Net Investments in Properties

9 Months Ended

Sep. 30, 2012

Net Investments in Properties

Net Investments in Properties

Note 5.Net Investments in Properties

Real Estate

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

	September 30, 2012		December 31, 2011
Land	$	514,304	$	111,483
Buildings		1,846,482		534,999
Less: Accumulated depreciation		(106,894)		(118,054)
	$	2,253,892	$	528,428

As discussed in Note 3, we acquired properties in the Merger, which increased the carrying value of our real estate by $1.8 billionduring the nine months ended September 30, 2012. Other acquisitions of real estate during this period are disclosed below and assets disposed of are disclosed in Note17. Impairment charges recognized on certain properties are discussed below. During this period, the U.S. dollar strengthened against the Euro, as the end-of-period rate for the U.S. dollar in relation to the Euro at September 30, 2012decreasedby 0.7% to $1.2860from$1.2950 at December31, 2011. The impact of this strengthening was a $0.5 million decrease in Real estate from December31, 2011 to September 30, 2012.

Acquisitions of Real Estate

On September 13, 2012, we acquired an interest in an investment with Walgreens Co. at a total cost of $24.8 million, including net lease intangible assets totaling $1.3 million (Note 8) and acquisition-related costs. In connection with this investment, which we deemed to be a real estate asset acquisition under current authoritative accounting guidance, we capitalized acquisition-related costs of $0.2 million.The Walgreens Co. leases are classified as operating leases.

Operating Real Estate

Operating real estate, which consists of our investments in 21 self-storage properties through Carey Storage and our Livho hotel subsidiary, at cost, is summarized as follows (in thousands):

	September 30, 2012		December 31, 2011
Land	$	24,030	$	24,031
Buildings		86,079		85,844
Less: Accumulated depreciation		(19,272)		(17,121)
	$	90,837	$	92,754

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 perform a future net cash flow analysis discounted for inherent risk associated with each investment.

During the nine months ended September 30, 2012, the decision to market for sale three partially vacant properties triggered an impairment analysis. As a result of reducing the holding period assumption, the undiscounted cash flows of the properties are not expected to exceed the previous carrying values of the properties. Therefore, we have recorded impairment charges totaling $5.5 million in order to reduce the carrying values of the properties to their estimated fair values, which approximated their estimated selling prices (Note 9). Such properties are currently classified as Real estate on the consolidated balance sheet. We evaluated and concluded such properties did not meet the criteria to be classified as held for sale as of September 30, 2012. As of the date of this Report, these properties are being marketed for sale, although there can be no assurance that we will be able to sell these properties at acceptable prices or at all. Impairment charges recognized within discontinued operations are discussed in Note 17.