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Equity Investments in the Managed Programs and Real Estate
 6 Months Ended
Jun. 30, 2020
Equity Method Investments and Joint Ventures [Abstract]  
Equity Investments in the Managed Programs and Real Estate Equity Investments in the Managed Programs and Real Estate
 
We own interests in (i) the Managed Programs, (ii) certain unconsolidated real estate investments with CPA:18 – Global and third parties, and (iii) WLT. We account for our interests in these investments under the equity method of accounting (i.e., at cost, increased or decreased by our share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting, such as basis differences) or at fair value by electing the equity method fair value option available under GAAP.

We classify distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.
 
The following table presents Equity in earnings (losses) of equity method investments in the Managed Programs and real estate, which represents our proportionate share of the income or losses of these investments, as well as certain adjustments related to other-than-temporary impairment charges and amortization of basis differences related to purchase accounting adjustments (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Gain on redemption of special general partner interests in CWI 1 and CWI 2, net (Note 3)
$
33,009

 
$
—

 
$
33,009

 
$
—

Distributions of Available Cash (Note 3)
2,029

 
3,765

 
3,945

 
9,450

Proportionate share of equity in (losses) earnings of equity investments in the Managed Programs
(1,142
)
 
312

 
(2,857
)
 
525

Amortization of basis differences on equity method investments in the Managed Programs
(124
)
 
(356
)
 
(568
)
 
(685
)
Other-than-temporary impairment charges on our equity method investments in CWI 1 and CWI 2 (Note 8)
—

 
—

 
(47,112
)
 
—

Total equity in earnings (losses) of equity method investments in the Managed Programs
33,772

 
3,721

 
(13,583
)
 
9,290

Equity in earnings of equity method investments in real estate
448

 
774

 
2,252

 
1,336

Amortization of basis differences on equity method investments in real estate
(237
)
 
(544
)
 
(476
)
 
(1,184
)
Total equity in earnings of equity method investments in real estate
211

 
230

 
1,776

 
152

Equity in earnings (losses) of equity method investments in the Managed Programs and real estate
$
33,983

 
$
3,951

 
$
(11,807
)
 
$
9,442



Managed Programs
 
We own interests in the Managed Programs and account for these interests under the equity method because, as their advisor, we do not exert control over, but we do have the ability to exercise significant influence over, the Managed Programs. Operating results of the Managed Programs are included in the Investment Management segment.
 
The following table sets forth certain information about our investments in the Managed Programs (dollars in thousands):
 
 
% of Outstanding Interests Owned at
 
Carrying Amount of Investment at
Fund
 
June 30, 2020
 
December 31, 2019
 
June 30, 2020
 
December 31, 2019
CPA:18 – Global (a)
 
4.124
%
 
3.851
%
 
$
44,147

 
$
42,644

CPA:18 – Global operating partnership
 
0.034
%
 
0.034
%
 
209

 
209

CWI 1 (b) (c)
 
—
%
 
3.943
%
 
—

 
49,032

CWI 1 operating partnership (b)
 
—
%
 
0.015
%
 
—

 
186

CWI 2 (b) (c)
 
—
%
 
3.755
%
 
—

 
33,669

CWI 2 operating partnership (b)
 
—
%
 
0.015
%
 
—

 
300

CESH (d)
 
2.430
%
 
2.430
%
 
4,543

 
3,527

 
 
 
 
 
 
$
48,899

 
$
129,567


__________
(a)
During the six months ended June 30, 2020, we received asset management revenue from CPA:18 – Global primarily in shares of its common stock, which increased our ownership percentage in CPA:18 – Global (Note 3).
(b)
The CWI 1 and CWI 2 Merger closed on April 13, 2020, as described in Note 3.
(c)
We recognized other-than-temporary impairment charges on these investments during the six months ended June 30, 2020, as described in Note 8.
(d)
Investment is accounted for at fair value.

CPA:18 – Global — The carrying value of our investment in CPA:18 – Global at June 30, 2020 includes asset management fees receivable, for which 105,651 shares of CPA:18 – Global Class A common stock were issued during the third quarter of 2020. We received distributions from this investment during the six months ended June 30, 2020 and 2019 of $1.8 million and $1.6 million, respectively. We received distributions from our investment in the CPA:18 – Global operating partnership during the six months ended June 30, 2020 and 2019 of $1.9 million and $4.0 million, respectively (Note 3).

CWI 1 — We received distributions from this investment during the six months ended June 30, 2020 (through April 13, 2020, the date of the CWI 1 and CWI 2 Merger (Note 3)) and 2019 of $0.8 million and $1.3 million, respectively. We received a distribution from our investment in the CWI 1 operating partnership during the six months ended June 30, 2019 of $2.4 million (Note 3). We did not receive such a distribution during 2020 (through April 13, 2020), as a result of the adverse effect of COVID-19 on the operations of CWI 1.

CWI 2 — We received distributions from this investment during the six months ended June 30, 2020 (through April 13, 2020, the date of the CWI 1 and CWI 2 Merger (Note 3)) and 2019 of $0.5 million and $0.7 million, respectively. We received a distribution from our investment in the CWI 2 operating partnership during the six months ended June 30, 2019 of $3.1 million (Note 3). We did not receive such a distribution during 2020 (through April 13, 2020), as a result of the adverse effect of COVID-19 on the operations of CWI 2.

CESH — We have elected to account for our investment in CESH at fair value by selecting the equity method fair value option available under GAAP. We record our investment in CESH on a one quarter lag; therefore, the balance of our equity method investment in CESH recorded as of June 30, 2020 is based on the estimated fair value of our investment as of March 31, 2020. We did not receive distributions from this investment during the six months ended June 30, 2020 or 2019.

At June 30, 2020 and December 31, 2019, the aggregate unamortized basis differences on our equity investments in the Managed Programs were $14.3 million and $47.0 million, respectively. This decrease was primarily due to the other-than-temporary impairment charges that we recognized on our equity investments in CWI 1 and CWI 2 during the six months ended June 30, 2020, as described in Note 8.

Interests in Other Unconsolidated Real Estate Investments and WLT

We own equity interests in properties that are generally leased to companies through noncontrolling interests in partnerships and limited liability companies that we do not control but over which we exercise significant influence. The underlying investments are jointly owned with affiliates or third parties. In addition, we own shares of WLT common stock, as described in Note 3. We account for these investments under the equity method of accounting. Operating results of our unconsolidated real estate investments are included in the Real Estate segment.

The following table sets forth our ownership interests in our equity investments in real estate, excluding the Managed Programs, and their respective carrying values (dollars in thousands):
 
 
 
 
 
 
Carrying Value at
Lessee/Fund
 
Co-owner
 
Ownership Interest
 
June 30, 2020
 
December 31, 2019
Johnson Self Storage
 
Third Party
 
90%
 
$
69,823

 
$
70,690

WLT (a)
 
WLT
 
5%
 
49,210

 
—

Kesko Senukai (b)
 
Third Party
 
70%
 
41,807

 
46,475

Bank Pekao (b)
 
CPA:18 – Global
 
50%
 
25,906

 
26,388

BPS Nevada, LLC (c)
 
Third Party
 
15%
 
23,040

 
22,900

State Farm Mutual Automobile Insurance Co.
 
CPA:18 – Global
 
50%
 
16,343

 
17,232

Apply Sørco AS (d)
 
CPA:18 – Global
 
49%
 
6,692

 
8,040

Fortenova Grupa d.d. (formerly Konzum d.d.) (b)
 
CPA:18 – Global
 
20%
 
2,923

 
2,712

 
 
 
 
 
 
$
235,744

 
$
194,437

__________
(a)
Following the closing of the CWI 1 and CWI 2 Merger, we own 12,208,243 shares of common stock of WLT, which we account for as an equity method investment in real estate. The initial fair value of this investment was based on third-party market data, including implied asset values and market capitalizations for publicly traded lodging REITS. We follow the HLBV model for this investment and recognize within equity earnings our proportionate share of WLT’s earnings based on our ownership of common shares of WLT, after giving effect to preferred dividends owed by WLT (our investment in preferred shares of WLT is included within Other assets, net on our consolidated balance sheets as available-for-sale debt securities). We record our investment in shares of common stock of WLT on a one quarter lag (Note 3).
(b)
The carrying value of this investment is affected by fluctuations in the exchange rate of the euro.
(c)
This investment is reported using the HLBV model, which may be different than pro rata ownership percentages, primarily due to the capital structure of the partnership agreement.
(d)
The carrying value of this investment is affected by fluctuations in the exchange rate of the Norwegian krone.

We received aggregate distributions of $8.5 million and $12.0 million from our other unconsolidated real estate investments for the six months ended June 30, 2020 and 2019, respectively. At June 30, 2020 and December 31, 2019, the aggregate unamortized basis differences on our unconsolidated real estate investments were $24.7 million and $25.2 million, respectively.