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 September 30, 2008

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	13-3912578
(State of incorporation)	(I.R.S. Employer Identification No.)
50 Rockefeller Plaza
New York, New York	10020
(Address of principal executive offices)	(Zip Code)

Investor Relations (212) 492-8920
(212) 492-1100
(Registrant’s telephone numbers, including area code)

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

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

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

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

Registrant has 40,023,222 Listed Shares, no par value, outstanding at November 3, 2008.

INDEX

	Page No.
PART I — FINANCIAL INFORMATION
Item 1. — Financial Statements*
Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007		2
Consolidated Statements of Income for the three and nine months ended September 30, 2008 and 2007		3
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2008 and 2007		4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007		5
Notes to Consolidated Financial Statements		6
Item 2. — Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3. — Quantitative and Qualitative Disclosures About Market Risk		35
Item 4. — Controls and Procedures		36
PART II — OTHER INFORMATION
Item 1. — Legal Proceedings		37
Item 2. — Unregistered Sales of Equity Securities and Use of Proceeds		37
Item 6. — Exhibits		37
Signatures		38
EX-10.1: ASSET MANAGEMENT AGREEMENT
EX-10.2: AMENDMENT NO.1 TO THE AMENDED AND RESTATED ADVISORY AGREEMENT
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATIONS

* 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 within the meaning of the federal securities laws. It is important to note that our actual results could be materially different from those projected in such forward-looking statements. You should exercise caution in relying on forward-looking statements as they involve known and unknown risks, uncertainties and other factors that may materially affect our future results, performance, achievements or transactions. Information on factors which could impact actual results and cause them to differ from what is anticipated in the forward-looking statements contained herein is included in this report as well as in our other filings with the SEC, including but not limited to those described in Item 1A — Risk Factors in our Form 10-K for the year ended December 31, 2007. We do not undertake to revise or update any forward-looking statements. Additionally, a description of our critical accounting estimates is included in the management’s discussion and analysis section in our Form 10-K for the year ended December 31, 2007. There has been no significant change in our critical accounting estimates.

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

W. P. Carey 9/30/2008 10-Q — 1

W. P. CAREY & CO. LLC

PART I

ITEM 1. — FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)

	September 30, 2008			December 31, 2007
				(NOTE)
Assets
Real estate, net	$	500,988		$	513,405
Net investment in direct financing leases		84,477			89,463
Equity investments in real estate and CPA® REITs		266,567			242,677
Operating real estate, net		75,311			73,189
Cash and cash equivalents		20,485			12,137
Due from affiliates		51,194			88,329
Intangible assets and goodwill, net		95,178			99,873
Other assets, net		30,654			34,211
Total assets	$	1,124,854		$	1,153,284
Liabilities and Members’ Equity
Liabilities:
Non-recourse debt	$	255,478		$	254,051
Line of credit		73,500			62,700
Accounts payable, accrued expenses and other liabilities		44,001			59,076
Income taxes, net		60,641			65,152
Distributions payable		19,650			29,222
Settlement provision (Note 9)		—			29,979
Total liabilities		453,270			500,180
Minority interest in consolidated entities		19,523			18,833
Commitments and contingencies (Note 8)
Members’ equity:
Listed shares, no par value, 100,000,000 shares authorized; 40,024,035 and 39,216,493 shares issued and outstanding, respectively		771,283			748,584
Distributions in excess of accumulated earnings		(119,319	)		(117,051	)
Accumulated other comprehensive income		97			2,738
Total members’ equity		652,061			634,271
Total liabilities and members’ equity	$	1,124,854		$	1,153,284

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

Note: The consolidated balance sheet at December 31, 2007 has been derived from the audited consolidated financial statements at that date.

W. P. Carey 9/30/2008 10-Q — 2

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except share and per share amounts)

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007
Revenues
Asset management revenue	$	20,205		$	18,648		$	60,370		$	63,886
Structuring revenue		10,818			9,778			17,403			67,809
Wholesaling revenue		1,517			—			4,145			—
Reimbursed costs from affiliates		11,303			3,422			32,749			10,141
Lease revenues		18,959			18,965			57,583			56,583
Other real estate income		3,834			3,764			10,261			9,879
		66,636			54,577			182,511			208,298
Operating Expenses
General and administrative		(17,013	)		(12,323	)		(48,242	)		(47,624	)
Reimbursable costs		(11,303	)		(3,422	)		(32,749	)		(10,141	)
Depreciation and amortization		(6,395	)		(6,083	)		(18,765	)		(19,555	)
Property expenses		(1,815	)		(2,282	)		(5,555	)		(5,069	)
Impairment charge		(538	)		—			(538	)		—
Other real estate expenses		(1,989	)		(2,255	)		(6,204	)		(6,080	)
		(39,053	)		(26,365	)		(112,053	)		(88,469	)
Other Income and Expenses
Other interest income		752			1,288			2,193			5,530
Income from equity investments in real estate and CPA® REITs		2,272			8,945			10,917			13,312
Minority interest in income		(103	)		(505	)		(496	)		(3,911	)
Gain on sale of investment in direct financing lease		1,103			—			1,103			—
(Loss) gain on sale of securities, foreign currency transactions and other, net		(1,566	)		1,029			3,093			1,384
Interest expense		(5,004	)		(5,269	)		(14,579	)		(15,271	)
		(2,546	)		5,488			2,231			1,044
Income from continuing operations before income taxes		25,037			33,700			72,689			120,873
Provision for income taxes		(5,839	)		(11,396	)		(20,405	)		(48,813	)
Income from continuing operations		19,198			22,304			52,284			72,060
Discontinued Operations
Income from operations of discontinued properties		—			422			3,863			2,534
Gain on sale of real estate, net		—			—			—			962
Impairment charges		—			(2,317	)		—			(2,317	)
(Loss) income from discontinued operations		—			(1,895	)		3,863			1,179
Net Income	$	19,198		$	20,409		$	56,147		$	73,239
Basic Earnings Per Share
Income from continuing operations	$	0.49		$	0.58		$	1.34		$	1.89
(Loss) income from discontinued operations		—			(0.05	)		0.10			0.03
Net income	$	0.49		$	0.53		$	1.44		$	1.92
Diluted Earnings Per Share
Income from continuing operations	$	0.48		$	0.58		$	1.31		$	1.87
(Loss) income from discontinued operations		—			(0.05	)		0.10			0.03
Net income	$	0.48		$	0.53		$	1.41		$	1.90
Weighted Average Shares Outstanding
Basic		39,294,889			38,298,979			39,125,329			38,117,280
Diluted		40,299,073			39,601,853			40,293,094			39,718,522
Distributions Declared Per Share	$	0.492		$	0.472		$	1.461		$	1.401

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

W. P. Carey 9/30/2008 10-Q — 3

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007
Net Income	$	19,198		$	20,409		$	56,147		$	73,239
Other Comprehensive Income
Change in unrealized appreciation on marketable securities		25			(31	)		(14	)		(23	)
Unrealized (loss) gain on derivative instrument		(315	)		—			184			—
Foreign currency translation adjustment		(6,147	)		1,507			(2,811	)		2,024
		(6,437	)		1,476			(2,641	)		2,001
Comprehensive Income	$	12,761		$	21,885		$	53,506		$	75,240

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

W. P. Carey 9/30/2008 10-Q — 4

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Nine months ended September 30,
	2008			2007
Cash Flows — Operating Activities
Net income	$	56,147		$	73,239
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization including intangible assets and deferred financing costs		20,412			21,140
Income from equity investments in real estate and CPA® REITs in excess of distributions received		(1,224	)		(9,269	)
Gain on sale of direct financing lease		(1,103	)		—
Gain on sale of real estate, net		—			(962	)
Minority interest in income		496			4,027
Straight-line rent adjustments		1,718			2,045
Management income received in shares of affiliates		(30,237	)		(43,415	)
Unrealized loss (gain) on foreign currency transactions, warrants and securities		324			(1,279	)
Realized gain on foreign currency transactions, warrants and securities		(1,567	)		(105	)
Impairment charges		538			2,317
Stock-based compensation expense		5,894			3,795
Decrease in deferred acquisition revenue received		46,695			16,164
Increase in structuring revenue receivable		(8,845	)		(50,253	)
(Decrease) increase in income taxes, net		(6,527	)		8,465
Decrease in settlement provision		(29,979	)		—
Net changes in other operating assets and liabilities		(5,250	)		(1,016	)
Net cash provided by operating activities		47,492			24,893
Cash Flows — Investing Activities
Distributions received from equity investments in real estate and CPA® REITs in excess of equity income		7,566			24,358
Capital contributions to equity investments		(1,361	)		—
Purchases of real estate and equity investments in real estate		(184	)		(40,845	)
Capital expenditures		(8,355	)		(11,768	)
Loan to affiliate		—			(8,676	)
Proceeds from repayment of loan to affiliate		—			8,676
VAT refunded on purchase of real estate		3,189			—
Proceeds from sales of real estate and securities		5,062			6,014
Funds placed in escrow in connection with the sale of property		—			(3,315	)
Funds released from escrow in connection with the sale of property		636			—
Payment of deferred acquisition revenue to affiliate		(120	)		(524	)
Net cash provided by (used in) investing activities		6,433			(26,080	)
Cash Flows — Financing Activities
Distributions paid		(67,987	)		(53,432	)
Contributions from minority interests		1,957			1,181
Distributions to minority interests		(1,659	)		(1,295	)
Scheduled payments of mortgage principal		(7,196	)		(13,854	)
Proceeds from mortgages and credit facilities		122,968			150,383
Prepayments of mortgage principal and credit facilities		(102,427	)		(70,590	)
Repayment of loan from affiliates		(7,569	)		—
Payment of financing costs		(375	)		(1,317	)
Proceeds from issuance of shares		21,242			4,532
Excess tax benefits associated with stock-based compensation awards		697			1,352
Repurchase and retirement of shares		(5,134	)		(21,104	)
Net cash used in financing activities		(45,483	)		(4,144	)
Change in Cash and Cash Equivalents During the Period
Effect of exchange rate changes on cash		(94	)		291
Net increase (decrease) in cash and cash equivalents		8,348			(5,040	)
Cash and cash equivalents, beginning of period		12,137			22,108
Cash and cash equivalents, end of period	$	20,485		$	17,068

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

W. P. Carey 9/30/2008 10-Q — 5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Business

We provide long-term sale-leaseback and build-to-suit transactions for companies worldwide and manage a global investment portfolio. We invest primarily in commercial properties that are each triple-net leased to single corporate tenants, domestically and internationally, and earn revenue as the advisor to publicly owned, non-traded real estate investment trusts (“CPA^® REITs”) sponsored by us that invest in similar properties. We are currently the advisor to the following CPA^® REITs: Corporate Property Associates 14 Incorporated (“CPA^®:14”), Corporate Property Associates 15 Incorporated (“CPA^®:15”), Corporate Property Associates 16 – Global Incorporated (“CPA^®:16 – Global”) and Corporate Property Associates 17 – Global Incorporated (“CPA^®:17 – Global”). As of September 30, 2008, we own and manage over 850 commercial properties domestically and internationally, including our own portfolio. Our own portfolio is comprised of our full or partial ownership interest in 187 commercial properties, substantially all of which are net leased to 84 tenants, with a total of approximately 18 million square feet (on a pro rata basis) and an occupancy rate of approximately 95%.

Primary Business Segments

Investment Management — 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 their portfolios (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 from which we earn revenue increases. In addition, we also receive a percentage of distributions of available cash from CPA^®:17 – Global’s operating partnership. We may also earn incentive and disposition revenue and receive other compensation in connection with providing liquidity alternatives to CPA^® REIT shareholders.

Real Estate Ownership — We own and invest in commercial properties globally that are then leased to companies, primarily on a triple-net leased basis. We may also invest in other properties on an opportunistic basis.

Note 2. Basis of Presentation

Our unaudited consolidated financial statements 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. 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 our annual report on Form 10-K for the year ended December 31, 2007.

Basis of Consolidation

The consolidated financial statements include all our accounts and our majority-owned and/or controlled subsidiaries. The portion of these entities not owned by us is presented as minority interest as of and during the periods consolidated. All material inter-entity transactions have been eliminated.

When we obtain an economic interest in an entity, we evaluate the entity to determine if the entity is deemed a variable interest entity (“VIE”) and if we are deemed to be the primary beneficiary, in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”). We consolidate (i) entities that are VIEs and of which we are deemed to be the primary beneficiary and (ii) entities that are non-VIEs that we control. Entities that we account for under the equity method (i.e., at cost, increased or decreased by our share of earnings or losses, less distributions) include (i) entities that are VIEs and of which we are not deemed to be the primary beneficiary and (ii) entities that are non-VIEs that we do not control but over which we have the ability to exercise significant influence. We will reconsider our 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.

In determining whether we control a non-VIE, our consideration includes using the 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”). The scope of EITF 04-05 is limited to limited partnerships or similar entities that are not variable interest entities under FIN 46R. The EITF reached a consensus that the general partners in a limited partnership (or similar entity) are presumed to control the entity regardless of the level of their ownership and,

W. P. Carey 9/30/2008 10-Q — 6

Notes to Consolidated Financial Statements

accordingly, may be required to consolidate the entity. This presumption may be overcome if the agreements provide the limited partners with either (a) the substantive ability to dissolve (liquidate) the limited partnership or otherwise remove the general partners without cause or (b) substantive participating rights. If it is deemed that the limited partners’ rights overcome the presumption of control by a general partner of the limited partnership, the general partner shall account for its investment in the limited partnership using the equity method of accounting.

In February 2007, we formed CPA^®:17 – Global, an affiliated REIT. In November 2007, the SEC declared effective CPA^®:17 – Global’s registration statement to raise up to $2 billion of its common stock in an initial public offering, plus up to an additional $475 million of its common stock under its distribution reinvestment and stock purchase plan. In December 2007, we commenced fundraising for CPA^®:17 – Global; however, no shares were issued until January 2008. Therefore, as of and during the period ended December 31, 2007, the financial results of CPA^®:17 – Global were included in our consolidated financial statements, as we owned all of CPA^®:17 – Global’s outstanding common stock. Beginning in 2008, we have accounted for our interest in CPA^®:17 – Global under the equity method of accounting.

In March 2008, we formed Carey Watermark Investors Incorporated (“Carey Watermark”). We filed a registration statement on Form S-11 with the SEC during March 2008 to raise up to $1 billion of common stock of Carey Watermark in an initial public offering, plus up to an additional $237.5 million of its common stock under a distribution reinvestment and stock purchase plan, and currently expect to commence fundraising in 2009. As of and during the three and nine months ended September 30, 2008, the financial statements of Carey Watermark, which had no operations during these periods, were included in our consolidated financial statements, as we owned all of Carey Watermark’s outstanding common stock.

Out-of-Period Adjustment

During the third quarter of 2007, we determined that a longer schedule of depreciation/amortization of assets in certain of our equity method investment holdings should appropriately be applied to reflect the lives of the underlying assets rather than the expected holding period of these investments. We concluded that these adjustments were not material to any prior periods’ consolidated financial statements. We also concluded that the cumulative adjustment was not material to the third quarter of 2007, nor to the year ended December 31, 2007. As such, the cumulative effect was recorded in the consolidated statements of income as a one-time cumulative out-of-period adjustment in the third quarter of 2007. The effect of this adjustment for the three and nine months ended September 30, 2007 was to increase income from continuing operations before income taxes by approximately $5.7 million and $4.2 million, respectively, and net income by approximately $4.8 million and $3.5 million, respectively. There was no associated net impact on our cash flow from operations for the nine months ended September 30, 2007.

Reclassifications and Revisions

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

Adoption of New Accounting Pronouncements

SFAS 157

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. SFAS 157 clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability and applies whenever other standards require assets or liabilities to be measured at fair value. SFAS 157 also provides for certain disclosure requirements, including, but not limited to, the valuation techniques used to measure fair value and a discussion of changes in valuation techniques, if any, during the period. We adopted SFAS 157 as required on January 1, 2008, with the exception of nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value on a recurring basis, for which the effective date is our 2009 fiscal year. The initial application of SFAS 157 did not have a material effect on our financial position and results of operations and we are currently evaluating the impact, if any, that the remaining application of SFAS 157 will have on our financial position and results of operations.

SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The following table sets forth our financial assets that were accounted for at fair value on a recurring basis as of September 30, 2008 (in thousands):

W. P. Carey 9/30/2008 10-Q — 7

Notes to Consolidated Financial Statements

			Fair Value Measurements at Reporting Date Using:
			Quoted Prices in
			Active Markets for		Significant Other
			Identical Assets		Observable Inputs		Unobservable Inputs
Description	September 30, 2008		(Level 1)		(Level 2)		(Level 3)
Assets:
Marketable equity securities	$	1,643	$	—	$	—	$	1,643
Derivative assets		189		—		189		—
	$	1,832	$	—	$	189	$	1,643

	Fair Value Measurements Using
	Significant Unobservable Inputs (Level 3 only)
	Marketable								Marketable
	Equity			Derivative		Total			Equity			Derivative			Total
	Securities			Assets		Assets			Securities			Assets			Assets
	Three months ended September 30,								Nine months ended September 30,
Beginning balance	$	1,652		$	—	$	1,652		$	1,494		$	204		$	1,698
Total gains or losses (realized/unrealized):
Included in earnings		—			—		—			(2	)		(204	)		(206	)
Included in other comprehensive income		(9	)		—		(9	)		(29	)		—			(29	)
Purchases, issuances and settlements		—			—		—			180			—			180
Ending balance	$	1,643		$	—	$	1,643		$	1,643		$	—		$	1,643
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date	$	—		$	—	$	—		$	—		$	(204	)	$	(204	)

Gains and losses (realized and unrealized) included in earnings are reported in gain on sale of securities, foreign currency transactions and other, net in the statement of income.

SFAS 159

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), which gives entities the option to measure at fair value, on an instrument-by-instrument basis, certain financial assets, financial liabilities and firm commitments that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a firm commitment. Subsequent changes (i.e., unrealized gains and losses) in fair value must be recorded in earnings. Additionally, SFAS 159 allows for a one-time election for existing positions upon adoption, with the transition adjustment recorded to beginning retained earnings. We adopted SFAS 159 as required on January 1, 2008 and the initial application did not have a material effect on our financial position and results of operations as we did not elect to measure financial assets and liabilities at fair value.

Recent Accounting Pronouncements

SFAS 141R

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), which establishes principles and requirements for how an acquirer shall recognize and measure in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and goodwill acquired in a business combination. Additionally, SFAS 141R requires that an acquiring entity must immediately expense all acquisition costs and fees associated with an acquisition. SFAS 141R is effective for our 2009 fiscal year. We expect the adoption of SFAS 141R to have an impact on our results of operations to the extent we enter into new acquisitions in 2009 and beyond as acquisition costs and fees, which are currently capitalized and allocated to the cost basis of acquisitions, will instead be expensed immediately as incurred, while post acquisition, there will be a subsequent positive impact on net income through a reduction in depreciation expense over the estimated life of the properties.

W. P. Carey 9/30/2008 10-Q — 8

Notes to Consolidated Financial Statements

SFAS 160

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an Amendment of ARB No. 51” (“SFAS 160”), which establishes and expands accounting and reporting standards for minority interests in a subsidiary, which will be recharacterized as noncontrolling interests, and the deconsolidation of a subsidiary. SFAS 160 is effective for our 2009 fiscal year. We are currently assessing the potential impact that the adoption of SFAS 160 will have on our financial position and results of operations.

SFAS 161

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”), which is intended to help investors better understand how derivative instruments and hedging activities affect an entity’s financial position, financial performance and cash flows through enhanced disclosure requirements. The enhanced disclosures primarily surround disclosing the objectives and strategies for using derivative instruments by their underlying risk as well as a tabular format of the fair values of the derivative instruments and their gains and losses. SFAS 161 is effective for our 2009 fiscal year.

FSP 142-3

In April 2008, the FASB issued Staff Position 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). FSP 142-3 is intended to improve the consistency between the useful life of an intangible asset determined under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141R and other U.S. GAAP. The guidance for determining the useful life of a recognized intangible asset in FSP 142-3 must be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements in FSP 142-3 must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP 142-3 is effective for our 2009 fiscal year. We are currently assessing the potential impact that the adoption of FSP 142-3 will have on our financial position and results of operations.

EITF 03-6-1

In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 requires that all unvested share-based payment awards that contain non-forfeitable rights to dividends be considered participating securities and therefore shall be included in the computation of earnings per share pursuant to the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common shares and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. The guidance for determining earnings per share under FSP EITF 03-6-1 must be applied retrospectively to all prior periods presented after the effective date. FSP EITF 03-6-1 is effective for our 2009 fiscal year. We are currently assessing the potential impact that the adoption of FSP EITF 03-6-1 will have on our financial position and results of operations.

Note 3. Transactions with Related Parties

Advisory Services

Directly and through wholly-owned subsidiaries, we earn revenue as the advisor to the CPA^® REITs. Under the advisory agreements with the CPA^® REITs, we perform various services, including but not limited to the day-to-day management of the CPA^® REITs and transaction-related services. We earn asset management revenue generally 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. For CPA^®:17 – Global, we earn asset management revenue ranging from 0.5% of average market value, for long-term net leases and certain other types of real estate investments, to 1.75% of average equity value, for certain types of securities. For CPA^®:17 – Global, we will also receive up to 10% of distributions of available cash of its operating partnership. No amounts have been allocated under this provision for the three and nine months ended September 30, 2008. Total asset-based revenue earned was $20.2 million and $18.6 million, for the three months ended September 30, 2008 and 2007, respectively, and $60.4 million and $63.9 million for the nine months ended September 30, 2008 and 2007, respectively. Asset-based revenue for the nine months ended September 30, 2007 includes performance revenue recognized from CPA^®:16 – Global on achievement of its performance criterion in June 2007.

The advisory agreements allow us to elect to receive restricted stock for any revenue due from each CPA^® REIT. In 2008, for CPA^®:14, CPA^®:15 and CPA^®:16 – Global, we elected to receive all asset management revenue in cash and all performance revenue in restricted shares rather than cash, while for CPA^®:17 – Global, we elected to receive asset management

W. P. Carey 9/30/2008 10-Q — 9

Notes to Consolidated Financial Statements

revenue in restricted shares rather than cash. We do not earn performance revenue from CPA^®:17 – Global. In 2007, we elected to receive all asset management revenue in cash, with the exception of CPA^®:16 – Global’s base asset management revenue, for which we elected to receive restricted shares, and all performance revenue in restricted shares of the respective CPA^® REITs rather than cash.

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, we may receive acquisition revenue of up to an average of 4.5% of the total cost of all investments made by each CPA^® REIT. 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%. For certain types of non-long term net lease investments acquired on behalf of CPA^®:17 – Global, initial acquisition revenue may range from 0% to 1.75% of the equity invested plus the related acquisition revenue, with no deferred acquisition revenue being earned. We may be entitled, subject to CPA^® REIT board approval, 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. We earned structuring revenue of $10.8 million and $9.8 million for the three months ended September 30, 2008 and 2007, respectively, and $17.4 million and $67.8 million for the nine months ended September 30, 2008 and 2007, respectively. Structuring revenue for the nine months ended September 30, 2007 includes structuring revenue recognized from CPA^®:16 – Global on achievement of its performance criterion in June 2007. In addition, we may also earn revenue related to the disposition of properties, subject to subordination provisions, and will only recognize such revenue as such provisions are achieved.

We are also reimbursed by the CPA^® REITs for certain costs, primarily broker/dealer commissions paid on behalf of the CPA^® REITs and marketing and personnel costs. For the three months ended September 30, 2008 and 2007, reimbursed costs totaled $11.3 million and $3.4 million, respectively. For the nine months ended September 30, 2008 and 2007, reimbursed costs totaled $32.7 million and $10.1 million, respectively.

Pursuant to a sales agency agreement between our wholly-owned broker-dealer subsidiary and CPA^®:17 – Global, we earn a selling commission of up to $0.65 per share sold, selected dealer revenue of up to $0.20 per share sold and/or wholesaling revenue for selected dealers or investment advisors of up to $0.15 per share sold. We will re-allow all selling commissions to selected dealers participating in CPA^®:17 – Global’s offering and will re-allow up to the full selected dealer revenue to selected dealers. We will use any retained portion of the selected dealer revenue together with the wholesaling revenue to cover other underwriting costs incurred in connection with CPA^®:17 – Global’s offering. Total underwriting compensation earned in connection with CPA^®:17 – Global’s offering, including selling commissions, selected dealer revenue, wholesaling revenue and reimbursements made by us to selected dealers, cannot exceed the limitations prescribed by the Financial Industry Regulatory Authority (“FINRA”). The limit on underwriting compensation is currently 10% of gross offering proceeds. We may also be reimbursed up to an additional 0.5% of the gross offering proceeds for bona fide due diligence expenses.

Other Transactions

We own interests in entities which range from 5% to 95%, with the remaining interests generally held by affiliates, and own common stock in each of the CPA^® REITs.

We are the general partner in a limited partnership (which we consolidate for financial statement purposes) that leases our home office space and participates in an agreement with certain affiliates, including the CPA^® REITs, for the purpose of leasing office space used for the administration of our operations and the operations of our affiliates and for sharing the associated costs. We recorded income from minority interest partners of $0.6 million for each of the three month periods ended September 30, 2008 and 2007 and $1.8 million and $1.4 million during the nine month periods ended September 30, 2008 and 2007, respectively, in each case related to reimbursements from these affiliates. The average estimated minimum lease payments on the office lease, inclusive of minority interest, as of September 30, 2008 approximates $2.9 million annually through 2016.

Included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets at September 30, 2008 and December 31, 2007 are amounts due to affiliates totaling $0.9 million and $10.3 million, respectively.

One of our directors is the sole shareholder of Livho, Inc. (“Livho”). We consolidate the accounts of Livho in our consolidated financial statements in accordance with FIN 46R as it is a VIE of which we are the primary beneficiary.

Family members of one of our directors have an ownership interest in certain companies that own minority interests in our French majority-owned subsidiaries. These ownership interests are subject to substantially the same terms as all other ownership interests in the subsidiary companies.

W. P. Carey 9/30/2008 10-Q — 10

Notes to Consolidated Financial Statements

Two employees 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.

In December 2007, we received a loan totaling $7.6 million from two affiliated ventures in which we have interests that are accounted for under the equity method of accounting. The loan was used to fund the acquisition of tenancy-in-common interests in Europe and was repaid in March 2008. During the nine months ended September 30, 2008, we incurred interest expense of $0.1 million in connection with this loan.

We have the right to loan funds to affiliates under our line of credit. Such loans generally bear interest at comparable rates to our line of credit. In August 2007, we loaned $8.7 million to a venture in which CPA^®:15 has an ownership interest to facilitate the defeasance of a mortgage obligation in connection with the venture’s sale of a property. We recognized interest income of less than $0.1 million prior to this loan being repaid in September 2007.

Note 4. Real Estate

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

	September 30, 2008			December 31, 2007
Land	$	109,359		$	110,141
Buildings		491,353			491,968
Less: Accumulated depreciation		(99,724	)		(88,704	)
	$	500,988		$	513,405

Operating real estate, which consists primarily of our self-storage investments and Livho subsidiary, at cost, is summarized as follows (in thousands):

	September 30, 2008			December 31, 2007
Land	$	15,408		$	15,408
Buildings (a)		69,408			65,950
Less: Accumulated depreciation		(9,505	)		(8,169	)
	$	75,311		$	73,189

(a) In April 2008, we completed renovations to the hotel facility at our Livho subsidiary.

We recognized an impairment charge of $0.5 million during the three and nine months ended September 30, 2008 at a domestic property as we expect to sell this property for less than its carrying amount.

In connection with our acquisition of properties, we have recorded net lease intangibles of $37.2 million. These intangibles are being amortized over periods ranging from 2 to 30 years. Amortization of below-market and above-market rent intangibles are recorded as an adjustment to revenue. Net amortization of intangibles was $1.9 million and $2 million for the three months ended September 30, 2008 and 2007, respectively, and $5.5 million and $7 million for the nine months ended September 30, 2008 and 2007, respectively.

Note 5. Net Investment in Direct Financing Leases

During the three and nine months ended September 30, 2008, we sold our investment in a direct financing lease for $5 million, net of selling costs, and recognized a net gain on sale of $1.1 million.

Note 6. Equity Investments in Real Estate and CPA^® REITs

Our equity investments in real estate, which are accounted for under the equity method, are summarized below for our investments in the CPA^® REITs and interests in joint venture properties.

CPA^® REITs

We own interests in the CPA^® REITs with which we have advisory agreements. Our interests in the CPA^® REITs are accounted for under the equity method due to our ability to exercise significant influence as the advisor to the CPA^® REITs. The CPA^® REITs are

W. P. Carey 9/30/2008 10-Q — 11

Notes to Consolidated Financial Statements

publicly registered and file periodic reports with the SEC. We have elected, in certain cases, to receive restricted stock in the CPA^® REITs rather than cash in connection with earning asset management and performance revenue (Note 3).

Information about our investments in the CPA^® REITs is as follows (dollars in thousands):

	% of Outstanding Shares						Carrying Amount of Investment
Fund	September 30, 2008			December 31, 2007			September 30, 2008		December 31, 2007
CPA®:14		7.3	%		6.6	%	$	75,397	$	67,049
CPA®:15		5.3	%		4.5	%		71,811		61,976
CPA®:16 – Global		3.6	%		2.9	%		44,293		36,677
CPA®:17 – Global (a)		0.1	%		100.0	%		708		—
							$	192,209	$	165,702

(a) Closings in connection with CPA^®:17 – Global’s initial public offering commenced in January 2008.

Combined summarized financial information of the CPA^® REITs (for the entire entities, not our proportionate share) is presented below (in thousands):

	September 30, 2008			December 31, 2007
Assets	$	8,496,719		$	8,296,685
Liabilities		(4,753,004	)		(4,701,869	)
Owner’s equity	$	3,743,715		$	3,594,816

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007
Revenues	$	160,089		$	163,222		$	537,847		$	453,107
Expenses		(144,748	)		(109,439	)		(435,192	)		(331,167	)
Net income	$	15,341		$	53,783		$	102,655		$	121,940
Our share of income from equity investments in CPA® REITs	$	200		$	6,004		$	4,759		$	7,972

Interests in Joint Venture Properties

We own interests in single-tenant net leased properties leased to corporations through noncontrolling interests in (i) partnerships and limited liability companies in which our ownership interests are 60% or less and we exercise significant influence, and (ii) as tenants-in-common subject to common control. The underlying investments are generally owned with affiliates.

Our ownership interests in our equity investments in real estate and their respective carrying values are presented below (dollars in thousands):

	Ownership Interest at			Carrying Value
Lessee	September 30, 2008			September 30, 2008			December 31, 2007
Carrefour France, S.A. (a)		46	%	$	26,083		$	25,186
Schuler A.G. (a)		33	%		25,533			26,576
Medica — France, S.A. (a)		46	%		10,154			10,461
Hologic, Inc.		36	%		4,411			4,439
Consolidated Systems, Inc.		60	%		3,430			3,497
Federal Express Corporation		40	%		2,736			3,595
Hellweg Die Profi-Baumarkte GmbH & Co. KG (a)		5	%		2,522			2,641
Childtime Childcare, Inc.		34	%		1,738			1,711
Information Resources, Inc.		33	%		1,563			1,542
The Retail Distribution Group		40	%		357			682
Sicor, Inc. (b)		50	%		(4,169	)		(3,355	)
				$	74,358		$	76,975

(a)	Dollar amounts shown are based on the exchange rate of the Euro as of September 30, 2008 and December 31, 2007, respectively.
(b)	In June 2007, this venture completed the refinancing of an existing $2.5 million non-recourse mortgage with new non-recourse financing of $35.3 million based on the appraised value of the underlying real estate of the venture and distributed the proceeds to the venture partners.

W. P. Carey 9/30/2008 10-Q — 12

Notes to Consolidated Financial Statements

Combined summarized financial information of our interests in joint venture properties (for the entire entities, not our proportionate share) is presented below (in thousands):

	September 30, 2008			December 31, 2007
Assets	$	858,761		$	872,056
Liabilities		(623,182	)		(643,154	)
Owner’s equity	$	235,579		$	228,902

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007
Revenues	$	22,045		$	18,491		$	66,847		$	48,443
Expenses		(15,892	)		(15,433	)		(49,907	)		(38,139	)
Net income	$	6,153		$	3,058		$	16,940		$	10,304
Our share of net income from equity investments in real estate	$	2,072		$	2,941		$	6,158		$	5,340

Note 7. Discontinued Operations

Tenants from time to time may vacate space due to lease buy-outs, elections not to renew, company insolvencies or lease rejections in the bankruptcy process. In such cases, we assess whether the highest value is obtained from re-leasing or selling the property. In addition, in certain cases, we may elect to sell a property that is occupied if it is considered advantageous to do so. When it is determined that the relevant criteria have been met in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), the asset is reclassified as an asset held for sale.

Subsequent to the sale of a domestic property in 2004, which was reflected in discontinued operations, we entered into litigation with the former tenant. In June 2008, we received $3.8 million from the former tenant in connection with the resolution of the lawsuit.

During the nine months ended September 30, 2007, we sold two domestic properties for $6 million, net of selling costs, and in addition received lease termination proceeds of $1.9 million. We recognized a combined net gain on sale of $1 million, exclusive of impairment charges recognized in prior periods. Impairment charges totaling $2.5 million were recognized in prior periods to write down the value of one of these properties to its estimated net sales proceeds. In addition, in September 2007, we entered into a contract to sell a domestic property for $4.6 million and recognized an impairment charge of $2.3 million to reduce the property’s carrying value to its estimated net sales proceeds. This sale was completed in October 2007.

In accordance with SFAS 144, the results of operations for properties held for sale or disposed of are reflected in the consolidated financial statements as discontinued operations for all periods presented and are summarized as follows (in thousands):

	Three months ended September 30,					Nine months ended September 30,
	2008		2007			2008			2007
Revenues	$	—	$	1,524		$	3,877		$	6,020
Expenses		—		(1,102	)		(14	)		(3,486	)
Gain on sale of real estate, net		—		—			—			962
Impairment charges		—		(2,317	)		—			(2,317	)
(Loss) income from discontinued operations	$	—	$	(1,895	)	$	3,863		$	1,179

W. P. Carey 9/30/2008 10-Q — 13

Notes to Consolidated Financial Statements

Note 8. Commitments and Contingencies

As of September 30, 2008, we were not involved in any material litigation. We note the following:

Maryland Securities Commission

The Maryland Securities Commission has previously sought information from Carey Financial and CPA^®:15 relating to the previously settled SEC investigation described in Note 9. While it is possible that Maryland or another state could commence proceedings against Carey Financial relating to the SEC investigation, we do not currently expect that any such proceedings, if commenced, would have a material effect on us incremental to that caused by the SEC settlement described in Note 9.

Payson v. Park et al.

On April 24, 2008, a shareholder, Herbert Payson, filed a shareholder derivative complaint in New York state court against us, as nominal defendant, and certain members of the board of directors and several current and former executive officers alleging breach of their fiduciary duties resulting from the matters alleged in the SEC investigation described in Note 9. Plaintiff claims that the conduct alleged caused damages to us, including but not limited to the $30 million paid by us in connection with our settlement with the SEC and costs incurred in connection with the investigation by the SEC. On June 20, 2008, all defendants filed a motion to dismiss the complaint on the grounds that the shareholder had failed to make a pre-suit demand on the board of directors as required by law and should not be excused from doing so, and a hearing was held on that motion on October 10, 2008. We and the individual defendants intend to defend ourselves vigorously against the action.

Los Angeles Unified School District

In October 2006, a revised complaint was filed in the Los Angeles Superior Court in an action that had named a wholly-owned indirect subsidiary, and other unrelated parties, in a state court action by a private plaintiff alleging various claims under the California False Claims Act that focus on alleged conduct by the Los Angeles Unified School District in connection with its direct application and invoicing for school development and construction funding for a new high school, for which our subsidiary acted as the development manager. We and another of our subsidiaries were named for the first time in the revised complaint, by virtue of an alleged relationship to the subsidiary that was a party to the development agreement, but were not served. In February 2007, the judge dismissed the action against our wholly-owned indirect subsidiary, as well as other defendants, following various substantive and procedural motions. The Plaintiff filed an appeal, and in August 2008, the California Court of Appeal affirmed the dismissal and thereafter denied Plaintiff’s request for a rehearing. In October 2008, Plaintiff filed a Petition for Review by the California Supreme Court, which Petition is pending. The Plaintiff may still seek to serve us and our other subsidiary in this action. However, we believe, based on the information currently available to us, that, if the dismissal is not sustained and if we are served, we and our subsidiaries have meritorious defenses to such claims.

Other

We have provided indemnification in connection with divestitures of certain of our properties. These indemnities address a variety of matters including environmental liabilities. Our maximum obligations under such indemnification are not subject to reasonable estimation. We are not aware of any claims or other information that would give rise to material payments under such indemnifications.

Note 9. Settlement of SEC Investigation

In March 2008, we entered into a settlement with the SEC with respect to all matters relating to a previously disclosed investigation. In connection with the settlement, we made payments of $20 million, including interest, to certain of our managed REITs and paid a $10 million civil penalty. In anticipation of this settlement, we took a charge of $30 million in the fourth quarter of 2007 and recognized an offsetting $9 million tax benefit in the same period. As a result, the settlement is reflected as “Decrease in settlement provision” in our Consolidated Statement of Cash Flows for the nine months ended September 30, 2008.

We recognized a gain of $1.8 million for the nine months ended September 30, 2008 related to an insurance reimbursement of certain professional services costs in July 2008, which were incurred in connection with the SEC investigation that we settled in the first quarter of 2008.

For additional information about the SEC investigation and the settlement, please refer to our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC.

W. P. Carey 9/30/2008 10-Q — 14

Notes to Consolidated Financial Statements

Note 10. Risk Management and Use of Derivative Financial Instruments

Risk Management

In the normal course of our on-going business operations, we encounter economic risk. There are three main components of economic risk: interest rate risk, credit risk and market risk. We are subject to interest rate risk on our interest-bearing liabilities. Credit risk is the risk of default on our operations and tenants’ inability or unwillingness to make contractually required payments. Market risk includes changes in the value of the properties and related loans we hold due to changes in interest rates or other market factors as well as changes in the value of the shares we hold in the CPA^® REITs. In addition, we own investments in Europe and are also subject to the risks associated with changing foreign currency exchange rates. We manage foreign currency exchange rate movements by generally placing both our debt obligation to the lender and the tenant’s rental obligation to us in the same currency but are subject to such movements to the extent of the difference between the rental obligation and the debt service. We also face challenges with repatriating cash from our foreign investments. We may encounter instances where it is difficult to repatriate cash due to jurisdictional restrictions. We may also encounter instances where repatriating cash will result in current or future tax liabilities.

We do not generally use derivative financial instruments to manage foreign currency rate risk exposure and generally do not use derivative instruments to hedge credit/market risks or for speculative purposes.

Interest Rate Swaps

We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we attempt to obtain mortgage financing on a long-term, fixed-rate basis. However, from time to time, we or our venture partners may obtain variable rate mortgage loans and may enter into interest rate swap agreements with counterparties, which effectively convert the variable rate debt service obligations of the loan to a fixed rate. Our objective in using derivatives is to limit our exposure to interest rate movements. Interest rate swaps are agreements in which a series of interest rate flows are exchanged over a specific period. The notional amount on which the swaps are based is not exchanged.

In connection with an investment in Poland, we obtained $10.1 million in variable rate mortgage financing (based upon the exchange rate on the date of acquisition), and entered into an interest rate swap agreement with a notional amount that matches the scheduled debt principal amounts to the outstanding balance over the related term ending March 2018. The interest rate swap agreement was effective commencing March 2008.

Interest Rate Caps

Another way in which we attempt to limit our exposure to the impact of interest rate changes is through the use of interest rate caps. Interest rate caps limit the borrowing rate of variable rate debt obligations while allowing participants to share in downward shifts in interest rates. Our secured credit facility has a variable interest rate consisting of the one-month LIBOR plus a spread of 225 basis points. In March 2008, we obtained a $35.5 million interest rate cap whereby the LIBOR component of the interest rate under the secured credit facility cannot exceed 4.75% through December 2008. We are not accounting for this instrument as a hedge, and as such, any change in value is reflected in the consolidated statement of income.

Fair Value of Interest Related Derivative

Interest rate swaps and caps may be designated as cash flow hedges, with changes in fair value included as a component of other comprehensive income in members’ equity, or as fair value hedges, with changes in fair value reflected in earnings. Our interest rate swap and cap derivative financial instruments at September 30, 2008 are summarized as follows (dollars in thousands):

		Notional		Effective			Expiration		Fair
	Type	Amount		Interest Rate			Date		Value (b)
3-Month Euribor (a)	“Pay-fixed” swap	$	9,505		4.2	%		3/2018	$	184
3-Month LIBOR	Interest rate cap		35,185		5.4	%		12/2008		5
									$	189

(a)	Amounts are based upon the Euro exchange rate at September 30, 2008.
(b)	Amounts are included in other assets.

Changes in the fair value of interest rate swaps included in other comprehensive income in members’ equity reflected an unrealized (loss) gain of $(0.3 million) and $0.2 million for the three and nine months ended September 30, 2008, respectively. There were no changes in the fair value of interest rate caps included in gain on sale of securities, foreign currency transactions and other, net, for the

W. P. Carey 9/30/2008 10-Q — 15

Notes to Consolidated Financial Statements

three and nine months ended September 30, 2008, respectively. We did not have any interest rate swaps or caps during the three and nine months ended September 30, 2007.

Concentration of Credit Risk

Concentrations of credit risk arise when a number of tenants are engaged in similar business activities or have similar economic features that would cause their ability to meet contractual obligations, including those to us, to be similarly affected by changes in economic conditions. We regularly monitor our portfolio to assess potential concentrations of credit risk. We believe our portfolio is reasonably well diversified and does not contain any unusual concentration of credit risks.

The majority of our directly owned real estate properties and related loans are located in the United States, with Texas (15%) and California (12%) representing the only significant geographic concentration (10% or more of current annualized lease revenue). As of September 30, 2008, no individual tenant accounted for more than 10% of current annualized lease revenue. As of September 30, 2008, our directly owned real estate properties contain significant concentrations in the following asset types: industrial (38%), office (36%) and warehouse/distribution (13%); and in the following tenant industries: telecommunications (15%) and business and commercial services (15%).

Note 11. Members’ Equity and Stock Based and Other Compensation

Stock Based and Other Compensation

The total compensation expense (net of forfeitures) for our stock-based compensation plans was $2 million and $1.5 million for the three months ended September 30, 2008 and 2007, respectively, and $5.9 million and $3.8 million for the nine months ended September 30, 2008 and 2007, respectively. The tax benefit recognized by us related to stock-based compensation plans totaled $0.9 million and $0.7 million for the three months ended September 30, 2008 and 2007, respectively, and $2.6 million and $1.7 million for the nine months ended September 30, 2008 and 2007, respectively.

We have several stock-based compensation plans or arrangements, including the 1997 Share Incentive Plan (the “Incentive Plan”), Non-Employee Directors’ Plan, Employee Share Purchase Plan, Partnership Equity Plan and WPCI stock/options. There has been no significant activity or changes to the terms and conditions of any of these plans or arrangements during 2008, other than those described below.

During the three and nine months ended September 30, 2008, a corporation wholly-owned by our Chairman, Wm. Polk Carey, exercised warrants to purchase a total of 345,930 and 695,930 shares of our common stock, respectively, at $23 per share, for which we received proceeds of $8 million and $16.1 million, respectively. During the nine months ended September 30, 2007, a total of 1,500,000 warrants were exercised by that corporation at $21 per share in a cashless exercise for which 567,164 shares of our common stock were issued. These warrants were issued in 1998 as compensation for investment banking services in connection with structuring the consolidation of the CPA^® Partnerships.

The Incentive Plan authorizes the issuance of up to 6,200,000 shares of our common stock and provides for the grant of (i) share options, which may or may not qualify as incentive stock options under the Internal Revenue Code (“the Code”), (ii) performance shares or units, (iii) dividend equivalent rights and (iv) restricted shares or units.

In December 2007, the compensation committee of our board of directors approved a long-term incentive compensation program and terminated further contributions to the Partnership Equity Unit Plan. In January 2008, the board of directors approved initial long-term incentive awards consisting of 111,300 restricted units and 138,250 performance units. The restricted units vest over three years. Vesting and payment of the performance units is conditional on certain performance goals being met by us during the performance period from January 1, 2008 through December 31, 2010. The ultimate number of performance units to be issued will depend on the extent to which we meet the performance goals and can range from zero to three times the original awards. Upon vesting, the restricted and performance units may be converted into shares of our common stock. Both the restricted and performance units carry dividend equivalent rights. Dividend equivalent rights on restricted units are paid in cash on a quarterly basis whereas dividend equivalent rights on performance units accrue during the performance period and may be converted into additional shares of common stock at the conclusion of the performance period to the extent the underlying units vest. Dividend equivalent rights are accounted for as a reduction to retained earnings to the extent that the awards are expected to vest. For awards that are not expected to vest or do not ultimately vest, dividend equivalent rights are accounted for as additional compensation expense.

As a result of issuing these awards, we currently expect to recognize compensation expense totaling approximately $8.5 million over the vesting period, of which $0.7 million and $2.1 million were recognized during the three and nine months ended September 30, 2008, respectively.

W. P. Carey 9/30/2008 10-Q — 16

Notes to Consolidated Financial Statements

Earnings Per Share

Basic and diluted earnings per share were calculated as follows (in thousands, except share amounts):

	Three months ended September 30,				Nine months ended September 30,
	2008		2007		2008		2007
Net income — basic	$	19,198	$	20,409	$	56,147	$	73,239
Income effect of dilutive securities, net of taxes		263		398		598		2,371
Net income — diluted	$	19,461	$	20,807	$	56,745	$	75,610
Weighted average shares outstanding — basic		39,294,889		38,298,979		39,125,329		38,117,280
Effect of dilutive securities		1,004,184		1,302,874		1,167,765		1,601,242
Weighted average shares outstanding — diluted		40,299,073		39,601,853		40,293,094		39,718,522

Securities included in our diluted earnings per share determination consist of stock options and warrants, restricted stock and units and performance units. Securities representing a total of 53,211 and 24,115 shares of our common stock for the three months ended September 30, 2008 and 2007, respectively, 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 nine months ended September 30, 2008 and 2007.

Share Repurchase Program

In March 2008, we terminated our existing $40 million share repurchase program, which commenced in June 2007. During the nine months ended September 30, 2008, we repurchased a total of $5.1 million of our common stock, all of which were purchased in the quarter ended March 31, 2008. During the term of the program, we repurchased a total of $30.7 million of our common stock. For a description of an additional share repurchase program announced after September 30, 2008, see Note 13.

Note 12. Income Taxes

We have elected to be treated as a partnership for U.S. federal income tax purposes and prior to our restructuring in October 2007 conducted our real estate ownership operations through partnerships or limited liability companies electing to be treated as partnerships for U.S. federal income tax purposes. As partnerships, we and our partnerships subsidiaries are generally not directly subject to tax. We conduct our investment management services through wholly owned taxable corporations. These operations are subject to federal, state, local and foreign taxes as applicable. We conduct business in the United States and Europe, and as a result, we or one or more of our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and certain foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2004. Certain of our inter-company transactions that have been eliminated in consolidation for financial accounting purposes are also subject to taxation. Periodically, shares in the CPA^® REITs that are payable to our taxable subsidiaries in consideration for services rendered are distributed from these subsidiaries to us.

At September 30, 2008, we had unrecognized tax benefits of $0.5 million (net of federal benefits) that, if recognized, would favorably affect the effective income tax rate in any future periods. We recognize interest and penalties related to uncertain tax positions in income tax expense. As of September 30, 2008, we have approximately $0.2 million of accrued interest and penalties related to uncertain tax positions.

During the next year, we currently expect the liability for uncertain taxes to increase on a similar basis to the additions that occurred in 2007. Our tax returns are subject to audit by taxing authorities. Such audits can often take years to complete and settle. The tax years 2004-2007 remain open to examination by the major taxing jurisdictions to which we are subject.

Our wholly owned REIT subsidiary, Carey REIT II, Inc. (“Carey REIT II”), owns our real estate assets and has elected to be treated as a REIT under Sections 856 through 860 of the Code with the filing of its 2007 return. In order to maintain its qualification as a REIT, Carey REIT II is required to, among other things, distribute at least 90% of its net taxable income to its shareholders (excluding net capital gains) and meet certain tests regarding the nature of its income and assets. As a REIT, Carey REIT II is not subject to U.S. federal income tax to the extent it distributes its net taxable income annually to its shareholders. Accordingly, no provision for U.S. federal income taxes is included in the consolidated financial statements. We have operated and intend to continue to operate so that Carey REIT II meets the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. If we were to fail to meet these requirements, Carey REIT II would be subject to U.S. federal income tax.

W. P. Carey 9/30/2008 10-Q — 17

Notes to Consolidated Financial Statements

Note 13. Segment Reporting

We evaluate our results from operations by our two major business segments as follows:

Investment Management

This business segment includes investment management services performed for the CPA^® REITs pursuant to 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 payments due under the advisory agreements. In connection with maintaining our status as a publicly traded partnership, this business segment is carried out largely by corporate subsidiaries that are subject to federal, state, local and foreign taxes as applicable. Our 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 Ownership

This business segment includes the operations of properties under operating leases, properties under direct financing leases, real estate under construction and development, operating real estate, assets held for sale and equity investments in real estate in ventures accounted for under the equity method. Because of our legal structure, these operations are generally not subject to U.S. 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 (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007
Investment Management
Revenues (a)	$	43,843		$	31,848		$	114,667		$	141,836
Operating expenses (a)		(27,886	)		(14,929	)		(78,199	)		(55,041	)
Other, net (b)		1,090			6,937			8,973			10,064
Provision for income taxes		(5,846	)		(11,171	)		(20,186	)		(47,685	)
Income from continuing operations	$	11,201		$	12,685		$	25,255		$	49,174
Real Estate Ownership (c)
Revenues	$	22,793		$	22,729		$	67,844		$	66,462
Operating expenses		(11,167	)		(11,436	)		(33,854	)		(33,428	)
Interest expense		(5,004	)		(5,269	)		(14,579	)		(15,271	)
Other, net (b)		1,368			3,820			7,837			6,251
Benefit from (provision for) income taxes		7			(225	)		(219	)		(1,128	)
Income from continuing operations	$	7,997		$	9,619		$	27,029		$	22,886
Total Company
Revenues	$	66,636		$	54,577		$	182,511		$	208,298
Operating expenses		(39,053	)		(26,365	)		(112,053	)		(88,469	)
Interest expense		(5,004	)		(5,269	)		(14,579	)		(15,271	)
Other, net (b)		2,458			10,757			16,810			16,315
Provision for income taxes		(5,839	)		(11,396	)		(20,405	)		(48,813	)
Income from continuing operations	$	19,198		$	22,304		$	52,284		$	72,060

	Equity Investments in Real Estate as of				Total Long-Lived Assets (d) as of				Total Assets as of
	September 30, 2008		December 31, 2007		September 30, 2008		December 31, 2007		September 30, 2008		December 31, 2007
Investment Management	$	192,209	$	165,702	$	202,178	$	178,965	$	339,623	$	347,086
Real Estate Ownership (c)		74,358		76,975		752,760		772,058		785,231		806,198
Total Company	$	266,567	$	242,677	$	954,938	$	951,023	$	1,124,854	$	1,153,284

(a) Included in revenues and operating expenses are reimbursable costs from affiliates totaling $11.3 million and $3.4 million for the three months ended September 30, 2008 and 2007, respectively, and $32.7 million and $10.1 million for the nine months ended September 30, 2008 and 2007, respectively.

W. P. Carey 9/30/2008 10-Q — 18

Notes to Consolidated Financial Statements

(b)	Includes interest income, income from equity investments in real estate and CPA® REITs, minority interest and gains and losses on sales and foreign currency transactions.
(c)	Includes investments in France, Poland and Germany that accounted for lease revenues (rental income and interest income from direct financing leases) of $1.9 million and $1.4 million for the three months ended September 30, 2008 and 2007, respectively, and $5.6 million and $4.1 million for the nine months ended September 30, 2008 and 2007, respectively as well as income from equity investments in real estate of $1.5 million and $0.1 million for the three months ended September 30, 2008 and 2007, respectively, and $4.6 million and $1.3 million for the nine months ended September 30, 2008 and 2007, respectively. These investments also accounted for long-lived assets as of September 30, 2008 and December 31, 2007 of $114.4 million and $117.9 million, respectively.
(d)	Includes real estate, net investment in direct financing leases, equity investments in real estate, operating real estate and intangible assets related to management contracts.

Note 14. Subsequent Event

In October 2008, we announced that our board of directors had approved a program to repurchase up to $10 million of our common stock through December 15, 2008. Through November 5, 2008, we repurchased shares totaling $2.3 million under this program.

W. P. Carey 9/30/2008 10-Q — 19

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to provide a reader of our financial statements with management’s perspective on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2007.

Business Overview

We provide long-term sale-leaseback and build-to-suit transactions for companies worldwide and manage a global investment portfolio. We operate two business segments, investment management and real estate ownership, as described below. As of September 30, 2008, we own and manage over 850 commercial properties domestically and internationally, including our own portfolio. Our own portfolio is comprised of our full or partial ownership interest in 187 commercial properties, substantially all of which are net leased to 84 tenants, with a total of approximately 18 million square feet (on a pro rata basis) and an occupancy rate of approximately 95%.

Within our investment management segment, we are currently the advisor to the following affiliated publicly-owned, non-traded real estate investment trusts: Corporate Property Associates 14 Incorporated (“CPA^®:14”), Corporate Property Associates 15 Incorporated (“CPA^®:15”), Corporate Property Associates 16 – Global Incorporated (“CPA^®:16 – Global”) and Corporate Property Associates 17 Incorporated (“CPA^®:17 – Global”) (collectively, the “CPA^® REITs”).

Our primary business segments are:

Investment Management — 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 their portfolios (asset-based management and performance revenues). Asset-based management and performance revenues for the CPA^® REITs are determined based on assets under management. In addition, we also receive a percentage of distributions of available cash from CPA^®:17 – Global’s operating partnership. As funds available to the CPA^® REITs are invested, the asset base for which we earn revenue increases. We may also earn incentive and disposition revenue and receive other compensation in connection with providing liquidity alternatives to CPA^® REIT shareholders.

Real Estate Ownership — We own and invest in commercial properties globally that are then leased to companies, primarily on a triple net leased basis. We may also invest in other properties on an opportunistic basis.

Highlights

Factors Affecting Comparability

Under the terms of our advisory agreement with CPA^®:16 – Global, certain revenues were to be deferred and were not payable to us until CPA^®:16 – Global met an agreed-upon performance criterion. In June 2007, CPA^®:16 – Global met its performance criterion, and as a result, we recognized previously deferred revenue totaling $45.9 million (consisting of asset management revenue of $11.9 million, structuring revenue of $31.7 million and interest income on the previously deferred structuring revenue of $2.3 million). Net income recognized in connection with CPA^®:16 – Global achieving its performance criterion totaled $21.6 million. In addition, as a result of CPA^®:16 – Global meeting its performance criterion, we recognized and paid to certain employees incentive and commission compensation of $6.2 million and interest thereon of $0.4 million that had previously been deferred. This second quarter 2007 event, which did not recur in 2008, had a significant positive impact on the results of our investment management segment for the nine months ended September 30, 2007 and as such makes it difficult to compare current year-to-date results with the comparable prior year period.

Financial Highlights

- Total revenues, excluding reimbursed costs from affiliates, were $55.3 million for the third quarter of 2008, compared to $51.2 million in the third quarter of 2007, and $149.8 million for the nine months ended September 30, 2008, compared to $198.2 million for the nine months ended September 30, 2007. Revenues from our investment management operations for the nine months ended September 30, 2007 included the recognition of previously deferred revenue totaling $45.9 million from CPA^®:16 – Global meeting its performance criterion. We also experienced record investment volume during the nine months ended September 30, 2007.

W. P. Carey 9/30/2008 10-Q — 20

- Net income was $19.2 million for the third quarter of 2008, compared to $20.4 million in the third quarter of 2007, and $56.1 million in the nine months ended September 30, 2008, compared to $73.2 million in the comparable prior year period. Net income from investment management for the nine months ended September 30, 2007 was positively affected by the $21.6 million recognized upon the achievement of CPA^®:16 – Global’s performance criterion. Net income from our real estate ownership increased by $0.3 million and $6.8 million, respectively, for the three and nine months ended September 30, 2008 over the comparable prior year periods.

- Cash flow from operating activities for the nine months ended September 30, 2008 was $47.5 million, compared to $24.9 million for the prior year period. Our cash flows fluctuate period to period due to a number of factors as described in Financial Condition below. Cash flow from operating activities during 2008 was affected both by the receipt in January 2008 of $28.3 million of deferred acquisition revenue from CPA^®:16 – Global, which revenue had been recognized at the time CPA^®:16 – Global met its performance criterion in June 2007, and by the payment of $30 million related to the SEC settlement. During the nine months ended September 30, 2007, cash flow from operating activities was affected by the payment of taxes of approximately $21 million in connection with revenue earned in December 2006 from the CPA^®:12 / CPA^®:14 merger and deferred compensation totaling $6.6 million in connection with CPA^®:16 – Global achieving its performance criterion.

- Our quarterly cash distribution increased to $0.492 per share for the third quarter of 2008, or $1.968 per share on an annualized basis.

Management considers the performance metrics described above as well as certain non-GAAP performance metrics to be important measures in the evaluation of our results of operations, liquidity and capital resources. 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 investment management segment and seeking to increase value in our real estate ownership segment. Results of operations by reportable segment are described below.

Managed Portfolio Highlights

Acquisition Activity — We earn revenue from the acquisition and disposition of assets on behalf of the CPA^® REITs. The revenue we earn from the disposition of assets is recognized upon liquidation of a CPA^® REIT’s portfolio. During the three months ended September 30, 2008, we structured real estate investments totaling approximately $259 million on behalf of the CPA^® REITs.

Fundraising Activity — Since commencing its initial public offering to raise up to $2 billion of common stock in December 2007, CPA^®:17 – Global has raised more than $300 million through November 5, 2008.

Current Trends

The deterioration in the credit and real estate financing markets that occurred in the second half of 2007 continued and substantially worsened in the first nine months of 2008. In addition, deteriorating economic conditions have resulted in heightened turmoil in the financial markets. In recent months, many markets have experienced nearly unprecedented volatility. We expect these markets, both domestic and international, to remain subject to continued volatility for the foreseeable future, a condition which necessarily renders any discussion of current trends highly uncertain. Nevertheless, our view of current trends is presented below:

Investment Opportunities

In times such as the present, when financing is difficult to obtain, we believe sale-leaseback transactions can often be a more attractive alternative for a corporation to raise capital, which may result in increased and more attractive investment opportunities for our managed funds. However, as a result of the deterioration in the real estate financing markets, it has become extremely difficult for us to obtain financing for sale-leaseback transactions, and we expect to complete no more than a limited number of transactions on behalf of the CPA^® REITs for the remainder of 2008. While the difficult financing markets have limited our ability to complete transactions, pricing on potential sale-leaseback transactions has started to become more attractive so that we may be able to achieve desired returns that would allow us to complete some transactions without financing. We believe the pricing improvements are due, in part, to the continued deterioration in the credit markets, which has made obtaining financing for most companies extremely difficult. We earn structuring revenue on acquisitions completed on behalf of the CPA^® REITs and expect such revenue to fluctuate based on changes in our investment volume period over period.

Certain of the sale-leaseback opportunities in which we invest on behalf of our managed funds arise in connection with private equity transactions. While private equity firms have raised a significant amount of capital for investment in recent periods, transaction volume has decreased significantly in part as a result of the deterioration in the credit financing markets. As a result, our participation in new private equity transactions has also decreased. While this is likely to affect us in the near term, we believe that attractive

W. P. Carey 9/30/2008 10-Q — 21

investment opportunities, including future participation in either new private equity transactions or transactions with existing portfolio companies owned by private equity firms, will be available to our managed funds.

International investments continue to make up a significant portion of our investment activity on behalf of the CPA^® REITs. For the nine months ended September 30, 2008, international investments accounted for 53% of total investments we made on behalf of the CPA^® REITs. For the year ended December 31, 2007, international investments accounted for 55% of total investments. We currently expect international transactions 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.

Fundraising

During times of heightened turmoil in the financial markets, investors are generally more cautious and may delay investment decisions. While we have been pleased with our fundraising results to date, and raised slightly more funds in the third quarter of 2008 than in the second quarter, the pace of fundraising slowed beginning in September 2008. We cannot predict what fundraising trends will be in the future, and while we have recently added to the number of selected dealers for CPA^®:17 - Global, these additional outlets are not expected to account for a material percentage of CPA^®:17 - Global’s sales in the near term. Since commencing fundraising on behalf of CPA^®:17 - Global in late December 2007, we have raised more than $300 million through November 5, 2008.

Financing Conditions

The real estate financing markets have continued to deteriorate during 2008, making it increasingly difficult to finance new investments both domestically and internationally. We expect these conditions to continue in the near term and cannot predict when these markets will recover. At present, financing on behalf of the CPA^® REITs, particularly for larger transactions and for certain property types, is not available. However, as described above, pricing on potential sales-leaseback transactions is starting to improve and may allow us to complete some transactions without financing.

The deterioration in the real estate financing markets has also made refinancing debt extremely difficult. All of our property level debt is non-recourse, which means that if we default on a mortgage obligation our exposure is generally limited to the equity we have invested in that property. In addition, we have a $250 million line of credit, maturing in 2011, that can be increased to $300 million and extended for an additional year subject to satisfying certain conditions. This line of credit can be used for working capital needs and other commitments and may be used for future investments. The line of credit contains covenants that restrict the amount of distributions that we can pay. We are in compliance with the line of credit’s covenants at September 30, 2008.

Credit Conditions/Commercial Real Estate

Over the last several years, commercial real estate values have risen significantly as a result of the relatively low long-term interest rate environment and aggressive credit conditions. In addition, credit spreads have been narrow compared to historical averages. As a result, we have benefited from increases in the valuations of the CPA^® REIT portfolios through our ownership of shares in the CPA^® REITs and increased management revenue. Although long-term interest rates remain relatively low by historical standards, there has been a significant increase in credit spreads across the credit spectrum. Increases in credit spreads or deterioration in individual tenant credits may lower the appraised values of properties owned by the CPA^® REITs we manage and thereby reduce our asset management revenues and the investment performance of the CPA^® REITs. We generally enter into long term leases with our tenants to mitigate the impact that fluctuations in interest rates have on the values of the portfolios we manage.

Corporate Defaults

We expect that corporate defaults may increase during the remainder of 2008 and beyond, which will require more intensive management of both the assets we own and those we manage on behalf of the CPA^® REITs. We believe that our emphasis on ownership of assets that are critically important to a tenant’s operations mitigates, to some extent, the risk of a tenant defaulting on its lease upon filing for bankruptcy protection. In addition, we attempt to diversify the portfolios by tenant and tenant industry to mitigate the effect of tenant defaults. However, even where defaults do not occur, a tenant’s credit profile may deteriorate which in turn could affect the value of the lease and may require us to incur impairment charges on properties we own, even where the tenant is continuing to make the required lease payments. Furthermore, a tenant may reject our lease in bankruptcy, which could subject us to losses as the property may be worth less without the lease. Corporate defaults by tenants in the CPA^® REIT portfolios could also have a negative impact on our results of operations through our income from equity investments in CPA^® REITs and our ability to market CPA^®:17 – Global.

We closely monitor tenant performance for our own and our managed portfolios through review of financial statements, meetings with management and review of financial covenant compliance where we have financial covenants. We have seen an increase in the level of stress of tenants in certain industries, including among others automotive parts, home building materials and food industries. We have also seen that consumer- related industries are feeling the effects of the slowing economy, as well as businesses that have operated with relatively higher levels of leverage.

We monitor closely rent delinquencies as a precursor to a potential default. We have seen a small increase in rent delinquencies in 2008. We have devoted additional resources to enhance tenant monitoring and rent collection activities. Nevertheless, we expect in the next year that there may be additional corporate defaults in these portfolios.

We believe that our portfolio and those we manage on behalf of the CPA^® REITs are reasonably well diversified and do not contain any unusual concentrations of credit risk. None of the portfolios we own or manage has any significant concentration of tenants in the financial services industry.

W. P. Carey 9/30/2008 10-Q — 22

Lease Expirations

A significant amount of the leases in our owned portfolio expire by 2011. Based on annualized contractual lease revenue, lease expirations for each of the next few years are as follows: 8% in 2009, 18% in 2010, and 18% in 2011. We actively manage our portfolio and work with tenants generally beginning three years prior to lease expiration. In certain cases, we obtain lease renewals from our tenants. However, tenants may exercise purchase options rather than renew their lease, and we may seek replacement tenants or sell the property.

Competition

As a result of the continued deterioration in the credit and real estate financing markets, we believe there is a decrease in the level of competition for the investments we make on behalf of our managed funds, both domestically and internationally.

CPI

Despite slow economic growth rates in recent periods, inflation rates in the U.S. and the Euro zone have continued to rise. Increases in inflation are sometimes associated with rising long-term interest rates, which may have a negative impact on the value of the portfolios we own and manage. To mitigate this risk, our leases and those of the CPA^® REITs generally have rent increases based on formulas indexed to increases in the Consumer Price Index (“CPI”) or other similar indices for the jurisdiction in which the property is located. To the extent that the CPI increases, additional rental income streams may be generated for these leases and thereby mitigate the impact of inflation.

Exchange Rate Movements

We have foreign investments and as a result are subject to risk from the effects of exchange rate movements. Our results of foreign operations benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to foreign currencies. Despite the strengthening of the U.S. dollar in the final weeks of the third quarter of 2008, the average rate for the U.S. dollar in relation to the Euro for both the three and nine months ended September 30, 2008 was considerably weaker than the comparable prior year periods, resulting in a positive impact on our results of operations for Euro-denominated investments. Significant deterioration in the value of the Euro could have an adverse impact on our results of operations, and those of our managed funds, in the future. Investments denominated in the Euro accounted for approximately 9% and 11% of our annualized lease revenues at September 30, 2008 and 2007, respectively.

W. P. Carey 9/30/2008 10-Q — 23

Results of Operations

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

Investment Management (in thousands)

	Three months ended September 30,									Nine months ended September 30,
	2008			2007			Change			2008			2007			Change
Revenues
Asset management revenue	$	20,205		$	18,648		$	1,557		$	60,370		$	63,886		$	(3,516	)
Structuring revenue		10,818			9,778			1,040			17,403			67,809			(50,406	)
Wholesaling revenue		1,517			—			1,517			4,145			—			4,145
Reimbursed costs from affiliates		11,303			3,422			7,881			32,749			10,141			22,608
		43,843			31,848			11,995			114,667			141,836			(27,169	)
Operating Expenses
General and administrative		(15,423	)		(10,461	)		(4,962	)		(42,165	)		(41,767	)		(398	)
Reimbursable costs		(11,303	)		(3,422	)		(7,881	)		(32,749	)		(10,141	)		(22,608	)
Depreciation and amortization		(1,160	)		(1,046	)		(114	)		(3,285	)		(3,133	)		(152	)
		(27,886	)		(14,929	)		(12,957	)		(78,199	)		(55,041	)		(23,158	)
Other Income and Expenses
Other interest income		586			1,087			(501	)		1,667			4,974			(3,307	)
Income from equity investments in CPA® REITs		200			6,004			(5,804	)		4,759			7,972			(3,213	)
Minority interest in loss (income)		304			(154	)		458			697			(2,870	)		3,567
Gain (loss) on foreign currency transactions and other, net		—			—			—			1,850			(12	)		1,862
		1,090			6,937			(5,847	)		8,973			10,064			(1,091	)
Income from continuing operations before income taxes		17,047			23,856			(6,809	)		45,441			96,859			(51,418	)
Provision for income taxes		(5,846	)		(11,171	)		5,325			(20,186	)		(47,685	)		27,499
Net income from investment management	$	11,201		$	12,685		$	(1,484	)	$	25,255		$	49,174		$	(23,919	)

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 bases resulting from sales of investments; (iii) increases or decreases in the annual estimated net asset valuations of CPA^® REIT funds (which are not recorded for financial reporting purposes); (iv) increases or decreases in distributions of available cash (for CPA^®:17 – Global only); and (v) whether the CPA^® REITs are meeting their performance criteria. The availability of funds for new investments is substantially dependent on our ability to raise funds for investment by the CPA^® REITs.

For the three months ended September 30, 2008 as compared to the same period in 2007, asset management revenue increased by $1.6 million, primarily due to higher investment activity of the CPA^® REITs in the current year period.

For the nine months ended September 30, 2008 as compared to the same period in 2007, asset management revenue decreased by $3.5 million, primarily due to the recognition of $11.9 million of previously deferred performance revenue from CPA^®:16 – Global during the second quarter of 2007 following the achievement of its performance criterion, partially offset by higher investment activity of the CPA^® REITs in the current year period and increases in the annual estimated net asset valuations of CPA^®:14 and CPA^®:15 compared with the prior year.

Recent real estate investment volume includes over $1 billion (inclusive of a $446.4 million investment in April 2007) in investments on behalf of the CPA^® REITs during 2007 and $384 million during the nine months ended September 30, 2008.

W. P. Carey 9/30/2008 10-Q — 24

Currently, annual estimated net asset valuations are performed for CPA^®:14, CPA^®:15 and CPA^®:16 – Global. As a result of the annual valuations at December 31, 2007: CPA^®:14’s estimated net asset value increased to $14.50 per share (from $13.20); CPA^®:15’s estimated net asset value increased to $12.20 per share (from $11.40) and CPA^®:16 – Global’s initial valuation totaled $10.00 per share, which is equivalent to its initial offering price. In July 2008, as a result of a valuation performed as of April 30, 2008, CPA^®:14’s estimated net asset value was adjusted downward to $14.00 per share. This reduction in CPA^®:14’s NAV did not have a significant impact on asset management revenue for the third quarter of 2008 and is not expected to have a significant impact on asset management revenue for the remainder of 2008.

Structuring Revenue

Structuring revenue includes current and deferred acquisition revenue from structuring investments and transactions on behalf of the CPA^® REITs. Investment activity is subject to significant period-to-period variation.

For the three months ended September 30, 2008 as compared to the same period in 2007, structuring revenue increased by $1 million, primarily due to an increase in investment volume in the current quarter.

For the nine months ended September 30, 2008 as compared to the same period in 2007, structuring revenue decreased by $50.4 million. This decrease is primarily the result of the recognition of $31.7 million of previously deferred structuring revenue from CPA^®:16 – Global in the nine months ended September 30, 2007 in addition to a significant decrease in investment volume in the current year -to-date period.

We structured real estate investments totaling $259 million and $384 million, respectively, for the three and nine months ended September 30, 2008 as compared with $214 million and $950 million, respectively, for the comparable prior year periods. In addition to structuring real estate investments, during the nine months ended September 30, 2008 we also acquired $20 million of commercial mortgage-backed securities on behalf of CPA^®:17 – Global, for which we earned structuring revenues of 1% compared to an average of 4.5% that we generally earn for structuring long-term net lease investments on behalf of the CPA^® REITs (Note 3).

Wholesaling Revenue

We earn wholesaling revenue in connection with CPA^®:17 – Global’s initial public offering based on the number of shares sold. Wholesaling revenue earned is substantially offset by underwriting costs incurred in connection with the offering. Such underwriting costs are included in general and administrative expenses.

For the three and nine months ended September 30, 2008, we earned wholesaling revenue of $1.5 million and $4.1 million, respectively, in connection with CPA^®:17 – Global’s initial pubic offering, which commenced in December 2007.

Reimbursed and Reimbursable Costs

Reimbursed costs from affiliates (revenue) and reimbursable costs (expenses) represent costs incurred by us on behalf of the CPA^® REITs, consisting primarily of broker-dealer commissions and marketing and personnel costs, which are reimbursed by the CPA^® REITs. Revenue from reimbursed costs from affiliates is offset by corresponding charges to reimbursable costs and therefore has no impact on net income.

For the three and nine months ended September 30, 2008 as compared to the same periods in 2007, reimbursed and reimbursable costs increased by $7.9 million and $22.6 million, respectively, primarily due to broker-dealer commissions related to CPA^®:17 – Global’s initial public offering, which commenced in December 2007.

General and Administrative

For the three months ended September 30, 2008 as compared to the same period in 2007, general and administrative expenses increased by $5 million, primarily due to an increase in compensation-related costs of $1.9 million as well as increases in underwriting costs of $1.4 million, professional fees of $1 million and business development costs of $0.9 million. Underwriting costs were substantially offset by wholesaling revenue earned in connection with providing these services.

Compensation-related costs were higher in the third quarter of 2008 due to several factors, including an increase of $0.7 million in the amortization of stock-based compensation to key officers in connection with a new long-term incentive compensation program implemented in 2008, higher investment volume during the current quarter as compared with the third quarter of 2007 resulting in increased commissions of $0.5 million and severance costs for terminated employees of $0.2 million. Underwriting costs represent costs incurred in connection with CPA^®:17 – Global’s initial public offering, which commenced in December 2007. Professional fees represent auditing, tax and consulting services and include fees incurred in connection with our international operations. The increase in business development costs relates primarily to our international operations.

W. P. Carey 9/30/2008 10-Q — 25

For the nine months ended September 30, 2008 as compared to the same period in 2007, general and administrative expenses increased by $0.4 million, primarily due to increases in underwriting costs of $3.6 million, business development costs of $1.8 million and professional fees of $1.4 million. These increases were substantially offset by a decrease in compensation related costs of $6.1 million.

Underwriting costs, professional fees and business development expenses increased due to the same factors described above. Compensation - related costs were significantly higher in the 2007 period, primarily due to CPA^®:16 – Global achieving its performance criterion in June 2007 as well as a higher investment volume. As a result of CPA^®:16 – Global achieving its performance criterion, we recognized $6.6 million of previously deferred compensation costs in the second quarter of 2007. Lower investment volume in the 2008 period resulted in a decrease in commissions of $3.1 million. The decreases in compensation costs for 2008 were partially offset by an increase of $2.1 million in the amortization of stock-based compensation to key officers as described above and severance costs of $0.3 million.

Other Interest Income

Other interest income is primarily comprised of interest earned on deferred structuring revenue due from the CPA^® REITs.
For the three and nine months ended September 30, 2008 as compared to the same periods in 2007, other interest income decreased by $0.5 million and $3.3 million, respectively. The 2007 comparable periods include interest earned on $31.7 million of deferred structuring revenue due from CPA^®:16 – Global. As a result of CPA^®:16 – Global achieving its performance criterion, we recognized interest income of $2.3 million in June 2007 that had been previously deferred and received the first annual installment of the deferred structuring revenue totaling $28.3 million in January 2008.

Income from Equity Investments in CPA^® REITs

Income from equity investments in CPA^® REITs represents our proportionate share of net income (revenues less expenses) from our investments in the CPA^® REITs in which we have a non-controlling interest but exercise significant influence.

For the three and nine months ended September 30, 2008 as compared to the same periods in 2007, income from equity investments in CPA^® REITs decreased by $5.8 million and $3.2 million, respectively, primarily due to the recognition of out-of-period adjustments totaling $4.4 million and $3.5 million for the three and nine months ended September 30, 2007, respectively (Note 2). We also recognized approximately $0.7 million less in each of the current year periods from our equity investment in CPA^®:15, primarily as a result of impairment charges recognized by CPA^®:15 during the third quarter of 2008. These decreases were partially offset by the recognition of our share of overall increases in net income in CPA^®:14 and CPA^®:16 – Global. Our share of CPA^®:17 – Global’s operating results for all periods presented was not significant as it is currently in its initial fundraising phase and has made a limited number of investments.

Minority Interest in Loss (Income)

We consolidate investments in which we are deemed to have a controlling interest. Minority interest in income represents the proportionate share of net income (revenue less expenses) from such investments that is attributable to the partner(s) holding the non-controlling interest. Minority interest is comprised of the results of operations of our subsidiary, W. P. Carey International (“WPCI”), in which two of our employees own a minority interest and reimbursements from a partnership agreement with certain affiliates, including the CPA^® REITs, to share the costs associated with leasing the home office space. Such costs are allocated among the participants in the entity based on gross revenues and are adjusted quarterly.

For the three months ended September 30, 2008, we recognized minority interest in loss of $0.3 million as compared to minority interest in income of $0.2 million in the same period in 2007. Our share of the loss generated from the cost sharing partnership agreement with certain affiliates remained relatively unchanged between the two periods. However, results of operations for WPCI were lower during the third quarter of 2008 as compared to 2007 because, beginning in the third quarter of 2008, WPCI no longer earns revenue from the management of our international assets as such revenue is now earned by a separate wholly-owned subsidiary, which is located in Amsterdam.

For the nine months ended September 30, 2008, we recognized minority interest in loss of $0.7 million as compared to minority interest in income of $2.9 million in the same period in 2007. Results of operations for WPCI were significantly lower in 2008, primarily due to the recognition, in June 2007, of previously deferred asset management and structuring revenue from CPA^®:16 – Global achieving its performance criterion and a reduction in international investment volume. As described above, 2007 was a record year in terms of investment volume with a significant portion coming from international investments. In addition, our share of the loss generated from the cost sharing partnership agreement with certain affiliates increased by $0.3 million.

W. P. Carey 9/30/2008 10-Q — 26

Gain (Loss) on Foreign Currency Transactions and Other, Net

We recognized a gain of $1.8 million for the nine months ended September 30, 2008 related to an insurance reimbursement of certain professional services costs in July 2008, which were incurred in connection with the SEC investigation that we settled in the first quarter of 2008. There were no gains or losses on foreign currency transactions and other, net for either of the three month periods ended September 30, 2008 or 2007.

Provision for Income Taxes

For the three months ended September 30, 2008 as compared to the same period in 2007, our provision for income taxes decreased by $5.3 million. The reduction for the current year period was due to several factors, including reductions in tax-generating intercompany transactions, international asset management revenue being taxed in a foreign jurisdiction beginning in the third quarter of 2008, and a reduction in the amount of shares in the CPA^® REITs that we hold in taxable subsidiaries.

For the nine months ended September 30, 2008 as compared to the same period in 2007, our provision for income taxes decreased by $27.5 million. The reduction for the current year period was due to the same factors described above. In addition, our provision for income taxes for the nine months ended September 30, 2007 included taxes on asset management and structuring revenue recognized in the second quarter of 2007 as a result of CPA^®:16-Global achieving its performance criterion.

Net Income from Investment Management

For the three and nine months ended September 30, 2008 as compared to 2007, the resulting net income from investment management decreased by $1.5 million and $23.9 million, respectively.

Real Estate Ownership (in thousands)

	Three months ended September 30,									Nine months ended September 30,
	2008			2007			Change			2008			2007			Change
Revenues
Lease revenues	$	18,959		$	18,965		$	(6	)	$	57,583		$	56,583		$	1,000
Other real estate income		3,834			3,764			70			10,261			9,879			382
		22,793			22,729			64			67,844			66,462			1,382
Operating Expenses
General and administrative		(1,590	)		(1,862	)		272			(6,077	)		(5,857	)		(220	)
Depreciation and amortization		(5,235	)		(5,037	)		(198	)		(15,480	)		(16,422	)		942
Property expenses		(1,815	)		(2,282	)		467			(5,555	)		(5,069	)		(486	)
Impairment charge		(538	)		—			(538	)		(538	)		—			(538	)
Other real estate expenses		(1,989	)		(2,255	)		266			(6,204	)		(6,080	)		(124	)
		(11,167	)		(11,436	)		269			(33,854	)		(33,428	)		(426	)
Other Income and Expenses
Other interest income		166			201			(35	)		526			556			(30	)
Income from equity investments in real estate		2,072			2,941			(869	)		6,158			5,340			818
Minority interest in income		(407	)		(351	)		(56	)		(1,193	)		(1,041	)		(152	)
Gain on sale of investment in direct financing lease		1,103			—			1,103			1,103			—			1,103
(Loss) gain on sale of securities, foreign currency transactions and other, net		(1,566	)		1,029			(2,595	)		1,243			1,396			(153	)
Interest expense		(5,004	)		(5,269	)		265			(14,579	)		(15,271	)		692
		(3,636	)		(1,449	)		(2,187	)		(6,742	)		(9,020	)		2,278
Income from continuing operations before income taxes		7,990			9,844			(1,854	)		27,248			24,014			3,234
Benefit from (provision for) income taxes		7			(225	)		232			(219	)		(1,128	)		909
Income from continuing operations		7,997			9,619			(1,622	)		27,029			22,886			4,143
(Loss) income from discontinued operations		—			(1,895	)		1,895			3,863			1,179			2,684
Net income from real estate operations	$	7,997		$	7,724		$	273		$	30,892		$	24,065		$	6,827

W. P. Carey 9/30/2008 10-Q — 27

Our real estate ownership consists of the investment in and the leasing of commercial real estate. Management’s evaluation of the sources of lease revenues is as follows (in thousands):

	Nine months ended September 30,
	2008		2007
Rental income	$	49,212	$	47,466
Interest income from direct financing leases		8,371		9,117
	$	57,583	$	56,583

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 (in thousands):

	Nine months ended September 30,
	2008		2007
Bouygues Telecom, S.A. (a) (b) (c)	$	4,828	$	4,066
CheckFree Holdings Corporation Inc. (b)		3,609		3,541
Daimler Trucks North America LLC		3,476		3,476
Dr Pepper Bottling Company of Texas		3,412		3,370
U.S. Airways Group(d)		2,268		2,128
Orbital Sciences Corporation		2,267		2,267
Titan Corporation		2,185		2,185
AutoZone, Inc.(d)		1,675		1,747
Lucent Technologies, Inc.		1,496		1,377
Quebecor Printing, Inc.		1,455		1,455
Sybron Dental Specialties Inc.		1,328		1,328
Unisource Worldwide, Inc.		1,259		1,265
Werner Corporation		1,220		1,220
BE Aerospace, Inc.		1,181		1,181
CSS Industries, Inc.		1,177		1,177
Career Education Corporation		1,126		1,126
PPD Development, Inc. (c)		1,109		990
Eagle Hardware & Garden, a subsidiary of Lowe’s Companies(d)		1,069		1,180
Sprint Spectrum, L.P.		1,068		1,068
Enviro Works, Inc.		1,060		1,013
AT&T Corporation		945		945
Omnicom Group Inc.		939		939
BellSouth Telecommunications, Inc.		921		921
United States Postal Service		881		881
Other (a)		15,629		15,737
	$	57,583	$	56,583

(a)	Revenue amounts are subject to fluctuations in foreign currency exchange rates.
(b)	Lease revenues applicable to minority interests in the consolidated amounts above total $8.4 million and $7.6 million for the nine months ended September 30, 2008 and 2007, respectively.
(c)	Increase is due to CPI-based (or equivalent) rent increase.
(d)	Revenue amounts are subject to fluctuations in percentage rents.

W. P. Carey 9/30/2008 10-Q — 28

We recognize income from equity investments in real estate of which lease revenues are a significant component. Net lease revenues from these ventures (for the entire venture, not our proportionate share) are as follows (dollars in thousands):

	Ownership Interest at			Nine months ended September 30,
Lessee	September 30, 2008			2008		2007
Carrefour France, S.A. (a)		46	%	$	16,581	$	14,015
Medica — France, S.A. (a)		46	%		5,519		4,628
Schuler A.G. (a) (b)		33	%		5,263		—
Federal Express Corporation		40	%		5,213		5,156
Information Resources, Inc.		33	%		3,729		3,729
Sicor, Inc.		50	%		2,507		2,507
Hologic, Inc.		36	%		2,488		2,407
Consolidated Systems, Inc.		60	%		1,373		1,373
Childtime Childcare, Inc.		34	%		939		963
The Retail Distribution Group		40	%		606		606
				$	44,218	$	35,384

(a)	Revenue amounts are subject to fluctuations in foreign currency exchange rates.
(b)	We acquired our interest in this venture in December 2007.

The above table does not reflect our share of interest income from our 5% interest in a venture that acquired a note receivable in April 2007. The venture recognized interest income (for the entire venture, not our proportionate share) of $28.8 million and $12.6 million for the nine months ended September 30, 2008 and 2007, respectively.

Lease Revenues

For the three months ended September 30, 2008 as compared to the same period in 2007, lease revenues (rental income and interest income from direct financing leases) remained relatively unchanged as lease revenues from rent increases at several properties were offset by the impact of recent property sales and lease expirations.

For the nine months ended September 30, 2008 as compared to the same period in 2007, lease revenues increased by $1 million, primarily due to the favorable impact of fluctuations in foreign currency exchange rates of $0.9 million and rent increases at several properties totaling $0.6 million. These increases were partially offset by the impact of property sales and lease expirations.

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.

General and Administrative

For the three months ended September 30, 2008 as compared to the same period in 2007, general and administrative expenses decreased by $0.3 million, primarily due to professional fees incurred in the third quarter of 2007 related to our corporate restructuring.

For the nine months ended September 30, 2008 as compared to the same period in 2007, general and administrative expenses increased by $0.2 million, primarily due to expenses incurred in connection with opening our Amsterdam office in July 2008.

Depreciation and Amortization

For the three months ended September 30, 2008 as compared to the same period in 2007, depreciation and amortization expense increased by $0.2 million, primarily due to an increase in depreciation at Livho (a subsidiary that operates a Radisson hotel franchise in Michigan) which completed its renovation work in May 2008.

For the nine months ended September 30, 2008 as compared to the same period in 2007, depreciation and amortization expense decreased by $0.9 million, primarily due to the result of in-place lease intangible assets at certain properties that became fully amortized in 2007 as well as the acceleration of depreciation on certain Livho assets in 2007.

W. P. Carey 9/30/2008 10-Q — 29

Property Expenses

For the three months ended September 30, 2008 as compared to the same period in 2007, property expenses decreased by $0.5 million. Property expenses in the third quarter of 2007 included an increase in uncollected rent expense from certain tenants.

For the nine months ended September 30, 2008 as compared to the same period in 2007, property expenses increased by $0.5 million, primarily due to increases in other property related expenses, including professional services, insurance and utilities, and to a lesser extent increases in reimbursable tenant costs. Actual recoveries of reimbursable tenant costs are recorded as both revenue and expense and therefore have no impact on net income.

Impairment Charge

We recognized an impairment charge of $0.5 million during the three and nine months ended September 30, 2008 at a domestic property as we expect to sell this property for less than its carrying amount.

Income from Equity Investments in Real Estate

Income from equity investments in real estate represents our proportionate share of net income (revenue less expenses) from investments entered into with affiliates or third parties in which we have a non-controlling interest but exercise significant influence.

For the three months ended September 30, 2008 as compared to the same period in 2007, income from equity investments in real estate decreased by $0.9 million, primarily due to the recognition of a $1.3 million out-of-period adjustment in the third quarter of 2007 (Note 2), which was partially offset by income earned from investment activity in 2007 totaling $0.6 million.

For the nine months ended September 30, 2008 as compared to the same period in 2007, income from equity investments in real estate increased by $0.8 million, primarily due to income earned from investment activity in 2007 totaling $1.7 million, partially offset by the recognition of a $0.7 million out-of-period adjustment in the third quarter of 2007 (Note 2).

Gain on Sale of Investment in Direct Financing Lease

During the three and nine months ended September 30, 2008, we sold our investment in a direct financing lease for $5 million, net of selling costs, and recognized a net gain on sale of $1.1 million.

(Loss) Gain on Sale of Securities, Foreign Currency Transactions and Other, Net

For the three months ended September 30, 2008, we recognized a net loss on the sale of securities, foreign currency transactions and other, net of $1.6 million as compared with a net gain of $1 million in the same period in 2007. This net loss is primarily due to a decrease in cumulative unrealized foreign currency gains recognized due to changes in foreign currency exchange rates on notes receivable from international subsidiaries.

For the nine months ended September 30, 2008 as compared to the same period in 2007, gain on the sale of securities, foreign currency transactions and other, net decreased by $0.2 million, primarily due to a loss incurred in connection with the write off of certain warrants. Increases in realized foreign currency gains arising on the repatriation of cash from foreign operations were largely offset by decreases in cumulative unrealized foreign currency gains as described above.

Income from Continuing Operations

For the three months ended September 30, 2008 as compared to the same period in 2007, the resulting income from continuing operations decreased by $1.6 million. For the nine months ended September 30, 2008 as compared to the same period in 2007, the resulting income from continuing operations increased by $4.1 million.

Discontinued Operations

For the three months ended September 30, 2008, we had no income from the operations of discontinued properties. For the nine months ended September 30, 2008, we earned income from the operations of discontinued properties of $3.9 million, which was primarily comprised of proceeds received from a former tenant in payment of a $3.8 million legal judgment in our favor.

For the three months ended September 30, 2007, we incurred a loss from discontinued operations of $1.9 million, primarily due to the recognition of an impairment charge of $2.3 million to reduce a domestic property’s carrying value to its net sales proceeds. For the nine months ended September 30, 2007, we earned income from discontinued operations of $1.2 million, which was primarily comprised of lease termination revenue of $1.9 million and a net gain of $1 million from the sale of two domestic properties. These increases were partially offset by the impairment charge of $2.3 million described above.

W. P. Carey 9/30/2008 10-Q — 30

Financial Condition

Uses of Cash during the Period

Our cash flows fluctuate period to period due to a number of factors, which include the nature and timing of receipts of transaction-related revenue, the performance of the CPA^® REITs relative to their performance criteria, the timing of purchases and sales of real estate, the timing of certain payments and the receipt of the annual installment of deferred acquisition revenue and interest thereon in the first quarter.

Although our cash flows may fluctuate from period to period, we believe that we will generate sufficient cash from operations and, if necessary, from the proceeds of non-recourse mortgage loans, unused capacity on our line of credit 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. There has been no material change in our financial condition since December 31, 2007. Our use of cash during the period is described below.

Operating Activities

During the nine months ended September 30, 2008, we used our cash flows from operations along with existing cash resources and borrowings under our line of credit to fund distributions to shareholders and make purchases of common stock under a share repurchase program that was terminated in March 2008. Cash flows from operations were also impacted during the nine months ended September 30, 2008 by payments made related to the SEC settlement totaling $30 million.

During the nine months ended September 30, 2008, we received revenue of $30 million 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 (see below). We also received revenue of $10.2 million in connection with structuring investments on behalf of the CPA^® REITs. In January 2008, we received $47.1 million related to the annual installment of deferred acquisition revenue from CPA^®:14, CPA^®:15 and CPA^®:16 – Global, including interest. This included previously deferred structuring revenues of $28.3 million from CPA^®:16 – Global, which met its performance criterion in June 2007.

In 2007, we elected to receive all performance revenue from CPA^®:14, CPA^®:15 and CPA^®:16 – Global, as well as the asset management revenue payable by CPA^®:16 – Global, in restricted shares rather than cash. For 2008, we have elected to continue to receive all performance revenue from CPA^®:14, CPA^®:15, CPA^®:16 – Global and CPA^®:17 – Global in restricted shares rather than cash. However, for 2008 we have elected to receive the base asset management revenue from CPA^®:16 – Global in cash (rather than in stock, as in the prior year), which benefited operating cash flows by $9 million during the nine months ended September 30, 2008. We expect that the election to receive our performance revenue in restricted shares will continue to have a negative impact on cash flows during the remainder of 2008.

During the nine months ended September 30, 2008, our real estate ownership provided cash flows (contractual lease revenues, net of property-level debt service) of approximately $43.9 million.

Investing Activities

Our investing activities are generally comprised of real estate transactions (purchases and sales) and capitalized property related costs. During the nine months ended September 30, 2008, we used $8.4 million to make capital improvements to existing properties. Cash inflows during this period included distributions from equity investments in real estate and CPA^® REITs in excess of equity income of $7.6 million, proceeds from the sale of real estate interests of $5.1 million and a refund of $3.2 million of foreign taxes previously paid on the purchase of real estate.

Financing Activities

During the nine months ended September 30, 2008, we paid distributions to shareholders of $68 million, inclusive of a special distribution of approximately $10.6 million paid in January 2008 in connection with our corporate restructuring that was completed during 2007, and made scheduled mortgage principal payments totaling $7.2 million. We also used $7.6 million to repay a loan from certain affiliates. Borrowings under our line of credit increased overall by $10.8 million since December 31, 2007 and were comprised of gross borrowings of $112.8 million and repayments of $102 million. Borrowings under our line of credit were used for several purposes, including making payments in connection with the SEC settlement. We also obtained $10.2 million of non-recourse mortgage financing on an unleveraged property. During the nine months ended September 30, 2008, we raised $21.2 million from the issuance of shares of our common stock, primarily as a result of the exercise of certain warrants in 2008 (Note 11) and to a lesser extent as a result of purchases under our distribution reinvestment program. In connection with a share repurchase program, we repurchased shares totaling $5.1 million through the date of the program’s termination in March 2008.

W. P. Carey 9/30/2008 10-Q — 31

Summary of Financing

The table below summarizes our mortgage notes payable and credit facilities as of September 30, 2008 and 2007, respectively (dollars in thousands).

	September 30,
	2008			2007
Balance
Fixed rate	$	177,463		$	194,521
Variable rate (a)		151,515			153,874
	$	328,978		$	348,395
Percent of total debt
Fixed rate		54	%		56	%
Variable rate (a)		46	%		44	%
		100	%		100	%
Weighted average interest rate at end of period
Fixed rate		6.3	%		6.4	%
Variable rate (a)		4.3	%		6.1	%

(a) Included in variable rate debt as of September 30, 2008 is (i) $73.5 million outstanding under our line of credit, (ii) $44.7 million in variable rate debt (inclusive of $35.2 million outstanding under our secured credit facility) that has been effectively converted to fixed rates or subject to cap through interest rate swap or interest rate cap derivative instruments (Note 10) and (iii) $28.3 million in mortgage obligations that are currently fixed rate but which have interest rate reset features that may change the interest rates to then prevailing market fixed rates (subject to specified caps) at certain points in their term. There are no interest rate resets scheduled during the next twelve months.

Cash Resources

At September 30, 2008, our cash resources consisted of the following:

- Cash and cash equivalents totaling $20.5 million. Of this amount $10 million, at current exchange rates, was held in foreign bank accounts, and we could be subject to restrictions or significant costs should we decide to repatriate these amounts;

- Line of credit with unused capacity of up to $176.5 million, which may also be used to loan funds to our affiliates. Our lender has issued letters of credit totaling $4 million on our behalf in connection with certain contractual obligations, which reduce amounts that may be drawn under this facility; and

- We have the potential to borrow against a portion of the value of our currently unleveraged properties, which had an aggregate carrying value of $246.9 million.

Our cash resources can be used for working capital needs and other commitments and may be used for future investments. We continue to evaluate fixed-rate financing options, such as obtaining non-recourse financing on our unleveraged properties. Any financing obtained may be used for working capital objectives and may be used to pay down existing debt balances. A summary of our secured and unsecured credit facilities is provided below (in thousands):

	September 30, 2008				December 31, 2007
	Outstanding		Maximum		Outstanding		Maximum
	Balance		Available		Balance		Available
Line of credit	$	73,500	$	250,000	$	62,700	$	250,000
Secured credit facility		35,185		35,185		35,581		105,000
	$	108,685	$	285,185	$	98,281	$	355,000

Line of credit

In June 2007, we entered into a $250 million revolving line of credit to replace our previous $175 million line of credit that was due to expire in July 2007. The line of credit, which matures in June 2011, can be increased up to $300 million upon satisfaction of certain conditions and provides for a one-year extension option subject to the satisfaction of certain conditions and the payment of an extension fee equal to 0.125% of the total commitments under the facility at that time. However, such expansion is at the discretion of the lenders.

W. P. Carey 9/30/2008 10-Q — 32

The line of credit provides for an annual interest rate, at our election, of either (i) LIBOR plus a spread that ranges from 75 to 120 basis points depending on our leverage or (ii) the greater of the lender’s prime rate and the Federal Funds Effective Rate plus 50 basis points. At September 30, 2008, the average interest rate on advances on the line of credit was 3.8%. In addition, we pay an annual fee ranging between 12.5 and 20 basis points of the unused portion of the line of credit, depending on our leverage ratio. Based on our leverage ratio at September 30, 2008, we pay interest at LIBOR plus 75 basis points and pay 12.5 basis points on the unused portion of the line of credit. The line of credit has financial covenants that among other things require us to maintain a minimum equity value and meet or exceed certain operating and coverage ratios. We were in compliance with these covenants as of September 30, 2008.

Secured credit facility

In December 2006, Carey Storage, a wholly owned subsidiary, entered into a credit facility for up to $105 million with Morgan Stanley Mortgage Capital Inc. that provided for advances through March 8, 2008, after which no more additional borrowings were available. The credit facility expires in December 2008; however, we have three options to extend the maturity date of this facility for consecutive one year periods on substantially the same terms. We have notified the lender that we intend to exercise the first option to extend the credit facility for an additional year. Extension of this facility is conditional on our meeting certain conditions required by the lender. We do not believe that any failure to extend or replace this facility would materially affect our operations. The credit facility is collateralized by any self-storage real estate assets acquired by Carey Storage with proceeds from the facility. Advances under this facility bear interest at the one-month LIBOR plus a spread of 225 basis points. In March 2008, we entered into an agreement whereby the LIBOR component of interest payable on advances under this facility cannot exceed 4.75% through December 2008. Advances can be prepaid at any time. This facility has financial covenants requiring Carey Storage, among other things, to meet or exceed certain operating and coverage ratios. Carey Storage is in compliance with these covenants as of September 30, 2008.

Cash Requirements

During the next twelve months, cash requirements will include paying distributions to shareholders, repaying our secured credit facility (which had a balance of $35.2 million at September 30, 2008), making scheduled mortgage principal payments, including mortgage balloon payments totaling $33.9 million (inclusive of our share of a balloon payment in connection with a venture in which we account for our interest as an equity investment in real estate), and 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 and maintain cash balances sufficient to meet working capital needs. We may issue additional shares in connection with investments when it is consistent with the objectives of the seller. We intend to extend our secured credit facility through December 2009 (as described above) and have two remaining extension options. We also extended the maturity of a $5 million scheduled balloon payment by an additional year to December 2009. We currently expect to exercise the first one-year extension prior to the scheduled due date for this obligation.

In October 2008, we announced that our board of directors had approved a program to repurchase up to $10 million of our common stock through December 15, 2008. Through November 5, 2008, we repurchased shares totaling $2.3 million under this program.

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

Off-Balance Sheet Arrangements and Contractual Obligations

The table below summarizes our off-balance sheet arrangements and contractual obligations as of September 30, 2008 and the effect that these obligations are expected to have on our liquidity and cash flow in future periods (in thousands).

			Less than						More than
	Total		1 year		1-3 years		3-5 years		5 years
Non-recourse debt — Principal	$	255,478	$	77,037	$	43,616	$	38,152	$	96,673
Line of credit — Principal		73,500		—		73,500		—		—
Interest on borrowings (a)		65,958		15,634		23,491		12,933		13,900
Operating and other lease commitments (b)		24,618		2,910		5,832		5,982		9,894
Property improvements (c)		2,400		2,400		—		—		—
Other commitments (d)		627		627		—		—		—
	$	422,581	$	98,608	$	146,439	$	57,067	$	120,467

(a)

Interest on variable rate debt obligations was calculated using the variable interest rates and balances outstanding as of September 30, 2008.

(b)

Operating and other lease commitments 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 future minimum rents under an office cost-sharing agreement. These amounts are allocated among the entities based on gross revenues and are adjusted quarterly. The table above excludes the rental obligation under a ground lease of a venture in which we own a 46% interest. This obligation totals approximately $2.9 million over the lease term.

W. P. Carey 9/30/2008 10-Q — 33

(c)	Represents remaining commitments to fund certain property improvements.
(d)	Includes estimates for accrued interest and penalties related to uncertain tax positions and a commitment to contribute capital to an investment in India.

Amounts related to our foreign operations are based on the exchange rate of the Euro as of September 30, 2008.

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

As of September 30, 2008, we had no material capital lease obligations for which we are the lessee, either individually or in the aggregate.

We have investments in unconsolidated joint ventures that own single-tenant properties net leased to corporations. All of the underlying investments are owned with affiliates. Summarized financial information for these ventures (for the entire venture, not our proportionate share) at September 30, 2008 is presented below (dollars in thousands):

						Total Third
Lessee	Ownership Interest			Total Assets		Party Debt		Maturity Date
The Retail Distribution Group		40	%	$	11,636	$	5,501		9/2009
Federal Express Corporation		40	%		47,432		40,864		1/2011
Information Resources, Inc.		33	%		47,896		22,517		1/2011
Childtime Childcare, Inc.		34	%		10,163		6,602		1/2011
Carrefour France, S.A. (a)		46	%		176,510		124,609		12/2014
Consolidated Systems, Inc.		60	%		17,231		11,737		11/2016
Sicor, Inc.		50	%		16,871		35,350		7/2017
Medica — France, S.A. (a)		46	%		59,348		43,187		10/2017
Hologic, Inc.		36	%		28,366		15,707		5/2023
Schuler A.G. (a)		33	%		75,144		—		N/A
				$	490,597	$	306,074

(a) Amounts shown are based on the exchange rate of the Euro as of September 30, 2008.

The table above does not reflect our acquisition in April 2007 of a 5% interest in a venture that made a loan (the “note receivable”) to the holder of a 75% interest in a limited partnership owning 37 properties throughout Germany at a total cost of $336 million. In connection with this transaction, the venture obtained non-recourse financing of $284.9 million having a fixed annual interest rate of 5.5% and a term of 10 years. Under the terms of the note receivable, the venture will receive interest that approximates 75% of all income earned by the limited partnership, less adjustments. All amounts are based on the exchange rate of the Euro at the date of acquisition.

In connection with the purchase of many of our properties, we required the sellers to perform environmental reviews. We believe, based on the results of these reviews, that our properties were in substantial compliance with Federal and state environmental statutes at the time the properties were acquired. However, portions of certain properties have been subject to some degree of contamination, principally in connection with leakage from underground storage tanks, surface spills or historical on-site activities. In most instances where contamination has been identified, tenants are actively engaged in the remediation process and addressing identified conditions. Tenants are generally subject to environmental statutes and regulations regarding the discharge of hazardous materials and any related remediation obligations. In addition, our leases generally require tenants to indemnify us from all liabilities and losses related to the leased properties with provisions of such indemnification specifically addressing environmental matters. The leases generally include provisions that allow for periodic environmental assessments, paid for by the tenant, and allow us to extend leases until such time as a tenant has satisfied its environmental obligations. Certain of our leases allow us to require financial assurances from tenants such as performance bonds or letters of credit if the costs of remediating environmental conditions are, in our estimation, in excess of specified amounts. Accordingly, we believe that the ultimate resolution of environmental matters should not have a material adverse effect on our financial condition, liquidity or results of operations.

W. P. Carey 9/30/2008 10-Q — 34

ITEM 3. — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks

Market risk is the exposure to loss resulting from changes in interest rates, 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. We are also exposed to market risk as a result of concentrations in certain tenant industries.

We do not generally use derivative financial instruments to manage foreign currency exchange rate risk exposure and do not use derivative instruments to hedge credit/market risks or for speculative purposes. We account for our derivative instruments in accordance with SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities,” as amended.

Interest Rate Risk

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

Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political conditions, and other factors beyond our control. An increase in interest rates would likely cause the value of our owned and managed assets to decrease, which would create lower revenues from managed assets and lower investment performance for the managed funds. Increases in interest rates may also have an impact on the credit profile of certain tenants.

We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we attempt to obtain mortgage financing on a long-term, fixed rate basis. However, from time to time, we or our venture partners may obtain variable rate mortgage loans and may enter into interest rate swap agreements with lenders which effectively convert the variable rate debt service obligations of the loan to a fixed rate. These interest rate swaps are derivative instruments designated as cash flow hedges on the forecasted interest payments on the debt obligation. Interest rate swaps are agreements in which a series of interest rate flows are exchanged over a specific period. The notional amount on which the swaps are based is not exchanged.

Another way in which we attempt to limit our exposure to the impact of interest rate changes is through the use of interest rate caps. Interest rate caps limit the borrowing rate of variable rate debt obligations while allowing participants to share in downward shifts in interest rates. Our secured credit facility has a variable interest rate consisting of the one-month LIBOR plus a spread of 225 basis points. In March 2008, we obtained an interest rate cap whereby the LIBOR component of our interest rate cannot exceed 4.75% through December 2008.

Our objective in using derivatives is to limit our exposure to interest rate movements. At September 30, 2008, the fair value of our interest rate swaps included in other assets was $0.2 million (Note 10).

At September 30, 2008, a significant portion (approximately 66%) of our long-term debt either bore interest at fixed rates, was fixed through the use of interest rate swap instruments that convert variable rate debt service obligations to a fixed rate, or was at fixed rates but was scheduled to reset to the then prevailing market fixed rates at certain future points in their term. The fair value of these instruments is affected by changes in market interest rates. The annual interest rates on our fixed rate debt at September 30, 2008 ranged from 4.9% to 8.1%. The annual interest rates on our variable rate debt at September 30, 2008 ranged from 3.8% to 5.5%. Our debt obligations are more fully described within the Financial Condition section of Item 2 of this quarterly report. The following table presents principal cash flows based upon expected maturity dates of our debt obligations at September 30, 2008 (in thousands):

	2008		2009		2010		2011		2012		Thereafter		Total		Fair value
Fixed rate debt	$	2,044	$	34,794	$	12,555	$	25,712	$	31,239	$	71,119	$	177,463	$	177,583
Variable rate debt	$	40,664	$	1,970	$	2,049	$	75,689	$	2,207	$	28,936	$	151,515	$	151,515

A change in interest rates of 1% would increase or decrease the combined fair value of our fixed rate debt by an aggregate of $5.7 million. Annual interest expense on our variable rate debt that does not currently bear interest at fixed rates (inclusive of debt which has been effectively converted to fixed rates through interest rate swap derivative instruments) would increase or decrease by $1.1 million for each 1% change in annual interest rates. As more fully described in Summary of Financing above, a portion of the debt classified as variable rate debt in the tables above currently bears interest at fixed rates but has interest rate reset features that may change the interest rates to variable rates at certain points in their term. Such debt is generally not subject to short-term fluctuations in interest rates.

W. P. Carey 9/30/2008 10-Q — 35

Foreign Currency Exchange Rate Risk

We have foreign operations and transact business in Europe and as a result are subject to risk from the effects of exchange rate movements of the Euro, which may affect future costs and cash flows. We manage foreign currency exchange rate movements by generally placing both our debt obligation to the lender and the tenant’s rental obligation to us in the same currency. For the Euro, we are currently a net receiver of the foreign currency (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. Net realized foreign currency translation gains were $1.6 million for the nine months ended September 30, 2008. No realized foreign currency translation gains or losses were recognized during the three months ended September 30, 2008. Net unrealized foreign currency translation losses were $1.6 million and $0.1 million for the three and nine months ended September 30, 2008, respectively. Such gains or losses are included in the consolidated financial statements and were primarily due to changes in the value of the Euro on accrued interest receivable on notes receivable from wholly-owned subsidiaries.

Item 4. — Controls and Procedures

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 (the “Exchange Act”) is accumulated and communicated to 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, after conducting an evaluation, together with members of our management, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2008, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of September 30, 2008 at a reasonable level of assurance.

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.

W. P. Carey 9/30/2008 10-Q — 36

PART II

Item 1. — Legal Proceedings

As of September 30, 2008, we were not involved in any material litigation.

For a description of the following matter, please refer to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 filed with the SEC.

– Settlement of SEC Investigation

In addition, we note the following:

Maryland Securities Commission

The Maryland Securities Commission has previously sought information from Carey Financial and CPA^®:15 relating to the previously settled SEC investigation described in Note 9. While it is possible that Maryland or another state could commence proceedings against Carey Financial relating to the SEC investigation, we do not currently expect that any such proceedings, if commenced, would have a material effect on us incremental to that caused by the SEC settlement described in Note 9.

Payson v. Park et al.

On April 24, 2008, a shareholder, Herbert Payson, filed a shareholder derivative complaint in New York state court against us, as nominal defendant, and certain members of the board of directors and several current and former executive officers alleging breach of their fiduciary duties resulting from the matters alleged in the SEC investigation described in Note 9. Plaintiff claims that the conduct alleged caused damages to us, including but not limited to the $30 million paid by us in connection with our settlement with the SEC and costs incurred in connection with the investigation by the SEC. On June 20, 2008, all defendants filed a motion to dismiss the complaint on the grounds that the shareholder had failed to make a pre-suit demand on the board of directors as required by law and should not be excused from doing so, and a hearing was held on that motion on October 10, 2008. We and the individual defendants intend to defend ourselves vigorously against the action.

Los Angeles Unified School District

In October 2006, a revised complaint was filed in the Los Angeles Superior Court in an action that had named a wholly-owned indirect subsidiary, and other unrelated parties, in a state court action by a private plaintiff alleging various claims under the California False Claims Act that focus on alleged conduct by the Los Angeles Unified School District in connection with its direct application and invoicing for school development and construction funding for a new high school, for which our subsidiary acted as the development manager. We and another of our subsidiaries were named for the first time in the revised complaint, by virtue of an alleged relationship to the subsidiary that was a party to the development agreement, but were not served. In February 2007, the judge dismissed the action against our wholly-owned indirect subsidiary, as well as other defendants, following various substantive and procedural motions. The Plaintiff filed an appeal, and in August 2008, the California Court of Appeal affirmed the dismissal and thereafter denied Plaintiff’s request for a rehearing. In October 2008, Plaintiff filed a Petition for Review by the California Supreme Court, which Petition is pending. The Plaintiff may still seek to serve us and our other subsidiary in this action. However, we believe, based on the information currently available to us, that, if the dismissal is not sustained and if we are served, we and our subsidiaries have meritorious defenses to such claims.

Item 2. — Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2008, a corporation wholly-owned by our Chairman, Wm. Polk Carey, exercised warrants to purchase a total of 345,930 shares of our common stock at $23 per share, for which we received proceeds of $8 million.

In October 2008, we announced that our board of directors had approved a program to repurchase up to $10 million of our Common Stock through December 15, 2008.

Item 6. — Exhibits

Exhibit No.	Description	Method of Filing
10.1	Asset Management Agreement dated as of September 2, 2008 between Corporate Property Associates 14 Incorporated and W.P. Carey & Co. B.V.	Filed herewith
10.2	Amendment No. 1 to the Amended and Restated Advisory Agreement dated as of September 2, 2008 between Corporate Property Associates 14 Incorporated and Carey Asset Management Corp.	Filed herewith
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
32	Chief Executive Officer and Chief Financial Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith

W. P. Carey 9/30/2008 10-Q — 37

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	W. P. Carey & Co. LLC
Date 11/7/2008	By:	/s/ Mark J. DeCesaris
		Mark J. DeCesaris
		Managing Director and acting Chief Financial Officer (acting Principal Financial Officer)
Date 11/7/2008	By:	/s/ Thomas J. Ridings
		Thomas J. Ridings
		Executive Director and Chief Accounting Officer (Principal Accounting Officer)

W. P. Carey 9/30/2008 10-Q — 38

EX-10.1

                                                                    Exhibit 10.1

                           ASSET MANAGEMENT AGREEMENT

     THIS ASSET MANAGEMENT AGREEMENT, dated as of September 2, 2008, is between
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED, a Maryland corporation (the
"Company"), and W.P. CAREY & Co. B.V., a Netherlands company (the "Manager").

                              W I T N E S S E T H:

     WHEREAS, the Company intends to qualify as a REIT (as defined below), and
to invest its funds in investments permitted by the terms of any prospectus
pursuant to which it raised equity capital and Sections 856 through 860 of the
Code (as defined below);

     WHEREAS, the Company desires to avail itself of the experience, sources of
information, and assistance of, and certain facilities available to, the Manager
with respect to disposition opportunities and asset management, for properties
located outside of the United States, and to have the Manager undertake the
duties and responsibilities hereinafter set forth, on behalf of, and subject to
the supervision of the Board of Directors of the Company, all as provided
herein; and

     WHEREAS, the Manager is willing to render such services, subject to the
supervision of the Board of Directors, on the terms and conditions hereinafter
set forth;

     NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:

     1.  DEFINITIONS.  As used in this Agreement, the following terms have the
definitions hereinafter indicated:

          Acquisition Expense.  Acquisition Expense as defined under the
     Advisory Agreement.

          Acquisition Fee.  The Acquisition Fee as defined under the Advisory
     Agreement.

          Adjusted Invested Assets.  The average during any period of the
     aggregate historical cost, or to the extent available for a particular
     asset, the most recent Appraised Value, of the Investment Assets of the
     Company, before accumulated reserves for depreciation or bad debt
     allowances or other similar non-cash reserves, computed (unless otherwise
     specified) by taking the average of such values at the end of each month
     during such period.

          Adjusted Investor Capital.  As of any date, the Initial Investor
     Capital reduced by any Redemptions, other than Redemptions intended to
     qualify as a liquidity event for purposes of this Agreement, and by any
     other Distributions on or prior to such date determined by the Board to be
     from Cash from Sales and Financings.


                                       1


          Adjusted Net Income.  For any period, the total revenues recognized in
     such period, less the total expenses recognized in such period excluding
     additions to reserves for depreciation and amortization, bad debts or other
     similar non-cash reserves, provided, however, if the Advisor receives a
     Subordinated Incentive Fee, Adjusted Net Income for purposes of calculating
     total allowable Operating Expenses shall exclude any gain, losses or
     writedowns from the sale of the Company's assets that gave rise to such
     Subordinated Incentive Fee.

          Advisor.  The Company's external advisor.  As of the date of this
     Agreement, the Advisor is Carey Asset Management Corp.

          Advisory Agreement.  The Advisory Agreement, dated as of September 30,
     2007, between the Company and the Advisor, as the same may be amended,
     supplemented, extended and renewed, and any successor advisory agreement.

          Affiliate.  An Affiliate of another Person shall include any of the
     following: (i) any Person directly or indirectly owning, controlling, or
     holding, with power to vote ten percent or more of the outstanding voting
     securities of such other Person; (ii) any Person ten percent or more of
     whose outstanding voting securities are directly or indirectly owned,
     controlled, or held, with power to vote, by such other Person; (iii) any
     Person directly or indirectly controlling, controlled by, or under common
     control with such other Person; (iv) any executive officer, director,
     trustee or general partner of such other Person; or (v) any legal entity
     for which such Person acts as an executive officer, director, trustee or
     general partner.


          Agreement.  This Asset Management Agreement.


          Appraised Value.  Value according to an appraisal made by an
     Independent Appraiser, which may take into consideration any factor deemed
     appropriate by such Independent Appraiser, including, but not limited to,
     the terms and conditions of any lease of the relevant property, the quality
     of any lessee's credit and the conditions of the credit markets.  The
     Appraised Value may be greater than the construction cost or the
     replacement cost of the property.  For purposes of the definition of
     Adjusted Invested Assets, Appraised Value shall not include the initial
     appraisal of any property in connection with the acquisition of that
     property.


          Articles of Incorporation.  Articles of Incorporation of the Company
     under the General Corporation Law of Maryland, as amended from time to
     time, pursuant to which the Company is organized.


          Asset Management Fee.  The Asset Management Fee as defined in Section
     9(a) hereof.


          Average Invested Assets.  The average during any period of the
     aggregate book value of the assets of the Company invested, directly or
     indirectly, in Properties and in Loans, before deducting reserves for
     depreciation, bad debts, impairments, amortization and all other similar
     non-cash reserves, computed by taking the average of such values at the end
     of each month during such period.

                                       2

          Board or Board of Directors.  The Board of Directors of the Company.

          Bylaws.  The bylaws of the Company.

          Cash from Financings. Net cash proceeds realized by the Company from
     the financing of Investment Assets or the refinancing of any Company
     indebtedness secured by real estate located outside the United States.

          Cash from Sales. Net cash proceeds realized by the Company from the
     sale, exchange or other disposition of any of its assets located outside
     the United States after deduction of all expenses incurred in connection
     therewith. Cash from Sales shall not include Cash from Financings.

          Cash from Sales and Financings.  The total sum of Cash from Sales and
     Cash from Financings.

          Cause. With respect to the termination of this Agreement, fraud,
     criminal conduct, willful misconduct or willful or negligent breach of
     fiduciary duty by the Manager that, in each case, is determined by a
     majority of the Independent Directors to be materially adverse to the
     Company, or a breach of a material term or condition of this Agreement by
     the Manager and the Manager has not cured such breach within 30 days of
     written notice thereof or, in the case of any breach that cannot be cured
     within 30 days by reasonable effort, has not taken all necessary action
     within a reasonable time period to cure such breach.

          Code.  Internal Revenue Code of 1986, as amended.

          Company.  Corporate Property Associates 14 Incorporated, a corporation
     organized under the laws of the State of Maryland.


          Competitive Real Estate Commission. The real estate or brokerage
     commission paid for the purchase or sale of a property that is reasonable,
     customary and competitive in light of the size, type and location of the
     property.

          Contract Sales Price.  The total consideration received by the Company
     for the sale of Properties and Loans.

          Cumulative Return. For the period for which the calculation is being
     made, the percentage resulting from dividing (A) the total Distributions
     for such period (not including Distributions out of Cash from Sales and
     Financings), by (B) the product of (i) the average Adjusted Investor
     Capital for such period (calculated on a daily basis), and (ii) the number
     of years (including fractions thereof) elapsed during such period.
     Notwithstanding the foregoing, neither the Shares received by the Manager
     or its Affiliates for any consideration other than cash, nor the
     Distributions in respect of such Shares, shall be included in the foregoing
     calculation.

                                       3


          Directors. The persons holding such office, as of any particular time,
     under the Articles of Incorporation, whether they be the directors named
     therein or additional or successor directors.

          Distributions.  Distributions declared by the Board.

          GAAP.  Generally accepted accounting principles in the United States.

          Good Reason. With respect to the termination of this Agreement, (i)
     any failure to obtain a satisfactory agreement from any successor to the
     Company to assume and agree to perform the Company's obligations under this
     Agreement; or (ii) any material breach of this Agreement of any nature
     whatsoever by the Company; provided that such breach (a) is of a material
     term or condition of this Agreement and (b) the Company has not cured such
     breach within 30 days of written notice thereof or, in the case of any
     breach that cannot be cured within 30 days by reasonable effort, has not
     taken all necessary action within a reasonable time period to cure such
     breach.

          Gross Offering Proceeds.  The aggregate purchase price of Shares sold
     in any Offering.

          Independent Appraiser. A qualified appraiser of real estate as
     determined by the Board, who is not affiliated, directly or indirectly,
     with the Company, the Manager or their respective Affiliates. Membership in
     a nationally recognized appraisal society such as the American Institute of
     Real Estate Appraisers or the Society of Real Estate Appraisers shall be
     conclusive evidence of such qualification.

          Independent Director.  A Director of the Company who meets the
     criteria for an Independent Director specified in the Bylaws.

          Individual.  Any natural person and those organizations treated as
     natural persons in Section 542(a) of the Code.

          Initial Closing Date.  The first date on which Shares were issued
     pursuant to an Offering.

          Initial Investor Capital. The total amount of capital invested from
     time to time by Shareholders (computed at the Original Issue Price per
     Share), excluding any Shares received by the Manager, the Advisor or their
     respective Affiliates for any consideration other than cash.

          Investment Asset.  Any Property, Loan or, subject to Section 4(b)
     Other Permitted Investment Asset.

          Loan Refinancing Fee.  The Loan Refinancing Fee as defined in Section
     9(b) hereof.

          Loans.  The notes and other evidences of indebtedness or obligations
     acquired or entered into by the Company as lender which are secured or
     collateralized by personal

                                       4

     property, or fee or leasehold interests in real estate or other assets, in
     each case located outside the United States, including but not limited to
     first or subordinate mortgage loans, construction loans, development loans,
     loans secured by capital stock or any other assets or form of equity
     interest and any other type of loan or financial arrangement, such as
     providing or arranging for letters of credit, providing guarantees of
     obligations to third parties, or providing commitments for loans. The term
     "Loans" shall not include leases, which are not recognized as leases for
     Federal income tax reporting purposes.

          Manager.  W.P. Carey & Co. B.V., a company organized under the laws of
     The Netherlands.


          Market Value. The value calculated by multiplying the total number of
     outstanding Shares by the average closing price of the Shares over the 30
     trading days beginning 180 calendar days after the Shares are first listed
     on a national security exchange or included for quotation on Nasdaq, as the
     case may be.

          Nasdaq.  The national automated quotation system operated by the
     National Association of Securities Dealers, Inc.

          Offering.  The offering of Shares pursuant to a Prospectus.

          Operating Expenses. All operating, general and administrative expenses
     paid or incurred by the Company, as determined under GAAP, except the
     following (insofar as they would otherwise be considered operating, general
     and administrative expenses under GAAP): (i) interest and discounts and
     other cost of borrowed money; (ii) taxes (including state and Federal
     income tax, property taxes and assessments, franchise taxes and taxes of
     any other nature); (iii) expenses of raising capital, including
     Organization and Offering Expenses, printing, engraving, and other
     expenses, and taxes incurred in connection with the issuance and
     distribution of the Company's Shares and Securities; (iv) Acquisition
     Expenses, real estate commissions on resale of real estate interests and
     other expenses connected with the acquisition, disposition, origination,
     ownership and operation of real estate interests, mortgage loans, or other
     property, including the costs of foreclosure, insurance premiums, legal
     services, brokerage and sales commissions, maintenance, repair and
     improvement of property; (v) Acquisition Fees; (vi) Subordinated
     Disposition Fees payable under this Agreement and the corresponding fees
     payable to the Advisor under the Advisory Agreement, or to any other party;
     (vii) non-cash items, such as depreciation, amortization, depletion, and
     additions to reserves for depreciation, amortization, depletion, losses and
     bad debts; (viii) Termination Fees; (ix) Subordinated Incentive Fees; (x)
     Asset Management Fees payable under this Agreement and the corresponding
     fees payable under the Advisory Agreement and (xi) Loan Refinancing Fees
     payable under this Agreement and the corresponding fees payable under the
     Advisory Agreement.

          Organization and Offering Expenses.  Organization and Offering
     Expenses as defined under the Advisory Agreement.


                                       5

          Original Issue Price. For any share issued in an Offering, the price
     at which such Share was initially offered to the public by the Company,
     regardless of whether selling commissions were paid in connection with the
     purchase of such Shares from the Company.

          Other Permitted Investment Asset. An asset, other than cash, cash
     equivalents, short term bonds, auction rate securities and similar short
     term investments, acquired by the Company for investment purposes that is
     not a Loan or a Property but that is attributable to an investment or
     activities of the Company outside the United States and is consistent with
     the investment objectives and policies of the Company.

          Person. An Individual, corporation, partnership, joint venture,
     association, company, trust, bank, or other entity, or government or any
     agency or political subdivision of a government.

          Preferred Return. A Cumulative Return of six percent computed from the
     Initial Closing Date through the date as of which such amount is being
     calculated.

          Property or Properties. The Company's partial or entire interest in
     real property (including leasehold interests) located outside the United
     States and personal or mixed property connected therewith. An investment
     which obligates the Company to acquire a Property will be treated as a
     Property for purposes of this Agreement.

          Property Management Fee. A fee for property management services
     rendered by the Advisor or its Affiliates in connection with assets of the
     Company acquired directly or through foreclosure.

          Prospectus. Any prospectus pursuant to which the Company offers Shares
     in a public offering, as the same may at any time and from time to time be
     amended or supplemented after the effective date of the registration
     statement in which it is included.

          Redemptions.  An amount determined by multiplying the number of Shares
     redeemed by the Original Issue Price.

          REIT.  A real estate investment trust, as defined in Sections 856-860
     of the Code.

          Securities. Any stock, shares (other than currently outstanding Shares
     and subsequently issued Shares), voting trust certificates, bonds,
     debentures, notes or other evidences of indebtedness, secured or unsecured,
     convertible, subordinated or otherwise or in general any instruments
     commonly known as "securities" or any certificate of interest, shares or
     participation in temporary or interim certificates for receipts (or,
     guarantees of, or warrants, options or rights to subscribe to, purchase or
     acquire any of the foregoing), which subsequently may be issued by the
     Company.

          Shareholders.  Those Persons who at the time any calculation hereunder
     is to be made are shown as holders of record of Shares on the books and
     records of the Company.

                                       6

          Shares.  All of the shares of common stock of the Company, $.001 par
     value, and any other shares of common stock of the Company.

          Sponsor. W.P. Carey & Co. LLC and any other Person directly or
     indirectly instrumental in organizing, wholly or in part, the Company or
     any person who will control, manage or participate in the management of the
     Company, and any Affiliate of any such person. Sponsor does not include a
     person whose only relationship to the Company is that of an independent
     property manager and whose only compensation is as such. Sponsor also does
     not include wholly independent third parties such as attorneys, accountants
     and underwriters whose only compensation is for professional services.

          Subordinated Acquisition Fee.  The Subordinated Acquisition Fee as
     defined under the Advisory Agreement.

          Subordinated Disposition Fee.  The Subordinated Disposition Fee as
     defined in Section 9(d) hereof.

          Subordinated Incentive Fee.  The Subordinated Incentive Fee as defined
     under the Advisory Agreement.

          Termination Date.  The effective date of any termination of this
     Agreement.

          Termination Fee.  The Termination Fee as defined under the Advisory
     Agreement.

          Two Percent/25% Guidelines. The requirement, as provided in Section 13
     hereof, that, in any 12-month period ending on the last day of any fiscal
     quarter, aggregate Operating Expenses under this Agreement and the Advisory
     Agreement not exceed the greater of two percent of the Company's Average
     Invested Assets during such 12-month period or 25% of the Company's
     Adjusted Net Income over the same 12-month period.


     2.   APPOINTMENT.  The Company hereby appoints the Manager to serve as
its manager on the terms and conditions set forth in this Agreement, and the
Manager hereby accepts such appointment.

     3.   DUTIES OF THE MANAGER. During the term of this Agreement, the Manager
agrees, for and in consideration of the compensation set forth below, to
supervise and direct the management and operation of the Properties on behalf of
the Company and for the account of the Company, in an efficient and satisfactory
manner consistent with like quality properties and at all times maintain or
contract for systems and personnel sufficient to enable it to carry out all of
its duties, obligations and functions under this Agreement. In performance of
this undertaking, subject to the supervision of the Board and consistent with
the provisions of the Articles of Incorporation and Bylaws of the Company and
any Prospectus pursuant to which Shares are offered, the Manager shall, with
respect to the Properties, either directly or by engaging an Affiliate:

          (a) demand, collect and receive (i) all rents, utility charges, common
area charges, insurance charges, VAT payments and real estate and personal
property tax and assessment charges, (ii) all other pass-through or bill-back
charges, sums, costs or expenses of

any nature whatsoever payable by tenants under the terms of any or all of
the leases and any other agreements relating to all or any portion of the
Properties, and (iii) all other revenues, issues and profits accruing from the
Properties and any covenant calculations and insurance certificates;

          (b) calculate and administer rent calculations; maintain and review
tenant covenant calculations; calculate and submit lender covenant calculations;
and maintain letters of credits and security deposit information;

          (c) serve as primary contact to all tenants, field inquiries and
requests; process easements and landlord lien waivers; manage third party asset
managers and coordinate loan closings with third party asset managers; inspect
at-risk properties, oversee inspections by lenders and third-party property
inspection firms, and coordinate site visits and reports; ascertain necessary
repair and monitor deferred maintenance, and ensure tenant compliance; schedule
and coordinate tenant improvement projects and leasing efforts; create expense
budgets for vacant properties as needed and pro forma expense budgets for
at-risk properties; assist in executing redevelopment strategies; provide or
source technical expertise when necessary relating to building issues;
formulate, structure and oversee redevelopment projects; and meet with tenants
to discuss potential needs;

          (d) assess residual risk and long term viability on all Properties;
perform credit analysis of tenant businesses and economic analysis of holding
and selling Properties; maximize returns for the Company through early renewals
or sales of Properties; manage bankruptcy process and monitor credit quality of
portfolios; restructure leases as necessary; execute opportunistic mortgage
refinancing; coordinate with annual third party appraisers in valuation process;
and assess and manage market risks and risks associated with legal, tax, and
corporate structure;

          (e) supervise the performance of such ministerial and administrative
functions as may be necessary in connection with the daily operations of the
Properties, including but not limited to, overseeing and training for
international compliance functions and staffing; overseeing and ensuring tax,
legal, and regulatory compliance; ensuring timely completion of all obligations
by tenants; and ensuring smooth integration of new investments into asset
management platform;

          (f) from time to time, or at any time reasonably requested by the
Board or management of the Company, make reports of its performance of services
to the Company under this Agreement, including the State of the Assets and bi-
weekly status reports to be provided to the Company's management;

          (g) provide the Company with such accounting data and any other
information requested by the Company concerning the investment activities of the
Company as shall be required to prepare and to file all periodic financial
reports and returns required to be filed with the Securities and Exchange
Commission and any other regulatory agency, including annual financial
statements;


                                       8

          (h) perform corporate secretarial work including, but not limited to,
tracking of dates of required filings and annual general meetings for
subsidiaries of the Company; obtaining and coordinating all relevant materials
needed for audit and/or statutory filing, including approvals of financial
information, auditor's representation letters, and minutes and resolutions;
preparing financial analyses of recurring payments; maintaining information for
compliance reports; organizing, planning, and presenting International State of
the Assets meetings; and preparing International Asset Operating Committee
Memos;

          (i) do all things necessary to assure its ability to render the
services described in this Agreement;

          (j) obtain for, or provide to, the Company such services as may be
required in disposing of Investment Assets;

     Notwithstanding anything to the contrary in this Agreement, the Company
acknowledges that the Manager does not have an office in the United States and
intends to conduct its business in a manner that will not cause Manager to be
deemed to be engaged in a United States trade or business or have a permanent
establishment in the United States.


     4.   AUTHORITY OF MANAGER.

          (a) Pursuant to the terms of this Agreement (and subject to the
restrictions included in Paragraphs (b) of this Section 4 and in Section 7
hereof), and subject to the continuing and exclusive authority of the Board over
the management of the Company, the Board hereby delegates to the Manager the
authority to: (1) arrange for refinancing, or assess changes in the asset or
capital structure of, and dispose of or otherwise deal with, Properties; (2)
enter into leases and service contracts for Properties, and perform other
property level operations; (3) oversee non-affiliated property managers and
other non-affiliated Persons who perform services for the Company; (4) undertake
accounting and other record-keeping functions at the Property level; and (5)
perform its duties set forth in Section 3.

          (b) The Manager shall be authorized to perform the services
contemplated by this Agreement with respect to Investment Assets other than
Properties and Loans; provided, however, that if fees for such services will be
different from the fees contemplated by Section 9 of this Agreement, such fees
shall be approved in advance by a majority of the Independent Directors.

          (c) The prior approval of the Board, including a majority of the
Independent Directors and a majority of the Directors not interested in the
transaction will be required for: (i) transactions that present issues which
involve conflicts of interest for the Manager or an Affiliate (other than
conflicts involving the payment of fees or the reimbursement of expenses); (ii)
the lease of assets to the Sponsor, any Director, the Manager or any Affiliate
of the Manager; (iii) any purchase or sale of an Investment Asset from or to the
Manager or an Affiliate; and (iv) the retention of any Affiliate of the Manager
to provide services to the Company not expressly contemplated by this Agreement
and the terms of such services by such Affiliate. In addition, the Manager shall
comply with any further approval requirements set forth in the Bylaws.


                                       9

          (d) The Board may, at any time upon the giving of notice to the
Manager, modify or revoke the authority set forth in this Section 4. If and to
the extent the Board so modifies or revokes the authority contained herein, the
Manager shall henceforth comply with such modification or revocation, provided
however, that such modification or revocation shall be effective upon receipt by
the Manager and shall not be applicable to transactions to which the Manager has
committed the Company prior to the date of receipt by the Manager of such
notification.

     5.  BANK ACCOUNTS. The Manager may establish and maintain one or more bank
accounts in its own name. The Manager may establish and maintain one or more
bank accounts for the account of the Company or in the name of the Company and
may collect and deposit into any such account or accounts, and disburse from any
such account or accounts, any money on behalf of the Company, provided that no
funds shall be commingled with the funds of the Manager; and the Manager shall
from time to time render appropriate accountings of such collections and
payments to the Board and to the auditors of the Company.

     6.  RECORDS; ACCESS. The Manager shall maintain appropriate records of all
its activities hereunder and make such records available for inspection by the
Board and by counsel, auditors and authorized agents of the Company, at any time
or from time to time during normal business hours. The Manager shall at all
reasonable times have access to the books and records of the Company.

     7.  LIMITATIONS ON ACTIVITIES. Anything else in this Agreement to the
contrary notwithstanding, the Manager shall refrain from taking any action
which, in its sole judgment made in good faith, would adversely affect the
status of the Company as a REIT, subject the Company to regulation under the
Investment Company Act of 1940, violate any law, rule, regulation or statement
of policy of any governmental body or agency having jurisdiction over the
Company, its Shares or its Securities, or otherwise not be permitted by the
Articles of Incorporation or Bylaws, except if such action shall be ordered by
the Board, in which case the Manager shall notify promptly the Board of the
Manager's judgment of the potential impact of such action and shall refrain from
taking such action until it receives further clarification or instructions from
the Board. In such event the Manager shall have no liability for acting in
accordance with the specific instructions of the Board so given. Notwithstanding
the foregoing, the Manager, its shareholders, directors, officers and employees,
and partners, shareholders, directors and officers of the Manager's partners and
Affiliates of any of them, shall not be liable to the Company, or to the
Directors or Shareholders for any act or omission by the Manager, its partners,
directors, officers and employees, or partners, shareholders, directors or
officers of the Manager's partners except as provided in Sections 18 and 20
hereof.

     8.  RELATIONSHIP WITH DIRECTORS. There shall be no limitation on any
shareholder, director, officer, employee or Affiliate of the Manager serving as
a Director or an officer of the Company, except that no employee of the Manager
or its Affiliates who also is a Director or officer of the Company shall receive
any compensation from the Company for serving as a Director or officer other
than for reasonable reimbursement for travel and related expenses incurred in
attending meetings of the Board; for the avoidance of doubt, the limitations of
this Section 8 shall not apply to any compensation paid by the Manager or any
Affiliate for which the Company reimbursed the Manager or Affiliate in
accordance with Section 10 hereof.

                                       10


     9.  FEES.

          (a) ASSET MANAGEMENT FEE. The Company shall pay to the Manager as
compensation for the services rendered to the Company hereunder an amount equal
to one percent per annum of the Adjusted Invested Assets of the Company (the
"Asset Management Fee") calculated as set forth below. The Asset Management Fee
will be calculated monthly, beginning with the month in which the Company and
the Manager execute this Agreement, on the basis of one-twelfth of one percent
of the Adjusted Invested Assets for that month, computed as a daily average. The
Asset Management Fee shall be prorated for the number of days during the month
that the Company owns an Investment Asset. One-half of the Asset Management Fee
with respect to an Investment Asset will be paid on the first business day of
each month beginning on the first business day after the month in which the
Investment Asset was acquired or originated. The remaining one-half of the Asset
Management Fee shall be subordinated to the extent described below and shall be
payable quarterly. The subordinated Asset Management Fee for any quarter shall
be payable only if the Preferred Return has been met through the end of the
applicable quarter. Any portion of the subordinated Asset Management Fee not
paid due to the Company's failure to meet the Preferred Return shall be paid by
the Company, to the extent it is not restricted by the Two Percent/25%
Guidelines as described below, at the end of the next fiscal quarter through
which the Company has met the Preferred Return. If at the end of any fiscal
quarter, the Company's Operating Expenses exceed the Two Percent/25% Guidelines
over the immediately preceding 12 months, payment of the subordinated Asset
Management Fee will be withheld consistent with Section 13. Any part of the
Asset Management Fee that has been subordinated pursuant to this subsection (a)
shall not be deemed earned until such time as payable hereunder.

          (b) LOAN REFINANCING FEE. The Company shall pay to the Manager for all
qualifying loan refinancings of Properties a Loan Refinancing Fee in the amount
up to one percent of the principal amount of the refinanced loan. Any Loan
Refinancing Fee shall be due and payable upon the funding of the related loan or
as soon thereafter as is reasonably practicable. A refinancing will qualify for
a Loan Refinancing Fee only if the refinanced loan is secured by Property and
(i) the maturity date of the refinanced loan (which must have a term of five
years or more) is less than one year from the date of the refinancing; or (ii)
the terms of the new loan represent, in the judgment of a majority of the
Independent Directors, an improvement over the terms of the refinanced loan; or
(iii) the new loan is approved by the Board, including a majority of the
Independent Directors and, in each case, the Loan Refinancing Fee is found, in
the judgment of a majority of the Independent Directors, to be in the best
interest of the Company.

          (c) PROPERTY MANAGEMENT FEE.  No Property Management Fee shall be paid
unless  approved  by a  majority  of the  Independent Directors.

          (d) SUBORDINATED DISPOSITION FEE. If the Manager provides a
substantial amount of services in the sale of a Property or Loan, the Manager
shall receive a fee equal to the lesser of: (i) 50% of the Competitive Real
Estate Commission and (ii) three percent of the Contract Sales Price of such
Property (the "Subordinated Disposition Fee"). The Subordinated Disposition Fee
will be paid only if Shareholders have received in the aggregate a return of
100% of Initial Investor Capital (through liquidity or Distributions) plus a
Preferred Return


                                       11

through the end of the fiscal quarter immediately preceding the date the
Subordination Disposition Fee is paid. The return requirement will be deemed
satisfied if the total Distributions paid by the Company have satisfied the
Preferred Return requirement and the Market Value of the Company equals or
exceeds Adjusted Investor Capital. To the extent that Subordinated Disposition
Fees are not paid by the Company on a current basis due to the foregoing
limitation, the unpaid fees will be due and paid at such time as the limitation
has been satisfied. The Subordinated Disposition Fee may be paid in addition to
real estate commissions paid to non-Affiliates, provided that the total of all
real estate commissions in respect of a Property paid to all Persons by the
Company and the Subordinated Disposition Fee shall not exceed an amount equal to
the lesser of: (i) seven percent of the Contract Sales Price of such Property or
(ii) the Competitive Real Estate Commission. The Manager shall present to the
Independent Directors such information as they may reasonably request to review
the level of services provided by the Manager in connection with a disposition
and the basis for the calculation of the amount of the accrued Subordinated
Disposition Fees on an annual basis. The amount of any accrued Subordinated
Disposition Fee shall be deemed conclusively established once it has been
approved by the Independent Directors, absent a subsequent finding of error. No
payment of Subordinated Disposition Fees shall be made prior to review and
approval of such information by the Independent Directors. If this Agreement is
terminated prior to such time as the Shareholders have received (through
liquidity or Distributions) a return of 100% of Initial Investor Capital plus a
Preferred Return through the date of termination of this Agreement, an appraisal
of the Properties then owned by the Company shall be made and any unpaid
Subordinated Disposition Fee on Properties sold prior to the date of termination
will be payable if the Appraised Value of the Properties then owned by the
Company plus Distributions to Shareholders prior to the date of termination of
this Agreement (through liquidity or Distributions) is equal to or greater than
100% of Initial Investor Capital plus an amount sufficient to pay a Preferred
Return through the date of termination of this Agreement. If the Company's
Shares are listed on a national securities exchange or included for quotation on
Nasdaq and, at the time of such listing, the Manager has provided a substantial
amount of services in the sale of Property, for purposes of determining whether
the subordination conditions for the payment of the Subordinated Disposition Fee
have been satisfied, Shareholders will be deemed to have received a Distribution
in an amount equal to the Market Value of the Company.

          (e) LOANS FROM AFFILIATES. The Company shall not borrow funds from the
Manager or its Affiliates unless (A) the transaction is approved by a majority
of the Independent Directors and a majority of the Directors who are not
interested in the transaction as being fair, competitive and commercially
reasonable, (B) the interest and other financing charges or fees received by the
Manager or its Affiliates do not exceed the amount which would be charged by
non-affiliated lending institutions and (C) the terms are not less favorable
than those prevailing for comparable arm's-length loans for the same purpose.
The Company will not borrow on a long-term basis from the Manager or its
Affiliates unless it is to provide the debt portion of a particular investment
and the Company is unable to obtain a permanent loan at that time or in the
judgment of the Board, it is not in the Company's best interest to obtain a
permanent loan at the interest rates then prevailing and the Board has reason to
believe that the Company will be able to obtain a permanent loan on or prior to
the end of the loan term provided by the Manager or its Affiliates.


                                       12

          (f) CHANGES TO FEE STRUCTURE. In the event the Shares are listed on a
national securities exchange or are included for quotation on Nasdaq, the
Company and the Manager shall negotiate in good faith to establish a fee
structure appropriate for an entity with a perpetual life. A majority of the
Independent Directors must approve the new fee structure negotiated with the
Manager. In negotiating a new fee structure, the Independent Directors may
consider any of the factors they deem relevant, including but not limited to:
(a) the size of the Asset Management Fee in relation to the size, composition
and profitability of the Company's portfolio; (b) the rates charged to other
REITs and to investors other than REITs by Managers performing similar services;
(c) additional revenues realized by the Manager and its Affiliates through their
relationship with the Company, including loan administration, underwriting or
broker commissions, servicing, engineering, inspection and other fees, whether
paid by the Company or by others with whom the Company does business; (d) the
quality and extent of service furnished by the Manager; (e) the performance of
the investment portfolio of the Company, including income, conversion or
appreciation of capital, frequency of problem investments and competence in
dealing with distress situations and (f) the quality of the portfolio of the
Company in relationship to the portfolio of real properties owned and managed by
W.P. Carey & Co. LLC for its own account. The new fee structure can be no more
favorable to the Manager than the current fee structure. The Independent
Directors shall not approve any new fee structure that is in their judgment more
favorable (taken as a whole) to the Manager than the current fee structure.

          (g) PAYMENT. The Company shall pay the compensation payable pursuant
to this Section 9 directly to the Manager; provided, however, that any fee
payable pursuant to Section 9 may be paid, at the option of the Manager, in the
form of: (i) cash, (ii) common stock of the Company, or (iii) a combination of
cash and common stock. The Manager shall notify the Company in writing annually
of the form in which the fee shall be paid. Such notice shall be provided no
later than December 31 of the year prior to the year to which such election
applies. If no such notice is provided, the fee shall be paid in cash. For
purposes of the payment of compensation to the Manager in the form of stock, the
value of each share of common stock shall be: (i) the Net Asset Value per Share
as determined by the most recent appraisal of the Company's assets performed by
an Independent Appraiser, or (ii) if an appraisal has not yet been performed,
$10 per share. If shares are being offered to the public at the time a fee is
paid with stock, the value shall be the price of the stock without commissions.
The Net Asset Value determined on the basis of such appraisal may be adjusted on
a quarterly basis by the Board to account for significant capital transactions.

     10.  EXPENSES.  To the extent applicable, in addition to the compensation
paid to the Manager pursuant to Section 9 hereof, the Company shall pay directly
or reimburse the Manager for the following expenses:

          (i) interest and other costs for borrowed money, including discounts,
     points and other similar fees;

          (ii) taxes and assessments on income of the Company, to the extent
     paid or advanced by the Manager, or on Property and taxes as an expense of
     doing business, in each case attributable to Properties or non-United
     States activities;

                                       13



          (iii)  expenses of managing and operating Properties, whether payable
     to an Affiliate of the Manager or a non-affiliated Person;

          (iv)  fees and expenses of legal counsel for the Company attributable
     to Properties;

          (v)  fees and expense of auditors and accountants for the Company
     attributable to Properties;

          (vi)  expenses related to the Properties and other fees relating to
     disposing of investments including personnel and other costs incurred in
     transactions relating to Properties where a fee is not payable to the
     Manager; and

          (vii)  all other expenses the Manager incurs in connection with
     providing services to the Company hereunder including reimbursement to the
     Manager or its Affiliates for the cost of rent, goods, materials and
     personnel incurred by them based upon the compensation of the Persons
     involved and an appropriate share of overhead allocable to those Persons as
     reasonably determined by the Manager on a basis approved annually by the
     Board (including a majority of the Independent Directors).

No reimbursement shall be made for the cost of personnel to the extent that such
personnel are used in transactions for which the Manager receives a separate
fee.

Expenses incurred by the Manager on behalf of the Company and payable pursuant
to this Section 10 shall be reimbursed quarterly to the Manager within 60 days
after the end of each quarter, subject to the provisions of Section 13 hereof.
The Manager shall prepare a statement documenting the Operating Expenses of the
Company within 45 days after the end of each quarter.

     11.  OTHER SERVICES. Should the Board request that the Manager or any
partner or employee thereof render services for the Company other than as set
forth in Section 3 hereof, such services shall be separately compensated and
shall not be deemed to be services pursuant to the terms of this Agreement.

     12.  FIDELITY BOND. The Manager shall maintain a fidelity bond for the
benefit of the Company which bond shall insure the Company from losses of up to
$5,000,000 and shall be of the type customarily purchased by entities performing
services similar to those provided to the Company by the Manager.

     13.  LIMITATION ON EXPENSES.

          (a) If the aggregate Operating Expenses of the Company under this
Agreement and the Advisory Agreement during the 12-month period ending on the
last day of any fiscal quarter of the Company exceed the greater of (i) two
percent of the Average Invested Assets during the same 12-month period or (ii)
25% of the Adjusted Net Income of the Company during the same 12-month period,
then subject to paragraph (b) of this Section 13, such excess amount shall be
the sole responsibility of the Manager and the Company shall not be liable for
payment therefor.

                                       14

          (b) Notwithstanding the foregoing, to the extent that the Manager
becomes responsible for any such excess amount as provided in paragraph (a), if
a majority of the Independent Directors finds such excess amount or a portion
thereof justified based on such unusual and non-recurring factors as they deem
sufficient, the Company shall reimburse the Manager in future quarters for the
full amount of such excess, or any portion thereof, but only to the extent such
reimbursement would not cause the Company's Operating Expenses to exceed the Two
Percent/25% Guidelines in the 12-month period ending on any such quarter. In no
event shall the Operating Expenses paid by the Company in any 12-month period
ending at the end of a fiscal quarter exceed the Two Percent/25% Guidelines.

          (c) Within 60 days after the end of any twelve-month period referred
to in paragraph (a), the Manager shall reimburse the Company for any amounts
expended by the Company in such twelve-month period that exceeds the limitations
provided in paragraph (a) unless the Independent Directors determine that such
excess expenses are justified, as provided in paragraph (b), and provided the
aggregate Operating Expenses under this Agreement and the Advisory Agreement for
such later quarter would not thereby exceed the Two Percent/25% Guidelines. To
the extent the Company is reimbursed for such excess expenses by the Advisor,
the Company shall not also be entitled to reimbursement for such excess from the
Manager.

          (d) All computations made under paragraphs (a) and (b) of this Section
13 shall be determined in accordance with GAAP applied on a consistent basis.

          (e) If the Advisor receives a Subordinated Incentive Fee for the sale
of Property, Adjusted Net Income, for purposes of calculating Operating
Expenses, shall exclude the gain from the sale of such Property.

     14.  OTHER ACTIVITIES OF THE MANAGER. Nothing herein contained shall
prevent the Manager from engaging in other activities, including without
limitation direct investment by the Manager and its Affiliates in assets that
would be suitable for the Company, the rendering of services to other investors
(including other REITs) and the management of other programs advised, sponsored
or organized by the Manager or its Affiliates; nor shall this Agreement limit or
restrict the right of the Manager or any of its Affiliates or of any director,
officer, employee, partner or shareholder of the Manager or its Affiliates to
engage in any other business or to render services of any kind to any other
partnership, corporation, firm, individual, trust or association. The Manager
may, with respect to any investment in which the Company is a participant, also
render service to each other participant therein. Without limiting the
generality of the foregoing, the Company acknowledges that the Manager provides
or will provide services to other "Corporate Property Associates" or CPA(R) REIT
funds, whether now in existence or formed hereafter, and that the Manager and
its Affiliates may invest for their own account. The Manager shall be
responsible for promptly reporting to the Board the existence of any actual or
potential conflict of interest that arises that may affect its performance of
its duties under this Agreement.

Neither the Manager nor any Affiliate of the Manager shall be obligated
generally to present any particular investment opportunity to the Company even
if the opportunity is of a character which, if presented to the Company, could
be taken by the Company.

                                       15


     15.  RELATIONSHIP OF MANAGER AND COMPANY.  The Company and the Manager
agree that they have not created and do not intend to create by this Agreement a
joint venture or partnership relationship between them and nothing in this
Agreement shall be construed to make them partners or joint venturers or impose
any liability as partners or joint venturers on either of them.

     16.  TERM; TERMINATION OF AGREEMENT.  This Agreement shall continue in
force until September 30, 2008 and thereafter shall be automatically renewed for
successive one year periods unless either party shall give notice in writing of
non renewal to the other party not less than 60 days before the end of any such
year.

     17.  TERMINATION BY COMPANY.  At the sole option the Board (including a
majority of the Independent Directors), this Agreement may be terminated
immediately by written notice of termination from the Company to the Manager
upon the occurrence of events which would constitute Cause or if any of the
following events occur:

          (a)   If the Manager shall be adjudged bankrupt or insolvent by a
     court of competent jurisdiction, or an order shall be made by a court of
     competent jurisdiction for the appointment of a receiver, liquidator, or
     trustee of the Manager, for all or substantially all of its property by
     reason of the foregoing, or if a court of competent jurisdiction approves
     any petition filed against the Manager for reorganization, and such
     adjudication or order shall remain in force or unstayed for a period of 30
     days; or

          (b)   If the Manager shall institute proceedings for voluntary
     bankruptcy or shall file a petition seeking reorganization under the
     federal bankruptcy laws, or for relief under any law for relief of debtors,
     or shall consent to the appointment of a receiver for itself or for all or
     substantially all of its property, or shall make a general assignment for
     the benefit of its creditors, or shall admit in writing its inability to
     pay its debts, generally, as they become due.

          Any notice of termination under Section 16 or 17 shall be effective on
the date specified in such notice, which may be the day on which such notice is
given or any date thereafter.  The Manager agrees that if any of the events
specified in Section 17(a) or (b) shall occur, it shall give written notice
thereof to the Board within 15 days after the occurrence of such event.

     18.  TERMINATION BY EITHER PARTY.  This Agreement may be terminated
immediately without penalty (but subject to the requirements of Section 20
hereof) by the Advisor by written notice of termination to the Company upon the
occurrence of events which would constitute Good Reason or by the Company
without cause or penalty (but subject to the requirements of Section 20 hereof)
by action of a majority of the Independent Directors or by action of a majority
of the Shareholders, in either case upon 60 days' written notice.

     19.  ASSIGNMENT PROHIBITION.  This Agreement may not be assigned by the
Manager without the approval of the Board (including a majority of the
Independent Directors); provided, however, that such approval shall not be
required in the case of an assignment to a corporation, partnership,
association, trust or organization which may take over the assets and carry on
the

                                       16

affairs of the Manager, provided: (i) that at the time of such assignment, such
successor organization shall be owned substantially by an entity directly or
indirectly controlled by the Sponsor and only if such entity has a net worth of
at least $5,000,000, and (ii) that the board of directors of the Manager shall
deliver to the Board a statement in writing indicating the ownership structure
and net worth of the successor organization and a certification from the new
Manager as to its net worth. Such an assignment shall bind the assignees
hereunder in the same manner as the Manager is bound by this Agreement. The
Manager may assign any rights to receive fees or other payments under this
Agreement without obtaining the approval of the Board. This Agreement shall not
be assigned by the Company without the consent of the Manager, except in the
case of an assignment by the Company to a corporation or other organization
which is a successor to the Company, in which case such successor organization
shall be bound hereunder and by the terms of said assignment in the same manner
as the Company is bound by this Agreement.

     20.  PAYMENTS TO AND DUTIES OF MANAGER UPON TERMINATION.

          (a) After the Termination Date, the Manager shall not be entitled to
compensation for further services hereunder but shall be entitled to receive
from the Company the following:

               (i)  all unpaid reimbursements of Operating Expenses payable to
          the Manager;

               (ii)  all earned but unpaid Asset Management Fees payable to the
          Manager prior to the Termination Date;

               (iii)  all earned but unpaid Subordinated Disposition Fees
          payable to the Advisor relating to the sale of any Property prior to
          the Termination Date; and

               (iv)  all earned but unpaid Loan Refinancing Fees.

Notwithstanding the foregoing, if this Agreement is terminated by the Company
for Cause, or by the Manager for other than Good Reason, the Manager will not be
entitled to receive the sums in Section 18(a) above.

          (b) Any and all amounts payable to the Advisor pursuant to Section
20(a) and Section 20(c) that, irrespective of the termination, were payable on a
current basis prior to the Termination Date either because they were not
subordinated or all conditions to their payment had been satisfied, shall be
paid within 90 days after the Termination Date. All other amounts payable to the
Advisor pursuant to Section 20(a) and Section 20(c) shall be paid in a manner
determined by the Board, but in no event on terms less favorable to the Advisor
than those represented by a note (i) maturing upon the liquidation of the
Company or three years from the Termination Date, whichever is earlier, (ii)
with no less than twelve equal quarterly installments and (iii) bearing a fair,
competitive and commercially reasonable interest rate (the "Note"). The Note, if
any, may be prepaid by the Company at any time prior to maturity with accrued
interest to the date of payment but without premium or penalty. Notwithstanding
the foregoing, any amounts that relate to Investment Assets (i) shall be an
amount which provides compensation to the Advisor only for that portion of the
holding period for the respective Investment Assets

                                       17

during which the Advisor provided services to the Company, (ii) shall not be
due and payable until the Investment Asset to which such amount relates is sold
or refinanced, and (iii) shall not bear interest until the Investment Asset to
which such amount relates is sold or refinanced. A portion of the amount shall
be paid as each Investment Asset owned by the Company on the Termination Date is
sold. The portion of such amount payable upon each such sale shall be equal to
(i) such amount multiplied by (ii) the percentage calculated by dividing the
fair value (at the Termination Date) of the Investment Asset sold by the Company
divided by the total fair value (at the Termination Date) of all Investment
Assets owned by the Company on the Termination Date.

          (c) The Manager shall promptly upon termination:

               (i)  pay over to the Company all money collected and held for the
          account of the Company pursuant to this Agreement, after deducting any
          accrued compensation and reimbursement for its expenses to which it is
          then entitled;

               (ii)  deliver to the Board a full accounting, including a
          statement showing all payments collected by it and a statement of all
          money held by it, covering the period following the date of the last
          accounting furnished to the Board;

               (iii)  deliver to the Board all assets, including Properties, and
          documents of the Company then in the custody of the Manager; and

               (iv)  cooperate with the Company to provide an orderly management
          transition.

     21.  INDEMNIFICATION BY THE COMPANY.

          (a) The Company shall not indemnify the Manager or any of its
Affiliates for any loss or liability suffered by the Manager or the Affiliate,
or hold the Manager or the Affiliate harmless for any loss or liability suffered
by the Company, unless all of the following conditions are met:

               (i)  The Manager or Affiliate has determined, in good faith, that
          the course of conduct which caused the loss or liability was in the
          best interests of the Company;

               (ii)  The Manager or the Affiliate was acting on behalf of or
          performing services for the Company; and

               (iii)  Such liability or loss was not the result of negligence or
          misconduct by the Manager or the Affiliate.

          (b) Notwithstanding the foregoing, the Manager and its Affiliates
shall not be indemnified by the Company for any losses, liabilities or expenses
arising from or out of the alleged violation of federal or state securities laws
unless one or more of the following conditions are met:


                                       18

               (i)  There has been a successful adjudication on the merits of
          each count involving alleged securities law violations as to the
          particular indemnitee;

               (ii)  Such claims have been dismissed with prejudice on the
          merits by a court of competent jurisdiction as to the particular
          indemnitee; or

               (iii)  A court of competent jurisdiction approves a settlement of
          the claims against a particular indemnitee and finds that
          indemnification of the settlement and the related costs should be
          made, and the court considering the request for indemnification has
          been advised of the position of the Securities and Exchange Commission
          and of the published position of any state securities regulatory
          authority in which securities of the Company were offered or sold as
          to indemnification for violation of securities laws.

          (c) The Company shall advance funds to the Manager or its Affiliates
for legal expenses and other costs incurred as a result of any legal action for
which indemnification is being sought only if all of the following conditions
are satisfied:

               (i)  The legal action relates to acts or omissions with respect
          to the performance of duties or services on behalf of the Company;

               (ii)  The legal action is initiated by a third party who is not a
          Shareholder or the legal action is initiated by a Shareholder acting
          in his or her capacity as such and a court of competent jurisdiction
          specifically approves such advancement; and

               (iii)  The Manager or the Affiliate undertakes to repay the
          advanced funds to the Company, together with the applicable legal rate
          of interest thereon, in cases in which such Manager or Affiliate is
          found not to be entitled to indemnification.

          (d) Notwithstanding the foregoing, the Manager shall not be entitled
to indemnification or be held harmless pursuant to this Section 19 for any
activity which the Manager shall be required to indemnify or hold harmless the
Company pursuant to Section 20.

          (e) Any amounts paid pursuant to this Section 19 shall be recoverable
or paid only out the net assets of the Company and not from Shareholders.

     22.  INDEMNIFICATION BY MANAGER. The Manager shall indemnify and hold
harmless the Company from liability, claims, damages, taxes or losses and
related expenses including attorneys' fees, to the extent that such liability,
claims, damages, taxes or losses and related expenses are not fully reimbursed
by insurance and are incurred by reason of the Manager's bad faith, fraud,
willful misfeasance, misconduct, negligence or reckless disregard of its duties.

     23.  NOTICES. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is accepted by the party to
whom it is given, and shall be given by being delivered by hand or by overnight
mail or other overnight delivery service to the addresses set forth herein:

                                       19



                 To the Board                Corporate Property Associates 14
                 and to the Company:         Incorporated
                                             50 Rockefeller Plaza
                                             New York, NY 10020

                 To the Manager:             W.P. Carey & Co. B.V.
                                             50 Rockefeller Plaza
                                             New York, NY 10020

     Either party may at any time give notice in writing to the other party of a
change in its address for the purposes of this Section 21.

     24.  MODIFICATION.  This Agreement shall not be changed, modified,
terminated, or discharged, in whole or in part, except by an instrument in
writing signed by both parties hereto, or their respective successors or
assignees.

     25.  SEVERABILITY.  The provisions of this Agreement are independent of and
severable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.

     26.  CONSTRUCTION.  This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New York.

     27.  ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. The express terms hereof
control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof. This Agreement may not be modified or
amended other than by an agreement in writing.

     28.  INDULGENCES, NOT WAIVERS. Neither the failure nor any delay on the
part of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.

     29.  GENDER.  Words used herein regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.

                                       20



     30.  TITLES NOT TO AFFECT INTERPRETATION.  The titles of Sections and
subsections contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.

     31.  EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.

     32.  NAME.  W.P. Carey & Co. LLC has a proprietary interest in the name
"Corporate Property Associates" and "CPA(R)." Accordingly, and in recognition of
this right, if at any time the Company ceases to retain W.P. Carey & Co. B.V.,
or an Affiliate thereof to perform the services of Manager, the Company will,
promptly after receipt of written request from W.P. Carey & Co. B.V., cease to
conduct business under or use the name "Corporate Property Associates" or
"CPA(R)" or any diminutive thereof and the Company shall use its best efforts to
change the name of the Company to a name that does not contain the name
"Corporate Property Associates" or "CPA(R)" or any other word or words that
might, in the sole discretion of the Manager, be susceptible of indication of
some form of relationship between the Company and the Manager or any Affiliate
thereof.  Consistent with the foregoing, it is specifically recognized that the
Manager or one or more of its Affiliates has in the past and may in the future
organize, sponsor or otherwise permit to exist other investment vehicles
(including vehicles for investment in real estate) and financial and service
organizations having "Corporate Property Associates" or "CPA(R)" as a part of
their name, all without the need for any consent (and without the right to
object thereto) by the Company or its Directors.


                                       21






     IN WITNESS WHEREOF, the parties hereto have executed this Asset Management
Agreement as of the day and year first above written.

                                CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

                                By: /s/ Gordon F. DuGan
                                ---------------------------------------------
                                Name: Gordon F. DuGan
                                Title: Chief Executive Officer


                                W.P. CAREY & CO. B.V.

                                By: /s/ Thomas E. Zacharias
                                ---------------------------------------------
                                Name: Thomas E. Zacharias
                                Title: Managing Director


                                By: /s/ Johnathan Perry
                                ---------------------------------------------
                                Name: Johnathan Perry
                                Title: Managing Director


                                By: /s/ Karsten von Koller
                                ---------------------------------------------
                                Name: Karsten von Koller
                                Title: Managing Director




                                       22

EX-10.2

                                                                    Exhibit 10.2

                      AMENDMENT NO. 1 TO ADVISORY AGREEMENT


THIS  AMENDMENT  NO. 1 (the  "Amendment"),  dated as of  September 2, 2008,  to
the Amended and  Restated  Advisory Agreement of Corporate  Property  Associates
14  Incorporated  (the  "Company"),  is between the Company and Carey Asset
Management Corp. (the "Advisor").

                                   WITNESSETH:

WHEREAS, the Company and the Advisor are parties to the Amended and Restated
Advisory Agreement of the Company, dated as of September 30, 2007 as amended,
extended or supplemented from time to time (the "Advisory Agreement");

WHEREAS,  W.P.  Carey & Co. B.V., a Netherlands  company (the  "Manager"), has
been formed and has  established an office in The Netherlands for the purpose of
providing asset  management and related  services with respect to real
properties and other real estate-related assets located outside the United
States;

WHEREAS, the Company desires to retain the services of the Manager with respect
to the Company's real properties and real estate-related assets located outside
the United States;

WHEREAS, on the date hereof, the Company is entering into a management agreement
with the Manager; and

WHEREAS, in order to give effect to the new management agreement, it is
necessary for the Company and the Advisor to amend the Advisory Agreement.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements contained herein, the Company and the Advisor agree as follows:

1.   Definitions.  (a)   The following  defined terms in the Advisory  Agreement
     shall be amended and restated in their entirety to read as follows:

          "2%/25% Guidelines."  The  requirement,  as  provided  in  Section 13
hereof,  that,  in any 12-month period ending on the last day of any fiscal
quarter, Operating Expenses under this Agreement and the Management Agreement
not exceed the greater of two percent of the Company's Average Invested Assets
during such 12-month period or 25% of the Company's Adjusted Net Income over the
same 12-month period.

          "Operating Expenses." All  operating,  general and  administrative
expenses paid or incurred by the Company, as determined under GAAP, except the
following (insofar as they would otherwise be considered operating, general and
administrative expenses under GAAP): (i) interest and discounts and other cost
of borrowed money; (ii) taxes (including state and Federal income tax, property
taxes and assessments, franchise taxes and taxes of any other nature); (iii)
expenses of raising capital, including Organization and Offering Expenses,
printing, engraving, and other expenses, and taxes incurred in connection with
the issuance and distribution of the Company's Shares and Securities; (iv)
Acquisition Expenses, real estate commissions on resale of real estate interests
and other expenses connected with the acquisition, disposition, origination,
ownership and operation of real estate interests, mortgage loans, or other
property, including the costs of foreclosure, insurance premiums, legal
services,



brokerage and sales commissions, maintenance, repair and improvement of
property; (v) Acquisition Fees; (vi) Subordinated Disposition Fees payable under
this Agreement and the corresponding fees payable to the Manager under the
Management Agreement or to any other party; (vii) non-cash items, such as
depreciation, amortization, depletion, and additions to reserves for
depreciation, amortization, depletion, losses and bad debts; (viii) Termination
Fees; (ix) Subordinated Incentive Fees; (x) Asset Management Fees payable
under this Agreement and the corresponding fees payable under the Management
Agreement and (xi) Loan Refinancing Fees payable under this Agreement and the
corresponding fees payable under the Management Agreement.



     (b)  The following definitions are hereby added to the Advisory Agreement:

          "MANAGER."  W.P. Carey & Co. B.V., a Netherlands company.

          "MANAGEMENT AGREEMENT." The Asset Management Agreement, dated as of
          September 2, 2008, between the Company and the Manager, as the same
          may be amended from time to time.

2.   Duties of the Advisor.

     (a)  The Company and the Advisor acknowledge and agree that, pursuant
          to the Management Agreement, the Manager will have the day-to-day
          responsibility to provide asset management and disposition services to
          the Company with respect to Properties located outside the United
          States and Loans secured by collateral located outside the United
          States.

     (b)  The following shall be added as a new subsection (v) in Section 3 of
          the Advisory Agreement:

               "(v)  Monitor the performance by the Manager of its duties under
               the Management Agreement."

3.   AUTHORITY OF ADVISOR. The Advisor and the Company acknowledge and agree
     that, for so long as the Manager adequately performs its obligation under
     the Management Agreement, the Manager shall have the day-to-day authority
     to provide the asset management and disposition services contemplated by
     the Management Agreement with respect to non-U.S. Properties and Loans and
     the Advisor shall not have such authority. However, if for any reason the
     Manager is unable or unwilling to perform, or fails to perform, its
     obligations under the Management Agreement, the Advisor shall be authorized
     to perform such obligations.

4.   Fees.

     (a)  During the term of the Management Agreement, no Asset Management Fees
          shall be paid to the Advisor under Section 9(a) of the Advisory
          Agreement with respect to Properties located outside the United States
          and Loans secured by collateral outside the United States.

     (b)  During the term of the Management Agreement, no Subordinated
          Disposition Fees shall be paid to the Advisor under Section 9(g) of
          the Advisory Agreement with respect to Properties located outside the
          United States and Loans secured by collateral outside the United
          States.


5.   EXPENSES. During the term of the Management Agreement, the Company shall
     have no obligation to reimburse the Advisor under Section 10 of the
     Advisory Agreement for any expenses related to the management and
     disposition of Properties located outside the United States and Loans
     secured by collateral outside the United States.

6.   LIMITATION ON EXPENSES.

     (a)  Subsection 13(a) of the Advisory Agreement shall be amended and
          restated in its entirety as follows:

               (a) If the aggregate Operating Expenses of the Company under this
          Agreement and the Management Agreement during the 12-month period
          ending on the last day of any fiscal quarter of the Company exceed the
          greater of (i) two percent of the Average Invested Assets during the
          same 12-month period or (ii) 25% of the Adjusted Net Income of the
          Company during the same 12-month period, then subject to paragraph (b)
          of this Section 13, such excess amount shall be the sole
          responsibility of the Advisor and the Company shall not be liable for
          payment therefor.

     (b)  Subsection 13(c) of the Advisory Agreement shall be amended and
          restated in its entirety as follows:

               (c) Within 60 days after the end of any twelve-month period
          referred to in paragraph (a), the Advisor shall reimburse the Company
          for any amounts expended by the Company in such twelve-month period
          that exceeds the limitations provided in paragraph (a) unless the
          Independent Directors determine that such excess expenses are
          justified, as provided in paragraph (b), and provided the aggregate
          Operating Expenses under this Agreement and the Management Agreement
          for such later quarter would not thereby exceed the Two Percent/25%
          Guidelines. To the extent the Company is reimbursed for such excess
          expenses by the Manager, the Company shall not also be entitled to
          reimbursement for such excess from the Advisor.


7.   EFFECT OF AMENDMENT.

This Amendment shall be effective and the Advisory Agreement shall be deemed to
be modified and amended in accordance herewith upon the receipt by the parties
hereto of counterparts hereof executed and delivered on behalf of each of the
parties hereto. Except as provided in this Amendment, the Advisory Agreement
shall remain in full force and effect in accordance with its terms.

8.   GOVERNING LAW.

THIS AMENDMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW PROVISIONS OR RULES THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION.

9.   COUNTERPARTS.

This Amendment may be executed by the parties hereto in separate counterparts
(including by means of facsimile), each of which counterparts will for all
purposes be deemed to be an original, but all of which counterparts shall
together constitute one and the same instrument.


10.  CAPITALIZED TERMS.

Capitalized terms used but not defined in this Amendment shall have the meanings
given to them in the Advisory Agreement.



IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first
written above.



                                   CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED


                                   By: /s/ Thomas E. Zacharias
                                       -----------------------




                                   CAREY ASSET MANAGEMENT CORP.


                                   By: /s/ Gordon F. DuGan
                                       -------------------

EX-31.1

Exhibit 31.1

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 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 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 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 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 report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this 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 control 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 control over financial reporting.

Date 11/7/2008

/s/ Gordon F. DuGan          
Gordon F. DuGan
President and Chief Executive Officer

EX-31.2

Exhibit 31.2

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 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 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 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 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 report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this 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 control 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 control over financial reporting.

Date 11/7/2008

/s/ Mark J. DeCesaris          
Mark J. DeCesaris
acting Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
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 September 30, 2008 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 results of operations of W. P. Carey & Co. LLC.

Date 11/7/2008

/s/ Gordon F. DuGan          
Gordon F. DuGan
President and Chief Executive Officer

In connection with the Quarterly Report of W. P. Carey & Co. LLC on Form 10-Q for the period ended September 30, 2008 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 results of operations of W. P. Carey & Co. LLC.

Date 11/7/2008

/s/ Mark J. DeCesaris          
Mark J. DeCesaris
acting Chief Financial Officer

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.