In the normal course of our ongoing business operations, we encounter economic risk. There are three main components of economic risk: interest rate risk, credit risk and market risk. We are primarily subject to interest rate risk on our interest-bearing assets and liabilities. Credit risk is the risk of default on our operations and tenants' inability or unwillingness to make contractually required payments. Market risk includes changes in the value of our properties and related loans as well as changes in the value of our investments due to changes in interest rates or other market factors. In addition, we own investments in Europe and are subject to the risks associated with changing foreign currency exchange rates.

When we use derivative instruments, it is generally to reduce our exposure to fluctuations in interest rates and foreign currency exchange rate movements. We have not entered, and do not plan to enter into financial instruments for trading or speculative purposes. In addition to derivative instruments that we entered into on our own behalf, we may also be a party to derivative instruments that are embedded in other contracts, and we may own common stock warrants, granted to us by lessees when structuring lease transactions, that are considered to be derivative instruments. The primary risks related to our use of derivative instruments are that a counterparty to a hedging arrangement could default on its obligation or that the credit quality of the counterparty may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction. While we seek to mitigate these risks by entering into hedging arrangements with counterparties that are large financial institutions that we deem to be creditworthy, it is possible that our hedging transactions, which are intended to limit losses, could adversely affect our earnings. Furthermore, if we terminate a hedging arrangement, we may be obligated to pay certain costs, such as transaction or breakage fees. We have established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities.

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 fair value hedge, the change in the fair value of the derivative is offset against the change in fair value of the hedged asset, liability, or firm commitment 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 (“OCI”) until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings.

The following table sets forth certain information regarding our derivative instruments for the periods presented (in thousands):

	Balance Sheet	Asset Derivatives Fair Value at				Liability Derivatives Fair Value at
	Location	September 30, 2011		December 31, 2010		September 30, 2011		December 31, 2010
Derivatives Designated
as Hedging Instruments
Interest rate cap	Other assets, net	$	85	$	733	$	-	$	-
Interest rate swap	Other assets, net		-		18		-		-
Foreign currency contracts	Other assets, net		6,246		-		-		-
Interest rate swaps	Accounts payable,		-		-		(4,958)		(1,134)
	accrued expenses and
	other liabilities
Foreign currency contracts	Accounts payable,		-		-		-		(1,081)
	accrued expenses and
	other liabilities

Derivatives Not Designated
as Hedging Instruments^(a)
Foreign currency contracts	Other assets, net		1,482		-		-		-
Foreign currency contracts	Accounts payable,		-		-		(421)		-
	accrued expenses and
	other liabilities
Stock warrants	Other assets, net		1,419		-		-		-
Total derivatives		$	9,232	$	751	$	(5,379)	$	(2,215)

The following tables present the impact of derivative instruments on the consolidated financial statements (in thousands):

	Amount of Gain (Loss) Recognized				Amount of Gain (Loss) Recognized
	in OCI on Derivatives (Effective Portion)				in OCI on Derivatives (Effective Portion)
	Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships	2011		2010		2011		2010
Interest rate cap ^(a)	$	(129)	$	(456)	$	(382)	$	(2,600)
Interest rate swaps		(3,589)		(1,082)		(3,862)		(2,676)
Foreign currency contracts		7,574		-		2,095		-
Total	$	3,856	$	(1,538)	$	(2,149)	$	(5,276)

	Amount of Gain (Loss) Reclassified				Amount of Gain (Loss) Reclassified
	from OCI into Income (Effective Portion)				from OCI into Income (Effective Portion)
	Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships	2011		2010		2011		2010
Foreign currency put options^(b)	$	(56)	$	-	$	(56)	$	-
Total	$	(56)	$	-	$	(56)	$	-

During the three and nine months ended September 30, 2011 and 2010, no gains or losses were reclassified from OCI into income related to ineffective portions of hedging relationships or to amounts excluded from effectiveness testing.

		Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives Not in Cash Flow	Location of Gain (Loss)	Three Months Ended		Nine Months Ended
Hedging Relationships	Recognized in Income	September 30, 2011		September 30, 2011
Foreign currency contracts	Other income and (expenses)	$	878	$	878
Stock warrants	Other income and (expenses)		(264)		(198)
Total		$	614	$	680

See below for information on our purposes for entering into derivative instruments, including those not designated as hedging instruments, and for information on derivative instruments owned by unconsolidated ventures, which are excluded from the tables above.

We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we attempt to obtain mortgage financing on a long-term, fixed-rate basis. However, from time to time, we or our venture partners may obtain variable-rate non-recourse mortgage loans and, as a result, may enter into interest rate swap agreements or interest rate cap agreements with counterparties. Interest rate swaps, which effectively convert the variable-rate debt service obligations of the loan to a fixed rate, are agreements in which one party exchanges a stream of interest payments for a counterparty's stream of cash flow over a specific period. The notional, or face, amount on which the swaps are based is not exchanged. Interest rate caps limit the effective borrowing rate of variable-rate debt obligations while allowing participants to share in downward shifts in interest rates. Our objective in using these derivatives is to limit our exposure to interest rate movements.

The derivative instruments that we had outstanding on our consolidated ventures at September 30, 2011 were designated as cash flow hedges and are summarized as follows (dollars in thousands):

Notional

Effective

Expiration

Fair Value at

Type

Amount

Interest Rate

Date

September 30, 2011

6-Month Euribor ^(a)

“Pay-fixed” swap

223,347

4.2%

9/2011

9/2016

(1,122)

3-Month London Inter-bank offered

rate (“LIBOR”) ^(b)

Interest rate cap

123,554

2.8%

3/2011

8/2014

3-Month LIBOR

“Pay-fixed” swap

27,120

6.6%

1/2010

12/2019

(3,149)

3-Month Euribor ^(a)

“Pay-fixed” swap

8,156

5.8%

7/2010

11/2017

(262)

1-Month LIBOR

“Pay-fixed” swap

4,200

6.0%

1/2011

1/2021

(425)

(4,873)

(a) Amounts are based upon the applicable exchange rate of the Euro at September 30, 2011.

(b) The applicable interest rate of the related debt was 2.8%, which was below the effective interest rate of the cap at September 30, 2011. Inclusive of noncontrolling interests are the notional amount and fair value of the swap of $55.6 million and less than $0.1 million, respectively.

We are exposed to foreign currency exchange rate movements in the Euro and, to a lesser extent, the British Pound Sterling. We manage foreign currency exchange rate movements by generally placing both our debt obligation to the lender and the tenant's rental obligation to us in the same currency. This reduces our overall exposure to the actual equity that we have invested and the equity portion of our cash flow. However, we are subject to foreign currency exchange rate movements to the extent of the difference in the timing and amount of the rental obligation and the debt service. We may also face challenges with repatriating cash from our foreign investments. We may encounter instances where it is difficult to repatriate cash because of jurisdictional restrictions or because repatriating cash may result in current or future tax liabilities. Realized and unrealized gains and losses recognized in earnings related to foreign currency transactions are included in Other income and (expenses) in the consolidated financial statements.

In order to hedge certain of our foreign currency cash flow exposures, we enter into foreign currency forward contracts, collars, and put options. A foreign currency forward contract is a commitment to deliver a certain amount of currency at a certain price on a specific date in the future. By entering into forward contracts, we are locked into a future currency exchange rate for the term of the contract. A foreign currency collar consists of a purchased call option to buy and a written put option to sell the foreign currency. These instruments guarantee that the exchange rate will not fluctuate beyond the range of the options' strike prices. A foreign currency put option is the right to sell the currency at a predetermined price, which limits our exposure to the movement in foreign currency exchange rates below a strike price.

The following table presents the foreign currency derivative contracts we had outstanding and their designations at September 30, 2011 (dollars in thousands, except strike price):

	Notional		Strike		Effective	Expiration	Fair Value at
Type	Amount^(a)		Price		Date	Date	September 30, 2011
Designated as Cash Flow Hedging Instruments
Collars	$	63,190	$	1.40 - 1.44	9/2011	12/2011 - 9/2014	$	3,397
Forward contracts		61,191		1.39	7/2011	7/2013		2,314
Forward contracts		53,535		1.34 - 1.35	9/2011	3/2012 - 3/2015		534

Not Designated as Cash Flow Hedging Instruments
Collars^(b)		20,590		1.40 - 1.42	9/2011	9/2012 - 3/2013		1,055
Put options^(c)		15,339		1.30	5/2011, 9/2011	12/2011 - 3/2012		7
	$	213,845					$	7,307

As part of the purchase of an interest in Hellweg 2 from CPA®:14 in May 2011 (Note 3), we acquired warrants from CPA®:14, which were granted by Hellweg 2 to CPA®:14 in connection with structuring the initial lease transaction, for a total cost of $0.8 million, which is based on the fair value of the warrants of $1.6 million less the assumption of a related liability of $0.8 million on the date of acquisition. These warrants give us participation rights to any distributions made by Hellweg 2. In addition, we are entitled to a cash distribution that equals to a certain percentage of the liquidity event price of Hellweg 2, should a liquidity event occur. Because these warrants are readily convertible to cash and provide for net cash settlement upon conversion, we account for them as derivative instruments.

In connection with a venture in Germany in which we and an affiliate have 67% and 33% interests, respectively, and which we consolidate, the venture obtained non-recourse mortgage financing for which the interest rate has both fixed and variable components. In connection with providing the financing, the lender entered into an interest rate swap agreement on its own behalf through which the fixed interest rate component on the financing was converted into a variable interest rate instrument. Through the venture, we have the right, at our sole discretion, to prepay this debt at any time and to participate in any realized gain or loss on the interest rate swap at that time. This participation right is deemed to be an embedded credit derivative. The derivative had an estimated fair value of zero at both September 30, 2011 and December 31, 2010. This derivative did not generate gains or losses during the three and nine months ended September 30, 2011 and 2010. In addition, an unconsolidated venture in which we acquired an interest from CPA®:14 in May 2011 (Note 6) has an embedded credit derivative similar to the one described above. Based on the valuation obtained at September 30, 2011 and including the effect of foreign currency translation, this embedded credit derivative had a fair value of less than $0.1 million and generated an unrealized gain of less than $0.1 million for the three months ended September 30, 2011 and un unrealized loss of less than $0.1 million for the nine months ended September 30, 2011. Amounts provided are the total amounts attributable to the venture and do not represent our proportionate share. Changes in the fair value of the embedded credit derivative are recognized in this venture's earnings.

Amounts reported in OCI related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. At September 30, 2011, we estimate that an additional $1.5 million, inclusive of amounts attributable to noncontrolling interests of $0.4 million, will be reclassified as interest expense during the next twelve months.

Some of the agreements we have with our derivative counterparties contain certain credit contingent provisions that could result in a declaration of default against us regarding our derivative obligations if we either default or are capable of being declared in default on certain of our indebtedness. At September 30, 2011, we had not been declared in default on any of our derivative obligations. The estimated fair value of our derivatives that were in a net liability position was $5.5 million and $2.2 million at September 30, 2011 and December 31, 2010, respectively, which included accrued interest but excluded any adjustment for nonperformance risk. If we had breached any of these provisions at either September 30, 2011 or December 31, 2010, we could have been required to settle our obligations under these agreements at their aggregate termination value of $6.2 million or $2.5 million, respectively.

Concentrations of credit risk arise when a group of tenants is engaged in similar business activities or is subject to similar economic risks or conditions that could cause them to default on their lease obligations to us. We regularly monitor our portfolio to assess potential concentrations of credit risk. While we believe our portfolio is reasonably well diversified, it does contain concentrations in excess of 10%, based on the percentage of our annualized contractual minimum base rent for the third quarter of 2011, in certain areas, as shown in the table below. The percentages in the table below represent our directly-owned real estate properties and do not include our pro rata share of equity investments.

Region:					At September 30, 2011
New York					13%
California					11%
Other U.S.					37%
Total U.S.					61%
Italy					14%
Spain					10%
Other Europe					15%
Total Europe					39%
Total					100%

Asset Type:
Warehouse/Distribution					27%
Office					26%
Retail					25%
Industrial					12%
Other					10%
Total					100%

Tenant Industry:
Retail					25%
Media - Printing & Publishing					17%
Grocery					13%
Other					45%
Total					100%

Guarantor/Tenant:
Metro AG (Europe)					14%
New York Times Company (U.S.)					13%