Subsequent Events

CPA^®:16 Merger

On July 25, 2013, we and CPA^®:16 – Global entered into a definitive agreement pursuant to which CPA^®:16 – Global would merge with and into one of our wholly-owned subsidiaries, subject to the approval of our stockholders and the stockholders of CPA^®:16 – Global. On January 24, 2014, our stockholders and the stockholders of CPA^®:16 – Global each approved the CPA^®:16 Merger, and the CPA^®:16 Merger closed on January 31, 2014.

In the CPA^®:16 Merger, CPA^®:16 – Global stockholders received 0.1830 shares of our common stock in exchange for their shares of CPA^®:16 – Global stock, pursuant to an exchange ratio based upon a value of $11.25 per share of CPA^®:16 – Global and the volume weighted average trading price, or VWAP, of our common stock for the five consecutive trading days ending on the third trading day preceding the closing of the transaction on January 31, 2014. CPA^®:16 – Global stockholders received cash in lieu of any fractional shares in the CPA^®:16 Merger. We paid total merger consideration of approximately $1.8 billion, including the issuance of 30,729,878 shares of our common stock with a fair value of $1.8 billion, based on the closing price of our common stock on January 31, 2014, of $59.08 per share, to the stockholders of CPA^®:16 – Global in exchange for the 168,041,772 shares of CPA^®:16 – Global common stock that we and our affiliates did not previously own, and cash of $1.3 million paid in lieu of issuing any fractional shares. As a condition of the CPA^®:16 Merger, we waived the subordinated disposition and termination fees that we would have been entitled to receive from CPA^®:16 – Global upon its liquidation pursuant to the terms of our advisory agreement with CPA^®:16 – Global (Note 4).

Immediately prior to the CPA^®:16 Merger, CPA^®:16 – Global’s portfolio was comprised of the consolidated full or partial interests in 327 leased properties, substantially all of which were triple-net leased with an average remaining life of 10.4 years and an estimated annual contractual minimum base rent totaling $300.1 million, and two hotel properties. The related property-level debt was comprised of 92 fixed-rate and 18 variable-rate non-recourse mortgage loans with an aggregate fair value of approximately $1.7 billion and a weighted-average annual interest rate of 5.6%. In addition, CPA^®:16 – Global had equity interests in 18 unconsolidated investments, eleven of which were consolidated by us prior to the CPA^®:16 Merger, five are consolidated by us subsequent to the CPA^®:16 Merger and two are jointly-owned with CPA^®:17 – Global . These investments own 140 properties, substantially all of which were triple-net leased with an average remaining life of 8.6 years and an estimated annual contractual minimum base rent totaling $63.9 million. The debt related to these equity investments was comprised of 17 fixed-rate and five variable-rate non-recourse mortgage loans with an aggregate fair value of approximately $0.3 billion and a weighted-average annual interest rate of 4.8%.

Preliminary Purchase Price Allocation

We accounted for the CPA^®:16 Merger as a business combination under the acquisition method of accounting. After consideration of all applicable factors pursuant to the business combination accounting rules, we were considered the “accounting acquirer” due to various factors, including the fact that our stockholders held the largest portion of the voting rights in us upon completion of the CPA^®:16 Merger. Costs of $5.0 million related to the CPA^®:16 Merger have been expensed as incurred and classified within Merger and acquisition expenses in the consolidated statements of income for the year ended December 31, 2013.

The purchase price was allocated to the assets acquired and liabilities assumed, based upon their preliminary fair values at January 31, 2014. The fair values of the lease intangibles acquired were measured in a manner consistent with our purchase price allocation policy described in Note 2. The following table summarizes the preliminary 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 real estate, net investments in direct financing leases, equity investments in real estate, non-recourse debt and amounts attributable to noncontrolling interests were based on preliminary valuation data and estimates. Accordingly, the fair value of these assets and liabilities and the impact to goodwill are subject to change.



	Preliminary Purchase Price Allocation (in thousands)
Total Consideration
Fair value of W. P. Carey shares of common stock issued	$	1,815,521
Cash consideration for fractional shares	1,338
Merger Consideration	1,816,859
Fair value of our equity interest in CPA^®:16 – Global prior to the CPA^®:16 Merger	324,049
Fair value of our equity interest in jointly-owned investments with CPA^®:16 – Global prior to the CPA^®:16 Merger	156,205
Fair value of noncontrolling interests acquired	(259,455		)
	$	2,037,658
Assets Acquired at Fair Value
Net investments in properties	$	2,018,445
Net investments in direct financing leases	496,723
Equity investments in real estate	68,608
Notes receivable	21,419
In-place lease intangible assets, net (weighted-average life - 12.8 years)	568,692
Above-market rent intangible assets, net (weighted-average life - 12.1 years)	387,206
Cash and cash equivalents	70,672
Other assets, net	71,969
	3,703,734
Liabilities Assumed at Fair Value
Non-recourse debt and line of credit	(1,728,382		)
Below-market rent and other intangible liabilities (weighted-average life - 19.3 years)	(66,183		)
Accounts payable, accrued expenses and other liabilities	(123,036		)
Deferred tax liability	(44,795		)
	(1,962,396		)

Total identifiable net assets	1,741,338
Amounts attributable to noncontrolling interests	(96,139		)
Goodwill	392,459
	$	2,037,658

Goodwill

The $392.5 million of preliminary estimated goodwill recorded in the CPA^®:16 Merger was primarily due to the $428.5 million premium we paid on CPA^®:16 – Global’s common stock. At the time we entered into the merger agreement, the consideration of $11.25 per common share of CPA^®:16 – Global represented a premium of $2.55 per share over the December 31, 2012 estimated NAV of CPA^®:16 – Global, which was $8.70. Management believes the premium is supported by several factors of the combined entity, including the fact that (i) it is among the largest publicly traded REITs with greater operating and financial flexibility and better access to capital markets and with a lower cost of capital than CPA^®:16 – Global had on a stand-alone basis; (ii) the CPA^®:16 Merger eliminated costs associated with the advisory structure that CPA^®:16 – Global had previously; and (iii) the combined portfolio has greater tenant and geographic diversification and an improved overall weighted-average debt maturity and interest rate.

The fair value of the 30,729,878 shares of our common stock issued in the CPA^®:16 Merger as part of the consideration paid for CPA^®:16 of $1.8 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^®:16 Merger, in a manner consistent with the methodology described above.

Goodwill is not deductible for income tax purposes.

Pro Forma Financial Information (Unaudited)

The following unaudited consolidated pro forma financial information has been presented as if the CPA^®:16 Merger, had occurred on January 1, 2013 for the year ended December 31, 2013. The pro forma financial information is not necessarily indicative of what the actual results would have been had the CPA^®:16 Merger on that date, nor does it purport to represent the results of operations for future periods.

(in thousands, except share and per share amounts):



Pro forma total revenues	$	787,219
Pro forma income attributable to W. P. Carey	$	85,827

Pro forma earnings per share: ^(a)
Basic	$	0.86
Diluted	$	0.85

Pro forma weighted-average shares: ^(b)
Basic	99,420,924
Diluted	100,437,886

___________


(a)	The pro forma income attributable to W. P. Carey reflects combined merger expenses of $36.3 million incurred related to the CPA^®:16 Merger for the year ended December 31, 2013 as if the CPA^®:16 Merger had taken place on January 1, 2013.


(b)	The pro forma weighted average shares outstanding for the year ended December 31, 2013 were determined as if the 30,729,878 shares of our common stock issued to CPA^®:16 stockholders in the CPA^®:16 Merger were issued on January 1, 2013.

New Senior Credit Facility

In January 2014, we entered into the Second Amended and Restated Credit Agreement with various banks to increase the maximum aggregate principal amount from $625.0 million to $1.25 billion, which is comprised of a $1.0 billion unsecured revolving credit facility and a $250.0 million term loan facility. The revolving credit facility matures in four years but may be extended by one year at our option, subject to the conditions provided in the credit agreement. The term loan facility matures in two years but we have two options to extend the maturity by another year. In connection with obtaining the new line of credit, we incurred financing costs totaling $8.6 million, to be amortized to interest expense over the life of the facilities. On January 31, 2014, we drew down $765.0 million, to repay and terminate our Prior Senior Credit Facility, and our Unsecured Term Loan, as well as CPA^®:16 – Global’s line of credit in connection with the CPA^®:16 Merger.

2014 LTIP Awards

In February 2014, the compensation committee of our board of directors approved long-term incentive plan awards to key employees consisting of 161,960 RSUs and 79,654 PSUs that will have a dilutive impact on our earnings per share calculation.