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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to __________
Commission File Number: 001-13779
W. P. Carey Inc.
(Exact name of registrant as specified in its charter)
Maryland45-4549771
(State of incorporation)(I.R.S. Employer Identification No.)
One Manhattan West, 395 9th Avenue, 58th Floor
New York,New York10001
(Address of principal executive offices)(Zip Code)
 
Investor Relations (212) 492-8920
(212) 492-1100
(Registrant’s telephone numbers, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 Par ValueWPCNew York Stock Exchange
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 No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Registrant has 177,965,296 shares of common stock, $0.001 par value, outstanding at April 23, 2021.



INDEX
Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
PART II — OTHER INFORMATION
Item 6. Exhibits


W. P. Carey 3/31/2021 10-Q 1



Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”), including Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of Part I of this Report, contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements include, but are not limited to, statements regarding: our corporate strategy and estimated or future economic performance and results, including our expectations surrounding the impact of the novel coronavirus (“COVID-19”) pandemic on our business, financial condition, liquidity, results of operations, and prospects; our future capital expenditure and leverage levels, debt service obligations, and plans to fund our liquidity needs; prospective statements regarding our access to the capital markets, including our “at-the-market” program (“ATM Program”) and settlement of our forward equity offering; the outlook for the investment programs that we manage, including possible liquidity events for those programs; statements that we make regarding our ability to remain qualified for taxation as a real estate investment trust (“REIT”); and the impact of recently issued accounting pronouncements and regulatory activity.

These statements are based on the current expectations of our management. It is important to note that our actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Other unknown or unpredictable risks or uncertainties, like the risks related to the effects of pandemics and global outbreaks of contagious diseases (such as the current COVID-19 pandemic) or the fear of such outbreaks, could also have material adverse effects on our business, financial condition, liquidity, results of operations, and prospects. You should exercise caution in relying on forward-looking statements as they involve known and unknown risks, uncertainties, and other factors that may materially affect our future results, performance, achievements, or transactions. Information on factors that could impact actual results and cause them to differ from what is anticipated in the forward-looking statements contained herein is included in this Report, as well as in our other filings with the Securities and Exchange Commission (“SEC”), including but not limited to those described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on February 12, 2021 (the “2020 Annual Report”). Moreover, because we operate in a very competitive and rapidly changing environment, new risks are likely to emerge from time to time. Given these risks and uncertainties, potential investors are cautioned not to place undue reliance on these forward-looking statements as a prediction of future results, which speak only as of the date of this Report, unless noted otherwise. Except as required by federal securities laws and the rules and regulations of the SEC, we do not undertake to revise or update any forward-looking statements.

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


W. P. Carey 3/31/2021 10-Q 2



PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

W. P. CAREY INC. 
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share amounts)
March 31, 2021December 31, 2020
Assets
Investments in real estate:
Land, buildings and improvements$10,930,595 $10,939,619 
Net investments in direct financing leases698,852 711,974 
In-place lease intangible assets and other2,295,863 2,301,174 
Above-market rent intangible assets868,242 881,159 
Investments in real estate14,793,552 14,833,926 
Accumulated depreciation and amortization(2,572,091)(2,490,087)
Assets held for sale, net14,983 18,590 
Net investments in real estate12,236,444 12,362,429 
Equity investments in the Managed Programs and real estate269,448 283,446 
Cash and cash equivalents229,153 248,662 
Due from affiliates4,027 26,257 
Other assets, net903,927 876,024 
Goodwill905,701 910,818 
Total assets (a)
$14,548,700 $14,707,636 
Liabilities and Equity
Debt:
Senior unsecured notes, net$5,451,520 $5,146,192 
Unsecured term loans, net318,440 321,971 
Unsecured revolving credit facility21,751 82,281 
Non-recourse mortgages, net728,663 1,145,554 
Debt, net6,520,374 6,695,998 
Accounts payable, accrued expenses and other liabilities618,300 603,663 
Below-market rent and other intangible liabilities, net192,029 197,248 
Deferred income taxes138,973 145,844 
Dividends payable188,569 186,514 
Total liabilities (a)
7,658,245 7,829,267 
Commitments and contingencies (Note 11)
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued
  
Common stock, $0.001 par value, 450,000,000 shares authorized; 177,520,962 and 175,401,757 shares, respectively, issued and outstanding
178 175 
Additional paid-in capital9,061,143 8,925,365 
Distributions in excess of accumulated earnings(1,988,440)(1,850,935)
Deferred compensation obligation49,815 42,014 
Accumulated other comprehensive loss(233,889)(239,906)
Total stockholders’ equity6,888,807 6,876,713 
Noncontrolling interests1,648 1,656 
Total equity6,890,455 6,878,369 
Total liabilities and equity$14,548,700 $14,707,636 
__________
(a)See Note 2 for details related to variable interest entities (“VIEs”).

See Notes to Consolidated Financial Statements.

W. P. Carey 3/31/2021 10-Q 3



W. P. CAREY INC. 
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except share and per share amounts)
Three Months Ended March 31,
20212020
Revenues
Real Estate:
Lease revenues$301,765 $282,110 
Lease termination income and other2,227 6,509 
Operating property revenues2,179 5,967 
306,171 294,586 
Investment Management:
Asset management and other revenue3,954 10,383 
Reimbursable costs from affiliates1,041 4,030 
4,995 14,413 
311,166 308,999 
Operating Expenses
Depreciation and amortization110,322 116,194 
General and administrative22,083 20,745 
Reimbursable tenant costs15,758 13,175 
Property expenses, excluding reimbursable tenant costs10,883 10,075 
Stock-based compensation expense5,381 2,661 
Operating property expenses1,911 5,223 
Reimbursable costs from affiliates1,041 4,030 
Merger and other expenses(476)187 
Impairment charges 19,420 
Subadvisor fees 1,277 
166,903 192,987 
Other Income and Expenses
Interest expense(51,640)(52,540)
Other gains and (losses)(41,188)(9,815)
Equity in losses of equity method investments in the Managed Programs and real estate(9,733)(45,790)
Gain on sale of real estate, net9,372 11,751 
Non-operating income6,356 5,392 
(86,833)(91,002)
Income before income taxes57,430 25,010 
(Provision for) benefit from income taxes(5,789)41,692 
Net Income51,641 66,702 
Net income attributable to noncontrolling interests(7)(612)
Net Income Attributable to W. P. Carey$51,634 $66,090 
Basic Earnings Per Share$0.29 $0.38 
Diluted Earnings Per Share$0.29 $0.38 
Weighted-Average Shares Outstanding
Basic176,640,861 173,249,236 
Diluted176,965,510 173,460,053 

See Notes to Consolidated Financial Statements.

W. P. Carey 3/31/2021 10-Q 4



W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands) 
 Three Months Ended March 31,
 20212020
Net Income$51,641 $66,702 
Other Comprehensive Income (Loss)
Unrealized gain on derivative instruments19,919 12,849 
Foreign currency translation adjustments(13,902)(52,200)
6,017 (39,351)
Comprehensive Income57,658 27,351 
Amounts Attributable to Noncontrolling Interests
Net income(7)(612)
Comprehensive income attributable to noncontrolling interests(7)(612)
Comprehensive Income Attributable to W. P. Carey$57,651 $26,739 
 
See Notes to Consolidated Financial Statements.

W. P. Carey 3/31/2021 10-Q 5



W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
(in thousands, except share and per share amounts)
W. P. Carey Stockholders
DistributionsAccumulated
Common StockAdditionalin Excess ofDeferredOtherTotal
$0.001 Par ValuePaid-inAccumulatedCompensationComprehensiveW. P. CareyNoncontrolling
SharesAmountCapitalEarningsObligationLossStockholdersInterestsTotal
Balance at January 1, 2021175,401,757 $175 $8,925,365 $(1,850,935)$42,014 $(239,906)$6,876,713 $1,656 $6,878,369 
Shares issued under “at-the-market” offering, net2,020,115 3 140,284 140,287 140,287 
Shares issued upon delivery of vested restricted share awards99,090 — (3,744)(3,744)(3,744)
Deferral of vested shares, net(7,049)7,049 —  
Amortization of stock-based compensation expense5,381 5,381 5,381 
Distributions to noncontrolling interests— (15)(15)
Dividends declared ($1.048 per share)
906(189,139)752(187,481)(187,481)
Net income51,634 51,634 7 51,641 
Other comprehensive income:
Unrealized gain on derivative instruments19,919 19,919 19,919 
Foreign currency translation adjustments(13,902)(13,902)(13,902)
Balance at March 31, 2021177,520,962 $178 $9,061,143 $(1,988,440)$49,815 $(233,889)$6,888,807 $1,648 $6,890,455 

W. P. Carey Stockholders
DistributionsAccumulated
Common StockAdditionalin Excess ofDeferredOtherTotal
$0.001 Par ValuePaid-inAccumulatedCompensationComprehensiveW. P. CareyNoncontrolling
SharesAmountCapitalEarningsObligationLossStockholdersInterestsTotal
Balance at January 1, 2020172,278,242 $172 $8,717,535 $(1,557,374)$37,263 $(255,667)$6,941,929 $6,244 $6,948,173 
Cumulative-effect adjustment for the adoption of ASU 2016-13,
Financial Instruments — Credit Losses
(14,812)(14,812)(14,812)
Shares issued upon delivery of vested restricted share awards124,274 — (5,012)(5,012)(5,012)
Deferral of vested shares, net(4,131)4,131 —  
Amortization of stock-based compensation expense2,661 2,661 2,661 
Distributions to noncontrolling interests— (4,725)(4,725)
Dividends declared ($1.040 per share)
1,191 (182,648)897 (180,560)(180,560)
Net income66,090 66,090 612 66,702 
Other comprehensive loss:
Foreign currency translation adjustments(52,200)(52,200)(52,200)
Unrealized gain on derivative instruments12,849 12,849 12,849 
Balance at March 31, 2020172,402,516 $172 $8,712,244 $(1,688,744)$42,291 $(295,018)$6,770,945 $2,131 $6,773,076 

See Notes to Consolidated Financial Statements.



W. P. Carey 3/31/2021 10-Q 6



W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended March 31,
20212020
Cash Flows — Operating Activities
Net income$51,641 $66,702 
Adjustments to net income:
Depreciation and amortization, including intangible assets and deferred financing costs114,021 119,483 
Net realized and unrealized losses on extinguishment of debt, equity securities, foreign currency transactions, and other42,360 7,275 
Amortization of rent-related intangibles and deferred rental revenue13,118 12,794 
Straight-line rent adjustments
(10,184)(11,619)
Equity in losses of equity method investments in the Managed Programs and real estate9,733 45,790 
Gain on sale of real estate, net(9,372)(11,751)
Stock-based compensation expense5,381 2,661 
Asset management revenue received in shares of Managed REITs(3,138)(7,056)
Deferred income tax benefit(2,567)(41,487)
Distributions of earnings from equity method investments1,603 2,656 
Allowance for credit losses
(1,358)5,499 
Impairment charges 19,420 
Net changes in other operating assets and liabilities(22,794)(30,670)
Net Cash Provided by Operating Activities188,444 179,697 
Cash Flows — Investing Activities
Purchases of real estate (150,922)(197,626)
Proceeds from sales of real estate (Note 14)
88,037 105,154 
Funding for real estate construction, redevelopments, and other capital expenditures on real estate(29,270)(53,392)
Proceeds from repayment of short-term loans to affiliates21,048 20,973 
Other investing activities, net
(8,445)6,591 
Return of capital from equity method investments
3,086 3,496 
Proceeds from repayment of loans receivable 11,000 
Funding of short-term loans to affiliates (5,433)
Capital contributions to equity method investments (595)
Net Cash Used in Investing Activities(76,466)(109,832)
Cash Flows — Financing Activities
Proceeds from issuance of Senior Unsecured Notes1,038,391  
Redemption of Senior Unsecured Notes(617,442) 
Prepayments of mortgage principal(425,219) 
Repayments of Unsecured Revolving Credit Facility(407,975)(466,643)
Proceeds from Unsecured Revolving Credit Facility350,525 348,977 
Dividends paid(185,426)(180,274)
Proceeds from shares issued under ATM Program, net of selling costs140,220  
Scheduled payments of mortgage principal(14,203)(21,117)
Payment of financing costs(7,797)(9,993)
Payments for withholding taxes upon delivery of equity-based awards(3,744)(5,011)
Other financing activities, net(95)7,269 
Distributions paid to noncontrolling interests(15)(4,725)
Proceeds from Unsecured Term Loans 298,974 
Net Cash Used in Financing Activities(132,780)(32,543)
Change in Cash and Cash Equivalents and Restricted Cash During the Period
Effect of exchange rate changes on cash and cash equivalents and restricted cash(6,479)(4,550)
Net (decrease) increase in cash and cash equivalents and restricted cash(27,281)32,772 
Cash and cash equivalents and restricted cash, beginning of period311,779 251,518 
Cash and cash equivalents and restricted cash, end of period$284,498 $284,290 

See Notes to Consolidated Financial Statements.

W. P. Carey 3/31/2021 10-Q 7



W. P. CAREY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Business and Organization
 
W. P. Carey Inc. (“W. P. Carey”) is a REIT that, together with our consolidated subsidiaries, invests primarily in operationally-critical, single-tenant commercial real estate properties located in the United States and Northern and Western Europe on a long-term basis. We earn revenue principally by leasing the properties we own to companies on a triple-net lease basis, which generally requires each tenant to pay the costs associated with operating and maintaining the property.

Founded in 1973, our shares of common stock are listed on the New York Stock Exchange under the symbol “WPC.”

We elected to be taxed as a REIT under Section 856 through 860 of the Internal Revenue Code effective as of February 15, 2012. As a REIT, we are not subject to federal income taxes on income and gains that we distribute to our stockholders as long as we satisfy certain requirements, principally relating to the nature of our income and the level of our distributions, as well as other factors. We also own real property in jurisdictions outside the United States through foreign subsidiaries and are subject to income taxes on our pre-tax income earned from properties in such countries. Through our taxable REIT subsidiaries (“TRSs”), we also earn revenue as the advisor to certain non-traded investment programs. We hold all of our real estate assets attributable to our Real Estate segment under the REIT structure, while the activities conducted by our Investment Management segment subsidiaries have been organized under TRSs.

On April 13, 2020, two of the non-traded REITs that we advised, Carey Watermark Investors Incorporated (“CWI 1”) and Carey Watermark Investors 2 Incorporated (“CWI 2”) (together, the “CWI REITs”), merged in an all-stock transaction, with CWI 2 as the surviving entity (the “CWI 1 and CWI 2 Merger”). Following the close of the CWI 1 and CWI 2 Merger, our advisory agreements with CWI 1 and CWI 2 were terminated, CWI 2 was renamed Watermark Lodging Trust, Inc. (“WLT”), and we began to provide certain services to WLT pursuant to a transition services agreement. As a result, at March 31, 2021, we were the advisor to the following entities (Note 3):

Corporate Property Associates 18 – Global Incorporated (“CPA:18 – Global”), a publicly owned, non-traded REIT that primarily invests in commercial real estate properties; we refer to CPA:18 – Global together with the CWI REITs as the “Managed REITs” (as used throughout this Report, the term “Managed REITs” does not include CWI 1 and CWI 2 after April 13, 2020); and
Carey European Student Housing Fund I, L.P. (“CESH”), a limited partnership formed for the purpose of developing, owning, and operating student housing properties and similar investments in Europe; we refer to the Managed REITs and CESH collectively as the “Managed Programs.”

We no longer raise capital for new or existing funds, but currently expect to continue managing CPA:18 – Global and CESH through the end of their respective life cycles (Note 3).

Reportable Segments

Real Estate — Lease revenues from our real estate investments generate the vast majority of our earnings. We invest primarily in commercial properties located in the United States and Northern and Western Europe, which are leased to companies on a triple-net lease basis. At March 31, 2021, our owned portfolio was comprised of our full or partial ownership interests in 1,261 properties, totaling approximately 146 million square feet, substantially all of which were net leased to 351 tenants, with a weighted-average lease term of 10.6 years and an occupancy rate of 98.3%. In addition, at March 31, 2021, our portfolio was comprised of full or partial ownership interests in 20 operating properties, including 19 self-storage properties and one hotel, totaling approximately 1.4 million square feet.

Investment Management — Through our TRSs, we manage the real estate investment portfolios for the Managed Programs, for which we earn asset management revenue. We may earn incentive revenue and receive other compensation through our advisory agreements with certain of the Managed Programs, including in connection with providing liquidity events for CPA:18 – Global’s stockholders. In addition, we include equity income generated through our (i) ownership of shares and limited partnership units of the Managed Programs (Note 7) and (ii) special general partner interest in the operating partnership of CPA:18 – Global, through which we participate in its cash flows (Note 3), in our Investment Management segment.


W. P. Carey 3/31/2021 10-Q 8


Notes to Consolidated Financial Statements (Unaudited)
At March 31, 2021, the Managed Programs owned all or a portion of 52 net-leased properties (including certain properties in which we also have an ownership interest), totaling approximately 10.6 million square feet, substantially all of which were leased to 65 tenants, with an occupancy rate of approximately 98.7%. The Managed Programs also had interests in 69 operating properties (totaling approximately 5.6 million square feet in the aggregate) and ten active build-to-suit projects at the same date.

Note 2. Basis of Presentation

Basis of Presentation

Our interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a fair statement of our consolidated financial position, results of operations, and cash flows in accordance with generally accepted accounting principles in the United States (“GAAP”).

In the opinion of management, the unaudited financial information for the interim periods presented in this Report reflects all normal and recurring adjustments necessary for a fair statement of financial position, results of operations, and cash flows. Our interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2020, which are included in the 2020 Annual Report, as certain disclosures that would substantially duplicate those contained in the audited consolidated financial statements have not been included in this Report. Operating results for interim periods are not necessarily indicative of operating results for an entire year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.

Basis of Consolidation

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

When we obtain an economic interest in an entity, we evaluate the entity to determine if it should be deemed a VIE and, if so, whether we are the primary beneficiary and are therefore required to consolidate the entity. There have been no significant changes in our VIE policies from what was disclosed in the 2020 Annual Report.

At both March 31, 2021 and December 31, 2020, we considered 12 entities to be VIEs, of which we consolidated five, as we are considered the primary beneficiary. The following table presents a summary of selected financial data of the consolidated VIEs included in our consolidated balance sheets (in thousands):
March 31, 2021December 31, 2020
Land, buildings and improvements$423,333 $423,333 
Net investments in direct financing leases15,149 15,242 
In-place lease intangible assets and other41,987 41,997 
Above-market rent intangible assets26,720 26,720 
Accumulated depreciation and amortization(141,973)(137,827)
Total assets378,662 381,953 
Non-recourse mortgages, net$3,268 $3,508 
Below-market rent and other intangible liabilities, net21,855 22,283 
Total liabilities48,869 48,971 


W. P. Carey 3/31/2021 10-Q 9


Notes to Consolidated Financial Statements (Unaudited)
At both March 31, 2021 and December 31, 2020, our seven unconsolidated VIEs included our interests in five unconsolidated real estate investments, which we account for under the equity method of accounting, and two unconsolidated entities, which we accounted for at fair value. We do not consolidate these entities because we are not the primary beneficiary and the nature of our involvement in the activities of these entities allows us to exercise significant influence on, but does not give us power over, decisions that significantly affect the economic performance of these entities. As of March 31, 2021, and December 31, 2020, the net carrying amount of our investments in these entities was $438.8 million and $425.3 million, respectively, and our maximum exposure to loss in these entities was limited to our investments.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

Asset management revenue and structuring and other advisory revenue are now included within Asset management and other revenue in the consolidated statements of income.

We currently present Non-operating income on its own line item in the consolidated statements of income, which was previously included within Other gains and (losses). Non-operating income primarily consists of realized gains and losses on derivative instruments, dividends from equity securities, and interest income on our cash deposits and loans to affiliates.

Segment Allocation Changes

Beginning with the second quarter of 2020, general and administrative expenses attributed to our Investment Management segment are comprised of the incremental costs of providing services to the Managed Programs, which are fully reimbursed by those funds (resulting in no net expense for us). All other general and administrative expenses are attributed to our Real Estate segment. Previously, general and administrative expenses were allocated based on time incurred by our personnel for the Real Estate and Investment Management segments. In addition, beginning with the second quarter of 2020, stock-based compensation expense and corporate depreciation and amortization expense are fully recognized within our Real Estate segment. In light of the termination of the advisory agreements with CWI 1 and CWI 2 in connection with the WLT management internalization (Note 3), we now view essentially all assets, liabilities, and operational expenses as part of our Real Estate segment, other than incremental activities that are expected to wind down as we manage CPA:18 – Global and CESH through the end of their respective life cycles. These changes between the segments had no impact on our consolidated financial statements.

In addition, our investments in WLT, and income recognized from our investments in WLT, are included within our Real Estate segment, since we are not the advisor to that company. Previously, our investments in CWI 1 and CWI 2, and income recognized from our investments in CWI 1 and CWI 2, were included within our Investment Management segment (Note 3).

Revenue Recognition

There have been no significant changes in our policies for revenue from contracts under Accounting Standards Codification (“ASC”) 606 from what was disclosed in the 2020 Annual Report. ASC 606 does not apply to our lease revenues, which constitute a majority of our revenues, but primarily applies to revenues generated from our hotel operating properties and our Investment Management segment. Revenue from contracts for our Real Estate segment primarily represented operating property revenues of $0.7 million and $4.6 million for the three months ended March 31, 2021 and 2020, respectively (Note 15). Revenue from contracts under ASC 606 from our Investment Management segment is discussed in Note 3.

Lease revenue (including straight-line lease revenue) is only recognized when deemed probable of collection. Collectibility is assessed for each tenant receivable using various criteria including credit ratings (Note 5), guarantees, past collection issues, and the current economic and business environment affecting the tenant. If collectibility of the contractual rent stream is not deemed probable, revenue will only be recognized upon receipt of cash from the tenant.

For the three months ended March 31, 2021 as compared to the same period in 2020, lease revenues decreased by $2.9 million due to the impact of the COVID-19 pandemic (including uncollected rent, as well as property vacancies and lease amendments). In addition, for the three months ended March 31, 2021 as compared to the same period in 2020, for our remaining hotel operating property, revenues decreased by $2.0 million and expenses decreased by $1.5 million, due to the adverse effect of the COVID-19 pandemic on the hotel’s operations.


W. P. Carey 3/31/2021 10-Q 10


Notes to Consolidated Financial Statements (Unaudited)
Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the consolidated statements of cash flows (in thousands):
March 31, 2021December 31, 2020
Cash and cash equivalents
$229,153 $248,662 
Restricted cash (a)
55,345 63,117 
Total cash and cash equivalents and restricted cash
$284,498 $311,779 
__________
(a)Restricted cash is included within Other assets, net on our consolidated balance sheets.

Note 3. Agreements and Transactions with Related Parties
 
Advisory Agreements and Partnership Agreements with the Managed Programs
 
We currently have advisory agreements with CPA:18 – Global and CESH, pursuant to which we earn fees and are entitled to receive reimbursement for certain fund management expenses. Upon completion of the CWI 1 and CWI 2 Merger on April 13, 2020, as described below, our advisory agreements with CWI 1 and CWI 2 were terminated, and we no longer receive fees, reimbursements, or distributions of Available Cash from CWI 1 and CWI 2. We no longer raise capital for new or existing funds, but we currently expect to continue to manage CPA:18 – Global and CESH and earn various fees (as described below) through the end of their respective life cycles. We have partnership agreements with CPA:18 – Global and CESH, and under the partnership agreement with CPA:18 – Global, we are entitled to receive certain cash distributions from its operating partnership.

The following tables present a summary of revenue earned, reimbursable costs, and distributions of Available Cash received/accrued from the Managed Programs and WLT for the periods indicated, included in the consolidated financial statements (in thousands):
 Three Months Ended March 31,
 20212020
Asset management revenue (a) (b)
$3,954 $9,889 
Distributions of Available Cash (c)
1,539 1,916 
Reimbursable costs from affiliates (a)
1,041 4,030 
Interest income on deferred acquisition fees and loans to affiliates (d)
34 278 
Structuring and other advisory revenue (a) (b)
 494 
$6,568 $16,607 

Three Months Ended March 31,
20212020
CPA:18 – Global
$5,359 $5,912 
CWI 1 5,040 
CWI 2 4,200 
CESH1,101 1,455 
WLT (reimbursed transition services)108  
$6,568 $16,607 
__________
(a)Amounts represent revenues from contracts under ASC 606.
(b)Included within Asset management and other revenue in the consolidated statements of income.
(c)Included within Equity in losses of equity method investments in the Managed Programs and real estate in the consolidated statements of income.
(d)Included within Non-operating income in the consolidated statements of income.


W. P. Carey 3/31/2021 10-Q 11


Notes to Consolidated Financial Statements (Unaudited)
The following table presents a summary of amounts included in Due from affiliates in the consolidated financial statements (in thousands):
March 31, 2021December 31, 2020
Asset management fees receivable$1,587 $1,054 
Accounts receivable1,119 305 
Reimbursable costs995 1,760 
Deferred acquisition fees receivable, including accrued interest199 1,858 
Current acquisition fees receivable127 136 
Short-term loans to affiliates, including accrued interest 21,144 
$4,027 $26,257 

Asset Management Revenue
 
Under the advisory agreements with the Managed Programs, we earn asset management revenue for managing their investment portfolios. The following table presents a summary of our asset management fee arrangements with the remaining Managed Programs:
Managed ProgramRatePayableDescription
CPA:18 – Global
0.5% – 1.5%
In shares of its Class A common stock and/or cash, at the option of CPA:18 – Global; payable 50% in cash and 50% in shares of its Class A common stock for 2020 through March 31, 2020; payable in shares of its Class A common stock effective as of April 1, 2020
Rate depends on the type of investment and is based on the average market or average equity value, as applicable
CESH1.0%In cashBased on gross assets at fair value

Structuring and Other Advisory Revenue
 
Under the terms of the advisory agreements with the Managed Programs, we earn revenue for structuring and negotiating investments. For CPA:18 – Global and CESH, we may earn fees of 4.5% and 2.0%, respectively, of the total aggregate cost of the investments or commitments made.

Reimbursable Costs from Affiliates
 
The existing Managed Programs reimburse us in cash for certain personnel and overhead costs that we incur on their behalf. For CPA:18 – Global, such costs, excluding those related to our legal transactions group, our senior management, and our investments team, are charged to CPA:18 – Global based on the average of the trailing 12-month aggregate reported revenues of the Managed Programs and us, and personnel costs are capped at 1.0% of CPA:18 – Global’s pro rata lease revenues for both 2021 and 2020; for the legal transactions group, costs are charged according to a fee schedule. Following the closing of the CWI 1 and CWI 2 Merger on April 13, 2020, we began recording reimbursements from WLT pursuant to a transition services agreement (described below) based on actual expenses incurred. For CESH, reimbursements are based on actual expenses incurred.

Distributions of Available Cash
 
We are entitled to receive distributions of up to 10% of the Available Cash (as defined in CPA:18 – Global’s partnership agreement) from the operating partnership of CPA:18 – Global, payable quarterly in arrears.


W. P. Carey 3/31/2021 10-Q 12


Notes to Consolidated Financial Statements (Unaudited)
Back-End Fees and Interests in the Managed Programs

Under our advisory agreements with certain of the Managed Programs, we may also receive compensation in connection with providing liquidity events for their stockholders. For CPA:18 – Global, the timing and form of such a liquidity event is at the discretion of its board of directors. Therefore, there can be no assurance as to whether or when any of these back-end fees or interests will be realized. Such back-end fees or interests include or may include disposition fees, interests in disposition proceeds, and distributions related to ownership of shares or limited partnership units in the Managed Programs.

Other Transactions with Affiliates
 
CWI 1 and CWI 2 Merger

The CWI 1 and CWI 2 Merger closed on April 13, 2020 and is discussed in detail in the 2020 Annual Report. Subsequently, CWI 2 was renamed WLT, as described in Note 1.

In connection with the CWI 1 and CWI 2 Merger, we entered into an internalization agreement and a transition services agreement. Immediately following the closing of the CWI 1 and CWI 2 Merger, (i) the advisory agreements with each of CWI 1 and CWI 2 and each of their respective operating partnerships terminated, (ii) the subadvisory agreements with the subadvisors for CWI 1 and CWI 2 were terminated, and (iii) we provided certain transition services at cost to WLT generally for a period of 12 months from closing. As of the date of this Report, all services provided under the transition services agreement have terminated, except for certain information systems and data services. Our investments in common stock and preferred stock of WLT are disclosed in Note 7 and Note 8, respectively.

Loans to Affiliates

From time to time, our board of directors (“the Board”) has approved the making of secured and unsecured loans or lines of credit from us to certain of the Managed Programs, at our sole discretion, generally for the purpose of facilitating acquisitions or for working capital purposes.

The principal outstanding balance on our line of credit to CPA:18 – Global was $21.1 million as of December 31, 2020. CPA:18 – Global repaid the principal outstanding balance in full during the three months ended March 31, 2021.

Other

At March 31, 2021, we owned interests in nine jointly owned investments in real estate (including our investment in shares of common stock of WLT, as described in Note 7), with the remaining interests held by affiliates or third parties. We account for eight such investments under the equity method of accounting (Note 7) and consolidate the remaining investment. In addition, we owned stock of CPA:18 – Global and limited partnership units of CESH at that date. We accounted for our investment in CPA:18 – Global under the equity method of accounting and elected to account for our investment in CESH under the fair value option (Note 7).

Note 4. Land, Buildings and Improvements and Assets Held for Sale
 
Land, Buildings and Improvements — Operating Leases

Land and buildings leased to others, which are subject to operating leases, and real estate under construction, are summarized as follows (in thousands):
March 31, 2021December 31, 2020
Land$2,023,689 $2,012,688 
Buildings and improvements8,740,637 8,724,064 
Real estate under construction82,767 119,391 
Less: Accumulated depreciation(1,261,690)(1,206,912)
$9,585,403 $9,649,231 
 

W. P. Carey 3/31/2021 10-Q 13


Notes to Consolidated Financial Statements (Unaudited)
During the three months ended March 31, 2021, the U.S. dollar strengthened against the euro, as the end-of-period rate for the U.S. dollar in relation to the euro decreased by 4.4% to $1.1725 from $1.2271. As a result of this fluctuation in foreign currency exchange rates, the carrying value of our Land, buildings and improvements subject to operating leases decreased by $129.5 million from December 31, 2020 to March 31, 2021.

Depreciation expense, including the effect of foreign currency translation, on our buildings and improvements subject to operating leases was $67.0 million and $65.9 million for the three months ended March 31, 2021 and 2020, respectively.

During the three months ended March 31, 2021, we determined that the tenant/seller in the January 2020 acquisition of an industrial facility in Aurora, Oregon, would not be able to secure an easement on the property. As a result, the tenant/seller forfeited $5.0 million of the initial purchase price that we held back at the time of acquisition, the release of which was contingent on securing the easement. Since we previously accounted for this as a contingent liability and included the $5.0 million holdback within our capitalized real estate, we reduced the carrying value of Land, buildings and improvements subject to operating leases by this amount during the three months ended March 31, 2021 and removed the corresponding liability from Accounts payable, accrued expenses and other liabilities on our consolidated balance sheets.

Acquisitions of Real Estate

During the three months ended March 31, 2021, we entered into the following investments, which were deemed to be real estate asset acquisitions (dollars in thousands):
Property Location(s)Number of PropertiesDate of AcquisitionProperty TypeTotal Capitalized Costs
Grove City, Ohio, and Anderson, South Carolina22/2/2021Warehouse$19,129 
Various, New Jersey and Pennsylvania (a)
102/11/2021Retail; Office55,115 
Central Valley, California (b)
42/11/2021Warehouse; Land75,008 
16$149,252 
__________
(a)This acquisition is comprised of seven retail facilities and three office facilities.
(b)This acquisition is comprised of two warehouse facilities and two parcels of land.

The aggregate purchase price allocation for investments disclosed above is as follows (dollars in thousands):
Total Capitalized Costs
Land$27,466 
Buildings and improvements86,807 
Intangibles:
In-place lease (weighted-average expected life of 24.7 years)
34,979 
$149,252 

As of March 31, 2021, we committed to purchase a food production facility in Lawrence, Kansas, for approximately $27.3 million upon completion of construction of the property, which is expected to take place during the fourth quarter of 2021.

Real Estate Under Construction

During the three months ended March 31, 2021, we capitalized real estate under construction totaling $18.5 million. The number of construction projects in progress with balances included in real estate under construction was four and five as of March 31, 2021 and December 31, 2020, respectively. Aggregate unfunded commitments totaled approximately $79.8 million and $81.8 million as of March 31, 2021 and December 31, 2020, respectively.


W. P. Carey 3/31/2021 10-Q 14


Notes to Consolidated Financial Statements (Unaudited)
During the three months ended March 31, 2021, we completed the following construction projects (dollars in thousands):
Property Location(s)Primary Transaction TypeNumber of PropertiesDate of CompletionProperty Type
Total Capitalized Costs (a)
Mason, Ohio
Expansion11/15/2021Office$2,428 
Langen, Germany (a)
Build-to-suit12/4/2021Industrial52,719 
2$55,147 
__________
(a)Amount reflects the applicable exchange rate on the date of transaction.

As of March 31, 2021, we committed to fund a build-to-suit project for a research center in Wageningen, the Netherlands, for an aggregate amount of $29.5 million (based on the exchange rate of the euro at March 31, 2021). We currently expect to complete the project in the first quarter of 2022.

Lease Termination Income and Other

2021 — For the three months ended March 31, 2021, lease termination income and other on our consolidated statements of income included: (i) deferred maintenance income totaling $0.8 million from former tenants; (ii) interest income of $0.6 million from our loans receivable (Note 5); and (iii) income from a parking garage attached to one of our net-leased properties totaling $0.5 million.