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Equity Investments in Real Estate (Tables)
 12 Months Ended
Dec. 31, 2017
Equity Method Investments and Joint Ventures [Abstract]  
Equity Method Investments
The following table presents Equity in earnings of equity method investments in real estate, which represents our proportionate share of the income or losses of these investments, as well as amortization of basis differences related to purchase accounting adjustments (in thousands):
 
Years Ended December 31,
 
2017
 
2016
 
2015
Equity Earnings from Equity Investments:
 
 
 
 
 
Net Lease (a)
$
9,369

 
$
15,271

 
$
21,692

Self Storage
—

 
(394
)
 
(1,703
)
All Other (b)
(6,274
)
 
(5,010
)
 
(1,762
)
 
3,095

 
9,867

 
18,227

Amortization of Basis Differences on Equity Investments:
 
 
 
 
 
Net Lease
(2,260
)
 
(3,077
)
 
(2,263
)
Self Storage
—

 
(39
)
 
(155
)
All Other
(574
)
 
(3,489
)
 
(1,142
)
 
(2,834
)
 
(6,605
)
 
(3,560
)
Equity in earnings of equity method investments in real estate
$
261

 
$
3,262

 
$
14,667


__________
(a)
For the years ended December 31, 2017 and 2016, amounts include impairment charges of $10.6 million and $1.9 million, respectively, related to certain of our equity investments (Note 8).
(b)
As of December 31, 2016, the carrying value of one of our investments was reduced to reflect a $22.8 million impairment of goodwill at the investee level to its fair value (Note 8). In addition, we recorded $10.6 million of income recognized in conjunction with the termination of a management agreement and a $10.6 million gain representing the portion of losses guaranteed by the previous management company under the terms of the management agreement.
The following tables present combined summarized investee financial information of our equity method investment properties. Amounts provided are the total amounts attributable to the investment properties and do not represent our proportionate share (in thousands):
 
December 31 or September 30
(as applicable), (a) (b) (c)
 
2017
 
2016
Net investments in real estate (d)
$
3,850,204

 
$
3,569,612

Other assets (d)
595,352

 
497,198

Total assets
4,445,556

 
4,066,810

Debt
2,584,248

 
2,619,153

Accounts payable, accrued expenses and other liabilities
374,040

 
447,944

Total liabilities
2,958,288

 
3,067,097

Total equity
$
1,487,268

 
$
999,713

 
Twelve Months Ended December 31 or September 30
(as applicable), (a) (b) (c)
 
2017
 
2016
 
2015
Revenues
$
888,159

 
$
815,161

 
$
779,875

Expenses
927,121

 
865,706

 
791,224

Loss from continuing operations
$
(38,962
)
 
$
(50,545
)
 
$
(11,349
)
__________
(a)
We record our investments in BPS Nevada, LLC and BG LLH, LLC on a one quarter lag. Therefore, amounts in our financial statements for the years ended December 31, 2017, 2016, and 2015 are based on balances and results of operations from the aforementioned investments is as of and for the 12 months ended September 30, 2017, 2016, and 2015, respectively.
(b)
Our investment in IDL Wheel Tenant, LLC was restructured on March 17, 2017, and as a result, we no longer account for this investment as an equity method investment as of that date. Prior to the restructuring, we recorded this investment on a one quarter lag. Therefore, amounts in our financial statements for the years ended December 31, 2016 and 2015 are based on balances and results of operations from IDL Wheel Tenant, LLC as of and for the 12 months ended September 30, 2016 and 2015, respectively. Therefore, amounts in our financial statements for the year ended December 31, 2017, only include operations from this investment for the three months ended December 31, 2016.
(c)
Our investment in Shelborne hotel was restructured on October 3, 2017, and as a result, we no longer account for this investment as an equity method investment as of that date. Prior to the restructuring, we recorded this investment on a one quarter lag. Therefore, amounts in our financial statements for the years ended December 31, 2016 and 2015 are based on balances and results of operations from Shelborne hotel as of and for the 12 months ended September 30, 2016 and 2015, respectively. Therefore, amounts for the year ended December 31, 2017 in the table above, only include operations from this investment for the 12 months ended September 30, 2017.
(d)
In the second quarter of 2017, we reclassified certain line items in our consolidated balance sheets. As a result, amounts for certain line items included within Net investments in real estate as of December 31, 2016 have been revised to the current year presentation (Note 2).
The following table sets forth our ownership interests in our equity method investments in real estate and their respective carrying values, along with those ADC Arrangements that are recorded as equity investments (dollars in thousands):
 
 
 
 
Ownership Interest at
 
Carrying Value at December 31,
Lessee/Equity Investee
 
Co-owner
 
December 31, 2017
 
2017
 
2016
Net Lease:
 
 
 
 
 
 
 
 
Hellweg Die Profi-Baumärkte GmbH & Co. KG (referred to as Hellweg 2) (a) (b) (c)
 
WPC
 
37%
 
$
109,933

 
$
10,125

Kesko Senukai (a) (d)
 
Third Party
 
70%
 
58,136

 
—

Jumbo Logistiek Vastgoed B.V. (a) (e)
 
WPC
 
85%
 
55,162

 
54,621

U-Haul Moving Partners, Inc. and Mercury Partners, LP (b)
 
WPC
 
12%
 
35,897

 
37,601

Bank Pekao S.A. (a) (b)
 
CPA:18 – Global
 
50%
 
25,582

 
23,025

BPS Nevada, LLC (b) (f)
 
Third Party
 
15%
 
23,455

 
23,036

State Farm Automobile Co. (b)
 
CPA:18 – Global
 
50%
 
16,072

 
17,603

Berry Global Inc. (b)
 
WPC
 
50%
 
14,476

 
14,974

Tesco Global Aruhazak Zrt. (a) (b) (g)
 
WPC
 
49%
 
10,707

 
10,807

Eroski Sociedad Cooperativa — Mallorca (a)
 
WPC
 
30%
 
7,629

 
6,576

Apply Sørco AS (referred to as Apply) (a) (h)
 
CPA:18 – Global
 
49%
 
6,298

 
12,528

Dick’s Sporting Goods, Inc. (b)
 
WPC
 
45%
 
3,750

 
4,367

Konzum d.d. (referred to as Agrokor) (a) (b) (i)
 
CPA:18 – Global
 
20%
 
3,433

 
7,079

 
 
 
 
 
 
370,530

 
222,342

All Other:
 
 
 
 
 
 
 
 
BG LLH, LLC (b) (f)
 
Third Party
 
6%
 
38,724

 
36,756

Shelborne Operating Associates, LLC (referred to as Shelborne) (b) (f) (j) (k) (l)
 
Third Party
 
N/A
 
—

 
127,424

IDL Wheel Tenant, LLC (m)
 
Third Party
 
N/A
 
—

 
37,124

BPS Nevada, LLC — Preferred Equity (b) (n)
 
Third Party
 
N/A
 
—

 
27,459

 
 
 
 
 
 
38,724

 
228,763

 
 
 
 
 
 
$
409,254

 
$
451,105

__________
(a)
The carrying value of this investment is affected by the impact of fluctuations in the exchange rate of the applicable foreign currency.
(b)
This investment is a VIE.
(c)
In January 2017, our Hellweg 2 jointly owned equity investment repaid non-recourse mortgage loans with an aggregate principal balance of approximately $243.8 million, of which we contributed $90.3 million (amounts are based on the exchange rate of the euro as of the date of repayment). This contribution was accounted for as a capital contribution to equity investments in real estate.
(d)
On May 23, 2017, we entered into a joint venture investment to acquire a 70% interest in a real estate portfolio for a total cost of $141.5 million, which excludes our portion of mortgage financing totaling $88.0 million (dollar amounts are based on the exchange rate of the euro on the date of acquisition). In addition, we recorded $7.2 million of basis difference, which was primarily attributable to acquisition costs. This was structured as a sale-leaseback transaction in which the tenant retained the remaining 30% ownership interest in the real estate portfolio. The portfolio includes 18 retail stores and one warehouse collectively located in Lithuania, Latvia, and Estonia, which we will account for as an equity method investment as the minority shareholders have significant influence. All major decisions that significantly impact the economic performance of the entity require a unanimous decision vote from all of the shareholders and, therefore, we do not have control over this investment.
(e)
This investment represents a tenancy-in-common interest, whereby the property is encumbered by debt for which we are jointly and severally liable. The co-obligor is WPC and the amount due under the arrangement was approximately $76.2 million at December 31, 2017. Of this amount, $64.8 million represents the amount we are liable for and is included within the carrying value of this investment at December 31, 2017.
(f)
This investment is reported using the hypothetical liquidation at book value model, which may be different then pro rata ownership percentages, primarily due to the complex capital structures of the partnership agreements.
(g)
On July 29, 2016, this investment refinanced a non-recourse mortgage loan that had an outstanding balance of $33.8 million with new financing of $34.6 million, of which our proportionate share was $17.0 million. The previous loan had an interest rate of 5.9% and a maturity date of July 31, 2016, while the new loan has an interest rate of Euro Interbank Offered Rate plus a margin of 3.3% and a term of five years.
(h)
During the year ended December 31, 2017, we recognized an impairment charge of $6.3 million related to our Apply equity method investment (Note 8).
(i)
During the year ended December 31, 2017, we recognized an impairment charge of $4.3 million related to our Agrokor equity method investment (Note 8).
(j)
On October 3, 2017, we restructured our Shelborne hotel investment by converting the underlying loan to equity when each of the partners transferred their equity interest in the investment to us in full satisfaction for the loan. We then transferred a 4.5% noncontrolling interest back to one of the original joint venture partners for a cash contribution of $4.0 million. As a result, we obtained approximately 95.5% (increased from 33%) of the interest in the entity. As a result of the restructuring, we determined that this investment should no longer be accounted for as an ADC Arrangement (Note 4) and we therefore consolidate this investment. During the year ended December 31, 2017, we recognized a loss on change in control of interests of $13.9 million as a result of this restructuring.
(k)
During the year ended December 31, 2017, as a result of Hurricane Irma and prior to the restructuring of this investment, we incurred damage at the Shelborne hotel, which is currently expected to be covered by insurance proceeds after the estimated deductible is paid (Note 4). We recognized this charge within Equity in earnings of equity method investments in real estate on our consolidated financial statements.
(l)
The carrying value as of December 31, 2016 includes a $22.8 million impairment charge to reduce goodwill at the investee level to its fair value, partially offset by $10.6 million of income recognized in conjunction with the termination of a management agreement and a $10.6 million gain representing the portion of losses guaranteed by the previous management company under the terms of the management agreement.
(m)
As of December 31, 2016, the carrying value included our investment in the Wheel Loan (Note 5) that was considered to be a VIE and was reported using the hypothetical liquidation at book value model. The Wheel Loan was restructured on March 17, 2017 and, as a result, we have reclassified the equity investment to a loan receivable, included in Other assets, net and no longer consider this to be a VIE.
(n)
This investment represents a preferred equity interest, with a preferred rate of return of 12%. On May 19, 2017, we received the full repayment of our preferred equity interest totaling $27.0 million; therefore, the preferred equity interest is now retired.