Equity Investment in Real Estate and the Managed REITs

3 Months Ended

Mar. 31, 2013

Equity Investments in Real Estate and the Managed REITs

Equity Investments in Real Estate and REITs

Note6.Equity Investments in Real Estate and the Managed REITs

We own interests in certain unconsolidated real estate investments and 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 from other-than-temporary impairments). 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 chargesand amortization of basis differences related to purchase accounting adjustments (in thousands):

		Three Months Ended March 31,
		2013		2012
Equity earnings from equity investments in the Managed REITs		$	22	$	1,848
Other-than-temporary impairment charges on our special member interest
	in CPA®:16 – Global operating partnership		(2,684)		(298)
Distributions of Available Cash (Note 3)			7,891		6,974
Deferred revenue earned (Note 3)			2,123		2,123
	Equity in net income from the Managed REITs		7,352		10,647
Equity in net earnings from other equity investments			3,304		3,339
	Total net income from equity investments in real estate and the Managed REITs	$	10,656	$	13,986

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 in 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	March 31, 2013	December 31, 2012	March 31, 2013 (a)		December 31, 2012
CPA®:16 – Global (b)	18.456%	18.330%	$	294,339	$	296,301
CPA®:16 – Global operating partnership (c)	0.015%	0.015%		14,220		17,140
CPA®:17 – Global (d)	1.429%	1.290%		43,368		38,977
CPA®:17 – Global operating partnership (e)	0.015%	0.015%		-		-
CWI	0.447%	0.400%		1,147		774
CWI operating partnership	0.015%	0.015%		(47)		(47)
			$	353,027	$	353,145

__________

• Includes asset management fees receivable, for which 171,808 shares, 175,316 shares and 15,236 shares of CPA®:16 – Global, CPA®:17 – Global and CWI, respectively, were issued during the second quarter of 2013.
• We received distributions of $6.2 million and $6.0 million from this investment during thethree months ended March 31, 2013 and 2012, respectively.
• During the three months ended March 31, 2013 and 2012, we recognized other-than-temporary impairment charges of $2.7 million and $0.3 million, respectively, on this investment to reduce the carrying value of our interest in the investment to its estimated fair value (Note 8). In addition, we received distributions of $3.6 million and $4.3 million from this investment during the three months ended March 31, 2013 and 2012, respectively.
• We received distributions of $0.6 million and $0.3 million from this investment during the three months ended March 31, 2013 and 2012, respectively.
• We received distributions of $4.3 million and $2.7 million from this investment during the three months ended March 31, 2013 and 2012, respectively.

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

	March 31, 2013		December 31, 2012
Real estate, net	$	6,193,018	$	6,049,926
Other assets		2,025,509		2,002,620
Total assets		8,218,527		8,052,546
Debt		(3,676,503)		(3,509,394)
Accounts payable, accrued expenses and other liabilities		(456,211)		(450,362)
Total liabilities		(4,132,714)		(3,959,756)
Redeemable noncontrolling interests		(21,094)		(21,747)
Noncontrolling interests		(167,140)		(170,140)
Stockholders’ equity	$	3,897,579	$	3,900,903

	Three Months Ended March 31,
	2013		2012
Revenues	$	178,685	$	212,890
Expenses		(171,253)		(175,440)
Net income from continuing operations	$	7,432	$	37,450
Net income attributable to the Managed REITs (a) (b)	$	10,352	$	33,197

_________

• Inclusive of impairment charges recognized by the Managed REITs totaling $9.3 millionand $1.2 million during thethree months ended March 31, 2013 and2012, respectively. These impairment charges reduced our income earned from these investments by approximately $1.7 million and $0.1 million during the three months ended March 31, 2013 and2012, respectively.
• Amounts included net gains (losses) on sale of real estate recorded by the Managed REITs totaling $2.7 million and ($2.1) million during the three months ended March 31, 2013 and2012, respectively.

Interests in Unconsolidated Real Estate Investments

We own interests in single-tenant net leased properties that are leased to companies through noncontrolling interests (i) in partnerships and limited liability companies that we do not control but over which we exercise significant influenceor (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.

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	Carrying Value at
Lessee	at March 31, 2013	March 31, 2013		December 31, 2012
Schuler A.G. (a) (b) (d)	67%	$	62,564	$	62,006
Hellweg Die Profi-Baumärkte GmbH & Co. KG (Hellweg 2) (a) (e)	40%		40,236		42,387
Advanced Micro Devices (c) (d)	33%		24,027		23,667
The New York Times Company (e)	18%		20,836		20,584
C1000 Logistiek Vastgoed B.V. (a) (c) (f)	15%		13,824		14,929
Del Monte Corporation (c) (d)	50%		7,969		8,318
U. S. Airways Group, Inc. (c)	75%		7,928		7,995
The Talaria Company (Hinckley) (d)	30%		7,842		7,702
The Upper Deck Company (d)	50%		7,187		7,198
Waldaschaff Automotive GmbH and Wagon Automotive Nagold GmbH (a) (f)	33%		6,173		6,323
Builders FirstSource, Inc. (d)	40%		5,097		5,138
PetSmart, Inc. (d)	30%		3,825		3,808
Consolidated Systems, Inc. (c) (d)	60%		3,249		3,278
Wanbishi Archives Co. Ltd. (a) (f) (g) (h)	3%		484		(736)
SaarOTEC (a) (d) (h)	50%		(176)		(116)
		$	211,065	$	212,481

__________

• The carrying value of the investmentis affected by the impact of fluctuations in the exchange rate of the foreign currency.
• Represents a tenancy-in-common interest, under which the investment is under common control by us and our investment partner.
• These investments are tenancy-in-common interests whereby the property is encumbered by debt for which we are jointly and severally liable.  The co-obligors include our Managed REITs, and the aggregate amount due under the arrangements was approximately $241.6 million.  Of this amount, $113.6 million represents the aggregate amount we agreed to pay and is included within the carrying value of each of these investments, where applicable. The carrying value of these investments also includes the undepreciated cost of the related properties.
• This investment is jointly-owned with CPA®:16 – Global.
• This investment is jointly-owned with CPA®:16 – Global and CPA®:17 – Global.
• This investment is jointly-owned with CPA®:17 – Global.
• We acquired our interest in this investment in December 2012. In January 2013, we made a purchase accounting adjustment of $1.3 million to this investment.
• At March 31, 2013 and December 31, 2012, as applicable, we intended to fund our share of the investment's future operating deficits if the need arose. However, we had no legal obligation to pay for any of the investment's liabilities nor did we have any legal obligation to fund operating deficits.