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

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

Commission File Number: 001-13779

W. P. CAREY & CO. LLC

(Exact name of registrant as specified in its charter)

Delaware		13-3912578
(State of incorporation)		(I.R.S. Employer Identification No.)
50 Rockefeller Plaza
New York, New York		10020
(Address of principal executive office)		(Zip Code)

Investor Relations (212) 492-8920
(212) 492-1100
(Registrant’s telephone numbers, including area code)

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company 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 39,717,286 shares of common stock, no par value, outstanding at November 1, 2011.

 

 

INDEX

		Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets			2
Consolidated Statements of Income			3
Consolidated Statements of Comprehensive Income			4
Consolidated Statements of Cash Flows			5
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Item 3. Quantitative and Qualitative Disclosures About Market Risk			53
Item 4. Controls and Procedures			54
PART II — OTHER INFORMATION
Item 6. Exhibits			55
Signatures			56
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Forward-Looking Statements

This Quarterly Report on Form 10-Q (the “Report”), including Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of Part I of this Report, contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. It is important to note that our actual results could be materially different from those projected in such forward-looking statements. You should exercise caution in relying on forward-looking statements as they involve known and unknown risks, uncertainties and other factors that may materially affect our future results, performance, achievements or transactions. Information on factors which could impact actual results and cause them to differ from what is anticipated in the forward-looking statements contained herein is included in this Report as well as in our other filings with the Securities and Exchange Commission (the “SEC”), including but not limited to those described in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2010 as filed with the SEC on February 25, 2011 (the “2010 Annual Report”) and in the Current Report on Form 8-K filed with the SEC on June 10, 2011. We do not undertake to revise or update any forward-looking statements. Additionally, a description of our critical accounting estimates is included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our 2010 Annual Report. There has been no significant change in our critical accounting estimates.

PART I

Item 1. Financial Statements

W. P. CAREY & CO. LLC

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

		September 30, 2011				December 31, 2010
Assets
Investments in real estate:
Real estate, at cost (inclusive of amounts attributable to consolidated variable interest entities (“VIEs”) of $41,018 and $39,718, respectively)		$	631,496			$	560,592
Operating real estate, at cost (inclusive of amounts attributable to consolidated VIEs of $26,306 and $25,665, respectively)			109,824				109,851
Accumulated depreciation (inclusive of amounts attributable to consolidated VIEs of $21,861 and $20,431, respectively)			(131,725	)			(122,312	)
Net investments in properties			609,595				548,131
Net investments in direct financing leases			75,886				76,550
Equity investments in real estate and the REITs			537,384				322,294
Net investments in real estate			1,222,865				946,975
Cash and cash equivalents (inclusive of amounts attributable to consolidated VIEs of $366 and $86, respectively)			37,095				64,693
Due from affiliates			39,659				38,793
Intangible assets and goodwill, net			128,249				87,768
Other assets, net (inclusive of amounts attributable to consolidated VIEs of $2,914 and $1,845, respectively)			41,021				34,097
Total assets		$	1,468,889			$	1,172,326
Liabilities and Equity
Liabilities:
Non-recourse debt (inclusive of amounts attributable to consolidated VIEs of $14,360 and $9,593, respectively)		$	335,354			$	255,232
Lines of credit			253,160				141,750
Accounts payable, accrued expenses and other liabilities (inclusive of amounts attributable to consolidated VIEs of $1,775 and $2,275, respectively)			71,708				40,808
Income taxes, net			48,710				41,443
Distributions payable			22,186				20,073
Total liabilities			731,118				499,306
Redeemable noncontrolling interest			6,631				7,546
Commitments and contingencies (Note 10)
Equity:
W. P. Carey members’ equity:
Listed shares, no par value, 100,000,000 shares authorized; 39,717,286 and 39,454,847 shares issued and outstanding, respectively			770,246				763,734
Distributions in excess of accumulated earnings			(80,954	)			(145,769	)
Deferred compensation obligation			11,211				10,511
Accumulated other comprehensive loss			(4,639	)			(3,463	)
Total W. P. Carey members’ equity			695,864				625,013
Noncontrolling interests			35,276				40,461
Total equity			731,140				665,474
Total liabilities and equity		$	1,468,889			$	1,172,326

See Notes to Consolidated Financial Statements.

W. P. CAREY & CO. LLC

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Revenues
Asset management revenue		$	14,840			$	19,219			$	51,279			$	57,119
Structuring revenue			21,221				708				42,901				20,644
Incentive, termination and subordinated disposition revenue			—				—				52,515				—
Wholesaling revenue			2,586				2,906				8,788				8,189
Reimbursed costs from affiliates			14,707				15,256				49,485				44,696
Lease revenues			18,609				15,356				50,846				45,586
Other real estate income			6,409				4,656				17,426				13,228
			78,372				58,101				273,240				189,462
Operating Expenses
General and administrative			(25,187	)			(15,480	)			(71,095	)			(52,174	)
Reimbursable costs			(14,707	)			(15,256	)			(49,485	)			(44,696	)
Depreciation and amortization			(7,180	)			(5,796	)			(19,126	)			(17,231	)
Property expenses			(3,672	)			(3,152	)			(9,827	)			(7,631	)
Other real estate expenses			(2,725	)			(1,987	)			(8,224	)			(5,575	)
Impairment charge			(4,934	)			—				(4,934	)			—
			(58,405	)			(41,671	)			(162,691	)			(127,307	)
Other Income and Expenses
Other interest income			323				329				1,558				938
Income from equity investments in real estate and the REITs			16,068				6,066				37,356				22,846
Gain on change in control of interests			—				—				27,859				—
Other income and (expenses)			(296	)			1,190				4,943				580
Interest expense			(5,989	)			(4,169	)			(15,660	)			(11,391	)
			10,106				3,416				56,056				12,973
Income from continuing operations before income taxes			30,073				19,846				166,605				75,128
Provision for income taxes			(5,931	)			(3,377	)			(38,541	)			(14,240	)
Income from continuing operations			24,142				16,469				128,064				60,888
Discontinued Operations
Income from operations of discontinued properties			504				383				639				1,664
Gain on deconsolidation of a subsidiary			1,008				—				1,008				—
(Loss) gain on sale of real estate			(396	)			—				264				460
Impairment charges			—				(481	)			(41	)			(8,618	)
Income (loss) from discontinued operations			1,116				(98	)			1,870				(6,494	)
Net Income			25,258				16,371				129,934				54,394
Add: Net loss attributable to noncontrolling interests			581				81				1,295				495
Less: Net income attributable to redeemable noncontrolling interest			(637	)			(106	)			(1,241	)			(698	)
Net Income Attributable to W. P. Carey Members		$	25,202			$	16,346			$	129,988			$	54,191
Basic Earnings Per Share
Income from continuing operations attributable to W. P. Carey members		$	0.59			$	0.41			$	3.17			$	1.54
Income (loss) from discontinued operations attributable to W. P. Carey members			0.03				—				0.05				(0.16	)
Net income attributable to W. P. Carey members		$	0.62			$	0.41			$	3.22			$	1.38
Diluted Earnings Per Share
Income from continuing operations attributable to W. P. Carey members		$	0.59			$	0.41			$	3.14			$	1.53
Income (loss) from discontinued operations attributable to W. P. Carey members			0.03				—				0.05				(0.17	)
Net income attributable to W. P. Carey members		$	0.62			$	0.41			$	3.19			$	1.36
Weighted Average Shares Outstanding
Basic			39,861,064				39,180,719				39,794,506				39,161,086
Diluted			40,404,520				39,717,931				40,424,316				39,774,122
Amounts Attributable to W. P. Carey Members
Income from continuing operations, net of tax		$	24,086			$	16,444			$	128,118			$	60,685
Income (loss) from discontinued operations, net of tax			1,116				(98	)			1,870				(6,494	)
Net income		$	25,202			$	16,346			$	129,988			$	54,191
Distributions Declared Per Share		$	0.560			$	0.508			$	1.622			$	1.518

See Notes to Consolidated Financial Statements.

W. P. CAREY & CO. LLC

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Net Income		$	25,258			$	16,371			$	129,934			$	54,394
Other Comprehensive (Loss) Income:
Foreign currency translation adjustments			(5,380	)			9,359				2,291				1,326
Unrealized loss on derivative instruments			(3,032	)			(1,808	)			(3,271	)			(3,103	)
Change in unrealized appreciation on marketable securities			(5	)			17				(8	)			5
			(8,417	)			7,568				(988	)			(1,772	)
Comprehensive Income			16,841				23,939				128,946				52,622
Amounts Attributable to Noncontrolling Interests:
Net loss			581				81				1,295				495
Foreign currency translation adjustments			866				(1,291	)			(187	)			(1,146	)
Comprehensive loss (income) attributable to noncontrolling interests			1,447				(1,210	)			1,108				(651	)
Amounts Attributable to Redeemable Noncontrolling Interest:
Net income			(637	)			(106	)			(1,241	)			(698	)
Foreign currency translation adjustments			8				(10	)			(1	)			7
Comprehensive income attributable to redeemable noncontrolling interest			(629	)			(116	)			(1,242	)			(691	)
Comprehensive Income Attributable to W. P. Carey Members		$	17,659			$	22,613			$	128,812			$	51,280

See Notes to Consolidated Financial Statements.

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

		Nine Months Ended September 30,
		2011				2010
Cash Flows — Operating Activities
Net income		$	129,934			$	54,394
Adjustments to net income:
Depreciation and amortization, including intangible assets and deferred financing costs			20,160				18,496
Income from equity investments in real estate and the REITs in excess of distributions received			(835	)			(5,373	)
Straight-line rent and financing lease adjustments			(2,039	)			144
Amortization of deferred revenue			(3,932	)			—
Gain on deconsolidation of a subsidiary			(1,008	)			—
Gain on sale of real estate			(264	)			(460	)
Unrealized (gain) loss on foreign currency transactions and others			(79	)			143
Realized (gain) loss on foreign currency transactions and others			(1,134	)			176
Allocation of loss to profit-sharing interest			—				(781	)
Management and disposition income received in shares of affiliates			(62,493	)			(26,262	)
Gain on conversion of shares			(3,834	)			—
Gain on change in control of interests			(27,859	)			—
Impairment charges			4,975				8,618
Stock-based compensation expense			13,026				6,695
Deferred acquisition revenue received			18,128				19,248
Increase in structuring revenue receivable			(17,732	)			(9,900	)
Increase (decrease) in income taxes, net			5,907				(9,461	)
Net changes in other operating assets and liabilities			(8,269	)			(3,409	)
Net cash provided by operating activities			62,652				52,268
Cash Flows — Investing Activities
Distributions received from equity investments in real estate and the REITs in excess of equity income			13,870				9,964
Capital contributions to equity investments			(2,297	)			—
Purchase of interests in CPA®:16 — Global			(121,315	)			—
Purchases of real estate and equity investments in real estate			(24,323	)			(93,059	)
Value added taxes (“VAT”) paid in connection with acquisition of real estate			—				(4,222	)
VAT refunded in connection with acquisitions of real estate			5,035				—
Capital expenditures			(6,731	)			(2,008	)
Cash acquired on acquisition of subsidiaries			57				—
Proceeds from sale of real estate			10,998				14,591
Proceeds from sale of securities			777				—
Funding of short-term loans to affiliates			(96,000	)			—
Proceeds from repayment of short-term loans to affiliates			95,000				—
Funds placed in escrow			(5,282	)			—
Funds released from escrow			2,326				36,132
Net cash used in investing activities			(127,885	)			(38,602	)
Cash Flows — Financing Activities
Distributions paid			(63,060	)			(72,625	)
Contributions from noncontrolling interests			2,341				11,403
Distributions to noncontrolling interests			(5,310	)			(2,022	)
Contributions from profit-sharing interest			—				3,694
Distributions to profit-sharing interest			—				(693	)
Purchase of noncontrolling interest			(7,502	)			—
Scheduled payments of mortgage principal			(22,893	)			(12,218	)
Proceeds from mortgage financing			20,848				52,816
Proceeds from lines of credit			251,410				83,250
Repayments of lines of credit			(140,000	)			(52,500	)
Payment of financing costs			(1,562	)			(1,083	)
Proceeds from issuance of shares			1,034				3,537
Windfall tax benefit associated with stock-based compensation awards			2,051				1,226
Net cash provided by financing activities			37,357				14,785
Change in Cash and Cash Equivalents During the Period
Effect of exchange rate changes on cash			278				(651	)
Net (decrease) increase in cash and cash equivalents			(27,598	)			27,800
Cash and cash equivalents, beginning of period			64,693				18,450
Cash and cash equivalents, end of period		$	37,095			$	46,250

(Continued)

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Continued)

Supplemental noncash investing activities:

On May 2, 2011, in connection with entering into an amended and restated advisory agreement with Corporate Property Associates 16 — Global Incorporated (“CPA^®:16 — Global”), we received a special membership interest in CPA^®:16 — Global’s operating partnership and recorded as consideration a $28.3 million adjustment to Equity investments in real estate and the REITs to reflect the fair value of our special interest in that operating partnership (Note 3).

Also on May 2, 2011, we exchanged 11,113,050 shares of Corporate Property Associates 14 Incorporated (“CPA^®:14”) for 13,260,091 shares of CPA^®:16 — Global, resulting in a gain of approximately $2.8 million (Note 3).

In connection with the acquisition of properties from CPA^®:14, we assumed two non-recourse mortgages on the related properties with an aggregate fair value of $87.6 million at the date of acquisition (Note 4).

In September 2011, we deconsolidated a wholly-owned subsidiary because we no longer had control over the activities that most significantly impact its economic performance following possession of the subsidiary’s property by a receiver (Note 15). The following table presents the assets and liabilities of the subsidiary on the date of deconsolidation:

Assets
Net investments in properties		$	5,340
Intangible assets and goodwill, net			(15	)
Total		$	5,325
Liabilities:
Non-recourse debt		$	(6,311	)
Accounts payable, accrued expenses and other liabilities			(22	)
Total		$	(6,333	)

See Notes to Consolidated Financial Statements

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Business

W. P. Carey & Co. LLC (“W. P. Carey” and, together with its consolidated subsidiaries and predecessors, “we”, “us” or “our”) provides long-term financing via sale-leaseback and build-to-suit transactions for companies worldwide and manages a global investment portfolio. We invest primarily in commercial properties domestically and internationally that are generally triple-net leased to single corporate tenants, which requires each tenant to pay substantially all of the costs associated with operating and maintaining the property. We also earn revenue as the advisor to publicly-owned, non-listed real estate investment trusts, which are sponsored by us under the Corporate Property Associates brand name (the “CPA^® REITs”) and invest in similar properties. At September 30, 2011, we were the advisor to the following CPA^® REITs: Corporate Property Associates 15 Incorporated (“CPA^®:15”), CPA^®:16 — Global and Corporate Property Associates 17 — Global Incorporated (“CPA^®:17 — Global”), and we were the advisor to CPA^®:14 until its merger with a subsidiary of CPA^®:16 — Global on May 2, 2011 (the “CPA^®:14/16 Merger”). We are also the advisor to Carey Watermark Investors Incorporated (“CWI” and, together with the CPA^® REITs, the “REITs”), which we formed in March 2008 for the purpose of acquiring interests in lodging and lodging-related properties. At September 30, 2011, we owned and/or managed more than 990 properties domestically and internationally. Our owned portfolio was comprised of our full or partial ownership interest in 158 properties, substantially all of which were net leased to 74 tenants, and totaled approximately 14 million square feet (on a pro rata basis) with an occupancy rate of approximately 91%. In addition, through one of our consolidated subsidiaries, Carey Storage Management LLC (“Carey Storage”), we had interests in 21 self-storage properties at September 30, 2011.

Primary Business Segments

Investment Management — We structure and negotiate investments and debt placement transactions for the REITs, for which we earn structuring revenue, and manage their portfolios of real estate investments, for which we earn asset-based management and performance revenue. We earn asset-based management and performance revenue from the REITs based on the value of their real estate-related and lodging-related assets under management. As funds available to the REITs are invested, the asset base from which we earn revenue increases. In addition, we also receive a percentage of distributions of available cash from the operating partnerships of CPA^®:17 — Global and CWI, as well as from the operating partnership of CPA^®:16 — Global after the CPA^®:14/16 Merger (Note 3). We may also earn incentive and disposition revenue and receive other compensation in connection with providing liquidity alternatives to the REIT shareholders.

Real Estate Ownership — We own and invest in commercial properties in the United States of America (“U.S.”) and the European Union that are then leased to companies, primarily on a triple-net lease basis. We may also invest in other properties if opportunities arise. Effective as of January 1, 2011, we include our equity investments in the REITs in our Real Estate Ownership segment. The equity income or loss from the REITs that is now included in our Real Estate Ownership segment represents our proportionate share of the revenue less expenses of the net-leased properties held by the REITs. This treatment is consistent with that of our directly-owned properties.

Note 2. Basis of Presentation

Our interim consolidated financial statements have been prepared, without audit, in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a fair statement of our consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the U.S. (“GAAP”).

In the opinion of management, the unaudited financial information for the interim periods presented in this Report reflects all normal and recurring adjustments necessary for a fair statement of results of operations, financial position and cash flows. Our interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2010, which are included in our 2010 Annual Report, as certain disclosures that would substantially duplicate those contained in the audited consolidated financial statements have not been included in this Report. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation.

Notes to Consolidated Financial Statements

Basis of Consolidation

The consolidated financial statements reflect all of our accounts, including those of our majority-owned and/or controlled subsidiaries. The portion of equity in a subsidiary that is not attributable, directly or indirectly, to us is presented as noncontrolling interests. All significant intercompany accounts and transactions have been eliminated.

In April 2010, CWI filed a registration statement with the SEC to sell up to $1.0 billion of its common stock in an initial public offering plus up to an additional $237.5 million of its common stock under a dividend reinvestment plan. This registration statement was declared effective by the SEC in September 2010. Through December 31, 2010, the financial statements of CWI, which had no significant assets, liabilities or operations, were included in our consolidated financial statements, as we owned all of CWI’s outstanding common stock. Beginning in 2011, we have accounted for our interest in CWI under the equity method of accounting because, as the advisor, we do not exert control over, but we have the ability to exercise significant influence on, CWI.

Future Accounting Requirements

The following Accounting Standards Updates (“ASUs”) promulgated by the Financial Accounting Standards Board (“FASB”) are applicable to us in current or future reports, as indicated:

ASU 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations — In December 2010, the FASB issued an update to Accounting Standards Codification Topic (“ASC”) 805, Business Combinations. The amendments in the update clarify that the pro forma disclosures required under ASC 805 should depict revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period. Additionally, the amendments expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination(s) included in the reported pro forma revenue and earnings. These amendments impact the form of our disclosures only, are applicable to us prospectively and are effective for our business combinations for which the acquisition date is on or after December 15, 2010.

ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs — In May 2011, the FASB issued an update to ASC 820, Fair Value Measurements. The amendments in the update explain how to measure fair value and do not require additional fair value measurements, nor are they intended to establish valuation standards or affect valuation practices outside of financial reporting. These new amendments will impact the level of information we provide, particularly for level 3 fair value measurements and the measurement’s sensitivity to changes in unobservable inputs, our use of a nonfinancial asset in a way that differs from that asset’s highest and best use, and the categorization by level of the fair value hierarchy for items that are not measured at fair value in the balance sheet but for which the fair value is required to be disclosed. These amendments are expected to impact the form of our disclosures only, are applicable to us prospectively and are effective for our interim and annual periods beginning in 2012.

ASU 2011-05, Presentation of Comprehensive Income — In June 2011, the FASB issued an update to ASC 220, Comprehensive Income. The amendments in the update change the reporting options applicable to the presentation of other comprehensive income and its components in the financial statements. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. Additionally, the update requires the consecutive presentation of the statement of net income and other comprehensive income. Finally, the update requires an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income. These amendments impact the form of our disclosures only, are applicable to us retrospectively and are effective for our interim and annual periods beginning in 2012.

ASU 2011-08, Testing Goodwill for Impairment — In September 2011, the FASB issued an update to ASC 350, Intangibles — Goodwill and Other. The objective of this ASU is to simplify how entities test goodwill for impairment. The amendments in the ASU permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Previous guidance under Topic 350 required an entity to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. Under the amendments in this ASU, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. We are currently assessing the potential impact that the adoption of the new guidance will have on our financial position and results of operations.

Notes to Consolidated Financial Statements

Note 3. Agreements and Transactions with Related Parties

Advisory Agreements with the REITs

We have advisory agreements with each of the REITs pursuant to which we earn certain fees or are entitled to receive distributions of cash flow. The terms of the advisory agreements are outlined in our 2010 Annual Report except as otherwise stated below. In connection with CPA^®:16 — Global’s internal reorganization on May 2, 2011 following the CPA^®:14/16 Merger, we entered into an amended and restated advisory agreement with CPA^®:16 — Global (see “CPA^®:16 — Global UPREIT Reorganization” below). In the third quarter of 2011, the CPA^® REIT advisory agreements, which were scheduled to expire on September 30, 2011, were renewed for a three-month period effective October 1, 2011. In the third quarter of 2011, the CWI advisory agreement, which was also scheduled to expire on September 30, 2011, was renewed for an additional year pursuant to its terms, effective as of October 1, 2011. The following table presents a summary of revenue earned and/or cash received from the REITs in connection with providing services as the advisor to the REITs (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Asset management revenue(a)		$	14,840			$	19,219			$	51,279			$	57,119
Structuring revenue(b)			21,221				708				42,901				20,644
Incentive, termination and subordinated disposition revenue(c)			—				—				52,515				—
Wholesaling revenue			2,586				2,906				8,788				8,189
Reimbursed costs from affiliates(d)			14,707				15,256				49,485				44,696
Distributions of available cash(e)			4,480				1,720				8,268				3,413
Deferred revenue earned(f)			2,123				—				3,538				—
		$	59,957			$	39,809			$	216,774			$	134,061

Notes to Consolidated Financial Statements

Unpaid transaction fees, including accrued interest, are included in Due from affiliates in the consolidated financial statements. Unpaid transaction fees bear interest at annual rates ranging from 5% to 7%. The following tables present the amount of unpaid transaction fees and interest earned on these fees (in thousands):

		At September 30, 2011				At December 31, 2010
Unpaid deferred acquisition fees		$	31,022			$	31,419

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Interest earned on unpaid deferred acquisition fees		$	294			$	297			$	936			$	835

Other Transactions with Affiliates

CPA^®:14/16 Merger

On May 2, 2011, CPA^®:14 merged with and into a subsidiary of CPA^®:16 — Global. In connection with the CPA^®:14/16 Merger, on May 2, 2011, we purchased three properties from CPA^®:14, in which we already had a partial ownership interest, for an aggregate purchase price of $31.8 million, plus the assumption of $87.6 million of indebtedness (Note 4). The purchase price was based on the appraised values of the properties and debt. Together with the three properties sold by CPA^®:14 to CPA^®:17 — Global on that date, as well as certain other properties sold to third parties in anticipation of the CPA^®:14/16 Merger, these sales are referred to herein as the CPA^®:14 Asset Sales.

In the CPA^®:14/16 Merger, CPA^®:14 shareholders were entitled to receive $11.50 per share, which was equal to the estimated net asset value (“NAV”) per share of CPA^®:14 as of September 30, 2010. For each share of CPA^®:14 stock owned, each CPA^®:14 shareholder received a $1.00 per share special cash dividend and a choice of either (i) $10.50 in cash or (ii) 1.1932 shares of CPA^®:16 — Global. The merger consideration of $954.5 million was paid by CPA^®:16 — Global, including payment of $444.0 million to liquidating shareholders and issuing 57,365,145 shares of common stock with a fair value of $510.5 million on the date of closing to shareholders of CPA^®:14 in exchange for 48,076,723 shares of CPA^®:14 common stock. The $1.00 per share special cash distribution, totaling $90.4 million in the aggregate, was funded from the proceeds of the CPA^®:14 Asset Sales. In connection with the CPA^®:14/16 Merger, we agreed to purchase a sufficient number of shares of CPA^®:16 — Global common stock from CPA^®:16 — Global to enable it to pay the merger consideration if the cash on hand and available to CPA^®:14 and CPA^®:16 — Global, including the proceeds of the CPA^®:14 Asset Sales and a new $320.0 million senior credit facility of CPA^®:16 — Global, were not sufficient. Accordingly, we purchased 13,750,000 shares of CPA^®:16 — Global on May 2, 2011 for $121.0 million, which we funded, along with other obligations, with cash on hand and $121.4 million drawn on our unsecured line of credit.

Notes to Consolidated Financial Statements

Upon consummation of the CPA^®:14/16 Merger, we earned revenues of $31.2 million in connection with the termination of the advisory agreement with CPA^®:14 and $21.3 million of subordinated disposition revenues. We elected to receive our termination revenue in 2,717,138 shares of CPA^®:14, which were exchanged into 3,242,089 shares of CPA^®:16 — Global. In addition, we received $11.1 million in cash as a result of the $1.00 per share special cash distribution paid by CPA^®:14 to its shareholders. Upon closing of the CPA^®:14/16 Merger, we received 13,260,091 shares of common stock of CPA^®:16 — Global in respect of our shares of CPA^®:14.

Carey Asset Management Corp. (“CAM”), our subsidiary that acts as the advisor to the CPA^® REITs, waived any acquisition fees payable by CPA^®:16 — Global under its advisory agreement with CAM in respect of the properties acquired in the CPA^®:14/16 Merger and also waived any disposition fees that may subsequently be payable by CPA^®:16 — Global upon a sale of such assets. As the advisor to CPA^®:14, CAM earned acquisition fees related to those properties acquired by CPA^®:14 and disposition fees on those properties upon the liquidation of CPA^®:14 and, as a result, CAM and CPA^®:16 — Global agreed that CAM should not receive fees upon the acquisition or disposition of the same properties by CPA^®:16 — Global.

CPA^®:16 — Global UPREIT Reorganization

Immediately following the CPA^®:14/16 Merger on May 2, 2011, CPA^®:16 — Global completed an internal reorganization whereby CPA^®:16 — Global formed an umbrella partnership real estate investment trust, or UPREIT which was approved by CPA^®:16 — Global shareholders in connection with the CPA^®:14/16 Merger. In connection with the formation of the UPREIT, CPA^®:16 — Global contributed substantially all of its assets and liabilities to an “Operating Partnership” in exchange for a managing member interest and units of membership interest in the Operating Partnership, which together represent a 99.985% capital interest of the “Managing Member” (representing the CPA^®:16 — Global shareholders’ interest). Through our subsidiary, Carey REIT III, Inc. (the “Special General Partner”), we acquired a special membership interest (“Special Interest”) of 0.015% in the Operating Partnership for $0.3 million, entitling us to receive certain profit allocations and distributions of cash.

As consideration for the Special Interest, we amended our advisory agreement with CPA^®:16 — Global to give effect to this UPREIT reorganization and to reflect a revised fee structure whereby (i) our asset management fees are prospectively reduced to 0.5% from 1.0% of the asset value of a property under management, (ii) the former 15% subordinated incentive fee and termination fees have been eliminated and replaced by (iii) a 10% Special General Partner Available Cash Distribution and (iv) the 15% Final Distribution, each defined below. The sum of the new 0.5% asset management fee and the Available Cash Distribution is expected to be lower than the original 1.0% asset management fee; accordingly, the Available Cash Distribution is contractually limited to 0.5% of the value of CPA^®:16 — Global’s assets under management. However, as a result of income tax savings, the amount of after-tax cash that we expect to receive pursuant to this revised structure is anticipated to be greater than the amount we received under the previous arrangement. The fee structure related to initial acquisition fees, subordinated acquisition fees and subordinated disposition fees for CPA^®:16 — Global remains unchanged.

As Special General Partner, we are entitled to 10% of the Operating Partnership’s available cash (the “Available Cash Distribution”), which is defined as the Operating Partnership’s cash generated from operations, excluding capital proceeds, as reduced by operating expenses and debt service, excluding prepayments and balloon payments. We may elect to receive our Available Cash Distribution in shares of CPA^®:16 — Global’s common stock. In the event of a capital transaction such as a sale, exchange, disposition or refinancing of CPA^®:16 — Global’s assets, we are also entitled to receive a “Final Distribution” equal to 15% of residual returns after giving effect to a 100% return of the Managing Member’s invested capital plus a 6% priority return.

We recorded the Special Interest as an equity investment at its fair value of $28.3 million and an equal amount of deferred revenues (Note 6), which is net of approximately $6.0 million related to our ownership interest of approximately 17.5% in CPA^®:16 — Global that was eliminated in our consolidated financial statements. We will recognize the deferred revenue earned from our Special Interest in the Operating Partnership into earnings on a straight-line basis over the expected period of performance, which is currently estimated at three years based on the stated intended life of CPA^®:16 — Global as described in its offering documents. The amount of deferred revenue recognized during the three and nine months ended September 30, 2011 was $2.1 million and $3.5 million, respectively, which is net of $0.2 million and $0.4 million in amortization, respectively, associated with the basis differential generated by the Special Interest in the Operating Partnership and our underlying claim on the net assets of CPA^®:16 — Global. We determined the fair value of the Special Interest based upon a discounted cash flow model, which included assumptions related to estimated future cash flows of CPA^®:16 — Global and the estimated duration of the fee stream of three years.

Other

We are the general partner in a limited partnership (which we consolidate for financial statement purposes) that leases our home office space and participates in an agreement with certain affiliates, including the REITs, for the purpose of leasing office space used for the administration of our operations and the operations of our affiliates and for sharing the associated costs. This limited partnership does

Notes to Consolidated Financial Statements

not have any significant assets, liabilities or operations other than its interest in the office lease. The average estimated minimum lease payments for the office lease, inclusive of noncontrolling interests, at September 30, 2011 approximates $3.0 million annually through 2016. The table below presents income from noncontrolling interest partners related to reimbursements from these affiliates (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Income from noncontrolling interest partners		$	680			$	564			$	1,876			$	1,778

The following table presents deferred rent due to affiliates related to this limited partnership, which are included in Accounts payable, accrued expenses and other liabilities in the consolidated balance sheets (in thousands):

		September 30, 2011				December 31, 2010
Deferred rent due to affiliates		$	819			$	854

We own interests in entities ranging from 5% to 95%, as well as jointly-controlled tenant-in-common interests in properties, with the remaining interests generally held by affiliates, and own common stock in each of the REITs. We consolidate certain of these investments and account for the remainder under the equity method of accounting.

One of our directors and officers is the sole shareholder of Livho, Inc. (“Livho”), a subsidiary that operates a hotel investment. We consolidate the accounts of Livho in our consolidated financial statements because it is a variable interest entity and we are its primary beneficiary.

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

An employee owns a redeemable noncontrolling interest (Note 12) in W. P. Carey International LLC (“WPCI”), a subsidiary company that structures net lease transactions on behalf of the CPA^® REITs outside of the U.S., as well as certain related entities.

In February 2011, we loaned $90.0 million at an annual interest rate of 1.15% to CPA^®:17 — Global, which was repaid on April 8, 2011, its maturity date. In May 2011, we loaned $4.0 million at an annual interest rate equal to the 30-day London inter-bank offered rate (“LIBOR”) plus 2.5% to CWI, which was repaid on June 6, 2011, its maturity date. In September 2011, we loaned $2.0 million at an annual interest rate equal to LIBOR plus 0.9% to CWI, of which $1.0 million was repaid on September 13, 2011 and the remaining $1.0 million was repaid on October 6, 2011. In connection with these loans, we received interest income from CPA^®:17 — Global and CWI totaling less than $0.1 million and $0.2 million during the three and nine months ended September 30, 2011, respectively.

Notes to Consolidated Financial Statements

Note 4. Net Investments in Properties

Real Estate

Real estate, which consists of land and buildings leased to others, at cost, and which are subject to operating leases, is summarized as follows (in thousands):

		September 30, 2011				December 31, 2010
Land		$	111,793			$	111,660
Buildings			519,703				448,932
Less: Accumulated depreciation			(115,319	)			(108,032	)
		$	516,177			$	452,560

Operating Real Estate

Operating real estate, which consists primarily of our investments in 21 self-storage properties through Carey Storage and our Livho hotel subsidiary, at cost, is summarized as follows (in thousands):

		September 30, 2011				December 31, 2010
Land		$	24,030			$	24,030
Buildings			85,794				85,821
Less: Accumulated depreciation			(16,406	)			(14,280	)
		$	93,418			$	95,571

Real Estate Acquired

As discussed in Note 3, in connection with the CPA^®:14/16 Merger in May 2011, we purchased the remaining interests in certain properties, in which we already had a joint interest, from CPA^®:14 as part of the CPA^®:14 Asset Sales. These three properties, which were leased to Checkfree, Federal Express and Amylin, had an aggregate fair value of $174.8 million at the date of acquisition. Prior to this purchase, we had consolidated the Checkfree property and accounted for the Federal Express and Amylin properties under the equity method. As part of the transaction, we assumed the related non-recourse mortgages on the Federal Express and Amylin properties. These two mortgages and the mortgage on the Checkfree property had an aggregate fair value of $117.1 million at the date of acquisition (Note 9). Amounts provided are the total amounts attributable to the venture properties and do not represent the proportionate share that we purchased. Upon acquiring the remaining interests in the properties leased to Federal Express and Amylin, we owned 100% of these entities and accounted for these acquisitions as step acquisitions utilizing the purchase method of accounting. Due to the change in control of the ventures that occurred, and in accordance with ASC 810 involving a step acquisition where control is obtained and there is a previously held equity interest, we recorded an aggregate gain of approximately $27.9 million related to the difference between our respective carrying values and the fair values of our previously held interests on the acquisition date. Subsequent to our acquisition, we consolidate all of these wholly-owned properties. The consolidation of these properties resulted in an increase of $90.2 million and $40.8 million to Real estate, net and net lease intangibles, respectively, in May 2011.

Impairment Charges

We periodically assess whether there are any indicators that the value of our real estate investments may be impaired or that their carrying value may not be recoverable. For investments in real estate in which an impairment indicator is identified, we follow a two-step process to determine whether the investment is impaired and to determine the amount of the charge. First, we compare the carrying value of the real estate to the future net undiscounted cash flow that we expect the real estate will generate, including any estimated proceeds from the eventual sale of the real estate. If this amount is less than the carrying value, the real estate is considered to be impaired, and we then measure the loss as the excess of the carrying value of the real estate over the estimated fair value of the real estate, which is primarily determined using market information such as recent comparable sales or broker quotes. If relevant market information is not available or is not deemed appropriate, we perform a future net cash flow analysis discounted for inherent risk associated with each investment.

During the third quarter of 2011, we recognized an impairment charge of $4.9 million to reduce the carrying value of a multi-tenant property to its estimated fair value, which reflected the estimated selling price. As of the date of this report, this property is being marketed for lease or sale as a result of the tenants vacating the property.

Notes to Consolidated Financial Statements

Other

In connection with our prior acquisitions of properties, we have recorded net lease intangibles of $77.1 million, which are being amortized over periods ranging from one year to 40 years. In-place lease, tenant relationship and above-market rent intangibles are included in Intangible assets and goodwill, net in the consolidated financial statements. Below-market rent intangibles are included in Accounts payable, accrued expenses and other liabilities in the consolidated financial statements. Amortization of below-market and above-market rent intangibles is recorded as an adjustment to Lease revenues, while amortization of in-place lease and tenant relationship intangibles is included in Depreciation and amortization. Net amortization of intangibles, including the effect of foreign currency translation, was $1.3 million and $1.2 million for the three months ended September 30, 2011 and 2010, respectively, and $3.5 million and $4.3 million for the nine months ended September 30, 2011 and 2010, respectively.

Note 5. Finance Receivables

Assets representing rights to receive money on demand or at fixed or determinable dates are referred to as finance receivables. Our finance receivable portfolios consist of our Net investments in direct financing leases and deferred acquisition fees. Operating leases are not included in finance receivables as such amounts are not recognized as an asset in the consolidated balance sheets.

Deferred Acquisition Fees Receivable

As described in Note 3, we earn revenue in connection with structuring and negotiating investments and related mortgage financing for the REITs. A portion of this revenue is due in equal annual installments ranging from three to four years, provided the relevant CPA^® REIT meets its performance criterion. Unpaid deferred installments, including accrued interest, from all of the CPA^® REITs were included in Due from affiliates in the consolidated financial statements.

Credit Quality of Finance Receivables

We generally seek investments in facilities that we believe are critical to a tenant’s business and that we believe have a low risk of tenant defaults. At September 30, 2011 and December 31, 2010, none of the balances of our finance receivables were past due and we had not established any allowances for credit losses. Additionally, there have been no modifications of finance receivables. We evaluate the credit quality of our tenant receivables utilizing an internal 5-point credit rating scale, with 1 representing the highest credit quality and 5 representing the lowest. The credit quality evaluation of our tenant receivables was last updated in the third quarter of 2011. We believe the credit quality of our deferred acquisition fees receivable falls under category 1, as all of the CPA^® REITs are expected to have the available cash to make such payments.

A summary of our finance receivables by internal credit quality rating for the periods presented is as follows (dollars in thousands):

		Number of Tenants at								Net Investments in Direct Financing Leases at
Internal Credit Quality Indicator		September 30, 2011				December 31, 2010				September 30, 2011				December 31, 2010
1			8				9			$	44,877			$	49,533
2			6				5				28,447				24,447
3			1				—				2,562				—
4			—				1				—				2,570
5			—				—				—				—
										$	75,886			$	76,550

At both September 30, 2011 and December 31, 2010, Other assets, net included $0.3 million of accounts receivable related to amounts billed under these direct financing leases.

Note 6. Equity Investments in Real Estate and the REITs

We own interests in the REITs and unconsolidated real estate investments. We account for our interests in these investments under the equity method of accounting (i.e., at cost, increased or decreased by our share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting, such as basis differences from other-than-temporary impairments). These investments are summarized below.

Notes to Consolidated Financial Statements

REITs

We own interests in the REITs and account for these interests under the equity method because, as their advisor and through our ownership in their common shares, we do not exert control over, but have the ability to exercise significant influence on, the REITs. Shares of the REITs are publicly registered and the REITs file periodic reports with the SEC, but the shares are not listed on any exchange and are not actively traded. We earn asset management and performance revenue from the REITs and have elected, in certain cases, to receive a portion of this revenue in the form of restricted common stock of the REITs rather than cash.

The following table sets forth certain information about our investments in the REITs (dollars in thousands):

		% of Outstanding Shares at								Carrying Amount of Investment at
Fund		September 30, 2011				December 31, 2010				September 30, 2011(a)				December 31, 2010(a)
CPA®:14 (b)			0.0	%			9.2	%		$	—			$	87,209
CPA®:15			7.6	%			7.1	%			91,932				87,008
CPA®:16 — Global (c)			17.7	%			5.6	%			340,563				62,682
CPA®:17 — Global			0.8	%			0.6	%			17,081				8,156
CWI (d)			0.6	%			100.0	%			127				—
										$	449,703			$	245,055

Notes to Consolidated Financial Statements

The following tables present combined summarized financial information for the REITs. Amounts provided are expected total amounts attributable to the REITs and do not represent our proportionate share (in thousands):

		At September 30, 2011				At December 31, 2010
Assets		$	9,265,711			$	8,533,899
Liabilities			(5,011,581	)			(4,632,709	)
Shareholders’ equity		$	4,254,130			$	3,901,190

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Revenues		$	206,380			$	193,116			$	612,383			$	571,019
Expenses (a)			(143,196	)			(114,869	)			(437,119	)			(410,950	)
Impairment charges (b)			(14,341	)			(16,557	)			(48,955	)			(27,698	)
Net income		$	48,843			$	61,690			$	126,309			$	132,371

As disclosed in its financial statements, CPA^®:16 — Global had not completed the initial accounting for the May 2, 2011 CPA^®:14/16 Merger by the end of the reporting period in which the business combination had occurred. During the third quarter of 2011, CPA^®:16 — Global identified certain measurement period adjustments that impacted its provisional acquisition accounting (the “CPA^®:16 — Global Measurement Period Adjustments”). Our proportionate share of the CPA^®:16 — Global Measurement Period Adjustments was approximately $2.6 million, which is reflected in the nine months ended September 30, 2011. In accordance with ASC 805-10-25, we have not recorded our proportionate share of the CPA^®:16 — Global Measurement Period Adjustments during the three months ended September 30, 2011. Rather, such amounts will be reflected in all future financial statements which include the three months ended June 30, 2011.

We recognized income from our equity investments in the REITs of $6.0 million and $1.9 million for the three months ended September 30, 2011 and 2010, respectively, and $15.9 million and $7.0 million for the nine months ended September 30, 2011 and 2010, respectively. In addition, we received distributions of available cash from the CPA^®:16 — Global and CPA^®:17 — Global operating partnerships totaling $4.5 million and $1.7 million during the three months ended September 30, 2011 and 2010, respectively, and $8.3 million and $3.4 million for the nine months ended September 30, 2011 and 2010, respectively, which we recorded as Income from equity investments in the REITs within the Investment Management segment. We also earned deferred revenue from our Special Interest in the Operating Partnership of CPA^®:16 — Global of $2.1 million and $3.5 million during the three and nine months ended September 30, 2011, respectively. Our proportionate share of income or loss recognized from our equity investments in the REITs is impacted by several factors, including impairment charges recorded by the REITs.

Interests in Unconsolidated Real Estate Investments

We own interests in single-tenant net leased properties that are leased to corporations through noncontrolling interests (i) in partnerships and limited liability companies that we do not control but over which we exercise significant influence or (ii) as tenants-in-common subject to common control. Generally, the underlying investments are jointly-owned with affiliates. We account for these investments under the equity method of accounting.

Notes to Consolidated Financial Statements

The following table sets forth our ownership interests in our equity investments in real estate and their respective carrying values. The carrying value of these ventures is affected by the timing and nature of distributions (dollars in thousands):

		Ownership Interest				Carrying Value at
Lessee		at September 30, 2011				September 30, 2011				December 31, 2010
Schuler A.G. (a) (b)			33	%		$	22,601			$	20,493
Carrefour France, SAS (a)			46	%			20,446				18,274
The New York Times Company			18	%			19,392				20,191
U.S. Airways Group, Inc. (b)			75	%			7,505				7,934
Medica — France, S.A. (a) (c)			46	%			4,490				5,232
Hologic, Inc. (b)			36	%			4,399				4,383
Childtime Childcare, Inc. (d)			34	%			4,278				1,862
Consolidated Systems, Inc. (b)			60	%			3,507				3,388
Hellweg Die Profi-Baumarkte GmbH & Co. KG (a)			5	%			1,063				1,086
Symphony IRI Group, Inc. (e)			0	%			—				3,375
Federal Express Corporation (f) (g) (h)			100	%			—				(4,272	)
Amylin Pharmaceuticals, Inc. (g) (h) (i)			100	%			—				(4,707	)
						$	87,681			$	77,239

The following tables present combined summarized financial information of our venture properties. Amounts provided are the total amounts attributable to the venture properties and do not represent our proportionate share (in thousands):

		September 30, 2011				December 31, 2010
Assets		$	1,041,239			$	1,151,859
Liabilities			(715,365	)			(818,238	)
Partners’/members’ equity		$	325,874			$	333,621

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Revenues		$	28,463			$	35,086			$	89,381			$	111,144
Expenses			(16,386	)			(19,292	)			(57,125	)			(58,949	)
Impairment charge(a)			—				—				(8,602	)			—
Net income		$	12,077			$	15,794			$	23,654			$	52,195

Notes to Consolidated Financial Statements

We recognized income from equity investments in real estate of $3.4 million and $2.5 million for the three months ended September 30, 2011 and 2010, respectively, and $9.6 million and $12.4 million for the nine months ended September 30, 2011 and 2010, respectively. Income from equity investments in real estate represents our proportionate share of the income or losses of these ventures as well as certain depreciation and amortization adjustments related to other-than-temporary impairment charges.

Note 7. Fair Value Measurements

Under current authoritative accounting guidance for fair value measurements, the fair value of an asset is defined as the exit price, which is the amount that would either be received when an asset is sold or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a three-tier fair value hierarchy based on the inputs used in measuring fair value. These tiers are: Level 1, for which quoted market prices for identical instruments are available in active markets, such as money market funds, equity securities and U.S. Treasury securities; Level 2, for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument, such as certain derivative instruments including interest rate caps and swaps; and Level 3, for which little or no market data exists, therefore requiring us to develop our own assumptions, such as certain securities.

Items Measured at Fair Value on a Recurring Basis

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Money Market Funds — Our money market funds consisted of government securities and U.S. Treasury bills. These funds were classified as Level 1 as we used quoted prices from active markets to determine their fair values.

Derivative Assets and Liabilities — Our derivative assets and liabilities are primarily comprised of interest rate swaps or caps. These derivative instruments were measured at fair value using readily observable market inputs, such as quotations on interest rates. These derivative instruments were classified as Level 2 because they are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.

Other Securities — Our other securities are primarily comprised of our investment in an India growth fund and our interest in a commercial mortgage loan securitization. These funds are not traded in an active market. We estimated the fair value of these securities using internal valuation models that incorporate market inputs and our own assumptions about future cash flows. We classified these assets as Level 3.

Redeemable Noncontrolling Interest — We account for our noncontrolling interest in WPCI as a redeemable noncontrolling interest. We determined the valuation of the redeemable noncontrolling interest using widely accepted valuation techniques, including expected discounted cash flows of the investment as well as the income capitalization approach, which considers prevailing market capitalization rates. We classified this liability as Level 3.

Notes to Consolidated Financial Statements

The following tables set forth our assets and liabilities that were accounted for at fair value on a recurring basis. Assets and liabilities presented below exclude assets and liabilities owned by unconsolidated ventures (in thousands):

						Fair Value Measurements at September 30, 2011 Using:
						Quoted Prices in
						Active Markets for				Significant Other				Unobservable
						Identical Assets				Observable Inputs				Inputs
Description		Total				(Level 1)				(Level 2)				(Level 3)
Assets:
Money market funds		$	35			$	35			$	—			$	—
Other securities			1,599				—				—				1,599
Total		$	1,634			$	35			$	—			$	1,599
Liabilities:
Derivative liabilities		$	3,846			$	—			$	3,846			$	—
Redeemable noncontrolling interest			6,631				—				—				6,631
Total		$	10,477			$	—			$	3,846			$	6,631

						Fair Value Measurements at December 31, 2010 Using:
						Quoted Prices in
						Active Markets for				Significant Other				Unobservable
						Identical Assets				Observable Inputs				Inputs
Description		Total				(Level 1)				(Level 2)				(Level 3)
Assets:
Money market funds		$	37,154			$	37,154			$	—			$	—
Other securities			1,726				—				—				1,726
Derivative assets			312				—				312				—
Total		$	39,192			$	37,154			$	312			$	1,726
Liabilities:
Derivative liabilities		$	969			$	—			$	969			$	—
Redeemable noncontrolling interest			7,546				—				—				7,546
Total		$	8,515			$	—			$	969			$	7,546

Notes to Consolidated Financial Statements

		Fair Value Measurements Using
		Significant Unobservable Inputs (Level 3 Only)
		Three Months Ended September 30, 2011								Three Months Ended September 30, 2010
		Assets				Liabilities				Assets				Liabilities
						Redeemable								Redeemable
		Other				Noncontrolling				Other				Noncontrolling
		Securities				Interest				Securities				Interest
Beginning balance		$	1,601			$	6,792			$	1,717			$	7,119
Total gains or losses (realized and unrealized):
Included in earnings			3				637				2				106
Included in other comprehensive (loss) income			(5	)			(8	)			4				10
Distributions paid			—				(199	)			—				(200	)
Redemption value adjustment			—				(591	)			—				(148	)
Ending balance		$	1,599			$	6,631			$	1,723			$	6,887
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date		$	3			$	—			$	2			$	—

		Fair Value Measurements Using
		Significant Unobservable Inputs (Level 3 Only)
		Nine Months Ended September 30, 2011								Nine Months Ended September 30, 2010
		Assets				Liabilities				Assets				Liabilities
						Redeemable								Redeemable
		Other				Noncontrolling				Other				Noncontrolling
		Securities				Interest				Securities				Interest
Beginning balance		$	1,726			$	7,546			$	1,687			$	7,692
Total gains or losses (realized and unrealized):
Included in earnings			1				1,241				2				698
Included in other comprehensive (loss) income			(8	)			1				11				(7	)
Purchases			53				—				23				—
Settlements			(173	)			—				—				—
Distributions paid			—				(875	)			—				(810	)
Redemption value adjustment			—				(1,282	)			—				(686	)
Ending balance		$	1,599			$	6,631			$	1,723			$	6,887
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date		$	1			$	—			$	2			$	—

We did not have any transfers into or out of Level 1, Level 2 and Level 3 measurements during the three and nine months ended September 30, 2011 and 2010. Gains and losses (realized and unrealized) included in earnings for other securities are reported in Other income and (expenses) in the consolidated financial statements.

Notes to Consolidated Financial Statements

Our other financial instruments had the following carrying values and fair values as of the dates shown (in thousands):

		At September 30, 2011								At December 31, 2010
		Carrying Value				Fair Value				Carrying Value				Fair Value
Deferred acquisition fees receivable		$	31,022			$	30,414			$	31,419			$	32,485
Non-recourse debt			335,354				327,937				255,232				255,460
Line of credit			253,160				250,800				141,750				140,600

We determined the estimated fair value of our debt instruments using a discounted cash flow model with rates that take into account the credit of the tenants and interest rate risk. We estimated that our other financial assets and liabilities (excluding net investments in direct financing leases) had fair values that approximated their carrying values at both September 30, 2011 and December 31, 2010.

Items Measured at Fair Value on a Non-Recurring Basis

We perform an assessment, when required, of the value of certain of our real estate investments in accordance with current authoritative accounting guidance. As part of that assessment, we determine the valuation of these assets using widely accepted valuation techniques, including expected discounted cash flows or an income capitalization approach, which considers prevailing market capitalization rates. We review each investment based on the highest and best use of the investment and market participation assumptions. We determined that the significant inputs used to value these investments fall within Level 3. As a result of our assessments, we calculated impairment charges, which were based on market conditions and assumptions that existed at the time. The valuation of real estate is subject to significant judgment and actual results may differ materially if market conditions or the underlying assumptions change.

The following table presents information about our other assets that were measured on a fair value basis for the periods presented. All of the impairment charges were measured using unobservable inputs (Level 3) and were recorded based on market conditions and assumptions that existed at the time (in thousands):

		Three Months Ended September 30, 2011								Three Months Ended September 30, 2010
		Total Fair Value				Total Impairment				Total Fair Value				Total Impairment
		Measurements				Charges				Measurements				Charges
Impairment Charges From Continuing Operations:
Real estate		$	4,473			$	4,934			$	—			$	—
Equity investments in real estate			—				—				22,846				1,394
			4,473				4,934				22,846				1,394
Impairment Charges From Discontinued Operations:
Real estate			—				—				521				481
		$	4,473			$	4,934			$	23,367			$	1,875

		Nine Months Ended September 30, 2011								Nine Months Ended September 30, 2010
		Total Fair Value				Total Impairment				Total Fair Value				Total Impairment
		Measurements				Charges				Measurements				Charges
Impairment Charges From Continuing Operations:
Real estate		$	4,473			$	4,934			$	—			$	—
Equity investments in real estate			1,554				206				22,846				1,394
			6,027				5,140				22,846				1,394
Impairment Charges From Discontinued Operations:
Real estate			350				41				6,923				8,618
		$	6,377			$	5,181			$	29,769			$	10,012