Companies: 10,660     total market cap: $140.341 T
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W. P. Carey
WPC
#1424
Rank
$15.60 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$71.21
Share price
-0.24%
Change (1 day)
30.71%
Change (1 year)
๐Ÿ  Real estate๐Ÿ’ฐ Investment ๐Ÿ˜๏ธ REITs
Categories
  1. W. P. Carey
  2. Annual Reports (10-K)
  3. Financial Year 2019

W. P. Carey - 10-K annual report 2019


Text size:
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-K

☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
or 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to __________
Commission File Number: 001-13779
wpclogo1a15.jpg

W. P. Carey Inc.
(Exact name of registrant as specified in its charter) 
Maryland
45-4549771
(State of incorporation)
(I.R.S. Employer Identification No.)
 
 
 
50 Rockefeller Plaza
 
New York,
New York
10020
(Address of principal executive offices)
(Zip Code)
 

Investor Relations (212) 492-8920
(212) 492-1100
(Registrant’s telephone numbers, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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. Yes ☑ No ☐
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 ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer  
☐
 
 
 
 
 
 
Smaller reporting company
☐
Emerging growth company
☐
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
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: $13.8 billion.
As of February 14, 2020 there were 172,278,242 shares of Common Stock of registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant incorporates by reference its definitive Proxy Statement with respect to its 2020 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
 
 
 
Page No.
PART I
 
 
Item 1.
Business
3
Item 1A.
Risk Factors
6
Item 1B.
Unresolved Staff Comments
23
Item 2.
Properties
23
Item 3.
Legal Proceedings
23
Item 4.
Mine Safety Disclosures
23
PART II
 
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
24
Item 6.
Selected Financial Data
25
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
26
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
57
Item 8.
Financial Statements and Supplementary Data
60
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
150
Item 9A.
Controls and Procedures
150
Item 9B.
Other Information
150
PART III
 
 
Item 10.
Directors, Executive Officers and Corporate Governance
151
Item 11.
Executive Compensation
151
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
151
Item 13.
Certain Relationships and Related Transactions, and Director Independence
151
Item 14.
Principal Accounting Fees and Services
151
PART IV
 
 
Item 15.
Exhibits and Financial Statement Schedules
152
Item 16.
Form 10-K Summary
158
SIGNATURES
 


 
W. P. Carey 2019 10-K – 1


Forward-Looking Statements

This Annual Report on Form 10-K (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: our potential UPREIT Reorganization (both as discussed and defined herein); the amount and timing of any future dividends; statements regarding our corporate strategy and 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 quality), possible new acquisitions and dispositions, 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 programs that we manage, including their 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 (“REIT”); the impact of recently issued accounting pronouncements and other regulatory activity; and the 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, 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 (“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.

All references to “Notes” throughout the document refer to the footnotes to the consolidated financial statements of the registrant in Part II, Item 8. Financial Statements and Supplementary Data.


 
W. P. Carey 2019 10-K – 2


PART I

Item 1. Business.

General Development of Business

W. P. Carey Inc. (“W. P. Carey”), together with our consolidated subsidiaries and predecessors, is an internally-managed diversified REIT and a leading owner of commercial real estate, net-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 originate from lease revenue provided by our real estate portfolio, which is comprised primarily of single-tenant industrial, warehouse, office, retail, and self-storage facilities that are critical to our tenants’ operations. Our portfolio is comprised of 1,214 properties, net-leased to 345 tenants in 25 countries. As of December 31, 2019, approximately 64% of our contractual minimum annualized base rent (“ABR”) was generated by properties located in the United States and approximately 34% was generated by properties located in Europe. As of that same date, our portfolio included 21 operating properties, comprised of 19 self-storage properties and two hotels (one of which was sold in January 2020, see Note 20), substantially all of which we acquired in connection with the CPA:17 Merger, as described below.

We also earn fees and other income by managing the portfolios of certain non-traded investment programs through our investment management business. Founded in 1973, we originally operated as sponsor and advisor to a series of non-traded investment programs under the Corporate Property Associates (“CPA”) brand name. We became a publicly traded company listed on the New York Stock Exchange (“NYSE”) in 1998 and reorganized as a REIT in 2012. In June 2017, we exited non-traded retail fundraising activities and no longer sponsor new investment programs. On October 31, 2018, one of our former investment programs, Corporate Property Associates 17 – Global Incorporated (“CPA:17 – Global”), merged into one of our wholly-owned subsidiaries (the “CPA:17 Merger”), which added approximately $5.6 billion of assets to our portfolio.

Our shares of common stock are listed on the NYSE under the ticker symbol “WPC.” Headquartered in New York, we also have offices in Dallas, London, and Amsterdam. At December 31, 2019, we had 204 employees.

Narrative Description of Business

Business Objectives and Strategy

Our primary business objective is to increase long-term stockholder value through accretive acquisitions and proactive asset management of our real estate portfolio, enabling us to grow our dividend.

Our investment strategy primarily focuses on owning and actively managing a diverse portfolio of commercial real estate that is net-leased to credit-worthy companies. We believe that many companies prefer to lease rather than own their corporate real estate because it allows them to deploy their capital more effectively into their core competencies. We generally structure financing for companies in the form of sale-leaseback transactions, where we acquire a company’s critical real estate and then lease it back to them on a long-term, triple-net basis, which requires 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 require minimal capital 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 monitor tenant credit quality and lease renewal risks. We believe that diversification across property type, tenant, tenant industry, and geographic location, as well as diversification of our lease expirations and scheduled rent increases, are vital aspects of portfolio risk management and accordingly have constructed a portfolio of real estate that we believe is well-diversified across each of these categories.

In addition to our real estate portfolio, as of December 31, 2019, we also managed assets, totaling approximately $7.5 billion, of the following entities: (i) Corporate Property Associates 18 – Global Incorporated (“CPA:18 – Global,” and together with CPA:17 – Global until October 31, 2018, the “CPA REITs”); (ii) two publicly owned, non-traded REITs that have invested in lodging and lodging-related properties: Carey Watermark Investors Incorporated (“CWI 1”) and Carey Watermark Investors 2 Incorporated (“CWI 2,” and together with CWI 1, the “CWI REITs”); and (iii) a private limited partnership formed for the purpose of developing, owning, and operating student housing properties and similar investments in Europe: Carey European Student Housing Fund I, L.P. (“CESH”). As used herein, “Managed REITs” refers to the CPA REITs and the CWI REITS, all of which have fully invested the funds raised in their offerings.


 
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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 refer 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 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 combined company will internalize the management services currently provided by us (Note 4).

We intend to operate our business in a manner that is consistent with the maintenance of our status as a REIT for federal income tax purposes. In addition, we expect to manage our investments in order to maintain our exemption from registration as an investment company under the Investment Company Act of 1940, as amended.

Investment Strategies

When considering potential net-lease investments for our real estate portfolio, we review various aspects of a transaction to determine whether the investment and lease structure will satisfy our investment criteria. We generally analyze the following main aspects of each transaction:

Tenant/Borrower Evaluation — We evaluate each potential tenant or borrower for creditworthiness, typically considering factors such as management experience, industry position and fundamentals, operating history, and capital 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 unique to a particular investment. We seek opportunities where we believe the tenant may have a stable or improving credit profile or credit potential that has not been fully recognized by the market. 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. We have a robust internal credit rating system and may designate a tenant as “implied investment grade” even if the credit rating agencies have not made a rating determination.

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, particularly 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 portfolio to avoid undue dependence on any one particular tenant, borrower, collateral type, geographic location, or industry. By diversifying 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 do not set any fixed diversity metrics in our portfolio, we believe that it is well-diversified.

Lease Terms — Generally, the net-leased properties we invest in are leased on a full-recourse basis to the tenants or their affiliates. In addition, the vast majority of our leases provide for scheduled rent increases over the term of the lease (see Our Portfolio below). These rent increases are either fixed (i.e., mandated on specific dates) or tied to increases in inflation indices (e.g., the Consumer Price Index (“CPI”) or similar indices in the jurisdiction where the property is 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 percentage rent.


 
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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 when required. When considering an investment outside the United States, we will also consider factors particular to a country or region, including 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 — When negotiating leases with potential tenants, we attempt to include provisions that we believe help to protect the investment from material changes in the tenant’s operating and financial characteristics, which 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 activities, requiring indemnification protections and/or security deposits, and requiring the tenant to satisfy specific operating tests. We may also seek to enhance the likelihood that a tenant will satisfy their lease obligations through a letter of credit or guaranty from the tenant’s parent or other entity. Such credit enhancements, if obtained, provide 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 option to repurchase the property, typically at the greater of the contract purchase price or the fair market value of the property at the time the option is exercised.

Competition — We face active competition from many sources, both domestically and internationally, for net-lease investment opportunities in commercial properties. In general, we believe that our management’s experience in real estate, credit underwriting, and transaction structuring will 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 find unacceptable.
 
Asset Management

We believe that proactive asset management 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 compliance by tenants with their lease obligations and other factors that could affect the financial performance of our real estate investments on an ongoing basis, which typically involves ensuring that each tenant has paid real estate taxes and other expenses relating to the properties it occupies and is maintaining appropriate insurance coverage. To ensure such compliance at our international properties, we often engage the expertise of third parties to complete property inspections. We also review tenant financial statements and undertake regular physical inspections of the properties to verify their condition and 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.


 
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Our Portfolio

At December 31, 2019, our portfolio had the following characteristics:

•
Number of properties — full or partial ownership interests in 1,214 net-leased properties, 19 self-storage properties, and two hotels;
•
Total net-leased square footage — 140.0 million; and
•
Occupancy rate — approximately 98.8%.

For more information about our portfolio, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Portfolio Overview.
 
Tenant/Lease Information

At December 31, 2019, our tenants/leases had the following characteristics:

•
Number of tenants — 345;
•
Investment grade tenants as a percentage of total ABR — 22%;
•
Implied investment grade tenants as a percentage of total ABR — 8%;
•
Weighted-average lease term — 10.7 years;
•
99% of our leases provide rent adjustments as follows:
◦
CPI and similar — 63%
◦
Fixed — 32%
◦
Other — 4%

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, as 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 and do not intend for it to be an active link. We do not intend to incorporate the information contained on our website into this Report or other documents filed with or furnished to the SEC.

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

We face active competition for investments.

We face active competition for our investments from many sources, including 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. We believe that the investment community remains risk averse and that the net lease financing market is perceived as a relatively conservative investment vehicle.

 
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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 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 24% of our leases, based on our ABR as of December 31, 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, our lease revenues could be substantially adversely affected. In addition, when attempting to re-lease such properties, we may incur significant costs and the terms of any new or renewed leases will depend on prevailing market conditions at that time. We may also seek to sell such properties and incur losses due to prevailing market conditions. Some of our properties are designed for the particular needs of a tenant; thus, we may be required to renovate or make rent concessions in order to lease the property to another tenant. If we need to sell such properties, we may have difficulty selling it to a third party 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.

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, we are not required to meet any diversification standards. Therefore, our investments may become concentrated in type or geographic location, which could subject us to significant 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, 2019, our real estate properties located outside of the United States represented 36% of our 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 observing a 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 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 Directives), which may result in additional taxes on our international investments;
•
changes in operating expenses in particular countries or regions; and
•
geopolitical risk and adverse market conditions caused by changes in national or regional economic or political conditions (which may impact relative interest rates and the terms or availability of mortgage 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 could impair our ability to analyze transactions and may cause us to forego an investment 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 less developed countries. Further, our expertise to date is primarily in the

 
W. P. Carey 2019 10-K – 7


United States and certain countries in Europe. We have less experience in other international markets and may not be as familiar with the potential risks to investments in these areas, which could cause us and the entities we manage to incur losses.
 
We may engage third-party asset managers in international jurisdictions to monitor compliance with legal requirements and lending agreements. Failure to comply with applicable requirements may expose us, our operating subsidiaries, or the entities we manage to additional liabilities. Our operations in the United Kingdom, the European Economic Area, and other countries are subject to significant compliance, disclosure, and other obligations. The European Union’s Alternative Investment Fund Managers Directive (“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, 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 may impose additional compliance burdens and expense on us and could reduce our operating 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 exposure is to the euro). Our 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).

Economic conditions and regulatory changes following the United Kingdom’s exit from the European Union could have a material adverse effect on our business and results of operations.

The United Kingdom initiated the process to leave the European Union (“Brexit”) on March 29, 2017, which formally occurred on January 31, 2020. The United Kingdom is currently in a transition period until December 31, 2020, during which it negotiates the terms of its future relationship with the European Union, while preserving membership in the European Union’s internal market and customs union and relinquishing representation in the European Union’s institutions.

The real estate industry faces substantial uncertainty regarding the impact of Brexit. Adverse consequences could include, but 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. As 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 events on our operations, financial condition, and results of operations.

The anticipated replacement of LIBOR with an alternative reference rate, may adversely affect our interest expense.

Certain instruments within our debt profile are indexed to the London Interbank Offered Rate (“LIBOR”), which is a benchmark rate at which banks offer to lend funds to one another in the international 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 September 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 Senior Unsecured Credit Facility and non-recourse mortgage loans subject to floating interest rates with carrying values of $201.3 million and $72.1 million, respectively, as of December 31, 2019) will fall back to various alternative methods, any of which could result in higher interest obligations than under LIBOR. Further, the same costs and risks that may lead to the discontinuation or unavailability of LIBOR may make one or more of the alternative methods impossible or impracticable to determine. There is no guarantee that a 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 financing costs, liquidity, results of operations, and overall financial condition.


 
W. P. Carey 2019 10-K – 8


We may incur substantial impairment charges.
 
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 collectability 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 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 significantly more indebtedness in the future, which would exacerbate the risks discussed above.


 
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Restrictive 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 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). 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.

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.
 
At December 31, 2019, we had $1.5 billion of property-level mortgage debt on a non-recourse basis, which 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 incorporated 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 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.


 
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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 compliance by tenants with their lease obligations and other factors that could affect the financial performance of our properties on an ongoing basis, we may not always be able to ascertain or forestall deterioration 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, including changes in interest rates or foreign exchange rates;
•
changes in the supply of, or demand for, similar or competing properties;
•
competition for tenants and changes in market rental rates;
•
inability to lease or sell properties upon termination of existing 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;
•
exposure to environmental losses; 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 22% of total ABR at December 31, 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.


 
W. P. Carey 2019 10-K – 11


The bankruptcy or insolvency of tenants 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 could cause the loss of lease or interest and principal payments, an increase in the carrying cost of the property, 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 our 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 and the maximum claim will be 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.

Insolvency laws outside the United States may be more or less favorable to reorganization or the protection of a debtor’s rights as in the United States (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 the financial difficulties of the Agrokor group). 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.
 
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 have invested, and may in the future invest, in real properties historically or currently used for industrial, manufacturing, and other commercial purposes, and some 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 environmental laws. 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.
 
Costs relating to investigation, remediation, or removal of hazardous or toxic substances, or for third-party claims for damages, may be 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 business are subject to volatility, which may cause our investment management revenue to fluctuate.
 
Revenue from our investment management business, as well as the value of our interests in the Managed Programs and distributions from those interests, may be affected by several factors:

•
the Managed 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;

 
W. P. Carey 2019 10-K – 12


•
our asset management revenue may be affected by changes in the valuation of the Managed Programs’ portfolios (CPA:18 – Global has significant investments in triple-net leased properties substantially similar to those we hold and may be affected by the same market conditions and risks as the properties we own);
•
each of the Managed Programs has incurred, and may continue to incur, significant debt that, either due to liquidity problems or covenants contained in their borrowing agreements, could restrict their ability to pay revenue owed to us;
•
the revenue payable to us under each of our advisory agreements with the Managed REITs is subject to a variable annual cap based on a formula tied to its assets and income;
•
our ability to earn revenue related to the disposition of properties is primarily tied to providing liquidity events for the Managed Programs and our ability to do so under circumstances that will satisfy the applicable subordination requirements will depend on market conditions at the relevant time;

Finally, 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 March 31, 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 may have a material adverse effect on our business, results of operations, and financial condition.

On 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 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 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, our advisory agreements with the CWI REITs will terminate and the newly combined company will internalize the management services currently provided by us. During a transitional period, we have agreed to provide the newly combined company with transitional services consistent with the services that we and our affiliates currently provide under the CWI REITs’ advisory agreements.

W. P. Carey is not currently registered as an Investment Adviser 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 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 must register with the SEC as an investment adviser, we will become subject to the requirements of the Investment Advisers Act, including: fiduciary duties to clients, substantive prohibitions and requirements, contractual and record-keeping requirements, and administrative oversight by the SEC (primarily by 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.
 
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. Due 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 adjustments to our consolidated financial statements. If our judgments, assumptions, and allocations prove to be incorrect, or if

 
W. P. Carey 2019 10-K – 13


circumstances 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, subject to certain exceptions, authorizes our Board to take such actions as are necessary and desirable to limit any person to beneficial or constructive ownership of 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) common stock (excluding any of our outstanding shares of common stock not treated as outstanding for federal income tax purposes). Our 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 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 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 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 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
•
“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 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 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

 
W. P. Carey 2019 10-K – 14


case of the control share provisions of the MGCL, we have elected to opt out of these provisions of the MGCL pursuant to a provision in our bylaws.
 
Additionally, Title 3, Subtitle 8 of the MGCL permits our 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 MGCL, which permits a board of directors to be divided into classes pursuant to Title 3, Subtitle 8 of the 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 MGCL 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 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, or the perception that such securities are available or that such issuances or sales are likely to 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 to make significant changes to our stock without stockholder approval. See the risk factor above titled “Our Board 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.

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.

The trading volume and market price of our common stock may fluctuate significantly and be adversely impacted in response to a number of factors, including, but not limited to:

•
actual or anticipated variations in our operating results, earnings, or liquidity, or those of our competitors;
•
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;

 
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;
•
changes in key management personnel;
•
our compliance with GAAP and its policies, including recent accounting pronouncements;
•
our compliance with the listing requirements of the 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 activist 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.

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.

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 upon favorable terms or at all, we may be required to liquidate one or more investments, including when an investment has not yet realized its maximum return, 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.

There can be no assurance that we will be able to maintain cash 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, in its sole discretion, determines the amount and timing of any future dividend payments to our stockholders based on a number of factors, 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.


 
W. P. Carey 2019 10-K – 16


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 on 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.
 

 
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. 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 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 are 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.


 
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 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 use TRSs, which may cause us to fail to qualify as a REIT.
 
To qualify as a REIT for federal income tax purposes, we 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 20% of the fair market value of our assets, we would lose tax efficiency and could potentially fail to qualify as a REIT.

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.
 

 
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.
 
The 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 alternative minimum 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 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 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.
 

 
W. P. Carey 2019 10-K – 20


The ability of our Board to revoke our REIT election, without stockholder approval, may cause adverse consequences for our stockholders.
 
Our organizational documents permit our Board 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).


 
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.


 
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 Dallas. We lease all of these offices and believe these leases are suitable for our operations for the foreseeable future.
 
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Portfolio Overview — Net-Leased Portfolio for a discussion of the properties we hold for rental operations and Part II, Item 8. Financial Statements and Supplementary Data — Schedule III — Real Estate and Accumulated Depreciation for a detailed listing of such properties.

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.


 
W. P. Carey 2019 10-K – 23


PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
Market Information
 
Our common stock is listed on the NYSE under the ticker symbol “WPC.” At February 14, 2020 there were 9,263 registered holders of record of our common stock. This figure does not reflect the beneficial ownership of shares of our common stock.

Stock Price Performance Graph
 
The graph below provides an indicator of cumulative total stockholder returns for our common stock for the period December 31, 2014 to December 31, 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, 2014, together with the reinvestment of all dividends.

chart-df9e7f414b6150fba8f.jpg

 
At December 31,
 
2014
 
2015
 
2016
 
2017
 
2018
 
2019
W. P. Carey Inc.
$
100.00

 
$
89.60

 
$
95.46

 
$
118.20

 
$
119.38

 
$
153.77

S&P 500 Index
100.00

 
101.38

 
113.51

 
138.29

 
132.23

 
173.86

FTSE NAREIT Equity REITs Index
100.00

 
103.20

 
111.99

 
117.84

 
112.39

 
141.61

 
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 2020 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 2019 10-K – 24


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,
 
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, 2019 and 2018 reflect the impact of the CPA:17 Merger, which was completed on October 31, 2018 (Note 3).
(b)
Amount for the year ended December 31, 2019 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 $47.8 million recognized in connection with the CPA: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.

 
W. P. Carey 2019 10-K – 25


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial statements and the reasons for changes in certain key components of our financial statements from period to period. This item also provides our perspective on our financial position and liquidity, as well as certain other factors that may affect our future results. The discussion also breaks down the financial results 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 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 are 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 21 operating properties as of December 31, 2019. We invest in high-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, and 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 portfolios 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 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.

Please see our Current Report on Form 8-K dated October 22, 2019 for additional information.

Amended Credit Facility

On February 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 $2.1 billion, which is comprised of a $1.8 billion revolving line of credit, a £150.0 million term loan, and a $105.0 million delayed draw term loan, all 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 0.85% on the revolving line of credit, and LIBOR, or a LIBOR equivalent, plus 0.95% on the term loan and delayed draw term loan (Note 20).


 
W. P. Carey 2019 10-K – 26


Financial Highlights
 
During the year ended December 31, 2019, we completed the following (as further described in the consolidated financial statements):

Real Estate

Investments

•
We acquired 23 investments totaling $737.5 million (Note 5)
•
We completed seven construction projects at a cost totaling $122.5 million. Construction projects include build-to-suit and expansion projects (Note 5).
•
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).
•
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).
•
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).
•
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).
•
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).
•
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

•
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

•
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.


 
W. P. Carey 2019 10-K – 27


Financing and Capital Markets Transactions

•
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).
•
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).
•
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.
•
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.


 
W. P. Carey 2019 10-K – 28


Consolidated Results

(in thousands, except shares)
 
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

2019 vs. 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

2019 vs. 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

2019 vs. 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

Our portfolio is comprised of operationally-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 subject to 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,
 
2019
 
2018
 
2017
Number of net-leased properties (a)
1,214

 
1,163

 
887

Number of operating properties (b)
21

 
48

 
2

Number of tenants (net-leased properties)
345

 
304

 
210

Total square footage (net-leased properties, in thousands) (c)
139,982

 
130,956

 
84,899

Occupancy (net-leased properties)
98.8
%
 
98.3
%
 
99.8
%
Weighted-average lease term (net-leased properties, in years)
10.7

 
10.2

 
9.6

Number of countries (d)
25

 
25

 
17

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,
 
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)
We acquired 273 net-leased properties (in which we did not already have an ownership interest) in the CPA:17 Merger in October 2018 (Note 3).
(b)
At 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 year ended December 31, 2019, one of which was sold in January 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 one hotel in the CPA:17 Merger in October 2018 (Note 3), and we acquired two self-storage properties in November 2018 (Note 8). We also sold a hotel in April 2018 (Note 17). At December 31, 2018, operating properties also included two hotel properties. At December 31, 2017, operating properties consisted of 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, 2019 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)
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 27 properties leased to Forterra, Inc., 25 are located in the United States and two are located in Canada.


 
W. P. Carey 2019 10-K – 32


Portfolio Diversification by Geography
(in thousands, except percentages)
Region
 
ABR
 
ABR Percent
 
Square Footage (a)
 
Square Footage Percent
United States
 
 
 
 
 
 
 
 
South
 
 
 
 
 
 
 
 
Texas
 
$
99,611

 
8.9
%
 
11,411

 
8.2
%
Florida
 
47,079

 
4.2
%
 
4,060

 
2.9
%
Georgia
 
28,197

 
2.5
%
 
4,024

 
2.9
%
Tennessee
 
15,721

 
1.4
%
 
2,260

 
1.6
%
Alabama
 
15,273

 
1.4
%
 
2,397

 
1.7
%
Other (b)
 
12,622

 
1.1
%
 
2,263

 
1.6
%
Total South
 
218,503

 
19.5
%
 
26,415

 
18.9
%
East
 
 
 
 
 
 
 
 
North Carolina
 
32,648

 
2.9
%
 
8,052

 
5.7
%
Pennsylvania
 
25,079

 
2.3
%
 
3,609

 
2.6
%
Massachusetts
 
21,395

 
1.9
%
 
1,397

 
1.0
%
New Jersey
 
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
 
12,919

 
1.2
%
 
1,392

 
1.0
%
Kentucky
 
11,220

 
1.0
%
 
3,063

 
2.2
%
Other (b)
 
22,818

 
2.0
%
 
3,531

 
2.5
%
Total East
 
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
 
60,393

 
5.4
%
 
5,162

 
3.7
%
Arizona
 
33,826

 
3.0
%
 
3,648

 
2.6
%
Colorado
 
11,413

 
1.0
%
 
1,008

 
0.7
%
Other (b)
 
44,575

 
4.0
%
 
4,210

 
3.0
%
Total West
 
150,207

 
13.4
%
 
14,028

 
10.0
%
United States Total
 
710,545

 
63.5
%
 
92,583

 
66.1
%
International
 
 
 
 
 
 
 
 
Germany
 
62,653

 
5.6
%
 
6,769

 
4.8
%
Poland
 
52,066

 
4.6
%
 
7,215

 
5.1
%
The Netherlands
 
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
 
13,336

 
1.2
%
 
1,359

 
1.0
%
Canada
 
12,867

 
1.2
%
 
2,103

 
1.5
%
Finland
 
11,376

 
1.0
%
 
949

 
0.7
%
Other (c)
 
57,280

 
5.1
%
 
8,107

 
5.8
%
International Total
 
407,974

 
36.5
%
 
47,399

 
33.9
%
Total
 
$
1,118,519

 
100.0
%
 
139,982

 
100.0
%

 
W. P. Carey 2019 10-K – 33


Portfolio Diversification by Property Type
(in thousands, except percentages)
Property Type
 
ABR
 
ABR Percent
 
Square Footage (a)
 
Square Footage Percent
Industrial
 
$
268,434

 
24.0
%
 
47,996

 
34.3
%
Office
 
251,519

 
22.5
%
 
16,894

 
12.1
%
Warehouse
 
240,200

 
21.5
%
 
46,169

 
33.0
%
Retail (d)
 
198,686

 
17.7
%
 
17,556

 
12.5
%
Self Storage (net lease)
 
58,270

 
5.2
%
 
5,810

 
4.1
%
Other (e)
 
101,410

 
9.1
%
 
5,557

 
4.0
%
Total
 
$
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, Oklahoma, Arkansas, and Mississippi. Other properties within East include assets in Maryland, Connecticut, West Virginia, New Hampshire, and Maine. Other properties within Midwest include assets in Missouri, Kansas, Nebraska, Iowa, North Dakota, and South Dakota. Other properties within West include assets in Utah, Nevada, Oregon, Washington, Hawaii, New Mexico, Wyoming, Montana, and Alaska.
(c)
Includes 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: education facility, hotel (net lease), fitness facility, laboratory, theater, and student housing (net lease).


 
W. P. Carey 2019 10-K – 34


Portfolio Diversification by Tenant Industry
(in thousands, except percentages)
Industry Type
 
ABR
 
ABR Percent
 
Square Footage
 
Square Footage Percent
Retail Stores (a)
 
$
233,346

 
20.9
%
 
30,993

 
22.1
%
Consumer Services
 
113,588

 
10.1
%
 
8,429

 
6.0
%
Automotive
 
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
 
39,259

 
3.5
%
 
3,364

 
2.4
%
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
 
30,444

 
2.7
%
 
3,384

 
2.4
%
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
 
14,785

 
1.3
%
 
1,435

 
1.0
%
Aerospace and Defense
 
13,539

 
1.2
%
 
1,279

 
0.9
%
Media: Broadcasting and Subscription
 
12,787

 
1.1
%
 
784

 
0.6
%
Wholesale
 
12,206

 
1.1
%
 
2,005

 
1.4
%
Chemicals, Plastics, and Rubber
 
12,037

 
1.1
%
 
1,403

 
1.0
%
Other (b)
 
28,580

 
2.6
%
 
4,797

 
3.4
%
Total
 
$
1,118,519

 
100.0
%
 
139,982

 
100.0
%
__________
(a)
Includes automotive dealerships.
(b)
Includes ABR from tenants in the following industries: metals and mining, oil and gas, environmental industries, electricity, consumer transportation, forest products and paper, real estate, and finance. Also includes square footage for vacant properties.


 
W. P. Carey 2019 10-K – 35


Lease Expirations
(in thousands, except percentages and number of leases)
Year of Lease Expiration (a)
 
Number of Leases Expiring
 
Number of Tenants with Leases Expiring
 
ABR
 
ABR Percent
 
Square Footage
 
Square Footage Percent
2020
 
25

 
22

 
$
19,294

 
1.7
%
 
2,050

 
1.5
%
2021
 
77

 
23

 
33,967

 
3.0
%
 
3,899

 
2.8
%
2022
 
41

 
32

 
58,261

 
5.2
%
 
5,377

 
3.8
%
2023
 
31

 
28

 
46,954

 
4.2
%
 
5,919

 
4.2
%
2024
 
76

 
49

 
111,646

 
10.0
%
 
13,961

 
10.0
%
2025
 
61

 
30

 
58,023

 
5.2
%
 
7,194

 
5.1
%
2026
 
32

 
20

 
49,824

 
4.5
%
 
7,354

 
5.2
%
2027
 
45

 
27

 
71,604

 
6.4
%
 
8,237

 
5.9
%
2028
 
43

 
25

 
61,774

 
5.5
%
 
4,867

 
3.5
%
2029
 
31

 
18

 
36,289

 
3.2
%
 
4,561

 
3.3
%
2030
 
28

 
22

 
73,580

 
6.6
%
 
6,638

 
4.7
%
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
 
—

 
—

 
—

 
—
%
 
1,630

 
1.2
%
Total
 
782

 
 
 
$
1,118,519

 
100.0
%
 
139,982

 
100.0
%
__________
(a)
Assumes tenants do not exercise any renewal 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 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.

Results of Operations

We operate in two reportable segments: 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 Real Estate segment. We focus our efforts on accretive investing and improving portfolio quality through re-leasing efforts, including negotiation of lease renewals, or selectively selling assets in order to increase value in our real estate portfolio. Through our Investment Management segment, we expect to continue to earn fees and other income from the management of the portfolios of the remaining Managed Programs until those programs reach the end of their respective life cycles.


 
W. P. Carey 2019 10-K – 36


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 Real Estate attributable to W. P. Carey (in thousands):
 
Years Ended December 31,
 
2019
 
2018
 
Change
 
2018
 
2017
 
Change
Existing Net-Leased Properties
 
 
 
 
 
 
 
 
 
 
 
Lease revenues
$
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
(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
(152,757
)
 
(22,136
)
 
(130,621
)
 
(22,136
)
 
—

 
(22,136
)
Reimbursable tenant costs
(27,618
)
 
(5,062
)
 
(22,556
)
 
(5,062
)
 
—

 
(5,062
)
Property expenses
(15,454
)
 
(2,685
)
 
(12,769
)
 
(2,685
)
 
—

 
(2,685
)
Property level contribution
153,689

 
25,520

 
128,169

 
25,520

 
—

 
25,520

Recently Acquired Net-Leased Properties
 
 
 
 
 
 
 
 
 
 
 
Lease revenues
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
(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
(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
(6,920
)
 
(1,907
)
 
(5,013
)
 
(1,907
)
 
—

 
(1,907
)
Properties Sold or Held for Sale
 
 
 
 
 
 
 
 
 
 
 
Lease revenues
11,918

 
35,199

 
(23,281
)
 
35,199

 
47,513

 
(12,314
)
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
(3,351
)
 
(2,487
)
 
(864
)
 
(2,487
)
 
(3,029
)
 
542

Operating property expenses
(18,068
)
 
(6,285
)
 
(11,783
)
 
(6,285
)
 
(12,068
)
 
5,783

Property level contribution
(4,980
)
 
16,507

 
(21,487
)
 
16,507

 
22,546

 
(6,039
)
Property Level Contribution
561,390

 
415,399

 
145,991

 
415,399

 
372,036

 
43,363

Add: Lease termination income and other
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
(32,539
)
 
(4,790
)
 
(27,749
)
 
(4,790
)
 
(2,769
)
 
(2,021
)
Stock-based compensation expense
(13,248
)
 
(10,450
)
 
(2,798
)
 
(10,450
)
 
(6,960
)
 
(3,490
)
Corporate depreciation and amortization
(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
(233,325
)
 
(178,375
)
 
(54,950
)
 
(178,375
)
 
(165,775
)
 
(12,600
)
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

 
(190,986
)
 
2,378

 
(193,364
)
 
2,378

 
(124,484
)
 
126,862

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 2019 10-K – 37


Property level contribution is a non-GAAP 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 Real Estate segment over time. Property level contribution presents our 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. While we believe that Property level contribution is a useful supplemental measure, it should not be considered as an alternative to Net income from 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, 2017 and that were not sold or held for sale during the periods presented. For the periods presented, there were 787 existing net-leased properties.

2019 vs. 2018 — For the year ended December 31, 2019 as compared to 2018, 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 primarily due to accelerated amortization of two in-place lease intangibles during the prior year in connection with lease terminations, as well as the weakening of foreign currencies (primarily the euro) in relation to the U.S. dollar between the years. 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:17 Merger

Net-leased properties acquired in the CPA:17 Merger on October 31, 2018 (Note 3) consisted of 275 net-leased properties, as well as one property placed into service during the first 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:17 Merger, which were reclassified from operating properties to net-leased properties during the year ended December 31, 2019 as a result of entering into net-lease agreements during the second quarter of 2019 (Note 5). Net-leased properties acquired in the CPA:17 Merger contributed lease revenue, depreciation and amortization, and property expenses for a full year during 2019, as compared to two months during 2018.

Recently Acquired Net-Leased Properties

Recently acquired net-leased properties are those that we acquired or placed into service subsequent to December 31, 2016, excluding properties acquired in the CPA:17 Merger, and that were not sold or held for sale during the periods presented. Since January 1, 2017, we acquired 40 investments, comprised of 121 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 in 2019).

2019 vs. 2018 — For the year ended December 31, 2019 as compared to 2018, lease revenues increased by $23.3 million as a result of the 45 properties we acquired or placed into service during the year ended December 31, 2019 and $37.7 million as a result of the 77 properties we acquired or placed into service during the year ended December 31, 2018. Depreciation and amortization expense increased by $8.8 million as a result of the 45 properties we acquired or placed into service during the year ended December 31, 2019 and $15.8 million as a result of the 77 properties we acquired or placed into service during the year ended December 31, 2018.


 
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 compared 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 ten self-storage properties (which excludes seven self-storage properties acquired in the CPA:17 Merger accounted for under the equity 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, 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

During 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 (Note 5), which we acquired in the CPA:17 Merger and sold in January 2020 (Note 20).

During the year ended December 31, 2018, we disposed of 72 properties, 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 gain (loss) on sale of real estate, lease termination income, impairment charges, and gain (loss) on extinguishment of debt. The impact of these transactions is described in further detail below and in Note 17.

Other Revenues and Expenses

Lease Termination Income and Other

2019 — For the year ended December 31, 2019, lease termination income and other was $36.3 million, primarily comprised of: (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 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 related value-added tax refund of $2.2 million that was recognized in May 2019; (iii) interest income from our loans receivable totaling $6.2 million; (iv) 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; and (v) income substantially from a parking garage attached to one of our net-leased properties totaling $3.5 million.

2018 — For the year ended December 31, 2018, lease termination income and other 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 fourth quarter of 2017. Lease termination income and other also consisted of interest income from our loans receivable.

General and Administrative

General and administrative expenses recorded by our Real Estate segment are allocated based on time incurred by our personnel for the Real Estate and Investment Management segments.


 
W. P. Carey 2019 10-K – 39


2019 vs. 2018 — For the year ended December 31, 2019 as compared to 2018, general and administrative expenses in our Real Estate segment increased by $9.6 million, primarily due to an increase in estimated time spent by management and personnel on Real Estate segment activities following the CPA:17 Merger (Note 3).

Impairment Charges

Our impairment charges are more fully described in Note 9.

2019 — For the year ended December 31, 2019, we recognized impairment charges totaling $32.5 million to reduce the carrying values of certain assets to their estimated fair values, consisting of the following:

•
$31.2 million recognized on five 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 Accounting Standards Codification (“ASC”) 310, Receivables; and
•
$1.3 million recognized on a property that was sold in February 2020 (Note 20).

2018 — For the year ended December 31, 2018, we recognized impairment charges totaling $4.8 million to reduce the carrying values of certain assets to their estimated fair values, consisting of the following:

•
$3.8 million recognized on a property due to a tenant bankruptcy; and
•
$1.0 million recognized on a property due to a tenant vacancy; this property was sold in July 2019.

Stock-based Compensation Expense

For a description of our equity plans and awards, please see Note 15.

2019 vs. 2018 — For the year ended December 31, 2019 as compared to 2018, stock-based compensation expense allocated to the Real Estate segment increased by $2.8 million, primarily due to an increase in time spent by management and personnel on Real Estate segment activities, partially offset by the impact of the modification of the restricted share units (“RSUs”) and performance share units (“PSUs”) held by our former chief executive officer in connection with his retirement in February 2018 (Note 15).

Merger and Other Expenses

2018 — For the year ended December 31, 2018, merger and other expenses were 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).

Interest Expense

2019 vs. 2018 — For the year ended December 31, 2019 as compared to 2018, interest expense increased by $55.0 million, primarily due to an increase 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 euro-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 $6.3 billion and $4.9 billion during the years ended December 31, 2019 and 2018, respectively. Our weighted-average interest rate was 3.4% during both the years ended December 31, 2019 and 2018.

Other Gains and (Losses)

Other gains and (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

 
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. 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.

2019 — For the year ended December 31, 2019, net other gains 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 $16.4 million related to the settlement of foreign currency forward contracts and foreign currency 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 $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 totaling $3.3 million related to the repayment of unsecured term loans and the payoff of certain mortgage 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 17.

2019 — During the year ended December 31, 2019, we sold 14 properties for total proceeds of $308.0 million, net of selling costs, and recognized a net gain on these sales totaling $10.9 million (inclusive of income taxes totaling $1.2 million recognized 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 $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 the mortgage loan), respectively, on the date of transfer, 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 of accrued interest payable). In addition, in December 2019, we transferred ownership of a property and the related non-recourse mortgage loan, which had an aggregate asset carrying value of $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 one of our hotel operating properties in April 2018. 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 a non-cash investing activity (Note 5).

(Loss) Gain on Change in Control of Interests

2019 — During the third 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 had a joint interest and accounted for under the equity method pre-merger. As a result, 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 this former equity interest on October 31, 2018 (Note 6). Subsequent to the CPA:17 Merger, we consolidated this wholly owned investment.


 
W. P. Carey 2019 10-K – 41


2018 — In connection with the CPA:17 Merger, we acquired the remaining interests in six investments in which we already had a joint interest and accounted for under the equity method. Due to the change in control of these six jointly owned investments, we recorded a gain on change in control of interests of $18.8 million reflecting the difference between our carrying values and the preliminary estimated fair values of our previously held equity interests on October 31, 2018. Subsequent to the CPA:17 Merger, we consolidated 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). In 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 CPA:17 Merger. In February 2019, we received full repayment of our 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 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 Income Taxes

2019 vs. 2018 — For the year ended December 31, 2019, we recorded a provision for income taxes of $30.8 million, compared to a benefit from income taxes of $0.8 million recognized during the year ended December 31, 2018 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 $19.6 million, since we owned the properties for a full year in 2019 compared to two months in 2018. In addition, during the year ended December 31, 2019, we recognized deferred tax expenses totaling approximately $8.6 million as a result of the 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 the 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 2019 10-K – 42


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:17 – Global (through October 31, 2018), CPA:18 – Global, CWI 1, CWI 2, CCIF (through September 10, 2017), and CESH. 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), 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.


 
W. P. Carey 2019 10-K – 43


Below is a summary of comparative results of our Investment Management segment (in thousands):
 
Years Ended December 31,
 
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
 
 
 
 
 
 
 
 
 
 
 
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
—

 
—

 
—

 
—

 
4,430

 
(4,430
)
 
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
16,547

 
21,925

 
(5,378
)
 
21,925

 
51,445

 
(29,520
)
Subadvisor fees
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
—

 
—

 
—

 
—

 
6,544

 
(6,544
)
 
51,997

 
64,115

 
(12,118
)
 
64,115

 
128,700

 
(64,585
)
Other Income and Expenses
 
 
 
 
 
 
 
 
 
 
 
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

 
22,092

 
77,093

 
(55,001
)
 
77,093

 
53,724

 
23,369

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
34,589

 
104,330

 
(69,741
)
 
104,330

 
85,150

 
19,180

Net income attributable to noncontrolling interests
(1,411
)
 
—

 
(1,411
)
 
—

 
—

 
—

Net Income from Investment Management Attributable to W. P. Carey
$
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.
 
2019 vs. 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 (Note 4). Following the CPA:17 Merger (Note 3), we no longer receive reimbursement of certain personnel costs and overhead costs from CPA:17 – Global, which totaled $6.2 million for the year ended December 31, 2018.

Structuring and Other Advisory Revenue
 
We earn structuring revenue when we structure investments and debt placement transactions for the Managed Programs. Structuring revenue is dependent on investment activity, which is subject to significant period-to-period 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.
 
2019 vs. 2018 — For the year ended December 31, 2019 as compared to 2018, structuring revenue decreased by $16.9 million. Structuring and other advisory revenue from CPA:18 – Global decreased by $16.6 million as a result of lower investment and debt placement volume during 2019. Structuring revenue from CPA:18 – Global for the year ended December 31, 2018 includes a $2.6 million reversal of an adjustment recorded in 2017 related to a development deal for one of the Managed Programs, in accordance with ASC 605, Revenue Recognition.

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 and overhead costs are charged to CPA:18 – Global based on the trailing 12-month reported revenues of the Managed Programs and us. We allocate certain personnel and overhead costs to the CWI REITs and CESH based on the time incurred by our personnel.

2019 vs. 2018 — For the year ended December 31, 2019 as compared to 2018, general and administrative expenses in our Investment Management segment decreased by $2.6 million, primarily due to a decrease in estimated time spent by management and personnel on Investment Management segment activities following the CPA:17 Merger (Note 3).

Subadvisor Fees

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 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

 
W. P. Carey 2019 10-K – 45


multi-family properties acquired on behalf of CPA:18 – Global, we entered into agreements with third-party advisors for the day-to-day management of the properties, for which we paid 100% of asset management fees paid to us by CPA:18 – 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.

2019 vs. 2018 — For the year ended December 31, 2019 as compared to 2018, subadvisor fees decreased by $1.7 million, primarily as a result of the disposition of the multi-family properties owned by CPA:18 – Global that were managed by the subadvisor, as described above.

Stock-based Compensation Expense

For a description of our equity plans and awards, please see Note 15.

2019 vs. 2018 — For the year ended December 31, 2019 as compared to 2018, stock-based compensation expense allocated to our Investment Management segment decreased by $2.3 million, primarily due to the modification of RSUs and PSUs in connection with the retirement of our former chief executive officer in February 2018 (Note 15), as well as a decrease in time spent by management and personnel on Investment Management segment activities.

Equity 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 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 Programs (in thousands):
 
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

__________
(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.
(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 — In connection with the CPA:17 Merger, we recognized a gain on change in control of interests of $29.0 million within our Investment Management segment related to the difference between the carrying value and the preliminary estimated fair value of our previously held equity interest in shares of CPA:17 – Global’s common stock (Note 3).


 
W. P. Carey 2019 10-K – 46


Benefit from (Provision for) Income Taxes

2019 vs. 2018 — For the year ended December 31, 2019, we recorded a benefit from income taxes of $4.6 million, compared to a provision for income taxes of $15.3 million recognized during the year ended December 31, 2018, 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:17 – Global to us for asset management services performed, in connection with the CPA: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 dividends 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 repayment of mortgage loans and receipt of lease revenues; the timing and amount of 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 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, available capacity under our Amended Credit Facility, proceeds from dispositions of properties, net contributions from noncontrolling interests, and the issuance of additional debt or equity securities, such as sales of our stock through our ATM 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

Operating Activities — Net cash provided by operating activities increased by $302.9 million during 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.

Investing Activities — Our investing activities are generally comprised of real estate-related transactions (purchases and sales) and capitalized property-related costs.

During 2019, we used $717.7 million to acquire 23 investments (Note 5). We sold 14 properties for net proceeds 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 $36.8 million to fund short-term loans to the Managed Programs, while $46.6 million of such loans were repaid during the year (Note 4). We received $19.7 million from the repayment of loans receivable (Note 6). We also received $19.4 million in distributions from equity method investments in the Managed Programs and real estate in excess of cumulative equity income and $15.0 million in proceeds from the full repayment of a preferred equity interest (Note 8).


 
W. P. Carey 2019 10-K – 47


Financing Activities — During 2019, gross borrowings under our Senior Unsecured Credit Facility were $1.3 billion and repayments were $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 $870.6 million in aggregate net proceeds from the issuances of the 3.850% Senior Notes due 2029 in June 2019 and the 1.350% Senior Notes due 2028 in September 2019, which we used primarily to pay down the outstanding balance on our Unsecured Revolving Credit facility and to repay certain non-recourse mortgage loans (Note 11). In connection with the issuances of these senior unsecured notes (Note 11), we incurred financing costs totaling $6.7 million. We paid dividends to stockholders totaling $704.4 million related to the fourth quarter of 2018 and the first, second, and third quarters of 2019. We also received $523.3 million in net proceeds from the issuance of shares under our ATM Program (Note 14).

2018

Operating Activities — Net cash provided by operating activities decreased by $11.5 million during 2018 as compared to 2017, primarily due to merger 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 acquired during 2017 and 2018, including properties acquired in the CPA:17 Merger (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 2018, we used $719.5 million to acquire 14 investments (Note 5). We sold 49 properties for net proceeds totaling $431.6 million (Note 17). We also used $107.7 million to fund construction projects and other capital expenditures on certain properties within our real estate portfolio. We used $10.0 million to fund short-term loans to the Managed Programs, while $37.0 million of such loans were repaid during the 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 $16.4 million in distributions from equity method investments in the Managed Programs and real estate in excess of cumulative equity income.

Financing Activities — During 2018, gross borrowings under our Senior Unsecured Credit Facility were $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 $2.1 billion (Note 11). We received the equivalent of approximately $1.2 billion in aggregate net proceeds from the issuance of (i) €500.0 million of 2.125% Senior Notes due 2027 in March 2018 and (ii) €500.0 million of 2.250% Senior Notes due 2026 in October 2018, which we used to repay in full the outstanding balance on our euro-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 the respective times (Note 11). In connection with the issuances of these Senior Unsecured Notes (Note 11), we incurred financing costs totaling $8.1 million. Additionally, we paid dividends to stockholders totaling $440.4 million related to the fourth quarter of 2017 and the first, second, and third quarters of 2018; and also paid distributions of $18.2 million to affiliates that hold noncontrolling interests in various entities with us. We received $287.5 million in net proceeds from the issuance of shares under our ATM Program (Note 14). We also made scheduled and prepaid non-recourse mortgage loan principal payments of $100.4 million and $207.5 million, respectively.


 
W. P. Carey 2019 10-K – 48


Summary of Financing
 
The table below summarizes our Senior Unsecured Notes, our non-recourse mortgages, and our Senior Unsecured Credit Facility (dollars in thousands):  
 
December 31,
 
2019
 
2018
Carrying Value
 
 
 
Fixed rate:
 
 
 
Senior Unsecured Notes (a)
$
4,390,189

 
$
3,554,470

Non-recourse mortgages (a)
1,232,898

 
1,795,460

 
5,623,087

 
5,349,930

Variable rate:
 
 
 
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
72,071

 
375,239

 
430,856

 
1,028,761

 
$
6,053,943

 
$
6,378,691

 
 
 
 
Percent of Total Debt
 
 
 
Fixed rate
93
%
 
84
%
Variable rate
7
%
 
16
%
 
100
%
 
100
%
Weighted-Average Interest Rate at End of Year
 
 
 
Fixed rate
3.3
%
 
3.7
%
Variable rate (b)
2.1
%
 
3.4
%
Total debt
3.2
%
 
3.6
%
 
____________
(a)
Aggregate debt balance includes unamortized discount, net, totaling $26.7 million and $37.6 million as of December 31, 2019 and 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, 2019, our cash resources consisted of the following:
 
•
cash and cash equivalents totaling $196.0 million. Of this amount, $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 Unsecured Revolving Credit Facility, with available capacity of $1.3 billion; and
•
unleveraged properties that had an aggregate asset carrying value of $8.8 billion at December 31, 2019, although there can be no assurance that we would be able to obtain financing for these properties.
 
We have also accessed the capital markets through additional debt and equity offerings, such as (i) the $325.0 million of 3.850% Senior Notes due 2029 that we issued in June 2019 (Note 11), (ii) the €500.0 million of 1.350% Senior Notes due 2028 that we issued in September 2019 (Note 11), and (iii) the 6,672,412 shares of common stock that we issued under our ATM Programs during the year ended December 31, 2019 at a weighted-average price of $79.70 per share, for net proceeds of $523.3 million. As of December 31, 2019, $616.6 million remained available for issuance under our ATM Program (Note 14).

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 include: payments to acquire new investments; funding capital commitments such as construction projects; paying dividends to our stockholders; paying distributions to our affiliates that hold noncontrolling interests in entities we control; making scheduled interest payments on the Senior Unsecured Notes, scheduled principal and balloon payments on our mortgage loan obligations, and prepayments of certain of our mortgage loan obligations; 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 Unsecured Revolving Credit Facility, issuances of shares through our ATM Program, and/or additional equity or debt offerings. On February 20, 2020, we entered into our Amended Credit Facility and increased the capacity of our unsecured line of credit to $2.1 billion, which is comprised of a $1.8 billion revolving line of credit, a £150.0 million term loan, and a $105.0 million delayed draw term loan, all of which will 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 to meet our normal recurring short-term and long-term liquidity needs. We may also use existing cash resources, available capacity under our 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, to meet these needs.

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) at December 31, 2019 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)
$
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 $23.4 million, the unamortized discount on the Senior Unsecured Notes of $20.5 million in aggregate, and the aggregate unamortized fair market value discount of $6.2 million, primarily resulting from the assumption of property-level debt in connection with business combinations, including the CPA:17 Merger (Note 3).
(b)
Our Senior Unsecured Notes are scheduled to mature from 2023 through 2029 (Note 11).
(c)
Our Unsecured Revolving Credit Facility was scheduled to mature on February 22, 2021. However, on February 20, 2020, we entered into our Amended Credit Facility and increased the capacity of our unsecured line of credit to $2.1 billion, which is comprised of a $1.8 billion revolving line of credit, a £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, 2019.
(e)
Capital commitments include (i) $227.8 million related to build-to-suit projects, 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 (iii) $51.3 million related to unfunded tenant improvements, including certain discretionary commitments.
(f)
Represents a 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 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, 2019, which consisted primarily of the euro. At December 31, 2019, we had no material capital lease obligations for which we were the lessee, either individually or in the aggregate.

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 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. Such 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 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.

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 (“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”), 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 restated in 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.

We also modify the NAREIT computation of FFO to adjust GAAP net income for certain non-cash charges, such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line and other non-cash rent adjustments, stock-based compensation, non-cash environmental accretion expense, and amortization of 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 gains or losses from extinguishment of debt, restructuring and other compensation-related expenses, and merger and acquisition 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 these items provides investors a view of our portfolio performance over time and makes it more comparable to other REITs that 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 income computed under GAAP, or as alternatives to net cash provided by operating activities computed under GAAP, or as indicators of our ability to fund our cash needs.


 
W. P. Carey 2019 10-K – 52


Consolidated FFO and AFFO were as follows (in thousands):
 
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 2019 10-K – 53


FFO and AFFO from Real Estate were as follows (in thousands):
 
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 2019 10-K – 54


FFO and AFFO from Investment Management were as follows (in thousands):
 
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, 2019 represents a loss recognized on the purchase of the remaining 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 this loss because we identified certain measurement period adjustments during the third quarter of 2019 that impacted the provisional accounting for this investment (Note 3, Note 6). Amount for the year ended December 31, 2018 represents a gain recognized on the purchase of the remaining interests in six investments from CPA:17 – Global in the CPA:17 Merger, which we had previously accounted for under the equity method (Note 3).
(b)
Amount for the year ended December 31, 2018 represents a gain recognized on our previously held interest in shares of CPA:17 – Global common stock in connection with the CPA:17 Merger (Note 3).
(c)
Equity 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 adjustments to equity income to reflect FFO and AFFO on a pro rata basis.
(d)
Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis. This adjustment reflects our FFO or AFFO on a pro rata basis.
(e)
Amount for the year ended December 31, 2019 includes an 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 certain 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 period presentation.
(g)
Amount for the year ended December 31, 2018 includes one-time taxes incurred upon the recognition of 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 CPA:17 Merger.
(h)
Amount for the year ended December 31, 2019 includes a current tax benefit, which is excluded from AFFO as it was incurred as a result of the CPA:17 Merger.
(i)
Amount for the year ended December 31, 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 2019 10-K – 55


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 2019 10-K – 56


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, as well as the values of our unsecured 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 generally seek long-term debt financing on a fixed-rate basis. However, from time to time, we or our joint investment partners 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. See Note 10 for additional information on our interest rate swaps and caps.
 
At December 31, 2019, a significant portion (approximately 95.5%) of our long-term debt either bore interest at fixed rates or was swapped or capped to a fixed rate. Our debt obligations are more fully described 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, 2019 (in thousands):
 
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, 2019, as applicable.
(b)
Amounts after 2022 are primarily comprised of principal payments for our Senior Unsecured Notes (Note 11).

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, 2019 would increase or decrease by $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.

Foreign Currency Exchange Rate Risk
 
We own international investments, primarily in Europe, Canada, and Japan, 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 Danish krone, the Canadian dollar, and the Japanese yen, which may affect future costs and cash flows. We have 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 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.

We enter into foreign currency forward contracts and collars to hedge certain of our foreign currency cash flow exposures. See Note 10 for additional information on our foreign currency forward contracts and collars.

Scheduled future lease payments, exclusive of renewals, under non-cancelable operating leases for our consolidated foreign operations as of December 31, 2019 are as follows (in thousands):
Lease Revenues (a)
 
2020
 
2021
 
2022
 
2023
 
2024
 
Thereafter
 
Total
Euro (b)
 
$
302,124

 
$
299,176

 
$
289,400

 
$
287,769

 
$
268,269

 
$
1,757,899

 
$
3,204,637

British pound sterling (c)
 
42,332

 
43,057

 
43,194

 
43,612

 
44,011

 
268,970

 
485,176

Japanese yen (d)
 
2,816

 
2,809

 
677

 
—

 
—

 
—

 
6,302

Other foreign currencies (e)
 
25,583

 
25,933

 
25,860

 
26,286

 
26,569

 
278,207

 
408,438

 
 
$
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, 2019 are as follows (in thousands):
Debt Service (a) (f)
 
2020
 
2021
 
2022
 
2023
 
2024
 
Thereafter
 
Total
Euro (b)
 
$
132,907

 
$
204,384

 
$
73,801

 
$
754,706

 
$
618,274

 
$
1,780,284

 
$
3,564,356

British pound sterling (c)
 
2,098

 
65,717

 
829

 
829

 
829

 
8,949

 
79,251

Japanese yen (d)
 
224

 
22,327

 
—

 
—

 
—

 
—

 
22,551

 
 
$
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, 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, 2019 of $3.6 million, excluding the impact of our derivative instruments. Debt service amounts included the equivalent of $2.8 billion of euro-denominated senior notes maturing from 2023 through 2028, and the equivalent of $131.4 million borrowed in euro 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).
(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, 2019 of $4.1 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 Japanese yen and the U.S. dollar, there would be a corresponding change in the projected estimated cash flow at December 31, 2019 of $0.2 million. Debt 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 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 Danish krone, the Norwegian krone, the Swedish krona, and the Canadian dollar.
(f)
Interest on unhedged variable-rate debt obligations was calculated using the applicable annual interest rates and balances outstanding at December 31, 2019.


 
W. P. Carey 2019 10-K – 58


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 well-diversified, it does contain concentrations in certain areas.

For the year ended December 31, 2019, our consolidated portfolio had the following significant characteristics in excess of 10%, based on the percentage of our consolidated total revenues:

•
68% related to domestic operations; and
•
32% related to international operations.

At December 31, 2019, our net-lease portfolio, which excludes our 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:

•
64% related to domestic properties;
•
36% related to international properties;
•
24% related to industrial facilities, 23% related to office facilities, 22% related to warehouse facilities, and 18% related to retail facilities; and
•
21% related to the retail stores industry (including automotive dealerships) and 10% related to the consumer services industry.


 
W. P. Carey 2019 10-K – 59


Item 8. Financial Statements and Supplementary Data.

TABLE OF CONTENTS
Page No.
 
 
Report of Independent Registered Public Accounting Firm
61
 
 
Consolidated Balance Sheets as of December 31, 2019 and 2018
63
 
 
Consolidated Statements of Income for the Years Ended December 31, 2019, 2018, and 2017
64
 
 
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2019, 2018, and 2017
65
 
 
Consolidated Statements of Equity for the Years Ended December 31, 2019, 2018, and 2017
66
 
 
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018, and 2017
69
 
 
Notes to Consolidated Financial Statements
71
 
 
Schedule II — Valuation and Qualifying Accounts for the Years Ended December 31, 2019, 2018, and 2017
131
 
 
Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2019
132
 
 
Notes to Schedule III for the Years Ended December 31, 2019, 2018, and 2017
148
 
 
Schedule IV — Mortgage Loans on Real Estate as of December 31, 2019
149
 
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.


 
W. P. Carey 2019 10-K – 60


Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of W. P. Carey Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of W. P. Carey Inc. and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes and financial statement schedules listed in the accompanying index (collectively referred to as the “consolidated financial 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 consolidated financial 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 its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, 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 the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our 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 PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial 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 consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial 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.

Definition and Limitations of 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.


 
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 also included, 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 21, 2020

We have served as the Company’s auditor since 1973, which includes periods before the Company became subject to SEC reporting requirements.

 
W. P. Carey 2019 10-K – 62


W. P. CAREY INC. 
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
December 31,
 
2019
 
2018
Assets
 
 
 
Investments in real estate:
 
 
 
Land, buildings and improvements
$
9,856,191

 
$
9,251,396

Net investments in direct financing leases
896,549

 
1,306,215

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
11,916,745

 
11,928,854

Equity investments in the Managed Programs and real estate
324,004

 
329,248

Cash and cash equivalents
196,028

 
217,644

Due from affiliates
57,816

 
74,842

Other assets, net
631,637

 
711,507

Goodwill
934,688

 
920,944

Total assets (a)
$
14,060,918

 
$
14,183,039

Liabilities and Equity
 
 
 
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
487,405

 
403,896

Below-market rent and other intangible liabilities, net
210,742

 
225,128

Deferred income taxes
179,309

 
173,115

Dividends payable
181,346

 
172,154

Total liabilities (a)
7,112,745

 
7,352,984

Commitments and contingencies (Note 12)


 


 
 
 
 
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued
—

 
—

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
8,717,535

 
8,187,335

Distributions in excess of accumulated earnings
(1,557,374
)
 
(1,143,992
)
Deferred compensation obligation
37,263

 
35,766

Accumulated other comprehensive loss
(255,667
)
 
(254,996
)
Total stockholders’ equity
6,941,929

 
6,824,278

Noncontrolling interests
6,244

 
5,777

Total equity
6,948,173

 
6,830,055

Total liabilities and equity
$
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 2019 10-K – 63


W. P. CAREY INC. 
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
 
Years Ended December 31,
 
2019
 
2018
 
2017
Revenues
 
 
 
 
 
Real Estate:
 
 
 
 
 
Lease revenues
$
1,086,375

 
$
744,498

 
$
651,897

Operating property revenues
50,220

 
28,072

 
30,562

Lease termination income and other
36,268

 
6,555

 
4,749

 
1,172,863

 
779,125

 
687,208

Investment Management:
 
 
 
 
 
Asset management revenue
39,132

 
63,556

 
70,125

Reimbursable costs from affiliates
16,547

 
21,925

 
51,445

Structuring and other advisory revenue
4,224

 
21,126

 
35,094

Dealer manager fees
—

 
—

 
4,430

 
59,903

 
106,607

 
161,094

 
1,232,766

 
885,732

 
848,302

Operating Expenses
 
 
 
 
 
Depreciation and amortization
447,135

 
291,440

 
253,334

General and administrative
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
32,539

 
4,790

 
2,769

Stock-based compensation expense
18,787

 
18,294

 
18,917

Reimbursable costs from affiliates
16,547

 
21,925

 
51,445

Subadvisor fees
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
—

 
—

 
6,544

 
731,117

 
526,451

 
489,748

Other Income and Expenses
 
 
 
 
 
Interest expense
(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
23,229

 
61,514

 
64,750

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

 
—

 
(168,894
)
 
79,471

 
(70,760
)
Income before income taxes
332,755

 
438,752

 
287,794

Provision for income taxes
(26,211
)
 
(14,411
)
 
(2,711
)
Net Income
306,544

 
424,341

 
285,083

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


 
 
 
 
 
Basic Earnings Per Share
$
1.78

 
$
3.50

 
$
2.56

Diluted Earnings Per Share
$
1.78

 
$
3.49

 
$
2.56

Weighted-Average Shares Outstanding
 
 
 
 
 
Basic
171,001,430

 
117,494,969

 
107,824,738

Diluted
171,299,414

 
117,706,445

 
108,035,971

 


See Notes to Consolidated Financial Statements.

 
W. P. Carey 2019 10-K – 64


W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands) 
 
Years Ended December 31,
 
2019
 
2018
 
2017
Net Income
$
306,544

 
$
424,341

 
$
285,083

Other Comprehensive (Loss) Income
 
 
 
 
 
Unrealized (loss) gain on derivative instruments
(1,054
)
 
4,923

 
(37,778
)
Foreign currency translation adjustments
376

 
(31,843
)
 
72,428

Unrealized gain (loss) on investments
7

 
154

 
(71
)
 
(671
)
 
(26,766
)
 
34,579

Comprehensive Income
305,873

 
397,575

 
319,662

 
 
 
 
 
 
Amounts Attributable to Noncontrolling Interests
 
 
 
 
 
Net income
(1,301
)
 
(12,775
)
 
(7,794
)
Foreign currency translation adjustments
—

 
7,774

 
(16,120
)
Unrealized loss on derivative instruments
—

 
7

 
15

Comprehensive income attributable to noncontrolling interests
(1,301
)
 
(4,994
)
 
(23,899
)
Comprehensive Income Attributable to W. P. Carey
$
304,572

 
$
392,581

 
$
295,763

 
See Notes to Consolidated Financial Statements.

 
W. P. Carey 2019 10-K – 65


W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF EQUITY
(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, 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


(Continued)

 
W. P. Carey 2019 10-K – 66


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, 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


(Continued)

 
W. P. Carey 2019 10-K – 67


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,
 
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 2019 10-K – 69


W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

Supplemental Non-Cash Investing and Financing Activities:

2018 — On October 31, 2018, CPA:17 – Global merged with and into us in the CPA:17 Merger (Note 3). The following table summarizes estimated fair values of the assets acquired and liabilities assumed in the CPA: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 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 2019 10-K – 70


W. P. CAREY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Business and Organization
 
W. P. Carey Inc. (“W. P. Carey”) is a real estate investment trust (“REIT”) that, together with our consolidated subsidiaries, invests primarily in operationally-critical, single-tenant commercial real estate properties located in the United States and Northern and Western Europe on a long-term basis. We earn revenue principally by leasing the properties we own to companies on a triple-net lease basis, which generally requires each tenant to pay the costs associated with operating and maintaining the property.

Founded in 1973, our shares of common stock are listed on the New York Stock Exchange under the symbol “WPC.”

We elected to be taxed as a REIT under Section 856 through 860 of the Internal Revenue Code effective as of February 15, 2012. As a REIT, we are not subject to federal income taxes on 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 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 Real Estate segment under the REIT structure, while the activities conducted by our Investment Management segment subsidiaries have been organized under TRSs.

On October 31, 2018, one of the non-traded REITs that we advised, Corporate Property Associates 17 – Global Incorporated (“CPA:17 – 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 (“CPA:18 – Global”), a publicly owned, non-traded REIT that primarily invests in commercial real estate properties; we refer to CPA:17 – Global (until the closing of the CPA:17 Merger on October 31, 2018) and CPA:18 – Global together as the “CPA REITs;”
•
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 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
•
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 announced 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 2 Proposed Merger”). On January 13, 2020, the joint proxy statement/prospectus on Form S-4 previously filed with the Securities 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 proposed 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).

In August 2017, we resigned as the advisor to Carey Credit Income Fund (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 (“BDC”) (Note 4). We refer to CCIF and the CCIF Feeder Funds collectively as the “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 CCIF, effective as of September 11, 2017. The shareholders of CCIF approved Guggenheim’s appointment as sole advisor on a permanent basis on October 20, 2017. The Managed BDCs were included in the Managed Programs prior to our resignation 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 consolidated financial statements (Note 9).


 
W. P. Carey 2019 10-K – 71

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 1,214 properties, totaling approximately 140.0 million square feet (unaudited), substantially all of which were net leased to 345 tenants, with a weighted-average lease term of 10.7 years and an occupancy rate of 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 two 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 Programs, for which we earn structuring revenue, and manage their portfolios of real estate investments, for which we earn asset management revenue. 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, 2019, the Managed Programs owned all or a portion of 49 net-leased properties (including certain properties in which we also have an ownership interest), totaling approximately 9.8 million square feet (unaudited), substantially all of which were leased to 62 tenants, with an occupancy rate of approximately 99.4%. The Managed Programs also had interests in 122 operating properties (including 16 active build-to-suit projects), totaling approximately 15.2 million square feet (unaudited), in the aggregate.

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 the value of 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. 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.


 
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.

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 or 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 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.
 
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 estimates or by relying in part upon third-party appraisals. We amortize the value of in-place lease intangibles to depreciation

 
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:17 Merger, was attributed to the Real Estate segment which comprises one reporting unit. In the event we dispose of a property that constitutes a business under U.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, 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.

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.

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.

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

 
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 periodically assess whether there are any indicators that the value of our net investments in direct financing leases may 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 a permanent decline in the current estimate of the residual value of the property. If this review indicates a permanent decline in the fair value of the asset below its carrying value, we recognize an impairment charge.

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.
 
Goodwill — We evaluate goodwill for possible impairment at least annually or upon the occurrence of a triggering event. Such a triggering event within our Investment Management segment depends on the timing and form of liquidity events for the Managed Programs (Note 4). To identify any impairment, we first assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. This assessment is used as a basis to determine whether it is necessary to calculate reporting unit fair values. If necessary, we calculate the estimated fair value of the Investment Management reporting unit by utilizing a discounted cash flow analysis methodology and available NAVs. We calculate the estimated fair value of the Real Estate reporting unit by utilizing our market capitalization and the aforementioned fair value of the Investment Management segment. Impairments, if any, will be the difference between the reporting unit’s fair value and carrying amount, not to exceed the carrying amount of goodwill.

Other Accounting Policies
 
Basis of Consolidation — Our consolidated financial statements reflect all of our accounts, including those of our controlled 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.

When we obtain an economic interest in an entity, we evaluate the entity to determine if it should be deemed a 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. The liabilities of these VIEs are non-recourse to us and can only be satisfied from each VIE’s respective assets.


 
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, 2019 and 2018, we considered 18 and 32 entities to be VIEs, respectively, 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 our consolidated balance sheets (in thousands):
 
December 31,
 
2019
 
2018
Land, buildings and improvements
$
493,714

 
$
781,347

Net investments in direct financing leases
15,584

 
305,493

In-place lease intangible assets and other
56,915

 
84,870

Above-market rent intangible assets
34,576

 
45,754

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



At December 31, 2019 and 2018, our seven and eight unconsolidated VIEs, respectively, included our interests in five and six unconsolidated real estate investments, respectively, which we account for under the equity method of accounting, and two 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, 2019 and 2018, the net carrying amount of our investments in these entities was $298.3 million and $301.6 million, respectively, and our maximum exposure to loss in these entities was limited to our investments.

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.

In connection with our adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), as described below in Recent Accounting Pronouncements, reimbursable tenant costs (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 sheets to the consolidated statements of cash 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.

 
W. P. Carey 2019 10-K – 76

Notes to Consolidated Financial Statements


Land, Buildings and 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 maintenance and repairs that do not improve or extend the lives of the respective assets as incurred.
 
Gain/Loss on Sale — We recognize gains and losses on the sale of properties when the transaction meets the definition of a contract, criteria are met for the sale of one or more distinct assets, and control of the properties is transferred.

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 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 our 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.
 
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.
 
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 (“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 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

 
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 Programs. We earn asset management revenue from property management, leasing, and advisory services performed. 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.
 
During their respective offering periods, the Managed Programs reimbursed us for certain costs in connection with those offerings that we incurred on their behalf, which consisted primarily of broker-dealer commissions, marketing costs, and an annual distribution and shareholder servicing fee, 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 in the third quarter of 2017 and no longer incur these costs. However, the Managed 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 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. 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 (“RSAs”), restricted share units (“RSUs”), and performance share units (“PSUs”) to certain employees, independent directors, and 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, 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 basis 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 and Stock-based compensation expense in the consolidated statements of income.


 
W. P. Carey 2019 10-K – 78

Notes to Consolidated Financial Statements

Foreign Currency Translation and Transaction Gains and Losses — We have interests in international real estate investments primarily in Europe, Canada, and Japan, and the primary functional currencies for those investments are the euro, the British pound sterling, the Danish krone, the Canadian dollar, and the Japanese yen. We perform the translation from these 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 income 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 (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 (within Other gains and (losses) in the statements of income).
 
Intercompany foreign currency transactions of a long-term nature (that is, settlement is not planned or anticipated in the foreseeable future), in which the entities involved 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 income in equity.

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 derivatives designated and that qualify as cash flow hedges, the change in fair value of the derivative is recognized in Other comprehensive (loss) income until the hedged transaction affects 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 derivatives designated and that qualify as a net investment hedge, the change in the fair value and/or the net settlement of the derivative is reported in Other comprehensive (loss) income as part of the cumulative foreign currency translation adjustment. Amounts are reclassified out of Other comprehensive (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. In accordance with fair 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 those segments. Following our exit from non-traded retail fundraising activities, as of June 30, 2017 (Note 1), we believe that this allocation methodology is appropriate.
 
Income Taxes — We conduct business in various states and municipalities primarily within North America and Europe, 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 foreign jurisdictions. We 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 state and local taxes, as applicable. We conduct our Investment 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. 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.

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 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.


 
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.

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 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).

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 nonvested RSUs by the weighted-average number of shares of common stock outstanding during the year. Diluted earnings per share reflects potentially dilutive securities (RSAs, RSUs, PSUs, and 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
 
Pronouncements Adopted as of December 31, 2019

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 modifies 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 guidelines that change the accounting for leasing arrangements for lessees, whereby their rights and obligations under substantially all leases, existing and new, are capitalized and recorded on the balance sheet. For lessors, however, the new standard remains generally consistent with existing guidance, but has been updated to align with certain changes to the lessee model and ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”).

We adopted this guidance for our interim and annual periods beginning January 1, 2019 using the modified retrospective method, applying the transition provisions at the beginning of the period of adoption 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 adoption of the lease standard did not result in a cumulative effect adjustment recognized in the opening balance of retained earnings as of January 1, 2019.

•
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 option. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. Our variable lease payments

 
W. P. Carey 2019 10-K – 80

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.

•
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 August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted 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 hedge 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 the 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 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 the equity instrument issued. We adopted this guidance for our interim and annual periods beginning January 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.

Pronouncements to be Adopted after December 31, 2019

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses. ASU 2016-13 replaces the “incurred loss” model with an “expected loss” model, resulting in the earlier recognition of credit losses even if the risk of loss is remote. This standard applies to financial assets measured at amortized cost and certain other instruments, including loans receivable and net investments in direct financing leases. This standard does not apply to receivables arising from operating leases, which are within the scope of Topic 842. We will adopt ASU 2016-13 for our interim and annual periods beginning January 1, 2020 using the modified retrospective method, which requires applying changes in reserves through a cumulative-effect adjustment to retained earnings as of January 1, 2020. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.


 
W. P. Carey 2019 10-K – 81

Notes to Consolidated Financial Statements

Note 3. Merger with CPA:17 – Global

CPA:17 Merger

On June 17, 2018, we and certain of our subsidiaries entered into a merger agreement with CPA:17 – Global, pursuant to which CPA:17 – Global would merge with and into one of our subsidiaries in exchange for shares of our common stock, subject to approvals of our stockholders and the stockholders of CPA:17 – Global. The 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 rights attaching to such share were converted automatically into the right to receive 0.160 shares of our common stock. Each share of CPA:17 – Global common stock owned by us or any of our subsidiaries immediately prior to the effective time of the CPA:17 Merger was automatically canceled and retired, and ceased to exist, for no consideration. In exchange for the 336,715,969 shares of CPA: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 $1.7 million paid in lieu of issuing any fractional shares of our common stock. As a condition of the CPA:17 Merger, we waived certain back-end fees that we would have otherwise been entitled to receive from CPA:17 – Global upon its liquidation pursuant to the terms of our advisory agreement with CPA:17 – Global.

Immediately prior to the closing of the CPA:17 Merger, CPA:17 – Global’s portfolio was comprised of full or partial ownership interests in 410 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 occupancy rate of 97.4%, and an estimated contractual minimum annualized base rent totaling $364.4 million, as well as 44 self-storage operating properties and one hotel operating property totaling 3.1 million square feet. The related property-level debt was comprised of non-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 seven unconsolidated investments in the CPA:17 Merger, four of which were consolidated by CPA:18 – Global and three 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 seven 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 $467.1 million, of which our proportionate share was $208.2 million, with a weighted-average annual interest rate of 3.6% 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 senior credit facility (comprised of a term loan and unsecured revolving credit facility) with an outstanding balance of approximately $180.3 million on October 31, 2018, the date of the closing of the CPA:17 Merger. On that date, we repaid in full all amounts outstanding under CPA:17 – Global’s senior credit facility, using funds borrowed under our Unsecured Revolving Credit Facility (Note 11).

Purchase Price Allocation

We accounted for the CPA: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:17 Merger. Costs related to the CPA:17 Merger have been expensed as incurred and classified within Merger and other expenses in the consolidated statements of income, totaling $41.8 million and $0.4 million for the years ended December 31, 2018 and 2017, respectively.
 

 
W. P. Carey 2019 10-K – 82

Notes to Consolidated Financial Statements

Initially, the purchase price was allocated to the assets acquired and 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 decreased 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 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 $296.1 million of goodwill recorded in the CPA:17 Merger was primarily due to the premium we paid over CPA:17 – Global’s 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 net lease assets that is well-aligned with our existing portfolio, (iv) enhances our overall portfolio metrics, (v) significantly increases our size, scale, and market prominence, and (vi) enhances our overall credit profile.
 

 
W. P. Carey 2019 10-K – 83

Notes to Consolidated Financial Statements

The fair value of the 53,849,087 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 acquired 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:17 Merger, in a manner consistent with the methodology described above.
 
Goodwill is not deductible for income tax purposes.

Equity Investments and Noncontrolling Interests
 
During the fourth quarter of 2018, we recognized a gain on change in control of interests of approximately $29.0 million, which was the difference between the carrying value of approximately $128.7 million and the fair value of approximately $157.6 million of our previously held equity interest in 16,131,967 shares of CPA:17 – Global’s common stock.
 
The CPA:17 Merger also resulted in our acquisition of the remaining interests in six 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 six jointly owned investments that occurred, we recorded a gain on change in control of interests of approximately $18.8 million during the year ended December 31, 2018, which was the difference between our carrying values and the fair values of our previously held equity interests on October 31, 2018 of approximately $122.3 million and approximately $141.1 million, respectively. Subsequent to the CPA: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:17 Merger, we also acquired the remaining interests in six less-than-wholly-owned investments that we already consolidated and recorded an adjustment to additional paid-in-capital of approximately $102.7 million related to the difference between our carrying values and the fair values of our previously held noncontrolling interests on October 31, 2018 of approximately $206.2 million and approximately $308.9 million, respectively.

The fair values of our previously held equity interests and our noncontrolling interests are based on the estimated fair market values of the underlying real estate and related mortgage debt, both of which were determined by management relying in part on a third 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 each property ranged from approximately 5.75% to 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:17 Merger had occurred on January 1, 2017 for the years ended December 31, 2018 and 2017. The pro forma financial information is not necessarily indicative of what the actual results would have been had the CPA:17 Merger on that date, nor does it purport to represent the results of operations for future periods.
 
(in thousands)
 
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 net income attributable to W. P. Carey through the year ended December 31, 2018 reflects the following income and expenses related to the CPA:17 Merger as if the CPA:17 Merger had taken place on January 1, 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.

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. 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 entitle us to fees for serving as the dealer manager for the offerings of the Managed Programs. However, 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, we are entitled to receive certain cash distributions from their respective operating partnerships. Pursuant to the partnership agreement with CESH, we received limited partnership units of CESH equal to 2.5% of its 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 Distributions of Available Cash received from the Managed Programs for the periods indicated, included in the consolidated financial statements (in thousands):
 
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,
 
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)
We no longer earn revenue from CPA:17 – Global following the completion of the CPA:17 Merger on October 31, 2018 (Note 3).

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




 
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:18 – Global
 
0.5% – 1.5%
 
In shares of its Class A common stock and/or cash, at the option of CPA:18 – Global; payable 50% in cash and 50% in shares of its Class A common stock for 2019; payable in shares of its Class 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%
 
In shares of its common stock and/or cash, at our election; payable in shares of its common stock for 2019, 2018, and 2017
 
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%
 
In shares of its Class A common stock and/or cash, at our election; payable in shares of its Class 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
CESH
 
1.0%
 
In cash
 
Based on gross assets at fair value


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 compensated for our services on a 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 resolve the variability associated with our fees on a 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 end of the 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 first business day following the month of the delivery of the service.


 
W. P. Carey 2019 10-K – 87

Notes to Consolidated Financial Statements

Structuring and Other Advisory Revenue
 
Under the terms of the advisory agreements with the Managed Programs, we earn revenue for structuring and negotiating investments and related financing. For the Managed 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 Programs:
Managed Program
 
Rate
 
Payable
 
Description
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
CWI REITs
 
1% – 2.5%
 
In cash upon completion; 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; we are required to pay 20% and 25% to the subadvisors of CWI 1 and CWI 2, respectively
CESH
 
2.0%
 
In cash upon acquisition
 
Based on the total aggregate cost of investments or commitments made, including the acquisition, development, construction, or redevelopment 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 is presented in the table below:
Managed Program
 
Payable
 
Description
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 CPA: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 1.0%, 1.0%, and 2.0% of CPA:18 – Global’s pro rata lease revenues for 2019, 2018, and 2017, respectively; for the legal transactions group, costs are charged according to a fee schedule
CWI REITs
 
In cash
 
Actual expenses 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
CESH
 
In cash
 
Actual expenses incurred

 

 
W. P. Carey 2019 10-K – 88

Notes to Consolidated Financial Statements

Distributions of Available Cash
 
We are entitled to receive distributions of up to 10% of the Available Cash (as defined in the respective partnership agreements) from the operating partnerships of each of the existing Managed REITs, 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.

Back-End Fees and Interests 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 form of such liquidity events are at the 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

From time to time, our Board has approved the making of secured and unsecured loans or lines of credit from us to certain of the 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 Unsecured Credit Facility (Note 11), generally for the purpose of facilitating acquisitions, construction 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 nine jointly owned investments in real estate, with the remaining interests held by affiliates or third parties. We consolidate two such investments and account for the remaining seven investments under the equity method of accounting (Note 8). In addition, we owned stock of each of the existing Managed REITs and limited partnership units of CESH at that date. We account for these investments under the equity method of accounting or at fair value (Note 8).


 
W. P. Carey 2019 10-K – 89

Notes to Consolidated Financial Statements

Note 5. Land, Buildings and Improvements and Assets Held for Sale
 
Land, Buildings and Improvements — Operating Leases

Land and buildings leased to others, which are subject to operating leases, and real estate under construction, are 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


 
During 2019, 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 1.9% to $1.1234 from $1.1450. As a result of this fluctuation in foreign currency exchange rates, the carrying value of our Land, buildings and improvements subject to operating leases decreased by $36.7 million from December 31, 2018 to December 31, 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 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.

In connection with changes in lease classifications due to extensions of the underlying leases, we reclassified ten 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 buildings and improvements subject to operating leases was $229.0 million, $162.6 million, and $143.9 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Acquisitions of Real Estate During 2019 — We entered into the following investments, which were deemed to be real estate asset acquisitions, at a total cost of $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 $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;
•
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 two manufacturing and distribution centers in Westerville, Ohio, and North Wales, Pennsylvania, on May 21, 2019;

 
W. P. Carey 2019 10-K – 90

Notes to Consolidated Financial Statements

•
an investment of $24.5 million for eight manufacturing facilities in various locations in the United States and Mexico on May 31, 2019;
•
an investment of $18.8 million for a headquarters and warehouse facility in Statesville, North Carolina, on June 7, 2019;
•
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 three manufacturing and warehouse facilities in Hartford and Milwaukee, Wisconsin, on July 19, 2019;
•
an investment of $15.1 million for two 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 three manufacturing facilities in York, Pennsylvania; Lexington, South Carolina; and Queretaro, Mexico, on October 3, 2019;
•
an investment of $9.9 million for a headquarters facility in Dearborn, Michigan, on October 3, 2019;
•
an investment of $39.1 million for six industrial and office facilities in Houston, Texas; Mason, Ohio; and Metairie, Louisiana, on November 5, 2019 (we also committed to fund an additional $2.5 million for an expansion at the facility in Mason, Ohio, which is expected to be completed in the second quarter of 2021);
•
an investment of $12.2 million for an industrial facility in Pardubice, Czech Republic, on November 26, 2019;
•
an investment of $38.0 million for two 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 three 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 border 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 the second quarter of 2020.

During the year ended December 31, 2019, 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.

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.

In addition, as discussed in Note 3, we acquired 232 consolidated properties subject to existing operating leases in the CPA:17 Merger, which increased the carrying value of our Land, buildings and improvements subject to operating leases by $3.0 billion during the year ended December 31, 2018.


 
W. P. Carey 2019 10-K – 91

Notes to Consolidated Financial Statements

Acquisitions of Real Estate During 2017 — We entered into two 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.

Real Estate Under Construction
 
During 2019, 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 three and four 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 construction projects, at a total cost of $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 capitalized interest;
•
a built-to-suit project for a warehouse facility in Dillon, South Carolina, in March 2019 at a cost totaling $47.4 million, including capitalized interest;
•
an expansion project at a warehouse facility in Rotterdam, the Netherlands, in May 2019 at a cost totaling $20.4 million, including capitalized interest;
•
an expansion project at an industrial facility in Legnica, Poland, in June 2019 at a cost totaling $6.0 million
•
an expansion project at a warehouse facility in Kilgore, Texas, in October 2019 at a cost totaling $14.1 million;
•
a built-to-suit project for an industrial facility in Katowice, Poland, in November 2019 at a cost totaling $15.4 million; and
•
an expansion 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 $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 facility in Marktheidenfeld, Germany, for an aggregate of $8.3 million, which we currently expect to complete in the 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;
•
a build-to-suit project for a headquarters and industrial facility in Langen, Germany, for an aggregate of $56.2 million, which we currently expect to be completed 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 currently expect to be completed in the fourth quarter of 2021.

During 2018, we completed nine construction projects, at a total cost of $102.5 million, of which $39.8 million was capitalized during 2017.

During 2017, we completed five construction projects, at a total cost of $65.4 million, of which $35.5 million was capitalized during 2016.

Dollar amounts are based on the exchange rates of the foreign currencies on the dates of activity, as applicable.

Dispositions of Real Estate

During 2019, we sold 16 properties, which were classified as Land, buildings and improvements subject to operating leases. As a result, the carrying value of our Land, buildings and improvements subject to operating leases decreased by $84.3 million from December 31, 2018 to December 31, 2019.


 
W. P. Carey 2019 10-K – 92

Notes to Consolidated Financial Statements

Future Disposition of Real Estate

As of December 31, 2019, one of our tenants exercised its option to repurchase a property it is leasing for $0.6 million (the amount for the repurchase option is based on the exchange rate of the euro as of December 31, 2019). At December 31, 2019, the property’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 income 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 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 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 Lease Payments to be Received
 
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, 2019 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
2019
 
$
920,044

2020
 
915,411

2021
 
896,083

2022
 
861,688

2023
 
802,509

Thereafter
 
6,151,480

Total
 
$
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 2019 10-K – 94

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 Properties
 
At December 31, 2019, Land, buildings and improvements attributable to operating properties consisted of our investments in ten consolidated self-storage properties and one consolidated hotel. As of December 31, 2019, we reclassified another consolidated hotel to Assets held for sale, net, as described below. At December 31, 2018, Land, buildings and improvements attributable to operating properties consisted of our investments in 37 consolidated self-storage properties and two consolidated hotels. Below is a summary of our Land, 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



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 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.

Depreciation expense on our buildings and improvements attributable to operating properties was $6.9 million, $4.2 million, and $4.3 million for the years ended December 31, 2019, 2018, and 2017, respectively.

For the year ended December 31, 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 two 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 three 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 two 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

 
$
—



At December 31, 2019, we had one hotel operating property classified as Assets held for sale, net, with an aggregate carrying value of $104.0 million. This property was sold in January 2020 for gross proceeds of $120.0 million (Note 20).

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, loans receivable, and deferred acquisition fees. Operating leases are not included in finance receivables. See Note 2 and Note 5 for information on ROU operating lease assets recognized in our consolidated balance sheets.
 
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


 
2019 — Interest income from direct financing leases, which was included in Lease revenues in the consolidated financial statements, was $98.4 million for the year ended December 31, 2019. During the year ended December 31, 2019, we sold six 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 ten 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 the euro, resulting in an $5.5 million decrease in the carrying value of Net investments in direct financing leases from December 31, 2018 to December 31, 2019.

During the third quarter of 2019, we identified 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 the CPA:17 Merger, we already had a joint interest in this investment and accounted for it under the equity 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 third quarter of 2019, reflecting adjustments to the difference between our carrying value and the preliminary estimated fair value of this former equity interest on October 31, 2018. We also recorded impairment charges totaling $25.8 million on this investment during the third quarter of 2019 (Note 9).

2018 — Interest income from direct financing leases, which was included in Lease revenues in the consolidated financial statements, was $74.2 million for the year ended December 31, 2018. In connection with the CPA:17 Merger in October 2018, we acquired 40 consolidated properties subject to direct financing leases with a total fair value of $626.0 million (Note 3).


 
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 $66.2 million for the year ended December 31, 2017.

Scheduled Future Lease Payments to be Received

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, 2019 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
2019 (a)
 
$
373,632

2020
 
98,198

2021
 
95,181

2022
 
85,801

2023
 
80,033

Thereafter
 
428,132

Total
 
$
1,160,977

__________
(a)
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.

Loans Receivable

At December 31, 2018, we had four loans receivable related to a domestic investment with an aggregate carrying value of $57.7 million. In October 2019, two 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 loans receivable are included in Lease termination income and other in the consolidated financial statements, and totaled $6.2 million, $1.8 million, and $0.8 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Deferred Acquisition Fees Receivable
 
As described in Note 4, we earn revenue in connection with structuring and negotiating investments and related mortgage financing for CPA:18 – Global. A portion of this revenue is due in equal annual installments over three years. Unpaid deferred installments, including accrued interest, from CPA: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 invest in facilities that we believe are critical to a tenant’s business and therefore have a lower risk of tenant default. At both December 31, 2019 and 2018, none of the balances of our finance receivables were past due. Other than the lease extensions noted under Net Investments in Direct Financing Leases above, there were no material modifications of finance receivables during the year ended December 31, 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 is updated quarterly. We believe the credit quality of our deferred acquisition fees receivable falls under category one, as CPA: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



Note 7. Goodwill 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 consolidated 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 reporting unit as it relates to the real estate assets we acquired in such business combinations. The following table presents a reconciliation of our 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 2019 10-K – 98

Notes to Consolidated Financial Statements

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 in October 2019 for goodwill recorded in both segments and found no impairment indicated.

Intangible assets, intangible liabilities, and goodwill are summarized as follows (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
)

__________
(a)
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.

During 2019, the U.S. dollar strengthened against the euro, resulting in a decrease of $10.5 million in the carrying value of our net intangible assets from December 31, 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 the years ended December 31, 2019, 2018, and 2017, respectively. Amortization of below-market rent and above-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 reclassification of above-

 
W. P. Carey 2019 10-K – 99

Notes to Consolidated Financial Statements

market ground lease and below-market ground lease intangibles to ROU assets in the first quarter of 2019, as described above and in Note 2.
 
Based on the intangible assets and liabilities recorded at December 31, 2019, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows (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



Note 8. Equity Investments in the Managed Programs and Real 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 the ability to exercise significant influence over, the Managed Programs. Operating results of the Managed Programs are included in the 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 Managed Programs (dollars in thousands):
 
 
% 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 CPA:17 Merger (Note 3). We received distributions from this investment during the years ended December 31, 2018 and 2017 of $10.1 million and $8.4 million, respectively. We received distributions from our investment in the CPA:17 – Global operating partnership during the years ended December 31, 2018 and 2017 of $26.3 million and $26.7 million, respectively (Note 4).

CPA:18 – Global — The carrying value of our investment in CPA: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 2017 of $3.3 million, $2.6 million, and $1.7 million, respectively. We received distributions from our investment in the 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).

CWI 1 — The carrying value of our investment in CWI 1 at December 31, 2019 includes asset management fees receivable, for which 106,386 shares of CWI 1 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 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 as of 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 the 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):
 
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 impairment charges recognized by the Managed Programs totaling $34.4 million and $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 by the Managed 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 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 2019 10-K – 102

Notes to Consolidated Financial Statements

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):
 
 
 
 
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


__________
(a)
On November 7, 2018, we entered into a joint venture investment to acquire a 90% interest in two 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 was completed subsequent to the CPA:17 Merger, in which we acquired seven properties related to this investment.
(b)
The 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 this jointly owned investment increased by approximately $5.2 million, of which our proportionate share was $2.6 million.
(f)
On February 27, 2019, we received a full repayment of our preferred equity interest in this investment totaling $15.0 million. As a result, this preferred equity interest is now retired.


 
W. P. Carey 2019 10-K – 103

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,
 
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



We received aggregate distributions of $17.0 million, $17.8 million, and $16.0 million from our other unconsolidated real estate investments for the years ended December 31, 2019, 2018, and 2017, respectively. At December 31, 2019 and 2018, the aggregate unamortized basis differences on our unconsolidated real estate investments were $25.2 million and $23.7 million, respectively.

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.

Derivative Assets and Liabilities — Our derivative assets and liabilities, which are included in Other assets, net and Accounts payable, accrued expenses and other liabilities, respectively, in the consolidated financial statements, are comprised of foreign currency forward contracts, foreign currency collars, interest rate swaps, interest 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 rates, and implied 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 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 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.

Equity Investment in CESH — We have elected to account for our investment in CESH, which 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 GAAP (Note 8). 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 approximated its carrying value as of December 31, 2019 and 2018.

Investment in Shares of a Cold Storage Operator — We have elected to apply the measurement alternative under ASU 2016-01, Financial Instruments — Overall (Subtopic 825-10) to account for our investment in shares of a cold storage operator, which is included in Other assets, net in the consolidated financial statements. Under this alternative, the carrying value is adjusted for any impairments or changes in fair value resulting from observable transactions for similar or identical investments in the issuer. We classified this investment as Level 3 because it is not traded in an active market. During the year ended December 31, 2019, we recognized unrealized gains on our investment in shares of a cold storage operator totaling $32.9 million, due to additional outside investments at a higher price per share, which was recorded within Other gains and (losses) in the consolidated financial statements. In addition, 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 this investment decreased by approximately $3.0 million. The fair value of this investment approximated its carrying value, which was $146.2 million and $116.3 million at December 31, 2019 and 2018, respectively.

Investment in Shares of GCIF — In August 2017, we resigned as the advisor to 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, 2019 or 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, 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)
The carrying value of Senior Unsecured Notes, net (Note 11) includes unamortized deferred financing costs of $22.8 million and $19.7 million at December 31, 2019 and 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 Senior Unsecured Notes, net includes unamortized discount of $20.5 million and $15.8 million at December 31, 2019 and 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 using observed market prices in an open market with limited trading volume.
(d)
We determined the estimated fair value of our 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 consider 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, including amounts outstanding under our Senior Unsecured Credit Facility (Note 11) and our loans receivable, but excluding net investments in direct financing leases, had fair values that approximated their carrying values at both December 31, 2019 and 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. Our impairment policies are described in Note 2.
 
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, 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 2019, 2018, and 2017 were as follows:

Net Investments in Direct Financing Leases

2019 — During the year ended December 31, 2019, we recognized impairment charges totaling $31.2 million on five 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 two 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. This property was sold in July 2019.

2017 — During the year ended December 31, 2017, we recognized impairment charges totaling $2.8 million on two properties in order to reduce the carrying values of the properties to their estimated fair values. The tenant in one of the properties 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 charge of $2.2 million on this property, which was sold in August 2019. The fair value measurement for the other property approximated its estimated selling price and we recognized an impairment charge of $0.6 million on this property, which was sold in 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, and Japan and are subject to risks associated with fluctuating foreign currency exchange rates.

Derivative Financial Instruments
 
When we use derivative instruments, it is generally to reduce our exposure to fluctuations in interest rates and foreign currency exchange rate movements. We have not entered 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 derivatives designated and that qualify as cash flow hedges, the change in fair value of the derivative is recognized in Other comprehensive (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 derivatives designated and that qualify as a net investment hedge, the change in the fair value and/or the net settlement of the derivative is reported in Other comprehensive (loss) income as part of the cumulative foreign currency translation adjustment. Amounts are reclassified out of Other comprehensive (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.


 
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, 2019 and 2018, no 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)
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.

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) Income (a)
 
 
Years Ended December 31,
Derivatives in Cash Flow Hedging Relationships 
 
2019
 
2018
 
2017
Foreign currency collars
 
$
5,997

 
$
9,029

 
$
(19,220
)
Foreign currency forward contracts
 
(4,253
)
 
(1,905
)
 
(19,120
)
Interest rate swaps
 
(1,666
)
 
(1,560
)
 
1,550

Interest rate caps
 
219

 
(68
)
 
(29
)
Derivatives in Net Investment Hedging Relationships (b)
 
 
 
 
 
 
Foreign currency collars
 
10

 
—

 
—

Foreign currency forward contracts
 
7

 
(2,630
)
 
(5,652
)
Total
 
$
314

 
$
2,866

 
$
(42,471
)


 
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 losses of $1.4 million, $0.6 million and $1.0 million, recognized on unconsolidated jointly owned investments for the years ended December 31, 2019, 2018, and 2017, respectively.
(b)
The changes in fair value of these contracts are reported in the foreign currency translation adjustment section of Other comprehensive (loss) income.
(c)
We reclassified net foreign currency transaction gains from net investment hedge foreign currency forward contracts related to our Australian investments from Accumulated other comprehensive loss to Gain on sale 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 in December 2018 (Note 14, Note 17).

Amounts reported in Other comprehensive (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) income related to foreign currency derivative contracts will be reclassified to Other gains and (losses) when the hedged foreign currency contracts are settled. As of December 31, 2019, we estimate that an additional $1.9 million and $9.3 million will be reclassified as interest expense and other 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
)


See below for information on our purposes for entering into derivative instruments.


 
W. P. Carey 2019 10-K – 109

Notes to Consolidated Financial Statements

Interest Rate Swaps and Caps

We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we generally seek long-term debt financing on a 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, 2019 are summarized as follows (currency in thousands):
Interest Rate Derivatives
 
 Number of Instruments

Notional
Amount

Fair Value at
December 31, 2019 (a)
Designated as Cash Flow Hedging Instruments
 
 
 
 
 
 
 
Interest rate swaps
 
5
 
76,028

USD
 
$
(3,122
)
Interest rate swaps
 
2
 
49,655

EUR
 
(1,372
)
Interest rate cap
 
1
 
11,388

EUR
 
1

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
 
7,750

USD
 
8

 
 
 
 
 
 
 
$
(4,578
)
__________ 
(a)
Fair value amounts are based on the exchange rate of the euro or British pound sterling at December 31, 2019, as applicable.
(b)
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.
 
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 Danish krone, the Norwegian krone, and certain other currencies. 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 2019 10-K – 110

Notes to Consolidated Financial Statements

The following table presents the foreign currency derivative contracts we had outstanding at December 31, 2019 (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



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. No collateral was received as of December 31, 2019. At December 31, 2019, our total credit exposure and the maximum exposure to any single counterparty was $23.0 million and $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, 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 $9.6 million and $7.3 million at December 31, 2019 and 2018, respectively, which included accrued interest and any nonperformance risk adjustments. If we had breached any of these provisions at December 31, 2019 or 2018, we could have been required to settle our obligations under these agreements at their aggregate termination value of $9.9 million and $7.6 million, respectively.

Net Investment Hedges

We have completed five offerings of euro-denominated senior notes, each with a principal amount of €500.0 million, which we refer to as the 2.0% Senior 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. Exchange rate variations impact our financial results because the financial results of our foreign subsidiaries are translated to U.S. dollars each period, with the effect of exchange rate variations being recorded in Other comprehensive (loss) income as part of the cumulative foreign currency translation adjustment. As a result, 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 foreign currency translation adjustments, which are recorded in Other comprehensive (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, 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 2019 10-K – 111

Notes to Consolidated Financial Statements

Note 11. Debt

Senior Unsecured Credit Facility

On February 22, 2017, we entered into the Third Amended and Restated Credit Facility (the “Credit Agreement”), which provided for a $1.5 billion unsecured revolving credit facility (our “Unsecured Revolving Credit Facility”), a €236.3 million term loan, and a $100.0 million delayed draw term loan, which we refer to collectively as the “Senior Unsecured Credit Facility”. The aggregate 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 is 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 under the Unsecured Revolving Credit Facility in certain currencies other than U.S. dollars.

On February 20, 2020, we amended and restated our Senior Unsecured Credit Facility (our “Amended Credit Facility”), increasing the capacity of our unsecured 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 five years (Note 20).

At December 31, 2019, our Unsecured Revolving Credit Facility had available capacity of $1.3 billion. We incur an annual facility fee of 0.20% of the total commitment on our Unsecured Revolving Credit Facility.

The following table presents a summary of our Senior Unsecured Credit Facility (dollars in thousands):
 
 
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)
The applicable interest rate at December 31, 2019 was based on the credit rating for our Senior Unsecured Notes of BBB/Baa2.
(b)
On February 20, 2020, we entered into our Amended Credit Facility, extending the maturity date of our revolving line of credit to five years (Note 20).
(c)
EURIBOR means Euro Interbank Offered Rate.

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 2019 10-K – 112

Notes to Consolidated Financial Statements

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


__________
(a)
Aggregate balance excludes unamortized deferred financing costs totaling $22.8 million and $19.7 million, and unamortized discount totaling $20.5 million and $15.8 million at December 31, 2019 and 2018, respectively.

Proceeds from the issuances of each of these notes were used primarily to partially pay down the amounts then outstanding under 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 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 $6.7 million during the year ended December 31, 2019, which are included in Senior Unsecured Notes, net in the consolidated financial statements and are being amortized to Interest expense over the term of the 3.850% Senior Notes due 2029 and 1.350% Senior Notes due 2028.

Covenants

The Credit Agreement 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 Credit Agreement 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 may 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 amount required to (i) maintain our REIT status and (ii) as a result of that status, not pay federal or state income or excise tax, as long as the loans under the Credit Agreement have not been accelerated and no bankruptcy or event of default has occurred.

Obligations under the 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.

Non-Recourse Mortgages

Non-recourse mortgages 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, 2019, the weighted-average interest rates for our fixed-rate and variable-rate non-recourse mortgage notes payable were 5.0% and 2.9%, respectively, with maturity dates ranging from June 2020 to September 2031.


 
W. P. Carey 2019 10-K – 113

Notes to Consolidated Financial Statements

During the year ended December 31, 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 $1.0 billion and (ii) repaid non-recourse mortgage loans at maturity with an aggregate principal balance of approximately $142.7 million. We recognized an aggregate net loss on extinguishment of debt of $14.8 million during the year ended December 31, 2019, primarily comprised of prepayment penalties. The weighted-average interest rate for these non-recourse mortgage loans on their respective dates of repayment was 4.4%. 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 proceeds from the issuances of senior notes to fund these prepayments.

Repayments During 2018

During the year ended December 31, 2018, we (i) prepaid non-recourse mortgage loans totaling $207.4 million, including $18.0 million encumbering properties that were disposed of during that year, and (ii) repaid non-recourse mortgage loans at maturity with an aggregate principal balance of approximately $44.0 million. The weighted-average interest rate for these non-recourse mortgage loans on their respective dates of repayment was 3.9%. Amounts are based on the exchange rate of the related foreign currency as of the date of repayment, as applicable.

Interest Paid

For the years ended December 31, 2019, 2018, and 2017, interest paid was $208.4 million, $157.3 million, and $155.4 million, respectively.

Foreign Currency Exchange Rate Impact

During the year ended December 31, 2019, the U.S. dollar strengthened against the euro, resulting in an aggregate decrease of $52.6 million in the aggregate carrying values of our Non-recourse mortgages, net, Senior Unsecured Credit Facility, and Senior Unsecured Notes, net from December 31, 2018 to December 31, 2019.

Scheduled Debt Principal Payments

Scheduled debt principal payments as of December 31, 2019 are as follows (in thousands):
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, 2019.
(b)
Represents the unamortized discount, net, of $6.2 million in aggregate primarily resulting from the assumption of property-level debt in connection with business combinations, including the CPA:17 Merger (Note 3), and 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 June 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 fundraising activities, consisting primarily of severance costs. During the year ended December 31, 2017, we recorded $8.2 million of severance and benefits and $1.2 million of other related costs, which are all included in Restructuring and other compensation in the consolidated financial statements.

Note 14. Equity

Common Stock

Dividends paid to stockholders consist of ordinary income, capital gains, return of capital or a combination thereof for income tax purposes. Our dividends per share are summarized as 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


__________
(a)
A portion of dividends paid during 2019 has been applied to 2018 for income tax purposes.

During the fourth quarter of 2019, our Board declared a quarterly dividend of $1.038 per share, which was paid on January 15, 2020 to stockholders of record as of December 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 connection with a one-time legal settlement.


 
W. P. Carey 2019 10-K – 115

Notes to Consolidated Financial Statements

Earnings Per Share
 
Under current authoritative guidance for determining earnings per share, all nonvested share-based payment awards that contain non-forfeitable rights to dividends 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. Certain of our nonvested RSUs contain rights to receive non-forfeitable dividend equivalents or 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 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


 
For the years ended December 31, 2019, 2018, and 2017, there were no potentially dilutive securities excluded from the computation of diluted earnings per share.

At-The-Market Equity Offering Program

On 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 $750.0 million, through a continuous “at-the-market” offering program (“ATM Program”) with a syndicate 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 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, 2019, we issued 6,672,412 shares of our common stock under our current and former ATM Programs at a weighted-average price of $79.70 per share for net proceeds of $523.3 million. During the year ended December 31, 2018, we issued 4,229,285 shares of our 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 at a weighted-average price of $67.78 per share for net proceeds of $22.8 million. As of December 31, 2019, $616.6 million remained available for issuance under our current ATM Program.

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%. No 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 accounted for the noncontrolling interest in our 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 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. However, the third party did not formally transfer his interests in WPCI to us pursuant to the put agreement at that time because of a dispute regarding any amounts that might still be owed to him. In September 2018, we negotiated a settlement 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 as of December 31, 2018.


 
W. P. Carey 2019 10-K – 117

Notes to Consolidated Financial Statements

Reclassifications Out of Accumulated Other Comprehensive Loss

The following tables present a reconciliation of changes in Accumulated other comprehensive loss by component for the periods presented (in thousands):
 
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:
 
 
 
 
 
 
 
Gain on sale of real estate, net (Note 10, Note 17)
—

 
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
)


See Note 10 for additional information on our derivatives activity recognized within Other comprehensive (loss) income for the periods presented.


 
W. P. Carey 2019 10-K – 118

Notes to Consolidated Financial Statements

Note 15. Stock-Based and Other Compensation

Stock-Based Compensation

At December 31, 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 $18.8 million, $18.3 million, and $18.9 million for the years ended December 31, 2019, 2018, and 2017, respectively, which was 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 $5.1 million, $6.6 million, and $4.6 million for the years ended December 31, 2019, 2018, and 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.
 
2017 Share Incentive Plan
 
In June 2017, our shareholders approved the 2017 Share Incentive Plan, which replaced our predecessor plans for employees, the 2009 Share Incentive Plan, and 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 authorizes the issuance of up to 4,000,000 shares of our common stock, reduced by the number of shares (279,728) that were subject to awards granted under the 2009 Share Incentive 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 2017 Share Incentive Plan provides for the grant of various stock- and cash-based awards, including (i) share options, (ii) RSUs, (iii) PSUs, (iv) RSAs, and (v) dividend equivalent rights. At December 31, 2019, 3,243,301 shares remained available for issuance under the 2017 Share Incentive Plan, assuming that the target level of performance is achieved for all outstanding PSU awards and not including any dividend equivalents to be paid on those PSUs, which are reinvested in shares of our common stock after the end of the relevant three-year performance cycle but only to the extent that the PSUs vest. PSUs are reflected at 100% of target but may settle at up to three times the target amount shown or less, including 0%, depending on the achievement of pre-set performance metrics over a three-year performance period. RSUs generally vest one-third annually over three years.
 
Employee Share Purchase Plan
 
We sponsor an employee share purchase plan (“ESPP”) pursuant to which eligible employees may contribute up to 10% of compensation, subject to certain limits, to purchase our common stock semi-annually at a price equal to 90% of the fair market value at certain plan defined dates. Compensation expense under this plan for each of the years ended December 31, 2019, 2018, and 2017 was less than $0.1 million.


 
W. P. Carey 2019 10-K – 119

Notes to Consolidated Financial Statements

Restricted and Conditional Awards
 
Nonvested RSAs, RSUs, and PSUs at December 31, 2019 and changes during the years ended December 31, 2019, 2018, and 2017 were as follows:
 
RSA and RSU Awards
 
PSU Awards
 
Shares
 
Weighted-Average Grant Date Fair Value
 
Shares
 
Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2017
356,865

 
$
61.63

 
310,018

 
$
73.80

Granted
194,349

 
62.22

 
107,934

 
75.39

Vested (a)
(185,259
)
 
62.72

 
(132,412
)
 
74.21

Forfeited
(41,616
)
 
61.08

 
(45,258
)
 
76.91

Adjustment (b)
—

 
—

 
41,017

 
63.18

Nonvested at December 31, 2017
324,339

 
61.43

 
281,299

 
74.57

Granted
137,519

 
64.50

 
75,864

 
75.81

Vested (a)
(181,777
)
 
62.25

 
(66,632
)
 
76.96

Forfeited
(3,079
)
 
61.71

 
(3,098
)
 
76.49

Adjustment (b)
—

 
—

 
43,783

 
74.17

Nonvested at December 31, 2018
277,002

 
62.41

 
331,216

 
78.82

Granted (c)
163,447

 
72.86

 
84,006

 
92.16

Vested (a)
(152,364
)
 
62.11

 
(403,701
)
 
74.04

Forfeited
(4,108
)
 
68.10

 
(2,829
)
 
75.81

Adjustment (b)
—

 
—

 
322,550

 
77.69

Nonvested at December 31, 2019 (d)
283,977

 
$
68.51

 
331,242

 
$
80.90

__________
(a)
The grant date fair value of shares vested during the years ended December 31, 2019, 2018, and 2017 was $39.4 million, $16.4 million, and $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, 2019 and 2018, we had an obligation to issue 893,713 and 867,871 shares, respectively, of our common stock underlying such deferred awards, which is recorded within Total stockholders’ equity as a Deferred compensation obligation of $37.3 million and $35.8 million, respectively.
(b)
Vesting and payment of the PSUs is conditioned upon certain company and/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 zero to three 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 value 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 an estimate of our future stock price over the three-year performance period and (ii) future financial performance projections. To estimate the fair value of PSUs granted during the year ended December 31, 2019, we used a risk-free interest rate of 2.5%, an expected volatility rate of 15.8%, and assumed a dividend yield of zero.
(d)
At December 31, 2019, total unrecognized compensation expense related to these awards was approximately $22.5 million, with an aggregate weighted-average remaining term of 1.6 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 are 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.

Stock Options
 
At December 31, 2016, we had 145,033 stock options outstanding, all of which were exercised during the year ended December 31, 2017 (prior to the expiration of their terms on that date), at a weighted-average exercise price of $33.27.
 
Options granted under the 1997 Share Incentive Plan, a predecessor employee plan, generally had a ten-year term and vested in four equal annual installments. We have not issued option awards since 2007. The total intrinsic value of options exercised during the year ended December 31, 2017 was $4.4 million.
 
At December 31, 2017, all of our options had either been fully exercised or expired, and all related compensation expense has been previously recognized.
 
Cash received from purchases under the ESPP and stock option exercises during the years ended December 31, 2019, 2018, and 2017 was $0.3 million, $0.2 million, and $0.2 million, respectively.
 
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. In December 2019, 2018, and 2017, our Board 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 $28,000 for 2019, $27,500 for 2018, and $27,000 for 2017. For the years ended December 31, 2019, 2018, and 2017, amounts expensed for contributions to the trust were $2.1 million, $2.6 million, and $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 the years ended December 31, 2019, 2018, and 2017, we recognized severance costs totaling $1.1 million, $0.9 million, and less than $0.1 million, 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 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


 
A reconciliation of effective income tax for the periods presented is as follows (in thousands):
 
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 income attributable to taxable subsidiaries for 2018 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 CPA:17 Merger. Pre-tax income attributable to taxable subsidiaries for 2017 excludes the impact of foreign currency exchange rates on an intercompany transaction related to the euro-denominated 2.25% Senior Notes due 2024 issued in 2017 (Note 11) since it had no tax impact and eliminates in consolidation.
(b)
The applicable statutory tax rate is 21%, 21%, and 35% for the years ended December 31, 2019, 2018, and 2017, respectively.
(c)
Amount for the year ended December 31, 2019 includes a current tax benefit of approximately $6.3 million due to a change in tax position for state and local taxes.

 
W. P. Carey 2019 10-K – 122

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, 2019 and 2018 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
)


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 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 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 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 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. Certain net operating losses and interest carryforwards were subject to limitations as a result of the CPA:17 Merger, and thus could not be applied to reduce future income tax liabilities.

As of December 31, 2019, U.S. federal and state net operating loss carryforwards were $66.4 million and $27.8 million, respectively, which will begin to expire in 2031 and 2024, respectively. As of December 31, 2019, net operating loss carryforwards in foreign jurisdictions were $49.7 million, which will begin to expire in 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 $8.9 million and $7.9 million at December 31, 2019 and 2018, respectively, which are included in Other assets, net in the consolidated balance sheets, and other deferred tax liability balances of $179.3 million and $173.1 million at December 31, 2019 and 2018, respectively, which are included in Deferred income taxes in the consolidated balance sheets.


 
W. P. Carey 2019 10-K – 123

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


 
At December 31, 2019 and 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, 2019 and 2018, we had approximately $1.6 million and $1.4 million, respectively, of accrued interest related to uncertain tax positions.

Income Taxes Paid

Income taxes paid were $35.3 million, $23.2 million, and $16.7 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Real Estate Operations
 
We elected to be taxed as a REIT under Section 856 through 860 of the Internal Revenue 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. We conduct business primarily in North America and Europe, 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, local, and foreign jurisdictions.
 
Investment Management Operations
 
We conduct our investment management services in our Investment Management segment through TRSs. 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. 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 2014 through 2018 or any ongoing audits remain open to adjustment in the major tax jurisdictions.


 
W. P. Carey 2019 10-K – 124

Notes to Consolidated Financial Statements

Note 17. Property Dispositions
 
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. All property dispositions are recorded within our Real Estate segment.

2019 — During the year ended December 31, 2019, we sold 14 properties for total proceeds of $308.0 million, net of selling costs, and recognized a net gain on these sales totaling $10.9 million (inclusive of income taxes totaling $1.2 million recognized 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 $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 the mortgage loan), respectively, on the date of transfer, 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 of accrued interest payable).

In addition, in December 2019, we transferred ownership of a property and the related non-recourse mortgage loan, which had an aggregate asset carrying value of $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 one 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 a non-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 two 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 two 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 $3.8 million of cash held in escrow that was retained by the mortgage lender), respectively, on the dates of transfer, to the mortgage lender, resulting in a net loss of less than $0.1 million.


 
W. P. Carey 2019 10-K – 125

Notes to Consolidated Financial Statements

Note 18. Segment Reporting

We evaluate our results from operations by our two major business segments: Real Estate and Investment Management (Note 1). The following tables present a summary of comparative results and assets for these business segments (in thousands):

Real Estate
 
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 2019 10-K – 126

Notes to Consolidated Financial Statements

Investment Management
 
Years Ended December 31,
 
2019
 
2018
 
2017
Revenues
 
 
 
 
 
Asset management revenue
$
39,132

 
$
63,556

 
$
70,125

Reimbursable costs from affiliates
16,547

 
21,925

 
51,445

Structuring and other advisory revenue
4,224

 
21,126

 
35,094

Dealer manager fees
—

 
—

 
4,430

 
59,903

 
106,607

 
161,094

Operating Expenses
 
 
 
 
 
General and administrative
18,497

 
21,127

 
31,889

Reimbursable costs from affiliates
16,547

 
21,925

 
51,445

Subadvisor fees
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
—

 
—

 
6,544

 
51,997

 
64,115

 
128,700

Other Income and Expenses
 
 
 
 
 
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

 
—

 
22,092

 
77,093

 
53,724

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
34,589

 
104,330

 
85,150

Net income attributable to noncontrolling interests
(1,411
)
 
—

 
—

Net Income from Investment Management Attributable to W. P. Carey
$
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



 
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 2019 10-K – 127

Notes to Consolidated Financial Statements

Our portfolio is comprised of domestic and international investments. At December 31, 2019, our international investments within our Real Estate segment were comprised of investments in Germany, Spain, the United Kingdom, Poland, the Netherlands, Finland, France, Denmark, Norway, Hungary, Italy, Austria, Sweden, Croatia, Belgium, Lithuania, Portugal, Slovakia, the Czech Republic, Canada, Mexico, and Japan. We sold all of our investments in Australia during 2018 (Note 17). We sold all of our investments in Malaysia and Thailand during 2017 (Note 17). No international country or tenant individually comprised at least 10% of our total lease revenues for the years ended December 31, 2019, 2018, or 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



 
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 2019 10-K – 128

Notes to Consolidated Financial Statements

Note 19. Selected Quarterly Financial Data (Unaudited)

(dollars in thousands, except per share amounts)
 
Three Months Ended
 
March 31, 2019
 
June 30, 2019
 
September 30, 2019
 
December 31, 2019
Revenues (a)
$
298,323

 
$
305,211

 
$
318,005

 
$
311,227

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 (a)
(302
)
 
(83
)
 
(496
)
 
(420
)
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 (e)
$
0.41

 
$
0.39

 
$
0.24

 
$
0.75

Diluted (e)
$
0.41

 
$
0.38

 
$
0.24

 
$
0.75

 
Three Months Ended
 
March 31, 2018
 
June 30, 2018
 
September 30, 2018
 
December 31, 2018
Revenues (a)
$
201,810

 
$
201,143

 
$
209,384

 
$
273,395

Expenses (a)
120,966

 
109,202

 
110,937

 
185,346

Net income (a) (f) (g)
68,066

 
79,424

 
81,573

 
195,278

Net income attributable to noncontrolling interests (a)
(2,792
)
 
(3,743
)
 
(4,225
)
 
(2,015
)
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 (e)
$
0.60

 
$
0.70

 
$
0.71

 
$
1.33

Diluted (e)
$
0.60

 
$
0.70

 
$
0.71

 
$
1.33

__________
(a)
Amounts for 2019 and the three months ended December 31, 2018 include the impact of the CPA:17 Merger (Note 3).
(b)
Amount for the three months ended September 30, 2019 includes impairment charges totaling $25.8 million recognized on a portfolio of four 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 $11.9 million recognized on the disposition of 25 properties. Amount for the three months ended December 31, 2018 includes an aggregate gain on sale of real estate of $99.6 million recognized on the disposition of 39 properties.


 
W. P. Carey 2019 10-K – 129

Notes to Consolidated Financial Statements

Note 20. Subsequent Events

Amended Credit Facility

On February 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 $2.1 billion, which is comprised of a $1.8 billion revolving line of credit, a £150.0 million term loan, and a $105.0 million delayed draw term loan, all 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 0.85% on the revolving line of credit, and LIBOR, or a LIBOR equivalent, plus 0.95% on the term loan and delayed draw term loan.

Acquisitions and Completed Construction Projects

In January 2020, we completed three investments for a total purchase price of approximately $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 one construction project at a total cost of $53.1 million.

Dispositions

In January and February 2020, we sold four properties for gross proceeds totaling $121.8 million, including one of our two hotel operating properties for gross proceeds of $120.0 million (inclusive of $5.5 million attributable to a noncontrolling interest). This property was classified as held for sale as of December 31, 2019 (Note 5).


 
W. P. Carey 2019 10-K – 130

W. P. CAREY INC.
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2019, 2018, and 2017
(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




 
W. P. Carey 2019 10-K – 131

W. P. CAREY INC.
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
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
 
 
 
 
Land, Buildings and Improvements Subject to Operating Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Industrial facilities in Erlanger, KY
 
$
—

 
$
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

 
2,238

 
1964; 1983
 
Jan. 1998
 
15 yrs.
Warehouse facilities in Anchorage, AK and Commerce, CA
 
—

 
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

 
1,705

 
1966
 
Jan. 1998
 
40 yrs.
Industrial facility in Goshen, IN
 
—

 
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

 
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

 
4,036

 
1968
 
Jan. 1998
 
40 yrs.
Industrial facility in Pinconning, MI
 
—

 
32

 
1,692

 
—

 
—

 
32

 
1,692

 
1,724

 
930

 
1948
 
Jan. 1998
 
40 yrs.
Industrial facilities in San Fernando, CA
 
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

 
14,696

 
9,025

 
15,291

 
24,316

 
5,790

 
Various
 
Jan. 1998
 
15 yrs.
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

 
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
 
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
Industrial facility in Chandler, AZ
 
—

 
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

 
3,768

 
1972
 
Jan. 1998
 
40 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

 
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

 
6,322

 
1994
 
Apr. 1998
 
40 yrs.
Office facility in Rio Rancho, NM
 
—

 
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

 
1,652

 
1

 
351

 
7,634

 
7,985

 
4,265

 
1964
 
Feb. 1999
 
40 yrs.
Industrial facilities in Lenexa, KS and Winston-Salem, NC
 
—

 
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 2019 10-K – 132

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 facilities in Apopka, FL
 
—

 
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
Fitness facility in Austin, TX
 
—

 
1,725

 
5,168

 
—

 
—

 
1,725

 
5,168

 
6,893

 
2,372

 
1995
 
Dec. 2006
 
29 yrs.
Retail facility in Wroclaw, Poland
 
—

 
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
 
—

 
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

 
—

 
(1,414
)
 
10,428

 
11,903

 
22,331

 
2,848

 
2008
 
Jun. 2010
 
40 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
 
—

 
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
 
1,631

 
4,173

 
—

 
—

 
—

 
4,173

 
—

 
4,173

 
—

 
N/A
 
Sep. 2012
 
N/A
Industrial facility in Alpharetta, GA
 
—

 
2,198

 
6,349

 
1,247

 
—

 
2,198

 
7,596

 
9,794

 
1,798

 
1997
 
Sep. 2012
 
30 yrs.
Office facility in Clinton, NJ
 
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

 
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

 
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

 
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

 
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
 
51,263

 
16,386

 
84,668

 
—

 
—

 
16,386

 
84,668

 
101,054

 
20,333

 
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

 
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 2019 10-K – 133

SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2019
(in thousands)
 
 
 
 
 
 
 
 
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
 
 
 
 
 
 
 
Description
 
Encumbrances
 
Land
 
Buildings
 
 
 
Land
 
Buildings
 
Total
 
 
 
 
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
 
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
 
7,732

 
6,080

 
23,424

 
—

 
—

 
6,080

 
23,424

 
29,504

 
5,430

 
1990; 1994; 2000
 
Sep. 2012
 
31 yrs.
Fitness facilities in Englewood, CO; Memphis TN; and Bedford, TX
 
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
 
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
 
2,298

 
3,333

 
8,270

 
—

 
—

 
3,333

 
8,270

 
11,603

 
1,922

 
1989; 1996
 
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
 
19,073

 
4,196

 
23,148

 
—

 
—

 
4,196

 
23,148

 
27,344

 
5,017

 
2005
 
Sep. 2012
 
33 yrs.
Office facility in Pleasanton, CA
 
—

 
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

 
157

 
2000
 
Sep. 2012
 
31 yrs.
Office facility in Chicago, IL
 
—

 
2,169

 
19,010

 
72

 
(72
)
 
2,169

 
19,010

 
21,179

 
4,326

 
1910
 
Sep. 2012
 
31 yrs.
Industrial facilities in Hollywood and Orlando, FL
 
—

 
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

 
1,096

 
1998
 
Sep. 2012
 
30 yrs.
Industrial facility in Texarkana, TX
 
—

 
1,755

 
4,493

 
—

 
(2,783
)
 
216

 
3,249

 
3,465

 
739

 
1997
 
Sep. 2012
 
31 yrs.
Industrial facility in Eugene, OR
 
4,014

 
2,286

 
3,783

 
—

 
—

 
2,286

 
3,783

 
6,069

 
861

 
1980
 
Sep. 2012
 
31 yrs.
Industrial facility in South Jordan, UT
 
—

 
2,183

 
11,340

 
1,642

 
—

 
2,183

 
12,982

 
15,165

 
2,782

 
1995
 
Sep. 2012
 
31 yrs.
Warehouse facility in Ennis, TX
 
—

 
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 2019 10-K – 134

SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2019
(in thousands)
 
 
 
 
 
 
 
 
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
 
 
 
 
 
 
 
Description
 
Encumbrances
 
Land
 
Buildings
 
 
 
Land
 
Buildings
 
Total
 
 
 
 
Industrial and office facility in Tampere, Finland
 
—

 
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

 
127

 
—

 
2,316

 
21,664

 
23,980

 
3,842

 
1989
 
Jun. 2013
 
40 yrs.
Office facility in Salford, United Kingdom
 
—

 
—

 
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

 
2,927

 
—

 
4,761

 
31,791

 
36,552

 
5,725

 
2001
 
Nov. 2013
 
40 yrs.
Office facility in Mönchengladbach, Germany
 
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
 
—

 
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

 
1,352

 
—

 
1,966

 
2,720

 
4,686

 
624

 
1987
 
Jan. 2014
 
27 yrs.
Fitness facility in Salt Lake City, UT
 
—

 
856

 
2,804

 
—

 
—

 
856

 
2,804

 
3,660

 
642

 
1999
 
Jan. 2014
 
26 yrs.
Land in Scottsdale, AZ
 
9,358

 
22,300

 
—

 
—

 
—

 
22,300

 
—

 
22,300

 
—

 
N/A
 
Jan. 2014
 
N/A
Industrial facility in Aurora, CO
 
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

 
1,527

 
1999
 
Jan. 2014
 
26 yrs.
Industrial facility in Albuquerque, NM
 
—

 
2,467

 
3,476

 
606

 
—

 
2,467

 
4,082

 
6,549

 
905

 
1993
 
Jan. 2014
 
27 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

 
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
Industrial facilities in Evansville, IN; Lawrence, KS; and Baltimore, MD
 
—

 
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
 
—

 
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
 
—

 
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
 
—

 
6,578

 
424

 
560

 
—

 
6,578

 
984

 
7,562

 
360

 
1978
 
Jan. 2014
 
27 yrs.
Land in Doncaster, United Kingdom
 
—

 
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 2019 10-K – 135

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 facility in Cynthiana, KY
 
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

 
3,112

 
1962
 
Jan. 2014
 
23 yrs.
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
 
—

 
1,966

 
18,896

 
—

 
—

 
1,966

 
18,896

 
20,862

 
4,308

 
2007
 
Jan. 2014
 
33 yrs.
Office facility in Greenville, SC
 
7,311

 
562

 
7,916

 
—

 
43

 
562

 
7,959

 
8,521

 
1,877

 
1972
 
Jan. 2014
 
25 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
 
—

 
9,297

 
24,086

 
—

 
(42
)
 
9,255

 
24,086

 
33,341

 
4,607

 
1981; 1997
 
Jan. 2014
 
31 yrs.
Industrial facilities in Hampton, NH
 
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

 
—

 
(8,126
)
 
29,091

 
4,301

 
33,392

 
1,111

 
Various
 
Jan. 2014
 
23 yrs.
Retail facility in Fairfax, VA
 
—

 
3,402

 
16,353

 
—

 
—

 
3,402

 
16,353

 
19,755

 
3,672

 
1998
 
Jan. 2014
 
26 yrs.
Retail facility in Lombard, IL
 
—

 
5,087

 
8,578

 
—

 
—

 
5,087

 
8,578

 
13,665

 
1,926

 
1999
 
Jan. 2014
 
26 yrs.
Warehouse facility in Plainfield, IN
 
18,054

 
1,578

 
29,415

 
—

 
—

 
1,578

 
29,415

 
30,993

 
5,735

 
1997
 
Jan. 2014
 
30 yrs.
Retail facility in Kennesaw, GA
 
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
 
7,750

 
1,487

 
13,417

 
—

 
—

 
1,487

 
13,417

 
14,904

 
3,013

 
1997
 
Jan. 2014
 
26 yrs.
Office facility in Tolland, CT
 
7,328

 
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
 
9,006

 
1,962

 
9,247

 
—

 
—

 
1,962

 
9,247

 
11,209

 
1,948

 
1988; 1996
 
Jan. 2014
 
28 yrs.
Retail facilities located throughout Germany
 
—

 
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 2019 10-K – 136

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
 
 
 
 
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 2019 10-K – 137

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 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 2019 10-K – 138

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
 
 
 
 
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 2019 10-K – 139

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 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 2019 10-K – 140

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 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 2019 10-K – 141

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 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
 
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 2019 10-K – 147


W. P. CAREY INC.
NOTES TO SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
 
Reconciliation of Land, Buildings and Improvements Subject to Operating Leases
 
Years Ended December 31,
 
2019
 
2018
 
2017
Beginning balance
$
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
(90,488
)
 
(296,543
)
 
(131,549
)
Reclassification from direct financing lease
76,934

 
15,998

 
1,611

Foreign currency translation adjustment
(37,032
)
 
(88,715
)
 
192,580

Capital improvements
18,860

 
25,727

 
17,778

CPA:17 Merger measurement period adjustments
(5,687
)
 
—

 
—

Impairment charges
(1,345
)
 
(3,030
)
 
(2,901
)
Acquisitions through CPA:17 Merger
—

 
2,907,982

 
—

Ending balance
$
9,703,504

 
$
8,717,612

 
$
5,334,446

 
Reconciliation of Accumulated Depreciation for
Land, Buildings and Improvements Subject to Operating Leases
 
Years Ended December 31,
 
2019
 
2018
 
2017
Beginning balance
$
724,550

 
$
613,543

 
$
472,294

Depreciation expense
232,927

 
162,119

 
144,183

Dispositions
(6,109
)
 
(41,338
)
 
(17,770
)
Foreign currency translation adjustment
(916
)
 
(9,774
)
 
14,836

Ending balance
$
950,452

 
$
724,550

 
$
613,543

 
Reconciliation of Land, Buildings and Improvements Attributable to Operating Properties
 
Years Ended December 31,
 
2019
 
2018
 
2017
Beginning balance
$
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
—

 
(43,607
)
 
—

Ending balance
$
83,083

 
$
466,050

 
$
83,047

 
Reconciliation of Accumulated Depreciation for
Land, Buildings and Improvements
Attributable to Operating Properties
 
Years Ended December 31,
 
2019
 
2018
 
2017
Beginning balance
$
10,234

 
$
16,419

 
$
12,143

Depreciation expense
2,553

 
4,240

 
4,276

Reclassification to assets held for sale
(1,546
)
 
—

 
—

Dispositions
—

 
(10,425
)
 
—

Ending balance
$
11,241

 
$
10,234

 
$
16,419


At December 31, 2019, the aggregate cost of real estate that we and our consolidated subsidiaries own for federal income tax purposes was approximately $12.4 billion.

 
W. P. Carey 2019 10-K – 148


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 and Financial 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 (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, 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, 2019 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, 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, 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, 2019 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 2019 10-K – 150

PART III

Item 10. Directors, Executive Officers and Corporate Governance.
 
This information will be contained in our definitive proxy statement for the 2020 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 2020 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 Management and Related Stockholder Matters.
 
This information will be contained in our definitive proxy statement for the 2020 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 Director Independence.
 
This information will be contained in our definitive proxy statement for the 2020 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 2020 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 2019 10-K – 151


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.
 
(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 Current Report on Form 8-K, filed June 16, 2017
3.2

 
Fifth Amended and Restated Bylaws of W. P. Carey Inc.
 
Incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed June 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
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 to Automatic shelf registration statement on Form S-3 (File No. 333-233159) filed August 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 2017 Share Incentive Plan
 
Incorporated by reference to Exhibit 4.9 to Registration Statement on Form S-8 filed June 27, 2017
10.8

 
Form of Restricted Share Agreement under the 2017 Share Incentive Plan
 
Incorporated by reference to Exhibit 4.7 to Registration Statement on Form S-8 filed June 27, 2017
10.9

 
Form of Restricted Share Unit Agreement under the 2017 Share Incentive Plan
 
Incorporated by reference to Exhibit 4.8 to Registration Statement on Form S-8 filed June 27, 2017
10.10

 
Form of Long-Term Performance Share Unit Award Agreement pursuant to the W. P. Carey Inc. 2017 Share Incentive Plan
 
Incorporated by reference to Exhibit 4.6 to Registration Statement on Form S-8 filed June 27, 2017
10.11

 
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 *
 
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 Inc. and Mark J. DeCesaris
 
Incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K for the year ended December 31, 2017 filed February 23, 2018
10.14

 
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
10.15

 
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’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed May 15, 2015
10.17

 
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

 
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 March 2, 2015
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
 
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
10.21

 
Second Amendment to Advisory Agreement, dated as of June 13, 2017, by and among Carey Watermark Investors 2 Incorporated, CWI 2 OP, LP and Carey Lodging Advisors, LLC
 
Incorporated by reference to Exhibit 10.27 to Annual Report on Form 10-K for the year ended December 31, 2017 filed February 23, 2018
10.22

 
Fourth Amended and Restated Credit Agreement, dated as of February 20, 2020, among W. P. Carey Inc. and Certain of its Subsidiaries identified therein as Guarantors, Bank of America, N.A., as Administrative Agent, 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 party thereto
 
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed February 20, 2020
10.23

 
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
 
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed January 19, 2017
10.24

 
Agency Agreement dated as of March 6, 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 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
101.INS

 
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document.
 
Filed 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 2019 10-K – 156


Exhibit
No.

 
Description
 
Method of Filing
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.

 
W. P. Carey 2019 10-K – 157


Item 16. Form 10-K Summary.

None.

 
W. P. Carey 2019 10-K – 158


SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
W. P. Carey Inc.
 
 
 
 
Date:
February 21, 2020
By: 
/s/ ToniAnn Sanzone
 
 
 
ToniAnn Sanzone
 
 
 
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report 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/ Jason E. Fox
 
Director and Chief Executive Officer
 
February 21, 2020
Jason E. Fox
 
(Principal Executive Officer)
 
 
 
 
 
 
 
/s/ ToniAnn Sanzone
 
Chief Financial Officer
 
February 21, 2020
ToniAnn Sanzone
 
(Principal Financial Officer)
 
 
 
 
 
 
 
/s/ Arjun Mahalingam
 
Chief Accounting Officer
 
February 21, 2020
Arjun Mahalingam
 
(Principal Accounting Officer)
 
 
 
 
 
 
 
/s/ Christopher J. Niehaus
 
Chairman of the Board and Director
 
February 21, 2020
Christopher J. Niehaus
 
 
 
 
 
 
 
 
 
/s/ Mark A. Alexander
 
Director
 
February 21, 2020
Mark A. Alexander
 
 
 
 
 
 
 
 
 
/s/ Peter J. Farrell
 
Director
 
February 21, 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. Hansing
 
Director
 
February 21, 2020
Axel K. A. Hansing
 
 
 
 
 
 
 
 
 
/s/ Jean Hoysradt
 
Director
 
February 21, 2020
Jean Hoysradt
 
 
 
 
 
 
 
 
 
/s/ Margaret G. Lewis
 
Director
 
February 21, 2020
Margaret G. Lewis
 
 
 
 
 
 
 
 
 
/s/ Nicolaas J. M. van Ommen
 
Director
 
February 21, 2020
Nicolaas J. M. van Ommen
 
 
 
 


 
W. P. Carey 2019 10-K – 159


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 Current Report on Form 8-K, filed June 16, 2017
3.2

 
Fifth Amended and Restated Bylaws of W. P. Carey Inc.
 
Incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed June 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
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
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 to Automatic shelf registration statement on Form S-3 (File No. 333-233159) filed August 9, 2019



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.
 
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
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



Exhibit
No.

 
Description
 
Method of Filing
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 2017 Share Incentive Plan
 
Incorporated by reference to Exhibit 4.9 to Registration Statement on Form S-8 filed June 27, 2017
10.8

 
Form of Restricted Share Agreement under the 2017 Share Incentive Plan
 
Incorporated by reference to Exhibit 4.7 to Registration Statement on Form S-8 filed June 27, 2017
10.9

 
Form of Restricted Share Unit Agreement under the 2017 Share Incentive Plan
 
Incorporated by reference to Exhibit 4.8 to Registration Statement on Form S-8 filed June 27, 2017
10.10

 
Form of Long-Term Performance Share Unit Award Agreement pursuant to the W. P. Carey Inc. 2017 Share Incentive Plan
 
Incorporated by reference to Exhibit 4.6 to Registration Statement on Form S-8 filed June 27, 2017
10.11

 
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 *
 
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 Inc. and Mark J. DeCesaris
 
Incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K for the year ended December 31, 2017 filed February 23, 2018
10.14

 
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
10.15

 
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’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed May 15, 2015
10.17

 
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
10.18

 
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 March 2, 2015



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
 
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
10.21

 
Second Amendment to Advisory Agreement, dated as of June 13, 2017, by and among Carey Watermark Investors 2 Incorporated, CWI 2 OP, LP and Carey Lodging Advisors, LLC
 
Incorporated by reference to Exhibit 10.27 to Annual Report on Form 10-K for the year ended December 31, 2017 filed February 23, 2018
10.22

 
Fourth Amended and Restated Credit Agreement, dated as of February 20, 2020, among W. P. Carey Inc. and Certain of its Subsidiaries identified therein as Guarantors, Bank of America, N.A., as Administrative Agent, 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 party thereto
 
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed February 20, 2020
10.23

 
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
 
Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed January 19, 2017
10.24

 
Agency Agreement dated as of March 6, 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 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
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



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
 
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
101.INS

 
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document.
 
Filed 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
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.

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