Agreements and Transactions with Related Parties

Advisory Agreements with the Managed REITs

We have advisory agreements with each of the Managed REITs, pursuant to which we earn fees and are entitled to receive cash distributions. The following tables present a summary of revenue earned and/or cash received from the Managed REITs for the periods indicated, included in the consolidated statements of income (in thousands):



	Three Months Ended March 31,
	2014		2013
Reimbursable costs from affiliates	$	39,732	$	11,968
Structuring revenue	17,750		6,342
Distributions of Available Cash	10,445		7,891
Asset management revenue ^(a)	9,754		9,993
Dealer manager fees	6,676		1,223
Deferred revenue earned	786		2,123
Interest income on deferred acquisition fees and loans to affiliates	175		255
	$	85,318	$	39,795



	Three Months Ended March 31,
	2014		2013
CPA^®:16 – Global ^(b)	$	7,998	$	13,942
CPA^®:17 – Global ^(c)	15,828		14,993
CPA^®:18 – Global ^(d)	56,176		—
CWI ^(d)	5,316		10,860
	$	85,318	$	39,795

___________


(a)	Excludes amounts received from third parties.

(b)

Upon completion of the CPA^®:16 Merger on January 31, 2014, we terminated the advisory agreement with CPA^®:16 – Global. Pursuant to the terms of the merger agreement, we waived the incentive or termination fee that we would have been entitled to receive from CPA^®:16 – Global pursuant to the terms of the advisory agreement. Amount shown for three months ended March 31, 2014 reflects transactions through January 31, 2014.


(c)	The current form of the advisory agreement is scheduled to expire on June 30, 2014, unless renewed pursuant to its terms.


(d)	The current form of the advisory agreement is scheduled to expire on September 30, 2014, unless renewed pursuant to its terms.

The following table presents a summary of amounts Due from affiliates (in thousands):



	March 31, 2014		December 31, 2013
Deferred acquisition fees receivable	$	20,479	$	19,684
Current acquisition fees receivable	6,120		4,149
Organization and offering costs	2,545		2,700
Reimbursable costs	2,150		334
Accounts receivable	1,203		3,716
Asset management fee receivable	—		1,451
	$	32,497	$	32,034

Asset Management Revenue

We earn asset management revenue from each Managed REIT, which is based on average invested assets and is calculated according to the respective advisory agreement. For CPA^®:16 – Global, prior to the CPA^®:16 Merger, we earned asset management revenue of 0.5% of average invested assets. For CPA^®:17 – Global, we earn asset management revenue ranging from 0.5% of average market value for long-term net leases and certain other types of real estate investments up to 1.75% of average equity value for certain types of securities. For CPA^®:18 – Global, we earn asset management revenue ranging from 0.5% to 1.5%, depending on the type of investment and based on the average market value or average equity value, as applicable. For CWI, we earn asset management revenue of 0.5% of the average market value of lodging-related investments.

Under the terms of the advisory agreements, we may elect to receive cash or shares of stock for asset management revenue due from each Managed REIT. In 2014 and 2013, we elected to receive all asset management revenue from CPA^®:17 – Global, CPA^®:18 – Global and CWI in their respective shares. For 2013, we had initially elected to receive asset management revenue from CPA^®:16 – Global in its shares. However, in light of the announcement of the CPA^®:16 Merger in July 2013 (Note 3), a Special Committee of the Board of Directors of CPA^®:16 – Global requested that we elect to receive the asset management revenue in cash, which became effective as of August 1, 2013.

Structuring Revenue

Under the terms of the advisory agreements, we earn revenue in connection with structuring and negotiating investments and related financing for the Managed REITs, which we call acquisition revenue. We may receive acquisition revenue of 4.5% of the total aggregate cost of long-term net lease investments made by each CPA^® REIT. A portion of this revenue (generally 2.5%) is paid when the transaction is completed, while the remainder (generally 2%) is payable in annual installments over three years, provided the relevant CPA^® REIT meets its performance criterion. For certain types of non-long term net lease investments acquired on behalf of CPA^®:17 – Global, initial acquisition revenue may range from 0% to 1.75% of the equity invested plus the related acquisition revenue, with no deferred acquisition revenue being earned. For CWI, we earn initial acquisition revenue of 2.5% of the total investment cost of the properties acquired and loans originated by CWI not to exceed 6% of the aggregate contract purchase price of all investments and loans, with no deferred acquisition revenue being earned. For CWI, we may also be entitled to fees for structuring loan refinancing transactions of up to 1% of the principal amount. This loan refinancing revenue, together with the acquisition revenue, is referred to as structuring revenue.

Unpaid transaction fees, including accrued interest, are included in Due from affiliates in the consolidated financial statements. Unpaid transaction fees bear interest at annual rates ranging from 2% to 5%.

Reimbursable Costs from Affiliates and Dealer Manager Fees

The Managed REITs reimburse us for certain costs we incur on their behalf, primarily broker-dealer commissions, marketing costs, and certain personnel and overhead costs. Since October 1, 2012, personnel and overhead costs have been charged to the CPA^®REITs based on the trailing 12-month reported revenues of the CPA^®REITs, CWI and us. We began to allocate personnel and overhead costs to CWI on January 1, 2014 based on the time incurred by our personnel. For 2014, we agreed to receive personnel cost reimbursements from CWI in shares of its common stock.

During CWI’s initial public offering, which was terminated in September 2013, we earned a selling commission of $0.70 per share sold and a dealer manager fee of $0.30 per share sold. We currently earn a selling commission of $0.70 per share sold and a dealer manager fee of $0.30 per share sold for CWI’s follow-on offering, which began in December 2013. We also earned a selling commission of $0.65 per share sold and a dealer manager fee of $0.35 per share sold during CPA^®:17 – Global’s follow-on offering, which was terminated in January 2013.

For CPA^®:18 – Global’s initial public offering, we receive selling commissions, depending on the class of common stock sold, of $0.70 or $0.14 per share sold, and a dealer manager fee of $0.30 or $0.21 per share sold, for its class A common stock and class C common stock, respectively. We also receive an annual distribution and shareholder servicing fee, or Shareholder Servicing Fee, paid in connection with investor purchases of shares of class C common stock. The amount of the Shareholder Servicing Fee is 1% of the purchase price per share (or, once reported, the amount of the estimated NAV per share) for the shares of class C common stock sold in the offering. The Shareholder Servicing Fee is accrued daily and is payable quarterly in arrears. CPA^®:18 – Global will cease paying the Shareholder Servicing Fee on the date at which, in the aggregate, underwriting compensation from all sources, including the Shareholder Servicing Fee, any organizational and offering fee paid for underwriting, and underwriting compensation paid by us, equals 10% of the gross proceeds from the initial public offering.

We re-allow all of the selling commissions and may re-allow a portion of the dealer manager fees to selected dealers in the offerings for CWI and CPA^®:18 – Global. Dealer manager fees that are not re-allowed and the Shareholder Servicing Fee are classified as Dealer manager fees in the consolidated financial statements.

Pursuant to its advisory agreement, CWI is obligated to reimburse us for all organization costs and a portion of offering costs incurred in connection with its initial and follow-on public offerings up to a maximum amount (excluding selling commissions and the dealer manager fee) of 2% and 4%, respectively, of the gross proceeds of its offering and distribution reinvestment plan. Through March 31, 2014, we incurred organization and offering costs on behalf of CWI of approximately $11.3 million, of which CWI is obligated to reimburse us $10.2 million, and $9.5 million had been reimbursed as of March 31, 2014.

Pursuant to its advisory agreement, CPA^®:18 – Global is obligated to reimburse us for all organization costs and a portion of offering costs incurred in connection with its initial public offering. CPA^®:18 – Global is obligated to reimburse us up to 4.0% of the gross proceeds of its offering if the gross proceeds are less than $500.0 million, 2% of the gross proceeds if the gross proceeds are $500.0 million or more but less than $750.0 million, and 1.5% of the gross proceeds if the gross proceeds are $750.0 million or more within 60 days after the end of the quarter in which the offering terminates. Through March 31, 2014, we incurred organization and offering costs on behalf of CPA^®:18 – Global of approximately $5.9 million, and based on current fundraising projections, the entire amount is expected to be reimbursed by CPA^®:18 – Global. As of March 31, 2014, $5.2 million had been reimbursed.

Distributions of Available Cash and Deferred Revenue Earned

We are entitled to receive distributions of our proportionate share of earnings up to 10% of the Available Cash from the operating partnerships of each of the Managed REITs, as defined in their respective operating partnership agreements. In May 2011, we acquired a special member interest, or the Special Member Interest, in CPA^®:16 – Global’s operating partnership. We initially recorded this Special Member Interest at its fair value, and amortized it into earnings through the date of the CPA^®:16 Merger. Cash distributions of our proportionate share of earnings from the Managed REITs’ operating partnerships as well as deferred revenue earned from our Special Member Interest in CPA^®:16 – Global’s operating partnership are recorded as Income from equity investments in real estate and the Managed REITs within the Real Estate Ownership segment.

Other Transactions with Affiliates

Transactions with the Estate of Wm. Polk Carey

On March 28, 2013, we received an irrevocable notice from the Estate of Wm. Polk Carey, our chairman and founder who passed away on January 2, 2012, to exercise its final sale option under a Share Purchase Agreement that we entered into in July 2012. Accordingly, as the notice resulted in a fixed and determinable obligation at March 31, 2013, we reclassified $40.0 million from Redeemable securities – related party to Accounts payable, accrued expenses and other liabilities. On April 4, 2013, we repurchased 616,971 shares of our common stock for $40.0 million from the Estate at a price of $64.83 per share.

The following table presents a reconciliation of our Redeemable securities – related party (in thousands):



	Three Months Ended March 31,
	2014		2013
Beginning balance	$	—	$	40,000
Reclassification to a liability upon receipt of notice	—		(40,000		)
Ending balance	$	—	$	—

Loans to Managed REITs

During 2013, our board of directors approved unsecured loans from us to CWI and CPA^®:18 – Global of up to $50.0 million and up to $100.0 million, respectively, each at a rate equal to the rate at which we are able to borrow funds under our senior credit facility (Note 12), for the purpose of facilitating acquisitions approved by their respective investment committees, that they would not otherwise have sufficient available funds to complete, with any loans to be made solely at our Management’s discretion. No such loans were provided for either the three months ended March 31, 2014 or 2013.

Treasury Stock

In February 2014, we repurchased 11,037 shares of our common stock for $0.7 million in cash from the former independent directors of CPA^®:16 – Global at a price per share equal to the volume weighted average trading price. These shares were issued to them as Merger Consideration in exchange for their shares of CPA^®:16 – Global common stock in the CPA^®:16 Merger (Note 3) and were repurchased by agreement in order to satisfy the independence requirements set forth in the organizational documents of the remaining CPA^® REITs, for which these individuals also serve as independent directors.

Other

We own interests in entities ranging from 3% to 90%, as well as jointly-controlled tenancy-in-common interests in properties, with the remaining interests generally held by affiliates, and own common stock in each of the Managed REITs. We consolidate certain of these investments and account for the remainder under the equity method of accounting.