10-Q 1 cpa182014q210-q.htm 10-Q CPA 18 2014 Q2 10-Q


 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
For the quarterly period ended June 30, 2014
 
 
 
or
 
 
 
o
 
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: 000-54970
CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
(Exact name of registrant as specified in its charter)
Maryland
 
90-0885534
(State of incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
50 Rockefeller Plaza
 
 
New York, New York
 
10020
(Address of principal executive offices)
 
(Zip Code)
Investor Relations (212) 492-8920
(212) 492-1100
(Registrant’s 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 R 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 R 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.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ
Smaller reporting company o
 
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No R

Registrant has 99,119,728 shares of Class A common stock, $0.001 par value, and 9,061,156 shares of Class C common stock, $0.001 par value, outstanding at July 31, 2014.




INDEX

Forward-Looking Statements

This Quarterly Report on Form 10-Q, or the Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, 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, or 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, 2013 as filed with the SEC on March 19, 2014, or the 2013 Annual Report. Except as required by federal securities laws and the rules and regulations of the SEC, we do not undertake to revise or update any forward-looking statements.

All references to “Notes” throughout the document refer to the footnotes to the consolidated financial statements of the registrant in Part I, Item 1, Financial Statements (Unaudited).



CPA®:18 – Global 6/30/2014 10-Q – 1

PART I
Item 1. Financial Statements.

CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share amounts)
 
June 30, 2014
 
December 31, 2013
Assets
 
 
 
Investments in real estate:
 
 
 
   Real estate, at cost
$
453,291

 
$
150,424

   Operating real estate, at cost
20,880

 
—

   Accumulated depreciation
(5,018
)
 
(824
)
Net investments in properties
469,153

 
149,600

Real estate under construction
182

 
—

Net investments in direct financing leases
44,025

 
22,064

Net investments in real estate
513,360

 
171,664

Cash and cash equivalents
695,086

 
109,061

In-place lease intangible assets, net
115,139

 
53,337

Below-market ground lease intangible assets, net
17,634

 
8,224

Other intangible assets, net
11,767

 
—

Other assets, net
27,521

 
13,384

Total assets
$
1,380,507

 
$
355,670

 
 
 
 
Liabilities and Equity
 
 
 
Liabilities:
 
 
 
Non-recourse debt
$
307,420

 
$
85,060

Bonds payable
51,712

 
—

Due to affiliate
12,688

 
5,149

Deferred income taxes
15,324

 
8,350

Distributions payable
12,772

 
1,821

Prepaid and deferred rental income
12,039

 
3,317

Accounts payable, accrued expenses and other liabilities
6,041

 
1,502

Total liabilities
417,996

 
105,199

 

 

Commitments and contingencies (Note 10)

 

Equity:
 
 
 
CPA®:18 – Global stockholders’ equity:
 
 
 
Preferred stock, $0.001 par value; 50,000,000 shares authorized; none issued
—

 
—

Class A common stock, $0.001 par value; 320,000,000 shares authorized; 97,375,728 and 21,290,097 shares issued, respectively, and 97,371,724 and 21,290,097 shares outstanding, respectively
97

 
21

Class C common stock, $0.001 par value; 80,000,000 shares authorized; 7,576,489 and 2,776,001 shares issued and outstanding, respectively
8

 
3

Additional paid-in capital
938,975

 
215,371

Distributions and accumulated losses
(40,034
)
 
(2,567
)
Accumulated other comprehensive loss
(3,020
)
 
(94
)
Less: treasury stock at cost, 4,004 and 0 shares, respectively
(40
)
 
—

Total CPA®:18 – Global stockholders’ equity
895,986

 
212,734

Noncontrolling interests
66,525

 
37,737

Total equity
962,511

 
250,471

Total liabilities and equity
$
1,380,507

 
$
355,670


See Notes to Consolidated Financial Statements.

CPA®:18 – Global 6/30/2014 10-Q – 2

CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share and per share amounts) 
 
 
Three Months Ended June 30,

Six Months Ended June 30,
 
 
2014

2013

2014

2013
Revenues
 
 
 
 
 
 
 
 
Lease revenues:
 
 
 
 
 
 
 
 
Rental income
 
$
10,471

 
$
—

 
$
16,130

 
$
—

Interest income from direct financing leases
 
873

 
—

 
1,425

 
—

Total lease revenues
 
11,344

 
—

 
17,555

 
—

Other operating income
 
788

 
—

 
851

 
—

Other real estate income
 
515

 
—

 
936

 
—

 
 
12,647


—


19,342


—

Operating Expenses
 
 
 
 
 
 
 
 
Depreciation and amortization
 
5,123

 
—

 
7,838

 
—

Acquisition expenses (inclusive of $3,021, $0, $18,893, and $0, respectively, to a related party)
 
3,972

 
—

 
22,966

 
—

Property expenses (inclusive of $603, $0, $934, and $0, respectively, to a related party)
 
1,670

 
—

 
2,297

 
—

General and administrative (inclusive of $155, $65, $259, and $65, respectively, to a related party)
 
1,174

 
65

 
1,812

 
65

Other real estate expenses
 
160

 
—

 
277

 
—

 
 
12,099

 
65

 
35,190

 
65

Other Income and Expenses
 
 
 
 
 
 
 
 
Interest expense (inclusive of $34, $0, $54, and $0, respectively, to a related party)
 
(3,776
)
 
—

 
(5,852
)
 
—

Other income and (expenses)
 
733

 
—

 
962

 
—

 
 
(3,043
)
 
—

 
(4,890
)
 
—

Loss from continuing operations before income taxes
 
(2,495
)
 
(65
)
 
(20,738
)
 
(65
)
Provision for income taxes
 
(486
)
 
—

 
(222
)
 
—

Net Loss
 
(2,981
)
 
(65
)
 
(20,960
)
 
(65
)
Net (income) loss attributable to noncontrolling interests (inclusive of Available Cash Distribution to a related party of ($537), $0, ($606), and $0, respectively)
 
(1,218
)
 
—

 
2,525

 
—

Net Loss Attributable to CPA®:18 – Global
 
$
(4,199
)

$
(65
)

$
(18,435
)

$
(65
)
 
 
 
 
 
 
 
 
 
Class A common stock:
 
 
 
 
 
 
 
 
Net loss attributable to CPA®:18 – Global
 
$
(3,760
)
 
$
(65
)
 
$
(16,761
)
 
$
(65
)
Weighted average shares outstanding
 
77,300,223

 
23,222

 
57,778,351

 
23,222

Net loss per share
 
$
(0.05
)
 
$
(2.81
)
 
$
(0.29
)
 
$
(2.81
)
Distributions Declared Per Share
 
$
0.1562

 
$
—

 
$
0.3125

 
$
—

 
 
 
 
 
 
 
 
 
Class C common stock:
 
 
 
 
 
 
 
 
Net loss attributable to CPA®:18 – Global
 
$
(439
)
 
$
—

 
$
(1,674
)
 
$
—

Weighted average shares outstanding
 
6,126,012

 
—

 
4,979,591

 
—

Net loss per share
 
$
(0.07
)
 
$
—

 
$
(0.34
)
 
$
—

Distributions Declared Per Share
 
$
0.1329

 
$
—

 
$
0.2657

 
$
—


See Notes to Consolidated Financial Statements.

CPA®:18 – Global 6/30/2014 10-Q – 3

CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(in thousands) 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Net Loss
 
$
(2,981
)
 
$
(65
)
 
$
(20,960
)
 
$
(65
)
Other Comprehensive Loss:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
(1,832
)
 
—

 
(2,293
)
 
—

Change in net unrealized loss on derivative instruments
 
(469
)
 
—

 
(1,132
)
 
—

 
 
(2,301
)
 
—

 
(3,425
)
 
—

Comprehensive Loss
 
(5,282
)
 
(65
)
 
(24,385
)
 
(65
)
 
 
 
 
 
 
 
 
 
Amounts Attributable to Noncontrolling Interests:
 
 
 
 
 
 
 
 
Net (income) loss
 
(1,218
)
 
—

 
2,525

 
—

Foreign currency translation adjustments
 
175

 
—

 
499

 
—

Comprehensive (income) loss attributable to noncontrolling interests
 
(1,043
)
 
—

 
3,024

 
—

Comprehensive Loss Attributable to CPA®:18 – Global
 
$
(6,325
)
 
$
(65
)
 
$
(21,361
)
 
$
(65
)
 
See Notes to Consolidated Financial Statements.


CPA®:18 – Global 6/30/2014 10-Q – 4

CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
Six Months Ended June 30, 2014 and Year Ended December 31, 2013
(in thousands, except share and per share amounts) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CPA®:18 – Global Stockholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional Paid-In Capital
 
Distributions
and
Accumulated
Losses
 
Accumulated
Other Comprehensive Loss
 
Treasury Stock
 
Total CPA®:18 – Global Stockholders
 
Noncontrolling Interests
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
Class A
 
Class C
 
General
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
Total
Balance at January 1, 2013
—

 
$
—

 
—

 
$
—

 
23,222

 
$
—

 
$
209

 
$
—

 
$
—

 
$
—

 
$
209

 
$
—

 
$
209

Renaming of General Shares to Class A common stock
23,222

 
—

 
—

 
—

 
(23,222
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Shares issued, net of offering costs
21,251,565

 
21

 
2,776,001

 
3

 
—

 
—

 
215,016

 
—

 
—

 
—

 
215,040

 
—

 
215,040

Shares issued to affiliate
7,903


—


—


—


—


—


79


—


—

 
—

 
79


—


79

Stock-based compensation
7,407

 
—

 
—

 
—

 
—

 
—

 
67

 
—

 
—

 
—

 
67

 
—

 
67

Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
38,169

 
38,169

Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(853
)
 
(853
)
Distributions declared ($0.2717 and $0.2311 per share to Class A and Class C, respectively)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,936
)
 
—

 
—

 
(1,936
)
 
—

 
(1,936
)
Net Loss
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(631
)
 
—

 
—

 
(631
)
 
390

 
(241
)
Other Comprehensive Loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Foreign currency translation adjustments
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
125

 
—

 
125

 
31

 
156

   Change in unrealized loss on derivative instrument
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(219
)
 
—

 
(219
)
 
—

 
(219
)
Balance at December 31, 2013
21,290,097

 
21

 
2,776,001

 
3

 
—

 
—

 
215,371

 
(2,567
)
 
(94
)
 
—

 
212,734

 
37,737

 
250,471

Shares issued, net of offering costs
76,009,975

 
76

 
4,800,488

 
5

 
—

 
—

 
722,848

 
—

 
—

 
—

 
722,929

 
—

 
722,929

Shares issued to affiliate
75,656

 
—

 
—

 
—

 
—

 
—

 
756

 
—

 
—

 
—

 
756

 
—

 
756

Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
95,889

 
95,889

Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(64,077
)
 
(64,077
)
Distributions declared ($0.3125 and $0.2657 per share to Class A and Class C, respectively)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(19,032
)
 
—

 
—

 
(19,032
)
 
—

 
(19,032
)
Net Loss
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(18,435
)
 
—

 
—

 
(18,435
)
 
(2,525
)
 
(20,960
)
Other Comprehensive Loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Foreign currency translation adjustments
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,794
)
 
—

 
(1,794
)
 
(499
)
 
(2,293
)
   Change in net unrealized loss on derivative instruments
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,132
)
 
—

 
(1,132
)
 
—

 
(1,132
)
Repurchase of shares
(4,004
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(40
)
 
(40
)
 
—

 
(40
)
Balance at June 30, 2014
97,371,724

 
$
97

 
7,576,489

 
$
8

 
—

 
$
—

 
$
938,975

 
$
(40,034
)
 
$
(3,020
)
 
$
(40
)
 
$
895,986

 
$
66,525

 
$
962,511


See Notes to Consolidated Financial Statements.

CPA®:18 – Global 6/30/2014 10-Q – 5

CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 
 
Six Months Ended June 30,
 
 
2014
 
2013
Cash Flows — Operating Activities
 

 
 
Net loss
 
$
(20,960
)
 
$
(65
)
Adjustments to net loss:
 
 
 
 
Depreciation and amortization, including intangible assets and deferred financing costs
 
8,265

 
—

Straight-line rent adjustment and amortization of rent-related intangibles
 
(892
)
 
—

Loss on foreign currency transactions and other
 
(190
)
 
—

Net change in operating assets and liabilities
 
10,832

 
65

Net Cash Used in Operating Activities
 
(2,945
)
 
—

 
 
 
 
 
Cash Flows — Investing Activities
 
 
 
 
Acquisitions of real estate and direct financing leases, net of cash acquired
 
(421,900
)
 
—

Value added taxes, or VAT, refunded in connection with acquisition of real estate
 
36,472

 
—

VAT paid in connection with acquisition of real estate
 
(34,844
)
 
—

Funds placed in escrow
 
(10,536
)
 
—

Funds released from escrow
 
5,330

 
—

Payment of deferred acquisition fees to an affiliate
 
(782
)
 
—

Net Cash Used in Investing Activities
 
(426,260
)
 
—

 
 
 
 
 
Cash Flows — Financing Activities
 
 
 
 
Proceeds from issuance of shares, net of issuance costs
 
715,293

 
—

Proceeds from mortgage financing
 
223,651

 
—

Contributions from noncontrolling interests
 
95,889

 
—

Distributions to noncontrolling interests
 
(64,077
)
 
—

Proceeds from bond financing
 
52,066

 
—

Distributions paid
 
(8,080
)
 
—

Receipt of tenant security deposits
 
4,072

 
—

Payment of deferred financing costs and mortgage deposits
 
(2,919
)
 
—

Scheduled payments of mortgage principal
 
(738
)
 
—

Purchase of treasury stock
 
(40
)
 
—

Net Cash Provided by Financing Activities
 
1,015,117

 
—

 
 
 
 
 
Change in Cash and Cash Equivalents During the Period
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
113

 
—

Net increase in cash and cash equivalents
 
586,025

 
—

Cash and cash equivalents, beginning of period
 
109,061

 
209

Cash and cash equivalents, end of period
 
$
695,086

 
$
209


See Notes to Consolidated Financial Statements.

CPA®:18 – Global 6/30/2014 10-Q – 6

CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Organization and Offering

Organization

Corporate Property Associates 18 – Global Incorporated, or CPA®:18 – Global, and, together with its consolidated subsidiaries, we, us, or our, is a Maryland corporation formed in September 2012 for the purpose of investing primarily in a diversified portfolio of income-producing commercial real estate properties and other real estate related assets, both domestically and outside the United States, or the U.S. We intend to qualify as a real estate investment trust, or REIT, under the internal revenue code for the taxable year ended December 31, 2013. We are a general partner and a limited partner and own a 99.97% interest in CPA:18 Limited Partnership, a Delaware limited partnership, which is our Operating Partnership. We intend to conduct substantially all of our investment activities and own all of our assets through our Operating Partnership. The Operating Partnership was formed on April 8, 2013. On July 3, 2013, WPC–CPA®:18 Holdings, LLC, or CPA®:18 Holdings, a subsidiary of our sponsor, W. P. Carey Inc., or WPC, acquired a special general partner interest in the Operating Partnership. On August 20, 2013, we acquired our first property. At June 30, 2014, our portfolio was comprised of full or partial ownership interests in 24 properties, all of which were fully occupied and triple-net leased to 18 tenants totaling 5.3 million square feet. In addition, our portfolio was comprised of our full ownership interests in two self-storage properties totaling 0.3 million square feet.

We are managed by WPC through Carey Asset Management Corp., or the advisor. Our advisor provides both strategic and day-to-day management services for us, including capital funding services, investment research and analysis, investment financing and other investment related services, asset management, disposition of assets, investor relations and administrative services. W. P. Carey & Co. B.V., an affiliate of our advisor, provides asset management services with respect to our foreign investments.

Public Offering

On May 7, 2013, our registration statement on Form S-11 (File No. 333-185111), or the Registration Statement, was declared effective by the SEC under the Securities Act of 1933, or the Securities Act. This Registration Statement covers our initial public offering of up to $1.0 billion of common stock, in any combination of Class A common stock and Class C common stock at a price of $10.00 per share of Class A common stock and $9.35 per share of Class C common stock. The Registration Statement also covers the offering of up to $400.0 million in common stock, in any combination of Class A common stock and Class C common stock, pursuant to our distribution reinvestment and stock purchase plan, or DRIP, at a price of $9.60 per share of Class A common stock and $8.98 per share of Class C common stock. Our initial public offering is being made on a “best efforts” basis by Carey Financial, LLC, our dealer manager and a subsidiary of WPC, or Carey Financial, and other selected dealers. The per share amount of distributions on shares of Class A and C common stock will likely differ because of different allocations of class-specific expenses. Specifically, distributions on shares of Class C common stock will be lower than distributions on shares of Class A common stock because shares of Class C common stock are subject to ongoing distribution and shareholder servicing fees (Note 3). 

On July 25, 2013, aggregate subscription proceeds for our Class A and Class C common stock exceeded the minimum offering amount of $2.0 million and we began to admit stockholders. On May 1, 2014, in order to moderate the pace of our fundraising, our board of directors approved the discontinuation of the sale of Class A shares as of June 30, 2014. In order to facilitate the final sales of Class A shares as of June 30, 2014 and the continued sale of Class C shares, the board of directors also approved the reallocation to our initial public offering of up to $250.0 million of the shares that were initially allocated to sales of our stock through our DRIP.  In June 2014, we reallocated the full $250.0 million in shares from the DRIP. Through June 30, 2014, we raised gross offering proceeds for our Class A common stock and Class C common stock of $964.9 million and $70.1 million, respectively. The gross offering proceeds raised exclude reinvested distributions through the DRIP of $3.9 million and $0.6 million for our Class A common stock and Class C common stock, respectively.

CPA®:18 – Global 6/30/2014 10-Q – 7

Notes to Consolidated Financial Statements (Unaudited)



Note 2. Basis of Presentation

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., or 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 financial position, results of operations 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, 2013, which are included in the 2013 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 year.
 
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

Our consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries. The portion of equity in a consolidated subsidiary that is not attributable, directly or indirectly, to us is presented as noncontrolling interests. All significant intercompany accounts and transactions have been eliminated.

When we obtain an economic interest in an entity, we evaluate the entity to determine if it is deemed to be a variable interest entity, or VIE, and, if so, whether we are deemed to be the primary beneficiary and are therefore required to consolidate the entity. We review the contractual arrangements provided for in the partnership agreement or other related contracts to determine whether the entity is considered a VIE, and to establish whether we have any variable interests in the VIE. We then compare our variable interests, if any, to those of the other variable interest holders to determine which party is the primary beneficiary of a VIE based on whether the entity (i) has the power to direct the activities that most significantly impact the economic performance of the VIE, and (ii) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. During the six months ended June 30, 2014, we made several new investments (Note 4) that we evaluated for VIE purposes. We have concluded that none of our investments through June 30, 2014 qualify as a VIE.

For an entity that is not considered to be a VIE, but rather a voting interest entity, the general partners in a limited partnership (or similar entity) are presumed to control the entity regardless of the level of their ownership and, accordingly, may be required to consolidate the entity. We evaluate the partnership agreements or other relevant contracts to determine whether there are provisions in the agreements that would overcome this presumption. If the agreements provide the limited partners with either (a) the substantive ability to dissolve or liquidate the limited partnership or otherwise remove the general partners without cause or (b) substantive participating rights, the limited partners’ rights overcome the presumption of control by a general partner of the limited partnership, and, therefore, the general partner must account for its investment in the limited partnership using the equity method of accounting.

Based on our evaluation, we determined that our Operating Partnership was not a VIE but should be consolidated as we control all decisions regarding our Operating Partnership. We account for the special general partner interest held by CPA®:18 Holdings in the Operating Partnership as a noncontrolling interest.

Recent Accounting Requirements

The following Accounting Standards Updates, or ASUs, promulgated by the Financial Accounting Standards Board are applicable to us:

ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 does not apply to our lease revenues, but will apply to reimbursed tenant costs and revenues generated from our operating properties. Additionally, this guidance modifies

CPA®:18 – Global 6/30/2014 10-Q – 8

Notes to Consolidated Financial Statements (Unaudited)


disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for us in 2017, and early adoption is not permitted. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. We are currently evaluating the impact of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2017.

ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360). ASU 2014-08 changes the requirements for reporting discontinued operations. A discontinued operation may include a component of an entity or a group of components of an entity, or a business. Under this new guidance, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a “strategic shift that has or will have a major effect on an entity’s operations and financial results.” The new guidance also requires disclosures including pre-tax profit or loss and significant gains or losses arising from dispositions that represent an “individually significant component of an entity,” but do not meet the criteria to be reported as discontinued operations under ASU 2014-08. In the ordinary course of business, we may sell properties, which, under prior accounting guidance, would have been reported each as discontinued operations; however, under ASU 2014-08 such property dispositions typically would not meet the criteria to be reported as discontinued operations. We elected to early adopt ASU 2014-08 prospectively for any dispositions after December 31, 2013. Consequently, individually significant operations that are sold or classified as held-for-sale during 2014 will not be reclassified to discontinued operations in the consolidated financial statements, but will be disclosed in the Notes to the consolidated financial statements. This ASU did not have a significant impact on our financial position or results of operations for any of the periods presented.

ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 requires an entity to present an unrecognized tax benefit relating to a net operating loss carryforward, a similar tax loss or a tax credit carryforward as a reduction to a deferred tax asset except in certain situations. To the extent the net operating loss carryforward, similar tax loss or tax credit carryforward is not available as of the reporting date under the governing tax law to settle any additional income taxes that would result from the disallowance of the tax position or the governing tax law does not require the entity to use and the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented as a liability and should not net with a deferred tax asset. ASU 2013-11 is effective for us at the beginning of 2014. The adoption of ASU 2013-11 did not have a material impact on our financial condition or results of operations.

CPA®:18 – Global 6/30/2014 10-Q – 9

Notes to Consolidated Financial Statements (Unaudited)



Note 3. Agreements and Transactions with Related Parties

We have an advisory agreement with the advisor whereby the advisor performs certain services for us under a fee arrangement, including the identification, evaluation, negotiation, purchase, and disposition of real estate and related assets and mortgage loans, day-to-day management, and the performance of certain administrative duties. The term of the advisory agreement is through September 30, 2014 and is scheduled to renew annually thereafter with our approval.

The following tables present a summary of fees we paid and expenses we reimbursed to the advisor and other affiliates in accordance with the terms of the related agreements (in thousands):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Amounts Included in the Consolidated Statements of Operations:
 
 
 
 
 
 
 
 
Acquisition expenses
 
$
3,021

 
$
—

 
$
18,893

 
$
—

Asset management fees
 
603

 
—

 
934

 
—

Available Cash Distribution
 
537

 
—

 
606

 
—

Shareholder servicing fee
 
141

 
—

 
229

 
—

Interest expense on deferred acquisition fees
 
34

 
—

 
54

 
—

Personnel and overhead reimbursements
 
14

 
—

 
30

 
—

Costs incurred by the advisor
 
—

 
141

 
—

 
141

Excess operating expenses charged back to the advisor
 
—

 
(76
)
 
—

 
(76
)
 
 
$
4,350

 
$
65

 
$
20,746

 
$
65

 
 
 
 
 
 
 
 
 
Other Transaction Fees Incurred:
 
 
 
 
 
 
 
 
Selling commissions and dealer manager fees
 
$
38,561

 
$
—

 
$
99,431

 
$
—

Current acquisition fees
 
736

 
—

 
1,251

 
—

Deferred acquisition fees
 
589

 
—

 
1,000

 
—

Offering costs
 
1,188

 
—

 
1,986

 
—

 
 
$
41,074

 
$
—

 
$
103,668

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2014
 
December 31, 2013
Due to Affiliate:
 
 
 
 
 
 
 
 
Deferred acquisition fees, including interest
 
 
 
 
 
$
8,999

 
$
2,705

Accounts payable
 
 
 
 
 
3,471

 
2,406

Asset management fees payable
 
 
 
 
 
216

 
38

Reimbursable costs
 
 
 
 
 
2

 
—

 
 
 
 
 
 
$
12,688

 
$
5,149


Organization and Offering Costs

Pursuant to the advisory agreement with the advisor, we are liable for certain expenses related to our initial public offering, which include filing, legal, accounting, printing, advertising, transfer agent, and escrow fees, and are to be deducted from the gross proceeds of the offering. We will reimburse Carey Financial or selected dealers for reasonable bona fide due diligence expenses incurred that are supported by a detailed and itemized invoice. The total underwriting compensation to Carey Financial and selected dealers in connection with the offering cannot exceed limitations prescribed by the Financial Industry Regulatory Authority, Inc. The advisor has agreed to be responsible for the repayment of organization and offering expenses (excluding selling commissions and dealer manager fees paid to Carey Financial and selected dealers and fees paid and expenses reimbursed to selected dealers) that exceed in the aggregate 1.5% of the gross proceeds from the initial public offering if the gross proceeds are $750.0 million or more. Since inception and through June 30, 2014, the advisor has incurred organization and offering costs of $0.1 million and $7.0 million, respectively, on our behalf, of which we repaid $6.4 million. We recorded a liability to the advisor for the remaining unpaid offering costs based on our estimate of expected gross offering proceeds. During the six months ended June 30, 2014, we charged $4.6 million of deferred offering costs to stockholder’s equity.


CPA®:18 – Global 6/30/2014 10-Q – 10

Notes to Consolidated Financial Statements (Unaudited)


Loans from WPC

Our board of directors and the board of directors of WPC have approved unsecured loans from WPC to us of up to $100.0 million, in the aggregate, at a rate equal to the rate at which WPC is able to borrow funds under its senior credit facility, for the purpose of facilitating acquisitions approved by our advisor’s investment committee that we would not otherwise have sufficient available funds to complete, with any loans to be made solely at the discretion of the management of WPC. We did not borrow any funds from WPC during either the three or six months ended June 30, 2014 nor do we have any amounts outstanding at June 30, 2014.

Asset Management Fees

Pursuant to the advisory agreement, the advisor is entitled to an annual asset management fee ranging from 0.5% to 1.5%, depending on the type of investment and based on the average market value or average equity value, as applicable, of our investments. The asset management fees are payable in cash or shares of our Class A common stock at the option of the advisor. If the advisor elects to receive all or a portion of its fees in shares, the number of shares issued is determined by dividing the dollar amount of fees by our most recently published estimated net asset value per share, or NAV, or, if an NAV has not yet been published, as currently is the case, $10.00 per share, which is the price at which our Class A shares are being sold in our initial public offering. For 2013 and 2014, the advisor elected to receive its asset management fees in shares of our Class A common stock. At June 30, 2014, the advisor owned 106,781 shares, or 0.1%, of our outstanding Class A common stock. Asset management fees are included in Property expenses in the consolidated financial statements.

Selling Commissions and Dealer Manager Fees

On May 7, 2013, we entered into a dealer manager agreement with Carey Financial, whereby Carey Financial receives a selling commission, depending on the class of common stock sold, of $0.70 and $0.14 per share sold and a dealer manager fee of $0.30 and $0.21 per share sold for the Class A and Class C common stock, respectively. These amounts are recorded in Additional paid-in capital in the consolidated financial statements.

Carey Financial also receives an annual distribution and shareholder servicing fee in connection with sales of our Class C common stock. The amount of the shareholder servicing fee is 1.0% of the selling price per share (or, once reported, the amount of our NAV) for the Class C common stock in our initial public offering. The shareholder servicing fee accrues daily and is payable quarterly in arrears. We will no longer incur the shareholder servicing fee beginning on the date at which, in the aggregate, underwriting compensation from all sources, including the shareholder servicing fee, any organizational and offering fee paid for underwriting and underwriting compensation paid by WPC and its affiliates, equals 10.0% of the gross proceeds from our initial public offering, which we have not yet reached. The shareholder servicing fee for the three and six months ended June 30, 2014 was $0.1 million and $0.2 million, respectively, and is included in General and administrative expenses in the consolidated financial statements.

Acquisition and Disposition Fees

The advisor receives acquisition fees, a portion of which is payable upon acquisition and the payment of the remaining portion is subordinated to a preferred return, a non-compounded cumulative distribution of 5.0% per annum (based initially on our invested capital). The initial acquisition fee and subordinated acquisition fee are 2.5% and 2.0%, respectively, of the aggregate total cost of our portion of each investment for all investments other than those in readily-marketable real estate securities purchased in the secondary market, for which the advisor will not receive any acquisition fees. Deferred acquisition fees are scheduled to be paid in three equal annual installments following the quarter in which a property was purchased. Unpaid deferred acquisition fees are included in Due to affiliate in the consolidated financial statements. The total acquisition fees to be paid (initial and subordinated, and including interest thereon) may not exceed 6.0% of the aggregate contract purchase price of all investments and loans.

In addition, pursuant to the advisory agreement, the advisor may be entitled to receive a disposition fee in an amount equal to the lesser of (i) 50.0% of the competitive real estate commission (as defined in the advisory agreement) or (ii) 3.0% of the contract sales price of the investment being sold; however, payment of such fees is subordinated to the 5.0% preferred return. These fees, which are paid at the discretion of our board of directors, are deferred and are payable to the advisor only in connection with a liquidity event.

Personnel and Overhead Reimbursements

Under the terms of the advisory agreement, the advisor allocates a portion of its personnel and overhead expenses to us and the other publicly-owned, non-listed REITs that are managed by our advisor under the Corporate Property Associates brand name, or the CPA®

CPA®:18 – Global 6/30/2014 10-Q – 11

Notes to Consolidated Financial Statements (Unaudited)


REITs, and Carey Watermark Investors Incorporated, or CWI. The advisor allocates these expenses on the basis of our trailing four quarters of reported revenues and those of WPC, the CPA® REITs, and CWI.

We reimburse the advisor for various expenses it incurs in the course of providing services to us. We reimburse certain third-party expenses paid by the advisor on our behalf, including property-specific costs, professional fees, office expenses and business development expenses. In addition, we reimburse the advisor for the allocated costs of personnel and overhead in managing our day-to-day operations, including accounting services, stockholder services, corporate management, and property management and operations. We do not reimburse the advisor for the cost of personnel if these personnel provide services for transactions for which the advisor receives a transaction fee, such as acquisitions and dispositions. Personnel and overhead reimbursements are included in General and administrative expenses in the consolidated financial statements.

Excess Operating Expenses
 
The advisory agreement provides that, for any four trailing quarters (with quoted variables as defined in the advisory agreement), “operating expenses” may not exceed the greater of 2.0% of our “average invested assets” or 25.0% of our “adjusted net income.” For the year ended December 31, 2013, we charged back less than $0.1 million to the advisor as excess operating expenses pursuant to the limitation described above. Our board of directors may elect to repay the advisor for such excess operating expenses in its sole discretion. For the second quarter of 2014, our operating expenses were below the 2.0%/25.0% threshold. 

Available Cash Distributions

CPA®:18 Holdings’ interest in the Operating Partnership entitles it to receive distributions of 10.0% of the available cash generated by the Operating Partnership, referred to as the Available Cash Distribution. During the three and six months ended June 30, 2014, we made $0.5 million and $0.6 million of such distributions, respectively. Available Cash Distributions are included in Net (income) loss attributable to noncontrolling interests in the consolidated financial statements.

Jointly-Owned Investments and Other Transactions with our Affiliate

At June 30, 2014, we owned interests ranging from 50% to 80% in three jointly-owned investments, with the remaining interests held by Corporate Property Associates 17 – Global Incorporated, or CPA®:17 – Global. We consolidate all of these investments and we account for CPA®:17 – Global’s equity investments as noncontrolling interests.

Note 4. Net Investments in Properties

Real Estate

Real estate, which consists of land and buildings leased to others, at cost, and which are subject to operating leases, is summarized as follows (in thousands):
 
June 30, 2014
 
December 31, 2013
Land
$
77,815

 
$
36,636

Building
375,476

 
113,788

Less: Accumulated depreciation
(4,839
)
 
(824
)
 
$
448,452

 
$
149,600


Operating Real Estate
 
Operating real estate, which consists of our self-storage operations, at cost, is summarized as follows (in thousands):
 
June 30, 2014
 
December 31, 2013
Land
$
6,564

 
$
—

Building
14,316

 
—

Less: Accumulated depreciation
(179
)
 
—

 
$
20,701

 
$
—



CPA®:18 – Global 6/30/2014 10-Q – 12

Notes to Consolidated Financial Statements (Unaudited)


2014 Acquisitions

During the six months ended June 30, 2014, we acquired 17 properties leased to 15 tenants. Of these properties, five were deemed to be asset acquisitions, four were deemed to be direct financing leases (Note 5) and the remainder were considered to be business combinations.

Real Estate Asset Acquisitions

During the six months ended June 30, 2014, we entered into the following domestic investments, which were deemed to be real estate asset acquisitions because we entered into new leases in connection with the acquisitions, at a total cost of $34.6 million, including lease intangible assets of $8.2 million (Note 6), and acquisition-related costs and fees of $2.0 million, which were capitalized:

•
an industrial building in Temple, Georgia and a manufacturing facility in Surprise, Arizona for $14.4 million leased to the same tenant;
•
an industrial facility in Columbus, Georgia for $8.5 million;
•
a warehouse facility in Streetsboro, Ohio for $5.9 million; and
•
an office building in Norcross, Georgia for $5.8 million.

A portion of the transaction fees capitalized include current and deferred acquisition fees paid and payable to our advisor, respectively (Note 3).

In connection with these investments, at June 30, 2014, we have unfunded commitments of $2.4 million related to building improvements.

Business Combinations - Net-Leased Properties

Belk — On June 4, 2014, we acquired a fulfillment center located in Jonesville, South Carolina from an unaffiliated third party for $20.5 million. The property is leased to Belk, Inc., or Belk. In addition, we will fund the development of an expansion of Belk’s existing facility (see Real Estate Under Construction below). This triple-net lease expires on May 31, 2023 and has a 15-year renewal option upon the completion of the expansion. Because we assumed the seller’s lease, we account for this acquisition as a business combination, and as a result, we expensed acquisition costs of $2.0 million, which include acquisition fees paid to the advisor (Note 3).

AT&T Investment — On May 19, 2014, we acquired an industrial warehouse and the land on which the building is located in Chicago, Illinois from an unaffiliated third party for $11.6 million. The property is leased to Illinois Bell Telephone Company, or AT&T. Because we assumed the seller’s lease, we account for this acquisition as a business combination, and as a result, we expensed acquisition costs of $0.6 million, which include acquisition fees paid to the advisor (Note 3). In accordance with GAAP, we have accounted for the land, which constituted more than 25% of the fair value of the leased property, as a business combination and the building as a direct financing lease (Note 5). On June 2, 2014, we entered into a mortgage loan encumbering this property in the amount of $8.0 million (Note 9).

North American Lighting — On May 6, 2014, we acquired an office building located in Farmington Hills, Michigan from an unaffiliated third party for $8.4 million. The property is leased to North American Lighting, Inc., or North American Lighting. This triple-net lease expires on March 31, 2026, has one five-year renewal option and includes fixed-rent escalations. Because we assumed the seller’s lease, we account for this acquisition as a business combination, and as a result, we expensed acquisition costs of $1.1 million, which include acquisition fees paid to the advisor (Note 3). Simultaneously, we entered into a mortgage loan in the amount of $7.3 million (Note 9).

Bank Pekao S.A. — On March 31, 2014, we acquired a 50% controlling interest in a jointly-owned investment, which is co-owned by our affiliate, CPA®:17 – Global, and on that date acquired the Bank Pekao S.A., or Bank Pekao, office headquarters located in Warsaw, Poland from an unaffiliated third party. The jointly-owned investment acquired real estate assets and intangibles of $147.9 million, with our portion of the investment totaling $74.0 million. CPA®:17 – Global’s equity investment was $74.0 million, which we account for as a noncontrolling interest. We have concluded that we will consolidate this entity as we are the managing member and the non-managing member does not have substantive participating or “kick-out” rights. This office facility is subject to multiple leases, of which Bank Pekao is the largest tenant and occupies over 98% of the rental space. Bank Pekao’s triple-net lease will expire on May 15, 2023 unless extended at the option of the lessee. The rent increase is subject to annual Harmonized Index of Consumer Prices, or HICP, which is an indicator of inflation and price stability for the European Central Bank. Because we assumed the seller’s

CPA®:18 – Global 6/30/2014 10-Q – 13

Notes to Consolidated Financial Statements (Unaudited)


lease, we account for this acquisition as a business combination, and as a result, we expensed acquisition costs of $8.4 million, which include acquisition fees paid to the advisor (Note 3). We recorded a deferred tax asset of $1.9 million related to this investment, which was fully offset by a valuation allowance as we currently estimate that it is more likely than not that we will be unable to recover this asset. On May 21, 2014, this jointly-owned investment obtained a €53.4 million, or $73.1 million, mortgage loan (Note 9).

Siemens AS — On February 27, 2014, we acquired the office headquarters of Siemens AS, or Siemens, located in Oslo, Norway from an unaffiliated third party for $82.0 million. This facility consists of an office building and three underground parking floors, all of which Siemens leases except for a portion of the parking area. These triple-net leases expire on December 14, 2025 with two ten-year renewal options and rent increases subject to annual Norwegian krone, or NOK, consumer price index, or CPI. Because we assumed the seller’s lease, we account for this acquisition as a business combination, and as a result, we expensed acquisition costs of $5.2 million, which include acquisition fees paid to the advisor (Note 3). Debt was incurred at closing through the issuance of privately placed bonds indexed to inflation in the amount of $52.1 million (NOK 315.0 million) (Note 9). Because we acquired stock in a subsidiary of the seller to complete the acquisition, this investment is considered to be a share transaction, and as a result, we assumed the tax basis of the entity that we purchased and recorded a deferred tax liability of $7.0 million and goodwill in the same amount.

Solo Cup — On February 3, 2014, we acquired a distribution center located in University Park, Illinois from an unaffiliated third party for $80.7 million. The property is leased to Solo Cup Operating Company, or Solo Cup. This triple-net lease expires on September 30, 2023, has two five-year renewal options and includes fixed-rent escalations. Because we assumed the seller’s lease, we account for this acquisition as a business combination, and as a result, we expensed acquisition costs of $3.9 million, which include acquisition fees paid to the advisor (Note 3). Simultaneously, we entered into a mortgage loan in the amount of $47.3 million (Note 9).

Business Combinations - Operating Properties

St. Petersburg Self-Storage Facility — On January 23, 2014, we acquired a self-storage facility located in St. Petersburg, Florida from an unaffiliated third party for $11.6 million. We refer to this investment as St. Petersburg Self Storage. In connection with this transaction, we expensed acquisition costs of $0.7 million, which include acquisition fees paid to the advisor (Note 3). On January 23, 2014, we entered into a mortgage loan in the amount of $14.5 million that we split between St. Petersburg Self Storage and Kissimmee Self Storage (described below), which are jointly and severally liable for any possible defaults on the loan (Note 9).

Kissimmee Self-Storage Facility — On January 22, 2014, we acquired a self-storage facility located in Kissimmee, Florida from an unaffiliated third party for $12.0 million. We refer to this investment as Kissimmee Self Storage. In connection with this transaction, we expensed acquisition costs of $0.6 million, which include acquisition fees paid to the advisor (Note 3). On April 30, 2014, we acquired an additional ground lease connected to this facility for the amount of $0.2 million.


CPA®:18 – Global 6/30/2014 10-Q – 14

Notes to Consolidated Financial Statements (Unaudited)


The following tables present a summary of assets acquired and liabilities assumed in these business combinations, each at the date of acquisition, and revenues and earnings thereon, since their respective dates of acquisition through June 30, 2014 (in thousands):
 
 
2014 Business Combinations (a)
 
 
Belk
 
AT&T
 
Bank Pekao
 
Siemens
 
Solo Cup
 
St. Petersburg Self Storage
 
Kissimmee Self Storage
Cash Consideration
 
$
20,451

 
$
3,036

 
$
73,952

 
$
82,019

 
$
80,650

 
$
11,550

 
$
11,960

Assets acquired at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Land
 
$
2,995

 
$
3,036

 
$
—

 
$
14,362

 
$
13,748

 
$
3,258

 
$
3,306

Building
 
14,645

 
—

 
112,676

 
59,219

 
52,135

 
7,128

 
7,187

In-place lease intangibles assets
 
3,393

 
—

 
23,471

 
10,528

 
15,394

 
1,201

 
1,221

Above-market rent intangible assets
 
—

 
—

 
3,014

 
—

 
773

 
—

 
—

Below-market ground lease
 
—

 
—

 
9,456

 
—

 
—

 
—

 
225

Other assets assumed
 
—

 
—

 
—

 
2,820

 
—

 
7

 
24

 
 
21,033

 
3,036

 
148,617

 
86,929

 
82,050

 
11,594

 
11,963

Liabilities assumed at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Below-market rent intangible liabilities
 
(582
)
 
—

 
(713
)
 
—

 
(1,400
)
 
—

 
—

Deferred income taxes
 
—

 
—

 
—

 
(6,982
)
 
—

 
—

 
—

Other liabilities assumed
 
—

 
—

 
—

 
(4,910
)
 
—

 
(44
)
 
(3
)
 
 
(582
)
 
—

 
(713
)
 
(11,892
)
 
(1,400
)
 
(44
)
 
(3
)
Total identifiable net assets
 
20,451

 
3,036

 
147,904

 
75,037

 
80,650

 
11,550

 
11,960

Amounts attributable to noncontrolling interests
 
—

 
—

 
(73,952
)
 
—

 
—

 
—

 
—

Goodwill
 
—

 
—

 
—

 
6,982

 
—

 
—

 
—

 
 
$
20,451

 
$
3,036

 
$
73,952

 
$
82,019

 
$
80,650

 
$
11,550

 
$
11,960


 
 
For the Period from
 
 
June 4, 2014 through
June 30, 2014
 
May 19, 2014 through
June 30, 2014
 
March 31, 2014 through
June 30, 2014
 
February 27, 2014 through
June 30, 2014
 
February 3, 2014 through
June 30, 2014
 
January 23, 2014 through
June 30, 2014
 
January 22, 2014 through
June 30, 2014
Revenues
 
$
160

 
$
161

 
$
3,122

 
$
2,223

 
$
2,495

 
$
458

 
$
478

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(1,945
)
 
$
(548
)
 
$
(10,205
)
 
$
(5,722
)
 
$
(3,954
)
 
$
(797
)
 
$
(772
)
Net loss attributable to noncontrolling interests
 
—

 
—

 
3,756

 
—

 
—

 
—

 
—

Net loss attributable to CPA®:18 – Global stockholders
 
$
(1,945
)
 
$
(548
)
 
$
(6,449
)
 
$
(5,722
)
 
$
(3,954
)
 
$
(797
)
 
$
(772
)
___________

(a)
The purchase price for each transaction was allocated to the assets acquired and liabilities assumed based upon their preliminary fair values. The information in this table is based on the best estimates of management as of the date of this Report. We are in the process of finalizing our assessment of the fair value of the assets acquired and liabilities assumed. Accordingly, the fair value of these assets acquired and liabilities assumed are subject to change.

Pro Forma Financial Information
 
The following unaudited consolidated pro forma financial information presents our financial results as if the acquisitions that were deemed business combinations were completed during the three and six months ended June 30, 2014, and any new financings related to these acquisitions, had occurred on January 1, 2013. The pro forma information below includes all significant business combinations. The pro forma financial information is not necessarily indicative of what the actual results would have been had the acquisitions actually occurred on January 1, 2013, nor does it purport to represent the results of operations for future periods.


CPA®:18 – Global 6/30/2014 10-Q – 15

Notes to Consolidated Financial Statements (Unaudited)


(Dollars in thousands, except share and per share amounts)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Pro forma total revenues
 
$
13,206

 
$
7,635

 
$
25,496

 
$
15,252

Pro forma net (loss) income
 
(299
)
 
579

 
1,259

 
(20,580
)
Net (income) loss attributable to noncontrolling interests
 
(1,036
)
 
(168
)
 
(1,663
)
 
3,855

Pro forma net (loss) income attributable to CPA®:18 – Global
 
$
(1,335
)
 
$
411

 
$
(404
)
 
$
(16,725
)
 
 
 
 
 
 
 
 
 
Pro forma net (loss) income per Class A share:
 
 
 
 
 
 
 
 
Net (loss) income attributable to CPA®:18 – Global
 
$
(1,108
)
 
$
411

 
$
(163
)
 
$
(16,725
)
Weighted average shares outstanding
 
79,143,058

 
14,928,391

 
63,941,148

 
14,928,391

Net (loss) income per share
 
$
(0.01
)
 
$
0.03

 
$
—

 
$
(1.12
)
 

 
 
 
 
 
 
 
Pro forma net loss per Class C share:
 
 
 
 
 
 
 
 
Net loss attributable to CPA®:18 – Global
 
$
(227
)
 
$
—

 
$
(241
)
 
$
—

Weighted average shares outstanding
 
6,126,012

 
—

 
4,979,591

 
—

Net loss per share
 
$
(0.04
)
 
$
—

 
$
(0.05
)
 
$
—

___________

(a)
Pro forma total revenues includes revenues from lease contracts based on the terms in place at June 30, 2014 and does not include adjustments to contingent rental amounts.
(b)
The pro forma weighted average shares outstanding were determined as if the number of shares issued in our initial public offering in order to raise the funds used for our significant business combinations were issued on January 1, 2013. We assumed that we would only issue Class A shares to raise such funds. All acquisition costs for our acquisitions completed during the six months ended June 30, 2014 are presented as if they were incurred on January 1, 2013.

Real Estate Under Construction

In conjunction with our acquisition of the property leased to Belk, we also will fund the development of an expansion to their existing facility located in Spartanburg, South Carolina, which is expected to complete in December 2014. Belk will continue to pay base rent on the existing facility during construction. At June 30, 2014, we have capitalized funds of $0.2 million as real estate under construction and have an unfunded commitment of $20.4 million remaining on this project.

2013 Acquisitions

In 2013, we made three investments in which we acquired certain properties leased to State Farm Automobile Company, or State Farm, Konzum d. d., or Agrokor, and Crowne Group Inc., or Crowne Group which we acquired on August 20, 2013, December 18, 2013 and December 30, 2013, respectively. The State Farm and Agrokor properties were considered to be asset acquisitions and the Crowne Group transaction was considered to be a direct financing lease.

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 receivables portfolio consists of the Net investments in direct financing leases described below. Operating leases are not included in finance receivables as such amounts are not recognized as an asset in the consolidated financial statements.

AT&T Investment

As discussed in Note 4, on May 19, 2014, in conjunction with the transaction with AT&T, we entered into a domestic net lease financing transaction in which we acquired an industrial warehouse located in Chicago, Illinois. The total cost of the building was $8.6 million.

Janus Investment

On May 16, 2014, we acquired an office building and two manufacturing facilities from Janus International, or Janus. One property, located in Houston, Texas, was considered to be a domestic net lease financing transaction with a total cost of $1.6 million and the other two properties were considered to be acquisitions of real estate properties (Note 4).


CPA®:18 – Global 6/30/2014 10-Q – 16

Notes to Consolidated Financial Statements (Unaudited)


Swift Spinning

On April 21, 2014, we acquired two industrial facilities from Swift Spinning, Inc., or Swift Spinning. One property, located in Columbus, Georgia, was considered to be a domestic net lease financing transaction (total cost of $3.4 million) and the other property was considered to be a real estate property acquisition (Note 4).

Crowne Group Investment

On March 7, 2014, we entered into a domestic net lease financing transaction with a subsidiary of Crowne Group from which we acquired two industrial facilities located in Michigan. The total cost was $8.0 million, including land of $1.0 million, building of $6.8 million and transaction costs of $0.2 million that were capitalized. This is a follow-on transaction to the acquisition that we completed with Crowne Group in December 2013. We amended the existing lease with Crowne Group to include the two new properties in Michigan. The amended lease now encompasses a total of five properties, all of which are leased for a 25-year term. Crowne Group will continue to serve as the guarantor under the lease.
 
Net investments in direct financing leases is summarized as follows (in thousands):
 
 
June 30, 2014
 
December 31, 2013
Minimum lease payments receivable
 
$
91,763

 
$
50,006

Unguaranteed residual value
 
44,003

 
22,064

 
 
135,766

 
72,070

Less: unearned income
 
(91,741
)
 
(50,006
)
 
 
$
44,025

 
$
22,064


Credit Quality of Finance Receivables
 
We generally seek investments in facilities that we believe are critical to a tenant’s business and that we believe have a low risk of tenant defaults. At both June 30, 2014 and December 31, 2013, none of the balances of our finance receivables were past due and we had not established any allowances for credit losses. Additionally, there were no modifications of finance receivables during the six months ended June 30, 2014 or the year ended December 31, 2013. We evaluate the credit quality of our finance receivables utilizing an internal five-point credit rating scale, with one representing the highest credit quality and five representing the lowest. The credit quality evaluation of our finance receivables was last updated in the second quarter of 2014.

A summary of our finance receivables by internal credit quality rating is as follows (dollars in thousands):
 
 
Number of Tenants
 
Net Investments in Direct Financing Leases at
Internal Credit Quality Indicator
 
June 30, 2014
 
December 31, 2013
 
June 30, 2014
 
December 31, 2013
1
 
—
 
—
 
$
—

 
$
—

2
 
1
 
—
 
8,905

 
—

3
 
2
 
1
 
31,685

 
22,064

4
 
1
 
—
 
3,435

 
—

5
 
—
 
—
 
—

 
—

 
 
 
 
 
 
$
44,025

 
$
22,064


At June 30, 2014, Other assets, net included less than $0.1 million of accounts receivable related to amounts billed under our direct financing leases. We did not have any outstanding account receivables related to the aforementioned direct financing lease at December 31, 2013.

CPA®:18 – Global 6/30/2014 10-Q – 17

Notes to Consolidated Financial Statements (Unaudited)



Note 6. Intangible Assets and Liabilities

In connection with our acquisitions of properties (Note 4), we have recorded net lease intangibles that are being amortized over periods ranging from two years to 30 years. In addition, we have ground lease intangibles that are being amortized over periods of up to 99 years. In-place lease intangibles are included in In-place lease intangible assets, net in the consolidated financial statements. Below-market ground lease intangibles are included in Below-market ground lease intangible assets, net in the consolidated financial statements. Above-market rent intangibles are included in Other intangible assets, net in the consolidated financial statements. Below-market rent intangibles are included in Prepaid and deferred rental income in the consolidated financial statements.

In connection with our investment activity during the six months ended June 30, 2014, we have recorded net lease intangibles comprised as follows (life in years, dollars in thousands):
 
Weighted-Average Life
 
Amount
Amortizable Intangible Assets
 
 
 

In-place lease
10.7
 
$
66,024

Below-market ground lease
74.9
 
9,625

Above-market rent
15.1
 
5,043

Total intangible assets
 
 
$
80,692

Amortizable Intangible Liabilities
 
 
 

Below-market rent
18.3
 
$
(3,768
)

Goodwill is included in Other intangible assets, net in the consolidated financial statements. The following table presents a reconciliation of our goodwill (in thousands):
 
 
Total
Balance at January 1, 2014
 
$
—

Acquisition of Siemens (a)
 
6,982

Foreign currency translation
 
(125
)
Balance at June 30, 2014
 
$
6,857

___________
(a)
This asset represents the consideration exceeding the fair value of the identifiable assets acquired and liabilities assumed in our Siemens acquisition (Note 4).

Intangible assets and liabilities are summarized as follows (in thousands):
 
June 30, 2014
 
December 31, 2013
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Amortizable Intangible Assets
 
 
 
 
 
 
 
 
 
 
 
In-place lease
$
119,250

 
$
(4,111
)
 
$
115,139

 
$
53,832

 
$
(495
)
 
$
53,337

Below-market ground lease
17,711

 
(77
)
 
17,634

 
8,227

 
(3
)
 
8,224

Above-market rent
5,021

 
(111
)
 
4,910

 
—

 
—

 
—

 
141,982

 
(4,299
)
 
137,683

 
62,059

 
(498
)
 
61,561

Unamortizable Intangible Assets
 
 
 
 
 
 
 
 
 
 
 
Goodwill
6,857

 
—

 
6,857

 
—

 
—

 
—

Total intangible assets
$
148,839

 
$
(4,299
)
 
$
144,540

 
$
62,059

 
$
(498
)
 
$
61,561

 
 
 
 
 
 
 
 
 
 
 
 
Amortizable Intangible Liabilities
 
 
 
 
 
 
 
 
 
 
 
Below-market rent
$
(5,410
)
 
$
155

 
$
(5,255
)
 
$
(1,647
)
 
$
40

 
$
(1,607
)


CPA®:18 – Global 6/30/2014 10-Q – 18

Notes to Consolidated Financial Statements (Unaudited)


Net amortization of intangibles, including the effect of foreign currency translation, was $2.4 million and $3.7 million for the three and six months ended June 30, 2014, respectively. Amortization of below-market and above-market rent is recorded as an adjustment to Rental income on the consolidated financial statements. We amortize in-place lease intangibles to Depreciation and amortization expense in the consolidated financial statements over the remaining initial term of each lease. Amortization of below-market ground lease intangibles is included in Property expenses in the consolidated financial statements.

Based on the intangible assets and liabilities recorded at June 30, 2014, scheduled annual net amortization of intangibles for the remainder of 2014, each of the next four calendar years following December 31, 2014, and thereafter is as follows (in thousands):
Years Ending December 31,
 
Net Decrease (Increase) in Rental Income
 
Increase to Amortization/Property Expense
 
Net
2014 (remaining)
 
$
34

 
$
5,020

 
$
5,054

2015
 
69

 
10,040

 
10,109

2016
 
59

 
10,039

 
10,098

2017
 
41

 
9,448

 
9,489

2018
 
41

 
9,262

 
9,303

Thereafter
 
(589
)
 
88,964

 
88,375

 
 
$
(345
)
 
$
132,773

 
$
132,428


Note 7. 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 an interest rate cap and swaps; and Level 3, for securities and other derivative assets that do not fall into Level 1 or Level 2 and for which little or no market data exists, therefore requiring us to develop our own assumptions.

Items Measured at Fair Value on a Recurring Basis

The methods and assumptions described below were used to estimate the fair value of each class of financial instrument. For significant Level 3 items, we have also provided the unobservable inputs along with their weighted-average ranges.

Derivative Assets — Our derivative assets, which are included in Other assets, net in the consolidated financial statements, are comprised of foreign currency forward contracts (Note 8). These derivatives were measured at fair value using readily observable market inputs, such as quotations on interest rates, and were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.

Derivative Liabilities — Our derivative liabilities, which are included in Accounts payable, accrued expenses and other liabilities in the consolidated financial statements, are comprised of interest rate swaps and foreign currency forward contracts (Note 8). These derivatives were measured at fair value using readily observable market inputs, such as quotations on interest rates, and were classified as Level 2 because they are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.
 
We did not have any transfers into or out of Level 1, Level 2, or Level 3 measurements during the three and six months ended June 30, 2014. Gains and losses (realized and unrealized) included in earnings are reported in Other income and (expenses) in the consolidated financial statements.
 

CPA®:18 – Global 6/30/2014 10-Q – 19

Notes to Consolidated Financial Statements (Unaudited)


Our other financial instruments had the following carrying values and fair values as of the dates shown (in thousands):
 
 
 
June 30, 2014
 
December 31, 2013
 
Level
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Debt (a)
3
 
$
359,132

 
$
363,765

 
$
85,060

 
$
85,060

Deferred acquisition fees payable (b)
3
 
8,999

 
9,036

 
2,705

 
2,705

___________
(a)
We determined the estimated fair value of these financial instruments using a discounted cash flow model with rates that take into account the credit of the tenant/obligor and interest rate risk. We also considered the value of the underlying collateral taking into account the quality of the collateral, the credit quality of the tenant/obligor, the time until maturity and the current market interest rate.
(b)
We determined the estimated fair value of our deferred acquisition fees based on an estimate of discounted cash flows using two significant unobservable inputs, which are the leverage adjusted unsecured spread and an illiquidity adjustment of 109 basis points and 75 basis points, respectively. Significant increases or decreases to these inputs in isolation would result in a significant change in the fair value measurement.

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 both June 30, 2014 and December 31, 2013.

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 that impact us: interest rate risk, credit risk and market risk. We are primarily subject to interest rate risk on our interest-bearing assets and liabilities. Credit risk is the risk of default on our operations and our tenants’ inability or unwillingness to make contractually required payments. Market risk includes changes in the value of our properties and related loans as well as changes in the value of our other 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.
 
Derivative Financial Instruments
 
When we use derivative instruments, it is generally to reduce our exposure to fluctuations in interest rates and foreign currency exchange rate movements. 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, which are considered to be derivative instruments. The primary risks related to our use of derivative instruments include default by a counterparty to a hedging arrangement on its obligation and a downgrade in the credit quality of a counterparty to such an extent that our ability to sell or assign our side of the hedging transaction is impaired. 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.
 
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. For a derivative designated and that qualified as a cash flow hedge, the effective portion of the change in fair value of the derivative is recognized in Other comprehensive loss until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings. Amounts are reclassified out of Other comprehensive loss into earnings when the hedged investment is either sold or substantially liquidated.
 

CPA®:18 – Global 6/30/2014 10-Q – 20

Notes to Consolidated Financial Statements (Unaudited)


The following table sets forth certain information regarding our derivative instruments (in thousands):
 
 
 
 
Asset Derivatives Fair Value at
 
Liability Derivatives Fair Value at
Derivative Designated as Hedging Instruments
 
Balance Sheet Location
 
June 30, 2014
 
December 31, 2013
 
June 30, 2014
 
December 31, 2013
Foreign currency forward contracts
 
Other assets, net
 
$
38

 
$
—

 
$
—

 
$
—

Foreign currency forward contracts
 
Accounts payable, accrued expenses and other liabilities
 
—

 
—

 
(151
)
 
—

Interest rate swaps
 
Accounts payable, accrued expenses and other liabilities
 
—

 
—

 
(1,238
)
 
(219
)
 
 
 
 
$
38

 
$
—

 
$
(1,389
)
 
$
(219
)

All derivative transactions with an individual counterparty are governed by a master International Swap and Derivatives Association agreement, which can be considered as a master netting arrangement; however, we report all our derivative instruments on a gross basis on our consolidated financial statements. At both June 30, 2014 and December 31, 2013, no cash collateral had been posted or received for any of our derivative positions.

The following tables present the impact of our derivative instruments in the consolidated financial statements (in thousands):
 
 
Amount of Gain (Loss) Recognized in
Other Comprehensive Loss on Derivatives (Effective Portion)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Derivatives in Cash Flow Hedging Relationships 
 
2014
 
2013
 
2014
 
2013
Interest rate swaps
 
$
647

 
$
—

 
$
1,019

 
$
—

Foreign currency forward contracts
 
(178
)
 
—

 
113

 
—

Total
 
$
469

 
$
—

 
$
1,132

 
$
—


During the three and six months ended June 30, 2014, we reclassified $0.2 million and $0.3 million, respectively, from other comprehensive loss into our consolidated financial statements related to our interest rate swaps.

Interest Rate Swaps

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 investment partners may obtain non-recourse variable-rate mortgage loans and, as a result, may enter into interest rate swap 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 counterparty’s stream of cash flow over a specific period. The notional, or face, amount on which the swaps are based is not exchanged.
 
The interest rate swaps that we had outstanding on our consolidated subsidiaries at June 30, 2014 are summarized as follows (dollars in thousands):
 
 
Number of Instruments
 
Notional
Amount
 
Fair Value at
June 30, 2014 
Interest rate swaps
 
4
 
$
31,511

 
$
(1,238
)


CPA®:18 – Global 6/30/2014 10-Q – 21

Notes to Consolidated Financial Statements (Unaudited)


Foreign Currency Contracts
 
We are exposed to foreign currency exchange rate movements, primarily in the euro and, to a lesser extent, the NOK. We manage foreign currency exchange rate movements by generally placing our debt service obligation on an investment in the same currency as the tenant’s rental obligation to us. This reduces our overall exposure to the net cash flow from that investment. However, 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. Realized and unrealized gains and losses recognized in earnings related to foreign currency transactions are included in Other income and (expenses) in the consolidated financial statements.

In order to hedge certain of our foreign currency cash flow exposures, we enter into foreign currency forward contracts. 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 forward contracts and holding them to maturity, we are locked into a future currency exchange rate for the term of the contract. This instrument locks the range in which the foreign currency exchange rate may fluctuate.

The following table presents the foreign currency derivative contracts we had outstanding and their designations at June 30, 2014 (currency in thousands):
Foreign Currency Derivatives
 
Number of Instruments
 
Notional
Amount
 
Fair Value at
June 30, 2014 (a)
Designated as Cash Flow Hedging Instruments
 
 
 
 
 
 
Foreign currency forward contracts (b)
 
47
 
€
18,035

 
$
(127
)
Foreign currency forward contracts (c)
 
19
 
kr
47,540

 
14

 
 
 
 
 
 
$
(113
)
___________
(a)
Fair value amounts are based on the applicable exchange rate of the euro or the NOK as applicable at June 30, 2014.
(b)
On January 16, 2014 and March 31, 2014, we entered into a series of forward contracts to exchange euro for U.S. dollars for each quarter through April 2020, which was intended to protect our then-projected revenue collections against possible exchange rate fluctuations in the euro.
(c)
On February 27, 2014, in conjunction with our Siemens investment (Note 4), we entered into a series of forward contracts to exchange NOK for U.S. dollars for each quarter through January 2019, which was intended to protect our then-projected revenue collections from this investment against possible exchange rate fluctuations in NOK.

Other

Amounts reported in Other comprehensive loss related to our interest rate swap will be reclassified to Interest expense as interest payments are made on our variable-rate debt. Amounts reported in Other comprehensive income (loss) related to foreign currency derivative contracts will be reclassified to Other income and (expenses) when the hedged foreign currency proceeds from foreign operations are repatriated to the U.S. At June 30, 2014, we estimate that an additional $0.8 million will be reclassified as interest expense and other income during the next 12 months.

We measure our credit exposure on a counterparty basis as the positive aggregate estimated fair value of our derivatives, net of collateral received, if any. No collateral was received as of June 30, 2014. At June 30, 2014, we did not have any credit exposure with a counterparty.


CPA®:18 – Global 6/30/2014 10-Q – 22

Notes to Consolidated Financial Statements (Unaudited)


Portfolio Concentration Risk

Concentrations of credit risk arise when a number of tenants are engaged in similar business activities or have similar economic risks or conditions that could cause them to default on their lease obligations to us. We currently have concentrations of credit risk in our portfolio as we have a limited number of investments. We intend to regularly monitor our portfolio to assess potential concentrations of credit risk as we make additional investments. As we invest the proceeds of our initial public offering, we will seek to ensure that our portfolio is reasonably well diversified and does not contain any unusual concentration of credit risks. At June 30, 2014, our net lease portfolio, which excludes our self-storage facilities, had the following significant property and lease characteristics (percentages based on the percentage of our contractual minimum annualized base rent, or ABR, as of June 30, 2014), which does contain concentrations in excess of 10% in certain areas, as follows:

•
48% related to domestic properties, which include concentrations in Texas and Illinois of 16% and 14%, respectively;
•
52% related to international properties, which include concentrations in Poland, Croatia, and Norway of 22%, 17%, and 13%, respectively;
•
53% related to office properties, 18% related to warehouse/distribution properties, 17% related to retail properties, and 12% related to industrial properties; and
•
22% related to the banking industry, 17% related to the grocery industry, 16% related to the insurance industry, 12% related to the electronics industry, and 12% related to the chemical, plastics, rubber, and glass industry.

Information About Geographic Areas
 
Our portfolio is comprised of domestic and international investments. At June 30, 2014, our international investments were comprised of investments in Europe. Foreign currency exposure and risk management are discussed above. The following tables present information about our investments on a geographic basis (in thousands):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Domestic
 
 
 
 
 
 
 
 
Revenues (a)
 
$
5,905

 
$
—

 
$
10,131

 
$
—

Loss from continuing operations before income taxes
 
(1,747
)
 
(65
)
 
(5,723
)
 
(65
)
Net income attributable to noncontrolling interests
 
(717
)
 
—

 
(1,006
)
 
—

Net loss attributable to CPA®:18 – Global
 
(2,632
)
 
(65
)
 
(6,897
)
 
(65
)
International
 
 
 
 
 
 
 
 
Revenues (b)
 
$
6,742

 
$
—

 
$
9,211

 
$
—

Loss from continuing operations before income taxes
 
(748
)
 
—

 
(15,015
)
 
—

Net (income) loss attributable to noncontrolling interests
 
(501
)
 
—

 
3,531

 
—

Net loss attributable to CPA®:18 – Global
 
(1,567
)
 
—

 
(11,538
)
 
—

Total
 
 
 
 
 
 
 
 
Revenues
 
$
12,647

 
$
—

 
$
19,342

 
$
—

Loss from continuing operations before income taxes
 
(2,495
)
 
(65
)
 
(20,738
)
 
(65
)
Net (income) loss attributable to noncontrolling interests
 
(1,218
)
 
—

 
2,525

 
—

Net loss attributable to CPA®:18 – Global
 
(4,199
)
 
(65
)
 
(18,435
)
 
(65
)


CPA®:18 – Global 6/30/2014 10-Q – 23

Notes to Consolidated Financial Statements (Unaudited)


 
 
June 30, 2014
 
December 31, 2013
Domestic
 
 
 
 
Long-lived assets (c) (d)
 
$
278,775

 
$
119,336

Non-recourse debt
 
192,466

 
85,060

International
 
 
 
 
Long-lived assets (c) (e)
 
$
234,585

 
$
52,328

Non-recourse debt and bonds payable
 
166,666

 
—

Total
 
 
 
 
Long-lived assets (c)
 
$
513,360

 
$
171,664

Non-recourse debt and bonds payable
 
359,132

 
85,060

___________
(a)
For the three months ended June 30, 2014, domestic revenue contains concentrations above 5% related to our State Farm ($2.0 million), Solo Cup ($1.5 million), and Crowne Group ($0.7 million) investments, which are located in Texas, Illinois, and Michigan/Indiana/South Carolina, respectively. For the six months ended June 30, 2014, domestic revenue contains concentrations above 5% related to our State Farm ($4.1 million), Solo Cup ($2.5 million), and Crowne Group ($1.2 million) investments, which are located in Texas, Illinois, and Michigan/Indiana/South Carolina, respectively.
(b)
For the three months ended June 30, 2014, international revenue contains concentrations above 5% related to our Bank Pekao ($3.1 million), Agrokor ($1.9 million) and Siemens ($1.7 million) investments that are located in Poland, Croatia and Norway, respectively. For the six months ended June 30, 2014, international revenue contains concentrations above 5% related to our Agrokor ($3.9 million), Bank Pekao ($3.1 million), and Siemens ($2.2 million) investments.
(c)
Consists of Net investments in real estate. 
(d)
At June 30, 2014, domestic long-lived assets contain concentrations above 10% related to our State Farm ($95.4 million) and Solo Cup ($65.1 million) investments, which are located in Texas and Illinois, respectively.
(e)
At June 30, 2014, international long-lived assets contain concentrations above 10% related to our Bank Pekao ($111.1 million), Siemens ($72.2 million), and Agrokor ($51.2 million) investments, which are located in Poland, Norway and Croatia, respectively. At December 31, 2013, international long-lived assets only pertained to our Agrokor investments located in Croatia.


CPA®:18 – Global 6/30/2014 10-Q – 24

Notes to Consolidated Financial Statements (Unaudited)


Note 9. Debt

Non-Recourse Debt

Non-recourse debt consists of mortgage notes payable, which are collateralized by the assignment of real estate properties with an aggregate carrying value of $307.4 million and $85.1 million at June 30, 2014 and December 31, 2013, respectively. The following table presents a summary of the non-recourse mortgage loans on our real estate property investments (dollars in thousands):
 
 
 
 
 
 
 
 
Carrying Amount at
Tenant
 
Interest Rate
 
Rate Type
 
Maturity Date
 
June 30, 2014
 
December 31, 2013
Agrokor (a)
 
5.8
%
 
Fixed
 
12/31/2020
 
$
42,126

 
$
—

Bank Pekao (b)
 
3.3
%
 
Fixed
 
3/10/2021
 
72,827

 
—

State Farm (a) (c)
 
4.5
%
 
Fixed
 
9/10/2023
 
72,800

 
72,800

Crowne Group (a) (d)
 
5.6
%
 
Variable
 
12/30/2023
 
12,133

 
12,260

Crowne Group (b) (d)
 
5.4
%
 
Variable
 
12/31/2023
 
4,038

 
—

Self-storage properties (b) (e)
 
4.9
%
 
Fixed
 
2/1/2024
 
14,500

 
—

Automobile Protection Corporation, or APCO (b) (d)
 
5.1
%
 
Variable
 
2/5/2024
 
3,802

 
—

Solo Cup (b) (c)
 
5.1
%
 
Fixed
 
2/6/2024
 
47,250

 
—

Swift Spinning (b)
 
5.0
%
 
Fixed
 
5/1/2024
 
7,792

 
—

Janus (b) (d)
 
4.9
%
 
Variable
 
5/5/2024
 
11,538

 
—

AT&T (b)
 
4.6
%
 
Fixed
 
6/11/2024
 
8,000

 
—

North American Lighting (b)
 
4.8
%
 
Fixed
 
5/6/2026
 
7,325

 
—

Air Enterprises Acquisition, LLC, or Air Enterprises(b)
 
5.3
%
 
Fixed
 
4/1/2039
 
3,289

 
—

 
 
 
 
 
 
 
 
$
307,420

 
$
85,060

__________
(a)
These mortgage loans were entered into in conjunction with the 2013 Acquisitions as described in Note 4.
(b)
These mortgage loans were entered into in conjunction with the 2014 Acquisitions as described in Note 4 and Note 5. During the six months ended June 30, 2014, we capitalized $2.5 million of deferred financing costs related to these loans. We amortize deferred financing costs over the term of the related mortgage loan using a method which approximates the effective interest method.
(c)
These mortgage loans have payments that are interest-only until their respective maturity dates.
(d)
These mortgage loans have variable interest rates, which have been effectively converted to fixed rates through the use of interest rate swaps (Note 8). The interest rates presented for these mortgage loans reflect interest rate swaps in effect at June 30, 2014.
(e)
On January 23, 2014, we entered into a mortgage loan that we allocate between our two self-storage properties, which are jointly and severally liable for any possible defaults on the loan.

Bonds Payable

In conjunction with our Siemens investment (Note 4), on February 27, 2014, we issued privately placed bonds of $52.1 million, NOK 315 million, with a coupon of 3.5%. These bonds are collateralized by the Siemens property. The bonds are coterminous with the lease and mature on December 31, 2025. The bonds are inflation-linked to the Norwegian CPI and the annual principal balance and coupon payment will increase as the inflation index increases. Coupon payments will be made annually in arrears on December 15. At June 30, 2014, these bonds had a carrying value of $51.7 million. During the six months ended June 30, 2014, we capitalized $0.5 million of deferred financing costs related to these loans.

The bond agreement has a covenant that requires a valuation for compliance of the “loan to value,” or LTV, in the fourth quarter of each year. If we breach this covenant, we would be required to either provide additional collateral or make an offer to the bondholders to redeem the aggregate amount of bonds necessary to cure the LTV breach.


CPA®:18 – Global 6/30/2014 10-Q – 25

Notes to Consolidated Financial Statements (Unaudited)


Scheduled Debt Principal Payments
 
Scheduled debt principal payments during the remainder of 2014, each of the next four calendar years following December 31, 2014 and thereafter are as follows (in thousands):
Years Ending December 31,
 
Total
2014 (remaining)
 
$
873

2015
 
1,815

2016
 
2,097

2017
 
3,017

2018
 
3,263

Thereafter through 2039
 
348,067

Total
 
$
359,132


Note 10. Commitments and Contingencies

At June 30, 2014, we were not involved in any material litigation. 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. See Note 4 for unfunded construction commitments.

Note 11. Loss Per Share and Equity

The following tables depict loss per share for the period presented (in thousands, except share and per share amounts):
 
Three Months Ended June 30, 2014
 
Weighted-Average
Shares Outstanding 
 
Allocation of Net Loss (a) 
 
Loss
Per Share 
Class A common stock
77,300,223

 
$
(3,760
)
 
$
(0.05
)
Class C common stock
6,126,012

 
(439
)
 
(0.07
)
Net loss attributable to CPA®:18 – Global
 
 
$
(4,199
)
 

 
Six Months Ended June 30, 2014
 
Weighted-Average
Shares Outstanding 
 
Allocation of Net Loss (a) 
 
Loss
Per Share 
Class A common stock
57,778,351

 
$
(16,761
)
 
$
(0.29
)
Class C common stock
4,979,591

 
(1,674
)
 
(0.34
)
Net loss attributable to CPA®:18 – Global

 
$
(18,435
)
 

 
Three and Six Months Ended June 30, 2013
 
Weighted-Average
Shares Outstanding 
 
Allocation of Net Loss
 
Loss
Per Share 
Class A common stock
23,222

 
$
(65
)
 
$
(2.81
)
Class C common stock
—

 
—

 
—

Net loss attributable to CPA®:18 – Global
 
 
$
(65
)
 
 
__________
(a)
The allocation of Net loss attributable to CPA®:18 – Global is calculated based on the weighted-average shares outstanding for Class A common stock and Class C common stock for each respective period. For the three and six months ended June 30, 2014, the allocation for the Class A common stock excludes the shareholder servicing fee of $0.1 million and $0.2 million, respectively, that is only applicable to holders of Class C common stock (Note 3).

Subsequent to June 30, 2014 and through July 31, 2014, we issued an additional 1,748,004 shares of Class A common stock and an additional 1,484,667 shares of Class C common stock in our initial public offering.

Proceeds from certain of the shares that we sold are held in escrow and considered unsettled until such time as all contingencies have been removed and the buyer has voting rights, or approximately three days. At June 30, 2014, 606,865 of the Class A shares that were

CPA®:18 – Global 6/30/2014 10-Q – 26

Notes to Consolidated Financial Statements (Unaudited)


sold remained unsettled. Net cash provided by financing activities for the six months ended June 30, 2014 does not include $13.8 million of shares sold but not settled (net of costs).

Distributions

On June 18, 2014, our board of directors declared distributions at a daily rate of $0.0016983 for our Class A common stock and $0.0014442 for our Class C common stock for the quarter ending September 30, 2014, payable on or about October 15, 2014 to stockholders of record on each day of the quarter.

During the second quarter of 2014, our board of directors declared distributions at a daily rate of $0.0017170 or our Class A common stock and $0.0014601 for our Class C common stock for the quarter ending June 30, 2014. The distributions in the amount of $12.8 million were paid on July 15, 2014 to the stockholders of record on June 30, 2014.

Distributions are declared at the discretion of our board of directors and are not guaranteed. Until we substantially invest the net proceeds of our initial public offering, we expect that distributions will be paid primarily from offering proceeds, which reduces amounts available to invest in properties and could lower our overall return.

Reclassifications Out of Accumulated Other Comprehensive Loss

The following tables present a reconciliation of changes in Accumulated other comprehensive loss by component for the periods presented (in thousands):
 
Three Months Ended June 30, 2014
 
Unrealized
Gains (Losses)
on Derivative Instruments
 
Foreign Currency Translation Adjustments
 
Total
Beginning balance
$
(882
)
 
$
(12
)
 
$
(894
)
Other comprehensive income (loss) before reclassifications
(292
)
 
(1,832
)
 
(2,124
)
Amounts reclassified from accumulated other comprehensive loss to:
 
 
 
 
 
Interest expense
(177
)
 
—

 
(177
)
Net current-period Other comprehensive income
(469
)
 
(1,832
)
 
(2,301
)
Net current-period Other comprehensive loss attributable to noncontrolling interests
—

 
175

 
175

Ending balance
$
(1,351
)
 
$
(1,669
)
 
$
(3,020
)

 
Six Months Ended June 30, 2014
 
Unrealized
Gains (Losses)
on Derivative Instruments
 
Foreign Currency Translation Adjustments
 
Total
Beginning balance
$
(219
)
 
$
125

 
$
(94
)
Other comprehensive income (loss) before reclassifications
(844
)
 
(2,293
)
 
(3,137
)
Amounts reclassified from accumulated other comprehensive loss to:
 
 
 
 
 
Interest expense
(288
)
 
—

 
(288
)
Net current-period Other comprehensive income
(1,132
)
 
(2,293
)
 
(3,425
)
Net current-period Other comprehensive loss attributable to noncontrolling interests
—

 
499

 
499

Ending balance
$
(1,351
)
 
$
(1,669
)
 
$
(3,020
)

There were no reclassifications out of Accumulated other comprehensive loss for the three and six months ended June 30, 2013.





CPA®:18 – Global 6/30/2014 10-Q – 27



Item 2. Management’s 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 2013 Annual Report.

Business Overview

As described in more detail in Item 1 in our 2013 Annual Report, we were formed in September 2012, and we intend to qualify as a REIT for the taxable year ended December 31, 2013. On May 7, 2013, our Registration Statement was declared effective by the SEC, and on July 25, 2013, aggregate subscription proceeds exceeded the minimum offering amount of $2.0 million and we began to admit stockholders. The Registration Statement relates to our initial public offering, which is being made on a “best efforts” basis by Carey Financial and selected other dealers, and covers up to $1.0 billion of common stock, in any combination of Class A common stock and Class C common stock at a price of $10.00 per share of Class A common stock and $9.35 per share of Class C common stock. The Registration Statement also covers the offering of up to $400.0 million in common stock, in any combination of Class A common stock and Class C common stock, pursuant to our DRIP at a price of $9.60 per share of Class A common stock and $8.98 per share of Class C common stock. 

We have no paid employees and are externally advised and managed by our advisor. We intend to use substantially all of the net proceeds from our offering to invest primarily in a diversified portfolio of income-producing commercial real estate properties and other real estate related assets, both domestically and outside the U.S. We currently expect that, for the foreseeable future, at least a majority of our investments will be in commercial real estate properties leased to single tenants on a long-term triple-net lease basis.

Our operating results and cash flows are primarily influenced by rental income from our commercial properties, interest expense on our property indebtedness and acquisition and operating expenses. Revenue is subject to fluctuation because of the timing of new lease transactions and foreign currency exchange rates. We may also experience lease terminations, lease expirations, contractual rent adjustments, tenant defaults, and sales of properties in future periods. 

Significant Developments

Based on our investment pipeline and an assessment of the current environment of the current environment for investment opportunities, we believe it was in our best interest to reduce our sales of shares after June 30, 2014. On May 1, 2014, our board of directors approved the discontinuation of the sale of Class A shares after June 30, 2014, in order to moderate the pace of our fundraising. In order to facilitate the final sales of Class A shares as of June 30, 2014 and the continued sale of Class C shares, the board of directors also approved the reallocation up to $250.0 million of the shares that were initially allocated to sales of our stock through our DRIP to our initial public offering. In June 2014, we reallocated the full $250.0 million in shares from the DRIP.


CPA®:18 – Global 6/30/2014 10-Q – 28



Portfolio Overview

We intend to acquire a diversified portfolio of income-producing commercial properties and other real estate-related assets. We expect to make these investments both domestically and outside of the U.S. We acquired our first domestic and international investments on August 20, 2013 and December 18, 2013, respectively. See below for more details regarding our portfolio at June 30, 2014. Portfolio information is provided on a consolidated basis to facilitate the review of our accompanying consolidated financial statements. In addition, we provide such information on a pro rata basis to better illustrate the economic impact of our various net leased jointly-owned investments.

Portfolio Summary
 
 
June 30, 2014
Number of net-leased properties
 
24

Number of operating properties
 
2

Number of tenants (a)
 
18

Total square footage (in thousands) (b)
 
5,539

Occupancy (a)
 
100
%
Average lease term (in years) (a)
 
14.0

Number of countries
 
4

Total assets (in thousands)
 
$
1,380,507

Total real estate assets (in thousands) (c)
 
513,360


(dollars in thousands, except exchange rate)
 
Six Months Ended 
 June 30, 2014
Acquisition volume — consolidated
 
$
444,663

Acquisition volume — pro rata (b)
 
370,711

Financing obtained — consolidated
 
275,710

Financing obtained — pro rata (b)
 
230,574

Funds raised — cumulative to date
 
1,034,985

Average U.S. dollar/euro exchange rate
 
$
1.371

Change in the U.S. CPI (d)
 
2.3
%
Change in the HICP (d)
 
0.3
%
Change in the Norwegian CPI (d)
 
1.0
%
__________
(a)
Represents our net-leased portfolio and, accordingly, excludes all operating properties.
(b)
Represents pro rata basis. See terms and definitions below for a description of pro rata metrics.
(c)
Represents Net investments in real estate.
(d)
Many of our lease agreements include contractual increases indexed to changes in the CPI or other similar indices.


CPA®:18 – Global 6/30/2014 10-Q – 29



 
 
 
 
 
 
 
 
Consolidated
 
Pro Rata (a)
 
 
 
 
Tenant/Lease Guarantor
 
Location
 
Property Type

Acquisition Date
 
Square Footage
 
Purchase Price
 
Square Footage

Purchase Price (b)

Lease Term (in years)
 
Percent Owned
(in thousands, except years and percentages)
Net-leased properties:
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 

State Farm (c)
 
Austin, TX
 
Office

8/20/2013
 
479,411

 
$
115,604

 
239,706


$
57,802


14.2

 
50
%
Agrokor (c)
 
Split, Zadar, Zagreb (3), Croatia
 
Retail

12/18/2013
 
564,578

 
96,957

 
451,662


77,566


19.5

 
80
%
Crowne Group (c)
 
Logansport, IN
Madison, IN
Marion, SC
Frasier, MI
Warren, MI
 
Industrial

12/30/2013
3/7/2014
 
859,701

 
30,940

 
859,701


30,940


24.8

 
100
%
Air Enterprises
 
Streetsboro, OH
 
Industrial

1/16/2014
 
178,180

 
5,901

 
178,180


5,901


14.7

 
100
%
Solo Cup (c) (d)
 
University Park, IL
 
Warehouse/Distribution

2/3/2014
 
1,552,475

 
80,650

 
1,552,475


84,588


9.3

 
100
%
APCO
 
Norcross, GA
 
Office

2/7/2014
 
50,600

 
5,822

 
50,600


5,822


14.7

 
100
%
Siemens (c) (d) (e)
 
Oslo, Norway
 
Office

2/27/2014
 
165,905

 
84,109

 
165,905


89,320


11.5

 
100
%
Bank Pekao (c) (d) (e)
 
Warsaw, Poland
 
Office

3/31/2014
 
423,818

 
147,904

 
211,909


78,141


8.9

 
50
%
Swift Spinning
 
Columbus, GA (2)
 
Industrial
 
4/21/2014
 
432,769

 
11,931

 
432,769

 
11,931

 
19.8

 
100
%
North American Lighting (d)
 
Farmington Hills, MI
 
Office
 
5/6/2014
 
75,286

 
8,403

 
75,286

 
9,489

 
11.8

 
100
%
Janus
 
Temple, GA
Houston, TX
Surprise, AZ
 
Industrial
 
5/16/2014
 
330,306

 
15,953

 
330,306

 
15,953

 
19.8

 
100
%
AT&T (d)
 
Chicago, IL
 
Warehouse/Distribution
 
5/19/2014
 
206,000

 
11,600

 
206,000

 
12,248

 
13.3

 
100
%
Belk (d) (f)
 
Jonesville, SC
 
Warehouse/Distribution
 
6/4/2014
 
515,279

 
20,451

 
515,279

 
42,842

 
8.9

 
100
%
Operating properties:
 
 
 
 


 
 
 
 
 
 



 
 
 
Kissimmee Self Storage (d)
 
Kissimmee, FL
 
Self-storage

1/22/2014
 
184,456

 
11,960

 
184,456


12,565


N/A

 
100
%
St. Petersburg Self Storage (d)
 
St. Petersburg, FL
 
Self-storage
 
1/23/2014
 
84,700

 
11,550

 
84,700

 
12,270

 
N/A

 
100
%
 
 
 
 
 
 
 
 
6,103,464

 
$
659,735

 
5,538,934

 
$
547,378

 
 
 
 
__________
(a)
Represents pro rata basis. See terms and definitions below for a description of pro rata metrics.
(b)
Purchase price represents the contractual purchase price, including acquisition fees and transaction closing costs, based on the applicable exchange rate.
(c)
Reflects tenants that exceed 5% of pro rata ABR as of June 30, 2014. See terms and definitions below for a description of pro rata amounts and ABR.
(d)
Represents business combinations in which acquisition fees are expensed in purchase accounting. Such acquisition fees are included in the purchase price listed above to depict the total cost of each respective investment.
(e)
These are considered multi-tenant properties.
(f)
The purchase price includes $20.6 million related to our funding commitment to develop an expansion to Belk’s existing facility located in Spartanburg, South Carolina, which is expected to complete in December 2014. At June 30, 2014, we have capitalized funds of $0.2 million as real estate under construction and have an unfunded commitment of $20.4 million remaining on this project (Note 4).


CPA®:18 – Global 6/30/2014 10-Q – 30



Portfolio Diversification by Geography and Property Type
(in thousands, except percentages)
 
 
Consolidated (a)

Pro Rata (a) (b)
Region
 
ABR (c)

Percent

ABR (c)

Percent
U.S.
 
 
 
 
 
 
 
 
Midwest (d)
 
$
9,772

 
21
%
 
$
9,772

 
27
%
South (e)
 
9,571

 
21
%
 
6,092

 
17
%
East
 
2,483

 
5
%
 
2,482

 
7
%
West
 
396

 
1
%
 
396

 
1
%
U.S. Total
 
22,222

 
48
%
 
18,742

 
52
%
 
 
 
 
 
 
 
 
 
International
 
 
 
 
 
 
 
 
Poland
 
10,381

 
22
%
 
5,191

 
14
%
Croatia
 
7,679

 
17
%
 
6,143

 
17
%
Norway
 
6,101

 
13
%
 
6,101

 
17
%
International Total
 
24,161

 
52
%
 
17,435

 
48
%
Total
 
$
46,383

 
100
%
 
$
36,177

 
100
%
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
Pro Rata (a) (b) (c)
Property Type
 
ABR (c)
 
Percent
 
ABR
 
Percent
Office
 
$
24,769

 
53
%
 
$
16,099

 
44
%
Warehouse/Distribution
 
8,178

 
18
%
 
8,178

 
23
%
Retail
 
7,679

 
17
%
 
6,143

 
17
%
Industrial
 
5,757

 
12
%
 
5,757

 
16
%
Total
 
$
46,383

 
100
%
 
$
36,177

 
100
%
__________
(a)
Represents our net-leased portfolio and, accordingly, excludes all operating properties.
(b)
See terms and definitions below for a description of pro rata metrics.
(c)
ABR is presented as of June 30, 2014. See terms and definitions below for a description of ABR.
(d)
Pro rata ABR for the Midwest region contains a concentration of 18% for our Illinois properties.
(e)
Pro rata ABR for the South region contains a concentration of 10% for our Texas properties.

Portfolio Diversification by Tenant Industry
 
 
Consolidated (a)
 
Pro Rata (a) (b)
Industry Type (c)
 
ABR (d)
 
Percent
 
ABR (d)
 
Percent
(in thousands, except percentages)
 
 
 
 
 
 
 
 
Banking
 
$
10,223

 
22
%
 
$
5,111

 
14
%
Grocery
 
7,679

 
17
%
 
6,143

 
17
%
Insurance
 
7,439

 
16
%
 
3,960

 
11
%
Electronics
 
5,740

 
12
%
 
5,740

 
16
%
Chemicals, Plastics, Rubber, and Glass
 
5,646

 
12
%
 
5,646

 
15
%
Automobile
 
3,523

 
8
%
 
3,523

 
10
%
Retail Trade
 
1,616

 
3
%
 
1,616

 
4
%
Construction and Building
 
1,378

 
3
%
 
1,378

 
4
%
Textiles, Leather, and Apparel
 
1,150

 
3
%
 
1,150

 
3
%
Telecommunications
 
978

 
2
%
 
947

 
3
%
Other (e)
 
1,011

 
2
%
 
963

 
3
%
 
 
$
46,383

 
100
%
 
$
36,177

 
100
%
__________

CPA®:18 – Global 6/30/2014 10-Q – 31



(a)
Represents our net-leased portfolio and, accordingly, excludes all operating properties.
(b)
See terms and definitions below for a description of pro rata amounts.
(c)
Based on the Moody’s Investors Service, Inc. classification system and information provided by the tenant.
(d)
ABR is presented as of June 30, 2014. See terms and definitions below for a description of ABR.
(e)
Includes ABR from tenants in the following industries: machinery, hotels and gaming, and unknown.

Lease Expirations
 
 
Consolidated (a) (b)
 
Pro Rata (a) (b) (c)
Year of Lease Expiration
 
Number of Leases Expiring
 
ABR (d)
 
Percent
 
Number of Leases Expiring
 
ABR (d)
 
Percent
(in thousands, except percentages and number of leases)
Remaining 2014
 
—

 
$
—

 
—
%
 
—

 
$
—

 
—
%
2015
 
1

 
4

 
—
%
 
1

 
2

 
—
%
2016
 
1

 
97

 
—
%
 
1

 
49

 
—
%
2017
 
—

 
—

 
—
%
 
—

 
—

 
—
%
2018
 
3

 
57

 
—
%
 
3

 
29

 
—
%
2019
 
—

 
—

 
—
%
 
—

 
—

 
—
%
2020
 
—

 
—

 
—
%
 
—

 
—

 
—
%
2021
 
—

 
—

 
—
%
 
—

 
—

 
—
%
2022
 
—

 
—

 
—
%
 
—

 
—

 
—
%
2023
 
4

 
17,484

 
38
%
 
4

 
12,373

 
34
%
2024
 
—

 
—

 
—
%
 
—

 
—

 
—
%
2025
 
2

 
6,101

 
13
%
 
2

 
6,101

 
17
%
2026
 
1

 
847

 
2
%
 
1

 
847

 
2
%
2027
 
1

 
916

 
2
%
 
1

 
916

 
3
%
Thereafter
 
7

 
20,877

 
45
%
 
7

 
15,860

 
44
%
 
 
20

 
$
46,383

 
100
%
 
20

 
$
36,177

 
100
%
__________
(a)
Assumes tenant does not exercise renewal option.
(b)
Represents our net-leased portfolio and, accordingly, excludes all operating properties.
(c)
See terms and definitions below for a description of pro rata metrics.
(d)
ABR is presented as of June 30, 2014. See terms and definitions below for a description of ABR.

Operating Properties

At June 30, 2014 our operating portfolio consisted of two self-storage properties that are located in St. Petersburg, Florida and Kissimmee, Florida. These two properties had a combined square footage of 269,156 and occupancy of 76%.

Terms and Definitions

Pro Rata Metrics

The portfolio information above contains certain metrics prepared under the pro rata consolidation method. We refer to these metrics as pro rata metrics. We have a number of investments, usually with our affiliates, in which our economic ownership is less than 100%. Under the full consolidation method, we report 100% of the assets, liabilities, revenues, and expenses of those investments that are deemed to be under our control or for which we are deemed to be the primary beneficiary, even if our ownership is less than 100%. Also, for all other jointly-owned investments, we report our net investment and our net income or loss from that investment. Under the pro rata consolidation method, we generally present our proportionate share, based on our economic ownership of these jointly-owned investments, of the assets, liabilities, revenues, and expenses of those investments.


CPA®:18 – Global 6/30/2014 10-Q – 32



ABR

ABR represents contractual minimum annualized base rent for our net-leased properties. ABR is not applicable to operating properties.

Results of Operations

We acquired our first three investments subsequent to the second quarter of 2013. During the six months ended June 30, 2014, we made 13 additional investments (Note 4). As such, the results discussed below primarily reflect our 2014 operations as we did not own any investments during the prior year periods presented.
 
Financial and Operating Highlights
(in thousands)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013 (a)
 
2014

2013 (a)
Total revenues
 
$
12,647

 
$
—

 
$
19,342

 
$
—

Net loss attributable to CPA®:18 – Global
 
(4,199
)
 
(65
)
 
(18,435
)
 
(65
)
 
 
 
 
 
 
 
 
 
Cash distributions paid
 
6,259


—


8,080


—

 
 
 
 
 
 
 
 
 
Net cash used in operating activities
 
 
 
 
 
(2,945
)

—

Net cash used in investing activities
 
 
 
 
 
(426,260
)

—

Net cash provided by financing activities
 
 
 
 
 
1,015,117


—

 
 
 
 
 
 
 
 
 
Supplemental financial measures:
 
 
 
 
 
 
 
 
Funds used in operations, or FFO (b)
 
(312
)

(65
)

(12,407
)

(65
)
Modified funds from (used in) operations, or MFFO (b)
 
3,446


(65
)

5,972


(65
)
__________
(a)
We began to admit stockholders on July 25, 2013 and acquired our first investment on August 20, 2013.
(b)
We consider the performance metrics listed above, FFO and MFFO, which are supplemental measures that are not defined by GAAP, both referred to as non-GAAP measures, to be important measures in the evaluation of our results of operations and capital resources. We evaluate our results of operations with a primary focus on the ability to generate cash flow necessary to meet our objective of funding distributions to stockholders. See Supplemental Financial Measures below for our definitions of these non-GAAP measures and reconciliations to their most directly comparable GAAP measures.

Total revenues, Net cash provided by operating activities, and MFFO were driven by our 2013 Acquisitions and 2014 Acquisitions. MFFO primarily reflects the activity of our 2013 Acquisitions.

Lease Revenues

For the three months ended June 30, 2014, lease revenues totaled $11.3 million, of which $6.7 million related to our 2014 Acquisitions and $4.6 million related to our 2013 Acquisitions. For the six months ended June 30, 2014, lease revenues totaled $17.6 million, of which $8.4 million related to our 2014 Acquisitions and $9.2 million related to our 2013 Acquisitions. We did not have any lease revenues during the three and six months ended June 30, 2013.

Other Real Estate Income

For the three and six months ended June 30, 2014, other real estate income totaled $0.5 million and $0.9 million, respectively, which was generated from the two self-storage properties we acquired in January 2014 (Note 4). We did not have any other real estate income during the three and six months ended June 30, 2013.


CPA®:18 – Global 6/30/2014 10-Q – 33

Other Operating Income

For the three and six months ended June 30, 2014, other operating income totaled $0.8 million and $0.9 million, respectively, which was primarily related to reimbursable tenant costs from our net-leased properties. These costs are recorded as both income and property expenses. We did not have any other operating income during the three and six months ended June 30, 2013.

Acquisition Expenses

For the three and six months ended June 30, 2014, acquisition expenses totaled $4.0 million and $23.0 million, respectively, all of which were directly related to our 2014 Acquisitions that were deemed to be business combinations. We did not have any acquisition expenses during the three and six months ended June 30, 2013.

Depreciation and Amortization

For the three months ended June 30, 2014, depreciation and amortization totaled $5.1 million, of which $3.5 million related to our 2014 Acquisitions and $1.6 million related to our 2013 Acquisitions. For the six months ended June 30, 2014, depreciation and amortization totaled $7.8 million, of which $4.6 million related to our 2014 Acquisitions and $3.2 million related to our 2013 Acquisitions. We did not have any depreciation and amortization expenses during the three and six months ended June 30, 2013.

General and Administrative

For the three and six months ended June 30, 2014, general and administrative expenses totaled $1.2 million and $1.8 million, respectively, including professional fees of $0.9 million and $1.4 million, respectively, and management expenses of $0.2 million and $0.3 million, respectively. Professional fees were primarily comprised of accounting fees, which were incurred in conjunction with our new investments and public filings, and investor relations costs. Management expenses are primarily related to the Class C shareholder servicing fee. We incurred less than $0.1 million of general and administrative expenses during each of the three and six months ended June 30, 2013.

Property Expenses

For the three and six months ended June 30, 2014, we recorded property expenses of $1.7 million and $2.3 million, respectively, of which $0.8 million for each period related to reimbursable tenant costs from our net-leased properties and asset management fees to our advisor of $0.6 million and $0.9 million, respectively. At our advisor’s election, we settle such asset management fees in the form of shares of our Class A common stock, rather than in cash (Note 3). We did not have any property expenses during the three and six months ended June 30, 2013.

Interest Expense

For the three months ended June 30, 2014, we incurred interest expense of $3.8 million, of which $2.1 million related to our 2014 Acquisitions and $1.7 million related to our 2013 Acquisitions. For the six months ended June 30, 2014, we incurred interest expense of $5.9 million, of which $2.9 million related to our 2014 Acquisitions and $2.9 million related to our 2013 Acquisitions. We did not have any interest expense during the three and six months ended June 30, 2013.

Net (Income) Loss Attributable to Noncontrolling Interests

For the three months ended June 30, 2014, net income attributable to noncontrolling interests was $1.2 million, which was primarily due to the $0.5 million Available Cash Distribution and $0.5 million related to CPA®:17 – Global’s 50% interest in the net income generated from the Bank Pekao property investment.

For the six months ended June 30, 2014, net loss attributable to noncontrolling interests was $2.5 million, which was primarily due to CPA®:17 – Global’s share of the Bank Pekao property net loss for the period of $3.8 million, partially offset by the Available Cash Distribution of $0.6 million.


CPA®:18 – Global 6/30/2014 10-Q – 34

Net Loss Attributable to CPA®:18 – Global

For the three and six months ended June 30, 2014, the resulting net loss attributable to CPA®:18 – Global was $4.2 million and $18.4 million, respectively. For both the three and six months ended June 30, 2013, the resulting net loss attributable to CPA®:18 – Global was less than $0.1 million.

Modified Funds from (Used in) Operations

MFFO is a non-GAAP measure that we use to evaluate our business. For a definition of MFFO and a reconciliation to net loss attributable to CPA®:18 – Global, see Supplemental Financial Measures below.

For the three and six months ended June 30, 2014, MFFO was $3.4 million and $6.0 million, respectively, primarily as a result of our 2013 Acquisitions and 2014 Acquisitions. For both the three and six months ended June 30, 2013, MFFO was less than $0.1 million.

Financial Condition

Sources and Uses of Cash During the Period

We are currently raising capital from the sale of our common stock in our initial public offering and expect to invest such proceeds primarily in a diversified portfolio of income-producing commercial real estate properties and other real estate related assets. After investing capital raised through our initial public offering, we expect our primary source of operating cash flow to be generated from cash flow from our investments. 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 the receipt of the proceeds from and the repayment of non-recourse mortgage loans and receipt of lease revenues, the advisor’s annual election to receive fees in shares of our common stock or cash, the timing and characterization of distributions received from equity investments in real estate, the timing of payments of distributions of available cash to the advisor, and changes in foreign currency exchange rates. Despite these fluctuations, we believe our investment will generate sufficient cash from operations to meet our short-term and long-term liquidity needs in the future as described below. However, as we continue to raise capital, it may be necessary to use cash raised in our initial public offering to fund our operating activities and distributions to our stockholders.

We intend to qualify as a REIT beginning with the tax year ended December 31, 2013, and if so qualified we will not be subject to U.S. federal income taxes on amounts distributed to stockholders provided we meet certain conditions, including distributing at least 90% of our taxable income to stockholders. Our objectives are to pay quarterly distributions, to increase equity in our commercial real estate through regular mortgage principal payments and to own a geographically diversified portfolio of net-leased commercial real estate and other real estate related assets that will increase in value. Our distributions declared through June 30, 2014 have exceeded our FFO and have been paid almost entirely from offering proceeds. We expect that future distributions will be paid in whole or in part from offering proceeds, borrowings, and other sources, without limitation, particularly during the period before we have substantially invested the net proceeds from our initial public offering.

Operating Activities

Net cash used in operating activities for the six months ended June 30, 2014 totaled $2.9 million, primarily reflecting cash flows generated from rental income directly related to our 2013 Acquisitions and 2014 Acquisitions, which were more than offset by acquisition expenses, interest paid on mortgage loans and other operating costs. We expect our operating cash flow to improve as we continue to acquire properties. We did not have any net cash used in operating activities during the six months ended June 30, 2013.
 
Investing Activities

Net cash used in investing activities totaled $426.3 million for the six months ended June 30, 2014. This was primarily the result of cash outflows related to our 2014 Acquisitions, including acquisitions of real estate and direct financing leases of $421.9 million, VAT paid in connection with our Bank Pekao investment of $34.8 million, and funds placed in escrow totaling $10.5 million related to future improvements for our new acquisitions. We also had cash inflows related to our acquisitions, such as funds released from escrow of $5.3 million related to Siemens and Bank Pekao investments and $36.5 million of VAT refunded for our Bank Pekao and Agrokor acquisitions. We did not have any investing activities during the six months ended June 30, 2013.


CPA®:18 – Global 6/30/2014 10-Q – 35



Financing Activities

Net cash provided by financing activities totaled $1.0 billion for the six months ended June 30, 2014. This was primarily due to net proceeds received from our public offering of $715.3 million and proceeds of $223.7 million and $52.1 million from non-recourse mortgage financings and bond financing, respectively, related to the 2014 Acquisitions. We also received contributions of $95.9 million from the noncontrolling interest in our Bank Pekao investment held by our affiliate, CPA®:17 – Global, which was partially offset by distributions paid to noncontrolling interests of $64.1 million, which was primarily related to the CPA®:17 – Global’s interest in Bank Pekao’s financing received. We also paid distributions of $8.1 million to our stockholders. We did not have any net cash provided by financing activities during the six months ended June 30, 2013.

Our objectives are to generate sufficient cash flow over time to provide stockholders with increasing distributions and to seek investments with potential for capital appreciation throughout varying economic cycles. From inception through June 30, 2014, we have declared distributions to stockholders totaling $21.0 million, which were comprised of cash distributions of $9.8 million and $11.2 million reinvested by stockholders in shares of our common stock pursuant to our DRIP. We have determined that FFO is the most appropriate metric to evaluate our ability to fund distributions to stockholders. For a discussion of FFO, see Supplemental Financial Measures below. Through June 30, 2014, we have not yet generated sufficient FFO to fund all of our distributions; therefore, we have funded approximately 99% of our cash distributions declared to date from the proceeds of our initial public offering.

We maintain a quarterly redemption program pursuant to which we may, at the discretion of our board of directors, redeem shares of our common stock from stockholders seeking liquidity. We limit the number of shares we may redeem so that the shares we redeem in any quarter, together with the aggregate number of shares redeemed in the preceding three fiscal quarters, does not exceed a maximum of 5% of our total shares outstanding as of the last day of the immediately preceding quarter. In addition, our ability to effect redemptions will be subject to our having available cash to do so. During the three months ended June 30, 2014, we received requests to redeem 4,004 shares of Class A common stock pursuant to our redemption plan, all of which were redeemed in the same period, at a weighted-average price of $10.00 per share, net of redemption fees, totaled less than $0.1 million.

Liquidity and Capital Resources

Our principal demands for funds will be for the acquisition of real estate and real estate related investments and the payment of acquisition related expenses, operating expenses, interest and principal on current and future indebtedness, and distributions to stockholders. We currently expect that, for the short-term, the aforementioned cash requirements will be funded primarily by the capital we raise in our initial public offering. We have raised aggregate gross proceeds in our initial public offering of approximately $1.1 billion through July 31, 2014 detailed as follows (in thousands):
 
 
Funds Raised
Period
 
Class A
 
Class C
 
Total
From inception to December 31, 2013
 
$
211,630

 
$
25,677

 
$
237,307

January 2014
 
63,750

 
5,229

 
68,979

February 2014
 
153,912

 
8,081

 
161,993

March 2014
 
160,523

 
7,476

 
167,999

April 2014
 
107,618

 
5,741

 
113,359

May 2014
 
106,281

 
6,979

 
113,260

June 2014
 
161,140

 
10,948

 
172,088

July 2014
 
12,556

 
13,318

 
25,874

 
 
$
977,410

 
$
83,449

 
$
1,060,859


We expect to use approximately 88% of the gross proceeds raised in our initial public offering to acquire investments, assuming that we sell the maximum amount of shares both in the offering and pursuant to our DRIP. The remaining portion of the proceeds will be used to pay distributions to stockholders, offering fees and expenses, including the payment of fees to our dealer manager, and the payment of fees and reimbursement of expenses to our advisor. 

We expect to meet our short-term liquidity requirements generally through existing cash balances, future offering proceeds that we raise, and, if necessary, short-term borrowings. We expect that in the future, as our portfolio grows and matures, our properties will provide sufficient cash flow to cover operating expenses and the payment of distributions to stockholders.

CPA®:18 – Global 6/30/2014 10-Q – 36




Our liquidity would be affected adversely by unanticipated costs and greater-than-anticipated operating expenses. To the extent that our working capital reserve is insufficient to satisfy our cash requirements, additional funds may be provided from cash generated from operations or through short-term borrowings.

Summary of Financing
 
The table below summarizes our non-recourse debt and bonds payable (dollars in thousands):
 
June 30, 2014
 
December 31, 2013
Carrying Value
 
 
 
Fixed rate
$
275,910

 
$
72,800

Variable rate (a)
83,222

 
12,260

Total
$
359,132

 
$
85,060

Percent of Total Debt
 
 
 
Fixed rate
77
%
 
86
%
Variable rate
23
%
 
14
%
 
100
%
 
100
%
Weighted-Average Interest Rate at End of Period
 
 
 
Fixed rate
4.5
%
 
4.5
%
Variable rate
4.2
%
 
5.6
%
___________
(a)
Variable-rate debt at June 30, 2014 primarily consisted of $51.7 million of floating rate debt that is inflation-linked to the Norwegian CPI and $31.5 million that was effectively converted to fixed-rate debt through interest rate swap derivative instruments.

Cash Resources
 
At June 30, 2014, our cash resources consisted of cash and cash equivalents totaling $695.1 million. Of this amount, $22.9 million, at then-current exchange rates, was held in foreign subsidiaries, but we could be subject to restrictions or significant costs should we decide to repatriate these amounts. Our cash resources may be used for future investments and can be used for working capital needs and other commitments. In addition, our board of directors and the board of directors of WPC have each approved unsecured loans to us from WPC of up to $100.0 million in the aggregate for the purpose of facilitating acquisitions, with any such loans made solely at the discretion of WPC’s management (Note 3). We did not borrow any funds from WPC during the three and six months ended June 30, 2014. Our cash resources may be used for future investments and can be used for working capital needs, other commitments, and distributions to our stockholders.
 
Cash Requirements
 
During the next 12 months, we expect that our cash uses will include acquiring new investments, funding capital commitments, paying distributions to our stockholders and to our affiliates that hold noncontrolling interests in entities we control and making any scheduled mortgage interest and principal payments, as well as other normal recurring operating expenses. We expect to be fund $22.8 million related to capital and ground lease commitments during the next 12 months.


CPA®:18 – Global 6/30/2014 10-Q – 37



Off-Balance Sheet Arrangements and Contractual Obligations

The table below summarizes our debt, off-balance sheet arrangements, and other contractual obligations at June 30, 2014 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):
 
Total
 
Less than
1 year
 
1-3 years
 
3-5 years
 
More than
5 years
Debt — principal (a)
$
359,132

 
$
1,758

 
$
4,428

 
$
6,632

 
$
346,314

Interest on borrowings and
   deferred acquisition fees
141,329

 
15,825

 
31,885

 
31,226

 
62,393

Organization and offering costs
   payable to affiliate (b)
741

 
741

 
—

 
—

 
—

Deferred acquisition fees — principal (c)
8,955

 
4,148

 
4,807

 
—

 
—

Capital commitments (d)
22,758

 
22,758

 
—

 
—

 
—

Other lease commitments (e)
3,613

 
75

 
153

 
156

 
3,229

 
$
536,528

 
$
45,305

 
$
41,273

 
$
38,014

 
$
411,936

__________
(a)
Represents the non-recourse debt and bonds payable we obtained in connection with our investments.
(b)
Represents the organization and offering costs incurred by our advisor for which we are liable (Note 3). The payment of such costs is contingent on the amount of offering proceeds we raise over our initial offering period, which is currently expected to terminate on or prior to May 7, 2015.
(c)
Represents deferred acquisition fees due to the advisor as a result of our acquisitions. These fees are scheduled to be paid in three equal annual installments from the date of each respective acquisition.
(d)
Capital commitments include our current build-to-suit project of $20.4 million (Note 4) and $2.4 million related to other construction commitments.
(e)
Other lease commitments consist of rental obligations under ground leases and our share of future rents payable pursuant to our advisory agreement for the purpose of leasing office space used for the administration of real estate entities. Amounts are allocated among WPC, the CPA® REITs and CWI based on gross revenues and are adjusted quarterly.

Amounts in the table above that relate to our foreign operations are based on the exchange rate of the local currencies at June 30, 2014, which consisted primarily of the euro and the NOK. At June 30, 2014, we had no material capital lease obligations for which we were the lessee, either individually or in the aggregate.

Supplemental Financial Measures

In the real estate industry, analysts and investors employ certain non-GAAP supplemental financial 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 use supplemental non-GAAP measures, which are uniquely defined by our management. We believe that 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.

FFO and MFFO

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc., or NAREIT, an industry trade group, has promulgated a measure known as FFO which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to nor a substitute for net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property, impairment charges on real estate and depreciation and amortization; and after adjustments for unconsolidated partnerships and jointly-owned investments. Adjustments for unconsolidated

CPA®:18 – Global 6/30/2014 10-Q – 38



partnerships and jointly-owned investments are calculated to reflect FFO. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate-related depreciation and amortization as well as impairment charges of real estate-related assets, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO described above, investors are cautioned that, due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. However, FFO and MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating the operating performance of the company. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) were put into effect in 2009. These other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start-up entities may also experience significant acquisition activity during their initial years, we believe that non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases. As disclosed in the prospectus, we intend to begin the process of achieving a liquidity event (i.e., listing of our common stock on a national exchange, a merger or sale of our assets or another similar transaction) within seven years following the closing of our initial public offering. Thus, we do not intend to continuously purchase assets and intend to have a limited life. Due to the above factors and other unique features of publicly registered, non-listed REITs, the Investment Program Association, or IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and once essentially all of our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and most of our acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved

CPA®:18 – Global 6/30/2014 10-Q – 39



in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of a company’s operating performance after a company’s offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on a company’s operating performance during the periods in which properties are acquired.

We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above- and below-market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; nonrecurring impairments of real estate-related investments (i.e., infrequent or unusual, not reasonably likely to recur in the ordinary course of business); mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and jointly-owned investments, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we are responsible for managing interest rate, hedge and foreign exchange risk, we retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such infrequent gains and losses in calculating MFFO, as such gains and losses are not reflective of on-going operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition-related expenses, amortization of above- and below-market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. These expenses are paid in cash by a company. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by the company, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets as infrequent items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for assessing operating performance. We account for certain of our equity investments using the hypothetical liquidation model which is based on distributable cash as defined in the operating agreement. Equity income for the period recognized under this model may be net of the equity investee’s payments of loan principal. Under GAAP, payments of loan principal do not impact net income.

Our management uses MFFO and the adjustments used to calculate it in order to evaluate our performance against other non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. For example, acquisition costs are generally funded from the proceeds of our offering and other financing sources and not from operations. By excluding expensed acquisition costs, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund

CPA®:18 – Global 6/30/2014 10-Q – 40



our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO accordingly.

FFO and MFFO were as follows (in thousands):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Net loss attributable to CPA®:18 – Global
 
$
(4,199
)
 
$
(65
)
 
$
(18,435
)
 
$
(65
)
Adjustments:
 
 
 
 
 
 
 
 
Depreciation and amortization of real property
 
5,134

 
—

 
7,835

 
—

Proportionate share of adjustments for noncontrolling interests to arrive at FFO
 
(1,247
)
 
—

 
(1,807
)
 
—

Total adjustments
 
3,887

 
—

 
6,028

 
—

FFO — as defined by NAREIT
 
(312
)
 
(65
)
 
(12,407
)
 
(65
)
Adjustments:
 
 
 
 
 
 
 
 
Other depreciation, amortization and other non-cash charges
 
12

 
—

 
9

 
—

Straight-line and other rent adjustments (a)
 
(535
)
 
—

 
(911
)
 
—

Acquisition expenses (b)
 
4,014

 
—

 
23,043

 
—

Above- and below-market rent intangible lease amortization, net
 
29

 
—

 
(4
)
 
—

Realized gains on foreign currency, derivatives and other
 
(85
)
 
—

 
(47
)
 
—

Unrealized losses on mark-to-market adjustments
 
152

 
—

 
245

 
—

Proportionate share of adjustments for noncontrolling interests to arrive at MFFO
 
171

 
—

 
(3,956
)
 
—

Total adjustments
 
3,758

 
—

 
18,379

 
—

MFFO
 
$
3,446

 
$
(65
)
 
$
5,972

 
$
(65
)
__________
(a)
Under GAAP, rental receipts are allocated to periods using an accrual basis. This may result in income recognition that is significantly different than underlying contract terms. By adjusting for these items (to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), management believes that MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments, provides insight on the contractual cash flows of such lease terms and debt investments, and aligns results with management’s analysis of operating performance.
(b)
Includes Acquisition expenses and amortization of deferred acquisition fees. In evaluating investments in real estate, management differentiates the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for non-listed REITs that have completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition costs and amortization of deferred acquisition fees, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or third parties. Acquisition fees and expenses under GAAP are considered operating expenses and as expenses included in the determination of net income and income from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to stockholders, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property.

CPA®:18 – Global 6/30/2014 10-Q – 41




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. In addition to these risks, we are subject to market risk as a result of concentrations in certain tenant industries, geographical location and property type because, as of the date of this report, we had only 16 investments. Adverse market factors can affect the ability of tenants in a particular industry/region to meet their respective lease obligations. In order to manage this risk, we view our collective tenant roster as a portfolio, and in its investment decisions the advisor attempts to diversify our portfolio so that we are not overexposed to a particular industry or geographic region.

Generally, we 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 derivative contracts to hedge our foreign currency cash flow exposures.

Interest Rate Risk
 
The value of our real estate and related fixed-rate debt obligations is subject to fluctuations 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, where applicable. 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 fair value of our owned assets to decrease. Increases in interest rates may also have an impact on the credit profile of certain tenants.
 
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 investment 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 or limit the underlying interest rate from exceeding a specified strike rate, respectively. Interest rate swaps are agreements in which one party exchanges a stream of interest payments for a counterparty’s stream of cash flows 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 (where applicable) 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 June 30, 2014, we estimated that the fair value of our interest rate swaps, which are included in Accounts payable, accrued expenses and other liabilities in the consolidated financial statements, was in a liability position of $1.2 million (Note 8).

At June 30, 2014, our outstanding debt either bore interest at a fixed rate or was swapped to a fixed rate or was inflation-linked to the Norwegian CPI. The annual interest rates on our fixed-rate debt at June 30, 2014 ranged from 3.3% to 5.8%. The contractual annual interest rate on our variable-rate debt at June 30, 2014 ranged from 3.5% to 5.6%. Our debt obligations are more fully described in Note 9 and Financial Condition – Summary of Financing in Item 2 above. The following table presents principal cash outflows for the remainder of 2014, each of the next four calendar years following December 31, 2014, and thereafter based upon expected maturity dates of our debt obligations outstanding at June 30, 2014 (in thousands):

2014 (Remainder)

2015

2016

2017

2018

Thereafter

Total

Fair value
Fixed-rate debt (a)
$
619


$
1,307


$
1,425


$
2,227


$
2,473


$
267,858


$
275,909


$
280,543

Variable rate debt (a)
$
254


$
508


$
672


$
790


$
790


$
80,209


$
83,223


$
83,222

__________
(a) Amounts are based on the exchange rate at June 30, 2014, as applicable.

At June 30, 2014, the estimated fair value of our fixed-rate debt and variable-rate debt, which either have effectually been converted to a fixed rate through the use of interest rate swaps or is inflation-linked to the Norwegian CPI, approximated their carrying values. A decrease or increase in interest rates of 1% would change the estimated fair value of this debt at June 30, 2014 by an aggregate

CPA®:18 – Global 6/30/2014 10-Q – 42



increase of $22.4 million or an aggregate decrease of $25.2 million, respectively. This debt is generally not subject to short-term fluctuations in interest rates.

As more fully described under Financial Condition – Summary of Financing in Item 2 above, a portion of our variable-rate debt in the table above bore interest at fixed rates at June 30, 2014 but has interest rate reset features that will change the fixed interest rates to then-prevailing market fixed rates at certain points during their term. This debt is generally not subject to short-term fluctuations in interest rates.

Foreign Currency Exchange Rate Risk

We own investments in Europe, and as a result we are subject to risk from the effects of exchange rate movements in the euro and, to a lesser extent, the NOK, which may affect future costs and cash flows. Although all of our foreign investments through the second quarter of 2014 were conducted in these currencies, we may conduct business in other currencies in the future as we seek to invest a portion of the funds from our initial public offering internationally. We manage foreign currency exchange rate movements by generally placing both our debt service obligation to the lender and the tenant’s rental obligation to us in the same currency. This reduces our overall exposure to the actual equity that we have invested and the equity portion of our cash flow. In addition, we may use currency hedging to further reduce the exposure to our equity cash flow. 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 obtain mortgage and bond financing in the local currency. To the extent that currency fluctuations increase or decrease rental revenues as translated to U.S. dollars, the change in debt service, as translated to U.S. dollars, will partially offset the effect of fluctuations in revenue and mitigate the risk from changes in foreign currency exchange rates.

Scheduled future minimum rents, exclusive of renewals, under non-cancelable operating leases, for our foreign operations as of June 30, 2014 during the remainder of 2014, each of the next four calendar years following December 31, 2014, and thereafter, are as follows (in thousands): 
Lease Revenues (a)
 
2014 (Remainder)
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Euro (b)
 
$
9,057

 
$
18,054

 
$
16,747

 
$
17,959

 
$
17,955

 
$
159,891

 
$
239,663

NOK (c)
 
3,078

 
6,096

 
6,107

 
6,101

 
6,101

 
42,423

 
69,906

 
 
$
12,135

 
$
24,150

 
$
22,854

 
$
24,060

 
$
24,056

 
$
202,314

 
$
309,569


Scheduled debt service payments (principal and interest) for mortgage notes and bond payable for our foreign operations as of June 30, 2014 during the remainder of 2014, each of the next four calendar years following December 31, 2014, and thereafter, are as follows (in thousands):
Debt Service (a)
 
2014 (Remainder)
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Euro (b)
 
$
2,998

 
$
5,923

 
$
5,874

 
$
6,340

 
$
6,437

 
$
118,476

 
$
146,048

NOK (c)
 
1,433

 
1,810

 
1,810

 
1,810

 
1,810

 
64,382

 
73,055

 
 
$
4,431

 
$
7,733

 
$
7,684

 
$
8,150

 
$
8,247

 
$
182,858

 
$
219,103

__________
(a)
Amounts are based on the applicable exchange rates at June 30, 2014. Contractual rents and debt obligations are denominated in the functional currency of the country of each property.
(b)
We estimate that, for a 1% increase or decrease in the exchange rate between the euro and the U.S. dollar, there would be a corresponding change in the projected estimated property-level cash flow at June 30, 2014 of $0.9 million.
(c)
We estimate that, for a 1% increase or decrease in the exchange rate between the NOK and the U.S. dollar, there would be a corresponding change in the projected estimated property-level cash flow at June 30, 2014 of less than $0.1 million.

As a result of scheduled balloon payments on the privately-placed international bonds issued in connection with our Siemens investment, projected debt service obligations exceed projected lease revenues after 2018. In 2025, balloon payments totaling $51.7 million are due on the aforementioned bonds, which are collateralized by the property we own. We currently anticipate that, by their respective due dates, we will refinance certain of our debt obligations and/or renew the related lease, but there can be no assurance that

CPA®:18 – Global 6/30/2014 10-Q – 43



we will be able to do so on favorable terms, if at all. If that has not occurred, we would expect to use our cash resources to make these payments, if necessary.

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, or the Exchange Act, is recorded, processed, summarized and reported within the required time periods specified in the SEC’s 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 company’s 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 as of June 30, 2014, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of June 30, 2014 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.


CPA®:18 – Global 6/30/2014 10-Q – 44



PART II

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

During the three months ended June 30, 2014, we issued 54,116 shares of our Class A common stock to the advisor as consideration for asset management fees. These shares were issued at $10.00 per share, which is the price at which shares of our Class A common stock were sold in our initial public offering. Since this transaction was not considered to have involved a “public offering” within the meaning of Section 4(a)(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.

Use of Offering Proceeds

On May 7, 2013, our Registration Statement (File No. 333-185111) for our initial public offering was declared effective by the SEC. The cumulative use of proceeds from our initial public offering was as follows as of June 30, 2014 (dollars in thousands):

Common Stock



Class A

Class C

Total
Shares registered (a)
100,000,000


26,737,968


126,737,968

Aggregate price of offering amount registered (a)
$
1,000,000


$
250,000


$
1,250,000

Shares sold (b)
96,675,212


7,500,645


104,175,857

Aggregated offering price of amount sold
$
964,854


$
70,131


$
1,034,985

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
(71,389
)
 
(1,452
)

(72,841
)
Direct or indirect payments to others
(30,878
)
 
(1,580
)

(32,458
)
Net offering proceeds to the issuer after deducting expenses
$
862,587


$
67,099


929,686

Purchases of real estate, net of financing and noncontrolling interest




(219,304
)
Cash distributions paid to stockholders
 
 
 
 
(8,195
)
Repayment of mortgage financing
 
 
 
 
(738
)
Working capital (c)
 
 
 
 
(6,363
)
Temporary investments in cash and cash equivalents
 
 
 
 
$
695,086

__________
(a)
These amounts are based on the assumption that the shares to be sold in our initial public offering will be composed of 80% of Class A common stock and 20% of Class C common stock.
(b)
Excludes shares issued to affiliates.
(c)
Working capital has been reduced to reflect $23.0 million of acquisition expenses.


CPA®:18 – Global 6/30/2014 10-Q – 45



Issuer Purchases of Equity Securities

The following table provides information with respect to repurchases of our common stock during the three months ended June 30, 2014:
2014 Period
 
Total number of Class A
shares purchased (a)
 
Average price
paid per share
 
Total number of shares
purchased as part of
publicly announced plans or program (a)
 
Maximum number (or
approximate dollar value)
of shares that may yet be
purchased under the plans or program (a)
April
 
—

 
$
—

 
N/A
 
N/A
May
 
—

 
—

 
N/A
 
N/A
June
 
4,004

 
10.00

 
N/A
 
N/A
Total
 
4,004

 
 
 
 
 
 
___________
(a)
Represents shares of our Class A common stock repurchased under our redemption plan, pursuant to which we may elect to redeem shares at the request of our stockholders 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. We satisfied all of the above redemption requests received during the three months ended June 30, 2014. We generally receive fees in connection with share redemptions.


CPA®:18 – Global 6/30/2014 10-Q – 46



Item 6. Exhibits.

The following exhibits are filed with this Report, except where indicated.

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

Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith





101

The following materials from Corporate Property Associates 18 – Global Incorporated’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at June 30, 2014 and December 31, 2013, (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013, (iii) Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2014 and 2013, (iv) Consolidated Statements of Equity for the six months ended June 30, 2014 and the year ended December 31, 2013, (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013, and (vi) Notes to Consolidated Financial Statements.

Filed herewith


CPA®:18 – Global 6/30/2014 10-Q – 47

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 18 – Global Incorporated
Date:
August 8, 2014
 
 
 
 
By:  
/s/ Catherine D. Rice
 
 
 
Catherine D. Rice
 
 
 
Chief Financial Officer
 
 
 
(Principal Financial Officer)
 
 
 
 
Date:
August 8, 2014
 
 
 
 
By:  
/s/ Hisham A. Kader
 
 
 
Hisham A. Kader
 
 
 
Chief Accounting Officer
 
 
 
(Principal Accounting Officer)




CPA®:18 – Global 6/30/2014 10-Q – 48

EXHIBIT INDEX

The following exhibits are filed with this Report, except where indicated.
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

Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith





101

The following materials from Corporate Property Associates 18 – Global Incorporated’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at June 30, 2014 and December 31, 2013, (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013, (iii) Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2014 and 2013, (iv) Consolidated Statements of Equity for the six months ended June 30, 2014 and the year ended December 31, 2013, (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013, and (vi) Notes to Consolidated Financial Statements.

Filed herewith