Form 10-Q/A
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2011
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 000-52891
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
(Exact name of registrant as specified in its charter)
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Maryland
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20-8429087 |
(State of incorporation)
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(I.R.S. Employer Identification No.) |
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50 Rockefeller Plaza |
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New York, New York
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10020 |
(Address of principal executive office)
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(Zip Code) |
Investor Relations (212) 492-8920
(212) 492-1100
(Registrants telephone numbers, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer þ
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
Registrant had 162,110,628 shares of common stock, $.001 par value, outstanding at May 9, 2011.
EXPLANATORY NOTE
This amendment to the Form 10-Q filed by Corporate Property Associates 17 Global Incorporated
for the quarterly period ended March 31, 2011 is being filed to change the word excludes
to includes in a sentence in Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations under the heading Financial Condition Operating
Activities. The corrected sentence is as follows:
During the three months ended March 31, 2011, we used cash flows provided by operating
activities of $26.4 million to fund cash distributions to shareholders of $21.5 million,
which includes $10.7 million in dividends that were reinvested by shareholders through our
distribution reinvestment and share purchase plan.
No other changes have been made to the Form 10-Q. This amendment speaks as of the original filing
date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original
filing date and does not modify or update in any way the 10-Q except as noted above.
INDEX
Forward Looking Statements
This Quarterly Report on Form 10-Q (the Report), including Managements Discussion and Analysis
of Financial Condition and Results of Operations in Item 2 of Part I of this Report, contains
forward-looking statements within the meaning of the federal securities laws. These forward-looking
statements generally are identified by the words believe, project, expect, anticipate,
estimate, intend, strategy, plan, may, should, will, would, will be, will
continue, will likely result, and similar expressions. It is important to note that our actual
results could be materially different from those projected in such forward-looking statements. You
should exercise caution in relying on forward-looking statements as they involve known and unknown
risks, uncertainties and other factors that may materially affect our future results, performance,
achievements or transactions. Information on factors which could impact actual results and cause
them to differ from what is anticipated in the forward-looking statements contained herein is
included in this report as well as in our other filings with the Securities and Exchange Commission
(the SEC), including but not limited to those described in Item 1A. Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2010 as filed with the SEC on March 18, 2011
(the 2010 Annual Report). We do not undertake to revise or update any forward-looking statements.
Additionally, a description of our critical accounting estimates is included in the Managements
Discussion and Analysis of Financial Condition and Results of Operations section of our 2010 Annual
Report. There has been no significant change in our critical accounting estimates.
CPA®:17 Global 3/31/2011 10-Q 1
PART I
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Item 1. |
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Financial Statements |
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share amounts)
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March 31, 2011 |
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December 31, 2010 |
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Assets |
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Investments in real estate: |
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Real estate, at cost |
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$ |
1,073,316 |
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$ |
930,404 |
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Operating real estate, at cost |
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12,179 |
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12,177 |
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Accumulated depreciation |
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(22,527 |
) |
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(16,574 |
) |
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Net investments in properties |
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1,062,968 |
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926,007 |
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Net investments in direct financing leases |
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400,593 |
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397,006 |
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Real estate under construction |
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75,143 |
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53,041 |
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Equity investments in real estate |
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152,883 |
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50,853 |
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Net investments in real estate |
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1,691,587 |
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1,426,907 |
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Cash and cash equivalents |
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210,876 |
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162,745 |
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Intangible assets, net |
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270,911 |
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252,078 |
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Notes receivable |
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40,000 |
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89,560 |
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Other assets, net |
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62,883 |
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56,965 |
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Total assets |
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$ |
2,276,257 |
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$ |
1,988,255 |
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Liabilities and Equity |
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Liabilities: |
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Non-recourse and limited-recourse debt |
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$ |
769,469 |
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$ |
667,478 |
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Accounts payable, accrued expenses and other liabilities |
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11,657 |
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14,719 |
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Prepaid and deferred rental income |
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29,911 |
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27,020 |
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Due to affiliates |
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26,994 |
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21,009 |
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Distributions payable |
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24,234 |
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21,520 |
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Total liabilities |
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862,265 |
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751,746 |
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Commitments and contingencies (Note 10) |
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Equity: |
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CPA®:17 Global shareholders equity: |
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Preferred stock, $0.001 par value; 50,000,000 shares authorized; none issued |
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Common stock, $0.001 par value; 400,000,000 shares authorized; 161,003,481
and
143,231,953 shares issued, respectively |
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161 |
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143 |
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Additional paid-in capital |
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1,439,576 |
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1,280,453 |
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Distributions in excess of accumulated earnings |
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(105,245 |
) |
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(93,446 |
) |
Accumulated other comprehensive income (loss) |
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18,658 |
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(14,943 |
) |
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1,353,150 |
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1,172,207 |
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Less, treasury stock at cost, 1,012,221 and 864,991 shares, respectively |
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(9,414 |
) |
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(8,044 |
) |
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Total CPA®:17 Global shareholders equity |
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1,343,736 |
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1,164,163 |
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Noncontrolling interests |
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70,256 |
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72,346 |
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Total equity |
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1,413,992 |
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1,236,509 |
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Total liabilities and equity |
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$ |
2,276,257 |
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$ |
1,988,255 |
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Note: Substantially all our assets and liabilities are held through our operating
partnership. See Note 2 for further information. |
See Notes to Consolidated Financial Statements.
CPA®:17 Global 3/31/2011 10-Q 2
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except share and per share amounts)
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Three Months Ended March 31, |
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2011 |
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2010 |
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Revenues |
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Rental income |
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$ |
27,632 |
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$ |
8,412 |
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Interest income from direct financing leases |
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11,293 |
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9,367 |
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Other real estate income |
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853 |
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Interest income on CMBS and notes receivable |
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2,219 |
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517 |
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Other operating income |
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551 |
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124 |
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42,548 |
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18,420 |
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Expenses |
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Depreciation and amortization |
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(8,359 |
) |
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(2,332 |
) |
General and administrative |
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(1,836 |
) |
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(977 |
) |
Property expenses |
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(3,782 |
) |
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(1,195 |
) |
Other real estate expenses |
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(484 |
) |
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(14,461 |
) |
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(4,504 |
) |
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Other Income and Expenses |
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Income from equity investments in real estate |
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1,770 |
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398 |
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Other income and (expenses) |
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(679 |
) |
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(64 |
) |
Other interest income |
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13 |
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4 |
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Interest expense |
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(12,176 |
) |
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(5,316 |
) |
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(11,072 |
) |
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(4,978 |
) |
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Income before income taxes |
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17,015 |
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8,938 |
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(Provision for) benefit from income taxes |
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(367 |
) |
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468 |
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Net Income |
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16,648 |
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9,406 |
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Less: Net income attributable to noncontrolling interests |
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(4,213 |
) |
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(3,283 |
) |
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Net Income Attributable to CPA®:17 Global Shareholders |
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$ |
12,435 |
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$ |
6,123 |
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Earnings Per Share |
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Net income attributable to CPA®:17 Global shareholders |
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$ |
0.08 |
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$ |
0.07 |
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Weighted Average Shares Outstanding |
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151,599,433 |
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87,261,461 |
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Distributions Declared Per Share |
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$ |
0.1600 |
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$ |
0.1600 |
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|
See Notes to Consolidated Financial Statements.
CPA®:17 Global 3/31/2011 10-Q 3
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands)
|
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Three Months Ended March 31, |
|
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2011 |
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2010 |
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Net Income |
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$ |
16,648 |
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$ |
9,406 |
|
Other Comprehensive Income (Loss): |
|
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|
|
|
|
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Foreign currency translation adjustments |
|
|
37,378 |
|
|
|
(9,643 |
) |
Change in unrealized gain (loss) on derivative instruments |
|
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(3,118 |
) |
|
|
(1,490 |
) |
|
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|
|
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34,260 |
|
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(11,133 |
) |
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Comprehensive income (loss) |
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50,908 |
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(1,727 |
) |
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Amounts Attributable to Noncontrolling Interests: |
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Net income |
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(4,213 |
) |
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(3,283 |
) |
Foreign currency translation adjustments |
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(635 |
) |
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|
638 |
|
Change in unrealized (gain) loss on derivative instruments |
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(24 |
) |
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523 |
|
|
|
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Comprehensive income attributable to noncontrolling interests |
|
|
(4,872 |
) |
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(2,122 |
) |
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Comprehensive Income (Loss) Attributable to
CPA®:17 Global Shareholders |
|
$ |
46,036 |
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$ |
(3,849 |
) |
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|
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|
See Notes to Consolidated Financial Statements.
CPA®:17 Global 3/31/2011 10-Q 4
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
For the three months ended March 31, 2011 and the year ended December 31, 2010
(in thousands, except share amounts)
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CPA®:17 Global Shareholders |
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Distributions |
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Accumulated |
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Total |
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Total |
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Additional |
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in Excess of |
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Other |
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CPA®:17 |
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Outstanding |
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Common |
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Paid-In |
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Accumulated |
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Comprehensive |
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Treasury |
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Global |
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Noncontrolling |
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Shares |
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Stock |
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Capital |
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Earnings |
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Income (Loss) |
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Stock |
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Shareholders |
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Interests |
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Total |
|
Balance at January 1, 2010 |
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79,886,568 |
|
|
$ |
82 |
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|
$ |
718,057 |
|
|
$ |
(53,118 |
) |
|
$ |
(4,902 |
) |
|
$ |
(2,314 |
) |
|
$ |
657,805 |
|
|
$ |
71,332 |
|
|
$ |
729,137 |
|
Shares issued, net of
offering costs |
|
|
62,643,431 |
|
|
|
60 |
|
|
|
557,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
557,895 |
|
|
|
|
|
|
|
557,895 |
|
Shares issued to affiliates |
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|
453,121 |
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|
1 |
|
|
|
4,561 |
|
|
|
|
|
|
|
|
|
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|
|
|
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|
4,562 |
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|
|
|
|
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|
4,562 |
|
Contributions from
noncontrolling interests |
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
412 |
|
|
|
412 |
|
Distributions declared
($0.6400 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
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|
(70,782 |
) |
|
|
|
|
|
|
|
|
|
|
(70,782 |
) |
|
|
|
|
|
|
(70,782 |
) |
Distributions to
noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,959 |
) |
|
|
(12,959 |
) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,454 |
|
|
|
|
|
|
|
|
|
|
|
30,454 |
|
|
|
15,333 |
|
|
|
45,787 |
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,660 |
) |
|
|
|
|
|
|
(6,660 |
) |
|
|
(778 |
) |
|
|
(7,438 |
) |
Change in unrealized loss
on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,381 |
) |
|
|
|
|
|
|
(3,381 |
) |
|
|
(994 |
) |
|
|
(4,375 |
) |
Repurchase of shares |
|
|
(616,158 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(5,730 |
) |
|
|
(5,730 |
) |
|
|
|
|
|
|
(5,730 |
) |
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|
Balance at December 31, 2010 |
|
|
142,366,962 |
|
|
|
143 |
|
|
|
1,280,453 |
|
|
|
(93,446 |
) |
|
|
(14,943 |
) |
|
|
(8,044 |
) |
|
|
1,164,163 |
|
|
|
72,346 |
|
|
|
1,236,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued, net of
offering costs |
|
|
17,528,956 |
|
|
|
17 |
|
|
|
156,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
156,714 |
|
|
|
|
|
|
|
156,714 |
|
Shares issued to affiliates |
|
|
242,572 |
|
|
|
1 |
|
|
|
2,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,427 |
|
|
|
|
|
|
|
2,427 |
|
Contributions from
noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,138 |
|
|
|
1,138 |
|
Distributions declared
($0.1600 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,234 |
) |
|
|
|
|
|
|
|
|
|
|
(24,234 |
) |
|
|
|
|
|
|
(24,234 |
) |
Distributions to
noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,100 |
) |
|
|
(8,100 |
) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,435 |
|
|
|
|
|
|
|
|
|
|
|
12,435 |
|
|
|
4,213 |
|
|
|
16,648 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,743 |
|
|
|
|
|
|
|
36,743 |
|
|
|
635 |
|
|
|
37,378 |
|
Change in unrealized loss
on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,142 |
) |
|
|
|
|
|
|
(3,142 |
) |
|
|
24 |
|
|
|
(3,118 |
) |
Repurchase of shares |
|
|
(147,230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,370 |
) |
|
|
(1,370 |
) |
|
|
|
|
|
|
(1,370 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2011 |
|
|
159,991,260 |
|
|
$ |
161 |
|
|
$ |
1,439,576 |
|
|
$ |
(105,245 |
) |
|
$ |
18,658 |
|
|
$ |
(9,414 |
) |
|
$ |
1,343,736 |
|
|
$ |
70,256 |
|
|
$ |
1,413,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
CPA®:17 Global 3/31/2011 10-Q 5
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2011 |
|
|
2010 |
|
Cash Flows Operating Activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
16,648 |
|
|
$ |
9,406 |
|
Adjustments to net income: |
|
|
|
|
|
|
|
|
Depreciation and amortization, including intangible assets |
|
|
9,847 |
|
|
|
2,334 |
|
Straight-line rent adjustments and amortization of rent-related intangibles |
|
|
585 |
|
|
|
(1,157 |
) |
Settlement of derivative liability |
|
|
(4,469 |
) |
|
|
|
|
Income from equity investment in real estate in excess of distributions received |
|
|
(259 |
) |
|
|
(56 |
) |
Issuance of shares to affiliate in satisfaction of fees due |
|
|
2,426 |
|
|
|
617 |
|
Realized loss on foreign currency transactions and other, net |
|
|
43 |
|
|
|
|
|
Unrealized loss on foreign currency transactions |
|
|
636 |
|
|
|
65 |
|
Decrease (increase) in accounts receivable and prepaid expenses |
|
|
926 |
|
|
|
(587 |
) |
(Decrease) increase in accounts payable and accrued expenses |
|
|
(2,192 |
) |
|
|
841 |
|
(Increase) decrease in prepaid and deferred rental income |
|
|
(496 |
) |
|
|
3,287 |
|
Increase in due to affiliates |
|
|
4,579 |
|
|
|
2,015 |
|
Change in other operating assets and liabilities, net |
|
|
(1,870 |
) |
|
|
(1,256 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
26,404 |
|
|
|
15,509 |
|
|
|
|
|
|
|
|
|
|
Cash Flows Investing Activities |
|
|
|
|
|
|
|
|
Distributions received from equity investments in real estate in excess of equity
income |
|
|
80,753 |
|
|
|
332 |
|
Acquisitions of real estate and direct financing leases and other capital
expenditures (a) |
|
|
(149,163 |
) |
|
|
(147,311 |
) |
Contributions to equity investments in real estate (a) |
|
|
(172,439 |
) |
|
|
(60 |
) |
VAT paid in connection with acquisitions in real estate |
|
|
(3,542 |
) |
|
|
(7,488 |
) |
VAT refunded in connection with acquisitions in real estate |
|
|
4,728 |
|
|
|
6,346 |
|
Proceeds from repayment of notes receivable |
|
|
49,560 |
|
|
|
7,000 |
|
Investment in securities |
|
|
(1,250 |
) |
|
|
|
|
Funds released from escrow |
|
|
7,407 |
|
|
|
455 |
|
Funds placed in escrow |
|
|
(5,666 |
) |
|
|
(2,334 |
) |
Payment of deferred acquisition fees to an affiliate |
|
|
(4,513 |
) |
|
|
(1,133 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(194,125 |
) |
|
|
(144,193 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows Financing Activities |
|
|
|
|
|
|
|
|
Distributions paid |
|
|
(21,520 |
) |
|
|
(11,675 |
) |
Contributions from noncontrolling interests |
|
|
1,138 |
|
|
|
|
|
Distributions to noncontrolling interests |
|
|
(8,100 |
) |
|
|
(2,394 |
) |
Proceeds from non-recourse and limited recourse debt financing |
|
|
92,166 |
|
|
|
71,678 |
|
Scheduled payments of non-recourse and limited recourse debt |
|
|
(2,779 |
) |
|
|
(1,357 |
) |
Payment of mortgage deposits, net of deposits refunded |
|
|
(6,683 |
) |
|
|
(1,662 |
) |
Proceeds from issuance of shares, net of offering costs |
|
|
156,714 |
|
|
|
130,055 |
|
Funds released from escrow |
|
|
(393 |
) |
|
|
(219 |
) |
Funds placed in escrow |
|
|
|
|
|
|
2,191 |
|
Purchase of treasury stock |
|
|
(1,370 |
) |
|
|
(984 |
) |
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
209,173 |
|
|
|
185,633 |
|
|
|
|
|
|
|
|
|
|
Change in Cash and Cash Equivalents During the Period |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
6,679 |
|
|
|
(646 |
) |
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
48,131 |
|
|
|
56,303 |
|
Cash and cash equivalents, beginning of period |
|
|
162,745 |
|
|
|
281,554 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
210,876 |
|
|
$ |
337,857 |
|
|
|
|
|
|
|
|
Noncash investing and financing activities:
|
|
|
(a) |
|
The cost basis of real estate investments acquired during the three months ended March 31,
2011 and 2010, including equity investments in real estate, also included deferred acquisition
fees payable of $2.7 million and $3.0 million, respectively. |
See Notes to Consolidated Financial Statements.
CPA®:17 Global 3/31/2011 10-Q 6
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Organization and Offering
Organization
Corporate Property Associates 17 Global Incorporated (CPA®:17 Global and,
together with its consolidated subsidiaries, we, us or our) is a publicly owned, non-listed
real estate investment trust (REIT) that invests primarily in commercial properties leased to
companies domestically and internationally. As a REIT, we are not subject to United States (U.S.)
federal income taxation as long as we satisfy certain requirements, principally relating to the
nature of our income, the level of our distributions and other factors. We earn revenue principally
by leasing the properties we own to single corporate tenants, on a triple-net leased basis, which
requires the tenant to pay substantially all of the costs associated with operating and maintaining
the property. Revenue is subject to fluctuation because of the timing of new lease transactions,
lease terminations, lease expirations, contractual rent adjustments, tenant defaults and sales of
properties. At March 31, 2011, our portfolio was comprised of our full or partial ownership
interests in 154 fully-occupied properties, substantially all of which were triple-net leased to 37
tenants, and totaled approximately 19 million square feet (on a pro rata basis). We were formed in
2007 and conduct substantially all of our investment activities and own all of our assets through
our operating partnership, CPA:17 Limited Partnership. We are a general partner and a limited
partner and own approximately a 99.985% capital interest in our operating partnership. W. P. Carey
Holdings, LLC (Carey Holdings), a subsidiary of W. P. Carey & Co. LLC (WPC), holds a special
general partner interest in the operating partnership. We refer to WPC, together with certain of
its subsidiaries and Carey Holdings, as the advisor.
In February 2007, WPC purchased 22,222 shares of our common stock for $0.2 million and was admitted
as our initial shareholder. WPC purchased its shares at $9.00 per share, net of commissions and
fees, which would have otherwise been payable to Carey Financial, LLC (Carey Financial), our
sales agent and a subsidiary of WPC. In addition, in July 2008, we received a capital contribution
from the advisor of $0.3 million.
Public Offering
In November 2007, our registration statement on Form S-11 (File No. 333-140842), covering an
initial public offering of up to 200,000,000 shares of common stock at $10.00 per share, was
declared effective by the SEC under the Securities Act of 1933, as amended (the Securities Act).
The registration statement also covered the offering of up to 50,000,000 shares of common stock at
$9.50 pursuant to our distribution reinvestment and stock purchase plan. Our shares were initially
being offered on a best efforts basis by Carey Financial and selected other dealers. We commenced
our initial public offering in late December 2007. Since inception through the termination of our
initial public offering on April 7, 2011, we raised a total of more than $1.5 billion.
In October 2010, we filed a registration statement on Form S-11 (File No. 333-170225) with the
SEC for a continuous public offering of up to $1.0 billion of common stock, which was declared
effective by the SEC on April 7, 2011, terminating our initial public offering. The registration
statement also covers the offering of up to 50,000,000 shares of common stock at $9.50 pursuant to
our distribution reinvestment and stock purchase plan. We refer to the continuous public offering
as the follow-on offering. There can be no assurance that we will successfully sell the full
number of shares registered.
We intend to use the net proceeds of these offerings to acquire, own and manage a portfolio of
commercial properties leased to a diversified group of companies primarily on a single tenant net
lease basis.
Note 2. Basis of Presentation
Our interim consolidated financial statements have been prepared, without audit, in accordance with
the instructions to Form 10-Q and, therefore, do not necessarily include all information and
footnotes necessary for a fair statement of our consolidated financial position, results of
operations and cash flows in accordance with accounting principles generally accepted in the U.S.
(GAAP).
In the opinion of management, the unaudited financial information for the interim periods
presented in this Report reflects all normal and recurring adjustments necessary for a fair
statement of results of operations, financial position and cash flows. Our interim consolidated
financial statements should be read in conjunction with our audited consolidated financial
statements and accompanying notes for the year ended December 31, 2010, which are included in our
2010 Annual Report, as certain disclosures that would substantially duplicate those contained in
the audited consolidated financial statements have not been included in this Report. Operating
results for interim periods are not necessarily indicative of operating results for an entire
fiscal year.
CPA®:17 Global 3/31/2011 10-Q 7
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts
in our consolidated financial statements and the accompanying notes. Actual results could differ
from those estimates.
Basis of Consolidation
The consolidated financial statements reflect all of our accounts, including those of our
majority-owned and/or controlled subsidiaries. The portion of equity in a subsidiary that is not
attributable, directly or indirectly, to us is presented as noncontrolling interests. All
significant intercompany accounts and transactions have been eliminated.
Because we conduct substantially all of our investment activities and own all of our assets through
the operating partnership, substantially all of the assets and liabilities presented in our
consolidated balance sheets are attributable to the operating partnership. The following table
presents amounts included in the consolidated balance sheets that are not attributable to the
operating partnership but rather are attributable to CPA®:17 Global, the primary
beneficiary of the operating partnership (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents not attributable to
consolidated
Variable Interest Entity (VIE) |
|
$ |
20,880 |
|
|
$ |
2,502 |
|
Other assets, net not attributable to consolidated VIE |
|
|
3,973 |
|
|
|
1,038 |
|
|
|
|
|
|
|
|
Total assets not attributable to consolidated VIE |
|
$ |
24,853 |
|
|
$ |
3,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Due to affiliates not attributable to consolidated VIE |
|
$ |
(598 |
) |
|
$ |
(408 |
) |
Distributions payable not attributable to consolidated
VIE |
|
|
(24,234 |
) |
|
|
(21,520 |
) |
|
|
|
|
|
|
|
Total liabilities not attributable to
consolidated VIE |
|
$ |
(24,832 |
) |
|
$ |
(21,928 |
) |
|
|
|
|
|
|
|
Because we generally utilize non-recourse debt, our maximum exposure to the operating partnership
is limited to the equity we have in the operating partnership. We have not provided financial or
other support to the operating partnership, and there were no guarantees or other commitments from
third parties that would affect the value of or risk related to our interest in this entity.
Information about International Geographic Areas
At March 31, 2011, our international investments were comprised of investments in Europe. The
following tables present information about these investments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2011 |
|
|
2010 |
|
Revenues |
|
$ |
12,364 |
|
|
$ |
4,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
Net investments in
real estate |
|
$ |
655,821 |
|
|
$ |
515,653 |
|
|
|
|
|
|
|
|
CPA®:17 Global 3/31/2011 10-Q 8
Note 3. Agreements and Transactions with Related Parties
We have an advisory agreement with the advisor whereby the advisor performs certain services for us
for a fee. The agreement that is currently in effect was recently renewed for an additional year
pursuant to its terms effective October 1, 2010. Under the terms of this agreement, the advisor
structures and negotiates the purchase and sale of investments and debt placement transactions for
us, for which we pay the advisor structuring and subordinated disposition fees, and manages our
day-to-day operations, for which we pay the advisor asset management fees and certain cash
distributions. In addition, we reimburse the advisor for organization and offering costs incurred
in connection with our offering and for certain administrative duties performed on our behalf. We
also have certain agreements with joint ventures. The following table presents a summary of fees we
paid and expenses we reimbursed to the advisor in accordance with the advisory agreement (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2011 |
|
|
2010 |
|
Amounts included in operating expenses: |
|
|
|
|
|
|
|
|
Asset management fees (a) |
|
$ |
2,850 |
|
|
$ |
939 |
|
Distributions of available cash |
|
|
1,815 |
|
|
|
506 |
|
Personnel reimbursements (b) |
|
|
388 |
|
|
|
160 |
|
Office rent reimbursements (b) |
|
|
74 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
$ |
5,127 |
|
|
$ |
1,638 |
|
|
|
|
|
|
|
|
Transaction fees incurred: |
|
|
|
|
|
|
|
|
Current acquisition fees (c) |
|
$ |
7,929 |
|
|
$ |
3,744 |
|
Deferred acquisition fees (c) (d) |
|
|
6,351 |
|
|
|
2,995 |
|
|
|
|
|
|
|
|
|
|
$ |
14,280 |
|
|
$ |
6,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid transaction fees: |
|
March 31, 2011 |
|
|
December 31, 2010 |
|
Unpaid deferred
acquisition fees |
|
$ |
21,588 |
|
|
$ |
19,809 |
|
|
|
|
(a) |
|
Asset management fees are included in Property expenses in the consolidated
financial statements. For 2011 and 2010, the advisor elected to receive its asset management
fees in restricted shares. At March 31, 2011, the advisor owned 1,037,578 restricted shares
(less than 1%) of our common stock. |
|
(b) |
|
Personnel and office rent expenses are included in General and administrative expenses in the
consolidated financial statements. Based on current gross revenues, our current share of
future minimum lease payments under our agreement would be $0.3 million annually through 2016;
however, we anticipate that our share of future annual minimum lease payments will increase
significantly as we continue to invest the proceeds of our offerings. |
|
(c) |
|
Current and deferred acquisition fees were capitalized and included in the cost basis of the
assets acquired. |
|
(d) |
|
We made payments of deferred acquisition fees to the advisor totaling $4.5 million and $1.1
million during the three months ended March 31, 2011 and 2010, respectively. |
Organization and Offering Expenses
The total costs paid by the advisor and its affiliates in connection with the organization and
offering of our securities were $13.3 million from inception through March 31, 2011, of which $12.8
million had been reimbursed as of March 31, 2011.
Joint Ventures and Other Transactions with Affiliates
On December 13, 2010 we agreed to purchase three properties from one of our affiliates, Corporate
Property Associates 14 Incorporated (CPA®:14), for an aggregate purchase price of
$57.4 million, plus the assumption of approximately $153.9 million of indebtedness (Note 13).
We own interests in entities ranging from 30% to 85%, with the remaining interests held by
affiliates. We consolidate certain of these entities and account for the remainder under the equity
method of accounting.
CPA®:17 Global 3/31/2011 10-Q 9
Note 4. Net Investments in Properties and Real Estate Under Construction
Real Estate
Real estate, which consists of land and buildings leased to others under operating leases, at cost,
is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
Land |
|
$ |
273,635 |
|
|
$ |
242,145 |
|
Buildings |
|
|
799,681 |
|
|
|
688,259 |
|
Less: Accumulated
depreciation |
|
|
(22,114 |
) |
|
|
(16,274 |
) |
|
|
|
|
|
|
|
|
|
$ |
1,051,202 |
|
|
$ |
914,130 |
|
|
|
|
|
|
|
|
Operating Real Estate
Operating real estate, which consists of our hotel operations, at cost, is summarized as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
Land |
|
$ |
1,330 |
|
|
$ |
1,330 |
|
Buildings |
|
|
10,485 |
|
|
|
10,483 |
|
Furniture, Fixtures &
Equipment |
|
|
364 |
|
|
|
364 |
|
Less: Accumulated
depreciation |
|
|
(413 |
) |
|
|
(300 |
) |
|
|
|
|
|
|
|
|
|
$ |
11,766 |
|
|
$ |
11,877 |
|
|
|
|
|
|
|
|
Acquisitions of Real Estate
During the three months ended March 31, 2011, we entered into three domestic investments, which
were classified as operating leases, at a total cost of $134.3 million, including net lease
intangible assets totaling $16.6 million (see Other below). In connection with these investments,
which we deemed to be real estate asset acquisitions under current authoritative accounting
guidance, we capitalized acquisition-related costs and fees totaling $6.4 million.
Real Estate Under Construction
During 2011, we entered into three build-to-suit projects located in the U.S. with Dollar General
Corp. as part of an estimated $40.0 million platform build-to-suit program covering up to 40
facilities, for a total cost of up to $2.9 million on these three projects, based on estimated
construction costs at the respective dates of acquisition. In connection with these investments,
which were deemed to be real estate acquisitions under current authoritative accounting guidance,
we capitalized acquisition-related costs and fees totaling $0.2 million. Costs incurred and
capitalized on our build-to-suit projects through March 31, 2011 totaled $75.1 million, including
$0.9 million on projects entered into during 2011, and have been included as Real estate under
construction in the consolidated balance sheet.
At December 31, 2010, Real estate under construction consisted of $53.0 million in costs incurred
and/or capitalized on several build-to-suit projects located in the U.S. and Poland.
Other
In connection with our acquisition of properties, we have recorded net lease intangibles of $269.5
million, including $16.6 million of net lease intangibles acquired in connection with our
investment activity during the three months ended March 31, 2011. These intangible assets and
liabilities are being amortized over periods ranging from 14 years to 40 years. In-place lease,
tenant relationship and above-market rent intangibles are included in Intangible assets, net in the
consolidated financial statements. Below-market rent intangibles are included in Prepaid and
deferred rental income. Amortization of below-market and above-market rent intangibles is recorded
as an adjustment to Lease revenues in the consolidated financial statements, while amortization of
in-place lease and tenant relationship intangibles is included in Depreciation and amortization.
Net amortization of intangibles, including the effect of foreign currency translation, was $3.3
million and $0.6 million for the three months ended March 31, 2011 and 2010, respectively.
CPA®:17 Global 3/31/2011 10-Q 10
Note 5. Finance Receivables
Assets representing rights to receive money on demand or at fixed or determinable dates are
referred to as finance receivables. Our finance receivable portfolios consist of our Net
investments in direct financing leases and notes receivable. Operating leases are not included in
finance receivables as such amounts are not recognized as an asset in the consolidated balance
sheets.
Notes Receivable
In December 2010, we provided financing of $40.0 million to China Alliance Properties Limited, a
subsidiary of Shanghai Forte Land, Co., Ltd (Forte). The financing was provided through a
collateralized loan guaranteed by Fortes parent company, Fosun International Limited, and has an
interest rate of 11% and matures in December 2015. At March 31, 2011 and December 31, 2010, the
balance of the note receivable was $40.0 million.
During the first quarter of 2011, our participation in the limited-recourse mortgage loan related
to our New York Times venture was repaid in full in connection with the refinancing of this loan (Note 9).
At December 31, 2010, the balance of the note receivable was $49.6 million.
Credit Quality of Finance Receivables
We generally seek investments in facilities that are critical to the tenants business and that we
believe have a low risk of tenant defaults. At March 31, 2011 and December 31, 2010, none of the
balances of our finance receivables were past due and we had not established any allowances for
credit losses. Additionally, there have been no modifications of finance receivables. We evaluate
the credit quality of our tenant receivables utilizing an internal 5-point credit rating scale,
with 1 representing the highest credit quality and 5 representing the lowest. The credit quality
evaluation of our tenant receivables was last updated in the first quarter of 2011.
A summary of our tenant receivables and notes receivable by internal credit quality rating at March
31, 2011 and December 31, 2010 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal Credit |
|
Number of |
|
Net Investments in Direct Financing Leases |
|
|
Number of |
|
Notes Receivable |
|
Quality Indicator |
|
Tenants |
|
March 31, 2011 |
|
|
December 31, 2010 |
|
|
Obligors |
|
March 31, 2011 |
|
|
December 31, 2010 |
|
1 |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
2 |
|
4 |
|
|
101,680 |
|
|
|
100,255 |
|
|
1 |
|
|
40,000 |
|
|
|
40,000 |
|
3 |
|
2 |
|
|
272,465 |
|
|
|
271,734 |
|
|
1 |
|
|
|
|
|
|
49,560 |
|
4 |
|
1 |
|
|
26,448 |
|
|
|
25,017 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
400,593 |
|
|
$ |
397,006 |
|
|
|
|
$ |
40,000 |
|
|
$ |
89,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 6. Equity Investments in Real Estate
We own interests in single-tenant net leased properties leased to corporations through
noncontrolling interests in (i) partnerships and limited liability companies that we do not control
but over which we exercise significant influence, and (ii) 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 (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).
CPA®:17 Global 3/31/2011 10-Q 11
The following table sets forth our ownership interests in our equity investments in real estate and
their respective carrying values (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership |
|
|
|
|
|
|
Interest at |
|
|
Carrying Value at |
|
Lessee |
|
March 31, 2011 |
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
C1000 B.V. (a) (b) |
|
|
85 |
% |
|
$ |
100,028 |
|
|
$ |
|
|
Tesco plc (a) |
|
|
49 |
% |
|
|
21,128 |
|
|
|
19,903 |
|
Berry Plastics Corporation |
|
|
50 |
% |
|
|
20,258 |
|
|
|
20,330 |
|
Eroski Sociedad Cooperativa -
Mallorca (a) |
|
|
30 |
% |
|
|
11,469 |
|
|
|
10,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
152,883 |
|
|
$ |
50,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The carrying value of this investment is affected by the impact of fluctuations in the
exchange rate of the Euro. |
|
(b) |
|
We acquired our tenancy-in-common interest in this investment in January 2011 as described below. |
The following tables present combined summarized financial information of our venture properties.
Amounts provided are the total amounts attributable to the venture properties and do not represent
our proportionate share (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
Assets |
|
$ |
429,307 |
|
|
$ |
203,989 |
|
Liabilities |
|
|
(182,010 |
) |
|
|
(79,786 |
) |
|
|
|
|
|
|
|
Partners/members equity |
|
$ |
247,297 |
|
|
$ |
124,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2011 |
|
|
2010 |
|
Revenue |
|
$ |
7,498 |
|
|
$ |
3,594 |
|
Expenses |
|
|
(4,770 |
) |
|
|
(2,970 |
) |
|
|
|
|
|
|
|
Net income |
|
$ |
2,728 |
|
|
$ |
624 |
|
|
|
|
|
|
|
|
We recognized income from equity investments in real estate of $1.8 million and $0.4 million for
the three months ended March 31, 2011 and 2010, respectively. Income (loss) from equity investments
in real estate represents our proportionate share of the income or loss of the ventures as well as
certain depreciation and amortization adjustments related to other-than-temporary impairment
charges.
Acquisition of Equity Investment
In January 2011, we and our affiliate, Corporate Property Associates 15 Incorporated
(CPA®:15), acquired a venture as a tenancy-in-common in which we and
CPA®:15 hold interests of 85% and 15%, respectively, and account for under the equity
method of accounting. The venture purchased properties from C1000 B.V. (C-1000), a leading Dutch
supermarket chain, for $207.6 million. Our share of the purchase price was $176.5 million, which
was funded in part by a $90.0 million short-term loan from the advisor that was repaid in full
during the first quarter of 2011. The venture capitalized acquisition-related costs and fees
totaling $12.5 million, of which our share was $10.6 million. In March 2011, the venture obtained
non-recourse financing totaling $98.3 million, which bears interest at a variable rate equal to the
three-month Euro inter-bank offered rate (Euribor) plus 2% and matures in March 2013. Amounts
above are based upon the exchange rate of the Euro at the date of acquisition and financing,
respectively.
Note 7. Fair Value Measurements
Under current authoritative accounting guidance for fair value measurements, the fair value of
an asset is defined as the exit price, which is the amount that would either be received when an
asset is sold or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. The guidance establishes a three-tier fair value hierarchy based on the
inputs used in measuring fair value. These tiers are: Level 1, for which quoted market prices for
identical instruments are available in active markets, such as money market funds, equity
securities and U.S. Treasury securities; Level 2, for which there are inputs other than quoted
prices included within Level 1 that are observable for the instrument, such as certain derivative
instruments including interest rate caps and swaps; and Level 3, for which little or no market data
exists, therefore requiring us to develop our own assumptions, such as certain securities.
CPA®:17 Global 3/31/2011 10-Q 12
Items Measured at Fair Value on a Recurring Basis
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument:
Money Market Funds Our money market funds consisted of government securities and U.S. treasury
bills. These funds were classified as Level 1 because we used quoted prices from active markets to
determine their fair values.
Derivative Assets and Liabilities Our derivative assets and liabilities are comprised of interest
rate swaps, interest rate caps and foreign currency exchange contracts. These derivative
instruments were measured at fair value using readily observable market inputs, such as quotations
on interest rates and foreign currency exchange rates. Our derivative instruments were classified
as Level 2 because these instruments are custom, over-the-counter contracts with various bank
counterparties that are not traded in an active market.
The following tables set forth our assets and liabilities that were accounted for at fair value on
a recurring basis at March 31, 2011 and December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2011 Using: |
|
|
|
|
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for |
|
|
Significant Other |
|
|
Unobservable |
|
|
|
|
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
|
Inputs |
|
Description |
|
Total |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
6,000 |
|
|
$ |
6,000 |
|
|
$ |
|
|
|
$ |
|
|
Derivative assets |
|
|
964 |
|
|
|
|
|
|
|
964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,964 |
|
|
$ |
6,000 |
|
|
$ |
964 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities |
|
$ |
(1,127 |
) |
|
$ |
|
|
|
$ |
(1,127 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2010 Using: |
|
|
|
|
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for |
|
|
Significant Other |
|
|
Unobservable |
|
|
|
|
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
|
Inputs |
|
Description |
|
Total |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
102,084 |
|
|
$ |
102,084 |
|
|
$ |
|
|
|
$ |
|
|
Derivative assets |
|
|
751 |
|
|
|
|
|
|
|
751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
102,835 |
|
|
$ |
102,084 |
|
|
$ |
751 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities |
|
$ |
(2,215 |
) |
|
$ |
|
|
|
$ |
(2,215 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and liabilities presented above exclude assets and liabilities owned by unconsolidated
ventures.
We did not have any transfers into or out of Level 1, Level 2 and Level 3 measurements during the
three months ended March 31, 2011 and 2010. Gains and losses (realized and unrealized) included in
earnings are reported in Other income and (expenses) in the consolidated financial statements.
CPA®:17 Global 3/31/2011 10-Q 13
Our other financial instruments had the following carrying values and fair values (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
Debt |
|
$ |
769,469 |
|
|
$ |
776,872 |
|
|
$ |
667,478 |
|
|
$ |
674,225 |
|
CMBS (a) |
|
|
3,792 |
|
|
|
7,319 |
|
|
|
3,797 |
|
|
|
4,677 |
|
|
|
|
(a) |
|
Carrying value of our commercial mortgage-backed securities (CMBS) represents historical
cost, inclusive of impairment charges recognized during 2009. |
We determined the estimated fair value of our debt instruments using a discounted cash flow model
with rates that take into account the credit of the tenants and interest rate risk. We estimated
that our other financial assets and liabilities (excluding net investments in direct financing
leases) had fair values that approximated their carrying values at March 31, 2011 and December 31,
2010.
Items Measured at Fair Value on a Non-Recurring Basis
We perform an assessment, when required, of the value of certain of our real estate investments in
accordance with current authoritative accounting guidance. As part of that assessment, we
determined the valuation of these assets using widely accepted valuation techniques, including
expected discounted cash flows or an income capitalization approach which considers prevailing
market capitalization rates. We reviewed each investment based on the highest and best use of the
investment and market participation assumptions. We determined that the significant inputs used to
value these investments fall within Level 3. We did not recognize any impairment charges during the
three months ended March 31, 2011 or 2010. The valuation of real estate is subject to significant
judgment and actual results may differ materially if market conditions or the underlying
assumptions change.
None of our other assets or liabilities was measured on a fair value basis for the three months
ended March 31, 2011.
Note 8. Risk Management and Use of Derivative Financial Instruments
Risk Management
In the normal course of our ongoing business operations, we encounter economic risk. There are
three main components of economic risk: interest rate risk, credit risk and market risk. We are
subject to interest rate risk on our interest-bearing assets and liabilities and our CMBS
investments. Credit risk is the risk of default on our operations and tenants inability or
unwillingness to make contractually required payments. Market risk includes changes in the value of
the properties and related loans as well as changes in the value of our CMBS investments due to
changes in interest rates or other market factors. In addition, we own investments in Europe and
are subject to the risks associated with changing foreign currency exchange rates.
Foreign Currency Exchange
We are exposed to foreign currency exchange rate movements in the Euro and British Pound Sterling.
We manage foreign currency exchange rate movements by generally placing both our debt obligation to
the lender and the tenants rental obligation to us in the same currency, but we are subject to
foreign currency exchange rate movements to the extent of the difference in the timing and amount
of the rental obligation and the debt service. We may also face challenges with repatriating cash
from our foreign investments. We may encounter instances where it is difficult to repatriate cash
because of jurisdictional restrictions or because repatriating cash may result in current or future
tax liabilities.
Use of Derivative Financial Instruments
When we use derivative instruments, it is generally to reduce our exposure to fluctuations in
interest rates. We have not entered, and do not plan to enter into financial instruments for
trading or speculative purposes. In addition to derivative instruments that we entered into on our
own behalf, we may also be a party to derivative instruments that are embedded in other contracts,
and we may own common stock warrants, granted to us by lessees when structuring lease transactions,
that are considered to be derivative instruments. The primary risks related to our use of
derivative instruments are that a counterparty to a hedging arrangement could default on its
obligation or that the credit quality of the counterparty may be downgraded to such an extent that
it impairs our ability to sell or assign our side of the hedging transaction. While we seek to
mitigate these risks by entering into hedging arrangements with counterparties that are large
financial institutions that we deem to be creditworthy, it is possible that our hedging
transactions, which are intended to limit losses, could adversely affect our earnings. Furthermore,
if we terminate a hedging arrangement, we may be obligated to pay certain costs, such as
transaction or breakage fees. We have established policies and procedures for risk assessment and
the approval, reporting and monitoring of derivative financial instrument activities.
CPA®:17 Global 3/31/2011 10-Q 14
We measure derivative instruments at fair value and record them as assets or liabilities, depending
on our rights or obligations under the applicable derivative contract. Derivatives that are not
designated as hedges must be adjusted to fair value through earnings. If a derivative is designated
as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will
either be offset against the change in fair value of the hedged asset, liability, or firm
commitment through earnings or recognized in Other comprehensive income (OCI) until the hedged
item is recognized in earnings. The ineffective portion of a derivatives change in fair value is
immediately recognized in earnings.
The following table sets forth certain information regarding our derivative instruments at March
31, 2011 and December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Designated |
|
|
|
Asset Derivatives Fair Value at |
|
|
Liabilities Derivatives Fair Value at |
|
as Hedging Instruments |
|
Balance Sheet Location |
|
March 31, 2011 |
|
|
December 31, 2010 |
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
Interest rate cap |
|
Other assets, net |
|
$ |
730 |
|
|
$ |
733 |
|
|
$ |
|
|
|
$ |
|
|
Interest rate swap |
|
Other assets, net |
|
|
234 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
Interest rate swap |
|
Accounts payable, accrued expenses and other liabilities |
|
|
|
|
|
|
|
|
|
|
(801 |
) |
|
|
(1,134 |
) |
Foreign currency forward contract |
|
Accounts payable, accrued expenses and other liabilities |
|
|
|
|
|
|
|
|
|
|
(326 |
) |
|
|
(1,081 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
964 |
|
|
$ |
751 |
|
|
$ |
(1,127 |
) |
|
$ |
(2,215 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2011 and December 31, 2010, we also had an embedded credit derivative that is not
designated as a hedging instrument. This instrument had a fair value of $0 at both March 31, 2011
and December 31, 2010.
The following tables present the impact of derivative instruments on the consolidated financial
statements (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) Recognized |
|
|
|
in OCI on Derivatives |
|
|
|
(Effective Portion) |
|
|
|
Three Months Ended March 31, |
|
Derivatives in Cash Flow Hedging Relationships |
|
2011 |
|
|
2010 |
|
Interest rate cap (a) |
|
$ |
53 |
|
|
$ |
(1,163 |
) |
Interest rate swaps |
|
|
543 |
|
|
|
(308 |
) |
Foreign currency forward contract (b) |
|
|
(3,714 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(3,118 |
) |
|
$ |
(1,471 |
) |
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes gains attributable to noncontrolling interests totaling less than $0.1 million for
the three months ended March 31, 2011 and losses totaling $0.5 million for the three months
ended March 31, 2010. |
|
|
|
(b) |
|
In connection with the extension of the maturity date of this foreign currency forward contract, we made
a cash payment of $4.5 million to roll-forward the original contract, which was recognized in OCI. |
See below for information on our purposes for entering into derivative instruments, including those
not designated as hedging instruments, and for information on derivative instruments owned by
unconsolidated ventures, which are excluded from the tables above.
CPA®:17 Global 3/31/2011 10-Q 15
Interest Rate Swaps and Caps
We are exposed to the impact of interest rate changes primarily through our borrowing activities.
To limit this exposure, we attempt to obtain mortgage financing on a long-term, fixed-rate basis.
However, from time to time, we or our venture partners may obtain variable-rate non-recourse
mortgage loans and, as a result, may enter into interest rate swap agreements or interest rate cap
agreements with counterparties. Interest rate swaps, which effectively convert the variable-rate
debt service obligations of the loan to a fixed rate, are agreements in which one party exchanges a
stream of interest payments for a counterpartys stream of cash flow over a specific period. The
notional, or face, amount on which the swaps are based is not exchanged. Interest rate caps limit
the effective borrowing rate of variable-rate debt obligations while allowing participants to share
in downward shifts in interest rates. Our objective in using these derivatives is to limit our
exposure to interest rate movements.
The interest rate swaps and interest rate cap derivative instruments that we had outstanding at
March 31, 2011 were designated as cash flow hedges and are summarized as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
|
Effective |
|
|
Effective |
|
Expiration |
|
Fair Value at |
|
|
|
Type |
|
Amount |
|
|
Interest Rate |
|
|
Date |
|
Date |
|
March 31, 2011 |
|
3-Month LIBOR |
|
Interest rate cap (a) |
|
$ |
125,000 |
|
|
|
2.8 |
% |
|
3/2011 |
|
8/2014 |
|
$ |
730 |
|
3-Month LIBOR |
|
Pay-fixed swap |
|
|
27,285 |
|
|
|
6.6 |
% |
|
1/2010 |
|
12/2019 |
|
|
(786 |
) |
3-Month Euribor (b) |
|
Pay-fixed swap |
|
|
8,542 |
|
|
|
5.8 |
% |
|
7/2010 |
|
11/2017 |
|
|
234 |
|
1-Month LIBOR |
|
Pay-fixed swap |
|
|
4,200 |
|
|
|
6.0 |
% |
|
1/2011 |
|
1/2021 |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The applicable interest rate of the related debt was 2.8%, which was below the effective
interest rate of the cap at March 31, 2011. Inclusive of noncontrolling interests in the
notional amount and fair value of the swap of $56.3 million and $0.3 million, respectively. |
|
(b) |
|
Amounts are based upon the applicable exchange rate at March 31, 2011. |
Foreign Currency Contracts
We enter into foreign currency forward contracts to hedge certain of our foreign currency cash flow
exposures. A foreign currency forward contract is a commitment to deliver a certain amount of
currency at a certain price on a specific date in the future. By entering into this instrument, we
are locked into a future currency exchange rate, which limits our exposure to the movement in
foreign currency exchange rates.
In December 2010, we entered into a foreign currency forward contract with a total notional amount
of $63.4 million, based on the exchange rate of the Euro at March 31, 2011. This contract fixed the
exchange rate of the Euro to $1.31047 with a maturity date of March 2011. This contract was
subsequently extended to July 2011.
Embedded Credit Derivative
In connection with a venture in Germany in which we and an affiliate have 67% and 33% interests,
respectively, and which we consolidate, the venture obtained non-recourse mortgage financing for
which the interest rate has both fixed and variable components. In connection with providing the
financing, the lender entered into an interest rate swap agreement on its own behalf through which
the fixed interest rate component on the financing was converted into a variable interest rate
instrument. Through the venture, we have the right, at our sole discretion, to prepay this debt at
any time and to participate in any realized gain or loss on the interest rate swap at that time.
This participation right is deemed to be an embedded credit derivative. The derivative had an
estimated fair value of $0 at both March 31, 2011 and December 31, 2010. This derivative did not
generate gains or losses during the three-month periods ended March 31, 2011 and 2010.
Other
Amounts reported in OCI related to derivatives will be reclassified to interest expense as
interest payments are made on our variable-rate debt. At March 31, 2011, we estimate that $1.6
million, inclusive of amounts attributable to noncontrolling interests of $0.2 million, will be
reclassified as interest expense during the next twelve months.
Some of the agreements we have with our derivative counterparties contain certain credit contingent
provisions that could result in a declaration of default against us regarding our derivative
obligations if we either default or are capable of being declared in default on certain of our
indebtedness. At March 31, 2011, we had not been declared in default on any of our derivative
obligations. The estimated fair value of our derivatives that were in a net liability position was
$0.9 million and $2.2 million at March 31, 2011 and December 31, 2010, respectively, which included
accrued interest but excluded any adjustment for nonperformance risk. If we had breached any of
these provisions at March 31, 2011 or December 31, 2010, we could have been required to settle our
obligations under these agreements at their aggregate termination value of $1.4 million or $2.5
million, respectively.
CPA®:17 Global 3/31/2011 10-Q 16
Portfolio Concentration Risk
Concentrations of credit risk arise when a group of tenants is engaged in similar business
activities or is subject to similar economic risks or conditions that could cause them to default
on their lease obligations to us. We regularly monitor our portfolio to assess potential
concentrations of credit risk. Our portfolio contains concentrations in excess of 10% of current
contractual annualized lease revenues in certain areas, as described below. The percentages in the
paragraph below represent our directly-owned real estate properties and do not include the pro rata
shares of our equity investments.
At March 31, 2011, the majority of our directly-owned real estate properties were located in the
U.S. (66%), with New York (16%) representing the only significant domestic concentration based on
percentage of our annualized contractual minimum base rent for the first quarter of 2011. All of
our directly-owned international properties were located in Europe, with Spain (13%) and Croatia
(11%) representing the only significant concentrations based on percentage of our annualized
contractual minimum base rent for the first quarter of 2011. At March 31, 2011, The New York Times
Company was the only tenant representing a significant concentration of credit risk, with 16% of
our total current annualized contractual minimum base rent (inclusive of amounts attributable to
noncontrolling interests). At March 31, 2011, our directly-owned real estate properties contained
concentrations in the following asset types: warehouse and distribution (38%), office (34%),
industrial (15%) and retail (10%); and in the following tenant industries: retail stores (23%),
media printing and publishing (22%) and beverages, food and tobacco (13%).
There were no significant concentrations, individually or in the aggregate, related to our
unconsolidated ventures.
Note 9. Non-Recourse and Limited Recourse Debt
During the first three months of 2011, we obtained non-recourse and limited-recourse mortgage
financing totaling $208.2 million at a weighted average annual interest rate and term of 4.1% and
8.4 years, respectively. Of the total financing,
|
|
|
$125.0 million related to the March 2009 New York Times transaction, inclusive of amounts
attributable to noncontrolling interests of $68.8 million. In March 2011, we refinanced the
limited-recourse mortgage loan obtained in August 2009 with an outstanding balance of $116.0
million at the date of refinancing, with new limited-recourse financing that matures in
April 2018, with the option to extend to April 2019. The financing bears interest at an
annual interest rate equal to the London inter-bank offered rate (LIBOR) plus 2.5%. The
interest rate has been capped at 4.0% through the use of an interest rate cap designated as
a cash flow hedge, which matures in March 2016 (Note 8); |
|
|
|
$75.1 million related to two domestic investments acquired during 2011; and |
|
|
|
$8.1 million related to two domestic investments acquired during 2010. |
Amounts above are based upon the exchange rate of the Euro at the date of financing where
applicable.
Non-recourse and limited-recourse debt consists of mortgage notes payable, which are collateralized
by an assignment of real property and direct financing leases with an aggregate carrying value of
$1.2 billion and $1.1 billion at March 31, 2011 and December 31, 2010, respectively. Our mortgage
notes payable bore interest at fixed annual rates ranging from 4.5% to 8.0% and variable annual
rates ranging from 2.8% to 6.6%, with maturity dates ranging from 2014 to 2028 at both March 31,
2011 and December 31, 2010, respectively.
CPA®:17 Global 3/31/2011 10-Q 17
Scheduled debt principal payments during each of the next five calendar years following March 31,
2011 and thereafter are as follows (in thousands):
|
|
|
|
|
|
|
Total |
|
2011 (remainder) |
|
$ |
10,619 |
|
2012 |
|
|
15,424 |
|
2013 |
|
|
17,265 |
|
2014 |
|
|
18,528 |
|
2015 |
|
|
64,779 |
|
Thereafter through 2028 |
|
|
642,854 |
|
|
|
|
|
Total |
|
$ |
769,469 |
|
|
|
|
|
Certain amounts in the table above are based on the applicable foreign currency exchange rate at
March 31, 2011.
Note 10. Commitments and Contingencies
Various claims and lawsuits arising in the normal course of business are pending against us. The
results of these proceedings are not expected to have a material adverse effect on our consolidated
financial position or results of operations.
During December 2010, in connection with the proposed merger between two of our affiliates,
CPA®:14 and Corporate Property Associates 16 Global (CPA®:16 Global),
we entered into an agreement to purchase three properties from CPA®:14 for an aggregate
purchase price of $57.4 million, plus the assumption of approximately $153.9 million of
related indebtedness. This merger closed on May 2, 2011 (Note 13).
Note 11. Income Taxes
We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code
of 1986, as amended. We believe we have operated, and we intend to continue to operate, in a manner
that allows us to continue to qualify as a REIT. Under the REIT operating structure, we are
permitted to deduct distributions paid to our shareholders and generally will not be required to
pay U.S. federal income taxes. Accordingly, no provision has been made for U.S. federal income
taxes in the consolidated financial statements.
We conduct business in various states and municipalities within the U.S. and Europe and, as a
result, we file income tax returns in the U.S. federal jurisdiction and various state and certain
foreign jurisdictions.
We account for uncertain tax positions in accordance with current authoritative accounting
guidance. We had unrecognized tax benefits of $0.3 million and $0.2 million at March 31, 2011 and
December 31, 2010, respectively, that, if recognized, would have a favorable impact on our
effective income tax rate in future periods. We recognize interest and penalties related to
uncertain tax positions in income tax expense. At both March 31, 2011 and December 31, 2010, we had
less than $0.1 million of accrued interest or penalties related to uncertain tax positions.
Our tax returns are subject to audit by taxing authorities. These audits can often take years to
complete and settle. The tax years 2007 through 2011 remain open to examination by the major taxing
jurisdictions to which we are subject.
During 2010, we elected to treat our corporate subsidiary that engages in hotel operations as a
taxable REIT subsidiary (TRS). This subsidiary owns a hotel that is managed on our behalf by a
third-party hotel management company. A TRS is subject to corporate federal income taxes, and we
provide for income taxes in accordance with current authoritative accounting guidance. This
subsidiary has recognized de minimus profit since inception.
CPA®:17 Global 3/31/2011 10-Q 18
Note 12. Pro Forma Financial Information
The following consolidated pro forma financial information has been presented as if the
acquisitions that we made, and the new financing that we obtained, since January 1, 2010 had
occurred on January 1, 2010 for the three months ended March 31, 2010. Acquisitions during the
three months ended March 31, 2011 were not significant individually or in the aggregate. The pro
forma financial information is not necessarily indicative of what the actual results would have
been, nor does it purport to represent the results of operations for future periods.
(Dollars in thousands, except per share amounts):
|
|
|
|
|
|
|
Three Months |
|
|
|
Ended |
|
|
|
March 31, |
|
|
|
2010 |
|
Pro forma total revenues |
|
$ |
20,498 |
|
|
|
|
|
|
Pro forma net income (a) |
|
$ |
10,700 |
|
Less: Net income attributable to noncontrolling interests |
|
|
(3,283 |
) |
|
|
|
|
Pro forma net income attributable to CPA®:17 Global
shareholders |
|
$ |
7,417 |
|
|
|
|
|
Pro forma earnings per share (a): |
|
|
|
|
Net income attributable to CPA®:17 Global
shareholders |
|
$ |
0.08 |
|
|
|
|
|
|
|
|
(a) |
|
Pro forma net income includes actual interest generated from the proceeds of our initial
public offering. A portion of these proceeds was used to fund the investments in the foregoing
pro forma financial information. |
The pro forma weighted average shares outstanding for the three months ended March 31, 2010 were
determined as if all shares issued since our inception through March 31, 2010 were issued on
January 1, 2010.
Note 13. Subsequent Events
In April 2011, we entered into an investment in which we acquired four domestic industrial
facilities for a total cost of approximately $51.0 million.
In April 2011, we obtained non-recourse mortgage financing totaling $24.5 million at a fixed
interest rate of 6.4% and term of 10 years in connection with a domestic investment acquired in
March 2010.
In connection with a merger between two of our affiliates, CPA®:14 and
CPA®:16 Global, which was completed on May 2, 2011, we purchased three properties
from CPA®:14 for an aggregate purchase price of $57.4 million, plus the assumption of
approximately $153.9 million of related indebtedness.
CPA®:17 Global 3/31/2011 10-Q 19
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and Results of Operations |
Managements discussion and analysis of financial condition and results of operations (MD&A) is
intended to provide the reader with information that will assist in understanding our financial
statements and the reasons for changes in certain key components of our financial statements from
period to period. MD&A also provides the reader with our perspective on our financial position and
liquidity, as well as certain other factors that may affect our future results. Our MD&A should be
read in conjunction with our 2010 Annual Report.
Business Overview
We are a publicly owned, non-listed REIT that invests primarily in commercial properties leased to
companies domestically and internationally. As a REIT, we are not subject to U.S. federal income
taxation as long as we satisfy certain requirements, principally relating to the nature of our
income, the level of our distributions and other factors. We earn revenue principally by leasing
the properties we own to single corporate tenants, primarily on a triple-net lease basis, which
requires the tenant to pay substantially all of the costs associated with operating and maintaining
the property. Revenue is subject to fluctuation because of the timing of new lease transactions,
lease terminations, lease expirations, contractual rent adjustments, tenant defaults and sales of
properties. We were formed in 2007 and are managed by the advisor.
Financial Highlights
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2011 |
|
|
2010 |
|
Total revenues |
|
$ |
42,548 |
|
|
$ |
18,420 |
|
Net income attributable to CPA®:17
Global shareholders |
|
|
12,435 |
|
|
|
6,123 |
|
Cash flow from operating activities |
|
|
26,404 |
|
|
|
15,509 |
|
|
|
|
|
|
|
|
|
|
Distributions paid |
|
|
(21,520 |
) |
|
|
(11,675 |
) |
|
|
|
|
|
|
|
|
|
Supplemental financial measures: |
|
|
|
|
|
|
|
|
Funds from operations as adjusted (AFFO) |
|
$ |
20,203 |
|
|
$ |
7,919 |
|
Adjusted cash flow from operating activities |
|
|
22,483 |
|
|
|
9,147 |
|
We consider the performance metrics listed above, including certain supplemental metrics that are
not defined by GAAP (non-GAAP) such as Funds from operations as adjusted, or AFFO, and
Adjusted cash flow from operating activities, to be important measures in the evaluation of our
results of operations, liquidity and capital resources. We evaluate our results of operations with
a primary focus on the ability to generate cash flow necessary to meet our objectives of funding
distributions to shareholders. See Supplemental Financial Measures below for our definition of
these measures and reconciliations to their most directly comparable GAAP measure.
Total revenues, Net income attributable to CPA®:17 Global shareholders and Cash flow
from operating activities all increased during the current year period as compared to the same
period in 2010, reflecting our investment activity during 2010 and 2011.
Our daily cash distribution for the first quarter of 2011 was $0.0017778 per share and was paid on
April 15, 2011 to shareholders of record as of the close of business on each day during the first
quarter, or $0.64 per share on an annualized basis. Our board of directors has declared that our
daily cash distribution for the second quarter of 2011 will be $0.0017857 per share, or $0.65 per
share on an annualized basis, and will be paid on or about July 15, 2011 to shareholders of record
as of the close of business on each day during the second quarter.
For the three months ended March 31, 2011 as compared to the same period in 2010, our AFFO
supplemental measure increased, primarily as a result of our investment activity during 2010 and
2011. For the three months ended March 31, 2011 as compared to the same period in 2010, our
adjusted cash flow from operating activities supplemental measure reflected increased cash flow
from operating activities, as described above.
CPA®:17 Global 3/31/2011 10-Q 20
Current Trends
We are impacted by macro-economic environmental factors, the capital markets and general conditions
in the commercial real estate market, both in the U.S. and globally. As of the date of this Report,
we have seen signs of modest improvement in the global economy following the significant distress
experienced in 2008 and 2009. Our experience during the three months ended March 31, 2011 reflected
strong investment volume, as well as an improved financing and fundraising environment. While these
factors reflect favorably on our business, the pace of the economic recovery remains slow, and our
business remains dependent on the speed and strength of the recovery, which cannot be predicted at
this time. Nevertheless, as of the date of this Report, the impact of current financial and
economic trends on our business, and our response to those trends, is presented below.
Fundraising
Fundraising trends for non-listed REITs generally reflect an increase in average monthly volume
during the three months ended March 31, 2011 as compared to the prior year period. We have made a
concerted effort to broaden our distribution channels and are seeing a greater portion of our
fundraising come from an expanded network of broker-dealers as a result of these efforts. We
continue to witness increased competition for investment dollars.
In October 2010, we filed a registration statement with the SEC for the follow-on offering of up to
an additional $1.0 billion of common stock, which was declared effective by the SEC on April 7,
2011 and, as a result, our initial public offering terminated. There can be no assurance that we
will sell the full number of shares registered. Through the termination of our initial public
offering, we raised $163.8 million during 2011 and raised more than $1.5 billion since beginning
fundraising in December 2007.
Capital Markets
Capital markets conditions continue to exhibit evidence of post-crisis improvement, including new
issuances of CMBS debt. Capital inflows to both commercial real estate debt and equity markets have
helped increase the availability of mortgage financing and asset prices continue to recover from
their credit crisis lows. The availability of financing for secured transactions has expanded;
however, lenders remain cautious and continue to employ conservative underwriting standards.
Commercial real estate capitalization rates remain low compared to credit crisis highs, especially
for higher-quality assets or assets leased to tenants with strong credit. The improvement in
financing conditions combined with a stabilization of prices for high quality assets has helped to
increase transaction activity, however increased competition from both public and private investors
continues.
Investment Opportunities
Our ability to complete investments fluctuates based on the pricing and availability of
transactions and the pricing and availability of financing, among other factors.
As a result of the recent improving economic conditions and increasing seller optimism, we have
seen an increased number of investment opportunities that we believe will allow us to enter into
transactions on favorable terms. Although capitalization rates have remained compressed over the
past few quarters compared to their credit crisis highs, we believe that the investment environment
remains attractive. We believe that the significant amount of debt that remains outstanding in the
marketplace, which will need to be refinanced over the next several years, will provide attractive
investment opportunities for net lease investors such as ourselves. To the extent that these trends
continue, we believe that our investment volume will benefit. However, we have recently seen an
increasing level of competition for investments, both domestically and in Europe, and further
capital inflows into the marketplace could put additional pressure on the returns that we can
generate from our investments and our willingness and ability to execute transactions. However, we
expect to continue to expand our ability to source deals in other markets.
We entered into investments totaling approximately $313.6 million during the three months ended
March 31, 2011, representing an increase of $164.5 million over the prior year period, and based on
current conditions we expect that we will be able to continue to take advantage of the investment
opportunities we are seeing in both the U.S. and Europe through the near term. Investment volume
reflects international investments of 56% (on a pro rata basis) during the first three months of
2011. While this fluctuates from quarter to quarter, we currently expect that international
transactions will continue to form a significant portion of our investments, although the relative
portion of international investments in any given period will vary.
Financing Conditions
We have recently seen a gradual improvement in both the credit and real estate financing markets.
We continue to see an increase in the number of lenders for both domestic and international
investments as market conditions improve compared to prior years. During the three months ended
March 31, 2011, we obtained non-recourse mortgage financing totaling $235.5 million (on a pro rata
basis).
CPA®:17 Global 3/31/2011 10-Q 21
General Economic Environment
Foreign Exchange Rates
We have foreign investments and, as a result, are subject to risk from the effects of exchange rate
movements. Our results of foreign operations benefit from a weaker U.S. dollar and are adversely
affected by a stronger U.S. dollar relative to foreign currencies. During the three months ended
March 31, 2011, the U.S. dollar weakened in relation to the Euro as evidenced by the change in the
end-of-period conversion rate of the Euro, which increased by 6% to $1.4099 at March 31, 2011 from
$1.3253 at December 31, 2010. Investments denominated in the Euro accounted for approximately 30%
of our annualized contractual minimum base rent for the three months ended March 31, 2011. This
weakening had a favorable impact on our balance sheet at March 31, 2011 as compared to our balance
sheet at December 31, 2010. During the three months ended March 31, 2011, the average conversion
rate for the U.S. dollar in relation to the Euro strengthened by 1% in comparison to the same period
in 2010. A significant unhedged decline in the value of the Euro could have a material negative
impact on our net asset values, future results, financial position and cash flows.
Real Estate Sector
As noted above, the commercial real estate market is impacted by a variety of macro-economic
factors, including but not limited to growth in gross domestic product, unemployment, interest
rates, inflation, and demographics. Despite improvements in expectations since the beginning of the
credit crisis, these macro-economic factors have persisted, negatively impacting commercial real
estate market fundamentals, which has resulted in higher vacancies, lower rental rates, and lower
demand for vacant space. However, recently there have been some indications of stabilization in
asset values and slight improvements in occupancy rates. We are chiefly affected by changes in the
appraised values of our properties, tenant defaults, inflation, lease expirations, and occupancy
rates.
Credit Quality of Tenants
As a net lease investor, we are exposed to credit risk within our tenant portfolio, which can
reduce our results of operations and cash flow from operations if our tenants are unable to pay
their rent. Tenants experiencing financial difficulties may become delinquent on their rent and/or
default on their leases and, if they file for bankruptcy protection, may reject our lease in
bankruptcy court, resulting in reduced cash flow, which may negatively impact net asset values and
require us to incur impairment charges. Even where a default has not occurred and a tenant is
continuing to make the required lease payments, we may restructure or renew leases on less
favorable terms, or the tenants credit profile may deteriorate, which could affect the value of
the leased asset and could in turn require us to incur impairment charges.
As of the date of this Report, we have one tenant, Waldaschaff Automotive GmbH, in our portfolio
operating under administrative protection who has been paying rent to us, albeit at a significantly
reduced rate, while new lease terms are being negotiated. The continued improvements in general
business conditions have favorably impacted the overall credit quality of our tenants.
To mitigate credit risk, we have historically looked to invest in assets that we believe are
critically important to our tenants operations and have attempted to diversify our portfolio by
tenant, tenant industry and geography. We also monitor tenant performance through review of rent
delinquencies as a precursor to a potential default, meetings with tenant management and review of
tenants financial statements and compliance with any financial covenants. When necessary, our
asset management process includes restructuring transactions to meet the evolving needs of tenants,
re-leasing properties, refinancing debt and selling properties, as well as protecting our rights
when tenants default or enter into bankruptcy.
Inflation
Our leases generally have rent adjustments that are either fixed or based on formulas indexed to
changes in the consumer price index (CPI) or other similar indices for the jurisdiction in which
the property is located. Because these rent adjustments may be calculated based on changes in the
CPI over a multi-year period, changes in inflation rates can have a delayed impact on our results
of operations. Despite recent signs of inflationary pressure, we continue to expect that rent
increases will be significantly lower in coming years as a result of the current historically low
inflation rates in the U.S. and the Euro zone.
CPA®:17 Global 3/31/2011 10-Q 22
Lease Expirations and Occupancy
Our leases are in their early stages, with no significant leases scheduled to expire or renew in
the near term. The advisor actively manages our real estate portfolio and begins discussing options
with tenants in advance of the scheduled lease expiration. In certain
cases, we may obtain lease renewals from our tenants; however, tenants may elect to move out at the
end of their term, or may elect to exercise purchase options, if any, in their leases. In cases
where tenants elect not to renew, we may seek replacement tenants or try to sell the property. Our investments were fully occupied at both March 31, 2011 and December 31, 2010, reflecting a
portfolio of primarily new tenants.
Proposed Accounting Changes
The International Accounting Standards Board and the Financial Accounting Standards Board have
issued an Exposure Draft on a joint proposal that would dramatically transform lease accounting
from the existing model. These changes would impact most companies but are particularly applicable
to those that are significant users of real estate. The proposal outlines a completely new model
for accounting by lessees, whereby their rights and obligations under all leases, existing and new,
would be capitalized and recorded on the balance sheet. For some companies, the new accounting
guidance may influence whether or not, or the extent to which, they enter into the type of
sale-leaseback transactions in which we specialize. At this time, the proposed guidance has not
been finalized and as such we are unable to determine whether this proposal will have a material
impact on our business.
Results of Operations
We were formed in 2007 and have a limited operating history. The results of operations presented
below for the three months ended March 31, 2011 are not expected to be representative of future
results because we anticipate that our asset base will increase substantially as we continue to
invest capital. As our asset base increases, we expect that property-related revenues and expenses,
as well as general and administrative expenses and other revenues and expenses, will increase.
We are dependent upon proceeds received from our follow-on offering to conduct our proposed
activities. The capital required to make investments will be obtained from the follow-on offering
and from any mortgage indebtedness that we may incur in connection with our investment activity.
The following table presents the components of our lease revenue (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2011 |
|
|
2010 |
|
Rental income |
|
$ |
27,632 |
|
|
$ |
8,412 |
|
Interest income from direct financing leases |
|
|
11,293 |
|
|
|
9,367 |
|
|
|
|
|
|
|
|
|
|
$ |
38,925 |
|
|
$ |
17,779 |
|
|
|
|
|
|
|
|
CPA®:17 Global 3/31/2011 10-Q 23
The following table sets forth the net lease revenues (i.e., rental income and interest income from
direct financing leases) that we earned from lease obligations through our direct ownership of real
estate (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
Lessee (Date Acquired or Placed in Service) |
|
2011 |
|
|
2010 |
|
The New York Times Company (3/2009) (a) |
|
$ |
7,238 |
|
|
$ |
6,659 |
|
General Parts Inc., Golden State Supply LLC, Straus-Frank Enterprises LLC,
General Parts Distribution LLC and Worldpac Inc., collectively
CARQUEST (12/2010)
|
|
|
5,216 |
|
|
|
|
|
Agrokor d.d. (12/2010, 4/2010) (b) |
|
|
3,822 |
|
|
|
|
|
Eroski Sociedad Cooperativa (6/2010, 2/2010, 12/2009) (b) |
|
|
2,662 |
|
|
|
1,398 |
|
Terminal Freezers, LLC (1/2011) |
|
|
2,608 |
|
|
|
|
|
DTS Distribuidora de Television Ditital SA (12/2010) (b) |
|
|
2,255 |
|
|
|
|
|
LifeTime Fitness, Inc. (9/2008) |
|
|
1,679 |
|
|
|
1,680 |
|
Flint River Services, LLC (11/2010) |
|
|
1,272 |
|
|
|
|
|
Angelica Corporation (3/2010) |
|
|
1,250 |
|
|
|
99 |
|
Frontier Spinning Mills, Inc. (12/2008) (a) |
|
|
1,111 |
|
|
|
1,118 |
|
McKesson Corporation (formerly US Oncology, Inc.)(12/2009) |
|
|
1,047 |
|
|
|
1,047 |
|
Actebis Peacock GmbH (7/2008) (a) (b) |
|
|
1,005 |
|
|
|
1,008 |
|
JP Morgan Chase Bank, National Association and AT&T Wireless Services
(5/2010) |
|
|
983 |
|
|
|
|
|
Kronos Products, Inc. (1/2010) |
|
|
956 |
|
|
|
995 |
|
Laureate Education, Inc. (7/2008) |
|
|
710 |
|
|
|
709 |
|
Mori Seiki USA, Inc. (12/2009) |
|
|
703 |
|
|
|
703 |
|
TDG Limited (5/2010, 4/2010) (b) |
|
|
701 |
|
|
|
|
|
Sabre Communications Corporation and Cellxion, LLC (6/2010, 8/2008) |
|
|
688 |
|
|
|
630 |
|
National Express Limited (12/2009) (b) |
|
|
517 |
|
|
|
485 |
|
Berry Plastics Corporation (3/2010) (c) |
|
|
514 |
|
|
|
7 |
|
Wagon Automotive Nagold GmbH (8/2008) (a)(b)(d) |
|
|
501 |
|
|
|
555 |
|
Other (b) |
|
|
1,487 |
|
|
|
686 |
|
|
|
|
|
|
|
|
|
|
$ |
38,925 |
|
|
$ |
17,779 |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
These revenues are generated in consolidated ventures with our affiliates, and on a combined
basis, include revenues applicable to noncontrolling interests totaling $4.2 million and $4.0
million for the three months ended March 31, 2011 and 2010, respectively. |
|
(b) |
|
Amounts are subject to fluctuations in foreign currency exchange rates. The average rate for
the U.S. dollar in relation to the Euro during the three months ended March 31, 2011
strengthened by approximately 1% in comparison to the same period in 2010, resulting in a
negative impact on lease revenues for our Euro-denominated investments in the current year
period. |
|
(c) |
|
We also own an interest in a venture with one of our affiliates that leases another property
to this lessee, which we account for as an equity investment in real estate. |
|
(d) |
|
The decrease was primarily due to the sale of a parcel of land in April 2010, which resulted
in a subsequent reduction of rent. |
CPA®:17 Global 3/31/2011 10-Q 24
We recognize income from equity investments in real estate, of which lease revenues are a
significant component. The following table sets forth the net lease revenues earned by ventures.
Amounts provided are the total amounts attributable to the ventures and do not represent our
proportionate share (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership |
|
|
|
|
|
|
Interest at |
|
|
Three Months Ended March 31, |
|
Lessee (Date Acquired) |
|
March 31, 2011 |
|
|
2011 |
|
|
2010 |
|
C1000 B.V. (1/2011) (a) (b) |
|
|
85 |
% |
|
$ |
3,109 |
|
|
$ |
|
|
Tesco plc (7/2009) (a) |
|
|
49 |
% |
|
|
1,884 |
|
|
|
1,870 |
|
Berry Plastics Corporation (12/2007) (c) |
|
|
50 |
% |
|
|
1,675 |
|
|
|
1,697 |
|
Eroski Sociedad Cooperativa Mallorca (6/2010)
(a) |
|
|
30 |
% |
|
|
794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,462 |
|
|
$ |
3,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Amounts are subject to fluctuations in foreign currency exchange rates. The average rate for
the U.S. dollar in relation to the Euro during the three months ended March 31, 2011
strengthened by approximately 1% in comparison to the same period in 2010, resulting in a
negative impact on lease revenues for our Euro-denominated investments in the current year
period. |
|
(b) |
|
We account for our interest in this venture as a tenancy-in-common. |
|
(c) |
|
We also consolidate a venture with one of our affiliates that leases another property to this lessee. |
Lease Revenues
Our net leases generally have rent adjustments based on formulas indexed to changes in the CPI or
other similar indices for the jurisdiction in which the property is located, sales overrides or
other periodic increases, which are intended to increase lease revenues in the future. We own
international investments and, therefore, lease revenues from these investments are subject to
fluctuations in exchange rate movements in foreign currencies.
For the three months ended March 31, 2011 as compared to the same period in 2010, lease revenues
increased by $21.1 million, primarily due to our investment activity during 2010 and 2011.
Other Real Estate Operations
Other real estate operations represents the results of operations (revenues and operating expenses)
of our domestic hotel venture, which we acquired in May 2010.
Our results of operations from our hotel venture reflected income and expenses of $0.9 million and
$0.5 million, respectively, for the three months ended March 31, 2011.
Interest Income on CMBS and Notes Receivable
For the three months ended March 31, 2011 as compared to the same period in 2010, interest income
on CMBS investments and notes receivable increased by $1.7 million as a result of interest income
recognized during 2011 related to notes receivables acquired during the second half of 2010.
Depreciation and Amortization
For the three months ended March 31, 2011 as compared to the same period in 2010, depreciation and
amortization increased by $6.0 million, as a result of investments we entered into during 2010 and
2011.
CPA®:17 Global 3/31/2011 10-Q 25
General and Administrative
For the three months ended March 31, 2011 as compared to the same period in 2010, general and
administrative expense increased by $0.9 million, primarily due to increases in professional fees
of $0.5 million and management expenses of $0.2 million. Professional fees include legal,
accounting and investor-related expenses incurred in the normal course of business. Management
expenses include our reimbursements to the advisor for the allocated costs of personnel and
overhead in providing management of our day-to-day operations, including accounting services,
shareholder services, corporate management, and property management and operations.
Property Expenses
For the three months ended March 31, 2011 as compared to the same period in 2010, property expense
increased by $2.6 million, primarily due to increases in asset management fees of $1.9 million and
reimbursable tenant costs of $0.5 million. Asset management fees increased as a result of 2010 and
2011 investment volume. Reimbursable tenant costs are recorded as both revenue and expenses and
therefore have no impact on our results of operations.
Income from Equity Investments in Real Estate
Income from equity investments in real estate represents our proportionate share of net income or
net loss (revenue less expenses) from investments entered into with affiliates in which we have a
noncontrolling interest but over which we exercise significant influence. Under current accounting
guidance for investments in unconsolidated ventures, we are required to periodically compare an
investments carrying value to its estimated fair value and recognize an impairment charge to the
extent that the carrying value exceeds fair value.
For the three months ended March 31, 2011 as compared to the same period in 2010, income from
equity investments in real estate increased by $1.4 million due to our investments in the C1000
venture in January 2011 and the Eroski Mallorca venture in June 2010, which contributed income of
$1.1 million and $0.2 million, respectively, during the first three months of 2011.
Interest Expense
For the three months ended March 31, 2011 as compared to the same period in 2010, interest expense
increased by $6.9 million primarily as a result of mortgage financing obtained in connection with
our investment activity during 2011 and 2010 which contributed additional expense of $5.8 million
as compared to the same period in 2010, as well as an increase in the amortization of deferred
financing costs primarily associated with the refinancing of the New York Times debt.
(Provision for) Benefit from Income Taxes
For the three months ended March 31, 2011, we recognized a provision for income taxes of $0.4
million as compared with a benefit from income taxes of $0.5 million during the same period in
2010, primarily due to international investments entered into during 2011. Additionally, during
the first quarter of 2010, we revised our estimates of income taxes payable on our investments in
Germany based on actual returns filed during the period, which resulted in a reduction in income
taxes payable.
Net Income Attributable to CPA®:17 Global Shareholders
For the three months ended March 31, 2011 as compared to the same period in 2010, the resulting net
income attributable to CPA®:17 Global shareholders increased by $6.3 million.
Funds from Operations as Adjusted (AFFO)
For the three months ended March 31, 2011 as compared to the same period in 2010, AFFO increased by
$12.3 million, primarily as a result of the aforementioned increases in results of operations
generated from our investment activity. AFFO is a non-GAAP measure that we use to evaluate our
business. For a definition of AFFO and reconciliation to net income attributable to
CPA®:17 Global shareholders, see Supplemental Financial Measures below.
Subsequent Events
In April 2011, we entered into an investment in which we acquired four domestic industrial
facilities for a total cost of approximately $51.0 million.
In April 2011, we obtained non-recourse mortgage financing totaling $24.5 million at a fixed
interest rate of 6.4% and term of 10 years in connection with a domestic investment acquired in
March 2010.
CPA®:17 Global 3/31/2011 10-Q 26
In connection with a merger between two of our affiliates, CPA®:14 and
CPA®:16 Global, which was completed on May 2, 2011, we purchased three properties
from CPA®:14 for an aggregate purchase price of $57.4 million, plus the assumption of
approximately $153.9 million of related indebtedness.
Financial Condition
Sources and Uses of Cash During the Period
Our initial public offering terminated on April 7, 2011, the date which the registration statement
for our follow-on offering was declared effective by the SEC. We expect to continue to invest the
proceeds of our offerings in a diversified portfolio of income-producing commercial properties and
other real estate related assets. Once we have fully invested these proceeds, we expect that our
primary source of operating cash flow will be cash flow generated from our net leases and other
real estate related assets. We expect that these cash flows will fluctuate period to period due to
a number of factors, which may include, among other things, the timing of purchases and sales of
real estate, the timing of proceeds from non-recourse mortgage loans and receipt of lease revenues,
the advisors annual election to receive fees in restricted shares of our common stock or cash,
changes in foreign currency exchange rates and the timing and characterization of distributions
received from equity investments in real estate. Despite this fluctuation, we believe our net
leases and other real estate related assets will generate sufficient cash from operations and from
equity distributions in excess of equity income in real estate to meet our short-term and long-term
liquidity needs. However, until we have fully invested the proceeds of our offerings, we may use a
portion of the offering proceeds to fund our operating activities and distributions to shareholders
(see Financing Activities below). Our sources and uses of cash during the period are described
below.
Operating Activities
During the three months ended March 31, 2011, we used cash flows provided by operating activities
of $26.4 million to fund cash distributions to shareholders of $21.5 million, which includes the
$10.7 million in dividends that were reinvested by shareholders through our distribution
reinvestment and share purchase plan. For 2011, the advisor elected to continue to receive its
asset management fees in restricted shares of our common stock, and as a result, we paid asset
management fees of $2.4 million through the issuance of restricted stock rather than in cash.
Investing Activities
Our investing activities are generally comprised of real estate-related transactions (purchases and
sales), payment of deferred acquisition fees to the advisor and capitalized property-related costs.
During the three months ended March 31, 2011, we used $172.4 million to acquire an 85% interest in
a venture that acquired an equity investment in C-1000 and $149.2 million to acquire three
consolidated investments and to fund construction costs on several build-to-suit projects. We
received $80.8 million in distributions from our equity investments in real estate in excess of
cumulative equity income and $49.6 million in proceeds from the full repayment of our participation
in the limited-recourse mortgage loan related to our New York Times venture in connection with the
refinancing of the loan. Funds totaling $5.7 million and $7.4 million were invested in and released
from, respectively, lender-held investment accounts. We paid foreign value added taxes, or VAT,
totaling $3.5 million during the three months ended March 31, 2011 in connection with several
international investments and recovered $4.7 million during the period. Payments of deferred
acquisition fees to the advisor totaled $4.5 million.
Financing Activities
For the three months ended March 31, 2011, our financing activities primarily consisted of the
receipt of $158.4 million in net proceeds from our initial public offering, which terminated on
April 7, 2011 upon the effectiveness of our follow-on offering, and a total of $92.2 million in
proceeds from mortgage financings related to recent investment activity. We also paid distributions
of $8.1 million to affiliates who hold noncontrolling interests in various entities with us and
made scheduled principal installments on mortgage loans of $2.8 million.
Our objectives are to generate sufficient cash flow over time to provide shareholders with
increasing distributions and to seek investments with potential for capital appreciation throughout
varying economic cycles. We have funded a portion of our cash distributions to date using net
proceeds from our initial public offering and we may do so in the future, particularly until we
substantially invest the net offering proceeds. In determining our distribution policy during the
periods we are raising funds and investing capital, we place primary emphasis on projections of
cash flow from operations, together with equity distributions in excess of equity income in real
estate, from our investments, rather than on historical results of operations (though these and
other factors may be a part of our consideration). In setting a distribution rate, we thus focus
primarily on expected returns from those investments we have already made, as well as our
anticipated rate of future investment, to assess the sustainability of a particular distribution
rate over time.
CPA®:17 Global 3/31/2011 10-Q 27
As described in our 2010 Annual Report, we maintain a quarterly redemption plan pursuant to which
we may, at the discretion of our board of directors, redeem shares of our common stock from
shareholders seeking liquidity. For the three months ended March 31, 2011, we received requests to
redeem 147,230 shares of our common stock pursuant to our redemption plan, and we used $1.4 million
to fulfill these requests at a price per share of $9.30. We funded share redemptions during the
three months ended March 31, 2011 from the proceeds of the sale of shares of our common stock
pursuant to our distribution reinvestment and stock purchase plan.
Liquidity would be affected adversely by unanticipated costs, lower-than-anticipated fundraising
and greater-than-anticipated operating expenses. To the extent that our cash reserves are
insufficient to satisfy our cash requirements, additional funds may be provided from cash generated
from operations or through short-term borrowings. In addition, we may incur indebtedness in
connection with the acquisition of any property, refinancing the debt thereon, arranging for the
leveraging of any previously unfinanced property, or reinvesting the proceeds of financings or
refinancings in additional properties.
Adjusted Cash Flow from Operating Activities
Adjusted cash flow from operating activities is a non-GAAP measure that we use to evaluate our
business. For a definition of adjusted cash flow from operating activities and reconciliation to
cash flow from operating activities, see Supplemental Financial Measures below.
Our adjusted cash flow from operating activities for the three months ended March 31, 2011 and 2010
was $22.5 million and $9.1 million, respectively. This increase was primarily due to increases in
property-level cash flow generated from our investment activity during 2010 and 2011.
Summary of Financing
The table below summarizes our non-recourse and limited-recourse long-term debt (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
Balance |
|
|
|
|
|
|
|
|
Fixed rate |
|
$ |
605,210 |
|
|
$ |
516,103 |
|
Variable rate (a) |
|
|
164,259 |
|
|
|
151,375 |
|
|
|
|
|
|
|
|
Total |
|
$ |
769,469 |
|
|
$ |
667,478 |
|
|
|
|
|
|
|
|
Percent of total debt |
|
|
|
|
|
|
|
|
Fixed rate |
|
|
79 |
% |
|
|
77 |
% |
Variable rate (a) |
|
|
21 |
% |
|
|
23 |
% |
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
Weighted average interest
rate at end of period |
|
|
|
|
|
|
|
|
Fixed rate |
|
|
6.2 |
% |
|
|
6.2 |
% |
Variable rate (a) |
|
|
3.7 |
% |
|
|
5.4 |
% |
|
|
|
(a) |
|
Variable-rate debt at March 31, 2011 consisted of (i) $125.0 million that was subject to an
interest rate cap, but for which the applicable interest rate was below the effective interest
rate of the cap at March 31, 2011, and (ii) $39.3 million that was effectively converted to
fixed-rate debt through interest rate swap derivative instruments. |
Cash Resources
At March 31, 2011, our cash resources consisted of cash and cash equivalents totaling $210.9
million, which reflects the uninvested proceeds of our initial public offering. Of our total cash
and cash equivalents at March 31, 2011, $29.7 million, at then-current exchange rates, was held in
foreign bank accounts, but we could be subject to restrictions or significant costs should we
decide to repatriate these amounts. We also had unleveraged properties that had an aggregate
carrying value of $337.7 million, although there can be no assurance that we would be able to
obtain financing for these properties. In April 2011, the SEC declared our registration statement
effective for a continuous public offering of up to $1.0 billion of common stock. We began
fundraising under this follow-on offering in April 2011. Our cash resources can be used to fund
future investments as well as for working capital needs and other commitments.
CPA®:17 Global 3/31/2011 10-Q 28
Cash Requirements
During the next twelve months, we expect that cash payments will include paying distributions to
our shareholders and to our affiliates who hold noncontrolling interests in entities we control,
making scheduled mortgage loan principal payments (neither we nor our venture partners have any
balloon payments on our mortgage loan obligations until 2013), reimbursing the advisor for costs
incurred on our behalf and paying normal recurring operating expenses. We expect to continue to use
funds raised from our initial public offering and follow-on offering to invest in new properties.
Impact of Asset Purchase from Affiliate
On May 2, 2011, we purchased three properties from CPA®:14, using existing cash
resources and proceeds from our public offering, for an aggregate purchase price of $57.4 million,
plus the assumption of approximately $153.9 million of related indebtedness. We currently estimate
that the properties acquired from CPA®:14 will generate annual equity income of
approximately $5.7 million based upon actual income from equity investments in real estate
recognized by CPA®:14 during 2010.
Off-Balance Sheet Arrangements and Contractual Obligations
The table below summarizes our debt, off-balance sheet arrangements and other contractual
obligations at March 31, 2011 and the effect that these arrangements and obligations are expected
to have on our liquidity and cash flow in the specified future periods (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
|
|
More than |
|
|
|
Total |
|
|
1 Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
5 years |
|
Non-recourse and limited-recourse debt principal (a) |
|
$ |
770,442 |
|
|
$ |
14,065 |
|
|
$ |
33,499 |
|
|
$ |
83,316 |
|
|
$ |
639,562 |
|
Deferred acquisition fees |
|
|
21,588 |
|
|
|
11,008 |
|
|
|
10,580 |
|
|
|
|
|
|
|
|
|
Interest on borrowings and deferred acquisition fees |
|
|
327,945 |
|
|
|
43,776 |
|
|
|
84,347 |
|
|
|
78,155 |
|
|
|
121,667 |
|
Build-to-suit commitment and other capital commitments(b) |
|
|
22,845 |
|
|
|
22,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Lending commitment (c) |
|
|
48,978 |
|
|
|
2,821 |
|
|
|
46,157 |
|
|
|
|
|
|
|
|
|
Operating and other lease commitments (d) |
|
|
1,933 |
|
|
|
323 |
|
|
|
652 |
|
|
|
642 |
|
|
|
316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,193,731 |
|
|
$ |
94,838 |
|
|
$ |
175,235 |
|
|
$ |
162,113 |
|
|
$ |
761,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Excludes debt discounts of $1.0 million. |
|
(b) |
|
Represents remaining build-to-suit commitments on two projects. As of March 31, 2011, total
estimated construction costs for these projects were projected to be $47.4 million in the
aggregate, of which $24.6 million had been funded at that date. Also includes a hotel capital
improvement commitment of less than $0.1 million. |
|
(c) |
|
Represents unfunded amount on commitments to provide loans to three developers of several
domestic build-to-suit projects. As of March 31, 2011, the total commitment for the loans was
for up to $91.1 million, of which $42.1 million had been funded at that date. |
|
(d) |
|
Operating and other lease commitments consist of our share of future minimum rents payable
under an office cost-sharing agreement with certain affiliates for the purpose of leasing
office space used for the administration of real estate entities as well as future minimum
rents payable under a lease executed in June 2010 (denominated in British Pound Sterling) in
conjunction with an investment in the United Kingdom. Amounts under the cost-sharing agreement
are allocated among the entities based on gross revenues and are adjusted quarterly. We
anticipate that our share of future minimum lease payments will increase significantly as we
continue to invest the proceeds of our offerings. |
Amounts in the table above related to our foreign operations are based on the exchange rate of the
local currencies at March 31, 2011. At March 31, 2011, we had no material capital lease obligations
for which we are the lessee, either individually or in the aggregate.
On May 2, 2011, CPA®:14 merged with and into a subsidiary of CPA®:16
Global based on a definitive merger agreement executed on December 13, 2010. In
connection with the merger between CPA®:14 and CPA®:16 Global, we have
agreed to purchase three properties from CPA®:14 for an aggregate purchase price of
$57.4 million, plus the assumption of approximately $153.9 million of indebtedness.
CPA®:17 Global 3/31/2011 10-Q 29
Equity Investments in Real Estate
We have investments in unconsolidated ventures that own single-tenant properties net leased to
corporations. Generally, the underlying investments are jointly-owned with our affiliates.
Summarized financial information for these ventures and our ownership interest in the ventures at
March 31, 2011 is presented below. Summarized financial information provided represents the total
amount attributable to the ventures and does not represent our proportionate share (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership |
|
|
|
|
|
|
|
|
|
|
|
|
Interest at |
|
|
|
|
|
|
Total Third- |
|
|
|
Lessee |
|
March 31, 2011 |
|
|
Total Assets |
|
|
Party Debt |
|
|
Maturity Date |
C1000 B.V. (a) |
|
|
85 |
% |
|
$ |
218,225 |
|
|
$ |
99,398 |
|
|
3/2013 |
Tesco plc (a) |
|
|
49 |
% |
|
|
94,300 |
|
|
|
48,014 |
|
|
6/2016 |
Berry Plastics Corporation |
|
|
50 |
% |
|
|
79,058 |
|
|
|
28,541 |
|
|
6/2020 |
Eroski Sociedad Cooperativa
Mallorca(a) |
|
|
30 |
% |
|
|
37,724 |
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
429,307 |
|
|
$ |
175,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Dollar amounts shown are based on the exchange rate of the Euro at March 31, 2011. |
Environmental Obligations
In connection with the purchase of many of our properties, we required the sellers to perform
environmental reviews. We believe, based on the results of these reviews, that our properties were
in substantial compliance with Federal and state environmental statutes at the time the properties
were acquired. However, portions of certain properties have been subject to some degree of
contamination, principally in connection with leakage from underground storage tanks, surface
spills or other on-site activities. In most instances where contamination has been identified,
tenants are actively engaged in the remediation process and addressing identified conditions.
Tenants are generally subject to environmental statutes and regulations regarding the discharge of
hazardous materials and any related remediation obligations. In addition, our leases generally
require tenants to indemnify us from all liabilities and losses related to the leased properties
and the provisions of such indemnifications specifically address environmental matters. The leases
generally include provisions that allow for periodic environmental assessments, paid for by the
tenant, and allow us to extend leases until such time as a tenant has satisfied its environmental
obligations. Certain of our leases allow us to require financial assurances from tenants, such as
performance bonds or letters of credit, if the costs of remediating environmental conditions are,
in our estimation, in excess of specified amounts. Accordingly, we believe that the ultimate
resolution of environmental matters should not have a material adverse effect on our financial
condition, liquidity or results of operations.
Subsequent Events
In April 2011, we entered into an investment in which we acquired four domestic industrial
facilities for a total cost of approximately $51.0 million.
In April 2011, we obtained non-recourse mortgage financing totaling $24.5 million at a fixed
interest rate of 6.4% and term of 10 years in connection with a domestic investment acquired in
March 2010.
In connection with a merger between two of our affiliates, CPA®:14 and
CPA®:16 Global, which was completed on May 2, 2011, we purchased three properties
from CPA®:14 for an aggregate purchase price of $57.4 million, plus the assumption of
approximately $153.9 million of related indebtedness.
Supplemental Financial Measures
In the real estate industry, analysts and investors employ certain non-GAAP supplemental measures
in order to facilitate meaningful comparisons between periods and among peer companies.
Additionally, in the formulation of our goals and in the evaluation of the effectiveness of our
strategies, we employ the use of supplemental non-GAAP measures, which are uniquely defined by our
management. We believe these measures are useful to investors to consider because they may assist
them to better understand and measure the performance of our business over time and against similar
companies. A description of these non-GAAP financial measures and reconciliations to the most
directly comparable GAAP measures are provided below.
Funds from Operations as Adjusted
Funds from Operations (FFO) is a non-GAAP measure defined by the National Association of Real
Estate Investment Trusts (NAREIT). NAREIT defines FFO as net income or loss (as computed in
accordance with GAAP) excluding: depreciation and amortization expense from real estate assets,
gains or losses from sales of depreciated real estate assets and extraordinary items, however FFO
related to assets held for sale, sold or otherwise transferred and included in the results of
discontinued operations are to
be included. These adjustments also incorporate the pro rata share of unconsolidated subsidiaries.
FFO is used by management, investors and analysts to facilitate meaningful comparisons of operating
performance between periods and among our peers. Although NAREIT has published this definition of
FFO, real estate companies often modify this definition as they seek to provide financial measures
that meaningfully reflect their distinctive operations.
CPA®:17 Global 3/31/2011 10-Q 30
We modify the NAREIT computation of FFO to include other adjustments to GAAP net income for certain
non-cash charges, where applicable, such as gains or losses from extinguishment of debt and
deconsolidation of subsidiaries, amortization of intangibles, straight-line rents, impairment
charges on real estate, allowances for credit losses and unrealized foreign currency exchange gains
and losses. We refer to our modified definition of FFO as Funds from Operations as Adjusted, or
AFFO, and we employ it as one measure of our operating performance when we formulate corporate
goals and evaluate the effectiveness of our strategies. We exclude these items from GAAP net income
as they are not the primary drivers in our decision-making process. Our assessment of our
operations is focused on long-term sustainability and not on such non-cash items, which may cause
short-term fluctuations in net income but have no impact on cash flows.
We believe that AFFO is a useful supplemental measure for investors to consider because it will
help them to better assess the sustainability of our operating performance without the potentially
distorting impact of these short-term fluctuations. However, there are limits on the usefulness of
AFFO to investors. For example, impairment charges and unrealized foreign currency losses that we
exclude may become actual realized losses upon the ultimate disposition of the properties in the
form of lower cash proceeds or other considerations.
FFO and AFFO for the three months ended March 31, 2011 and 2010 are presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
|
Net income attributable to CPA®:17 - Global shareholders |
|
$ |
12,435 |
|
|
$ |
6,123 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Depreciation and amortization of real property |
|
|
8,001 |
|
|
|
2,255 |
|
Proportionate share of adjustments to equity in net income of partially owned
entities to arrive at FFO: |
|
|
|
|
|
|
|
|
Depreciation and amortization of real property |
|
|
2,039 |
|
|
|
786 |
|
Proportionate share of adjustments for noncontrolling interests to arrive at
FFO |
|
|
(159 |
) |
|
|
(161 |
) |
|
|
|
|
|
|
|
Total adjustments |
|
|
9,881 |
|
|
|
2,880 |
|
|
|
|
|
|
|
|
FFO as defined by NAREIT |
|
|
22,316 |
|
|
|
9,003 |
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
Other depreciation, amortization and non-cash charges |
|
|
624 |
|
|
|
65 |
|
Straight-line and other rent adjustments |
|
|
(3,050 |
) |
|
|
(1,361 |
) |
Proportionate share of adjustments to equity in net income of partially owned
entities to arrive at AFFO: |
|
|
|
|
|
|
|
|
Other depreciation, amortization and other non-cash charges |
|
|
(9 |
) |
|
|
|
|
Straight-line and other rent adjustments |
|
|
(127 |
) |
|
|
(61 |
) |
Proportionate share of adjustments for noncontrolling interests to arrive at
AFFO |
|
|
449 |
|
|
|
273 |
|
|
|
|
|
|
|
|
Total adjustments |
|
|
(2,113 |
) |
|
|
(1,084 |
) |
|
|
|
|
|
|
|
AFFO |
|
$ |
20,203 |
|
|
$ |
7,919 |
|
|
|
|
|
|
|
|
Adjusted Cash Flow from Operating Activities
Adjusted cash flow from operating activities refers to our cash flow from operating activities (as
computed in accordance with GAAP) adjusted, where applicable, primarily to: add cash distributions
that we receive from our investments in unconsolidated real estate joint ventures in excess of our
equity income; subtract cash distributions that we make to our noncontrolling partners in real
estate joint ventures that we consolidate; and eliminate changes in working capital. We hold a
number of interests in real estate joint ventures, and we believe that adjusting our GAAP cash flow
provided by operating activities to reflect these actual cash receipts and cash payments as well as
eliminating the effect of timing differences between the payment of certain liabilities and the
receipt of certain receivables in a period other than that in which the item is recognized, may
give investors additional information about our actual cash flow that is not incorporated in cash
flow from operating activities as defined by GAAP.
CPA®:17 Global 3/31/2011 10-Q 31
We believe that adjusted cash flow from operating activities is a useful supplemental measure for
assessing the cash flow generated from our core operations as it gives investors important
information about our liquidity that is not provided within cash flow from operating activities as
defined by GAAP, and we use this measure when evaluating distributions to shareholders. As we are
still in our offering and investment stage, we also consider our expectations as to the yields that
may be generated on existing investments and our acquisition pipeline when evaluating distributions
to shareholders.
Adjusted cash flow from operating activities for the three months ended March 31, 2011 and 2010 is
presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2011 |
|
|
2010 |
|
Cash flow provided by operating activities |
|
$ |
26,404 |
|
|
$ |
15,509 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Distributions received from equity investments in real
estate in excess of
equity income, net |
|
|
2,085 |
|
|
|
332 |
|
Distributions paid to noncontrolling interests, net |
|
|
(5,059 |
) |
|
|
(2,394 |
) |
Changes in working capital |
|
|
(947 |
) |
|
|
(4,300 |
) |
|
|
|
|
|
|
|
Adjusted cash flow from operating activities (a) |
|
$ |
22,483 |
|
|
$ |
9,147 |
|
|
|
|
|
|
|
|
|
|
Distributions declared (weighted average share basis) |
|
$ |
24,256 |
|
|
$ |
13,962 |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
During the first quarter of 2011, we made an adjustment to exclude the impact of escrow funds
from Adjusted cash flow from operating activities as, more often than not, these funds
represent investing and/or financing activities. Adjusted cash flow from operating activities
for the three months ended March 31, 2010 has been adjusted to reflect this reclassification. |
While we believe that FFO, AFFO and Adjusted cash flow from operating activities are important
supplemental measures, they should not be considered as alternatives to net income as an indication
of a companys operating performance or to cash flow from operating activities as a measure of
liquidity. These non-GAAP measures should be used in conjunction with net income and cash flow from
operating activities as defined by GAAP. FFO, AFFO and Adjusted cash flow from operating
activities, or similarly titled measures disclosed by other REITs, may not be comparable to our
FFO, AFFO and Adjusted cash flow from operating activities measures.
|
|
|
Item 3. |
|
Quantitative and Qualitative Disclosures About Market Risk |
Market Risk
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency
exchange rates and equity prices. The primary risks to which we are exposed are interest rate risk
and foreign currency exchange risk. We are also exposed to market risk as a result of
concentrations in certain tenant industries as we have a limited number of investments. We
regularly monitor our portfolio to assess potential concentrations of market risk as we make
additional investments. As we invest the proceeds of our initial public offering and follow-on
offering, we will seek to ensure that our portfolio is reasonably well diversified and does not
contain any unusual concentration of market risks.
Generally, we do not use derivative instruments to manage foreign currency exchange rate exposure
and do not use derivative instruments to hedge credit/market risks or for speculative purposes.
However, from time to time, we may enter into foreign currency forward contracts to hedge our
foreign currency cash flow exposures.
Interest Rate Risk
The value of our real estate, related fixed rate debt obligations and CMBS investments is subject
to fluctuation based on changes in interest rates. The value of our real estate is also subject to
fluctuations based on local and regional economic conditions and changes in the creditworthiness of
lessees, all of which may affect our ability to refinance property-level mortgage debt when balloon
payments are scheduled. Interest rates are highly sensitive to many factors, including governmental
monetary and tax policies, domestic and international economic and political conditions, and other
factors beyond our control. An increase in interest rates would
likely cause the value of our owned assets to decrease. Increases in interest rates may also have
an impact on the credit profile of certain tenants.
CPA®:17 Global 3/31/2011 10-Q 32
We are exposed to the impact of interest rate changes primarily through our borrowing activities.
To limit this exposure, we attempt to obtain non-recourse mortgage financing on a long-term,
fixed-rate basis. However, from time to time, we or our venture partners may obtain variable rate
mortgage loans and, as a result, may enter into interest rate swap agreements or interest rate cap
agreements with lenders that effectively convert the variable rate debt service obligations of the
loan to a fixed rate. Interest rate swaps are agreements in which a series of interest rate flows
are exchanged over a specific period, and interest rate caps limit the effective borrowing rate of
variable rate debt obligations while allowing participants to share in downward shifts in interest
rates. These interest rate swaps and caps are derivative instruments designated as cash flow hedges
on the forecasted interest payments on the debt obligation. The notional, or face, amount on which
the swaps or caps are based is not exchanged. Our objective in using these derivatives is to limit
our exposure to interest rate movements. At March 31, 2011, we estimate that the net fair value of
our interest rate cap and interest rate swaps, which are included in Other assets, net and Accounts
payable, accrued expenses and other liabilities, respectively, in the consolidated financial
statements, was in a net asset position of $0.2 million (Note 8).
At March 31, 2011, all of our debt either bore interest at fixed rates, was swapped to a fixed rate
or was subject to an interest rate cap. The estimated fair value of these instruments is affected
by changes in market interest rates. The annual interest rates on our fixed-rate debt at March 31,
2011 ranged from 4.5% to 8.0%. The annual interest rates on our variable-rate debt at March 31,
2011 ranged from 2.8% to 6.6%. Our debt obligations are more fully described under Financial
Condition in Item 2 above. The following table presents principal cash flows based upon expected
maturity dates of our debt obligations outstanding at March 31, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
|
Thereafter |
|
|
Total |
|
|
Fair value |
|
Fixed rate debt |
|
$ |
7,858 |
|
|
$ |
11,193 |
|
|
$ |
12,917 |
|
|
$ |
14,076 |
|
|
$ |
60,219 |
|
|
$ |
499,919 |
|
|
$ |
606,182 |
|
|
$ |
612,613 |
|
Variable rate debt |
|
$ |
2,761 |
|
|
$ |
4,231 |
|
|
$ |
4,348 |
|
|
$ |
4,452 |
|
|
$ |
4,560 |
|
|
$ |
143,907 |
|
|
$ |
164,259 |
|
|
$ |
164,259 |
|
A decrease or increase in interest rates of 1% would change the estimated fair value of this debt
at March 31, 2011 by an aggregate increase of $39.3 million or an aggregate decrease of $36.4
million, respectively. This debt is generally not subject to short-term fluctuations in interest
rates. Annual interest expense on our variable-rate debt that does not bear interest at fixed-rates
at March 31, 2011 would increase or decrease by $1.6 million for each respective 1% change in
annual interest rates.
Foreign Currency Exchange Rate Risk
We own international investments in Europe, and as a result are subject to risk from the effects of
exchange rate movements in the Euro and, to a lesser extent, the British Pound Sterling, which may
affect future costs and cash flows. Although all of our foreign investments through the first
quarter of 2011 were conducted in these currencies, we are likely to conduct business in other
currencies in the future as we seek to invest funds from our offering internationally. We manage
foreign currency exchange rate movements by generally placing both our debt obligation to the
lender and the tenants rental obligation to us in the same currency. We are generally a net
receiver of these currencies (we receive more cash than we pay out), and therefore our foreign
operations benefit from a weaker U.S. dollar, and are adversely affected by a stronger U.S. dollar,
relative to the foreign currency. We recognized unrealized and realized foreign currency
transaction losses of $0.6 million and $0.1 million, respectively, for the three months ended March
31, 2011. These gains and losses are included in Other income and (expenses) in the consolidated
financial statements and were primarily due to changes in the value of the foreign currency on
accrued interest receivable on notes receivable from consolidated subsidiaries.
We enter into foreign currency forward contracts to hedge certain of our foreign currency cash flow
exposures. A foreign currency forward contract is a commitment to deliver a certain amount of
currency at a certain price on a specific date in the future. By entering into these instruments,
we are locked into a future currency exchange rate, which limits our exposure to the movement in
foreign currency exchange rates. The estimated fair value of our foreign currency forward contract,
which is included in Accounts payable, accrued expenses and other liabilities in the consolidated
financial statements, was $0.3 million at March 30, 2011.
CPA®:17 Global 3/31/2011 10-Q 33
|
|
|
Item 4. |
|
Controls and Procedures |
Disclosure Controls and Procedures
Our disclosure controls and procedures include our controls and other procedures designed to
provide reasonable assurance that information required to be disclosed in this and other reports
filed under the Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded,
processed, summarized and reported within the required time periods specified in the SECs rules
and forms and that such information is accumulated and communicated to management, including our
chief executive officer and chief financial officer, to allow timely decisions regarding required
disclosures. It should be noted that no system of controls can provide complete assurance of
achieving a companys objectives and that future events may impact the effectiveness of a system of
controls.
Our chief executive officer and chief financial officer, after conducting an evaluation, together
with members of our management, of the effectiveness of the design and operation of our disclosure
controls and procedures at March 31, 2011, have concluded that our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of March 31,
2011 at a reasonable level of assurance.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during our most
recently completed fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
PART II
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds |
For the three months ended March 31, 2011, we issued 242,572 restricted shares of our common stock
to the advisor as consideration for asset management fees. These shares were issued at $10.00 per
share, which represents our initial offering price. Since none of these transactions were
considered to have involved a public offering within the meaning of Section 4(2) of the
Securities Act, the shares issued were deemed to be exempt from registration. In acquiring our
shares, the advisor represented that such interests were being acquired by it for the purposes of
investment and not with a view to the distribution thereof.
We intend to use the net proceeds of our initial public offering and our follow-on offering to
invest in a diversified portfolio of income-producing commercial properties and other real estate
related assets. Our initial public offering commenced in December 2007 and was terminated in April
2011 when the registration statement for our follow-on offering was declared effective by the SEC.
The use of proceeds from our initial public offering of common stock was as follows at March 31,
2011 (in thousands except share amounts):
|
|
|
|
|
Shares registered |
|
|
200,000,000 |
|
Aggregate price of offering amount registered |
|
$ |
2,000,000 |
|
Shares sold (a) |
|
|
153,957,700 |
|
Aggregated offering price of amount sold |
|
$ |
1,537,187 |
|
Direct or indirect payments to directors, officers, general partners of the issuer or their
associates;
to persons owning ten percent or more of any class of equity securities of the issuer; and to
affiliates of the issuer |
|
|
(153,776 |
) |
Direct or indirect payments to others |
|
|
(12,755 |
) |
|
|
|
|
Net offering proceeds to the issuer after deducting expenses |
|
|
1,370,656 |
|
Purchases of real estate related assets |
|
|
(1,184,059 |
) |
|
|
|
|
Temporary investments in cash and cash equivalents |
|
$ |
186,597 |
|
|
|
|
|
|
|
|
(a) |
|
Excludes shares issued to affiliates, including our advisor, and shares issued pursuant to
our distribution reinvestment and stock purchase plan. |
CPA®:17 Global 3/31/2011 10-Q 34
Issuer Purchases of Equity Securities
The following table provides information with respect to repurchases of our common stock during the
three months ended March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum number (or |
|
|
|
|
|
|
|
|
|
|
|
Total number of shares |
|
|
approximate dollar value) |
|
|
|
|
|
|
|
|
|
|
|
purchased as part of |
|
|
of shares that may yet be |
|
|
|
Total number of |
|
|
Average price |
|
|
publicly announced |
|
|
purchased under the |
|
2011 Period |
|
shares purchased(a) |
|
|
paid per share |
|
|
plans or programs(a) |
|
|
plans or programs(a) |
|
January |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
February |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
March |
|
|
147,230 |
|
|
$ |
9.30 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
147,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Represents shares of our common stock purchased under our redemption plan, pursuant to which
we may elect to redeem shares at the request of our shareholders who have held their shares
for at least one year from the date of their issuance, subject to certain exceptions,
conditions and limitations. The maximum amount of shares purchasable by us in any period
depends on a number of factors and is at the discretion of our board of directors. The
redemption plan will terminate if and when our shares are listed on a national securities
market. |
The following exhibits are filed with this Report, except where indicated.
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
31.1 |
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
31.2 |
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
32 |
|
|
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
CPA®:17 Global 3/31/2011 10-Q 35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
Corporate Property Associates 17 Global Incorporated
|
|
Date 05/17/2011 |
By: |
/s/ Mark J. DeCesaris
|
|
|
|
Mark J. DeCesaris |
|
|
|
Chief Financial Officer
(Principal Financial Officer) |
|
|
|
|
Date 05/17/2011 |
By: |
/s/ Thomas J. Ridings, Jr.
|
|
|
|
Thomas J. Ridings, Jr. |
|
|
|
Chief Accounting Officer
(Principal Accounting Officer) |
|
CPA®:17 Global 3/31/2011 10-Q 36
EXHIBIT INDEX
|
|
|
|
|
|
|
Exhibit No. |
|
Description |
|
Method of Filing |
|
|
|
|
|
|
|
|
31.1 |
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith |
|
|
|
|
|
|
|
|
31.2 |
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith |
|
|
|
|
|
|
|
|
32 |
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Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Filed herewith |