W. P. Carey (WPC) 8-K 2011 FY Other Events

Exhibit 99.5

Item 8. Financial Statements and Supplementary Data.

The following financial statements and schedule are filed as a part of this Report:

	Page No.
Report of Independent Registered Public Accounting Firm		2
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Comprehensive Income		5
Consolidated Statements of Equity		6
Consolidated Statements of Cash Flows		7
Notes to Consolidated Financial Statements		9
Schedule III — Real Estate and Accumulated Depreciation		51
Notes to Schedule III		54

Financial statement schedules other than those listed above are omitted because the required information is given in the financial statements, including the notes thereto, or because the conditions requiring their filing do not exist.

1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of W. P. Carey & Co. LLC:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of W. P. Carey & Co. LLC and its subsidiaries at December 31, 2011 and December 31, 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

New York, New York

February 29, 2012, except with respect to our opinion insofar as it relates to the effects of the discontinued operations as discussed in Notes 2, 6, 8, 10, 15, 16, 17, and 19, as to which the date is June 6, 2012.

2

W. P. CAREY & CO. LLC

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	December 31,
	2011			2010
Assets
Investments in real estate:
Real estate, at cost (inclusive of amounts attributable to consolidated VIEs of $41,032 and $39,718, respectively)	$	646,482		$	560,592
Operating real estate, at cost (inclusive of amounts attributable to consolidated VIEs of $26,318 and $25,665, respectively)		109,875			109,851
Accumulated depreciation (inclusive of amounts attributable to consolidated VIEs of $22,350 and $20,431, respectively)		(135,175	)		(122,312	)
Net investments in properties		621,182			548,131
Net investments in direct financing leases		58,000			76,550
Equity investments in real estate and the REITs		538,749			322,294
Net investments in real estate		1,217,931			946,975
Cash and cash equivalents (inclusive of amounts attributable to consolidated VIEs of $230 and $86, respectively)		29,297			64,693
Due from affiliates		38,369			38,793
Intangible assets and goodwill, net		125,957			87,768
Other assets, net (inclusive of amounts attributable to consolidated VIEs of $2,773 and $1,845, respectively)		51,069			34,097
Total assets	$	1,462,623		$	1,172,326
Liabilities and Equity
Liabilities:
Non-recourse and limited-recourse debt (inclusive of amounts attributable to consolidated VIEs of $14,261 and $9,593, respectively)	$	356,209		$	255,232
Line of credit		233,160			141,750
Accounts payable, accrued expenses and other liabilities (inclusive of amounts attributable to consolidated VIEs of $1,651 and $2,275, respectively)		82,055			40,808
Income taxes, net		44,783			41,443
Distributions payable		22,314			20,073
Total liabilities		738,521			499,306
Redeemable noncontrolling interest		7,700			7,546
Commitments and contingencies (Note 12)
Equity:
W. P. Carey members’ equity:
Listed shares, no par value, 100,000,000 shares authorized; 39,729,018 and 39,454,847 shares issued and outstanding, respectively		779,071			763,734
Distributions in excess of accumulated earnings		(95,046	)		(145,769	)
Deferred compensation obligation		7,063			10,511
Accumulated other comprehensive loss		(8,507	)		(3,463	)
Total W. P. Carey members’ equity		682,581			625,013
Noncontrolling interests		33,821			40,461
Total equity		716,402			665,474
Total liabilities and equity	$	1,462,623		$	1,172,326

See Notes to Consolidated Financial Statements.

3

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share amounts)

	Years Ended December 31,
	2011			2010			2009
Revenues
Asset management revenue	$	66,808		$	76,246		$	76,621
Structuring revenue		46,831			44,525			23,273
Incentive, termination and subordinated disposition revenue		52,515			—			—
Wholesaling revenue		11,664			11,096			7,691
Reimbursed costs from affiliates		64,829			60,023			47,534
Lease revenues		65,438			55,452			54,081
Other real estate income		23,556			18,083			14,698
		331,641			265,425			223,898
Operating Expenses
General and administrative		(93,706	)		(73,428	)		(63,817	)
Reimbursable costs		(64,829	)		(60,023	)		(47,534	)
Depreciation and amortization		(26,065	)		(20,100	)		(18,375	)
Property expenses		(13,164	)		(10,382	)		(6,694	)
Other real estate expenses		(10,784	)		(8,121	)		(7,308	)
Impairment charges		(3,751	)		(1,140	)		(3,516	)
		(212,299	)		(173,194	)		(147,244	)
Other Income and Expenses
Other interest income		2,001			1,268			1,713
Income from equity investments in real estate and the REITs		51,228			30,992			13,425
Gain on change in control of interests		27,859			—			—
Other income and (expenses)		4,550			1,407			7,357
Interest expense		(21,920	)		(15,725	)		(14,462	)
		63,718			17,942			8,033
Income from continuing operations before income taxes		183,060			110,173			84,687
Provision for income taxes		(37,214	)		(25,815	)		(22,784	)
Income from continuing operations		145,846			84,358			61,903
Discontinued Operations
Income from operations of discontinued properties		2,397			4,374			7,872
Gain on deconsolidation of a subsidiary		1,008			—			—
(Loss) gain on sale of real estate		(3,391	)		460			7,701
Impairment charges		(6,722	)		(14,241	)		(6,908	)
(Loss) income from discontinued operations		(6,708	)		(9,407	)		8,665
Net Income		139,138			74,951			70,568
Add: Net loss attributable to noncontrolling interests		1,864			314			713
Less: Net income attributable to redeemable noncontrolling interest		(1,923	)		(1,293	)		(2,258	)
Net Income Attributable to W. P. Carey Members	$	139,079		$	73,972		$	69,023
Basic Earnings Per Share
Income from continuing operations attributable to W. P. Carey members	$	3.61		$	2.10		$	1.52
(Loss) income from discontinued operations attributable to W. P. Carey members		(0.17	)		(0.24	)		0.22
Net income attributable to W. P. Carey members	$	3.44		$	1.86		$	1.74
Diluted Earnings Per Share
Income from continuing operations attributable to W. P. Carey members	$	3.58		$	2.09		$	1.52
(Loss) income from discontinued operations attributable to W. P. Carey members		(0.16	)		(0.23	)		0.22
Net income attributable to W. P. Carey members	$	3.42		$	1.86		$	1.74
Weighted Average Shares Outstanding
Basic		39,819,475			39,514,746			39,019,709
Diluted		40,098,095			40,007,894			39,712,735
Amounts Attributable to W. P. Carey Members
Income from continuing operations, net of tax	$	145,787		$	83,379		$	60,358
(Loss) income from discontinued operations, net of tax		(6,708	)		(9,407	)		8,665
Net income	$	139,079		$	73,972		$	69,023

See Notes to Consolidated Financial Statements.

4

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Years Ended December 31,
	2011			2010			2009
Net Income	$	139,138		$	74,951		$	70,568
Other Comprehensive (Loss) Income:
Foreign currency translation adjustments		(1,796	)		(1,227	)		619
Unrealized loss on derivative instruments		(3,588	)		(757	)		(482	)
Change in unrealized appreciation on marketable securities		(11	)		6			53
		(5,395	)		(1,978	)		190
Comprehensive Income		133,743			72,973			70,758
Amounts Attributable to Noncontrolling Interests:
Net loss		1,864			314			713
Foreign currency translation adjustments		346			(816	)		(31	)
Comprehensive loss (income) attributable to noncontrolling interests		2,210			(502	)		682
Amounts Attributable to Redeemable Noncontrolling Interest:
Net income		(1,923	)		(1,293	)		(2,258	)
Foreign currency translation adjustments		5			12			(12	)
Comprehensive income attributable to redeemable noncontrolling interest		(1,918	)		(1,281	)		(2,270	)
Comprehensive Income Attributable to W. P. Carey Members	$	134,035		$	71,190		$	69,170

See Notes to Consolidated Financial Statements.

5

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF EQUITY

Years Ended December 31, 2011, 2010, and 2009

(in thousands, except share and per share amounts)

				W. P. Carey Members
	Shares			Listed Shares			Distributions in Excess of Accumulated Earnings			Deferred Compensation Obligation			Accumulated Other Comprehensive Loss			Total W. P.  Carey Members			Noncontrolling Interests			Total
Balance at January 1, 2009		39,589,594		$	757,921		$	(116,990	)	$	—		$	(828	)	$	640,103		$	6,232		$	646,335
Cash proceeds on issuance of shares, net		84,283			1,507												1,507						1,507
Grants issued in connection with services rendered											787						787						787
Shares issued under share incentive plans		222,600									9,462						9,462						9,462
Contributions					102												102			2,845			2,947
Forfeitures of shares		(2,528	)		(77	)											(77	)					(77	)
Distributions declared ($2.00 per share)(a)								(90,475	)								(90,475	)					(90,475	)
Distributions to noncontrolling interests																	—			(1,661	)		(1,661	)
Windfall tax benefits - share incentive plans					143												143						143
Stock-based compensation expense					8,626												8,626						8,626
Repurchase and retirement of shares		(689,344	)		(11,759	)											(11,759	)					(11,759	)
Redemption value adjustment					(6,773	)											(6,773	)					(6,773	)
Tax impact of purchase of W. P. Carey International LLC interest					4,817												4,817						4,817
Net income								69,023									69,023			(713	)		68,310
Change in other comprehensive loss														147			147			72			219
Balance at December 31, 2009		39,204,605			754,507			(138,442	)		10,249			(681	)		625,633			6,775			632,408
Cash proceeds on issuance of shares, net		196,802			3,724												3,724						3,724
Grants issued in connection with services rendered											450						450						450
Shares issued under share incentive plans		368,012															—						—
Contributions																	—			14,261			14,261
Forfeitures of shares		(47,214	)		(1,517	)											(1,517	)					(1,517	)
Distributions declared ($2.03 per share)								(81,299	)								(81,299	)					(81,299	)
Distributions to noncontrolling interests																	—			(3,305	)		(3,305	)
Windfall tax benefits - share incentive plans					2,354												2,354						2,354
Stock-based compensation expense					8,149						(188	)					7,961						7,961
Repurchase and retirement of shares		(267,358	)		(2,317	)											(2,317	)					(2,317	)
Redemption value adjustment					471												471						471
Tax impact of purchase of W. P. Carey International LLC interest					(1,637	)											(1,637	)					(1,637	)
Reclassification of the Investor’s interest in Carey Storage (Note 4)																	—			22,402			22,402
Net income								73,972									73,972			(314	)		73,658
Change in other comprehensive loss														(2,782	)		(2,782	)		642			(2,140	)
Balance at December 31, 2010		39,454,847			763,734			(145,769	)		10,511			(3,463	)		625,013			40,461			665,474
Cash proceeds on issuance of shares, net		45,674			1,488												1,488						1,488
Grants issued in connection with services rendered		5,285									700						700						700
Shares issued under share incentive plans		576,148															—						—
Contributions																	—			3,223			3,223
Forfeitures of shares		(3,562	)		(274	)											(274	)					(274	)
Distributions declared ($2.19 per share)								(88,356	)		301						(88,055	)					(88,055	)
Distributions to noncontrolling interests																	—			(6,000	)		(6,000	)
Windfall tax benefits - share incentive plans					2,569												2,569						2,569
Stock-based compensation expense					21,739						(4,449	)					17,290						17,290
Repurchase and retirement of shares		(349,374	)		(4,761	)											(4,761	)					(4,761	)
Redemption value adjustment					455												455						455
Purchase of noncontrolling interest (Note 4)					(5,879	)											(5,879	)		(1,612	)		(7,491	)
Net income								139,079									139,079			(1,864	)		137,215
Change in other comprehensive loss														(5,044	)		(5,044	)		(387	)		(5,431	)
Balance at December 31, 2011		39,729,018		$	779,071			(95,046	)	$	7,063		$	(8,507	)	$	682,581		$	33,821		$	716,402

(a) Distributions declared per share excludes special distribution of $0.30 per share declared in December 2009.

See Notes to Consolidated Financial Statements.

6

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2011			2010			2009
Cash Flows — Operating Activities
Net income	$	139,138		$	74,951		$	70,568
Adjustments to net income:
Depreciation and amortization, including intangible assets and deferred financing costs		29,616			24,443			24,476
Loss (income) from equity investments in real estate and the REITs in excess of distributions received		310			(4,920	)		(2,258	)
Straight-line rent and financing lease adjustments		(3,698	)		286			2,223
Amortization of deferred revenue		(6,291	)		—			—
Gain on deconsolidation of a subsidiary		(1,008	)		—			—
Loss (gain) on sale of real estate		3,391			(460	)		(7,701	)
Gain on extinguishment of debt		—			—			(6,991	)
Unrealized loss (gain) on foreign currency transactions and others		138			300			(174	)
Realized gain on foreign currency transactions and others		(965	)		(731	)		(257	)
Allocation of (loss) earnings to profit-sharing interest		—			(781	)		3,900
Management and disposition income received in shares of affiliates		(73,936	)		(35,235	)		(31,721	)
Gain on conversion of shares		(3,806	)		—			—
Gain on change in control of interests		(27,859	)		—			—
Impairment charges		10,473			15,381			10,424
Stock-based compensation expense		17,716			7,082			9,336
Deferred acquisition revenue received		21,546			21,204			25,068
Increase in structuring revenue receivable		(19,537	)		(20,237	)		(11,672	)
Increase (decrease) in income taxes, net		244			(1,288	)		(9,276	)
Net changes in other operating assets and liabilities		(5,356	)		6,422			(1,401	)
Net cash provided by operating activities		80,116			86,417			74,544
Cash Flows — Investing Activities
Distributions received from equity investments in real estate and the REITs in excess of equity income		20,807			18,758			39,102
Capital contributions to equity investments		(2,297	)		—			(2,872	)
Purchase of interests in CPA®:16 – Global		(121,315	)		—			—
Purchases of real estate and equity investments in real estate		(24,315	)		(96,884	)		(39,632	)
VAT paid in connection with acquisition of real estate		—			(4,222	)		—
VAT refunded in connection with acquisitions of real estate		5,035			—			—
Capital expenditures		(13,239	)		(5,135	)		(7,775	)
Cash acquired on acquisition of subsidiaries		57			—			—
Proceeds from sale of real estate		12,516			14,591			43,487
Proceeds from sale of securities		818			—			—
Proceeds from transfer of profit-sharing interest		—			—			21,928
Funding of short-term loans to affiliates		(96,000	)		—			—
Proceeds from repayment of short-term loans to affiliates		96,000			—			—
Funds released from escrow		2,584			36,620			—
Funds placed in escrow		(6,735	)		(1,571	)		(36,132	)
Net cash (used in) provided by investing activities		(126,084	)		(37,843	)		18,106
Cash Flows — Financing Activities
Distributions paid		(85,814	)		(92,591	)		(78,618	)
Contributions from noncontrolling interests		3,223			14,261			2,947
Distributions to noncontrolling interests		(7,258	)		(4,360	)		(5,505	)
Contributions from profit-sharing interest		—			3,694			—
Distributions to profit-sharing interest		—			(693	)		(5,645	)
Purchase of noncontrolling interest		(7,502	)		—			(15,380	)
Scheduled payments of mortgage principal		(25,327	)		(14,324	)		(9,534	)
Prepayments of mortgage principal		—			—			(13,974	)
Proceeds from mortgage financing		45,491			56,841			42,495
Proceeds from lines of credit		251,410			83,250			150,500
Repayments of lines of credit		(160,000	)		(52,500	)		(148,518	)
Proceeds from loans from affiliates		—			—			1,625
Repayments of loans from affiliates		—			—			(1,770	)
Payment of financing costs		(7,778	)		(1,204	)		(862	)
Proceeds from issuance of shares		1,488			3,724			1,507
Windfall tax benefit associated with stock-based compensation awards		2,569			2,354			143
Repurchase and retirement of shares		—			—			(10,686	)
Net cash provided by (used in) financing activities		10,502			(1,548	)		(91,275	)
Change in Cash and Cash Equivalents During the Year
Effect of exchange rate changes on cash		70			(783	)		276
Net (decrease) increase in cash and cash equivalents		(35,396	)		46,243			1,651
Cash and cash equivalents, beginning of year		64,693			18,450			16,799
Cash and cash equivalents, end of year	$	29,297		$	64,693		$	18,450

(Continued)

7

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

Supplemental noncash activities:

On May 2, 2011, in connection with entering into an amended and restated advisory agreement with CPA^®:16 – Global as a result of the UPREIT Reorganization, 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 Member Interest in that operating partnership (Note 3).

Also on May 2, 2011, we exchanged 11,113,050 shares of CPA^®:14 for 13,260,091 shares of CPA^®:16 – Global in connection with the CPA^®:14/16 Merger, resulting in a gain of approximately $2.8 million (Note 3).

In connection with the acquisition of properties from CPA^®:14 in May 2011, 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 16). The following table presents the assets and liabilities of the subsidiary on the date of deconsolidation (in thousands):

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

Supplemental cash flows information (in thousands):

	Years Ended December 31,
	2011		2010		2009
Interest paid	$	21,168	$	15,351	$	14,845
Income taxes paid	$	33,641	$	24,307	$	35,039

See Notes to Consolidated Financial Statements.

8

W. P. CAREY & CO. LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Business

W. P. Carey 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 CPA^® REITs and invest in similar properties. At December 31, 2011, we were the advisor to the following CPA^® REITs: CPA^®:15, CPA^®:16 – Global and CPA^®:17 – Global, and we were the advisor to CPA^®:14 until the CPA^®:14/16 Merger (Note 3). We are also the advisor to CWI, which invests in lodging and lodging-related properties. At December 31, 2011, we owned and/or managed more than 980 properties domestically and internationally. Our owned portfolio was comprised of our full or partial ownership interest in 157 properties, substantially all of which were net leased to 73 tenants, and totaled approximately 13 million square feet (on a pro rata basis) with an occupancy rate of approximately 93%. In addition, through our Carey Storage and Livho subsidiaries, we had interests in 21 self-storage properties and a hotel property, respectively, for an aggregate of approximately 0.8 million square feet (on a pro rata basis) at December 31, 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 assets related to real estate, lodging, and self-storage 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. 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 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. Summary of Significant Accounting Policies

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.

We have investments in tenancy-in-common interests in various domestic and international properties. Consolidation of these investments is not required as they do not qualify as VIEs and do not meet the control requirement required for consolidation. Accordingly, we account for these investments using the equity method of accounting. We use the equity method of accounting because the shared decision-making involved in a tenancy-in-common interest investment creates an opportunity for us to have significant influence on the operating and financial decisions of these investments and thereby creates some responsibility by us for a return on our investment. Additionally, we own interests in single-tenant net leased properties leased to corporations through noncontrolling interests in partnerships and limited liability companies that we do not control but over which we exercise significant influence. We account for these investments under the equity method of accounting. At times the carrying value of our equity investments may fall below zero for certain investments. We intend to fund our share of the ventures’ future operating deficits should the need arise. However, we have no legal obligation to pay for any of the liabilities of such ventures nor do we have any legal obligation to fund operating deficits.

We formed CWI in March 2008 for the purpose of acquiring interests in lodging and lodging-related properties. 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

9

Notes to Consolidated Financial Statements

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.

Out-of-Period Adjustment

During the fourth quarter of 2011, we identified an error in the consolidated financial statements related to prior years. The error relates to the misapplication of accounting guidance related to the modifications of certain leases. We concluded this adjustment, with a net impact of $0.2 million on our statement of operations for the fourth quarter of 2011, was not material to our results for the prior year periods or to the period of adjustment. Accordingly, this cumulative change was recorded in the consolidated financial statements in the fourth quarter of 2011 as an out-of-period adjustment as follows: a reduction to Net investment in direct financing leases of $17.6 million and an increase in net Operating real estate of $17.9 million on the consolidated balance sheet; and an increase in Lease revenues of $0.9 million, a reduction of Impairment charges of $1.6 million, and an increase in Depreciation expense of $2.2 million on the consolidated statement of operations.

Use of Estimates

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.

Reclassifications and Revisions

Certain prior year amounts have been reclassified to conform to the current year presentation. The consolidated financial statements included in this Report have been retrospectively adjusted to reflect the disposition (or planned disposition) of certain properties as discontinued operations for all periods presented.

Purchase Price Allocation

In accordance with the guidance for business combinations, we determine whether a transaction or other event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, we account for the transaction or other event as an asset acquisition. Under both methods, we recognize the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity, as well as recognizing and measuring goodwill or a gain from a bargain purchase. However, we immediately expense acquisition-related costs and fees associated with business combinations.

When we acquire properties accounted for as operating leases, we allocate the purchase costs to the tangible and intangible assets and liabilities acquired based on their estimated fair values. We determine the value of the tangible assets, consisting of land and buildings, as if vacant, and record intangible assets, including the above-market and below-market value of leases, the value of in-place leases and the value of tenant relationships, at their relative estimated fair values. See Real Estate Leased to Others and Depreciation below for a discussion of our significant accounting policies related to tangible assets. We include the value of below-market leases in Accounts payable, accrued expenses and other liabilities in the consolidated financial statements.

We record above-market and below-market lease values for owned properties based on the present value (using an interest rate reflecting the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the leases negotiated and in place at the time of acquisition of the properties and (ii) our estimate of fair market lease rates for the property or equivalent property, both of which are measured over a period equal to the estimated market lease term. We amortize the capitalized above-market lease value as a reduction of rental income over the estimated market lease term. We amortize the capitalized below-market lease value as an increase to rental income over the initial term and any fixed rate renewal periods in the respective leases.

We allocate the total amount of other intangibles to in-place lease values and tenant relationship intangible values based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with each tenant. The characteristics we consider in allocating these values include estimated market rent, the nature and extent of the existing relationship with the tenant, the expectation of lease renewals, estimated carrying costs of the property if vacant and estimated costs to execute a new lease, among other factors. We determine these values using our estimates or by relying in part upon third-party appraisals. We amortize the

10

Notes to Consolidated Financial Statements

capitalized value of in-place lease intangibles to expense over the remaining initial term of each lease. We amortize the capitalized value of tenant relationships to expense over the initial and expected renewal terms of the lease. No amortization period for intangibles will exceed the remaining depreciable life of the building.

If a lease is terminated, we charge the unamortized portion of above-market and below-market lease values to lease revenue, and in-place lease and tenant relationship values to amortization expenses.

Operating Real Estate

We carry land and buildings and personal property at cost less accumulated depreciation. We capitalize improvements, while we expense replacements, maintenance and repairs that do not improve or extend the lives of the respective assets as incurred.

Cash and Cash Equivalents

We consider all short-term, highly liquid investments that are both readily convertible to cash and have a maturity of three months or less at the time of purchase to be cash equivalents. Items classified as cash equivalents include commercial paper and money-market funds. Our cash and cash equivalents are held in the custody of several financial institutions, and these balances, at times, exceed federally insurable limits. We seek to mitigate this risk by depositing funds only with major financial institutions.

Other Assets and Liabilities

We include prepaid expenses, deferred rental income, tenant receivables, deferred charges, escrow balances held by lenders, restricted cash balances, marketable securities, derivative assets and corporate fixed assets in Other assets. We include derivative instruments; miscellaneous amounts held on behalf of tenants; and deferred revenue, including unamortized below-market rent intangibles in Other liabilities. Deferred charges are costs incurred in connection with mortgage financings and refinancings that are amortized over the terms of the mortgages and included in Interest expense in the consolidated financial statements. Deferred rental income is the aggregate cumulative difference for operating leases between scheduled rents that vary during the lease term, and rent recognized on a straight-line basis. Marketable securities are classified as available-for-sale securities and reported at fair value with unrealized gains and losses on these securities reported as a component of Other comprehensive income until realized.

Real Estate Leased to Others

We lease real estate to others primarily on a triple-net leased basis, whereby the tenant is generally responsible for all operating expenses relating to the property, including property taxes, insurance, maintenance, repairs, renewals and improvements. We charge expenditures for maintenance and repairs, including routine betterments, to operations as incurred. We capitalize significant renovations that increase the useful life of the properties. For the years ended December 31, 2011, 2010 and 2009, although we are legally obligated for payment pursuant to our lease agreements with our tenants, lessees were responsible for the direct payment to the taxing authorities of real estate taxes of approximately $6.4 million, $7.7 million and $8.8 million, respectively.

We diversify our real estate investments among various corporate tenants engaged in different industries, by property type and by geographic area (Note 9). Substantially all of our leases provide for either scheduled rent increases, periodic rent adjustments based on formulas indexed to changes in the CPI or similar indices or percentage rents. CPI-based adjustments are contingent on future events and are therefore not included in straight-line rent calculations. We recognize rents from percentage rents as reported by the lessees, which is after the level of sales requiring a rental payment to us is reached. Percentage rents were insignificant for the periods presented.

We account for leases as operating or direct financing leases, as described below:

Operating leases —We record real estate at cost less accumulated depreciation; we recognize future minimum rental revenue on a straight-line basis over the term of the related leases and charge expenses (including depreciation) to operations as incurred (Note 4).

Direct financing method —We record leases accounted for under the direct financing method at their net investment (Note 5). We defer and amortize unearned income to income over the lease term so as to produce a constant periodic rate of return on our net investment in the lease.

On an ongoing basis, we assess our ability to collect rent and other tenant-based receivables and determine an appropriate allowance for uncollected amounts. Because we have a limited number of lessees (18 lessees represented 77% of lease revenues during 2011), we believe that it is necessary to evaluate the collectability of these receivables based on the facts and circumstances of each situation

11

Notes to Consolidated Financial Statements

rather than solely using statistical methods. Therefore, in recognizing our provision for uncollected rents and other tenant receivables, we evaluate actual past due amounts and make subjective judgments as to the collectability of those amounts based on factors including, but not limited to, our knowledge of a lessee’s circumstances, the age of the receivables, the tenant’s credit profile and prior experience with the tenant. Even if a lessee has been making payments, we may reserve for the entire receivable amount if we believe there has been significant or continuing deterioration in the lessee’s ability to meet its lease obligations.

Revenue Recognition

We earn structuring revenue and asset management revenue in connection with providing services to the REITs. We earn structuring revenue for services we provide in connection with the analysis, negotiation and structuring of transactions, including acquisitions and dispositions and the placement of mortgage financing obtained by the REITs. Asset management revenue consists of property management, leasing and advisory revenue. Receipt of the incentive revenue portion of the asset management revenue or performance revenue, however, is subordinated to the achievement of specified cumulative return requirements by the shareholders of the REITs. At our option, the performance revenue may be collected in cash or shares of the REIT (Note 3). In addition, we earn subordinated incentive and disposition revenue related to the disposition of properties. We may also earn termination revenue in connection with the termination of the advisory agreements for the REITs.

We recognize all revenue as earned. We earn structuring revenue upon the consummation of a transaction and asset management revenue when services are performed. We recognize revenue subject to subordination only when the performance criteria of the REIT is achieved and contractual limitations are not exceeded.

We earn subordinated disposition and incentive revenue after shareholders have received their initial investment plus a specified preferred return. We earn termination revenue when a liquidity event is consummated.

We are also reimbursed for certain costs incurred in providing services, including broker-dealer commissions paid on behalf of the REITs, marketing costs and the cost of personnel provided for the administration of the REITs. We record reimbursement income as the expenses are incurred, subject to limitations on a REIT’s ability to incur offering costs.

We earned wholesaling revenue of $0.15 per share sold in connection with CPA^® 17 – Global’s initial public offering through its termination on April 7, 2011. In addition, as discussed in Note 3 to the consolidated financial statements, we earn a dealer manager fee of up to $0.35 per share sold in connection with CPA^® 17 – Global’s follow-on offering commencing April 7, 2011 and $0.30 per share sold in connection with CWI’s initial offering. We re-allow all or a portion of the dealer manager fees to selected dealers in the offerings. Dealer manager fees that are not re-allowed are classified as wholesaling revenue. Wholesaling revenue earned is generally offset by underwriting costs incurred in connection with the offerings, which are included in General and administrative expenses.

Depreciation

We compute depreciation of building and related improvements using the straight-line method over the estimated useful lives of the properties (generally 40 years) and furniture, fixtures and equipment (generally up to seven years). We compute depreciation of tenant improvements using the straight-line method over the lesser of the remaining term of the lease or the estimated useful life.

Impairments

We periodically assess whether there are any indicators that the value of our long-lived assets, including goodwill, may be impaired or that their carrying value may not be recoverable. These impairment indicators include, but are not limited to, the vacancy of a property that is not subject to a lease; a lease default by a tenant that is experiencing financial difficulty; the termination of a lease by a tenant; or the rejection of a lease in a bankruptcy proceeding. We may incur impairment charges on long-lived assets, including real estate, direct financing leases, assets held for sale and equity investments in real estate. We may also incur impairment charges on marketable securities and goodwill. Our policies for evaluating whether these assets are impaired are presented below.

Real Estate

For real estate assets in which an impairment indicator is identified, we follow a two-step process to determine whether an asset is impaired and to determine the amount of the charge. First, we compare the carrying value of the property to the future net undiscounted cash flow that we expect the property will generate, including any estimated proceeds from the eventual sale of the property. The undiscounted cash flow analysis requires us to make our best estimate of market rents, residual values and holding periods. Depending on the assumptions made and estimates used, the future cash flow projected in the evaluation of long-lived assets can vary within a range of outcomes. We consider the likelihood of possible outcomes in determining the best possible estimate of future cash flows. If the future net undiscounted cash flow of the property is less than the carrying value, the property is considered to be impaired. We then measure the loss as the excess of the carrying value of the property over its estimated fair value.

12

Notes to Consolidated Financial Statements

Direct Financing Leases

We review our direct financing leases at least annually to determine whether there has been an other-than-temporary decline in the current estimate of residual value of the property. The residual value is our estimate of what we could realize upon the sale of the property at the end of the lease term, based on market information. If this review indicates that a decline in residual value has occurred that is other-than-temporary, we recognize an impairment charge and revise the accounting for the direct financing lease to reflect a portion of the future cash flow from the lessee as a return of principal rather than as revenue.

When we enter into a contract to sell the real estate assets that are recorded as direct financing leases, we evaluate whether we believe it is probable that the disposition will occur. If we determine that the disposition is probable and therefore the asset’s holding period is reduced, we record an allowance for credit losses to reflect the change in the estimate of the undiscounted future rents. Accordingly, the net investment balance is written down to fair value.

Assets Held for Sale

We classify real estate assets that are accounted for as operating leases as held for sale when we have entered into a contract to sell the property, all material due diligence requirements have been satisfied and we believe it is probable that the disposition will occur within one year. When we classify an asset as held for sale, we calculate its estimated fair value as the expected sale price, less expected selling costs. We then compare the asset’s estimated fair value to its carrying value, and if the estimated fair value is less than the property’s carrying value, we reduce the carrying value to the estimated fair value. We will continue to review the initial impairment for subsequent changes in the estimated fair value, and may recognize an additional impairment charge if warranted.

If circumstances arise that we previously considered unlikely and, as a result, we decide not to sell a property previously classified as held for sale, we reclassify the property as held and used. We measure and record a property that is reclassified as held and used at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held and used, or (ii) the estimated fair value at the date of the subsequent decision not to sell.

Equity Investments in Real Estate and the REITs

We evaluate our equity investments in real estate and in the REITs on a periodic basis to determine if there are any indicators that the value of our equity investment may be impaired and whether or not that impairment is other-than-temporary. To the extent impairment has occurred, we measure the charge as the excess of the carrying value of our investment over its estimated fair value. For equity investments in real estate, we calculate estimated fair value by multiplying the estimated fair value of the underlying venture’s net assets by our ownership interest percentage. For our investments in the REITs, we calculate the estimated fair value of our investment using the most recently published NAV of each REIT.

Marketable Securities

We evaluate our marketable securities for impairment if a decline in estimated fair value below cost basis is considered other-than-temporary. In determining whether the decline is other-than-temporary, we consider the underlying cause of the decline in value, the estimated recovery period, the severity and duration of the decline, as well as whether we plan to sell the security or will more likely than not be required to sell the security before recovery of its cost basis. If we determine that the decline is other-than-temporary, we record an impairment charge to reduce our cost basis to the estimated fair value of the security. In accordance with current accounting guidance, the credit component of an other-than-temporary impairment is recognized in earnings while the non-credit component is recognized in Other comprehensive income.

Goodwill

We evaluate goodwill recorded by our Investment Management segment for possible impairment at least annually using a two-step process. To identify any impairment, we first compare the estimated fair value of our Investment Management segment with its carrying amount, including goodwill. We calculate the estimated fair value of the Investment Management segment by applying a multiple, based on comparable companies, to earnings. If the fair value of the Investment Management segment exceeds its carrying amount, we do not consider goodwill to be impaired and no further analysis is required. If the carrying amount of the Investment Management segment exceeds its estimated fair value, we then perform the second step to measure the amount of the impairment charge.

13

Notes to Consolidated Financial Statements

For the second step, we determine the impairment charge by comparing the implied fair value of the goodwill with its carrying amount and record an impairment charge equal to the excess of the carrying amount over the implied fair value. We determine the implied fair value of the goodwill by allocating the estimated fair value of the Investment Management segment to its assets and liabilities. The excess of the estimated fair value of the Investment Management segment over the amounts assigned to its assets and liabilities is the implied fair value of the goodwill.

Assets Held for Sale

We classify assets that are accounted for as operating leases as held for sale when we have entered into a contract to sell the property, all material due diligence requirements have been satisfied and we believe it is probable that the disposition will occur within one year. Assets held for sale are recorded at the lower of carrying value or estimated fair value, which is generally calculated as the expected sale price, less expected selling costs. The results of operations and the related gain or loss on sale of properties that have been sold or that are classified as held for sale are included in discontinued operations (Note 16).

If circumstances arise that we previously considered unlikely and, as a result, we decide not to sell a property previously classified as held for sale, we reclassify the property as held and used. We measure and record a property that is reclassified as held and used at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held and used or (ii) the estimated fair value at the date of the subsequent decision not to sell.

We recognize gains and losses on the sale of properties when, among other criteria, we no longer have continuing involvement, the parties are bound by the terms of the contract, all consideration has been exchanged and all conditions precedent to closing have been performed. At the time the sale is consummated, a gain or loss is recognized as the difference between the sale price, less any selling costs, and the carrying value of the property.

Stock-Based Compensation

We have granted restricted shares, stock options, RSUs and PSUs to certain employees and independent directors. Grants were awarded in the name of the recipient subject to certain restrictions of transferability and a risk of forfeiture. The forfeiture provisions on the awards generally expire annually, over their respective vesting periods. Stock-based compensation expense for all equity-classified stock-based compensation awards is based on the grant date fair value estimated in accordance with current accounting guidance for share-based payments. We recognize these compensation costs for only those shares expected to vest on a straight-line or graded-vesting basis, as appropriate, over the requisite service period of the award. We include stock-based compensation within the listed shares caption of equity.

Foreign Currency

Translation

We have interests in real estate investments in the European Union for which the functional currency is the Euro. We perform the translation from the Euro to the U.S. dollar for assets and liabilities using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. We report the gains and losses resulting from such translation as a component of other comprehensive income in equity. At December 31, 2011 and 2010, the cumulative foreign currency translation adjustment losses were $3.3 million and $1.9 million, respectively.

Transaction Gains or Losses

Foreign currency transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in the exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of that transaction. That increase or decrease in the expected functional currency cash flows is an unrealized foreign currency transaction gain or loss that generally will be included in the determination of net income for the period in which the exchange rate changes. Likewise, a transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later), realized upon settlement of a foreign currency transaction generally will be included in net income for the period in which the transaction is settled. Foreign currency transactions that are (i) designated as, and are effective as, economic hedges of a net

14

Notes to Consolidated Financial Statements

investment and (ii) inter-company foreign currency transactions that are of a long-term nature (that is, settlement is not planned or anticipated in the foreseeable future), when the entities to the transactions are consolidated or accounted for by the equity method in our financial statements, are not included in determining net income but are accounted for in the same manner as foreign currency translation adjustments and reported as a component of other comprehensive income in equity.

Foreign currency intercompany transactions that are scheduled for settlement, consisting primarily of accrued interest and the translation to the reporting currency of subordinated intercompany debt with scheduled principal payments, are included in the determination of net income. We recognized net unrealized gains (losses) of $(0.1) million, $(0.3) million and $0.2 million from such transactions for the years ended December 31, 2011, 2010 and 2009, respectively. For the years ended December 31, 2011, 2010 and 2009, we recognized net realized (losses) gains of $0.4 million, $(0.1) million and less than $0.1 million, respectively, on foreign currency transactions in connection with the transfer of cash from foreign operations of subsidiaries to the parent company.

Derivative Instruments

We measure derivative instruments at fair value and record them as assets or liabilities, depending on our rights or obligations under the applicable derivative contract. Derivatives that are not designated as hedges must be adjusted to fair value through earnings. If a derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. For cash flow hedges, any ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.

Income Taxes

We have elected to be treated as a partnership for U.S. federal income tax purposes. Deferred income taxes are recorded for the corporate subsidiaries based on earnings reported. The provision for income taxes differs from the amounts currently payable because of temporary differences in the recognition of certain income and expense items for financial reporting and tax reporting purposes. Income taxes are computed under the asset and liability method. The asset and liability method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between tax bases and financial bases of assets and liabilities (Note 15).

Real Estate Ownership Operations

Our real estate operations are conducted through subsidiaries that are real estate investment trusts. As such, our real estate operations are generally not subject to federal tax, and accordingly, no provision has been made for U.S. federal income taxes in the consolidated financial statements for these operations. These operations are subject to certain state, local and foreign taxes, as applicable.

We hold our real estate assets under a subsidiary, Carey REIT II, Inc. (“Carey REIT II”). Carey REIT II has elected to be taxed as a real estate investment trust under the Internal Revenue Code. We believe we have operated, and we intend to continue to operate, in a manner that allows Carey REIT II to continue to qualify as a real estate investment trust. Under the real estate investment trust operating structure, Carey REIT II is permitted to deduct distributions paid to our shareholders and generally will not be required to pay U.S. federal income taxes. Accordingly, no provision has been made for U.S. federal income taxes in the consolidated financial statements related to Carey REIT II.

Investment Management Operations

We conduct our investment management operations primarily through taxable subsidiaries. These operations are subject to federal, state, local and foreign taxes, as applicable. Our financial statements are prepared on a consolidated basis including these taxable subsidiaries and include a provision for current and deferred taxes on these operations.

Earnings Per Share

Basic earnings per share is calculated by dividing net income available to common shareholders, as adjusted for unallocated earnings attributable to the unvested RSUs by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflects potentially dilutive securities (options, restricted shares and RSUs) using the treasury stock method, except when the effect would be anti-dilutive.

15

Notes to Consolidated Financial Statements

Future Accounting Requirements

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

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 and ASU 2011-12, Presentation of Comprehensive Income— In June and December 2011, the FASB issued updates to ASC 220,Comprehensive Income. The amendments in the initial update change the reporting options applicable to the presentation of other comprehensive income and its components in the financial statements. The initial update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. Additionally, the initial update requires the consecutive presentation of the statement of net income and other comprehensive income. Finally, the initial update required an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income; however, the update issued in December 2011 tabled this requirement for further deliberation. 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.

ASU 2011-10, Derecognition of in Substance Real Estate - a Scope Clarification— In December 2011, the FASB issued an update to clarify that when a parent (reporting entity) ceases to have a controlling financial interest (as described in ASC subtopic 810-10,Consolidation) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in subtopic 360-20,Property, Plant and Equipment, to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. Under this new guidance, even if the reporting entity ceases to have a controlling financial interest under subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. This amendment is applicable to us prospectively for deconsolidation events occurring after June 15, 2012 and will impact the timing in which we recognize the impact of such transactions, which may be material, within our results of operations.

ASU 2011-11,Disclosures about Offsetting Assets and Liabilities— In December 2011, the FASB issued an update to ASC 210,Balance Sheet, which enhances current disclosures about financial instruments and derivative instruments that are either offset on the statement of financial position or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the statement of financial position. Entities are required to provide both net and gross information for these assets and liabilities in order to facilitate comparability between financial statements prepared on the basis of U.S. GAAP and financial statements prepared on the basis of IFRS. This standard will be effective for our fiscal quarter beginning January 1, 2014 with retrospective application required. We do not expect the adoption will have a material impact on our statement of financial position.

16

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. 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). The CPA^® REIT advisory agreements, which were scheduled to expire on September 30, 2011, were extended twice for three-month periods since that date and are currently scheduled to expire on March 31, 2012 unless otherwise extended. 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):

	Years Ended December 31,
	2011		2010		2009
Asset management revenue	$	66,808	$	76,246	$	76,621
Reimbursed costs from affiliates		64,829		60,023		47,534
Incentive, termination and subordinated disposition revenue		52,515		—		—
Structuring revenue		46,831		44,525		23,273
Wholesaling revenue		11,664		11,096		7,691
Distributions of available cash		15,535		4,468		2,160
Deferred revenue earned		5,662		—		—
	$	263,844	$	196,358	$	157,279

Asset Management Revenue

We earn asset management revenue from each REIT, which is based on average invested assets and is calculated according to the advisory agreement for each REIT. For CPA^®:16 – Global prior to the CPA^®:14/16 Merger and for CPA^®:15, this revenue generally totaled 1% per annum, with a portion of this revenue, or 0.5%, contingent upon the achievement of specific performance criteria. For CPA^®:16 – Global subsequent to the CPA^®:14/16 Merger, we earn asset management revenue of 0.5% of average invested assets. For CPA^®:17 – Global, we earn asset management revenue ranging from 0.5% of average market value for long-term net leases and certain other types of real estate investments up to 1.75% of average equity value for certain types of securities. For CWI, we earn asset management revenue of 0.5% of the average market value of lodging-related investments. We do not earn performance revenue from CPA^®:17 – Global, CWI and, subsequent to the CPA^®:14/16 Merger, from CPA^®:16 – Global.

Under the terms of the advisory agreements, we may elect to receive cash or shares of stock for any revenue due from each REIT. In both 2011 and 2010, we elected to receive all asset management revenue in cash, with the exception of the asset management revenue received from CPA^®:17 – Global and CPA^®:16 – Global subsequent to the CPA^®:14/16 Merger, which we elected to receive in shares. For both 2011 and 2010, we also elected to receive performance revenue from CPA^®:16 – Global prior to the CPA^®:14/16 Merger in shares, while for CPA^®:14 prior to CPA^®:14/16 Merger and CPA^®:15 we elected to receive 80% of all performance revenue in shares, with the remaining 20% payable in cash.

Reimbursed Costs from Affiliates and Wholesaling Revenue

The REITs reimburse us for certain costs, primarily broker-dealer commissions paid on behalf of the REITs and marketing and personnel costs. Under the terms of a sales agency agreement between our wholly-owned broker-dealer subsidiary and CPA^®:17 – Global, we earn a selling commission of up to $0.65 per share sold and a dealer manager fee of up to $0.35 per share sold. We re-allow all or a portion of the selling commissions to selected dealers participating in CPA^®:17 – Global’s offering and may re-allow up to the full selected dealer revenue to selected dealers. In addition, our wholly-owned broker-dealer subsidiary entered into a dealer manager agreement with CWI, whereby we receive a selling commission of up to $0.70 per share sold and a dealer manager fee of up to $0.30 per share sold, a portion of which may be re-allowed to the selected broker dealers. Dealer manager fees that are not re-allowed are classified as wholesaling revenue. Total underwriting compensation earned in connection with CPA^®:17 – Global and CWI’s offerings, including selling commissions, selected dealer revenue, wholesaling revenue and reimbursements made by us to selected dealers, cannot exceed the limitations prescribed by the Financial Industry Regulatory Authority, Inc. The limit on underwriting compensation is currently 10% of gross offering proceeds. We may also be reimbursed for reasonable bona fide due diligence expenses incurred which are supported by a detailed and itemized invoice. Such reimbursements are subject to the limitations on organization and offering expenses described above.

17

Notes to Consolidated Financial Statements

Pursuant to our advisory agreement with CWI, upon reaching the minimum offering amount of $10.0 million on March 3, 2011, CWI became obligated to reimburse us for all organization and a portion of offering costs incurred in connection with its offering, up to a maximum amount (excluding selling commissions and the dealer manager fee) of 2% of the gross proceeds of its offering and distribution reinvestment plan. Through December 31, 2011, we have incurred organization and offering costs on behalf of CWI of approximately $5.1 million. However, at December 31, 2011, CWI was only obligated to reimburse us $0.9 million of these costs because of the 2% limitation described above, and no such costs had been reimbursed as of that date because CWI had no available cash.

Incentive, Termination and Subordinated Disposition Revenue

We earn revenue related to the disposition of properties by the REITs, subject to subordination provisions, which will only be recognized as the relevant conditions are met. Such revenue may include subordinated disposition revenue of no more than 3% of the value of any assets sold, payable only after shareholders have received back their initial investment plus a specified preferred return, and subordinated incentive revenue of 15% of the net cash proceeds distributable to shareholders from the disposition of properties, after recoupment by shareholders of their initial investment plus a specified preferred return. We may also, in connection with the termination of the advisory agreements for the REITs, be entitled to a termination payment based on the amount by which the fair value of a REITs’ properties, less indebtedness, exceeds investors’ capital plus a specified preferred return.

We waived any acquisition fees payable by CPA^®:16 – Global under its advisory agreement with us in respect of the properties it 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, we earned acquisition fees related to those properties when they were acquired by CPA^®:14 and disposition fees on those properties to CPA^®:16 – Global by CPA^®:14 in the CPA^®:14/16 Merger and, as a result, we and CPA^®:16 – Global agreed that we should not receive fees upon the acquisition or disposition of the same properties by CPA^®:16 – Global. As a condition of the Proposed Merger, we have agreed to waive our subordinated disposition and termination fees from CPA^®:15.

Structuring Revenue

Under the terms of the advisory agreements, we earn revenue in connection with structuring and negotiating investments and related financing for the REITs, which we call acquisition revenue. We may receive acquisition revenue of up to an average of 4.5% of the total cost of all investments made by each CPA^® REIT. A portion of this revenue (generally 2.5%) is paid when the transaction is completed, while the remainder (generally 2%) is payable in annual installments ranging from three to eight years, provided the relevant CPA^® REIT meets its performance criterion. For certain types of non-long term net lease investments acquired on behalf of CPA^®:17 – Global, initial acquisition revenue may range from 0% to 1.75% of the equity invested plus the related acquisition revenue, with no deferred acquisition revenue being earned. For CWI, we earn initial acquisition revenue of 2.5% of the total investment cost of the properties acquired and loans originated by us not to exceed 6% of the aggregate contract purchase price of all investments and loans with no deferred acquisition revenue being earned. We may also be entitled, subject to the REIT board approval, to fees for structuring loan refinancing of up to 1% of the principal amount. This loan refinancing revenue, together with the acquisition revenue, is referred to as structuring revenue.

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 December 31, 2011		At December 31, 2010
Unpaid deferred acquisition fees	$	29,410	$	31,419

	Years Ended December 31,
	2011		2010		2009
Interest earned on unpaid deferred acquisition fees	$	1,332	$	1,136	$	1,534

Distributions of Available Cash and Deferred Revenue Earned

We receive distributions of our proportionate share of earnings up to 10% of available cash from CPA^®:17 – Global, CWI, and after the UPREIT reorganization, CPA^®:16 – Global, as defined in the respective advisory agreements, from their operating partnerships.

18

Notes to Consolidated Financial Statements

As discussed under “CPA^®:16 – Global UPREIT Reorganization” below, we acquired the Special Member Interest in CPA^®:16 – Global’s operating partnership for $0.3 million during the second quarter of 2011. We recorded the Special Member Interest at its fair value of $28.3 million, which is net of approximately $6.0 million related to our ownership interest in CPA^®:16 – Global that was eliminated in our consolidated financial statement, to be amortized into earnings over the expected period of performance. Cash distributions of our proportionate share of earnings from the CPA^®:16 – Global and CPA^®:17 – Global operating partnerships as well as deferred revenue earned from our Special Member Interest in CPA^®:16 – Global’s operating partnership are recorded as Income from equity investments in real estate and the REITs within the Investment Management segment. We have not yet received any cash distributions of our proportionate share of earnings from CWI’s operating partnership because CWI had no earnings through December 31, 2011.

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 the remaining interests in three ventures 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 ventures’ underlying properties and debt.

In the CPA^®:14/16 Merger, CPA^®:14 shareholders were entitled to receive $11.50 per share, which was equal to the estimated NAV 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 then-existing unsecured line of credit.

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 the CPA^®:14/16 Merger. 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.

CAM 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 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. Through Carey REIT III, we acquired a Special Member 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 Member 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

19

Notes to Consolidated Financial Statements

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, the amount of after-tax cash we 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 Member 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 Member Interest in CPA^®:16 – Global’s 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 year ended December 31, 2011 was $5.7 million, which is net of $0.6 million in amortization associated with the basis differential generated by the Special Member Interest in CPA^®:16 – Global’s operating partnership and our underlying claim on the net assets of CPA^®:16 – Global. We determined the fair value of the Special Member 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. The equity investment is evaluated for impairment consistent with the policy described in Note 2.

Other

We are the general partner in a limited partnership (which we consolidate for financial statement purposes) that leases our 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 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 December 31, 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):

	Years Ended December 31,
	2011		2010		2009
Income from noncontrolling interest partners	$	2,542	$	2,372	$	2,374

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):

	December 31,
	2011		2010
Deferred rent due to affiliates	$	798	$	854

We own interests in entities ranging from 5% to 95%, as well as jointly-controlled tenancy-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, a subsidiary that operates a hotel investment. We consolidate the accounts of Livho in our consolidated financial statements because it is a VIE and we are its primary beneficiary.

20

Notes to Consolidated Financial Statements

A family member of one of our directors has an ownership interest in certain companies that own a noncontrolling interest in one of our French majority-owned subsidiaries. This ownership interest is subject to substantially the same terms as all other ownership interests in the subsidiary companies.

An officer owns a redeemable noncontrolling interest (Note 13) in W. P. Carey International LLC (“WPCI”), a subsidiary 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. In May 2011, we loaned $4.0 million at an annual interest rate equal to LIBOR plus 2.5% to CWI, which was repaid on June 6, 2011. 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. All of these loans were repaid by or before their respective maturity dates. In connection with these loans, we received interest income totaling $0.2 million during the year ended December 31, 2011.

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):

	December 31,
	2011			2010
Land	$	111,483		$	111,660
Buildings		534,999			448,932
Less: Accumulated depreciation		(118,054	)		(108,032	)
	$	528,428		$	452,560

Real Estate Acquired During 2011— As discussed in Note 3, in connection with the CPA^®:14/16 Merger in May 2011, we purchased the remaining interests in certain ventures, in which we already had a joint interest, from CPA^®:14 as part of the CPA^®:14 Asset Sales. These three ventures, which lease properties 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 venture and accounted for the Federal Express and Amylin ventures under the equity method. As part of the transaction, we assumed the related non-recourse mortgages on the Federal Express and Amylin ventures. These two mortgages and the mortgage on the Checkfree venture had an aggregate fair value of $117.1 million at the date of acquisition (Note 11). 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 ventures leased to Federal Express and Amylin, we owned 100% of these ventures 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 ventures. The consolidation of these ventures resulted in an increase of $90.2 million and $40.8 million to Real estate, net and net lease intangibles, respectively, in May 2011.

During 2011, we reclassified real estate with a net carrying value of $17.9 million to Real estate in connection with an out-of-period adjustment (Note 2).

Real Estate Acquired During 2010— In February 2010, we entered into a domestic investment that was deemed to be a real estate asset acquisition at a total cost of $47.6 million and capitalized acquisition-related costs of $0.1 million. We funded the investment with the escrowed proceeds of $36.1 million from a sale of property in December 2009 in an exchange transaction under Section 1031 of the Internal Revenue Code and $11.5 million from our line of credit.

In June 2010, a venture in which we and an affiliate hold 70% and 30% interests, respectively, and which we consolidate, entered into an investment in Spain for a total cost of $27.2 million, inclusive of a noncontrolling interest of $8.4 million. We funded our share of the purchase price with proceeds from our prior line of credit. In connection with this transaction, which was deemed to be a real estate asset acquisition, we capitalized acquisition-related costs and fees totaling $1.0 million, inclusive of amounts attributable to a noncontrolling interest of $0.6 million. Dollar amounts are based on the exchange rate of the Euro on the date of acquisition.

21

Notes to Consolidated Financial Statements

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):

	December 31,
	2011			2010
Land	$	24,031		$	24,030
Buildings		85,844			85,821
Less: Accumulated depreciation		(17,121	)		(14,280	)
	$	92,754		$	95,571

In January 2009, Carey Storage completed a transaction whereby it received cash proceeds of $21.9 million, plus a commitment to invest up to a further $8.1 million of equity, from the Investor to fund the purchase of self-storage assets in the future in exchange for an interest of approximately 60% in its self-storage portfolio (“Carey Storage Venture”). We reflect the Carey Storage Venture’s operations in our Real Estate Ownership segment. Costs totaling $1.0 million incurred in structuring the transaction and bringing in the Investor into these operations were reflected in General and administrative expenses in our Investment Management segment during 2009. Prior to September 2010, we accounted for this transaction under the profit-sharing method because Carey Storage had a contingent option to repurchase this interest from the Investor at fair value. During the third quarter of 2010, Carey Storage amended its agreement with the Investor to, among other matters, remove the contingent purchase option in the original agreement. However, Carey Storage retained a controlling interest in the Carey Storage Venture. As of September 30, 2010, we have reclassified the Investor’s interest from Accounts payable, accrued expenses and other liabilities to Noncontrolling interests on our consolidated balance sheet.

Operating Real Estate Acquired During 2010— During 2010, the Carey Storage Venture and an entity owned 100% by Carey Storage acquired eight self-storage properties in the U.S. at a total cost of $22.0 million, inclusive of amounts attributable to the Investor’s interest of $11.5 million. These investments were deemed to be business combinations, and as a result, Carey Storage expensed acquisition-related costs of $0.4 million, inclusive of amounts attributable to the Investor’s interest of $0.2 million.

Scheduled Future Minimum Rents

Scheduled future minimum rents, which are inclusive of those properties in continuing and discontinued operations, exclusive of renewals and expenses paid by tenants and future CPI-based increases under non-cancelable operating leases, at December 31, 2011 are as follows (in thousands):

Years Ending December 31,	Total
2012	$	61,734
2013		59,039
2014		56,844
2015		49,094
2016		40,352

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.

22

Notes to Consolidated Financial Statements

Net Investment in Direct Financing Leases

Net investment in direct financing leases is summarized as follows (in thousands):

	December 31,
	2011			2010
Minimum lease payments receivable	$	29,986		$	57,380
Unguaranteed residual value		57,218			75,595
		87,204			132,975
Less: unearned income		(29,204	)		(56,425	)
	$	58,000		$	76,550

During the years ended December 31, 2010 and 2009, in connection with our annual reviews of our estimated residual values of our properties, we recorded impairment charges related to several direct financing leases of $1.1 million and $2.6 million, respectively. Impairment charges related primarily to other-than-temporary declines in the estimated residual values of the underlying properties due to market conditions (Note 10). In the fourth quarter of 2011, we also recorded $1.6 million in connection with an out-of-period adjustment (Note 2). At December 31, 2011 and 2010, Other assets, net included less than $0.1 million and $0.3 million, respectively, of accounts receivable related to amounts billed under these direct financing leases.

During 2011, we reclassified $17.6 million out of Net investments in direct financing leases in connection with an out-of-period adjustment (Note 2).

Scheduled future minimum rents, which are inclusive of those properties in continuing and discontinued operations, exclusive of renewals and expenses paid by tenants, percentage of sales rents and future CPI-based adjustments, under non-cancelable direct financing leases at December 31, 2011 are as follows (in thousands):

Years Ending December 31,	Total
2012	$	7,999
2013		7,777
2014		5,364
2015		2,831
2016		2,078

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 December 31, 2011 and 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 fourth 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.

23

Notes to Consolidated Financial Statements

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 December 31,				Net Investments in Direct Financing Leases at December 31,
Internal Credit Quality Indicator	2011		2010		2011		2010
1		8		9	$	46,694	$	49,533
2		2		5		11,306		24,447
3		—		—		—		—
4		—		1		—		2,570
5		—		—		—		—
					$	58,000	$	76,550

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.

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 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 December 31,						Carrying Amount of Investment at December 31,
Fund	2011			2010			2011		2010
CPA®:14 (b)		0.0	%		9.2	%		—	$	87,209
CPA®:15		7.7	%		7.1	%	$	93,650		87,008
CPA®:16 – Global (c)		17.9	%		5.6	%		338,964		62,682
CPA®:17 – Global		0.9	%		0.6	%		21,277		8,156
CWI(d)		0.5	%		100.0	%		121		—
							$	454,012	$	245,055

(a) Includes asset management fees receivable, for which shares that will be issued during the subsequent period.

(b) In connection with the CPA^®:14/16 Merger, we earned termination fees of $31.2 million, which were received in shares of CPA^®:14. Upon closing of the CPA^®:14/16 Merger (Note 3), our shares of CPA^®:14 were exchanged into 13,260,091 shares of CPA^®:16 – Global with a fair value of $118.0 million. In connection with this share exchange, we recognized a gain of $2.8 million, which is the difference between the carrying value of our investment in CPA^®:14 and the estimated fair value of consideration received in shares of CPA^®:16 – Global. This gain is included in Other income and (expenses) within our Investment Management segment.

(c) Our investment in CPA^®:16 – Global exceeded 20% of our total assets at December 31, 2011. As such, audited annual financial statements of CPA^®:16 – Global are provided with this Report. In addition to normal operating activities, the increase in carrying value was due to several factors, including (i) our purchase of 13,750,000 shares of CPA^®:16 – Global for $121.0 million; (ii) an increase of $118.0 million as a result of the exchange of our shares of CPA^®:14 into shares of CPA^®:16 – Global in the CPA^®:14/16 Merger; (iii) a $0.3 million contribution to acquire the Special Member Interest in CPA^®:16 – Global’s operating partnership; and (iv) $28.3 million to reflect the receipt of the Special Member Interest in CPA^®:16 – Global’s operating partnership (Note 3).

24

Notes to Consolidated Financial Statements

(d) Prior to 2011, the operating results 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.

The following tables present preliminary 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):

	December 31,
	2011			2010
Assets	$	9,184,111		$	8,533,899
Liabilities		(4,896,116	)		(4,632,709	)
Redeemable noncontrolling interest		(21,306	)		(21,805	)
Noncontrolling interests		(330,873	)		(376,560	)
Shareholders’ equity	$	3,935,816		$	3,502,825

	Years Ended December 31,
	2011			2010			2009
Revenues	$	787,094		$	734,758		$	695,904
Expenses(a)		(605,438	)		(529,328	)		(624,795	)
Net income from continuing operations	$	181,656		$	205,430		$	71,109
Net income (loss) attributable to the REITs(b)	$	123,479		$	189,155		$	(5,173	)

(a) Total net expenses recognized by the REITs during the year ended December 31, 2011 included the following items related to the CPA^®:14/16 Merger: (i) $78.8 million of net gains recognized by CPA^®:14 in connection with the CPA^®:14 Asset Sales, of which our share was approximately $7.4 million; (ii) a net bargain purchase gain of $28.7 million recognized by CPA^®:16 – Global in connection with the CPA^®:14/16 Merger as a result of the fair value of CPA^®:14 exceeding the total merger consideration, of which our share was approximately $5.0 million; (iii) approximately $13.6 million of expenses incurred by CPA^®:16 – Global related to the CPA^®:14/16 Merger, of which our share was approximately $2.4 million; and (iv) a $2.8 million net loss recognized by CPA^®:16 – Global in connection with the prepayment of certain non-recourse mortgages, of which our share was approximately $0.5 million.

(b) Inclusive of impairment charges recognized by the REITs totalling $61.7 million, $40.7 million and $170.0 million during the years ended December 31, 2011, 2010, and 2009, respectively, which reduced our income earned from these investments by $7.8 million, $3.0 million, and $11.5 million, respectively.

We recognized income (loss) from our equity investments in the REITs of $16.9 million, $10.5 million, and $(2.5) million for the years ended December 31, 2011, 2010, and 2009, respectively. In addition, we received distributions from and recorded fee income from the CPA^®:16 – Global and CPA^®:17 – Global operating partnerships totaling $15.5 million, $4.5 million, and $2.2 million for the years ended December 31, 2011, 2010, and 2009, respectively, which we recorded as Income from equity investments in the REITs within the Investment Management segment. We also earned deferred revenue related to our Special Member Interest in the operating partnership of CPA^®:16 – Global of $5.7 million during the year ended December 31, 2011.

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.

25

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 December 31,
Lessee	at December 31, 2011			2011			2010
Carrefour France, SAS(a)		46	%	$	20,014		$	18,274
Schuler A.G.(a) (b)		33	%		19,958			20,493
The New York Times Company		18	%		19,647			20,191
U.S. Airways Group, Inc.(b)		75	%		7,415			7,934
Medica - France, S.A.(a) (c)		46	%		4,430			5,232
Hologic, Inc.(b)		36	%		4,429			4,383
Childtime Childcare, Inc.(d)		34	%		4,419			1,862
Consolidated Systems, Inc.(b)		60	%		3,387			3,388
Hellweg Die Profi-Baumarkte GmbH & Co. KG(a)		5	%		1,062			1,086
Symphony IRI Group, Inc.(e) (g)		33	%		(24	)		3,375
Federal Express Corporation(f) (g) (h)		100	%		—			(4,272	)
Amylin Pharmaceuticals, Inc.(g) (h) (i)		100	%		—			(4,707	)
				$	84,737		$	77,239

(a) The carrying value of the investment is affected by the impact of fluctuations in the exchange rate of the Euro.

(b) Represents a tenancy-in-common interest.

(c) The decrease in carrying value was due to cash distributions made to us by the venture.

(d) In 2011, we made a contribution of $2.1 million to the venture to pay off our share of its maturing mortgage loan.

(e) In 2011, this venture sold one of its properties and distributed the proceeds to the venture partners. Our share of the proceeds was approximately $1.4 million, which exceeded our total investment in the venture at that time.

(f) In 2010, this venture refinanced its maturing non-recourse mortgage debt with new non-recourse financing and distributed the net proceeds to the venture partners. Our share of the distribution was $5.5 million, which exceeded our total investment in the venture at that time.

(g) At December 31, 2011 or 2010, as applicable, we intended to fund our share of the venture’s future operating deficits if the need arose. However, we had no legal obligation to pay for any of the venture’s liabilities nor did we have any legal obligation to fund operating deficits.

(h) In connection with the CPA^®:14/16 Merger in May 2011, we purchased the remaining interest in this investment from CPA^®:14. Subsequent to the acquisition, we consolidate this investment as our ownership interest in the investment is now 100% (Note 4).

(i) In 2007, this venture refinanced its existing non-recourse mortgage debt with new non-recourse financing based on the appraised value of its underlying real estate and distributed the proceeds to the venture partners. Our share of the distribution was $17.6 million, which exceeded our total investment in the venture at that time.

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):

	December 31,
	2011			2010
Assets	$	1,026,124		$	1,151,859
Liabilities		(706,244	)		(818,238	)
Partners’/members’ equity	$	319,880		$	333,621

26

Notes to Consolidated Financial Statements

	Years Ended December 31,
	2011			2010			2009
Revenues	$	118,819		$	146,214		$	119,265
Expenses		(75,992	)		(79,665	)		(61,519	)
Impairment Charge		(40	)		—			—
Net income from continuing operations	$	42,787		$	66,549		$	57,746
Net income attributable to the joint ventures (a)	$	34,225		$	66,549		$	57,746

(a) 2011 is inclusive of an impairment charge of $8.6 million incurred by a venture that leases property to the Symphony IRI Group, Inc. in connection with a potential sale of the property, of which our share was approximately $0.4 million. The venture completed the sale in June 2011.

We recognized income from equity investments in real estate of $13.1 million, $16.0 million, and $13.8 million for the years ended December 31, 2011, 2010, and 2009, 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. Intangible Assets and Goodwill

In connection with our acquisitions of properties, we have recorded net lease intangibles of $76.6 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.

Intangibles and goodwill are summarized as follows (in thousands):

	December 31,
	2011			2010
Amortizable Intangible Assets
Management contracts	$	32,765		$	32,765
Less: accumulated amortization		(30,172	)		(29,035	)
		2,593			3,730
Lease Intangibles:(a)
In-place lease		62,162			23,028
Tenant relationship		10,968			10,251
Above-market rent		9,905			9,737
Less: accumulated amortization		(27,253	)		(26,560	)
		55,782			16,456
Unamortizable Goodwill and Indefinite-Lived Intangible Assets
Goodwill		63,607			63,607
Trade name		3,975			3,975
		67,582			67,582
	$	125,957		$	87,768
Amortizable Below-Market Rent Intangible Liabilities
Below-market rent	$	(6,455	)	$	(1,954	)
Less: accumulated amortization		1,482			1,270
	$	(4,973	)	$	(684	)

(a) 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 16). As of the date of deconsolidation, the subsidiary had lease intangibles consisting of the following: $1.5 million of in-place lease; $1.1 million of tenant relationship, $1.8 million of above-market rent and $4.4 million of accumulated amortization.

27

Notes to Consolidated Financial Statements

Current accounting guidance requires that we test for the recoverability of goodwill at the reporting unit level. The test for recoverability must be conducted at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. We performed our annual test for impairment during the fourth quarter of 2011 and no impairment was indicated.

Net amortization of intangibles was $6.0 million, $5.6 million and $6.6 million for the years ended December 31, 2011, 2010 and 2009, respectively. 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.

Based on the intangible assets and liabilities recorded at December 31, 2011, scheduled annual net amortization of intangibles, which is inclusive of those properties in continuing and discontinued operations, for each of the next five years is as follows (in thousands):

Years Ending December 31,	Total
2012	$	6,236
2013		5,231
2014		4,861
2015		4,706
2016		4,621
Thereafter		27,747
	$	53,402

Note 8. 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 (Note 13). 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.

28

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 December 31, 2011 Using:
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Money market funds	$	35	$	35	$	—	$	—
Other securities		1,535		—		—		1,535
Total	$	1,570	$	35	$	—	$	1,535
Liabilities:
Derivative liabilities	$	4,175	$	—	$	4,175	$	—
Redeemable noncontrolling interest		7,700		—		—		7,700
Total	$	11,875	$	—	$	4,175	$	7,700

			Fair Value Measurements at December 31, 2010 Using:
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (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

29

Notes to Consolidated Financial Statements

	Fair Value Measurements Using
	Significant Unobservable Inputs (Level 3 Only)
	Year Ended December 31, 2011						Year Ended December 31, 2010
	Assets			Liabilities			Assets		Liabilities
	Other Securities			Redeemable Noncontrolling Interest			Other Securities		Redeemable Noncontrolling Interest
Beginning balance	$	1,726		$	7,546		$	1,687	$	7,692
Total gains or losses (realized and unrealized):
Included in earnings		(20	)		1,923			4		1,293
Included in other comprehensive (loss) income		(11	)		(5	)		12		(12	)
Purchases		53			—			23		—
Settlements		(213	)		—			—		—
Distributions paid		—			(1,309	)		—		(956	)
Redemption value adjustment		—			(455	)		—		(471	)
Ending balance	$	1,535		$	7,700		$	1,726	$	7,546
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	$	(20	)	$	—		$	4	$	—

We did not have any transfers into or out of Level 1, Level 2 and Level 3 measurements during the years ended December 31, 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.

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

	December 31, 2011				December 31, 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
Non-recourse and limited-recourse debt	$	356,209	$	361,948	$	255,232	$	255,460
Line of credit		233,160		233,160		141,750		140,600
Deferred acquisition fees receivable		29,410		31,638		31,419		32,485

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 December 31, 2011 and 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.

30

Notes to Consolidated Financial Statements

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):

	Year Ended December 31, 2011						Year Ended December 31, 2010				Year Ended December 31, 2009
	Total Fair Value Measurements			Total Impairment Charges			Total Fair Value Measurements		Total Impairment Charges		Total Fair Value Measurements		Total Impairment Charges
Impairment Charges from Continuing Operations:
Real estate	$	4,623		$	5,359		$	—	$	—	$	823	$	900
Net investments in direct financing leases(a)		—			(1,608	)		3,548		1,140		23,571		2,616
Equity investments in real estate		1,554			206			22,846		1,394		—		—
		6,177			3,957			26,394		2,534		24,394		3,516
Impairment Charges from Discontinued Operations:
Real estate		32,375			6,460			11,662		14,241		9,719		6,908
Intangible assets		5,699			415			—		—		—		—
Intangible liabilities		(416	)		(153	)		—		—		—		—
	$	43,835		$	10,679		$	38,056	$	16,775	$	34,113	$	10,424

(a) In the fourth quarter of 2011, we recorded an out-of-period adjustment of $1.6 million (Note 2).

Note 9. Risk Management and Use of Derivative Financial Instruments

Risk Management

In the normal course of our ongoing business operations, we encounter economic risk. There are three main components of economic risk: interest rate risk, credit risk and market risk. We are primarily subject to interest rate risk on our interest-bearing liabilities. Credit risk is the risk of default on our operations and tenants’ inability or unwillingness to make contractually required payments. Market risk includes changes in the value of our properties and related loans, as well as changes in the value of our other securities and the shares we hold in the REITs due to changes in interest rates or other market factors. In addition, we own investments in the European Union and are subject to the risks associated with changing foreign currency exchange rates.

Foreign Currency Exchange

We are exposed to foreign currency exchange rate movements, primarily in the Euro. We manage foreign currency exchange rate movements by generally placing both our debt obligation to the lender and the tenant’s rental obligation to us in the same currency, but we are subject to foreign currency exchange rate movements to the extent there may be a difference in the timing and amount of the rental obligation and the debt service. We also face challenges with repatriating cash from our foreign investments. We may encounter instances where it is difficult to repatriate cash because of jurisdictional restrictions or because repatriating cash may result in current or future tax liabilities. Realized and unrealized gains and losses related to foreign currency transactions are recognized in earnings and are included in Other income and (expenses) in the consolidated financial statements.

Use of Derivative Financial Instruments

When we use derivative instruments, it is generally to reduce our exposure to fluctuations in interest rates. We have not entered, and do not plan to enter into financial instruments for trading or speculative purposes. In addition to derivative instruments that we entered into on our own behalf, we may also be a party to derivative instruments that are embedded in other contracts, and we may own common stock warrants, granted to us by lessees when structuring lease transactions, that are considered to be derivative instruments. The primary risks related to our use of derivative instruments are that a counterparty to a hedging arrangement could default on its obligation or that the credit quality of the counterparty may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction. While we seek to mitigate these risks by entering into hedging arrangements with counterparties that are large financial institutions that we deem to be creditworthy, it is possible that our hedging transactions, which are intended to

31

Notes to Consolidated Financial Statements

limit losses, could adversely affect our earnings. Furthermore, if we terminate a hedging arrangement, we may be obligated to pay certain costs, such as transaction or breakage fees. We have established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities.

We measure derivative instruments at fair value and record them as assets or liabilities, depending on our rights or obligations under the applicable derivative contract. Derivatives that are not designated as hedges must be adjusted to fair value through earnings. For a derivative designated and qualified as a fair value hedge, the change in the fair value of the derivative is offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings. For a derivative designated and qualified as a cash flow hedge, the effective portion of the change in fair value of the derivative is recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings.

The following table sets forth certain information regarding our derivative instruments for the periods presented (in thousands):

Derivatives Designated as Hedging Instruments		Asset Derivatives Fair Value at December 31,				Liability Derivatives Fair Value at December 31,
	Balance Sheet Location	2011		2010		2011			2010
Interest rate swap	Other assets, net	$	—	$	312	$	—			—
Interest rate swaps	Accounts payable, accrued expenses and other liabilities		—		—		(4,175	)		(969	)
Total derivatives		$	—	$	312	$	(4,175	)	$	(969	)

The following table presents the impact of derivative instruments on Other comprehensive income within our consolidated financial statements (in thousands):

	Amount of Gain (Loss) Recognized in Other comprehensive income  on Derivatives (Effective Portion)
	Years Ended December 31,
Derivatives in Cash Flow Hedging Relationships	2011			2010			2009
Interest rate swaps(a)	$	(3,564	)	$	(45	)	$	(243	)
Total	$	(3,564	)	$	(45	)	$	(243	)

(a) During the years ended December 31, 2011, 2010 and 2009, no gains or losses were reclassified from Other comprehensive income into income related to effective or ineffective portions of hedging relationships or amounts excluded from effectiveness testing.

See below for information on our purposes for entering into derivative instruments and for information on derivative instruments owned by unconsolidated ventures, which are excluded from the tables above.

Interest Rate Swaps and Caps

We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we attempt to obtain mortgage financing on a long-term, fixed-rate basis. However, from time to time, we or our venture partners may obtain variable rate non-recourse mortgage loans and, as a result, may enter into interest rate swap agreements or interest rate cap agreements with counterparties. Interest rate swaps, which effectively convert the variable-rate debt service obligations of the loan to a fixed rate, are agreements in which one party exchanges a stream of interest payments for a counterparty’s stream of cash flow over a specific period. The notional, or face, amount on which the swaps are based is not exchanged. Interest rate caps limit the effective borrowing rate of variable rate debt obligations while allowing participants to share in downward shifts in interest rates. Our objective in using these derivatives is to limit our exposure to interest rate movements.

32

Notes to Consolidated Financial Statements

The interest rate swap derivative instruments that we had outstanding at December 31, 2011 were designated as cash flow hedges and are summarized as follows (dollars in thousands):

Instrument	Type	Notional Amount		Effective Interest Rate			Effective Date		Expiration Date		Fair Value
3-Month Euribor(a)	“Pay-fixed” swap	$	8,242		4.2	%		3/2008		3/2018	$	(1,065	)
1-Month LIBOR	“Pay-fixed” swap		4,557		3.0	%		4/2010		4/2015		(297	)
1-Month LIBOR	“Pay-fixed” swap		34,218		3.0	%		7/2010		7/2020		(2,813	)
											$	(4,175	)

(a) Amounts are based upon the exchange rate of the Euro at December 31, 2011.

The interest rate cap derivative instruments that our unconsolidated ventures had outstanding at December 31, 2011 were designated as cash flow hedges and are summarized as follows (dollars in thousands):

Instrument	Ownership Interest in Venture at December 31, 2011			Type	Notional Amount		Cap Rate			Spread			Effective Date		Expiration Date		Fair Value
3-Month LIBOR		17.75	%	Interest rate cap	$	122,679		4.0	% (a)		4.8	%		8/2009		8/2014	$	80
1-Month LIBOR		78.95	%	Interest rate cap		17,793		3.0	% (b)		4.0	%		9/2009		4/2014		6
																	$	86

(a) The applicable interest rate of the related loan was 2.9% at December 31, 2011; therefore, the interest rate cap was not being utilized at that date.

(b) The applicable interest rate of the related loan was 4.3% at December 31, 2011; therefore, the interest rate cap was not being utilized at that date.

Other

Amounts reported in Other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our non-recourse variable-rate debt. At December 31, 2011, we estimate that an additional $1.4 million will be reclassified as interest expense during the next twelve months.

We measure credit exposure on a counterparty basis as the net positive aggregate estimated fair value, net of collateral received, if any. None was received as of December 31, 2011. The total credit exposure as of December 31, 2011 was less than $0.1 million.

Some of the agreements we have with derivative counterparties contain certain credit contingent provisions that could result in a declaration of default against us regarding our derivative obligations if we either default or are capable of being declared in default on certain of our indebtedness. At December 31, 2011, we had not been declared in default on any of our derivative obligations. The estimated fair value of our derivatives that were in a net liability position was $4.3 million at December 31, 2011, which includes accrued interest but excludes any adjustment for nonperformance risk. If we had breached any of these provisions at December 31, 2011, we could have been required to settle our obligations under these agreements at their termination value of $4.8 million.

33

Notes to Consolidated Financial Statements

Portfolio Concentration Risk

Concentrations of credit risk arise when a group of tenants is engaged in similar business activities or is subject to similar economic risks or conditions that could cause them to default on their lease obligations to us. We regularly monitor our portfolio to assess potential concentrations of credit risk. While we believe our portfolio is reasonably well diversified, it does contain concentrations in excess of 10%, based on the percentage of our annualized contractual minimum base rent at December 31, 2011, in certain areas, as shown in the table below. The percentages in the table below represent our directly-owned real estate properties and do not include our pro rata share of equity investments.

	December 31, 2011
Region:
Texas		19	%
California		17	%
Tennessee		13	%
Georgia		10	%
All other U.S.		31	%
Total U.S.		90	%
Total Europe		10	%
Total		100	%
Asset Type:
Office		44	%
Industrial		30	%
Warehouse/Distribution		16	%
All others		10	%
Total		100	%
Tenant Industry:
Business and commercial services		19	%
Transportation - Cargo		11	%
All others		70	%
Total		100	%

Except for our investment in CPA^®:16 – Global, there were no significant concentrations, individually or in the aggregate, related to our unconsolidated ventures. At December 31, 2011, we owned 17.9% of CPA^®:16 – Global, which had total assets of approximately $3.6 billion consisting of a portfolio comprised of full or partial ownership interests in 512 properties substantially all of which were triple-net leased to 150 tenants, and had certain concentrations within its portfolio, which are outlined in its periodic filings.

Note 10. 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 then perform a future net cash flow analysis discounted for inherent risk associated with each investment.

34

Notes to Consolidated Financial Statements

The following table summarizes impairment charges recognized on our consolidated and unconsolidated real estate investments for all periods presented (in thousands):

	Years Ended December 31,
	2011			2010		2009
Real estate	$	5,359		$	—	$	900
Net investments in direct financing leases		(1,608	)		1,140		2,616
Total impairment charges included in expenses		3,751			1,140		3,516
Equity investments in real estate(a)		206			1,394		—
Total impairment charges included in continuing operations		3,957			2,534		3,516
Impairment charges included in discontinued operations		6,722			14,241		6,908
Total impairment charges	$	10,679		$	16,775	$	10,424

(a) Impairment charges on our equity investments in real estate are included in Income from equity investments in real estate and the REITs within the consolidated financial statements.

Real Estate

During the years ended December 31, 2011 and 2009, we recognized impairment charges on various properties totaling $5.4 million and $0.9 million, respectively. These impairments were primarily the result of writing down the properties’ carrying values to their respective estimated fair values in connection with potential sales subsequent to tenants vacating or not renewing their leases.

Direct Financing Leases

In connection with our annual review of the estimated residual values on our properties classified as net investments in direct financing leases, we determined that an other-than-temporary decline in estimated residual value had occurred at various properties due to market conditions. The changes in estimates resulted in the recognition of impairment charges totaling $1.1 million and $2.6 million in 2010 and 2009, respectively. In the fourth quarter of 2011, we recorded an out-of-period adjustment of $1.6 million (Note 2).

Equity Investments in Real Estate

During the year ended December 31, 2011, we recognized an other-than-temporary impairment charge of $0.2 million on a venture as a result of the anticipated sale of the venture property. The venture completed the sale of its property in the third quarter of 2011. In connection with our annual review of the fair value of our equity investments, we recognized an other-than-temporary impairment charge of $1.4 million during the year ended December 31, 2010 to reflect the decline in the estimated fair value of the venture’s underlying net assets in comparison with the carrying value of our interest in the venture.

Properties Sold

During the years ended December 31, 2011, 2010 and 2009, we recognized impairment charges on properties sold totaling $6.7 million, $14.2 million and $6.9 million, respectively. These impairment charges, which are included in discontinued operations, were the result of reducing these properties’ carrying values to their estimated fair values (Note 16) in connection with anticipated sales.

Note 11. Debt

Line of Credit

At December 31, 2010, we had a $250.0 million unsecured revolving line of credit that was scheduled to mature in June 2012. On May 2, 2011, we obtained a $30.0 million secured revolving line of credit from Bank of America that was coterminous with the unsecured line of credit, expiring in June 2012. In December 2011, we terminated the secured and unsecured lines of credit. We entered into a new unsecured revolving line of credit in order to extend the maturity and to provide for additional commitments as described below and accounted for this transaction as a modification of the original loan and capitalized the related financing costs totaling $6.7 million, which will be amortized to interest expense over the remaining term of the credit facility. The previous unsecured revolving line of credit had an outstanding balance of $233.2 million, which we rolled over to the new unsecured line of credit. The secured line of credit had no outstanding balance on the date of termination.

35

Notes to Consolidated Financial Statements

The new line of credit provides for an aggregate principal amount of up to $450.0 million that matures in December 2014, but may be extended by one year at our option, subject to the conditions provided in the credit agreement. At our election, the principal amount available under the new line of credit may be increased by up to an additional $125.0 million, subject to the conditions provided in the credit facility agreement. The new line of credit also permits (i) up to $150.0 million under the line of credit to be borrowed in certain currencies other than the U.S. dollars, (ii) swing line loans of up to $35.0 million under the line of credit, and (iii) the issuance of letters of credit under the line of credit in an aggregate amount not to exceed $50.0 million.

The new line of credit provides for an annual interest rate, at our election, of either (i) the Eurocurrency Rate or (ii) the Base Rate, in each case plus the Applicable Rate (each as defined in the credit agreement). Prior to us obtaining an Investment Grade Debt Rating (as defined in the credit agreement), the Applicable Rate on Eurocurrency Rate loans and letters of credit ranges from 1.75% to 2.50% and the Applicable Rate on Base Rate loans ranges from 0.75% to 1.50%. After an Investment Grade Debt Rating has been obtained, the Applicable Rate on Eurocurrency Rate loans and letters of credit ranges from 1.10% to 2.00% and the Applicable Rate on Base Rate loans ranges from 0.10% to 1.00%. Swing line loans will bear interest at the Base Rate plus the Applicable Rate then in effect. In addition, prior to obtaining an Investment Grade Debt Rating, we pay a quarterly fee ranging from 0.3% to 0.4% of the unused portion of the line of credit, depending on our leverage ratio. After an Investment Grade Debt Rating has been obtained, we will pay a facility fee ranging from 0.2% to 0.4% of the total commitment. At December 31, 2011, the outstanding balance on this line of credit was $233.2 million with an annual interest rate consisting of a Base Rate of 3.5% plus 0.5%. On January 2, 2012, we converted the interest rate to a Eurocurrency Rate, which is equal to LIBOR of 0.30% plus 1.75%. In addition, as of December 31, 2011, our lenders had issued letters of credit totaling $6.8 million on our behalf in connection with certain contractual obligations. At December 31, 2011, the line of credit had unused capacity of $210.0 million, reflecting outstanding letters of credit, which reduce amounts that may be drawn. The line of credit is expected to be utilized primarily for potential new investments, repayment of existing debt and general corporate purposes.

The line of credit requires us to ensure that the total Restricted Payments (as defined in the credit agreement) made in the current quarter, when added to the total for the three preceding fiscal quarters, does not exceed 90% of Adjusted Total EBITDA (as defined in the credit agreement), for the four preceding fiscal quarters. Restricted Payments include quarterly dividends and the total amount of shares repurchased by us, if any, in excess of $10.0 million per year. In addition to placing limitations on dividend distributions and share repurchases, the credit agreement stipulates six financial covenants that require us to maintain the following ratios and benchmarks at the end of each quarter (the quoted variables are specifically defined in the credit facility agreement):

(i) a “maximum leverage” ratio, which requires us to maintain a ratio for “total outstanding indebtedness” to “total value” of 60% or less;

(ii) a “maximum secured debt” ratio, which requires us to maintain a ratio for “total secured outstanding indebtedness” (inclusive of permitted “indebtedness of subsidiaries”) to “total value” of 40% or less;

(iii) a “minimum combined equity value,” which requires us to maintain a “total value” less “total outstanding indebtedness” of at least $850.0 million. This amount must be adjusted in the event of any securities offering by adding 80% of the “fair market value of all net offering proceeds;”

(iv) a “minimum fixed charge coverage ratio,” which requires us to maintain a ratio for “adjusted total EBITDA” to “fixed charges” of 1.40 to 1.00;

(v) a “minimum unsecured interest coverage ratio,” which requires us to maintain a ratio of “unencumbered property NOI plus unencumbered management EBITDA” to “interest expense on total unsecured outstanding indebtedness of 2.00 to 1.00; and

(vi) a limitation on “recourse indebtedness,” which prohibits us from incurring additional secured indebtedness other than “non-recourse indebtedness” or indebtedness that is recourse to us that exceeds $75.0 million or 5% of the “total value,” whichever is greater.

We were in compliance with these covenants at December 31, 2011.

Non-Recourse and Limited-Recourse Debt

Non-recourse and limited-recourse debt consists of mortgage notes payable, which are collateralized by the assignment of real property, and direct financing leases, with an aggregate carrying value of $458.6 million at December 31, 2011. Our mortgage notes payable had fixed annual interest rates ranging from 3.1% to 7.8% and variable annual interest rates ranging from 2.8% to 7.3% with maturity dates ranging from 2012 to 2025 at December 31, 2011.

36

Notes to Consolidated Financial Statements

2011 — In connection with our acquisition of three properties from CPA^®:14 in May 2011 as part of the CPA^®:14 Asset Sales (Note 4), we assumed two non-recourse mortgages with an aggregate fair value of $87.6 million (and a carrying value of $88.7 million) on the date of acquisition and recorded a net fair market value adjustment of $1.1 million. The fair market value adjustment will be amortized to interest expense over the remaining lives of the loans. These mortgages have a weighted-average annual fixed interest rate and remaining term of 5.8% and 8.3 years, respectively.

During the year ended December 31, 2011, we refinanced two maturing non-recourse mortgages totaling $10.5 million with new financing totaling $11.9 million and obtained new financing on two unencumbered properties totalling $29.0 million, of which $24.0 million was limited-recourse. These mortgage loans have a weighted-average annual interest rate and term of 5.1% and 10.4 years, respectively. Additionally, during the year ended December 31, 2011, the Carey Storage Venture borrowed a total of $4.6 million, inclusive of amounts attributable to the Investor’s interest of $2.8 million, with a weighted-average annual interest rate and term of 6.7% and 8.2 years, respectively.

2010 — In connection with an acquisition in February 2010, we obtained non-recourse mortgage financing of $35.0 million at an annual interest rate of LIBOR plus 2.5% that has been fixed at 5.5% through the use of an interest rate swap. This financing has a term of 10 years.

In connection with their acquisitions in 2010, the Carey Storage Venture and an entity 100% owned by Carey Storage obtained new non-recourse mortgage financing and assumed existing mortgage loans from the sellers totaling $17.1 million, inclusive of amounts attributable to the Investor’s interest of $8.2 million. The mortgage loans have a weighted-average annual fixed interest rate and term of 6.3% and 8.5 years, respectively.

2009 — In 2009, the Carey Storage Venture repaid in full the $35.0 million outstanding balance on its secured credit facility at a discount for $28.0 million, terminated the facility, and recognized a gain of $7.0 million on the repayment of this debt, inclusive of the Investor’s interest of $4.2 million. The debt repayment was financed with a portion of the proceeds from the exchange of the 60% interest and non-recourse debt with a new lender totaling $25.0 million at an annual fixed interest rate of 7% and term of 10 years with a rate reset after five years. The gain recognized on the debt repayment and the Investor’s interest in this gain are both reflected in Other income and (expenses) in the consolidated financial statements.

Scheduled Debt Principal Payments

Scheduled debt principal payments during each of the next five calendar years following December 31, 2011 and thereafter are as follows (in thousands):

Years Ending December 31,	Total
2012	$	37,518
2013		9,131
2014 (a)		246,081
2015		49,160
2016		58,167
Thereafter through 2025		190,357
		590,414
Fair market value adjustments		(1,045	)
Total	$	589,369

(a) Includes $233.2 million outstanding under our new unsecured line of credit at December 31, 2011, which is scheduled to mature in 2014 unless extended pursuant to its terms.

Certain amounts in the table above are based on the applicable foreign currency exchange rate at December 31, 2011.

37

Notes to Consolidated Financial Statements

Note 12. Commitments and Contingencies

At December 31, 2011, we were not involved in any material litigation.

Various claims and lawsuits arising in the normal course of business are pending against us. The results of these proceedings are not expected to have a material adverse effect on our consolidated financial position or results of operations.

We have provided certain representations in connection with divestitures of certain of our properties. These representations address a variety of matters including environmental liabilities. We are not aware of any claims or other information that would give rise to material payments under such representations.

Note 13. Equity

Distributions Payable

We declared a quarterly distribution of $0.563 per share in December 2011, which was paid in January 2012 to shareholders of record at December 31, 2011; and a quarterly distribution of $0.510 per share in December 2010, which was paid in January 2011 to shareholders of record at December 31, 2010.

Redeemable Noncontrolling Interest

On June 30, 2003, WPCI granted an incentive award to two officers of WPCI consisting of 1,500,000 restricted units, representing an approximate 13% interest in WPCI, and 1,500,000 options for WPCI units with a combined fair value of $2.5 million at that date. Both the options and restricted units vested ratably over five years, with full vesting occurring December 31, 2007. During 2008, the officers exercised all of their 1,500,000 options to purchase 1,500,000 units of WPCI at $1 per unit. Upon the exercise of the WPCI options, the officers had a total interest of approximately 23% in WPCI. The terms of the vested restricted units and units received in connection with the exercise of options of WPCI by noncontrolling interest holders provided that the units could be redeemed, commencing December 31, 2012 and thereafter, solely in exchange for our shares and that any redemption would be subject to a third-party valuation of WPCI. In connection with a reorganization of WPCI into three separate entities in 2008, the officers also owned equivalent interests in the three new entities.

In December 2009, one of those officers resigned from W. P. Carey, WPCI and all affiliated entities pursuant to a mutually agreed separation. As part of this separation, we effected the purchase of all of the interests in WPCI and certain related entities held by that officer for cash, at a negotiated fair market value of $15.4 million. The tax effect of approximately $4.8 million relating to the acquisition of this interest, which resulted in an increase in contributed capital, was recorded as an adjustment to Listed shares in the consolidated balance sheets. The remaining officer currently has a total interest of approximately 7.7% in each of WPCI and the related entities.

We account for the noncontrolling interest in WPCI held by the officer as a redeemable noncontrolling interest, as we have an obligation to repurchase the interest from that officer for shares of our common stock, subject to certain conditions. As the redemption provisions include certain terms that are not solely within our control, the noncontrolling interest is classified as redeemable. The officer’s interest is reflected at estimated redemption value for all periods presented. Redeemable noncontrolling interests, as presented on the consolidated balance sheets, reflect adjustments of $(0.5) million, $(0.5) million and $6.8 million at December 31, 2011, 2010 and 2009, respectively, to present the officer’s interest at redemption value.

38

Notes to Consolidated Financial Statements

The following table presents a reconciliation of redeemable noncontrolling interest (in thousands):

	Years Ended December 31,
	2011			2010			2009
Beginning balance	$	7,546		$	7,692		$	18,085
Redemption value adjustment		(455	)		(471	)		6,773
Net income		1,923			1,293			2,258
Distributions		(1,309	)		(956	)		(4,056	)
Purchase of noncontrolling interests		—			—			(15,380	)
Change in other comprehensive (loss) income		(5	)		(12	)		12
Ending balance	$	7,700		$	7,546		$	7,692

Accumulated Other Comprehensive Loss

The following table presents the components of accumulated other comprehensive loss reflected in equity, net of tax. Amounts include our proportionate share of other comprehensive income or loss from our unconsolidated investments (in thousands):

	December 31,
	2011			2010
Unrealized gain on marketable securities	$	37		$	48
Unrealized loss on derivative instruments		(5,246	)		(1,658	)
Foreign currency translation adjustment		(3,298	)		(1,853	)
Accumulated other comprehensive loss	$	(8,507	)	$	(3,463	)

Earnings Per Share

Under current authoritative guidance for determining earnings per share, all unvested share-based payment awards that contain non-forfeitable rights to distributions are considered to be participating securities and therefore are included in the computation of earnings per share under the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common shares and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Our unvested RSUs contain rights to receive non-forfeitable distribution equivalents, and therefore we apply the two-class method of computing earnings per share. The calculation of earnings per share below excludes the income attributable to the unvested RSUs from the numerator. The following table summarizes basic and diluted earnings per share for the periods indicated (in thousands, except share amounts):

	Years Ended December 31,
	2011			2010			2009
Net income attributable to W. P. Carey members	$	139,079		$	73,972		$	69,023
Allocation of earnings to participating unvested RSUs		(2,130	)		(440	)		(1,127	)
Net income – basic		136,949			73,532			67,896
Income effect of dilutive securities, net of taxes		—			724			1,250
Net income – diluted	$	136,949		$	74,256		$	69,146
Weighted average shares outstanding – basic		39,819,475			39,514,746			39,019,709
Effect of dilutive securities		278,620			493,148			693,026
Weighted average shares outstanding – diluted		40,098,095			40,007,894			39,712,735

Securities included in our diluted earnings per share determination consist of stock options and restricted stock awards. Securities totaling 207,258 shares, 247,750 shares and 485,408 shares for the years ended December 31, 2011, 2010 and 2009, respectively, were excluded from the earnings per share computations above as their effect would have been anti-dilutive.

In January 2012, the Compensation Committee approved long-term incentive plan awards to key employees consisting of 168,900 RSUs and 282,400 PSUs that could have a dilutive impact on our earnings per share calculation.

39

Notes to Consolidated Financial Statements

Share Repurchase Programs

In December 2008, the Executive Committee of our board of directors (the “Executive Committee”) approved a program to repurchase up to $10.0 million of our common stock through March 4, 2009 or the date the maximum was reached, if earlier. During the term of this program, we repurchased a total of $9.3 million of our common stock. In March 2009, the Executive Committee approved an additional program to repurchase up to $3.5 million of our common stock through March 27, 2009 or the date the maximum was reached, if earlier. During the term of this program, we repurchased a total of $2.8 million of our common stock.

Note 14. Stock-Based and Other Compensation

Stock-Based Compensation

At December 31, 2011, we maintained several stock-based compensation plans as described below. The total compensation expense (net of forfeitures) for awards issued under these plans was $17.8 million, $7.4 million and $9.3 million for the years ended December 31, 2011, 2010 and 2009, respectively, all of which are included in General and administrative expenses in the consolidated financial instruments. Stock-based compensation expense for the year ended December 31, 2011 included an additional $4.5 million of compensation expense as a result of revising the expected vesting of PSUs granted during 2009 and 2010. Stock-based compensation expense for the year ended December 31, 2010 included net forfeitures of $2.0 million as a result of the resignation of two senior officers. The tax benefit recognized by us related to these awards totaled $7.8 million, $3.3 million and $4.2 million for the years ended December 31, 2011, 2010 and 2009, respectively.

2009 Incentive Plan and 1997 Incentive Plans

We maintain the 1997 Share Incentive Plan (as amended, the “1997 Incentive Plan”), which authorized the issuance of up to 6,200,000 shares of our common stock. In June 2009, our shareholders approved the 2009 Share Incentive Plan (the “2009 Incentive Plan”) to replace the 1997 Incentive Plan, except with respect to outstanding contractual obligations under the 1997 Incentive Plan, so that no further awards can be made under that plan. The 2009 Incentive Plan authorizes the issuance of up to 3,600,000 shares of our common stock, of which 1,102,605 were issued or reserved for issuance upon vesting of RSUs and PSUs at December 31, 2011. The 1997 Incentive Plan provided for the grant of (i) share options, which may or may not qualify as incentive stock options under the Code, (ii) performance shares or PSUs, (iii) dividend equivalent rights and (iv) restricted shares or RSUs. The 2009 Incentive Plan provides for the grant of (i) share options, (ii) restricted shares or RSUs, (iii) performance shares or PSUs, and (iv) dividend equivalent rights. The vesting of grants under both plans is accelerated upon a change in our control and under certain other conditions.

In December 2007, the Compensation Committee approved the long-term incentive plan (“LTIP”) and terminated further contributions to the Partnership Equity Unit Plan described below. The following table presents LTIP awards granted in the past three years:

2009 Incentive Plan					1997 Incentive Plan
Fiscal Year	RSUs awarded		PSUs Awarded		Fiscal Year	RSUs awarded		PSUs Awarded
2010		140,050		159,250	2009		126,050		152,000
2011 (a)		524,550		291,600

(a) Includes 340,000 RSUs and 100,000 PSUs issued in connection with entering into employment agreements with certain employees, and excludes 20,000 PSUs for which the terms and conditions were not determined at the time of grant.

As a result of issuing the LTIP awards, we currently expect to recognize compensation expense totaling approximately $47.9 million over the vesting period, of which $15.7 million, $5.7 million and $4.2 million was recognized during 2011, 2010 and 2009, respectively.

2009 Non-Employee Directors Incentive Plan and 1997 Non-Employee Directors’ Plan

We maintain the 1997 Non-Employee Directors’ Plan (the “1997 Directors’ Plan”), which authorized the issuance of up to 300,000 shares of our Common Stock. In June 2007, the 1997 Director’s Plan, which had been due to expire in October 2007, was extended through October 2017. In June 2009, our shareholders approved the 2009 Non-Employee Directors’ Incentive Plan (the “2009 Directors’ Plan”) to replace the 1997 Directors’ Plan, except with respect to outstanding contractual obligations under the predecessor plan, so that no further awards can be made under that plan. The 1997 Directors’ Plan provided for the grant of (i) share options,

40

Notes to Consolidated Financial Statements

which may or may not qualify as incentive stock options, (ii) performance shares, (iii) dividend equivalent rights and (iv) restricted shares. The 2009 Directors’ Plan authorizes the issuance of 325,000 shares of our common stock in the aggregate and initially provided for the automatic annual grant of RSUs with a total value of $50,000 to each director. In January 2011, the Compensation Committee approved an increase in the value of the annual grant to $70,000 per director, effective as of July 1, 2011. In the discretion of our board of directors, the awards may also be in the form of share options or restricted shares, or any combination of the permitted awards. At December 31, 2011, there were 64,905 shares issued or reserved for issuance upon vesting of RSUs under this plan.

Employee Share Purchase Plan

We sponsor an Employee Share Purchase Plan (“ESPP”) pursuant to which eligible employees may contribute up to 10% of compensation, subject to certain limits, to purchase our common stock. Employees can purchase stock semi-annually at a price equal to 85% of the fair market value at certain plan defined dates. Compensation expense under this plan for the years ended December 31, 2011, 2010 and 2009 was $0.6 million, $0.2 million and $0.4 million, respectively.

Partnership Equity Unit Plan

During 2003, we adopted a non-qualified deferred compensation plan (the “Partnership Equity Plan”, or “PEP”) under which a portion of any participating officer’s cash compensation in excess of designated amounts was deferred and the officer was awarded Partnership Equity Plan Units (“PEP Units”). The value of each PEP Unit was intended to correspond to the value of a share of the CPA^® REIT designated at the time of such award. During 2005, further contributions to the initial PEP were terminated and it was succeeded by a second PEP. As amended, payment under these plans will occur at the earlier of December 16, 2013 (in the case of the initial PEP) or twelve years from the date of award. The award is fully vested upon grant. Each of the PEPs is a deferred compensation plan and is therefore considered to be outside the scope of current accounting guidance for stock-based compensation and subject to liability award accounting. The value of each PEP Unit will be adjusted to reflect the underlying appraised value of the designated CPA^® REIT. Additionally, each PEP Unit will be entitled to distributions equal to the distribution rate of the CPA^® REIT. All issuances of PEP Units, changes in the fair value of PEP Units and distributions paid are included in our compensation expense.

The plans are carried at fair value each quarter and are subject to changes in the fair value of the PEP units. Compensation expense under these Plans for the years ended December 31, 2011, 2010 and 2009 was less than $0.1 million, $0.1 million and $0.2 million, respectively. Further contributions to the second PEP were terminated at December 31, 2007; however, this termination did not affect any awardees’ rights pursuant to awards granted under this plan. In December 2008, participants in the PEPs were required to make an election to either (i) remain in the PEPs, (ii) receive cash for their PEP Units (available to former employees only) or (iii) convert their PEP Units to fully vested RSUs (available to current employees only) to be issued under the 1997 Incentive Plan on June 15, 2009. Substantially all of the PEP participants elected to receive cash or convert their existing PEP Units to RSUs. In January 2009, we paid $2.0 million in cash to former employee participants who elected to receive cash for their PEP Units. As a result of the election to convert PEP Units to RSUs, we derecognized $9.3 million of our existing PEP liability and recorded a deferred compensation obligation within W. P. Carey members’ equity in the same amount during the second quarter of 2009. The PEP participants that elected RSUs received a total of 356,416 RSUs, which was equal to the total value of their PEP Units divided by the closing price of our common stock on June 15, 2009. The PEP participants electing to receive RSUs were required to defer receipt of the underlying shares of our common stock for a minimum of two years. While employed by us, these participants are entitled to receive dividend equivalents equal to the amount of dividends paid on the underlying common stock during the deferral period. At December 31, 2011, we are obligated to issue 108,441 shares of our common stock underlying these RSUs, which is recorded within W. P. Carey members’ equity as a Deferred compensation obligation of $2.8 million. The remaining PEP liability pertaining to participants who elected to remain in the plans was $0.7 million at December 31, 2011.

41

Notes to Consolidated Financial Statements

Stock Options

Option activity and changes for all periods presented were as follows:

	Year Ended December 31, 2011
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value
Outstanding at beginning of year		1,699,701		$	28.57
Exercised		(449,660	)		27.71
Forfeited / Expired		(42,000	)		32.85
Outstanding at end of year		1,208,041		$	28.73		3.29	$	14,582,357
Vested and expected to vest at end of year		1,194,123		$	28.81		3.29	$	14,484,260
Exercisable at end of year		959,779		$	28.36		2.95	$	12,073,268

	Years Ended December 31,
	2010							2009
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)		Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)
Outstanding at beginning of year		2,255,604		$	27.55				2,543,239		$	27.16
Exercised		(399,507	)		22.26				(201,701	)		22.29
Forfeited / Expired		(156,396	)		30.24				(85,934	)		28.46
Outstanding at end of year		1,699,701		$	28.57		4.26		2,255,604		$	27.55		4.80
Exercisable at end of year		1,231,683		$	27.86				2,220,902		$	27.50

Options granted under the 1997 Incentive Plan generally have a 10-year term and generally vest in four equal annual installments. Options granted under the 1997 Directors’ Plan have a 10-year term and vest generally over three years from the date of grant. We have not issued option awards since 2008. The total intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009 was $4.6 million, $2.8 million and $1.0 million, respectively.

At December 31, 2011, approximately $24.4 million of total unrecognized compensation expense related to nonvested stock-based compensation awards was expected to be recognized over a weighted-average period of approximately 2.3 years.

We have the ability and intent to issue shares upon stock option exercises. Historically, we have issued authorized but unissued common stock to satisfy such exercises. Cash received from stock option exercises and purchases under the ESPP during the years ended December 31, 2011, 2010 and 2009 was $1.2 million, $3.7 million and $1.5 million, respectively.

42

Notes to Consolidated Financial Statements

Restricted and Conditional Awards

Nonvested restricted stock, RSUs and PSUs at December 31, 2011 and changes during the years ended December 31, 2011 and 2010 were as follows:

	Restricted Stock and RSU Awards					PSU Awards
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2009		454,452		$	30.50		90,469		$	37.88
Granted		159,362			23.97		152,000			30.42
Vested (a)		(194,741	)		29.77		—			—
Forfeited		(37,195	)		23.00		(20,625	)		32.33
Adjustment (b)		—			—		(51,469	)		26.50
Nonvested at December 31, 2009		381,878			28.87		170,375			32.33
Granted		156,682			28.34		159,250			36.16
Vested (a)		(175,225	)		28.58		—			—
Forfeited		(99,515	)		29.75		(65,725	)		36.26
Adjustment (b)		—			—		(19,906	)		28.49
Nonvested at December 31, 2010		263,820			28.42		243,994			36.18
Granted		541,890			34.65		291,600			46.66
Vested (a)		(162,437	)		30.48		(48,925	)		39.78
Forfeited		(18,480	)		29.32		(14,055	)		42.14
Adjustment (b)		—			—		200,814			22.65
Nonvested at December 31, 2011		624,793		$	33.26		673,428		$	36.30

(a) The total fair value of shares vested during the years ended December 31, 2011, 2010 and 2009 was $6.9 million, $5.0 million and $7.2 million, respectively.

(b) Vesting and payment of the PSUs is conditional on certain company and market performance goals being met during the relevant three-year performance period. The ultimate number of PSUs to be vested will depend on the extent to which the performance goals are met and can range from zero to three times the original awards. Pursuant to a review of our current and expected performance versus the performance goals, we revised our estimate of the ultimate number of certain of the PSUs to be vested. As a result, we recorded an adjustment in 2011, 2010 and 2009 to reflect the number of shares expected to be issued when the PSUs vest.

At the end of each reporting period, we evaluate the ultimate number of PSUs we expect to vest based upon the extent to which we have met and expect to meet the performance goals and where appropriate revise our estimate and associated expense. We do not adjust the associated expense for revision on PSUs expected to vest based on market performance. Upon vesting, the RSUs and PSUs may be converted into shares of our common stock. Both the RSUs and PSUs carry dividend equivalent rights. Dividend equivalent rights on RSUs are paid in cash on a quarterly basis whereas dividend equivalent rights on PSUs accrue during the performance period and may be converted into additional shares of common stock at the conclusion of the performance period to the extent the PSUs vest. Dividend equivalent rights are accounted for as a reduction to retained earnings to the extent that the awards are expected to vest. For awards that are not expected to vest or do not ultimately vest, dividend equivalent rights are accounted for as additional compensation expense.

Other Compensation

Profit-Sharing Plan

We sponsor a qualified profit-sharing plan and trust that generally permits all employees, as defined by the plan, to make pre-tax contributions into the plan. We are under no obligation to contribute to the plan and the amount of any contribution is determined by and at the discretion of our board of directors. Our board of directors can authorize contributions to a maximum of 15% of an eligible participant’s compensation, limited to less than $0.1 million annually per participant. For the years ended December 31, 2011, 2010 and 2009, amounts expensed for contributions to the trust were $3.8 million, $3.3 million and $3.3 million, respectively, which were

43

Notes to Consolidated Financial Statements

included in General and administrative expenses in the accompanying consolidated financial statements. The profit-sharing plan is a deferred compensation plan and is therefore considered to be outside the scope of current accounting guidance for stock-based compensation.

Other

We have employment contracts with certain senior executives. These contracts provide for severance payments in the event of termination under certain conditions including a change of control. During 2011, 2010 and 2009, we recognized severance costs totaling approximately $0.4 million, $1.1 million and $1.7 million, respectively, related to several former employees who did not have employment contracts. Such costs are included in General and administrative expenses in the accompanying consolidated financial statements.

Note 15. Income Taxes

The components of our provision for income taxes for the periods presented are as follows (in thousands):

	Years Ended December 31,
	2011		2010			2009
Federal
Current	$	17,834	$	17,737		$	19,796
Deferred		6,867		(2,409	)		(6,388	)
		24,701		15,328			13,408
State, Local and Foreign
Current		10,545		12,243			12,713
Deferred		1,968		(1,756	)		(3,337	)
		12,513		10,487			9,376
Total Provision	$	37,214	$	25,815		$	22,784

Deferred income taxes at December 31, 2011 and 2010 consist of the following (in thousands):

	At December 31,
	2011			2010
Deferred tax assets
Unearned and deferred compensation	$	12,598		$	14,937
Other		3,465			82
		16,063			15,019
Deferred tax liabilities
Receivables from affiliates		(14,378	)		(14,290	)
Investments		(45,812	)		(35,267	)
Other		—			(755	)
		(60,190	)		(50,312	)
Net deferred tax liability	$	(44,127	)	$	(35,293	)

44

Notes to Consolidated Financial Statements

A reconciliation of the provision for income taxes with the amount computed by applying the statutory federal income tax rate to income before provision for income taxes for the periods presented is as follows (in thousands):

	Years Ended December 31,
	2011				2010				2009
Pre-tax income from taxable subsidiaries	$	78,561			$	49,253			$	41,943
Federal provision at statutory tax rate (35%)		27,496	35.0	%		17,238	35.0	%		14,680	35.0	%
State and local taxes, net of federal benefit		7,409	9.4	%		4,303	8.7	%		4,246	10.1	%
Amortization of intangible assets		486	0.6	%		854	1.7	%		855	2.0	%
Other		286	0.4	%		272	0.6	%		101	0.3	%
Tax provision — taxable subsidiaries		35,677	45.4	%		22,667	46.0	%		19,882	47.4	%
Other state, local and foreign taxes		1,537				3,148				2,902
Total provision	$	37,214			$	25,815			$	22,784

Included in Income taxes, net in the consolidated balance sheets at December 31, 2011 and 2010 are accrued income taxes totaling $0.7 million and $6.1 million, respectively, and deferred income taxes totaling $44.1 million and $35.3 million, respectively.

We have elected to be treated as a partnership for U.S. federal income tax purposes. As partnerships, we and our partnership subsidiaries are generally not directly subject to tax. We conduct our investment management services primarily through taxable subsidiaries. These operations are subject to federal, state, local and foreign taxes, as applicable. We conduct business in the U.S. and the European Union, and as a result, we or one or more of our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and certain foreign jurisdictions. Certain of our inter-company transactions that have been eliminated in consolidation for financial accounting purposes are also subject to taxation. Periodically, shares in the REITs that are payable to our taxable subsidiaries in consideration for services rendered are distributed from these subsidiaries to us.

At January 1, 2010, we had unrecognized tax benefits of $0.6 million (net of federal benefits), if recognized, would affect our effective tax rate. During 2010, we reversed the unrecognized tax benefits, including all related interest totaling $0.1 million, as they were no longer required.

Our tax returns are subject to audit by taxing authorities. Such audits can often take years to complete and settle. The tax years 2008 through 2011 remain open to examination by the major taxing jurisdictions to which we are subject.

Our subsidiary, Carey REIT II, owns our real estate assets and has elected to be taxed as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code. In connection with the CPA^®:14/16 Merger in May 2011, we formed Carey REIT III to hold the Special Member Interest in the newly formed operating partnership of CPA^®:16 – Global (Note 3). Carey REIT III has also elected to be taxed as a real estate investment trust under the Internal Revenue Code. We believe we have operated, and we intend to continue to operate, in a manner that allows Carey REIT II and Carey REIT III to continue to qualify as real estate investment trusts. Under the real estate investment trust operating structure, Carey REIT II and Carey REIT III are permitted to deduct distributions paid to our shareholders and generally will not be required to pay U.S. federal income taxes. Accordingly, no provision has been made for U.S. federal income taxes in the consolidated financial statements related to either Carey REIT II or Carey REIT III.

Note 16. Discontinued Operations

From time to time, tenants may vacate space due to lease buy-outs, elections not to renew their leases, insolvency or lease rejection in the bankruptcy process. In these cases, we assess whether we can obtain the highest value from the property by re-leasing or selling it. In addition, in certain cases, we may try to sell a property that is occupied. When it is appropriate to do so under current accounting guidance for the disposal of long-lived assets, we classify the property as an asset held for sale on our consolidated balance sheet and the current and prior period results of operations of the property are reclassified as discontinued operations.

45

Notes to Consolidated Financial Statements

The results of operations for properties that are held for sale or have been sold are reflected in the consolidated financial statements as discontinued operations for all periods presented and are summarized as follows (in thousands):

	Years Ended December 31,
	2011			2010			2009
Revenues	$	7,039		$	10,145		$	16,697
Expenses		(4,642	)		(5,771	)		(8,825	)
Gain on deconsolidation of a subsidiary		1,008			—			—
(Loss) gain on sale of real estate		(3,391	)		460			7,701
Impairment charges		(6,722	)		(14,241	)		(6,908	)
(Loss) income from discontinued operations	$	(6,708	)	$	(9,407	)	$	8,665

During the three months ended March 31, 2012, we sold two domestic properties for $2.4 million, net of selling costs, and recognized a net loss on these sales of $0.2 million, excluding impairment charges of $0.8 million previously recognized during 2011. Additionally, in January 2012, we entered into an agreement to sell a domestic property previously leased to L-3 Communications Titan Corp. In April 2012, we completed the sale of this property for $13.2 million, net of selling costs. In connection with the sale, we recognized impairment charges totaling $2.4 million during the three months ended March 31, 2012. We also recognized an impairment charge of $5.8 million on this property during 2011.

2011 —During the year ended December 31, 2011, we sold seven domestic properties for $12.5 million, net of selling costs, and recognized a net loss on these sales of $3.4 million, excluding impairment charges of less than $0.1 million and $2.7 million previously recognized during the years ended December 31, 2011 and 2010, respectively.

In September 2011, one of our subsidiaries consented to a court order appointing a receiver when it stopped making payments on the non-recourse debt obligation on a property after the tenant, Career Education Institute, vacated it. As we no longer had control over the activities that most significantly impact the economic performance of this subsidiary following possession of the property by the receiver, we deconsolidated the subsidiary during the third quarter of 2011. As of the date of deconsolidation, the property had a carrying value of $5.3 million, reflecting the impact of impairment charges totaling $5.6 million recognized during 2010, and the related non-recourse mortgage loan had an outstanding balance of $6.3 million. In connection with the deconsolidation, we recognized a gain of $1.0 million during the third quarter of 2011. We believe that our retained interest in this deconsolidated entity had no value at the date of deconsolidation.

2010 —We sold seven properties for a total of $14.6 million, net of selling costs, and recognized a net gain on these sales totaling $0.5 million, excluding impairment charges totaling $5.9 million and $6.0 million that were previously recognized in 2010 and 2009, respectively.

2009 —We sold five properties for $43.5 million, net of selling costs, and recognized a net gain on sale of $7.7 million, excluding impairment charges of $0.9 million, $0.5 million and $0.6 million recognized in 2009, 2008 and 2007, respectively.

46

Notes to Consolidated Financial Statements

Note 17. Segment Reporting

We evaluate our results from operations by our two major business segments — Investment Management and Real Estate Ownership (Note 1). Effective 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. Results for the years ended December 31, 2010 and 2009 have been reclassified to conform to the current period presentation. The following table presents a summary of comparative results of these business segments (in thousands):

	Years Ended December 31,
	2011			2010			2009
Investment Management
Revenues(a)	$	242,647		$	191,890		$	155,119
Operating expenses(a)		(157,544	)		(133,682	)		(110,160	)
Other, net(b)		23,866			7,026			7,913
Provision for income taxes		(34,971	)		(23,661	)		(21,813	)
Income from continuing operations attributable to W. P. Carey members	$	73,998		$	41,573		$	31,059
Real Estate Ownership(c)
Revenues	$	88,994		$	73,535		$	68,779
Operating expenses		(54,755	)		(39,512	)		(37,084	)
Interest expense		(21,920	)		(15,725	)		(14,462	)
Other, net(b)		61,713			25,662			13,037
Provision for income taxes		(2,243	)		(2,154	)		(971	)
Income from continuing operations attributable to W. P. Carey members	$	71,789		$	41,806		$	29,299
Total Company
Revenues(a)	$	331,641		$	265,425		$	223,898
Operating expenses(a)		(212,299	)		(173,194	)		(147,244	)
Interest expense		(21,920	)		(15,725	)		(14,462	)
Other, net(b)		85,579			32,688			20,950
Provision for income taxes		(37,214	)		(25,815	)		(22,784	)
Income from continuing operations attributable to W. P. Carey members	$	145,787		$	83,379		$	60,358

	Total Long-Lived Assets at December 31,(d)				Total Assets at December 31,
	2011		2010		2011		2010
Investment Management	$	2,593	$	3,730	$	128,557	$	123,921
Real Estate Ownership		1,217,931		946,975		1,334,066		1,048,405
Total Company	$	1,220,524	$	950,705	$	1,462,623	$	1,172,326

(a) Included in revenues and operating expenses are reimbursable costs from affiliates totaling $64.8 million, $60.0 million, and $47.5 million for the years ended December 31, 2011, 2010, and 2009, respectively.

(b) Includes Other interest income, Income from equity investments in real estate and the REITs, Gain on change in control of interests, Income (loss) attributable to noncontrolling interests, Income attributable to redeemable noncontrolling interest and Other income and (expenses). Equity earnings that represent our proportionate share of revenue less expenses of the net-leased properties held by the REITs are included in Real Estate Ownership segment. However, cash distributions of our proportionate share of earnings from the operating partnerships of CPA^®:16 – Global and CPA^®:17 – Global and the amortization of deferred revenue related to our Special Member Interest in the operating partnership of CPA^®:16 – Global are included in the Investment Management segment.

(c) Included within the Real Estate Ownership segment is our total investment in shares of CPA^®:16 – Global, which represents approximately 23% of our total assets at December 31, 2011 (Note 6).

(d) Long-lived assets include Net investments in real estate and intangible assets related to management contracts.

47

Notes to Consolidated Financial Statements

Geographic information for our Real Estate Ownership segment is as follows:

Year Ended December 31, 2011	Domestic			Foreign (a)			Total
Revenues	$	79,265		$	9,729		$	88,994
Operating expenses		(49,896	)		(4,859	)		(54,755	)
Interest expense		(20,225	)		(1,695	)		(21,920	)
Other, net(b)		55,537			6,176			61,713
Provision for income taxes		(2,135	)		(108	)		(2,243	)
Income from continuing operations attributable to W. P. Carey members	$	62,546		$	9,243		$	71,789
Total assets	$	1,258,544		$	75,522		$	1,334,066
Total long-lived assets	$	1,151,845		$	66,086		$	1,217,931
Year Ended December 31, 2010	Domestic			Foreign(a)			Total
Revenues	$	65,829		$	7,706		$	73,535
Operating expenses		(35,770	)		(3,742	)		(39,512	)
Interest expense		(13,983	)		(1,742	)		(15,725	)
Other, net(b)		21,719			3,943			25,662
Provision for income taxes		(2,124	)		(30	)		(2,154	)
Income from continuing operations attributable to W. P. Carey members	$	35,671		$	6,135		$	41,806
Total assets	$	965,418		$	82,987		$	1,048,405
Total long-lived assets	$	877,849		$	69,126		$	946,975
Year Ended December 31, 2009	Domestic			Foreign(a)			Total
Revenues	$	60,806		$	7,973		$	68,779
Operating expenses		(34,665	)		(2,419	)		(37,084	)
Interest expense		(12,411	)		(2,051	)		(14,462	)
Other, net(b)		7,248			5,789			13,037
Provision for income taxes		(8	)		(963	)		(971	)
Income from continuing operations attributable to W. P. Carey members	$	20,970		$	8,329		$	29,299
Total assets	$	900,431		$	64,865		$	965,296
Total long-lived assets	$	836,549		$	47,911		$	884,460

(a) All years include operations in France, Germany and Poland; and 2010 and 2011 also include operations in Spain.

(b) Includes Interest income, Income from equity investments in real estate and the REITs, Income (loss) attributable to noncontrolling interests and Other income and (expenses).

48

Notes to Consolidated Financial Statements

Note 18. Selected Quarterly Financial Data (Unaudited)

(Dollars in thousands, except per share amounts)

	Three Months Ended
	March 31, 2011			June 30, 2011			September 30, 2011			December 31, 2011
Revenues (a) (b)	$	75,945		$	116,776		$	76,973		$	61,947
Expenses (a)		49,328			53,507			57,674			51,790
Net income		23,616			81,060			25,258			9,204
Add: Net loss attributable to noncontrolling interests		330			384			581			569
Less: Net income attributable to redeemable noncontrolling interests		(603	)		(1	)		(637	)		(682	)
Net income attributable to W. P. Carey members	$	23,343		$	81,443		$	25,202		$	9,091
Earnings per share attributable to W. P. Carey members -
Basic		0.58			2.02			0.62			0.22
Diluted		0.58			1.99			0.62			0.23
Distributions declared per share		0.512			0.550			0.560			0.563
	Three Months Ended
	March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010
Revenues (a)	$	60,532		$	67,904		$	56,927		$	80,062
Expenses (a)		41,713			42,342			40,947			48,192
Net income		14,302			23,721			16,371			20,557
Add: Net loss attributable to noncontrolling interests		286			128			81			(181	)
Less: Net income attributable to redeemable noncontrolling interests		(175	)		(417	)		(106	)		(595	)
Net income attributable to W. P. Carey members	$	14,413		$	23,432		$	16,346		$	19,781
Earnings per share attributable to W. P. Carey members -
Basic		0.36			0.59			0.41			0.50
Diluted		0.36			0.59			0.41			0.50
Distributions declared per share		0.504			0.506			0.508			0.510

(a) Certain amounts from previous quarters have been reclassified to discontinued operations (Note 16)

(b) Amount for the three months ended June 30, 2011 includes $52.5 million of incentive, termination and subordinated disposition revenue recognized in connection with the CPA^®:14/16 Merger (Note 3).

Note 19. Subsequent Events

Proposed Merger

On February 17, 2012, we and CPA^®:15 entered into a definitive agreement pursuant to which CPA^®:15 will merge with and into one of our subsidiaries for a combination of cash and shares of our common stock as described below. In connection with the Proposed Merger, we plan to file a registration statement with the SEC regarding the shares of our common stock to be issued to shareholders of CPA^®:15 in the Proposed Merger. Special meetings will be scheduled to obtain the approval of CPA^®:15’s shareholders of the Proposed Merger and the approval of our shareholders of the Proposed Merger and the Proposed REIT Reorganization described below. The closing of the Proposed Merger is also subject to customary closing conditions. If the Proposed Merger is approved and the other closing conditions are met, we currently expect that the closing will occur by the third quarter of 2012, although there can be no assurance of such timing.

At December 31, 2011, CPA^®:15’s portfolio was comprised of full or partial ownership in 315 properties, substantially all of which were triple-net leased with an average remaining life of 10.4 years and an estimated annual contractual minimum base rent of $223.0

49

Notes to Consolidated Financial Statements

million (on a pro rata basis). We expect to assume the related property debt comprised of 74 fixed-rate and seven variable-rate non-recourse mortgage loans with an aggregate fair value of $1.2 billion and a weighted-average annual interest rate of 5.7% at December 31, 2011 (on a pro rata basis). During 2011, we earned $26.0 million in fees from CPA^®:15 and recognized $3.4 million in equity earnings based on our ownership of shares in CPA^®:15.

We have also obtained a commitment for a $175.0 million term loan as part of our credit facility in order to pay for the cash portion of the consideration in the Proposed Merger. Our commitment expires on the earlier of the termination or closing of the Proposed Merger or September 30, 2012. The commitment letters are subject to a number of closing conditions, including the lenders’ satisfactory completion of due diligence and determination that no material adverse change has occurred, and there can be no assurance that we will be able to obtain the term loan on acceptable terms or at all.

In the Proposed Merger, CPA^®:15 shareholders will be entitled to receive a $1.25 in cash and 0.2326 shares of our common stock for each share of CPA^®:15 common stock owned, which equated to $11.73 per share of CPA^®:15 common stock based on our $45.07 per share closing price as of February 17, 2012, the date that the merger agreement was signed. The estimated total Proposed Merger consideration includes cash of approximately $151.8 million and the issuance of approximately 28,241,000 of our shares, based on the total shares of CPA^®:15 outstanding of 131,566,206, of which 10,153,074 shares were owned by us, on February 17, 2012. As a condition of the Proposed Merger, we have agreed to waive our subordinated disposition and termination fees.

If the Proposed Merger is approved, immediately prior to merging, we plan to reorganize as a real estate investment trust. The Proposed REIT Reorganization is an internal reorganization of our corporate structure into a real estate investment trust to hold substantially all of our real estate assets attributable to our Real Estate Ownership segment while the activities conducted by our Investment Management segment subsidiaries will be organized under taxable real estate investment trust subsidiaries. This Proposed REIT Reorganization is expected to be tax-free for U.S. Federal purposes, except for the cash consideration.

Retrospective Adjustment for Discontinued Operations

During the three months ended March 31, 2012, we sold two domestic properties for $2.4 million, net of selling costs, and recognized a net loss on these sales of $0.2 million, excluding impairment charges of $0.8 million previously recognized during 2011. Additionally, in January 2012, we entered into an agreement to sell a domestic property previously leased to L-3 Communications Titan Corp. In April 2012, we completed the sale of this property for $13.2 million, net of selling costs. In connection with the sale, we recognized impairment charges totaling $2.4 million during the three months ended March 31, 2012. We also recognized an impairment charge of $5.8 million on this property during 2011. In accordance with current authoritative guidance for accounting for disposal of long-lived assets, the accompanying consolidated statements of income have been retrospectively adjusted and the net results of operations of each of these properties have been reclassified to discontinued operations for the years ended December 31, 2011, 2010 and 2009. The net effect of the reclassification represents an increase of $4.5 million, or 3%, in our previously reported income from continuing operations for the year ended December 31, 2011, and decreases of $1.9 million, or 2%, and $2.0 million, or 3%, in our previously reported income from continuing operations for the years ended December 31, 2010 and 2009, respectively. There is no effect on our previously reported net income, financial condition or cash flows.

REIT Reorganization and Merger (Unaudited)

On September 28, 2012, as part of its plan to reorganize the business operations of W. P. Carey & Co. LLC (“the Predecessor”) in order to qualify as a real estate investment trust (“REIT”) for federal income tax purposes, the Predecessor merged with and into W. P. Carey Inc., with W. P. Carey Inc. as the surviving corporation, succeeding to and continuing to operate the existing business of the predecessor.

The conversion of the Predecessor to a REIT was implemented through a series of reorganizations and transactions, including, among other things (i) certain mergers of subsidiaries of the Predecessor with and into W. P. Carey Inc., (ii) the merger of the Predecessor with and into W. P. Carey Inc., with W. P. Carey Inc. surviving the merger (the “W. P. Carey Merger”) pursuant to a definitive agreement and plan of merger dated as of February 17, 2012 between W. P. Carey & Co. LLC and W. P. Carey Inc., and (iii) the qualification by W. P. Carey Inc. as a REIT for federal income tax purposes (collectively, the “REIT Reorganization”).

The REIT Reorganization and the Proposed Merger were approved by the requisite vote of shareholders of the Predecessor at a special meeting held on September 13, 2012. At the effective time of the W. P. Carey Merger, each outstanding listed share of the Predecessor, no par value per share, was converted into the right to receive an equal number of shares of W. P. Carey Inc.’s common stock, par value $0.001 per share, which are subject to certain share ownership and transfer restrictions designed to protect W. P. Carey Inc.’s ability to qualify for REIT status. The REIT Reorganization was completed on September 28, 2012.

The Proposed Merger was also approved by the requisite vote of the stockholders of CPA^®:15 at a special meeting held on September 13, 2012. At the effective time of the Proposed Merger, each share of CPA^®:15 common stock issued and outstanding immediately prior to the effective time of the Proposed Merger, other than shares owned by holders of CPA^®:15 common stock who had perfected their appraisal rights, were cancelled and ultimately converted into the Proposed Merger consideration. A term loan facility was obtained in February 2012 as part of the Predecessor’s credit facility, the proceeds of which were available in a single draw and used solely to finance in part the Merger consideration and transaction costs and expenses. The Proposed Merger was completed on September 28, 2012.

50

W. P. CAREY & CO. LLC

SCHEDULE III — REAL ESTATE and ACCUMULATED DEPRECIATION

December 31, 2011

(in thousands)

			Initial Cost to Company				Costs Capitalized Subsequent to Acquisition (a)		Increase (Decrease) in Net Investments (b)			Gross Amount at which Carried at Close of Period(c)						Accumulated Depreciation (c)		Date Acquired		Life on which Depreciation in Latest Statement of Income is Computed
Description	Encumbrances		Land		Buildings							Land		Buildings		Total
Real Estate Under Operating Leases:
Office facilities in Broomfield, CO	$	—	$	248	$	2,538	$	4,844	$	(1,784	)	$	2,928	$	2,918	$	5,846	$	1,143		Jan. 1998		40 yrs.
Distribution facilities and warehouses in Erlanger, KY		9,323		1,526		21,427		2,966		141			1,526		24,534		26,060		8,681		Jan. 1998		40 yrs.
Retail stores in Montgomery and Brewton, AL		—		855		6,762		143		(6,547	)		142		1,071		1,213		759		Jan. 1998		40 yrs.
Warehouse/distribution facilities in Anchorage, AK and Commerce, CA		—		4,905		11,898		—		12			4,905		11,910		16,815		1,041		Jan. 1998		40 yrs.
Office facility in Toledo, OH		2,313		224		2,408		—		—			224		2,408		2,632		903		Jan. 1998		40 yrs.
Industrial facility in Goshen, IN		—		239		940		—		—			239		940		1,179		86		Jan. 1998		40 yrs.
Office facility in Beaumont, TX		—		164		2,344		967		—			164		3,311		3,475		1,323		Jan. 1998		40 yrs.
Office facility in Raleigh, NC		—		1,638		2,844		157		(2,554	)		828		1,257		2,085		383		Jan. 1998		20 yrs.
Office facility in King of Prussia, PA		—		1,219		6,283		1,295		—			1,219		7,578		8,797		2,461		Jan. 1998		40 yrs.
Warehouse/distribution facility in Fort Lauderdale, FL		—		1,893		11,077		703		(8,449	)		1,173		4,051		5,224		1,325		Jan. 1998		40 yrs.
Industrial facilities in Pinconning, MS		—		32		1,692		—		—			32		1,692		1,724		592		Jan. 1998		40 yrs.
Industrial facilities in San Fernando, CA		8,020		2,052		5,322		—		152			2,052		5,474		7,526		1,906		Jan. 1998		40 yrs.
Land leased in several cities in the following states: Alabama, Florida, Georgia, Illinois, Louisiana, Missouri, New Mexico, North Carolina, South Carolina and Texas		395		9,382		—		—		(172	)		9,210		—		9,210		—		Jan. 1998		N/A
Industrial facility in Milton, VT		—		220		1,579		—		—			220		1,579		1,799		553		Jan. 1998		40 yrs.
Land in Glendora, CA		—		1,135		—		—		17			1,152		—		1,152		—		Jan. 1998		N/A
Office facilities in Bloomingdale, IL		—		1,075		11,453		1,050		(4,934	)		520		8,124		8,644		4,160		Jan. 1998		40 yrs.
Industrial facility in Doraville, GA		4,939		3,288		9,864		1,546		274			3,287		11,685		14,972		3,576		Jan. 1998		40 yrs.
Office facilities in Collierville, TN and warehouse/distribution facilities in Corpus Christi and College Station, TX		52,921		3,490		72,497		—		(15,008	)		335		60,644		60,979		1,969		Jan. 1998		40 yrs.
Land in Irving and Houston, TX		8,508		9,795		—		—		—			9,795		—		9,795		—		Jan. 1998		N/A
Industrial facility in Chandler, AZ		12,685		5,035		18,957		7,435		541			5,035		26,933		31,968		8,176		Jan. 1998		40 yrs.
Warehouse/distribution facilities in Houston, TX		—		167		885		68		—			167		953		1,120		320		Jan. 1998		40 yrs.
Industrial facility in Prophetstown, IL		—		70		1,477		—		(1,424	)		7		116		123		27		Jan. 1998		40 yrs.
Office facilities in Bridgeton, MO		—		842		4,762		1,627		71			842		6,460		7,302		1,272		Jan. 1998		40 yrs.
Industrial facility in Industry, CA		—		3,789		13,164		1,380		318			3,789		14,862		18,651		4,172		Jan. 1998		40 yrs.

51

SCHEDULE III — REAL ESTATE and ACCUMULATED DEPRECIATION (Continued)

December 31, 2011

(in thousands)

			Initial Cost to Company				Costs Capitalized Subsequent to Acquisition (a)		(Decrease) Increase in Net Investments (b)			Gross Amount at which Carried at Close of Period (c)						Accumulated Depreciation (c)		Date Acquired		Life on which Depreciation in Latest Statement of Income is Computed
Description	Encumbrances		Land		Buildings							Land		Buildings		Total
Warehouse/distribution facilities in Memphis, TN		—		1,051		14,037		1,519		(3,418	)		807		12,382		13,189		10,388		Jan. 1998		7 yrs.
Retail stores in Drayton Plains, MI and Citrus Heights, CA		—		1,039		4,788		165		193			1,039		5,146		6,185		920		Jan. 1998		35 yrs.
Warehouse/distribution facilities in New Orleans, LA; Memphis, TN and San Antonio, TX		—		1,882		3,973		—		—			1,882		3,973		5,855		496		Jan. 1998		15 yrs.
Retail store in Bellevue, WA		8,533		4,125		11,812		393		—			4,494		11,836		16,330		4,056		Apr. 1998		40 yrs.
Office facility in Houston, TX		4,360		3,260		22,574		1,628		(5,947	)		2,522		18,993		21,515		6,449		Jun. 1998		40 yrs.
Office facility in Rio Rancho, NM		8,418		1,190		9,353		1,316		—			1,467		10,392		11,859		3,333		Jul. 1998		40 yrs.
Vacant office facility in Moorestown, NJ		—		351		5,981		937		43			351		6,961		7,312		2,689		Feb. 1999		40 yrs.
Office facility in Norcross, GA		28,752		5,200		25,585		11,822		—			5,200		37,407		42,607		11,392		Jun. 1999		40 yrs.
Office facility in Tours, France		5,572		1,034		9,737		323		3,868			1,421		13,541		14,962		3,730		Sep. 2000		40 yrs.
Office facility in Illkirch, France		14,098		—		18,520		—		8,555			—		27,075		27,075		7,971		Dec. 2001		40 yrs.
Industrial and warehouse/distribution facilities in Lenexa, KS; Winston-Salem, NC and Dallas, TX		7,990		1,860		12,539		—		5			1,860		12,544		14,404		2,989		Sep. 2002		40 yrs.
Office buildings in Venice, CA		24,000		2,032		10,152		13,160		1			2,032		23,313		25,345		1,918		Sep. 2004		40 yrs.
Warehouse/distribution facility in Greenfield, IN		—		2,807		10,335		210		(8,383	)		967		4,002		4,969		709		Sep. 2004		40 yrs.
Office facility in San Diego, CA		—		4,647		19,712		8		(5,530	)		3,399		15,438		18,837		3,602		Sep. 2004		40 yrs.
Warehouse/distribution facilities in Birmingham, AL		4,557		1,256		7,704		—		—			1,256		7,704		8,960		1,404		Sep. 2004		40 yrs.
Industrial facility in Scottsdale, AZ		1,306		586		46		—		—			586		46		632		8		Sep. 2004		40 yrs.
Retail store in Hot Springs, AR		—		850		2,939		2		(2,614	)		—		1,177		1,177		215		Sep. 2004		40 yrs.
Industrial facilities in Apopka, FL		—		362		10,855		576		—			362		11,431		11,793		2,001		Sep. 2004		40 yrs.
Retail facility in Jacksonville, FL		—		975		6,980		20		—			975		7,000		7,975		1,274		Sep. 2004		40 yrs.
Retail facilities in Charlotte, NC		—		1,639		10,608		171		25			1,639		10,804		12,443		2,108		Sep. 2004		40 yrs.
Land in San Leandro, CA		—		1,532		—		—		—			1,532		—		1,532		—		Dec. 2006		N/A
Industrial facility in Sunnyvale, CA		—		1,663		3,571		—		—			1,663		3,571		5,234		672		Dec. 2006		27 yrs.
Fitness and recreational sports center in Austin, TX		3,314		1,725		5,168		—		—			1,725		5,168		6,893		922		Dec. 2006		28.5 yrs.
Retail store in Wroclaw, Poland		8,242		3,600		10,306		—		(2,200	)		3,238		8,468		11,706		859		Dec. 2007		40 yrs.
Office facility in Fort Worth, TX		34,218		4,600		37,580		—		—			4,600		37,580		42,180		1,801		Feb. 2010		40 yrs.
Warehouse/distribution facility in Mallorca, Spain		—		11,109		12,636		—		1,693			11,914		13,524		25,438		535		Jun. 2010		40 yrs.
Industrial and office facilities in San Diego, CA		33,752		7,247		29,098		953		(5,514	)		4,761		27,023		31,784		785		May 2011		40 yrs.
	$	286,216	$	120,905	$	526,762	$	57,384	$	(58,569	)	$	111,483	$	534,999	$	646,482	$	118,054

52

SCHEDULE III — REAL ESTATE and ACCUMULATED DEPRECIATION (Continued)

December 31, 2011

(in thousands)

			Initial Cost to Company				Costs Capitalized Subsequent to Acquisition (a)		Decrease in  Net Investments (b)			Gross Amount at which Carried at Close of Period Total		Date Acquired
Description	Encumbrances		Land		Buildings
Direct Financing Method:
Retail stores in several cities in the following states: Alabama, Florida, Georgia, Illinois, Louisiana, Missouri, New Mexico, North Carolina, South Carolina and Texas	$	577	$	—	$	16,416	$	—	$	(384	)	$	16,032		Jan. 1998
Office and industrial facilities in Glendora, CA and Romulus, MI		—		454		13,251		9		(2,408	)		11,306		Jan. 1998
Industrial facilities in Thurmont, MD and Farmington, NY		—		729		6,093		—		(139	)		6,683		Jan. 1998
Industrial facilities in Irving and Houston, TX		20,828		—		27,599		—		(3,620	)		23,979		Jan. 1998
	$	21,405	$	1,183	$	63,359	$	9	$	(6,551	)	$	58,000

			Initial Cost to Company						Costs Capitalized Subsequent to Acquisition (a)		Decrease in Net Investments (b)			Gross Amount at which Carried at Close of Period (c)								Accumulated Depreciation (c)		Date Acquired		Life on which Depreciation in Latest Statement of Income is Computed
Description	Encumbrances		Land		Buildings		Personal Property							Land		Buildings		Personal Property		Total
Operating Real Estate:
Hotel located in Livonia, MI	$	—	$	2,765	$	11,087	$	3,816	$	18,623	$	(9,972	)	$	2,765	$	14,086	$	9,468	$	26,319	$	10,093		Jan. 1998		7-40 yrs.
Self storage facilities in Taunton, North Andover, North Billerica and Brockton, MA		9,722		4,300		12,274		—		223		(478	)		4,300		12,019		—		16,319		1,697		Dec. 2006		25-40 yrs.
Self storage facility in Newington, CT		2,115		520		2,973		—		231		(121	)		520		3,083		—		3,603		388		Dec. 2006		40 yrs.
Self storage facility in Killeen, TX		3,290		1,230		3,821		—		337		(179	)		1,230		3,979		—		5,209		525		Dec. 2006		30 yrs.
Self storage facility in Rohnert Park, CA		3,169		1,761		4,989		—		39		—			1,761		5,028		—		6,789		620		Jan. 2007		40 yrs.
Self storage facility in Fort Worth, TX		2,192		1,030		4,176		—		33		—			1,030		4,209		—		5,239		521		Jan. 2007		40 yrs.
Self storage facility in Augusta, GA		1,912		970		2,442		—		48		—			970		2,490		—		3,460		304		Feb. 2007		39 yrs.
Self storage facility in Garland, TX		1,464		880		3,104		—		56		—			880		3,160		—		4,040		381		Feb. 2007		40 yrs.
Self storage facility in Lawrenceville, GA		2,360		1,410		4,477		—		83		—			1,411		4,559		—		5,970		592		Mar. 2007		37 yrs.
Self storage facility in Fairfield, OH		1,860		540		2,640		—		19		—			540		2,659		—		3,199		420		Apr. 2007		30 yrs.
Self storage facility in Tallahassee, FL		3,701		850		5,736		—		7		—			850		5,743		—		6,593		665		Apr. 2007		40 yrs.
Self storage facility in Lincolnshire, IL		1,993		1,477		1,519		—		67		—			1,477		1,586		—		3,063		127		Jul. 2010		18 yrs.
Self storage facility in Chicago, IL		1,715		823		912		—		623		—			823		1,535		—		2,358		154		Jul. 2010		15 yrs.
Self storage facility in Chicago, IL		1,438		700		733		—		512		—			700		1,245		—		1,945		122		Jul. 2010		15 yrs.
Self storage facility in Bedford Park, IL		1,746		809		1,312		—		179		—			809		1,491		—		2,300		112		Jul. 2010		20 yrs.
Self storage facility in Bentonville, AR		2,056		1,050		1,323		—		4		—			1,050		1,327		—		2,377		74		Sep. 2010		24 yrs.
Self storage facility in Tallahassee, FL		3,899		570		3,447		—		26		—			570		3,473		—		4,043		144		Sep. 2010		30 yrs.
Self storage facility in Pensacola, FL		1,838		560		2,082		—		5		—			560		2,087		—		2,647		87		Sep. 2010		30 yrs.
Self storage facility in Chicago, IL		2,118		1,785		2,617		—		—		—			1,785		2,617		—		4,402		95		Oct. 2010		32 yrs.
	$	48,588	$	24,030	$	71,664	$	3,816	$	21,115	$	(10,750	)	$	24,031	$	76,376	$	9,468	$	109,875	$	17,121

53

W. P. CAREY & CO. LLC

NOTES TO SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION

(in thousands)

(a) Consists of the cost of improvements and acquisition costs subsequent to acquisition, including legal fees, appraisal fees, title costs, other related professional fees and purchases of furniture, fixtures, equipment and improvements at the hotel properties.

(b) The increase (decrease) in net investment is primarily due to (i) the amortization of unearned income from net investment in direct financing leases, which produces a periodic rate of return that at times may be greater or less than lease payments received, (ii) sales of properties, (iii) impairment charges, (iv) changes in foreign currency exchange rates, and (v) adjustments in connection with purchasing certain noncontrolling interests.

(c) Reconciliation of real estate and accumulated depreciation (see below):

	Reconciliation of Real Estate Subject to Operating Leases
	Years Ended December 31,
	2011			2010			2009
Balance at beginning of year	$	560,592		$	525,607		$	603,044
Additions		107,484			67,787			4,754
Dispositions		(22,106	)		(18,896	)		(46,951	)
Foreign currency translation adjustment		(1,837	)		(2,142	)		966
Reclassification from (to) equity investment, direct financing lease, intangible assets or assets held for sale		20,105			1,790			(28,977	)
Deconsolidation of real estate asset		(5,938	)		—			—
Impairment charges		(11,818	)		(13,554	)		(7,229	)
Balance at end of year	$	646,482		$	560,592		$	525,607
	Reconciliation of Accumulated Depreciation for Real Estate Subject  to Operating Leases
	Years Ended December 31,
	2011			2010			2009
Balance at beginning of year	$	108,032		$	100,247		$	103,249
Depreciation expense		15,179			13,437			12,841
Dispositions		(5,785	)		(5,000	)		(9,677	)
Foreign currency translation adjustment		(396	)		(839	)		285
Reclassification from (to) equity investment, direct financing lease, intangible assets or assets held for sale		2,339			187			(6,451	)
Deconsolidation of real estate asset		(1,315	)		—			—
Balance at end of year	$	118,054		$	108,032		$	100,247
	Reconciliation of Operating Real Estate
	Years Ended December 31,
	2011			2010			2009
Balance at beginning of year	$	109,851		$	85,927		$	84,547
Additions/Capital expenditures		24			23,924			1,380
Balance at end of year	$	109,875		$	109,851		$	85,927
	Reconciliation of Accumulated Depreciation for Operating Real Estate
	Years Ended December 31,
	2011			2010			2009
Balance at beginning of year	$	14,280		$	12,039		$	10,013
Depreciation expense		2,841			2,241			2,026
Balance at end of year	$	17,121		$	14,280		$	12,039

At December 31, 2011, the aggregate cost of real estate that we and our consolidated subsidiaries own for federal income tax purposes was approximately $824.3 million.

54