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 June 30, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

W. P. CAREY & CO. LLC

Delaware (State of incorporation)		13-3912578 (I.R.S. Employer Identification No.)
50 Rockefeller Plaza
New York, New York (Address of principal executive offices)		10020 (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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ     Accelerated filer o     Non-accelerated filer o

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 39,143,611 Listed Shares, no par value, outstanding at July 26, 2007.

 

 

INDEX

		Page No.
PART I — FINANCIAL INFORMATION
Item 1. — Financial Statements*
Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006			2
Consolidated Statements of Income for the three and six months ended June 30, 2007 and 2006			3
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2007 and 2006			4
Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006			5
Notes to Consolidated Financial Statements			6
Item 2. — Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3. — Quantitative and Qualitative Disclosures About Market Risk			32
Item 4. — Controls and Procedures			33
PART II — OTHER INFORMATION
Item 1. — Legal Proceedings			34
Item 1A. — Risk Factors			34
Item 2. — Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 4. — Submission of Matters to a Vote of Security Holders			35
Item 6. — Exhibits			35
Signatures			36
EX-10.1: CREDIT AGREEMENT
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATIONS

Forward Looking Statements

This quarterly report on Form 10-Q, 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 that involve risks, uncertainties and assumptions. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “expect,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan” or similar expressions. Do not unduly rely on forward-looking statements. They give our expectations about the future and are not guarantees, and speak only as of the date they are made. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievement to be materially different from the results of operations or plan expressed or implied by such forward-looking statements. While we cannot predict all of the risks and uncertainties, they include, but are not limited to, those described in Item 1A – Risk Factors of our annual report on Form 10-K for the year ended December 31, 2006 as updated herein. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved. Additionally, a description of our critical accounting estimates is included in the management’s discussion and analysis section in our annual report on Form 10-K for the year ended December 31, 2006. There has been no significant change in our critical accounting estimates.

As used in this quarterly report on Form 10-Q, the terms “we,” “us” and “our” include W. P. Carey & Co. LLC, its consolidated subsidiaries and predecessors, unless otherwise indicated.

W. P. CAREY & CO. LLC

PART I

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share amounts)

		June 30, 2007				December 31, 2006
						(NOTE)
Assets
Real estate, net		$	531,485			$	540,504
Net investment in direct financing leases			107,886				108,581
Equity investments in real estate			183,226				166,147
Operating real estate, net			72,049				33,606
Assets held for sale			—				1,269
Cash and cash equivalents			19,050				22,108
Due from affiliates			76,877				88,884
Goodwill			63,607				63,607
Intangible assets, net			40,116				43,742
Other assets, net			29,421				24,562
Total assets		$	1,123,717			$	1,093,010
Liabilities and Members’ Equity
Liabilities:
Limited recourse mortgage notes payable		$	258,663			$	261,152
Secured credit facility			35,581				15,501
Unsecured credit facility			28,000				2,000
Deferred revenue			—				40,490
Accounts payable and accrued expenses			32,549				34,047
Income taxes, net			64,744				63,462
Other liabilities			22,359				19,127
Distributions payable			18,227				17,481
Total liabilities			460,123				453,260
Minority interest in consolidated entities			7,609				7,765
Commitments and contingencies (Note 9)
Members’ equity:
Listed shares, no par value, 100,000,000 shares authorized; 39,129,982 and 38,262,157 shares issued and outstanding, respectively			751,508				745,969
Dividends in excess of accumulated earnings			(96,072	)			(114,008	)
Accumulated other comprehensive income			549				24
Total members’ equity			655,985				631,985
Total liabilities and members’ equity		$	1,123,717			$	1,093,010

The accompanying notes are an integral part of these consolidated financial statements.

Note: The consolidated balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date.

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except share and per share amounts)

		Three months ended June 30,								Six months ended June 30,
		2007				2006				2007				2006
Revenues
Asset management revenue		$	30,204			$	14,752			$	45,238			$	29,114
Structuring revenue			53,448				2,462				58,031				12,354
Reimbursed costs from affiliates			3,244				19,894				6,719				22,892
Lease revenues			19,998				18,285				39,630				36,412
Other real estate income			3,241				2,149				6,415				4,532
			110,135				57,542				156,033				105,304
Operating Expenses
General and administrative			(23,256	)			(9,871	)			(35,493	)			(21,029	)
Reimbursable costs			(3,244	)			(19,894	)			(6,719	)			(22,892	)
Depreciation and amortization			(6,950	)			(6,007	)			(13,894	)			(11,977	)
Property expenses			(1,893	)			(1,345	)			(3,313	)			(3,013	)
Other real estate expenses			(1,301	)			(1,466	)			(3,825	)			(3,033	)
			(36,644	)			(38,583	)			(63,244	)			(61,944	)
Other Income and Expenses
Other interest income			3,643				811				4,241				1,538
Income from equity investments in real estate			1,929				1,244				4,367				2,794
Minority interest in (income) loss			(3,141	)			254				(3,472	)			(608	)
Gain on sale of securities, foreign currency transactions and other gains, net			169				5,228				355				5,478
Interest expense			(5,669	)			(4,541	)			(10,532	)			(8,929	)
			(3,069	)			2,996				(5,041	)			273
Income from continuing operations before income taxes			70,422				21,955				87,748				43,633
Provision for income taxes			(31,144	)			(3,998	)			(37,522	)			(10,720	)
Income from continuing operations			39,278				17,957				50,226				32,913
Discontinued Operations
Income (loss) from operations of discontinued properties			1,790				(653	)			1,642				(1,187	)
Gain on sale of real estate, net			962				—				962				—
Impairment charges on assets held for sale			—				—				—				(3,357	)
Income (loss) from discontinued operations			2,752				(653	)			2,604				(4,544	)
Net Income		$	42,030			$	17,304			$	52,830			$	28,369
Basic Earnings (Loss) Per Share
Income from continuing operations		$	1.03			$	0.48			$	1.32			$	0.87
Income (loss) from discontinued operations			0.07				(0.02	)			0.07				(0.12	)
Net income		$	1.10			$	0.46			$	1.39			$	0.75
Diluted Earnings (Loss) Per Share
Income from continuing operations		$	1.03			$	0.46			$	1.30			$	0.85
Income (loss) from discontinued operations			0.07				(0.02	)			0.07				(0.12	)
Net income		$	1.10			$	0.44			$	1.37			$	0.73
Weighted Average Shares Outstanding
Basic			38,308,202				37,876,079				38,120,532				37,802,340
Diluted			40,004,379				39,346,537				39,894,412				38,794,914
Distributions Declared Per Share		$	0.467			$	0.454			$	0.929			$	0.906

The accompanying notes are an integral part of these consolidated financial statements.

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)

		Three months ended June 30,								Six months ended June 30,
		2007				2006				2007				2006
Net Income		$	42,030			$	17,304			$	52,830			$	28,369
Other Comprehensive Income
Change in unrealized appreciation on marketable securities			(10	)			12				8				783
Reversal of unrealized appreciation on sale of marketable securities			—				(4,746	)			—				(4,746	)
Foreign currency translation adjustment			134				557				517				275
			124				(4,177	)			525				(3,688	)
Comprehensive Income		$	42,154			$	13,127			$	53,355			$	24,681

The accompanying notes are an integral part of these consolidated financial statements.

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)

		Six months ended June 30,
		2007				2006
Cash Flows — Operating Activities
Net income		$	52,830			$	28,369
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization including intangible assets and deferred financing costs			14,509				12,625
Income from equity investments in real estate in excess of distributions received			(1,628	)			(202	)
Gains on sale of real estate and investments, net			(962	)			(4,800	)
Minority interest in income			3,472				608
Straight-line rent adjustments			1,421				1,612
Management income received in shares of affiliates			(31,728	)			(15,816	)
Unrealized gain on foreign currency transactions, warrants and securities			(313	)			(577	)
Impairment charges			—				3,357
Increase in income taxes, net			2,802				7
Realized gain on foreign currency transactions			(42	)			(101	)
Stock-based compensation expense			2,328				1,639
Decrease in deferred acquisition revenue receivable			16,164				12,543
Increase in structuring revenue receivable			(44,956	)			(3,039	)
Net changes in other operating assets and liabilities			(2,249	)			(660	)
Net cash provided by operating activities			11,648				35,565
Cash Flows — Investing Activities
Distributions received from equity investments in real estate in excess of equity income			21,716				3,106
Purchases of real estate and equity investments in real estate			(40,381	)			—
Capital expenditures			(7,361	)			(4,024	)
Loan to affiliate			—				(84,000	)
Proceeds from repayment of loan to affiliate			—				84,000
Proceeds from sales of property and investments			6,014				22,471
Funds placed in escrow in connection with the sale of property			(3,340	)			(9,163	)
Payment of deferred acquisition revenue to affiliate			(524	)			(524	)
Net cash (used in) provided by investing activities			(23,876	)			11,866
Cash Flows — Financing Activities
Distributions paid			(35,202	)			(34,356	)
Contributions from minority interests			688				1,161
Distributions to minority interests			(942	)			(5,075	)
Scheduled payments of mortgage principal			(7,719	)			(5,705	)
Proceeds from mortgages and credit facilities			118,617				55,000
Prepayments of mortgage principal and credit facilities			(68,257	)			(62,971	)
Release of funds from escrow in connection with the financing of properties			—				4,031
Payment of financing costs			(1,303	)			(472	)
Proceeds from issuance of shares			3,917				3,652
Excess tax benefits associated with stock-based compensation awards			1,335				271
Repurchase and retirement of shares			(2,038	)			(482	)
Net cash provided by (used in) financing activities			9,096				(44,946	)
Change in Cash and Cash Equivalents During the Period
Effect of exchange rate changes on cash			74				94
Net (decrease) increase in cash and cash equivalents			(3,058	)			2,579
Cash and cash equivalents, beginning of period			22,108				13,014
Cash and cash equivalents, end of period		$	19,050			$	15,593

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

Note 1. Business

W. P. Carey & Co. LLC is a real estate and advisory company that invests in commercial properties leased to companies domestically and internationally, and earns revenue as the advisor to the following publicly registered affiliated real estate investment trusts (“CPA^® REITs”) that each make similar investments: Corporate Property Associates 14 Incorporated (“CPA^®:14”), Corporate Property Associates 15 Incorporated (“CPA^®:15”) and Corporate Property Associates 16 – Global Incorporated (“CPA^®:16 – Global”) and served in this capacity for Corporate Property Associates 12 Incorporated (“CPA^®:12”) until its merger with CPA^®:14 in December 2006. As of June 30, 2007, we own and manage over 850 commercial properties domestically and internationally including our own portfolio, which is comprised of our full or partial ownership interest in 181 commercial properties net leased to 109 tenants and totaling approximately 18 million square feet (on a pro rata basis), with an occupancy rate of 96.2%. We also own 13 domestic self-storage properties totaling approximately 0.9 million square feet.

Primary Business Segments

Investment Management — We provide services to the CPA^® REITs in connection with structuring and negotiating investment and debt placement transactions (structuring revenue) and provide on-going management of the portfolio (asset-based management and performance revenue). Asset-based management and performance revenues for the CPA^® REITs are determined based on real estate related assets under management. As funds available to the CPA^® REITs are invested, the asset base from which we earn revenue increases. We may elect to receive revenue in cash or restricted shares of the CPA^® REITs. We may also earn incentive and disposition revenue and receive termination payments in connection with providing liquidity alternatives to CPA^® REIT shareholders.

Real Estate Ownership — We invest in commercial properties that are then leased to companies domestically and internationally, primarily on a triple net leased basis. We also invest in domestic self-storage real estate properties.

Note 2. Basis of Presentation

Our unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results of the interim periods presented have been included. The results of operations for the interim periods are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2006.

Basis of Consolidation

The consolidated financial statements include all our accounts and our majority-owned and/or controlled subsidiaries. The portion of these entities not owned by us is presented as minority interest as of and during the periods consolidated. All material inter-entity transactions have been eliminated.

When we obtain an economic interest in an entity, we evaluate the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if we are deemed to be the primary beneficiary, in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”). We consolidate (i) entities that are VIEs and of which we are deemed to be the primary beneficiary and (ii) entities that are non-VIEs which we control. Entities that we account for under the equity method (i.e. at cost, increased or decreased by our share of earnings or losses, less distributions) include (i) entities that are VIEs and of which we are not deemed to be the primary beneficiary and (ii) entities that are non-VIEs which we do not control, but over which we have the ability to exercise significant influence. We will reconsider our determination of whether an entity is a VIE and who the primary beneficiary is if certain events occur that are likely to cause a change in the original determinations.

In determining whether we control a non-VIE, our consideration includes using the Emerging Issues Task Force (“EITF”) Consensus on Issue No. 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-05”). The scope of EITF 04-05 is limited to limited partnerships or similar entities that are not variable interest entities under FIN 46R. The EITF reached a consensus that 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. This presumption may be overcome if the agreements provide the limited

Notes to Consolidated Financial Statements

partners with either (a) the substantive ability to dissolve (liquidate) the limited partnership or otherwise remove the general partners without cause or (b) substantive participating rights. If it is deemed that the limited partners’ rights overcome the presumption of control by a general partner of the limited partnership, the general partner shall account for its investment in the limited partnership using the equity method of accounting.

We have several interests in joint ventures that are consolidated and have minority interests that have finite lives and were considered mandatorily redeemable non-controlling interests prior to the issuance of Staff Position No. 150-3 (“FSP 150-3”). As a result of the deferral provisions of FSP 150-3, these minority interests have been reflected as liabilities.

We formed Corporate Property Associates 17 – Global Incorporated (“CPA^®:17”) in February 2007 for the purpose of investing in a diversified portfolio of income-producing commercial properties and other real estate related assets, both domestically and outside the United States. We filed a registration statement on Form S-11 with the SEC during February 2007 to raise up to $2,475,000 of common stock of CPA^®:17 (including amounts under a dividend reinvestment plan) and expect to commence fundraising during 2007. As of and during the three and six months ended June 30, 2007, the financial statements of CPA^®:17, which had no operations during these periods, were included in our consolidated financial statements, as we owned all of CPA^®:17’s outstanding common stock.

Reclassifications and Revisions

Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. The financial statements included in this Form 10-Q have been adjusted to reflect the disposition (or planned disposition) of certain properties as discontinued operations for all periods presented.

Adoption of New Accounting Pronouncements

SFAS 155

FASB Statement No. 155, “Accounting for Certain Hybrid Financial Instruments an Amendment of FASB No. 133 and 140” (“SFAS 155”) was issued to simplify the accounting for certain hybrid financial instruments by permitting fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. SFAS 155 also eliminates the restriction on passive derivative instruments that a qualifying special-purpose entity may hold. We adopted SFAS 155 as required on January 1, 2007 and the initial application of this statement did not have a material impact on our financial position or results of operations.

FIN 48

FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”) clarifies the accounting for uncertainty in income tax positions. This Interpretation requires that we not recognize in our consolidated financial statements the impact of a tax position that fails to meet the more likely than not recognition threshold based on the technical merits of the position. We adopted FIN 48 as required on January 1, 2007 (Note 12).

Recent Accounting Pronouncements

SFAS 157

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective for our 2008 fiscal year. We do not believe that the adoption of SFAS 157 will have a material impact on our financial position or results of operations.

SFAS 159

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), which gives entities the option to measure eligible financial assets, financial liabilities and firm commitments at fair value on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a firm commitment. Subsequent changes (i.e., unrealized gains and losses) in fair value must be recorded in earnings. Additionally, SFAS 159 allows for a one-time election for existing positions upon adoption, with the transition adjustment recorded to beginning retained earnings. This statement is effective for our 2008 fiscal year. We are currently assessing the potential impact that the adoption of SFAS 159 will have on our financial position and results of operations.

Notes to Consolidated Financial Statements

SOP 07-1

In June 2007, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies” (“SOP07-1”). SOP 07-1 addresses when the accounting principles of the AICPA Audit and Accounting Guide “Investment Companies” must be applied by an entity and whether investment company accounting must be retained by a parent company in consolidation or by an investor in the application of the equity method of accounting. In addition, SOP 07-1 includes certain disclosure requirements for parent companies and equity method investors in investment companies that retain investment company accounting in the parent company’s consolidated financial statements or the financial statements of an equity method investor. SOP 07-1 is effective for our fiscal year beginning January 1, 2008. We have determined that we are not an investment company under the provisions of SOP 07-1 and do not expect to retain specialized investment company accounting for any of our consolidated or equity method investments where the investment entity may be deemed an investment company. Accordingly, we do not expect the adoption of SOP 07-1 to have a material impact on our financial position and results of operations.

Note 3. Transactions with Related Parties

Advisory Services

Directly and through a wholly-owned subsidiary, we earn revenue as the advisor (“advisor”) to the CPA^® REITs. Under the advisory agreements with the CPA^® REITs, we perform various services, including but not limited to the day-to-day management of the CPA^® REITs and transaction-related services. We earn asset management revenue totaling 1% per annum of average invested assets, as calculated pursuant to the advisory agreements for each CPA^® REIT, of which 1/2 of 1% (“performance revenue”) is contingent upon specific performance criteria for each CPA^® REIT. We are also reimbursed for certain costs, primarily broker/dealer commissions paid on behalf of the CPA^® REITs and marketing and personnel costs. The advisory agreements allow us to elect to receive restricted stock for any revenue due from each CPA^® REIT. For the three months ended June 30, 2007 and 2006, total asset-based revenue earned was $30,204 and $14,752, respectively, while reimbursed costs totaled $3,244 and $19,894, respectively. For the six months ended June 30, 2007 and 2006, total asset-based revenue earned was $45,238 and $29,114, respectively, while reimbursed costs totaled $6,719 and $22,892, respectively. Asset-based revenue for the three and six months ended June 30, 2007 includes amounts recognized in connection with CPA^®:16 – Global’s achievement of its performance criterion (as described below). In 2007 and 2006, we elected to receive all performance revenue from the CPA^® REITs as well as the asset management revenue payable by CPA^®:16 – Global in restricted shares.

In connection with structuring and negotiating investments and related mortgage financing for the CPA^® REITs, the advisory agreements provide for structuring revenue based on the cost of investments. Under each of the advisory agreements, we may receive acquisition revenue of up to an average of 4.5% of the total cost of all investments made by each CPA^® REIT. A portion of this revenue (generally 2.5%) is paid when the transaction is completed while the remainder (generally 2%) is payable in equal annual installments ranging from three to eight years, subject to the relevant CPA^® REIT meeting its performance criterion. Unpaid installments bear interest at annual rates ranging from 5% to 7%. We may be entitled to loan refinancing revenue of up to 1% of the principal amount refinanced in connection with structuring and negotiating investments. This loan refinancing revenue, together with the acquisition revenue, is referred to as structuring revenue. We earned structuring revenue of $53,448 and $2,462 during the three months ended June 30, 2007 and 2006, respectively and $58,031 and $12,354 during the six months ended June 30, 2007 and 2006, respectively. Structuring revenue for the three and six months ended June 30, 2007 includes amounts recognized in connection with CPA^®:16 – Global’s achievement of its performance criterion (as described below). In addition, we may also earn revenue related to the disposition of properties, subject to subordination provisions, and will only recognize such revenue as the subordination provisions are achieved.

CPA^®:16 – Global Performance Criterion

In June 2007, CPA^®:16 – Global met its performance criterion (a non-compounded cumulative distribution return of 6% per annum), as defined in its advisory agreement, and as a result, we recognized previously deferred revenue totaling $45,919 (consisting of asset –based revenue of $11,945, structuring revenue of $31,674 and interest income on the previously deferred structuring revenue of $2,300). In addition, as a result of CPA^®:16 – Global meeting its performance criterion, we recognized and paid to certain employees incentive and commission compensation of $6,191 and interest thereon of $434 that had previously been deferred.

The deferred asset-based revenue of $11,945 was paid in July 2007 by CPA^®:16 – Global in the form of 1,194,549 shares of CPA^®:16 – Global’s restricted common stock while the deferred structuring revenue of $31,674 and interest thereon of $2,300 are payable in cash beginning in January 2008. CPA^®:16 – Global will pay the deferred structuring revenue in three annual installments of $28,259 in January 2008 (including the accrued interest), $4,663 in January 2009 and $1,052 in January 2010. Interest will accrue on amounts outstanding at the rate of 5% per annum.

Notes to Consolidated Financial Statements

Merger of CPA^®:12 and CPA^®:14

One of our subsidiaries has agreed to indemnify CPA^®:14 if CPA^®:14 suffers certain losses arising out of a breach by CPA^®:12 of its representations and warranties under the merger agreement and having a material adverse effect on CPA^®:14 after the CPA^®:12 and CPA^®:14 merger (the “CPA^®:12/14 Merger”), up to the amount of fees received by our subsidiary in connection with the CPA^®:12/14 Merger. We have evaluated the exposure related to this indemnification and have determined the exposure to be minimal.

Other Transactions

We own interests in entities which range from 5% to 60%, with the remaining interests generally held by affiliates, and own common stock in each of the CPA^® REITs. We have a significant influence in these investments, which are accounted for under the equity method of accounting.

We are the general partner in a limited partnership that leases our home office space and participates in an agreement with certain affiliates, including the CPA^® REITs, for the purpose of leasing office space used for the administration of our operations, the operations of our affiliates and for sharing the associated costs. During the three months ended June 30, 2007 and 2006, we recorded income from minority interest partners of $624 and $601, respectively, related to reimbursements from these affiliates. During the six months ended June 30, 2007 and 2006, we recorded income from minority partners of $872 and $1,008, respectively. Our estimated minimum annual lease payments on the office lease, inclusive of minority interest, as of June 30, 2007 approximates $2,868 through 2016.

Included in other liabilities in the consolidated balance sheets at June 30, 2007 and December 31, 2006 are amounts due to affiliates totaling $1,097 and $1,239, respectively, comprised primarily of amounts due in connection with the office sharing agreement and deferred acquisition fees.

One of our directors and officers is the sole shareholder of Livho, Inc. (“Livho”), one of our lessees. We consolidate the accounts of Livho in our consolidated financial statements in accordance with FIN 46R as it is a VIE of which we are the primary beneficiary.

Family members of one of our directors have an ownership interest in certain companies that own minority interests in our French majority-owned subsidiaries. These ownership interests are subject to substantially the same terms as all other ownership interests in the subsidiary companies.

Two employees own a minority interest in W. P. Carey International LLC (“WPCI”), a subsidiary company that structures net lease transactions on behalf of the CPA^® REITs outside of the United States.

We have the right to loan funds to affiliates under our unsecured credit facility. Such loans bear interest at comparable rates to our credit facility. During June 2006, we loaned $84,000 to CPA^®:15 to facilitate the early repayment of a mortgage obligation in connection with their sale of a property. The loan was repaid within the next few business days.

Note 4. Real Estate

Real estate, which consists of land and buildings leased to others, at cost, and accounted for as operating leases, is summarized as follows:

		June 30, 2007				December 31, 2006
Cost		$	618,647			$	620,472
Less: Accumulated depreciation			(87,162	)			(79,968	)
		$	531,485			$	540,504

Notes to Consolidated Financial Statements

Operating real estate, which consists of our Livho subsidiary and self-storage facilities, at cost, is summarized as follows:

		June 30, 2007				December 31, 2006
Cost (1)		$	79,516			$	41,275
Less: Accumulated depreciation			(7,467	)			(7,669	)
		$	72,049			$	33,606

In November 2006, we formed a subsidiary (“Carey Storage”) for the purpose of investing in self-storage real estate properties and their related businesses within the United States. During the six months ended June 30, 2007, Carey Storage used a portion of the proceeds from our initial contribution and loans along with borrowings totaling $20,080 under its $105,000 credit facility to acquire seven self-storage properties in several states totaling $35,000. Borrowings under the credit facility are fixed at an annual fixed interest rate of 7.6% for the first month of borrowing and at an annual variable interest rate equal to the one-month LIBOR plus a spread which ranges from 175 to 235 basis points thereafter, depending on the aggregate debt yield for the collateralized asset pool. As of June 30, 2007, borrowings under the credit facility bear interest at a variable rate of 7.57% and mature in December 2008. Carey Storage’s results of operations are included in other real estate income and other real estate expenses in the consolidated financial statements.

Note 5. Equity Investments in Real Estate

Our equity investments in real estate, which are accounted for under the equity method, are summarized below for our CPA^® REITs and interests in joint venture properties.

CPA^® REITs
We own interests in three CPA^® REITs with which we have advisory agreements. Our interests in the CPA^® REITs are accounted for under the equity method due to our ability to exercise significant influence as the advisor to the CPA^® REITs. The CPA^® REITs are publicly registered and file financial statements with the SEC. We have elected, in certain cases, to receive restricted shares of common stock in the CPA^® REITs rather than cash in connection with earning asset management and performance revenue (Note 3).

Information about our investments in the CPA^® REITs is as follows:

		% of Outstanding Shares								Carrying Amount of Investment
Fund		June 30, 2007				December 31, 2006				June 30, 2007				December 31, 2006
CPA®:14			6.09	%			5.65	%		$	58,182			$	53,200
CPA®:15			4.01	%			3.53	%			51,872				45,030
CPA®:16 – Global (1)			2.14	%			0.78	%			27,224				9,161
										$	137,278			$	107,391

Combined summarized financial information of the CPA^® REITs (for the entire entities, not our proportionate share) is presented below:

		June 30, 2007				December 31, 2006
Assets (primarily real estate)		$	8,243,272			$	6,785,186
Liabilities (primarily mortgage notes payable)			(4,435,615	)			(3,663,396	)
Shareholder’s equity		$	3,807,657			$	3,121,790

Notes to Consolidated Financial Statements

		Six months ended June 30,
		2007				2006
Revenues (primarily rental income and interest income from direct financing leases)		$	288,570			$	251,242
Expenses (primarily interest on mortgages and depreciation)			(221,596	)			(154,250	)
Net income		$	66,974			$	96,992
Our share of net income from equity investments in real estate		$	1,968			$	1,609

Interests in Joint Venture Properties

We own interests in single-tenant net leased properties leased to corporations through noncontrolling interests in (i) partnerships and limited liability companies in which our ownership interests are 50% or less and we exercise significant influence, and (ii) as tenants-in-common subject to common control. The underlying investments are generally owned with affiliates.

Our ownership interests in our equity investments in real estate and their respective carrying values are presented below:

		Ownership				Carrying Value
Principal Tenant		Interest				June 30, 2007				December 31, 2006
Carrefour France, S.A. (1)			49.63	%		$	23,644			$	21,741
Medica — France, S.A. (1)			35	%			9,149				9,040
Hologic, Inc.			36	%			4,595				4,620
Federal Express Corporation			40	%			4,146				4,690
Consolidated Systems, Inc.			60	%			3,487				3,505
Hellweg Die Profi-Baumarkte GmBH & Co. KG (1) (2)			5	%			1,952				—
Childtime Childcare, Inc.			33.93	%			1,716				1,725
Information Resources, Inc.			33.33	%			1,525				1,509
The Retail Distribution Group			40	%			1,446				596
Sicor, Inc. (3)			50	%			(5,712	)			11,330
						$	45,948			$	58,756

Combined summarized financial information of our equity investments in real estate (for the entire entities, not our proportionate share) is presented below:

						June 30, 2007				December 31, 2006
Assets (primarily real estate)						$	748,334			$	407,145
Liabilities (primarily mortgage notes payable)							(598,066	)			(273,798	)
Partners’ and members’ equity						$	150,268			$	133,347

		Six months ended June 30,
		2007				2006
Revenues (primarily rental incomxe and interest income from direct financing leases)		$	30,157			$	18,005
Expenses, net (primarily interest on mortgages and depreciation)			(21,366	)			(13,639	)
Net income		$	8,791			$	4,366
Our share of net income from equity investments in real estate		$	2,399			$	1,185

Note 6. Assets Held for Sale and Discontinued Operations

Tenants from time to time may vacate space due to lease buy-outs, elections not to renew, company insolvencies or lease rejections in the bankruptcy process. In such cases, we assess whether the highest value is obtained from re-leasing or selling the property. In addition, in certain cases, we may elect to sell a property that is occupied if it is considered advantageous to do so. When it is determined that the probable outcome will be a sale, the asset is reclassified as an asset held for sale.

Notes to Consolidated Financial Statements

Discontinued Operations

During the six months ended June 30, 2007, we completed the sale of two domestic properties for $6,014, net of selling costs and, in addition, received lease termination proceeds of $1,905. Impairment charges totaling $2,507 were recognized in prior periods to write down the value of one of these properties to its estimated net sales proceeds. In connection with these sales, we recorded a net gain of $962, exclusive of impairment charges recognized in prior periods.

During the six months ended June 30, 2006, we incurred impairment charges of $3,357 to write down the value of certain properties to their estimated fair value.

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the results of operations, impairment charges and gain or loss on sale of real estate for properties held for sale are reflected in the consolidated financial statements as discontinued operations for all periods presented and are summarized as follows:

		Three months ended June 30,								Six months ended June 30,
		2007				2006				2007				2006
Revenues (primarily rental revenues and other operating income)			2,006				452				2,250				1,186
Expenses (primarily depreciation and property expenses)			(216	)			(1,105	)			(608	)			(2,373	)
Gain on sales of real estate, net			962				—				962				—
Impairment charges on assets held for sale			—				—				—				(3,357	)
Income (loss) from discontinued operations			2,752				(653	)			2,604				(4,544	)

Note 7. Intangibles

In connection with our acquisition of properties, we have recorded net lease intangibles of $36,330. These intangibles are being amortized over periods generally ranging from 19 months to 31 years. Amortization of below-market and above-market rent intangibles are recorded as an adjustment to revenue.

Intangibles are summarized as follows:

		June 30, 2007				December 31, 2006
Amortized Intangibles:
Management contracts		$	32,765			$	32,765
Less: accumulated amortization			(19,329	)			(17,943	)
		$	13,436			$	14,822
Lease Intangibles:
In-place lease		$	18,602			$	18,345
Tenant relationship			10,030				8,783
Above-market rent			9,707				9,707
Less: accumulated amortization			(15,634	)			(11,890	)
		$	22,705			$	24,945
Below-market rent		$	(2,009	)		$	(2,009	)
Less: accumulated amortization			379				325
		$	(1,630	)		$	(1,684	)
Unamortized Goodwill and Indefinite-Lived Intangible Assets:
Goodwill		$	63,607			$	63,607
Trade name			3,975				3,975
		$	67,582			$	67,582

Net amortization of intangibles was $2,620 and $2,393 for the three months ended June 30, 2007 and 2006, respectively and $5,076 and $4,805 for the six months ended June 30, 2007 and 2006, respectively.

Based on the intangible assets as of June 30, 2007, annual net amortization of intangibles for each of the next five years is as follows: 2007 — $8,873; 2008 — $7,245; 2009 — $6,639; 2010 — $5,716, 2011 — $2,696 and 2012 — $1,989.

Notes to Consolidated Financial Statements

Note 8. Unsecured Credit Facility

In June 2007, we entered into an unsecured credit facility for a $250,000 revolving line of credit to replace our previous $175,000 line of credit that was due to expire in July 2007. The credit facility, which matures in June 2011, can be increased up to $300,000 upon satisfaction of certain conditions and carries a one-year extension option subject to the satisfaction of certain conditions and the payment of an extension fee equal to 0.125% of the total commitments under the facility at that time.

The credit facility has an annual interest rate of either (i) LIBOR plus a spread which ranges from 75 to 120 basis points depending on our leverage or (ii) the greater of the lender’s prime rate and the Federal Funds Effective Rate plus 50 basis points. At June 30, 2007, the average interest rate on advances on the credit facility was 6.125%. In addition, we pay an annual fee ranging between 12.5 and 20 basis points of the unused portion of the credit facility, depending on our leverage ratio. Based on our leverage at June 30, 2007, we pay interest at LIBOR plus 75 basis points and pay 12.5 basis points on the unused portion of the credit facility.

The credit facility has financial covenants that among other things require us to maintain a minimum equity value and meet or exceed certain operating and coverage ratios. As of June 30, 2007, we had drawn down $28,000 under this facility, which was used to repay our previous credit facility.

Note 9. Commitments and Contingencies

As of June 30, 2007, we were not involved in any material litigation.

In March 2004, following a broker-dealer examination of Carey Financial, LLC (“Carey Financial”), our wholly-owned broker-dealer subsidiary, by the staff of the SEC, Carey Financial received a letter from the staff of the SEC alleging certain infractions by Carey Financial of the Securities Act of 1933, the Securities Exchange Act of 1934, the rules and regulations thereunder and those of the National Association of Securities Dealers, Inc. (“NASD”).

The staff alleged that in connection with a public offering of shares of CPA^®:15, Carey Financial and its retail distributors sold certain securities without an effective registration statement. Specifically, the staff alleged that the delivery of investor funds into escrow after completion of the first phase of the offering (the “Phase I Offering”), completed in the fourth quarter of 2002 but before a registration statement with respect to the second phase of the offering (the “Phase II Offering”) became effective in the first quarter of 2003, constituted sales of securities in violation of Section 5 of the Securities Act of 1933. In addition, in the March 2004 letter the staff raised issues about whether actions taken in connection with the Phase II offering were adequately disclosed to investors in the Phase I Offering. In the event the Commission pursues these allegations, or if affected CPA^®:15 investors bring a similar private action, CPA^®:15 might be required to offer the affected investors the opportunity to receive a return of their investment. It cannot be determined at this time if, as a consequence of investor funds being returned by CPA^®:15, Carey Financial would be required to return to CPA^®:15 the commissions paid by CPA^®:15 on purchases actually rescinded. Further, as part of any action against us, the SEC could seek disgorgement of any such commissions or different or additional penalties or relief, including without limitation, injunctive relief and/or civil monetary penalties, irrespective of the outcome of any rescission offer. We cannot predict the potential effect such a rescission offer or SEC action may ultimately have on our operations or those of Carey Financial. There can be no assurance that the effect, if any, would not be material.

The staff also alleged in the March 2004 letter that the prospectus delivered with respect to the Phase I Offering contained material misrepresentations and omissions in violation of Section 17 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder in that the prospectus failed to disclose that (i) the proceeds of the Phase I Offering would be used to advance commissions and expenses payable with respect to the Phase II Offering, and (ii) the payment of dividends to Phase II shareholders whose funds had been held in escrow pending effectiveness of the registration statement resulted in significantly higher annualized rates of return than were being earned by Phase I shareholders. Carey Financial has reimbursed CPA^®:15 for the interest cost of advancing the commissions that were later recovered by CPA^®:15 from the Phase II Offering proceeds.

In June 2004, the Division of Enforcement of the SEC (“Enforcement Staff”) commenced an investigation into compliance with the registration requirements of the Securities Act of 1933 in connection with the public offerings of shares of CPA^®:15 during 2002 and 2003. In December 2004, the scope of the Enforcement Staff’s inquiries broadened to include broker-dealer compensation arrangements in connection with CPA^®:15 and other REITs managed by us, as well as the disclosure of such arrangements. At that time we and Carey Financial received a subpoena from the Enforcement Staff seeking documents relating to payments by us, Carey Financial and REITs managed by us to (or requests for payment received from) any broker-dealer, excluding selling commissions and selected dealer fees. We and Carey Financial subsequently received additional subpoenas and requests for information from the

Notes to Consolidated Financial Statements

Enforcement Staff seeking, among other things, information relating to any revenue sharing agreements or payments (defined to include any payment to a broker-dealer, excluding selling commissions and selected dealer fees) made by us, Carey Financial or any of our managed REITs in connection with the distribution of such REITs or the retention or maintenance of REIT assets. Other information sought by the SEC includes information concerning the accounting treatment and disclosure of any such payments, communications with third parties (including other REIT issuers) concerning revenue sharing, and documents concerning the calculation of underwriting compensation in connection with the REIT offerings under applicable NASD rules.

In response to the Enforcement Staff’s subpoenas and requests, we and Carey Financial have produced documents relating to payments made to certain broker-dealers both during and after the offering process, for certain of the REITs managed by us (including Corporate Property Associates 10 Incorporated (“CPA^®:10”), Carey Institutional Properties Incorporated (“CIP^®”),CPA^®:12, CPA^®:14 and CPA^®:15), in addition to selling commissions and selected dealer fees.

Among the payments reflected on documents produced to the Staff were certain payments, aggregating in excess of $9,600, made to a broker-dealer which distributed shares of the REITs. The expenses associated with these payments, which were made during the period from early 2000 through the end of 2003, were borne by and accounted for on the books and records of the REITs. Of these payments, CPA^®:10 paid in excess of $40; CIP^® paid in excess of $875; CPA^®:12 paid in excess of $2,455; CPA^®:14 paid in excess of $4,990; and CPA^®:15 paid in excess of $1,240. In addition, other smaller payments by the REITs to the same and other broker-dealers have been identified aggregating less than $1,000.

We and Carey Financial are cooperating fully with this investigation and have provided information to the Enforcement Staff in response to the subpoenas and requests. Although no formal regulatory action has been initiated against us or Carey Financial in connection with the matters being investigated, we expect that the SEC may pursue such an action against either or both entities. The nature of the relief or remedies the SEC may seek cannot be predicted at this time. If such an action is brought, it could have a material adverse effect on us, and the magnitude of that effect would not necessarily be limited to the payments described above but could include other payments and civil monetary penalties.

Several state securities regulators have sought information from Carey Financial and CPA^®:15 relating to the matters described above. While one or more states may commence proceedings against Carey Financial in connection with these inquiries, we do not currently expect that these inquiries and proceedings will have a material effect on us incremental to that caused by any SEC action.

In October 2006, a revised complaint was filed in the Los Angeles Superior Court in an action that had named a wholly-owned indirect subsidiary, and other unrelated parties, in a state court action by a private plaintiff alleging various claims under the California False Claims Act that focus on alleged conduct by the Los Angeles Unified School District in connection with its direct application and invoicing for school development and construction funding for a new high school, for which our subsidiary acted as the development manager. We and another of our subsidiaries were named for the first time in the revised complaint, by virtue of an alleged relationship to the subsidiary that was a party to the development agreement, but were not served. In February 2007, the judge dismissed the action against our wholly-owned indirect subsidiary, as well as other defendants, following various substantive and procedural motions. However, the plaintiff has filed a notice of appeal and may still seek to serve us and our other subsidiary in this action. Although no assurance can be given that the dismissal will be sustained if appealed, or that the claims alleged by plaintiff against us and our subsidiaries, if proven, would not have a material effect on us, we believe, based on the information currently available to us, that we and our subsidiaries have meritorious defenses to such claims.

We have provided indemnification in connection with divestitures. These indemnities address a variety of matters including environmental liabilities. Our maximum obligations under such indemnification cannot be reasonably estimated. We are not aware of any claims or other information that would give rise to material payments under such indemnifications.

Note 10. Risk Management and Use of Derivative Financial Instruments

Risk Management

In the normal course of our on-going business operations, we encounter economic risk. There are three main components of economic risk: interest rate risk, credit risk and market risk. We are subject to interest rate risk on our interest-bearing 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 the properties and related loans we hold due to changes in interest rates or other market factors. In addition, we transact business in Europe and are also subject to the risks associated with changing foreign exchange rates. 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 local currency but remain subject to such movements to the extent of any difference.

Notes to Consolidated Financial Statements

We do not generally use derivative financial instruments to manage foreign currency rate risk exposure and do not use derivative instruments to hedge credit/market risks or for speculative purposes.

Concentration of Credit Risk

Concentrations of credit risk arise when a number of tenants are engaged in similar business activities, or conduct business in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to us, to be similarly affected by changes in economic conditions. We regularly monitor our portfolio to assess potential concentrations of credit risk. We believe our portfolio is reasonably well diversified and does not contain any unusual concentration of credit risks.

The majority of our directly owned real estate properties and related loans are located in the United States, with Texas (14%) and California (12%) representing the only significant geographic concentration (greater than 10% of current annualized lease revenue). Our directly owned real estate properties in France accounted for 10% of current annualized lease revenue. No individual tenant accounted for more than 10% of current annualized lease revenue. Our directly owned real estate properties contain significant concentrations in the following asset types as of June 30, 2007: industrial (38%), office (37%) and warehouse/distribution (14%) and the following tenant industries as of June 30, 2007: telecommunications (14%) and business and commercial services (14%).

Note 11. Members’ Equity and Stock Based and Other Compensation

Stock Based Compensation

Effective January 1, 2006, we adopted the fair value recognition provisions of FASB Statement 123(R), “Share-Based Payment” using the modified prospective application method and therefore have not restated prior periods’ results. The total compensation expense (net of forfeitures) for these plans was $1,405 and $920 for the three months ended June 30, 2007 and 2006, respectively, and $2,328 and $1,639 for the six months ended June 30, 2007 and 2006, respectively. The tax benefit recognized in the three months ended June 30, 2007 and 2006 related to stock-based compensation plans totaled $630 and $407, respectively, and $1,041 and $725 for the six months ended June 30, 2007 and 2006, respectively.

We have several stock-based compensation plans including the 1997 Share Incentive Plan, Non-Employee Directors’ Plan, Employee Share Purchase Plan, Carey Management Warrants, Partnership Equity Plan Unit, Profit-Sharing Plan and WPCI Stock Option Plan. There have been no significant changes to the terms and conditions of any of these plans during 2007.

In January 1998, the predecessor of Carey Management was granted warrants to purchase 2,284,800 shares of our common stock exercisable at $21 per share and 725,930 shares exercisable at $23 per share as compensation for investment banking services in connection with structuring the consolidation of the CPA^® Partnerships. During the six months ended June 30, 2007, warrants totaling 1,500,000 were exercised at $21 per share in a cashless exercise for which 567,164 shares were issued.

Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

		Three months ended June 30,								Six months ended June 30,
		2007				2006				2007				2006
Net income — basic		$	42,030			$	17,304			$	52,830			$	28,369
Income effect of dilutive securities, net of taxes			1,885				—				1,985				—
Net income — diluted		$	43,915			$	17,304			$	54,815			$	28,369
Weighted average shares outstanding — basic			38,308,202				37,876,079				38,120,532				37,802,340
Effect of dilutive securities			1,696,177				1,470,458				1,773,880				992,574
Weighted average shares outstanding — diluted			40,004,379				39,346,537				39,894,412				38,794,914

Securities included in our diluted earnings per share determination consist of stock options and warrants and restricted stock. Securities totaling 454,073 shares for the six months ended June 30, 2006 were excluded from the earnings per share computations above as their effect would have been anti-dilutive. There were no such anti-dilutive securities for the three and six months ended June 30, 2007 and the three months ended June 30, 2006. Certain securities of our subsidiary WPCI are held by employees who have rights to exchange such WPCI securities for our securities, generally beginning in 2012. The calculation of the dilutive effective of such rights is based on a periodic valuation of WPCI that is performed by a third party and includes various assumptions, as well as on our

Notes to Consolidated Financial Statements

current common stock price. Actual dilution will be dependent on the valuation of WPCI and on our common stock price at the time the rights are exercised. This valuation may differ from, as well as be based on different assumptions than, the current valuation.

Share Repurchase Program

In June 2007, our board of directors approved a $20,000 share repurchase program. Under this program, we may repurchase up to $20,000 of our common stock in the open market through December 31, 2007 as conditions warrant. Through June 30, 2007, we repurchased shares totaling $2,038 under this program.

Note 12. Income Taxes

We have elected to be treated as a partnership for U.S. Federal income tax purposes and conduct our real estate ownership operations through partnership or limited liability companies electing to be treated as partnerships for U.S Federal income tax purposes. As partnerships, we and our partnership subsidiaries are generally not directly subject to tax. We conduct our investment management services through wholly owned taxable corporations. These operations are subject to federal, state, local and foreign taxes as applicable. We conduct business in the United States and Europe, and as a result, we or one or more of our subsidiaries file income tax returns in the U.S. Federal jurisdiction and various state and certain foreign jurisdictions. With few exceptions, we are no longer subject to U.S. Federal, state and local, or non-U.S. income tax examinations for years before 2003.

We adopted FIN 48 on January 1, 2007. As a result of the implementation we recognized a $1,050 decrease to reserves for uncertain tax positions. This decrease in reserves was accounted for as an adjustment to the beginning balance of retained earnings on the balance sheet. Including the cumulative effect decrease in reserves, at the beginning of 2007, we had approximately $830 of total gross unrecognized tax benefits. Of this total, $440 (net of the federal benefit on state issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.

We recognize interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2007, we have approximately $488 of accrued interest and penalties related to uncertain tax positions. The tax years 2003-2006 remain open to examination by the major taxing jurisdictions to which we are subject.

Included in income taxes in the consolidated balance sheets as of June 30, 2007 and December 31, 2006 are accrued income taxes totaling $3,048 and $21,935, respectively, and deferred income taxes totaling $61,696 and $41,527, respectively.

Note 13. Segment Reporting

We evaluate our results from operations by our two major business segments as follows:

Investment Management

This business segment includes investment management services performed for the CPA^® REITs pursuant to advisory agreements. This business line also includes interest on deferred revenue and earnings from unconsolidated investments in the CPA^® REITs accounted for under the equity method, which were received in lieu of cash for certain payments due under the advisory agreements. In connection with maintaining our status as a publicly traded partnership, this business segment is carried out largely by corporate subsidiaries that are subject to federal, state, local and foreign taxes as applicable. Our financial statements are prepared on a consolidated basis including these taxable operations and include a provision for current and deferred taxes on these operations.

Real Estate Ownership

This business segment includes the operations of properties under operating leases, properties under direct financing leases, real estate under construction and development, operating real estate, assets held for sale and equity investments in real estate in ventures accounted for under the equity method. Because of our legal structure, these operations are generally not subject to federal income taxes; however, they may be subject to certain state, local and foreign taxes.

Notes to Consolidated Financial Statements

A summary of comparative results of these business segments is as follows:

		Three months ended June 30,								Six months ended June 30,
		2007				2006				2007				2006
Investment Management
Revenues		$	86,896			$	37,108			$	109,988			$	64,360
Operating expenses			(25,476	)			(29,703	)			(40,112	)			(43,774	)
Other, net (1)			1,056				1,973				3,127				3,053
Provision for income taxes			(30,376	)			(3,896	)			(36,514	)			(10,428	)
Income from continuing operations		$	32,100			$	5,482			$	36,489			$	13,211
Real Estate Ownership (2)
Revenues		$	23,239			$	20,434			$	46,045			$	40,944
Operating expenses			(11,168	)			(8,880	)			(23,132	)			(18,170	)
Interest expense			(5,669	)			(4,541	)			(10,532	)			(8,929	)
Other, net (1)			1,544				5,564				2,364				6,149
Provision for income taxes			(768	)			(102	)			(1,008	)			(292	)
Income from continuing operations		$	7,178			$	12,475			$	13,737			$	19,702
Total Company
Revenues		$	110,135			$	57,542			$	156,033			$	105,304
Operating expenses			(36,644	)			(38,583	)			(63,244	)			(61,944	)
Interest expense			(5,669	)			(4,541	)			(10,532	)			(8,929	)
Other, net (1)			2,600				7,537				5,491				9,202
Provision for income taxes			(31,144	)			(3,998	)			(37,522	)			(10,720	)
Income from continuing operations		$	39,278			$	17,957			$	50,226			$	32,913

		Equity Investments in Real Estate as of								Total Long-Lived Assets (3) as of								Total Assets as of
		June 30, 2007				December 31, 2006				June 30, 2007				December 31, 2006				June 30, 2007				December 31, 2006
Investment Management		$	137,278			$	107,391			$	151,629			$	122,828			$	310,555			$	299,036
Real Estate Ownership			45,948				58,756				779,158				765,777				813,162				793,974
Total Company		$	183,226			$	166,147			$	930,787			$	888,605			$	1,123,717			$	1,093,010

Note 14. Subsequent Event

In July 2007, we entered into an agreement to sell two domestic properties for approximately $17,575, net of estimated selling costs. If the sale is consummated, we expect to recognize a gain of approximately $1,690. The sale is subject to customary due diligence requirements and there is no guarantee that the sale will be completed in accordance with the above terms or at all.

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except share and per share amounts)

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto as of June 30, 2007.

Executive Overview

Business Overview

We are a publicly traded limited liability company. Our stock is listed on the New York Stock Exchange. We operate in two operating segments, investment management and real estate ownership. Within our investment management segment, we are currently the advisor to the following affiliated publicly-owned, non-traded real estate investment trusts: Corporate Property Associates 14 Incorporated (“CPA^®:14”), Corporate Property Associates 15 Incorporated (“CPA^®:15”) and Corporate Property Associates 16 – Global Incorporated (“CPA^®:16 – Global”) and served in this capacity for Corporate Property Associates 12 Incorporated (“CPA^®:12”) until its merger with CPA^®:14 in December 2006 (collectively, the “CPA^® REITs”). Under the advisory agreements with the CPA^® REITs, we perform services related to the day-to-day management of the CPA^® REITs and transaction-related services. As of June 30, 2007, we own and manage over 850 commercial properties domestically and internationally including our own portfolio, which is comprised of our full or partial ownership interest in 181 commercial properties net leased to 109 tenants and totaling approximately 18 million square feet (on a pro rata basis) with an occupancy rate of 96.2%. We also own 13 domestic self-storage properties totaling approximately 0.9 million square feet.

Our primary business segments are:

Investment Management — We provide services to the CPA^® REITs in connection with structuring and negotiating investment and debt placement transactions (structuring revenue) and provide on-going management of the portfolio (asset-based management and performance revenue). Asset-based management and performance revenues for the CPA^® REITs are determined based on real estate related assets under management. As funds available to the CPA^® REITs are invested, the asset base for which we earn revenue increases. We may elect to receive fees in cash or restricted shares of the CPA^® REITs. We may also earn incentive and disposition revenue and receive termination payments in connection with providing liquidity alternatives to CPA^® REIT shareholders.

Real Estate Ownership — We invest in commercial properties that are then leased to companies domestically and internationally, primarily on a triple net leased basis. We currently have investments in the United States and Europe. We also invest in domestic self-storage real estate properties.

Current Developments and Trends

Current developments include:

Managed Portfolio Update:

CPA^®:16 – Global Performance Criterion — In June 2007, CPA^®:16 – Global met its performance criterion (a non-compounded cumulative distribution return of 6% per annum), as defined in its advisory agreement, and as a result, we recognized previously deferred revenue totaling $45,919 (consisting of asset management revenue of $11,945, structuring revenue of $31,674 and interest income on the previously deferred structuring revenue of $2,300). In addition, as a result of CPA^®:16 – Global meeting its performance criterion, we recognized and paid to certain employees incentive and commission compensation of $6,191 and interest thereon of $434 that had previously been deferred.

The deferred asset-based revenue of $11,945 was paid in July 2007 by CPA^®:16 – Global in the form of 1,194,549 shares of CPA^®:16 – Global’s restricted common stock while the deferred structuring revenue of $31,674 and interest thereon of $2,300 are payable in cash beginning in January 2008. CPA^®:16 – Global will pay the deferred structuring revenue in three annual installments of $28,259 in January 2008 (including the accrued interest), $4,663 in January 2009 and $1,052 in January 2010. Interest will accrue on amounts outstanding at the rate of 5% per annum.

Acquisition Activity — We earn revenue from the acquisition and disposition of properties on behalf of the CPA^® REITs. During the three months ended June 30, 2007, we structured investments totaling approximately $493,000 on behalf of the CPA^® REITs, a significant portion of which relates to an investment in Germany totaling approximately $429,590. Approximately 95% of these investments were for international transactions.

Company and Owned Portfolio Update:

Share Repurchase Program — In June 2007, our board of directors approved a $20,000 share repurchase program. Under this program, we may repurchase up to $20,000 of our common stock in the open market through December 31, 2007 as conditions warrant. Through June 30, 2007 we repurchased shares totaling $2,038 under this program.

Corporate Restructuring — In May 2007, our board of directors approved a plan to transfer our real estate assets into a wholly owned REIT subsidiary. We currently expect this restructuring to be completed by the end of 2007.

Credit Facility — In June 2007, we entered into an unsecured credit facility for a $250,000 revolving line of credit to replace our previous $175,000 line of credit that was due to expire in July 2007. The credit facility, which matures in June 2011, can be increased to up to $300,000 upon satisfaction of certain conditions. As of June 30, 2007, we had drawn down $28,000 under this facility, which was used to repay our previous credit facility (see Financial Condition below).

Financing Activity — In June 2007, a venture in which we and an affiliate each hold 50% interests completed the refinancing of a limited recourse mortgage of $2,483 for $35,350 and distributed the proceeds to the venture partners. The new limited recourse mortgage financing carries a fixed annual interest rate of 6.2% versus 8.125% for the prior financing. The new financing matures in July 2017.

Acquisition Activity — During the three months ended June 30, 2007, we obtained a 5% interest in a venture, the remaining interests in which are held by our affiliated CPA^® REITs, which made a loan (the “note receivable”) to the holder of a 75.26% interest in a limited partnership owning 37 properties throughout Germany at a total cost of $335,981. In connection with this transaction, the venture obtained limited recourse financing of $284,932 having a fixed rate of 5.49% per annum and a term of 10 years. All amounts are based on the exchange rate of the Euro at the date of acquisition (see Aggregate Contractual Agreements below).

In addition, during the three months ended June 30, 2007, our subsidiary Carey Storage acquired two domestic self-storage properties totaling $9,000. These acquisitions were funded in part through borrowings totaling $4,930 under Carey Storage’s secured credit facility (see Financial Condition below).

Disposition Activity — During the three months ended June 30, 2007, we completed the sale of two domestic vacant properties for $6,014, net of selling costs and, in addition, received lease termination proceeds of $1,905. In connection with these sales, we recorded a net gain of $962, exclusive of impairment charges of $2,507 recognized in prior periods.

Quarterly Distribution — In June 2007, our board of directors approved and increased the 2007 second quarter distribution to $0.467 per share payable in July 2007 to shareholders of record as of June 29, 2007.

SEC Investigation — As previously reported, we and Carey Financial, LLC, our wholly-owned broker-dealer subsidiary, are currently subject to an SEC investigation into payments made to third party broker-dealers in connection with the distribution of REITs managed by us and other matters. Although no regulatory action has been initiated against us or Carey Financial in connection with the matters being investigated, we expect that the SEC may pursue an action in the future. The potential timing of any action and the nature of the relief or remedies the SEC may seek cannot be predicted at this time. If an action is brought, it could materially affect us and the REITs we manage.

Senior Management — As previously reported in a Report on Form 8K dated June 14, 2007, Thomas Ridings, an executive director, was appointed chief accounting officer. Mr. Ridings succeeds Claude Fernandez, who resigned from his position as chief accounting officer in June. Mr. Fernandez will continue in his capacity as managing director.

Directors — Effective April 2007, Trevor Bond was appointed to our board of directors and serves as an independent director. In June 2007, Robert E. Mittelstaedt, Jr. was elected to our board of directors and serves as an independent director.

The following development occurred subsequent to our second quarter:

Disposition Activity — In July 2007, we entered into an agreement to sell two domestic properties for approximately $17,575, net of estimated selling costs. If the sale is consummated, we expect to recognize a gain of approximately $1,690. The sale is subject to customary due diligence requirements and there is no guarantee that the sale will be completed in accordance with the above terms or at all.

Current trends include:

We continue to see intense competition in both the domestic and international markets for triple net leased properties, as capital continues to flow into real estate, in general, and triple net leased real estate, in particular. We believe that relatively low long-term interest rates by historical standards have created greater investor demand for yield-based investments, such as triple net leased real estate, thus creating increased capital flows and a more competitive investment environment. We currently expect these trends to continue in 2007 but believe that we have competitive strengths that will enable us to continue to find attractive investment opportunities, both domestically and internationally. In addition to our competitive strengths, we currently believe that several factors may also provide us with continued investment opportunities. These factors include significant merger and acquisition activity, which may provide additional sale-leaseback opportunities as a source of funding, a continued desire of corporations to divest themselves of real estate holdings and increasing opportunities for sale-leaseback transactions in the international market, which continues to make up a large portion of our investment opportunities.

For the six months ended June 30, 2007, international investments accounted for 71% of total investments made on behalf of the CPA^® REITs. For the year ended December 31, 2006, international investments accounted for 48% of total investments. We currently expect international commercial real estate to continue to comprise a significant portion of the investments we make on behalf of the CPA^® REITs, although the percentage of international investments in any given period may vary substantially.

Commercial real estate values have risen significantly in recent years. We benefit from increases in the valuations of the CPA^® REIT portfolios through our ownership of shares in the CPA^® REITs and increased management fees. To the extent that disposing of properties fits with our strategic plans, we may look to take advantage of the increase in real estate prices by selectively disposing of properties in our owned portfolio.

Increases in long term interest rates would likely cause the value of our owned and managed assets to decrease, which would create lower revenues from managed assets and lower investment performance for the managed funds. Increases in interest rates may also have an impact on the credit quality of certain tenants. To the extent that the Consumer Price Index (“CPI”) increases, additional rental income streams may be generated for leases with CPI adjustment triggers and partially offset the impact of declining property values. In addition, we constantly evaluate our debt exposure, and to the extent that opportunities exist to refinance and lock in lower interest rates over a longer term, we may be able to reduce our exposure to short term interest rate fluctuation.

We have seen a shift in the capital markets during the second quarter. Spreads on corporate obligations and mortgages have widened, in part, based upon investor concerns about credit quality and potential defaults. We have experienced some widening on the mortgage spreads on our limited recourse borrowings which we utilize for our investing activity. Furthermore, a decrease in credit availability might increase the default rates that we experience with our tenants. On the other hand, we believe that we may find more attractive investment opportunities at potentially wider spreads during a time of stricter credit. In addition, we utilize moderate leverage and do not believe the current environment will materially impact our ability to borrow, at favorable rates, on a limited recourse basis.

Companies in automotive related industries (manufacturing, parts, services, etc.) continue to experience a challenging environment, which has resulted in several companies filing for bankruptcy protection in recent years. We currently have several automotive industry related tenants in the portfolios we manage, including our own portfolio. Some of these tenants have filed voluntary petitions of bankruptcy. As of June 30, 2007, tenants in the automotive industry in our portfolio and the portfolios we manage represented less than 1% and 5% of the asset carrying value of total real estate assets, respectively. If conditions in this industry worsen, additional tenants may file for bankruptcy protection and may disaffirm their leases as part of their bankruptcy reorganization plans. The net result of these trends may have an adverse impact on our asset management revenue. Despite these conditions, we continue to evaluate opportunities in these industries as we believe there still may be attractive investment opportunities.

How Management Evaluates Results of Operations

Management evaluates our results of operations with a primary focus on increasing and enhancing the value, quality and amount of assets under management by our investment management segment and seeking to increase value in our real estate ownership. Management focuses its efforts on improving underperforming assets through re-leasing efforts, including negotiation of lease renewals, or selectively selling such assets in order to increase value in our real estate portfolio. The ability to increase assets under management by structuring investments on behalf of the CPA^® REITs is affected, among other things, by the CPA^® REITs’ ability to raise capital and our ability to identify appropriate investments.

Management’s evaluation of operating results includes our ability to generate necessary cash flow in order to fund distributions to our shareholders. As a result, management’s assessment of operating results gives less emphasis to the effects of unrealized gains and losses, which may cause fluctuations in net income for comparable periods but have no impact on cash flows, and to other non-cash

charges such as depreciation and impairment charges. Management does not consider unrealized gains and losses resulting from short-term foreign currency fluctuations when evaluating our ability to fund distributions. Management’s evaluation of our potential for generating cash flow includes an assessment of the long-term sustainability of both our real estate portfolio and the assets we manage on behalf of the CPA^® REITs.

Management considers cash flows from operations, cash flows from investing activities and cash flows from financing activities to be important measures in the evaluation of our results of operations, liquidity and capital resources. Cash flows from operations are sourced primarily by revenues earned from structuring investments and providing asset-based management services on behalf of the CPA^® REITs we manage and long-term lease contracts from our real estate ownership. Management’s evaluation of the amount and expected fluctuation of cash flows from operations is essential in evaluating our ability to fund operating expenses, service debt and fund distributions to shareholders.

Management considers cash flows from operating activities plus cash distributions from equity investments in real estate in excess of equity income as a supplemental measure of liquidity in evaluating our ability to sustain distributions to shareholders. Management considers this measure useful as a supplemental measure to the extent the source of distributions in excess of equity income is the result of non-cash charges, such as depreciation and amortization, because it allows management to evaluate such cash flows from consolidated and unconsolidated investments in a comparable manner. In deriving this measure, cash distributions from equity investments in real estate that are sourced from sales of equity investee’s assets or refinancing of debt are excluded because they are deemed to be returns of investment.

Management focuses on measures of cash flows from investing activities and cash flows from financing activities in its evaluation of our capital resources. Investing activities typically consist of the acquisition or disposition of investments in real property and the funding of capital expenditures with respect to real properties. Financing activities primarily consist of the payment of distributions to shareholders, borrowings and repayments under our lines of credit and the payment of mortgage principal amortization.

Results of Operations

We evaluate our results of operations by our two major business segments — investment management and real estate ownership. A summary of comparative results of these business segments is as follows:

Investment Management

		Three months ended June 30,												Six months ended June 30,
		2007				2006				Change				2007				2006				Change
Revenues
Asset management revenue		$	30,204			$	14,752			$	15,452			$	45,238			$	29,114			$	16,124
Structuring revenue			53,448				2,462				50,986				58,031				12,354				45,677
Reimbursed costs from affiliates			3,244				19,894				(16,650	)			6,719				22,892				(16,173	)
			86,896				37,108				49,788				109,988				64,360				45,628
Operating Expenses
General and administrative			(21,191	)			(8,344	)			(12,847	)			(31,306	)			(17,962	)			(13,344	)
Reimbursable costs			(3,244	)			(19,894	)			16,650				(6,719	)			(22,892	)			16,173
Depreciation and amortization			(1,041	)			(1,465	)			424				(2,087	)			(2,920	)			833
			(25,476	)			(29,703	)			4,227				(40,112	)			(43,774	)			3,662
Other Income and Expenses
Other interest income			3,360				596				2,764				3,887				1,138				2,749
Income from equity investments in real estate			491				625				(134	)			1,968				1,609				359
Minority interest in (income) loss			(2,783	)			729				(3,512	)			(2,716	)			283				(2,999	)
(Loss) gain on foreign currency transactions and other gains, net			(12	)			23				(35	)			(12	)			23				(35	)
			1,056				1,973				(917	)			3,127				3,053				74
Income from continuing operations before income taxes			62,476				9,378				53,098				73,003				23,639				49,364
Provision for income taxes			(30,376	)			(3,896	)			(26,480	)			(36,514	)			(10,428	)			(26,086	)
Net income from investment management		$	32,100			$	5,482			$	26,618			$	36,489			$	13,211			$	23,278

Asset Management Revenue

We earn asset management revenue (asset-based management and performance revenue) from the CPA^® REITs based on assets under management. As funds available to the CPA^® REITs are invested, the asset base for which we earn revenue increases. The asset management revenue that we earn may increase or decrease depending upon (i) increases in the CPA^® REIT asset bases as a result of new investments; (ii) decreases in the CPA^® REIT asset bases resulting from sales of investments; or (iii) increases or decreases in the asset valuations of CPA^® REIT funds (which are not recorded for financial reporting purposes). The availability of funds for new investments is substantially dependent on our ability to raise funds for investment by the CPA^® REITs.

For the three and six months ended June 30, 2007 versus the comparable 2006 periods, asset management revenue increased $15,452 and $16,124, respectively, primarily due to the recognition of $11,945 of previously deferred asset management revenue from CPA^®:16 – Global during the second quarter of 2007 following the achievement of its performance criterion, and $2,186 of performance revenue that was earned in the current quarter. A portion of the asset management revenue we earn from the CPA^® REITs is based on each CPA^® REIT meeting specific performance criteria and is earned only if the criteria are achieved. Because CPA^®:16 – Global had not achieved its performance criterion at June 30, 2006, no performance revenue was recognized from CPA^®:16 – Global for the three and six months ended June 30, 2006. The increase is also attributable to a net increase in our assets under management as a result of recent investment activity of the CPA^® REITs and increases in the annual asset valuations of CPA^®:14 and CPA^®:15, which were performed as of December 31, 2006.

These increases were partially offset by a reduction in revenue resulting from our acquisition of properties from CPA^®:12 (the “CPA^®:12 Acquisition”) for $126,006 and the sale of properties by CPA^®:12 to third parties prior to its merger with CPA^®:14 (the “CPA^®:12/14 Merger”) in December 2006. While we expect an overall increase in asset management revenue during 2007 as a result of CPA^®:16 – Global meeting its performance criterion, recent investment activity and expected activity during the remainder of 2007, the CPA^®:12 Acquisition will have a negative impact on asset management revenue of approximately $1,300 during 2007.

Structuring Revenue
Structuring revenue includes current and deferred acquisition revenue from structuring investments and financing on behalf of the CPA^® REITs. Investment activity is subject to significant period-to-period variation.

For the three and six months ended June 30, 2007 and 2006 versus the comparable 2006 periods, structuring revenue increased $50,986 and $45,677, respectively, primarily due to the recognition of $35,210 of structuring revenue from CPA^®:16 – Global during the second quarter of 2007 following the achievement of its performance criterion, $31,674 of which had been previously deferred. The increase in structuring revenue is also attributable to an increase in investment volume. We structured investments totaling $493,000 and $660,000, respectively, for the three and six months ended June 30, 2007 as compared with $83,000 and $338,000, respectively, for the comparable prior year periods.

As discussed above, a portion of the CPA^® REIT structuring revenue is based on each CPA^® REIT meeting specific performance criteria and is earned only if the criteria are achieved. Because CPA^®:16 – Global had not achieved its performance criterion as of June 30, 2006, no deferred structuring revenue was recognized from CPA^®:16 – Global for the three and six months ended June 30, 2006.

Reimbursed and Reimbursable Costs

Reimbursed costs from affiliates (revenue) and reimbursable costs (expenses) represent costs incurred by us on behalf of the CPA^® REITs, primarily broker-dealer commissions and marketing and personnel costs, which are reimbursed by the CPA^® REITs. Revenue from reimbursed costs from affiliates is offset by corresponding charges to reimbursable costs and therefore has no impact on net income.

For the three and six months ended June 30, 2007 versus the comparable 2006 periods, reimbursed and reimbursable costs decreased $16,650 and $16,173, respectively, primarily due to a decrease in broker-dealer commissions and marketing costs related to CPA^®:16 – Global’s second public offering, which commenced in March 2006 and was completed in December 2006.

General and Administrative

For the three months ended June 30, 2007 and 2006, general and administrative expenses increased by $12,847, primarily due to increases in compensation related costs. Compensation related costs increased by $11,589 primarily due to CPA^®:16 – Global achieving its performance criterion in June 2007 as well as an increase in investment volume. As a result of CPA^®:16 – Global achieving its performance criterion, we recognized $6,625 of previously deferred compensation costs in the second quarter of 2007. We also recognized compensation related to current quarter acquisitions, which totaled $493,000 while in the second quarter of 2006, investments totaled $83,000, and a significant portion of the compensation relating to those investments was deferred as CPA^®:16 – Global had not yet met its performance criterion.

For the six months ended June 30, 2007 and 2006, general and administrative expenses increased by $13,344, primarily due to the same factors as described above. Compensation related costs increased by $11,232, primarily due to the recognition of $6,625 of previously deferred compensation costs in connection with CPA^®:16 – Global achieving its performance criterion and an increase in

investment volume. Year-to date investments totaled $660,000 compared to $338,000 for the comparable prior year period. In addition, general and administrative expenses also increased $1,348 as a result of increases in professional fees including costs incurred in studying various corporate restructuring alternatives and other legal and consulting fees.

Depreciation and Amortization

For the three and six months ended June 30, 2007 versus the comparable 2006 periods, depreciation and amortization expense decreased by $424 and $833, respectively. The decrease is primarily due to accelerated amortization on intangible assets related to a management contract with CPA^®:12 that was terminated as a result of the CPA^®:12/14 Merger in December 2006.

Other Interest Income

For the three and six months ended June 30, 2007 versus the comparable 2006 periods, other interest income increased by $2,764 and $2,749, respectively, primarily due to the recognition of $2,725 of interest income on deferred structuring revenue from CPA^®:16 – Global during the second quarter of 2007 following CPA^®:16 – Global’s achievement of its performance criterion, $2,300 of which had been previously deferred.

Minority Interest in (Income) Loss

For the three and six months ended June 30, 2007, we recognized minority interest in income of $2,783 and $2,716, respectively, as compared to minority interest in losses of $729 and $283 for the three and six months ended June 30, 2006, respectively. Two employees own a minority interest in our subsidiary W. P. Carey International LLC that had a significant increase in net income as a result of the recognition of previously deferred asset management and structuring revenue from CPA^®:16 – Global following CPA^®:16 – Global’s achievement of its performance criterion in June 2007, as well as an increase in investment volume.

Provision for Income Taxes

For the three and six months ended June 30, 2007 versus the comparable 2006 periods, our provision for income taxes increased $26,480 and $26,086, respectively, primarily as a result of revenue recognized in connection with CPA^®:16 – Global achieving its performance criterion in June 2007. The effective tax rate for the second quarter of 2007 and 2006 was 48.6% and 41.5%, respectively. The year-to-date effective tax rate for 2007 and 2006 was 50% and 44.1%, respectively. The effective tax rate increased in both periods because performance and asset management revenues in respect of CPA^®:12’s assets that had been paid directly to us were, subsequent to the acquisition of those assets by CPA^®:14 in the CPA^®:12/14 Merger, paid to a taxable, wholly owned subsidiary which is the advisor to CPA^®:14. In addition, investment management income presented above excludes income that has been eliminated in consolidation but is subject to taxation. The adoption of FIN 48 did not have a material impact on our income tax provision during the first quarter of 2007 (Note 12).

Net Income from Investment Management

For the three and six months ended June 30, 2007 versus the comparable 2006 periods, net income from investment management increased by $26,618 and $23,278, respectively, primarily due to increases in revenue attributable to CPA^®:16 – Global achieving its performance criterion and increases in investment volume and assets under management. As a result of CPA^®:16 – Global achieving its performance criterion, we recognized $45,919 in previously deferred revenue in June 2007. These increases were partially offset by increases in our provision for income taxes as a result of the revenue increase and increases in general and administrative expenses. General and administrative expenses increased primarily due to the recognition of deferred compensation totaling $6,625 in connection with CPA^®:16 – Global achieving its performance criterion and in connection with significant increases in investment volume. These variances are described above.

Real Estate Ownership

		Three months ended June 30,												Six months ended June 30,
		2007				2006				Change				2007				2006				Change
Revenues
Lease revenues		$	19,998			$	18,285			$	1,713			$	39,630			$	36,412			$	3,218
Other real estate income			3,241				2,149				1,092				6,415				4,532				1,883
			23,239				20,434				2,805				46,045				40,944				5,101
Operating Expenses
General and administrative			(2,065	)			(1,527	)			(538	)			(4,187	)			(3,067	)			(1,120	)
Depreciation and amortization			(5,909	)			(4,542	)			(1,367	)			(11,807	)			(9,057	)			(2,750	)
Property expenses			(1,893	)			(1,345	)			(548	)			(3,313	)			(3,013	)			(300	)
Other real estate expenses			(1,301	)			(1,466	)			165				(3,825	)			(3,033	)			(792	)
			(11,168	)			(8,880	)			(2,288	)			(23,132	)			(18,170	)			(4,962	)
Other Income and Expenses
Other interest income			283				215				68				354				400				(46	)
Income from equity investments in real estate			1,438				619				819				2,399				1,185				1,214
Minority interest in income			(358	)			(475	)			117				(756	)			(891	)			135
Gain on sale of securities, foreign currency transactions and other gains, net			181				5,205				(5,024	)			367				5,455				(5,088	)
Interest expense			(5,669	)			(4,541	)			(1,128	)			(10,532	)			(8,929	)			(1,603	)
			(4,125	)			1,023				(5,148	)			(8,168	)			(2,780	)			(5,388	)
Income from continuing operations before income taxes			7,946				12,577				(4,631	)			14,745				19,994				(5,249	)
Provision for income taxes			(768	)			(102	)			(666	)			(1,008	)			(292	)			(716	)
Income from continuing operations			7,178				12,475				(5,297	)			13,737				19,702				(5,965	)
Income (loss) from discontinued operations			2,752				(653	)			3,405				2,604				(4,544	)			7,148
Net income from real estate ownership		$	9,930			$	11,822			$	(1,892	)		$	16,341			$	15,158			$	1,183

Our real estate ownership consists of the investment in and the leasing of commercial real estate. Management’s evaluation of the sources of lease revenues for the six months ended June 30, 2007 and 2006 is as follows:

		Six months ended June 30,
		2007				2006
Rental income		$	33,505			$	29,564
Interest income from direct financing leases			6,125				6,848
		$	39,630			$	36,412

We earned net lease revenues (i.e., rental income and interest income from direct financing leases) from our direct ownership of real estate from the following lease obligations:

		Six months ended June 30,
		2007				2006
Bouygues Telecom, S.A. (a) (b) (c)		$	2,682			$	2,343
CheckFree Holdings Corporation Inc. (b)			2,353				2,302
Detroit Diesel Corporation			2,317				2,317
Dr Pepper Bottling Company of Texas			2,237				2,203
Orbital Sciences Corporation			1,511				1,511
Titan Corporation			1,456				1,449
America West Holdings Corp.			1,419				1,419
AutoZone, Inc.			1,192				1,154
Quebecor Printing, Inc.			970				970
Sybron Dental Specialties Inc.			885				885
Lucent Technologies, Inc. (d)			878				759
Unisource Worldwide, Inc.			844				848
Werner Corporation (e)			813				—
BE Aerospace, Inc.			786				790
CSS Industries, Inc.			785				785
Career Education Corporation (f)			751				—
Eagle Hardware & Garden, Inc., a wholly-owned subsidiary of Lowe’s Companies Inc.			742				733
Sprint Spectrum, L.P.			712				712
EnviroWorks, Inc.			675				651
PPD Development, Inc. (f)			659				—
Swat-Fame, Inc.			646				621
AT&T Corporation			630				630
Omnicom Group Inc. (g)			626				570
United States Postal Service			617				617
BellSouth Telecommunications, Inc.			612				612
Other (a) (b) (f)			11,832				11,531
		$	39,630			$	36,412