10-Q 1 cpa182015q310-q.htm 10-Q 10-Q


 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
For the quarterly period ended September 30, 2015
 
 
 
or
 
 
 
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
For the transition period from                     to                       

Commission File Number: 000-54970
CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
(Exact name of registrant as specified in its charter)
Maryland
 
90-0885534
(State of incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
50 Rockefeller Plaza
 
 
New York, New York
 
10020
(Address of principal executive offices)
 
(Zip Code)
Investor Relations (212) 492-8920
(212) 492-1100
(Registrant’s telephone numbers, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ
Smaller reporting company o
 
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Registrant has 103,246,075 shares of Class A common stock, $0.001 par value, and 29,568,217 shares of Class C common stock, $0.001 par value, outstanding at November 9, 2015.





INDEX

Forward-Looking Statements

This Quarterly Report on Form 10-Q, or this Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of Part I of this Report, contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. It is important to note that our actual results could be materially different from those projected in such forward-looking statements. You should exercise caution in relying on forward-looking statements as they involve known and unknown risks, uncertainties, and other factors that may materially affect our future results, performance, achievements, or transactions. Information on factors that could impact actual results and cause them to differ from what is anticipated in the forward-looking statements contained herein is included in this Report as well as in our other filings with the Securities and Exchange Commission, or the SEC, including but not limited to those described in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC on March 27, 2015, or the 2014 Annual Report. Except as required by federal securities laws and the rules and regulations of the SEC, we do not undertake to revise or update any forward-looking statements.

All references to “Notes” throughout the document refer to the footnotes to the consolidated financial statements of the registrant in Part I, Item 1. Financial Statements (Unaudited).




CPA®:18 – Global 9/30/2015 10-Q 1


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.

CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share amounts)
 
September 30, 2015
 
December 31, 2014
Assets
 
 
 
Investments in real estate:
 
 
 
Real estate, at cost
$
928,142

 
$
743,735

Operating real estate, at cost
417,978

 
133,596

Accumulated depreciation
(33,054
)
 
(11,814
)
Net investments in properties
1,313,066

 
865,517

Real estate under construction (inclusive of $80,992 and $0, respectively, attributable to variable interest entities, or VIEs)
108,739

 
2,258

Net investments in direct financing leases
28,449

 
45,582

Note receivable
28,000

 
28,000

Net investments in real estate
1,478,254

 
941,357

Cash and cash equivalents (inclusive of $601 and $0, respectively, attributable to VIEs)
269,861

 
429,548

In-place lease intangible assets, net
202,353

 
167,635

Other intangible assets, net
25,659

 
25,667

Goodwill
20,325

 
9,692

Other assets, net (inclusive of $26,530 and $0, respectively, attributable to VIEs)
100,040

 
41,985

Total assets
$
2,096,492

 
$
1,615,884

Liabilities and Equity
 
 
 
Liabilities:
 
 
 
Non-recourse debt
$
804,758

 
$
430,462

Bonds payable
139,247

 
91,250

Deferred income taxes
41,601

 
28,753

Accounts payable, accrued expenses and other liabilities (inclusive of $3,397 and $0, respectively, attributable to VIEs)
60,773

 
26,911

Due to affiliate
29,365

 
20,651

Distributions payable
19,924

 
17,629

Total liabilities
1,095,668

 
615,656

Commitments and contingencies (Note 11)

 

Equity:
 
 
 
CPA®:18 – Global stockholders’ equity:
 
 
 
Preferred stock, $0.001 par value; 50,000,000 shares authorized; none issued

 

Class A common stock, $0.001 par value; 320,000,000 shares authorized; 103,059,924 and 100,079,255 shares issued, respectively; and 102,360,384 and 99,924,009 shares outstanding, respectively
103

 
100

Class C common stock, $0.001 par value; 80,000,000 shares authorized; 29,338,963 and 18,026,013 shares issued, respectively; and 29,294,278 and 18,026,013 shares outstanding, respectively
29

 
18

Additional paid-in capital
1,186,583

 
1,056,862

Distributions and accumulated losses
(212,083
)
 
(111,878
)
Accumulated other comprehensive loss
(40,548
)
 
(20,941
)
Less: treasury stock at cost, 744,225 and 155,246 shares, respectively
(7,141
)
 
(1,520
)
Total CPA®:18 – Global stockholders’ equity
926,943

 
922,641

Noncontrolling interests
73,881

 
77,587

Total equity
1,000,824

 
1,000,228

Total liabilities and equity
$
2,096,492

 
$
1,615,884

See Notes to Consolidated Financial Statements.


CPA®:18 – Global 9/30/2015 10-Q 2


CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share and per share amounts) 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015

2014
 
2015
 
2014
Revenues
 
 
 
 
 
 
 
 
Lease revenues:
 
 
 
 
 
 
 
 
Rental income
 
$
20,628

 
$
11,163

 
$
56,054

 
$
27,293

Interest income from direct financing leases
 
1,047

 
1,012

 
3,079

 
2,437

Total lease revenues
 
21,675

 
12,175

 
59,133

 
29,730

Other real estate income
 
12,308

 
1,052

 
27,332

 
1,988

Other operating income
 
2,376

 
1,103

 
6,128

 
1,954

Other interest income
 
710

 
552

 
2,120

 
552

 
 
37,069


14,882

 
94,713

 
34,224

Operating Expenses
 
 
 
 
 
 
 
 
Depreciation and amortization
 
17,652

 
5,647

 
44,303

 
13,485

Acquisition expenses (inclusive of $6,851, $4,915, $25,532, and $23,808, respectively, to a related party)
 
10,795

 
8,861

 
34,575

 
31,827

Property expenses (inclusive of $2,098, $713, $5,244, and $1,647, respectively, to a related party)
 
5,612

 
2,166

 
13,703

 
4,463

Other real estate expenses
 
5,380

 
389

 
11,660

 
666

General and administrative (inclusive of $1,180, $386, $2,788, and $645, respectively, to a related party)
 
2,735

 
1,517

 
6,459

 
3,329

 
 
42,174

 
18,580

 
110,700

 
53,770

Other Income and Expenses
 
 
 
 
 
 
 
 
Interest expense (inclusive of $101, $43, $274, and $97, respectively, to a related party)
 
(7,970
)
 
(4,311
)
 
(24,065
)
 
(10,163
)
Other income and (expenses)
 
(2,324
)
 
(2,100
)
 
(4,256
)
 
(1,731
)
 
 
(10,294
)
 
(6,411
)
 
(28,321
)
 
(11,894
)
Loss before income taxes
 
(15,399
)
 
(10,109
)
 
(44,308
)
 
(31,440
)
Benefit from income taxes
 
1,062

 
644

 
854

 
422

Loss before gain on sale of real estate
 
(14,337
)
 
(9,465
)
 
(43,454
)
 
(31,018
)
Gain on sale of real estate, net of tax
 
6,654

 

 
6,654

 

Net Loss
 
(7,683
)
 
(9,465
)
 
(36,800
)
 
(31,018
)
Net (income) loss attributable to noncontrolling interests (inclusive of Available Cash Distributions to a related party of $1,705, $590, $4,021, and $1,196, respectively)
 
(2,092
)
 
(1,136
)
 
(5,096
)
 
1,389

Net Loss Attributable to CPA®:18 – Global
 
$
(9,775
)

$
(10,601
)
 
$
(41,896
)
 
$
(29,629
)
 
 
 
 
 
 
 
 
 
Class A Common Stock
 
 
 
 
 
 
 
 
Net loss attributable to CPA®:18 – Global
 
$
(7,078
)
 
$
(9,426
)
 
$
(31,659
)
 
$
(26,695
)
Basic and diluted weighted-average shares outstanding
 
102,293,880

 
99,007,256

 
101,471,695

 
71,680,784

Basic and diluted loss per share
 
$
(0.07
)
 
$
(0.10
)
 
$
(0.31
)
 
$
(0.37
)
Distributions Declared Per Share
 
$
0.1563

 
$
0.1562

 
$
0.4687

 
$
0.4686

 
 
 
 
 
 
 
 
 
Class C Common Stock
 
 
 
 
 
 
 
 
Net loss attributable to CPA®:18 – Global
 
$
(2,697
)
 
$
(1,175
)
 
$
(10,237
)
 
$
(2,934
)
Basic and diluted weighted-average shares outstanding
 
29,279,706

 
9,925,481

 
26,925,898

 
6,646,337

Basic and diluted loss per share
 
$
(0.09
)
 
$
(0.12
)
 
$
(0.38
)
 
$
(0.44
)
Distributions Declared Per Share
 
$
0.1340

 
$
0.1329

 
$
0.3998

 
$
0.3987



See Notes to Consolidated Financial Statements.


CPA®:18 – Global 9/30/2015 10-Q 3


CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(in thousands) 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net Loss
 
$
(7,683
)
 
$
(9,465
)
 
$
(36,800
)
 
$
(31,018
)
Other Comprehensive Loss
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
(6,724
)
 
(11,443
)
 
(28,202
)
 
(13,143
)
Change in net unrealized gain on derivative instruments
 
837

 
1,888

 
3,115

 
756

 
 
(5,887
)
 
(9,555
)
 
(25,087
)
 
(12,387
)
Comprehensive Loss
 
(13,570
)
 
(19,020
)
 
(61,887
)
 
(43,405
)
 
 
 
 
 
 
 
 
 
Amounts Attributable to Noncontrolling Interests
 
 
 
 
 
 
 
 
Net (income) loss
 
(2,092
)
 
(1,136
)
 
(5,096
)
 
1,389

Foreign currency translation adjustments
 
1,300

 
3,252

 
5,480

 
3,751

Comprehensive (income) loss attributable to noncontrolling interests
 
(792
)
 
2,116

 
384

 
5,140

Comprehensive Loss Attributable to CPA®:18 – Global
 
$
(14,362
)
 
$
(16,904
)
 
$
(61,503
)
 
$
(38,265
)
 
See Notes to Consolidated Financial Statements.



CPA®:18 – Global 9/30/2015 10-Q 4


CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
Nine Months Ended September 30, 2015 and 2014
(in thousands, except share and per share amounts) 
 
CPA®:18 – Global Stockholders
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional Paid-In Capital
 
Distributions
and
Accumulated
Losses
 
Accumulated
Other Comprehensive Loss
 
Treasury Stock
 
Total CPA®:18 – Global Stockholders
 
Noncontrolling Interests
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
Class A
 
Class C
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
Total
Balance at January 1, 2015
99,924,009

 
$
100

 
18,026,013

 
$
18

 
$
1,056,862

 
$
(111,878
)
 
$
(20,941
)
 
$
(1,520
)
 
$
922,641

 
$
77,587

 
$
1,000,228

Shares issued, net of offering costs
2,478,960

 
2

 
11,312,950

 
11

 
124,715

 
 
 
 
 
 
 
124,728

 

 
124,728

Shares issued to affiliate
490,598

 
1

 

 

 
4,906

 
 
 
 
 
 
 
4,907

 

 
4,907

Stock-based compensation
11,111

 

 
 
 
 
 
100

 
 
 
 
 
 
 
100

 
 
 
100

Contributions from noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
4,132

 
4,132

Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
(7,454
)
 
(7,454
)
Distributions declared ($0.4687 and $0.3998 per share to Class A and Class C, respectively)
 
 
 
 
 
 
 
 
 
 
(58,309
)
 
 
 
 
 
(58,309
)
 
 
 
(58,309
)
Net loss
 
 
 
 
 
 
 
 
 
 
(41,896
)
 
 
 
 
 
(41,896
)
 
5,096

 
(36,800
)
Other comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

Foreign currency translation adjustments
 
 
 
 
 
 
 
 
 
 
 
 
(22,722
)
 
 
 
(22,722
)
 
(5,480
)
 
(28,202
)
Change in net unrealized gain on derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
3,115

 
 
 
3,115

 
 
 
3,115

Repurchase of shares
(544,294
)
 
 
 
(44,685
)
 
 
 
 
 
 
 
 
 
(5,621
)
 
(5,621
)
 
 
 
(5,621
)
Balance at September 30, 2015
102,360,384

 
$
103

 
29,294,278

 
$
29

 
$
1,186,583

 
$
(212,083
)
 
$
(40,548
)
 
$
(7,141
)
 
$
926,943

 
$
73,881

 
$
1,000,824

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2014
21,290,097

 
$
21

 
2,776,001

 
$
3

 
$
215,371

 
$
(2,567
)
 
$
(94
)
 
$

 
$
212,734

 
$
37,737

 
$
250,471

Shares issued, net of offering costs
77,725,349

 
78

 
9,466,047

 
9

 
779,817

 
 
 
 
 
 
 
779,904

 
 
 
779,904

Shares issued to affiliate
143,482

 
 
 
 
 
 
 
1,435

 
 
 
 
 
 
 
1,435

 
 
 
1,435

Stock-based compensation
11,110

 
 
 
 
 
 
 
99

 
 
 
 
 
 
 
99

 
 
 
99

Contributions from noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
95,889

 
95,889

Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
(67,385
)
 
(67,385
)
Distributions declared ($0.4686 and $0.3987 per share to Class A and Class C, respectively)
 
 
 
 
 
 
 
 
 
 
(35,816
)
 
 
 
 
 
(35,816
)
 
 
 
(35,816
)
Net loss
 
 
 
 
 
 
 
 
 
 
(29,629
)
 
 
 
 
 
(29,629
)
 
(1,389
)
 
(31,018
)
Other comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

Foreign currency translation adjustments
 
 
 
 
 
 
 
 
 
 
 
 
(9,392
)
 
 
 
(9,392
)
 
(3,751
)
 
(13,143
)
Change in net unrealized gain on derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
756

 
 
 
756

 
 
 
756

Repurchase of shares
(37,160
)
 
 
 
 
 
 
 
 
 
 
 
 
 
(371
)
 
(371
)
 
 
 
(371
)
Balance at September 30, 2014
99,132,878

 
$
99

 
12,242,048

 
$
12

 
$
996,722

 
$
(68,012
)
 
$
(8,730
)
 
$
(371
)
 
$
919,720

 
$
61,101

 
$
980,821


See Notes to Consolidated Financial Statements.


CPA®:18 – Global 9/30/2015 10-Q 5


CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 
 
Nine Months Ended September 30,
 
 
2015
 
2014
Cash Flows — Operating Activities
 

 
 
Net Cash Provided by (Used in) Operating Activities
 
$
24,380

 
$
(411
)
Cash Flows — Investing Activities
 
 
 
 
Acquisitions of real estate and direct financing leases, net of cash acquired
 
(662,565
)
 
(481,947
)
Proceeds from sale of real estate
 
35,674

 

Funding and advances for build-to-suit projects
 
(34,978
)
 
(5,725
)
Change in investing restricted cash
 
(7,208
)
 
(4,897
)
Acquisition of equity investment
 
(5,517
)
 

Deposits for investments
 
(4,000
)
 

Value added taxes paid in connection with acquisition of real estate
 
(3,407
)
 
(35,136
)
Payment of deferred acquisition fees to an affiliate
 
(2,995
)
 
(978
)
Value added taxes refunded in connection with the acquisition of real estate
 

 
36,472

Investment in note receivable
 

 
(28,000
)
Net Cash Used in Investing Activities
 
(684,996
)
 
(520,211
)
Cash Flows — Financing Activities
 
 
 
 
Proceeds from mortgage financing
 
436,656

 
223,651

Proceeds from issuance of shares, net of issuance costs
 
125,243

 
785,518

Proceeds from bond financing
 
66,328

 
52,066

Distributions paid
 
(56,014
)
 
(20,852
)
Scheduled payments and prepayments of mortgage principal
 
(49,082
)
 
(1,163
)
Payment of deferred financing costs and mortgage deposits
 
(8,313
)
 
(2,954
)
Distributions to noncontrolling interests
 
(7,454
)
 
(67,385
)
Purchase of treasury stock
 
(5,621
)
 
(371
)
Contributions from noncontrolling interests
 
2,692

 
95,889

Receipt of tenant security deposits
 
(65
)
 
4,072

Net Cash Provided by Financing Activities
 
504,370

 
1,068,471

Change in Cash and Cash Equivalents During the Period
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
(3,441
)
 
(4,782
)
Net (decrease) increase in cash and cash equivalents
 
(159,687
)
 
543,067

Cash and cash equivalents, beginning of period
 
429,548

 
109,061

Cash and cash equivalents, end of period
 
$
269,861

 
$
652,128


See Notes to Consolidated Financial Statements.


CPA®:18 – Global 9/30/2015 10-Q 6


CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Organization and Offering

Organization

Corporate Property Associates 18 – Global Incorporated, or CPA®:18 – Global, and, together with its consolidated subsidiaries, we, us, or our, is a publicly-owned, non-listed real estate investment trust, or REIT, that invests primarily in a diversified portfolio of income-producing commercial real estate properties leased to companies and other real estate related assets, both domestically and outside the United States. We were formed in 2012 and are managed by W. P. Carey Inc., or WPC, through one of its subsidiaries, or collectively our advisor. As a REIT, we are not subject to U.S. federal income taxation as long as we satisfy certain requirements, principally relating to the nature of our income and the level of our distributions, among other factors. We earn revenue primarily by leasing the properties we own to single corporate tenants, predominantly on a triple-net lease basis, which requires the tenant to pay substantially all of the costs associated with operating and maintaining the property. Revenue is subject to fluctuation due to the timing of new lease transactions, lease terminations, lease expirations, contractual rent adjustments, tenant defaults, sales of properties, and changes in foreign currency exchange rates.

Substantially all of our assets and liabilities are held by CPA®:18 Limited Partnership, a Delaware limited partnership, which is our Operating Partnership, and at September 30, 2015 we owned 99.97% of general and limited partnership interests in the Operating Partnership. The remaining interest in the Operating Partnership is held by WPC–CPA®:18 Holdings, LLC, or CPA®:18 Holdings, a subsidiary of our sponsor, WPC.

At September 30, 2015, the majority of our portfolio was comprised of full or partial ownership interests in 54 properties, the majority of which were fully-occupied and triple-net leased to 94 tenants totaling 8.2 million square feet. The remainder of our portfolio was comprised of our full or partial ownership interests in 44 self-storage properties, six multi-family properties, and one student housing development totaling 5.0 million square feet.

Our advisor provides both strategic and day-to-day management services for us, including capital funding services, investment research and analysis, investment financing and other investment-related services, asset management, disposition of assets, investor relations, and administrative services. W. P. Carey & Co. B.V., an affiliate of our advisor, provides asset management services with respect to our foreign investments.

Public Offering

On May 7, 2013, we commenced our initial public offering of up to $1.4 billion in shares of our common stock, in any combination of Class A and Class C shares, including $150.0 million in shares of common stock through our distribution reinvestment plan at a price of $9.60 per share of Class A common stock and $8.98 per share of Class C common stock.

We ceased accepting new orders for shares of Class A and Class C common stock on June 30, 2014 and March 27, 2015, respectively. Through the closing of our initial public offering on April 2, 2015, we raised gross offering proceeds for our Class A common stock and Class C common stock of $977.4 million and $266.1 million, respectively, which excludes reinvested distributions through our distribution reinvestment plan. Through September 30, 2015, proceeds from our distribution reinvestment plan were $42.0 million and $7.9 million for our Class A and Class C common stock, respectively.



CPA®:18 – Global 9/30/2015 10-Q 7


Notes to Consolidated Financial Statements (Unaudited)


Note 2. Revisions of Previously-Issued Financial Statements

2015 Revisions

Description of the Errors and Revisions

During the second quarter of 2015, we identified errors in the interim consolidated financial statements for the three months ended March 31, 2015 related to the classification of certain activities within the statement of cash flows and one error related to the capitalization of financing costs associated with the refinancing of a mortgage loan. We evaluated the impact of these errors on the previously-issued financial statements and concluded that these errors were not material to our consolidated financial statements as of and for the three months ended March 31, 2015. However, in order to correctly present the aforementioned errors, we will revise the consolidated statements of operations and cash flows for the three months ended March 31, 2015 when such statements are presented in our future public filings. The revisions described below had no effect on our cash balances or liquidity as of March 31, 2015. The interim consolidated financial statements as of and for the three and nine months ended September 30, 2015 are not impacted by these adjustments.

Errors Associated with Cash Flow Classification

We identified errors in our consolidated statement of cash flows for the three months ended March 31, 2015 as follows (in thousands):
 
 
Three Months Ended March 31, 2015
 
 
As Reported
 
Revisions
 
As Revised
 
 
 
 
 
 
 
Net Cash Provided by Operating Activities
 
$
9,586

 
$
3,085

(a) (b) (c) (d) 
$
12,671

 
 
 
 
 
 
 
Net Cash Used in Investing Activities
 
(145,309
)
 
536

(a) 
(144,773
)
 
 
 
 
 
 
 
 
 
 
 
(1,923
)
(b) 
 
 
 
 
 
948

(c) 
 
Net Cash Provided by Financing Activities
 
248,240

 
(975
)
 
247,265

 
 
 
 
 
 
 
Change in Cash and Cash Equivalents During the Period
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
(2,971
)
 
(2,646
)
(a) (d) 
(5,617
)
Net increase in cash and cash equivalents
 
109,546

 


109,546

Cash and cash equivalents, beginning of period
 
429,548

 

 
429,548

Cash and cash equivalents, end of period
 
$
539,094

 
$


$
539,094

___________
(a)
These items relate to an error in classification of cash flows for an acquisition of real estate; whereby Net cash provided by operating activities was overstated by $1.0 million, Net cash used in investing activities was overstated by $0.5 million and the Effect of exchange rate changes on cash and cash equivalents should have been increased by $0.5 million.
(b)
These items relate to an error of classification of cash flows related to the settlement of proceeds from the sale of shares and an error in the classification of cash flows for offering costs, whereby Net cash provided by operating activities was understated by $1.9 million and Net cash provided by financing activities was overstated by the same amount.
(c)
These items relate to an error in the capitalization of financing costs as described below, whereby Net cash provided by operating activities was overstated by $0.9 million and Net cash provided by financing activities was understated by the same amount.
(d)
These items relate to an error in the classification of the remeasurement of foreign cash balances held in U.S. dollar functional currency subsidiaries, whereby Net cash provided by operating activities was understated by $3.1 million and the Effect of exchange rate changes on cash and cash equivalents should have been decreased by the same amount.



CPA®:18 – Global 9/30/2015 10-Q 8


Notes to Consolidated Financial Statements (Unaudited)


In summary, if these cash flow classification items had been properly presented within the consolidated statement of cash flows for the three months ended March 31, 2015, Net cash provided by operating activities would have increased by $3.1 million, Net cash used in investing activities would have decreased by $0.5 million, Net cash provided by financing activities would have decreased by $1.0 million and the Effect of exchange rate changes on cash and cash equivalents would have decreased by $2.6 million, with no change in the Net increase in cash and cash equivalents.
Error Associated with Financing Costs
In addition to the classification errors described above, we identified an error related to the capitalization of financing costs associated with the refinancing of a mortgage loan, which should have been recorded as Interest expense within our consolidated statement of operations for the three months ended March 31, 2015. If interest expense had been recorded correctly on the consolidated statement of operations, Interest expense, Loss before income taxes, Net loss, and Net loss attributable to CPA®:18 – Global each would have been higher by $0.9 million and Net loss per share for Class A and Class C common stock would have been higher by $0.01 on the consolidated statement of operations. This also would have resulted in a corresponding decrease of $0.9 million to Other assets, Total assets, Distributions and accumulated losses, and Total equity within the consolidated balance sheet and, where applicable, within the consolidated statement of equity. In addition, the amounts for Net loss, Comprehensive loss and Comprehensive loss attributable to CPA®:18 – Global on the consolidated statement of comprehensive loss for the three months ended March 31, 2015 each would have increased by $0.9 million.

2014 Revisions

Description of the Error and Revision

In the course of preparing our consolidated financial statements for the 2014 Annual Report, we discovered an error related to our accounting for a subsidiary’s functional currency, which was incorrectly designated as the euro instead of the U.S. dollar, and as a result, the applicable financial results of this entity were being translated when they should have been remeasured. The correction of this error resulted in an increase of foreign currency losses within the consolidated statement of operations and a decrease of foreign currency losses in the consolidated statements of comprehensive loss for the same amounts. We concluded that these revision adjustments, summarized in the tables below, were not material to our financial position or results of operations for the prior periods presented and revised the prior periods presented herein to reflect the correction of this error.



CPA®:18 – Global 9/30/2015 10-Q 9


Notes to Consolidated Financial Statements (Unaudited)


We corrected this error, and one other error previously recorded as an out-of-period adjustment, and revised our consolidated financial statements for all prior periods impacted. Accordingly, our financial results for the prior periods presented herein have been revised for the correction of such errors as follows (in thousands, except share and per share amounts):

Consolidated Statements of Operations
 
 
Three Months Ended September 30, 2014
 
Nine Months Ended September 30, 2014
 
 
As Reported
 
Revisions
 
As Revised
 
As Reported
 
Revisions
 
As Revised
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
14,882

 
$

 
$
14,882

 
$
34,224

 
$

 
$
34,224

Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Total operating expenses
 
18,580

 

 
18,580

 
53,770

 

 
53,770

Other Income and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
(4,311
)
 

 
(4,311
)
 
(10,163
)
 

 
(10,163
)
Other income and (expenses) (a)
 
852

 
(2,952
)
 
(2,100
)
 
1,814

 
(3,545
)
 
(1,731
)
 
 
(3,459
)
 
(2,952
)
 
(6,411
)
 
(8,349
)
 
(3,545
)
 
(11,894
)
Loss before income taxes
 
(7,157
)
 
(2,952
)
 
(10,109
)
 
(27,895
)
 
(3,545
)
 
(31,440
)
Benefit from income taxes
 
644

 

 
644

 
422

 

 
422

Net Loss
 
(6,513
)
 
(2,952
)
 
(9,465
)
 
(27,473
)
 
(3,545
)
 
(31,018
)
Net (income) loss attributable to noncontrolling interests
 
(1,136
)
 

 
(1,136
)
 
1,389

 

 
1,389

Net Loss Attributable to CPA®:18 – Global
 
$
(7,649
)
 
$
(2,952
)
 
$
(10,601
)
 
$
(26,084
)
 
$
(3,545
)
 
$
(29,629
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Class A Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
Net loss attributable to CPA®:18 – Global
 
$
(6,743
)
 
$
(2,683
)
 
$
(9,426
)
 
$
(23,451
)
 
$
(3,244
)
 
$
(26,695
)
Basic and diluted weighted-average shares outstanding
 
99,007,256

 

 
99,007,256

 
71,680,784

 

 
71,680,784

Basic and diluted loss per share
 
$
(0.07
)
 
$
(0.03
)
 
$
(0.10
)
 
$
(0.33
)
 
$
(0.04
)
 
$
(0.37
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Class C Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
Net loss attributable to CPA®:18 – Global
 
$
(906
)
 
$
(269
)
 
$
(1,175
)
 
$
(2,633
)
 
$
(301
)
 
$
(2,934
)
Basic and diluted weighted-average shares outstanding
 
9,925,481

 

 
9,925,481

 
6,646,337

 

 
6,646,337

Basic and diluted loss per share
 
$
(0.09
)
 
$
(0.03
)
 
$
(0.12
)
 
$
(0.40
)
 
$
(0.04
)
 
$
(0.44
)

Consolidated Statements of Comprehensive Loss
 
 
Three Months Ended September 30, 2014
 
Nine Months Ended September 30, 2014
 
 
As Reported
 
Revisions
 
As Revised
 
As Reported
 
Revisions
 
As Revised
Net Loss (a)
 
$
(6,513
)
 
$
(2,952
)
 
$
(9,465
)
 
$
(27,473
)
 
$
(3,545
)
 
$
(31,018
)
Other Comprehensive Loss
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments (a)
 
(14,395
)
 
2,952

 
(11,443
)
 
(16,688
)
 
3,545

 
(13,143
)
Change in net unrealized gain on derivative instruments
 
1,888

 

 
1,888

 
756

 

 
756

 
 
(12,507
)
 
2,952

 
(9,555
)
 
(15,932
)
 
3,545

 
(12,387
)
Comprehensive Loss
 
(19,020
)
 

 
(19,020
)
 
(43,405
)
 

 
(43,405
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts Attributable to Noncontrolling Interests
 
 
 
 
 
 
 
 
 
 
 
 
Net (income) loss
 
(1,136
)
 

 
(1,136
)
 
1,389

 

 
1,389

Foreign currency translation adjustments
 
3,252

 

 
3,252

 
3,751

 

 
3,751

Comprehensive loss attributable to noncontrolling interests
 
2,116

 

 
2,116

 
5,140

 

 
5,140

Comprehensive Loss Attributable to CPA®:18 – Global
 
$
(16,904
)
 
$

 
$
(16,904
)
 
$
(38,265
)
 
$

 
$
(38,265
)



CPA®:18 – Global 9/30/2015 10-Q 10


Notes to Consolidated Financial Statements (Unaudited)


Consolidated Statement of Equity
 
CPA®:18 – Global Stockholders
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional Paid-In Capital
 
Distributions
and
Accumulated
Losses (a)
 
Accumulated
Other Comprehensive Loss (a)
 
 
 
Total CPA®:18 – Global Stockholders
 
Noncontrolling Interests
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
Class A
 
Class C
 
 
 
 
 
 
 
 
 
Balance at September 30, 2014
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Treasury Stock
 
 
 
Total
As Reported
99,132,878

 
$
99

 
12,242,048

 
$
12

 
$
996,722

 
$
(64,467
)
 
$
(12,275
)
 
$
(371
)
 
$
919,720

 
$
61,101

 
$
980,821

Revisions

 

 

 

 

 
(3,545
)
 
3,545

 

 

 

 

As Revised
99,132,878

 
$
99

 
12,242,048

 
$
12

 
$
996,722

 
$
(68,012
)
 
$
(8,730
)
 
$
(371
)
 
$
919,720

 
$
61,101

 
$
980,821

___________
(a)
These adjustments are the result of the error we identified related to foreign currency matters, as discussed above.

Statement of Cash Flows

These revisions had no net impact on Net cash used in operating activities, Net cash used in investing activities, or Net cash provided by financing activities in the statement of cash flows for the nine months ended September 30, 2014.

Note 3. Basis of Presentation

Basis of Presentation

Our interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a fair statement of our consolidated financial position, results of operations, and cash flows in accordance with accounting principles generally accepted in the United States, or GAAP.
 
In the opinion of management, the unaudited financial information for the interim periods presented in this Report reflects all normal and recurring adjustments necessary for a fair statement of financial position, results of operations, and cash flows. Our interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2014, which are included in the 2014 Annual Report, as certain disclosures that would substantially duplicate those contained in the audited consolidated financial statements have not been included in this Report. Operating results for interim periods are not necessarily indicative of operating results for an entire year.
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.

Basis of Consolidation

Our consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries. The portions of equity in consolidated subsidiaries that are not attributable, directly or indirectly, to us are presented as noncontrolling interests. All significant intercompany accounts and transactions have been eliminated.

When we obtain an economic interest in an entity, we evaluate the entity to determine if it should be deemed to be a VIE, and, if so, whether we should be deemed to be the primary beneficiary and are therefore required to consolidate the entity. We apply accounting guidance for consolidation of VIEs to certain entities in which the equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Fixed price purchase and renewal options within a lease, as well as certain decision-making rights within a loan or joint-venture agreement, can cause us to consider an entity a VIE. Significant judgment is required to determine whether a VIE should be consolidated. We review the arrangements provided for in the partnership agreement or other related contracts to determine whether the entity is considered a VIE and to establish whether we have any variable interests in the VIE. We then compare our variable interests, if any, to those of the other variable interest holders to determine which party is the primary beneficiary of the VIE, based on whether the entity (i) has the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) has the obligation to absorb losses or the


CPA®:18 – Global 9/30/2015 10-Q 11


Notes to Consolidated Financial Statements (Unaudited)


right to receive benefits of the VIE that could potentially be significant to the VIE. We performed this analysis on all of our subsidiary entities to determine whether they qualify as VIEs and whether they should be consolidated or accounted for as equity investments in an unconsolidated venture. As a result of our assessment, at September 30, 2015 we considered three entities VIEs, two of which we consolidate and the other we account for as an equity investment.

For an entity that is not considered to be a VIE, but rather a voting interest entity, the general partners in a limited partnership (or similar entity) are presumed to control the entity regardless of the level of their ownership and, accordingly, may be required to consolidate the entity. We evaluate the partnership agreements or other relevant contracts to determine whether there are provisions in the agreements that would overcome this presumption. If the agreements provide the limited partners with either (i) the substantive ability to dissolve or liquidate the limited partnership or otherwise remove the general partners without cause or (ii) substantive participating rights, the limited partners’ rights overcome the presumption of control by a general partner of the limited partnership, and, therefore, the general partner must account for its investment in the limited partnership using the equity method of accounting.

Additionally, we own an interest in a self-storage development joint venture through a noncontrolling interest in a partnership and limited liability company that we do not control, but over which we exercise significant influence. We account for this investment under the equity method of accounting. At times, the carrying value of our equity investment may fall below zero. We intend to fund our share of the jointly-owned investment’s future operating deficits should the need arise. However, we have no legal obligation to pay for any of the liabilities of such an investment nor do we have any legal obligation to fund operating deficits. At September 30, 2015, our sole equity investment did not have a carrying value below zero.
Recent Accounting Requirements

The following Accounting Standards Updates, or ASUs, promulgated by the Financial Accounting Standards Board are applicable to us:

ASU 2015-16, Business Combinations (Topic 805) ASU 2015-16  requires that an acquirer recognize adjustments identified during the business combination measurement period in the reporting period in which the adjustment amounts are determined. The effects on earnings due to changes in depreciation, amortization, or other income effects as a result of the change are also recognized in the same period’s financial statements.  ASU 2015-16 also requires that acquirers present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the adjustment had been recognized as of the acquisition date.  ASU 2015-16 is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, early adoption is permitted and prospective application is required for adjustments that are identified after the effective date of this update. We elected to early adopt ASU 2015-16 and implemented the standard prospectively beginning July 1, 2015. The adoption and implementation of the standard did not have a material impact on our financial statements.

ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30) — ASU 2015-03 changes the presentation of debt issuance costs, which are currently recognized as a deferred charge (that is, an asset) and requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 does not affect the recognition and measurement guidance for debt issuance costs. ASU 2015-03 is effective for periods beginning after December 15, 2015, early adoption is permitted and retrospective application is required. We are currently evaluating the impact of ASU 2015-03 on our consolidated financial statements.

ASU 2014-09, Revenue from Contracts with Customers (Topic 606) — ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 does not apply to our lease revenues, but will apply to reimbursed tenant costs and revenues generated from our operating properties. Additionally, this guidance modifies disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the Financial Accounting Standards Board issued ASU 2015-14, which defers the effective date of ASU 2014-09 for all entities by one year, until years beginning in 2018, with early adoption permitted but not before 2017, the original public company effective date. We are currently evaluating the impact of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard.



CPA®:18 – Global 9/30/2015 10-Q 12


Notes to Consolidated Financial Statements (Unaudited)


Note 4. Agreements and Transactions with Related Parties

Transactions with Our Advisor

We have an advisory agreement with our advisor whereby our advisor performs certain services for us under a fee arrangement, including the identification, evaluation, negotiation, purchase, and disposition of real estate and related assets and mortgage loans; day-to-day management; and the performance of certain administrative duties. The current advisory agreement will expire on December 31, 2015 and is scheduled to renew annually thereafter with our approval.

The following tables present a summary of fees we paid, expenses we reimbursed, and distributions we made to our advisor and other affiliates in accordance with the terms of the related agreements (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Amounts Included in the Consolidated Statements of Operations
 
 
 
 
 
 
 
 
Acquisition expenses
 
$
6,851

 
$
4,915

 
$
25,532

 
$
23,808

Asset management fees
 
2,098

 
713

 
5,244

 
1,647

Available Cash Distributions
 
1,705

 
590

 
4,021

 
1,196

Shareholder servicing fee
 
671

 
230

 
1,836

 
459

Personnel and overhead reimbursements
 
409

 
57

 
852

 
87

Interest expense on deferred acquisition fees
 
101

 
43

 
274

 
97

Stock-based compensation
 
100

 
99

 
100

 
99

 
 
$
11,935

 
$
6,647

 
$
37,859

 
$
27,393

 
 
 
 
 
 
 
 
 
Other Transaction Fees Incurred
 
 
 
 
 
 
 
 
Current acquisition fees
 
$
677

 
$

 
$
7,052

 
$
1,251

Deferred acquisition fees
 
542

 

 
5,641

 
1,000

Offering costs
 
48

 
640

 
613

 
2,626

Selling commissions and dealer manager fees
 

 
2,695

 
3,746

 
79,926

 
 
$
1,267

 
$
3,335

 
$
17,052

 
$
84,803


The following table presents a summary of amounts included in Due to affiliate in the consolidated financial statements (in thousands):
 
 
September 30, 2015
 
December 31, 2014
Due to Affiliate
 
 
 
 
Deferred acquisition fees, including interest
 
$
24,180

 
$
17,525

Accounts payable
 
2,858

 
2,702

Current acquisition fees
 
1,355

 

Asset management fees payable
 
716

 
378

Reimbursable costs
 
256

 
46

 
 
$
29,365

 
$
20,651


Organization and Offering Costs

Pursuant to the advisory agreement with our advisor, we were liable for certain expenses related to our initial public offering, which include filing, legal, accounting, printing, advertising, transfer agent, and escrow fees, and were deducted from the gross proceeds of the offering. We reimbursed Carey Financial LLC, or Carey Financial, our dealer manager and an affiliate of our advisor, or selected dealers for reasonable bona fide due diligence expenses incurred that were supported by a detailed and itemized invoice. The total underwriting compensation to Carey Financial and selected dealers in connection with the offering cannot exceed limitations prescribed by the Financial Industry Regulatory Authority, Inc. Our advisor has agreed to be


CPA®:18 – Global 9/30/2015 10-Q 13


Notes to Consolidated Financial Statements (Unaudited)


responsible for the repayment of organization and offering expenses (excluding selling commissions and dealer manager fees paid to Carey Financial and selected dealers and fees paid and expenses reimbursed to selected dealers) that exceed, in the aggregate, 1.5% of the gross proceeds from the initial public offering. From inception and through September 30, 2015, our advisor incurred organization and offering costs of $8.7 million on our behalf, which we have fully repaid and charged to stockholders’ equity.

Loans from WPC

Our board of directors and the board of directors of WPC have approved unsecured loans from WPC to us of up to $100.0 million, in the aggregate, at a rate equal to the rate at which WPC is able to borrow funds under its senior credit facility, for the purpose of facilitating acquisitions approved by our advisor’s investment committee that we would not otherwise have sufficient available funds to complete. All loans are to be made solely at the discretion of WPC’s management. We did not borrow any funds from WPC during the three and nine months ended September 30, 2015 and 2014, nor did we have any amounts outstanding at September 30, 2015 or December 31, 2014.

Asset Management Fees

Pursuant to the advisory agreement, our advisor is entitled to an annual asset management fee 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, of our investments. For 2014, the asset management fees were payable in cash or shares of our Class A common stock at the option of our advisor. We amended the advisory agreement for 2015, so that the asset management fees are payable in cash or shares of our Class A common stock at our option, after consultation with our advisor. If our advisor receives all or a portion of its fees in shares, the number of shares issued is determined by dividing the dollar amount of fees by our most recently published estimated net asset value per share, or, if net asset values have not yet been published, as is currently the case, $10.00 per share, which is the price at which our Class A shares were sold in our initial public offering. For 2015 and 2014, we paid our advisor in shares of our Class A common stock. For both the three and nine months ended September 30, 2015 and 2014, our advisor received its asset management fees in shares of our Class A common stock. At September 30, 2015, our advisor owned 751,111 shares, or 0.7%, of our outstanding Class A common stock. Asset management fees are included in Property expenses in the consolidated financial statements.

Broker Dealer Fees

Pursuant to our dealer manager agreement, Carey Financial received a selling commission in connection with our initial public offering of $0.70 and $0.14 per share sold and a dealer manager fee of $0.30 and $0.21 per share sold for the Class A and Class C common stock, respectively. Our initial public offering terminated on April 2, 2015. These amounts were recorded in Additional paid-in capital in the consolidated financial statements.

Carey Financial also receives an annual distribution and shareholder servicing fee in connection with our Class C common stock, which it may re-allow to selected dealers. The amount of the shareholder servicing fee is 1.0% of the selling price per share for the Class C common stock in our initial public offering, or, once published, the amount of our net asset value. The shareholder servicing fee accrues daily and is payable quarterly in arrears. We will no longer incur the shareholder servicing fee beginning 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 WPC and its affiliates, reaches 10.0% of the gross proceeds from our initial public offering, which it has not yet reached. The shareholder servicing fee is included in General and administrative expenses in the consolidated financial statements.



CPA®:18 – Global 9/30/2015 10-Q 14


Notes to Consolidated Financial Statements (Unaudited)


Acquisition and Disposition Fees

Our advisor receives acquisition fees, a portion of which is payable upon acquisition, while the remaining portion is subordinated to a preferred return of a non-compounded cumulative distribution of 5.0% per annum (based initially on our invested capital). The initial acquisition fee and subordinated acquisition fee are 2.5% and 2.0%, respectively, of the aggregate total cost of our portion of each investment for all investments, other than those in readily-marketable real estate securities purchased in the secondary market, for which our advisor will not receive any acquisition fees. Deferred acquisition fees are scheduled to be paid in three equal annual installments following the quarter in which a property was purchased. Unpaid deferred acquisition fees are included in Due to affiliate in the consolidated financial statements. The total acquisition fees to be paid (initial and subordinated, and including interest thereon) may not exceed 6.0% of the aggregate contract purchase price of all investments and loans.

In addition, pursuant to the advisory agreement, our advisor may be entitled to receive a disposition fee equal to the lesser of (i) 50.0% of the competitive real estate commission (as defined in the advisory agreement) or (ii) 3.0% of the contract sales price of the investment being sold.

Personnel and Overhead Reimbursements

Under the terms of the advisory agreement, our advisor allocates a portion of its personnel and overhead expenses to us and the other publicly-owned, non-listed REITs that are managed by our advisor, including Corporate Property Associates 17 – Global Incorporated, or CPA®:17 – Global, or, together with us, the CPA® REITs, Carey Watermark Investors Incorporated, or CWI, and Carey Watermark Investors 2 Incorporated, or CWI 2. Our advisor allocates these expenses to us on the basis of our trailing four quarters of reported revenues and those of WPC and other entities managed by WPC and its affiliates.

We reimburse our advisor for various expenses it incurs in the course of providing services to us. We reimburse certain third-party expenses paid by our advisor on our behalf, including property-specific costs, professional fees, office expenses, and business development expenses. In addition, we reimburse our advisor for the allocated costs of personnel and overhead in managing our day-to-day operations, including accounting services, stockholder services, corporate management, and property management and operations. We do not reimburse our advisor for the cost of personnel if these personnel provide services for transactions for which our advisor receives a transaction fee, such as acquisitions and dispositions. Under the advisory agreement currently in place, the amount of applicable personnel costs allocated to us is capped at 2.4% for 2015 and 2.2% for 2016, of pro rata lease revenues for each year. Beginning in 2017, the cap decreases to 2.0% of pro rata lease revenues for that year. Costs related to our advisor’s legal transactions group are based on a schedule of expenses for different types of transactions, including 0.25% of the total investment cost of an acquisition. Personnel and overhead reimbursements are included in General and administrative expenses in the consolidated financial statements.

Excess Operating Expenses
 
The advisory agreement provides that, for any four trailing quarters (with quoted variables as defined in the advisory agreement), “operating expenses” may not exceed the greater of 2.0% of our “average invested assets” or 25.0% of our “adjusted net income.” For the most recent four trailing quarters, our operating expenses were below this threshold.

Available Cash Distributions

CPA®:18 Holdings’ interest in the Operating Partnership entitles it to receive distributions of 10.0% of the available cash generated by the Operating Partnership, referred to as the Available Cash Distribution, which is defined as cash generated from operations, excluding capital proceeds, as reduced by operating expenses and debt service, excluding prepayments and balloon payments. Available Cash Distributions are included in Net (income) loss attributable to noncontrolling interests in the consolidated financial statements.



CPA®:18 – Global 9/30/2015 10-Q 15


Notes to Consolidated Financial Statements (Unaudited)


Jointly-Owned Investments and Other Transactions with our Affiliate

At September 30, 2015, we owned interests in four jointly-owned investments, with the remaining interests held by our affiliate CPA®:17 – Global. The amounts listed below are the original investment amounts at the closing of each respective investment:

$108.3 million, of which our share was $55.2 million, or 51%, for an office facility located in Stavanger, Norway on October 31, 2014;
$147.9 million, of which our share was $74.0 million, or 50%, for an office facility located in Warsaw, Poland on March 31, 2014;
$97.0 million, of which our share was $77.6 million, or 80%, for a retail portfolio consisting of five properties located in Croatia on December 18, 2013; and
$115.6 million, of which our share was $57.8 million, or 50%, for an office facility located in Austin, Texas on August 20, 2013.

We consolidate all of the above joint ventures because we are either the majority equity holder and/or control the significant activities of the ventures. Additionally, no other parties, including CPA®:17 – Global, hold any rights that overcome our control. We account for CPA®:17 – Global’s share of these investments as noncontrolling interests.

Note 5. Net Investments in Properties and Real Estate Under Construction

Real Estate

Real estate, which consists of land and buildings leased to others, at cost, and which are subject to operating leases, is summarized as follows (in thousands):
 
September 30, 2015
 
December 31, 2014
Land
$
173,505

 
$
104,604

Buildings
754,637

 
639,131

Less: Accumulated depreciation
(25,810
)
 
(10,875
)
 
$
902,332

 
$
732,860


The carrying value of our Real estate decreased by $49.9 million from December 31, 2014 to September 30, 2015, due to the strengthening of the U.S. dollar relative to foreign currencies during the same period.

Operating Real Estate
 
Operating real estate, which consists of our self-storage and multi-family properties, at cost, is summarized as follows (in thousands):
 
September 30, 2015
 
December 31, 2014
Land
$
74,811

 
$
28,040

Buildings
343,167

 
105,556

Less: Accumulated depreciation
(7,244
)
 
(939
)
 
$
410,734

 
$
132,657


During the nine months ended September 30, 2015, we acquired 38 new investments. Of these investments, five were deemed to be asset acquisitions, 31 were considered to be business combinations, one was deemed to be a direct finance lease (Note 6), and one was deemed to be an equity method investment. We refer to these investments as our 2015 Acquisitions.



CPA®:18 – Global 9/30/2015 10-Q 16


Notes to Consolidated Financial Statements (Unaudited)


Asset Acquisitions

Acosta — On July 10, 2015, we acquired an office building in Jacksonville, Florida from a party affiliated with the tenant for $16.5 million. The facility is leased to Acosta, Inc. On August 4, 2015, we entered into a mortgage loan in the amount of $10.7 million for this property (Note 10).

See the Real Estate Under Construction section below for more information regarding our other asset acquisitions.

Business Combinations

Business Combinations Net-Leased Properties

During the nine months ended September 30, 2015, we acquired the following investments that were deemed to be business combinations because we assumed the existing leases on the properties, for which the sellers were not the lessees, and expensed aggregate acquisition costs of $17.0 million.

The purchase prices for each of our business combination acquisitions were allocated to the assets acquired and liabilities assumed based upon their preliminary fair values. The information for such allocation is based on the best estimates of management as of the date of this Report. We are in the process of finalizing our assessment of the fair value of the assets acquired and liabilities assumed. Accordingly, the fair value of these assets acquired and liabilities assumed are subject to change.

Exelon — On September 1, 2015, we acquired the regional headquarters and nuclear power plant monitoring facility of Exelon Generation Company, or Exelon, located in Warrenville, Illinois from an unaffiliated third-party for $32.9 million. We simultaneously entered into a mortgage loan in the amount of $22.6 million (Note 10).

Jacobsweerd — On July 30, 2015, we acquired an office building located in Utrecht, Netherlands from an unaffiliated third party for $46.2 million, which is based on the exchange rate of the euro on the date of acquisition. The facility, which we refer to as Jacobsweerd, is leased to four Dutch government agencies. We simultaneously entered into a mortgage loan in the amount of $30.1 million for the building (Note 10), which is based on the exchange rate of the euro on the date of acquisition. The purchase consideration for this investment also included a rent guarantee from the seller regarding the vacant space on this property. As a result, we recognized a contingent asset in the amount of $0.6 million, which is equal to the fair value (Note 8) of the rent guarantee, and we will mark the guarantee to market through earnings in subsequent periods.

COOP — On May 28, 2015, we acquired a 90% controlling interest in a jointly-owned investment with a third party that purchased a retail site located in Oslo, Norway from an unaffiliated third party, COOP Norge Eiendom, for $98.0 million, which is based on the exchange rate of the Norwegian krone on the date of acquisition. This is a multi-tenant facility with the largest tenant being COOP Ost AS, or COOP, which is an affiliate of COOP Norge Eiendom. Our joint-venture partner is the third-party asset manager. We incurred debt at closing through the issuance of privately-placed bonds in the amount of $64.2 million, which is based on the exchange rate of the Norwegian krone on the date of acquisition (Note 10). This investment was a share transaction, and as a result, we assumed the historical tax basis of the property owned by the entity that we purchased and, therefore, recorded a deferred tax liability of $16.7 million and goodwill of $12.5 million (Note 7). The purchase consideration for this investment also included a rent guarantee from the seller regarding the vacant space on this property. As a result, we recognized a contingent asset in the amount of $0.8 million, which is equal to the fair value (Note 8) of the rent guarantee, and we will mark the guarantee to market through earnings in subsequent periods. In July 2015, our joint-venture partner agreed to a debt-to-equity conversion of a portion of the loan they made to the property at the acquisition date. As a result, we recognized an additional $1.4 million in Contributions from noncontrolling interests within our consolidated financial statements.

Core-Mark — On May 27, 2015, we acquired a warehouse facility located in Plymouth, Minnesota from an unaffiliated third-party group of sellers for $15.0 million. The facility is leased to Minter-Weisman Co., d/b/a Core-Mark International. On May 29, 2015, we entered into a mortgage loan in the amount of $10.5 million for this property (Note 10).

Intuit Inc. — On April 28, 2015, we acquired an office facility located in Plano, Texas from an unaffiliated third party for $33.7 million. The building is leased to Intuit Inc. We simultaneously entered into a mortgage loan in the amount of $21.9 million (Note 10).



CPA®:18 – Global 9/30/2015 10-Q 17


Notes to Consolidated Financial Statements (Unaudited)


Republic — On April 17, 2015, we acquired a facility located in Freetown, Massachusetts from an unaffiliated third party for $3.7 million. The facility is leased to Republic Services Environmental Solutions LLC and guaranteed by Republic Services, Inc., which will expand and redevelop the facility into a specialized-materials recycling plant later this year. On July 21, 2015, we entered into a mortgage loan in the amount of $3.2 million regarding this property (Note 10).

Broadfold — On March 24, 2015, we acquired a light industrial site located in Aberdeen, United Kingdom from an unaffiliated third party for $6.8 million, which is based on the exchange rate of the British pound sterling on the date of acquisition. The site is fully occupied by three tenants. We intend to engage an unaffiliated third party to act as the asset manager for this property.

Business Combinations Operating Properties

During the nine months ended September 30, 2015, we acquired 20 self-storage investments and four multi-family investments, which are considered to be operating properties, at a total cost of $305.1 million.

Self-Storage Properties

We acquired the following 20 self-storage investments, aggregating $175.4 million, during the nine months ended September 30, 2015, which we refer to as our 2015 Self Storage Acquisitions:

$5.0 million for a facility in Hudson, Florida on September 30, 2015;
$7.0 million for two facilities in Las Vegas, Nevada on September 29, 2015;
$3.5 million for a facility in Ithaca, New York on September 29, 2015;
$7.1 million for a facility in Houston, Texas on August 11, 2015;
$11.0 million for a facility in Palm Bay, Florida on July 28, 2015;
$3.7 million for a facility in Leesburg, Florida on July 9, 2015;
$3.5 million for a facility in St. Peters, Missouri on June 17, 2015;
$13.7 million for two facilities in Sarasota, Florida on June 16, 2015;
$9.4 million for a facility in Panama City Beach, Florida on May 26, 2015;
$9.8 million for a facility in Las Vegas, Nevada on May 18, 2015;
$4.0 million for a facility in Crystal Lake, Illinois on May 12, 2015;
$10.1 million for a facility in Louisville, Kentucky on April 29, 2015;
$36.3 million for seven facilities in California on April 10, 2015;
$6.1 million for two facilities in Lilburn and Stockbridge, Georgia on April 2, 2015;
$4.0 million for a facility in Panama City Beach, Florida on March 10, 2015;
$6.0 million for a facility in Lady Lake, Florida on February 25, 2015;
$3.0 million for a facility in Sebastian, Florida on February 18, 2015;
$7.5 million for a facility in Tallahassee, Florida on February 4, 2015;
$9.2 million for a facility in Valrico, Florida on January 29, 2015; and
$15.6 million for a facility in Naples, Florida on January 28, 2015.

In connection with these self-storage property transactions, we incurred acquisition expenses totaling $10.4 million, which are included in Acquisition expenses in the consolidated financial statements. During the nine months ended September 30, 2015, we obtained mortgage loans totaling $101.8 million related to our self-storage investments (Note 10).

Multi-Family Properties

We acquired the following multi-family properties, for an aggregate of $129.7 million during the nine months ended September 30, 2015.

Cayo Grande — On July 23, 2015, we acquired a 97% controlling interest in Cayo Grande Apartments, or Cayo Grande, a 301-unit multi-family property located in Fort Walton Beach, Florida, for $25.7 million. The transaction was completed with two joint-venture partners, one of which has been engaged to be the property manager. We simultaneously entered into a mortgage loan in the amount of $18.2 million (Note 10).



CPA®:18 – Global 9/30/2015 10-Q 18


Notes to Consolidated Financial Statements (Unaudited)


Grand Estates — On June 8, 2015, we acquired a 97% controlling interest in Grand Estates Apartments, or Grand Estates, a 408-unit multi-family property located in San Antonio, Texas, for $42.5 million. The transaction was completed with two joint-venture partners, one of which has been engaged to be the property manager. We simultaneously entered into a mortgage loan in the amount of $29.8 million (Note 10).

Pinnacle Ridge — On January 15, 2015, we acquired a 97% controlling interest in Pinnacle Ridge Apartments, a 350-unit multi-family property located in Durham, North Carolina, for $34.3 million. The transaction was completed with two joint-venture partners, one of which has been engaged to be the property manager. We simultaneously entered into a mortgage loan in the amount of $24.0 million (Note 10).

Brantley Pines — On January 15, 2015, we acquired a 97% controlling interest in Brantley Pines Apartments, a 296-unit multi-family property located in Fort Myers, Florida, for $27.2 million. The transaction was completed with two joint-venture partners, one of which has been engaged to be the property manager. We simultaneously entered into a mortgage loan in the amount of $19.0 million (Note 10).

In connection with our multi-family property transactions, we incurred acquisition expenses totaling $7.2 million, which are included in Acquisition expenses in the consolidated financial statements.

Summary of Assets Acquired and Liabilities Assumed

The following tables present a summary of assets acquired and liabilities assumed in our business combinations at the date of acquisition, and revenues and earnings thereon since their respective dates of acquisition through September 30, 2015 (in thousands):
 
 
2015 Business Combinations (a)
 
 
COOP
 
Other Net-Leased Properties
 
Operating Properties
 
Total
Cash consideration
 
$
88,331

 
$
138,291

 
$
301,204

 
$
527,826

Assets acquired at fair value:
 
 
 
 
 
 
 
 
Land
 
$
59,595

 
$
15,767

 
$
46,773

 
$
122,135

Buildings
 
33,049

 
98,379

 
235,045

 
366,473

In-place lease intangible assets
 
4,618

 
31,681

 
24,107

 
60,406

Above-market rent intangible assets
 

 
105

 
137

 
242

Other assets acquired
 
5,777

 
549

 
268

 
6,594

 
 
103,039

 
146,481

 
306,330

 
555,850

Liabilities assumed at fair value:
 
 
 
 
 
 
 
 
Below-market rent intangible liabilities
 
(63
)
 
(7,888
)
 
(85
)
 
(8,036
)
Deferred tax liability
 
(16,708
)
 

 

 
(16,708
)
Other liabilities assumed
 
(715
)
 
(302
)
 
(1,150
)
 
(2,167
)
 
 
(17,486
)
 
(8,190
)
 
(1,235
)
 
(26,911
)
Total identifiable net assets
 
85,553

 
138,291

 
305,095

 
528,939

Amounts attributable to noncontrolling interests
 
(9,706
)
 

 
(3,891
)
 
(13,597
)
Goodwill (Note 7)
 
12,484

 

 

 
12,484

 
 
$
88,331

 
$
138,291

 
$
301,204

 
$
527,826




CPA®:18 – Global 9/30/2015 10-Q 19


Notes to Consolidated Financial Statements (Unaudited)


 
 
COOP
 
Other Net-Leased Properties
 
Operating Properties
 
 
 
 
May 28, 2015 through
September 30, 2015
 
Respective Acquisition Dates through
September 30, 2015
 
Respective Acquisition Dates through
September 30, 2015
 
Total
Revenues
 
$
2,111

 
$
3,313