Segment Reporting

6 Months Ended

Jun. 30, 2013

Segment Reporting

Segment Reporting

Note14.Segment Reporting

We evaluate our results from operations by our two major business segments — Real Estate Ownership and Investment Management (Note1).The following table presents a summary of comparative results of these business segments (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Real Estate Ownership (a)
Revenues	$	84,492	$	23,277	$	167,451	$	45,795
Operating expenses		(46,739)		(14,971)		(91,786)		(28,381)
Interest expense		(26,912)		(7,128)		(53,706)		(14,408)
Other, net (b)		31,926		29,345		41,556		43,485
Provision for income taxes		(2,408)		(762)		(3,558)		(1,835)
Income from continuing operations attributable to W. P. Carey	$	40,359	$	29,761	$	59,957	$	44,656
Investment Management
Revenues (c)	$	34,564	$	43,822	$	64,110	$	89,586
Operating expenses (c)		(38,218)		(43,974)		(73,514)		(87,197)
Other, net (d)		184		918		1,040		2,196
Benefit from income taxes		3,530		2,644		5,913		2,022
Income (loss) from continuing operations attributable to W. P. Carey	$	60	$	3,410	$	(2,451)	$	6,607
Total Company
Revenues (c)	$	119,056	$	67,099	$	231,561	$	135,381
Operating expenses (c)		(84,957)		(58,945)		(165,300)		(115,578)
Interest expense		(26,912)		(7,128)		(53,706)		(14,408)
Other, net (b) (d)		32,110		30,263		42,596		45,681
Benefit from income taxes		1,122		1,882		2,355		187
Income from continuing operations attributable to W. P. Carey	$	40,419	$	33,171	$	57,506	$	51,263

	Total Long-Lived Assets at				Total Assets at
	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
Real Estate Ownership:
Net investments in real estate	$	3,304,677	$	3,239,755
Goodwill		264,403		265,525
In-place lease, net		465,931		447,278
Above-market rent, net		269,355		279,885
Other intangible assets, net		5,403		4,550
Total		4,309,769		4,236,993	$	4,374,810	$	4,484,821
Investment Management:
Goodwill		63,607		63,607
Other intangible assets, net		6,130		5,651
Total		69,737		69,258		260,550		124,221
Total Company	$	4,379,506	$	4,306,251	$	4,635,360	$	4,609,042

__________

• Included within the Real Estate Ownership segment is our total investment in shares of CPA®:16 – Global, which representedapproximately6.3% of our total assets at June 30, 2013 (Note6).
• Includes Other interest income, Net income from equity investments in real estate and the Managed REITs, Other income and (expenses), and Net income attributable to noncontrolling interests.
• Included in revenues and operating expenses are reimbursable costs from affiliates totaling $15.5 million and $20.5 million for thethree months endedJune 30, 2013 and 2012, respectively, and $27.4 million and $39.2million for the six months ended June 30, 2013 and 2012, respectively.
• Includes Other interest income, Other income and (expenses), Net (income) loss attributable to noncontrolling interests and Net loss attributable to redeemable noncontrolling interest.

At June 30, 2013, our international investments within our Real Estate Ownership segment were comprised of investments inFrance, Japan, Poland, Germany, Spain, Belgium, Finland, Netherlands and the United Kingdom. The following tables present information about these investments (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Lease revenues (a)	$	21,693	$	2,024	$	42,394	$	4,045
Income from equity investments in real estate (b)		956		16,313		2,037		17,697
	$	22,649	$	18,337	$	44,431	$	21,742

	June 30, 2013		December 31, 2012
Long-lived assets	$	929,141	$	875,796

__________

• Amounts for the three and six months ended June 30, 2013 included lease revenues of $19.3 million and $38.3 million, respectively, from properties acquired in the CPA®:15 Merger.
• Each of the three and six months ended June 30, 2012 included our $15.1 million share of the net gain recognized by a jointly-owned entity in connection with the sale of an investment.

Note 15.Subsequent Events

Proposed Merger

On July 25, 2013, we and CPA®:16 – Global entered into a merger agreement pursuant to which CPA®:16 – Global will merge with and into one of our subsidiaries in exchange for shares of our common stock (the “Proposed Merger”). We plan to file a registration statement with the SEC to register the shares of our common stock to be issued to stockholders of CPA®:16 – Global in connection with the Proposed Merger. Special meetings will be scheduled to obtain the approval of the Proposed Merger by our stockholders and by CPA®:16 – Global's stockholders, and the closing of the Proposed Merger also is subject to customary closing conditions. In addition, under the terms of the merger agreement, a special committee of the board of directors of CPA®:16 – Global (the “CPA®:16 – Global Special Committee)” may solicit, receive, evaluate and enter into negotiations with respect to alternative proposals from third parties through August 24, 2013 (the “Go Shop Period”). If the Proposed Merger is approved by our stockholders and the stockholders of CPA®:16 – Global and the other closing conditions are met, we expect that the closing will occur by the first quarter of 2014, although there can be no assurance of such timing.

Subject to the terms and conditions of the merger agreement, CPA®:16 – Global stockholders will receive shares of our common stock in exchange for their shares of CPA®:16 – Global stock, pursuant to an exchange ratio based upon a value of $11.25 per share of CPA®:16 – Global and the volume weighted average trading price (“VWAP”) of our common stock for the five consecutive trading days ending on the third trading day preceding the closing of the transaction. The exchange ratio is subject to a 12% collar based on the VWAP of our common stock on July 22, 2013 and July 23, 2013, which results in an exchange ratio of not more than 0.1842 shares and not less than 0.1447 shares of our common stock for each share of CPA®:16 – Global, (the “Per Share Merger Consideration”). No fractional shares will be issued in the Proposed Merger, and CPA®:16 – Global stockholders will receive cash in lieu of any fractional shares.

Based on the outstanding common stock of CPA®:16 – Global of approximately206,400,000 shares at July 25, 2013, of which we owned approximately 38,200,000 shares, and the Per Share Merger Consideration, based on the VWAP of our common stock on July 22, 2013 and July 23, 2013 of 0.1621 shares, we would issue approximately 27,200,000 shares of our common stock to stockholders of CPA®:16 – Global in exchange for the shares of CPA®:16 – Global we do not currently own. The estimated aggregate value of such shares issued in the Proposed Merger would be approximately $1.8 billion, based on the closing price of our common stock on July 25, 2013, of $67.81 per share. The nominal value of the Per Share Merger Consideration and estimated total merger consideration may be higher or lower as of the date of closing due to changes in the market price of our common stock, subject to the limitations of the collar discussed above.

The merger agreement contains certain termination rights for both us and CPA®:16 – Global. Each party has agreed to pay the other party's out-of-pocket expenses in the event that the merger agreement is terminated because such party has breached any of its representations, warranties, covenants or agreements.

Pursuant to the terms of the advisory agreement between us and CPA®:16 – Global, we are entitled to be paid the subordinated disposition fees and certain profit interests in connection with any liquidity event regarding CPA®:16 – Global as described in Note 3 (collectively, the “Back End Amounts”). In the merger agreement, we have agreed to waive our rights to receive the Back End Amounts upon consummation of the Proposed Merger. However, in the event that the merger agreement is terminated in accordance with the go shop provision, we will be entitled to the Back End Amounts as well as $75.0 million (“the Special GP Amount”) in exchange for our Special Member Interest in the operating partnership of CPA®:16 – Global (Note 3). In the event that the merger agreement has been terminated under certain circumstances in connection with a CPA16 Superior Competing Transaction (as defined in the merger agreement),CPA®:16 – Global has agreed to pay us an up-front termination fee (the “CPA16 Termination Fee”) of $57.0 million, unless CPA®:16 – Global has entered into an agreement with an Exempted Person (as defined in the merger agreement) with respect to a CPA16 Superior Competing Transaction, in which case the termination fee would be $35.0 million. The CPA16 Termination Fee would be offset against the sum of the Back End Amounts and the Special GP Amount.

At June 30, 2013, CPA®:16 – Global's portfolio was comprised of the consolidated full or partial interests in 347 leased properties, substantially all of which were triple-net leased with an average remaining life of 10.8 years and an estimated annual contractual minimum base rent totaling $302.7 million, and two hotel properties. The related property debt was comprised of 96 fixed-rate and 19 variable-rate non-recourse mortgage loans with an aggregate fair value of approximately $1.6 billion and a weighted-average annual interest rate of 5.6% at June 30, 2013. In addition, CPA®:16 – Global had equity interests in 19 unconsolidated investments holding 141 properties, substantially all of which were triple-net leased with an average remaining life of 9.1 years and an estimated annual contractual minimum base rent totaling $62.3 million. The debt related to these equity investments was comprised of 18 fixed-rate and five variable-rate non-recourse mortgage loans with an aggregate fair value of approximately $0.3 billion and a weighted-average annual interest rate of 5.0% at June 30, 2013. We currently consolidate 11 and hold equity interests in six of these investments. If the Proposed Merger occurs, we expect to consolidate five of the six investments in which we have equity interests. The portfolio and debt of CPA®:16 – Global is subject to change based on normal business activity.

Unsecured Term Loan

On July 31, 2013, we entered into a new credit agreement with our existing lender, Bank of America, for an unsecured term loan of up to $300.0 million, which we drew down in full on that date primarily to repay the $250.0 million outstanding balance on the Revolver. The Unsecured Term Loan matures in July 2014, but we have three options to extend the maturity of the loan by another six months, subject to the conditions provided in the Term Loan Credit Agreement. The Unsecured Term Loan provides for an annual interest rate, at our election, of either (i) the Eurocurrency Rate or (ii) the Base Rate, in each case plus the Applicable Rate (each as defined in the Term Loan Credit Agreement). Currently, the Applicable Rate on Eurocurrency Rate loans ranges from 1.60% to 2.35% (based on LIBOR) and the Applicable Rate on Base Rate loans ranges from 0.60% to 1.35% (based on the “prime rate”, defined in the Term Loan Credit Agreement as a rate of interest set by Bank of America based upon various factors including Bank of America's costs and desired returns). At July 31, 2013, the annual interest rate on the Unsecured Term Loan was LIBOR plus 1.60%.

CPA®:18 – GlobalDeconsolidation

On September 13, 2012, we purchased 1,000 shares of CPA®:18 – Global common stock, par value $0.001 per share, for an aggregate purchase price of $9,000 and were admitted as its initial stockholder. On December 14, 2012, we made a capital contribution of $0.2 million in exchange for 22,222 shares of CPA®:18 – Global common stock. Through June 30, 2013, the financial activity of CPA®:18– Global, which had no significant assets, liabilities or operations, was included in our consolidated financial statements. On July 25, 2013, upon CPA®:18 – Globalreaching its minimum offering proceeds and admitting new stockholders, we deconsolidated CPA®:18– Global and began to account for our interests in it under the equity method.