Equity Investments in Real Estate and the Managed REITs

We own interests in certain unconsolidated real estate investments with the Managed REITs and also own interests in the Managed REITs. We account for our interests in these investments under the equity method of accounting (i.e., at cost, increased or decreased by our share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting, such as basis differences).

The following table presents net income from equity investments in real estate and the Managed REITs, which represents our proportionate share of the income or losses of these investments as well as certain adjustments related to other-than-temporary impairment charges and amortization of basis differences related to purchase accounting adjustments (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Proportionate share of earnings from equity investments in the Managed REITs	$	381		$	3,542		$	1,930		$	7,086
Amortization of basis differences on equity investments in the Managed REITs	(140		)	(958		)	(648		)	(3,418		)
Other-than-temporary impairment charges on the Special Member Interest in CPA^®:16 – Global’s operating partnership	—			(6,554		)	(735		)	(12,082		)
Distributions of Available Cash (Note 4)	7,893			7,323			23,574			23,891
Deferred revenue earned (Note 4)	—			2,123			786			6,369
Total equity earnings from the Managed REITs	8,134			5,476			24,907			21,846
Equity earnings from other equity investments	3,507			4,625			11,124			34,557
Amortization of basis differences on other equity investments	(31		)	(921		)	(707		)	(4,026		)
Net income from equity investments in real estate and the Managed REITs	$	11,610		$	9,180		$	35,324		$	52,377

Managed REITs

We own interests in the Managed REITs and account for these interests under the equity method because, as their advisor and through our ownership of their common stock, we do not exert control over, but we do have the ability to exercise significant influence on, the Managed REITs.

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



	% of Outstanding Shares Owned at				Carrying Amount of Investment at
Fund	September 30, 2014		December 31, 2013		September 30, 2014 ^{(a) (b)}		December 31, 2013^(b)
CPA^®:16 – Global ^(c)	100.000	%	18.533	%	$	—	$	282,520
CPA^®:16 – Global operating partnership ^(d)	100.000	%	0.015	%	—		813
CPA^®:17 – Global ^(e)	2.482	%	1.910	%	74,768		57,753
CPA^®:17 – Global operating partnership ^(f)	0.009	%	0.009	%	—		—
CPA^®:18 – Global	0.157	%	0.127	%	1,870		320
CPA^®:18 – Global operating partnership ^(g)	0.034	%	0.034	%	209		209
CWI	1.105	%	0.538	%	9,667		3,369
CWI operating partnership ^(h)	0.015	%	0.015	%	—		—
					$	86,514	$	344,984

___________


(a)	Includes asset management fees receivable, for which 232,966 shares, 25,044 class A shares, and 63,542 shares of common stock of CPA^®:17 – Global, CPA^®:18 – Global, and CWI, respectively, were issued during the fourth quarter of 2014.


(b)	At September 30, 2014 and December 31, 2013, the aggregate unamortized basis differences on our equity investments in the Management REITs were $17.4 million and $80.5 million, respectively.


(c)	On January 31, 2014, we acquired all the remaining interests in CPA^®:16 – Global, which merged into one of our subsidiaries with our subsidiary as the surviving entity, in the CPA^®:16 Merger (Note 3). We received distributions of $6.4 million and $18.9 million from this affiliate during January 2014 and the nine months ended September 30, 2013, respectively.

(d)

During January 2014 and the nine months ended September 30, 2013, we recognized other-than-temporary impairment charges of $0.7 million and $12.1 million, respectively, on this investment to reduce the carrying value of our interest in the investment to its estimated fair value (Note 9). In addition, we received distributions of $4.8 million and $11.2 million from this investment during January 2014 and the nine months ended September 30, 2013, respectively. On January 31, 2014, we acquired the remaining interests in CPA^®:16 – Global’s operating partnership and now consolidate this entity.


(e)	We received distributions of $3.3 million and $2.1 million from this affiliate during the nine months ended September 30, 2014 and 2013, respectively.


(f)	We received distributions of $15.4 million and $12.7 million from this affiliate during the nine months ended September 30, 2014 and 2013, respectively.


(g)	We received distributions of $1.2 million from this affiliate, which commenced operations in May 2013, during the nine months ended September 30, 2014.


(h)	We received distributions of $2.2 million from this affiliate during the nine months ended September 30, 2014.

The following tables present estimated combined summarized financial information for the Managed REITs. Certain prior year amounts have been retrospectively adjusted to reflect the impact of discontinued operations. Amounts provided are expected total amounts attributable to the Managed REITs and do not represent our proportionate share (in thousands):



	September 30, 2014			December 31, 2013
Real estate, net	$	5,407,623		$	7,218,177
Other assets	2,186,173			2,128,862
Total assets	7,593,796			9,347,039
Debt	(3,109,373		)	(4,237,044		)
Accounts payable, accrued expenses and other liabilities	(444,320		)	(571,097		)
Total liabilities	(3,553,693		)	(4,808,141		)
Noncontrolling interests	(158,711		)	(192,492		)
Stockholders’ equity	$	3,881,392		$	4,346,406



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenues	$	210,031		$	211,102		$	602,153		$	573,969
Expenses	(204,097		)	(198,286		)	(594,186		)	(528,847		)
Income from continuing operations	$	5,934		$	12,816		$	7,967		$	45,122
Net income attributable to the Managed REITs ^(a) (b)	$	5,934		$	18,303		$	7,967		$	45,389

___________

(a)

Inclusive of impairment charges recognized by the Managed REITs totaling $0.1 million during each of the three and nine months ended September 30, 2014, and $0.5 million and $22.2 million during the three and nine months ended September 30, 2013, respectively. These impairment charges reduced our income earned from these investments by less than $0.1 million during each of the three and nine months ended September 30, 2014, and by approximately $0.1 million and $4.1 million during the three and nine months ended September 30, 2013, respectively.


(b)	Amounts included net gains on sale of real estate recorded by the Managed REITs totaling $0.8 million and $13.3 million for the three and nine months ended September 30, 2014, respectively, and net gains (losses) on sale of real estate of $2.4 million and $(2.9) million during the three and nine months ended September 30, 2013, respectively.

Interests in Other Unconsolidated Real Estate Investments

We own equity interests in single-tenant net-leased properties that are generally leased to companies through noncontrolling interests (i) in partnerships and limited liability companies that we do not control but over which we exercise significant influence or (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. Earnings for each investment are recognized in accordance with each respective investment agreement. Investments in unconsolidated investments are required to be evaluated periodically. We periodically compare an investment’s carrying value to its estimated fair value and recognize an impairment charge to the extent that the carrying value exceeds fair value and such decline is determined to be other than temporary.

The following table sets forth our ownership interests in our equity investments in real estate, excluding the Managed REITs, and their respective carrying values (dollars in thousands):



		Ownership Interest at	Carrying Value at
Lessee	Co-owner(s)	September 30, 2014	September 30, 2014		December 31, 2013
Same Store Equity Investments ^{(a) (b)}
C1000 Logistiek Vastgoed B.V. ^(c)	CPA^®:17 – Global	15%	$	12,278	$	13,673
Waldaschaff Automotive GmbH and Wagon Automotive Nagold GmbH	CPA^®:17 – Global	33%	7,090		7,267
Wanbishi Archives Co. Ltd.	CPA^®:17 – Global	3%	367		395
			19,735		21,335
Equity Investments Consolidated After the CPA^®:16 Merger ^(d)
Schuler A.G. ^(a)	CPA^®:16 – Global	100%	—		65,798
Hellweg Die Profi-Baumärkte GmbH & Co. KG (Hellweg 2) ^{(a) (e)}	CPA^®:16 – Global/ CPA^®:17 – Global	63%	—		27,923
Advanced Micro Devices	CPA^®:16 – Global	100%	—		22,392
The Upper Deck Company	CPA^®:16 – Global	100%	—		7,518
Del Monte Corporation	CPA^®:16 – Global	100%	—		7,145
Builders FirstSource, Inc.	CPA^®:16 – Global	100%	—		4,968
PetSmart, Inc.	CPA^®:16 – Global	100%	—		3,877
Consolidated Systems, Inc.	CPA^®:16 – Global	100%	—		3,176
SaarOTEC ^(a)	CPA^®:16 – Global	100%	—		(639		)
			—		142,158
Equity Investments Acquired in the CPA^®:16 Merger
The New York Times Company ^(f)	CPA^®:16 – Global/ CPA^®:17 – Global	45%	74,704		21,543
Frontier Spinning Mills, Inc.	CPA^®:17 – Global	40%	15,578		—
Actebis Peacock GmbH ^(a)	CPA^®:17 – Global	30%	6,467		—
			96,749		21,543
Recently Acquired Equity Investment
Beach House JV, LLC ^(g)	Third Party	N/A^(g)	15,105		—
			$	131,589	$	185,036

___________


(a)	The carrying value of this investment is affected by the impact of fluctuations in the exchange rate of the foreign currency.


(b)	Represents equity investments we acquired prior to January 1, 2013.

(c)

This investment represents a tenancy-in-common interest, whereby the property is encumbered by the debt for which we are jointly and severally liable. For this investment, the co-obligor is CPA^®:17 – Global and the amount due under the arrangement was approximately $86.8 million at September 30, 2014. Of this amount, $13.0 million represents the amount we agreed to pay and is included within the carrying value of the investment at September 30, 2014.


(d)	We acquired the remaining interests in these investments from CPA^®:16 – Global in the CPA^®:16 Merger. Subsequent to the CPA^®:16 Merger, we consolidate these wholly-owned or majority-owned investments (Note 3).


(e)	We acquired an additional 25% interest in this investment in the CPA^®:16 Merger. The remaining interest in this investment is owned by CPA^®:17 – Global.


(f)	We acquired an additional 27% interest in this investment in the CPA^®:16 Merger. The remaining interest in this investment is owned by CPA^®:17 – Global.

(g)

During the nine months ended September 30, 2014, we received a preferred equity position in Beach House JV, LLC, as part of the sale of the Soho House investment. The preferred equity interest, which is redeemable on March 13, 2019, provides us with a preferred rate of return of 8.5%. The rights under these preferred units allow us to have significant influence over the entity. Accordingly, we account for this investment using the equity method of accounting. We own 100 redeemable preferred units and zero common units of Beach House JV LLC. During the nine months ended September 30, 2014, we recognized $0.7 million of income related to this investment, which is included in Net income from equity investments in real estate and the Managed REITs in the consolidated financial statements.

We received aggregate distributions of $9.0 million and $10.4 million from our other unconsolidated real estate investments for the nine months ended September 30, 2014 and 2013, respectively. At September 30, 2014 and December 31, 2013, the aggregate unamortized basis differences on our unconsolidated real estate investments were $5.8 million and $16.6 million, respectively.