0001025378 us-gaap:LandBuildingsAndImprovementsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2017-01-01 2017-12-31 0001025378 wpc:RealEstateSubjectToOperatingLeaseMember wpc:NetLeaseStudentHousingFacilityInJacksonvilleFLMember 2019-12-31
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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þ☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended December 31, 2016 |
For the fiscal year ended December 31, 2019
or
or
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o☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from__________ to __________
Commission File Number: 001-13779
W. P. CAREY INC.Carey Inc.
(Exact name of registrant as specified in its charter)
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| Maryland | 45-4549771 |
| (State of incorporation) | (I.R.S. Employer Identification No.) |
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| 50 Rockefeller Plaza | |
| New York, | New York | 10020 |
| (Address of principal executive offices) | (Zip Code) |
Investor Relations (212) 492-8920
(212) (212) 492-1100
(Registrant’s telephone numbers, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | | Trading Symbol(s) | | Name of exchange on which registered |
| Common Stock, $0.001 Par Value | | WPC | | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesþ☑ No o☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o☐Noþ☑
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. Yesþ☑ 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). Yesþ☑ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filerþ | ☑ | Accelerated filero | ☐ | Non-accelerated filer o | Smaller reporting company o
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Smaller reporting company)company | ☐ | Emerging growth company | ☐ | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o☐ No þ☑
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of last business day of the registrant’s most recently completed second fiscal quarter: $7.2$13.8 billion.
As of February 17, 201714, 2020 there were 106,321,207172,278,242 shares of Common Stock of registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant incorporates by reference its definitive Proxy Statement with respect to its 20172020 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of its fiscal year, into Part III of this Annual Report on Form 10-K.
INDEX
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| PART I | | |
| Item 1. | | |
| Item 1A. | | |
| Item 1B. | | |
| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
| PART II | | |
| Item 5. | | |
| Item 6. | | |
| Item 7. | | |
| Item 7A. | | |
| Item 8. | | |
| Item 9. | | |
| Item 9A. | | |
| Item 9B. | | |
| PART III | | |
| Item 10. | | |
| Item 11. | | |
| Item 12. | | |
| Item 13. | | |
| Item 14. | | |
| PART IV | | |
| Item 15. | | |
| Item 16. | | |
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| | W. P. Carey 20162019 10-K– 1 |
Forward-Looking Statements
This Annual Report on Form 10-K or this Report,(the “Report”) including Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of Part II 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. These forward-looking statements include, but are not limited to, statements regarding: capital markets; tenant credit quality;our potential UPREIT Reorganization (both as discussed and defined herein); the general economic outlook; our expected rangeamount and timing of Adjusted funds from operations, or AFFO;any future dividends; statements regarding our corporate strategy; our capital structure; our portfolio lease terms; our international exposurestrategy and acquisition volume, including the effects of the United Kingdom’s referendum to approve an exit from the European Union; our expectations about tenant bankruptcies and interest coverage; statements regarding estimated or future economic performance and results, including our projected assets under management, underlying assumptions about our portfolio (e.g., occupancy rate, lease terms, and tenant credit ratings, andquality), possible new acquisitions and dispositions, by us and our international exposure (including the effects of Brexit, as defined herein); our capital structure, future capital expenditure levels (including any plans to fund our future liquidity needs), and future leverage and debt service obligations; capital markets, including our credit ratings and ability to sell shares under our “at-the-market” program (“ATM Program”) and the use of proceeds from that program; the outlook for the investment management programs; the Managed Programs discussed herein,programs that we manage, including their earnings;earnings, as well as possible liquidity events for those programs; statements that we make regarding our ability to remain qualified for taxation as a real estate investment trust or REIT;(“REIT”); the impact of a recently issued pronouncement regarding accounting for leases; the amountpronouncements and timing of any future dividends; our existing or future leverage and debt service obligations; our ability to sell shares under our “at-the-market” programother regulatory activity; and the use of proceeds from that program; our future prospects for growth; our projected assets under management; our future capital expenditure levels; our future financing transactions; our estimates of growth; and our plans to fund our future liquidity needs.general economic outlook. These statements are based on the current expectations of our management. It is important to note that our actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on our business, financial condition, liquidity, results of operations, AFFO, and prospects. 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 that 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,(“SEC”), including but not limited to those described in Item 1A. Risk Factors of this Report. Moreover, because we operate in a very competitive and rapidly changing environment, new risks are likely to emerge from time to time. Given these risks and uncertainties, potential investors are cautioned not to place undue reliance on these forward-looking statements as a prediction of future results, which speak only as of the date of this presentation, unless noted otherwise. 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.
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| | W. P. Carey 20162019 10-K– 2 |
PART I
Item 1. Business.
General Development of Business
Overview
W. P. Carey Inc., or (“W. P. Carey,Carey”), together with our consolidated subsidiaries and predecessors, is a self-managedan internally-managed diversified REIT and a leading owner and manager of commercial real estate, primarily net leasednet-leased to companies located primarily in the United States and Northern and Western Europe on a long-term basis. The vast majority of our revenues areoriginate from lease revenues, which are derived fromrevenue provided by our owned real estate portfolio. In addition, we earn fee revenue by managing a series of non-traded public and private investment programs through our investment management business.
Our owned real estate portfolio, which we believe is diversified by property type, tenant, tenant industry, and geographic location, is comprised primarily of single-tenant industrial, warehouse, office, retail, and warehouseself-storage facilities that are essentialcritical to our corporate tenants’ operations. We have 217 corporateOur portfolio is comprised of 1,214 properties, net-leased to 345 tenants and own 903 properties in 1925 countries. As of December 31, 2016,2019, approximately 66%64% of our contractual minimum annualized base rent or ABR,(“ABR”) was generated by properties located in the United States and approximately 34% was generated by properties located outside the United States, primarily in WesternEurope. As of that same date, our portfolio included 21 operating properties, comprised of 19 self-storage properties and Northern European countries.
The vast majoritytwo hotels (one of our leases specify a base rent with scheduled rent increases, either fixed or tied to an inflation-related index, and require our tenants to paywhich was sold in January 2020, see Note 20), substantially all of which we acquired in connection with the costs associated with operatingCPA:17 Merger, as described below.
We also earn fees and
maintainingother income by managing the
property, including the real estate taxes, insurance, and maintenanceportfolios of
the facilities. See Our Portfolio below for more information on the characteristics ofcertain non-traded investment programs through our properties. Furthermore, we actively manage our owned real estate portfolio to try to mitigate risk with respect to changes in tenant credit quality and the likelihood of lease renewal.
Originally foundedinvestment management business. Founded in 1973, we originally operated primarily as a sponsor of and advisor to a series of income-generatingnon-traded investment programs under the Corporate Property Associates or CPA®,(“CPA”) brand name; until September 2012, when wename. We became a publicly traded company listed on the New York Stock Exchange (“NYSE”) in 1998 and reorganized as a REIT in connection with2012. In June 2017, we exited non-traded retail fundraising activities and no longer sponsor new investment programs. On October 31, 2018, one of our merger withformer investment programs, Corporate Property Associates 15 Incorporated, or CPA®:15, which we refer to as the CPA®:15 Merger. On January 31, 2014, Corporate Property Associates 1617 – Global Incorporated or CPA®:16(“CPA:17 – Global,Global”), merged with and into us,one of our wholly-owned subsidiaries (the “CPA:17 Merger”), which we referadded approximately $5.6 billion of assets to as the CPA®:16 Merger (Note 3).our portfolio.
Our shares of common stock are listed on the New York Stock ExchangeNYSE under the ticker symbol “WPC.”
Headquartered in New York, we also have offices in Dallas, London, and Amsterdam. At December 31, 2016,2019, we employed 281 individuals.had 204 employees.
Financial Information About Segments
Our business operates in two segments: Owned Real Estate and Investment Management, as described below.
Narrative Description of Business
Business Objectives and Strategy
Our primary business objective is to increase long-term stockholder value through accretive acquisitions forand proactive asset management of our owned real estate portfolio, and to grow the assets managed by our investment management operations, which in turn will allowenabling us to grow earnings and to maintain or increase our dividend.
Our investment strategy primarily focuses on owning and actively managing a diverse portfolio of commercial real estate that is net leasednet-leased to credit-worthy companies globally.companies. We believe that many companies prefer to lease rather than own their corporate real estate.estate because it allows them to deploy their capital more effectively into their core competencies. We generally structure long-term financing for our corporate tenants primarilycompanies in the form of sale-leaseback transactions, where we acquire what we believe is a company’s essentialcritical real estate and then lease it back to them on a long-term, net leasetriple-net basis, which typically produces a more predictable income stream comparedrequires them to pay substantially all of the costs associated with operating and maintaining the property (such as real estate taxes, insurance, and facility maintenance). Compared to other types of real estate investments, sale-leaseback transactions typically produce a more predictable income stream and requiresrequire minimal capital expenditures.expenditures, which in turn generate revenues that provide our stockholders with a stable, growing source of income.
We actively manage our real estate portfolio to mitigate risk with respect to any changes inmonitor tenant credit quality and probability of lease renewal.renewal risks. We believe that diversification with respect toacross property type, tenant, tenant industry, and geographic location, is an important componentas well as diversification of our lease expirations and scheduled rent increases, are vital aspects of portfolio risk management and that we ownaccordingly have constructed a portfolio of real estate that we believe is well-diversified across each of these categories.
In addition to managing our owned real estate portfolio, we manage a series of non-traded public and private investment programs with assets under management of approximately $12.9 billion as of December 31, 2016. For each2019, we also managed assets, totaling approximately $7.5 billion, of these programs, we raise equity capital through either public or private offerings of their shares or limited partnership units, invest those funds, and manage their assets in return for fee revenue as specified in our advisory agreements with them.
Since 1979, we have sponsored a series of 17 income-generating investment programs under the CPA® brand name that invest primarily in commercial real estate properties net leased to single tenants. At December 31, 2016, we were the advisor to Corporate Property Associates 17 – Global Incorporated, or CPA®:17 – Global, andfollowing entities: (i) Corporate Property Associates 18 – Global Incorporated or CPA®:(“CPA:18 – Global. We were the advisor to CPA®:16Global,” and together with CPA:17 – Global until October 31, 2018, the CPA®:16 Merger on January 31, 2014. We refer to CPA®:16 – Global, CPA®:17 – Global,“CPA REITs”); (ii) two publicly owned, non-traded REITs that have invested in lodging and CPA®:18 – Global together as the CPA® REITs.
At December 31, 2016, we were also the advisor tolodging-related properties: Carey Watermark Investors Incorporated or (“CWI 1,1”) and Carey Watermark Investors 2 Incorporated or (“CWI 2, two non-traded publicly registered REITs that invest in lodging and lodging-related properties. We refer to CWI 1 and CWI 2 together as the CWI REITs,” and together with CWI 1, the CPA® REITs, as the Managed REITs (Note 4“CWI REITs”).
At December 31, 2016, we also served as the advisor to Carey Credit Income Fund, or CCIF,; and (iii) a business development company, or BDC, which is the master fund in a master/feeder fund structure. We refer to CCIF and the feeder funds of CCIF, or the CCIF Feeder Funds, collectively as the Managed BDCs. At December 31, 2016, we were also the advisor to Carey European Student Housing Fund I, L.P., or CESH I, aprivate limited partnership formed for the purpose of developing, owning, and operating student housing properties and similar investments in Europe. We referEurope: Carey European Student Housing Fund I, L.P. (“CESH”). As used herein, “Managed REITs” refers to the ManagedCPA REITs Managed BDCs, and CESH I collectively as the Managed Programs. See Financial Update in Item 7. Management’s Discussion and AnalysisCWI REITS, all of Financial Condition and Results of Operations for a summary ofwhich have fully invested the funds we have raised on behalf of the Managed Programs.in their offerings.
We believe that our owned real estate investments provide our stockholders with a stable, growing source of income, primarily from lease revenues. We also believe that the fee income we generate from our advisory contracts with the Managed Programs provides our stockholders with attractive sources of additional income, a portion of which is more variable in nature.
We have two primary reportable segments, Owned Real Estate and Investment Management. These segments are each described below.
Owned Real Estate
We own and invest in commercial real estate properties primarily located in the United States and Europe and leased on a triple-net lease basis, which requires the tenant to pay substantially all of the costs associated with operating and maintaining the property (Note 18). We earn revenues or equity income from:
our wholly owned commercial real estate investments;
our co-owned commercial real estate investments;
our investments in the shares of the Managed REITs; and
our participation in the cash flows of the Managed REITs through distributions of up to 10% of the Available Cash (as defined in the respective advisory agreements) from the operating partnerships of each of the Managed REITs.
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| | W. P. Carey 20162019 10-K– 43 |
Investment Management
In June 2017, in alignment with our long-term strategy of focusing exclusively on net lease investing for our own balance sheet, our board of directors (our “Board”) approved a plan to exit non-traded retail fundraising activities carried out by our wholly-owned subsidiary Carey Financial LLC (“Carey Financial”), which was a registered broker-dealer. As a result, Carey Financial ceased active fundraising on behalf of the Managed Programs, as defined below, on June 30, 2017 and deregistered as a broker-dealer as of October 11, 2017. In August 2017, we resigned as the advisor to Carey Credit Income Fund, effective on September 11, 2017 (known since October 23, 2017 as Guggenheim Credit Income Fund) (“CCIF”) and by extension its feeder funds (“CCIF Feeder Funds,” and together with CCIF, the “Managed BDCs”), each of which is a business development company (“BDC”). We earn revenuerefer to the Managed REITs, CESH, and, prior to our resignation as their advisor, the Managed BDCs as the “Managed Programs.” We continue to act as the advisor to the remaining Managed Programs. UnderPrograms and currently expect to do so through the end of their respective life cycles (Note 4).
On October 22, 2019, CWI 1 and CWI 2 announced that they had entered into a definitive merger agreement under which the two companies intend to merge in an all-stock transaction, with CWI 2 as the surviving entity (the “CWI 1 and CWI 2 Proposed Merger”). On January 13, 2020, the joint proxy statement/prospectus on Form S-4 previously filed with the SEC by CWI 1 and CWI 2 was declared effective. Each of CWI 1 and CWI 2 has scheduled a special meeting of stockholders for March 26, 2020; if the proposed transaction is approved, the merger is expected to close shortly thereafter. Immediately following the closing of the CWI 1 and CWI 2 Proposed Merger, the advisory agreements with each of CWI 1 and CWI 2 will terminate, and the Managed Programs, we perform variouscombined company will internalize the management services including but not limitedcurrently provided by us (Note 4).
We intend to the day-to-day management of the Managed Programs and transaction-related services, for which we earn revenues as follows:
we earn dealer manager feesoperate our business in connectiona manner that is consistent with the offeringsmaintenance of the Managed Programs;
we structure and negotiate investments and debt placement transactionsour status as a REIT for the Managed REITs and CESH I, for which we earn structuring revenue;
we manage the portfolios of the Managed REITs’ and CESH I’s real estate investments and the loans made by CCIF, for which we earn asset-based management revenue;
the Managed Programs reimburse us for certain costs that we incur on their behalf, consisting primarily of broker-dealer commissions and marketing costs while we are raising funds for their offerings, and certain personnel and overhead costs;
under the limited partnership agreement we have with CESH I, we pay all organization and offering costs on behalf of CESH I, and instead of being reimbursed by CESH I on a dollar-for-dollar basis for those costs, we receive limited partnership units of CESH I; and
we may also earn incentive and disposition revenue and receive other compensation in connection with providing liquidity alternatives to the Managed Programs’ stockholders and limited partners.
federal income tax purposes. In addition, we earn equity incomeexpect to manage our investments in order to maintain our exemption from ourregistration as an investment incompany under the sharesInvestment Company Act of CCIF. Our business strategy includes exploring alternatives for expanding our investment management operations beyond advising the existing Managed Programs. Any such expansion could involve the purchase of properties or other investments1940, as principal, either for our owned portfolio or with the intention of transferring such investments to a newly created fund.amended.
Investment Strategies
In analyzingWhen considering potential net-lease investments for our owned real estate portfolio, and the CPA® REITs, we review various aspects of a transaction including tenant and real estate fundamentals, to determine whether a potentialthe investment and lease structure will satisfy our investment criteria. In evaluating net-lease transactions, weWe generally consider, among other things,analyze the following main aspects of each transaction:
Tenant/Borrower Evaluation — We evaluate each potential tenant or borrower for its creditworthiness, typically considering factors such as management experience, industry position and fundamentals, operating history, and capital structure,structure. We also rate each asset based on its market, liquidity, and criticality to the tenant’s operations, as well as other factors that may be relevantunique to a particular investment. We seek opportunities in whichwhere we believe the tenant may have a stable or improving credit profile or credit potential that has not been fully recognized by the market. Whether a prospective tenant or borrower is creditworthy is determined by our investment department and our independent investment committee, as described below. We define creditworthiness as a risk-reward relationship appropriate to our investment strategies, which may or may not coincide with ratings issued by the credit rating agencies. As such, creditworthy may not mean “investment grade,” as defined by theWe have a robust internal credit rating agencies.
We generally seek investments in facilities that we believe are critical to a tenant’s current businesssystem and that we believe have a low risk of tenant default. We rate each asset based on the asset’s market and liquidity and also based on how critical the asset is to the tenant’s operations. We also assess the relative risk of the portfolio quarterly. We evaluate the credit quality of our tenants utilizing an internal five-point credit rating scale, with one representing the highest credit quality (investment grade or equivalent) and five representing the lowest (bankruptcy or foreclosure). Investment grade ratings are provided by third-party rating agencies such as Standard & Poor’s Ratings Services or Moody’s Investors Service, although we may determine thatdesignate a tenant is equivalent toas “implied investment gradegrade” even if the credit rating agencies have not made thata rating determination. We refer to such tenants as being implied investment grade in this Report. As of December 31, 2016, we had 32 tenants that were rated investment grade. Ratings for other tenants are generated internally utilizing metrics such as interest coverage and debt-to-earnings before interest, taxes, depreciation, and amortization, or EBITDA. These metrics are computed internally based on financial statements obtained from each tenant on a quarterly basis. Under the terms of our lease agreements, tenants are generally required to provide us with periodic financial statements. As of December 31, 2016, we had 185 below-investment grade tenants, including implied investment grade tenants, with a weighted-average credit rating of 3.1.
Properties Critical to Tenant/Borrower Operations — We generally focus on properties and facilities that we believe are critical to the ongoing operations of the tenant. We believe that these properties generally provide better protection, generally as well asparticularly in the event of a bankruptcy, since a tenant/borrower is less likely to risk the loss of a critically important lease or property in a bankruptcy proceeding or otherwise.
Diversification — We attempt to diversify our owned and managed portfoliosportfolio to avoid undue dependence on any one particular tenant, borrower, collateral type, geographic location, or tenant/borrower industry. By diversifying the portfolios,our portfolio, we seek to reduce the adverse effect of a single underperforming investment or a downturn in any particular industry or geographic region. While we havedo not endeavored to maintainset any particular standard offixed diversity metrics in our owned portfolio, we believe that it is reasonably well-diversified.
Lease Terms — Generally, the net-leased properties in which we invest will bein are leased on a full-recourse basis to the tenants or their affiliates. In addition, we seek to include a clause in each lease that providesthe vast majority of our leases provide for scheduled rent increases in rent over the term of the lease.lease (see Our Portfolio below). These rent increases are either fixed (i.e., mandated on specific dates) or tied generally to increases in inflation indices such as(e.g., the Consumer Price Index (“CPI”) or CPI, or other similar indexindices in the jurisdiction in whichwhere the property is located,located), but may contain caps or other limitations, either on an annual or overall basis. In the case of retail stores and hotels, the lease may provide for participation in the gross revenues of the tenant above a stated level, which we refer to as a percentage rent. Alternatively, a lease may provide for mandated rental increases on specific dates.
Real Estate Evaluation — We review and evaluate the physical condition of the property and the market in which it is located. We consider a variety of factors, including current market rents, replacement cost, residual valuation, property operating history, demographic characteristics of the location and accessibility, competitive properties, and suitability for re-leasing. We obtain third-party environmental and engineering reports and market studies if needed.when required. When considering an investment outside the United States, we will also consider factors particular to foreign countries,a country or region, including those mentioned in Item 1A. Risk Factors,geopolitical risk, in addition to the risks normally associated with real property investments. See Item 1A. Risk Factors.
Transaction Provisions to Enhance and Protect Value — WeWhen negotiating leases with potential tenants, we attempt to include provisions in the leases that we believe may help to protect anthe investment from material changes in the tenant’s operating and financial characteristics, of a tenant thatwhich may affect the tenant’s ability to satisfy its obligations to us or reduce the value of the investment. Such provisions include covenants requiring our consent for certain specified activities, requiring the tenant to provide indemnification protections and/or security deposits, and requiring the tenant to satisfy specific operating tests. We may also seek to enhance the likelihood ofthat a tenant’stenant will satisfy their lease obligations being satisfied through a guaranty of such obligations from the tenant’s corporate parent or other entity, or through a letter of credit. This credit enhancement,or guaranty from the tenant’s parent or other entity. Such credit enhancements, if obtained, providesprovide us with additional financial security. However, in markets where competition for net-lease transactions is strong, some or all of these lease provisions may be difficult to obtain. In addition, in some circumstances, tenants may retain the rightoption to repurchase the property, leased by the tenant. The option purchase price is generallytypically at the greater of the contract purchase price or the fair market value of the property at the time the option is exercised.
Other Equity Enhancements Competition — We may attempt to obtain equity enhancementsface active competition from many sources, both domestically and internationally, for net-lease investment opportunities in connection with transactions. These equity enhancements may involve warrants exercisable at a future time to purchase stock of the tenant or borrower or their parent. If warrants are obtainedcommercial properties. In general, we believe that our management’s experience in real estate, credit underwriting, and become exercisable, and if the value of the stock subsequently exceeds the exercise price of the warrant, equity enhancements can helptransaction structuring will allow us to achieve our goal of increasing investor returns.
Investment Committee — We have an independent investment committee that provides services to us, the CPA® REITs, and CESH I. Our investment department, under the oversight of our chief investment officer, is primarily responsiblecompete effectively for evaluating, negotiating, and structuring potential investment opportunities. The investment committee is not directly involved in originating or negotiating potential investments, but instead functions as a separate and final step in the investment process. We place special emphasis on having experienced individuals serve on our investment committee. For 2017, the investment committee has delegated to management the authority to enter into transactions for our own portfolio of less than $100.0 million without the prior approval of the committee, and it retains the authority to identify other categories of transactions thatcommercial properties. However, competitors may be entered into without its prior approval.willing to accept rates of return, lease terms, other transaction terms, or levels of risk that we find unacceptable.
Financing Strategies
We seek to maintain a conservative capital structure that enhances equity returns, maintains financial flexibility, and enables us to effectively match our assets and liabilities. Since 2014, we have generally repaid all maturing mortgages and purchased all new acquisitions unencumbered by mortgage debt, thereby increasing the level of unencumbered assets on our balance sheet and giving us greater flexibility to issue unsecured bonds in the capital markets. Through the date of this Report, we have issued senior unsecured notes, which we refer to collectively as the Senior Unsecured Notes, as follows (Note 11, Note 20):
$500.0 million of 4.6% Senior Notes, issued on March 14, 2014 with a maturity date of April 1, 2024;
€500.0 million of 2.0% Senior Notes, issued on January 21, 2015 with a maturity date of January 20, 2023;
$450.0 million of 4.0% Senior Notes, issued on January 26, 2015 with a maturity date of February 1, 2025;
$350.0 million of 4.25% Senior Notes, issued on September 12, 2016 with a maturity date of October 1, 2026; and
€500.0 million of 2.25% Senior Notes, issued in a public offering on January 19, 2017 with a maturity date of July 19, 2024.
As part of this strategy to finance acquisitions and fund working capital needs with unsecured debt, we also utilize our senior credit facility that provides for an unsecured revolving credit facility, or our Revolver, and a term loan facility, or our Term Loan Facility, which we refer to collectively as our Senior Unsecured Credit Facility, and we amended and restated that facility in February 2017 for a total capacity of $1.85 billion, which we refer to as our Amended Credit Facility (Note 20). We have also issued shares of our common stock through public offerings, including through an “at-the-market,” or ATM, program (Note 14). We expect to continue to have access to a wide variety of capital sources, including the public debt and equity markets, although there can be no assurance that such access will be available to us at all times.
Asset Management
We believe that effectiveproactive asset management of our assets is essential to maintaining and enhancing property values. Important aspects of asset management include entering into new or modified transactions to meet the evolving needs of current tenants, re-leasing properties, credit and real estate risk analysis, building expansions and redevelopments, sustainability and efficiency analysis and retrofits, and strategic dispositions. We regularly engage directly with our tenants and form long-term working relationships with their decision makers in order to provide proactive solutions and to obtain an in-depth, real-time understanding of tenant credit.
We monitor on an ongoing basis, compliance by tenants with their lease obligations and other factors that could affect the financial performance of any of our real estate investments. Monitoringinvestments on an ongoing basis, which typically involves receiving assurancesensuring that each tenant has paid real estate taxes assessments, and other expenses relating to the properties it occupies and confirming thatis maintaining appropriate insurance coverage is being maintained by the tenant. Forcoverage. To ensure such compliance at our international compliance,properties, we often engage third-party asset managers.the expertise of third parties to complete property inspections. We also review thetenant financial statements of tenants and undertake regular physical inspections of the properties to verify their condition and maintenance of properties.maintenance. Additionally, we periodically analyze each tenant’s financial condition, the industry in which each tenant operates, and each tenant’s relative strength in its industry.
Financing Strategies
We believe in maintaining ample liquidity, a conservative capital structure, and access to multiple forms of capital. We preserve balance sheet flexibility and liquidity by maintaining significant capacity on our $1.8 billion unsecured revolving credit facility (the “Unsecured Revolving Credit Facility”), as well as a term loan and a delayed draw term loan, which we refer to collectively as our “Senior Unsecured Credit Facility,” and which was amended and restated in February 2020 for a total capacity of $2.1 billion (our “Amended Credit Facility” (Note 20)). We generally use the Senior Unsecured Credit Facility to fund our immediate capital needs, including new acquisitions and the repayment of secured mortgage debt as we continue to unencumber our balance sheet. We seek to replace short-term financing with more permanent forms of capital, including, but not limited to, common stock, unsecured debt securities, bank debt, and proceeds from asset sales. When evaluating which form of capital to pursue, we take into consideration multiple factors, including our corporate leverage levels and targets, the most advantageous sources of capital available to us, and the optimal timing to raise new capital. We strive to maintain an investment grade rating that places limitations on the amount of leverage acceptable in our capital structure. Although we expect to continue to have access to a wide variety of capital sources and maintain our investment grade rating, there can be no assurance that we will be able to do so in the future.
Our Portfolio
At December 31, 2016,2019, our portfolio had the following characteristics:
Number of properties –— full or partial ownership interests in 9031,214 net-leased properties, 19 self-storage properties, and two hotels;
Total net-leased square footage – 87.9— 140.0 million; and
Occupancy rate –— approximately 99.1%98.8%.
Tenant/Lease Information
At December 31, 2016,2019, our tenants/leases had the following characteristics:
Number of tenants – 217;— 345;
Investment grade tenants as a percentage of total ABR – 16%— 22%;
Implied investment grade tenants as a percentage of total ABR – 9%— 8%;
Weighted-average remaining lease term – 9.7— 10.7 years;
99% of our leases provide rent adjustments as follows:
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| ◦ | CPI and similar – 69%— 63% |
Competition
We face active competition in both our Owned Real Estate segment and our Investment Management segment from many sources for investment opportunities in commercial properties net leased to tenants both domestically and internationally. In general, we believe that our management’s experience in real estate, credit underwriting, and transaction structuring should allow us to compete effectively for commercial properties. However, competitors may be willing to accept rates of return, lease terms, other transaction terms, or levels of risk that we may find unacceptable.
In our Investment Management segment, we face active competition in raising funds for the Managed Programs, from other funds with similar investment objectives such as non-traded publicly registered funds, publicly traded funds, and private funds (including hedge funds). In addition, we face broad competition from other forms of investment. Currently, we raise substantially all of the investment funds for the Managed Programs from investors within the United States.
Environmental Matters
We and the CPA® REITs have invested, and expect to continue to invest, in properties currently or historically used as industrial, manufacturing, and commercial properties. Under various federal, state, and local environmental laws and regulations, current and former owners and operators of property may have liability for the cost of investigating, cleaning up, or disposing of hazardous materials released at, on, under, in, or from the property. These laws typically impose responsibility and liability without regard to whether the owner or operator knew of or was responsible for the presence of hazardous materials or contamination, and liability under these laws is often joint and several. Third parties may also make claims against owners or operators of properties for personal injuries and property damage associated with releases of hazardous materials. As part of our efforts to mitigate these risks, we typically engage third parties to perform assessments of potential environmental risks when evaluating a new acquisition of property, and we frequently require sellers to address them before closing or obtain contractual protection (indemnities, cash reserves, letters of credit, or other instruments) from property sellers, tenants, a tenant’s parent company, or another third party to address known or potential environmental issues. With respect to our hotels and other operating properties that any of the Managed REITs or CESH I may acquire, which are not subject to net lease arrangements, there is no tenant of the property to provide indemnification, so we may be liable for costs associated with environmental contamination in the event any such circumstances arise after we acquire the property.
Financial Information About Geographic Areas
See Our Portfolio above and Note 18 for financial information pertaining to our geographic operations.
Available Information
We will supply to any stockholder, upon written request and without charge, a copy of this Report as filed with the SEC. Our filings can also be obtained for free on the SEC’s website at http://www.sec.gov. All filings we make with the SEC, including this Report, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, andas well as any amendments to those reports, are available for free on the Investor Relations portion of our website, http://www.wpcarey.com, as soon as reasonably practicable after they are filed with or furnished to the SEC. We are providing our website address solely for the information of investors.investors and do not intend for it to be an active link. We do not intend our website to be an active link or to otherwise incorporate the information contained on our website into this Report or other filingsdocuments filed with or furnished to the SEC. Our SEC filings are available to be read or copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information regarding the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. Our filings can also be obtained for free on the SEC’s website at http://www.sec.gov.
Our Code of Business Conduct and Ethics, which applies to all employees, including our chief executive
officer and chief financial officer, is available on our website at http://www.wpcarey.com. We intend to make available on our website any future amendments or waivers to our Code of Business Conduct and Ethics within four business days after any such amendments or waivers. Generally, we also post the dates of our upcoming scheduled financial press releases, telephonic investor calls, and investor presentations on the Investor Relations portion of our website at least ten days prior to the event. Our investor calls are open to the public and remain available on our website for at least two weeks thereafter.
Item 1A. Risk Factors.
Our business, results of operations, financial condition, and ability to pay dividends could be materially adversely affected by various risks and uncertainties, including those enumerated below. These risk factors may have affected, and in the future could affect, our actual operating and financial results, and could cause such results to differ materially from those in any forward-looking statements. You should not consider this list exhaustive. New risk factors emerge periodically and we cannot assure you that the factors described below list all risks that may become material to us at any later time.
Risks Related to Our Business
Adverse changes in general economic conditions can negatively affect our business.
Our success is dependent upon general economic conditions in the United States and in the international geographic areas where a substantial number of our investments are located. Adverse changes in economic conditions in the United States or those countries or regions would likely have a negative impact on real estate values and, accordingly, our financial performance, the market prices of our securities, and our ability to pay dividends.
Changes in investor preferences or market conditions could limit our ability to raise funds or make new investments on behalf of the Managed Programs.
In order to raise funds on behalf of the Managed Programs, we have relied predominantly on sales of the Managed Programs’ publicly registered, non-traded securities to individual investors through participating selected dealers. Although we have diversified the selected dealers we use for fundraising on behalf of the Managed Programs, the majority of our fundraising efforts remain channeled through three major selected dealers. If this capital raising method were to become less available as a result of changes in market receptivity to non-liquid investments with high selected dealer fees, regulatory scrutiny, or other reasons, our ability to raise funds and make investments on behalf of the Managed Programs could be adversely affected. While we are not limited to raising funds through selected dealers (for example, some of the Managed Programs have obtained credit facilities for investment), our experience with other fundraising methods is limited.
The U.S. Department of Labor’s regulation expanding the definition of fiduciary investment advice under ERISA could adversely affect our financial condition and results of operations.
On April 6, 2016, the U.S. Department of Labor, or the DOL, issued its final regulation addressing when a person providing investment advice with respect to an employee benefit plan or individual retirement account is considered to be a fiduciary under the Employee Retirement Income Security Act of 1974, or ERISA, and the Internal Revenue Code. The final regulation, which we refer to as the Fiduciary Rule, significantly expands the class of advisers and the scope of investment advice that are subject to fiduciary standards, imposing the same fiduciary standards on advisers to individual retirement accounts that have historically only applied to plans covered under ERISA. The Fiduciary Rule also contains certain exemptions that allow investment advisers to receive compensation for providing investment advice under arrangements that would otherwise be prohibited due to conflicts of interest, such as the Best Interest Contract Exemption and the Principal Transaction Exemption. The Fiduciary Rule was scheduled to take effect on April 10, 2017. However, the memorandum issued by the new presidential administration on February 3, 2017 has caused the DOL to seek a delay of the implementation date from the Office of Management and Budget. As a result, we cannot predict when or how the Fiduciary Rule may be implemented.
The changes required by the Fiduciary Rule have already triggered significant changes in the operations of financial advisors and broker-dealers. The implementation of the Fiduciary Rule could (i) have negative implications on our ability to raise capital from potential investors, including those investing through individual retirement accounts; and (ii) impact our ability to raise funds from individual retirement accounts on behalf of the Managed Programs (as well as any other funds that we may sponsor in the future) through their public or private offerings and affect their operations, as well as the fees we earn by serving as their advisor, which could adversely impact our financial condition and results of operations. In the near term, we believe that these changes have already created uncertainty in the industry, which has negatively impacted fundraising from individual retirement accounts for unlisted REITs and direct participation programs generally.
In addition, the SEC is authorized under the Dodd-Frank Wall Street Reform and Consumer Protection Act to enact its own fiduciary rule; however, it is not clear if or when the SEC intends to release a proposed rule or whether the rule will work in tandem with the DOL regulations to create a uniform set of fiduciary rules.
We face active competition for investments.
We face active competition for our investments from many sources, including insurance companies, credit companies, pension funds, private individuals, financial institutions, finance companies, and investment companies. These institutions may accept greater risk or lower returns, allowing them to offer more attractive terms to prospective tenants. In addition, when evaluating acceptable rates of return on behalf of the CPA® REITs, we consider a variety of factors, such as the cost of raising capital, the amount of revenue we can earn, and the performance hurdle rates of the relevant REIT. These factors may limit the number of investments that we make on behalf of the CPA® REITs, which will in turn restrict revenue growth from our investment management operations. We believe that the investment community remains risk averse and that the net lease financing market is perceived as a relatively conservative investment vehicle.
Accordingly, we expect increased competition for investments, both domestically and internationally. Further capital inflows into our marketplace will place additional pressure on the returns that we can generate from our investments, as well as our willingness and ability to execute transactions. In addition, the vast majority of our and the CPA® REITs’ current investments are in single-tenant commercial properties that are subject to triple-net leases. Many factors, including changes in tax laws or accounting rules, may make these types of sale-leaseback transactions less attractive to potential sellers and lessees, which could negatively affect our ability to increase the amount of assets of this type under management.
A significant amount of our leases will expire within the next five years and we may have difficulty re-leasing or selling our properties if tenants do not renew their leases.
Within the next five years, approximately 19%24% of our leases, based on our ABR as of December 31, 2016,2019, are due to expire. If these leases are not renewed or if the properties cannot be re-leased on terms that yield comparable payments, then our lease revenues could be substantially adversely affected. In addition, if the current tenants choose to vacate, we may incur substantial costs inwhen attempting to re-lease such properties. Theproperties, we may incur significant costs and the terms of any new or renewed leases will depend on prevailing market conditions prevailing at the time of lease expiration.that time. We may also seek to sell thesesuch properties in which event we mayand incur losses depending upondue to prevailing market conditions prevailing at the time of sale.conditions. Some of our net leases involve properties that are designed for the particular needs of a tenant. With these properties,tenant; thus, we may be required to renovate or make rent concessions in order to lease the property to another tenant. In addition, ifIf we are forcedneed to sell thesesuch properties, we may have difficulty selling it to a third party other than the tenant due to the property’s unique design. Real estate investments are generally less liquid than many other financial assets, which may limit our ability to quickly adjust our portfolio in response to changes in economic or other conditions. These and other limitations may affect our ability to re-lease or sell properties without adversely affecting returns to stockholders.
There may be competition among us and the CPA®REITs for business opportunities.
We currently manage, and may in the future manage, REITs and other entities that have investment and/or rate of return objectives similar to our own. Those entities may be in competition with us with respect to properties; potential purchasers, sellers and lessees of properties; and mortgage financing opportunities. We have agreed to implement certain procedures to help manage any perceived or actual conflicts between us and the CPA® REITs, including the following:
allocating funds based on numerous factors, including available cash, diversification/concentration, transaction size, tax, leverage, and fund life;
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• | all transactions where we co-invest with a CPA® REIT are subject to the approval of the independent directors of the applicable CPA® REIT;
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• | investment allocations are reviewed as part of the annual advisory contract renewal process of each CPA® REIT; and
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• | quarterly review of all of our investment activities and the investment activities of the CPA® REITs by the independent directors of the CPA® REITs.
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We are not required to meet any diversification standards; therefore, our investments may become subject to concentration risks.
Subject to our intention to maintain our qualification as a REIT, there are no limitations on the number or value of particular types of investments that we may make. We are not required to meet any diversification standards, including geographic
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diversification standards. Therefore, our investments may become concentrated in type or geographic location, which could subject us to significant concentration risks with potentially adverse effects on our investment objectives.
Because we invest in properties located outside the United States, we are exposed to additional risks.
We have invested, and may continue to invest, in properties located outside the United States. At December 31, 2016,2019, our directly owned real estate properties located outside of the United States represented 34%36% of currentour ABR. These investments may be affected by factors particular to the local jurisdiction where the property is located and may expose us to additional risks, including:
enactment of laws relating to the foreign ownership of property (including expropriation of investments), or laws and regulations relating to our ability to repatriate invested capital, profits, or cash and cash equivalents back to the United States;
legal systems where the ability to enforce contractual rights and remedies may be more limited than under U.S. law;
difficulty in complying with conflicting obligations in various jurisdictions and the burden of complying withobserving a wide variety of evolving foreign laws, regulations, and governmental rules and policies, which may be more stringent than U.S. laws and regulations (including land use, zoning, environmental, financial, and environmental laws)privacy laws and regulations, such as the European Union’s General Data Protection Regulation);
tax requirements vary by country and existing foreign tax laws and interpretations may change (e.g., the on-going implementation of the European Union’s Anti-Tax Avoidance Directive)Directives), which may result in additional taxes on our international investments;
changes in operating expenses including real estate and other tax rates, in particular countries;countries or regions; and
geopolitical risk and adverse market conditions caused by changes in national or localregional economic or political conditions;
changing laws or governmental rules and policies; and
changes inconditions (which may impact relative interest rates and the terms or availability cost, and terms of mortgage funds resulting from varying national economic policies.funds), including with regard to Brexit (discussed below).
The failure of our compliance and internal control systems to properly mitigate such additional risks, or of our operating infrastructure to support such international investments, could result in operational failures, regulatory fines, or other governmental sanctions.
In addition, the lack of publicly available information in certain jurisdictions in accordance with U.S. generally accepted accounting principles, or GAAP, could impair our ability to analyze transactions and may cause us to forego an investment opportunity for ourselves or the CPA® REITs.opportunity. It may also impair our ability to receive timely and accurate financial information from tenants necessary to meet reporting obligations to financial institutions or governmental and regulatory agencies. Certain of these risks may be greater in emerging markets and less developed countries. Further, our expertise to date is primarily in the
United States and certain countries in Europe and Asia.Europe. We have less experience in other international markets and may not be as familiar with the potential risks to our and the CPA® REITs’ investments in these areas, which could cause us and the entities we manage to incur losses as a result.losses.
We may engage third-party asset managers in international jurisdictions to monitor compliance with legal requirements and lending agreements with respect to properties we own or manage on behalf of the CPA® REITs.agreements. Failure to comply with applicable requirements may expose us, or our operating subsidiaries, or the entities we manage to additional liabilities. Our operations in the United Kingdom, the European Economic Area, Australia, and other countries are subject to significant compliance, disclosure, and other obligations. The European Union’s Alternative Investment Fund Managers Directive or AIFMD,(“AIFMD”), as transposed into national law within the states of the European Economic Area, established a new regulatory regime for alternative investment fund managers, including private equity and hedge fund managers. Although AIFMD generally applies to managers with a registered office in the European Economic Area managing one or more alternative investments funds. Compliancefunds, if a regulator in Europe determines that we are an alternative investment fund manager, and therefore subject to the AIFMD, compliance with the requirements of AIFMD willmay impose additional compliance burdens and expense on us and could reduce our operating flexibility and fundraising opportunities. AIFMD may also limit our operating flexibility and impact our ability to expand in the European Economic Area or other markets.flexibility.
We are also subject to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar because we translate revenue denominated in foreign currency into U.S. dollars for our financial statements (our principal foreign currency exposure is to the euro). Since we have historically placed both our debt obligations and tenants’ rental obligations to us in the same currency, ourOur results of foreign operations are adversely affected by a stronger U.S. dollar relative to foreign currencies (i.e., absent other considerations, a stronger U.S. dollar will reduce both our revenues and our expenses).
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Economic conditions and regulatory changes leading up to and following the United Kingdom’s potential exit from the European Union could have a material adverse effect on our business and results of operations.
Following a referendum on June 23, 2016, in which voters in theThe United Kingdom approved an exit frominitiated the European Union, it was expected that the British government would initiate a process to leave the European Union (a process commonly referred to as “Brexit”(“Brexit”). On on March 29, 2017, which formally occurred on January 24, 2017, however, the Supreme Court of the31, 2020. The United Kingdom ruled that Parliamentary approval will be required to giveis currently in a transition period until December 31, 2020, during which it negotiates the Article 50 Notice that will start the United Kingdom’s withdrawal process. We cannot predict when or how the referendum may be implemented, if at all, and are continuing to assess the potential impact, if any, of these events on our operations, financial condition, and results of operations.
If the referendum is passed into law, negotiations would commence to determine the future terms of the United Kingdom’sits future relationship with the European Union, including the terms of trade between the United Kingdom andwhile preserving membership in the European Union. The announcement of Brexit caused significant volatility in global stock marketsUnion’s internal market and currency exchange rate fluctuations that resultedcustoms union and relinquishing representation in the strengthening of the U.S. dollar against foreign currencies in which we conduct business. As described elsewhere in this Report, we own real estate in foreign jurisdictions, including the United Kingdom and other European countries, and we translate revenue denominated in foreign currency into U.S. dollars for our financial statements. During periods of a strengthening U.S. dollar, our reported international lease revenue is reduced because foreign currencies translate into fewer U.S. dollars.Union’s institutions.
The longer-term effects of Brexit will depend on any agreements that the United Kingdom makes to retain access to European Union markets, either during a transitional period or more permanently. The real estate industry faces substantial uncertainty regarding the impact of the potential exit of the United Kingdom from the European Union.Brexit. Adverse consequences could include, andbut are not limited to: global economic uncertainty and deterioration, volatility in currency exchange rates, adverse changes in regulation of the real estate industry, disruptions to the markets we invest in and the tax jurisdictions we operate in (which may adversely impact tax benefits or liabilities in these or other jurisdictions), and/or negative impacts on the operations and financial conditions of our tenants. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replace or replicate. AnyAs of December 31, 2019, 4% and 30% of our total ABR was from the United Kingdom and other European Union countries, respectively.
Given the ongoing uncertainty surrounding the transition period negotiations (including the potential implementation of a free trade agreement versus a “no-deal Brexit”), we cannot predict how the Brexit process will finally be implemented and are continuing to assess the potential impact, if any, of these effects of Brexit, among others, could have a material negative impactevents on our operations, financial condition, and results of operations.
Our participation in joint ventures creates additional risk.The anticipated replacement of LIBOR with an alternative reference rate, may adversely affect our interest expense.
From time to time, we participate in joint ventures to purchase assets together with the CPA® REITs and may do so as well with third parties. ThereCertain instruments within our debt profile are additional risks involved in joint venture transactions. As a co-investor in a joint venture, we may not be in a position to exercise sole decision-making authority relatingindexed to the property, joint venture, or our investment partner. In addition, thereLondon Interbank Offered Rate (“LIBOR”), which is the potential that our investment partner may become bankrupt or that we may have diverging or inconsistent economic or business interests. These diverging interests could, among other things, expose usa benchmark rate at which banks offer to liabilitieslend funds to one another in the joint ventureinternational interbank market for short term loans. Concerns regarding the accuracy and integrity of LIBOR led the United Kingdom to publish a review of LIBOR in excessSeptember 2012. Based on the review, final rules for the regulation and supervision of LIBOR by the Financial Conduct Authority (the “FCA”) were published and came into effect on April 2, 2013. On July 27, 2017, the FCA announced its intention to phase out LIBOR rates by the end of 2021.
We cannot predict the impact of these changes as regulators and the global financial markets debate the transition to a successor benchmark. Assuming that LIBOR becomes unavailable after 2021, the interest rates on our LIBOR-indexed debt (comprised of our proportionate shareSenior Unsecured Credit Facility and non-recourse mortgage loans subject to floating interest rates with carrying values of those liabilities. The partition rights$201.3 million and $72.1 million, respectively, as of each ownerDecember 31, 2019) will fall back to various alternative methods, any of which could result in a jointly owned property could reducehigher interest obligations than under LIBOR. Further, the valuesame costs and risks that may lead to the discontinuation or unavailability of each portionLIBOR may make one or more of the divided property. In addition, the fiduciary obligationalternative methods impossible or impracticable to determine. There is no guarantee that membersa transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates or borrowing costs to borrowers, any of which could have an adverse effect on our boardfinancing costs, liquidity, results of operations, and overall financial condition.
We may owe to our partner in an affiliated transaction may make it more difficult for us to enforce our rights.
If we recognizeincur substantial impairment charges on our properties or investments, our net income may be reduced.charges.
We recognized impairment charges totaling $59.3 million for the year ended December 31, 2016. In the future, we may incur substantial impairment charges, which we are required to recognize: (i) whenever we sell a property for less than its carrying value or we determine that the carrying amount of the property is not recoverable and exceeds its fair value; (ii) for direct financing leases, whenever losses related to the unguaranteedcollectability of receivables are both probable and reasonably estimable or there has been a permanent decline in the current estimate of the residual value of the underlying property has declined on an other-than-temporary basis;property; and (iii) for equity investments, whenever the estimated fair value of the investment’s underlying net assets in comparison with the carrying value of our interest in the investment has declined on an other-than-temporary basis. By their nature, the timing or extent of impairment charges are not predictable.
Impairments of goodwill could also adversely affect our financial condition and results of operations. We assess our goodwill and other intangible assets for impairment at least annually and more frequently when required by U.S. generally accepted accounting principles (“GAAP”). We are required to record an impairment charge if circumstances indicate that the asset carrying values exceed their fair values. Our assessment of goodwill or other intangible assets could indicate that an impairment of the carrying value of such assets may have occurred, resulting in a material, non-cash write-down of such assets, which could have a material adverse effect on our results of operations.
Our level of indebtedness could have significant adverse consequences and our cash flow may be insufficient to meet our debt service obligations.
Our consolidated indebtedness as of December 31, 2019 was approximately $6.1 billion, representing a consolidated debt to gross assets ratio of approximately 40.3%. This consolidated indebtedness was comprised of (i) $4.4 billion in Senior Unsecured Notes (as defined in Note 11), (ii) $1.5 billion in non-recourse mortgage loans on various properties, and (iii) $201.3 million outstanding under our Senior Unsecured Credit Facility (as defined in Note 11). Our level of indebtedness could have significant adverse consequences on our business and operations, including the following:
it may increase our vulnerability to changes in economic conditions (including increases in interest rates) and limit our flexibility in planning for, or reacting to, changes in our business and/or industry;
we may be at a disadvantage compared to our competitors with comparatively less indebtedness;
we may be unable to hedge our debt, or such hedges may fail or expire, leaving us exposed to potentially volatile interest or currency exchange rates;
any default on our secured indebtedness may lead to foreclosures, creating taxable income that could hinder our ability to meet the REIT distribution requirements imposed by the Internal Revenue Code; and
we may be unable to refinance our indebtedness or obtain additional financing as needed or on favorable terms.
Our ability to generate sufficient cash flow determines whether we will be able to (i) meet our existing or potential future debt service obligations; (ii) refinance our existing or potential future indebtedness; and (iii) fund our operations, working capital, acquisitions, capital expenditures, and other important business uses. Our future cash flow is subject to many factors beyond our control and we cannot assure you that our business will generate sufficient cash flow from operations, or that future sources of cash will be available to us on favorable terms, to meet all of our debt service obligations and fund our other important business uses or liquidity needs. As a result, we may be forced to take other actions to meet those obligations, such as selling properties, raising equity, or delaying capital expenditures, any of which may not be feasible or could have a material adverse effect on us. In addition, despite our substantial outstanding indebtedness and the restrictions in the agreements governing our indebtedness, we may incur non-cash impairment chargessignificantly more indebtedness in the future, which may reduce our net income.would exacerbate the risks discussed above.
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BecauseRestrictive covenants in our credit agreement and indentures may limit our ability to expand or fully pursue our business strategies.
The credit agreement for our Senior Unsecured Credit Facility and the indentures governing our Senior Unsecured Notes contain financial and operating covenants that, among other things, require us to meet specified financial ratios and may limit our ability to take specific actions, even if we usebelieve them to be in our best interest (e.g., subject to certain exceptions, our ability to consummate a merger, consolidation, or a transfer of all or substantially all of our consolidated assets to another person is restricted). These covenants may restrict our ability to expand or fully pursue our business strategies. Our ability to comply with these and other provisions of our debt agreements may be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse regulatory developments, or other events beyond our control. The breach of any of these covenants could result in a default under our indebtedness, which could result in the acceleration of the maturity of such indebtedness and potentially other indebtedness. If any of our indebtedness is accelerated prior to finance investments,maturity, we may not be able to repay such indebtedness or refinance such indebtedness on favorable terms, or at all.
A downgrade in our credit ratings could materially adversely affect our business and financial condition as well as the market price of our Senior Unsecured Notes.
We plan to manage our operations to maintain investment grade status with a capital structure consistent with our current profile, but there can be no assurance that we will be able to maintain our current credit ratings. Our credit ratings could change based upon, among other things, our historical and projected business, financial condition, liquidity, results of operations, and prospects. These ratings are subject to ongoing evaluation by credit rating agencies and we cannot provide any assurance that our ratings will not be changed or withdrawn by a rating agency in the future. If any of the credit rating agencies downgrades or lowers our credit rating, or if any credit rating agency indicates that it has placed our rating on a “watch list” for a possible downgrading or lowering, or otherwise indicates that its outlook for our rating is negative, it could have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on us and on our ability to satisfy our debt service obligations (including those under our Senior Unsecured Credit Facility, our Senior Unsecured Notes, or other similar debt securities that we issue) and to pay dividends on our common stock. Furthermore, any such action could negatively impact the market price of our Senior Unsecured Notes.
Some of our properties are encumbered by mortgage debt, which could adversely affect our cash flow could be adversely affected.flow.
Prior to 2014, mostAt December 31, 2019, we had $1.5 billion of our investments were made by borrowing a portion of the total investment and securing the loan with aproperty-level mortgage on the property. We generally borroweddebt on a non-recourse basis, to limitwhich limits our exposure on any property to the amount of equity invested in the property. If we are unable to make our mortgage-related debt payments as required, a lender could foreclose on the property or properties securing its debt. Additionally, lenders for our international mortgage loan transactions typically incorporateincorporated various covenants and other provisions (including loan to value ratio, debt service coverage ratio, and material adverse changes in the borrower’s or tenant’s business) that can cause a technical loan default. Accordingly, if the real estate value declines or the tenant defaults, the lender would have the right to foreclose on its security. If any of these events were to occur, it could cause us to lose part or all of our investment, which could reduce the value of our portfolio and revenues available for distribution to our stockholders.
Some of our property-level financing may also require us to make a balloon payment at maturity. Our ability to make such balloon payments may depend upon our ability to refinance the obligation invest additional equity, or sell the underlying property. When a balloon payment is due, however, we may be unable to refinance the balloon payment on terms as favorable as the original loan, make the payment with existing cash or cash resources, or sell the property at a price sufficient to cover the payment. Our ability to accomplish these goals will be affected by various factors existing at the relevant time, such as the state of national and regional economies, local real estate conditions, available mortgage or interest rates, availability of credit, our equity in the mortgaged properties, our financial condition, the operating history of the mortgaged properties, and tax laws. A refinancing or sale could affect the rate of return to stockholders and the projected disposition timeline of our assets.
Our level of indebtedness and the limitations imposed on us by our debt agreements could have significant adverse consequences.
Our consolidated indebtedness as of December 31, 2016 was approximately $4.4 billion, representing a leverage ratio (total debt less cash to EBITDA) of approximately 5.9. This consolidated indebtedness was comprised of (i) $1.8 billion in Senior Unsecured Notes, (ii) $1.7 billion in non-recourse mortgages, and (iii) $926.7 million outstanding under our Senior Unsecured Credit Facility. Our level of indebtedness and the limitations imposed by our debt agreements could have significant adverse consequences, including the following:
it may increase our vulnerability to general adverse economic conditions and limit our flexibility in planning for, or reacting to, changes in our business and industry;
we may be required to use a substantial portion of our cash flow from operations for the payment of principal and interest on indebtedness, thereby reducing our ability to fund working capital, acquisitions, capital expenditures, and general corporate requirements;
we may be at a disadvantage compared to our competitors with comparatively less indebtedness;
it could cause us to violate restrictive covenants in our debt agreements, which would entitle lenders and other debtholders to accelerate the maturity of such debt;
debt service requirements and financial covenants relating to our indebtedness may limit our ability to maintain our REIT qualification;
we may be unable to hedge our debt; counterparties may fail to honor their obligations under our hedge agreements; our hedge agreements may not effectively protect us from interest rate or currency fluctuation risk; and we will be exposed to existing, and potentially volatile, interest or currency exchange rates upon the expiration of our hedge agreements;
because a portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense;
we may be forced to dispose of one or more of our properties, possibly on disadvantageous terms, in order to service our debt or if we fail to meet our debt service obligations, in whole or in part;
upon any default on our secured indebtedness, lenders may foreclose on the properties or our interests in the entities that own the properties securing such indebtedness and receive an assignment of rents and leases; and
we may be unable to raise additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to capitalize upon acquisition opportunities or meet operational needs.
If any one of these events were to occur, our business, financial condition, liquidity, results of operations, earnings, and prospects, as well as our ability to satisfy all of our debt obligations (including those under our Senior Unsecured Credit Facility, our Senior Unsecured Notes, or other similar debt securities that we issue), could be materially and adversely affected. Furthermore, foreclosures could create taxable income without accompanying cash proceeds, a circumstance that could hinder our ability to meet the REIT distribution requirements imposed by the Internal Revenue Code.
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We may not be able to generate sufficient cash flow to meet all of our existing or potential future debt service obligations.
Our ability to meet all of our existing or potential future debt service obligations (including those under our Senior Unsecured Credit Facility and our Senior Unsecured Notes, or other similar debt securities that we issue); to refinance our existing or potential future indebtedness; and to fund our operations, working capital, acquisitions, capital expenditures, and other important business uses; depends on our ability to generate sufficient cash flow in the future. Our future cash flow is subject to, among other factors, general economic, industry, financial, competitive, operating, legislative, and regulatory conditions, many of which are beyond our control.
We cannot assure you that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us on favorable terms, or at all; in amounts sufficient to enable us to meet all of our existing or potential future debt service obligations; or to fund our other important business uses or liquidity needs. Furthermore, if we incur additional indebtedness in connection with future acquisitions or development projects, or for any other purpose, our existing or potential future debt service obligations could increase significantly and our ability to meet those obligations could depend, in large part, on the returns from such acquisitions or projects, as to which no assurance can be given.
We may need to refinance all or a portion of our indebtedness at or prior to maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things, (i) our business, financial condition, liquidity, results of operations, Adjusted funds from operations, or AFFO, prospects, and then-current market conditions; and (ii) restrictions in the agreements governing our indebtedness. As a result, we may not be able to refinance any of our indebtedness or obtain additional financing on favorable terms, or at all.
If we do not generate sufficient cash flow from operations and additional borrowings or refinancings are not available to us, we may be unable to meet all of our existing or potential future debt service obligations. As a result, we would be forced to take other actions to meet those obligations, such as selling properties, raising equity, or delaying capital expenditures, any of which could have a material adverse effect on us. Furthermore, we cannot assure you that we will be able to effect any of these actions on favorable terms, or at all.
The effective subordination of our Senior Unsecured Notes, or other similar debt securities that we issue, may limit our ability to meet all of our debt service obligations.
Our Senior Unsecured Notes are unsecured and unsubordinated obligations and rank equally in right of payment with each other and with all of our unsecured and unsubordinated indebtedness. However, our Senior Unsecured Notes are effectively subordinated in right of payment to all of our secured indebtedness to the extent of the value of the collateral securing such indebtedness. As of December 31, 2016, we had $1.7 billion of secured consolidated indebtedness outstanding. While the indentures governing our Senior Unsecured Notes limit our ability to incur secured indebtedness in the future, they do not prohibit us from incurring such indebtedness if we and our subsidiaries are in compliance with certain financial ratios and other requirements at the time of incurrence. In the event of a bankruptcy, liquidation, dissolution, reorganization, or similar proceeding with respect to us, the holders of any secured indebtedness will be entitled to proceed directly against the collateral that secures such indebtedness. Therefore, the collateral will not be available for satisfaction of any amounts owed under our unsecured indebtedness, including our Senior Unsecured Notes or similar debt securities that we issue, until such secured indebtedness is satisfied in full.
Our Senior Unsecured Notes are also effectively subordinated to all liabilities, whether secured or unsecured, and any preferred equity of our subsidiaries, which is particularly important because we have no significant operations or assets other than our equity interests in our subsidiaries. In the event of a bankruptcy, liquidation, dissolution, reorganization, or similar proceeding with respect to any of our subsidiaries, we (as a common equity owner of such subsidiary), and therefore holders of our debt (including our Senior Unsecured Notes or similar debt securities that we issue), will be subject to the prior claims of such subsidiary's creditors, including trade creditors and preferred equity holders. As of December 31, 2016, we had consolidated indebtedness of $5.0 billion outstanding, of which $1.7 billion was secured indebtedness issued by certain of our subsidiaries, and no preferred equity.
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Despite our substantial outstanding indebtedness, we may still incur significantly more indebtedness in the future, which would exacerbate any or all of the risks described herein.
We may incur substantial additional indebtedness in the future. Although the agreements governing our indebtedness do limit our ability to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions could be substantial. To the extent that we incur substantial additional indebtedness in the future, the risks associated with our substantial leverage described herein, including our inability to meet all of our debt service obligations, would be exacerbated.
The indentures governing our Senior Unsecured Notes contain restrictive covenants that may limit our ability to expand or fully pursue our business strategies.
The indentures governing our Senior Unsecured Notes contain financial and operating covenants that, among other things, may limit our ability to take specific actions, even if we believe them to be in our best interest (e.g., subject to certain exceptions, our ability to consummate a merger, consolidation, or a transfer of all or substantially all of our consolidated assets to another person is restricted).
In addition, our current debt agreements require us to meet specified financial ratios and the indentures governing our Senior Unsecured Notes require us to (i) limit the amount of our total debt and the amount of our secured debt before incurring new debt, (ii) maintain at all times a specified ratio of unencumbered assets to unsecured debt, and (iii) meet a debt service coverage ratio before incurring new debt. These covenants may restrict our ability to expand or fully pursue our business strategies. Our ability to comply with these and other provisions of our debt agreements may be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse regulatory developments, or other events beyond our control. The breach of any of these covenants could result in a default under our indebtedness, which could result in the acceleration of the maturity of such indebtedness and potentially other indebtedness. If any of our indebtedness is accelerated prior to maturity, we may not be able to repay such indebtedness or refinance such indebtedness on favorable terms, or at all.
The market price of our Senior Unsecured Notes may be volatile.
The market price of our Senior Unsecured Notes may be highly volatile and subject to wide fluctuations. The market price of our Senior Unsecured Notes may fluctuate as a result of factors (such as changes in interest rates) that are beyond our control or unrelated to our historical and projected business, financial condition, liquidity, results of operations, earnings, or prospects. It is impossible to assure investors that the market price of our Senior Unsecured Notes will not fall in the future and it may be difficult for investors to resell our Senior Unsecured Notes at prices they find attractive, or at all. Furthermore, while the euro-denominated 2.0% Senior Notes have been listed on the New York Stock Exchange and the euro-denominated 2.25% Senior Notes have been listed on the Global Exchange Market, no assurance can be given that such listings can be maintained or that it will ensure an active trading market for these notes. In addition, there is currently no public market for the other Senior Unsecured Notes. Therefore, if an active trading market does not exist for our Senior Unsecured Notes, investors may not be able to resell them on favorable terms when desired, or at all. The liquidity of the trading market, if any, and the future market price of our Senior Unsecured Notes will depend on many factors, including, among other things, prevailing interest rates; our business, financial condition, liquidity, results of operations, AFFO, and prospects; the market for similar securities; and the state of the overall securities market. It is possible that the market for the Senior Unsecured Notes will be subject to disruptions, which may have a negative effect on the holders of our Senior Unsecured Notes, regardless of our business, financial condition, liquidity, results of operations, AFFO, or prospects.
Volatility and disruption in capital markets could materially and adversely impact us.
The capital markets may experience extreme volatility and disruption, which could make it more difficult to raise capital. If we cannot access the capital markets or if we cannot access capital upon favorable terms, we may be required to liquidate one or more investments in properties at times that may not permit us to realize the maximum return on those investments, which could also result in adverse tax consequences and affect our ability to capitalize on acquisition opportunities and/or meet operational needs. Moreover, market turmoil could lead to decreased consumer confidence and widespread reduction of business activity, which may materially and adversely impact us, including our ability to acquire and dispose of properties.
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A downgrade in our credit ratings could materially adversely affect our business and financial condition as well as the market price of our Senior Unsecured Notes.
We plan to manage our operations to maintain investment grade status with a capital structure consistent with our current profile, but there can be no assurance that we will be able to maintain our current credit ratings. Our credit ratings could change based upon, among other things, our historical and projected business, financial condition, liquidity, results of operations, AFFO, and prospects. These ratings are subject to ongoing evaluation by credit rating agencies and we cannot provide any assurance that our ratings will not be changed or withdrawn by a rating agency in the future. If any of the credit rating agencies that have rated us downgrades or lowers our credit rating, or if any credit rating agency indicates that it has placed our rating on a “watch list” for a possible downgrading or lowering, or otherwise indicates that its outlook for our rating is negative, it could have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on us and on our ability to satisfy our debt service obligations (including those under our Senior Unsecured Credit Facility, our Senior Unsecured Notes, or other similar debt securities that we issue) and to pay dividends on our common stock. Furthermore, any such action could negatively impact the market price of our Senior Unsecured Notes.
Certain of our leases permit tenants to purchase a property at a predetermined price, which could limit our realization of any appreciation or result in a loss.
We have granted certain tenants a right to repurchase the properties they lease from us. The purchase price may be a fixed price or it may be based on a formula or the market value at the time of exercise. If a tenant exercises its right to purchase the property and the property’s market value has increased beyond that price, we would not be able to fully realize the appreciation on that property. Additionally, if the price at which the tenant can purchase the property is less than our carrying value (e.g., where the purchase price is based on an appraised value), we may incur a loss. In addition, we may also be unable to reinvest proceeds from these dispositions in investments with similar or better investment returns.
Our ability to fully control the management of our net-leased properties may be limited.
The tenants or managers of net-leased properties are responsible for maintenance and other day-to-day management of the properties. If a property is not adequately maintained in accordance with the terms of the applicable lease, we may incur expenses for deferred maintenance expenditures or other liabilities once the property becomes free of the lease. While our leases generally provide for recourse against the tenant in these instances, a bankrupt or financially troubled tenant may be more likely to defer maintenance and it may be more difficult to enforce remedies against such a tenant. In addition, to the extent tenants are unable to successfully conduct their operations, their ability to pay rent may be adversely affected. Although we endeavor to monitor on an ongoing basis, compliance by tenants with their lease obligations and other factors that could affect the financial performance of our properties such monitoringon an ongoing basis, we may not always be able to ascertain or forestall deterioration either in the condition of a property or the financial circumstances of a tenant.
The value of our real estate is subject to fluctuation.
We are subject to all of the general risks associated with the ownership of real estate. While the revenues from our leases are not directly dependent upon the value of the real estate owned, significant declines in real estate values could adversely affect us in many ways, including a decline in the residual values of properties at lease expiration, possible lease abandonments by tenants, and a decline in the attractiveness of triple-net lease transactions to potential sellers. We also face the risk that lease revenue will be insufficient to cover all corporate operating expenses and the debt service payments we incur. General risks associated with the ownership of real estate include:
adverse changes in general or local economic conditions;conditions, including changes in interest rates or foreign exchange rates;
changes in the supply of, or demand for, similar or competing properties;
changes in interest rates and operating expenses;
competition for tenants;
tenants and changes in market rental rates;
inability to lease or sell properties upon termination of existing leases;
leases, or renewal of leases at lower rental rates;
inability to collect rents from tenants due to financial hardship, including bankruptcy;
changes in tax, real estate, zoning, or environmental laws that adversely impact the value of real estate;
failure to comply with federal, state, and local legal and regulatory requirements, including the Americans with Disabilities Act and fire or life-safety requirements;
uninsured property liability, property damage, or casualty losses;
changes in operating expenses or unexpected expenditures for capital improvements or to bring properties into compliance with applicable federal, state, and local laws;
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improvements;
exposure to environmental losses;
changes in foreign exchange rates; and
force majeure and other factors beyond the control of our management.
In addition, the initial appraisals that we obtain on our properties are generally based on the value of the properties when they are leased. If the leases on the properties terminate, the value of the properties may fall significantly below the appraised value, which could result in impairment charges on the properties.
Because most of our properties are occupied by a single tenant, our success is materially dependent upon the tenant’s financial stability.
Most of our properties are occupied by a single tenant; therefore, the success of our investments is materially dependent on the financial stability of these tenants. Revenues from several of our tenants/guarantors constitute a significant percentage of our lease revenues. Our top ten tenants accounted for approximately 31.0%22% of total ABR at December 31, 2016.2019. Lease payment defaults by tenants could negatively impact our net income and reduce the amounts available for distribution to stockholders. As some of our tenants may not have a recognized credit rating, these tenants may have a higher risk of lease defaults than tenants with a recognized credit rating. In addition, the bankruptcy or default of a tenant could cause the loss of lease payments as well as an increase in the costs incurred to carry the property until it can be re-leased or sold. We have had, and may in the future have, tenants file for bankruptcy protection. In the event of a default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting the investment and re-leasing the property. If a lease is terminated, there is no assurance that we will be able to re-lease the property for the rent previously received or sell the property without incurring a loss.
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The bankruptcy or insolvency of tenants or borrowers may cause a reduction in our revenue and an increase in our expenses.
We have had, and may in the future have, tenants file for bankruptcy protection. Bankruptcy or insolvency of a tenant or borrower could cause the loss of lease or interest and principal payments, an increase in the costs incurred to carrycarrying cost of the property, litigation,and litigation. If one or a series of bankruptcies or insolvencies is significant enough (more likely during a period of economic downturn), it could lead to a reduction in the value of our shares and/or a decrease in amounts available for distribution to our stockholders. dividend.
Under U.S. bankruptcy law, a tenant that is the subject of bankruptcy proceedings has the option of assuming or rejecting any unexpired lease. If the tenant rejects the lease, any resulting claim we have for breach of the lease (excluding collateral securing the claim) will be treated as a general unsecured claim. Theclaim and the maximum claim will be capped at the amount owed for unpaid rent prior to the bankruptcy (unrelated to the termination), plus the greater of one year’s lease payments or 15% of the remaining lease payments payable under the lease (but no more than three years’ lease payments).capped. In addition, due to the long-term nature of our leases and, in some cases, terms providing for the repurchase of a property by the tenant, a bankruptcy court could recharacterize a net lease transaction as a secured lending transaction. If that were to occur, we would not be treated as the owner of the property, but we might have rights as a secured creditor. Those rights would not include a right to compel the tenant to timely perform its obligations under the lease but may instead entitle us to “adequate protection,” a bankruptcy concept that applies to protect against a decrease in the value of the property if the value of the property is less than the balance owed to us.
Insolvency laws outside the United States may not be asmore or less favorable to reorganization or the protection of a debtor’s rights as in the United States. Our rightStates (e.g., the Croatian government’s adoption of the Act on Extraordinary Administration Proceedings in Companies of Systemic Importance for the Republic of Croatia in April 2017 in reaction to terminate a lease for default may be more likely to be enforced in foreign jurisdictions where a debtor/tenant or its insolvency representative lacks the right to forcefinancial difficulties of the continuation of a lease without our consent. Nonetheless, such laws may permit a tenant or an appointed insolvency representative to terminate a lease if it so chooses.
Agrokor group). In addition, in circumstances where the bankruptcy laws of the United States are considered to be more favorable to debtors and/or their reorganization, entities that are not ordinarily perceived as U.S. entities may seek to take advantage of U.S. bankruptcy laws (an entity would be eligible to be a debtor under the U.S. bankruptcy laws if it had a domicile (state of incorporation or registration), place of business, or assets in the United States). If a tenant became a debtor under U.S. bankruptcy laws, it would then have the option of assuming or rejecting any unexpired lease. As a general matter, after the commencement of bankruptcy proceedings and prior to assumption or rejection of an expired lease, U.S. bankruptcy laws provide that, until such unexpired lease is assumed or rejected, the tenant or its trustee must perform the tenant’s obligations under the lease in a timely manner. However, under certain circumstances, the time period for performance of such obligations may be extended by an order of the bankruptcy court. We and certain of the CPA® programs have had tenants file for bankruptcy protection and have been involved in bankruptcy-related litigation (including with several international tenants). Historically, four of the seventeen CPA® programs temporarily reduced the rate of distributions to their investors as a result of adverse developments involving tenants.
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Similarly, if a borrower under one of our loan transactions declares bankruptcy, there may not be sufficient funds to satisfy its payment obligations to us, which may adversely affect our revenue and distributions to our stockholders. The mortgage loans that we may invest in may also be subject to delinquency, foreclosure, and loss, which could result in losses to us.laws.
Because we are subject to possible liabilities relating to environmental matters, we could incur unexpected costs and our ability to sell or otherwise dispose of a property may be negatively impacted.
We ownhave invested, and may in the future invest, in real properties historically or currently used for industrial, manufacturing, and other commercial propertiespurposes, and are subjectsome of our tenants may handle hazardous or toxic substances, generate hazardous wastes, or discharge regulated pollutants to the environment. Buildings and structures on the properties we purchase may have known or suspected asbestos-containing building materials. We may invest in properties located in countries that have adopted laws or observe environmental management standards that are less stringent than those generally followed in the United States, which may pose a greater risk that releases of hazardous or toxic substances have occurred. We therefore may own properties that have known or potential environmental contamination as a result of historical or ongoing operations, which may expose us to liabilities under federal, state, and local environmental laws. These responsibilities and liabilities also exist for properties owned by the Managed REITs, and if they become liable for these costs, their ability to pay for our services could be materially affected. Some of these laws could impose the following on us:
responsibility and liability for the cost of investigation and removal or remediation (including at appropriate disposal facilities) of hazardous or toxic substances in, on, or migrating from our property, generally without regard to our knowledge of, or responsibility for, the presence of these contaminants;
liability for claims by third parties based on damages to natural resources or property, personal injuries, or costs of removal or remediation of hazardous or toxic substances in, on, or migrating from our property; and
responsibility for managing asbestos-containing building materials and third-party claims for exposure to those materials; and
claims being made against us by the Managed REITs for inadequate due diligence.materials.
Our costs ofCosts relating to investigation, remediation, or removal of hazardous or toxic substances, or for third-party claims for damages, may be substantial.substantial and could exceed any amounts estimated and recorded within our consolidated financial statements. The presence of hazardous or toxic substances at any of our properties, or the failure to properly remediate a contaminated property, could (i) give rise to a lien in favor of the government for costs it may incur to address the contamination or (ii) otherwise adversely affect our ability to sell or lease the property or to borrow using the property as collateral. In addition, environmental liabilities, or costs or operating limitations imposed on a tenant by environmental laws, could affect its ability to make rental payments to us. And although we endeavor to avoid doing so, we may be required, in connection with any future divestitures of property, to provide buyers with indemnifications against potential environmental liabilities.
Revenue and earnings from our investment management operationsbusiness are subject to volatility, which may cause our investment management revenue to fluctuate.
Growth in revenueRevenue from our investment management operations is dependent in large part on (i) future capital raising in existing or future managed entities and (ii) our ability to make investments that meet the investment criteria of these entities, both of which are subject to uncertainty with respect to capital market and real estate market conditions. This uncertainty creates volatility in our earnings because of the resulting fluctuation in transaction-based revenue. Asset management revenue may be affected by factors that include not only our ability to increase the Managed REITs’ portfolio of properties under management, but also changes in valuation of those properties and sales of the Managed REIT properties. In addition, revenue from our investment management operations,business, as well as the value of our interests in the Managed REITsPrograms and dividend incomedistributions from those interests, may be significantly affected by several factors:
the results of operationsManaged Programs have fully invested the funds raised in their offerings, and as a result, we expect the structuring revenue that we earn for structuring and negotiating investments on their behalf to continue to decline;
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our asset management revenue may be affected by changes in the valuation of the Managed REITs. Each of the CPA® REITsPrograms’ portfolios (CPA:18 – Global has invested the majority of its assets (other than short-term investments)significant investments in triple-net leased properties substantially similar to those we hold. Consequently, the results of operations of,hold and cash available for distribution by, each of the CPA® REITs are likely tomay be substantially affected by the same market conditions and are subject to the same risk factors,risks as the properties we own. Historically, four of the seventeen CPA® programs temporarily reduced the rate of distributions to their investors as a result of adverse developments involving tenants.own);
Eacheach of the Managed REITsPrograms has incurred, and may continue to incur, significant debt that, either due to liquidity problems or restrictive covenants contained in their borrowing agreements, could restrict their ability to pay revenue owed to us when due. In addition, us;
the revenue payable to us under each of our current investment advisory agreements with the Managed REITs is subject to a variable annual cap based on a formula tied to theits assets and income of that Managed REIT. This cap may limit the growth of our investment management revenue. Furthermore, income;
our ability to earn revenue related to the disposition of properties is primarily tied to providing liquidity events for the Managed REIT investors. OurPrograms and our ability to provide such liquidity, and to do so under circumstances that will satisfy the applicable subordination requirements will depend on market conditions at the relevant time, which may vary considerably over a period of years. In any case, liquidity events typically occur several years apart, and income from our investment management operations is likely to be significantly higher in years when such events occur.time;
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BecauseFinally, the revenue streams from the advisory agreements we have with the ManagedREITs are subject to limitation or cancellation, any such termination could have a material adverse effect on our business, results of operations, and financial condition.
The advisory agreements under which we provide services to the Managed REITs are renewable annually and may generally be terminated by each Managed REIT upon 60 days’ notice, with or without cause. Unless otherwise renewed, the advisory agreement with each of the Managed REITs is scheduled to expire on DecemberMarch 31, 2017.2020. There can be no assurance that these agreements will not expire or be terminated. Upon certain terminations, the Managed REITs each have the right, but not the obligation, to repurchase our interests in their operating partnerships at fair market value. If such right is not exercised, we would remain as a limited partner of the respective operating partnerships. Nonetheless, any such termination wouldmay have a material adverse effect on our business, results of operations, and financial condition.
The recent changesOn October 22, 2019, CWI 1 and CWI 2 announced that they entered into a definitive merger agreement under which the two companies intend to merge in both U.S.an all-stock transaction. On January 13, 2020, the joint proxy statement/prospectus on Form S-4 previously filed with the SEC by CWI 1 and international accounting standards regarding operating leases may make the leasingCWI 2 was declared effective. Each of facilities less attractive to our potential tenants, which could reduce overall demandCWI 1 and CWI 2 has scheduled a special meeting of stockholders for our leasing services.
A lease is classified by a tenant as a capital leaseMarch 26, 2020; if the significant risksproposed transaction is approved, the merger is expected to close shortly thereafter. Immediately following the closing of the CWI 1 and rewards of ownership are considered to resideCWI 2 Proposed Merger, our advisory agreements with the tenant. This situation is generally considered to be met if, among other things, the non-cancelable lease term is more than 75% of the useful life of the asset or if the present value of the minimum lease payments equals 90% or more of the leased property’s fair value at lease inception. Under capital lease accounting for a tenant, both the leased asset and liability are reflected on their balance sheet. If the lease does not meet any of the criteria for a capital lease, the lease is considered an operating lease by the tenantCWI REITs will terminate and the obligation does not appear on the tenant’s balance sheet; rather, the contractual future minimum payment obligations are only disclosed in the footnotes thereto. Thus, entering into an operating lease can appear to enhance a tenant’s balance sheet in comparison to direct ownership. In the first quarter of 2016, both the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board, or IASB, issued new standards on lease accounting which bring most leases, both existing and new, on the balance sheet for lessees. For lessors, however, the accounting remains largely unchanged and the distinction between operating and finance leases is retained. The new standards also replace existing sale-leaseback guidance with new models applicable to both lessees and lessors. These changes would impact most companies, but are particularly applicable to those that are significant users of real estate. The standards outline a completely new model for accounting by lessees, whereby their rights and obligations under most leases, existing and new, would be capitalized and recorded on the balance sheet. For some companies, the new accounting guidance may influence whether or not, or the extent to which, they may enter into the type of sale-leaseback transactions in which we specialize.
The BDCs are subject to extensive regulation.
We sponsor several closed-end funds in a master/feeder fund structure that have each elected to be treated as a BDC. These BDCs are subject to certain provisions of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder, collectively referred to herein as the Investment Company Act. One of our subsidiaries also serves as the investment adviser for the master fund, CCIF, and is subject to the Investment Advisers Act of 1940, as amended, and the rules and regulations thereunder, collectively referred to herein as the Investment Advisers Act. Failure to comply with such rules and regulations could result in liability and/or adversely affect the operation of the BDCs and our ability to successfully raise funds for the BDCs or to generate revenue as the advisor to CCIF.
The investment advisory agreement with CCIF may be terminated upon short notice.
Under the investment advisory agreement with CCIF, its board of trustees has the right to terminate our subsidiary’s management of CCIF upon 60 days’ prior notice. If our subsidiary is terminated as CCIF’s advisor, (i) wenewly combined company will loseinternalize the management and incentive fees that it is paid for managing CCIF and (ii) CCIF may terminate our interest in their revenues, expenses, income, losses, distributions, and capitalservices currently provided by paying us an amount equal us. During a transitional period, we have agreed to provide the then-present fair market value of our interest (excluding any interest we may have in CCIF’s common shares), as determined between us and CCIF. There can be no assurance thatnewly combined company with transitional services consistent with the investment advisory agreement with CCIF will not be terminated. Any such termination would diminish our ability to generate revenue from the BDCs, which could have a material adverse effect on our business, results of operations, and financial condition.
The BDCs may be affected by weak investment performance by portfolio companies in which CCIF invests.
Weak investment returns for the portfolio companies in which CCIF invests may reduce the amount of management and incentive fees that we earn. CCIF may experience weak returns due to general market conditions or underperformance by portfolio companies in which it invests. These factors may also affect CCIF’s ability to invest in new portfolio companies or
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reinvest in existing portfolio companies. If such factors continue to persist, CCIF may be forced to liquidate its position in a portfolio company at an inopportune time.
Our operations could be restricted if we become subject to the Investment Company Act and your investment return, if any, may be reduced if we are required to register as an investment company under the Investment Company Act.
A person will generally be deemed to be an “investment company” for purposes of the Investment Company Act if:
it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities; or
it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
We believeservices that we and our subsidiaries are engaged primarily in the business of acquiring and owning interests in real estate. We do not hold ourselves out as being engaged primarily in the business of investing, reinvesting, or trading in securities. Accordingly, we do not believe that we are an investment company as definedaffiliates currently provide under the Investment Company Act. If we were required to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things, (i) limitations on our capital structure (including our ability to use leverage), (ii) restrictions on specified investments, (iii) prohibitions on proposed transactions with “affiliated persons” (as defined in the Investment Company Act), and (iv) compliance with reporting, record keeping, voting, proxy disclosure, and other rules and regulations that would significantly increase our operating expenses.CWI REITs’ advisory agreements.
Although we intend to monitor our portfolio, there can be no assurance that we will be able to maintain an exclusion or exemption from registration as an investment company under the Investment Company Act. In order to maintain compliance with an Investment Company Act exemption or exclusion, we may be unable to sell assets that we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have to acquire additional income or loss generating assets that we might not otherwise have acquired, or may have to forego opportunities to acquire interests in companies that we would otherwise want to acquire and that would be important to our investment strategy. If we were required to register as an investment company, we may be prohibited from engaging in our business as currently conducted because, among other things, the Investment Company Act imposes significant limitations on an investment company’s leverage. Furthermore, if we fail to comply with the Investment Company Act, criminal and civil actions could be brought against us, our contracts could be unenforceable, and a court could appoint a receiver to take control of us and liquidate our business. Were any of these results to occur, your investment return, if any, may be reduced.
W. P. Carey is not currently registered as an Investment AdvisorAdviser and our failure to do so could subject us to civil and/or criminal penalties.
If the SEC determines that W. P. Carey is an investment advisor,adviser, we will have to register as an investment adviser with the SEC pursuant to the Investment Advisers Act. Registration requirements and other obligations imposed upon investment advisers may be costly and burdensome. In addition, if we are deemed to be an investment advisor and are required tomust register with the SEC as an investment adviser, we will become subject to the requirements of the Investment Advisers Act. The Investment Advisers Act, requires: (i)including: fiduciary duties to clients; (ii)clients, substantive prohibitions and requirements; (iii)requirements, contractual requirements; (iv)and record-keeping requirements;requirements, and (v) administrative oversight by the SEC primarily(primarily by inspection.inspection). If we are deemed to be out of compliance with such rules and regulations, we may be subject to civil and/or criminal penalties.
We depend on key personnel for our future success, and the loss of key personnel or inability to attract and retain personnel could harm our business.
Our future success depends in large part on our ability to hire and retain a sufficient number of qualified personnel, including our executive officers. The nature of our executive officers’ experience and the extent of the relationships they have developed with real estate professionals and financial institutions are important to the success of our business. We cannot provide any assurances regarding their continued employment with us. The loss of the services of certain of our executive officers could detrimentally affect our business and prospects.
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Our accounting policies and methods are fundamental to how we record and report our financial position and results of operations, and they require management to make estimates, judgments, and assumptions about matters that are inherently uncertain.
Our accounting policies and methods are fundamental to how we record and report our financial position and results of operations. We have identified several accounting policies as being critical to the presentation of our financial position and results of operations because they require management to make particularly subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be recorded under different conditions or using different assumptions. Because ofDue to the inherent uncertainty of the estimates, judgments, and assumptions associated with these critical accounting policies, we cannot provide any assurance that we will not make significant subsequent significant adjustments to our consolidated financial statements. If our judgments, assumptions, and allocations prove to be incorrect;incorrect, or if
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| W. P. Carey 2019 10-K– 13 |
circumstances change;change, our business, financial condition, revenues, operating expense, results of operations, liquidity, ability to pay dividends, or stock price may be materially adversely affected.
Our charter and Maryland law contain provisions that may delay or prevent a change of control transaction.
Our charter, contains 7.9% ownership limits. Our charter, subject to certain exceptions, authorizes our directorsBoard to take such actions as are necessary and desirable to limit any person to beneficial or constructive ownership of (i) 7.9%9.8%, in either value or number of shares, whichever is more restrictive, of our aggregate outstanding shares of (i) common and preferred stock (excluding any outstanding shares of our common or preferred stock not treated as outstanding for federal income tax purposes) or (ii) 7.9%, in either value or number of shares, whichever is more restrictive, of our aggregate outstanding shares of common stock (excluding any of our outstanding shares of common stock not treated as outstanding for federal income tax purposes). Our board of directors,Board, in its sole discretion, may exempt a person from such ownership limits, provided that they obtain such representations, covenants, and undertakings as appropriate to determine that the exemption would not affect our REIT status. Our board of directorsBoard may also increase or decrease the common stock ownership limit and/or the aggregate stock ownership limit, so long as the change would not result in five or fewer persons beneficially owning more than 49.9% in value of our outstanding stock. The ownership limits and other stock ownership restrictions contained in our charter may delay or prevent a transaction or change of control that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.
Our board of directorsBoard may modify our authorized shares of stock of any class or series and may create and issue a class or series of common stock or preferred stock without stockholder approval.
Our charter empowers our board of directorsBoard to, without stockholder approval, increase or decrease the aggregate number of shares of our stock or the number of shares of stock of any class or series that we have authority to issue; classify any unissued shares of common stock or preferred stock; reclassify any previously classified, but unissued, shares of common stock or preferred stock into one or more classes or series of stock; and issue such shares of stock so classified or reclassified. Our board of directorsBoard may determine the relative rights, preferences, and privileges of any class or series of common stock or preferred stock issued. As a result, we may issue series or classes of common stock or preferred stock with preferences, dividends, powers, and rights (voting or otherwise) senior to the rights of current holders of our common stock. The issuance of any such classes or series of common stock or preferred stock could also have the effect of delaying or preventing a change of control transaction that might otherwise be in the best interests of our stockholders.
Certain provisions of Maryland law could inhibit changes in control.
Certain provisions of the Maryland General Corporation Law (“MGCL”) may have the effect of inhibiting a third party from making a proposal to acquire us or impeding a change of control that could provide our stockholders with the opportunity to realize a premium over the then-prevailing market price of our common stock, including:
“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock), or an affiliate thereof, for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes special appraisal rights and supermajority voting requirements on these combinations; and
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| W. P. Carey 2016 10-K– 21
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“control share” provisions that provide that holders of “control shares” of our company (defined as voting shares which, when aggregated with all other shares owned or controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
The statute permits various exemptions from its provisions, including business combinations that are exempted by a board of directors prior to the time that the “interested stockholder” becomes an interested stockholder. Our board of directorsBoard has, by resolution, exempted any business combination between us and any person who is an existing, or becomes in the future, an “interested stockholder.” Consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and any such person. As a result, such person may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance with the supermajority vote requirements and the other provisions of the statute. Additionally, this resolution may be altered, revoked, or repealed in whole or in part at any time and we may opt back into the business combination provisions of the Maryland General Corporation Law.MGCL. If this resolution is revoked or repealed, the statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. In the
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| W. P. Carey 2019 10-K– 14 |
case of the control share provisions of the Maryland General Corporation Law,MGCL, we have elected to opt out of these provisions of the Maryland General Corporation LawMGCL pursuant to a provision in our bylaws.
Additionally, Title 3, Subtitle 8 of the Maryland General Corporation LawMGCL permits our board of directors,Board, without stockholder approval and regardless of what is currently provided in our charter or our bylaws, to implement certain governance provisions, some of which we do not currently have. We have opted out of Section 3-803 of the Maryland General Corporation Law,MGCL, which permits a board of directors to be divided into classes pursuant to Title 3, Subtitle 8 of the Maryland General Corporation Law.MGCL. Any amendment or repeal of this resolution must be approved in the same manner as an amendment to our charter. The remaining provisions of Title 3, Subtitle 8 of the Maryland General Corporation LawMGCL may have the effect of inhibiting a third party from making an acquisition proposal for our company or of delaying, deferring, or preventing a change in control of our company under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-current market price. Our charter, our bylaws, and Maryland law also contain other provisions that may delay, defer, or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.
Future issuances of debt and equity securities may negatively affect the market price of our common stock.
We may issue debt or equity securities or incur additional borrowings in the future. Future issuances of debt securities would rank senior to our common stock upon our liquidation and additional issuances of equity securities would dilute the holdings of our existing common stockholders (and any preferred stock may rank senior to our common stock for the purposes of making distributions), both of which may negatively affect the market price of our common stock.
Upon our liquidation, holders of our debt securities and other loans and preferred stock will receive a distribution of our available assets before common stockholders. If we incur debt in the future, our future interest costs could increase and adversely affect our liquidity AFFO, and results of operations.
The issuance or sale of substantial amounts of our common stock (directly, in underwritten offerings or through our ATM Program, or indirectly through convertible or exchangeable securities, warrants, or options) to raise additional capital, or pursuant to our stock incentive plans;plans, or the perception that such securities are available or that such issuances or sales are likely to occur;occur, could materially and adversely affect the market price of our common stock and our ability to raise capital through future offerings of equity or equity-related securities. However, our future growth will depend, in part, upon our ability to raise additional capital, including through the issuance of equity securities. We are not required to offer any additional equity securities to existing common stockholders on a preemptive basis and our charter empowers our board of directorsBoard to make significant changes to our stock without stockholder approval. See the risk factor above titled “Our board of directorsBoard may modify our authorized shares of stock of any class or series and may create and issue a class or series of common stock or preferred stock without stockholder approval.” Our preferred stock, if any are issued, would likely have a preference on distribution payments, periodically or upon liquidation, which could eliminate or otherwise limit our ability to make distributions to common stockholders.
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Because our decision to issue additional debt or equity securities or incur additional borrowings in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature, or success of our future capital raising efforts. Thus, common stockholders bear the risk that our future issuances of debt or equity securities, or our incurrence of additional borrowings, will negatively affect the market price of our common stock.
The trading volume and market price of shares of our common stock may fluctuate or be adversely impacted by various factors.
Our current or historical trading volume and share prices are not indicative of the number of shares of our common stock that will trade going forward or how the market will value shares of our common stock in the future. One factor that may influence the price of our common stock will be our dividend yield relative to yields on other financial instruments (e.g., if an increase in market interest rates results in higher yields on other financial instruments, the market price of our common stock could be adversely affected). In addition, our use of taxable REIT subsidiaries, or TRSs, may cause the market to value our common stock differently than the shares of other REITs, which may not use TRSs as extensively as we do. In addition, theThe trading volume and market price of our common stock may fluctuate significantly and be adversely impacted in response to a number of factors, including:including, but not limited to:
actual or anticipated variations in our operating results, earnings, or liquidity, or those of our competitors;
changes in our dividend policy;
publication of research reports about us, our competitors, our tenants, or the REIT industry;
changes in market valuations of similar companies;
speculation in the press or investment community;
our failure to meet, or the lowering of, our earnings estimates, or those of any securities analysts;
increases in market interest rates, which may lead investors to demand a higher dividend yield for our common stock and would result in increased interest expense on our debt;
changes in our dividend policy;
publication of research reports about us, our competitors, our tenants, or the REIT industry;
changes in market valuations of similar companies;
speculation in the press or investment community;
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| W. P. Carey 2019 10-K– 15 |
our use of taxable REIT subsidiaries (“TRSs”) may cause the market to value our common stock differently than the shares of REITs that do not use TRSs as extensively;
adverse market reaction to the amount of maturing debt in the near and medium term and our ability to refinance such debt and the terms thereof;
adverse market reaction to any additional indebtedness we incur or equity or equity-related securities we issue in the future;
changes in our credit ratings;
actual or perceived conflicts of interest;
additions or departures ofchanges in key management personnel;
our compliance with GAAP and its policies;policies, including recent accounting pronouncements;
our compliance with the listing requirements of the New York Stock Exchange;NYSE;
our compliance with applicable laws and regulations or the impact of new laws and regulations;
the financial condition, liquidity, results of operations, and prospects of our tenants;
failure to maintain our REIT qualification;
litigation, regulatory enforcement actions, or disruptive actions by institutionalactivist stockholders;
general market and economic conditions, including the current state of the credit and capital markets; and
the realization of any of the other risk factors presented in this Report or in subsequent reports that we file with the SEC.
ComplianceOur current or failure to comply withhistorical trading volume and share prices are not indicative of the Americans with Disabilities Act and other similar regulations could result in substantial costs.
Undernumber of shares of our common stock that will trade going forward or how the Americans with Disabilities Act, placesmarket will value shares of public accommodation must meet certain federal requirements related to access and use by disabled persons. Noncompliance could resultour common stock in the imposition of fines by the federal government or the award of damagesfuture.
The capital markets may experience extreme volatility and disruption, which could make it more difficult to private litigants.raise capital. If we arecannot access the capital markets upon favorable terms or at all, we may be required to make unanticipated expenditures toliquidate one or more of our propertiesinvestments, including when an investment has not yet realized its maximum return, which could also result in order to comply with the Americans with Disabilities Act, our cash flowadverse tax consequences and the amounts available for dividends to our stockholders may be adversely affected. We have not conducted a compliance audit or investigation of all of our or the Managed REITs’ properties and we cannot predict the ultimate cost of compliance with the Americans with Disabilities Act or similar legislation.
Our properties are also subject to various federal, state, and local regulatory requirements, such as state and local fire and life-safety requirements. We could incur fines or private damage awards if we fail to comply with these requirements. While we believe that our properties are currently in material compliance with these regulatory requirements, the requirements may change or new requirements may be imposed that could require significant unanticipated expenditures by us that will affect our cash flowability to capitalize on acquisition opportunities and/or meet operational needs. Moreover, market turmoil could lead to decreased consumer confidence and resultswidespread reduction of operations.
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The occurrence of cyber incidents, or a deficiency inbusiness activity, which may materially and adversely impact us, including our cyber security, could negatively impact our business by causing a disruptionability to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources. More specifically, a cyber incident could be (i) an intentional attack, which could include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information; or (ii) an unintentional accident or error. As our reliance on technology has increased, so have the risks posed to our systems, both internalacquire and outsourced. We may also store or come into contact with sensitive information and data. If we or our partners fail to comply with applicable privacy or data security laws in handling this information, we could face significant legal and financial exposure to claims of governmental agencies and parties whose privacy is compromised. The three primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our tenants, and private data exposure. We maintain insurance intended to cover some of these risks, but it may not be sufficient to cover the losses from any future breaches of our systems. We have implemented processes, procedures, and controls to help mitigate these risks, but these measures, as well as our increased awareness of a risk of a cyber incident, do not guarantee that our financial results will not be negatively impacted by such an incident.
Impairment of goodwill may adversely affect our results of operations.
Impairment of goodwill could adversely affect our financial condition and results of operations. We assess our goodwill and other intangible assets for impairment at least annually and more frequently when required by GAAP. We are required to record an impairment charge if circumstances indicate that the asset carrying values exceed their fair values. Our assessment of goodwill or other intangible assets could indicate that an impairment of the carrying value of such assets may have occurred, resulting in a material, non-cash write-down of such assets, which could have a material adverse effect on our results of operations and future earnings. We are also required to write off a portion of goodwill whenever we dispose of a property that constitutes a business under GAAP from a reporting unit with goodwill. We allocate a portion of the reporting unit’s goodwill to that business in determining the gain or loss on the disposal of the business. The amount of goodwill allocated to the business is based on the relative fair value of the business for the reporting unit.properties.
There can be no assurance that we will be able to maintain cash dividends, and certain agreements relating to our indebtedness may prohibit or otherwise restrict our ability to pay dividends to holders of our common stock.dividends.
Our ability to continue to pay dividends in the future may be adversely affected by the risk factors described in this Report. More specifically, while we expect to continue our current dividend practices, we can give no assurance that we will be able to maintain dividend levels in the future for various reasons, including the following:
there is no assurance that rents from our properties will increase or that future acquisitions will increase our cash available for distribution to stockholders, and we may not have enough cash to pay such dividends due to changes in our cash requirements, capital plans, cash flow, or financial position;
our board of directors,Board, in its sole discretion, determines whether, when,the amount and in which amounts to maketiming of any future distributionsdividend payments to our stockholders based on a number of factors, (including, but not limited to: our results of operations and financial condition, capital requirements and borrowing capacity, general economic conditions, tax considerations, maintenance of our REIT status, Maryland law, contractual limitations relating to our indebtedness (such as debt covenant restrictions that may impose limitations on cash payments, future acquisitions and divestitures), and other factors relevant from time to time), therefore our dividend levels are not guaranteed and may fluctuate; and
the amount of dividends that our subsidiaries may distribute to us may be subject to restrictions imposed by state law or regulators, as well as the terms of any current or future indebtedness that these subsidiaries may incur.
Furthermore, certain agreements relating to our borrowings may, under certain circumstances, prohibit or otherwise restrict our ability to pay dividends to our common stockholders. Future dividends, if any, are expected to be based upon our earnings, financial condition, cash flows and liquidity, debt service requirements, capital expenditure requirements for our properties, financing covenants, and applicable law. If we do not have sufficient cash available to pay dividends, we may need to fund the shortage out of working capital or revenues from future acquisitions, if any, or borrow to provide funds for such dividends, which would reduce the amount of funds available for investment and increase our future interest costs. Our inability to pay dividends, or to pay dividends at expected levels, could adversely impact the market price of our common stock.
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| | W. P. Carey 20162019 10-K– 2416 |
The occurrence of cyber incidents, or a deficiency in our cyber security, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources. More specifically, a cyber incident could be an intentional attack (which could include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information) or an unintentional accident or error. We use information technology and other computer resources to carry out important operational activities and to maintain our business records. In addition, we may store or come into contact with sensitive information and data. If we or our third-party service providers fail to comply with applicable privacy or data security laws in handling this information, including the General Data Protection Regulation and the California Consumer Privacy Act, we could face significant legal and financial exposure to claims of governmental agencies and parties whose privacy is compromised, including sizable fines and penalties.
As our reliance on technology has increased, so have the risks posed to our systems, both internal and outsourced. We have implemented processes, procedures, and controls intended to address ongoing and evolving cyber security risks, but these measures, as well as our increased awareness of a risk of a cyber incident, do not guarantee that our financial results will not be negatively impacted by such an incident. Although we and our third-party service providers employ what we believe are adequate security, disaster recovery and other preventative and corrective measures, our security measures may not be sufficient for all possible situations and could be vulnerable to, among other things, hacking, employee error, system error, and faulty password management. The primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our tenants, and private data exposure. A significant and extended disruption could damage our business or reputation; cause a loss of revenue; have an adverse effect on tenant relations; cause an unintended or unauthorized public disclosure; or lead to the misappropriation of proprietary, personal identifying and confidential information; all of which could result in us incurring significant expenses to address and remediate or otherwise resolve these kinds of issues. In addition, the insurance we maintain that is intended to cover some of these risks may not be sufficient to cover the losses from any future breaches of our systems.
Risks Related to REIT Structure
While we believe that we are properly organized as a REIT in accordance with applicable law, we cannot guarantee that the Internal Revenue Service will find that we have qualified as a REIT.
We believe that we are organized in conformity with the requirements for qualification as a REIT under the Internal Revenue Code beginning with our 2012 taxable year and that our current and anticipated investments and plan of operation will enable us to meet and continue to meet the requirements for qualification and taxation as a REIT. Investors should be aware, however, that the Internal Revenue Service or any court could take a position different from our own. Given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we will qualify as a REIT for any particular year.
Furthermore, our qualification and taxation as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership, and other requirements on a continuing basis. Our ability to satisfy the quarterly asset tests under applicable Internal Revenue Code provisions and Treasury Regulations will depend in part upon our board of directors’ good faith analysis ofon the fair market values of our assets, some of which are not susceptible to a precise determination. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis. While we believe that we will satisfy these tests, we cannot guarantee that this will be the case on a continuing basis.
If we fail to remain qualified as a REIT, we would be subject to federal income tax at corporate income tax rates and would not be able to deduct distributions to stockholders when computing our taxable income.
If, in any taxable year, we fail to qualify for taxation as a REIT and are not entitled to relief under the Internal Revenue Code, we will:
not be allowed a deduction for distributions to stockholders in computing our taxable income;
be subject to federal and state income tax, including any applicable alternative minimum tax (for taxable years ending prior to January 1, 2018), on our taxable income at regular corporate rates; and
be barred from qualifying as a REIT for the four taxable years following the year when we were disqualified.
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| W. P. Carey 2019 10-K– 17 |
Any such corporate tax liability could be substantial and would reduce the amount of cash available for distributions to our stockholders, which in turn could have an adverse impact on the value of our common stock. This adverse impact could last for five or more years because, unless we are entitled to relief under certain statutory provisions, we will be taxed as a corporation beginning the year in which the failure occurs and for the following four years.
If we fail to qualify for taxation as a REIT, we may need to borrow funds or liquidate some investments to pay the additional tax liability. Were this to occur, funds available for investment would be reduced. REIT qualification involves the application of highly technical and complex provisions of the Internal Revenue Code to our operations, as well as various factual determinations concerning matters and circumstances not entirely within our control. There are limited judicial or administrative interpretations of these provisions. Although we plan to continue to operate in a manner consistent with the REIT qualification rules, we cannot assure you that we will qualify in a given year or remain so qualified.
If we fail to make required distributions, we may be subject to federal corporate income tax.
We intend to declare regular quarterly distributions, the amount of which will be determined, and is subject to adjustment, by our board of directors.Board. To continue to qualify and be taxed as a REIT, we will generally be required to distribute at least 90% of our REIT taxable income (determined without regard to the dividends-paid deduction and excluding net capital gain) each year to our stockholders. Generally, we expect to distribute all, or substantially all, of our REIT taxable income. If our cash available for distribution falls short of our estimates, we may be unable to maintain the proposed quarterly distributions that approximate our taxable income and we may fail to qualify for taxation as a REIT. In addition, our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes or the effect of nondeductible expenditures (e.g., capital expenditures, payments of compensation for which Section 162(m) of the Internal Revenue Code denies a deduction, the creation of reserves, or required debt service or amortization payments). To the extent we satisfy the 90% distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. We will also be subject to a 4.0% nondeductible excise tax if the actual amount that we pay out to our stockholders for a calendar year is less than a minimum amount specified under the Internal Revenue Code. In addition, in order to continue to
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| W. P. Carey 2016 10-K– 25
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qualify as a REIT, any C-corporation earnings and profits to which we succeed must be distributed as of the close of the taxable year in which we accumulate or acquire such C-corporation’s earnings and profits.
Because certain covenants in our debt instruments may limit our ability to make required REIT distributions, we could be subject to taxation.
Our existing debt instruments include, and our future debt instruments may include, covenants that limit our ability to make required REIT distributions. If the limits set forth in these covenants prevent us from satisfying our REIT distribution requirements, we could fail to qualify for federal income tax purposes as a REIT. If the limits set forth in these covenants do not jeopardize our qualification for taxation as a REIT, but prevent us from distributing 100% of our REIT taxable income, we will be subject to federal corporate income tax, and potentially a nondeductible excise tax, on the retained amounts.
Because we will beare required to satisfy numerous requirements imposed upon REITs, we may be required to borrow funds, sell assets, or raise equity on terms that are not favorable to us.
In order to meet the REIT distribution requirements and maintain our qualification and taxation as a REIT, we may need to borrow funds, sell assets, or raise equity, even if the then-prevailing market conditions are not favorable for such transactions. If our cash flows are not sufficient to cover our REIT distribution requirements, it could adversely impact our ability to raise short- and long-term debt, sell assets, or offer equity securities in order to fund the distributions required to maintain our qualification and taxation as a REIT. Furthermore, the REIT distribution requirements may increase the financing we need to fund capital expenditures, future growth, and expansion initiatives, which would increase our total leverage.
In addition, if we fail to comply with certain asset ownership tests at the end of any calendar quarter, we must generally correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification. As a result, we may be required to liquidate otherwise attractive investments. These actions may reduce our income and amounts available for distribution to our stockholders.
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| W. P. Carey 2019 10-K– 18 |
Because the REIT rules require us to satisfy certain rules on an ongoing basis, our flexibility or ability to pursue otherwise attractive opportunities may be limited.
To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders, and the ownership of our common stock. Compliance with these tests will require us to refrain from certain activities and may hinder our ability to make certain attractive investments, including the purchase of non-qualifying assets, the expansion of non-real estate activities, and investments in the businesses to be conducted by our TRSs, thereby limiting our opportunities and the flexibility to change our business strategy. Furthermore, acquisition opportunities in domestic and international markets may be adversely affected if we need or require target companies to comply with certain REIT requirements prior to closing on acquisitions.
To meet our annual distribution requirements, we may be required to distribute amounts that may otherwise be used for our operations, including amounts that may be invested in future acquisitions, capital expenditures, or debt repayment; and it is possible that we might be required to borrow funds, sell assets, or raise equity to fund these distributions, even if the then-prevailing market conditions are not favorable for such transactions.
Because the REIT provisions of the Internal Revenue Code limit our ability to hedge effectively, the cost of our hedging may increase and we may incur tax liabilities.
The REIT provisions of the Internal Revenue Code limit our ability to hedge assets and liabilities that are not incurred to acquire or carry real estate. Generally, income from hedging transactions that have been properly identified for tax purposes (which we enter into to manage interest rate risk with respect to borrowings to acquire or carry real estate assets) and income from certain currency hedging transactions related to our non-U.S. operations, do not constitute “gross income” for purposes of the REIT gross income tests (such a hedging transaction is referred to as a “qualifying hedge”). In addition, if we enter into a qualifying hedge, but dispose of the underlying property (or a portion thereof) or the underlying debt (or a portion thereof) is extinguished, we can enter into a hedge of the original qualifying hedge, and income from the subsequent hedge will also not constitute “gross income” for purposes of the REIT gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of the REIT gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRSs could be subject to tax on
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| W. P. Carey 2016 10-K– 26
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income or gains resulting from such hedges or expose us to greater interest rate risks than we would otherwise want to bear. In addition, losses in any of our TRSs generally will not provide any tax benefit, except for being carried forward for use against future taxable income in the TRSs.
We intend to use TRSs, which may cause us to fail to qualify as a REIT.
To qualify as a REIT for federal income tax purposes, we plan to hold our non-qualifying REIT assets and conduct our non-qualifying REIT income activities in or through one or more TRSs. The net income of our TRSs is not required to be distributed to us and income that is not distributed to us will generally not be subject to the REIT income distribution requirement. However, there may be limitations on our ability to accumulate earnings in our TRSs and the accumulation or reinvestment of significant earnings in our TRSs could result in adverse tax treatment. In particular, if the accumulation of cash in our TRSs causes the fair market value of our TRS interests and certain other non-qualifying assets to exceed 25%20% of the fair market value of our assets, we would lose tax efficiency and could potentially fail to qualify as a REIT. For taxable years beginning after December 31, 2017, no more than 20% of the value of a REIT’s gross assets may consist of interests in TRSs.
Because the REIT rules limit our ability to receive distributions from TRSs, our ability to fund distribution payments using cash generated through our TRSs may be limited.
Our ability to receive distributions from our TRSs is limited by the rules we must comply with in order to maintain our REIT status. In particular, at least 75% of our gross income for each taxable year as a REIT must be derived from real estate-related sources, which principally includes gross income from the leasing of our properties. Consequently, no more than 25% of our gross income may consist of dividend income from our TRSs and other non-qualifying income types. Thus, our ability to receive distributions from our TRSs is limited and may impact our ability to fund distributions to our stockholders using cash flows from our TRSs. Specifically, if our TRSs become highly profitable, we might be limited in our ability to receive net income from our TRSs in an amount required to fund distributions to our stockholders commensurate with that profitability.
Our ownership of TRSs will be subject to limitations that could prevent us from growing our investment management business and our transactions
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| W. P. Carey 2019 10-K– 19 |
Transactions with our TRSs could cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on an arm’s-length basis.
Overall, (i) for taxable years beginning prior to January 1, 2018, no more than 25% of the value of a REIT’s gross assets, and (ii) for taxable years beginning after December 31, 2017, no more than 20% of the value of a REIT’s gross assets, may consist of interests in TRSs; compliance with this limitation could limit our ability to grow our investment management business. In addition, theThe Internal Revenue Code limits the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The Internal Revenue Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. We will monitor the value of investments in our TRSs in order to ensure compliance with TRS ownership limitations and will structure our transactions with our TRSs on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the TRS ownership limitation or be able to avoid application of the 100% excise tax.
Because distributions payable by REITs generally do not qualify for reduced tax rates, the value of our common stock could be adversely affected.
Certain distributions payable by domestic or qualified foreign corporations to individuals, trusts, and estates in the United States are currently eligible for federal income tax at a maximum rate of 20%. Distributions payable by REITs, in contrast, are generally not eligible for this reduced rate, unless the distributions are attributable to dividends received by the REIT from other corporations that would otherwise be eligible for the reduced rate. This more favorable tax rate for regular corporate distributions could cause qualified investors to perceive investments in REITs to be less attractive than investments in the stock of corporations that pay distributions, which could adversely affect the value of REIT stocks, including our common stock.
Even if we continue to qualify as a REIT, certain of our business activities will be subject to corporate level income tax and foreign taxes, which will continue to reduce our cash flows, and we will have potential deferred and contingent tax liabilities.
Even if we qualify for taxation as a REIT, we may be subject to certain (i) federal, state, local, and foreign taxes on our income and assets including(including alternative minimum taxes;taxes for taxable years ending prior to January 1, 2018); (ii) taxes on any undistributed income and state, local, or foreign income; and (iii) franchise, property, and transfer taxes. In addition, we could be required to pay an excise or penalty tax under certain
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| W. P. Carey 2016 10-K– 27
|
circumstances in order to utilize one or more relief provisions under the Internal Revenue Code to maintain qualification for taxation as a REIT, which could be significant in amount.
Any TRS assets and operations would continue to be subject, as applicable, to federal and state corporate income taxes and to foreign taxes in the jurisdictions in which those assets and operations are located. Any of these taxes would decrease our earnings and our cash available for distributions to stockholders.
We will also be subject to a federal corporate level tax at the highest regular corporate rate (currently 35% for year 2017)21%) on all or a portion of the gain recognized from a sale of assets formerly held by any C corporation that we acquire on a carry-over basis transaction occurring within a five-year period after we acquire such assets, to the extent the built-in gain based on the fair market value of those assets on the effective date of the REIT election is in excess of our then tax basis. The tax on subsequently sold assets will be based on the fair market value and built-in gain of those assets as of the beginning of our holding period. Gains from the sale of an asset occurring after the specified period will not be subject to this corporate level tax. We expect to have only a de minimis amount of assets subject to these corporate tax rules and do not expect to dispose of any significant assets subject to these corporate tax rules.
Because dividends received by foreign stockholders are generally taxable, we may be required to withhold a portion of our distributions to such persons.
Ordinary dividends received by foreign stockholders that are not effectively connected with the conduct of a U.S. trade or business are generally subject to U.S. withholding tax at a rate of 30%, unless reduced by an applicable income tax treaty. Additional rules with respect to certain capital gain distributions will apply to foreign stockholders that own more than 10% of our common stock.
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| W. P. Carey 2019 10-K– 20 |
The ability of our board of directorsBoard to revoke our REIT election, without stockholder approval, may cause adverse consequences for our stockholders.
Our organizational documents permit our board of directorsBoard to revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to be a REIT, we will not be allowed a deduction for dividends paid to stockholders in computing our taxable income and we will be subject to federal income tax at regular corporate rates and state and local taxes, which may have adverse consequences on the total return to our stockholders.
Federal and state income tax laws governing REITs and related interpretations may change at any time, and any such legislative or other actions affecting REITs could have a negative effect on us and our stockholders.
Federal and state income tax laws governing REITs or the administrative interpretations of those laws may be amended at any time. Federal, state, and foreign tax laws are under constant review by persons involved in the legislative process, at the Internal Revenue Service and the U.S. Department of the Treasury, and at various state and foreign tax authorities. Changes to tax laws, regulations, or administrative interpretations, which may be applied retroactively, could adversely affect us or our stockholders. We cannot predict whether, when, in what forms, or with what effective dates, the tax laws, regulations, and administrative interpretations applicable to us or our stockholders may be changed. Accordingly, we cannot assure you that any such change will not significantly affect our ability to qualify for taxation as a REIT or the federal income tax consequences to you or us.
Recent changes to U.S. tax laws could have a negative impact on our business.
On December 22, 2017, the President signed a tax reform bill into law, referred to herein as the “Tax Cuts and Jobs Act,” which among other things:
reduces the corporate income tax rate from 35% to 21% (including with respect to our TRSs);
reduces the rate of U.S. federal withholding tax on distributions made to non-U.S. shareholders by a REIT that are attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%;
allows for an immediate 100% deduction of the cost of certain capital asset investments (generally excluding real estate assets), subject to a phase-down of the deduction percentage over time;
changes the recovery periods for certain real property and building improvements (e.g., 30 years (previously 40 years) for residential real property);
restricts the deductibility of interest expense by businesses (generally, to 30% of the business’s adjusted taxable income) except, among others, real property businesses electing out of such restriction; generally, we expect our business to qualify as such a real property business, but businesses conducted by our TRSs may not qualify, and we have not yet determined whether our subsidiaries can and/or will make such an election;
requires the use of the less favorable alternative depreciation system to depreciate real property in the event a real property business elects to avoid the interest deduction restriction above;
restricts the benefits of like-kind exchanges that defer capital gains for tax purposes to exchanges of real property;
permanently repeals the “technical termination” rule for partnerships, meaning sales or exchanges of the interests in a partnership will be less likely to, among other things, terminate the taxable year of, and restart the depreciable lives of assets held by, such partnership for tax purposes;
requires accrual method taxpayers to take certain amounts in income no later than the taxable year in which such income is taken into account as revenue in an applicable financial statement prepared under GAAP, which, with respect to certain leases, could accelerate the inclusion of rental income;
eliminates the federal corporate alternative minimum tax;
implements a one-time deemed repatriation tax on corporate profits (at a rate of 15.5% on cash assets and 8% on non-cash assets) held offshore, which profits are not taken into account for purposes of the REIT gross income tests;
reduces the highest marginal income tax rate for individuals to 37% from 39.6% (excluding, in each case, the 3.8% Medicare tax on net investment income);
generally allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income), generally resulting in a maximum effective federal income tax rate applicable to such dividends of 29.6% compared to 37% (excluding, in each case, the 3.8% Medicare tax on net investment income), although regulations may restrict the ability to claim this deduction for non-corporate shareholders depending upon their holding period in our stock; and
limits certain deductions for individuals, including deductions for state and local income taxes, and eliminates deductions for miscellaneous itemized deductions (including certain investment expenses).
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| W. P. Carey 2019 10-K– 21 |
As a REIT, we are required to distribute at least 90% of our taxable income to our shareholders annually. As a result of the changes to U.S. federal tax laws implemented by the Tax Cuts and Jobs Act, our taxable income and the amount of distributions to our stockholders required to maintain our REIT status, as well as our relative tax advantage as a REIT, could change.
The Tax Cuts and Jobs Act is a complex revision to the U.S. federal income tax laws with impacts on different categories of taxpayers and industries, which will require subsequent rulemaking and interpretation in a number of areas. In addition, many provisions in the Tax Cuts and Jobs Act, particularly those affecting individual taxpayers, expire at the end of 2025. The long-term impact of the Tax Cuts and Jobs Act on the overall economy, government revenues, our tenants, us, and the real estate industry cannot be reliably predicted at this time. Furthermore, the Tax Cuts and Jobs Act may negatively impact the operating results, financial condition, and future business plans for some or all of our tenants. The Tax Cuts and Jobs Act may also result in reduced government revenues, and therefore reduced government spending, which may negatively impact some of our tenants that rely on government funding. There can be no assurance that the Tax Cuts and Jobs Act will not negatively impact our operating results, financial condition, and future business operations.
Risks Related to a Potential Umbrella Partnership Real Estate Investment Trust (“UPREIT”) Reorganization
The UPREIT structure will make us dependent on distributions from the Operating Partnership.
As previously announced, we may reorganize into an UPREIT (the “UPREIT Reorganization”), in connection with which we will convert WPC Holdco LLC, our directly wholly-owned subsidiary that currently holds substantially all of our assets, into a limited partnership (the “Operating Partnership”). Following the consummation of the UPREIT Reorganization, we will own all or substantially all of the equity interests in the Operating Partnership, including all of the non-economic equity interests of the general partner thereof, and the Operating Partnership will own substantially all of the assets that we owned prior to the UPREIT Reorganization. Since we expect to conduct our operations generally through the Operating Partnership following the UPREIT Reorganization, our ability to service debt obligations and pay dividends will be entirely dependent upon the earnings and cash flows of the Operating Partnership and the ability of the Operating Partnership to make distributions to us.
It is possible that factors outside our control could result in the UPREIT Reorganization being completed at a later time, or not at all, or that our board of directors may, in their sole discretion and without any prior written notice, cancel, delay or modify the UPREIT Reorganization at any time for any reason.
Adoption of the UPREIT structure could inhibit us from selling properties or retiring debt that would otherwise be in our best interest and the best interest of our stockholders.
One of the benefits of the UPREIT structure is that sellers of property may contribute their properties to the Operating Partnership in exchange for limited partnership units in the Operating Partnership, which allows such sellers to realize certain tax benefits that are not available if we acquired the properties directly for cash or shares of our common stock. In order to ensure such tax-deferred contributions, sellers of properties may require us to agree to maintain a certain level of minimum debt at the Operating Partnership level and refrain from selling such properties for a period of time. Agreeing to certain of these restrictions, therefore, could inhibit us from selling properties or retiring debt that would otherwise be in our best interest and the best interest of our stockholders.
Our interest in the Operating Partnership may be diluted upon the issuance of additional limited partnership units of the Operating Partnership.
Upon the issuance of limited partnership units of the Operating Partnership in connection with future property contributions or as a form of employee compensation, our interest (and therefore the interest of our stockholders) in the assets of the Operating Partnership will be diluted. This dilutive effect would remain if limited partnership units were redeemed or exchanged for shares of our common stock (although our interest in the Operating Partnership will increase if limited partnership units are redeemed for cash). The dilutive effect from property contributions in exchange for limited partnership units of the Operating Partnership is comparable to that from sales of shares of our common stock to fund acquisitions.
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| W. P. Carey 2019 10-K– 22 |
The UPREIT structure could lead to potential conflicts of interest.
As the ultimate owner of the general partner of the Operating Partnership, upon the admission of additional limited partners to the Operating Partnership, we may owe a fiduciary obligation to the limited partners under applicable law. In most cases, the interests of the other partners would coincide with our interests and the interests of our stockholders because (i) we would own a majority of the interests in the Operating Partnership and (ii) the other partners will generally receive shares of our common stock upon redemption of their limited partnership units of the Operating Partnership. Nevertheless, under certain circumstances, the interests of the other partners might conflict with our interests and the interests of our stockholders. We currently expect that the operating partnership agreement of the Operating Partnership will provide that in the event of a conflict in the duties owed by us to our stockholders and the fiduciary duties owed by us to the limited partners, we will fulfill our fiduciary duties to the limited partners by acting in the best interests of our company.
In addition, our directors and officers have duties to us and our stockholders under Maryland law. At the same time, as the ultimate general partner of the Operating Partnership, we will have fiduciary duties to the limited partners in the Operating Partnership and to the other members in connection with our management of the Operating Partnership. The duties of our officers and directors in relation to us and our duties as the ultimate owner of the general partner in these two roles may conflict.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Our principal corporate offices are located at 50 Rockefeller Plaza, New York, NY 10020 and our international offices are located in London and Amsterdam. We have additional office space domestically in New York and Dallas. We lease all of these offices and believe these leases are suitable for our operations for the foreseeable future.
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| W. P. Carey 2016 10-K– 28
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Item 3. Legal Proceedings.
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.
Item 4.Mine Safety Disclosures.
Not applicable.
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| | W. P. Carey 20162019 10-K– 2923 |
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Mattersand Issuer Purchases of Equity Securities.
Common Stock and DistributionsMarket Information
Our common stock is listed on the New York Stock ExchangeNYSE under the ticker symbol “WPC.” At February 17, 201714, 2020 there were 9,0839,263 registered holders of record of our common stock. The following table showsThis figure does not reflect the high and low prices per share and quarterly cash distributions declared for the past two fiscal years:beneficial ownership of shares of our common stock.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2016 | | 2015 |
| Period | | High | | Low | | Cash Distributions Declared | | High | | Low | | Cash Distributions Declared |
| First quarter | | $ | 62.27 |
| | $ | 51.12 |
| | $ | 0.9742 |
| | $ | 73.88 |
| | $ | 65.46 |
| | $ | 0.9525 |
|
| Second quarter | | 69.44 |
| | 59.25 |
| | 0.9800 |
| | 69.47 |
| | 58.15 |
| | 0.9540 |
|
| Third quarter | | 72.89 |
| | 63.83 |
| | 0.9850 |
| | 62.55 |
| | 56.01 |
| | 0.9550 |
|
| Fourth quarter | | 64.35 |
| | 55.77 |
| | 0.9900 |
| | 65.19 |
| | 57.25 |
| | 0.9646 |
|
Our Amended Credit Facility (as described in Item 7) contains covenants that restrict the amount of distributions that we can pay.
Stock Price Performance Graph
The graph below provides an indicator of cumulative total stockholder returns for our common stock for the period December 31, 20112014 to December 31, 2016,2019, as compared with the S&P 500 Index and the FTSE NAREIT Equity REITs Index. The graph assumes a $100 investment on December 31, 2011,2014, together with the reinvestment of all dividends.
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| W. P. Carey 2016 10-K– 30
|
| | | | At December 31, | At December 31, |
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 |
W. P. Carey Inc. (a) | $ | 100.00 |
| | $ | 133.95 |
| | $ | 166.17 |
| | $ | 200.90 |
| | $ | 180.00 |
| | $ | 191.77 |
| $ | 100.00 |
| | $ | 89.60 |
| | $ | 95.46 |
| | $ | 118.20 |
| | $ | 119.38 |
| | $ | 153.77 |
|
| S&P 500 Index | 100.00 |
| | 116.00 |
| | 153.57 |
| | 174.60 |
| | 177.01 |
| | 198.18 |
| 100.00 |
| | 101.38 |
| | 113.51 |
| | 138.29 |
| | 132.23 |
| | 173.86 |
|
| FTSE NAREIT Equity REITs Index | 100.00 |
| | 118.06 |
| | 120.97 |
| | 157.43 |
| | 162.46 |
| | 176.30 |
| 100.00 |
| | 103.20 |
| | 111.99 |
| | 117.84 |
| | 112.39 |
| | 141.61 |
|
___________
| |
(a) | Prices in the tables above reflect the price of the listed shares of our predecessor through the date of the CPA®:15 Merger and our REIT conversion on September 28, 2012, as well as the price of our common stock thereafter.
|
The stock price performance included in this graph is not indicative of future stock price performance.
Dividends
We currently intend to continue paying cash dividends consistent with our historical practice; however, our Board determines the amount and timing of any future dividend payments to our stockholders based on a variety of factors.
Securities Authorized for Issuance Under Equity Compensation Plans
This information will be contained in our definitive proxy statement for the 20172020 Annual Meeting of Stockholders, to be filed within 120 days following the end of our fiscal year, and is incorporated herein by reference.
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| | W. P. Carey 20162019 10-K– 3124 |
Item 6. Selected Financial Data.
The following selected financial data should be read in conjunction with the consolidated financial statements and related notes in Item 8 (in thousands, except per share data): |
| | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 | | 2013 | | 2012 |
| Operating Data | | | | | | | | | |
Revenues from continuing operations (a) (b) | $ | 941,533 |
| | $ | 938,383 |
| | $ | 908,446 |
| | $ | 489,851 |
| | $ | 352,361 |
|
Income from continuing operations (a) (b) (c) | 274,807 |
| | 185,227 |
| | 212,751 |
| | 93,985 |
| | 87,514 |
|
Net income (a) (c) (d) | 274,807 |
| | 185,227 |
| | 246,069 |
| | 132,165 |
| | 62,779 |
|
| Net income attributable to noncontrolling interests | (7,060 | ) | | (12,969 | ) | | (6,385 | ) | | (32,936 | ) | | (607 | ) |
| Net loss (income) attributable to redeemable noncontrolling interest | — |
| | — |
| | 142 |
| | (353 | ) | | (40 | ) |
Net income attributable to W. P. Carey (a) (c) (d) | 267,747 |
| | 172,258 |
| | 239,826 |
| | 98,876 |
| | 62,132 |
|
| | | | | | | | | | |
| Basic Earnings Per Share: | |
| | |
| | |
| | |
| | |
|
| Income from continuing operations attributable to W. P. Carey | 2.50 |
| | 1.62 |
| | 2.08 |
| | 1.22 |
| | 1.83 |
|
| Net income attributable to W. P. Carey | 2.50 |
| | 1.62 |
| | 2.42 |
| | 1.43 |
| | 1.30 |
|
| | | | | | | | | | |
| Diluted Earnings Per Share: | |
| | |
| | |
| | |
| | |
|
| Income from continuing operations attributable to W. P. Carey | 2.49 |
| | 1.61 |
| | 2.06 |
| | 1.21 |
| | 1.80 |
|
| Net income attributable to W. P. Carey | 2.49 |
| | 1.61 |
| | 2.39 |
| | 1.41 |
| | 1.28 |
|
| | | | | | | | | | |
Cash distributions declared per share (e) | 3.9292 |
| | 3.8261 |
| | 3.6850 |
| | 3.5000 |
| | 2.4420 |
|
| Balance Sheet Data | | | | | | | | | |
Total assets (f) | $ | 8,453,954 |
| | $ | 8,742,089 |
| | $ | 8,641,029 |
| | $ | 4,671,965 |
| | $ | 4,600,563 |
|
| Net investments in real estate | 5,511,706 |
| | 5,826,544 |
| | 5,656,555 |
| | 2,803,634 |
| | 2,675,573 |
|
Senior Unsecured Notes, net (f) | 1,807,200 |
| | 1,476,084 |
| | 494,231 |
| | — |
| | — |
|
Non-recourse debt, net (f) | 1,706,921 |
| | 2,269,421 |
| | 2,530,217 |
| | 1,485,425 |
| | 1,706,918 |
|
Senior credit facilities (f) | 926,693 |
| | 734,704 |
| | 1,056,648 |
| | 575,000 |
| | 253,000 |
|
| Other Information | | | | | | | | | |
| Net cash provided by operating activities | $ | 517,771 |
| | $ | 477,277 |
| | $ | 399,092 |
| | $ | 207,908 |
| | $ | 80,643 |
|
| Cash distributions paid | 416,655 |
| | 403,555 |
| | 347,902 |
| | 220,395 |
| | 113,867 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 | | 2016 | | 2015 |
| Operating Data | | | | | | | | | |
Revenues (a) | $ | 1,232,766 |
| | $ | 885,732 |
| | $ | 848,302 |
| | $ | 941,533 |
| | $ | 938,383 |
|
Net income (a) (b) (c) (d) | 306,544 |
| | 424,341 |
| | 285,083 |
| | 274,807 |
| | 185,227 |
|
Net income attributable to noncontrolling interests (a) | (1,301 | ) | | (12,775 | ) | | (7,794 | ) | | (7,060 | ) | | (12,969 | ) |
Net income attributable to W. P. Carey (a) (b) (c) (d) | 305,243 |
| | 411,566 |
| | 277,289 |
| | 267,747 |
| | 172,258 |
|
| | | | | | | | | | |
| Basic earnings per share | 1.78 |
| | 3.50 |
| | 2.56 |
| | 2.50 |
| | 1.62 |
|
| Diluted earnings per share | 1.78 |
| | 3.49 |
| | 2.56 |
| | 2.49 |
| | 1.61 |
|
| | | | | | | | | | |
| Cash dividends declared per share | 4.1400 |
| | 4.0900 |
| | 4.0100 |
| | 3.9292 |
| | 3.8261 |
|
| | | | | | | | | | |
| Balance Sheet Data | | | | | | | | | |
| Total assets | $ | 14,060,918 |
| | $ | 14,183,039 |
| | $ | 8,231,402 |
| | $ | 8,453,954 |
| | $ | 8,742,089 |
|
| Net investments in real estate | 11,916,745 |
| | 11,928,854 |
| | 6,703,715 |
| | 6,781,900 |
| | 7,229,873 |
|
| Senior Unsecured Notes, net | 4,390,189 |
| | 3,554,470 |
| | 2,474,661 |
| | 1,807,200 |
| | 1,476,084 |
|
| Senior credit facilities | 201,267 |
| | 91,563 |
| | 605,129 |
| | 926,693 |
| | 734,704 |
|
| Non-recourse mortgages, net | 1,462,487 |
| | 2,732,658 |
| | 1,185,477 |
| | 1,706,921 |
| | 2,269,421 |
|
__________
| |
| (a) | The years ended December 31, 2016, 2015,2019 and 20142018 reflect the impact of the CPA®:16CPA:17 Merger, which was completed on JanuaryOctober 31, 20142018 (Note 3). All years reflect the impact of the CPA®:15 Merger, which was completed on September 28, 2012. |
| |
| (b) | Amounts for the years ended December 31, 2016, 2015, and 2014 include the operating results of properties sold or reclassified as held for sale during those years. For the year ended December 31, 2014, operating results of properties held for sale as of December 31, 2013 and sold during 2014, and properties we acquired in the CPA®:16 Merger that were held for sale and sold during 2014, were included in income from discontinued operations. Prior to 2014, operating results of properties sold or held for sale were included in income from discontinued operations (Note 17). |
| |
(c) | Amount for the year ended December 31, 20142019 includes a loss on change in control of interests of $8.4 million recognized in connection with the CPA:17 Merger. Amount for the year ended December 31, 2018 includes a Gain on change in control of interests of $105.9$47.8 million recognized in connection with the CPA®:16CPA:17 Merger (Note 3). |
| |
| (c) | Amount for the year ended December 31, 2019 includes unrealized gains recognized on our investment in shares of a cold storage operator totaling $32.9 million (Note 9). |
| |
| (d) | Amounts from year to year will not be comparable primarily due to fluctuations in gains/losses recognized on the sale of real estate, lease termination and other income, foreign currency exchange rates, and impairment charges. |
| |
(e) | The year ended December 31, 2013 includes a special distribution of $0.110 per share paid in January 2014 to stockholders of record at December 31, 2013. |
|
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| | W. P. Carey 20162019 10-K– 3225 |
| |
(f) | On January 1, 2016, we adopted ASU 2015-03, which changes the presentation of debt issuance costs (previously recognized as an asset) and requires that they be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability (Note 2). As a result of adopting this guidance, we reclassified deferred financing costs totaling $12.6 million, $7.5 million, $7.0 million, and $8.5 million from Other assets, net to our secured and unsecured debt as of December 31, 2015, 2014, 2013, and 2012, respectively. |
|
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| W. P. Carey 2016 10-K– 33
|
Item 7. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations 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. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThis item 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. The discussion also provides information aboutbreaks down the financial results of the segments of our business by segment to provide a better understanding of how these segments and their results affect our financial condition and results of operations.
The following discussion should be read in conjunction with our consolidated financial statements included in Item 8 of this Report and the matters described under Item 1A. Risk Factors. Please see our Annual Report on Form 10-K for the year ended December 31, 2018 for discussion of our financial condition and results of operations for the year ended December 31, 2017.
Business Overview
We provide long-term financing via sale-leasebackare a diversified net lease REIT with a portfolio of operationally-critical, commercial real estate that includes 1,214 net lease properties covering approximately 140.0 million square feet and build-to-suit transactions for companies worldwide and,21 operating properties as of December 31, 2016, manage an investment portfolio of 1,373 properties, including 903 net-leased properties and two operating properties within our owned real estate portfolio. Our business operates in two segments: Owned Real Estate and Investment Management, as described below.
Owned Real Estate—2019. We own and invest in commercialhigh-quality single tenant industrial, warehouse, office, retail, and self-storage properties subject to long-term net leases with built-in rent escalators. Our portfolio is located primarily in the United States and Northern and Western Europe, that are leased to companies, primarily on a triple-net lease basis, which requiresand we believe it is well-diversified by tenant, property type, geographic location, and tenant industry.
We also earn fees and other income by managing the tenant to pay substantially all of the costs associated with operating and maintaining the property. We earn lease revenues from our wholly owned and co-owned real estate investments that we control. In addition, we generate equity earnings through our investments in shares of the Managed REITs and certain co-owned real estate investments that we do not control. In addition, through our ownership of special member interests in the operating partnerships of the Managed REITs, we participate in the cash flows of those REITs.
Investment Management— We earn revenue as the advisor to the Managed Programs. Under the advisory agreements with the Managed Programs, we perform various services, including but not limited to the day-to-day managementportfolios of the Managed Programs through our investment management business. We no longer raise capital for new or existing funds, but currently expect to continue managing our existing Managed Programs through the end of their respective life cycles (Note 1).
Significant Developments
CWI 1 and transaction-related services. We earn dealer manager feesCWI 2 Proposed Merger
On October 22, 2019, CWI 1 and CWI 2 announced that they had entered into a definitive merger agreement under which the two companies intend to merge in an all-stock transaction, with CWI 2 as the surviving entity. On January 13, 2020, the joint proxy statement/prospectus on Form S-4 previously filed with the SEC by CWI 1 and CWI 2 was declared effective. Each of CWI 1 and CWI 2 has scheduled a special meeting of stockholders for March 26, 2020; if the proposed transaction is approved, the merger is expected to close shortly thereafter. In connection with the offeringsCWI 1 and CWI 2 Proposed Merger, we have entered into an internalization agreement and transition services agreement. Immediately following the closing of the Managed Programs. We structureCWI 1 and negotiate investments and debt placement transactions for certain of the Managed Programs, for which we earn structuring revenue, and we manage their portfolios of real estate investments, for which we earn asset-based management revenue. In addition, we generate equity earnings (losses) through our investment in the shares of CCIF. The Managed Programs reimburse us for certain costs that we incur on their behalf, consisting primarily of broker-dealer commissions and marketing costs while we are raising funds for their public offerings, and certain personnel and overhead costs. We pay all organization and offering costs on behalf of CESH I, and instead of being reimbursed by CESH I on a dollar-for-dollar basis for those costs, we receive limited partnership units of CESH I.CWI 2 Proposed Merger:
Financial Highlights
During the year ended December 31, 2016, we completed the following activities, as further described below and in the consolidated financial statements:
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•(i) | We acquired three investments totaling $530.3 million for our Owned Real Estate segment,the advisory agreements with an additional build-to-suit commitmenteach of $128.1 million,CWI 1 and placed one build-to-suit project into service at a cost totaling $13.8 million (Note 5). |
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•(ii) | As partthe operating partnerships of our active capital recycling program,each of CWI 1 and CWI 2 will redeem the special general partnership interests that we disposedcurrently hold, for which we will receive approximately $97 million in consideration, comprised of 33 properties$65 million in shares of CWI 2 preferred stock and a parcel of vacant land from our Owned Real Estate portfolio for total proceeds of $632.1 million, net of selling costs (Note 17). |
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•(iii) | On September 12, 2016, we issued $350.0 million of 4.25% Senior Notes, at a price of 99.682% of par value, in a registered public offering. These 4.25% Senior Notes have a ten-year termCWI 2 will internalize the management services currently provided by us; and are scheduled to mature on October 1, 2026 (Note 11). |
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•(iv) | We reduced our mortgage debt outstanding by prepaying or repayingwe will provide certain transition services at maturity $405.9 millioncost to CWI 2 for periods generally up to 12 months from closing of non-recourse mortgage loans with a weighted-average interest rate of 5.4% (Note 11). |
We structured new investments on behalf of the Managed Programs totaling $1.6 billion, increasing
Please see our assets under management to $12.9 billion as of December 31, 2016, an increase of approximately 17% as compared to December 31, 2015.
We reduced our general and administrative expenses by $20.8 million as compared to 2015, primarily resulting from various cost saving initiatives, including a reduction in force, or RIF, implemented early in 2016.
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| W. P. Carey 2016 10-K– 34
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• | We issued 1,249,836 shares of our common stock under the ATM program at a weighted-average price of $68.52 per share for net proceeds of $84.4 million (Note 14). |
We declared cash distributions totaling $3.93 per share in the aggregate amount of $415.1 million, comprised of four quarterly dividends per share declared of $0.9742, $0.9800, $0.9850, ad $0.9900.
Consolidated Results
(in thousands, except shares)
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| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Revenues from Owned Real Estate | $ | 755,364 |
| | $ | 735,448 |
| | $ | 645,383 |
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| Reimbursable tenant costs | 25,438 |
| | 22,832 |
| | 24,862 |
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| Revenues from Owned Real Estate (excluding reimbursable tenant costs) | 729,926 |
| | 712,616 |
| | 620,521 |
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| Revenues from Investment Management | 186,169 |
| | 202,935 |
| | 263,063 |
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| Reimbursable costs from affiliates | 66,433 |
| | 55,837 |
| | 130,212 |
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| Revenues from Investment Management (excluding reimbursable costs from affiliates) | 119,736 |
| | 147,098 |
| | 132,851 |
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| Total revenues | 941,533 |
| | 938,383 |
| | 908,446 |
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| Total reimbursable costs | 91,871 |
| | 78,669 |
| | 155,074 |
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| Total revenues (excluding reimbursable costs) | 849,662 |
| | 859,714 |
| | 753,372 |
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| Net income from Owned Real Estate attributable to W. P. Carey | 252,353 |
| | 146,810 |
| | 228,387 |
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| Net income from Investment Management attributable to W. P. Carey | 15,394 |
| | 25,448 |
| | 11,439 |
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Net income attributable to W. P. Carey (a) | 267,747 |
| | 172,258 |
| | 239,826 |
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| Cash distributions paid | 416,655 |
| | 403,555 |
| | 347,902 |
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| Net cash provided by operating activities | 517,771 |
| | 477,277 |
| | 399,092 |
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| Net cash used in investing activities | (269,806 | ) | | (645,185 | ) | | (640,226 | ) |
| Net cash (used in) provided by financing activities | (242,804 | ) | | 152,537 |
| | 343,140 |
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| Supplemental financial measure: | | | |
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Adjusted funds from operations attributable to W. P. Carey (AFFO) — Owned Real Estate (b) | 518,654 |
| | 482,773 |
| | 447,106 |
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Adjusted funds from operations attributable to W. P. Carey (AFFO) — Investment Management (b) | 29,043 |
| | 48,429 |
| | 33,360 |
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Adjusted funds from operations attributable to W. P. Carey (AFFO) (b) | 547,697 |
| | 531,202 |
| | 480,466 |
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Diluted weighted-average shares outstanding (c) | 107,073,203 |
| | 106,507,652 |
| | 99,827,356 |
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(a) | Amount for the year ended December 31, 2014 includes a Gain on change in control of interests of $105.9 million recognized in connection with the CPA®:16 Merger (Note 3). |
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(b) | We consider the performance metrics listed above, including AFFO, a supplemental measure that is not defined by GAAP, referred to as a non-GAAP measure, to be important measures in the evaluation of our operating performance. See Supplemental Financial Measures below for our definition of this non-GAAP measure and a reconciliation to its most directly comparable GAAP measure. |
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(c) | Amount for the year ended December 31, 2014 includes the dilutive impact of the 4,600,000 shares issued in the Equity Offering on September 30, 2014 and the 30,729,878 shares issued to stockholders of CPA®:16 – Global in connection with the CPA®:16 Merger on January 31, 2014.
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| W. P. Carey 2016 10-K– 35
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Revenues and Net Income Attributable to W. P. Carey
2016vs.2015 — Total revenues increased in 2016 as compared to 2015, primarily due to higher revenues within our Owned Real Estate segment, partially offset by lower revenues within our Investment Management segment. The growth in revenues within our Owned Real Estate segment was generated substantially from lease termination income related to a domestic property sold during 2016 (Note 17), as well as from properties acquired in 2015 and 2016. Investment Management revenue declined primarily as a result of a decrease in structuring revenue due to lower investment volume for the Managed Programs during 2016, partially offset by an increase in asset management revenue, primarily as a result of growth in assets under management for the Managed Programs.
Net income attributable to W. P. Carey increased in 2016 as compared to 2015, primarily driven by an increase in net income from our Owned Real Estate segment, partially offset by a decrease in net income from our Investment Management segment. Within our Owned Real Estate segment, we had increases in lease revenues and in the distributions of Available Cash received from the Managed REITs (Note 4), as well as a decline in interest expense. Dispositions of properties from our Owned Real Estate segment generated higher lease termination income and increased gains on sales in 2016, which were partially offset by increased impairment charges. Net income from our Investment Management segment decreased due to lower structuring revenue in 2016, partially offset by higher asset management revenue and a lower provision for income taxes. Within both segments, we reduced general and administrative expenses in 2016, primarily as a result of implementing cost savings initiatives, including the RIF, for which we recognized one-time restructuring and other compensation expense.
2015 vs. 2014 — Total revenues increased in 2015 as compared to 2014, primarily due to higher revenues within our Owned Real Estate segment. The growth in revenues within our Owned Real Estate segment was generated substantially from the nine investments we acquired during 2015 (Note 5) and the properties we acquired in the CPA®:16 Merger on January 31, 2014, which we owned for the full year ended December 31, 2015 (Note 3). Additionally, total revenues within our Investment Management segment improved as a result of increases in structuring revenue and asset management revenue, due to higher investment volume on behalf of the Managed REITs in 2015 as compared to 2014, which increased our assets under management. These increases were partially offset by the impact of a decrease in the average exchange rate of the U.S. dollar in relation to foreign currencies (primarily the euro) during 2015 as compared to 2014.
Net income attributable to W. P. Carey decreased in 2015 as compared to 2014, primarily due to a Gain on change in control of interests of $105.9 million recognized in connection with the CPA®:16 Merger during 2014 (Note 3), income from properties in discontinued operations recognized during 2014, and an increase in interest expense described below in Results of Operations, partially offset by the increase in total revenues during 2015 as compared to 2014 described above, the reversal of liabilities for German real estate transfer taxes recognized in 2015 (Note 7), lease termination income related to a domestic property that was classified as held for sale as of December 31, 2015 and sold during 2016 (Note 17), and an increase in the distributions of Available Cash received from the Managed REITs, which was driven by growth in assets under management (Note 4).
Net Cash Provided by Operating Activities
2016vs.2015 — Net cash provided by operating activities increased in 2016 as compared to 2015, primarily due to the lease termination income received in connection with the sale of a property during 2016, an increase in operating cash flow generated from properties we acquired during 2015 and 2016, and higher distributions of Available Cash received from the Managed REITs, partially offset by a decrease in structuring revenue received in cash from the Managed Programs due to lower investment volume during 2016.
2015 vs. 2014 — Net cash provided by operating activities increased in 2015 as compared to 2014, primarily due to operating cash flow generated from properties we acquired during 2014 and 2015 and the properties we acquired in the CPA®:16 Merger in January 2014, as well as increases in structuring revenue and asset management revenue received in cash from the Managed REITs.
AFFO
2016vs.2015 — AFFO increased in 2016 as compared to 2015, primarily due to lower general and administrative expenses, higher asset management revenue, higher distributions of Available Cash received from the Managed REITs, and lower interest expense, partially offset by lower structuring revenue due to lower investment volume for the Managed Programs during 2016.
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| W. P. Carey 2016 10-K– 36
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2015 vs. 2014 — AFFO increased in 2015 as compared to 2014, primarily due to income generated from the nine investments that we acquired during 2015, the full year effect of the CPA®:16 Merger, the increases in structuring revenue and asset management revenue described above, and the increase in distributions of Available Cash received from the Managed REITs, partially offset by the impact of the decrease in the average exchange rate of the U.S. dollar in relation to foreign currencies (primarily the euro) during 2015 as compared to 2014.
Owned Real Estate
Acquisitions
During 2016, we acquired three sale-leaseback investments totaling $530.3 million, inclusive of acquisition-related costs, with an additional commitment of $128.1 million of build-to-suit financing (Note 5), as follows:
one investment of $167.7 million in three private school campuses in Coconut Creek and Windermere, Florida and Houston, Texas, with a commitment to fund $128.1 million of build-to-suit financing over the next four years in order to fund expansions of the existing facilities;
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• | one investment of $218.2 million in 43 manufacturing facilities in various locations in the United States and six manufacturing facilities in various locations in Canada; in addition, we subsequently acquired a manufacturing facility in San Antonio, Texas from the tenant for $3.8 million (which we consider to be part of the original investment) and simultaneously disposed of a manufacturing facility in Mascouche, Canada, which was acquired as part of the original investment, for the same amount (Note 17); and |
one investment of $140.7 million for 13 manufacturing facilities and one office facility in various locations in Canada, Mexico, and the United States.
In addition, during 2016 we placed into service a build-to-suit investment at a cost totaling $13.8 million.
Dispositions
During 2016, we sold 30 properties and a parcel of vacant land from our Owned Real Estate portfolio for total proceeds of $542.4 million, net of selling costs, and recorded a net gain on sale of real estate of $42.6 million, inclusive of amounts attributable to noncontrolling interests of $0.9 million. In connection with the sale of one of these properties, we recognized $32.2 million of lease termination income during 2016. We also disposed of three properties with an aggregate carrying value of $56.7 million, either through transferring ownership to the mortgage lender or foreclosure, in satisfaction of mortgage loans encumbering the properties totaling $89.7 million (net of $2.6 million of cash held in escrow that was retained by the mortgage lender for one of these dispositions), resulting in an aggregate net gain of $28.6 million (Note 17).
Financing Transactions
During 2016, we entered into the following financing transactions (Note 11):
On September 12, 2016, we issued $350.0 million of 4.25% Senior Notes, at a price of 99.682% of par value, in a registered public offering. These 4.25% Senior Notes have a ten-year term and are scheduled to mature on October 1, 2026.
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• | On July 29, 2016, a jointly owned investment with CPA®:17 – Global, which we consolidate, refinanced a non-recourse mortgage loan that had an outstanding balance of $33.8 million with new financing of $34.6 million, inclusive of the amount attributable to a noncontrolling interest of $17.0 million. The previous loan had an interest rate of 5.9% and a maturity date of July 31, 2016. The new loan has a rate of the Euro Interbank Offered Rate, or EURIBOR, plus a 3.3% margin and a term of five years.
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During 2016, we prepaid non-recourse mortgage loans totaling $321.7 million, including a mortgage loan of $50.8 million encumbering a property that was sold in August 2016 (Note 17). In connection with these payments, we recognized a loss on extinguishment of debt of $4.1 million during 2016, which was included in Other income and (expenses) in the consolidated financial statements. In addition, we made balloon payments aggregating $84.2 million at maturity on non-recourse mortgage loans during 2016, including a payment of $33.8 million in connection with the refinancing described above.
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| W. P. Carey 2016 10-K– 37
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Composition
As of December 31, 2016, our Owned Real Estate portfolio consisted of 903 net-lease properties, comprising 87.9 million square feet leased to 217 tenants, and two hotels, which are classified as operating properties. As of that date, the weighted-average lease term of the net-lease portfolio was 9.7 years and the occupancy rate was 99.1%.
Investment Management
During 2016, we managed CPA®:17 – Global, CPA®:18 – Global, CWI 1, CWI 2, CCIF, and CESH I. As of December 31, 2016, these Managed Programs had total assets under management of approximately $12.9 billion.
Investment Transactions
During 2016, we structured new investments totaling $1.6 billion on behalf of the Managed REITs and CESH I, from which we earned $47.3 million in structuring revenue.
CWI 2: We structured investments in six domestic hotels for an aggregate of $936.0 million, inclusive of acquisition-related costs, on behalf of CWI 2.
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• | CPA®:17 – Global: We structured investments in 23 properties and a build-to-suit expansion on an existing property for an aggregate of $240.3 million, inclusive of acquisition-related costs, on behalf of CPA®:17 – Global. Approximately $134.1 million was invested in the United States and $106.2 million was invested in Europe.
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• | CPA®:18 – Global: We structured investments in ten properties, a build-to-suit project, and a mezzanine loan collateralized by a portfolio of properties for an aggregate of $200.7 million, inclusive of acquisition-related costs, on behalf of CPA®:18 – Global. Approximately $119.5 million was invested in the United States and $81.2 million was invested internationally.
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CWI 1: We structured investments in two domestic hotels and a property adjacent to one of these hotels for an aggregate of $108.6 million, inclusive of acquisition-related costs, on behalf of CWI 1.
CESH I: We structured three investments in international student housing properties for $73.3 million, inclusive of acquisition-related costs, on behalf of CESH I.
Financing Transactions
During 2016, we arranged mortgage financing totaling $465.5 million for CPA®:17 – Global, $387.6 million for CWI 2, $324.8 million for CWI 1, and $184.9 million for CPA®:18 – Global.
Regulatory Changes
On April 6, 2016, the DOL issued its final regulation addressing when a person providing investment advice with respect to an employee benefit plan or individual retirement account is considered to be a fiduciary under ERISA and the Internal Revenue Code. This Fiduciary Rule significantly expands the class of advisers and the scope of investment advice that are subject to fiduciary standards, imposing the same fiduciary standards on advisers to individual retirement accounts that have historically only applied to plans covered under ERISA. The Fiduciary Rule also contains certain exemptions that allow investment advisers to receive compensation for providing investment advice under arrangements that would otherwise be prohibited due to conflicts of interest, such as the Best Interest Contract Exemption and the Principal Transaction Exemption. The Fiduciary Rule was scheduled to take effect on April 10, 2017. However, the memorandum issued by the new presidential administration on February 3, 2017 has caused the DOL to seek a delay of the implementation date from the Office of Management and Budget. We will continue to monitor how the regulation may be implemented. In anticipation of the effectiveness of this new regulation, some broker-dealers and financial advisors have already made significant changes to their operations, which has led to additional uncertainty in this industry.
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| W. P. Carey 2016 10-K– 38
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Investor Capital Inflows
Fundraising from investment products such as non-traded REITs and non-traded BDCs overall was significantly lower in 2016 as compared to 2015, due in large part to the uncertainty that has resulted from the regulatory changes described above. The investor capital inflows for the funds managed by us during 2016 were as follows:
CWI 2 commenced its initial public offering in the first quarter of 2015 and began to admit new stockholders on May 15, 2015. Through December 31, 2016, CWI 2 had raised approximately $616.3 million through its offering, of which $369.3 million was raised during 2016. We earned $4.6 million in Dealer manager fees during 2016 related to this offering.
Two CCIF Feeder Funds commenced their respective initial public offerings in the third quarter of 2015 and invest the proceeds that they raise in the master fund, CCIF. Through December 31, 2016, these funds have invested $125.1 million in CCIF, of which $123.1 million was invested during 2016. We earned $1.8 million in Dealer manager fees during 2016 related to these offerings.
In May 2016, a new feeder fund of CCIF, Carey Credit Income Fund 2018 T, filed a registration statementCurrent Report on Form N-2 with the SEC to sell up to 102,564,103 shares of common stock and intends to invest the net proceeds from the public offering in CCIF. The registration statement was declared effective by the SEC in8-K dated October 2016 but fundraising has not yet commenced.
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• | CESH I commenced its private placement in July 2016 (Note 4). We earned $1.5 million in Dealer manager fees during 2016 related to this offering. |
22, 2019 for additional information.
Significant Developments
Management Changes
On December 7, 2016, we announced that Mr. Thomas E. Zacharias, our chief operating officer and head of asset management, had informed our board of directors of his decision to retire effective March 31, 2017. We do not currently intend to appoint a successor to the office of chief operating officer and all responsibilities associated with that role will be reallocated to other members of our management.
On February 1, 2017, we announced that our board of directors had appointed Ms. ToniAnn Sanzone as our chief financial officer, effective immediately. Ms. Sanzone had been serving as our interim chief financial officer since October 14, 2016, having previously served as our chief accounting officer since June 2015 and, prior to that, as our controller since April 2013 (Note 20).
Issuance of Senior Unsecured Notes
On January 19, 2017, we completed a public offering of €500.0 million of 2.25% Senior Notes, at a price of 99.448% of par value, issued by our wholly owned subsidiary, WPC Eurobond B.V., which are guaranteed by us. These 2.25% Senior Notes have a 7.5-year term and are scheduled to mature on July 19, 2024 (Note 20).
Amended Credit Facility
On February 22, 2017,20, 2020, we amended and restated our Senior Unsecured Credit Facility. We increased the capacity of our unsecured line of credit under our Amended Credit Facility to $1.85$2.1 billion, which is comprised of a $1.5$1.8 billion revolving line of credit, maturing in four years with two six-month extension options, a €236.3£150.0 million term loan, maturing in five years, and a $100.0$105.0 million delayed draw term loan, alsoall maturing in five years. The delayed draw term loan may be drawn within one year and allows for borrowings in U.S. dollars, euros, or British pounds sterling. The aggregate principal amount (of revolving and term loans) available under the Amended Credit Facility may be increased up to an amount not to exceed the U.S. dollar equivalent of $2.75 billion, subject to the conditions to increase provided in the related credit agreement. We will incur interest at the London Interbank Offered Rate, or LIBOR, or a LIBOR equivalent, plus 1.00%0.85% on the revolving line of credit, EURIBOR plus 1.10% on the term loan, and LIBOR, or a LIBOR equivalent, plus 1.10%0.95% on the term loan and delayed draw term loan (Note 20).
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| | W. P. Carey 20162019 10-K– 3926 |
Financial Highlights
During the year ended December 31, 2019, we completed the following (as further described in the consolidated financial statements):
Real Estate
Investments
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| • | We acquired 23 investments totaling $737.5 million (Note 5) |
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| • | We completed seven construction projects at a cost totaling $122.5 million. Construction projects include build-to-suit and expansion projects (Note 5). |
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| • | We committed to purchase a warehouse and distribution facility in Knoxville, Tennessee, for approximately $68.0 million upon completion of construction of the property, which is expected to take place during the second quarter of 2020 (Note 5). |
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| • | We committed to purchase two warehouse facilities in Hillerød and Hammelev, Denmark, for approximately $19.9 million (based on the exchange rate of the Danish krone at December 31, 2019) upon completion of construction of the properties. One property was completed in January 2020 (Note 20) and the second property is expected to be completed during the first quarter of 2020 (Note 5). |
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| • | We committed to fund an aggregate of $8.3 million (based on the exchange rate of the euro at December 31, 2019) for a warehouse expansion project for an existing tenant at an industrial and office facility in Marktheidenfeld, Germany. We currently expect to complete the project in the second quarter of 2020 (Note 5). |
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| • | We committed to fund an aggregate of $3.0 million for an expansion project for an existing tenant at a warehouse facility in Wichita, Kansas. We currently expect to complete in the third quarter of 2020 (Note 5). |
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| • | We committed to fund an aggregate of $56.2 million (based on the exchange rate of the euro at December 31, 2019) for a build-to-suit project for a headquarters and industrial facility in Langen, Germany, which we currently expect to be completed in the first quarter of 2021 (Note 5). |
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| • | We committed to fund an aggregate of $70.0 million for a renovation project at a warehouse facility in Bowling Green, Kentucky, which we currently expect to be completed in the fourth quarter of 2021 (Note 5). |
Dispositions
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| • | As part of our active capital recycling program, we disposed of 22 properties for total proceeds of $382.4 million, net of selling costs (Note 17). In January 2020, we sold one of our two hotel operating properties for gross proceeds of $120.0 million (inclusive of $5.5 million attributable to a noncontrolling interest) (Note 20). |
Leasing Transactions
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| • | We entered into net lease agreements for certain self-storage properties previously classified as operating properties. As a result, in June 2019 and August 2019, we reclassified 22 and five consolidated self-storage properties, respectively, with an aggregate carrying value of $287.7 million from Land, buildings and improvements attributable to operating properties to Land, buildings and improvements subject to operating leases. Effective as of those times, we began recognizing lease revenues from these properties, whereas previously we recognized operating property revenues and expenses from these properties (Note 5). |
We restructured the leases with a tenant on a portfolio of grocery store and warehouse properties in Croatia. For 19 properties, we reached agreements on new rents, reducing contractual rents, but increasing total contractual minimum annualized base rent (“ABR”) from $10.2 million to $15.4 million. We extended the lease terms on these properties by a weighted average of three years. We also agreed to a payment plan to collect approximately 50% of unpaid back rents plus value-added tax, which is being paid in ten monthly installments of €1.0 million each (equivalent to approximately $1.1 million) and started in July 2019. During the third and fourth quarters of 2019, such payments totaled approximately $6.6 million, which was included within Lease termination income and other on our consolidated statements of income.
We received proceeds totaling $9.1 million from a bankruptcy claim on a prior tenant, which was included within Lease termination income and other on our consolidated statements of income.
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| W. P. Carey 2019 10-K– 27 |
Financing and Capital Markets Transactions
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| • | On June 14, 2019, we completed an underwritten public offering of $325.0 million of 3.850% Senior Notes due 2029, at a price of 98.876% of par value. These 3.850% Senior Notes due 2029 have a 10.1-year term and are scheduled to mature on July 15, 2029 (Note 11). |
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| • | On September 19, 2019, we completed a public offering of €500.0 million of 1.350% Senior Notes due 2028, at a price of 99.266% of par value, issued by our wholly owned finance subsidiary, WPC Eurobond B.V., and fully and unconditionally guaranteed by us. These 1.350% Senior Notes due 2028 have an 8.6-year term and are scheduled to mature on April 15, 2028 (Note 11). |
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| • | During the year ended December 31, 2019, we issued 6,672,412 shares of our common stock under our ATM Programs at a weighted-average price of $79.70 per share for net proceeds of $523.3 million (Note 14). Proceeds from issuances of common stock under our ATM Programs were used primarily to prepay certain non-recourse mortgage loans (as described below and in Note 11) and to fund acquisitions. |
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| • | We reduced our mortgage debt outstanding by prepaying or repaying at maturity a total of $1.2 billion of non-recourse mortgage loans with a weighted-average interest rate of 4.4% (Note 11). |
Investment Management
As of December 31, 2019, we managed total assets of approximately $7.5 billion on behalf of the Managed Programs. Upon completion of the CPA:17 Merger (Note 3), we ceased earning advisory fees and other income previously earned when we served as advisor to CPA:17 – Global. During 2018, through the date of the CPA:17 Merger, such fees and other income from CPA:17 – Global totaled $58.8 million. We expect to receive lower structuring and other advisory revenue from the Managed Programs going forward since they are fully invested and we no longer raise capital for new or existing funds.
Dividends to Stockholders
We declared cash dividends totaling $4.140 per share, comprised of four quarterly dividends per share of $1.032, $1.034, $1.036, and $1.038.
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| W. P. Carey 2019 10-K– 28 |
Consolidated Results
(in thousands, except shares)
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| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Revenues from Real Estate | $ | 1,172,863 |
| | $ | 779,125 |
| | $ | 687,208 |
|
| Revenues from Investment Management | 59,903 |
| | 106,607 |
| | 161,094 |
|
| Total revenues | 1,232,766 |
| | 885,732 |
| | 848,302 |
|
| | | | | | |
| Net income from Real Estate attributable to W. P. Carey | 272,065 |
| | 307,236 |
| | 192,139 |
|
| Net income from Investment Management attributable to W. P. Carey | 33,178 |
| | 104,330 |
| | 85,150 |
|
| Net income attributable to W. P. Carey | 305,243 |
| | 411,566 |
| | 277,289 |
|
| | | | | | |
| Dividends declared | 713,588 |
| | 502,819 |
| | 433,834 |
|
| | | | | | |
| Net cash provided by operating activities | 812,077 |
| | 509,166 |
| | 520,659 |
|
| Net cash (used in) provided by investing activities | (522,773 | ) | | (266,132 | ) | | 214,238 |
|
| Net cash used in financing activities | (457,778 | ) | | (24,292 | ) | | (745,466 | ) |
| | | | | | |
Supplemental financial measures (a): | | | |
| | |
|
| Adjusted funds from operations attributable to W. P. Carey (AFFO) — Real Estate | 811,193 |
| | 516,502 |
| | 456,865 |
|
| Adjusted funds from operations attributable to W. P. Carey (AFFO) — Investment Management | 45,277 |
| | 118,084 |
| | 116,114 |
|
| Adjusted funds from operations attributable to W. P. Carey (AFFO) | 856,470 |
| | 634,586 |
| | 572,979 |
|
| | | | | | |
Diluted weighted-average shares outstanding (b) | 171,299,414 |
| | 117,706,445 |
| | 108,035,971 |
|
__________
| |
| (a) | We consider Adjusted funds from operations (“AFFO”), a supplemental measure that is not defined by GAAP (a “non-GAAP measure”), to be an important measure in the evaluation of our operating performance. See Supplemental Financial Measures below for our definition of this non-GAAP measure and a reconciliation to its most directly comparable GAAP measure. |
| |
| (b) | Amounts for the years ended December 31, 2019 and 2018 reflect the dilutive impact of the 53,849,087 shares of our common stock issued to stockholders of CPA:17 – Global in connection with the CPA:17 Merger on October 31, 2018 (Note 3), as well as the dilutive impact of the 10,901,697 shares of our common stock issued under our ATM Programs since January 1, 2018 (Note 14). |
Revenues and Net Income Attributable to W. P. Carey
2019vs.2018 — Total revenues increased in 2019 as compared to 2018, due to increases within our Real Estate segment, partially offset by decreases within our Investment Management segment. Real Estate revenue increased due to an increase in lease revenues and operating property revenues, primarily from the properties we acquired in the CPA:17 Merger on October 31, 2018 (Note 3) and other property acquisition activity, partially offset by the impact of property dispositions. We also received proceeds from a bankruptcy claim on a prior tenant during 2019 (Note 5). Investment Management revenue decreased primarily due to the cessation of asset management revenue earned from CPA:17 – Global after the CPA:17 Merger on October 31, 2018 (Note 3), as well as lower structuring and other advisory revenue earned from the Managed Programs.
Net income attributable to W. P. Carey decreased in 2019 as compared to 2018, due to decreases within both our Investment Management and Real Estate segments. Net income from Investment Management attributable to W. P. Carey decreased primarily due to the cessation of revenues and distributions previously earned from CPA:17 – Global (Note 3) and a gain on change in control of interests recognized during 2018 in connection with the CPA:17 Merger (Note 3), partially offset by tax benefits recognized during 2019. Net income from Real Estate attributable to W. P. Carey decreased primarily due to a lower gain on sale of real estate recognized during 2019 as compared to 2018 (Note 17), as well as higher impairment charges (Note 9) and loss on extinguishment of debt (Note 11). We also recognized a loss on change in control of interests during 2019 in
|
| |
| W. P. Carey 2019 10-K– 29 |
connection with the CPA:17 Merger, as compared to a gain on change in control of interests during 2018 (Note 3). These decreases were partially offset by the impact of real estate acquisitions and properties acquired in the CPA:17 Merger (Note 3), which we owned for a full year in 2019 as compared to two months in 2018. The increase in revenues from such properties was partially offset by corresponding increases in depreciation and amortization, interest expense, and property expenses. We also recognized significant merger expenses in 2018 related to the CPA:17 Merger (Note 3) and unrealized gains on our investment in shares of a cold storage operator during 2019 (Note 9), and received proceeds from a bankruptcy claim on a prior tenant during 2019 (Note 5).
Net Cash Provided by Operating Activities
2019vs.2018 — Net cash provided by operating activities increased in 2019 as compared to 2018, primarily due to an increase in cash flow generated from properties acquired during 2018 and 2019, including properties acquired in the CPA:17 Merger, as well as proceeds from a bankruptcy claim on a prior tenant received during 2019 (Note 5), partially offset by merger expenses recognized in 2018 related to the CPA:17 Merger (Note 3) and a decrease in cash flow as a result of property dispositions during 2018 and 2019, as well as an increase in interest expense, primarily due to the assumption of non-recourse mortgage loans in the CPA:17 Merger and the issuance of senior unsecured notes in March 2018, October 2018, June 2019, and September 2019.
AFFO
2019vs.2018 — AFFO increased in 2019 as compared to 2018, primarily due to higher Real Estate revenues, partially offset by higher interest expense and lower Investment Management revenues and cash distributions as a result of the CPA:17 Merger.
Portfolio Overview
We intend to continue to acquire a diversifiedOur portfolio is comprised of income-producingoperationally-critical, commercial real estate assets net leased to tenants located primarily in the United States and Northern and Western Europe. We invest in high-quality single tenant industrial, warehouse, office, retail, and self-storage (net lease) properties and other real estate-related assets. We expectsubject to make these investments both domestically and internationally.long-term leases with built-in rent escalators. Portfolio information is provided on a pro rata basis, unless otherwise noted below, to better illustrate the economic impact of our various net-leased jointly owned investments. See Terms and Definitions below for a description of pro rata amounts.
Portfolio Summary
| | | | As of December 31, | As of December 31, |
| | 2016 | | 2015 | | 2014 | 2019 | | 2018 | | 2017 |
Number of net-leased properties | 903 |
| | 869 |
| | 783 |
| 1,214 |
| | 1,163 |
| | 887 |
|
Number of operating properties (a)(b) | 2 |
| | 3 |
| | 4 |
| 21 |
| | 48 |
| | 2 |
|
| Number of tenants (net-leased properties) | 217 |
| | 222 |
| | 219 |
| 345 |
| | 304 |
| | 210 |
|
Total square footage (net-leased properties, in thousands) | 87,866 |
| | 90,120 |
| | 87,300 |
| 139,982 |
| | 130,956 |
| | 84,899 |
|
| Occupancy (net-leased properties) | 99.1 | % | | 98.8 | % | | 98.6 | % | 98.8 | % | | 98.3 | % | | 99.8 | % |
| Weighted-average lease term (net-leased properties, in years) | 9.7 |
| | 9.0 |
| | 9.1 |
| 10.7 |
| | 10.2 |
| | 9.6 |
|
Number of countries | 19 |
| | 19 |
| | 18 |
| 25 |
| | 25 |
| | 17 |
|
| Total assets (consolidated basis, in thousands) | $ | 8,453,954 |
| | $ | 8,742,089 |
| | $ | 8,641,029 |
| |
| Net investments in real estate (consolidated basis, in thousands) | 5,511,706 |
| | 5,826,544 |
| | 5,656,555 |
| |
| Total assets (in thousands) | | $ | 14,060,918 |
| | $ | 14,183,039 |
| | $ | 8,231,402 |
|
| Net investments in real estate (in thousands) | | 11,916,745 |
| | 11,928,854 |
| | 6,703,715 |
|
|
| |
| W. P. Carey 2019 10-K– 30 |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
Financing obtained — consolidated (in millions) (b) | $ | 384.6 |
| | $ | 1,541.7 |
| | $ | 1,750.0 |
|
Financing obtained — pro rata (in millions) (b) | 367.6 |
| | 1,541.7 |
| | 1,750.0 |
|
Acquisition volume (in millions, pro rata amount equals consolidated amount) (c) | 530.3 |
| | 688.7 |
| | 906.9 |
|
| Build-to-suit projects placed into service (in millions, pro rata amount equals consolidated amount) | 13.8 |
| | 53.2 |
| | — |
|
| New equity investments (in millions) | — |
| | — |
| | 25.0 |
|
| Average U.S. dollar/euro exchange rate | 1.1067 |
| | 1.1099 |
| | 1.3295 |
|
| Average U.S. dollar/British pound sterling exchange rate | 1.3558 |
| | 1.5286 |
| | 1.6482 |
|
Change in the U.S. CPI (d) | 2.0 | % | | 0.7 | % | | 0.8 | % |
Change in the German CPI (d) | 1.7 | % | | 0.3 | % | | 0.2 | % |
Change in the Spanish CPI (d) | 1.6 | % | | 0.1 | % | | (1.0 | )% |
Change in the Finnish CPI (d) | 1.0 | % | | (0.2 | )% | | 0.5 | % |
Change in the French CPI (d) | 0.6 | % | | 0.2 | % | | 0.1 | % |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
Acquisition volume (in millions) (e) | $ | 737.5 |
| | $ | 824.8 |
| | $ | 31.8 |
|
Construction projects completed (in millions) (f) | 122.5 |
| | 102.5 |
| | 65.4 |
|
| Average U.S. dollar/euro exchange rate | 1.1196 |
| | 1.1813 |
| | 1.1292 |
|
| Average U.S. dollar/British pound sterling exchange rate | 1.2767 |
| | 1.3356 |
| | 1.2882 |
|
Change in the U.S. CPI (g) | 2.3 | % | | 1.9 | % | | 2.1 | % |
Change in the Germany CPI (g) | 1.5 | % | | 1.7 | % | | 1.7 | % |
Change in the Poland CPI (g) | 3.2 | % | | 1.2 | % | | 2.2 | % |
Change in the Netherlands CPI (g) | 2.7 | % | | 2.0 | % | | 1.3 | % |
Change in the Spain CPI (g) | 0.8 | % | | 1.2 | % | | 1.1 | % |
__________
| |
| (a) | At December 31, 2016, operatingWe acquired 273 net-leased properties included two hotel properties acquired(in which we did not already have an ownership interest) in the CPA®:16CPA:17 Merger with an average occupancy of 82.1% for 2016. During each of 2016 and 2015, we sold one self-storage propertyin October 2018 (Note 173). At December 31, 2014, operating properties included the two hotel properties and two self-storage properties. |
| |
| (b) | BothAt December 31, 2019, operating properties consisted of 19 self-storage properties (of which we consolidated ten, with an average occupancy of 91.3% at that date), and two hotel properties, with an average occupancy of 85.4% for the consolidated and pro rata amounts for 2016 include the issuanceyear ended December 31, 2019, one of $350.0 million of 4.25% Senior Notes in September 2016. The consolidated amount for 2016 includes the refinancing of a non-recourse mortgage loan for $34.6 million, while the pro rata amount includes our proportionate share of such refinancing of $17.6 million. Amount for 2015 represents the exercise of the accordion feature under our Senior Unsecured Credit Facilitywhich was sold in January 2015, which increased our borrowing capacity under our Revolver by $500.0 million,2020 (Note 20). During the second quarter of 2019, we entered into net lease agreements for certain self-storage properties previously classified as operating properties. As a result, during the year ended December 31, 2019, we reclassified 27 consolidated self-storage properties from operating properties to net leases (Note 5). We acquired 44 self-storage properties and the issuances of €500.0 million of 2.0% Senior Notes and $450.0 million of 4.0% Senior Notes in January 2015. Amount for 2014 includes $500.0 million of 4.6% Senior Notes and our $1.25 billion Senior Unsecured Credit Facility (Note 11). |
|
| |
| W. P. Carey 2016 10-K– 40
|
| |
(c) | Amount for 2016 excludes an aggregate commitment for $128.1 million of build-to-suit financing (Note 5). Amount for 2016 also excludes $1.9 million for land acquired in connection with build-to-suit or expansion projects (Note 5). Amounts for 2015 and 2014 include acquisition-related costs for business combinations, which were expensedone hotel in the consolidated financial statements. We did not complete any business combinations during 2016. Amount for 2014 excludes properties acquired in the CPA®:16CPA:17 Merger in January 2014 withOctober 2018 (Note 3), and we acquired two self-storage properties in November 2018 (Note 8). We also sold a total fair valuehotel in April 2018 (Note 17). At December 31, 2018, operating properties also included two hotel properties. At December 31, 2017, operating properties consisted of approximately $3.7 billion (Note 3).two hotel properties. |
| |
| (c) | Excludes total square footage of 1.6 million for our operating properties at December 31, 2019. |
| |
| (d) | We acquired investments in Croatia, the Czech Republic, Estonia, Italy, Latvia, Lithuania, and Slovakia in connection with the CPA:17 Merger in October 2018 (Note 3). We also acquired investments in Denmark and Portugal during 2018. We sold all of our investments in Australia during 2018 (Note 17). |
| |
| (e) | Amount for 2018 excludes properties acquired in the CPA:17 Merger (Note 3). Amount for 2018 includes a property valued at $85.5 million that was acquired in exchange for 23 properties leased to the same tenant in a nonmonetary transaction (Note 5). Amount for 2018 includes the acquisition of an equity interest in two self-storage properties for $17.9 million (Note 8). |
| |
| (f) | Amount for 2017 includes projects that were partially completed in 2016. |
| |
| (g) | Many of our lease agreements include contractual increases indexed to changes in the CPI or similar indices in the jurisdictions in which the properties are located. |
|
| |
| W. P. Carey 2019 10-K– 31 |
Net-Leased Portfolio
The tables below represent information about our net-leased portfolio at December 31, 20162019 on a pro rata basis and, accordingly, exclude all operating properties. See Terms and Definitions below for a description of pro rata amounts and ABR.
Top Ten Tenants by ABR
(dollars in thousands, except percentages)thousands)
|
| | | | | | | | | | | | | | | | |
| Tenant/Lease Guarantor | | Property Type | | Tenant Industry | | Location | | Number of Properties | | ABR | | ABR Percent |
Hellweg Die Profi-Baumärkte GmbH & Co. KG (a) | | Retail | | Retail Stores | | Germany | | 53 |
| | $ | 32,019 |
| | 4.9 | % |
| U-Haul Moving Partners Inc. and Mercury Partners, LP | | Self Storage | | Cargo Transportation, Consumer Services | | Various U.S. | | 78 |
| | 31,853 |
| | 4.8 | % |
State of Andalucia (a) | | Office | | Sovereign and Public Finance | | Spain | | 70 |
| | 25,253 |
| | 3.8 | % |
Pendragon Plc (a) | | Retail | | Retail Stores, Consumer Services | | United Kingdom | | 73 |
| | 20,682 |
| | 3.1 | % |
| Marriott Corporation | | Hotel | | Hotel, Gaming and Leisure | | Various U.S. | | 18 |
| | 19,774 |
| | 3.0 | % |
Forterra Building Products (a) (b) | | Industrial | | Construction and Building | | Various U.S. and Canada | | 49 |
| | 16,981 |
| | 2.6 | % |
| True Value Company | | Warehouse | | Retail Stores | | Various U.S. | | 7 |
| | 15,372 |
| | 2.3 | % |
OBI Group (a) | | Office, Retail | | Retail Stores | | Poland | | 18 |
| | 14,375 |
| | 2.2 | % |
| UTI Holdings, Inc. | | Education Facility | | Consumer Services | | Various U.S. | | 5 |
| | 14,359 |
| | 2.2 | % |
ABC Group Inc. (c) | | Industrial, Office, Warehouse | | Automotive | | Various Canada, Mexico, and U.S. | | 14 |
| | 13,771 |
| | 2.1 | % |
| Total | | | | | | | | 385 |
| | $ | 204,439 |
| | 31.0 | % |
|
| | | | | | | | | | | | | | | |
| Tenant/Lease Guarantor | | Description | | Number of Properties | | ABR | | ABR Percent | | Weighted-Average Lease Term (Years) |
| U-Haul Moving Partners Inc. and Mercury Partners, LP | | Net lease self-storage properties in the U.S. | | 78 |
| | $ | 38,751 |
| | 3.5 | % | | 4.3 |
|
Hellweg Die Profi-Baumärkte GmbH & Co. KG (a) | | Do-it-yourself retail properties in Germany | | 42 |
| | 33,338 |
| | 3.0 | % | | 17.2 |
|
State of Andalucía (a) | | Government office properties in Spain | | 70 |
| | 28,393 |
| | 2.5 | % | | 15.0 |
|
Metro Cash & Carry Italia S.p.A. (a) | | Business-to-business wholesale stores in Italy and Germany | | 20 |
| | 27,119 |
| | 2.4 | % | | 7.3 |
|
Pendragon PLC (a) | | Automotive dealerships in the United Kingdom | | 69 |
| | 22,449 |
| | 2.0 | % | | 10.4 |
|
| Marriott Corporation | | Net lease hotel properties in the U.S. | | 18 |
| | 20,065 |
| | 1.8 | % | | 3.9 |
|
| Extra Space Storage, Inc. | | Net lease self-storage properties in the U.S. | | 27 |
| | 19,519 |
| | 1.7 | % | | 24.3 |
|
| Nord Anglia Education, Inc. | | K-12 private schools in the U.S. | | 3 |
| | 18,734 |
| | 1.7 | % | | 23.7 |
|
Forterra, Inc. (a) (b) | | Industrial properties in the U.S. and Canada | | 27 |
| | 18,394 |
| | 1.7 | % | | 23.5 |
|
| Advance Auto Parts, Inc. | | Distribution facilities in the U.S. | | 30 |
| | 18,345 |
| | 1.6 | % | | 13.1 |
|
| Total | | | | 384 |
| | $ | 245,107 |
| | 21.9 | % | | 13.3 |
|
__________
| |
| (a) | ABR amounts are subject to fluctuations in foreign currency exchange rates. |
| |
| (b) | Of the 4927 properties leased to Forterra, Building Products, 44Inc., 25 are located in the United States and fivetwo are located in Canada. |
| |
(c) | Of the 14 properties leased to ABC Group Inc., six are located in Canada, four are located in Mexico, and four are located in the United States. Tenant has 15 addresses for 14 properties, subject to three master leases denominated in U.S. dollars. |
|
| |
| | W. P. Carey 20162019 10-K– 4132 |
Portfolio Diversification by Geography
(in thousands, except percentages)
| | | Region | | ABR | | Percent | | Square Footage | | Percent | | ABR | | ABR Percent | | Square Footage (a) | | Square Footage Percent |
| United States | | | | | | | | | | | | | | | | |
| South | | | | | | | | | | | | | | | | |
| Texas | | $ | 55,891 |
| | 8.5 | % | | 8,217 |
| | 9.4 | % | | $ | 99,611 |
| | 8.9 | % | | 11,411 |
| | 8.2 | % |
| Florida | | 27,928 |
| | 4.2 | % | | 2,600 |
| | 3.0 | % | | 47,079 |
| | 4.2 | % | | 4,060 |
| | 2.9 | % |
| Georgia | | 19,795 |
| | 3.0 | % | | 3,293 |
| | 3.7 | % | | 28,197 |
| | 2.5 | % | | 4,024 |
| | 2.9 | % |
| Tennessee | | 15,317 |
| | 2.3 | % | | 2,306 |
| | 2.6 | % | | 15,721 |
| | 1.4 | % | | 2,260 |
| | 1.6 | % |
Other (a) | | 9,717 |
| | 1.5 | % | | 1,987 |
| | 2.3 | % | |
| Alabama | | | 15,273 |
| | 1.4 | % | | 2,397 |
| | 1.7 | % |
Other (b) | | | 12,622 |
| | 1.1 | % | | 2,263 |
| | 1.6 | % |
| Total South | | 128,648 |
| | 19.5 | % | | 18,403 |
| | 21.0 | % | | 218,503 |
| | 19.5 | % | | 26,415 |
| | 18.9 | % |
| | | | | | | | | | |
| East | | | | | | | | | | | | | | | | |
| North Carolina | | 19,680 |
| | 3.0 | % | | 4,518 |
| | 5.1 | % | | 32,648 |
| | 2.9 | % | | 8,052 |
| | 5.7 | % |
| Pennsylvania | | 18,518 |
| | 2.8 | % | | 2,526 |
| | 2.9 | % | | 25,079 |
| | 2.3 | % | | 3,609 |
| | 2.6 | % |
| Massachusetts | | | 21,395 |
| | 1.9 | % | | 1,397 |
| | 1.0 | % |
| New Jersey | | 18,339 |
| | 2.8 | % | | 1,097 |
| | 1.2 | % | | 19,330 |
| | 1.7 | % | | 1,100 |
| | 0.8 | % |
| South Carolina | | | 15,570 |
| | 1.4 | % | | 4,437 |
| | 3.2 | % |
| Virginia | | | 13,449 |
| | 1.2 | % | | 1,430 |
| | 1.0 | % |
| New York | | 18,063 |
| | 2.7 | % | | 1,178 |
| | 1.3 | % | | 12,919 |
| | 1.2 | % | | 1,392 |
| | 1.0 | % |
| Massachusetts | | 14,895 |
| | 2.3 | % | | 1,390 |
| | 1.6 | % | |
| Virginia | | 8,048 |
| | 1.2 | % | | 1,093 |
| | 1.2 | % | |
Other (a) | | 24,005 |
| | 3.6 | % | | 4,894 |
| | 5.6 | % | |
| Kentucky | | | 11,220 |
| | 1.0 | % | | 3,063 |
| | 2.2 | % |
Other (b) | | | 22,818 |
| | 2.0 | % | | 3,531 |
| | 2.5 | % |
| Total East | | 121,548 |
| | 18.4 | % | | 16,696 |
| | 18.9 | % | | 174,428 |
| | 15.6 | % | | 28,011 |
| | 20.0 | % |
| | | | | | | | | | |
| Midwest | | | | | | | | | |
| Illinois | | | 51,385 |
| | 4.6 | % | | 5,974 |
| | 4.3 | % |
| Minnesota | | | 25,652 |
| | 2.3 | % | | 2,362 |
| | 1.7 | % |
| Indiana | | | 18,002 |
| | 1.6 | % | | 2,827 |
| | 2.0 | % |
| Wisconsin | | | 15,874 |
| | 1.4 | % | | 2,984 |
| | 2.1 | % |
| Ohio | | | 15,125 |
| | 1.4 | % | | 3,153 |
| | 2.2 | % |
| Michigan | | | 13,898 |
| | 1.2 | % | | 2,132 |
| | 1.5 | % |
Other (b) | | | 27,471 |
| | 2.5 | % | | 4,697 |
| | 3.4 | % |
| Total Midwest | | | 167,407 |
| | 15.0 | % | | 24,129 |
| | 17.2 | % |
| West | | | | | | | | | | | | | | | | |
| California | | 42,097 |
| | 6.4 | % | | 3,303 |
| | 3.8 | % | | 60,393 |
| | 5.4 | % | | 5,162 |
| | 3.7 | % |
| Arizona | | 26,434 |
| | 4.0 | % | | 3,049 |
| | 3.5 | % | | 33,826 |
| | 3.0 | % | | 3,648 |
| | 2.6 | % |
| Colorado | | 10,768 |
| | 1.6 | % | | 1,268 |
| | 1.4 | % | | 11,413 |
| | 1.0 | % | | 1,008 |
| | 0.7 | % |
| Utah | | 6,781 |
| | 1.0 | % | | 920 |
| | 1.1 | % | |
Other (a) | | 18,265 |
| | 2.8 | % | | 2,322 |
| | 2.6 | % | |
Other (b) | | | 44,575 |
| | 4.0 | % | | 4,210 |
| | 3.0 | % |
| Total West | | 104,345 |
| | 15.8 | % | | 10,862 |
| | 12.4 | % | | 150,207 |
| | 13.4 | % | | 14,028 |
| | 10.0 | % |
| | | | | | | | | | |
| Midwest | | | | | | | | | |
| Illinois | | 21,041 |
| | 3.2 | % | | 3,246 |
| | 3.7 | % | |
| Michigan | | 11,894 |
| | 1.8 | % | | 1,396 |
| | 1.6 | % | |
| Indiana | | 9,163 |
| | 1.4 | % | | 1,418 |
| | 1.6 | % | |
| Ohio | | 8,407 |
| | 1.3 | % | | 1,911 |
| | 2.2 | % | |
| Missouri | | 6,900 |
| | 1.1 | % | | 1,305 |
| | 1.5 | % | |
| Minnesota | | 6,854 |
| | 1.0 | % | | 811 |
| | 0.9 | % | |
Other (a) | | 17,065 |
| | 2.6 | % | | 3,080 |
| | 3.5 | % | |
| Total Midwest | | 81,324 |
| | 12.4 | % | | 13,167 |
| | 15.0 | % | |
| United States Total | | 435,865 |
| | 66.1 | % | | 59,128 |
| | 67.3 | % | | 710,545 |
| | 63.5 | % | | 92,583 |
| | 66.1 | % |
| | | | | | | | | | |
| International | | | | | | | | | | | | | | | | |
| Germany | | 56,683 |
| | 8.6 | % | | 7,131 |
| | 8.1 | % | | 62,653 |
| | 5.6 | % | | 6,769 |
| | 4.8 | % |
| United Kingdom | | 31,778 |
| | 4.8 | % | | 2,569 |
| | 2.9 | % | |
| Spain | | 26,753 |
| | 4.1 | % | | 2,927 |
| | 3.3 | % | |
| Finland | | 18,707 |
| | 2.8 | % | | 1,588 |
| | 1.8 | % | |
| Poland | | 16,163 |
| | 2.5 | % | | 2,189 |
| | 2.5 | % | | 52,066 |
| | 4.6 | % | | 7,215 |
| | 5.1 | % |
| The Netherlands | | 13,662 |
| | 2.1 | % | | 2,233 |
| | 2.6 | % | | 50,698 |
| | 4.5 | % | | 6,862 |
| | 4.9 | % |
| Spain | | | 49,089 |
| | 4.4 | % | | 4,226 |
| | 3.0 | % |
| United Kingdom | | | 42,592 |
| | 3.8 | % | | 3,309 |
| | 2.4 | % |
| Italy | | | 25,513 |
| | 2.3 | % | | 2,386 |
| | 1.7 | % |
| Croatia | | | 16,513 |
| | 1.5 | % | | 1,794 |
| | 1.3 | % |
| Denmark | | | 13,991 |
| | 1.3 | % | | 2,320 |
| | 1.7 | % |
| France | | 13,247 |
| | 2.0 | % | | 1,338 |
| | 1.5 | % | | 13,336 |
| | 1.2 | % | | 1,359 |
| | 1.0 | % |
| Canada | | 12,232 |
| | 1.9 | % | | 2,196 |
| | 2.5 | % | | 12,867 |
| | 1.2 | % | | 2,103 |
| | 1.5 | % |
| Australia | | 11,162 |
| | 1.7 | % | | 3,160 |
| | 3.6 | % | |
| Finland | | | 11,376 |
| | 1.0 | % | | 949 |
| | 0.7 | % |
Other (b)(c) | | 22,677 |
| | 3.4 | % | | 3,407 |
| | 3.9 | % | | 57,280 |
| | 5.1 | % | | 8,107 |
| | 5.8 | % |
| International Total | | 223,064 |
| | 33.9 | % | | 28,738 |
| | 32.7 | % | | 407,974 |
| | 36.5 | % | | 47,399 |
| | 33.9 | % |
| | | | | | | | | | |
Total (c) | | $ | 658,929 |
| | 100.0 | % | | 87,866 |
| | 100.0 | % | |
| Total | | | $ | 1,118,519 |
| | 100.0 | % | | 139,982 |
| | 100.0 | % |
|
| |
| | W. P. Carey 20162019 10-K– 4233 |
Portfolio Diversification by Property Type
(in thousands, except percentages)
| | | Property Type | | ABR | | Percent | | Square Footage | | Percent | | ABR | | ABR Percent | | Square Footage (a) | | Square Footage Percent |
| Industrial | | $ | 196,803 |
| | 29.9 | % | | 39,781 |
| | 45.3 | % | | $ | 268,434 |
| | 24.0 | % | | 47,996 |
| | 34.3 | % |
| Office | | 167,609 |
| | 25.4 | % | | 11,650 |
| | 13.2 | % | | 251,519 |
| | 22.5 | % | | 16,894 |
| | 12.1 | % |
| Retail | | 102,687 |
| | 15.6 | % | | 9,862 |
| | 11.3 | % | |
| Warehouse | | 93,576 |
| | 14.2 | % | | 18,705 |
| | 21.3 | % | | 240,200 |
| | 21.5 | % | | 46,169 |
| | 33.0 | % |
| Self Storage | | 31,853 |
| | 4.8 | % | | 3,535 |
| | 4.0 | % | |
Retail (d) | | | 198,686 |
| | 17.7 | % | | 17,556 |
| | 12.5 | % |
| Self Storage (net lease) | | | 58,270 |
| | 5.2 | % | | 5,810 |
| | 4.1 | % |
Other (d)(e) | | 66,401 |
| | 10.1 | % | | 4,333 |
| | 4.9 | % | | 101,410 |
| | 9.1 | % | | 5,557 |
| | 4.0 | % |
Total (c) | | $ | 658,929 |
| | 100.0 | % | | 87,866 |
| | 100.0 | % | | $ | 1,118,519 |
| | 100.0 | % | | 139,982 |
| | 100.0 | % |
| |
| (a) | Includes square footage for any vacant properties. |
| |
| (b) | Other properties within South include assets in Louisiana, Alabama,Oklahoma, Arkansas, Mississippi, and Oklahoma.Mississippi. Other properties within East include assets in Maryland, Connecticut, South Carolina, Kentucky,West Virginia, New Hampshire, Maryland, and West Virginia.Maine. Other properties within Midwest include assets in Missouri, Kansas, Nebraska, Iowa, North Dakota, and South Dakota. Other properties within West include assets in Washington,Utah, Nevada, Oregon, Wyoming,Washington, Hawaii, New Mexico, Alaska,Wyoming, Montana, and Montana. Other properties within Midwest include assets in Nebraska, Kansas, Wisconsin, Iowa, South Dakota, and North Dakota. |
| |
(b) | Includes assets in Norway, Mexico, Thailand, Hungary, Austria, Sweden, Belgium, Malaysia, and Japan.Alaska. |
| |
| (c) | Includes square footage for vacant properties.assets in Lithuania, Norway, Mexico, Hungary, the Czech Republic, Austria, Portugal, Sweden, Japan, Slovakia, Latvia, Belgium, and Estonia. |
| |
| (d) | Includes automotive dealerships. |
| |
| (e) | Includes ABR from tenants with the following property types: hotel, education facility, hotel (net lease), fitness facility, laboratory, theater, net-leaseand student housing and fitness facility.(net lease). |
|
| |
| | W. P. Carey 20162019 10-K– 4334 |
Portfolio Diversification by Tenant Industry
(in thousands, except percentages)
| | | Industry Type | | ABR | | Percent | | Square Footage | | Percent | | ABR | | ABR Percent | | Square Footage | | Square Footage Percent |
Retail Stores (a) | | $ | 110,802 |
| | 16.8 | % | | 14,961 |
| | 17.0 | % | | $ | 233,346 |
| | 20.9 | % | | 30,993 |
| | 22.1 | % |
| Consumer Services | | 68,557 |
| | 10.4 | % | | 5,565 |
| | 6.3 | % | | 113,588 |
| | 10.1 | % | | 8,429 |
| | 6.0 | % |
| Automotive | | 52,296 |
| | 7.9 | % | | 8,864 |
| | 10.1 | % | | 72,679 |
| | 6.5 | % | | 12,166 |
| | 8.7 | % |
| Cargo Transportation | | | 60,211 |
| | 5.4 | % | | 9,345 |
| | 6.7 | % |
| Business Services | | | 60,073 |
| | 5.4 | % | | 5,272 |
| | 3.8 | % |
| Grocery | | | 56,574 |
| | 5.1 | % | | 6,549 |
| | 4.7 | % |
| Healthcare and Pharmaceuticals | | | 51,010 |
| | 4.6 | % | | 4,281 |
| | 3.1 | % |
| Hotel, Gaming, and Leisure | | | 43,663 |
| | 3.9 | % | | 2,423 |
| | 1.7 | % |
| Construction and Building | | | 42,290 |
| | 3.8 | % | | 7,673 |
| | 5.5 | % |
| Capital Equipment | | | 39,686 |
| | 3.5 | % | | 6,550 |
| | 4.7 | % |
| Sovereign and Public Finance | | 37,846 |
| | 5.7 | % | | 3,408 |
| | 3.9 | % | | 39,259 |
| | 3.5 | % | | 3,364 |
| | 2.4 | % |
| Construction and Building | | 35,986 |
| | 5.5 | % | | 8,142 |
| | 9.3 | % | |
| Hotel, Gaming, and Leisure | | 34,614 |
| | 5.3 | % | | 2,254 |
| | 2.6 | % | |
| Beverage, Food, and Tobacco | | | 37,825 |
| | 3.4 | % | | 4,862 |
| | 3.5 | % |
| Containers, Packaging, and Glass | | | 35,718 |
| | 3.2 | % | | 6,186 |
| | 4.4 | % |
| High Tech Industries | | 33,138 |
| | 5.0 | % | | 2,905 |
| | 3.3 | % | | 30,444 |
| | 2.7 | % | | 3,384 |
| | 2.4 | % |
| Beverage, Food, and Tobacco | | 29,204 |
| | 4.4 | % | | 6,680 |
| | 7.6 | % | |
| Cargo Transportation | | 27,711 |
| | 4.2 | % | | 3,860 |
| | 4.4 | % | |
| Durable Consumer Goods | | | 30,214 |
| | 2.7 | % | | 6,870 |
| | 4.9 | % |
| Insurance | | | 24,875 |
| | 2.2 | % | | 1,759 |
| | 1.3 | % |
| Banking | | | 19,239 |
| | 1.7 | % | | 1,247 |
| | 0.9 | % |
| Telecommunications | | | 18,803 |
| | 1.7 | % | | 1,732 |
| | 1.2 | % |
| Non-Durable Consumer Goods | | | 15,088 |
| | 1.3 | % | | 5,194 |
| | 3.7 | % |
| Media: Advertising, Printing, and Publishing | | 27,695 |
| | 4.2 | % | | 1,695 |
| | 1.9 | % | | 14,785 |
| | 1.3 | % | | 1,435 |
| | 1.0 | % |
| Healthcare and Pharmaceuticals | | 27,537 |
| | 4.2 | % | | 1,988 |
| | 2.3 | % | |
| Containers, Packaging, and Glass | | 26,665 |
| | 4.1 | % | | 5,325 |
| | 6.1 | % | |
| Capital Equipment | | 25,891 |
| | 3.9 | % | | 4,873 |
| | 5.5 | % | |
| Aerospace and Defense | | | 13,539 |
| | 1.2 | % | | 1,279 |
| | 0.9 | % |
| Media: Broadcasting and Subscription | | | 12,787 |
| | 1.1 | % | | 784 |
| | 0.6 | % |
| Wholesale | | 14,414 |
| | 2.2 | % | | 2,806 |
| | 3.2 | % | | 12,206 |
| | 1.1 | % | | 2,005 |
| | 1.4 | % |
| Business Services | | 12,060 |
| | 1.8 | % | | 1,730 |
| | 2.0 | % | |
| Durable Consumer Goods | | 11,089 |
| | 1.7 | % | | 2,486 |
| | 2.8 | % | |
| Aerospace and Defense | | 10,697 |
| | 1.6 | % | | 1,183 |
| | 1.4 | % | |
| Grocery | | 10,515 |
| | 1.6 | % | | 1,260 |
| | 1.4 | % | |
| Chemicals, Plastics, and Rubber | | 9,568 |
| | 1.5 | % | | 1,108 |
| | 1.3 | % | | 12,037 |
| | 1.1 | % | | 1,403 |
| | 1.0 | % |
| Metals and Mining | | 8,885 |
| | 1.3 | % | | 1,341 |
| | 1.5 | % | |
| Oil and Gas | | 8,014 |
| | 1.2 | % | | 368 |
| | 0.4 | % | |
| Non-Durable Consumer Goods | | 7,689 |
| | 1.2 | % | | 1,883 |
| | 2.1 | % | |
| Telecommunications | | 7,254 |
| | 1.1 | % | | 447 |
| | 0.5 | % | |
| Banking | | 7,155 |
| | 1.1 | % | | 596 |
| | 0.7 | % | |
Other (b) | | 13,647 |
| | 2.1 | % | | 2,138 |
| | 2.4 | % | | 28,580 |
| | 2.6 | % | | 4,797 |
| | 3.4 | % |
| Total | | $ | 658,929 |
| | 100.0 | % | | 87,866 |
| | 100.0 | % | | $ | 1,118,519 |
| | 100.0 | % | | 139,982 |
| | 100.0 | % |
__________
| |
| (a) | Includes automotive dealerships. |
| |
| (b) | Includes ABR from tenants in the following industries: insurance,metals and mining, oil and gas, environmental industries, electricity, media: broadcasting and subscription,consumer transportation, forest products and paper, real estate, and environmental industries.finance. Also includes square footage for vacant properties. |
|
| |
| | W. P. Carey 20162019 10-K– 4435 |
Lease Expirations
(in thousands, except percentages and number of leases)
| | Year of Lease Expiration (a) | | Number of Leases Expiring | | ABR | | Percent | | Square Footage | | Percent | | Number of Leases Expiring | | Number of Tenants with Leases Expiring | | ABR | | ABR Percent | | Square Footage | | Square Footage Percent |
December 31, 2016 (b) | | 2 |
| | $ | 7,222 |
| | 1.1 | % | | 466 |
| | 0.5 | % | |
2017 (c) | | 11 |
| | 8,238 |
| | 1.3 | % | | 1,530 |
| | 1.7 | % | |
| 2018 | | 11 |
| | 12,059 |
| | 1.8 | % | | 1,528 |
| | 1.7 | % | |
| 2019 | | 23 |
| | 30,459 |
| | 4.6 | % | | 3,375 |
| | 3.8 | % | |
| 2020 | | 23 |
| | 34,430 |
| | 5.2 | % | | 3,433 |
| | 3.9 | % | | 25 |
| | 22 |
| | $ | 19,294 |
| | 1.7 | % | | 2,050 |
| | 1.5 | % |
| 2021 | | 81 |
| | 41,602 |
| | 6.3 | % | | 6,639 |
| | 7.6 | % | | 77 |
| | 23 |
| | 33,967 |
| | 3.0 | % | | 3,899 |
| | 2.8 | % |
| 2022 | | 38 |
| | 66,337 |
| | 10.1 | % | | 8,732 |
| | 10.0 | % | | 41 |
| | 32 |
| | 58,261 |
| | 5.2 | % | | 5,377 |
| | 3.8 | % |
| 2023 | | 17 |
| | 38,334 |
| | 5.8 | % | | 5,387 |
| | 6.1 | % | | 31 |
| | 28 |
| | 46,954 |
| | 4.2 | % | | 5,919 |
| | 4.2 | % |
| 2024 | | 43 |
| | 91,362 |
| | 13.9 | % | | 11,441 |
| | 13.0 | % | | 76 |
| | 49 |
| | 111,646 |
| | 10.0 | % | | 13,961 |
| | 10.0 | % |
| 2025 | | 43 |
| | 32,344 |
| | 4.9 | % | | 3,553 |
| | 4.1 | % | | 61 |
| | 30 |
| | 58,023 |
| | 5.2 | % | | 7,194 |
| | 5.1 | % |
| 2026 | | 24 |
| | 21,489 |
| | 3.3 | % | | 3,275 |
| | 3.7 | % | | 32 |
| | 20 |
| | 49,824 |
| | 4.5 | % | | 7,354 |
| | 5.2 | % |
| 2027 | | 27 |
| | 42,704 |
| | 6.5 | % | | 6,911 |
| | 7.9 | % | | 45 |
| | 27 |
| | 71,604 |
| | 6.4 | % | | 8,237 |
| | 5.9 | % |
| 2028 | | 9 |
| | 18,693 |
| | 2.8 | % | | 2,166 |
| | 2.5 | % | | 43 |
| | 25 |
| | 61,774 |
| | 5.5 | % | | 4,867 |
| | 3.5 | % |
| 2029 | | 11 |
| | 19,272 |
| | 2.9 | % | | 2,897 |
| | 3.3 | % | | 31 |
| | 18 |
| | 36,289 |
| | 3.2 | % | | 4,561 |
| | 3.3 | % |
| 2030 | | 11 |
| | 45,853 |
| | 7.0 | % | | 4,804 |
| | 5.5 | % | | 28 |
| | 22 |
| | 73,580 |
| | 6.6 | % | | 6,638 |
| | 4.7 | % |
| Thereafter | | 86 |
| | 148,531 |
| | 22.5 | % | | 20,910 |
| | 23.8 | % | |
| 2031 | | | 66 |
| | 16 |
| | 68,973 |
| | 6.2 | % | | 8,155 |
| | 5.8 | % |
| 2032 | | | 35 |
| | 14 |
| | 43,105 |
| | 3.9 | % | | 5,914 |
| | 4.2 | % |
| 2033 | | | 19 |
| | 13 |
| | 48,275 |
| | 4.3 | % | | 6,672 |
| | 4.8 | % |
| Thereafter (>2033) | | | 172 |
| | 84 |
| | 336,950 |
| | 30.1 | % | | 47,554 |
| | 34.0 | % |
| Vacant | | — |
| | — |
| | — | % | | 819 |
| | 0.9 | % | | — |
| | — |
| | — |
| | — | % | | 1,630 |
| | 1.2 | % |
| Total | | 460 |
| | $ | 658,929 |
| | 100.0 | % | | 87,866 |
| | 100.0 | % | | 782 |
| | | | $ | 1,118,519 |
| | 100.0 | % | | 139,982 |
| | 100.0 | % |
__________
| |
| (a) | Assumes tenant doestenants do not exercise any renewal option. |
| |
(b) | Reflects ABR for leases that expired on December 31, 2016. |
| |
(c) | One month-to-month lease with ABR of $0.1 million is included in 2017 ABR.options or purchase options. |
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, which we do not control, we report our net investment and our net income or loss from that investment. Under the pro rata consolidation method, we present our proportionate share, based on our economic ownership of these jointly owned investments, of the portfolio metrics of those investments. Multiplying each of our jointly owned investments’ financial statement line items by our percentage ownership and adding or subtracting those amounts from our totals, as applicable, may not accurately depict the legal and economic implications of holding an ownership interest of less than 100% in our jointly owned investments.
ABR —ABR represents contractual minimum annualized base rent for our net-leased properties, net of receivable reserves as determined by GAAP, and reflects exchange rates as of the date of this Report.December 31, 2019. If there is a rent abatement, we annualize the first monthly contractual base rent following the free rent period. ABR is not applicable to operating properties.
|
| |
| W. P. Carey 2016 10-K– 45
|
Results of Operations
We operate in two reportable segments: Owned Real Estate and Investment Management. We evaluate our results of operations with a primary focus on increasing and enhancing the value, quality, and number of properties in our Owned Real Estate segment, as well as assets owned by the Managed Programs, which are managed by our Investment Management segment. We focus our efforts on accretive investing and improving underperforming assetsportfolio quality through re-leasing efforts, including negotiation of lease renewals, or selectively selling assets in order to increase value in our real estate portfolio. The abilityThrough our Investment Management segment, we expect to increase assets undercontinue to earn fees and other income from the management by structuring investments on behalf of the portfolios of the remaining Managed Programs is affected, among other things, by our ability to raise capital on behalfuntil those programs reach the end of the Managed Programs and our ability to identify and enter into appropriate investments and related financing on their behalf.respective life cycles.
|
| |
| | W. P. Carey 20162019 10-K– 4636 |
Owned Real Estate
The following table presents the comparative results of our Owned Real Estate segment (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | Change | | 2015 | | 2014 | | Change |
| Revenues | | | | | | | | | | | |
| Lease revenues | $ | 663,463 |
| | $ | 656,956 |
| | $ | 6,507 |
| | $ | 656,956 |
| | $ | 573,829 |
| | $ | 83,127 |
|
| Lease termination income and other | 35,696 |
| | 25,145 |
| | 10,551 |
| | 25,145 |
| | 17,767 |
| | 7,378 |
|
| Operating property revenues | 30,767 |
| | 30,515 |
| | 252 |
| | 30,515 |
| | 28,925 |
| | 1,590 |
|
| Reimbursable tenant costs | 25,438 |
| | 22,832 |
| | 2,606 |
| | 22,832 |
| | 24,862 |
| | (2,030 | ) |
| | 755,364 |
| | 735,448 |
| | 19,916 |
| | 735,448 |
| | 645,383 |
| | 90,065 |
|
| Operating Expenses | | | | | | | | | | | |
| Depreciation and amortization: | | | | | | | | | | | |
| Net-leased properties | 266,637 |
| | 270,241 |
| | (3,604 | ) | | 270,241 |
| | 228,418 |
| | 41,823 |
|
| Operating properties | 4,238 |
|
| 4,251 |
| | (13 | ) | | 4,251 |
| | 3,889 |
| | 362 |
|
| Corporate depreciation and amortization | 1,399 |
| | 1,744 |
| | (345 | ) | | 1,744 |
| | 792 |
| | 952 |
|
| | 272,274 |
| | 276,236 |
| | (3,962 | ) | | 276,236 |
| | 233,099 |
| | 43,137 |
|
| Property expenses: | | | | | | | | | | | |
| Net-leased properties | 26,762 |
| | 30,080 |
| | (3,318 | ) | | 30,080 |
| | 16,877 |
| | 13,203 |
|
| Reimbursable tenant costs | 25,438 |
| | 22,832 |
| | 2,606 |
| | 22,832 |
| | 24,862 |
| | (2,030 | ) |
| Operating property expenses | 22,669 |
| | 22,119 |
| | 550 |
| | 22,119 |
| | 20,848 |
| | 1,271 |
|
| | 74,869 |
| | 75,031 |
| | (162 | ) | | 75,031 |
| | 62,587 |
| | 12,444 |
|
| Impairment charges | 59,303 |
| | 29,906 |
| | 29,397 |
| | 29,906 |
| | 23,067 |
| | 6,839 |
|
| General and administrative | 34,591 |
| | 47,676 |
| | (13,085 | ) | | 47,676 |
| | 38,797 |
| | 8,879 |
|
| Stock-based compensation expense | 5,224 |
| | 7,873 |
| | (2,649 | ) | | 7,873 |
| | 12,659 |
| | (4,786 | ) |
| Restructuring and other compensation | 4,413 |
| | — |
| | 4,413 |
| | — |
| | — |
| | — |
|
| Merger, property acquisition, and other expenses | 2,993 |
| | (9,908 | ) | | 12,901 |
| | (9,908 | ) | | 34,465 |
| | (44,373 | ) |
| | 453,667 |
| | 426,814 |
| | 26,853 |
| | 426,814 |
| | 404,674 |
| | 22,140 |
|
| Other Income and Expenses | | | | | | | | | | | |
| Interest expense | (183,409 | ) | | (194,326 | ) | | 10,917 |
| | (194,326 | ) | | (178,122 | ) | | (16,204 | ) |
| Equity in earnings of equity method investments in the Managed REITs and real estate | 62,724 |
| | 52,972 |
| | 9,752 |
| | 52,972 |
| | 44,116 |
| | 8,856 |
|
| Other income and (expenses) | 3,665 |
| | 1,952 |
| | 1,713 |
| | 1,952 |
| | (14,505 | ) | | 16,457 |
|
| Gain on change in control of interests | — |
| | — |
| | — |
| | — |
| | 105,947 |
| | (105,947 | ) |
| | (117,020 | ) | | (139,402 | ) | | 22,382 |
| | (139,402 | ) | | (42,564 | ) | | (96,838 | ) |
| Income from continuing operations before income taxes | 184,677 |
| | 169,232 |
| | 15,445 |
| | 169,232 |
| | 198,145 |
| | (28,913 | ) |
| Benefit from (provision for) income taxes | 3,418 |
| | (17,948 | ) | | 21,366 |
| | (17,948 | ) | | 916 |
| | (18,864 | ) |
| Income from continuing operations before gain on sale of real estate | 188,095 |
| | 151,284 |
| | 36,811 |
| | 151,284 |
| | 199,061 |
| | (47,777 | ) |
| Income from discontinued operations, net of tax | — |
| | — |
| | — |
| | — |
| | 33,318 |
| | (33,318 | ) |
| Gain on sale of real estate, net of tax | 71,318 |
| | 6,487 |
| | 64,831 |
| | 6,487 |
| | 1,581 |
| | 4,906 |
|
| Net Income from Owned Real Estate | 259,413 |
| | 157,771 |
| | 101,642 |
| | 157,771 |
| | 233,960 |
| | (76,189 | ) |
| Net income attributable to noncontrolling interests | (7,060 | ) | | (10,961 | ) | | 3,901 |
| | (10,961 | ) | | (5,573 | ) | | (5,388 | ) |
| Net Income from Owned Real Estate Attributable to W. P. Carey | $ | 252,353 |
| | $ | 146,810 |
| | $ | 105,543 |
| | $ | 146,810 |
| | $ | 228,387 |
| | $ | (81,577 | ) |
|
| |
| W. P. Carey 2016 10-K– 47
|
Lease Composition and Leasing Activities
As of December 31, 2016, 94.7% of our net leases, based on ABR, have rent increases, of which 68.7% have adjustments based on CPI or similar indices and 26.0% have fixed rent increases. CPI and similar rent adjustments are based on formulas indexed to changes in the CPI, or other similar indices for the jurisdiction in which the property is located, some of which have caps and/or floors. Over the next 12 months, fixed rent escalations are scheduled to increase ABR by an average of 2.8%, excluding leases that are set to expire within the next 12 months. We own international investments and, therefore, lease revenues from these investments are subject to exchange rate fluctuations in various foreign currencies, primarily the euro.
The following discussion presents a summary of rents on existing properties arising from leases with new tenants and renewed leases with existing tenants for the period presented and, therefore, does not include new acquisitions for our portfolio during the period presented.
During 2016, we entered into six new leases for a total of approximately 0.4 million square feet of leased space. The average rent for the leased space is $10.38 per square foot. We provided a tenant improvement allowance on four of these leases totaling $2.6 million. In addition, during 2016, we extended 16 leases with existing tenants for a total of approximately 3.2 million square feet of leased space. The estimated average new rent for the leased space is $7.17 per square foot, compared to the average former rent of $8.24 per square foot, reflecting current market conditions. We provided a tenant improvement allowance on five of these leases totaling $17.3 million.
|
| |
| W. P. Carey 2016 10-K– 48
|
Real Estate — Property Level Contribution
The following table presents the Property level contribution for our consolidated net-leased and operating properties within our Real Estate segment, as well as a reconciliation to Net income from Owned Real Estate attributable to W. P. Carey (in thousands):
| | | | Years Ended December 31, | Years Ended December 31, |
| | 2016 | | 2015 | | Change | | 2015 | | 2014 | | Change | 2019 | | 2018 | | Change | | 2018 | | 2017 | | Change |
| Existing Net-Leased Properties | | | | | | | | | | | | | | | | | | | | | | |
| Lease revenues | $ | 250,758 |
| | $ | 253,364 |
| | $ | (2,606 | ) | | $ | 253,364 |
| | $ | 259,556 |
| | $ | (6,192 | ) | $ | 634,557 |
| | $ | 624,698 |
| | $ | 9,859 |
| | $ | 624,698 |
| | $ | 603,889 |
| | $ | 20,809 |
|
| Depreciation and amortization | | (221,176 | ) | | (228,060 | ) | | 6,884 |
| | (228,060 | ) | | (222,308 | ) | | (5,752 | ) |
| Reimbursable tenant costs | | (25,800 | ) | | (21,445 | ) | | (4,355 | ) | | (21,445 | ) | | (19,590 | ) | | (1,855 | ) |
| Property expenses | (5,537 | ) | | (8,256 | ) | | 2,719 |
| | (8,256 | ) | | (4,715 | ) | | (3,541 | ) | (19,373 | ) | | (17,201 | ) | | (2,172 | ) | | (17,201 | ) | | (14,223 | ) | | (2,978 | ) |
| Property level contribution | | 368,208 |
| | 357,992 |
| | 10,216 |
| | 357,992 |
| | 347,768 |
| | 10,224 |
|
| Net-Leased Properties Acquired in the CPA:17 Merger | | | | | | | | | | | | |
| Lease revenues | | 349,518 |
| | 55,403 |
| | 294,115 |
| | 55,403 |
| | — |
| | 55,403 |
|
| Depreciation and amortization | (96,439 | ) | | (95,909 | ) | | (530 | ) | | (95,909 | ) | | (100,268 | ) | | 4,359 |
| (152,757 | ) | | (22,136 | ) | | (130,621 | ) | | (22,136 | ) | | — |
| | (22,136 | ) |
| Property level contribution | 148,782 |
| | 149,199 |
| | (417 | ) | | 149,199 |
| | 154,573 |
| | (5,374 | ) | |
Net-Leased Properties Acquired in the CPA®:16 Merger | | | | | | | | | | | | |
| Lease revenues | 217,110 |
| | 220,640 |
| | (3,530 | ) | | 220,640 |
| | 211,626 |
| | 9,014 |
| |
| Reimbursable tenant costs | | (27,618 | ) | | (5,062 | ) | | (22,556 | ) | | (5,062 | ) | | — |
| | (5,062 | ) |
| Property expenses | (10,683 | ) | | (10,697 | ) | | 14 |
| | (10,697 | ) | | (3,739 | ) | | (6,958 | ) | (15,454 | ) | | (2,685 | ) | | (12,769 | ) | | (2,685 | ) | | — |
| | (2,685 | ) |
| Depreciation and amortization | (81,832 | ) | | (87,264 | ) | | 5,432 |
| | (87,264 | ) | | (82,994 | ) | | (4,270 | ) | |
| Property level contribution | 124,595 |
| | 122,679 |
| | 1,916 |
| | 122,679 |
| | 124,893 |
| | (2,214 | ) | 153,689 |
| | 25,520 |
| | 128,169 |
| | 25,520 |
| | — |
| | 25,520 |
|
| Recently Acquired Net-Leased Properties | | | | | | | | | | | | | | | | | | | | | | |
| Lease revenues | 142,406 |
| | 103,244 |
| | 39,162 |
| | 103,244 |
| | 15,796 |
| | 87,448 |
| 90,382 |
| | 29,198 |
| | 61,184 |
| | 29,198 |
| | 495 |
| | 28,703 |
|
| Depreciation and amortization | | (37,438 | ) | | (12,730 | ) | | (24,708 | ) | | (12,730 | ) | | (174 | ) | | (12,556 | ) |
| Reimbursable tenant costs | | (1,928 | ) | | (406 | ) | | (1,522 | ) | | (406 | ) | | (3 | ) | | (403 | ) |
| Property expenses | (6,898 | ) | | (6,207 | ) | | (691 | ) | | (6,207 | ) | | (1,277 | ) | | (4,930 | ) | (1,367 | ) | | (400 | ) | | (967 | ) | | (400 | ) | | (78 | ) | | (322 | ) |
| Property level contribution | | 49,649 |
| | 15,662 |
| | 33,987 |
| | 15,662 |
| | 240 |
| | 15,422 |
|
| Existing Operating Property | | | | | | | | | | | | |
| Operating property revenues | | 15,001 |
| | 15,179 |
| | (178 | ) | | 15,179 |
| | 14,554 |
| | 625 |
|
| Depreciation and amortization | (58,099 | ) | | (49,948 | ) | | (8,151 | ) | | (49,948 | ) | | (6,827 | ) | | (43,121 | ) | (1,515 | ) | | (1,947 | ) | | 432 |
| | (1,947 | ) | | (1,714 | ) | | (233 | ) |
| Operating property expenses | | (11,742 | ) | | (11,607 | ) | | (135 | ) | | (11,607 | ) | | (11,358 | ) | | (249 | ) |
| Property level contribution | | 1,744 |
| | 1,625 |
| | 119 |
| | 1,625 |
| | 1,482 |
| | 143 |
|
| Operating Properties Acquired in the CPA:17 Merger | | | | | | | | | | | | |
| Operating property revenues | | 20,787 |
| | 6,391 |
| | 14,396 |
| | 6,391 |
| | — |
| | 6,391 |
|
| Depreciation and amortization | | (19,502 | ) | | (6,040 | ) | | (13,462 | ) | | (6,040 | ) | | — |
| | (6,040 | ) |
| Operating property expenses | | (8,205 | ) | | (2,258 | ) | | (5,947 | ) | | (2,258 | ) | | — |
| | (2,258 | ) |
| Property level contribution | 77,409 |
| | 47,089 |
| | 30,320 |
| | 47,089 |
| | 7,692 |
| | 39,397 |
| (6,920 | ) | | (1,907 | ) | | (5,013 | ) | | (1,907 | ) | | — |
| | (1,907 | ) |
| Properties Sold or Held for Sale | | | | | | | | | | | | | | | | | | | | | | |
| Lease revenues | 53,189 |
| | 79,708 |
| | (26,519 | ) | | 79,708 |
| | 86,851 |
| | (7,143 | ) | 11,918 |
| | 35,199 |
| | (23,281 | ) | | 35,199 |
| | 47,513 |
| | (12,314 | ) |
| Operating revenues | 64 |
| | 944 |
| | (880 | ) | | 944 |
| | 1,063 |
| | (119 | ) | |
| Operating property revenues | | 14,432 |
| | 6,502 |
| | 7,930 |
| | 6,502 |
| | 16,008 |
| | (9,506 | ) |
| Depreciation and amortization | | (9,681 | ) | | (15,259 | ) | | 5,578 |
| | (15,259 | ) | | (23,947 | ) | | 8,688 |
|
| Reimbursable tenant costs | | (230 | ) | | (1,163 | ) | | 933 |
| | (1,163 | ) | | (1,931 | ) | | 768 |
|
| Property expenses | (3,749 | ) | | (5,464 | ) | | 1,715 |
| | (5,464 | ) | | (7,739 | ) | | 2,275 |
| (3,351 | ) | | (2,487 | ) | | (864 | ) | | (2,487 | ) | | (3,029 | ) | | 542 |
|
| Depreciation and amortization | (30,275 | ) | | (37,280 | ) | | 7,005 |
| | (37,280 | ) | | (38,539 | ) | | 1,259 |
| |
| Property level contribution | 19,229 |
| | 37,908 |
| | (18,679 | ) | | 37,908 |
| | 41,636 |
| | (3,728 | ) | |
| Operating Properties | | | | | | | | | | | | |
| Revenues | 30,703 |
| | 29,571 |
| | 1,132 |
| | 29,571 |
| | 27,862 |
| | 1,709 |
| |
| Property expenses | (22,564 | ) | | (21,575 | ) | | (989 | ) | | (21,575 | ) | | (20,255 | ) | | (1,320 | ) | |
| Depreciation and amortization | (4,230 | ) | | (4,091 | ) | | (139 | ) | | (4,091 | ) | | (3,679 | ) | | (412 | ) | |
| Operating property expenses | | (18,068 | ) | | (6,285 | ) | | (11,783 | ) | | (6,285 | ) | | (12,068 | ) | | 5,783 |
|
| Property level contribution | 3,909 |
| | 3,905 |
| | 4 |
| | 3,905 |
| | 3,928 |
| | (23 | ) | (4,980 | ) | | 16,507 |
| | (21,487 | ) | | 16,507 |
| | 22,546 |
| | (6,039 | ) |
| Property Level Contribution | 373,924 |
| | 360,780 |
| | 13,144 |
| | 360,780 |
| | 332,722 |
| | 28,058 |
| 561,390 |
| | 415,399 |
| | 145,991 |
| | 415,399 |
| | 372,036 |
| | 43,363 |
|
| Add: Lease termination income and other | 35,696 |
| | 25,145 |
| | 10,551 |
| | 25,145 |
| | 17,767 |
| | 7,378 |
| 36,268 |
| | 6,555 |
| | 29,713 |
| | 6,555 |
| | 4,749 |
| | 1,806 |
|
| Less other expenses: | | | | | | | | | | | | | | | | | | | | | | |
| General and administrative | | (56,796 | ) | | (47,210 | ) | | (9,586 | ) | | (47,210 | ) | | (39,002 | ) | | (8,208 | ) |
| Impairment charges | (59,303 | ) | | (29,906 | ) | | (29,397 | ) | | (29,906 | ) | | (23,067 | ) | | (6,839 | ) | (32,539 | ) | | (4,790 | ) | | (27,749 | ) | | (4,790 | ) | | (2,769 | ) | | (2,021 | ) |
| General and administrative | (34,591 | ) | | (47,676 | ) | | 13,085 |
| | (47,676 | ) | | (38,797 | ) | | (8,879 | ) | |
| Stock-based compensation expense | (5,224 | ) | | (7,873 | ) | | 2,649 |
| | (7,873 | ) | | (12,659 | ) | | 4,786 |
| (13,248 | ) | | (10,450 | ) | | (2,798 | ) | | (10,450 | ) | | (6,960 | ) | | (3,490 | ) |
| Restructuring and other compensation | (4,413 | ) | | — |
| | (4,413 | ) | | — |
| | — |
| | — |
| |
| Merger, property acquisition, and other expenses | (2,993 | ) | | 9,908 |
| | (12,901 | ) | | 9,908 |
| | (34,465 | ) | | 44,373 |
| |
| Corporate depreciation and amortization | (1,399 | ) | | (1,744 | ) | | 345 |
| | (1,744 | ) | | (792 | ) | | (952 | ) | (1,231 | ) | | (1,289 | ) | | 58 |
| | (1,289 | ) | | (1,289 | ) | | — |
|
| Merger and other expenses | | (101 | ) | | (41,426 | ) | | 41,325 |
| | (41,426 | ) | | (605 | ) | | (40,821 | ) |
| Other Income and Expenses | | | | |
|
| |
|
| | | |
|
| | | | |
|
| |
|
| | | |
|
|
| Interest expense | (183,409 | ) | | (194,326 | ) | | 10,917 |
| | (194,326 | ) | | (178,122 | ) | | (16,204 | ) | (233,325 | ) | | (178,375 | ) | | (54,950 | ) | | (178,375 | ) | | (165,775 | ) | | (12,600 | ) |
| Equity in earnings of equity method investments in the Managed REITs and real estate | 62,724 |
| | 52,972 |
| | 9,752 |
| | 52,972 |
| | 44,116 |
| | 8,856 |
| |
| Other income and (expenses) | 3,665 |
| | 1,952 |
| | 1,713 |
| | 1,952 |
| | (14,505 | ) | | 16,457 |
| |
| Gain on change in control of interests | — |
| | — |
| | — |
| | — |
| | 105,947 |
| | (105,947 | ) | |
| Other gains and (losses) | | 30,251 |
| | 30,015 |
| | 236 |
| | 30,015 |
| | (5,655 | ) | | 35,670 |
|
| Gain on sale of real estate, net | | 18,143 |
| | 118,605 |
| | (100,462 | ) | | 118,605 |
| | 33,878 |
| | 84,727 |
|
| (Loss) gain on change in control of interests | | (8,416 | ) | | 18,792 |
| | (27,208 | ) | | 18,792 |
| | — |
| | 18,792 |
|
| Equity in earnings of equity method investments in real estate | | 2,361 |
| | 13,341 |
| | (10,980 | ) | | 13,341 |
| | 13,068 |
| | 273 |
|
| | (117,020 | ) | | (139,402 | ) | | 22,382 |
| | (139,402 | ) | | (42,564 | ) | | (96,838 | ) | (190,986 | ) | | 2,378 |
| | (193,364 | ) | | 2,378 |
| | (124,484 | ) | | 126,862 |
|
| Income from continuing operations before income taxes and gain on sale of real estate | 184,677 |
|
| 169,232 |
|
| 15,445 |
|
| 169,232 |
|
| 198,145 |
|
| (28,913 | ) | |
| Benefit from (provision for) income taxes | 3,418 |
| | (17,948 | ) | | 21,366 |
| | (17,948 | ) | | 916 |
| | (18,864 | ) | |
| Income from continuing operations before gain on sale of real estate | 188,095 |
|
| 151,284 |
|
| 36,811 |
|
| 151,284 |
|
| 199,061 |
|
| (47,777 | ) | |
| Income from discontinued operations, net of tax | — |
| | — |
| | — |
| | — |
| | 33,318 |
| | (33,318 | ) | |
| Gain on sale of real estate, net of tax | 71,318 |
| | 6,487 |
| | 64,831 |
| | 6,487 |
| | 1,581 |
| | 4,906 |
| |
| Net Income from Owned Real Estate | 259,413 |
|
| 157,771 |
|
| 101,642 |
|
| 157,771 |
|
| 233,960 |
|
| (76,189 | ) | |
| Net income attributable to noncontrolling interests | (7,060 | ) | | (10,961 | ) | | 3,901 |
| | (10,961 | ) | | (5,573 | ) | | (5,388 | ) | |
| Net Income from Owned Real Estate Attributable to W. P. Carey | $ | 252,353 |
|
| $ | 146,810 |
|
| $ | 105,543 |
|
| $ | 146,810 |
|
| $ | 228,387 |
|
| $ | (81,577 | ) | |
| Income before income taxes | | 302,757 |
|
| 319,167 |
|
| (16,410 | ) |
| 319,167 |
|
| 201,676 |
|
| 117,491 |
|
| (Provision for) benefit from income taxes | | (30,802 | ) | | 844 |
| | (31,646 | ) | | 844 |
| | (1,743 | ) | | 2,587 |
|
| Net Income from Real Estate | | 271,955 |
|
| 320,011 |
|
| (48,056 | ) |
| 320,011 |
|
| 199,933 |
|
| 120,078 |
|
| Net loss (income) attributable to noncontrolling interests | | 110 |
| | (12,775 | ) | | 12,885 |
| | (12,775 | ) | | (7,794 | ) | | (4,981 | ) |
| Net Income from Real Estate Attributable to W. P. Carey | | $ | 272,065 |
|
| $ | 307,236 |
|
| $ | (35,171 | ) |
| $ | 307,236 |
|
| $ | 192,139 |
|
| $ | 115,097 |
|
Also refer to Note 18 for a table presenting the comparative results of our Real Estate segment.
|
| |
| | W. P. Carey 20162019 10-K– 4937 |
Property level contribution is a non-GAAP financial measure that we believe to be a useful supplemental measure for management and investors in evaluating and analyzing the financial results of our net-leased and operating properties included in our Owned Real Estate segment over time. Property level contribution presents theour lease and operating property revenues, less property expenses, reimbursable tenant costs, and depreciation and amortization. Reimbursable tenant costs (within Real Estate revenues) are now included within Lease revenues in the consolidated statements of income (Note 2). We believe that Property level contribution allows for meaningful comparison between periods of the direct costs of owning and operating our net-leased assets and operating properties. When a property is leased on a net-lease basis, reimbursable tenant costs are recorded as both income and property expense and, therefore, have no impact on the Property level contribution. While we believe that Property level contribution is a useful supplemental measure, it should not be considered as an alternative to Net income from Owned Real Estate attributable to W. P. Carey as an indication of our operating performance.
Existing Net-Leased Properties
Existing net-leased properties are those that we acquired or placed into service prior to January 1, 20142017 and that were not sold or held for sale during the periods presented. For the periods presented, there were 313787 existing net-leased properties.
20162019vs.20152018 — For the year ended December 31, 20162019 as compared to 2015, property level contribution2018, lease revenues from existing net-leased properties increased by $9.2 million due to new leases, $8.2 million related to scheduled rent increases, $4.4 million related to completed construction projects on existing properties, and $3.1 million primarily due to accelerated amortization of an above-market rent lease intangible during the prior year in connection with a lease restructuring. These increases were partially offset by decreases of $10.1 million as a result of the weakening of foreign currencies (primarily the euro) in relation to the U.S. dollar between the years and $7.3 million due to lease expirations or early termination options.
Reimbursable tenant costs from existing net-leased properties increased primarily due to land lease payments for several properties recorded during the current year following the adoption of Accounting Standards Update 2016-02, Leases (Topic 842) as of January 1, 2019 (Note 2), as a result of which we began recording such payments on a gross basis, as well as higher real estate taxes related to a domestic property. Depreciation and amortization expense from existing net-leased properties decreased by $0.4 million, due to a decrease in lease revenues of $2.6 million and an increase in depreciation and amortization expense of $0.5 million, partially offset by a decrease in property expenses of $2.7 million. Lease revenues decreased primarily due to accelerated amortization of two in-place lease intangibles during the terminationprior year in connection with lease terminations, as well as the weakening of an existing lease on a domestic property that was subsequently demolished and redeveloped into an industrial facility (Note 5). Property expenses decreased primarily due to the conversion of a gross lease into a triple-net lease in November 2015, which decreased non-reimbursable property expenses by $1.6 million.
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, property level contribution from existing net-leased properties decreased by $5.4 million, primarily due to a decrease in lease revenues of $6.2 million. Lease revenues decreased by $10.9 million as a result of a decrease in the average exchange rate of the U.S. dollar in relation to foreign currencies (primarily the euro) in relation to the U.S. dollar between the years. This decrease was partially offset by an increase of $4.3 million as a result of scheduled rent increases.Property expenses from existing net-leased properties increased primarily due to tenant vacancies during 2018 and 2019, which resulted in property expenses no longer being reimbursable.
Net-Leased Properties Acquired in the CPA®:16CPA:17 Merger
Net-leased properties acquired in the CPA®:16CPA:17 Merger on October 31, 2018 (Note 3) consistsconsisted of 302275 net-leased properties, that were heldas well as one property placed into service during all periods presented.
2016vs.2015 — For the year ended December 31, 2016 as compared to 2015, property level contribution fromfirst quarter of 2019, which was an active build-to-suit project at the time of acquisition in the CPA:17 Merger. The 275 net-leased properties included 27 self-storage properties acquired in the CPA®:16CPA:17 Merger, increased by $1.9 million, primarily duewhich were reclassified from operating properties to a decrease in depreciation and amortization expense of $5.4 million, partially offset by a decrease in lease revenues of $3.5 million. The decrease in depreciation and amortization was primarily due to the acceleration of amortization of in-place lease intangibles for leases terminated during 2015. Lease revenues decreased due to a termination payment of $3.0 million recorded during 2015 that was amortized into lease revenues over the remaining life of the shortened lease. In addition,net-leased properties during the year ended December 31, 2016, we recorded an allowance for credit losses2019 as a result of $7.1 million on a direct financing lease due to a decline inentering into net-lease agreements during the estimated amountsecond quarter of future payments we will receive from the tenant, including the possible early termination of the direct financing lease2019 (Note 65), which was included in property expenses. During the year ended December 31, 2015, we recorded an allowance for credit losses of $8.7 million on this property.
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, property level contribution from net-leased. Net-leased properties acquired in the CPA®:16CPA:17 Merger decreased by $2.2 million, primarily due to an increase in property expenses of $7.0 million and an increase incontributed lease revenue, depreciation and amortization, expense of $4.3 million, partially offset by an increase in lease revenues of $9.0 million. During theand property expenses for a full year ended December 31, 2015, we recorded an allowance for credit losses of $8.7 million on a direct financing lease, as described above, which was included in property expenses. Depreciation and amortization expense and lease revenues represent 12 months of activity for the year ended December 31, 2015during 2019, as compared to 11two months of activity for the year ended December 31, 2014. The additional month of depreciation and amortization expense resulted in an increase of $8.0 million, partially offset by a decrease of $4.7 million as a result of a decrease in the average exchange rate of the U.S. dollar in relation to foreign currencies (primarily the euro) between the years. The additional month of lease revenues resulted in an increase of $22.5 million, partially offset by a decrease of $13.5 million as a result of the fluctuations in foreign currency described above.during 2018.
|
| |
| W. P. Carey 2016 10-K– 50
|
Recently Acquired Net-Leased Properties
Recently acquired net-leased properties are those that we acquired or placed into service subsequent to December 31, 2013,2016, excluding thoseproperties acquired in the CPA®:16 Merger.CPA:17 Merger, and that were not sold or held for sale during the periods presented. Since January 1, 2014,2017, we acquired 2240 investments, comprised of 272121 properties (two of which we acquired in 2017, 75 of which we acquired in 2018, and 44 of which we acquired in 2019), and placed three properties into service (two in 2018 and one property into service.in 2019).
20162019vs.20152018 — For the year ended December 31, 20162019 as compared to 2015, property level contribution from recently acquired net-leased properties increased by $30.3 million, primarily due to an increase in2018, lease revenues of $39.2 million, partially offset by an increase in depreciation and amortization expense of $8.2 million. Lease revenues increased by $24.7$23.3 million as a result of the 66 properties we acquired during the year ended December 31, 2016 and by $15.7 million as a result of the 9845 properties we acquired or placed into service during the year ended December 31, 2015. Depreciation2019 and amortization expense increased by $7.1$37.7 million primarily as a result of a full year of activity for the 9877 properties we acquired or placed into service during the year ended December 31, 2015.
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, property level contribution from recently acquired net-leased properties increased by $39.4 million, primarily due to an increase in lease revenues of $87.4 million, partially offset by an increase in depreciation2018. Depreciation and amortization expense of $43.1 million. Lease revenues increased by $33.5$8.8 million as a result of the 9845 properties we acquired or placed into service during the year ended December 31, 2015,2019 and by $53.9$15.8 million as a result of the 109 properties we acquired during the year ended December 31, 2014. Depreciation and amortization expense increased by $14.2 million as a result of the 9877 properties we acquired or placed into service during the year ended December 31, 2015 and by $28.9 million primarily2018.
|
| |
| W. P. Carey 2019 10-K– 38 |
Existing Operating Property
We have one hotel operating property with results of operations reflected in all periods presented. In April 2018, we sold another hotel operating property, which is included in Properties Sold or Held for Sale below.
For the year ended December 31, 2019 as a resultcompared to 2018, property level contribution from our existing operating property was substantially unchanged.
Operating Properties Acquired in the CPA:17 Merger
Operating properties acquired in the CPA:17 Merger (Note 3) consisted of a full year of activityten self-storage properties (which excludes seven self-storage properties acquired in the CPA:17 Merger accounted for under the 109equity method). Aside from these ten operating properties, we acquired 27 self-storage properties in the CPA:17 Merger, which were reclassified from operating properties to net-leased properties during the year ended December 31, 2014.2019, as described in Net-Leased Properties Acquired in the CPA:17 Merger above. At December 31, 2019, we had one hotel operating property classified as held for sale (Note 5), which was acquired in the CPA:17 Merger and is included in Properties Sold or Held for Sale below. Operating properties acquired in the CPA:17 Merger contributed operating property revenues, depreciation and amortization, and operating property expenses for a full year during 2019, as compared to two months during 2018.
Properties Sold or Held for Sale
Properties sold orDuring the year ended December 31, 2019, we disposed of 22 properties, including the repayment of a loan receivable in June 2019 (Note 6). At December 31, 2019, we had one hotel operating property classified as held for sale discussed(Note 5), which we acquired in this section represent only thosethe CPA:17 Merger and sold in January 2020 (Note 20).
During the year ended December 31, 2018, we disposed of 72 properties, that did not qualify for classification as discontinued operations. including one hotel operating property.
During the year ended December 31, 2017, we disposed of 18 properties and a parcel of vacant land.
In addition to the impact on property level contribution related to properties we sold or classified as held for sale during the periods presented, we recognized gains and lossesgain (loss) on sale of real estate, lease termination income, impairment charges, and a lossgain (loss) on extinguishment of debt. The impact of these transactions is described in further detail below. We discuss properties sold or held-for sale that did qualify for classification as discontinued operations under below and in Note 17.
Other Revenues and Expenses
Lease Termination Income and
Income from Discontinued Operations, Net of Tax, below and in Note 17.Other
During2019 — For the year ended December 31, 2016, we sold 30 properties (one2019, lease termination income and other was $36.3 million, primarily comprised of: (i) income of which was held for sale at December 31, 2015)$9.1 million from receipt of proceeds from a bankruptcy claim on a prior tenant; (ii) income of $8.8 million related to a lease restructuring in May 2019 that led to the recognition of $6.6 million in rent receipts during the third and fourth quarters of 2019 on claims that were previously deemed uncollectible, and a parcelrelated value-added tax refund of vacant land. We also disposed$2.2 million that was recognized in May 2019; (iii) interest income from our loans receivable totaling $6.2 million; (iv) income of three properties (one of which was held for sale at December 31, 2015) with an aggregate carrying value of $56.7$6.2 million either through transferring ownershiprelated to the mortgage lender or foreclosure, in satisfaction of mortgage loans encumbering the properties totaling $92.4 million (Note 17).
Ina lease termination and related master lease restructuring that occurred during the fourth quarter of 2015, we executed a lease amendment with a tenant in a domestic office building. The amendment extended2019, for which payment will be received over the remaining lease term an additional 15 yearsof properties held under that master lease; and (v) income substantially from a parking garage attached to January 31, 2037 and provided a one-time rent paymentone of $25.0 million, which was paid to us on December 18, 2015. The lease amendment also provided an option to terminate the lease effective February 29, 2016, with additional lease termination fees of $22.2 million to be paid to us on or five days before February 29, 2016 upon exercise of the option. The tenant exercised the option on January 1, 2016. The aggregate of the additional rent payment of $25.0 million and the lease termination fees of $22.2 million were amortized to lease termination income from the lease amendment date on December 4, 2015 through the end of the non-cancelable lease term on February 29, 2016, resulting in $15.0 million recognized duringour net-leased properties totaling $3.5 million.
2018 — For the year ended December 31, 20152018, lease termination income and $32.2other was $6.6 million, primarily comprised of lease termination income from a former tenant received in the third quarter of 2018 and income recognized during 2018 related to a lease termination that occurred during the year ended December 31, 2016 withinfourth quarter of 2017. Lease termination income and other in the consolidated financial statements. In connection with the lease amendment, we defeased the mortgage loan encumbering the property with a principal balancealso consisted of $36.5 million,interest income from our loans receivable.
General and recognized a lossAdministrative
General and administrative expenses recorded by our Real Estate segment are allocated based on
extinguishment of debt of $5.3 million, which was included in Other income and (expenses) in the consolidated financial statementstime incurred by our personnel for the
year ended December 31, 2015. In addition, during the fourth quarter of 2015, we entered into an agreement to sell the property to a third party,Real Estate and
the buyer placed a deposit of $12.7 million for the purchase of the property that was held in escrow. At December 31, 2015, this property was classified as held for sale (Note 5). During the three months ended March 31, 2016, we sold the property for proceeds of $44.4 million, net of selling costs, and recognized a loss on the sale of $10.7 million.Investment Management segments.
During the year ended December 31, 2015, we sold 14 properties, four of which were held for sale at December 31, 2014.
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During the year ended December 31, 2014, we sold 13 properties, including a property subject to a direct financing lease that we acquired in the CPA®:16 Merger and a parcel of land that was conveyed to the local government.
Operating Properties
Operating properties consist of our investments in two hotels acquired in the CPA®:16 Merger for all periods presented.
For the years ended December 31, 2016, 2015, and 2014, property level contribution from operating properties was substantially the same.
Other Revenues and Expenses
Lease Termination Income and Other
20162019vs.2018 — For the year ended December 31, 2016, lease termination income2019 as compared to 2018, general and other was $35.7administrative expenses in our Real Estate segment increased by $9.6 million, primarily consisting of the $32.2 million of lease termination income related to a domestic property that was sold during the three months ended March 31, 2016, as discussed above (Note 17).
2015 — For the year ended December 31, 2015, lease termination income and other was $25.1 million, primarily consisting of:
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• | $15.0 million of lease termination income related to the domestic property that was sold during the three months ended March 31, 2016, as described above (Note 17); |
$2.7 million in lease termination income related to a tenant paying us at the end of the lease term for costs associated with repairs the tenant was required to make under the terms of the lease;
$2.4 million of other income in connection with the termination by the buyer of a purchase and sale agreement on one of our properties; and
$2.7 million of lease termination income due to
an increase in estimated time spent by management and personnel on Real Estate segment activities following the
early termination of two leases during the first quarter of 2015.CPA:17 Merger (Note 3).
2014 — For the year ended December 31, 2014, lease termination income and other was $17.8 million, primarily consisting of lease termination income from the early termination of three leases.
Impairment Charges
Where the undiscounted cash flows for an asset are less than the asset’s carrying value when considering and evaluating the various alternative courses of action that may occur, we recognize an impairment charge to reduce the carrying value of the asset to its estimated fair value. Further, when we classify an asset as held for sale, we carry the asset at the lower of its current carrying value or its fair value, less estimated cost to sell. Our impairment charges are more fully described in Note 9.
2016 2019 — For the year ended December 31, 2016,2019, we recognized impairment charges totaling $59.3$32.5 million to reduce the carrying values of certain assets to their estimated fair values, consisting of the following:
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| • | $41.031.2 million recognized on five properties accounted for as Net investments in direct financing leases, primarily due to a portfolio of 14 properties that were sold during 2016 (Note 17lease restructuring, based on the cash flows expected to be derived from the underlying assets (discounted at the rate implicit in the lease), in accordance with Accounting Standards Codification (“ASC”) 310, Receivables; and |
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| • | $11.4 million, inclusive of an amount attributable to a noncontrolling interest of $1.2 million, recognized on four vacant properties, one of which was sold in 2016 and two of which were disposed of in January 2017 (Note 20); and |
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• | $7.01.3 million recognized on a property that was classified as held for sale as of December 31, 2016 and sold in January 2017February 2020 (Note 20). |
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| W. P. Carey 2016 10-K– 52
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2015 2018 — For the year ended December 31, 2015,2018, we recognized impairment charges totaling $29.9$4.8 million to reduce the carrying values of certain assets to their estimated fair values, consisting of the following:
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• | $8.7 million recognized on a property due to the expected expiration of its related lease; this property was disposed of in January 2017 (Note 20); |
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• | $6.9 million recognized on a property that was demolished in accordance with a plan to redevelop the property (Note 5); |
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• | $6.9 million, inclusive of an amount attributable to a noncontrolling interest of $1.0 million, recognized on two properties and a parcel of vacant land that are expected to be sold; one of these properties was disposed of in January 2017 (Note 20); |
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• | $4.1 million recognized on three properties that were disposed of during 2015 or 2016 (Note 17); and |
$3.33.8 million recognized on five properties as a result of other-than-temporary declines in the estimated fair values of the buildings’ residual values.property due to a tenant bankruptcy; and
2014 — For the year ended December 31, 2014, we recognized impairment charges totaling $23.1 million to reduce the carrying values of certain assets to their estimated fair values, consisting of the following:
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• | $14.0 million recognized on a property as a result of the tenant not renewing its lease; this property was disposed of during 2016 (Note 17); |
$8.51.0 million recognized on 13 properties that were sold; and
$0.6 million recognized on two properties as a result of other-than-temporary declines in the estimated fair values of the buildings’ residual values.
See Equity in earnings of equity method investments in the Managed REITs and real estate below for an additional impairment charge incurred.
General and Administrative
As discussed in Note 4, certain personnel costs (i.e., those not related to our senior management, our legal transactions team, our broker-dealer, or our investments team) and overhead costs are charged to the CPA® REITs and our Owned Real Estate Segment based on the trailing 12-month reported revenues of the Managed Programs and us, with the remainder borne by our Investment Management segment. Personnel costs related to our senior management, our legal transactions team, and our investments team are allocated to our Owned Real Estate Segment based on the trailing 12-month investment volume. We allocate personnel costs (excluding our senior management, our broker-dealer, and our investments team) and overhead costs to the CWI REITs, the Managed BDCs, and CESH I based on the time incurred by our personnel.
2016vs.2015 — For the year ended December 31, 2016 as compared to 2015, general and administrative expenses in our Owned Real Estate segment, which excludes restructuring and other compensation expenses as described below, decreased by $13.1 million, primarilyproperty due to an overall declinea tenant vacancy; this property was sold in compensation expense and professional fees as a result of the reduction in headcount, including the RIF, and other cost savings initiatives implemented during 2016. The allocation of personnel and overhead costs to our Owned Real Estate segment also declined as a result of a change in the mix of investment volume on which a portion of the allocation is based. Also contributing to the decrease were commissions to investment officers related to our owned real estate acquisitions, which decreased by $3.4 million during 2016 as compared to 2015, as a result of lower acquisition volume in 2016.July 2019.
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, general and administrative expenses in our Owned Real Estate segment increased by $8.9 million, primarily due to an increase of $5.5 million in general and administrative expenses related to a shift in expenses allocable to our Owned Real Estate segment as a result of the CPA®:16 Merger, in accordance with the allocation formula outlined above. In addition, commissions to investment officers related to our real estate acquisitions increased by $3.4 million due to higher acquisition volume in our owned portfolio during 2015.
Stock-based Compensation Expense
For a description of our equity plans and awards, please see Note 15.
20162019vs.20152018 — For the year ended December 31, 20162019 as compared to 2015,2018, stock-based compensation expense allocated to the Owned Real Estate segment decreasedincreased by $2.6$2.8 million, primarily due to an increase in time spent by management and personnel on Real Estate segment activities, partially offset by the reduction inimpact of the modification of the restricted share units or RSUs,(“RSUs”) and performance share units or PSUs, outstanding as a result of the RIF(“PSUs”) held by our former chief executive officer in connection with his retirement in February 2018 (Note 1315), as well as a reduced allocation of costs resulting.
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| W. P. Carey 2016 10-K– 53
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from lower investment volume in our Owned Real Estate segment as compared to the investment volume for the Managed Programs.
2015 vs. 20142018 — For the year ended December 31, 2015 as compared to 2014, stock-based compensation expense allocated to2018, merger and other expenses were primarily comprised of costs incurred in connection with the Owned Real Estate segment decreased by $4.8 million, primarily due to the higher value of RSUsCPA:17 Merger, including advisory fees, transfer taxes, and PSUs that vested in 2014 as compared to the RSUslegal, accounting, and PSUs granted in 2015.tax-related professional fees (Note 1, Note 3).
Restructuring and Other CompensationInterest Expense
2016 2019vs.2018— For the year ended December 31, 2016, we recorded total restructuring and other compensation expenses of $11.9 million, of which $4.4 million was allocated to our Owned Real Estate segment. Included in the total was $5.1 million of severance related to our employment agreement with our former chief executive officer and $6.8 million related to severance, stock-based compensation, and other costs incurred as part of the employee terminations and RIF during the year (Note 13).
Merger, Property Acquisition, and Other Expenses
Merger, property acquisition, and other expenses consist primarily of acquisition-related costs incurred on investments that are accounted for as business combinations, which are required to be expensed under current accounting guidance, as well as costs incurred related to the formal strategic review that we completed in May 2016 and merger-related expenses incurred in connection with the CPA®:16 Merger.
2016 — For the year ended December 31, 2016, Merger, property acquisition, and other expenses were $3.0 million, which consisted of advisory expenses and professional fees within our Owned Real Estate segment in connection with our formal strategic review.
2015 — For the year ended December 31, 2015, Merger, property acquisition, and other expenses included a reversal of $25.0 million of liabilities for German real estate transfer taxes that were previously recorded in connection with both the CPA®:15 Merger in September 2012 and the restructuring of a German investment, Hellweg Die Profi-Baumärkte GmbH & Co. KG, or Hellweg 2, in October 2013 (Note 7). Based on the German tax authority’s revocation of its previous position on the application of a ruling in Federal German tax court, the obligation to pay the transfer taxes in connection with these transactions was no longer deemed probable of occurring. This benefit was partially offset by property acquisition expenses of $11.5 million and advisory expenses and professional fees of $3.6 million incurred related to our formal strategic review.
2014 — For the year ended December 31, 2014, Merger, property acquisition, and other expenses were $34.5 million, which consisted of merger-related expenses of $30.5 million and property acquisition expenses of $4.0 million. Merger-related expenses during 2014 represent costs incurred in connection with the CPA®:16 Merger, which was completed on January 31, 2014.
Interest Expense
2016vs.2015 — For the year ended December 31, 20162019 as compared to 2015,2018, interest expense decreasedincreased by $10.9$55.0 million, primarily due to an overall decreaseincrease of $47.8 million related to non-recourse mortgage loans assumed in the CPA:17 Merger (Note 3). We incurred interest expense on such mortgage loans for a full year during 2019, as compared to two months during 2018. Since January 1, 2018, we have (i) completed four offerings of senior unsecured notes totaling $2.1 billion (based on the exchange rate of the euro on the dates of issuance for our weighted-average interest rate. Oureuro-denominated senior unsecured notes) with a weighted-average interest rate of 2.2% and (ii) reduced our mortgage debt outstanding by prepaying or repaying at maturity a total of $1.4 billion of non-recourse mortgage loans with a weighted-average interest rate of 4.3% (Note 11). Our average outstanding debt balance was 3.9%$6.3 billion and 4.1%$4.9 billion during the years ended December 31, 20162019 and 2015,2018, respectively. The weighted-average interest rate of our debt decreased primarily as a result of paying off certain non-recourse mortgage loans with our Revolver, which bears interest at a lower rate than our mortgage loans (Note 11).
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, interest expense increased by $16.2 million as a result of an increase in average outstanding borrowings, partially offset by an overall decrease in our weighted-average interest rate and the impact of the weakening of foreign currencies (primarily the euro) in relation to the U.S. dollar. Average outstanding indebtedness increased to $4.6 billion during 2015 as compared to $3.7 billion during 2014. Our weighted-average interest rate decreased to 4.1%was 3.4% during 2015 as compared to 4.6% during 2014. The decrease in the average exchange rate of the U.S. dollar in relation to foreign currencies betweenboth the years resulted in an $8.2 million decrease in interest expense in 2015 as compared to 2014. During 2014, interest expense included $8.0 million related to the amortization of a mortgage loan premium related to an international mortgage loan that matured inended December 2014.31, 2019 and 2018.
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| W. P. Carey 2016 10-K– 54
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Equity in Earnings of Equity Method Investments in the Managed REITs and Real Estate
Equity in earnings of equity method investments in the Managed REITs and real estate is recognized in accordance with the investment agreement for each of our equity method investments. In addition, we are entitled to receive distributions of Available Cash (Note 4) from the operating partnerships of each of the Managed REITs. The net income of our unconsolidated investments fluctuates based on the timing of transactions, such as new leases and property sales, as well as the level of impairment charges. The following table presents the details of our Equity in earnings of equity method investments in the Managed REITs and real estate (in thousands): |
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Equity in earnings of equity method investments in the Managed REITs: | | | | | |
Equity in earnings of equity method investments in the Managed REITs (a) (b) | $ | 4,675 |
| | $ | 692 |
| | $ | 1,694 |
|
Other-than-temporary impairment charges on the Special Member Interest in CPA®:16 – Global’s operating partnership, net of related deferred revenue earned (a) | — |
| | — |
| | (28 | ) |
Distributions of Available Cash: (c) | | | | | |
CPA®:16 – Global | — |
| | — |
| | 4,751 |
|
CPA®:17 – Global | 24,765 |
| | 24,668 |
| | 20,427 |
|
CPA®:18 – Global | 7,586 |
| | 6,317 |
| | 1,778 |
|
| CWI 1 | 9,445 |
| | 7,120 |
| | 4,096 |
|
| CWI 2 | 3,325 |
| | 301 |
| | — |
|
| Equity in earnings of equity method investments in the Managed REITs | 49,796 |
| | 39,098 |
| | 32,718 |
|
| Equity in earnings of equity method investments in real estate: | | | | | |
Equity investments acquired in the CPA®:16 Merger (a) (d) | 9,866 |
| | 9,509 |
| | 8,306 |
|
Existing equity investments (e) | 1,787 |
| | 3,090 |
| | 1,300 |
|
Recently acquired equity investment (f) | 1,275 |
| | 1,275 |
| | 1,018 |
|
| Equity investments sold | — |
| | — |
| | 82 |
|
Equity investments consolidated after the CPA®:16 Merger (g) | — |
| | — |
| | 692 |
|
| Total equity in earnings of equity method investments in real estate | 12,928 |
| | 13,874 |
| | 11,398 |
|
| Total equity in earnings of equity method investments in the Managed REITs and real estate | $ | 62,724 |
| | $ | 52,972 |
| | $ | 44,116 |
|
__________
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(a) | In May 2011, we acquired a special member interest, or the Special Member Interest, in CPA®:16 – Global’s operating partnership, which we recorded as an equity investment at fair value with an equal amount recorded as deferred revenue (Note 3). On January 31, 2014, we acquired all the remaining interests in CPA®:16 – Global through the CPA®:16 Merger, and as a result, we now consolidate the operating partnership. See Gain on Change in Control of Interests below for discussion on the gain recognized. |
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(b) | Increase for 2016 as compared to 2015 was primarily due to an increase of $3.9 million from our investment in shares of common stock of CPA®:17 – Global, which recognized significant gains on the sale of real estate during 2016.
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(c) | We are entitled to receive distributions of our share of earnings up to 10% of the Available Cash from the operating partnerships of each of the Managed REITs, as defined in their respective operating partnership agreements (Note 4). Distributions of Available Cash received and earned from the Managed REITs increased primarily as a result of new investments that they entered into during 2016, 2015, and 2014. We ceased receiving such distributions from CPA®:16 – Global following the CPA®:16 Merger in January 2014 (Note 3). |
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(d) | We acquired our interests or additional interests in these investments in the CPA®:16 Merger in January 2014 (Note 3). |
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(e) | Represents equity investments we held prior to January 1, 2014. Equity income on a jointly owned German investment increased by $2.1 million during the year ended December 31, 2015 as compared to 2014, representing our share of the bankruptcy proceeds received (Note 7). |
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(f) | Represents the equity investment we acquired after December 31, 2013. During the year ended December 31, 2014, we received a preferred equity position in Beach House JV, LLC as part of a sale of a property. The preferred equity, redeemable on March 13, 2019, provides us with a preferred rate of return of 8.5% (Note 7). |
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(g) | We acquired additional interests in these investments in the CPA®:16 Merger. Subsequent to the CPA®:16 Merger, we consolidate these majority owned or wholly owned investments.
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Other IncomeGains and (Expenses)(Losses)
Other incomegains and (expenses)(losses) primarily consists of gains and losses on foreign currency transactions, derivative instruments, and extinguishment of debt. For the year ended December 31, 2018, gains and losses on foreign currency transactions were recognized on the remeasurement of certain of our euro-denominated unsecured debt instruments that were not designated as net investment hedges; such instruments were all designated as net investment hedges during the year ended December 31, 2019 (Note 10). We also make certain foreign currency-denominated intercompany loans to a number of our foreign subsidiaries, most of which do not have the U.S. dollar as their functional currency. Remeasurement of foreign currency
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| W. P. Carey 2019 10-K– 40 |
intercompany transactions that are scheduled for settlement, consisting primarily of accrued interest and short-term loans, are included in the determination of net income. We also recognize gains or losses on foreign currency transactions when we repatriate cash from our foreign investments. In addition, we have certain derivative instruments, including common stock warrants and foreign currency forward and collar contracts, that are not designated as hedges for accounting purposes, for which realized and unrealized gains and losses are included in earnings. We also recognize unrealized gains and losses on movements in the fair value of certain investments within Other gains and (losses). The timing and amount of such gains or losses cannot always be estimated and are subject to fluctuation.
20162019 — For the year ended December 31, 2016,2019, net other income was $3.7gains were $30.3 million. During the year, we recognized unrealized gains of $32.9 million related to an increase in the fair value of our investment in shares of a cold storage operator (Note 9) and realized gains of $9.4$16.4 million related to the settlement of foreign currency forward contracts and foreign currency collars and unrealized gains of $3.7 million recognized primarily on interest rate swaps that did not qualify for hedge accounting. In addition, we recognized a gain of $0.7 million in our Owned Real Estate segment on the deconsolidation of an affiliate, CESH I, once it had raised a sufficient level of funds in its private placement (Note 2).collars. These gains were partially offset by a net loss on extinguishment of debt totaling $14.8 million related to the prepayment of mortgage loans (primarily comprised of prepayment penalties) (Note 11) and net realized and unrealized losses of $6.2$4.9 million on foreign currency transactions as a result of changes in foreign currency exchange rates.
2018 — For the year ended December 31, 2018, net other gains were $30.0 million. During the year, we recognized net realized and unrealized gains of $21.3 million on foreign currency transactions as a result of changes in foreign currency exchange rates, realized gains of $9.5 million on the settlement of foreign currency forward contracts and foreign currency collars, and interest income of $2.5 million primarily related to our loans to affiliates (Note 4). These gains were partially offset by a non-cash net loss on extinguishment of debt of $4.1totaling $3.3 million related to the repayment of unsecured term loans and the payoff of certain mortgage loans (loans.
Gain on Sale of Real Estate, Net
Gain on sale of real estate, net, consists of gain on the sale of properties that were disposed of during the years ended December 31, 2019, 2018, and 2017. Our dispositions are more fully described in Note 1117).
20152019 — ForDuring the year ended December 31, 2015,2019, we sold 14 properties for total proceeds of $308.0 million, net otherof selling costs, and recognized a net gain on these sales totaling $10.9 million (inclusive of income was $2.0 million. During the year, we recognized realized gains of $8.0 million related to foreign currency forward contracts, unrealized gains of $4.0taxes totaling $1.2 million recognized on interest rate swaps that did not qualifyupon sale). In June 2019, a loan receivable was repaid in full to us for hedge accounting, and interest income of $1.7$9.3 million, recognized on our deposits. These gains were partially offset by net realized and unrealized losses of $6.3 million recognized on foreign currency transactions as a result of changeswhich resulted in foreign currency exchange rates and a net loss of $0.1 million (Note 6). In October 2019, we transferred ownership of six properties and the related non-recourse mortgage loan, which had an aggregate asset carrying value of $42.3 million and a mortgage carrying value of $43.4 million (including a $13.8 million discount on extinguishmentthe mortgage loan), respectively, on the date of debttransfer, to the mortgage lender, resulting in a net gain of $8.3 million (outstanding principal balance was $56.4 million and we wrote off $5.6 million primarily related to the dispositionof accrued interest payable). In addition, in December 2019, we transferred ownership of a property and defeasancethe related non-recourse mortgage loan, which had an aggregate asset carrying value of $10.4 million and a loan encumberingmortgage carrying value of $8.2 million (including a property classified as held for sale.$0.5 million discount on the mortgage loan), respectively, on the date of transfer, to the mortgage lender, resulting in a net loss of $1.0 million (outstanding principal balance was $8.7 million and we wrote off $0.9 million of accrued interest payable).
20142018 — ForDuring the year ended December 31, 2014,2018, we sold 49 properties for total proceeds of $431.6 million, net other expenses were $14.5 million. During the year, we recognized net realizedof selling costs, and unrealized losses of $9.0 million on foreign currency transactions as a result of changes in foreign currency exchange rates. In addition, we recognized a net lossgain on extinguishmentthese sales totaling $112.3 million (inclusive of debtincome taxes totaling $21.8 million recognized upon sale). Disposition activity included the sale of $6.9 millionone of our hotel operating properties in connection withApril 2018. In addition, in June 2018, we completed a nonmonetary transaction, in which we disposed of 23 properties in exchange for the prepaymentacquisition of several non-recourse mortgage loans. These losses were partially offset by unrealized gains of $3.7 millionone property leased to the same tenant. This swap was recorded based on the interest rate swaps wefair value of the property acquired from CPA®:15of $85.5 million, which resulted in the CPA®:15 Merger that did not qualify for hedge accounting.a net gain of $6.3 million, and was a non-cash investing activity (Note 5).
(Loss) Gain on Change in Control of Interests
2014 2019— In connection withDuring the CPA®:16third quarter of 2019, we identified certain measurement period adjustments that impacted the provisional accounting for an investment we acquired in the CPA:17 Merger (Note 3), in which we recognizedhad a gainjoint interest and accounted for under the equity method pre-merger. As a result, we recorded a loss on change in control of interests of $75.7$8.4 million relatedduring the year ended December 31, 2019, reflecting adjustments to the difference between theour carrying value and the preliminary estimated fair value of our previously heldthis former equity interest in shares of CPA®:16 – Global’s common stockon October 31, 2018 (Note 36) during 2014.. Subsequent to the CPA:17 Merger, we consolidated this wholly owned investment.
The CPA®:16
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| W. P. Carey 2019 10-K– 41 |
2018 — In connection with the CPA:17 Merger, also resulted in our acquisition ofwe acquired the remaining interests in ninesix investments in which we already had a joint interest and accounted for under the equity method. Due to the change in control of the ninethese six jointly owned investments, that occurred, we recorded a gain on change in control of interests of $30.2$18.8 million related toreflecting the difference between our carrying values and the preliminary estimated fair values of our previously held equity interests on JanuaryOctober 31, 2014.2018. Subsequent to the CPA®:16CPA:17 Merger, we consolidateconsolidated these wholly owned investments (Note 3).
Equity in Earnings of Equity Method Investments in Real Estate
In connection with the CPA:17 Merger (Note 3), we acquired the remaining interests in six investments, in which we already had a joint interest and accounted for under the equity method, and equity interests in seven unconsolidated investments (Note 8). DuringIn November 2018, we acquired an equity interest in two self-storage properties (Note 8); this acquisition was related to a jointly owned investment in seven self-storage properties that we acquired in the year ended December 31, 2014, oneCPA:17 Merger. In February 2019, we received full repayment of theseour preferred equity interest in an investment, which is now retired (Note 8). The following table presents the details of our Equity in earnings of equity method investments was sold.in real estate (in thousands): |
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Equity in earnings of equity method investments in real estate: | | | | | |
| Equity investments acquired in the CPA:17 Merger | $ | 2,510 |
| | $ | 342 |
| | $ | — |
|
| Recently acquired equity investment | (409 | ) | | (115 | ) | | — |
|
| Retired equity investment | 260 |
| | 1,275 |
| | 1,275 |
|
| Equity investments consolidated after the CPA:17 Merger | — |
| | 11,839 |
| | 11,793 |
|
| Equity in earnings of equity method investments in real estate | $ | 2,361 |
| | $ | 13,341 |
| | $ | 13,068 |
|
(Provision for) Benefit from (Provision for) Income Taxes
20162019 vs. 2015 2018 — For the year ended December 31, 2016, we recorded a benefit from income taxes of $3.4 million, compared to a provision for income taxes of $17.9 million recognized during the year ended December 31, 2015. During 2016, we recorded $17.2 million of deferred tax benefits associated with basis differences on certain foreign properties, primarily resulting from the impairment charges recorded in the period on international properties (Note 9). In addition, current federal, foreign, and state franchise taxes decreased by $5.9 million due to decreases in taxable income on our domestic TRSs and foreign properties.
2015 vs. 2014 — For the year ended December 31, 2015,2019, we recorded a provision for income taxes of $17.9$30.8 million, compared to a benefit from income taxes of $0.9$0.8 million recognized during the year ended December 31, 2014. Current2018 within our Real Estate segment. For the year ended December 31, 2019 as compared to 2018, provision for income taxes related to properties acquired in the CPA:17 Merger on October 31, 2018 (Note 3) increased by $10.3$19.6 million, primarily duesince we owned the properties for a full year in 2019 compared to increasestwo months in taxable income on foreign properties resulting from the reversal of prior deductions for German real estate transfer taxes and taxable income generated by foreign investments acquired during the fourth quarter of 2014.2018. In addition, during 2014,the year ended December 31, 2019, we reversedrecognized deferred tax expenses totaling approximately $8.6 million as a reserveresult of $3.3the increase in the fair value of our investment in shares of a cold storage operator, as described above under Other Gains and (Losses). Also, during the year ended December 31, 2018, we recognized a deferred tax benefit of approximately $6.2 million as a result of the release of a deferred tax liability relating to a property holding company that was no longer required due to a change in tax classification.
Net Loss (Income) Attributable to Noncontrolling Interests
2019 vs. 2018 — For the year ended December 31, 2019, we recorded loss attributable to noncontrolling interests of $0.1 million, compared to income attributable to noncontrolling interests of $12.8 million for unrecognized tax benefits duethe year ended December 31, 2018. During the prior year, through the CPA:17 Merger on October 31, 2018 (Note 3), we consolidated seven less-than-wholly-owned investments, for which the remaining interests were owned by CPA:17 – Global or a third party. Following the CPA:17 Merger, we consolidate two less-than-wholly-owned investments (for which the remaining interest was owned by a third party), resulting in a decrease in amounts attributable to noncontrolling interests during the current year as compared to the prior year.
|
| |
| | W. P. Carey 20162019 10-K– 5642 |
expirations of the statutes of limitations. Deferred income taxes increased by $5.3 million due to changes in basis differences on certain foreign properties.
Income from Discontinued Operations, Net of Tax
The results of operations for properties that have been classified as held for sale or that have been sold prior to January 1, 2014 and the properties that were acquired as held for sale in the CPA®:16 Merger, and with which we have no continuing involvement, are reflected in the consolidated financial statements as discontinued operations. During 2014, we sold nine properties that were classified as held for sale prior to January 1, 2014. In connection with the CPA®:16 Merger, we acquired ten properties that were classified as held for sale from CPA®:16 – Global, all of which were sold during the year ended December 31, 2014. Results of operations for these properties are included within discontinued operations in the consolidated financial statements for all periods presented.
2014 — For the year ended December 31, 2014, income from discontinued operations, net of tax was $33.3 million, primarily due to a net gain on the sale of 19 properties of $27.7 million and income generated from the operations of these properties of $6.9 million in the aggregate. The income was partially offset by a net loss on extinguishment of debt of $1.2 million recognized in connection with the repayment of several mortgage loans on six of the disposed properties.
Gain on Sale of Real Estate, Net of Tax
Gain on sale of real estate, net of tax consists of gain on the sale of properties that were disposed of and that did not qualify for classification as discontinued operations (Note 17). Properties that were sold in 2014 that were not classified as held for sale at December 31, 2013 or upon acquisition in the CPA®:16 Merger did not qualify for classification as discontinued operations.
2016 — During the year ended December 31, 2016, we sold 30 properties and a parcel of vacant land for net proceeds of $542.4 million and recognized a net gain on these sales, net of tax totaling $42.6 million, inclusive of amounts attributable to noncontrolling interests of $0.9 million. In 2016, we transferred ownership of a vacant international property and the related non-recourse mortgage loan, which had a carrying value of $39.8 million and an outstanding balance of $60.9 million, respectively, on the date of transfer, to the mortgage lender, resulting in a net gain of $16.4 million. In addition, a vacant domestic property with an asset carrying value of $13.7 million, which was encumbered by a $24.3 million mortgage loan (net of $2.6 million of cash held in escrow that was retained by the mortgage lender), was foreclosed upon by the mortgage lender, resulting in a net gain of $11.6 million. We also transferred ownership of an international property and the related non-recourse mortgage loan to the mortgage lender. This property was held for sale at December 31, 2015 (Note 5). At the date of the transfer, the property had an asset carrying value of $3.2 million and the related non-recourse mortgage loan had an outstanding balance of $4.5 million, resulting in a net gain of $0.6 million.
2015 — During the year ended December 31, 2015, we sold 13 properties and recognized a net gain on these sales, net of tax totaling $5.9 million. In addition, during July 2015, a vacant domestic property was foreclosed upon and sold, and we recognized a gain of $0.6 million in connection with that disposition.
2014 — For the year ended December 31, 2014, loss on sale of real estate, net of tax was $1.6 million, primarily due to a $6.7 million gain recognized on a property in France that was foreclosed upon and sold, partially offset by a total of $5.1 million of net losses recognized on 13 properties that were sold. During the year ended December 31, 2014, we sold 16 properties, three of which were foreclosed upon, that did not qualify for classification as discontinued operations.
Net Income Attributable to Noncontrolling Interests
2016vs.2015 — For the year ended December 31, 2016 as compared to 2015, net income attributable to noncontrolling interests decreased by $3.9 million, primarily due to the noncontrolling interest holder’s portion of the reversal of reserves for German real estate transfer tax liabilities during 2015 discussed above, partially offset by income attributable to noncontrolling interests of $1.5 million recognized during 2016 related to the self-storage property that we sold during the year.
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, net income attributable to noncontrolling interests increased by $5.4 million, primarily due to the noncontrolling interest holder’s portion of the reversal of reserves for German real estate transfer tax liabilities during 2015 discussed above.
|
| |
| W. P. Carey 2016 10-K– 57
|
Investment Management
We earn revenue as the advisor to the Managed Programs. For the periods presented, we acted as advisor to the following affiliated Managed Programs: CPA®:16CPA:17 – Global (through JanuaryOctober 31, 2014)2018), CPA®:17 – Global, CPA®:CPA:18 – Global, CWI 1, CWI 2, (since February 9, 2015), CCIF (since February 27, 2015)(through September 10, 2017), and CESH I (since JuneCESH. The CWI 1 and CWI 2 Proposed Merger is expected to close in the first quarter of 2020, subject to the approval of stockholders of each of CWI 1 and CWI 2, among other conditions. Each of CWI 1 and CWI 2 has scheduled a special meeting of stockholders for March 26, 2020. Immediately following the closing of the CWI 1 and CWI 2 Proposed Merger, the advisory agreements with each of CWI 1 and CWI 2 will terminate and CWI 2 will internalize the management services currently provided by us (Note 4).
In connection with the CWI 1 and CWI 2 Proposed Merger, we expect to record an impairment charge on a significant portion of goodwill within our Investment Management segment, which had a carrying value of $63.6 million as of December 31, 2019. Our accounting policies for evaluating impairment of goodwill are described in Note 2.
Upon completion of the CPA:17 Merger on October 31, 2018 (Note 3 2016)), the advisory agreements with CPA:17 – Global were terminated, and we ceased earning revenue from CPA:17 – Global. We no longer raise capital for new or existing funds, but we currently expect to continue to manage all existing Managed Programs and earn the various fees described below through the end of their respective life cycles (Note 1, Note 4). As of December 31, 2019, we managed total assets of approximately $7.5 billion on behalf of the remaining Managed Programs.
The following tables present other operating data that management finds useful in evaluating results of operations (dollars in millions):
|
| | | | | | | | | | | |
| | As of December 31, |
| | 2016 | | 2015 | | 2014 |
Total properties — Managed REITs and CESH I (a) | 606 |
| | 602 |
| | 519 |
|
Assets under management — Managed Programs (b) | $ | 12,874.8 |
| | $ | 11,045.3 |
| | $ | 9,231.8 |
|
Cumulative funds raised — CPA®:18 – Global offering (c) (d) | 1,243.5 |
| | 1,243.5 |
| | 1,143.1 |
|
Cumulative funds raised — CWI 1 offerings (c) (e) | 1,153.2 |
| | 1,153.2 |
| | 1,153.2 |
|
Cumulative funds raised — CWI 2 offering (c) (f) | 616.3 |
| | 247.0 |
| | — |
|
Cumulative funds raised — CCIF offering (g) | 125.1 |
| | 2.0 |
| | — |
|
Cumulative funds raised — CESH I offering (h) | 112.8 |
| | — |
| | — |
|
|
| | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Financings structured — Managed REITs | $ | 1,362.8 |
| | $ | 1,196.9 |
| | $ | 968.0 |
|
Investments structured — Managed REITs and CESH I (i) | 1,558.9 |
| | 2,533.9 |
| | 1,880.1 |
|
Funds raised — CPA®:18 – Global offering (c) (d) | — |
| | 100.4 |
| | 905.8 |
|
Funds raised — CWI 1 offerings (c) (e) | — |
| | — |
| | 577.4 |
|
Funds raised — CWI 2 offering (c) (f) | 369.3 |
| | 247.0 |
| | — |
|
Funds raised — CCIF offering (g) | 123.1 |
| | 2.0 |
| | — |
|
Funds raised — CESH I offering (h) | 112.8 |
| | — |
| | — |
|
__________
| |
(a) | Includes properties owned by CPA®:17 – Global and CPA®:18 – Global for all periods. Includes hotels owned by CWI 1 for all periods. Includes hotels owned by CWI 2 at December 31, 2016 and 2015. Includes properties owned by CESH I at December 31, 2016.
|
| |
(b) | Represents the estimated fair value of the real estate assets owned by the Managed REITs, which was calculated by us as the advisor to the Managed REITs based in part upon third-party appraisals, plus cash and cash equivalents, less distributions payable. Amounts as of December 31, 2016 and 2015 include the fair value of the investment assets, plus cash, owned by CCIF. Amount as of December 31, 2016 also includes the fair value of the investment assets, plus cash, owned by CESH I. |
| |
(c) | Excludes reinvested distributions through each entity’s distribution reinvestment plan. |
| |
(d) | Reflects funds raised from CPA®:18 – Global’s initial public offering, which commenced in May 2013 and closed in April 2015.
|
| |
(e) | Reflects funds raised in CWI 1’s initial public offering, which closed in September 2013, and CWI 1’s follow-on offering, which commenced in December 2013 and closed in December 2014. |
| |
(f) | Reflects funds raised from CWI 2’s initial public offering, which commenced in February 2015. |
| |
(g) | We began to raise funds on behalf of the CCIF Feeder Funds in the fourth quarter of 2015. Amount represents funding from the CCIF Feeder Funds to CCIF. |
| |
(h) | Reflects funds raised from CESH I’s private placement, which commenced in July 2016 (Note 4). |
| |
(i) | Includes acquisition-related costs. |
|
| |
| | W. P. Carey 20162019 10-K– 5843 |
Below is a summary of comparative results of our Investment Management segment (in thousands):
| | | | Years Ended December 31, | Years Ended December 31, |
| | 2016 | | 2015 | | Change | | 2015 | | 2014 | | Change | 2019 | | 2018 | | Change | | 2018 | | 2017 | | Change |
| Revenues | | | | | | | | | | | | | | | | | | | | | | |
| Asset management revenue | | | | | | | | | | | | |
| CPA:17 – Global | | $ | — |
| | $ | 24,884 |
| | $ | (24,884 | ) | | $ | 24,884 |
| | $ | 29,363 |
| | $ | (4,479 | ) |
| CPA:18 – Global | | 11,539 |
| | 12,087 |
| | (548 | ) | | 12,087 |
| | 11,293 |
| | 794 |
|
| CWI 1 | | 14,052 |
| | 14,136 |
| | (84 | ) | | 14,136 |
| | 14,499 |
| | (363 | ) |
| CWI 2 | | 10,734 |
| | 10,400 |
| | 334 |
| | 10,400 |
| | 8,669 |
| | 1,731 |
|
| CCIF | | — |
| | — |
| | — |
| | — |
| | 5,229 |
| | (5,229 | ) |
| CESH | | 2,807 |
| | 2,049 |
| | 758 |
| | 2,049 |
| | 1,072 |
| | 977 |
|
| | | 39,132 |
| | 63,556 |
| | (24,424 | ) | | 63,556 |
| | 70,125 |
| | (6,569 | ) |
| Reimbursable costs from affiliates | $ | 66,433 |
| | $ | 55,837 |
| | $ | 10,596 |
| | $ | 55,837 |
| | $ | 130,212 |
| | $ | (74,375 | ) | | | | | | | | | | | |
| Asset management revenue | 61,971 |
| | 49,984 |
| | 11,987 |
| | 49,984 |
| | 38,063 |
| | 11,921 |
| |
| Structuring revenue | 47,328 |
| | 92,117 |
| | (44,789 | ) | | 92,117 |
| | 71,256 |
| | 20,861 |
| |
| CPA:17 – Global | | — |
| | 6,233 |
| | (6,233 | ) | | 6,233 |
| | 9,775 |
| | (3,542 | ) |
| CPA:18 – Global | | 3,934 |
| | 4,207 |
| | (273 | ) | | 4,207 |
| | 4,055 |
| | 152 |
|
| CWI 1 | | 6,936 |
| | 6,653 |
| | 283 |
| | 6,653 |
| | 6,039 |
| | 614 |
|
| CWI 2 | | 4,364 |
| | 4,171 |
| | 193 |
| | 4,171 |
| | 22,331 |
| | (18,160 | ) |
| CCIF | | — |
| | — |
| | — |
| | — |
| | 6,591 |
| | (6,591 | ) |
| CESH | | 1,313 |
| | 661 |
| | 652 |
| | 661 |
| | 2,654 |
| | (1,993 | ) |
| | | 16,547 |
| | 21,925 |
| | (5,378 | ) | | 21,925 |
| | 51,445 |
| | (29,520 | ) |
| Structuring and other advisory revenue | | | | | | | | | | | | |
| CPA:17 – Global | | — |
| | 1,184 |
| | (1,184 | ) | | 1,184 |
| | 9,103 |
| | (7,919 | ) |
| CPA:18 – Global | | 2,322 |
| | 18,900 |
| | (16,578 | ) | | 18,900 |
| | 3,999 |
| | 14,901 |
|
| CWI 1 | | 1,365 |
| | 953 |
| | 412 |
| | 953 |
| | 4,976 |
| | (4,023 | ) |
| CWI 2 | | 225 |
| | 245 |
| | (20 | ) | | 245 |
| | 10,889 |
| | (10,644 | ) |
| CESH | | 312 |
| | (156 | ) | | 468 |
| | (156 | ) | | 6,127 |
| | (6,283 | ) |
| | | 4,224 |
| | 21,126 |
| | (16,902 | ) | | 21,126 |
| | 35,094 |
| | (13,968 | ) |
| Dealer manager fees | 8,002 |
| | 4,794 |
| | 3,208 |
| | 4,794 |
| | 23,532 |
| | (18,738 | ) | — |
| | — |
| | — |
| | — |
| | 4,430 |
| | (4,430 | ) |
| Other advisory revenue | 2,435 |
| | 203 |
| | 2,232 |
| | 203 |
| | — |
| | 203 |
| |
| | 186,169 |
| | 202,935 |
| | (16,766 | ) | | 202,935 |
| | 263,063 |
| | (60,128 | ) | 59,903 |
| | 106,607 |
| | (46,704 | ) | | 106,607 |
| | 161,094 |
| | (54,487 | ) |
| Operating Expenses | | | | | | | | | | | | | | | | | | | | | | |
| General and administrative | | 18,497 |
| | 21,127 |
| | (2,630 | ) | | 21,127 |
| | 31,889 |
| | (10,762 | ) |
| Reimbursable costs from affiliates | 66,433 |
| | 55,837 |
| | 10,596 |
| | 55,837 |
| | 130,212 |
| | (74,375 | ) | 16,547 |
| | 21,925 |
| | (5,378 | ) | | 21,925 |
| | 51,445 |
| | (29,520 | ) |
| General and administrative | 47,761 |
| | 55,496 |
| | (7,735 | ) | | 55,496 |
| | 52,791 |
| | 2,705 |
| |
| Subadvisor fees | 14,141 |
| | 11,303 |
| | 2,838 |
| | 11,303 |
| | 5,501 |
| | 5,802 |
| 7,579 |
| | 9,240 |
| | (1,661 | ) | | 9,240 |
| | 13,600 |
| | (4,360 | ) |
| Stock-based compensation expense | | 5,539 |
| | 7,844 |
| | (2,305 | ) | | 7,844 |
| | 11,957 |
| | (4,113 | ) |
| Depreciation and amortization | | 3,835 |
| | 3,979 |
| | (144 | ) | | 3,979 |
| | 3,902 |
| | 77 |
|
| Restructuring and other compensation | | — |
| | — |
| | — |
| | — |
| | 9,363 |
| | (9,363 | ) |
| Dealer manager fees and expenses | 12,808 |
| | 11,403 |
| | 1,405 |
| | 11,403 |
| | 21,760 |
| | (10,357 | ) | — |
| | — |
| | — |
| | — |
| | 6,544 |
| | (6,544 | ) |
| Stock-based compensation expense | 12,791 |
| | 13,753 |
| | (962 | ) | | 13,753 |
| | 18,416 |
| | (4,663 | ) | |
| Restructuring and other compensation | 7,512 |
| | — |
| | 7,512 |
| | — |
| | — |
| | — |
| |
| Depreciation and amortization | 4,236 |
| | 4,079 |
| | 157 |
| | 4,079 |
| | 4,024 |
| | 55 |
| |
| Property acquisition and other expenses | 2,384 |
| | 2,144 |
| | 240 |
| | 2,144 |
| | — |
| | 2,144 |
| |
| | 168,066 |
| | 154,015 |
| | 14,051 |
| | 154,015 |
| | 232,704 |
| | (78,689 | ) | 51,997 |
| | 64,115 |
| | (12,118 | ) | | 64,115 |
| | 128,700 |
| | (64,585 | ) |
| Other Income and Expenses | | | | | | | | | | | | | | | | | | | | | | |
| Other income and (expenses) | 2,002 |
| | 161 |
| | 1,841 |
| | 161 |
| | 275 |
| | (114 | ) | |
| Equity in earnings (losses) of equity method investment in CCIF | 1,995 |
| | (1,952 | ) | | 3,947 |
| | (1,952 | ) | | — |
| | (1,952 | ) | |
| Equity in earnings of equity method investments in the Managed Programs | | 20,868 |
| | 48,173 |
| | (27,305 | ) | | 48,173 |
| | 51,682 |
| | (3,509 | ) |
| Other gains and (losses) | | 1,224 |
| | (102 | ) | | 1,326 |
| | (102 | ) | | 2,042 |
| | (2,144 | ) |
| Gain on change in control of interests | | — |
| | 29,022 |
| | (29,022 | ) | | 29,022 |
| | — |
| | 29,022 |
|
| | 3,997 |
| | (1,791 | ) | | 5,788 |
| | (1,791 | ) | | 275 |
| | (2,066 | ) | 22,092 |
| | 77,093 |
| | (55,001 | ) | | 77,093 |
| | 53,724 |
| | 23,369 |
|
| Income from continuing operations before income taxes | 22,100 |
| | 47,129 |
| | (25,029 | ) | | 47,129 |
| | 30,634 |
| | 16,495 |
| |
| Provision for income taxes | (6,706 | ) | | (19,673 | ) | | 12,967 |
| | (19,673 | ) | | (18,525 | ) | | (1,148 | ) | |
| Income before income taxes | | 29,998 |
| | 119,585 |
| | (89,587 | ) | | 119,585 |
| | 86,118 |
| | 33,467 |
|
| Benefit from (provision for) income taxes | | 4,591 |
| | (15,255 | ) | | 19,846 |
| | (15,255 | ) | | (968 | ) | | (14,287 | ) |
| Net Income from Investment Management | 15,394 |
| | 27,456 |
| | (12,062 | ) | | 27,456 |
| | 12,109 |
| | 15,347 |
| 34,589 |
| | 104,330 |
| | (69,741 | ) | | 104,330 |
| | 85,150 |
| | 19,180 |
|
| Net income attributable to noncontrolling interests | — |
| | (2,008 | ) | | 2,008 |
| | (2,008 | ) | | (812 | ) | | (1,196 | ) | (1,411 | ) | | — |
| | (1,411 | ) | | — |
| | — |
| | — |
|
| Net loss attributable to redeemable noncontrolling interest | — |
| | — |
| | — |
| | — |
| | 142 |
| | (142 | ) | |
| Net Income from Investment Management Attributable to W. P. Carey | $ | 15,394 |
| | $ | 25,448 |
| | $ | (10,054 | ) | | $ | 25,448 |
| | $ | 11,439 |
| | $ | 14,009 |
| $ | 33,178 |
| | $ | 104,330 |
| | $ | (71,152 | ) | | $ | 104,330 |
| | $ | 85,150 |
| | $ | 19,180 |
|
|
| |
| W. P. Carey 2019 10-K– 44 |
Asset Management Revenue
During the periods presented, we earned asset management revenue from (i) CPA:17 – Global, prior to the CPA:17 Merger, and CPA:18 – Global based on the value of their real estate-related assets under management, (ii) the CWI REITs based on the value of their lodging-related assets under management, and (iii) CESH based on its gross assets under management at fair value. We also earned asset management revenue from CCIF, prior to our resignation as its advisor in the third quarter of 2017, based on the average of its gross assets under management at fair value, which was payable in cash. Asset management revenue may increase or decrease depending upon changes in the Managed Programs’ asset bases as a result of purchases, sales, or changes in the appraised value of the real estate-related and lodging-related assets in their investment portfolios. For 2019, (i) we received asset management fees from CPA:18 – Global 50% in cash and 50% in shares of its common stock, (ii) we received asset management fees from the CWI REITs in shares of their common stock, and (iii) we received asset management fees from CESH in cash. As a result of the CPA:17 Merger (Note 3), we no longer receive asset management revenue from CPA:17 – Global. 2019vs.2018 — For the year ended December 31, 2019 as compared to 2018, asset management revenue decreased by $24.4 million, primarily as a result of the cessation of asset management fees earned from CPA:17 – Global after the CPA:17 Merger on October 31, 2018 (Note 3).
Reimbursable Costs from Affiliates
Reimbursable costs from affiliates represent costs incurred by us on behalf of the Managed Programs consisting primarily(Note 4). Following the CPA:17 Merger (Note 3), we no longer receive reimbursement of broker-dealer commissions and marketing andcertain personnel costs and overhead costs from CPA:17 – Global, which are reimbursed by the Managed Programs and are reflected as a component of both revenues and expenses. 2016vs.2015 — Fortotaled $6.2 million for the year ended December 31, 2016 as compared to 2015, reimbursable costs increased by $10.6 million, primarily due to an increase of $12.8 million of commissions paid to broker-dealers related to CWI 2’s initial public offering, which began in February 2015; an increase of $8.0 million of commissions paid to broker-dealers related to CESH I’s private placement, which began in July 2016;2018.
Structuring and $4.8 million of commissions paid to broker-dealers related to the sale of two of the CCIF Feeder Funds’ shares, which began in the fourth quarter of 2015. These increases were partially offset by the cessation of commissions paid to broker-dealers related to the CPA®:18 – Global initial public offering, which closed in April 2015, and totaled $13.1 million in that year; and a decrease of $2.7 million in personnel costs reimbursed to us by the Managed Programs.
|
| |
| W. P. Carey 2016 10-K– 59
|
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, reimbursable costs decreased by $74.4 million, primarily due to decreases of $53.2 million in commissions paid to broker-dealers related to the CPA®:18 – Global initial public offering, which closed in April 2015. In addition, commissions paid to broker-dealers related to CWI 1’s follow-on offering, which closed in December 2014, were $46.4 million during 2014. These decreases were partially offset by $16.3 million of commissions paid to broker-dealers during 2015 related to CWI 2’s initial public offering, which began in February 2015, and increases in personnel costs reimbursed by the Managed REITs of $4.4 million during 2015 as compared to 2014, primarily due to additional headcount.
Asset Management Revenue
We earn asset management revenue from the Managed REITs based on the value of their real estate-related and lodging-related assets under management. We also earn asset management revenue from CCIF based on the average of its gross assets at fair value and from CESH I based on its gross assets at fair value. This asset management revenue may increase or decrease depending upon (i) increases in the Managed Programs’ asset bases as a result of new investments; (ii) decreases in the Managed Programs’ asset bases as a result of sales of investments; (iii) increases or decreases in the appraised value of the real estate-related and lodging-related assets in the investment portfolios of the Managed REITs and CESH I; and (iv) increases or decreases in the fair value of CCIF’s investment portfolio.
2016vs.2015 — For the year ended December 31, 2016 as compared to 2015, asset management revenue increased by $12.0 million as a result of the growth in assets under management due to investments acquired during 2016. Asset management revenue increased by $3.4 million from CWI 2, $3.1 million from CCIF, $2.5 million from CPA®:18 – Global, $2.4 million from CWI 1, and $0.5 million from CPA®:17 – Global.
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, asset management revenue increased by $11.9 million as a result of the growth in assets under management due to investments acquired during 2015. Asset management revenue increased by $5.0 million from CPA®:18 – Global, $4.5 million from CWI 1, and $2.6 million from CPA®:17 – Global. Additionally, asset management revenue from CWI 2 was $1.0 million during 2015 as a result of new investments that it entered into since the commencement of its offering in February 2015. Asset management revenue from CCIF was $0.4 million during 2015. These increases were partially offset by a decrease of $1.4 million as a result of the cessation of asset management revenue earned from CPA®:16 – Global after the CPA®:16 Merger on January 31, 2014.
StructuringOther Advisory Revenue
We earn structuring revenue when we structure investments and debt placement transactions for the Managed REITs and CESH I.Programs. Structuring revenue is dependent on investment activity, which is subject to significant period-to-period variation.variation, and is expected to continue to decline on an annual basis in future periods because the Managed Programs are fully invested, we no longer raise capital for new or existing funds, and as a result of the CPA:17 Merger. Going forward, investment activity for the Managed Programs will be generally limited to capital recycling. In addition, we may earn disposition revenue when we complete dispositions for the Managed Programs.
20162019vs.20152018 — For the year ended December 31, 20162019 as compared to 2015,2018, structuring revenue decreased by $44.8$16.9 million. Structuring and other advisory revenue from CPA®:CPA:18 – Global, CWI 1, and CPA®:17 – Global decreased by $42.2$16.6 million $14.3 million, and $4.5 million, respectively, as a result of lower investment and debt placement volume in 2016 as compared to 2015, partially offset by an increase of $15.4 million in structuringduring 2019. Structuring revenue from CWI 2, which completed six investments during 2016. We also recognized $0.8 million of structuring revenue during 2016 from CESH I, which completed three investments during the year.
2015 vs. 2014 — ForCPA:18 – Global for the year ended December 31, 2015 as compared2018 includes a $2.6 million reversal of an adjustment recorded in 2017 related to 2014, structuring revenue increased by $20.9 million, primarily due to increases of $7.6 million and $5.3 million in structuring revenue earned from CPA®:18 – Global and CPA®:17 – Global, respectively, as a result of higher investment volume in 2015 as compared to 2014. We also recognized $8.1 million of structuring revenue during 2015 from CWI 2, which completed its first investment on April 1, 2015.
Dealer Manager Fees
As discussed in Note 4, we earn a dealer manager fee, depending on the class of common stock sold, of $0.30 or $0.26 per share sold,development deal for the class A common stock and class T common stock, respectively, in connection with CWI 2’s initial public offering, which began in February 2015. We also earned a $0.30 dealer manager fee per share sold in connection with CWI 1’s follow-on offering, which began in December 2013 and terminated in December 2014. In addition, we received dealer manager fees, depending on the class of common stock sold, of $0.30 or $0.21 per share sold, for the class A common stock and class C common stock, respectively, in connection with CPA®:18 – Global’s initial public offering, which commenced in May 2013 and closed in April 2015. We receive dealer manager fees of 2.75% - 3.0% based on the selling price of each share sold in connection with the offeringsone of the CCIF Feeder Funds, which beganManaged Programs, in the fourth quarter of 2015. We also receive dealer manager fees of up to 3.0% of gross offering proceeds based on the selling price of each limited partnership unit sold inaccordance with ASC 605, Revenue Recognition.
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| W. P. Carey 2016 10-K– 60
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connection with CESH I’s private placement. We may re-allow a portion of the dealer manager fees to selected dealers in the offerings. Dealer manager fees that were not re-allowed were classified as Dealer manager fees from affiliates in the consolidated financial statements. Dealer manager fees earned are generally offset by costs incurred in connection with the offerings, which are included in Dealer manager fees and expenses in the consolidated financial statements.
2016vs.2015 — For the year ended December 31, 2016 as compared to 2015, dealer manager fees increased by $3.2 million, primarily due to an increase of $1.8 million in fees earned in connection with the sale of shares of the CCIF Feeder Funds, $1.5 million in fees earned in 2016 in connection with the sale of limited partnership units of CESH I in its private placement, and an increase of $1.2 million in fees earned in connection with the sale of CWI 2 shares in its initial public offering. These increases were partially offset by the cessation of fees earned in connection with the sale of CPA®:18 – Global shares in its initial public offering due to the closing of the offering in April 2015, which totaled $1.3 million in that year.
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, dealer manager fees decreased by $18.7 million, substantially due to a decrease of $12.8 million in fees earned in connection with the sale of CPA®:18 – Global shares in its initial public offering, primarily resulting from the cessation of sales of its class A shares in June 2014 as well as the closing of the offering in April 2015. In addition, dealer manager fees earned in connection with CWI 1’s follow-on offering, which closed in December 2014, were $9.4 million during the year ended December 31, 2014. These decreases were partially offset by $3.4 million of commissions paid to broker-dealers related to CWI 2’s initial public offering during the year ended December 31, 2015.
Other Advisory Revenue
Under the limited partnership agreement we have with CESH I, we pay all organization and offering costs on behalf of CESH I, and instead of being reimbursed by CESH I on a dollar-for-dollar basis for those costs, we receive limited partnership units of CESH I equal to 2.5% of its gross offering proceeds.
2016 — For the year ended December 31, 2016, other advisory revenue was $2.4 million, reflecting the limited partnership units of CESH I we received following the deconsolidation of CESH I in August 2016 (Note 2) in connection with CESH I’s private placement, which commenced in July 2016.
General and Administrative
General and administrative expenses recorded by our Investment Management segment are allocated based on time incurred by our personnel for the Real Estate and Investment Management segments. As discussed in Note 4, certain personnel costs (i.e., those not related to our senior management, our legal transactions team, our broker-dealer, or our investments team) and overhead costs are charged to the CPA® REITs and our Owned Real Estate SegmentCPA:18 – Global based on the trailing 12-month reported revenues of the Managed Programs and us, with the remainder borne by our Investment Management segment. Personnel costs related to our senior management, our legal transactions team, and our investments team are allocated to our Owned Real Estate Segment based on the trailing 12-month investment volume.us. We allocate certain personnel costs (excluding our senior management, our broker-dealer, and our investments team) and overhead costs to the CWI REITs the Managed BDCs, and CESH I based on the time incurred by our personnel.
20162019vs.20152018 — For the year ended December 31, 20162019 as compared to 2015,2018, general and administrative expenses in our Investment Management segment which excludes restructuring and other compensation expenses as described below, decreased by $7.7$2.6 million, primarily due to an overall declinea decrease in compensation expenseestimated time spent by management and professional fees as a result of a reduction in headcount, including the RIF, and other cost savings initiatives implemented during 2016. Also contributing to the decrease were lower commissions to investment officers, which decreased by $5.2 million, resulting from lower investment volumepersonnel on behalf of the Managed Programs in 2016 as compared to 2015.
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, general and administrative expenses in our Investment Management segment increased by $2.7 million, primarily due to an increase in compensation expense of $6.0 million resulting from additional headcount attributable toactivities following the increased activities of the Managed Programs. This increase was partially offset by a decrease of $2.8 million in other general and administrative expenses allocable to the Investment Management segment resulting from the CPA®:16 Merger.CPA:17 Merger (Note 3).
Subadvisor Fees
As discussed in Note 4, we earn investment management revenue from CWI 1, CWI 2, and CPA®:18 – Global. Pursuant to the terms of the subadvisory agreements we have with the third-party subadvisors in connection with both CWI 1 and CWI 2, we pay a subadvisory fee equal to 20% of the amount of fees paid to us by CWI 1 and 25% of the amount of fees paid to us by
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| W. P. Carey 2016 10-K– 61
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CWI 2, including but not limited to: acquisition fees, asset management fees, loan refinancing fees, property management fees, and subordinated disposition fees, each as defined in the advisory agreements we have with each of CWI 1 and CWI 2. We also pay to each subadvisor 20% and 25% of the net proceeds resulting from any sale, financing, or recapitalization or sale of securities of CWI 1 and CWI 2, respectively, by us, the advisor. In addition, in connection with the
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| W. P. Carey 2019 10-K– 45 |
multi-family properties acquired on behalf of CPA®:CPA:18 – Global, we entered into agreements with third-party advisors for the acquisition and day-to-day management of the properties, for which we pay 30% of the initial acquisition fees andpaid 100% of asset management fees paid to us by CPA®:CPA:18 – Global.Global, as well as disposition fees. In 2018, CPA:18 – Global sold five of its six multi-family properties and in January 2019 CPA:18 – Global sold its remaining multi-family property. We also terminated the related subadvisory agreements, so subadvisor fees related to CPA:18 – Global have ceased.
20162019vs.20152018 — For the year ended December 31, 20162019 as compared to 2015,2018, subadvisor fees increaseddecreased by $2.8 million, primarily due to an increase of $5.5 million as a result of an increase in fees earned from CWI 2, which completed six investments during 2016, and an increase of $1.5 million as a result of an increase in fees earned from CCIF. These increases were partially offset by a decrease of $2.4 million as a result of a decrease in fees earned from CWI 1 due its lower investment volume, and a decrease of $1.8 million as a result of a decrease in fees earned from CPA®:18 – Global due to lower multi-family property investment volume in 2016 as compared to 2015.
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, subadvisor fees increased by $5.8$1.7 million, primarily as a result of $2.7 millionthe disposition of fees incurred related to CPA®:18 – Global’s acquisitions of severalthe multi-family properties during 2015 and $2.5 million of fees incurred related to CWI 2’s acquisitions and operations, which commenced in April 2015.
Dealer Manager Fees and Expenses
Dealer manager fees earned in the offerings that we manage for the Managed Programs are generally offsetowned by costs incurred in connection with the offerings, which are included in Dealer manager fees and expenses in the consolidated financial statements.
2016vs.2015 — For the year ended December 31, 2016 as compared to 2015, dealer manager fees and expenses increased by $1.4 million, primarily due to an increase of $2.9 million in expenses paid in connection with the sale of shares of the CCIF Feeder Funds and an increase of $2.2 million in expenses paid during 2016 in connection with the sale of limited partnership units of CESH I in its private placement. These increases were partially offset by expenses of $2.8 million that were paid during 2015 in connection with the sale of CPA®:CPA:18 – Global shares in its initial public offering, which closed in April 2015, and a decrease of $0.9 million in expenses paid in connection withthat were managed by the CWI 2 initial public offering, which began to admit stockholders in May 2015.subadvisor, as described above.
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, dealer manager fees and expenses decreased by $10.4 million, primarily due to a decrease of $11.7 million in expenses paid in connection with the sale of CPA®:18 – Global shares in its initial public offering as a result of a corresponding decrease in funds raised, substantially due to the cessation of sales of its class A shares in June 2014, as well as the closing of its offering in April 2015. In addition, expenses paid in connection with the sale of CWI 1 shares in its follow-on offering, which closed in December 2014, totaled $7.1 million during 2014. These decreases were partially offset by $8.3 million in expenses paid in connection with the CWI 2 initial public offering, which began to admit stockholders in May 2015.
Stock-based Compensation Expense
For a description of our equity plans and awards, please see Note 15.
20162019vs.20152018 — For the year ended December 31, 20162019 as compared to 2015,2018, stock-based compensation expense allocated to theour Investment Management segment decreased by $1.0 million, primarily due to a reduction in RSUs and PSUs outstanding as a result of the RIF (Note 13).
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, stock-based compensation expense allocated to the Investment Management segment decreased by $4.7$2.3 million, primarily due to the higher valuemodification of RSUs and PSUs that vested in 2014 as compared toconnection with the RSUs and PSUs grantedretirement of our former chief executive officer in February 2015.2018 (Note 15), as well as a decrease in time spent by management and personnel on Investment Management segment activities.
RestructuringEquity in Earnings of Equity Method Investments in the Managed Programs
Equity in earnings of equity method investments in the Managed Programs is recognized in accordance with GAAP (Note 8). In addition, we are entitled to receive distributions of Available Cash (Note 4) from the operating partnerships of each of the Managed REITs. The net income of our unconsolidated investments fluctuates based on the timing of transactions, such as new leases and Other Compensationproperty sales, as well as the level of impairment charges. The following table presents the details of our Equity in earnings of equity method investments in the Managed Programs (in thousands): 2016 |
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Equity in earnings of equity method investments in the Managed Programs: | | | | | |
Equity in (losses) earnings of equity method investments in the Managed Programs (a) | $ | (621 | ) | | $ | 1,564 |
| | $ | 3,820 |
|
Distributions of Available Cash: (b) | | | | | |
CPA:17 – Global (a) | — |
| | 26,308 |
| | 26,675 |
|
| CPA:18 – Global | 8,132 |
| | 9,692 |
| | 8,650 |
|
| CWI 1 | 7,095 |
| | 5,142 |
| | 7,459 |
|
| CWI 2 | 6,262 |
| | 5,467 |
| | 5,078 |
|
| Equity in earnings of equity method investments in the Managed Programs | $ | 20,868 |
| | $ | 48,173 |
| | $ | 51,682 |
|
__________
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| (a) | As a result of the completion of the CPA:17 Merger on October 31, 2018 (Note 3), we no longer recognize equity income from our investment in shares of common stock of CPA:17 – Global or receive distributions of Available Cash from CPA:17 – Global. |
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| (b) | We are entitled to receive distributions of up to 10% of the Available Cash from the operating partnerships of each of the Managed REITs, as defined in their respective operating partnership agreements (Note 4). We are required to pay 20% and 25% of such distributions to the subadvisors of CWI 1 and CWI 2, respectively. Distributions of Available Cash received and earned from the Managed REITs fluctuate based on the timing of certain events, including acquisitions, dispositions, and weather-related disruptions. |
Gain on Change in Control of Interests
2018 — ForIn connection with the year ended December 31, 2016,CPA:17 Merger, we recorded total restructuring and other compensation expensesrecognized a gain on change in control of $11.9interests of $29.0 million of which $7.5 million was allocated towithin our Investment Management segment. Includedsegment related to the difference between the carrying value and the preliminary estimated fair value of our previously held equity interest in the total was $5.1 millionshares of CPA:17 – Global’s common stock (Note 3).
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| | W. P. Carey 20162019 10-K– 6246 |
severance related to our employment agreement with our former chief executive officer and $6.8 million related to severance, stock-based compensation, and other costs incurred as part of the RIF during the year (Note 13).Benefit from (Provision for)Income Taxes
Property Acquisition and Other Expenses
20162019vs.2018 — For the year ended December 31, 2016,2019, we incurred advisory expenses and professional feesrecorded a benefit from income taxes of $2.4 million within our Investment Management segment in connection with the formal strategic review that we completed in May 2016.
2015 — For the year ended December 31, 2015, we incurred advisory expenses and professional fees of $2.1 million within our Investment Management in connection with our formal strategic review.
Other Income and (Expenses)
2016 — For the year ended December 31, 2016, we recognized a gain of $1.2 million in our Investment Management segment on the deconsolidation of CESH I (Note 2).
Equity in Earnings (Losses) of Equity Method Investment in CCIF
In December 2014, we acquired a $25.0 million interest in CCIF (Note 7).
2016vs.2015 — For the year ended December 31, 2016, we recognized equity in earnings of equity method investment in CCIF of $2.0$4.6 million, compared to equity in losses of equity method investment in CCIF of $2.0 million for the year ended December 31, 2015. Equity in earnings recognized during 2016 reflected an increase in the fair value of investments owned by CCIF. Equity in losses recognized during 2015 reflected a decrease in the fair value of investments owned by CCIF.
Provision forIncome Taxes
2016vs.2015 — For the year ended December 31, 2016 as compared to 2015, provision for income taxes decreased by $13.0of $15.3 million primarily due to a decrease in pre-tax income recognized by the TRSs in our Investment Management segment, for the reasons described above.
2015 vs. 2014 — For the year ended December 31, 2015 as compared to 2014, provision for income taxes increased by $1.1 million. Higher pre-tax income recognized by the TRSs in our Investment Management segment resulted in a $5.9 million increase in provision for income taxes. This increase was partially offset by $4.8 million of income taxes recognized during the year ended December 31, 20142018, within our Investment Management segment, primarily as a result of lower pre-tax income within that segment, as well as a current tax benefit of approximately $6.3 million recognized during the current year due to a change in tax position for state and local taxes. In addition, we incurred one-time current taxes during the prior year upon the recognition of taxable income associated with the accelerated vesting of shares previously issued by CPA®:16CPA:17 – Global to us for asset management and performance feesservices performed, in connection with the CPA®:16CPA:17 Merger.
Liquidity and Capital Resources
Sources and Uses of Cash During the Year
We use the cash flow generated from our investments primarily to meet our operating expenses, service debt, and fund distributionsdividends to stockholders. Our cash flows fluctuate periodically due to a number of factors, which may include, among other things: the timing of our equity and debt offerings; the timing of purchases and sales of real estate; the timing of the receipt of proceeds from, and the repayment of mortgage loans and receipt of lease revenues; the receipttiming and amount of the annual installment of deferred acquisition revenue and interest thereon from the CPA® REITs;other lease-related payments; the receipt of the asset management fees in either shares of the common stock or limited partnership units of the Managed Programs or cash; the timing and characterization of distributions from equity investments in the Managed Programs and real estate; the receipt of distributions of Available Cash from the Managed REITs; the timing of settlement of foreign currency transactions; and changes in foreign currency exchange rates. We no longer receive certain fees and distributions from CPA:17 – Global following the completion of the CPA:17 Merger on October 31, 2018 (Note 3). Despite these fluctuations, we believe that we will generate sufficient cash from operations to meet our normal recurring short-term and long-term liquidity needs. We may also use existing cash resources, unusedavailable capacity under our Amended Credit Facility, proceeds from dispositions of properties, proceeds of mortgage loans, net contributions from noncontrolling interests, and the issuance of additional debt or equity securities, such as sales of our stock through our ATM program,Program, in order to meet these needs. We assess our ability to access capital on an ongoing basis. Our sources and uses of cash during the period are described below.
2019
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| W. P. Carey 2016 10-K– 63
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2016
Operating Activities — Net cash provided by operating activities increased by $40.5$302.9 million during 20162019 as compared to 2015,2018, primarily due to the lease termination income received in connection with the sale of a property during 2016, an increase in operating cash flow generated from properties we acquired or placed into service since January 1, 2015,during 2018 and an increase2019, including properties acquired in distributions of Available Cashthe CPA:17 Merger, as well as proceeds from a bankruptcy claim on a prior tenant received from the Managed REITs. These increases wereduring 2019 (Note 5), partially offset by merger expenses recognized in 2018 related to the CPA:17 Merger (Note 3) and a decrease in structuring revenue received in cash from the Managed Programsflow as a result of their lower investment volumeproperty dispositions during 2016.2018 and 2019, as well as an increase in interest expense, primarily due to the assumption of non-recourse mortgage loans in the CPA:17 Merger and the issuance of senior unsecured notes in March 2018, October 2018, June 2019, and September 2019.
Investing Activities — Our investing activities are generally comprised of real estate-related transactions (purchases and sales) and capitalized property-related costs.
During 2016,2019, we used $717.7 million to acquire 23 investments (Note 5). We sold 3014 properties and a parcel of vacant land for net proceeds of $542.4 million.totaling $308.0 million (Note 17). We also used $165.5 million to fund construction projects and other capital expenditures on certain properties within our real estate portfolio. We used $531.7 million to acquire three investments and $56.6 million primarily to fund expansions on our existing properties. We used $257.5$36.8 million to fund short-term loans to the Managed Programs, (Note 4),while $46.6 million of which $37.1 million wassuch loans were repaid during 2016.the year (Note 4). We used $7.9received $19.7 million to invest in capital expenditures for owned real estate.from the repayment of loans receivable (Note 6). We also received $6.5$19.4 million in distributions from equity method investments in the Managed Programs and real estate in excess of cumulative equity income.income and $15.0 million in proceeds from the full repayment of a preferred equity interest (Note 8).
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| W. P. Carey 2019 10-K– 47 |
Financing Activities — During 2016,2019, gross borrowings under our Senior Unsecured Credit Facility were $1.2$1.3 billion and repayments were $954.0 million.$1.2 billion (Note 11). We made prepaid and scheduled non-recourse mortgage loan principal payments of $1.0 billion and $210.4 million, respectively. Additionally, we received $348.9$870.6 million in aggregate net proceeds from the issuanceissuances of the 4.25%3.850% Senior Notes due 2029 in June 2019 and the 1.350% Senior Notes due 2028 in September 2016,2019, which we used primarily to pay down the outstanding balance on our Revolver at that timeUnsecured Revolving Credit facility and to repay certain non-recourse mortgage loans (Note 11). In connection with the issuances of thosethese senior unsecured notes (Note 11), we incurred financing costs totaling $3.6$6.7 million. Also in 2016, weWe paid distributionsdividends to stockholders totaling $416.7$704.4 million related to the fourth quarter of 20152018 and the first, second, and third quarters of 2016; and also paid distributions of $17.0 million to affiliates who hold noncontrolling interests in various entities with us.2019. We also made prepaid and scheduled non-recourse mortgage loan principal payments of $321.7 million and $161.1 million, respectively. We received $84.1$523.3 million in net proceeds from the issuance of shares under our ATM programProgram (Note 14). We recognized windfall tax benefits of $6.7 million in connection with the exercise of employee stock options and the vesting of PSUs and RSUs, which reduced our tax liability to various taxing authorities.
20152018
Operating Activities — Net cash provided by operating activities increaseddecreased by $78.2$11.5 million during 20152018 as compared to 2014,2017, primarily due to operatingmerger expenses recognized in 2018 related to the CPA:17 Merger (Note 3), a decrease in structuring revenue received from the Managed Programs as a result of their lower investment volume during 2018, an increase in interest expense, and a decrease in cash flow as a result of property dispositions during 2017 and 2018. These decreases were partially offset by an increase in cash flow generated from properties we acquired during 20142017 and 2015,2018, including the properties we acquired in the CPA®:16CPA:17 Merger in January 2014, as well as increases in structuring revenue and asset management revenue received in cash from the Managed REITs.(Note 3).
Investing Activities — Our investing activities are generally comprised of real estate-related transactions (purchases and sales) and capitalized property-related costs. In connection with the CPA:17 Merger, we acquired $113.6 million of cash and restricted cash, and paid $1.7 million in cash for the fractional shares of CPA:17 – Global.
During 2015,2018, we used $674.8$719.5 million to acquire nine14 investments and $28.0 million primarily to fund a build-to-suit transaction.(Note 5). We sold 1349 properties for net proceeds of $35.6 million. Net funds that were invested intotaling $431.6 million (Note 17). We also used $107.7 million to fund construction projects and released from lender-held investment accounts totaled $26.6 million.other capital expenditures on certain properties within our real estate portfolio. We used $185.4$10.0 million to fund short-term loans to the Managed Programs, (Note 4), allwhile $37.0 million of whichsuch loans were repaid during 2015. We received $10.4 million from the repayment of a note receivable from a third party.year (Note 4). We also made $18.2 million in contributions to jointly owned investments, primarily comprised of $17.9 million to acquire a 90% noncontrolling interest in two self-storage properties (Note 8), and received $8.2$16.4 million in distributions from equity method investments in the Managed Programs and real estate in excess of cumulative equity income and made $16.2 million in contributions to jointly owned investments to repay the related non-recourse mortgage loans.income.
Financing Activities — During 2015,2018, gross borrowings under our Senior Unsecured Credit Facility were $1.0$1.4 billion, including amounts borrowed to repay in full $180.3 million outstanding under CPA:17 – Global’s senior credit facility in connection with the CPA:17 Merger (Note 3), and repayments were $1.3 billion.$2.1 billion (Note 11). We received $1.0the equivalent of approximately $1.2 billion in aggregate net proceeds from the issuancesissuance of the 2.0%(i) €500.0 million of 2.125% Senior Notes due 2027 in March 2018 and 4.0%(ii) €500.0 million of 2.250% Senior Notes due 2026 in January 2015,October 2018, which we used primarily to pay offrepay in full the outstanding balance on our Revolvereuro-denominated unsecured term loans in March 2018, prepay certain euro-denominated non-recourse mortgage loans, and pay down the euro-denominated outstanding balance under our Unsecured Revolving Credit Facility at that timethe respective times (Note 11). In connection with the issuances of the aforementioned notes, and the exercise of the existing accordion feature under thethese Senior Unsecured Credit Facility at that timeNotes (Note 11), we incurred financing costs totaling $10.9$8.1 million. During 2015, we also made scheduled and prepaid mortgage loan principal payments of $90.3 million and $91.6 million, respectively, and drew down $22.7 million on a construction loan in relation to a build-to-suit transaction. Also in 2015,Additionally, we paid distributionsdividends to stockholders of $403.6totaling $440.4 million related to the fourth quarter of 20142017 and the first, second, and third quarters of 2015;2018; and also paid distributions of $14.7$18.2 million to affiliates whothat hold noncontrolling interests in various entities with us. We recognized windfall tax benefits of $12.5received $287.5 million in connection withnet proceeds from the exerciseissuance of employee stock optionsshares under our ATM Program (Note 14). We also made scheduled and the vestingprepaid non-recourse mortgage loan principal payments of PSUs$100.4 million and RSUs, which reduced our tax liability to various taxing authorities.$207.5 million, respectively.
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| | W. P. Carey 20162019 10-K– 6448 |
Summary of Financing
The table below summarizes our non-recourse debt, our Senior Unsecured Notes, our non-recourse mortgages, and our Senior Unsecured Credit Facility (dollars in thousands):
| | | | December 31, | December 31, |
| | 2016 | | 2015 | 2019 | | 2018 |
| Carrying Value | | | | | | |
| Fixed rate: | | | | | | |
Senior Unsecured Notes (a) | $ | 1,807,200 |
| | $ | 1,476,084 |
| $ | 4,390,189 |
| | $ | 3,554,470 |
|
Non-recourse mortgage loans (a) | 1,406,222 |
| | 1,942,528 |
| |
Non-recourse mortgages (a) | | 1,232,898 |
| | 1,795,460 |
|
| | 3,213,422 |
| | 3,418,612 |
| 5,623,087 |
| | 5,349,930 |
|
| Variable rate: | | | | | | |
| Revolver | 676,715 |
| | 485,021 |
| |
Term Loan Facility (a) | 249,978 |
| | 249,683 |
| |
Non-recourse debt (a): | | | | |
| Amount subject to interest rate swaps and cap | 158,765 |
| | 283,441 |
| |
| Unsecured Revolving Credit Facility | | 201,267 |
| | 91,563 |
|
Non-recourse mortgages (a): | | | | |
| Amount subject to interest rate swaps and caps | | 157,518 |
| | 561,959 |
|
| Floating interest rate mortgage loans | 141,934 |
| | 43,452 |
| 72,071 |
| | 375,239 |
|
| | 1,227,392 |
| | 1,061,597 |
| 430,856 |
| | 1,028,761 |
|
| | $ | 4,440,814 |
| | $ | 4,480,209 |
| $ | 6,053,943 |
| | $ | 6,378,691 |
|
| | | | | | | |
| Percent of Total Debt | | | | | | |
| Fixed rate | 72 | % | | 76 | % | 93 | % | | 84 | % |
| Variable rate | 28 | % | | 24 | % | 7 | % | | 16 | % |
| | 100 | % | | 100 | % | 100 | % | | 100 | % |
| Weighted-Average Interest Rate at End of Year | | | | | | |
| Fixed rate | 4.5 | % | | 4.8 | % | 3.3 | % | | 3.7 | % |
Variable rate (b) | 1.9 | % | | 2.1 | % | 2.1 | % | | 3.4 | % |
| Total debt | | 3.2 | % | | 3.6 | % |
____________
| |
| (a) | In accordance with ASU 2015-03, we reclassified deferred financing costs from Other assets, net to Non-recourse debt, net, Senior Unsecured Notes, net, and Senior Unsecured Credit Facility - Term Loan, net as of December 31, 2015 (Note 2). Aggregate debt balance includes unamortized deferred financing costsdiscount, net, totaling $13.4$26.7 million and $12.6$37.6 million as of December 31, 20162019 and 2015,2018, respectively, and unamortized deferred financing costs totaling $23.4 million and $20.5 million as of December 31, 2019 and 2018, respectively. |
| |
| (b) | The impact of our derivative instruments is reflected in the weighted-average interest rates. |
Cash Resources
At December 31, 2016,2019, our cash resources consisted of the following:
cash and cash equivalents totaling $155.5$196.0 million. Of this amount, $48.5$94.9 million, at then-current exchange rates, was held in foreign subsidiaries, and we could be subject to restrictions or significant costs should we decide to repatriate these amounts;
our Revolver,Unsecured Revolving Credit Facility, with unusedavailable capacity of $823.3 million, excluding amounts reserved for outstanding letters of credit;$1.3 billion; and
unleveraged properties that had an aggregate asset carrying value of $3.2$8.8 billion at December 31, 2016,2019, although there can be no assurance that we would be able to obtain financing for these properties.
We have also have the ability to accessaccessed the capital markets in the form ofthrough additional debt and/orand equity offerings, such as (i) the $350.0$325.0 million of 4.25%3.850% Senior Notes due 2029 that we issued in September 2016June 2019 (Note 11), (ii) the €500.0 million of 2.25%1.350% Senior Notes due 2028 that we issued in January 2017September 2019 (Note 2011), and (iii) the 6,672,412 shares of common stock that we issued under our ATM program, if necessary. During 2016, we issued 1,249,836 shares of our common stock underPrograms during the ATM programyear ended December 31, 2019 at a weighted-average price of $68.52$79.70 per share, for net proceeds of $84.4 million (Note 14). In addition, we paid $0.3 million of professional fees during 2016 related to the ATM program.$523.3 million. As of December 31, 2016, $314.42019, $616.6 million remained available for issuance under our ATM offering program.Program (Note 14).
|
| |
| W. P. Carey 2016 10-K– 65
|
Senior Unsecured Credit Facility
Our Senior Unsecured Credit Facility is more fully described in Note 11. A summary of our Senior Unsecured Credit Facility is provided below (in thousands): |
| | | | | | | | | | | | | | | |
| | December 31, 2016 | | December 31, 2015 |
| | Outstanding Balance | | Maximum Available | | Outstanding Balance | | Maximum Available |
| Revolver | $ | 676,715 |
| | $ | 1,500,000 |
| | $ | 485,021 |
| | $ | 1,500,000 |
|
Term Loan Facility (a) | 250,000 |
| | 250,000 |
| | 250,000 |
| | 250,000 |
|
__________
| |
(a) | Outstanding balance excludes unamortized deferred financing costs of less than $0.1 million and $0.3 million at December 31, 2016 and 2015, respectively. |
Our cash resources can be used for working capital needs and other commitments and may be used for future investments.
|
| |
| W. P. Carey 2019 10-K– 49 |
Cash Requirements and Liquidity
During the next 12 months, we expect that our cash requirements will includeinclude: payments to acquire new investments,investments; funding capital commitments such as build-to-suit projects,construction projects; paying distributionsdividends to our stockholders andstockholders; paying distributions to our affiliates that hold noncontrolling interests in entities we control,control; making scheduled interest payments on the Senior Unsecured Notes, scheduled mortgage loan principal payments, including mortgageand balloon payments on our consolidated mortgage loan obligations, and prepayments of certain of our consolidated mortgage loan obligations, as well as other normal recurring operating expenses. In January 2017, we repaid or extinguished six non-recourse mortgage loans with an aggregate principal balance of approximately $305.4 million, including mortgage loans totaling $243.8 million, inclusive of amounts attributable to a noncontrolling interest of $89.0 million, encumbering the Hellweg 2 portfolio (Note 20). We expect to fund future investments, build-to-suit commitments, any capital expenditures on existing properties, scheduled debt maturities on non-recourse mortgage loans, and anyobligations; making loans to certain of the Managed Programs (Note 4); and other normal recurring operating expenses. We expect to fund these cash requirements through cash generated from operations, cash received from dispositions of properties, the use of our cash reserves or unused amounts on our Revolver,Unsecured Revolving Credit Facility, issuances of shares through our ATM Program, and/or additional equity or debt offerings. On January 19, 2017, we completed a public offering of €500.0 million of 2.25% Senior Notes, at a price of 99.448% of par value (NoteFebruary 20,). On February 22, 2017, 2020, we entered into our Amended Credit Facility and increased the capacity of our unsecured line of credit to $1.85$2.1 billion, which is comprised of a $1.5$1.8 billion revolving line of credit, a €236.3£150.0 million term loan, and a $100.0$105.0 million delayed draw term loan. The revolving lineloan, all of credit will mature in four years, the term loanwhich will mature in five years and the delayed draw term loan will also mature in five years (Note 20).
Our liquidity would be adversely affected 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 from operations and from equity distributions in excess of equity income in real estate to meet our normal recurring short-term and long-term liquidity needs. We may also use existing cash resources, the proceeds of mortgage loans, unusedavailable capacity onunder our Revolver,Unsecured Revolving Credit Facility, net contributions from noncontrolling interests, mortgage loan proceeds, and the issuance of additional debt or equity securities, such as through our ATM program,Program, to meet these needs.
|
| |
| W. P. Carey 2016 10-K– 66
|
Off-Balance Sheet Arrangements and Contractual Obligations
The table below summarizes our debt, off-balance sheet arrangements, and other contractual obligations (primarily our capital commitments and lease obligations)commitments) at December 31, 20162019 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 |
Senior Unsecured Notes — principal (a) (b) | $ | 1,827,050 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1,827,050 |
|
Non-recourse debt — principal (a) | 1,708,452 |
| | 518,480 |
| | 363,242 |
| | 374,028 |
| | 452,702 |
|
Senior Unsecured Credit Facility — principal (c) | 926,715 |
| | 250,000 |
| | 676,715 |
| | — |
| | — |
|
Interest on borrowings (d) | 815,021 |
| | 149,627 |
| | 237,102 |
| | 201,668 |
| | 226,624 |
|
Operating and other lease commitments (e) | 165,895 |
| | 8,341 |
| | 16,539 |
| | 12,396 |
| | 128,619 |
|
Capital commitments and tenant expansion allowances (f) | 154,161 |
| | 71,590 |
| | 30,646 |
| | 48,412 |
| | 3,513 |
|
Restructuring and other compensation commitments (g) | 3,309 |
| | 2,900 |
| | 409 |
| | — |
| | — |
|
| | $ | 5,600,603 |
| | $ | 1,000,938 |
| | $ | 1,324,653 |
| | $ | 636,504 |
| | $ | 2,638,508 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Total | | Less than 1 year | | 1-3 years | | 3-5 years | | More than 5 years |
Senior Unsecured Notes — principal (a) (b) | $ | 4,433,500 |
| | $ | — |
| | $ | — |
| | $ | 1,623,400 |
| | $ | 2,810,100 |
|
Non-recourse mortgages — principal (a) | 1,469,250 |
| | 164,682 |
| | 704,587 |
| | 460,895 |
| | 139,086 |
|
Senior Unsecured Credit Facility — principal (c) | 201,267 |
| | — |
| | 201,267 |
| | — |
| | — |
|
Interest on borrowings (d) | 935,444 |
| | 193,812 |
| | 343,555 |
| | 233,263 |
| | 164,814 |
|
Capital commitments and tenant expansion allowances (e) | 367,001 |
| | 271,876 |
| | 85,607 |
| | 3,000 |
| | 6,518 |
|
Lease commitments (f) | 96,147 |
| | — |
| | 10,469 |
| | 11,965 |
| | 73,713 |
|
| | $ | 7,502,609 |
| | $ | 630,370 |
| | $ | 1,345,485 |
| | $ | 2,332,523 |
| | $ | 3,194,231 |
|
___________
| |
| (a) | Excludes unamortized deferred financing costs totaling $13.4$23.4 million, the unamortized discount on the Senior Unsecured Notes of $7.8$20.5 million in aggregate, and the aggregate unamortized fair market value adjustmentdiscount of $0.2$6.2 million, primarily resulting from the assumption of property-level debt in connection with business combinations, including the CPA®:15 Merger and CPA®:16CPA:17 Merger (Note 113). |
| |
| (b) | Our Senior Unsecured Notes are scheduled to mature from 2023 through 2026.2029 (Note 11). |
| |
| (c) | Our Revolver was scheduled to mature on January 31, 2018 and our Term LoanUnsecured Revolving Credit Facility was scheduled to mature on January 31, 2017.February 22, 2021. However, on January 26, 2017, we exercised our option to extend the maturity of our Term Loan Facility by an additional year to January 31, 2018. In addition, on February 22, 2017,20, 2020, we entered into our Amended Credit Facility to increaseand increased the capacity of our unsecured line of credit to $1.85$2.1 billion, and, as amended, thewhich is comprised of a $1.8 billion revolving line of credit, agreement will mature in four years and thea £150.0 million term loan, and a $105.0 million delayed draw term loan, all of which will mature in five years (Note 20). |
| |
| (d) | Interest on unhedged variable-rate debt obligations was calculated using the applicable annual variable interest rates and balances outstanding at December 31, 2016.2019. |
| |
| (e) | Operating and other lease commitments consist primarily of rental obligations under ground leases and the future minimum rents payable on the leases for our principal offices. Pursuant to their respective advisory agreements with us, we are reimbursed by the Managed Programs for their share of overhead costs, which includes a portion of those future minimum rent amounts. Our operating lease commitments are presented net of $8.2 million, based on the allocation percentages as of December 31, 2016, which we estimate the Managed Programs will reimburse us for in full. |
| |
(f) | Capital commitments include (i) $135.2$227.8 million related to build-to-suit expansionsprojects, including $48.0 million related to projects for which the tenant has not exercised the associated construction option, (ii) $87.9 million related to purchase commitments, and (ii) $19.0(iii) $51.3 million related to unfunded tenant improvements, including certain discretionary commitments. |
| |
(g)(f) | Represents severance-related obligationsa contractual rent commitment to lease office space. The lease was executed during 2019 but does not commence until the second quarter of 2020; therefore, it is not reflected as an office lease right-of-use asset (Note 2) on our former chief executive officer and other employees (Note 13).consolidated balance sheets as of December 31, 2019. |
|
| |
| W. P. Carey 2019 10-K– 50 |
Amounts in the table above that relate to our foreign operations are based on the exchange rate of the local currencies at December 31, 2016,2019, which consisted primarily of the euro. At December 31, 2016,2019, we had no material capital lease obligations for which we were the lessee, either individually or in the aggregate.
|
| |
| W. P. Carey 2016 10-K– 67
|
Equity Method Investments
We have interests in unconsolidated investments that own single-tenant properties net leased to companies. Generally, the underlying investments are jointly owned with our affiliates. Summarized financial information for these investments and our ownership interest in the investments at December 31, 2016 is presented below. Summarized financial information provided represents the total amounts attributable to the investments and does not represent our proportionate share (dollars in thousands):
|
| | | | | | | | | | | | |
| | | Ownership Interest at | | | | Total Third- | | |
| Lessee | | December 31, 2016 | | Total Assets | | Party Debt | | Maturity Date |
Wanbishi Archives Co. Ltd (a) | | 3% | | $ | 33,940 |
| | $ | 22,159 |
| | 12/2017 |
| The New York Times Company | | 45% | | 250,770 |
| | 102,985 |
| | 3/2020 |
C1000 Logistiek Vastgoed B. V. (b) | | 15% | | 135,252 |
| | 68,377 |
| | 3/2020 |
| Frontier Spinning Mills, Inc. | | 40% | | 37,397 |
| | — |
| | N/A |
Actebis Peacock GmbH (b) | | 30% | | 30,379 |
| | — |
| | N/A |
Waldaschaff Automotive GmbH and Wagon Automotive Nagold GmbH (b) | | 33% | | 29,197 |
| | — |
| | N/A |
| | | | | $ | 516,935 |
| | $ | 193,521 |
| | |
___________
| |
(a) | Dollar amounts shown are based on the exchange rate of the Japanese yen at December 31, 2016. |
| |
(b) | Dollar amounts shown are based on the exchange rate of the euro at December 31, 2016. |
Environmental Obligations
In connection with the purchase of many of our properties, we required the sellers to perform environmental reviews. We believe, based on the results of these reviews, that our properties were in substantial compliance with federal, state, and foreign environmental statutes at the time the properties were acquired. However, portions of certain properties have been subject to some degree of contamination, principally in connection with leakage from underground storage tanks, surface spills, or other on-site activities. In most instances where contamination has been identified, tenants are actively engaged in the remediation process and addressing identified conditions. Sellers are generally subject to environmental statutes and regulations regarding the discharge of hazardous materials and any related remediation obligations, and we frequently require sellers to address them before closing or obtain contractual protection (e.g., indemnities, cash reserves, letters of credit, or other instruments) from sellers when we acquire a property. In addition, certain of our leases generally require tenants to indemnify us from all liabilities and losses related to the leased properties and the provisions of such indemnifications specifically address environmental matters. TheSuch leases generally include provisions that allow for periodic environmental assessments, paid for by the tenant, and allow us to extend leases until such time as a tenant has satisfied its environmental obligations. Certain of our leases allow us to require financial assurances from tenants, such as performance bonds or letters of credit, if the costs of remediating environmental conditions are, in our estimation, in excess of specified amounts. With respect to our operating properties or vacant net lease properties, which are not subject to net-leasenet lease arrangements, there is no tenant to provide for indemnification, so we may be liable for costs associated with environmental contamination in the event any such circumstances arise. However, we believe that the ultimate resolution of any environmental matters should not have a material adverse effect on our financial condition, liquidity, or results of operations. We record environmental obligations within Accounts payable, accrued expenses and other liabilities in the consolidated financial statements.
Critical Accounting Estimates
Our significant accounting policies are described in Note 2. Many of these accounting policies require judgment and the use of estimates and assumptions when applying these policies in the preparation of our consolidated financial statements. On a quarterly basis, we evaluate these estimates and judgments based on historical experience as well as other factors that we believe to be reasonable under the circumstances. These estimates are subject to change in the future if underlying assumptions or factors change. Certain accounting policies, while significant, may not require the use of estimates. Those accounting policies that require significant estimation and/or judgment are described under Critical Accounting Policies and Estimates in Note 2. The proposed accounting changes that may potentially impact our business are described under Recent Accounting Pronouncements in Note 2.
|
| |
| W. P. Carey 2016 10-K– 68
|
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 Funds from Operations or FFO,(“FFO”) and AFFO, which are non-GAAP measures 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 FFO and AFFO and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are provided below.
Funds from Operations and Adjusted Funds from Operations
Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”), or NAREIT, an industry trade group, has promulgated a non-GAAP measure known as FFO, which we believe to be an appropriate supplemental measure, when used in addition to and in conjunction with results presented in accordance with GAAP, to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental non-GAAP measure. FFO is not equivalent to, nor a substitute for, net income or loss as determined under GAAP.
|
| |
| W. P. Carey 2019 10-K– 51 |
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 revisedrestated in February 2004.December 2018. 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, gains or losses on changes in control of interests in real estate, and depreciation and amortization from real estate assets; and after adjustments for unconsolidated partnerships and jointly owned investments. Adjustments for unconsolidated partnerships and jointly owned investments are calculated to reflect FFO. Our FFO calculation complies with NAREIT’s policy described above.
We also modify the NAREIT computation of FFO to include other adjustments toadjust GAAP net income to adjust for certain non-cash charges, such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line rents, stockand other non-cash rent adjustments, stock-based compensation, gains or losses from extinguishmentnon-cash environmental accretion expense, and amortization of debt and deconsolidation of subsidiaries, and unrealized foreign currency exchange gains and losses.deferred financing costs. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short-term fluctuations in net income but have no impact on cash flows. Additionally, we exclude non-core income and expenses, such as certain lease termination income,gains or losses from extinguishment of debt, restructuring and other compensation-related expenses, resulting from a reduction in headcount and employee severance arrangements, and merger propertyand acquisition and other expenses which includes costs recorded related to the CPA®:16 Merger, the restructuring of the Hellweg 2 investment, the reversal of liabilities for German real estate transfer taxes that were previously recorded in connection with the CPA®:15 Merger, and expenses related to our formal strategic review.expenses. We also exclude realized and unrealized gains/losses on foreign currency exchange transactions (other than those realized on the settlement of foreign currency derivatives), which are not considered fundamental attributes of our business plan and do not affect our overall long-term operating performance. We refer to our modified definition of FFO as AFFO. We exclude these items from GAAP net income to arrive at AFFO as they are not the primary drivers in our decision-making process and excluding thosethese items provides investors a view of our portfolio performance over time and makemakes it more comparable to other REITs whichthat are currently not engaged in acquisitions, mergers, and restructuring, which are not part of our normal business operations. AFFO also reflects adjustments for unconsolidated partnerships and jointly owned investments. We use AFFO as one measure of our operating performance when we formulate corporate goals, evaluate the effectiveness of our strategies, and determine executive compensation.
We believe that AFFO is a useful supplemental measure for investors to consider as we believe it will help them to better assess the sustainability of our operating performance without the potentially distorting impact of these short-term fluctuations. However, there are limits on the usefulness of AFFO to investors. For example, impairment charges and unrealized foreign currency losses that we exclude may become actual realized losses upon the ultimate disposition of the properties in the form of lower cash proceeds or other considerations. We use our FFO and AFFO measures as supplemental financial measures of operating performance. We do not use our FFO and AFFO measures as, nor should they be considered to be, alternatives to net earningsincome computed under GAAP, or as alternatives to net cash fromprovided by operating activities computed under GAAP, or as indicators of our ability to fund our cash needs.
|
| |
| | W. P. Carey 20162019 10-K– 6952 |
��
Consolidated FFO and AFFO were as follows (in thousands):
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Net income attributable to W. P. Carey | $ | 267,747 |
| | $ | 172,258 |
| | $ | 239,826 |
|
| Adjustments: | | | | | |
| Depreciation and amortization of real property | 270,822 |
| | 274,358 |
| | 232,692 |
|
| Gain on sale of real estate, net | (71,318 | ) | | (6,487 | ) | | (34,079 | ) |
| Impairment charges | 59,303 |
| | 29,906 |
| | 23,067 |
|
| Proportionate share of adjustments for noncontrolling interests to arrive at FFO | (11,725 | ) | | (11,510 | ) | | (11,808 | ) |
| Proportionate share of adjustments to equity in net income of partially owned entities to arrive at FFO | 5,053 |
| | 5,142 |
| | 5,381 |
|
| Total adjustments | 252,135 |
| | 291,409 |
| | 215,253 |
|
| FFO attributable to W. P. Carey — as defined by NAREIT | 519,882 |
| | 463,667 |
| | 455,079 |
|
| Adjustments: | | | | | |
Straight-line and other rent adjustments (a) | (39,215 | ) | | (25,397 | ) | | (17,116 | ) |
Above- and below-market rent intangible lease amortization, net (b) | 36,504 |
| | 43,964 |
| | 59,050 |
|
| Tax (benefit) expense — deferred | (24,955 | ) | | 1,617 |
| | (22,582 | ) |
| Stock-based compensation | 18,015 |
| | 21,626 |
| | 31,075 |
|
Restructuring and other compensation (c) | 11,925 |
| | — |
| | — |
|
| Allowance for credit losses | 7,064 |
| | 8,748 |
| | — |
|
Merger, property acquisition, and other expenses (d) (e) (f) | 5,377 |
| | (7,764 | ) | | 48,333 |
|
| Loss on extinguishment of debt | 4,109 |
| | 5,645 |
| | 9,835 |
|
Realized losses (gains) on foreign currency and other (g) | 3,671 |
| | 818 |
| | (95 | ) |
Amortization of deferred financing costs (h) | 3,197 |
| | 2,655 |
| | 9,442 |
|
Other amortization and non-cash items (h) (i) (j) | (2,111 | ) | | 960 |
| | 4,978 |
|
Gain on change in control of interests (k) | — |
| | — |
| | (105,947 | ) |
Other, net (l) | — |
| | — |
| | 5,369 |
|
| Proportionate share of adjustments to equity in net income of partially owned entities to arrive at AFFO | 3,551 |
| | 8,593 |
| | 6,051 |
|
Proportionate share of adjustments for noncontrolling interests to arrive at AFFO (m) | 683 |
| | 6,070 |
| | (3,006 | ) |
| Total adjustments | 27,815 |
| | 67,535 |
| | 25,387 |
|
| AFFO attributable to W. P. Carey | $ | 547,697 |
| | $ | 531,202 |
| | $ | 480,466 |
|
| | | | | | |
| Summary | | | | | |
| FFO attributable to W. P. Carey — as defined by NAREIT | $ | 519,882 |
| | $ | 463,667 |
| | $ | 455,079 |
|
| AFFO attributable to W. P. Carey | $ | 547,697 |
| | $ | 531,202 |
| | $ | 480,466 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Net income attributable to W. P. Carey | $ | 305,243 |
| | $ | 411,566 |
| | $ | 277,289 |
|
| Adjustments: | | | | | |
| Depreciation and amortization of real property | 442,096 |
| | 286,164 |
| | 248,042 |
|
| Impairment charges | 32,539 |
| | 4,790 |
| | 2,769 |
|
| Gain on sale of real estate, net | (18,143 | ) | | (118,605 | ) | | (33,878 | ) |
Loss (gain) on change in control of interests (a) (b) | 8,416 |
| | (47,814 | ) | | — |
|
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 15,826 |
| | 4,728 |
| | 5,293 |
|
Proportionate share of adjustments for noncontrolling interests (d) | (69 | ) | | (8,966 | ) | | (10,491 | ) |
| Total adjustments | 480,665 |
| | 120,297 |
| | 211,735 |
|
| FFO (as defined by NAREIT) attributable to W. P. Carey | 785,908 |
| | 531,863 |
| | 489,024 |
|
| Adjustments: | | | | | |
| Above- and below-market rent intangible lease amortization, net | 64,383 |
| | 52,314 |
| | 55,195 |
|
Straight-line and other rent adjustments (e) | (31,787 | ) | | (14,460 | ) | | (11,679 | ) |
| Stock-based compensation | 18,787 |
| | 18,294 |
| | 18,917 |
|
| Amortization of deferred financing costs | 11,714 |
| | 6,184 |
| | 8,169 |
|
Other (gains) and losses (f) | (8,924 | ) | | (15,704 | ) | | 17,163 |
|
Tax expense (benefit) — deferred and other (g) (h) | 5,974 |
| | 1,079 |
| | (18,664 | ) |
| Other amortization and non-cash items | 3,198 |
| | 920 |
| | (912 | ) |
Merger and other expenses (i) | 101 |
| | 41,426 |
| | 605 |
|
| Restructuring and other compensation | — |
| | — |
| | 9,363 |
|
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 7,165 |
| | 12,439 |
| | 8,476 |
|
Proportionate share of adjustments for noncontrolling interests (d) | (49 | ) | | 231 |
| | (2,678 | ) |
| Total adjustments | 70,562 |
| | 102,723 |
| | 83,955 |
|
| AFFO attributable to W. P. Carey | $ | 856,470 |
| | $ | 634,586 |
| | $ | 572,979 |
|
| | | | | | |
| Summary | | | | | |
| FFO (as defined by NAREIT) attributable to W. P. Carey | $ | 785,908 |
| | $ | 531,863 |
| | $ | 489,024 |
|
| AFFO attributable to W. P. Carey | $ | 856,470 |
| | $ | 634,586 |
| | $ | 572,979 |
|
|
| |
| | W. P. Carey 20162019 10-K– 7053 |
FFO and AFFO from Owned Real Estate were as follows (in thousands):
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Net income from Owned Real Estate attributable to W. P. Carey | $ | 252,353 |
| | $ | 146,810 |
| | $ | 228,387 |
|
| Adjustments: | | | | | |
| Depreciation and amortization of real property | 270,822 |
| | 274,358 |
| | 232,692 |
|
| Gain on sale of real estate, net | (71,318 | ) | | (6,487 | ) | | (34,079 | ) |
| Impairment charges | 59,303 |
| | 29,906 |
| | 23,067 |
|
| Proportionate share of adjustments for noncontrolling interests to arrive at FFO | (11,725 | ) | | (11,510 | ) | | (11,808 | ) |
| Proportionate share of adjustments to equity in net income of partially owned entities to arrive at FFO | 5,053 |
| | 5,142 |
| | 5,381 |
|
| Total adjustments | 252,135 |
| | 291,409 |
| | 215,253 |
|
| FFO attributable to W. P. Carey — as defined by NAREIT — Owned Real Estate | 504,488 |
| | 438,219 |
| | 443,640 |
|
| Adjustments: | | | | | |
Straight-line and other rent adjustments (a) | (39,215 | ) | | (25,397 | ) | | (17,116 | ) |
Above- and below-market rent intangible lease amortization, net (b) | 36,504 |
| | 43,964 |
| | 59,050 |
|
| Tax benefit — deferred | (17,439 | ) | | (2,017 | ) | | (10,953 | ) |
| Allowance for credit losses | 7,064 |
| | 8,748 |
| | — |
|
| Stock-based compensation | 5,224 |
| | 7,873 |
| | 12,659 |
|
Restructuring and other compensation (c) | 4,413 |
| | — |
| | — |
|
| Loss on extinguishment of debt | 4,109 |
| | 5,645 |
| | 9,306 |
|
Realized losses (gains) on foreign currency and other (g) | 3,654 |
| | 757 |
| | (117 | ) |
Amortization of deferred financing costs (h) | 3,197 |
| | 2,655 |
| | 9,290 |
|
Merger, property acquisition, and other expenses (d) (e) (f) | 2,993 |
| | (9,908 | ) | | 34,465 |
|
Other amortization and non-cash items (h) (i) (j) | (1,889 | ) | | 519 |
| | 4,415 |
|
Gain on change in control of interests (k) | — |
| | — |
| | (105,947 | ) |
Other, net (l) | — |
| | — |
| | 5,369 |
|
| Proportionate share of adjustments to equity in net income of partially owned entities to arrive at AFFO | 4,868 |
| | 5,645 |
| | 6,051 |
|
Proportionate share of adjustments for noncontrolling interests to arrive at AFFO (m) | 683 |
| | 6,070 |
| | (3,006 | ) |
| Total adjustments | 14,166 |
| | 44,554 |
| | 3,466 |
|
| AFFO attributable to W. P. Carey — Owned Real Estate | $ | 518,654 |
| | $ | 482,773 |
| | $ | 447,106 |
|
| | | | | | |
| Summary | | | | | |
| FFO attributable to W. P. Carey — as defined by NAREIT — Owned Real Estate | $ | 504,488 |
| | $ | 438,219 |
| | $ | 443,640 |
|
| AFFO attributable to W. P. Carey — Owned Real Estate | $ | 518,654 |
| | $ | 482,773 |
| | $ | 447,106 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Net income from Real Estate attributable to W. P. Carey | $ | 272,065 |
| | $ | 307,236 |
| | $ | 192,139 |
|
| Adjustments: | | | | | |
| Depreciation and amortization of real property | 442,096 |
| | 286,164 |
| | 248,042 |
|
| Impairment charges | 32,539 |
| | 4,790 |
| | 2,769 |
|
| Gain on sale of real estate, net | (18,143 | ) | | (118,605 | ) | | (33,878 | ) |
Loss (gain) on change in control of interests (a) | 8,416 |
| | (18,792 | ) | | — |
|
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 15,826 |
| | 4,728 |
| | 5,293 |
|
Proportionate share of adjustments for noncontrolling interests (d) | (69 | ) | | (8,966 | ) | | (10,491 | ) |
| Total adjustments | 480,665 |
| | 149,319 |
| | 211,735 |
|
| FFO (as defined by NAREIT) attributable to W. P. Carey — Real Estate | 752,730 |
| | 456,555 |
| | 403,874 |
|
| Adjustments: | | | | | |
| Above- and below-market rent intangible lease amortization, net | 64,383 |
| | 52,314 |
| | 55,195 |
|
Straight-line and other rent adjustments (e) | (31,787 | ) | | (14,460 | ) | | (11,679 | ) |
| Stock-based compensation | 13,248 |
| | 10,450 |
| | 6,960 |
|
| Amortization of deferred financing costs | 11,714 |
| | 6,184 |
| | 8,169 |
|
Other (gains) and losses (f) | (9,773 | ) | | (18,025 | ) | | 18,063 |
|
| Tax expense (benefit) — deferred and other | 7,971 |
| | (18,790 | ) | | (20,168 | ) |
| Other amortization and non-cash items | 2,540 |
| | 330 |
| | (912 | ) |
Merger and other expenses (i) | 101 |
| | 41,426 |
| | 605 |
|
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 115 |
| | 287 |
| | (564 | ) |
Proportionate share of adjustments for noncontrolling interests (d) | (49 | ) | | 231 |
| | (2,678 | ) |
| Total adjustments | 58,463 |
| | 59,947 |
| | 52,991 |
|
| AFFO attributable to W. P. Carey — Real Estate | $ | 811,193 |
| | $ | 516,502 |
| | $ | 456,865 |
|
| | | | | | |
| Summary | | | | | |
| FFO (as defined by NAREIT) attributable to W. P. Carey — Real Estate | $ | 752,730 |
| | $ | 456,555 |
| | $ | 403,874 |
|
| AFFO attributable to W. P. Carey — Real Estate | $ | 811,193 |
| | $ | 516,502 |
| | $ | 456,865 |
|
|
| |
| | W. P. Carey 20162019 10-K– 7154 |
FFO and AFFO from Investment Management were as follows (in thousands):
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Net income from Investment Management attributable to W. P. Carey | $ | 15,394 |
| | $ | 25,448 |
| | $ | 11,439 |
|
| FFO attributable to W. P. Carey — as defined by NAREIT — Investment Management | 15,394 |
| | 25,448 |
| | 11,439 |
|
| Adjustments: | | | | | |
| Stock-based compensation | 12,791 |
| | 13,753 |
| | 18,416 |
|
| Tax (benefit) expense — deferred | (7,516 | ) | | 3,634 |
| | (11,629 | ) |
Restructuring and other compensation (c) | 7,512 |
| | — |
| | — |
|
Merger, property acquisition, and other expenses (d) (e) (f) | 2,384 |
| | 2,144 |
| | 13,868 |
|
Other amortization and non-cash items (i) | (222 | ) | | 441 |
| | 563 |
|
Realized losses on derivatives and other (g) | 17 |
| | 61 |
| | 22 |
|
| Loss on extinguishment of debt | — |
| | — |
| | 529 |
|
Amortization of deferred financing costs (h) | — |
| | — |
| | 152 |
|
| Proportionate share of adjustments to equity in net income of partially owned entities to arrive at AFFO | (1,317 | ) | | 2,948 |
| | — |
|
| Total adjustments | 13,649 |
| | 22,981 |
| | 21,921 |
|
| AFFO attributable to W. P. Carey — Investment Management | $ | 29,043 |
| | $ | 48,429 |
| | $ | 33,360 |
|
| | | | | | |
| Summary | | | | | |
| FFO attributable to W. P. Carey — as defined by NAREIT — Investment Management | $ | 15,394 |
| | $ | 25,448 |
| | $ | 11,439 |
|
| AFFO attributable to W. P. Carey — Investment Management | $ | 29,043 |
| | $ | 48,429 |
| | $ | 33,360 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Net income from Investment Management attributable to W. P. Carey | $ | 33,178 |
| | $ | 104,330 |
| | $ | 85,150 |
|
| Adjustments: | | | | | |
Gain on change in control of interests (b) | — |
| | (29,022 | ) | | — |
|
| Total adjustments | — |
| | (29,022 | ) | | — |
|
| FFO (as defined by NAREIT) attributable to W. P. Carey — Investment Management | 33,178 |
| | 75,308 |
| | 85,150 |
|
| Adjustments: | | | | | |
| Stock-based compensation | 5,539 |
| | 7,844 |
| | 11,957 |
|
Tax (benefit) expense — deferred and other (g) (h) | (1,997 | ) | | 19,869 |
| | 1,504 |
|
Other (gains) and losses (f) | 849 |
| | 2,321 |
| | (900 | ) |
| Other amortization and non-cash items | 658 |
| | 590 |
| | — |
|
| Restructuring and other compensation | — |
| | — |
| | 9,363 |
|
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 7,050 |
| | 12,152 |
| | 9,040 |
|
| Total adjustments | 12,099 |
| | 42,776 |
| | 30,964 |
|
| AFFO attributable to W. P. Carey — Investment Management | $ | 45,277 |
| | $ | 118,084 |
| | $ | 116,114 |
|
| | | | | | |
| Summary | | | | | |
| FFO (as defined by NAREIT) attributable to W. P. Carey — Investment Management | $ | 33,178 |
| | $ | 75,308 |
| | $ | 85,150 |
|
| AFFO attributable to W. P. Carey — Investment Management | $ | 45,277 |
| | $ | 118,084 |
| | $ | 116,114 |
|
__________
| |
| (a) | Amount for the year ended December 31, 2016 includes an adjustment to exclude $27.2 million2019 represents a loss recognized on the purchase of the $32.2 million of lease termination incomeremaining interest in a real estate investment from CPA:17 – Global in the CPA:17 Merger, which we had previously accounted for under the equity method. We recognized in connection with a domestic property that was soldthis loss because we identified certain measurement period adjustments during the period, as such amount was determined to be non-core incomethird quarter of 2019 that impacted the provisional accounting for this investment (Note 173, Note 6). Amount for the year ended December 31, 2016 also reflects an adjustment to include $1.8 million2018 represents a gain recognized on the purchase of lease termination income receivedthe remaining interests in December 2015 that represented core income for the year ended December 31, 2016. Amount for the year ended December 31, 2015 includes an adjustment of $15.0 million related to lease termination income recognizedsix investments from the tenantCPA:17 – Global in the aforementioned domestic property,CPA:17 Merger, which has been determined to be non-core incomewe had previously accounted for under the equity method (Note 173). |
| |
| (b) | Amount for the year ended December 31, 2016 includes an adjustment2018 represents a gain recognized on our previously held interest in shares of $15.6 million related toCPA:17 – Global common stock in connection with the acceleration of a below-market lease from a tenant of a domestic property that was sold during the year.CPA:17 Merger (Note 3). |
| |
| (c) | AmountEquity income, including amounts that are not typically recognized for FFO and AFFO, is recognized within Equity in earnings of equity method investments in the Managed Programs and real estate on the consolidated statements of income. This represents restructuringadjustments to equity income to reflect FFO and other compensation-related expenses resulting fromAFFO on a reduction in headcount, including the RIF, and employee severance arrangements (Note 13). |
| |
| (d) | Amount for the year ended December 31, 2015 includesAdjustments disclosed elsewhere in this reconciliation are on a reversal of $25.0 million of liabilities for German real estate transfer taxes, of which $7.9 million was previously recorded as merger expenses in connection with the CPA®:15 Merger in September 2012 and $17.1 million was previously recorded in connection with the restructuring ofconsolidated basis. This adjustment reflects our FFO or AFFO on a German investment, Hellweg 2, in October 2013 (Note 7). At the time of the restructuring, we owned an equity interest in the Hellweg 2 investment, which we jointly owned with CPA®:16 – Global. In connection with the CPA®:16 Merger, we acquired CPA®:16 – Global’s controlling interest in the investment. Therefore, the reversal related to the Hellweg 2 investment has been recorded in Merger, property acquisition, and other expenses in the consolidated financial statements for the year ended December 31, 2015, since we now consolidate the Hellweg 2 investment. |
| |
| (e) | Amount for the year ended December 31, 20142019 includes reported merger costsan adjustment to exclude $6.2 million of non-cash lease termination revenue, which will be collected and reflected within AFFO over the remaining master lease term. |
| |
| (f) | Primarily comprised of unrealized gains and losses on derivatives, and gains and losses from foreign currency movements, extinguishment of debt, and marketable securities. Beginning in the second quarter of 2019, we aggregated (gain) loss on extinguishment of debt and realized (gains) losses on foreign currency (both of which were previously disclosed as separate AFFO adjustment line items), as well as income tax expense incurred in connection with the CPA®:16 Merger. Income tax expense incurred in connection with the CPA®:16 Merger representscertain other adjustments, within this line item, which is comprised of adjustments related to Other gains and (losses) on our consolidated statements of income. Prior period amounts have been reclassified to conform to the current portion of income tax expense includingperiod presentation. |
| |
| (g) | Amount for the permanent differenceyear ended December 31, 2018 includes one-time taxes incurred upon the recognition of deferred revenuetaxable income associated with the accelerated vesting of shares previously issued by CPA:17 – Global to us by CPA®:16 – Global for asset management and performance fees.services performed, in connection with the CPA:17 Merger. |
| |
(f)(h) | AmountsAmount for the yearsyear ended December 31, 2016 and 2015 include expenses related to our formal strategic review,2019 includes a current tax benefit, which concluded in May 2016.is excluded from AFFO as it was incurred as a result of the CPA:17 Merger. |
| |
(g)(i) | Effective January 1, 2015, we no longer adjustAmount for realized gains or losses on foreign currency derivatives. For the year ended December 31, 2014, realized gains on foreign exchange derivatives were $0.3 million.2018 is primarily comprised of costs incurred in connection with the CPA:17 Merger, including advisory fees, transfer taxes, and legal, accounting, and tax-related professional fees (Note 1, Note 3). |
|
| |
| | W. P. Carey 20162019 10-K– 7255 |
| |
(h) | Effective July 1, 2016, the amortization of debt premiums and discounts, which was previously included in Other amortization and non-cash items, is included in Amortization of deferred financing costs. Prior periods are retrospectively adjusted to reflect this change. Amortization of debt premiums and discounts for the years ended December 31, 2015 and 2014 was $3.0 million and $5.4 million, respectively. |
| |
(i) | Represents primarily unrealized gains and losses from foreign exchange and derivatives. |
| |
(j) | Amount for the year ended December 31, 2016 includes an adjustment of $0.6 million to exclude a portion of a gain recognized on the deconsolidation of CESH I (Note 2). |
| |
(k) | Gain on change in control of interests for the year ended December 31, 2014 represents a gain of $75.7 million recognized on our previously held interest in shares of CPA®:16 – Global common stock and a gain of $30.2 million recognized on the purchase of the remaining interests in nine investments from CPA®:16 – Global (Note 3). |
| |
(l) | Other, net for the year ended December 31, 2014 primarily consists of proceeds from the bankruptcy settlement claim with U.S. Aluminum of Canada, a former CPA®:16 – Global tenant that was acquired as part of the CPA®:16 Merger on January 31, 2014.
|
| |
(m) | Amount for the year ended December 31, 2015 includes CPA®:17 – Global’s $6.3 million share of the reversal of liabilities for German real estate transfer taxes, as described above.
|
While we believe that FFO and AFFO are important supplemental measures, they should not be considered as alternatives to net income as an indication of a company’s operating performance. These non-GAAP measures should be used in conjunction with net income as defined by GAAP. FFO and AFFO, or similarly titled measures disclosed by other REITs, may not be comparable to our FFO and AFFO measures.
|
| |
| | W. P. Carey 20162019 10-K– 7356 |
Item 7A. 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 that we are exposed to are interest rate risk and foreign currency exchange risk. We are also exposed to further market risk as a result of tenant concentrations in certain industries and/or geographic regions, since 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 we attempt to diversify such 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 forward contracts and collars to hedge our foreign currency cash flow exposures.
Interest Rate Risk
The values of our real estate and related fixed-rate debt obligations, andas well as the values of our note receivable investmentunsecured debt obligations, are 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, which may affect our ability to refinance property-level mortgage debt when balloon payments are scheduled, if we do not choose to repay the debt when due. 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 and managed assets to decrease, which would create lower revenues from managed assets and lower investment performance for the Managed REITs. 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 historically attempted to obtain non-recourse mortgagegenerally seek long-term debt financing on a long-term, fixed-rate basis. However, from time to time, we or our joint investment partners have obtained, and may in the future obtain, variable-rate non-recourse mortgage loans and, as a result, we have entered into, and may continue to enter into, interest rate swap agreements or interest rate cap agreements with lenders. Interest rate swap agreements effectively convert the variable-rate debt service obligations of a loan to a fixed rate, while interest rate cap agreements limit the underlying interest rate from exceeding a specified strike rate. Interest rate swaps are agreements in which one party exchanges a stream of interest paymentscounterparties. See Note 10 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 are derivative instruments that, where applicable, are designated as cash flow hedgesadditional information on the forecasted interest payments on the debt obligation. The 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 December 31, 2016, we estimated that the total fair value of our interest rate swaps and cap, which are included in Other assets, net and Accounts payable, accrued expenses and other liabilities in the consolidated financial statements, was in a net liability position of $2.8 million (Note 10).caps.
At December 31, 2016,2019, a significant portion (approximately 75.9%95.5%) of our long-term debt either bore interest at fixed rates or was swapped or capped to a fixed rate, or bore interest at fixed rates that were scheduled to convert to then-prevailing market fixed rates at certain future points during their term. The annual interest rates on our fixed-rate debt at December 31, 2016 ranged from 2.0% to 7.8%. The contractual annual interest rates on our variable-rate debt at December 31, 2016 ranged from 0.9% to 6.9%.rate. Our debt obligations are more fully described under in Note 11 and Liquidity and Capital Resources — Summary of Financing in Item 7 above. The following table presents principal cash flows based upon expected maturity dates of our debt obligations outstanding at December 31, 20162019 (in thousands): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total | | Fair value |
Fixed-rate debt (a) | $ | 466,370 |
| | $ | 134,239 |
| | $ | 86,384 |
| | $ | 174,052 |
| | $ | 117,547 |
| | $ | 2,255,072 |
| | $ | 3,233,664 |
| | $ | 3,244,597 |
|
Variable-rate debt (a) (b) | $ | 302,110 |
| | $ | 806,152 |
| | $ | 13,182 |
| | $ | 42,992 |
| | $ | 39,438 |
| | $ | 24,679 |
| | $ | 1,228,553 |
| | $ | 1,222,289 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter | | Total | | Fair value |
Fixed-rate debt (a) (b) | $ | 152,812 |
| | $ | 213,087 |
| | $ | 406,785 |
| | $ | 801,170 |
| | $ | 1,148,989 |
| | $ | 2,949,186 |
| | $ | 5,672,029 |
| | $ | 5,941,459 |
|
Variable-rate debt (a) | $ | 11,870 |
| | $ | 232,382 |
| | $ | 53,600 |
| | $ | 99,118 |
| | $ | 35,018 |
| | $ | — |
| | $ | 431,988 |
| | $ | 430,132 |
|
__________
| |
| (a) | Amounts are based on the exchange rate at December 31, 2016,2019, as applicable. |
| |
| (b) | Includes $250.0 million outstanding underAmounts after 2022 are primarily comprised of principal payments for our Term Loan Facility at December 31, 2016, which was scheduled to mature on January 31, 2017. However, on January 26, 2017, we exercised our option to extend our Term Loan Facility by an additional year to January 31, 2018, and on February 22, 2017, we entered into our Amended Credit Facility to increase the capacity of our unsecured line of credit to $1.85 billion. The term loan, as amended, will mature in five yearsSenior Unsecured Notes (Note 2011). |
|
| |
| W. P. Carey 2016 10-K– 74
|
The estimated fair value of our fixed-rate debt and our variable-rate debt that currently bears interest at fixed rates or has effectively been converted to a fixed rate through the use of interest rate swaps, or that has been subject to interest rate caps, is affected by changes in interest rates. Annual interest expense on our unhedged variable-rate debt that does not bear interest at fixed rates at December 31, 20162019 would increase or decrease by $10.7$1.9 million for our euro-denominated debt, by $0.6 million for our British pound sterling-denominated debt, and by $0.2 million for our Japanese yen-denominated debt for each respective 1% change in annual interest rates. As more fully described under Liquidity and Capital Resources — Summary of Financing in Item 7 above, a portion of the debt classified as variable-rate debt in the tables above bore interest at fixed rates at December 31, 2016 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 international investments, primarily in Europe, Australia, Asia,Canada, and CanadaJapan, and as a result are subject to risk from the effects of exchange rate movements in various foreign currencies, primarily the euro, the British pound sterling, the AustralianDanish krone, the Canadian dollar, and the Canadian dollar,Japanese yen, which may affect future costs and cash flows. We managehave obtained, and may in the future obtain, non-recourse mortgage financing in the local currency. We have also completed five offerings of euro-denominated
|
| |
| W. P. Carey 2019 10-K– 57 |
senior notes, and have borrowed under our Unsecured Revolving Credit Facility and Amended Credit Facility (Note 20) in foreign currencies, including the euro, British pound sterling, and Japanese yen (Note 11). 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, to some extent, mitigate the risk from changes in foreign currency exchange rate movements by generally placing 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 net cash flow from that investment.rates. 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. As part of our investment strategy, we make intercompany loans to a number of our foreign subsidiaries, most of which do not have the U.S. dollar as their functional currency. Remeasurement of foreign currency intercompany transactions that are scheduled for settlement, consisting primarily of accrued interest and short-term loans, are included in the determination of net income. For the year ended December 31, 2016, we recognized net foreign currency transaction losses (included in Other income and (expenses) in the consolidated financial statements) of $6.6 million, primarily due to the strengthening of the U.S. dollar relative to the British pound sterling and the euro during the year. The end-of-period rate for the U.S. dollar in relation to the British pound sterling at December 31, 2016 decreased by 17.0% to $1.2312 from $1.4833 at December 31, 2015. The end-of-period rate for the U.S. dollar in relation to the euro at December 31, 2016 decreased by 3.2% to $1.0541 from $1.0887 at December 31, 2015.
The Brexit referendum adversely impacted global markets, including certain currencies, and resulted in a sharp decline in the value of the British pound sterling and, to a lesser extent, the euro, as compared to the U.S. dollar. In addition, in October 2016, the Prime Minister of the United Kingdom announced that the formal withdrawal process would be triggered in the first quarter of 2017. As a result, the end-of-period rate for the U.S. dollar in relation to the British pound sterling at December 31, 2016 decreased by 5.0% to $1.2312 from $1.2962 at September 30, 2016. Volatility in exchange rates is expected to continue as the United Kingdom negotiates its possible exit from the European Union. As of December 31, 2016, 4.8% and 23.5% of our total ABR was from the United Kingdom and other European Union countries, respectively. We currently hedge a portion of our British pound sterling exposure and our euro exposure through the approximately next five years, thereby significantly reducing our currency risk.
Any impact from Brexit on us will depend, in part, on the outcome of the related tariff, trade, regulatory, and other negotiations. Although it is unknown what the result of those negotiations will be, it is possible that new terms may adversely affect our operations and financial results.
We enter into foreign currency forward contracts and collars to hedge certain of our foreign currency cash flow exposures. A foreign currency forward contract is a commitment to deliver a certain amount of foreign currency at a certain priceSee Note 10 for additional information on a specific date in the future. A foreign currency collar consists of a written call option and a purchased put option to sell the foreign currency at a range of predetermined exchange rates. 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. A foreign currency collar guarantees that the exchange rate of the currency will not fluctuate beyond the range of the options’ strike prices. The estimated fair value of our foreign currency forward contracts and collars, which are included in Other assets, net in the consolidated financial statements, was in an asset position of $54.4 million at December 31, 2016. We have obtained, and may in the future obtain, non-recourse mortgage financing in local currencies. We have also issued euro-denominated Senior Unsecured Notes (Note 11, Note 20) and have borrowed under our Senior Unsecured Credit Facility and Amended Credit Facility (Note 20) in foreign currencies, including the euro and the British pound sterling. 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, to some extent, mitigate the risk from changes in foreign currency exchange rates.collars.
|
| |
| W. P. Carey 2016 10-K– 75
|
Scheduled future minimum rents,lease payments, exclusive of renewals, under non-cancelable operating leases for our consolidated foreign operations as of December 31, 2016, during each of the next five calendar years and thereafter,2019 are as follows (in thousands):
| | Lease Revenues (a) | | 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter | | Total |
Euro (b) | | $ | 155,267 |
| | $ | 155,797 |
| | $ | 152,677 |
| | $ | 149,805 |
| | $ | 145,654 |
| | $ | 1,122,916 |
| | $ | 1,882,116 |
| | $ | 302,124 |
| | $ | 299,176 |
| | $ | 289,400 |
| | $ | 287,769 |
| | $ | 268,269 |
| | $ | 1,757,899 |
| | $ | 3,204,637 |
|
British pound sterling (c) | | 31,782 |
| | 31,956 |
| | 32,211 |
| | 32,550 |
| | 32,821 |
| | 261,672 |
| | 422,992 |
| | 42,332 |
| | 43,057 |
| | 43,194 |
| | 43,612 |
| | 44,011 |
| | 268,970 |
| | 485,176 |
|
Australian dollar (d) | | 11,155 |
| | 11,155 |
| | 11,155 |
| | 11,186 |
| | 11,155 |
| | 143,241 |
| | 199,047 |
| |
Japanese yen (d) | | | 2,816 |
| | 2,809 |
| | 677 |
| | — |
| | — |
| | — |
| | 6,302 |
|
Other foreign currencies (e) | | 16,065 |
| | 16,274 |
| | 16,734 |
| | 15,109 |
| | 15,316 |
| | 156,211 |
| | 235,709 |
| | 25,583 |
| | 25,933 |
| | 25,860 |
| | 26,286 |
| | 26,569 |
| | 278,207 |
| | 408,438 |
|
| | | $ | 214,269 |
| | $ | 215,182 |
| | $ | 212,777 |
| | $ | 208,650 |
| | $ | 204,946 |
| | $ | 1,684,040 |
| | $ | 2,739,864 |
| | $ | 372,855 |
| | $ | 370,975 |
| | $ | 359,131 |
| | $ | 357,667 |
| | $ | 338,849 |
| | $ | 2,305,076 |
| | $ | 4,104,553 |
|
Scheduled debt service payments (principal and interest) for our Senior Unsecured Notes, Senior Unsecured Credit Facility, and non-recourse mortgage notes payable for our consolidated foreign operations as of December 31, 2016, during each of the next five calendar years and thereafter,2019 are as follows (in thousands):
| | Debt service (a) (f) | | 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total | |
Debt Service (a) (f) | | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter | | Total |
Euro (b) | | $ | 358,232 |
| | $ | 426,304 |
| | $ | 21,746 |
| | $ | 60,539 |
| | $ | 44,950 |
| | $ | 572,196 |
| | $ | 1,483,967 |
| | $ | 132,907 |
| | $ | 204,384 |
| | $ | 73,801 |
| | $ | 754,706 |
| | $ | 618,274 |
| | $ | 1,780,284 |
| | $ | 3,564,356 |
|
British pound sterling (c) | | 773 |
| | 773 |
| | 773 |
| | 773 |
| | 773 |
| | 10,660 |
| | 14,525 |
| | 2,098 |
| | 65,717 |
| | 829 |
| | 829 |
| | 829 |
| | 8,949 |
| | 79,251 |
|
Other foreign currencies (e) | | 8,852 |
| | 8,594 |
| | — |
| | — |
| | — |
| | — |
| | 17,446 |
| |
Japanese yen (d) | | | 224 |
| | 22,327 |
| | — |
| | — |
| | — |
| | — |
| | 22,551 |
|
| | | $ | 367,857 |
| | $ | 435,671 |
| | $ | 22,519 |
| | $ | 61,312 |
| | $ | 45,723 |
| | $ | 582,856 |
| | $ | 1,515,938 |
| | $ | 135,229 |
| | $ | 292,428 |
| | $ | 74,630 |
| | $ | 755,535 |
| | $ | 619,103 |
| | $ | 1,789,233 |
| | $ | 3,666,158 |
|
__________
| |
| (a) | Amounts are based on the applicable exchange rates at December 31, 2016.2019. 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 cash flow at December 31, 20162019 of $4.0 million. Amounts$3.6 million, excluding the impact of our derivative instruments. Debt service amounts included the equivalent of $286.7$2.8 billion of euro-denominated senior notes maturing from 2023 through 2028, and the equivalent of $131.4 million borrowed in euroseuro under our Revolver,Unsecured Revolving Credit Facility, which was scheduled to mature on January 31, 2018February 22, 2021 (Note 11). However, in February 2017,2020, we entered into our Amended Credit Facility and, as amended, the revolving line of credit will mature in fourfive years (Note 20). Amounts also included the equivalent of $527.1 million of 2.0% Senior Notes outstanding maturing in January 2023 (Note 11). |
| |
| (c) | We estimate that, for a 1% increase or decrease in the exchange rate between the British pound sterling and the U.S. dollar, there would be a corresponding change in the projected estimated cash flow at December 31, 20162019 of $4.1 million.million, excluding the impact of our derivative instruments. Debt service amounts included the equivalent of $47.5 million borrowed in British pound sterling under our Unsecured Revolving Credit Facility, which was scheduled to mature on February 22, 2021 (Note 11). However, in February 2020, we entered into our Amended Credit Facility and, as amended, the revolving line of credit will mature in five years (Note 20). |
| |
| (d) | We estimate that, for a 1% increase or decrease in the exchange rate between the Australian dollarJapanese yen and the U.S. dollar, there would be a corresponding change in the projected estimated cash flow at December 31, 20162019 of $2.0$0.2 million. There is no related mortgage loanDebt service amounts included the equivalent of $22.3 million borrowed in Japanese yen under our Unsecured Revolving Credit Facility, which was scheduled to mature on this investment.February 22, 2021 (Note 11). However, in February 2020, we entered into our Amended Credit Facility and, as amended, the revolving line of credit will mature in five years (Note 20). |
| |
| (e) | Other foreign currencies for future lease payments consist of the Canadian dollar,Danish krone, the Malaysian ringgit,Norwegian krone, the Swedish krona, the Norwegian krone, and the Thai baht.Canadian dollar. |
| |
| (f) | Interest on unhedged variable-rate debt obligations was calculated using the applicable annual interest rates and balances outstanding at December 31, 2016.2019. |
As a result of scheduled balloon payments on certain of our international non-recourse mortgage loans, primarily denominated in euros, projected debt service obligations exceed projected lease revenues in 2017. In 2017, balloon payments totaling $329.4 million are due on nine non-recourse mortgage loans that are collateralized by properties that we own. We currently anticipate that, by their respective due dates, we will have refinanced or repaid these loans using our cash resources, including unused capacity on our Revolver and proceeds from dispositions of properties. In January 2017, we repaid or extinguished four international non-recourse mortgage loans with an aggregate principal balance of $294.3 million, including mortgage loans totaling $243.8 million, inclusive of amounts attributable to a noncontrolling interest of $89.0 million, encumbering the Hellweg 2 portfolio (Note 20).
Projected debt service obligations exceed projected lease revenues in 2018, primarily due to amounts totaling $286.7 million borrowed in euros under our Revolver, which was scheduled to mature on January 31, 2018. However, in February 2017, we entered into our Amended Credit Facility and, as amended, the revolving line of credit will mature in four years (Note 20).
|
| |
| | W. P. Carey 20162019 10-K– 7658 |
Concentration of Credit 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 regularly monitor our portfolio to assess potential concentrations of credit risk. While we believe our portfolio is reasonably well diversified,well-diversified, it does contain concentrations in certain areas.
For the year ended December 31, 2016,2019, our consolidated portfolio had the following significant characteristics in excess of 10%, based on the percentage of our consolidated total revenues:
69%68% related to domestic properties;operations; and
31%32% related to international properties.operations.
At December 31, 2016,2019, our net-lease portfolio, which excludes our two operating properties, had the following significant property and lease characteristics in excess of 10% in certain areas, based on the percentage of our ABR as of that date:
66%64% related to domestic properties;
34%36% related to international properties;
30%24% related to industrial facilities, 25%23% related to office facilities, 16%22% related to warehouse facilities, and 18% related to retail facilities, and 14% related to warehouse facilities; and
17%21% related to the retail stores industry (including automotive dealerships) and 10% related to the consumer services industry.
|
| |
| | W. P. Carey 20162019 10-K– 7759 |
Item 8. Financial Statements and Supplementary Data.
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Financial statement schedules other than those listed above are omitted because the required information is given in the financial statements, including the notes thereto, or because the conditions requiring their filing do not exist.
|
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| | W. P. Carey 20162019 10-K– 7860 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm
To theBoard of Directors and Stockholders of W. P. Carey Inc.
In our opinion,Opinions on the consolidated financial statements listed inFinancial Statements and Internal Control over Financial Reporting
We have audited the accompanying index appearing under Item 8 present fairly, in all material respects, the financial positionconsolidated balance sheets ofW. P. Carey Inc.and its subsidiaries (the(the “Company”) atas of December 31, 20162019 and December 31, 2015, 2018,and the resultsrelated consolidated statements of their operationsincome, of comprehensive income, of equity and theirof cash flows for each of the three years in the period ended December 31, 2016 2019, including the related notes and financial statement schedules listed in the accompanying index (collectively referred to as the “consolidatedfinancial statements”).We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of itsoperations and itscash flows for each of the three years in the period ended December 31, 2019in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 8 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016,2019, based on criteria established in Internal Control — Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). COSO.
Basis for Opinions
The Company'sCompany’s management is responsible for these consolidatedfinancial statements, and financial statement schedules, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these the Company’s consolidatedfinancial statements on the financial statement schedules, and on the Company'sCompany’s internal control over financial reporting based on our integrated audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidatedfinancial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the consolidatedfinancial statement presentation.statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
The Company adopted accounting standards update (“ASU”) No. 2014-08, “Reporting Discontinued OperationsDefinition and DisclosuresLimitations of Disposals of Components of an Entity”, which changed the criteria for reporting discontinued operations in 2014.Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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| W. P. Carey 2019 10-K– 61 |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Purchase Price Allocation for Acquisitions
As described in Notes 2 and 5 to the consolidated financial statements, the Company completed real estate acquisitions for total consideration of $737.5 million during the year ended December 31, 2019. For acquired properties with leases classified as operating leases, management allocated the purchase price to the tangible and intangible assets and liabilities based on their estimated fair values. Management determines the fair value of real estate (i) primarily by reference to portfolio appraisals, which determines their values on a property level, by applying a discounted cash flow analysis to the estimated net operating income for each property in the portfolio during the remaining anticipated lease term, and (ii) by the estimated residual value, which is based on a hypothetical sale of the property upon expiration of a lease factoring in the re-tenanting of such property at estimated current market rental rates, applying a selected capitalization rate, and deducting estimated costs of sale. Management records above- and below-market lease intangible assets and liabilities for acquired properties based on the present value, using a discount rate reflecting the risks associated with the leases acquired.
The principal considerations for our determination that performing procedures relating to purchase price allocation for acquisitions is a critical audit matter are (i) there was significant judgment by management to develop the fair value measurements of tangible and intangible assets and liabilities which resulted in a high degree of auditor judgment and subjectivity in performing procedures relating to these fair value measurements; (ii) significant audit effort was necessary in evaluating the significant assumptions relating to the tangible and intangible assets and liabilities, such as the projected cash flows, capitalization rates, market rental rates and discount rates; (iii) significant auditor judgment was necessary in evaluating audit evidence related to tangible and intangible assets acquired and liabilities assumed; and (iv) the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing the procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to purchase price allocations for acquisitions, including controls over management’s valuation of the tangible and intangibles assets and liabilities and controls over development of the assumptions related to the valuation of tangible and intangible assets and liabilities, including projected cash flows, capitalization rates, market rental rates and discount rates.These procedures alsoincluded, among others, for a sample of acquisitions (i) reading the executed purchase agreements and leasing documents; (ii) testing management’s process for estimating the fair value of tangible and intangible assets and liabilities by evaluating the appropriateness of the valuation methods and reasonableness of the significant assumptions, including the projected cash flows, capitalization rates, market rental rates and discount rates for the tangible and intangible assets and liabilities, using professionals with specialized skill and knowledge to assist in doing so; (iii) evaluating the accuracy of the valuation model output; and (iv) performing procedures to test the completeness and accuracy of data provided by management. Evaluating the reasonableness of the capitalization rates, market rental rates, and discount rates involved considering comparable market data and other industry factors.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 24, 201721, 2020
We have served as the Company’s auditor since 1973, which includes periods before the Company became subject to SEC reporting requirements.
|
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| | W. P. Carey 20162019 10-K– 7962 |
W. P. CAREY INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| | | | December 31, | December 31, |
| | 2016 | | 2015 | 2019 | | 2018 |
| Assets | | | | | | |
| Investments in real estate: | | | | | | |
| Real estate, at cost | $ | 5,204,126 |
| | $ | 5,309,925 |
| |
| Operating real estate | 81,711 |
| | 82,749 |
| |
| Accumulated depreciation | (484,437 | ) | | (381,529 | ) | |
| Net investments in properties | 4,801,400 |
| | 5,011,145 |
| |
| Land, buildings and improvements | | $ | 9,856,191 |
| | $ | 9,251,396 |
|
| Net investments in direct financing leases | 684,059 |
| | 756,353 |
| 896,549 |
| | 1,306,215 |
|
| Assets held for sale | 26,247 |
| | 59,046 |
| |
| In-place lease intangible assets and other | | 2,186,851 |
| | 2,009,628 |
|
| Above-market rent intangible assets | | 909,139 |
| | 925,797 |
|
| Investments in real estate | | 13,848,730 |
| | 13,493,036 |
|
| Accumulated depreciation and amortization | | (2,035,995 | ) | | (1,564,182 | ) |
| Assets held for sale, net | | 104,010 |
| | — |
|
| Net investments in real estate | 5,511,706 |
| | 5,826,544 |
| 11,916,745 |
| | 11,928,854 |
|
| Equity investments in the Managed Programs and real estate | 298,893 |
| | 275,473 |
| 324,004 |
| | 329,248 |
|
| Cash and cash equivalents | 155,482 |
| | 157,227 |
| 196,028 |
| | 217,644 |
|
| Due from affiliates | 299,610 |
| | 62,218 |
| 57,816 |
| | 74,842 |
|
| In-place lease and tenant relationship intangible assets, net | 826,113 |
| | 902,848 |
| |
| Other assets, net | | 631,637 |
| | 711,507 |
|
| Goodwill | 635,920 |
| | 681,809 |
| 934,688 |
| | 920,944 |
|
| Above-market rent intangible assets, net | 421,456 |
| | 475,072 |
| |
| Other assets, net | 304,774 |
| | 360,898 |
| |
| Total assets | $ | 8,453,954 |
| | $ | 8,742,089 |
| |
Total assets (a) | | $ | 14,060,918 |
| | $ | 14,183,039 |
|
| Liabilities and Equity | | | | | | |
| Liabilities: | | | | |
| Senior Unsecured Notes, net | $ | 1,807,200 |
| | $ | 1,476,084 |
| |
| Non-recourse debt, net | 1,706,921 |
| | 2,269,421 |
| |
| Senior Unsecured Credit Facility - Revolver | 676,715 |
| | 485,021 |
| |
| Senior Unsecured Credit Facility - Term Loan, net | 249,978 |
| | 249,683 |
| |
| Debt: | | | | |
| Senior unsecured notes, net | | $ | 4,390,189 |
| | $ | 3,554,470 |
|
| Unsecured revolving credit facility | | 201,267 |
| | 91,563 |
|
| Non-recourse mortgages, net | | 1,462,487 |
| | 2,732,658 |
|
| Debt, net | | 6,053,943 |
| | 6,378,691 |
|
| Accounts payable, accrued expenses and other liabilities | 266,917 |
| | 342,374 |
| 487,405 |
| | 403,896 |
|
| Below-market rent and other intangible liabilities, net | 122,203 |
| | 154,315 |
| 210,742 |
| | 225,128 |
|
| Deferred income taxes | 90,825 |
| | 86,104 |
| 179,309 |
| | 173,115 |
|
| Distributions payable | 107,090 |
| | 102,715 |
| |
| Total liabilities | 5,027,849 |
| | 5,165,717 |
| |
| Redeemable noncontrolling interest | 965 |
| | 14,944 |
| |
| Dividends payable | | 181,346 |
| | 172,154 |
|
Total liabilities (a) | | 7,112,745 |
| | 7,352,984 |
|
Commitments and contingencies (Note 12) |
|
| |
|
|
|
| |
|
|
| Equity: | | | | |
| W. P. Carey stockholders’ equity: | | | | |
| | | | | |
| Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued | — |
| | — |
| — |
| | — |
|
| Common stock, $0.001 par value, 450,000,000 shares authorized; 106,294,162 and 104,448,777 shares, respectively, issued and outstanding | 106 |
| | 104 |
| |
| Common stock, $0.001 par value, 450,000,000 shares authorized; 172,278,242 and 165,279,642 shares, respectively, issued and outstanding | | 172 |
| | 165 |
|
| Additional paid-in capital | 4,399,651 |
| | 4,282,042 |
| 8,717,535 |
| | 8,187,335 |
|
| Distributions in excess of accumulated earnings | (893,827 | ) | | (738,652 | ) | (1,557,374 | ) | | (1,143,992 | ) |
| Deferred compensation obligation | 50,222 |
| | 56,040 |
| 37,263 |
| | 35,766 |
|
| Accumulated other comprehensive loss | (254,485 | ) | | (172,291 | ) | (255,667 | ) | | (254,996 | ) |
| Total W. P. Carey stockholders’ equity | 3,301,667 |
| | 3,427,243 |
| |
| Total stockholders’ equity | | 6,941,929 |
| | 6,824,278 |
|
| Noncontrolling interests | 123,473 |
| | 134,185 |
| 6,244 |
| | 5,777 |
|
| Total equity | 3,425,140 |
| | 3,561,428 |
| 6,948,173 |
| | 6,830,055 |
|
| Total liabilities and equity | $ | 8,453,954 |
| | $ | 8,742,089 |
| $ | 14,060,918 |
| | $ | 14,183,039 |
|
__________
| |
| (a) | See Note 2 for details related to variable interest entities (“VIEs”). |
See Notes to Consolidated Financial Statements.
|
| |
| | W. P. Carey 20162019 10-K– 8063 |
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
| | | | Years Ended December 31, | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 | 2019 | | 2018 | | 2017 |
| Revenues | | | | | | | | | | |
| Owned Real Estate: | | | | | | |
| Real Estate: | | | | | | |
| Lease revenues | $ | 663,463 |
| | $ | 656,956 |
| | $ | 573,829 |
| $ | 1,086,375 |
| | $ | 744,498 |
| | $ | 651,897 |
|
| Operating property revenues | | 50,220 |
| | 28,072 |
| | 30,562 |
|
| Lease termination income and other | 35,696 |
| | 25,145 |
| | 17,767 |
| 36,268 |
| | 6,555 |
| | 4,749 |
|
| Operating property revenues | 30,767 |
| | 30,515 |
| | 28,925 |
| |
| Reimbursable tenant costs | 25,438 |
| | 22,832 |
| | 24,862 |
| |
| | 755,364 |
| | 735,448 |
| | 645,383 |
| 1,172,863 |
| | 779,125 |
| | 687,208 |
|
| Investment Management: | | | | | | | | | | |
| Asset management revenue | | 39,132 |
| | 63,556 |
| | 70,125 |
|
| Reimbursable costs from affiliates | 66,433 |
| | 55,837 |
| | 130,212 |
| 16,547 |
| | 21,925 |
| | 51,445 |
|
| Asset management revenue | 61,971 |
| | 49,984 |
| | 38,063 |
| |
| Structuring revenue | 47,328 |
| | 92,117 |
| | 71,256 |
| |
| Structuring and other advisory revenue | | 4,224 |
| | 21,126 |
| | 35,094 |
|
| Dealer manager fees | 8,002 |
| | 4,794 |
| | 23,532 |
| — |
| | — |
| | 4,430 |
|
| Other advisory revenue | 2,435 |
| | 203 |
| | — |
| |
| | 186,169 |
| | 202,935 |
| | 263,063 |
| 59,903 |
| | 106,607 |
| | 161,094 |
|
| | 941,533 |
| | 938,383 |
| | 908,446 |
| 1,232,766 |
| | 885,732 |
| | 848,302 |
|
| Operating Expenses | | | | | | | | | | |
| Depreciation and amortization | 276,510 |
| | 280,315 |
| | 237,123 |
| 447,135 |
| | 291,440 |
| | 253,334 |
|
| Reimbursable tenant and affiliate costs | 91,871 |
| | 78,669 |
| | 155,074 |
| |
| General and administrative | 82,352 |
| | 103,172 |
| | 91,588 |
| 75,293 |
| | 68,337 |
| | 70,891 |
|
| Reimbursable tenant costs | | 55,576 |
| | 28,076 |
| | 21,524 |
|
| Property expenses, excluding reimbursable tenant costs | | 39,545 |
| | 22,773 |
| | 17,330 |
|
| Operating property expenses | | 38,015 |
| | 20,150 |
| | 23,426 |
|
| Impairment charges | 59,303 |
| | 29,906 |
| | 23,067 |
| 32,539 |
| | 4,790 |
| | 2,769 |
|
| Property expenses, excluding reimbursable tenant costs | 49,431 |
| | 52,199 |
| | 37,725 |
| |
| Stock-based compensation expense | 18,015 |
| | 21,626 |
| | 31,075 |
| 18,787 |
| | 18,294 |
| | 18,917 |
|
| Reimbursable costs from affiliates | | 16,547 |
| | 21,925 |
| | 51,445 |
|
| Subadvisor fees | 14,141 |
| | 11,303 |
| | 5,501 |
| 7,579 |
| | 9,240 |
| | 13,600 |
|
| Merger and other expenses | | 101 |
| | 41,426 |
| | 605 |
|
| Restructuring and other compensation | | — |
| | — |
| | 9,363 |
|
| Dealer manager fees and expenses | 12,808 |
| | 11,403 |
| | 21,760 |
| — |
| | — |
| | 6,544 |
|
| Restructuring and other compensation | 11,925 |
| | — |
| | — |
| |
| Merger, property acquisition, and other expenses | 5,377 |
| | (7,764 | ) | | 34,465 |
| |
| | 621,733 |
| | 580,829 |
| | 637,378 |
| 731,117 |
| | 526,451 |
| | 489,748 |
|
| Other Income and Expenses | | | | | | | | | | |
| Interest expense | (183,409 | ) | | (194,326 | ) | | (178,122 | ) | (233,325 | ) | | (178,375 | ) | | (165,775 | ) |
| Other gains and (losses) | | 31,475 |
| | 29,913 |
| | (3,613 | ) |
| Equity in earnings of equity method investments in the Managed Programs and real estate | 64,719 |
| | 51,020 |
| | 44,116 |
| 23,229 |
| | 61,514 |
| | 64,750 |
|
| Other income and (expenses) | 5,667 |
| | 2,113 |
| | (14,230 | ) | |
| Gain on change in control of interests | — |
| | — |
| | 105,947 |
| |
| Gain on sale of real estate, net | | 18,143 |
| | 118,605 |
| | 33,878 |
|
| (Loss) gain on change in control of interests | | (8,416 | ) | | 47,814 |
| | — |
|
| | (113,023 | ) | | (141,193 | ) | | (42,289 | ) | (168,894 | ) | | 79,471 |
| | (70,760 | ) |
| Income from continuing operations before income taxes and gain on sale of real estate | 206,777 |
| | 216,361 |
| | 228,779 |
| |
| Income before income taxes | | 332,755 |
| | 438,752 |
| | 287,794 |
|
| Provision for income taxes | (3,288 | ) | | (37,621 | ) | | (17,609 | ) | (26,211 | ) | | (14,411 | ) | | (2,711 | ) |
| Income from continuing operations before gain on sale of real estate | 203,489 |
| | 178,740 |
| | 211,170 |
| |
| Income from discontinued operations, net of tax | — |
| | — |
| | 33,318 |
| |
| Gain on sale of real estate, net of tax | 71,318 |
| | 6,487 |
| | 1,581 |
| |
| Net Income | 274,807 |
| | 185,227 |
| | 246,069 |
| 306,544 |
| | 424,341 |
| | 285,083 |
|
| Net income attributable to noncontrolling interests | (7,060 | ) | | (12,969 | ) | | (6,385 | ) | (1,301 | ) | | (12,775 | ) | | (7,794 | ) |
| Net loss attributable to redeemable noncontrolling interest | — |
| | — |
| | 142 |
| |
| Net Income Attributable to W. P. Carey | $ | 267,747 |
| | $ | 172,258 |
| | $ | 239,826 |
| $ | 305,243 |
| | $ | 411,566 |
| | $ | 277,289 |
|
| | | | | | |
| Basic Earnings Per Share | | | | | | $ | 1.78 |
| | $ | 3.50 |
| | $ | 2.56 |
|
| Income from continuing operations attributable to W. P. Carey | $ | 2.50 |
| | $ | 1.62 |
| | $ | 2.08 |
| |
| Income from discontinued operations attributable to W. P. Carey | — |
| | — |
| | 0.34 |
| |
| Net Income Attributable to W. P. Carey | $ | 2.50 |
| | $ | 1.62 |
| | $ | 2.42 |
| |
| Diluted Earnings Per Share | | | | | | $ | 1.78 |
| | $ | 3.49 |
| | $ | 2.56 |
|
| Income from continuing operations attributable to W. P. Carey | $ | 2.49 |
| | $ | 1.61 |
| | $ | 2.06 |
| |
| Income from discontinued operations attributable to W. P. Carey | — |
| | — |
| | 0.33 |
| |
| Net Income Attributable to W. P. Carey | $ | 2.49 |
| | $ | 1.61 |
| | $ | 2.39 |
| |
| Weighted-Average Shares Outstanding | | | | | | | | | | |
| Basic | 106,743,012 |
| | 105,675,692 |
| | 98,764,164 |
| 171,001,430 |
| | 117,494,969 |
| | 107,824,738 |
|
| Diluted | 107,073,203 |
| | 106,507,652 |
| | 99,827,356 |
| 171,299,414 |
| | 117,706,445 |
| | 108,035,971 |
|
| Amounts Attributable to W. P. Carey | | | | | | |
| Income from continuing operations, net of tax | $ | 267,747 |
| | $ | 172,258 |
| | $ | 206,329 |
| |
| Income from discontinued operations, net of tax | — |
| | — |
| | 33,497 |
| |
| Net Income | $ | 267,747 |
| | $ | 172,258 |
| | $ | 239,826 |
| |
See Notes to Consolidated Financial Statements.
|
| |
| | W. P. Carey 20162019 10-K– 8164 |
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
| | | | Years Ended December 31, | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 | 2019 | | 2018 | | 2017 |
| Net Income | $ | 274,807 |
| | $ | 185,227 |
| | $ | 246,069 |
| $ | 306,544 |
| | $ | 424,341 |
| | $ | 285,083 |
|
| Other Comprehensive Loss | | | | | | |
| Other Comprehensive (Loss) Income | | | | | | |
| Unrealized (loss) gain on derivative instruments | | (1,054 | ) | | 4,923 |
| | (37,778 | ) |
| Foreign currency translation adjustments | (92,434 | ) | | (125,447 | ) | | (117,938 | ) | 376 |
| | (31,843 | ) | | 72,428 |
|
| Realized and unrealized gain on derivative instruments | 9,278 |
| | 24,053 |
| | 21,085 |
| |
| Change in unrealized (loss) gain on marketable securities | (126 | ) | | 15 |
| | (10 | ) | |
| Unrealized gain (loss) on investments | | 7 |
| | 154 |
| | (71 | ) |
| | (83,282 | ) | | (101,379 | ) | | (96,863 | ) | (671 | ) | | (26,766 | ) | | 34,579 |
|
| Comprehensive Income | 191,525 |
| | 83,848 |
| | 149,206 |
| 305,873 |
| | 397,575 |
| | 319,662 |
|
| | | | | | | | | | | |
| Amounts Attributable to Noncontrolling Interests | | | | | | | | | | |
| Net income | (7,060 | ) | | (12,969 | ) | | (6,385 | ) | (1,301 | ) | | (12,775 | ) | | (7,794 | ) |
| Foreign currency translation adjustments | 1,081 |
| | 4,647 |
| | 5,977 |
| — |
| | 7,774 |
| | (16,120 | ) |
| Realized and unrealized loss on derivative instruments | 7 |
| | — |
| | — |
| |
| Unrealized loss on derivative instruments | | — |
| | 7 |
| | 15 |
|
| Comprehensive income attributable to noncontrolling interests | (5,972 | ) | | (8,322 | ) | | (408 | ) | (1,301 | ) | | (4,994 | ) | | (23,899 | ) |
| Amounts Attributable to Redeemable Noncontrolling Interest | | | | | | |
| Net loss | — |
| | — |
| | 142 |
| |
| Foreign currency translation adjustments | — |
| | — |
| | (9 | ) | |
| Comprehensive loss attributable to redeemable noncontrolling interest | — |
| | — |
| | 133 |
| |
| Comprehensive Income Attributable to W. P. Carey | $ | 185,553 |
| | $ | 75,526 |
| | $ | 148,931 |
| $ | 304,572 |
| | $ | 392,581 |
| | $ | 295,763 |
|
See Notes to Consolidated Financial Statements.
|
| |
| | W. P. Carey 20162019 10-K– 8265 |
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF EQUITY
Years Ended December 31, 2016, 2015, and 2014
(in thousands, except share and per share amounts)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | W. P. Carey Stockholders | | | | |
| | | | | | | | Distributions | | | | Accumulated | | | | | | |
| | Common Stock | | Additional | | in Excess of | | Deferred | | Other | | Total | | | | |
| | $0.001 Par Value | | Paid-in | | Accumulated | | Compensation | | Comprehensive | | W. P. Carey | | Noncontrolling | | |
| | Shares | | Amount | | Capital | | Earnings | | Obligation | | (Loss) Income | | Stockholders | | Interests | | Total |
| Balance at January 1, 2016 | 104,448,777 |
| | $ | 104 |
| | $ | 4,282,042 |
| | $ | (738,652 | ) | | $ | 56,040 |
| | $ | (172,291 | ) | | $ | 3,427,243 |
| | $ | 134,185 |
| | $ | 3,561,428 |
|
| Shares issued under “at-the-market” offering, net | 1,249,836 |
| | 2 |
| | 83,764 |
| | | | | | | | 83,766 |
| | | | 83,766 |
|
| Shares issued to a third party in connection with the redemption of a redeemable noncontrolling interest | 217,011 |
| | — |
| | 13,418 |
| | | | | | | | 13,418 |
| | | | 13,418 |
|
Contributions from noncontrolling interests (Note 2) | | | | | | | | | | | | | — |
| | 14,530 |
| | 14,530 |
|
| Shares issued upon delivery of vested restricted share awards | 337,179 |
| | — |
| | (14,599 | ) | | | | | | | | (14,599 | ) | | | | (14,599 | ) |
| Shares issued upon exercise of stock options and purchases under employee share purchase plan | 41,359 |
| | — |
| | (1,210 | ) | | | | | | | | (1,210 | ) | | | | (1,210 | ) |
| Delivery of deferred vested shares, net | | | | | 6,506 |
| | | | (6,506 | ) | | | | — |
| | | | — |
|
Deconsolidation of affiliate (Note 2) | | | | | | | | | | | | | — |
| | (14,184 | ) | | (14,184 | ) |
| Windfall tax benefits - share incentive plans | | | | | 6,711 |
| | | | | | | | 6,711 |
| | | | 6,711 |
|
| Amortization of stock-based compensation expense | | | | | 21,222 |
| | | | | | | | 21,222 |
| | | | 21,222 |
|
| Redemption value adjustment | | | | | 561 |
| | | | | | | | 561 |
| | | | 561 |
|
| Distributions to noncontrolling interests | | | | | | | | | | | | | — |
| | (17,030 | ) | | (17,030 | ) |
| Distributions declared ($3.9292 per share) | | | | | 1,236 |
| | (422,922 | ) | | 688 |
| | | | (420,998 | ) | | | | (420,998 | ) |
| Net income | | | | | | | 267,747 |
| | | | | | 267,747 |
| | 7,060 |
| | 274,807 |
|
| Other comprehensive loss: | | | | | | | | | | | | |
|
| | | |
|
|
| Foreign currency translation adjustments | | | | | | | | | | | (91,353 | ) | | (91,353 | ) | | (1,081 | ) | | (92,434 | ) |
| Realized and unrealized gain on derivative instruments | | | | | | | | | | | 9,285 |
| | 9,285 |
| | (7 | ) | | 9,278 |
|
| Change in unrealized loss on marketable securities | | | | | | | | | | | (126 | ) | | (126 | ) | | | | (126 | ) |
| Balance at December 31, 2016 | 106,294,162 |
| | $ | 106 |
| | $ | 4,399,651 |
| | $ | (893,827 | ) | | $ | 50,222 |
| | $ | (254,485 | ) | | $ | 3,301,667 |
| | $ | 123,473 |
| | $ | 3,425,140 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | W. P. Carey Stockholders | | | | |
| | | | | | | | Distributions | | | | Accumulated | | | | | | |
| | Common Stock | | Additional | | in Excess of | | Deferred | | Other | | Total | | | | |
| | $0.001 Par Value | | Paid-in | | Accumulated | | Compensation | | Comprehensive | | W. P. Carey | | Noncontrolling | | |
| | Shares | | Amount | | Capital | | Earnings | | Obligation | | Loss | | Stockholders | | Interests | | Total |
| Balance at January 1, 2019 | 165,279,642 |
| | $ | 165 |
| | $ | 8,187,335 |
| | $ | (1,143,992 | ) | | $ | 35,766 |
| | $ | (254,996 | ) | | $ | 6,824,278 |
| | $ | 5,777 |
| | $ | 6,830,055 |
|
| Shares issued under “at-the-market” offering, net | 6,672,412 |
| | 6 |
| | 523,387 |
| | | | | | | | 523,393 |
| | | | 523,393 |
|
| Shares issued upon delivery of vested restricted share awards | 322,831 |
| | 1 |
| | (15,766 | ) | | | | | | | | (15,765 | ) | | | | (15,765 | ) |
| Shares issued upon purchases under employee share purchase plan | 3,357 |
| | — |
| | 252 |
| | | | | | | | 252 |
| | | | 252 |
|
| Deferral of vested shares, net | | | | | (1,445 | ) | | | | 1,445 |
| | | | — |
| | | | — |
|
| Amortization of stock-based compensation expense | | | | | 18,787 |
| | | | | | | | 18,787 |
| | | | 18,787 |
|
| Contributions from noncontrolling interests | | | | | | | | | | | | | — |
| | 849 |
| | 849 |
|
| Distributions to noncontrolling interests | | | | | | | | | | | | | — |
| | (1,683 | ) | | (1,683 | ) |
| Dividends declared ($4.14 per share) | | | | | 4,985 |
| | (718,625 | ) | | 52 |
| | | | (713,588 | ) | | | | (713,588 | ) |
| Net income | | | | | | | 305,243 |
| | | | | | 305,243 |
| | 1,301 |
| | 306,544 |
|
| Other comprehensive loss: | | | | | | | | | | | | |
|
| | | |
|
|
| Unrealized loss on derivative instruments | | | | | | | | | | | (1,054 | ) | | (1,054 | ) | | | | (1,054 | ) |
| Foreign currency translation adjustments | | | | | | | | | | | 376 |
| | 376 |
| | | | 376 |
|
| Unrealized gain on investments | | | | | | | | | | | 7 |
| | 7 |
| | | | 7 |
|
| Balance at December 31, 2019 | 172,278,242 |
| | $ | 172 |
| | $ | 8,717,535 |
| | $ | (1,557,374 | ) | | $ | 37,263 |
| | $ | (255,667 | ) | | $ | 6,941,929 |
| | $ | 6,244 |
| | $ | 6,948,173 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2015 | 104,040,653 |
| | $ | 104 |
| | $ | 4,293,450 |
| | $ | (497,730 | ) | | $ | 30,624 |
| | $ | (75,559 | ) | | $ | 3,750,889 |
| | $ | 139,846 |
| | $ | 3,890,735 |
|
| Contributions from noncontrolling interests | | | | | | | | | | | | | — |
| | 730 |
| | 730 |
|
| Shares issued upon delivery of vested restricted share awards | 331,252 |
| | — |
| | (15,493 | ) | | | | | | | | (15,493 | ) | | | | (15,493 | ) |
| Shares issued upon exercise of stock options and purchases under employee share purchase plan | 76,872 |
| | — |
| | (2,735 | ) | | | | | | | | (2,735 | ) | | | | (2,735 | ) |
| Deferral of vested shares, net | | | | | (20,740 | ) | | | | 20,740 |
| | | | — |
| | | | — |
|
| Windfall tax benefits - share incentive plans | | | | | 12,522 |
| | | | | | | | 12,522 |
| | | | 12,522 |
|
| Amortization of stock-based compensation expense | | | | | 21,626 |
| | | | | | | | 21,626 |
| | | | 21,626 |
|
| Redemption value adjustment | | | | | (8,873 | ) | | | | | | | | (8,873 | ) | | | | (8,873 | ) |
| Distributions to noncontrolling interests | | | | | | | | | | | | | — |
| | (14,713 | ) | | (14,713 | ) |
| Distributions declared ($3.8261 per share) | | | | | 2,285 |
| | (413,180 | ) | | 4,676 |
| | | | (406,219 | ) | | | | (406,219 | ) |
| Net income | | | | | | | 172,258 |
| | | | | | 172,258 |
| | 12,969 |
| | 185,227 |
|
| Other comprehensive loss: | | | | | | | | | | | | | | | | | |
| Foreign currency translation adjustments | | | | | | | | | | | (120,800 | ) | | (120,800 | ) | | (4,647 | ) | | (125,447 | ) |
| Realized and unrealized gain on derivative instruments | | | | | | | | | | | 24,053 |
| | 24,053 |
| | | | 24,053 |
|
| Change in unrealized gain on marketable securities | | | | | | | | | | | 15 |
| | 15 |
| | | | 15 |
|
| Balance at December 31, 2015 | 104,448,777 |
| | $ | 104 |
| | $ | 4,282,042 |
| | $ | (738,652 | ) | | $ | 56,040 |
| | $ | (172,291 | ) | | $ | 3,427,243 |
| | $ | 134,185 |
| | $ | 3,561,428 |
|
(Continued)
|
| |
| | W. P. Carey 20162019 10-K– 8366 |
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Continued)
Years Ended December 31, 2016, 2015, and 2014
(in thousands, except share and per share amounts)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | W. P. Carey Stockholders | | | | |
| | | | | | | | Distributions | | | | Accumulated | | | | | | |
| | Common Stock | | Additional | | in Excess of | | Deferred | | Other | | Total | | | | |
| | $0.001 Par Value | | Paid-in | | Accumulated | | Compensation | | Comprehensive | | W. P. Carey | | Noncontrolling | | |
| | Shares | | Amount | | Capital | | Earnings | | Obligation | | (Loss) Income | | Stockholders | | Interests | | Total |
| Balance at January 1, 2014 | 68,266,570 |
| | $ | 68 |
| | $ | 2,228,031 |
| | $ | (350,374 | ) | | $ | 11,354 |
| | $ | 15,336 |
| | $ | 1,904,415 |
| | $ | 298,316 |
| | $ | 2,202,731 |
|
Shares issued to stockholders of CPA®:16 – Global in connection with the CPA®:16 Merger | 30,729,878 |
| | 31 |
| | 1,815,490 |
| | | | | | | | 1,815,521 |
| | | | 1,815,521 |
|
| Shares issued in public offering | 4,600,000 |
| | 5 |
| | 282,157 |
| | | | | | | | 282,162 |
| | | | 282,162 |
|
Purchase of the remaining interests in less-than-wholly owned investments that we already consolidate in connection with the CPA®:16 Merger | | | | | (41,374 | ) | | | | | | | | (41,374 | ) | | (239,562 | ) | | (280,936 | ) |
Purchase of noncontrolling interests in connection with the CPA®:16 Merger | | | | | | | | | | | | | — |
| | 99,757 |
| | 99,757 |
|
| Contributions from noncontrolling interests | | | | | | | | | | | | | — |
| | 570 |
| | 570 |
|
| Shares issued upon delivery of vested restricted share awards | 368,347 |
| | — |
| | (15,737 | ) | | | | | | | | (15,737 | ) | | | | (15,737 | ) |
| Shares issued upon exercise of stock options and purchases under employee share purchase plan | 86,895 |
| | — |
| | 462 |
| | | | | | | | 462 |
| | | | 462 |
|
| Deferral of vested shares, net | | | | | (15,428 | ) | | | | 15,428 |
| | | | — |
| | | | — |
|
| Windfall tax benefits - share incentive plans | | | | | 5,641 |
| | | | | | | | 5,641 |
| | | | 5,641 |
|
| Amortization of stock-based compensation expense | | | | | 31,075 |
| | | | | | | | 31,075 |
| | | | 31,075 |
|
| Redemption value adjustment | | | | | 306 |
| | | | | | | | 306 |
| | | | 306 |
|
| Distributions to noncontrolling interests | | | | | | | | | | | | | — |
| | (19,719 | ) | | (19,719 | ) |
| Distributions declared ($3.6850 per share) | | | | | 3,178 |
| | (386,855 | ) | | 3,842 |
| | | | (379,835 | ) | | | | (379,835 | ) |
| Repurchase of shares | (11,037 | ) | | — |
| | (351 | ) | | (327 | ) | | | | | | (678 | ) | | | | (678 | ) |
| Foreign currency translation | | | | | | | | | | | | | — |
| | 76 |
| | 76 |
|
| Net income | | | | | | | 239,826 |
| | | | | | 239,826 |
| | 6,385 |
| | 246,211 |
|
| Other comprehensive loss: | | | | | | | | | | | | | | | | | |
| Foreign currency translation adjustments | | | | | | | | | | | (111,970 | ) | | (111,970 | ) | | (5,977 | ) | | (117,947 | ) |
| Realized and unrealized gain on derivative instruments | | | | | | | | | | | 21,085 |
| | 21,085 |
| | | | 21,085 |
|
| Change in unrealized loss on marketable securities | | | | | | | | | | | (10 | ) | | (10 | ) | | | | (10 | ) |
| Balance at December 31, 2014 | 104,040,653 |
| | $ | 104 |
| | $ | 4,293,450 |
| | $ | (497,730 | ) | | $ | 30,624 |
| | $ | (75,559 | ) | | $ | 3,750,889 |
| | $ | 139,846 |
| | $ | 3,890,735 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | W. P. Carey Stockholders | | | | |
| | | | | | | | Distributions | | | | Accumulated | | | | | | |
| | Common Stock | | Additional | | in Excess of | | Deferred | | Other | | Total | | | | |
| | $0.001 Par Value | | Paid-in | | Accumulated | | Compensation | | Comprehensive | | W. P. Carey | | Noncontrolling | | |
| | Shares | | Amount | | Capital | | Earnings | | Obligation | | Loss | | Stockholders | | Interests | | Total |
| Balance at January 1, 2018 | 106,922,616 |
| | $ | 107 |
| | $ | 4,433,573 |
| | $ | (1,052,064 | ) | | $ | 46,656 |
| | $ | (236,011 | ) | | $ | 3,192,261 |
| | $ | 219,124 |
| | $ | 3,411,385 |
|
| Shares issued to stockholders of CPA:17 – Global in connection with CPA:17 Merger | 53,849,087 |
| | 54 |
| | 3,554,524 |
| | | | | | | | 3,554,578 |
| | | | 3,554,578 |
|
| Shares issued under “at-the-market” offering, net | 4,229,285 |
| | 4 |
| | 287,433 |
| | | | | | | | 287,437 |
| | | | 287,437 |
|
| Shares issued upon delivery of vested restricted share awards | 293,481 |
| | — |
| | (13,644 | ) | | | | | | | | (13,644 | ) | | | | (13,644 | ) |
| Shares issued upon purchases under employee share purchase plan | 2,951 |
| | — |
| | 178 |
| | | | | | | | 178 |
| | | | 178 |
|
| Delivery of deferred vested shares, net | | | | | 10,890 |
| | | | (10,890 | ) | | | | — |
| | | | — |
|
| Amortization of stock-based compensation expense | | | | | 18,294 |
| | | | | | | | 18,294 |
| | | | 18,294 |
|
| Acquisition of remaining noncontrolling interests in investments that we already consolidate in connection with the CPA:17 Merger | | | | | (103,075 | ) | | | | | | | | (103,075 | ) | | (206,516 | ) | | (309,591 | ) |
| Acquisition of noncontrolling interests in connection with the CPA:17 Merger | | | | | | | | | | | | | — |
| | 5,039 |
| | 5,039 |
|
| Contributions from noncontrolling interests | | | | | | | | | | | | | — |
| | 71 |
| | 71 |
|
| Distributions to noncontrolling interests | | | | | | | | | | | | | — |
| | (16,935 | ) | | (16,935 | ) |
| Redemption value adjustment | | | | | (335 | ) | | | | | | | | (335 | ) | | | | (335 | ) |
| Dividends declared ($4.09 per share) | | | | | 675 |
| | (503,494 | ) | | — |
| | | | (502,819 | ) | | | | (502,819 | ) |
| Repurchase of shares in connection with CPA:17 Merger | (17,778 | ) | | — |
| | (1,178 | ) | | | | | | | | (1,178 | ) | | | | (1,178 | ) |
| Net income | | | | | | | 411,566 |
| | | | | | 411,566 |
| | 12,775 |
| | 424,341 |
|
| Other comprehensive loss: | | | | | | | | | | | | | | | | | |
| Foreign currency translation adjustments | | | | | | | | | | | (24,069 | ) | | (24,069 | ) | | (7,774 | ) | | (31,843 | ) |
| Unrealized gain on derivative instruments | | | | | | | | | | | 4,930 |
| | 4,930 |
| | (7 | ) | | 4,923 |
|
| Unrealized gain on investments | | | | | | | | | | | 154 |
| | 154 |
| | | | 154 |
|
| Balance at December 31, 2018 | 165,279,642 |
| | $ | 165 |
| | $ | 8,187,335 |
| | $ | (1,143,992 | ) | | $ | 35,766 |
| | $ | (254,996 | ) | | $ | 6,824,278 |
| | $ | 5,777 |
| | $ | 6,830,055 |
|
See Notes to Consolidated Financial Statements.(Continued)
|
| |
| | W. P. Carey 20162019 10-K– 8467 |
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Continued)
(in thousands, except share and per share amounts)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | W. P. Carey Stockholders | | | | |
| | | | | | | | Distributions | | | | Accumulated | | | | | | |
| | Common Stock | | Additional | | in Excess of | | Deferred | | Other | | Total | | | | |
| | $0.001 Par Value | | Paid-in | | Accumulated | | Compensation | | Comprehensive | | W. P. Carey | | Noncontrolling | | |
| | Shares | | Amount | | Capital | | Earnings | | Obligation | | Loss | | Stockholders | | Interests | | Total |
| Balance at January 1, 2017 | 106,294,162 |
| | $ | 106 |
| | $ | 4,399,961 |
| | $ | (894,137 | ) | | $ | 50,222 |
| | $ | (254,485 | ) | | $ | 3,301,667 |
| | $ | 123,473 |
| | $ | 3,425,140 |
|
| Shares issued under “at-the-market” offering, net | 345,253 |
| | 1 |
| | 22,885 |
| | | | | | | | 22,886 |
| | | | 22,886 |
|
| Shares issued to a third party in connection with a legal settlement | 11,077 |
| | — |
| | 772 |
| | | | | | | | 772 |
| | | | 772 |
|
| Shares issued upon delivery of vested restricted share awards | 229,121 |
| | — |
| | (10,385 | ) | | | | | | | | (10,385 | ) | | | | (10,385 | ) |
| Shares issued upon exercise of stock options and purchases under employee share purchase plan | 43,003 |
| | — |
| | (1,680 | ) | | | | | | | | (1,680 | ) | | | | (1,680 | ) |
| Delivery of deferred vested shares, net | | | | | 3,790 |
| | | | (3,790 | ) | | | | — |
| | | | — |
|
| Amortization of stock-based compensation expense | | | | | 18,917 |
| | | | | | | | 18,917 |
| | | | 18,917 |
|
| Acquisition of noncontrolling interest | | | | | (1,845 | ) | | | | | | | | (1,845 | ) | | 1,845 |
| | — |
|
| Contributions from noncontrolling interests | | | | | | | | | | | | | — |
| | 90,550 |
| | 90,550 |
|
| Distributions to noncontrolling interests | | | | | | | | | | | | | — |
| | (20,643 | ) | | (20,643 | ) |
| Dividends declared ($4.01 per share) | | | | | 1,158 |
| | (435,216 | ) | | 224 |
| | | | (433,834 | ) | | | | (433,834 | ) |
| Net income | | | | | | | 277,289 |
| | | | | | 277,289 |
| | 7,794 |
| | 285,083 |
|
| Other comprehensive income: | | | | | | | | | | | | | | | | | |
| Foreign currency translation adjustments | | | | | | | | | | | 56,308 |
| | 56,308 |
| | 16,120 |
| | 72,428 |
|
| Unrealized loss on derivative instruments | | | | | | | | | | | (37,763 | ) | | (37,763 | ) | | (15 | ) | | (37,778 | ) |
| Unrealized loss on investments | | | | | | | | | | | (71 | ) | | (71 | ) | | | | (71 | ) |
| Balance at December 31, 2017 | 106,922,616 |
| | $ | 107 |
| | $ | 4,433,573 |
| | $ | (1,052,064 | ) | | $ | 46,656 |
| | $ | (236,011 | ) | | $ | 3,192,261 |
| | $ | 219,124 |
| | $ | 3,411,385 |
|
See Notes to Consolidated Financial Statements.
|
| |
| W. P. Carey 2019 10-K– 68 |
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 |
| 2015 | | 2014 |
| Cash Flows — Operating Activities | | | | | |
| Net income | $ | 274,807 |
| | $ | 185,227 |
| | $ | 246,069 |
|
| Adjustments to net income: | | | | | |
| Depreciation and amortization, including intangible assets and deferred financing costs | 279,693 |
| | 287,835 |
| | 248,549 |
|
| Gain on sale of real estate | (71,318 | ) | | (6,487 | ) | | (29,250 | ) |
| Equity in earnings of equity method investments in the Managed Programs and real estate | (64,719 | ) | | (51,020 | ) | | (44,116 | ) |
| Distributions of earnings from equity investments | 64,650 |
| | 51,435 |
| | 42,809 |
|
| Impairment charges | 59,303 |
| | 29,906 |
| | 23,067 |
|
| Management income received in shares of Managed REITs and other | (31,786 | ) | | (23,266 | ) | | (39,866 | ) |
| Deferred income taxes | (21,444 | ) | | 1,476 |
| | (18,565 | ) |
| Stock-based compensation expense | 21,222 |
| | 21,626 |
| | 31,075 |
|
| Straight-line rent, amortization of rent-related intangibles, and deferred rental revenue | (14,514 | ) | | 16,071 |
| | 44,843 |
|
| Allowance for credit losses | 7,064 |
| | 8,748 |
| | — |
|
| Realized and unrealized (gains) losses on foreign currency transactions, derivatives, extinguishment of debt, and other | (1,314 | ) | | (1,978 | ) | | 3,012 |
|
| Gain on change in control of interests | — |
| | — |
| | (105,947 | ) |
| Amortization of deferred other revenue | — |
| | — |
| | (786 | ) |
| Changes in assets and liabilities: | | | | | |
| Deferred acquisition revenue received | 20,695 |
| | 23,469 |
| | 15,724 |
|
| Payments for withholding taxes upon delivery of equity-based awards and exercises of stock options | (16,291 | ) | | (18,742 | ) | | (17,165 | ) |
| Increase in structuring revenue receivable | (8,951 | ) | | (29,327 | ) | | (23,713 | ) |
| Net changes in other operating assets and liabilities | 20,674 |
| | (17,696 | ) | | 23,352 |
|
| Net Cash Provided by Operating Activities | 517,771 |
| | 477,277 |
| | 399,092 |
|
| Cash Flows — Investing Activities | | | | | |
| Proceeds from sales of real estate | 542,422 |
| | 35,557 |
| | 285,742 |
|
| Purchases of real estate | (531,694 | ) | | (674,808 | ) | | (898,162 | ) |
| Funding of short-term loans to affiliates | (257,500 | ) | | (185,447 | ) | | (11,000 | ) |
| Funding for real estate construction and expansion | (56,557 | ) | | (28,040 | ) | | (20,647 | ) |
| Proceeds from repayment of short-term loans to affiliates | 37,053 |
| | 185,447 |
| | 11,000 |
|
Deconsolidation of affiliate (Note 2) | (15,408 | ) | | — |
| | — |
|
| Change in investing restricted cash | 15,188 |
| | 26,610 |
| | (23,731 | ) |
Investment in assets of affiliate (Note 2) | (14,861 | ) | | — |
| | — |
|
Proceeds from limited partnership units issued by affiliate (Note 2) | 14,184 |
| | — |
| | — |
|
| Capital expenditures on owned real estate | (7,884 | ) | | (4,415 | ) | | (5,757 | ) |
| Return of capital from equity investments | 6,498 |
| | 8,200 |
| | 13,101 |
|
| Value added taxes paid in connection with acquisition and construction of real estate | (4,550 | ) | | (10,401 | ) | | (7,036 | ) |
| Other investing activities, net | 3,019 |
| | 2,224 |
| | 1,652 |
|
| Value added taxes refunded in connection with acquisition of real estate | 1,038 |
| | 9,997 |
| | — |
|
| Capital expenditures on corporate assets | (1,016 | ) | | (4,321 | ) | | (18,262 | ) |
| Proceeds from repayments of note receivable | 409 |
| | 10,441 |
| | 1,915 |
|
| Capital contributions to equity investments in real estate | (147 | ) | | (16,229 | ) | | (25,468 | ) |
Cash acquired in connection with the CPA®:16 Merger | — |
| | — |
| | 65,429 |
|
| Purchase of securities | — |
| | — |
| | (7,664 | ) |
Cash paid to stockholders of CPA®:16 – Global in the CPA®:16 Merger | — |
| | — |
| | (1,338 | ) |
| Net Cash Used in Investing Activities | (269,806 | ) | | (645,185 | ) | | (640,226 | ) |
| Cash Flows — Financing Activities | | | | | |
| Proceeds from Senior Unsecured Credit Facility | 1,154,157 |
| | 1,044,767 |
| | 1,757,151 |
|
| Repayments of Senior Unsecured Credit Facility | (954,006 | ) | | (1,330,122 | ) | | (1,415,000 | ) |
| Distributions paid | (416,655 | ) | | (403,555 | ) | | (347,902 | ) |
| Proceeds from issuance of Senior Unsecured Notes | 348,887 |
| | 1,022,303 |
| | 498,195 |
|
| Prepayments of mortgage principal | (321,705 | ) | | (91,560 | ) | | (220,786 | ) |
| Scheduled payments of mortgage principal | (161,104 | ) | | (90,328 | ) | | (205,024 | ) |
| Proceeds from shares issued under “at-the-market” offering, net of selling costs | 84,063 |
| | — |
| | — |
|
| Proceeds from mortgage financing | 33,935 |
| | 22,667 |
| | 20,354 |
|
| Distributions paid to noncontrolling interests | (17,030 | ) | | (14,713 | ) | | (20,646 | ) |
| Windfall tax benefit associated with stock-based compensation awards | 6,711 |
| | 12,522 |
| | 5,641 |
|
| Payment of financing costs | (3,619 | ) | | (10,878 | ) | | (12,321 | ) |
| Change in financing restricted cash | 2,734 |
| | (9,811 | ) | | (588 | ) |
| Proceeds from exercise of stock options and employee purchases under the employee share purchase plan | 482 |
| | 515 |
| | 1,890 |
|
| Contributions from noncontrolling interests | 346 |
| | 730 |
| | 693 |
|
| Proceeds from issuance of shares in public offering | — |
| | — |
| | 282,162 |
|
| Repurchase of shares | — |
| | — |
| | (679 | ) |
| Net Cash (Used in) Provided by Financing Activities | (242,804 | ) | | 152,537 |
| | 343,140 |
|
| Change in Cash and Cash Equivalents During the Year | | | | | |
| Effect of exchange rate changes on cash | (6,906 | ) | | (26,085 | ) | | (20,842 | ) |
| Net (decrease) increase in cash and cash equivalents | (1,745 | ) | | (41,456 | ) | | 81,164 |
|
| Cash and cash equivalents, beginning of year | 157,227 |
| | 198,683 |
| | 117,519 |
|
| Cash and cash equivalents, end of year | $ | 155,482 |
| | $ | 157,227 |
| | $ | 198,683 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 |
| 2018 | | 2017 |
| Cash Flows — Operating Activities | | | | | |
| Net income | $ | 306,544 |
| | $ | 424,341 |
| | $ | 285,083 |
|
| Adjustments to net income: | | | | | |
| Depreciation and amortization, including intangible assets and deferred financing costs | 460,030 |
| | 298,166 |
| | 261,415 |
|
| Amortization of rent-related intangibles and deferred rental revenue | 84,878 |
| | 51,132 |
| | 55,051 |
|
| Straight-line rent adjustments | (46,260 | ) | | (21,994 | ) | | (16,980 | ) |
| Impairment charges | 32,539 |
| | 4,790 |
| | 2,769 |
|
| Investment Management revenue received in shares of Managed REITs and other | (30,555 | ) | | (49,110 | ) | | (69,658 | ) |
| Distributions of earnings from equity method investments | 26,772 |
| | 62,015 |
| | 66,259 |
|
| Equity in earnings of equity method investments in the Managed Programs and real estate | (23,229 | ) | | (61,514 | ) | | (64,750 | ) |
| Stock-based compensation expense | 18,787 |
| | 18,294 |
| | 18,917 |
|
| Gain on sale of real estate, net | (18,143 | ) | | (118,605 | ) | | (33,878 | ) |
| Loss (gain) on change in control of interests | 8,416 |
| | (47,814 | ) | | — |
|
| Deferred income tax expense (benefit) | 9,255 |
| | (6,279 | ) | | (20,013 | ) |
| Realized and unrealized (gains) losses on foreign currency transactions, derivatives, and other | (466 | ) | | (17,644 | ) | | 16,879 |
|
| Changes in assets and liabilities: | | | | | |
| Net changes in other operating assets and liabilities | (20,783 | ) | | (28,054 | ) | | 9,390 |
|
| Deferred structuring revenue received | 4,913 |
| | 9,456 |
| | 16,705 |
|
| Increase in deferred structuring revenue receivable | (621 | ) | | (8,014 | ) | | (6,530 | ) |
| Net Cash Provided by Operating Activities | 812,077 |
| | 509,166 |
| | 520,659 |
|
| Cash Flows — Investing Activities | | | | | |
| Purchases of real estate | (717,666 | ) | | (719,548 | ) | | (31,842 | ) |
| Proceeds from sales of real estate | 307,959 |
| | 431,626 |
| | 159,933 |
|
| Funding for real estate construction, redevelopments, and other capital expenditures on real estate | (165,490 | ) | | (107,684 | ) | | (78,367 | ) |
| Proceeds from repayment of short-term loans to affiliates | 46,637 |
| | 37,000 |
| | 277,894 |
|
| Funding of short-term loans to affiliates | (36,808 | ) | | (10,000 | ) | | (123,492 | ) |
| Return of capital from equity method investments | 34,365 |
| | 16,382 |
| | 10,085 |
|
| Proceeds from repayment of loans receivable | 19,707 |
| | 488 |
| | 436 |
|
| Other investing activities, net | (8,882 | ) | | (8,169 | ) | | 882 |
|
| Capital contributions to equity method investments | (2,595 | ) | | (18,173 | ) | | (1,291 | ) |
| Cash and restricted cash acquired in connection with the CPA:17 Merger | — |
| | 113,634 |
| | — |
|
| Cash paid to stockholders of CPA:17 – Global in the CPA:17 Merger | — |
| | (1,688 | ) | | — |
|
| Net Cash (Used in) Provided by Investing Activities | (522,773 | ) | | (266,132 | ) | | 214,238 |
|
| Cash Flows — Financing Activities | | | | | |
| Proceeds from Senior Unsecured Credit Facility | 1,336,824 |
| | 1,403,254 |
| | 1,302,463 |
|
| Repayments of Senior Unsecured Credit Facility | (1,227,153 | ) | | (2,108,629 | ) | | (1,680,198 | ) |
| Prepayments of mortgage principal | (1,028,795 | ) | | (207,450 | ) | | (193,434 | ) |
| Proceeds from issuance of Senior Unsecured Notes | 870,635 |
| | 1,183,828 |
| | 530,456 |
|
| Dividends paid | (704,396 | ) | | (440,431 | ) | | (431,182 | ) |
| Proceeds from shares issued under “at-the-market” offering, net of selling costs | 523,287 |
| | 287,544 |
| | 22,824 |
|
| Scheduled payments of mortgage principal | (210,414 | ) | | (100,433 | ) | | (344,440 | ) |
| Payments for withholding taxes upon delivery of equity-based awards and exercises of stock options | (15,766 | ) | | (13,985 | ) | | (11,969 | ) |
| Payment of financing costs | (6,716 | ) | | (8,059 | ) | | (12,675 | ) |
| Other financing activities, net | 5,550 |
| | (1,465 | ) | | (1,301 | ) |
| Distributions paid to noncontrolling interests | (1,683 | ) | | (18,216 | ) | | (20,643 | ) |
| Contributions from noncontrolling interests | 849 |
| | 71 |
| | 90,550 |
|
| Repurchase of shares in connection with CPA:17 Merger | — |
| | (1,178 | ) | | — |
|
| Proceeds from mortgage financing | — |
| | 857 |
| | 4,083 |
|
| Net Cash Used in Financing Activities | (457,778 | ) | | (24,292 | ) | | (745,466 | ) |
| Change in Cash and Cash Equivalents and Restricted Cash During the Year | | | | | |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (4,071 | ) | | (4,355 | ) | | 9,514 |
|
| Net (decrease) increase in cash and cash equivalents and restricted cash | (172,545 | ) | | 214,387 |
| | (1,055 | ) |
| Cash and cash equivalents and restricted cash, beginning of year | 424,063 |
| | 209,676 |
| | 210,731 |
|
| Cash and cash equivalents and restricted cash, end of year | $ | 251,518 |
| | $ | 424,063 |
| | $ | 209,676 |
|
See Notes to Consolidated Financial Statements.
|
| |
| | W. P. Carey 20162019 10-K– 8569 |
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Supplemental Non-Cash Investing and Financing Activities:
2014 2018 — On JanuaryOctober 31, 2014, CPA®:162018, CPA:17 – Global merged with and into us in the CPA®:16CPA:17 Merger (Note 3). The following table summarizes estimated fair values of the assets acquired and liabilities assumed in the CPA®:16CPA:17 Merger, which reflects measurement period adjustments since the date of acquisition (in thousands): |
| | | |
| Total Consideration | |
|
| Fair value of W. P. Carey shares of common shares issued | $ | 1,815,521 |
|
| Cash consideration for fractional shares | 1,338 |
|
Fair value of our equity interest in CPA®:16 – Global prior to the CPA®:16 Merger | 349,749 |
|
Fair value of our equity interest in jointly owned investments with CPA®:16 – Global prior to the CPA®:16 Merger | 172,720 |
|
| Fair value of noncontrolling interests acquired | (278,187 | ) |
| | 2,061,141 |
|
| Assets Acquired at Fair Value | |
| Net investments in real estate | 1,970,175 |
|
| Net investments in direct financing leases | 538,225 |
|
| Equity investments in real estate | 74,367 |
|
| Assets held for sale | 133,415 |
|
| Goodwill | 346,642 |
|
| In-place lease intangible assets | 553,723 |
|
| Above-market rent intangible assets | 395,824 |
|
| Other assets | 85,567 |
|
| Liabilities Assumed at Fair Value | |
| Non-recourse debt and line of credit | (1,768,288 | ) |
| Accounts payable, accrued expenses and other liabilities | (118,389 | ) |
| Below-market rent and other intangible liabilities | (57,569 | ) |
| Deferred tax liability | (58,347 | ) |
| Amounts attributable to noncontrolling interests | (99,633 | ) |
| Net assets acquired excluding cash | 1,995,712 |
|
| Cash acquired on acquisition of subsidiaries | $ | 65,429 |
|
|
| | | |
| Total Consideration | |
|
| Fair value of W. P. Carey shares of common stock issued | $ | 3,554,578 |
|
| Cash paid for fractional shares | 1,688 |
|
| Fair value of our equity interest in CPA:17 – Global prior to the CPA:17 Merger | 157,594 |
|
| Fair value of our equity interest in jointly owned investments with CPA:17 – Global prior to the CPA:17 Merger | 132,661 |
|
| Fair value of noncontrolling interests acquired | (308,891 | ) |
| | 3,537,630 |
|
| Assets Acquired at Fair Value | |
| Land, buildings and improvements — operating leases | 2,948,347 |
|
| Land, buildings and improvements — operating properties | 426,758 |
|
| Net investments in direct financing leases | 604,998 |
|
| In-place lease and other intangible assets | 793,463 |
|
| Above-market rent intangible assets | 298,180 |
|
| Equity investments in real estate | 192,322 |
|
| Goodwill | 296,108 |
|
| Other assets, net (excluding restricted cash) | 228,194 |
|
| Liabilities Assumed at Fair Value | |
| Non-recourse mortgages, net | 1,849,177 |
|
| Senior Credit Facility, net | 180,331 |
|
| Accounts payable, accrued expenses and other liabilities | 141,750 |
|
| Below-market rent and other intangible liabilities | 112,721 |
|
| Deferred income taxes | 75,356 |
|
| Amounts attributable to noncontrolling interests | 5,039 |
|
| Net assets acquired excluding cash and restricted cash | 3,423,996 |
|
| Cash and restricted cash acquired | $ | 113,634 |
|
See Notes to Consolidated Financial Statements.
|
| |
| | W. P. Carey 20162019 10-K– 8670 |
W. P. CAREY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Business and Organization
W. P. Carey Inc., or (“W. P. Carey,Carey”) is a real estate investment trust (“REIT”) that, together with itsour consolidated subsidiaries, a REIT that provides long-term financing via sale-leaseback and build-to-suit transactions for companies worldwide and manages a global investment portfolio. We investinvests primarily in operationally-critical, single-tenant commercial real estate properties domesticallylocated in the United States and internationally.Northern and Western Europe on a long-term basis. We earn revenue principally by leasing the properties we own to single corporate tenants, primarilycompanies on a triple-net lease basis, which generally requires each tenant to pay substantially all of the costs associated with operating and maintaining the property.
Originally foundedFounded in 1973, we reorganized as a REIT in September 2012 in connection with our merger with Corporate Property Associates 15 Incorporated. We refer to that merger as the CPA®:15 Merger. On January 31, 2014, Corporate Property Associates 16 – Global Incorporated, or CPA®:16 – Global, merged with and into us (Note 3), which we refer to as the CPA®:16 Merger. Our shares of common stock are listed on the New York Stock Exchange under the symbol “WPC.”
We have elected to be taxed as a REIT under Section 856 through 860 of the Internal Revenue Code.Code effective as of February 15, 2012. As a REIT, we are not generally subject to United States federal income taxation other than fromtaxes on income and gains that we distribute to our taxable REIT subsidiaries, or TRSs,stockholders as long as we satisfy certain requirements, principally relating to the nature of our income and the level of our distributions, as well as other factors. We also own real property in jurisdictions outside the United States through foreign subsidiaries and are subject to income taxes on our pre-tax income earned from properties in such countries. Through our taxable REIT subsidiaries (“TRSs”), we also earn revenue as the advisor to certain publicly owned, non-traded investment programs. We hold all of our real estate assets attributable to our Owned Real Estate segment under the REIT structure, while the activities conducted by our Investment Management segment subsidiaries have been organized under TRSs.
Through our TRSs,On October 31, 2018, one of the non-traded REITs that we also earn revenue as the advisor to publicly owned, non-listed REITs, which are sponsored by us under the Corporate Property Associates, or CPA®,brand name that invest in similar properties. At December 31, 2016, we were the advisor toadvised, Corporate Property Associates 17 – Global Incorporated or CPA®:(“CPA:17 – Global,Global”), merged with and into one of our wholly owned subsidiaries (the “CPA:17 Merger”) (Note 3). As a result, at December 31, 2019, we were the advisor to the following entities:Corporate Property Associates 18 – Global Incorporated or CPA®:(“CPA:18 – Global. We were also the advisor to CPA®:16 – Global until its merger with us. WeGlobal”), a publicly owned, non-traded REIT that primarily invests in commercial real estate properties; we refer to CPA®:16 – Global, CPA®:CPA:17 – Global (until the closing of the CPA:17 Merger on October 31, 2018) and CPA®:CPA:18 – Global together as the CPA® REITs.“CPA REITs;”
At December 31, 2016, | |
| • | Carey Watermark Investors Incorporated (“CWI 1”) and Carey Watermark Investors 2 Incorporated (“CWI 2”), two publicly owned, non-traded REITs that invest in lodging and lodging-related properties; we were also the advisor to Carey Watermark Investors Incorporated, or CWI 1, and Carey Watermark Investors 2 Incorporated, or CWI 2, two publicly owned, non-listed REITs that invest in lodging and lodging-related properties. We refer to CWI 1 and CWI 2 together as the “CWI REITs” and, together with the CPA REITs, as the “Managed REITs” (Note 4); and |
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| • | Carey European Student Housing Fund I, L.P. (“CESH”), a limited partnership formed for the purpose of developing, owning, and operating student housing properties and similar investments in Europe (Note 4); we refer to the Managed REITs (including CPA:17 – Global prior to the CPA:17 Merger) and CESH collectively as the “Managed Programs.” |
In June 2017, our board of directors (the “Board”) approved a plan to exit non-traded retail fundraising activities carried out by our wholly-owned broker-dealer subsidiary, Carey Financial LLC (“Carey Financial”), as of June 30, 2017. As a result, we no longer raise capital for new or existing funds, but expect to continue managing our existing Managed Programs through the end of their respective life cycles (Note 4). On October 22, 2019, CWI 1 and CWI 2 together asannounced that they had entered into a definitive merger agreement under which the two companies intend to merge in an all-stock transaction (the “CWI 1 and CWI REITs and, together2 Proposed Merger”). On January 13, 2020, the joint proxy statement/prospectus on Form S-4 previously filed with the CPA® REITs, asSecurities and Exchange Commission (“SEC”) by CWI 1 and CWI 2 was declared effective. Each of CWI 1 and CWI 2 has scheduled a special meeting of stockholders for March 26, 2020; if the Managed REITsproposed transaction is approved, the merger is expected to close shortly thereafter. Following the close of the merger, the combined company intends to internalize the management services currently provided by one of our subsidiaries (Note 4).
At December 31, 2016,In August 2017, we also servedresigned as the advisor to Carey Credit Income Fund or CCIF,(known since October 23, 2017 as Guggenheim Credit Income Fund) (“CCIF”), and by extension, its feeder funds (the “CCIF Feeder Funds”), each of which is a business development company or BDC, and feeder funds of CCIF, or the CCIF Feeder Funds, which are also BDCs(“BDC”) (Note 4). In May 2016, one of the CCIF Feeder Funds, Carey Credit Income Fund 2018 T, filed a registration statement on Form N-2 with the SEC to sell up to 102,564,103 shares of its beneficial interest in an initial public offering, with the proceeds to be invested in shares of CCIF. The registration statement was declared effective by the SEC in October 2016 but fundraising has not yet commenced. We refer to CCIF and the CCIF Feeder Funds collectively as the Managed BDCs. At December 31, 2016, we were also“Managed BDCs”. The board of trustees of CCIF approved our resignation and appointed CCIF’s subadvisor Guggenheim Partners Investment Management, LLC (“Guggenheim”), as the interim sole advisor to Carey European Student Housing Fund I, L.P., or CESH I,CCIF, effective as of September 11, 2017. The shareholders of CCIF approved Guggenheim’s appointment as sole advisor on a limited partnership formed for the purpose of developing, owning, and operating student housing properties and similar investments in Europe. We refer to the Managed REITs,permanent basis on October 20, 2017. The Managed BDCs and CESH I collectively as the Managed Programs.
On May 4, 2016, we filed a registration statement with the SEC for Corporate Property Associates 19 – Global Incorporated, or CPA®:19 – Global, a diversified non-traded REIT, for a capital raise of up to $2.0 billion, whichwere included $500.0 million of shares allocated to CPA®:19 – Global’s distribution reinvestment plan. We have decided to delay the introduction of CPA®:19 – Global due to regulatory uncertainty surrounding the adoption of the Fiduciary Rule and the resulting impact on the market with regard to product choices, pricing, and timing, which is currently in a state of flux. As a result, there can be no assurances as to whether or when CPA®:19 – Global’s offering will commence. Through December 31, 2016, the financial activity of CPA®:19 – Global, which has no significant assets, liabilities, or operations, was included in our consolidated financial statements.
Reportable Segments
Owned Real Estate — We own and invest in commercial properties principally in North America, Europe, Australia, and Asia that are then leased to companies, primarily on a triple-net lease basis. We also own two hotels, which are considered operating properties. We earn lease revenues from our wholly owned and co-owned real estate investments that we control. In addition, we generate equity income through co-owned real estate investments that we do not control and through our ownership of shares and limited partnership units of the Managed Programs (Note 7). Throughprior to our special member interestsresignation as their advisor. We have retained our initial investment in shares of CCIF (now known as “GCIF”), which is included within Other assets, net in the operating partnerships of the Managed REITs, we also participate in their cash flowsconsolidated financial statements (Note 49). At December 31, 2016, our owned
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| | W. P. Carey 20162019 10-K– 8771 |
Notes to Consolidated Financial Statements
Reportable Segments
Real Estate — Lease revenues from our real estate investments generate the vast majority of our earnings. We invest primarily in commercial properties located in the United States and Northern and Western Europe, which are leased to companies on a triple-net lease basis. At December 31, 2019, our owned portfolio was comprised of our full or partial ownership interests in 9031,214 properties, totaling approximately 87.9140.0 million square feet (unaudited), substantially all of which were net leased to 217345 tenants, with a weighted-average lease term of 10.7 years and an occupancy rate of 99.1%98.8%. In addition, at December 31, 2019, our portfolio was comprised of full or partial ownership interests in 21 operating properties, including 19 self-storage properties and 2 hotels (one of which was sold in January 2020, see Note 20), totaling approximately 1.6 million square feet.
Investment Management — Through our TRSs, we structure and negotiate investments and debt placement transactions for the Managed REITs and CESH I,Programs, for which we earn structuring revenue, and manage their portfolios of real estate investments, for which we earn asset management revenue. We also earn asset management revenue from CCIF based on the average of its gross assets at fair value. We may earn disposition revenue when we negotiate and structure the sale of properties on behalf of the Managed REITs, and we may also earn incentive revenue and receive other compensation through our advisory agreements with certain of the Managed Programs, including in connection with providing liquidity events for the Managed REITs’ stockholders. In addition, we include equity income generated through our (i) ownership of shares and limited partnership units of the Managed Programs (Note 8) and (ii) special general partner interests in the operating partnerships of the Managed REITs, through which we participate in their cash flows (Note 4), in our Investment Management segment.
At December 31, 2016, CPA®:17 – Global and CPA®:18 – Global collectively2019, the Managed Programs owned all or a portion of 44649 net-leased properties including(including certain properties in which we also have an ownership interest. Substantially all of these properties,interest), totaling approximately 52.09.8 million square feet (unaudited), substantially all of which were net leased to 21662 tenants, with an average occupancy rate of approximately 99.8%99.4%. The Managed REITs and CESH IPrograms also had interests in 160122 operating properties (including 16 active build-to-suit projects), totaling approximately 20.015.2 million square feet (unaudited), in the aggregate. We continue to explore alternatives for expanding our investment management operations beyond advising the existing Managed Programs. Any such expansion could involve the purchase of properties or other investments as principal with the intention of transferring such investments to a newly created fund. These new funds could invest primarily in assets other than net-lease real estate and could include funds raised through private placements, such as CESH I, or publicly traded vehicles, either in the United States or internationally.
Note 2. Summary of Significant Accounting Policies
Critical Accounting Policies and Estimates
Accounting for Acquisitions
In accordance with the guidance for business combinations, we determine whether a transaction or other event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, we account for the transaction or other event as an asset acquisition. Under both methods, we recognize the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, we evaluate the existence of goodwill or a gain from a bargain purchase. We capitalize acquisition-related costs and fees associated with asset acquisitions. We immediately expense acquisition-related costs and fees associated with business combinations. All transaction costs incurred during the years ended December 31, 2019, 2018, and 2017 were capitalized since our acquisitions during the years were classified as asset acquisitions (excluding the CPA:17 Merger). Most of our future acquisitions are likely to be classified as asset acquisitions.
Purchase Price Allocation of Tangible Assets — When we acquire properties with leases classified as operating leases, we allocate the purchase price to the tangible and intangible assets and liabilities acquired based on their estimated fair values. The tangible assets consist of land, buildings, and site improvements. The intangible assets include the above- and below-market value of leases and the in-place leases, which includes athe value forof tenant relationships. Land is typically valued utilizing the sales comparison (or market) approach. Buildings are valued, as if vacant, using the cost and/or income approach. Site improvements are valued using the cost approach. The fair value of real estate is determined (i) primarily by reference to portfolio appraisals, which determines their values on a property level, by applying a discounted cash flow analysis to the estimated net operating income for each property in the portfolio during the remaining anticipated lease term, and (ii) by the estimated residual value, which is based on a hypothetical sale of the property upon expiration of a lease factoring in the re-tenanting of such property at estimated current market rental rates, applying a selected capitalization rate, and deducting estimated costs of sale.
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| W. P. Carey 2019 10-K– 72 |
Notes to Consolidated Financial Statements
Assumptions used in the model are property-specific where this information is available; however, when certain necessary information is not available, we use available regional and property-type information. Assumptions and estimates include the following:
a discount rate or internal rate of return;
the marketing period necessary to put a lease in place;
carrying costs during the marketing period;
leasing commissions and tenant improvement allowances;
market rents and growth factors of these rents; and
a market lease term and a capitalization rate to be applied to an estimate of market rent at the end of the market lease term.
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| W. P. Carey 2016 10-K– 88
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Notes to Consolidated Financial Statements
The discount rates and residual capitalization rates used to value the properties are selected based on several factors, including:
the creditworthiness of the lessees;
industry surveys;
property type;
property location and age;
current lease rates relative to market lease rates; and
anticipated lease duration.
In the case where a tenant has a purchase option deemed to be favorable to the tenant, or the tenant has long-term renewal options at rental rates below estimated market rental rates, we generally include the value of the exercise of such purchase option or long-term renewal options in the determination of residual value.
The remaining economic life of leased assets is estimated by relying in part upon third-party appraisals of the leased assets, industry standards, and based on our experience. Different estimates of remaining economic life will affect the depreciation expense that is recorded.
Purchase Price Allocation of Intangible Assets and Liabilities — We record above- and below-market lease intangible assets and liabilities for acquired properties based on the present value (using a discount rate reflecting the risks associated with the leases acquired including consideration of the credit of the lessee) of the difference between (i) the contractual rents to be paid pursuant to the leases negotiated andor in place at the time of acquisition of the properties and (ii) our estimate of fair market lease rates for the property or equivalent property, both of which are measured over the estimated lease term, which includes renewal options that have rental rates below estimated market rental rates. We discount the difference between the estimated market rent and contractual rent to a present value using an interest rate reflecting our current assessment of the risk associated with the lease acquired, which includes a consideration of the credit of the lessee. Estimates of market rent are generally determined by us relying in part upon a third-party appraisal obtained in connection with the property acquisition and can include estimates of market rent increase factors, which are generally provided in the appraisal or by local real estate brokers. When we enter into sale-leaseback transactions with above- or below-market leases, the intangibles will be accounted for as loan receivables or prepaid rent liabilities, respectively. We measure the fair value of below-market purchase option liabilities we acquire as the excess of the present value of the fair value of the real estate over the present value of the tenant’s exercise price at the option date.
We evaluate the specific characteristics of each tenant’s lease and any pre-existing relationship with each tenant in determining the value of in-place lease intangibles. To determine the value of in-place lease intangibles, we consider the following:
estimated market rent;
estimated carrying costs of the property during a hypothetical expected lease-up period; and
current market conditions and costs to execute similar leases, including tenant improvement allowances and rent concessions.
Estimated carrying costs of the property include real estate taxes, insurance, other property operating costs, and estimates of lost rentals at market rates during the market participants’ expected lease-up periods, based on assessments of specific market conditions.
We determine these values using our estimates or by relying in part upon third-party appraisals conducted by independent appraisal firms.
We amortize the above-market lease intangible as a reduction of lease revenue over the remaining contractual lease term. We amortize the below-market lease intangible as an increase to lease revenue over the initial term and any renewal periods in the respective leases. We include the value of below-market leases in Below-market rent and other intangible liabilities in the consolidated financial statements. We include the amortization of above- and below-market ground lease intangibles in Property expenses in the consolidated financial statements.
The value of any in-place lease is estimated to be equal to the acquirer’s avoidance of costs as a result of having tenants in place, that would be necessary to lease the property for a lease term equal to the remaining primary in-place lease term and the value of investment grade tenancy. The cost avoidance is derived first by determining the in-place lease term on the subject lease. Then, based on our review of the market, the cost to be borne by a property owner to replicate a market lease to the remaining in-place term is estimated. These costs consist of: (i) rent lost during downtime (i.e., assumed periods of vacancy), (ii) estimated expenses that would be incurred by the property owner during periods of vacancy, (iii) rent concessions (i.e. free rent), (iv) leasing commissions, and (v) tenant improvements allowances given to tenants. We determine these values using our
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| W. P. Carey 2016 10-K– 89
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Notes to Consolidated Financial Statements
estimates or by relying in part upon third-party appraisals. We amortize the value of in-place lease intangibles to depreciation
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| W. P. Carey 2019 10-K– 73 |
Notes to Consolidated Financial Statements
and amortization expense over the remaining initial term of each lease. The amortization period for intangibles does not exceed the remaining depreciable life of the building.
If a lease is terminated, we charge the unamortized portion of above- and below-market lease values to rental income and in-place lease values to amortization expense. If a lease is amended, we will determine whether the economics of the amended lease continue to support the existence of the above- or below-market lease intangibles.
Purchase Price Allocation of Debt — When we acquire leveraged properties, the fair value of the related debt instruments is determined using a discounted cash flow model with rates that take into account the credit of the tenants, where applicable, and interest rate risk. Such resulting premium or discount is amortized over the remaining term of the obligation. We also consider the value of the underlying collateral, taking into account the quality of the collateral, the credit quality of the tenant, the time until maturity and the current interest rate.
Purchase Price Allocation of Goodwill — In the case of a business combination, after identifying all tangible and intangible assets and liabilities, the excess consideration paid over the fair value of the assets and liabilities acquired and assumed, respectively, represents goodwill. We allocate goodwill to the respective reporting units in which such goodwill arises. Goodwill acquired in certain business combinations, including the CPA®:15 Merger and the CPA®:16CPA:17 Merger, was attributed to the Owned Real Estate segment which comprises one1 reporting unit. In the event we dispose of a property that constitutes a business under GAAPU.S. generally accepted accounting principles (“GAAP”) from a reporting unit with goodwill, we allocate a portion of the reporting unit’s goodwill to that business in determining the gain or loss on the disposal of the business. The amount of goodwill allocated to the business is based on the relative fair value of the business to the fair value of the reporting unit. As part of purchase accounting for a business, we record any deferred tax assets and/or liabilities resulting from the difference between the tax basis and GAAP basis of the investment in the taxing jurisdiction. Such deferred tax amount will be included in purchase accounting and may impact the amount of goodwill recorded depending on the fair value of all of the other assets and liabilities and the amounts paid.
Impairments
Real Estate —We periodically assess whether there are any indicators that the value of our long-lived real estate and related intangible assets may be impaired or that their carrying value may not be recoverable. These impairment indicators include, but are not limited to, the vacancy of a property that is not subject to a lease,vacancies, an upcoming lease expiration, a tenant with credit difficulty, the termination of a lease by a tenant, or a likely disposition of the property. We may incur impairment charges on long-lived assets, including real estate, related intangible assets, direct financing leases, assets held for sale, and equity investments in real estate. We may also incur impairment charges on marketable securities and goodwill. Our policies and estimates for evaluating whether these assets are impaired are presented below.
Real Estate —For real estate assets held for investment and related intangible assets in which an impairment indicator is identified, we follow a two-step process to determine whether an asset is impaired and to determine the amount of the charge. First, we compare the carrying value of the property’s asset group to the estimated future net undiscounted cash flow that we expect the property’s asset group will generate, including any estimated proceeds from the eventual sale of the property’s asset group. The undiscounted cash flow analysis requires us to make our best estimate of market rents, residual values, and holding periods. We estimate market rents and residual values using market information from outside sources such as third-party market research, external appraisals, broker quotes, or recent comparable sales. In cases where the available market information is not deemed appropriate, we perform a future net cash flow analysis discounted for inherent risk associated with each asset to determine an estimated fair value.
As our investment objective is to hold properties on a long-term basis, holding periods used in the undiscounted cash flow analysis are generally ten years, but may be less if our intent is to hold a property for less than ten years. Depending on the assumptions made and estimates used, the future cash flow projected in the evaluation of long-lived assets and associated intangible assets can vary within a range of outcomes. We consider the likelihood of possible outcomes in determining our estimate of future cash flows and, if warranted, we apply a probability-weighted method to the different possible scenarios. If the future net undiscounted cash flow of the property’s asset group is less than the carrying value, the carrying value of the property’s asset group is considered not recoverable. We then measure the impairment loss as the excess of the carrying value of the property’s asset group over its estimated fair value. The estimated fair value of the property’s asset group is primarily determined using market information from outside sources such as broker quotes or recent comparable sales. In cases where the available market information is not deemed appropriate, we perform a future net cash flow analysis discounted for inherent risk associated with each asset to determine an estimated fair value.
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| W. P. Carey 2016 10-K– 90
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Notes to Consolidated Financial Statements
Assets Held for Sale — We generally classify real estate assets that are subject to operating leases or direct financing leases as held for sale when we have entered into a contract to sell the property, all material due diligence requirements have been satisfied, we received a non-refundable deposit, and we believe it is probable that the disposition will occur within one year. When we classify an asset as held for sale, we compare the asset’s fair value less estimated cost to sell to its carrying value, and if the fair value less estimated cost to sell is less than the property’s carrying value, we reduce the carrying value to the fair value less estimated cost to sell. We base the fair value on the contract and the estimated cost to sell on information provided by brokers and legal counsel. We then compare the asset’s fair value (less estimated cost to sell) to its carrying value, and if the fair value, less estimated cost to sell, is less than the property’s carrying value, we reduce the carrying value to the fair value, less
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| W. P. Carey 2019 10-K– 74 |
Notes to Consolidated Financial Statements
estimated cost to sell. We will continue to review the property for subsequent changes in the fair value, and may recognize an additional impairment charge, if warranted.
Direct Financing Leases — We reviewperiodically assess whether there are any indicators that the value of our net investments in direct financing leases at least annually tomay be impaired. When determining a possible impairment, we take into consideration the collectability of direct financing lease receivables for which a reserve would be required if any losses are both probable and reasonably estimable. In addition, we determine whether there has been an other-than-temporarya permanent decline in the current estimate of the residual value of the property. The residual value is our estimate of what we could realize upon the sale of the property at the end of the lease term, based on market information and third-party estimates, where available. If this review indicates that a permanent decline in residualthe fair value has occurred that is other-than-temporary,of the asset below its carrying value, we recognize an impairment charge equal to the difference between the fair value and carrying amount of the residual value.charge.
We also assess the carrying amount for recoverability and if, as a result of the decreased expected cash flows, we determine that our carrying value is not fully recoverable, we record an allowance for credit losses to reflect the change in the estimate of the future cash flows that includes rent. Accordingly, the net investment balance is written down to fair value. When we enter into a contract to sell the real estate assets that are recorded as direct financing leases, we evaluate whether we believe it is probable that the disposition will occur. If we determine that the disposition is probable, we will classify the net investment as held for sale and write down the net investment to its fair value if the fair value is less than the carrying value.
Equity Investments in the Managed Programs and Real Estate — We evaluate our equity investments in the Managed Programs and real estate on a periodic basis to determine if there are any indicators that the value of our equity investment may be impaired and whether or not that impairment is other-than-temporary. To the extent an impairment has occurred and is determined to be other-than-temporary, we measure the charge as the excess of the carrying value of our investment over its estimated fair value, which is determined by calculating our share of the estimated fair market value of the underlying net assets based on the terms of the applicable partnership or joint venture agreement. For certain investments in the Managed REITs, we calculate the estimated fair value of our investment using the most recently published net asset value per share (“NAV”) of each Managed REIT multiplied by the number of shares owned. For our equity investments in real estate, we calculate the estimated fair value of the underlying investment’s real estate or net investment in direct financing lease as described in Real Estate and Direct Financing Leases above. The fair value of the underlying investment’s debt, if any, is calculated based on market interest rates and other market information. The fair value of the underlying investment’s other financial assets and liabilities (excluding net investment in direct financing leases) have fair values that generally approximate their carrying values. For certain investments in the Managed REITs, we calculate the estimated fair value of our investment using the most recently published net asset value per share of each Managed REIT multiplied by the number of shares owned.
Goodwill — We evaluate goodwill for possible impairment at least annually or upon the occurrence of a triggering event usingevent. Such a two-step process. A triggering event is an event or circumstance that would more likely than not reducewithin our Investment Management segment depends on the fair valuetiming and form of a reporting unit below its carrying amount, including sales of properties defined as businessesliquidity events for which the relative size of the sold property is significant to the reporting unit, that could impact our goodwill impairment calculations.Managed Programs (Note 4). To identify any impairment, we first compare the estimated fair value of each of our reporting units with their respective carrying amount, including goodwill. Ifassess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit exceedsis less than its carrying amount, we do not consider goodwillvalue. This assessment is used as a basis to be impaired and no further analysisdetermine whether it is required. If the carrying amount of thenecessary to calculate reporting unit exceeds its estimated fair value,values. If necessary, we then perform the second step to determine and measure the amount of the potential impairment charge.
We calculate the estimated fair value of the Investment Management reporting unit by applyingutilizing a price-to-EBITDA multiple to earnings. For the Owned Real Estate reporting unit, wediscounted cash flow analysis methodology and available NAVs. We calculate its estimated fair value by applying an AFFO multiple. For both reporting units, the multiples are based on comparable companies. The selection of the comparable companies to be used in our evaluation process could have a significant impact on the fair value of our reporting units and possible impairments. The testing did not indicate any goodwill impairment as each of the reporting units with goodwill had fair value that was substantially in excess of the carrying value.
For the second step, if it were required, we compare the implied fair value of the goodwill for each reporting unit with its respective carrying amount and record an impairment charge equal to the excess of the carrying amount over the implied fair value. We would determine the implied fair value of the goodwill by allocating the estimated fair value of the Real Estate reporting unit to its assetsby utilizing our market capitalization and liabilities. The excess of the estimatedaforementioned fair value of the Investment Management segment. Impairments, if any, will be the difference between the reporting unit over the amounts assigned to its assets and liabilities is the impliedunit’s fair value and carrying amount, not to exceed the carrying amount of the goodwill.
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| W. P. Carey 2016 10-K– 91
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Notes to Consolidated Financial Statements
The goodwill recorded in our Investment Management and Owned Real Estate reporting units is evaluated during the fourth quarter of every year. In connection with the CPA®:16 Merger and the CPA®:15 Merger, we recorded goodwill in our Owned Real Estate reporting unit. In addition, in connection with the acquisition of certain international properties, we have recorded goodwill in our Owned Real Estate reporting unit related to deferred foreign income taxes. Prior to the CPA®:15 Merger, there was no goodwill recorded in our Owned Real Estate reporting unit.
Other Accounting Policies
Basis of Consolidation — Our consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries and our tenancy-in-common interest as described below.subsidiaries. The portions of equity in consolidated subsidiaries that are not attributable, directly or indirectly, to us are presented as noncontrolling interests. All significant intercompany accounts and transactions have been eliminated.
On January 1, 2016, we adopted the Financial Accounting Standards Board’s, or FASB’s, Accounting Standards Update, or ASU, 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, as described in the Recent Accounting Pronouncements section below, which amends the current consolidation guidance, including introducing a separate consolidation analysis specific to limited partnerships and other similar entities. When we obtain an economic interest in an entity, we evaluate the entity to determine if it should be deemed a variable interest entity, or VIE and, if so, whether we are the primary beneficiary and are therefore required to consolidate the entity. We apply accounting guidance for consolidation of VIEs to certain entities in which the equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Fixed price purchase and renewal options within a lease, as well as certain decision-making rights within a loan or joint-venture agreement, can cause us to consider an entity a VIE. Limited partnerships and other similar entities that operate as a partnership will be considered a VIE unless the limited partners hold substantive kick-out rights or participation rights. Significant judgment is required to determine whether a VIE should be consolidated. 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 the 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. We performed this analysis on all of our subsidiary entities following the guidance in ASU 2015-02 to determine whether they qualify as VIEs and whether they should be consolidated or accounted for as equity investments in an unconsolidated venture. As a result of this change in guidance, we determined that 13 entities that were previously classified as voting interest entities should now be classified as VIEs as of January 1, 2016 and therefore included in our VIE disclosures. However, there was no change in determining whether or not we consolidate these entities as we continue not to be the primary beneficiary. We elected to retrospectively adopt ASU 2015-02, which resulted in changes to our VIE disclosures. There were no other changes to our consolidated balance sheets or results of operations for the periods presented. The liabilities of these VIEs are non-recourse to us and can only be satisfied from each VIE’s respective assets.
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| W. P. Carey 2019 10-K– 75 |
Notes to Consolidated Financial Statements
During the year ended December 31, 2019, we had a net decrease of 13 entities considered to be consolidated VIEs, primarily related to disposition activity and certain lease amendments. In addition, during the year ended December 31, 2019, we received a full repayment of our preferred equity interest in an unconsolidated VIE entity. As a result, this preferred equity interest is now retired and is no longer considered a VIE (Note 8).
At December 31, 2016,2019 and 2018, we considered 18 and 32 entities to be VIEs, 25respectively, of which we consolidated 11 and 24, respectively, as we are considered the primary beneficiary. The following table presents a summary of selected financial data of the consolidated VIEs included in theour consolidated balance sheets (in thousands):
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| | December 31, |
| | 2019 | | 2018 |
| Land, buildings and improvements | $ | 493,714 |
| | $ | 781,347 |
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| Net investments in direct financing leases | 15,584 |
| | 305,493 |
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| In-place lease intangible assets and other | 56,915 |
| | 84,870 |
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| Above-market rent intangible assets | 34,576 |
| | 45,754 |
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| Accumulated depreciation and amortization | (151,017 | ) | | (164,942 | ) |
| Assets held for sale, net | 104,010 |
| | — |
|
| Total assets | 596,168 |
| | 1,112,984 |
|
| | | | |
| Non-recourse mortgages, net | $ | 32,622 |
| | $ | 157,955 |
|
| Total liabilities | 98,671 |
| | 227,461 |
|
|
| | | | | | | |
| | December 31, |
| | 2016 | | 2015 |
| Net investments in properties | $ | 786,379 |
| | $ | 890,454 |
|
| Net investments in direct financing leases | 60,294 |
| | 61,454 |
|
| In-place lease and tenant relationship intangible assets, net | 182,177 |
| | 214,924 |
|
| Above-market rent intangible assets, net | 71,852 |
| | 80,901 |
|
| Total assets | 1,150,093 |
| | 1,297,276 |
|
| | | | |
| Non-recourse debt, net | $ | 406,574 |
| | $ | 439,285 |
|
| Total liabilities | 548,659 |
| | 590,596 |
|
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| |
| W. P. Carey 2016 10-K– 92
|
Notes to Consolidated Financial Statements
At both December 31, 20162019 and 2015,2018, our seven7 and 8 unconsolidated VIEs, respectively, included our interests in six5 and 6 unconsolidated real estate investments, and one unconsolidated entity among our interests in the Managed Programs, all ofrespectively, which we account for under the equity method of accounting.accounting, and 2 unconsolidated entities, which we account for at fair value. We do not consolidate these entities because we are not the primary beneficiary and the nature of our involvement in the activities of these entities allows us to exercise significant influence on, but does not give us power over, decisions that significantly affect the economic performance of these entities. As of December 31, 20162019 and 2015,2018, the net carrying amount of our investments in these entities was $152.9$298.3 million and $154.8$301.6 million, respectively, and our maximum exposure to loss in these entities was limited to our investments.
At December 31, 2016, we had an investment in a tenancy-in-common interest in various underlying international properties. Consolidation of this investment is not required as such interest does not qualify as a VIE and does not meet the control requirement for consolidation. Accordingly, we account for this investment using the equity method of accounting. We use the equity method of accounting because the shared decision-making involved in a tenancy-in-common interest investment provides us with significant influence on the operating and financial decisions of this investment. We also had certain investments in other wholly owned tenancy-in-common interests, which we now consolidate after we obtained the remaining interests in the CPA®:16 Merger.
In connection with the CPA®:16 Merger, we acquired 19 VIEs. In accordance with ASU 2015-02, we determined that seven of these entities, which were previously classified as voting interest entities, should now be classified as VIEs as of January 1, 2016 and therefore included in our VIE disclosures.
At times, the carrying value of our equity investments may fall below zero for certain investments. We intend to fund our share of the jointly owned investments’ future operating deficits should the need arise. However, we have no legal obligation to pay for any of the liabilities of such investments nor do we have any legal obligation to fund operating deficits. At December 31, 2016, none of our equity investments had a carrying value below zero.
On April 20, 2016, we formed a limited partnership, CESH I, for the purpose of developing, owning, and operating student housing properties and similar investments in Europe. CESH I commenced fundraising in July 2016 through a private placement with an initial offering of $100.0 million and a maximum offering of $150.0 million. Through August 30, 2016, the financial results and balances of CESH I were included in our consolidated financial statements, and we had collected $14.2 million of net proceeds on behalf of CESH I from limited partnership units issued in the private placement primarily to independent investors. On August 31, 2016, we determined that CESH I had sufficient equity to finance its operations and that we were no longer considered the primary beneficiary, and as a result we deconsolidated CESH I and began to account for our interest in it at fair value by electing the equity method fair value option available under U.S. GAAP. As of August 31, 2016, CESH I had assets totaling $30.3 million on our consolidated balance sheet, including $15.4 million in Cash and cash equivalents and $14.9 million in Other assets, net. In connection with the deconsolidation, we recorded offsetting amounts of $14.2 million for the year ended December 31, 2016 in Contributions from noncontrolling interests and Deconsolidation of affiliate in the consolidated statements of equity, and in Proceeds from limited partnership units issued by affiliate and Deconsolidation of affiliate in the consolidated statements of cash flows. We recognized a gain on deconsolidation of $1.9 million, which is included in Other income and (expenses) in the consolidated statements of income for the year ended December 31, 2016. The deconsolidation did not have a material impact on our financial position or results of operations. Following the deconsolidation, we continue to serve as the advisor to CESH I (Note 4).
As of December 31, 2016, CPA®:19 – Global had not yet commenced fundraising through its registered public offering. Therefore, we included the financial activity of CPA®:19 – Global in our consolidated financial statements and eliminated all intercompany accounts and transactions in consolidation. For the year ended December 31, 2016, the consolidated results of operations from CPA®:19 – Global were insignificant. All assets and liabilities of CPA®:19 – Global were insignificant as of December 31, 2016. We have decided to delay the introduction of CPA®:19 – Global due to regulatory uncertainty surrounding the adoption of the Fiduciary Rule and the resulting impact on the market with regard to product choices, pricing, and timing, which is currently in a state of flux. As a result, there can be no assurances as to whether or when CPA®:19 – Global’s offering will commence.
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| W. P. Carey 2016 10-K– 93
|
Notes to Consolidated Financial Statements
Out-of-Period Adjustments
During the second quarter of 2016, we identified and recorded out-of-period adjustments related to adjustments to prior period income tax returns. We concluded that these adjustments were not material to our consolidated financial statements for any of the current or prior periods presented. The net adjustment is reflected as a $3.0 million increase in our Provision for income taxes in the consolidated statements of income for the year ended December 31, 2016, with a net increase to Accounts payable, accrued expenses and other liabilities and Accumulated other comprehensive loss in the consolidated balance sheet as of December 31, 2016.
Reclassifications — Certain prior period amounts have been reclassified to conform to the current period presentation. Structuring revenue and other advisory revenue were previously presented separately, but are now included within Structuring and other advisory revenue in the consolidated statements of income.
On January 1, 2016, we adopted ASU 2015-03, Interest-ImputationIn connection with our adoption of Interest(Subtopic 835-30) Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), as described below in the Recent Accounting Pronouncements section below. ASU 2015-03 changes the presentation of debt issuance, reimbursable tenant costs which were previously recognized as an asset and requires that they be presented(within Real Estate revenues) are now included within Lease revenues in the consolidated statements of income. In addition, we currently present Reimbursable tenant costs and Reimbursable costs from affiliates (both within operating expenses) on their own line items in the consolidated statements of income. Previously, these line items were included within Reimbursable tenant and affiliate costs.
Restricted Cash — Restricted cash primarily consists of security deposits and amounts required to be reserved pursuant to lender agreements for debt service, capital improvements, and real estate taxes. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheet as a direct deduction fromsheets to the carrying amountconsolidated statements of that debt liability. As a result of adopting this guidance, we reclassified $12.6 million of deferred financing costs, net fromcash flows (in thousands):
|
| | | | | | | | | | | |
| | December 31, |
| | 2019 | | 2018 | | 2017 |
| Cash and cash equivalents | $ | 196,028 |
| | $ | 217,644 |
| | $ | 162,312 |
|
Restricted cash (a) | 55,490 |
| | 206,419 |
| | 47,364 |
|
| Total cash and cash equivalents and restricted cash | $ | 251,518 |
| | $ | 424,063 |
| | $ | 209,676 |
|
__________
| |
| (a) | Restricted cash is included within Other assets, net in our consolidated balance sheets. The amount as of December 31, 2018 includes $145.7 million of proceeds from the sale of a portfolio of Australian properties in December 2018. These funds were transferred from a restricted cash account to us in January 2019. |
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| W. P. Carey 2019 10-K– 76 |
Notes to Non-recourse debt, net, Senior Unsecured Notes, net,Consolidated Financial Statements
Land, Buildings and Senior Unsecured Credit Facility - Term Loan, net as of December 31, 2015.
Real Estate and Operating Real Estate Improvements — We carry land, buildings, and personal property at cost less accumulated depreciation. We capitalize improvements and significant renovations that extend the useful life of the properties, while we expense replacements, maintenance and repairs that do not improve or extend the lives of the respective assets as incurred.
Assets Held forGain/Loss on Sale — We classify those assets as held for sale when we have entered into a contract to sell the property, all material due diligence requirements have been satisfied, and we believe it is probable that the disposition will occur within one year. Assets held for sale are recorded at the lower of carrying value or estimated fair value, less estimated costs to sell. For the year ended December 31, 2014, the results of operations and the related gain or loss on sale of properties held for sale as of December 31, 2013 and sold during 2014, and properties we acquired in the CPA®:16 Merger that were held for sale and sold during 2014, were included in income from discontinued operations. Prior to January 1, 2014, the results of operations and the related gain or loss on sale of properties that have been sold or that were classified as held for sale and in which we will have no significant continuing involvement are included in discontinued operations (Note 17).In the unlikely event that we decide not to sell a property previously classified as held for sale, we reclassify the property as held and used. We measure and record a property that is reclassified as held and used at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held and used or (ii) the estimated fair value at the date of the subsequent decision not to sell.
We recognize gains and losses on the sale of properties when among otherthe transaction meets the definition of a contract, criteria we no longer have continuing involvement,are met for the parties are bound by the termssale of one or more distinct assets, and control of the contract, all consideration has been exchanged, and all conditions precedent to closing have been performed. At the time the saleproperties is consummated, a gain or loss is recognized as the difference between the sale price, less any selling costs, and the carrying value of the property.transferred.
Notes Receivable — For investments in mortgage notes and loan participations, the loans are initially reflected at acquisition cost, which consists of the outstanding balance, net of the acquisition discount or premium. We amortize any discount or premium as an adjustment to increase or decrease, respectively, the yield realized on these loans over the life of the loan. As such, differences between carrying value and principal balances outstanding do not represent embedded losses or gains as we generally plan to hold such loans to maturity. Our notes receivable are included in Other assets, net in the consolidated financial statements.
Cash and Cash Equivalents — We consider all short-term, highly liquid investments that are both readily convertible to cash and have a maturity of three months or less at the time of purchase to be cash equivalents. Items classified as cash equivalents include commercial paper and money market funds. Our cash and cash equivalents are held in the custody of several financial institutions, and these balances, at times, exceed federally insurable limits. We seek to mitigate this risk by depositing funds only with major financial institutions.
Internal-Use Software Development Costs — We expense costs associated with the assessment stage of software development projects. Upon completion of the preliminary project assessment stage, we capitalize internal and external costs associated with the application development stage, including the costs associated with software that allows for the conversion of our old data to
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| W. P. Carey 2016 10-K– 94
|
Notes to Consolidated Financial Statements
our new system. We expense the personnel-related costs of training and data conversion. We also expense costs associated with the post-implementation and operation stage, including maintenance and specified upgrades; however, we capitalize internal and external costs associated with significant upgrades to existing systems that result in additional functionality. Capitalized costs are amortized on a straight-line basis over the software’s estimated useful life, which is three to seven years. Periodically, we reassess the useful life considering technology, obsolescence, and other factors.
Other Assets and Liabilities — We include prepaid expenses, deferred rental income, tenant receivables, deferred charges, escrow balances held by lenders, restricted cash balances, marketable securities, derivative assets, other intangible assets, corporate fixed assets, our investment in shares of a cold storage operator (Note 9), our investment in shares of GCIF (Note 9), and notesour loans receivable in Other assets, net. We include derivative liabilities, amounts held on behalf of tenants, and deferred revenue in Accounts payable, accrued expenses and other liabilities. Deferred charges are costs incurred in connection with obtaining or amending our credit facility that are amortized over the terms of the debt and included in Interest expense in the consolidated financial statements. Deferred rental income is the aggregate cumulative difference for operating leases between scheduled rents that vary during the lease term, and rent recognized on a straight-line basis.
Allowance for Doubtful Accounts — We consider rents due under leases and payments under notes receivable to be past-due or delinquent when a contractually required rent, principal payment, or interest payment is not remitted in accordance with the provisions of the underlying agreement. We evaluate each account individually and set up an allowance when, based upon current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms, and the amount can be reasonably estimated.
Revenue Recognition, Real Estate Leased to Others — We lease real estate to others primarily on a triple-net leased basis, whereby the tenant is generally responsible for operating expenses relating to the property, including property taxes, insurance, maintenance, repairs, and improvements. For the years ended December 31, 2016, 2015, and 2014, our tenants, pursuant to their lease obligations, have made direct payment to the taxing authorities of real estate taxes of approximately $56.0 million, $57.7 million, and $59.8 million, respectively.
Substantially all of our leases provide for either scheduled rent increases, periodic rent adjustments based on formulas indexed to changes in the Consumer Price Index or CPI,(“CPI”) or similar indices, or percentage rents. CPI-based adjustments are contingent on future events and are therefore not included as minimum rent in straight-line rent calculations. We recognize rents from percentage rents as reported by the lessees, which is after the level of sales requiring a rental payment to us is reached. Percentage rents were insignificant for the periods presented.
For our operating leases, we record real estate at cost less accumulated depreciation; we recognize future minimum rental revenue on a straight-line basis over the non-cancelable lease term of the related leases and charge expenses to operations as incurred (Note 5). We record leases accounted for under the direct financing method as a net investment in direct financing leases (Note 6). The net investment is equal to the cost of the leased assets. The difference between the cost and the gross investment, which includes the residual value of the leased asset and the future minimum rents, is unearned income. We defer and amortize unearned income to income over the lease term so as to produce a constant periodic rate of return on our net investment in the lease.
Revenue from contracts under Accounting Standards Codification (“ASC”) 606 is recognized when, or as, control of promised goods or services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. At contract inception, we assess the services promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, we consider all of the services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. ASC 606 does not apply to our lease revenues, which constitute a majority of our revenues, but primarily applies to revenues generated from our hotel operating properties and our Investment Management segment.
Revenue from contracts for our Real Estate segment primarily represented operating property revenues of $29.4 million, $21.7 million, and $30.6 million for the years ended December 31, 2019, 2018, and 2017, respectively. Such operating property revenues are primarily comprised of revenues from room rentals and from food and beverage services at our hotel operating
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| W. P. Carey 2019 10-K– 77 |
Notes to Consolidated Financial Statements
properties during those years. We identified a single performance obligation for each distinct service. Performance obligations are typically satisfied at a point in time, at the time of sale, or at the rendering of the service. Fees are generally determined to be fixed. Payment is typically due immediately following the delivery of the service. Revenue from contracts under ASC 606 from our Investment Management segment is discussed in Note 4.
Revenue Recognition, Investment Management Operations — We earn structuring revenue and asset management revenue in connection with providing services to the Managed Programs. We earn structuring revenue for services we provide in connection with the analysis, negotiation, and structuring of transactions, including acquisitions and dispositions and the placement of mortgage financing obtained by the Managed REITs and CESH I.Programs. We earn asset management revenue from property management, leasing, and advisory services performed. Receipt of the incentive revenue portion of the asset management revenue or performance revenue, however, was subordinated to the achievement of specified cumulative return requirements by the stockholders of those CPA® REITs. At our option, the performance revenue could be collected in cash or shares of the CPA® REIT (Note 4). In addition, we earn subordinated incentive and disposition revenue related to the disposition of properties. We may also earn termination revenue in connection with a liquidity event and/or the termination of the advisory agreements for the Managed REITs.
We recognize all revenue as earned. We earn structuring revenue upon the consummation of a transaction and asset management revenue when services are performed. We recognize revenue subject to subordination only when the performance criteria ofDuring their respective offering periods, the Managed REIT is achieved and contractual limitations are not exceeded.
We may earn termination revenue if a liquidity event is consummated by any of the Managed REITs. As a condition of the CPA®:16 Merger, we waived the subordinated disposition and termination fees that we would have been entitled to receive from CPA®:16 – Global upon its liquidation pursuant to the terms of our advisory agreement with CPA®:16 – Global (Note 4).
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| W. P. Carey 2016 10-K– 95
|
Notes to Consolidated Financial Statements
We are alsoPrograms reimbursed us for certain costs in connection with those offerings that we incurred in providing services, includingon their behalf, which consisted primarily of broker-dealer commissions, paidmarketing costs, and an annual distribution and shareholder servicing fees incurredfee, as applicable. As a result of our exit from non-traded retail fundraising activities on June 2017, we ceased raising funds on behalf of the Managed Programs marketing costs,in the third quarter of 2017 and the cost of personnel provided for the administration ofno longer incur these costs. However, the Managed Programs.Programs will continue to reimburse us for certain personnel and overhead costs that we incur on their behalf. We record reimbursement income as the expenses are incurred, subject to limitations on a Managed Program’s ability to incur offering costs or limitations imposed by the advisory agreements.
Asset Retirement Obligations — Asset retirement obligations relate to the legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development, and/or normal operation of a long-lived asset. The fair value of a liability for an asset retirement obligation is recorded in the period in which it is incurred or at the point of acquisition of an asset with an assumed asset retirement obligation, and the cost of such liability is recorded as an increase in the carrying amount of the related long-lived asset by the same amount. The liability is accreted each period and the capitalized cost is depreciated over the estimated remaining life of the related long-lived asset. Revisions to estimated retirement obligations result in adjustments to the related capitalized asset and corresponding liability.
In order to determine the fair value of the asset retirement obligations, we make certain estimates and assumptions including, among other things, projected cash flows, the borrowing interest rate, and an assessment of market conditions that could significantly impact the estimated fair value. These estimates and assumptions are subjective.
Depreciation — We compute depreciation of building and related improvements using the straight-line method over the estimated remaining useful lives of the properties (not to exceed 40 years) and furniture, fixtures, and equipment (generally up to seven years).equipment. We compute depreciation of tenant improvements using the straight-line method over the lesser of the remaining term of the lease or the estimated useful life.
Stock-Based Compensation — We have granted stock options, restricted share awards or RSAs,(“RSAs”), restricted share units or RSUs,(“RSUs”), and performance share units or PSUs,(“PSUs”) to certain employees, independent directors, and independent directors.nonemployees. Grants were awarded in the name of the recipient subject to certain restrictions of transferability and a risk of forfeiture. Stock-based compensation expense for all equity-classified stock-based compensation awards is based on the grant date fair value estimated in accordance with current accounting guidance for share-based payments.payments, which includes awards granted to certain nonemployees, upon our adoption of ASU 2018-07 on January 1, 2019, as described below. We recognize these compensation costs for only those shares expected to vest on a straight-line or graded-vesting basis as appropriate, over the requisite service or performance period of the award. We include stock-based compensation within Additional paid-in capital in the consolidated statements of equity.equity and Stock-based compensation expense in the consolidated statements of income.
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| W. P. Carey 2019 10-K– 78 |
Notes to Consolidated Financial Statements
Foreign CurrencyTranslation and Transaction Gains and Losses — We have interests in international real estate investments primarily in Europe, Canada, and Japan, and the European Union, the United Kingdom, and Australiaprimary functional currencies for which the functional currency isthose investments are the euro, the British pound sterling, the Danish krone, the Canadian dollar, and the Australian dollar, respectively.Japanese yen. We perform the translation from the euro, the British pound sterling, or the Australian dollarthese currencies to the U.S. dollar for assets and liabilities using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted-average exchange rate during the year. We report the gains and losses resulting from such translation as a component of other comprehensive lossincome in equity. These translation gains and losses are released to net income (within Gain on sale of real estate, net, in the consolidated statements of income) when we have substantially exited from all investments in the related currency.currency (Note 10, Note 14, Note 17).
A transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later), realized upon settlement of a foreign currency transaction generally will be included in net income for the period in which the transaction is settled. Also, foreign currency intercompany transactions that are scheduled for settlement, consisting primarily of accrued interest and the translation to the reporting currency of short-term subordinated intercompany debt or debt with scheduled principal payments, are included in the determination of net income.income (within Other gains and (losses) in the statements of income).
Intercompany foreign currency transactions of a long termlong-term nature (that is, settlement is not planned or anticipated in the foreseeable future), in which the entities toinvolved in the transactions are consolidated or accounted for by the equity method in our consolidated financial statements, are not included in net income but are reported as a component of other comprehensive lossincome in equity.
Net realized gains or (losses) are recognized on foreign currency transactions in connection with the transfer of cash from foreign operations of subsidiaries to the parent company. For the years ended December 31, 2016, 2015, and 2014, we recognized net realized losses on such transactions of $3.7 million, $0.8 million, and $0.4 million, respectively.
Derivative Instruments — 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 derivativederivatives designated and that qualifiedqualify as a cash flow hedge, the effective portion ofhedges, the change in fair value of the derivative is recognized in Other comprehensive loss(loss) income until the hedged item istransaction affects earnings. Gains and losses on the cash flow hedges representing hedge components excluded from the assessment of effectiveness are recognized in earnings.
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| W. P. Carey 2016 10-K– 96
|
Notes to Consolidated Financial Statements
earnings over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with our accounting policy election. Such gains and losses are recorded within Other gains and (losses) or Interest expense in our consolidated statements of income. The ineffective portionearnings recognition of a derivative’s changeexcluded components is presented in fair value is immediately recognized in earnings.the same line item as the hedged transactions. For a derivativederivatives designated and that qualifiedqualify as a net investment hedge, the effective portion of the change in the fair value and/or the net settlement of the derivative areis reported in Other comprehensive loss(loss) income as part of the cumulative foreign currency translation adjustment. The ineffective portion of the change in fair value of the derivative is recognized directly in earnings. Amounts are reclassified out of Other comprehensive loss(loss) income into earnings (within Gain on sale of real estate, net, in our consolidated statements of income) when the hedged investment is either sold or substantially liquidated.
We use the portfolio exception in Accounting Standards Codification, 820-10-35-18D, Application to Financial Assets and Financial Liabilities In accordance with Offsetting Positions in Market Risk or Counterparty Credit Risk, with respect to measuringfair value measurement guidance, counterparty credit risk is measured on a net portfolio position basis.
General and Administrative Expenses — Beginning with the third quarter of 2017, personnel and rent expenses included within general and administrative expenses that are recorded by our Real Estate and Investment Managements segments are allocated based on time incurred by our personnel for allthose segments. Following our exit from non-traded retail fundraising activities, as of our derivative transactions subject to master netting arrangements.June 30, 2017 (Note 1), we believe that this allocation methodology is appropriate.
Income Taxes — We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code. In order to maintain our qualification as a REIT, we are required, among other things, to distribute at least 90% of our REIT net taxable income to our stockholders and meet certain tests regarding the nature of our income and assets. As a REIT, we are not subject to federal income taxes on our income and gains that we distribute to our stockholders as long as we satisfy certain requirements, principally relating to the nature of our income and the level of our distributions, as well as other factors. We believe that we have operated, and we intend to continue to operate, in a manner that allows us to continue to qualify as a REIT.
We conduct business in various states and municipalities primarily within North America Europe, Australia, and AsiaEurope, and as a result, we or one or more of our subsidiaries file income tax returns in the United States federal jurisdiction and various state and certain foreign jurisdictions. As a result, weWe derive most of our REIT income from our real estate operations under our Real Estate segment. Our domestic real estate operations are generally not subject to federal tax, and accordingly, no provision has been made for U.S. federal income taxes in the consolidated financial statements for these operations. These operations may be subject to certain foreign, state and local taxes, and a provision for such taxes is included in the consolidated financial statements.
as applicable. We elect to treat certain ofconduct our corporate subsidiaries asInvestment Management operations primarily through TRSs. In general, a TRS may perform additional services for our tenants and generally may engage in any real estate or non-real estate-related business (except for the operation or management of health care facilities or lodging facilities or providing to any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated). A TRS isbusiness. These operations are subject to corporate federal, income tax.state, local, and foreign taxes, as applicable. Our financial statements are prepared on a consolidated basis including these TRSs and include a provision for current and deferred taxes on these operations.
Significant judgment is required in determining our tax provision and in evaluating our tax positions. We establish tax reserves based on a benefit recognition model, which we believe could result in a greater amount of benefit (and a lower amount of reserve) being initially recognized in certain circumstances. Provided that the tax position is deemed more likely than not of being sustained, we recognize the largest amount of tax benefit that is greater than 50% likely of being ultimately realized upon settlement. We derecognize the tax position when it is no longer more likely than not of being sustained.
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| W. P. Carey 2019 10-K– 79 |
Notes to Consolidated Financial Statements
Our earnings and profits, which determine the taxability of distributions to stockholders, differ from net income reported for financial reporting purposes due primarily to differences in depreciation, including hotel properties, and timing differences of rent recognition and certain expense deductions, for federal income tax purposes.
Deferred income taxes relate primarily to our TRSs and foreign properties and are accounted for using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the financial reporting bases of assets and liabilities of our TRSs and their respective tax bases and for their operating loss and tax credit carryforwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including tax planning strategies and other factors (Note 16).
We recognize deferred income taxes in certain of our subsidiaries taxable in the United States or in foreign jurisdictions. Deferred income taxes are generally the result of temporary differences (items that are treated differently for tax purposes than for U.S. GAAP purposes as described in Note 16). In addition, deferred tax assets arise from unutilized tax net operating losses, generated in prior years. Deferred income taxes are computed under the asset and liability method. The asset and liability method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between tax bases and financial bases of assets and liabilities. We provide a valuation allowance against our deferred income tax assets when we believe that it is more likely than not that all or some portion of the deferred income tax asset may not be realized. Whenever a change in circumstances causes a change in the estimated realizability of the related deferred income tax asset, the resulting increase or decrease in the valuation allowance is included in deferred income tax expense (benefit).
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| W. P. Carey 2016 10-K– 97
|
Notes to Consolidated Financial Statements
We derive most of our REIT income from our real estate operations under our Owned Real Estate segment. As such, our domestic real estate operations are generally not subject to federal tax, and accordingly, no provision has been made for U.S. federal income taxes in the consolidated financial statements for these operations. These operations may be subject to certain state, local, and foreign taxes, as applicable. We conduct our Investment Management operations primarily through TRSs. These operations are subject to federal, state, local, and foreign taxes, as applicable. Our financial statements are prepared on a consolidated basis including these TRSs and include a provision for current and deferred taxes on these operations.
Earnings Per Share — Basic earnings per share is calculated by dividing net income available to common stockholders, as adjusted for unallocated earnings attributable to the unvestednonvested RSUs and RSAs by the weighted-average number of shares of common stock outstanding during the year. Diluted earnings per share reflects potentially dilutive securities (options(RSAs, RSUs, PSUs, and PSUs)options) using the treasury stock method, except when the effect would be anti-dilutive.
Use of Estimates — 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.
Recent Accounting Pronouncements
In May 2014, the FASB issued 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 transferPronouncements Adopted as 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, which constitute a majority of our revenues, but will apply to reimbursed tenant costs and revenues generated from our operating properties and our Investment Management business. We will adopt this guidance for our annual and interim periods beginning January 1, 2018 using one of two methods: retrospective restatement for each reporting period presented at the time of adoption, or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application. We have not decided which method of adoption we will use. We are evaluating the impact of the new standard and have not yet determined if it will have a material impact on our business or our consolidated financial statements.December 31, 2019
In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810). ASU 2015-02 amends the current consolidation guidance, including modification of the guidance for evaluating whether limited partnerships and similar legal entities are VIEs or voting interest entities. The guidance does not amend the existing disclosure requirements for VIEs or voting interest model entities. The guidance, however, modified the requirements to qualify under the voting interest model. Under the revised guidance, ASU 2015-02 requires an entity to classify a limited liability company or a limited partnership as a VIE unless the partnership provides partners with either substantive kick-out rights over the managing member or substantive participating rights over the entity or VIE. Please refer to the discussion in the Basis of Consolidation section above.
In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30). ASU 2015-03 changes the presentation of debt issuance costs, which were previously recognized as an asset, and requires that they be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 does not affect the recognition and measurement guidance for debt issuance costs. ASU 2015-03 is effective for periods beginning after December 15, 2015, and retrospective application is required. We adopted ASU 2015-03 on January 1, 2016 and have disclosed the reclassification of our debt issuance costs in the Reclassifications section above.
In February 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 outlinesmodifies the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract: the lessee and the lessor. ASU 2016-02 provides new modelguidelines that change the accounting for accounting byleasing arrangements for lessees, whereby their rights and obligations under substantially all leases, existing and new, would beare capitalized and recorded on the balance sheet. For lessors, however, the accountingnew standard remains largely unchanged from the current model,generally consistent with the distinction between operating and financing leases retained,existing guidance, but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. The new standard also replaces existing sale-leasebackASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”).
We adopted this guidance with a new model applicable to both lesseesfor our interim and lessors. Additionally,annual periods beginning January 1, 2019 using the new standard requires extensive quantitative and qualitative disclosures. ASU 2016-02 is effective for U.S. GAAP public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; for all other entities, the final lease standard will be effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application will be permitted for all entities. The new standard must be adopted using a modified retrospective method, applying the transition provisions at the beginning of the new guidance and provides for certain practical expedients. Transition will require applicationperiod of the new modeladoption rather than at the beginning of the earliest comparative period presented. We elected the package of practical expedients as permitted under the transition guidance, which allowed us to not reassess whether arrangements contain leases, lease classification, and initial direct costs. The ASU is expected to impact our consolidated financial statementsadoption of the lease standard did not result in a cumulative effect adjustment recognized in the opening balance of retained earnings as we haveof January 1, 2019.
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| • | As a Lessee: we recognized $115.6 million of land lease right-of-use (“ROU”) assets, $12.7 million of office lease ROU assets, and $95.3 million of corresponding lease liabilities for certain operating office and land lease arrangements for which we were the lessee on January 1, 2019, which included reclassifying below-market ground lease intangible assets, above-market ground lease intangible liabilities, prepaid rent, and deferred rent as a component of the ROU asset (a net reclassification of $33.0 million). See Note 5 for additional disclosures on the presentation of these amounts in our consolidated balance sheets. |
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments under the lease. We determine if an arrangement contains a lease at contract inception and determine the classification of the lease at commencement. Operating lease ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. We do not include renewal options in the lease term when calculating the lease liability unless we are reasonably certain we will exercise the lessee. Weoption. Variable lease payments are evaluatingexcluded from the impact ofROU assets and lease liabilities and are recognized in the new standard and have not yet determined if it will have a material impact on our business or our consolidated financial statements.period in which the obligation for those payments is incurred. Our variable lease payments
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| | W. P. Carey 20162019 10-K– 9880 |
Notes to Consolidated Financial Statements
consist of increases as a result of the CPI or other comparable indices, taxes, and maintenance costs. Lease expense for lease payments is recognized on a straight-line basis over the term of the lease.
The implicit rate within our operating leases is generally not determinable and, as a result, we use our incremental borrowing rate at the lease commencement date to determine the present value of lease payments. The determination of our incremental borrowing rate requires judgment. We determine our incremental borrowing rate for each lease using estimated baseline mortgage rates. These baseline rates are determined based on a review of current mortgage debt market activity for benchmark securities across domestic and international markets, utilizing a yield curve. The rates are then adjusted for various factors, including level of collateralization and lease term.
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| • | As a Lessor: a practical expedient allows lessors to combine non-lease components (lease arrangements that include common area maintenance services) with related lease components (lease revenues), if both the timing and pattern of transfer are the same for the non-lease component and related lease component, the lease component is the predominant component, and the lease component would otherwise be classified as an operating lease. We elected the practical expedient. For (i) operating lease arrangements involving real estate that include common area maintenance services and (ii) all real estate arrangements that include real estate taxes and insurance costs, we present these amounts within lease revenues in our consolidated statements of income. We record amounts reimbursed by the lessee in the period in which the applicable expenses are incurred. |
Under ASU 2016-02, lessors are allowed to only capitalize incremental direct leasing costs. Historically, we have not capitalized internal legal and leasing costs incurred, and, as a result, we were not impacted by this change.
In March 2016,August 2017, the FASB issued ASU 2016-05,2017-12, Derivatives and Hedging (Topic 815): EffectTargeted Improvements to Accounting for Hedging Activities. ASU 2017-12 makes more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and eliminates the requirements to separately measure and disclose hedge effectiveness. It is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of Derivative Contract Novations on Existing Hedge Accounting Relationships. ASU 2016-05 clarifies that ahedge accounting, and increase transparency as to the scope and results of hedging programs. We adopted this guidance for our interim and annual periods beginning January 1, 2019. The adoption of this standard impacted our consolidated financial statements for both cash flow hedges and net investment hedges. Changes in the fair value of our hedging instruments are no longer separated into effective and ineffective portions. The entire change in counterpartythe fair value of these hedging instruments included in the assessment of effectiveness is now recorded in Accumulated other comprehensive loss. The impact to our consolidated financial statements as a derivative contract,result of these changes was not material.
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions in exchange for goods and services from nonemployees, which will align the accounting for such payments to nonemployees with the existing requirements for share-based payments granted to employees (with certain exceptions). These share-based payments will now be measured at the grant-date fair value of itself, does not require the dedesignation of a hedging relationship. ASU 2016-05 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. Early adoption is permitted and entities have the option of adoptingequity instrument issued. We adopted this guidance on a prospective basis to new derivative contracts or on a modified retrospective basis. We elected to early adopt ASU 2016-05 onfor our interim and annual periods beginning January 1, 2016 on2019. The adoption of this standard did not have a prospective basis, and there was nomaterial impact on our consolidated financial statements.
In March 2016, the FASB issued ASU 2016-07, Investments – Equity Method and Joint Ventures (Topic 323). ASU 2016-07 simplifies the transitionPronouncements to the equity method of accounting. ASU 2016-07 eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. Instead the equity method of accounting will be applied prospectively from the date significant influence is obtained. The new standard should be applied prospectively for investments that qualify for the equity method of accounting in interim and annual periods beginningAdopted after December 15, 2016. Early adoption is permitted, and we elected to early adopt this standard as of January 1, 2016. The adoption of this standard had no impact on our consolidated financial statements.31, 2019
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 amends Accounting Standards Codification Topic 718, Compensation-Stock Based Compensation to simplify various aspects of how share-based payments are accounted for and presented in the financial statements including (i) reflecting income tax effects of share-based payments through the income statement, (ii) allowing statutory tax withholding requirements at the employees’ maximum individual tax rate without requiring awards to be classified as liabilities and (iii) permitting an entity to make an accounting policy election for the impact of forfeitures on the recognition of expense. ASU 2016-09 is effective for public business entities for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period, with early adoption permitted.
We adopted ASU 2016-09 as of January 1, 2017 and elected to account for forfeitures as they occur, rather than to account for them based on an estimate of expected forfeitures. This election is to be adopted using a modified retrospective transition method, with a cumulative effect adjustment to retained earnings. The related financial statement impact of this adjustment is not expected to be material. Depending on several factors, such as the market price of our common stock, employee stock option exercise behavior, and corporate income tax rates, the excess tax benefits associated with the exercise of stock options and the vesting and delivery of RSAs, RSUs, and PSUs could generate a significant income tax benefit in a particular interim period, potentially creating volatility in Net income attributable to W. P. Carey and basic and diluted earnings per share between interim periods. We do not expect that the impact will be material to Net income attributable to W. P. Carey and basic and diluted earnings per share on an annual basis. Under the current accounting guidance, windfall tax benefits related to stock-based compensation were approximately $6.7 million and $12.5 million during the years ended December 31, 2016 and 2015, respectively, and were recognized within Additional paid-in capital in our consolidated financial statements. If ASU 2016-09 had been adopted as of January 1, 2015, these amounts would have been reflected as a reduction to Provision for income taxes in those respective periods.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments –— Credit Losses. ASU 2016-13 introduces a newreplaces the “incurred loss” model for estimatingwith an “expected loss” model, resulting in the earlier recognition of credit losses based on current expected credit losses foreven if the risk of loss is remote. This standard applies to financial assets measured at amortized cost and certain types of financialother instruments, including loans receivable held-to-maturity debt securities, and net investments in direct financing leases. This standard does not apply to receivables arising from operating leases, amongst other financial instruments.which are within the scope of Topic 842. We will adopt ASU 2016-13 also modifiesfor our interim and annual periods beginning January 1, 2020 using the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses. ASU 2016-13 will be effective for public business entitiesmodified retrospective method, which requires applying changes in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early application of the guidance permitted. We are in the process of evaluating the impact of adopting ASU 2016-13 on our consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 intends to reduce diversity in practice for certain cash flow classifications, including, but not limited to (i) debt prepayment or debt extinguishment costs, (ii) contingent consideration payments made after a business combination, (iii) proceeds from the settlement of insurance claims, and (iv) distributions received from equity method investees. ASU 2016-15 will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early application of the guidance permitted. We are in the process of evaluating the impact of adopting ASU 2016-15 on our consolidated financial statements.
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| W. P. Carey 2016 10-K– 99
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Notes to Consolidated Financial Statements
In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control. ASU 2016-17 changes how a reporting entity that is a decision maker should consider indirect interests in a VIE held through an entity under common control. If a decision maker must evaluate whether it is the primary beneficiary of a VIE, it will only need to consider its proportionate indirect interest in the VIE heldreserves through a common control party. ASU 2016-17 amends ASU 2015-02, which we adopted oncumulative-effect adjustment to retained earnings as of January 1, 2016, and which currently directs the decision maker to treat the common control party’s interest in the VIE as if the decision maker held the interest itself. ASU 2016-17 will be effective for public business entities in fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted.2020. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 intends
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| W. P. Carey 2019 10-K– 81 |
Notes to reduce diversity in practice for the classificationConsolidated Financial Statements
Note 3. Merger with CPA:17 – Global
CPA:17 Merger
On June 17, 2018, we and presentation of changes in restricted cash on the statement of cash flows. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We are in the process of evaluating the impact of adopting ASU 2016-18 on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 intends to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business: inputs, processes, and outputs. While an integrated set of assets and activities, collectively referred to as a “set,” that is a business usually has outputs, outputs are not required to be present. ASU 2017-01 provides a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. ASU 2017-01 will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We elected to early adopt ASU 2017-01 on January 1, 2017 on a prospective basis. While our acquisitions have historically been classified as either business combinations or asset acquisitions, certain acquisitions that were classified as business combinations by us likely would have been considered asset acquisitions under the new standard. As a result, future transaction costs are more likely to be capitalized since we expect most of our future acquisitions to be classified as asset acquisitions under this new standard. In addition, goodwill that was previously allocated to businesses that were sold or held for sale will no longer be allocated and written off upon sale if future sales were deemed to be sales of assets and not businesses.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 removes step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. ASU 2017-04 will be effective for public business entities in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years in which a goodwill impairment test is performed, with early adoption permitted. We are in the process of evaluating the impact of adopting ASU 2017-04 on our consolidated financial statements.
Note 3.Merger with CPA®:16 – Global
On July 25, 2013, we and CPA®:16 – Globalsubsidiaries entered into a definitivemerger agreement with CPA:17 – Global, pursuant to which CPA®:16CPA:17 – Global would merge with and into one of our wholly owned subsidiaries in exchange for shares of our common stock, subject to the approvalapprovals of our stockholders and the stockholders of CPA®:16CPA:17 – Global. On January 24, 2014, ourThe CPA:17 Merger and related transactions were approved by both sets of stockholders on October 29, 2018 and completed on October 31, 2018.
At the effective time of the CPA:17 Merger, each share of CPA:17 – Global common stock issued and outstanding immediately prior to the effective time of the CPA:17 Merger was canceled and the stockholders of CPA®:16 – Global each approvedrights attaching to such share were converted automatically into the CPA®:16 Merger, and the CPA®:16 Merger closed on January 31, 2014.
In the CPA®:16 Merger, CPA®:16 – Global stockholders received 0.1830right to receive 0.160 shares of our common stock in exchange for eachstock. Each share of CPA®:16CPA:17 – Global common stock owned pursuant to an exchange ratio based upon a value of $11.25 per share of CPA®:16 – Global and the volume weighted-average trading priceby us or any of our common stock forsubsidiaries immediately prior to the five consecutive trading days ending on the third trading day preceding the closingeffective time of the transaction on January 31, 2014. CPA®:16 – Global stockholders received cash in lieu of any fractional shares in the CPA®:16 Merger. We paid total merger consideration of approximately $1.8 billion, including the issuance of 30,729,878 shares of our common stock with a fair value of $1.8 billion based on the closing price of
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| W. P. Carey 2016 10-K– 100
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NotesCPA:17 Merger was automatically canceled and retired, and ceased to Consolidated Financial Statements
our common stock on January 31, 2014, of $59.08 per share, to the stockholders of CPA®:16 – Global inexist, for no consideration. In exchange for the 168,041,772336,715,969 shares of CPA®:16CPA:17 – Global common stock that we and our affiliates did not previously own, we paid total merger consideration of approximately $3.6 billion, consisting of (i) the issuance of 53,849,087 shares of our common stock with a fair value of $3.6 billion, based on the closing price of our common stock on October 31, 2018 of $66.01 per share and (ii) cash of $1.3$1.7 million paid in lieu of issuing any fractional shares or collectively, the Merger Consideration.of our common stock. As a condition of the CPA®:16CPA:17 Merger, we waived the subordinated disposition and terminationcertain back-end fees that we would have otherwise been entitled to receive from CPA®:16CPA:17 – Global upon its liquidation pursuant to the terms of our advisory agreement with CPA®:16CPA:17 – Global (Note 4).Global.
Immediately prior to the CPA®:16closing of the CPA:17 Merger, CPA®:16CPA:17 – Global’s portfolio was comprised of the consolidated full or partial ownership interests in 325410 leased properties (including 137 properties in which we already owned a partial ownership interest), substantially all of which were triple-net leased with a weighted-average lease term of 11.0 years, an average remaining lifeoccupancy rate of 10.4 years97.4%, and an estimated contractual minimum annualized base rent or ABR, totaling $300.1$364.4 million, as well as 44 self-storage operating properties and two1 hotel properties.operating property totaling 3.1 million square feet. The related property-level debt was comprised of 92 fixed-ratenon-recourse mortgage loans with an aggregate consolidated fair value of approximately $1.85 billion with a weighted-average annual interest rate of 4.3% as of October 31, 2018. We acquired equity interests in 7 unconsolidated investments in the CPA:17 Merger, 4 of which were consolidated by CPA:18 – Global and 18 variable-rate3 of which were jointly owned with a third party. These investments owned a total of 28 net-lease properties (which are included in the 410 leased properties described above) and 7 self-storage properties (which are included in the 44 self-storage operating properties described above). The debt related to these equity investments was comprised of non-recourse mortgage loans with an aggregate fair value of approximately $1.8 billion and$467.1 million, of which our proportionate share was $208.2 million, with a weighted-average annual interest rate of 5.6% at that date. Additionally, CPA®:163.6% as of October 31, 2018. From the date of the CPA:17 Merger through December 31, 2018, lease revenues, operating property revenues, and net income from properties acquired were $52.8 million, $8.0 million, and $13.7 million, respectively.
CPA:17 – Global had a linesenior credit facility (comprised of a term loan and unsecured revolving credit facility) with an outstanding balance of $170.0approximately $180.3 million on October 31, 2018, the date of the closing of the CPA®:16CPA:17 Merger. In addition, CPA®:16 – Global had equity interestsOn that date, we repaid in 18 unconsolidated investments, 11 of which were consolidated by us prior to the CPA®:16 Merger, five of which were consolidated by us subsequent to the CPA®:16 Merger, and two of which were jointly owned with CPA®:full all amounts outstanding under CPA:17 – Global. These investments owned 140 properties, substantially all of which were triple-net leased with an average remaining life of 8.6 years and an estimated ABR totaling $63.9 million, as of January 31, 2014. The debt related to these equity investments was comprised of 17 fixed-rate and five variable-rate non-recourse mortgage loans with an aggregate fair value of approximately $291.2 million and a weighted-average annual interest rate of 4.8% on January 31, 2014. The lease revenues and income from continuing operations from the properties acquired from the date of the CPA®:16 Merger through December 31, 2014 were $251.5 million and $91.1 million (inclusive of $2.4 million attributable to noncontrolling interests), respectively.Global’s senior credit facility, using funds borrowed under our Unsecured Revolving Credit Facility (Note 11).
During 2014, we sold all ten of the properties that were classified as held for sale upon acquisition in connection with the CPA®:16 Merger (Note 17). The results of operations for all ten of these properties have been included in Income from discontinued operations, net of tax in the consolidated financial statements. In addition, we sold one property subject to a direct financing lease that we acquired in the CPA®:16 Merger. The results of operations for this property have been included in Income from continuing operations before income taxes and gain on sale of real estate in the consolidated financial statements.
Purchase Price Allocation
We accounted for the CPA®:16CPA:17 Merger as a business combination under the acquisition method of accounting. After consideration of all applicable factors pursuant to the business combination accounting rules, we were considered the “accounting acquirer” due to various factors, including the fact that our stockholders held the largest portion of the voting rights in us upon completion of the CPA®:16CPA:17 Merger. Costs related to the CPA®:16CPA:17 Merger have been expensed as incurred and classified within Merger and other expenses in the consolidated statements of $30.5income, totaling $41.8 million and $5.0$0.4 million were expensed as incurred for the years ended December 31, 20142018 and 2013, respectively,2017, respectively.
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| W. P. Carey 2019 10-K– 82 |
Notes to Consolidated Financial Statements
Initially, the purchase price was allocated to the assets acquired and classified within Merger, property acquisition,liabilities assumed, based upon their preliminary fair values at October 31, 2018. During 2019, we identified certain measurement period adjustments that impacted the provisional accounting, which decreased the total consideration by $8.4 million and other expensesdecreased total identifiable net assets by $24.2 million, resulting in a $15.8 million increase in goodwill. The following tables summarize the fair values of the assets acquired and liabilities assumed in the consolidated financial statements. In addition, CPA®:16 – Global incurred a total of $10.6 million of merger expenses prior to January 31, 2014.acquisition.
(in thousands)
|
| | | | | | | | | | | |
| | Initially Reported at December 31, 2018 | | Measurement Period Adjustments | | As Revised at December 31, 2019 |
| Total Consideration | |
| | | | |
| Fair value of W. P. Carey shares of common stock issued | $ | 3,554,578 |
| | $ | — |
| | $ | 3,554,578 |
|
| Cash paid for fractional shares | 1,688 |
| | — |
| | 1,688 |
|
| Merger Consideration | 3,556,266 |
| | — |
| | 3,556,266 |
|
| Fair value of our equity interest in CPA:17 – Global prior to the CPA:17 Merger | 157,594 |
| | — |
| | 157,594 |
|
| Fair value of our equity interest in jointly owned investments with CPA:17 – Global prior to the CPA:17 Merger | 141,077 |
| | (8,416 | ) | | 132,661 |
|
| Fair value of noncontrolling interests acquired | (308,891 | ) | | — |
| | (308,891 | ) |
| | $ | 3,546,046 |
| | $ | (8,416 | ) | | $ | 3,537,630 |
|
|
| | | | | | | | | | | |
| | Initially Reported at December 31, 2018 | | Measurement Period Adjustments | | As Revised at December 31, 2019 |
| Assets | | | | | |
| Land, buildings and improvements — operating leases | $ | 2,954,034 |
| | $ | (5,687 | ) | | $ | 2,948,347 |
|
| Land, buildings and improvements — operating properties | 426,758 |
| | — |
| | 426,758 |
|
| Net investments in direct financing leases | 626,038 |
| | (21,040 | ) | | 604,998 |
|
| In-place lease and other intangible assets | 793,463 |
| | — |
| | 793,463 |
|
| Above-market rent intangible assets | 298,180 |
| | — |
| | 298,180 |
|
| Equity investments in real estate | 189,756 |
| | 2,566 |
| | 192,322 |
|
| Cash and cash equivalents and restricted cash | 113,634 |
| | — |
| | 113,634 |
|
| Other assets, net (excluding restricted cash) | 228,980 |
| | (786 | ) | | 228,194 |
|
| Total assets | 5,630,843 |
| | (24,947 | ) | | 5,605,896 |
|
| Liabilities | | | | | |
| Non-recourse mortgages, net | 1,849,177 |
| | — |
| | 1,849,177 |
|
| Senior Credit Facility, net | 180,331 |
| | — |
| | 180,331 |
|
| Accounts payable, accrued expenses and other liabilities | 141,750 |
| | — |
| | 141,750 |
|
| Below-market rent and other intangible liabilities | 112,721 |
| | — |
| | 112,721 |
|
| Deferred income taxes | 76,085 |
| | (729 | ) | | 75,356 |
|
| Total liabilities | 2,360,064 |
| | (729 | ) | | 2,359,335 |
|
| Total identifiable net assets | 3,270,779 |
| | (24,218 | ) | | 3,246,561 |
|
| Noncontrolling interests | (5,039 | ) | | — |
| | (5,039 | ) |
| Goodwill | 280,306 |
| | 15,802 |
| | 296,108 |
|
| | $ | 3,546,046 |
| | $ | (8,416 | ) | | $ | 3,537,630 |
|
Goodwill
The $346.6$296.1 million of goodwill recorded in connection with the CPA®:16CPA:17 Merger was primarily attributabledue to the premium we agreed to pay for CPA®:16paid over CPA:17 – Global’s common stock at the time we entered into the merger agreement in July 2013.estimated fair value. Management believes the premium is supported by several factors, including that: the CPA:17 Merger (i) improves our earnings quality, (ii) accelerates our strategy to further simplify our business, (iii) adds a high-quality diversified portfolio of the combined entity, including the factnet lease assets that (i) it is among the largest publicly traded commercial net-lease REITswell-aligned with greater operatingour existing portfolio, (iv) enhances our overall portfolio metrics, (v) significantly increases our size, scale, and financial flexibilitymarket prominence, and better access(vi) enhances our overall credit profile.
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| W. P. Carey 2019 10-K– 83 |
Notes to capital markets and with a lower cost of capital than CPA®:16 – Global had on a stand-alone basis; (ii) the CPA®:16 Merger eliminated costs associated with the advisory structure that CPA®:16 – Global had previously; and (iii) the combined portfolio has greater tenant and geographic diversification and an improved overall weighted-average debt maturity and interest rate. Consolidated Financial Statements
The aforementioned amount of goodwill attributable to the premium was partially offset by an increase in the fair value of the net53,849,087 shares of our common stock issued in the CPA:17 Merger as part of the consideration paid for CPA:17 – Global of $3.6 billion was derived from the closing market price of our common stock on the acquisition date. As required by GAAP, the fair value related to the assets throughacquired and liabilities assumed, as well as the shares exchanged, has been computed as of the date we gained control, which was the closing date of the CPA®:16 Merger.CPA:17 Merger, in a manner consistent with the methodology described above.
Goodwill acquired in the CPA®:16 Merger is not deductible for income tax purposes.
Equity Investments and Noncontrolling Interests
During the firstfourth quarter of 2014,2018, we recognized a gain on change in control of interests of approximately $73.1$29.0 million, which was the difference between the carrying value of approximately $274.1$128.7 million and the preliminary estimated fair value of approximately $347.2$157.6 million of our previously held equity interest in 38,229,29416,131,967 shares of CPA®:16CPA:17 – Global’s common stock. During 2014, we identified certain measurement period adjustments that impacted the provisional accounting, which increased
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| W. P. Carey 2016 10-K– 101
|
Notes to Consolidated Financial Statements
the estimated fair value of our previously held equity interest in shares of CPA®:16 – Global’s common stock by $2.6 million, resulting in an increase of $2.6 million in Gain on change in control of interests. In accordance with Accounting Standards Codification, or ASC, 805-10-25, we did not record the measurement period adjustments during the periods they occurred. Rather, such amounts are reflected in the financial statements for the three months ended March 31, 2014.
The CPA®:16CPA:17 Merger also resulted in our acquisition of the remaining interests in nine6 investments in which we already had a joint interest and accounted for under the equity method. Upon acquiring the remaining interests in these investments, we owned 100% of these investments and thus accounted for the acquisitions of these interests utilizing the purchase method of accounting. Due to the change in control of the nine6 jointly owned investments that occurred, we recorded a gain on change in control of interests of approximately $30.2$18.8 million during the first quarter of 2014,year ended December 31, 2018, which was the difference between our carrying values and the estimated fair values of our previously held equity interests on the acquisition dateOctober 31, 2018 of approximately $142.5$122.3 million and approximately $172.7$141.1 million, respectively. Subsequent to the CPA®:16CPA:17 Merger, we consolidate these wholly owned investments. We recorded a loss on change in control of interests of $8.4 million during the year ended December 31, 2019, reflecting adjustments to the difference between our carrying value and the preliminary estimated fair value of one of these former equity interests on October 31, 2018 (Note 6), as a result of a decrease in the purchase price allocated to the investment.
In connection with the CPA®:16CPA:17 Merger, we also acquired the remaining interests in 12 less-than-wholly owned6 less-than-wholly-owned investments that we already consolidateconsolidated and recorded an adjustment to additional paid-in-capital of approximately $42.0$102.7 million during the first quarter of 2014 related to the difference between our carrying values and the preliminary estimated fair values of our previously held noncontrolling interests on the acquisition dateOctober 31, 2018 of approximately $236.8$206.2 million and $278.2approximately $308.9 million, respectively. During 2014, we identified certain measurement period adjustments that impacted the provisional accounting, which increased the
The fair valuevalues of our previously held equity interests and our noncontrolling interests are based on the acquisition dateestimated fair market values of the underlying real estate and related mortgage debt, both of which were determined by $0.6 million, resultingmanagement relying in part on a reductionthird party. Real estate valuation requires significant judgment. We determined the significant inputs to be Level 3 with ranges for our previously held equity interests and our noncontrolling interests as follows:
Market rents ranged from $1.65 per square foot to $54.00 per square foot;
Discount rates applied to the estimated net operating income of $0.6 millioneach property ranged from approximately 5.75% to additional paid-in capital.10.50%;
Discount rates applied to the estimated residual value of each property ranged from approximately 3.89% to 10.25%;
Residual capitalization rates applied to the properties ranged from approximately 5.75% to 9.50%;
The fair market value of the property level debt was determined based upon available market data for comparable liabilities and by applying selected discount rates to the stream of future debt payments; and
Discount rates applied to the property level debt cash flows ranged from approximately 2.40% to 5.95%.
|
| |
| W. P. Carey 2019 10-K– 84 |
Notes to Consolidated Financial Statements
Pro Forma Financial Information (Unaudited)
The following unaudited consolidated pro forma financial information has been presented as if the CPA®:16CPA:17 Merger had occurred on January 1, 20132017 for the yearyears ended December 31, 2014.2018 and 2017. The pro forma financial information is not necessarily indicative of what the actual results would have been had the CPA®:16CPA:17 Merger occurred on that date, nor does it purport to represent the results of operations for future periods.
(in thousands, except share and per share amounts)thousands)
|
| | | |
| | Year Ended December 31, 2014 |
| Pro forma total revenues | $ | 931,309 |
|
| | |
| Pro forma net income from continuing operations, net of tax | $ | 139,698 |
|
| Pro forma net income attributable to noncontrolling interests | (5,380 | ) |
| Pro forma net loss attributable to redeemable noncontrolling interest | 142 |
|
| Pro forma net income from continuing operations, net of tax attributable to W. P. Carey | $ | 134,460 |
|
| | |
| Pro forma earnings per share: | |
| Basic | $ | 1.32 |
|
| Diluted | $ | 1.31 |
|
| | |
Pro forma weighted-average shares outstanding: (a) | |
| Basic | 101,296,847 |
|
| Diluted | 102,360,038 |
|
|
| | | | | | | |
| | Years Ended December 31, |
| | 2018 | | 2017 |
| Pro forma total revenues | $ | 1,207,820 |
| | $ | 1,228,909 |
|
| | | | |
| Pro forma net income | $ | 405,659 |
| | $ | 275,634 |
|
| Pro forma net loss (income) attributable to noncontrolling interests | 1,301 |
| | (429 | ) |
Pro forma net income attributable to W. P. Carey (a) | $ | 406,960 |
| | $ | 275,205 |
|
_____________________
| |
| (a) | The pro forma weighted-average shares outstanding fornet income attributable to W. P. Carey through the year ended December 31, 2014 were determined2018 reflects the following income and expenses related to the CPA:17 Merger as if the 30,729,878 shares of our common stock issued to CPA®:16 – Global stockholders in the CPA®:16CPA:17 Merger were issuedhad taken place on January 1, 2013. 2017: (i) combined merger expenses of $58.9 million through December 31, 2018 and (ii) an aggregate gain on change in control of interests of $47.8 million. |
|
| |
| W. P. Carey 2016 10-K– 102
|
Notes to Consolidated Financial Statements
Note 4. Agreements and Transactions with Related Parties
CWI 1 and CWI 2 Proposed Merger
On October 22, 2019, CWI 1 and CWI 2 announced that they had entered into a definitive merger agreement under which the two companies intend to merge in an all-stock transaction, with CWI 2 as the surviving entity. On January 13, 2020, the joint proxy statement/prospectus on Form S-4 previously filed with the SEC by CWI 1 and CWI 2 was declared effective. Each of CWI 1 and CWI 2 has scheduled a special meeting of stockholders for March 26, 2020; if the proposed transaction is approved, the merger is expected to close shortly thereafter. In connection with the CWI 1 and CWI 2 Proposed Merger, we have entered into an internalization agreement and transition services agreement. Immediately following the closing of the CWI 1 and CWI 2 Proposed Merger:
| |
| (i) | the advisory agreements with each of CWI 1 and CWI 2 will terminate; |
| |
| (ii) | the operating partnerships of each of CWI 1 and CWI 2 will redeem the special general partnership interests that we currently hold, for which we will receive approximately $97 million in consideration, comprised of $65 million in shares of CWI 2 preferred stock and 2,840,549 shares in CWI 2 common stock valued at approximately $32 million; |
| |
| (iii) | CWI 2 will internalize the management services currently provided by us; and |
| |
| (iv) | we will provide certain transition services at cost to CWI 2 for periods generally up to 12 months from closing of the proposed merger. |
Advisory Agreements and Partnership Agreements with the Managed Programs
We have advisory agreements with each of the existing Managed Programs, pursuant to which we earn fees and are entitled to receive reimbursement for certain fund management expenses, as well as cash distributions. Weexpenses. Upon completion of the CPA:17 Merger on October 31, 2018 (Note 3), our advisory agreements with CPA:17 – Global were terminated, and we no longer receive fees or reimbursements from CPA:17 – Global. The advisory agreements also earnentitle us to fees for serving as the dealer-manager ofdealer manager for the offerings of the Managed Programs. TheHowever, as previously noted, we ceased all active non-traded retail fundraising activities as of June 30, 2017 and facilitated the orderly processing of sales for CWI 2 and CESH until their offerings closed on July 31, 2017, at which point we no longer received dealer manager fees. In addition, we resigned as CCIF’s advisor in August 2017 and our advisory agreement with CCIF was terminated effective as of September 11, 2017, at which point we no longer earned any fees from CCIF. We no longer raise capital for new or existing funds, but we currently expect to continue to manage all existing Managed Programs and earn various fees (as described below) through the end of their respective life cycles (Note 1).
|
| |
| W. P. Carey 2019 10-K– 85 |
Notes to Consolidated Financial Statements
We have partnership agreements with each of the Managed Programs, and under the partnership agreements with the Managed REITs, have terms of one year, may be renewed for successive one-year periods, andwe are currently scheduledentitled to expire on December 31, 2017, unless otherwise renewed. The advisory agreement with CCIF is subjectreceive certain cash distributions from their respective operating partnerships. Pursuant to renewal on or before January 26, 2018. The advisorythe partnership agreement with CESH, I, which commenced June 3, 2016, will continue until terminated pursuantwe received limited partnership units of CESH equal to 2.5% of its terms.gross offering proceeds in lieu of reimbursement of certain organizational expenses prior to the closing of CESH’s offering on July 31, 2017.
The following tables present a summary of revenue earned and/or cashand Distributions of Available Cash received from the Managed Programs for the periods indicated, included in the consolidated financial statements. Asset management revenue excludes amounts received from third partiesstatements (in thousands):
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Reimbursable costs from affiliates | $ | 66,433 |
| | $ | 55,837 |
| | $ | 130,212 |
|
| Asset management revenue | 61,879 |
| | 49,892 |
| | 37,970 |
|
| Structuring revenue | 47,328 |
| | 92,117 |
| | 71,256 |
|
| Distributions of Available Cash | 45,121 |
| | 38,406 |
| | 31,052 |
|
| Dealer manager fees | 8,002 |
| | 4,794 |
| | 23,532 |
|
| Other advisory revenue | 2,435 |
| | 203 |
| | — |
|
| Interest income on deferred acquisition fees and loans to affiliates | 740 |
| | 1,639 |
| | 684 |
|
| Deferred revenue earned | — |
| | — |
| | 786 |
|
| | $ | 231,938 |
| | $ | 242,888 |
| | $ | 295,492 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
Asset management revenue (a) | $ | 39,132 |
| | $ | 63,556 |
| | $ | 70,125 |
|
Distributions of Available Cash (b) | 21,489 |
| | 46,609 |
| | 47,862 |
|
Reimbursable costs from affiliates (a) | 16,547 |
| | 21,925 |
| | 51,445 |
|
Structuring and other advisory revenue (a) | 4,224 |
| | 21,126 |
| | 35,094 |
|
Interest income on deferred acquisition fees and loans to affiliates (c) | 2,237 |
| | 2,055 |
| | 2,103 |
|
Dealer manager fees (a) | — |
| | — |
| | 4,430 |
|
| | $ | 83,629 |
| | $ | 155,271 |
| | $ | 211,059 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
CPA®:16 – Global | $ | — |
| | $ | — |
| | $ | 7,999 |
|
CPA®:17 – Global | 74,852 |
| | 81,740 |
| | 68,710 |
|
CPA®:18 – Global | 31,330 |
| | 85,431 |
| | 129,642 |
|
| CWI 1 | 34,085 |
| | 44,712 |
| | 89,141 |
|
| CWI 2 | 67,524 |
| | 30,340 |
| | — |
|
| CCIF | 11,164 |
| | 665 |
| | — |
|
| CESH I | 12,983 |
| | — |
| | — |
|
| | $ | 231,938 |
| | $ | 242,888 |
| | $ | 295,492 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
CPA:17 – Global (d) | $ | — |
| | $ | 58,788 |
| | $ | 75,188 |
|
| CPA:18 – Global | 26,039 |
| | 44,969 |
| | 28,683 |
|
| CWI 1 | 30,770 |
| | 28,243 |
| | 33,691 |
|
| CWI 2 | 21,584 |
| | 20,283 |
| | 50,189 |
|
| CCIF | — |
| | — |
| | 12,787 |
|
| CESH | 5,236 |
| | 2,988 |
| | 10,521 |
|
| | $ | 83,629 |
| | $ | 155,271 |
| | $ | 211,059 |
|
__________
|
| |
| (a) | Amounts represent revenues from contracts under ASC 606. |
| |
| (b) | Included within Equity in earnings of equity method investments in the Managed Programs and real estate in the consolidated statements of income. |
| |
| (c) | Included within Other gains and (losses) in the consolidated statements of income. |
| |
| (d) | W. P. Carey 2016 10-KWe no longer earn revenue from CPA:17 – 103Global following the completion of the CPA:17 Merger on October 31, 2018 (Note 3). |
Notes to Consolidated Financial Statements
The following table presents a summary of amounts included in Due from affiliates in the consolidated financial statements (in thousands):
|
| | | | | | | |
| | December 31, |
| | 2019 | | 2018 |
| Short-term loans to affiliates, including accrued interest | $ | 47,721 |
| | $ | 58,824 |
|
| Deferred acquisition fees receivable, including accrued interest | 4,450 |
| | 8,697 |
|
| Reimbursable costs | 3,129 |
| | 3,227 |
|
| Asset management fees receivable | 1,267 |
| | 563 |
|
| Accounts receivable | 1,118 |
| | 1,425 |
|
| Current acquisition fees receivable | 131 |
| | 2,106 |
|
| | $ | 57,816 |
| | $ | 74,842 |
|
|
| | | | | | | |
| | December 31, |
| | 2016 | | 2015 |
| Short-term loans to affiliates | $ | 237,613 |
| | $ | — |
|
| Deferred acquisition fees receivable | 21,967 |
| | 33,386 |
|
| Distribution and shareholder servicing fees | 19,341 |
| | 11,801 |
|
| Current acquisition fees receivable | 8,024 |
| | 4,909 |
|
| Accounts receivable | 5,005 |
| | 3,910 |
|
| Reimbursable costs | 4,427 |
| | 5,579 |
|
| Asset management fees receivable | 2,449 |
| | 2,172 |
|
| Organization and offering costs | 784 |
| | 461 |
|
| | $ | 299,610 |
| | $ | 62,218 |
|
|
| |
| W. P. Carey 2019 10-K– 86 |
Notes to Consolidated Financial Statements
Performance Obligations and Significant Judgments
The fees earned pursuant to our advisory agreements are considered variable consideration. For the agreements that include multiple performance obligations, including asset management and investment structuring services, revenue is allocated to each performance obligation based on estimates of the price that we would charge for each promised service if it were sold on a standalone basis.
Judgment is applied in assessing whether there should be a constraint on the amount of fees recognized, such as amounts in excess of certain threshold limits with respect to the contract price or any potential clawback provisions included in certain of our arrangements. We exclude fees subject to such constraints to the extent it is probable that a significant reversal of those amounts will occur.
Asset Management Revenue
Under the advisory agreements with the Managed Programs, we earn asset management revenue for managing their investment portfolios. The following table presents a summary of our asset management fee arrangements with the existing Managed Programs:
|
| | | | | | |
| Managed Program | | Rate | | Payable | | Description |
CPA®:16CPA:18 – Global
| | 0.5% | | 2014 in cash; 2015 and 2016 N/A | | Rate is based on adjusted invested assets |
CPA®:17 – Global
| | 0.5% - 1.75%– 1.5% | | 2014 inIn shares of its Class A common stock; 2015 and 2016stock and/or cash, at the option of CPA:18 – Global; payable 50% in cash and 50% in shares of its Class A common stock | | Rate depends on the type of investment and is based on the average market or average equity value, as applicable |
CPA®:18 – Global
| | 0.5% - 1.5% | | 2014, 2015, and 2016 for 2019; payable in shares of its classClass A common stock for 2018 and 2017 | | Rate depends on the type of investment and is based on the average market or average equity value, as applicable |
| CWI 1 | | 0.5% | | 2014In shares of its common stock and/or cash, at our election; payable in shares of its common stock; 2015stock for 2019, 2018, and 2016 in cash2017 | | Rate is based on the average market value of the investment; we are required to pay 20% of the asset management revenue we receive to the subadvisor |
| CWI 2 | | 0.55% | | 2014 N/A; 2015 and 2016In shares of its Class A common stock and/or cash, at our election; payable in shares of its classClass A common stock for 2019, 2018, and 2017 | | Rate is based on the average market value of the investment; we are required to pay 25% of the asset management revenue we receive to the subadvisor |
CCIF | | 1.75% - 2.00% | | 2014 N/A; 2015 and 2016 in cash | | Based on the average of gross assets at fair value; we are required to pay 50% of the asset management revenue we receive to the subadvisor |
CESH I | | 1.0% | | In cash | | Based on gross assets at fair value |
Incentive Fees
The performance obligation for asset management services is satisfied over time as services are rendered. The time-based output method is used to measure progress over time, as this is representative of the transfer of the services. We are entitled to receive a quarterly incentive fee on income from CCIF equal to 100% of quarterly net investment income, before incentive fee payments, in excess of 1.875% of CCIF’s average adjusted capital up to a limit of 2.344%, plus 20% of net investment income, before incentive fee payments, in excess of 2.344% of average adjusted capital. We are also entitled to receive from CCIF an incentive fee on realized capital gains of 20%, net of (i) all realized capital losses and unrealized depreciationcompensated for our services on a cumulative basis,monthly or quarterly basis. However, these services represent a series of distinct daily services under ASU 2014-09. Accordingly, we satisfy the performance obligation and (ii)resolve the aggregate amount, if any, of previously paid incentivevariability associated with our fees on capital gains since inception.
Upon completiona daily basis. We apply the practical expedient and, as a result, do not disclose variable consideration attributable to wholly or partially unsatisfied performance obligations as of the CPA®:16 Merger on January 31, 2014, the advisory agreement with CPA®:16 – Global terminated. Pursuant to the termsend of the merger agreement,reporting period.
In providing asset management services, we are reimbursed for certain costs. Direct reimbursement of these costs does not represent a separate performance obligation. Payment for asset management services is typically due on the incentive or termination fee that we would have been entitled to receive from CPA®:16 – Global pursuant tofirst business day following the terms of its advisory agreement was waived upon the completionmonth of the CPA®:16 Merger.delivery of the service.
|
| |
| | W. P. Carey 20162019 10-K– 10487 |
Notes to Consolidated Financial Statements
Structuring and Other Advisory Revenue
Under the terms of the advisory agreements with the Managed REITs and CESH I,Programs, we earn revenue for structuring and negotiating investments and related financing. We do not earn any structuring revenue fromFor the Managed BDCs.REITs, the combined total of acquisition fees and other acquisition expenses are limited to 6% of the contract prices in aggregate. The following table presents a summary of our structuring fee arrangements with the existing Managed REITs and CESH I:Programs:
|
| | | | | | |
| Managed Program | | Rate | | Payable | | Description |
CPA®:17 – Global
| | 1% - 1.75%, 4.5% | | In cash; for non net-lease investments, 1% - 1.75% upon completion; for net-lease investments, 2.5% upon completion, with 2% deferred and payable in three interest-bearing annual installments | | Based on the total aggregate cost of the net-lease investments made; also based on the total aggregate cost of the non net-lease investments or commitments made; total limited to 6% of the contract prices in aggregate |
CPA®:CPA:18 – Global
| | 4.5% | | In cash; for all investments, other than readily marketable real estate securities for which we will not receive any acquisition fees, 2.5% upon completion, with 2% deferred and payable in three interest-bearing annual installments | | Based on the total aggregate cost of the investments or commitments made; total limited to 6% of the contract prices in aggregatemade |
| CWI REITs | | 1% – 2.5% | | In cash upon completioncompletion; loan refinancing transactions up to 1% of the principal amount; 2.5% of the total investment cost of the properties acquired, however, fees were paid 50% in cash and 50% in shares of CWI 1’s common stock and CWI 2’s Class A common stock for a jointly owned investment structured on behalf of CWI 1 and CWI 2 in September 2017, with the approval of each CWI REIT’s board of directors | | Based on the total aggregate cost of the lodging investments or commitments made; loan refinancing transactions up to 1% of the principal amount; we are required to pay 20% and 25% to the subadvisors of CWI 1 and CWI 2, respectively; total for each CWI REIT limited to 6% of the contract prices in aggregaterespectively |
CESH I | | 2.0% | | In cash upon completionacquisition | | Based on the total aggregate cost of investments or commitments made, including the acquisition, development, construction, or re-developmentredevelopment of the investments |
The performance obligation for investment structuring services is satisfied at a point in time upon the closing of an investment acquisition, when there is an enforceable right to payment, and control (as well as the risks and rewards) has been transferred. Determining when control transfers requires management to make judgments that affect the timing of revenue recognized. Payment is due either on the day of acquisition (current portion) or deferred, as described above (Note 6). We do not believe the deferral of the fees represents a significant financing component.
In addition, we may earn fees for dispositions and mortgage loan refinancings completed on behalf of the Managed Programs.
Reimbursable Costs from Affiliates
The existing Managed Programs reimburse us for certain personnel and overhead costs that we incur on their behalf, a summary of which consist primarily of broker-dealer commissions, marketing costs, an annual distribution and shareholder servicing fee, or Shareholder Servicing Fee, and certain personnel and overhead costs, as applicable. The following tables present summaries of such fee arrangements:is presented in the table below:
Broker-Dealer Selling Commissions
|
| | | | | | |
Managed Program | | Rate | | Payable | | Description |
CPA®:18 – Global and CWI 2 Class A Shares, and CWI 1 Common Stock
| | $0.70 | | In cash upon share settlement; 100% re-allowed to broker-dealers | | Per share sold; offerings for CPA®:18 – Global Class A shares closed in April 2015 and for CWI 1 Common Stock in December 2014
|
CWI 2 Class T Shares | | $0.19 | | In cash upon share settlement; 100% re-allowed to broker-dealers | | Per share sold |
CPA®:18 – Global Class C Shares
| | $0.14 | | In cash upon share settlement; 100% re-allowed to broker-dealers | | Per share sold; this offering closed in April 2015 |
CCIF Feeder Funds | | 0% - 3% | | In cash upon share settlement; 100% re-allowed to broker-dealers | | Based on the selling price of each share sold |
CESH I | | Up to 7.0% of gross offering proceeds | | In cash upon limited partnership unit settlement; 100% re-allowed to broker-dealers | | Based on the selling price of each limited partnership unit sold |
|
| |
| W. P. Carey 2016 10-K– 105
|
Notes to Consolidated Financial Statements
Dealer Manager Fees
|
| | | | | | |
Managed Program | | Rate | | Payable | | Description |
CPA®:18 – Global and CWI 2 Class A Shares, and CWI 1 Common Stock
| | $0.30 | | Per share sold | | In cash upon share settlement; a portion may be re-allowed to broker-dealers; offerings for CPA®:18 – Global Class A shares closed in April 2015 and for CWI Common Stock in December 2014
|
CPA®:18 – Global Class C Shares
| | $0.21 | | Per share sold | | In cash upon share settlement; a portion may be re-allowed to broker-dealers; this offering closed in April 2015 |
CWI 2 Class T Shares | | $0.26 | | Per share sold | | In cash upon share settlement; a portion may be re-allowed to broker-dealers |
CCIF Feeder Funds | | 2.75% - 3.0% | | Based on the selling price of each share sold | | In cash upon share settlement; a portion may be re-allowed to broker-dealers |
CESH I | | Up to 3.0% of gross offering proceeds | | Per limited partnership unit sold | | In cash upon limited partnership unit settlement; a portion may be re-allowed to broker-dealers |
Annual Distribution and Shareholder Servicing Fee
|
| | | | | | |
Managed Program | | Rate | | Payable | | Description |
CPA®:18 – Global Class C Shares
| | 1.0% | | Accrued daily and payable quarterly in arrears in cash; a portion may be re-allowed to selected dealers | | Based on the purchase price per share sold or, once it was reported, the net asset value per share; cease paying when underwriting compensation from all sources equals 10% of gross offering proceeds |
CWI 2 Class T Shares | | 1.0% | | Accrued daily and payable quarterly in arrears in cash; a portion may be re-allowed to selected dealers | | Based on the purchase price per share sold or, once it was reported, the net asset value per share; cease paying on the earlier of six years or when underwriting compensation from all sources equals 10% of gross offering proceeds |
Carey Credit Income Fund 2016 T and Carey Credit Income Fund 2018 T (two of the CCIF Feeder Funds) | | 0.9% | | Accrued daily and payable quarterly in arrears in cash; a portion may be re-allowed to selected dealers | | Based on the weighted-average net price of shares sold in the public offering; commences in the first quarter after the close of the public offering; cease paying on the earlier of when underwriting compensation from all sources equals 10% of gross offering proceeds or the date at which a liquidity event occurs |
|
| |
| W. P. Carey 2016 10-K– 106
|
Notes to Consolidated Financial Statements
Personnel and Overhead Costs
|
| | | | |
| Managed Program | | Payable | | Description |
CPA®:17 – Global and CPA®:CPA:18 – Global
| | In cash | | Personnel and overhead costs, excluding those related to our legal transactions group, our senior management, and our investments team, are charged to the CPA® REITsCPA:18 – Global based on the average of the trailing 12-month aggregate reported revenues of the Managed Programs and us, and personnel costs are capped at 2.2%1.0%, 1.0%, and 2.4%2.0% of each CPA® REIT’sCPA:18 – Global’s pro rata lease revenues for 20162019, 2018, and 2015,2017, respectively; for the legal transactions group, costs are charged according to a fee schedule |
CWI 1REITs | | 2014 in shares of its common stock; 2015 and 2016 inIn cash | | Actual expenses incurred;incurred, excluding those related to our senior management; allocated between the CWI REITs based on the percentage of their total pro rata hotel revenues for the most recently completed quarter |
CWI 2CESH | | 2014 N/A; 2015 and 2016 in cash | | Actual expenses incurred; allocated between the CWI REITs based on the percentage of their total pro rata hotel revenues for the most recently completed quarter |
CCIF and CCIF Feeder Funds | | 2014 N/A; 2015 and 2016 in cash | | Actual expenses incurred, excluding those related to our investment management team and senior management team |
CESH I | | 2014 and 2015 N/A; 2016 inIn cash | | Actual expenses incurred |
Organization and Offering Costs
|
| | | | |
Managed Program | | Payable | | Description |
CPA®:18 – Global and CWI 2
| | In cash; within 60 days after the end of the quarter in which the offering terminates | | Actual costs incurred from 1.5% through 4.0% of the gross offering proceeds, depending on the amount raised; offering for CPA®:18 – Global closed in April 2015
|
CWI 1 | | In cash; within 60 days after the end of the quarter in which the offering terminates | | Actual costs incurred up to 4.0% of the gross offering proceeds; offering closed in December 2014 |
CCIF and CCIF Feeder Funds | | In cash; payable monthly | | Up to 1.5% of the gross offering proceeds; we are required to pay 50% of the organization and offering costs we receive to the subadvisor |
CESH I | | N/A | | In lieu of reimbursing us for organization and offering costs, CESH I will pay us limited partnership units, as described below under Other Advisory Revenue |
For CCIF, total reimbursements to us for personnel and overhead costs and organization and offering costs may not exceed 18% of total Front End Fees, as defined in its Declaration of Trust, so that total funds available for investment may not be lower than 82% of total gross proceeds.
Other Advisory Revenue
Under the limited partnership agreement we have with CESH I, we pay all organization and offering costs on behalf of CESH I, and instead of being reimbursed by CESH I on a dollar-for-dollar basis for those costs, we receive limited partnership units of CESH I equal to 2.5% of its gross offering proceeds. This revenue is included in Other advisory revenue in the consolidated statements of income and totaled $2.4 million for the year ended December 31, 2016, representing activity following the deconsolidation of CESH I on August 31, 2016 (Note 2).
|
| |
| | W. P. Carey 20162019 10-K– 10788 |
Notes to Consolidated Financial Statements
Expense Support and Conditional Reimbursements
Under the expense support and conditional reimbursement agreement we have with each of the CCIF Feeder Funds, we and the CCIF subadvisor are obligated to reimburse the CCIF Feeder Fund 50% of the excess of the cumulative distributions paid to the CCIF Feeder Funds’ shareholders over the available operating funds on a monthly basis. Following any month in which the available operating funds exceed the cumulative distributions paid to its shareholders, the excess operating funds are used to reimburse us and the CCIF subadvisor for any expense payment we made within three years prior to the last business day of such month that have not been previously reimbursed by the CCIF Feeder Fund, up to the lesser of (i) 1.75% of each CCIF Feeder Fund’s average net assets or (ii) the percentage of each CCIF Feeder Fund’s average net assets attributable to its common shares represented by other operating expenses during the fiscal year in which such expense support payment from us and the CCIF’s subadvisor was made, provided that the effective rate of distributions per share at the time of reimbursement is not less than such rate at the time of expense payment.
Distributions of Available Cash and Deferred Revenue Earned
We are entitled to receive distributions of up to 10% of the Available Cash (as defined in the respective advisorypartnership agreements) from the operating partnerships of each of the existing Managed REITs, as described in their respective operating partnership agreements, payable quarterly in arrears. We are required to pay 20% and 25% of such distributions to the subadvisors of CWI 1 and CWI 2, respectively.
In May 2011, we acquired a special member interest, or the Special Member Interest, in CPA®:16 – Global’s operating partnership. We initially recorded this Special Member Interest at its fair value,Back-End Fees and amortized it into earnings as deferred revenue through the date of the CPA®:16 Merger. Cash distributions of our proportionate share of earnings from the Managed REITs’ operating partnerships, as well as deferred revenue earned from our Special Member Interest in CPA®:16 – Global’s operating partnership, are recorded as Equity in earnings of equity method investmentsInterests in the Managed Programs
Under our advisory agreements with certain of the Managed Programs, we may also receive compensation in connection with providing liquidity events for their stockholders. For the Managed REITs, the timing and real estate withinform of such liquidity events are at the Owned Real Estate segment.discretion of each REIT’s board of directors. Therefore, there can be no assurance as to whether or when any of these back-end fees or interests will be realized. Such back-end fees or interests may include disposition fees, interests in disposition proceeds, and distributions related to ownership of shares or limited partnership units in the Managed Programs. As a condition of the CPA:17 Merger, we waived certain back-end fees that we would have been entitled to receive from CPA:17 – Global upon its liquidation pursuant to the terms of our advisory agreement and partnership agreement with CPA:17 – Global (Note 3).
Other Transactions with Affiliates
Loans to Affiliates
During 2015From time to time, our Board has approved the making of secured and 2014, our board of directors approved unsecured loans or lines of credit from us to CPA®:17 – Globalcertain of up to $75.0 million, CPA®:18 – Global of up to $100.0 million, CWI 1 and CWI 2 of up to $110.0 million in the aggregate, and CCIF of up to $50.0 million,Managed Programs, at our sole discretion, with each loan at a rate equal to the rate at which we are able to borrow funds under our senior credit facilitySenior Unsecured Credit Facility (Note 11), generally for the purpose of facilitating acquisitions, approvedconstruction funding, or for working capital purposes.
The following table sets forth certain information regarding our loans or lines of credit to affiliates (dollars in thousands):
|
| | | | | | | | | | | | | | | | |
| | | Interest Rate at
December 31, 2019 | | Maturity Date at December 31, 2019 | | Maximum Loan Amount Authorized at December 31, 2019 | | Principal Outstanding Balance at December 31, (a) |
| Managed Program | | | | | 2019 | | 2018 |
CESH (b) (c) | | LIBOR + 1.00% | | 10/1/2020 | | $ | 65,000 |
| | $ | 46,269 |
| | $ | 14,461 |
|
CWI 1 (d) | | N/A | | N/A | | 25,000 |
| | — |
| | 41,637 |
|
| CPA:18 – Global | | N/A | | N/A | | 50,000 |
| | — |
| | — |
|
CWI 2 (d) | | N/A | | N/A | | 25,000 |
| | — |
| | — |
|
| | | | | | | | | $ | 46,269 |
| | $ | 56,098 |
|
__________
| |
| (a) | Amounts exclude accrued interest of $1.5 million and $2.7 million at December 31, 2019 and 2018, respectively. |
| |
| (b) | LIBOR means London Interbank Offered Rate. |
| |
| (c) | In February 2020, we loaned an additional $5.5 million to CESH. |
| |
| (d) | During the first quarter of 2020, loan authorization expiration dates for CWI 1 and CWI 2 were extended to the earlier of March 31, 2020 or the completion date of the CWI 1 and CWI 2 Proposed Merger. |
Other
At December 31, 2019, we owned interests in 9 jointly owned investments in real estate, with the remaining interests held by their respective investment committees that they would not otherwise have had sufficient available funds to complete. In April 2016, our board of directors approved unsecured loans from us to CESH I of up to $35.0 million,affiliates or third parties. We consolidate 2 such investments and account for the remaining 7 investments under the same terms and for the same purpose.
During 2015 and 2014, various loans aggregating $185.4 million and $11.0 million, respectively, were made to the Managed Programs, allequity method of which were repaid during the same year. Allaccounting (Note 8). In addition, we owned stock of each of the loans were made at an interest rate equal to the London Interbank Offered Rate, or LIBOR, as of the issue date, plus 1.1%. During 2015, we arranged credit agreements for each of CPA®:17 – Global, CWI 1,existing Managed REITs and CCIF, and our board of directors terminated its previous authorizations to provide loans to CPA®:17 – Global and CWI 1. In January 2016, our board of directors terminated its previous authorizations to provide loans to CPA®:18 – Global and CCIF. However, in July 2016, our board of directors approved unsecured loans from us to CPA®:18 – Global of up to $50.0 million, at our sole discretion, with a rate equal to the rate at which we are able to borrow funds under our senior credit facility (Note 11), for the purpose of facilitating investments approved by CPA®:18 – Global’s investment committee.
On January 20, 2016, we made a $20.0 million loan to CWI 2, which was repaid in full on February 20, 2016.
In May 2016, we made a total of $17.1 million in loans to CESH I, at an annual interest rate of LIBOR plus 1.1%, which were repaid in full in September 2016, subsequent to the commencementlimited partnership units of CESH I’s private placementat that date. We account for these investments under the equity method of accounting or at fair value (Note 28).
On October 31, 2016, we made a $27.5 million loan to CPA®:18 – Global at an annual interest rate of LIBOR plus 1.1% with a scheduled maturity date of October 31, 2017 for the purpose of facilitating an investment approved by CPA®:18 – Global’s investment committee.
In December 2016, our board of directors approved an increase in unsecured loans from us to CWI 2 from up to $110.0 million to up to $250.0 million. On December 29, 2016, we made a $210.0 million loan to CWI 2 at an annual interest rate of LIBOR
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| | W. P. Carey 20162019 10-K– 10889 |
Notes to Consolidated Financial Statements
plus 1.1% with a scheduled maturity date of December 29, 2017 for the purpose of facilitating an investment approved by CWI 2’s investment committee. In January and February 2017, CWI 2 repaid this loan in full to us (Note 20). Short-term loans to affiliates outstanding to us at December 31, 2016 includes accrued interest of $0.1 million.
Share Repurchases
In February 2014, we repurchased 11,037 shares of our common stock for $0.7 million in cash from the former independent directors of CPA®:16 – Global at a price per share equal to the volume weighted-average trading price of our stock utilized in the CPA®:16 Merger. These shares were issued to them as their portion of the Merger Consideration in exchange for their shares of CPA®:16 – Global common stock (Note 3) and were repurchased by agreement in order to satisfy the independence requirements set forth in the organizational documents of the remaining CPA® REITs, for which these individuals also serve as independent directors.
Other
On February 2, 2016, an entity in which we, one of our employees, and third parties owned 38.3%, 0.5%, and 61.2%, respectively, and which we consolidated, sold a self-storage property (Note 17). In connection with the sale, we made a distribution of $0.1 million to the employee, representing the employee’s share of the net proceeds from the sale.
At December 31, 2016, we owned interests ranging from 3% to 90% in jointly owned investments in real estate, including a jointly controlled tenancy-in-common interest in several properties, with the remaining interests generally held by affiliates. In addition, we owned stock of each of the Managed REITs and CCIF, and limited partnership units of CESH I. We consolidate certain of these investments and account for the remainder either (i) under the equity method of accounting or (ii) at fair value by electing the equity method fair value option available under U.S. GAAP (Note 7).
Note 5. Net Investments in PropertiesLand, Buildings and Improvements and Assets Held for Sale
Real EstateLand, Buildings and Improvements — Operating Leases
Real estate, which consists of landLand and buildings leased to others, at cost, and which are subject to operating leases, and real estate under construction, isare summarized as follows (in thousands):
|
| | | | | | | |
| | December 31, |
| | 2019 | | 2018 |
| Land | $ | 1,875,065 |
| | $ | 1,772,099 |
|
| Buildings and improvements | 7,828,439 |
| | 6,945,513 |
|
| Real estate under construction | 69,604 |
| | 63,114 |
|
| Less: Accumulated depreciation | (950,452 | ) | | (724,550 | ) |
| | $ | 8,822,656 |
| | $ | 8,056,176 |
|
|
| | | | | | | |
| | December 31, |
| | 2016 | | 2015 |
| Land | $ | 1,128,933 |
| | $ | 1,160,567 |
|
| Buildings | 4,053,334 |
| | 4,147,644 |
|
| Real estate under construction | 21,859 |
| | 1,714 |
|
| Less: Accumulated depreciation | (472,294 | ) | | (372,735 | ) |
| | $ | 4,731,832 |
| | $ | 4,937,190 |
|
During 2016, the U.S. dollar strengthened against the British pound sterling, as the end-of-period rate for the U.S. dollar in relation to the British pound sterling at December 31, 2016 decreased by 17.0% to $1.2312 from $1.4833 at December 31, 2015. Additionally, during the same period2019, the U.S. dollar strengthened against the euro, as the end-of-period rate for the U.S. dollar in relation to the euro decreased by 3.2%1.9% to $1.0541$1.1234 from $1.0887.$1.1450. As a result of these fluctuationsthis fluctuation in foreign currency exchange rates, the carrying value of our real estateLand, buildings and improvements subject to operating leases decreased by $89.8$36.7 million from December 31, 20152018 to December 31, 2016.2019.
During the second quarter of 2019, we entered into net lease agreements for certain self-storage properties previously classified as operating properties. As a result, in June 2019 and August 2019, we reclassified 22 and 5 consolidated self-storage properties, respectively, with an aggregate carrying value of $287.7 million from Land, buildings and improvements attributable to operating properties to Land, buildings and improvements subject to operating leases. Effective as of those times, we began recognizing lease revenues from these properties, whereas previously we recognized operating property revenues and expenses from these properties.
In connection with changes in lease classifications due to extensions of the underlying leases, we reclassified 10 properties with an aggregate carrying value of $76.9 million from Net investments in direct financing leases to Land, buildings and improvements during 2019 (Note 6).
During the third quarter of 2019, we identified measurement period adjustments that impacted the provisional accounting for an investment classified as Land, buildings and improvements subject to operating leases, which was acquired in the CPA:17 Merger on October 31, 2018 (Note 3). As such, the CPA:17 Merger purchase price allocated to this investment decreased by approximately $5.7 million.
Depreciation expense, including the effect of foreign currency translation, on our real estatebuildings and improvements subject to operating leases was $142.7$229.0 million, $137.3$162.6 million, and $113.0$143.9 million for the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, respectively.
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| W. P. Carey 2016 10-K– 109
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Notes to Consolidated Financial Statements
Acquisitions of Real Estate During 2016 – 2019 — We entered into the following investments, which were deemed to be real estate asset acquisitions because we acquired the sellers’ properties and simultaneously entered into new leases in connection with the acquisitions, at a total cost of $530.3 million, including land of $140.2 million, buildings of $259.8 million, and net lease intangibles of $130.3 million (Note 8) (including acquisition-related costs of $4.0 million in the aggregate, which were capitalized to land, building, and intangibles):
an investment of $167.7 million for three private school campuses in Coconut Creek, Florida on April 1, 2016 and in Windermere, Florida and Houston, Texas on May 31, 2016. We also committed to fund an additional $128.1 million of build-to-suit financing over the next four years in order to fund expansions of the existing facilities;
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• | an investment of $218.2 million for 43 manufacturing facilities in various locations in the United States and six manufacturing facilities in various locations in Canada on April 5 and 14, 2016; on October 4, 2016, we acquired a manufacturing facility in San Antonio, Texas from the tenant for $3.8 million (which we consider to be part of the original investment) and simultaneously disposed of a manufacturing facility in Mascouche, Canada, which was acquired as part of the original investment, for the same amount (Note 17); and |
an investment of $140.7 million for 13 manufacturing facilities and one office facility in various locations in Canada, Mexico, and the United States on November 8, 2016 and December 1, 2016. In addition, we recorded an estimated deferred tax liability of $29.4 million, with a corresponding increase to the asset value, since we assumed the tax basis of the acquired entities as part of the acquisition of the shares of these entities.
In addition, we entered into the following investments, which were deemed to be real estate asset acquisitions, at a total cost of $1.9$737.5 million, including land of $86.3 million, buildings of $523.3 million (including capitalized acquisition-related costs of $9.6 million), net lease intangibles of $134.9 million, a prepaid rent liability of $6.1 million, a debt premium of $0.8 million (related to the non-recourse mortgage loan assumed in connection with an acquisition, as described below), and net other liabilities assumed of $0.1 million:
an investment of $1.1$32.7 million for an educational facility in Portland, Oregon, on February 20, 2019;
an investment of $48.3 million for an office building in Morrisville, North Carolina, on March 7, 2019;
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| • | an investment of $37.6 million for a distribution center in Inwood, West Virginia, on March 27, 2019, which is encumbered by a non-recourse mortgage loan that we assumed on the date of acquisition with an outstanding principal balance of $20.2 million (Note 11); |
an investment of $49.3 million for an industrial facility in Hurricane, Utah, on March 28, 2019;
an investment of $16.6 million for an industrial facility in Bensenville, Illinois, on March 29, 2019;
an investment of $10.2 million for 2 manufacturing and distribution centers in Westerville, Ohio, and North Wales, Pennsylvania, on May 21, 2019;
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| W. P. Carey 2019 10-K– 90 |
Notes to Consolidated Financial Statements
an investment of $24.5 million for 8 manufacturing facilities in various locations in the United States and Mexico on May 31, 2019;
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| • | an investment of $18.8 million for a headquarters and warehouse facility in Statesville, North Carolina, on June 7, 2019; |
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| • | an investment of $70.1 million for a headquarters and industrial facility in Conestoga, Pennsylvania, on June 27, 2019; |
an investment of $30.1 million for 3 manufacturing and warehouse facilities in Hartford and Milwaukee, Wisconsin, on July 19, 2019;
an investment of $15.1 million for 2 manufacturing facilities in Brockville and Prescott, Canada, on July 24, 2019;
an investment of $16.4 million for an industrial facility in Dordrecht, the Netherlands, on September 26, 2019;
an investment of $53.2 million for 3 manufacturing facilities in York, Pennsylvania; Lexington, South Carolina; and Queretaro, Mexico, on October 3, 2019;
an investment of $9.9 million for a parcel of land adjacent to a property owned by usheadquarters facility in McCalla, AlabamaDearborn, Michigan, on October 20, 2016. We3, 2019;
an investment of $39.1 million for 6 industrial and office facilities in Houston, Texas; Mason, Ohio; and Metairie, Louisiana, on November 5, 2019 (we also committed to fund $21.5an additional $2.5 million for an expansion at the facility in Mason, Ohio, which is expected to be completed in the second quarter of build-to-suit financing2021);
an investment of $12.2 million for the construction of an industrial facility in Pardubice, Czech Republic, on November 26, 2019;
an investment of $38.0 million for 2 warehouse facilities in Brabrand, Denmark, and Arlandastad, Sweden, on November 29, 2019 and December 2, 2019 (we also recorded an estimated deferred tax liability of $1.2 million, with a corresponding increase to the asset value, since we assumed the tax basis of one of the acquired properties);
an investment of $1.8 million for 3 industrial facilities in Cortland, Illinois, and Madison and Monona, Wisconsin, on December 3, 2019;
an investment of $55.9 million for a retail facility in Hamburg, Pennsylvania, on December 12, 2019;
an investment of $94.1 million for a warehouse facility in Charlotte, North Carolina (located on the land. Construction commencedborder with Fort Mill, South Carolina), on December 18, 2019;
an investment of $16.8 million for a headquarters and logistics facility in Buffalo Grove, Illinois, on December 20, 2019
an investment of $7.8 million for an industrial facility in Hvidovre, Denmark, on December 20, 2019 (we also recorded an estimated deferred tax liability of $0.5 million, with a corresponding increase to the asset value, since we assumed the tax basis of the acquired property); and
an investment of $38.9 million for a distribution center in Huddersfield, United Kingdom, on December 31, 2019.
The acquired net lease intangibles are comprised of (i) in-place lease intangible assets totaling $150.1 million, which have a weighted-average expected life of 19.9 years, (ii) below-market rent intangible liabilities totaling $16.1 million, which have a weighted-average expected life of 18.3 years, and (iii) an above-market rent intangible asset of $0.9 million, which has an expected life of 19.3 years.
During the year ended December 31, 2019, we committed to purchase a warehouse and distribution facility in Knoxville, Tennessee, for approximately $68.0 million upon completion of construction of the property, which is expected to take place during 2016the second quarter of 2020.
During the year ended December 31, 2019, we committed to purchase 2 warehouse facilities in Hillerød and Hammelev, Denmark, for approximately $19.9 million (based on the exchange rate of the Danish krone at December 31, 2019) upon completion of construction of the properties. One property was completed in January 2020 (Note 20) and the second property is expected to be completed during 2017;the first quarter of 2020.
Acquisitions of Real Estate During 2018 — We entered into 15 investments, which were deemed to be real estate asset acquisitions, at a total cost of $806.9 million, including land of $126.4 million, buildings of $571.6 million (including capitalized acquisition-related costs of $17.3 million), net lease intangibles of $113.7 million, and net other liabilities assumed of $4.8 million.
an investment of $0.8 million for a parcel of land adjacent
In addition, as discussed in Note 3, we acquired 232 consolidated properties subject to a property owned by us in Rio Rancho, New Mexico on December 9, 2016. We will reimburse the tenantexisting operating leases in the property forCPA:17 Merger, which increased the costs of constructing a parking lot up to $0.7 million.
We reclassified 31 properties with an aggregate carrying value of $9.7 million from Net investments in direct financingour Land, buildings and improvements subject to operating leases to Real estate, at costby $3.0 billion during the year ended December 31, 2016, in connection with the extensions2018.
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| W. P. Carey 2019 10-K– 91 |
Notes to Consolidated Financial Statements
Acquisitions of the underlying leases (Note 6).Real Estate During 2017 — We entered into 2 investments, which were deemed to be real estate asset acquisitions, at a total cost of $31.8 million, including land of $4.8 million, buildings of $18.5 million (including capitalized acquisition-related costs of $0.1 million), and net lease intangibles of $8.5 million.
Dollar amounts are based on the exchange rates of the foreign currencies on the dates of activity, as applicable.
Acquisitions of Real Estate Under Construction
During 2015 – We entered into2019, we capitalized real estate under construction totaling $129.0 million. The number of construction projects in progress with balances included in real estate under construction was 3 and 4 as of December 31, 2019 and 2018, respectively. Aggregate unfunded commitments totaled approximately $227.8 million and $204.5 million as of December 31, 2019 and 2018, respectively.
During 2019, we completed the following investments, which were deemed to be business combinations because we assumed the existing leases on the properties, for which the sellers were not the lessees,construction projects, at a total cost of $561.6$122.5 million:
an expansion project at a warehouse facility in Zabia Wola, Poland, in March 2019 at a cost totaling $5.6 million, including land of $89.5capitalized interest;
a built-to-suit project for a warehouse facility in Dillon, South Carolina, in March 2019 at a cost totaling $47.4 million, buildings of $382.6 million, and net lease intangibles of $89.5 million:
including capitalized interest;
an investment of $345.9 million for 73 auto dealership properties in various locations in the United Kingdom on January 28, 2015;
an investment of $42.4 million forexpansion project at a logisticswarehouse facility in Rotterdam, the Netherlands, on February 11, 2015;in May 2019 at a cost totaling $20.4 million, including capitalized interest;
an investment of $23.2 million for a retailexpansion project at an industrial facility in Bad Fischau, Austria on April 10, 2015;Legnica, Poland, in June 2019 at a cost totaling $6.0 million
an investment of $26.3 million forexpansion project at a logisticswarehouse facility in Oskarshamn, Sweden on June 17, 2015;Kilgore, Texas, in October 2019 at a cost totaling $14.1 million;
a built-to-suit project for an investment of $41.2 million for three truck and bus service facilitiesindustrial facility in Gersthofen and Senden, Germany on August 12, 2015 and Leopoldsdorf, Austria on August 24, 2015;
an investment of $51.7 million for six hotel propertiesKatowice, Poland, in Iowa, Louisiana, Missouri, New Jersey, North Carolina, and Texas on October 15, 2015;November 2019 at a cost totaling $15.4 million; and
an investmentexpansion project at an industrial facility in McCalla, Alabama, in December 2019 at a cost totaling $13.6 million.
During 2019, we committed to fund an aggregate of $30.9$137.5 million (based on the exchange rate of the foreign currency at December 31, 2019, as applicable) for the following construction projects:
a warehouse expansion project for an existing tenant at an industrial and office buildingfacility in Irvine, California on December 22, 2015.
In connection with these transactions, we also expensed acquisition-related costs totaling $11.1Marktheidenfeld, Germany, for an aggregate of $8.3 million, which are included in Merger, property acquisition, and other expenseswe currently expect to complete in the consolidated financial statements.second quarter of 2020;
an expansion project for an existing tenant at a warehouse facility in Wichita, Kansas, for an aggregate of $3.0 million, which we currently expect to complete in the third quarter of 2020;
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| W. P. Carey 2016 10-K– 110
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Notes to Consolidated Financial Statements
We also entered into the following investments,a build-to-suit project for a headquarters and industrial facility in Langen, Germany, for an aggregate of $56.2 million, which were deemedwe currently expect to be real estate asset acquisitions becausecompleted in the first quarter of 2021; and
a renovation project at a warehouse facility in Bowling Green, Kentucky, for an aggregate of $70.0 million, which we acquiredcurrently expect to be completed in the sellers’ properties and simultaneously entered into new leases in connection with the acquisitions,fourth quarter of 2021.
During 2018, we completed 9 construction projects, at a total cost of $116.0$102.5 million, including land of $8.6which $39.8 million buildingswas capitalized during 2017.
During 2017, we completed 5 construction projects, at a total cost of $68.1$65.4 million, (including acquisition-related costs of $3.9which $35.5 million which were capitalized), and net lease intangibles of $39.4 million:was capitalized during 2016.
an investment of $53.5 million for an office building in Sunderland, United Kingdom on August 6, 2015; and
an investment of $62.5 million for ten auto dealership properties in Almere, Amsterdam, Eindhoven, Houten, Nieuwegein, Utrecht, Veghel, and Zwaag, Netherlands on November 11, 2015.
Dollar amounts are based on the exchange rates of the foreign currencies on the dates of activity, as applicable.
AcquisitionsDispositions of Real Estate
During 2014 – We entered into the following investments,2019, we sold 16 properties, which were deemed to be business combinations because we assumed the existing leases on the properties, for which the sellers were not the lessees, at a total cost of $366.9 million, including land of $33.1 million, buildings of $278.1 million, and net lease intangibles of $55.7 million:
an investment of $41.9 million for an office building in Chandler, Arizona on March 26, 2014;
an investment of $47.2 million for a warehouse facility in University Park, Illinois on May 15, 2014;
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• | an investment of $117.7 million for an office building in Stavanger, Norway on August 6, 2014. Because we acquired stock in a subsidiary of the seller to complete the acquisition, we assumed the tax basis of the entity that we purchased and recorded an estimated deferred tax liability of $14.7 million. In connection with this business combination, we recorded goodwill of $11.1 million (Note 8); |
an investment of $46.0 million for an office building in Westborough, Massachusetts on August 22, 2014;
an investment of $56.0 million for an office building in Andover, Massachusetts on October 7, 2014;
an investment of $29.1 million for an office building in Newport, United Kingdom on October 13, 2014; and
an investment of $29.0 million for a light-industrial/distribution center in Opole, Poland on December 12, 2014.
In connection with these transactions, we also expensed acquisition-related costs totaling $3.3 million, which are included in Merger, property acquisition, and other expenses in the consolidated financial statements. Dollar amounts are based on the exchange rates of the foreign currencies on the dates of acquisition, as applicable.
We also entered into the following investments, which were deemed to be real estate asset acquisitions because we acquired the sellers’ properties and simultaneously entered into new leases in connection with the acquisitions, at a total cost of $536.7 million, including land of $83.9 million, buildings of $366.6 million (including acquisition-related costs of $17.8 million, which were capitalized), net lease intangibles of $82.9 million, and a property classified as a net investment in direct financing lease of $3.3 million (Note 6):
an investment of $138.3 million for 10 industrialLand, buildings and 21 agricultural properties in various locations in Australia on October 28, 2014. We also committed to fund a tenant expansion allowance of $14.8 million;
an investment of $19.8 million for a manufacturing facility in Lewisburg, Ohio on November 4, 2014; and
an investment of $378.5 million for 70 office buildings in various locations in Spain on December 19, 2014.
Dollar amounts are based on the exchange rates of the foreign currencies on the dates of activity, as applicable.
As discussed in Note 3, we acquired 225 propertiesimprovements subject to existing operating leases in the CPA®:16 Merger, which increasedleases. As a result, the carrying value of our real estateLand, buildings and improvements subject to operating leases decreased by $2.0 billion during the year ended$84.3 million from December 31, 2014. We reclassified properties with an aggregate carrying value of $13.7 million from Net investments in direct financing leases2018 to Real estate, at cost during the year ended December 31, 2014, in connection with the extensions of the underlying leases (Note 6).2019.
Real Estate Under Construction
During 2016, we capitalized real estate under construction totaling $58.7 million, including accrual activity of $2.1 million, primarily related to construction projects on our properties. Of this total, $16.9 million related to an expansion of one of the three private school campuses that we acquired during 2016, as described above. As of December 31, 2016, we had three construction projects in progress. As of December 31, 2015, we had an outstanding commitment related to a tenant expansion allowance, for which construction had not yet commenced, and no other open construction projects. Aggregate unfunded commitments totaled approximately $135.2 million and $12.2 million as of December 31, 2016 and 2015, respectively.
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| | W. P. Carey 20162019 10-K– 11192 |
Notes to Consolidated Financial Statements
In December 2015, we entered into a build-to-suit transaction for the redevelopmentFuture Disposition of a property in Doraville, Georgia. We demolished the property (Note 9) and commenced construction of an industrial facility, which was completed in October 2016. The building was placed into service at a cost totaling $13.8 million and we have no further funding commitment asReal Estate
As of December 31, 2016. In addition, we placed into service amounts totaling $24.72019, 1 of our tenants exercised its option to repurchase a property it is leasing for $0.6 million related to partially-completed build-to-suit projects or other expansion projects during the year ended December 31, 2016.
On December 4, 2013, we entered into a build-to-suit transaction(the amount for the construction of an office building in Mönchengladbach, Germany for a total projected cost of up to $65.0 million, including acquisition expenses, which wasrepurchase option is based on the exchange rate of the euro on that date. During the years ended December 31, 2015 and 2014, we funded approximately $28.0 million and $20.6 million, respectively. The building was placed in service in September 2015 at a cost totaling $53.2 million and we have no further funding commitment as of December 31, 2016.
Dispositions of Real Estate
During 2016, we sold 28 properties and a parcel of vacant land, excluding the disposition of two properties that were classified as held for sale as of December 31, 2015, transferred ownership of another property to the related mortgage lender, and disposed of another property through foreclosure (Note 17)2019). As a result, the carrying value of our real estate decreased by $411.2 million from December 31, 2015 to December 31, 2016.
Future Dispositions of Real Estate
During 2016, two tenants each exercised an option to repurchase the properties they are leasing in accordance with their lease agreements during 2017 for an aggregate of $21.6 million. At December 31,
2016,2019, the
properties had an aggregateproperty’s asset carrying value
approximated its sales price. This property was sold in February 2020 (Note 20).
Lease Termination Income and Other
For the year ended December 31, 2019, lease termination income and other on our consolidated statements of $16.3 million. There is no accounting impact during 2016income included: (i) income of $9.1 million from receipt of proceeds from a bankruptcy claim on a prior tenant; (ii) income of $8.8 million related to a lease restructuring in May 2019 that led to the exerciserecognition of these options.$6.6 million in rent receipts during the third and fourth quarters of 2019 on claims that were previously deemed uncollectible, and a related value-added tax refund of $2.2 million that was recognized in May 2019; and (iii) income of $6.2 million related to a lease termination and related master lease restructuring that occurred during the fourth quarter of 2019, for which payment will be received over the remaining lease term of properties held under that master lease.
Leases
Operating Lease Income
Lease income related to operating leases recognized and included in the consolidated statements of income is as follows (in thousands):
|
| | | |
| | Year Ended December 31, 2019 |
| Lease income — fixed | $ | 898,111 |
|
Lease income — variable (a) | 89,873 |
|
Total operating lease income (b) | $ | 987,984 |
|
__________
| |
| (a) | Includes (i) rent increases based on changes in the CPI and other comparable indices and (ii) reimbursements for property taxes, insurance, and common area maintenance services. |
| |
| (b) | Excludes $98.4 million of interest income from direct financing leases that is included in Lease revenues in the consolidated statement of income for the year ended December 31, 2019. |
Scheduled Future Minimum RentsLease Payments to be Received
Scheduled future minimum rents, exclusivelease payments to be received (exclusive of renewals, expenses paid by tenants, percentage of sales rents, and future CPI-based adjustments,adjustments) under non-cancelable operating leases at December 31, 20162019 are as follows (in thousands):
|
| | | | |
| Years Ending December 31, | | Total |
| 2020 | | $ | 1,007,041 |
|
| 2021 | | 992,378 |
|
| 2022 | | 962,801 |
|
| 2023 | | 924,275 |
|
| 2024 | | 854,652 |
|
| Thereafter | | 7,071,917 |
|
| Total | | $ | 11,813,064 |
|
|
| |
| W. P. Carey 2019 10-K– 93 |
Notes to Consolidated Financial Statements
Scheduled future lease payments to be received (exclusive of expenses paid by tenants, percentage of sales rents, and future CPI-based adjustments) under non-cancelable operating leases at December 31, 2018 are as follows (in thousands):
| | | Years Ending December 31, | | Total | | Total |
| 2017 | | $ | 585,799 |
| |
| 2018 | | 575,925 |
| |
| 2019 | | 565,614 |
| | $ | 920,044 |
|
| 2020 | | 533,916 |
| | 915,411 |
|
| 2021 | | 506,875 |
| | 896,083 |
|
| 2022 | | | 861,688 |
|
| 2023 | | | 802,509 |
|
| Thereafter | | 3,401,847 |
| | 6,151,480 |
|
| Total | | $ | 6,169,976 |
| | $ | 10,547,215 |
|
See Note 6 for scheduled future lease payments to be received under non-cancelable direct financing leases.
Lease Cost
Certain information related to the total lease cost for operating leases is as follows (in thousands):
|
| | | |
| | Year Ended December 31, 2019 |
| Fixed lease cost | $ | 14,503 |
|
| Variable lease cost | 1,186 |
|
| Total lease cost | $ | 15,689 |
|
During the year ended December 31, 2019, we received sublease income totaling approximately $5.4 million, which is included in Lease revenues in the consolidated statement of income.
Other Information
Supplemental balance sheet information related to ROU assets and lease liabilities is as follows (dollars in thousands):
|
| | | | | |
| | Location on Consolidated Balance Sheets | | December 31, 2019 |
| Operating ROU assets — land leases | In-place lease intangible assets and other | | $ | 114,209 |
|
| Operating ROU assets — office leases | Other assets, net | | 7,519 |
|
| Total operating ROU assets | | | $ | 121,728 |
|
| | | | |
| Operating lease liabilities | Accounts payable, accrued expenses and other liabilities | | $ | 87,658 |
|
| | | | |
| Weighted-average remaining lease term — operating leases | | | 38.2 years |
|
| Weighted-average discount rate — operating leases | | | 7.8 | % |
| Number of land lease arrangements | | | 64 |
|
| Number of office space arrangements | | | 6 |
|
| Lease term range (excluding extension options not reasonably certain of being exercised) | | 1 – 100 years |
|
Cash paid for operating lease liabilities included in Net cash provided by operating activities totaled $14.6 million for the year ended December 31, 2019. There are no land or office direct financing leases for which we are the lessee, therefore there are no related ROU assets or lease liabilities.
|
| |
| | W. P. Carey 20162019 10-K– 11294 |
Notes to Consolidated Financial Statements
Undiscounted Cash Flows
A reconciliation of the undiscounted cash flows for operating leases recorded on the consolidated balance sheet within Accounts payable, accrued expenses and other liabilities as of December 31, 2019 is as follows (in thousands):
|
| | | | |
| Years Ending December 31, | | Total |
| 2020 | | $ | 14,197 |
|
| 2021 | | 8,769 |
|
| 2022 | | 8,006 |
|
| 2023 | | 7,866 |
|
| 2024 | | 6,728 |
|
| Thereafter | | 251,844 |
|
| Total lease payments | | 297,410 |
|
| Less: amount of lease payments representing interest | | (209,752 | ) |
| Present value of future lease payments/lease obligations | | $ | 87,658 |
|
Scheduled future lease payments (excluding amounts paid directly by tenants) for the years subsequent to the year ended December 31, 2018 are: $14.5 million for 2019, $13.5 million for 2020, $7.9 million for 2021, $7.1 million for 2022, $7.0 million for 2023, and $246.7 million for the years thereafter.
Land, Buildings and Improvements — Operating Real EstateProperties
At December 31, 2016, Operating real estate2019, Land, buildings and improvements attributable to operating properties consisted of our investments in two hotels.10 consolidated self-storage properties and 1 consolidated hotel. As of December 31, 2019, we reclassified another consolidated hotel to Assets held for sale, net, as described below. At December 31, 2015, Operating real estate2018, Land, buildings and improvements attributable to operating properties consisted of our investments in two hotels37 consolidated self-storage properties and one self-storage property. During the year ended December 31, 2016, we sold our remaining self-storage property, and as a result, the carrying value of our Operating real estate decreased by $2.3 million from December 31, 2015 to December 31, 2016 (Note 17).2 consolidated hotels. Below is a summary of our Operating real estateLand, buildings and improvements attributable to operating properties (in thousands): |
| | | | | | | |
| | December 31, |
| | 2019 | | 2018 |
| Land | $ | 10,452 |
| | $ | 102,478 |
|
| Buildings and improvements | 72,631 |
| | 363,572 |
|
| Real estate under construction | — |
| | 4,620 |
|
| Less: Accumulated depreciation | (11,241 | ) | | (10,234 | ) |
| | $ | 71,842 |
| | $ | 460,436 |
|
|
| | | | | | | |
| | December 31, |
| | 2016 | | 2015 |
| Land | $ | 6,041 |
| | $ | 6,578 |
|
| Buildings | 75,670 |
| | 76,171 |
|
| Less: Accumulated depreciation | (12,143 | ) | | (8,794 | ) |
| | $ | 69,568 |
| | $ | 73,955 |
|
As described above under Land, Buildings and Improvements — Operating Leases, during the second quarter of 2019, we entered into net lease agreements for certain self-storage properties previously classified as operating properties. As a result, in June 2019 and August 2019, we reclassified 22 and 5 consolidated self-storage properties, respectively, with an aggregate carrying value of $287.7 million from Land, buildings and improvements attributable to operating properties to Land, buildings and improvements subject to operating leases.
Depreciation expense on our buildings and improvements attributable to operating real estateproperties was $4.2$6.9 million, $4.2 million, and $3.8$4.3 million for the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, respectively.
We capitalized or reclassified from real estate under construction $2.2 million of building improvements related to our operating properties duringFor the year ended December 31, 2016.2019, Operating property revenues totaling $50.2 million were comprised of $39.5 million in lease revenues and $10.7 million in other income (such as food and beverage revenue) from 37 consolidated self-storage properties and 2 consolidated hotels. For the year ended December 31, 2018, Operating property revenues totaling $28.1 million were comprised of $20.9 million in lease revenues and $7.2 million in other income from 37 consolidated self-storage properties and 3 consolidated hotels. For the year ended December 31, 2017, Operating property revenues totaling $30.6 million were comprised of $22.3 million in lease revenues and $8.3 million in other income from 2 consolidated hotels. We derive self-storage revenue primarily from rents received from customers who rent storage space under month-to-month leases for personal or business use. We derive hotel revenue primarily from room rentals, as well as food, beverage, and other services.
|
| |
| W. P. Carey 2019 10-K– 95 |
Notes to Consolidated Financial Statements
Assets Held for Sale, Net
Below is a summary of our properties held for sale (in thousands):
|
| | | | | | | |
| | December 31, |
| | 2019 | | 2018 |
| Land, buildings and improvements | $ | 105,573 |
| | $ | — |
|
| Accumulated depreciation and amortization | (1,563 | ) | | — |
|
| Assets held for sale, net | $ | 104,010 |
| | $ | — |
|
|
| | | | | | | |
| | December 31, |
| | 2016 | | 2015 |
| Net investments in direct financing leases | $ | 26,247 |
| | $ | — |
|
| Real estate, net | — |
| | 59,046 |
|
| Assets held for sale | $ | 26,247 |
| | $ | 59,046 |
|
At December 31, 2016,2019, we had one1 hotel operating property classified as Assets held for sale, net, with aan aggregate carrying value of $26.2$104.0 million. In addition, there was a deferred tax liability of $2.5 million related to this property as of December 31, 2016, which is included in Deferred income taxes in the consolidated balance sheets. TheThis property was disposedsold in January 2020 for gross proceeds of subsequent to December 31, 2016$120.0 million (Note 20). At December 31, 2015, we had two properties classified as Assets held for sale, both of which were sold during the year ended December 31, 2016 (Note 17).
Note 6. 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 our Net investments in direct financing leases, notesloans receivable, and deferred acquisition fees. Operating leases are not included in finance receivables as such amounts are notreceivables. See Note 2 and Note 5 for information on ROU operating lease assets recognized as an asset in theour consolidated financial statements.balance sheets.
|
| |
| W. P. Carey 2016 10-K– 113
|
Notes to Consolidated Financial Statements
Net Investments in Direct Financing Leases
Net investments in direct financing leases is summarized as follows (in thousands):
|
| | | | | | | |
| | December 31, |
| | 2019 | | 2018 |
| Lease payments receivable | $ | 686,149 |
| | $ | 1,160,977 |
|
| Unguaranteed residual value | 828,206 |
| | 966,826 |
|
| | 1,514,355 |
| | 2,127,803 |
|
| Less: unearned income | (617,806 | ) | | (821,588 | ) |
| | $ | 896,549 |
| | $ | 1,306,215 |
|
|
| | | | | | | |
| | December 31, |
| | 2016 | | 2015 |
| Minimum lease payments receivable | $ | 619,014 |
| | $ | 797,736 |
|
| Unguaranteed residual value | 639,002 |
| | 700,143 |
|
| | 1,258,016 |
| | 1,497,879 |
|
| Less: unearned income | (573,957 | ) | | (741,526 | ) |
| | $ | 684,059 |
| | $ | 756,353 |
|
2016 2019 — Interest income from direct financing leases, which was included in Lease revenues in the consolidated financial statements, was $71.2$98.4 million for the year ended December 31, 2016.2019. During the year ended December 31, 2016,2019, we sold 6 properties accounted for as direct financing leases that had an aggregate net carrying value of $255.0 million. During the year ended December 31, 2019, we reclassified 10 properties with a carrying value of $76.9 million from Net investments in direct financing leases to Land, buildings and improvements in connection with changes in lease classifications due to extensions of the underlying leases (Note 5). During the year ended December 31, 2019, the U.S. dollar strengthened against both the euro, and British pound sterling, resulting in a $18.3an $5.5 million decrease in the carrying value of Net investments in direct financing leases from December 31, 20152018 to December 31, 2016. 2019.
During the year ended December 31, 2016,third quarter of 2019, we reclassified 31 properties with a carrying value of $9.7 million fromidentified measurement period adjustments that impacted the provisional accounting for an investment classified as Net investments in direct financing leases, which was acquired in the CPA:17 Merger on October 31, 2018 (Note 3). Prior to Real estate, at cost,the CPA:17 Merger, we already had a joint interest in connection withthis investment and accounted for it under the extensionsequity method (subsequent to the CPA:17 Merger, we consolidated this wholly owned investment). As such, the CPA:17 Merger purchase price allocated to this investment decreased by approximately $21.0 million. In addition, we recorded a loss on change in control of interests of $8.4 million during the underlying leases. Duringthird quarter of 2019, reflecting adjustments to the year ended December 31, 2016, we reclassified a property from Net investments in direct financing leases to Assets held for sale based ondifference between our carrying value and the preliminary estimated fair value of the property less costs to sell of $26.2 million (Note 5) and recognized anthis former equity interest on October 31, 2018. We also recorded impairment charge of $7.0charges totaling $25.8 million on this investment during the propertythird quarter of 2019 (Note 9).
20152018 — Interest income from direct financing leases, which was included in Lease revenues in the consolidated financial statements, was $74.4$74.2 million for the year ended December 31, 2015. We also recognized impairment charges totaling $3.3 million on five2018. In connection with the CPA:17 Merger in October 2018, we acquired 40 consolidated properties accounted for as Net investments insubject to direct financing leases in connection with an other-than-temporary decline in the estimateda total fair valuesvalue of the properties’ residual values$626.0 million (Note 93).
2014
|
| |
| W. P. Carey 2019 10-K– 96 |
Notes to Consolidated Financial Statements
2017— Interest income from direct financing leases, which was included in Lease revenues in the consolidated financial statements, was $78.8$66.2 million for the year ended December 31, 2014. In connection with the CPA®:16 Merger in January 2014, we acquired 98 properties subject to direct financing leases with a total fair value of $538.2 million (Note 3), of which one was sold during the year ended December 31, 2014 (Note 17). In connection with our acquisition of an investment in Australia, we acquired one property subject to a direct financing lease for $3.3 million. During the year ended December 31, 2014, we reclassified properties with a carrying value of $13.7 million from Net investments in direct financing leases to Real estate in connection with the extensions of the underlying leases. We also recognized impairment charges totaling $1.3 million on eight properties accounted for as Net investments in direct financing leases in connection with an other-than-temporary decline in the estimated fair values of the properties’ residual values (Note 9).2017.
Scheduled Future Minimum RentsLease Payments to be Received
Scheduled future minimum rents, exclusivelease payments to be received (exclusive of renewals, expenses paid by tenants, percentage of sales rents, and future CPI-based adjustments,adjustments) under non-cancelable direct financing leases at December 31, 20162019 are as follows (in thousands): |
| | | | |
| Years Ending December 31, | | Total |
| 2020 | | $ | 86,334 |
|
| 2021 | | 85,061 |
|
| 2022 | | 75,865 |
|
| 2023 | | 69,406 |
|
| 2024 | | 64,636 |
|
| Thereafter | | 304,847 |
|
| Total | | $ | 686,149 |
|
Scheduled future lease payments to be received (exclusive of expenses paid by tenants, percentage of sales rents, and future CPI-based adjustments) under non-cancelable direct financing leases at December 31, 2018 are as follows (in thousands): | | | Years Ending December 31, | | Total | | Total |
| 2017 | | $ | 65,781 |
| |
| 2018 | | 65,893 |
| |
| 2019 | | 64,138 |
| |
2019 (a) | | | $ | 373,632 |
|
| 2020 | | 63,438 |
| | 98,198 |
|
| 2021 | | 60,232 |
| | 95,181 |
|
| 2022 | | | 85,801 |
|
| 2023 | | | 80,033 |
|
| Thereafter | | 299,532 |
| | 428,132 |
|
| Total | | $ | 619,014 |
| | $ | 1,160,977 |
|
__________
|
| |
| (a) | W. P. Carey 2016 10-K– 114
Includes total rents owed and a bargain purchase option amount (for an aggregate of $275.4 million as of December 31, 2018) from The New York Times Company, a tenant at one of our properties, which exercised its bargain purchase option and repurchased the property in December 2019. |
See Note 5 for scheduled future lease payments to be received under non-cancelable operating leases. Notes to Consolidated Financial Statements
NotesLoans Receivable
At December 31, 2018, we had 4 loans receivable related to a domestic investment with an aggregate carrying value of $57.7 million. In October 2019, 2 of these loans receivable were repaid in full to us for $10.0 million. In addition, at December 31, 2018, we had a loan receivable representing the expected future payments under a sales type lease with a carrying value of $9.5 million. In June 2019, this loan receivable was repaid in full to us for $9.3 million (Note 17). Our loans receivable are included in Other assets, net in the consolidated financial statements, and had an aggregate carrying value of $47.7 million at December 31, 2019. Earnings from our notesloans receivable are included in Lease termination income and other in the consolidated financial statements.
Atstatements, and totaled $6.2 million, $1.8 million, and $0.8 million for the years ended December 31, 20162019, 2018, and 2015, we had a note receivable with an outstanding balance of $10.4 million and $10.7 million, respectively, representing the expected future payments under a sales type lease, which was included in Other assets, net in the consolidated financial statements.2017, respectively.
At December 31, 2014, we had a B-note with an outstanding balance of $10.0 million. In February 2015, the B-note was repaid in full to us for $10.0 million.
Deferred Acquisition Fees Receivable
As described in Note 4, we earn revenue in connection with structuring and negotiating investments and related mortgage financing for the CPA® REITs.CPA:18 – Global. A portion of this revenue is due in equal annual installments over three years, provided the CPA® REITs meet their respective performance criteria.years. Unpaid deferred installments, including accrued interest, from the CPA® REITsCPA:18 – Global were included in Due from affiliates in the consolidated financial statements.
|
| |
| W. P. Carey 2019 10-K– 97 |
Notes to Consolidated Financial Statements
Credit Quality of Finance Receivables
We generally seek investmentsinvest in facilities that we believe are critical to a tenant’s business and that we believetherefore have a lowlower risk of tenant default. As of December 31, 2016 and 2015, we had allowances for credit losses of $13.3 million and $8.7 million, respectively, on a single direct financing lease, including the impact of foreign currency translation. During the years ended December 31, 2016 and 2015, we increased the allowance by $7.1 million and $8.7 million, respectively, which was recorded in Property expenses, excluding reimbursable tenant costs in the consolidated financial statements, due to a decline in the estimated amount of future payments we will receive from the tenant, including the possible early termination of the direct financing lease. At both December 31, 20162019 and 2015,2018, none of the balances of our finance receivables were past due. Other than the lease extensions noted under Net InvestmentInvestments in Direct Financing Leases above and the allowance for credit losses discussed above, there were no material modifications of finance receivables during the yearsyear ended December 31, 2016 or 2015. 2019.
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. A credit quality of one through three indicates a range of investment grade to stable. A credit quality of four through five indicates a range of inclusion on the watch list to risk of default. The credit quality evaluation of our finance receivables was lastis updated in the fourth quarter of 2016.quarterly. We believe the credit quality of our deferred acquisition fees receivable falls under category one, as the CPA® REITs areCPA:18 – Global is expected to have the available cash to make such payments.
A summary of our finance receivables by internal credit quality rating, excluding our deferred acquisition fees receivable, is as follows (dollars in thousands):
|
| | | | | | | | | | | | |
| | | Number of Tenants / Obligors at December 31, | | Carrying Value at December 31, |
| Internal Credit Quality Indicator | | 2019 | | 2018 | | 2019 | | 2018 |
| 1 – 3 | | 28 | | 36 | | $ | 798,108 |
| | $ | 1,135,321 |
|
| 4 | | 8 | | 10 | | 146,178 |
| | 227,591 |
|
| 5 | | — | | 1 | | — |
| | 10,580 |
|
| | | | | | | $ | 944,286 |
| | $ | 1,373,492 |
|
|
| | | | | | | | | | | | |
| | | Number of Tenants / Obligors at December 31, | | Carrying Value at December 31, |
| Internal Credit Quality Indicator | | 2016 | | 2015 | | 2016 | | 2015 |
| 1 - 3 | | 27 | | 28 | | $ | 621,955 |
| | $ | 657,034 |
|
| 4 | | 5 | | 6 | | 70,811 |
| | 110,002 |
|
| 5 | | 1 | | — | | 1,644 |
| | — |
|
| | | | | | | $ | 694,410 |
| | $ | 767,036 |
|
Note 7. Equity InvestmentsGoodwill and Other Intangibles
We have recorded net lease, internal-use software development, and trade name intangibles that are being amortized over periods ranging from two years to 48 years. In-place lease intangibles, at cost are included in In-place lease intangible assets and other in the Managed Programsconsolidated financial statements. Above-market rent intangibles, at cost are included in Above-market rent intangible assets in the consolidated financial statements. Accumulated amortization of in-place lease and above-market rent intangibles is included in Accumulated depreciation and amortization in the consolidated financial statements. Internal-use software development and trade name intangibles are included in Other assets, net in the consolidated financial statements. Below-market rent and below-market purchase option intangibles are included in Below-market rent and other intangible liabilities, net in the consolidated financial statements.
In connection with certain business combinations, including the CPA:17 Merger, we recorded goodwill as a result of consideration exceeding the fair values of the assets acquired and liabilities assumed (Note 2). The goodwill was attributed to our Real Estate We own interests in certain unconsolidated reporting unit as it relates to the real estate investments with the Managed Programs and also own interestsassets we acquired in the Managed Programs. We account forsuch business combinations. The following table presents a reconciliation of our interests in these investments under the equity method of accounting (i.e., at cost, increased or decreased by our share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting, such as basis differences) or at fair value by electing the equity method fair value option available under U.S. GAAP.
goodwill (in thousands):
|
| | | | | | | | | | | |
| | Real Estate | | Investment Management | | Total |
| Balance at January 1, 2017 | $ | 572,313 |
| | $ | 63,607 |
| | $ | 635,920 |
|
| Foreign currency translation adjustments | 8,040 |
| | — |
| | 8,040 |
|
| Balance at December 31, 2017 | 580,353 |
| | 63,607 |
| | 643,960 |
|
Acquisition of CPA:17 – Global (Note 3) | 280,306 |
| | — |
| | 280,306 |
|
| Foreign currency translation adjustments | (3,322 | ) | | — |
| | (3,322 | ) |
| Balance at December 31, 2018 | 857,337 |
| | 63,607 |
| | 920,944 |
|
CPA:17 Merger measurement period adjustments (Note 3) | 15,802 |
| | — |
| | 15,802 |
|
| Foreign currency translation adjustments | (2,058 | ) | | — |
| | (2,058 | ) |
| Balance at December 31, 2019 | $ | 871,081 |
| | $ | 63,607 |
| | $ | 934,688 |
|
|
| |
| | W. P. Carey 20162019 10-K– 11598 |
Notes to Consolidated Financial Statements
Current accounting guidance requires that we test for the recoverability of goodwill at the reporting unit level. The following table presents Equitytest for recoverability must be conducted at least annually, or more frequently if events or changes in earningscircumstances indicate that the carrying value of equity method investmentsgoodwill may not be recoverable. We performed our annual test for impairment in the Managed ProgramsOctober 2019 for goodwill recorded in both segments and real estate, which represents our proportionate share of the income or losses of these investments,found no impairment indicated.
Intangible assets, intangible liabilities, and goodwill are summarized as well as certain adjustments related to other-than-temporary impairment charges and amortization of basis differences related to purchase accounting adjustmentsfollows (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, |
| | 2019 | | 2018 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| Finite-Lived Intangible Assets | | | | | | | | | | | |
| Internal-use software development costs | $ | 19,582 |
| | $ | (13,491 | ) | | $ | 6,091 |
| | $ | 18,924 |
| | $ | (10,672 | ) | | $ | 8,252 |
|
| Trade name | 3,975 |
| | (1,991 | ) | | 1,984 |
| | 3,975 |
| | (1,196 | ) | | 2,779 |
|
| | 23,557 |
| | (15,482 | ) | | 8,075 |
| | 22,899 |
| | (11,868 | ) | | 11,031 |
|
| Lease Intangibles: | | | | | | | | | | | |
| In-place lease | 2,072,642 |
| | (676,008 | ) | | 1,396,634 |
| | 1,960,437 |
| | (496,096 | ) | | 1,464,341 |
|
| Above-market rent | 909,139 |
| | (398,294 | ) | | 510,845 |
| | 925,797 |
| | (330,935 | ) | | 594,862 |
|
Below-market ground lease (a) | — |
| | — |
| | — |
| | 42,889 |
| | (2,367 | ) | | 40,522 |
|
| | 2,981,781 |
| | (1,074,302 | ) | | 1,907,479 |
| | 2,929,123 |
| | (829,398 | ) | | 2,099,725 |
|
| Indefinite-Lived Goodwill and Intangible Assets | | | | | | | | | | | |
| Goodwill | 934,688 |
| | — |
| | 934,688 |
| | 920,944 |
| | — |
| | 920,944 |
|
Below-market ground lease (a) | — |
| | — |
| | — |
| | 6,302 |
| | — |
| | 6,302 |
|
| | 934,688 |
| | — |
| | 934,688 |
| | 927,246 |
| | — |
| | 927,246 |
|
| Total intangible assets | $ | 3,940,026 |
| | $ | (1,089,784 | ) | | $ | 2,850,242 |
| | $ | 3,879,268 |
| | $ | (841,266 | ) | | $ | 3,038,002 |
|
| | | | | | | | | | | | |
| Finite-Lived Intangible Liabilities | | | | | | | | | | | |
| Below-market rent | $ | (268,515 | ) | | $ | 74,484 |
| | $ | (194,031 | ) | | $ | (253,633 | ) | | $ | 57,514 |
| | $ | (196,119 | ) |
Above-market ground lease (a) | — |
| | — |
| | — |
| | (15,961 | ) | | 3,663 |
| | (12,298 | ) |
| | (268,515 | ) | | 74,484 |
| | (194,031 | ) | | (269,594 | ) | | 61,177 |
| | (208,417 | ) |
| Indefinite-Lived Intangible Liabilities | | | | | | | | | | | |
| Below-market purchase option | (16,711 | ) | | — |
| | (16,711 | ) | | (16,711 | ) | | — |
| | (16,711 | ) |
| Total intangible liabilities | $ | (285,226 | ) | | $ | 74,484 |
| | $ | (210,742 | ) | | $ | (286,305 | ) | | $ | 61,177 |
| | $ | (225,128 | ) |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
Distributions of Available Cash (Note 4) | $ | 45,121 |
| | $ | 38,406 |
| | $ | 31,052 |
|
| Proportionate share of equity in earnings (losses) of equity method investments in the Managed Programs | 7,698 |
| | (454 | ) | | 2,425 |
|
| Amortization of basis differences on equity method investments in the Managed Programs | (1,028 | ) | | (806 | ) | | (810 | ) |
Deferred revenue earned (Note 4) | — |
| | — |
| | 786 |
|
Other-than-temporary impairment charges on the Special Member Interest in CPA®:16 – Global’s operating partnership | — |
| | — |
| | (735 | ) |
| Total equity in earnings of equity method investments in the Managed Programs | 51,791 |
| | 37,146 |
| | 32,718 |
|
| Equity in earnings of equity method investments in real estate | 16,503 |
| | 17,559 |
| | 14,828 |
|
| Amortization of basis differences on equity method investments in real estate | (3,575 | ) | | (3,685 | ) | | (3,430 | ) |
| Equity in earnings of equity method investments in the Managed Programs and real estate | $ | 64,719 |
| | $ | 51,020 |
| | $ | 44,116 |
|
Managed Programs
We own interests in the Managed Programs and account for these interests under the equity method because, as their advisor and through our ownership of their common stock, we do not exert control over, but we do have the ability to exercise significant influence on, the Managed Programs. Operating results of the Managed REITs and CESH I are included in the Owned Real Estate segment and operating results of CCIF are included in the Investment Management segment.
The following table sets forth certain information about our investments in the Managed Programs (dollars in thousands):
|
| | | | | | | | | | | | | | |
| | | % of Outstanding Shares Owned at | | Carrying Amount of Investment at |
| | | December 31, | | December 31, |
| Fund | | 2016 | | 2015 | | 2016 | | 2015 |
CPA®:17 – Global | | 3.456 | % | | 3.087 | % | | $ | 99,584 |
| | $ | 87,912 |
|
CPA®:17 – Global operating partnership | | 0.009 | % | | 0.009 | % | | — |
| | — |
|
CPA®:18 – Global | | 1.616 | % | | 0.735 | % | | 17,955 |
| | 9,279 |
|
CPA®:18 – Global operating partnership | | 0.034 | % | | 0.034 | % | | 209 |
| | 209 |
|
| CWI 1 | | 1.109 | % | | 1.131 | % | | 11,449 |
| | 12,619 |
|
| CWI 1 operating partnership | | 0.015 | % | | 0.015 | % | | — |
| | — |
|
| CWI 2 | | 0.773 | % | | 0.379 | % | | 5,091 |
| | 949 |
|
| CWI 2 operating partnership | | 0.015 | % | | 0.015 | % | | 300 |
| | 300 |
|
| CCIF | | 13.322 | % | | 47.882 | % | | 23,528 |
| | 22,214 |
|
CESH I (a) | | 2.431 | % | | — | % | | 2,701 |
| | — |
|
| | | | | | | $ | 160,817 |
| | $ | 133,482 |
|
__________
| |
| (a) | Investment is accounted for at fair value.In connection with our adoption of ASU 2016-02 (Note 2), in the first quarter of 2019, we prospectively reclassified below-market ground lease intangible assets and above-market ground lease intangible liabilities to be a component of ROU assets within In-place lease intangible assets and other in our consolidated balance sheets. As of December 31, 2018, below-market ground lease intangible assets were included in In-place lease intangible assets and other in the consolidated balance sheets, and above-market ground lease intangible liabilities were included in Below-market rent and other intangible liabilities, net in the consolidated balance sheets. |
CPA®:17 – Global— The carryingDuring 2019, the U.S. dollar strengthened against the euro, resulting in a decrease of $10.5 million in the carrying value of our investment in CPA®:17 – Global atnet intangible assets from December 31, 2016 includes asset management fees receivable,2018 to December 31, 2019. Net amortization of intangibles, including the effect of foreign currency translation, was $272.0 million, $174.1 million, and $157.8 million for which 109,825 shares of CPA®:17 – Global common stock were issued during the first quarter of 2017. We received distributions from this investment during the years ended December 31, 2016, 2015,2019, 2018, and 20142017, respectively. Amortization of $7.3 million, $5.9 million,below-market rent and $4.6 million, respectively. We received distributions from our investmentabove-market rent intangibles is recorded as an adjustment to Lease revenues; amortization of internal-use software development, trade name, and in-place lease intangibles is included in Depreciation and amortization; and amortization of above-market ground lease and below-market ground lease intangibles was included in Property expenses, excluding reimbursable tenant costs, prior to the CPA®:17 – Globalreclassification of above-
|
| |
| | W. P. Carey 20162019 10-K– 11699 |
Notes to Consolidated Financial Statements
operating partnership during the years ended December 31, 2016, 2015,market ground lease and 2014 of $24.8 million, $24.7 million, and $20.4 million, respectively.
CPA®:18 – Global— The carrying value of our investmentbelow-market ground lease intangibles to ROU assets in CPA®:18 – Global at December 31, 2016 includes asset management fees receivable, for which 109,639 shares of CPA®:18 – Global class A common stock were issued during the first quarter of 2017. We received distributions from this investment during2019, as described above and in Note 2.Based on the years ended December 31, 2016, 2015,intangible assets and 2014 of $0.9 million, $0.2 million, and less than $0.1 million, respectively. We received distributions from our investment in the CPA®:18 – Global operating partnership during the years ended December 31, 2016, 2015, and 2014 of $7.6 million, $6.3 million, and $1.8 million, respectively.
CWI 1— We received distributions from this investment during the years ended December 31, 2016, 2015, and 2014 of $0.9 million, $0.8 million, and $0.3 million, respectively. We received distributions from our investment in the CWI 1 operating partnership during the years ended December 31, 2016, 2015, and 2014 of $9.4 million, $7.1 million, and $4.1 million, respectively.
CWI 2— On May 30, 2014, we purchased 22,222 shares of CWI 2’s class A common stock, par value $0.001 per share, for an aggregate purchase price of $0.2 million and consolidated this investment. On May 15, 2015, upon CWI 2 reaching its minimum offering proceeds and admitting new stockholders, we deconsolidated our investment and began to account for our interest in CWI 2 under the equity method of accounting. We received distributions from this investment during the year ended December 31, 2016 of $0.1 million. We did not receive distributions from this investment during the years ended December 31, 2015 and 2014. The carrying value of our investment in CWI 2liabilities recorded at December 31, 2016 includes asset management fees receivable,2019, scheduled annual net amortization of intangibles for which 46,439 shares of class A common stock of CWI 2 were issued during the first quarter of 2017. On March 27, 2015, we purchased a 0.015% special general partnership interest in the CWI 2 operating partnership for $0.3 million. This special general partnership interest entitles us to receive distributions of our proportionate share of earnings up to 10%each of the Available Cash from CWI 2’s operating partnership (Note 4). We received distributions from this investment during thenext five calendar years ended December 31, 2016 and 2015 of $3.3 million and $0.3 million, respectively.
CCIF— We received distributions from our investment in CCIF during the years ended December 31, 2016 and 2015 of $0.7 million and $0.8 million, respectively.
CESH I— Under the limited partnership agreement we have with CESH I, we pay all organization and offering costs on behalf of CESH I, and instead of being reimbursed by CESH I on a dollar-for-dollar basis for those costs, we receive limited partnership units of CESH I equal to 2.5% of its gross offering proceeds (Note 4). We have elected to account for our investment in CESH I at fair value by selecting the equity method fair value option available under U.S. GAAP. We record our investment in CESH I on a one quarter lag; therefore, the balance of our equity method investment in CESH I recordedthereafter is as of December 31, 2016 is based on the estimated fair value of our equity method investment in CESH I as of September 30, 2016. We did not receive distributions from this investment during the year ended December 31, 2016.
At December 31, 2016 and 2015, the aggregate unamortized basis differences on our equity investments in the Managed Programs were $31.7 million and $27.4 million, respectively.
The following tables present estimated combined summarized financial information for the Managed Programs. Amounts provided are expected total amounts attributable to the Managed Programs and do not represent our proportionate sharefollows (in thousands):
|
| | | | | | | | | | | | |
| Years Ending December 31, | | Net Decrease in Lease Revenues | | Increase to Amortization | | Total |
| 2020 | | $ | 55,165 |
| | $ | 189,081 |
| | $ | 244,246 |
|
| 2021 | | 50,656 |
| | 173,294 |
| | 223,950 |
|
| 2022 | | 43,208 |
| | 160,116 |
| | 203,324 |
|
| 2023 | | 39,144 |
| | 148,999 |
| | 188,143 |
|
| 2024 | | 34,192 |
| | 134,364 |
| | 168,556 |
|
| Thereafter | | 94,449 |
| | 598,855 |
| | 693,304 |
|
| Total | | $ | 316,814 |
| | $ | 1,404,709 |
| | $ | 1,721,523 |
|
|
| | | | | | | |
| | December 31, |
| | 2016 | | 2015 |
| Real estate, net | $ | 8,464,447 |
| | $ | 7,274,549 |
|
| Other assets | 2,737,441 |
| | 2,492,789 |
|
| Total assets | 11,201,888 |
| | 9,767,338 |
|
| Debt | (5,128,640 | ) | | (4,535,506 | ) |
| Accounts payable, accrued expenses and other liabilities | (943,090 | ) | | (652,139 | ) |
| Total liabilities | (6,071,730 | ) | | (5,187,645 | ) |
| Noncontrolling interests | (263,783 | ) | | (287,051 | ) |
| Stockholders’ equity | $ | 4,866,375 |
| | $ | 4,292,642 |
|
|
| |
| W. P. Carey 2016 10-K– 117
|
Notes to Consolidated Financial Statements
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Revenues | $ | 1,465,803 |
| | $ | 1,157,432 |
| | $ | 825,405 |
|
| Expenses | (1,265,819 | ) | | (1,129,294 | ) | | (816,630 | ) |
| Income from continuing operations | $ | 199,984 |
| | $ | 28,138 |
| | $ | 8,775 |
|
Net income (loss) attributable to the Managed Programs (a) (b) | $ | 145,936 |
| | $ | (15,740 | ) | | $ | (12,695 | ) |
__________
| |
(a) | Inclusive of impairment charges recognized by the Managed Programs totaling $31.4 million, $7.2 million, and $1.3 million during the years ended December 31, 2016, 2015, and 2014, respectively. These impairment charges reduced our income earned from these investments by $1.0 million, $0.1 million, and less than $0.1 million during the years ended December 31, 2016, 2015, and 2014, respectively. |
| |
(b) | Amounts included net gains on sale of real estate recorded by the Managed Programs totaling $132.8 million, $8.9 million, and $13.3 million for the years ended December 31, 2016, 2015, and 2014, respectively. These net gains on sale of real estate increased our income earned from these investments by $4.6 million, $0.1 million, and $0.4 million during the years ended December 31, 2016, 2015, and 2014, respectively. |
Interests in Other Unconsolidated Real Estate Investments
We own equity interests in single-tenant net-leased properties that are generally leased to companies through noncontrolling interests (i) in partnerships and limited liability companies that we do not control but over which we exercise significant influence or (ii) as tenants-in-common subject to common control. Generally, the underlying investments are jointly owned with affiliates. We account for these investments under the equity method of accounting. Earnings for each investment are recognized in accordance with each respective investment agreement. Investments in unconsolidated investments are required to be evaluated periodically. We periodically compare an investment’s carrying value to its estimated fair value and recognize an impairment charge to the extent that the carrying value exceeds fair value and such decline is determined to be other than temporary.
The following table sets forth our ownership interests in our equity investments in real estate, excluding the Managed Programs, and their respective carrying values (dollars in thousands):
|
| | | | | | | | | | | | |
| | | | | | | Carrying Value at December 31, |
| Lessee | | Co-owner | | Ownership Interest | | 2016 | | 2015 |
| The New York Times Company | | CPA®:17 – Global | | 45% | | $ | 69,668 |
| | $ | 70,976 |
|
| Frontier Spinning Mills, Inc. | | CPA®:17 – Global | | 40% | | 24,138 |
| | 24,288 |
|
Beach House JV, LLC (a) | | Third Party | | N/A | | 15,105 |
| | 15,318 |
|
Actebis Peacock GmbH (b) | | CPA®:17 – Global | | 30% | | 11,205 |
| | 12,186 |
|
Waldaschaff Automotive GmbH and Wagon Automotive Nagold GmbH (b) | | CPA®:17 – Global | | 33% | | 8,887 |
| | 9,507 |
|
C1000 Logistiek Vastgoed B.V. (b) (c) | | CPA®:17 – Global | | 15% | | 8,739 |
| | 9,381 |
|
Wanbishi Archives Co. Ltd. (d) | | CPA®:17 – Global | | 3% | | 334 |
| | 335 |
|
| | | | | | | $ | 138,076 |
| | $ | 141,991 |
|
__________
| |
(a) | This investment is in the form of a preferred equity interest. |
| |
(b) | The carrying value of this investment is affected by fluctuations in the exchange rate of the euro. |
| |
(c) | This investment represents a tenancy-in-common interest, whereby the property is encumbered by the debt for which we are jointly and severally liable. The co-obligor is CPA®:17 – Global and the amount due under the arrangement was approximately $68.4 million at December 31, 2016. Of this amount, $10.3 million represents the amount we agreed to pay and is included within the carrying value of the investment at December 31, 2016.
|
| |
(d) | The carrying value of this investment is affected by fluctuations in the exchange rate of the yen. |
|
| |
| W. P. Carey 2016 10-K– 118
|
Notes to Consolidated Financial Statements
The following tables present estimated combined summarized financial information of our equity investments, excluding the Managed Programs. Amounts provided are the total amounts attributable to the investments and do not represent our proportionate share (in thousands):
|
| | | | | | | |
| | December 31, |
| | 2016 | | 2015 |
| Real estate, net | $ | 460,198 |
| | $ | 464,730 |
|
| Other assets | 56,737 |
| | 64,989 |
|
| Total assets | 516,935 |
| | 529,719 |
|
| Debt | (193,521 | ) | | (201,611 | ) |
| Accounts payable, accrued expenses and other liabilities | (10,354 | ) | | (9,749 | ) |
| Total liabilities | (203,875 | ) | | (211,360 | ) |
| Stockholders’ equity | $ | 313,060 |
| | $ | 318,359 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Revenues | $ | 56,791 |
| | $ | 61,887 |
| | $ | 64,294 |
|
| Expenses | (17,933 | ) | | (21,124 | ) | | (27,801 | ) |
| Income from continuing operations | $ | 38,858 |
| | $ | 40,763 |
| | $ | 36,493 |
|
| Net income attributable to the jointly owned investments | $ | 38,858 |
| | $ | 40,763 |
| | $ | 36,493 |
|
We received aggregate distributions of $16.1 million, $13.3 million, and $12.5 million from our other unconsolidated real estate investments for the years ended December 31, 2016, 2015, and 2014, respectively. At both December 31, 2016 and 2015, the aggregate unamortized basis differences on our unconsolidated real estate investments were $6.7 million.
Hellweg 2 Restructuring
In 2007, Corporate Property Associates 14 Incorporated, or CPA®:14, CPA®:15, and CPA®:16 – Global, acquired a 33%, 40%, and 27% interest, respectively, in an entity, or Purchaser, for purposes of acquiring a 25% interest in a property holding company, or PropCo, that owns 37 do-it-yourself stores located in Germany. This is referred to as the Hellweg 2 transaction. The remaining 75% interest in PropCo was owned by a third party, or the Partner. In November 2010, CPA®:14, CPA®:15, and CPA®:16 – Global obtained a 70% additional interest in PropCo from the Partner, resulting in Purchaser owning approximately 95% of PropCo. In 2011, CPA®:17 – Global acquired CPA®:14’s interests, and in 2012, through the CPA®:15 Merger, we acquired CPA®:15’s interests. We had previously accounted for our investment under the equity method of accounting. In January 2014 in connection with the CPA®:16 Merger, we acquired CPA®:16 – Global’s interests in the investment. Subsequent to the acquisition, we consolidate this investment.
In October 2013, the Partner’s remaining 5% equity interest in PropCo was acquired by CPA®:17 – Global, which resulted in PropCo recording a German real estate transfer tax of $22.1 million, of which our share was approximately $8.4 million and was reflected within Equity in earnings of equity method investments in the Managed Programs and real estate in our consolidated financial statements for the year ended December 31, 2013. In connection with the CPA®:16 Merger, we acquired CPA®:16 – Global’s controlling interest in the Hellweg 2 investment. During the fourth quarter of 2015, the German tax authority revoked its previous position on the application of a ruling in a Federal German tax court. Based on this change in position, the obligation to pay the German real estate transfer taxes recorded in connection with the Hellweg 2 restructuring, as well as those recorded in connection with the CPA®:15 Merger, were no longer deemed probable of occurring. As a result, we reversed liabilities totaling $25.0 million, including $17.1 million recorded in connection with the Hellweg 2 restructuring and $7.9 million recorded in connection with the CPA®:15 Merger, which is reflected in Merger, property acquisition, and other expenses in the consolidated financial statements for the year ended December 31, 2015.
Waldaschaff Automotive GmbH and Wagon Automotive Nagold GmbH
In the second quarter of 2015, we recognized equity income of approximately $2.1 million, representing our share of the bankruptcy proceeds received by this jointly owned investment. The proceeds were used to repay the mortgage loan encumbering the two properties owned by the jointly owned investment in the amount of $14.3 million, of which our share was $4.7 million, in the third quarter of 2015.
|
| |
| W. P. Carey 2016 10-K– 119
|
Notes to Consolidated Financial Statements
Note 8.Goodwill Equity Investments in the Managed Programs and Other IntangiblesReal Estate
We own interests in certain unconsolidated real estate investments with CPA:18 – Global and third parties, and also own interests in the Managed Programs. We account for our interests in these investments under the equity method of accounting (i.e., at cost, increased or decreased by our share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting, such as basis differences) or at fair value by electing the equity method fair value option available under GAAP.
We classify distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.
The following table presents Equity in earnings of equity method investments in the Managed Programs and real estate, which represents our proportionate share of the income or losses of these investments, as well as certain adjustments related to amortization of basis differences related to purchase accounting adjustments (in thousands):
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
Distributions of Available Cash (Note 4) | $ | 21,489 |
| | $ | 46,609 |
| | $ | 47,862 |
|
| Proportionate share of equity in earnings of equity method investments in the Managed Programs | 862 |
| | 3,896 |
| | 5,156 |
|
| Amortization of basis differences on equity method investments in the Managed Programs | (1,483 | ) | | (2,332 | ) | | (1,336 | ) |
| Total equity in earnings of equity method investments in the Managed Programs | 20,868 |
| | 48,173 |
| | 51,682 |
|
| Equity in earnings of equity method investments in real estate | 3,408 |
| | 15,585 |
| | 15,452 |
|
| Amortization of basis differences on equity method investments in real estate | (1,047 | ) | | (2,244 | ) | | (2,384 | ) |
| Total equity in earnings of equity method investments in real estate | 2,361 |
| | 13,341 |
| | 13,068 |
|
| Equity in earnings of equity method investments in the Managed Programs and real estate | $ | 23,229 |
| | $ | 61,514 |
| | $ | 64,750 |
|
Managed Programs
We own interests in the Managed Programs and account for these interests under the equity method because, as their advisor, we do not exert control over, but we do have recorded net lease and internal-use software development intangibles that are being amortizedthe ability to exercise significant influence over, periods ranging from one year to 40 years. In addition, we have several ground lease intangibles that are being amortized over periodsthe Managed Programs. Operating results of up to 99 years. In-place lease and tenant relationship intangiblesthe Managed Programs are included in In-place lease and tenant relationship intangible assets, netthe Investment Management segment.
|
| |
| W. P. Carey 2019 10-K– 100 |
Notes to Consolidated Financial Statements
The following table sets forth certain information about our investments in the consolidated financial statements. Above-market rent intangibles are includedManaged Programs (dollars in Above-market rent intangible assets, netthousands):
|
| | | | | | | | | | | | | | |
| | | % of Outstanding Shares Owned at | | Carrying Amount of Investment at |
| | | December 31, | | December 31, |
| Fund | | 2019 | | 2018 | | 2019 | | 2018 |
CPA:18 – Global (a) | | 3.851 | % | | 3.446 | % | | $ | 42,644 |
| | $ | 39,600 |
|
| CPA:18 – Global operating partnership | | 0.034 | % | | 0.034 | % | | 209 |
| | 209 |
|
CWI 1 (a) | | 3.943 | % | | 3.062 | % | | 49,032 |
| | 38,600 |
|
| CWI 1 operating partnership | | 0.015 | % | | 0.015 | % | | 186 |
| | 186 |
|
CWI 2 (a) | | 3.755 | % | | 2.807 | % | | 33,669 |
| | 25,200 |
|
| CWI 2 operating partnership | | 0.015 | % | | 0.015 | % | | 300 |
| | 300 |
|
CESH (b) | | 2.430 | % | | 2.430 | % | | 3,527 |
| | 3,495 |
|
| | | | | | | $ | 129,567 |
| | $ | 107,590 |
|
__________
| |
| (a) | During 2019, we received asset management revenue from the Managed REITs in shares of their common stock, which increased our ownership percentage in each of the Managed REITs (Note 4). |
| |
| (b) | Investment is accounted for at fair value. |
CPA:17 – Global— On October 31, 2018, we acquired all of the remaining interests in CPA:17 – Global and the CPA:17 – Global operating partnership in the consolidated financial statements. Below-market ground lease (as lessee), trade name, management contracts,CPA:17 Merger (Note 3). We received distributions from this investment during the years ended December 31, 2018 and internal-use software development intangibles are included in Other assets, net2017 of $10.1 million and $8.4 million, respectively. We received distributions from our investment in the consolidated financial statements. Below-market rent, above-market ground lease (as lessee),CPA:17 – Global operating partnership during the years ended December 31, 2018 and below-market purchase option intangibles are included2017 of $26.3 million and $26.7 million, respectively (Note 4).
CPA:18 – Global— The carrying value of our investment in Below-market rentCPA:18 – Global at December 31, 2019 includes asset management fees receivable, for which 55,421 shares of CPA:18 – Global class A common stock were issued during the first quarter of 2020. We received distributions from this investment during the years ended December 31, 2019, 2018, and other intangible liabilities, net2017 of $3.3 million, $2.6 million, and $1.7 million, respectively. We received distributions from our investment in the consolidated financial statements.CPA:18 – Global operating partnership during the years ended December 31, 2019, 2018, and 2017 of $8.1 million, $9.7 million, and $8.7 million, respectively (Note 4).
In connection withCWI 1— The carrying value of our investment activityin CWI 1 at December 31, 2019 includes asset management fees receivable, for which 106,386 shares of CWI 1 common stock were issued during 2016, wethe first quarter of 2020. We received distributions from this investment during the years ended December 31, 2019, 2018, and 2017 of $2.7 million, $2.0 million, and $1.1 million, respectively. We received distributions from our investment in the CWI 1 operating partnership during the years ended December 31, 2019, 2018, and 2017 of $7.1 million, $5.1 million, and $7.5 million, respectively (Note 4).
CWI 2— The carrying value of our investment in CWI 2 at December 31, 2019 includes asset management fees receivable, for which 78,392 shares of class A common stock of CWI 2 were issued during the first quarter of 2020. We received distributions from this investment during the years ended December 31, 2019, 2018 and 2017 of $1.6 million, $1.1 million, and $0.4 million, respectively. We received distributions from our investment in the CWI 2 operating partnership during the years ended December 31, 2019, 2018, and 2017 of $6.3 million, $5.5 million, and $5.1 million, respectively (Note 4).
CESH— We have elected to account for our investment in CESH at fair value by selecting the equity method fair value option available under GAAP. We record our investment in CESH on a one quarter lag; therefore, the balance of our equity method investment in CESH recorded net lease intangibles comprised as follows (lifeof December 31, 2019 is based on the estimated fair value of our investment as of September 30, 2019. We did not receive distributions from this investment during the years ended December 31, 2019, 2018, or 2017.
At December 31, 2019 and 2018, the aggregate unamortized basis differences on our equity investments in years, dollars inthe Managed Programs were $47.0 million and $35.2 million, respectively.
|
| |
| W. P. Carey 2019 10-K– 101 |
Notes to Consolidated Financial Statements
The following tables present estimated combined summarized financial information for the Managed Programs. Amounts provided are expected total amounts attributable to the Managed Programs and do not represent our proportionate share (in thousands):
|
| | | | | |
| | Weighted-Average Life | | Amount |
| Finite-Lived Intangible Assets | | | |
In-place lease (a) | 21.2 | | $ | 124,742 |
|
| Above-market rent | 20.0 | | 35,576 |
|
| | | | $ | 160,318 |
|
| | | | |
| Finite-Lived Intangible Liabilities | | | |
| Below-market rent | 20.1 | | $ | (604 | ) |
|
| | | | | | | |
| | December 31, |
| | 2019 | | 2018 |
| Net investments in real estate | $ | 5,291,051 |
| | $ | 5,417,770 |
|
| Other assets | 959,358 |
| | 1,019,783 |
|
| Total assets | 6,250,409 |
| | 6,437,553 |
|
| Debt | (3,366,138 | ) | | (3,474,126 | ) |
| Accounts payable, accrued expenses and other liabilities | (517,803 | ) | | (467,758 | ) |
| Total liabilities | (3,883,941 | ) | | (3,941,884 | ) |
| Noncontrolling interests | (130,656 | ) | | (146,799 | ) |
| Stockholders’ equity | $ | 2,235,812 |
| | $ | 2,348,870 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Revenues | $ | 1,184,585 |
| | $ | 1,562,688 |
| | $ | 1,637,198 |
|
| Expenses | (1,142,286 | ) | | (1,368,051 | ) | | (1,456,842 | ) |
| Income from continuing operations | $ | 42,299 |
| | $ | 194,637 |
| | $ | 180,356 |
|
Net income attributable to the Managed Programs (a) (b) | $ | 8,505 |
| | $ | 121,503 |
| | $ | 127,130 |
|
__________
| |
| (a) | Includes intangible assetsimpairment charges recognized by the Managed Programs totaling $29.8$34.4 million related to a deferred tax liability that weand $19.5 million during the years ended December 31, 2018 and 2017, respectively. These impairment charges reduced our income earned from these investments by $1.6 million and $0.8 million during the years ended December 31, 2018 and 2017, respectively. The Managed Programs did not recognize impairment charges during the year ended December 31, 2019. |
| |
| (b) | Amounts included net gains on sale of real estate recorded in connection with an acquisition completed in 2016. We recorded a corresponding increase toby the asset valueManaged Programs totaling $55.7 million, $114.3 million, and $22.3 million for the years ended December 31, 2019, 2018, and 2017, respectively. These net gains on sale of real estate increased our income earned from these investments by $2.2 million, $3.9 million, and $0.6 million during the acquisition, since we assumed the tax basis of the acquired entities as part of the acquisition of the shares of these entities.years ended December 31, 2019, 2018, and 2017, respectively. |
Interests in Other Unconsolidated Real Estate Investments
We own equity interests in properties that are generally leased to companies through noncontrolling interests in partnerships and limited liability companies that we do not control but over which we exercise significant influence. The underlying investments are jointly owned with affiliates or third parties. We account for these investments under the equity method of accounting. Investments in unconsolidated investments are required to be evaluated periodically for impairment. We periodically compare an investment’s carrying value to its estimated fair value and recognize an impairment charge to the extent that the carrying value exceeds fair value and such decline is determined to be other than temporary. Operating results of our unconsolidated real estate investments are included in the Real Estate segment.
|
| |
| | W. P. Carey 20162019 10-K– 120102 |
Notes to Consolidated Financial Statements
In connection with the CPA®:16 Merger and the CPA®:15 Merger, we recorded goodwill as a result of the merger considerations exceeding the fair values of the assets acquired and liabilities assumed (Note 3). The goodwill was attributed to our Owned Real Estate reporting unit as it relates to the real estate assets we acquired in the CPA®:16 Merger and CPA®:15 Merger. The following table presents a reconciliation ofsets forth our goodwill (inownership interests in our equity investments in real estate, excluding the Managed Programs, and their respective carrying values (dollars in thousands): |
| | | | | | | | | | | | |
| | | | | Ownership Interest at | | Carrying Value at December 31, |
| Lessee | | Co-owner | | December 31, 2019 | | 2019 | | 2018 |
Johnson Self Storage (a) | | Third Party | | 90% | | $ | 70,690 |
| | $ | 73,475 |
|
Kesko Senukai (b) | | Third Party | | 70% | | 46,475 |
| | 52,432 |
|
Bank Pekao (b) | | CPA:18 – Global | | 50% | | 26,388 |
| | 29,086 |
|
BPS Nevada, LLC (c) | | Third Party | | 15% | | 22,900 |
| | 22,292 |
|
| State Farm Mutual Automobile Insurance Co. | | CPA:18 – Global | | 50% | | 17,232 |
| | 18,927 |
|
Apply Sørco AS (d) (e) | | CPA:18 – Global | | 49% | | 8,040 |
| | 7,483 |
|
Fortenova Grupa d.d. (formerly Konzum d.d.) (b) | | CPA:18 – Global | | 20% | | 2,712 |
| | 2,858 |
|
Beach House JV, LLC (f) | | Third Party | | N/A | | — |
| | 15,105 |
|
| | | | | | | $ | 194,437 |
| | $ | 221,658 |
|
|
| | | | | | | | | | | |
| | Owned Real Estate | | Investment Management | | Total |
| Balance at January 1, 2014 | $ | 286,601 |
| | $ | 63,607 |
| | $ | 350,208 |
|
Acquisition of CPA®:16 – Global | 346,642 |
| | — |
| | 346,642 |
|
| Foreign currency translation adjustments and other | (14,258 | ) | | — |
| | (14,258 | ) |
Other business combinations (a) | 13,585 |
| | — |
| | 13,585 |
|
Allocation of goodwill to the cost basis of properties sold or classified as held for sale (b) | (3,762 | ) | | — |
| | (3,762 | ) |
| Balance at December 31, 2014 | 628,808 |
| | 63,607 |
| | 692,415 |
|
| Foreign currency translation adjustments | (10,548 | ) | | — |
| | (10,548 | ) |
Allocation of goodwill to the cost basis of properties sold or classified as held for sale (b) | (1,762 | ) | | — |
| | (1,762 | ) |
| Other business combinations | 1,704 |
| | — |
| | 1,704 |
|
| Balance at December 31, 2015 | 618,202 |
| | 63,607 |
| | 681,809 |
|
Allocation of goodwill to the cost basis of properties sold or classified as held for sale (b) | (34,405 | ) | | — |
| | (34,405 | ) |
| (10,191 | ) | | — |
| | (10,191 | ) |
| Foreign currency translation adjustments | (1,293 | ) | | — |
| | (1,293 | ) |
| Balance at December 31, 2016 | $ | 572,313 |
| | $ | 63,607 |
| | $ | 635,920 |
|
__________
| |
| (a) | Primarily relatesOn November 7, 2018, we entered into a joint venture investment to acquire a 90% interest in 2 self-storage properties for an aggregate amount of $19.9 million, with our portion of the investment totaling $17.9 million (one property is located in South Carolina and one property is located in North Carolina). This transaction was accounted for as an equity method investment as the minority shareholders have significant influence over this investment. All major decisions that significantly impact the economic performance of the entity require a unanimous decision vote from all of the shareholders; therefore, we have joint control over this investment. This acquisition of an investmentwas completed subsequent to the CPA:17 Merger, in Norway (Note 5). |
| |
| (b) | GoodwillThe carrying value of this investment is affected by fluctuations in the exchange rate of the euro. |
| |
| (c) | This investment is reported using the hypothetical liquidation at book value model, which may be different than pro rata ownership percentages, primarily due to the capital structure of the partnership agreement. |
| |
| (d) | The carrying value of this investment is affected by fluctuations in the exchange rate of the Norwegian krone. |
| |
| (e) | During the first quarter of 2019, we identified measurement period adjustments that impacted the provisional accounting for this investment, which was acquired in the CPA:17 Merger on October 31, 2018 (Note 3). As such, the CPA:17 Merger purchase price allocated to the cost basisthis jointly owned investment increased by approximately $5.2 million, of the properties based on the relative fair valuewhich our proportionate share was $2.6 million. |
| |
| (f) | On February 27, 2019, we received a full repayment of goodwill at the time the properties are sold or classified as held for sale.our preferred equity interest in this investment totaling $15.0 million. As a result, this preferred equity interest is now retired. |
Current accounting guidance requires that we test for the recoverability of goodwill at the reporting unit level. The test for recoverability must be conducted at least annually, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. We performed our annual test for impairment during the fourth quarter of 2016 for goodwill recorded in both segments, and no impairment was indicated.
|
| |
| | W. P. Carey 20162019 10-K– 121103 |
Notes to Consolidated Financial Statements
Intangible assets, intangible liabilities,The following tables present estimated combined summarized financial information of our equity investments, excluding the Managed Programs. Amounts provided are the total amounts attributable to the investments and goodwill are summarized as followsdo not represent our proportionate share (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, |
| | 2016 | | 2015 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| Finite-Lived Intangible Assets | | | | | | | | | | | |
| Internal-use software development costs | $ | 18,568 |
| | $ | (5,068 | ) | | $ | 13,500 |
| | $ | 18,188 |
| | $ | (2,038 | ) | | $ | 16,150 |
|
| Management contracts | — |
| | — |
| | — |
| | 32,765 |
| | (32,765 | ) | | — |
|
| | 18,568 |
| | (5,068 | ) | | 13,500 |
| | 50,953 |
| | (34,803 | ) | | 16,150 |
|
| Lease Intangibles: | | | | | | | | | | | |
| In-place lease and tenant relationship | 1,148,232 |
| | (322,119 | ) | | 826,113 |
| | 1,205,585 |
| | (302,737 | ) | | 902,848 |
|
| Above-market rent | 632,383 |
| | (210,927 | ) | | 421,456 |
| | 649,035 |
| | (173,963 | ) | | 475,072 |
|
| Below-market ground lease | 23,140 |
| | (1,381 | ) | | 21,759 |
| | 25,403 |
| | (889 | ) | | 24,514 |
|
| | 1,803,755 |
| | (534,427 | ) | | 1,269,328 |
| | 1,880,023 |
| | (477,589 | ) | | 1,402,434 |
|
| Indefinite-Lived Goodwill and Intangible Assets | | | | | | | | | | | |
| Goodwill | 635,920 |
| | — |
| | 635,920 |
| | 681,809 |
| | — |
| | 681,809 |
|
| Trade name | 3,975 |
| | — |
| | 3,975 |
| | 3,975 |
| | — |
| | 3,975 |
|
| Below-market ground lease | 866 |
| | — |
| | 866 |
| | 895 |
| | — |
| | 895 |
|
| | 640,761 |
| | — |
| | 640,761 |
| | 686,679 |
| | — |
| | 686,679 |
|
| Total intangible assets | $ | 2,463,084 |
| | $ | (539,495 | ) | | $ | 1,923,589 |
| | $ | 2,617,655 |
| | $ | (512,392 | ) | | $ | 2,105,263 |
|
| | | | | | | | | | | | |
| Finite-Lived Intangible Liabilities | | | | | | | | | | | |
| Below-market rent | $ | (133,137 | ) | | $ | 38,231 |
| | $ | (94,906 | ) | | $ | (171,199 | ) | | $ | 44,873 |
| | $ | (126,326 | ) |
| Above-market ground lease | (12,948 | ) | | 2,362 |
| | (10,586 | ) | | (13,052 | ) | | 1,774 |
| | (11,278 | ) |
| | (146,085 | ) | | 40,593 |
| | (105,492 | ) | | (184,251 | ) | | 46,647 |
| | (137,604 | ) |
| Indefinite-Lived Intangible Liabilities | | | | | | | | | | | |
| Below-market purchase option | (16,711 | ) | | — |
| | (16,711 | ) | | (16,711 | ) | | — |
| | (16,711 | ) |
| Total intangible liabilities | $ | (162,796 | ) | | $ | 40,593 |
| | $ | (122,203 | ) | | $ | (200,962 | ) | | $ | 46,647 |
| | $ | (154,315 | ) |
|
| | | | | | | |
| | December 31, |
| | 2019 | | 2018 |
| Net investments in real estate | $ | 729,442 |
| | $ | 769,643 |
|
| Other assets | 32,983 |
| | 31,227 |
|
| Total assets | 762,425 |
| | 800,870 |
|
| Debt | (455,876 | ) | | (469,343 | ) |
| Accounts payable, accrued expenses and other liabilities | (32,049 | ) | | (28,648 | ) |
| Total liabilities | (487,925 | ) | | (497,991 | ) |
| Stockholders’ equity | $ | 274,500 |
| | $ | 302,879 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Revenues | $ | 66,608 |
| | $ | 60,742 |
| | $ | 57,377 |
|
| Expenses | (71,977 | ) | | (28,422 | ) | | (22,231 | ) |
| (Loss) income from continuing operations | $ | (5,369 | ) | | $ | 32,320 |
| | $ | 35,146 |
|
| Net (loss) income attributable to the jointly owned investments | $ | (5,369 | ) | | $ | 32,320 |
| | $ | 35,146 |
|
Net amortization
We received aggregate distributions of intangibles, including the effect of foreign currency translation, was $163.8$17.0 million, $180.8$17.8 million, and $174.0$16.0 million from our other unconsolidated real estate investments for the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, respectively. Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to Lease revenues; amortization of management contracts, internal-use software development, and in-place lease and tenant relationship intangibles is included in Depreciation and amortization; and amortization of above-market ground lease and below-market ground lease intangibles is included in Property expenses, excluding reimbursable tenant costs.
|
| |
| W. P. Carey 2016 10-K– 122
|
Notes to Consolidated Financial Statements
Based on the intangible assets and liabilities recorded atAt December 31, 2016, scheduled annual net amortization of intangibles for each of2019 and 2018, the next five calendar yearsaggregate unamortized basis differences on our unconsolidated real estate investments were $25.2 million and thereafter is as follows (in thousands):$23.7 million, respectively.
|
| | | | | | | | | | | | |
| Years Ending December 31, | | Net Decrease in Lease Revenues | | Increase to Amortization/ Property Expenses | | Total |
| 2017 | | $ | 49,925 |
| | $ | 98,909 |
| | $ | 148,834 |
|
| 2018 | | 47,663 |
| | 95,452 |
| | 143,115 |
|
| 2019 | | 44,630 |
| | 91,543 |
| | 136,173 |
|
| 2020 | | 36,950 |
| | 83,386 |
| | 120,336 |
|
| 2021 | | 32,459 |
| | 76,529 |
| | 108,988 |
|
| Thereafter | | 114,923 |
| | 404,967 |
| | 519,890 |
|
| Total | | $ | 326,550 |
| | $ | 850,786 |
| | $ | 1,177,336 |
|
Note 9. Fair Value Measurements
The fair value of an asset is defined as the exit price, which is the amount that would either be received when an asset is sold or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a three-tier fair value hierarchy based on the inputs used in measuring fair value. These tiers are: Level 1, for which quoted market prices for identical instruments are available in active markets, such as money market funds, equity securities, and U.S. Treasury securities; Level 2, for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument, such as certain derivative instruments including interest rate caps, interest rate swaps, foreign currency forward contracts, and foreign currency collars; and Level 3, for securities 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.inputs.
Money Market FundsDerivative Assets and Liabilities — Our money market funds,derivative assets and liabilities, which are included in CashOther assets, net and cash equivalentsAccounts payable, accrued expenses and other liabilities, respectively, in the consolidated financial statements, are comprised of government securities and U.S. Treasury bills. These funds were classified as Level 1 as we used quoted prices from active markets to determine their fair values.
Derivative Assets — Our derivative assets, which are included in Other assets, net in the consolidated financial statements, are comprised of an interest rate cap, interest rate swaps, stock warrants, foreign currency forward contracts, and foreign currency collars, (Note 10). The interest rate cap, interest rate swaps, foreign currencyinterest rate caps, and stock warrants (Note 10).
The valuation of our derivative instruments (excluding stock warrants) is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves, spot and forward contracts,rates, and foreign currency forward collars were measured atimplied volatilities. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value using readily observable market inputs,measurements. In adjusting the fair value of our derivative instruments for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as quotations on interest rates,collateral postings, thresholds, mutual puts, and guarantees. These derivative instruments 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.
|
| |
| W. P. Carey 2019 10-K– 104 |
Notes to Consolidated Financial Statements
The stock warrants were measured at fair value using valuation models that incorporate market inputs and our own assumptions about future cash flows. We classified these assets as Level 3 because these assets 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 (Note 10). These derivative instruments 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.
Redeemable Noncontrolling Interest — We account for the noncontrolling interest in W. P. Carey International, LLC, or WPCI, held by a third party as a redeemable noncontrolling interest (Note 14). We determined the valuation of redeemable noncontrolling interest using widely accepted valuation techniques, including comparable transaction analysis, comparable public company analysis, and discounted cash flow analysis. We classified this liability as Level 3.
Equity Investment in CESH I— We have elected to account for our investment in CESH, Iwhich is included in Equity investments in the Managed Programs and real estate in the consolidated financial statements, at fair value by selecting the equity method fair value option available under U.S. GAAP (Note 78). We classified this investment as Level 3 because we primarily used valuation models that incorporate unobservable inputs to determine its fair value. The fair value of our equity investment in CESH I approximated its carrying value as of December 31, 2016.2019 and 2018.
|
| |
| W. P. Carey 2016 10-K– 123
|
NotesInvestment in Shares of GCIF — In August 2017, we resigned as the advisor to Consolidated Financial Statements
CCIF, effective as of September 11, 2017 (Note 1). As such, we reclassified our investment in shares of CCIF (known since October 23, 2017 as GCIF) from Equity investments in the Managed Programs and real estate to Other assets, net in our consolidated balance sheets and accounted for it under the cost method, since we no longer shared decision-making responsibilities with the third-party investment partner. We received distributions from our investment in CCIF during the year ended December 31, 2017 of $0.9 million, which was included within Equity in earnings of equity method investments in the Managed Programs and real estate in the consolidated statements of income. Following our resignation as the advisor to CCIF in the third quarter of 2017, distributions of earnings from GCIF are recorded within Other gains and (losses) in the consolidated financial statements.
Following our adoption of ASU 2016-01, effective January 1, 2018, (Note 2), we account for our investment in shares of GCIF at fair value. We classified this investment as Level 2 because we used a quoted price from an inactive market to determine its fair value. During the year ended December 31, 2019, we redeemed a portion of our investment in shares of GCIF for approximately $9.7 million and recognized a net loss of $0.6 million, which was included within Other gains and (losses) in the consolidated statements of income. Distributions of earnings from GCIF and unrealized gains or losses recognized on GCIF are recorded within Other gains and (losses) in the consolidated financial statements. During the year ended December 31, 2019, we recognized unrealized losses on our investment in shares of GCIF totaling $1.1 million, due to a decrease in the NAV of the investment. The fair value of our investment in shares of GCIF approximated its carrying value, which was $12.2 million and $23.6 million at December 31, 2019 and 2018, respectively.
We did not have any transfers into or out of Level 1, Level 2, and Level 3 category of measurements during either the years ended December 31, 20162019 or 2015.2018. Gains and losses (realized and unrealized) recognized on items measured at fair value on a recurring basis included in earnings are reported within Other gains and (losses) on our consolidated financial statements.
Our other material financial instruments had the following carrying values and fair values as of the dates shown (dollars in thousands):
|
| | | | | | | | | | | | | | | | | |
| | | | December 31, 2016 | | December 31, 2015 |
| | Level | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
Senior Unsecured Notes, net (a) (b) (c) | 2 | | $ | 1,807,200 |
| | $ | 1,828,829 |
| | $ | 1,476,084 |
| | $ | 1,459,544 |
|
Non-recourse debt, net (a) (b) (d) | 3 | | 1,706,921 |
| | 1,711,364 |
| | 2,269,421 |
| | 2,293,542 |
|
Note receivable (d) | 3 | | 10,351 |
| | 10,046 |
| | 10,689 |
| | 10,610 |
|
|
| | | | | | | | | | | | | | | | | |
| | | | December 31, 2019 | | December 31, 2018 |
| | Level | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
Senior Unsecured Notes, net (a) (b) (c) | 2 | | $ | 4,390,189 |
| | $ | 4,682,432 |
| | $ | 3,554,470 |
| | $ | 3,567,593 |
|
Non-recourse mortgages, net (a) (b) (d) | 3 | | 1,462,487 |
| | 1,487,892 |
| | 2,732,658 |
| | 2,737,861 |
|
__________
|
| |
| W. P. Carey 2019 10-K– 105 |
Notes to Consolidated Financial Statements
| |
| (a) | In accordance with ASU 2015-03, we reclassified deferred financing costs from Other assets, net to Non-recourse debt, net and Senior Unsecured Notes, net as of December 31, 2015 (Note 2). The carrying value of Non-recourse debt, net includes unamortized deferred financing costs of $1.3 million and $1.8 million at December 31, 2016 and 2015, respectively. The carrying value of Senior Unsecured Notes, net (Note 11) includes unamortized deferred financing costs of $12.1$22.8 million and $10.5$19.7 million at December 31, 20162019 and 2015,2018, respectively. The carrying value of Non-recourse mortgages, net includes unamortized deferred financing costs of $0.6 million and $0.8 million at December 31, 2019 and 2018, respectively. |
| |
| (b) | The carrying value of Non-recourse debt, net includes unamortized discount of $0.2 million at December 31, 2016 and unamortized premium of $3.8 million at December 31, 2015. The carrying value of Senior Unsecured Notes, net includes unamortized discount of $7.8$20.5 million and $15.8 million at both December 31, 20162019 and 2015.2018, respectively. The carrying value of Non-recourse mortgages, net includes unamortized discount of $6.2 million and $21.8 million at December 31, 2019 and 2018, respectively. |
| |
| (c) | We determined the estimated fair value of the Senior Unsecured Notes (Note 11) using quotedobserved market prices in an open market with limited trading volume where available. In cases where there was no trading volume, we determined the estimated fair value using a discounted cash flow model using a rate that reflects the average yield of similar market participants. volume. |
| |
| (d) | We determined the estimated fair value of these financial instrumentsour non-recourse mortgage loans using a discounted cash flow model that estimates the present value of the future loan payments by discounting such payments at current estimated market interest rates. The estimated market interest rates take into accountconsider interest rate risk and the value of the underlying collateral, which includes quality of the collateral, the credit quality of the tenant/obligor, and the time until maturity. |
We estimated that our other financial assets and liabilities, (excludingincluding amounts outstanding under our Senior Unsecured Credit Facility (Note 11) and our loans receivable, but excluding net investments in direct financing leases)leases, had fair values that approximated their carrying values at both December 31, 20162019 and 2015.2018.
Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges)
We periodically assess whether there are any indicators that the value of our real estate investments may be impaired or that their carrying value may not be recoverable. For investmentsOur impairment policies are described in real estate held for use for which an impairment indicator is identified, we follow a two-step process to determine whether the investment is impaired and to determine the amount of the charge. First, we compare the carrying value of the property’s asset group to the future undiscounted net cash flows that we expect the property’s asset group will generate, including any estimated proceeds from the eventual sale of the property’s asset group. If this amount is less than the carrying value, the property’s asset group is considered to be not recoverable. We then measure the impairment charge as the excess of the carrying value of the property’s asset group over the estimated fair value of the property’s asset group, which is primarily determined using market information such as recent comparable sales, broker quotes, or third-party appraisals. If relevant market information is not available or is not deemed appropriate, we perform a future net cash flow analysis, discounted for inherent risk associated with each investment. We determined that the significant inputs used to value these investments fall within Level 3 for fair value reporting. As a result of our assessments, we calculated impairment charges based on market conditions and assumptions that existed at the time. The valuation of real estate is subject to significant judgment and actual results may differ materially if market conditions or the underlying assumptions change.Note 2.
|
| |
| W. P. Carey 2016 10-K– 124
|
Notes to Consolidated Financial Statements
The following table presents information about assets for which we recorded an impairment charge and that were measured at fair value on a non-recurring basis (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Year Ended December 31, 2014 |
| | Fair Value Measurements | | Total Impairment Charges | | Fair Value
Measurements | | Total Impairment
Charges | | Fair Value
Measurements | | Total Impairment
Charges |
Impairment Charges in Continuing Operations | | | | | | | | | | | |
| Real estate | $ | 155,839 |
| | $ | 52,316 |
| | $ | 63,027 |
| | $ | 26,597 |
| | $ | 26,503 |
| | $ | 21,738 |
|
| Net investments in direct financing leases | 23,775 |
| | 6,987 |
| | 65,132 |
| | 3,309 |
| | 39,158 |
| | 1,329 |
|
| Equity investments in real estate | — |
| | — |
| | — |
| | — |
| | — |
| | 735 |
|
| | | | $ | 59,303 |
| | | | $ | 29,906 |
| | | | $ | 23,802 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2019 | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 |
| | Fair Value Measurements | | Total Impairment Charges | | Fair Value
Measurements | | Total Impairment
Charges | | Fair Value
Measurements | | Total Impairment
Charges |
| Impairment Charges | | | | | | | | | | | |
| Net investments in direct financing leases | $ | 33,115 |
| | $ | 31,194 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Land, buildings and improvements and intangibles | 1,012 |
| | 1,345 |
| | 7,797 |
| | 4,790 |
| | 2,914 |
| | 2,769 |
|
| | | | $ | 32,539 |
| | | | $ | 4,790 |
| | | | $ | 2,769 |
|
Impairment charges, and their related triggering events and fair value measurements, recognized during 2016, 2015,2019, 2018, and 20142017 were as follows:
Real Estate
2016 — During the year ended December 31, 2016, we recognized impairment charges totaling $52.3 million, inclusive of an amount attributable to a noncontrolling interest of $1.2 million, on 18 properties, including a portfolio of 14 properties, in order to reduce the carrying values of the properties to their estimated fair values. The fair value measurements for substantially all of these properties approximated their estimated selling prices, less estimated costs to sell. We recognized impairment charges on the portfolio of 14 properties totaling $41.0 million, including $10.2 million allocated to goodwill. We disposed of 15 of these properties during 2016 (Note 17) and two of these properties in January 2017 (Note 20).
2015 — During the year ended December 31, 2015, we recognized impairment charges totaling $26.6 million, inclusive of an amount attributable to a noncontrolling interest of $1.0 million, on seven properties and a parcel of vacant land in order to reduce the carrying values of the properties to their estimated fair values. The fair value measurements for five of the properties and the parcel of vacant land approximated their estimated selling prices, and we recognized impairment charges totaling $10.9 million on these properties. We disposed of two of these properties during 2015, one of these properties during 2016, and one of these properties in January 2017 (Note 20).
We reduced the estimated holding period for another property due to the expected expiration of its related lease within one year after December 31, 2015 and recognized an impairment charge of $8.7 million on the property. The fair value measurement related to the impairment charge was determined by estimating discounted cash flows using three significant unobservable inputs, which are the cash flow discount rate, the residual discount rate, and the residual capitalization rate equal to 9.25%, 9.75%, and 8.5%, respectively. We disposed of this property in January 2017 (Note 20).
The building located on another property was demolished in connection with the redevelopment of the property, which commenced in December 2015 and was completed in October 2016 (Note 5), and the fair value of the building was reduced to zero. We recognized an impairment charge of $6.9 million on this property.
2014 — During the year ended December 31, 2014, we recognized impairment charges totaling $7.8 million on 13 properties in order to reduce the carrying values of the properties to their estimated fair values, which approximated their estimated selling prices.
Additionally, we recognized an impairment charge of $14.0 million on a property during the year ended December 31, 2014 as result of the tenant vacating the property. The fair value measurements relating to the $14.0 million impairment charge were determined by a direct cap approach and market approach and utilizing the average of these two approaches, as the property has potential utility as both a commercial net lease building (direct cap approach) and a redeveloped residential structure (market approach). The fair value under the market approach was determined by comparing the property to similar properties that have been sold or offered for sale, with adjustments made for differences in date of sale, age, condition, size, location, land/building ratio, local tax policies, and other physical characteristics and circumstances influencing the sale. The fair value under the direct cap approach was determined by estimating future net operating income of the leased up asset utilizing comparable market rents that have been leased or offered for lease, capitalizing the resulting net operating income utilizing a residual capitalization rate of 8.0%, offset by the leasing capital required to secure a tenant and the market vacancy assumptions.
|
| |
| W. P. Carey 2016 10-K– 125
|
Notes to Consolidated Financial Statements
Net Investments in Direct Financing Leases
20162019 — During the year ended December 31, 2016,2019, we recognized an impairment charge of $7.0charges totaling $31.2 million on one property5 properties accounted for as Net investments in direct financing leases, primarily due to a lease restructuring, based on the cash flows expected to be derived from the underlying assets (discounted at the rate implicit in the lease), in accordance with ASC 310, Receivables.
Land, Buildings and Improvements and Intangibles
2019 — During the year ended December 31, 2019, we recognized an impairment charge of $1.3 million on a property in order to reduce the carrying value of the property to its estimated fair value. The fair value measurement for this property approximated its estimated selling price, and this property was sold in February 2020 (Note 20).
|
| |
| W. P. Carey 2019 10-K– 106 |
Notes to Consolidated Financial Statements
2018 — During the year ended December 31, 2018, we recognized impairment charges totaling $4.8 million on 2 properties in order to reduce the carrying values of the properties to their estimated fair values, which was $3.9 million in each case. We recognized an impairment charge of $3.8 million on one of those properties due to a tenant bankruptcy and the resulting vacancy, and the fair value measurement for the property was determined by estimating discounted cash flows using market rent assumptions. We recognized an impairment charge of $1.0 million on the other property due to a lease expiration and resulting vacancy, and the fair value measurement for the property approximated its estimated selling price, less estimated costs to sell. Theprice. This property was classified as held for sale as of December 31, 2016. We sold this property in January July 2019.
The fair value measurements related to the impairment charges recognized on our Net investments in direct financing leases during 2015 and 2014 were determined by estimating market rents at the time the leases expire, taking into account the following factors related to the properties and their locations: (i) estimated rent growth in property location; (ii) the quality of the property relative to other properties nearby; and (iii) the number of vacant properties nearby.
2015 — During the year ended December 31, 2015,2017, we recognized impairment charges totaling $3.3$2.8 million on five2 properties accounted for as Net investments in direct financing leases in connection with an other-than-temporary decline inorder to reduce the estimated faircarrying values of the buildings’ residualproperties to their estimated fair values.
2014 — During The tenant in one of the year ended December 31, 2014, weproperties filed for bankruptcy and the fair value measurement for the property was based on the average sales price per square foot of comparable properties that were sold during 2017 by other entities. We recognized an impairment charges totaling $1.3charge of $2.2 million on eight properties accountedthis property, which was sold in August 2019. The fair value measurement for as Net investments in direct financing leases in connection with an other-than-temporary decline in the other property approximated its estimated fair values of the buildings’ residual values.
Equity Investments in Real Estate
During the year ended December 31, 2014,selling price and we recognized an other-than-temporary impairment charge of $0.7$0.6 million on the Special Member Interestthis property, which was sold in CPA®:16 – Global’s operating partnership to reduce its carrying value to its estimated fair value, which had declined. The estimated fair value was computed by estimating discounted cash flows using two significant unobservable inputs, which are the discount rate and the estimated general and administrative costs as a percentage of assets under management with a weighted-average range of 12.75% - 15.75% and 35 - 45 basis points, respectively. The valuation was also dependent upon the estimated date of a liquidity event for CPA®:16 – Global because cash flows attributable to this investment would cease upon such event.March 2018.
Note 10. 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 four main components of economic risk that impact us: interest rate risk, credit risk, market risk, and foreign currency risk. We are primarily subject to interest rate risk on our interest-bearing liabilities, including our Senior Unsecured Credit Facility and Senior Unsecured Notes (Note 11). 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 securities and the shares or limited partnership units we hold in the Managed Programs due to changes in interest rates or other market factors. We own investments in North America, Europe, Australia, and AsiaJapan and are subject to risks associated with fluctuating foreign currency exchange rates.
|
| |
| W. P. Carey 2016 10-K– 126
|
Notes to Consolidated Financial Statements
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 into, and do not plan to enter into, financial instruments for trading or speculative purposes. In addition to entering into derivative instruments on our own behalf, we may also be a party to derivative instruments that are embedded in other contracts, and we may be granted common stock warrants by lessees when structuring lease transactions, which are considered to be derivative instruments. The primary risks related to our use of derivative instruments include a counterparty to a hedging arrangement defaulting 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 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 derivativederivatives designated and that qualified,qualify as a cash flow hedge, the effective portion ofhedges, the change in fair value of the derivative is recognized in Other comprehensive loss(loss) income until the hedged item is recognized in earnings. Gains and losses on the cash flow hedges representing hedge components excluded from the assessment of effectiveness are recognized in earnings over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with our accounting policy election. Such gains and losses are recorded within Other gains and (losses) or Interest expense in our consolidated statements of income. The earnings recognition of excluded components is presented in the same line item as the hedged transactions. For a derivativederivatives designated and that qualified,qualify as a net investment hedge, the effective portion of the change in the fair value and/or the net settlement of the derivative is reported in Other comprehensive loss(loss) income as part of the cumulative foreign currency translation adjustment. Amounts are reclassified out of Other comprehensive loss(loss) income into earnings (within Gain on sale of real estate, net, in our consolidated statements of income) when the hedged net investment is either sold or substantially liquidated. The ineffective portion of the change in fair value of any derivative is immediately recognized in earnings.
The following table sets forth certain information regarding our derivative instruments (in thousands):
|
| | | | | | | | | | | | | | | | | | |
| Derivatives Designated as Hedging Instruments | | Balance Sheet Location | | Asset Derivatives Fair Value at | | Liability Derivatives Fair Value at |
| | | December 31, 2016 | | December 31, 2015 | | December 31, 2016 | | December 31, 2015 |
| Foreign currency forward contracts | | Other assets, net | | $ | 37,040 |
| | $ | 38,975 |
| | $ | — |
| | $ | — |
|
| Foreign currency collars | | Other assets, net | | 17,382 |
| | 7,718 |
| | — |
| | — |
|
| Interest rate swaps | | Other assets, net | | 190 |
| | — |
| | — |
| | — |
|
| Interest rate cap | | Other assets, net | | 45 |
| | — |
| | — |
| | — |
|
| Interest rate swaps | | Accounts payable, accrued expenses and other liabilities | | — |
| | — |
| | (2,996 | ) | | (4,762 | ) |
| Derivatives Not Designated as Hedging Instruments | | | | | | | | | | |
| Stock warrants | | Other assets, net | | 3,752 |
| | 3,618 |
| | — |
| | — |
|
Interest rate swaps (a) | | Other assets, net | | 9 |
| | 9 |
| | — |
| | — |
|
Interest rate swaps (a) | | Accounts payable, accrued expenses and other liabilities | | — |
| | — |
| | — |
| | (2,612 | ) |
| Total derivatives | | | | $ | 58,418 |
| | $ | 50,320 |
| | $ | (2,996 | ) | | $ | (7,374 | ) |
__________
|
| |
(a) | These interest rate swaps do not qualify for hedge accounting; however, they do protect against fluctuations in interest rates related to the underlying variable-rate debt.W. P. Carey 2019 10-K– 107 |
Notes to Consolidated Financial Statements
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 December 31, 20162019 and 2015, no2018, 0 cash collateral had been posted nor received for any of our derivative positions.
The following table sets forth certain information regarding our derivative instruments (in thousands):
|
| | | | | | | | | | | | | | | | | | |
| Derivatives Designated as Hedging Instruments | | Balance Sheet Location | | Asset Derivatives Fair Value at | | Liability Derivatives Fair Value at |
| | | December 31, 2019 | | December 31, 2018 | | December 31, 2019 | | December 31, 2018 |
| Foreign currency collars | | Other assets, net | | $ | 14,460 |
| | $ | 8,536 |
| | $ | — |
| | $ | — |
|
| Foreign currency forward contracts | | Other assets, net | | 9,689 |
| | 22,520 |
| | — |
| | — |
|
| Interest rate caps | | Other assets, net | | 1 |
| | 56 |
| | — |
| | — |
|
| Interest rate swaps | | Other assets, net | | — |
| | 1,435 |
| | — |
| | — |
|
| Interest rate swaps | | Accounts payable, accrued expenses and other liabilities | | — |
| | — |
| | (4,494 | ) | | (3,387 | ) |
| Foreign currency collars | | Accounts payable, accrued expenses and other liabilities | | — |
| | — |
| | (1,587 | ) | | (1,679 | ) |
| | | | | 24,150 |
| | 32,547 |
| | (6,081 | ) | | (5,066 | ) |
| Derivatives Not Designated as Hedging Instruments | | | | | | | | | | |
| Stock warrants | | Other assets, net | | 5,000 |
| | 5,500 |
| | — |
| | — |
|
Interest rate swap (a) | | Other assets, net | | 8 |
| | — |
| | — |
| | — |
|
| Foreign currency forward contracts | | Other assets, net | | — |
| | 7,144 |
| | — |
| | — |
|
Interest rate swaps (a) | | Accounts payable, accrued expenses and other liabilities | | — |
| | — |
| | (93 | ) | | (343 | ) |
| | | | | 5,008 |
| | 12,644 |
| | (93 | ) | | (343 | ) |
| Total derivatives | | | | $ | 29,158 |
| | $ | 45,191 |
| | $ | (6,174 | ) | | $ | (5,409 | ) |
__________
|
| |
| (a) | W. P. Carey 2016 10-K– 127
These interest rate swaps do not qualify for hedge accounting; however, they do protect against fluctuations in interest rates related to the underlying variable-rate debt. |
Notes to Consolidated Financial Statements
The following tables present the impact of our derivative instruments in the consolidated financial statements (in thousands):
| | | | | Amount of Gain (Loss) Recognized on Derivatives in Other Comprehensive Loss (Effective Portion) (a) | | Amount of Gain (Loss) Recognized on Derivatives in Other Comprehensive (Loss) Income (a) |
| | | Years Ended December 31, | | Years Ended December 31, |
| Derivatives in Cash Flow Hedging Relationships | | 2016 | | 2015 | | 2014 | | 2019 | | 2018 | | 2017 |
| Foreign currency collars | | $ | 9,679 |
| | $ | 7,769 |
| | $ | — |
| | $ | 5,997 |
| | $ | 9,029 |
| | $ | (19,220 | ) |
| Foreign currency forward contracts | | (1,948 | ) | | 15,949 |
| | 23,167 |
| | (4,253 | ) | | (1,905 | ) | | (19,120 | ) |
| Interest rate swaps | | 1,291 |
| | (284 | ) | | (2,628 | ) | | (1,666 | ) | | (1,560 | ) | | 1,550 |
|
| Interest rate caps | | 21 |
| | 64 |
| | 290 |
| | 219 |
| | (68 | ) | | (29 | ) |
Derivatives in Net Investment Hedging Relationships (b) | | | | | | | | | | | | |
| Foreign currency collars | | | 10 |
| | — |
| | — |
|
| Foreign currency forward contracts | | (462 | ) | | 5,819 |
| | 2,566 |
| | 7 |
| | (2,630 | ) | | (5,652 | ) |
| Total | | $ | 8,581 |
| | $ | 29,317 |
| | $ | 23,395 |
| | $ | 314 |
| | $ | 2,866 |
| | $ | (42,471 | ) |
|
| | | | | | | | | | | | | | |
| | | | | Amount of Gain (Loss) on Derivatives Reclassified from Other Comprehensive Loss (Effective Portion) (c) |
| Derivatives in Cash Flow Hedging Relationships | | Location of Gain (Loss) Recognized in Income | | Years Ended December 31, |
| | | 2016 | | 2015 | | 2014 |
| Foreign currency forward contracts | | Other income and (expenses) | | $ | 7,442 |
| | $ | 7,272 |
| | $ | (103 | ) |
| Interest rate swaps and caps | | Interest expense | | (2,106 | ) | | (2,291 | ) | | (2,691 | ) |
| Foreign currency collars | | Other income and (expenses) | | 1,968 |
| | 357 |
| | — |
|
| Total | | | | $ | 7,304 |
| | $ | 5,338 |
| | $ | (2,794 | ) |
|
| |
| W. P. Carey 2019 10-K– 108 |
Notes to Consolidated Financial Statements
|
| | | | | | | | | | | | | | |
| | | | | Amount of Gain (Loss) on Derivatives Reclassified from Other Comprehensive (Loss) Income |
| Derivatives in Cash Flow Hedging Relationships | | Location of Gain (Loss) Recognized in Income | | Years Ended December 31, |
| | | 2019 | | 2018 | | 2017 |
| Foreign currency forward contracts | | Other gains and (losses) | | $ | 9,582 |
| | $ | 6,533 |
| | $ | 6,845 |
|
| Foreign currency collars | | Other gains and (losses) | | 5,759 |
| | 2,359 |
| | 3,650 |
|
| Interest rate swaps and caps | | Interest expense | | (2,256 | ) | | (400 | ) | | (1,294 | ) |
| Derivatives in Net Investment Hedging Relationships | | | | | | | | |
Foreign currency forward contracts (c) | | Gain on sale of real estate, net | | — |
| | 7,609 |
| | — |
|
| Total | | | | $ | 13,085 |
| | $ | 16,101 |
| | $ | 9,201 |
|
__________
| |
| (a) | Excludes net gainslosses of $0.2$1.4 million, $0.6 million and $0.3$1.0 million, recognized on unconsolidated jointly owned investments for the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, respectively. |
| |
| (b) | The effective portion of the changechanges in fair value and the settlement of these contracts are reported in the foreign currency translation adjustment section of Other comprehensive loss until the underlying investment is sold, at which time we reclassify the gain or loss to earnings.(loss) income. |
| |
| (c) | ExcludesWe reclassified net foreign currency transaction gains recognizedfrom net investment hedge foreign currency forward contracts related to our Australian investments from Accumulated other comprehensive loss to Gain on unconsolidated jointly ownedsale of real estate, net (as an increase to Gain on sale of real estate, net) in connection with the disposal of all of our Australian investments of $0.4 million for the year endedin December 31, 2014. There were no such gains or losses recognized for the years ended December 31, 2016 or 2015.2018 (Note 14, Note 17). |
Amounts reported in Other comprehensive loss(loss) income related to interest rate swaps will be reclassified to Interest expense as interest is incurred on our variable-rate debt. Amounts reported in Other comprehensive loss(loss) income related to foreign currency derivative contracts will be reclassified to Other incomegains and (expenses)(losses) when the hedged foreign currency contracts are settled. As of December 31, 2016,2019, we estimate that an additional $0.8$1.9 million and $14.4$9.3 million will be reclassified as interest expense and other income,gains, respectively, during the next 12 months.
The following table presents the impact of our derivative instruments in the consolidated financial statements (in thousands):
|
| | | | | | | | | | | | | | |
| | | | | Amount of Gain (Loss) on Derivatives Recognized in Income |
| Derivatives Not in Cash Flow Hedging Relationships | | Location of Gain (Loss) Recognized in Income | | Years Ended December 31, |
| | | 2019 | | 2018 | | 2017 |
| Foreign currency forward contracts | | Other gains and (losses) | | $ | 575 |
| | $ | 356 |
| | $ | (53 | ) |
| Stock warrants | | Other gains and (losses) | | (500 | ) | | (99 | ) | | (67 | ) |
| Interest rate swaps | | Interest expense | | 265 |
| | — |
| | — |
|
| Foreign currency collars | | Other gains and (losses) | | 184 |
| | 455 |
| | (754 | ) |
| Interest rate swaps | | Other gains and (losses) | | (118 | ) | | (20 | ) | | 18 |
|
| Derivatives in Cash Flow Hedging Relationships | | | | | | | | |
| Interest rate swaps | | Interest expense | | (941 | ) | | 286 |
| | 693 |
|
| Interest rate caps | | Interest expense | | (220 | ) | | — |
| | — |
|
| Foreign currency forward contracts | | Other gains and (losses) | | (132 | ) | | 132 |
| | (75 | ) |
| Foreign currency collars | | Other gains and (losses) | | 7 |
| | 18 |
| | (32 | ) |
| Total | | | | $ | (880 | ) | | $ | 1,128 |
| | $ | (270 | ) |
|
| | | | | | | | | | | | | | |
| | | | | Amount of Gain (Loss) on Derivatives Recognized in Income |
| Derivatives Not in Cash Flow Hedging Relationships | | Location of Gain (Loss) Recognized in Income | | Years Ended December 31, |
| | | 2016 | | 2015 | | 2014 |
| Interest rate swaps | | Other income and (expenses) | | $ | 2,682 |
| | $ | 4,164 |
| | $ | 3,186 |
|
| Foreign currency collars | | Other income and (expenses) | | 824 |
| | 514 |
| | — |
|
| Stock warrants | | Other income and (expenses) | | 134 |
| | (134 | ) | | 134 |
|
| Foreign currency forward contracts | | Other income and (expenses) | | — |
| | (296 | ) | | — |
|
| Derivatives in Cash Flow Hedging Relationships | | | | | | | | |
Interest rate swaps (a) | | Interest expense | | 657 |
| | 649 |
| | 761 |
|
| Foreign currency forward contracts | | Other income and (expenses) | | 40 |
| | 45 |
| | — |
|
| Foreign currency collars | | Other income and (expenses) | | (7 | ) | | 23 |
| | — |
|
| Total | | | | $ | 4,330 |
| | $ | 4,965 |
| | $ | 4,081 |
|
__________
|
| |
| W. P. Carey 2016 10-K– 128
|
Notes to Consolidated Financial Statements
| |
(a) | Relates to the ineffective portion of the hedging relationship. |
See below for information on our purposes for entering into derivative instruments and for information on derivative instruments owned by unconsolidated investments, which are excluded from the tables above.instruments.
|
| |
| W. P. Carey 2019 10-K– 109 |
Notes to Consolidated Financial Statements
Interest Rate Swaps and CapCaps
We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we attempt to obtain mortgagegenerally seek long-term debt financing on a long-term, fixed-rate basis. However, from time to time, we or our investment partners have obtained, and may in the future obtain, variable-rate, non-recourse mortgage loans and, as a result, we have entered into, and may continue to enter into, interest rate swap agreements or interest rate cap agreements with counterparties. Interest rate swaps, which effectively convert the variable-rate debt service obligations of a 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. Interest rate caps limit the effective borrowing rate of variable-rate debt obligations while allowing participants to share in downward shifts in interest rates. Our objective in using these derivatives is to limit our exposure to interest rate movements.
The interest rate swaps and caps that our consolidated subsidiaries had outstanding at December 31, 20162019 are summarized as follows (currency in thousands):
| | | | | Number of Instruments |
| Notional Amount |
| Fair Value at
December 31, 2016 (a) | | | | | | | | | |
| Interest Rate Derivatives | |
| | Number of Instruments |
| Notional
Amount |
| Fair Value at
December 31, 2019 (a) |
| Designated as Cash Flow Hedging Instruments | | | | | | | | |
| Interest rate swaps | | 13 | | 118,145 |
| USD | | $ | (2,474 | ) | | 5 | | 76,028 |
| USD | | $ | (3,122 | ) |
| Interest rate swap | | 1 | | 5,900 |
| EUR | | (332 | ) | |
| Interest rate swaps | | | 2 | | 49,655 |
| EUR | | (1,372 | ) |
| Interest rate cap | | 1 | | 30,867 |
| EUR | | 45 |
| | 1 | | 11,388 |
| EUR | | 1 |
|
| Not Designated as Cash Flow Hedging Instruments | | | | | |
| Interest rate cap | | | 1 | | 6,394 |
| GBP | | — |
|
| Not Designated as Hedging Instruments | | | | | |
Interest rate swap (b) | | | 1 | | 4,608 |
| EUR | | (93 | ) |
Interest rate swap (b) | | 1 | | 2,993 |
| USD | | 9 |
| | 1 | | 7,750 |
| USD | | 8 |
|
| | | | | $ | (2,752 | ) | | | | $ | (4,578 | ) |
__________
| |
| (a) | Fair value amounts are based on the exchange rate of the euro or British pound sterling at December 31, 2016,2019, as applicable. |
| |
| (b) | ThisThese interest rate swap doesswaps do not qualify for hedge accounting; however, it doesthey do protect against fluctuations in interest rates related to the underlying variable-rate debt. |
Foreign Currency Forward Contracts and Collars
We are exposed to foreign currency exchange rate movements, primarily in the euro and, to a lesser extent, the British pound sterling, the Australian dollar,Danish krone, the Norwegian krone, and certain other currencies. 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 that there is a 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 and collars. 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. A foreign currency collar consists of a written call option and a purchased put option to sell the foreign currency at a range of predetermined exchange rates. 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. A foreign currency collar guarantees that the exchange rate of the currency will not fluctuate beyond the range of the options’ strike prices. Our foreign currency forward contracts and foreign currency collars have maturities of 77 months or less.
|
| |
| | W. P. Carey 20162019 10-K– 129110 |
Notes to Consolidated Financial Statements
The following table presents the foreign currency derivative contracts we had outstanding at December 31, 2016, which were designated as cash flow hedges2019 (currency in thousands):
|
| | | | | | | | | | |
| Foreign Currency Derivatives | | Number of Instruments | | Notional
Amount | | Fair Value at December 31, 2019 |
| Designated as Cash Flow Hedging Instruments | | | | | | | |
| Foreign currency collars | | 86 | | 277,624 |
| EUR | | $ | 11,696 |
|
| Foreign currency forward contracts | | 10 | | 30,376 |
| EUR | | 9,671 |
|
| Foreign currency collars | | 61 | | 44,000 |
| GBP | | 1,162 |
|
| Foreign currency forward contract | | 1 | | 729 |
| NOK | | 18 |
|
| Foreign currency collars | | 3 | | 2,000 |
| NOK | | 7 |
|
| Designated as Net Investment Hedging Instruments | | | | | | | |
| Foreign currency collar | | 1 | | 2,500 |
| NOK | | 8 |
|
| | | | | | | | $ | 22,562 |
|
|
| | | | | | | | | | |
| | | Number of Instruments | | Notional
Amount | | Fair Value at December 31, 2016 |
| Foreign Currency Derivatives | | | |
| Designated as Cash Flow Hedging Instruments | | | | | | | |
| Foreign currency forward contracts | | 36 | | 98,839 |
| EUR | | $ | 26,540 |
|
| Foreign currency collars | | 20 | | 43,000 |
| GBP | | 11,095 |
|
| Foreign currency collars | | 20 | | 80,150 |
| EUR | | 6,287 |
|
| Foreign currency forward contracts | | 12 | | 15,256 |
| AUD | | 1,602 |
|
| Foreign currency forward contracts | | 8 | | 4,280 |
| GBP | | 1,393 |
|
| Designated as Net Investment Hedging Instruments | | | | | | | |
| Foreign currency forward contracts | | 4 | | 79,658 |
| AUD | | 7,505 |
|
| | | | | | | | $ | 54,422 |
|
Credit Risk-Related Contingent Features
We measure our credit exposure on a counterparty basis as the net positive aggregate estimated fair value of our derivatives, net of any collateral received. NoNaN collateral was received as of December 31, 2016.2019. At December 31, 2016,2019, our total credit exposure and the maximum exposure to any single counterparty was $54.5$23.0 million and $29.5$7.2 million, respectively.
Some of the agreements we have with our derivative counterparties contain cross-default provisions that could trigger a declaration of default on our derivative obligations if we default, or are capable of being declared in default, on certain of our indebtedness. At December 31, 2016,2019, we had not been declared in default on any of our derivative obligations. The estimated fair value of our derivatives in a net liability position was $3.3$9.6 million and $8.2$7.3 million at December 31, 20162019 and 2015,2018, respectively, which included accrued interest and any nonperformance risk adjustments. If we had breached any of these provisions at December 31, 20162019 or 2015,2018, we could have been required to settle our obligations under these agreements at their aggregate termination value of $3.3$9.9 million and $8.3$7.6 million, respectively.
Net Investment Hedges
At December 31, 2016 and 2015, the amounts borrowed in euro outstanding under our Revolver (Note 11) were €272.0 million and €361.0 million, respectively. Additionally, weWe have issuedcompleted 5 offerings of euro-denominated senior notes, each with a principal amount of €500.0 million, (Note 11), which we refer to as the 2.0% Senior Notes.Notes due 2023, 2.25% Senior Notes due 2024, 2.250% Senior Notes due 2026, 2.125% Senior Notes due 2027, and 1.350% Senior Notes due 2028 (Note 11). In addition, at December 31, 2019, the amounts borrowed in Japanese yen, euro, and British pound sterling outstanding under our Unsecured Revolving Credit Facility (Note 11) were ¥2.4 billion, €117.0 million, and £36.0 million, respectively. These borrowings are designated as, and are effective as, economic hedges of our net investments in foreign entities. Variability in the exchange rates of the foreign currencies with respect to the U.S. dollar impactsExchange rate variations impact our financial results asbecause the financial results of our foreign subsidiaries are translated to U.S. dollars each period, with the effect of changes in the foreign currencies to U.S. dollar exchange ratesrate variations being recorded in Other comprehensive loss(loss) income as part of the cumulative foreign currency translation adjustment. As a result, the borrowings in euro under our Revolver and 2.0% Senior Notes are recorded at cost in the consolidated financial statements and all changes in the value of our borrowings under our euro-denominated senior notes and changes in the value of our euro and Japanese yen borrowings under our Unsecured Revolving Credit Facility, related to changes in the spot rates, will be reported in the same manner as aforeign currency translation adjustment,adjustments, which isare recorded in Other comprehensive loss(loss) income as part of the cumulative foreign currency translation adjustment. Such gains (losses) related to non-derivative net investment hedges were $33.4 million, $66.3 million, and $(163.9) million for the years ended December 31, 2019, 2018, and 2017, respectively.
At December 31, 2016,2019, we also had foreign currency forward contracts that were designated as net investment hedges, as discussed in“Derivative Financial Instruments” above.
|
| |
| | W. P. Carey 20162019 10-K– 130111 |
Notes to Consolidated Financial Statements
Note 11. Debt
Senior Unsecured Credit Facility
As of December 31, 2016,On February 22, 2017, we had a senior credit facility thatentered into the Third Amended and Restated Credit Facility (the “Credit Agreement”), which provided for a $1.5 billion unsecured revolving credit facility or our Revolver, and(our “Unsecured Revolving Credit Facility”), a $250.0€236.3 million term loan, facility, or our Term Loan Facility,and a $100.0 million delayed draw term loan, which we refer to collectively as the Senior“Senior Unsecured Credit Facility.Facility”. The Senioraggregate principal amount (of revolving and term loans) available under the Credit Agreement may be increased up to an amount not to exceed the U.S. dollar equivalent of $2.35 billion, subject to the conditions to increase provided in the Credit Agreement. The Unsecured Revolving Credit Facility also contained a $500.0 million accordion feature that, if exercised, subject to lender commitments, would have allowed us to increase our maximumis used for working capital needs, for acquisitions, and for other general corporate purposes, including the repayment of certain non-recourse mortgage loans. The Credit Agreement permits borrowing capacity under our Revolver from $1.5 billion to $2.0 billion and under the Senior Unsecured Revolving Credit Facility in the aggregate to $2.25 billion. At December 31, 2016, the Senior Unsecured Credit Facility also permitted (i) up to $750.0 million under our Revolver to be borrowed in certain currencies other than the U.S. dollar, (ii) swing line loans up to $50.0 million underdollars.
On February 20, 2020, we amended and restated our Revolver, and (iii) the issuance of letters of credit under our Revolver in an aggregate amount not to exceed $50.0 million. The Senior Unsecured Credit Facility is being used for working capital needs, to refinance our existing indebtedness, for new investments, and for other general corporate purposes.
We exercised a prior accordion feature for(our “Amended Credit Facility”), increasing the
Senior Unsecured Credit Facility on January 15, 2015, which allowed us to increase the maximum borrowing capacity of our
Revolver from $1.0unsecured line of credit to $2.1 billion
and extending the maturity dates of our revolving line of credit, term loan, and delayed draw term loan to
$1.5 billion. In connection with the exercise of this accordion feature, we incurred financing costs totaling $3.1 million, which are being amortized to Interest expense in the consolidated financial statements over the remaining terms of the facility.five years (Note 20).
At December 31, 2016,2019, our RevolverUnsecured Revolving Credit Facility had unusedavailable capacity of $823.3 million, excluding amounts reserved for outstanding letters of credit. As of December 31, 2016, our lenders had issued letters of credit totaling $0.6 million on our behalf in connection with certain contractual obligations, which reduce amounts that may be drawn under our Revolver by the same amount.$1.3 billion. We also incur aan annual facility fee of 0.20% of the total commitment on our Revolver. On January 29, 2016, we exercised our option to extend our Term Loan Facility by an additional year to January 31, 2017. On January 26, 2017, we exercised our second and final option to extend our Term Loan Facility by an additional year to January 31, 2018 (Note 20). At December 31, 2016, we also had an option to extend the maturity date of the Revolver by another year, subject to the conditions provided in the Second Amended and RestatedUnsecured Revolving Credit Agreement dated January 31, 2014, as amended, or the Credit Agreement. On February 22, 2017, we amended and restated our Senior Unsecured Credit Facility. We increased the capacity of our unsecured line of credit under our Amended Credit Facility to $1.85 billion, and extended the maturity dates of our revolving line of credit by four years and our term loan by five years (Note 20).
The following table presents a summary of our Senior Unsecured Credit Facility (dollars in millions)thousands):
|
| | | | | | | | | | | | |
| | | Interest Rate at December 31, 2016 (a) | | | | Principal Outstanding Balance at December 31, |
| Senior Unsecured Credit Facility | | | Maturity Date | | 2016 | | 2015 |
| Revolver: | | | | | | | | |
Revolver - borrowing in U.S. dollars (b) | | LIBOR + 1.10% | | 1/31/2018 | | $ | 390.0 |
| | $ | 92.0 |
|
Revolver - borrowing in euros (b) (c) | | EURIBOR + 1.10% | | 1/31/2018 | | 286.7 |
| | 393.0 |
|
| | | | | | | 676.7 |
| | 485.0 |
|
Term Loan Facility (b) (d) | | LIBOR + 1.25% | | 1/31/2017 | | 250.0 |
| | 250.0 |
|
| | | | | | | $ | 926.7 |
| | $ | 735.0 |
|
|
| | | | | | | | | | | | |
| | | Interest Rate at December 31, 2019 (a) | | Maturity Date at December 31, 2019 | | Principal Outstanding Balance at December 31, |
| Senior Unsecured Credit Facility | | | | 2019 | | 2018 |
Unsecured Revolving Credit Facility: (b) | | | | | | | | |
Unsecured Revolving Credit Facility — borrowing in euros (c) | | EURIBOR + 1.00% | | 2/22/2021 | | $ | 131,438 |
| | $ | 69,273 |
|
| Unsecured revolving credit facility — borrowing in British pounds sterling | | GBP LIBOR + 1.00% | | 2/22/2021 | | 47,534 |
| | — |
|
| Unsecured Revolving Credit Facility — borrowing in Japanese yen | | JPY LIBOR + 1.00% | | 2/22/2021 | | 22,295 |
| | 22,290 |
|
| | | | | | | $ | 201,267 |
| | $ | 91,563 |
|
__________
| |
| (a) | InterestThe applicable interest rate at December 31, 2016 is2019 was based on ourthe credit rating for our Senior Unsecured Notes of BBB/Baa2. |
| |
| (b) | Our Term Loan Facility was scheduled to mature on January 31, 2017. However, on January 26, 2017, we exercised our option to extend the maturity of our Term Loan Facility by an additional year to January 31, 2018 (NoteOn February 20,). In addition, on February 22, 2017, 2020, we entered into our Amended Credit Facility, and increased the capacity of our unsecured line of credit to $1.85 billion, and extendedextending the maturity datesdate of our revolving line of credit by four years and our term loan byto five years (Note 20). |
| |
| (c) | EURIBOR means Euro Interbank Offered Rate. |
| |
(d) | Balance excludes unamortized deferred financing costs of less than $0.1 million and $0.3 million at December 31, 2016 and 2015, respectively (Note 2). |
Senior Unsecured Notes
As set forth in the table below, we have euro and U.S. dollar-denominated senior unsecured notes outstanding with an aggregate principal balance outstanding of $4.4 billion at December 31, 2019 (the “Senior Unsecured Notes”). On June 14, 2019, we completed an underwritten public offering of $325.0 million of 3.850% Senior Notes due 2029, at a price of 98.876% of par value. These 3.850% Senior Notes due 2029 have a 10.1-year term and are scheduled to mature on July 15, 2029. On September 19, 2019, we completed a public offering of €500.0 million of 1.350% Senior Notes due 2028, at a price of 99.266% of par value, issued by our wholly owned finance subsidiary, WPC Eurobond B.V., and fully and unconditionally guaranteed by us. These 1.350% Senior Notes due 2028 have an 8.6-year term and are scheduled to mature on April 15, 2028.
|
| |
| | W. P. Carey 20162019 10-K– 131112 |
Notes to Consolidated Financial Statements
Senior Unsecured Notes
As of December 31, 2016, the senior unsecured notes set forth in the table below had an outstanding aggregate principal balance of $1.8 billion. We refer to these notes and our €500.0 million of 2.25% Senior Notes, as described below and in Note 20, collectively as the Senior Unsecured Notes.
On September 12, 2016, we issued $350.0 million of 4.25% Senior Notes, at a price of 99.682% of par value, in a registered public offering. These 4.25% Senior Notes have a ten-year term and are scheduled to mature on October 1, 2026.
Interest on the Senior Unsecured Notes is payable annually in arrears for our euro-denominated senior notes and semi-annually for U.S. dollar-denominated senior notes. The Senior Unsecured Notes can be redeemed at par within three months of their respective maturities, or we can call the notes at any time for the principal, accrued interest, and a make-whole amount based upon the applicable government bond yield plus 30 to 35 basis points. The following table presents a summary of our Senior Unsecured Notes outstanding at December 31, 2019 (currency in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Principal Amount | | Price of Par Value | | Original Issue Discount | | Effective Interest Rate | | Coupon Rate | | Maturity Date | | Principal Outstanding Balance at December 31, |
Senior Unsecured Notes, net (a) | | Issue Date | | | | | | | | 2019 | | 2018 |
| 2.0% Senior Notes due 2023 | | 1/21/2015 | | € | 500.0 |
| | 99.220 | % | | $ | 4.6 |
| | 2.107 | % | | 2.0 | % | | 1/20/2023 | | $ | 561.7 |
| | $ | 572.5 |
|
| 4.6% Senior Notes due 2024 | | 3/14/2014 | | $ | 500.0 |
| | 99.639 | % | | $ | 1.8 |
| | 4.645 | % | | 4.6 | % | | 4/1/2024 | | 500.0 |
| | 500.0 |
|
| 2.25% Senior Notes due 2024 | | 1/19/2017 | | € | 500.0 |
| | 99.448 | % | | $ | 2.9 |
| | 2.332 | % | | 2.25 | % | | 7/19/2024 | | 561.7 |
| | 572.5 |
|
| 4.0% Senior Notes due 2025 | | 1/26/2015 | | $ | 450.0 |
| | 99.372 | % | | $ | 2.8 |
| | 4.077 | % | | 4.0 | % | | 2/1/2025 | | 450.0 |
| | 450.0 |
|
| 2.250% Senior Notes due 2026 | | 10/9/2018 | | € | 500.0 |
| | 99.252 | % | | $ | 4.3 |
| | 2.361 | % | | 2.250 | % | | 4/9/2026 | | 561.7 |
| | 572.5 |
|
| 4.25% Senior Notes due 2026 | | 9/12/2016 | | $ | 350.0 |
| | 99.682 | % | | $ | 1.1 |
| | 4.290 | % | | 4.25 | % | | 10/1/2026 | | 350.0 |
| | 350.0 |
|
| 2.125% Senior Notes due 2027 | | 3/6/2018 | | € | 500.0 |
| | 99.324 | % | | $ | 4.2 |
| | 2.208 | % | | 2.125 | % | | 4/15/2027 | | 561.7 |
| | 572.5 |
|
| 1.350% Senior Notes due 2028 | | 9/19/2019 | | € | 500.0 |
| | 99.266 | % | | $ | 4.1 |
| | 1.442 | % | | 1.350 | % | | 4/15/2028 | | 561.7 |
| | — |
|
| 3.850% Senior Notes due 2029 | | 6/14/2019 | | $ | 325.0 |
| | 98.876 | % | | $ | 3.7 |
| | 3.986 | % | | 3.850 | % | | 7/15/2029 | | 325.0 |
| | — |
|
| | | | | | | | | | | | | | | | | $ | 4,433.5 |
| | $ | 3,590.0 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Principal Amount | | Price of Par Value | | Original Issue Discount | | Effective Interest Rate | | Coupon Rate | | Maturity Date | | Principal Outstanding Balance at December 31, |
Senior Unsecured Notes, net (a) | | Issue Date | | | | | | | | 2016 | | 2015 |
| 2.0% Senior Notes | | 1/21/2015 | | € | 500.0 |
| | 99.220 | % | | $ | 4.6 |
| | 2.107 | % | | 2.0 | % | | 1/20/2023 | | $ | 527.1 |
| | $ | 544.4 |
|
| 4.6% Senior Notes | | 3/14/2014 | | $ | 500.0 |
| | 99.639 | % | | $ | 1.8 |
| | 4.645 | % | | 4.6 | % | | 4/1/2024 | | 500.0 |
| | 500.0 |
|
| 4.0% Senior Notes | | 1/26/2015 | | $ | 450.0 |
| | 99.372 | % | | $ | 2.8 |
| | 4.077 | % | | 4.0 | % | | 2/1/2025 | | 450.0 |
| | 450.0 |
|
| 4.25% Senior Notes | | 9/12/2016 | | $ | 350.0 |
| | 99.682 | % | | $ | 1.1 |
| | 4.290 | % | | 4.3 | % | | 10/1/2026 | | 350.0 |
| | — |
|
| | | | | | | | | | | | | | | | | $ | 1,827.1 |
| | $ | 1,494.4 |
|
__________
| |
| (a) | Aggregate balance excludes unamortized deferred financing costs totaling $12.1$22.8 million and $10.5$19.7 million, (Note 2) at December 31, 2016 and 2015, respectively, and unamortized discount totaling $7.8$20.5 million and $15.8 million at both December 31, 20162019 and 2015. 2018, respectively. |
Proceeds from the issuances of each of these notes were used primarily to partially pay down the amounts then outstanding under our Revolver.the senior unsecured credit facility that we had in place at that time and/or to repay certain non-recourse mortgage loans. In connection with these offerings,the offering of the 3.850% Senior Notes due 2029 in June 2019 and 1.350% Senior Notes due 2028 in September 2019, we incurred financing costs totaling $3.1 million, $7.8 million, and $4.2$6.7 million during the yearsyear ended December 31, 2016, 2015, and 2014 respectively,2019, which are included in Senior Unsecured Notes, net in the consolidated financial statements in accordance with our adoption of ASU 2015-03 (Note 2), and are being amortized to Interest expense over the respective termsterm of the Senior Unsecured Notes.
On January 19, 2017, we completed a public offering of €500.0 million of 2.25%3.850% Senior Notes at a price of 99.448% of par value, issued by our wholly owned subsidiary, WPC Eurobond B.V., which are guaranteed by us. These 2.25%due 2029 and 1.350% Senior Notes have a 7.5-year term and are scheduled to mature on July 19, 2024 (Note 20).due 2028.
Covenants
The Senior Unsecured Credit FacilityAgreement and each of the Senior Unsecured Notes include customary financial maintenance covenants that require us to maintain certain ratios and benchmarks at the end of each quarter. The Senior Unsecured Credit FacilityAgreement also contains various customary affirmative and negative covenants applicable to us and our subsidiaries, subject to materiality and other qualifications, baskets, and exceptions as outlined in the Credit Agreement. We were in compliance with all of these covenants at December 31, 2019.
We are required to ensure that the totalmay make unlimited Restricted Payments (as defined in the Credit Agreement), as long as no non-payment default or financial covenant default has occurred before, or would on a pro forma basis occur as a result of, the Restricted Payment. In addition, we may make Restricted Payments in an aggregate amount in any fiscal year does not exceed the greater ofrequired to (i) 95% of Adjusted Funds from Operations (as defined in the Credit Agreement) and (ii) the amount of Restricted Payments required in order for us to maintain our REIT status. Restricted Payments include quarterly dividendsstatus and (ii) as a result of that status, not pay federal or state income or excise tax, as long as the total amountloans under the Credit Agreement have not been accelerated and no bankruptcy or event of shares repurchased by us, if any, in excess of $100.0 million per year.default has occurred.
Obligations under the Senior Unsecured Revolving Credit Facility may be declared immediately due and payable upon the occurrence of certain events of default as defined in the Credit Agreement, including failure to pay any principal when due and payable, failure to pay interest within five business days after becoming due, failure to comply with any covenant, representation or condition of any loan document, any change of control, cross-defaults, and certain other events as set forth in the Credit Agreement, with grace periods in some cases.
|
| |
| W. P. Carey 2016 10-K– 132
|
Notes to Consolidated Financial Statements
The Credit Agreement stipulates several financial covenants that require us to maintain certain ratios and benchmarks at the end of each quarter as defined in the Credit Agreement. In connection with entering into our Amended Credit Facility on February 22, 2017 (Note 20), we obtained a waiver from our lenders stating that we were not required to certify that we were in compliance with these financial covenants under the Credit Agreement. However, as of December 31, 2016, we were in compliance with the financial covenants contained within the Amended Credit Facility agreement.
Non-Recourse DebtMortgages
Non-recourse debt consistsmortgages consist of mortgage notes payable, which are collateralized by the assignment of real estate properties. For a list of our encumbered properties, please see Schedule III — Real Estate and Accumulated Depreciation. At December 31, 2016,2019, the weighted-average interest rates for our fixed-rate and variable-rate non-recourse mortgage notes payable bore interest at fixed annual rates ranging from 2.0% to 7.8%were 5.0% and variable contractual annual rates ranging from 0.9% to 6.9%2.9%, respectively, with maturity dates ranging from January 2017June 2020 to June 2027.September 2031.
|
| |
| W. P. Carey 2019 10-K– 113 |
Notes to Consolidated Financial Statements
During the year ended December 31, 2016,2019, we assumed a non-recourse mortgage loan with an outstanding principal balance of $20.2 million in connection with the acquisition of a property (Note 5). This mortgage loan has a fixed annual interest rate of 4.7% and a maturity date of July 6, 2024.
CPA:17 Merger
In connection with the CPA:17 Merger on October 31, 2018 (Note 3), we assumed property-level debt comprised of non-recourse mortgage loans with fair values totaling $1.85 billion and recorded an aggregate fair market value net discount of $20.4 million. The fair market value net discount will be amortized to interest expense over the remaining lives of the related loans. These non-recourse mortgage loans had a weighted-average annual interest rate of 4.3% on the merger date.
Repayments During 2019
During the year ended December 31, 2019, we (i) prepaid non-recourse mortgage loans totaling $321.7 million, including a$1.0 billion and (ii) repaid non-recourse mortgage loanloans at maturity with an aggregate principal balance of $50.8 million encumbering a property that was sold in August 2016 (Note 17). In connection with these payments, weapproximately $142.7 million. We recognized aan aggregate net loss on extinguishment of debt of $4.1$14.8 million during the year ended December 31, 2016, which2019, primarily comprised of prepayment penalties. The weighted-average interest rate for these non-recourse mortgage loans on their respective dates of repayment was included in Other income4.4%. Amounts are based on the exchange rate of the related foreign currency as of the date of repayment, as applicable. We primarily used proceeds from issuances of common stock under our ATM Programs (Note 14) and (expenses) inproceeds from the consolidated financial statements. In addition,issuances of senior notes to fund these prepayments.
Repayments During 2018
During the year ended December 31, 2018, we
made a balloon payment(i) prepaid non-recourse mortgage loans totaling $207.4 million, including $18.0 million encumbering properties that were disposed of
$31.9 millionduring that year, and (ii) repaid non-recourse mortgage loans at maturity
on awith an aggregate principal balance of approximately $44.0 million. The weighted-average interest rate for these non-recourse mortgage
loan encumbering a portfolioloans on their respective dates of
international properties and a balloon payment of $18.5 million at maturityrepayment was 3.9%. Amounts are based on
another non-recourse mortgage loan during 2016. See Note 20, Subsequent Events.
On July 29, 2016, a jointly owned investment with CPA®:17 – Global, which we consolidate, refinanced a non-recourse mortgage loan that had an outstanding balance of $33.8 million with new financing of $34.6 million, inclusivethe exchange rate of the amount attributable to a noncontrolling interestrelated foreign currency as of $17.0 million. The previous loan had an interest rate of 5.9% and a maturitythe date of July 31, 2016. The new loan has a rate of EURIBOR plus a 3.3% margin and a term of five years.repayment, as applicable.
Interest Paid
For the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, interest paid was $182.2$208.4 million, $174.5$157.3 million, and $156.3$155.4 million, respectively.
Foreign Currency Exchange Rate Impact
During the year ended December 31, 2016,2019, the U.S. dollar strengthened against the euro, and British pound sterling, resulting in an aggregate decrease of $45.2$52.6 million in the aggregate carrying values of our Non-recourse debt,mortgages, net, Senior Unsecured Credit Facility, - Revolver, and Senior Unsecured Notes, net from December 31, 20152018 to December 31, 2016.2019.
Scheduled Debt Principal Payments
Scheduled debt principal payments during eachas of the next five calendar years following December 31, 2016 and thereafter through 20272019 are as follows (in thousands):
|
| | | | |
| Years Ending December 31, | | Total (a) |
| 2017 | | $ | 768,480 |
|
| 2018 | | 940,391 |
|
| 2019 | | 99,566 |
|
| 2020 | | 217,044 |
|
| 2021 | | 156,985 |
|
| Thereafter through 2027 | | 2,279,751 |
|
| Total principal payments | | 4,462,217 |
|
Deferred financing costs (b) | | (13,403 | ) |
Unamortized discount, net (c) | | (8,000 | ) |
| Total | | $ | 4,440,814 |
|
|
| | | | |
| Years Ending December 31, | | Total (a) |
| 2020 | | $ | 164,682 |
|
| 2021 | | 445,469 |
|
| 2022 | | 460,385 |
|
| 2023 | | 900,288 |
|
| 2024 | | 1,184,007 |
|
| Thereafter through 2031 | | 2,949,186 |
|
| Total principal payments | | 6,104,017 |
|
Unamortized discount, net (b) | | (26,679 | ) |
| Unamortized deferred financing costs | | (23,395 | ) |
| Total | | $ | 6,053,943 |
|
__________
|
| |
| W. P. Carey 2019 10-K– 114 |
Notes to Consolidated Financial Statements
| |
| (a) | Certain amounts are based on the applicable foreign currency exchange rate at December 31, 2016.2019. |
| |
| (b) | In accordance with ASU 2015-03, we reclassified deferred financing costs from Other assets, net to Non-recourse debt, net, Senior Unsecured Notes, net, and Senior Unsecured Credit Facility - Term Loan, net as of December 31, 2015 (Note 2). |
|
| |
| W. P. Carey 2016 10-K– 133
|
Notes to Consolidated Financial Statements
| |
(c) | Represents the unamortized discount, on the Senior Unsecured Notes totaling $7.8 million and the unamortized discountnet, of $0.2$6.2 million in the aggregate primarily resulting from the assumption of property-level debt in connection with business combinations, including the CPA®:15CPA:17 Merger (Note 3), and CPA®:16 Merger.the unamortized discount on the Senior Unsecured Notes of $20.5 million in aggregate. |
Note 12. Commitments and Contingencies
At December 31, 2019, 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.
Note 13. Restructuring and Other Compensation
In connection with the resignationJune 2017, our Board approved a plan to exit non-traded retail fundraising activities carried out by our wholly-owned broker-dealer subsidiary, Carey Financial, as of June 30, 2017 (Note 1). As a result, we incurred non-recurring charges to exit our then-chief executive officer, Trevor P. Bond, we and Mr. Bond entered into a letter agreement, dated February 10, 2016. Under the termsfundraising activities, consisting primarily of the agreement, subject to certain conditions, Mr. Bond is entitled to receive the severance benefits provided for in his employment agreement and, subject to satisfaction of applicable performance conditions and proration, vesting of his outstanding unvested PSUs in accordance with their terms. In addition, the portion of his previously granted RSUs that were scheduled to vest on February 15, 2016, which would have been forfeited upon separation pursuant to their terms, were allowed to vest on that date. In connection with the separation agreement, we recorded $5.1 million of severance-related expenses duringcosts. During the year ended December 31, 2016, which are included in Restructuring and other compensation in the consolidated financial statements.
In February 2016, we entered into an agreement with Catherine D. Rice, our former chief financial officer, in connection with the termination of her employment, which provides for the continued vesting of her outstanding RSUs and PSUs pursuant to their terms as though her employment had continued through their respective vesting dates. In connection with the modification of these award terms, we recorded incremental stock-based compensation expense of $2.4 million during the year ended December 31, 2016, which is included in Restructuring and other compensation in the consolidated financial statements.
In March 2016, as part of a cost savings initiative, we undertook a reduction in force, or RIF, and realigned and consolidated certain positions within the company, resulting in employee headcount reductions. As a result of these reductions in headcount and the separations described above, during the year ended December 31, 2016,2017, we recorded $8.2 million of severance and benefits $3.2 million of stock-based compensation, and $0.5$1.2 million of other related costs, which are all included in Restructuring and other compensation in the consolidated financial statements.
As of December 31, 2016, the accrued liability for these severance obligations was $3.3 million and is included within Accounts payable, accrued expenses and other liabilities in the consolidated financial statements.
Note 14. Equity
Common Stock
DistributionsDividends paid to stockholders consist of ordinary income, capital gains, return of capital or a combination thereof for income tax purposes. The following table presents distributionsOur dividends per share declared and paid during the years ended December 31, 2016, 2015, and 2014, reported for federal tax purposes and servesare summarized as a designation of capital gain distributions, if applicable, pursuant to Internal Revenue Code Section 857(b)(3)(C) and Treasury Regulation § 1.857-6(e) (dollars per share):follows:
|
| | | | | | | | | | | |
| | Dividends Paid |
| | During the Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Ordinary income | $ | 3.1939 |
| | $ | 3.5122 |
| | $ | 3.2537 |
|
| Return of capital | 0.9194 |
| | — |
| | 0.5182 |
|
| Capital gains | 0.0187 |
| | 0.5578 |
| | 0.2181 |
|
Total dividends paid (a) | $ | 4.1320 |
| | $ | 4.0700 |
| | $ | 3.9900 |
|
|
| | | | | | | | | | | |
| | Distributions Paid |
| | During the Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Ordinary income | $ | 3.3075 |
| | $ | 3.5497 |
| | $ | 3.6566 |
|
| Return of capital | 0.5963 |
| | 0.2618 |
| | 0.0584 |
|
| Total distributions paid | $ | 3.9038 |
| | $ | 3.8115 |
| | $ | 3.7150 |
|
| |
| (a) | A portion of dividends paid during 2019 has been applied to 2018 for income tax purposes. |
During the fourth quarter of 2016, we2019, our Board declared a quarterly distributiondividend of $0.9900$1.038 per share, which was paid on January 13, 201715, 2020 to stockholders of record onas of December 30, 2016,31, 2019.
In October 2017, we issued 11,077 shares of our common stock to a third party, which had a value of $0.8 million as of the date of issuance, in the amount of $107.1 million.connection with a one-time legal settlement.
|
| |
| | W. P. Carey 20162019 10-K– 134115 |
Notes to Consolidated Financial Statements
Earnings Per Share
UnderUnder current authoritative guidance for determining earnings per share, all nonvested share-based payment awards that contain non-forfeitable rights to distributionsdividends are considered to be participating securities and therefore are included in the computation of earnings per share under the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common shares and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. OurCertain of our nonvested RSUs and RSAs contain rights to receive non-forfeitable distributiondividend equivalents or distributions,dividends, respectively, and therefore we apply the two-class method of computing earnings per share. The calculation of earnings per share below excludes the income attributable to the nonvested participating RSUs and RSAs from the numerator and such nonvested shares in the denominator. The following table summarizes basic and diluted earnings (in thousands, except share amounts):
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Net income attributable to W. P. Carey | $ | 305,243 |
| | $ | 411,566 |
| | $ | 277,289 |
|
| Net income attributable to nonvested participating RSUs | (77 | ) | | (340 | ) | | (784 | ) |
| Net income – basic and diluted | $ | 305,166 |
| | $ | 411,226 |
| | $ | 276,505 |
|
| | | | | | |
| Weighted-average shares outstanding – basic | 171,001,430 |
| | 117,494,969 |
| | 107,824,738 |
|
| Effect of dilutive securities | 297,984 |
| | 211,476 |
| | 211,233 |
|
| Weighted-average shares outstanding – diluted | 171,299,414 |
| | 117,706,445 |
| | 108,035,971 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Net income attributable to W. P. Carey | $ | 267,747 |
| | $ | 172,258 |
| | $ | 239,826 |
|
| Allocation of distribution equivalents paid on nonvested RSUs and RSAs in excess of income | (886 | ) | | (579 | ) | | (1,007 | ) |
| Net income – basic | 266,861 |
| | 171,679 |
| | 238,819 |
|
| Income effect of dilutive securities, net of taxes | — |
| | — |
| | (77 | ) |
| Net income – diluted | $ | 266,861 |
| | $ | 171,679 |
| | $ | 238,742 |
|
| | | | | | |
| Weighted-average shares outstanding – basic | 106,743,012 |
| | 105,675,692 |
| | 98,764,164 |
|
| Effect of dilutive securities | 330,191 |
| | 831,960 |
| | 1,063,192 |
|
| Weighted-average shares outstanding – diluted | 107,073,203 |
| | 106,507,652 |
| | 99,827,356 |
|
For the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, there were no0 potentially dilutive securities excluded from the computation of diluted earnings per share.
At-The-Market Equity Offering Program
On June 3, 2015,August 9, 2019, we filed a prospectus supplement with the SEC, pursuant to which we may offer and sell shares of our common stock from time to time, up to an aggregate gross sales price of $400.0$750.0 million, through ana continuous “at-the-market” or ATM, offering program (“ATM Program”) with a consortiumsyndicate of banks. The related equity sales agreement contemplates that, in addition to issuing shares of our common stock through or to the banks acting as sales agents. agents or as principal for their own accounts, we may also enter into separate forward sale agreements with participating banks or their affiliates acting as forward purchasers. Effective as of that date, we terminated a prior ATM Program that was established on February 27, 2019. Previously, on February 27, 2019, we also terminated an earlier ATM Program that was established on March 1, 2017.
During the year ended December 31, 2016,2019, we issued 1,249,8366,672,412 shares of our common stock under theour current and former ATM programPrograms at a weighted-average price of $68.52$79.70 per share for net proceeds of $84.4$523.3 million. In addition,During the year ended December 31, 2018, we paid $0.3 millionissued 4,229,285 shares of professional fees during 2016 related toour common stock under a prior ATM Program at a weighted-average price of $69.03 per share for net proceeds of $287.5 million. During the year ended December 31, 2017, we issued 345,253 shares of our common stock under a prior ATM program.Program at a weighted-average price of $67.78 per share for net proceeds of $22.8 million. As of December 31, 2016, $314.42019, $616.6 million remained available for issuance under our current ATM program.Program.
Equity Offering
In September 2014, we completed a public offering of 4,600,000 shares of our common stock, $0.001 par value per share, at a price of $64.00 per share, or the Equity Offering, which includes the full exercise of the underwriters’ option to purchase an additional 600,000 shares of our common stock. The net proceeds of $282.2 million from the Equity Offering were intended to repay certain indebtedness, including amounts outstanding under our Senior Unsecured Credit Facility, to fund potential future acquisitions and for general corporate purposes. We utilized $225.8 million of the net proceeds from the Equity Offering to pay down a portion of the amount then outstanding under our Revolver.
Noncontrolling Interests
Acquisition of Noncontrolling Interest
On May 24, 2017, we acquired the remaining 25% interest in an international jointly owned investment (which we already consolidated) from the noncontrolling interest holders for €2, bringing our ownership interest to 100%. NaN gain or loss was recognized on the transaction. We recorded an adjustment of approximately $1.8 million to Additional paid-in capital in our consolidated statement of equity for the year ended December 31, 2017 related to the difference between the consideration transferred and the carrying value of the noncontrolling interest related to this investment. The property owned by the investment was sold on May 26, 2017 and we recognized a gain on sale of less than $0.1 million.
|
| |
| W. P. Carey 2019 10-K– 116 |
Notes to Consolidated Financial Statements
Redeemable Noncontrolling Interest
We accountWe accounted for the noncontrolling interest in WPCIour subsidiary, W. P. Carey International, LLC (“WPCI”), held by a third party as a redeemable noncontrolling interest, because, pursuant to a put option held by the third party, we had an obligation to redeem the interest at fair value, subject to certain conditions. This obligation was required to be settled in shares of our common stock. On October 1, 2013, we received a notice from the holder of the noncontrolling interest in WPCI regarding the exercise of the put option, pursuant to which we were required to purchase the third party’s 7.7% interest in WPCI. Pursuant to the terms of the related put agreement, the value of
|
| |
| W. P. Carey 2016 10-K– 135
|
Notes to Consolidated Financial Statements
that interest was determined based on a third-party valuation as of October 31, 2013, which is the end of the month that the put option was exercised. In March 2016, we issued 217,011 shares of our common stock to the holder of the redeemable noncontrolling interest, which had a value of $13.4 million at the date of issuance, pursuant to a formula set forth in the put agreement. Through the date of this Report,However, the third party hasdid not formally transferredtransfer his interests in WPCI to us pursuant to the put agreement at that time because of a dispute regarding any amounts that maymight still be owed to him.
The following table presents In September 2018, we negotiated a reconciliationsettlement of that dispute, and as a result, we recorded an adjustment of $0.3 million to Additional paid-in capital in our consolidated statement of equity for the year ended December 31, 2018 to reflect the redemption value of the third party’s interest. As part of the settlement, the third party acknowledged that all of his interests in WPCI have been transferred to us and all disputes between the parties were resolved. We have no further obligation related to this redeemable noncontrolling interest (in thousands):as of December 31, 2018.
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Beginning balance | $ | 14,944 |
| | $ | 6,071 |
| | $ | 7,436 |
|
| Distributions | (13,418 | ) | | — |
| | (926 | ) |
| Redemption value adjustment | (561 | ) | | 8,873 |
| | (306 | ) |
| Net income | — |
| | — |
| | (142 | ) |
| Change in other comprehensive income | — |
| | — |
| | 9 |
|
| Ending balance | $ | 965 |
| | $ | 14,944 |
| | $ | 6,071 |
|
Transfers to Noncontrolling Interests
The following table presents a reconciliation of the effect of transfers in noncontrolling interest (in thousands):
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Net income attributable to W. P. Carey | $ | 267,747 |
| | $ | 172,258 |
| | $ | 239,826 |
|
| Transfers to noncontrolling interest | | | | | |
Decrease in W. P. Carey’s additional paid-in capital for purchases of less-than-wholly owned investments in connection with the CPA®:16 Merger | — |
| | — |
| | (41,374 | ) |
| Net transfers to noncontrolling interest | — |
| | — |
| | (41,374 | ) |
| Change from net income attributable to W. P. Carey and transfers to noncontrolling interest | $ | 267,747 |
| | $ | 172,258 |
| | $ | 198,452 |
|
|
| |
| | W. P. Carey 20162019 10-K– 136117 |
Notes to Consolidated Financial Statements
Reclassifications Out of Accumulated Other Comprehensive Income (Loss)Loss
The following tables present a reconciliation of changes in Accumulated other comprehensive income (loss)loss by component for the periods presented (in thousands):
|
| | | | | | | | | | | | | | | |
| | Gains and (Losses) on Derivative Instruments | | Foreign Currency Translation Adjustments | | Gains and (Losses) on Investments | | Total |
| Balance at January 1, 2017 | $ | 46,935 |
| | $ | (301,330 | ) | | $ | (90 | ) | | $ | (254,485 | ) |
| Other comprehensive income before reclassifications | (28,577 | ) | | 69,040 |
| | (71 | ) | | 40,392 |
|
| Amounts reclassified from accumulated other comprehensive loss to: | | | | | | | |
Gain on sale of real estate, net (Note 17) | — |
| | 3,388 |
| | — |
| | 3,388 |
|
| Other gains and (losses) | (10,495 | ) | | — |
| | — |
| | (10,495 | ) |
| Interest expense | 1,294 |
| | — |
| | — |
| | 1,294 |
|
| Total | (9,201 | ) | | 3,388 |
| | — |
| | (5,813 | ) |
| Net current period other comprehensive income | (37,778 | ) | | 72,428 |
| | (71 | ) | | 34,579 |
|
| Net current period other comprehensive income attributable to noncontrolling interests | 15 |
| | (16,120 | ) | | — |
| | (16,105 | ) |
| Balance at December 31, 2017 | 9,172 |
| | (245,022 | ) | | (161 | ) | | (236,011 | ) |
| Other comprehensive loss before reclassifications | 13,415 |
| | (52,069 | ) | | 154 |
| | (38,500 | ) |
| Amounts reclassified from accumulated other comprehensive loss to: | | | | | | | |
| — |
| | 20,226 |
| | — |
| | 20,226 |
|
| Other gains and (losses) | (8,892 | ) | | — |
| | — |
| | (8,892 | ) |
| Interest expense | 400 |
| | — |
| | — |
| | 400 |
|
| Total | (8,492 | ) | | 20,226 |
| | — |
| | 11,734 |
|
| Net current period other comprehensive loss | 4,923 |
| | (31,843 | ) | | 154 |
| | (26,766 | ) |
| Net current period other comprehensive loss attributable to noncontrolling interests | 7 |
| | 7,774 |
| | — |
| | 7,781 |
|
| Balance at December 31, 2018 | 14,102 |
| | (269,091 | ) | | (7 | ) | | (254,996 | ) |
| Other comprehensive income before reclassifications | 12,031 |
| | 376 |
| | 7 |
| | 12,414 |
|
| Amounts reclassified from accumulated other comprehensive loss to: | | | | | | | |
| Other gains and (losses) | (15,341 | ) | | — |
| | — |
| | (15,341 | ) |
| Interest expense | 2,256 |
| | — |
| | — |
| | 2,256 |
|
| Total | (13,085 | ) | | — |
| | — |
| | (13,085 | ) |
| Net current period other comprehensive loss | (1,054 | ) | | 376 |
| | 7 |
| | (671 | ) |
| Balance at December 31, 2019 | $ | 13,048 |
| | $ | (268,715 | ) | | $ | — |
| | $ | (255,667 | ) |
|
| | | | | | | | | | | | | | | |
| | Gains and Losses on Derivative Instruments | | Foreign Currency Translation Adjustments | | Gains and Losses on Marketable Securities | | Total |
| Balance at January 1, 2014 | $ | (7,488 | ) | | $ | 22,793 |
| | $ | 31 |
| | $ | 15,336 |
|
| Other comprehensive loss before reclassifications | 17,911 |
| | (117,938 | ) | | (10 | ) | | (100,037 | ) |
| Amounts reclassified from accumulated other comprehensive income (loss) to: | | | | | | | |
| Interest expense | 2,691 |
| | — |
| | — |
| | 2,691 |
|
| Other income and (expenses) | 103 |
| | — |
| | — |
| | 103 |
|
| Equity in earnings of equity method investments in the Managed Programs and real estate | 380 |
| | — |
| | — |
| | 380 |
|
| Total | 3,174 |
| | — |
| | — |
| | 3,174 |
|
| Net current period other comprehensive loss | 21,085 |
| | (117,938 | ) | | (10 | ) | | (96,863 | ) |
| Net current period other comprehensive loss attributable to noncontrolling interests and redeemable noncontrolling interest | — |
| | 5,968 |
| | — |
| | 5,968 |
|
| Balance at December 31, 2014 | 13,597 |
| | (89,177 | ) | | 21 |
| | (75,559 | ) |
| Other comprehensive loss before reclassifications | 29,391 |
| | (125,447 | ) | | 15 |
| | (96,041 | ) |
| Amounts reclassified from accumulated other comprehensive loss to: | | | | | | | |
| Interest expense | 2,291 |
| | — |
| | — |
| | 2,291 |
|
| Other income and (expenses) | (7,629 | ) | | — |
| | — |
| | (7,629 | ) |
| Total | (5,338 | ) | | — |
| | — |
| | (5,338 | ) |
| Net current period other comprehensive loss | 24,053 |
| | (125,447 | ) | | 15 |
| | (101,379 | ) |
| Net current period other comprehensive loss attributable to noncontrolling interests | — |
| | 4,647 |
| | — |
| | 4,647 |
|
| Balance at December 31, 2015 | 37,650 |
| | (209,977 | ) | | 36 |
| | (172,291 | ) |
| Other comprehensive loss before reclassifications | 16,582 |
| | (92,434 | ) | | (126 | ) | | (75,978 | ) |
| Amounts reclassified from accumulated other comprehensive loss to: | | | | | | | |
| Interest expense | 2,106 |
| | — |
| | — |
| | 2,106 |
|
| Other income and (expenses) | (9,410 | ) | | — |
| | — |
| | (9,410 | ) |
| Total | (7,304 | ) | | — |
| | — |
| | (7,304 | ) |
| Net current period other comprehensive loss | 9,278 |
| | (92,434 | ) | | (126 | ) | | (83,282 | ) |
| Net current period other comprehensive loss attributable to noncontrolling interests | 7 |
| | 1,081 |
| | — |
| | 1,088 |
|
| Balance at December 31, 2016 | $ | 46,935 |
| | $ | (301,330 | ) | | $ | (90 | ) | | $ | (254,485 | ) |
See Note 10 for additional information on our derivatives activity recognized within Other comprehensive (loss) income for the periods presented.
|
| |
| | W. P. Carey 20162019 10-K– 137118 |
Notes to Consolidated Financial Statements
Note 15. Stock-Based and Other Compensation
Stock-Based Compensation
At December 31, 2016,2019, we maintained several stock-based compensation plans as described below. The total compensation expense (net of forfeitures) for awards issued under these plans was $21.2$18.8 million, $21.6$18.3 million, and $31.1$18.9 million for the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, respectively, of which $3.2 million was included in Restructuring and other compensation in the consolidated financial statements for the year ended December 31, 2016. The remaining amounts for the years ended December 31, 2016, 2015, and 2014 were included in Stock-based compensation expense in the consolidated financial statements. Approximately $4.2 million of the stock-based compensation expense recorded during the year ended December 31, 2018 was attributable to the modification of RSUs and PSUs in connection with the retirement of our former chief executive officer in February 2018. The tax benefit recognized by us related to these awards totaled $6.7$5.1 million, $12.5$6.6 million, and $17.3$4.6 million for the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, respectively. The tax benefits for the years ended December 31, 2019, 2018, and 2017 were reflected as a deferred tax benefit within Provision for income taxes in the consolidated financial statements.
20092017 Share Incentive Plan
We maintainIn June 2017, our shareholders approved the W. P. Carey Inc.2017 Share Incentive Plan, which replaced our predecessor plans for employees, the 2009 Share Incentive Plan, orand for non-employee directors, the 2009 Non-Employee Directors’ Incentive Plan. No further awards will be granted under those predecessor plans, which are more fully described in the 2016 Annual Report. The 2017 Share Incentive Plan which as amended currently authorizes the issuance of up to 5,900,0004,000,000 shares of our common stock. At December 31, 2016, therestock, reduced by the number of shares (279,728) that were 1,873,145 shares available for issuancesubject to awards granted under the 2009 Share Incentive Plan.Plan and the 2009 Non-Employee Directors’ Incentive Plan after December 31, 2016 and before the effective date of the 2017 Share Incentive Plan, which was June 15, 2017. The 20092017 Share Incentive Plan provides for the grant of various stock- and cash-based awards, including (i) stockshare options, (ii) RSUs, (iii) PSUs, (iv) RSAs, and (iv)(v) dividend equivalent rights. The vestingAt December 31, 2019, 3,243,301 shares remained available for issuance under the 2017 Share Incentive Plan, assuming that the target level of grants under both plansperformance is accelerated upon a changeachieved for all outstanding PSU awards and not including any dividend equivalents to be paid on those PSUs, which are reinvested in shares of our control and under certain other conditions.
In December 2007,common stock after the Compensation Committee approvedend of the long-term incentive plan, or LTIP, and terminated further contributionsrelevant three-year performance cycle but only to the Partnership Equity Unit Plan described below. Duringextent that the years ended December 31, 2016, 2015, and 2014, we awarded RSUs totaling 262,824, 173,741, and 172,460, respectively, and PSUs totaling 200,005, 75,277, and 89,653, respectively, to key employees.vest. PSUs are reflected at 100% of target but may settle at up to three3 times the target amount shown or less. PSUs awarded during eachless, including 0%, depending on the achievement of the years ended December 31, 2015 and 2014 include 10,000 PSUs awarded for which the undetermined terms and conditions of the grant were finalized in subsequentpre-set performance metrics over a three-year performance period. RSUs generally vest one-third annually over three years.
2009 Non-Employee Directors Incentive Plan
We maintain the W. P. Carey, Inc. 2009 Non-Employee Directors’ Incentive Plan, or the 2009 Directors’ Plan, which authorizes the issuance of 325,000 shares of our common stock in the aggregate. At the discretion of our board of directors, the awards may be in the form of RSUs, share options, or RSAs, or any combination of the permitted awards. In July 2014, we issued 16,159 RSAs with a total value of $1.0 million to our directors. In July 2015, we issued 16,152 RSAs with a total value of $1.0 million to our directors. These RSAs are scheduled to vest one year from the date of grant. In July 2016, we issued 13,860 RSAs with a total value of $1.0 million to our directors. At December 31, 2016, there were 185,693 shares that remained available for issuance under this plan.
Employee Share Purchase Plan
We sponsor an employee share purchase plan or ESPP,(“ESPP”) pursuant to which eligible employees may contribute up to 10% of compensation, subject to certain limits, to purchase our common stock. During the years ended December 31, 2016 and 2015, employees were entitled to purchase stock through the ESPP semi-annually at a price equal to 90% of the fair market value at certain plan defined dates. During the year ended December 31, 2014, employees were entitled to purchase stock through the ESPP semi-annually at a price equal to 85% of the fair market value at certain plan defined dates. Compensation expense under this plan for each of the years ended December 31, 2016, 2015,2019, 2018, and 20142017 was $0.1 million, less than $0.1 million, and $0.3 million, respectively.million.
|
| |
| | W. P. Carey 20162019 10-K– 138119 |
Notes to Consolidated Financial Statements
Restricted and Conditional Awards
Nonvested RSAs, RSUs, and PSUs at December 31, 20162019 and changes during the years ended December 31, 20162019, 2015,2018, and 20142017 were as follows:
| | | | RSA and RSU Awards | | PSU Awards | RSA and RSU Awards | | PSU Awards |
| | Shares | | Weighted-Average Grant Date Fair Value | | Shares | | Weighted-Average
Grant Date
Fair Value | Shares | | Weighted-Average Grant Date Fair Value | | Shares | | Weighted-Average Grant Date Fair Value |
| Nonvested at January 1, 2014 | 519,608 |
| | $ | 45.19 |
| | 1,220,720 |
| | $ | 28.28 |
| |
| Nonvested at January 1, 2017 | | 356,865 |
| | $ | 61.63 |
| | 310,018 |
| | $ | 73.80 |
|
| Granted | 188,619 |
| | 61.08 |
| | 89,653 |
| | 76.05 |
| 194,349 |
| | 62.22 |
| | 107,934 |
| | 75.39 |
|
Vested (a) | (264,724 | ) | | 43.35 |
| | (881,388 | ) | | 51.00 |
| (185,259 | ) | | 62.72 |
| | (132,412 | ) | | 74.21 |
|
| Forfeited | (1,001 | ) | | 59.45 |
| | (78 | ) | | 54.31 |
| (41,616 | ) | | 61.08 |
| | (45,258 | ) | | 76.91 |
|
Adjustment (b) | — |
| | — |
| | 448,734 |
| | 55.91 |
| — |
| | — |
| | 41,017 |
| | 63.18 |
|
| Nonvested at December 31, 2014 | 442,502 |
| | 53.03 |
| | 877,641 |
| | 32.06 |
| |
| Nonvested at December 31, 2017 | | 324,339 |
| | 61.43 |
| | 281,299 |
| | 74.57 |
|
| Granted | 189,893 |
| | 69.92 |
| | 75,277 |
| | 83.68 |
| 137,519 |
| | 64.50 |
| | 75,864 |
| | 75.81 |
|
Vested (a) | (264,628 | ) | | 49.69 |
| | (792,465 | ) | | 56.77 |
| (181,777 | ) | | 62.25 |
| | (66,632 | ) | | 76.96 |
|
| Forfeited | (10,996 | ) | | 66.46 |
| | — |
| | — |
| (3,079 | ) | | 61.71 |
| | (3,098 | ) | | 76.49 |
|
Adjustment (b) | — |
| | — |
| | 179,905 |
| | 49.70 |
| — |
| | — |
| | 43,783 |
| | 74.17 |
|
| Nonvested at December 31, 2015 | 356,771 |
| | 64.09 |
| | 340,358 |
| | 52.26 |
| |
| Nonvested at December 31, 2018 | | 277,002 |
| | 62.41 |
| | 331,216 |
| | 78.82 |
|
Granted (c) | 277,836 |
| | 58.27 |
| | 200,005 |
| | 73.18 |
| 163,447 |
| | 72.86 |
| | 84,006 |
| | 92.16 |
|
Vested (a) | (217,617 | ) | | 61.32 |
| | (180,723 | ) | | 80.21 |
| (152,364 | ) | | 62.11 |
| | (403,701 | ) | | 74.04 |
|
| Forfeited | (60,125 | ) | | 61.81 |
| | (51,657 | ) | | 75.49 |
| (4,108 | ) | | 68.10 |
| | (2,829 | ) | | 75.81 |
|
Adjustment (b) | — |
| | — |
| | 2,035 |
| | 72.22 |
| — |
| | — |
| | 322,550 |
| | 77.69 |
|
Nonvested at December 31, 2016 (d) | 356,865 |
| | $ | 61.63 |
| | 310,018 |
| | $ | 73.80 |
| |
Nonvested at December 31, 2019 (d) | | 283,977 |
| | $ | 68.51 |
| | 331,242 |
| | $ | 80.90 |
|
| |
| (a) | The totalgrant date fair value of shares vested during the years ended December 31, 2016, 2015,2019, 2018, and 20142017 was $27.8$39.4 million, $58.1$16.4 million, and $56.4$21.4 million, respectively. Employees have the option to take immediate delivery of the shares upon vesting or defer receipt to a future date pursuant to previously made deferral elections. At December 31, 20162019 and 2015,2018, we had an obligation to issue 1,217,274893,713 and 1,395,907867,871 shares, respectively, of our common stock underlying such deferred awards, which is recorded within W. P. CareyTotal stockholders’ equity as a Deferred compensation obligation of $50.2$37.3 million and $56.0$35.8 million, respectively. |
| |
| (b) | Vesting and payment of the PSUs is conditioned upon certain company andand/or market performance goals being met during the relevant three-year performance period. The ultimate number of PSUs to be vested will depend on the extent to which the performance goals are met and can range from zero0 to three3 times the original awards. As a result, we recorded adjustments to reflect the number of shares expected to be issued when the PSUs vest. |
| |
| (c) | The grant date fair valuesvalue of RSAs and RSUs reflect our stock price on the date of grant on a one-for-one basis. The grant date fair value of PSUs was determined utilizing (i) a Monte Carlo simulation model to generate a rangean estimate of possibleour future stock prices for both us and the plan defined peer indexprice over the three-year performance period.period and (ii) future financial performance projections. To estimate the fair value of PSUs granted during the year ended December 31, 2016,2019, we used a risk-free interest rates ranging from 0.9% - 1.1% andrate of 2.5%, an expected volatility rates ranging from 18.2% - 19.1% (the plan defined peer index assumes a rangerate of 15.0% - 15.6%)15.8%, and assumed a dividend yield of zero.0. |
| |
| (d) | At December 31, 2016,2019, total unrecognized compensation expense related to these awards was approximately $19.6$22.5 million, with an aggregate weighted-average remaining term of less than 21.6 years. |
At the end of each reporting period, we evaluate the ultimate number of PSUs we expect to vest based upon the extent to which we have met and expect to meet the performance goals and where appropriate, revise our estimate and associated expense. We do not adjust the associated expense for revision on PSUs expected to vest based on market performance. Upon vesting, the RSUs and PSUs may be converted into shares of our common stock. Both the RSUs and PSUs carry dividend equivalent rights. Dividend equivalent rights on RSUs issued under the predecessor employee plan are paid in cash on a quarterly basis, whereas dividend equivalent rights on RSUs issued under the 2017 Share Incentive Plan are accrued and paid in cash only when the underlying shares vest, which is generally on an annual basis; dividend equivalents on PSUs accrue during the performance period and may beare converted into additional shares of common stock at the conclusion of the performance period to the extent the PSUs vest. Dividend equivalent rights are accounted for as a reduction to retained earnings to the extent that the awards are
|
| |
| W. P. Carey 2019 10-K– 120 |
Notes to Consolidated Financial Statements
expected to vest. For awards that are not expected to vest or do not ultimately vest, dividend equivalent rights are accounted for as additional compensation expense.
|
| |
| W. P. Carey 2016 10-K– 139
|
Notes to Consolidated Financial Statements
Stock Options
Option activity and changes forAt December 31, 2016, we had 145,033 stock options outstanding, all periods presentedof which were as follows:
|
| | | | | | | | | | | | |
| | Year Ended December 31, 2016 |
| | Shares | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term (in Years) | | Aggregate Intrinsic Value |
| Outstanding – beginning of year | 258,787 |
| | $ | 31.10 |
| | | | |
| Exercised | (113,002 | ) | | 28.34 |
| | | | |
| Canceled / Expired | (752 | ) | | 28.42 |
| | | | |
| Outstanding – end of year | 145,033 |
| | $ | 33.27 |
| | 0.30 | | $ | 3,745,163 |
|
| Vested and expected to vest – end of year | 145,033 |
| | $ | 33.27 |
| | 0.30 | | $ | 3,745,163 |
|
| Exercisable – end of year | 145,033 |
| | $ | 33.27 |
| | 0.30 | | $ | 3,745,163 |
|
|
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2015 | | 2014 |
| | Shares | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term (in Years) | | Shares | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term (in Years) |
| Outstanding – beginning of year | 475,765 |
| | $ | 29.95 |
| | | | 619,601 |
| | $ | 30.30 |
| | |
| Exercised | (213,479 | ) | | 28.57 |
| | | | (140,718 | ) | | 31.41 |
| | |
| Canceled / Expired | (3,499 | ) | | 28.71 |
| | | | (3,118 | ) | | 32.99 |
| | |
| Outstanding – end of year | 258,787 |
| | $ | 31.10 |
| | 1.06 | | 475,765 |
| | $ | 29.95 |
| | 1.75 |
| Exercisable – end of year | 236,112 |
| | $ | 30.99 |
| | | | 421,656 |
| | $ | 29.75 |
| | |
Options granted under the 1997 Share Incentive Plan, a predecessor employee plan, generally havehad a ten-year term and generally vested in four equal annual installments. We have not issued option awards since 2007. Our options will be fully expired in December 2017. The total intrinsic value of options exercised during the years ended December 31, 2016, 2015, and 2014 was $3.7 million, $7.4 million, and $4.9 million, respectively. The tax benefit recognized by us related to these awards totaled $1.6 million during the year ended December 31, 2016.2017 was $4.4 million.
At December 31, 2016,2017, all of our options werehad either been fully vested and exercisable,exercised or expired, and all related compensation expense has been previously recognized.
We have the ability and intent to issue shares upon stock option exercises. Historically, we have issued authorized but unissued common stock to satisfy such exercises. Cash received from stock option exercises and purchases under the ESPP and stock option exercises during the years ended December 31, 2016, 2015,2019, 2018, and 20142017 was $0.5$0.3 million, $0.5$0.2 million, and $1.9$0.2 million, respectively.
|
| |
| W. P. Carey 2016 10-K– 140
|
Notes to Consolidated Financial Statements
Other Compensation
Profit-Sharing Plan
We sponsor a qualified profit-sharing plan and trust that generally permits all employees, as defined by the plan, to make pre-tax contributions into the plan. We are under no obligation to contribute to the plan and the amount of any contribution is determined by and at the discretion of our board of directors.Board. In December 2016, 2015,2019, 2018, and 2014,2017, our board of directorsBoard determined that the contribution to the plan for each of those respective years would be 10% of an eligible participant’s compensation, up to the legal maximum allowable in each of those years of $26,500$28,000 for 20162019, $27,500 for 2018, and 2015, and $26,000$27,000 for 2014.2017. For the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, amounts expensed for contributions to the trust were $3.9$2.1 million, $4.1$2.6 million, and $3.5$3.3 million, respectively, which were included in General and administrative expenses in the consolidated financial statements. The profit-sharing plan is a deferred compensation plan and is therefore considered to be outside the scope of current accounting guidance for stock-based compensation.
Other
During each of the periods presented, we had employment contracts with certain senior executives. These contracts also provided for severance payments in the event of termination under certain conditions (Note 13). No such agreements were outstanding as of December 31, 2016. During the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, we recognized severance costs totaling approximately $0.5$1.1 million, $0.8$0.9 million, and $1.0less than $0.1 million, respectively, related to several former employees who did not have employment contracts.respectively. Such costs are included in General and administrative expenses in the accompanying consolidated financial statements, and exclude severance-related costs that are included in Restructuring and other compensation in the consolidated financial statements (Note 13).
|
| |
| W. P. Carey 2019 10-K– 121 |
Notes to Consolidated Financial Statements
Note 16. Income Taxes
Income Tax Provision
The components of our provision for income taxes attributable to continuing operations for the periods presented are as follows (in thousands):
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2019 |
| 2018 |
| 2017 |
| Federal |
|
|
|
|
|
|
|
|
| Current | $ | 407 |
|
| $ | (829 | ) |
| $ | (687 | ) |
| Deferred | 9,579 |
|
| 3,275 |
|
| (9,520 | ) |
| 9,986 |
|
| 2,446 |
|
| (10,207 | ) |
| State and Local |
|
|
|
|
|
|
|
|
| Current | (3,814 | ) |
| 4,820 |
|
| 1,954 |
|
| Deferred | (376 | ) |
| 3,042 |
|
| 572 |
|
| (4,190 | ) |
| 7,862 |
|
| 2,526 |
|
| Foreign |
|
|
|
|
|
|
|
|
| Current | 20,363 |
|
| 16,791 |
|
| 21,457 |
|
| Deferred | 52 |
|
| (12,688 | ) |
| (11,065 | ) |
| 20,415 |
|
| 4,103 |
|
| 10,392 |
|
| Total Provision | $ | 26,211 |
|
| $ | 14,411 |
|
| $ | 2,711 |
|
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2016 |
| 2015 |
| 2014 |
| Federal |
|
|
|
|
|
|
|
|
| Current | $ | 6,412 |
|
| $ | 10,551 |
|
| $ | 19,545 |
|
| Deferred | (1,608 | ) |
| 1,901 |
|
| (7,609 | ) |
| 4,804 |
|
| 12,452 |
|
| 11,936 |
|
| State and Local |
|
|
|
|
|
|
|
|
| Current | 7,014 |
|
| 9,075 |
|
| 13,422 |
|
| Deferred | (2,026 | ) |
| 1,158 |
|
| (4,693 | ) |
| 4,988 |
|
| 10,233 |
|
| 8,729 |
|
| Foreign |
|
|
|
|
|
|
|
|
| Current | 10,727 |
|
| 16,656 |
|
| 6,869 |
|
| Deferred | (17,231 | ) |
| (1,720 | ) |
| (9,925 | ) |
| (6,504 | ) |
| 14,936 |
|
| (3,056 | ) |
| Total Provision | $ | 3,288 |
|
| $ | 37,621 |
|
| $ | 17,609 |
|
|
| |
| W. P. Carey 2016 10-K– 141
|
Notes to Consolidated Financial Statements
A reconciliation of effective income tax for the periods presented is as follows (in thousands):
|
| | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 |
Pre-tax (loss) income attributable to taxable subsidiaries (a) | $ | (15,374 | ) | | $ | 72,343 |
|
| | | | |
| Federal (benefit) provision at statutory tax rate (35%) | $ | (5,380 | ) | | $ | 25,244 |
|
| Change in valuation allowance | 6,477 |
| | 9,074 |
|
| Non-taxable income | (5,399 | ) | | (5,475 | ) |
| Non-deductible expense | 3,111 |
| | 6,982 |
|
| State and local taxes, net of federal benefit | 2,749 |
| | 6,151 |
|
| Rate differential | 892 |
| | (10,589 | ) |
| Other | 838 |
| | 6,234 |
|
| Total provision | $ | 3,288 |
| | $ | 37,621 |
|
|
| | | |
| Year Ended December 31, |
| 2014 |
| Pre-tax income attributable to taxable subsidiaries | $ | 21,131 |
|
| | |
| Federal provision at statutory tax rate (35%) | $ | 7,396 |
|
Recognition of taxable income as a result of the CPA®:16 Merger (b) | 4,833 |
|
| State and local taxes, net of federal benefit | 2,296 |
|
| Interest | 2,111 |
|
| Dividend income from Managed REITs | 939 |
|
| Other | 893 |
|
| Tax provision — taxable subsidiaries | 18,468 |
|
Deferred foreign tax benefit (c) | (9,925 | ) |
| Current foreign taxes | 6,869 |
|
| Other state and local taxes | 2,197 |
|
| Total provision | $ | 17,609 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
Pre-tax income attributable to taxable subsidiaries (a) | $ | 74,754 |
| | $ | 98,245 |
| | $ | 49,909 |
|
| | | | | | |
Federal provision at statutory tax rate (b) | $ | 15,698 |
| | $ | 20,632 |
| | $ | 17,468 |
|
| Change in valuation allowance | 11,041 |
| | 6,735 |
| | 11,805 |
|
Rate differential (c) | (6,820 | ) | | (14,165 | ) | | (13,134 | ) |
| Non-deductible expense | 5,313 |
| | 4,996 |
| | 3,010 |
|
| Windfall tax benefit | (5,183 | ) | | (3,754 | ) | | (4,618 | ) |
| State and local taxes, net of federal benefit | 4,062 |
| | 7,590 |
| | 1,115 |
|
| Non-taxable income | 103 |
| | (736 | ) | | (8,073 | ) |
| Revocation of TRS Status | — |
| | (6,285 | ) | | — |
|
Revaluation of deferred taxes due to Tax Cuts and Jobs Act (d) | — |
| | — |
| | (7,826 | ) |
| Other | 1,997 |
| | (602 | ) | | 2,964 |
|
| Total provision | $ | 26,211 |
| | $ | 14,411 |
| | $ | 2,711 |
|
__________
| |
| (a) | Pre-tax lossincome attributable to taxable subsidiaries for 2016 was primarily driven2018 includes taxable income associated with the accelerated vesting of shares previously issued by CPA:17 – Global to us for asset management services performed, in connection with the impairment charges we recognizedCPA:17 Merger. Pre-tax income attributable to taxable subsidiaries for 2017 excludes the impact of foreign currency exchange rates on international properties duringan intercompany transaction related to the yeareuro-denominated 2.25% Senior Notes due 2024 issued in 2017 (Note 911). since it had no tax impact and eliminates in consolidation. |
| |
| (b) | Represents incomeThe applicable statutory tax expense due to a permanent difference fromrate is 21%, 21%, and 35% for the recognition of deferred revenue as a result of the accelerated vesting of shares previously issued by CPA®:16 – Global for asset managementyears ended December 31, 2019, 2018, and performance fees and the payment of deferred acquisition fees in connection with the CPA®:16 Merger.
2017, respectively. |
| |
| (c) | Represents deferredAmount for the year ended December 31, 2019 includes a current tax benefit associated with basis differences on certain foreign properties acquired.of approximately $6.3 million due to a change in tax position for state and local taxes. |
|
| |
| | W. P. Carey 20162019 10-K– 142122 |
Notes to Consolidated Financial Statements
| |
| (d) | The Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, lowered the U.S. corporate income tax rate from 35% to 21%. The dollar amount shown in the table reflects the net impact of the Tax Cuts and Jobs Act on our domestic TRSs. |
Deferred Income Taxes
Deferred income taxes at December 31, 20162019 and 20152018 consist of the following (in thousands):
|
| | | | | | | |
| | December 31, |
| | 2019 | | 2018 |
| Deferred Tax Assets | |
| | |
|
| Net operating loss and other tax credit carryforwards | $ | 51,265 |
| | $ | 44,445 |
|
| Basis differences — foreign investments | 31,704 |
| | 15,286 |
|
| Unearned and deferred compensation | 10,345 |
| | 16,255 |
|
| Other | 555 |
| | 640 |
|
| Total deferred tax assets | 93,869 |
| | 76,626 |
|
| Valuation allowance | (73,643 | ) | | (54,499 | ) |
| Net deferred tax assets | 20,226 |
| | 22,127 |
|
| Deferred Tax Liabilities | |
| | |
|
| Basis differences — foreign investments | (137,074 | ) | | (138,712 | ) |
| Basis differences — equity investees | (53,460 | ) | | (46,899 | ) |
| Deferred revenue | (100 | ) | | (1,778 | ) |
| Total deferred tax liabilities | (190,634 | ) | | (187,389 | ) |
| Net Deferred Tax Liability | $ | (170,408 | ) | | $ | (165,262 | ) |
|
| | | | | | | |
| | At December 31, |
| | 2016 | | 2015 |
| Deferred Tax Assets | |
| | |
|
| Unearned and deferred compensation | $ | 33,100 |
| | $ | 35,525 |
|
| Net operating loss and other tax credit carryforwards | 31,381 |
| | 19,553 |
|
| Basis differences — foreign investments | 28,324 |
| | 6,975 |
|
| Other | 5,560 |
| | 3,788 |
|
| Total deferred tax assets | 98,365 |
| | 65,841 |
|
| Valuation allowance | (27,350 | ) | | (29,746 | ) |
| Net deferred tax assets | 71,015 |
| | 36,095 |
|
| Deferred Tax Liabilities | |
| | |
|
| Basis differences — foreign investments | (123,269 | ) | | (81,058 | ) |
| Basis differences — equity investees | (17,282 | ) | | (19,925 | ) |
| Deferred revenue | (7,318 | ) | | (8,654 | ) |
| Total deferred tax liabilities | (147,869 | ) | | (109,637 | ) |
| Net Deferred Tax Liability | $ | (76,854 | ) | | $ | (73,542 | ) |
Certain basis differences on foreign investments are now presented as deferred tax assets in the table above. Prior period amounts have been reclassified to conform to the current period presentation.
Our deferred tax assets and liabilities are primarily the result of temporary differences related to the following:
Basis differences between tax and U.S. GAAP for certain international real estate investments. For income tax purposes, in certain acquisitions, we assume the seller’s basis, or the carry-over basis, in the acquired assets. The carry-over basis is typically lower than the purchase price, or the U.S. GAAP basis, resulting in a deferred tax liability with an offsetting increase to goodwill or the acquired tangible or intangible assets;
Timing differences generated by differences in the U.S. GAAP basis and the tax basis of assets such as those related to capitalized acquisition costs, straight-line rent, prepaid rents, and intangible assets, as well as unearned and deferred compensation;
Basis differences in equity investments represents fees earned in shares recognized under U.S. GAAP into income and deferred for U.S. taxes based upon a share vesting schedule; and
Tax net operating losses in certain subsidiaries, including those domiciled in foreign jurisdictions, that may be realized in future periods if the respective subsidiary generates sufficient taxable income.
During Certain net operating losses and interest carryforwards were subject to limitations as a result of the second quarter of 2016, we identifiedCPA:17 Merger, and recorded out-of-period adjustments relatedthus could not be applied to adjustments to prior periodreduce future income tax returns. This adjustment is reflected as a $3.0 million increase in our Provision for income taxes in the consolidated statements of income for the year ended December 31, 2016 (Note 2), and is included in current income tax expense for the year ended December 31, 2016.liabilities.
As of December 31, 2016 and 2015, our taxable subsidiaries have recorded gross deferred tax assets of $31.4 million and $19.6 million, respectively, in connection with2019, U.S. federal state and local, and foreignstate net operating loss carryforwards were $66.4 million and other tax credit carryforwards. The utilization of net operating losses may be subject to certain limitations under the tax laws of the relevant jurisdiction. If not utilized, our federal and state and local net operating losses$27.8 million, respectively, which will begin to expire in 20342031 and our foreign2024, respectively. As of December 31, 2019, net operating lossesloss carryforwards in foreign jurisdictions were $49.7 million, which will begin to expire in 2017. As of December 31, 2016 and 2015, we recorded a valuation allowance of $27.4 million and $29.7 million, respectively, related to these net operating loss carryforwards and basis difference in U.S. and foreign jurisdictions.2020.
The net deferred tax liability in the table above is comprised of deferred tax asset balances, net of certain deferred tax liabilities and valuation allowances, of $14.0$8.9 million and $12.6$7.9 million at December 31, 20162019 and 2015,2018, respectively, which are included in Other assets, net in the consolidated balance sheets, and other deferred tax liability balances of $90.8$179.3 million and $86.1$173.1 million at December 31, 20162019 and 2015,2018, respectively, which are included in Deferred income taxes in the consolidated balance sheets.
|
| |
| | W. P. Carey 20162019 10-K– 143123 |
Notes to Consolidated Financial Statements
Our taxable subsidiaries recognize tax positions in the financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the financial statements.
The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits (in thousands):
|
| | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 |
| Beginning balance | $ | 6,105 |
| | $ | 5,202 |
|
| Addition based on tax positions related to the current year | 543 |
| | 514 |
|
| Decrease due to lapse in statute of limitations | (497 | ) | | (2,186 | ) |
| (Decrease) addition based on tax positions related to prior years | (287 | ) | | 442 |
|
| Foreign currency translation adjustments | (108 | ) | | (140 | ) |
| Increase due to CPA:17 Merger | — |
| | 2,273 |
|
| Ending balance | $ | 5,756 |
| | $ | 6,105 |
|
|
| | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 |
| Beginning balance | $ | 4,304 |
| | $ | 2,055 |
|
| Addition based on tax positions related to prior years | 1,264 |
| | 1,447 |
|
| Addition based on tax positions related to the current year | 137 |
| | 1,510 |
|
| Decrease due to lapse in statute of limitations | (97 | ) | | (572 | ) |
| Foreign currency translation adjustments | (22 | ) | | (136 | ) |
| Ending balance | $ | 5,586 |
| | $ | 4,304 |
|
At December 31, 20162019 and 2015,2018, we had unrecognized tax benefits as presented in the table above that, if recognized, would have a favorable impact on our effective income tax rate in future periods. We recognize interest and penalties related to uncertain tax positions in income tax expense. At December 31, 2016,2019 and 2018, we had approximately $1.1$1.6 million and $1.4 million, respectively, of accrued interest related to uncertain tax positions.
Income Taxes Paid
Income taxes paid were $19.3$35.3 million, $49.2$23.2 million, and $25.2$16.7 million for the years ended December 31, 2016, 2015,2019, 2018, and 2014, respectively. Income taxes that would have been paid before the windfall tax benefit associated with stock-based compensation awards were $26.0 million, $61.7 million, and $30.9 million for the years ended December 31, 2016, 2015, and 2014,2017, respectively.
Owned Real Estate Operations
Effective February 15, 2012, weWe elected to be taxed as a REIT under SectionsSection 856 through 860 of the Internal Revenue Code.Code effective as of February 15, 2012. In order to maintain our qualification as a REIT, we are required, among other things, to distribute at least 90% of our REIT net taxable income to our stockholders and meet certain tests regarding the nature of our income and assets. As a REIT, we are not subject to federal income taxes on our income and gains that we distribute to our stockholders as long as we satisfy certain requirements, principally relating to the nature of our income and the level of our distributions, as well as other factors. We believe that we have operated, and we intend to continue to operate, in a manner that allows us to continue to qualify as a REIT. AsWe conduct business primarily in North America and Europe, and as a REIT,result, we expect to derive mostor one or more of our REITsubsidiaries file income from our real estate operations under our Owned Real Estate segment.tax returns in the United States federal jurisdiction and various state, local, and foreign jurisdictions.
Investment Management Operations
We conduct our investment management services in our Investment Management segment through TRSs. A TRS is a subsidiary of a REIT that is subject to corporate federal, state, local, and foreign taxes, as applicable. Our use of TRSs enables us to engage in certain businesses while complying with the REIT qualification requirements and also allows us to retain income generated by these businesses for reinvestment without the requirement to distribute those earnings. We conduct business in North America, Europe, Australia, and Asia, and as a result, we or one or more of our subsidiaries file income tax returns in the United States federal jurisdiction and various state and certain foreign jurisdictions. Certain of our inter-company transactions that have been eliminated in consolidation for financial accounting purposes are also subject to taxation. Periodically, shares in the Managed REITs that are payable to our TRSs in consideration of services rendered are distributed from TRSs to us.
Tax authorities in the relevant jurisdictions may select our tax returns for audit and propose adjustments before the expiration of the statute of limitations. Our tax returns filed for tax years 20122014 through 20162018 or any ongoing audits remain open to adjustment in the major tax jurisdictions.
|
| |
| | W. P. Carey 20162019 10-K– 144124 |
Notes to Consolidated Financial Statements
Note 17. Property Dispositions and Discontinued Operations
From time to time, we may decide to sell a property. We have an active capital recycling program, with a goal of extending the average lease term through reinvestment, improving portfolio credit quality through dispositions and acquisitions of assets, increasing the asset criticality factor in our portfolio, and/or executing strategic dispositions of assets. We may make a decision to dispose of a property when it is vacant as a result of tenants vacating space, tenants electing not to renew their leases, tenant insolvency, or lease rejection in the bankruptcy process. In such cases, we assess whether we can obtain the highest value from the property by selling it, as opposed to re-leasing it. We may also sell a property when we receive an unsolicited offer or negotiate a price for an investment that is consistent with our strategy for that investment. When it is appropriate to do so, we classify the property as an asset held for sale on our consolidated balance sheet. For those properties sold or classified as held for sale prior to January 1, 2014, or that we acquired as held for sale in the CPA®:16 Merger and sold during 2014, we classify current and prior period results of operations of the property as discontinued operations in accordance with our adoption of ASU 2014-08. All property dispositions are recorded within our Owned Real Estate segment.
Property Dispositions Included in Continuing Operations
The results of operations for properties that have been sold or classified as held for sale that did not qualify for discontinued operations are included within continuing operations in the consolidated financial statements and are summarized as follows (in thousands):
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Revenues | $ | 96,625 |
| | $ | 107,494 |
| | $ | 98,959 |
|
| Expenses | (44,681 | ) | | (62,606 | ) | | (81,260 | ) |
| Gain on sale of real estate | 71,122 |
| | 6,487 |
| | 1,334 |
|
| Impairment charges | (50,769 | ) | | (4,071 | ) | | (22,491 | ) |
| Loss on extinguishment of debt | (4,498 | ) | | (3,156 | ) | | (167 | ) |
| Benefit from (provision for) income taxes | 12,493 |
| | (7,187 | ) | | (3,973 | ) |
Income from continuing operations from properties sold or classified as held for sale, net of income taxes (a) | $ | 80,292 |
| | $ | 36,961 |
| | $ | (7,598 | ) |
__________
| |
(a) | Amounts included net (income) loss attributable to noncontrolling interests of $(1.5) million, $(2.0) million, and $0.3 million, respectively, for the years ended December 31, 2016, 2015, and 2014, respectively. |
20162019 — During the year ended December 31, 2016,2019, we sold 3014 properties and a parcel of vacant land for total proceeds of $542.4$308.0 million, net of selling costs, and recognized a net gain on these sales totaling $10.9 million (inclusive of $42.6income taxes totaling $1.2 million inclusiverecognized upon sale).
In June 2019, a loan receivable was repaid in full to us for $9.3 million, which resulted in a net loss of amounts attributable to noncontrolling interests of $0.9 million. During the year ended December 31, 2016, we recognized impairment charges totaling $41.0$0.1 million on a portfolio of 14 of these properties (Note 96).
In 2016,October 2019, we transferred ownership of a vacant international property6 properties and the related non-recourse mortgage loan, which had aan aggregate asset carrying value of $39.8$42.3 million and an outstanding balancea mortgage carrying value of $60.9$43.4 million (including a $13.8 million discount on the mortgage loan), respectively, on the date of transfer, to the mortgage lender, resulting in a net gain of $16.4 million. $8.3 million (outstanding principal balance was $56.4 million and we wrote off $5.6 million of accrued interest payable).
In addition, in December 2019, we transferred ownership of a vacant domestic property withand the related non-recourse mortgage loan, which had an aggregate asset carrying value of $13.7$10.4 million and a mortgage carrying value of $8.2 million (including a $0.5 million discount on the mortgage loan), respectively, on the date of transfer, to the mortgage lender, resulting in a net loss of $1.0 million (outstanding principal balance was $8.7 million and we wrote off $0.9 million of accrued interest payable).
2018 — During the year ended December 31, 2018, we sold 49 properties for total proceeds of $431.6 million, net of selling costs, and recognized a net gain on these sales totaling $112.3 million (inclusive of income taxes totaling $21.8 million recognized upon sale). Disposition activity included the sale of 1 of our hotel operating properties in April 2018. In connection with the sale of 28 properties in Australia in December 2018, and in accordance with ASC 830-30-40, Foreign Currency Matters, we reclassified an aggregate of $20.2 million of net foreign currency translation losses, including net gains of $7.6 million from net investment hedge forward currency contracts (Note 10), from Accumulated other comprehensive loss to Gain on sale of real estate, net (as a reduction to Gain on sale of real estate, net), since the sale represented a disposal of all of our Australian investments (Note 14).
In addition, in June 2018, we completed a nonmonetary transaction, in which we disposed of 23 properties in exchange for the acquisition of one property leased to the same tenant. This swap was recorded based on the fair value of the property acquired of $85.5 million, which resulted in a net gain of $6.3 million, and was encumbered by a $24.3non-cash investing activity (Note 5).
2017 — During the year ended December 31, 2017, we sold 16 properties and a parcel of vacant land for total proceeds of $159.9 million, net of selling costs, and recognized a net gain on these sales totaling $33.9 million (inclusive of income taxes totaling $5.2 million recognized upon sale). In connection with the sale of a property in Malaysia in August 2017 and the sale of 2 properties in Thailand in December 2017, and in accordance with ASC 830-30-40, Foreign Currency Matters, we reclassified an aggregate of $3.4 million of net foreign currency translation losses from Accumulated other comprehensive loss to Gain on sale of real estate, net (as a reduction to Gain on sale of real estate, net), since the sales represented disposals of all of our Malaysian and Thai investments (Note 14).
In addition, in January 2017, we transferred ownership of 2 international properties and the related non-recourse mortgage loan,
which had an aggregate asset carrying value of $28.1 million and an outstanding balance of $28.1 million (net of
$2.6$3.8 million of cash held in escrow that was retained by the mortgage lender),
was foreclosed upon byrespectively, on the dates of transfer, to the mortgage lender, resulting in a net
gainloss of
$11.6less than $0.1 million.
We also transferred ownership of an international property and the related non-recourse mortgage loan to the mortgage lender. The property was held for sale at December 31, 2015 (Note 5). At the date of the transfer, the property had an asset carrying value of $3.2 million and the related non-recourse mortgage loan had an outstanding balance of $4.5 million, resulting in a net gain of $0.6 million.
During the year ended December 31, 2016, we entered into a contract to sell an international property, which was classified as held for sale as of December 31, 2016 (Note 5), and which was previously included in Net investments in direct financing leases in our consolidated financial statements. In connection with this potential sale, we recognized an impairment charge of $7.0 million during the year ended December 31, 2016 to reduce the carrying value of the property to its estimated selling price (Note 9). This property was sold in January 2017 (Note 20).
|
| |
| | W. P. Carey 20162019 10-K– 145125 |
Notes to Consolidated Financial Statements
In connection with those sales that constituted businesses, during the year ended December 31, 2016 we allocated goodwill totaling $34.4 million to the cost basis of the properties for our Owned Real Estate segment based on the relative fair value at the time of the sale (Note 8).
In the fourth quarter of 2015, we executed a lease amendment with a tenant in a domestic office building. The amendment extended the lease term an additional 15 years to January 31, 2037 and provided a one-time rent payment of $25.0 million, which was paid to us on December 18, 2015. The lease amendment also provided an option to terminate the lease effective February 29, 2016, with additional lease termination fees of $22.2 million to be paid to us on or five days before February 29, 2016 upon exercise of the option. The tenant exercised the option on January 1, 2016. The aggregate of the additional rent payment of $25.0 million and the lease termination fees of $22.2 million were amortized to lease termination income from the lease amendment date on December 4, 2015 through the end of the non-cancelable lease term on February 29, 2016, resulting in $15.0 million recognized during the year ended December 31, 2015 and $32.2 million recognized during the three months ended March 31, 2016 within Lease termination income and other in the consolidated financial statements. In connection with the lease amendment, we defeased the mortgage loan encumbering the property with a principal balance of $36.5 million and recognized a loss on extinguishment of debt of $5.3 million, which was included in Other income and (expenses) in the consolidated financial statements for the year ended December 31, 2015. In addition, during the fourth quarter of 2015, we entered into an agreement to sell the property to a third party and the buyer placed a deposit of $12.7 million for the purchase of the property that was held in escrow. At December 31, 2015, this property was classified as held for sale (Note 5). During the three months ended March 31, 2016, we sold the property for proceeds of $44.4 million, net of selling costs, and recognized a loss on the sale of $10.7 million.
2015 — During the year ended December 31, 2015, we sold 13 properties for total proceeds of $35.7 million, net of selling costs, and we recognized a net gain on these sales of $5.9 million. We recognized impairment charges (Note 9) on these properties totaling $6.0 million, of which $2.7 million and $3.3 million were recognized during 2015 and 2014, respectively, and a gain on extinguishment of debt of $2.1 million in 2015. In addition, during July 2015, a vacant domestic property was foreclosed upon and sold for $1.4 million. We recognized a gain on sale of $0.6 million in connection with that disposition. In connection with those sales that constituted businesses, during the year ended December 31, 2015 we allocated goodwill totaling $1.7 million to the cost basis of the properties for our Owned Real Estate segment, based on the relative fair value at the time of the sale (Note 8).
2014 — During the year ended December 31, 2014, we sold 13 properties for total proceeds of $45.6 million, net of selling costs, and we recognized a net loss on these sales of $5.1 million, excluding impairment charges totaling $1.8 million, of which $1.7 million and $0.1 million were recognized in 2014 and 2013, respectively. These sales included a manufacturing facility for which the contractual minimum sale price of $5.8 million was not met. The third-party purchaser paid $1.4 million, with the difference of $4.4 million being paid by the vacating tenant. We also recorded a receivable of $5.5 million from the tenant representing the present value of the termination fee from the tenant, which will be paid over 5.7 years. The total amount paid and to be paid was recorded as lease termination income, which was partially offset by the $8.4 million loss recognized on the sale of the property.
During the year ended December 31, 2014, two domestic properties were foreclosed upon and sold for a total of $8.3 million. The proceeds from the sales were used to repay mortgage loans encumbering these properties. At the time of the sales, the properties had a total carrying value of $8.3 million and the related mortgage loans on the properties had a total outstanding balance of $8.5 million. We recognized a net loss on the sales of $0.1 million, excluding an impairment charge of $3.5 million recognized in 2014.
In December 2014, we transferred ownership of a property in France and the related non-recourse mortgage loan to a third-party property manager for net proceeds of €1. As of the date of transfer, the property had a carrying value of $14.5 million and the related non-recourse mortgage loan had an outstanding balance of $19.4 million. In connection with the transfer, we recognized a net gain on sale of $6.7 million.
During the year ended December 31, 2014, we entered into contracts to sell four properties for a total of $10.0 million. In connection with these potential sales, we recognized an impairment charge of $1.3 million during the year ended December 31, 2014 to reduce the carrying values of the properties to their estimated selling prices. At December 31, 2014, these properties were classified as held for sale (Note 5). We completed the sale of these properties during the year ended December 31, 2015.
In connection with those sales that constituted businesses during the year ended December 31, 2014, we allocated goodwill totaling $2.7 million to the cost basis of the properties, for our Owned Real Estate segment, based on the relative fair value at the time of the sale (Note 8).
|
| |
| W. P. Carey 2016 10-K– 146
|
Notes to Consolidated Financial Statements
Property Dispositions Included in Discontinued Operations
The results of operations for properties that have been classified as held for sale or have been sold prior to January 1, 2014, and the properties that were acquired as held for sale in the CPA®:16 Merger and sold during 2014, are reflected in the consolidated financial statements as discontinued operations, net of tax and are summarized as follows (in thousands):
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2016 | | 2015 | | 2014 |
| Revenues | $ | — |
| | $ | — |
| | $ | 8,931 |
|
| Expenses | — |
| | — |
| | (2,039 | ) |
| Loss on extinguishment of debt | — |
| | — |
| | (1,244 | ) |
| Gain on sale of real estate | — |
| | — |
| | 27,670 |
|
| Income from discontinued operations | $ | — |
| | $ | — |
| | $ | 33,318 |
|
2014 — At December 31, 2013, we had nine properties classified as held for sale, all of which were sold during the year ended December 31, 2014. The properties were sold for a total of $116.4 million, net of selling costs, and we recognized a net gain on these sales of $28.0 million. We used a portion of the proceeds to repay a related mortgage loan obligation of $11.4 million and recognized a loss on extinguishment of debt of $0.1 million.
In connection with those sales of properties accounted for as businesses for the year ended December 31, 2014, we allocated goodwill totaling $7.0 million to the cost basis of the properties, for our Owned Real Estate segment based on the relative fair value at the time of the sale.
In connection with the CPA®:16 Merger in January 2014, we acquired ten properties, including five properties held by one jointly owned investment, that were classified as held for sale with a total fair value of $133.4 million. We sold all of these properties during the six months ended June 30, 2014 for a total of $123.4 million, net of selling costs, including seller financing of $15.0 million, and recognized a net loss on these sales of $0.3 million. We used a portion of the proceeds to repay the related mortgage loan obligations totaling $18.9 million and recognized a loss on extinguishment of debt of $1.2 million. We did not allocate any goodwill to these properties since they qualified as held for sale at the time of acquisition and were not considered to have been integrated into the relevant reporting unit.
|
| |
| W. P. Carey 2016 10-K– 147
|
Notes to Consolidated Financial Statements
Note 18. Segment Reporting
We evaluate our results from operations by our two2 major business segments — Ownedsegments: Real Estate and Investment Management (Note 1). The following tables present a summary of comparative results and assets for these business segments (in thousands):
Owned Real Estate
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Revenues | | | | | |
| Lease revenues | $ | 663,463 |
| | $ | 656,956 |
| | $ | 573,829 |
|
| Lease termination income and other | 35,696 |
| | 25,145 |
| | 17,767 |
|
| Operating property revenues | 30,767 |
| | 30,515 |
| | 28,925 |
|
| Reimbursable tenant costs | 25,438 |
| | 22,832 |
| | 24,862 |
|
| | 755,364 |
| | 735,448 |
| | 645,383 |
|
| Operating Expenses | | | | | |
| Depreciation and amortization | 272,274 |
| | 276,236 |
| | 233,099 |
|
| Impairment charges | 59,303 |
| | 29,906 |
| | 23,067 |
|
| Property expenses, excluding reimbursable tenant costs | 49,431 |
| | 52,199 |
| | 37,725 |
|
| General and administrative | 34,591 |
| | 47,676 |
| | 38,797 |
|
| Reimbursable tenant costs | 25,438 |
| | 22,832 |
| | 24,862 |
|
| Stock-based compensation expense | 5,224 |
| | 7,873 |
| | 12,659 |
|
| Restructuring and other compensation | 4,413 |
| | — |
| | — |
|
| Property acquisition and other expenses | 2,993 |
| | (9,908 | ) | | 34,465 |
|
| | 453,667 |
| | 426,814 |
| | 404,674 |
|
| Other Income and Expenses | | | | | |
| Interest expense | (183,409 | ) | | (194,326 | ) | | (178,122 | ) |
| Equity in earnings of equity method investments in the Managed REITs and real estate | 62,724 |
| | 52,972 |
| | 44,116 |
|
| Other income and (expenses) | 3,665 |
| | 1,952 |
| | (14,505 | ) |
| Gain on change in control of interests | — |
| | — |
| | 105,947 |
|
| | (117,020 | ) | | (139,402 | ) | | (42,564 | ) |
| Income from continuing operations before income taxes and gain on sale of real estate | 184,677 |
| | 169,232 |
| | 198,145 |
|
| Benefit from (provision for) income taxes | 3,418 |
| | (17,948 | ) | | 916 |
|
| Income from continuing operations before gain on sale of real estate | 188,095 |
| | 151,284 |
| | 199,061 |
|
| Income from discontinued operations, net of tax | — |
| | — |
| | 33,318 |
|
| Gain on sale of real estate, net of tax | 71,318 |
| | 6,487 |
| | 1,581 |
|
| Net Income from Owned Real Estate | 259,413 |
| | 157,771 |
| | 233,960 |
|
| Net income attributable to noncontrolling interests | (7,060 | ) | | (10,961 | ) | | (5,573 | ) |
| Net Income from Owned Real Estate Attributable to W. P. Carey | $ | 252,353 |
| | $ | 146,810 |
| | $ | 228,387 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Revenues | | | | | |
| Lease revenues | $ | 1,086,375 |
| | $ | 744,498 |
| | $ | 651,897 |
|
Operating property revenues (a) | 50,220 |
| | 28,072 |
| | 30,562 |
|
| Lease termination income and other | 36,268 |
| | 6,555 |
| | 4,749 |
|
| | 1,172,863 |
| | 779,125 |
| | 687,208 |
|
| Operating Expenses | | | | | |
| Depreciation and amortization | 443,300 |
| | 287,461 |
| | 249,432 |
|
| General and administrative | 56,796 |
| | 47,210 |
| | 39,002 |
|
| Reimbursable tenant costs | 55,576 |
| | 28,076 |
| | 21,524 |
|
| Property expenses, excluding reimbursable tenant costs | 39,545 |
| | 22,773 |
| | 17,330 |
|
| Operating property expenses | 38,015 |
| | 20,150 |
| | 23,426 |
|
| Impairment charges | 32,539 |
| | 4,790 |
| | 2,769 |
|
| Stock-based compensation expense | 13,248 |
| | 10,450 |
| | 6,960 |
|
| Merger and other expenses | 101 |
| | 41,426 |
| | 605 |
|
| | 679,120 |
| | 462,336 |
| | 361,048 |
|
| Other Income and Expenses | | | | | |
| Interest expense | (233,325 | ) | | (178,375 | ) | | (165,775 | ) |
| Other gains and (losses) | 30,251 |
| | 30,015 |
| | (5,655 | ) |
| Gain on sale of real estate, net | 18,143 |
| | 118,605 |
| | 33,878 |
|
| (Loss) gain on change in control of interests | (8,416 | ) | | 18,792 |
| | — |
|
| Equity in earnings of equity method investments in real estate | 2,361 |
| | 13,341 |
| | 13,068 |
|
| | (190,986 | ) | | 2,378 |
| | (124,484 | ) |
| Income before income taxes | 302,757 |
| | 319,167 |
| | 201,676 |
|
| (Provision for) benefit from income taxes | (30,802 | ) | | 844 |
| | (1,743 | ) |
| Net Income from Real Estate | 271,955 |
| | 320,011 |
| | 199,933 |
|
| Net loss (income) attributable to noncontrolling interests | 110 |
| | (12,775 | ) | | (7,794 | ) |
| Net Income from Real Estate Attributable to W. P. Carey | $ | 272,065 |
| | $ | 307,236 |
| | $ | 192,139 |
|
__________
| |
| (a) | Operating property revenues from our hotels include (i) $15.0 million, $15.2 million, and $14.6 million for the years ended December 31, 2019, 2018, and 2017, respectively, generated from a hotel in Bloomington, Minnesota, (ii) $14.4 million and $1.7 million for the years ended December 31, 2019 and 2018, respectively, generated from a hotel in Miami, Florida, which was acquired in the CPA:17 Merger (Note 3), classified as held for sale as of December 31, 2019 (Note 5), and sold in January 2020 (Note 20), and (iii) $4.8 million and $16.0 million for the years ended December 31, 2018 and 2017, respectively, generated from a hotel in Memphis, Tennessee, which was sold in April 2018 (Note 17). |
|
| |
| | W. P. Carey 20162019 10-K– 148126 |
Notes to Consolidated Financial Statements
Investment Management
| | | | Years Ended December 31, | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 | 2019 | | 2018 | | 2017 |
| Revenues | | | | | | | | | | |
| Asset management revenue | | $ | 39,132 |
| | $ | 63,556 |
| | $ | 70,125 |
|
| Reimbursable costs from affiliates | $ | 66,433 |
| | $ | 55,837 |
| | $ | 130,212 |
| 16,547 |
| | 21,925 |
| | 51,445 |
|
| Asset management revenue | 61,971 |
| | 49,984 |
| | 38,063 |
| |
| Structuring revenue | 47,328 |
| | 92,117 |
| | 71,256 |
| |
| Structuring and other advisory revenue | | 4,224 |
| | 21,126 |
| | 35,094 |
|
| Dealer manager fees | 8,002 |
| | 4,794 |
| | 23,532 |
| — |
| | — |
| | 4,430 |
|
| Other advisory revenue | 2,435 |
| | 203 |
| | — |
| |
| | 186,169 |
| | 202,935 |
| | 263,063 |
| 59,903 |
| | 106,607 |
| | 161,094 |
|
| Operating Expenses | | | | | | | | | | |
| General and administrative | | 18,497 |
| | 21,127 |
| | 31,889 |
|
| Reimbursable costs from affiliates | 66,433 |
| | 55,837 |
| | 130,212 |
| 16,547 |
| | 21,925 |
| | 51,445 |
|
| General and administrative | 47,761 |
| | 55,496 |
| | 52,791 |
| |
| Subadvisor fees | 14,141 |
| | 11,303 |
| | 5,501 |
| 7,579 |
| | 9,240 |
| | 13,600 |
|
| Stock-based compensation expense | | 5,539 |
| | 7,844 |
| | 11,957 |
|
| Depreciation and amortization | | 3,835 |
| | 3,979 |
| | 3,902 |
|
| Restructuring and other compensation | | — |
| | — |
| | 9,363 |
|
| Dealer manager fees and expenses | 12,808 |
| | 11,403 |
| | 21,760 |
| — |
| | — |
| | 6,544 |
|
| Stock-based compensation expense | 12,791 |
| | 13,753 |
| | 18,416 |
| |
| Restructuring and other compensation | 7,512 |
| | — |
| | — |
| |
| Depreciation and amortization | 4,236 |
| | 4,079 |
| | 4,024 |
| |
| Property acquisition and other expenses | 2,384 |
| | 2,144 |
| | — |
| |
| | 168,066 |
| | 154,015 |
| | 232,704 |
| 51,997 |
| | 64,115 |
| | 128,700 |
|
| Other Income and Expenses | | | | | | | | | | |
| Other income and (expenses) | 2,002 |
| | 161 |
| | 275 |
| |
| Equity in earnings (losses) of equity method investment in CCIF | 1,995 |
| | (1,952 | ) | | — |
| |
| Equity in earnings of equity method investments in the Managed Programs | | 20,868 |
| | 48,173 |
| | 51,682 |
|
| Other gains and (losses) | | 1,224 |
| | (102 | ) | | 2,042 |
|
| Gain on change in control of interests | | — |
| | 29,022 |
| | — |
|
| | 3,997 |
| | (1,791 | ) | | 275 |
| 22,092 |
| | 77,093 |
| | 53,724 |
|
| Income from continuing operations before income taxes | 22,100 |
| | 47,129 |
| | 30,634 |
| |
| Provision for income taxes | (6,706 | ) | | (19,673 | ) | | (18,525 | ) | |
| Income before income taxes | | 29,998 |
| | 119,585 |
| | 86,118 |
|
| Benefit from (provision for) income taxes | | 4,591 |
| | (15,255 | ) | | (968 | ) |
| Net Income from Investment Management | 15,394 |
| | 27,456 |
| | 12,109 |
| 34,589 |
| | 104,330 |
| | 85,150 |
|
| Net income attributable to noncontrolling interests | — |
| | (2,008 | ) | | (812 | ) | (1,411 | ) | | — |
| | — |
|
| Net loss attributable to redeemable noncontrolling interest | — |
| | — |
| | 142 |
| |
| Net Income from Investment Management Attributable to W. P. Carey | $ | 15,394 |
| | $ | 25,448 |
| | $ | 11,439 |
| $ | 33,178 |
| | $ | 104,330 |
| | $ | 85,150 |
|
Total Company
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Revenues | $ | 1,232,766 |
| | $ | 885,732 |
| | $ | 848,302 |
|
| Operating expenses | 731,117 |
| | 526,451 |
| | 489,748 |
|
| Other income and expenses | (168,894 | ) | | 79,471 |
| | (70,760 | ) |
| Provision for income taxes | (26,211 | ) | | (14,411 | ) | | (2,711 | ) |
| Net income attributable to noncontrolling interests | (1,301 | ) | | (12,775 | ) | | (7,794 | ) |
| Net income attributable to W. P. Carey | $ | 305,243 |
| | $ | 411,566 |
| | $ | 277,289 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Revenues | $ | 941,533 |
| | $ | 938,383 |
| | $ | 908,446 |
|
| Operating expenses | 621,733 |
| | 580,829 |
| | 637,378 |
|
| Other income and (expenses) | (113,023 | ) | | (141,193 | ) | | (42,289 | ) |
| Provision for income taxes | (3,288 | ) | | (37,621 | ) | | (17,609 | ) |
| Income from discontinued operations, net of tax | — |
| | — |
| | 33,318 |
|
| Gain on sale of real estate, net of tax | 71,318 |
| | 6,487 |
| | 1,581 |
|
| Net income attributable to noncontrolling interests | (7,060 | ) | | (12,969 | ) | | (6,385 | ) |
| Net loss attributable to redeemable noncontrolling interest | — |
| | — |
| | 142 |
|
| Net income attributable to W. P. Carey | $ | 267,747 |
| | $ | 172,258 |
| | $ | 239,826 |
|
|
| | | | | | | |
| | Total Assets at December 31, |
| | 2019 | | 2018 |
| Real Estate | $ | 13,811,403 |
| | $ | 13,941,963 |
|
| Investment Management | 249,515 |
| | 241,076 |
|
| Total Company | $ | 14,060,918 |
| | $ | 14,183,039 |
|
|
| |
| | W. P. Carey 20162019 10-K– 149127 |
Notes to Consolidated Financial Statements
|
| | | | | | | | | | | | | | | |
| | Total Long-Lived Assets (a) at December 31, | | Total Assets at December 31, |
| | 2016 | | 2015 | | 2016 | | 2015 (b) |
| Owned Real Estate | $ | 5,787,071 |
| | $ | 6,079,803 |
| | $ | 8,242,263 |
| | $ | 8,537,544 |
|
| Investment Management | 23,528 |
| | 22,214 |
| | 211,691 |
| | 204,545 |
|
| Total Company | $ | 5,810,599 |
| | $ | 6,102,017 |
| | $ | 8,453,954 |
| | $ | 8,742,089 |
|
__________
| |
(a) | Consists of Net investments in real estate and Equity investments in the Managed Programs and real estate. Total long-lived assets for our Investment Management segment consists of our equity investment in CCIF (Note 7). |
| |
(b) | In accordance with ASU 2015-03, we reclassified deferred financing costs from Other assets, net to Non-recourse debt, net, Senior Unsecured Notes, net, and Senior Unsecured Credit Facility - Term Loan, net as of December 31, 2015 (Note 2). |
|
| |
| W. P. Carey 2016 10-K– 150
|
��
Notes to Consolidated Financial Statements
Our portfolio is comprised of domestic and international investments. At December 31, 2016,2019, our international investments within our Owned Real Estate segment were comprised of investments in Germany, Spain, the United Kingdom, Spain, Finland, Poland, the Netherlands, Finland, France, Denmark, Norway, Hungary, Italy, Austria, Hungary, Sweden, Croatia, Belgium, Australia, Thailand, Malaysia, Japan,Lithuania, Portugal, Slovakia, the Czech Republic, Canada, Mexico, and Mexico. There are noJapan. We sold all of our investments in foreign jurisdictions withinAustralia during 2018 (Note 17). We sold all of our Investment Management segment. Other than Germany, noinvestments in Malaysia and Thailand during 2017 (Note 17). No international country or tenant individually comprised more thanat least 10% of our total lease revenues for the years ended December 31, 2016, 2015,2019, 2018, or 2014.2017, or at least 10% of our total long-lived assets at December 31, 2019 or 2018. Revenues and assets within our Investment Management segment are entirely domestic. The following tables present the geographic information for our Real Estate segment (in thousands): |
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Revenues | | | | | |
| Domestic | $ | 783,828 |
| | $ | 499,342 |
| | $ | 451,310 |
|
| International | 389,035 |
| | 279,783 |
| | 235,898 |
|
| Total | $ | 1,172,863 |
|
| $ | 779,125 |
|
| $ | 687,208 |
|
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 |
| Domestic | | | | | |
| Revenues | $ | 490,134 |
| | $ | 468,703 |
| | $ | 426,578 |
|
| Operating expenses | (274,013 | ) | | (296,265 | ) | | (284,362 | ) |
| Interest expense | (149,615 | ) | | (153,219 | ) | | (117,603 | ) |
| Other income and expenses, excluding interest expense | 59,683 |
| | 50,891 |
| | 146,156 |
|
| Provision for income taxes | (4,808 | ) | | (6,219 | ) | | (3,238 | ) |
| Gain (loss) on sale of real estate, net of tax | 56,492 |
| | 2,941 |
| | (5,119 | ) |
| Net income attributable to noncontrolling interests | (7,591 | ) | | (5,358 | ) | | (4,233 | ) |
| Net loss attributable to noncontrolling interests in discontinued operations | — |
| | — |
| | (179 | ) |
| Income from continuing operations attributable to W. P. Carey | $ | 170,282 |
| | $ | 61,474 |
| | $ | 158,000 |
|
| Germany | | | | | |
| Revenues | $ | 68,372 |
| | $ | 65,777 |
| | $ | 72,978 |
|
Operating (expenses) benefits (a) | (28,473 | ) | | 818 |
| | (40,847 | ) |
| Interest expense | (15,681 | ) | | (15,432 | ) | | (18,880 | ) |
| Other income and expenses, excluding interest expense | 649 |
| | 4,175 |
| | (10,698 | ) |
| (Provision for) benefit from income taxes | (4,083 | ) | | (4,357 | ) | | 3,163 |
|
| Gain on sale of real estate, net of tax | — |
| | 21 |
| | — |
|
| Net income attributable to noncontrolling interests | 252 |
| | (5,537 | ) | | (1,017 | ) |
| Income from continuing operations attributable to W. P. Carey | $ | 21,036 |
| | $ | 45,465 |
| | $ | 4,699 |
|
| Other International | | | | | |
| Revenues | $ | 196,858 |
| | $ | 200,968 |
| | $ | 145,827 |
|
| Operating expenses | (151,181 | ) | | (131,367 | ) | | (79,465 | ) |
| Interest expense | (18,113 | ) | | (25,675 | ) | | (41,639 | ) |
| Other income and expenses, excluding interest expense | 6,057 |
| | (142 | ) | | 100 |
|
| Benefit from (provision for) income taxes | 12,309 |
| | (7,372 | ) | | 991 |
|
| Gain on sale of real estate, net of tax | 14,826 |
| | 3,525 |
| | 6,700 |
|
| Net loss (income) attributable to noncontrolling interests | 279 |
| | (66 | ) | | (323 | ) |
| Income from continuing operations attributable to W. P. Carey | $ | 61,035 |
| | $ | 39,871 |
| | $ | 32,191 |
|
| Total | | | | | |
| Revenues | $ | 755,364 |
|
| $ | 735,448 |
|
| $ | 645,383 |
|
| Operating expenses | (453,667 | ) |
| (426,814 | ) |
| (404,674 | ) |
| Interest expense | (183,409 | ) |
| (194,326 | ) |
| (178,122 | ) |
| Other income and expenses, excluding interest expense | 66,389 |
|
| 54,924 |
|
| 135,558 |
|
| Benefit from (provision for) income taxes | 3,418 |
|
| (17,948 | ) |
| 916 |
|
| Gain on sale of real estate, net of tax | 71,318 |
| | 6,487 |
| | 1,581 |
|
| Net income attributable to noncontrolling interests | (7,060 | ) | | (10,961 | ) | | (5,573 | ) |
| Net loss attributable to noncontrolling interests in discontinued operations | — |
| | — |
| | (179 | ) |
| Income from continuing operations attributable to W. P. Carey | $ | 252,353 |
|
| $ | 146,810 |
| | $ | 194,890 |
|
|
| | | | | | | |
| | December 31, |
| | 2019 | | 2018 |
Long-lived Assets (a) | | | |
| Domestic | $ | 7,574,110 |
| | $ | 7,579,018 |
|
| International | 4,342,635 |
| | 4,349,836 |
|
| Total | $ | 11,916,745 |
| | $ | 11,928,854 |
|
| | | | |
| Equity Investments in Real Estate | | | |
| Domestic | $ | 110,822 |
| | $ | 129,799 |
|
| International | 83,615 |
| | 91,859 |
|
| Total | $ | 194,437 |
| | $ | 221,658 |
|
__________
| |
| (a) | Consists of Net investments in real estate. |
|
| |
| | W. P. Carey 20162019 10-K– 151128 |
Notes to Consolidated Financial Statements
|
| | | | | | | |
| | December 31, |
| | 2016 | | 2015 |
| Domestic | | | |
Long-lived assets (b) | $ | 3,784,905 |
| | $ | 3,794,232 |
|
Total assets (c) | 5,517,050 |
| | 5,435,251 |
|
| Germany | | | |
Long-lived assets (b) | $ | 545,672 |
| | $ | 581,283 |
|
Total assets (c) | 718,397 |
| | 790,895 |
|
| Other International | | | |
Long-lived assets (b) | $ | 1,456,494 |
| | $ | 1,704,288 |
|
Total assets (c) | 2,006,816 |
| | 2,311,398 |
|
| Total | | | |
Long-lived assets (b) | $ | 5,787,071 |
| | $ | 6,079,803 |
|
Total assets (c) | 8,242,263 |
| | 8,537,544 |
|
__________
| |
(a) | Amount for the year ended December 31, 2015 includes a reversal of $25.0 million of liabilities for German real estate transfer taxes (Note 7). |
| |
(b) | Consists of Net investments in real estate and Equity investments in the Managed Programs and real estate, excluding our equity investment in CCIF (Note 7). |
| |
(c) | In accordance with ASU 2015-03, we reclassified deferred financing costs from Other assets, net to Non-recourse debt, net, Senior Unsecured Notes, net, and Senior Unsecured Credit Facility - Term Loan, net as of December 31, 2015 (Note 2). |
|
| |
| W. P. Carey 2016 10-K– 152
|
Notes to Consolidated Financial Statements
Note 19. Selected Quarterly Financial Data (Unaudited)
(dollars in thousands, except per share amounts)
| | | | Three Months Ended | Three Months Ended |
| | March 31, 2016 | | June 30, 2016 | | September 30, 2016 | | December 31, 2016 | March 31, 2019 | | June 30, 2019 | | September 30, 2019 | | December 31, 2019 |
Revenues (a) | $ | 270,240 |
| | $ | 217,266 |
| | $ | 225,247 |
| | $ | 228,780 |
| $ | 298,323 |
| | $ | 305,211 |
| | $ | 318,005 |
| | $ | 311,227 |
|
| Expenses | 180,000 |
| | 160,697 |
| | 136,472 |
| | 144,564 |
| |
Net income (a) (b) | 60,864 |
| | 53,171 |
| | 112,302 |
| | 48,470 |
| |
Expenses (a) (b) | | 177,722 |
| | 179,170 |
| | 198,409 |
| | 175,816 |
|
Net income (a) (b) (c) (d) | | 68,796 |
| | 66,121 |
| | 41,835 |
| | 129,792 |
|
Net income attributable to noncontrolling interests | (3,425 | ) | | (1,510 | ) | | (1,359 | ) | | (766 | ) | (302 | ) | | (83 | ) | | (496 | ) | | (420 | ) |
Net income attributable to W. P. Carey (a) (b) | $ | 57,439 |
| | $ | 51,661 |
| | $ | 110,943 |
| | $ | 47,704 |
| |
Net income attributable to W. P. Carey (a) (b) (c) (d) | | 68,494 |
| | 66,038 |
| | 41,339 |
| | 129,372 |
|
| Earnings per share attributable to W. P. Carey: | | | | | | | | | | | | | | |
Basic | $ | 0.54 |
| | $ | 0.48 |
| | $ | 1.03 |
| | $ | 0.44 |
| $ | 0.41 |
| | $ | 0.39 |
| | $ | 0.24 |
| | $ | 0.75 |
|
Diluted | $ | 0.54 |
| | $ | 0.48 |
| | $ | 1.03 |
| | $ | 0.44 |
| $ | 0.41 |
| | $ | 0.38 |
| | $ | 0.24 |
| | $ | 0.75 |
|
| Distributions declared per share | $ | 0.9742 |
| | $ | 0.9800 |
| | $ | 0.9850 |
| | $ | 0.9900 |
| |
| | | | Three Months Ended | Three Months Ended |
| | March 31, 2015 | | June 30, 2015 | | September 30, 2015 | | December 31, 2015 | March 31, 2018 | | June 30, 2018 | | September 30, 2018 | | December 31, 2018 |
Revenues (c)(a) | $ | 220,388 |
| | $ | 238,079 |
| | $ | 214,666 |
| | $ | 265,250 |
| $ | 201,810 |
| | $ | 201,143 |
| | $ | 209,384 |
| | $ | 273,395 |
|
Expenses (d)(a) | 140,479 |
| | 130,382 |
| | 159,066 |
| | 150,902 |
| 120,966 |
| | 109,202 |
| | 110,937 |
| | 185,346 |
|
Net income (c) (d) | 38,582 |
| | 66,923 |
| | 23,578 |
| | 56,144 |
| |
Net income (a) (f) (g) | | 68,066 |
| | 79,424 |
| | 81,573 |
| | 195,278 |
|
Net income attributable to noncontrolling interests | (2,466 | ) | | (3,575 | ) | | (1,833 | ) | | (5,095 | ) | (2,792 | ) | | (3,743 | ) | | (4,225 | ) | | (2,015 | ) |
Net income attributable to W. P. Carey (c) (d) | $ | 36,116 |
| | $ | 63,348 |
| | $ | 21,745 |
| | $ | 51,049 |
| |
Net income attributable to W. P. Carey (a) (f) (g) | | 65,274 |
| | 75,681 |
| | 77,348 |
| | 193,263 |
|
| Earnings per share attributable to W. P. Carey: | | | | | | | | | | | | | | |
Basic | $ | 0.34 |
| | $ | 0.60 |
| | $ | 0.20 |
| | $ | 0.48 |
| $ | 0.60 |
| | $ | 0.70 |
| | $ | 0.71 |
| | $ | 1.33 |
|
Diluted | $ | 0.34 |
| | $ | 0.59 |
| | $ | 0.20 |
| | $ | 0.48 |
| $ | 0.60 |
| | $ | 0.70 |
| | $ | 0.71 |
| | $ | 1.33 |
|
| Distributions declared per share | $ | 0.9525 |
| | $ | 0.9540 |
| | $ | 0.9550 |
| | $ | 0.9646 |
| |
__________
| |
| (a) | AmountAmounts for 2019 and the three months ended MarchDecember 31, 2016 includes lease termination income2018 include the impact of $32.2 million recognized in connection with a domestic property that was sold during the periodCPA:17 Merger (Note 173). |
| |
| (b) | Amount for the three months ended September 30, 20162019 includes impairment charges totaling $25.8 million recognized on a portfolio of 4 properties accounted for as Net investments in direct financing leases (Note 9). |
| |
| (c) | Amount for the three months ended September 30, 2019 includes a loss on change in control of interests of $8.4 million recognized in connection with the CPA:17 Merger (Note 3). |
| |
| (d) | Amount for the three months ended December 31, 2019 includes: (i) unrealized gains recognized on our investment in shares of a cold storage operator totaling $36.1 million (Note 9) and (ii) an aggregate gain on sale of real estate of $17.5 million recognized on the disposition of 12 properties. |
| |
| (e) | The sum of the quarterly basic and diluted earnings per share amounts may not agree to the full year basic and diluted earnings per share amounts because the calculations of basic and diluted weighted-average shares outstanding for each quarter and the full year are performed independently. For the year ended December 31, 2018, total quarterly basic and diluted earnings per share were $0.16 and $0.15 lower, respectively, than the corresponding earnings per share as computed on an annual basis, as a result of the change in the shares outstanding for each of the periods, primarily due to the issuance of shares in the CPA:17 Merger (Note 3) and under our ATM Programs (Note 14). |
| |
| (f) | Amount for the three months ended December 31, 2018 includes a gain on change in control of interests of $47.8 million recognized in connection with the CPA:17 Merger (Note 3). |
| |
| (g) | Amount for the three months ended June 30, 2018 includes an aggregate gain on sale of real estate of $49.1$11.9 million recognized on the disposition of four properties (Note 17). |
| |
(c) | 25 properties. Amount for the three months ended December 31, 20152018 includes $15.0an aggregate gain on sale of real estate of $99.6 million recognized on the disposition of termination income related to a domestic property that was classified as held for sale as of December 31, 2015. The property was subsequently sold during the first quarter of 2016 (Note 17). 39 properties. |
|
| |
(d) | Amount for the three months ended December 31, 2015 includes a reversal of $25.0 million of liabilities for German real estate transfer taxes (Note 7).W. P. Carey 2019 10-K– 129 |
Notes to Consolidated Financial Statements
Note 20. Subsequent Events
Issuance of Senior Unsecured Notes
On January 19, 2017, we completed a public offering of €500.0 million of 2.25% Senior Notes, at a price of 99.448% of par value, issued by our wholly owned subsidiary, WPC Eurobond B.V., which are guaranteed by us. These 2.25% Senior Notes have a 7.5-year term and are scheduled to mature on July 19, 2024.
Senior Unsecured Credit Facility
On January 26, 2017, we exercised our option to extend our Term Loan Facility (Note 11) by an additional year to January 31, 2018. In connection with the extension, we incurred financing costs of $0.3 million.
|
| |
| W. P. Carey 2016 10-K– 153
|
Notes to Consolidated Financial Statements
Amended Credit Facility
On February 22, 2017,20, 2020, we amended and restated our Senior Unsecured Credit Facility. We increased the capacity of our unsecured line of credit under our Amended Credit Facility to $1.85$2.1 billion, which is comprised of a $1.5$1.8 billion revolving line of credit, maturing in four years with two six-month extension options, a €236.3£150.0 million term loan, maturing in five years, and a $100.0$105.0 million delayed draw term loan, alsoall maturing in five years. The delayed draw term loan may be drawn within one year and allows for borrowings in U.S. dollars, euros, or British pounds sterling. The aggregate principal amount (of revolving and term loans) available under the Amended Credit Facility may be increased up to an amount not to exceed the U.S. dollar equivalent of $2.75 billion, subject to the conditions to increase provided in the related credit agreement. We will incur interest at LIBOR, or a LIBOR equivalent, plus 1.00%0.85% on the revolving line of credit, EURIBOR plus 1.10% on the term loan, and LIBOR, or a LIBOR equivalent, plus 1.10%0.95% on the term loan and delayed draw term loan.
Mortgage Loan RepaymentsAcquisitions and Completed Construction Projects
In January 2017,2020, we repaid five non-recourse mortgage loans with an aggregate principal balancecompleted 3 investments for a total purchase price of approximately $273.5$149.9 million (based on the exchange rates of the foreign currencies on the dates of acquisition, as applicable). It is not practicable to disclose the preliminary purchase price allocations for these transactions given the short period of time between the acquisition dates and the filing of this Report.
In addition, in January 2020, we completed 1 construction project at a total cost of $53.1 million.
Dispositions
In January and February 2020, we sold 4 properties for gross proceeds totaling $121.8 million, including three international mortgage loans with an aggregate principal balance1 of approximately $262.4our two hotel operating properties for gross proceeds of $120.0 million (€245.9 million). Included in these amounts were mortgage loans totaling $243.8(inclusive of $5.5 million (€228.6 million), inclusive of amounts attributable to a noncontrolling interest of $89.0 million (€83.5 million), encumbering the Hellweg 2 portfolio.
Dispositions
On January 25, 2017, we sold an internationalinterest). This property that was classified as held for sale as of December 31, 20162019 (Note 5) for gross proceeds of $24.3 million (€22.6 million). In addition, in January 2017, we transferred ownership of two international properties and the related non-recourse mortgage loan to the mortgage lender. At the dates of the transfers, the properties had an aggregate asset carrying value of $31.3 million (€29.6 million) and the related non-recourse mortgage loan had an outstanding balance of $31.9 million (€30.2 million).
Repayments of Loans to Affiliate
During January and February 2017, CWI 2 repaid in full the $210.0 million loan that was outstanding to us at December 31, 2016.
Management Change
On February 1, 2017, we announced that our board of directors had appointed Ms. ToniAnn Sanzone as our chief financial officer, effective immediately. Ms. Sanzone had been serving as our interim chief financial officer since October 14, 2016.
Issuance of Stock-Based Compensation Awards
During the first quarter of 2017 and through the date of this Report, in connection with our LTIP award program (Note 15), we issued 173,995 RSUs, 107,934 PSUs, and 2,656 RSAs to key employees, which will have a dilutive impact on our future earnings per share calculations.
|
| |
| | W. P. Carey 20162019 10-K– 154130 |
W. P. CAREY INC.
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2016, 2015,2019, 2018, and 20142017
(in thousands)
|
| | | | | | | | | | | | | | | | |
| Description | | Balance at Beginning of Year | | Other Additions | | Deductions | | Balance at End of Year |
| Year Ended December 31, 2019 | | | | | | | | |
| Valuation reserve for deferred tax assets | | $ | 54,499 |
| | $ | 22,384 |
| | $ | (3,240 | ) | | $ | 73,643 |
|
| | | | | | | | | |
| Year Ended December 31, 2018 | | | | | | | | |
| Valuation reserve for deferred tax assets | | $ | 39,155 |
| | $ | 30,557 |
| | $ | (15,213 | ) | | $ | 54,499 |
|
| | | | | | | | | |
| Year Ended December 31, 2017 | | | | | | | | |
| Valuation reserve for deferred tax assets | | $ | 27,350 |
| | $ | 18,031 |
| | $ | (6,226 | ) | | $ | 39,155 |
|
|
| | | | | | | | | | | | | | | | |
| Description | | Balance at Beginning of Year | | Other Additions | | Deductions | | Balance at End of Year |
| Year Ended December 31, 2016 | | | | | | | | |
| Valuation reserve for deferred tax assets | | $ | 29,746 |
| | $ | 8,810 |
| | $ | (11,206 | ) | | $ | 27,350 |
|
| | | | | | | | | |
| Year Ended December 31, 2015 | | | | | | | | |
| Valuation reserve for deferred tax assets | | $ | 20,672 |
| | $ | 10,001 |
| | $ | (927 | ) | | $ | 29,746 |
|
| | | | | | | | | |
| Year Ended December 31, 2014 | | | | | | | | |
| Valuation reserve for deferred tax assets | | $ | 18,214 |
| | $ | 2,458 |
| | $ | — |
| | $ | 20,672 |
|
|
| |
| | W. P. Carey 20162019 10-K– 155131 |
W. P. CAREY INC.
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 20162019
(in thousands)
| | | | | | | Initial Cost to Company | | Cost Capitalized
Subsequent to
Acquisition (a) | | Increase
(Decrease)
in Net
Investments (b) | | Gross Amount at which
Carried at Close of Period (c) | | Accumulated Depreciation (c) | | Date of Construction | | Date Acquired | | Life on which
Depreciation in Latest
Statement of
Income
is Computed | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Initial Cost to Company | | Cost Capitalized Subsequent to
Acquisition (a) | | Increase
(Decrease)
in Net
Investments (b) | | Gross Amount at which
Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which
Depreciation in Latest
Statement of
Income
is Computed |
| | | | | | | |
| | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | Land | | Buildings | | Total | | | Encumbrances | | Land | | Buildings | | Land | | Buildings | | Total | |
| Real Estate Under Operating Leases | | | | | | | | | | | | | | | | | | | | |
| Land, Buildings and Improvements Subject to Operating Leases | | Land, Buildings and Improvements Subject to Operating Leases | | | | | | | | | | | | | | | |
| Industrial facilities in Erlanger, KY | | $ | 10,794 |
| | $ | 1,526 |
| | $ | 21,427 |
| | $ | 2,966 |
| | $ | 141 |
| | $ | 1,526 |
| | $ | 24,534 |
| | $ | 26,060 |
| | $ | 12,048 |
| | 1979; 1987 | | Jan. 1998 | | 40 yrs. | | $ | — |
| | $ | 1,526 |
| | $ | 21,427 |
| | $ | 2,966 |
| | $ | 141 |
| | $ | 1,526 |
| | $ | 24,534 |
| | $ | 26,060 |
| | $ | 13,881 |
| | 1979; 1987 | | Jan. 1998 | | 40 yrs. |
| Industrial facilities in Thurmont, MD and Farmington, NY | | — |
| | 729 |
| | 5,903 |
| | — |
| | — |
| | 729 |
| | 5,903 |
| | 6,632 |
| | 1,057 |
| | 1964; 1983 | | Jan. 1998 | | 15 yrs. | | — |
| | 729 |
| | 5,903 |
| | — |
| | — |
| | 729 |
| | 5,903 |
| | 6,632 |
| | 2,238 |
| | 1964; 1983 | | Jan. 1998 | | 15 yrs. |
| Retail facility in Montgomery, AL | | — |
| | 855 |
| | 6,762 |
| | 277 |
| | (6,978 | ) | | 142 |
| | 774 |
| | 916 |
| | 490 |
| | 1987 | | Jan. 1998 | | 40 yrs. | |
| Warehouse facilities in Anchorage, AK and Commerce, CA | | — |
| | 4,905 |
| | 11,898 |
| | — |
| | 12 |
| | 4,905 |
| | 11,910 |
| | 16,815 |
| | 4,018 |
| | 1948; 1975 | | Jan. 1998 | | 40 yrs. | | — |
| | 4,905 |
| | 11,898 |
| | — |
| | 12 |
| | 4,905 |
| | 11,910 |
| | 16,815 |
| | 5,803 |
| | 1948; 1975 | | Jan. 1998 | | 40 yrs. |
| Industrial facility in Toledo, OH | | — |
| | 224 |
| | 2,408 |
| | — |
| | — |
| | 224 |
| | 2,408 |
| | 2,632 |
| | 1,405 |
| | 1966 | | Jan. 1998 | | 40 yrs. | | — |
| | 224 |
| | 2,408 |
| | — |
| | — |
| | 224 |
| | 2,408 |
| | 2,632 |
| | 1,705 |
| | 1966 | | Jan. 1998 | | 40 yrs. |
| Industrial facility in Goshen, IN | | — |
| | 239 |
| | 940 |
| | — |
| | — |
| | 239 |
| | 940 |
| | 1,179 |
| | 321 |
| | 1973 | | Jan. 1998 | | 40 yrs. | | — |
| | 239 |
| | 940 |
| | — |
| | — |
| | 239 |
| | 940 |
| | 1,179 |
| | 462 |
| | 1973 | | Jan. 1998 | | 40 yrs. |
| Office facility in Raleigh, NC | | — |
| | 1,638 |
| | 2,844 |
| | 187 |
| | (2,554 | ) | | 828 |
| | 1,287 |
| | 2,115 |
| | 737 |
| | 1983 | | Jan. 1998 | | 20 yrs. | | — |
| | 1,638 |
| | 2,844 |
| | 187 |
| | (2,554 | ) | | 828 |
| | 1,287 |
| | 2,115 |
| | 911 |
| | 1983 | | Jan. 1998 | | 20 yrs. |
| Office facility in King of Prussia, PA | | — |
| | 1,219 |
| | 6,283 |
| | 1,295 |
| | — |
| | 1,219 |
| | 7,578 |
| | 8,797 |
| | 3,445 |
| | 1968 | | Jan. 1998 | | 40 yrs. | | — |
| | 1,219 |
| | 6,283 |
| | 1,295 |
| | — |
| | 1,219 |
| | 7,578 |
| | 8,797 |
| | 4,036 |
| | 1968 | | Jan. 1998 | | 40 yrs. |
| Industrial facility in Pinconning, MI | | — |
| | 32 |
| | 1,692 |
| | — |
| | — |
| | 32 |
| | 1,692 |
| | 1,724 |
| | 804 |
| | 1948 | | Jan. 1998 | | 40 yrs. | | — |
| | 32 |
| | 1,692 |
| | — |
| | — |
| | 32 |
| | 1,692 |
| | 1,724 |
| | 930 |
| | 1948 | | Jan. 1998 | | 40 yrs. |
| Industrial facilities in San Fernando, CA | | 6,466 |
| | 2,052 |
| | 5,322 |
| | — |
| | (1,889 | ) | | 1,494 |
| | 3,991 |
| | 5,485 |
| | 1,913 |
| | 1962; 1979 | | Jan. 1998 | | 40 yrs. | | 6,103 |
| | 2,052 |
| | 5,322 |
| | — |
| | (1,889 | ) | | 1,494 |
| | 3,991 |
| | 5,485 |
| | 2,208 |
| | 1962; 1979 | | Jan. 1998 | | 40 yrs. |
| Retail facilities in several cities in the following states: Alabama, Florida, Georgia, Illinois, Louisiana, Missouri, New Mexico, North Carolina, South Carolina, Tennessee, and Texas | | — |
| | 9,382 |
| | — |
| | 238 |
| | 12,618 |
| | 9,025 |
| | 13,213 |
| | 22,238 |
| | 1,779 |
| | Various | | Jan. 1998 | | 15 yrs. | | — |
| | 9,382 |
| | — |
| | 238 |
| | 14,696 |
| | 9,025 |
| | 15,291 |
| | 24,316 |
| | 5,790 |
| | Various | | Jan. 1998 | | 15 yrs. |
| Land in Glendora, CA | | — |
| | 1,135 |
| | — |
| | — |
| | 17 |
| | 1,152 |
| | — |
| | 1,152 |
| | — |
| | N/A | | Jan. 1998 | | N/A | |
| Industrial facility in Glendora, CA | | | — |
| | 1,135 |
| | — |
| | — |
| | 1,942 |
| | 1,152 |
| | 1,925 |
| | 3,077 |
| | 192 |
| | 1950 | | Jan. 1998 | | 10 yrs. |
| Warehouse facility in Doraville, GA | | — |
| | 3,288 |
| | 9,864 |
| | 15,374 |
| | (11,409 | ) | | 3,288 |
| | 13,829 |
| | 17,117 |
| | 58 |
| | 2016 | | Jan. 1998 | | 40 yrs. | | — |
| | 3,288 |
| | 9,864 |
| | 16,729 |
| | (11,410 | ) | | 3,288 |
| | 15,183 |
| | 18,471 |
| | 1,268 |
| | 2016 | | Jan. 1998 | | 40 yrs. |
| Office facility in Collierville, TN and warehouse facility in Corpus Christi, TX | | 47,006 |
| | 3,490 |
| | 72,497 |
| | — |
| | (15,609 | ) | | 288 |
| | 60,090 |
| | 60,378 |
| | 11,877 |
| | 1989; 1999 | | Jan. 1998 | | 40 yrs. | | 42,576 |
| | 3,490 |
| | 72,497 |
| | — |
| | (15,609 | ) | | 288 |
| | 60,090 |
| | 60,378 |
| | 17,933 |
| | 1989; 1999 | | Jan. 1998 | | 40 yrs. |
| Land in Irving and Houston, TX | | — |
| | 9,795 |
| | — |
| | — |
| | — |
| | 9,795 |
| | — |
| | 9,795 |
| | — |
| | N/A | | Jan. 1998 | | N/A | | — |
| | 9,795 |
| | — |
| | — |
| | — |
| | 9,795 |
| | — |
| | 9,795 |
| | — |
| | N/A | | Jan. 1998 | | N/A |
| Industrial facility in Chandler, AZ | | 8,984 |
| | 5,035 |
| | 18,957 |
| | 7,435 |
| | 541 |
| | 5,035 |
| | 26,933 |
| | 31,968 |
| | 12,102 |
| | 1989 | | Jan. 1998 | | 40 yrs. | | — |
| | 5,035 |
| | 18,957 |
| | 7,460 |
| | 516 |
| | 5,035 |
| | 26,933 |
| | 31,968 |
| | 14,406 |
| | 1989 | | Jan. 1998 | | 40 yrs. |
| Office facility in Bridgeton, MO | | — |
| | 842 |
| | 4,762 |
| | 2,523 |
| | 71 |
| | 842 |
| | 7,356 |
| | 8,198 |
| | 2,886 |
| | 1972 | | Jan. 1998 | | 40 yrs. | | — |
| | 842 |
| | 4,762 |
| | 2,523 |
| | 71 |
| | 842 |
| | 7,356 |
| | 8,198 |
| | 3,768 |
| | 1972 | | Jan. 1998 | | 40 yrs. |
| Retail facilities in Drayton Plains, MI and Citrus Heights, CA | | — |
| | 1,039 |
| | 4,788 |
| | 236 |
| | 193 |
| | 1,039 |
| | 5,217 |
| | 6,256 |
| | 1,576 |
| | 1972 | | Jan. 1998 | | 35 yrs. | |
| Retail facility in Drayton Plains, MI | | | — |
| | 1,039 |
| | 4,788 |
| | 236 |
| | (2,297 | ) | | 494 |
| | 3,272 |
| | 3,766 |
| | 1,266 |
| | 1972 | | Jan. 1998 | | 35 yrs. |
| Warehouse facility in Memphis, TN | | — |
| | 1,882 |
| | 3,973 |
| | 294 |
| | (3,892 | ) | | 328 |
| | 1,929 |
| | 2,257 |
| | 942 |
| | 1969 | | Jan. 1998 | | 15 yrs. | | — |
| | 1,882 |
| | 3,973 |
| | 294 |
| | (3,892 | ) | | 328 |
| | 1,929 |
| | 2,257 |
| | 1,266 |
| | 1969 | | Jan. 1998 | | 15 yrs. |
| Industrial facility in Romulus, MI | | | — |
| | 454 |
| | 6,411 |
| | 525 |
| | — |
| | 454 |
| | 6,936 |
| | 7,390 |
| | 682 |
| | 1970 | | Jan. 1998 | | 10 yrs. |
| Retail facility in Bellevue, WA | | — |
| | 4,125 |
| | 11,812 |
| | 393 |
| | (123 | ) | | 4,371 |
| | 11,836 |
| | 16,207 |
| | 5,495 |
| | 1994 | | Apr. 1998 | | 40 yrs. | | — |
| | 4,125 |
| | 11,812 |
| | 393 |
| | (123 | ) | | 4,371 |
| | 11,836 |
| | 16,207 |
| | 6,322 |
| | 1994 | | Apr. 1998 | | 40 yrs. |
| Warehouse facilities in Houston, TX | | — |
| | 3,260 |
| | 22,574 |
| | 1,628 |
| | (26,145 | ) | | 211 |
| | 1,106 |
| | 1,317 |
| | 268 |
| | 1982 | | Jun. 1998 | | 40 yrs. | |
| Office facility in Rio Rancho, NM | | — |
| | 1,190 |
| | 9,353 |
| | 3,016 |
| | — |
| | 2,287 |
| | 11,272 |
| | 13,559 |
| | 4,888 |
| | 1999 | | Jul. 1998 | | 40 yrs. | | — |
| | 1,190 |
| | 9,353 |
| | 5,866 |
| | — |
| | 2,287 |
| | 14,122 |
| | 16,409 |
| | 6,369 |
| | 1999 | | Jul. 1998 | | 40 yrs. |
| Office facility in Moorestown, NJ | | — |
| | 351 |
| | 5,981 |
| | 1,516 |
| | 43 |
| | 351 |
| | 7,540 |
| | 7,891 |
| | 3,637 |
| | 1964 | | Feb. 1999 | | 40 yrs. | | — |
| | 351 |
| | 5,981 |
| | 1,652 |
| | 1 |
| | 351 |
| | 7,634 |
| | 7,985 |
| | 4,265 |
| | 1964 | | Feb. 1999 | | 40 yrs. |
| Office facility in Illkirch, France | | 6,993 |
| | — |
| | 18,520 |
| | 6 |
| | (4,352 | ) | | — |
| | 14,174 |
| | 14,174 |
| | 9,325 |
| | 2001 | | Dec. 2001 | | 40 yrs. | |
| Industrial facilities in Lenexa, KS and Winston-Salem, NC | | — |
| | 1,860 |
| | 12,539 |
| | 2,875 |
| | (1,135 | ) | | 1,725 |
| | 14,414 |
| | 16,139 |
| | 4,731 |
| | 1968; 1980 | | Sep. 2002 | | 40 yrs. | | — |
| | 1,860 |
| | 12,539 |
| | 3,075 |
| | (1,135 | ) | | 1,725 |
| | 14,614 |
| | 16,339 |
| | 6,531 |
| | 1968; 1980 | | Sep. 2002 | | 40 yrs. |
| Office facilities in Playa Vista and Venice, CA | | | 21,048 |
| | 2,032 |
| | 10,152 |
| | 52,817 |
| | 1 |
| | 5,889 |
| | 59,113 |
| | 65,002 |
| | 15,303 |
| | 1991; 1999 | | Sep. 2004; Sep. 2012 | | 40 yrs. |
| Warehouse facility in Greenfield, IN | | | — |
| | 2,807 |
| | 10,335 |
| | 223 |
| | (8,383 | ) | | 967 |
| | 4,015 |
| | 4,982 |
| | 1,857 |
| | 1995 | | Sep. 2004 | | 40 yrs. |
| Retail facility in Hot Springs, AR | | | — |
| | 850 |
| | 2,939 |
| | 2 |
| | (2,614 | ) | | — |
| | 1,177 |
| | 1,177 |
| | 451 |
| | 1985 | | Sep. 2004 | | 40 yrs. |
|
| |
| | W. P. Carey 20162019 10-K– 156132 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 20162019
(in thousands)
| | | | | | | Initial Cost to Company | | Cost Capitalized
Subsequent to
Acquisition (a) | | Increase
(Decrease)
in Net
Investments (b) | | Gross Amount at which
Carried at Close of Period (c) | | Accumulated Depreciation (c) | | Date of Construction | | Date Acquired | | Life on which
Depreciation in Latest
Statement of
Income
is Computed | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Initial Cost to Company | | Cost Capitalized
Subsequent to
Acquisition (a) | | Increase
(Decrease)
in Net
Investments (b) | | Gross Amount at which
Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which
Depreciation in Latest
Statement of
Income
is Computed |
| | | | | | | |
| | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | Land | | Buildings | | Total | | | Encumbrances | | Land | | Buildings | | Land | | Buildings | | Total | |
| Office facilities in Playa Vista and Venice, CA | | 45,301 |
| | 2,032 |
| | 10,152 |
| | 52,817 |
| | 1 |
| | 5,889 |
| | 59,113 |
| | 65,002 |
| | 9,967 |
| | 1991; 1999 | | Sep. 2004; Sep. 2012 | | 40 yrs. | |
| Warehouse facility in Greenfield, IN | | — |
| | 2,807 |
| | 10,335 |
| | 223 |
| | (8,383 | ) | | 967 |
| | 4,015 |
| | 4,982 |
| | 1,426 |
| | 1995 | | Sep. 2004 | | 40 yrs. | |
| Industrial facility in Scottsdale, AZ | | — |
| | 586 |
| | 46 |
| | — |
| | — |
| | 586 |
| | 46 |
| | 632 |
| | 14 |
| | 1988 | | Sep. 2004 | | 40 yrs. | |
| Retail facility in Hot Springs, AR | | — |
| | 850 |
| | 2,939 |
| | 2 |
| | (2,614 | ) | | — |
| | 1,177 |
| | 1,177 |
| | 362 |
| | 1985 | | Sep. 2004 | | 40 yrs. | |
| Warehouse facilities in Apopka, FL | | — |
| | 362 |
| | 10,855 |
| | 920 |
| | (155 | ) | | 337 |
| | 11,645 |
| | 11,982 |
| | 3,335 |
| | 1969 | | Sep. 2004 | | 40 yrs. | | — |
| | 362 |
| | 10,855 |
| | 1,195 |
| | (155 | ) | | 337 |
| | 11,920 |
| | 12,257 |
| | 4,100 |
| | 1969 | | Sep. 2004 | | 40 yrs. |
| Land in San Leandro, CA | | — |
| | 1,532 |
| | — |
| | — |
| | — |
| | 1,532 |
| | — |
| | 1,532 |
| | — |
| | N/A | | Dec. 2006 | | N/A | | — |
| | 1,532 |
| | — |
| | — |
| | — |
| | 1,532 |
| | — |
| | 1,532 |
| | — |
| | N/A | | Dec. 2006 | | N/A |
| Fitness facility in Austin, TX | | 2,466 |
| | 1,725 |
| | 5,168 |
| | — |
| | — |
| | 1,725 |
| | 5,168 |
| | 6,893 |
| | 1,829 |
| | 1995 | | Dec. 2006 | | 29 yrs. | | — |
| | 1,725 |
| | 5,168 |
| | — |
| | — |
| | 1,725 |
| | 5,168 |
| | 6,893 |
| | 2,372 |
| | 1995 | | Dec. 2006 | | 29 yrs. |
| Retail facility in Wroclaw, Poland | | 6,188 |
| | 3,600 |
| | 10,306 |
| | — |
| | (4,373 | ) | | 2,636 |
| | 6,897 |
| | 9,533 |
| | 1,554 |
| | 2007 | | Dec. 2007 | | 40 yrs. | | — |
| | 3,600 |
| | 10,306 |
| | — |
| | (3,747 | ) | | 2,809 |
| | 7,350 |
| | 10,159 |
| | 2,195 |
| | 2007 | | Dec. 2007 | | 40 yrs. |
| Office facility in Fort Worth, TX | | 31,081 |
| | 4,600 |
| | 37,580 |
| | — |
| | — |
| | 4,600 |
| | 37,580 |
| | 42,180 |
| | 6,499 |
| | 2003 | | Feb. 2010 | | 40 yrs. | | — |
| | 4,600 |
| | 37,580 |
| | 186 |
| | — |
| | 4,600 |
| | 37,766 |
| | 42,366 |
| | 9,335 |
| | 2003 | | Feb. 2010 | | 40 yrs. |
| Warehouse facility in Mallorca, Spain | | — |
| | 11,109 |
| | 12,636 |
| | — |
| | (2,791 | ) | | 9,785 |
| | 11,169 |
| | 20,954 |
| | 1,835 |
| | 2008 | | Jun. 2010 | | 40 yrs. | | — |
| | 11,109 |
| | 12,636 |
| | — |
| | (1,414 | ) | | 10,428 |
| | 11,903 |
| | 22,331 |
| | 2,848 |
| | 2008 | | Jun. 2010 | | 40 yrs. |
| Retail facilities in Florence, AL; Snellville, GA; Concord, NC; Rockport, TX; and Virginia Beach, VA | | 21,984 |
| | 5,646 |
| | 12,367 |
| | — |
| | — |
| | 5,646 |
| | 12,367 |
| | 18,013 |
| | 1,412 |
| | 2005; 2007 | | Sep. 2012 | | 40 yrs. | |
| Hotels in Irvine, Sacramento, and San Diego, CA; Orlando, FL; Des Plaines, IL; Indianapolis, IN; Louisville, KY; Linthicum Heights, MD; Newark, NJ; Albuquerque, NM; and Spokane, WA | | 135,299 |
| | 32,680 |
| | 198,999 |
| | — |
| | — |
| | 32,680 |
| | 198,999 |
| | 231,679 |
| | 23,301 |
| | 1989; 1990 | | Sep. 2012 | | 34 - 37 yrs. | |
| Retail facilities in Florence, AL; Snellville, GA; Rockport, TX; and Virginia Beach, VA | | | — |
| | 5,646 |
| | 12,367 |
| | — |
| | (3,786 | ) | | 4,323 |
| | 9,904 |
| | 14,227 |
| | 1,900 |
| | 2005; 2007 | | Sep. 2012 | | 40 yrs. |
| Net-lease hotels in Irvine, Sacramento, and San Diego, CA; Orlando, FL; Des Plaines, IL; Indianapolis, IN; Louisville, KY; Linthicum Heights, MD; Newark, NJ; Albuquerque, NM; and Spokane, WA | | | 128,609 |
| | 32,680 |
| | 198,999 |
| | — |
| | — |
| | 32,680 |
| | 198,999 |
| | 231,679 |
| | 39,753 |
| | 1989; 1990 | | Sep. 2012 | | 34 - 37 yrs. |
| Industrial facilities in Auburn, IN; Clinton Township, MI; and Bluffton, OH | | 7,310 |
| | 4,403 |
| | 20,298 |
| | — |
| | (3,870 | ) | | 2,589 |
| | 18,242 |
| | 20,831 |
| | 2,082 |
| | 1968; 1975; 1995 | | Sep. 2012; Jan. 2014 | | 30 yrs. | | — |
| | 4,403 |
| | 20,298 |
| | — |
| | (3,870 | ) | | 2,589 |
| | 18,242 |
| | 20,831 |
| | 3,998 |
| | 1968; 1975; 1995 | | Sep. 2012; Jan. 2014 | | 30 yrs. |
| Land in Irvine, CA | | 1,619 |
| | 4,173 |
| | — |
| | — |
| | — |
| | 4,173 |
| | — |
| | 4,173 |
| | — |
| | N/A | | Sep. 2012 | | N/A | | 1,631 |
| | 4,173 |
| | — |
| | — |
| | — |
| | 4,173 |
| | — |
| | 4,173 |
| | — |
| | N/A | | Sep. 2012 | | N/A |
| Industrial facility in Alpharetta, GA | | 7,014 |
| | 2,198 |
| | 6,349 |
| | 1,248 |
| | — |
| | 2,198 |
| | 7,597 |
| | 9,795 |
| | 921 |
| | 1997 | | Sep. 2012 | | 30 yrs. | | — |
| | 2,198 |
| | 6,349 |
| | 1,247 |
| | — |
| | 2,198 |
| | 7,596 |
| | 9,794 |
| | 1,798 |
| | 1997 | | Sep. 2012 | | 30 yrs. |
| Office facility in Clinton, NJ | | 21,952 |
| | 2,866 |
| | 34,834 |
| | — |
| | — |
| | 2,866 |
| | 34,834 |
| | 37,700 |
| | 4,943 |
| | 1987 | | Sep. 2012 | | 30 yrs. | | 18,718 |
| | 2,866 |
| | 34,834 |
| | — |
| | — |
| | 2,866 |
| | 34,834 |
| | 37,700 |
| | 8,435 |
| | 1987 | | Sep. 2012 | | 30 yrs. |
| Office facilities in St. Petersburg, FL | | — |
| | 3,280 |
| | 24,627 |
| | — |
| | — |
| | 3,280 |
| | 24,627 |
| | 27,907 |
| | 3,483 |
| | 1996; 1999 | | Sep. 2012 | | 30 yrs. | | — |
| | 3,280 |
| | 24,627 |
| | 2,078 |
| | — |
| | 3,280 |
| | 26,705 |
| | 29,985 |
| | 6,001 |
| | 1996; 1999 | | Sep. 2012 | | 30 yrs. |
| Movie theater in Baton Rouge, LA | | — |
| | 4,168 |
| | 5,724 |
| | — |
| | — |
| | 4,168 |
| | 5,724 |
| | 9,892 |
| | 813 |
| | 2003 | | Sep. 2012 | | 30 yrs. | | — |
| | 4,168 |
| | 5,724 |
| | 3,200 |
| | — |
| | 4,168 |
| | 8,924 |
| | 13,092 |
| | 1,890 |
| | 2003 | | Sep. 2012 | | 30 yrs. |
| Industrial and office facility in San Diego, CA | | — |
| | 7,804 |
| | 16,729 |
| | 1,725 |
| | — |
| | 7,804 |
| | 18,454 |
| | 26,258 |
| | 2,774 |
| | 2002 | | Sep. 2012 | | 30 yrs. | | — |
| | 7,804 |
| | 16,729 |
| | 4,654 |
| | (705 | ) | | 7,804 |
| | 20,678 |
| | 28,482 |
| | 5,228 |
| | 2002 | | Sep. 2012 | | 30 yrs. |
| Industrial facility in Richmond, CA | | — |
| | 895 |
| | 1,953 |
| | — |
| | — |
| | 895 |
| | 1,953 |
| | 2,848 |
| | 277 |
| | 1999 | | Sep. 2012 | | 30 yrs. | | — |
| | 895 |
| | 1,953 |
| | — |
| | — |
| | 895 |
| | 1,953 |
| | 2,848 |
| | 473 |
| | 1999 | | Sep. 2012 | | 30 yrs. |
| Warehouse facilities in Kingman, AZ; Woodland, CA; Jonesboro, GA; Kansas City, MO; Springfield, OR; Fogelsville, PA; and Corsicana, TX | | 56,061 |
| | 16,386 |
| | 84,668 |
| | — |
| | — |
| | 16,386 |
| | 84,668 |
| | 101,054 |
| | 11,916 |
| | Various | | Sep. 2012 | | 30 yrs. | | 51,263 |
| | 16,386 |
| | 84,668 |
| | — |
| | — |
| | 16,386 |
| | 84,668 |
| | 101,054 |
| | 20,333 |
| | Various | | Sep. 2012 | | 30 yrs. |
| Industrial facilities in Orlando, FL; Rocky Mount, NC; and Lewisville, TX | | — |
| | 2,163 |
| | 17,715 |
| | — |
| | — |
| | 2,163 |
| | 17,715 |
| | 19,878 |
| | 2,514 |
| | Various | | Sep. 2012 | | 30 yrs. | |
| Industrial facilities in Rocky Mount, NC and Lewisville, TX | | | — |
| | 2,163 |
| | 17,715 |
| | 609 |
| | (8,389 | ) | | 1,132 |
| | 10,966 |
| | 12,098 |
| | 2,573 |
| | 1948; 1989 | | Sep. 2012 | | 30 yrs. |
| Industrial facilities in Chattanooga, TN | | — |
| | 558 |
| | 5,923 |
| | — |
| | — |
| | 558 |
| | 5,923 |
| | 6,481 |
| | 831 |
| | 1974; 1989 | | Sep. 2012 | | 30 yrs. | | — |
| | 558 |
| | 5,923 |
| | — |
| | — |
| | 558 |
| | 5,923 |
| | 6,481 |
| | 1,418 |
| | 1974; 1989 | | Sep. 2012 | | 30 yrs. |
| Industrial facility in Mooresville, NC | | | 2,690 |
| | 756 |
| | 9,775 |
| | — |
| | — |
| | 756 |
| | 9,775 |
| | 10,531 |
| | 2,334 |
| | 1997 | | Sep. 2012 | | 30 yrs. |
| Industrial facility in McCalla, AL | | | — |
| | 960 |
| | 14,472 |
| | 42,662 |
| | — |
| | 2,076 |
| | 56,018 |
| | 58,094 |
| | 7,431 |
| | 2004 | | Sep. 2012 | | 31 yrs. |
| Office facility in Lower Makefield Township, PA | | | — |
| | 1,726 |
| | 12,781 |
| | 4,378 |
| | — |
| | 1,726 |
| | 17,159 |
| | 18,885 |
| | 3,430 |
| | 2002 | | Sep. 2012 | | 30 yrs. |
| Industrial facility in Fort Smith, AZ | | | — |
| | 1,063 |
| | 6,159 |
| | — |
| | — |
| | 1,063 |
| | 6,159 |
| | 7,222 |
| | 1,455 |
| | 1982 | | Sep. 2012 | | 30 yrs. |
| Retail facilities in Greenwood, IN and Buffalo, NY | | | 6,547 |
| | — |
| | 19,990 |
| | — |
| | — |
| | — |
| | 19,990 |
| | 19,990 |
| | 4,672 |
| | 2000; 2003 | | Sep. 2012 | | 30 - 31 yrs. |
| Industrial facilities in Bowling Green, KY and Jackson, TN | | | — |
| | 1,492 |
| | 8,182 |
| | — |
| | — |
| | 1,492 |
| | 8,182 |
| | 9,674 |
| | 1,928 |
| | 1989; 1995 | | Sep. 2012 | | 31 yrs. |
|
| |
| | W. P. Carey 20162019 10-K– 157133 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 20162019
(in thousands)
| | | | | | | | | | | Cost Capitalized
Subsequent to
Acquisition (a) | | Increase
(Decrease)
in Net
Investments (b) | | Gross Amount at which
Carried at Close of Period (c) | | Accumulated Depreciation (c) | | Date of Construction | | Date Acquired | | Life on which
Depreciation in Latest
Statement of
Income
is Computed | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Cost Capitalized
Subsequent to
Acquisition (a) | | Increase
(Decrease)
in Net
Investments (b) | | Gross Amount at which
Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which
Depreciation in Latest
Statement of
Income
is Computed |
| | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | | | | Initial Cost to Company | |
| Description | | Encumbrances | | Land | | Buildings | | Land | | Buildings | | Total | | | Encumbrances | | Land | | Buildings | | Land | | Buildings | | Total | |
| Industrial facility in Mooresville, NC | | 4,536 |
| | 756 |
| | 9,775 |
| | — |
| | — |
| | 756 |
| | 9,775 |
| | 10,531 |
| | 1,368 |
| | 1997 | | Sep. 2012 | | 30 yrs. | |
| Industrial facility in McCalla, AL | | — |
| | 960 |
| | 14,472 |
| | 7,466 |
| | — |
| | 2,076 |
| | 20,822 |
| | 22,898 |
| | 3,337 |
| | 2004 | | Sep. 2012 | | 31 yrs. | |
| Office facility in Lower Makefield Township, PA | | 9,052 |
| | 1,726 |
| | 12,781 |
| | — |
| | — |
| | 1,726 |
| | 12,781 |
| | 14,507 |
| | 1,784 |
| | 2002 | | Sep. 2012 | | 30 yrs. | |
| Industrial facility in Fort Smith, AZ | | — |
| | 1,063 |
| | 6,159 |
| | — |
| | — |
| | 1,063 |
| | 6,159 |
| | 7,222 |
| | 853 |
| | 1982 | | Sep. 2012 | | 30 yrs. | |
| Retail facilities in Greenwood, IN and Buffalo, NY | | 8,176 |
| | — |
| | 19,990 |
| | — |
| | — |
| | — |
| | 19,990 |
| | 19,990 |
| | 2,738 |
| | 2000; 2003 | | Sep. 2012 | | 30 - 31 yrs. | |
| Industrial facilities in Bowling Green, KY and Jackson, TN | | 6,004 |
| | 1,492 |
| | 8,182 |
| | — |
| | — |
| | 1,492 |
| | 8,182 |
| | 9,674 |
| | 1,130 |
| | 1989; 1995 | | Sep. 2012 | | 31 yrs. | |
| Education facilities in Avondale, AZ; Rancho Cucamonga, CA; Glendale Heights, IL; and Exton, PA | | 30,593 |
| | 14,006 |
| | 33,683 |
| | — |
| | (1,961 | ) | | 12,045 |
| | 33,683 |
| | 45,728 |
| | 4,480 |
| | 1988; 2004 | | Sep. 2012 | | 31 - 32 yrs. | |
| Education facilities in Avondale, AZ; Rancho Cucamonga, CA; and Exton, PA | | | 6,947 |
| | 14,006 |
| | 33,683 |
| | 157 |
| | (3,878 | ) | | 11,179 |
| | 32,789 |
| | 43,968 |
| | 7,404 |
| | 2004 | | Sep. 2012 | | 31 - 32 yrs. |
| Industrial facilities in St. Petersburg, FL; Buffalo Grove, IL; West Lafayette, IN; Excelsior Springs, MO; and North Versailles, PA | | 9,131 |
| | 6,559 |
| | 19,078 |
| | — |
| | — |
| | 6,559 |
| | 19,078 |
| | 25,637 |
| | 2,613 |
| | Various | | Sep. 2012 | | 31 yrs. | | 5,695 |
| | 6,559 |
| | 19,078 |
| | — |
| | — |
| | 6,559 |
| | 19,078 |
| | 25,637 |
| | 4,459 |
| | Various | | Sep. 2012 | | 31 yrs. |
| Industrial facilities in Tolleson, AZ; Alsip, IL; and Solvay, NY | | 11,285 |
| | 6,080 |
| | 23,424 |
| | — |
| | — |
| | 6,080 |
| | 23,424 |
| | 29,504 |
| | 3,183 |
| | 1990; 1994; 2000 | | Sep. 2012 | | 31 yrs. | | 7,732 |
| | 6,080 |
| | 23,424 |
| | — |
| | — |
| | 6,080 |
| | 23,424 |
| | 29,504 |
| | 5,430 |
| | 1990; 1994; 2000 | | Sep. 2012 | | 31 yrs. |
| Land in Kahl, Germany | | — |
| | 6,694 |
| | — |
| | — |
| | (1,207 | ) | | 5,487 |
| | — |
| | 5,487 |
| | — |
| | N/A | | Sep. 2012 | | N/A | |
| Fitness facilities in Englewood, CO; Memphis TN; and Bedford, TX | | 7,210 |
| | 4,877 |
| | 4,258 |
| | 5,169 |
| | 4,823 |
| | 4,877 |
| | 14,250 |
| | 19,127 |
| | 1,462 |
| | 1990; 1995; 2001 | | Sep. 2012 | | 31 yrs. | | 1,371 |
| | 4,877 |
| | 4,258 |
| | 5,215 |
| | 4,756 |
| | 4,877 |
| | 14,229 |
| | 19,106 |
| | 3,629 |
| | 1990; 1995; 2001 | | Sep. 2012 | | 31 yrs. |
| Office facility in Mons, Belgium | | 7,061 |
| | 1,505 |
| | 6,026 |
| | 653 |
| | (1,504 | ) | | 1,234 |
| | 5,446 |
| | 6,680 |
| | 697 |
| | 1982 | | Sep. 2012 | | 32 yrs. | | 5,501 |
| | 1,505 |
| | 6,026 |
| | 653 |
| | (1,065 | ) | | 1,315 |
| | 5,804 |
| | 7,119 |
| | 1,289 |
| | 1982 | | Sep. 2012 | | 32 yrs. |
| Warehouse facilities in Oceanside, CA and Concordville, PA | | 3,354 |
| | 3,333 |
| | 8,270 |
| | — |
| | — |
| | 3,333 |
| | 8,270 |
| | 11,603 |
| | 1,127 |
| | 1989; 1996 | | Sep. 2012 | | 31 yrs. | | 2,298 |
| | 3,333 |
| | 8,270 |
| | — |
| | — |
| | 3,333 |
| | 8,270 |
| | 11,603 |
| | 1,922 |
| | 1989; 1996 | | Sep. 2012 | | 31 yrs. |
| Self-storage facilities located throughout the United States | | — |
| | 74,551 |
| | 319,186 |
| | — |
| | (50 | ) | | 74,501 |
| | 319,186 |
| | 393,687 |
| | 43,024 |
| | Various | | Sep. 2012 | | 31 yrs. | |
| Net-lease self-storage facilities located throughout the United States | | | — |
| | 74,551 |
| | 319,186 |
| | — |
| | (50 | ) | | 74,501 |
| | 319,186 |
| | 393,687 |
| | 73,409 |
| | Various | | Sep. 2012 | | 31 yrs. |
| Warehouse facility in La Vista, NE | | 20,675 |
| | 4,196 |
| | 23,148 |
| | — |
| | — |
| | 4,196 |
| | 23,148 |
| | 27,344 |
| | 2,941 |
| | 2005 | | Sep. 2012 | | 33 yrs. | | 19,073 |
| | 4,196 |
| | 23,148 |
| | — |
| | — |
| | 4,196 |
| | 23,148 |
| | 27,344 |
| | 5,017 |
| | 2005 | | Sep. 2012 | | 33 yrs. |
| Office facility in Pleasanton, CA | | 9,584 |
| | 3,675 |
| | 7,468 |
| | — |
| | — |
| | 3,675 |
| | 7,468 |
| | 11,143 |
| | 1,004 |
| | 2000 | | Sep. 2012 | | 31 yrs. | | — |
| | 3,675 |
| | 7,468 |
| | — |
| | — |
| | 3,675 |
| | 7,468 |
| | 11,143 |
| | 1,713 |
| | 2000 | | Sep. 2012 | | 31 yrs. |
| Office facility in San Marcos, TX | | — |
| | 440 |
| | 688 |
| | — |
| | — |
| | 440 |
| | 688 |
| | 1,128 |
| | 92 |
| | 2000 | | Sep. 2012 | | 31 yrs. | | — |
| | 440 |
| | 688 |
| | — |
| | — |
| | 440 |
| | 688 |
| | 1,128 |
| | 157 |
| | 2000 | | Sep. 2012 | | 31 yrs. |
| Office facilities in Espoo, Finland | | 31,853 |
| | 40,555 |
| | 15,662 |
| | — |
| | (24,614 | ) | | 23,499 |
| | 8,104 |
| | 31,603 |
| | 377 |
| | 1972; 1975 | | Sep. 2012 | | 31 yrs. | |
| Office facility in Chicago, IL | | 13,753 |
| | 2,169 |
| | 19,010 |
| | — |
| | — |
| | 2,169 |
| | 19,010 |
| | 21,179 |
| | 2,536 |
| | 1910 | | Sep. 2012 | | 31 yrs. | | — |
| | 2,169 |
| | 19,010 |
| | 72 |
| | (72 | ) | | 2,169 |
| | 19,010 |
| | 21,179 |
| | 4,326 |
| | 1910 | | Sep. 2012 | | 31 yrs. |
| Industrial facility in Louisville, CO | | 7,201 |
| | 5,342 |
| | 8,786 |
| | 1,849 |
| | — |
| | 5,481 |
| | 10,496 |
| | 15,977 |
| | 1,745 |
| | 1993 | | Sep. 2012 | | 31 yrs. | |
| Industrial facilities in Hollywood and Orlando, FL | | — |
| | 3,639 |
| | 1,269 |
| | — |
| | — |
| | 3,639 |
| | 1,269 |
| | 4,908 |
| | 169 |
| | 1996 | | Sep. 2012 | | 31 yrs. | | — |
| | 3,639 |
| | 1,269 |
| | — |
| | — |
| | 3,639 |
| | 1,269 |
| | 4,908 |
| | 289 |
| | 1996 | | Sep. 2012 | | 31 yrs. |
| Warehouse facility in Golden, CO | | — |
| | 808 |
| | 4,304 |
| | 77 |
| | — |
| | 808 |
| | 4,381 |
| | 5,189 |
| | 641 |
| | 1998 | | Sep. 2012 | | 30 yrs. | | — |
| | 808 |
| | 4,304 |
| | 77 |
| | — |
| | 808 |
| | 4,381 |
| | 5,189 |
| | 1,096 |
| | 1998 | | Sep. 2012 | | 30 yrs. |
| Industrial facility in Texarkana, TX | | — |
| | 1,755 |
| | 4,493 |
| | — |
| | (2,783 | ) | | 216 |
| | 3,249 |
| | 3,465 |
| | 433 |
| | 1997 | | Sep. 2012 | | 31 yrs. | | — |
| | 1,755 |
| | 4,493 |
| | — |
| | (2,783 | ) | | 216 |
| | 3,249 |
| | 3,465 |
| | 739 |
| | 1997 | | Sep. 2012 | | 31 yrs. |
| Industrial facility in Eugene, OR | | 4,360 |
| | 2,286 |
| | 3,783 |
| | — |
| | — |
| | 2,286 |
| | 3,783 |
| | 6,069 |
| | 505 |
| | 1980 | | Sep. 2012 | | 31 yrs. | | 4,014 |
| | 2,286 |
| | 3,783 |
| | — |
| | — |
| | 2,286 |
| | 3,783 |
| | 6,069 |
| | 861 |
| | 1980 | | Sep. 2012 | | 31 yrs. |
| Industrial facility in South Jordan, UT | | 11,940 |
| | 2,183 |
| | 11,340 |
| | — |
| | — |
| | 2,183 |
| | 11,340 |
| | 13,523 |
| | 1,513 |
| | 1995 | | Sep. 2012 | | 31 yrs. | | — |
| | 2,183 |
| | 11,340 |
| | 1,642 |
| | — |
| | 2,183 |
| | 12,982 |
| | 15,165 |
| | 2,782 |
| | 1995 | | Sep. 2012 | | 31 yrs. |
| Warehouse facility in Ennis, TX | | 2,232 |
| | 478 |
| | 4,087 |
| | 145 |
| | — |
| | 478 |
| | 4,232 |
| | 4,710 |
| | 667 |
| | 1989 | | Sep. 2012 | | 31 yrs. | | — |
| | 478 |
| | 4,087 |
| | 145 |
| | — |
| | 478 |
| | 4,232 |
| | 4,710 |
| | 1,075 |
| | 1989 | | Sep. 2012 | | 31 yrs. |
| Retail facility in Braintree, MA | | | — |
| | 2,409 |
| | — |
| | 6,184 |
| | (1,403 | ) | | 1,006 |
| | 6,184 |
| | 7,190 |
| | 1,209 |
| | 1994 | | Sep. 2012 | | 30 yrs. |
| Office facility in Paris, France | | | 46,269 |
| | 23,387 |
| | 43,450 |
| | — |
| | (8,451 | ) | | 20,430 |
| | 37,956 |
| | 58,386 |
| | 8,418 |
| | 1975 | | Sep. 2012 | | 32 yrs. |
| Retail facilities in Bydgoszcz, Czestochowa, Jablonna, Katowice, Kielce, Lodz, Lubin, Olsztyn, Opole, Plock, Rybnik, Walbrzych, and Warsaw, Poland | | | — |
| | 26,564 |
| | 72,866 |
| | — |
| | (12,613 | ) | | 23,164 |
| | 63,653 |
| | 86,817 |
| | 19,395 |
| | Various | | Sep. 2012 | | 23 - 34 yrs. |
| Industrial facility in Laupheim, Germany | | | — |
| | 2,072 |
| | 8,339 |
| | — |
| | (1,317 | ) | | 1,810 |
| | 7,284 |
| | 9,094 |
| | 2,649 |
| | 1960 | | Sep. 2012 | | 20 yrs. |
| Industrial facilities in Danbury, CT and Bedford, MA | | | 5,443 |
| | 3,519 |
| | 16,329 |
| | — |
| | — |
| | 3,519 |
| | 16,329 |
| | 19,848 |
| | 3,965 |
| | 1965; 1980 | | Sep. 2012 | | 29 yrs. |
| Industrial facility in Brownwood, TX | | | — |
| | 722 |
| | 6,268 |
| | — |
| | — |
| | 722 |
| | 6,268 |
| | 6,990 |
| | 418 |
| | 1964 | | Sep. 2012 | | 15 yrs. |
| Warehouse facilities in Venlo, Netherlands | | | — |
| | 10,154 |
| | 18,590 |
| | — |
| | (3,911 | ) | | 8,772 |
| | 16,061 |
| | 24,833 |
| | 3,160 |
| | 1998; 1999 | | Apr. 2013 | | 35 yrs. |
|
| |
| | W. P. Carey 20162019 10-K– 158134 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 20162019
(in thousands)
| | | | | | | | | | | Cost Capitalized
Subsequent to
Acquisition (a) | | Increase
(Decrease)
in Net
Investments (b) | | Gross Amount at which
Carried at Close of Period (c) | | Accumulated Depreciation (c) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Cost Capitalized
Subsequent to
Acquisition (a) | | Increase
(Decrease)
in Net
Investments (b) | | Gross Amount at which
Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | | | | Initial Cost to Company | |
| Description | | Encumbrances | | Land | | Buildings | | Land | | Buildings | | Total | | | Encumbrances | | Land | | Buildings | | Land | | Buildings | | Total | |
| Retail facility in Braintree, MA | | 2,958 |
| | 2,409 |
| | — |
| | 6,184 |
| | (1,403 | ) | | 1,006 |
| | 6,184 |
| | 7,190 |
| | 588 |
| | 1994 | | Sep. 2012 | | 30 yrs. | |
| Office facility in Paris, France | | 53,713 |
| | 23,387 |
| | 43,450 |
| | — |
| | (12,053 | ) | | 19,170 |
| | 35,614 |
| | 54,784 |
| | 4,629 |
| | 1975 | | Sep. 2012 | | 32 yrs. | |
| Retail facilities in Bydgoszcz, Czestochowa, Jablonna, Katowice, Kielce, Lodz, Lubin, Olsztyn, Opole, Plock, Rybnik, Walbrzych, and Warsaw, Poland | | 107,618 |
| | 26,564 |
| | 72,866 |
| | — |
| | (17,930 | ) | | 21,774 |
| | 59,726 |
| | 81,500 |
| | 10,663 |
| | Various | | Sep. 2012 | | 23 - 34 yrs. | |
| Industrial facility in Laupheim, Germany | | — |
| | 2,072 |
| | 8,339 |
| | — |
| | (1,877 | ) | | 1,699 |
| | 6,835 |
| | 8,534 |
| | 1,456 |
| | 1960 | | Sep. 2012 | | 20 yrs. | |
| Industrial facilities in Danbury, CT and Bedford, MA | | 9,078 |
| | 3,519 |
| | 16,329 |
| | — |
| | — |
| | 3,519 |
| | 16,329 |
| | 19,848 |
| | 2,324 |
| | 1965; 1980 | | Sep. 2012 | | 29 yrs. | |
| Warehouse facilities in Venlo, Netherlands | | — |
| | 10,154 |
| | 18,590 |
| | — |
| | (5,443 | ) | | 8,231 |
| | 15,070 |
| | 23,301 |
| | 1,631 |
| | 1998; 1999 | | Apr. 2013 | | 35 yrs. | |
| Industrial and office facility in Tampere, Finland | | — |
| | 2,309 |
| | 37,153 |
| | — |
| | (7,554 | ) | | 1,843 |
| | 30,065 |
| | 31,908 |
| | 3,442 |
| | 2012 | | Jun. 2013 | | 40 yrs. | | — |
| | 2,309 |
| | 37,153 |
| | — |
| | (5,456 | ) | | 1,965 |
| | 32,041 |
| | 34,006 |
| | 6,736 |
| | 2012 | | Jun. 2013 | | 40 yrs. |
| Office facility in Quincy, MA | | — |
| | 2,316 |
| | 21,537 |
| | — |
| | — |
| | 2,316 |
| | 21,537 |
| | 23,853 |
| | 2,073 |
| | 1989 | | Jun. 2013 | | 40 yrs. | | — |
| | 2,316 |
| | 21,537 |
| | 127 |
| | — |
| | 2,316 |
| | 21,664 |
| | 23,980 |
| | 3,842 |
| | 1989 | | Jun. 2013 | | 40 yrs. |
| Office facility in Salford, United Kingdom | | — |
| | — |
| | 30,012 |
| | — |
| | (6,392 | ) | | — |
| | 23,620 |
| | 23,620 |
| | 2,022 |
| | 1997 | | Sep. 2013 | | 40 yrs. | | — |
| | — |
| | 30,012 |
| | — |
| | (4,679 | ) | | — |
| | 25,333 |
| | 25,333 |
| | 4,119 |
| | 1997 | | Sep. 2013 | | 40 yrs. |
| Office facility in Lone Tree, CO | | — |
| | 4,761 |
| | 28,864 |
| | 2,822 |
| | — |
| | 4,761 |
| | 31,686 |
| | 36,447 |
| | 2,713 |
| | 2001 | | Nov. 2013 | | 40 yrs. | | — |
| | 4,761 |
| | 28,864 |
| | 2,927 |
| | — |
| | 4,761 |
| | 31,791 |
| | 36,552 |
| | 5,725 |
| | 2001 | | Nov. 2013 | | 40 yrs. |
| Office facility in Mönchengladbach, Germany | | 27,988 |
| | 2,154 |
| | 6,917 |
| | 44,205 |
| | (3,449 | ) | | 2,024 |
| | 47,803 |
| | 49,827 |
| | 1,631 |
| | 2015 | | Dec. 2013 | | 40 yrs. | | 32,182 |
| | 2,154 |
| | 6,917 |
| | 50,626 |
| | (1,728 | ) | | 2,158 |
| | 55,811 |
| | 57,969 |
| | 5,766 |
| | 2015 | | Dec. 2013 | | 40 yrs. |
| Fitness facility in Houston, TX | | 3,172 |
| | 2,430 |
| | 2,270 |
| | — |
| | — |
| | 2,430 |
| | 2,270 |
| | 4,700 |
| | 295 |
| | 1995 | | Jan. 2014 | | 23 yrs. | | — |
| | 2,430 |
| | 2,270 |
| | — |
| | — |
| | 2,430 |
| | 2,270 |
| | 4,700 |
| | 599 |
| | 1995 | | Jan. 2014 | | 23 yrs. |
| Fitness facility in St. Charles, MO | | — |
| | 1,966 |
| | 1,368 |
| | 80 |
| | — |
| | 1,966 |
| | 1,448 |
| | 3,414 |
| | 154 |
| | 1987 | | Jan. 2014 | | 27 yrs. | | — |
| | 1,966 |
| | 1,368 |
| | 1,352 |
| | — |
| | 1,966 |
| | 2,720 |
| | 4,686 |
| | 624 |
| | 1987 | | Jan. 2014 | | 27 yrs. |
| Fitness facility in Salt Lake City, UT | | 2,814 |
| | 856 |
| | 2,804 |
| | — |
| | — |
| | 856 |
| | 2,804 |
| | 3,660 |
| | 316 |
| | 1999 | | Jan. 2014 | | 26 yrs. | | — |
| | 856 |
| | 2,804 |
| | — |
| | — |
| | 856 |
| | 2,804 |
| | 3,660 |
| | 642 |
| | 1999 | | Jan. 2014 | | 26 yrs. |
| Land in Scottsdale, AZ | | 10,316 |
| | 22,300 |
| | — |
| | — |
| | — |
| | 22,300 |
| | — |
| | 22,300 |
| | — |
| | N/A | | Jan. 2014 | | N/A | | 9,358 |
| | 22,300 |
| | — |
| | — |
| | — |
| | 22,300 |
| | — |
| | 22,300 |
| | — |
| | N/A | | Jan. 2014 | | N/A |
| Industrial facility in Aurora, CO | | 2,952 |
| | 737 |
| | 2,609 |
| | — |
| | — |
| | 737 |
| | 2,609 |
| | 3,346 |
| | 241 |
| | 1985 | | Jan. 2014 | | 32 yrs. | | 2,611 |
| | 737 |
| | 2,609 |
| | — |
| | — |
| | 737 |
| | 2,609 |
| | 3,346 |
| | 488 |
| | 1985 | | Jan. 2014 | | 32 yrs. |
| Warehouse facility in Burlington, NJ | | — |
| | 3,989 |
| | 6,213 |
| | 377 |
| | — |
| | 3,989 |
| | 6,590 |
| | 10,579 |
| | 733 |
| | 1999 | | Jan. 2014 | | 26 yrs. | | — |
| | 3,989 |
| | 6,213 |
| | 377 |
| | — |
| | 3,989 |
| | 6,590 |
| | 10,579 |
| | 1,527 |
| | 1999 | | Jan. 2014 | | 26 yrs. |
| Industrial facility in Albuquerque, NM | | — |
| | 2,467 |
| | 3,476 |
| | 606 |
| | — |
| | 2,467 |
| | 4,082 |
| | 6,549 |
| | 429 |
| | 1993 | | Jan. 2014 | | 27 yrs. | | — |
| | 2,467 |
| | 3,476 |
| | 606 |
| | — |
| | 2,467 |
| | 4,082 |
| | 6,549 |
| | 905 |
| | 1993 | | Jan. 2014 | | 27 yrs. |
| Industrial facilities in North Salt Lake, UT and Radford, VA | | 1,350 |
| | 10,601 |
| | 17,626 |
| | — |
| | (14,477 | ) | | 4,963 |
| | 8,787 |
| | 13,750 |
| | 979 |
| | 1981; 1998 | | Jan. 2014 | | 26 yrs. | |
| Industrial facility in North Salt Lake, UT | | | — |
| | 10,601 |
| | 17,626 |
| | — |
| | (16,936 | ) | | 4,388 |
| | 6,903 |
| | 11,291 |
| | 1,560 |
| | 1981 | | Jan. 2014 | | 26 yrs. |
| Industrial facilities in Lexington, NC and Murrysville, PA | | — |
| | 2,185 |
| | 12,058 |
| | — |
| | 2,713 |
| | 1,608 |
| | 15,348 |
| | 16,956 |
| | 1,613 |
| | 1940; 1995 | | Jan. 2014 | | 28 yrs. | | — |
| | 2,185 |
| | 12,058 |
| | — |
| | 2,713 |
| | 1,608 |
| | 15,348 |
| | 16,956 |
| | 3,271 |
| | 1940; 1995 | | Jan. 2014 | | 28 yrs. |
| Land in Welcome, NC | | — |
| | 980 |
| | 11,230 |
| | — |
| | (11,724 | ) | | 486 |
| | — |
| | 486 |
| | — |
| | N/A | | Jan. 2014 | | N/A | | — |
| | 980 |
| | 11,230 |
| | — |
| | (11,724 | ) | | 486 |
| | — |
| | 486 |
| | — |
| | N/A | | Jan. 2014 | | N/A |
| Industrial facilities in Evansville, IN; Lawrence, KS; and Baltimore, MD | | 25,292 |
| | 4,005 |
| | 44,192 |
| | — |
| | — |
| | 4,005 |
| | 44,192 |
| | 48,197 |
| | 5,405 |
| | 1911; 1967; 1982 | | Jan. 2014 | | 24 yrs. | | — |
| | 4,005 |
| | 44,192 |
| | — |
| | — |
| | 4,005 |
| | 44,192 |
| | 48,197 |
| | 10,965 |
| | 1911; 1967; 1982 | | Jan. 2014 | | 24 yrs. |
| Industrial facilities in Colton, CA; Bonner Springs, KS; and Dallas, TX and land in Eagan, MN | | 19,214 |
| | 8,451 |
| | 25,457 |
| | — |
| | 298 |
| | 8,451 |
| | 25,755 |
| | 34,206 |
| | 2,615 |
| | 1978; 1979; 1986 | | Jan. 2014 | | 17 - 34 yrs. | | — |
| | 8,451 |
| | 25,457 |
| | — |
| | 298 |
| | 8,451 |
| | 25,755 |
| | 34,206 |
| | 5,304 |
| | 1978; 1979; 1986 | | Jan. 2014 | | 17 - 34 yrs. |
| Retail facility in Torrance, CA | | 24,215 |
| | 8,412 |
| | 12,241 |
| | 1,213 |
| | (77 | ) | | 8,335 |
| | 13,454 |
| | 21,789 |
| | 1,573 |
| | 1973 | | Jan. 2014 | | 25 yrs. | | — |
| | 8,412 |
| | 12,241 |
| | 1,377 |
| | (76 | ) | | 8,335 |
| | 13,619 |
| | 21,954 |
| | 3,345 |
| | 1973 | | Jan. 2014 | | 25 yrs. |
| Office facility in Houston, TX | | 3,393 |
| | 6,578 |
| | 424 |
| | 223 |
| | — |
| | 6,578 |
| | 647 |
| | 7,225 |
| | 81 |
| | 1978 | | Jan. 2014 | | 27 yrs. | | — |
| | 6,578 |
| | 424 |
| | 560 |
| | — |
| | 6,578 |
| | 984 |
| | 7,562 |
| | 360 |
| | 1978 | | Jan. 2014 | | 27 yrs. |
| Land in Doncaster, United Kingdom | | — |
| | 4,257 |
| | 4,248 |
| | — |
| | (7,893 | ) | | 612 |
| | — |
| | 612 |
| | — |
| | N/A | | Jan. 2014 | | N/A | | — |
| | 4,257 |
| | 4,248 |
| | — |
| | (8,111 | ) | | 394 |
| | — |
| | 394 |
| | — |
| | N/A | | Jan. 2014 | | N/A |
| Warehouse facility in Norwich, CT | | | 8,111 |
| | 3,885 |
| | 21,342 |
| | — |
| | 2 |
| | 3,885 |
| | 21,344 |
| | 25,229 |
| | 4,469 |
| | 1960 | | Jan. 2014 | | 28 yrs. |
| Warehouse facility in Norwich, CT | | | — |
| | 1,437 |
| | 9,669 |
| | — |
| | — |
| | 1,437 |
| | 9,669 |
| | 11,106 |
| | 2,024 |
| | 2005 | | Jan. 2014 | | 28 yrs. |
| Warehouse facility in Whitehall, PA | | | — |
| | 7,435 |
| | 9,093 |
| | — |
| | (4,164 | ) | | 6,983 |
| | 5,381 |
| | 12,364 |
| | 1,379 |
| | 1986 | | Jan. 2014 | | 23 yrs. |
| Retail facilities in York, PA | | | 2,972 |
| | 3,776 |
| | 10,092 |
| | — |
| | (2,016 | ) | | 2,668 |
| | 9,184 |
| | 11,852 |
| | 1,853 |
| | 1992; 2005 | | Jan. 2014 | | 26 - 34 yrs. |
| Industrial facility in Pittsburgh, PA | | | — |
| | 1,151 |
| | 10,938 |
| | — |
| | — |
| | 1,151 |
| | 10,938 |
| | 12,089 |
| | 2,613 |
| | 1991 | | Jan. 2014 | | 25 yrs. |
| Warehouse facilities in Atlanta, GA and Elkwood, VA | | | — |
| | 5,356 |
| | 4,121 |
| | — |
| | (2,104 | ) | | 4,284 |
| | 3,089 |
| | 7,373 |
| | 656 |
| | 1975 | | Jan. 2014 | | 28 yrs. |
| Warehouse facility in Harrisburg, NC | | | — |
| | 1,753 |
| | 5,840 |
| | — |
| | (111 | ) | | 1,642 |
| | 5,840 |
| | 7,482 |
| | 1,324 |
| | 2000 | | Jan. 2014 | | 26 yrs. |
| Industrial facility in Chandler, AZ; industrial, office, and warehouse facility in Englewood, CO; and land in Englewood, CO | | | 3,416 |
| | 4,306 |
| | 7,235 |
| | — |
| | 3 |
| | 4,306 |
| | 7,238 |
| | 11,544 |
| | 1,415 |
| | 1978; 1987 | | Jan. 2014 | | 30 yrs. |
|
| |
| | W. P. Carey 20162019 10-K– 159135 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 20162019
(in thousands)
| | | | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) | | Accumulated Depreciation (c) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | |
| | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | Land | | Buildings | | Total | | | Encumbrances | | Land | | Buildings | | Land | | Buildings | | Total | |
| Warehouse facility in Norwich, CT | | 10,695 |
| | 3,885 |
| | 21,342 |
| | — |
| | 2 |
| | 3,885 |
| | 21,344 |
| | 25,229 |
| | 2,203 |
| | 1960 | | Jan. 2014 | | 28 yrs. | |
| Warehouse facility in Norwich, CT | | — |
| | 1,437 |
| | 9,669 |
| | — |
| | — |
| | 1,437 |
| | 9,669 |
| | 11,106 |
| | 998 |
| | 2005 | | Jan. 2014 | | 28 yrs. | |
| Retail facility in Johnstown, PA and warehouse facility in Whitehall, PA | | — |
| | 7,435 |
| | 9,093 |
| | — |
| | 17 |
| | 7,435 |
| | 9,110 |
| | 16,545 |
| | 1,151 |
| | 1986; 1992 | | Jan. 2014 | | 23 yrs. | |
| Retail facilities in York, PA | | 8,603 |
| | 3,776 |
| | 10,092 |
| | — |
| | — |
| | 3,776 |
| | 10,092 |
| | 13,868 |
| | 949 |
| | 1992; 2005 | | Jan. 2014 | | 26 - 34 yrs. | |
| Industrial facility in Pittsburgh, PA | | — |
| | 1,151 |
| | 10,938 |
| | — |
| | — |
| | 1,151 |
| | 10,938 |
| | 12,089 |
| | 1,288 |
| | 1991 | | Jan. 2014 | | 25 yrs. | |
| Warehouse facilities in Atlanta, GA and Elkwood, VA | | — |
| | 5,356 |
| | 4,121 |
| | — |
| | (2,104 | ) | | 4,284 |
| | 3,089 |
| | 7,373 |
| | 324 |
| | 1975 | | Jan. 2014 | | 28 yrs. | |
| Warehouse facility in Harrisburg, NC | | — |
| | 1,753 |
| | 5,840 |
| | — |
| | (111 | ) | | 1,642 |
| | 5,840 |
| | 7,482 |
| | 653 |
| | 2000 | | Jan. 2014 | | 26 yrs. | |
| Education facility in Nashville, TN | | 5,240 |
| | 1,098 |
| | 7,043 |
| | 2,611 |
| | — |
| | 1,098 |
| | 9,654 |
| | 10,752 |
| | 799 |
| | 1988 | | Jan. 2014 | | 31 yrs. | |
| Industrial facility in Chandler, AZ; industrial, office, and warehouse facility in Englewood, CO; and land in Englewood, CO | | 4,989 |
| | 4,306 |
| | 7,235 |
| | — |
| | 3 |
| | 4,306 |
| | 7,238 |
| | 11,544 |
| | 698 |
| | 1978; 1987 | | Jan. 2014 | | 30 yrs. | |
| Industrial facility in Cynthiana, KY | | 2,358 |
| | 1,274 |
| | 3,505 |
| | 480 |
| | (107 | ) | | 1,274 |
| | 3,878 |
| | 5,152 |
| | 363 |
| | 1967 | | Jan. 2014 | | 31 yrs. | | 1,672 |
| | 1,274 |
| | 3,505 |
| | 525 |
| | (107 | ) | | 1,274 |
| | 3,923 |
| | 5,197 |
| | 807 |
| | 1967 | | Jan. 2014 | | 31 yrs. |
| Industrial facility in Columbia, SC | | — |
| | 2,843 |
| | 11,886 |
| | — |
| | — |
| | 2,843 |
| | 11,886 |
| | 14,729 |
| | 1,534 |
| | 1962 | | Jan. 2014 | | 23 yrs. | | — |
| | 2,843 |
| | 11,886 |
| | — |
| | — |
| | 2,843 |
| | 11,886 |
| | 14,729 |
| | 3,112 |
| | 1962 | | Jan. 2014 | | 23 yrs. |
| Land in Midlothian, VA | | — |
| | 2,824 |
| | — |
| | — |
| | — |
| | 2,824 |
| | — |
| | 2,824 |
| | — |
| | N/A | | Jan. 2014 | | N/A | |
| Movie theater in Midlothian, VA | | | — |
| | 2,824 |
| | 16,618 |
| | — |
| | — |
| | 2,824 |
| | 16,618 |
| | 19,442 |
| | 514 |
| | 2000 | | Jan. 2014 | | 40 yrs. |
| Net-lease student housing facility in Laramie, WY | | 15,626 |
| | 1,966 |
| | 18,896 |
| | — |
| | — |
| | 1,966 |
| | 18,896 |
| | 20,862 |
| | 2,698 |
| | 2007 | | Jan. 2014 | | 33 yrs. | | — |
| | 1,966 |
| | 18,896 |
| | — |
| | — |
| | 1,966 |
| | 18,896 |
| | 20,862 |
| | 4,308 |
| | 2007 | | Jan. 2014 | | 33 yrs. |
| Office facility in Greenville, SC | | 8,477 |
| | 562 |
| | 7,916 |
| | — |
| | 43 |
| | 562 |
| | 7,959 |
| | 8,521 |
| | 925 |
| | 1972 | | Jan. 2014 | | 25 yrs. | | 7,311 |
| | 562 |
| | 7,916 |
| | — |
| | 43 |
| | 562 |
| | 7,959 |
| | 8,521 |
| | 1,877 |
| | 1972 | | Jan. 2014 | | 25 yrs. |
| Warehouse facilities in Mendota, IL; Toppenish and Yakima, WA; and Plover, WI | | — |
| | 1,444 |
| | 21,208 |
| | — |
| | — |
| | 1,444 |
| | 21,208 |
| | 22,652 |
| | 2,758 |
| | 1996 | | Jan. 2014 | | 23 yrs. | |
| Warehouse facilities in Mendota, IL; Toppenish, WA; and Plover, WI | | | — |
| | 1,444 |
| | 21,208 |
| | — |
| | (623 | ) | | 1,382 |
| | 20,647 |
| | 22,029 |
| | 5,447 |
| | 1996 | | Jan. 2014 | | 23 yrs. |
| Industrial facility in Allen, TX and office facility in Sunnyvale, CA | | 10,243 |
| | 9,297 |
| | 24,086 |
| | — |
| | — |
| | 9,297 |
| | 24,086 |
| | 33,383 |
| | 2,271 |
| | 1981; 1997 | | Jan. 2014 | | 31 yrs. | | — |
| | 9,297 |
| | 24,086 |
| | — |
| | (42 | ) | | 9,255 |
| | 24,086 |
| | 33,341 |
| | 4,607 |
| | 1981; 1997 | | Jan. 2014 | | 31 yrs. |
| Industrial facilities in Hampton, NH | | 8,843 |
| | 8,990 |
| | 7,362 |
| | — |
| | — |
| | 8,990 |
| | 7,362 |
| | 16,352 |
| | 708 |
| | 1976 | | Jan. 2014 | | 30 yrs. | | 6,067 |
| | 8,990 |
| | 7,362 |
| | — |
| | — |
| | 8,990 |
| | 7,362 |
| | 16,352 |
| | 1,435 |
| | 1976 | | Jan. 2014 | | 30 yrs. |
| Industrial facilities located throughout France | | — |
| | 36,306 |
| | 5,212 |
| | — |
| | (9,367 | ) | | 28,115 |
| | 4,036 |
| | 32,151 |
| | 514 |
| | Various | | Jan. 2014 | | 23 yrs. | | — |
| | 36,306 |
| | 5,212 |
| | — |
| | (8,126 | ) | | 29,091 |
| | 4,301 |
| | 33,392 |
| | 1,111 |
| | Various | | Jan. 2014 | | 23 yrs. |
| Retail facility in Fairfax, VA | | 4,944 |
| | 3,402 |
| | 16,353 |
| | — |
| | — |
| | 3,402 |
| | 16,353 |
| | 19,755 |
| | 1,810 |
| | 1998 | | Jan. 2014 | | 26 yrs. | | — |
| | 3,402 |
| | 16,353 |
| | — |
| | — |
| | 3,402 |
| | 16,353 |
| | 19,755 |
| | 3,672 |
| | 1998 | | Jan. 2014 | | 26 yrs. |
| Retail facility in Lombard, IL | | 4,944 |
| | 5,087 |
| | 8,578 |
| | — |
| | — |
| | 5,087 |
| | 8,578 |
| | 13,665 |
| | 950 |
| | 1999 | | Jan. 2014 | | 26 yrs. | | — |
| | 5,087 |
| | 8,578 |
| | — |
| | — |
| | 5,087 |
| | 8,578 |
| | 13,665 |
| | 1,926 |
| | 1999 | | Jan. 2014 | | 26 yrs. |
| Warehouse facility in Plainfield, IN | | 19,958 |
| | 1,578 |
| | 29,415 |
| | — |
| | — |
| | 1,578 |
| | 29,415 |
| | 30,993 |
| | 2,828 |
| | 1997 | | Jan. 2014 | | 30 yrs. | | 18,054 |
| | 1,578 |
| | 29,415 |
| | — |
| | — |
| | 1,578 |
| | 29,415 |
| | 30,993 |
| | 5,735 |
| | 1997 | | Jan. 2014 | | 30 yrs. |
| Retail facility in Kennesaw, GA | | 3,719 |
| | 2,849 |
| | 6,180 |
| | — |
| | — |
| | 2,849 |
| | 6,180 |
| | 9,029 |
| | 684 |
| | 1999 | | Jan. 2014 | | 26 yrs. | | 2,395 |
| | 2,849 |
| | 6,180 |
| | 5,530 |
| | (76 | ) | | 2,773 |
| | 11,710 |
| | 14,483 |
| | 2,174 |
| | 1999 | | Jan. 2014 | | 26 yrs. |
| Retail facility in Leawood, KS | | 8,782 |
| | 1,487 |
| | 13,417 |
| | — |
| | — |
| | 1,487 |
| | 13,417 |
| | 14,904 |
| | 1,485 |
| | 1997 | | Jan. 2014 | | 26 yrs. | | 7,750 |
| | 1,487 |
| | 13,417 |
| | — |
| | — |
| | 1,487 |
| | 13,417 |
| | 14,904 |
| | 3,013 |
| | 1997 | | Jan. 2014 | | 26 yrs. |
| Office facility in Tolland, CT | | 7,955 |
| | 1,817 |
| | 5,709 |
| | — |
| | 11 |
| | 1,817 |
| | 5,720 |
| | 7,537 |
| | 608 |
| | 1968 | | Jan. 2014 | | 28 yrs. | | 7,328 |
| | 1,817 |
| | 5,709 |
| | — |
| | 11 |
| | 1,817 |
| | 5,720 |
| | 7,537 |
| | 1,234 |
| | 1968 | | Jan. 2014 | | 28 yrs. |
| Warehouse facilities in Lincolnton, NC and Mauldin, SC | | 9,734 |
| | 1,962 |
| | 9,247 |
| | — |
| | — |
| | 1,962 |
| | 9,247 |
| | 11,209 |
| | 960 |
| | 1988; 1996 | | Jan. 2014 | | 28 yrs. | | 9,006 |
| | 1,962 |
| | 9,247 |
| | — |
| | — |
| | 1,962 |
| | 9,247 |
| | 11,209 |
| | 1,948 |
| | 1988; 1996 | | Jan. 2014 | | 28 yrs. |
| Retail facilities located throughout Germany | | 257,606 |
| | 81,109 |
| | 153,927 |
| | — |
| | (53,029 | ) | | 62,809 |
| | 119,198 |
| | 182,007 |
| | 12,254 |
| | Various | | Jan. 2014 | | Various | | — |
| | 81,109 |
| | 153,927 |
| | 10,510 |
| | (127,152 | ) | | 29,403 |
| | 88,991 |
| | 118,394 |
| | 16,834 |
| | Various | | Jan. 2014 | | Various |
| Industrial and office facility in Marktheidenfeld, Germany | | | — |
| | 1,303 |
| | 16,116 |
| | — |
| | 551 |
| | 1,344 |
| | 16,626 |
| | 17,970 |
| | 105 |
| | 2002 | | Jan. 2014 | | 40 yrs. |
| Office facility in Southfield, MI | | | — |
| | 1,726 |
| | 4,856 |
| | 89 |
| | — |
| | 1,726 |
| | 4,945 |
| | 6,671 |
| | 943 |
| | 1985 | | Jan. 2014 | | 31 yrs. |
| Office facility in The Woodlands, TX | | | 17,072 |
| | 3,204 |
| | 24,997 |
| | — |
| | — |
| | 3,204 |
| | 24,997 |
| | 28,201 |
| | 4,693 |
| | 1997 | | Jan. 2014 | | 32 yrs. |
| Warehouse facilities in Valdosta, GA and Johnson City, TN | | | — |
| | 1,080 |
| | 14,998 |
| | 1,688 |
| | — |
| | 1,080 |
| | 16,686 |
| | 17,766 |
| | 3,392 |
| | 1978; 1998 | | Jan. 2014 | | 27 yrs. |
| Industrial facility in Amherst, NY | | | 7,021 |
| | 674 |
| | 7,971 |
| | — |
| | — |
| | 674 |
| | 7,971 |
| | 8,645 |
| | 2,103 |
| | 1984 | | Jan. 2014 | | 23 yrs. |
| Industrial and warehouse facilities in Westfield, MA | | | — |
| | 1,922 |
| | 9,755 |
| | 7,435 |
| | 9 |
| | 1,922 |
| | 17,199 |
| | 19,121 |
| | 3,451 |
| | 1954; 1997 | | Jan. 2014 | | 28 yrs. |
| Warehouse facilities in Kottka, Finland | | | — |
| | — |
| | 8,546 |
| | — |
| | (1,493 | ) | | — |
| | 7,053 |
| | 7,053 |
| | 1,910 |
| | 1999; 2001 | | Jan. 2014 | | 21 - 23 yrs. |
| Office facility in Bloomington, MN | | | — |
| | 2,942 |
| | 7,155 |
| | — |
| | — |
| | 2,942 |
| | 7,155 |
| | 10,097 |
| | 1,494 |
| | 1988 | | Jan. 2014 | | 28 yrs. |
| Warehouse facility in Gorinchem, Netherlands | | | 3,131 |
| | 1,143 |
| | 5,648 |
| | — |
| | (1,186 | ) | | 944 |
| | 4,661 |
| | 5,605 |
| | 973 |
| | 1995 | | Jan. 2014 | | 28 yrs. |
| Retail facility in Cresskill, NJ | | | — |
| | 2,366 |
| | 5,482 |
| | — |
| | 19 |
| | 2,366 |
| | 5,501 |
| | 7,867 |
| | 1,044 |
| | 1975 | | Jan. 2014 | | 31 yrs. |
| Retail facility in Livingston, NJ | | | — |
| | 2,932 |
| | 2,001 |
| | — |
| | 14 |
| | 2,932 |
| | 2,015 |
| | 4,947 |
| | 439 |
| | 1966 | | Jan. 2014 | | 27 yrs. |
| Retail facility in Maplewood, NJ | | | — |
| | 845 |
| | 647 |
| | — |
| | 4 |
| | 845 |
| | 651 |
| | 1,496 |
| | 142 |
| | 1954 | | Jan. 2014 | | 27 yrs. |
|
| |
| | W. P. Carey 20162019 10-K– 160136 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 20162019
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) | | Accumulated Depreciation (c) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Office facility in Southfield, MI | | — |
| | 1,726 |
| | 4,856 |
| | 89 |
| | — |
| | 1,726 |
| | 4,945 |
| | 6,671 |
| | 462 |
| | 1985 | | Jan. 2014 | | 31 yrs. |
| Office facility in The Woodlands, TX | | 19,882 |
| | 3,204 |
| | 24,997 |
| | — |
| | — |
| | 3,204 |
| | 24,997 |
| | 28,201 |
| | 2,314 |
| | 1997 | | Jan. 2014 | | 32 yrs. |
| Industrial facilities in Shah Alam, Malaysia | | 4,447 |
| | — |
| | 10,429 |
| | — |
| | (2,651 | ) | | — |
| | 7,778 |
| | 7,778 |
| | 760 |
| | 1992 | | Jan. 2014 | | 30 yrs. |
| Warehouse facilities in Lam Luk Ka and Bang Pa-in, Thailand | | 9,717 |
| | 13,054 |
| | 19,497 |
| | — |
| | (2,506 | ) | | 12,049 |
| | 17,996 |
| | 30,045 |
| | 1,684 |
| | 2003; 2005 | | Jan. 2014 | | 31 yrs. |
| Warehouse facilities in Valdosta, GA and Johnson City, TN | | 8,015 |
| | 1,080 |
| | 14,998 |
| | — |
| | — |
| | 1,080 |
| | 14,998 |
| | 16,078 |
| | 1,645 |
| | 1978; 1998 | | Jan. 2014 | | 27 yrs. |
| Industrial facility in Amherst, NY | | 7,959 |
| | 674 |
| | 7,971 |
| | — |
| | — |
| | 674 |
| | 7,971 |
| | 8,645 |
| | 1,037 |
| | 1984 | | Jan. 2014 | | 23 yrs. |
| Industrial and warehouse facilities in Westfield, MA | | — |
| | 1,922 |
| | 9,755 |
| | 5,146 |
| | 9 |
| | 1,922 |
| | 14,910 |
| | 16,832 |
| | 1,126 |
| | 1954; 1997 | | Jan. 2014 | | 28 yrs. |
| Warehouse facilities in Kottka, Finland | | — |
| | — |
| | 8,546 |
| | — |
| | (1,928 | ) | | — |
| | 6,618 |
| | 6,618 |
| | 884 |
| | 1999; 2001 | | Jan. 2014 | | 21 - 23 yrs. |
| Office facility in Bloomington, MN | | — |
| | 2,942 |
| | 7,155 |
| | — |
| | — |
| | 2,942 |
| | 7,155 |
| | 10,097 |
| | 736 |
| | 1988 | | Jan. 2014 | | 28 yrs. |
| Warehouse facility in Gorinchem, Netherlands | | 3,505 |
| | 1,143 |
| | 5,648 |
| | — |
| | (1,532 | ) | | 885 |
| | 4,374 |
| | 5,259 |
| | 450 |
| | 1995 | | Jan. 2014 | | 28 yrs. |
| Retail facility in Cresskill, NJ | | — |
| | 2,366 |
| | 5,482 |
| | — |
| | 19 |
| | 2,366 |
| | 5,501 |
| | 7,867 |
| | 515 |
| | 1975 | | Jan. 2014 | | 31 yrs. |
| Retail facility in Livingston, NJ | | 5,186 |
| | 2,932 |
| | 2,001 |
| | — |
| | 14 |
| | 2,932 |
| | 2,015 |
| | 4,947 |
| | 216 |
| | 1966 | | Jan. 2014 | | 27 yrs. |
| Retail facility in Maplewood, NJ | | — |
| | 845 |
| | 647 |
| | — |
| | 4 |
| | 845 |
| | 651 |
| | 1,496 |
| | 70 |
| | 1954 | | Jan. 2014 | | 27 yrs. |
| Retail facility in Montclair, NJ | | — |
| | 1,905 |
| | 1,403 |
| | — |
| | 6 |
| | 1,905 |
| | 1,409 |
| | 3,314 |
| | 151 |
| | 1950 | | Jan. 2014 | | 27 yrs. |
| Retail facility in Morristown, NJ | | — |
| | 3,258 |
| | 8,352 |
| | — |
| | 26 |
| | 3,258 |
| | 8,378 |
| | 11,636 |
| | 899 |
| | 1973 | | Jan. 2014 | | 27 yrs. |
| Retail facility in Summit, NJ | | — |
| | 1,228 |
| | 1,465 |
| | — |
| | 8 |
| | 1,228 |
| | 1,473 |
| | 2,701 |
| | 158 |
| | 1950 | | Jan. 2014 | | 27 yrs. |
| Industrial and office facilities in Bunde, Dransfeld, and Wolfach, Germany | | — |
| | 2,789 |
| | 8,750 |
| | — |
| | (2,564 | ) | | 2,160 |
| | 6,815 |
| | 8,975 |
| | 816 |
| | 1898; 1956; 1978 | | Jan. 2014 | | 24 yrs. |
| Industrial facilities in Georgetown, TX and Woodland, WA | | — |
| | 965 |
| | 4,113 |
| | — |
| | — |
| | 965 |
| | 4,113 |
| | 5,078 |
| | 356 |
| | 1998; 2001 | | Jan. 2014 | | 33 - 35 yrs. |
| Education facilities in Union, NJ; Allentown and Philadelphia, PA; and Grand Prairie, TX | | — |
| | 5,365 |
| | 7,845 |
| | — |
| | 5 |
| | 5,365 |
| | 7,850 |
| | 13,215 |
| | 822 |
| | Various | | Jan. 2014 | | 28 yrs. |
| Industrial facility in Ylämylly, Finland | | 6,554 |
| | 1,669 |
| | 6,034 |
| | — |
| | (1,738 | ) | | 1,292 |
| | 4,673 |
| | 5,965 |
| | 400 |
| | 1999 | | Jan. 2014 | | 34 yrs. |
| Industrial facility in Salisbury, NC | | 6,132 |
| | 1,499 |
| | 8,185 |
| | — |
| | — |
| | 1,499 |
| | 8,185 |
| | 9,684 |
| | 860 |
| | 2000 | | Jan. 2014 | | 28 yrs. |
| Industrial facilities in Solon and Twinsburg, OH and office facility in Plymouth, MI | | 3,671 |
| | 2,831 |
| | 10,565 |
| | — |
| | — |
| | 2,831 |
| | 10,565 |
| | 13,396 |
| | 1,133 |
| | 1970; 1991; 1995 | | Jan. 2014 | | 26 - 27 yrs. |
| Industrial facility in Cambridge, Canada | | — |
| | 1,849 |
| | 7,371 |
| | — |
| | (1,562 | ) | | 1,536 |
| | 6,122 |
| | 7,658 |
| | 571 |
| | 2001 | | Jan. 2014 | | 31 yrs. |
| Industrial facilities in Peru, IL; Huber Heights, Lima, and Sheffield, OH; and Lebanon, TN | | 11,303 |
| | 2,962 |
| | 17,832 |
| | — |
| | — |
| | 2,962 |
| | 17,832 |
| | 20,794 |
| | 1,664 |
| | Various | | Jan. 2014 | | 31 yrs. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Retail facility in Montclair, NJ | | — |
| | 1,905 |
| | 1,403 |
| | — |
| | 6 |
| | 1,905 |
| | 1,409 |
| | 3,314 |
| | 307 |
| | 1950 | | Jan. 2014 | | 27 yrs. |
| Retail facility in Morristown, NJ | | — |
| | 3,258 |
| | 8,352 |
| | — |
| | 26 |
| | 3,258 |
| | 8,378 |
| | 11,636 |
| | 1,824 |
| | 1973 | | Jan. 2014 | | 27 yrs. |
| Retail facility in Summit, NJ | | — |
| | 1,228 |
| | 1,465 |
| | — |
| | 8 |
| | 1,228 |
| | 1,473 |
| | 2,701 |
| | 321 |
| | 1950 | | Jan. 2014 | | 27 yrs. |
| Industrial and office facilities in Dransfeld and Wolfach, Germany | | — |
| | 2,789 |
| | 8,750 |
| | — |
| | (3,345 | ) | | 2,168 |
| | 6,026 |
| | 8,194 |
| | 1,465 |
| | 1898; 1978 | | Jan. 2014 | | 24 yrs. |
| Industrial facilities in Georgetown, TX and Woodland, WA | | — |
| | 965 |
| | 4,113 |
| | — |
| | — |
| | 965 |
| | 4,113 |
| | 5,078 |
| | 721 |
| | 1998; 2001 | | Jan. 2014 | | 33 - 35 yrs. |
| Education facilities in Union, NJ; Allentown and Philadelphia, PA; and Grand Prairie, TX | | — |
| | 5,365 |
| | 7,845 |
| | — |
| | 5 |
| | 5,365 |
| | 7,850 |
| | 13,215 |
| | 1,668 |
| | Various | | Jan. 2014 | | 28 yrs. |
| Industrial facility in Salisbury, NC | | — |
| | 1,499 |
| | 8,185 |
| | — |
| | — |
| | 1,499 |
| | 8,185 |
| | 9,684 |
| | 1,744 |
| | 2000 | | Jan. 2014 | | 28 yrs. |
| Industrial facilities in Solon and Twinsburg, OH and office facility in Plymouth, MI | | — |
| | 2,831 |
| | 10,565 |
| | — |
| | — |
| | 2,831 |
| | 10,565 |
| | 13,396 |
| | 2,298 |
| | 1970; 1991; 1995 | | Jan. 2014 | | 26 - 27 yrs. |
| Industrial facility in Cambridge, Canada | | — |
| | 1,849 |
| | 7,371 |
| | — |
| | (1,288 | ) | | 1,591 |
| | 6,341 |
| | 7,932 |
| | 1,200 |
| | 2001 | | Jan. 2014 | | 31 yrs. |
| Industrial facilities in Peru, IL; Huber Heights, Lima, and Sheffield, OH; and Lebanon, TN | | 8,073 |
| | 2,962 |
| | 17,832 |
| | — |
| | — |
| | 2,962 |
| | 17,832 |
| | 20,794 |
| | 3,375 |
| | Various | | Jan. 2014 | | 31 yrs. |
| Industrial facility in Ramos Arizpe, Mexico | | — |
| | 1,059 |
| | 2,886 |
| | — |
| | — |
| | 1,059 |
| | 2,886 |
| | 3,945 |
| | 545 |
| | 2000 | | Jan. 2014 | | 31 yrs. |
| Industrial facilities in Salt Lake City, UT | | — |
| | 2,783 |
| | 3,773 |
| | — |
| | — |
| | 2,783 |
| | 3,773 |
| | 6,556 |
| | 714 |
| | 1983; 2002 | | Jan. 2014 | | 31 - 33 yrs. |
| Net-lease student housing facility in Blairsville, PA | | 8,821 |
| | 1,631 |
| | 23,163 |
| | — |
| | — |
| | 1,631 |
| | 23,163 |
| | 24,794 |
| | 5,051 |
| | 2005 | | Jan. 2014 | | 33 yrs. |
| Warehouse facilities in Atlanta, Doraville, and Rockmart, GA | | — |
| | 6,488 |
| | 77,192 |
| | — |
| | — |
| | 6,488 |
| | 77,192 |
| | 83,680 |
| | 16,002 |
| | 1959; 1962; 1991 | | Jan. 2014 | | 23 - 33 yrs. |
| Warehouse facilities in Flora, MS and Muskogee, OK | | 3,106 |
| | 554 |
| | 4,353 |
| | — |
| | — |
| | 554 |
| | 4,353 |
| | 4,907 |
| | 786 |
| | 1992; 2002 | | Jan. 2014 | | 33 yrs. |
| Industrial facility in Richmond, MO | | — |
| | 2,211 |
| | 8,505 |
| | 747 |
| | — |
| | 2,211 |
| | 9,252 |
| | 11,463 |
| | 1,874 |
| | 1996 | | Jan. 2014 | | 28 yrs. |
| Industrial facility in Tuusula, Finland | | — |
| | 6,173 |
| | 10,321 |
| | — |
| | (2,881 | ) | | 5,095 |
| | 8,518 |
| | 13,613 |
| | 1,975 |
| | 1975 | | Jan. 2014 | | 26 yrs. |
| Office facility in Turku, Finland | | — |
| | 5,343 |
| | 34,106 |
| | — |
| | (6,893 | ) | | 4,409 |
| | 28,147 |
| | 32,556 |
| | 5,981 |
| | 1981 | | Jan. 2014 | | 28 yrs. |
| Industrial facility in Turku, Finland | | — |
| | 1,105 |
| | 10,243 |
| | — |
| | (1,967 | ) | | 912 |
| | 8,469 |
| | 9,381 |
| | 1,806 |
| | 1981 | | Jan. 2014 | | 28 yrs. |
| Industrial facility in Baraboo, WI | | — |
| | 917 |
| | 10,663 |
| | — |
| | — |
| | 917 |
| | 10,663 |
| | 11,580 |
| | 4,821 |
| | 1988 | | Jan. 2014 | | 13 yrs. |
| Warehouse facility in Phoenix, AZ | | 16,836 |
| | 6,747 |
| | 21,352 |
| | — |
| | — |
| | 6,747 |
| | 21,352 |
| | 28,099 |
| | 4,550 |
| | 1996 | | Jan. 2014 | | 28 yrs. |
| Land in Calgary, Canada | | — |
| | 3,721 |
| | — |
| | — |
| | (520 | ) | | 3,201 |
| | — |
| | 3,201 |
| | — |
| | N/A | | Jan. 2014 | | N/A |
| Industrial facilities in Sandersville, GA; Erwin, TN; and Gainesville, TX | | 1,541 |
| | 955 |
| | 4,779 |
| | — |
| | — |
| | 955 |
| | 4,779 |
| | 5,734 |
| | 912 |
| | 1950; 1986; 1996 | | Jan. 2014 | | 31 yrs. |
| Industrial facility in Buffalo Grove, IL | | 4,926 |
| | 1,492 |
| | 12,233 |
| | — |
| | — |
| | 1,492 |
| | 12,233 |
| | 13,725 |
| | 2,340 |
| | 1996 | | Jan. 2014 | | 31 yrs. |
| Warehouse facility in Spanish Fork, UT | | — |
| | 991 |
| | 7,901 |
| | — |
| | — |
| | 991 |
| | 7,901 |
| | 8,892 |
| | 1,430 |
| | 2001 | | Jan. 2014 | | 33 yrs. |
|
| |
| | W. P. Carey 20162019 10-K– 161137 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 20162019
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) | | Accumulated Depreciation (c) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | |
| | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Industrial facility in Ramos Arizpe, Mexico | | — |
| | 1,059 |
| | 2,886 |
| | — |
| | — |
| | 1,059 |
| | 2,886 |
| | 3,945 |
| | 269 |
| | 2000 | | Jan. 2014 | | 31 yrs. |
| Industrial facilities in Salt Lake City, UT | | — |
| | 2,783 |
| | 3,773 |
| | — |
| | — |
| | 2,783 |
| | 3,773 |
| | 6,556 |
| | 352 |
| | 1983; 2002 | | Jan. 2014 | | 31 - 33 yrs. |
| Net-lease student housing facility in Blairsville, PA | | 11,321 |
| | 1,631 |
| | 23,163 |
| | — |
| | — |
| | 1,631 |
| | 23,163 |
| | 24,794 |
| | 3,052 |
| | 2005 | | Jan. 2014 | | 33 yrs. |
| Industrial facility in Nashville, TN | | — |
| | 1,078 |
| | 5,619 |
| | — |
| | — |
| | 1,078 |
| | 5,619 |
| | 6,697 |
| | 768 |
| | 1962 | | Jan. 2014 | | 21 yrs. |
| Office facility in Lafayette, LA | | 1,680 |
| | 1,048 |
| | 1,507 |
| | — |
| | — |
| | 1,048 |
| | 1,507 |
| | 2,555 |
| | 162 |
| | 1995 | | Jan. 2014 | | 27 yrs. |
| Warehouse facilities in Atlanta, Doraville, and Rockmart, GA | | — |
| | 6,488 |
| | 77,192 |
| | — |
| | — |
| | 6,488 |
| | 77,192 |
| | 83,680 |
| | 7,889 |
| | 1959; 1962; 1991 | | Jan. 2014 | | 23 - 33 yrs. |
| Warehouse facilities in Flora, MS and Muskogee, OK | | 3,342 |
| | 554 |
| | 4,353 |
| | — |
| | — |
| | 554 |
| | 4,353 |
| | 4,907 |
| | 388 |
| | 1992; 2002 | | Jan. 2014 | | 33 yrs. |
| Industrial facility in Richmond, MO | | 4,511 |
| | 2,211 |
| | 8,505 |
| | — |
| | — |
| | 2,211 |
| | 8,505 |
| | 10,716 |
| | 899 |
| | 1996 | | Jan. 2014 | | 28 yrs. |
| Warehouse facility in Dallas, TX | | 5,860 |
| | 468 |
| | 8,042 |
| | — |
| | — |
| | 468 |
| | 8,042 |
| | 8,510 |
| | 994 |
| | 1997 | | Jan. 2014 | | 24 yrs. |
| Industrial facility in Tuusula, Finland | | — |
| | 6,173 |
| | 10,321 |
| | — |
| | (3,721 | ) | | 4,781 |
| | 7,992 |
| | 12,773 |
| | 914 |
| | 1975 | | Jan. 2014 | | 26 yrs. |
| Office facility in Turku, Finland | | 22,030 |
| | 5,343 |
| | 34,106 |
| | — |
| | (8,901 | ) | | 4,137 |
| | 26,411 |
| | 30,548 |
| | 2,767 |
| | 1981 | | Jan. 2014 | | 28 yrs. |
| Industrial facility in Turku, Finland | | 4,046 |
| | 1,105 |
| | 10,243 |
| | — |
| | (2,546 | ) | | 855 |
| | 7,947 |
| | 8,802 |
| | 836 |
| | 1981 | | Jan. 2014 | | 28 yrs. |
| Industrial facility in Baraboo, WI | | — |
| | 917 |
| | 10,663 |
| | — |
| | — |
| | 917 |
| | 10,663 |
| | 11,580 |
| | 2,375 |
| | 1988 | | Jan. 2014 | | 13 yrs. |
| Warehouse facility in Phoenix, AZ | | 18,485 |
| | 6,747 |
| | 21,352 |
| | — |
| | — |
| | 6,747 |
| | 21,352 |
| | 28,099 |
| | 2,243 |
| | 1996 | | Jan. 2014 | | 28 yrs. |
| Land in Calgary, Canada | | — |
| | 3,721 |
| | — |
| | — |
| | (631 | ) | | 3,090 |
| | — |
| | 3,090 |
| | — |
| | N/A | | Jan. 2014 | | N/A |
| Industrial facilities in Sandersville, GA; Erwin, TN; and Gainesville, TX | | 2,204 |
| | 955 |
| | 4,779 |
| | — |
| | — |
| | 955 |
| | 4,779 |
| | 5,734 |
| | 449 |
| | 1950; 1986; 1996 | | Jan. 2014 | | 31 yrs. |
| Industrial facility in Buffalo Grove, IL | | 6,771 |
| | 1,492 |
| | 12,233 |
| | — |
| | — |
| | 1,492 |
| | 12,233 |
| | 13,725 |
| | 1,154 |
| | 1996 | | Jan. 2014 | | 31 yrs. |
| Warehouse facility in Spanish Fork, UT | | 6,842 |
| | 991 |
| | 7,901 |
| | — |
| | — |
| | 991 |
| | 7,901 |
| | 8,892 |
| | 705 |
| | 2001 | | Jan. 2014 | | 33 yrs. |
| Industrial facilities in West Jordan, UT and Tacoma, WA; office facility in Eugene, OR; and warehouse facility in Perris, CA | | — |
| | 8,989 |
| | 5,435 |
| | — |
| | 8 |
| | 8,989 |
| | 5,443 |
| | 14,432 |
| | 565 |
| | Various | | Jan. 2014 | | 28 yrs. |
| Office facility in Carlsbad, CA | | — |
| | 3,230 |
| | 5,492 |
| | — |
| | — |
| | 3,230 |
| | 5,492 |
| | 8,722 |
| | 679 |
| | 1999 | | Jan. 2014 | | 24 yrs. |
| Land in Pensacola, FL | | — |
| | 1,746 |
| | — |
| | — |
| | — |
| | 1,746 |
| | — |
| | 1,746 |
| | — |
| | N/A | | Jan. 2014 | | N/A |
| Movie theater in Port St. Lucie, FL | | — |
| | 4,654 |
| | 2,576 |
| | — |
| | — |
| | 4,654 |
| | 2,576 |
| | 7,230 |
| | 275 |
| | 2000 | | Jan. 2014 | | 27 yrs. |
| Movie theater in Hickory Creek, TX | | — |
| | 1,693 |
| | 3,342 |
| | — |
| | — |
| | 1,693 |
| | 3,342 |
| | 5,035 |
| | 364 |
| | 2000 | | Jan. 2014 | | 27 yrs. |
| Industrial facility in Nurieux-Volognat, France | | — |
| | 121 |
| | 5,328 |
| | — |
| | (1,136 | ) | | 93 |
| | 4,220 |
| | 4,313 |
| | 381 |
| | 2000 | | Jan. 2014 | | 32 yrs. |
| Warehouse facility in Suwanee, GA | | 14,981 |
| | 2,330 |
| | 8,406 |
| | — |
| | — |
| | 2,330 |
| | 8,406 |
| | 10,736 |
| | 725 |
| | 1995 | | Jan. 2014 | | 34 yrs. |
| Retail facilities in Wichita, KS and Oklahoma City, OK and warehouse facility in Wichita, KS | | 7,057 |
| | 1,878 |
| | 8,579 |
| | — |
| | — |
| | 1,878 |
| | 8,579 |
| | 10,457 |
| | 1,068 |
| | 1954; 1975; 1984 | | Jan. 2014 | | 24 yrs. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | |
| | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Industrial facilities in West Jordan, UT and Tacoma, WA; office facility in Eugene, OR; and warehouse facility in Perris, CA | | — |
| | 8,989 |
| | 5,435 |
| | — |
| | 8 |
| | 8,989 |
| | 5,443 |
| | 14,432 |
| | 1,146 |
| | Various | | Jan. 2014 | | 28 yrs. |
| Office facility in Carlsbad, CA | | — |
| | 3,230 |
| | 5,492 |
| | — |
| | — |
| | 3,230 |
| | 5,492 |
| | 8,722 |
| | 1,377 |
| | 1999 | | Jan. 2014 | | 24 yrs. |
| Land in Pensacola, FL | | — |
| | 1,746 |
| | — |
| | — |
| | — |
| | 1,746 |
| | — |
| | 1,746 |
| | — |
| | N/A | | Jan. 2014 | | N/A |
| Movie theater in Port St. Lucie, FL | | — |
| | 4,654 |
| | 2,576 |
| | — |
| | — |
| | 4,654 |
| | 2,576 |
| | 7,230 |
| | 557 |
| | 2000 | | Jan. 2014 | | 27 yrs. |
| Movie theater in Hickory Creek, TX | | — |
| | 1,693 |
| | 3,342 |
| | — |
| | — |
| | 1,693 |
| | 3,342 |
| | 5,035 |
| | 739 |
| | 2000 | | Jan. 2014 | | 27 yrs. |
| Industrial facility in Nurieux-Volognat, France | | — |
| | 121 |
| | 5,328 |
| | — |
| | (852 | ) | | 99 |
| | 4,498 |
| | 4,597 |
| | 823 |
| | 2000 | | Jan. 2014 | | 32 yrs. |
| Warehouse facility in Suwanee, GA | | — |
| | 2,330 |
| | 8,406 |
| | — |
| | — |
| | 2,330 |
| | 8,406 |
| | 10,736 |
| | 1,470 |
| | 1995 | | Jan. 2014 | | 34 yrs. |
| Retail facilities in Wichita, KS and Oklahoma City, OK and warehouse facility in Wichita, KS | | — |
| | 1,878 |
| | 8,579 |
| | — |
| | — |
| | 1,878 |
| | 8,579 |
| | 10,457 |
| | 2,167 |
| | 1954; 1975; 1984 | | Jan. 2014 | | 24 yrs. |
| Industrial facilities in Fort Dodge, IA and Menomonie and Oconomowoc, WI | | 7,337 |
| | 1,403 |
| | 11,098 |
| | — |
| | — |
| | 1,403 |
| | 11,098 |
| | 12,501 |
| | 4,039 |
| | 1996 | | Jan. 2014 | | 16 yrs. |
| Industrial facility in Mesa, AZ | | 3,864 |
| | 2,888 |
| | 4,282 |
| | — |
| | — |
| | 2,888 |
| | 4,282 |
| | 7,170 |
| | 929 |
| | 1991 | | Jan. 2014 | | 27 yrs. |
| Industrial facility in North Amityville, NY | | — |
| | 3,486 |
| | 11,413 |
| | — |
| | — |
| | 3,486 |
| | 11,413 |
| | 14,899 |
| | 2,596 |
| | 1981 | | Jan. 2014 | | 26 yrs. |
| Warehouse facilities in Greenville, SC | | — |
| | 567 |
| | 10,217 |
| | — |
| | (1,330 | ) | | 454 |
| | 9,000 |
| | 9,454 |
| | 2,938 |
| | 1960 | | Jan. 2014 | | 21 yrs. |
| Industrial facility in Fort Collins, CO | | — |
| | 821 |
| | 7,236 |
| | — |
| | — |
| | 821 |
| | 7,236 |
| | 8,057 |
| | 1,303 |
| | 1993 | | Jan. 2014 | | 33 yrs. |
| Warehouse facility in Elk Grove Village, IL | | — |
| | 4,037 |
| | 7,865 |
| | — |
| | — |
| | 4,037 |
| | 7,865 |
| | 11,902 |
| | 32 |
| | 1980 | | Jan. 2014 | | 22 yrs. |
| Office facility in Washington, MI | | — |
| | 4,085 |
| | 7,496 |
| | — |
| | — |
| | 4,085 |
| | 7,496 |
| | 11,581 |
| | 1,354 |
| | 1990 | | Jan. 2014 | | 33 yrs. |
| Office facility in Houston, TX | | — |
| | 522 |
| | 7,448 |
| | 227 |
| | — |
| | 522 |
| | 7,675 |
| | 8,197 |
| | 1,724 |
| | 1999 | | Jan. 2014 | | 27 yrs. |
| Industrial facilities in Conroe, Odessa, and Weimar, TX and industrial and office facility in Houston, TX | | 4,613 |
| | 4,049 |
| | 13,021 |
| | — |
| | 133 |
| | 4,049 |
| | 13,154 |
| | 17,203 |
| | 4,167 |
| | Various | | Jan. 2014 | | 12 - 22 yrs. |
| Education facility in Sacramento, CA | | 25,542 |
| | — |
| | 13,715 |
| | — |
| | — |
| | — |
| | 13,715 |
| | 13,715 |
| | 2,428 |
| | 2005 | | Jan. 2014 | | 34 yrs. |
| Industrial facilities in City of Industry, CA; Chelmsford, MA; and Lancaster, TX | | — |
| | 5,138 |
| | 8,387 |
| | — |
| | 43 |
| | 5,138 |
| | 8,430 |
| | 13,568 |
| | 1,799 |
| | 1969; 1974; 1984 | | Jan. 2014 | | 27 yrs. |
| Office facility in Tinton Falls, NJ | | — |
| | 1,958 |
| | 7,993 |
| | 725 |
| | — |
| | 1,958 |
| | 8,718 |
| | 10,676 |
| | 1,562 |
| | 2001 | | Jan. 2014 | | 31 yrs. |
| Industrial facility in Woodland, WA | | — |
| | 707 |
| | 1,562 |
| | — |
| | — |
| | 707 |
| | 1,562 |
| | 2,269 |
| | 262 |
| | 2009 | | Jan. 2014 | | 35 yrs. |
| Warehouse facilities in Gyál and Herceghalom, Hungary | | — |
| | 14,601 |
| | 21,915 |
| | — |
| | (6,379 | ) | | 12,050 |
| | 18,087 |
| | 30,137 |
| | 5,239 |
| | 2002; 2004 | | Jan. 2014 | | 21 yrs. |
| Industrial facility in Windsor, CT | | — |
| | 453 |
| | 637 |
| | 3,422 |
| | (83 | ) | | 453 |
| | 3,976 |
| | 4,429 |
| | 363 |
| | 1999 | | Jan. 2014 | | 33 yrs. |
| Industrial facility in Aurora, CO | | 2,482 |
| | 574 |
| | 3,999 |
| | — |
| | — |
| | 574 |
| | 3,999 |
| | 4,573 |
| | 603 |
| | 2012 | | Jan. 2014 | | 40 yrs. |
| Office facility in Chandler, AZ | | — |
| | 5,318 |
| | 27,551 |
| | 19 |
| | — |
| | 5,318 |
| | 27,570 |
| | 32,888 |
| | 4,608 |
| | 2000 | | Mar. 2014 | | 40 yrs. |
| Warehouse facility in University Park, IL | | — |
| | 7,962 |
| | 32,756 |
| | 221 |
| | — |
| | 7,962 |
| | 32,977 |
| | 40,939 |
| | 5,305 |
| | 2008 | | May 2014 | | 40 yrs. |
|
| |
| | W. P. Carey 20162019 10-K– 162138 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 20162019
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) | | Accumulated Depreciation (c) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | |
| | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Industrial facilities in Fort Dodge, IA and Menomonie and Oconomowoc, WI | | 8,350 |
| | 1,403 |
| | 11,098 |
| | — |
| | — |
| | 1,403 |
| | 11,098 |
| | 12,501 |
| | 1,990 |
| | 1996 | | Jan. 2014 | | 16 yrs. |
| Industrial facility in Mesa, AZ | | 4,528 |
| | 2,888 |
| | 4,282 |
| | — |
| | — |
| | 2,888 |
| | 4,282 |
| | 7,170 |
| | 458 |
| | 1991 | | Jan. 2014 | | 27 yrs. |
| Industrial facility in North Amityville, NY | | 7,446 |
| | 3,486 |
| | 11,413 |
| | — |
| | — |
| | 3,486 |
| | 11,413 |
| | 14,899 |
| | 1,280 |
| | 1981 | | Jan. 2014 | | 26 yrs. |
| Warehouse facilities in Greenville, SC | | — |
| | 567 |
| | 10,217 |
| | — |
| | 15 |
| | 567 |
| | 10,232 |
| | 10,799 |
| | 1,448 |
| | 1960 | | Jan. 2014 | | 21 yrs. |
| Industrial facility in Fort Collins, CO | | — |
| | 821 |
| | 7,236 |
| | — |
| | — |
| | 821 |
| | 7,236 |
| | 8,057 |
| | 643 |
| | 1993 | | Jan. 2014 | | 33 yrs. |
| Land in Elk Grove Village, IL | | 1,650 |
| | 4,037 |
| | — |
| | — |
| | — |
| | 4,037 |
| | — |
| | 4,037 |
| | — |
| | N/A | | Jan. 2014 | | N/A |
| Office facility in Washington, MI | | — |
| | 4,085 |
| | 7,496 |
| | — |
| | — |
| | 4,085 |
| | 7,496 |
| | 11,581 |
| | 667 |
| | 1990 | | Jan. 2014 | | 33 yrs. |
| Office facility in Houston, TX | | — |
| | 522 |
| | 7,448 |
| | 227 |
| | — |
| | 522 |
| | 7,675 |
| | 8,197 |
| | 838 |
| | 1999 | | Jan. 2014 | | 27 yrs. |
| Industrial facilities in Conroe, Odessa, and Weimar, TX and industrial and office facility in Houston, TX | | 6,165 |
| | 4,049 |
| | 13,021 |
| | — |
| | 133 |
| | 4,049 |
| | 13,154 |
| | 17,203 |
| | 2,054 |
| | Various | | Jan. 2014 | | 12 - 22 yrs. |
| Education facility in Sacramento, CA | | 26,898 |
| | — |
| | 13,715 |
| | — |
| | — |
| | — |
| | 13,715 |
| | 13,715 |
| | 1,197 |
| | 2005 | | Jan. 2014 | | 34 yrs. |
| Industrial facilities in City of Industry, CA; Chelmsford, MA; and Lancaster, TX | | — |
| | 5,138 |
| | 8,387 |
| | — |
| | 43 |
| | 5,138 |
| | 8,430 |
| | 13,568 |
| | 887 |
| | 1969; 1974; 1984 | | Jan. 2014 | | 27 yrs. |
| Office facility in Tinton Falls, NJ | | — |
| | 1,958 |
| | 7,993 |
| | 13 |
| | — |
| | 1,958 |
| | 8,006 |
| | 9,964 |
| | 763 |
| | 2001 | | Jan. 2014 | | 31 yrs. |
| Industrial facility in Woodland, WA | | — |
| | 707 |
| | 1,562 |
| | — |
| | — |
| | 707 |
| | 1,562 |
| | 2,269 |
| | 129 |
| | 2009 | | Jan. 2014 | | 35 yrs. |
| Warehouse facilities in Gyál and Herceghalom, Hungary | | 31,993 |
| | 14,601 |
| | 21,915 |
| | — |
| | (8,239 | ) | | 11,306 |
| | 16,971 |
| | 28,277 |
| | 2,423 |
| | 2002; 2004 | | Jan. 2014 | | 21 yrs. |
| Industrial facility in Windsor, CT | | — |
| | 453 |
| | 637 |
| | 3,422 |
| | — |
| | 453 |
| | 4,059 |
| | 4,512 |
| | 56 |
| | 1999 | | Jan. 2014 | | 33 yrs. |
| Industrial facility in Aurora, CO | | 2,743 |
| | 574 |
| | 3,999 |
| | — |
| | — |
| | 574 |
| | 3,999 |
| | 4,573 |
| | 297 |
| | 2012 | | Jan. 2014 | | 40 yrs. |
| Office facility in Chandler, AZ | | — |
| | 5,318 |
| | 27,551 |
| | — |
| | — |
| | 5,318 |
| | 27,551 |
| | 32,869 |
| | 2,203 |
| | 2000 | | Mar. 2014 | | 40 yrs. |
| Warehouse facility in University Park, IL | | — |
| | 7,962 |
| | 32,756 |
| | 221 |
| | — |
| | 7,962 |
| | 32,977 |
| | 40,939 |
| | 2,486 |
| | 2008 | | May 2014 | | 40 yrs. |
| Office facility in Stavanger, Norway | | — |
| | 10,296 |
| | 91,744 |
| | — |
| | (28,513 | ) | | 7,490 |
| | 66,037 |
| | 73,527 |
| | 4,037 |
| | 1975 | | Aug. 2014 | | 40 yrs. |
| Office facility in Westborough, MA | | — |
| | 3,409 |
| | 37,914 |
| | — |
| | — |
| | 3,409 |
| | 37,914 |
| | 41,323 |
| | 2,490 |
| | 1992 | | Aug. 2014 | | 40 yrs. |
| Office facility in Andover, MA | | — |
| | 3,980 |
| | 45,120 |
| | — |
| | — |
| | 3,980 |
| | 45,120 |
| | 49,100 |
| | 2,684 |
| | 2013 | | Oct. 2014 | | 40 yrs. |
| Office facility in Newport, United Kingdom | | — |
| | — |
| | 22,587 |
| | — |
| | (5,293 | ) | | — |
| | 17,294 |
| | 17,294 |
| | 981 |
| | 2014 | | Oct. 2014 | | 40 yrs. |
| Industrial facilities located throughout Australia | | — |
| | 30,455 |
| | 94,724 |
| | 10,007 |
| | (22,044 | ) | | 24,974 |
| | 88,168 |
| | 113,142 |
| | 11,235 |
| | Various | | Oct. 2014 | | Various |
| Industrial facility in Lewisburg, OH | | — |
| | 1,627 |
| | 13,721 |
| | — |
| | — |
| | 1,627 |
| | 13,721 |
| | 15,348 |
| | 834 |
| | 2014 | | Nov. 2014 | | 40 yrs. |
| Industrial facility in Opole, Poland | | — |
| | 2,151 |
| | 21,438 |
| | — |
| | (3,591 | ) | | 1,824 |
| | 18,174 |
| | 19,998 |
| | 1,094 |
| | 2014 | | Dec. 2014 | | 38 yrs. |
| Office facilities located throughout Spain | | — |
| | 51,778 |
| | 257,624 |
| | 10 |
| | (42,401 | ) | | 47,382 |
| | 219,629 |
| | 267,011 |
| | 11,612 |
| | Various | | Dec. 2014 | | Various |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | |
| | | | | �� | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Office facility in Stavanger, Norway | | — |
| | 10,296 |
| | 91,744 |
| | — |
| | (29,855 | ) | | 7,354 |
| | 64,831 |
| | 72,185 |
| | 8,876 |
| | 1975 | | Aug. 2014 | | 40 yrs. |
| Office facility in Westborough, MA | | — |
| | 3,409 |
| | 37,914 |
| | — |
| | — |
| | 3,409 |
| | 37,914 |
| | 41,323 |
| | 5,706 |
| | 1992 | | Aug. 2014 | | 40 yrs. |
| Office facility in Andover, MA | | — |
| | 3,980 |
| | 45,120 |
| | 289 |
| | — |
| | 3,980 |
| | 45,409 |
| | 49,389 |
| | 6,289 |
| | 2013 | | Oct. 2014 | | 40 yrs. |
| Office facility in Newport, United Kingdom | | — |
| | — |
| | 22,587 |
| | — |
| | (4,040 | ) | | — |
| | 18,547 |
| | 18,547 |
| | 2,454 |
| | 2014 | | Oct. 2014 | | 40 yrs. |
| Industrial facility in Lewisburg, OH | | — |
| | 1,627 |
| | 13,721 |
| | — |
| | — |
| | 1,627 |
| | 13,721 |
| | 15,348 |
| | 1,987 |
| | 2014 | | Nov. 2014 | | 40 yrs. |
| Industrial facility in Opole, Poland | | — |
| | 2,151 |
| | 21,438 |
| | — |
| | (2,276 | ) | | 1,944 |
| | 19,369 |
| | 21,313 |
| | 2,866 |
| | 2014 | | Dec. 2014 | | 38 yrs. |
| Office facilities located throughout Spain | | — |
| | 51,778 |
| | 257,624 |
| | 10 |
| | (24,847 | ) | | 50,497 |
| | 234,068 |
| | 284,565 |
| | 30,609 |
| | Various | | Dec. 2014 | | Various |
| Retail facilities located throughout the United Kingdom | | — |
| | 66,319 |
| | 230,113 |
| | 277 |
| | (48,957 | ) | | 55,222 |
| | 192,530 |
| | 247,752 |
| | 31,546 |
| | Various | | Jan. 2015 | | 20 - 40 yrs. |
| Warehouse facility in Rotterdam, Netherlands | | — |
| | — |
| | 33,935 |
| | 20,442 |
| | (211 | ) | | — |
| | 54,166 |
| | 54,166 |
| | 4,717 |
| | 2014 | | Feb. 2015 | | 40 yrs. |
| Retail facility in Bad Fischau, Austria | | — |
| | 2,855 |
| | 18,829 |
| | — |
| | 923 |
| | 2,977 |
| | 19,630 |
| | 22,607 |
| | 2,908 |
| | 1998 | | Apr. 2015 | | 40 yrs. |
| Industrial facility in Oskarshamn, Sweden | | — |
| | 3,090 |
| | 18,262 |
| | — |
| | (2,382 | ) | | 2,745 |
| | 16,225 |
| | 18,970 |
| | 2,025 |
| | 2015 | | Jun. 2015 | | 40 yrs. |
| Office facility in Sunderland, United Kingdom | | — |
| | 2,912 |
| | 30,140 |
| | — |
| | (5,047 | ) | | 2,467 |
| | 25,538 |
| | 28,005 |
| | 3,263 |
| | 2007 | | Aug. 2015 | | 40 yrs. |
| Industrial facilities in Gersthofen and Senden, Germany and Leopoldsdorf, Austria | | — |
| | 9,449 |
| | 15,838 |
| | — |
| | 231 |
| | 9,535 |
| | 15,983 |
| | 25,518 |
| | 2,387 |
| | 2008; 2010 | | Aug. 2015 | | 40 yrs. |
| Net-lease hotels in Clive, IA; Baton Rouge, LA; St. Louis, MO; Greensboro, NC; Mount Laurel, NJ; and Fort Worth, TX | | — |
| | — |
| | 49,190 |
| | — |
| | — |
| | — |
| | 49,190 |
| | 49,190 |
| | 6,111 |
| | 1988; 1989; 1990 | | Oct. 2015 | | 38 - 40 yrs. |
| Retail facilities in Almere, Amsterdam, Eindhoven, Houten, Nieuwegein, Utrecht, Veghel, and Zwaag, Netherlands | | — |
| | 5,698 |
| | 38,130 |
| | 79 |
| | 2,015 |
| | 5,959 |
| | 39,963 |
| | 45,922 |
| | 5,128 |
| | Various | | Nov. 2015 | | 30 - 40 yrs. |
| Office facility in Irvine, CA | | — |
| | 7,626 |
| | 16,137 |
| | — |
| | — |
| | 7,626 |
| | 16,137 |
| | 23,763 |
| | 1,705 |
| | 1977 | | Dec. 2015 | | 40 yrs. |
| Education facility in Windermere, FL | | — |
| | 5,090 |
| | 34,721 |
| | 15,333 |
| | — |
| | 5,090 |
| | 50,054 |
| | 55,144 |
| | 6,695 |
| | 1998 | | Apr. 2016 | | 38 yrs. |
| Industrial facilities located throughout the United States | | — |
| | 66,845 |
| | 87,575 |
| | 65,400 |
| | (56,517 | ) | | 49,680 |
| | 113,623 |
| | 163,303 |
| | 16,284 |
| | Various | | Apr. 2016 | | Various |
| Industrial facilities in North Dumfries and Ottawa, Canada | | — |
| | 17,155 |
| | 10,665 |
| | — |
| | (18,207 | ) | | 5,963 |
| | 3,650 |
| | 9,613 |
| | 1,240 |
| | 1967; 1974 | | Apr. 2016 | | 28 yrs. |
| Education facilities in Coconut Creek, FL and Houston, TX | | — |
| | 15,550 |
| | 83,862 |
| | 63,830 |
| | — |
| | 15,550 |
| | 147,692 |
| | 163,242 |
| | 13,234 |
| | 1979; 1984 | | May 2016 | | 37 - 40 yrs. |
| Office facility in Southfield, MI and warehouse facilities in London, KY and Gallatin, TN | | — |
| | 3,585 |
| | 17,254 |
| | — |
| | — |
| | 3,585 |
| | 17,254 |
| | 20,839 |
| | 1,539 |
| | 1969; 1987; 2000 | | Nov. 2016 | | 35 - 36 yrs. |
| Industrial facilities in Brampton, Toronto, and Vaughan, Canada | | — |
| | 28,759 |
| | 13,998 |
| | — |
| | — |
| | 28,759 |
| | 13,998 |
| | 42,757 |
| | 1,488 |
| | Various | | Nov. 2016 | | 28 - 35 yrs. |
| Industrial facilities in Queretaro and San Juan del Rio, Mexico | | — |
| | 5,152 |
| | 12,614 |
| | — |
| | — |
| | 5,152 |
| | 12,614 |
| | 17,766 |
| | 1,083 |
| | Various | | Dec. 2016 | | 28 - 40 yrs. |
|
| |
| | W. P. Carey 20162019 10-K– 163139 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 20162019
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) | | Accumulated Depreciation (c) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | |
| | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Retail facilities located throughout the United Kingdom | | — |
| | 66,319 |
| | 230,113 |
| | — |
| | (55,893 | ) | | 53,814 |
| | 186,725 |
| | 240,539 |
| | 11,936 |
| | Various | | Jan. 2015 | | 20 - 40 yrs. |
| Warehouse facility in Rotterdam, Netherlands | | — |
| | — |
| | 33,935 |
| | — |
| | (2,417 | ) | | — |
| | 31,518 |
| | 31,518 |
| | 1,594 |
| | 2014 | | Feb. 2015 | | 40 yrs. |
| Retail facility in Bad Fischau, Austria | | — |
| | 2,855 |
| | 18,829 |
| | — |
| | (472 | ) | | 2,793 |
| | 18,419 |
| | 21,212 |
| | 1,039 |
| | 1998 | | Apr. 2015 | | 40 yrs. |
| Industrial facility in Oskarshamn, Sweden | | — |
| | 3,090 |
| | 18,262 |
| | — |
| | (1,886 | ) | | 2,817 |
| | 16,649 |
| | 19,466 |
| | 706 |
| | 2015 | | Jun. 2015 | | 40 yrs. |
| Office facility in Sunderland, United Kingdom | | — |
| | 2,912 |
| | 30,140 |
| | — |
| | (6,940 | ) | | 2,300 |
| | 23,812 |
| | 26,112 |
| | 971 |
| | 2007 | | Aug. 2015 | | 40 yrs. |
| Industrial facilities in Gersthofen and Senden, Germany and Leopoldsdorf, Austria | | — |
| | 9,449 |
| | 15,838 |
| | — |
| | (1,343 | ) | | 8,947 |
| | 14,997 |
| | 23,944 |
| | 724 |
| | 2008; 2010 | | Aug. 2015 | | 40 yrs. |
| Hotels in Clive, IA; Baton Rouge, LA; St. Louis, MO; Greensboro, NC; Mount Laurel, NJ; and Fort Worth, TX | | — |
| | — |
| | 49,190 |
| | — |
| | — |
| | — |
| | 49,190 |
| | 49,190 |
| | 1,760 |
| | 1988; 1989; 1990 | | Oct. 2015 | | 38 - 40 yrs. |
| Retail facilities in Almere, Amsterdam, Eindhoven, Houten, Nieuwegein, Utrecht, Veghel, and Zwaag, Netherlands | | — |
| | 5,698 |
| | 38,130 |
| | 79 |
| | (817 | ) | | 5,592 |
| | 37,498 |
| | 43,090 |
| | 1,325 |
| | Various | | Nov. 2015 | | 30 - 40 yrs. |
| Office facility in Irvine, CA | | — |
| | 7,626 |
| | 16,137 |
| | — |
| | — |
| | 7,626 |
| | 16,137 |
| | 23,763 |
| | 435 |
| | 1977 | | Dec. 2015 | | 40 yrs. |
| Education facility in Windermere, FL | | — |
| | 5,090 |
| | 34,721 |
| | — |
| | — |
| | 5,090 |
| | 34,721 |
| | 39,811 |
| | 1,234 |
| | 1998 | | Apr. 2016 | | 38 yrs. |
| Industrial facilities located throughout the United States | | — |
| | 66,845 |
| | 87,575 |
| | — |
| | — |
| | 66,845 |
| | 87,575 |
| | 154,420 |
| | 4,891 |
| | Various | | Apr. 2016 | | Various |
| Industrial facilities in North Dumfries, Ottawa, Saint-Eustache, Uxbridge, and Whitchurch-Stouffville, Canada | | — |
| | 17,155 |
| | 10,665 |
| | — |
| | (3,686 | ) | | 14,292 |
| | 9,842 |
| | 24,134 |
| | 703 |
| | Various | | Apr. 2016 | | Various |
| Education facilities in Coconut Creek, FL and Houston, TX | | — |
| | 15,550 |
| | 83,862 |
| | — |
| | — |
| | 15,550 |
| | 83,862 |
| | 99,412 |
| | 1,688 |
| | 1979; 1984 | | May 2016 | | 37 - 40 yrs. |
| Office facility in Southfield, MI and warehouse facilities in London, KY and Gallatin, TN | | — |
| | 3,585 |
| | 17,254 |
| | — |
| | — |
| | 3,585 |
| | 17,254 |
| | 20,839 |
| | 72 |
| | 1969; 1987; 2000 | | Nov. 2016 | | 35 - 36 yrs. |
| Industrial facilities in Brampton, Toronto, and Vaughan, Canada | | — |
| | 28,759 |
| | 13,998 |
| | — |
| | — |
| | 28,759 |
| | 13,998 |
| | 42,757 |
| | 70 |
| | Various | | Nov. 2016 | | 28 - 35 yrs. |
| Industrial facilities in Queretaro and San Juan del Rio, Mexico | | — |
| | 5,152 |
| | 12,614 |
| | — |
| | 13 |
| | 5,156 |
| | 12,623 |
| | 17,779 |
| | 30 |
| | Various | | Dec. 2016 | | 28 - 40 yrs. |
| | | $ | 1,586,581 |
| | $ | 1,252,460 |
| | $ | 4,215,721 |
| | $ | 190,568 |
| | $ | (476,482 | ) | | $ | 1,128,933 |
| | $ | 4,053,334 |
| | $ | 5,182,267 |
| | $ | 472,294 |
| | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | |
| | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Industrial facility in Chicago, IL | | — |
| | 2,222 |
| | 2,655 |
| | 3,511 |
| | — |
| | 2,222 |
| | 6,166 |
| | 8,388 |
| | 680 |
| | 1985 | | Jun. 2017 | | 30 yrs. |
| Industrial facility in Zawiercie, Poland | | — |
| | 395 |
| | 102 |
| | 10,378 |
| | (401 | ) | | 380 |
| | 10,094 |
| | 10,474 |
| | 427 |
| | 2018 | | Aug. 2017 | | 40 yrs. |
| Office facility in Roseville, MN | | — |
| | 2,560 |
| | 16,025 |
| | — |
| | — |
| | 2,560 |
| | 16,025 |
| | 18,585 |
| | 955 |
| | 2001 | | Nov. 2017 | | 40 yrs. |
| Industrial facility in Radomsko, Poland | | — |
| | 1,718 |
| | 59 |
| | 14,453 |
| | (629 | ) | | 1,657 |
| | 13,944 |
| | 15,601 |
| | 465 |
| | 2018 | | Nov. 2017 | | 40 yrs. |
| Warehouse facility in Sellersburg, IN | | — |
| | 1,016 |
| | 3,838 |
| | — |
| | — |
| | 1,016 |
| | 3,838 |
| | 4,854 |
| | 246 |
| | 2000 | | Feb. 2018 | | 36 yrs. |
| Retail and warehouse facilities in Appleton, Madison, and Waukesha, WI | | — |
| | 5,512 |
| | 61,230 |
| | — |
| | — |
| | 5,465 |
| | 61,277 |
| | 66,742 |
| | 3,392 |
| | 1995; 2004 | | Mar. 2018 | | 36 - 40 yrs. |
| Office and warehouse facilities located throughout Denmark | | — |
| | 20,304 |
| | 185,481 |
| | — |
| | (6,754 | ) | | 19,638 |
| | 179,393 |
| | 199,031 |
| | 8,534 |
| | Various | | Jun. 2018 | | 25 - 41 yrs. |
| Retail facilities located throughout the Netherlands | | — |
| | 38,475 |
| | 117,127 |
| | — |
| | (5,465 | ) | | 37,124 |
| | 113,013 |
| | 150,137 |
| | 5,890 |
| | Various | | Jul. 2018 | | 26 - 30 yrs. |
| Industrial facility in Oostburg, WI | | — |
| | 786 |
| | 6,589 |
| | — |
| | — |
| | 786 |
| | 6,589 |
| | 7,375 |
| | 432 |
| | 2002 | | Jul. 2018 | | 35 yrs. |
| Warehouse facility in Kampen, Netherlands | | — |
| | 3,251 |
| | 12,858 |
| | 126 |
| | (492 | ) | | 3,152 |
| | 12,591 |
| | 15,743 |
| | 734 |
| | 1976 | | Jul. 2018 | | 26 yrs. |
| Warehouse facility in Azambuja, Portugal | | — |
| | 13,527 |
| | 35,631 |
| | — |
| | (1,452 | ) | | 13,127 |
| | 34,579 |
| | 47,706 |
| | 1,688 |
| | 1994 | | Sep. 2018 | | 28 yrs. |
| Retail facilities in Amsterdam, Moordrecht, and Rotterdam, Netherlands | | — |
| | 2,582 |
| | 18,731 |
| | 3,219 |
| | (317 | ) | | 2,549 |
| | 21,666 |
| | 24,215 |
| | 912 |
| | Various | | Oct. 2018 | | 27 - 37 yrs. |
| Office and warehouse facilities in Bad Wünnenberg and Soest, Germany | | — |
| | 2,916 |
| | 39,687 |
| | — |
| | (595 | ) | | 2,875 |
| | 39,133 |
| | 42,008 |
| | 1,225 |
| | 1982; 1986 | | Oct. 2018 | | 40 yrs. |
| Industrial facility in Norfolk, NE | | 1,172 |
| | 802 |
| | 3,686 |
| | — |
| | — |
| | 802 |
| | 3,686 |
| | 4,488 |
| | 146 |
| | 1975 | | Oct. 2018 | | 40 yrs. |
| Education facility in Chicago, IL | | 11,180 |
| | 7,720 |
| | 17,266 |
| | — |
| | — |
| | 7,720 |
| | 17,266 |
| | 24,986 |
| | 538 |
| | 1912 | | Oct. 2018 | | 40 yrs. |
| Fitness facilities in Phoenix, AZ and Columbia, MD | | — |
| | 18,286 |
| | 33,030 |
| | — |
| | — |
| | 18,286 |
| | 33,030 |
| | 51,316 |
| | 1,024 |
| | 2006 | | Oct. 2018 | | 40 yrs. |
| Retail facility in Gorzow, Poland | | — |
| | 1,736 |
| | 8,298 |
| | — |
| | (140 | ) | | 1,712 |
| | 8,182 |
| | 9,894 |
| | 275 |
| | 2008 | | Oct. 2018 | | 40 yrs. |
| Industrial facilities in Sergeant Bluff, IA; Bossier City, LA; and Alvarado, TX | | 9,996 |
| | 6,460 |
| | 49,462 |
| | — |
| | — |
| | 6,460 |
| | 49,462 |
| | 55,922 |
| | 1,660 |
| | Various | | Oct. 2018 | | 40 yrs. |
| Industrial facilities in Mayodan, Sanford, and Stoneville, NC | | — |
| | 3,505 |
| | 20,913 |
| | — |
| | — |
| | 3,505 |
| | 20,913 |
| | 24,418 |
| | — |
| | 1992; 1997; 1998 | | Oct. 2018 | | 29 yrs. |
| Warehouse facility in Dillon, SC | | 15,522 |
| | 3,424 |
| | 43,114 |
| | — |
| | — |
| | 3,424 |
| | 43,114 |
| | 46,538 |
| | 1,447 |
| | 2001 | | Oct. 2018 | | 40 yrs. |
| Office facility in Birmingham, United Kingdom | | 16,915 |
| | 7,383 |
| | 7,687 |
| | — |
| | 330 |
| | 7,545 |
| | 7,855 |
| | 15,400 |
| | 241 |
| | 2009 | | Oct. 2018 | | 40 yrs. |
| Retail facilities located throughout Spain | | — |
| | 17,626 |
| | 44,501 |
| | — |
| | (867 | ) | | 17,380 |
| | 43,880 |
| | 61,260 |
| | 1,387 |
| | Various | | Oct. 2018 | | 40 yrs. |
| Warehouse facility in Gadki, Poland | | — |
| | 1,376 |
| | 6,137 |
| | — |
| | (105 | ) | | 1,357 |
| | 6,051 |
| | 7,408 |
| | 193 |
| | 2011 | | Oct. 2018 | | 40 yrs. |
| Office facility in The Woodlands, TX | | 22,895 |
| | 1,697 |
| | 52,289 |
| | — |
| | — |
| | 1,697 |
| | 52,289 |
| | 53,986 |
| | 1,564 |
| | 2009 | | Oct. 2018 | | 40 yrs. |
| Office facility in Hoffman Estates, IL | | — |
| | 5,550 |
| | 14,214 |
| | — |
| | — |
| | 5,550 |
| | 14,214 |
| | 19,764 |
| | 441 |
| | 2009 | | Oct. 2018 | | 40 yrs. |
| Warehouse facility in Zagreb, Croatia | | — |
| | 15,789 |
| | 33,287 |
| | — |
| | (685 | ) | | 15,568 |
| | 32,823 |
| | 48,391 |
| | 1,523 |
| | 2001 | | Oct. 2018 | | 26 yrs. |
|
| |
| | W. P. Carey 20162019 10-K– 164140 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 20162019
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period Total | | Date of Construction | | Date Acquired |
| Description | | Encumbrances | | Land | | Buildings | | | | | |
| Direct Financing Method | | | | | | | | | | | | | | | | |
| Retail facilities in Jacksonville and Panama City, Florida; Baton Rouge and Hammond, Louisiana; St. Peters, Missouri; and Kannapolis, Morgantown, and Shelby, North Carolina | | $ | — |
| | $ | — |
| | $ | 16,416 |
| | $ | — |
| | $ | (13,903 | ) | | $ | 2,513 |
| | 1984; 1985; 1986 | | Jan. 1998 |
| Industrial facilities in Glendora, CA and Romulus, MI | | — |
| | 454 |
| | 13,251 |
| | 9 |
| | (3,907 | ) | | 9,807 |
| | 1950; 1970 | | Jan. 1998 |
| Industrial facilities in Irving and Houston, TX | | — |
| | — |
| | 27,599 |
| | — |
| | (3,976 | ) | | 23,623 |
| | 1978 | | Jan. 1998 |
| Retail facility in Freehold, NJ | | 7,897 |
| | — |
| | 17,067 |
| | — |
| | (146 | ) | | 16,921 |
| | 2004 | | Sep. 2012 |
| Office facilities in Corpus Christi, Odessa, San Marcos, and Waco, TX | | 3,838 |
| | 2,089 |
| | 14,211 |
| | — |
| | (455 | ) | | 15,845 |
| | 1969; 1996; 2000 | | Sep. 2012 |
| Retail facilities in Arnstadt, Borken, Bünde, Dorsten, Duisburg, Freiberg, Gütersloh, Leimbach-Kaiserro, Monheim, Oberhausen, Osnabrück, Rodewisch, Sankt Augustin, Schmalkalden, Stendal, and Wuppertal Germany | | — |
| | 28,734 |
| | 145,854 |
| | — |
| | (31,861 | ) | | 142,727 |
| | Various | | Sep. 2012 |
| Warehouse facility in Brierley Hill, United Kingdom | | — |
| | 2,147 |
| | 12,357 |
| | — |
| | (2,791 | ) | | 11,713 |
| | 1996 | | Sep. 2012 |
| Industrial and warehouse facility in Mesquite, TX | | 6,148 |
| | 2,851 |
| | 15,899 |
| | — |
| | (1,468 | ) | | 17,282 |
| | 1972 | | Sep. 2012 |
| Industrial facility in Rochester, MN | | 3,645 |
| | 881 |
| | 17,039 |
| | — |
| | (1,666 | ) | | 16,254 |
| | 1997 | | Sep. 2012 |
| Office facility in Irvine, CA | | 6,287 |
| | — |
| | 17,027 |
| | — |
| | (823 | ) | | 16,204 |
| | 1981 | | Sep. 2012 |
| Industrial facility in Brownwood, TX | | — |
| | 722 |
| | 6,268 |
| | — |
| | (1 | ) | | 6,989 |
| | 1964 | | Sep. 2012 |
| Office facility in Scottsdale, AZ | | 19,926 |
| | — |
| | 43,570 |
| | — |
| | (494 | ) | | 43,076 |
| | 1977 | | Jan. 2014 |
| Retail facilities in El Paso and Fabens, TX | | — |
| | 4,777 |
| | 17,823 |
| | — |
| | (17 | ) | | 22,583 |
| | Various | | Jan. 2014 |
| Industrial facility in Dallas, TX | | — |
| | 3,190 |
| | 10,010 |
| | — |
| | 62 |
| | 13,262 |
| | 1968 | | Jan. 2014 |
| Industrial facility in Eagan, MN | | 6,938 |
| | — |
| | 11,548 |
| | — |
| | (141 | ) | | 11,407 |
| | 1975 | | Jan. 2014 |
| Industrial facilities in Albemarle and Old Fort, NC; Holmesville, OH; and Springfield, TN | | 8,677 |
| | 6,542 |
| | 20,668 |
| | — |
| | (1,360 | ) | | 25,850 |
| | Various | | Jan. 2014 |
| Movie theater in Midlothian, VA | | — |
| | — |
| | 16,546 |
| | — |
| | 166 |
| | 16,712 |
| | 2000 | | Jan. 2014 |
| Industrial facilities located throughout France | | — |
| | — |
| | 27,270 |
| | — |
| | (5,470 | ) | | 21,800 |
| | Various | | Jan. 2014 |
| Retail facility in Gronau, Germany | | 5,503 |
| | 281 |
| | 4,401 |
| | — |
| | (1,056 | ) | | 3,626 |
| | 1989 | | Jan. 2014 |
| Industrial and office facility in Marktheidenfeld, Germany | | — |
| | 1,629 |
| | 22,396 |
| | — |
| | (6,194 | ) | | 17,831 |
| | 2002 | | Jan. 2014 |
| Industrial and warehouse facility in Newbridge, United Kingdom | | 9,748 |
| | 6,851 |
| | 22,868 |
| | — |
| | (8,140 | ) | | 21,579 |
| | 1998 | | Jan. 2014 |
| Education facility in Mooresville, NC | | 3,359 |
| | 1,795 |
| | 15,955 |
| | — |
| | 2 |
| | 17,752 |
| | 2002 | | Jan. 2014 |
| Industrial facility in Mount Carmel, IL | | — |
| | 135 |
| | 3,265 |
| | — |
| | (34 | ) | | 3,366 |
| | 1896 | | Jan. 2014 |
| Retail facility in Vantaa, Finland | | — |
| | 5,291 |
| | 15,522 |
| | — |
| | (4,695 | ) | | 16,118 |
| | 2004 | | Jan. 2014 |
| Retail facility in Linköping, Sweden | | — |
| | 1,484 |
| | 9,402 |
| | — |
| | (3,083 | ) | | 7,803 |
| | 2004 | | Jan. 2014 |
| Industrial facility in Calgary, Canada | | — |
| | — |
| | 7,076 |
| | — |
| | (1,195 | ) | | 5,881 |
| | 1965 | | Jan. 2014 |
| Industrial facilities in Kearney, MO; Fair Bluff, NC; York, NE; Walbridge, OH; Middlesex Township, PA; Rocky Mount, VA; and Martinsburg, WV | | 9,880 |
| | 5,780 |
| | 40,860 |
| | — |
| | (160 | ) | | 46,480 |
| | Various | | Jan. 2014 |
| Industrial and office facility in Leeds, United Kingdom | | — |
| | 2,712 |
| | 16,501 |
| | — |
| | (17,569 | ) | | 1,644 |
| | 1980 | | Jan. 2014 |
| Movie theater in Pensacola, FL | | — |
| | — |
| | 13,034 |
| | — |
| | (492 | ) | | 12,542 |
| | 2001 | | Jan. 2014 |
| Industrial facility in Monheim, Germany | | — |
| | 2,939 |
| | 7,379 |
| | — |
| | (2,452 | ) | | 7,866 |
| | 1992 | | Jan. 2014 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | |
| | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Industrial facilities in Middleburg Heights and Union Township, OH | | 5,126 |
| | 1,295 |
| | 13,384 |
| | — |
| | — |
| | 1,295 |
| | 13,384 |
| | 14,679 |
| | 411 |
| | 1990; 1997 | | Oct. 2018 | | 40 yrs. |
| Retail facility in Las Vegas, NV | | 39,504 |
| | — |
| | 79,720 |
| | — |
| | — |
| | — |
| | 79,720 |
| | 79,720 |
| | 2,331 |
| | 2012 | | Oct. 2018 | | 40 yrs. |
| Industrial facilities located in Phoenix, AZ; Colton, Fresno, Los Angeles, Orange, Pomona, and San Diego, CA; Safety Harbor, FL; Durham, NC; and Columbia, SC | | 10,306 |
| | 20,517 |
| | 14,135 |
| | — |
| | — |
| | 20,517 |
| | 14,135 |
| | 34,652 |
| | 458 |
| | Various | | Oct. 2018 | | 40 yrs. |
| Warehouse facility in Bowling Green, KY | | — |
| | 2,652 |
| | 51,915 |
| | — |
| | — |
| | 2,652 |
| | 51,915 |
| | 54,567 |
| | 1,787 |
| | 2011 | | Oct. 2018 | | 40 yrs. |
| Warehouse facilities in Cannock, Liverpool, Luton, Plymouth, Southampton, and Taunton United Kingdom | | — |
| | 6,791 |
| | 2,315 |
| | — |
| | 199 |
| | 6,940 |
| | 2,365 |
| | 9,305 |
| | 81 |
| | Various | | Oct. 2018 | | 40 yrs. |
| Industrial facility in Evansville, IN | | 14,085 |
| | 180 |
| | 22,095 |
| | — |
| | — |
| | 180 |
| | 22,095 |
| | 22,275 |
| | 662 |
| | 2009 | | Oct. 2018 | | 40 yrs. |
| Office facilities in Tampa, FL | | 31,792 |
| | 3,889 |
| | 49,843 |
| | 257 |
| | — |
| | 3,889 |
| | 50,100 |
| | 53,989 |
| | 1,525 |
| | 1985; 2000 | | Oct. 2018 | | 40 yrs. |
| Warehouse facility in Elorrio, Spain | | — |
| | 7,858 |
| | 12,728 |
| | — |
| | (286 | ) | | 7,749 |
| | 12,551 |
| | 20,300 |
| | 443 |
| | 1996 | | Oct. 2018 | | 40 yrs. |
| Industrial and office facilities in Elberton, GA | | — |
| | 879 |
| | 2,014 |
| | — |
| | — |
| | 879 |
| | 2,014 |
| | 2,893 |
| | 85 |
| | 1997; 2002 | | Oct. 2018 | | 40 yrs. |
| Office facility in Tres Cantos, Spain | | 55,156 |
| | 24,344 |
| | 39,646 |
| | — |
| | (893 | ) | | 24,004 |
| | 39,093 |
| | 63,097 |
| | 1,242 |
| | 2002 | | Oct. 2018 | | 40 yrs. |
| Office facility in Hartland, WI | | 2,850 |
| | 1,454 |
| | 6,406 |
| | — |
| | — |
| | 1,454 |
| | 6,406 |
| | 7,860 |
| | 211 |
| | 2001 | | Oct. 2018 | | 40 yrs. |
| Retail facilities in Dugo Selo, Kutina, Samobor, Spansko, and Zagreb, Croatia | �� | — |
| | 5,549 |
| | 12,408 |
| | 1,308 |
| | 6,367 |
| | 6,712 |
| | 18,920 |
| | 25,632 |
| | 683 |
| | 2000; 2002; 2003 | | Oct. 2018 | | 26 yrs. |
| Office and warehouse facilities located throughout the United States | | 99,793 |
| | 42,793 |
| | 193,666 |
| | — |
| | — |
| | 42,793 |
| | 193,666 |
| | 236,459 |
| | 6,278 |
| | Various | | Oct. 2018 | | 40 yrs. |
| Warehouse facilities in Rincon and Unadilla, GA | | — |
| | 1,954 |
| | 48,421 |
| | — |
| | — |
| | 1,954 |
| | 48,421 |
| | 50,375 |
| | 1,536 |
| | 2000; 2006 | | Oct. 2018 | | 40 yrs. |
| Warehouse facilities in Breda, Elst, Gieten, Raalte, and Woerden, Netherlands | | — |
| | 37,755 |
| | 91,666 |
| | — |
| | (1,807 | ) | | 37,228 |
| | 90,386 |
| | 127,614 |
| | 2,780 |
| | Various | | Oct. 2018 | | 40 yrs. |
| Warehouse facilities in Oxnard and Watsonville, CA | | — |
| | 22,453 |
| | 78,814 |
| | — |
| | — |
| | 22,453 |
| | 78,814 |
| | 101,267 |
| | 2,435 |
| | 1975; 1994; 2002 | | Oct. 2018 | | 40 yrs. |
| Retail facilities located throughout Italy | | — |
| | 75,492 |
| | 138,280 |
| | — |
| | (2,984 | ) | | 74,438 |
| | 136,350 |
| | 210,788 |
| | 4,536 |
| | Various | | Oct. 2018 | | 40 yrs. |
| Land in Hudson, NY | | — |
| | 2,405 |
| | — |
| | — |
| | — |
| | 2,405 |
| | — |
| | 2,405 |
| | — |
| | N/A | | Oct. 2018 | | N/A |
| Office facility in Houston, TX | | — |
| | 2,136 |
| | 2,344 |
| | — |
| | — |
| | 2,136 |
| | 2,344 |
| | 4,480 |
| | 84 |
| | 1982 | | Oct. 2018 | | 40 yrs. |
| Office facility in Martinsville, VA | | — |
| | 1,082 |
| | 8,108 |
| | — |
| | — |
| | 1,082 |
| | 8,108 |
| | 9,190 |
| | 266 |
| | 2011 | | Oct. 2018 | | 40 yrs. |
| Land in Chicago, IL | | — |
| | 9,887 |
| | — |
| | — |
| | — |
| | 9,887 |
| | — |
| | 9,887 |
| | — |
| | N/A | | Oct. 2018 | | N/A |
| Industrial facility in Fraser, MI | | — |
| | 1,346 |
| | 9,551 |
| | — |
| | — |
| | 1,346 |
| | 9,551 |
| | 10,897 |
| | 304 |
| | 2012 | | Oct. 2018 | | 40 yrs. |
| Net-lease self-storage facilities located throughout the United States | | — |
| | 19,583 |
| | 108,971 |
| | — |
| | — |
| | 19,583 |
| | 108,971 |
| | 128,554 |
| | 3,597 |
| | Various | | Oct. 2018 | | 40 yrs. |
|
| |
| | W. P. Carey 20162019 10-K– 165141 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 20162019
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period Total | | Date of Construction | | Date Acquired |
| Description | | Encumbrances | | Land | | Buildings | | | | | |
| Industrial facility in Göppingen, Germany | | — |
| | 10,717 |
| | 60,120 |
| | — |
| | (16,978 | ) | | 53,859 |
| | 1930 | | Jan. 2014 |
| Warehouse facility in Elk Grove Village, IL | | 3,216 |
| | — |
| | 7,863 |
| | — |
| | 1 |
| | 7,864 |
| | 1980 | | Jan. 2014 |
| Industrial facility in Sankt Ingbert, Germany | | — |
| | 2,786 |
| | 26,902 |
| | — |
| | (7,082 | ) | | 22,606 |
| | 1960 | | Jan. 2014 |
| Industrial facility in McKees Hill, Australia | | — |
| | 283 |
| | 2,978 |
| | — |
| | (587 | ) | | 2,674 |
| | 1980 | | Oct. 2014 |
| | | $ | 95,062 |
| | $ | 95,070 |
| | $ | 726,945 |
| | $ | 9 |
| | $ | (137,965 | ) | | $ | 684,059 |
| | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | |
| | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Warehouse facility in Middleburg Heights, OH | | — |
| | 542 |
| | 2,507 |
| | — |
| | — |
| | 542 |
| | 2,507 |
| | 3,049 |
| | 77 |
| | 2002 | | Oct. 2018 | | 40 yrs. |
| Net-lease self-storage facility in Fort Worth, TX | | — |
| | 691 |
| | 6,295 |
| | — |
| | — |
| | 691 |
| | 6,295 |
| | 6,986 |
| | 213 |
| | 2004 | | Oct. 2018 | | 40 yrs. |
| Retail facilities in Delnice, Pozega, and Sesvete, Croatia | | — |
| | 5,519 |
| | 9,930 |
| | 1,068 |
| | (200 | ) | | 5,442 |
| | 10,875 |
| | 16,317 |
| | 472 |
| | 2011 | | Oct. 2018 | | 27 yrs. |
| Office facilities in Aurora, Eagan, and Virginia, MN | | — |
| | 16,302 |
| | 91,239 |
| | — |
| | — |
| | 16,302 |
| | 91,239 |
| | 107,541 |
| | 2,964 |
| | Various | | Oct. 2018 | | 40 yrs. |
| Retail facility in Orlando, FL | | — |
| | 6,262 |
| | 25,134 |
| | 430 |
| | — |
| | 6,371 |
| | 25,455 |
| | 31,826 |
| | 754 |
| | 2011 | | Oct. 2018 | | 40 yrs. |
| Industrial facility in Avon, OH | | 3,057 |
| | 1,447 |
| | 5,564 |
| | — |
| | — |
| | 1,447 |
| | 5,564 |
| | 7,011 |
| | 185 |
| | 2001 | | Oct. 2018 | | 40 yrs. |
| Industrial facility in Chimelow, Poland | | — |
| | 6,158 |
| | 28,032 |
| | — |
| | (477 | ) | | 6,072 |
| | 27,641 |
| | 33,713 |
| | 885 |
| | 2012 | | Oct. 2018 | | 40 yrs. |
| Net-lease self-storage facility in Fayetteville, NC | | — |
| | 1,839 |
| | 4,654 |
| | — |
| | — |
| | 1,839 |
| | 4,654 |
| | 6,493 |
| | 201 |
| | 2001 | | Oct. 2018 | | 40 yrs. |
| Retail facilities in Huntsville, AL; Bentonville, AR; Bossier City, LA; Lee's Summit, MO; Fayetteville, TN, and Fort Worth, TX | | — |
| | 19,529 |
| | 42,318 |
| | — |
| | — |
| | 19,529 |
| | 42,318 |
| | 61,847 |
| | 1,370 |
| | Various | | Oct. 2018 | | 40 yrs. |
| Education facilities in Montgomery, AL and Savannah, GA | | 13,520 |
| | 5,508 |
| | 12,032 |
| | — |
| | — |
| | 5,508 |
| | 12,032 |
| | 17,540 |
| | 385 |
| | 1969; 2002 | | Oct. 2018 | | 40 yrs. |
| Office facilities in St. Louis, MO | | — |
| | 1,297 |
| | 5,362 |
| | 3,316 |
| | — |
| | 1,297 |
| | 8,678 |
| | 9,975 |
| | 178 |
| | 1995 | | Oct. 2018 | | 40 yrs. |
| Office and warehouse facility in Zary, PL | | — |
| | 2,062 |
| | 10,034 |
| | — |
| | (169 | ) | | 2,034 |
| | 9,893 |
| | 11,927 |
| | 325 |
| | 2013 | | Oct. 2018 | | 40 yrs. |
| Industrial facility in Sterling, VA | | — |
| | 3,198 |
| | 23,981 |
| | — |
| | — |
| | 3,198 |
| | 23,981 |
| | 27,179 |
| | 720 |
| | 1980 | | Oct. 2018 | | 40 yrs. |
| Industrial facility in Elk Grove Village, IL | | 8,230 |
| | 5,511 |
| | 10,766 |
| | 2 |
| | — |
| | 5,511 |
| | 10,768 |
| | 16,279 |
| | 337 |
| | 1961 | | Oct. 2018 | | 40 yrs. |
| Industrial facility in Portage, WI | | 4,408 |
| | 3,450 |
| | 7,797 |
| | — |
| | — |
| | 3,450 |
| | 7,797 |
| | 11,247 |
| | 275 |
| | 1970 | | Oct. 2018 | | 40 yrs. |
| Office facility in Warrenville, IL | | 17,155 |
| | 3,662 |
| | 23,711 |
| | — |
| | — |
| | 3,662 |
| | 23,711 |
| | 27,373 |
| | 732 |
| | 2002 | | Oct. 2018 | | 40 yrs. |
| Warehouse facility in Saitama Prefecture, Japan | | — |
| | 13,507 |
| | 25,301 |
| | 15 |
| | (4,141 | ) | | 12,005 |
| | 22,677 |
| | 34,682 |
| | 767 |
| | 2007 | | Oct. 2018 | | 40 yrs. |
| Retail facility in Dallas, TX | | — |
| | 2,977 |
| | 16,168 |
| | — |
| | — |
| | 2,977 |
| | 16,168 |
| | 19,145 |
| | 485 |
| | 1913 | | Oct. 2018 | | 40 yrs. |
| Office facility in Houston, TX | | 124,592 |
| | 23,161 |
| | 104,266 |
| | 256 |
| | — |
| | 23,161 |
| | 104,522 |
| | 127,683 |
| | 3,091 |
| | 1973 | | Oct. 2018 | | 40 yrs. |
| Retail facilities located throughout Croatia | | — |
| | 9,000 |
| | 13,002 |
| | 1,202 |
| | (286 | ) | | 8,874 |
| | 14,044 |
| | 22,918 |
| | 515 |
| | Various | | Oct. 2018 | | 29 - 38 yrs. |
| Office facility in Northbrook, IL | | 5,226 |
| | — |
| | 493 |
| | — |
| | — |
| | — |
| | 493 |
| | 493 |
| | 58 |
| | 2007 | | Oct. 2018 | | 40 yrs. |
| Education facilities in Chicago, IL | | — |
| | 18,510 |
| | 163 |
| | — |
| | — |
| | 18,510 |
| | 163 |
| | 18,673 |
| | 19 |
| | 2014; 2015 | | Oct. 2018 | | 40 yrs. |
| Warehouse facility in Dillon, SC | | 25,745 |
| | 3,516 |
| | 44,933 |
| | — |
| | — |
| | 3,516 |
| | 44,933 |
| | 48,449 |
| | 1,496 |
| | 2013 | | Oct. 2018 | | 40 yrs. |
| Net-lease self-storage facilities in New York City, NY | | — |
| | 29,223 |
| | 77,202 |
| | 114 |
| | — |
| | 29,223 |
| | 77,316 |
| | 106,539 |
| | 2,274 |
| | Various | | Oct. 2018 | | 40 yrs. |
| Net-lease self-storage facility in Hilo, HI | | — |
| | 769 |
| | 12,869 |
| | — |
| | — |
| | 769 |
| | 12,869 |
| | 13,638 |
| | 381 |
| | 2007 | | Oct. 2018 | | 40 yrs. |
| Net-lease self-storage facility in Clearwater, FL | | — |
| | 1,247 |
| | 5,733 |
| | — |
| | — |
| | 1,247 |
| | 5,733 |
| | 6,980 |
| | 193 |
| | 2001 | | Oct. 2018 | | 40 yrs. |
|
| |
| W. P. Carey 2019 10-K– 142 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2019
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Costs Capitalized Subsequent to
Acquisition (a) | | Increase (Decrease) in Net
Investments (b) | | Gross Amount at which Carried at Close of Period (c) | | | | | | | | Life on which Depreciation in Latest Statement of Income is
Computed |
| Description | | Encumbrances | | Land | | Buildings | | Personal Property | | | | Land | | Buildings | | Personal Property | | Total | | Accumulated Depreciation (c) | | Date of Construction | | Date Acquired | |
| Operating Real Estate – Hotels | | | | | | | | | | | | | | | | | | | | | | | | |
| Bloomington, MN | | $ | — |
| | $ | 3,810 |
| | $ | 29,126 |
| | $ | 3,622 |
| | $ | 1,834 |
| | $ | — |
| | $ | 3,874 |
| | $ | 30,313 |
| | $ | 4,205 |
| | $ | 38,392 |
| | $ | 4,928 |
| | 2008 | | Jan. 2014 | | 34 yrs. |
| Memphis, TN | | 26,486 |
| | 2,120 |
| | 36,594 |
| | 3,647 |
| | 958 |
| | — |
| | 2,167 |
| | 37,304 |
| | 3,848 |
| | 43,319 |
| | 7,215 |
| | 1985 | | Jan. 2014 | | 22 yrs. |
| | | $ | 26,486 |
| | $ | 5,930 |
| | $ | 65,720 |
| | $ | 7,269 |
| | $ | 2,792 |
| | $ | — |
| | $ | 6,041 |
| | $ | 67,617 |
| | $ | 8,053 |
| | $ | 81,711 |
| | $ | 12,143 |
| | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | |
| | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Warehouse facilities in Gadki, Poland | | — |
| | 10,422 |
| | 47,727 |
| | 57 |
| | (812 | ) | | 10,276 |
| | 47,118 |
| | 57,394 |
| | 1,527 |
| | 2007; 2010 | | Oct. 2018 | | 40 yrs. |
| Net-lease self-storage facility in Orlando, FL | | — |
| | 1,070 |
| | 8,686 |
| | — |
| | — |
| | 1,070 |
| | 8,686 |
| | 9,756 |
| | 276 |
| | 2000 | | Oct. 2018 | | 40 yrs. |
| Retail facility in Lewisville, TX | | 8,711 |
| | 3,485 |
| | 11,263 |
| | — |
| | — |
| | 3,485 |
| | 11,263 |
| | 14,748 |
| | 352 |
| | 2004 | | Oct. 2018 | | 40 yrs. |
| Industrial facility in Wageningen, Netherlands | | 17,293 |
| | 5,227 |
| | 18,793 |
| | — |
| | (55 | ) | | 5,154 |
| | 18,811 |
| | 23,965 |
| | 599 |
| | 2013 | | Oct. 2018 | | 40 yrs. |
| Office facility in Haibach, Germany | | 8,690 |
| | 1,767 |
| | 12,229 |
| | — |
| | (195 | ) | | 1,743 |
| | 12,058 |
| | 13,801 |
| | 390 |
| | 1993 | | Oct. 2018 | | 40 yrs. |
| Net-lease self-storage facility in Palm Coast, FL | | — |
| | 1,994 |
| | 4,982 |
| | — |
| | — |
| | 1,994 |
| | 4,982 |
| | 6,976 |
| | 197 |
| | 2001 | | Oct. 2018 | | 40 yrs. |
| Office facility in Auburn Hills, MI | | 5,473 |
| | 1,910 |
| | 6,773 |
| | — |
| | — |
| | 1,910 |
| | 6,773 |
| | 8,683 |
| | 216 |
| | 2012 | | Oct. 2018 | | 40 yrs. |
| Net-lease self-storage facility in Holiday, FL | | — |
| | 1,730 |
| | 4,213 |
| | — |
| | — |
| | 1,730 |
| | 4,213 |
| | 5,943 |
| | 162 |
| | 1975 | | Oct. 2018 | | 40 yrs. |
| Office facility in Tempe, AZ | | 14,108 |
| | — |
| | 19,533 |
| | — |
| | — |
| | — |
| | 19,533 |
| | 19,533 |
| | 603 |
| | 2000 | | Oct. 2018 | | 40 yrs. |
| Office facility in Tucson, AZ | | — |
| | 2,448 |
| | 17,353 |
| | — |
| | — |
| | 2,448 |
| | 17,353 |
| | 19,801 |
| | 543 |
| | 2002 | | Oct. 2018 | | 40 yrs. |
| Industrial facility in Drunen, Netherlands | | — |
| | 2,316 |
| | 9,370 |
| | — |
| | (163 | ) | | 2,284 |
| | 9,239 |
| | 11,523 |
| | 288 |
| | 2014 | | Oct. 2018 | | 40 yrs. |
| Industrial facility New Concord, OH | | 1,416 |
| | 958 |
| | 2,309 |
| | — |
| | — |
| | 958 |
| | 2,309 |
| | 3,267 |
| | 88 |
| | 1999 | | Oct. 2018 | | 40 yrs. |
| Office facility in Krakow, Poland | | 5,192 |
| | 2,381 |
| | 6,212 |
| | — |
| | (120 | ) | | 2,348 |
| | 6,125 |
| | 8,473 |
| | 192 |
| | 2003 | | Oct. 2018 | | 40 yrs. |
| Retail facility in Gelsenkirchen, Germany | | 12,848 |
| | 2,178 |
| | 17,097 |
| | — |
| | (269 | ) | | 2,147 |
| | 16,859 |
| | 19,006 |
| | 523 |
| | 2000 | | Oct. 2018 | | 40 yrs. |
| Warehouse facilities in Mszczonow and Tomaszow Mazowiecki, Poland | | — |
| | 8,782 |
| | 53,575 |
| | — |
| | (870 | ) | | 8,660 |
| | 52,827 |
| | 61,487 |
| | 1,777 |
| | 1995; 2000 | | Oct. 2018 | | 40 yrs. |
| Office facility in Plymouth, MN | | 21,310 |
| | 2,871 |
| | 26,353 |
| | — |
| | — |
| | 2,871 |
| | 26,353 |
| | 29,224 |
| | 815 |
| | 1999 | | Oct. 2018 | | 40 yrs. |
| Office facility in San Antonio, TX | | 12,390 |
| | 3,094 |
| | 16,624 |
| | — |
| | — |
| | 3,094 |
| | 16,624 |
| | 19,718 |
| | 523 |
| | 2002 | | Oct. 2018 | | 40 yrs. |
| Warehouse facility in Sered, Slovakia | | — |
| | 3,428 |
| | 28,005 |
| | — |
| | (439 | ) | | 3,380 |
| | 27,614 |
| | 30,994 |
| | 866 |
| | 2004 | | Oct. 2018 | | 40 yrs. |
| Industrial facility in Tuchomerice, Czech Republic | | — |
| | 7,864 |
| | 27,006 |
| | — |
| | (487 | ) | | 7,754 |
| | 26,629 |
| | 34,383 |
| | 824 |
| | 1998 | | Oct. 2018 | | 40 yrs. |
| Office facility in Warsaw, Poland | | 37,151 |
| | — |
| | 44,990 |
| | — |
| | (628 | ) | | — |
| | 44,362 |
| | 44,362 |
| | 1,339 |
| | 2015 | | Oct. 2018 | | 40 yrs. |
| Warehouse facility in Kaunas, Lithuania | | 38,847 |
| | 10,199 |
| | 47,391 |
| | — |
| | (804 | ) | | 10,057 |
| | 46,729 |
| | 56,786 |
| | 1,481 |
| | 2008 | | Oct. 2018 | | 40 yrs. |
| Net-lease student housing facility in Jacksonville, FL | | 11,717 |
| | 906 |
| | 17,020 |
| | — |
| | — |
| | 906 |
| | 17,020 |
| | 17,926 |
| | 514 |
| | 2015 | | Oct. 2018 | | 40 yrs. |
| Warehouse facilities in Houston, TX | | — |
| | 791 |
| | 1,990 |
| | — |
| | — |
| | 791 |
| | 1,990 |
| | 2,781 |
| | 66 |
| | 1972 | | Oct. 2018 | | 40 yrs. |
| Office facility in Oak Creek, WI | | — |
| | 2,858 |
| | 11,055 |
| | — |
| | — |
| | 2,858 |
| | 11,055 |
| | 13,913 |
| | 367 |
| | 2000 | | Oct. 2018 | | 40 yrs. |
| Warehouse facilities in Shelbyville, IN; Kalamazoo, MI; Tiffin, OH; Andersonville, TN; and Millwood, WV | | — |
| | 2,868 |
| | 37,571 |
| | — |
| | — |
| | 2,868 |
| | 37,571 |
| | 40,439 |
| | 1,268 |
| | Various | | Oct. 2018 | | 40 yrs. |
| Warehouse facility in Perrysburg, OH | | — |
| | 806 |
| | 11,922 |
| | — |
| | — |
| | 806 |
| | 11,922 |
| | 12,728 |
| | 415 |
| | 1974 | | Oct. 2018 | | 40 yrs. |
| Warehouse facility in Dillon, SC | | — |
| | 620 |
| | 46,319 |
| | 434 |
| | — |
| | 620 |
| | 46,753 |
| | 47,373 |
| | 916 |
| | 2019 | | Oct. 2018 | | 40 yrs. |
|
| |
| W. P. Carey 2019 10-K– 143 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2019
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | |
| | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Warehouse facility in Zabia Wola, Poland | | 16,970 |
| | 4,742 |
| | 23,270 |
| | 5,636 |
| | (438 | ) | | 4,676 |
| | 28,534 |
| | 33,210 |
| | 843 |
| | 1999 | | Oct. 2018 | | 40 yrs. |
| Office facility in Buffalo Grove, IL | | — |
| | 2,224 |
| | 6,583 |
| | — |
| | — |
| | 2,224 |
| | 6,583 |
| | 8,807 |
| | 210 |
| | 1992 | | Oct. 2018 | | 40 yrs. |
| Warehouse facilities in McHenry, IL | | — |
| | 5,794 |
| | 21,141 |
| | — |
| | — |
| | 5,794 |
| | 21,141 |
| | 26,935 |
| | 917 |
| | 1990; 1999 | | Dec. 2018 | | 27 - 28 yrs. |
| Industrial facilities in Chicago, Cortland, Forest View, Morton Grove, and Northbrook, IL and Madison and Monona, WI | | — |
| | 23,267 |
| | 9,166 |
| | — |
| | — |
| | 23,267 |
| | 9,166 |
| | 32,433 |
| | 354 |
| | Various | | Dec. 2018; Dec. 2019 | | 35 - 40 yrs. |
| Warehouse facility in Kilgore, TX | | — |
| | 3,002 |
| | 36,334 |
| | 14,096 |
| | (6 | ) | | 3,002 |
| | 50,424 |
| | 53,426 |
| | 1,161 |
| | 2007 | | Dec. 2018 | | 37 yrs. |
| Industrial facility in San Luis Potosi, Mexico | | — |
| | 2,787 |
| | 12,945 |
| | — |
| | — |
| | 2,787 |
| | 12,945 |
| | 15,732 |
| | 391 |
| | 2009 | | Dec. 2018 | | 39 yrs. |
| Industrial facility in Legnica, Poland | | — |
| | 995 |
| | 9,787 |
| | 6,007 |
| | (252 | ) | | 979 |
| | 15,558 |
| | 16,537 |
| | 459 |
| | 2002 | | Dec. 2018 | | 29 yrs. |
| Industrial facility in Meru, France | | — |
| | 4,231 |
| | 14,731 |
| | 8 |
| | (238 | ) | | 4,178 |
| | 14,554 |
| | 18,732 |
| | 557 |
| | 1997 | | Dec. 2018 | | 29 yrs. |
| Education facility in Portland, OR | | — |
| | 2,396 |
| | 23,258 |
| | 10 |
| | — |
| | 2,396 |
| | 23,268 |
| | 25,664 |
| | 513 |
| | 2006 | | Feb. 2019 | | 40 yrs. |
| Office facility in Morrisville, NC | | — |
| | 2,374 |
| | 30,140 |
| | — |
| | — |
| | 2,374 |
| | 30,140 |
| | 32,514 |
| | 693 |
| | 1998 | | Mar. 2019 | | 40 yrs. |
| Warehouse facility in Inwood, WV | | 20,579 |
| | 3,265 |
| | 36,692 |
| | — |
| | — |
| | 3,265 |
| | 36,692 |
| | 39,957 |
| | 777 |
| | 2000 | | Mar. 2019 | | 40 yrs. |
| Industrial facility in Hurricane, UT | | — |
| | 1,914 |
| | 37,279 |
| | — |
| | — |
| | 1,914 |
| | 37,279 |
| | 39,193 |
| | 745 |
| | 2011 | | Mar. 2019 | | 40 yrs. |
| Industrial facility in Bensenville, IL | | — |
| | 8,640 |
| | 4,948 |
| | — |
| | 300 |
| | 8,940 |
| | 4,948 |
| | 13,888 |
| | 158 |
| | 1981 | | Mar. 2019 | | 40 yrs. |
| Industrial facility in Katowice, Poland | | — |
| | — |
| | 764 |
| | 14,586 |
| | 313 |
| | — |
| | 15,663 |
| | 15,663 |
| | 38 |
| | 2019 | | Apr. 2019 | | 40 yrs. |
| Industrial facilities in Westerville, OH and North Wales, PA | | — |
| | 1,545 |
| | 6,508 |
| | — |
| | — |
| | 1,545 |
| | 6,508 |
| | 8,053 |
| | 128 |
| | 1960; 1997 | | May 2019 | | 40 yrs. |
| Industrial facilities in Fargo, ND; Norristown, PA; and Atlanta, TX | | — |
| | 1,616 |
| | 5,589 |
| | — |
| | — |
| | 1,616 |
| | 5,589 |
| | 7,205 |
| | 134 |
| | Various | | May 2019 | | 40 yrs. |
| Industrial facilities in Chihuahua and Juarez, Mexico | | — |
| | 3,426 |
| | 7,286 |
| | — |
| | — |
| | 3,426 |
| | 7,286 |
| | 10,712 |
| | 158 |
| | 1983; 1986; 1991 | | May 2019 | | 40 yrs. |
| Warehouse facility in Statesville, NC | | — |
| | 1,683 |
| | 13,827 |
| | — |
| | — |
| | 1,683 |
| | 13,827 |
| | 15,510 |
| | 238 |
| | 1979 | | Jun. 2019 | | 40 yrs. |
| Industrial facility in Conestoga, PA | | — |
| | 4,290 |
| | 51,410 |
| | — |
| | — |
| | 4,290 |
| | 51,410 |
| | 55,700 |
| | 822 |
| | 1950 | | Jun. 2019 | | 40 yrs. |
| Industrial facilities in Hartford and Milwaukee, WI | | — |
| | 1,471 |
| | 21,293 |
| | — |
| | — |
| | 1,471 |
| | 21,293 |
| | 22,764 |
| | 290 |
| | 1964; 1992; 1993 | | Jul. 2019 | | 40 yrs. |
| Industrial facilities in Brockville and Prescott, Canada | | — |
| | 2,025 |
| | 9,519 |
| | — |
| | — |
| | 2,025 |
| | 9,519 |
| | 11,544 |
| | 127 |
| | 1955; 1995 | | Jul. 2019 | | 40 yrs. |
| Industrial facility in Dordrecht, Netherlands | | — |
| | 3,233 |
| | 10,954 |
| | — |
| | 328 |
| | 3,307 |
| | 11,208 |
| | 14,515 |
| | 76 |
| | 1986 | | Sep. 2019 | | 40 yrs. |
| Industrial facilities in York, PA and Lexington, SC | | — |
| | 4,155 |
| | 22,930 |
| | — |
| | — |
| | 4,155 |
| | 22,930 |
| | 27,085 |
| | 197 |
| | 1968; 1971 | | Oct. 2019 | | 40 yrs. |
| Industrial facility in Queretaro, Mexico | | — |
| | 2,851 |
| | 12,748 |
| | — |
| | — |
| | 2,851 |
| | 12,748 |
| | 15,599 |
| | 99 |
| | 1999 | | Oct. 2019 | | 40 yrs. |
| Office facility in Dearborn, MI | | — |
| | 1,431 |
| | 5,402 |
| | — |
| | — |
| | 1,431 |
| | 5,402 |
| | 6,833 |
| | 43 |
| | 2002 | | Oct. 2019 | | 40 yrs. |
|
| |
| W. P. Carey 2019 10-K– 144 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2019
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period (c) (d) | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | | Life on which Depreciation in Latest Statement of Income is Computed |
| | | | | | | | | | | |
| | | |
| | | | | | | | |
| Description | | Encumbrances | | Land | | Buildings | | | | Land | | Buildings | | Total | | | | |
| Industrial facilities in Houston, TX and Metairie, LA and office facilities in Houston, TX and Mason, OH | | — |
| | 6,130 |
| | 24,981 |
| | — |
| | — |
| | 6,130 |
| | 24,981 |
| | 31,111 |
| | 116 |
| | Various | | Nov. 2019 | | 40 yrs. |
| Industrial facility in Pardubice, Czech Republic | | — |
| | 1,694 |
| | 8,793 |
| | — |
| | 203 |
| | 1,727 |
| | 8,963 |
| | 10,690 |
| | — |
| | 1970 | | Nov. 2019 | | 40 yrs. |
| Warehouse facilities in Brabrand, Denmark and Arlandastad, Sweden | | — |
| | 6,499 |
| | 27,899 |
| | — |
| | 858 |
| | 6,665 |
| | 28,591 |
| | 35,256 |
| | 70 |
| | 2012; 2017 | | Nov. 2019 | | 40 yrs. |
| Retail facility in Hamburg, PA | | — |
| | 4,520 |
| | 34,167 |
| | — |
| | — |
| | 4,520 |
| | 34,167 |
| | 38,687 |
| | — |
| | 2003 | | Dec. 2019 | | 40 yrs. |
| Warehouse facility in Charlotte, NC | | — |
| | 6,481 |
| | 82,936 |
| | — |
| | — |
| | 6,481 |
| | 82,936 |
| | 89,417 |
| | — |
| | 1995 | | Dec. 2019 | | 40 yrs. |
| Warehouse facility in Buffalo Grove, IL | | — |
| | 3,287 |
| | 10,167 |
| | — |
| | — |
| | 3,287 |
| | 10,167 |
| | 13,454 |
| | 17 |
| | 1987 | | Dec. 2019 | | 40 yrs. |
| Industrial facility in Hvidovre, Denmark | | — |
| | 1,931 |
| | 4,243 |
| | — |
| | 77 |
| | 1,955 |
| | 4,296 |
| | 6,251 |
| | — |
| | 2007 | | Dec. 2019 | | 40 yrs. |
| Warehouse facility in Huddersfield, United Kingdom | | — |
| | 8,659 |
| | 29,752 |
| | — |
| | — |
| | 8,659 |
| | 29,752 |
| | 38,411 |
| | — |
| | 2005 | | Dec. 2019 | | 40 yrs. |
| | | $ | 1,387,046 |
| | $ | 2,028,107 |
| | $ | 7,687,370 |
| | $ | 506,074 |
| | $ | (518,047 | ) | | $ | 1,875,065 |
| | $ | 7,828,439 |
| | $ | 9,703,504 |
| | $ | 950,452 |
| | | | | | |
|
| |
| W. P. Carey 2019 10-K– 145 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2019
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period Total | | Date of Construction | | Date Acquired |
| Description | | Encumbrances | | Land | | Buildings | | | | | |
| Direct Financing Method | | | | | | | | | | | | | | | | |
| Industrial facilities in Irving and Houston, TX | | $ | — |
| | $ | — |
| | $ | 27,599 |
| | $ | — |
| | $ | (4,074 | ) | | $ | 23,525 |
| | 1978 | | Jan. 1998 |
| Retail facility in Freehold, NJ | | 7,637 |
| | — |
| | 17,067 |
| | — |
| | (278 | ) | | 16,789 |
| | 2004 | | Sep. 2012 |
| Office facilities in Corpus Christi, Odessa, San Marcos, and Waco, TX | | 2,434 |
| | 2,089 |
| | 14,211 |
| | — |
| | (937 | ) | | 15,363 |
| | 1969; 1996; 2000 | | Sep. 2012 |
| Retail facilities in Arnstadt, Borken, Bünde, Dorsten, Duisburg, Freiberg, Gütersloh, Leimbach-Kaiserro, Monheim, Oberhausen, Osnabrück, Rodewisch, Sankt Augustin, Schmalkalden, Stendal, and Wuppertal Germany | | — |
| | 28,734 |
| | 145,854 |
| | 5,582 |
| | (23,090 | ) | | 157,080 |
| | Various | | Sep. 2012 |
| Warehouse facility in Brierley Hill, United Kingdom | | — |
| | 2,147 |
| | 12,357 |
| | — |
| | (1,553 | ) | | 12,951 |
| | 1996 | | Sep. 2012 |
| Industrial and warehouse facility in Mesquite, TX | | 5,580 |
| | 2,851 |
| | 15,899 |
| | — |
| | (2,377 | ) | | 16,373 |
| | 1972 | | Sep. 2012 |
| Industrial facility in Rochester, MN | | 2,184 |
| | 881 |
| | 17,039 |
| | — |
| | (2,336 | ) | | 15,584 |
| | 1997 | | Sep. 2012 |
| Office facility in Irvine, CA | | 5,785 |
| | — |
| | 17,027 |
| | — |
| | (2,230 | ) | | 14,797 |
| | 1981 | | Sep. 2012 |
| Office facility in Scottsdale, AZ | | 17,819 |
| | — |
| | 43,570 |
| | — |
| | (1,108 | ) | | 42,462 |
| | 1977 | | Jan. 2014 |
| Retail facilities in El Paso and Fabens, TX | | — |
| | 4,777 |
| | 17,823 |
| | — |
| | (54 | ) | | 22,546 |
| | Various | | Jan. 2014 |
| Industrial facility in Dallas, TX | | — |
| | 3,190 |
| | 10,010 |
| | — |
| | 161 |
| | 13,361 |
| | 1968 | | Jan. 2014 |
| Industrial facility in Eagan, MN | | — |
| | — |
| | 11,548 |
| | — |
| | (359 | ) | | 11,189 |
| | 1975 | | Jan. 2014 |
| Industrial facilities in Albemarle and Old Fort, NC and Holmesville, OH | | — |
| | 6,542 |
| | 20,668 |
| | 5,317 |
| | (7,297 | ) | | 25,230 |
| | 1955; 1966; 1970 | | Jan. 2014 |
| Industrial facilities located throughout France | | — |
| | — |
| | 27,270 |
| | — |
| | (7,877 | ) | | 19,393 |
| | Various | | Jan. 2014 |
| Retail facility in Gronau, Germany | | — |
| | 281 |
| | 4,401 |
| | — |
| | (818 | ) | | 3,864 |
| | 1989 | | Jan. 2014 |
| Industrial and warehouse facility in Newbridge, United Kingdom | | 9,818 |
| | 6,851 |
| | 22,868 |
| | — |
| | (7,378 | ) | | 22,341 |
| | 1998 | | Jan. 2014 |
| Education facility in Mooresville, NC | | 2,009 |
| | 1,795 |
| | 15,955 |
| | — |
| | — |
| | 17,750 |
| | 2002 | | Jan. 2014 |
| Industrial facility in Mount Carmel, IL | | — |
| | 135 |
| | 3,265 |
| | — |
| | (150 | ) | | 3,250 |
| | 1896 | | Jan. 2014 |
| Retail facility in Vantaa, Finland | | — |
| | 5,291 |
| | 15,522 |
| | — |
| | (3,636 | ) | | 17,177 |
| | 2004 | | Jan. 2014 |
| Retail facility in Linköping, Sweden | | — |
| | 1,484 |
| | 9,402 |
| | — |
| | (3,282 | ) | | 7,604 |
| | 2004 | | Jan. 2014 |
| Industrial facility in Calgary, Canada | | — |
| | — |
| | 7,076 |
| | — |
| | (985 | ) | | 6,091 |
| | 1965 | | Jan. 2014 |
| Industrial facilities in Kearney, MO; Fair Bluff, NC; York, NE; Walbridge, OH; Middlesex Township, PA; Rocky Mount, VA; and Martinsburg, WV | | 6,783 |
| | 5,780 |
| | 40,860 |
| | — |
| | (380 | ) | | 46,260 |
| | Various | | Jan. 2014 |
| Movie theater in Pensacola, FL | | — |
| | — |
| | 13,034 |
| | — |
| | (6,083 | ) | | 6,951 |
| | 2001 | | Jan. 2014 |
| Industrial facility in Monheim, Germany | | — |
| | 2,939 |
| | 7,379 |
| | — |
| | (2,174 | ) | | 8,144 |
| | 1992 | | Jan. 2014 |
| Industrial facility in Göppingen, Germany | | — |
| | 10,717 |
| | 60,120 |
| | — |
| | (15,177 | ) | | 55,660 |
| | 1930 | | Jan. 2014 |
| Industrial facility in Sankt Ingbert, Germany | | — |
| | 2,786 |
| | 26,902 |
| | — |
| | (6,168 | ) | | 23,520 |
| | 1960 | | Jan. 2014 |
| Industrial and office facility in Nagold, Germany | | — |
| | 4,553 |
| | 17,675 |
| | — |
| | (310 | ) | | 21,918 |
| | 1994 | | Oct. 2018 |
| Industrial facility in Glendale Heights, IL | | — |
| | 4,237 |
| | 45,173 |
| | — |
| | 269 |
| | 49,679 |
| | 1991 | | Oct. 2018 |
| Industrial facilities in Colton, Fresno, Orange, Pomona, and San Diego, CA; Holly Hill, FL; Rockmart, GA; Ooltewah, TN; and Dallas, TX | | 9,967 |
| | 2,068 |
| | 31,256 |
| | — |
| | (254 | ) | | 33,070 |
| | Various | | Oct. 2018 |
| Warehouse facilities in Bristol, Leeds, Liverpool, Luton, Newport, Plymouth, and Southampton, United Kingdom | | — |
| | 1,062 |
| | 23,087 |
| | — |
| | 497 |
| | 24,646 |
| | Various | | Oct. 2018 |
| Warehouse facility in Gieten, Netherlands | | — |
| | — |
| | 15,258 |
| | — |
| | (248 | ) | | 15,010 |
| | 1985 | | Oct. 2018 |
| Warehouse facility in Oxnard, CA | | — |
| | — |
| | 10,960 |
| | — |
| | (305 | ) | | 10,655 |
| | 1975 | | Oct. 2018 |
|
| |
| W. P. Carey 2019 10-K– 146 |
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2019
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to Acquisition (a) | | Increase (Decrease) in Net Investments (b) | | Gross Amount at which Carried at Close of Period Total | | Date of Construction | | Date Acquired |
| Description | | Encumbrances | | Land | | Buildings | | | | | |
| Industrial facilities in Bartow, FL; Momence, IL; Smithfield, NC; Hudson, NY; and Ardmore, OK | | — |
| | 4,454 |
| | 87,030 |
| | — |
| | 1,099 |
| | 92,583 |
| | Various | | Oct. 2018 |
| Industrial facility in Countryside, IL | | — |
| | 563 |
| | 1,457 |
| | — |
| | 16 |
| | 2,036 |
| | 1981 | | Oct. 2018 |
| Industrial facility in Clarksville, TN | | 3,688 |
| | 1,680 |
| | 10,180 |
| | — |
| | (7 | ) | | 11,853 |
| | 1998 | | Oct. 2018 |
| Industrial facility in Bluffton, IN | | 1,737 |
| | 503 |
| | 3,407 |
| | — |
| | (11 | ) | | 3,899 |
| | 1975 | | Oct. 2018 |
| Warehouse facility in Houston, TX | | — |
| | — |
| | 5,977 |
| | — |
| | (32 | ) | | 5,945 |
| | 1972 | | Oct. 2018 |
| | | $ | 75,441 |
| | $ | 108,390 |
| | $ | 876,186 |
| | $ | 10,899 |
| | $ | (98,926 | ) | | $ | 896,549 |
| | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Initial Cost to Company | | Cost Capitalized Subsequent to
Acquisition (a) | | Increase (Decrease) in Net
Investments (b) | | Gross Amount at which Carried at Close of Period (c) (d) | | | | | | | | Life on which Depreciation in Latest Statement of Income is
Computed |
| Description | | Encumbrances | | Land | | Buildings | | Personal Property | | | | Land | | Buildings | | Personal Property | | Total | | Accumulated Depreciation (d) | | Date of Construction | | Date Acquired | |
| Land, Buildings and Improvements Attributable to Operating Properties – Hotels | | | | | | | | | | | | | | | | | | |
| Bloomington, MN | | $ | — |
| | $ | 3,810 |
| | $ | 29,126 |
| | $ | 3,622 |
| | $ | 5,974 |
| | $ | (247 | ) | | $ | 3,874 |
| | $ | 31,208 |
| | $ | 7,203 |
| | $ | 42,285 |
| | $ | 9,855 |
| | 2008 | | Jan. 2014 | | 34 yrs. |
| Land, Buildings and Improvements Attributable to Operating Properties – Self-Storage Facilities | | | | | | | |
|
| | | | | | | | |
| Loves Park, IL | | — |
| | 1,412 |
| | 4,853 |
| | — |
| | 4 |
| | — |
| | 1,412 |
| | 4,853 |
| | 4 |
| | 6,269 |
| | 214 |
| | 1997 | | Oct. 2018 | | 40 yrs. |
| Cherry Valley, IL | | — |
| | 1,339 |
| | 4,160 |
| | — |
| | — |
| | — |
| | 1,339 |
| | 4,160 |
| | — |
| | 5,499 |
| | 179 |
| | 1988 | | Oct. 2018 | | 40 yrs. |
| Rockford, IL | | — |
| | 695 |
| | 3,873 |
| | — |
| | 14 |
| | — |
| | 695 |
| | 3,883 |
| | 4 |
| | 4,582 |
| | 151 |
| | 1979 | | Oct. 2018 | | 40 yrs. |
| Rockford, IL | | — |
| | 87 |
| | 785 |
| | — |
| | — |
| | — |
| | 87 |
| | 785 |
| | — |
| | 872 |
| | 28 |
| | 1979 | | Oct. 2018 | | 40 yrs. |
| Rockford, IL | | — |
| | 454 |
| | 4,724 |
| | — |
| | — |
| | — |
| | 454 |
| | 4,724 |
| | — |
| | 5,178 |
| | 152 |
| | 1957 | | Oct. 2018 | | 40 yrs. |
| Peoria, IL | | — |
| | 444 |
| | 4,944 |
| | — |
| | 37 |
| | — |
| | 443 |
| | 4,964 |
| | 18 |
| | 5,425 |
| | 215 |
| | 1990 | | Oct. 2018 | | 40 yrs. |
| East Peoria, IL | | — |
| | 268 |
| | 3,290 |
| | — |
| | 53 |
| | — |
| | 268 |
| | 3,336 |
| | 7 |
| | 3,611 |
| | 138 |
| | 1986 | | Oct. 2018 | | 40 yrs. |
| Loves Park, IL | | — |
| | 721 |
| | 2,973 |
| | — |
| | 17 |
| | — |
| | 721 |
| | 2,990 |
| | — |
| | 3,711 |
| | 120 |
| | 1978 | | Oct. 2018 | | 40 yrs. |
| Winder, GA | | — |
| | 338 |
| | 1,310 |
| | — |
| | 2 |
| | — |
| | 338 |
| | 1,310 |
| | 2 |
| | 1,650 |
| | 55 |
| | 2006 | | Oct. 2018 | | 40 yrs. |
| Winder, GA | | — |
| | 821 |
| | 3,180 |
| | — |
| | — |
| | — |
| | 821 |
| | 3,180 |
| | — |
| | 4,001 |
| | 134 |
| | 2001 | | Oct. 2018 | | 40 yrs. |
| | | $ | — |
| | $ | 10,389 |
| | $ | 63,218 |
| | $ | 3,622 |
| | $ | 6,101 |
| | $ | (247 | ) | | $ | 10,452 |
| | $ | 65,393 |
| | $ | 7,238 |
| | $ | 83,083 |
| | $ | 11,241 |
| | | | | | |
__________
| |
| (a) | Consists of the cost of improvements subsequent to acquisition and acquisition costs, including construction costs on build-to-suit transactions, legal fees, appraisal fees, title costs, and other related professional fees. For business combinations, transaction costs are excluded. |
| |
| (b) | The increase (decrease) in net investment was primarily due to (i) sales of properties, (ii) impairment charges, (iii) changes in foreign currency exchange rates, (iv) allowances for credit loss, and (v) the amortization of unearned income from net investments in direct financing leases, which produces a periodic rate of return that at times may be greater or less than lease payments received. |
| |
| (c) | Excludes (i) gross lease intangible assets of $3.0 billion and the related accumulated amortization of $1.1 billion, (ii) gross lease intangible liabilities of $285.2 million and the related accumulated amortization of $74.5 million, (iii) assets held for sale, net of $104.0 million, and (iv) real estate under construction of $69.6 million. |
| |
| (d) | A reconciliation of real estate and accumulated depreciation follows: |
|
| |
| | W. P. Carey 20162019 10-K– 166147 |
W. P. CAREY INC.
NOTES TO SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
| | | | Reconciliation of Real Estate Subject to Operating Leases | Reconciliation of Land, Buildings and Improvements Subject to Operating Leases |
| | Years Ended December 31, | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 | 2019 | | 2018 | | 2017 |
| Beginning balance | $ | 5,308,211 |
| | $ | 4,976,685 |
| | $ | 2,506,804 |
| $ | 8,717,612 |
| | $ | 5,334,446 |
| | $ | 5,182,267 |
|
| Acquisitions | | 610,381 |
| | 734,963 |
| | 23,462 |
|
| Reclassification from operating properties | | 291,750 |
| | — |
| | — |
|
| Reclassification from real estate under construction | | 122,519 |
| | 86,784 |
| | 51,198 |
|
| Dispositions | (446,144 | ) | | (19,597 | ) | | (137,018 | ) | (90,488 | ) | | (296,543 | ) | | (131,549 | ) |
| Additions | 404,161 |
| | 548,521 |
| | 2,785,863 |
| |
| Reclassification from direct financing lease | | 76,934 |
| | 15,998 |
| | 1,611 |
|
| Foreign currency translation adjustment | (94,738 | ) | | (181,064 | ) | | (157,262 | ) | (37,032 | ) | | (88,715 | ) | | 192,580 |
|
| Capital improvements | | 18,860 |
| | 25,727 |
| | 17,778 |
|
| CPA:17 Merger measurement period adjustments | | (5,687 | ) | | — |
| | — |
|
| Impairment charges | (41,660 | ) | | (25,773 | ) | | (20,677 | ) | (1,345 | ) | | (3,030 | ) | | (2,901 | ) |
| Reclassification from real estate under construction | 28,989 |
| | 55,362 |
| | — |
| |
| Improvements | 16,169 |
| | 24,014 |
| | 18,474 |
| |
| Reclassification from direct financing lease | 9,740 |
| | — |
| | 13,663 |
| |
| Write-off of fully depreciated assets | (2,461 | ) | | (6,443 | ) | | — |
| |
| Reclassification to assets held for sale | — |
| | (63,494 | ) | | (33,162 | ) | |
| Acquisitions through CPA:17 Merger | | — |
| | 2,907,982 |
| | — |
|
| Ending balance | $ | 5,182,267 |
| | $ | 5,308,211 |
| | $ | 4,976,685 |
| $ | 9,703,504 |
| | $ | 8,717,612 |
| | $ | 5,334,446 |
|
| | | | Reconciliation of Accumulated Depreciation for Real Estate Subject to Operating Leases | Reconciliation of Accumulated Depreciation for Land, Buildings and Improvements Subject to Operating Leases |
| | Years Ended December 31, | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 | 2019 | | 2018 | | 2017 |
| Beginning balance | $ | 372,735 |
| | $ | 253,627 |
| | $ | 168,076 |
| $ | 724,550 |
| | $ | 613,543 |
| | $ | 472,294 |
|
| Depreciation expense | 142,432 |
| | 137,144 |
| | 112,758 |
| 232,927 |
| | 162,119 |
| | 144,183 |
|
| Dispositions | (35,172 | ) | | (1,566 | ) | | (20,740 | ) | (6,109 | ) | | (41,338 | ) | | (17,770 | ) |
| Foreign currency translation adjustment | (5,240 | ) | | (6,159 | ) | | (5,318 | ) | (916 | ) | | (9,774 | ) | | 14,836 |
|
| Write-off of fully depreciated assets | (2,461 | ) | | (6,443 | ) | | — |
| |
| Reclassification to assets held for sale | — |
| | (3,868 | ) | | (1,149 | ) | |
| Ending balance | $ | 472,294 |
| | $ | 372,735 |
| | $ | 253,627 |
| $ | 950,452 |
| | $ | 724,550 |
| | $ | 613,543 |
|
| | | | Reconciliation of Operating Real Estate | Reconciliation of Land, Buildings and Improvements Attributable to Operating Properties |
| | Years Ended December 31, | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 | 2019 | | 2018 | | 2017 |
| Beginning balance | $ | 82,749 |
| | $ | 84,885 |
| | $ | 6,024 |
| $ | 466,050 |
| | $ | 83,047 |
| | $ | 81,711 |
|
| Reclassification to operating leases | | (291,750 | ) | | — |
| | — |
|
| Reclassification to assets held for sale | | (94,078 | ) | | — |
| | — |
|
| Capital improvements | | 1,853 |
| | 3,080 |
| | 1,336 |
|
| Reclassification from real estate under construction | | 1,008 |
| | — |
| | — |
|
| Acquisitions through CPA:17 Merger | | — |
| | 423,530 |
| | — |
|
| Dispositions | (3,188 | ) | | (2,663 | ) | | — |
| — |
| | (43,607 | ) | | — |
|
| Improvements | 1,542 |
| | 527 |
| | 438 |
| |
| Reclassification from real estate under construction | 608 |
| | — |
| | — |
| |
| Additions | — |
| | — |
| | 78,423 |
| |
| Ending balance | $ | 81,711 |
| | $ | 82,749 |
| | $ | 84,885 |
| $ | 83,083 |
| | $ | 466,050 |
| | $ | 83,047 |
|
| | | | Reconciliation of Accumulated Depreciation for Operating Real Estate | Reconciliation of Accumulated Depreciation for Land, Buildings and Improvements Attributable to Operating Properties |
| | Years Ended December 31, | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 | 2019 | | 2018 | | 2017 |
| Beginning balance | $ | 8,794 |
| | $ | 4,866 |
| | $ | 882 |
| $ | 10,234 |
| | $ | 16,419 |
| | $ | 12,143 |
|
| Depreciation expense | 4,235 |
| | 4,275 |
| | 3,984 |
| 2,553 |
| | 4,240 |
| | 4,276 |
|
| Reclassification to assets held for sale | | (1,546 | ) | | — |
| | — |
|
| Dispositions | (886 | ) | | (347 | ) | | — |
| — |
| | (10,425 | ) | | — |
|
| Ending balance | $ | 12,143 |
| | $ | 8,794 |
| | $ | 4,866 |
| $ | 11,241 |
| | $ | 10,234 |
| | $ | 16,419 |
|
At December 31, 2016,2019, the aggregate cost of real estate that we and our consolidated subsidiaries own for federal income tax purposes was approximately $6.9$12.4 billion.
|
| |
| | W. P. Carey 20162019 10-K– 167148 |
W. P. CAREY INC.
SCHEDULE IV — MORTGAGE LOANS ON REAL ESTATE
December 31, 2019
(dollars in thousands)
|
| | | | | | | | | | | | | |
| | | Interest Rate | | Final Maturity Date | | Fair Value | | Carrying Amount |
| Description | | | | |
| Financing agreement — observation wheel | | 6.5 | % | | Mar. 2020 | | $ | 24,350 |
| | $ | 24,350 |
|
| Financing agreement — mezzanine loan | | 9.0 | % | | Apr. 2020 | | 23,387 |
| | 23,387 |
|
| | | | | | | $ | 47,737 |
| | $ | 47,737 |
|
|
| | | | | | | | | | | |
| | Reconciliation of Mortgage Loans on Real Estate |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Beginning balance | $ | 57,737 |
| | $ | — |
| | $ | — |
|
| Repayments | (10,000 | ) | | — |
| | — |
|
| Acquisitions through CPA:17 Merger | — |
| | 57,737 |
| | — |
|
| Ending balance | $ | 47,737 |
| | $ | 57,737 |
| | $ | — |
|
|
| |
| W. P. Carey 2019 10-K– 149 |
Item 9. Changes in and Disagreements With Accountants on Accounting andFinancial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
Our disclosure controls and procedures include internal 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,(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 December 31, 2016,2019, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of December 31, 20162019 at a reasonable level of assurance.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
We assessed the effectiveness of our internal control over financial reporting at December 31, 2016.2019. In making this assessment, we used criteria set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, we concluded that, at December 31, 2016,2019, our internal control over financial reporting is effective based on those criteria.
The effectiveness of our internal control over financial reporting as of December 31, 20162019 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, and in connection therewith, PricewaterhouseCoopers LLP has issued an attestation report on the Company’s effectiveness of internal controls over financial reporting as of December 31, 2019, as stated in their report in Item 8.
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 controls over financial reporting.
Item 9B. Other Information.
None.
|
| |
| | W. P. Carey 20162019 10-K– 168150 |
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
This information will be contained in our definitive proxy statement for the 20172020 Annual Meeting of Stockholders, to be filed within 120 days following the end of our fiscal year, and is incorporated herein by reference.
Item 11. Executive Compensation.
This information will be contained in our definitive proxy statement for the 20172020 Annual Meeting of Stockholders, to be filed within 120 days following the end of our fiscal year, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters.
This information will be contained in our definitive proxy statement for the 20172020 Annual Meeting of Stockholders, to be filed within 120 days following the end of our fiscal year, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and DirectorIndependence.
This information will be contained in our definitive proxy statement for the 20172020 Annual Meeting of Stockholders, to be filed within 120 days following the end of our fiscal year, and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
This information will be contained in our definitive proxy statement for the 20172020 Annual Meeting of Stockholders, to be filed within 120 days following the end of our fiscal year, and is incorporated herein by reference.
|
| |
| | W. P. Carey 20162019 10-K– 169151 |
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(1) and (2) — Financial statements and schedules: see index to financial statements and schedules included in Item 8.
Other Financial Statements:
Corporate Property Associates 16 – Global Incorporated (Incorporated by reference to Exhibit 99.2 of the Annual Report on Form 10-K filed March 3, 2014 by W. P. Carey Inc.)
(3)Exhibits:
The following exhibits are filed with this Report. Documents other than those designated as being filed herewith are incorporated herein by reference.
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 3.1 |
| | Articles of Amendment and Restatement | | Incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 2012 filed February 26, 2013 |
3.2 |
| | Articles Supplementary | | Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K, filed January 28, 2015June 16, 2017 |
3.33.2 |
| | ThirdFifth Amended and Restated Bylaws of W. P. Carey Inc. | | Incorporated by reference to Exhibit 3.13.2 to Current Report on Form 8-K filed January 22, 2016June 16, 2017 |
| 4.1 |
| | Form of Common Stock Certificate | | Incorporated by reference to Exhibit 4.1 to Annual Report on Form 10-K for the year ended December 31, 2012 filed February 26, 2013 |
| 4.2 |
| | Indenture, dated as of March 14, 2014, by and between W. P. Carey Inc., as issuer and U.S. Bank National Association, as trustee | | Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed March 14, 2014 |
| 4.3 |
| | First Supplemental Indenture, dated as of March 14, 2014, by and between W. P. Carey Inc., as issuer, and U.S. Bank National Association, as trustee | | Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed March 14, 2014 |
| 4.4 |
| | Form of Global Note Representing $500,000,000 Aggregate Principal Amount of 4.60% Senior Notes due 2024 | | Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed March 14, 2014 |
| 4.5 |
| | Second Supplemental Indenture, dated as of January 21, 2015, by and between W. P. Carey Inc., as issuer, and U.S. Bank National Association, as trustee | | Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed January 21, 2015 |
| 4.6 |
| | Form of Note representing €500 Million Aggregate Principal Amount of 2.000% Senior Notes due 2023 | | Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed January 21, 2015 |
| 4.7 |
| | Third Supplemental Indenture, dated January 26, 2015, by and between W. P. Carey Inc., as issuer, and U.S. Bank National Association, as trustee | | Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed January 26, 2015 |
| 4.8 |
| | Form of Note representing $450 Million Aggregate Principal Amount of 4.000% Senior Notes due 2025 | | Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed January 26, 2015 |
|
| |
| W. P. Carey 2016 10-K– 170
|
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 4.9 |
| | Fourth Supplemental Indenture, dated as of September 12, 2016, by and between W. P. Carey Inc., as issuer, and U.S. Bank National Association, as trustee | | Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed September 12, 2016 |
|
| |
| W. P. Carey 2019 10-K– 152 |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 4.10 |
| | Form of Note representing $350 Million Aggregate Principal Amount of 4.250% Senior Notes due 2026 | | Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed September 12, 2016 |
| 4.11 |
| | Indenture, dated as of November 8, 2016, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, and U.S. Bank National Association, as trustee | | Incorporated by reference to Exhibit 4.3 ofto Automatic shelf registration statement on Form S-3ASRS-3 (File No. 333-214510),333-233159) filed on November 8, 2016August 9, 2019 |
| 4.12 |
| | First Supplemental Indenture, dated as of January 19, 2017, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, and U.S. Bank National Association, as trustee. | | Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed January 19, 2017 |
| 4.13 |
| | Form of Note representing €500 Million Aggregate Principal Amount of 2.250% Senior Notes due 2024 | | Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed January 19, 2017 |
| 4.14 |
| | Second Supplemental Indenture dated as of March 6, 2018, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, and U.S. Bank National Association, as trustee | | Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed March 6, 2018 |
| 4.15 |
| | Form of Note representing €500 Million Aggregate Principal Amount of 2.125% Senior Notes due 2027 | | Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed March 6, 2018 |
| 4.16 |
| | Third Supplemental Indenture dated as of October 9, 2018, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, and U.S. Bank National Association, as trustee | | Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed October 9, 2018 |
| 4.17 |
| | Form of Note representing €500 Million Aggregate Principal Amount of 2.250% Senior Notes due 2026 | | Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed October 9, 2018 |
| 4.18 |
| | Fifth Supplemental Indenture, dated June 14, 2019, by and between W. P. Carey Inc., as issuer, and U.S. Bank National Association, as trustee | | Incorporated by reference to Exhibit 4.1 to Current Report on Form 10-Q filed August 2, 2019 |
| 4.19 |
| | Form of Note representing $325 Million Aggregate Principal Amount of 3.850% Senior Notes due 2029 | | Incorporated by reference to Exhibit 4.2 to Current Report on Form 10-Q filed August 2, 2019 |
| 4.20 |
| | Fourth Supplemental Indenture, dated as of September 19, 2019, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, and U.S. Bank National Association, as trustee | | Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed September 19, 2019 |
| 4.21 |
| | Form of Note representing €500 Million Aggregate Principal Amount of 1.350% Senior Notes due 2028 | | Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed September 19, 2019 |
| 4.22 |
| | Description of Securities Registered under Section 12 of the Exchange Act | | Filed herewith |
| 10.1 |
| | W. P. Carey Inc. 1997 Share Incentive Plan, as amended * | | Incorporated by reference to Exhibit 10.2 to Annual Report on Form 10-K for the year ended December 31, 2014 filed March 2, 2015 |
| 10.2 |
| | W. P. Carey Inc. (formerly W. P. Carey & Co. LLC) Long-Term Incentive Program as amended and restated effective as of September 28, 2012 * | | Incorporated by reference to Exhibit 10.3 to Annual Report on Form 10-K for the year ended December 31, 2012 filed February 26, 2013 |
|
| |
| W. P. Carey 2019 10-K– 153 |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 10.3 |
| | W. P. Carey Inc. Amended and Restated Deferred Compensation Plan for Employees * | | Incorporated by reference to Exhibit 10.4 to Annual Report on Form 10-K for the year ended December 31, 2012 filed February 26, 2013 |
| 10.4 |
| | Amended and Restated W. P. Carey Inc. 2009 Share Incentive Plan * | | Incorporated by reference to Appendix A of Schedule 14A filed April 30, 2013 |
| 10.5 |
| | 2017 Annual Incentive Compensation Plan | | Incorporated by reference to Exhibit A of Schedule 14A filed April 11, 2017 |
| 10.6 |
| | 2017 Share Incentive Plan | | Incorporated by reference to Exhibit B of Schedule 14A filed April 11, 2017 |
| 10.7 |
| | Form of Share Option Agreement under the 20092017 Share Incentive Plan * | | Incorporated by reference to Exhibit 10.24.9 to Quarterly ReportRegistration Statement on Form 10-Q for the quarter endedS-8 filed June 30, 2009 filed August 6, 200927, 2017 |
10.610.8 |
| | Form of Restricted Share Agreement under the 20092017 Share Incentive Plan * | | Incorporated by reference to Exhibit 10.34.7 to Quarterly ReportRegistration Statement on Form 10-Q for the quarter endedS-8 filed June 30, 2009 filed August 6, 200927, 2017 |
10.710.9 |
| | Form of Restricted Share Unit Agreement under the 20092017 Share Incentive Plan * | | Incorporated by reference to Exhibit 10.84.8 to Annual ReportRegistration Statement on Form 10-K for the year ended December 31, 2012S-8 filed February 26, 2013June 27, 2017 |
10.810.10 |
| | Form of Long-Term Performance Share Unit Award Agreement underpursuant to the 2009W. P. Carey Inc. 2017 Share Incentive Plan * | | Incorporated by reference to Exhibit 10.54.6 to Quarterly ReportRegistration Statement on Form 10-Q for the quarter endedS-8 filed June 30, 2015 filed August 7, 201527, 2017 |
10.910.11 |
| | Form of Non-Employee Director Restricted Share Agreement under the 2017 Share Incentive Plan | | Incorporated by reference to Exhibit 4.5 to Registration Statement on Form S-8, filed June 27, 2017 |
| 10.12 |
| | W. P. Carey Inc. 2009 Non-Employee Directors’ Incentive Plan (the “2009 Directors Plan”) *
| | Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed August 6, 2013 |
|
| 10.13 |
|
| | Amendment to Certain Equity Award Agreements between W. P. Carey 2016 10-K– 171 |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
10.10 |
| | Form of Restricted Share Agreement under the 2009 Directors Plan *Inc. and Mark J. DeCesaris | | Incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed August 6, 2013 |
10.11 |
| | Separation Agreement, dated February 10, 2016, by and between W. P. Carey Inc. and Trevor P. Bond * | | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K, filed on February 10, 2016 |
10.12 |
| | Separation Agreement, dated February 10, 2016, by and between W. P. Carey Inc. and Catherine Rice * | | Incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016 |
10.13 |
| | Transition Agreement, dated as of December 7, 2016, by and between W. P. Carey Inc. and Thomas E. Zacharias * | | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K, filed on December 9, 2016 |
10.14 |
| | Amended and Restated Advisory Agreement dated as of January 1, 2015 among Corporate Property Associates 17 – Global Incorporated, CPA:17 Limited Partnership and Carey Asset Management Corp. | | Incorporated by reference to Exhibit 10.1210.16 to Annual Report on Form 10-K for the year ended December 31, 20142017 filed March 2, 2015February 23, 2018 |
10.1510.14 |
| | Amended and Restated Asset Management Agreement dated as of May 13, 2015 between Corporate Property Associates 17 – Global Incorporated, CPA:17 Limited Partnership and W. P. Carey & Co. B. V. | | Incorporated by reference to Exhibit 10.3 to Corporate Property Associates 17 - Global Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed May 15, 2015 |
10.16 |
| | Amended and Restated Advisory Agreement, dated as of January 1, 2015 by and among Corporate Property Associates 18 – Global Incorporated, CPA:18 Limited Partnership and Carey Asset Management Corp. | | Incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K for the year ended December 31, 2014 filed March 2, 2015 |
10.1710.15 |
| | First Amendment to Amended and Restated Advisory Agreement, dated as of January 30, 2018, among Corporate Property Associates 18 – Global Incorporated, CPA: 18 Limited Partnership and Carey Asset Management Corp. | | Incorporated by reference to Exhibit 10.21 to Annual Report on Form 10-K for the year ended December 31, 2017 filed February 23, 2018 |
| 10.16 |
| | Amended and Restated Asset Management Agreement dated as of May 13, 2015, by and among, Corporate Property Associates 18 -– Global Incorporated, CPA:18 Limited Partnership and W. P. Carey & Co. B.V. | | Incorporated by reference to Exhibit 10.3 to Corporate Property Associates 18 -– Global Incorporated'sIncorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed May 15, 2015 |
10.1810.17 |
| | Dealer Manager Agreement, dated as of May 7, 2013, by and between Corporate Property Associates 18 – Global Incorporated and Carey Financial, LLC | | Incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q filed by Corporate Property Associates 18 – Global Incorporated on June 20, 2013 |
10.19 |
| | Amended and Restated Advisory Agreement, dated as of January 1, 2016, by and among Carey Watermark Investors Incorporated, CWI OP, LP, and Carey Lodging Advisors, LLC | | Incorporated by reference to Exhibit 10.14 to Annual Report on Form 10-K filed February 26, 2016 |
10.20 |
|
|
| W. P. Carey 2019 10-K– 154 |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 10.18 |
| | First Amendment to Amended and Restated Advisory Agreement, dated as of June 13, 2017, among Carey Watermark Investors Incorporated, CWI OP, LP, and Carey Lodging Advisors, LLC | | Incorporated by reference to Exhibit 10.24 to Annual Report on Form 10-K for the year ended December 31, 2017 filed February 23, 2018 |
| 10.19 |
| | Advisory Agreement, dated as of February 9, 2015, by and among Carey Watermark Investors 2 Incorporated, CWI 2 OP, LP and Carey Lodging Advisors, LLC | | Incorporated by reference to Exhibit 10.25 to Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 2, 2015 |
10.2110.20 |
| | First Amendment to Advisory Agreement, dated as of June 30, 2015, by and among Carey Watermark Investors 2 Incorporated, CWI 2 OP, LP and Carey Lodging Advisors, LLC | | Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filed August 7, 2015 |
10.2210.21 |
| | Dealer ManagerSecond Amendment to Advisory Agreement, dated as of AprilJune 13, 20152017, by and betweenamong Carey Watermark Investors 2 Incorporated, CWI 2 OP, LP and Carey Financial, LLC | | Incorporated by reference to Exhibit 10.9 to Carey Watermark Investors 2 Incorporated Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed May 15, 2015 |
10.23 |
| | Investment Advisory Agreement, dated as of February 27, 2015, between Carey Credit Income Fund and Carey CreditLodging Advisors, LLC | | Incorporated by reference to Exhibit 99(g)(1) filed with Pre-Effective Amendment No. 310.27 to Carey Credit Income Fund 2015 T’s registration statementAnnual Report on Form N-210-K for the year ended December 31, 2017 filed on May 4, 2015 |
| February 23, 2018 |
| 10.22 | |
| W. P. Carey 2016 10-K– 172
|
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
10.24 |
| | Investment Sub-Advisory Agreement, dated as of February 27, 2015, among Carey Credit Advisors, LLC, Guggenheim Partners Investment Management LLC and Carey Credit Income Fund | | Incorporated by reference to Exhibit 99(g)(2) filed with Pre-Effective Amendment No. 3 to Carey Credit Income Fund 2015 T’s registration statement on Form N-2, filed on May 4, 2015 |
10.25 |
| | ThirdFourth Amended and Restated Credit Agreement, dated as of February 22, 2017, by and20, 2020, among W. P. Carey as Borrower, certainInc. and Certain of its Subsidiaries of W. P. Carey identified therein from time to time as Guarantors, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, and Bank of America, N.A., JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A., as L/C Issuers, Bank of America, N.A., as Swing Line Lender, and the Lenders and L/C Issuers.party thereto | | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on February 23, 201720, 2020 |
10.2610.23 |
| | Agency Agreement dated as of January 19, 2017, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, Elavon Financial Services DAC, UK Branch, as paying agent and U.S. Bank National Association, as transfer agent, registrar and trustee.trustee | | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 19, 2017 |
1210.24 |
| | ComputationsAgency Agreement dated as of Ratios of Earnings to Fixed Charges for the years ended December 31, 2016, 2015, 2014, 2013,March 6, 2018, by and 2012among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, Elavon Financial Services DAC, UK Branch, as paying agent and U.S. Bank National Association, as transfer agent, registrar and trustee | | Filed herewithIncorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed March 6, 2018 |
| 10.25 |
| | Agency Agreement dated as of October 9, 2018, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, Elavon Financial Services DAC, UK Branch, as paying agent and U.S. Bank National Association, as transfer agent, registrar and trustee | | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed October 9, 2018 |
| 10.26 |
| | Equity Sales Agreement, dated August 9, 2019, by and among W. P. Carey Inc. and each of Barclays Capital Inc., BMO Capital Markets Corp., BNY Mellon Capital Markets, LLC, BofA Securities, Inc., BTIG, LLC, Capital One Securities, Inc., Fifth Third Securities, Inc., Jefferies LLC, J.P. Morgan Securities LLC, Regions Securities LLC, Scotia Capital (USA) Inc., Stifel, Nicolaus & Company, Incorporated and Wells Fargo Securities, LLC, as agents, and each of Barclays Bank PLC, Bank of Montreal, The Bank of New York Mellon, Bank of America, N.A., Jefferies LLC, JPMorgan Chase Bank, National Association, The Bank of Nova Scotia and Wells Fargo Bank, National Association, as forward purchasers | | Incorporated by reference to Exhibit 1.1 to Current Report on Form 8-K filed August 12, 2019 |
|
| |
| W. P. Carey 2019 10-K– 155 |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 10.27 |
| | Agency Agreement dated as of September 19, 2019, by and among WPC Eurobond B.V., as issuer, W.P. Carey Inc., as guarantor, Elavon Financial Services DAC, as paying agent and U.S. Bank National Association, as transfer agent, registrar and trustee | | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed September 19, 2019 |
| 10.28 |
| | Internalization Agreement dated as of October 22, 2019, by and among Carey Watermark Investors Incorporated, CWI OP, LP, Carey Watermark Investors 2 Incorporated, CWI 2 OP, LP, W. P. Carey Inc., Carey Watermark Holdings, LLC, Carey Watermark Holdings 2, LLC, Carey Lodging Advisors, LLC, Watermark Capital Partners, LLC, CWA, LLC, and CWA 2, LLC | | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed October 22, 2019 |
| 10.29 |
| | Transition Services Agreement dated as of October 22, 2019, by and between W. P. Carey Inc. and Carey Watermark Investors 2 Incorporated | | Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed October 22, 2019 |
| 18.1 |
| | Preferability letter of Independent Registered Public Accounting Firm | | Incorporated by reference to Exhibit 18.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 filed November 5, 2013 |
| 21.1 |
| | List of Registrant Subsidiaries | | Filed herewith |
| 23.1 |
| | Consent of PricewaterhouseCoopers LLP | | Filed herewith |
| 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 |
| 99.1 |
| | Director and Officer Indemnification Policy | | Incorporated by reference to Exhibit 99.1 to Annual Report on Form 10-K for the year ended December 31, 2012 filed February 26, 2013 |
99.2101.INS |
| | Financial Statements of Corporate Property Associates 16XBRL Instance Document – Global Incorporatedthe instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document. | | Incorporated by reference to Exhibit 99.2 to Annual Report on Form 10-K for the year ended December 31, 2013 filed March 3, 2014Filed herewith |
| 101.SCH |
| | XBRL Taxonomy Extension Schema Document | | Filed herewith |
| 101.CAL |
| | XBRL Taxonomy Extension Calculation Linkbase Document | | Filed herewith |
| 101.DEF |
| | XBRL Taxonomy Extension Definition Linkbase Document | | Filed herewith |
|
| |
| | W. P. Carey 20162019 10-K– 173156 |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
101101.LAB |
| | The following materials from W. P. Carey Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2016 and 2015, (ii) Consolidated Statements of Income for the years ended December 31, 2016, 2015, and 2014, (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015, and 2014, (iv) Consolidated Statements of Equity for the years ended December 31, 2016, 2015, and 2014, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015, and 2014, (vi) Notes to Consolidated Financial Statements, (vii) Schedule II — Valuation and Qualifying Accounts, (viii) Schedule III — Real Estate and Accumulated Depreciation, and (ix) Notes to Schedule III — Real Estate and Accumulated Depreciation.Taxonomy Extension Label Linkbase Document | | Filed herewith |
| 101.PRE |
| | XBRL Taxonomy Extension Presentation Linkbase Document | | Filed herewith |
______________________
*The referenced exhibit is a management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item 15 (a)(3) of Form 10-K.
|
| |
| | W. P. Carey 20162019 10-K– 174157 |
Item 16. Form 10-K Summary.
None.
|
| |
| | W. P. Carey 20162019 10-K– 175158 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this reportReport to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| | | |
| | | | W. P. Carey Inc. |
| | | | |
| Date: | February 24, 201721, 2020 | By: | /s/ ToniAnn Sanzone |
| | | | ToniAnn Sanzone |
| | | | Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this reportReport has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
| | | | |
| Signature | | Title | | Date |
| | | | | |
/s/ Mark J. DeCesarisJason E. Fox | | Director and Chief Executive Officer | | February 24, 201721, 2020 |
Mark J. DeCesarisJason E. Fox | | (Principal Executive Officer) | | |
| | | | | |
| /s/ ToniAnn Sanzone | | Chief Financial Officer | | February 24, 201721, 2020 |
| ToniAnn Sanzone | | (Principal Financial Officer) | | |
| | | | | |
| /s/ Arjun Mahalingam | | Chief Accounting Officer | | February 24, 201721, 2020 |
| Arjun Mahalingam | | (Principal Accounting Officer) | | |
| | | | | |
/s/ Benjamin H. Griswold, IVChristopher J. Niehaus | | Chairman of the Board and Director | | February 24, 201721, 2020 |
Benjamin H. Griswold, IVChristopher J. Niehaus | | | | |
| | | | | |
| /s/ Mark A. Alexander | | Director | | February 24, 201721, 2020 |
| Mark A. Alexander | | | | |
| | | | |
/s/ Nathaniel S. Coolidge | | Director | | February 24, 2017 |
Nathaniel S. Coolidge | | | | |
| | | | | |
| /s/ Peter J. Farrell | | Director | | February 24, 201721, 2020 |
| Peter J. Farrell | | | | |
| | | | | |
| /s/ Robert J. Flanagan | | Director | | February 21, 2020 |
| Robert J. Flanagan | | | | |
| | | | |
| /s/ Benjamin H. Griswold, IV | | Director | | February 21, 2020 |
| Benjamin H. Griswold, IV | | | | |
| | | | |
/s/ Axel K.A.K. A. Hansing | | Director | | February 24, 201721, 2020 |
Axel K.A.K. A. Hansing | | | | |
| | | | | |
| /s/ Jean Hoysradt | | Director | | February 24, 201721, 2020 |
| Jean Hoysradt | | | | |
| | | | | |
/s/ Richard C. MarstonMargaret G. Lewis | | Director | | February 24, 201721, 2020 |
Richard C. Marston | | | | |
| | | | |
/s/ Christopher J. Niehaus | | Director | | February 24, 2017 |
Christopher J. NiehausMargaret G. Lewis | | | | |
| | | | | |
/s/ Nicolaas J.M.J. M. van Ommen | | Director | | February 24, 201721, 2020 |
Nicolaas J.M.J. M. van Ommen | | | | |
| | | | |
/s/ Mary M. VanDeWeghe | | Director | | February 24, 2017 |
Mary M. VanDeWeghe | | | | |
| | | | |
/s/ Reginald Winssinger | | Director | | February 24, 2017 |
Reginald Winssinger | | | | |
|
| |
| | W. P. Carey 20162019 10-K– 176159 |
EXHIBIT INDEX
The following exhibits are filed with this Report. Documents other than those designated as being filed herewith are incorporated herein by reference.
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 3.1 |
| | Articles of Amendment and Restatement | | Incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 2012 filed February 26, 2013 |
3.2 |
| | Articles Supplementary | | |
3.33.2 |
| | ThirdFifth Amended and Restated Bylaws of W. P. Carey Inc. | | |
| 4.1 |
| | Form of Common Stock Certificate | | |
| 4.2 |
| | Indenture, dated as of March 14, 2014, by and between W. P. Carey Inc., as issuer and U.S. Bank National Association, as trustee | | |
| 4.3 |
| | First Supplemental Indenture, dated as of March 14, 2014, by and between W. P. Carey Inc., as issuer, and U.S. Bank National Association, as trustee | | |
| 4.4 |
| | Form of Global Note Representing $500,000,000 Aggregate Principal Amount of 4.60% Senior Notes due 2024 | | |
| 4.5 |
| | Second Supplemental Indenture, dated as of January 21, 2015, by and between W. P. Carey Inc., as issuer, and U.S. Bank National Association, as trustee | | |
| 4.6 |
| | Form of Note representing €500 Million Aggregate Principal Amount of 2.000% Senior Notes due 2023 | | |
| 4.7 |
| | Third Supplemental Indenture, dated January 26, 2015, by and between W. P. Carey Inc., as issuer, and U.S. Bank National Association, as trustee | | |
| 4.8 |
| | Form of Note representing $450 Million Aggregate Principal Amount of 4.000% Senior Notes due 2025 | | |
| 4.9 |
| | Fourth Supplemental Indenture, dated as of September 12, 2016, by and between W. P. Carey Inc., as issuer, and U.S. Bank National Association, as trustee | | |
| 4.10 |
| | Form of Note representing $350 Million Aggregate Principal Amount of 4.250% Senior Notes due 2026 | | |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 4.11 |
| | Indenture, dated as of November 8, 2016, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, and U.S. Bank National Association, as trustee | | |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 4.12 |
| | First Supplemental Indenture, dated as of January 19, 2017, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, and U.S. Bank National Association, as trustee. | | |
| 4.13 |
| | Form of Note representing €500 Million Aggregate Principal Amount of 2.250% Senior Notes due 2024 | | |
| 4.14 |
| | Second Supplemental Indenture dated as of March 6, 2018, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, and U.S. Bank National Association, as trustee | | |
| 4.15 |
| | Form of Note representing €500 Million Aggregate Principal Amount of 2.125% Senior Notes due 2027 | | |
| 4.16 |
| | Third Supplemental Indenture dated as of October 9, 2018, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, and U.S. Bank National Association, as trustee | | |
| 4.17 |
| | Form of Note representing €500 Million Aggregate Principal Amount of 2.250% Senior Notes due 2026 | | |
| 4.18 |
| | Fifth Supplemental Indenture, dated June 14, 2019, by and between W. P. Carey Inc., as issuer, and U.S. Bank National Association, as trustee | | |
| 4.19 |
| | Form of Note representing $325 Million Aggregate Principal Amount of 3.850% Senior Notes due 2029 | | |
| 4.20 |
| | Fourth Supplemental Indenture, dated as of September 19, 2019, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, and U.S. Bank National Association, as trustee | | |
| 4.21 |
| | Form of Note representing €500 Million Aggregate Principal Amount of 1.350% Senior Notes due 2028 | | |
| 4.22 |
| | Description of Securities Registered under Section 12 of the Exchange Act | | |
| 10.1 |
| | W. P. Carey Inc. 1997 Share Incentive Plan, as amended * | | |
| 10.2 |
| | W. P. Carey Inc. (formerly W. P. Carey & Co. LLC) Long-Term Incentive Program as amended and restated effective as of September 28, 2012 * | | |
| 10.3 |
| | W. P. Carey Inc. Amended and Restated Deferred Compensation Plan for Employees * | | |
| 10.4 |
| | Amended and Restated W. P. Carey Inc. 2009 Share Incentive Plan * | | |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 10.5 |
| | 2017 Annual Incentive Compensation Plan | | |
| 10.6 |
| | 2017 Share Incentive Plan | | |
| 10.7 |
| | Form of Share Option Agreement under the 20092017 Share Incentive Plan * | | |
10.610.8 |
| | Form of Restricted Share Agreement under the 20092017 Share Incentive Plan * | | |
10.710.9 |
| | Form of Restricted Share Unit Agreement under the 20092017 Share Incentive Plan * | | |
10.810.10 |
| | Form of Long-Term Performance Share Unit Award Agreement underpursuant to the 2009W. P. Carey Inc. 2017 Share Incentive Plan * | | |
10.910.11 |
| | Form of Non-Employee Director Restricted Share Agreement under the 2017 Share Incentive Plan | | |
| 10.12 |
| | W. P. Carey Inc. 2009 Non-Employee Directors’ Incentive Plan (the “2009 Directors Plan”) *
| | |
10.1010.13 |
| | Form of Restricted Share Agreement under the 2009 Directors Plan * | | Incorporated by referenceAmendment to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed August 6, 2013 |
10.11 |
| | Separation Agreement, dated February 10, 2016, by andCertain Equity Award Agreements between W. P. Carey Inc. and Trevor P. Bond *Mark J. DeCesaris | | |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
10.12 |
| | Separation Agreement, dated February 10, 2016, by and between W. P. Carey Inc. and Catherine Rice * | | Incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016 |
10.13 |
| | Transition Agreement, dated as of December 7, 2016, by and between W. P. Carey Inc. and Thomas E. Zacharias * | | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K, filed on December 9, 2016 |
10.14 |
| | Amended and Restated Advisory Agreement dated as of January 1, 2015 among Corporate Property Associates 17 – Global Incorporated, CPA:17 Limited Partnership and Carey Asset Management Corp. | | Incorporated by reference to Exhibit 10.1210.16 to Annual Report on Form 10-K for the year ended December 31, 20142017 filed March 2, 2015February 23, 2018 |
10.1510.14 |
| | Amended and Restated Asset Management Agreement dated as of May 13, 2015 between Corporate Property Associates 17 – Global Incorporated, CPA:17 Limited Partnership and W. P. Carey & Co. B. V. | | Incorporated by reference to Exhibit 10.3 to Corporate Property Associates 17 - Global Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed May 15, 2015 |
10.16 |
| | Amended and Restated Advisory Agreement, dated as of January 1, 2015 by and among Corporate Property Associates 18 – Global Incorporated, CPA:18 Limited Partnership and Carey Asset Management Corp. | | |
10.1710.15 |
| | First Amendment to Amended and Restated Advisory Agreement, dated as of January 30, 2018, among Corporate Property Associates 18 – Global Incorporated, CPA: 18 Limited Partnership and Carey Asset Management Corp. | | |
| 10.16 |
| | Amended and Restated Asset Management Agreement dated as of May 13, 2015, by and among, Corporate Property Associates 18 -– Global Incorporated, CPA:18 Limited Partnership and W. P. Carey & Co. B.V. | | |
10.1810.17 |
| | Dealer Manager Agreement, dated as of May 7, 2013, by and between Corporate Property Associates 18 – Global Incorporated and Carey Financial, LLC | | Incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q filed by Corporate Property Associates 18 – Global Incorporated on June 20, 2013 |
10.19 |
| | Amended and Restated Advisory Agreement, dated as of January 1, 2016, by and among Carey Watermark Investors Incorporated, CWI OP, LP, and Carey Lodging Advisors, LLC | | |
10.2010.18 |
| | First Amendment to Amended and Restated Advisory Agreement, dated as of June 13, 2017, among Carey Watermark Investors Incorporated, CWI OP, LP, and Carey Lodging Advisors, LLC | | |
| 10.19 |
| | Advisory Agreement, dated as of February 9, 2015, by and among Carey Watermark Investors 2 Incorporated, CWI 2 OP, LP and Carey Lodging Advisors, LLC | | |
|
10.21 |
| | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 10.20 |
| | First Amendment to Advisory Agreement, dated as of June 30, 2015, by and among Carey Watermark Investors 2 Incorporated, CWI 2 OP, LP and Carey Lodging Advisors, LLC | | |
10.2210.21 |
| | Dealer ManagerSecond Amendment to Advisory Agreement, dated as of AprilJune 13, 20152017, by and betweenamong Carey Watermark Investors 2 Incorporated, CWI 2 OP, LP and Carey Financial,Lodging Advisors, LLC | | |
10.2310.22 |
| | Investment Advisory Agreement, dated as of February 27, 2015, between Carey Credit Income Fund and Carey Credit Advisors, LLC | | Incorporated by reference to Exhibit 99(g)(1) filed with Pre-Effective Amendment No. 3 to Carey Credit Income Fund 2015 T’s registration statement on Form N-2 filed on May 4, 2015 |
10.24 |
| | Investment Sub-Advisory Agreement, dated as of February 27, 2015, among Carey Credit Advisors, LLC, Guggenheim Partners Investment Management LLC and Carey Credit Income Fund | | Incorporated by reference to Exhibit 99(g)(2) filed with Pre-Effective Amendment No. 3 to Carey Credit Income Fund 2015 T’s registration statement on Form N-2, filed on May 4, 2015 |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
10.25 |
| | ThirdFourth Amended and Restated Credit Agreement, dated as of February 22, 2017, by and20, 2020, among W. P. Carey as Borrower, certainInc. and Certain of its Subsidiaries of W. P. Carey identified therein from time to time as Guarantors, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, and Bank of America, N.A., JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A., as L/C Issuers, Bank of America, N.A., as Swing Line Lender, and the Lenders and L/C Issuers.party thereto | | |
10.2610.23 |
| | Agency Agreement dated as of January 19, 2017, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, Elavon Financial Services DAC, UK Branch, as paying agent and U.S. Bank National Association, as transfer agent, registrar and trustee.trustee | | |
1210.24 |
| | ComputationsAgency Agreement dated as of Ratios of Earnings to Fixed Charges for the years ended December 31, 2016, 2015, 2014, 2013,March 6, 2018, by and 2012among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, Elavon Financial Services DAC, UK Branch, as paying agent and U.S. Bank National Association, as transfer agent, registrar and trustee | | Filed herewith |
| 10.25 |
| | Agency Agreement dated as of October 9, 2018, by and among WPC Eurobond B.V., as issuer, W. P. Carey Inc., as guarantor, Elavon Financial Services DAC, UK Branch, as paying agent and U.S. Bank National Association, as transfer agent, registrar and trustee | | |
| 10.26 |
| | Equity Sales Agreement, dated August 9, 2019, by and among W. P. Carey Inc. and each of Barclays Capital Inc., BMO Capital Markets Corp., BNY Mellon Capital Markets, LLC, BofA Securities, Inc., BTIG, LLC, Capital One Securities, Inc., Fifth Third Securities, Inc., Jefferies LLC, J.P. Morgan Securities LLC, Regions Securities LLC, Scotia Capital (USA) Inc., Stifel, Nicolaus & Company, Incorporated and Wells Fargo Securities, LLC, as agents, and each of Barclays Bank PLC, Bank of Montreal, The Bank of New York Mellon, Bank of America, N.A., Jefferies LLC, JPMorgan Chase Bank, National Association, The Bank of Nova Scotia and Wells Fargo Bank, National Association, as forward purchasers | | |
| 10.27 |
| | Agency Agreement dated as of September 19, 2019, by and among WPC Eurobond B.V., as issuer, W.P. Carey Inc., as guarantor, Elavon Financial Services DAC, as paying agent and U.S. Bank National Association, as transfer agent, registrar and trustee | | |
| 10.28 |
| | Internalization Agreement dated as of October 22, 2019, by and among Carey Watermark Investors Incorporated, CWI OP, LP, Carey Watermark Investors 2 Incorporated, CWI 2 OP, LP, W. P. Carey Inc., Carey Watermark Holdings, LLC, Carey Watermark Holdings 2, LLC, Carey Lodging Advisors, LLC, Watermark Capital Partners, LLC, CWA, LLC, and CWA 2, LLC | | |
|
| | | | | |
Exhibit
No. |
| | Description | | Method of Filing |
| 10.29 |
| | Transition Services Agreement dated as of October 22, 2019, by and between W. P. Carey Inc. and Carey Watermark Investors 2 Incorporated | | |
| 18.1 |
| | Preferability letter of Independent Registered Public Accounting Firm | | |
| 21.1 |
| | List of Registrant Subsidiaries | | |
| 23.1 |
| | Consent of PricewaterhouseCoopers LLP | | |
| 31.1 |
| | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | |
| 31.2 |
| | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | |
| 32 |
| | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | |
| 99.1 |
| | Director and Officer Indemnification Policy | | |
99.2101.INS |
| | Financial Statements of Corporate Property Associates 16XBRL Instance Document – Global Incorporatedthe instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document. | | Incorporated by reference to Exhibit 99.2 to Annual Report on Form 10-K for the year ended December 31, 2013 filed March 3, 2014 |
| Filed herewith |
| 101.SCH | | | | | |
Exhibit
No. |
| | DescriptionXBRL Taxonomy Extension Schema Document | | Method of FilingFiled herewith |
101101.CAL |
| | The following materials from W. P. Carey Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2016 and 2015, (ii) Consolidated Statements of Income for the years ended December 31, 2016, 2015, and 2014, (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015, and 2014, (iv) Consolidated Statements of Equity for the years ended December 31, 2016, 2015, and 2014, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015, and 2014, (vi) Notes to Consolidated Financial Statements, (vii) Schedule II — Valuation and Qualifying Accounts, (viii) Schedule III — Real Estate and Accumulated Depreciation, and (ix) Notes to Schedule III — Real Estate and Accumulated Depreciation.
Taxonomy Extension Calculation Linkbase Document | | Filed herewith |
| 101.DEF |
| | XBRL Taxonomy Extension Definition Linkbase Document | | Filed herewith |
| 101.LAB |
| | XBRL Taxonomy Extension Label Linkbase Document | | Filed herewith |
| 101.PRE |
| | XBRL Taxonomy Extension Presentation Linkbase Document | | Filed herewith |
______________________
*The referenced exhibit is a management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item 15 (a)(3) of Form 10-K.
