Exhibit 99.4
Exhibit 99.4
|
|
|
Item 8. |
|
Financial Statements and Supplementary Data. |
The following financial statements and schedule are filed as a part of this Report:
|
|
|
|
|
Report of Independent Registered Public Accounting Firm |
|
|
2 |
|
Consolidated Balance Sheets |
|
|
3 |
|
Consolidated Statements of Income |
|
|
4 |
|
Consolidated Statements of Comprehensive Income |
|
|
5 |
|
Consolidated Statements of Equity |
|
|
6 |
|
Consolidated Statements of Cash Flows |
|
|
7 |
|
Notes to Consolidated Financial Statements |
|
|
9 |
|
Schedule III Real Estate and Accumulated Depreciation |
|
|
47 |
|
Notes to Schedule III |
|
|
50 |
|
Financial statement schedules other than those listed above are omitted because the required
information is given in the financial statements, including the notes thereto, or because the
conditions requiring their filing do not exist.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of W. P. Carey & Co. LLC:
In our opinion, the consolidated financial statements listed in the accompanying index present
fairly, in all material respects, the financial position of W. P. Carey & Co. LLC and its
subsidiaries at December 31, 2010 and December 31, 2009, and the results of their operations and
their cash flows for each of the three years in the period ended December 31, 2010 in conformity
with accounting principles generally accepted in the United States of America. In addition, in our
opinion, the financial statement schedule listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read in conjunction with the related
consolidated financial statements. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2010, based on
criteria established in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible
for these financial statements and financial statement schedule, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included under Item 9A. Our responsibility is to express opinions on
these financial statements, on the financial statement schedule, and on the Companys internal
control over financial reporting based on our integrated audits. We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal
control over financial reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. Our
audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 25, 2011, except with respect to our opinion insofar as it relates to the effects of the
discontinued operations and segment reporting as discussed in Notes 1, 2, 6, 11, 13, 16, 17, 18,
and 20, as to which the date is June 8, 2011.
2
W. P. CAREY & CO. LLC
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Assets |
|
|
|
|
|
|
|
|
Investments in real estate: |
|
|
|
|
|
|
|
|
Real estate, at cost (inclusive of amounts attributable to consolidated variable interest
entities (VIEs) of $39,718 and $52,625, respectively) |
|
$ |
560,592 |
|
|
$ |
525,607 |
|
Operating real estate, at cost (inclusive of amounts attributable to consolidated VIEs of
$25,665 and $25,665, respectively) |
|
|
109,851 |
|
|
|
85,927 |
|
Accumulated depreciation (inclusive of amounts attributable to consolidated VIEs of
$20,431 and $25,650, respectively) |
|
|
(122,312 |
) |
|
|
(112,286 |
) |
|
|
|
|
|
|
|
Net investments in properties |
|
|
548,131 |
|
|
|
499,248 |
|
Net investments in direct financing leases |
|
|
76,550 |
|
|
|
80,222 |
|
Equity investments in real estate and CPA® REITs |
|
|
322,294 |
|
|
|
304,990 |
|
|
|
|
|
|
|
|
Net investments in real estate |
|
|
946,975 |
|
|
|
884,460 |
|
Cash and cash equivalents (inclusive of amounts attributable to consolidated VIEs
of $86 and $108, respectively) |
|
|
64,693 |
|
|
|
18,450 |
|
Due from affiliates |
|
|
38,793 |
|
|
|
35,998 |
|
Intangible assets and goodwill, net |
|
|
87,768 |
|
|
|
85,187 |
|
Other assets, net (inclusive of amounts attributable to consolidated VIEs of $1,845
and $1,504, respectively) |
|
|
34,097 |
|
|
|
69,241 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,172,326 |
|
|
$ |
1,093,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Non-recourse debt (inclusive of amounts attributable to consolidated VIEs of
$9,593 and $9,850, respectively) |
|
$ |
255,232 |
|
|
$ |
215,330 |
|
Line of credit |
|
|
141,750 |
|
|
|
111,000 |
|
Accounts payable, accrued expenses and other liabilities (inclusive of amounts attributable
to consolidated VIEs of $2,275 and $2,286, respectively) |
|
|
40,808 |
|
|
|
51,710 |
|
Income taxes, net |
|
|
41,443 |
|
|
|
43,831 |
|
Distributions payable |
|
|
20,073 |
|
|
|
31,365 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
499,306 |
|
|
|
453,236 |
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
|
7,546 |
|
|
|
7,692 |
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 8) |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
W. P. Carey members equity: |
|
|
|
|
|
|
|
|
Listed
shares, no par value, 100,000,000 shares authorized; 39,454,847 and
39,204,605 shares
issued and outstanding, respectively |
|
|
763,734 |
|
|
|
754,507 |
|
Distributions in excess of accumulated earnings |
|
|
(145,769 |
) |
|
|
(138,442 |
) |
Deferred compensation obligation |
|
|
10,511 |
|
|
|
10,249 |
|
Accumulated other comprehensive loss |
|
|
(3,463 |
) |
|
|
(681 |
) |
|
|
|
|
|
|
|
Total W. P. Carey members equity |
|
|
625,013 |
|
|
|
625,633 |
|
Noncontrolling interests |
|
|
40,461 |
|
|
|
6,775 |
|
|
|
|
|
|
|
|
Total equity |
|
|
665,474 |
|
|
|
632,408 |
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
1,172,326 |
|
|
$ |
1,093,336 |
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
3
W. P. CAREY & CO. LLC
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Asset management revenue |
|
$ |
76,246 |
|
|
$ |
76,621 |
|
|
$ |
80,714 |
|
Structuring revenue |
|
|
44,525 |
|
|
|
23,273 |
|
|
|
20,236 |
|
Wholesaling revenue |
|
|
11,096 |
|
|
|
7,691 |
|
|
|
5,208 |
|
Reimbursed costs from affiliates |
|
|
60,023 |
|
|
|
47,534 |
|
|
|
41,100 |
|
Lease revenues |
|
|
61,951 |
|
|
|
61,045 |
|
|
|
65,506 |
|
Other real estate income |
|
|
18,570 |
|
|
|
14,907 |
|
|
|
20,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
272,411 |
|
|
|
231,071 |
|
|
|
233,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
(73,429 |
) |
|
|
(63,819 |
) |
|
|
(62,669 |
) |
Reimbursable costs |
|
|
(60,023 |
) |
|
|
(47,534 |
) |
|
|
(41,100 |
) |
Depreciation and amortization |
|
|
(23,712 |
) |
|
|
(22,127 |
) |
|
|
(22,771 |
) |
Property expenses |
|
|
(10,746 |
) |
|
|
(7,023 |
) |
|
|
(6,278 |
) |
Other real estate expenses |
|
|
(8,121 |
) |
|
|
(7,308 |
) |
|
|
(8,196 |
) |
Impairment charges |
|
|
(7,244 |
) |
|
|
(3,516 |
) |
|
|
(473 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(183,275 |
) |
|
|
(151,327 |
) |
|
|
(141,487 |
) |
|
|
|
|
|
|
|
|
|
|
Other
Income and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Other interest income |
|
|
1,268 |
|
|
|
1,713 |
|
|
|
2,883 |
|
Income from equity investments in real estate and CPA® REITs |
|
|
30,992 |
|
|
|
13,425 |
|
|
|
14,198 |
|
Gain on sale of investment in direct financing lease |
|
|
|
|
|
|
|
|
|
|
1,103 |
|
Other income and (expenses) |
|
|
1,407 |
|
|
|
7,357 |
|
|
|
1,444 |
|
Interest expense |
|
|
(16,234 |
) |
|
|
(14,979 |
) |
|
|
(18,598 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
17,433 |
|
|
|
7,516 |
|
|
|
1,030 |
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
106,569 |
|
|
|
87,260 |
|
|
|
92,967 |
|
Provision for income taxes |
|
|
(25,822 |
) |
|
|
(22,793 |
) |
|
|
(23,541 |
) |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
80,747 |
|
|
|
64,467 |
|
|
|
69,426 |
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations of discontinued properties |
|
|
1,881 |
|
|
|
5,308 |
|
|
|
9,717 |
|
Gains on sale of real estate, net |
|
|
460 |
|
|
|
7,701 |
|
|
|
|
|
Impairment charges |
|
|
(8,137 |
) |
|
|
(6,908 |
) |
|
|
(538 |
) |
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations |
|
|
(5,796 |
) |
|
|
6,101 |
|
|
|
9,179 |
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
74,951 |
|
|
|
70,568 |
|
|
|
78,605 |
|
Add: Net loss attributable to noncontrolling interests |
|
|
314 |
|
|
|
713 |
|
|
|
950 |
|
Less: Net income attributable to redeemable noncontrolling interests |
|
|
(1,293 |
) |
|
|
(2,258 |
) |
|
|
(1,508 |
) |
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to W. P. Carey Members |
|
$ |
73,972 |
|
|
$ |
69,023 |
|
|
$ |
78,047 |
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to W. P. Carey members |
|
$ |
2.01 |
|
|
$ |
1.59 |
|
|
$ |
1.75 |
|
(Loss) income from discontinued operations attributable to W. P. Carey members |
|
|
(0.15 |
) |
|
|
0.15 |
|
|
|
0.23 |
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to W. P. Carey members |
|
$ |
1.86 |
|
|
$ |
1.74 |
|
|
$ |
1.98 |
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to W. P. Carey members |
|
$ |
2.01 |
|
|
$ |
1.59 |
|
|
$ |
1.72 |
|
(Loss) income from discontinued operations attributable to W. P. Carey members |
|
|
(0.15 |
) |
|
|
0.15 |
|
|
|
0.23 |
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to W. P. Carey members |
|
$ |
1.86 |
|
|
$ |
1.74 |
|
|
$ |
1.95 |
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
39,514,746 |
|
|
|
39,019,709 |
|
|
|
39,202,520 |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
40,007,894 |
|
|
|
39,712,735 |
|
|
|
40,221,112 |
|
|
|
|
|
|
|
|
|
|
|
Amounts Attributable to W. P. Carey Members |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax |
|
$ |
79,768 |
|
|
$ |
62,922 |
|
|
$ |
68,868 |
|
(Loss) income from discontinued operations, net of tax |
|
|
(5,796 |
) |
|
|
6,101 |
|
|
|
9,179 |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
73,972 |
|
|
$ |
69,023 |
|
|
$ |
78,047 |
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
4
W. P. CAREY & CO. LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Net Income |
|
$ |
74,951 |
|
|
$ |
70,568 |
|
|
$ |
78,605 |
|
Other Comprehensive (Loss) Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
(1,227 |
) |
|
|
619 |
|
|
|
(3,199 |
) |
Unrealized loss on derivative instruments |
|
|
(757 |
) |
|
|
(482 |
) |
|
|
(419 |
) |
Change in unrealized appreciation on marketable securities |
|
|
6 |
|
|
|
53 |
|
|
|
(29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,978 |
) |
|
|
190 |
|
|
|
(3,647 |
) |
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
72,973 |
|
|
|
70,758 |
|
|
|
74,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Attributable to Noncontrolling Interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
314 |
|
|
|
713 |
|
|
|
950 |
|
Foreign currency translation adjustment |
|
|
(816 |
) |
|
|
(31 |
) |
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (income) loss attributable to noncontrolling interests |
|
|
(502 |
) |
|
|
682 |
|
|
|
1,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Attributable to Redeemable Noncontrolling Interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
(1,293 |
) |
|
|
(2,258 |
) |
|
|
(1,508 |
) |
Foreign currency translation adjustment |
|
|
12 |
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to redeemable noncontrolling interests |
|
|
(1,281 |
) |
|
|
(2,270 |
) |
|
|
(1,508 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income Attributable to W. P. Carey Members |
|
$ |
71,190 |
|
|
$ |
69,170 |
|
|
$ |
74,481 |
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
5
W. P. CAREY & CO. LLC
CONSOLIDATED STATEMENTS OF EQUITY
For the years ended December 31, 2010, 2009 and 2008
(in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. P. Carey Members |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Excess of |
|
|
Deferred |
|
|
Other |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed |
|
|
Accumulated |
|
|
Compensation |
|
|
Comprehensive |
|
|
W. P. Carey |
|
|
Noncontrolling |
|
|
|
|
|
|
Shares |
|
|
Shares |
|
|
Earnings |
|
|
Obligation |
|
|
Income (Loss) |
|
|
Members |
|
|
Interests |
|
|
Total |
|
Balance at January 1, 2008 |
|
|
39,216,493 |
|
|
$ |
740,873 |
|
|
$ |
(117,051 |
) |
|
$ |
|
|
|
$ |
2,738 |
|
|
$ |
626,560 |
|
|
$ |
6,150 |
|
|
$ |
632,710 |
|
Cash proceeds on issuance of shares, net |
|
|
961,648 |
|
|
|
23,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,133 |
|
|
|
|
|
|
|
23,133 |
|
Shares issued in connection with services rendered |
|
|
7,128 |
|
|
|
217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217 |
|
|
|
|
|
|
|
217 |
|
Shares issued under share incentive plans |
|
|
50,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,582 |
|
|
|
2,582 |
|
Forfeitures of shares |
|
|
(12,565 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8 |
) |
|
|
|
|
|
|
(8 |
) |
Distributions declared ($1.96 per share) |
|
|
|
|
|
|
|
|
|
|
(77,986 |
) |
|
|
|
|
|
|
|
|
|
|
(77,986 |
) |
|
|
|
|
|
|
(77,986 |
) |
Distributions to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,469 |
) |
|
|
(1,469 |
) |
Windfall tax benefits share incentive plans |
|
|
|
|
|
|
2,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,156 |
|
|
|
|
|
|
|
2,156 |
|
Stock-based compensation expense |
|
|
|
|
|
|
7,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,285 |
|
|
|
|
|
|
|
7,285 |
|
Repurchase and retirement of shares |
|
|
(633,510 |
) |
|
|
(15,413 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,413 |
) |
|
|
|
|
|
|
(15,413 |
) |
Redemption value adjustment |
|
|
|
|
|
|
(322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(322 |
) |
|
|
|
|
|
|
(322 |
) |
Net income |
|
|
|
|
|
|
|
|
|
|
78,047 |
|
|
|
|
|
|
|
|
|
|
|
78,047 |
|
|
|
(950 |
) |
|
|
77,097 |
|
Change in other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,566 |
) |
|
|
(3,566 |
) |
|
|
(81 |
) |
|
|
(3,647 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
|
39,589,594 |
|
|
|
757,921 |
|
|
|
(116,990 |
) |
|
|
|
|
|
|
(828 |
) |
|
|
640,103 |
|
|
|
6,232 |
|
|
|
646,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds on issuance of shares, net |
|
|
84,283 |
|
|
|
1,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,507 |
|
|
|
|
|
|
|
1,507 |
|
Grants issued in connection with services rendered |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
787 |
|
|
|
|
|
|
|
787 |
|
|
|
|
|
|
|
787 |
|
Shares issued under share incentive plans |
|
|
222,600 |
|
|
|
|
|
|
|
|
|
|
|
9,462 |
|
|
|
|
|
|
|
9,462 |
|
|
|
|
|
|
|
9,462 |
|
Contributions |
|
|
|
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102 |
|
|
|
2,845 |
|
|
|
2,947 |
|
Forfeitures of shares |
|
|
(2,528 |
) |
|
|
(77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77 |
) |
|
|
|
|
|
|
(77 |
) |
Distributions declared ($2.00 per share) (a) |
|
|
|
|
|
|
|
|
|
|
(90,475 |
) |
|
|
|
|
|
|
|
|
|
|
(90,475 |
) |
|
|
|
|
|
|
(90,475 |
) |
Distributions to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,661 |
) |
|
|
(1,661 |
) |
Windfall tax benefits share incentive plans |
|
|
|
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143 |
|
|
|
|
|
|
|
143 |
|
Stock-based compensation expense |
|
|
|
|
|
|
8,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,626 |
|
|
|
|
|
|
|
8,626 |
|
Repurchase and retirement of shares |
|
|
(689,344 |
) |
|
|
(11,759 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,759 |
) |
|
|
|
|
|
|
(11,759 |
) |
Redemption value adjustment |
|
|
|
|
|
|
(6,773 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,773 |
) |
|
|
|
|
|
|
(6,773 |
) |
Tax impact of purchase of WPCI interest |
|
|
|
|
|
|
4,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,817 |
|
|
|
|
|
|
|
4,817 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
69,023 |
|
|
|
|
|
|
|
|
|
|
|
69,023 |
|
|
|
(713 |
) |
|
|
68,310 |
|
Change in other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147 |
|
|
|
147 |
|
|
|
72 |
|
|
|
219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
|
39,204,605 |
|
|
|
754,507 |
|
|
|
(138,442 |
) |
|
|
10,249 |
|
|
|
(681 |
) |
|
|
625,633 |
|
|
|
6,775 |
|
|
|
632,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds on issuance of shares, net |
|
|
196,802 |
|
|
|
3,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,724 |
|
|
|
|
|
|
|
3,724 |
|
Grants issued in connection with services rendered |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450 |
|
|
|
|
|
|
|
450 |
|
|
|
|
|
|
|
450 |
|
Shares issued under share incentive plans |
|
|
368,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,261 |
|
|
|
14,261 |
|
Forfeitures of shares |
|
|
(47,214 |
) |
|
|
(1,517 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,517 |
) |
|
|
|
|
|
|
(1,517 |
) |
Distributions declared ($2.03 per share) |
|
|
|
|
|
|
|
|
|
|
(81,299 |
) |
|
|
|
|
|
|
|
|
|
|
(81,299 |
) |
|
|
|
|
|
|
(81,299 |
) |
Distributions to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,305 |
) |
|
|
(3,305 |
) |
Windfall tax benefits share incentive plans |
|
|
|
|
|
|
2,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,354 |
|
|
|
|
|
|
|
2,354 |
|
Stock-based compensation expense |
|
|
|
|
|
|
8,149 |
|
|
|
|
|
|
|
(188 |
) |
|
|
|
|
|
|
7,961 |
|
|
|
|
|
|
|
7,961 |
|
Repurchase and retirement of shares |
|
|
(267,358 |
) |
|
|
(2,317 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,317 |
) |
|
|
|
|
|
|
(2,317 |
) |
Redemption value adjustment |
|
|
|
|
|
|
471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
471 |
|
|
|
|
|
|
|
471 |
|
Tax impact of purchase of WPCI interest |
|
|
|
|
|
|
(1,637 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,637 |
) |
|
|
|
|
|
|
(1,637 |
) |
Reclassification of the Investors interest in Carey Storage (Note 4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,402 |
|
|
|
22,402 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
73,972 |
|
|
|
|
|
|
|
|
|
|
|
73,972 |
|
|
|
(314 |
) |
|
|
73,658 |
|
Change in other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,782 |
) |
|
|
(2,782 |
) |
|
|
642 |
|
|
|
(2,140 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010 |
|
|
39,454,847 |
|
|
$ |
763,734 |
|
|
$ |
(145,769 |
) |
|
$ |
10,511 |
|
|
$ |
(3,463 |
) |
|
$ |
625,013 |
|
|
$ |
40,461 |
|
|
$ |
665,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Distributions declared per share excludes special distribution of $0.30 per share declared in
December 2009 (Note 14). |
See Notes to Consolidated Financial Statements.
6
W. P. CAREY & CO. LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Cash Flows Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
74,951 |
|
|
$ |
70,568 |
|
|
$ |
78,605 |
|
Adjustments to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization including intangible assets and deferred financing costs |
|
|
24,443 |
|
|
|
24,476 |
|
|
|
27,197 |
|
(Income) loss from equity investments in real estate and CPA® REITs in excess of distributions |
|
|
(4,920 |
) |
|
|
(2,258 |
) |
|
|
1,866 |
|
Straight-line rent and financing lease adjustments |
|
|
286 |
|
|
|
2,223 |
|
|
|
2,227 |
|
Gain on sale of real estate and investment in direct financing lease |
|
|
(460 |
) |
|
|
(7,701 |
) |
|
|
(1,103 |
) |
Gain on extinguishment of debt |
|
|
|
|
|
|
(6,991 |
) |
|
|
|
|
Gain on
lease termination (a) |
|
|
|
|
|
|
|
|
|
|
(4,998 |
) |
Allocation of (loss) earnings to profit-sharing interest |
|
|
(781 |
) |
|
|
3,900 |
|
|
|
|
|
Management income received in shares of affiliates |
|
|
(35,235 |
) |
|
|
(31,721 |
) |
|
|
(40,717 |
) |
Unrealized loss (gain) on foreign currency transactions and others |
|
|
300 |
|
|
|
(174 |
) |
|
|
2,656 |
|
Realized gain on foreign currency transactions and others |
|
|
(731 |
) |
|
|
(257 |
) |
|
|
(2,250 |
) |
Impairment charges |
|
|
15,381 |
|
|
|
10,424 |
|
|
|
1,011 |
|
Stock-based compensation expense |
|
|
7,082 |
|
|
|
9,336 |
|
|
|
7,278 |
|
Deferred acquisition revenue received |
|
|
21,204 |
|
|
|
25,068 |
|
|
|
48,266 |
|
Increase in structuring revenue receivable |
|
|
(20,237 |
) |
|
|
(11,672 |
) |
|
|
(10,512 |
) |
Decrease in income taxes, net |
|
|
(1,288 |
) |
|
|
(9,276 |
) |
|
|
(8,079 |
) |
Decrease in settlement provision |
|
|
|
|
|
|
|
|
|
|
(29,979 |
) |
Net changes in other operating assets and liabilities |
|
|
6,422 |
|
|
|
(1,401 |
) |
|
|
(8,221 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
86,417 |
|
|
|
74,544 |
|
|
|
63,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Distributions received from equity investments in real estate and CPA® REITs
in excess of equity income |
|
|
18,758 |
|
|
|
39,102 |
|
|
|
19,852 |
|
Capital contributions to equity investments |
|
|
|
|
|
|
(2,872 |
) |
|
|
(1,769 |
) |
Purchases of real estate and equity investments in real estate |
|
|
(96,884 |
) |
|
|
(39,632 |
) |
|
|
(201 |
) |
VAT paid in connection with acquisition of real estate |
|
|
(4,222 |
) |
|
|
|
|
|
|
|
|
VAT refunded in connection with acquisition of real estate |
|
|
|
|
|
|
|
|
|
|
3,189 |
|
Capital expenditures |
|
|
(5,135 |
) |
|
|
(7,775 |
) |
|
|
(14,051 |
) |
Proceeds from sale of real estate, net investment in direct financing lease and securities |
|
|
14,591 |
|
|
|
43,487 |
|
|
|
5,062 |
|
Funds placed in escrow in connection with the sale of property |
|
|
(1,571 |
) |
|
|
(36,132 |
) |
|
|
|
|
Funds released from escrow in connection with the sale of property |
|
|
36,620 |
|
|
|
|
|
|
|
636 |
|
Proceeds from transfer of profit-sharing interest |
|
|
|
|
|
|
21,928 |
|
|
|
|
|
Payment of deferred acquisition revenue to affiliate |
|
|
|
|
|
|
|
|
|
|
(120 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(37,843 |
) |
|
|
18,106 |
|
|
|
12,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Distributions paid |
|
|
(92,591 |
) |
|
|
(78,618 |
) |
|
|
(87,700 |
) |
Contributions from noncontrolling interests |
|
|
14,261 |
|
|
|
2,947 |
|
|
|
2,582 |
|
Distributions to noncontrolling interests |
|
|
(4,360 |
) |
|
|
(5,505 |
) |
|
|
(5,607 |
) |
Contributions from profit-sharing interest |
|
|
3,694 |
|
|
|
|
|
|
|
|
|
Distributions to profit-sharing interest |
|
|
(693 |
) |
|
|
(5,645 |
) |
|
|
|
|
Purchase of noncontrolling interest |
|
|
|
|
|
|
(15,380 |
) |
|
|
|
|
Scheduled payments of non-recourse debt |
|
|
(14,324 |
) |
|
|
(9,534 |
) |
|
|
(9,678 |
) |
Prepayments of non-recourse debt |
|
|
|
|
|
|
(13,974 |
) |
|
|
|
|
Proceeds from non-recourse debt financing |
|
|
56,841 |
|
|
|
42,495 |
|
|
|
10,137 |
|
Proceeds from line of credit |
|
|
83,250 |
|
|
|
150,500 |
|
|
|
129,300 |
|
Prepayments of line of credit |
|
|
(52,500 |
) |
|
|
(148,518 |
) |
|
|
(111,572 |
) |
Proceeds from loans from affiliates |
|
|
|
|
|
|
1,625 |
|
|
|
|
|
Repayments of loans from affiliates |
|
|
|
|
|
|
(1,770 |
) |
|
|
(7,569 |
) |
Payment of financing costs |
|
|
(1,204 |
) |
|
|
(862 |
) |
|
|
(375 |
) |
Funds placed in escrow in connection with financing |
|
|
|
|
|
|
|
|
|
|
(400 |
) |
Proceeds
from issuance of shares (b) |
|
|
3,724 |
|
|
|
1,507 |
|
|
|
23,350 |
|
Windfall tax benefits associated with stock-based compensation awards |
|
|
2,354 |
|
|
|
143 |
|
|
|
2,156 |
|
Repurchase and retirement of shares |
|
|
|
|
|
|
(10,686 |
) |
|
|
(15,413 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(1,548 |
) |
|
|
(91,275 |
) |
|
|
(70,789 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Cash and Cash Equivalents During the Year |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
(783 |
) |
|
|
276 |
|
|
|
(394 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
46,243 |
|
|
|
1,651 |
|
|
|
4,662 |
|
Cash and cash equivalents, beginning of year |
|
|
18,450 |
|
|
|
16,799 |
|
|
|
12,137 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year |
|
$ |
64,693 |
|
|
$ |
18,450 |
|
|
$ |
16,799 |
|
|
|
|
|
|
|
|
|
|
|
(Continued)
7
Non-cash activities
(a) |
|
In October 2008, we terminated the lease on a domestic property in exchange for a gross
termination fee of $7.5 million. The termination fee consisted of tenants assumption of the
existing $6.0 million debt balance by substituting one of their owned assets as collateral and
a $1.5 million cash payment. In connection with the lease termination, we wrote off $0.8
million of straight line rent adjustments and $0.2 million of unamortized leasing commission. |
|
(b) |
|
We issued restricted shares valued at $0.5 million in 2010, $0.8 million in 2009 and $0.2
million in 2008, to certain directors in consideration of service rendered. Stock-based awards
(net of adjustment Note 15) valued at $10.2 million, $6.7 million and $9.6 million in 2010,
2009 and 2008, respectively, were issued to officers and employees and were recorded to Listed
shares, of which $1.5 million, $0.1 million and less than $0.1 million, respectively, was
forfeited in 2010, 2009 and 2008. |
Supplemental cash flows information (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Interest paid, net of amounts capitalized |
|
$ |
15,351 |
|
|
$ |
14,845 |
|
|
$ |
18,753 |
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
24,307 |
|
|
$ |
35,039 |
|
|
$ |
33,280 |
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Business
W. P. Carey, its consolidated subsidiaries and predecessors provides long-term financing via
sale-leaseback and build-to-suit transactions for companies worldwide and manages a global
investment portfolio. We invest primarily in commercial properties domestically and internationally
that are each triple-net leased to single corporate tenants, which requires each tenant to pay
substantially all of the costs associated with operating and maintaining the property. We also earn
revenue as the advisor to publicly owned, non-listed CPA® REITs that invest in similar
properties. We are currently the advisor to the following CPA® REITs:
CPA®:14, CPA®:15, CPA®:16 Global and CPA®:17
Global. At December 31, 2010, we owned and managed 955 properties domestically and internationally.
Our owned portfolio was comprised of our full or partial ownership interest in 164 properties,
substantially all of which were net leased to 75 tenants, and totaled approximately 14 million
square feet (on a pro rata basis) with an occupancy rate of approximately 89%.
Primary Business Segments
Investment Management We structure and negotiate investments and debt placement transactions for
the CPA® REITs, for which we earn structuring revenue, and manage their portfolios of
real estate investments, for which we earn asset-based management and performance revenue. We earn
asset-based management and performance revenue from the CPA® REITs based on the value of
their 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 Globals 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 in the U.S. and the European
Union that are then leased to companies, primarily on a triple-net leased basis. We may also invest
in other properties if opportunities arise.
Effective January 1, 2011, we include our equity investments in the CPA® REITs in our
real estate ownership segment. The equity income or loss from the CPA® REITs that is now
included in our real estate ownership segment represents our proportionate share of the revenue
less expenses of the net-leased properties held by the CPA® REITs. This treatment is
consistent with that of our directly-owned properties (Note 20).
Organization
We commenced operations on January 1, 1998 by combining the limited partnership interests of nine
CPA® partnerships, at which time we listed on the New York Stock Exchange. On June 28,
2000, we acquired the net lease real estate management operations of Carey Management LLC (Carey
Management) from Wm. Polk Carey, our Chairman and then Chief Executive Officer, subsequent to
receiving the approval of the transaction by our shareholders. The assets acquired included the
advisory agreements with four affiliated CPA® REITs, our management agreement, the stock
of an affiliated broker-dealer, investments in the common stock of the CPA® REITs, and
certain office furniture, fixtures, equipment and employees required to carry on the business
operations of Carey Management.
Note 2. Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements reflect all of our accounts, including those of our
majority-owned and/or controlled subsidiaries. The portion of equity in a subsidiary that is not
attributable, directly or indirectly, to us is presented as noncontrolling interests. All
significant intercompany accounts and transactions have been eliminated. We hold investments in
tenant-in-common interests, which we account for as equity investments in real estate under current
authoritative accounting guidance.
We formed Carey Watermark in March 2008 for the purpose of acquiring interests in lodging and
lodging-related properties. In April 2010, we filed a registration statement with the SEC to sell
up to $1.0 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 dividend reinvestment plan. This registration
statement was declared effective by the SEC in September 2010. As of and during the years ended
December 31, 2010, 2009 and 2008, the financial statements of Carey Watermark, which had no
significant assets, liabilities or operations during either period, were included in our
consolidated financial statements, as we owned all of Carey Watermarks outstanding common stock.
9
In June 2009, the FASB issued amended guidance related to the consolidation of VIEs. The amended
guidance affects the overall consolidation analysis, changing the approach taken by companies in
identifying which entities are VIEs and in determining which party is the primary beneficiary, and
requires an enterprise to qualitatively assess the determination of the primary beneficiary of a
VIE based on whether the entity (i) has the power to direct the activities that most significantly
impact the economic performance of the VIE, and (ii) has the obligation to absorb losses or the
right to receive benefits of the VIE that could potentially be significant to the VIE. The amended
guidance changes the consideration of kick-out rights in determining if an entity is a VIE, which
may cause certain additional entities to now be considered VIEs. Additionally, the guidance
requires an ongoing reconsideration of the primary beneficiary and provides a framework for the
events that trigger a reassessment of whether an entity is a VIE. We adopted this amended guidance
on January 1, 2010, which did not require consolidation of any additional VIEs, but we have
disclosed the assets and liabilities related to previously consolidated VIEs, of which we are the
primary beneficiary and which we consolidate, separately in our consolidated balance sheets for all
periods presented. The adoption of this amended guidance did not have a material impact on our
financial position and results of operations.
Additionally, in February 2010, the FASB issued further guidance, which provided a limited-scope
deferral for an interest in an entity that meets all of the following conditions: (a) the entity
has all the attributes of an investment company as defined under the American Institute of
Certified Public Accountants (AICPA) Audit and Accounting Guide, Investment Companies, or does
not have all the attributes of an investment company but is an entity for which it is acceptable
based on industry practice to apply measurement principles that are consistent with the AICPA Audit
and Accounting Guide, Investment Companies, (b) the reporting entity does not have explicit or
implicit obligations to fund any losses of the entity that could potentially be significant to the
entity, and (c) the entity is not a securitization entity, asset-based financing entity or an
entity that was formerly considered a qualifying special-purpose entity. We evaluated our
involvement with the CPA® REITs and concluded that all three of the above conditions
were met for the limited scope deferral. Accordingly, we continued to perform our consolidation
analysis for the CPA® REITs in accordance with previously issued guidance on VIEs.
In connection with the adoption of the amended guidance on the consolidation of VIEs, we performed
an analysis of all of our subsidiary entities, including our venture entities with other parties,
to determine whether they qualify as VIEs and whether they should be consolidated or accounted for
as equity investments in an unconsolidated venture. As a result of our quantitative and qualitative
assessment to determine whether these entities are VIEs, we identified four entities that were
deemed to be VIEs. Three of these entities were deemed VIEs as the third-party tenant that leases
property from each entity has the right to repurchase the property during the term of their lease
at a fixed price. The fourth entity was deemed a VIE as a third party was deemed to have the right
to receive the expected residual returns of the entity. The nature of operations and organizational
structure of these four VIEs are consistent with our other entities (Note 1) except for the
repurchase and residual returns rights of these entities.
After making the determination that these entities were VIEs, we performed an assessment as to
which party would be considered the primary beneficiary of each entity and would be required to
consolidate each entitys balance sheet and results of operations. This assessment was based upon
which party (i) had the power to direct activities that most significantly impact the entitys
economic performance and (ii) had the obligation to absorb the expected losses of or right to
receive benefits from the VIE that could potentially be significant to the VIE. Based on our
assessment, it was determined that we would continue to consolidate the four VIEs. Activities that
we considered significant in our assessment included which entity had control over financing
decisions, leasing decisions and ability to sell the entitys assets. In September 2010, one of
these entities amended its lease with the third-party tenant to remove the tenants right to
repurchase the property at a fixed price during the term of the lease. As a result of the lease
amendment, this entity is no longer considered a VIE. We will continue to consolidate this entity.
Because we generally utilize non-recourse debt, our maximum exposure to any VIE is limited to the
equity we have invested in each VIE. We have not provided financial or other support to any VIE,
and there were no guarantees or other commitments from third parties that would affect the value of
or risk related to our interest in these entities.
Out-of-Period Adjustment
During the third quarter of 2009, we recorded an adjustment to record an entity on the equity
method that had been incorrectly accounted for under a proportionate consolidation method since its
acquisition in 1989. This adjustment was recorded as a reduction to Real estate and Non-recourse
debt of approximately $23.3 million and $15.0 million, respectively, and an increase to Equity
investment in real estate and CPA® REITs of $7.8 million on our consolidated balance
sheet at September 30, 2009, and an adjustment to classify approximately $1.2 million of net
earnings to income from equity investments in real estate and CPA® REITs for the nine
months ended September 30, 2009, respectively, which did not result in any change to previously
reported net income attributable to W. P. Carey members. We have concluded that the effect of this
adjustment was not material to any of our previously issued financial statements, nor was it
material to the quarter or fiscal year in which it was recorded. As such, this adjustment was
recorded in our consolidated balance sheets and statements of income at September 30, 2009 and for
the nine months ended September 30, 2009. Prior period financial statements have not been revised
in the current filing, nor will such amounts be revised in subsequent filings.
10
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America (GAAP) requires management to make estimates and assumptions that
affect the reported amounts and the disclosure of contingent amounts in our consolidated financial
statements and the accompanying notes. Actual results could differ from those estimates.
Reclassifications and Revisions
Certain prior year amounts have been reclassified from continuing operations to discontinued
operations and to conform to the current year presentation.
Purchase Price Allocation
When we acquire properties accounted for as operating leases, we allocate the purchase costs to the
tangible and intangible assets and liabilities acquired based on their estimated fair values. We
determine the value of the tangible assets, consisting of land and buildings, as if vacant, and
record intangible assets, including the above-market and below-market value of leases, the value of
in-place leases and the value of tenant relationships, at their relative estimated fair values. See
Real Estate Leased to Others and Depreciation below for a discussion of our significant accounting
policies related to tangible assets. We include the value of below-market leases in Accounts
payable, accrued expenses and other liabilities in the consolidated financial statements.
We record above-market and below-market lease values for owned properties based on the present
value (using an interest rate reflecting the risks associated with the leases acquired) of the
difference between (i) the contractual amounts to be paid pursuant to the leases negotiated and in
place at the time of acquisition of the properties and (ii) our estimate of fair market lease rates
for the property or equivalent property, both of which are measured over a period equal to the
estimated market lease term. We amortize the capitalized above-market lease value as a reduction of
rental income over the estimated market lease term. We amortize the capitalized below-market lease
value as an increase to rental income over the initial term and any fixed rate renewal periods in
the respective leases.
We allocate the total amount of other intangibles to in-place lease values and tenant relationship
intangible values based on our evaluation of the specific characteristics of each tenants lease
and our overall relationship with each tenant. The characteristics we consider in allocating these
values include estimated market rent, the nature and extent of the existing relationship with the
tenant, the expectation of lease renewals, estimated carrying costs of the property if vacant and
estimated costs to execute a new lease, among other factors. We determine these values using our
estimates or by relying in part upon third-party appraisals. We amortize the capitalized value of
in-place lease intangibles to expense over the remaining initial term of each lease. We amortize
the capitalized value of tenant relationships to expense over the initial and expected renewal
terms of the lease. No amortization period for intangibles will exceed the remaining depreciable
life of the building.
If a lease is terminated, we charge the unamortized portion of each intangible, including
above-market and below-market lease values, in-place lease values and tenant relationship values,
to expense.
Operating Real Estate
We carry land and buildings and personal property at cost less accumulated depreciation. We
capitalize improvements, while we expense replacements, maintenance and repairs that do not improve
or extend the lives of the respective assets as incurred.
Cash and Cash Equivalents
We consider all short-term, highly liquid investments that are both readily convertible to cash and
have a maturity of three months or less at the time of purchase to be cash equivalents. Items
classified as cash equivalents include commercial paper and money-market funds. Our cash and cash
equivalents are held in the custody of several financial institutions, and these balances, at
times, exceed federally insurable limits. We seek to mitigate this risk by depositing funds only
with major financial institutions.
11
Other Assets and Liabilities
We include prepaid expenses, deferred rental income, tenant receivables, deferred charges, escrow
balances held by lenders, restricted cash balances, marketable securities, derivative assets and
corporate fixed assets in Other assets. We include derivative instruments; miscellaneous amounts
held on behalf of tenants; and deferred revenue, including unamortized below-market rent
intangibles in Other liabilities. Other liabilities at December 31, 2009 also included our
profit-sharing obligation related to our Carey Storage subsidiary. The profit-sharing obligation
was reclassified to Noncontrolling interest in 2010 as a result of Carey Storage amending its
agreement with the third-party investor (Note 4). Deferred charges are costs incurred in connection
with mortgage financings and refinancings that are amortized over the terms of the mortgages and
included in Interest expense in the consolidated financial statements. Deferred rental income is
the aggregate cumulative difference for operating leases between scheduled rents that vary during
the lease term, and rent recognized on a straight-line basis. Marketable securities are classified
as available-for-sale securities and reported at fair value with unrealized gains and losses on
these securities reported as a component of OCI until realized.
Real Estate Leased to Others
We lease real estate to others primarily on a triple-net leased basis, whereby the tenant is
generally responsible for all operating expenses relating to the property, including property
taxes, insurance, maintenance, repairs, renewals and improvements. We charge expenditures for
maintenance and repairs, including routine betterments, to operations as incurred. We capitalize
significant renovations that increase the useful life of the properties. For the years ended
December 31, 2010, 2009 and 2008, although we are legally obligated for payment, lessees were
responsible for the direct payment to the taxing authorities of real estate taxes of approximately
$7.7 million, $8.8 million and $9.3 million, respectively.
We diversify our real estate investments among various corporate tenants engaged in different
industries, by property type and by geographic area. Substantially all of our leases provide for
either scheduled rent increases, periodic rent adjustments based on formulas indexed to changes in
the CPI or similar indices or percentage rents. CPI-based adjustments are contingent on future
events and are therefore not included in straight-line rent calculations. We recognize rents from
percentage rents as reported by the lessees, which is after the level of sales requiring a rental
payment to us is reached.
We account for leases as operating or direct financing leases, as described below:
Operating leases We record real estate at cost less accumulated depreciation; we recognize future
minimum rental revenue on a straight-line basis over the term of the related leases and charge
expenses (including depreciation) to operations as incurred (Note 4).
Direct financing method We record leases accounted for under the direct financing method at their
net investment (Note 5). We defer and amortize unearned income to income over the lease term so as
to produce a constant periodic rate of return on our net investment in the lease.
On an ongoing basis, we assess our ability to collect rent and other tenant-based receivables and
determine an appropriate allowance for uncollected amounts. Because we have a limited number of
lessees (18 lessees represented 70% of lease revenues during 2010), we believe that it is necessary
to evaluate the collectibility of these receivables based on the facts and circumstances of each
situation rather than solely using statistical methods. Therefore, in recognizing our provision for
uncollected rents and other tenant receivables, we evaluate actual past due amounts and make
subjective judgments as to the collectability of those amounts based on factors including, but not
limited to, our knowledge of a lessees circumstances, the age of the receivables, the tenants
credit profile and prior experience with the tenant. Even if a lessee has been making payments, we
may reserve for the entire receivable amount if we believe there has been significant or continuing
deterioration in the lessees ability to meet its lease obligations.
Acquisition Costs
In accordance with the FASBs revised guidance for business combinations, which we adopted on
January 1, 2009, we immediately expense all acquisition costs and fees associated with transactions
deemed to be business combinations, but we capitalize these costs for transactions deemed to be
acquisitions of an asset. We are impacted by the revised guidance through both the investments we
make for our owned portfolio as well as our equity interests in the CPA® REITs. To the
extent we make investments for our owned portfolio or on behalf of the CPA® REITs that
are deemed to be business combinations, our results of operations will be negatively impacted by
the immediate expensing of acquisition costs and fees incurred in accordance with the revised
guidance, whereas in the past such costs and fees would generally have been capitalized and
allocated to the cost basis of the acquisition. Subsequent to the acquisition, there will be a
positive impact on our results of operations through a reduction in depreciation expense over the
estimated life of the properties.
12
Revenue Recognition
We earn structuring revenue and asset management revenue in connection with providing services to
the CPA® REITs. We earn structuring revenue for services we provide in connection with
the analysis, negotiation and structuring of transactions, including acquisitions and dispositions
and the placement of mortgage financing obtained by the CPA® REITs. Asset management
revenue consists of property management, leasing and advisory revenue. Receipt of the incentive
revenue portion of the asset management revenue (performance revenue), however, is subordinated
to the achievement of specified cumulative return requirements by the shareholders of the CPA®
REITs. At our option, the performance revenue may be collected in cash or shares of the
CPA® REIT (Note 3).
We recognize all revenue as earned. We earn structuring revenue upon the consummation of a
transaction and asset management revenue when services are performed. We recognize revenue subject
to subordination only when the performance criteria of the CPA® REIT is achieved and
contractual limitations are not exceeded.
We are also reimbursed for certain costs incurred in providing services, including broker-dealer
commissions paid on behalf of the CPA® REITs, marketing costs and the cost of personnel
provided for the administration of the CPA® REITs. We record reimbursement income as the
expenses are incurred, subject to limitations on a CPA® REITs ability to incur offering
costs.
We earn wholesaling revenue of $0.15 per share sold in connection with CPA®:17
Globals initial public offering. This revenue is used to cover the cost of wholesaling activities.
Depreciation
We compute depreciation of building and related improvements using the straight-line method over
the estimated useful lives of the properties (generally 40 years) and furniture, fixtures and
equipment (generally up to seven years). We compute depreciation of tenant improvements using the
straight-line method over the lesser of the remaining term of the lease or the estimated useful
life.
Impairments
We periodically assess whether there are any indicators that the value of our long-lived assets,
including goodwill, may be impaired or that their carrying value may not be recoverable. These
impairment indicators include, but are not limited to, the vacancy of a property that is not
subject to a lease; a lease default by a tenant that is experiencing financial difficulty; the
termination of a lease by a tenant; or the rejection of a lease in a bankruptcy proceeding. We may
incur impairment charges on long-lived assets, including real estate, direct financing leases,
assets held for sale and equity investments in real estate. We may also incur impairment charges on
marketable securities and goodwill. Our policies for evaluating whether these assets are impaired
are presented below.
Real Estate
For real estate assets in which an impairment indicator is identified, we follow a two-step process
to determine whether an asset is impaired and to determine the amount of the charge. First, we
compare the carrying value of the property to the future net undiscounted cash flow that we expect
the property will generate, including any estimated proceeds from the eventual sale of the
property. The undiscounted cash flow analysis requires us to make our best estimate of market
rents, residual values and holding periods. Depending on the assumptions made and estimates used,
the future cash flow projected in the evaluation of long-lived assets can vary within a range of
outcomes. We consider the likelihood of possible outcomes in determining the best possible estimate
of future cash flows. If the future net undiscounted cash flow of the property is less than the
carrying value, the property is considered to be impaired. We then measure the loss as the excess
of the carrying value of the property over its estimated fair value.
Direct Financing Leases
We review our direct financing leases at least annually to determine whether there has been an
other-than-temporary decline in the current estimate of residual value of the property. The
residual value is our estimate of what we could realize upon the sale of the property at the end of
the lease term, based on market information. If this review indicates that a decline in residual
value has occurred that is other-than-temporary, we recognize an impairment charge and revise the
accounting for the direct financing lease to reflect a portion of the future cash flow from the
lessee as a return of principal rather than as revenue. While we evaluate direct financing leases
if there are any indicators that the residual value may be impaired, the evaluation of a direct
financing lease can be affected by changes in long-term market conditions even though the
obligations of the lessee are being met.
13
Assets Held for Sale
We classify real estate assets that are accounted for as operating leases as held for sale when we
have entered into a contract to sell the property, all material due diligence requirements have
been satisfied and we believe it is probable that the disposition will occur within one year. When
we classify an asset as held for sale, we calculate its estimated fair value as the expected sale
price, less expected selling costs. We then compare the assets estimated fair value to its
carrying value, and if the estimated fair value is less than the propertys carrying value, we
reduce the carrying value to the estimated fair value. We will continue to review the initial
impairment for subsequent changes in the estimated fair value, and may recognize an additional
impairment charge if warranted.
If circumstances arise that we previously considered unlikely and, as a result, we decide not to
sell a property previously classified as held for sale, we reclassify the property as held and
used. We measure and record a property that is reclassified as held and used at the lower of (a)
its carrying amount before the property was classified as held for sale, adjusted for any
depreciation expense that would have been recognized had the property been continuously classified
as held and used, or (b) the estimated fair value at the date of the subsequent decision not to
sell.
Equity Investments in Real Estate and CPA® REITs
We evaluate our equity investments in real estate and in the CPA® REITs on a periodic
basis to determine if there are any indicators that the value of our equity investment may be
impaired and whether or not that impairment is other-than-temporary. To the extent impairment has
occurred, we measure the charge as the excess of the carrying value of our investment over its
estimated fair value. For equity investments in real estate, we calculate estimated fair value by
multiplying the estimated fair value of the underlying ventures net assets by our ownership
interest percentage. For our investments in the CPA® REITs, we calculate the estimated
fair value of our investment using the most recently published net asset value of each CPA®
REIT.
Marketable Securities
We evaluate our marketable securities for impairment if a decline in estimated fair value below
cost basis is considered other-than-temporary. In determining whether the decline is
other-than-temporary, we consider the underlying cause of the decline in value, the estimated
recovery period, the severity and duration of the decline, as well as whether we plan to sell the
security or will more likely than not be required to sell the security before recovery of its cost
basis. If we determine that the decline is other-than-temporary, we record an impairment charge to
reduce our cost basis to the estimated fair value of the security. Beginning in 2009, the credit
component of an other-than-temporary impairment is recognized in earnings while the non-credit
component is recognized in OCI. Prior to 2009, all portions of other-than-temporary impairments
were recorded in earnings.
Goodwill
We evaluate goodwill recorded by our investment management segment for possible impairment at least
annually using a two-step process. To identify any impairment, we first compare the estimated fair
value of our investment management segment with its carrying amount, including goodwill. We
calculate the estimated fair value of the investment management segment by applying a multiple,
based on comparable companies, to earnings. If the fair value of the investment management segment
exceeds its carrying amount, we do not consider goodwill to be impaired and no further analysis is
required. If the carrying amount of the investment management segment exceeds its estimated fair
value, we then perform the second step to measure the amount of the impairment charge.
For the second step, we determine the impairment charge by comparing the implied fair value of the
goodwill with its carrying amount and record an impairment charge equal to the excess of the
carrying amount over the implied fair value. We determine the implied fair value of the goodwill by
allocating the estimated fair value of the investment management segment to its assets and
liabilities. The excess of the estimated fair value of the investment management segment over the
amounts assigned to its assets and liabilities is the implied fair value of the goodwill.
14
Stock-Based Compensation
We have granted restricted shares, stock options, restricted share units (RSUs) and performance
share units (PSUs) to certain employees and independent directors. Grants were awarded in the
name of the recipient subject to certain restrictions of transferability and a risk of forfeiture.
The forfeiture provisions on the awards generally expire annually, over their respective vesting
periods. We granted stock options to certain employees during 2008 and prior years. Stock-based
compensation expense for all stock-based compensation awards is based on the grant date fair value
estimated in accordance with current accounting guidance for share-based payments. We recognize
these compensation costs for only those shares expected to vest on a straight-line basis over the
requisite service period of the award. We include stock-based compensation within the listed shares
caption of equity.
Foreign Currency Translation
We have interests in real estate investments in the European Union for which the functional
currency is the Euro. We perform the translation from the Euro to the U.S. dollar for assets and
liabilities using current exchange rates in effect at the balance sheet date and for revenue and
expense accounts using a weighted average exchange rate during the period. We report the gains and
losses resulting from such translation as a component of OCI in equity. At December 31, 2010 and
2009, the cumulative foreign currency translation adjustment (losses) gains were ($1.9) million and
$0.2 million, respectively.
Foreign currency transactions may produce receivables or payables that are fixed in terms of the
amount of foreign currency that will be received or paid. A change in the exchange rates between
the functional currency and the currency in which a transaction is denominated increases or
decreases the expected amount of functional currency cash flows upon settlement of that
transaction. That increase or decrease in the expected functional currency cash flows is an
unrealized foreign currency transaction gain or loss that generally will be included in determining
net income for the period in which the exchange rate changes. Likewise, a transaction gain or loss
(measured from the transaction date or the most recent intervening balance sheet date, whichever is
later), realized upon settlement of a foreign currency transaction generally will be included in
net income for the period in which the transaction is settled. Foreign currency transactions that
are (i) designated as, and are effective as, economic hedges of a net investment and (ii)
inter-company foreign currency transactions that are of a long-term nature (that is, settlement is
not planned or anticipated in the foreseeable future), when the entities to the transactions are
consolidated or accounted for by the equity method in our financial statements, are not included in
determining net income but are accounted for in the same manner as foreign currency translation
adjustments and reported as a component of OCI in equity. International equity investments in real
estate were funded in part through subordinated intercompany debt.
Foreign currency intercompany transactions that are scheduled for settlement, consisting primarily
of accrued interest and the translation to the reporting currency of subordinated intercompany debt
with scheduled principal payments, are included in the determination of net income. We recognized
net unrealized (losses) gains of ($0.3) million, $0.2 million and ($2.4) million from such
transactions for the years ended December 31, 2010, 2009 and 2008, respectively. For the years
ended December 31, 2010, 2009 and 2008, we recognized net realized (losses) gains of ($0.1)
million, less than $0.1 million and $2.3 million, respectively, on foreign currency transactions in
connection with the transfer of cash from foreign operations of subsidiaries to the parent company.
Derivative Instruments
We measure derivative instruments at fair value and record them as assets or liabilities, depending
on our rights or obligations under the applicable derivative contract. Derivatives that are not
designated as hedges must be adjusted to fair value through earnings. If a derivative is designated
as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will
either be offset against the change in fair value of the hedged asset, liability, or firm
commitment through earnings, or recognized in OCI until the hedged item is recognized in earnings.
For cash flow hedges, the ineffective portion of a derivatives change in fair value will be
immediately recognized in earnings.
Income Taxes
We have elected to be treated as a partnership for U.S. federal income tax purposes. Deferred
income taxes are recorded for the corporate subsidiaries based on earnings reported. The provision
for income taxes differs from the amounts currently payable because of temporary differences in the
recognition of certain income and expense items for financial reporting and tax reporting purposes.
Income taxes are computed under the asset and liability method. The asset and liability method
requires the recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between tax bases and financial bases of assets and
liabilities (Note 16).
15
Real Estate Ownership Operations
Our real estate operations are conducted through a subsidiary REIT. As a REIT, our real estate
operations are generally not subject to federal tax, and accordingly, no provision has been made
for U.S. federal income taxes in the consolidated financial statements for these operations. These
operations are subject to certain state, local and foreign taxes, as applicable.
In October 2007, we transferred our real estate assets from a wholly-owned subsidiary into Carey
REIT II, Inc. (Carey REIT II), a newly-formed wholly-owned REIT subsidiary. On January 1, 2008,
we merged our subsidiary Carey REIT, Inc. (Carey REIT) into Carey REIT II with Carey REIT II as
the survivor. Carey REIT held certain properties, including certain properties acquired from
Corporate Property Associates 12 Incorporated in 2006. To the extent that the fair value of Carey
REIT property in the merger exceeded its tax basis at the time of the merger, Carey REIT II would
be subject to corporate level taxes to the extent of this built-in-gain if the properties were to
be sold in a taxable transaction within ten years from the date of the merger. At the time of the
merger, Carey REIT owned three properties whose tax values were not significantly different from
their fair values. We do not expect to trigger any built-in-gains nor do we expect any
significant built-in-gains tax if triggered.
Carey REIT II elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended (the Code), with the filing of its 2007 return. We believe we have
operated, and we intend to continue to operate, in a manner that allows Carey REIT II to continue
to qualify as a REIT. Under the REIT operating structure, Carey REIT II is permitted to deduct
distributions paid to our shareholders and generally will not be required to pay U.S. federal
income taxes. Accordingly, no provision has been made for U.S. federal income taxes related to
Carey REIT II in the consolidated financial statements.
Investment Management Operations
We conduct our investment management operations primarily through taxable subsidiaries. These
operations are subject to federal, state, local and foreign taxes, as applicable. Our financial
statements are prepared on a consolidated basis including these taxable subsidiaries and include a
provision for current and deferred taxes on these operations.
Earnings Per Share
Basic earnings per share is calculated by dividing net income available to common shareholders, as
adjusted for unallocated earnings attributable to the unvested RSUs by the weighted average number
of shares of common stock outstanding during the period. Diluted earnings per share reflects
potentially dilutive securities (options, restricted shares and RSUs) using the treasury stock
method, except when the effect would be anti-dilutive.
Future Accounting Requirements
In December 2010, the FASB issued ASU 2010-28, which clarifies when step two of the goodwill
impairment test must be performed for entities whose reporting units have a negative carrying
value. This ASU will be applicable to us for our annual goodwill impairment evaluation beginning
with the year ending December 31, 2011. We do not anticipate that it will have a material impact on
our financial position or results of operations.
Note 3. Agreements and Transactions with Related Parties
Advisory Agreements with the CPA® REITs
We have advisory agreements with each of the CPA® REITs pursuant to which we earn
certain fees. The advisory agreements were renewed for an additional year pursuant to their terms
effective October 1, 2010. The following table presents a summary of revenue earned and cash
received from the CPA® REITs in connection with providing services as the advisor to the
CPA® REITs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Asset management revenue |
|
$ |
76,246 |
|
|
$ |
76,621 |
|
|
$ |
80,714 |
|
Structuring revenue |
|
|
44,525 |
|
|
|
23,273 |
|
|
|
20,236 |
|
Wholesaling revenue |
|
|
11,096 |
|
|
|
7,691 |
|
|
|
5,208 |
|
Reimbursed costs from affiliates |
|
|
60,023 |
|
|
|
47,534 |
|
|
|
41,100 |
|
Distributions of available cash (CPA®:17 Global only) |
|
|
4,468 |
|
|
|
2,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
196,358 |
|
|
$ |
157,279 |
|
|
$ |
147,258 |
|
|
|
|
|
|
|
|
|
|
|
16
Asset Management Revenue
We earn asset management revenue totaling 1% per annum of average invested assets, which is
calculated according to the advisory agreements for each CPA® REIT. A portion of this
asset management revenue is contingent upon the achievement of specific performance criteria for
each CPA® REIT, which is generally defined to be a cumulative distribution return for
shareholders of the CPA® REIT. For CPA®:14, CPA®:15 and
CPA®:16 Global, this performance revenue is generally equal to 0.5% of the average
invested assets of the 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 up to 1.75% of average equity value for certain types of
securities. For CPA®:17 Global, we do not earn performance revenue, but we receive up
to 10% of distributions of available cash from its operating partnership. Distributions of
available cash from CPA®:17 Globals operating partnership are recorded as income from
equity investments in CPA® REITs within the investment management segment.
Under the terms of the advisory agreements, we may elect to receive cash or shares of restricted
stock for any revenue due from each CPA® REIT. In both 2010 and 2009, we elected to
receive all asset management revenue in cash, with the exception of CPA®:17 Globals
asset management revenue, which we elected to receive in restricted shares. For both 2010 and 2009,
we also elected to receive performance revenue from CPA®:16 Global in restricted
shares, while for CPA®:14 and CPA®:15 we elected to receive 80% of all
performance revenue in restricted shares, with the remaining 20% payable in cash.
Structuring Revenue
We earn revenue in connection with structuring and negotiating investments and related mortgage
financing for the CPA® REITs. 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, provided the
relevant CPA® REIT meets its performance criterion. Unpaid deferred installments totaled
$30.5 million and $31.0 million at December 31, 2010 and 2009, respectively, and were included in
Due from affiliates in the consolidated financial statements (Note 5). Unpaid installments bear
interest at annual rates ranging from 5% to 7%. Interest earned on unpaid installments was $1.1
million, $1.5 million and $2.3 million for the years ended December 31, 2010, 2009 and 2008,
respectively. 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 also be entitled, subject to CPA® REIT board approval, to fees for structuring
loan refinancings of up to 1% of the principal amount. This loan refinancing revenue, together with
the acquisition revenue, is referred to as structuring revenue. In addition, we may also earn
revenue related to the sale of properties, subject to subordination provisions. We will only
recognize this revenue if we meet the subordination provisions.
Reimbursed Costs from Affiliates and Wholesaling Revenue
The CPA® REITs reimburse us for certain costs, primarily broker-dealer commissions paid
on behalf of the CPA® REITs and marketing and personnel costs. In addition, under the
terms of 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 re-allow all or a portion of the selling
commissions to selected dealers participating in CPA®:17 Globals offering and may
re-allow up to the full selected dealer revenue to selected dealers. If needed, 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 Globals offering. Total
underwriting compensation earned in connection with CPA®:17 Globals 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. 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.
17
Other Transactions with Affiliates
Proposed Merger of Affiliates
On December 13, 2010, two of the CPA® REITs we manage, CPA®:14 and
CPA®:16 Global, entered into a definitive agreement pursuant to which
CPA®:14 will merge with and into a subsidiary of CPA®:16 Global, subject to
the approval of the shareholders of CPA®:14. The closing of the Proposed Merger is also
subject to customary closing conditions, as well as the closing of the CPA®:14 Asset
Sales. If the Proposed Merger is approved, we currently expect that the closing will occur in the
second quarter of 2011, although there can be no assurance of such timing.
In connection with the Proposed Merger, we have agreed to purchase three properties from
CPA®:14, in which we already have a joint venture interest, for an aggregate purchase
price of $32.1 million, plus the assumption of approximately $64.7 million of indebtedness. These
properties all have remaining lease terms of less than 8 years, which are shorter than the average
lease term of CPA®:16 Globals portfolio of properties. Consequently,
CPA®:16 Global required that these assets be sold by CPA®:14 prior to the
Proposed Merger. This asset sale to us is contingent upon the approval of the Proposed Merger by
the shareholders of CPA®:14.
If the Proposed Merger is consummated, we expect to earn revenues of $31.2 million in connection
with the termination of the advisory agreements with CPA®:14 and $21.3 million of
subordinated disposition revenues. We currently expect to receive our termination fee in shares of
CPA®:14, which will then be exchanged into shares of CPA®:16 Global in
order to facilitate this transaction. In addition, based on our ownership of 8,018,456 shares of
CPA®:14 at December 31, 2010, we will receive approximately $8.0 million as a result of
a special $1.00 cash distribution to be paid by CPA®:14 to its shareholders, in part
from the proceeds of the CPA®:14 Asset Sales, immediately prior to the Proposed Merger,
as described below. We have agreed to elect to receive stock of CPA®:16 Global in
respect of our shares of CPA®:14 if the Proposed Merger is consummated. CAM has also
agreed to waive any acquisition fees payable by CPA®:16 Global under its advisory
agreement with CAM in respect of the properties being acquired in the Proposed Merger and has also
agreed to waive any disposition fees that may subsequently be payable by CPA®:16
Global upon a sale of such assets.
In the Proposed Merger, CPA®:14 shareholders will be entitled to receive $11.50 per
share, which is equal to the NAV of CPA®:14 as of September 30, 2010. The Merger
Consideration will be paid to shareholders of CPA®:14, at their election, in either cash
or a combination of the $1.00 per share special cash distribution and 1.1932 shares of
CPA®:16 Global common stock, which equates to $10.50 based on the $8.80 per share NAV
of CPA®:16 Global as of September 30, 2010. We computed these NAVs internally, relying
in part upon a third-party valuation of each companys real estate portfolio and indebtedness as of
September 30, 2010. The board of directors of each of CPA®:16 Global and
CPA®:14 have the ability, but not the obligation, to terminate the transaction if more
than 50% of the shareholders of CPA®:14 elect to receive cash in the Proposed Merger.
Assuming that holders of 50% of CPA®:14s outstanding stock elect to receive cash in the
Proposed Merger, then the maximum cash required by CPA®:16 Global to purchase these
shares would be approximately $416.1 million, based on the total shares of CPA®:14
outstanding at December 31, 2010. If the cash on hand and available to CPA®:14 and
CPA®:16 Global, including the proceeds of the CPA®:14 Asset Sales and a new
$300.0 million senior credit facility of CPA®:16 Global, is not sufficient to enable
CPA®:16 Global to fulfill cash elections in the Proposed Merger by CPA®:14
shareholders, we have agreed to purchase a sufficient number of shares of CPA®:16
Global stock from CPA®:16 Global to enable it to pay such amounts to
CPA®:14 shareholders.
Other
We are the general partner in a limited partnership (which we consolidate for financial statement
purposes) that leases our home office space and participates in an agreement with certain
affiliates, including the 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. This limited partnership does not have any significant assets, liabilities or
operations other than its interest in the office lease. During each of the years ended December 31,
2010, 2009 and 2008, we recorded income from noncontrolling interest partners of $2.4 million, in
each case related to reimbursements from these affiliates. The average estimated minimum lease
payments on the office lease, inclusive of noncontrolling interests, at December 31, 2010
approximates $3.0 million annually through 2016.
We own interests in entities ranging from 5% to 95%, including jointly-controlled tenant-in-common
interests in properties, with the remaining interests generally held by affiliates, and own common
stock in each of the CPA® REITs and Carey Watermark. We consolidate certain of these
investments and account for the remainder under the equity method of accounting.
One of our directors and officers is the sole shareholder of Livho, a subsidiary that operates a
hotel investment. We consolidate the accounts of Livho in our consolidated financial statements in
accordance with current accounting guidance for consolidation of VIEs because it is a VIE and we
are its primary beneficiary.
Family members of one of our directors have an ownership interest in certain companies that own
noncontrolling interests in one of our French majority-owned subsidiaries. These ownership
interests are subject to substantially the same terms as all other ownership interests in the
subsidiary companies.
An officer owns a redeemable noncontrolling 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 U.S., as well as certain related entities.
Included in Accounts payable, accrued expenses and other liabilities in the consolidated balance
sheets at each of December 31, 2010 and 2009 are amounts due to affiliates totaling $0.9 million.
18
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 certain tenancy-in-common interests in Europe and was repaid in March 2008.
During the year ended December 31, 2008, we incurred interest expense of $0.1 million in connection
with this loan.
Advisory Agreement with Carey Watermark
Effective September 15, 2010, we entered into an advisory agreement with Carey Watermark to perform
certain services, including managing Carey Watermarks offering and its overall business,
identification, evaluation, negotiation, purchase and disposition of lodging-related properties and
the performance of certain administrative duties. We are currently fundraising for Carey Watermark;
however, as of December 31, 2010, Carey Watermark had no investments or significant operating
activity. Costs incurred on behalf of Carey Watermark totaled $3.4 million through December 31,
2010. We anticipate being reimbursed for all or a portion of these costs in accordance with the
terms of the advisory agreement if the minimum offering proceeds are raised.
Note 4. Net Investments in Properties
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):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Land |
|
$ |
111,660 |
|
|
$ |
98,971 |
|
Buildings |
|
|
448,932 |
|
|
|
426,636 |
|
Less: Accumulated depreciation |
|
|
(108,032 |
) |
|
|
(100,247 |
) |
|
|
|
|
|
|
|
|
|
$ |
452,560 |
|
|
$ |
425,360 |
|
|
|
|
|
|
|
|
Real Estate Acquired
In February 2010, we entered into a domestic investment that was deemed to be a real estate asset
acquisition at a total cost of $47.6 million and capitalized acquisition-related costs of $0.1
million. We funded the investment with the escrowed proceeds of $36.1 million from a sale of
property in December 2009 in an exchange transaction under Section 1031 of the Code, and $11.5
million from our line of credit. In July 2010, we obtained non-recourse mortgage financing of $35.0
million for this investment at an annual interest rate of LIBOR plus 2.5% that has been fixed at
5.5% through the use of an interest rate swap. This financing has a term of 10 years.
In June 2010, a venture in which we and an affiliate hold 70% and 30% interests, respectively, and
which we consolidate, entered into an investment in Spain for a total cost of $27.2 million,
inclusive of a noncontrolling interest of $8.4 million. We funded our share of the purchase price
with proceeds from our line of credit. In connection with this transaction, which was deemed to be
a real estate asset acquisition, we capitalized acquisition-related costs and fees totaling $1.0
million, inclusive of amounts attributable to a noncontrolling interest of $0.6 million. Dollar
amounts are based on the exchange rate of the Euro on the date of acquisition.
19
Operating Real Estate
Operating real estate, which consists primarily of our self-storage investments through Carey
Storage and our Livho subsidiary, at cost, is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Land |
|
$ |
24,030 |
|
|
$ |
16,257 |
|
Buildings |
|
|
85,821 |
|
|
|
69,670 |
|
Less: Accumulated depreciation |
|
|
(14,280 |
) |
|
|
(12,039 |
) |
|
|
|
|
|
|
|
|
|
$ |
95,571 |
|
|
$ |
73,888 |
|
|
|
|
|
|
|
|
In January 2009, Carey Storage completed a transaction whereby it received cash proceeds of
$21.9 million, plus a commitment to invest up to a further $8.1 million of equity, from the
Investor to fund the purchase of self-storage assets in the future in exchange for a 60% interest
in its self-storage portfolio (Carey Storage venture). We reflect the Carey Storage ventures
operations in our real estate ownership segment. Costs totaling $1.0 million incurred in
structuring the transaction and bringing in the Investor into these operations are reflected in
General and administrative expenses in our investment management segment during 2009. Prior to
September 2010, we accounted for this transaction under the profit-sharing method because Carey
Storage had a contingent option to repurchase this interest from the Investor at fair value. During
the third quarter of 2010, Carey Storage amended its agreement with the Investor to, among other
matters, remove the contingent purchase option in the original agreement. However, Carey Storage
retained a controlling interest in the Carey Storage venture. As of September 30, 2010, we have
reclassified the Investors interest from Accounts payable, accrued expenses and other liabilities
to Noncontrolling interests on our consolidated balance sheet.
In connection with the January 2009 transaction, the Carey Storage venture repaid in full, the
$35.0 million outstanding balance on its secured credit facility at a discount for $28.0 million,
terminated the facility, and recognized a gain of $7.0 million on the repayment of this debt,
inclusive of the Investors interest of $4.2 million. The debt repayment was financed with a
portion of the proceeds from the exchange of the 60% interest and non-recourse debt with a new
lender totaling $25.0 million, which is secured by individual mortgages on, and
cross-collateralized by, the thirteen properties in the Carey Storage portfolio at the time of the
January 2009 transaction. The new financing bears interest at a fixed rate of 7% per annum and has
a 10-year term with a rate reset after 5 years. The $7.0 million gain recognized on the debt
repayment and the Investors $4.2 million interest in this gain are both reflected in Other income
and (expenses) in the consolidated financial statements.
In August 2009, the Carey Storage venture borrowed an additional $3.5 million that is
collateralized by individual mortgages on, and cross-collateralized by, seven properties in the
Carey Storage portfolio and distributed the proceeds to its profit-sharing interest holders. This
loan has an annual fixed interest rate of 7.25% and a term of 9.6 years with a rate reset after 5
years. As part of this transaction, the Carey Storage venture distributed $1.9 million to the
Investor, which has been reflected as a reduction of the profit-sharing obligation.
During 2010, the Carey Storage venture acquired seven self-storage properties in the U.S. at a
total cost of $19.2 million, inclusive of amounts attributable to the Investors interest of $11.5
million. These investments were deemed to be business combinations, and as a result, the venture
expensed acquisition-related costs of $0.4 million, inclusive of amounts attributable to the
Investors interest of $0.2 million. In connection with these investments, the Carey Storage
venture obtained new non-recourse mortgage financing and assumed existing mortgage loans from the
sellers totaling $13.7 million, inclusive of amounts attributable to the Investors interest of
$8.2 million. The mortgage loans have a weighted-average annual fixed interest rate and term of
6.3% and 8.2 years, respectively.
During 2010, an entity owned 100% by Carey Storage acquired another self-storage property in the
U.S. for $2.8 million that was deemed to be a business combination, and as a result, it expensed
acquisition-related costs of less than $0.1 million. In connection with this investment, Carey
Storage obtained new non-recourse mortgage financing of $1.9 million with an annual fixed interest
rate of 6.3% and a term of 10 years.
20
Scheduled Future Minimum Rents
Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants and future
CPI-based increases under non-cancelable operating leases, at December 31, 2010 are as follows (in
thousands):
|
|
|
|
|
Years ending December 31, |
|
|
|
|
2011 |
|
$ |
51,326 |
|
2012 |
|
|
43,477 |
|
2013 |
|
|
39,050 |
|
2014 |
|
|
36,851 |
|
2015 |
|
|
31,231 |
|
Thereafter through 2030 |
|
|
141,716 |
|
Percentage rent revenue was approximately $0.1 million in each of 2010, 2009 and 2008.
Note 5. Finance Receivables
Assets representing rights to receive money on demand or at fixed or determinable dates are
referred to as finance receivables. Our finance receivable portfolios consist of direct financing
leases and deferred acquisition fees. Operating leases are not included in finance receivables as
such amounts are not recognized as an asset in the consolidated balance sheets.
Net Investment in Direct Financing Leases
Net investment in direct financing leases is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Minimum lease payments receivable |
|
$ |
57,380 |
|
|
$ |
64,201 |
|
Unguaranteed residual value |
|
|
75,595 |
|
|
|
78,526 |
|
|
|
|
|
|
|
|
|
|
|
132,975 |
|
|
|
142,727 |
|
Less: unearned income |
|
|
(56,425 |
) |
|
|
(62,505 |
) |
|
|
|
|
|
|
|
|
|
$ |
76,550 |
|
|
$ |
80,222 |
|
|
|
|
|
|
|
|
During 2008, we sold our net investment in a direct financing lease for $5.0 million, net of
selling costs, and recognized a net gain on sale of $1.1 million. During the years ended December
31, 2010, 2009 and 2008, in connection with our annual reviews of the estimated residual values of
our properties, we recorded impairment charges related to four direct financing leases of $1.1
million, $2.6 million and $0.5 million, respectively. Impairment charges relate primarily to
other-than-temporary declines in the estimated residual values of the underlying properties due to
market conditions (see Note 13). At both December 31, 2010 and 2009, Other assets included $0.3
million of accounts receivable, net of allowance for uncollectible accounts of less than $0.1
million, related to amounts billed under these direct financing leases.
Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, percentage of
sales rents and future CPI-based adjustments, under non-cancelable direct financing leases at
December 31, 2010 are as follows (in thousands):
|
|
|
|
|
Years ending December 31, |
|
|
|
|
2011 |
|
$ |
10,607 |
|
2012 |
|
|
10,488 |
|
2013 |
|
|
10,093 |
|
2014 |
|
|
7,518 |
|
2015 |
|
|
4,599 |
|
Thereafter through 2022 |
|
|
14,075 |
|
Percentage rent revenue approximated $0.1 million in each of 2010, 2009 and 2008.
Deferred Acquisition Fees Receivable
As described in Note 3, we earn revenue in connection with structuring and negotiating investments
and related mortgage financing for the CPA® REITs. A portion of this revenue is due in
equal annual installments ranging from three to eight years, provided the relevant CPA®
REIT meets its performance criterion. Unpaid deferred installments, including accrued
interest, from all of the CPA® REITs totaled $31.4 million and $32.4 million at December
31, 2010 and 2009, respectively, and were included in Due from affiliates in the consolidated
financial statements. Unpaid installments bear interest at annual rates ranging from 5% to 7%.
21
Credit Quality of Finance Receivables
We generally seek investments in facilities that are critical to the tenants business and that we
believe have a low risk of tenant defaults. At December 31, 2010, none of the balances of our
finance receivables were past due and we had not established any allowances for credit losses.
Additionally, there have been no modifications of finance receivables. We evaluate the credit
quality of our tenant receivables utilizing an internal 5-point credit rating scale, with 1
representing the highest credit quality and 5 representing the lowest. The credit quality
evaluation of our tenant receivables was last updated in the fourth quarter of 2010. We believe the
credit quality of our deferred acquisition fees receivable falls under category 1, as all of the
CPA® REITs are expected to have the available cash to make such payments.
A summary of our tenant receivables by internal credit quality rating at December 31, 2010 is as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal |
|
|
|
|
|
|
|
|
Net Investments in |
|
Credit Quality |
|
|
Number |
|
|
|
|
Direct Financing |
|
Rating |
|
|
of Tenants |
|
|
|
|
Leases |
|
|
1 |
|
|
|
9 |
|
|
|
|
$ |
49,533 |
|
|
2 |
|
|
|
5 |
|
|
|
|
|
24,447 |
|
|
3 |
|
|
|
0 |
|
|
|
|
|
|
|
|
4 |
|
|
|
1 |
|
|
|
|
|
2,570 |
|
|
5 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
76,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 6. Equity Investments in Real Estate and CPA® REITs
Our equity investments in real estate for our investments in the CPA® REITs and for our
interests in unconsolidated real estate investments are summarized below.
CPA® REITs
We own interests in the CPA® REITs and account for these interests under the equity
method because, as their advisor, we do not exert control but have the ability to exercise
significant influence. Shares of the CPA® REITs are publicly registered and the
CPA® REITs file periodic reports with the SEC, but the shares are not listed on any
exchange and are not actively traded. We earn asset management and performance revenue from the
CPA® REITs and have elected, in certain cases, to receive a portion of this revenue in
the form of restricted common stock of the CPA® REITs rather than cash.
The following table sets forth certain information about our investments in the CPA®
REITs (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Outstanding Shares at |
|
|
Carrying Amount of Investment at |
|
|
|
December 31, |
|
|
December 31, |
|
Fund |
|
2010 |
|
|
2009 |
|
|
2010 (a) |
|
|
2009 (a) |
|
CPA®:14 |
|
|
9.2 |
% |
|
|
8.5 |
% |
|
$ |
87,209 |
|
|
$ |
79,906 |
|
CPA®:15 |
|
|
7.1 |
% |
|
|
6.5 |
% |
|
|
87,008 |
|
|
|
78,816 |
|
CPA®:16 Global |
|
|
5.6 |
% |
|
|
4.7 |
% |
|
|
62,682 |
|
|
|
53,901 |
|
CPA®:17 Global (b) |
|
|
0.6 |
% |
|
|
0.4 |
% |
|
|
8,156 |
|
|
|
3,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
245,055 |
|
|
$ |
215,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes asset management fee receivable at period end for which shares will be issued during
the subsequent period. |
|
(b) |
|
CPA®:17 Global has been deemed to be a VIE of which we are not the primary
beneficiary (Note 2). |
22
The following tables present combined summarized financial information for the CPA®
REITs. Amounts provided are the total amounts attributable to the CPA® REITs and
do not represent our proportionate share (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Assets |
|
$ |
8,533,899 |
|
|
$ |
8,468,955 |
|
Liabilities |
|
|
(4,632,709 |
) |
|
|
(4,638,552 |
) |
|
|
|
|
|
|
|
Shareholders equity |
|
$ |
3,901,190 |
|
|
$ |
3,830,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
$ |
774,861 |
|
|
$ |
757,780 |
|
|
$ |
730,207 |
|
Expenses |
|
|
(588,137 |
) |
|
|
(759,378 |
) |
|
|
(633,492 |
) |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
186,724 |
|
|
$ |
(1,598 |
) |
|
$ |
96,715 |
|
|
|
|
|
|
|
|
|
|
|
We recognized income (loss) from our equity investments in the CPA® REITs, which is
reflected in the real estate segment, of $10.5 million, ($2.5) million and $6.2 million for the
years ended December 31, 2010, 2009 and 2008, respectively. In addition, we received distributions
of available cash from CPA ®:17 Globals operating partnership of $4.5 million and,
$2.2 million for the years ended December 31, 2010 and 2009, respectively, which we recorded as
income from equity investments in the CPA® REITs within the investment management
segment. Our proportionate share of income or loss recognized from our equity investments in the
CPA® REITs is impacted by several factors, including impairment charges recorded by the
CPA® REITs. During 2010, 2009 and 2008, the CPA® REITs recognized impairment
charges totaling approximately $40.7 million, $170.0 million and $40.4 million, respectively, which
based upon our proportionate ownership reduced the income we earned from these investments by $3.0
million, $11.5 million and $2.1 million, respectively.
Interests in Unconsolidated Real Estate Investments
We own interests in single-tenant net leased properties leased to corporations through
noncontrolling interests in (i) partnerships and limited liability companies that we do not control
but over which we exercise significant influence, and (ii) as tenants-in-common subject to common
control. Generally, the underlying investments are jointly owned with affiliates. We account for
these investments under the equity method of accounting (i.e., at cost, increased or decreased by
our share of earnings or losses, less distributions, plus contributions and other adjustments
required by equity method accounting, such as basis differences from other-than-temporary
impairments).
The following table sets forth our ownership interests in our equity investments in real estate and
their respective carrying values (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership |
|
|
Carrying Value at |
|
|
|
Interest at |
|
|
December 31, |
|
Lessee |
|
December 31, 2010 |
|
|
2010 |
|
|
2009 |
|
Schuler A. G. (a) (b) (c) |
|
|
33 |
% |
|
$ |
20,493 |
|
|
$ |
23,755 |
|
The New York Times Company |
|
|
18 |
% |
|
|
20,191 |
|
|
|
19,740 |
|
Carrefour France, SAS (a) |
|
|
46 |
% |
|
|
18,274 |
|
|
|
17,570 |
|
U. S. Airways Group, Inc. (b) (d) |
|
|
75 |
% |
|
|
7,934 |
|
|
|
8,927 |
|
Medica France, S.A. (a) |
|
|
46 |
% |
|
|
5,232 |
|
|
|
6,160 |
|
Hologic, Inc. |
|
|
36 |
% |
|
|
4,383 |
|
|
|
4,388 |
|
Consolidated Systems, Inc. (b) |
|
|
60 |
% |
|
|
3,388 |
|
|
|
3,395 |
|
Information Resources, Inc. (e) |
|
|
33 |
% |
|
|
3,375 |
|
|
|
2,270 |
|
Childtime Childcare, Inc. |
|
|
34 |
% |
|
|
1,862 |
|
|
|
1,843 |
|
Hellweg Die Profi-Baumarkte GmbH & Co. KG (a) |
|
|
5 |
% |
|
|
1,086 |
|
|
|
2,639 |
|
The Retail Distribution Group (f) |
|
|
40 |
% |
|
|
|
|
|
|
1,099 |
|
Federal Express Corporation (g) |
|
|
40 |
% |
|
|
(4,272 |
) |
|
|
1,976 |
|
Amylin Pharmaceuticals, Inc. (h) |
|
|
50 |
% |
|
|
(4,707 |
) |
|
|
(4,723 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
77,239 |
|
|
$ |
89,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The carrying value of the investment is affected by the impact of fluctuations in the
exchange rate of the Euro. |
|
(b) |
|
Represents tenant-in-common interest. |
23
|
|
|
(c) |
|
In 2010, we recognized an other-than-temporary impairment charge of $1.4 million to reflect
the decline in the estimated fair value of the investments underlying net assets in
comparison with the carrying value of our interest in the investment. |
|
(d) |
|
The decrease in carrying value was due to cash distributions made to us by the venture. |
|
(e) |
|
The increase in carrying value was due to operating contributions we made to the venture. |
|
(f) |
|
In March 2010, this venture sold its property and distributed the proceeds to the venture
partners. We have no further economic interest in this venture. |
|
(g) |
|
In 2010, this venture refinanced its maturing non-recourse mortgage debt with new
non-recourse financing and distributed the net proceeds to the venture partners. Our share of
the distribution was $5.5 million, which exceeded our total investment in the venture at that
time. |
|
(h) |
|
In 2007, this venture refinanced its existing non-recourse mortgage debt with new
non-recourse financing based on the appraised value of its underlying real estate and
distributed the proceeds to the venture partners. Our share of the distribution was $17.6
million, which exceeded our total investment in the venture at that time. |
As discussed in Note 2, we adopted the FASBs amended guidance on the consolidation of VIEs
effective January 1, 2010. Upon adoption of the amended guidance, we re-evaluated our existing
interests in unconsolidated entities and determined that we should continue to account for our
interests in The New York Times and Hellweg ventures using the equity method of accounting
primarily because the partners in each of these ventures has the power to direct the activities
that most significantly impact the entitys economic performance, including disposal rights of the
property. Carrying amounts related to these VIEs are noted in the table above. Because we generally
utilize non-recourse debt, our maximum exposure to either VIE is limited to the equity we have in
each VIE. We have not provided financial or other support to either VIE, and there are no
guarantees or other commitments from third parties that would affect the value or risk of our
interest in such entities.
The following tables present combined summarized financial information of our venture properties.
Amounts provided are the total amounts attributable to the venture properties and do not represent
our proportionate share (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Assets |
|
$ |
1,151,859 |
|
|
$ |
1,452,103 |
|
Liabilities |
|
|
(818,238 |
) |
|
|
(714,558 |
) |
|
|
|
|
|
|
|
Partners/members equity |
|
$ |
333,621 |
|
|
$ |
737,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
$ |
146,214 |
|
|
$ |
119,265 |
|
|
$ |
88,713 |
|
Expenses |
|
|
(79,665 |
) |
|
|
(61,519 |
) |
|
|
(65,348 |
) |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
66,549 |
|
|
$ |
57,746 |
|
|
$ |
23,365 |
|
|
|
|
|
|
|
|
|
|
|
We recognized income from these equity investments in real estate of $16.0 million, $13.8 million
and $8.0 million for the years ended December 31, 2010, 2009 and 2008, respectively. Income from
equity investments in real estate represents our proportionate share of the income or losses of
these ventures as well as certain depreciation and amortization adjustments related to purchase
accounting and other-than-temporary impairment charges.
We have a 5% interest in a Lending Venture that made a loan, the Note Receivable, to the Partner
who held a 75.3% interest in the Partnership owning 37 properties throughout Germany at a total
cost of $336.0 million. Concurrently, our affiliates also acquired an interest in a Property
Venture that acquired the remaining 24.7% ownership interest in the Partnership as well as an
option to purchase an additional 75% interest from the Partner by December 2010. Also in connection
with this transaction, the Lending Venture obtained non-recourse financing of $284.9 million having
a fixed annual interest rate of 5.5%, a term of 10 years and is collateralized by the 37 German
properties. In November 2010, the Property Venture exercised a portion of its call option via the
Lending Venture whereby the Partner exchanged a 70% interest in the limited partnership for a
$295.7 million reduction in the Note Receivable due to the Lending Venture. Subsequent to the
exercise of the option, the Property Venture now owns a 94.7% interest in the Partnership and
retains options to purchase the remaining 5.3% interest from the Partner by December 2012. All
dollar amounts are based on the exchange rates of the Euro at the dates of the transactions, and
dollar amounts provided represent the total amounts attributable to the ventures and do not
represent our proportionate share.
24
Equity Investment in Direct Financing Lease Acquired
In March 2009, an entity in which we, CPA®:16 Global and CPA®:17 Global
hold 17.75%, 27.25% and 55% interests, respectively, completed a net lease financing transaction
with respect to a leasehold condominium interest, encompassing approximately 750,000 rentable
square feet, in the office headquarters of The New York Times Company for approximately $233.7
million. Our share of the purchase price was approximately $40.0 million, which we funded with
proceeds from our line of credit. We account for this investment under the equity method of
accounting, as we do not have a controlling interest in the entity but exercise significant
influence over it. In connection with this investment, which was deemed a direct financing lease,
the venture capitalized costs and fees totaling $8.7 million. In August 2009, the venture obtained
mortgage financing on the New York Times property of $119.8 million at an annual interest rate of
LIBOR plus 4.75% that has been capped at 8.75% through the use of an interest rate cap. This
financing has a term of five years.
Note 7. Intangible Assets and Goodwill
In connection with our acquisition of properties, we have recorded net lease intangibles of $41.1
million, which are being amortized over periods ranging from approximately one year to 40 years.
Amortization of below-market and above-market rent intangibles is recorded as an adjustment to
lease revenues, while amortization of in-place lease and tenant relationship intangibles is
included in Depreciation and amortization. Below-market rent intangibles are included in Accounts
payable, accrued expenses and other liabilities in the consolidated financial statements.
Intangibles and goodwill are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Amortized Intangibles Assets |
|
|
|
|
|
|
|
|
Management contracts |
|
$ |
32,765 |
|
|
$ |
32,765 |
|
Less: accumulated amortization |
|
|
(29,035 |
) |
|
|
(26,262 |
) |
|
|
|
|
|
|
|
|
|
|
3,730 |
|
|
|
6,503 |
|
|
|
|
|
|
|
|
Lease Intangibles: |
|
|
|
|
|
|
|
|
In-place lease |
|
|
23,028 |
|
|
|
18,614 |
|
Tenant relationship |
|
|
10,251 |
|
|
|
9,816 |
|
Above-market rent |
|
|
9,737 |
|
|
|
8,085 |
|
Less: accumulated amortization |
|
|
(26,560 |
) |
|
|
(25,413 |
) |
|
|
|
|
|
|
|
|
|
|
16,456 |
|
|
|
11,102 |
|
|
|
|
|
|
|
|
Unamortized Goodwill and Indefinite-Lived Intangible Assets |
|
|
|
|
|
|
|
|
Goodwill |
|
|
63,607 |
|
|
|
63,607 |
|
Trade name |
|
|
3,975 |
|
|
|
3,975 |
|
|
|
|
|
|
|
|
|
|
|
67,582 |
|
|
|
67,582 |
|
|
|
|
|
|
|
|
|
|
$ |
87,768 |
|
|
$ |
85,187 |
|
|
|
|
|
|
|
|
Amortized Below-Market Rent Intangible |
|
|
|
|
|
|
|
|
Below-market rent |
|
$ |
(1,954 |
) |
|
$ |
(2,009 |
) |
Less: accumulated amortization |
|
|
1,270 |
|
|
|
641 |
|
|
|
|
|
|
|
|
|
|
$ |
(684 |
) |
|
$ |
(1,368 |
) |
|
|
|
|
|
|
|
Net amortization of intangibles was $5.6 million, $6.6 million and $7.3 million for the years ended
December 31, 2010, 2009 and 2008, respectively.
Based on the intangible assets at December 31, 2010, annual net amortization of intangibles for
each of the next five years is as follows: 2011 $3.1 million, 2012 $2.6 million, 2013 $2.3
million, 2014 $1.1 million, and 2015 $0.9 million.
25
Note 8. Debt
Scheduled debt principal payments during each of the next five years following December 31, 2010
and thereafter are as follows (in thousands):
|
|
|
|
|
Years ending December 31, |
|
Total |
|
2011(a) |
|
$ |
176,438 |
|
2012 |
|
|
35,334 |
|
2013 |
|
|
6,408 |
|
2014 |
|
|
6,414 |
|
2015 |
|
|
46,449 |
|
Thereafter through 2021 |
|
|
125,939 |
|
|
|
|
|
Total |
|
$ |
396,982 |
|
|
|
|
|
|
|
|
(a) |
|
Includes $141.8 million outstanding under our line of credit, which is scheduled to mature in
June 2011. We currently intend to extend this line for an additional year. |
Non-recourse debt
Non-recourse debt consists of mortgage notes payable, which are collateralized by the assignment of
real property and direct financing leases, with an aggregate carrying value of $367.5 million at
December 31, 2010. Our mortgage notes payable had fixed annual interest rates ranging from 3.1% to
7.8% and variable annual interest rates ranging from 1.2% to 7.3%, with maturity dates ranging from
2011 to 2021 at December 31, 2010.
In January 2009, Carey Storage repaid, in full, the $35.0 million outstanding under its $105.0
credit facility at a discount for $28.0 million and terminated the facility.
Line of credit
We have a $250.0 million unsecured revolving line of credit that is scheduled to mature in June
2011. Pursuant to the terms of the credit agreement, the line of credit can be increased up to
$300.0 million at the discretion of the lenders. Additionally, as long as there has been no
default, we may extend the line of credit at our discretion, within 90 days of, but not less than
30 days prior to, expiration, for an additional year. Such extension is subject to the payment of
an extension fee equal to 0.125% of the total commitments under the facility at that time. We
currently intend to extend this line for an additional year.
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 lenders prime rate and the Federal Funds Effective Rate plus 50 basis points. 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 December 31, 2010, we pay
interest at LIBOR, or 0.25%, plus 90 basis points and pay 15 basis points on the unused portion of
the line of credit.
The credit agreement stipulates six financial covenants that require us to maintain the following
ratios and benchmarks at the end of each quarter (the quoted variables are specifically defined in
the credit agreement):
(i) |
|
a maximum leverage ratio, which requires us to maintain a ratio for total outstanding
indebtedness to total value of 60% or less; |
(ii) |
|
a maximum secured debt ratio, which requires us to maintain a ratio for total secured
outstanding indebtedness (inclusive of permitted indebtedness of subsidiaries) to total
value of 50% or less; |
(iii) |
|
a minimum combined equity value, which requires us to maintain a total value less total
outstanding indebtedness of at least $550.0 million. This amount must be adjusted in the
event of any securities offering by adding 85% of the fair market value of all net offering
proceeds; |
(iv) |
|
a minimum fixed charge coverage ratio, which requires us to maintain a ratio for adjusted
total EBITDA to fixed charges of 1.75 to 1.0; |
(v) |
|
a maximum dividend payout, which requires us to ensure that the total of restricted
payments made in the current quarter, when added to the total for the three preceding fiscal
quarters, shall not exceed 90% of adjusted total EBITDA for the four preceding fiscal
quarters. Restricted payments include quarterly dividends and the total amount of shares
repurchased by us in excess of $10.0 million per year; and |
(vi) |
|
a limitation on recourse indebtedness, which prohibits us from incurring additional secured
indebtedness other than non-recourse indebtedness or indebtedness that is recourse to us
that exceeds $50.0 million or 5% of the total value, whichever is greater. |
26
We were in compliance with these covenants at December 31, 2010.
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 anticipation of this settlement, we recognized a charge of
$30.0 million and an offsetting $9.0 million tax benefit in the fourth quarter of 2007. As a
result, the settlement is reflected as Decrease in settlement provision in our Consolidated
Statement of Cash Flows for the year ended December 31, 2008. We also recognized a gain of $1.8
million for the year ended December 31, 2008 related to an insurance reimbursement of certain
professional services costs incurred in connection with the SEC investigation.
Note 10. Commitments and Contingencies
At December 31, 2010, we were not involved in any material litigation.
Various claims and lawsuits arising in the normal course of business are pending against us. The
results of these proceedings are not expected to have a material adverse effect on our consolidated
financial position or results of operations.
We have provided certain representations in connection with divestitures of certain of our
properties. These representations address a variety of matters including environmental liabilities.
We are not aware of any claims or other information that would give rise to material payments under
such representations.
Proposed Merger of Affiliates
As discussed in Note 3, in connection with the Proposed Merger, we have agreed to purchase three
properties from CPA®:14, in which we already have a joint venture interest, for an
aggregate purchase price of $32.1 million, plus the assumption of approximately $64.7 million of
indebtedness.
If the cash on hand and available to CPA®:14 and CPA®:16 Global, including
the proceeds of the CPA®:14 Asset Sales and a new $300.0 million senior credit facility
of CPA®:16 Global, is not sufficient to enable CPA®:16 Global to fulfill
cash elections in the Proposed Merger by CPA®:14 shareholders, we have agreed to
purchase a sufficient number of shares of CPA®:16 Global stock from CPA®:16
Global to enable it to pay such amounts to CPA®:14 shareholders. Assuming that holders
of 50% of CPA®:14s outstanding stock elect to receive cash in the Proposed Merger, then
the maximum cash required by CPA®:16 Global to purchase these shares would be
approximately $416.1 million, based on the total shares of CPA®:14 outstanding at
December 31, 2010.
The merger agreement also contains certain termination rights for both CPA®:14 and
CPA®:16. If the merger agreement is terminated because the closing condition that
CPA®:16 Global obtain funding pursuant to the debt financing and, if applicable, the
equity financing described above is not satisfied or waived, we have agreed to pay
CPA®:16 Globals and CPA®:14s out-of-pocket expenses up to $5.0 million
and $4.0 million, respectively. We have also agreed to pay CPA®:14s out-of-pocket
expenses if the merger agreement is terminated due to more than 50% of CPA®:14s
shareholders electing to receive cash in the Proposed Merger or CPA®:14 failing to
obtain the requisite shareholder approval. Costs incurred by CPA®:14 and
CPA®:16 Global related to the Proposed Merger totaled approximately $1.2 million and
$1.8 million, respectively, through December 31, 2010.
In connection with the Proposed Merger, CAM has agreed to indemnify CPA®:16 Global if
it suffers certain losses arising out of a breach by CPA®:14 of its representations and
warranties under the merger agreement and having a material adverse effect on CPA®:16
Global after the Proposed Merger, up to the amount of fees received by CAM in connection with the
Proposed Merger. We have evaluated the exposure related to this indemnification and believe the
exposure to be minimal.
27
Note 11. Fair Value Measurements
Under current authoritative accounting guidance for fair value measurements, the fair value of an
asset is defined as the exit price, which is the amount that would either be received when an asset
is sold or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. The guidance establishes a three-tier fair value hierarchy based on the
inputs used in measuring fair value. These tiers are: Level 1, for which quoted market prices for
identical instruments are available in active markets, such as money market funds, equity
securities and U.S. Treasury securities; Level 2, for which there are inputs other than quoted
prices included within Level 1 that are observable for the instrument, such as certain derivative
instruments including interest rate caps and swaps; and Level 3, for which little or no market data
exists, therefore requiring us to develop our own assumptions, such as certain securities.
Items Measured at Fair Value on a Recurring Basis
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument:
Money Market Funds Our money market funds consisted of government securities and treasury bills.
These funds were classified as Level 1 as we used quoted prices from active markets to determine
their fair values.
Derivative Assets and Liabilities Our derivative assets and liabilities primarily comprised of
interest rate swaps or caps. These derivative instruments were measured at fair value using readily
observable market inputs, such as quotations on interest rates. Our derivative instruments were
classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank
counterparties that are not traded in an active market.
Other Securities Our other securities primarily comprised of our investment in an India growth
fund and our interest in a commercial mortgage loan securitization. These funds are not traded in
an active market. We estimated the fair value of these securities using internal valuation models
that incorporate market inputs and our own assumptions about future cash flows. We classified these
assets as Level 3.
Redeemable Noncontrolling Interest We account for the noncontrolling interest in WPCI as
redeemable noncontrolling interest. We determined the valuation of redeemable noncontrolling
interest using widely accepted valuation techniques, including discounted cash flow on the expected
cash flows of the investment as well as the income capitalization approach, which considers
prevailing market capitalization rates. We classified this liability as Level 3.
28
The following tables set forth our assets and liabilities that were accounted for at fair value on
a recurring basis at December 31, 2010 and 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2010 Using: |
|
|
|
|
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for |
|
|
Significant Other |
|
|
Unobservable |
|
|
|
|
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
|
Inputs |
|
Description |
|
Total |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
37,154 |
|
|
$ |
37,154 |
|
|
$ |
|
|
|
$ |
|
|
Other securities |
|
|
1,726 |
|
|
|
|
|
|
|
|
|
|
|
1,726 |
|
Derivative assets |
|
|
312 |
|
|
|
|
|
|
|
312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
39,192 |
|
|
$ |
37,154 |
|
|
$ |
312 |
|
|
$ |
1,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
$ |
969 |
|
|
$ |
|
|
|
$ |
969 |
|
|
$ |
|
|
Redeemable noncontrolling interest |
|
|
7,546 |
|
|
|
|
|
|
|
|
|
|
|
7,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
8,515 |
|
|
$ |
|
|
|
$ |
969 |
|
|
$ |
7,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2009 Using: |
|
|
|
|
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for |
|
|
Significant Other |
|
|
Unobservable |
|
|
|
|
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
|
Inputs |
|
Description |
|
Total |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
4,283 |
|
|
$ |
4,283 |
|
|
$ |
|
|
|
$ |
|
|
Other securities |
|
|
1,687 |
|
|
|
|
|
|
|
|
|
|
|
1,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
5,970 |
|
|
$ |
4,283 |
|
|
$ |
|
|
|
$ |
1,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
$ |
634 |
|
|
$ |
|
|
|
$ |
634 |
|
|
$ |
|
|
Redeemable noncontrolling interest |
|
|
7,692 |
|
|
|
|
|
|
|
|
|
|
|
7,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
8,326 |
|
|
$ |
|
|
|
$ |
634 |
|
|
$ |
7,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and liabilities presented above exclude assets and liabilities owned by unconsolidated
ventures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
Significant Unobservable Inputs (Level 3 Only) |
|
|
|
Year ended December 31, 2010 |
|
|
Year ended December 31, 2009 |
|
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
|
|
|
|
Redeemable |
|
|
|
|
|
Redeemable |
|
|
|
Other |
|
|
Noncontrolling |
|
|
Other |
|
|
Noncontrolling |
|
|
|
Securities |
|
|
Interest |
|
|
Securities |
|
|
Interest |
|
Beginning balance |
|
$ |
1,687 |
|
|
$ |
7,692 |
|
|
$ |
1,628 |
|
|
$ |
18,085 |
|
Total gains or losses (realized and unrealized): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings |
|
|
4 |
|
|
|
1,293 |
|
|
|
(2 |
) |
|
|
2,258 |
|
Included in other comprehensive income (loss) |
|
|
12 |
|
|
|
(12 |
) |
|
|
16 |
|
|
|
12 |
|
Purchases |
|
|
23 |
|
|
|
|
|
|
|
45 |
|
|
|
|
|
Settlements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,380 |
) |
Distributions paid |
|
|
|
|
|
|
(956 |
) |
|
|
|
|
|
|
(4,056 |
) |
Redemption value adjustment |
|
|
|
|
|
|
(471 |
) |
|
|
|
|
|
|
6,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
1,726 |
|
|
$ |
7,546 |
|
|
$ |
1,687 |
|
|
$ |
7,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
4 |
|
|
$ |
|
|
|
$ |
(2 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We did not have any transfers into or out of Level 1, Level 2 and Level 3 measurements during the
years ended December 31, 2010 and 2009. Gains and losses (realized and unrealized) included in
earnings for other securities are reported in other income and (expenses) in the consolidated
financial statements.
29
Our other financial instruments had the following carrying values and fair values as of the
dates shown (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
December 31, 2009 |
|
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
Deferred acquisition fees receivable |
|
$ |
31,419 |
|
|
$ |
32,485 |
|
|
$ |
32,386 |
|
|
$ |
32,800 |
|
Non-recourse debt |
|
|
255,232 |
|
|
|
255,460 |
|
|
|
215,330 |
|
|
|
201,774 |
|
Line of credit |
|
|
141,750 |
|
|
|
140,600 |
|
|
|
111,000 |
|
|
|
108,900 |
|
We determine the estimated fair value of our debt instruments using a discounted cash flow model
with rates that take into account the credit of the tenants and interest rate risk. We estimate
that our other financial assets and liabilities (excluding net investment in direct financing
leases) had fair values that approximated their carrying values at both December 31, 2010 and 2009.
Items Measured at Fair Value on a Non-Recurring Basis
We perform an assessment, when required, of the value of certain of our real estate investments in
accordance with current authoritative accounting guidance. As part of that assessment, we
determined the valuation of these assets using widely accepted valuation techniques, including
expected discounted cash flows or an income capitalization approach, which considers prevailing
market capitalization rates. We reviewed each investment based on the highest and best use of the
investment and market participation assumptions. We determined that the significant inputs used to
value these investments fall within Level 3. We calculated the impairment charges recorded during
the years ended December 31, 2010, 2009 and 2008 based on contracted or expected selling prices.
The valuation of real estate is subject to significant judgment and actual results may differ
materially if market conditions change.
The following table presents information about our nonfinancial assets that were measured on a fair
value basis for the years ended December 31, 2010 and 2009. All of the impairment charges were
measured using unobservable inputs (Level 3) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2010 |
|
|
Year ended December 31, 2009 |
|
|
Year ended December 31, 2008 |
|
|
|
Total Fair Value |
|
|
Total Impairment |
|
|
Total Fair Value |
|
|
Total Impairment |
|
|
Total Fair Value |
|
|
Total Impairment |
|
|
|
Measurements |
|
|
Charges |
|
|
Measurements |
|
|
Charges |
|
|
Measurements |
|
|
Charges |
|
Impairment Charges From Continuing Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate |
|
$ |
5,260 |
|
|
$ |
6,104 |
|
|
$ |
823 |
|
|
$ |
900 |
|
|
$ |
|
|
|
$ |
|
|
Net investments in direct financing leases |
|
|
3,548 |
|
|
|
1,140 |
|
|
|
23,571 |
|
|
|
2,616 |
|
|
|
4,201 |
|
|
|
473 |
|
Equity investments in real estate |
|
|
22,846 |
|
|
|
1,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,654 |
|
|
|
8,638 |
|
|
|
24,394 |
|
|
|
3,516 |
|
|
|
4,201 |
|
|
|
473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment Charges From Discontinued Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate |
|
|
6,402 |
|
|
|
8,137 |
|
|
|
9,719 |
|
|
|
6,908 |
|
|
|
3,751 |
|
|
|
538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
38,056 |
|
|
$ |
16,775 |
|
|
$ |
34,113 |
|
|
$ |
10,424 |
|
|
$ |
7,952 |
|
|
$ |
1,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 12. Risk Management and Use of Derivative Financial Instruments
Risk Management
In the normal course of our ongoing 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 our properties and related loans, as well as
changes in the value of our other securities and the shares we hold in the CPA® REITs
due to changes in interest rates or other market factors. In addition, we own investments in the
European Union and are subject to the risks associated with changing foreign currency exchange
rates.
Foreign Currency Exchange
We are exposed to foreign currency exchange rate movements, primarily in the Euro. We manage
foreign currency exchange rate movements by generally placing both our debt obligation to the
lender and the tenants rental obligation to us in the same currency, but we are subject to foreign
currency exchange rate movements to the extent of the difference in the timing and amount of the
rental obligation and the debt service. We also face challenges with repatriating cash from our
foreign investments. We may encounter instances where it is difficult to repatriate cash because of
jurisdictional restrictions or because repatriating cash may result in current or future tax
liabilities. Realized and unrealized gains and losses recognized in earnings related to foreign
currency transactions are included in Other income and (expenses) in the consolidated financial
statements.
30
Use of Derivative Financial Instruments
When we use derivative instruments, it is generally to reduce our exposure to fluctuations in
interest rates. We have not entered, and do not plan to enter into, financial instruments for
trading or speculative purposes. In addition to derivative instruments that we enter
into on our own behalf, we may also be a party to derivative instruments that are embedded in other
contracts, and we may own common stock warrants, granted to us by lessees when structuring lease
transactions, that are considered to be derivative instruments. The primary risks related to our
use of derivative instruments are that a counterparty to a hedging arrangement could default on its
obligation or that the credit quality of the counterparty may be downgraded to such an extent that
it impairs our ability to sell or assign our side of the hedging transaction. While we seek to
mitigate these risks by entering into hedging arrangements with counterparties that are large
financial institutions that we deem to be creditworthy, it is possible that our hedging
transactions, which are intended to limit losses, could adversely affect our earnings. Furthermore,
if we terminate a hedging arrangement, we may be obligated to pay certain costs, such as
transaction or breakage fees. We have established policies and procedures for risk assessment and
the approval, reporting and monitoring of derivative financial instrument activities.
We measure derivative instruments at fair value and record them as assets or liabilities, depending
on our rights or obligations under the applicable derivative contract. Derivatives that are not
designated as hedges must be adjusted to fair value through earnings. If a derivative is designated
as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will
either be offset against the change in fair value of the hedged asset, liability, or firm
commitment through earnings, or recognized in OCI until the hedged item is recognized in earnings.
For cash flow hedges, the ineffective portion of a derivatives change in fair value will be
immediately recognized in earnings.
The following table sets forth certain information regarding our derivative instruments at December
31, 2010 and 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives Fair Value |
|
|
Liability Derivatives Fair Value |
|
Derivatives designated as |
|
|
|
at December 31, |
|
|
at December 31, |
|
hedging instruments |
|
Balance Sheet Location |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Interest rate swaps |
|
Other assets, net |
|
$ |
312 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate swaps |
|
Accounts payable, accrued expenses and other liabilities |
|
|
|
|
|
|
|
|
|
|
(969 |
) |
|
|
(634 |
) |
The following table presents the impact of derivative instruments on OCI within our
consolidated financial statements (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (Loss) Gain Recognized in |
|
|
|
OCI on Derivative (Effective Portion) |
|
|
|
Years ended December 31, |
|
Derivatives in Cash Flow Hedging Relationships |
|
2010 |
|
|
2009 |
|
|
2008 |
|
Interest rate swaps (a) |
|
$ |
(45 |
) |
|
$ |
(243 |
) |
|
$ |
(419 |
) |
|
|
|
(a) |
|
During the years ended December 31, 2010, 2009 and 2008, no gains or losses were reclassified
from OCI into income related to effective or ineffective portions of hedging relationships or
to amounts excluded from effectiveness testing. |
See below for information on our purposes for entering into derivative instruments and for
information on derivative instruments owned by unconsolidated ventures, which are excluded from the
tables above.
Interest Rate Swaps and Caps
We are exposed to the impact of interest rate changes primarily through our borrowing activities.
To limit this exposure, we attempt to obtain mortgage financing on a long-term, fixed-rate basis.
However, from time to time, we or our venture partners may obtain variable rate non-recourse
mortgage loans and, as a result, may enter into interest rate swap agreements or interest rate cap
agreements with counterparties. Interest rate swaps, which effectively convert the variable rate
debt service obligations of the loan to a fixed rate, are agreements in which one party exchanges a
stream of interest payments for a counterpartys stream of cash flow over a specific period. The
notional, or face, amount on which the swaps are based is not exchanged. Interest rate caps limit
the effective borrowing rate of variable rate debt obligations while allowing participants to share
in downward shifts in interest rates. Our objective in using these derivatives is to limit our
exposure to interest rate movements.
31
The interest rate swap derivative instruments that we had outstanding at December 31, 2010 were
designated as cash flow hedges and are summarized as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
|
Effective |
|
|
Effective |
|
|
Expiration |
|
|
|
|
|
|
Type |
|
Amount |
|
|
Interest Rate |
|
|
Date |
|
|
Date |
|
|
Fair Value |
|
3-Month Euribor (a) |
|
Pay-fixed swap |
|
$ |
8,522 |
|
|
|
4.2 |
% |
|
|
3/2008 |
|
|
|
3/2018 |
|
|
$ |
(757 |
) |
1-Month Libor |
|
Pay-fixed swap |
|
|
4,681 |
|
|
|
3.0 |
% |
|
|
4/2010 |
|
|
|
4/2015 |
|
|
|
(212 |
) |
1-Month Libor |
|
Pay-fixed swap |
|
|
34,804 |
|
|
|
3.0 |
% |
|
|
7/2010 |
|
|
|
7/2020 |
|
|
|
312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(657 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Amounts are based upon the Euro exchange rate at December 31, 2010. |
The interest rate cap derivative instruments that our unconsolidated ventures had outstanding at
December 31, 2010 were designated as cash flow hedges and are summarized as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Venture at |
|
|
|
|
Notional |
|
|
|
|
|
|
|
|
|
|
Effective |
|
|
Expiration |
|
|
|
|
|
|
December 31, 2010 |
|
|
Type |
|
Amount |
|
|
Cap Rate
(a) |
|
|
Spread |
|
|
Date |
|
|
Date |
|
|
Fair Value |
|
3-Month LIBOR |
|
|
17.75 |
% |
|
Interest rate cap |
|
$ |
116,684 |
|
|
|
4.0 |
% |
|
|
4.8 |
% |
|
|
8/2009 |
|
|
|
8/2014 |
|
|
$ |
733 |
|
1-Month LIBOR |
|
|
78.95 |
% |
|
Interest rate cap |
|
|
18,310 |
|
|
|
3.0 |
% |
|
|
4.0 |
% |
|
|
9/2009 |
|
|
|
4/2014 |
|
|
|
122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The applicable interest rates of the related loans were 5.0% and 4.3% at December 31,
2010; therefore, the interest rate caps were not being utilized at that date. |
Other
Amounts reported in OCI related to derivatives will be reclassified to interest expense as interest
payments are made on our non-recourse variable-rate debt. At December 31, 2010, we estimate that an
additional $1.3 million will be reclassified as interest expense during the next twelve months.
Some of the agreements we have with derivative counterparties contain certain credit contingent
provisions that could result in a declaration of default against us regarding our derivative
obligations if we either default or are capable of being declared in default on certain of our
indebtedness. At December 31, 2010, we had not been declared in default on any of our derivative
obligations. The estimated fair value of our derivatives that were in a net liability position was
$0.8 million at December 31, 2010, which includes accrued interest but excludes any adjustment for
nonperformance risk. If we had breached any of these provisions at December 31, 2010, we could have
been required to settle our obligations under these agreements at their termination value of $0.9
million.
Portfolio Concentration Risk
Concentrations of credit risk arise when a group of tenants is engaged in similar business
activities or is subject to similar economic risks or conditions that could cause them to default
on their lease obligations to us. We regularly monitor our portfolio to assess potential
concentrations of credit risk. While we believe our portfolio is reasonably well diversified, it
does contain concentrations in excess of 10% of current annualized lease revenues in certain areas,
as described below. The percentages in the paragraph below represent our directly-owned real estate
properties and do not include our pro rata share of equity investments.
32
At December 31, 2010, the majority of our directly-owned real estate properties were located in the
U.S. (89%), with Texas (20%), California (14%), Arizona (11%) and Georgia (11%) representing the
most significant geographic concentrations, based on percentage of our annualized contractual
minimum base rent for the fourth quarter of 2010. At December 31, 2010, our directly-owned real
estate properties contained concentrations in the following asset types: office (38%), industrial
(30%) and warehouse/distribution (17%); and in the following tenant industries: retail stores
(13%), business and commercial services (12%) and telecommunications (12%).
Note 13. Impairment Charges
We periodically assess whether there are any indicators that the value of our real estate
investments may be impaired or that their carrying value may not be recoverable. For investments in
real estate in which an impairment indicator is identified, we follow a two-step process to
determine whether the investment is impaired and to determine the amount of the charge. First, we
compare the carrying value of the real estate to the future net undiscounted cash flow that we
expect the real estate will generate, including any estimated proceeds from the eventual sale of
the real estate. If this amount is less than the carrying value, the real estate is considered to
be impaired, and we then measure the loss as the excess of the carrying value of the real estate
over the estimated fair value of the real estate, which is primarily determined using market
information such as recent comparable sales or broker quotes. If relevant market information is not
available or is not deemed appropriate, we then perform a future net cash flow analysis discounted
for inherent risk associated with each investment.
The following table summarizes impairment charges recognized during the years ended December 31,
2010, 2009, and 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Real estate |
|
$ |
6,104 |
|
|
$ |
900 |
|
|
$ |
|
|
Net investments in direct financing leases |
|
|
1,140 |
|
|
|
2,616 |
|
|
|
473 |
|
|
|
|
|
|
|
|
|
|
|
Total impairment charges included in expenses |
|
|
7,244 |
|
|
|
3,516 |
|
|
|
473 |
|
Equity investments in real estate (a) |
|
|
1,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impairment charges included in continuing
operations |
|
|
8,638 |
|
|
|
3,516 |
|
|
|
473 |
|
Impairment charges included in discontinued operations |
|
|
8,137 |
|
|
|
6,908 |
|
|
|
538 |
|
|
|
|
|
|
|
|
|
|
|
Total impairment charges |
|
$ |
16,775 |
|
|
$ |
10,424 |
|
|
$ |
1,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Impairment charges on our equity investments in real estate are included in Income from
equity investments in real estate and CPA® REITs within the consolidated financial
statements. |
Impairment Charges on Real Estate
During the years ended December 31, 2010 and 2009, we recognized impairment charges on various
properties totaling $6.1 million and $0.9 million, respectively. These impairments were primarily
the result of writing down the properties carrying values to their respective estimated fair
values in connection with potential sales due to tenants vacating or not renewing their leases.
Impairment Charges on Direct Financing Leases
In connection with our annual review of the estimated residual values on our properties classified
as net investments in direct financing leases, we determined that an other-than-temporary decline
in estimated residual value had occurred at various properties due to market conditions, and the
accounting for these direct financing leases was revised using the changed estimates. The changes
in estimates resulted in the recognition of impairment charges totaling $1.1 million, $2.6 million
and $0.5 million in 2010, 2009 and 2008, respectively.
Impairment Charges on Equity Investments in Real Estate
During the year ended December 31, 2010, we recognized an other-than-temporary impairment charge of
$1.4 million on a venture to reflect the decline in the estimated fair value of the ventures
underlying net assets in comparison with the carrying value of our interest in the venture.
33
Impairment Charges on Properties Sold
During the years ended December 31, 2010, 2009 and 2008, we recognized impairment charges on
properties sold totaling $8.1 million, $6.9 million and $0.5 million, respectively. These
impairment charges, which are included in discontinued operations, were the result of reducing
these properties carrying values to their estimated fair values (Note 17).
Note 14. Equity
Distributions Payable
We declared a quarterly distribution of $0.510 per share in December 2010, which was paid in
January 2011 to shareholders of record at December 31, 2010; and a quarterly distribution of $0.502
per share and a special distribution of $0.30 per share in December 2009, which were paid in
January 2010 to shareholders of record at December 31, 2009. The special distribution was approved
by our board of directors as a result of an increase in our 2009 taxable income.
Redeemable Noncontrolling Interest
We account for the noncontrolling interest in WPCI held by one of our officers as a redeemable
noncontrolling interest, as we have an obligation to repurchase the interest from that officer,
subject to certain conditions. The officers interest is reflected at estimated redemption value
for all periods presented. Redeemable noncontrolling interests, as presented on the consolidated
balance sheets, reflect adjustments of ($0.5) million, $6.8 million and $0.3 million at December
31, 2010, 2009 and 2008, respectively, to present the officers interest at redemption value. See
Note 15.
The following table presents a reconciliation of redeemable noncontrolling interest (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Balance at beginning of year |
|
$ |
7,692 |
|
|
$ |
18,085 |
|
|
$ |
20,394 |
|
Redemption value adjustment |
|
|
(471 |
) |
|
|
6,773 |
|
|
|
322 |
|
Net income |
|
|
1,293 |
|
|
|
2,258 |
|
|
|
1,508 |
|
Distributions |
|
|
(956 |
) |
|
|
(4,056 |
) |
|
|
(4,139 |
) |
Purchase of noncontrolling interests |
|
|
|
|
|
|
(15,380 |
) |
|
|
|
|
Change in other comprehensive (loss) income |
|
|
(12 |
) |
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
7,546 |
|
|
$ |
7,692 |
|
|
$ |
18,085 |
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
The following table presents accumulated other comprehensive loss reflected in equity, net of tax.
Amounts include our proportionate share of other comprehensive income or loss from our
unconsolidated investments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Unrealized gain on marketable securities |
|
$ |
48 |
|
|
$ |
42 |
|
Unrealized loss on derivative instruments |
|
|
(1,658 |
) |
|
|
(901 |
) |
Foreign currency translation adjustment |
|
|
(1,853 |
) |
|
|
178 |
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
$ |
(3,463 |
) |
|
$ |
(681 |
) |
|
|
|
|
|
|
|
34
Earnings Per Share
Under current authoritative guidance for determining earnings per share, all unvested share-based
payment awards that contain non-forfeitable rights to distributions are considered to be
participating securities and therefore are included in the computation of earnings per share under
the two-class method. The two-class method is an earnings allocation formula that determines
earnings per share for each class of common shares and participating security according to
dividends declared (or accumulated) and participation rights in undistributed earnings. Our
unvested RSUs contain rights to receive non-forfeitable distribution equivalents, and therefore we
apply the two-class method of computing earnings per share. The calculation of earnings per share
below excludes the income attributable to the unvested RSUs from the numerator. The following table
summarizes basic and diluted earnings per share for the periods indicated (in thousands, except
share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Net income attributable to W. P. Carey members |
|
$ |
73,972 |
|
|
$ |
69,023 |
|
|
$ |
78,047 |
|
Allocation of distributions paid on unvested RSUs in excess of net income |
|
|
(440 |
) |
|
|
(1,127 |
) |
|
|
(295 |
) |
|
|
|
|
|
|
|
|
|
|
Net income basic |
|
|
73,532 |
|
|
|
67,896 |
|
|
|
77,752 |
|
Income effect of dilutive securities, net of taxes |
|
|
724 |
|
|
|
1,250 |
|
|
|
840 |
|
|
|
|
|
|
|
|
|
|
|
Net income diluted |
|
$ |
74,256 |
|
|
$ |
69,146 |
|
|
$ |
78,592 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic |
|
|
39,514,746 |
|
|
|
39,019,709 |
|
|
|
39,202,520 |
|
Effect of dilutive securities |
|
|
493,148 |
|
|
|
693,026 |
|
|
|
1,018,592 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted |
|
|
40,007,894 |
|
|
|
39,712,735 |
|
|
|
40,221,112 |
|
|
|
|
|
|
|
|
|
|
|
Securities included in our diluted earnings per share determination consist of stock options,
warrants and restricted stock. Securities totaling 1.8 million shares, 2.6 million shares and 2.4
million shares for the years ended December 31, 2010, 2009, and 2008, respectively, were excluded
from the earnings per share computations above as their effect would have been anti-dilutive.
Share Repurchase Programs
In June 2007, our board of directors approved a share repurchase program through December 31, 2007
that was later extended through March 2008. During the term of the program, we repurchased a total
of $30.7 million of our common stock. In October 2008, the Executive Committee of our board of
directors (the Executive Committee) approved a program to repurchase up to $10.0 million of our
common stock through December 15, 2008. During the term of this program, we repurchased a total of
$8.5 million of our common stock. In December 2008, the Executive Committee approved a further
program to repurchase up to $10.0 million of our common stock through March 4, 2009 or the date the
maximum was reached, if earlier. During the term of this program, we repurchased a total of $9.3
million of our common stock. In March 2009, the Executive Committee approved an additional program
to repurchase up to $3.5 million of our common stock through March 27, 2009 or the date the maximum
was reached, if earlier. During the term of this program, we repurchased a total of $2.8 million of
our common stock.
Note 15. Stock-Based and Other Compensation
Stock-Based Compensation
At December 31, 2010, we maintained several stock-based compensation plans as described below. The
total compensation expense (net of forfeitures) for these plans was $7.4 million, $9.3 million and
$7.3 million for the years ended December 31, 2010, 2009 and 2008, respectively. Total stock-based
compensation expense for the year ended December 31, 2010 included net forfeitures of $2.0 million
as a result of the resignation of two senior officers. The tax benefit recognized by us related to
these plans totaled $3.3 million, $4.2 million and $3.2 million for the years ended December 31,
2010, 2009 and 2008, respectively.
2009 Incentive Plan and 1997 Incentive Plans
We maintain the 1997 Share Incentive Plan (as amended, the 1997 Incentive Plan), which authorized
the issuance of up to 6,200,000 shares of our common stock. In June 2009, our shareholders approved
the 2009 Share Incentive Plan (the 2009 Incentive Plan) to replace the 1997 Incentive Plan,
except with respect to outstanding contractual obligations under the 1997 Incentive Plan, so that
no further awards can be made under that plan. The 2009 Incentive Plan authorizes the issuance of
up to 3,600,000 shares of our common stock, of which 218,644 were issued or reserved for issuance
upon vesting of RSUs and PSUs at December 31, 2010. The 1997 Incentive Plan provided for the grant
of (i) share options, which may or may not qualify as incentive stock options under the Code, (ii)
performance shares or PSUs, (iii) dividend equivalent rights and (iv) restricted shares or RSUs.
The 2009 Incentive Plan provides for
the grant of (i) share options, (ii) restricted shares or RSUs, (iii) performance shares or PSUs,
and (iv) dividend equivalent rights. The vesting of grants under both plans is accelerated upon a
change in our control and under certain other conditions. During 2010, grants under our long-term
incentive program (the LTIP) were made under the 2009 Incentive Plan.
35
In December 2007, the Compensation Committee approved the LTIP and terminated further contributions
to the Partnership Equity Unit Plan described below. In 2008, the Compensation Committee approved
long-term incentive awards consisting of 153,900 RSUs and 148,250 PSUs under the LTIP through the
1997 Incentive Plan. In 2009, the Compensation Committee granted 126,050 RSUs and 152,000 PSUs
under the LTIP through the 1997 Incentive Plan. In 2010, the Compensation Committee granted 140,050
RSUs and 159,250 PSUs under the LTIP through the 2009 Incentive Plan.
As a result of issuing these awards, we currently expect to recognize compensation expense totaling
approximately $18.1 million over the vesting period, of which $5.7 million, $4.2 million and $2.4
million was recognized during 2010, 2009 and 2008, respectively.
2009 Non-Employee Directors Incentive Plan and 1997 Non-Employee Directors Plan
We maintain the 1997 Non-Employee Directors Plan (the 1997 Directors Plan), which authorized
the issuance of up to 300,000 shares of our Common Stock. In June 2007, the 1997 Directors Plan,
which had been due to expire in October 2007, was extended through October 2017. In June 2009, our
shareholders approved the 2009 Non-Employee Directors Incentive Plan (the 2009 Directors Plan)
to replace the 1997 Directors Plan, except with respect to outstanding contractual obligations
under the predecessor plan, so that no further awards can be made under that plan. The 1997
Directors Plan provided for the grant of (i) share options, which may or may not qualify as
incentive stock options, (ii) performance shares, (iii) dividend equivalent rights and (iv)
restricted shares. The 2009 Directors Plan authorizes the issuance of 325,000 shares of our common
stock in the aggregate and initially provided for the automatic annual grant of RSUs with a total
value of $50,000 to each director. In the discretion of our board of directors, the awards may also
be in the form of share options or restricted shares, or any combination of the permitted awards.
Grants under the 2009 Directors Plan totaled 47,565 RSUs at December 31, 2010.
Employee Share Purchase Plan
We sponsor an Employee Share Purchase Plan (ESPP) pursuant to which eligible employees may
contribute up to 10% of compensation, subject to certain limits, to purchase our common stock.
Employees can purchase stock semi-annually at a price equal to 85% of the fair market value at
certain plan defined dates. The ESPP is not material to our results of operations. Compensation
expense under this plan for the years ended December 31, 2010, 2009 and 2008 was $0.2 million, $0.4
million and $0.1 million, respectively.
Carey Management Warrants
In January 1998, the predecessor of Carey Management was granted warrants to purchase 2,284,800
shares of our common stock exercisable at $21 per share and warrants to purchase 725,930 shares
exercisable at $23 per share as compensation for investment banking services in connection with
structuring the consolidation of the CPA® Partnerships. During the year ended December
31, 2008, a corporation wholly-owned by our Chairman, Wm. Polk Carey, exercised warrants under a
1998 grant (the Carey Management Warrants) to purchase a total of 695,930 shares of our common
stock at $23 per share, for which we received proceeds of $16.1 million. All other Carey Management
Warrants were exercised prior to 1998 or expired without value.
Partnership Equity Unit Plan
During 2003, we adopted a non-qualified deferred compensation plan (the Partnership Equity Plan,
or PEP) under which a portion of any participating officers cash compensation in excess of
designated amounts was deferred and the officer was awarded Partnership Equity Plan Units (PEP
Units). The value of each PEP Unit was intended to correspond to the value of a share of the
CPA® REIT designated at the time of such award. During 2005, further contributions to
the initial PEP were terminated and it was succeeded by a second PEP. As amended, payment under
these plans will occur at the earlier of December 16, 2013 (in the case of the initial PEP) or
twelve years from the date of award. The award is fully vested upon grant. Each of the PEPs is a
deferred compensation plan and is therefore considered to be outside the scope of current
accounting guidance for stock-based compensation and subject to liability award accounting. The
value of each PEP Unit will be adjusted to reflect the underlying appraised value of the designated
CPA® REIT. Additionally, each PEP Unit will be entitled to distributions equal to the
distribution rate of the CPA® REIT. All issuances of PEP Units, changes in the fair
value of PEP Units and distributions paid are included in our compensation expense.
36
The value of the plans is reflected at fair value each quarter and is subject to changes in the
fair value of the PEP units. Compensation expense under these Plans for the years ended December
31, 2010, 2009 and 2008 was $0.1 million, $0.2 million and $0.9 million, respectively. Further
contributions to the second PEP were terminated at December 31, 2007; however, this termination did
not affect any awardees rights pursuant to awards granted under this plan. In December 2008,
participants in the PEPs were required to make an election to either (i) remain in the PEPs, (ii)
receive cash for their PEP Units (available to former employees only) or (iii) convert their PEP
Units to fully vested RSUs (available to current employees only) to be issued under the 1997
Incentive Plan on June 15, 2009. Substantially all of the PEP participants elected to receive cash
or convert their existing PEP Units to RSUs. In January 2009, we paid $2.0 million in cash to
former employee participants who elected to receive cash for their PEP Units. As a result of the
election to convert PEP Units to RSUs, we derecognized $9.3 million of our existing PEP liability
and recorded a deferred compensation obligation within W. P. Carey members equity in the same
amount during the second quarter of 2009. The PEP participants that elected RSUs received a total
of 356,416 RSUs, which was equal to the total value of their PEP Units divided by the closing price
of our common stock on June 15, 2009. The PEP participants electing to receive RSUs were required
to defer receipt of the underlying shares of our common stock for a minimum of two years. While
employed by us, these participants are entitled to receive dividend equivalents equal to the amount
of dividends paid on the underlying common stock during the deferral period. At December 31, 2010,
we are obligated to issue 356,416 shares of our common stock underlying these RSUs, which is
recorded within W. P. Carey members equity as a Deferred compensation obligation of $10.5 million.
The remaining PEP liability pertaining to participants who elected to remain in the plans was $0.8
million at December 31, 2010.
WPCI Stock Options
On June 30, 2003, WPCI granted an incentive award to two officers of WPCI consisting of 1,500,000
restricted units, representing an approximate 13% interest in WPCI, and 1,500,000 options for WPCI
units with a combined fair value of $2.5 million at that date. Both the options and restricted
units vested ratably over five years, with full vesting occurring December 31, 2007. During 2008,
the officers exercised all of their 1,500,000 options to purchase 1,500,000 units of WPCI at $1 per
unit. Upon the exercise of the WPCI options, the officers had a total interest of approximately 23%
in WPCI. The terms of the vested restricted units and units received in connection with the
exercise of options of WPCI by noncontrolling interest holders provided that the units could be
redeemed, commencing December 31, 2012 and thereafter, solely in exchange for our shares and that
any redemption would be subject to a third party valuation of WPCI. In connection with a
reorganization of WPCI into three separate entities in 2008, the officers also owned equivalent
interests in the three new entities.
In December 2009, one of those officers resigned from W. P. Carey, WPCI and all affiliated entities
pursuant to a mutually agreed separation. As part of this separation, we effected the purchase of
all of the interests in WPCI and certain related entities held by that officer for cash, at a
negotiated fair market value of $15.4 million. The tax effect of approximately $4.8 million
relating to the acquisition of this interest, which resulted in an increase in contributed capital,
was recorded as an adjustment to Listed shares in the consolidated balance sheets. The remaining
officer currently has a total interest of approximately 7.7% in each of WPCI and the related
entities.
Stock Options
Option and warrant activity at December 31, 2010 and changes during the year ended December 31,
2010 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Remaining |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Contractual |
|
|
Aggregate |
|
|
|
Shares |
|
|
Exercise Price |
|
|
Term (in Years) |
|
|
Intrinsic Value |
|
Outstanding at beginning of year |
|
|
2,255,604 |
|
|
$ |
27.55 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(399,507 |
) |
|
|
22.26 |
|
|
|
|
|
|
|
|
|
Forfeited / Expired |
|
|
(156,396 |
) |
|
|
30.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year |
|
|
1,699,701 |
|
|
$ |
28.57 |
|
|
|
4.26 |
|
|
$ |
5,700,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at end of year |
|
|
1,671,438 |
|
|
$ |
28.57 |
|
|
|
4.25 |
|
|
$ |
5,661,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year |
|
|
1,231,863 |
|
|
$ |
27.86 |
|
|
|
3.93 |
|
|
$ |
4,981,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
Option and warrant activity for 2009 and 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
|
Weighted |
|
|
Contractual |
|
|
|
|
|
|
Weighted |
|
|
Contractual |
|
|
|
|
|
|
|
Average |
|
|
Term |
|
|
|
|
|
|
Average |
|
|
Term |
|
|
|
Shares |
|
|
Exercise Price |
|
|
(in Years) |
|
|
Shares |
|
|
Exercise Price |
|
|
(in Years) |
|
Outstanding at beginning of year |
|
|
2,543,239 |
|
|
$ |
27.16 |
|
|
|
|
|
|
|
3,428,170 |
|
|
$ |
25.87 |
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
31.56 |
|
|
|
|
|
Exercised |
|
|
(201,701 |
) |
|
|
22.29 |
|
|
|
|
|
|
|
(882,931 |
) |
|
|
22.15 |
|
|
|
|
|
Forfeited / Expired |
|
|
(85,934 |
) |
|
|
28.46 |
|
|
|
|
|
|
|
(22,000 |
) |
|
|
30.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year |
|
|
2,255,604 |
|
|
$ |
27.55 |
|
|
|
4.80 |
|
|
|
2,543,239 |
|
|
|
27.16 |
|
|
|
5.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year |
|
|
2,220,902 |
|
|
$ |
27.50 |
|
|
|
|
|
|
|
1,242,076 |
|
|
$ |
24.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted under the 1997 Incentive Plan generally have a 10-year term and generally vest in
four equal annual installments. Options granted under the 1997 Directors Plan have a 10-year term
and vest generally over three years from the date of grant. We did not issue any option awards
during 2010 and 2009. The weighted average grant date fair value of options granted during the
years ended December 31, 2008 was $2.42. The total intrinsic value of options exercised during the
years ended December 31, 2010, 2009 and 2008 was $2.8 million, $1.0 million and $1.9 million,
respectively.
At December 31, 2010, approximately $7.3 million of total unrecognized compensation expense related
to nonvested stock-based compensation awards was expected to be recognized over a weighted-average
period of approximately 1.8 years.
We have the ability and intent to issue shares upon stock option exercises. Historically, we have
issued authorized but unissued common stock to satisfy such exercises. Cash received from stock
option exercises and purchases under the ESPP during the years ended December 31, 2010, 2009 and
2008 was $3.7 million, $1.5 million and $4.0 million, respectively.
Restricted and Conditional Awards
Nonvested restricted stock, RSUs and PSUs at December 31, 2010 and changes during the year ended
December 31, 2010 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested Restricted Stock and RSU Awards |
|
|
Nonvested PSU Awards |
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
|
Grant Date |
|
|
|
Shares |
|
|
Fair Value |
|
|
Shares |
|
|
Fair Value |
|
Nonvested at January 1, 2009 |
|
|
454,452 |
|
|
$ |
30.50 |
|
|
|
90,469 |
|
|
$ |
37.88 |
|
Granted |
|
|
159,362 |
|
|
|
23.97 |
|
|
|
152,000 |
|
|
|
30.42 |
|
Vested (a) |
|
|
(194,741 |
) |
|
|
29.77 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(37,195 |
) |
|
|
23.00 |
|
|
|
(20,625 |
) |
|
|
32.33 |
|
Adjustment (b) |
|
|
|
|
|
|
|
|
|
|
(51,469 |
) |
|
|
26.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2009 |
|
|
381,878 |
|
|
$ |
28.87 |
|
|
|
170,375 |
|
|
$ |
32.33 |
|
Granted |
|
|
156,682 |
|
|
|
28.34 |
|
|
|
159,250 |
|
|
|
36.16 |
|
Vested (a) |
|
|
(175,225 |
) |
|
|
28.58 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(99,515 |
) |
|
|
29.75 |
|
|
|
(65,725 |
) |
|
|
36.26 |
|
Adjustment (b) |
|
|
|
|
|
|
|
|
|
|
(19,906 |
) |
|
|
28.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2010 |
|
|
263,820 |
|
|
$ |
28.42 |
|
|
|
243,994 |
|
|
$ |
36.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The total fair value of shares vested during the years ended December 31, 2010, 2009 and 2008
was $5.0 million, $7.2 million and $4.4 million, respectively. |
|
(b) |
|
Vesting and payment of the PSUs is conditional on certain company and market performance
goals being met during the relevant three-year performance period. The ultimate number of PSUs
to be vested will depend on the extent to which the performance goals are met and can range
from zero to three times the original awards. Pursuant to a review of our current and expected
performance versus the performance goals, we revised our estimate of the ultimate number of
certain of the PSUs to be vested. As a result, we recorded an adjustment in 2010 and 2009 to
reflect the number of shares expected to be issued when the PSUs vest. |
38
At the end of each reporting period, we evaluate the ultimate number of PSUs we expect to vest
based upon the extent to which we have met and expect to meet the performance goals and where
appropriate revise our estimate and associated expense. Upon vesting, the RSUs and PSUs may be
converted into shares of our common stock. Both the RSUs and PSUs carry dividend equivalent rights.
Dividend equivalent rights on RSUs are paid in cash on a quarterly basis whereas dividend
equivalent rights on PSUs accrue during the performance period and may be converted into additional
shares of common stock at the conclusion of the performance period to the extent the PSUs vest.
Dividend equivalent rights are accounted for as a reduction to retained earnings to the extent that
the awards are expected to vest. For awards that are not expected to vest or do not ultimately
vest, dividend equivalent rights are accounted for as additional compensation expense.
Fair Value Assumptions
We estimate the fair value of our options and warrants using the Black-Scholes option pricing
formula, which involves the use of assumptions that are used in estimating the fair value of
share-based payment awards. The risk-free interest rate for periods within the contractual life of
the award is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend
yield is based upon the trailing quarterly distribution for the four quarters preceding the award
expressed as a percentage of our stock price. Expected volatilities are based on a review of the
five- and ten-year historical volatility of our stock as well as the historical volatilities and
implied volatilities of common stock and exchange-traded options of selected comparable companies.
The expected term of awards granted is derived from an analysis of the remaining life of our awards
giving consideration to their maturity dates and remaining time to vest. We use historical data to
estimate option exercise and employee termination within the valuation model; separate groups of
employees that have similar historical exercise behavior are considered separately for valuation
purposes. We did not grant any stock option or warrant awards during 2010 and 2009. For the year
ended December 31, 2008, the following assumptions and weighted average fair values were used:
|
|
|
|
|
|
|
Year ended |
|
|
|
December 31, 2008 |
|
Risk-free interest rates |
|
|
3.3% 3.8 |
% |
Dividend yields |
|
|
5.4% 6.3 |
% |
Expected volatility |
|
|
15% 16.4 |
% |
Expected term in years |
|
|
6.3 |
|
Other Compensation
Profit-Sharing Plan
We sponsor a qualified profit-sharing plan and trust covering substantially all of our full-time
employees who have attained age 21, worked a minimum of 1,000 hours and completed one year of
service. We are under no obligation to contribute to the plan and the amount of any contribution is
determined by and at the discretion of our board of directors. Our board of directors can authorize
contributions to a maximum of 15% of an eligible participants compensation, limited to less than
$0.1 million annually per participant. For the years ended December 31, 2010, 2009 and 2008,
amounts expensed for contributions to the trust were $3.3 million, $3.3 million and $2.8 million,
respectively. The profit-sharing plan is a deferred compensation plan and is therefore considered
to be outside the scope of current accounting guidance for stock-based compensation.
Other
We have employment contracts with certain senior executives. These contracts provide for severance
payments in the event of termination under certain conditions including a change of control. During
2010, 2009 and 2008, we recognized severance costs totaling approximately $1.1 million, $1.7
million and $0.7 million, respectively, related to several former employees. Such costs are
included in General and administrative expenses in the accompanying consolidated financial
statements.
39
Note 16. Income Taxes
The components of our provision for income taxes for the years ended December 31, 2010, 2009 and
2008 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Federal |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
17,737 |
|
|
$ |
19,796 |
|
|
$ |
22,266 |
|
Deferred |
|
|
(2,409 |
) |
|
|
(6,388 |
) |
|
|
(6,123 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
15,328 |
|
|
|
13,408 |
|
|
|
16,143 |
|
|
|
|
|
|
|
|
|
|
|
State, Local and Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
12,250 |
|
|
|
12,722 |
|
|
|
10,614 |
|
Deferred |
|
|
(1,756 |
) |
|
|
(3,337 |
) |
|
|
(3,216 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
10,494 |
|
|
|
9,385 |
|
|
|
7,398 |
|
|
|
|
|
|
|
|
|
|
|
Total Provision |
|
$ |
25,822 |
|
|
$ |
22,793 |
|
|
$ |
23,541 |
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes at December 31, 2010 and 2009 consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Deferred tax assets |
|
|
|
|
|
|
|
|
Unearned and deferred compensation |
|
$ |
14,937 |
|
|
$ |
10,121 |
|
Other |
|
|
82 |
|
|
|
4,899 |
|
|
|
|
|
|
|
|
|
|
|
15,019 |
|
|
|
15,020 |
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
Receivables from affiliates |
|
|
14,290 |
|
|
|
13,478 |
|
Investments |
|
|
35,267 |
|
|
|
39,116 |
|
Other |
|
|
755 |
|
|
|
247 |
|
|
|
|
|
|
|
|
|
|
|
50,312 |
|
|
|
52,841 |
|
|
|
|
|
|
|
|
Net deferred tax liability |
|
$ |
35,293 |
|
|
$ |
37,821 |
|
|
|
|
|
|
|
|
The difference between the tax provision and the tax benefit recorded at the statutory rate at
December 31, 2010, 2009 and 2008 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Pre-tax income from taxable subsidiaries |
|
$ |
49,253 |
|
|
|
|
|
|
$ |
41,943 |
|
|
|
|
|
|
$ |
56,151 |
|
|
|
|
|
Federal provision at statutory tax rate (35%) |
|
|
17,238 |
|
|
|
35.0 |
% |
|
|
14,680 |
|
|
|
35.0 |
% |
|
|
19,653 |
|
|
|
35.0 |
% |
State and local taxes, net of federal benefit |
|
|
4,303 |
|
|
|
8.7 |
% |
|
|
4,246 |
|
|
|
10.1 |
% |
|
|
3,522 |
|
|
|
6.3 |
% |
Amortization of intangible assets |
|
|
854 |
|
|
|
1.7 |
% |
|
|
855 |
|
|
|
2.0 |
% |
|
|
856 |
|
|
|
1.5 |
% |
Other |
|
|
272 |
|
|
|
0.6 |
% |
|
|
101 |
|
|
|
0.3 |
% |
|
|
211 |
|
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax provision taxable subsidiaries |
|
|
22,667 |
|
|
|
46.0 |
% |
|
|
19,882 |
|
|
|
47.4 |
% |
|
|
24,242 |
|
|
|
43.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other state, local and foreign taxes |
|
|
3,155 |
|
|
|
|
|
|
|
2,911 |
|
|
|
|
|
|
|
(701 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax provision |
|
$ |
25,822 |
|
|
|
|
|
|
$ |
22,793 |
|
|
|
|
|
|
$ |
23,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in income taxes in the consolidated balance sheets at December 31, 2010 and 2009 are
accrued income taxes totaling $6.1 million and $5.3 million, respectively, and deferred income
taxes totaling $35.3 million and $37.8 million, respectively.
We have elected to be treated as a partnership for U.S. federal income tax purposes. As
partnerships, we and our partnership subsidiaries are generally not directly subject to tax. We
conduct our investment management services primarily through taxable subsidiaries. These operations
are subject to federal, state, local and foreign taxes, as applicable. We conduct business in the
U.S. and the European Union, and as a result, we or one or more of our subsidiaries file income tax
returns in the U.S. federal jurisdiction and various state and certain foreign jurisdictions. 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 2007. 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.
40
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Balance at January 1, |
|
$ |
1,033 |
|
|
$ |
1,022 |
|
Additions based on tax positions related to the current year |
|
|
|
|
|
|
|
|
Additions for tax positions of prior years |
|
|
|
|
|
|
11 |
|
Reductions for tax positions of prior years |
|
|
(1,033 |
) |
|
|
|
|
Settlements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, |
|
$ |
|
|
|
$ |
1,033 |
|
|
|
|
|
|
|
|
During the third quarter of 2010, we reversed unrecognized tax benefits of $0.6 million (net of
federal benefits), including all related interest totaling $0.1 million, as they were no longer
required.
Our tax returns are subject to audit by taxing authorities. Such audits can often take years to
complete and settle. The tax years 2007-2010 remain open to examination by the major taxing
jurisdictions to which we are subject.
Carey REIT II owns our real estate assets and has elected to be taxed as a REIT under Sections 856
through 860 of the Code. We believe we have operated, and we intend to continue to operate, in a
manner that allows Carey REIT II to continue to qualify as a REIT. Under the REIT operating
structure, Carey REIT II is permitted to deduct distributions paid to our shareholders and
generally will not be required to pay U.S. federal income taxes. Accordingly, no provision has been
made for U.S. federal income taxes in the consolidated financial statements.
Note 17. Discontinued Operations
From time to time, tenants may vacate space due to lease buy-outs, elections not to renew their
leases, insolvency or lease rejection in the bankruptcy process. In these cases, we assess whether
we can obtain the highest value from the property by re-leasing or selling it. In addition, in
certain cases, we may try to sell a property that is occupied. When it is appropriate to do so
under current accounting guidance for the disposal of long-lived assets, we classify the property
as an asset held for sale and the current and prior period results of operations of the property
are reclassified as discontinued operations.
During the first quarter of 2011, we sold two domestic properties for $9.2 million, net of selling
costs, and recognized a net gain on these sales of $0.8 million, excluding impairment charges of
$2.3 million previously recognized in 2010. The net results of operations of each of these
properties have been reclassified to discontinued operations for the years ended December 31, 2010,
2009 and 2008 (Note 20).
2010 We sold seven properties for a total of $14.6 million, net of selling costs, and recognized
a net gain on these sales totaling $0.5 million, excluding impairment charges totaling $5.9 million
and $6.0 million that were previously recognized in 2010 and 2009, respectively.
2009 We sold five properties for $43.5 million, net of selling costs, and recognized a net gain
on sale of $7.7 million, excluding impairment charges of $0.9 million recognized in 2009, $0.5
million recognized in 2008 and $0.6 million recognized in 2007.
2008 In June 2008, we received $3.8 million from a former tenant in connection with the
resolution of a lawsuit.
The results of operations for properties that are held for sale or have been sold are reflected in
the consolidated financial statements as discontinued operations for all periods presented and are
summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
$ |
3,159 |
|
|
$ |
9,525 |
|
|
$ |
14,327 |
|
Expenses |
|
|
(1,278 |
) |
|
|
(4,217 |
) |
|
|
(4,610 |
) |
Gains on sales of real estate, net |
|
|
460 |
|
|
|
7,701 |
|
|
|
|
|
Impairment charges |
|
|
(8,137 |
) |
|
|
(6,908 |
) |
|
|
(538 |
) |
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations |
|
$ |
(5,796 |
) |
|
$ |
6,101 |
|
|
$ |
9,179 |
|
|
|
|
|
|
|
|
|
|
|
41
Note 18. Segment Reporting
We evaluate our results from operations by our two major business segments investment management
and real estate ownership (Note 1). Effective January 1, 2011, we include our equity investments in
the CPA® REITs in our real estate ownership segment. The equity income or loss from the
CPA® REITs that is now included in our real estate ownership segment represents our
proportionate share of the revenue less expenses of the net-leased properties held by the CPA®
REITs. This treatment is consistent with that of our directly-owned properties. Results of
operations for the years ended December 31, 2010, 2009 and 2008 have been reclassified to conform
to the current presentation (Note 20). The following table presents a summary of comparative
results of these business segments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Investment Management |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (a) |
|
$ |
191,890 |
|
|
$ |
155,119 |
|
|
$ |
147,258 |
|
Operating expenses (a) |
|
|
(133,682 |
) |
|
|
(110,160 |
) |
|
|
(101,202 |
) |
Other, net (b) |
|
|
7,026 |
|
|
|
7,913 |
|
|
|
5,023 |
|
Provision for income taxes |
|
|
(23,661 |
) |
|
|
(21,813 |
) |
|
|
(20,803 |
) |
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations attributable
to W. P. Carey members |
|
$ |
41,573 |
|
|
$ |
31,059 |
|
|
$ |
30,276 |
|
|
|
|
|
|
|
|
|
|
|
Real Estate Ownership |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
80,521 |
|
|
$ |
75,952 |
|
|
$ |
86,166 |
|
Operating expenses |
|
|
(49,593 |
) |
|
|
(41,167 |
) |
|
|
(40,285 |
) |
Interest expense |
|
|
(16,234 |
) |
|
|
(14,979 |
) |
|
|
(18,598 |
) |
Other, net (c) |
|
|
25,662 |
|
|
|
13,037 |
|
|
|
14,047 |
|
Provision for income taxes |
|
|
(2,161 |
) |
|
|
(980 |
) |
|
|
(2,738 |
) |
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations attributable
to W. P. Carey members |
|
$ |
38,195 |
|
|
$ |
31,863 |
|
|
$ |
38,592 |
|
|
|
|
|
|
|
|
|
|
|
Total Company |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (a) |
|
$ |
272,411 |
|
|
$ |
231,071 |
|
|
$ |
233,424 |
|
Operating expenses (a) |
|
|
(183,275 |
) |
|
|
(151,327 |
) |
|
|
(141,487 |
) |
Interest expense |
|
|
(16,234 |
) |
|
|
(14,979 |
) |
|
|
(18,598 |
) |
Other, net (b) |
|
|
32,688 |
|
|
|
20,950 |
|
|
|
19,070 |
|
Provision for income taxes |
|
|
(25,822 |
) |
|
|
(22,793 |
) |
|
|
(23,541 |
) |
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations attributable
to W. P. Carey members |
|
$ |
79,768 |
|
|
$ |
62,922 |
|
|
$ |
68,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Long-Lived Assets(d) |
|
|
Total Assets |
|
|
|
as of December 31, |
|
|
as of December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Investment Management |
|
$ |
3,729 |
|
|
$ |
6,503 |
|
|
$ |
123,921 |
|
|
$ |
128,039 |
|
Real Estate Owners hip |
|
|
946,976 |
|
|
|
884,460 |
|
|
|
1,048,405 |
|
|
|
965,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company |
|
$ |
950,705 |
|
|
$ |
890,963 |
|
|
$ |
1,172,326 |
|
|
$ |
1,093,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Included in revenues and operating expenses are reimbursable costs from affiliates totaling
$60.0 million, $47.5 million and $41.1 million for the years ended December 31, 2010, 2009 and
2008, respectively. |
|
(b) |
|
Includes interest income, cash distributions from CPA®:17 Globals operating
partnership, income (loss) attributable to noncontrolling interests and other income and
(expenses). Other income and (expenses) in 2009 includes other income of $4.0 million related
to a settlement of a dispute with a vendor regarding certain fees we paid in prior years for
services they performed. |
|
(c) |
|
Includes interest income, income from equity investments in real estate and CPA®
REITs, income (loss) attributable to noncontrolling interests and other income and (expenses). |
|
(d) |
|
Includes real estate, real estate under construction, net investment in direct financing
leases, equity investments in real estate, operating real estate and intangible assets related
to management contracts and leases. |
42
Geographic information for our real estate ownership segment is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
Domestic |
|
|
Foreign (a) |
|
|
Total |
|
Revenues |
|
$ |
72,815 |
|
|
$ |
7,706 |
|
|
$ |
80,521 |
|
Operating expenses |
|
|
(45,851 |
) |
|
|
(3,742 |
) |
|
|
(49,593 |
) |
Interest expense |
|
|
(14,492 |
) |
|
|
(1,742 |
) |
|
|
(16,234 |
) |
Other, net (b) |
|
|
21,719 |
|
|
|
3,943 |
|
|
|
25,662 |
|
Provision for income taxes |
|
|
(2,131 |
) |
|
|
(30 |
) |
|
|
(2,161 |
) |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to W. P. Carey members |
|
$ |
32,060 |
|
|
$ |
6,135 |
|
|
$ |
38,195 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
965,418 |
|
|
$ |
82,987 |
|
|
$ |
1,048,405 |
|
Total long-lived assets |
|
$ |
877,850 |
|
|
$ |
69,126 |
|
|
$ |
946,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
Domestic |
|
|
Foreign (a) |
|
|
Total |
|
Revenues |
|
$ |
67,979 |
|
|
$ |
7,973 |
|
|
$ |
75,952 |
|
Operating expenses |
|
|
(38,748 |
) |
|
|
(2,419 |
) |
|
|
(41,167 |
) |
Interest expense |
|
|
(12,928 |
) |
|
|
(2,051 |
) |
|
|
(14,979 |
) |
Other, net (b) |
|
|
7,248 |
|
|
|
5,789 |
|
|
|
13,037 |
|
Provision for income taxes |
|
|
(17 |
) |
|
|
(963 |
) |
|
|
(980 |
) |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to W. P. Carey members |
|
$ |
23,534 |
|
|
$ |
8,329 |
|
|
$ |
31,863 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
900,432 |
|
|
$ |
64,865 |
|
|
$ |
965,297 |
|
Total long-lived assets |
|
$ |
836,549 |
|
|
$ |
47,911 |
|
|
$ |
884,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
Domestic |
|
|
Foreign (a) |
|
|
Total |
|
Revenues |
|
$ |
78,331 |
|
|
$ |
7,835 |
|
|
$ |
86,166 |
|
Operating expenses |
|
|
(37,014 |
) |
|
|
(3,271 |
) |
|
|
(40,285 |
) |
Interest expense |
|
|
(16,450 |
) |
|
|
(2,148 |
) |
|
|
(18,598 |
) |
Other, net (b) |
|
|
10,684 |
|
|
|
3,363 |
|
|
|
14,047 |
|
Provision for income taxes |
|
|
(2,035 |
) |
|
|
(703 |
) |
|
|
(2,738 |
) |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to W. P. Carey members |
|
$ |
33,516 |
|
|
$ |
5,076 |
|
|
$ |
38,592 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
908,371 |
|
|
$ |
57,169 |
|
|
$ |
965,540 |
|
Total long-lived assets |
|
$ |
886,975 |
|
|
$ |
48,541 |
|
|
$ |
935,516 |
|
|
|
|
(a) |
|
At December 31, 2010, our international investments were comprised of investments in France,
Germany, Poland and Spain. |
|
(b) |
|
Includes interest income, income from equity investments in real estate, income (loss)
attributable to noncontrolling interests and other income and (expenses). |
43
Note 19. Selected Quarterly Financial Data (unaudited)
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, 2010 |
|
|
June 30, 2010 |
|
|
September 30, 2010 |
|
|
December 31, 2010 |
|
Revenues (a) |
|
$ |
62,272 |
|
|
$ |
69,650 |
|
|
$ |
58,559 |
|
|
$ |
81,930 |
|
Expenses (a) |
|
|
42,767 |
|
|
|
42,512 |
|
|
|
42,396 |
|
|
|
55,600 |
|
Net income |
|
|
14,302 |
|
|
|
23,721 |
|
|
|
16,371 |
|
|
|
20,557 |
|
Add: Net loss attributable to
noncontrolling interests |
|
|
286 |
|
|
|
128 |
|
|
|
81 |
|
|
|
(181 |
) |
Less: Net income attributable to
redeemable noncontrolling
interests |
|
|
(175 |
) |
|
|
(417 |
) |
|
|
(106 |
) |
|
|
(595 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to
W. P. Carey members |
|
|
14,413 |
|
|
|
23,432 |
|
|
|
16,346 |
|
|
|
19,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to
W. P. Carey members |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
0.36 |
|
|
|
0.59 |
|
|
|
0.41 |
|
|
|
0.50 |
|
Diluted |
|
|
0.36 |
|
|
|
0.59 |
|
|
|
0.41 |
|
|
|
0.50 |
|
Distributions declared per share |
|
|
0.504 |
|
|
|
0.506 |
|
|
|
0.508 |
|
|
|
0.510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, 2009 |
|
|
June 30, 2009 |
|
|
September 30, 2009 |
|
|
December 31, 2009 |
|
Revenues (a) |
|
$ |
59,748 |
|
|
$ |
52,487 |
|
|
$ |
58,865 |
|
|
$ |
59,971 |
|
Expenses (a) |
|
|
37,562 |
|
|
|
36,210 |
|
|
|
37,579 |
|
|
|
39,976 |
|
Net income |
|
|
17,774 |
|
|
|
14,877 |
|
|
|
14,184 |
|
|
|
23,733 |
|
Add: Net loss attributable to
noncontrolling interests |
|
|
170 |
|
|
|
203 |
|
|
|
186 |
|
|
|
154 |
|
Less: Net income attributable to
redeemable noncontrolling
interests |
|
|
(235 |
) |
|
|
(103 |
) |
|
|
(1,019 |
) |
|
|
(901 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to
W. P. Carey members |
|
|
17,709 |
|
|
|
14,977 |
|
|
|
13,351 |
|
|
|
22,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to
W. P. Carey members |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
0.45 |
|
|
|
0.37 |
|
|
|
0.33 |
|
|
|
0.59 |
|
Diluted |
|
|
0.44 |
|
|
|
0.37 |
|
|
|
0.34 |
|
|
|
0.59 |
|
Distributions declared per share |
|
|
0.496 |
|
|
|
0.498 |
|
|
|
0.500 |
|
|
|
0.502 |
(b) |
|
|
|
(a) |
|
Certain amounts from previous quarters have been reclassified to discontinued operations
(Note 17). |
|
(b) |
|
Excludes a special distribution of $0.30 per share paid in January 2010 to shareholders of
record at December 31, 2009. |
44
Note 20. Subsequent Events
Loan to Affiliate
In January 2011, we made a $90.0 million loan to CPA®:17 Global to fund acquisitions
that were closed within the first two weeks of the year. The principal and accrued interest thereon
at 1.15% per annum are due to us no later than March 11, 2011. We funded the loan with proceeds
from our line of credit.
Retrospective Adjustment for Discontinued Operations and Segment Reporting
During the first quarter of 2011, we sold two domestic properties for $9.2 million, net of selling
costs, and recognized a net gain on these sales of $0.8 million, excluding impairment charges of
$2.3 million previously recognized in 2010. In accordance with current authoritative guidance for
accounting for disposal of long-lived assets, the accompanying consolidated statements of income
have been retrospectively adjusted and the net results of operations of each of these properties
have been reclassified to Discontinued Operations for the years ended December 31, 2010, 2009 and
2008. The net effect of the reclassification represents an increase of $1.2 million, or 1%, in our
previously reported income from continuing operations for the year ended December 31, 2010, and
decreases of $0.9 million, or 1%, and $0.8 million, or 1%, in our previously reported income from
continuing operations for the years ended December 31, 2009 and 2008, respectively. There is no
effect on our previously reported net income, financial condition or cash flows.
Additionally, effective January 1, 2011, we reclassified our equity investments in the CPA®
REITs from our investment management segment to our real estate ownership segment. The equity
income or loss from the CPA® REITs that is now included in our real estate ownership
segment represents our proportionate share of the revenue less expenses of the net-leased
properties held by the CPA® REITs. This treatment is consistent with that of our
directly-owned properties. Results of operations for the years ended December 31, 2010, 2009 and
2008 have been reclassified to conform to the current presentation. The net effect of the
reclassification represents a decrease in net income of $9.1 million and $4.6 million for the years
ended December 31, 2010 and 2008, respectively, and an increase in net income of $1.7 million for
the year ended December 31, 2009 in the investment management segment, with the corresponding
increase and decrease in the real estate ownership segment. In addition, each of equity investments
in real estate, total long-lived assets and total assets in the investment management segment
decreased by $245.1 million and $216.0 million at December 31, 2010 and 2009, respectively, with
the corresponding increase in the real estate ownership segment. There is no effect on our
previously reported consolidated net income, financial condition or cash flows.
Merger of Affiliates
On May 2, 2011, CPA®:14 merged with and into a subsidiary of CPA®:16
Global based on a definitive merger agreement executed on December 13, 2010 (the Merger).
In connection with the Merger, on May 2, 2011, we purchased three properties from
CPA®:14, in which we already had a joint venture interest, for an aggregate purchase
price of approximately $32.1 million, plus the assumption of approximately $64.7 million of
indebtedness.
Upon consummation of the Merger, we expect to earn fees of $31.2 million in connection with the
termination of the advisory agreements with CPA®:14 and $21.3 million of subordinated
disposition revenues. We elected to receive our termination fee in shares of CPA®:14,
which we exchanged into approximately 3.2 million shares of CPA®:16 Global. In
addition, we will receive approximately $11.1 million as a result of the $1.00 per share special
cash distribution to be paid by CPA®:14 to its shareholders. Upon closing of the Merger,
we received approximately 13.2 million shares of common stock of CPA®:16 Global in
respect of our shares of CPA®:14.
Carey Asset Management (CAM), our subsidiary that acts as the advisor to the REITs, has waived
any acquisition fees payable by CPA®:16 Global under its advisory agreement with CAM
in respect of the properties acquired in the Merger and also waived any disposition fees that may
subsequently be payable by CPA®:16 Global upon a sale of such assets. Additionally,
on May 2, 2011, we entered into an amended and restated advisory agreement with CPA®:16
Global which changes our fee arrangement with CPA®:16 Global under its new UPREIT
structure. Changes include, among others, a reduction in our asset management fee from 1% to 0.5%
of the property value of the assets under management and the distribution of 10% of the available
cash of CPA®:16 Globals operating partnership.
45
In the Merger, CPA®:14 shareholders were entitled to receive $11.50 per share, which is
equal to the NAV of CPA®:14 as of
September 30, 2010. The merger consideration of approximately $534.4 million was paid by
CPA®:16 Global, including payment of approximately $486.3 million to liquidating
shareholders and approximately $48.1 million to shareholders merging into CPA®:16
Global. In connection with the Merger, we agreed to purchase a sufficient number of shares of
CPA®:16 Global common stock from CPA®:16 Global to enable it to pay the
merger consideration if the cash on hand and available to CPA®:14 and CPA®:16
Global, including the proceeds of the CPA®:14 asset sales and a new $320.0 million
senior credit facility of CPA®:16 Global, were not sufficient. Accordingly, we
purchased approximately 13.8 million shares of CPA®:16 Global on May 2, 2011 for
approximately $121.0 million, based on an NAV of $8.8 per share, which we funded with cash on hand
and available credit facilities, including $121.4 million drawn on our existing line of credit.
Subsequent to the Merger we own approximately 34.5 million shares, or 17.3%, of CPA®:16
Global.
Financing
On May 2, 2011, we obtained a $30.0 million secured revolving line of credit from Bank of America.
The secured line of credit provides for an annual interest rate (as defined in the credit facility
agreement) of either: (i) the Adjusted LIBO Rate plus 2.50%, or (ii) the Alternative Base Rate plus
3.50%. In addition, we paid a commitment fee of 0.25%, or $75,000, and are required to pay an
annual fee on the unused portion of the line of credit of 50 basis points. This new line of credit
is collateralized by five properties with a carrying value of approximately $51.4 million and is
coterminous with the unsecured line of credit, expiring in June 2012. Through the date of this
Report, we have borrowed $10.0 million on this line and used a portion of it to fund a short-term
$4.0 million loan to Carey Watermark.
46
SCHEDULE III REAL ESTATE and ACCUMULATED DEPRECIATION
at December 31, 2010
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life on which |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs Capitalized |
|
|
Increase |
|
|
Gross Amount at which Carried |
|
|
|
|
|
|
|
|
|
|
Latest Statement |
|
|
|
|
|
|
|
Initial Cost to Company |
|
|
Subsequent to |
|
|
(Decrease) in Net |
|
|
at Close of Period(c) |
|
|
Accumulated |
|
|
Date |
|
|
of Income is |
|
Description |
|
Encumbrances |
|
|
Land |
|
|
Buildings |
|
|
Acquisition(a) |
|
|
Investments(b) |
|
|
Land |
|
|
Buildings |
|
|
Total |
|
|
Depreciation(c) |
|
|
Acquired |
|
|
Computed |
|
|
|
|
|
Real Estate Under
Operating Leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office facilities in Broomfield, CO |
|
$ |
|
|
|
$ |
248 |
|
|
$ |
2,538 |
|
|
$ |
4,844 |
|
|
$ |
(1,784 |
) |
|
$ |
2,928 |
|
|
$ |
2,918 |
|
|
$ |
5,846 |
|
|
$ |
1,070 |
|
|
Jan. 1998 |
|
40 yrs. |
Distribution facilities and warehouses in Erlanger, KY |
|
|
9,593 |
|
|
|
1,526 |
|
|
|
21,427 |
|
|
|
2,952 |
|
|
|
141 |
|
|
|
1,526 |
|
|
|
24,520 |
|
|
|
26,046 |
|
|
|
7,903 |
|
|
Jan. 1998 |
|
40 yrs. |
Retail stores in Montgomery and Brewton, AL |
|
|
|
|
|
|
855 |
|
|
|
6,762 |
|
|
|
103 |
|
|
|
(6,121 |
) |
|
|
407 |
|
|
|
1,192 |
|
|
|
1,599 |
|
|
|
718 |
|
|
Jan. 1998 |
|
40 yrs. |
Land in Commerce, CA |
|
|
|
|
|
|
4,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,573 |
|
|
|
|
|
|
|
4,573 |
|
|
|
|
|
|
Jan. 1998 |
|
|
N/A |
|
Office facility in Beaumont, TX |
|
|
|
|
|
|
164 |
|
|
|
2,344 |
|
|
|
967 |
|
|
|
|
|
|
|
164 |
|
|
|
3,311 |
|
|
|
3,475 |
|
|
|
1,201 |
|
|
Jan. 1998 |
|
40 yrs. |
Office and industrial facilities in Bridgeton, MO |
|
|
|
|
|
|
270 |
|
|
|
5,100 |
|
|
|
4,166 |
|
|
|
|
|
|
|
270 |
|
|
|
9,266 |
|
|
|
9,536 |
|
|
|
2,131 |
|
|
Jan. 1998 |
|
40 yrs. |
Partially vacant industrial/office and distribution facilities in Salisbury, NC |
|
|
|
|
|
|
247 |
|
|
|
5,035 |
|
|
|
2,702 |
|
|
|
|
|
|
|
247 |
|
|
|
7,737 |
|
|
|
7,984 |
|
|
|
2,871 |
|
|
Jan. 1998 |
|
40 yrs. |
Office facility in Raleigh, NC |
|
|
|
|
|
|
1,638 |
|
|
|
2,844 |
|
|
|
157 |
|
|
|
(2,554 |
) |
|
|
828 |
|
|
|
1,257 |
|
|
|
2,085 |
|
|
|
312 |
|
|
Jan. 1998 |
|
20 yrs. |
Office facility in King of Prussia, PA |
|
|
|
|
|
|
1,219 |
|
|
|
6,283 |
|
|
|
1,295 |
|
|
|
|
|
|
|
1,219 |
|
|
|
7,578 |
|
|
|
8,797 |
|
|
|
2,264 |
|
|
Jan. 1998 |
|
40 yrs. |
Warehouse and distribution facility in Fort Lauderdale, FL |
|
|
|
|
|
|
1,893 |
|
|
|
11,077 |
|
|
|
703 |
|
|
|
(8,449 |
) |
|
|
1,173 |
|
|
|
4,051 |
|
|
|
5,224 |
|
|
|
1,221 |
|
|
Jan. 1998 |
|
40 yrs. |
Industrial facilities in Pinconning, MS |
|
|
|
|
|
|
32 |
|
|
|
1,692 |
|
|
|
|
|
|
|
|
|
|
|
32 |
|
|
|
1,692 |
|
|
|
1,724 |
|
|
|
550 |
|
|
Jan. 1998 |
|
40 yrs. |
Industrial facilities in San Fernando, CA |
|
|
8,256 |
|
|
|
2,052 |
|
|
|
5,322 |
|
|
|
|
|
|
|
152 |
|
|
|
2,052 |
|
|
|
5,474 |
|
|
|
7,526 |
|
|
|
1,769 |
|
|
Jan. 1998 |
|
40 yrs. |
Land leased in several cities in the following states: Alabama, Florida, Georgia, Illinois, Louisiana, Missouri, New Mexico, North Carolina, South Carolina and Texas |
|
|
728 |
|
|
|
9,382 |
|
|
|
|
|
|
|
|
|
|
|
(172 |
) |
|
|
9,210 |
|
|
|
|
|
|
|
9,210 |
|
|
|
|
|
|
Jan. 1998 |
|
|
N/A |
|
Industrial facility in Milton, VT |
|
|
|
|
|
|
220 |
|
|
|
1,579 |
|
|
|
|
|
|
|
|
|
|
|
220 |
|
|
|
1,579 |
|
|
|
1,799 |
|
|
|
513 |
|
|
Jan. 1998 |
|
40 yrs. |
Land in Glendora, CA |
|
|
|
|
|
|
1,135 |
|
|
|
|
|
|
|
|
|
|
|
17 |
|
|
|
1,152 |
|
|
|
|
|
|
|
1,152 |
|
|
|
|
|
|
Jan. 1998 |
|
|
N/A |
|
Office facilities in Bloomingdale, IL |
|
|
|
|
|
|
1,075 |
|
|
|
11,453 |
|
|
|
997 |
|
|
|
|
|
|
|
1,090 |
|
|
|
12,435 |
|
|
|
13,525 |
|
|
|
3,877 |
|
|
Jan. 1998 |
|
40 yrs. |
Industrial facility in Doraville, GA |
|
|
|
|
|
|
3,288 |
|
|
|
9,864 |
|
|
|
246 |
|
|
|
275 |
|
|
|
3,288 |
|
|
|
10,385 |
|
|
|
13,673 |
|
|
|
3,287 |
|
|
Jan. 1998 |
|
40 yrs. |
Office facilities in Collierville, TN |
|
|
|
|
|
|
335 |
|
|
|
1,839 |
|
|
|
|
|
|
|
|
|
|
|
335 |
|
|
|
1,839 |
|
|
|
2,174 |
|
|
|
598 |
|
|
Jan. 1998 |
|
40 yrs. |
Land in Irving and Houston, TX |
|
|
8,992 |
|
|
|
9,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,795 |
|
|
|
|
|
|
|
9,795 |
|
|
|
|
|
|
Jan. 1998 |
|
|
N/A |
|
Industrial facility in Chandler, AZ |
|
|
13,259 |
|
|
|
5,035 |
|
|
|
18,957 |
|
|
|
7,435 |
|
|
|
541 |
|
|
|
5,035 |
|
|
|
26,933 |
|
|
|
31,968 |
|
|
|
7,392 |
|
|
Jan. 1998 |
|
40 yrs. |
Warehouse and distribution facilities in Houston, TX |
|
|
|
|
|
|
167 |
|
|
|
885 |
|
|
|
60 |
|
|
|
|
|
|
|
167 |
|
|
|
945 |
|
|
|
1,112 |
|
|
|
295 |
|
|
Jan. 1998 |
|
40 yrs. |
Industrial facility in Prophetstown, IL |
|
|
|
|
|
|
70 |
|
|
|
1,477 |
|
|
|
|
|
|
|
(909 |
) |
|
|
70 |
|
|
|
568 |
|
|
|
638 |
|
|
|
121 |
|
|
Jan. 1998 |
|
40 yrs. |
Office facilities in Bridgeton, MO |
|
|
|
|
|
|
842 |
|
|
|
4,762 |
|
|
|
1,627 |
|
|
|
71 |
|
|
|
842 |
|
|
|
6,460 |
|
|
|
7,302 |
|
|
|
992 |
|
|
Jan. 1998 |
|
40 yrs. |
Industrial facility in Industry, CA |
|
|
|
|
|
|
3,789 |
|
|
|
13,164 |
|
|
|
1,380 |
|
|
|
318 |
|
|
|
3,789 |
|
|
|
14,862 |
|
|
|
18,651 |
|
|
|
3,708 |
|
|
Jan. 1998 |
|
40 yrs. |
Warehouse and distribution facilities in Memphis, TN |
|
|
|
|
|
|
1,051 |
|
|
|
14,037 |
|
|
|
510 |
|
|
|
(2,571 |
) |
|
|
1,051 |
|
|
|
11,976 |
|
|
|
13,027 |
|
|
|
8,695 |
|
|
Jan. 1998 |
|
7 yrs. |
Retail stores in Drayton Plains, MI and Citrus Heights, CA |
|
|
|
|
|
|
1,039 |
|
|
|
4,788 |
|
|
|
165 |
|
|
|
193 |
|
|
|
1,039 |
|
|
|
5,146 |
|
|
|
6,185 |
|
|
|
791 |
|
|
Jan. 1998 |
|
35 yrs. |
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life on which |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs Capitalized |
|
|
Increase |
|
|
Gross Amount at which Carried |
|
|
|
|
|
|
|
|
|
|
Latest Statement |
|
|
|
|
|
|
|
Initial Cost to Company |
|
|
Subsequent to |
|
|
(Decrease) in Net |
|
|
at Close of Period(c) |
|
|
Accumulated |
|
|
Date |
|
|
of Income is |
|
Description |
|
Encumbrances |
|
|
Land |
|
|
Buildings |
|
|
Acquisition(a) |
|
|
Investments(b) |
|
|
Land |
|
|
Buildings |
|
|
Total |
|
|
Depreciation(c) |
|
|
Acquired |
|
|
Computed |
|
Real Estate Under
Operating Leases
(Continued): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse and distribution facilities in New Orleans, LA; Memphis, TN and San Antonio, TX |
|
|
|
|
|
|
328 |
|
|
|
1,463 |
|
|
|
|
|
|
|
|
|
|
|
328 |
|
|
|
1,463 |
|
|
|
1,791 |
|
|
|
187 |
|
|
Jan. 1998 |
|
15 yrs. |
Retail store in Bellevue, WA |
|
|
8,784 |
|
|
|
4,125 |
|
|
|
11,812 |
|
|
|
393 |
|
|
|
|
|
|
|
4,494 |
|
|
|
11,836 |
|
|
|
16,330 |
|
|
|
3,760 |
|
|
Apr. 1998 |
|
40 yrs. |
Office facility in Houston, TX |
|
|
5,000 |
|
|
|
3,260 |
|
|
|
22,574 |
|
|
|
801 |
|
|
|
(3,765 |
) |
|
|
2,785 |
|
|
|
20,085 |
|
|
|
22,870 |
|
|
|
6,469 |
|
|
Jun. 1998 |
|
40 yrs. |
Office facility in Rio Rancho, NM |
|
|
7,853 |
|
|
|
1,190 |
|
|
|
9,353 |
|
|
|
1,316 |
|
|
|
|
|
|
|
1,467 |
|
|
|
10,392 |
|
|
|
11,859 |
|
|
|
3,073 |
|
|
Jul. 1998 |
|
40 yrs. |
Vacant office facility in Moorestown, NJ |
|
|
5,285 |
|
|
|
351 |
|
|
|
5,981 |
|
|
|
919 |
|
|
|
42 |
|
|
|
351 |
|
|
|
6,942 |
|
|
|
7,293 |
|
|
|
2,412 |
|
|
Feb. 1999 |
|
40 yrs. |
Office facility in Norcross, GA |
|
|
29,138 |
|
|
|
5,200 |
|
|
|
25,585 |
|
|
|
11,822 |
|
|
|
|
|
|
|
5,200 |
|
|
|
37,407 |
|
|
|
42,607 |
|
|
|
10,456 |
|
|
Jun. 1999 |
|
40 yrs. |
Office facility in Tours, France |
|
|
6,401 |
|
|
|
1,034 |
|
|
|
9,737 |
|
|
|
226 |
|
|
|
4,210 |
|
|
|
1,455 |
|
|
|
13,752 |
|
|
|
15,207 |
|
|
|
3,465 |
|
|
Sep. 2000 |
|
40 yrs. |
Office facility in Illkirch, France |
|
|
15,650 |
|
|
|
|
|
|
|
18,520 |
|
|
|
|
|
|
|
9,189 |
|
|
|
|
|
|
|
27,709 |
|
|
|
27,709 |
|
|
|
7,464 |
|
|
Dec. 2001 |
|
40 yrs. |
Industrial, warehouse and distribution facilities in Lenexa, KS; Winston-Salem, NC and Dallas, TX |
|
|
8,159 |
|
|
|
1,860 |
|
|
|
12,539 |
|
|
|
|
|
|
|
5 |
|
|
|
1,860 |
|
|
|
12,544 |
|
|
|
14,404 |
|
|
|
2,666 |
|
|
Sep. 2002 |
|
40 yrs. |
Office buildings in Venice, CA |
|
|
|
|
|
|
2,032 |
|
|
|
10,152 |
|
|
|
|
|
|
|
1 |
|
|
|
2,032 |
|
|
|
10,153 |
|
|
|
12,185 |
|
|
|
1,597 |
|
|
Sep. 2004 |
|
40 yrs. |
Retail store in West Mifflin, PA and warehouse and distribution facility in Greenfield, IN |
|
|
|
|
|
|
2,807 |
|
|
|
10,335 |
|
|
|
210 |
|
|
|
(7,161 |
) |
|
|
2,127 |
|
|
|
4,064 |
|
|
|
6,191 |
|
|
|
773 |
|
|
Sep. 2004 |
|
40 yrs. |
Office facility in San Diego, CA |
|
|
|
|
|
|
4,647 |
|
|
|
19,712 |
|
|
|
8 |
|
|
|
40 |
|
|
|
4,647 |
|
|
|
19,760 |
|
|
|
24,407 |
|
|
|
3,107 |
|
|
Sep. 2004 |
|
40 yrs. |
Warehouse and distribution facilities in Birmingham, AL |
|
|
4,681 |
|
|
|
1,256 |
|
|
|
7,704 |
|
|
|
|
|
|
|
|
|
|
|
1,256 |
|
|
|
7,704 |
|
|
|
8,960 |
|
|
|
1,212 |
|
|
Sep. 2004 |
|
40 yrs. |
Industrial facility in Scottsdale, AZ |
|
|
1,353 |
|
|
|
586 |
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
586 |
|
|
|
46 |
|
|
|
632 |
|
|
|
7 |
|
|
Sep. 2004 |
|
40 yrs. |
Retail stores in Hope, Little Rock and Hot Springs, AZ |
|
|
|
|
|
|
850 |
|
|
|
2,939 |
|
|
|
2 |
|
|
|
(2,160 |
) |
|
|
85 |
|
|
|
1,546 |
|
|
|
1,631 |
|
|
|
244 |
|
|
Sep. 2004 |
|
40 yrs. |
Industrial facilities in Apopka, FL |
|
|
|
|
|
|
362 |
|
|
|
10,855 |
|
|
|
474 |
|
|
|
|
|
|
|
362 |
|
|
|
11,329 |
|
|
|
11,691 |
|
|
|
1,715 |
|
|
Sep. 2004 |
|
40 yrs. |
Retail facility in Jacksonville, FL |
|
|
|
|
|
|
975 |
|
|
|
6,980 |
|
|
|
20 |
|
|
|
|
|
|
|
975 |
|
|
|
7,000 |
|
|
|
7,975 |
|
|
|
1,099 |
|
|
Sep. 2004 |
|
40 yrs. |
Retail facilities in Charlotte, NC |
|
|
|
|
|
|
1,639 |
|
|
|
10,608 |
|
|
|
172 |
|
|
|
24 |
|
|
|
1,639 |
|
|
|
10,804 |
|
|
|
12,443 |
|
|
|
1,843 |
|
|
Sep. 2004 |
|
40 yrs. |
Land in San Leandro, CA |
|
|
|
|
|
|
1,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,532 |
|
|
|
|
|
|
|
1,532 |
|
|
|
|
|
|
Dec. 2006 |
|
|
N/A |
|
Educational facility in Mendota Heights, MN |
|
|
6,599 |
|
|
|
2,484 |
|
|
|
9,078 |
|
|
|
|
|
|
|
(5,623 |
) |
|
|
2,484 |
|
|
|
3,455 |
|
|
|
5,939 |
|
|
|
1,199 |
|
|
Dec. 2006 |
|
30.9 yrs. |
Industrial facility in Sunnyvale, CA |
|
|
|
|
|
|
1,663 |
|
|
|
3,571 |
|
|
|
|
|
|
|
|
|
|
|
1,663 |
|
|
|
3,571 |
|
|
|
5,234 |
|
|
|
540 |
|
|
Dec. 2006 |
|
27 yrs. |
Fitness and recreational sports center in Austin, TX |
|
|
2,766 |
|
|
|
1,725 |
|
|
|
5,168 |
|
|
|
|
|
|
|
|
|
|
|
1,725 |
|
|
|
5,168 |
|
|
|
6,893 |
|
|
|
740 |
|
|
Dec. 2006 |
|
28.5 yrs. |
Retail store in Wroclaw, Poland |
|
|
8,522 |
|
|
|
3,600 |
|
|
|
10,306 |
|
|
|
|
|
|
|
(1,927 |
) |
|
|
3,313 |
|
|
|
8,666 |
|
|
|
11,979 |
|
|
|
662 |
|
|
Dec. 2007 |
|
40 yrs. |
Office facility in Fort Worth, TX |
|
|
34,804 |
|
|
|
4,600 |
|
|
|
37,580 |
|
|
|
|
|
|
|
|
|
|
|
4,600 |
|
|
|
37,580 |
|
|
|
42,180 |
|
|
|
861 |
|
|
Feb. 2010 |
|
40 yrs. |
Warehouse and distribution facility in Mallorca, Spain |
|
|
|
|
|
|
11,109 |
|
|
|
12,636 |
|
|
|
|
|
|
|
2,279 |
|
|
|
12,192 |
|
|
|
13,832 |
|
|
|
26,024 |
|
|
|
202 |
|
|
Jun. 2010 |
|
40 yrs. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
185,823 |
|
|
$ |
111,155 |
|
|
$ |
428,463 |
|
|
$ |
46,672 |
|
|
$ |
(25,698 |
) |
|
$ |
111,660 |
|
|
$ |
448,932 |
|
|
$ |
560,592 |
|
|
$ |
108,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amount at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs Capitalized |
|
|
Increase |
|
|
which Carried |
|
|
|
|
|
|
|
|
|
Initial Cost to Company |
|
|
Subsequent to |
|
|
(Decrease) in Net |
|
|
at Close of |
|
|
Date |
Description |
|
Encumbrances |
|
|
Land |
|
|
Buildings |
|
|
Acquisition(a) |
|
|
Investments(b) |
|
|
Period Total |
|
|
Acquired |
Direct Financing Method: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse and distribution facilities in Anchorage, Alaska and Commerce, California |
|
$ |
|
|
|
$ |
332 |
|
|
$ |
12,281 |
|
|
$ |
|
|
|
$ |
(375 |
) |
|
$ |
12,238 |
|
|
Jan. 1998 |
Office facility in Toledo, Ohio |
|
|
2,381 |
|
|
|
224 |
|
|
|
2,684 |
|
|
|
|
|
|
|
(338 |
) |
|
|
2,570 |
|
|
Jan. 1998 |
Industrial facility in Goshen, Indiana |
|
|
|
|
|
|
239 |
|
|
|
3,339 |
|
|
|
|
|
|
|
(2,399 |
) |
|
|
1,179 |
|
|
Jan. 1998 |
Retail stores in several cities in the following states: Alabama, Florida, Georgia, Illinois, Louisiana,
Missouri, New Mexico, North Carolina, South Carolina and Texas |
|
|
1,083 |
|
|
|
|
|
|
|
16,416 |
|
|
|
|
|
|
|
(867 |
) |
|
|
15,549 |
|
|
Jan. 1998 |
Office and industrial facilities in Glendora, California and Romulus, Michigan |
|
|
|
|
|
|
454 |
|
|
|
13,251 |
|
|
|
9 |
|
|
|
(2,684 |
) |
|
|
11,030 |
|
|
Jan. 1998 |
Industrial facilities in Thurmont, Maryland and Farmington, New York |
|
|
|
|
|
|
729 |
|
|
|
6,093 |
|
|
|
|
|
|
|
(121 |
) |
|
|
6,701 |
|
|
Jan. 1998 |
Warehouse and distribution facilities in New Orleans, Louisiana; Memphis, Tennessee and San Antonio, Texas |
|
|
|
|
|
|
1,882 |
|
|
|
5,846 |
|
|
|
38 |
|
|
|
(3,584 |
) |
|
|
4,182 |
|
|
Jan. 1998 |
Industrial facilities in Irving and Houston, Texas |
|
|
21,206 |
|
|
|
|
|
|
|
27,599 |
|
|
|
|
|
|
|
(4,498 |
) |
|
|
23,101 |
|
|
Jan. 1998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,670 |
|
|
$ |
3,860 |
|
|
$ |
87,509 |
|
|
$ |
47 |
|
|
$ |
(14,866 |
) |
|
$ |
76,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life on which |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs |
|
|
Increase |
|
|
Gross Amount at which Carried |
|
|
|
|
|
|
|
|
|
|
in Latest |
|
|
|
|
|
|
|
Initial Cost to Company |
|
|
Capitalized |
|
|
(Decrease) |
|
|
at Close of Period(c) |
|
|
|
|
|
|
|
|
|
|
Statement of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal |
|
|
Subsequent to |
|
|
in Net |
|
|
|
|
|
|
|
|
|
|
Personal |
|
|
|
|
|
|
Accumulated |
|
|
Date |
|
|
Income is |
|
Description |
|
Encumbrances |
|
|
Land |
|
|
Buildings |
|
|
Property |
|
|
Acquisition(a) |
|
|
Investments(b) |
|
|
Land |
|
|
Buildings |
|
|
Property |
|
|
Total |
|
|
Depreciation(c) |
|
|
Acquired |
|
|
Computed |
|
Operating Real
Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel located in Livonia, Michigan |
|
$ |
|
|
|
$ |
2,765 |
|
|
$ |
11,087 |
|
|
$ |
3,277 |
|
|
$ |
19,291 |
|
|
$ |
(9,971 |
) |
|
$ |
2,765 |
|
|
$ |
14,755 |
|
|
$ |
8,929 |
|
|
$ |
26,449 |
|
|
$ |
9,242 |
|
|
Jan. 1998 |
|
7-40 yrs. |
Self-storage facilities in Taunton, North Andover, North Billerica and Brockton, Massachusetts |
|
|
8,406 |
|
|
|
4,300 |
|
|
|
12,274 |
|
|
|
|
|
|
|
214 |
|
|
|
(478 |
) |
|
|
4,300 |
|
|
|
12,010 |
|
|
|
|
|
|
|
16,310 |
|
|
|
1,359 |
|
|
Dec. 2006 |
|
25-40 yrs. |
Self-storage facility in Newington, Connecticut |
|
|
2,153 |
|
|
|
520 |
|
|
|
2,973 |
|
|
|
|
|
|
|
217 |
|
|
|
(121 |
) |
|
|
520 |
|
|
|
3,069 |
|
|
|
|
|
|
|
3,589 |
|
|
|
309 |
|
|
Dec. 2006 |
|
40 yrs. |
Self-storage facility in Killeen, Texas |
|
|
3,350 |
|
|
|
1,230 |
|
|
|
3,821 |
|
|
|
|
|
|
|
337 |
|
|
|
(179 |
) |
|
|
1,230 |
|
|
|
3,979 |
|
|
|
|
|
|
|
5,209 |
|
|
|
402 |
|
|
Dec. 2006 |
|
30 yrs. |
Self-storage facility in Roehnert Park, California |
|
|
3,136 |
|
|
|
1,761 |
|
|
|
4,989 |
|
|
|
|
|
|
|
39 |
|
|
|
|
|
|
|
1,761 |
|
|
|
5,028 |
|
|
|
|
|
|
|
6,789 |
|
|
|
493 |
|
|
Jan. 2007 |
|
40 yrs. |
Self-storage facility in Fort Worth, Texas |
|
|
1,565 |
|
|
|
1,030 |
|
|
|
4,176 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
1,030 |
|
|
|
4,209 |
|
|
|
|
|
|
|
5,239 |
|
|
|
415 |
|
|
Jan. 2007 |
|
40 yrs. |
Self-storage facility in Augusta, Georgia |
|
|
1,947 |
|
|
|
970 |
|
|
|
2,442 |
|
|
|
|
|
|
|
48 |
|
|
|
|
|
|
|
970 |
|
|
|
2,490 |
|
|
|
|
|
|
|
3,460 |
|
|
|
241 |
|
|
Feb. 2007 |
|
39 yrs. |
Self-storage facility in Garland, Texas |
|
|
1,490 |
|
|
|
880 |
|
|
|
3,104 |
|
|
|
|
|
|
|
58 |
|
|
|
|
|
|
|
880 |
|
|
|
3,162 |
|
|
|
|
|
|
|
4,042 |
|
|
|
301 |
|
|
Feb. 2007 |
|
40 yrs. |
Self-storage facility in Lawrenceville, Georgia |
|
|
2,403 |
|
|
|
1,410 |
|
|
|
4,477 |
|
|
|
|
|
|
|
69 |
|
|
|
|
|
|
|
1,410 |
|
|
|
4,546 |
|
|
|
|
|
|
|
5,956 |
|
|
|
468 |
|
|
Mar. 2007 |
|
37 yrs. |
Self-storage facility in Fairfield, Ohio |
|
|
1,617 |
|
|
|
540 |
|
|
|
2,640 |
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
540 |
|
|
|
2,659 |
|
|
|
|
|
|
|
3,199 |
|
|
|
331 |
|
|
Apr. 2007 |
|
30 yrs. |
Self-storage facility in Tallahassee, Florida |
|
|
3,199 |
|
|
|
850 |
|
|
|
5,736 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
850 |
|
|
|
5,743 |
|
|
|
|
|
|
|
6,593 |
|
|
|
522 |
|
|
Apr. 2007 |
|
40 yrs. |
Self-storage facility in Lincolnshire, Illinois |
|
|
2,029 |
|
|
|
1,477 |
|
|
|
1,519 |
|
|
|
|
|
|
|
67 |
|
|
|
|
|
|
|
1,477 |
|
|
|
1,586 |
|
|
|
|
|
|
|
3,063 |
|
|
|
36 |
|
|
Jul. 2010 |
|
18 yrs. |
Self-storage facility in Chicago, Illinois |
|
|
1,096 |
|
|
|
823 |
|
|
|
912 |
|
|
|
|
|
|
|
580 |
|
|
|
|
|
|
|
823 |
|
|
|
1,492 |
|
|
|
|
|
|
|
2,315 |
|
|
|
32 |
|
|
Jul. 2010 |
|
15 yrs. |
Self-storage facility in Chicago, Illinois |
|
|
1,178 |
|
|
|
700 |
|
|
|
733 |
|
|
|
|
|
|
|
482 |
|
|
|
|
|
|
|
700 |
|
|
|
1,215 |
|
|
|
|
|
|
|
1,915 |
|
|
|
22 |
|
|
Jul. 2010 |
|
15 yrs. |
Self-storage facility in Bedford Park, Illinois |
|
|
1,111 |
|
|
|
809 |
|
|
|
1,312 |
|
|
|
|
|
|
|
169 |
|
|
|
|
|
|
|
809 |
|
|
|
1,481 |
|
|
|
|
|
|
|
2,290 |
|
|
|
29 |
|
|
Jul. 2010 |
|
20 yrs. |
Self-storage facility in Bentonville, Arkansas |
|
|
2,090 |
|
|
|
1,050 |
|
|
|
1,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,050 |
|
|
|
1,323 |
|
|
|
|
|
|
|
2,373 |
|
|
|
18 |
|
|
Sep. 2010 |
|
24 yrs. |
Self-storage facility Tallahassee, Florida |
|
|
3,947 |
|
|
|
570 |
|
|
|
3,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
570 |
|
|
|
3,447 |
|
|
|
|
|
|
|
4,017 |
|
|
|
29 |
|
|
Sep. 2010 |
|
30 yrs. |
Self-storage facility in Pensacola, Florida |
|
|
1,872 |
|
|
|
560 |
|
|
|
2,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
560 |
|
|
|
2,082 |
|
|
|
|
|
|
|
2,642 |
|
|
|
17 |
|
|
Sep. 2010 |
|
30 yrs. |
Self-storage facility in Chicago, Illinois |
|
|
2,150 |
|
|
|
1,785 |
|
|
|
2,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,785 |
|
|
|
2,616 |
|
|
|
|
|
|
|
4,401 |
|
|
|
14 |
|
|
Oct. 2010 |
|
32 yrs. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
44,739 |
|
|
$ |
24,030 |
|
|
$ |
71,663 |
|
|
$ |
3,277 |
|
|
$ |
21,630 |
|
|
$ |
(10,749 |
) |
|
$ |
24,030 |
|
|
$ |
76,892 |
|
|
$ |
8,929 |
|
|
$ |
109,851 |
|
|
$ |
14,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
NOTES TO SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
|
|
|
(a) |
|
Consists of the cost of improvements and acquisition costs subsequent to acquisition,
including legal fees, appraisal fees, title costs, other related professional fees and
purchases of furniture, fixtures, equipment and improvements at the hotel properties. |
|
(b) |
|
The increase (decrease) in net investment is primarily due to (i) the amortization of
unearned income from net investment in direct financing leases, which produces a periodic rate
of return that at times may be greater or less than lease payments received, (ii) sales of
properties, (iii) impairment charges, (iv) changes in foreign currency exchange rates and (v)
adjustments in connection with purchasing certain noncontrolling interests. |
|
(c) |
|
Reconciliation of real estate and accumulated depreciation (see below). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Real Estate Subject to |
|
|
|
Operating Leases |
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Balance at beginning of year |
|
$ |
525,607 |
|
|
$ |
603,044 |
|
|
$ |
602,109 |
|
Additions |
|
|
67,787 |
|
|
|
4,754 |
|
|
|
4,972 |
|
Dispositions |
|
|
(18,896 |
) |
|
|
(46,951 |
) |
|
|
|
|
Foreign currency translation adjustment |
|
|
(2,142 |
) |
|
|
966 |
|
|
|
(2,608 |
) |
Reclassification from (to) equity
investment, direct financing lease,
intangible assets or assets held for
sale |
|
|
1,790 |
|
|
|
(28,977 |
) |
|
|
(891 |
) |
Impairment charge |
|
|
(13,554 |
) |
|
|
(7,229 |
) |
|
|
(538 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
560,592 |
|
|
$ |
525,607 |
|
|
$ |
603,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of |
|
|
|
Accumulated Depreciation |
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Balance at beginning of year |
|
$ |
100,247 |
|
|
$ |
103,249 |
|
|
$ |
88,704 |
|
Depreciation expense |
|
|
13,437 |
|
|
|
12,841 |
|
|
|
15,007 |
|
Depreciation expense from discontinued operations |
|
|
578 |
|
|
|
1,298 |
|
|
|
|
|
Foreign currency translation adjustment |
|
|
(839 |
) |
|
|
285 |
|
|
|
(462 |
) |
Reclassification from (to) equity investment,
direct financing lease, intangible assets or
assets held for sale |
|
|
187 |
|
|
|
(6,451 |
) |
|
|
|
|
Dispositions |
|
|
(5,578 |
) |
|
|
(10,975 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
108,032 |
|
|
$ |
100,247 |
|
|
$ |
103,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Operating Real Estate |
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Balance at beginning of year |
|
$ |
85,927 |
|
|
$ |
84,547 |
|
|
$ |
81,358 |
|
Additions/Capital expenditures |
|
|
23,924 |
|
|
|
1,380 |
|
|
|
3,189 |
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
109,851 |
|
|
$ |
85,927 |
|
|
$ |
84,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Accumulated |
|
|
|
Depreciation for Operating Real Estate |
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Balance at beginning of year |
|
$ |
12,039 |
|
|
$ |
10,013 |
|
|
$ |
8,169 |
|
Depreciation expense |
|
|
2,241 |
|
|
|
2,026 |
|
|
|
1,844 |
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
14,280 |
|
|
$ |
12,039 |
|
|
$ |
10,013 |
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010, the aggregate cost of real estate that we and our consolidated subsidiaries
own for federal income tax purposes is approximately $827.1 million.
50