Agreements and Transactions with Related Parties

6 Months Ended

Jun. 30, 2011

Agreements and Transactions with Related Parties [Abstract]

Agreements and Transactions with Related Parties

Note 3.       Agreements and Transactions with Related Parties

Advisory Agreements with the REITs

We have advisory agreements with each of the REITs pursuant to which we earn certain fees or are entitled to receive distributions of cash flow. The terms of the advisory agreements are outlined in our 2010 Annual Report except as otherwise stated below. The CPA® REIT advisory agreements were renewed for an additional year pursuant to their terms effective October 1, 2010. Effective September 15, 2010, we entered into an advisory agreement with CWI to perform certain services, including managing CWI's offering and its overall businesses, identification, evaluation, negotiation, purchase and disposition of lodging-related properties and performance of certain administrative duties. In connection with CPA®:16 — Global's internal reorganization on May 2, 2011 following the CPA®:14/16 Merger, we entered into an amended and restated advisory agreement with CPA®:16 — Global (see “CPA® :16 — Global UPREIT Reorganization” below). The following table presents a summary of revenue earned and/or cash received from the REITs in connection with providing services as the advisor to the REITs (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Asset management revenue (a)	$	16,619	$	19,080	$	36,439	$	37,900
Structuring revenue (b)		5,735		13,102		21,680		19,936
Incentive, termination and subordinated disposition revenue (c)		52,515		-		52,515		-
Wholesaling revenue		2,922		2,741		6,202		5,283
Reimbursed costs from affiliates (d)		17,059		14,838		34,778		29,440
Distributions of available cash (e)		1,973		1,187		3,788		1,693
	$	96,823	$	50,948	$	155,402	$	94,252

• We earn asset management revenue from each REIT, which is based on average invested assets and is calculated according to the advisory agreement for each REIT. For CPA®:16 — Global prior to the CPA®:14/16 Merger and forCPA®:15, this revenue generally totals 1% per annum, with a portion of this revenue, or 0.5%, contingent upon the achievement of specific performance criteria. For CPA®:16 — Global subsequent to the CPA®:14/16 Merger, we earn asset management revenue of 0.5% of average invested assets. For CPA®:17 — Global, we earn asset management revenue ranging from 0.5% of average market value for long-term net leases and certain other types of real estate investments up to 1.75% of average equity value for certain type of securities. For CWI, we earn asset management revenue of 0.5% of the average market value of lodging-related investments. We do not earn performance revenue from CPA®:17 — Global,CWI and, subsequent to the CPA®:14/16 Merger, from CPA®:16 — Global (see “e” below). In 2011, we elected to receive all asset management revenue from CWI in cash and, subsequent to the CPA®:14/16 Merger, from CPA®:16 — Global in shares.
• We earn revenue in connection with structuring and negotiating investments and related mortgage financing for the REITs. We may receive acquisition revenue of up to 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 annual installments. For CWI, we earn initial acquisition revenue of 2.5% of the total investment cost of the properties acquired and loans originated by us not to exceed 6% of the aggregate contract purchase price of all investments and loans with no deferred acquisition revenue being earned.

Unpaid transaction fees, including accrued interest, are included in Due from affiliates in the consolidated financial statements. Unpaid transaction fees bear interest at annual rates ranging from 5% to 7%. The following tables present the amount of unpaid transaction fees and interest earned on these fees (in thousands):

					At June 30, 2011		At December 31, 2010
Unpaid deferred acquisition fees					$	25,179	$	31,419
	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Interest earned on unpaid deferred acquisition fees	$	310	$	289	$	642	$	538

• In connection with providing a liquidity event for CPA®:14 shareholders, we earned termination revenue of $31.2 million and subordinated disposition revenue of $21.3 million, which we elected to receive in shares of CPA®:14and cash, respectively, as described below.
• The REITs reimburse us for certain costs, primarily broker/dealer commissions paid on behalf of the REITs and marketing and personnel costs. In addition, we earn a selling commission of up to $0.65 per share sold, and a dealer manager fee of up to $0.35 per share sold from CPA®:17 — Global. Effective September 15, 2010, we entered into a dealermanager agreement with CWI, whereby we receive a selling commission of up to $0.70 per share sold and a dealermanager fee of up to $0.30 per share sold. Pursuant to the advisory agreement, upon reaching the minimum offering amount of $10.0 million on March 3, 2011, CWI became obligated to reimburse us for all organization costs and a portion of offering costs incurred in connection with its offering, up to a maximum amount (excluding selling commissions and the dealer manager fee) of 2% of the gross proceeds of its offering and distribution reinvestment plan. Through June 30, 2011, we have incurred organization and offering costs on behalf of CWI of approximately $4.2 million. However, at June 30, 2011, CWI was only obligated to reimburse us $0.6 million of these costs because of the 2% limitation described above, and no such costs had been reimbursed as of that date.
• We receive up to 10% of distributions of available cash from the operating partnerships of CPA®:17– Global, CWI and, subsequent to the CPA®:14/16 Merger in May 2011, CPA®:16 — Global. Amounts in the table above relate to CPA®:17– Global only. We will receive these distributions from CPA®:16 — Global beginning in the third quarter of 2011, and we have not yet received any cash distributions of available cash from CWI's operating partnership because CWI had no available cash through June 30, 2011.

Other Transactions with Affiliates

CPA®:14/16 Merger

On May 2, 2011, CPA®:14 merged with and into a subsidiary of CPA®:16 – Global. In connection with theCPA®:14/16 Merger, on May 2, 2011, we purchased three properties from CPA®:14, in which we already had a partial ownership interest, for an aggregate purchase price of $31.8 million, plus the assumption of $87.6 million of indebtedness(Note 4). The purchase price was based on the appraised values of the properties and debt. Together with the three properties sold by CPA®:14 to CPA®:17– Global on that date, as well as certain other properties sold to third parties in anticipation of the CPA®:14/16 Merger, these sales are referred to herein as the CPA®:14 Asset Sales.

In the CPA®:14/16 Merger, CPA®:14 shareholders were entitled to receive$11.50 per share, which was equal to the estimated net asset value (“NAV”) of CPA®:14 as of September 30, 2010. For each share of CPA®:14 stock owned, each CPA®:14 shareholder received a $1.00 per share special cash dividend and a choice of either (i) $10.50 in cash or (ii) 1.1932 shares of CPA®:16 – Global. The merger consideration of $954.5 million was paid by CPA®:16 – Global, including payment of $444.0 million to liquidating shareholders and issuing 57,365,145 shares of common stock with a fair value of $510.5 millionon the date of closing to shareholders of CPA®:14 in exchange for 48,076,723 shares of CPA®:14 common stock. The $1.00 per share special cash distribution, totalling $90.4 million in the aggregate, was paid by CPA®:14 immediately prior to the CPA®:14/16 Merger from the proceeds of the CPA®:14 Asset Sales. In connection with the CPA®:14/16 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 13,750,000 shares of CPA®:16 – Global on May 2, 2011 for $121.0 million, which we funded,along with other obligations, with cash on hand and $121.4 million drawn on our existing line of credit.

Upon consummation of the CPA®:14/16 Merger, we earned revenues of $31.2 million in connection with the termination of the advisory agreement with CPA®:14 and $21.3 million of subordinated disposition revenues. We elected to receive our termination revenue in 2,717,138 shares of CPA®:14, which were exchanged into 3,242,089 shares of CPA®:16 – Global. In addition, we received $11.1 million in cash as a result of the $1.00 per share special cash distribution paid by CPA®:14 to its shareholders. Upon closing of the CPA®:14/16 Merger, we received approximately 13.3 million shares of common stock of CPA®:16 – Global in respect of our shares of CPA®:14.

Carey Asset Management Corp. (“CAM”), our subsidiary that acts as the advisor to the CPA®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 CPA®:14/16 Merger and also waived any disposition fees that may subsequently be payable by CPA®:16 – Global upon a sale of such assets. As the advisor to CPA®:14, CAM earned acquisition fees related to those properties acquired by CPA®:14 and disposition fees on those properties upon the liquidation of CPA®:14 and, as a result, CAM and CPA®:16 – Global agreed that CAM should not receive fees upon the acquisition or disposition of the same properties by CPA®:16 – Global.

CPA®:16 – Global UPREIT Reorganization

Immediately following the CPA®:14/16 Merger on May 2, 2011, CPA®:16 – Global completed an internal reorganization whereby CPA®:16 – Global formed an umbrella partnership real estate investment trust, or UPREIT which was approved by CPA®:16 – Global shareholders in connection with the CPA®:14/16 Merger. In connection with the formation of the UPREIT, CPA®:16 – Global contributed substantially all of its assets and liabilities to an“Operating Partnership” in exchange for a managing member interest and units of membership interest in the Operating Partnership, which together represent a 99.985% capital interest of the “Managing Member”(representing the CPA®:16 – Global shareholders' interest). Through our subsidiary, Carey REIT III, Inc. (the “Special General Partner”), we acquired a special membership interest (“Special Interest”) of 0.015% in the Operating Partnership for $0.3 million,entitling us to receive certain profit allocations and distributions of cash.

As consideration for the Special Interest, we amended our advisory agreement with CPA®:16 – Global to give effect to this UPREIT reorganization and to reflect a revised fee structure whereby (i) our asset management fees are prospectively reduced to 0.5% from 1.0% of the asset value of a property under management, (ii) the former 15% subordinated incentive fee and termination fees have been eliminated and replaced by (iii) a 10% Special General Partner Available Cash Distribution and (iv) the 15% Final Distribution, each defined below. The sum of the new 0.5% asset management fee and the Available Cash Distribution is expected to be lower than the original 1.0% asset management fee; accordingly, the Available Cash Distribution is contractually limited to 0.5% of the value of CPA®:16 – Global's assets under management. However, the amount of after-tax cash we receive pursuant to this revised structure is anticipated to be greater than the amount we received under the previous arrangement. The fee structure related to initial acquisition fees, subordinated acquisition fees and subordinated disposition fees for CPA®:16 – Global remains unchanged.

As Special General Partner, we are entitled to 10% ofthe Operating Partnership's available cash (the “Available Cash Distribution”), which is defined as the Operating Partnership'scash generated from operations, excluding capital proceeds, as reduced by operating expenses and debt service, excluding prepayments and balloon payments. We may elect to receive our Available Cash Distribution in shares of CPA®:16 – Global's common stock. In the event of a capital transaction such as a sale, exchange, disposition or refinancing of CPA®:16 – Global's assets, we are also entitled to receive a “Final Distribution” equal to15% of residual returns after giving effect to a 100% return of the Managing Member's invested capital plus a 6% priority return.

We recorded the Special Interest as an equity investment at its fair value of $28.3 million(Note 6). We will recognize the deferred revenue earned from our Special Interest in the Operating Partnership into earnings on a straight-line basis over the expected period of performance, which is currently estimated at three years based on the stated intended life of CPA®:16 – Globalas described in its offering documents. The amount of deferred revenue recognized during the three and six months ended June 30, 2011 was $1.4 million, which is net of $0.2 million associated with the amortization of the basis differential generated by the Special Interest in the Operating Partnership and our underlying claim on the net assets of CPA®:16 – Global. We determined the fair value of the Special Interest based upon a discounted cash flow model, which included assumptions related to estimated future cash flows of CPA®:16 – Global and the estimated duration of the fee stream.

Other

We are the general partner in a limited partnership (which we consolidate for financial statement purposes) that leases our home office space and participates in an agreement with certain affiliates, including the REITs, for the purpose of leasing office space used for the administration of our operations and the operations of our affiliates and for sharing the associated costs. This limited partnership does not have any significant assets, liabilities or operations other than its interest in the office lease. The average estimated minimum lease payments for the office lease, inclusive of noncontrolling interests, at June 30, 2011 approximates $3.0 million annually through 2016. The table below presents income from noncontrolling interest partners related to reimbursements from these affiliates (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Income from noncontrolling interest partners	$	644	$	568	$	1,196	$	1,214

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

	June 30, 2011		December 31, 2010
Deferred rent due to affiliates	$	830	$	854

We own interests in entities ranging from 5% to 95%, as well as jointly-controlled tenant-in-common interests in properties, with the remaining interests generally held by affiliates, and own common stock in each of the REITs. We consolidate certain of these investments and account for the remainder under the equity method of accounting.

One of our directors and officers is the sole shareholder of Livho, Inc. (“Livho”), a subsidiary that operates a hotel investment. We consolidate the accounts of Livho in our consolidated financial statements because it is a variable interest entity 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 employee 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.

During May 2011, we loaned $4.0 million at a rate of 30-day London inter-bank offered rate (“LIBOR”) plus 2.5% to CWI which was repaid on June 6, 2011. In addition, during February 2011, we loaned $90.0 million at a rate of 1.15% to CPA®:17 — Globalwhich was repaid on April 8, 2011, its maturity date.