Equity Investments in the Managed Programs and Real Estate

We own interests in certain unconsolidated real estate investments with the Managed Programs and also own interests in the Managed Programs. 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) or at fair value by electing the equity method fair value option available under U.S. GAAP.

The following table presents Equity in earnings of equity method investments in the Managed Programs and real estate, 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):



	Years Ended December 31,
	2016			2015			2014
Distributions of Available Cash (Note 4)	$	45,121		$	38,406		$	31,052
Proportionate share of equity in earnings (losses) of equity method investments in the Managed Programs	7,698			(454		)	2,425
Amortization of basis differences on equity method investments in the Managed Programs	(1,028		)	(806		)	(810		)
Deferred revenue earned (Note 4)	—			—			786
Other-than-temporary impairment charges on the Special Member Interest in CPA^®:16 – Global’s operating partnership	—			—			(735		)
Total equity in earnings of equity method investments in the Managed Programs	51,791			37,146			32,718
Equity in earnings of equity method investments in real estate	16,503			17,559			14,828
Amortization of basis differences on equity method investments in real estate	(3,575		)	(3,685		)	(3,430		)
Equity in earnings of equity method investments in the Managed Programs and real estate	$	64,719		$	51,020		$	44,116

Managed Programs

We own interests in the Managed Programs 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 Programs. Operating results of the Managed REITs and CESH I are included in the Owned Real Estate segment and operating results of CCIF are included in the Investment Management segment.

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



	% of Outstanding Shares Owned at				Carrying Amount of Investment at
	December 31,				December 31,
Fund	2016		2015		2016		2015
CPA^®:17 – Global	3.456	%	3.087	%	$	99,584	$	87,912
CPA^®:17 – Global operating partnership	0.009	%	0.009	%	—		—
CPA^®:18 – Global	1.616	%	0.735	%	17,955		9,279
CPA^®:18 – Global operating partnership	0.034	%	0.034	%	209		209
CWI 1	1.109	%	1.131	%	11,449		12,619
CWI 1 operating partnership	0.015	%	0.015	%	—		—
CWI 2	0.773	%	0.379	%	5,091		949
CWI 2 operating partnership	0.015	%	0.015	%	300		300
CCIF	13.322	%	47.882	%	23,528		22,214
CESH I ^(a)	2.431	%	—	%	2,701		—
					$	160,817	$	133,482

__________


(a)	Investment is accounted for at fair value.

CPA^®:17 – Global — The carrying value of our investment in CPA^®:17 – Global at December 31, 2016 includes asset management fees receivable, for which 109,825 shares of CPA^®:17 – Global common stock were issued during the first quarter of 2017. We received distributions from this investment during the years ended December 31, 2016, 2015, and 2014 of $7.3 million, $5.9 million, and $4.6 million, respectively. We received distributions from our investment in the CPA^®:17 – Global operating partnership during the years ended December 31, 2016, 2015, and 2014 of $24.8 million, $24.7 million, and $20.4 million, respectively.

CPA^®:18 – Global — The carrying value of our investment in CPA^®:18 – Global at December 31, 2016 includes asset management fees receivable, for which 109,639 shares of CPA^®:18 – Global class A common stock were issued during the first quarter of 2017. We received distributions from this investment during the years ended December 31, 2016, 2015, and 2014 of $0.9 million, $0.2 million, and less than $0.1 million, respectively. We received distributions from our investment in the CPA^®:18 – Global operating partnership during the years ended December 31, 2016, 2015, and 2014 of $7.6 million, $6.3 million, and $1.8 million, respectively.

CWI 1 — We received distributions from this investment during the years ended December 31, 2016, 2015, and 2014 of $0.9 million, $0.8 million, and $0.3 million, respectively. We received distributions from our investment in the CWI 1 operating partnership during the years ended December 31, 2016, 2015, and 2014 of $9.4 million, $7.1 million, and $4.1 million, respectively.

CWI 2 — On May 30, 2014, we purchased 22,222 shares of CWI 2’s class A common stock, par value $0.001 per share, for an aggregate purchase price of $0.2 million and consolidated this investment. On May 15, 2015, upon CWI 2 reaching its minimum offering proceeds and admitting new stockholders, we deconsolidated our investment and began to account for our interest in CWI 2 under the equity method of accounting. We received distributions from this investment during the year ended December 31, 2016 of $0.1 million. We did not receive distributions from this investment during the years ended December 31, 2015 and 2014. The carrying value of our investment in CWI 2 at December 31, 2016 includes asset management fees receivable, for which 46,439 shares of class A common stock of CWI 2 were issued during the first quarter of 2017. On March 27, 2015, we purchased a 0.015% special general partnership interest in the CWI 2 operating partnership for $0.3 million. This special general partnership interest entitles us to receive distributions of our proportionate share of earnings up to 10% of the Available Cash from CWI 2’s operating partnership (Note 4). We received distributions from this investment during the years ended December 31, 2016 and 2015 of $3.3 million and $0.3 million, respectively.

CCIF — We received distributions from our investment in CCIF during the years ended December 31, 2016 and 2015 of $0.7 million and $0.8 million, respectively.

CESH I — Under the limited partnership agreement we have with CESH I, we pay all organization and offering costs on behalf of CESH I, and instead of being reimbursed by CESH I on a dollar-for-dollar basis for those costs, we receive limited partnership units of CESH I equal to 2.5% of its gross offering proceeds (Note 4). We have elected to account for our investment in CESH I at fair value by selecting the equity method fair value option available under U.S. GAAP. We record our investment in CESH I on a one quarter lag; therefore, the balance of our equity method investment in CESH I recorded as of December 31, 2016 is based on the estimated fair value of our equity method investment in CESH I as of September 30, 2016. We did not receive distributions from this investment during the year ended December 31, 2016.

At December 31, 2016 and 2015, the aggregate unamortized basis differences on our equity investments in the Managed Programs were $31.7 million and $27.4 million, respectively.

The following tables present estimated combined summarized financial information for the Managed Programs. Amounts provided are expected total amounts attributable to the Managed Programs and do not represent our proportionate share (in thousands):



	December 31,
	2016			2015
Real estate, net	$	8,464,447		$	7,274,549
Other assets	2,737,441			2,492,789
Total assets	11,201,888			9,767,338
Debt	(5,128,640		)	(4,535,506		)
Accounts payable, accrued expenses and other liabilities	(943,090		)	(652,139		)
Total liabilities	(6,071,730		)	(5,187,645		)
Noncontrolling interests	(263,783		)	(287,051		)
Stockholders’ equity	$	4,866,375		$	4,292,642



	Years Ended December 31,
	2016			2015			2014
Revenues	$	1,465,803		$	1,157,432		$	825,405
Expenses	(1,265,819		)	(1,129,294		)	(816,630		)
Income from continuing operations	$	199,984		$	28,138		$	8,775
Net income (loss) attributable to the Managed Programs ^(a) (b)	$	145,936		$	(15,740	)	$	(12,695	)

__________


(a)	Inclusive of impairment charges recognized by the Managed Programs totaling $31.4 million, $7.2 million, and $1.3 million during the years ended December 31, 2016, 2015, and 2014, respectively. These impairment charges reduced our income earned from these investments by $1.0 million, $0.1 million, and less than $0.1 million during the years ended December 31, 2016, 2015, and 2014, respectively.

(b)

Amounts included net gains on sale of real estate recorded by the Managed Programs totaling $132.8 million, $8.9 million, and $13.3 million for the years ended December 31, 2016, 2015, and 2014, respectively. These net gains on sale of real estate increased our income earned from these investments by $4.6 million, $0.1 million, and $0.4 million during the years ended December 31, 2016, 2015, and 2014, 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 Programs, and their respective carrying values (dollars in thousands):



			Carrying Value at December 31,
Lessee	Co-owner	Ownership Interest	2016		2015
The New York Times Company	CPA^®:17 – Global	45%	$	69,668	$	70,976
Frontier Spinning Mills, Inc.	CPA^®:17 – Global	40%	24,138		24,288
Beach House JV, LLC ^(a)	Third Party	N/A	15,105		15,318
Actebis Peacock GmbH ^(b)	CPA^®:17 – Global	30%	11,205		12,186
Waldaschaff Automotive GmbH and Wagon Automotive Nagold GmbH ^(b)	CPA^®:17 – Global	33%	8,887		9,507
C1000 Logistiek Vastgoed B.V. ^{(b) (c)}	CPA^®:17 – Global	15%	8,739		9,381
Wanbishi Archives Co. Ltd. ^(d)	CPA^®:17 – Global	3%	334		335
			$	138,076	$	141,991

__________


(a)	This investment is in the form of a preferred equity interest.


(b)	The carrying value of this investment is affected by fluctuations in the exchange rate of the euro.

(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. The co-obligor is CPA^®:17 – Global and the amount due under the arrangement was approximately $68.4 million at December 31, 2016. Of this amount, $10.3 million represents the amount we agreed to pay and is included within the carrying value of the investment at December 31, 2016.


(d)	The carrying value of this investment is affected by fluctuations in the exchange rate of the yen.

The following tables present estimated combined summarized financial information of our equity investments, excluding the Managed Programs. Amounts provided are the total amounts attributable to the investments and do not represent our proportionate share (in thousands):



	December 31,
	2016			2015
Real estate, net	$	460,198		$	464,730
Other assets	56,737			64,989
Total assets	516,935			529,719
Debt	(193,521		)	(201,611		)
Accounts payable, accrued expenses and other liabilities	(10,354		)	(9,749		)
Total liabilities	(203,875		)	(211,360		)
Stockholders’ equity	$	313,060		$	318,359



	Years Ended December 31,
	2016			2015			2014
Revenues	$	56,791		$	61,887		$	64,294
Expenses	(17,933		)	(21,124		)	(27,801		)
Income from continuing operations	$	38,858		$	40,763		$	36,493
Net income attributable to the jointly owned investments	$	38,858		$	40,763		$	36,493

We received aggregate distributions of $16.1 million, $13.3 million, and $12.5 million from our other unconsolidated real estate investments for the years ended December 31, 2016, 2015, and 2014, respectively. At both December 31, 2016 and 2015, the aggregate unamortized basis differences on our unconsolidated real estate investments were $6.7 million.

Hellweg 2 Restructuring

In 2007, Corporate Property Associates 14 Incorporated, or CPA^®:14, CPA^®:15, and CPA^®:16 – Global, acquired a 33%, 40%, and 27% interest, respectively, in an entity, or Purchaser, for purposes of acquiring a 25% interest in a property holding company, or PropCo, that owns 37 do-it-yourself stores located in Germany. This is referred to as the Hellweg 2 transaction. The remaining 75% interest in PropCo was owned by a third party, or the Partner. In November 2010, CPA^®:14, CPA^®:15, and CPA^®:16 – Global obtained a 70% additional interest in PropCo from the Partner, resulting in Purchaser owning approximately 95% of PropCo. In 2011, CPA^®:17 – Global acquired CPA^®:14’s interests, and in 2012, through the CPA^®:15 Merger, we acquired CPA^®:15’s interests. We had previously accounted for our investment under the equity method of accounting. In January 2014 in connection with the CPA^®:16 Merger, we acquired CPA^®:16 – Global’s interests in the investment. Subsequent to the acquisition, we consolidate this investment.

In October 2013, the Partner’s remaining 5% equity interest in PropCo was acquired by CPA^®:17 – Global, which resulted in PropCo recording a German real estate transfer tax of $22.1 million, of which our share was approximately $8.4 million and was reflected within Equity in earnings of equity method investments in the Managed Programs and real estate in our consolidated financial statements for the year ended December 31, 2013. In connection with the CPA^®:16 Merger, we acquired CPA^®:16 – Global’s controlling interest in the Hellweg 2 investment. During the fourth quarter of 2015, the German tax authority revoked its previous position on the application of a ruling in a Federal German tax court. Based on this change in position, the obligation to pay the German real estate transfer taxes recorded in connection with the Hellweg 2 restructuring, as well as those recorded in connection with the CPA^®:15 Merger, were no longer deemed probable of occurring. As a result, we reversed liabilities totaling $25.0 million, including $17.1 million recorded in connection with the Hellweg 2 restructuring and $7.9 million recorded in connection with the CPA^®:15 Merger, which is reflected in Merger, property acquisition, and other expenses in the consolidated financial statements for the year ended December 31, 2015.

Waldaschaff Automotive GmbH and Wagon Automotive Nagold GmbH

In the second quarter of 2015, we recognized equity income of approximately $2.1 million, representing our share of the bankruptcy proceeds received by this jointly owned investment. The proceeds were used to repay the mortgage loan encumbering the two properties owned by the jointly owned investment in the amount of $14.3 million, of which our share was $4.7 million, in the third quarter of 2015.