EDGAR 10-K Filing

Company CIK: 1025378
Filing Year: 2023
Filename: 1025378_10-K_2023_0001025378-23-000035.json

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ITEM 1. BUSINESS
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 1,449 properties, net-leased to 392 tenants in 26 countries. As of December 31, 2022, approximately 63% 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 87 operating properties, comprised of 84 self-storage properties, two student housing properties, and one hotel.
On August 1, 2022, one of our former investment programs, Corporate Property Associates 18 - Global Incorporated (“CPA:18 - Global”), merged with and into one of our indirect subsidiaries (the “CPA:18 Merger”), which added approximately $2.2 billion of real estate assets to our portfolio (Note 3). This effectively completed our exit from our investment management business.
Founded in 1973, we became a publicly traded company listed on the New York Stock Exchange (“NYSE”) in 1998 and reorganized as a REIT in 2012. 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.
Narrative Description of Business
Business Objectives and Strategy
Our primary business objective is to invest in a diversified portfolio of high-quality, mission-critical assets subject to long-term net leases with built-in rent escalators for the purpose of generating stable cash flows, enabling us to grow our dividend and increase long-term stockholder value.
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 review and evaluate the fundamental value of the underlying real estate. 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 specialize in 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 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. We capitalize on our large portfolio and existing tenant relationships through accretive expansions, renovations, and follow-on deals. We actively manage our real estate portfolio to monitor tenant credit quality and lease renewal risks. We also maintain ample liquidity, a conservative capital structure, and access to multiple forms of capital.
Our business operates in two segments: Real Estate and Investment Management, as described herein and in Note 1. Our Real Estate segment generates the vast majority of our earnings through the lease revenues we earn from our real estate investments. We have historically earned asset management fees and other compensation from the management of non-traded real estate investment programs through our Investment Management segment. Following the close of the CPA:18 Merger, our advisory agreements with CPA:18 - Global were terminated (Note 3). On April 13, 2020, two of our former investment programs, Carey Watermark Investors Incorporated (“CWI 1”) and Carey Watermark Investors 2 Incorporated (“CWI 2”) (together, the “CWI REITs”), merged in an all-stock transaction (the “CWI 1 and CWI 2 Merger”). Following the close of the CWI 1 and CWI 2
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Merger, our advisory agreements with CWI 1 and CWI 2 were terminated and CWI 2 was renamed Watermark Lodging Trust, Inc. (“WLT”) (Note 4). As used herein, “Managed Programs” refers to CPA:18 - Global (through August 1, 2022), the CWI REITs (through April 13, 2020), and Carey European Student Housing Fund I, L.P. (“CESH”). We continue to act as the advisor to CESH and currently expect to do so through the end of its life cycle (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 subsidiaries of non-guarantor parent companies with investment grade ratings as “implied investment grade.”
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.
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.
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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, repositioning assets, 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 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. The in-depth understanding of our tenants’ businesses and direct relationships with their management teams provides strong visibility into potential issues as well as additional investment opportunities. Our business intelligence platform provides real-time surveillance and early warning, allowing asset managers to work with tenants to enforce lease provisions, and where appropriate, consider lease modifications.
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 any amounts available to us under our term loan (“Term Loan”) and delayed draw term loan (“Delayed Draw Term Loan”), which, together with our Unsecured Revolving Credit Facility, we refer to collectively as our “Senior Unsecured Credit Facility.” We also hold cash on hand to settle our forward equity arrangements, as needed. We generally use the Unsecured Revolving Credit Facility to fund our immediate capital needs, including new acquisitions and the repayment of secured mortgage debt as we continue to unencumber assets. 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, and the most attractive source of capital available to us. We may choose to issue unsecured debt securities and bank debt denominated in foreign currencies in part to fund international acquisitions, unencumber assets, and mitigate our exposure to fluctuations in exchange rates. We strive to maintain an investment grade rating, which places limitations on the amount of leverage acceptable in our capital structure. Although we expect to continue to have access to a wide variety of capital sources and maintain our investment grade rating, there can be no assurance that we will be able to do so in the future.
Our Portfolio
At December 31, 2022, our portfolio had the following characteristics:
•Number of properties - full or partial ownership interests in 1,449 net-leased properties, 84 self-storage properties, two student housing properties, and one hotel;
•Total net-leased square footage - approximately 176 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.
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Tenant/Lease Information
At December 31, 2022, our tenants/leases had the following characteristics:
•Number of tenants - 392;
•Investment grade tenants as a percentage of total ABR - 24%;
•Implied investment grade tenants as a percentage of total ABR - 7%;
•Weighted-average lease term - 10.8 years;
•99.0% of our leases as a percentage of total ABR provide rent adjustments as follows:
◦CPI and similar - 55.5%
◦Fixed - 40.0%
◦Other - 3.5%
Human Capital
Investing in Our Employees
At December 31, 2022, we had 193 employees, 141 of which were located in the United States and 52 of which were located in Europe. We strive to make W. P. Carey a great place to work by attracting a diverse pool of the best and brightest applicants and making them feel supported as they grow with the company. We offer various levels of training, including “Respect in the Workplace,” skills training, Diversity, Equity & Inclusion, and executive coaching, as well as additional training including safety and cybersecurity. By engaging with our employees and investing in their careers through training and development, we have built a talented workforce capable of executing our business strategies.
Diversity
We believe that our success is dependent upon the diverse backgrounds and perspectives of our employees and directors. W. P. Carey is an equal opportunity employer and considers qualified applicants regardless of race, color, religion, sexual orientation, gender, gender identity or expression, national origin, age, disability, military or veteran status, genetic information, or other statuses protected by applicable federal, state, and local law. Our diversity, equity and inclusion initiative is designed to facilitate conversations around race, sexual orientation and gender identity, national origin, creeds, and other important topics. These conversations, led by our Diversity, Equity & Inclusion Advisory Committee, provide a forum for us to translate our positions as a company into action in both our internal and external communities. We are also signatory to the CEO Action Pledge for Diversity & Inclusion, which reflects our commitment to fostering a more diverse and inclusive workforce.
Employee Wellness and Benefits
The health and wellness of our employees and their families are paramount and our comprehensive benefits package is designed to address the evolving needs of our diverse workforce and their dependents. Our benefits package is evaluated on an annual basis. In addition to robust health and wellness benefits, we also provide our employees with competitive compensation programs, with a focus on both current compensation and retirement planning for their future.
Additional information regarding our human capital programs and initiatives is available in our annual Proxy Statement and Environmental, Social, and Governance (“ESG”) Report, which can be found on our company website. Information on our website, including our ESG Report, is not incorporated by reference into this Report.
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.
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Our quarterly earnings conference call and investor presentations are accessible by the public. We generally announce via press release the dates and conference call details for upcoming scheduled quarterly earnings announcements and webcast investor presentations, which are also available in the Investor Relations section of our website approximately ten days prior to the event.
Our Code of Business Conduct and Ethics, which applies to all employees, including our chief executive officer and chief financial officer, is also available on our website. 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. 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.

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ITEM 1A. RISK FACTORS
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, which 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 Portfolio and Ownership of Real Estate
We face an increasingly competitive marketplace for investments.
The net lease financing market is perceived as a relatively conservative investment vehicle and there has been increasing capital inflows into our sector; accordingly, we face escalating competition for investments, both domestically and internationally. We compete for investments with many other financial institutions and investors, including other REITs, private equity firms, pension funds, and finance companies. Our competitors may accept greater risk or lower returns, allowing them to offer more attractive terms to prospective tenants. Further capital inflows into our sector will place additional pressure on our ability to execute transactions and the returns that we can generate from investments. In particular, private equity real estate investors have raised record amounts of capital in recent periods, which is expected to be deployed into acquisitions that are contributing to an increasingly competitive marketplace. This competitive marketplace for investments could also have a negative impact on our revenue growth.
In addition, expectations of rising interest rates may increase our cost of capital, while capitalization rates (which generally respond to higher interest rates on a lag) could remain low or continue to decline, thereby placing additional pressure on investment spreads throughout the net lease sector. Finally, 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 these types of investments.
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.
Inflation and increased interest rates may adversely affect our financial condition and results of operations.
Increases in inflation and interest rates could have an adverse impact on the cost of our existing variable-rate debt, new debt obligations entered into in the future, and costs incurred by the company through its operations. Our leases typically require tenants to pay all property operating expenses and increases in those property-level expenses at our leased properties generally do not affect us. However, increased operating expenses at properties not subject to full triple-net leases could cause us to incur additional operating expenses. Increases in inflation could also impact other costs incurred by the company including general and administrative costs. While the vast majority of leases contain rent escalators, including inflation-linked rent escalators, these costs could increase at a rate higher than our rental and other revenue. In addition, as a result of rising interest rates we may experience difficulty arranging third-party financing, including refinancing maturing debt in part or in full as it comes due, and could pay higher interest costs on future financings. If increases in costs are not sufficiently offset by the contractual rent
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increases or increases in other revenue, we may be required to implement measures to conserve cash or preserve liquidity. Certain financial covenants could be affected as a result of higher debt service costs, which may place restrictions on our liquidity. If we are unable to find alternative credit arrangements or other funding in a high interest environment, our business needs may not be adequately met. Tenants and potential tenants of our properties may also be adversely impacted by inflation and rising interest rates, which could negatively impact our tenants’ ability to pay rent and the demand for our properties. Such adverse impacts on our tenants may cause increased vacancies and lower future rents.
We may incur substantial impairment charges.
We may incur substantial impairment charges, which could adversely affect our results of operations or limit our ability to dispose of assets at attractive prices and may reduce the availability of buyer financing. By their nature, the timing or extent of impairment charges are not predictable.
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, 2022, our real estate properties located outside of the United States represented 37% 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 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;
•increased energy and commodity prices in Europe;
•foreign exchange rates; and
•geopolitical and military conflict risk and adverse market conditions caused by changes in national or regional economic or political conditions, including the ongoing conflict between Russia and Ukraine (which may impact relative interest rates and the terms or availability of debt financing).
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. 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.
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 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 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).
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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 26% of our leases, based on our ABR as of December 31, 2022, 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 adversely affect returns to our stockholders.
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.
Under our existing leases, certain tenants have 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 control the management of our net-leased properties is limited, which limits our ability to manage property deterioration risks and could impact our ESG ratings and our ability to make ESG disclosures.
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. 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.
This lack of control over our net-leased properties also makes it difficult for us to collect property-level environmental metrics and to enforce sustainability initiatives, which may impact our ability to comply with certain ESG disclosure requirements (such as the SEC’s expected new ESG disclosure rules) or engage effectively with established ESG frameworks and standards, such as the Global Real Estate Sustainability Benchmarks, the Task Force for Climate-Related Financial Disclosures and the Sustainability Accounting Standards Board. If we are unable to successfully collect the data necessary to comply with ESG disclosure requirements, we may be subject to increased regulatory risk; and if such data is incomplete or unfavorable, our relationship with our investor base, our stock price, and our access to capital may be negatively impacted.
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, which 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;
•the ongoing need for capital improvements;
•Federal Reserve short term rate decisions;
•the mortgage market and real estate market in the United States;
•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;
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•failure to comply with federal, state, and local legal and regulatory requirements, including the Americans with Disabilities Act and fire or life-safety requirements;
•changes in governmental rules and fiscal policies;
•uninsured property liability, property damage, or casualty losses;
•increased operating costs, which may not necessarily be offset by increased rents, including insurance premiums, utilities and real estate taxes, due to inflation and other factors;
•exposure to environmental losses and the effects of climate change; and
•civil unrest, acts of war, terrorism, acts of God, including earthquakes, hurricanes and other natural disasters (which may result in uninsured losses) and other factors beyond our control.
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 abandonment 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.
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 18% of total ABR at December 31, 2022. Lease payment defaults by tenants could negatively impact our net income and reduce the amounts available for distribution to stockholders.
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 lead to 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. 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.
The continued disruption and reduced economic activity caused by COVID-19, rising interest rates, inflation and a potential economic downturn may severely affect our tenants’ businesses, financial condition and liquidity, leading to an increase in tenant bankruptcy or insolvency. In addition, a portion of our tenants may fail to meet their obligations to us in full (or at all), or may otherwise seek modifications of such obligations. Certain jurisdictions may also enact laws or regulations that impact or alter our ability to collect rent under our existing least terms. The ultimate extent to which COVID-19 will continue to impact the operations of our tenants will depend on future developments, which remain uncertain and cannot be predicted with confidence.
We may be materially adversely affected by laws, regulations or other issues related to climate change.
If we become subject to laws or regulations related to climate change, our business, financial condition and results of operations could be materially adversely affected. The federal government has enacted certain climate change laws and regulations which may, among other things, regulate “carbon footprints” and greenhouse gas emissions. In addition, the SEC has recently proposed rule amendments that would require us to prepare a wide range of new climate-related disclosures, including with respect to our climate-related risks, greenhouse gas emissions, and other climate-related targets, goals and plans. Such laws and regulations could result in substantial compliance costs, retrofit costs and construction costs, including monitoring and reporting costs and capital expenditures for environmental control facilities and other new equipment. Noncompliance with these laws or regulations may result in potential cost increases, litigation, fines, penalties, brand or reputational damage, loss of tenants, lower
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valuation and higher investor activism activities. We cannot predict how future laws and regulations, or future interpretations of current laws and regulations related to climate change will affect our business, financial condition and results of operations.
Additionally, the potential physical impacts of climate change on our operations are highly uncertain. These may include changes in rainfall and storm patterns and intensity, increased strength of hurricanes, water shortages, changing sea levels and changing temperatures. These impacts may have a material adverse effect on our business, financial condition and results of operations.
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.
Risks Related to Our Liquidity and Capital Resources
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, 2022 was approximately $7.9 billion, representing a consolidated debt to gross assets ratio of approximately 39.8%. This consolidated indebtedness was comprised of (i) $5.9 billion in Senior Unsecured Notes (as defined in Note 11), (ii) $828.9 million outstanding under our Senior Unsecured Credit Facility (as defined in Note 11), and (iii) $1.1 billion in non-recourse mortgage loans on various properties. 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.
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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.
We are subject to risks related to the anticipated replacement of the London Inter-bank Offered Rate (“LIBOR”).
In July 2017, the Financial Conduct Authority (“FCA”), the authority that regulates LIBOR, announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to USD LIBOR in derivatives and other financial contracts. The ICE Benchmark Administration stated that it will cease to publish all remaining USD LIBOR settings immediately following their publication on June 30, 2023. We have financial contracts that are indexed to LIBOR. Our Senior Unsecured Credit Facility contained provisions that contemplate methods to establishing an alternative base rate upon USD LIBOR’s retirement and, in January 2023, we entered into a Third Amendment to the Fourth Amended and Restated Credit Agreement to transition to SOFR.
In a similar manner, we will manage the transition from LIBOR for all of our remaining debt and derivative instruments using any language that may be included in their respective agreements and through potential modifications. Risks related to potential changes in LIBOR availability include, but are not limited to, potential changes to financial products and market practices, borrowing rates, fees, interest obligations, and the value of debt and derivative instruments. Transitioning to an alternative reference rate may require negotiations with lenders and other counterparties, which could present challenges if the method of transition is not mutually agreed upon. We have transitioned all non-USD LIBOR base rate exposures phased out at the end of 2021 to their respective alternative reference rates.
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. In September 2022 our rating was upgraded by Moody’s to Baa1 and in January 2023 our rating was upgraded by S&P Global Ratings to BBB+, 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
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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, 2022, we had $1.1 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 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.
Risks Related to our Corporate Structure and Maryland Law
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 of directors (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.
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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 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.
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.
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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 the Inflation Reduction Act of 2022 which was signed into law in the United States on August 16, 2022 and will be effective in 2023 (which introduced a 15% corporate minimum tax on certain corporations and a 1% excise tax on certain stock repurchases by certain corporations, among other changes), on our taxable income at regular corporate rate; and
•be barred from qualifying as a REIT for the four taxable years following the year when we were disqualified.
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.
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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.
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 taxable REIT subsidiaries (“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. Also, please see the risk “There can be no assurance that we will be able to maintain cash dividends” below.
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.
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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. Income that is not distributed to us by our domestic TRSs will generally not be subject to the REIT income distribution requirement. However, certain income that is not distributed to us by our foreign TRSs may be deemed distributed to us by operation of certain provisions of the U.S. Tax Code and generally subject to REIT income distribution requirements. In addition, 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.
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% plus the 3.8% Medicare tax on net investment income, if applicable. 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.
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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.
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 rate 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.
Risks Related to Our Overall Business
We are subject to the volatility of the capital markets, which may impact our ability to deploy capital.
The trading volume and market price of our common stock may fluctuate significantly and be adversely impacted in response to a number of factors. Therefore, 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. In addition, the capital markets may experience extreme volatility, disruption and periods of dislocation (e.g., during pandemics or a global financial crisis), which could make it more difficult for us to raise capital. Since net-lease REITs must be able to deploy capital with agility and consistency, 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.
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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 increase our interest costs and 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. However, our future growth will depend, in part, upon our ability to raise additional capital, including through the issuance of debt and equity securities. 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.
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 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.
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 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.
W. P. Carey 2022 10-K - 19
We may make investments in asset classes or countries outside of our core investment strategy which may be perceived as complicating our strategy relative to our peers.
We may need to expand beyond our current asset class mix to growth our portfolio. As a result, we intend, to the extent that market conditions warrant, to seek to grow our businesses by increasing our investments in existing businesses, pursuing new investment strategies (including investment opportunities in new asset classes), developing new types of investment structures and products, and expanding into new geographic markets and businesses. Introducing new types of investment structures and products could increase the complexities involved in managing such investments, including to ensure compliance with regulatory requirements and terms of the investment. Making investments in assets classes or countries outside of our core investment strategy may also be perceived as complicating our strategy relative to our peers.
Entry into asset classes or countries may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk and costs.
Failure to hedge effectively against interest rate changes and foreign exchange rate changes may have a material adverse effect on our business, financial condition and results of operations.
The interest rate and foreign exchange rate hedge instruments we may use to manage some of our exposure to interest rate and foreign exchange rate volatility involve risk, such as the risk that counterparties may fail to honor their obligations under these arrangements. Failure to hedge effectively against such interest rate and foreign exchange rate changes may have a material adverse effect on our business, financial condition and results of operations.
Our future success depends on the successful recruitment and retention of personnel, including our executives.
Our future success depends in large part on our ability to hire and retain a sufficient number of qualified and diverse personnel. Failure to recruit from a diverse pool of qualified candidates, particularly in light of recent labor shortages could negatively impact the dynamic growth of our company. In addition, 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, and a sustained labor shortage or increased turnover rates among our employees, could increase costs and materially adversely affect our business.
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, which could be an intentional attack 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. With the advent of remote work environments and technologies, we face heightened cybersecurity risks as our employees and counterparties increasingly depend on the internet and face greater exposure to malware and phishing attacks. These heightened cybersecurity risks may increase our vulnerability to cyber-attacks and cause disruptions to our internal control procedures.
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.
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. 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. There can be no assurance that the insurance we maintain to cover some of these risks will be sufficient to cover the losses from any future breaches of our systems.
W. P. Carey 2022 10-K - 20
Our business may continue to be adversely affected by the ongoing COVID-19 pandemic.
We are unable to predict the impact of ongoing disruptions caused by additional surges and strains of COVID-19 transmission. The economic downturn and market volatility caused by the ongoing COVID-19 pandemic has already eroded the financial condition of certain of our tenants and operating properties; therefore, we cannot predict the impact that COVID-19 will continue to have on our tenants’ ability to pay rent and any information provided regarding historical rent collections should not serve as an indication of expected future rent collections. We also cannot assure you that conditions in the bank lending, capital, and other financial markets will not deteriorate as a result of the continued impact of COVID-19, causing our access to capital and other sources of funding to become constrained, which could adversely affect the terms or even availability of future borrowings, renewals, and refinancings. Changes in laws and regulatory policies, including any governmental actions related to COVID-19 and the effects of fiscal and monetary policy changes, could result in business disruptions and subject us to additional market volatility and risks.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties.
Our principal corporate offices are located at One Manhattan West, 395 9th Avenue, 58th Floor, New York, NY 10001 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 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.

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ITEM 3. LEGAL PROCEEDINGS
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.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
W. P. Carey 2022 10-K - 21
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
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 3, 2023 there were 8,982 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, 2017 to December 31, 2022, as compared with the S&P 500 Index, the FTSE NAREIT Equity REITs Index, and the MSCI US REIT Index, which we have added to the graph below since it serves as a benchmark index for our compensation decisions. We intend to discontinue presentation of the FTSE NAREIT Equity REITs Index in future stock price performance graphs, as the MSCI US REIT Index will serve as our industry index. The graph assumes a $100 investment on December 31, 2017, together with the reinvestment of all dividends.
At December 31,
2017 2018 2019 2020 2021 2022
W. P. Carey Inc. $ 100.00 $ 101.08 $ 130.23 $ 122.44 $ 150.45 $ 151.16
S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88
FTSE NAREIT Equity REITs Index 100.00 95.38 120.17 110.56 158.36 119.77
MSCI US REIT Index 100.00 95.43 120.09 110.99 158.79 119.87
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.
W. P. Carey 2022 10-K - 22
Securities Authorized for Issuance Under Equity Compensation Plans
This information will be contained in our definitive proxy statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days following the end of our fiscal year, and is incorporated herein by reference.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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, 2021 for discussion of our financial condition and results of operations for the year ended December 31, 2020. Refer to Item 1. Business for a description of our business.
Significant Developments
Board of Directors Change
On December 12, 2022, we announced that Ms. Elisabeth Stheeman, age 58, was appointed to our Board. Please see our Current Report on Form 8-K filed on December 12, 2022 for additional information.
Financial Highlights
During the year ended December 31, 2022, we completed the following (as further described in the consolidated financial statements):
Real Estate
CPA:18 Merger
On August 1, 2022, we completed the CPA:18 Merger (Note 3).
•We acquired full or partial ownership interests in 42 properties in the CPA:18 Merger (including seven 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 7.0 years, an occupancy rate of 99.3%, and an estimated ABR totaling $81.0 million. We also acquired 65 self-storage operating properties and two student housing operating properties totaling 5.1 million square feet. The related property-level debt was comprised of non-recourse mortgage loans with an aggregate consolidated fair value of approximately $900.2 million with a weighted-average annual interest rate of 5.1% as of August 1, 2022.
•We issued the following to CPA:18 - Global stockholders as part of the merger consideration: (i) 13,786,302 shares of our common stock of approximately $1.2 billion, (ii) $3.00 per share of cash consideration totaling approximately $423.3 million, and (iii) cash of $0.1 million paid in lieu of issuing any fractional shares of our common stock.
•Lease revenues and operating property revenues from properties acquired in the CPA:18 Merger were $42.7 million and $39.2 million, respectively, for the year ended December 31, 2022.
•We recognized a Gain on change in control of interests of $33.9 million in connection with the CPA:18 Merger during the year ended December 31, 2022, of which $11.4 million was attributable to our Real Estate segment and $22.5 million was attributable to our Investment Management segment.
W. P. Carey 2022 10-K - 23
Investments
•We acquired 23 investments totaling $1.2 billion (Note 5, Note 6).
•We completed six construction projects at a cost totaling $148.1 million (Note 5).
•We funded approximately $89.5 million for a construction loan to build a retail complex in Las Vegas, Nevada, during the year ended December 31, 2022. Through December 31, 2022, we have funded $193.2 million (Note 8).
•We committed to fund six build-to-suit or redevelopment projects totaling $20.3 million. We currently expect to complete the projects in 2023 (Note 5).
Dispositions
•We disposed of 23 properties for total proceeds, net of selling costs, of $234.7 million (Note 16).
•In January 2022, WLT redeemed in full our 1,300,000 shares of its preferred stock for gross proceeds of $65.0 million (Note 9).
•In October 2022, we received $82.6 million in cash proceeds as a result of certain private real estate funds’ acquisition of all outstanding shares of WLT common stock. As of the date of acquisition, we owned 12,208,243 shares of WLT common stock. Upon completion of this transaction, we have no remaining interest in WLT (Note 9).
Financing and Capital Markets Transactions
•In April 2022, we increased the Term Loan to £270.0 million and the Delayed Draw Term Loan to €215.0 million, thereby increasing the total capacity of our Senior Unsecured Credit Facility to approximately $2.4 billion. We used the approximately $300 million of proceeds from this increase in the capacity of our Unsecured Term Loans to partially repay amounts outstanding under our Unsecured Revolving Credit Facility (Note 11).
•On May 2, 2022, we established a $1.0 billion ATM Program, under which we may issue shares directly or defer delivery to a later date through our ATM Forwards (Note 13).
•We issued 2,740,295 shares of our common stock under our prior ATM Program at a weighted-average price of $80.79 per share, for net proceeds of $218.1 million (Note 13).
•We settled our remaining Equity Forwards by delivering 3,925,000 shares of common stock for net proceeds of $284.3 million (Note 13).
•As of December 31, 2022, we had approximately $530.0 million of available proceeds under our ATM Forwards (Note 13).
•On September 28, 2022, we completed a private placement of (i) €150 million of 3.41% Senior Notes due 2029, which have a seven-year term and are scheduled to mature on September 28, 2029, and (ii) €200 million of 3.70% Senior Notes due 2032, which have a ten-year term and are scheduled to mature on September 28, 2032 (Note 11).
Investment Management
•Upon completion of the CPA:18 Merger (Note 3), we ceased earning advisory fees and other income previously earned when we served as advisor to CPA:18 - Global. During the year ended December 31, 2022, through the date of the CPA:18 Merger, such fees and other income from CPA:18 - Global totaled $17.9 million. Investment Management fees and other income are expected to be minimal going forward.
Dividends to Stockholders
We declared cash dividends totaling $4.242 per share, comprised of four quarterly dividends per share of $1.057, $1.059, $1.061, and $1.065.
W. P. Carey 2022 10-K - 24
Consolidated Results
(in thousands, except shares)
Years Ended December 31,
2022 2021
Revenues from Real Estate $ 1,468,101 $ 1,312,126
Revenues from Investment Management
10,985 19,398
Total revenues 1,479,086 1,331,524
Net income from Real Estate attributable to W. P. Carey 591,603 384,766
Net income from Investment Management attributable to W. P. Carey 7,536 25,222
Net income attributable to W. P. Carey 599,139 409,988
Dividends declared 859,655 781,626
Net cash provided by operating activities 1,003,556 926,479
Net cash used in investing activities (1,052,531) (1,566,727)
Net cash provided by financing activities 57,887 557,048
Supplemental financial measures (a):
Adjusted funds from operations attributable to W. P. Carey (AFFO) - Real Estate
1,042,782 896,139
Adjusted funds from operations attributable to W. P. Carey (AFFO) - Investment Management
17,816 25,352
Adjusted funds from operations attributable to W. P. Carey (AFFO)
1,060,598 921,491
Diluted weighted-average shares outstanding 200,427,124 183,127,098
__________
(a)We consider Adjusted funds from operations (“AFFO”), a supplemental measure that is not defined by U.S. generally accepted accounting principles (“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.
Revenues
Real Estate revenue increased in 2022 as compared to 2021, primarily due to higher lease revenues (substantially as a result of property acquisition activity and rent escalations, as well as the net-leased properties we acquired in the CPA:18 Merger on August 1, 2022 (Note 3), partially offset by the impact of the weakening euro and British pound sterling) and higher operating property revenues (primarily from the operating properties we acquired in the CPA:18 Merger on August 1, 2022 (Note 3)), partially offset by lower other lease-related income (Note 5).
Net Income Attributable to W. P. Carey
Net income attributable to W. P. Carey increased in 2022 as compared to 2021. Net income from Real Estate attributable to W. P. Carey increased primarily due to a lower loss on extinguishment of debt (Note 11), non-cash unrealized gains recognized on our investment in common shares of WLT (Note 9), and the impact of real estate acquisitions, partially offset by higher interest expense and the impact of the weakening euro and British pound sterling. In addition, we recognized non-cash unrealized gains on our investment in shares of Lineage Logistics during both the current and prior year (Note 9). Net income from Investment Management attributable to W. P. Carey decreased primarily due to an impairment charge recognized on goodwill within our Investment Management segment (Note 9). In addition, we recognized a gain on change in control of interests during the current year in connection with the CPA:18 Merger (Note 3).
W. P. Carey 2022 10-K - 25
AFFO
AFFO increased in 2022 as compared to 2021, primarily due to investment activity and rent escalations, higher other lease-related income (on an AFFO basis), and the accretive impact of the CPA:18 Merger (Note 3), partially offset by the impact of the weakening euro and British pound sterling and higher interest expense.
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,
Net-leased Properties 2022 2021
ABR (in thousands) $ 1,381,899 $ 1,247,764
Number of net-leased properties (a)
1,449 1,304
Number of tenants 392 352
Total square footage (in thousands) 175,957 155,674
Occupancy 98.8 % 98.5 %
Weighted-average lease term (in years) 10.8 10.8
Operating Properties
Number of operating properties: (b)
87 20
Number of self-storage operating properties 84 19
Number of student housing operating properties 2 -
Number of hotel operating properties 1 1
Occupancy (self-storage operating properties) 91.0 % 95.3 %
Number of countries (c)
26 24
Total assets (in thousands) $ 18,102,035 $ 15,480,630
Net investments in real estate (in thousands) 15,488,898 13,037,369
Years Ended December 31,
2022 2021
Acquisition volume (in millions) (d)
$ 1,265.5 $ 1,627.9
Construction projects completed (in millions) 148.1 88.2
Average U.S. dollar/euro exchange rate 1.0540 1.1830
Average U.S. dollar/British pound sterling exchange rate 1.2373 1.3755
__________
(a)We acquired 35 net-leased properties (in which we did not already have an ownership interest) in the CPA:18 Merger in August 2022 (Note 3).
(b)We acquired 65 self-storage properties, one student housing property, and one student housing development project in the CPA:18 Merger in August 2022 (Note 3).
(c)We acquired investments in Belgium during the year ended December 31, 2022. We acquired an investment in Mauritius in connection with the CPA:18 Merger in August 2022 (Note 3).
(d)Amount for the year ended December 31, 2022 excludes properties acquired in the CPA:18 Merger (Note 3). Amounts for the years ended December 31, 2022 and 2021 include $19.8 million and $217.0 million, respectively, of sale-leasebacks classified as loans receivable (Note 6). Amounts for the years ended December 31, 2022 and 2021 include $89.5 million and $103.7 million, respectively, of funding for a construction loan (Note 8).
W. P. Carey 2022 10-K - 26
Net-Leased Portfolio
The tables below represent information about our net-leased portfolio at December 31, 2022 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 2.8 % 1.3
State of Andalucía (a)
Government office properties in Spain 70 29,271 2.1 % 12.0
Metro Cash & Carry Italia S.p.A. (a)
Business-to-business wholesale stores in Italy and Germany 20 27,512 2.0 % 5.8
Hellweg Die Profi-Baumärkte GmbH & Co. KG (a)
Do-it-yourself retail properties in Germany 35 27,250 2.0 % 14.2
Extra Space Storage, Inc. Net lease self-storage properties in the U.S. 27 22,957 1.7 % 21.3
OBI Group (a)
Do-it-yourself retail properties in Poland 26 22,266 1.6 % 7.8
Marriott Corporation (b)
Net lease hotel properties in the U.S. 18 21,350 1.6 % 1.0
Nord Anglia Education, Inc. K-12 private schools in the U.S. 3 20,981 1.5 % 20.7
Advance Auto Parts, Inc. Distribution facilities in the U.S. 29 19,851 1.4 % 10.1
Eroski Sociedad
Cooperativa (a)
Grocery stores and warehouses in Spain 63 19,705 1.4 % 13.2
Total 369 $ 249,894 18.1 % 10.1
__________
(a)ABR amounts are subject to fluctuations in foreign currency exchange rates.
(b)ABR for this tenant includes $16.1 million from a lease that expired in January 2023. Upon lease expiration, these properties were converted from net lease properties to operating properties.
W. P. Carey 2022 10-K - 27
Portfolio Diversification by Geography
(in thousands, except percentages)
Region ABR ABR Percent Square Footage (a)
Square Footage Percent
United States
South
Texas $ 115,176 8.3 % 12,609 7.2 %
Florida 54,064 3.9 % 4,544 2.6 %
Georgia 28,411 2.1 % 4,721 2.7 %
Tennessee 25,545 1.8 % 4,136 2.3 %
Alabama 20,072 1.5 % 3,334 1.9 %
Other (b)
14,529 1.1 % 2,237 1.3 %
Total South 257,797 18.7 % 31,581 18.0 %
Midwest
Illinois 75,252 5.5 % 10,864 6.2 %
Minnesota 34,977 2.5 % 3,686 2.1 %
Indiana 29,312 2.1 % 5,222 3.0 %
Michigan 28,311 2.1 % 4,705 2.7 %
Ohio 28,303 2.0 % 6,181 3.5 %
Wisconsin 18,126 1.3 % 3,276 1.8 %
Other (b)
42,430 3.1 % 6,230 3.5 %
Total Midwest 256,711 18.6 % 40,164 22.8 %
East
North Carolina 38,333 2.8 % 8,302 4.7 %
Pennsylvania 32,169 2.3 % 3,527 2.0 %
New York 19,373 1.4 % 2,257 1.3 %
Kentucky 18,638 1.4 % 3,063 1.7 %
South Carolina 18,556 1.3 % 4,949 2.8 %
Massachusetts 18,209 1.3 % 1,387 0.8 %
New Jersey 15,735 1.1 % 943 0.5 %
Virginia 14,652 1.1 % 1,854 1.1 %
Other (b)
25,029 1.8 % 3,884 2.2 %
Total East 200,694 14.5 % 30,166 17.1 %
West
California 64,977 4.7 % 6,417 3.6 %
Arizona 30,417 2.2 % 3,437 2.0 %
Other (b)
64,897 4.7 % 6,994 4.0 %
Total West 160,291 11.6 % 16,848 9.6 %
United States Total 875,493 63.4 % 118,759 67.5 %
International
Germany 71,304 5.2 % 7,020 4.0 %
Spain 63,779 4.6 % 5,187 3.0 %
Poland 63,552 4.6 % 8,631 4.9 %
The Netherlands 55,666 4.0 % 7,054 4.0 %
United Kingdom 51,977 3.8 % 4,766 2.7 %
Italy 26,884 1.9 % 2,541 1.4 %
Denmark 23,526 1.7 % 3,039 1.7 %
France 19,920 1.4 % 1,679 1.0 %
Croatia 19,475 1.4 % 2,063 1.2 %
Canada 16,337 1.2 % 2,492 1.4 %
Norway 15,533 1.1 % 753 0.4 %
Other (c)
78,453 5.7 % 11,973 6.8 %
International Total 506,406 36.6 % 57,198 32.5 %
Total $ 1,381,899 100.0 % 175,957 100.0 %
W. P. Carey 2022 10-K - 28
Portfolio Diversification by Property Type
(in thousands, except percentages)
Property Type ABR ABR Percent Square Footage (a)
Square Footage Percent
Industrial $ 366,777 26.5 % 62,521 35.6 %
Warehouse 333,713 24.1 % 63,192 35.9 %
Office 239,941 17.4 % 16,703 9.5 %
Retail (d)
231,839 16.8 % 20,290 11.5 %
Self Storage (net lease) 61,708 4.5 % 5,810 3.3 %
Other (e)
147,921 10.7 % 7,441 4.2 %
Total $ 1,381,899 100.0 % 175,957 100.0 %
__________
(a)Includes square footage for any vacant properties.
(b)Other properties within South include assets in Louisiana, Arkansas, Oklahoma, and Mississippi. Other properties within Midwest include assets in Iowa, Missouri, Kansas, Nebraska, South Dakota, and North Dakota. Other properties within East include assets in Maryland, Connecticut, West Virginia, New Hampshire, and Maine. Other properties within West include assets in Utah, Oregon, Colorado, Washington, Nevada, Hawaii, Idaho, New Mexico, Wyoming, and Montana.
(c)Includes assets in Lithuania, Mexico, Finland, Belgium, Hungary, Mauritius, Slovakia, Portugal, the Czech Republic, Austria, Sweden, Japan, Latvia, and Estonia.
(d)Includes automotive dealerships.
(e)Includes ABR from tenants with the following property types: hotel (net lease), education facility, laboratory, specialty, fitness facility, research and development, student housing (net lease), theater, funeral home, restaurant, land, and parking.
W. P. Carey 2022 10-K - 29
Portfolio Diversification by Tenant Industry
(in thousands, except percentages)
Industry Type ABR ABR Percent Square Footage Square Footage Percent
Retail Stores (a)
$ 283,868 20.5 % 36,457 20.7 %
Consumer Services 110,969 8.0 % 8,067 4.6 %
Beverage and Food 105,906 7.7 % 15,759 9.0 %
Automotive 85,966 6.2 % 13,477 7.7 %
Grocery 79,516 5.8 % 8,363 4.8 %
Cargo Transportation 63,473 4.6 % 9,550 5.4 %
Hotel and Leisure 57,132 4.1 % 3,060 1.7 %
Healthcare and Pharmaceuticals 55,806 4.0 % 5,557 3.2 %
Capital Equipment 55,593 4.0 % 8,459 4.8 %
Business Services 48,375 3.5 % 4,113 2.3 %
Containers, Packaging, and Glass 46,942 3.4 % 8,266 4.7 %
Durable Consumer Goods 46,761 3.4 % 10,300 5.9 %
Construction and Building 46,583 3.4 % 9,235 5.2 %
Sovereign and Public Finance 42,578 3.1 % 3,560 2.0 %
High Tech Industries 36,027 2.6 % 3,574 2.0 %
Insurance 30,862 2.2 % 2,024 1.1 %
Chemicals, Plastics, and Rubber 29,935 2.2 % 5,254 3.0 %
Non-Durable Consumer Goods 26,374 1.9 % 6,244 3.5 %
Banking 23,894 1.7 % 1,426 0.8 %
Metals 18,673 1.4 % 3,259 1.9 %
Telecommunications 16,839 1.2 % 1,686 1.0 %
Other (b)
69,827 5.1 % 8,267 4.7 %
Total $ 1,381,899 100.0 % 175,957 100.0 %
__________
(a)Includes automotive dealerships.
(b)Includes ABR from tenants in the following industries: media: broadcasting and subscription, aerospace and defense, wholesale, media: advertising, printing, and publishing, oil and gas, utilities: electric, environmental industries, consumer transportation, forest products and paper, electricity, and real estate. Also includes square footage for vacant properties.
W. P. Carey 2022 10-K - 30
Lease Expirations
(dollars and square footage in thousands)
Year of Lease Expiration (a)
Number of Leases Expiring Number of Tenants with Leases Expiring ABR ABR Percent Square Footage Square Footage Percent
2023 (b)
36 30 $ 54,228 3.9 % 5,500 3.1 %
2024 (c)
41 35 90,330 6.6 % 11,230 6.4 %
2025 53 32 61,241 4.4 % 7,068 4.0 %
2026 46 36 64,074 4.7 % 9,081 5.1 %
2027 57 33 82,953 6.0 % 8,906 5.1 %
2028 46 28 69,298 5.0 % 5,589 3.2 %
2029 57 29 68,802 5.0 % 8,337 4.7 %
2030 34 29 73,128 5.3 % 6,165 3.5 %
2031 37 21 70,249 5.1 % 8,749 5.0 %
2032 41 22 44,204 3.2 % 6,200 3.5 %
2033 31 24 81,864 5.9 % 11,377 6.5 %
2034 49 18 83,347 6.0 % 8,638 4.9 %
2035 14 14 29,388 2.1 % 4,957 2.8 %
2036 49 19 84,795 6.1 % 13,524 7.7 %
Thereafter (>2036) 261 107 423,998 30.7 % 58,555 33.3 %
Vacant - - - - % 2,081 1.2 %
Total 852 $ 1,381,899 100.0 % 175,957 100.0 %
__________
(a)Assumes tenants do not exercise any renewal options or purchase options.
(b)Includes ABR of $16.1 million from a tenant (Marriott Corporation) with a lease that expired in January 2023. Upon lease expiration, these properties were converted from net lease properties to operating properties.
(c)Includes ABR of $38.8 million from a tenant (U-Haul Moving Partners, Inc. and Mercury Partners, LP) that holds an option to repurchase the 78 properties it is leasing in April 2024. There can be no assurance that such repurchase will be completed.
Rent Collections
Through the date of this Report, we received from tenants over 99.3% of contractual base rent that was due during the fourth quarter of 2022 (based on contractual minimum ABR as of September 30, 2022).
Terms and Definitions
Pro Rata Metrics -The portfolio information above contains certain metrics prepared on a pro rata basis. 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%. On a full consolidation basis, 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. On a pro rata basis, we generally 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 and reflects exchange rates as of December 31, 2022. If there is a rent abatement, we annualize the first monthly contractual base rent following the free rent period. ABR is not applicable to operating properties.
W. P. Carey 2022 10-K - 31
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 CESH portfolio until it reaches the end of its life cycle. Refer to Note 17 for tables presenting the comparative results of our Real Estate and Investment Management segments.
Real Estate
Revenues
The following table presents revenues within our Real Estate segment (in thousands):
Years Ended December 31,
2022 2021 Change
Real Estate Revenues
Lease revenues from:
Existing net-leased properties $ 1,110,502 $ 1,103,945 $ 6,557
Recently acquired net-leased properties 140,431 53,687 86,744
Net-leased properties acquired in the CPA:18 Merger 36,040 - 36,040
Net-leased properties sold or held for sale 14,644 19,806 (5,162)
Total lease revenues (including reimbursable tenant costs) 1,301,617 1,177,438 124,179
Income from direct financing leases and loans receivable 74,266 67,555 6,711
Operating property revenues from:
Operating properties acquired in the CPA:18 Merger 39,193 - 39,193
Existing operating properties 20,037 13,478 6,559
Total operating property revenues 59,230 13,478 45,752
Other lease-related income 32,988 53,655 (20,667)
$ 1,468,101 $ 1,312,126 $ 155,975
W. P. Carey 2022 10-K - 32
Lease Revenues
“Existing net-leased properties” are those that we acquired or placed into service prior to January 1, 2021 and that were not sold or held for sale during the periods presented. For the periods presented, there were 1,108 existing net-leased properties.
For the year ended December 31, 2022 as compared to 2021, lease revenues from existing net-leased properties increased due to the following items (in millions):
__________
(a)Excludes fixed minimum rent increases, which are reflected as straight-line rent adjustments within lease revenues.
(b)Primarily related to (i) straight-line rent adjustments and (ii) write-offs of above/below-market rent intangibles.
“Recently acquired net-leased properties” are those that we acquired or placed into service subsequent to December 31, 2020 and that were not sold or held for sale during the periods presented. Since January 1, 2021, we acquired 48 investments (comprised of 192 properties and six land parcels under buildings that we already own) and placed three properties into service.
“Net-leased properties acquired in the CPA:18 Merger” on August 1, 2022 (Note 3) consisted of 38 net-leased properties, which contributed five months of lease revenue, depreciation and amortization, and property expenses during the year ended December 31, 2022.
“Net-leased properties sold or held for sale” include (i) 23 net-leased properties disposed of during the year ended December 31, 2022; (ii) three net-leased properties classified as held for sale at December 31, 2022, one of which was sold in January 2023 (Note 5, Note 18); and (iii) 24 net-leased properties disposed of during the year ended December 31, 2021. Our dispositions are more fully described in Note 16.
W. P. Carey 2022 10-K - 33
Income from Direct Financing Leases and Loans Receivable
For the year ended December 31, 2022 as compared to 2021, income from direct financing leases and loans receivable decreased due to the following items (in millions):
Operating Property Revenues and Expenses
“Operating properties acquired in the CPA:18 Merger” on August 1, 2022 (Note 3) consisted of 65 self-storage properties and two student housing properties, which contributed five months of operating property revenues, depreciation and amortization, and operating property expenses during the year ended December 31, 2022.
“Existing operating properties” are those that we acquired or placed into service prior to January 1, 2021 and that were not sold or held for sale during the periods presented. For the periods presented, we recorded operating property revenues from 11 existing operating properties, comprised of ten self-storage operating properties (which excludes nine self-storage properties accounted for under the equity method) and one hotel operating property. For our hotel operating property, revenues and expenses increased by $4.9 million and $2.8 million, respectively, for the year ended December 31, 2022 as compared to 2021, reflecting higher occupancy as the hotel’s business recovers from the ongoing COVID-19 pandemic.
Other Lease-Related Income
Other lease-related income is described in Note 5.
Operating Expenses
Depreciation and Amortization
For the year ended December 31, 2022 as compared to 2021, depreciation and amortization expense for net-leased properties and self-storage operating properties increased primarily due to the impact of net acquisition activity (including properties acquired in the CPA:18 Merger (Note 3)), partially offset by the weakening of foreign currencies (primarily the euro and British pound sterling) in relation to the U.S. dollar between the periods.
W. P. Carey 2022 10-K - 34
General and Administrative
All general and administrative expenses are recognized within our Real Estate segment.
For the year ended December 31, 2022 as compared to 2021, general and administrative expenses increased by $7.1 million, primarily due to higher compensation expense, increased professional fees resulting from the CPA:18 Merger, and higher travel costs.
Property Expenses, Excluding Reimbursable Tenant Costs
For the year ended December 31, 2022 as compared to 2021, property expenses, excluding reimbursable tenant costs, increased by $2.9 million, primarily due to due to tenant vacancies during 2021 and 2022 (which resulted in property expenses no longer being reimbursable) and property expenses incurred on acquisitions since January 1, 2021 (Note 3).
Impairment Charges
Our impairment charges are described in Note 9.
Stock-based Compensation Expense
For a description of our equity plans and awards, please see Note 14. Stock-based compensation expense is fully recognized within our Real Estate segment.
For the year ended December 31, 2022 as compared to 2021, stock-based compensation expense increased by $8.0 million, primarily due to changes in the projected payout for performance share units.
Merger and Other Expenses
For the years ended December 31, 2022 and 2021, merger and other expenses are primarily comprised of costs incurred in connection with the CPA:18 Merger (Note 3) and/or reversals of estimated liabilities for German real estate transfer taxes that were previously recorded in connection with mergers in prior years.
Other Income and (Expenses), and (Provision for) Benefit from Income Taxes
Interest Expense
For the year ended December 31, 2022 as compared to 2021, interest expense increased by $22.3 million, primarily due to (i) $20.1 million of interest expense incurred from August through December 2022 related to non-recourse mortgage loans assumed in the CPA:18 Merger (Note 3), (ii) higher outstanding balances and interest rates on our Senior Unsecured Credit Facility, and (iii) five senior unsecured notes issuances totaling $1.7 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 2.1% completed since January 1, 2021, partially offset by (i) the weakening of foreign currencies (primarily the euro and British pound sterling) in relation to the U.S. dollar between the periods and (ii) the reduction of our mortgage debt outstanding by prepaying or repaying at or close to maturity a total of $892.9 million of non-recourse mortgage loans with a weighted-average interest rate of 4.8% since January 1, 2021.
The following table presents certain information about our outstanding debt (dollars in thousands):
Years Ended December 31,
2022 2021
Average outstanding debt balance $ 7,392,208 $ 6,906,997
Weighted-average interest rate 2.7 % 2.6 %
The weighted-average interest rate for our debt instruments as of December 31, 2022 increased to 3.0% as compared to 2.5% as of December 31, 2021, and is expected to be further impacted by rising interest rates over the next year.
W. P. Carey 2022 10-K - 35
Other Gains and (Losses)
Other gains and (losses) primarily consists of gains and losses on (i) the mark-to-market fair value of equity securities, (ii) extinguishment of debt, and (iii) foreign currency exchange rate movements. The timing and amount of such gains or losses cannot always be estimated and are subject to fluctuation. All of our foreign currency-denominated unsecured debt instruments were designated as net investment hedges during the years ended December 31, 2022 and 2021. Therefore, no gains and losses on foreign currency exchange rate movements were recognized on the remeasurement of such instruments during those periods (Note 10).
The following table presents other gains and (losses) within our Real Estate segment (in thousands):
Years Ended December 31,
2022 2021 Change
Other Gains and (Losses)
Non-cash unrealized gains related to an increase in the fair value of our investment in common shares of WLT (Note 9)
$ 49,233 $ - $ 49,233
Non-cash unrealized gains related to an increase in the fair value of our investment in shares of Lineage Logistics (Note 9)
38,582 76,312 (37,730)
Net realized and unrealized losses on foreign currency exchange rate movements (a)
(26,866) (15,608) (11,258)
Non-cash unrealized gains related to an increase in the fair value of our investment in preferred shares of WLT (Note 9)
18,688 - 18,688
Change in allowance for credit losses on finance receivables (Note 6)
14,363 (266) 14,629
Gain on repayment of secured loan receivable (b)
10,613 - 10,613
Adjustment to insurance receivable acquired as part of a prior merger (c)
(9,358) - (9,358)
Gain (loss) on extinguishment of debt (d)
1,301 (75,339) 76,640
Other 593 1,225 (632)
$ 97,149 $ (13,676) $ 110,825
__________
(a)We 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 intercompany transactions that are scheduled for settlement, consisting primarily of accrued interest and amortizing loans, are included in other gains and (losses).
(b)We acquired a secured loan receivable with a fair value of $23.4 million in our merger with a former affiliate, Corporate Property Associates 17 - Global Incorporated, in October 2018 (“CPA:17 Merger”), for which the outstanding principal of $34.0 million was fully repaid to us in September 2022 (Note 6). Therefore, we recorded a $10.6 million gain on repayment of this secured loan receivable.
(c)This insurance receivable was acquired in the CPA:17 Merger.
(d)Amount for the year ended December 31, 2021 is related to the prepayment of mortgage loans (primarily comprised of prepayment penalties totaling $45.2 million) and redemption of the €500.0 million of 2.0% Senior Notes due 2023 in March 2021 (primarily comprised of a “make-whole” amount of $26.2 million related to the redemption) (Note 11).
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 reporting period. Our dispositions are more fully described in Note 16.
W. P. Carey 2022 10-K - 36
Non-Operating Income
Non-operating income primarily consists of realized gains and losses on derivative instruments, dividends from equity securities, and interest income on our loans to affiliates and cash deposits.
The following table presents non-operating income within our Real Estate segment (in thousands):
Years Ended December 31,
2022 2021 Change
Non-Operating Income
Realized gains on foreign currency collars (Note 10)
$ 24,058 $ 2,357 $ 21,701
Cash dividend from our investment in Lineage Logistics (Note 9)
4,308 6,438 (2,130)
Interest income related to our loans to affiliates and cash deposits 1,011 90 921
Cash dividends from our investment in preferred shares of WLT (Note 9)
912 4,893 (3,981)
$ 30,289 $ 13,778 $ 16,511
Earnings (Losses) from Equity Method Investments in Real Estate
Our equity method investments in real estate are more fully described in Note 8. The following table presents earnings (losses) from equity method investments in real estate (in thousands):
Years Ended December 31,
2022 2021 Change
Earnings (Losses) from Equity Method Investments in Real Estate
Existing Equity Method Investments:
Earnings from Las Vegas Retail Complex $ 10,077 $ 3,017 $ 7,060
Earnings from Johnson Self Storage (a)
4,334 2,460 1,874
Earnings from Kesko Senukai (b)
3,908 841 3,067
Earnings from Harmon Retail Center 1,051 1,108 (57)
Losses from WLT (c)
- (10,790) 10,790
19,370 (3,364) 22,734
Equity Method Investments Consolidated after the CPA:18 Merger (Note 3):
Proportionate share of impairment charge or other-than-temporary impairment charge recognized on Bank Pekao (Note 8, Note 9)
(4,610) (13,220) 8,610
Earnings from Fortenova Grupa d.d. (d)
136 1,542 (1,406)
Other-than-temporary impairment charge on State Farm Mutual Automobile Insurance Co. (Note 8, Note 9)
- (6,830) 6,830
Other 1,325 2,223 (898)
(3,149) (16,285) 13,136
$ 16,221 $ (19,649) $ 35,870
__________
(a)Increase is primarily due to higher occupancy and unit rates at these self-storage facilities.
(b)Increase is primarily due to higher rent collections at these retail properties, where certain rents were previously disputed and subsequently collected.
(c)Loss for 2021 is primarily due to the adverse impact of the COVID-19 pandemic on WLT’s operations. We recorded losses from this investment on a one quarter lag. This investment was reclassified to equity securities at fair value within Other assets, net on our consolidated balance sheets in January 2022 (Note 9).
(d)Amount for 2021 reflects our proportionate share of a gain recognized on the sale of one of the properties in this portfolio.
W. P. Carey 2022 10-K - 37
(Provision for) Benefit from Income Taxes
For the year ended December 31, 2022 as compared to 2021, provision for income taxes within our Real Estate segment decreased by $7.3 million, primarily due to (i) deferred tax benefits totaling $3.5 million recognized during 2022 related to the release of valuation allowances on certain foreign properties, (ii) trade taxes of $1.8 million recognized during 2021 as a result of the completion of a tax review on a portfolio of properties in Germany, and (iii) tax benefits of $0.7 million recognized on certain foreign properties during 2022 as a result of a tax court ruling.
Investment Management
We earn revenue as the advisor to the Managed Programs. For the periods presented, we acted as advisor to the following Managed Programs: CPA:18 - Global (through August 1, 2022), CWI 1 and CWI 2 (through April 13, 2020), and CESH. Upon completion of the CPA:18 Merger on August 1, 2022 (Note 3), the advisory agreement with CPA:18 - Global was terminated, and we ceased earning revenue from CPA:18 - Global. The CWI 1 and CWI 2 Merger closed on April 13, 2020, and as a result, CWI 2 was renamed Watermark Lodging Trust, Inc., for which we provided certain services pursuant to a transition services agreement, which was terminated on October 13, 2021 (Note 4).
We no longer raise capital for new or existing funds, but we currently expect to continue managing CESH and earn the various fees described below through the end of its life cycle (Note 1, Note 4).
Revenues
The following table presents revenues within our Investment Management segment (in thousands):
Years Ended December 31,
2022 2021 Change
Investment Management Revenues
Asset management and other revenue
CPA:18 - Global $ 6,956 $ 12,528 $ (5,572)
CESH 1,511 2,835 (1,324)
8,467 15,363 (6,896)
Reimbursable costs from affiliates
CPA:18 - Global 2,040 2,874 (834)
CESH 478 878 (400)
WLT - 283 (283)
2,518 4,035 (1,517)
$ 10,985 $ 19,398 $ (8,413)
Asset Management and Other Revenue
During the periods presented, we earned asset management revenue from (i) CPA:18 - Global (prior to the CPA:18 Merger) based on the value of its real estate-related assets under management and (ii) CESH based on its gross assets under management at fair value. For 2022, we received asset management fees from (i) CPA:18 - Global in shares of its common stock through February 28, 2022; effective as of March 1, 2022, we receive asset management fees from CPA:18 - Global in cash in light of the CPA:18 Merger, which closed on August 1, 2022 (Note 3), and (ii) CESH in cash. Asset management revenues from CESH are expected to decline as assets are sold.
Operating Expenses
Impairment Charges - Investment Management Goodwill
Our impairment charges on Investment Management goodwill are more fully described in Note 9.
W. P. Carey 2022 10-K - 38
Other Income and Expenses, and (Provision for) Benefit from Income Taxes
Earnings from Equity Method Investments in the Managed Programs
The following table presents the details of our earnings from equity method investments in the Managed Programs (Note 8) (in thousands):
Years Ended December 31,
2022 2021
Earnings from equity method investments in the Managed Programs:
Distributions of Available Cash from CPA:18 - Global (a)
$ 8,746 $ 7,345
Earnings from equity method investments in the Managed Programs (a) (b)
4,542 1,475
Earnings from equity method investments in the Managed Programs $ 13,288 $ 8,820
__________
(a)As a result of the completion of the CPA:18 Merger on August 1, 2022 (Note 3), we no longer recognize equity income from our investment in shares of common stock of CPA:18 - Global or receive distributions of Available Cash from CPA:18 - Global.
(b)The increase for the year ended December 31, 2022 as compared to 2021 was primarily due to an increase of $3.1 million from our investment in shares of CPA:18 - Global.
(Provision for) Benefit from Income Taxes
For the year ended December 31, 2022 we recorded a provision for income taxes of $6.3 million, compared to a benefit from income taxes of $0.2 million recognized during the year ended December 31, 2021, within our Investment Management segment. During 2022, in connection with the CPA:18 Merger, we incurred one-time current taxes upon the recognition of taxable income associated with the accelerated vesting of shares previously issued by CPA:18 - Global to us for asset management services performed.
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 timing of settlement of foreign currency transactions; changes in foreign currency exchange rates; and the timing of distributions from equity method investments. We no longer receive certain fees and distributions from CPA:18 - Global following the completion of the CPA:18 Merger on August 1, 2022 (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 Senior Unsecured Credit Facility, proceeds from dispositions of properties, and the issuance of additional debt or equity securities, such as issuances of common stock through our ATM Forwards (Note 13), 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.
Operating Activities - Net cash provided by operating activities increased by $77.1 million during 2022 as compared to 2021, primarily due to an increase in cash flow generated from net investment activity (including properties acquired in the CPA:18 Merger (Note 3)) and scheduled rent increases at existing properties. These increases were partially offset by higher interest expense and merger expenses recognized during the current year related to the CPA:18 Merger (Note 3).
W. P. Carey 2022 10-K - 39
Investing Activities - Our investing activities are generally comprised of real estate-related transactions (purchases and sales) and funding for build-to-suit activities and other capital expenditures on real estate. In connection with the CPA:18 Merger, we paid $423.4 million in cash consideration, and acquired $331.1 million of cash and restricted cash. We received $147.6 million of proceeds from the redemption of WLT preferred stock and cash exchanged for WLT common stock (Note 9). In addition, during the year ended December 31, 2022, we used $26.0 million to fund short-term loans to the Managed Programs, all of which were repaid during that period (Note 4). We also received $7.1 million in distributions from equity method investments.
Financing Activities - Our financing activities are generally comprised of borrowings and repayments under our Unsecured Revolving Credit Facility and Unsecured Term Loans, issuances of the Senior Unsecured Notes, payments and prepayments of non-recourse mortgage loans, and payments of dividends to stockholders. In addition to these types of transactions, during the year ended December 31, 2022, we received (i) $284.3 million in net proceeds from the issuance of common stock under our Equity Forwards (Note 14) and (ii) $218.1 million in net proceeds from the issuance of shares under our prior ATM Program (Note 14).
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,
2022 2021
Carrying Value
Fixed rate:
Senior Unsecured Notes (a)
$ 5,916,400 $ 5,701,913
Non-recourse mortgages (a)
824,270 235,898
6,740,670 5,937,811
Variable rate:
Unsecured Term Loans (a)
552,539 310,583
Unsecured Revolving Credit Facility 276,392 410,596
Non-recourse mortgages (a):
Floating interest rate mortgage loans 213,958 53,571
Amount subject to interest rate swaps and caps 94,189 79,055
1,137,078 853,805
$ 7,877,748 $ 6,791,616
Percent of Total Debt
Fixed rate 86 % 87 %
Variable rate 14 % 13 %
100 % 100 %
Weighted-Average Interest Rate at End of Year
Fixed rate 2.9 % 2.7 %
Variable rate (b)
3.6 % 1.1 %
Total debt 3.0 % 2.5 %
____________
(a)Aggregate debt balance includes unamortized discount, net, totaling $35.9 million and $30.9 million as of December 31, 2022 and 2021, respectively, and unamortized deferred financing costs totaling $26.0 million and $28.8 million as of December 31, 2022 and 2021, respectively.
(b)The impact of our interest rate swaps and caps is reflected in the weighted-average interest rates.
W. P. Carey 2022 10-K - 40
Cash Resources
At December 31, 2022, our cash resources consisted of the following:
•cash and cash equivalents totaling $168.0 million. Of this amount, $96.6 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 $1.5 billion (net of amounts reserved for standby letters of credit totaling $0.6 million);
•available proceeds under our ATM Forwards of approximately $530.0 million; and
•unleveraged properties that had an aggregate asset carrying value of approximately $13.1 billion at December 31, 2022, although there can be no assurance that we would be able to obtain financing for these properties.
We may also access the capital markets through additional debt (denominated in both U.S. dollars and euros) and equity offerings.
Our cash resources can be used for working capital needs and other commitments and may be used for future investments.
Cash Requirements and Liquidity
As of December 31, 2022, we had (i) $168.0 million of cash and cash equivalents, (ii) approximately $1.5 billion of available capacity under our Unsecured Revolving Credit Facility (net of amounts reserved for standby letters of credit totaling $0.6 million), and (iii) available proceeds under our ATM Forwards of approximately $530.0 million. Our Senior Unsecured Credit Facility includes a $1.8 billion Unsecured Revolving Credit Facility and Unsecured Term Loans outstanding totaling $552.5 million as of December 31, 2022 (Note 11), and is scheduled to mature on February 20, 2025. As of December 31, 2022, scheduled debt principal payments total $456.7 million through December 31, 2023 and $1.7 billion through December 31, 2024, and our Senior Unsecured Notes do not start to mature until April 2024 (Note 11).
During the next 12 months following December 31, 2022 and thereafter, we expect that our significant cash requirements will include:
•paying dividends to our stockholders; (which we expect to be higher, following the issuance of 13,786,302 shares of our common stock in the CPA:18 Merger (Note 3));
•funding acquisitions of new investments (Note 5);
•funding future capital commitments and tenant improvement allowances (Note 5);
•making scheduled principal and balloon payments on our debt obligations (Note 11);
•making scheduled interest payments on our debt obligations (future interest payments total $927.7 million, with $231.6 million due during the next 12 months; interest on unhedged variable-rate debt obligations was calculated using the applicable annual variable interest rates and balances outstanding at December 31, 2022); 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 (as described above), issuances of common stock through our ATM Program (Note 13), and potential issuances of additional debt or equity securities. We may also choose to prepay certain of our non-recourse mortgage loan obligations, depending on our capital needs and market conditions at that time.
Our liquidity could be adversely affected by unanticipated costs, greater-than-anticipated operating expenses, and the ongoing impact of the COVID-19 pandemic. 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, mortgage loan proceeds, and the issuance of additional debt or equity securities to meet these needs.
Certain amounts disclosed above are based on the applicable foreign currency exchange rate at December 31, 2022.
W. P. Carey 2022 10-K - 41
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. 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. See Item 1A. Risk Factors for further discussion of potential environmental risks.
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.
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.
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 or other assets incidental to the company’s main business, 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 rent and related reserves, other non-cash rent adjustments, non-cash allowance for credit losses on loans receivable and direct financing leases, stock-based compensation, non-cash environmental accretion expense, amortization of discounts and premiums on debt, 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, and merger and acquisition expenses. We also exclude realized and unrealized gains/losses on foreign currency exchange rate movements (other than those realized on the settlement of foreign currency derivatives), which are not considered fundamental attributes of our business plan
W. P. Carey 2022 10-K - 42
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.
Consolidated FFO and AFFO were as follows (in thousands):
Years Ended December 31,
2022 2021
Net income attributable to W. P. Carey $ 599,139 $ 409,988
Adjustments:
Depreciation and amortization of real property 500,764 470,554
Gain on sale of real estate, net (43,476) (40,425)
Impairment charges - real estate 39,119 24,246
Gain on change in control of interests (a) (b)
(33,931) -
Impairment charges - Investment Management goodwill (c)
29,334 -
Proportionate share of adjustments to earnings from equity method investments (d) (e)
15,155 32,213
Proportionate share of adjustments for noncontrolling interests (f)
(491) (16)
Total adjustments 506,474 486,572
FFO (as defined by NAREIT) attributable to W. P. Carey 1,105,613 896,560
Adjustments:
Other (gains) and losses (g)
(96,038) 12,885
Straight-line and other leasing and financing adjustments (h)
(54,431) (83,267)
Above- and below-market rent intangible lease amortization, net 41,390 53,585
Stock-based compensation 32,841 24,881
Merger and other expenses (i)
19,387 (4,546)
Amortization of deferred financing costs 17,203 13,523
Tax benefit - deferred and other (3,759) (5,967)
Other amortization and non-cash items 1,931 1,709
Proportionate share of adjustments to earnings from equity method investments (e)
(2,770) 12,152
Proportionate share of adjustments for noncontrolling interests (f)
(769) (24)
Total adjustments (45,015) 24,931
AFFO attributable to W. P. Carey $ 1,060,598 $ 921,491
Summary
FFO (as defined by NAREIT) attributable to W. P. Carey $ 1,105,613 $ 896,560
AFFO attributable to W. P. Carey $ 1,060,598 $ 921,491
W. P. Carey 2022 10-K - 43
FFO and AFFO from Real Estate were as follows (in thousands):
Years Ended December 31,
2022 2021
Net income from Real Estate attributable to W. P. Carey $ 591,603 $ 384,766
Adjustments:
Depreciation and amortization of real property 500,764 470,554
Gain on sale of real estate, net (43,476) (40,425)
Impairment charges - real estate 39,119 24,246
Gain on change in control of interests (a) (b)
(11,405) -
Proportionate share of adjustments to earnings from equity method investments (d) (e)
15,155 32,213
Proportionate share of adjustments for noncontrolling interests (f)
(491) (16)
Total adjustments 499,666 486,572
FFO (as defined by NAREIT) attributable to W. P. Carey - Real Estate 1,091,269 871,338
Adjustments:
Other (gains) and losses (g)
(97,149) 13,676
Straight-line and other leasing and financing adjustments (h)
(54,431) (83,267)
Above- and below-market rent intangible lease amortization, net 41,390 53,585
Stock-based compensation 32,841 24,881
Merger and other expenses (i)
19,384 (4,597)
Amortization of deferred financing costs 17,203 13,523
Tax benefit - deferred and other (8,164) (4,938)
Other amortization and non-cash items 1,931 1,709
Proportionate share of adjustments to earnings from equity method investments (e)
(723) 10,253
Proportionate share of adjustments for noncontrolling interests (f)
(769) (24)
Total adjustments (48,487) 24,801
AFFO attributable to W. P. Carey - Real Estate $ 1,042,782 $ 896,139
Summary
FFO (as defined by NAREIT) attributable to W. P. Carey - Real Estate $ 1,091,269 $ 871,338
AFFO attributable to W. P. Carey - Real Estate $ 1,042,782 $ 896,139
W. P. Carey 2022 10-K - 44
FFO and AFFO from Investment Management were as follows (in thousands):
Years Ended December 31,
2022 2021
Net income from Investment Management attributable to W. P. Carey $ 7,536 $ 25,222
Adjustments:
Impairment charges - Investment Management goodwill (c)
29,334 -
Gain on change in control of interests (a) (b)
(22,526) -
Total adjustments 6,808 -
FFO (as defined by NAREIT) attributable to W. P. Carey - Investment Management 14,344 25,222
Adjustments:
Tax expense (benefit) - deferred and other 4,405 (1,029)
Other (gains) and losses (g)
1,111 (791)
Merger and other expenses 3 51
Proportionate share of adjustments to earnings from equity method investments (e)
(2,047) 1,899
Total adjustments 3,472 130
AFFO attributable to W. P. Carey - Investment Management $ 17,816 $ 25,352
Summary
FFO (as defined by NAREIT) attributable to W. P. Carey - Investment Management $ 14,344 $ 25,222
AFFO attributable to W. P. Carey - Investment Management $ 17,816 $ 25,352
__________
(a)Amount for the year ended December 31, 2022 represents a gain recognized on the remaining interests in four investments acquired in the CPA:18 Merger, which we had previously accounted for under the equity method (Note 3).
(b)Amount for the year ended December 31, 2022 represents a gain recognized on our previously held interest in shares of CPA:18 - Global common stock in connection with the CPA:18 Merger (Note 3).
(c)Amount for the year ended December 31, 2022 represents an impairment charge recognized on goodwill within our Investment Management segment, since future Investment Management cash flows are expected to be minimal (Note 7, Note 9).
(d)Amount for the year ended December 31, 2022 includes our $4.6 million proportionate share of an impairment charge recognized on an equity method investment in real estate (Note 8). Amount for the year ended December 31, 2021 includes a non-cash other-than-temporary impairment charge of $6.8 million recognized on an equity method investment in real estate (Note 9)
(e)Equity income, including amounts that are not typically recognized for FFO and AFFO, is recognized within Earnings (losses) from equity method investments on the consolidated statements of income. This represents adjustments to equity income to reflect FFO and AFFO on a pro rata basis.
(f)Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis. This adjustment reflects our FFO or AFFO on a pro rata basis.
(g)Primarily comprised of gains and losses on extinguishment of debt, the mark-to-market fair value of equity securities, and foreign currency exchange rate movements, as well as non-cash allowance for credit losses on loans receivable and direct financing leases.
(h)Amount for the year ended December 31, 2021 includes an adjustment to exclude $37.8 million of lease termination fees received from a tenant, as such amount was determined to be non-core income (Note 5).
(i)Amounts for the years ended December 31, 2022 and 2021 are primarily comprised of costs incurred in connection with the CPA:18 Merger (Note 3) and/or reversals of estimated liabilities for German real estate transfer taxes that were previously recorded in connection with mergers in prior years.
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 2022 10-K - 45

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 market risks that we are exposed to are interest rate risk and foreign currency exchange risk; however, we do not use derivative instruments to hedge credit/market risks or for speculative purposes. From time to time, we may enter into foreign currency collars to hedge our foreign currency cash flow exposures.
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 (such as the COVID-19 pandemic) 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.
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 (including the ongoing impact of the COVID-19 pandemic) 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 assets to decrease. Increases in interest rates may also have an impact on the credit profile of certain tenants.
We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we generally seek long-term debt financing on a fixed-rate basis. However, we are subject to variable-rate interest on our Unsecured Term Loans, Unsecured Revolving Credit Facility, and certain of our non-recourse mortgage debt. We have entered into, and may continue to enter into, interest rate swap agreements or interest rate cap agreements with counterparties related to certain of our variable-rate non-recourse mortgage loans. See Note 10 for additional information on our interest rate swaps and caps.
At December 31, 2022, a significant portion (approximately 86.8%) 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, 2022 (in thousands):
2023 2024 2025 2026 2027 Thereafter Total Fair Value
Fixed-rate debt (a) (b)
$ 239,146 $ 1,195,330 $ 791,654 $ 972,135 $ 533,760 $ 3,070,039 $ 6,802,064 $ 6,041,968
Variable-rate debt (a)
$ 217,562 $ 36,138 $ 872,622 $ 11,290 $ - $ - $ 1,137,612 $ 1,135,000
__________
(a)Amounts are based on the exchange rate at December 31, 2022, as applicable.
(b)Amounts after 2023 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, 2022 would increase or decrease by $5.9 million for our euro-denominated debt, by $3.7 million for our British pound sterling-denominated debt, by $0.3 million for U.S. dollar-denominated debt, and by $0.2 million for our Japanese yen-denominated debt for each respective 1% change in annual interest rates.
W. P. Carey 2022 10-K - 46
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 Canadian dollar, the Japanese yen, and certain other currencies 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 several offerings of euro-denominated senior notes, and have borrowed under our Senior Unsecured Credit Facility in foreign currencies, including the euro, British pound sterling, and Japanese yen (Note 11). Volatile market conditions arising from the ongoing effects of the COVID-19 global pandemic, as well as other macroeconomic factors, may result in significant fluctuations in foreign currency exchange rates. To the extent that currency fluctuations increase or decrease rental revenues, as translated to U.S. dollars, the change in debt service (comprised of principal and interest, excluding balloon payments), 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. We estimate that, for a 1% increase or decrease in the exchange rate between the euro, British pound sterling, or Japanese yen and the U.S. dollar, there would be a corresponding change in the projected estimated cash flow (scheduled future rental revenues, net of scheduled future debt service payments for the next 12 months) for our consolidated foreign operations at December 31, 2022 of $2.7 million, $0.3 million, and less than $0.1 million, respectively, excluding the impact of our derivative instruments.
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 collars to hedge certain of our foreign currency cash flow exposures. See Note 10 for additional information on our foreign currency collars.
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, 2022, our consolidated portfolio had the following significant characteristics in excess of 10%, based on the percentage of our consolidated total revenues:
•67% related to domestic operations; and
•33% related to international operations.
At December 31, 2022, 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:
•63% related to domestic properties;
•37% related to international properties;
•27% related to industrial facilities, 24% related to warehouse facilities, 17% related to office facilities, and 17% related to retail facilities; and
•21% related to the retail stores industry (including automotive dealerships).
W. P. Carey 2022 10-K - 47

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
TABLE OF CONTENTS Page No.
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Income for the Years Ended December 31, 2022, 2021, and 2020
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021, and 2020
Consolidated Statements of Equity for the Years Ended December 31, 2022, 2021, and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021, and 2020
Notes to Consolidated Financial Statements
Schedule II - Valuation and Qualifying Accounts for the Years Ended December 31, 2022, 2021, and 2020
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2022
Notes to Schedule III for the Years Ended December 31, 2022, 2021, and 2020
Schedule IV - Mortgage Loans on Real Estate as of December 31, 2022
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 2022 10-K - 48
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, 2022 and 2021, 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, 2022, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 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, 2022, 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 2022 10-K - 49
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 Asset Acquisitions and Business Combinations
As described in Note 2 to the consolidated financial statements, management determines whether a transaction or other event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired and liabilities assumed are not a business, management accounts for the transaction or other event as an asset acquisition. As described in Note 5, the Company completed real estate asset acquisitions with total capitalized costs of $1.2 billion during the year ended December 31, 2022. As described in Note 3, the Company accounted for the CPA:18 Merger as a business combination under the acquisition method of accounting for total merger consideration of approximately $1.6 billion during the year ended December 31, 2022. Land is typically valued utilizing the sales comparison (or market) approach. Buildings are valued, as if vacant, using the cost and/or income approach. Under the income approach, management uses either the discounted cash flow method or the direct capitalization method. For the discounted cash flow method, the fair value of real estate is determined (i) 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 market rental rates and applying a selected capitalization rate. For the direct capitalization method, the fair value of real estate is determined (i) by the stabilized estimated net operating income for each property in the portfolio and (ii) a selected capitalization rate. For acquired properties with leases classified as operating leases, management allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. For acquired properties that do not qualify as sale-leaseback transactions, 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. For acquired properties with tenants in place, management records in-place lease intangible assets based on the estimated value ascribed to the avoidance of costs of leasing the properties for the remaining primary in-place lease terms.
The principal considerations for our determination that performing procedures relating to the purchase price allocation for asset acquisitions and business combinations is a critical audit matter are (i) the significant judgment by management to develop the fair value estimates of tangible and intangible assets and liabilities using the discounted cash flow and direct capitalization methods; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the market rental rates, capitalization rates, and discount rates used in the discounted cash flow method, and capitalization rates used in the direct capitalization method; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
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 asset acquisitions and business combinations, including controls over management’s valuation of the tangible and intangible assets and liabilities and controls over management’s review of the assumptions related to market rental rates, capitalization rates, and discount rates. These procedures also included, among others, (i) reading the executed purchase agreements and leasing documents; (ii) testing management’s process for developing the fair value estimates of tangible and intangible assets and liabilities, (iii) evaluating the appropriateness of the discounted cash flow and direct capitalization valuation methods, (iv) evaluating the reasonableness of the significant assumptions related to market rental rates, capitalization rates, and discount rates used in the discounted cash flow method, and capitalization rates used in the direct capitalization method, and (v) testing the completeness and accuracy of data used in the valuation methods. Evaluating management’s significant assumptions related to market rental rates, capitalization rates, and discount rates involved evaluating whether the assumptions used by management were reasonable considering (i) comparable market data and other industry
W. P. Carey 2022 10-K - 50
factors and (ii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s valuation methods and (ii) the reasonableness of the significant assumptions related to market rental rates, capitalization rates, and discount rates.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 10, 2023
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 2022 10-K - 51
W. P. CAREY INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31,
2022 2021
Assets
Investments in real estate:
Land, buildings and improvements - net lease and other $ 13,338,857 $ 11,791,734
Land, buildings and improvements - operating properties 1,095,892 83,673
Net investments in direct financing leases and loans receivable 771,761 813,577
In-place lease intangible assets and other
2,659,750 2,386,000
Above-market rent intangible assets
833,751 843,410
Investments in real estate 18,700,011 15,918,394
Accumulated depreciation and amortization (3,269,057) (2,889,294)
Assets held for sale, net 57,944 8,269
Net investments in real estate 15,488,898 13,037,369
Equity method investments 327,502 356,637
Cash and cash equivalents
167,996 165,427
Due from affiliates 919 1,826
Other assets, net 1,079,308 1,017,842
Goodwill 1,037,412 901,529
Total assets (a)
$ 18,102,035 $ 15,480,630
Liabilities and Equity
Debt:
Senior unsecured notes, net
$ 5,916,400 $ 5,701,913
Unsecured term loans, net 552,539 310,583
Unsecured revolving credit facility 276,392 410,596
Non-recourse mortgages, net 1,132,417 368,524
Debt, net 7,877,748 6,791,616
Accounts payable, accrued expenses and other liabilities 623,843 572,846
Below-market rent and other intangible liabilities, net
184,584 183,286
Deferred income taxes
178,959 145,572
Dividends payable 228,257 203,859
Total liabilities (a)
9,093,391 7,897,179
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; 210,620,949 and 190,013,751 shares, respectively, issued and outstanding
211 190
Additional paid-in capital 11,706,836 9,977,686
Distributions in excess of accumulated earnings (2,486,633) (2,224,231)
Deferred compensation obligation 57,012 49,810
Accumulated other comprehensive loss (283,780) (221,670)
Total stockholders’ equity 8,993,646 7,581,785
Noncontrolling interests 14,998 1,666
Total equity 9,008,644 7,583,451
Total liabilities and equity $ 18,102,035 $ 15,480,630
__________
(a)See Note 2 for details related to variable interest entities (“VIEs”).
See Notes to Consolidated Financial Statements.
W. P. Carey 2022 10-K - 52
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
Years Ended December 31,
2022 2021 2020
Revenues
Real Estate:
Lease revenues $ 1,301,617 $ 1,177,438 $ 1,080,623
Income from direct financing leases and loans receivable 74,266 67,555 74,893
Operating property revenues 59,230 13,478 11,399
Other lease-related income 32,988 53,655 11,082
1,468,101 1,312,126 1,177,997
Investment Management:
Asset management and other revenue 8,467 15,363 22,467
Reimbursable costs from affiliates 2,518 4,035 8,855
10,985 19,398 31,322
1,479,086 1,331,524 1,209,319
Operating Expenses
Depreciation and amortization 503,403 475,989 442,935
General and administrative 88,952 81,888 75,950
Reimbursable tenant costs 73,622 62,417 56,409
Property expenses, excluding reimbursable tenant costs 50,753 47,898 44,067
Impairment charges - real estate 39,119 24,246 35,830
Stock-based compensation expense 32,841 24,881 15,938
Impairment charges - Investment Management goodwill 29,334 - -
Operating property expenses 27,054 9,848 9,901
Merger and other expenses 19,387 (4,546) 247
Reimbursable costs from affiliates 2,518 4,035 8,855
Subadvisor fees - - 1,469
866,983 726,656 691,601
Other Income and Expenses
Interest expense (219,160) (196,831) (210,087)
Other gains and (losses) 96,038 (12,885) 37,165
Gain on sale of real estate, net 43,476 40,425 109,370
Gain on change in control of interests 33,931 - -
Non-operating income 30,309 13,860 9,587
Earnings (losses) from equity method investments 29,509 (10,829) (18,557)
14,103 (166,260) (72,522)
Income before income taxes 626,206 438,608 445,196
(Provision for) benefit from income taxes (27,724) (28,486) 20,759
Net Income 598,482 410,122 465,955
Net loss (income) attributable to noncontrolling interests 657 (134) (10,596)
Net Income Attributable to W. P. Carey $ 599,139 $ 409,988 $ 455,359
Basic Earnings Per Share $ 3.00 $ 2.25 $ 2.61
Diluted Earnings Per Share $ 2.99 $ 2.24 $ 2.60
Weighted-Average Shares Outstanding
Basic 199,633,802 182,486,476 174,504,406
Diluted 200,427,124 183,127,098 174,839,428
See Notes to Consolidated Financial Statements.
W. P. Carey 2022 10-K - 53
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Years Ended December 31,
2022 2021 2020
Net Income $ 598,482 $ 410,122 $ 465,955
Other Comprehensive (Loss) Income
Foreign currency translation adjustments (63,149) (35,736) 47,746
Unrealized gain (loss) on derivative instruments 19,732 35,305 (31,978)
(Reclassification of unrealized gain on investments to net income) / Unrealized gain on investments (18,688) 18,688 -
(62,105) 18,257 15,768
Comprehensive Income 536,377 428,379 481,723
Amounts Attributable to Noncontrolling Interests
Net loss (income) 657 (134) (10,596)
Foreign currency translation adjustments (5) - -
Unrealized gain on derivative instruments - (21) (7)
Comprehensive loss (income) attributable to noncontrolling interests 652 (155) (10,603)
Comprehensive Income Attributable to W. P. Carey $ 537,029 $ 428,224 $ 471,120
See Notes to Consolidated Financial Statements.
W. P. Carey 2022 10-K - 54
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, 2022 190,013,751 $ 190 $ 9,977,686 $ (2,224,231) $ 49,810 $ (221,670) $ 7,581,785 $ 1,666 $ 7,583,451
Shares issued to stockholders of CPA:18 - Global in connection with CPA:18 Merger 13,786,302 14 1,205,736 1,205,750 1,205,750
Shares issued under Equity Forwards, net 3,925,000 4 284,198 284,202 284,202
Shares issued under ATM Program, net 2,740,295 3 218,098 218,101 218,101
Shares issued upon delivery of vested restricted share awards 152,830 - (6,612) (6,612) (6,612)
Shares issued upon purchases under employee share purchase plan
2,771 - 205 205 205
Amortization of stock-based compensation expense 32,841 32,841 32,841
Deferral of vested shares, net (6,696) 6,696 - -
Acquisition of noncontrolling interests in connection with the CPA:18 Merger - 14,367 14,367
Distributions to noncontrolling interests - (413) (413)
Contributions from noncontrolling interests - 30 30
Dividends declared ($4.242 per share)
1,380 (861,541) 506 (859,655) (859,655)
Net income 599,139 599,139 (657) 598,482
Other comprehensive loss:
Foreign currency translation adjustments (63,154) (63,154) 5 (63,149)
Unrealized gain on derivative instruments 19,732 19,732 19,732
Reclassification of unrealized gain on investments to net income (18,688) (18,688) (18,688)
Balance at December 31, 2022 210,620,949 $ 211 $ 11,706,836 $ (2,486,633) $ 57,012 $ (283,780) $ 8,993,646 $ 14,998 $ 9,008,644
(Continued)
W. P. Carey 2022 10-K - 55
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, 2021
175,401,757 $ 175 $ 8,925,365 $ (1,850,935) $ 42,014 $ (239,906) $ 6,876,713 $ 1,656 $ 6,878,369
Shares issued under Equity Forwards, net 9,798,209 10 697,034 697,044 697,044
Shares issued under ATM Program, net 4,690,073 5 340,061 340,066 340,066
Shares issued upon delivery of vested restricted share awards 119,268 - (3,822) (3,822) (3,822)
Shares issued upon purchases under employee share purchase plan
4,444 - 305 305 305
Amortization of stock-based compensation expense 24,881 24,881 24,881
Deferral of vested shares, net (7,044) 7,044 - -
Distributions to noncontrolling interests - (145) (145)
Dividends declared ($4.205 per share)
906 (783,284) 752 (781,626) (781,626)
Net income 409,988 409,988 134 410,122
Other comprehensive loss:
Foreign currency translation adjustments (35,736) (35,736) (35,736)
Unrealized gain on derivative instruments 35,284 35,284 21 35,305
Unrealized gain on investments 18,688 18,688 18,688
Balance at December 31, 2021 190,013,751 $ 190 $ 9,977,686 $ (2,224,231) $ 49,810 $ (221,670) $ 7,581,785 $ 1,666 $ 7,583,451
(Continued)
W. P. Carey 2022 10-K - 56
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, 2020
172,278,242 $ 172 $ 8,717,535 $ (1,557,374) $ 37,263 $ (255,667) $ 6,941,929 $ 6,244 $ 6,948,173
Cumulative-effect adjustment for the adoption of ASU 2016-13,
Financial Instruments - Credit Losses
(14,812) (14,812) (14,812)
Shares issued under Equity Forwards, net 2,951,791 3 199,478 199,481 199,481
Shares issued upon delivery of vested restricted share awards 162,331 - (5,372) (5,372) (5,372)
Shares issued upon purchases under employee share purchase plan 6,893 - 389 389 389
Shares issued under ATM Program, net 2,500 - 60 60 60
Amortization of stock-based compensation expense 15,938 15,938 15,938
Deferral of vested shares, net (3,854) 3,854 - -
Distributions to noncontrolling interests - (5,326) (5,326)
Dividends declared ($4.172 per share)
1,191 (734,108) 897 (732,020) (732,020)
Redemption of noncontrolling interest (Note 4)
- (9,865) (9,865)
Net income 455,359 455,359 10,596 465,955
Other comprehensive income:
Foreign currency translation adjustments 47,746 47,746 47,746
Unrealized loss on derivative instruments (31,985) (31,985) 7 (31,978)
Balance at December 31, 2020 175,401,757 $ 175 $ 8,925,365 $ (1,850,935) $ 42,014 $ (239,906) $ 6,876,713 $ 1,656 $ 6,878,369
See Notes to Consolidated Financial Statements.
W. P. Carey 2022 10-K - 57
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
2022 2021 2020
Cash Flows - Operating Activities
Net income $ 598,482 $ 410,122 $ 465,955
Adjustments to net income:
Depreciation and amortization, including intangible assets and deferred financing costs 519,741 490,722 456,210
Net realized and unrealized (gains) losses on extinguishment of debt, equity securities, foreign currency exchange rate movements, and other (76,202) 15,505 (55,810)
Straight-line rent adjustments
(57,988) (50,565) (50,299)
Gain on sale of real estate, net (43,476) (40,425) (109,370)
Amortization of rent-related intangibles and deferred rental revenue 43,249 56,910 52,736
Impairment charges - real estate 39,119 24,246 35,830
Gain on change in control of interests (33,931) - -
Stock-based compensation expense 32,841 24,881 15,938
Distributions of earnings from equity method investments
30,236 15,471 9,419
(Earnings) losses from equity method investments (29,509) 10,829 18,557
Impairment charges - Investment Management goodwill 29,334 - -
(Decrease) increase in allowance for credit losses (24,976) 266 22,259
Deferred income tax benefit (8,071) (4,703) (49,076)
Asset management revenue received in shares of Managed Programs (1,024) (12,528) (16,642)
Net changes in other operating assets and liabilities (14,269) (14,252) 5,831
Net Cash Provided by Operating Activities 1,003,556 926,479 801,538
Cash Flows - Investing Activities
Purchases of real estate (1,145,734) (1,306,858) (656,313)
Cash paid to stockholders of CPA:18 - Global in the CPA:18 Merger (423,435) - -
Cash and restricted cash acquired in connection with the CPA:18 Merger 331,063 - -
Proceeds from sales of real estate 234,652 163,638 366,532
Proceeds from redemption of WLT preferred stock and cash exchanged for WLT common stock (Note 9)
147,625 - -
Funding for real estate construction, redevelopments, and other capital expenditures on real estate (104,441) (113,616) (207,256)
Capital contributions to equity method investments
(93,416) (107,552) (4,253)
Proceeds from repayment of loans receivable 34,000 - 11,000
Proceeds from repayment of short-term loans to affiliates 26,000 62,048 51,702
Funding of short-term loans to affiliates (26,000) (41,000) (26,481)
Investments in loans receivable (20,180) (217,711) -
Other investing activities, net (19,767) (19,631) 1,165
Return of capital from equity method investments
7,102 13,955 19,483
Purchases of securities - - (95,511)
Net Cash Used in Investing Activities (1,052,531) (1,566,727) (539,932)
Cash Flows - Financing Activities
Repayments of Unsecured Revolving Credit Facility (2,168,392) (1,663,869) (1,137,026)
Proceeds from Unsecured Revolving Credit Facility 2,079,420 2,000,639 1,019,158
Dividends paid (835,257) (764,281) (726,955)
Proceeds from issuance of Senior Unsecured Notes 334,775 1,385,059 495,495
Proceeds from shares issued under Equity Forwards, net of selling costs 284,259 697,044 199,716
Proceeds from Unsecured Term Loans 283,139 - 298,974
Proceeds from shares issued under ATM Program, net of selling costs 218,081 339,968 158
Scheduled payments of mortgage principal (127,230) (64,290) (275,746)
Prepayments of mortgage principal (10,381) (745,124) (68,501)
Other financing activities, net 8,839 4,606 8,917
Payments for withholding taxes upon delivery of equity-based awards (6,612) (3,822) (5,372)
Payment of financing costs (2,371) (11,295) (14,205)
Distributions to noncontrolling interests (413) (145) (5,326)
Contributions from noncontrolling interests 30 - -
Redemption of Senior Unsecured Notes - (617,442) -
Net Cash Provided by (Used in) Financing Activities 57,887 557,048 (210,713)
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 (2,721) (10,629) 9,368
Net increase (decrease) in cash and cash equivalents and restricted cash 6,191 (93,829) 60,261
Cash and cash equivalents and restricted cash, beginning of year 217,950 311,779 251,518
Cash and cash equivalents and restricted cash, end of year $ 224,141 $ 217,950 $ 311,779
See Notes to Consolidated Financial Statements.
W. P. Carey 2022 10-K - 58
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Supplemental Non-Cash Investing and Financing Activities:
2022 - On August 1, 2022, CPA:18 - Global (as defined herein) merged with and into one of our indirect subsidiaries in the CPA:18 Merger (as defined herein) (Note 3). The following table summarizes estimated fair values of the assets acquired and liabilities assumed in the CPA:18 Merger (in thousands):
Total Consideration
Fair value of W. P. Carey shares of common stock issued $ 1,205,750
Cash consideration paid 423,297
Cash paid for fractional shares 138
Fair value of our equity interest in CPA:18 - Global prior to the CPA:18 Merger 88,299
Fair value of our equity interest in jointly owned investments with CPA:18 - Global prior to the CPA:18 Merger 28,574
1,746,058
Assets Acquired at Fair Value
Land, buildings and improvements - net lease and other 881,613
Land, buildings and improvements - operating properties 1,000,447
Net investments in direct financing leases and loans receivable 38,517
In-place lease and other intangible assets 224,458
Above-market rent intangible assets 61,090
Assets held for sale 85,026
Goodwill 172,346
Other assets, net (excluding restricted cash) 25,229
Liabilities Assumed at Fair Value
Non-recourse mortgages, net 900,173
Accounts payable, accrued expenses and other liabilities 90,035
Below-market rent and other intangible liabilities 16,836
Deferred income taxes 52,320
Amounts attributable to noncontrolling interests 14,367
Net assets acquired excluding cash and restricted cash 1,414,995
Cash and cash equivalents and restricted cash acquired $ 331,063
See Notes to Consolidated Financial Statements.
W. P. Carey 2022 10-K - 59
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 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 August 1, 2022, a non-traded REIT that we advised, Corporate Property Associates 18 - Global Incorporated (“CPA:18 - Global”) merged with and into one of our indirect subsidiaries (the “CPA:18 Merger”) (Note 3). At December 31, 2022, we were the advisor to Carey European Student Housing Fund I, L.P. (“CESH”), a limited partnership formed for the purpose of developing, owning, and operating student housing properties in Europe (Note 4).
We refer to CPA:18 - Global (prior to the CPA:18 Merger) and CESH collectively as the “Managed Programs.” We no longer raise capital for new or existing funds, but currently expect to continue managing CESH through the end of its life cycle (Note 4).
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, 2022, our owned portfolio was comprised of our full or partial ownership interests in 1,449 properties, totaling approximately 176 million square feet (unaudited), substantially all of which were net leased to 392 tenants, with a weighted-average lease term of 10.8 years and an occupancy rate of 98.8% (unaudited). In addition, at December 31, 2022, our portfolio was comprised of full or partial ownership interests in 87 operating properties, including 84 self-storage properties, two student housing properties, and one hotel, totaling approximately 6.6 million square feet (unaudited).
Investment Management - Through our TRSs, we manage the real estate investment portfolio for CESH, for which we earn asset management revenue. We may also be entitled to receive certain distributions pursuant to our advisory arrangements with CESH. At December 31, 2022, CESH owned (i) all or a portion of three net-leased properties, totaling approximately 0.4 million square feet (unaudited), all of which were leased to one tenant, with an occupancy rate of 100.0% (unaudited), and (ii) one active build-to-suit project.
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. 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
W. P. Carey 2022 10-K - 60
Notes to Consolidated Financial Statements
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 reporting period were capitalized since our acquisitions were classified as asset acquisitions (excluding the CPA:18 Merger).
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. Under the cost approach, the fair value of real estate is based on estimated costs to construct a vacant building with similar characteristics. Under the income approach, we use either the discounted cash flow method or the direct capitalization method. For the discounted cash flow method, the fair value of real estate is determined (i) 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 market rental rates, and applying a selected capitalization rate. For the direct capitalization method, the fair value of real estate is determined (i) by the stabilized estimated net operating income for each property in the portfolio and (ii) a selected capitalization rate.
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;
•market rents, growth factors of rents, and market lease term;
•capitalization rates to be applied to an estimate of market rent at the beginning and/or the end of the market lease term;
•the marketing period necessary to put a lease in place;
•carrying costs during the marketing period; and
•leasing commissions and tenant improvement allowances.
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 and industry standards. Different estimates of remaining economic life will affect the depreciation expense that is recorded.
Purchase Price Allocation of Intangible Assets and Liabilities - For acquired properties that do not qualify as sale-leaseback transactions, 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. 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
W. P. Carey 2022 10-K - 61
Notes to Consolidated Financial Statements
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 valuations 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.
For acquired properties with tenants in place, we record in-place lease intangible assets based on the estimated value ascribed to the avoidance of costs of leasing the properties for the remaining primary in-place lease terms. 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 valuations. We amortize the value of in-place lease intangibles to depreciation 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 was attributed to the Real Estate segment which comprises one reporting unit. In the event we dispose of a property or an investment 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.
Financing Arrangements - In accordance with Accounting Standards Codification (“ASC”) 310, Receivables and ASC 842, Leases, real estate assets acquired through a sale-leaseback transaction are accounted for as a financing arrangement if the investment does not meet the criteria for sale-leaseback accounting. We record such investments within Net investments in direct financing leases and loans receivable on the consolidated balance sheets. Rent payments from these investments are included within Income from direct financing leases and loans receivable on the consolidated statements of income.
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.
W. P. Carey 2022 10-K - 62
Notes to Consolidated Financial Statements
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 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 will continue to review the property for subsequent changes in the fair value, and may recognize an additional impairment charge, if warranted.
Equity Method Investments - We evaluate our equity method investments 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 our equity investments in real estate, we calculate the estimated fair value of the underlying investment’s real estate as described in Real Estate 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 depended on the timing and form of liquidity events for the Managed Programs (Note 3, 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 net asset values. 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.
Credit Losses
We adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses on January 1, 2020, which 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 net investments in direct financing leases and loans receivable. This standard does not apply to receivables arising from operating leases, which are within the scope of Topic 842. We adopted ASU 2016-13 using the modified retrospective method, under which we recorded a cumulative-effect adjustment as a charge to retained earnings of $14.8 million on January 1, 2020, which is reflected within our consolidated statements of equity.
W. P. Carey 2022 10-K - 63
Notes to Consolidated Financial Statements
The allowance for credit losses, which is recorded as a reduction to Net investments in direct financing leases and loans receivable on our consolidated balance sheets, is measured on a pool basis by credit ratings (Note 6), using a probability of default method based on the lessees’ respective credit ratings, the expected value of the underlying collateral upon its repossession, and our historical loss experience related to other direct financing leases. Included in our model are factors that incorporate forward-looking information. Allowance for credit losses is included in our consolidated statements of income within Other gains and (losses).
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.
Upon the closing of the CPA:18 Merger, we acquired five consolidated VIEs and declassified three entities as VIEs.
At December 31, 2022 and 2021, we considered 16 and 14 entities to be VIEs, respectively, of which we consolidated 11 and six, 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,
2022 2021
Land, buildings and improvements - net lease and other $ 590,390 $ 426,831
Land, buildings and improvements - operating properties 143,390 -
Net investments in direct financing leases and loans receivable 144,103 144,103
In-place lease intangible assets and other 72,070 42,884
Above-market rent intangible assets 33,634 26,720
Accumulated depreciation and amortization (176,379) (154,413)
Total assets 843,500 500,884
Non-recourse mortgages, net $ 132,950 $ 1,485
Below-market rent and other intangible liabilities, net 18,891 20,568
Total liabilities 199,633 46,302
W. P. Carey 2022 10-K - 64
Notes to Consolidated Financial Statements
At December 31, 2022 and 2021, our five and eight unconsolidated VIEs included our interests in (i) three and six unconsolidated real estate investments, respectively, which we account for under the equity method of accounting (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), and (ii) two unconsolidated investments in equity securities, which we accounted for as investments in shares of the entities at fair value. As of December 31, 2022 and 2021, the net carrying amount of our investments in these entities was $693.4 million and $581.3 million, respectively, and our maximum exposure to loss in these entities was limited to our investments.
Leases
As a Lessee: Right-of-use (“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 and financing 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 consist of increases as a result of the Consumer Price Index (“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. Below-market ground lease intangible assets and above-market ground lease intangible liabilities are included as a component of ROU assets. See Note 5 for additional disclosures on the presentation of these amounts in our consolidated balance sheets.
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: We combine non-lease components (lease arrangements that include common area maintenance services) with related lease components (lease revenues), since 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. 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, if the reimbursements are deemed collectible.
Reclassifications - Certain prior period amounts have been reclassified to conform to the current period presentation.
We currently present Land, buildings and improvements - net lease and other and Land, buildings and improvements - operating properties on separate line items in the consolidated balance sheets. Previously, land, buildings and improvements attributable to net lease properties and operating properties were aggregated within Land, buildings and improvements in the consolidated balance sheets (Note 5).
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,
2022 2021 2020
Cash and cash equivalents
$ 167,996 $ 165,427 $ 248,662
Restricted cash (a)
56,145 52,523 63,117
Total cash and cash equivalents and restricted cash
$ 224,141 $ 217,950 $ 311,779
__________
W. P. Carey 2022 10-K - 65
Notes to Consolidated Financial Statements
(a)Restricted cash is included within Other assets, net on our consolidated balance sheets.
Real Estate and Operating Real Estate - We carry land, buildings, and improvements at cost less accumulated depreciation. We capitalize costs that extend the useful life of properties or increase their value, 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 and Cloud Computing Arrangements - 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. 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. Cloud computing arrangement costs follow the internal-use software accounting guidance to determine which implementation costs to capitalize as assets or expense as incurred. Capitalized internal-use software development costs are amortized on a straight-line basis over the software’s estimated useful life, which is three to seven years. Capitalized implementation costs related to a service contract will be amortized over the term of the hosting arrangement beginning when the component of the hosting arrangement is ready for its intended use. 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 Lineage Logistics (a cold storage REIT) (Note 9), our investment in shares of Guggenheim Credit Income Fund (“GCIF”) (Note 9), and office lease ROU assets in Other assets, net. We include derivative liabilities, amounts held on behalf of tenants, operating lease liabilities, 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 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.
W. P. Carey 2022 10-K - 66
Notes to Consolidated Financial Statements
Revenue from contracts under ASC 606, Revenue from Contracts with Customers 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 hotel operating property revenues of $12.0 million, $7.2 million, and $5.9 million for the years ended December 31, 2022, 2021, and 2020, respectively. Such operating property revenues are primarily comprised of revenues from room rentals and from food and beverage services at our hotel operating 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.
Lease revenue (including straight-line lease revenue) is only recognized when deemed probable of collection. Collectibility is assessed for each tenant receivable using various criteria including credit ratings (Note 6), guarantees, past collection issues, and the current economic and business environment affecting the tenant. If collectibility of the contractual rent stream is not deemed probable, revenue will only be recognized upon receipt of cash from the tenant.
Revenue Recognition, Investment Management Operations - We earn asset management revenue in connection with providing services to 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.
The Managed Programs 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 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. 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 2022 10-K - 67
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 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 the average exchange rate during the month in which the transaction occurs. 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.
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 intercompany debt that is short-term or has scheduled principal payments, are included in the determination of net income (within Other gains and (losses) in the statements of income).
The translation impact of 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.
Segment Allocation Changes - Beginning with the second quarter of 2020, general and administrative expenses attributed to our Investment Management segment are comprised of the incremental costs of providing services to the Managed Programs, which are fully reimbursed by those funds (resulting in no net expense for us). All other general and administrative expenses are attributed to our Real Estate segment. Previously, general and administrative expenses were allocated based on time incurred by our personnel for the Real Estate and Investment Management segments. In addition, beginning with the second quarter of 2020, stock-based compensation expense and corporate depreciation and amortization expense are fully recognized within our Real Estate segment. In light of the termination of the advisory agreements with CWI 1 and CWI 2 in connection with the Watermark Lodging Trust, Inc. (“WLT”) management internalization (Note 4), as well as the termination of the advisory agreements with CPA:18 - Global in connection with the CPA:18 Merger (Note 3), we now view essentially all assets, liabilities, and operational expenses as part of our Real Estate segment, other than incremental activities that are expected to wind down as we manage CESH through the end of its life cycle. These changes between the segments had no impact on our consolidated financial statements.
In addition, our investments in WLT, and income recognized from our investments in WLT, were included within our Real Estate segment following the CWI 1 and CWI 2 Merger, since we were no longer the advisor to that company. Previously, our investments in CWI 1 and CWI 2, and income recognized from our investments in CWI 1 and CWI 2, were included within our Investment Management segment (Note 4).
W. P. Carey 2022 10-K - 68
Notes to Consolidated Financial Statements
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.
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 15). 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 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 shares available for issuance under our Equity Forwards and ATM Forwards) 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.
Note 3. Merger with CPA:18 - Global
CPA:18 Merger
On February 27, 2022, we and certain of our subsidiaries entered into a merger agreement with CPA:18 - Global, pursuant to which CPA:18 - Global would merge with and into one of our indirect subsidiaries in exchange for shares of our common stock and cash, subject to approval by the stockholders of CPA:18 - Global. The CPA:18 Merger and related transactions were approved by the stockholders of CPA:18 - Global on July 26, 2022 and completed on August 1, 2022.
At the effective time of the CPA:18 Merger, each share of CPA:18 - Global common stock issued and outstanding immediately prior to the effective time of the CPA:18 Merger was canceled and, in exchange for cancellation of such share, the rights attaching to such share were converted automatically into the right to receive (i) 0.098 shares of our common stock and (ii) $3.00 in cash, which we refer to herein as the Merger Consideration. Each share of CPA:18 - Global common stock owned by us or any of our subsidiaries immediately prior to the effective time of the CPA:18 Merger was automatically canceled and retired, and ceased to exist, for no Merger Consideration. In exchange for the 141,099,002 shares of CPA:18 - Global common stock that we and our subsidiaries did not previously own, we paid total merger consideration of approximately $1.6 billion,
W. P. Carey 2022 10-K - 69
Notes to Consolidated Financial Statements
consisting of (i) the issuance of 13,786,302 shares of our common stock with a fair value of $1.2 billion, based on the closing price of our common stock on August 1, 2022 of $87.46 per share, (ii) cash consideration of $423.3 million, and (iii) cash of $0.1 million paid in lieu of issuing any fractional shares of our common stock. Pursuant to the terms of the definitive merger agreement, in connection with the closing of the CPA:18 Merger, we waived certain back-end fees that we would have otherwise been entitled to receive from CPA:18 - Global upon its liquidation pursuant to the terms of our pre-closing advisory agreement with CPA:18 - Global.
Immediately prior to the closing of the CPA:18 Merger, CPA:18 - Global’s portfolio was comprised of full or partial ownership interests in 42 leased properties (including seven properties in which we already owned a partial ownership interest), substantially all of which were net leased with a weighted-average lease term of 7.0 years, an occupancy rate of 99.3% (unaudited), and an estimated contractual minimum annualized base rent (“ABR”) totaling $81.0 million, as well as 65 self-storage operating properties and two student housing operating properties totaling 5.1 million square feet (unaudited). The related property-level debt was comprised of non-recourse mortgage loans with an aggregate consolidated fair value of approximately $900.2 million with a weighted-average annual interest rate of 5.1% as of August 1, 2022. From the closing of the CPA:18 Merger through December 31, 2022, lease revenues, operating property revenues, and net income from properties acquired were $42.7 million, $39.2 million, and $12.3 million, respectively.
Two of the net lease properties that we acquired in the CPA:18 Merger were classified as Assets held for sale, with an aggregate fair value of $85.0 million at acquisition (Note 5). From the closing of the CPA:18 Merger through December 31, 2022, lease revenues from these properties totaled $4.9 million. We sold one of these properties in August 2022 for total proceeds, net of selling costs, of $44.5 million, and recognized a loss on sale of $0.2 million (Note 16).
Purchase Price Allocation
We accounted for the CPA:18 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 the combined company upon completion of the CPA:18 Merger. Costs related to the CPA:18 Merger have been expensed as incurred and classified within Merger and other expenses in the consolidated statements of income, totaling $17.2 million for the year ended December 31, 2022.
The purchase price was allocated to the assets acquired and liabilities assumed, based upon their preliminary fair values at August 1, 2022. The following tables summarize the preliminary consideration and estimated fair values of the assets acquired and liabilities assumed in the acquisition, based on the current best estimate of management. We are in the process of finalizing our assessment of the fair value of the assets acquired and liabilities assumed. Investments in land, buildings and improvements, net investments in direct financing leases, non-recourse mortgages, and noncontrolling interests were based on preliminary valuation data and estimates.
Preliminary Purchase Price Allocation (in thousands)
Total Consideration
Fair value of W. P. Carey shares of common stock issued $ 1,205,750
Cash consideration paid 423,297
Cash paid for fractional shares 138
Merger Consideration 1,629,185
Fair value of our equity interest in CPA:18 - Global prior to the CPA:18 Merger 88,299
Fair value of our equity interest in jointly owned investments with CPA:18 - Global prior to the CPA:18 Merger 28,574
$ 1,746,058
W. P. Carey 2022 10-K - 70
Notes to Consolidated Financial Statements
Preliminary Purchase Price Allocation (in thousands)
Assets
Land, buildings and improvements - net lease and other $ 881,613
Land, buildings and improvements - operating properties 1,000,447
Net investments in direct financing leases and loans receivable 38,517
In-place lease and other intangible assets 224,458
Above-market rent intangible assets 61,090
Assets held for sale 85,026
Cash and cash equivalents and restricted cash 331,063
Other assets, net (excluding restricted cash) 25,229
Total assets 2,647,443
Liabilities
Non-recourse mortgages, net 900,173
Accounts payable, accrued expenses and other liabilities 90,035
Below-market rent and other intangible liabilities 16,836
Deferred income taxes 52,320
Total liabilities 1,059,364
Total identifiable net assets 1,588,079
Noncontrolling interests (14,367)
Goodwill 172,346
$ 1,746,058
Goodwill
The $172.3 million of goodwill recorded in the CPA:18 Merger was primarily due to the premium we paid over CPA:18 - Global’s estimated fair value. Management believes the premium is supported by several factors, including that the CPA:18 Merger (i) concludes our exit from the non-traded REIT business, (ii) adds a high-quality diversified portfolio of net lease assets that is well-aligned with our existing portfolio, (iii) enhances certain portfolio metrics, and (iv) adds an attractive portfolio of self-storage operating properties.
The fair value of the 13,786,302 shares of our common stock issued in the CPA:18 Merger as part of the consideration paid for CPA:18 - Global of $1.6 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:18 Merger, in a manner consistent with the methodology described above.
Goodwill is not deductible for income tax purposes.
Equity Investments
During the third quarter of 2022, we recognized a gain on change in control of interests of approximately $22.5 million, which was the difference between the carrying value of approximately $65.8 million and the fair value of approximately $88.3 million of our previously held equity interest in 8,556,732 shares of CPA:18 - Global’s common stock.
The CPA:18 Merger also resulted in our acquisition of the remaining interests in four 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 four jointly owned investments that occurred, we recorded a gain on change in control of interests of approximately $11.4 million during the third quarter of 2022, which was the difference between our carrying values and the fair values of our previously held equity interests on August 1, 2022 of approximately $17.2 million and approximately $28.6 million, respectively. Subsequent to the CPA:18 Merger, we consolidate these wholly owned investments.
W. P. Carey 2022 10-K - 71
Notes to Consolidated Financial Statements
The fair values of our previously held equity 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 assumptions to be Level 3 with ranges for our previously held equity interests as follows:
•Market rents ranged from $8.65 per square foot to $21.00 per square foot;
•Discount rates applied to the estimated net operating income of each property ranged from approximately 5.75% to 9.75%;
•Discount rates applied to the estimated residual value of each property ranged from approximately 6.50% to 8.50%;
•Residual capitalization rates applied to the properties ranged from approximately 5.75% to 8.00%;
•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 2.28% to 5.50%.
Pro Forma Financial Information (Unaudited)
The following consolidated pro forma financial information has been presented as if the CPA:18 Merger had occurred on January 1, 2021 for the years ended December 31, 2022 and 2021. The pro forma financial information is not necessarily indicative of what the actual results would have been had the CPA:18 Merger on that date, nor does it purport to represent the results of operations for future periods.
(in thousands)
Years Ended December 31,
2022 2021
Pro forma total revenues $ 1,590,233 $ 1,509,828
Note 4. Agreements and Transactions with Related Parties
Advisory Agreements and Partnership Agreements with the Managed Programs
We currently have advisory arrangements with CESH, pursuant to which we earn fees and are entitled to receive reimbursement for certain fund management expenses. Upon completion of the CPA:18 Merger on August 1, 2022 (Note 3), our advisory agreements with CPA:18 - Global were terminated, and we ceased earning revenue from CPA:18 - Global. We no longer raise capital for new or existing funds, but we currently expect to continue to manage CESH and earn various fees (as described below) through the end of its life cycle.
W. P. Carey 2022 10-K - 72
Notes to Consolidated Financial Statements
The following tables present a summary of revenue earned, reimbursable costs, and distributions of Available Cash received/accrued from the Managed Programs and WLT for the periods indicated, included in the consolidated financial statements (in thousands):
Years Ended December 31,
2022 2021 2020
Distributions of Available Cash (a)
$ 8,746 $ 7,345 $ 7,225
Asset management revenue (b)
8,467 15,363 21,973
Reimbursable costs from affiliates (b)
2,518 4,035 8,855
Interest income on deferred acquisition fees and loans to affiliates (c)
112 120 369
Structuring and other advisory revenue (b)
- - 494
$ 19,843 $ 26,863 $ 38,916
Years Ended December 31,
2022 2021 2020
CPA:18 - Global $ 17,854 $ 22,867 $ 22,200
CWI 1 - - 5,662
CWI 2 - - 4,668
CESH 1,989 3,713 4,723
WLT (reimbursed transition services) - 283 1,663
$ 19,843 $ 26,863 $ 38,916
__________
(a)Included within Earnings (losses) from equity method investments in the consolidated statements of income.
(b)Amounts represent revenues from contracts under ASC 606.
(c)Included within Non-operating income in the consolidated statements of income.
The following table presents a summary of amounts included in Due from affiliates in the consolidated financial statements (in thousands):
December 31,
2022 2021
Asset management fees receivable $ 386 $ 494
Accounts receivable 329 336
Reimbursable costs 204 974
Current acquisition fees receivable - 19
Deferred acquisition fees receivable, including accrued interest - 3
$ 919 $ 1,826
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 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.
W. P. Carey 2022 10-K - 73
Notes to Consolidated Financial Statements
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 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 2021 through February 28, 2022; payable in cash from March 1, 2022 to August 1, 2022 (the date of the completion of the CPA:18 Merger)
Rate depended on the type of investment and was based on the average market or average equity value, as applicable
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 ASC 606, Revenue from Contracts with Customers. 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.
Reimbursable Costs from Affiliates
CESH reimburses us in cash for certain personnel and overhead costs that we incur on its behalf, based on actual expenses incurred.
Distributions of Available Cash
We were entitled to receive distributions of up to 10% of the Available Cash (as defined in CPA:18 - Global’s partnership agreement) from the operating partnership of CPA:18 - Global, payable quarterly in arrears. After completion of the CPA:18 Merger on August 1, 2022 (Note 3), we no longer receive distributions of Available Cash from CPA:18 - Global.
Back-End Fees and Interests in the Managed Programs
Under our advisory arrangements with CESH, we may also receive compensation in connection with providing a liquidity event for its investors. Such back-end fees or interests include or may include interests in disposition proceeds. There can be no assurance as to whether or when any back-end fees or interests will be realized. Pursuant to the terms of the definitive merger agreement, in connection with the closing of the CPA:18 Merger, we waived certain back-end fees that we would have been entitled to receive from CPA:18 - Global upon its liquidation pursuant to the terms of our advisory agreement and partnership agreement with CPA:18 - Global (Note 3).
W. P. Carey 2022 10-K - 74
Notes to Consolidated Financial Statements
Other Transactions with Former Affiliates
CWI 1 and CWI 2 Merger
On October 22, 2019, Carey Watermark Investors Incorporated (“CWI 1”) and Carey Watermark Investors 2 Incorporated (“CWI 2”), two non-traded REITs that we advised, announced that they had entered into a definitive merger agreement under which the two companies intended to merge in an all-stock transaction, with CWI 2 as the surviving entity (the “CWI 1 and CWI 2 Merger”). The CWI 1 and CWI 2 Merger was approved by the stockholders of CWI 1 and CWI 2 on April 8, 2020 and closed on April 13, 2020. Subsequently, CWI 2 was renamed WLT. In connection with the CWI 1 and CWI 2 Merger, we entered into an internalization agreement and a transition services agreement. Immediately following the closing of the CWI 1 and CWI 2 Merger, (i) the advisory agreements with each of CWI 1 and CWI 2 and each of their respective operating partnerships terminated, (ii) the subadvisory agreements with the subadvisors for CWI 1 and CWI 2 were terminated, (iii) pursuant to the internalization agreement, two of our representatives were appointed to the board of directors of WLT (however both representatives resigned from the board of directors of WLT on April 29, 2020), and (iv) we provided certain transition services at cost to WLT, pursuant to a transition services agreement. On October 13, 2021, all services provided under the transition services agreement were terminated.
In accordance with the merger agreement, at the effective time of the CWI 1 and CWI 2 Merger, each issued and outstanding share of CWI 1’s common stock (or fraction thereof), was converted into the right to receive 0.9106 shares (the “exchange ratio”) of CWI 2 Class A common stock. As a result, we exchanged 6,074,046 shares of CWI 1 common stock for 5,531,025 shares of CWI 2 Class A common stock.
Pursuant to the internalization agreement, the operating partnerships of each of CWI 1 and CWI 2 redeemed the special general partner interests that we previously held, for which we received 1,300,000 shares of CWI 2 preferred stock with a liquidation preference of $50.00 per share and 2,840,549 shares in CWI 2 Class A common stock (which was a non-cash investing activity). In connection with this redemption, we recognized a non-cash net gain on sale of $33.0 million, which was included within Earnings (losses) from equity method investments in the consolidated statements of income for the year ended December 31, 2020. This net gain on sale was recorded based on:
•a fair value of $46.3 million for the 1,300,000 shares of CWI 2 preferred stock that we received (Note 9);
•a fair value of $11.6 million for the 2,840,549 shares in CWI 2 common stock that we received (Note 8);
•a gain recognized on the redemption of the noncontrolling interest in the special general partner interests previously held by the respective subadvisors for CWI 1 and CWI 2 of $9.9 million (which is included within Net income attributable to noncontrolling interests in our consolidated statements of income and Redemption of noncontrolling interest in our consolidated statements of equity);
•an allocation of $34.3 million of goodwill within our Investment Management segment in accordance with ASC 350, Intangibles-goodwill and other, since the WLT management internalization resulted in a sale of a portion of our Investment Management business (the allocation of goodwill was based on the relative fair value of the portion of the Investment Management business sold) (Note 7); and
•the carrying value of our previously held equity investments in the operating partnerships of CWI 1 and CWI 2 (Note 8), which totaled $0.5 million on the date of the merger.
In January 2022, WLT redeemed in full our 1,300,000 shares of its preferred stock for gross proceeds of $65.0 million (based on the liquidation preference of $50.00 per share, as described above) (Note 9).
Prior to the closing of the CWI 1 and CWI 2 Merger, we owned 3,836,669 shares of CWI 2 Class A common stock. Following the closing of the CWI 1 and CWI 2 Merger, execution of the internalization agreement, and CWI 2 being renamed WLT, we owned 12,208,243 shares of WLT common stock, which we accounted for as an equity method investment. We recorded our investment in shares of common stock of WLT on a one quarter lag. In January 2022, we reclassified our investment in shares of common stock of WLT from equity method investments to equity securities, since we no longer had significant influence over WLT, following the redemption of our investment in preferred shares of WLT, as described above (Note 8). As a result, we accounted for this investment, which was included in Other assets, net in the consolidated financial statements, at fair value. WLT completed its previously announced sale to private real estate funds in October 2022 and we received $82.6 million in cash proceeds. We recognized non-cash unrealized gains of $49.2 million on our investment in common shares of WLT during the year ended December 31, 2022, which was recorded within Other gains and (losses) in the consolidated financial statements. Upon completion of this transaction, we have no remaining interest in WLT.
W. P. Carey 2022 10-K - 75
Notes to Consolidated Financial Statements
Loans to Affiliates
From time to time, our board of directors (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, generally for the purpose of facilitating acquisitions or for working capital purposes. No amounts were outstanding on our line of credit to CPA:18 - Global as of December 31, 2021. In July 2022, CPA:18 - Global repaid the $16.0 million principal outstanding balance in full. The loan agreement with CPA:18 - Global was terminated upon completion of the CPA:18 Merger on August 1, 2022. No such line of credit with CESH existed during the reporting period.
Other
At December 31, 2022, we owned interests in ten jointly owned investments in real estate, with the remaining interests held by third parties. We consolidate six such investments and account for the remaining four investments under the equity method of accounting (Note 8). In addition, we owned limited partnership units of CESH at that date. We elected to account for our investment in CESH under the fair value option (Note 8).
Note 5. Land, Buildings and Improvements, and Assets Held for Sale
Land, Buildings and Improvements - Net Lease and Other
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,
2022 2021
Land $ 2,400,002 $ 2,151,327
Buildings and improvements 10,916,630 9,525,858
Real estate under construction 22,225 114,549
Less: Accumulated depreciation (1,672,091) (1,448,020)
$ 11,666,766 $ 10,343,714
As discussed in Note 3, we acquired 39 consolidated properties subject to existing operating leases in the CPA:18 Merger, which increased the carrying value of our Land, buildings and improvements - net lease and other by $881.6 million during the year ended December 31, 2022.
During 2022, 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 5.8% to $1.0666 from $1.1326. As a result of this fluctuation in foreign currency exchange rates, the carrying value of our Land, buildings and improvements - net lease and other decreased by $250.5 million from December 31, 2021 to December 31, 2022.
In connection with changes in lease classifications due to terminations or extensions of the underlying leases, we reclassified seven properties with an aggregate carrying value of $67.0 million from Net investments in direct financing leases and loans receivable to Land, buildings and improvements - net lease and other during 2022 (Note 6).
Depreciation expense, including the effect of foreign currency translation, on our buildings and improvements subject to operating leases was $299.4 million, $286.4 million, and $258.9 million for the years ended December 31, 2022, 2021, and 2020, respectively.
W. P. Carey 2022 10-K - 76
Notes to Consolidated Financial Statements
Acquisitions of Real Estate During 2022
During 2022, we entered into the following investments, which were deemed to be real estate asset acquisitions, and which excludes properties acquired in the CPA:18 Merger (dollars in thousands):
Property Location(s) Number of Properties Date of Acquisition Property Type Total Capitalized Costs (a)
Pleasant Prairie, Wisconsin 1 1/10/2022 Industrial $ 20,024
Various, Spain (a)
26 2/3/2022 Funeral Home 146,364
Various, Denmark (a) (b)
8 2/11/2022 Retail 33,976
Laval, Canada (a)
1 2/18/2022 Industrial 21,459
Chattanooga, Tennessee (c)
1 3/4/2022 Warehouse 43,198
Various, United States (4 properties), Canada (1 property), and Mexico (1 property)
6 4/27/2022; 5/9/2022 Industrial 80,595
Various, United States 6 5/16/2022 Industrial; Warehouse 110,381
Various, Denmark (a) (b)
10 6/1/2022; 6/30/2022 Retail 42,635
Medina, Ohio 1 6/17/2022 Industrial 28,913
Bree, Belgium (a)
1 6/30/2022 Warehouse 96,697
Various, Spain (a)
5 7/21/2022 Retail 19,894
Various, United States 18 7/26/2022 Industrial; Warehouse 262,061
Various, Denmark (a) (b)
8 8/1/2022; 9/28/2022 Retail 29,644
Westlake, Ohio 1 8/3/2022 Warehouse 29,517
Hebron and Strongsville, Ohio; and Scarborough, Canada 3 8/10/2022 Industrial; Warehouse 20,111
Clifton Park, New York and West Des Moines, Iowa 2 8/12/2022 Specialty 23,317
Orzinuovi, Italy (a)
1 8/26/2022 Industrial 14,033
West Chester, Pennsylvania 1 10/1/2022 Outdoor Advertising 1,863
Various, Denmark (a) (b)
4 11/30/2022 Retail 15,553
Various, United States 19 12/21/2022 Industrial 63,006
Romulus, Michigan 1 12/30/2022 Warehouse 36,569
Salisbury, North Carolina (d)
1 12/30/2022 Industrial 16,412
125 $ 1,156,222
__________
(a)Amount reflects the applicable exchange rate on the date of transaction.
(b)We also entered into a purchase agreement to acquire one additional retail facility leased to this tenant for $3.4 million (based on the exchange rate of the Danish krone at December 31, 2022), which is expected to be completed in 2023.
(c)We also committed to fund an additional $26.6 million for an expansion at the facility, which is expected to be completed in the third quarter of 2023.
(d)We also committed to fund an additional $13.8 million for an expansion at this facility, which is expected to be completed in the fourth quarter of 2023.
W. P. Carey 2022 10-K - 77
Notes to Consolidated Financial Statements
The aggregate purchase price allocation for investments disclosed above is as follows (dollars in thousands):
Total Capitalized Costs
Land $ 145,078
Buildings and improvements 852,991
Intangible assets and liabilities:
In-place lease (weighted-average expected life of 20.6 years)
152,889
Below-market rent (weighted-average expected life of 10.9 years)
(7,023)
ROU assets:
Prepaid rent (a)
12,287
$ 1,156,222
__________
(a)Represents prepaid rent for a land lease. Therefore, there is no future obligation on the land lease asset and no corresponding operating lease liability. This asset is included in In-place lease intangible assets and other in the consolidated balance sheets.
Acquisitions of Real Estate During 2021 - We entered into 28 investments, which were deemed to be real estate asset acquisitions, at a total cost of $1.3 billion, including land of $191.0 million, buildings of $946.9 million, net lease intangibles of $188.9 million, land lease ROU assets of $6.0 million, above-market ground lease intangibles, net, of $4.2 million (included within ROU assets), prepaid rent liabilities of $15.4 million, and operating lease liabilities of $6.0 million.
Acquisitions of Real Estate During 2020 - We entered into 14 investments, which were deemed to be real estate asset acquisitions, at a total cost of $661.4 million, including land of $105.4 million, buildings of $449.4 million, and net lease intangibles of $106.6 million.
Real Estate Under Construction
During 2022, we capitalized real estate under construction totaling $141.2 million (including $78.3 million related to a student housing development project acquired in the CPA:18 Merger, as discussed below under Land, Buildings and Improvements - Operating Properties). The number of construction projects in progress with balances included in real estate under construction was eight and six as of December 31, 2022 and 2021, respectively. Aggregate unfunded commitments totaled approximately $61.1 million and $55.3 million as of December 31, 2022 and 2021, respectively.
During 2022, we completed the following construction projects (dollars in thousands):
Property Location(s) Primary Transaction Type Number of Properties Date of Completion Property Type Total Capitalized Costs (a)
Hurricane, Utah
Expansion 1 3/8/2022 Warehouse $ 20,517
Breda, Netherlands (a)
Expansion 1 3/18/2022 Warehouse 4,721
Bowling Green, Kentucky Renovation 1 4/26/2022 Warehouse 72,971
Wageningen, Netherlands (a)
Build-to-Suit 1 7/7/2022 Research and Development 26,054
Radomsko, Poland (a)
Expansion 1 8/1/2022 Industrial 23,042
Flemington, New Jersey Build-to-Suit 1 10/1/2022 Outdoor Advertising 832
6 $ 148,137
__________
(a)Amount reflects the applicable exchange rate on the date of transaction.
During 2021, we completed four construction projects, at a total cost of $88.2 million.
During 2020, we completed five construction projects, at a total cost of $171.2 million.
W. P. Carey 2022 10-K - 78
Notes to Consolidated Financial Statements
In addition to the expansion commitments discussed under Acquisitions of Real Estate During 2022 above, during 2022, we committed to fund six build-to-suit or redevelopment projects, for an aggregate amount of $20.3 million. We currently expect to complete the projects in 2023.
Capitalized interest incurred during construction was $1.3 million, $2.5 million, and $2.9 million for the years ended December 31, 2022, 2021, and 2020 respectively, which reduces Interest expense in the consolidated statements of income.
Dispositions of Properties
During 2022, we sold 20 properties, which were classified as Land, buildings and improvements - net lease and other. As a result, the carrying value of our Land, buildings and improvements - net lease and other decreased by $118.1 million from December 31, 2021 to December 31, 2022 (Note 16).
Other Lease-Related Income
2022 - For the year ended December 31, 2022, Other lease-related income on our consolidated statements of income included: (i) lease termination income totaling $12.4 million received from two tenants; (ii) other lease-related settlements totaling $17.6 million; and (iii) income from a parking garage attached to one of our net-leased properties totaling $1.6 million.
2021 - For the year ended December 31, 2021, Other lease-related income on our consolidated statements of income included: (i) lease termination income of $41.0 million received from a tenant; (ii) other lease-related settlements totaling $9.8 million; and (iii) income from a parking garage attached to one of our net-leased properties totaling $1.9 million.
2020 - For the year ended December 31, 2020, Other lease-related income on our consolidated statements of income included: (i) lease-related settlements totaling $7.9 million and (ii) income from a parking garage attached to one of our net-leased properties totaling $2.3 million.
Leases
Operating Lease Income
Lease income related to operating leases recognized and included in the consolidated statements of income is as follows (in thousands):
Years Ended December 31,
2022 2021 2020
Lease income - fixed $ 1,160,942 $ 1,066,250 $ 981,430
Lease income - variable (a)
140,675 111,188 99,193
Total operating lease income $ 1,301,617 $ 1,177,438 $ 1,080,623
__________
(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.
W. P. Carey 2022 10-K - 79
Notes to Consolidated Financial Statements
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, 2022 are as follows (in thousands):
Years Ending December 31, Total
2023 $ 1,285,481
2024 1,233,058
2025 1,179,250
2026 1,127,974
2027 1,064,061
Thereafter 9,481,009
Total $ 15,370,833
See Note 6 for scheduled future lease payments to be received under non-cancelable direct financing leases.
Lease Cost
Lease costs for operating leases are included in (i) General and administrative expenses (office leases), (ii) Property expenses, excluding reimbursable tenant costs (land leases), and (iii) Reimbursable tenant costs (land leases) in the consolidated statements of income. Certain information related to the total lease cost for operating leases is as follows (in thousands):
Years Ended December 31,
2022 2021 2020
Fixed lease cost
$ 15,087 $ 16,426 $ 17,616
Variable lease cost
1,086 1,149 1,089
Total lease cost $ 16,173 $ 17,575 $ 18,705
During the years ended December 31, 2022, 2021, and 2020, we received sublease income totaling approximately $4.6 million, $5.1 million, and $5.5 million, respectively, which is included in Lease revenues in the consolidated statements of income.
Other Information
Supplemental balance sheet information related to ROU assets and lease liabilities is as follows (dollars in thousands):
December 31,
Location on Consolidated Balance Sheets 2022 2021
Operating ROU assets - land leases In-place lease intangible assets and other $ 123,834 $ 106,095
Finance ROU assets - land leases In-place lease intangible assets and other 12,598 -
Operating ROU assets - office leases Other assets, net 56,674 59,902
Total operating ROU assets $ 193,106 $ 165,997
Operating lease liabilities Accounts payable, accrued expenses and other liabilities $ 146,302 $ 146,437
Weighted-average remaining lease term - operating leases 25.8 years 26.1 years
Weighted-average discount rate - operating leases 6.8 % 6.8 %
Number of land lease arrangements - operating leases 72 66
Number of land lease arrangements - finance leases 1 -
Number of office space arrangements 4 4
Lease term range (excluding extension options not reasonably certain of being exercised) <1 - 99 years
<1 - 100 years
W. P. Carey 2022 10-K - 80
Notes to Consolidated Financial Statements
Cash paid for operating lease liabilities included in Net cash provided by operating activities totaled $15.8 million, $13.9 million, and $15.5 million for the years ended December 31, 2022, 2021, and 2020, respectively.
We assumed seven land lease arrangements in the CPA:18 Merger, for which we are the lessee. As a result, we capitalized (i) ROU assets totaling $24.5 million (comprised of below-market ground lease intangibles totaling $17.9 million and land lease ROU assets totaling $6.6 million), which are included within In-place lease intangible assets and other on our consolidated balance sheets, and (ii) operating lease liabilities totaling $6.6 million, which are included within Accounts payable, accrued expenses and other liabilities on our consolidated balance sheets.
During the year ended December 31, 2022, we entered into a land lease agreement for 99 years, which we account for as a finance lease. Upon entering into the lease, we prepaid the full ground rent of $12.3 million, which is included in Net cash used in investing activities on the consolidated statements of cash flows. During the year ended December 31, 2022, we recognized $0.1 million of rent expense for this finance lease, which is included in Depreciation and amortization on our consolidated statements of income.
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, 2022 is as follows (in thousands):
Years Ending December 31, Total
2023 $ 14,486
2024 13,856
2025 13,851
2026 13,721
2027 13,911
Thereafter 269,848
Total lease payments 339,673
Less: amount of lease payments representing interest (193,371)
Present value of future lease payments/lease obligations $ 146,302
Land, Buildings and Improvements - Operating Properties
At December 31, 2022, Land, buildings and improvements - operating properties consisted of our investments in 75 consolidated self-storage properties, two consolidated student housing properties, and one consolidated hotel. We acquired 65 self-storage properties, one student housing property, and one student housing development project with an aggregate fair value of $1.0 billion in the CPA:18 Merger (including $78.3 million within real estate under construction) (Note 3). In September 2022, we partially placed into service the student housing development project for total capitalized costs of $66.8 million. At December 31, 2021, Land, buildings and improvements - operating properties consisted of our investments in ten consolidated self-storage properties and one consolidated hotel. Below is a summary of our Land, buildings and improvements - operating properties (in thousands):
December 31,
2022 2021
Land $ 122,317 $ 10,452
Buildings and improvements 955,009 73,221
Real estate under construction 18,566 -
Less: Accumulated depreciation (28,295) (16,750)
$ 1,067,597 $ 66,923
Depreciation expense on our buildings and improvements attributable to operating properties was $11.6 million, $2.7 million, and $2.8 million for the years ended December 31, 2022, 2021, and 2020, respectively.
For the year ended December 31, 2022, Land, buildings and improvements - operating properties revenues totaling $59.2 million were comprised of $54.4 million in lease revenues and $4.8 million in other income (such as food and beverage
W. P. Carey 2022 10-K - 81
Notes to Consolidated Financial Statements
revenue) from 75 consolidated self-storage properties, two student housing properties, and one consolidated hotel. For the year ended December 31, 2021, Land, buildings and improvements - operating properties revenues totaling $13.5 million were comprised of $11.2 million in lease revenues and $2.3 million in other income from ten consolidated self-storage properties and one consolidated hotel. For the year ended December 31, 2020, Land, buildings and improvements - operating properties revenues totaling $11.4 million were comprised of $9.5 million in lease revenues and $1.9 million in other income from ten consolidated self-storage properties and one consolidated hotel. 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 earn student housing operating revenue primarily from leases of one year or less with individual students. We derive hotel revenue primarily from room rentals, as well as food, beverage, and other services.
Assets Held for Sale, Net
Below is a summary of our properties held for sale (in thousands):
December 31,
2022 2021
Land, buildings and improvements - net lease and other
$ 47,134 $ 10,628
In-place lease intangible assets and other 10,854 -
Above-market rent intangible assets 3,210 -
Accumulated depreciation and amortization (3,254) (2,359)
Assets held for sale, net $ 57,944 $ 8,269
At December 31, 2022, we had three properties classified as Assets held for sale, net, with an aggregate carrying value of $57.9 million. We sold one of these properties in January 2023 for gross proceeds of $11.2 million (Note 18). We acquired two properties classified as Assets held for sale, net, with a fair value of $85.0 million in the CPA:18 Merger (Note 3), one of which was sold in August 2022 (Note 16). At December 31, 2021, we had two properties classified as Assets held for sale, net, with an aggregate carrying value of $8.3 million. These properties were sold in the first quarter of 2022.
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 and loans receivable (net of allowance for credit losses). 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.
Finance Receivables
Net investments in direct financing leases and loans receivable are summarized as follows (in thousands):
Maturity Date December 31,
2022 2021
Net investments in direct financing leases (a)
2023 - 2036 $ 498,313 $ 572,205
Sale-leaseback transactions accounted for as loans receivable (b)
2038 - 2052 234,198 217,229
Secured loans receivable (a)
2023 - 2024 39,250 24,143
$ 771,761 $ 813,577
__________
(a)Amounts are net of allowance for credit losses, as disclosed below under Net Investments in Direct Financing Leases.
(b)These investments are accounted for as loans receivable in accordance with ASC 310, Receivables and ASC 842, Leases. Maturity dates reflect the current lease maturity dates.
(c)Amounts are net of allowance for credit losses of $2.1 million and $12.6 million as of December 31, 2022 and 2021, respectively.
W. P. Carey 2022 10-K - 82
Notes to Consolidated Financial Statements
Net Investments in Direct Financing Leases
Net investments in direct financing leases is summarized as follows (in thousands):
December 31,
2022 2021
Lease payments receivable $ 332,618 $ 414,002
Unguaranteed residual value 470,839 545,896
803,457 959,898
Less: unearned income (296,411) (370,353)
Less: allowance for credit losses (a)
(8,733) (17,340)
$ 498,313 $ 572,205
__________
(a)During the years ended December 31, 2022 and 2021, we recorded a net release of allowance for credit losses of $3.9 million and a net allowance for credit losses of $0.3 million, respectively, on our net investments in direct financing leases due to changes in expected economic conditions and improved credit quality for certain tenants, which was included within Other gains and (losses) in our consolidated statements of income. In addition, during the year ended December 31, 2022, we reduced the allowance for credit losses balance by $4.7 million, in connection with the reclassifications of properties from Net investments in direct financing leases and loans receivable to Real estate, as described below.
2022 - Income from direct financing leases, which is included in Income from direct financing leases and loans receivable in the consolidated financial statements, was $53.0 million for the year ended December 31, 2022.
As discussed in Note 3, we acquired one consolidated property subject to a direct financing lease in the CPA:18 Merger, which increased the carrying value of our Net investments in direct financing leases and loans receivable by $10.5 million during the year ended December 31, 2022. During the year ended December 31, 2022, we reclassified seven properties with a carrying value of $67.0 million from Net investments in direct financing leases and loans receivable to Real estate in connection with changes in lease classifications due to terminations or extensions of the underlying leases (Note 5). During the year ended December 31, 2022, the U.S. dollar strengthened against the euro, resulting in a $23.5 million decrease in the carrying value of Net investments in direct financing leases and loans receivable from December 31, 2021 to December 31, 2022.
2021 - Income from direct financing leases, which is included in Income from direct financing leases and loans receivable in the consolidated financial statements, was $63.2 million for the year ended December 31, 2021.
2020 - Income from direct financing leases, which was included in Income from direct financing leases and loans receivable in the consolidated financial statements, was $73.9 million for the year ended December 31, 2020.
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, 2022 are as follows (in thousands):
Years Ending December 31, Total
2023 50,273
2024 48,146
2025 43,897
2026 42,578
2027 41,370
Thereafter 106,354
Total $ 332,618
See Note 5 for scheduled future lease payments to be received under non-cancelable operating leases.
W. P. Carey 2022 10-K - 83
Notes to Consolidated Financial Statements
Loans Receivable
During the year ended December 31, 2022, we entered into the following sale-leaseback, which was deemed to be a loan receivable in accordance with ASC 310, Receivables and ASC 842, Leases (dollars in thousands):
Property Location(s) Number of Properties Date of Acquisition Property Type Total Investment
Various, Belgium (a)
5 6/22/2022 Retail $ 19,795
5 $ 19,795
__________
(a)Amount reflects the applicable exchange rate on the date of transaction.
During the year ended December 31, 2021, we entered into three sale-leasebacks, which were deemed to be loans receivable, at a total cost of $217.0 million.
As discussed in Note 3, we acquired one secured loan receivable in the CPA:18 Merger for $28.0 million, which pays interest at 10% per annum with a maturity date of July 2024.
In September 2022, one of our secured loans receivable was repaid to us for $34.0 million. In connection with this repayment, we recorded a release of allowance for credit losses of $10.5 million since the loan principal was fully repaid. In addition, in the first quarter of 2021, we entered into an agreement with the borrowers for certain of our secured loans receivable, who agreed to pay us at maturity a total of $3.7 million of unpaid interest due over the previous year. In connection with the repayment of the secured loan receivable in September 2022, we collected $2.3 million of this interest, which was included in Income from direct financing leases and loans receivable on the consolidated statements of income for the year ended December 31, 2022. The remaining $1.4 million of unpaid interest is related to a secured loan receivable that we still own, and has not been recognized in the consolidated financial statements due to uncertainty of collectibility.
Earnings from our loans receivable are included in Income from direct financing leases and loans receivable in the consolidated financial statements, and totaled $21.2 million, $4.3 million, and $1.0 million for the years ended December 31, 2022, 2021, and 2020, respectively.
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, 2022 and 2021, other than uncollected income from our secured loans receivable (as noted above), no material balances of our finance receivables were past due. Other than the lease terminations and extensions noted under Net Investments in Direct Financing Leases above, there were no material modifications of finance receivables during the year ended December 31, 2022.
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.
A summary of our finance receivables by internal credit quality rating, excluding our allowance for credit losses, is as follows (dollars in thousands):
Number of Tenants / Obligors at December 31, Carrying Value at December 31,
Internal Credit Quality Indicator 2022 2021 2022 2021
1 - 3 19 17 $ 664,761 $ 703,280
4 8 9 117,833 140,230
5 - - - -
$ 782,594 $ 843,510
W. P. Carey 2022 10-K - 84
Notes to Consolidated Financial Statements
Note 7. Goodwill and Other Intangibles
We have recorded lease, internal-use software development, and trade name intangibles that are being amortized over periods ranging from one year 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.
Net lease intangibles recorded in connection with property acquisitions during the year ended December 31, 2022 are described in Note 5. In connection with the CPA:18 Merger (Note 3), we recorded net lease intangibles comprised as follows (life in years, dollars in thousands):
Weighted-Average Life Amount
Finite-Lived Intangible Assets
In-place lease 7.4 $ 199,913
Above-market rent 11.9 61,090
$ 261,003
Finite-Lived Intangible Liabilities
Below-market rent 8.5 $ (16,836)
In connection with certain business combinations, including the CPA:18 Merger (Note 3), 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, 2020
$ 871,081 $ 63,607 $ 934,688
Foreign currency translation adjustments 10,403 - 10,403
Allocation of goodwill based on portion of Investment Management business sold (Note 4)
- (34,273) (34,273)
Balance at December 31, 2020
881,484 29,334 910,818
Foreign currency translation adjustments (9,289) - (9,289)
Balance at December 31, 2021
872,195 29,334 901,529
Acquisition of CPA:18 - Global (Note 3)
172,346 - 172,346
Foreign currency translation adjustments (7,129) - (7,129)
Impairment charges (Note 9)
- (29,334) (29,334)
Balance at December 31, 2022
$ 1,037,412 $ - $ 1,037,412
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. In connection with the completion of the CPA:18 Merger in August 2022 (Note 3), we performed a test for impairment during the third quarter of 2022 for goodwill recorded in both segments and recognized an impairment charge of $29.3 million on goodwill within our Investment Management segment (Note 9). We also performed our annual test for impairment in October 2022 for goodwill recorded in our Real Estate segment and found no impairment indicated.
W. P. Carey 2022 10-K - 85
Notes to Consolidated Financial Statements
Intangible assets, intangible liabilities, and goodwill are summarized as follows (in thousands):
December 31,
2022 2021
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
$ 19,812 $ (19,144) $ 668 $ 19,553 $ (18,682) $ 871
Trade name - - - 3,975 (3,581) 394
19,812 (19,144) 668 23,528 (22,263) 1,265
Lease Intangibles:
In-place lease 2,523,318 (1,061,235) 1,462,083 2,279,905 (934,663) 1,345,242
Above-market rent 833,751 (507,436) 326,315 843,410 (489,861) 353,549
3,357,069 (1,568,671) 1,788,398 3,123,315 (1,424,524) 1,698,791
Goodwill
Goodwill 1,037,412 - 1,037,412 901,529 - 901,529
Total intangible assets $ 4,414,293 $ (1,587,815) $ 2,826,478 $ 4,048,372 $ (1,446,787) $ 2,601,585
Finite-Lived Intangible Liabilities
Below-market rent $ (293,160) $ 125,287 $ (167,873) $ (272,483) $ 105,908 $ (166,575)
Indefinite-Lived Intangible Liabilities
Below-market purchase option (16,711) - (16,711) (16,711) - (16,711)
Total intangible liabilities $ (309,871) $ 125,287 $ (184,584) $ (289,194) $ 105,908 $ (183,286)
During 2022, the U.S. dollar strengthened against the euro, resulting in an decrease of $42.3 million in the carrying value of our net intangible assets from December 31, 2021 to December 31, 2022. Net amortization of intangibles, including the effect of foreign currency translation, was $229.2 million, $236.6 million, and $226.2 million for the years ended December 31, 2022, 2021, and 2020, respectively. Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to Lease revenues and amortization of internal-use software development, trade name, and in-place lease intangibles is included in Depreciation and amortization.
Based on the intangible assets and liabilities recorded at December 31, 2022, 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
2023 $ 34,878 $ 213,525 $ 248,403
2024 30,783 158,641 189,424
2025 27,047 144,395 171,442
2026 21,196 128,578 149,774
2027 17,100 115,105 132,205
Thereafter 27,438 702,507 729,945
Total $ 158,442 $ 1,462,751 $ 1,621,193
W. P. Carey 2022 10-K - 86
Notes to Consolidated Financial Statements
Note 8. Equity Method Investments
We own interests in the Managed Programs and certain unconsolidated real estate investments with third parties. 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. In general, 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.
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.
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 2022 2021 2022 2021
CPA:18 - Global (a)
100.000 % 5.578 % $ - $ 60,836
CPA:18 - Global operating partnership
100.000 % 0.034 % - 209
CESH (b)
2.430 % 2.430 % 2,225 3,689
$ 2,225 $ 64,734
__________
(a)On August 1, 2022, we acquired all of the remaining interests in CPA:18 - Global and the CPA:18 - Global operating partnership in the CPA:18 Merger (Note 3).
(b)Investment is accounted for at fair value.
CPA:18 - Global - We received distributions from this investment during the years ended December 31, 2022, 2021, and 2020 of $1.6 million, $3.5 million, and $2.6 million, respectively. We received distributions from our investment in the CPA:18 - Global operating partnership during the years ended December 31, 2022, 2021, and 2020 of $8.7 million, $7.3 million, and $7.2 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, 2022 is based on the estimated fair value of our investment as of September 30, 2022. We received distributions from this investment during the years ended December 31, 2022 and 2021 of $1.2 million and $1.3 million, respectively. We did not receive distributions from this investment during the year ended December 31, 2020.
At December 31, 2021, the aggregate unamortized basis differences on our equity method investments in the Managed Programs were $23.3 million. During the third quarter of 2022, we recognized a gain on change in control of interests of approximately $22.5 million, which was the difference between the carrying value and the fair value of our previously held equity interest in shares of CPA:18 - Global’s common stock (Note 3). Following the close of the CPA:18 Merger, there are no such unamortized basis differences on our equity method investments in the Managed Programs.
W. P. Carey 2022 10-K - 87
Notes to Consolidated Financial Statements
Interests in Other Unconsolidated Real Estate Investments and WLT
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. In addition, we owned shares of WLT common stock, which we accounted for under the equity method of accounting as of December 31, 2021, but was reclassified to equity securities at fair value within Other assets, net on our consolidated balance sheets in January 2022, as described in Note 9. Operating results of our unconsolidated real estate investments are included in the Real Estate segment.
The following table sets forth our ownership interests in our equity method 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/Fund/Description Co-owner December 31, 2022 2022 2021
Existing Equity Method Investments
Las Vegas Retail Complex (a)
Third Party N/A $ 196,352 $ 104,114
Johnson Self Storage Third Party 90% 65,707 67,573
Kesko Senukai (b)
Third Party 70% 38,569 41,955
Harmon Retail Corner (c)
Third Party 15% 24,649 24,435
WLT (d)
WLT N/A - 33,392
Equity Method Investments Consolidated After the CPA:18 Merger (e)
State Farm Mutual Automobile Insurance Co. CPA:18 - Global 100% - 7,129
Apply Sørco AS (f)
CPA:18 - Global N/A - 5,909
Bank Pekao (b) (g)
CPA:18 - Global 100% - 4,460
Fortenova Grupa d.d. (b)
CPA:18 - Global 100% - 2,936
$ 325,277 $ 291,903
__________
(a)See “Las Vegas Retail Complex” below for discussion of this equity method investment in real estate.
(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)At December 31, 2021, we owned 12,208,243 shares of common stock of WLT, which we accounted for as an equity method investment in real estate, but was reclassified to equity securities at fair value within Other assets, net on our consolidated balance sheets in January 2022 (Note 9). WLT completed its previously announced sale to private real estate funds in October 2022 (Note 9).
(e)We acquired the remaining interests in these investments from CPA:18 - Global in the CPA:18 Merger, subsequent to which we consolidated these wholly owned investments (Note 3).
(f)The carrying value of this investment is affected by fluctuations in the exchange rate of the Norwegian krone. We sold this investment in December 2022, which was consolidated and wholly owned at the time of disposition.
(g)We recognized our $4.6 million proportionate share of an impairment charge recorded on this investment during the year ended December 31, 2022, which was reflected within Earnings (losses) from equity method investments in our consolidated statements of income. The estimated fair value of the investment is based on the estimated selling price of the international office facility owned by the investment, and the fair value of the non-recourse mortgage encumbering the property also approximates the fair value of the property.
We received aggregate distributions of $27.8 million, $18.6 million, and $17.8 million from our other unconsolidated real estate investments for the years ended December 31, 2022, 2021, and 2020, respectively. At December 31, 2022 and 2021, the aggregate unamortized basis differences on our unconsolidated real estate investments were $19.1 million and $7.9 million, respectively. During the third quarter of 2022, we recorded a gain on change in control of interests of approximately $11.4 million, which was the difference between our carrying values and the fair values of our previously held equity method investments in real estate consolidated after the CPA:18 Merger (Note 3).
W. P. Carey 2022 10-K - 88
Notes to Consolidated Financial Statements
Las Vegas Retail Complex
On June 10, 2021, we entered into an agreement to fund a construction loan of approximately $261.9 million for a retail complex in Las Vegas, Nevada, at an interest rate of 6.0% and term of 36 months. Through December 31, 2022, we funded $193.2 million, with the remaining amount expected to be funded in 2023. We hold a purchase option for two net-leased units at the complex upon its completion, as well as an equity purchase option to acquire a 47.5% equity interest in the partnership that owns the borrower. As of the agreement date, we did not deem the exercise of the purchase options to be reasonably certain.
In accordance with ASC 810, Consolidation, we determined that this loan will not be consolidated, but due to the characteristics of the arrangement (including our participation in expected residual profits), the risks and rewards of the agreement are similar to those associated with an investment in real estate rather than a loan. Therefore, the loan will be treated as an implied investment in real estate (i.e., an equity method investment in real estate) for accounting purposes in accordance with the acquisition, development and construction arrangement sub-section of ASC 310, Receivables. Equity income from this investment was $10.1 million and $3.0 million for the years ended December 31, 2022 and 2021, respectively, which was recognized within Earnings (losses) from equity method investments in our consolidated statements of income.
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, 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 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.
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 Method Investment in CESH - We have elected to account for our investment in CESH, which is included in Equity method investments 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.
W. P. Carey 2022 10-K - 89
Notes to Consolidated Financial Statements
Investment in Shares of Lineage Logistics - 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 Lineage Logistics (a cold storage REIT), 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 years ended December 31, 2022, 2021, and 2020, we recognized non-cash unrealized gains on our investment in shares of Lineage Logistics totaling $38.6 million, $76.3 million, and $48.3 million, respectively, due to secondary market transactions at a higher price per share, which was recorded within Other gains and (losses) in the consolidated financial statements. In addition, during the years ended December 31, 2022 and 2021, we received cash dividends of $4.3 million and $6.4 million, respectively, from our investment in shares of Lineage Logistics, which was recorded within Non-operating income in the consolidated financial statements. See Note 15 for further discussion of the impact of Lineage Logistics’s conversion to a REIT during the first quarter of 2020. In addition, in October 2020, we purchased additional shares of Lineage Logistics for $95.5 million. The fair value of this investment was $404.9 million and $366.3 million at December 31, 2022 and 2021, respectively.
Investment in Shares of GCIF - We account for our investment in shares of GCIF, which is included in Other assets, net in the consolidated financial statements, 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, 2022, we received liquidating distributions from our investment in shares of GCIF totaling $2.6 million, which reduced the cost basis of our investment (in March 2021, GCIF announced its intention to liquidate and to distribute substantially all of its assets). The fair value of our investment in shares of GCIF was $1.7 million and $4.3 million at December 31, 2022 and 2021, respectively.
Investment in Preferred Shares of WLT - In January 2022, WLT redeemed in full our 1,300,000 shares of its preferred stock for gross proceeds of $65.0 million (based on the liquidation preference of $50.00 per share). Since this redemption was based on market conditions that existed as of December 31, 2021, during the year ended December 31, 2021, we recognized an unrealized gain on our investment in preferred shares of WLT of $18.7 million, which was recognized within Other comprehensive (loss) income in the consolidated financial statements. In January 2022, in connection with this redemption, we reclassified this $18.7 million unrealized gain from Accumulated other comprehensive loss to Other gains and (losses) in the consolidated financial statements (Note 13). During the years ended December 31, 2022 and 2021, we received cash dividends of $0.9 million and $4.9 million, respectively, from our investment in preferred shares of WLT, which was recorded within Non-operating income in the consolidated financial statements. The fair value of our investment in preferred shares of WLT approximated its carrying value, which was $65.0 million as of December 31, 2021.
Investment in Common Shares of WLT - In January 2022, we reclassified our investment in 12,208,243 shares of common stock of WLT from equity method investments to equity securities, since we no longer had significant influence over WLT, following the redemption of our investment in preferred shares of WLT, as described above. As a result, we accounted for this investment, which was included in Other assets, net in the consolidated financial statements, at fair value. We classified this investment as Level 3 because it is not traded in an active market. The carrying value of this investment was $33.4 million as of December 31, 2021, which was included within Equity method investments in the consolidated financial statements. WLT completed its previously announced sale to private real estate funds in October 2022 and we received $82.6 million in cash proceeds. As a result, we recognized non-cash unrealized gains of $49.2 million on our investment in common shares of WLT during the year ended December 31, 2022, which was recorded within Other gains and (losses) in the consolidated financial statements. Upon completion of this transaction, we have no remaining interest in WLT.
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, 2022 or 2021. 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, 2022 December 31, 2021
Level Carrying Value Fair Value Carrying Value Fair Value
Senior Unsecured Notes, net (a) (b) (c)
2 and 3
$ 5,916,400 $ 5,238,588 $ 5,701,913 $ 5,984,228
Non-recourse mortgages, net (a) (b) (d)
3 1,132,417 1,109,449 368,524 369,841
__________
W. P. Carey 2022 10-K - 90
Notes to Consolidated Financial Statements
(a)The carrying value of Senior Unsecured Notes, net (Note 11) includes unamortized deferred financing costs of $25.9 million and $28.7 million at December 31, 2022 and 2021, respectively. The carrying value of Non-recourse mortgages, net includes unamortized deferred financing costs of less than $0.1 million at both December 31, 2022 and 2021.
(b)The carrying value of Senior Unsecured Notes, net includes unamortized discount of $24.1 million and $29.2 million at December 31, 2022 and 2021, respectively. The carrying value of Non-recourse mortgages, net includes unamortized discount of $10.3 million and $0.8 million at December 31, 2022 and 2021, respectively.
(c)For those Senior Unsecured Notes for which there are no observable market prices (specifically, our private placement Senior Unsecured Notes (Note 11)), we used a discounted cash flow model that estimates the present value of future loan payments by discounting such payments at current estimated market interest rates. We consider these notes to be within the Level 3 category. For all other Senior Unsecured Notes, we determined the estimated fair value using observed market prices in an open market, which may experience limited trading volume. We consider these notes to be within the Level 2 category.
(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), but excluding finance receivables (Note 6), had fair values that approximated their carrying values at both December 31, 2022 and 2021.
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):
Years Ended December 31,
2022 2021 2020
Fair Value
Measurements Impairment
Charges Fair Value
Measurements Impairment
Charges Fair Value
Measurements Impairment
Charges
Impairment Charges
Real estate and intangibles $ 32,497 $ 39,119 $ 29,494 $ 24,246 $ 31,350 $ 35,830
Investment Management goodwill - 29,334 - - - -
Equity method investments - - 8,175 6,830 55,245 55,387
$ 68,453 $ 31,076 $ 91,217
Impairment charges, and their related triggering events and fair value measurements, recognized during 2022, 2021, and 2020 were as follows:
Real Estate and Intangibles
The impairment charges described below are reflected within Impairment charges - real estate in our consolidated statements of income.
2022 - During the year ended December 31, 2022, we recognized impairment charges totaling $39.1 million on 11 properties in order to reduce their carrying values to their estimated fair values, as follows:
•$12.4 million on three properties based on their estimated selling prices; we sold one of these properties in August 2022;
•$10.9 million on a property due to changes in expected cash flows related to the existing tenant’s lease expiration in 2023. The fair value measurement was determined by estimating discounted cash flows using two significant unobservable inputs, which were the cash flow discount rate (14.0%) and terminal capitalization rate (11.0%);
W. P. Carey 2022 10-K - 91
Notes to Consolidated Financial Statements
•$9.3 million on six Pendragon PLC properties in order to reduce the carrying values of the properties to their estimated fair values. The fair value measurements for the properties were determined using a direct capitalization rate analysis; the capitalization rate for the various scenarios ranged from 4.75% to 10.00%. In March 2022, we entered into a transaction to restructure certain leases with Pendragon PLC (a tenant at certain automotive dealerships in the United Kingdom). Under this restructuring, we extended the leases on 30 properties by 11 years (no change to rent) and entered into an agreement to dispose of 12 properties, with the tenant continuing to pay rent until the earlier of sale date or certain specified dates over the following 12 months; and
•$6.5 million on a property due to a potential property vacancy.
2021 - During the year ended December 31, 2021, we recognized impairment charges totaling $24.2 million on two properties in order to reduce the carrying values of the properties to their estimated fair values, as follows:
•$16.3 million on a property due to the former tenant’s non-renewal of its lease expiring in 2022; the fair value measurement was determined by estimating discounted cash flows using four significant unobservable inputs, which were the cash flow discount rate (range of 7.00% to 9.00%), terminal capitalization rate (range of 6.00% to 7.00%), estimated market rents (range of $10 to $11 per square foot), and estimated capital expenditures ($100 per square foot); we sold this property in September 2022; and
•$7.9 million on a property due to a lease termination and resulting vacancy; the fair value measurement for the property was based on the sales prices for comparable properties.
2020 - During the year ended December 31, 2020, we recognized impairment charges totaling $35.8 million on six properties in order to reduce the carrying values of the properties to their estimated fair values, as follows:
•$16.0 million on two properties leased to the same tenant, due to potential property vacancies; the fair value measurements for the properties were determined using a direct capitalization rate analysis based on the probability of vacancy versus the tenant continuing in the lease; the capitalization rate for the various scenarios ranged from 6% to 11%;
•$12.6 million on an international property due to a tenant bankruptcy; the fair value measurement for the property was determined by using a probability-weighted approach of lease restructure and vacancy scenarios;
•$3.4 million on an international property based on its estimated selling price; we sold this property in September 2020;
•$2.8 million on an international property due to a lease expiration and resulting vacancy; the fair value measurement for the property approximated its estimated selling price; we sold this property in May 2022; and
•$1.0 million on a property based on its estimated selling price; we sold this property in September 2021.
Investment Management Goodwill
The impairment charges described below are reflected within Impairment charges - Investment Management goodwill in our consolidated statements of income.
2022 - During the year ended December 31, 2022, we recognized an impairment charge of $29.3 million on goodwill within our Investment Management segment in order to reduce its carrying value to its estimated fair value of $0, since future Investment Management cash flows are expected to be minimal following the CPA:18 Merger (Note 3).
Equity Method Investments
The other-than-temporary impairment charges described below are reflected within Earnings (losses) from equity method investments in our consolidated statements of income.
2021 - During the year ended December 31, 2021, we recognized an other-than-temporary impairment charge of $6.8 million on a jointly owned real estate investment to reduce the carrying value of our investment to its estimated fair value, which declined due to changes in expected cash flows related to the existing tenant’s lease expiration in 2028. The fair value measurement was determined by estimating discounted cash flows using three significant unobservable inputs, which were the cash flow discount rate (5.75%), residual discount rate (7.50%), and residual capitalization rate (6.75%).
W. P. Carey 2022 10-K - 92
Notes to Consolidated Financial Statements
2020 - During the year ended December 31, 2020, we recognized other-than-temporary impairment charges of $27.8 million and $19.3 million on our equity method investments in CWI 1 and CWI 2, respectively, to reduce the carrying values of our investments to their estimated fair values, due to the COVID-19 pandemic, which had an adverse effect on the operations of CWI 1 and CWI 2. The fair value measurements were estimated based on implied asset value changes and changes in market capitalizations for publicly traded lodging REITs, all of which was obtained from third-party market data.
During the year ended December 31, 2020, we recognized an other-than-temporary impairment charge of $8.3 million on a jointly owned real estate investment to reduce the carrying value of our investment to its estimated fair value, which declined due to an uncertain probability of lease renewal with the tenant at the international office facility owned by the investment (lease expiration is in May 2023). The fair value measurement was determined by relying on an estimate of the fair market value of the property and the related mortgage loan, both provided by a third party.
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 (Note 11) and unhedged variable-rate non-recourse mortgage loans. 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, Senior Unsecured Notes, other securities, and the limited partnership units we hold in CESH, 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.
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, 2022 and 2021, no cash collateral had been posted nor received for any of our derivative positions.
W. P. Carey 2022 10-K - 93
Notes to Consolidated Financial Statements
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, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Foreign currency collars
Other assets, net
$ 32,631 $ 19,484 $ - $ -
Interest rate swaps (a)
Other assets, net
2,679 - - -
Interest rate caps Other assets, net 14 1 - -
Foreign currency collars
Accounts payable, accrued expenses and other liabilities
- - (1,445) (1,311)
Interest rate swaps
Accounts payable, accrued expenses and other liabilities
- - - (908)
35,324 19,485 (1,445) (2,219)
Derivatives Not Designated as Hedging Instruments
Stock warrants Other assets, net 3,950 4,600 - -
Foreign currency collars
Accounts payable, accrued expenses and other liabilities
- - (248) -
3,950 4,600 (248) -
Total derivatives $ 39,274 $ 24,085 $ (1,693) $ (2,219)
__________
(a)In connection with the CPA:18 Merger on August 1, 2022, we acquired five interest rate swaps, which had an aggregate fair value of $0.4 million on the date of acquisition.
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 2022 2021 2020
Foreign currency collars $ 13,013 $ 29,805 $ (24,818)
Interest rate swaps 3,068 4,198 (1,553)
Interest rate caps 16 6 6
Foreign currency forward contracts - - (5,272)
Derivatives in Net Investment Hedging Relationships (b)
Foreign currency collars - - 9
Total $ 16,097 $ 34,009 $ (31,628)
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,
2022 2021 2020
Foreign currency collars Non-operating income $ 17,483 $ 854 $ 4,956
Interest rate swaps and caps (c)
Interest expense (167) (932) (1,818)
Foreign currency forward contracts
Non-operating income - - 5,716
Total $ 17,316 $ (78) $ 8,854
__________
(a)Excludes net gains of $3.6 million, net gains of $1.3 million, and net losses of $0.3 million recognized on unconsolidated jointly owned investments for the years ended December 31, 2022, 2021, and 2020, respectively.
W. P. Carey 2022 10-K - 94
Notes to Consolidated Financial Statements
(b)The changes in fair value of these contracts are reported in the foreign currency translation adjustment section of Other comprehensive (loss) income.
(c)Amount for the year ended December 31, 2021 excludes other comprehensive income totaling $3.1 million that was released from the consolidated financial statements (along with the related liability balances) upon the termination of interest rate swaps in connection with certain prepayments of non-recourse mortgage loans during the period (Note 11).
Amounts reported in Other comprehensive (loss) income related to interest rate derivative contracts 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 Non-operating income when the hedged foreign currency contracts are settled. As of December 31, 2022, we estimate that an additional $1.6 million and $14.6 million will be reclassified as Interest expense and Non-operating income, 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 in Cash Flow Hedging Relationships Location of Gain (Loss) Recognized in Income
Years Ended December 31,
2022 2021 2020
Foreign currency collars Non-operating income $ 6,574 $ 1,503 $ (2,477)
Interest rate swaps Interest expense
171 1,592 2,132
Foreign currency forward contracts
Non-operating income - - (43)
Derivatives Not in Cash Flow Hedging Relationships
Stock warrants Other gains and (losses)
(650) (1,200) 800
Foreign currency collars Other gains and (losses)
(248) - -
Interest rate swaps Other gains and (losses)
- - 106
Total $ 5,847 $ 1,895 $ 518
See below for information on our purposes for entering into derivative instruments.
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, 2022 are summarized as follows (currency in thousands):
Interest Rate Derivatives Number of Instruments Notional
Amount Fair Value at
December 31, 2022 (a)
Designated as Cash Flow Hedging Instruments
Interest rate swaps 5 34,918 USD $ 1,399
Interest rate swaps 2 45,970 EUR 1,280
Interest rate cap 1 10,452 EUR 14
$ 2,693
__________
(a)Fair value amounts are based on the exchange rate of the euro at December 31, 2022, as applicable.
W. P. Carey 2022 10-K - 95
Notes to Consolidated Financial Statements
Foreign Currency Collars
We are exposed to foreign currency exchange rate movements, primarily in the euro and, to a lesser extent, the British pound sterling and certain other currencies. In order to hedge certain of our foreign currency cash flow exposures, we enter into foreign currency collars. 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. 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 collars have maturities of 62 months or less.
The following table presents the foreign currency derivative contracts we had outstanding at December 31, 2022 (currency in thousands):
Foreign Currency Derivatives Number of Instruments Notional
Amount Fair Value at
December 31, 2022
Designated as Cash Flow Hedging Instruments
Foreign currency collars 75 295,400 EUR $ 25,578
Foreign currency collars 69 44,520 GBP 5,608
Not Designated as Cash Flow Hedging Instruments
Foreign currency collars 4 29,500 EUR (248)
$ 30,938
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, 2022. At December 31, 2022, our total credit exposure and the maximum exposure to any single counterparty was $33.8 million and $6.0 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, 2022, 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 $1.7 million and $2.2 million at December 31, 2022 and 2021, respectively, which included accrued interest and any nonperformance risk adjustments. If we had breached any of these provisions at December 31, 2022 or 2021, we could have been required to settle our obligations under these agreements at their aggregate termination value of $1.7 million and $2.3 million, respectively.
Net Investment Hedges
Borrowings under our Senior Unsecured Notes, Unsecured Revolving Credit Facility, and Unsecured Term Loans (all as defined in Note 11) denominated in euro, British pounds sterling, or Japanese yen 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, Japanese yen, and British pound sterling borrowings under our Senior Unsecured 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 $214.3 million, $255.9 million, and $(280.4) million for the years ended December 31, 2022, 2021, and 2020, respectively.
W. P. Carey 2022 10-K - 96
Notes to Consolidated Financial Statements
Note 11. Debt
Senior Unsecured Credit Facility
On February 20, 2020, we entered into the Fourth Amended and Restated Credit Facility, which has capacity of approximately $2.1 billion, comprised of (i) a $1.8 billion unsecured revolving credit facility for our working capital needs, acquisitions, and other general corporate purposes (our “Unsecured Revolving Credit Facility”), (ii) a £150.0 million term loan (our “Term Loan”), and (iii) a €96.5 million delayed draw term loan (our “Delayed Draw Term Loan”). We refer to our Term Loan and Delayed Draw Term Loan collectively as the “Unsecured Term Loans” and the entire facility collectively as our “Senior Unsecured Credit Facility.” In December 2021, the Senior Unsecured Credit Facility was amended to transition certain London Inter-bank Offered Rate (“LIBOR”)-based rates that were discontinued after December 31, 2021 to successor alternative reference rates. The updated reference rates are included in the Senior Unsecured Credit Facility table below. As of December 31, 2022 and 2021, this reference rate transition impacted only our Senior Unsecured Credit Facility.
In April 2022, we entered into a Second Amendment to the Credit Agreement to increase the Term Loan to £270.0 million and the Delayed Draw Term Loan to €215.0 million, thereby increasing the total capacity of our Senior Unsecured Credit Facility to approximately $2.4 billion. There were no other changes to the terms of our Credit Agreement. We used the approximately $300 million of proceeds from this increase in the capacity of our Unsecured Term Loans to partially repay amounts outstanding under our Unsecured Revolving Credit Facility.
The Senior Unsecured Credit Facility includes the ability to borrow in certain currencies other than U.S. dollars and has a maturity date of February 20, 2025. As of December 31, 2022, the aggregate principal amount (of revolving and term loans) available under the Senior Unsecured Credit Facility was able to be increased up to an amount not to exceed the U.S. dollar equivalent of $2.75 billion, subject to the conditions to increase set forth in the Credit Agreement. In January 2023, we entered into a Third Amendment to the Credit Agreement to (i) transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”) and (ii) increase the aggregate principal amount (of revolving and term loans) available under the Senior Unsecured Credit Facility to an amount not to exceed the U.S. dollar equivalent of $3.05 billion, subject to the conditions to increase set forth in the Credit Agreement. See Note 18, Subsequent Events for more information about this amendment.
At December 31, 2022, our Unsecured Revolving Credit Facility had available capacity of approximately $1.5 billion (net of amounts reserved for standby letters of credit totaling $0.6 million). We incur an annual facility fee of 0.20% of the total commitment on our Unsecured Revolving Credit Facility, which is included within Interest expense in our consolidated statements of income.
The following table presents a summary of our Senior Unsecured Credit Facility (dollars in thousands):
Interest Rate at December 31, 2022 (a)
Maturity Date at December 31, 2022
Principal Outstanding Balance at
December 31,
Senior Unsecured Credit Facility 2022 2021
Unsecured Term Loans:
Term Loan - borrowing in British pounds sterling (b) (c) (d)
SONIA + 0.85%
2/20/2025 $ 324,695 $ 202,183
Delayed Draw Term Loan - borrowing in euros (e)
EURIBOR + 0.85%
2/20/2025 229,319 109,296
554,014 311,479
Unsecured Revolving Credit Facility:
Borrowing in euros (e)
EURIBOR + 0.775%
2/20/2025 258,117 205,001
Borrowing in Japanese yen (f)
TIBOR + 0.775%
2/20/2025 18,275 20,935
Borrowing in British pounds sterling N/A 2/20/2025 - 184,660
276,392 410,596
$ 830,406 $ 722,075
__________
(a)The applicable interest rate at December 31, 2022 was based on the credit rating for our Senior Unsecured Notes of BBB/Baa1.
(b)Balance excludes unamortized discount of $1.5 million and $0.9 million at December 31, 2022 and 2021, respectively.
(c)SONIA means Sterling Overnight Index Average.
W. P. Carey 2022 10-K - 97
Notes to Consolidated Financial Statements
(d)Interest rate includes both a spread adjustment to the base rate and a credit spread.
(e)EURIBOR means Euro Interbank Offered Rate.
(f)TIBOR means Tokyo 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 $6.0 billion at December 31, 2022 (the “Senior Unsecured Notes”).
On September 28, 2022, we completed a private placement of (i) €150 million of 3.41% Senior Notes due 2029, which have a 7-year term and are scheduled to mature on September 28, 2029, and (ii) €200 million of 3.70% Senior Notes due 2032, which have a 10-year term and are scheduled to mature on September 28, 2032.
We redeemed the €500.0 million of 2.0% Senior Notes due 2023 in March 2021. In connection with this redemption, we paid a “make-whole” amount of $26.2 million (based on the exchange rate of the euro as of the date of redemption) and recognized a loss on extinguishment of $28.2 million, which is included within Other gains and (losses) on our consolidated statements of income for the year ended December 31, 2021.
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 20 to 35 basis points. The following table presents a summary of our Senior Unsecured Notes outstanding at December 31, 2022 (currency in thousands):
Principal Amount Coupon Rate Maturity Date Principal Outstanding Balance at December 31,
Senior Unsecured Notes, net (a)
Issue Date 2022 2021
4.6% Senior Notes due 2024
3/14/2014 $ 500,000 4.6 % 4/1/2024 $ 500,000 $ 500,000
2.25% Senior Notes due 2024
1/19/2017 € 500,000 2.25 % 7/19/2024 533,300 566,300
4.0% Senior Notes due 2025
1/26/2015 $ 450,000 4.0 % 2/1/2025 450,000 450,000
2.250% Senior Notes due 2026
10/9/2018 € 500,000 2.250 % 4/9/2026 533,300 566,300
4.25% Senior Notes due 2026
9/12/2016 $ 350,000 4.25 % 10/1/2026 350,000 350,000
2.125% Senior Notes due 2027
3/6/2018 € 500,000 2.125 % 4/15/2027 533,300 566,300
1.350% Senior Notes due 2028
9/19/2019 € 500,000 1.350 % 4/15/2028 533,300 566,300
3.850% Senior Notes due 2029
6/14/2019 $ 325,000 3.850 % 7/15/2029 325,000 325,000
3.41% Senior Notes due 2029
9/28/2022 € 150,000 3.41 % 9/28/2029 159,990 -
0.950% Senior Notes due 2030
3/8/2021 € 525,000 0.950 % 6/1/2030 559,965 594,615
2.400% Senior Notes due 2031
10/14/2020 $ 500,000 2.400 % 2/1/2031 500,000 500,000
2.450% Senior Notes due 2032
10/15/2021 $ 350,000 2.450 % 2/1/2032 350,000 350,000
3.70% Senior Notes due 2032
9/28/2022 € 200,000 3.70 % 9/28/2032 213,320 -
2.250% Senior Notes due 2033
2/25/2021 $ 425,000 2.250 % 4/1/2033 425,000 425,000
$ 5,966,475 $ 5,759,815
__________
(a)Aggregate balance excludes unamortized deferred financing costs totaling $25.9 million and $28.7 million, and unamortized discount totaling $24.1 million and $29.2 million at December 31, 2022 and 2021, respectively.
In connection with the private placement of the €150 million of 3.41% Senior Notes due 2029 and the €200 million of 3.70% Senior Notes due 2032 in September 2022, we incurred financing costs totaling $2.6 million during the year ended December 31, 2022, which are included in the Senior Unsecured Notes, net in the consolidated financial statements and are being amortized to Interest expense over the term of their respective Senior Notes.
W. P. Carey 2022 10-K - 98
Notes to Consolidated Financial Statements
Covenants
The Credit Agreement, each of the Senior Unsecured Notes, and certain of our non-recourse mortgage loan agreements 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, 2022.
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, 2022, the weighted-average interest rate for our total non-recourse mortgage notes payable was 4.3% (fixed-rate and variable-rate non-recourse mortgage notes payable were 4.4% and 4.1%, respectively), with maturity dates ranging from January 2023 to April 2039.
CPA:18 Merger
In connection with the CPA:18 Merger on August 1, 2022 (Note 3), we assumed property-level debt comprised of non-recourse mortgage loans with fair values totaling $900.2 million and recorded an aggregate fair market value net discount of $13.1 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 5.1% on the merger date.
Repayments During 2022
During the year ended December 31, 2022, we (i) repaid non-recourse mortgage loans at or close to maturity with an aggregate principal balance of approximately $104.7 million, and (ii) prepaid non-recourse mortgage loans totaling $10.4 million. We recognized an aggregate net loss on extinguishment of debt of $1.3 million on these repayments, which is included within Other gains and (losses) on our consolidated statements of income. The weighted-average interest rate for these non-recourse mortgage loans on their respective dates of repayment was 4.4%.
Repayments During 2021
During the year ended December 31, 2021, we (i) prepaid non-recourse mortgage loans totaling $745.1 million, and (ii) repaid non-recourse mortgage loans at or close to maturity with an aggregate principal balance of approximately $32.7 million. We recognized an aggregate net loss on extinguishment of debt of $47.2 million on these repayments, primarily comprised of prepayment penalties totaling $45.2 million, which is included within Other gains and (losses) on our consolidated statements of income. The weighted-average interest rate for these non-recourse mortgage loans on their respective dates of repayment was 4.8%.
Interest Paid
For the years ended December 31, 2022, 2021, and 2020, interest paid was $191.0 million, $190.8 million, and $190.6 million, respectively.
W. P. Carey 2022 10-K - 99
Notes to Consolidated Financial Statements
Foreign Currency Exchange Rate Impact
During the year ended December 31, 2022, the U.S. dollar strengthened against the euro, resulting in an aggregate decrease of $224.4 million in the aggregate carrying values of our Non-recourse mortgages, net, Senior Unsecured Credit Facility, and Senior Unsecured Notes, net from December 31, 2021 to December 31, 2022.
Scheduled Debt Principal Payments
Scheduled debt principal payments as of December 31, 2022 are as follows (in thousands):
Years Ending December 31, Total
2023 $ 456,708
2024 1,231,468
2025 1,664,276
2026 983,425
2027 533,760
Thereafter through 2039 3,070,039
Total principal payments 7,939,676
Unamortized discount, net (35,936)
Unamortized deferred financing costs (25,992)
Total $ 7,877,748
Certain amounts are based on the applicable foreign currency exchange rate at December 31, 2022.
Note 12. Commitments and Contingencies
At December 31, 2022, 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. 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,
2022 2021 2020
Ordinary income $ 4.0329 $ 3.3300 $ 3.3112
Return of capital 0.1718 0.5407 -
Capital gains 0.0273 0.3253 0.8528
Total dividends paid $ 4.2320 $ 4.1960 $ 4.1640
During the fourth quarter of 2022, our Board declared a quarterly dividend of $1.065 per share, which was paid on January 13, 2023 to stockholders of record as of December 30, 2022.
W. P. Carey 2022 10-K - 100
Notes to Consolidated Financial Statements
Earnings Per Share
The following table summarizes basic and diluted earnings (dollars in thousands):
Years Ended December 31,
2022 2021 2020
Net income - basic and diluted $ 599,139 $ 409,988 $ 455,359
Weighted-average shares outstanding - basic 199,633,802 182,486,476 174,504,406
Effect of dilutive securities 793,322 640,622 335,022
Weighted-average shares outstanding - diluted 200,427,124 183,127,098 174,839,428
For the years ended December 31, 2022, 2021, and 2020, potentially dilutive securities excluded from the computation of diluted earnings per share were insignificant.
ATM Program
On May 2, 2022, we established a continuous “at-the-market” offering program (“ATM Program”) with a syndicate of banks, pursuant to which shares of our common stock having an aggregate gross sales price of up to $1.0 billion may be sold (i) directly through or to the banks acting as sales agents or as principal for their own accounts or (ii) through or to participating banks or their affiliates acting as forward sellers on behalf of any forward purchasers pursuant to a forward sale agreement (our “ATM Forwards”). Effective as of that date, we terminated a prior ATM Program that was established on August 9, 2019, under which we were able to offer and sell shares of our common stock from time to time, up to an aggregate gross sales price of $750.0 million, with a syndicate of banks.
The following table sets forth certain information regarding the issuance of shares of our common stock under our prior ATM Program during the periods presented (net proceeds in thousands):
Years Ended December 31,
2022 2021 2020
Shares of common stock issued 2,740,295 4,690,073 2,500
Weighted-average price per share $ 80.79 $ 73.42 $ 72.05
Net proceeds $ 218,081 $ 339,968 $ 159
Forward Equity
We expect to settle the ATM Forwards in full on or prior to the maturity date of each ATM Forward via physical delivery of the outstanding shares of common stock in exchange for cash proceeds. However, subject to certain exceptions, we may also elect to cash settle or net share settle all or any portion of our obligations under any ATM Forwards. The forward sale price that we will receive upon physical settlement of the ATM Forwards will be (i) subject to adjustment on a daily basis based on a floating interest rate factor equal to a specified daily rate less a spread (i.e., if the specified daily rate is less than the spread on any day, the interest rate factor will result in a daily reduction of the applicable forward sale price) and (ii) decreased based on amounts related to expected dividends on shares of our common stock during the term of the ATM Forwards.
We determined that our ATM Forwards meet the criteria for equity classification and are therefore exempt from derivative accounting. We recorded the ATM Forwards at fair value at inception, which we determined to be zero. Subsequent changes to fair value are not required under equity classification.
From time to time, we have entered into underwriting agreements and forward sale agreements with syndicates of banks acting as underwriters, forward sellers, and/or forward purchasers in connection with public offerings of our common stock. At the closing of these transactions, the offered shares were borrowed from third parties by the banks acting as forward purchasers and sold to the underwriters for distribution at the respective gross offering prices. As a result of this forward construct, we did not receive any proceeds from the sale of shares at the closing of each offering, but rather at later settlement dates. We have determined that the forward sale agreements meet the criteria for equity classification and are therefore exempt from derivative accounting. We recorded the forward sale agreements at fair value at inception, which we determined to be zero. Subsequent changes to fair value are not required under equity classification.
W. P. Carey 2022 10-K - 101
Notes to Consolidated Financial Statements
We refer to our three forward equity offerings presented below as the June 2020 Equity Forwards, June 2021 Equity Forwards, and August 2021 Equity Forwards (collectively, the “Equity Forwards”). Our ATM Forwards are also presented below (gross offering proceeds at closing in thousands):
Agreement Date (a)
Shares Offered (b)
Gross Offering Price Gross Offering Proceeds at Closing Outstanding Shares as of December 31, 2022
June 2020 Equity Forwards (c)
6/17/2020 5,462,500 $ 70.00 $ 382,375 -
June 2021 Equity Forwards (c)
6/7/2021 6,037,500 75.30 454,624 -
August 2021 Equity Forwards (d)
8/9/2021 5,175,000 78.00 403,650 -
ATM Forwards (e)
5/2/2022 6,524,437 84.09 548,626 6,524,437
6,524,437
__________
(a)We expect to settle the Equity Forwards in full within 18 months of the respective agreement dates via physical delivery of the outstanding shares of common stock in exchange for cash proceeds, although we may elect cash settlement or net share settlement for all or a portion of our obligations under the Equity Forwards, subject to certain conditions.
(b)Includes 712,500, 787,500, and 675,000 shares of common stock purchased by certain underwriters in connection with the June 2020 Equity Forwards, June 2021 Equity Forwards, and August 2021 Equity Forwards, respectively, upon the exercise of 30-day options to purchase additional shares.
(c)All remaining outstanding shares were settled during the year ended December 31, 2021.
(d)All remaining outstanding shares were settled during the year ended December 31, 2022.
(e)We sold shares under our ATM Forwards during the year ended December 31, 2022. We did not settle any of the shares sold and therefore did not receive any proceeds from such sales. See Note 18, Subsequent Events for sales through our ATM Forwards subsequent to December 31, 2022 and through the date of this Report.
The following table sets forth certain information regarding the settlement of our Equity Forwards during the periods presented (dollars in thousands):
Years Ended December 31,
2022 2021 2020
Shares of common stock delivered 3,925,000 9,798,209 2,951,791
Net proceeds $ 284,259 $ 697,044 $ 199,716
W. P. Carey 2022 10-K - 102
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, 2020
$ 13,048 $ (268,715) $ - $ (255,667)
Other comprehensive income before reclassifications (23,124) 47,746 - 24,622
Amounts reclassified from accumulated other comprehensive loss to:
Non-operating income (10,672) - - (10,672)
Interest expense
1,818 - - 1,818
Total (8,854) - - (8,854)
Net current period other comprehensive income (31,978) 47,746 - 15,768
Net current period other comprehensive income attributable to noncontrolling interests (7) - - (7)
Balance at December 31, 2020 (18,937) (220,969) - (239,906)
Other comprehensive income before reclassifications 35,227 (35,736) 18,688 18,179
Amounts reclassified from accumulated other comprehensive loss to:
Interest expense 932 - - 932
Non-operating income (854) - - (854)
Total 78 - - 78
Net current period other comprehensive income 35,305 (35,736) 18,688 18,257
Net current period other comprehensive income attributable to noncontrolling interests (21) - - (21)
Balance at December 31, 2021 16,347 (256,705) 18,688 (221,670)
Other comprehensive loss before reclassifications 37,048 (63,149) - (26,101)
Amounts reclassified from accumulated other comprehensive loss to:
Non-operating income (17,483) - - (17,483)
Interest expense 167 - - 167
Other gains and (losses) (Note 9)
- - (18,688) (18,688)
Total (17,316) - (18,688) (36,004)
Net current period other comprehensive loss 19,732 (63,149) (18,688) (62,105)
Net current period other comprehensive income attributable to noncontrolling interests - (5) - (5)
Balance at December 31, 2022 $ 36,079 $ (319,859) $ - $ (283,780)
See Note 10 for additional information on our derivatives activity recognized within Other comprehensive (loss) income for the periods presented.
W. P. Carey 2022 10-K - 103
Notes to Consolidated Financial Statements
Note 14. Stock-Based and Other Compensation
Stock-Based Compensation
At December 31, 2022, we maintained several stock-based compensation plans as described below. The total compensation expense (net of forfeitures) for awards issued under these plans was $32.8 million, $24.9 million, and $15.9 million for the years ended December 31, 2022, 2021, and 2020, respectively, which was included in Stock-based compensation expense in the consolidated financial statements. The tax (expense) benefit recognized by us related to these awards totaled $(4.3) million, $0.8 million, and $4.7 million for the years ended December 31, 2022, 2021, and 2020, respectively. The tax benefits for the years ended December 31, 2022, 2021, and 2020 were reflected as a deferred tax benefit within (Provision for) benefit from income taxes in the consolidated financial statements.
2017 Share Incentive Plan
We maintain the 2017 Share Incentive Plan, which authorizes the issuance of up to 4,000,000 shares of our common stock. 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, 2022, 2,186,067 shares remained available for issuance under the 2017 Share Incentive Plan, which is more fully described in the 2019 Annual Report.
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, 2022, 2021, and 2020 was less than $0.1 million. Cash received from purchases under the ESPP during the years ended December 31, 2022, 2021, and 2020 was $0.2 million, $0.3 million, and $0.4 million, respectively.
Restricted and Conditional Awards
Nonvested RSAs, RSUs, and PSUs at December 31, 2022 and changes during the years ended December 31, 2022, 2021, and 2020 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, 2020
283,977 $ 68.51 331,242 $ 80.90
Granted 146,162 81.02 90,518 104.65
Vested (a)
(163,607) 69.62 (156,838) 80.42
Forfeited (5,555) 71.69 (6,715) 88.94
Adjustment (b)
- - 3,806 62.07
Nonvested at December 31, 2020
260,977 74.75 262,013 88.99
Granted 194,940 66.40 134,290 86.19
Vested (a)
(137,267) 71.99 (151,678) 76.04
Forfeited (11,656) 60.98 (16,463) 93.91
Adjustment (b)
- - 170,093 71.17
Nonvested at December 31, 2021
306,994 71.21 398,255 86.86
Granted (c)
235,348 80.28 144,311 104.97
Vested (a)
(154,028) 72.80 (165,615) 92.16
Forfeited (12,016) 75.93 (4,262) 98.26
Adjustment (b)
- - 159,092 80.90
Nonvested at December 31, 2022 (d)
376,298 $ 74.78 531,781 $ 89.14
__________
W. P. Carey 2022 10-K - 104
Notes to Consolidated Financial Statements
(a)The grant date fair value of shares vested during the years ended December 31, 2022, 2021, and 2020 was $26.5 million, $21.4 million, and $24.0 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, 2022 and 2021, we had an obligation to issue 1,181,947 and 1,104,020 shares, respectively, of our common stock underlying such deferred awards, which is recorded within Total stockholders’ equity as a Deferred compensation obligation of $57.0 million and $49.8 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, 2022, we used a risk-free interest rate of 1.2%, an expected volatility rate of 36.7%, and assumed a dividend yield of zero.
(d)At December 31, 2022, total unrecognized compensation expense related to these awards was approximately $34.4 million, with an aggregate weighted-average remaining term of 1.8 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 revise the associated expense 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 expected to vest.
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 2022, 2021, and 2020, our Board determined that the contribution to the plan for each of those respective years would be 10% of an eligible participant’s cash compensation, up to the legal maximum allowable in each of those years of $30,500 for 2022, $29,000 for 2021, and $28,500 for 2020. For the years ended December 31, 2022, 2021, and 2020, amounts expensed for contributions to the trust were $2.3 million, $2.2 million, and $1.9 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.
W. P. Carey 2022 10-K - 105
Notes to Consolidated Financial Statements
Note 15. Income Taxes
Income Tax Provision
The components of our provision for (benefit from) income taxes for the periods presented are as follows (in thousands):
Years Ended December 31,
2022 2021 2020
Federal
Current $ 5,329 $ (405) $ (1,118)
Deferred (a)
13 17 (33,040)
5,342 (388) (34,158)
State and Local
Current 3,388 3,008 3,284
Deferred (a)
- (30) (7,756)
3,388 2,978 (4,472)
Foreign
Current 27,077 30,599 26,137
Deferred (8,083) (4,703) (8,266)
18,994 25,896 17,871
Total Provision for (Benefit from) Income Taxes $ 27,724 $ 28,486 $ (20,759)
A reconciliation of effective income tax for the periods presented is as follows (in thousands):
Years Ended December 31,
2022 2021 2020
Pre-tax income (loss) attributable to taxable subsidiaries (a) (b)
$ 55,604 $ 37,861 $ (56,789)
Federal provision at statutory tax rate (21%)
$ 11,677 $ 7,951 $ (11,926)
Change in valuation allowance 8,082 13,178 13,946
Non-deductible expense 6,972 3,148 6,303
State and local taxes, net of federal benefit 2,920 2,713 2,336
Windfall tax benefit (1,896) (1,375) (2,132)
Rate differential (387) (232) (632)
Revocation of TRS Status (c)
- - (37,249)
Tax expense related to allocation of goodwill based on portion of Investment Management business sold (Note 4)
- - 7,203
Non-taxable income - - (2)
Other 356 3,103 1,394
Total provision for (benefit from) income taxes $ 27,724 $ 28,486 $ (20,759)
__________
(a)Pre-tax loss attributable to taxable subsidiaries for 2020 was primarily driven by: (i) a portion of the other-than-temporary impairment charges totaling $47.1 million recognized on our equity method investments in CWI 1 and CWI 2 (Note 9), (ii) the allocation of $34.3 million of goodwill within our Investment Management segment as a result of the WLT management internalization (Note 4), and (iii) an impairment charge of $12.6 million recognized on an international property (Note 9).
(b)Pre-tax income attributable to taxable subsidiaries for 2022 includes taxable income, recognized in connection with the CPA:18 Merger, associated with the accelerated vesting of shares previously issued by CPA:18 - Global to us for asset management services performed.
W. P. Carey 2022 10-K - 106
Notes to Consolidated Financial Statements
(c)Amount for the year ended December 31, 2020 includes an aggregate deferred tax benefit of $37.2 million as a result of the release of a deferred tax liability relating to our investment in shares of Lineage Logistics (Note 9), which converted to a REIT during the year and is therefore no longer subject to federal and state income taxes
Benefit from income taxes for the year ended December 31, 2020 includes a deferred tax benefit of $6.3 million as a result of the other-than-temporary impairment charges that we recognized on our equity method investments in CWI 1 and CWI 2 during the year (Note 9).
In light of the COVID-19 outbreak during the first quarter of 2020, we continue to monitor domestic and international tax considerations and the potential impact on our consolidated financial statements. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) (U.S. federal legislation enacted on March 27, 2020 in response to the COVID-19 pandemic) provides that net operating losses incurred in 2018, 2019, or 2020 may be carried back to offset taxable income earned during the five-year period prior to the year in which the net operating loss was incurred. As a result, we recognized a $4.7 million current tax benefit during the year ended December 31, 2020 by carrying back certain net operating losses, which is included in Benefit from income taxes disclosed in the tables above.
Deferred Income Taxes
Deferred income taxes at December 31, 2022 and 2021 consist of the following (in thousands):
December 31,
2022 2021
Deferred Tax Assets
Net operating loss and other tax credit carryforwards $ 63,454 $ 55,147
Basis differences - foreign investments 62,099 52,705
Unearned and deferred compensation 643 15,895
Lease liabilities (a)
- 14,752
Other 1,242 374
Total deferred tax assets 127,438 138,873
Valuation allowance (106,185) (108,812)
Net deferred tax assets 21,253 30,061
Deferred Tax Liabilities
Basis differences - foreign investments (179,761) (145,524)
ROU assets (a)
- (12,637)
Basis differences - equity investees - (1,195)
Total deferred tax liabilities (179,761) (159,356)
Net Deferred Tax Liability $ (158,508) $ (129,295)
__________
(a)Balances represent our basis differences for our office leases on domestic taxable subsidiaries. Basis differences on our foreign ground leases are included within the line item Basis differences - foreign investments.
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
W. P. Carey 2022 10-K - 107
Notes to Consolidated Financial Statements
•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:18 Merger, and thus could not be applied to reduce future income tax liabilities.
As of December 31, 2022, U.S. federal and state net operating loss carryforwards were $17.5 million and $11.4 million, respectively, which will begin to expire in 2033. As of December 31, 2022, net operating loss carryforwards in foreign jurisdictions were $90.6 million, which will begin to expire in 2023.
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 $20.5 million and $16.3 million at December 31, 2022 and 2021, respectively, which are included in Other assets, net in the consolidated balance sheets, and other deferred tax liability balances of $179.0 million and $145.6 million at December 31, 2022 and 2021, respectively, which are included in Deferred income taxes in the consolidated balance sheets.
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,
2022 2021
Beginning balance $ 5,994 $ 6,312
Decrease due to lapse in statute of limitations (2,847) (508)
Increase due to CPA:18 Merger 2,694 -
Addition based on tax positions related to the prior year 543 315
Foreign currency translation adjustments (407) (451)
Addition based on tax positions related to the current year 241 326
Ending balance $ 6,218 $ 5,994
At December 31, 2022 and 2021, 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. These unrecognized tax benefits are recorded as liabilities within Accounts payable, accrued expenses and other liabilities on our consolidated balance sheets. We recognize interest and penalties related to uncertain tax positions in income tax expense. At December 31, 2022 and 2021, we had approximately $1.6 million and $2.1 million, respectively, of accrued interest related to uncertain tax positions.
Income Taxes Paid
Income taxes paid were $42.6 million, $44.3 million, and $43.5 million for the years ended December 31, 2022, 2021, and 2020, 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.
W. P. Carey 2022 10-K - 108
Notes to Consolidated Financial Statements
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.
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 2017 through 2021 or any ongoing audits remain open to adjustment in the major tax jurisdictions.
Note 16. 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 decide 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 and are also discussed in Note 5 and Note 6.
2022 - During the year ended December 31, 2022, we sold 23 properties for total proceeds, net of selling costs, of $234.7 million, and recognized a net gain on these sales totaling $43.5 million (inclusive of income taxes totaling $5.3 million recognized upon sale). This disposition activity included two properties acquired in the CPA:18 Merger, one of which was classified as assets held for sale and sold in August 2022 (Note 3, Note 5).
2021 - During the year ended December 31, 2021, we sold 24 properties for total proceeds, net of selling costs, of $163.6 million, and recognized a net gain on these sales totaling $40.4 million (inclusive of income taxes totaling $4.7 million recognized upon sale).
2020 - During the year ended December 31, 2020, we sold 22 properties for total proceeds, net of selling costs, of $366.5 million (inclusive of $4.7 million attributable to a noncontrolling interest), and recognized a net gain on these sales totaling $109.4 million (inclusive of income taxes totaling $3.0 million recognized upon sale and $0.6 million attributable to a noncontrolling interest). Disposition activity included the sale of one of our two hotel operating properties in January 2020 for total proceeds, net of selling costs, of $103.5 million (inclusive of $4.7 million attributable to a noncontrolling interest).
W. P. Carey 2022 10-K - 109
Notes to Consolidated Financial Statements
Note 17. 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,
2022 2021 2020
Revenues
Lease revenues $ 1,301,617 $ 1,177,438 $ 1,080,623
Income from direct financing leases and loans receivable 74,266 67,555 74,893
Operating property revenues (a)
59,230 13,478 11,399
Other lease-related income 32,988 53,655 11,082
1,468,101 1,312,126 1,177,997
Operating Expenses
Depreciation and amortization (b)
503,403 475,989 441,948
General and administrative (b)
88,952 81,888 70,127
Reimbursable tenant costs 73,622 62,417 56,409
Property expenses, excluding reimbursable tenant costs 50,753 47,898 44,067
Impairment charges 39,119 24,246 35,830
Stock-based compensation expense (b)
32,841 24,881 15,247
Operating property expenses 27,054 9,848 9,901
Merger and other expenses 19,384 (4,597) (937)
835,128 722,570 672,592
Other Income and Expenses
Interest expense (219,160) (196,831) (210,087)
Other gains and (losses) 97,149 (13,676) 37,104
Gain on sale of real estate, net 43,476 40,425 109,370
Non-operating income 30,289 13,778 8,970
Earnings (losses) from equity method investments in real estate 16,221 (19,649) (9,017)
Gain on change in control of interests 11,405 - -
(20,620) (175,953) (63,660)
Income before income taxes 612,353 413,603 441,745
(Provision for) benefit from income taxes (21,407) (28,703) 18,498
Net Income from Real Estate 590,946 384,900 460,243
Net loss (income) attributable to noncontrolling interests 657 (134) (731)
Net Income from Real Estate Attributable to W. P. Carey $ 591,603 $ 384,766 $ 459,512
W. P. Carey 2022 10-K - 110
Notes to Consolidated Financial Statements
Investment Management
Years Ended December 31,
2022 2021 2020
Revenues
Asset management revenue $ 8,467 $ 15,363 $ 22,467
Reimbursable costs from affiliates 2,518 4,035 8,855
10,985 19,398 31,322
Operating Expenses
Impairment charges - Investment Management goodwill 29,334 - -
Reimbursable costs from affiliates 2,518 4,035 8,855
Merger and other expenses 3 51 1,184
General and administrative (b)
- - 5,823
Subadvisor fees - - 1,469
Depreciation and amortization (b)
- - 987
Stock-based compensation expense (b)
- - 691
31,855 4,086 19,009
Other Income and Expenses
Gain on change in control of interests 22,526 - -
Earnings (losses) from equity method investments in the Managed Programs 13,288 8,820 (9,540)
Other gains and (losses) (1,111) 791 61
Non-operating income 20 82 617
34,723 9,693 (8,862)
Income before income taxes 13,853 25,005 3,451
(Provision for) benefit from income taxes (6,317) 217 2,261
Net Income from Investment Management 7,536 25,222 5,712
Net income attributable to noncontrolling interests - - (9,865)
Net Income (Loss) from Investment Management Attributable to W. P. Carey $ 7,536 $ 25,222 $ (4,153)
Total Company
Years Ended December 31,
2022 2021 2020
Revenues $ 1,479,086 $ 1,331,524 $ 1,209,319
Operating expenses
866,983 726,656 691,601
Other income and expenses 14,103 (166,260) (72,522)
(Provision for) benefit from income taxes (27,724) (28,486) 20,759
Net loss (income) attributable to noncontrolling interests 657 (134) (10,596)
Net income attributable to W. P. Carey $ 599,139 $ 409,988 $ 455,359
Total Assets at December 31,
2022 2021
Real Estate $ 18,077,155 $ 15,344,703
Investment Management (c)
24,880 135,927
Total Company $ 18,102,035 $ 15,480,630
__________
(a)Operating property revenues from our hotels include (i) $12.0 million, $7.2 million, and $4.0 million for the years ended December 31, 2022, 2021, and 2020, respectively, generated from a hotel in Bloomington, Minnesota (revenues reflect higher occupancy as the hotel’s business recovered from the COVID-19 pandemic), and (ii) $1.9 million for the year ended December 31, 2020 generated from a hotel in Miami, Florida, which was sold in January 2020 (Note 16).
W. P. Carey 2022 10-K - 111
Notes to Consolidated Financial Statements
(b)Beginning with the second quarter of 2020, general and administrative expenses attributed to our Investment Management segment are comprised of the incremental costs of providing services to the Managed Programs, which are fully reimbursed by those funds (resulting in no net expense for us). All other general and administrative expenses are attributed to our Real Estate segment. Previously, general and administrative expenses were allocated based on time incurred by our personnel for the Real Estate and Investment Management segments. In addition, beginning with the second quarter of 2020, stock-based compensation expense and corporate depreciation and amortization expense are fully recognized within our Real Estate segment. In light of the termination of the advisory agreements with CWI 1 and CWI 2 in connection with the WLT management internalization (Note 4), as well as the termination of the advisory agreements with CPA:18 - Global in connection with the CPA:18 Merger (Note 3), we now view essentially all assets, liabilities, and operational expenses as part of our Real Estate segment, other than incremental activities that are expected to wind down as we manage CESH through the end of its life cycle (Note 2). These changes between the segments had no impact on our consolidated financial statements.
(c)Following the CPA:18 Merger on August 1, 2022, we no longer own an equity investment in CPA:18 - Global, which was previously included within our Investment Management segment (Note 3, Note 8). In addition, during the year ended December 31, 2022, we recorded an impairment charge of $29.3 million on goodwill within our Investment Management segment (Note 7, Note 9).
Our portfolio is comprised of domestic and international investments. At December 31, 2022, our international investments within our Real Estate segment were comprised of investments in Poland, Germany, the Netherlands, Spain, the United Kingdom, France, Italy, Denmark, Croatia, Canada, Norway, Mexico, Finland, Lithuania, Hungary, Portugal, Slovakia, the Czech Republic, Belgium, Austria, Sweden, Japan, Mauritius, Latvia, and Estonia. No tenant or international country individually comprised at least 10% of our total lease revenues for the years ended December 31, 2022, 2021, or 2020, or at least 10% of our total long-lived assets at December 31, 2022 or 2021. 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,
2022 2021 2020
Revenues
Domestic $ 985,763 $ 860,961 $ 756,763
International 482,338 451,165 421,234
Total $ 1,468,101 $ 1,312,126 $ 1,177,997
December 31,
2022 2021
Long-lived Assets
Domestic $ 10,053,422 $ 8,170,448
International 5,435,476 4,866,921
Total $ 15,488,898 $ 13,037,369
Equity Investments in Real Estate
Domestic $ 286,708 $ 236,643
International 38,569 55,260
Total $ 325,277 $ 291,903
W. P. Carey 2022 10-K - 112
Notes to Consolidated Financial Statements
Note 18. Subsequent Events
Acquisition
In January 2023, we completed one acquisition for approximately $64.8 million.
Disposition
In January 2023, we sold one property for gross proceeds of $11.2 million, which was classified as held for sale as of December 31, 2022 (Note 5).
Issuances Under our ATM Program
In January 2023, we sold 353,264 shares of our common stock through our ATM Forwards at a weighted-average price of $81.94 per share for anticipated net proceeds of approximately $29 million (Note 13).
Amended Credit Facility
In January 2023, we entered into a Third Amendment to the Credit Agreement (Note 11) to (i) replace the benchmark rate at which U.S.-dollar-denominated borrowings bear interest from LIBOR to the forward-looking SOFR and (ii) increase the aggregate principal amount (of revolving and term loans) available under the Senior Unsecured Credit Facility from an amount not to exceed the U.S. dollar equivalent of $2.75 billion to $3.05 billion, subject to the conditions to increase set forth in the Credit Agreement.
W. P. Carey 2022 10-K - 113
W. P. CAREY INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2022, 2021, and 2020
(in thousands)
Description Balance at
Beginning
of Year Other Additions Deductions Balance at
End of Year
Year Ended December 31, 2022
Valuation reserve for deferred tax assets $ 108,812 $ 34,894 $ (37,521) $ 106,185
Year Ended December 31, 2021
Valuation reserve for deferred tax assets $ 86,069 $ 40,895 $ (18,152) $ 108,812
Year Ended December 31, 2020
Valuation reserve for deferred tax assets $ 73,643 $ 31,470 $ (19,044) $ 86,069
W. P. Carey 2022 10-K - 114
W. P. CAREY INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2022
(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
Real Estate Subject to Operating Leases
Industrial facilities in Erlanger, KY $ - $ 1,526 $ 21,427 $ 2,966 $ (84) $ 1,526 $ 24,309 $ 25,835 $ 15,406 1979; 1987 Jan. 1998 40 yrs.
Industrial facilities in Thurmont, MD and Farmington, NY - 729 5,903 - - 729 5,903 6,632 3,420 1964; 1983 Jan. 1998 15 yrs.
Warehouse facility in Commerce, CA - 4,905 11,898 - (3,043) 4,573 9,187 13,760 5,820 1948 Jan. 1998 40 yrs.
Industrial facility in Toledo, OH - 224 2,408 - - 224 2,408 2,632 2,007 1966 Jan. 1998 40 yrs.
Industrial facility in Goshen, IN - 239 940 - - 239 940 1,179 604 1973 Jan. 1998 40 yrs.
Office facility in Raleigh, NC - 1,638 2,844 187 (2,554) 828 1,287 2,115 1,085 1983 Jan. 1998 20 yrs.
Office facility in King of Prussia, PA - 1,219 6,283 1,295 - 1,219 7,578 8,797 4,627 1968 Jan. 1998 40 yrs.
Industrial facility in Pinconning, MI - 32 1,692 - - 32 1,692 1,724 1,057 1948 Jan. 1998 40 yrs.
Industrial facilities in Sylmar, CA - 2,052 5,322 - (1,889) 1,494 3,991 5,485 2,504 1962; 1979 Jan. 1998 40 yrs.
Retail facilities in the United States - 9,382 - 238 14,696 9,025 15,291 24,316 10,071 Various Jan. 1998 15 yrs.
Land in Glendora, CA - 1,135 - - 17 1,152 - 1,152 - N/A Jan. 1998 N/A
Warehouse facility in Doraville, GA - 3,288 9,864 17,079 (11,410) 3,288 15,533 18,821 2,797 2016 Jan. 1998 40 yrs.
Office facility in Collierville, TN and warehouse facility in Corpus Christi, TX - 3,490 72,497 3,513 (15,608) 288 63,604 63,892 24,648 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 8,373 516 5,035 27,846 32,881 16,742 1989 Jan. 1998 40 yrs.
Office facility in Bridgeton, MO - 842 4,762 2,523 (196) 842 7,089 7,931 4,307 1972 Jan. 1998 40 yrs.
Warehouse facility in Memphis, TN - 1,882 3,973 294 (3,892) 328 1,929 2,257 1,591 1969 Jan. 1998 15 yrs.
Industrial facility in Romulus, MI - 454 6,411 525 - 454 6,936 7,390 2,766 1970 Jan. 1998 10 yrs.
Retail facility in Bellevue, WA - 4,125 11,812 393 (123) 4,371 11,836 16,207 7,149 1994 Apr. 1998 40 yrs.
Office facility in Rio Rancho, NM - 1,190 9,353 5,866 (238) 2,287 13,884 16,171 7,639 1999 Jul. 1998 40 yrs.
Office facility in Moorestown, NJ - 351 5,981 1,690 1 351 7,672 8,023 4,887 1964 Feb. 1999 40 yrs.
Industrial facility in Winston-Salem, NC - 1,860 12,539 3,075 (7,325) 925 9,224 10,149 5,591 1980 Sep. 2002 40 yrs.
Office facilities in Playa Vista and Venice, CA 19,523 2,032 10,152 52,817 1 5,889 59,113 65,002 20,644 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 2,288 1995 Sep. 2004 40 yrs.
Warehouse facilities in Apopka, FL - 362 10,855 1,195 (155) 337 11,920 12,257 4,891 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 2,917 1995 Dec. 2006 29 yrs.
Retail facility in Wroclaw, Poland - 3,600 10,306 - (4,260) 2,667 6,979 9,646 2,596 2007 Dec. 2007 40 yrs.
Office facility in Fort Worth, TX - 4,600 37,580 367 - 4,600 37,947 42,547 12,191 2003 Feb. 2010 40 yrs.
Warehouse facility in Mallorca, Spain - 11,109 12,636 - (2,543) 9,901 11,301 21,202 3,553 2008 Jun. 2010 40 yrs.
Net-lease hotels in the United States - 32,680 198,999 - (10,651) 30,099 190,929 221,028 56,001 1989; 1990 Sep. 2012 34 - 37 yrs.
W. P. Carey 2022 10-K - 115
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 Auburn, IN; Clinton Township, MI; and Bluffton, OH - 4,403 20,298 - (3,870) 2,589 18,242 20,831 5,915 1968; 1975; 1995 Sep. 2012; Jan. 2014 30 yrs.
Office facility in Irvine, CA - 4,173 - - 13,766 4,173 13,766 17,939 665 1981 Sep. 2012 31 yrs.
Industrial facility in Alpharetta, GA - 2,198 6,349 1,247 - 2,198 7,596 9,794 2,675 1997 Sep. 2012 30 yrs.
Office facilities in St. Petersburg, FL - 3,280 24,627 4,627 - 3,280 29,254 32,534 9,207 1996; 1999 Sep. 2012 30 yrs.
Movie theater in Baton Rouge, LA - 4,168 5,724 3,200 - 4,168 8,924 13,092 3,105 2003 Sep. 2012 30 yrs.
Industrial and office facility in San Diego, CA - 7,804 16,729 5,939 (832) 7,804 21,836 29,640 7,626 2002 Sep. 2012 30 yrs.
Industrial facility in Richmond, CA - 895 1,953 - - 895 1,953 2,848 669 1999 Sep. 2012 30 yrs.
Warehouse facilities in the United States - 16,386 84,668 10,959 - 16,386 95,627 112,013 29,926 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 3,725 1948; 1989 Sep. 2012 30 yrs.
Industrial facilities in Chattanooga, TN - 558 5,923 - - 558 5,923 6,481 2,006 1974; 1989 Sep. 2012 30 yrs.
Industrial facility in Mooresville, NC - 756 9,775 - - 756 9,775 10,531 3,302 1997 Sep. 2012 30 yrs.
Industrial facility in McCalla, AL - 960 14,472 42,662 (254) 2,076 55,764 57,840 12,717 2004 Sep. 2012 31 yrs.
Office facility in Yardley, PA - 1,726 12,781 4,378 - 1,726 17,159 18,885 5,555 2002 Sep. 2012 30 yrs.
Industrial facility in Fort Smith, AZ - 1,063 6,159 - - 1,063 6,159 7,222 2,058 1982 Sep. 2012 30 yrs.
Retail facilities in Greenwood, IN and Buffalo, NY 2,519 - 19,990 - - - 19,990 19,990 6,608 2000; 2003 Sep. 2012 30 - 31 yrs.
Industrial facilities in Bowling Green, KY and Jackson, TN - 1,492 8,182 600 - 1,492 8,782 10,274 2,771 1989; 1995 Sep. 2012 31 yrs.
Education facilities in Rancho Cucamonga, CA and Exton, PA - 14,006 33,683 9,428 (20,142) 6,638 30,337 36,975 8,207 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 - 6,559 19,078 3,285 - 6,559 22,363 28,922 6,657 Various Sep. 2012 31 yrs.
Industrial and warehouse facility in Mesquite, TX - 2,702 13,029 - - 2,702 13,029 15,731 507 1972 Sep. 2012 31 yrs.
Industrial facilities in Tolleson, AZ; Alsip, IL; and Solvay, NY - 6,080 23,424 546 - 6,080 23,970 30,050 7,690 1990; 1994; 2000 Sep. 2012 31 yrs.
Fitness facility in Memphis, TN - 4,877 4,258 5,215 (2,353) 2,027 9,970 11,997 4,415 1990 Sep. 2012 31 yrs.
Warehouse facilities in Oceanside, CA and Concordville, PA 1,045 3,333 8,270 - - 3,333 8,270 11,603 2,719 1989; 1996 Sep. 2012 31 yrs.
Net-lease self-storage facilities in the United States - 74,551 319,186 - (50) 74,501 319,186 393,687 103,823 Various Sep. 2012 31 yrs.
Warehouse facility in La Vista, NE 17,095 4,196 23,148 - - 4,196 23,148 27,344 7,095 2005 Sep. 2012 33 yrs.
Office facility in Pleasanton, CA - 3,675 7,468 - - 3,675 7,468 11,143 2,423 2000 Sep. 2012 31 yrs.
Office facility in San Marcos, TX - 440 688 - - 440 688 1,128 223 2000 Sep. 2012 31 yrs.
Office facility in Chicago, IL - 2,169 19,010 83 (72) 2,169 19,021 21,190 6,125 1910 Sep. 2012 31 yrs.
W. P. Carey 2022 10-K - 116
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 facilities in Hollywood and Orlando, FL - 3,639 1,269 - - 3,639 1,269 4,908 409 1996 Sep. 2012 31 yrs.
Warehouse facility in Golden, CO - 808 4,304 77 - 808 4,381 5,189 1,551 1998 Sep. 2012 30 yrs.
Industrial facility in Texarkana, TX - 1,755 4,493 - (2,783) 216 3,249 3,465 1,046 1997 Sep. 2012 31 yrs.
Industrial facility in South Jordan, UT - 2,183 11,340 1,642 - 2,183 12,982 15,165 4,093 1995 Sep. 2012 31 yrs.
Warehouse facility in Ennis, TX - 478 4,087 145 (145) 478 4,087 4,565 1,316 1989 Sep. 2012 31 yrs.
Office facility in Paris, France - 23,387 43,450 703 (11,450) 19,397 36,693 56,090 11,375 1975 Sep. 2012 32 yrs.
Retail facilities in Poland - 26,564 72,866 - (17,002) 21,993 60,435 82,428 26,047 Various Sep. 2012 23 - 34 yrs.
Industrial facilities in Danbury, CT and Bedford, MA - 3,519 16,329 - - 3,519 16,329 19,848 5,608 1965; 1980 Sep. 2012 29 yrs.
Industrial facility in Brownwood, TX - 722 6,268 - - 722 6,268 6,990 1,671 1964 Sep. 2012 15 yrs.
Industrial facility in Rochester, MN - 809 14,236 1,200 - 809 15,436 16,245 673 1997 Sep. 2012 31 yrs.
Industrial and office facility in Tampere, Finland - 2,309 37,153 - (7,176) 1,865 30,421 32,286 9,311 2012 Jun. 2013 40 yrs.
Office facility in Quincy, MA - 2,316 21,537 127 - 2,316 21,664 23,980 5,594 1989 Jun. 2013 40 yrs.
Office facility in Salford, United Kingdom - - 30,012 - (6,940) - 23,072 23,072 5,484 1997 Sep. 2013 40 yrs.
Office facility in Lone Tree, CO - 4,761 28,864 3,381 - 4,761 32,245 37,006 8,768 2001 Nov. 2013 40 yrs.
Office facility in Mönchengladbach, Germany 27,642 2,154 6,917 50,626 (4,660) 2,048 52,989 55,037 9,449 2015 Dec. 2013 40 yrs.
Fitness facility in Houston, TX - 2,430 2,270 - - 2,430 2,270 4,700 903 1995 Jan. 2014 23 yrs.
Fitness facility in St. Charles, MO - 1,966 1,368 1,658 - 1,966 3,026 4,992 1,140 1987 Jan. 2014 27 yrs.
Office facility in Scottsdale, AZ - 22,300 42,329 89 - 22,300 42,418 64,718 3,052 1977 Jan. 2014 34 yrs.
Industrial facility in Aurora, CO - 737 2,609 - - 737 2,609 3,346 736 1985 Jan. 2014 32 yrs.
Warehouse facility in Burlington, NJ - 3,989 6,213 377 - 3,989 6,590 10,579 2,323 1999 Jan. 2014 26 yrs.
Industrial facility in Albuquerque, NM - 2,467 3,476 606 - 2,467 4,082 6,549 1,382 1993 Jan. 2014 27 yrs.
Industrial facility in North Salt Lake, UT - 10,601 17,626 - (16,936) 4,388 6,903 11,291 2,352 1981 Jan. 2014 26 yrs.
Industrial facility in Lexington, NC - 2,185 12,058 - (2,519) 494 11,230 11,724 3,608 2003 Jan. 2014 28 yrs.
Industrial facility in Dallas, TX - 3,190 10,010 - - 3,190 10,010 13,200 133 1968 Jan. 2014 32 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 16,530 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 7,996 1978; 1979; 1986 Jan. 2014 17 - 34 yrs.
Retail facility in Torrance, CA - 8,412 12,241 2,227 (77) 8,335 14,468 22,803 5,219 1973 Jan. 2014 25 yrs.
Office facility in Houston, TX - 6,578 424 560 - 6,578 984 7,562 640 1978 Jan. 2014 27 yrs.
Land in Doncaster, United Kingdom - 4,257 4,248 - (8,146) 359 - 359 - N/A Jan. 2014 N/A
Warehouse facility in Norwich, CT - 3,885 21,342 - 2 3,885 21,344 25,229 6,736 1960 Jan. 2014 28 yrs.
W. P. Carey 2022 10-K - 117
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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
Warehouse facility in Norwich, CT - 1,437 9,669 - - 1,437 9,669 11,106 3,052 2005 Jan. 2014 28 yrs.
Warehouse facility in Whitehall, PA - 7,435 9,093 27,148 (9,545) 6,983 27,148 34,131 971 2021 Jan. 2014 40 yrs.
Retail facility in York, PA - 3,776 10,092 - (6,413) 527 6,928 7,455 1,830 2005 Jan. 2014 34 yrs.
Warehouse facilities in Atlanta, GA and Elkwood, VA - 5,356 4,121 - (2,104) 4,284 3,089 7,373 989 1975 Jan. 2014 28 yrs.
Warehouse facility in Harrisburg, NC - 1,753 5,840 781 (111) 1,642 6,621 8,263 2,071 2000 Jan. 2014 26 yrs.
Industrial facility in Chandler, AZ; industrial, office, and warehouse facility in Englewood, CO; and land in Englewood, CO 1,552 4,306 7,235 - 3 4,306 7,238 11,544 2,133 1978; 1987 Jan. 2014 30 yrs.
Industrial facility in Cynthiana, KY 831 1,274 3,505 525 (107) 1,274 3,923 5,197 1,257 1967 Jan. 2014 31 yrs.
Industrial facilities in Albemarle and Old Fort, NC and Holmesville, OH - 5,507 18,653 - - 5,507 18,653 24,160 722 1955; 1966; 1970 Jan. 2014 32 yrs.
Industrial facility in Columbia, SC - 2,843 11,886 - - 2,843 11,886 14,729 4,692 1962 Jan. 2014 23 yrs.
Movie theater in Midlothian, VA - 2,824 16,618 - - 2,824 16,618 19,442 2,355 2000 Jan. 2014 40 yrs.
Net-lease student housing facility in Laramie, WY - 1,966 18,896 - - 1,966 18,896 20,862 5,920 2007 Jan. 2014 33 yrs.
Warehouse facilities in Mendota, IL; Toppenish, WA; and Plover, WI - 1,444 21,208 - (623) 1,382 20,647 22,029 8,212 1996 Jan. 2014 23 yrs.
Land in Sunnyvale, CA - 9,297 24,086 - (26,077) 7,306 - 7,306 - N/A Jan. 2014 N/A
Industrial facilities in Hampton, NH - 8,990 7,362 - - 8,990 7,362 16,352 2,164 1976 Jan. 2014 30 yrs.
Industrial facilities in France - 36,306 5,212 337 3,123 24,411 20,567 44,978 2,904 Various Jan. 2014 23 yrs.
Retail facility in Fairfax, VA - 3,402 16,353 - (6,219) 1,914 11,622 13,536 5,536 1998 Jan. 2014 26 yrs.
Retail facility in Lombard, IL - 5,087 8,578 - - 5,087 8,578 13,665 2,904 1999 Jan. 2014 26 yrs.
Warehouse facility in Plainfield, IN - 1,578 29,415 1,674 - 1,578 31,089 32,667 8,786 1997 Jan. 2014 30 yrs.
Retail facility in Kennesaw, GA - 2,849 6,180 5,530 (76) 2,773 11,710 14,483 3,966 1999 Jan. 2014 26 yrs.
Retail facility in Leawood, KS - 1,487 13,417 - - 1,487 13,417 14,904 4,542 1997 Jan. 2014 26 yrs.
Office facility in Tolland, CT - 1,817 5,709 - 11 1,817 5,720 7,537 1,860 1968 Jan. 2014 28 yrs.
Warehouse facilities in Lincolnton, NC and Mauldin, SC - 1,962 9,247 - - 1,962 9,247 11,209 2,936 1988; 1996 Jan. 2014 28 yrs.
Retail facilities in Germany - 81,109 153,927 10,510 (142,195) 26,287 77,064 103,351 22,737 Various Jan. 2014 Various
Office facility in Southfield, MI - 1,726 4,856 89 - 1,726 4,945 6,671 1,425 1985 Jan. 2014 31 yrs.
Office facility in The Woodlands, TX - 3,204 24,997 - - 3,204 24,997 28,201 7,075 1997 Jan. 2014 32 yrs.
Warehouse facilities in Valdosta, GA and Johnson City, TN - 1,080 14,998 1,841 - 1,080 16,839 17,919 5,395 1978; 1998 Jan. 2014 27 yrs.
Industrial facility in Amherst, NY 5,893 674 7,971 - - 674 7,971 8,645 3,170 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 5,850 1954; 1997 Jan. 2014 28 yrs.
Office facility in Bloomington, MN - 2,942 7,155 - (3,257) 1,740 5,100 6,840 2,200 1988 Jan. 2014 28 yrs.
W. P. Carey 2022 10-K - 118
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 Gorinchem, Netherlands - 1,143 5,648 - (1,470) 896 4,425 5,321 1,393 1995 Jan. 2014 28 yrs.
Retail facility in Cresskill, NJ - 2,366 5,482 - 19 2,366 5,501 7,867 1,574 1975 Jan. 2014 31 yrs.
Retail facility in Livingston, NJ - 2,932 2,001 - 14 2,932 2,015 4,947 661 1966 Jan. 2014 27 yrs.
Retail facility in Montclair, NJ - 1,905 1,403 - 6 1,905 1,409 3,314 462 1950 Jan. 2014 27 yrs.
Retail facility in Morristown, NJ - 3,258 8,352 - 26 3,258 8,378 11,636 2,750 1973 Jan. 2014 27 yrs.
Retail facility in Summit, NJ - 1,228 1,465 - 8 1,228 1,473 2,701 483 1950 Jan. 2014 27 yrs.
Industrial facilities in Georgetown, TX and Woodland, WA - 965 4,113 - - 965 4,113 5,078 1,087 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 2,514 Various Jan. 2014 28 yrs.
Industrial facility in Salisbury, NC - 1,499 8,185 - - 1,499 8,185 9,684 2,629 2000 Jan. 2014 28 yrs.
Industrial facility in Twinsburg, OH and office facility in Plymouth, MI - 2,831 10,565 386 (2,244) 2,501 9,037 11,538 2,898 1991; 1995 Jan. 2014 27 yrs.
Industrial facility in Cambridge, Canada - 1,849 7,371 - (1,607) 1,526 6,087 7,613 1,737 2001 Jan. 2014 31 yrs.
Industrial facilities in Peru, IL; Huber Heights, Lima, and Sheffield, OH; and Lebanon, TN - 2,962 17,832 - - 2,962 17,832 20,794 5,087 Various Jan. 2014 31 yrs.
Industrial facility in Ramos Arizpe, Mexico - 1,059 2,886 - - 1,059 2,886 3,945 821 2000 Jan. 2014 31 yrs.
Industrial facilities in Salt Lake City, UT - 2,783 3,773 - - 2,783 3,773 6,556 1,076 1983; 2002 Jan. 2014 31 - 33 yrs.
Net-lease student housing facility in Blairsville, PA - 1,631 23,163 - - 1,631 23,163 24,794 7,052 2005 Jan. 2014 33 yrs.
Education facility in Mooresville, NC 397 1,795 15,955 - - 1,795 15,955 17,750 983 2002 Jan. 2014 33 yrs.
Warehouse facilities in Atlanta, Doraville, and Rockmart, GA - 6,488 77,192 - - 6,488 77,192 83,680 24,122 1959; 1962; 1991 Jan. 2014 23 - 33 yrs.
Warehouse facility in Muskogee, OK - 554 4,353 - (3,437) 158 1,312 1,470 357 1992 Jan. 2014 33 yrs.
Industrial facility in Richmond, MO - 2,211 8,505 747 - 2,211 9,252 11,463 2,938 1996 Jan. 2014 28 yrs.
Industrial facility in Tuusula, Finland - 6,173 10,321 - (3,570) 4,837 8,087 12,924 2,828 1975 Jan. 2014 26 yrs.
Office facility in Turku, Finland - 5,343 34,106 3,792 325 5,052 38,514 43,566 11,238 1981 Jan. 2014 28 yrs.
Warehouse facility in Phoenix, AZ - 6,747 21,352 380 - 6,747 21,732 28,479 7,056 1996 Jan. 2014 28 yrs.
Land in Calgary, Canada - 3,721 - - (649) 3,072 - 3,072 - N/A Jan. 2014 N/A
Industrial facilities in Kearney, MO; York, NE; Walbridge, OH; Rocky Mount, VA; and Martinsburg, WV - 4,816 31,712 - - 4,816 31,712 36,528 114 Various Jan. 2014 31 yrs.
Industrial facilities in Sandersville, GA; Erwin, TN; and Gainesville, TX 739 955 4,779 - - 955 4,779 5,734 1,374 1950; 1986; 1996 Jan. 2014 31 yrs.
Industrial facility in Buffalo Grove, IL 2,763 1,492 12,233 - - 1,492 12,233 13,725 3,527 1996 Jan. 2014 31 yrs.
W. P. Carey 2022 10-K - 119
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 1,728 Various Jan. 2014 28 yrs.
Office facility in Carlsbad, CA - 3,230 5,492 - - 3,230 5,492 8,722 2,076 1999 Jan. 2014 24 yrs.
Movie theater in Pensacola, FL - 1,746 - - 5,181 1,746 5,181 6,927 361 2001 Jan. 2014 33 yrs.
Movie theater in Port St. Lucie, FL - 4,654 2,576 - - 4,654 2,576 7,230 840 2000 Jan. 2014 27 yrs.
Industrial facility in Nurieux-Volognat, France - 121 5,328 - (1,085) 94 4,270 4,364 1,177 2000 Jan. 2014 32 yrs.
Industrial facility in Monheim, Germany - 2,500 5,727 - (664) 2,303 5,260 7,563 209 1992 Jan. 2014 32 yrs.
Warehouse facility in Suwanee, GA - 2,330 8,406 - - 2,330 8,406 10,736 2,215 1995 Jan. 2014 34 yrs.
Retail facilities in Wichita, KS and Oklahoma City, OK and warehouse facility in Wichita, KS - 1,878 8,579 3,128 (89) 1,878 11,618 13,496 3,434 1954; 1975; 1984 Jan. 2014 24 yrs.
Industrial facilities in Fort Dodge, IA and Menomonie and Oconomowoc, WI - 1,403 11,098 - - 1,403 11,098 12,501 6,089 1996 Jan. 2014 16 yrs.
Industrial facility in Mesa, AZ - 2,888 4,282 - - 2,888 4,282 7,170 1,401 1991 Jan. 2014 27 yrs.
Industrial facility in North Amityville, NY - 3,486 11,413 - - 3,486 11,413 14,899 3,913 1981 Jan. 2014 26 yrs.
Industrial facility in Fort Collins, CO - 821 7,236 - - 821 7,236 8,057 1,965 1993 Jan. 2014 33 yrs.
Warehouse facility in Elk Grove Village, IL - 4,037 7,865 - - 4,037 7,865 11,902 1,160 1980 Jan. 2014 22 yrs.
Office facility in Washington, MI - 4,085 7,496 - - 4,085 7,496 11,581 2,040 1990 Jan. 2014 33 yrs.
Office facility in Houston, TX - 522 7,448 227 - 522 7,675 8,197 2,610 1999 Jan. 2014 27 yrs.
Industrial facilities in Conroe, Odessa, and Weimar, TX and industrial and office facility in Houston, TX - 4,049 13,021 - 133 4,049 13,154 17,203 6,282 Various Jan. 2014 12 - 22 yrs.
Education facility in Sacramento, CA 23,843 - 13,715 - - - 13,715 13,715 3,659 2005 Jan. 2014 34 yrs.
Industrial facility in Sankt Ingbert, Germany - 2,226 17,460 - (380) 2,183 17,123 19,306 1,358 1960 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 2,712 1969; 1974; 1984 Jan. 2014 27 yrs.
Office facility in Tinton Falls, NJ - 1,958 7,993 725 - 1,958 8,718 10,676 2,476 2001 Jan. 2014 31 yrs.
Industrial facility in Woodland, WA - 707 1,562 - - 707 1,562 2,269 395 2009 Jan. 2014 35 yrs.
Warehouse facilities in Gyál and Herceghalom, Hungary - 14,601 21,915 - (7,903) 11,441 17,172 28,613 7,499 2002; 2004 Jan. 2014 21 yrs.
Industrial facility in Windsor, CT - 453 637 3,422 (83) 453 3,976 4,429 671 1999 Jan. 2014 33 yrs.
Industrial facility in Aurora, CO - 574 3,999 - - 574 3,999 4,573 908 2012 Jan. 2014 40 yrs.
Office facility in Chandler, AZ - 5,318 27,551 105 - 5,318 27,656 32,974 7,032 2000 Mar. 2014 40 yrs.
Warehouse facility in University Park, IL - 7,962 32,756 221 - 7,962 32,977 40,939 8,126 2008 May 2014 40 yrs.
Office facility in Stavanger, Norway - 10,296 91,744 - (37,742) 6,550 57,748 64,298 12,287 1975 Aug. 2014 40 yrs.
W. P. Carey 2022 10-K - 120
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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
Laboratory facility in Westborough, MA - 3,409 37,914 53,065 - 3,409 90,979 94,388 12,853 1992 Aug. 2014 40 yrs.
Office facility in Andover, MA - 3,980 45,120 323 - 3,980 45,443 49,423 9,939 2013 Oct. 2014 40 yrs.
Office facility in Newport, United Kingdom - - 22,587 - (5,695) - 16,892 16,892 3,512 2014 Oct. 2014 40 yrs.
Industrial facility in Lewisburg, OH - 1,627 13,721 - - 1,627 13,721 15,348 3,141 2014 Nov. 2014 40 yrs.
Industrial facility in Opole, Poland - 2,151 21,438 - (3,354) 1,845 18,390 20,235 4,338 2014 Dec. 2014 38 yrs.
Office facilities in Spain - 51,778 257,624 10 (39,234) 47,944 222,234 270,178 46,368 Various Dec. 2014 Various
Retail facilities in the United Kingdom - 66,319 230,113 277 (92,573) 43,593 160,543 204,136 42,766 Various Jan. 2015 20 - 40 yrs.
Warehouse facility in Rotterdam, Netherlands - - 33,935 20,767 (3,270) - 51,432 51,432 8,516 2014 Feb. 2015 40 yrs.
Retail facility in Bad Fischau, Austria - 2,855 18,829 - (221) 2,826 18,637 21,463 4,112 1998 Apr. 2015 40 yrs.
Industrial facility in Oskarshamn, Sweden - 3,090 18,262 - (4,435) 2,447 14,470 16,917 2,999 2015 Jun. 2015 40 yrs.
Office facility in Sunderland, United Kingdom - 2,912 30,140 - (7,546) 2,247 23,259 25,506 4,949 2007 Aug. 2015 40 yrs.
Industrial facilities in Gersthofen and Senden, Germany and Leopoldsdorf, Austria - 9,449 15,838 - (1,059) 9,053 15,175 24,228 3,354 2008; 2010 Aug. 2015 40 yrs.
Net-lease hotels in the United States - - 49,190 17,396 - 17,396 49,190 66,586 10,402 1988; 1989; 1990 Oct. 2015 38 - 40 yrs.
Retail facilities in the Netherlands - 5,698 38,130 79 (306) 5,658 37,943 43,601 8,397 Various Nov. 2015 30 - 40 yrs.
Office facility in Irvine, CA - 7,626 16,137 - - 7,626 16,137 23,763 2,974 1977 Dec. 2015 40 yrs.
Education facility in Windermere, FL - 5,090 34,721 15,333 - 5,090 50,054 55,144 11,366 1998 Apr. 2016 38 yrs.
Industrial facilities in the United States - 66,845 87,575 65,400 (56,517) 49,680 113,623 163,303 28,399 Various Apr. 2016 Various
Industrial facilities in North Dumfries and Ottawa, Canada - 17,155 10,665 - (18,593) 5,723 3,504 9,227 1,626 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 26,642 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 3,006 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 2,906 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 2,136 Various Dec. 2016 28 - 40 yrs.
Industrial facility in Chicago, IL - 2,222 2,655 3,511 - 2,222 6,166 8,388 1,722 1985 Jun. 2017 30 yrs.
Industrial facility in Zawiercie, Poland - 395 102 10,378 (931) 361 9,583 9,944 1,124 2018 Aug. 2017 40 yrs.
Office facility in Roseville, MN - 2,560 16,025 809 - 2,560 16,834 19,394 2,340 2001 Nov. 2017 40 yrs.
Industrial facility in Radomsko, Poland - 1,718 59 37,496 (442) 1,573 37,258 38,831 1,686 2018 Nov. 2017 40 yrs.
Warehouse facility in Sellersburg, IN - 1,016 3,838 - - 1,016 3,838 4,854 648 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 9,046 1995; 2004 Mar. 2018 36 - 40 yrs.
W. P. Carey 2022 10-K - 121
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 and warehouse facilities in Denmark - 20,304 185,481 - (15,928) 18,733 171,124 189,857 24,289 Various Jun. 2018 25 - 41 yrs.
Retail facilities in the Netherlands - 38,475 117,127 - (13,057) 35,246 107,299 142,545 16,996 Various Jul. 2018 26 - 30 yrs.
Industrial facility in Oostburg, WI - 786 6,589 - - 786 6,589 7,375 1,318 2002 Jul. 2018 35 yrs.
Warehouse facility in Kampen, Netherlands - 3,251 12,858 126 (1,288) 2,992 11,955 14,947 2,145 1976 Jul. 2018 26 yrs.
Warehouse facility in Azambuja, Portugal - 13,527 35,631 28,051 (6,533) 12,463 58,213 70,676 6,890 1994 Sep. 2018 28 yrs.
Retail facilities in Amsterdam, Moordrecht, and Rotterdam, Netherlands - 2,582 18,731 11,338 (2,036) 2,420 28,195 30,615 3,550 Various Oct. 2018 27 - 37 yrs.
Office and warehouse facilities in Bad Wünnenberg and Soest, Germany - 2,916 39,687 - (2,718) 2,730 37,155 39,885 4,152 1982; 1986 Oct. 2018 40 yrs.
Industrial facility in Norfolk, NE - 802 3,686 - - 802 3,686 4,488 521 1975 Oct. 2018 40 yrs.
Education facility in Chicago, IL - 7,720 17,266 - (7,945) 5,113 11,928 17,041 1,764 1912 Oct. 2018 40 yrs.
Fitness facilities in Phoenix, AZ and Columbia, MD - 18,286 33,030 - - 18,286 33,030 51,316 3,655 2006 Oct. 2018 40 yrs.
Retail facility in Gorzow, Poland - 1,736 8,298 - (640) 1,625 7,769 9,394 932 2008 Oct. 2018 40 yrs.
Industrial facilities in Sergeant Bluff, IA; Bossier City, LA; and Alvarado, TX 8,986 6,460 49,462 - - 6,460 49,462 55,922 5,927 Various Oct. 2018 40 yrs.
Industrial facility in Glendale Heights, IL - 4,237 45,484 - - 4,237 45,484 49,721 3,008 1991 Oct. 2018 38 yrs.
Industrial facilities in Mayodan, Sanford, and Stoneville, NC - 3,505 20,913 - - 3,505 20,913 24,418 2,157 1992; 1997; 1998 Oct. 2018 29 yrs.
Warehouse facility in Dillon, SC - 3,424 43,114 - - 3,424 43,114 46,538 5,166 2001 Oct. 2018 40 yrs.
Office facility in Birmingham, United Kingdom - 7,383 7,687 - (1,044) 6,872 7,154 14,026 783 2009 Oct. 2018 40 yrs.
Retail facilities in Spain - 17,626 44,501 - (3,964) 16,502 41,661 58,163 4,702 Various Oct. 2018 40 yrs.
Warehouse facility in Gadki, Poland - 1,376 6,137 - (480) 1,288 5,745 7,033 655 2011 Oct. 2018 40 yrs.
Office facility in The Woodlands, TX - 1,697 52,289 - - 1,697 52,289 53,986 5,583 2009 Oct. 2018 40 yrs.
Office facility in Hoffman Estates, IL - 5,550 14,214 - - 5,550 14,214 19,764 1,574 2009 Oct. 2018 40 yrs.
Warehouse facility in Zagreb, Croatia - 15,789 33,287 - (3,132) 14,781 31,163 45,944 5,163 2001 Oct. 2018 26 yrs.
Industrial facilities in Middleburg Heights and Union Township, OH 3,899 1,295 13,384 - - 1,295 13,384 14,679 1,468 1990; 1997 Oct. 2018 40 yrs.
Retail facility in Las Vegas, NV - - 79,720 - - - 79,720 79,720 8,322 2012 Oct. 2018 40 yrs.
Industrial facilities in the United States - 20,517 14,135 - 30,060 22,585 42,127 64,712 3,476 Various Oct. 2018 40 yrs.
Warehouse facility in Bowling Green, KY - 2,652 51,915 72,976 - 2,652 124,891 127,543 7,605 2011 Oct. 2018 40 yrs.
Warehouse facilities in the United Kingdom - 6,791 2,315 - (631) 6,321 2,154 8,475 264 Various Oct. 2018 40 yrs.
Industrial facility in Evansville, IN - 180 22,095 - - 180 22,095 22,275 2,362 2009 Oct. 2018 40 yrs.
W. P. Carey 2022 10-K - 122
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 facilities in Tampa, FL - 3,889 49,843 1,498 - 3,889 51,341 55,230 5,585 1985; 2000 Oct. 2018 40 yrs.
Warehouse facility in Elorrio, Spain - 7,858 12,728 - (1,313) 7,357 11,916 19,273 1,503 1996 Oct. 2018 40 yrs.
Industrial and office facilities in Elberton, GA - 879 2,014 - - 879 2,014 2,893 303 1997; 2002 Oct. 2018 40 yrs.
Office facility in Tres Cantos, Spain 47,277 24,344 39,646 - (4,084) 22,790 37,116 59,906 4,209 2002 Oct. 2018 40 yrs.
Office facility in Hartland, WI 2,228 1,454 6,406 - - 1,454 6,406 7,860 752 2001 Oct. 2018 40 yrs.
Retail facilities in Dugo Selo, Kutina, Samobor, Spansko, and Zagreb, Croatia - 5,549 12,408 1,625 5,048 6,373 18,257 24,630 2,841 2000; 2002; 2003 Oct. 2018 26 yrs.
Office and warehouse facilities in the United States - 42,793 193,666 - - 42,793 193,666 236,459 22,416 Various Oct. 2018 40 yrs.
Warehouse facilities in Breda, Elst, Gieten, Raalte, and Woerden, Netherlands - 37,755 91,666 4,787 (8,402) 35,346 90,460 125,806 9,515 Various Oct. 2018 40 yrs.
Warehouse facilities in Oxnard and Watsonville, CA - 22,453 78,814 - - 22,453 78,814 101,267 8,695 1975; 1994; 2002 Oct. 2018 40 yrs.
Retail facilities in Italy - 75,492 138,280 7,242 (14,891) 70,675 135,448 206,123 15,617 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 4,480 301 1982 Oct. 2018 40 yrs.
Office facility in Martinsville, VA - 1,082 8,108 - - 1,082 8,108 9,190 950 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 1,084 2012 Oct. 2018 40 yrs.
Net-lease self-storage facilities in the United States - 19,583 108,971 - - 19,583 108,971 128,554 12,879 Various Oct. 2018 40 yrs.
Warehouse facility in Middleburg Heights, OH - 542 2,507 - - 542 2,507 3,049 275 2002 Oct. 2018 40 yrs.
Net-lease self-storage facility in Fort Worth, TX - 691 6,295 - - 691 6,295 6,986 761 2004 Oct. 2018 40 yrs.
Retail facilities in Delnice, Pozega, and Sesvete, Croatia - 5,519 9,930 1,291 (1,212) 5,167 10,361 15,528 1,707 2011 Oct. 2018 27 yrs.
Office facilities in Eagan and Virginia, MN - 16,302 91,239 - (722) 15,954 90,865 106,819 10,510 Various Oct. 2018 40 yrs.
Retail facility in Orlando, FL - 6,262 25,134 430 - 6,371 25,455 31,826 2,692 2011 Oct. 2018 40 yrs.
Industrial facility in Avon, OH - 1,447 5,564 - - 1,447 5,564 7,011 662 2001 Oct. 2018 40 yrs.
Industrial facility in Chimelow, Poland - 6,158 28,032 - (2,182) 5,765 26,243 32,008 2,999 2012 Oct. 2018 40 yrs.
Net-lease self-storage facility in Fayetteville, NC - 1,839 4,654 - - 1,839 4,654 6,493 718 2001 Oct. 2018 40 yrs.
Retail facilities in the United States - 19,529 42,318 - - 19,529 42,318 61,847 4,892 Various Oct. 2018 40 yrs.
Education facilities in Montgomery, AL and Savannah, GA - 5,508 12,032 - - 5,508 12,032 17,540 1,375 1969; 2002 Oct. 2018 40 yrs.
Office facilities in St. Louis, MO - 1,297 5,362 7,951 - 1,836 12,774 14,610 1,545 1995; 1999 Oct. 2018; Aug. 2021 40 yrs.
W. P. Carey 2022 10-K - 123
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 and warehouse facility in Zary, PL - 2,062 10,034 - (772) 1,931 9,393 11,324 1,101 2013 Oct. 2018 40 yrs.
Industrial facilities in San Antonio, TX and Sterling, VA - 3,198 23,981 78,728 (462) 6,767 98,678 105,445 7,277 1980; 2020 Oct. 2018; Dec. 2018 40 yrs.
Industrial facility in Elk Grove Village, IL - 5,511 10,766 2 - 5,511 10,768 16,279 1,203 1961 Oct. 2018 40 yrs.
Industrial facility in Portage, WI 3,861 3,450 7,797 - - 3,450 7,797 11,247 982 1970 Oct. 2018 40 yrs.
Office facility in Warrenville, IL - 3,662 23,711 - - 3,662 23,711 27,373 2,614 2002 Oct. 2018 40 yrs.
Warehouse facility in Saitama Prefecture, Japan - 13,507 25,301 6,586 (11,253) 11,035 23,106 34,141 2,368 2007 Oct. 2018 40 yrs.
Retail facility in Dallas, TX - 2,977 16,168 - - 2,977 16,168 19,145 1,732 1913 Oct. 2018 40 yrs.
Office facility in Houston, TX - 23,161 104,266 1,118 - 23,161 105,384 128,545 11,173 1973 Oct. 2018 40 yrs.
Retail facilities in Croatia - 9,000 13,002 1,415 (5,811) 7,305 10,301 17,606 1,504 Various Oct. 2018 29 - 37 yrs.
Office facility in Northbrook, IL - - 493 447 - - 940 940 212 2007 Oct. 2018 40 yrs.
Education facilities in Chicago, IL - 18,510 163 - (16,831) 1,793 49 1,842 39 2014; 2015 Oct. 2018 40 yrs.
Warehouse facility in Dillon, SC - 3,516 44,933 - - 3,516 44,933 48,449 5,343 2013 Oct. 2018 40 yrs.
Net-lease self-storage facilities in New York City, NY - 29,223 77,202 714 - 29,223 77,916 107,139 8,175 Various Oct. 2018 40 yrs.
Net-lease self-storage facility in Hilo, HI - 769 12,869 - - 769 12,869 13,638 1,361 2007 Oct. 2018 40 yrs.
Net-lease self-storage facility in Clearwater, FL - 1,247 5,733 - - 1,247 5,733 6,980 690 2001 Oct. 2018 40 yrs.
Warehouse facilities in Gadki, Poland - 10,422 47,727 57 (3,714) 9,756 44,736 54,492 5,185 2007; 2010 Oct. 2018 40 yrs.
Net-lease self-storage facility in Orlando, FL - 1,070 8,686 - - 1,070 8,686 9,756 986 2000 Oct. 2018 40 yrs.
Retail facility in Lewisville, TX - 3,485 11,263 - - 3,485 11,263 14,748 1,256 2004 Oct. 2018 40 yrs.
Industrial facility in Wageningen, Netherlands - 5,227 18,793 - (1,266) 4,894 17,860 22,754 2,039 2013 Oct. 2018 40 yrs.
Net-lease self-storage facility in Palm Coast, FL - 1,994 4,982 - - 1,994 4,982 6,976 704 2001 Oct. 2018 40 yrs.
Office facility in Auburn Hills, MI - 1,910 6,773 - - 1,910 6,773 8,683 771 2012 Oct. 2018 40 yrs.
Net-lease self-storage facility in Holiday, FL - 1,730 4,213 - - 1,730 4,213 5,943 580 1975 Oct. 2018 40 yrs.
Office facility in Tempe, AZ 13,417 - 19,533 - - - 19,533 19,533 2,152 2000 Oct. 2018 40 yrs.
Office facility in Tucson, AZ - 2,448 17,353 869 - 2,448 18,222 20,670 1,940 2002 Oct. 2018 40 yrs.
Industrial facility in Drunen, Netherlands - 2,316 9,370 - (745) 2,169 8,772 10,941 976 2014 Oct. 2018 40 yrs.
Industrial facility New Concord, OH 1,248 958 2,309 - - 958 2,309 3,267 313 1999 Oct. 2018 40 yrs.
Office facility in Krakow, Poland - 2,381 6,212 - (548) 2,229 5,816 8,045 652 2003 Oct. 2018 40 yrs.
Retail facility in Gelsenkirchen, Germany 11,156 2,178 17,097 - (1,230) 2,039 16,006 18,045 1,774 2000 Oct. 2018 40 yrs.
W. P. Carey 2022 10-K - 124
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 Mszczonow and Tomaszow Mazowiecki, Poland - 8,782 53,575 - (3,979) 8,222 50,156 58,378 6,025 1995; 2000 Oct. 2018 40 yrs.
Office facility in Plymouth, MN - 2,871 26,353 686 - 2,871 27,039 29,910 2,982 1999 Oct. 2018 40 yrs.
Office facility in San Antonio, TX - 3,094 16,624 - - 3,094 16,624 19,718 1,867 2002 Oct. 2018 40 yrs.
Warehouse facility in Sered, Slovakia - 3,428 28,005 - (2,006) 3,209 26,218 29,427 2,935 2004 Oct. 2018 40 yrs.
Industrial facility in Tuchomerice, Czech Republic - 7,864 27,006 - (2,226) 7,362 25,282 32,644 2,794 1998 Oct. 2018 40 yrs.
Office facility in Warsaw, Poland 31,475 - 44,990 - (2,871) - 42,119 42,119 4,540 2015 Oct. 2018 40 yrs.
Warehouse facility in Kaunas, Lithuania 34,541 10,199 47,391 - (3,675) 9,548 44,367 53,915 5,022 2008 Oct. 2018 40 yrs.
Net-lease student housing facility in Jacksonville, FL 11,562 906 17,020 - - 906 17,020 17,926 1,834 2015 Oct. 2018 40 yrs.
Warehouse facilities in Houston, TX - 791 1,990 - - 791 1,990 2,781 234 1972 Oct. 2018 40 yrs.
Office facility in Oak Creek, WI - 2,858 11,055 - - 2,858 11,055 13,913 1,310 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 4,527 Various Oct. 2018 40 yrs.
Warehouse facility in Perrysburg, OH - 806 11,922 - - 806 11,922 12,728 1,483 1974 Oct. 2018 40 yrs.
Warehouse facility in Dillon, SC - 620 46,319 434 - 620 46,753 47,373 4,422 2019 Oct. 2018 40 yrs.
Warehouse facility in Zabia Wola, Poland 14,507 4,742 23,270 5,636 (2,118) 4,439 27,091 31,530 2,974 1999 Oct. 2018 40 yrs.
Office facility in Buffalo Grove, IL - 2,224 6,583 - - 2,224 6,583 8,807 749 1992 Oct. 2018 40 yrs.
Warehouse facilities in McHenry, IL - 5,794 21,141 - - 5,794 21,141 26,935 3,539 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 1,459 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 5,454 2007 Dec. 2018 37 yrs.
Industrial facility in San Luis Potosi, Mexico - 2,787 12,945 - - 2,787 12,945 15,732 1,527 2009 Dec. 2018 39 yrs.
Industrial facility in Legnica, Poland - 995 9,787 6,007 (1,088) 930 14,771 15,701 1,915 2002 Dec. 2018 29 yrs.
Industrial facility in Meru, France - 4,231 14,731 8 (1,186) 3,966 13,818 17,784 2,094 1997 Dec. 2018 29 yrs.
Education facility in Portland, OR - 2,396 23,258 4,177 - 2,396 27,435 29,831 3,355 2006 Feb. 2019 40 yrs.
Office facility in Morrisville, NC - 2,374 30,140 2,172 - 2,374 32,312 34,686 3,375 1998 Mar. 2019 40 yrs.
Warehouse facility in Inwood, WV - 3,265 36,692 - - 3,265 36,692 39,957 3,817 2000 Mar. 2019 40 yrs.
Industrial facility in Hurricane, UT - 1,914 37,279 - - 1,914 37,279 39,193 3,668 2011 Mar. 2019 40 yrs.
Industrial facility in Bensenville, IL - 8,640 4,948 - 300 8,940 4,948 13,888 782 1981 Mar. 2019 40 yrs.
Industrial facility in Katowice, Poland - - 764 15,163 (484) - 15,443 15,443 1,195 2019 Apr. 2019 40 yrs.
Industrial facilities in Westerville, OH and North Wales, PA - 1,545 6,508 - - 1,545 6,508 8,053 781 1960; 1997 May 2019 40 yrs.
W. P. Carey 2022 10-K - 125
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 Fargo, ND; Norristown, PA; and Atlanta, TX - 1,616 5,589 - - 1,616 5,589 7,205 818 Various May 2019 40 yrs.
Industrial facilities in Chihuahua and Juarez, Mexico - 3,426 7,286 - - 3,426 7,286 10,712 965 1983; 1986; 1991 May 2019 40 yrs.
Warehouse facility in Statesville, NC - 1,683 13,827 - - 1,683 13,827 15,510 1,489 1979 Jun. 2019 40 yrs.
Industrial facilities in Searcy, AR and Conestoga, PA - 4,290 51,410 21,027 - 4,678 72,049 76,727 6,511 1950; 1951 Jun. 2019; Apr. 2021 40 yrs.
Industrial facilities in Hartford and Milwaukee, WI - 1,471 21,293 - - 1,471 21,293 22,764 2,203 1964; 1992; 1993 Jul. 2019 40 yrs.
Industrial facilities in Brockville and Prescott, Canada - 2,025 9,519 - - 2,025 9,519 11,544 990 1955; 1995 Jul. 2019 40 yrs.
Industrial facility in Dordrecht, Netherlands - 3,233 10,954 - (424) 3,140 10,623 13,763 890 1986 Sep. 2019 40 yrs.
Industrial facilities in York, PA and Lexington, SC - 4,155 22,930 - - 4,155 22,930 27,085 2,600 1968; 1971 Oct. 2019 40 yrs.
Industrial facility in Queretaro, Mexico - 2,851 12,748 - (3) 2,851 12,745 15,596 1,305 1999 Oct. 2019 40 yrs.
Office facility in Dearborn, MI - 1,431 5,402 - - 1,431 5,402 6,833 567 2002 Oct. 2019 40 yrs.
Industrial facilities in Houston, TX and Metairie, LA and office facilities in Houston, TX and Mason, OH - 6,130 24,981 2,145 - 6,130 27,126 33,256 2,444 Various Nov. 2019 40 yrs.
Industrial facility in Pardubice, Czech Republic - 1,694 8,793 436 (377) 1,639 8,907 10,546 742 1970 Nov. 2019 40 yrs.
Warehouse facilities in Brabrand, Denmark and Arlandastad, Sweden - 6,499 27,899 146 (1,659) 6,140 26,745 32,885 2,294 2012; 2017 Nov. 2019 40 yrs.
Retail facility in Hamburg, PA - 4,520 34,167 - - 4,520 34,167 38,687 2,994 2003 Dec. 2019 40 yrs.
Warehouse facility in Charlotte, NC - 6,481 82,936 - - 6,481 82,936 89,417 7,128 1995 Dec. 2019 40 yrs.
Warehouse facility in Buffalo Grove, IL - 3,287 10,167 - - 3,287 10,167 13,454 1,049 1987 Dec. 2019 40 yrs.
Industrial facility in Hvidovre, Denmark - 1,931 4,243 - (265) 1,856 4,053 5,909 436 2007 Dec. 2019 40 yrs.
Warehouse facility in Huddersfield, United Kingdom - 8,659 29,752 - (3,428) 7,886 27,097 34,983 2,156 2005 Dec. 2019 40 yrs.
Warehouse facility in Newark, United Kingdom - 21,869 74,777 - (8,170) 20,020 68,456 88,476 5,111 2006 Jan. 2020 40 yrs.
Industrial facility in Langen, Germany - 14,160 7,694 32,169 (5,999) 12,461 35,563 48,024 1,695 2021 Jan. 2020 40 yrs.
Industrial facility in Aurora, OR - 2,914 21,459 - (5,000) 2,914 16,459 19,373 1,209 1976 Jan. 2020 40 yrs.
Warehouse facility in Vojens, Denmark - 1,031 8,784 - (296) 1,000 8,519 9,519 622 2020 Jan. 2020 40 yrs.
Office facility in Kitzingen, Germany - 4,812 41,125 - (3,171) 4,481 38,285 42,766 2,694 1967 Mar. 2020 40 yrs.
Warehouse facility in Knoxville, TN - 2,455 47,446 - - 2,455 47,446 49,901 2,988 2020 Jun. 2020 40 yrs.
Industrial facilities in Bluffton and Plymouth, IN; and Lawrence, KS - 674 33,519 20,542 - 1,064 53,671 54,735 2,440 1981; 2014; 2021 Sep 2020; Dec. 2021 40 yrs.
Industrial facility in Huntley, IL - 5,260 26,617 - - 5,260 26,617 31,877 1,500 1996 Sep. 2020 40 yrs.
W. P. Carey 2022 10-K - 126
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 Winter Haven, FL; Belvedere, IL; and Fayetteville, NC - 8,232 31,745 - - 8,232 31,745 39,977 1,763 1954; 1984; 1997 Oct. 2020 40 yrs.
Retail facilities in Spain - 34,216 57,151 239 (8,069) 31,198 52,339 83,537 2,842 Various Oct. 2020 40 yrs.
Warehouse facility in Little Canada, MN - 3,384 23,422 - - 3,384 23,422 26,806 1,272 1987 Oct. 2020 40 yrs.
Warehouse facility in Hurricane, UT - 5,154 22,893 20,517 - 5,154 43,410 48,564 1,602 2005 Dec. 2020 40 yrs.
Industrial facilities in Bethlehem, PA and Waco, TX - 4,673 19,111 - - 4,673 19,111 23,784 984 Various Dec. 2020 40 yrs.
Industrial facilities in Pleasanton, KS; Savage, MN; Grove City, OH; and Mahanoy City, PA - 7,717 21,569 - - 7,717 21,569 29,286 1,078 Various Dec. 2020 40 yrs.
Outdoor advertising in Fort Washington, Huntington Valley, and West Chester, PA - - 492 - - - 492 492 24 2011; 2014; 2016 Jan. 2021 40 yrs.
Warehouse facilities in Grove City, OH and Anderson, SC - 1,415 15,151 - - 1,415 15,151 16,566 724 1995; 2001 Feb. 2021 40 yrs.
Office and retail facilities in NJ and PA - 17,537 25,987 - - 17,537 25,987 43,524 1,226 Various Feb. 2021 40 yrs.
Land and warehouse facilities in CA - 8,513 45,669 6 - 8,516 45,672 54,188 2,158 Various Feb. 2021 40 yrs.
Research and development facility in Wageningen, Netherlands - 1,429 5,777 18,848 1,244 1,494 25,804 27,298 315 2022 Mar. 2021 40 yrs.
Retail facilities in France - 15,954 104,578 - (11,082) 14,487 94,963 109,450 4,163 1968; 1981; 1983 Apr. 2021 40 yrs.
Warehouse facility in Detroit, MI - 3,625 47,743 - - 3,625 47,743 51,368 2,008 1991 Apr. 2021 40 yrs.
Warehouse facility in Solihull, United Kingdom - 42,137 123,315 - (21,832) 36,577 107,043 143,620 4,450 2021 May 2021 40 yrs.
Net-lease student housing facility in New Rochelle, NY - 3,617 21,590 - - 3,617 21,590 25,207 896 2018 May 2021 40 yrs.
Industrial facility in Groveport, OH - - 26,639 2,904 - - 29,543 29,543 1,165 1982 May 2021 40 yrs.
Industrial facility in Dakota, IL - 1,970 50,369 - - 1,970 50,369 52,339 2,066 1978 May 2021 40 yrs.
Industrial facility in San Jose, CA - 12,808 31,714 - - 12,808 31,714 44,522 1,299 1984 May 2021 40 yrs.
Warehouse facility in Opelika, AL - 2,115 39,980 - - 2,115 39,980 42,095 1,569 2005 Jun. 2021 40 yrs.
Warehouse facilities in Elk Grove Village and Niles, IL; and Guelph, Canada - 12,932 25,096 - - 12,932 25,096 38,028 981 1962; 1976; 1983 Jun. 2021 40 yrs.
Warehouse facility in Rome, NY - 1,480 47,781 - - 1,480 47,781 49,261 1,865 2021 Jun. 2021 40 yrs.
Warehouse facility in Frankfort, IN - 5,423 95,915 - - 5,423 95,915 101,338 3,239 2015 Aug. 2021 40 yrs.
Warehouse facility in Rogers, MN - 1,871 20,959 - - 1,871 20,959 22,830 688 2005 Sep. 2021 40 yrs.
Industrial facilities in Chattanooga, TN - 4,859 29,302 - - 4,859 29,302 34,161 881 2006; 2017 Oct. 2021 40 yrs.
Warehouse facility in Mankato, MN - 2,979 11,619 - - 2,979 11,619 14,598 330 1976 Nov. 2021 40 yrs.
Retail facilities in Denmark - 2,695 38,428 - (2,157) 2,553 36,413 38,966 973 Various Dec. 2021 40 yrs.
Retail facilities in Poland - 15,110 47,511 - (3,313) 14,311 44,997 59,308 1,177 Various Dec. 2021 40 yrs.
W. P. Carey 2022 10-K - 127
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 Cary, IL - 4,568 31,977 - - 4,568 31,977 36,545 808 1975 Dec. 2021 40 yrs.
Retail facilities in the Netherlands - 9,342 32,770 - (2,373) 8,816 30,923 39,739 779 Various Dec. 2021 40 yrs.
Outdoor advertising in Flemington and Pennsauken, NJ - 1,025 397 832 - 1,025 1,229 2,254 18 Various Dec. 2021 40 yrs.
Industrial facility in Pleasant Prairie, WI - 1,443 16,532 - - 1,443 16,532 17,975 403 2001 Jan. 2022 40 yrs.
Funeral homes in Spain - 26,735 99,822 - (6,953) 25,266 94,338 119,604 2,145 Various Feb. 2022 40 yrs.
Retail facilities in Denmark - 3,295 35,898 - (1,477) 3,154 34,562 37,716 625 Various Various 40 yrs.
Industrial facility in Laval, Canada - 4,014 16,037 - (1,237) 3,766 15,048 18,814 327 1966 Feb. 2022 40 yrs.
Warehouse facility in Chattanooga, TN - 5,063 36,645 - - 5,063 36,645 41,708 761 2003 Mar. 2022 40 yrs.
Industrial facility in Coatzacoalcos, Mexico - 9,805 17,622 - - 9,805 17,622 27,427 301 1960 Apr. 2022 40 yrs.
Industrial facility in Lowbanks, CA - 3,574 1,605 - - 3,574 1,605 5,179 27 1967 Apr. 2022 40 yrs.
Industrial facilities in Chicago, IL; Geismar, LA; and Nashville, TN - 9,300 26,945 - - 9,300 26,945 36,245 437 Various May 2022 40 yrs.
Industrial and warehouse facilities in the United States - 9,847 88,227 - - 9,847 88,227 98,074 1,390 Various May 2022 40 yrs.
Retail facilities in Denmark - 2,228 31,774 - 251 2,246 32,007 34,253 443 Various Various 40 yrs.
Industrial facility in Medina, OH - 2,029 22,938 - - 2,029 22,938 24,967 311 1963 Jun. 2022 40 yrs.
Warehouse facility in Bree, Belgium - - 73,302 42 1,972 - 75,316 75,316 954 1964 Jun. 2022 40 yrs.
Retail facilities in Spain - 4,906 12,825 - 813 5,131 13,413 18,544 151 Various Jul. 2022 40 yrs.
Industrial and warehouse facilities in the United States - 27,543 192,197 - - 27,543 192,197 219,740 2,093 Various Jul. 2022 40 yrs.
Retail facilities in Denmark - 2,690 33,703 - 1,312 2,789 34,916 37,705 297 Various Various 40 yrs.
Office facility in Austin, TX 72,295 31,095 45,393 - - 31,095 45,393 76,488 476 1993 Aug. 2022 40 yrs.
Land in Chicago, IL 1,885 3,873 - - - 3,873 - 3,873 - N/A Aug. 2022 N/A
Retail facilities in Croatia 14,788 1,367 23,337 - 1,046 1,425 24,325 25,750 255 2001; 2006 Aug. 2022 40 yrs.
Warehouse in Streetsboro, OH 2,576 2,435 9,333 - - 2,435 9,333 11,768 98 1993 Aug. 2022 40 yrs.
Office facility in Norcross, GA 2,936 1,795 2,676 - - 1,795 2,676 4,471 28 1999 Aug. 2022 40 yrs.
Warehouse in University Park, IL 46,812 15,377 63,299 - - 15,377 63,299 78,676 663 2003 Aug. 2022 40 yrs.
Office facility in Oslo, Norway 43,560 15,763 33,250 - (1,085) 15,414 32,514 47,928 341 2013 Aug. 2022 40 yrs.
Industrial facilities in Surprise, AZ; Temple, GA; and Houston, TX 9,640 2,994 26,100 - - 2,994 26,100 29,094 274 1998; 2007; 2011 Aug. 2022 40 yrs.
Office facility in Farmington Hills, MI 6,188 2,195 5,213 - - 2,195 5,213 7,408 55 2001 Aug. 2022 40 yrs.
Warehouse facility in Jonesville, SC 25,198 2,895 32,152 - - 2,895 32,152 35,047 337 1997 Aug. 2022 40 yrs.
Warehouse facility in Albany, GA 5,232 3,108 12,220 - - 3,108 12,220 15,328 128 1977 Aug. 2022 40 yrs.
Office facility in Eagan, MN 8,573 1,298 7,445 - - 1,298 7,445 8,743 78 2013 Aug. 2022 40 yrs.
W. P. Carey 2022 10-K - 128
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 Plymouth, MN 25,187 4,624 29,243 - - 4,624 29,243 33,867 306 1982 Aug. 2022 40 yrs.
Industrial facilities in Dallas/Forth Worth, TX 4,336 3,918 9,817 - - 3,918 9,817 13,735 103 1990; 2008 Aug. 2022 40 yrs.
Warehouse facility in Byron Center, MI 6,407 1,925 10,098 - - 1,925 10,098 12,023 106 2015 Aug. 2022 40 yrs.
Net-lease hotel in Albion, Mauritius 10,972 7,633 29,274 - 1,562 7,956 30,513 38,469 320 2007 Aug. 2022 40 yrs.
Office facility in Warstein, Germany - 3,917 4,049 20 337 4,083 4,240 8,323 44 2011 Aug. 2022 40 yrs.
Net-lease hotel in Munich, Germany 45,331 17,892 61,405 - 3,356 18,649 64,004 82,653 671 2016 Aug. 2022 40 yrs.
Office facility in Plano, TX 21,221 3,667 28,073 - - 3,667 28,073 31,740 294 2001 Aug. 2022 40 yrs.
Industrial facility in Plymouth, MN 9,969 3,693 13,242 9 - 3,693 13,251 16,944 139 1975 Aug. 2022 40 yrs.
Net-lease hotel in Hamburg, Germany 15,419 7,328 17,467 - 1,050 7,639 18,206 25,845 191 2017 Aug. 2022 40 yrs.
Retail facility in Oslo, Norway 54,079 27,948 64,033 725 (2,032) 27,330 63,344 90,674 672 1971 Aug. 2022 40 yrs.
Office facility in Jacksonville, FL 9,310 2,084 6,673 - - 2,084 6,673 8,757 70 2001 Aug. 2022 40 yrs.
Industrial facility in Michalovce, Slovakia - 4,538 19,009 - 996 4,730 19,813 24,543 208 2006 Aug. 2022 40 yrs.
Office facility in Warrenville, IL 21,433 3,285 11,666 387 - 3,285 12,053 15,338 129 2001 Aug. 2022 40 yrs.
Office facility in Coralville, IA - 2,222 35,695 - - 2,222 35,695 37,917 374 2015 Aug. 2022 40 yrs.
Net-lease hotel in Stuttgart, Germany 13,338 - 31,276 - 1,324 - 32,600 32,600 342 1965 Aug. 2022 40 yrs.
Industrial facility in Menomonee Falls, WI 11,841 2,726 17,453 - - 2,726 17,453 20,179 183 1974 Aug. 2022 40 yrs.
Warehouse facility in Iowa Falls, IA 6,138 997 8,819 - - 997 8,819 9,816 92 2001 Aug. 2022 40 yrs.
Warehouse facility in Westlake, OH - 1,928 24,353 - - 1,928 24,353 26,281 252 1972 Aug. 2022 40 yrs.
Industrial facility in Hebron, Ohio and warehouse facility in Strongsville, OH - 4,671 5,494 - - 4,671 5,494 10,165 54 1969; 1999 Aug. 2022 40 yrs.
Warehouse facility in Scarsborough, Canada - 5,092 1,868 - - 5,092 1,868 6,960 18 1980 Aug. 2022 40 yrs.
Specialty facilities in West Des Moines, IA and Clifton Park, NY - 3,229 17,080 - - 3,229 17,080 20,309 166 1971; 2021 Aug. 2022 40 yrs.
Industrial facility in Orzinuovi, Italy - 2,473 9,892 - 815 2,636 10,544 13,180 91 1978 Aug. 2022 40 yrs.
Outdoor advertising in West Chester, PA - - 559 - - - 559 559 10 2022 Oct. 2022 40 yrs.
Industrial facilities in the United States - 11,117 41,107 - - 11,117 41,107 52,224 31 Various Dec. 2022 40 yrs.
Warehouse facility in Romulus, MI - 2,788 33,353 - - 2,788 33,353 36,141 5 2017 Dec. 2022 40 yrs.
Industrial facility in Salisbury, NC - 1,308 13,082 - - 1,308 13,082 14,390 2 2015 Dec. 2022 40 yrs.
$ 782,663 $ 2,628,187 $ 10,520,207 $ 1,013,116 $ (844,878) $ 2,400,002 $ 10,916,630 $ 13,316,632 $ 1,672,091
W. P. Carey 2022 10-K - 129
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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 $ - $ (4,227) $ 23,372 1978 Jan. 1998
Retail facility in Freehold, NJ 2,925 - 17,067 - (435) 16,632 2004 Sep. 2012
Office facilities in Corpus Christi, Odessa, San Marcos, and Waco, TX 713 2,089 14,211 - (1,572) 14,728 1969; 1996; 2000 Sep. 2012
Retail facilities in Germany - 28,734 145,854 5,582 (64,558) 115,612 Various Sep. 2012
Warehouse facility in Brierley Hill, United Kingdom - 2,147 12,357 - (2,554) 11,950 1996 Sep. 2012
Retail facilities in El Paso and Fabens, TX - 4,777 17,823 - (102) 22,498 Various Jan. 2014
Industrial facility in Eagan, MN - - 11,548 - (628) 10,920 1975 Jan. 2014
Retail facility in Gronau, Germany - 281 4,401 - (1,013) 3,669 1989 Jan. 2014
Industrial facility in Mount Carmel, IL - 135 3,265 - (303) 3,097 1896 Jan. 2014
Retail facility in Vantaa, Finland - 5,291 15,522 - (4,505) 16,308 2004 Jan. 2014
Retail facility in Linköping, Sweden - 1,484 9,402 - (4,105) 6,781 2004 Jan. 2014
Industrial facility in Calgary, Canada - - 7,076 - (1,232) 5,844 1965 Jan. 2014
Industrial facilities in Fair Bluff, NC and Valencia, PA - 5,780 40,860 - (37,179) 9,461 1968; 1976 Jan. 2014
Industrial facility in Göppingen, Germany - 10,717 60,120 - (20,026) 50,811 1930 Jan. 2014
Industrial and office facility in Nagold, Germany - 4,553 17,675 - (1,419) 20,809 1994 Oct. 2018
Warehouse facilities in Bristol, Leeds, Liverpool, Luton, Newport, Plymouth, and Southampton, United Kingdom - 1,062 23,087 - (1,784) 22,365 Various Oct. 2018
Warehouse facility in Gieten, Netherlands - - 15,258 - (1,027) 14,231 1985 Oct. 2018
Warehouse facility in Oxnard, CA - - 10,960 - (1,427) 9,533 1975 Oct. 2018
Industrial facilities in Bartow, FL; Momence, IL; Smithfield, NC; Hudson, NY; and Ardmore, OK - 4,454 87,030 - 2,921 94,405 Various Oct. 2018
Industrial facility in Countryside, IL - 563 1,457 - 37 2,057 1981 Oct. 2018
Industrial facility in Clarksville, TN 2,973 1,680 10,180 - (155) 11,705 1998 Oct. 2018
Industrial facility in Bluffton, IN 1,634 503 3,407 - (44) 3,866 1975 Oct. 2018
Warehouse facility in Houston, TX - - 5,977 - (128) 5,849 1972 Oct. 2018
Warehouse in Chicago, IL 5,131 - 10,517 - 26 10,543 1942 Aug. 2022
Less: allowance for credit losses (8,733) (8,733)
$ 13,376 $ 74,250 $ 572,653 $ 5,582 $ (154,172) $ 498,313
W. P. Carey 2022 10-K - 130
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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)
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
Operating Real Estate - Hotels
Bloomington, MN $ - $ 3,810 $ 29,126 $ 3,622 $ 6,329 $ (314) $ 3,874 $ 31,265 $ 7,434 $ 42,573 $ 14,303 2008 Jan. 2014 34 yrs.
Operating Real Estate - Student Housing Facilities
Austin, TX 28,533 12,994 60,006 - 44 - 12,994 60,033 17 73,044 629 2020 Aug. 2022 40 yrs.
Swansea, United Kingdom 43,134 - 32,884 - 33,936 3,526 - 70,346 - 70,346 364 2022 Aug. 2022 40 yrs.
Operating Real Estate - Self-Storage Facilities
Loves Park, IL - 1,412 4,853 - 35 - 1,412 4,862 26 6,300 777 1997 Oct. 2018 40 yrs.
Cherry Valley, IL - 1,339 4,160 - 9 - 1,339 4,160 9 5,508 640 1988 Oct. 2018 40 yrs.
Rockford, IL - 695 3,873 - 44 - 695 3,903 14 4,612 545 1979 Oct. 2018 40 yrs.
Rockford, IL - 87 785 - - - 87 785 - 872 98 1979 Oct. 2018 40 yrs.
Rockford, IL - 454 4,724 - 12 - 454 4,733 3 5,190 546 1957 Oct. 2018 40 yrs.
Peoria, IL - 444 4,944 - 238 - 444 5,164 18 5,626 849 1990 Oct. 2018 40 yrs.
East Peoria, IL - 268 3,290 - 108 - 268 3,375 23 3,666 528 1986 Oct. 2018 40 yrs.
Loves Park, IL - 721 2,973 - 27 - 721 3,000 - 3,721 429 1978 Oct. 2018 40 yrs.
Winder, GA - 338 1,310 - 69 - 338 1,354 25 1,717 218 2006 Oct. 2018 40 yrs.
Winder, GA - 821 3,180 - 34 - 821 3,198 16 4,035 486 2001 Oct. 2018 40 yrs.
Kissimmee, FL 6,386 2,147 17,164 - 4 - 2,147 17,168 - 19,315 180 2005 Aug. 2022 40 yrs.
St. Petersburg, FL 6,842 1,505 16,229 - 4 - 1,505 16,229 4 17,738 170 2007 Aug. 2022 40 yrs.
Corpus Christi, TX 2,563 904 10,779 - 40 - 904 10,819 - 11,723 114 1998 Aug. 2022 40 yrs.
Palm Desert, CA 6,481 1,036 22,714 - - - 1,036 22,714 - 23,750 238 2006 Aug. 2022 40 yrs.
Kailua-Kona, HI 3,546 1,425 12,267 - 30 - 1,425 12,297 - 13,722 129 1991 Aug. 2022 40 yrs.
Miami, FL 2,854 3,680 7,215 - 6 - 3,680 7,215 6 10,901 76 1986 Aug. 2022 40 yrs.
Columbia, SC 2,875 2,481 5,217 - - - 2,481 5,217 - 7,698 55 1988 Aug. 2022 40 yrs.
Kailua-Kona, HI 3,316 2,889 16,397 - - - 2,889 16,397 - 19,286 172 2004 Aug. 2022 40 yrs.
Pompano Beach, FL 2,869 1,227 10,897 - - - 1,227 10,897 - 12,124 114 1992 Aug. 2022 40 yrs.
Jensen Beach, FL 5,294 1,544 15,841 - 42 - 1,544 15,878 5 17,427 166 1989 Aug. 2022 40 yrs.
Dickinson, TX 6,094 1,952 8,826 - - - 1,952 8,826 - 10,778 92 2001 Aug. 2022 40 yrs.
Humble, TX 4,771 813 6,459 - - - 813 6,459 - 7,272 68 2009 Aug. 2022 40 yrs.
Temecula, CA 6,156 2,368 20,802 - - - 2,368 20,802 - 23,170 218 2006 Aug. 2022 40 yrs.
Cumming, GA 2,709 655 10,455 - 5 - 655 10,455 5 11,115 110 1994 Aug. 2022 40 yrs.
Naples, FL 10,157 6,826 20,254 - 18 - 6,826 20,264 8 27,098 213 1974 Aug. 2022 40 yrs.
Valrico, FL 5,694 1,423 11,316 - 8 - 1,423 11,316 8 12,747 119 2009 Aug. 2022 40 yrs.
Tallahassee, FL 4,891 1,534 14,416 - 6 - 1,534 14,416 6 15,956 151 1999 Aug. 2022 40 yrs.
W. P. Carey 2022 10-K - 131
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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)
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
Sebastian, FL 1,847 529 7,917 - 10 - 529 7,927 - 8,456 83 1986 Aug. 2022 40 yrs.
Lady Lake, FL 3,923 928 11,881 - 7 - 928 11,881 7 12,816 124 2010 Aug. 2022 40 yrs.
Panama City Beach, FL 2,605 736 7,581 - - - 736 7,581 - 8,317 79 1997 Aug. 2022 40 yrs.
Hesperia, CA - 1,416 18,691 - - - 1,416 18,691 - 20,107 196 2004 Aug. 2022 40 yrs.
Hesperia, CA - 639 9,412 - - - 639 9,412 - 10,051 99 2007 Aug. 2022 40 yrs.
Hesperia, CA - 699 12,896 - 4 - 699 12,900 - 13,599 135 1985 Aug. 2022 40 yrs.
Highland, CA - 1,465 11,966 - - - 1,465 11,966 - 13,431 125 2003 Aug. 2022 40 yrs.
Lancaster, CA - 598 12,100 - - - 598 12,100 - 12,698 127 1989 Aug. 2022 40 yrs.
Rialto, CA - 3,502 16,924 - 6 - 3,502 16,924 6 20,432 178 2007 Aug. 2022 40 yrs.
Thousand Palms, CA - 2,465 17,632 - - - 2,465 17,632 - 20,097 185 2007 Aug. 2022 40 yrs.
Lilburn, GA 2,325 1,555 6,225 - 16 - 1,555 6,225 16 7,796 66 1998 Aug. 2022 40 yrs.
Stockbridge GA 1,614 308 7,238 - 43 - 308 7,268 13 7,589 77 2003 Aug. 2022 40 yrs.
Louisville, KY 6,564 3,115 13,908 - 115 - 3,115 14,020 3 17,138 151 1998 Aug. 2022 40 yrs.
St. Peters, MO 2,309 386 5,521 - 40 - 386 5,552 9 5,947 59 1991 Aug. 2022 40 yrs.
Crystal Lake, IL 2,615 1,325 6,056 - 2 - 1,325 6,056 2 7,383 64 1977 Aug. 2022 40 yrs.
Las Vegas, NV 6,328 717 20,963 - 24 - 717 20,985 2 21,704 220 1996 Aug. 2022 40 yrs.
Panama City Beach, FL 6,134 666 17,086 - 8 - 666 17,094 - 17,760 179 2008 Aug. 2022 40 yrs.
Sarasota, FL 5,204 1,076 13,597 - 7 - 1,076 13,597 7 14,680 142 2003 Aug. 2022 40 yrs.
Sarasota, FL 3,806 638 10,175 - 8 - 638 10,175 8 10,821 107 2001 Aug. 2022 40 yrs.
Leesburg, FL 2,407 1,272 5,888 - - - 1,272 5,888 - 7,160 62 1988 Aug. 2022 40 yrs.
Palm Bay, FL 7,156 2,814 21,425 - 21 - 2,814 21,425 21 24,260 225 2000 Aug. 2022 40 yrs.
Houston, TX 4,619 1,878 8,719 - 57 - 1,878 8,776 - 10,654 91 1971 Aug. 2022 40 yrs.
Hudson, FL 3,253 669 6,092 - 6 - 669 6,092 6 6,767 64 2008 Aug. 2022 40 yrs.
Las Vegas, NV 2,342 918 12,355 - - - 918 12,355 - 13,273 129 1984 Aug. 2022 40 yrs.
Las Vegas, NV 2,212 829 11,275 - 12 - 829 11,275 12 12,116 118 1987 Aug. 2022 40 yrs.
Ithaca, NY 2,297 890 4,484 - 8 - 890 4,484 8 5,382 47 1988 Aug. 2022 40 yrs.
Kissimmee, FL - 626 13,147 - - - 626 13,147 - 13,773 138 2015 Aug. 2022 40 yrs.
El Paso, TX 3,704 2,126 5,628 - - - 2,126 5,628 - 7,754 59 1983 Aug. 2022 40 yrs.
El Paso, TX 2,542 1,053 4,583 - 3 - 1,053 4,583 3 5,639 48 1980 Aug. 2022 40 yrs.
El Paso, TX 3,612 994 7,451 - 105 - 994 7,556 - 8,550 79 1980 Aug. 2022 40 yrs.
El Paso, TX 3,628 1,295 6,318 - 36 - 1,295 6,354 - 7,649 67 1986 Aug. 2022 40 yrs.
El Paso, TX 1,428 587 3,121 - 14 - 587 3,121 14 3,722 34 1985 Aug. 2022 40 yrs.
El Paso, TX 3,718 1,143 5,894 - 92 - 1,143 5,986 - 7,129 63 1980 Aug. 2022 40 yrs.
W. P. Carey 2022 10-K - 132
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2022
(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)
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
Fernandina Beach, FL 7,269 2,664 25,000 - 7 - 2,664 25,007 - 27,671 262 1986 Aug. 2022 40 yrs.
Kissimmee, FL 3,448 2,149 6,223 - 20 - 2,149 6,234 9 8,392 65 1981 Aug. 2022 40 yrs.
Houston, TX 2,758 1,350 6,257 - 12 - 1,350 6,257 12 7,619 66 1998 Aug. 2022 40 yrs.
Houston, TX 2,957 1,112 8,044 - 16 - 1,112 8,055 5 9,172 85 2001 Aug. 2022 40 yrs.
Portland, OR 6,348 994 10,176 - - - 994 10,176 - 11,170 107 2000 Aug. 2022 40 yrs.
Greensboro, NC 4,036 1,389 15,175 - - - 1,389 15,175 - 16,564 159 1953 Aug. 2022 40 yrs.
Avondale, LA 3,422 1,154 9,090 - - - 1,154 9,090 - 10,244 95 2008 Aug. 2022 40 yrs.
Washington, D.C. 6,470 3,371 13,655 - - - 3,371 13,655 - 17,026 143 1962 Aug. 2022 40 yrs.
Kissimmee, FL - 1,770 7,034 - 10 - 1,770 7,034 10 8,814 74 2000 Aug. 2022 40 yrs.
Milford, MA - 951 11,935 - 1 - 951 11,935 1 12,887 125 2003 Aug. 2022 40 yrs.
Millsboro, DE - 1,180 14,286 - - - 1,180 14,286 - 15,466 150 2001 Aug. 2022 40 yrs.
New Castle, DE 4,367 1,110 15,787 - - - 1,110 15,787 - 16,897 165 2005 Aug. 2022 40 yrs.
Rehoboth, DE 8,215 1,565 18,284 - 10 - 1,565 18,284 10 19,859 192 1999 Aug. 2022 40 yrs.
Chicago, IL - 787 4,931 - 67 - 787 4,971 27 5,785 53 1990 Aug. 2022 40 yrs.
Gilroy, CA - 3,058 13,014 - 8 - 3,058 13,022 - 16,080 137 1999 Aug. 2022 40 yrs.
$ 292,647 $ 122,253 $ 906,396 $ 3,622 $ 41,843 $ 3,212 $ 122,317 $ 947,171 $ 7,838 $ 1,077,326 $ 28,295
__________
(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 (Note 6), (v) reclassifications from net investments in direct financing leases to real estate subject to operating leases, and (vi) 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 $3.4 billion and the related accumulated amortization of $1.6 billion, (ii) gross lease intangible liabilities of $309.9 million and the related accumulated amortization of $125.3 million, (iii) sale-leasebacks classified as loans receivable of $234.2 million, (iv) secured loans receivable of $39.3 million (as disclosed in Schedule IV - Mortgage Loans on Real Estate), (v) assets held for sale, net of $57.9 million, and (vi) real estate under construction of $40.8 million.
(d)A reconciliation of real estate and accumulated depreciation follows:
W. P. Carey 2022 10-K - 133
W. P. CAREY INC.
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
Reconciliation of Real Estate Subject to Operating Leases
Years Ended December 31,
2022 2021 2020
Beginning balance $ 11,677,185 $ 10,736,752 $ 9,703,504
Acquisitions 997,937 1,144,757 555,032
Acquisitions through CPA:18 Merger 881,613 - -
Foreign currency translation adjustment (269,272) (267,018) 290,559
Dispositions (165,516) (80,129) (167,671)
Reclassification from real estate under construction 147,982 86,179 176,211
Reclassification from direct financing leases 67,001 76,929 183,789
Impairment charges (36,624) (24,246) (26,343)
Capital improvements 29,419 14,589 35,722
Reclassification to assets held for sale (13,093) (10,628) (14,051)
Ending balance $ 13,316,632 $ 11,677,185 $ 10,736,752
Reconciliation of Accumulated Depreciation for
Real Estate Subject to Operating Leases
Years Ended December 31,
2022 2021 2020
Beginning balance $ 1,448,020 $ 1,206,912 $ 950,452
Depreciation expense 298,972 286,347 259,337
Dispositions (47,463) (17,582) (24,786)
Foreign currency translation adjustment (26,400) (25,298) 24,764
Reclassification to assets held for sale (1,038) (2,359) (2,855)
Ending balance $ 1,672,091 $ 1,448,020 $ 1,206,912
Reconciliation of Operating Real Estate
Years Ended December 31,
2022 2021 2020
Beginning balance $ 83,673 $ 83,476 $ 83,083
Acquisitions through CPA:18 Merger 922,161 - -
Reclassification from real estate under construction 66,820 - -
Foreign currency translation adjustment 3,526 - -
Capital improvements 1,146 197 393
Ending balance $ 1,077,326 $ 83,673 $ 83,476
Reconciliation of Accumulated Depreciation for
Operating Real Estate
Years Ended December 31,
2022 2021 2020
Beginning balance $ 16,750 $ 14,004 $ 11,241
Depreciation expense 11,541 2,746 2,763
Foreign currency translation adjustment 4 - -
Ending balance $ 28,295 $ 16,750 $ 14,004
At December 31, 2022, the aggregate cost of real estate that we and our consolidated subsidiaries own for federal income tax purposes was approximately $16.5 billion.
W. P. Carey 2022 10-K - 134
W. P. CAREY INC.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 2022
(dollars in thousands)
Interest Rate Final Maturity Date Carrying Amount
Description
Financing agreement - Cipriani 10.0 % Jul. 2024 $ 28,000
Financing agreement - observation wheel 7.5 % Jun. 2023 11,250
$ 39,250
Reconciliation of Mortgage Loans on Real Estate
Years Ended December 31,
2022 2021 2020
Beginning balance $ 24,143 $ 24,143 $ 47,737
Repayments (34,000) - (11,000)
Acquisition through CPA:18 Merger (Note 6)
28,000 - -
Gain on repayment of secured loan receivable 10,613 - -
Change in allowance for credit losses (Note 6)
10,494 - (12,594)
Ending balance $ 39,250 $ 24,143 $ 24,143
W. P. Carey 2022 10-K - 135

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
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, 2022, 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, 2022 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, 2022. 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, 2022, 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, 2022 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, 2022, 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
Item 9B. Other Information.
None.
W. P. Carey 2022 10-K - 136

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
This information will be contained in our definitive proxy statement for the 2023 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
Item 11. Executive Compensation.
This information will be contained in our definitive proxy statement for the 2023 Annual Meeting of Stockholders, to be filed within 120 days following the end of our fiscal year, and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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 2023 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
Item 13. Certain Relationships and Related Transactions, and Director Independence.
This information will be contained in our definitive proxy statement for the 2023 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
Item 14. Principal Accounting Fees and Services.
This information will be contained in our definitive proxy statement for the 2023 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 2022 10-K - 138
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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 of W. P. Carey Inc. dated June 15, 2017 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. dated June 15, 2017 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 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
4.6 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
4.7 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
4.8 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
4.9 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
4.10 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
W. P. Carey 2022 10-K - 139
Exhibit
No. Description Method of Filing
4.11 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
4.12 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
4.13 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
4.14 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
4.15 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
4.16 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
4.17 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
4.18 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
4.19 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
4.20 Description of Securities Registered under Section 12 of the Exchange Act Incorporated by reference to Exhibit 4.22 to Annual Report on Form 10-K for the year ended December 31, 2019 filed February 21, 2020
4.21 Sixth Supplemental Indenture, dated October 14, 2020, 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 October 14, 2020
4.22 Form of Note representing $500 Million Aggregate Principal Amount of 2.400% Senior Notes due 2031 Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed October 14, 2020
4.23 Seventh Supplemental Indenture, dated February 25, 2021, 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 February 25, 2021
4.24 Form of Note representing $425 Million Aggregate Principal Amount of 2.250% Senior Notes Due 2033 Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed February 25, 2021
4.25 Fifth Supplemental Indenture dated as of March 8, 2021, 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 8, 2021
W. P. Carey 2022 10-K - 140
Exhibit
No. Description Method of Filing
4.26 Form of Note representing €525 Million Aggregate Principal Amount of 0.950% Senior Notes Due 2030 Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed March 8, 2021
4.27 Eighth Supplemental Indenture, dated October 15, 2021, by and between W. P. Carey Inc., as issuer, and U.S. Bank National Association, as trustee Incorporated by reference Exhibit 4.2 to Current Report on Form 8-K filed October 15, 2021
4.28 Form of Note representing $350 Million Aggregate Principal Amount of 2.450% Senior Notes due 2032 Incorporated by reference Exhibit 4.3 to Current Report on Form 8-K filed October 15, 2021
4.29 Form of Note Representing €150,000,000 Aggregate Principal Amount of 3.41% Senior Notes due 2029 Incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q filed November 4, 2022
4.30 Form of Note Representing €200,000,000 Aggregate Principal Amount of 3.70% Senior Notes due 2032 Incorporated by reference to Exhibit 4.2 to Quarterly Report on Form 10-Q filed November 4, 2022
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
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
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No. Description Method of Filing
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 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
10.14 First Amendment (LIBOR Transition), dated as of December 1, 2021, to the Fourth Amended and Restated Credit Agreement, dated as of February 20, 2020, among W. P. Carey Inc. and Bank of America, N.A., as administrative agent
Incorporated by reference to Exhibit 10.18 to Annual Report on Form 10-K filed February 11, 2022
10.15 Second Amendment, dated as of April 19, 2022, to the Fourth Amended and Restated Credit Agreement, dated as of February 20, 2020, by and among W. P. Carey Inc. as Borrower, certain Subsidiaries of W. P. Carey identified therein, from time to time 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 Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed April 22, 2022
10.16 Third Amendment, dated as of January 26, 2023, to the Fourth Amended and Restated Credit Agreement, dated as of February 20, 2020, is entered into among W. P. Carey Inc., as Parent Borrower, each of the Lenders party hereto, each of the L/C Issuers party hereto, and Bank of America, N.A., as administrative agent Filed herewith
10.17 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
10.18 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
10.19 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
10.20 Agency Agreement dated as of March 8, 2021, 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 March 8, 2021
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No. Description Method of Filing
10.21 Equity Sales Agreement, dated May 2, 2022, 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, JMP Securities LLC, J.P. Morgan Securities LLC, RBC Capital Markets, LLC, Regions Securities LLC, Scotia Capital (USA) Inc., 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, Regions Securities LLC, Royal Bank of Canada, 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 May 3, 2022
10.22 Form of Forward Confirmation Incorporated by reference to Exhibit 1.2 to Current Report on Form 8-K, filed May 3, 2022
10.23 Note Purchase Agreement, dated August 31, 2022, by and among W. P. Carey Inc. and the purchasers listed in the purchaser schedule thereto Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed September 1, 2022
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
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Exhibit
No. Description Method of Filing
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
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) 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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