10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2006

or

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 & CO. LLC

(Exact name of registrant as specified in its charter)

Delaware
(State of incorporation) 13-3912578
(I.R.S. Employer Identification No.)

50 Rockefeller Plaza
New York, New York
(Address of principal executive offices) 10020
(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 þ No o

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

Large accelerated filer þ       Accelerated filer o      Non-accelerated filer o

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

Registrant has 38,017,173 Listed Shares, no par value, outstanding at August 2, 2006.

W. P. CAREY & CO. LLC

INDEX

	PAGE NO.
PART I — FINANCIAL INFORMATION
Item 1. — Financial Statements*
Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005		2
Consolidated Statements of Income for the three and six months ended June 30, 2006 and 2005		3
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2006 and 2005		4
Consolidated Statements of Cash Flows for the six months ended June 30, 2006 and 2005		5
Notes to Consolidated Financial Statements		6
Item 2. — Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. — Quantitative and Qualitative Disclosures About Market Risk		30
Item 4. — Controls and Procedures		31
PART II – OTHER INFORMATION
Item 1. — Legal Proceedings		32
Item 2. — Unregistered Sales of Equity Securities and Use of Proceeds		32
Item 4. — Submission of Matters to a Vote of Security Holders		32
Item 6. — Exhibits		32
Signatures		33
EX-10.2: AMENDED AND RESTATED LLC AGREEMENT
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

* The summarized consolidated financial statements contained herein are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of such financial statements have been included.

Forward Looking Statements

This quarterly report on Form 10-Q, 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 that involve risks, uncertainties and assumptions. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “expect,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seeks,” “plans” or similar expressions. Do not unduly rely on forward-looking statements. They give our expectations about the future and are not guarantees, and speak only as of the date they are made. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievement to be materially different from the results of operations or plan expressed or implied by such forward-looking statements. While we cannot predict all of the risks and uncertainties, they include, but are not limited to, the risk factors described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2005. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved. Additionally, a description of our critical accounting estimates is included in the management’s discussion and analysis section in our Annual Report on Form 10-K for the year ended December 31, 2005. There has been no significant change in such critical accounting estimates.

As used in this quarterly report on Form 10-Q, the terms “the Company,” “we,” “us” and “our” include W. P. Carey & Co. LLC, its consolidated subsidiaries and predecessors, unless otherwise indicated.

1

W. P. CAREY & CO. LLC

PART I

ITEM 1. — FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands except share amounts)

				December 31,
	June 30,			2005
	2006			(NOTE)
ASSETS
Real estate, net	$	489,591		$	454,478
Net investment in direct financing leases		117,250			131,975
Equity investments		140,286			134,567
Operating real estate, net		7,657			7,865
Assets held for sale		16,064			18,815
Cash and cash equivalents		15,593			13,014
Due from affiliates		78,939			82,933
Goodwill		63,607			63,607
Intangible assets, net		35,821			40,700
Other assets, net		33,114			35,308
Total assets	$	997,922		$	983,262
LIABILITIES AND MEMBERS’ EQUITY
Liabilities:
Limited recourse mortgage notes payable	$	253,897		$	226,701
Limited recourse mortgage notes payable on assets held for sale		—			4,412
Credit facility		2,000			15,000
Accrued interest		1,696			2,036
Distributions payable		17,234			16,963
Due to affiliates		1,069			2,994
Deferred revenue		29,787			23,085
Accounts payable and accrued expenses		25,679			23,002
Prepaid and deferred rental income and security deposits		4,905			4,414
Accrued income taxes		483			634
Deferred income taxes, net		38,787			39,908
Other liabilities		12,647			12,956
Total liabilities		388,184			372,105
Minority interest in consolidated entities		7,443			3,689
Commitments and contingencies (Note 8)
Members’ equity:
Listed shares, no par value; 38,054,358 and 37,706,247 shares issued and outstanding, respectively		740,247			740,593
Dividends in excess of accumulated earnings		(137,436	)		(131,178	)
Unearned compensation		—			(5,119	)
Accumulated other comprehensive income		(516	)		3,172
Total members’ equity		602,295			607,468
Total liabilities and members’ equity	$	997,922		$	983,262

The accompanying notes are an integral part of these consolidated financial statements.

NOTE: The consolidated balance sheet at December 31, 2005 has been derived from the audited consolidated financial statements at that date.

2

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share and share amounts)

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
REVENUES:
Asset management revenue	$	14,752		$	12,867		$	29,114		$	25,467
Structuring revenue		2,462			9,817			12,354			20,524
Reimbursed costs from affiliates		19,894			2,028			22,892			4,860
Rental income		14,975			13,019			29,797			25,919
Interest income from direct financing leases		3,427			3,867			6,848			7,703
Other operating income		432			422			952			981
Revenues of other business operations		1,717			1,928			3,580			3,656
		57,659			43,948			105,537			89,110
OPERATING EXPENSES:
General and administrative		(9,871	)		(12,190	)		(21,029	)		(23,169	)
Reimbursable costs		(19,894	)		(2,028	)		(22,892	)		(4,860	)
Depreciation		(3,658	)		(2,815	)		(7,277	)		(5,877	)
Amortization		(2,278	)		(2,203	)		(4,562	)		(4,406	)
Property expenses		(1,442	)		(1,586	)		(3,203	)		(3,299	)
Impairment charge		—			(330	)		—			(1,130	)
Operating expenses of other business operations		(1,466	)		(1,607	)		(3,033	)		(3,123	)
		(38,609	)		(22,759	)		(61,996	)		(45,864	)
OTHER INCOME AND EXPENSES:
Other interest income		806			824			1,533			1,666
Income from equity investments		1,244			1,197			2,794			2,565
Minority interest in loss (income)		254			(766	)		(608	)		(1,398	)
Gain (loss) on sale of securities, foreign currency transactions and other gains, net		5,228			(313	)		5,478			(663	)
Interest expense		(4,541	)		(4,110	)		(8,929	)		(8,337	)
		2,991			(3,168	)		268			(6,167	)
Income from continuing operations before income taxes		22,041			18,021			43,809			37,079
Provision for income taxes		(3,998	)		(5,099	)		(10,720	)		(10,952	)
Income from continuing operations		18,043			12,922			33,089			26,127
DISCONTINUED OPERATIONS:
(Loss) income from operations of discontinued properties		(739	)		691			(1,363	)		2,233
Gain on sale of real estate, net		—			9,139			—			9,119
Impairment charges on assets held for sale		—			(5,819	)		(3,357	)		(14,691	)
(Loss) income from discontinued operations		(739	)		4,011			(4,720	)		(3,339	)
NET INCOME	$	17,304		$	16,933		$	28,369		$	22,788
BASIC EARNINGS PER SHARE:
Income from continuing operations	$	.48		$	.34		$	.88		$	.69
(Loss) income from discontinued operations		(.02	)		.11			(.13	)		(.08	)
Net income	$	.46		$	.45		$	.75		$	.61
DILUTED EARNINGS PER SHARE:
Income from continuing operations	$	.46		$	.33		$	.85		$	.66
(Loss) income from discontinued operations		(.02	)		.10			(.12	)		(.08	)
Net income	$	.44		$	.43		$	.73		$	.58
DISTRIBUTIONS DECLARED PER SHARE	$	.454		$	.446		$	.906		$	.890
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		37,876,079			37,670,305			37,802,340			37,631,539
Diluted		39,346,537			39,017,636			38,794,914			39,185,907

The accompanying notes are an integral part of these consolidated financial statements.

3

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
Net Income	$	17,304		$	16,933		$	28,369		$	22,788
Other comprehensive income:
Change in unrealized appreciation on marketable securities		12			1,179			783			114
Reversal of unrealized appreciation on sale of marketable securities		(4,746	)		—			(4,746	)		—
Foreign currency translation adjustment		557			(363	)		275			(846	)
		(4,177	)		816			(3,688	)		(732	)
Comprehensive Income	$	13,127		$	17,749		$	24,681		$	22,056

The accompanying notes are an integral part of these consolidated financial statements.

4

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands, except share amounts)

	Six months ended June 30,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	28,369		$	22,788
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization including intangible assets and deferred financing costs		12,625			10,776
Income from equity investments in excess of distributions received		(202	)		(100	)
Gains on sale of real estate and investments		(4,800	)		(9,215	)
Minority interest in income		608			1,398
Straight-line rent adjustments		1,612			1,983
Management income received in shares of affiliates		(15,816	)		(14,769	)
Costs paid by issuance of shares		—			96
Amortization of unearned compensation		—			1,696
Unrealized (gain) loss on foreign currency transactions and warrants		(577	)		754
Impairment charges		3,348			15,821
Deferred income taxes		(1,121	)		(554	)
Realized gain (loss) on foreign currency transactions		(102	)		11
Decrease in accrued income taxes		(151	)		(2,830	)
Decrease in prepaid taxes		1,279			—
Tax charge — share incentive plan		—			360
Excess tax benefits associated with stock based compensation awards		1,639			—
Increase in structuring revenue receivable		(3,039	)		(4,234	)
Deferred acquisition fees received		12,543			8,961
Net changes in other operating assets and liabilities		(650	)		(2,691	)
Net cash provided by operating activities		35,565			30,251
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from equity investments in excess of equity income		3,106			3,049
Capital expenditures		(3,874	)		(976	)
Payment of deferred acquisition revenue to an affiliate		(524	)		(524	)
Purchase of investment		(150	)		—
Loan to affiliate		(84,000	)		—
Proceeds from repayment of loan to affiliate		84,000			—
Proceeds from sales of property and investments		22,471			32,604
Funds placed in escrow in connection with the sale of property and investments		(9,163	)		—
Net cash provided by investing activities		11,866			34,153
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid		(34,356	)		(33,294	)
Contributions from minority interests		1,161			—
Distributions to minority interests		(5,075	)		(356	)
Scheduled payments of mortgage principal		(5,705	)		(4,616	)
Proceeds from mortgages and credit facility		55,000			41,000
Prepayments of mortgage principal and credit facility		(62,971	)		(70,893	)
Release of funds from escrow in connection with the financing of properties		4,031			—
Payment of financing costs		(472	)		—
Proceeds from issuance of shares		3,652			2,420
Excess tax benefits associated with stock based compensation awards		271			—
Retirement of shares		(482	)		—
Net cash used in financing activities		(44,946	)		(65,739	)
Effect of exchange rate changes on cash		94			(268	)
Net increase (decrease) in cash and cash equivalents		2,579			(1,603	)
Cash and cash equivalents, beginning of year		13,014			16,715
Cash and cash equivalents, end of year	$	15,593		$	15,112
Supplemental cash flow information:
Interest paid, net of amounts capitalized	$	8,346		$	7,769
Income taxes paid	$	10,393		$	14,267

The accompanying notes are an integral part of these consolidated financial statements.

5

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)

NOTE 1. Business

W. P. Carey & Co. LLC (the “Company”) is a real estate and advisory company that invests in commercial properties leased to companies domestically and internationally, and earns revenue as the advisor to the following affiliated real estate investment trusts (“CPA^® REITs”) that each make similar investments: Corporate Property Associates 12 Incorporated (“CPA^®:12”), Corporate Property Associates 14 Incorporated (“CPA^®:14”), Corporate Property Associates 15 Incorporated (“CPA^®:15”), Corporate Property Associates 16 — Global Incorporated (“CPA^®:16 — Global”). Under the advisory agreements with the CPA^® REITs, the Company performs services related to the day-to-day management of the CPA^® REITs and transaction-related services. As of June 30, 2006, the Company owns and manages over 700 commercial properties domestically and internationally including its own portfolio which is comprised of 169 commercial properties net leased to 109 tenants and totaling approximately 16 million square feet.

The Company’s Primary Business Segments

MANAGEMENT SERVICES — The Company provides services to the CPA^® REITs in connection with structuring and negotiating investment and debt placement transactions (structuring revenue) and provides on-going management of the portfolio (asset-based management and performance revenue). Asset-based management and performance revenue for the CPA^® REITs are determined based on real estate related assets under management. As funds available to the CPA^® REITs are invested, the asset base for which the Company earns revenue increases. The Company may elect to receive revenue in cash or restricted shares of the CPA^® REITs. The Company may also earn incentive and disposition revenue in connection with providing liquidity alternatives to CPA^® REIT shareholders.

REAL ESTATE OPERATIONS — The Company invests in commercial properties that are then leased to companies domestically and internationally.

NOTE 2. Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. All significant intercompany balances and transactions have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results of the interim periods presented have been included. The results of operations for the interim periods are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

Principles of Consolidation

The accompanying consolidated financial statements include all accounts of the Company, and its majority-owned and/or controlled subsidiaries. The portion of these entities not owned by the Company is presented as minority interest as of and during the periods consolidated.

When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if the Company is deemed to be the primary beneficiary, in accordance with FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities” (“FIN 46(R)”). The Company consolidates (i) entities that are VIEs and of which the Company is deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company controls. Entities that the Company accounts for under the equity method (i.e. at cost, increased or decreased by the Company’s share of earnings or losses, less distributions) include (i) entities that are VIEs and of which the Company is not deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company does not control, but over which the Company has the ability to exercise significant influence. The Company will reconsider its determination of whether an entity is a VIE and who the primary beneficiary is if certain events occur that are likely to cause a change in the original determinations.

6

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)

As a result of adopting the provisions of Emerging Issues Task Force (“EITF”) Consensus on Issue No. 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-05”) effective January 1, 2006, the Company now consolidates a limited liability company that leases property to CheckFree Holdings Corporation Inc., that was previously accounted for under the equity method of accounting.

Reclassifications and Revisions

Certain prior period amounts have been reclassified to conform to current period financial statement presentation. The financial statements included in this Form 10-Q have been adjusted to reflect asset management and structuring revenue as separate components of revenue and the disposition (or planned disposition) of certain properties as discontinued operations for all periods presented.

The Company has revised its consolidated statement of cash flow for the period ended June 30, 2005 to present the operating portion of the cash flows attributable to its discontinued operations on a combined basis.

Recent Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income tax positions. This Interpretation requires that the Company not recognize in its consolidated financial statements the impact of a tax position that fails to meet the more likely than not recognition threshold based on the technical merits of the position. The provisions of FIN 48 will be effective for the Company as of the beginning of its 2007 fiscal year. The Company is currently evaluating the impact of adopting FIN 48 on its consolidated financial statements.

NOTE 3. Transactions with Related Parties

Directly and through one of its wholly-owned subsidiaries, the Company earns revenue as the advisor (“advisor”) to the CPA^® REITs. Under the advisory agreements with the CPA^® REITs, the Company performs various services, including but not limited to the day-to-day management of the CPA^® REITs and transaction-related services. The Company earns asset management revenue totaling 1% per annum of average invested assets, as calculated pursuant to the advisory agreements for each CPA^® REIT, of which 1/2 of 1% (“performance revenue”) is contingent upon specific performance criteria for each CPA^® REIT, and is reimbursed for certain costs, primarily broker/dealer commissions paid on behalf of the CPA^® REITs and marketing and personnel costs. Effective in 2005, the advisory agreements were amended to allow the Company to elect to receive restricted stock for any revenue due from each CPA^® REIT. For the three months ended June 30, 2006 and 2005, total asset-based revenue earned was $14,752 and $12,867, respectively, while reimbursed costs totaled $19,894 and $2,028, respectively. For the six months ended June 30, 2006 and 2005, total asset-based revenue earned was $29,114 and $25,467, respectively, while reimbursed costs totaled $22,892 and $4,860, respectively. As of June 30, 2006, CPA^®:16 — Global did not meet its performance criterion (a non-compounded cumulative distribution return of 6%), as defined in its advisory agreement, and since its inception, the Company has deferred cumulative performance revenue of $7,034 that will be recognized if the performance criterion is met. For 2006, the Company elected to continue to receive all performance revenue from the CPA^® REITs as well as the asset management revenue payable by CPA^®:16-Global in restricted shares.

In connection with structuring and negotiating investments and related mortgage financing for the CPA^® REITs, the advisory agreements provide for structuring revenue based on the cost of investments. Under each of the advisory agreements, the Company may receive acquisition revenue of up to an average of 4.5% of the total cost of all 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 equal annual installments ranging from three to eight years, subject to the relevant CPA^® REIT meeting its performance criterion. Unpaid installments bear interest at annual rates ranging from 5% to 7%. The Company may in certain circumstances be entitled to loan refinancing revenue of up to 1% of the principal amount refinanced in connection with structuring and negotiating investments. This loan refinancing revenue, together with the acquisition revenue, is referred to as structuring revenue.

For the three months ended June 30, 2006 and 2005, the Company earned structuring revenue of $2,462 and $9,817, respectively. For the six months ended June 30, 2006 and 2005, the Company earned structuring revenue of $12,354 and $20,524, respectively. CPA^®:16-Global has not met its performance criterion and since its inception, cumulative deferred structuring revenue of $21,409 and interest thereon of $1,344 have been deferred, and will be recognized by the Company if CPA^®:16-Global meets the performance criterion. In addition, the Company may also earn revenue related to the disposition of properties, subject to subordination provisions, and will only recognize such revenue as the subordination provisions are achieved.

7

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)

Included in due from affiliates and deferred revenue in the accompanying consolidated balance sheets as of June 30, 2006 and December 31, 2005 is $29,787 and $23,085, respectively, of deferred revenue related to providing services to CPA^®:16-Global (as described above). Recognition and ultimate collection of these amounts is subject to CPA^®:16-Global meeting its performance criterion.

On June 29, 2006, two of the CPA^® REITs managed by the Company, CPA^®:12 and CPA^®:14, entered into a definitive agreement pursuant to which CPA^®:12 will merge with and into CPA^®:14, subject to the approval of the stockholders of CPA^®:12 and CPA^®:14. A joint proxy/registration statement was filed with the SEC on July 25, 2006 relating to the merger. CPA^®:12 and CPA^®:14 are currently awaiting comments from the SEC. The closing of the merger is also subject to customary closing conditions. The Company currently expects that the closing will occur late in the fourth quarter of 2006 at the earliest, although there can be no assurance of such timing. Prior to the proposed merger, CPA^®:12 will also sell certain properties or interests in properties valued at approximately $199,200 (including the pro rata values of properties which, for financial reporting purposes, will be accounted for under the equity method of accounting), to the Company for approximately $120,500 in cash and the Company’s assumption of approximately $78,700 in limited recourse mortgage notes payable. CPA^®:12’s sale of properties to the Company is contingent on the approval of the merger. These properties all have remaining lease terms of eight years or less, which is shorter than the average lease term of CPA^®:14’s portfolio of properties and CPA^®:14 consequently required that these assets be sold by CPA^®:12. The Company expects to use the available credit facility to finance this transaction, however pre-tax income to be received from disposition and termination fees payable by CPA^®:12 of approximately $48,845 in connection with the proposed liquidation of CPA^®:12 and $7,719 as part of a special cash distribution of $3.00 per share to CPA^®:12 stockholders would also be available to finance this transaction or to reduce any indebtedness incurred in connection with this transaction. The proposed purchase price of the properties is based on a third party valuation of CPA^®:12’s properties as of December 31, 2005 and consequently does not take into account any changes in value that may have occurred subsequent to that date or may occur prior to the completion of this transaction.

In connection with the purchase of properties from CPA^®:12, the Company has agreed that if it enters into a definitive agreement within six months after the closing of the asset sale to sell any of the properties acquired from CPA^®:12 at a price that is higher than the price paid to CPA^®:12, the Company will pay 85% of the excess (net of selling expenses and fees) over to an independent paying agent that will distribute such funds to the former stockholders of CPA^®:12.

A subsidiary of the Company has agreed to indemnify CPA^®:14 if CPA^®:14 suffers certain losses arising out of a breach by CPA^®:12 of its representations and warranties under the merger agreement and having a material adverse effect on CPA^®:14 after the merger, up to the amount of fees received by such subsidiary of the Company in connection with the merger. The Company has also agreed to waive any acquisition fees payable by CPA^®:14 under its advisory agreement with the Company in respect of the properties being acquired in the merger and has also agreed to waive any disposition fees that may subsequently be payable by CPA^®:14 to the Company upon a sale of such assets. The Company has evaluated the exposure related to this indemnification and has determined the exposure to be minimal.

The Company owns interests in entities which range from 22.50% to 50%, a jointly-controlled 36% tenancy-in-common interest in two properties subject to a net lease with the remaining interests held by affiliates and owns common stock in each of the CPA^® REITs. The Company has a significant influence in these investments, which are accounted for under the equity method of accounting.

The Company is the general partner in a limited partnership that leases the Company’s home office spaces and participates in an agreement with certain affiliates, including the CPA^® REITs for the purpose of leasing office space used for the administration of the Company and other affiliated real estate entities and sharing the associated costs. During the fourth quarter of 2005, the Company began consolidating the results of operations of this limited partnership. As a result, during the three and six months ended June 30, 2006, the Company recorded lease revenues of $706 and $1,329, respectively, of which $521 and $981, respectively, was reimbursed by certain affiliates. During the three and six months ended June 30, 2005 (prior to consolidation) the Company’s share of rental expenses under this agreement was $252 and $499, respectively. Based on current allocation percentages, the Company’s estimated minimum annual lease payments on the office lease, inclusive of minority interest, as of June 30, 2006 approximate $2,750 through 2016.

In June 2000, the Company acquired Carey Management LLC (“Carey Management”). Prior to its acquisition by the Company, Carey Management performed certain services for the Company and earned structuring revenue in connection with the purchase and disposition of properties. The Company is obligated to pay deferred acquisition compensation in equal annual installments over a period of no less than eight years. As of June 30, 2006 and December 31, 2005, unpaid deferred acquisition compensation was $661 and $1,185, respectively, and bore interest at an annual rate of 6%.

8

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)

A person who serves as a director and an officer of the Company is the sole shareholder of Livho, Inc. (“Livho”), a lessee of the Company. The Company consolidates the accounts of Livho in its consolidated financial statements in accordance with FIN 46(R) as it is a VIE where the Company is the primary beneficiary.

A director of the Company has an ownership interest in companies that own the minority interest in the Company’s French majority-owned subsidiaries. The director’s ownership interest is subject to the same terms as all other ownership interests in the subsidiary companies.

Two employees of the Company own a minority interest in W. P. Carey International LLC (“WPCI”), a subsidiary company that structures net lease transactions on behalf of the CPA^® REITs outside of the United States of America.

NOTE 4. Real Estate

Real estate, which consists of land and buildings leased to others, at cost, and accounted for under the operating method, is summarized as follows:

	June 30, 2006			December 31, 2005
Cost	$	556,565		$	515,275
Less: Accumulated depreciation		(66,974	)		(60,797	)
	$	489,591		$	454,478

Operating real estate, which consists of the Company’s hotel operations, at cost, is summarized as follows:

	June 30, 2006			December 31, 2005
Cost	$	15,108		$	15,108
Less: Accumulated depreciation		(7,451	)		(7,243	)
	$	7,657		$	7,865

NOTE 5. Equity Investments

The Company owns interests in four CPA^® REITs with which it has advisory agreements. The Company’s interests in the CPA^® REITs are accounted for under the equity method due to the Company’s ability to exercise significant influence as the advisor to the CPA^® REITs. The CPA^® REITs are publicly registered and file financial statements with the SEC. In connection with earning asset management and performance revenue, the Company has elected, in certain cases, to receive restricted shares of common stock in the CPA^® REITs rather than cash in consideration for such revenue (see Note 3).

As of June 30, 2006, the Company’s ownership in the CPA^® REITs is as follows:

	Shares		% of outstanding shares
CPA®:12		2,572,993		8.26	%
CPA®:14		3,574,686		5.22	%
CPA®:15		3,856,781		3.01	%
CPA®:16-Global		595,503		0.80	%

The Company owns equity interests as a limited partner in two limited partnerships, three limited liability companies and a jointly-controlled 36% tenancy-in-common interest in two properties subject to a master lease with the remaining interests owned by affiliates, all of which net lease real estate on a single-tenant basis.

Combined financial information of the affiliated equity investees is summarized as follows:

	June 30, 2006			December 31, 2005
Assets (primarily real estate)	$	6,239,362		$	5,593,102
Liabilities (primarily mortgage notes payable)		(3,442,413	)		(2,992,146	)
Owner’s equity	$	2,796,949		$	2,600,956
Company’s share of equity investees’ net assets	$	140,286		$	134,567

9

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)

	Six months ended June 30,
	2006			2005
Revenue (primarily rental income and interest income from direct financing leases)	$	256,181		$	205,404
Expenses (primarily depreciation and property expenses)		(130,670	)		(87,078	)
Other interest income		8,289			6,751
Income from equity investments		22,905			24,330
Minority interest in income		(20,605	)		(9,156	)
Gain (loss) on sales of real estate, derivatives and foreign currency transactions, net		3,090			(2,495	)
Interest expense		(97,526	)		(78,445	)
Income from continuing operations		41,664			59,311
(Loss) income from discontinued operations		(800	)		3,634
Gain on sale of real estate, net		58,850			494
Impairment charge on properties held for sale		(400	)		(3,455	)
Net income	$	99,314		$	59,984
Company’s share of net income from equity investments	$	2,794		$	2,565

NOTE 6. Discontinued Operations

Tenants from time to time may vacate space due to lease buy-out, election not to renew, company insolvency or lease rejection in the bankruptcy process. In such cases, the Company assesses whether the highest value is obtained from re-leasing or selling the property. When it is determined that the most likely outcome will be a sale, the asset is reclassified as an asset held for sale.

Assets Held for Sale

During the three months ended June 30, 2006, the Company entered into a contract to sell a vacant property in Reno, Nevada for a sales price of $8,000. The Company currently expects to complete this transaction during 2006 and expects to record a net gain of approximately $3,500.

In March 2005, the Company entered into a contract to sell its property in Travelers Rest, South Carolina to a third party for $2,550. The Company currently expects to complete this transaction during 2006 and expects to record a gain on this sale of approximately $1,000. Impairment charges totaling $2,507 were recognized in prior years to write down the property value to the estimated net sales proceeds.

Assets held for sale also include a property located in Cincinnati, Ohio that is subject to a contract for sale for approximately $10,100. Impairment charges totaling $2,700 were previously recorded in prior years to write down the property’s value to its estimated fair value.

Discontinued Operations

During the six months ended June 30, 2006, the Company sold two domestic properties to third parties for combined sales proceeds of $8,168, net of closing costs and exclusive of combined impairment charges of $157 recognized during this period. The Company previously recognized combined impairment charges of $1,266 related to these properties.

In March 2005, the Company received notification from the lessee of its Amberly Village, Ohio and Berea, Kentucky properties, that the lessee had exercised its existing option to purchase both properties, at fair value, pursuant to the terms of the lease agreement. Fair value was determined pursuant to an appraisal process in accordance with the terms of the lease agreement between the Company and the lessee. In December 2005, the Company received a $3,000 payment from the tenant in connection with the termination of its lease on the Ohio property and sold the Kentucky property to the tenant for $8,961, net of closing costs and recognized a gain of $20, exclusive of impairment charges previously recorded totaling $6,340 on the Kentucky property. In May 2006, the Company sold the Ohio property to a third party for $6,212, net of closing costs and exclusive of an impairment charge of $3,200 recognized in the first quarter of 2006. The Company previously recognized impairment charges of $14,037 related to this property.

During the six months ended June 30, 2005, the Company sold several domestic properties to third parties for combined sales proceeds of $32,464, net of closing costs and recognized a combined net gain of $9,119. Impairment charges totaling $1,582 were previously recognized on these properties to reduce their property values to the estimated net sales proceeds.

Impairment charges on properties sold and held for sale as of June 30, 2006 are discussed in Note 9.

10

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)

Other Information

Included in the Company’s operating assets and liabilities in the accompanying consolidated balance sheet as of June 30, 2006 are assets of $1,002 and liabilities of $1,258 related to the Company’s properties held for sale.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the results of operations, impairment charges and gain or loss on sale of real estate for properties held for sale are reflected in the accompanying consolidated financial statements as discontinued operations for all periods presented and are summarized as follows:

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
Revenues (primarily rental revenues and other operating income):	$	335		$	1,396		$	953		$	3,447
Expenses (primarily interest on mortgages, depreciation and property expenses):		(1,074	)		(705	)		(2,316	)		(1,214	)
Gain on sales of real estate		—			9,139			—			9,119
Impairment reversal (charges) on assets held for sale		—			(5,819	)		(3,357	)		(14,691	)
(Loss) Income from discontinued operations	$	(739	)	$	4,011		$	(4,720	)	$	(3,339	)

NOTE 7. Intangibles

In connection with its acquisition of properties, the Company has recorded net lease intangibles of $20,312. These intangibles are being amortized over periods ranging from 19 months to 27 1/2 years. Amortization of below-market and above-market rent intangibles are recorded as an adjustment to revenue.

Intangibles are summarized as follows:

	June 30, 2006			December 31, 2005
Amortized Intangibles:
Management contracts	$	46,348		$	46,348
Less: accumulated amortization		(27,498	)		(25,206	)
		18,850			21,142
Lease Intangibles:
In-place lease		13,630			13,630
Tenant relationship		4,863			4,863
Above-market rent		3,828			3,828
Less: accumulated amortization		(9,325	)		(6,738	)
		12,996			15,583
Unamortized Goodwill and Indefinite-Lived Intangible Assets:
Goodwill		63,607			63,607
Trade name		3,975			3,975
	$	67,582		$	67,582
Below-market rent	$	(2,009	)	$	(2,009	)
Less: accumulated amortization		271			197
	$	(1,738	)	$	(1,812	)

Net amortization of intangibles was $2,393 and $2,412 for the three months ended June 30, 2006 and 2005, respectively, and $4,805 and $4,824 for the six months ended June 30, 2006 and 2005, respectively.

Based on the intangibles recorded through June 30, 2006, annual net amortization of intangibles for each of the next five years is as follows: 2006 — $9,406; 2007 — $7,295; 2008 — $4,211; 2009 — $4,184; 2010 — $3,542 and 2011 — $1,643.

NOTE 8. Commitments and Contingencies

As of June 30, 2006, the Company was not involved in any material litigation.

In March 2004, following a broker-dealer examination of Carey Financial, LLC (“Carey Financial”), the Company’s wholly-owned broker-dealer subsidiary, by the staff of the SEC, Carey Financial received a letter from the staff of the SEC alleging certain

11

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)

infractions by Carey Financial of the Securities Act of 1933, the Securities Exchange Act of 1934, the rules and regulations thereunder and those of the National Association of Securities Dealers, Inc. (“NASD”).

The staff alleged that in connection with a public offering of shares of CPA^®:15, Carey Financial and its retail distributors sold certain securities without an effective registration statement. Specifically, the staff alleged that the delivery of investor funds into escrow after completion of the first phase of the offering (the “Phase I Offering”), completed in the fourth quarter of 2002 but before a registration statement with respect to the second phase of the offering (the “Phase II Offering”) became effective in the first quarter of 2003, constituted sales of securities in violation of Section 5 of the Securities Act of 1933. In addition, in the March 2004 letter the staff raised issues about whether actions taken in connection with the Phase II offering were adequately disclosed to investors in the Phase I Offering. In the event the Commission pursues these allegations, or if affected CPA^®:15 investors bring a similar private action, CPA^®:15 might be required to offer the affected investors the opportunity to receive a return of their investment. It cannot be determined at this time if, as a consequence of investor funds being returned by CPA^®:15, Carey Financial would be required to return to CPA^®:15 the commissions paid by CPA^®:15 on purchases actually rescinded. Further, as part of any action against the Company, the SEC could seek disgorgement of any such commissions or different or additional penalties or relief, including without limitation, injunctive relief and/or civil monetary penalties, irrespective of the outcome of any rescission offer. The Company cannot predict the potential effect such a rescission offer or SEC action may ultimately have on the operations of Carey Financial or the Company. There can be no assurance that the effect, if any, would not be material.

The staff also alleged in the March 2004 letter that the prospectus delivered with respect to the Phase I Offering contained material misrepresentations and omissions in violation of Section 17 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder in that the prospectus failed to disclose that (i) the proceeds of the Phase I Offering would be used to advance commissions and expenses payable with respect to the Phase II Offering, and (ii) the payment of dividends to Phase II shareholders whose funds had been held in escrow pending effectiveness of the registration statement resulted in significantly higher annualized rates of return than were being earned by Phase I shareholders. Carey Financial has reimbursed CPA^®:15 for the interest cost of advancing the commissions that were later recovered by CPA^®:15 from the Phase II Offering proceeds.

In June 2004, the Division of Enforcement of the SEC (“Enforcement Staff”) commenced an investigation into compliance with the registration requirements of the Securities Act of 1933 in connection with the public offerings of shares of CPA^®:15 during 2002 and 2003. In December 2004, the scope of the Enforcement Staff’s inquiries broadened to include broker-dealer compensation arrangements in connection with CPA^®:15 and other REITs managed by the Company, as well as the disclosure of such arrangements. At that time the Company and Carey Financial received a subpoena from the Enforcement Staff seeking documents relating to payments by Carey Financial, the Company and REITs managed by the Company to (or requests for payment received from) any broker-dealer, excluding selling commissions and selected dealer fees. The Company and Carey Financial subsequently received additional subpoenas and requests for information from the Enforcement Staff seeking, among other things, information relating to any revenue sharing agreements or payments (defined to include any payment to a broker-dealer, excluding selling commissions and selected dealer fees) made by the Company, Carey Financial or any Company-managed REIT in connection with the distribution of Company-managed REITs or the retention or maintenance of REIT assets. Other information sought by the SEC includes information concerning the accounting treatment and disclosure of any such payments, communications with third parties (including other REIT issuers) concerning revenue sharing, and documents concerning the calculation of underwriting compensation in connection with the REIT offerings under applicable NASD rules.

In response to the Enforcement Staff’s subpoenas and requests, the Company and Carey Financial have produced documents relating to payments made to certain broker-dealers both during and after the offering process, for certain of the REITs managed by the Company (including Corporate Property Associates 10 Incorporated (“CPA^®:10”), Carey Institutional Properties Incorporated (“CIP^®”),CPA^®:12, CPA^®:14 and CPA ^®:15), in addition to selling commissions and selected dealer fees.

Among the payments reflected on documents produced to the Staff were certain payments, aggregating in excess of $9,600, made to a broker-dealer which distributed shares of the REITs. The expenses associated with these payments, which were made during the period from early 2000 through the end of 2003, were borne by and accounted for on the books and records of the REITs. Of these payments, CPA^®:10 paid in excess of $40; CIP^® paid in excess of $875; CPA^®:12 paid in excess of $2,455; CPA^®:14 paid in excess of $4,990; and CPA^®:15 paid in excess of $1,240. In addition, other smaller payments by the REITs to the same and other broker-dealers have been identified aggregating less than $1,000.

The Company and Carey Financial are cooperating fully with this investigation and have provided information to the Enforcement Staff in response to the subpoenas and requests. Although no formal regulatory action has been initiated against the Company or

12

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)

Carey Financial in connection with the matters being investigated, the Company expects that the SEC may pursue such an action against either or both of them. The nature of the relief or remedies the SEC may seek cannot be predicted at this time. If such an action is brought, it could have a material adverse effect on the Company and the magnitude of that effect would not necessarily be limited to the payments described above but could include other payments and civil monetary penalties.

Several state securities regulators have sought information from Carey Financial relating to the matters described above. While one or more states may commence proceedings against Carey Financial in connection with these inquiries, the Company does not currently expect that these inquiries will have a material effect on it incremental to that caused by any SEC action.

NOTE 9. Impairment Charges

The Company recorded impairment charges totaling $3,357 for the six months ended June 30, 2006. Impairment charges recorded for the three and six months ended June 30, 2005 were $6,149 and $15,821, respectively.

In March 2005, the Company received notification from the lessee of its Amberly Village, Ohio and Berea, Kentucky properties, that the lessee had exercised its existing option to purchase both properties, at fair value, pursuant to the terms of the lease agreement. Fair value was determined pursuant to an appraisal process in accordance with the terms of the lease agreement between the Company and the lessee. In connection with this transaction, in the quarter ended March 31, 2005, the Company recognized an impairment charge of $8,872, as the estimated fair value of the properties estimated by management was lower than their carrying value. As a result of the Company obtaining its own appraisal of these properties, the Company recognized an additional impairment charge of $5,819 in the quarter ended June 30, 2005. In December 2005, the tenant completed the purchase of the Kentucky property and terminated its lease on the Ohio property for a lease termination payment of $3,000. In March 2006, the Company entered into a contract with a third party for the sale of the Ohio property and recognized an additional impairment charge of $3,200 in the quarter ended March 31, 2006 to reduce this property’s carrying value to its estimated selling price, less closing costs. The sale of the Ohio property was completed in May 2006. The sales of these properties are discussed in Note 6.

In connection with the sale of a property in Olive Branch, Mississippi, the Company recognized an impairment charge of $116 in the first quarter of 2006, as the net proceeds were less than the property’s carrying value. The sale was completed in April 2006 (see Note 6 for a discussion of the sale of this property). The Company previously recognized impairment charges of $650 related to this property.

In connection with entering into a commitment to sell a property in Bay Minette, Alabama, the Company recognized an impairment charge of $41 in the first quarter of 2006, as the property’s estimated fair value was lower than its carrying value. The Company previously recognized impairment charges of $625 related to this property.

In connection with entering into a commitment to sell a property in Livonia, Michigan for $8,500 during the first quarter of 2005, the Company recognized an impairment charge of $800, as the property’s estimated fair value was lower than its carrying value. The $8,500 proposed transaction was terminated and in June 2005 the Company entered into a letter of intent with a third party to sell this property for $8,000. As the proposed sale proceeds net of closing costs were below the property’s carrying value, the Company recorded an additional impairment charge of $330 during the quarter ended June 30, 2005 for a total impairment charge on this property during the six months ended June 30, 2005 of $1,130. In the fourth quarter of 2005 the Company terminated its plan to sell the property and entered into an agreement with the proposed buyer to upgrade and manage the facility on a fee basis. The Company previously recognized impairment charges of $7,500 related to this property.

NOTE 10. Members’ Equity and Stock Based and Other Compensation

Stock Based Compensation

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123(R), “Share-Based Payment,” using the modified prospective application method and therefore has not restated prior periods’ results. Under this transition method, stock-based compensation expense for the three and six months ended June 30, 2006 included compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123. Stock-based compensation expense for all stock-based compensation awards granted subsequent to January 1, 2006 is based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). The Company recognizes these compensation costs for only those shares expected to vest on a straight-line basis over the requisite service period of the award.

13

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)

As a result of adopting SFAS 123(R), income from continuing operations before income taxes and net income were $136 and $81 lower for the three months ended June 30, 2006, respectively, and $161 and $125 higher for the six months ended June 30, 2006, respectively, than if the Company had continued to account for stock-based compensation awards under APB 25. There was no impact on either basic or diluted earnings per share for the three and six months ended June 30, 2006 as a result of the adoption of FAS 123(R). In addition, prior to the adoption of SFAS 123(R), the Company presented the tax benefit of stock option exercises as operating cash flows. Upon the adoption of SFAS 123(R), tax benefits resulting from the tax deductions in excess of the compensation cost recognized for those options totaling $270 for the six months ended June 30, 2006 are classified as financing cash flow inflows with a corresponding decrease included within operating cash flows.

The pro forma table below reflects net income and basic and diluted earnings per share for the three and six months ended June 30, 2005, had the Company applied the fair value recognition provisions of SFAS 123, as follows:

	Three months ended			Six months ended
	June 30, 2005			June 30, 2005
Net income as reported	$	16,933		$	22,788
Add: Stock based compensation included in net income as reported, net of related tax effects		526			1,029
Less: Stock based compensation determined under fair value based methods for all awards, net of related tax effects		(624	)		(1,277	)
Pro forma net income	$	16,835		$	22,540
Earnings per share as reported:
Basic	$	.45		$	.61
Diluted	$	.43		$	.58
Pro forma earnings per share:
Basic	$	.45		$	.60
Diluted	$	.43		$	.58

At June 30, 2006, the Company had the following stock-based compensation plans as described below. The total compensation expense for these plans was $829 and $916 for the three months ended June 30, 2006 and 2005, respectively, and $1,548 and $1,792 for the six months ended June 30, 2006 and 2005, respectively. The tax benefit recognized in the three months ended June 30, 2006 and 2005 related to stock-based compensation plans totaled $367 and $405, respectively, and totaled $685 and $799 for the six months ended June 30, 2006 and 2005, respectively. Prior to January 1, 2006, the Company accounted for these plans under the provisions of APB 25.

1997 Share Incentive Plan

The Company maintains the 1997 Share Incentive Plan (the “Incentive Plan”), as amended, which authorizes the issuance of up to 6,200,000 shares. The Incentive Plan provides for the grant of (i) share options which may or may not qualify as incentive stock options, (ii) performance shares, (iii) dividend equivalent rights and (iv) restricted shares. Options granted under the Incentive Plan generally have a 10-year term and generally vest over periods ranging from three to ten years from the date of grant. The vesting of grants is accelerated upon a change in control of the Company and under certain other conditions.

Non-Employee Directors’ Plan

The Company maintains the Non-Employee Directors’ Plan (the “Directors’ Plan”), which authorizes the issuance of up to 300,000 shares. The Directors’ Plan provides for the grant of (i) share options which may or may not qualify as incentive stock options, (ii) performance shares, (iii) dividend equivalent rights and (iv) restricted shares. Options granted under the Directors’ Plan have a 10-year term and vest over three years from the date of grant.

Employee Share Purchase Plan

The Company sponsors the Carey Diversified LLC Employee Share Purchase Plan (“ESPP”), pursuant to which eligible employees may contribute up to 10% of compensation, subject to certain limits, to purchase the Company’s common stock. Employees can purchase stock semi-annually at a price equal to 85% of the fair market value at certain plan defined dates. The ESPP is not material to the Company’s results of operations.

14

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)

Carey Management Warrants

In January 1998, the predecessor of Carey Management was granted warrants to purchase 2,284,800 shares of the Company’s common stock exercisable at $21 per share and 725,930 shares exercisable at $23 per share as compensation for investment banking services in connection with structuring the consolidation of the CPA^® Partnerships. The warrants are exercisable until January 2009. These warrants and shares were fully vested prior to January 1, 2006.

Partnership Equity Plan Unit

During 2003, the Company adopted a non-qualified deferred compensation plan under which a portion of any participating officer’s cash compensation in excess of designated amounts will be deferred and the officer will be awarded a Partnership Equity Plan Unit (“PEP Unit”). The value of each PEP Unit is intended to correspond to the value of a share of the CPA^® REIT designated at the time of such award. Redemption will occur at the earlier of a liquidity event of the underlying CPA^® REIT or twelve years from the date of award. The award is fully vested upon grant, and the Company may terminate the plan at any time. The value of each PEP Unit will be adjusted to reflect the underlying appraised value of the CPA^® REIT. Additionally, each PEP Unit will be entitled to a distribution equal to the distribution rate of the CPA^® REIT. All issuances of PEP Units, changes in the fair value of PEP Units and distributions paid are included in compensation expense of the Company. The PEP plan is a deferred compensation plan and is therefore considered to be outside the scope of SFAS 123(R).

WPCI Stock Option Plan

On June 30, 2003, WPCI granted an incentive award to certain officers of WPCI consisting of 1,500,000 restricted shares, representing an approximate 13% interest in WPCI, and 1,500,000 options for WPCI common stock with a combined fair value of $2,485 at that date. Both the options and restricted stock were issued in 2003 and are vesting ratably over five years. The options are exercisable at $1 per share for a period of ten years from the initial vesting date. The vested restricted stock and stock received upon the exercise of options of WPCI by minority interest holders may be redeemed commencing December 31, 2012 and thereafter solely in exchange for shares of the Company. Any redemption will be subject to a third party valuation of WPCI.

Option and warrant activity as of June 30, 2006 and changes during the six months ended June 30, 2006 were as follows:

				Weighted			Weighted Average
				Average			Remaining Contractual		Aggregate Intrinsic
	Shares			Exercise Price			Term (in years)		Value (in 000’s)
Outstanding at January 1, 2006		5,360,967		$	22.64
Granted		538,310			26.65
Exercised		(114,376	)		(20.06	)
Forfeited		(33,401	)		(29.52	)
Outstanding at June 30, 2006		5,751,500			22.62			4.53	$	18,229
Vested and expected to vest at June 30, 2006		5,582,425		$	22.82			4.42	$	18,221
Exercisable at June 30, 2006		4,320,210		$	21.12			3.20	$	18,177

The weighted average grant date fair value of options granted during the three months ended June 30, 2006 and 2005 was $2.21 and $1.73, respectively, and $2.11 and $2.02 during the six months ended June 30, 2006 and 2005, respectively. The total intrinsic value of options exercised during the three months ended June 30, 2006 and 2005, was $428 and $297, respectively.

Nonvested restricted stock awards as of June 30, 2006 and changes during the six months ended June 30, 2006 were as follows:

				Weighted
				Average Grant
	Shares			Date Fair Value
Nonvested at January 1, 2006		248,579		$	29.75
Granted		115,500			26.55
Vested		(76,188	)		28.18
Forfeited		(17,938	)		25.24
Nonvested at June 30, 2006		269,953		$	29.13

The total fair value of shares vested during the three months ended June 30, 2006 and 2005 was $0, respectively, and $2,147 and $1,911 during the six months ended June 30, 2006 and 2005, respectively.

15

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)

The fair value of share-based payment awards is estimated using the Black-Scholes option pricing formula (options and warrants) which involves the use of assumptions which are used in estimating the fair value of share based payment awards. The risk-free interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is based upon the trailing quarterly distribution for the four quarters prior to June 30, 2006 expressed as a percentage of the Company’s stock price. Expected volatilities are based on a review of the five and ten-year historical volatility of the Company’s stock as well as the historical volatilities and implied volatilities of common stock and exchange traded options of selected comparable companies. The expected term of awards granted is derived from an analysis of the remaining life of the Company’s awards giving consideration to their maturity dates and remaining time to vest. The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. For the three and six months ended June 30, 2006 and 2005, the following assumptions and weighted average fair values were used:

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
Risk-free interest rates		5.04 - 5.07	%		3.94 - 4.12	%		4.61 - 5.07	%		3.94 - 4.23	%
Dividend yields		6.65	%		7.7	%		6.65 – 6.89	%		7.7 – 7.8	%
Expected volatility		17.0	%		20.0	%		17.0 – 17.5	%		20.0	%
Expected term in years		6.25 - 8.5			10			6.22 – 8.5			10

As of June 30, 2006, approximately $9,743 of total unrecognized compensation expense related to nonvested stock-based compensation awards is expected to be recognized over a weighted-average period of approximately 4.3 years.

The Company has the ability and intent to issue shares upon stock option exercises. Historically, the Company has issued new common stock to satisfy such exercises. Cash received from stock option exercises and purchases under the ESPP during the three and six months ended June 30, 2006 was $1,877 and $2,723, respectively.

Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

	Three months ended June 30,				Six months ended June 30,
	2006		2005		2006		2005
Net income	$	17,304	$	16,933	$	28,369	$	22,788
Weighted average shares outstanding — basic		37,876,079		37,670,305		37,802,340		37,631,539
Effect of dilutive securities: Stock options		1,470,458		1,347,331		992,574		1,554,368
Weighted average shares outstanding — diluted		39,346,537		39,017,636		38,794,914		39,185,907

Securities totaling 454,073 for the six months ended June 30, 2006 were excluded from the earnings per share computations above as their effect would have been anti-dilutive. There were no such anti-dilutive securities for the three months ended June 30, 2006 or the comparable period in 2005.

Share Repurchase Program

In December 2005, the board of directors approved a $20,000 share repurchase program. Under this program, the Company may repurchase up to $20,000 of its common stock in the open market during the twelve-month period beginning December 16, 2005 as conditions warrant. Through June 30, 2006, the Company repurchased shares totaling $2,684 under this program.

Other

During the six months ended June 30, 2006, the Company recognized compensation costs totaling approximately $1,800 related to several former employees. Such costs are included in general and administrative expenses in the accompanying consolidated financial statements.

NOTE 11. Segment Reporting

The Company evaluates its results from operations by major business segment as follows:

16

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)

Management Services Operations

This business segment includes management operations services performed for the CPA^® REITs pursuant to the advisory agreements. This business line also includes interest on deferred revenue and earnings from unconsolidated investments in the CPA^® REITs accounted for under the equity method which were received in lieu of cash for certain compensation payments. This business segment is carried out largely by corporate subsidiaries which are subject to federal, state, local and foreign taxes as applicable. The Company’s financial statements are prepared on a consolidated basis including these taxable operations and include a provision for current and deferred taxes on these operations.

Real Estate Operations

This business segment includes the operations of properties under operating lease, properties under direct financing leases, real estate
under construction and development, assets held for sale and equity investments in ventures accounted for under the equity method which are engaged in these activities. Because of the Company’s and its subsidiaries’ legal structure, these operations are not generally subject to federal income taxes; however, they may be subject to certain state, local and foreign taxes.

A summary of comparative results of these business segments is as follows:

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
MANAGEMENT SERVICES
Revenues	$	37,108		$	24,733		$	64,360		$	50,906
Operating expenses		(29,703	)		(13,654	)		(43,774	)		(27,277	)
Other, net (1)		1,973			418			3,053			1,285
Provision for income taxes		(3,896	)		(4,727	)		(10,428	)		(10,526	)
Income from continuing operations	$	5,482		$	6,770		$	13,211		$	14,388
REAL ESTATE (2)
Revenues	$	20,551		$	19,215		$	41,177		$	38,204
Operating expenses		(8,906	)		(9,105	)		(18,222	)		(18,587	)
Interest expense		(4,541	)		(4,110	)		(8,929	)		(8,337	)
Other, net (1)		5,559			524			6,144			885
Provision for income taxes		(102	)		(372	)		(292	)		(426	)
Income from continuing operations	$	12,561		$	6,152		$	19,878		$	11,739
TOTAL COMPANY
Revenues	$	57,659		$	43,948		$	105,537		$	89,110
Operating expenses		(38,609	)		(22,759	)		(61,996	)		(45,864	)
Interest expense		(4,541	)		(4,110	)		(8,929	)		(8,337	)
Other, net (1)		7,532			942			9,197			2,170
Provision for income taxes		(3,998	)		(5,099	)		(10,720	)		(10,952	)
Income from continuing operations	$	18,043		$	12,922		$	33,089		$	26,127

	Total Long-Lived Assets (3)				Equity Investments				Total Assets
	As of		As of		As of		As of		As of		As of
	June 30, 2006		December 31, 2005		June 30, 2006		December 31, 2005		June 30, 2006		December 31, 2005
Management Services	$	120,048	$	109,204	$	104,581	$	90,411	$	313,030	$	288,926
Real Estate		666,581		656,406		35,705		44,156		684,892		694,336
Total Company	$	786,629	$	765,610	$	140,286	$	134,567	$	997,922	$	983,262

(1)	Includes interest income, minority interest, income from equity investments and gains and losses on sales and foreign currency transactions.
(2)	Includes two investments in France that accounted for lease revenues (rental income and interest income in direct financing leases) of $2,057 and $2,081 for the three months ended June 30, 2006 and 2005, respectively, and $4,044 and $4,142 for the six months ended June 30, 2006 and 2005, respectively, and income from equity investments of $229 and $203 for the three months ended June 30, 2006 and 2005, respectively, and $431 and $417 for the six months ended June 30, 2006 and 2005, respectively. These investments also accounted for long-lived assets as of June 30, 2006 and December 31, 2005 of $57,809 and $55,213, respectively.
(3)	Includes real estate, net investment in direct financing leases, equity investments, operating real estate and intangible assets related to management contracts.

17

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in thousands, except share amounts)

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto as of June 30, 2006.

EXECUTIVE OVERVIEW

Business Overview

We are a real estate and advisory company that invests in commercial properties leased to companies domestically and internationally, and earns revenue as the advisor to the following affiliated real estate investment trusts (“CPA^® REITs”) that each make similar investments: Corporate Property Associates 12 Incorporated (“CPA^®:12”), Corporate Property Associates 14 Incorporated (“CPA^®:14”), Corporate Property Associates 15 Incorporated (“CPA^®:15”), and Corporate Property Associates 16 — Global Incorporated (“CPA^®:16 — Global”). Under the advisory agreements with the CPA^® REITs, we perform services related to the day-to-day management of the CPA^® REITs and transaction-related services. As of June 30, 2006, we own and manage over 700 commercial properties domestically and internationally including our own portfolio which is comprised of 169 commercial properties net leased to 109 tenants and totaling approximately 16 million square feet.

Our primary business segments are:

MANAGEMENT SERVICES — We provide services to the CPA^® REITs in connection with structuring and negotiating investment and debt placement transactions (structuring revenue) and provide on-going management of the portfolio (asset-based management and performance revenue). Asset-based management and performance revenue for the CPA^® REITs are determined based on real estate related assets under management. As funds available to the CPA^® REITs are invested, the asset base for which we earn revenue increases. We may elect to receive fees in cash or restricted shares of the CPA^® REITs. We may also earn incentive and disposition revenue in connection with providing liquidity alternatives to CPA^® REIT shareholders.

REAL ESTATE OPERATIONS — We invest in commercial properties that are then leased to companies domestically and internationally. We currently have investments in the United States and Europe.

Current Developments and Trends

Current developments include:

INVESTMENT ACTIVITY — We earn revenue from the acquisition and disposition of properties on behalf of the CPA^® REITs. During the three months ended June 30, 2006, we structured approximately $83,000 in investments on behalf of the CPA^® REITs. All of these investments were made on behalf of CPA^®:16 — Global. Additionally, 29% of the total investments structured were for international transactions. During the three months ended June 30, 2006, we sold four properties on behalf of the CPA^® REITs for approximately $260,470. We did not acquire any properties for our own portfolio in the three months ended June 30, 2006.

DISPOSITION ACTIVITY — During the three months ended June 30, 2006, we sold three domestic properties for combined proceeds of $14,317, net of selling costs, and recognized a combined net loss of $127, exclusive of impairment charges previously recorded totaling $18,660. In addition, we entered into a contract to sell a vacant domestic property for $8,000. We expect to complete this transaction during 2006 at which time we expect to record a gain on this sale of approximately $3,500.

In May 2006, Blackstone Group purchased our interest of approximately 780,000 shares of Meristar Hospitality Corp. for $10.45 per share, at which time we received $8,154 and recorded a realized gain of $4,800. We previously recognized impairment charges totaling $11,345 against this investment.

PROPOSED MERGER — On June 29, 2006, two of the CPA^® REITs we manage, CPA^®:12 and CPA^®:14, entered into a definitive agreement pursuant to which CPA^®:12 will merge with and into CPA^®:14, subject to the approval of the stockholders of CPA^®:12 and CPA^®:14. A joint proxy/registration statement was filed with the SEC on July 25, 2006 relating to the merger. CPA^®:12 and CPA^®:14 are currently awaiting comments from the SEC. The closing of the merger is also subject to customary closing conditions. We currently expect that the closing will occur late in the fourth quarter of 2006 at the earliest although there can be no assurance of such timing. Prior to the proposed merger, CPA^®:12 will also sell certain properties or interests in properties valued at approximately

18

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in thousands, except share amounts)

$199,200 (including the pro rata values of properties which, for financial reporting purposes, we will account for under the equity method of accounting), to us for approximately $120,500 in cash and our assumption of approximately $78,700 in limited recourse mortgage notes payable. CPA^®:12’s sale of properties to us is contingent on the approval of the merger. These properties all have remaining lease terms of eight years or less, which is shorter than the average lease term of CPA^®:14’s portfolio of properties and CPA^®:14 consequently required that these assets be sold by CPA^®:12. We expect to use the available credit facility to finance this transaction, however pre-tax income to be received from disposition and termination fees payable by CPA^®:12 of approximately $48,845 in connection with the proposed liquidation of CPA^®:12 and $7,719 as part of a special cash distribution of $3.00 per share to CPA^®:12 shareholders would also be available to finance this transaction or to reduce any indebtedness incurred in connection with this transaction. The proposed purchase price of the properties is based on a third party valuation of CPA^®:12’s properties as of December 31, 2005 and consequently does not take into account any changes in value that may have occurred subsequent to that date or may occur prior to the completion of this transaction.

CPA^®:16 — GLOBAL PUBLIC OFFERING — Since commencing its second public offering to raise up to $550,000 on March 27, 2006, CPA^®:16 – Global has raised $162,945 through June 30, 2006. We are reimbursed for marketing and personnel costs incurred in raising capital on behalf of CPA^®:16 — Global, subject to certain limitations.

FINANCING ACTIVITY – In June 2006, a joint venture in which we and an affiliate each hold a 50% interest paid a $20,599 balloon payment that was due on a domestic property, and refinanced the property for $30,000. The new limited recourse mortgage financing has an annual fixed interest rate of 6.18% and a 10-year term. As a result of adopting the provisions of EITF 04-05 effective January 1, 2006, we now consolidate this investment.

QUARTERLY DISTRIBUTION — In June 2006, our board of directors approved and increased the 2006 second quarter distribution to $.454 per share payable in July 2006 to shareholders of record as of June 30, 2006.

Current trends include:

We continue to see intense competition in both the domestic and international markets for triple-net leased properties as capital continues to flow into real estate, in general, and triple-net leased real estate, in particular. We believe that low long-term interest rates by historical standards have created greater investor demand for yield-based investments, such as triple-net leased real estate, thus creating increased capital flows and a more competitive investment environment.

We believe that several factors may provide us with continued investment opportunities both domestically and internationally including increased merger and acquisition activity, which may provide additional sale-leaseback opportunities as a source of funding, a continued desire of corporations to divest themselves of real estate holdings and increasing opportunities for sale-leaseback transactions in the international market, which continues to make up a large portion of our investment opportunities.

For the six months ended June 30, 2006, international investments accounted for 61% of total investments made on behalf of the CPA^® REITs. For the year ended December 31, 2005, international investments accounted for 54% of total investments. We currently expect international commercial real estate to continue to comprise a significant portion of the investments we make on behalf of the CPA^® REITs although the percentage of international investments in any given period may vary substantially. Financing terms for international transactions are generally more favorable as they provide for lower interest rates and greater flexibility to finance the underlying property. These benefits are partially offset by shorter financing maturities.

Real estate valuations have risen significantly in recent years. To the extent that disposing of properties fits with our strategic plans, we may look to take advantage of the increase in real estate prices by selectively disposing of properties, particularly in the more mature portfolios that we manage.

Increases in long term interest rates would likely cause the value of the owned and managed assets to decrease, which would create lower revenues from managed assets and lower investment performance for the managed funds. Increases in interest rates may also have an impact on the credit quality of certain tenants. To the extent that the Consumer Price Index (“CPI”) increases, additional rental income streams may be generated for leases with CPI adjustment triggers and partially offset the impact of declining property values. In addition, we constantly evaluate our debt exposure and to the extent that opportunities exist to refinance and lock in lower interest rates over a longer term, we may be able to reduce our exposure to short term interest rate fluctuation.

19

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in thousands, except share amounts)

Companies in automotive related industries (manufacturing, parts, services, etc.) are currently experiencing a challenging environment, which has resulted in several companies filing for bankruptcy protection in recent years. We currently have several auto industry related tenants in the portfolios we manage on behalf of the CPA^® REITs. Some of these tenants have filed voluntary petitions of bankruptcy. If conditions in this industry worsen, additional tenants may file for bankruptcy protection and may disaffirm their leases as part of their bankruptcy reorganization plans. The net result of these trends may have an adverse impact on our asset management revenue.

For the three months ended June 30, 2006, distributions paid to shareholders and minority partners and scheduled mortgage principal payments were substantially funded by cash flow from operations and equity investments. Existing cash and cash equivalent reserves were used to fund the difference.

How Management Evaluates Results of Operations

Management evaluates our results of operations with a primary focus on increasing and enhancing the value, quality and amount of assets under management by our management services operations and seeking to increase value in our real estate operations. Management focuses efforts on underperforming assets through re-leasing efforts, including negotiation of lease renewals, or selectively selling such assets in order to increase value in our real estate portfolio. The ability to increase assets under management by structuring investments on behalf of the CPA^® REITs is affected, among other things, by the CPA^® REITs’ ability to raise capital and our ability to identify appropriate investments.

Management’s evaluation of operating results includes our ability to generate necessary cash flow in order to fund distributions to our shareholders. As a result, management’s assessment of operating results gives less emphasis to the effect of unrealized gains and losses, which may cause fluctuations in net income for comparable periods but has no impact on cash flow, and to other non-cash charges such as depreciation and impairment charges. In evaluating cash flow from operations, management includes equity distributions that are included in investing activities to the extent that the distributions in excess of equity income are the result of non- cash charges such as depreciation and amortization. Management does not consider unrealized gains and losses resulting from short-term foreign currency fluctuations when evaluating our ability to fund distributions. Management’s evaluation of our potential for generating cash flow includes an assessment of the long-term sustainability of both our real estate portfolio and the assets we manage on behalf of the CPA^® REITs.

RESULTS OF OPERATIONS

We evaluate our results from operations by our two major business segments — management services operations and real estate operations. A summary of comparative results of these business segments is as follows:

20

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in thousands, except share amounts)

Management Services Operations

	Three months ended June 30,									Six months ended June 30,
	2006			2005			Change			2006			2005			Change
REVENUES:
Asset management revenue	$	14,752		$	12,867		$	1,885		$	29,114		$	25,467		$	3,647
Structuring revenue		2,462			9,817			(7,355	)		12,354			20,524			(8,170	)
Reimbursed costs from affiliates		19,894			2,028			17,866			22,892			4,860			18,032
Revenues of other business operations		—			21			(21	)		—			55			(55	)
		37,108			24,733			12,375			64,360			50,906			13,454
OPERATING EXPENSES:
General and administrative		(8,344	)		(10,300	)		1,956			(17,962	)		(19,779	)		1,817
Reimbursable costs		(19,894	)		(2,028	)		(17,866	)		(22,892	)		(4,860	)		(18,032	)
Depreciation and amortization		(1,465	)		(1,326	)		(139	)		(2,920	)		(2,638	)		(282	)
		(29,703	)		(13,654	)		(16,049	)		(43,774	)		(27,277	)		(16,497	)
OTHER INCOME AND EXPENSES:
Other interest income		596			621			(25	)		1,138			1,417			(279	)
Income from equity investments		625			415			210			1,609			960			649
Minority interest in loss (income)		729			(618	)		1,347			283			(1,092	)		1,375
Gain on foreign currency transactions and other gains, net		23			—			23			23			—			23
		1,973			418			1,555			3,053			1,285			1,768
Income from continuing operations before income taxes		9,378			11,497			(2,119	)		23,639			24,914			(1,275	)
Provision for income taxes		(3,896	)		(4,727	)		831			(10,428	)		(10,526	)		98
Net income from management services operations	$	5,482		$	6,770		$	(1,288	)	$	13,211		$	14,388		$	(1,177	)

Asset Management Revenue

We earn asset management revenue (asset-based management and performance revenue) from the CPA^® REITs based on assets under management. As funds available to the CPA^® REITs are invested, the asset base for which we earn revenue increases. The asset management revenue that we earn may increase or decrease depending upon (i) increases in the CPA^® REIT asset bases as a result of new investments; (ii) decreases in the CPA^® REIT asset base resulting from sales of investments; or (iii) increases or decreases in the annual asset valuations of CPA^® REIT funds.

For the three and six months ended June 30, 2006 as compared to the comparable 2005 periods, asset management revenue increased $1,885 and $3,647, respectively, primarily due to a net increase in our assets under management as a result of recent investment activity of the CPA^® REITs as well as increases in the annual asset valuations of the CPA^® REITs, including CPA^®:15, which had its initial appraisal in December 2005.

A portion of the CPA^® REIT asset management revenue is based on each CPA^® REIT meeting specific performance criteria and is earned only if the criteria are achieved. The performance criterion for CPA^®:16-Global has not yet been satisfied as of June 30, 2006, resulting in $1,337 and $2,517 in performance revenue being deferred by us for the three and six months ended June 30, 2006, respectively. Since the inception of CPA^®:16-Global, we have deferred $7,034 of performance revenue. We will only be able to recognize this revenue if the performance criterion is met. The performance criterion for CPA^®:16-Global is a cumulative non-compounded distribution return to shareholders of 6%. As of June 30, 2006, CPA^®:16-Global’s current distribution rate was 6.35% and its cumulative distribution return was 5.67%. Based on management’s current assessment, CPA^®:16-Global is expected to meet the cumulative performance criterion during the first half of 2007, at which time we would recognize the cumulative deferred revenue. There is no assurance that the performance criterion will be achieved as projected as it is dependent on, among other factors, the investment of CPA^®:16-Global’s capital raised in its second offering of its shares, and the performance of properties that CPA^®:16-Global invests in generating income in excess of the performance criterion, as well as on the distribution rates that may be set by CPA^®:16-Global’s board of directors. If the performance criterion is achieved, deferred incentive and commission compensation related to achievement of the performance criterion, in the amount of $3,307 (exclusive of interest) as of June 30, 2006, would become payable by us to certain employees.

Structuring Revenue

Structuring revenue includes current and deferred acquisition revenue from structuring investments and financing on behalf of the CPA^® REITs. Investment activity is subject to fluctuations. As described above in the Current Developments and Trends section, we continue to face intense competition for investments in commercial properties both domestically and internationally.

21

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in thousands, except share amounts)

For the three months ended June 30, 2006 and 2005, structuring revenue decreased $7,355, primarily due to a reduction in investment volume. We structured $83,000 of investments for the three months ended June 30, 2006 as compared with $262,000 in the comparable prior year period. The reduction in structuring revenue was magnified by an increase in the proportion of investments structured on behalf of CPA^®:16-Global. For the three months ended June 30, 2006, 100% of investments structured related to CPA^®:16 — Global as compared with approximately 50% in the comparable prior year period. Because CPA^®:16 — Global has not achieved its performance criterion, no deferred acquisition revenue was recorded for the three months ended June 30, 2006.

For the six months ended June 30, 2006 and 2005, structuring revenue decreased $8,170, primarily due to a reduction in investment volume. We structured $338,000 of investments for the six months ended June 30, 2006 as compared with $627,000 in the comparable prior year period. The effect of this decrease was offset in part by a reduction in the proportion of investments structured on behalf of CPA^®:16-Global, for which the performance criterion has not yet been met. For the six months ended June 30, 2006, approximately 55% of investments structured related to CPA^®:16 — Global as compared with approximately 64% in the comparable prior year period resulting in a lower deferral of revenue during the six months ended June 30, 2006 as compared to the comparable prior year period. Additionally, the reduction in structuring revenue was also partially offset by our having charged a reduced fee on an investment completed on behalf of CPA^®:16-Global during the first six months of 2005.

As discussed above, a portion of the CPA^® REIT structuring revenue is based on each CPA^® REIT meeting specific performance criteria and is earned only if the criteria are achieved. The performance criterion for CPA^®:16 — Global has not yet been satisfied as of June 30, 2006, resulting in $3,701 in structuring revenue being deferred by us for the six months ended June 30, 2006. Since the inception of CPA^®:16 — Global, we have deferred $21,409 of structuring revenue and interest thereon of $1,344. We will only be able to recognize this revenue if the performance criterion is met. The current status and anticipated future achievement of the performance criterion is discussed further above. Given that we expect CPA^®:16 — Global to represent a significant portion of our total 2006 investment volume relative to the other CPA^® REITs, structuring revenue will continue to be affected by the deferral of a portion of such fees until CPA^®:16 — Global achieves its performance criterion.

Reimbursable and Reimbursed Costs

Reimbursable costs from affiliates (revenue) and reimbursed costs (expenses) represent costs incurred by us on behalf of the CPA^® REITs, primarily broker/dealer commissions and marketing and personnel costs, and reimbursed by the CPA^® REITs. Revenue from reimbursed costs from affiliates is offset by corresponding charges to reimbursable costs and as such there is no impact on net income related to such income.

For the three and six months ended June 30, 2006 as compared to the comparable 2005 periods, reimbursable and reimbursed costs increased $17,866 and $18,032, respectively, primarily due to broker/dealer commissions related to the commencement of CPA^®:16 – Global’s second public offering in March 2006.

General and Administrative

For the three months ended June 30, 2006 and 2005, general and administrative expenses decreased $1,956 primarily due to several factors including a reduction in compensation related costs of $1,070 primarily due to lower commissions as a result of lower investment volume, a reduction in legal related costs of $1,102 and a reduction in several other general and administrative costs totaling $623. These reductions were partially offset by severance costs incurred and increased office expenses as a result of consolidating the results of operations of a limited partnership, beginning in 2005, that was previously established to administer an office sharing agreement.

For the six months ended June 30, 2006 and 2005, general and administrative expenses decreased $1,817 primarily due to the same factors as described above. Compensation related costs were reduced by $1,989 while legal expenses and other general and administrative expenses decreased by $1,569 and $935, respectively. These reductions were partially offset by severance costs incurred of $1,800 and increased office expenses as described above.

Minority Interest in Loss (Income)

For the three and six months ended June 30, 2006, we recognized minority interest in losses of $729 and $283, respectively, as compared to minority interest in income of $618 and $1,092 for the three and six months ended June 30, 2005, respectively. These

22

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

variances result primarily from the consolidation of the results of operations of a limited partnership, which leases our home office space. We participate in an agreement with certain affiliates, including the CPA^® REITs, to share the costs associated with the leasing the home office space and as a result, reimbursements from affiliates are reflected within minority interest. During the three and six months ended June 30, 2005 (prior to consolidation) our share of costs related to this agreement were included within general and administrative expenses.

Net Income from Management Services Operations

For the three and six months ended June 30, 2006 as compared to the comparable 2005 periods, net income from management services operations decreased by $1,288 and $1,177, respectively, primarily due to a decrease in structuring revenue as a result of lower investment volume. This decrease was partially offset by an increase in asset management revenue resulting primarily from growth in assets under management and increases in the annual asset valuations of the CPA^® REITs and reductions in general and administrative expenses. These variances are described above.

Real Estate Operations

	Three months ended June 30,									Six months ended June 30,
	2006			2005			Change			2006			2005			Change
REVENUES:
Lease revenues	$	18,402		$	16,886		$	1,516		$	36,645		$	33,622		$	3,023
Other operating income		432			422			10			952			981			(29	)
Revenues of other business operations		1,717			1,907			(190	)		3,580			3,601			(21	)
		20,551			19,215			1,336			41,177			38,204			2,973
OPERATING EXPENSES:
General and administrative		(1,527	)		(1,890	)		363			(3,067	)		(3,390	)		323
Depreciation and amortization		(4,471	)		(3,692	)		(779	)		(8,919	)		(7,645	)		(1,274	)
Property expenses		(1,442	)		(1,586	)		144			(3,203	)		(3,299	)		96
Impairment charge		—			(330	)		330			—			(1,130	)		1,130
Operating expenses of other business operations		(1,466	)		(1,607	)		141			(3,033	)		(3,123	)		90
		(8,906	)		(9,105	)		199			(18,222	)		(18,587	)		365
OTHER INCOME AND EXPENSES:
Other interest income		210			203			7			395			249			146
Income from equity investments		619			782			(163	)		1,185			1,605			(420	)
Minority interest in income		(475	)		(148	)		(327	)		(891	)		(306	)		(585	)
Gain (loss) on foreign currency transactions and other gains, net		5,205			(313	)		5,518			5,455			(663	)		6,118
Interest expense		(4,541	)		(4,110	)		(431	)		(8,929	)		(8,337	)		(592	)
		1,018			(3,586	)		4,604			(2,785	)		(7,452	)		4,667
Income from continuing operations before income taxes		12,663			6,524			6,139			20,170			12,165			8,005
Provision for income taxes		(102	)		(372	)		270			(292	)		(426	)		134
Income from continuing operations		12,561			6,152			6,409			19,878			11,739			8,139
(Loss) income from discontinued operations		(739	)		4,011			(4,750	)		(4,720	)		(3,339	)		(1,381	)
Net income from real estate operations	$	11,822		$	10,163		$	1,659		$	15,158		$	8,400		$	6,758

Our real estate operations consist of the investment in and the leasing of commercial real estate. Management’s evaluation of the sources of lease revenues for the six months ended June 30, 2006 and 2005 is as follows:

	Six months ended
	June 30,
	2006		2005
Rental income	$	29,797	$	25,919
Interest income from direct financing leases		6,848		7,703
	$	36,645	$	33,622

23

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

We earned net lease revenues (i.e., rental income and interest income from direct financing leases) from our direct ownership of real estate from the following lease obligations:

	Six months ended
	June 30,
	2006		2005
Bouygues Telecom, S.A. (a) (b)	$	2,343	$	2,414
Detroit Diesel Corporation (c)		2,317		2,079
CheckFree Holdings Corporation Inc. (a) (d)		2,302		—
Dr Pepper Bottling Company of Texas		2,203		2,175
Orbital Sciences Corporation		1,511		1,511
Titan Corporation		1,449		1,449
America West Holdings Corp.		1,419		1,419
AutoZone, Inc.		1,154		1,156
Quebecor Printing, Inc.		970		970
Sybron Dental Specialties Inc.		885		885
Unisource Worldwide, Inc.		848		851
BE Aerospace, Inc.		790		790
CSS Industries, Inc. (e)		785		695
Lucent Technologies, Inc.		759		759
Eagle Hardware & Garden, Inc., a wholly-owned subsidiary of Lowe’s Companies Inc. (f)		733		787
Sprint Spectrum, L.P.		712		712
EnviroWorks, Inc.		651		627
AT&T Corporation		630		630
Swat-Fame, Inc.		621		618
United States Postal Service		617		617
BellSouth Telecommunications, Inc.		612		612
Omnicom Group Inc.		570		570
Other (a) (b)		11,764		11,296
	$	36,645	$	33,622

(a)	Lease revenue applicable to minority interests in the consolidated amounts above total $1,990 and $862 for the six months ended June 30, 2006 and 2005, respectively.
(b)	Revenue amounts are subject to fluctuations in foreign currency exchange rates.
(c)	Increase is due to rent increase in July 2005.
(d)	Property is consolidated beginning January 1, 2006 as a result of implementation of EITF 04-05.
(e)	Property reclassified as an operating lease from a direct financing lease in January 2006.
(f)	Rent increase threshold (percentage of revenue) was not met in 2006.

We recognize income from equity investments of which lease revenues are a significant component. Our ownership interests range from 22.5% to 50%. Our share of net lease revenues in the following lease obligations is as follows:

	Six months ended
	June 30,
	2006		2005
Carrefour France, S.A. (a)	$	1,794	$	1,856
Federal Express Corporation		1,358		1,344
Sicor, Inc.		836		836
Information Resources, Inc. (b)		829		719
Hologic, Inc.		568		568
Childtime Childcare, Inc.		219		204
CheckFree Holdings Corporation Inc. (c)		—		1,124
	$	5,604	$	6,651

(a)	Revenue amounts are subject to fluctuations in foreign currency exchange rates.
(b)	Increase is due to rent increase in October 2005.
(c)	Property is consolidated beginning January 1, 2006 as a result of implementation of EITF 04-05.

24

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

The presentation of results of operations for our real estate operations for the six months ended June 30, 2006 were affected by our adoption of EITF 04-05 effective January 1, 2006. As a result of adopting EITF 04-05, we now consolidate an investment in a property leased to CheckFree Holdings Corporation Inc. that was previously accounted for as an equity investment. This contributed to the increases described below for lease revenues, depreciation and amortization and interest expense. This also resulted in a decrease of $596 in income from equity investments as compared to the comparable prior year period and a corresponding increase in minority interest in income.

Lease Revenues

For the three months ended June 30, 2006 and 2005, lease revenues (rental income and interest income from direct financing leases) increased by $1,516 primarily due to the consolidation of an investment that we previously accounted for as an equity investment as well as rent increases and new lease activity at existing properties. As a result of adopting EITF 04-05 effective January 1, 2006, we recognized revenue of $1,151 from the consolidation of an investment leased to CheckFree Holdings. Rent increases and rent from new tenants at existing properties also contributed $717 of the increase. These increases were partially offset by the negative impact of non-recurring sales overrides and the effect of lower average foreign currency exchange rates in 2006 as compared to 2005 totaling $202.

For the six months ended June 30, 2006 and 2005, lease revenues increased by $3,023 primarily due to the same factors described above. The consolidation of an investment leased to CheckFree Holdings contributed $2,303 of the increase while rent increases and rent from new tenants at existing properties contributed $1,190 of the increase. These increases were partially offset by the negative impact of non-recurring sales overrides and the effect of lower average foreign currency exchange rates in 2006 as compared to 2005 totaling $319.

Our net leases generally have rent increases based on formulas indexed to increases in the CPI or other indices for the jurisdiction in which the property is located, sales overrides or other periodic increases, which are designed to increase lease revenues in the future.

Revenues of Other Business Operations

Revenues of other business operations consist of revenues from Livho, Inc. (“Livho”), a Holiday Inn hotel franchise which we operate at our property in Livonia, Michigan.

For the three and six months ended June 30, 2006 as compared to the comparable 2005 periods, revenues of other business operations decreased by $190 and $21, respectively, primarily due to a decrease in room occupancy rates during 2006.

Depreciation and Amortization

For the three months ended June 30, 2006 and 2005, depreciation and amortization expense increased by $779 primarily due to depreciation of $427 from the reclassification of a property as an operating lease that was previously accounted for as a direct financing lease and depreciation of $234 related to the consolidation of our investment in CheckFree Holdings that we previously accounted for as an equity investment.

For the six months ended June 30, 2006 and 2005, depreciation and amortization expense increased by $1,274 primarily due to the same factors described above. For the six months ended June 30, 2006, we incurred additional depreciation of $836 from the reclassification of a property as an operating lease that was previously accounted for as a direct financing lease and depreciation of $468 related to the consolidation of our investment in CheckFree Holdings that we previously accounted for as an equity investment.

Impairment Charge

No impairment charge was recognized during the three and six months ended June 30, 2006. During the three and six months ended June 30, 2005, we recognized impairment charges of $330 and $1,130, respectively, in connection with entering into a commitment to sell our Livho property as the property’s estimated fair value was lower than its carrying value. The proposed transaction was terminated in June 2005.

Gain (Loss) on Foreign Currency Transactions, Securities and Other Gains, net

We recognized net unrealized gains on foreign currency transactions and other gains of $5,205 and $5,455 for the three and six

25

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

months ended June 30, 2006, respectively, as compared to a losses of $313 and $663 for the comparable three and six months ended June 30, 2005, respectively. These increases resulted primarily from the recognition of a realized gain of approximately $4,800 in May 2006 on the sale of our Meristar Hospitality Corp common stock. In addition, we benefited from the impact of the relative weakening of the U.S. dollar compared to the Euro for the three and six months ended June 30, 2006 as compared to the strengthening of the U.S. dollar in the comparable prior year periods.

Interest Expense

For the three months ended June 30, 2006 and 2005, interest expense increased $431, primarily due to an increase of $810 related to new fixed rate mortgage financing at existing properties obtained in 2005 and $410 related to the consolidation of our investment in CheckFree Holdings that we previously accounted for as an equity investment. These increases were partially offset by a reduction in interest payments of $773 related to our credit facility and a reduction in interest payments as a result of making scheduled principal payments. The reduction in credit facility related interest resulted from lower average outstanding balances during the comparable periods on our facility partially offset by rising interest rates.

For the six months ended June 30, 2006 and 2005, interest expense increased $592, primarily due to the same factors described above. New fixed rate mortgage financing obtained in 2005 contributed an additional $1,571 in interest, while the consolidation of our investment in CheckFree Holdings contributed $773. These increases were partially offset by a net reduction in interest payments of $1,481 related to our credit facility and was also partially offset by a reduction in interest payments as a result of making scheduled principal payments.

Income from Continuing Operations

For the three months ended June 30, 2006 and 2005, income from continuing operations increased $6,409, primarily due to the recognition of a realized gain of approximately $4,800 on the sale of our Meristar common stock as well as an increase in lease revenues of $1,516 primarily from rent increases at existing properties and the consolidation of our investment in CheckFree Holdings. These variances are described above.

For the six months ended June 30, 2006 and 2005, income from continuing operations increased $8,139 primarily due to the same factors described above. We recognized a realized gain of approximately $4,800 on the sale of our Meristar common stock as well as an increase in lease revenues of $3,023 primarily from rent increases at existing properties and the consolidation of our investment in CheckFree Holdings. These variances are described above.

Discontinued Operations

For the three months ended June 30, 2006, we incurred a loss from discontinued operations of $739 due to losses from the operations of discontinued operations. For the six months ended June 30, 2006, we incurred a loss from discontinued operations of $4,720 primarily due to the recognition of impairment charges totaling $3,357.

For the three months ended June 30, 2005, we earned income from discontinued operations of $4,011 primarily due to a gain from the sale of real estate of $9,139 which was partially offset by impairment charges totaling $5,819. For the six months ended June 30, 2005, we incurred a loss from discontinued operations of $3,339 primarily due to the recognition of impairment charges totaling $14,691 which were partially offset by net gains from the sales of real estate totaling $9,119 and income from the operations of discontinued operations of $2,233.

The effect of suspending depreciation was $72 and $198 for the three months ended June 30, 2006 and 2005, respectively, and was $187 and $337 for the six months ended June 30, 2006 and 2005, respectively.

FINANCIAL CONDITION

Uses of Cash during the Period

There has been no material change in our financial condition since December 31, 2005. Cash and cash equivalents totaled $15,593 as of June 30, 2006, an increase of $2,579 from the December 31, 2005 balance. We believe that we will generate sufficient cash from operations and, if necessary, from the proceeds of limited recourse mortgage loans, unused capacity on our credit facility, unsecured indebtedness and the issuance of additional equity securities to meet our short-term and long-term liquidity needs. We assess our ability to access capital on an ongoing basis. Our use of cash during the period is described below.

26

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

OPERATING ACTIVITIES — In evaluating cash flow from operations, management includes cash flow from distributions received on equity investments, which are included in investing activities to the extent that the distributions in excess of equity income are the result of non-cash charges such as depreciation and amortization. During the six months ended June 30, 2006, cash flow from operations and equity investments of $38,671 was sufficient to pay distributions to shareholders of $34,356. For 2006, we have elected to continue to receive all performance revenue from the CPA^® REITs as well as the asset management revenue payable by CPA^®:16 — Global in restricted shares rather than cash. However, for 2006 we have elected to receive the base asset management revenue from CPA^®:12 in cash. Operating cash flows for the six months ended June 30, 2006 benefited by $1,869 as a result of receiving CPA^®:12’s base asset management revenue in cash instead of restricted shares. We expect that annual cash flows for 2006 will benefit by approximately $3,800 as a result of this election.

During the six months ended June 30, 2006, we received revenue of $9,315 in connection with structuring investments and revenue of $13,299 from providing asset-based management services on behalf of the CPA^® REITs, exclusive of that portion of such revenue being satisfied by the CPA^® REITs through the issuance of their restricted common stock rather than paying cash. In January 2006, we received $15,474 from the annual installment of deferred acquisition revenue, including interest. The installments are subject to certain subordination provisions. CPA^®:16-Global has not yet met the subordination provisions and management currently anticipates that no deferred amounts will be recognized by us and payable by CPA^®:16-Global before the first half of 2007.

Our real estate operations provided cash flows (contractual lease revenues, net of property-level debt service) of approximately $24,545. Annual cash flow from operations is currently projected to fund distributions to shareholders; however, operating cash flow fluctuates on a quarterly basis due to factors that include the timing of the receipt of transaction-related revenue, the timing of certain compensation costs that are paid and receipt of the annual installment of deferred acquisition revenue and interest thereon in the first quarter.

INVESTING ACTIVITIES — Our investing activities are generally comprised of real estate transactions (purchases and sales) and capitalized property related costs. During the six months ended June 30, 2006 we received $22,471 in proceeds from the sale of properties and investments of which $9,163 was placed in an escrow account for a potential future investment. We made capital improvements totaling $3,874 to existing properties and also paid our annual installment of deferred acquisition revenue of $524 to our former management company relating to 1998 and 1999 property acquisitions. The remaining obligation as of June 30, 2006 is $661. We currently anticipate using cash from operations to fund the remaining obligation.

During the six months ended June 30, 2006, we provided our affiliate, CPA^®:15, with $84,000 to fund the early repayment of a mortgage obligation. This loan was used to facilitate the completion of the sale of one of its properties and was repaid the next business day. During the six months ended June 30, 2006, we received distributions of $3,255 from the CPA^® REITs, with $1,646 included in cash flows from investing activities, representing an amount in excess of the income recognized on the CPA^® REIT investments for financial reporting purposes.

FINANCING ACTIVITIES — During the six months ended June 30, 2006, we paid distributions to shareholders of $34,356. In addition to paying distributions, our financing activities included making scheduled mortgage principal payments of $5,705 and paying down the outstanding balance on our credit facility by $13,000. Gross borrowings under the credit facility were $25,000, which were used for several purposes in the normal course of business, and repayments were $38,000. In addition, we obtained $30,000 from the refinancing of an investment leased to CheckFree Holdings that we now consolidate in accordance with EITF 04-05. Also during the six months ended June 30, 2006, we received $4,031 from the release of escrow funds that we deposited during 2005 in connection with obtaining mortgage financing on several investments and raised $3,652 from the issuance of shares primarily through our Distribution Reinvestment and Share Purchase Plan.

In the case of limited recourse mortgage financing that does not fully amortize over its term or is currently due, we are responsible for the balloon payment only to the extent of our interest in the encumbered property because the holder generally has recourse only to the collateral. When balloon payments come due, we may seek to refinance the loans, restructure the debt with the existing lenders or evaluate our ability to satisfy the obligation from our existing resources including our revolving line of credit. To the extent the remaining initial lease term on any property remains in place for a number of years beyond the balloon payment date, we believe that the ability to refinance balloon payment obligations is enhanced. We also evaluate our outstanding loans for opportunities to refinance debt at lower interest rates that may occur as a result of decreasing interest rates or improvements in the credit rating of tenants. We believe we have sufficient resources to pay off the loans if they are not refinanced.

27

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

Cash Resources

As of June 30, 2006, we had $15,593 in cash and cash equivalents, which can be used for working capital needs and other commitments and may be used for future investments, including financing the purchase of certain properties from CPA^®:12. We also have a credit facility with unused capacity of up to $173,000 available as of June 30, 2006, which is also available to meet working capital needs and other commitments. In addition, debt may be incurred on unleveraged properties with a carrying value of $225,382 as of June 30, 2006, subject to meeting certain financial ratios on our credit facility, and any proceeds may be used to finance future investments. We continue to evaluate fixed-rate financing options, such as obtaining limited recourse financing on our unleveraged properties. Any financing obtained may be used for working capital objectives and may be used to pay down existing debt balances. In addition, during July 2006, we received approximately $1,600 from CPA^®:14 as part of a special cash distribution of $.45 per share to CPA^®:14 shareholders in connection with the gain on sale of certain properties.

The credit facility has financial covenants requiring us, among other things, to maintain a minimum equity value and to meet or exceed certain operating and coverage ratios. We are in compliance with these covenants as of June 30, 2006. Advances are prepayable at any time. Amounts drawn on the credit facility, which expires in May 2007, bear interest at a rate of either (i) the one, two, three or six-month LIBOR, plus a spread which ranges from 0.6% to 1.45% depending on leverage or corporate credit rating or (ii) the greater of the bank’s Prime Rate and the Federal Funds Effective Rate, plus .50%, plus a spread of up to .125% depending on our leverage ratio. We can renew the credit facility for an additional one year period.

	June 30, 2006				December 31, 2005
	Maximum		Outstanding		Maximum		Outstanding
	Available		Balance		Available		Balance
Credit Facility	$	175,000	$	2,000	$	225,000	$	15,000

Cash Requirements

During the next twelve months, cash requirements will include paying distributions to shareholders, scheduled mortgage principal payments (our next balloon payment is not due until August 2007), making distributions to minority partners as well as other normal recurring operating expenses. We may also seek to use our cash to invest in new properties, to repurchase shares under our share repurchase program and maintain cash balances sufficient to meet working capital needs. We may issue additional shares in connection with investments in real estate when it is consistent with the objectives of the seller.

We have budgeted capital expenditures of up to approximately $3,565 at various properties during the next twelve months. The capital expenditures will primarily be for tenant and property improvements in order to enhance a property’s cash flow or marketability for re-leasing or sale.

We expect to meet our capital requirements to fund future investments, any capital expenditures on existing properties and scheduled debt maturities on limited recourse mortgages through use of our cash reserves or unused amounts on our credit facility.

Expected Impact of Proposed Merger

In connection with the proposed merger, if approved, we expect to receive approximately $48,845 in disposition and termination fees from CPA^®:12 as well as $7,719 as part of a special cash distribution of $3.00 per share to CPA^®:12 shareholders, however there can be no assurances that the merger will be completed. These funds will be used, along with our credit facility and existing cash resources, to finance the purchase of certain properties or interests in properties from CPA^®:12 for approximately $120,500 in cash and the assumption of debt of approximately $78,700. We may also use our credit facility to loan up to $50,000 to CPA^®:14 in connection with their merger with CPA^®:12. Disposition fees approximating $5,970 to be received from CPA^®:12 related to properties we acquire from CPA^®:12 will not be recognized as income but will reduce the cost of the properties we acquire.

We currently estimate that the properties to be acquired from CPA^®:12 will generate annual lease revenue and cash flow, inclusive of minority interest, of approximately $17,030 and $13,310, respectively, and annual equity income of approximately $1,870. This additional cash flow will be partially offset by lower annual asset management revenue approximating $1,990 and interest expense incurred related to any borrowing under our credit facility to finance this transaction.

28

W. P. CAREY & CO. LLC

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

Summary of Financing

The table below summarizes our mortgage notes payable and unsecured line of credit as of June 30, 2006 and 2005, respectively.

	June 30,
	2006			2005
Balance:
Fixed rate	$	202,488		$	127,941
Variable rate		53,424			123,933
Total	$	255,912		$	251,874
Percent of total debt:
Fixed rate		79	%		51	%
Variable rate		21	%		49	%
Total		100	%		100	%
Weighted average interest rate at end of period:
Fixed rate		6.54	%		7.44	%
Variable rate		4.90	%		5.69	%

Aggregate Contractual Agreements

The table below summarizes our contractual obligations as of June 30, 2006 and the effect that such obligations are expected to have on our liquidity and cash flow in future periods.

			Less than						More than
	Total		1 year		1-3 years		3-5 years		5 years
Mortgage notes payable — Principal	$	253,897	$	11,624	$	58,204	$	47,543	$	136,526
Mortgage notes payable — Interest (1)		83,723		15,682		26,396		17,512		24,133
Credit facility — Principal		2,000		2,000		—		—		—
Credit facility — Interest (1)		151		151		—		—		—
Deferred acquisition compensation due to affiliates — Principal		661		524		137		—		—
Deferred acquisition compensation due to affiliates — Interest		38		32		6		—		—
Operating leases (2)		28,566		1,820		5,724		5,572		15,450
	$	369,036	$	31,833	$	90,467	$	70,627	$	176,109

(1)	Interest on variable rate debt obligations was calculated using the variable interest rate as of June 30, 2006.
(2)	Operating lease obligations consist primarily of the total minimum rents payable on the lease for our principal offices. We are reimbursed by affiliates for their share of the minimum rents under an office cost-sharing agreement. Such amounts are allocated among the entities, based on gross revenues and are adjusted quarterly.

Amounts related to our foreign operations are based on the exchange rate of the Euro as of June 30, 2006.

We have employment contracts with several senior executives. These contracts provide for severance payments in the event of termination under certain conditions including change in control.

As of June 30, 2006, we have no material capital lease obligations for which we are the lessee, either individually or in the aggregate.

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W. P. CAREY & CO. LLC

ITEM 3. — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(in thousands except share and per share amounts)

Market risk is the exposure to loss resulting from changes in interest, foreign currency exchange rates and equity prices. In pursuing our business plan, the primary risks to which we are exposed are interest rate risk and foreign currency exchange risk.

Interest Rate Risk

The value of our real estate is subject to fluctuations based on changes in interest rates, local and regional economic conditions and changes in the creditworthiness of lessees, all which may affect our ability to refinance property-level mortgage debt when balloon payments are scheduled.

At June 30, 2006, $202,474 of our long-term debt bears interest at fixed rates, and therefore the fair value of these instruments is affected by changes in the market interest rates. The following table presents principal cash flows based upon expected maturity dates and scheduled amortization payments of our debt obligations and the related weighted-average interest rates by expected maturity dates for our fixed rate debt. Annual interest rates on fixed rate debt as of June 30, 2006 ranged from 4.87% to 10.125%. The annual interest rates on our variable rate debt as of June 30, 2006 ranged from 3.86% to 8.25%.

Advances from the line of credit bear interest at an annual rate of either (i) the one, two, three or six-month LIBOR, plus a spread which ranges from 0.6% to 1.45% depending on leverage or corporate credit rating or (ii) the greater of the bank’s Prime Rate and the Federal Funds Effective Rate, plus .50%, plus a spread of up to .125% depending on our leverage.

	2006			2007			2008			2009			2010			Thereafter			Total		Fair value
Fixed rate debt	$	4,325		$	24,682		$	9,737		$	36,936		$	13,984		$	112,810		$	202,474	$	200,911
Weighted average interest rate		7.26	%		7.80	%		7.34	%		7.31	%		7.59	%		4.75	%
Variable rate debt	$	1,361		$	4,816		$	8,108		$	3,291		$	3,384		$	32,463		$	53,423	$	53,423

Annual interest expense would increase or decrease on variable rate debt by approximately $534 for each 1% increase or decrease in interest rates. A change in interest rates of 1% would increase or decrease the fair value of our fixed rate debt at June 30, 2006 by approximately $3,911.

Foreign Currency Exchange Rate Risk

We have foreign operations in France and as such are subject to risk from the effects of exchange rate movements of the Euro, which may affect future costs and cash flows. We are a net receiver of the Euro (we receive more cash than we pay out) and therefore our foreign operations benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to the Euro. For the three months ended June 30, 2006 and 2005, we recognized a gain of $17 and a loss of $25, respectively, and for the six months ended June 30, 2006 and 2005, we recognized a gain of $102 and a loss of $11, respectively, in foreign currency transaction gains in connection with the transfer of cash from foreign operating subsidiaries to the parent company. The cash received was subsequently converted into dollars. In addition, for the three months ended June 30, 2006 and 2005, we recognized net unrealized foreign currency gains of $400 and losses of $456, respectively. The cumulative foreign currency translation adjustment reflects a loss of $560 as of June 30, 2006. To date, we have not entered into any foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.

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W. P. CAREY & CO. LLC

ITEM 4. — CONTROLS AND PROCEDURES

(A) Disclosure Controls and Procedures

Our disclosure controls and procedures include our controls and other procedures designed to provide reasonable assurance that information required to be disclosed in this and other reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is accumulated and communicated to our management, including our chief executive officer and acting chief financial officer, to allow timely decisions regarding required disclosure and to ensure that such information is recorded, processed, summarized and reported, within the required time periods specified in the SEC’s rules and forms. It should be noted that no system of controls can provide complete assurance of achieving a company’s objectives, and that future events may impact the effectiveness of a system of controls.

Our chief executive officer and acting chief financial officer have conducted a review of our disclosure controls and procedures as of June 30, 2006. Based upon this review, our chief executive officer and acting chief financial officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of June 30, 2006 at a reasonable level of assurance and procedures to ensure that the information required to be disclosed in the reports we file under the Exchange Act is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms.

(B) Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

31

W. P. CAREY & CO. LLC

PART II
(Amounts in thousands, except share amounts)

ITEM 1. — LEGAL PROCEEDINGS

Refer to Note 8, Commitments and Contingencies, of the consolidated financial statements for information regarding legal proceedings.

ITEM 2. — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities — There were no issuer purchases of equity securities during the three months ended June 30, 2006. In December 2005, our board of directors approved a share repurchase program that gives us authorization to repurchase up to $20,000 of our common stock in the open market beginning December 16, 2005 and over the next 12 months as conditions warrant. As of June 30, 2006, the maximum approximate dollar value of shares that may yet be purchased under the plan approximated $17,316.

ITEM 4. — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual shareholders’ meeting was held on June 7, 2006, at which time a vote was taken to elect our directors through the solicitation of proxies. The shareholders elected the following directors for the ensuing year:

	Total Shares		Shares Voting		Shares
Name of Director	Voting		For		Withheld
Francis J. Carey		30,802,067		30,510,520		291,547
Wm. Polk Carey		30,802,067		30,559,256		242,811
Nathaniel S. Coolidge		30,802,067		29,067,263		1,734,804
Gordon F. DuGan		30,802,067		30,576,507		225,560
Eberhard Faber IV		30,802,067		29,117,296		1,684,771
Lawrence R. Klein		30,802,067		30,549,785		252,282
Charles E. Parente		30,802,067		30,541,472		260,595
George E. Stoddard		30,802,067		30,072,064		730,003
C. C. Townsend, Jr.		30,802,067		29,525,519		1,276,548
Karsten von Köller		30,802,067		30,613,484		188,583
Reginald H. Winssinger		30,802,067		30,616,098		185,969

The shareholders elected to amend and restate our Amended and Restated Limited Liability Company Agreement to conform the provision regarding sales of assets to a corresponding provision of the Delaware General Corporate Law:

Shares Voting For	20,549,157
Shares Voting Against	130,496
Shares Abstaining	412,229
Non-votes	9,710,185

ITEM 6. — EXHIBITS

10.1	Agreement for Sale and Purchase, dated June 29, 2006, by and among Corporate Property Associates 12 Incorporated, the entities listed on schedule 1 named therein, Carey Asset Management Corp. and W. P. Carey & Co. LLC (Incorporated by reference to Form 8-K, dated July 6, 2006).
10.2	W. P. Carey & Co. LLC Amended and Restated Limited Liability Company Agreement.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32

W. P. CAREY & CO. LLC

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	W.P. CAREY & CO. LLC
8/9/2006	By:	/s/ Mark J. DeCesaris
Date		Mark J. DeCesaris
		Managing Director and acting Chief Financial Officer
		(acting Principal Financial Officer)
8/9/2006	By:	/s/ Claude Fernandez
Date		Claude Fernandez
		Managing Director and Chief Accounting Officer
		(Principal Accounting Officer)

33

EX-10.2

                                                                               .
                                                                               .
                                                                               .

                                                                    EXHIBIT 10.2

                                TABLE OF CONTENTS



                                                                            PAGE
                                                                            ----
                                                                         
                                    ARTICLE 1
                                   DEFINITIONS

                                    ARTICLE 2
                         CONTINUATION, PURPOSE AND TERM

2.1.  Continuation.......................................................    12
2.2.  Company Name.......................................................    12
2.3.  The Certificate....................................................    12
2.4.  Principal Place of Business........................................    13
2.5.  Term of Company....................................................    13
2.6.  Purposes...........................................................    13
2.7.  Powers.............................................................    13
2.8.  Effectiveness of this Agreement....................................    14

                                   ARTICLE 3
         CLASSES OF SHARES; ADMISSIONS OF SHAREHOLDERS; CAPITALIZATION

3.1.  Classes of Shares..................................................    16
3.2.  Additional Shareholders............................................    17
3.3.  Capital Accounts...................................................    17
3.4.  Transfer of Capital Accounts.......................................    18
3.5.  Tax Matters Partner................................................    19

                                   ARTICLE 4
                                  ALLOCATIONS

4.1.  General Rules Concerning Allocations...............................    19
4.2.  Allocations of Profits and Losses..................................    19
4.3.  Special Allocations................................................    19
4.4.  Additional Allocations.............................................    21
4.5.  Tax Allocations....................................................    21

                                   ARTICLE 5
         DISTRIBUTIONS, REDEMPTIONS AND CERTAIN PERMITTED CONVERSIONS

5.1.  Special Distributions; Distributions of Cash Flow from Operations
      or Financings......................................................    23




                                                                         
5.2.  Distributions Relating to Liquidation Events.......................    23
5.3.  Priority...........................................................    23
5.4.  Payments to Shareholders for Services..............................    24
5.5.  Withholding........................................................    24

                                    ARTICLE 6
                                  SHAREHOLDERS

6.1.  Limited Liability..................................................    25
6.2.  Voting Rights of Shareholders; Authority of Board of Directors.....    25

                                    ARTICLE 7
                             DIRECTORS AND OFFICERS

7.1.  General Powers of Directors........................................    27
7.2.  Number and Term of Office of Directors.............................    28
7.3.  Officers...........................................................    29

                                    ARTICLE 8
  LIMITATIONS ON LIABILITY OF, AND INDEMNIFICATION OF, DIRECTORS AND OFFICERS.

8.1.  Limitations on Liability of, and Indemnification of, Directors
      and Officers.......................................................    29

                                    ARTICLE 9
              TRANSFERS OF INTERESTS; ADMISSION OF NEW SHAREHOLDERS

9.1.  Transfers..........................................................    30
9.2.  New Shareholders...................................................    30
9.3.  Lender Ownership Limit.............................................    30

                                   ARTICLE 10
                           DISSOLUTION AND TERMINATION

10.1. Events of Dissolution..............................................    31
10.2. Application of Assets..............................................    32
10.3. Gain or Losses in Process of Liquidation...........................    32
10.4. Procedural and Other Matters.......................................    33

                                   ARTICLE 11
                         APPOINTMENT OF ATTORNEY-IN-FACT

11.1. Appointment and Powers.............................................    33
11.2. Presumption of Authority...........................................    34





                                                                         
                                   ARTICLE 12
   CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL AND BUSINESS COMBINATIONS

12.1. Definitions........................................................    34
12.2. Business Combinations..............................................    37
12.3. Exemptions.........................................................    38
12.4. Amendment..........................................................    41
12.5. Certain Determinations with Respect to this Article 12.............    41

                                   ARTICLE 13
                     VOTING RIGHTS OF CERTAIN CONTROL SHARES

13.1. Definitions........................................................    42

                                   ARTICLE 14
                            MISCELLANEOUS PROVISIONS








                              AMENDED AND RESTATED
                       LIMITED LIABILITY COMPANY AGREEMENT
                                       OF
                              W. P. CAREY & CO. LLC
                     (A DELAWARE LIMITED LIABILITY COMPANY)

     THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"AGREEMENT") of W. P. CAREY & CO. LLC, a Delaware limited liability company (the
"COMPANY"), dated as of June 7, 2006, is entered into by and among those Persons
who have executed this Agreement or a counterpart hereof, or who become parties
hereto pursuant to the terms of this Agreement.

                                   WITNESSETH:

     WHEREAS, this Agreement shall constitute the Limited Liability Company
Agreement of the Company, and shall be binding upon all Persons (as defined
herein) now or at any time hereafter who are Shareholders (as defined herein).

     NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth in this Agreement, and of other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto, intending legally
to be bound, hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

     Capitalized terms used in this Agreement shall have the meanings set forth
below or in the Section of this Agreement referred to below, except as otherwise
expressly indicated or limited by the context in which they appear in this
Agreement. All terms defined in this Article 1 or in the preamble to this
Agreement in the singular have the same meanings when used in the plural and
vice versa.

     "ACQUIRING PERSON" shall have the meaning set forth in Section 13.1 of this
Agreement.

     "ACT" means the Delaware Limited Liability Company Act, Del. Code Ann. tit.
6, sec.sec.18-101 et seq., as amended from time to time.



     "ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Shareholder,
the negative balance, if any, in such Shareholder's Capital Account as of the
end of any relevant Fiscal Year, determined after giving effect to the following
adjustments:

          (a) credit to such Capital Account any portion of such negative
     balance which such Shareholder (i) is treated as obligated to restore to
     the Company pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c) of
     the Treasury Regulations, or (ii) is deemed to be obligated to restore to
     the Shareholder pursuant to the penultimate sentences of Section
     1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations; and

          (b) debit to such Capital Account the items described in Sections
     1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury Regulations.

     "AFFILIATE" means, with respect to any Person, (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person;
(ii) any Person owning or controlling 10% or more of the outstanding voting
securities of such Person; (iii) any officer, director or partner of such Person
or of any Person specified in (i) or (ii) above; and (iv) any Person in which
any officer, director or partner of any Person specified in (iii) above is an
officer, director or partner.

     "AGREEMENT" means this Amended and Restated Limited Liability Company
Agreement of the Company, as may be amended, restated, supplemented or otherwise
modified from time to time as herein provided.

     "ANNOUNCEMENT DATE" shall have the meaning set forth in Section 12.3 of
this Agreement.

     "ASSOCIATE" shall have the meanings set forth in Sections 12.1 and 13.1 of
this Agreement.

     "BENEFICIAL OWNER". shall have the meaning set forth in Section 12.1 of
this Agreement.

     "BOARD OF DIRECTORS" or "BOARD OF MANAGERS" or "BOARD". means the board on
which all of the Company's Managers sit, in their capacities as Managers.

     "BOOK GAIN" or "BOOK LOSS" means the gain or loss recognized by the Company
for Section 704(b) book purposes in any Fiscal Year by reason of any sale or
disposition with respect to any of the assets of the Company. Such Book Gain or
Book Loss shall be computed by reference to the Book Value of such property or
assets as of the date of such sale or disposition (determined in accordance with
Section 1.12 of this Agreement), rather than by reference to the tax


                                      B-5



basis of such property or assets as of such date, and each and every reference
herein to "GAIN" or "LOSS" shall be deemed to refer to Book Gain or Book Loss,
rather than to tax gain or tax loss, unless the context manifestly otherwise
requires.

     "BOOK VALUE" means, with respect to any asset of the Company, such asset's
adjusted basis for federal income tax purposes, except as follows:

          (a) the initial Book Value of any asset contributed by a Shareholder
     to the Company shall be the gross fair market value of such asset, without
     reduction for liabilities, as determined by the contributing Shareholder
     and the Company on the date of contribution thereof;

          (b) if the Managing Member reasonably determines that an adjustment is
     necessary or appropriate to reflect the relative economic interests of the
     Shareholders, the Book Values of all Company assets shall be adjusted in
     accordance with Sections 1.704-1(b)(2)(iv)(f) and (g) of the Treasury
     Regulations to equal their respective gross fair market values, without
     reduction for liabilities, as reasonably determined by the Managing Member,
     as of the following times:

               (1) a Capital Contribution (other than a de minimis Capital
          Contribution) to the Company by a new or existing Shareholder as
          consideration for a Share; or

               (2) the distribution by the Company to a Shareholder of more than
          a de minimis amount of Company assets as consideration for the
          repurchase of a Share; or

               (3) the liquidation of the Company within the meaning of Section
          1.704-1(b)(2)(ii)(g) of the Treasury Regulations;

          (c) the Book Value of Company assets distributed to any Shareholder
     shall be the gross fair market values of such assets (taking Section
     7701(g) of the Code into account) without reduction for liabilities, as
     reasonably determined by the Managing Member as of the date of
     distribution; and

          (d) The Book Value of Company assets shall be increased (or decreased)
     to reflect any adjustments to the adjusted basis of such assets pursuant to
     Sections 734(b) or 743(b) of the Code, but only to the extent that such
     adjustments are taken into account in determining Capital Accounts pursuant
     to Section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations (as set forth
     in Section 3.3); provided, however, that Book Values shall not be adjusted
     pursuant to this paragraph (d) to the extent the Managing Member reasonably
     determines that an adjustment pursuant to paragraph (b) above is


                                      B-6



     necessary or appropriate in connection with a transaction that would
     otherwise result in an adjustment pursuant to this paragraph (d).

     At all times, Book Value shall be adjusted by any Depreciation taken into
account with respect to the Company's or a CPA(R) Partnership's assets for
purposes of computing Profit and Loss.

     "BUSINESS COMBINATION" shall have the meaning set forth in Section 12.1 of
this Agreement.

     "BYLAWS" means the bylaws of the Company, as amended from time to time,
governing various aspects of the operation of the Company and the rights and
obligations of its Shareholders, Board of Directors, officers and other agents.
The Bylaws shall be deemed an amendment and supplement to and part of this
Agreement after they are adopted by the Board of Directors in accordance with
Section 7.1(a). All provisions of the Bylaws not inconsistent with law or this
Agreement shall be valid and binding.

     "CAPITAL ACCOUNT" shall have the meaning ascribed thereto in Section 3.3 of
this Agreement.

     "CAPITAL CONTRIBUTIONS" means the total amount of cash and the fair market
value of other property contributed to the Company by the Shareholders.

     "CAPITAL TRANSACTIONS" means (a) any sale, exchange, taking by eminent
domain, damage, destruction or other disposition of all or any part of the
assets of the Company, other than tangible personal property disposed of in the
ordinary course of business; or (b) any financing or refinancing of any Company
indebtedness; provided, that the receipt by the Company of Capital Contributions
shall not constitute Capital Transactions.

     "CERTIFICATE" means the "CERTIFICATE OF FORMATION" of the Company, as
originally filed with the office of the Secretary of State of the State of
Delaware, as amended, restated, supplemented or otherwise modified from time to
time as herein provided.

     "CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and any subsequent federal law of similar import, and, to the extent
applicable, any Treasury Regulations promulgated thereunder.

     "COMPANY" means the limited liability company heretofore formed and
continued hereby in accordance with this Agreement by the parties hereto, as
such limited liability company may from time to time be constituted.

     "COMPANY INTEREST" means a limited liability company interest in the
Company, and, if the context so allows, the percentage of a limited liability


                                      B-7



company interest as compared to all of the aggregate Capital Accounts of all
Shareholders (as such percentage may be changed from time to time to reflect
adjustments as provided for in this Agreement); it being understood and agreed
that this term shall not be deemed to apply to any debt incurred by the Company
(directly or indirectly), including but not limited to through custodial, trust,
or similar or other arrangements.

     "CONSENT" means either the consent given by vote at a duly called and held
meeting or the prior written consent, as the case may be, of a Person to do the
act or thing for which the consent is solicited, or the act of granting such
consent, as the context may require.

     "CONTROL SHARES" shall have the meaning set forth in Section 13.1 of this
Agreement.

     "CPA(R) PARTNERSHIP" means Corporate Property Associates, a California
limited partnership, Corporate Property Associates 4, a California limited
partnership, Corporate Property Associates 6, a California limited partnership,
Corporate Property Associates 9, L.P., a Delaware limited partnership or any of
them.

     "DEPRECIATION" means, for each Fiscal Year, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such year or other period for federal income tax
purposes; provided, that if the Book Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of any such year or other
period, Depreciation shall be an amount that bears the same relationship to the
Book Value of such asset as the depreciation, amortization, or other cost
recovery deduction computed for federal income tax purposes with respect to such
asset for the applicable period bears to the adjusted tax basis of such asset at
the beginning of such period, or if such asset has a zero adjusted tax basis,
Depreciation shall be an amount determined under any reasonable method selected
by the Board of Directors.

     "DETERMINATION DATE" shall have the meaning set forth in Section 12.3 of
this Agreement.

     "DIRECTOR" shall have the same meaning as Manager.

     "DISTRIBUTION PAYMENT DATE" means each such date as the Board of Directors
shall declare for a distribution to Shareholders.

     "ENTITY" means any general partnership, limited partnership, corporation,
joint venture, trust, limited liability company, limited liability partnership,
business trust, cooperative, or association. An Entity may or may not be an
Affiliate of the Company or of a Company Affiliate.


                                      B-8



     "FISCAL YEAR" means the fiscal year of the Company and shall be the same as
its taxable year, which shall be the calendar year unless otherwise determined
by the Board of Directors in accordance with the Code.

     "FIVE YEAR TOLLING PERIOD" shall have the meaning set forth in Section 12.2
of this Agreement.

     "FUTURE SHARES" shall have the meaning set forth in Section 3.1 of this
Agreement.

     "INDEPENDENT DIRECTOR" means a Director of the Company who, in the opinion
of the Board of Directors of the Company, is free from any relationship that
would interfere with the exercise of independent judgment. A Director of the
Company who is an Affiliate of the Company or an officer or employee of the
Company or its Subsidiaries or Affiliates would not qualify as an Independent
Director.

     "INTERESTED SHARES" shall have the meaning set forth in Section 13.1 of
this Agreement.

     "INTERESTED PARTY" shall have the meaning set forth in Section 12.1 of this
Agreement.

     "LIMITED PARTNER" means a limited partner of a CPA Partnership.

     "LISTED SHAREHOLDERS" means the holders of Listed Shares.

     "LISTED SHARES" shall have the meaning set forth in Section 3.1 of this
Agreement.

     "MANAGERS" means those individuals serving on the Board of Directors of the
Company, including successor or additional Managers duly elected in accordance
with the terms of this Agreement in their capacities as "MANAGERS" of the
Company within the meaning of the Act.

     "MARKET VALUE" shall have the meaning set forth in Section 12.1 of this
Agreement.

     "MEMBERS" means all Persons who become Members as herein provided and who
are listed as members of the Company in the books and records of the Company, in
such Persons' capacity as "MEMBERS" of the Company within the meaning of the
Act.

     "NONRECOURSE DEDUCTIONS" has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Treasury Regulations.


                                      B-9



     "NONRECOURSE LIABILITIES" has the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.

     "PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Treasury Regulations Section 1.704-2(i)(3).

     "PARTNER NONRECOURSE DEBT" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).

     "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in Treasury
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Company taxable year
shall be determined in accordance with the rules of Treasury Regulations Section
1.704-2(i)(2).

     "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in a Partnership Minimum Gain, for a
Company taxable year shall be determined in accordance with the rules of
Treasury Regulations.

     "PERMITTED SELLING EXPENSES" means the out-of-pocket expenses actually
incurred directly by a CPA(R) Partnership in the course of selling a particular
Property, or by securing such Property; or, if no such actual sale has occurred
in the case in question, the out-of-pocket expenses which would have been
incurred directly by such CPA(R) Partnership (based on local conditions and
practices existing at the time) had such CPA(R) Partnership sold a particular
Property.

     "PERSON" means any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors, and assigns of such Person
where the context so admits.

     "PROFIT" and "LOSS" means, for each Fiscal Year or other period for which
allocations to Shareholders are made, an amount equal to the Company's taxable
income or loss for such year or period, determined in accordance with Section
703(a) of the Code (provided, that for this purpose, all items of income, gain,
loss, or deduction required to be stated separately pursuant to Section
703(a)(1) of the Code shall be included in taxable income or loss), with the
following adjustments:

          (a) Any income of the Company that is exempt from federal income tax
     and not otherwise taken into account in computing Profit or Loss pursuant
     to this provision shall be added to such taxable income or loss;


                                      B-10



          (b) Any expenditure of the Company described in Section 705(a)(2)(B)
     of the Code or treated as Code Section 705(a)(2)(B) expenditures pursuant
     to Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations, and not
     otherwise taken into account in computing Profit or Loss pursuant to this
     provision, shall be subtracted from such taxable income or loss;

          (c) Book Gain or Book Loss from a Capital Transaction shall be taken
     into account in lieu of any tax gain or tax loss recognized by the Company
     by reason of such Capital Transaction; and

          (d) In lieu of the depreciation, amortization, and other cost recovery
     deductions taken into account in computing such taxable income or loss,
     there shall be taken into account Depreciation for such Fiscal Year or
     other period, computed as provided in this Agreement.

     If the Company's taxable income or loss for such Fiscal Year or other
period, as adjusted in the manner provided above, is a positive amount, such
amount shall be the Company's Profit for such Fiscal Year or other period; and
if a negative amount, such amount shall be the Company's Loss for such Fiscal
Year or other period.

     "PROPERTY" means the land and the buildings thereon which the Company or a
CPA(R) Partnership owns at a particular time.

     "RELATIVE" means, with respect to any Person, any parent, spouse, brother,
sister, or natural or adopted lineal descendant or spouse of such descendant of
such Person.

     "SALE" means the sale or other disposition of a Partnership Property to a
third party which is unaffiliated with the current CPA(R) Partnership (or
respective general partner) owning such Property; provided, however, that this
term shall not include the pledge, mortgage or encumbrance of a Property, or of
any interest therein, in connection with the financing, refinancing or other
leveraging of such Property or otherwise or any assignment of any leases or
rents related to such Property.

     "SHAREHOLDERS" means all Persons who hold Shares, and shall have the same
meaning as the word "MEMBERS".

     "SHARES" means Company Interests and includes Listed Shares and Future
Shares.

     "SUBSIDIARY" shall have the meaning set forth in Section 12.1 of this
Agreement.


                                      B-11



     "TAX MATTERS PARTNER" shall have the meaning ascribed thereto in Section
3.5 of this Agreement.

     "TRANSFER" (or "TRANSFERRED") means to give, sell, assign, devise,
bequeath, or otherwise dispose of, transfer, or permit to be transferred, during
life or at death. The word "TRANSFER," when used as a noun, shall mean any
Transfer transaction.

     "TRANSFEREE" means any Person to whom Shares are Transferred by a
Shareholder for any reason or by any means.

     "TREASURY REGULATIONS" means the federal income tax regulations, including
any temporary or proposed regulations, promulgated under the Code, as such
Treasury Regulations may be amended from time to time (it being understood that
all references herein to specific sections of the Treasury Regulations shall be
deemed also to refer to any corresponding provisions of succeeding Treasury
Regulations).

     "VALUATION DATE" shall have the meaning set forth in Section 12.3 of this
Agreement.

     "WORKING CAPITAL RESERVES" means funds held in reserves which are
maintained as working capital for the Company and available for any
contingencies relating to the ownership of the Property and the operation of the
Company. Amounts held in the Working Capital Reserves may at any time, in the
discretion of the Board of Directors, be added to the liquidation proceeds
allocable to the respective Shares (depending upon the characterization of such
amounts when received by the Company), but may not be otherwise removed from the
respective Working Capital Reserves.

                                    ARTICLE 2
                         CONTINUATION, PURPOSE AND TERM

     2.1. Continuation. The parties hereto hereby agree to continue the limited
liability company known as W. P. Carey & Co. LLC, as a limited liability company
under the provisions of the Act.

     2.2. Company Name. The name of the Company is "W. P. CAREY & CO. LLC." The
business of the Company shall be conducted under such name or such other names
as the Board of Directors or the Shareholders may from time to time determine on
and pursuant to the terms of this Agreement.

     2.3. The Certificate. The Managing Member, and any other Person designated
as such by the Board of Directors, shall be an "AUTHORIZED PERSON"


                                      B-12



within the meaning of the Act and is hereby authorized to execute, file and
record all such certificates and documents, including amendments to the
Certificate, and to do such other acts as may be appropriate to comply with all
requirements for the formation, continuation, and operation of a limited
liability company, the ownership of property, and the conduct of business under
the laws of the State of Delaware and any other jurisdiction in which the
Company may own property or conduct business.

     2.4. Principal Place of Business. The principal place of business shall be
located at 50 Rockefeller Plaza, New York, New York 10020, or at such location
as may hereafter be determined by the Board of Directors. The principal business
office, as well as the registered office and the registered agent, of the
Company may be changed by the Board of Directors from time to time in accordance
with the then applicable provisions of the Act and any other applicable laws, as
well as the terms and conditions of this Agreement.

     2.5. Term of Company. The term of the Company commenced on the date of the
filing of the Certificate and shall continue until the Company is dissolved
pursuant to the provisions of Article 10 hereof.

     2.6. Purposes. The purposes of the Company are (a) to own and invest in or
engage in activities related to investment in net leased properties (including,
without limitation, industrial, commercial, retail and warehouse distribution
properties); provided, however, that the investment criteria shall be
established by the Board of Directors from time to time in its sole discretion
subject to the requirement that such criteria be consistent with the purposes of
the Company; (b) to acquire, own and dispose of general and limited partner
interests, and stock, warrants, options or other equity interests in Entities,
and to exercise all rights and powers granted to the owner of any such
interests; (c) to invest in any type of investment and to engage in any other
lawful act or activity for which limited liability companies may be formed under
the Act, and by such statement all lawful acts and activities shall be within
the purposes of the Company, except for express limitations, if any; (d) to
engage in any other activities relating to, and compatible with, the purposes
set forth above; and (e) to take such other actions, or do such other things, as
are necessary or appropriate (in the sole discretion of the Board of Directors)
to carry out the provisions of this Agreement.

     2.7. Powers. In furtherance of its purposes, but subject to all of the
provisions of this Agreement, the Company shall have the power and is hereby
authorized to (a) invest (at any time during the term of the Company) in real
property for the purpose of engaging in net lease transactions with respect
thereto and in other assets which are designed to accomplish the foregoing
purpose or in any manner consistent with the Company's then-existing investment
criteria and objectives, and to reinvest the proceeds (to the extent permitted
by this Agreement) of any Sales by the Company of Company assets; (b) act as
general or limited


                                      B-13



partner, member, joint venturer, manager or shareholder of any Entity, and to
exercise all of the powers, duties, rights and responsibilities associated
therewith; (c) take any and all actions necessary, convenient or appropriate as
the holder of any such interests or positions; (d) make mortgage loans; (e)
operate, purchase, maintain, finance, improve, own, sell, convey, assign,
mortgage, lease, construct, demolish or otherwise dispose of any real property
or personal property that may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company; (f) borrow money and issue
evidences of indebtedness in furtherance of any or all of the purposes of the
Company, and secure the same by mortgage, pledge or other lien or encumbrance on
any assets of the Company; (g) invest any funds of the Company pending
distribution or payment of the same pursuant to the provisions of this
Agreement; (h) prepay in whole or in part, refinance, recast, increase, modify
or extend any indebtedness of the Company and, in connection therewith, execute
any extensions, renewals or modifications of any mortgage or security agreement
securing such indebtedness; (i) enter into, perform and carry out contracts of
any kind, including, without limitation, contracts with any Person affiliated
with any of the Shareholders, necessary to, in connection with or incidental to
the accomplishment of the purposes of the Company; (j) establish reserves for
capital expenditures, working capital, debt service taxes, assessments,
insurance premiums, repairs, improvements, depreciation, depletion, obsolescence
and general maintenance of buildings or other property out of the rents, profits
or other income received; (k) employ or otherwise engage employees, managers,
contractors, advisors and consultants, and pay reasonable compensation for such
services, and enter into employee benefit plans of any type; (l) purchase or
repurchase Shares from any Person for such consideration as the Board of
Directors may determine in its reasonable discretion (whether more or less than
the original issuance price of such Share or the then trading price of such
Share); (m) enter into rights plans or other plans relating to Shares, options
or bonuses, and to issue Shares, options or warrants thereunder (or other
derivatives relating thereto) for any consideration (even if such consideration
is less than the market value of such Shares); and (n) do such other things and
engage in such other activities as may be necessary, convenient or advisable
with respect to the conduct of the business of the Company, and have and
exercise all of the powers and rights conferred upon limited liability companies
formed pursuant to the Act.

     2.8. Effectiveness of this Agreement. This Agreement shall govern the
operations of the Company and the rights and restrictions applicable to the
Shareholders, to the extent permitted by law. Pursuant to Section 18-101(7)(a)
of the Act, all Persons who become holders of Shares in the Company shall be
bound by the provisions of this Agreement and shall be admitted as Members. The
acceptance by a Person of a certificate issued to such Person evidencing the
Shares acquired in connection with the Consolidation and the acceptance by a
Person of a certificate issued to such Person evidencing the acquisition of
Shares from the Company or another Shareholder shall be deemed to constitute a
direction to the


                                      B-14



Managing Member to execute this Agreement on such Person's behalf and a request
that the records of the Company reflect such admission; and shall be deemed to
be a sufficient act to comply with the requirements of Section 18-101(7)(a) of
the Act and to so cause that Person to become a Shareholder and to bind that
Person to the terms and conditions of this Agreement (and to entitle that Person
to the rights of a Shareholder hereunder).


                                      B-15



                                   ARTICLE 3
          CLASSES OF SHARES; ADMISSIONS OF SHAREHOLDERS; CAPITALIZATION

     3.1. Classes of Shares.(a) The Company shall have the authority to issue
the following classes and Series of Shares:

               (i) Shares which are designated "Listed Shares";

               (ii) One or more other classes or series of Shares, as to which
          the Board of Directors shall have the exclusive authority, by
          resolution or resolutions providing for the issuance of Shares or of a
          particular class or series thereof, to fix and determine the voting
          powers, full or limited or no voting power, and such designations,
          preferences, and relative, participating, optional or other special
          rights, and qualifications, limitations, or restrictions thereof, as
          may be desired by the Board of Directors from time to time, to the
          fullest extent now or hereafter permitted by the laws of the State of
          Delaware (collectively, all such other classes and series to be
          referred to as the "FUTURE SHARES").

          (b) Each Share shall have the rights and be governed by the provisions
     set forth in this Agreement or in the resolutions of the Board of Directors
     authorizing the issuance by the Company of such Shares; and none of such
     Shares shall have any preemptive rights, or give the holders thereof any
     rights to convert into any other securities of the Company, or give the
     holders thereof any cumulative voting rights, except as specifically set
     forth herein or in such resolutions. Except as otherwise provided herein or
     in a resolution of the Board of Directors, each Shareholder shall be
     entitled to one vote for each Share held by such Shareholder.

          (c) The Board of Directors may cause the Company to issue such numbers
     of Listed Shares and Future Shares from time to time as the Board of
     Directors may determine in its sole discretion, and the number of such
     Shares is not limited.

          (d) If the Board of Directors determines that it is necessary or
     desirable to amend this Agreement or to make any filings under the Act or
     otherwise in order to reference the existence or creation of a class or
     series of Future Shares, the Board of Directors may cause such amendments
     and filings to be made, which filings might take the form of amendments to
     the Certificate; provided, however, that, unless specifically required by
     the Act or this Agreement, no approval or consent of any Shareholders shall
     be required in connection with the making of any such filing or amendment.


                                      B-16



          (e) The Board of Directors, without any Consent of any Shareholder
     required, may effect a split or reverse split of Shares of any Series or
     class, by adopting a resolution therefor. If the Board of Directors
     determines that it is necessary or desirable to make any filings under the
     Act or otherwise in order to reference the existence of such a split or
     reverse split, the Board of Directors may cause such filings to be made,
     which filings might take the form of amendments to the Certificate;
     provided, however, that, unless specifically required by the Act or this
     Agreement, no approval or consent of any Shareholders shall be required in
     connection with the making of any such filing.

          (f) Notwithstanding any other provisions of this Agreement, the Board
     of Directors may, without the consent of any Shareholder, amend this
     Agreement to the extent required to allow the Board of Directors to
     exercise the powers granted to it by this Section 3.1.

     3.2. Additional Shareholders. In the event that the Board of Directors
determines that additional funds are required by the Company for any Company
purpose, or that the Company should for any reason seek to raise additional
capital or acquire Property, the Board may cause the Company to sell Future
Shares for a price equal to what the Board of Directors determines to be the
fair value of such Shares, in exchange for cash, other property, services or any
other lawful consideration to be received by the Company in consideration of
such Shares (to be valued by the Board of Directors in its discretion), or may
cause the Company to obtain funds as a loan from any third party upon such terms
and conditions as the Board of Directors deems appropriate, or any combination
thereof from time to time. The Capital Contribution of any such additional
Shareholders shall be specified by the Board of Directors at the time of
admission of such additional Shareholders.

     3.3. Capital Accounts. A separate capital account (a "CAPITAL ACCOUNT")
shall be established and maintained for each Shareholder, including any
substitute or additional Shareholder who shall hereafter acquire a Company
Interest, in accordance with the following provisions:

          (a) To each Shareholder's Capital Account there shall be credited the
     amount of cash and fair market value of the property actually or deemed to
     be contributed to the Company by such Shareholder pursuant to Section 3.2
     hereof, such Shareholder's allocable share of Profit, and the amount of any
     Company liabilities that are assumed by such Shareholder or that are
     secured by any Company property distributed to such Shareholder.

          (b) To each Shareholder's Capital Account there shall be debited the
     amount of cash and the fair market value of any Company property
     distributed or deemed distributed to such Shareholder pursuant to


                                      B-17



     any provision of this Agreement, such Shareholder's allocable share of
     Loss, and the amount of any liabilities of such Shareholder that are
     assumed by the Company or that are secured by any property contributed by
     such Shareholder to the Company.

          (c) If any asset of the Company is distributed in kind, the Company
     shall be deemed to have realized Profit or Loss thereon in the same manner
     as if the Company had sold such asset for an amount equal to the greater of
     (i) the fair market value of such asset, or (ii) the fair market value of
     any nonrecourse debts to which such asset is then subject, in each case as
     determined by the Board of Directors. If at any time after the date of this
     Agreement, the Book Value of any Company asset is adjusted pursuant to the
     last sentence of the definition of Book Value set forth in Article 1
     hereof, the Capital Accounts of all Shareholders shall be adjusted
     simultaneously to reflect the aggregate net adjustments, as if the Company
     recognized Profit or Loss equal to the respective amounts of such aggregate
     net adjustments.

          (d) The provisions of this Agreement relating to the maintenance of
     Capital Accounts are intended to comply with Section 1.704-1(b)(2)(iv) and
     1.704-2 of the Treasury Regulations, and shall be interpreted and applied
     in a manner consistent with such Treasury Regulations.

          (e) A Shareholder shall not be entitled to withdraw any part of its
     Capital Account or to receive any distributions from the Company, except as
     provided in Article 5 hereof, nor shall a Shareholder be entitled to make
     any loan or Capital Contribution to the Company other than as expressly
     provided herein. No loan made to the Company by any Shareholder shall
     constitute a capital contribution to the Company.

          (f) No Shareholder shall have any liability for the return of the
     Capital Contribution of any other Shareholder. A Shareholder who has more
     than one class of interest in the Company may have a separate Capital
     Account for each different class of interest owned.

     3.4. Transfer of Capital Accounts. The original Capital Account established
for each Transferee shall be in the same amount as the Capital Account or
portion thereof of the Shareholder which such Transferee succeeds, at the time
such Transferee is admitted to the Company. The Capital Account of any
Shareholder whose Company Interest shall be increased by means of the Transfer
to it of all or part of the Shares of another Shareholder shall be appropriately
adjusted to reflect such Transfer. Any reference in this Agreement to a Capital
Contribution of, or distribution to, a then-Shareholder shall include a Capital


                                      B-18



Contribution or distribution previously made by or to any prior Shareholder on
account of the Shares of such then-Shareholder.

     3.5. Tax Matters Partner. The Managing Member shall be the Company's "TAX
MATTERS PARTNER" (as such term is defined in Section 6231(a)(7) of the Code),
with all of the powers that accompany such status (except as otherwise provided
in this Agreement). Promptly following the written request of the Tax Matters
Partner, the Company shall, to the fullest extent permitted by law, reimburse
and indemnify the Tax Matters Partner for all reasonable expenses, including
reasonable legal and accounting fees, claims, liabilities, losses and damages
incurred by the Tax Matters Partner in connection with any administrative or
judicial proceeding with respect to the tax liability of the Shareholders. The
provisions of this Section 3.5 shall survive the termination of the Company and
shall remain binding on the Shareholders for as long a period of time as is
necessary to resolve with the Internal Revenue Service any and all matters
regarding the federal income taxation of the Company or the Shareholders.

                                   ARTICLE 4
                                  ALLOCATIONS

     4.1. General Rules Concerning Allocations. Within 45 days after the end of
each calendar month, the Company shall conduct an interim closing of books as of
the end of the last day of that calendar month. On the basis of the closing of
the books for each calendar month, Profit and Loss for such month shall be
determined in accordance with the accounting methods followed by the Company for
federal income tax purposes.

     4.2. Allocations of Profits and Losses. All allocations to the Shareholders
of items included within the Company's Profits and Losses attributable to each
calendar month shall be allocated solely among the Shareholders recognized as
Shareholders as of the last day of that calendar month, as follows:

          (a) The Profits and Losses shall be allocated to the holders of
     Shares.

          (b) The Tax Matters Partner is authorized to make reasonable
     determinations regarding the allocation of Profit and Loss under this
     Section 4.2, including determinations relating to the calculation of Profit
     or Loss, and such other items of the Company's income, gain, loss,
     deduction and credit as may be appropriate to carry out the intent of this
     Section 4.2.

     4.3. Special Allocations. (a) Notwithstanding any other provision of this
Agreement, to the extent an allocation of Profit or Loss or any item thereof to
any


                                      B-19



Shareholder pursuant to Sections 4.1 or 4.2 of this Agreement would be in
violation of the requirements of the Treasury Regulations under Section 704(b)
of the Code, the Tax Matters Partner shall comply with the requirements of such
Treasury Regulations and adjust such allocations to comply with such
requirements in a manner that will, in the reasonable judgment of the Tax
Matters Partner, have the least effect on the amounts to be allocated and
distributed under this Agreement. The Shareholders agree that if this Section
4.3 becomes applicable, the Tax Matters Partner is authorized to review and
adjust the allocations made pursuant to Sections 4.1 or 4.2 of this Agreement.

          (b) Qualified Income Offset. In the event a Shareholder unexpectedly
     receives any adjustment, allocation or distribution described in Treasury
     Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) that causes or
     increases an Adjusted Capital Account Deficit, items of Profit shall be
     specially allocated to such Shareholder so as to eliminate such negative
     balance as quickly as possible. This subparagraph is intended to constitute
     a "qualified income offset" under Section 1.704-1(b)(2)(ii)(d) of the
     Regulations and shall be interpreted consistently therewith.

          (c) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as
     otherwise provided in Section 1.704-2(f) of the Regulations, if there is a
     net decrease in Partnership Minimum Gain for any Fiscal Year, each
     Shareholder shall be specially allocated items of Company income and gain
     for such year (and, if necessary, subsequent years) in an amount equal to
     such Shareholder's share of the net decrease in Partnership Minimum Gain to
     the extent required by Treasury Regulations Section 1.704-2(f). The items
     to be so allocated shall be determined in accordance with Sections
     1.704-2(f) and (j)(2) of the Treasury Regulations. This subparagraph is
     intended to comply with the minimum gain chargeback requirement in said
     section of the Treasury Regulations and shall be interpreted consistently
     therewith. Allocations pursuant to this subparagraph shall be made in
     proportion to the respective amounts required to be allocated to each
     Shareholder pursuant hereto.

          (d) Partner Minimum Gain Chargeback. Except as otherwise provided in
     Section 1.704-2(i)(4) of the Treasury Regulations, if there is a net
     decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt
     during any Fiscal Year, each Shareholder who has a share of the Partner
     Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
     accordance with Section 1.704-2(i)(5) of the Treasury Regulations, shall be
     specially allocated items of Partnership income and gain for such year
     (and, if necessary, subsequent years) in an amount equal to that
     Shareholder's share of the net decrease in the Partner Minimum Gain
     attributable to such Partner Nonrecourse Debt to the extent and in the
     manner required by Section 1.704-2(i) of the Treasury


                                      B-20



     Regulations. The items to be so allocated shall be determined in accordance
     with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations.
     This subparagraph is intended to comply with the minimum gain chargeback
     requirement with respect to Partner Nonrecourse Debt contained in said
     section of the Treasury Regulations and shall be interpreted consistently
     therewith. Allocations pursuant to this subparagraph shall be made in
     proportion to the respective amounts to be allocated to each Shareholder
     pursuant hereto.

          (e) Nonrecourse Deductions. Partner Nonrecourse Deductions for any
     Fiscal Year or other applicable period with respect to a Partner
     Nonrecourse Debt shall be specially allocated to the Shareholders that bear
     the economic risk of loss for such Partner Nonrecourse Debt (as determined
     under Sections 1.704-2(b)(4) and 1.704-2(i)(1) of the Treasury
     Regulations).

     4.4. Additional Allocations. (a) The Tax Matters Partner, in order to
preserve uniformity of Shares within a class, in its sole discretion, may make a
special allocation of items of Company income, gain, loss or deduction but only
if such allocations would not have a material adverse effect on the Shareholders
and if they are consistent with the principles of Section 704 of the Code.

          (b) If, and to the extent that any Shareholder is deemed to recognize
     income as a result of any transaction between such Shareholder and the
     Company resulting from a compensatory transfer of Shares by the Company to
     such Shareholder or pursuant to Sections 482, 483, 1272-1274 and 7872 of
     the Code, or any similar provision now or hereafter in effect, any
     corresponding loss or deduction (or if unavailable, the next available loss
     or deduction) of the Company shall be allocated to the Shareholder who was
     charged with such income.

          (c) Adjustments to the Capital Accounts of Shareholders with respect
     to an adjustment to the Tax Basis of any asset of the Company pursuant to
     Section 734(b) or Section 743(b) of the Code shall be made in accordance
     with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(m).

     4.5. Tax Allocations. (a) For federal income tax purposes, except as
otherwise provided in this Section 4.5, each item of Profit, gain, Loss and
deduction of the Company shall be allocated among the Shareholders in the same
proportion as the corresponding items are allocated pursuant to Sections 4.2,
4.3 and 4.4 hereof.

          (b) In the event that the Book Value of any asset contributed to and
     held by the Company differs from its basis for federal income tax


                                      B-21



     purposes ("TAX BASIS"), allocations of income, gain, loss or deduction with
     respect to such asset shall, solely for tax purposes, be allocated among
     the Shareholders so as to take account of any variation between Book Value
     and Tax Basis in accordance with the provisions of Section 704(c) of the
     Code and Treasury Regulations thereunder. The Tax Matters Partner may elect
     any reasonable method or methods for making such allocations.

          (c) If the Book Value of any asset of the Company is adjusted pursuant
     to Section 0 hereof, subsequent allocations of Profit, gain, Loss and
     deductions with respect to such asset shall take into account any variation
     between Book Value and Tax Basis in accordance with the provisions of
     Section 704(c) of the Code and Treasury Regulations thereunder.

     The Tax Matters Partner shall have the sole discretion to make special
allocations of items of income, gain, loss and deductions that are consistent
with the principles of Section 704(c) of the Code and to amend the provisions of
this Agreement (without Shareholder action, notwithstanding Section 14.D of this
Agreement), as appropriate, to reflect the proposal or promulgation of Treasury
Regulations under Subchapter K of the Code. The Tax Matters Partner may adopt
and employ such methods for (A) the maintenance of capital accounts for book and
tax purposes, (B) the determination and allocation of adjustments under Sections
704(c), 734 and 743 of the Code, (C) the determination and allocation of taxable
income, tax loss and items thereof under this Agreement and pursuant to the
Code, (D) the determination of the identities and tax classification of
Shareholders, (E) the provision of tax information and reports to the
Shareholders, (F) the adoption of reasonable conventions and methods for the
valuation of assets and the determination of tax basis, (G) the allocation of
asset values and Tax Basis, (H) conventions for the determination of
depreciation, cost recovery and amortization deductions and the adoption and
maintenance of accounting methods, (I) the recognition of the transfer of
Shares, (J) tax compliance and other tax-related requirements, including without
limitation, the use of computer software, and to use filing and reporting
procedures similar to those employed by publicly-traded partnerships and limited
liability companies, as it determines in its sole discretion are necessary and
appropriate to execute the provisions of this Agreement and to comply with
federal, state and local tax law, and to achieve uniformity of Shares within a
class. The Tax Matters Partner shall be indemnified and held harmless by the
Company for any expenses, penalties or other liabilities arising as a result of
decision made in good faith on any of the matters referred to in the preceding
sentence. If the Tax Matters Partner determines, based on advice of counsel,
that no reasonable allowable convention or other method is available to preserve
the uniformity of Shares within a class, or the Tax Matters Partner in its
discretion so elects, Shares may be separately identified as distinct classes to
reflect differences in tax consequences.


                                      B-22



                                   ARTICLE 5
          DISTRIBUTIONS, REDEMPTIONS AND CERTAIN PERMITTED CONVERSIONS

     5.1. Special Distributions; Distributions of Cash Flow from Operations or
Financings. This Section 5.1 (except for Section 5.1(b)) applies only to
distributions other than distributions upon the liquidation of the Company (such
subject being governed by Section 5.2 of this Agreement).

          (a) If the Board of Directors declares a distribution payable on a
     Distribution Date, then the holders of Shares shall be entitled to receive
     all such distributions which the Board has declared, with each holder of
     Listed Shares entitled to receive a pro-rata portion (with reference to the
     number of Listed Shares then-held by such holder of Listed Shares and the
     total number of Listed Shares then-held by all Persons) of such available
     distributions.

          (b) Notwithstanding any other provision of this Agreement, neither the
     Company, nor the Board of Directors on behalf of the Company, shall make a
     distribution to any Shareholder on account of its Shares if such
     distribution would violate the Act or other applicable law.

     5.2. Distributions Relating to Liquidation Events. Upon the dissolution,
liquidation or winding-up of the Company, after satisfaction of all of the
Company's liabilities (whether by payment or the making of reasonable provision
for payment therefor), each Shareholder shall be entitled to receive out of the
assets of the Company, an amount in cash or in kind equal to the sum of (A) its
pro-rata portion of all accrued and unpaid distributions on the Shares; plus (B)
its pro-rata portion of any remaining assets of the Company.

     No distribution shall be made to any holder of Listed Shares that would
result in such holder having a deficit balance in its Capital Account until such
time as the balance of each such holder's Capital Account is zero.

     A consolidation or merger of the Company with or into any other Entity, or
a sale, lease or exchange of any or all assets of the Company in consideration
for the issuance of equity securities of another Entity, shall not be deemed to
be a dissolution, liquidation or winding up of the Company, provided that the
consolidation, merger, sale, lease or exchange has been approved by the majority
vote of the Shareholders voting together as one class.

     5.3. Priority. Notwithstanding any other provision of this Agreement, it is
specifically acknowledged and agreed by each Shareholder that the Company's
failure to pay any amounts to such Shareholder, whether as a distribution,
redemption payment or otherwise, even if such payment is specifically required
hereunder, shall not give such Shareholder creditor status with regard to such


                                      B-23



unpaid amount; but rather, such Shareholder shall be treated only as a
Shareholder of whatever class such Person is a Shareholder, and not as a
creditor, of the Company. This Section 5.3 is, as permitted by Section 18-606 of
the Act, intended to override the provisions of Section 18-606 of the Act
relating to a member's status and remedies as a creditor, to the extent that
such provisions would be applicable in the absence of this Section 5.3.

     5.4. Payments to Shareholders for Services. Any payments by the Company to
a Shareholder for services rendered to or on behalf to the Company shall be
treated as guaranteed payments for services under Section 707(c) of the Code.

     5.5. Withholding. (a) With respect to any withholding tax or other similar
tax liability or obligation to which the Company may be subject as a result of
any act or status of any Shareholder or to which the Company becomes subject
with respect to any Share, the Company shall have the right to withhold amounts
distributable to such Shareholder or with respect to such Shares, to the extent
of the amount of such withholding tax or other similar tax liability or
obligation, pursuant to the provision contained in Section 5.5(b).

          (b) Each Shareholder hereby authorizes the Company to withhold from,
     or pay on behalf of or with respect to such Shareholder any amount of
     federal, state, local or foreign taxes that the Managing Member determines
     that the Company is required to withhold or pay with respect to any amount
     distributable or allocable to such Shareholder pursuant to this Agreement,
     including, without limitation, any taxes required to be withheld or paid by
     the Company pursuant to Sections 1441, 1442, 1445 or 1446 of the Code. Any
     amount paid on behalf of or with respect to a Shareholder shall constitute
     a loan by the Company to such Shareholder, which loan shall be repaid by
     such Shareholder within fifteen (15) days after notice from the Managing
     Member that such payment must be made unless (i) the Company withholds such
     payment from a distribution which would otherwise be made to the
     Shareholder; or (ii) the Managing Member determines, in its sole and
     absolute discretion, that such payment may be satisfied out of the
     available funds of the Company which would, but for such payment, be
     distributed to the Shareholder. Any amounts withheld pursuant to the
     foregoing clauses (i) or (ii) shall be treated as having been distributed
     to such Shareholder. In the event that a Shareholder fails to pay when due
     any amounts owed to the Company pursuant to this Section 5.5(b), the
     Managing Member, in its sole and absolute discretion, may elect to make the
     payment to the Company on behalf of such defaulting Shareholder, and in
     such event shall be deemed to have loaned such amount to such defaulting
     Shareholder and shall succeed to all rights and remedies of the Company as
     against such defaulting Shareholder.


                                      B-24



                                    ARTICLE 6
                                  SHAREHOLDERS

     6.1. Limited Liability. Except as otherwise provided by the Act, the debts,
obligations and liabilities of the Company, whether arising in contract, tort or
otherwise, shall be solely the debts, obligations and liabilities of the
Company, and the Shareholders shall not be obligated personally for any such
debt, obligation or liability of the Company solely by reason of being a
Shareholder of the Company. The Shareholders shall not be required to lend any
funds to the Company. Each of the Shareholders shall be liable to make payment
of his, her or its respective contributions as and when due hereunder and other
payments as expressly provided in this Agreement. If and to the extent a
Shareholder's contribution shall be fully paid, such Shareholder shall not,
except as required by the express provisions of the Act regarding repayment of
sums wrongfully distributed to Shareholders, be required to make any further
contributions.

     6.2. Voting Rights of Shareholders; Authority of Board of Directors.

          (a) The Board of Directors, in its sole discretion, has full, complete
     and exclusive right, power and authority in the management and control of
     the Company's business to do any and all things necessary to effectuate the
     purpose of the Company; except, however, as expressly set forth herein. The
     members of the Board of Directors shall devote such time as is necessary to
     the affairs of the Company, and shall receive such compensation from the
     Company and such reimbursement for expenses as is permitted by the Bylaws.
     No Person dealing with the Board of Directors shall be required to
     determine its authority to make any undertaking on behalf of the Company or
     to determine any facts or circumstances bearing upon the existence of such
     authority.

          (b) Notwithstanding Section 6.2(a) above, but subject to Section
     10.1(a), Article 12 and Article 13 hereof, any of the following must, (x)
     receive the approval of the Board of Directors, and (y) receive the vote,
     at a duly held meeting, of more than 50% in interest of the total then -
     issued and outstanding Shares (or, in the case of a written Consent without
     a meeting, more than 50% in interest of the total of such then-issued and
     outstanding Shares) (or such greater percentage as is then required under
     the Act):

               (i) any sale, lease, exchange or other disposition of all or
          substantially all of the property and assets of the Company, including
          its goodwill and its corporate franchises;

               (ii) any merger or consolidation of the Company (where the
          Company is not the surviving Entity); or


                                      B-25



               (iii) any vote to dissolve the Company.

          (c) For purposes of this subsection and subsection (b) only, the
     property and assets of the Company include the property and assets of any
     subsidiary of the Company. As used in this subsection, "subsidiary" means
     any entity wholly-owned and controlled or substantially wholly-owned and
     controlled, directly or indirectly, by the Company and includes, without
     limitation, corporations, partnerships, limited partnerships, limited
     liability partnerships, limited liability companies, and/or statutory
     trusts. Notwithstanding subsection (b)(i) of this section, no resolution by
     the Shareholders or Members shall be required for a sale, lease, exchange
     or other disposition of property and assets of the Company to a subsidiary
     or among its subsidiaries.

          (d) Subject to Sections 7.2(a) and 7.2(b) and Articles 12 and 13
     hereof, the vote, at a duly held meeting, of more than 50% interest of the
     total then issued and outstanding Shares (or, in the case of a written
     Consent without a meeting, more than 50% in interest of the total of such
     then-issued and outstanding Shares) shall be able to remove any Director
     and elect a replacement therefor. If such Shareholders intend to vote to
     remove a Director pursuant to this Section 6.2(d), they shall provide the
     removed Director with notice thereof, which notice shall set forth the date
     upon which such removal is to become effective.

          (e) The annual meeting of the holders of Shares of the Company for the
     election of Directors and for the transaction of such other business as
     properly may come before such meeting shall be held in accordance with the
     Bylaws. Subject to the provisions of Article 13 relating to meetings of
     Shareholders and related subjects, the Bylaws shall govern matters relating
     to, among other things, annual and special meetings, notice, waiver of
     notice, adjournment, proxies, written consents, procedures, and telephonic
     meetings, to the extent not inconsistent with this Agreement.

          (f) Notwithstanding any other provision of this Agreement,
     Shareholders have voting rights with respect to a particular matter (to the
     extent provided herein with regard to categories of Shareholders permitted
     to vote on particular matters, and otherwise) only after such matter has
     first been approved by the Board of Directors, except with regard to (i)
     the removal of a Director (and the election of a replacement therefor) as
     provided in this Agreement, (ii) the amendment of this Agreement, (iii) any
     matter as to which any Share plan or Share incentive plan adopted by the
     Company provides otherwise, and (iv) any matter presented at a special
     meeting of Shareholders called upon the written request of holders of at
     least 10% of the outstanding Shares.


                                      B-26



          (g) For purposes of this Agreement, in order for a meeting of
     Shareholders to be considered duly held with regard to a particular
     question, a quorum of more than 50% in interest of the Shares which are
     entitled to vote at such meeting on the particular question must be present
     (in person or by proxy).

                                   ARTICLE 7
                             DIRECTORS AND OFFICERS

     7.1. General Powers of Directors. (a) Except as may otherwise be provided
by the Act or by this Agreement, the property, affairs and business of the
Company shall be managed by or under the direction of the Board of Directors,
the Board of Directors may exercise all the powers of the Company (including but
not limited to deciding whether to make various tax elections), and the
Shareholders shall have no right to act on behalf of or bind the Company. The
Board of Directors shall have the power and authority, on behalf of the Company,
to (i) hire employees and such other agents, who may be designated as officers,
consultants and Persons necessary or appropriate to effectuate the purpose of
the Company, and (ii) delegate to one or more Persons (or to committees of the
Board of Directors) its rights and powers to manage and control the affairs of
the Company. Such delegation may be in the Bylaws or by a management agreement
or other agreement with such Persons and such delegation shall not cause the
Directors to cease to be "MANAGERS" (within the meaning of the Act) of the
Company. The management agreement or other agreement may designate a Person or
Persons to be "MANAGERS" (within the meaning of the Act) of the Company. The
officers shall not be "MANAGERS" (within the meaning of the Act) of the Company.
The Directors shall act only as a Board, and the individual Directors shall have
no power as such. Subject to the provisions of this Agreement and the Bylaws
with regard to Board of Directors, the approval of a matter by a majority of the
Directors present at a meeting at which a quorum is present shall constitute
approval by the Board of Directors (or, in the case of a written Consent without
a meeting, the approval of a matter by all of the Directors shall constitute
approval by the Board of Directors.)

          (b) No contract or transaction among the Company and one or more of
     its Affiliates, Directors or officers, or among the Company and any other
     Entity in which one or more of the Company's Affiliates, Directors or
     officers are directors or officers, or have a financial interest, shall be
     void or voidable solely for this reason, or solely because the Director or
     officer is present at or participates in the meeting of the Board of
     Directors or of a committee thereof which authorizes the contract or
     transaction, or solely because his or their votes are counted for such
     purpose, if:

               (i) The material facts as to such Affiliate's, Director's or
          officer's relationship or interest as to the contract or transaction


                                      B-27



          are disclosed or are known to the Board of Directors or the committee,
          and the Board of Directors or committee in good faith authorizes the
          contract or transaction by the affirmative vote of a majority of the
          disinterested Directors, even though the disinterested Directors be
          less than a quorum; or

               (ii) The contract or transaction is fair as to the Company.

     Interested Directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.

     Notwithstanding, and instead of, the foregoing provisions of this Section
7.1(b), the Company shall enter into or renew no agreement pursuant to which any
Affiliate of any Director would provide management services for any Property,
unless such agreement is approved by a majority of the Independent Directors;
and, if such approval is obtained in the case of a particular contract, such
approval shall be deemed to satisfy the requirements of this Section 7.1(b).

     Furthermore, notwithstanding the foregoing, the Company may acquire
property as tenants-in-common, in joint ventures, or in other joint ownership
arrangements with Affiliates of the Company without approval of the Board other
than that which would be required for transactions with non-Affiliates.

     7.2. Number and Term of Office of Directors. (a) The number of seats
constituting the entire Board of Directors shall be at least two, and, for so
long as the Company has a class of its securities registered under Section 12(b)
or 12(g) of the Securities Exchange Act of 1934 (the "EXCHANGE ACT"), at least
five and no more than 15, with the exact number of seats on the Board of
Directors to be determined from time to time by resolution of the Board of
Directors. At least a majority of the Directors in office at any point in time
while the Company has a class of its securities registered under Section 12(b)
or 12(g) of the Exchange Act must be Independent Directors. Each Director
(whenever elected) shall hold office until his or her successor has been duly
elected and qualified, or until his or her earlier death, resignation, or
removal. A Director shall not be required to be a Shareholder or a resident of
the State of Delaware.

          (b) At each Annual Meeting of the Shareholders, Directors shall be
     elected for a term of office expiring at the next Annual Meeting of the
     Shareholders after their election. Each Director may be re-elected by the
     Shareholders. The terms of office of Directors shall not be affected by any
     decrease or increase in the number of Directors.


                                      B-28



     7.3. Officers. Pursuant to the Bylaws, the Company will have officers, who
need not be employees of the Company, who will have the rights and be subject to
the restrictions provided therein.

                                    ARTICLE 8
  LIMITATIONS ON LIABILITY OF, AND INDEMNIFICATION OF, DIRECTORS AND OFFICERS.

     8.1. Limitations on Liability of, and Indemnification of, Directors and
Officers. (a) No Directors or officers of the Company shall be liable,
responsible or accountable in damages or otherwise to the Company or any of the
Shareholders for any act or omission performed or omitted by him or her, or for
any decision, except in the case of fraudulent or illegal conduct of such
Person. For purposes of this Article 8, the fact that an action, omission to act
or decision is taken on the advice of counsel for the Company shall be evidence
of good faith and lack of fraudulent conduct.

          (b) To the fullest extent permitted by law, all Directors and officers
     of the Company shall be entitled to indemnification from the Company for
     any loss, damage or claim (including any reasonable attorney's fees
     incurred by such person in connection therewith) due to any act or omission
     made by him or her, except in the case of fraudulent or illegal conduct of
     such Person; provided, that any indemnity shall be paid out of the assets
     of the Company only (or any insurance proceeds available therefor), and no
     Shareholder shall have any personal liability on account thereof.

          (c) The termination of any action, suit or proceeding by judgment,
     order, settlement or conviction, or upon a plea of nolo contendere or its
     equivalent, shall not, of itself, create a presumption that the Person
     acted fraudulently or illegally.

          (d) The indemnification provided by this Article 8 shall not be deemed
     exclusive of any other rights to which those indemnified maybe entitled
     under any agreement, vote of Shareholders or Directors, or otherwise, and
     shall inure to the benefit of the heirs, executors and administrators of
     such a Person.

          (e) Any repeal or modification of this Article 8 shall not adversely
     affect any right or protection of a Director or officer of the Company
     existing at the time of such repeal of modifications.

     The Company may, if the Board of Directors of the Company deems it
appropriate in its sole discretion, obtain insurance for the benefit of the
Company's


                                      B-29



Directors and officers, or enter into indemnification agreements with such
Directors and officers, relating to the liability of such Persons.

                                   ARTICLE 9
              TRANSFERS OF INTERESTS; ADMISSION OF NEW SHAREHOLDERS

     9.1. Transfers. The Listed Shares shall be freely transferable. Subject to
the foregoing and in accordance with Section 2.8, any Person who is a Transferee
of Shares shall, upon acceptance of a certificate evidencing the Shares, (a)
automatically become a Shareholder of the Company with no further action being
required on such Person's part, and (b) automatically be bound to the terms and
conditions of this Agreement (and be entitled to the rights of a Shareholder
hereunder).

     9.2. New Shareholders. The Company may issue Future Shares pursuant to
Sections 3.1; and, in accordance with Section 2.8, any Person acquiring Future
Shares from the Company shall, upon acceptance of a certificate evidencing the
Shares, (a) automatically become a Shareholder of the Company with no future
action being required on such Person's part, and (b) automatically be bound to
the terms and conditions of the Agreement (and be entitled to the rights of a
Shareholder hereunder).

     9.3. Lender Ownership Limit. (a) No Lender, as defined in Section 9.3(c),
may own Shares nor shall Shares be accepted, purchased, or in any manner
acquired by any Lender if such issuance or transfer would result in a Lender
owning Shares.

          (b) If any Shares are accepted, purchased, or in any manner acquired
     by any Lender resulting in a violation of Section 9.3(a) hereof, any such
     purchase or acquisition shall be null and void with respect to such Shares
     ("EXCESS SHARES"). If the last clause of the foregoing sentence is
     determined to be invalid by virtue of any legal decision, statute, rule or
     regulation, such Lender shall be conclusively deemed to have acted as an
     agent on behalf of the Company in acquiring the Excess Shares and to hold
     such Excess Shares on behalf of the ultimate owner of such Excess Shares.
     Any Lender who receives dividends, interest or any other distribution paid
     on account of Excess Shares shall hold and retain these dividends, interest
     or any other distribution an agent for the ultimate owner of such Excess
     Shares.

     While the Excess Shares are so held on behalf of the ultimate owner of such
Excess Shares, such Excess Shares shall not have any voting rights and shall not
be considered for purposes of any Shareholder vote and/or for determining a
quorum for such a vote. The Excess Shares shall be treated as outstanding
Shares.


                                      B-30


     In the event that a Shareholder knowingly holds Excess Shares and the other
Shareholders' basis for federal income tax purposes is reduced, such Shareholder
shall be required to indemnify the Company for the full amount of any damages
and expenses (including the Company's estimate of the costs (including tax
costs) to the other Shareholders, reasonable attorneys' fees and administrative
costs) resulting from the shift of basis for federal income tax purposes.

     Upon discovering the ownership of any Excess Shares, the Managing Member
may (i) cause the Company to immediately redeem such Excess Shares at the
Redemption Price (as defined below) or (ii) grant the Shareholder 30 days to
transfer such Excess Shares to any Person whose ownership of such Excess Shares
would not result in a violation of Section 9.3(a) hereof. Upon such permitted
transfer, the Company shall pay or distribute to the transferee any dividends on
the Excess Shares not previously paid or distributed. If such Excess Shares are
not transferred within such 30 day period, the Company will redeem such Shares
at the Redemption Price (as defined below). For purposes of this Section 9.3,
the "REDEMPTION PRICE" shall mean the lesser of the price paid for such Excess
Shares by the Shareholder in whose possession the redeemed Shares were Excess
Shares or the fair market value of the Excess Shares.

          (c) For purposes of this Section 9.3, the term "LENDER" shall mean (i)
     any Person who is currently owed money by the Company or any one or more of
     the CPA, (ii) Partnerships in an amount exceeding $1,000,000 and (iii) any
     Person related to a Person described in (i) under the rules of Treas. Reg
     sec. 1.752-4(b).

          (d) The Managing Member may exempt a Lender from the provisions of
     this Section 9.3 upon receipt of an opinion of counsel that other
     Shareholders will not suffer any material negative affects as a consequence
     of such Lender owning Shares.

          (e) If any provision of this Section 9.3 or any application thereof is
     determined to be invalid by any federal or state court having jurisdiction
     over the issue, the validity of the remaining provisions shall not be
     affected and other applications of such provision shall be affected only to
     the extent necessary to comply with the determination of such court.

                                   ARTICLE 10
                           DISSOLUTION AND TERMINATION

     10.1. Events of Dissolution. (a) In accordance with Section 18-801 of the
Act, and the provisions therein permitting this Agreement to specify the events
of the Company's dissolution, the Company has perpetual existence but shall be


                                      B-31



dissolved and the affairs of the Company wound up upon the occurrence of any of
the following events:

               (i) expulsion, bankruptcy (as defined in Section 18-304 of the
          Act) or insolvency or dissolution of the Managing Member, absent a
          vote of Shareholders holding interests in more than 50% of the profits
          and capital of the Company to continue the Company within 90 days
          following such event;

               (ii) the vote of the Shareholders pursuant to Sections 6.2(b) and
          6.2(f) hereof; or

               (iii) the entry of a decree of judicial dissolution under Section
          18-802 of the Act.

     The death, retirement, resignation, expulsion, bankruptcy (as defined in
Section 18-304 of the Act) or dissolution of a Shareholder or the occurrence of
any other event that terminates the continued membership of a Shareholder in the
Company, shall not cause the dissolution of the Company except to the extent
specified above in this Section 10.1(a).

          (b) Dissolution of the Company shall be effective on the day on which
     the event occurs which gives rise to the dissolution, but the Company shall
     not terminate until the assets of the Company shall have been distributed
     as provided herein and a certificate of cancellation of the Certificate has
     been filed with the Secretary of State of the State of Delaware.

     10.2. Application of Assets. In the event of dissolution, the Company shall
conduct only such activities as are necessary to wind up its affairs (including
the sale of the assets of the Company in an orderly manner), and the assets of
the Company shall be applied, first, as required by Section 18-804(a)(1) of the
Act, and then in the manner, and in the order of priority, set forth in Article
5. Notwithstanding anything herein to the contrary, in the event the Company is
liquidated within the meaning of Treasury Regulation sec. 1.704-1(b)(2)(ii)(g),
liquidation distributions shall be made by the end of the taxable year in which
the Company liquidates or, if later, within 90 days of the date of such
liquidation. Distributions may be made to a trust for the purposes of an orderly
liquidation of the Company by the trust in accordance with the Act.

     10.3. Gain or Losses in Process of Liquidation. Any gain or loss on the
disposition of Company property in the process of liquidation shall be credited
or charged to the Capital Accounts of Shareholders in accordance with the
provisions of Article 3. Any property distributed in kind in the liquidation
shall be valued and treated as though the property was sold at its fair market
value and the cash


                                      B-32



proceeds were distributed. The difference between the fair market value of
property distributed in kind and its Book Value shall be treated as a gain or
loss on the sale of such property and shall be credited or charged to the
Capital Account of Shareholders in accordance with Article 3; provided, that no
Shareholder shall have the right to request or require the distribution of the
assets of the Company in kind.

     10.4. Procedural and Other Matters. (a) Upon dissolution of the Company and
until the filing of a certificate of cancellation as provided in Section
10.4(b), the Persons winding up the affairs of the Company may, in the name of,
and for and on behalf of, the Company, prosecute and defend suits, whether
civil, criminal or administrative, settle and close the business of the Company,
dispose of and convey the property of the Company, discharge or make reasonable
provision for the liabilities of the Company, and distribute to the Shareholders
any remaining assets of the Company, in accordance with this Article 10 and all
without affecting the liability of Shareholders and Directors and without
imposing liability on a liquidating trustee.

          (b) The Certificate may be canceled upon the dissolution and the
     completion of winding up of the Company, by any Person authorized to cause
     such cancellation in connection with such dissolution and winding up.

                                   ARTICLE 11
                         APPOINTMENT OF ATTORNEY-IN-FACT

     11.1. Appointment and Powers. (a) Each Shareholder hereby irrevocably
constitutes and appoints the Managing Member, with full power of substitution,
as his, her or its true and lawful attorney-in-fact, with full power and
authority in his, her or its name, place and stead to execute, acknowledge,
deliver, swear to, file and record at the appropriate public offices such
documents, instruments and conveyances as may be necessary or appropriate to
carry out the provisions or purposes of this Agreement, including, without
limitation, the following: (i) the Certificate; (ii) all other certificates and
instruments and amendments thereto that the Board of Directors deems appropriate
to qualify or continue the Company as a limited liability company in the
jurisdiction in which the Company may conduct business; (iii) all instruments
that the Board of Directors deems appropriate to reflect a change or
modification of this Agreement in accordance with the terms of this Agreement;
(iv) all conveyances and other instruments that the Board of Directors deems
appropriate to reflect the dissolution and termination of the Company; (v) all
fictitious or assumed name certificates required or permitted to be filed on
behalf of the Company; (vi) any and all documents necessary to admit
Shareholders to the Company, or to reflect any change or transfer of a
Shareholder's Shares, or relating to the admission or increased Capital
Contribution of a Shareholder; (vii) any amendment or other document to be filed


                                      B-33



as referenced in Section 3.1(d) or 3.1(f) of this Agreement; and (viii) all
other instruments that may be required or permitted by law to be filed on behalf
of or relating to the Company and that are not inconsistent with this Agreement.

     The authority granted by this Section 11.1 (i) is a special power of
attorney coupled with an interest, is irrevocable, and shall not be affected by
the subsequent incapacity or disability of the Shareholder; (ii) may be
exercised by a signature for each Shareholder or by a single signature of any
such Person acting as attorney-in-fact for all of them; and (iii) shall survive
the Transfer by a Shareholder of the whole or any portion of his, her or its
Shares.

     11.2. Presumption of Authority. Any Person dealing with the Company may
conclusively presume and rely upon the fact that any instrument referred to
above, executed by such Person acting as attorney-in-fact, is authorized,
regular and binding, without further inquiry.

                                   ARTICLE 12
   CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL AND BUSINESS COMBINATIONS

     12.1. Definitions. For purposes of this Article 12, the following
definitions shall apply:

     "ASSOCIATE" when used to indicate a relationship with any Person, means:

          (a) Any Entity (other than the Company or a Subsidiary of the Company)
     of which such Person is an officer, manager, member, director or partner or
     is, directly or indirectly, the beneficial owner of 10 percent or more of
     any class of equity securities of such Entity;

          (b) Any trust or other estate in which such Person has a substantial
     beneficial interest or as to which such Person serves as trustee or in a
     similar fiduciary capacity; and

          (c) Any Relative of such Person, or any Relative of a spouse of such
     Person, who has the same home as such Person or who is a Director or
     officer of the Company or a manager, member, director or officer of any of
     its Affiliates.

     "BENEFICIAL OWNER" When used with respect to Shares, means a Person:


                                      B-34



          (a) That, individually or with any of its Affiliates or Associates,
     beneficially owns Shares directly or indirectly; or

          (b) That, individually or with any of its Affiliates or Associates,
     has (i) the right to acquire Shares (whether such right is exercisable
     immediately or only after the passage of time), pursuant to any agreement,
     arrangement, or understanding or upon the exercise of conversion rights,
     exchange rights, warrants or options, or otherwise; or (ii) the right to
     vote Shares pursuant to any agreement, arrangement or understanding; or

          (c) That has any agreement, arrangement, or understanding for the
     purpose of acquiring, holding, voting, or disposing of Shares with any
     other Person that beneficially owns, or whose Affiliates or Associates
     beneficially own, directly or indirectly, such Shares.

     "BUSINESS COMBINATION" means:

          (a) Unless the merger, consolidation or exchange of Shares does not
     alter the contract rights of the Shares as expressly set forth in this
     Agreement or change or convert in whole or in part the outstanding Shares,
     any merger, consolidation or exchange of Shares or any interests in a
     Subsidiary with (i) any Interested Party or (ii) any other Entity (whether
     or not itself an Interested Party) which is, or after the merger,
     consolidation or exchange of interests would be, an Affiliate of an
     Interested Party that was an Interested Party prior to the transaction;

          (b) Any sale, lease, transfer or other disposition, other than in the
     ordinary course of business or pursuant to a distribution or any other
     method affording substantially proportionate treatment to the Shareholders,
     in one transaction or a series of transactions in any 12-month period, to
     any Interested Party or any Affiliate of any Interested Party (other than
     the Company or any of its Subsidiaries) of any assets of the Company or any
     Subsidiary having, measured at the time the transaction or transactions are
     approved by the Board of Directors of the Company, an aggregate Book Value
     as of the end of the Company's most recently ended fiscal quarter of 10
     percent or more of (i) the total Market Value of the outstanding Shares or
     (ii) the Company's net worth as of the end of its most recently ended
     fiscal quarter;

          (c) The issuance or transfer by the Company or any Subsidiary, in one
     transaction or a series of transactions, of any Shares or any equity
     securities of a Subsidiary which have an aggregate Market Value of five
     percent or more of the total Market Value of the outstanding Shares to any
     Interested Party or any Affiliate of any Interested Party (other than the
     Company or any of its Subsidiaries) except pursuant to the exercise of


                                      B-35



     warrants or rights to purchase securities pro-rata to all Shareholders or
     any other method affording substantially proportionate treatment to those
     Shareholders;

          (d) The adoption of any plan or proposal for the liquidation or
     dissolution of the Company in which anything other than cash will be
     received by an Interested Party or any Affiliate of any Interested Party;

          (e) Any reclassification of securities or recapitalization of the
     Company, or any merger, consolidation or exchange of Shares with any of its
     Subsidiaries which has the effect, directly or indirectly, in one
     transaction or series of transactions, of increasing by five percent or
     more of the total number of outstanding Shares, the proportionate amount of
     the outstanding Shares or the outstanding number of any class of equity
     securities of any Subsidiary which is directly or indirectly owned by any
     Interested Party or any Affiliate of any Interested Party; or

          (f) The receipt by any Interested Party or any Affiliate of any
     Interested Party (other than the Company or any of its Subsidiaries) of the
     benefit, directly or indirectly (except proportionately as a holder of
     Shares of any loan, advance, guarantee, pledge or other financial
     assistance or any tax credit or other tax advantage provided by the Company
     or any of its Subsidiaries.

     "INTERESTED PARTY" means any Person (other than the Company, and any
Subsidiary of the Company) that:

          (a) Is the beneficial owner, directly or indirectly, of 10 percent or
     more of the outstanding Shares;

          (b) Is an Affiliate or Associate of the Company and at any time within
     the two-year period immediately prior to the date in question was the
     beneficial owner, directly or indirectly, of 10 percent or more of the then
     outstanding Shares; or

          (c) Is an Affiliate or Associate of any Person described in clause (a)
     or (b) above.

     For purposes of determining whether a Person is an Interested Party, the
number of Shares deemed to be outstanding shall include Shares deemed
beneficially owned by the Person through the definitions of Beneficial Owner set
forth above but may not include any other Shares which may be issuable pursuant
to any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.


                                      B-36



     "MARKET VALUE" means:

          (a) In the case of Shares, the highest closing sale price of Shares
     during the 30-day period immediately preceding the date in question on the
     composite tape of the New York Stock Exchange-listed stocks, and

          (b) In the case of property other than cash or stock, the fair market
     value of such property on the date in question as determined by the Board
     of Directors in good faith.

     "SUBSIDIARY" means any Person (other than an individual) in which the
Company, directly or indirectly, holds a majority of the voting securities.

     12.2. Business Combinations. (a) Unless an exemption under Section 12.3
hereunder applies, the Company may not engage in any Business Combination with
an Interested Party or any Affiliate of an Interested Party for a period of five
years following the most recent date on which such Interested Party became an
Interested Party (the "FIVE YEAR TOLLING PERIOD"), unless:

               (i) In addition to any vote otherwise required by law or this
          Agreement, the Board of Directors of the Company, prior to the most
          recent date upon which the Interested Party became an Interested
          Party, approved either the Business Combination or the transaction
          which resulted in the Interested Party becoming an Interested Party;
          and

               (ii) On or subsequent to the date upon which the Interested Party
          became an Interested Party, the Business Combination is (A) approved
          by at least two-thirds of the Persons who are then members of the
          Board of Directors and (B) authorized at an annual or special meeting
          of the Shareholders (and not by written consent) by the affirmative
          vote of at least two-thirds in interest of the Listed Shareholders,
          excluding the Shares held by an Interested Party who will be (or whose
          Affiliate will be) a party to the Business Combination or by an
          Affiliate or Associate of that Interested Party, voting together as a
          single class.

          (b) Unless an exemption under Section 12.3 applies, in addition to any
     vote otherwise required by law or this Agreement, a Business Combination
     proposed by an Interested Party or an Affiliate of the Interested Party
     after the Five Year Tolling Period shall be permitted only if recommended
     by the Board of Directors who are present at a duly-called meeting at which
     a quorum is present and approved by the affirmative vote of at least:


                                      B-37



               (i) 80% in interest of all Listed Shareholders, voting together
          as a single voting group; and

               (ii) Two-thirds in interest of the Listed Shareholders, excluding
          Shares held by an Interested Party who will (or whose Affiliate will)
          be a party to the Business Combination or by an Affiliate or Associate
          of the Interested Party.

     12.3. Exemptions. (a) For purposes of this Section 12.3:

     "ANNOUNCEMENT DATE" means the first general public announcement of the
proposal or intentions to make a proposal of the Business Combination or its
first communication generally to the Shareholders, whichever is earlier;

     "DETERMINATION DATE" means the most recent date on which the Interested
Party became an Interested Party; and

     "VALUATION DATE" means:

               (i) For a Business Combination voted upon by the Shareholders,
          the later of the day prior to the date of the vote or the day 20 days
          prior to the consummation of the Business Combination; and

               (ii) For a Business Combination not voted upon by the
          Shareholders, the date of the consummation of the Business
          Combination.

          (b) The vote required by Section 12.2(b) does not apply to a Business
     Combination if (1) the Business Combination or the transaction which
     resulted in the Interested Party becoming an Interested Party shall have
     been approved by the Board of Directors prior to the Determination Date or
     (2) each of the conditions in items 12.3(b)(i) through 12.3(b)(iii) below
     is met:

               (i) The aggregate amount of the cash and the Market Value as of
          the Valuation Date of consideration other than cash to be received for
          each Share in such Business Combination (whether or not the Interested
          Party has previously acquired the particular class or series of Shares
          in question) is at least equal to the highest of the following:

                    (A) The highest per Share price (including any brokerage
               commissions, transfer taxes and soliciting dealers' fees) paid by
               the Interested Party for any Shares acquired by it within the
               five-year period immediately prior to the Announcement Date of
               the proposal of the Business


                                      B-38



               Combination, plus an amount equal to interest compounded annually
               from the earliest date on which the highest per Share acquisition
               price was paid through the Valuation Date at the rate for
               one-year United States Treasury obligations from time to time in
               effect, less the aggregate amount of any cash distributions paid
               and the Market Value of any distributions paid in other than
               cash, per Share from the earliest date through the Valuation
               Date, up to the amount of the interest compounded annually for
               such period; or

                    (B) The highest per Share price (including any brokerage
               commissions, transfer taxes and soliciting dealers' fees) paid by
               the Interested Party for any Share acquired by it on, or within
               the five-year period immediately before, the Determination Date,
               plus an amount equal to interest compounded annually from the
               earliest date on which the highest per Share acquisition price
               was paid to the same class or series through the Valuation Date
               at the rate for one-year United States Treasury obligations from
               time to time in effect, less the aggregate amount of any cash
               distributions paid and the Market Value of any distributions paid
               in other than cash, per Share from the earliest date through the
               Valuation Date, up to the amount of the interest compounded
               annually for such period; or

                    (C) The highest preferential amount per Share to which the
               holders of Shares are entitled in the event of any voluntary or
               involuntary dissolution or winding up of the Company; or

                    (D) The Market Value per Share on the Announcement Date,
               plus an amount equal to interest compounded annually from that
               date through the Valuation Date at the rate for one-year United
               Sates Treasury obligations from time to time in effect, less the
               aggregate amount of any cash distributions paid and the Market
               Value of any distributions paid in other than cash, per Share
               from that date through the Valuation Date, up to the amount of
               the interest compounded annually for such period; or

                    (E) The Market Value per Share on the Determination Date,
               plus an amount equal to interest compounded annually from that
               date through the Valuation Date at the rate for one-year United
               States Treasury obligations from time to time in effect, less the
               aggregate


                                      B-39



               amount of any cash distributions paid and the Market Value of any
               distributions paid and the Market Value of any distributions paid
               in other than cash, per Share from that date through the
               Valuation Date, up to the amount of the interest; or

                    (F) The price per Share equal to the Market Value per Share
               on the Announcement Date or on the Determination Date, whichever
               is higher, multiplied by the fraction of:

                         (1) The highest per Share price (including any
                    brokerage commissions, transfer taxes and solicitation
                    dealers' fees) paid by the Interested Party for any Shares
                    acquired by it within the five-year period immediately prior
                    to the Announcement Date, over

                         (2) The Market Value per Share on the first day in such
                    five-year period on which the Interested Party acquired the
                    Shares.

               (ii) The consideration to be received in such Business
          Combination by the holders of any Shares is to be in cash or in the
          same form as the Interested Party has previously paid for such Shares,
          except to the extent that the Shareholders otherwise elect in
          connection with their approval of the proposed transaction under
          Section 12.2 of this Agreement. If the Interested Party has paid for
          Shares with varying forms of consideration, the form of consideration
          for such Shares shall be either cash or the form used to acquire the
          largest number of Shares previously acquired by it, except to the
          extent that the Shareholders otherwise elect.

               (iii) After the Determination Date and prior to the consummation
          of such Business Combination:

                    (A) There shall have been no failure to declare and pay at
               the regular date therefor (if applicable) any full periodic
               distributions (whether or not cumulative) on any outstanding
               Shares;

                    (B) There shall have been:

                         (1) No reduction in the annual rate of distributions
                    made with respect to the Shares; and


                                      B-40



                         (2) An increase in such annual rate of distributions as
                    necessary to reflect any reclassification, recapitalization,
                    reorganization or any similar transaction which has the
                    effect of reducing the number of outstanding Shares; and

                    (C) The Interested Party did not become the Beneficial Owner
               of any additional Shares except as part of the transaction which
               resulted in such Interested Party becoming an Interested Party or
               by virtue of proportionate Share splits or distributions.

     The provisions of items 12.3(b)(iii)(A) and 12.3(b)(iii)(B) do not apply if
(I) no Interested Party or Affiliate or Associate of the Interested Party voted
as a member of the Board of Directors of the Company in a manner inconsistent
with such items 12.3(b)(iii)(A) and 12.3(b)(iii)(B) and (II) the Interested
Party, within 10 days after any act or failure to act inconsistent with such
items, notifies the Board of Directors of the Company in writing that the
Interested Party disapproves thereof and requests in good faith that the Board
of Directors rectify such act or failure to act.

          (c) The provisions of Section 12.2 do not apply to any Business
     Combination of the Company with an Interested Party that became an
     Interested Party inadvertently, if the Interested Party:

               (i) As soon as practicable (but not more than 10 days after the
          Interested Party knew or should have known it had become an Interested
          Party) divests itself of a sufficient amount of Shares to avoid being
          an Interested Party; and

               (ii) Would not at any time within the five-year period preceding
          the Announcement Date with respect to the Business Combinations have
          been an Interested Party except by inadvertence.

     12.4. Amendment. Notwithstanding any other provisions of this Agreement,
this Article 12 may be amended or repealed only by a vote of 80% in interest of
all Shareholders, excluding Shares held by any Interested Party or any Affiliate
of an Interested Party.

     12.5. Certain Determinations with Respect to this Article 12. The Board of
Directors shall have the power to determine for the purposes of this Article 12,
on the basis of information known to the Directors: (i) the number of Shares of
which any Person is the Beneficial Owner, (ii) whether a Person is an Affiliate
or Associate of another, (iii) whether a Person has an agreement, arrangement or
understanding with another as to the matters referred to in the definition of


                                      B-41



"BENEFICIAL OWNER" as hereinabove defined, (iv) whether two or more transactions
constitute a "SERIES OF TRANSACTIONS," and (v) such other matters with respect
to which a determination is required under this Article 12.

                                   ARTICLE 13
                     VOTING RIGHTS OF CERTAIN CONTROL SHARES

     13.1. Definitions. For purposes of this Article 13, the following
definitions shall apply:

     "ACQUIRING PERSON" means a Person who makes or proposes to make a Control
Shares Acquisition, or such Person's Affiliate or Associate.

     "ASSOCIATE" when used to indicate a relationship with any Person means:

          (a) An "ASSOCIATE" as defined in Section 12.1; or

          (b) A Person that:

               (i) Directly or indirectly controls, or is controlled by, or is
          under common control with, the Person specified; or

               (ii) Is acting or intends to act jointly or in concert with the
          Person specified.

     "CONTROL SHARES" means Shares that, except for this Article 13, would, if
aggregated with all other Shares (including Shares the acquisition of which is
excluded from the definition "CONTROL SHARES ACQUISITION" below) owned by a
Person or in respect of which that Person is entitled to exercise or direct the
exercise of voting power, except solely by virtue of a revocable proxy, entitle
that Person, directly or indirectly, to exercise or direct the exercise of the
voting power of Shares within any of the following ranges of voting power:

          (a) One-fifth or more, but less than one-third of all voting power;

          (b) One-third or more, but less than a majority of all voting power;
     or

          (c) A majority or more of all voting power.

but such definition includes Shares only to the extent that the Acquiring
Person, following the acquisition of the Shares, is entitled, directly or
indirectly, to exercise or direct the exercise of voting power within any level
of voting power set forth in


                                      B-42



this section for which approval has not been obtained previously under Section
[13.2].

     "CONTROL SHARES ACQUISITION" means the acquisition, directly or indirectly,
by any Person (other than the Company and any Subsidiary of the Company), of
ownership of, or the power to direct the exercise of voting power with respect
to, issued and outstanding Control Shares. Control Shares Acquisition does not
include the acquisition of Control Shares:

          (a) Under the laws of descent and distribution;

          (b) Under the satisfaction of a pledge or other security interest
     created in good faith and not for the purpose of circumventing this Article
     13; or

          (c) Under a merger, consolidation or exchange of interests if the
     Company is a party to the merger, consolidation or exchange of interests.

     Unless the acquisition entitles any Person, directly or indirectly, to
exercise or direct the exercise of voting power of Shares in excess of the range
of voting power previously authorized or attained under an acquisition that is
exempt under items (a), (b), or (c) of this definition, "CONTROL SHARES
ACQUISITION" does not include the acquisition of Shares in good faith and not
for the purpose of circumventing this Article 13, by or from any Person whose
voting rights have previously been authorized by the Shareholders in compliance
with this Article 13 or any Person whose previous acquisition of Shares would
have constituted a Control Shares Acquisition but for the exclusions in items
(a) through (c) of this definition.

     "INTERESTED SHARES" means Shares in respect of which an Acquiring Person is
entitled to exercise or direct the exercise of the voting power of Shares in the
election of Directors or otherwise.

     B. Voting Rights.

          1. Control Shares acquired in a Control Shares Acquisition have no
     voting rights except to the extent approved by the Shareholders at a
     meeting held under Section [13.4] by the affirmative vote of two-thirds in
     interest of all Shareholders, excluding any votes cast with respect to
     Interested Shares.

          2. For purposes of this Section [13.2]:

                    a. Shares acquired within 180 days of Shares acquired under
               a plan to make a Control Shares Acquisition


                                      B-43



               are considered to have been acquired in the same acquisition; and

                    b. A Person may be deemed to be entitled to exercise or
               direct the exercise of voting power with respect to Shares held
               for the benefit of others if the Person:

                         (1) Is acting in the ordinary course of business, in
                    good faith and not for the purpose of circumventing the
                    provisions of this Section of the Agreement; and

                         (2) Is not entitled to exercise or to direct the
                    exercise of the voting power of the Shares unless the Person
                    first seeks to obtain the instruction of another Person.

     C. Acquiring Person Statement.

     Any Person who proposes to make or who has made a Control Shares
Acquisition may deliver an Acquiring Person statement to the Company at the
Company's principal office. The Acquiring Person statement shall set forth all
of the following:

          1. The identity of the Acquiring Person and each other member of any
     group of which the Person is a part for purposes of determining Control
     Shares;

          2. A statement that the Acquiring Person statement is given under this
     Article 13;

          3. The number of Shares owned (directly or indirectly) by the
     Acquiring Person and each other member of any group;

          4. The applicable range of voting power as set forth in the definition
     of "Control Shares"; and

          5. If the Control Shares Acquisition has not occurred:

                    a. A description in reasonable detail of the terms of the
               proposed Control Shares Acquisition; and

                    b. Representations of the Acquiring Person, together with a
               statement in reasonable detail of the facts on which they are
               based, that:


                                      B-44



                         (1) The proposed Control Shares Acquisition, if
                    consummated, will not be contrary to law; and

                         (2) The Acquiring Person has the financial capacity,
                    through financing to be provided by the Acquiring Person,
                    and any additional specified sources of financing required
                    under Section [13.5], to make the proposed Control Shares
                    Acquisition.

     D. Special Meeting.

          1. Except as provided in Section [13.5], if the Acquiring Person
     requests, at the time of delivery of an Acquiring Person statement, and
     gives a written undertaking to pay the Company's expenses of a special
     meeting, except the expenses of opposing approval of the voting rights,
     within ten days after the day on which the Company receives both the
     request and undertaking, the Board of Directors of the Company shall call a
     special meeting of the Shareholders, to be held within 50 days after
     receipt of the Acquiring Person statement and undertaking, for the purpose
     of considering the voting rights to be accorded the Shares acquired in the
     Control Shares Acquisition.

          2. The Board of Directors may require the Acquiring Person to give
     bond, with sufficient surety, to reasonably assure the Company that this
     undertaking will be satisfied.

          3. Unless the Acquiring Person agrees in writing to another date, the
     special meeting of Shareholders shall be held within 50 days after the day
     on which the Company has received the Acquiring Person statement.

          4. If no request is made under [Section 13.4(a)], the issue of the
     voting rights to be accorded the Shares acquired in the Control Shares
     Acquisition may, at the option of the Company, be presented for
     consideration at any meeting of the Shareholders. If no request is made
     under [Section 13.4(a)] and the Company proposes to present the issue of
     the voting rights to be accorded the Shares acquired in a Control Shares
     Acquisition for consideration at any meeting of the Shareholders, the
     Company shall provide the Acquiring Person with written notice of the
     proposal not less than 20 days before the date on which notice of the
     meeting is given.


                                      B-45



     E. Calls.

          1. A call of a special meeting of the Shareholders is not required to
     be made under [Section 13.4(a)] unless, at the time of delivery of an
     Acquiring Person statement an Acquiring Person has:

               a. Entered into a definitive financing agreement or agreements
          with one or more responsible financial institutions or other entities
          that have the necessary financial capacity, providing for any amount
          of financing of the Control Shares Acquisition not provided by the
          Acquiring Person; and

               b. Delivered a copy of the agreements to the Company.

     F. Notice of Meeting.

          1. If a special meeting of the Shareholders is requested, notice of
     the special meeting shall be given as promptly as reasonably practicable by
     the Company to all Shareholders of record as of the record date set for the
     meeting, whether or not such Shareholder is entitled to vote at the
     meeting.

          2. Notice of the special or annual meeting at which the voting rights
     are to be considered shall include or be accompanied by the following:

               a. A copy of the Acquiring Person statement delivered to the
          Company under [Section 13.3]; and

               b. A statement by the Board of Directors setting forth its
          position or recommendation, or stating that it is taking no position
          or making no recommendation, with respect to the issue of voting
          rights to be accorded the Control Shares.

     G. Redemption Rights.

          1. If an Acquiring Person statement has been delivered on or before
     the 10th day after the Control Shares Acquisition, the Company may, at its
     option, redeem any or all Control Shares, except Control Shares for which
     voting rights have been previously approved under [Section 13.2], at any
     time during a 60-day period commencing on the day of a meeting at which
     voting rights are considered under [Section 13.4] and are not approved.

          2. In addition to the redemption rights authorized under Section
     13.7(a), if an Acquiring Person statement has not been delivered on


                                      B-46



     or before the 10th day after the Control Shares Acquisition, the Company
     may, at its option, redeem any or all Control Shares for which voting
     rights have been previously approved under [Section 13.2], at any time
     during a period commencing on the 11th day after the Control Shares
     Acquisition and ending 60 days after the Acquiring Person statement has
     been delivered.

          3. Any redemption of Control Shares under this Section shall be at the
     fair value of the Control Shares. For purposes of this section, "FAIR
     value" shall be determined:

               a. As of the date of the last acquisition of Control Shares by
          the Acquiring Person in a Control Shares Acquisition or, if a meeting
          is held under [Section 13.4], as of the date of the meeting; and

               b. Without regard to the absence of voting rights for the Control
          Shares.

     H. Amendment. Notwithstanding any other provision of this Agreement, this
Article 13 may only be amended or repealed by a vote of 80% in interest of all
Shareholders, excluding any votes cast with respect to Interested Shares.

                                   ARTICLE 14
                            MISCELLANEOUS PROVISIONS

     A. Notices.

          1. Except as otherwise provided in this Agreement or in the Bylaws,
     any and all notices, consents, offers, elections and other communications
     required or permitted under this Agreement shall be deemed adequately given
     only if in writing and the same shall be delivered either in hand, by
     telecopy, or by mail or Federal Express or similar expedited commercial
     carrier, addressed to the recipient of the notice, postage prepaid and
     registered or certified with return receipt requested (if by mail), or with
     all freight charges prepaid (if by Federal Express or similar carrier).

          2. All notices, demands, and requests to be sent hereunder shall be
     deemed to have been given for all purposes of this Agreement upon the date
     of receipt or refusal.


                                      B-47



          3. All such notices, demands and requests shall be addressed as
     follows: (i) if to the Company, to its principal place of business, as set
     forth in Article 2 hereof and (ii) if to a Shareholder, to the address of
     such Shareholder listed on the Company's Shareholder register.

          4. By giving to the other parties written notice thereof, parties
     hereto and their respective successors and assigns shall have the right
     from time to time and at any time during the term of this Agreement to
     change their respective addresses effective upon receipt by the other
     parties of such notice and each shall have the right to specify as its
     address any other address.

     B. Word Meanings. The words such as "HEREIN", "HEREINAFTER", "HEREOF" and
"HEREUNDER" refer to this Agreement as a whole and not merely to the subdivision
in which such words appear unless the context otherwise requires. The singular
shall include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, unless the context otherwise requires.

     C. Binding Provisions. The covenants and agreements contained herein shall
be binding upon, and insure to the benefit of, the heirs, legal representatives,
successors and assigns of the respective parties hereto.

     D. Amendment and Modification. Unless otherwise specifically provided in
this Agreement, this Agreement may be amended, modified or supplemented only by
the vote, at a duly held meeting, of more than 50% in interest of the
then-outstanding Shares (or, in the case of a written Consent without a meeting,
more than 50% in interest of the aggregate then-outstanding Shares) voting or
acting as one class (and not as separate classes, notwithstanding the fact that
there may be Shareholders of more than one class voting); provided, however,
that Article 8 shall not be amended, modified or supplemented, unless such
amendment, modification or supplement receives the Consent of at least 80% in
interest of the holders of then-outstanding Shares. Notwithstanding anything to
the contrary contained herein, the Bylaws may be amended by the affirmative vote
of a majority of all members of the Board of Directors as provided in the Bylaws
without any further vote, consent or approval of any Shareholder or other
Person.

     E. Waiver. The waiver by any party hereto of a breach of any provisions
contained herein shall be in writing, signed by the waiving party, and shall in
no way be construed as a waiver of any succeeding breach of such provision or
the waiver of the provision itself.

     F. Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware, without regard to such
state's laws concerning conflicts of laws. In the event of a conflict between
any provisions


                                      B-48



of this Agreement and any nonmandatory provisions of the Act, the provision of
this Agreement shall control and take precedence.

     G. Severability of Provisions. Each provision of this Agreement shall be
deemed severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be changed consistent with the intent
of the parties hereto to make it fully legal, valid, binding and enforceable,
then such provision shall be stricken from this Agreement, and the remaining
provisions of this Agreement shall not in any way be affected or impaired, but
shall remain in full force and effect.

     H. Headings. The headings contained in this Agreement have been inserted
for the convenience of reference only, and neither such headings nor the
placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof.

     I. Further Assurances. The Shareholders shall execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purposes of this Agreement.

     J. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.

     K. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and supersedes all prior understandings or agreements, oral or written, between
the parties.


                                      B-49



     IN WITNESS WHEREOF, the parties hereto, being the sole current Members of
the Company, have executed and delivered this Amended and Restated Limited
Liability Company Agreement as of the day and year first-above written.

                                        W. P. CAREY & CO. LLC

                                        By: CAREY MANAGEMENT LLC,
                                            Managing Member Company Name


                                        By: /s/ GORDON F. DUGAN
                                            ------------------------------------
                                        Name: Gordon F. DuGan
                                        Title: President and CEO

     MEMBERS

     All Members now admitted as members of the limited liability company
pursuant to powers of attorney in favor of and granted and delivered to the
Managing Member in accordance with Section 11.1 hereof:

                                        By: CAREY MANAGEMENT LLC

                                        Attorney-in-Fact


                                        By: /s/ GORDON F. DUGAN
                                            ------------------------------------
                                        Name: Gordon F. DuGan
                                        Title: President and CEO


                                      B-50

EX-31.1

EXHIBIT 31.1

W. P. CAREY & CO. LLC

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A)

I, Gordon F. DuGan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of W. P. Carey & Co. LLC;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and we have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
d)	Disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date 8/9/2006

/s/ Gordon F. DuGan

Gordon F. DuGan

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

W. P. CAREY & CO. LLC

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A)

I, Mark J. DeCesaris, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of W. P. Carey & Co. LLC;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and we have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
d)	Disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date 8/9/2006

/s/ Mark J. DeCesaris

Mark J. DeCesaris

acting Chief Financial Officer

EX-32

EXHIBIT 32

W. P. CAREY & CO. LLC

CERTIFICATION OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of W. P. Carey & Co. LLC on Form 10-Q for the period ended June 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gordon F. DuGan, Chief Executive Officer of W. P. Carey & Co. LLC, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of W. P. Carey & Co. LLC.

/s/ Gordon F. DuGan

Gordon F. DuGan

President and Chief Executive Officer

8/9/2006

Date

In connection with the Quarterly Report of W. P. Carey & Co. LLC on Form 10-Q for the period ended June 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark J. DeCesaris, acting Chief Financial Officer of W. P. Carey & Co. LLC, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of W. P. Carey & Co. LLC.

/s/ Mark J. DeCesaris

Mark J. DeCesaris

acting Chief Financial Officer

8/9/2006

Date

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to W. P. Carey & Co. LLC and will be retained by W. P. Carey & Co. LLC and furnished to the Securities and Exchange Commission or its staff upon request.