WPC 2013 Q4 10-K EXH 99.2

EX-99.2 8 wpc2013q410-kexh992.htm EXHIBIT WPC 2013 Q4 10-K EXH 99.2



	Exhibit 99.2

CORPORATE PROPERTY ASSOCIATES 16 – GLOBAL INCORPORATED


TABLE OF CONTENTS
	Page No.
Report of Independent Registered Public Accounting Firm	2
Consolidated Balance Sheets	3
Consolidated Statements of Income	4
Consolidated Statements of Comprehensive Income (Loss)	5
Consolidated Statements of Equity	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	10

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Corporate Property Associates 16 - Global Incorporated:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income (loss), equity and cash flows present fairly, in all material respects, the financial position of Corporate Property Associates 16 – Global Incorporated and its subsidiaries (“the Company”) at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York

March 3, 2014



	Exhibit 99.2 — 2




CORPORATE PROPERTY ASSOCIATES 16 – GLOBAL INCORPORATED

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

					December 31,
					2013		2012
Assets
Investments in real estate:
	Real estate, at cost (inclusive of $113,223 and $528,858, respectively, attributable to variable
		interest entities (“VIEs”))			$	2,158,181	$	2,243,470
	Operating real estate, at cost (inclusive of $29,219 and $29,219, respectively, attributable to VIEs)					86,065		85,565
	Accumulated depreciation (inclusive of $19,822 and $68,529, respectively, attributable to VIEs)					(306,011)		(258,655)
			Net investments in properties			1,938,235		2,070,380
Net investments in direct financing leases (inclusive of $43,789 and $48,363, respectively,
	attributable to VIEs)					427,279		467,831
Equity investments in real estate						265,343		227,675
			Net investments in real estate			2,630,857		2,765,886
Notes receivable (inclusive of $11,524 and $33,558, respectively, attributable to VIEs)						21,419		43,394
Cash and cash equivalents (inclusive of $1,567 and $10,993, respectively, attributable to VIEs)						70,672		66,405
In-place lease intangible assets, net (inclusive of $28,696 and $40,931, respectively,
	attributable to VIEs)					212,062		260,120
Other intangible assets, net (inclusive of $8,219 and $21,251, respectively, attributable to VIEs)						152,894		182,972
Funds in escrow (inclusive of $1,838 and $3,268, respectively, attributable to VIEs)						25,319		23,274
Other assets, net (inclusive of $3,864 and $5,225, respectively, attributable to VIEs)						81,357		64,741
				Total assets	$	3,194,580	$	3,406,792

Liabilities and Equity
Liabilities:
Non-recourse debt (inclusive of $124,811 and $485,951, respectively, attributable to VIEs)					$	1,518,325	$	1,644,180
Line of credit						155,000		143,000
Accounts payable, accrued expenses, and other liabilities (inclusive of $970 and $12,409, respectively,
	attributable to VIEs)					66,829		40,931
Prepaid and deferred rental income and security deposits (inclusive of $17,556 and $25,402, respectively,
	attributable to VIEs)					86,485		93,208
Due to affiliates						4,306		6,401
Distributions payable						34,744		33,965
				Total liabilities		1,865,689		1,961,685
Redeemable noncontrolling interest						-		21,747
Commitments and contingencies (Note 12)

Equity:
CPA^®:16 – Global stockholders’ equity:
Common stock $0.001 par value, 400,000,000 shares authorized;
	221,841,495 and 216,822,067 shares issued, respectively; and
	206,279,678 and 202,617,274 shares outstanding, respectively					222		217
Additional paid-in capital						2,025,418		1,980,984
Distributions and accumulated losses						(605,380)		(500,050)
Accumulated other comprehensive loss						(18,098)		(27,043)
Less: treasury stock at cost, 15,561,817 and 14,204,793 shares, respectively						(137,783)		(126,228)
				Total CPA^®:16 – Global stockholders’ equity		1,264,379		1,327,880
Noncontrolling interests						64,512		95,480
				Total equity		1,328,891		1,423,360
				Total liabilities and equity	$	3,194,580	$	3,406,792

See Notes to Consolidated Financial Statements.



	Exhibit 99.2 — 3



CORPORATE PROPERTY ASSOCIATES 16 – GLOBAL INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME
(in thousands)

		Years Ended December 31,
		2013		2012		2011
Revenues
	Lease revenues:
	Rental income	$	230,963	$	230,829	$	221,674
	Interest income from direct financing leases		36,616		36,372		32,414
	Total lease revenues		267,579		267,201		254,088
	Other real estate income		28,399		27,352		25,950
	Other operating income		9,647		7,803		8,259
	Interest income on notes receivable		2,512		3,520		4,463
			308,137		305,876		292,760
Operating Expenses
	Depreciation and amortization		88,043		89,926		80,207
	Property expenses		56,496		35,330		34,976
	General and administrative		22,942		16,428		27,777
	Other real estate expenses		20,296		20,330		19,218
	Allowance for credit losses		3,626		-		-
	Impairment charges		2,589		4,764		9,441
	Issuance of Special Member Interest		-		-		34,300
			193,992		166,778		205,919
Other Income and Expenses
	Net income from equity investments in real estate		23,423		17,752		22,071
	Other income and (expenses)		2,590		979		(529)
	Gain on deconsolidation of a subsidiary		1,580		-		-
	(Loss) gain on extinguishment of debt		(2,451)		5,472		3,701
	Interest expense		(93,730)		(99,322)		(101,241)
	Bargain purchase gain on acquisition		-		1,617		28,709
			(68,588)		(73,502)		(47,289)
	Income from continuing operations before income taxes		45,557		65,596		39,552
	Provision for income taxes		(12,763)		(10,950)		(11,500)
	Income from continuing operations		32,794		54,646		28,052

Discontinued Operations
	Income from operations of discontinued properties, net of tax		15,867		2,527		6,661
	Gain on deconsolidation of a subsidiary, net of tax		4,699		-		1,167
	(Loss) gain on sale of real estate, net of tax		(318)		(4,087)		201
	Loss on extinguishment of debt, net of tax		(1,746)		(342)		(566)
	Allowance for credit losses, net of tax		(5,732)		-		-
	Impairment charges, net of tax		(12,349)		(11,294)		(14,222)
	Income (loss) from discontinued operations, net of tax		421		(13,196)		(6,759)

Net Income			33,215		41,450		21,293
	Net loss (income) attributable to noncontrolling interests (inclusive of Available Cash Distributions to advisor of $15,182, $15,389, and $6,157, respectively)		1,079		(25,576)		(9,891)
	Net (income) loss attributable to redeemable noncontrolling interests		(1,556)		2,192		(1,902)
Net Income Attributable to CPA^®:16 – Global		$	32,738	$	18,066	$	9,500

See Notes to Consolidated Financial Statements.



	Exhibit 99.2 — 4



CORPORATE PROPERTY ASSOCIATES 16 – GLOBAL INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)

		Years Ended December 31,
		2013		2012		2011
Net Income		$	33,215	$	41,450	$	21,293
Other Comprehensive Income (Loss)
	Foreign currency translation adjustments		9,814		7,905		(18,873)
	Change in unrealized (depreciation) appreciation on marketable securities		(17)		43		(92)
	Change in unrealized gain (loss) on derivative instruments		1,648		(5,851)		(849)
			11,445		2,097		(19,814)
Comprehensive Income			44,660		43,547		1,479

Amounts Attributable to Noncontrolling Interests
	Net loss (income)		1,079		(25,576)		(9,891)
	Foreign currency translation adjustments		(1,595)		(1,169)		(5,266)
	Change in unrealized appreciation on marketable securities		-		-		(21)
Comprehensive income attributable to noncontrolling interests			(516)		(26,745)		(15,178)

Amounts Attributable to Redeemable Noncontrolling Interest
	Net (income) loss		(1,556)		2,192		(1,902)
	Foreign currency translation adjustments		(905)		(441)		499
Comprehensive (income) loss attributable to redeemable noncontrolling interest			(2,461)		1,751		(1,403)

Comprehensive Income (Loss) Attributable to CPA^®:16 – Global		$	41,683	$	18,553	$	(15,102)

See Notes to Consolidated Financial Statements.



	Exhibit 99.2 — 5

CORPORATE PROPERTY ASSOCIATES 16 – GLOBAL INCORPORATED

CONSOLIDATED STATEMENTS OF EQUITY

Years Ended December 31, 2013, 2012, and 2011

(in thousands, except share and per share amounts)



		CPA^®:16 – Global Stockholders
								Distributions		Accumulated				Total
		Total				Additional		and		Other				CPA^®:16 –
		Outstanding		Common		Paid-In		Accumulated		Comprehensive		Treasury		Global		Noncontrolling
		Shares		Stock		Capital		Losses		Loss		Stock		Stockholders		Interests		Total
Balance at January 1, 2011			125,756,357	$	135	$	1,216,565	$	(275,948)	$	(8,460)	$	(81,080)	$	851,212	$	79,139	$	930,351
Shares issued, net of offering costs			3,746,731		3		31,327								31,330				31,330
Shares issued to affiliates			15,641,539		16		137,752								137,768				137,768
Shares issued to shareholders of CPA^®:14 in the CPA^®:14/16 Merger			57,365,145		57		510,492								510,549				510,549
Issuance of noncontrolling interest															-		78,136		78,136
Purchase of noncontrolling interests through CPA^®:14/16 Merger							3,543				5,532				9,075		(54,964)		(45,889)
Issuance of Special Member Interest							34,612								34,612		34,612		69,224
Change of ownership interest															-		(34,300)		(34,300)
Distributions declared ($0.6642 per share)									(116,465)						(116,465)				(116,465)
Contributions from noncontrolling interests															-		2,271		2,271
Distributions to noncontrolling interests															-		(42,846)		(42,846)
Net income									9,500						9,500		9,891		19,391
Other comprehensive loss:
	Foreign currency translation adjustments										(23,640)				(23,640)		5,266		(18,374)
	Change in unrealized loss on derivative instruments										(849)				(849)				(849)
	Change in unrealized depreciation on marketable securities										(113)				(113)		21		(92)
Repurchase of shares			(2,250,087)										(18,922)		(18,922)				(18,922)
Balance at December 31, 2011			200,259,685		211		1,934,291		(382,913)		(27,530)		(100,002)		1,424,057		77,226		1,501,283
Shares issued, net of offering costs			4,064,041		5		34,974								34,979				34,979
Shares issued to affiliates			1,295,937		1		11,719								11,720				11,720
Distributions declared ($0.6692 per share)									(135,203)						(135,203)				(135,203)
Contributions from noncontrolling interests															-		20,797		20,797
Distributions to noncontrolling interests															-		(29,288)		(29,288)
Net income									18,066						18,066		25,576		43,642
Other comprehensive income:
	Foreign currency translation adjustments										6,295				6,295		1,169		7,464
	Change in unrealized loss on derivative instruments										(5,851)				(5,851)				(5,851)
	Change in unrealized appreciation on marketable securities										43				43				43
Repurchase of shares			(3,002,389)										(26,226)		(26,226)				(26,226)
Balance at December 31, 2012			202,617,274		217		1,980,984		(500,050)		(27,043)		(126,228)		1,327,880		95,480		1,423,360
Shares issued, net of offering costs			3,904,614		4		32,645								32,649				32,649
Shares issued to affiliates			1,114,814		1		9,732								9,733				9,733
Hellweg 2 option exercise							2,057								2,057		(2,057)		-
Distributions declared ($0.6724 per share)									(138,068)						(138,068)				(138,068)
Contributions from noncontrolling interests															-		461		461
Distributions to noncontrolling interests															-		(29,888)		(29,888)
Net income									32,738						32,738		(1,079)		31,659
Other comprehensive income:
	Foreign currency translation adjustments										7,314				7,314		1,595		8,909
	Change in unrealized gain on derivative instruments										1,648				1,648				1,648
	Change in unrealized depreciation on marketable securities										(17)				(17)				(17)
Repurchase of shares			(1,357,024)										(11,555)		(11,555)				(11,555)
Balance at December 31, 2013			206,279,678	$	222	$	2,025,418	$	(605,380)	$	(18,098)	$	(137,783)	$	1,264,379	$	64,512	$	1,328,891

See Notes to Consolidated Financial Statements.



	Exhibit 99.2 — 6



CORPORATE PROPERTY ASSOCIATES 16 – GLOBAL INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

			Years Ended December 31,
			2013		2012		2011
Cash Flows — Operating Activities
Net income			$	33,215	$	41,450	$	21,293
Adjustments to net income:
	Depreciation and amortization including intangible assets and deferred financing costs			94,437		104,585		92,026
	Net (income) loss from equity investments in real estate in excess of distributions received			(2,863)		3,293		(824)
	Gain on bargain purchase			-		(1,617)		(28,709)
	Issuance of Special Member Interest			-		-		34,300
	Gain on deconsolidation of a subsidiary			(6,279)		-		(1,167)
	(Gain) loss on sale of real estate			(55)		4,087		(471)
	Unrealized (gain) loss on foreign currency transactions and other			(1,671)		455		2,308
	Realized (gain) loss on foreign currency transactions and other			(329)		17		(1,815)
	Straight-line rent adjustment and amortization of rent-related intangibles			16,650		16,463		357
	Loss (gain) on extinguishment of debt			-		(5,130)		(3,135)
	Impairment charges			14,938		16,058		23,663
	Allowance for credit losses			9,358		-		-
	Net changes in other operating assets and liabilities			18,750		11,278		19,101
Net Cash Provided by Operating Activities				176,151		190,939		156,927

Cash Flows — Investing Activities
	Distributions received from equity investments in real estate in excess of equity income			13,148		14,489		38,034
	Capital contributions to equity investments in real estate related to transactions			(45,319)		-		-
	Distributions received from equity investments in real estate related to transactions			1,890		-		-
	Acquisitions of real estate			(4,772)		(2,621)		(7,794)
	Capital improvements			(2,068)		(504)		-
	Cash acquired through CPA^®:14/16 Merger			-		-		189,438
	Cash and other distributions paid to liquidating shareholders of CPA^®:14 in connection with the CPA^®:14/16 Merger			-		-		(539,988)
	Cash acquired on issuance of additional shares in subsidiary			-		-		7,121
	Maturities (purchases) of debt securities			130		133		(4,340)
	Proceeds from sale of real estate			127,668		25,066		131,077
	Funds placed in escrow			(11,438)		(16,648)		(11,735)
	Funds released from escrow			10,015		16,960		18,828
	Payment of deferred acquisition fees to an affiliate			(546)		(1,633)		(1,911)
	Proceeds from repayment of notes receivable			286		37,356		-
	Cash receipts from direct financing leases greater than revenue recognized			5,296		-		-
Net Cash Provided by (Used in) Investing Activities				94,290		72,598		(181,270)

Cash Flows — Financing Activities
	Distributions paid			(137,289)		(134,649)		(103,880)
	Contributions from noncontrolling interests			2,833		20,797		2,597
	Distributions to noncontrolling interests			(32,299)		(31,108)		(44,768)
	Scheduled payments of mortgage principal			(43,748)		(85,990)		(52,034)
	Prepayments of mortgage principal			(105,824)		(62,439)		(155,489)
	Proceeds from mortgage financing			15,955		67,555		76,275
	Proceeds from line of credit			170,000		35,000		327,000
	Repayments of line of credit			(158,000)		(119,000)		(100,000)
	Funds placed in escrow			56		83		64
	Funds released from escrow			(62)		(2,738)		(1,025)
	Deferred financing costs and mortgage deposits			(290)		(3,568)		(6,080)
	Proceeds from issuance of shares, net of issuance costs			32,582		34,911		152,330
	Purchase of treasury stock			(11,555)		(26,226)		(18,922)
Net Cash (Used in) Provided by Financing Activities				(267,641)		(307,372)		76,068

Change in Cash and Cash Equivalents During the Year
		Effect of exchange rate changes on cash		1,467		546		(1,043)
		Net increase (decrease) in cash and cash equivalents		4,267		(43,289)		50,682
	Cash and cash equivalents, beginning of year			66,405		109,694		59,012
	Cash and cash equivalents, end of year		$	70,672	$	66,405	$	109,694

(Continued)



	Exhibit 99.2 — 7

CORPORATE PROPERTY ASSOCIATES 16 – GLOBAL INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

Supplemental non-cash investing and financing activities:

During 2013, we deconsolidated an investment with carrying values for its net investment in properties, non-recourse debt, and accrued interest payable of $8.7 million, $13.0 million, and $0.4 million, respectively, and recognized a gain on the deconsolidation of $4.7 million (Note 16).

During 2013, we deconsolidated an investment with carrying values for its net investment in direct financing leases, non-recourse debt, and accrued interest payable of $2.4 million, $3.7 million, and $0.3 million, respectively, and recognized a gain on the deconsolidation of $1.6 million (Note 6).

During 2013, we incurred trade taxes related to prior years’ activity on our Hellweg Die Profi-Baumärkte GmbH & Co. KG (“Hellweg 2”) investment of $2.4 million. The taxes were attributable to our third-party partner’s redeemable noncontrolling interest in the investment and paid by that partner.

In a series of transactions which were completed during 2013, our Hellweg 2 Note was effectively redeemed in exchange for the redeemable noncontrolling interest in our PropCo subsidiary, as described in Note 6. Both the Hellweg 2 Note and the redeemable noncontrolling interest in our PropCo subsidiary had a carrying value of approximately $22.7 million at the time of redemption (Note 14).

During 2013, we reclassified $0.6 million related to a property from Net investments in direct financing leases to Real estate in connection with a tenant lease termination (Note 6).

During 2013, 2012, and 2011, we paid asset management fees of $9.8 million, $11.8 million, and $16.8 million, respectively, to W. P. Carey Inc. (“WPC”) and its subsidiaries (collectively, the “advisor”) in shares of our common stock (Note 4).

During 2013, in connection with the sale of a property to an existing tenant, we modified the terms of its remaining lease obligations to include a portion of the sale price of the disposed building in its future rental payments in the amount of $9.7 million.

During the fourth quarter of 2013 and 2012, we declared distributions totaling $34.7 million and $34.0 million, respectively, which were paid on January 15, 2014 and 2013, respectively.

During 2011, we deconsolidated an investment with carrying values for its net investment in properties, intangible assets, net, other assets, net, non-recourse debt, and accounts payable, accrued expenses, and other liabilities of $36.5 million, $1.5 million, less than $0.1 million, $38.7 million, and $0.6 million, respectively, and recognized a gain on the deconsolidation of $1.2 million (Note 16).

In January 2011, we acquired shares in a subsidiary of Corporate Property Associates 14 Incorporated (“CPA^®:14”) that owns ten properties in France (the “Carrefour Properties”) in exchange for newly issued shares in one of our wholly-owned subsidiaries with a fair value of $75.5 million. The newly issued equity in our subsidiary, which is in substance real estate, resulted in a reduction of our effective ownership stake in the entity from 100% to 3%; however, we continued to consolidate this entity in the first quarter of 2011 because we effectively bought back these shares as part of the CPA^®:14 merger with and into CPA 16 Merger Sub, Inc. (“CPA 16 Merger Sub”) (the “CPA^®:14/16 Merger,” Note 3). As a result of the CPA^®:14/16 Merger, we acquired the remaining 97% interest in this entity on May 2, 2011.

On May 2, 2011, we acquired all of the outstanding stock of CPA^®:14 in exchange for 57,365,145 newly issued shares of our common stock with a fair value of $510.5 million and cash of $444.0 million in the CPA^®:14/16 Merger.



	Exhibit 99.2 — 8

These transactions consisted of the acquisition and assumption of certain assets and liabilities, respectively, as detailed in the table below (in thousands):




		Carrefour		CPA^®:14
Assets Acquired at Fair Value:
	Investments in real estate	$	97,722	$	604,093
	Net investment in direct financing leases		-		161,414
	Assets held for sale		-		11,202
	Equity investments in real estate		-		134,609
	Intangible assets		48,029		418,631
	Other assets, net		154		27,264
Liabilities Assumed at Fair Value:
	Non-recourse debt		(81,671)		(460,007)
	Accounts payable, accrued expenses, and other liabilities		(1,193)		(9,878)
	Prepaid and deferred rental income and security deposits		(96)		(49,412)
	Due to affiliates		-		(2,753)
	Distributions payable		-		(95,943)
	Amounts attributable to noncontrolling interests		(70,066)		58,188
Net (liabilities assumed) assets acquired excluding cash			(7,121)		797,408
Fair value of common shares issued			-		(510,549)
Cash consideration			-		(444,045)
Change in interest upon acquisition of noncontrolling interest of Carrefour			-		(3,543)
Bargain purchase gain on acquisition			-		(28,709)
Cash acquired on acquisition of subsidiaries, net		$	(7,121)	$	(189,438)

Supplemental cash flow information (in thousands):



	Years Ended December 31,
	2013		2012		2011
Interest paid	$	95,946	$	104,819	$	107,429
Income taxes paid	$	9,791	$	9,741	$	8,431

See Notes to Consolidated Financial Statements.



	Exhibit 99.2 — 9

CORPORATE PROPERTY ASSOCIATES 16 – GLOBAL INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Business and Organization

Corporate Property Associates 16 – Global Incorporated (“CPA^®:16 – Global” and, together with its consolidated subsidiaries and predecessors, “we,” “us,” or “our”) was a publicly owned, non-listed real estate investment trust (“REIT”) that invested primarily in commercial properties leased to companies domestically and internationally. On July 25, 2013, we and WPC entered into a merger agreement pursuant to which we will merge with and into one of WPC’s subsidiaries and CPA^®:16 – Global’s stockholders will receive shares of WPC common stock as merger consideration, based on a fixed value of $11.25 per share, subject to a pricing collar (the “Merger”). On January 24, 2014, our stockholders and the stockholders of WPC approved the Merger and it was completed on January 31, 2014 (Note 4, Note 17).

We were formed in 2003 and were managed by the advisor. As a REIT, we are not subject to United States (“U.S.”) federal income taxation as long as we satisfy certain requirements, principally relating to the nature of our income, the level of our distributions, and other factors. We earn revenue principally by leasing the properties we own to single corporate tenants, primarily on a triple-net lease basis, which requires the tenant to pay substantially all of the costs associated with operating and maintaining the property. Revenue is subject to fluctuation primarily because of the timing of new lease transactions, lease terminations, lease expirations, contractual rent adjustments, tenant defaults, and sales of properties.

At December 31, 2013, our portfolio was comprised of our full or partial ownership interests in 467 properties, substantially all of which were triple-net leased to 139 tenants, and totaled approximately 45 million square feet (unaudited), with an occupancy rate of approximately 97.8% (unaudited). In addition, our portfolio contained our ownership interests in two hotel properties, which had an aggregate net carrying value of $66.7 million at December 31, 2013.

On May 2, 2011, CPA^®:14 merged with and into CPA 16 Merger Sub, one of our wholly-owned subsidiaries. Following the consummation of the CPA^®:14/16 Merger, we implemented an internal reorganization pursuant to which we were reorganized as an umbrella partnership real estate investment trust (the “UPREIT Reorganization”) to hold substantially all of our assets and liabilities in CPA 16 LLC (the “Operating Partnership”), a Delaware limited liability company subsidiary (Note 3). At December 31, 2013, we owned 99.985% of general and limited partnership interests in the Operating Partnership. The remaining 0.015% interest (the “Special Member Interest”) in the Operating Partnership is held by a subsidiary of WPC.

Note 2. Summary of Significant Accounting Policies

Basis of Consolidation

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

When we obtain an economic interest in an entity, we evaluate the entity to determine if it is deemed a variable interest entity (“VIE”). 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 can cause us to consider an entity a VIE.

We review the contractual arrangements provided for in the partnership agreement or other related contracts to determine whether the entity is considered a VIE, and to establish whether we have any variable interests in the VIE. We then compare our variable interests, if any, to those of the other variable interest holders to determine which party is the primary beneficiary of a VIE based on whether the entity (i) has the power to direct the activities that most significantly impact the economic performance of the VIE, and (ii) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

For an entity that is not considered to be a VIE, the general partners in a limited partnership (or similar entity) are presumed to control the entity regardless of the level of their ownership and, accordingly, may be required to consolidate the entity. We evaluate the partnership agreements or other relevant contracts to determine whether there are provisions in the agreements that would overcome this presumption. If the agreements provide the limited partners with either (a) the substantive ability to dissolve or liquidate the



	Exhibit 99.2 — 10

Notes to Consolidated Financial Statements

limited partnership or otherwise remove the general partners without cause or (b) substantive participating rights, the limited partners’ rights overcome the presumption of control by a general partner of the limited partnership, and, therefore, the general partner must account for its investment in the limited partnership using the equity method of accounting.

We have investments in tenancy-in-common interests in various domestic and international properties. Consolidation of these investments is not required as such interests do not qualify as VIEs and do not meet the control requirement required for consolidation. Accordingly, we account for these investments using the equity method of accounting. We use the equity method of accounting because the shared decision-making involved in a tenancy-in-common interest investment provides us with significant influence on the operating and financial decisions of these investments.

Additionally, we own interests in single-tenant net leased properties leased to companies through noncontrolling interests in partnerships and limited liability companies that we do not control but over which we exercise significant influence. We account for these investments under the equity method of accounting. At times, the carrying value of our equity investments may fall below zero for certain investments. We intend to fund our share of the jointly-owned investments’ future operating deficits should the need arise. However, we have no legal obligation to pay for any of the liabilities of such investments nor do we have any legal obligation to fund operating deficits.

We previously determined that our Hellweg 2 investment was a VIE and that we were its primary beneficiary. In connection with the Hellweg 2 call option exercise (Note 14), the Hellweg 2 investment was restructured. Subsequent to the restructuring, it did not meet the criteria to be classified as a VIE in accordance with Accounting Standards Codification (“ASC”) 810-10-15-14 and is no longer a VIE. We continue to consolidate our Hellweg 2 investment. There were no other changes to our VIE classifications during 2013.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. The consolidated financial statements included in this Report have been retrospectively adjusted to reflect the disposition (or planned disposition) of certain properties as discontinued operations.

Accounting for Acquisitions

In accordance with the guidance for business combinations, we determine whether a transaction or other event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, we account for the transaction or other event as an asset acquisition. Under both methods, we recognize the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, we evaluate the existence of goodwill or a gain from a bargain purchase. We immediately expense acquisition-related costs and fees associated with business combinations.

Purchase Price Allocation

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. We determine the value of the tangible assets, consisting of land, buildings, and site improvements, and intangible assets, including the above- and below-market value of leases and the value of in-place leases at their estimated fair values. Land is typically valued utilizing the sales comparison (or market approach). Buildings are valued, as if vacant, using the cost and/or income approach. Site improvements are valued using the cost approach. The fair value of real estate is determined by reference to portfolio appraisals which determines their values, on a property level, by applying a discounted cash flow analysis to the estimated net operating income for each property in the portfolio during the remaining anticipated lease term, and the estimated residual value. The estimated residual value of each property is based on a hypothetical sale of the property upon expiration of the lease, factoring in the re-tenanting of such property at estimated current market rental rates, applying a selected capitalization rate and deducting estimated costs of sale. 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, 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 materially favorable to the tenant, or the tenant has long-term renewal options at rental rates below estimated market rental rates, the appraisal assumes the exercise of such purchase option or long-term renewal options in its determination of residual value. Where a property is deemed to have excess land, the discounted cash flow analysis includes the estimated excess land value at the assumed expiration of the lease, based upon an analysis of comparable land sales or listings in the general market area of the property grown at estimated market growth rates through the year of lease expiration. For those properties that are under contract for sale, the appraised value of the portfolio reflects the current contractual sale price of such properties. See Real Estate Leased to Others and Depreciation below for a discussion of our significant accounting policies related to tangible assets.



	Exhibit 99.2 — 11

Notes to Consolidated Financial Statements

We record above- and below-market lease values for owned properties based on the present value (using a discount rate reflecting the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the leases negotiated and 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 a period equal to the estimated lease term which includes renewal options with rental rates below estimated market rental rates. We amortize the capitalized above- lease value as a reduction of rental income over the estimated market lease term. We amortize the capitalized below-market lease value as an increase to rental income over the initial term and any below-market fixed-rate renewal periods in the respective leases. We include the value of below-market leases in Prepaid and deferred rental income and security deposits in the consolidated financial statements.

The value of any in-place lease is estimated to be equal to the property owners’ avoidance of costs necessary to release the property for a lease term equal to the remaining primary in-place lease term and the value of investment grade tenancy. The cost avoidance to the property owners’ of vacancy/leasing costs necessary to lease the property for a lease term equal to the remaining in-place lease term 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 improvement allowances given to tenants. We determine these values using our estimates or by relying in part upon third-party appraisals. We amortize the capitalized value of in-place lease intangibles to expense over the remaining initial term of each lease. No amortization period for intangibles will 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 lease revenue and in-place lease and tenant relationship values to amortization expense. We amortize the capitalized value of in-place lease intangibles and tenant relationships to expense over the remaining initial term of each lease.

When we acquire leveraged properties, the fair value of debt instruments acquired 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 company, the time until maturity and the current interest rate.

Real Estate and Operating Real Estate

We carry land and buildings and personal property at cost less accumulated depreciation. We charge expenditures for maintenance and repairs, including routine betterments, to operations as incurred. We capitalize significant renovations that increase the useful life of the properties.

Real Estate Under Construction

For properties under construction, operating expenses including interest charges and other property expenses, including real estate taxes, are capitalized rather than expensed. We capitalize interest by applying the interest rate applicable to outstanding borrowings to the average amount of accumulated qualifying expenditures for properties under construction during the period.

Assets Held for Sale

We classify those assets that are associated with 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 and we believe it is probable that the disposition will occur within one year. Assets held for sale are recorded at the lower of carrying value or estimated fair value, less estimated costs to sell. The results of operations and the related gain or loss on sale of properties that have been sold or that are classified as held for sale, and in which we will have no significant continuing involvement, are included in discontinued operations (Note 16).

If circumstances arise that we previously considered unlikely and, as a result, we decide not to sell a property previously classified as held for sale, we reclassify the property as held and used. We measure and record a property that is reclassified as held and used at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held and used or (ii) the estimated fair value at the date of the subsequent decision not to sell.

We recognize gains and losses on the sale of properties when, among other criteria, we no longer have continuing involvement, the parties are bound by the terms of the contract, all consideration has been exchanged and all conditions precedent to closing have been performed. At the time the sale is consummated, a gain or loss is recognized as the difference between the sale price, less any selling costs, and the carrying value of the property.



	Exhibit 99.2 — 12

Notes to Consolidated Financial Statements

Notes Receivable

For investments in mortgage notes and loan participations, the loans are initially reflected at acquisition cost which consists of the outstanding balance, net of the acquisition discount or premium. We amortize any discount or premium as an adjustment to increase or decrease, respectively, the yield realized on these loans over the life of the loan. As such, differences between carrying value and principal balances outstanding do not represent embedded losses or gains as we generally plan to hold such loans to maturity.

Allowance for Doubtful Accounts

We consider direct financing leases and notes receivable to be past-due or delinquent when a contractually required principal or interest payment is not remitted in accordance with the provisions of the underlying agreement. We evaluate each account individually and set up an allowance when, based upon current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms, and the amount can be reasonably estimated.

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.

Marketable Securities

Marketable securities, which consist of common stock in publicly traded companies, are classified as available for sale securities and reported at fair value, with any unrealized gains and losses on these securities reported as a component of Other comprehensive income (loss) until realized.

Other Assets and Other Liabilities

We include accounts receivable, derivatives, stock warrants, marketable securities, deferred charges, and deferred rental income in Other assets, net. We include derivatives and miscellaneous amounts held on behalf of tenants in Other liabilities. Deferred charges are costs incurred in connection with mortgage financings and refinancings that are amortized over the terms of the mortgages and included in Interest expense in the consolidated financial statements. Deferred rental income is the aggregate cumulative difference for operating leases between scheduled rents that vary during the lease term, and rent recognized on a straight-line basis.

Deferred Acquisition Fees Payable to Affiliate

Fees payable to the advisor for structuring and negotiating investments and related mortgage financing on our behalf are included in Due to affiliates. A portion of these fees is payable in equal annual installments each January of the three calendar years following the date on which a property was purchased. Payment of such fees is subject to the performance criterion (Note 4).

Treasury Stock

Treasury stock is recorded at cost under our redemption plan, pursuant to which we may elect to redeem shares at the request of our stockholders, subject to certain exceptions, conditions, and limitations. The maximum amount of shares purchasable by us in any period depends on a number of factors and is at the discretion of our board of directors.

Special Member Interest

We accounted for the Special Member Interest as a noncontrolling interest based on the fair value of the rights attributed to the interest at the time it was transferred to a subsidiary of WPC (the “Special General Partner”) (Note 3). The Special Member Interest entitles the Special General Partner to cash distributions and, in the event there is a termination or non-renewal of the advisory agreement, redemption rights. In exchange for the Special Member Interest, we amended the fee arrangement with the advisor. The Special Member Interest was accounted for at fair value representing the estimated net present value of the related fee reduction. Cash distributions to the Special General Partner are accounted for as an allocation to net income attributable to noncontrolling interest.



	Exhibit 99.2 — 13

Notes to Consolidated Financial Statements

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 all operating expenses relating to the property, including property taxes, insurance, maintenance, repairs, and improvements. For the years ended December 31, 2013, 2012, and 2011, although we are legally obligated for the payment, pursuant to our lease agreements with our tenants, lessees were responsible for the direct payment to the taxing authorities of real estate taxes of approximately $32.4 million, $32.9 million, and $36.3 million, respectively, which are included in Property expenses in the consolidated financial statements.

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 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.

We account for leases as operating or direct financing leases as described below:

Operating leases — We record real estate at cost less accumulated depreciation; we recognize future minimum rental revenue on a straight-line basis over the non-cancelable lease term of the related leases and charge expenses to operations as incurred (Note 5).

Direct financing method — We record leases accounted for under the direct financing method at their net investment (Note 6). 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.

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). 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.

Impairments

We periodically assess whether there are any indicators that the value of our long-lived assets may be impaired or that their carrying value may not be recoverable. These impairment indicators include, but are not limited to, the vacancy of a property that is not subject to a lease; a lease default by a tenant that is experiencing financial difficulty; the termination of a lease by a tenant or the rejection of a lease in a bankruptcy proceeding. We may incur impairment charges on long-lived assets, including real estate, assets held for sale, direct financing leases, and equity investments in real estate. Our policies for evaluating whether these assets are impaired are presented below.

Real Estate

For real estate assets, which include intangibles, 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 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, among other things, market rents, residual values, and holding periods. Depending on the assumptions made and estimates used, the future cash flow projected in the evaluation of long-lived assets can vary within a range of outcomes. We consider the likelihood of possible outcomes in determining our estimate of future cash flows. If the future net undiscounted cash flow of the property’s asset group is less than the carrying value, the property’s asset group is considered to be impaired. We then measure the loss as the excess of the carrying value of the property’s asset group over its estimated fair value.

Assets Held for Sale

When we classify an asset as held for sale, we compare the asset’s estimated fair value less estimated cost to sell to its carrying value. If the estimated fair value less estimated cost to sell is less than the property’s carrying value, we reduce the carrying value to the estimated fair value, less cost to sell. We will continue to review the property for subsequent changes in the estimated fair value and may recognize an additional impairment charge if warranted.



	Exhibit 99.2 — 14

Notes to Consolidated Financial Statements

Direct Financing Leases

We review our direct financing leases at least annually to determine whether there has been an other-than-temporary decline in the current estimate of residual value of the property. The residual value is our estimate of what we could realize upon the sale of the property at the end of the lease term, based on market information. If this review indicates that a decline in residual value has occurred that is other-than-temporary, we recognize an impairment charge equal to the difference between the fair value and carrying value of the residual.

Equity Investments in Real Estate

We evaluate our equity investments in real estate on a periodic basis to determine if there are any indicators that the value of our equity investment may be impaired and whether or not that impairment is other-than-temporary. To the extent an other-than-temporary impairment has occurred, we measure the charge as the excess of the carrying value of our investment over its estimated fair value, which is determined by multiplying the estimated fair value of the underlying investment’s net assets by our ownership interest percentage. For our equity investments in real estate, we calculate the estimated fair value of the underlying investment’s real estate or net investments in direct financing leases, as described in Real Estate and Direct Financing Leases above. The fair value of the underlying investment’s debt, if any, is calculated based on market interest rates and other market information. The underlying investment’s other financial assets and liabilities (excluding net investments in direct financing leases) have fair values that generally approximate their carrying values.

Foreign Currency

Translation

We have interests in real estate investments in Europe (primarily Germany), Canada, Mexico, Malaysia, and Thailand and own interests in properties in Europe. The functional currencies for these investments are primarily the euro and the British Pound Sterling and, to a lesser extent, the Canadian dollar, the Malaysian ringgit, the Swedish krona, and the Thai baht. We perform the translation from these local currencies to the U.S. dollar for assets and liabilities using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted-average exchange rate during the period. We report the gains and losses resulting from this translation as a component of Other comprehensive income (loss) in equity. These translation gains and losses are released to net income when we have substantially exited from all investments in the related currency.

Transaction Gains or Losses

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. Foreign currency transactions that are (i) designated as, and are effective as, economic hedges of a net investment and (ii) intercompany foreign currency transactions that are of a long-term nature (that is, settlement is not planned or anticipated in the foreseeable future), in which the entities to the transactions are consolidated or accounted for by the equity method in our financial statements are not included in net income but are reported as a component of Other comprehensive income (loss) 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 a derivative designated and that qualified as a cash flow hedge, the effective portion of the change in fair value of the derivative is recognized in Other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings.

We made an accounting policy election effective January 1, 2011, or the “effective date”, to use the portfolio exception in ASC 820-10-35-18D, Application to Financial Assets and Financial Liabilities with Offsetting Positions in Market Risk or Counterparty Credit Risk, the “portfolio exception,” with respect to measuring counterparty credit risk for all of our derivative transactions subject to master netting arrangements.

Income Taxes

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code. In order to maintain our qualification as a REIT, we are required, among other things, to distribute at least 90% of our REIT net taxable income to our stockholders and meet certain tests regarding the nature of our income and assets. As a REIT, we are not subject to federal income tax



	Exhibit 99.2 — 15

Notes to Consolidated Financial Statements

with respect to the portion of our income that meets certain criteria and is distributed annually to stockholders. Accordingly, no provision for federal income taxes is included in the consolidated financial statements with respect to these operations. We believe we have operated, and we intend to continue to operate, in a manner that allows us to continue to meet the requirements for taxation as a REIT.

We conduct business in various states and municipalities within the U.S., Europe, Asia, Canada, and Mexico and, as a result, we or one or more of our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and certain foreign jurisdictions. As a result, we are subject to certain foreign, state, and local taxes and a provision for such taxes is included in the consolidated financial statements.

We elect to treat certain of our corporate subsidiaries as TRSs. In general, a TRS may perform additional services for our tenants and generally may engage in any real estate or non-real estate-related business (except for the operation or management of health care facilities or lodging facilities or providing to any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated). A TRS is subject to corporate federal income tax. Our TRS subsidiaries own hotels that are managed on our behalf by third-party hotel management companies.

Significant judgment is required in determining our tax provision and in evaluating our tax positions. We establish tax reserves based on a benefit recognition model, which we believe could result in a greater amount of benefit (and a lower amount of reserve) being initially recognized in certain circumstances. Provided that the tax position is deemed more likely than not of being sustained, we recognize the largest amount of tax benefit that is greater than 50 percent 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. Deferred income taxes relate primarily to our TRSs and are accounted for using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the financial reporting bases of assets and liabilities of our TRSs and their respective tax bases and for their operating loss and tax credit carry forwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including tax planning strategies and other factors.

Out-of-Period Adjustments

During the third quarter of 2013, we identified an error in the consolidated financial statements for the year ended December 31, 2012 in connection with the finalization of a tax return for an investment in Germany, which is accounted for using the equity method of accounting. The error originated based upon the application of a tax law change that became effective in 2012, but for which the accounting was not finalized and recorded until the third quarter of 2013. As a result of this error, both our Net income attributable to CPA^®:16 – Global and Income from continuing operations before income taxes, from our proportionate share of this investment, were overstated by $0.4 million in 2012, and understated by $0.4 million for the three months ended September 30, 2013. We also identified an error in the consolidated financial statements for the second quarter of 2013 in connection with the under-accrual of a tax expense due to a clerical error. As a result of this error, both our Net income attributable to CPA^®:16 – Global and Income from continuing operations before income taxes from our proportionate share of this investment were overstated by $0.3 million for the three months ended June 30, 2013, and understated by $0.3 million for the three months ended September 30, 2013. We have concluded that both adjustments are not material to the current period or any prior period’s consolidated financial statements. As such, the cumulative charges were recorded in the consolidated statements of income for the three months ended September 30, 2013, rather than restating prior periods.

During the third quarter of 2012, we identified a receivable which we had acquired as part of the CPA^®:14/16 Merger in the second quarter of 2011 that was not recorded at that time. The receivable, if recorded during the second quarter of 2011, would have resulted in an increase to the bargain purchase gain from the CPA^®:14/16 Merger in that quarter of $1.6 million. This change was recorded in the consolidated statements of operations in the third quarter of 2012.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally adopted in the U.S. (“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.



	Exhibit 99.2 — 16

Notes to Consolidated Financial Statements

Recent Accounting Requirements

The following Accounting Standards Updates (“ASUs”) promulgated by the Financial Accounting Standards Board (“FASB”) are applicable to us as indicated:

ASU 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities — In January 2013, the FASB issued an update to ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2013-01 clarifies that the scope of ASU 2011-11 applies to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with Section 210-20-45 or Section 815-10-45 or subject to an enforceable master netting or similar arrangement. These amendments did not have a significant impact on our financial position or results of operations and were applicable to us for our interim and annual reports beginning in 2013.

ASU 2013-02, Other Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income — In February 2013, the FASB issued ASU 2013-02 requiring entities to disclose additional information about items reclassified out of accumulated other comprehensive income. This ASU impacts the form of our disclosures only, is applicable to us for our interim and annual reports beginning in 2013, and has been applied retrospectively. The related additional disclosures are located in Note 14.

ASU 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date, a Consensus of the FASB Emerging Issues Task Force — In February 2013, the FASB issued ASU 2013-04, which requires entities to measure obligations resulting from joint and several liability arrangements (in our case, tenancy-in-common arrangements, Note 7) for which the total amount of the obligation is fixed as the sum of the amount the entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. This ASU is applicable to us for our interim and annual reports beginning in 2014 and shall be applied retrospectively; however, we elected to adopt this ASU early in 2013 and it did not have a significant impact on our financial position or results of operations for any of the periods presented.

ASU 2013-10, Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes, a Consensus of the FASB Emerging Issues Task Force — In July 2013, the FASB issued ASU 2013-10, which permits the Fed Funds Effective Swap Rate, also referred to as the “Overnight Index Swap Rate,” to be used as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to the U.S. government and London Interbank Offered Rate (“LIBOR”) swap rate. The update also removes the restriction on the use of different benchmark rates for similar hedges. This ASU is applicable to us for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. Through the date of this Report, we had not entered into any transactions to which this ASU applies.

Note 3. CPA^®:14/16 Merger and UPREIT Reorganization

CPA^®:14/16 Merger

On May 2, 2011, CPA^®:14 merged with and into one of our consolidated subsidiaries based on a merger agreement, which entitled shareholders of CPA^®:14 to receive $10.50 per share after giving effect to a $1.00 per share special cash distribution funded by CPA^®:14. The estimated net asset value per share (“NAV”) of CPA^®:14 as of May 2, 2011 was $11.90. NAV was determined based upon an estimate of the fair market value of real estate adjusted to give effect to the estimated fair value of mortgages encumbering CPA^®:14’s assets as well as other adjustments. There are a number of variables that comprise this calculation, including individual tenant credits, lease terms, lending credit spreads, foreign currency exchange rates, and tenant defaults, among others.

For each share of CPA^®:14 stock owned, each CPA^®:14 shareholder received the CPA^®:14/16 Merger consideration. We paid the CPA^®:14/16 Merger consideration of $954.6 million, including the payment of $444.0 million in cash to liquidating shareholders and the issuance of 57,365,145 shares of common stock with a fair value of $510.5 million on the date of closing to shareholders of CPA^®:14 in exchange for 48,076,723 shares of CPA^®:14 common stock. The $1.00 per share special cash distribution, totaling $90.4 million in the aggregate, was funded from the proceeds of properties sold by CPA^®:14 in connection with the CPA^®:14/16 Merger, as described below. In order to fund the CPA^®:14/16 Merger consideration, we utilized a portion of the $302.0 million of available cash drawn under our line of credit (Note 11) and $121.0 million in cash we received from WPC in return for the issuance of 13,750,000 of our common shares.

The assets we acquired and liabilities we assumed in the CPA^®:14/16 Merger exclude certain sales made in connection with the CPA^®:14/16 Merger by CPA^®:14 of equity interests in entities that owned six properties (the “Asset Sales”) to Corporate Property Associates 17 – Global Incorporated (“CPA^®:17 – Global”) and WPC, for an aggregate of $89.5 million in cash. Immediately prior to



	Exhibit 99.2 — 17

Notes to Consolidated Financial Statements

the CPA^®:14/16 Merger and subsequent to the Asset Sales, CPA^®:14’s portfolio was comprised of full or partial ownership in 177 properties, substantially all of which were triple-net leased. In the CPA^®:14/16 Merger, we acquired these properties and their related leases with an average remaining life of 8.3 years and an estimated aggregate annualized contractual minimum base rent of $149.8 million. We also assumed the related property debt comprised of seven variable-rate and 48 fixed-rate non-recourse mortgages with fair values of $38.1 million and $421.9 million, respectively, with weighted-average annual interest rates of 6.8% and 6.1%, respectively. We accounted for the CPA^®:14/16 Merger as a business combination under the acquisition method of accounting. As part of the CPA^®:14/16 Merger, we acquired from CPA^®:14 the remaining equity interests in a subsidiary that we previously consolidated, which was accounted for as an equity transaction. Acquisition costs of $13.6 million related to the CPA^®:14/16 Merger, as well as those related to the equity transaction described above and the reorganization described below, have been expensed as incurred and classified within General and administrative expenses in the consolidated statements of income for the year ended December 31, 2011.

The purchase price was allocated to the assets acquired and liabilities assumed based upon their fair values. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in the acquisition (in thousands):





		As Revised at
		December 31, 2011
Merger Consideration:
	Fair value of CPA^®:16 – Global shares of common stock issued	$	510,549
	Cash consideration		444,045
			954,594

Assets Acquired at Fair Value:
	Investments in real estate		604,093
	Net investment in direct financing leases		161,414
	Assets held for sale		11,202
	Equity investments in real estate		134,609
	Intangible assets		418,631
	Cash and cash equivalents		189,438
	Other assets, net		27,264
			1,546,651
Liabilities Assumed at Fair Value:
	Non-recourse debt		(460,007)
	Accounts payable, accrued expenses, and other liabilities		(9,878)
	Prepaid and deferred rental income and security deposits		(49,412)
	Due to affiliates		(2,753)
	Distributions payable		(95,943)
			(617,993)
	Amounts attributable to noncontrolling interests		58,188
	Net assets acquired at fair value		986,846
	Change in interest upon acquisition of noncontrolling interest of Carrefour		(3,543)
Bargain purchase gain on acquisition		$	(28,709)

As required by GAAP, fair value related to the assets acquired and liabilities assumed as well as the shares exchanged, has been computed as of the closing date of the CPA^®:14/16 Merger by the advisor in a manner consistent with the methodology described above. The computed fair values as of the closing date of the CPA^®:14/16 Merger reflect increases in the fair values of our and CPA^®:14’s net assets during that period, which were primarily attributable to changes in foreign exchange rates as well the length of time that elapsed between the date of the merger agreement which was December 13, 2010 and May 2, 2011, the date on which we obtained control of CPA^®:14. The advisor normally calculates our NAV annually as of year-end; however, in connection with entering into the merger agreement the advisor had determined that our NAV as of September 30, 2010 was $8.80 per share. As of the date of the CPA^®:14/16 Merger, the advisor conducted an updated analysis reflecting an increase of $0.10 per share or $8.90, which was unchanged as of June 30, 2011. The increase in NAV at the date of the CPA^®:14/16 Merger resulted in the total fair value of the CPA^®:14/16 Merger consideration of $954.6 million; however the preliminary fair value for the net assets acquired from CPA^®:14 increased more to $975.1 million, resulting in a bargain purchase gain on acquisition of $17.0 million recorded on the consolidated statements of operations for the six months ended June 30, 2011. During the third and fourth quarters of 2011, we identified certain



	Exhibit 99.2 — 18

Notes to Consolidated Financial Statements

measurement period adjustments that impacted the provisional acquisition accounting, primarily related to properties leased to PetSmart, Inc. (“PetSmart,” Note 16), which resulted in an increase of $11.7 million to the preliminary fair values of the assets acquired and the bargain purchase gain on acquisition, which increased to $986.8 million and $28.7 million, respectively. Furthermore, during the third quarter of 2012, we identified a receivable that we acquired as part of the CPA^®:14/16 Merger in the second quarter of 2011 but was not recorded at that time. The receivable, if recorded during the second quarter of 2011, would have resulted in an increase to the bargain purchase gain from the CPA^®:14/16 Merger in that quarter of $1.6 million. This change was recorded in the consolidated statements of operations in the third quarter of 2012.

The estimated revenues and income from operations contributed from the properties acquired in the CPA^®:14/16 Merger from May 2, 2011 through December 31, 2011 were $55.6 million and $5.3 million, respectively.

UPREIT Reorganization

Immediately following the CPA^®:14/16 Merger on May 2, 2011, we completed an internal reorganization whereby CPA^®:16 – Global formed an UPREIT, which was approved by our stockholders in connection with the CPA^®:14/16 Merger. In connection with this UPREIT Reorganization, we contributed substantially all of our assets and liabilities to the Operating Partnership in exchange for a managing member interest and units of membership interest in the Operating Partnership, which together represent a 99.985% capital interest of the Managing Member (representing our stockholders’ interest). The Special General Partner, a subsidiary of WPC, acquired a Special Member Interest of 0.015% in the Operating Partnership entitling it to receive certain profit allocations and a distribution of 10% of the available cash of the Operating Partnership (the “Available Cash Distribution”), as well as a Final Distribution, each as discussed below. As we have control of the Operating Partnership through our managing member’s interest, we consolidate the Operating Partnership in our financial results.

After the CPA^®:14/16 Merger, we amended our advisory agreement with affiliates of WPC to give effect to this reorganization and to reflect a revised fee structure whereby (i) our asset management fees were prospectively reduced to 0.5% from 1.0% of the asset value of a property under management and (ii) the former 15% subordinated incentive fee and termination fees were eliminated. The Available Cash Distribution is contractually limited to 0.5% of our assets excluding cash, cash equivalents, and certain short-term investments and non-cash reserves. The fee structure related to initial acquisition fees, subordinated acquisition fees, and subordinated disposition fees remained unchanged. On September 28, 2012, we entered into an amended and restated advisory agreement, which did not change this fee structure. For a description of the other provisions of the agreement that were amended, see Note 4.

The Special General Partner is entitled to the Available Cash Distribution, which is contractually limited to 0.5% of the value of our assets under management. The Special General Partner may also elect to receive the Available Cash Distribution in shares of our common stock. In the event of a capital transaction such as a sale, exchange, disposition, or refinancing of our net assets, the Special General Partner may also be entitled to receive a “Final Distribution” equal to 15% of residual returns after giving effect to a 100% return of stockholders’ invested capital plus a 6% priority return.

In May 2011, we incurred a non-cash charge of $34.3 million in connection with the issuance of the Special Member Interest to a subsidiary of WPC in consideration of the amendment of our advisory agreement. This charge was recorded in the consolidated statements of operations and is equal to the fair value of the noncontrolling interests issued (Note 14). We determined the fair value of the Special Member Interest based on a discounted cash flow model, which included assumptions related to estimated future cash flows.



	Exhibit 99.2 — 19

Notes to Consolidated Financial Statements

Note 4. Agreements and Transactions with Related Parties

Transactions with the Advisor

We had an advisory agreement with the advisor whereby the advisor performed certain services for us under a fee arrangement. On September 28, 2012, we amended and restated certain terms in that advisory agreement, as described below. The fee structure related to asset management fees, initial acquisition fees, subordinated acquisition fees, and subordinated disposition fees was unchanged by the amendment and restatement, and the advisor remained entitled to the Available Cash Distribution, as described below. The advisory agreement automatically terminated upon the closing of the Merger on January 31, 2014. We also had certain agreements with affiliates regarding jointly-owned investments. The following tables present a summary of fees we paid and expenses we reimbursed to the advisor in accordance with the advisory agreement (in thousands):




	Years Ended December 31,
	2013		2012		2011
Amounts Included in the Consolidated Statements of Income:
Asset management fees	$	17,761	$	18,553	$	16,920
Performance fees		-		-		3,921
Available Cash Distribution		15,182		15,389		6,157
Personnel reimbursements		10,120		7,478		5,513
Office rent reimbursements		1,634		1,176		1,058
Issuance of Special Member Interest		-		-		34,300
	$	44,697	$	42,596	$	67,869

Other Transaction Fees Capitalized:
Current acquisition fees	$	122	$	-	$	147
Deferred acquisition fees		97		-		118
Mortgage refinancing fees		-		520		639
	$	219	$	520	$	904

			December 31,
			2013		2012
Unpaid Transaction Fees:
Deferred acquisition fees			$	1,309	$	1,757
Subordinated disposition fees				1,197		1,197
			$	2,506	$	2,954

Asset Management Fees and Performance Fees

We paid the advisor asset management fees, which were 0.5% per annum of our average invested assets and were computed as provided for in the advisory agreement. Prior to the CPA^®:14/16 Merger, we also paid the advisor performance fees, which were also 0.5% per annum of our average invested assets and were computed as provided for in the advisory agreement. The performance fees were subordinated to the performance criterion, a non-compounded cumulative annual distribution return of 6% per annum. The asset management and, prior to the CPA^®:14/16 Merger, performance fees were payable in cash or shares of our common stock at the advisor’s option. If the advisor elected to receive all or a portion of its fees in shares, the number of shares issued was determined by dividing the dollar amount of fees by our most recently published NAV as approved by our board of directors. For 2013, the advisor elected to receive its asset management fees in shares of our common stock. In light of the Merger, however, a Special Committee of our board of directors (the “Special Committee”) requested that the advisor receive payment of asset management fees in cash subsequent to July 31, 2013. For 2012, the advisor elected to receive 50% of its asset management fees in cash and 50% in shares of our common stock. For 2011, prior to the CPA^®:14/16 Merger, the advisor elected to receive its asset management fees in cash and its performance fees in shares, and subsequent to the CPA^®:14/16 Merger, the advisor elected to receive its asset management fees for 2011 in shares. As a result of the UPREIT Reorganization, in accordance with the terms of the amended and restated advisory agreement, beginning on May 2, 2011, we no longer paid the advisor performance fees, but instead we paid the Available Cash Distribution, as described below. Asset management and performance fees are included in Property expenses in the consolidated financial statements.



	Exhibit 99.2 — 20

Notes to Consolidated Financial Statements

Available Cash Distribution

In connection with the UPREIT Reorganization, the Special General Partner acquired the Special Member Interest, entitling it to receive the Available Cash Distribution, which was measured and paid quarterly in cash. The Available Cash Distribution was defined as cash generated from operations, excluding capital proceeds, as reduced by operating expenses and debt service, excluding prepayments and balloon payments. The Available Cash Distribution was contractually limited to 0.5% of our assets excluding cash, cash equivalents, and certain short-term investments and non-cash reserves. In the event of a capital transaction such as a sale, exchange, disposition, or refinancing of our net assets, the Special General Partner was also entitled to receive a distribution in an amount equal to 15% of the excess, if any, of the consideration generated by the capital transaction (net of costs and expenses) after our stockholders have received a return of their invested capital plus a 6% priority return. See Merger, as described below. Available Cash Distributions are included in Net income attributable to noncontrolling interests in the consolidated financial statements.

Personnel and Overhead Reimbursements

Under the terms of the advisory agreement, the advisor allocated a portion of its personnel and overhead expenses to us and the other publicly-owned, non-listed REITs, which are managed by our advisor under the Corporate Property Associates brand name (the “CPA^® REITs”) and Carey Watermark Investors Incorporated (“CWI”). Effective as of October 1, 2012, the advisor allocated these expenses on the basis of our trailing four quarters of reported revenues and those of WPC, the CPA^® REITs, and CWI. Prior to that date, these costs were allocated on the basis of time charges incurred by the advisor’s personnel on behalf of the CPA^® REITs