SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
Annual report pursuant to section 13 of the securities exchange act of 1934

For the year ended DECEMBER 31, 2001

W. P. CAREY & CO. LLC
("WPC")
(FORMERLY CAREY DIVERSIFIED LLC)

A DELAWARE Limited Liability Company
IRS Employer Identification No. 13-3912578
SEC File Number 001-13779

50 ROCKEFELLER PLAZA,
NEW YORK, NEW YORK 10020
(212) 492-1100

WPC has LISTED SHARES registered pursuant to Section 12(g) of the Act.

WPC is registered on the NEW YORK STOCK EXCHANGE.

WPC does not have any Securities registered pursuant to Section 12(b) of the
Act.

WPC is unaware of any delinquent filers pursuant to Item 405 of Regulation S-K.

WPC (1) has filed all reports required by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

Non-affiliates held 20,672,888 Listed Shares at March 18, 2002.

There are 34,792,140 Listed Shares outstanding at March 18, 2002.

WPC incorporates by reference its definitive Proxy Statement with respect to its
2002 Annual Meeting of Shareholders, to be filed with the Securities and
Exchange Commission within120 days following the end of its fiscal year, into
Part III of this Report.

PART I

Item 1. Business.

W. P. Carey & Co. LLC (the "Company" or "WPC") is a real estate investment
company that acquires and owns commercial properties leased to companies
nationwide, primarily on a triple net basis. As of December 31, 2001, WPC's
portfolio consisted of 184 properties in the United States and 6 properties in
Europe and totaled more than 20 million square feet. The Company also earns fees
as the advisor to five affiliated CPA(R) REITs. Under the advisory agreements
with the CPA(R) REITs, the Company performs services related to the day-to-day
management of the CPA(R) REITs and transaction-related services. In addition,
the Company's broker-dealer subsidiary earns fees in connection with the
on-going "best efforts" public offering of Corporate Property Associates(R):15
Incorporated.

WPC's core strategy is to purchase properties leased to a variety of companies
on a single tenant net lease basis that are either owned outright or owned by an
entity managed by WPC.

These leases generally place the economic burden of ownership on the tenant by
requiring them to pay the costs of maintenance, insurance, taxes, structural
repairs and other operating expenses. WPC also generally seeks to include in its
leases:

- clauses providing for mandated rent increases or periodic rent
increases tied to increases in the consumer price index or other
indices or, when appropriate, increases tied to the volume of sales
at the property;

- covenants restricting the activity of the tenant to reduce the risk
of a change in credit quality;

- indemnification of WPC for environmental and other liabilities; and

- guarantees from parent companies or other entities.

The Company was formed as a limited liability company under the laws of Delaware
on July 15, 1996. Since January 1, 1998, the Company has been consolidated with
nine Corporate Property Associates ("CPA(R) ") limited partnerships and is the
General Partner and owner of all of the limited partnership interests in each
partnership. Effective January 1, 2001, five partnerships were merged into
existing partnerships. The Company's shares began trading on the New York Stock
Exchange on January 21, 1998. As a limited liability company, WPC is not subject
to federal income taxation as long as it satisfies certain requirements relating
to its operations.

W. P. Carey & Co. LLC now both owns and manages commercial and industrial
properties located in 42 states and Europe, net leased to more than 230 tenants.
In addition, W. P. Carey & Co. LLC manages 273 additional net leased properties
on behalf of five real estate investment trusts of which it is the advisor and
manager: Corporate Property Associates 10 Incorporated, Carey Institutional
Properties Incorporated, Corporate Property Associates 12 Incorporated,
Corporate Property Associates 14 Incorporated and Corporate Property Associates
15 Incorporated (the "CPA(R) REITs"). In December 2001, Corporate Property
Associates 10 and Carey Institutional Properties entered into a merger agreement
whereby Carey Institutional Properties will be the surviving entity, subject to
approval by each of their shareholders. If the merger is completed, the Company
will be the advisor and manager of the surviving entity.

WPC's principal executive offices are located at 50 Rockefeller Plaza, New York,
NY 10020 and its telephone number is (212) 492-1100. WPC's website address is
http://www.wpcarey.com. As of December 31, 2001, WPC employed no employees
directly, however a wholly-owned subsidiary of WPC employs individuals who
perform services for WPC.

BUSINESS OBJECTIVES AND STRATEGY

WPC's objective is to increase shareholder value and its funds from operations
through prudent management of its real estate assets and opportunistic
investments and through the expansion of its asset and private equity management
business. WPC expects to evaluate a number of different opportunities in a
variety of property types and geographic locations and to pursue the most
attractive based upon its analysis of the risk/return tradeoffs. WPC will
continue to own properties as long as it believes ownership helps attain its
objectives.

WPC presently intends to:

- seek additional investment and other opportunities that leverage
core management skills (which include in-depth credit analysis,
asset valuation and sophisticated structuring techniques);

- optimize the current portfolio of properties through expansion of
existing properties, timely dispositions and favorable lease
modifications;

- utilize its size and access to capital to refinance existing debt;

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- increase its access to capital; and

- increase revenues from the management business by increasing assets
under management as the CPA(R) REITs acquire additional property and
organizing new investment entities.

DEVELOPMENTS DURING 2001

Effective January 1, 2001, WPC acquired the remaining minority interest in the
CPA(R) Partnerships in consideration for 151,964 shares (approximately
$2,811,000). Concurrent with the purchase of the remaining interests, certain
CPA(R) Partnerships were merged so that as of January 1, 2001 the four remaining
partnerships are wholly-owned subsidiaries.

Pursuant to its merger agreement for the management services operations and in
connection with meeting specified performance criteria as of December 31, 2000,
500,000 shares were issued during the first quarter of 2001 and 500,000 shares
will be issued in 2002, based on meeting performance criteria as of December 31,
2001.

WPC restructured its lease with Livho, Inc., the lessee of the Holiday Inn in
Livonia, Michigan. Annual rent was retroactively reduced to $2,520,000 from
$3,109,000 effective January 1, 2001. As amended, annual rents will be
renegotiated during each lease extension period and, if market conditions
permit, will allow for negotiating higher rents, but no less than $2,621,000.
With more frequent renewal periods, rentals can be more closely matched with
existing business conditions.

During 2001, Comark, Inc. ("Comark"), the lessee at the Bloomingdale, Illinois
property and Western Union Financial Services, Inc. ("Western Union"), a lessee
at the Bridgeton, Missouri property, exercised the renewal options in their
lease. Comark extended their lease for two years through May 2003 at an annual
rent of $293,000 and Western Union extended their lease for five years through
November 2006 at an annual rent of $937,000.

In October 2001, WPC entered into a $2,450,000 settlement agreement with
Harcourt General, Inc., the guarantor of a lease with General Cinema Corporation
("General Cinema") for a property in Burnsville, Minnesota. General Cinema filed
a petition of bankruptcy in October 2000, and in March 2001 the bankruptcy court
permitted General Cinema to disaffirm the lease in connection with its plan of
reorganization. The lease had been scheduled to expire in July 2006. In
addition, in May 2001, WPC paid off the existing mortgage on the property. The
loan had a scheduled maturity date of July 2006. In 2001, the Company entered
into an agreement to sell the property for $2,200,000. The sale was completed in
January 2002.

In February 2001 WPC received a $2,500,000 final settlement of a claim against a
former lessee, New Valley Corporation, relating to a termination of a lease in
1993 on a property in Moorestown, New Jersey. The property is currently leased
to Cendant Operations, Inc.

In December 2001, Thermadyne Holdings Corp. ("Thermadyne") filed a petition of
bankruptcy and subsequently vacated the property in February 2002. Annual rents
from Thermadyne were $2,525,000. WPC has entered into an agreement-in-principle
to re-lease a portion of the space for approximately $817,000 and is actively
remarketing the remaining space.

During 2001, WPC acquired a 90% interest in a joint venture that had entered
into a build-to-suit commitment in Strasbourg, France, which, upon completion,
would be net leased to Bouygues Telecom S.A., an existing lessee. The project
was completed in December 2001 for a total cost of approximately $18,520,000
which was primarily financed through a construction loan of $16,874,000 which
was subsequently converted to a mortgage secured by the property. The lease has
an initial term of twelve years and annual rents will be approximately
$2,000,000.

During 2000, WPC committed to fund expansions at the Sprint Spectrum L.P.
("Sprint") property in Rio Rancho, New Mexico and a property leased to AT&T
Corporation ("AT&T") in Bridgeton, Missouri. The Sprint expansion was 20,000
square feet and was completed in July 2001 for a total cost of approximately
$1,313,000, and annual rent from Sprint has increased by approximately $270,000.
Upon completion of the Sprint expansion, WPC obtained $8,753,000 of limited
recourse mortgage financing collateralized by the property and which matures in
August 2011. The AT&T expansion was completed in October 2001 for $4,104,000 and
AT&T's annual rent will increase by $405,000.

During 2001, WPC made $9,225,000 of mortgage balloon payments in May on two
properties leased to Quebecor, Inc., located in Doraville, Georgia and Olive
Branch, Mississippi, and in June obtained new limited recourse mortgage
financing of $5,000,000 on the Olive Branch property. The Olive branch loan
matures in July of 2006. In December 2001, WPC made a $2,318,000 payment to
payoff the mortgage on one of its Houston, Texas properties. The loan was
scheduled to mature in January 2002.

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During 2001, WPC sold ten properties including two retail properties leased to
Kobacker Stores, Inc. in Fremont and Tallmadge Ohio, three retail properties
partially leased to CSK Auto, Inc. in Denver, Colorado, Mesa and Scottsdale,
Arizona, a retail property leased to a private individual in Greensboro, North
Carolina, a warehouse facility leased to High Voltage Engineering Corporation in
Sterling, Massachusetts, a retail property formerly leased to Clear Vision
Centers in New Orleans, Louisiana, a retail property leased to Eastside
Appliance, Inc. in Canton, Ohio, and a manufacturing facility leased to
Duff-Norton Company, Inc. in Forrest City, Arkansas. In addition, during 2001,
WPC sold a limited partnership interest in a property in Carlsbad, California.
Since December 31, 2001, WPC has sold three additional properties, a retail
facility located in Burnhaven, Minnesota and warehousing facilities located in
Urbana, Illinois and Maumelle, Arkansas.

In 1999, subsequent to the termination of a lease, WPC commenced redeveloping
its property in Los Angeles, California. In January 2002, WPC entered into a
purchase and sales agreement with the Los Angeles Unified School District
("LAUSD") for $24,000,000. The sale is subject to completion of LAUSD's
conducting certain due diligence, environmental approvals and the approval of
the LAUSD Board of Education. If the sale has not been completed by June 30,
2002, the LAUSD will be required to pay monthly extension fees at an increasing
rate.

WPC had also entered into an agreement with the LAUSD to provide environmental
and management services in connection with the development of the property.
Under the agreement which expires in April 2002, WPC received an initial payment
of $200,000 and will be paid a management fee of $25,000 per month. WPC and the
LAUSD are currently negotiating an extension of the agreement. Under the
agreement, the LAUSD has agreed to reimburse WPC for approximately $1,150,000 of
costs which were incurred in the redevelopment of the property.

In March 2001, WPC entered into a revolving credit agreement for a $185,000,000
line of credit which renewed and extended its original revolving unsecured line
of credit. The credit agreement has a three-year term through March 2004. WPC
has a one-time right to increase the commitment to up to $225,000,000.
Borrowings on the credit facility were $95,000,000 as of December 31, 2001. The
revolving credit agreement has financial covenants that require WPC to maintain
a minimum equity value and to meet or exceed certain operating and coverage
ratios. WPC remains in compliance with the financial covenants.

WPC owns a distribution/warehouse facility located in Cincinnati, Ohio, which
was leased to Red Bank Distribution Inc. ("Red Bank"). In November 2001, WPC
evicted Red Bank Distribution Inc. and entered into an agreement-in-principle
that effectively terminated the net lease because of Red Bank's inability to
meet its annual rent lease obligation of $1,850,000. WPC has assumed control of
the property and is managing a public warehousing operation for a portion of the
building which is used as a public warehouse facility. The property has
approximately 46 short-term tenants who collectively generate approximately
$130,000 in monthly rents and expense reimbursements. Management is evaluating
several alternatives including continuing to manage the operation, seeking a
single-tenant net lease or selling the property.

WPC became the Advisor to Corporate Property Associates 15 Incorporated
("CPA(R):15"), a newly-formed CPA(R) REIT. CPA(R):15 commenced a "best efforts"
public offering on November 16, 2001, and will attempt to raise up to $400,000
over a two-year period. CPA(R):15 has also entered into sales agreements with
two additional major broker-dealers, both of whom will be marketing CPA(R):15 by
the third quarter.

WPC from time to time may offer to sell its Listed Shares, Future Shares and
Warrants pursuant to a registration statement declared effective by the
Securities and Exchange Commission on February 25, 2002. The total amount of
these securities will have an initial aggregate offering price of up to
$100,000,000, although WPC may increase this amount in the future. The shares
and/or warrants may be offered and sold to or through one or more underwriters,
dealers and agents, or directly to purchasers, on a continuous or delayed basis.
The prospectus included as part of the registration statement describes some of
the general terms that may apply to these securities and the general manner in
which they may be offered. The specific terms of any securities to be offered,
the specific manner in which they may be offered and the specific use of
proceeds, will be described in a supplement to this prospectus.

In January 2002, The Gap, Inc. notified WPC that it would not renew its leases
which expire in 2003 and currently contribute annual rent of approximately
$2,205,000. In February 2002, Pillowtex, Inc. notified WPC that under its plan
of reorganization it would terminate its lease with annual rents of
approximately $691,000, effective April 1, 2002.

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ACQUISITION STRATEGIES

WPC has a well-developed process with established procedures and systems for
acquiring net leased property. As a result of its reputation and experience in
the industry and the contacts maintained by its professionals, WPC has a
presence in the net lease market that has provided it with the opportunity to
invest in a significant number of transactions on an ongoing basis. In
evaluating opportunities for WPC, it carefully examines the credit, management
and other attributes of the tenant and the importance of the property under
consideration to the tenant's operations. Careful credit analysis is a crucial
aspect of every transaction. WPC believes that it has one of the most extensive
underwriting processes in the industry and has an experienced staff of
professionals involved with underwriting transactions. WPC seeks to identify
those prospective tenants whose creditworthiness is likely to improve over time.
WPC believes that its experience in structuring sale-leaseback transactions to
meet the needs of a prospective tenant enables it to obtain a higher return for
a given level of risk than would typically be available by purchasing a property
subject to an existing lease.

WPC's strategy in structuring net lease investments is to:

- combine the stability and security of long-term lease payments,
including rent increases, with the appreciation potential inherent
in the ownership of real estate;

- enhance current returns by utilizing varied lease structures;

- reduce credit risk by diversifying investments by tenant, type of

facility, geographic location and tenant industry; and
- increase potential returns by obtaining equity enhancements from the
tenant when possible, such as warrants to purchase tenant common
stock.

FINANCING STRATEGIES

Consistent with its investment policies, WPC uses leverage when available on
favorable terms. WPC has in place a credit facility of up to $225 million, which
it has used and intends to continue to use in connection with acquiring
additional properties, funding build-to-suit projects and refinancing existing
debt. As of December 31, 2001, WPC also had approximately $201,000,000 in
property-level debt outstanding and $95,000,000 outstanding under the line of
credit. WPC continually seeks opportunities and considers alternative financing
techniques to refinance debt, reduce interest expense or improve its capital
structure.

TRANSACTION ORIGINATION

In analyzing potential acquisitions, either for its own acquisitions or as part
of its asset management service to the CPA(R) REITs, WPC reviews and structures
many aspects of a transaction, including the tenant, the real estate and the
lease, to determine whether a potential acquisition can be structured to satisfy
WPC's acquisition criteria. The aspects of a transaction which are reviewed and
structured by WPC's management team include the following:

Tenant Evaluation. WPC subjects each potential tenant to an extensive
evaluation of its credit, management, position within its industry,
operating history and profitability. WPC seeks tenants it believes will
have stable or improving credit. By leasing properties to these types of
tenants, WPC can generally charge rent that is higher than the rent
charged to tenants with recognized credit and, thereby, enhance its
current return from these properties as compared with properties leased to
companies whose credit potential has already been recognized by the
market.

Furthermore, if a tenant's credit does improve, the value of WPC's
properties leased to that tenant will likely increase (if all other
factors affecting value remain unchanged). WPC may also seek to enhance
the likelihood of a tenant's lease obligations being satisfied, such as
through a letter of credit or a guaranty of lease obligations from the
tenant's corporate parent. This credit enhancement provides WPC with
additional financial security.

Leases with Increasing Rents. WPC seeks to include clauses in its leases
that provide for increases in rent over the term of the leases. These
increases are generally tied to increases in certain indices such as the
consumer price index, in the case of retail stores, participation in gross
sales above a stated level, mandated rental increases on specific dates
and through other methods. WPC seeks to avoid entering into leases that
provide for contractual reductions in rents during their primary term
(other than reductions related to reductions in debt service).

Properties Important to Tenant Operations. WPC generally seeks to acquire
properties with operations that are essential or important to the ongoing
operations of the tenant. WPC believes that these properties provide
better protection in the event that tenants file for bankruptcy, because
leases on properties essential or important to the

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operations of a bankrupt tenant are less likely to be rejected and
terminated by a bankrupt tenant. WPC also seeks to assess the income, cash
flow and profitability of the business conducted at the property, so that,
if the tenant is unable to operate its business, WPC can either continue
operating the business conducted at the property or re-lease the property
to another entity in the industry which can operate the property
profitably.

Lease Provisions that Enhance and Protect Value. When appropriate, WPC
attempts to include provisions in its leases that require its consent to
certain tenant activities or require the tenant to satisfy certain
operating tests.

These provisions include, for example, operational and financial covenants
of the tenant, prohibitions on a change in control of the tenant and
indemnification from the tenant against environmental and other contingent
liabilities. Including these provisions in its leases enables WPC to
protect its investment from changes in the operating and financial
characteristics of a tenant that may impact its ability to satisfy its
obligations to WPC or could reduce the value of WPC's properties.

Diversification. WPC tries to diversify its portfolio of properties to
avoid dependence on any one particular tenant, type of facility,
geographic location and tenant industry. By diversifying its portfolio,
WPC reduces the adverse effect on WPC of a single underperforming
investment or a downturn in any particular industry or geographic
location.

WPC employs a variety of other strategies and practices in connection with
the acquisitions it makes on its own behalf and on behalf of the CPA(R)
REITs. These strategies include attempting to obtain equity enhancements
in connection with transactions.

Typically, these equity enhancements involve warrants to purchase stock of
the tenant to which the property is leased or the stock of the parent of
the tenant. In certain instances, WPC grants to the tenant a right to
purchase the property leased by the tenant, but generally the option
purchase price will be not less than the fair market value of the
property. WPC's practices include performing evaluations of the physical
condition of properties and performing environmental surveys in an attempt
to determine potential environmental liabilities associated with a
property prior to its acquisition.

As a transaction is structured, it is evaluated by the Chairman of the
Investment Committee with respect to the potential tenant's credit,
business prospects, position within its industry and other characteristics
important to the long-term value of the property and the capability of the
tenant to meet its lease obligations. Before a property is acquired, the
transaction is reviewed by the Investment Committee to ensure that it
satisfies WPC's investment criteria. Aspects of the transaction that are
typically reviewed by the Investment Committee include the expected
financial returns, the creditworthiness of the tenant, the real estate
characteristics and the lease terms.

The Investment Committee is not directly involved in originating or
negotiating potential acquisitions, but instead functions as a separate
and final step in the acquisition process. WPC places special emphasis on
having experienced individuals serve on its Investment Committee and does
not invest in a transaction unless it is approved by the Investment
Committee.

WPC believes that the Investment Committee review process gives WPC a
unique, competitive advantage over other unaffiliated net lease companies
because of the substantial experience and perspective that the Investment
Committee has in evaluating the blend of corporate credit, real estate and
lease terms that combine to make an acceptable risk.

The following people serve on the Investment Committee:

- George E. Stoddard, Chairman, was formerly responsible for the
direct corporate investments of The Equitable Life Assurance Society
of the United States and has been involved with the CPA(R) Programs
for over 20 years.

- Frank J. Hoenemeyer, Vice Chairman, was formerly Vice Chairman,
Director and Chief Investment Officer of The Prudential Insurance
Company of America. As Chief Investment Officer, Mr. Hoenemeyer was
responsible for all of Prudential's investments, including stocks,
bonds, private placements, real estate and mortgages.

- Nathaniel S. Coolidge previously served as Senior Vice President -
Head of Bond & Corporate Finance Department of the John Hancock
Mutual Life Insurance Company. His responsibilities included
overseeing $21 billion of fixed income investments for Hancock, its
affiliates and outside clients.

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- Lawrence R. Klein is Benjamin Franklin Professor of Economics
Emeritus at the University of Pennsylvania and its Wharton School.
Dr. Klein has been awarded the Alfred Nobel Memorial Prize in
Economic Sciences and currently advises various governments and
government agencies.

ASSET MANAGEMENT

WPC believes that effective management of net lease assets is essential to
maintain and enhance property values. Important aspects of asset management
include restructuring transactions to meet the evolving needs of current
tenants, re-leasing properties, refinancing debt, selling properties and
knowledge of the bankruptcy process.

WPC monitors, on an ongoing basis, compliance by tenants with their lease
obligations and other factors that could affect the financial performance of any
of its properties. Monitoring involves receiving assurances that each tenant has
paid real estate taxes, assessments and other expenses relating to the
properties it occupies and confirming that appropriate insurance coverage is
being maintained by the tenant. WPC reviews financial statements of its tenants
and undertakes regular physical inspections of the condition and maintenance of
its properties. Additionally, WPC periodically analyzes each tenant's financial
condition, the industry in which each tenant operates and each tenant's relative
strength in its industry.

COMPETITION

WPC faces competition for the acquisition of office and industrial properties in
general, and such properties net leased to major corporations in particular,
from insurance companies, credit companies, pension funds, private individuals,
investment companies and CPA(R) REITs. WPC also faces competition from
institutions that provide or arrange for other types of commercial financing
through private or public offerings of equity or debt or traditional bank
financings. WPC believes its management's experience in real estate, credit
underwriting and transaction structuring will allow it to compete effectively
for office and industrial properties.

ENVIRONMENTAL MATTERS

Under various federal, state and local environmental laws, regulations and
ordinances, current or former owners of real estate, as well as other parties,
may be required to investigate and clean up hazardous or toxic chemicals,
substances or waste or petroleum product or waste, releases on, under, in or
from a property. These parties may be held liable to governmental entities or to
third parties for specified damages and for investigation and cleanup costs
incurred by these parties in connection with the release or threatened release
of hazardous materials. These laws typically impose responsibility and liability
without regard to whether the owner knew of or was responsible for the presence
of hazardous materials, and the liability under these laws has been interpreted
to be joint and several under some circumstances. WPC's leases often provide
that the tenant is responsible for all environmental liability and for
compliance with environmental regulations relating to the tenant's operations.

WPC typically undertakes an investigation of potential environmental risks when
evaluating an acquisition. Phase I environmental assessments are performed by
independent environmental consulting and engineering firms for all properties
acquired by WPC. Where warranted, Phase II environmental assessments are
performed. Phase I assessments do not involve subsurface testing, whereas Phase
II assessments involve some degree of soil and/or groundwater testing. WPC may
acquire a property which is known to have had a release of hazardous materials
in the past, subject to a determination of the level of risk and potential cost
of remediation. WPC normally requires property sellers to indemnify it fully
against any environmental problem existing as of the date of purchase.
Additionally, WPC often structures its leases to require the tenant to assume
most or all responsibility for compliance with the environmental provisions of
the lease or environmental remediation relating to the tenant's operations and
to provide that non-compliance with environmental laws is a lease default. In
some cases, WPC may also require a cash reserve, a letter of credit or a
guarantee from the tenant, the tenant's parent company or a third party to
assure lease compliance and funding of remediation. The value of any of these
protections depends on the amount of the collateral and/or financial strength of
the entity providing the protection. Such a contractual arrangement does not
eliminate WPC's statutory liability or preclude claims against WPC by
governmental authorities or persons who are not a party to the arrangement.
Contractual arrangements in WPC's leases may provide a basis for WPC to recover
from the tenant damages or costs for which v has been found liable.

Some of the properties are located in urban and industrial areas where fill or
current or historic industrial uses of the areas may have caused site
contamination at the properties. In addition, WPC is aware of environmental
conditions at certain of the properties that require some degree of remediation.
All such environmental conditions are primarily the responsibility of the
respective tenants under their leases. WPC and its consultants estimate that the
majority of the aggregate cost of

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addressing environmental conditions known to require remediation at the
properties is covered by existing letters of credit and corporate guarantees.
WPC believes that its tenants are taking or will soon be taking all required
remedial action with respect to any material environmental conditions at the
properties. However, WPC could be responsible for some or all of these costs if
one or more of the tenants fails to perform its obligations or to indemnify WPC.
Furthermore, no assurance can be given that the environmental assessments that
have been conducted at the properties disclosed all environmental liabilities,
that any prior owner did not create a material environmental condition not known
to the Company, or that a material condition does not otherwise exist as to any
of the properties.

OPERATING SEGMENTS

WPC operates in two operating segments, real estate operations, with investments
in the United States and Europe, and advisory operations. For the year ended
December 31, 2001, no lessee represented 10% or more of the total operating
revenue of WPC.

FACTORS AFFECTING FUTURE OPERATING RESULTS

The provisions of the Private Securities Litigation Reform Act of 1995 (the
"Act") became effective in December 1995. The Act provides a "safe harbor" for
companies which make forward-looking statements providing prospective
information. The "safe harbor" under the Act relates to protection for companies
with respect to litigation filed on the basis of such forward-looking
statements.

WPC wishes to take advantage of the "safe harbor" provisions of the Act and is
therefore including this section in its Annual Report on Form 10-K. The
statements contained in this Annual Report, if not historical, are
forward-looking statements and involve risks and uncertainties which are
described below that could cause actual results to differ materially from the
results, financial or otherwise, or other expectations described in such
forward-looking statements. These statements are identified with the words
"anticipated," "expected," "intends," "seeks" or "plans" or words of similar
meaning. Therefore, forward-looking statements should not be relied upon as a
prediction of actual future results or occurrences.

WPC's future results may be affected by certain risks and uncertainties
including the following:

Single tenant leases increase WPC's exposure in the event of a failure of
tenant.

WPC focuses its acquisition activities on net leased real properties or
interests therein. Due to the fact that WPC's net leased real properties
are leased to single tenants, the financial failure of or other default by
a tenant resulting in the termination of a lease is likely to cause a
reduction in the operating cash flow of WPC and might decrease the value
of the property leased to such tenant.

WPC depends on major tenants.

Revenues from several of WPC's tenants and/or their guarantors constitute
a significant percentage of WPC's consolidated rental revenues. The
Company's five largest tenants/guarantors, which occupy 9 properties,
represent 21% of annualized revenues. The default, financial distress or
bankruptcy of any of the tenants of such properties could cause
interruptions in the receipt of lease revenues from such tenants and/or
result in vacancies in the respective properties, which would reduce the
Company's revenues until the affected property is re-let, and could
decrease the ultimate sale value of each such property.

WPC can borrow a significant amount of funds.

WPC has incurred, and may continue to incur, indebtedness (secured and
unsecured) in furtherance of its activities. Neither the Operating
Agreement nor any policy statement formally adopted by the Board of
Directors limits either the total amount of indebtedness or the specified
percentage of indebtedness (based upon the total market capitalization of
WPC) which may be incurred. Accordingly, WPC could become more highly
leveraged, resulting in increased risk of default on its obligations and
in an increase in debt service requirements which could adversely affect
its financial condition and results of operations and its ability to pay
distributions. WPC's current unsecured revolving credit facility with
Chase Manhattan Bank, as agent, contains various covenants which limit the
amount of secured and unsecured indebtedness WPC may incur.

WPC may not be able to refinance balloon payments on its mortgage debts.

A significant number of WPC's properties are subject to mortgages with
balloon payments. Scheduled balloon payments for the next five years are
as follows:

- 2002 - $ 0 million;
- 2003 - $ 2.5 million;
- 2004 - $20 million;

-7-

- 2005 - $ 0 million; and
- 2006 - $33 million.

Our credit facility matures in 2004. As of December 31, 2001, WPC had
$95,000,000 drawn from the line of credit. As of March 15, 2002, the
balance outstanding on the line of credit was $81,000,000. WPC's ability
to make such balloon payments will depend upon its ability either to
refinance the obligation when due, invest additional equity in the
property or to sell the related property. WPC's ability to accomplish
these goals will be affected by various factors existing at the relevant
time, such as the state of the national and regional economies, local real
estate conditions, available mortgage rates, WPC's equity in the mortgaged
properties, its financial condition, the operating history of the
mortgaged properties and tax laws.

WPC may be unable to renew leases or re-let vacated spaces.

WPC will be subject to the risks that, upon expiration of leases, the
premises may not be re-let or the terms of re-letting (including the cost
of concessions to tenants) may be less favorable than current lease terms.
If the Company is unable to re-let promptly all or a substantial portion
of its properties or if the rental rates upon such re-letting were
significantly lower than current rates, WPC's net income and ability to
make expected distributions to its shareholders would be adversely
affected. There can be no assurance that the Company will be able to
retain tenants in any of its properties upon the expiration of their
leases. WPC's scheduled lease expirations, as a percentage of annualized
revenues for the next five years, are as follows:

- 2002 - 2%
- 2003 - 5%
- 2004 - 5%
- 2005 - 4%
- 2006 - 6%

WPC is subject to possible liabilities relating to environmental matters.

WPC owns industrial and commercial properties and are subject to the risk
of liabilities under federal, state and local environmental laws. Some of
these laws could impose the following on WPC:

- Responsibility and liability for the cost of investigation and
removal or remediation of hazardous substances released on
WPC's property, generally without regard to its knowledge or
responsibility of the presence of the contaminants;

- Liability for the costs of investigation and removal or
remediation of hazardous substances at disposal facilities for
persons who arrange for the disposal or treatment of such
substances; and

- Potential liability for common law claims by third parties
based on damages and costs of environmental contaminants.

WPC may be unable to make acquisitions on an advantageous basis.

A significant element of the Company's business strategy is the
enhancement of its portfolio through acquisitions of additional
properties. The consummation of any future acquisition will be subject to
satisfactory completion of WPC's extensive analysis and due diligence
review and to the negotiation of definitive documentation. There can be no
assurance that WPC will be able to identify and acquire additional
properties or that it will be able to finance acquisitions in the future.
In addition, there can be no assurance that any such acquisition, if
consummated, will be profitable for WPC. If WPC is unable to consummate
the acquisition of additional properties in the future, there can be no
assurance that it will be able to increase the cash available for
distribution to its shareholders.

WPC may suffer uninsured losses.

There are certain types of losses (such as due to wars or some natural
disasters) that generally are not insured because they are either
uninsurable or not economically insurable. Should an uninsured loss or a
loss in excess of the limits of WPC's insurance occur, WPC could lose
capital invested in a property, as well as the anticipated future revenues
from a property, while remaining obligated for any mortgage indebtedness
or other financial obligations related to the property. Any such loss
would adversely affect the Company's financial condition.

Changes in market interest rates could cause WPC's stock price to go down.

The trading prices of equity securities issued by real estate companies
have historically been affected by changes in broader market interest
rates, with increases in interest rates resulting in decreases in trading
prices, and decreases in interest rates resulting in increases in such
trading prices. An increase in market interest rates could therefore
adversely affect the trading prices of any equity securities issued by us.

-8-

WPC faces intense competition.

The real estate industry is highly competitive. WPC's principal
competitors include national real estate investment trusts, many of which
are substantially larger and have substantially greater financial
resources than WPC.

WPC's participation in joint ventures creates additional risk.

WPC participates in joint ventures with other entities, some of which may
be unaffiliated with WPC. There are additional risks involved in these
types of transactions. These risks include the potential of WPC's joint
venture partner becoming bankrupt and the possibility of diverging or
inconsistent economic or business interests of WPC and its partner which
could result in, among other things, subjecting WPC to liabilities in
excess of those contemplated under the joint venture agreement and/or
exposing WPC to liabilities of the joint venture in excess of its
proportionate share of these liabilities.

In some of WPC's joint venture relationships with publicly registered
investment programs or other entities sponsored by Carey Asset Management
Corp. or one of its affiliate, WPC enters into investments as
tenants-in-common. This poses risks in addition to those mentioned above.
The partition rights of each co-tenant in a tenancy-in-common could reduce
the value of each portion of the divided property. In addition, the
fiduciary obligation that Carey Asset Management Corp. or WPC's board may
owe to its partner in an affiliated transaction may make it more difficult
for WPC to enforce its rights.

International investments involve additional risks.

WPC owns properties in France and may purchase additional property located
outside the United States. These investments may be affected by factors
peculiar to the laws of the jurisdiction in which the property is located.
These laws may expose WPC to risks that are different from and in addition
to those commonly found in the United States. Foreign investments could be
subject to the following risks:

- changing governmental rules and policies;

- enactment of laws relating to the foreign ownership of
property and laws relating to the ability of foreign persons
or corporations to remove profits earned from activities
within the country to the person's or corporation's country of
origin;

- variations in the currency exchange rates;

- adverse market conditions caused by changes in national or
local economic conditions;

- changes in relative interest rates;

- change in the availability, cost and terms of mortgage funds
resulting from varying national economic policies;

- changes in real estate and other tax rates and other operating
expenses in particular countries;

- changes in land use and zoning laws; and

- more stringent environmental laws or changes in such laws.

The value of WPC's real estate is subject to fluctuation.

WPC is subject to all of the general risks associated with the ownership
of real estate. In particular, WPC faces the risk that rental revenue from
the properties will be insufficient to cover all corporate operating
expenses and debt service payments on indebtedness it incurs. Additional
real estate ownership risks include:

- Adverse changes in general or local economic conditions,

- Changes in supply of or demand for similar or competing
properties,

- Changes in interest rates and operating expenses,

- Competition for tenants,

- Changes in market rental rates,

- Inability to lease properties upon termination of existing
leases,

- Renewal of leases at lower rental rates,

- Inability to collect rents from tenants due to financial
hardship, including bankruptcy,

- Changes in tax, real estate, zoning and environmental laws
that may have an adverse impact upon the value of real estate,

- Uninsured property liability, property damage or casualty
losses,

- Unexpected expenditures for capital improvements or to bring
properties into compliance with applicable federal, state and
local laws, and

- Acts of God and other factors beyond the control of the
Company's management.

-9-

WPC depends on key personnel for its future success.

WPC depends on the efforts of the executive officers and key employees.
The loss of the services of these executive officers and key employees
could have a material adverse effect on WPC's operations.

The investment advisory business presents additional risks.

W. P. Carey & Co. LLC is exposed to the risks of the real estate
management business. These risks include that:

- WPC's earnings could be volatile because revenue from the real
estate management business has traditionally been more
volatile than revenue from ownership of real estate subject to
triple net leases; and

- the growth in revenue from the management business is
dependent in part on future capital raising in existing or
future managed entities which is subject to uncertainty and is
subject to capital market and real estate market conditions.

The revenue streams from the investment advisory agreements are subject to
limitation or cancellation.

The agreements under which WPC will provide investment advisory services
may generally be terminated by each CPA(R) REIT upon 60 days notice, with
or without cause. In addition, the fees payable under each agreement are
subject to a variable annual cap based on a formula tied to the assets and
income of that CPA(R) REIT. This cap may limit the growth of the
management fees. There can be no assurance that these agreements will not
be terminated or that WPC's income will not be limited by the cap on fees
payable under the agreements. A cap on the fees could have a material
adverse effect on WPC's business, results of operations and financial
condition.

WPC's business, results of operations or financial condition could be
materially adversely affected by the above conditions.

The risk factors may have affected, and in the future could affect, WPC's actual
operating and financial results and could cause such results to differ
materially from those in any forward-looking statements. You should not consider
this list exhaustive. New risk factors emerge periodically, and the Company
cannot completely assure you that the factors described above list all material
risks to WPC at any specific point in time. The Company has disclosed many of
the important risk factors discussed above in its previous filings with the
Securities and Exchange Commission.

-10-

Item 2. Properties.

Set forth below is certain information relating to the Company's properties
owned as of December 31, 2001:

SHARE OF
RENT PER CURRENT
LEASE OBLIGOR/ SQUARE SQUARE ANNUAL INCREASE LEASE TERM MAXIMUM
LOCATION FOOTAGE FOOT RENTS(a) FACTOR TERM
- -------------------------------------------------------------------------------------------------------------------------

DR PEPPER BOTTLING COMPANY OF TEXAS
Irving and Houston, Texas 721,947 6.08 4,389,512 CPI Jun. 2014 Jun. 2014

DETROIT DIESEL CORPORATION(b)
Detroit, MI 2,730,750 1.52 4,157,524 PPI Jun. 2010 Jun. 2030

GIBSON GREETINGS, INC.
Berea, KY and Cincinnati, OH 1,194,840 3.11 3,720,000 Stated Nov. 2013 Nov. 2023

FEDERAL EXPRESS CORPORATION(e)
College Station, TX 12,080 5.38 65,000 Market Feb. 2003 Feb. 2009
Colliersville, TN (b) 390,380 16.65 2,600,330 CPI Nov. 2019 Nov. 2029
Corpus Christi, TX 30,212 6.29 189,986 Market May 2004 May 2009
------- ---------
Total: 432,672 2,855,316

BOUYGUES TELECOM SA(b)
Tours, France 105,055 8.92 889,832(h) INSEE(i) Sep. 2009 Sep. 2012
Illkirch, France 107,180 17.83 1,910,819(t) INSEE(i) Jul. 2013 Jul. 2013
------- ---------
Total: 212,235 2,800,651

ORBITAL SCIENCES CORPORATION(b)
Chandler, AZ 280,000 9.48 2,655,320 CPI Sep. 2009 Sep. 2029

AMERICA WEST HOLDINGS CORPORATION(b,d)
Tempe, AZ 218,000 15.61 2,538,805 CPI Nov. 2019 Nov. 2029

THERMADYNE HOLDINGS CORP. (y)
Industry, CA 325,800 7.75 2,525,163 N/A N/A N/A

LIVHO, INC.
Livonia, MI 158,000 15.95 2,520,000 Stated Dec. 2008 Dec. 2028

SAINT-GOBAIN PERFORMANCE PLASTICS
CORPORATION (FORMERLY FURON COMPANY)(b)
New Haven, CT; Mickleton, NJ; Aurora
(2) and Mantua, OH; Bristol, RI 627,290 3.85 2,414,800 PPI Jul. 2012 Jul. 2037

QUEBECOR PRINTING INC.
Doraville, GA 432,559 3.30 1,428,094 CPI Dec. 2009 Dec. 2034
Olive Branch, MS (b) 270,500 3.60 973,255 CPI Jun. 2008 Jun. 2033
------- ---------
Total: 703,059 2,401,349

AUTOZONE, INC.(b,g) 31 Locations :
NC, TX, AL, GA, IL, LA, MO 185,990 7.11 1,321,567 % Sales Jan. 2011 Feb. 2026
11 Locations:
FL, GA, NM, SC, TX 54,000 9.64 520,391 % Sales Aug. 2013 Aug. 2038
12 Locations :
FL, LA, MO, NC, TN 64,965 5.71 370,636 % Sales Aug. 2012 Aug. 2037
------- ---------
Total: 304,955 2,212,594

-11-

THE GAP, INC.(b)
Erlanger, KY (2) 753,750 2.93 2,205,385 CPI Feb. 2003 N/A

SYBRON INTERNATIONAL CORPORATION
Dubuque, IA; Portsmouth, NH and
Rochester, NY 494,100 4.38 2,163,816 CPI Dec. 2013 Dec. 2038

CHECKFREE HOLDINGS, INC.(o)
Norcross, GA 220,675 18.92 2,088,107 CPI Dec. 2015 Dec. 2015

UNISOURCE WORLDWIDE, INC.
Anchorage, AK 44,712 7.34 328,360 Stated Dec. 2009 Dec. 2029
Commerce, CA(b) 411,579 3.46 1,422,080 Stated Apr. 2010 Apr. 2030
------- ---------
Total: 456,291 1,750,440

INFORMATION RESOURCES, INC.(f)
Chicago, IL 252,000 19.92 1,673,191 CPI Oct. 2005 Oct. 2015

PEERLESS CHAIN COMPANY
Winona, MN 357,760 4.63 1,657,790 CPI Jun. 2011 Jun. 2026

AP PARTS INTERNATIONAL, INC.
Toledo, OH 1,092,986 1.48 1,617,251 CPI Dec. 2007 Dec. 2022

BRODART CO.(b)
Williamsport, PA (2) 521,231 2.91 1,519,253 CPI Jun. 2008 Jun. 2028

COMARK, INC. 36,285 8.07 292,896 Stated May 2003 May 2003
GENERAL SERVICES ADMINISTRATION 3,949 15.95 62,986 Stated Apr. 2006 Apr. 2006
UNITED STATES POSTAL SERVICE 60,320 20.44 1,233,000 Stated Apr. 2006 Apr. 2006
------- ---------
Total for property in Bloomingdale, IL: 100,554 1,588,882

CSS INDUSTRIES, INC.
Memphis, TN 1,006,566 1.49 1,500,000 CPI Dec. 2005 Dec. 2015

SYBRON DENTAL SPECIALTIES, INC.
Glendora, CA and Romulus, MI 245,000 5.97 1,463,096 CPI Dec. 2018 Dec. 2043

SPRINT SPECTRUM L.P. (b)
Albuquerque, NM 94,731 15.04 1,424,561 CPI May 2011 Sep. 2018

VARIOUS TENANTS (b,v)
Cincinnati, OH 589,150

EAGLE HARDWARE & GARDEN, INC.(b,g)
Bellevue, WA 153,360 8.12 1,245,180 CPI & Aug. 2017 Aug. 2017
% Sales

AT&T CORPORATION
Bridgeton, MO 85,510 13.60 1,162,546 Stated Jun. 2011 Jun. 2021

BELLSOUTH TELECOMMUNICATIONS, INC.(b)
Lafayette Parish, LA 66,846 16.40 1,096,170 Stated Dec. 2009 Dec. 2039

-12-

CENDANT OPERATION, INC.(b)
Moorestown, NJ 74,066 14.42 1,067,738 Stated Jun. 2004 Jun. 2004

JOHNSON ENGINEERING CORPORATION(b) 31,114 9.89 307,800 Stated Jun. 2003 Jun. 2003
LOCKHEED MARTIN CORPORATION(b) 39,464 9.30 366,936 Stated Jul. 2004 Jul. 2004
UNITED SPACE ALLIANCE LLC(b) 38,000 10.00 380,004 Stated Apr. 2006 Apr. 2006
------- ---------
Total for property in
Houston, TX: 108,578 1,054,740

ANTHONY'S MANUFACTURING COMPANY, INC.
San Fernando, CA 182,845 5.57 1,019,047 CPI May 2007 May 2012

LOCKHEED MARTIN CORPORATION
King of Prussia, PA 88,578 11.00 974,358 Market Jul. 2003 Jul. 2008

AMS HOLDING GROUP 52,261 14.64 765,101 None Dec. 2004 Dec. 2009
TEXAS DIGITAL SYSTEMS, INC. 36,291 5.37 194,820 None Aug. 2002 Aug. 2002
------ -------
Total for property in
College Station, TX: 88,552 959,921

WAL-MART STORES, INC.(b)
West Mifflin, PA 118,125 8.05 950,905 CPI Jan. 2007 Jan. 2037

UNITED STATIONERS SUPPLY COMPANY
New Orleans, LA; Memphis, TN and San
Antonio, TX 197,321 4.64 915,834 CPI Mar. 2010 Mar. 2030

PRE FINISH METALS INCORPORATED
Walbridge, OH 313,704 2.84 892,091 CPI Jun. 2003 Jun. 2028

IMO INDUSTRIES, INC. (b)
Garland, TX 150,203 5.48 822,750 Stated Sep. 2002 Sep. 2007

ALPENA HOLIDAY INN(b)
Alpena, MI 96,333 819,089(c) Dec. 2009

NVR L.P.
Thurmont, MD and
Farmington, NY 179,741 4.30 773,370 CPI Mar. 2014 Mar. 2030

WINN-DIXIE STORES, INC.(g)
Bay Minette, AL 34,887 3.68 128,470 % Sales Jun. 2007 Jun. 2037
Brewton, AL 30,625 4.39 134,500 % Sales Oct. 2010 Oct. 2030
Leeds, AL 25,600 5.65 144,713 % Sales Mar. 2004 Mar. 2034
Montgomery, AL 32,690 5.86 191,534 % Sales Mar. 2008 Mar. 2038
Panama City, FL 34,710 4.91 170,399 % Sales Mar. 2008 Mar. 2038
------- -------
Total: 158,512 769,616

LOCKHEED MARTIN CORPORATION 66,000 7.94 523,908 Stated Aug. 2002 Aug. 2003
MERCHANTS HOME DELIVERY, INC. 22,716 11.71 266,064 Stated Jun. 2004 Jun. 2014
------ -------
Total for property in
Oxnard, CA: 88,716 789,972

PANTIN, FRANCE - MULTI-TENANT (b) 68,951 13.32 688,772(j) INSEE(i) Various

-13-

SHINN SYSTEMS, INC. 13,284 2.00 26,568 CPI Nov. 2003 Nov. 2003
PILLOWTEX CORPORATION (z) 288,000 2.40 691,200 N/A N/A N/A
------- -------
Total for property in
Salisbury, NC: 301,284 717,768

DATCON INSTRUMENT COMPANY
Lancaster, PA 70,712 9.60 679,083 CPI Nov. 2013 Nov. 2030

EXIDE ELECTRONICS CORPORATION
Raleigh, NC 27,770 23.22 644,937 CPI Jul. 2006 Jul. 2006

WESTERN UNION FINANCIAL SERVICES, INC.
Bridgeton, MO 78,080 7.34 573,221 Stated Nov. 2006 Nov. 2011

EXCEL COMMUNICATIONS, INC.
Reno, NV 53,158 10.02 532,800 Stated Dec. 2006 Dec. 2020

TITAN CORPORATION(k)
San Diego, CA 166,403 16.43 506,783 CPI Jul. 2007 Jul. 2023

UNITED SPACE ALLIANCE LLC
Webster, TX 88,200 5.73 505,020 Stated Sep. 2006 Sep. 2006

DS GROUP LIMITED
Goshen, IN 54,270 9.22 500,212 CPI Feb. 2010 Feb. 2035

WOZNIAK INDUSTRIES, INC.
Schiller Park, IL 84,197 5.91 497,400 Stated Aug. 2005 Dec. 2023

HONEYWELL, INC. 112,125 2.99 335,484 Stated Sep. 2002 Sep. 2002
CONTINENTAL AIRLINES, INC. 32,320 4.41 142,560 Stated Jul. 2003 Jul. 2003
------- -------
Total for property in
Houston, TX(b): 144,445 478,044

YALE SECURITY, INC.
Lemont, IL 130,000 3.53 459,000 Stated Apr. 2011 Apr. 2011

NATIONSPACK, INC. (q) (FORMERLY B&G
CONTRACT PACKAGING, INC.) 80,000 2.33 186,626 Stated Dec. 2003 Dec. 2003
VITAL RECORDS COMPANY OF ARKANSAS, INC.
(q) 80,000 3.40 272,000 Stated Jul. 2010 Jul. 2020
------- -------
Total for property in
Maumelle, AR: 160,000 458,626

PETOSKEY HOLIDAY INN(b)
Petoskey, MI 83,462 N/A 446,044(c) Dec. 2009

CHILDTIME CHILDCARE, INC.(b,l)
12 Locations: AZ, CA, MI, TX 83,694 15.45 439,008 CPI Jan. 2016 Jan. 2041

PENN CRUSHER CORPORATION
Cuyahoga Falls, OH and Broomall, PA 103,255 3.65 377,234 Market Jan. 2005 Jan. 2020

-14-

SOCIETE DE TRAITEMENTS(b) 69,470 3.32 184,347(m) INSEE(i) Jun. 2005 Jun. 2008
GIST-BROCADES FRANCE SA(b) 37,337 5.37 160,402(m) INSEE(i) Jun. 2005 Jun. 2008
------- -------
Total for property in
Indre et Loire, France: 106,807 344,749(m)

TELLIT ASSURANCES(b)
Rouen, France 36,791 12.43 342,913(j) INSEE(i) Aug. 2004 Aug. 2009

BELLSOUTH ENTERTAINMENT, INC.
Ft. Lauderdale, FL 80,450 5.14 413,748 CPI Jul. 2006 Jul. 2009

OLMSTEAD KIRK PAPER COMPANY 5,760 6.56 37,800 Stated Jan. 2003 Jan. 2003
PETROCON ENGINEERING, INC. 48,700 5.46 265,740 Stated Monthly Renewals
------ -------
Total for property in
Beaumont, TX: 54,460 303,540

BLUE TOOL, INC.
Frankenmuth, MI(s) 132,400 2.27 300,000 None Monthly Renewals

BIKE BARN HOLDING COMPANY, INC. 6,216 10.42 64,800 Stated Aug. 2005 Aug. 2005
SEARS ROEBUCK AND CO. 21,069 10.60 223,331 Stated Sep. 2005 Sep. 2005
------ -------
Total for property in
Houston, TX(b): 27,285 288,131

GAMES WORKSHOP, INC.
Glen Burnie, MD 45,804 5.70 260,849 Stated May 2006 May 2016

THE ROOF CENTERS, INC.
Manassas, VA 60,446 4.31 260,749 Stated Jul. 2009 Jul. 2009

HARCOURT GENERAL, INC.(g)
Canton, MI 29,818 7.84 233,750 % Sales Jul. 2005 Jul. 2030

VERIZON COMMUNICATIONS, INC.
Milton, VT 30,624 7.54 231,000 Stated Feb. 2003 Feb. 2013

VARIOUS TENANTS (b)
Broomfield, CO 44,676 5.04 225,361 CPI Various

NORTHERN TUBE, INC.
Pinconning, MI 220,588 1.02 225,000 CPI Dec. 2007 Dec. 2022

PENBERTHY PRODUCTS, INC.
Prophetstown, IL 161,878 1.47 237,486 CPI Apr. 2006 Apr. 2026

ADR BOOKPRINT INC. 3,330 7.56 25,176 Stated May 2003 May 2003
TRANS AMERICAN AUTOMATION INC. 5,632 7.92 44,604 Stated Feb. 2007 Feb. 2007
CUSTOM TRAINING GROUP, INC. 11,740 8.23 96,600 Stated Aug. 2006 Aug. 2006
WORK READY, INC. 7,306 9.20 67,220 Stated Aug. 2006 Aug. 2006
------ -------
Total for property in
Houston, TX: 28,008 233,600

CSK AUTO, INC.
Apache Junction, AZ (p) 11,807 4.18 49,348 CPI Jan. 2002 Jan. 2022
Casa Grande, AZ 11,588 5.57 64,590 CPI Jan. 2007 Jan. 2022
Glendale, AZ (p) 11,700 5.67 66,720 CPI Jan. 2002 Jan. 2022
------ -------
Total: 35,095 180,658

-15-

ROCHESTER BUTTON COMPANY, INC.
South Boston and Kenbridge, VA 81,387 2.21 180,000 None Dec. 2016 Dec. 2036

DIRECTION REGIONAL DES AFFAIRES
SANITAIRES ET SOCIALES(b)
Rouen, France 25,228 8.70 164,661(n) INSEE(i) Oct. 2004 Oct. 2004

PEPSICO, INC.
Houston, TX 17,725 6.29 111,557 Stated Oct. 2004 Oct. 2004

STAIR PANS OF AMERICA, INC.
Fredericksburg, VA 45,821 2.06 94,300 Stated Jul. 2007 Jul. 2007

LOCKHEED MARTIN CORPORATION
Webster, TX 10,960 8.27 90,603 Stated Jul. 2002 Jul. 2002

PENN VIRGINIA COAL COMPANY
Duffield, VA 12,804 5.78 73,999 CPI Nov. 2004 Nov. 2004

THE CRAFTERS MALL, INC.
Glendale, AZ 3,406 14.08 47,968 None Quarterly Renewals

RECLAMATION FOODS, INC.
Apache Junction, AZ 3,194 8.21 26,225 CPI Jun. 2006 Jun. 2006

SCALLON'S CARPET CASTLE, INC.
Casa Grande, AZ 3,134 5.90 18,480 Stated Dec. 2003 Dec. 2003

CARE FREE HAIR DESIGN
Colville, WA 800 10.40 8,400 None Monthly Renewals

VARIOUS TENANTS (b,v)
Cincinnati, OH 589,150

VACANT PROPERTIES
McMinnville, TN (x) 276,991
Burnsville, MN (q) 31,837
Urbana, IL (q) 46,350
Travelers Rest, SC 85,959
Los Angeles, CA (w) 390,000
Broomfield, CO (r) 11 acres Land Only

(a) Share of Current Annual Rents is the product of the Square Footage,
the Rent per Square Foot, and any ownership interest percentage as
noted below.

(b) These properties are encumbered by mortgage notes payable.

(c) The Company operates a hotel business at this property. Dollar
amounts are net operating income for 2001 for the hotel business.

(d) Current annual rent represents the 74.583% ownership interest as a
tenancy in common in this property.

(e) Current annual rent for the Colliersville, TN property represents
the 40% ownership interest in a limited liability company owning
land and building.

(f) Current annual rent represents the 33.33% ownership interest in a
limited partnership owing land and building.

(g) Current annual rent does not include percentage of sales rent,
payable under the lease contract.

(h) Current annual rent represents the 95% ownership interest in a
foreign partnership owning land and building. Rents are collected in
French Francs, conversion rate at December 31, 2001 used.

(i) INSEE construction index, an index published quarterly by the French
Government.

-16-

(j) Current annual rent represents the 75% ownership interest in a
foreign partnership owning land and building. Rents are collected in
French Francs, conversion rate at December 31, 2001 used.

(k) Current annual rent represents the 18.54% ownership interest in a
limited partnership owning land and building.

(l) Current annual rent represents the 33.93% ownership interest as a
tenancy in common in this property.

(m) Current annual rent represents the 80% ownership interest in a
foreign partnership owning land and building. Rents are collected in
French Francs, conversion rate at December 31, 2001 used.

(n) Current annual rent represents the 75% ownership interest in a
foreign partnership owning land and building. Rents are collected in
French Francs, conversion rate at December 31, 2001 used.

(o) Current annual rent represents the 50% ownership interest in a
limited liability company owning land and building.

(p) Tenant vacated property in January 2002.

(q) Property subsequently sold in 2002.

(r) Property is currently under development.

(s) Tenant currently occupies the space under a month-to-month license
agreement.

(t) Current annual rent represents the 90% ownership interest in a
foreign partnership owning a building. Rents are collected in French
Francs, conversion rate at December 31, 2001 used.

(u) Represents total vacant space from various locations in Houston,
Texas under Billup Portfolio.

(v) The property primarily consists of public warehousing operations and
has approximately 46 short-term tenants who collectively generate
approximately $130,000 in monthly rents and expense reimbursements.

(w) WPC entered into a purchase and sale agreement in January 2002 for
the sale of the property.

(x) The property is mostly vacant, except for the former tenant
occupying the foundry space on a month-to-month license agreement
for $8,300.

(y) Tenant filed a voluntary petition for bankruptcy in December 2001,
and in February 2002 the lease was terminated. The tenant vacated
the property in February 2002.

(z) Tenant notified WPC in February 2002 that under its bankruptcy plan
of reorganization it would terminate its lease and vacate the
property effective April 2002.

Item 3. Legal Proceedings.

As of the date hereof, the Company is not a party to any material pending legal
proceedings.

Item 4. Submission of Matters to a Vote of Security Holders.

No matter was submitted during the fourth quarter of the year ended December 31,
2001 to a vote of security holders, through the solicitation of proxies or
otherwise.

-17-

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

Information with respect to Registrant's common equity is hereby incorporated by
reference to page 37 of the Company's Annual Report contained in Appendix A.

Item 6. Selected Financial Data.

Selected Financial Data are hereby incorporated by reference to page 1 of the
Company's Annual Report contained in Appendix A.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

Management's Discussion and Analysis are hereby incorporated by reference to
pages 2 to 10 of the Company's Annual Report contained in Appendix A.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk:

$180,020 of WPC's long-term debt bears interest at fixed rates, and therefore
the fair value of these instruments is affected by changes in the market
interest rates. The following table presents principal cash flows based upon
expected maturity dates of the debt obligations and the related weighted-average
interest rates by expected maturity dates for the fixed rate debt. The interest
rate on the variable rate debt as of December 31, 2001 ranged from 4.56% to
6.44%. The interest on the fixed rate debt as of December 31, 2001 ranged from
5.92% to 10%.

Advances from the line of credit bear interest at an annual rate of either (i)
the one, two, three or six-month LIBOR, plus a spread which ranges from 0.6% to
1.45% depending on leverage or corporate credit rating or (ii) the greater of
the bank's Prime Rate and the Federal Funds Effective Rate, plus .50%, plus a
spread of up to .125% depending on WPC's leverage.

(in thousands)

2002 2003 2004 2005 2006 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------

Fixed rate debt $9,444 $10,266 $27,412 $8,394 $25,947 $98,557 $180,020 $180,348
Weighted average
interest rate 7.28% 7.28% 8.02% 7.61% 7.41% 7.36%
Variable rate debt $ 926 $ 958 $96,026 $1,059 $ 1,167 $15,359 $115,495 $115,495

WPC conducts business in France. The foreign operations were not material to
WPC's consolidated financial position, results of operations or cash flows
during the three-year period ended December 31, 2001. Additionally, foreign
currency transaction gains and losses were not material to our results of
operations for the three-year period ended December 31, 2001. Accordingly, we
were not subject to material foreign currency exchange rate risk from the
effects that exchange rate movements of foreign currencies would have on our
future costs or on future cash flows we would receive from our foreign
subsidiaries. To date, we have not entered into any foreign currency forward
exchange contracts or other derivative financial instruments to hedge the
effects of adverse fluctuations in foreign currency exchange rates. Scheduled
future minimum rents, exclusive of renewals, under non-cancelable operating
leases resulting from WPC's foreign operations are as follows:

(in thousands) 2002 2003 2004 2005 2006 Thereafter Total
---- ---- ---- ---- ---- ---------- -----

Minimum Rents(1) $4,783 $4,783 $4,606 $3,941 $3,739 $16,946 $38,798

Scheduled principal payments for the mortgage notes payable during each of the
next five years following December 31, 2001 and thereafter are as follows:

(in thousands) 2002 2003 2004 2005 2006 Thereafter Total
---- ---- ---- ---- ---- ---------- -----

Mortgage notes
Payable(1) $3,134 $1,144 $1,398 $1,430 $1,612 $28,651 $37,369

(1) Based on December 31, 2001 exchange rate for the French Franc.

-18-

Item 8. Consolidated Financial Statements and Supplementary Data:

The following consolidated financial statements and supplementary data of the
Company are hereby incorporated by reference to pages 11 to 36 of the Company's
Annual Report contained in Appendix A:

(i) Report of Independent Accountants.
(ii) Consolidated Balance Sheets as of December 31, 2001 and 2000.
(iii) Consolidated Statements of Operations for the years ended December
31, 2001, 2000 and 1999.
(iv) Consolidated Statements of Members' Equity for the years ended
December 31, 2001, 2000 and 1999.
(v) Consolidated Statements of Cash Flows for the years ended December
31, 2001, 2000 and 1999.
(vi) Notes to Consolidated Financial Statements.

Item 9. Disagreements on Accounting and Financial Disclosure.

None.

PART III

Item 10. Directors and Executive Officers of the Registrant.

This information will be contained in Company's definitive Proxy Statement with
respect to the Company's 2002 Annual Meeting of Shareholders, to be filed with
the Securities and Exchange Commission within 120 days following the end of the
Company's fiscal year, and is hereby incorporated by reference.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

Item 13. Certain Relationships and Related Transactions.

-19-

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) 1. Financial Statements:

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

Report of Independent Accountants.

Consolidated Balance Sheets as of December 31, 2001 and 2000.

Consolidated Statements of Operations for the years ended
December 31, 2001, 2000 and 1999.

Consolidated Statements of Members' Equity for the years ended
December 31, 2001, 2000 and 1999.

Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999.

Notes to Consolidated Financial Statements.

The consolidated financial statements are hereby incorporated by reference to
pages 11 to 36 of the Company's Annual Report contained in Appendix A.

(a) 2. Financial Statement Schedule:

The following schedule is filed as a part of this Report:

Report of Independent Accountants.

Schedule III - Real Estate and Accumulated Depreciation as of
December 31, 2001.

Notes to Schedule III.

Schedule III and notes thereto are contained herein on pages
24 to 32 of this Form 10-K.

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.

-20-

(a) 3 Exhibits:

The following exhibits are filed as part of this Report. Documents other than
those designated as being filed herewith are incorporated herein by reference.

Exhibit Method of
No. Description Filing
- -------- ----------- --------------------------

3.1 Amended and Restated Limited Liability Exhibit 3.1 to
Company Agreement of Carey Diversified Registration Statement on
LLC. Form S-4 (No. 333-37901)
dated October 15, 1997

3.2 Bylaws of Carey Diversified LLC. Exhibit 3.2 to
Registration Statement on
Form S-4 (No. 333-37901)
dated October 15, 1997

4.1 Form of Listed Share Stock Exhibit 4.1 to
Certificate. Registration Statement on
Form S-4 (No. 333-37901)
dated October 15, 1997

10.1 Management Agreement Between Carey Exhibit 10.1 to
Management LLC and the Company. Registration Statement on
Form S-4 (No. 333-37901)
dated October 15, 1997

10.2 Non-Employee Directors' Incentive Exhibit 10.2 to
Plan. Registration Statement on
Form S-4 (No. 333-37901)
dated October 15, 1997

10.3 1997 Share Incentive Plan. Exhibit 10.3 to
Registration Statement on
Form S-4 (No. 333-37901)
dated October 15, 1997

10.4 Investment Banking Engagement Letter Exhibit 10.4 to
between W. P. Carey & Co. and the Registration Statement on
Company. Form S-4 (No. 333-37901)
dated October 15, 1997

10.5 Non-Statutory Listed Share Option Exhibit 10.5 to
Agreement. Registration Statement on
Form S-4 (No. 333-37901)
dated October 15, 1997

10.6 Second Amended and Restated Credit Filed herewith
Agreement dated as of March 23, 2001

21.1 List of Registrant Subsidiaries Filed herewith

23.1 Consent of PricewaterhouseCoopers LLP Filed herewith

99.13 Amended and Restated Agreement of Exhibit 99.13 to
Limited Partnership of CPA(R):1. Registration Statement on
Form S-4 (No. 333-37901)
dated October 15, 1997

-21-

Exhibit Method of
No. Description Filing
- -------- ----------- --------------------------

99.16 Amended and Restated Agreement of Exhibit 99.16 to
Limited Partnership of CPA(R):4. Registration Statement on
Form S-4 (No. 333-37901)
dated October 15, 1997

99.18 Amended and Restated Agreement of Exhibit 99.18 to
Limited Partnership of CPA(R):6. Registration Statement on
Form S-4 (No. 333-37901)
dated October 15, 1997

99.21 Amended and Restated Agreement of Exhibit 99.21 to
Limited Partnership of CPA(R):9. Registration Statement on
Form S-4 (No. 333-37901)
dated October 15, 1997

99.22 Listed Share Purchase Warrant. Exhibit 99.22 to
Registration Statement on
Form S-4 (No. 333-37901)
dated October 15, 1997

(b) Report on Form 8-K:

During the quarter ended December 31, 2001, the Company was not required
to file any reports on Form 8-K.

-22-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

W. P. CAREY & CO. LLC

3/20/2002 BY: /s/ John J. Park
- --------- --------------------------------------------------------
Date John J. Park
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

BY: W. P. CAREY & CO. LLC

3/20/2002 BY: /s/ William P. Carey
- --------- -------------------------------------------------------
Date William P. Carey
Chairman of the Board, Chief Executive Officer and
Director
(Principal Executive Officer)

3/20/2002 BY: /s/ Francis J. Carey
- --------- -------------------------------------------------------
Date Francis J. Carey
Vice Chairman of the Board, Chairman of the Executive
Committee and Director

3/20/2002 BY: /s/ Gordon F. DuGan
- --------- -------------------------------------------------------
Date Gordon F. DuGan
President, Chief Acquisitions Officer and Director

3/20/2002 BY: /s/ Donald E. Nickelson
- --------- -------------------------------------------------------
Date Donald E. Nickelson
Chairman of the Audit Committee and Director

3/20/2002 BY: /s/ Eberhard Faber IV
- --------- -------------------------------------------------------
Date Eberhard Faber IV
Director

3/20/2002 BY: /s/ Dr. Lawrence R. Klein
- --------- -------------------------------------------------------
Date Dr. Lawrence R. Klein
Director

3/20/2002 BY: /s/ Charles C. Townsend, Jr.
- --------- -------------------------------------------------------
Date Charles C. Townsend, Jr.
Director

3/20/2002 BY: /s/ Reginald Winssinger
- --------- -------------------------------------------------------
Date Reginald Winssinger
Director

3/20/2002 BY: /s/ John J. Park
- --------- -------------------------------------------------------
Date John J. Park
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial Officer)

3/20/2002 BY: /s/ Claude Fernandez
- --------- -------------------------------------------------------
Date Claude Fernandez
Executive Vice President - Financial Operations
(Principal Accounting Officer)

-23-

REPORT of INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
W. P. CAREY & CO. LLC:

Our audits of the consolidated financial statements referred to in our report
dated February 25, 2002 appearing in the 2001 Annual Report to Shareholders of
W. P. CAREY & CO. LLC (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

New York, New York
February 25, 2002

-24-

W. P. CAREY & CO. LLC AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE and ACCUMULATED DEPRECIATION

as of December 31, 2001

Initial Cost to Company
-----------------------

Costs Capitalized Increase
Personal Subsequent to (decrease) in Net
Description Encumbrances Land Buildings Property Acquisition(a) Investments (b)
- ----------- ------------ ---- --------- -------- -------------- ---------------

Operating Method:
Office, warehouse and
manufacturing buildings
leased to various
tenants in Broomfield,
Colorado $1,788,177 $247,993 $2,538,263 $1,200,000
Office and manufacturing
building leased to IMO
Industries, Inc. 273,454 814,267 4,761,042 $(2,238,231)
Distribution facilities
and warehouses leased
to The Gap, Inc. 13,302,145 1,525,593 21,427,148 141,235
Supermarkets leased to
Winn-Dixie Stores, Inc. 855,196 6,762,374 (1,924,025)
Warehouse and manufac-
turing plant leased to
Pre Finish Metals
Incorporated 324,046 8,408,833
Land leased to Unisource
Worldwide, Inc. 4,573,360
Centralized telephone
bureau leased to Excel
Communications, Inc. 925,162 4,023,627 101,983
Office building in
Beaumont, Texas leased
to Petrocon
Engineering, Inc. and
Olmstead Kirk Paper
Company 164,113 2,343,849 39,593
Computer center leased to
AT&T Corporation 269,700 5,099,964 3,753,145 (2,612)
Office, manufacturing and
warehouse buildings
leased to AMS Holding
Group and Texas Digital
Systems, Inc. 1,389,951 5,337,002 92,326 431,899
Warehouse and
distribution center
leased to Pillowtex,
Corporation and Shinn
Systems, Inc. 246,949 5,034,911 1,363,829
Manufacturing and office
buildings leased to
Penn Virginia
Corporation 240,072 609,267
Land leased to Exide
Electronics Corporation 1,638,012

Gross Amount at which Carried at Close of Period (c)
----------------------------------------------------
Life on
which
Depreciation
in Latest
Statement of
Personal Accumulated Date Income
Description Land Buildings Property Total Depreciation(d) Acquired is Computed
- ----------- ---- --------- -------- ----- --------------- -------- -----------

Operating Method:
Office, warehouse and
manufacturing buildings
leased to various
tenants in Broomfield,
Colorado $247,993 $3,738,263 $3,986,256 $325,077 1/1/1998 40 yrs.
Office and manufacturing
building leased to IMO
Industries, Inc. 814,267 2,522,811 3,337,078 420,149 1/1/1998 40 yrs.
Distribution facilities
and warehouses leased
to The Gap, Inc. 1,525,593 21,568,383 23,093,976 2,146,245 1/1/1998 40 yrs.
Supermarkets leased to
Winn-Dixie Stores, Inc. 448,523 5,245,022 5,693,545 524,503 1/1/1998 40 yrs.
Warehouse and manufac-
turing plant leased to
Pre Finish Metals
Incorporated 324,046 8,408,833 8,732,879 840,884 1/1/1998 40 yrs.
Land leased to Unisource
Worldwide, Inc. 4,573,360 4,573,360 1/1/1998 N/A
Centralized telephone
bureau leased to Excel
Communications, Inc. 925,162 4,125,610 5,050,772 405,880 1/1/1998 40 yrs.
Office building in
Beaumont, Texas leased
to Petrocon
Engineering, Inc. and
Olmstead Kirk Paper
Company 164,113 2,383,442 2,547,555 234,436 1/1/1998 40 yrs.
Computer center leased to
AT&T Corporation 269,700 8,850,497 9,120,197 46,096 1/1/1998 40 yrs.
Office, manufacturing and
warehouse buildings
leased to AMS Holding
Group and Texas Digital
Systems, Inc. 1,389,951 5,861,227 7,251,178 551,695 1/1/1998 40 yrs.
Warehouse and
distribution center
leased to Pillowtex,
Corporation and Shinn
Systems, Inc. 246,949 6,398,740 6,645,689 609,843 1/1/1998 40 yrs.
Manufacturing and office
buildings leased to
Penn Virginia
Corporation 240,072 609,267 849,339 60,927 1/1/1998 40 yrs.
Land leased to Exide
Electronics Corporation 1,638,012 1,638,012 1/1/1998 N/A

-25-

W. P. CAREY & CO. LLC AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE and ACCUMULATED DEPRECIATION

as of December 31, 2001

Initial Cost to Company
-----------------------

Operating Method:
Motion picture theaters
leased to Harcourt
General, Inc. 1,527,425 5,709,495 (4,752,521)
Warehouse/ office
research facilities
leased to Lockheed
Martin Corporation 1,218,860 6,283,475 539,706
Warehouse/office research
facilities leased to
Lockheed Martin
Corporation and
Merchant Home Delivery,
Inc. 1,104,669 6,556,607 42,232
Warehouse/distribution
facilities leased to
Games Workshop, Inc. 293,801 1,912,271
Warehouse and office
facility leased to
BellSouth
Entertainment, Inc. 1,173,108 3,368,141 241,350 98,916
Manufacturing and office
facility leased to Yale
Security, Inc. 345,323 3,913,657 60,394
Manufacturing facilities
leased to AP Parts
International, Inc. 3,389,587 447,170 12,337,106 260,258
Manufacturing facilities
leased to Northern
Tube, Inc. 31,725 1,691,580
Manufacturing facilities
leased to Anthony's
Manufacturing Company,
Inc. 2,051,769 5,321,776 152,368
Manufacturing facilities
in Traveler's Rest, SC 263,618 4,046,406 (2,506,543)
Land leased to AutoZone,
Inc. 14,839,615 9,382,198 (147,949)
Retail stores leased to
CSK Auto, Inc. 3,202,467 2,711,994 (4,680,386)
Retail stores leased to
Care Free Hair Design 129,173 313,107
Office facility leased to
Verizon Communications,
Inc. 219,548 1,578,592
Land leased to Sybron 1,135,003 17,286

Operating Method:
Motion picture theaters
leased to Harcourt
General, Inc. 274,985 2,209,414 2,484,399 220,941 1/1/1998 40 yrs.
Warehouse/ office
research facilities
leased to Lockheed
Martin Corporation 1,218,860 6,823,181 8,042,041 672,966 1/1/1998 40 yrs.
Warehouse/office research
facilities leased to
Lockheed Martin
Corporation and
Merchant Home Delivery,
Inc. 1,104,669 6,598,839 7,703,508 661,737 1/1/1998 40 yrs.
Warehouse/distribution
facilities leased to
Games Workshop, Inc. 293,801 1,912,271 2,206,072 191,227 1/1/1998 40 yrs.
Warehouse and office
facility leased to
BellSouth
Entertainment, Inc. 1,173,108 3,708,407 4,881,515 348,526 1/1/1998 40 yrs.
Manufacturing and office
facility leased to Yale
Security, Inc. 345,323 3,974,051 4,319,374 393,702 1/1/1998 40 yrs.
Manufacturing facilities
leased to AP Parts
International, Inc. 447,170 12,597,364 13,044,534 1,242,686 1/1/1998 40 yrs.
Manufacturing facilities
leased to Northern
Tube, Inc. 31,725 1,691,580 1,723,305 169,158 1/1/1998 40 yrs.
Manufacturing facilities
leased to Anthony's
Manufacturing Company,
Inc. 2,051,769 5,474,144 7,525,913 537,439 1/1/1998 40 yrs.
Manufacturing facilities
in Traveler's Rest, SC 263,618 1,539,863 1,803,481 341,977 1/1/1998 40 yrs.
Land leased to AutoZone,
Inc. 9,234,249 9,234,249 1/1/1998 N/A
Retail stores leased to
CSK Auto, Inc. 804,134 429,941 1,234,075 91,715 1/1/1998 40 yrs.
Retail stores leased to
Care Free Hair Design 129,173 313,107 442,280 31,311 1/1/1998 40 yrs.
Office facility leased to
Verizon Communications,
Inc. 219,548 1,578,592 1,798,140 157,859 1/1/1998 40 yrs.
Land leased to Sybron 1,152,289 1,152,289 1/1/1998 N/A

-26-

W. P. CAREY & CO. LLC AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE and ACCUMULATED DEPRECIATION

as of December 31, 2001

Initial Cost to Company
-----------------------

Operating Method:
Dental Specialities,
Inc.
Office facility leased to
United States Postal
Service, General
Services Administration
and Comark, Inc. 1,074,640 11,452,967 154,728
Manufacturing facilities
leased to Blue Tool,
Inc. 284,314 2,483,597
Manufacturing and office
buildings leased to
Penn Crusher Corporation 412,596 3,471,346 40,743
Manufacturing facilities
in McMinnville, TN 177,981 4,660,047 (3,177,000)
Manufacturing and office
facility leased to The
Roof Centers, Inc. 459,593 1,351,737
Manufacturing facilities
leased to Quebecor
Printing Inc. 4,952,024 4,458,047 18,695,004 477,347
Land leased to Datcon
Instrument Company 1,954,882 40,000
Manufacturing facility
leased to Wozniak
Industries, Inc. 864,638 2,677,512 1,745 50,913
Distribution and office
facilities leased to
Federal Express
Corporation 335,189 1,839,331
Land leased to Dr Pepper
Bottling Company of
Texas 9,795,193
Manufacturing facility
leased to Detroit
Diesel Corporation 17,490,234 5,967,620 31,730,547 775,099
Engineering and
Fabrication facility
leased to Orbital
Sciences Corporation 14,427,241 5,034,749 18,956,971 2,185,077 541,325
Distribution facility
leased to PepsiCo, Inc. 166,745 884,772
Office/warehouse facility
formerly leased to Red
Bank Distribution, Inc. 2,097,266 1,629,715 9,396,770 (2,000,000)
Land leased to Childtime
Childcare, Inc. 419,832 1,673,925 324

Operating Method:
Dental Specialities,
Inc.
Office facility leased to
United States Postal
Service, General
Services Administration
and Comark, Inc. 1,074,640 11,607,695 12,682,335 1,153,234 1/1/1998 40 yrs.
Manufacturing facilities
leased to Blue Tool,
Inc. 284,314 2,483,597 2,767,911 62,090 1/1/1998 40 yrs.
Manufacturing and office
buildings leased to
Penn Crusher Corporation 412,596 3,512,089 3,924,685 347,566 1/1/1998 40 yrs.
Manufacturing facilities
in McMinnville, TN 177,981 1,483,047 1,661,028 49,576 1/1/1998 40 yrs.
Manufacturing and office
facility leased to The
Roof Centers, Inc. 459,593 1,351,737 1,811,330 135,174 1/1/1998 40 yrs.
Manufacturing facilities
leased to Quebecor
Printing Inc. 4,458,047 19,172,351 23,630,398 1,885,963 1/1/1998 40 yrs.
Land leased to Datcon
Instrument Company 1,994,882 1,994,882 1/1/1998 N/A
Manufacturing facility
leased to Wozniak
Industries, Inc. 864,638 2,730,170 3,594,808 269,892 1/1/1998 40 yrs.
Distribution and office
facilities leased to
Federal Express
Corporation 335,189 1,839,331 2,174,520 183,933 1/1/1998 40 yrs.
Land leased to Dr Pepper
Bottling Company of
Texas 9,795,193 9,795,193 1/1/1998 N/A
Manufacturing facility
leased to Detroit
Diesel Corporation 5,967,620 32,505,646 38,473,266 3,199,787 1/1/1998 40 yrs.
Engineering and
Fabrication facility
leased to Orbital
Sciences Corporation 5,034,749 21,683,373 26,718,122 2,057,752 1/1/1998 40 yrs.
Distribution facility
leased to PepsiCo, Inc. 166,745 884,772 1,051,517 88,478 1/1/1998 40 yrs.
Office/warehouse facility
formerly leased to Red
Bank Distribution, Inc. 1,629,715 7,396,770 9,026,485 29,365 1/1/1998 40 yrs.
Land leased to Childtime
Childcare, Inc. 1,674,249 1,674,249 1/1/1998 N/A

-27-

W. P. CAREY & CO. LLC AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE and ACCUMULATED DEPRECIATION

as of December 31, 2001

Initial Cost to Company
-----------------------

Operating Method:
Hotel leased to Livho,
Inc. 2,765,094 11,086,650 3,290,990 4,831,329
Retail store leased to
Eagle Hardware and
Garden, Inc. 10,474,432 4,125,000 11,811,641 393,206
Office building in
Pantin, France leased
to five lessees 5,889,106 2,674,914 8,113,120 (2,098,836)
Office facility in Mont
Saint Argany, France
leased to Tellit
Assurances 3,054,610 542,968 5,286,915 (1,318,643)
Portfolio of seven
properties in Houston,
Texas leased to 12
lessees 7,105,500 3,260,000 22,574,073 74,343
Office facility leased to
America West Holdings
Corp. 17,971,175 2,274,782 26,701,663
Office facility leased to
Sprint Spectrum L.P. 8,731,254 1,190,000 9,352,965 1,312,509
Office facility leased
to Direction Regional
des Affaires Sanitaires
et Sociales 1,168,098 303,061 2,109,731 (636,546)
Office facility leased to
Cendant Operations, Inc. 5,952,827 351,445 5,980,736 527,368 42,917
Office facility leased to
BellSouth
Telecommunications, Inc. 5,589,491 720,000 7,708,458 119,092
Office building in Lille
and Indre et Loire,
France leased to
Gist-Brocades France SA
and Societe de
Traitements 2,915,593 451,168 4,478,891 (932,234)
Office facility in Tours,
France leased to
Bouygues Telecom SA 7,467,185 1,033,532 9,737,359 (612,426)
Office facility in
Illkirch, France
leased to Bouygues
Telecom SA 16,874,116 18,520,178
------------ ----------- ------------ ---------- ----------- ------------
$166,172,962 $89,722,062 $373,153,468 $3,290,990 $16,912,645 $(23,836,012)
============ =========== ============ ========== =========== ============

Operating Methods:
Hotel leased to Livho,
Inc. 2,765,094 13,266,579 5,942,390 21,974,063 3,486,711 1/1/1998 7-40 yrs.
Retail store leased to
Eagle Hardware and
Garden, Inc. 4,493,534 11,836,313 16,329,847 1,096,417 4/23/1998 40 yrs.
Office building in
Pantin, France leased
to five lessees 1,037,136 7,652,062 8,689,198 671,585 5/27/1998 40 yrs.
Office facility in Mont
Saint Argany, France
leased to Tellit
Assurances 430,535 4,080,705 4,511,240 332,802 6/10/1998 40 yrs.
Portfolio of seven
properties in Houston,
Texas leased to 12
lessees 3,260,000 22,648,416 25,908,416 2,003,671 6/15/1998 40 yrs.
Office facility leased to
America West Holdings
Corp. 2,274,782 26,701,663 28,976,445 1,778,203 6/30/1998 40 yrs.
Office facility leased to
Sprint Spectrum L.P. 1,466,884 10,388,590 11,855,474 734,060 7/1/1998 40 yrs.
Office facility leased
to Direction Regional
des Affaires Sanitaires
et Sociales 167,450 1,608,796 1,776,246 120,745 11/16/1998 40 yrs.
Office facility leased to
Cendant Operations, Inc. 351,445 6,551,021 6,902,466 537,049 2/19/1999 40 yrs.
Office facility leased to
BellSouth
Telecommunications, Inc. 720,000 7,827,550 8,547,550 398,276 12/22/1999 40 yrs.
Office building in Lille
and Indre et Loire,
France leased to
Gist-Brocades France SA
and Societe de
Traitements 377,594 3,620,231 3,997,825 247,351 5/5/1999 40 yrs.
Office facility in Tours,
France leased to
Bouygues Telecom SA 972,290 9,186,175 10,158,465 285,253 9/1/2000 40 yrs.
Office facility in
Illkirch, France
leased to Bouygues
Telecom SA 18,520,178 18,520,178 19,292 12/3/2001 40 yrs.
------------ ------------ ---------- ------------ -----------
$ 84,199,057 $369,101,706 $5,942,390 $459,243,153 $32,401,204
============ ============ ========== ============ ===========

-28-

W. P. CAREY & CO. LLC AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE and ACCUMULATED DEPRECIATION

as of December 31, 2001

Gross Amount
at which
Carried
at Close of
Initial Cost to Company Period (c)
--------------------------- -------------
Costs Increase
Capitalized (Decrease)
Subsequent to in Net Date
Description Encumbrances Land Buildings Acquisition (a) Investment(b) Total Acquired
----------- ------------ ---- --------- --------------- ------------- ----- --------

Direct Financing Method:
Office buildings and
warehouses leased to
Unisource Worldwide, Inc. $ 4,986,494 $ 331,910 $ 12,281,102 $ 331,180 $ 12,944,192 1/1/1998
Centralized Telephone
Bureau leased to Western
Union Financial
Services, Inc. 842,233 4,762,302 37,083 5,641,618 1/1/1998
Warehouse and
manufacturing buildings
leased to Gibson
Greetings, Inc. 3,495,507 34,016,822 3,134,329 40,646,658 1/1/1998
Warehouse and
manufacturing buildings
leased to CSS
Industries, Inc. 1,051,005 14,036,912 374,779 15,462,696 1/1/1998
Manufacturing,
distribution and office
buildings leased to
Brodart Co. 2,262,110 445,383 11,323,899 149,476 11,918,758 1/1/1998
Manufacturing facilities
leased to Rochester
Button Company, Inc. 43,753 1,235,328 1,279,081 1/1/1998
Manufacturing facilities
leased to Thermadyne
Holdings Corp. 3,789,019 13,163,763 103,139 17,055,921 1/1/1998
Office and research
facility leased to Exide
Electronics Corporation 2,844,120 2,844,120 1/1/1998
Manufacturing facility
leased to Penberthy
Products, Inc. 70,317 1,476,657 1,546,974 1/1/1998
Manufacturing facility and
warehouse leased to DS
Group Limited 238,532 3,339,449 3,577,981 1/1/1998
Retail stores leased to
AutoZone, Inc. 16,416,402 (384,609) 16,031,793 1/1/1998
Manufacturing facility
leased to Peerless Chain
Company 1,307,590 11,026,975 21,775 75,175 12,431,515 1/1/1998
Retail store leased to
Wal-Mart Stores, Inc. 2,793,503 1,839,303 6,535,144 8,374,447 1/1/1998
Manufacturing and office
facilities leased to
Sybron International
Corporation 2,273,857 18,078,975 12,728 265,585 20,631,145 1/1/1998
Manufacturing and office
facilities leased to
Sybron Dental
Specialties, Inc. 454,101 13,250,980 9,315 174,479 13,888,875 1/1/1998

-29-

W. P. CAREY & CO. LLC AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE and ACCUMULATED DEPRECIATION

as of December 31, 2001

Direct Financing Methods:
Manufacturing and office
facilities leased to NVR
L.P. 728,683 6,092,840 41,501 6,863,024 1/1/1998
Manufacturing and
generating facilities
leased to Datcon
Instrument Company 4,409,856 4,409,856 1/1/1998
Office/warehouse
facilities leased to
United Stationers Supply
Company 1,882,372 5,846,214 26,581 47,182 7,802,349 1/1/1998
Bottling and Distribution
facilities lease to Dr
Pepper Bottling Company
of Texas 27,598,638 476,424 28,075,062 1/1/1998
Land and industrial/
warehouse/office
facilities leased to
Saint-Gobain Performance
Plastics Corporation 10,986,819 4,221,568 19,676,226 304,475 24,202,269 1/1/1998
Day care facilities leased
to Childtime Childcare,
Inc. 733,231 2,412,916 2,412,916 1/1/1998
----------- ----------- ------------ ------------- ---------- ------------
$21,762,157 $23,015,133 $229,825,520 $ 70,399 $5,130,198 $258,041,250
=========== =========== ============ ============= ========== ============

-30-

W. P. CAREY & CO. LLC AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE and ACCUMULATED DEPRECIATION

as of December 31, 2001

Initial Cost to Company
-----------------------

Costs Capitalized
Personal Subsequent to
Description Encumbrances Land Buildings Property Acquisition(a)
- ----------- ------------ ---- --------- -------- --------------

Operating real estate:

Hotel located in:

Alpena, Michigan $ 6,290,000 $114,241 $4,256,356 $618,066 $ 471,614

Petoskey, Michigan 6,290,000 98,326 1,446,757 290,668 770,216
----------- -------- ---------- -------- ----------

$12,580,000 $212,567 $5,703,113 $908,734 $1,241,830
=========== ======== ========== ======== ==========

Operating real estate:

Hotel located in:

Alpena, Michigan $114,241 $4,370,052 $ 975,984 $5,460,277 $1,340,957 1/1/1998 7-40 yrs.

Petoskey, Michigan 98,326 1,622,373 885,268 2,605,967 735,357 1/1/1998 7-40 yrs.
-------- ---------- ---------- ---------- ----------

$212,567 $5,992,425 $1,861,252 $8,066,244 $2,076,314
======== ========== ========== ========== ==========

-31-

W. P. CAREY & CO. LLC and SUBSIDIARIES

NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

(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 producing a periodic rate of return which at times may be greater
or less than lease payments received, (ii) sales of properties (iii)
impairment losses, (iv) changes in foreign currency exchange rates, and
(v) an adjustment in connection with purchasing certain minority
interests.

(c) At December 31, 2001, the aggregate cost of real estate owned by the
Company and its subsidiaries for Federal income tax purposes is
$709,497,000.

Reconciliation of Real Estate
-----------------------------
Accounted for Under
-------------------
the Operating Method
--------------------
December 31,
------------
2001 2000
---- ----

Balance at beginning of year $ 438,164,796 $ 441,876,323
Additions 19,406,917 22,239,038
Purchase accounting adjustments in connection
with acquisition of minority interests 920,041 1,800,000
Dispositions (2,164,984) (10,572,364)
Foreign currency translation adjustment (1,729,439) (2,236,271)
Reclassification from/to assets held for sale
and net investment in direct financing lease 8,408,498 (8,207,979)
Impairment loss (3,762,676) (6,733,951)
------------- -------------
Balance at end of year $ 459,243,153 $ 438,164,796
============= =============

Reconciliation of Accumulated Depreciation
------------------------------------------
December 31,
------------
2001 2000
---- ----

Balance at beginning of year $ 24,159,250 $ 16,455,189
Depreciation expense 9,561,382 12,763,126
Foreign currency translation adjustment (68,530) (9,740)
Reclassification from/to assets held for sale
and net investment in direct financing lease (1,163,444) (3,119,596)
Dispositions (87,454) (1,929,729)
------------- -------------
Balance at end of year $ 32,401,204 $ 24,159,250
============= =============

Reconciliation for Operating Real Estate
----------------------------------------
December 31,
------------
2001 2000
---- ----

Balance at beginning of year $ 7,943,711 $ 7,584,625
Additions 122,533 359,086
------------- -------------
Balance at close of year $ 8,066,244 $ 7,943,711
============= =============

Reconciliation of Accumulated
-----------------------------
Depreciation for Operating
--------------------------
Real Estate
-----------
December 31,
------------
2001 2000
---- ----

Balance at beginning of year $ 1,441,587 $ 831,736
Depreciation expense 634,727 609,851
------------- -------------
Balance at end of year $ 2,076,314 $ 1,441,587
============= =============

-32-

APPENDIX A TO FORM 10-K

W. P. CAREY & CO. LLC

2001 ANNUAL REPORT

SELECTED FINANCIAL DATA

(In thousands except per share amounts)

The Company Consolidated The
------------------------ Predecessor
Combined
--------
Operating Data 2001 2000 1999 1998 1997
---- ---- ---- ---- ----

Revenues $ 139,411 $ 120,251 $ 88,506 $ 85,330 $ 96,271

Income (loss) before extraordinary items 35,761 (9,278) 34,039 39,085 40,561

Basic earnings (loss) per share 1.04 (.31) 1.33 1.55 XXXX

Diluted earnings (loss) per share 1.02 (.31) 1.33 1.55 XXXX

Cash dividends (1) 58,048 49,957 42,525 30,820 43,620

Cash provided by operating activities 58,877 58,268 48,186 51,944 51,641

Cash (used in) provided by investing (13,368) 41,138 (55,173) (71,525) (273)
activities

Cash (used in) provided by financing (46,815) (91,498) 3,392 6,668 (61,335)
activities

Cash dividends declared per share 1.70 1.69 1.67 1.65 XXXX

Balance Sheet Data:

Real estate, net (2) $ 435,629 $ 433,867 $ 501,350 $ 453,181 $ 240,498

Net investment in direct financing leases 258,041 287,876 295,556 295,826 216,761

Total assets 915,883 904,242 856,259 813,264 523,420

Long-term obligations (3) 287,903 176,657 310,562 254,827 150,907

(1) 1997 amounts represent cash distributions to Limited Partners of the
predecessor partnerships.
(2) Includes real estate accounted for under the operating method, operating
real estate and real estate under construction, net of accumulated
depreciation.
(3) Represents mortgage and note obligations and deferred acquisition fees due
after more than one year.

-1-

MANAGEMENT'S DISCUSSION AND ANALYSIS

(dollar amounts in thousands)

Overview

The following discussion and analysis of financial condition and results of
operations of W. P. Carey & Co. LLC ("WPC") should be read in conjunction with
the consolidated financial statements and notes thereto for the year ended
December 31, 2001. The following discussion includes forward looking statements.
Forward looking statements, which are based on certain assumptions, describe
future plans, strategies and expectations of WPC. Such statements involve known
and unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievement of WPC to be materially different from the
results of operations or plan expressed or implied by such forward looking
statements. The risk factors are fully described in Item I of this Annual Report
on Form 10-K. Accordingly, such information should not be regarded as
representations by WPC that the results or conditions described in such
statements or objectives and plans of WPC will be achieved.

Effective June 29, 2000, Carey Diversified LLC acquired the net lease real
estate management operations of Carey Management LLC by issuing 8,000,000
shares, and changed its name to W. P. Carey & Co. LLC. As a result of acquiring
the operations of Carey Management, WPC acquired its workforce of approximately
95 employees, assumed the advisory contracts with four publicly registered
affiliated real estate investment trusts ("REITs" and "CPA(R) REITs") and
terminated the management contract between Carey Diversified and Carey
Management LLC. Management believes that the acquisition has provided WPC with
several potential advantages including, but not limited to, increased
diversification of revenue sources, reduced operating expenses through the
elimination of management fees formerly paid to Carey Management, a potentially
increased earnings growth rate, a strengthened credit profile and improved
access to capital markets. The net operating income of the management business
of Carey Management has historically grown at a faster rate than the net
operating income and revenues of WPC's real estate operations, and Management
believes the prospects for an increase in the growth rate of earnings (excluding
amortization charges) has been improved. Because the capital markets have
indicated a strong preference for internally managed real estate companies, the
ability of WPC to raise additional equity capital in the public markets should
be enhanced.

WPC's net lease real estate management operations derives substantially all of
its revenues from the four affiliated REITs. All transactions with these
affiliates are subject to contractual agreements including Advisory Agreements.
As an Advisor to these REITs, WPC's contracts are renewable annually by
independent directors who are elected by each REIT's shareholders. In connection
with each renewal, WPC's management is required to provide the independent
directors with a comparison of the fee structure of the company with several
similar companies. The Advisory Agreements also provide that after a specific
time period the asset base used for determining management and performance fees
are based on valuations performed by independent professionals. WPC is also a
real estate investment company that acquires, owns and manages commercial
properties leased to companies nationwide, primarily on a triple net basis. As
of December 31, 2001, WPC owned 184 properties in the United States and 6
properties in Europe totaling more than 20 million square feet. WPC's core
investment strategy is to purchase properties, leased to a variety of companies
on a single tenant net lease basis, that are either owned outright or owned by
an entity managed by WPC.

Certain accounting policies are critical to the understanding of WPC's financial
condition and results of operations. Management believes that an understanding
of financial condition and results of operations requires an understanding of
accounting policies relating to the use of estimates and revenue recognition.

The preparation of financial statements requires that Management make estimates
and assumptions that affect the reported amount of assets, liabilities, revenues
and expenses. For instance, WPC must assess its ability to collect rent and
other tenant-based receivables and determine an appropriate charge for
uncollected amounts. Because WPC's real estate operations have a limited number
of lessees, Management believes that it is necessary to evaluate specific
situations rather than solely use statistical methods.

WPC also uses estimates and judgments when evaluating whether long-lived assets
and goodwill are impaired. When events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable, Management performs
projections of undiscounted cash flows, and if such cash flows are insufficient,
the assets are adjusted (i.e., written down) to their estimated fair value. An
analysis of whether a real estate asset has been impaired requires Management to
make its best estimate of market rents and residual values. In its evaluations,
WPC obtains market information from outside

-2-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

(dollar amounts in thousands)

sources; however, such information requires Management to determine whether the
information received is appropriate to the circumstances. Because most of WPC's
properties are leased to one tenant, WPC is more likely to incur significant
writedowns when circumstances change because of the possibility that a property
will be vacated in its entirety and, therefore, it is different than the risks
related to leasing and managing multi-tenant properties. Events or changes in
circumstances can result in further noncash writedowns and impact the gain or
loss ultimately realized upon sale of the assets.

In connection with the net lease real estate management business, WPC earns
transaction and asset-based fees. Transaction fees are primarily earned in
connection with investment banking services provided in connection with
structuring acquisitions, refinancing and dispositions on behalf of the
affiliated real estate investment trusts. Transaction fees are earned upon
consummation of a transaction, that is, when a purchase has been completed by
the affiliate. Completion of a transaction includes determining that the
purchaser and seller are bound by a contract and all substantive conditions of
closing have been performed. When these conditions are met, acquisition-based
services have been completed and the fees are recognized.

Asset-based management services are earned when performed. A portion of the fees
are subject to subordination provisions pursuant to the Advisory Agreements and
are based on specific performance criteria. In connection with determining
whether management and performance fees are recorded as revenue, Management
performs analyses on a quarterly basis to measure whether subordination
provisions have been met. Revenue is only recognized when the specific
performance criteria are achieved.

WPC recognizes rental income from sales overrides when reported by lessees, that
is, after the level of sales requiring a rental payment is reached.

Public business enterprises are required to report financial and descriptive
information about their reportable operating segments. WPC's management
evaluates the performance of its owned and managed real estate portfolio as a
whole, but allocates its resources between two operating segments: real estate
operations with domestic and international investments and management services.

Results of Operations:

Year-Ended December 31, 2001 Compared to Year-Ended December 31, 2000

WPC reported net income of $35,761 and a net loss of $9,278 for the years ended
December 31, 2001 and 2000, respectively. The results for 2001 and 2000 are not
fully comparable, primarily due to the acquisition of the management operations
in June 2000 and the related charge in 2000 of $38,000 in connection with
terminating its management contract. Excluding the charge on the termination of
the management contract in 2000, net income for the comparable periods would
have increased by $7,039. WPC is engaged in two reportable segments, real estate
operations and management services.

Real estate operations operating income (real estate segment income before gains
and losses, income taxes, minority interest and the charge on the contract
termination) was $33,341 and $26,556 in 2001 and 2000, respectively. The results
for 2001 and 2000 include asset impairment charges of $12,643 and $11,047,
respectively, representing noncash impairment writedowns of assets to estimated
fair value. Excluding the effect of the writedowns, operating income from real
estate operations for 2001 would have reflected an increase of $8,381.

The increase in real estate operating income was primarily due to decreases in
interest expense and depreciation. The decrease in interest expense was
attributable to lower average outstanding balances on WPC's $185,000 credit
facility and a decrease in interest rates during 2001. Of the $5,834 decrease in
interest expense for the comparable years to $21,603 in 2001, $6,292 was due to
lower interest from the credit facility. WPC's credit facility is indexed to the
London Inter-Bank Offered Rate ("LIBOR") and the LIBOR benchmark rate declined
substantially in 2001. The average balance outstanding on the credit line was
$104,000 in 2001 and $146,000 in 2000 and the average interest rate declined
from 7.77% to 5.29%. As of December 31, 2001, advances outstanding on the credit
facility were $95,000. Based on current outstanding balances on the credit
facility, a change of 1% in the benchmark rate changes annual interest charges
by $950. The decrease in interest expense from the credit facility is partially
offset by an increase in mortgage interest due to placement of mortgages on the
Cendant Operations, Inc. and Sprint Spectrum L.P. properties in December 2000
and July 2001, respectively,

-3-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

(dollar amounts in thousands)

resulting in higher interest charges from mortgages. The decrease in
depreciation of $2,976 to $10,532 in 2001 was primarily due to the disposition
of the majority interest in the Federal Express Corporation property in
Colliersville, Tennessee in December 2000 to an affiliate and the
reclassification of a property located in Los Angeles, California to real estate
under development in December 1999 at which time depreciation was no longer
incurred. In January 2002, WPC entered into a purchase and sales agreement with
the Los Angeles Unified School District ("LAUSD") to sell the property for
$24,000. As of December 31, 2001, the carrying value of the property was
$13,047. The sale is subject to approval by the LAUSD Board of Education and
completion of LAUSD's due diligence.

Other income primarily consists of nonrecurring items including, but not limited
to, consideration from lease termination and settlements. In 2001, WPC received
a $2,500 final settlement of a claim against a former lessee, New Valley
Corporation, relating to a termination of a lease in 1993. WPC also recognized
$2,165 from a settlement with Harcourt General Corporation, the guarantor of a
lease with General Cinema Corporation for a property in Burnsville, Minnesota.
The settlement was received as a result of the termination of the General Cinema
lease in connection with General Cinema's plan of reorganization. The Burnsville
property was sold in January 2002. WPC is continuing to seek settlements with
other former lessees; however, the timing of such settlements and the amounts
that will be received cannot be estimated.

The increase in property expenses in 2001 of $1,681 to $7,325 was primarily due
to an increase in real estate taxes and utilities on vacant and partially vacant
properties of $1,045 and an increase in the provision for uncollected rents of
$2,098 and was partially offset by decreases in management fees of $1,908.
Effective with the cancellation of its Management Agreement in June 2000, the
Company no longer incurred management fees. The provision for uncollected rents
included a writeoff of accumulated straight-line rents of $1,321 that was
recorded in connection with amending a lease.

The decrease in lease revenues (rental income and interest income from direct
financing leases) of $6,087 to $79,571 in 2001 was primarily as a result of the
sale of a 60% majority interest in the Federal Express property to an affiliate
in December 2000 and the restructuring of a lease with Livho, Inc., the lessee
of the Holiday Inn in Livonia, Michigan, and was partially offset by rent
increases on various leases and increased rents from the completion of
expansions at existing properties. The lease restructuring with Livho, Inc.
resulted in a decrease in rental income of $658. During the year ended December
31, 2000, revenues from the Federal Express lease were $5,404. The remaining 40%
interest in the property is now accounted for under the equity method of
accounting. Under the equity method, WPC recognizes its share of the net income
or loss from the Federal Express investment.

During 2000, WPC acquired a 90% interest in a joint venture that entered into a
build-to-suit commitment in Strasbourg, France at a property which is net leased
to Bouygues Telecom S.A., an existing lessee. The project was completed in
November 2001. The lease has an initial term of twelve years with annual rents
of approximately $2,000. During 2001, WPC completed expansions of the Sprint
Spectrum and AT&T Corporation properties which have increased annual rents by
$675. Comark, Inc., a lessee at WPC's multi-tenant Bloomingdale, Illinois
property, and Western Union Financial Services, Inc. exercised renewal options.
Comark extended its lease through May 2003 at an annual rent of $293 and Western
Union extended its lease through November 2006 at an annual rent of $937.

In December 2001, Thermadyne Holdings Corp. filed a petition of bankruptcy and
subsequently vacated the property in February 2002. Annual rents from Thermadyne
were $2,525. WPC has entered into an agreement-in-principle to re-lease a
portion of the space for approximately $817 and is actively remarketing the
remaining space.

In November 2001, WPC evicted Red Bank Distribution Inc. and entered into an
agreement-in-principle that effectively terminated the net lease because of Red
Bank's inability to meet its annual rent lease obligation of $1,579. WPC has
assumed control of the property and is managing a public warehousing operation
that occupies a portion of the building. The property has approximately 46
short-term tenants who collectively generate approximately $130 in monthly rents
and expense reimbursements. Management is evaluating several alternatives
including continuing to manage the operation, seeking a single-tenant net lease
or selling the property.

WPC is closely monitoring the financial condition of several lessees which it
believes have been affected by current economic conditions and other trends.
Such lessees include America West Holding Corp. and Livho, Inc. which together
represent 6% of lease revenues. America West, an air carrier, has obtained
government financing subsequent to September 11, 2001 and its financial
prospects are uncertain. Livho, the lessee of a Holiday Inn in Livonia,
Michigan, is affected by the cyclical nature of the automotive industry. The
financial condition of another lessee, Peerless Chain Company, has been

-4-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

(dollar amounts in thousands)

adversely affected by foreign competition, and it has not kept current on its
annual rent of $1,561. Peerless is currently paying only a portion of its rents
and has entered into discussions with WPC to restructure the lease, but WPC has
made no commitment.

In January 2002, The Gap, Inc. notified WPC that it would not renew its leases
which expire in February 2003 and contribute annual rent of $2,205. In addition,
Pillowtex, Inc. notified WPC in February 2002 that under its plan of
reorganization it would terminate its lease with annual rents of $691, effective
April 1, 2002. Both the Gap and Pillowtex properties are warehouse/distribution
properties and are being actively remarketed.

WPC incurred impairment losses of $12,643 in 2001 including a writedown of
$6,749 in its equity investment in the operating partnership of MeriStar
Hospitality Corporation as a result of a decrease in MeriStar's earnings and the
uncertainty regarding its distribution rate which was reduced in the fourth
quarter of 2001. WPC incurred a $2,000 impairment loss on the Red Bank property
as a result of the eviction. The remaining impairment losses primarily related
to the writedowns of several under-performing properties which WPC has entered
into commitments to sell.

As of December 31, 2001, WPC has classified seven properties as being held for
sale in the accompanying financial statements, based on either a contractual
commitment to sell the properties or the expectation that the properties will be
sold within the next year. If all of the properties are subsequently sold,
annual lease revenues would decrease by $821. In July 2001, the Company sold its
property in Forrest City, Arkansas to the lessee, Duff-Norton Company, Inc.
Annual rent from the Duff-Norton lease was $1,164. In addition, annual rents
have decreased by $1,212 as a result of selling nine properties in 2001.

Because of the long-term nature of WPC's net leases, inflation and changing
prices should not unfavorably affect revenues and net income or have an impact
on the continuing operations of WPC's properties. WPC's leases usually have rent
increase provisions based on the consumer price index and other similar indexes
and may have caps on such increases, or sales overrides, which should increase
operating revenues in the future. The moderate increases in the consumer price
index over the past several years will affect the rate of such future rent
increases.

Net operating income from WPC's management services operations for the years
ended December 31, 2001 and 2000 was $7,598 and $9,361, respectively, and is not
fully comparable as the acquisition of the management services operations
occurred June 29, 2000. Results for the years ended December 31, 2001 and 2000
include noncash charges for amortization of goodwill and intangible assets of
$11,903 and $5,958, respectively. Excluding amortization charges, operating
income from management services would have been $19,501 and $15,319 for the
years ended December 31, 2001 and 2000, respectively. Income tax expense for
management services for the year ended December 31, 2001 increased by $4,182
over the year ended December 31, 2000. The increase is a result of 80% of
management revenues being earned by a taxable, wholly-owned subsidiary.

Total revenues earned by the management services operations for the years ended
December 31, 2001 and 2000 were $46,911 and $25,271, respectively. Management
fee revenues were comprised of transaction fees of $17,160 and $14,894 and
asset-based fees and reimbursements of $29,751 and $10,377 for the years ended
December 31, 2001 and 2000, respectively. Transaction fees included fees from
structuring acquisition and refinancing transactions on behalf of the CPA(R)
REITs. WPC and affiliates structured approximately $395,000 of acquisitions in
2001 and Management currently projects that acquisitions will meet or exceed
such acquisition volume in 2002. As of December 31, 2001, Corporate Property
Associates 14 Incorporated ("CPA(R):14"), which concluded a public offering in
November 2001, had more than $100,000 of cash available for investment in real
estate. Corporate Property Associates 15 Incorporated ("CPA(R):15"), an newly
formed CPA(R) REIT, commenced a "best efforts" public offering in November 2001
and as of March 15, 2002 had raised $59,516 which it will use along with
mortgage financing to invest in real estate. Management believes that the CPA(R)
REITs will benefit from several trends including the increasing use of
sale-leaseback transactions by corporations as an alternative source of
financing and individual investors seeking dividend-paying investments, and
which has the potential to allow CPA(R):15 to fully subscribe its $400,000 "best
efforts" offering. CPA(R):15 is negotiating sales agreements with two additional
major broker-dealers, both of whom WPC expects will be selling CPA(R):15 shares
by the third quarter.

The asset-based management income includes fees based on the value of CPA(R)
REIT real estate assets under management. A portion of the CPA(R) REIT fees is
based on each CPA(R) REIT meeting specific performance criteria (the
"performance fee") and WPC earns this performance fee income only when the
performance criteria of each CPA(R) REIT are being

-5-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

(dollar amounts in thousands)

achieved. Total asset based fees for the years ended December 31, 2001 and 2000
were $21,511 and $6,809, respectively. The performance criteria for CPA(R):14
were satisfied for the first time during 2001, resulting in the Company's
recognition of $2,459 for the period December 1997 through December 31, 2000. As
the real estate asset base of CPA(R):14 continues to increase and CPA(R):15
builds a diversified portfolio, the management and performance fees will
continue to increase. Based on the value of assets under management of the
CPA(R) REIT's as of December 31 2001, annualized management and performance fees
under the advisory agreements are approximately $21,750.

In December 2001, CPA(R):10 and CIP(R), both affiliated REITs, entered into a
merger agreement providing for the merger of the two companies, subject to the
approval of the shareholders of both companies. The merger would not result in a
change in assets under management, so that the asset-based fees earned by WPC
should be unchanged. If the merger is approved, WPC will receive certain fees of
$1,444 that had been deferred subject to subordination provisions in the
CPA(R):10 Advisory Agreement.

The increase in general and administrative expenses was primarily due to the
acquisition of the management services operations in 2000. Approximately 89% of
the increase in general and administrative costs resulted from personnel-related
costs. The portion of personnel costs necessary to administer the CPA(R) REITs
is billed back to the REITs and is included in management income.

Year-Ended December 31, 2000 Compared to Year-Ended December 31, 1999

WPC reported a net loss of $9,278 and net income of $34,039 for the years ended
December 31, 2000 and 1999, respectively. The results for 2000 and 1999 are not
fully comparable, primarily due to the acquisition of the operations of Carey
Management. WPC incurred a charge of $38,000 on the termination of its
management contract with Carey Management. Management believes that the
termination of the management contract will provide substantial benefit to WPC.

In addition to the $38,000 fair value attributed to the terminated management
contract, a substantial portion of the other net assets acquired consists of
intangible assets and goodwill. Intangible assets and goodwill are amortized
over their estimated useful lives, and such amortization, a non-cash charge, was
$5,958 in the current year. Results for 2000 include approximately six months of
operations for the management services business. Prior to the acquisition, real
estate operations contributed substantially all of WPC's income. Excluding the
charges for amortization and the writeoff of the management contract, the
management business segment contributed income of $13,081.

Income from real estate operations provided operating income (income before
gains and losses on sales, income taxes, minority interest, extraordinary items
and the writeoff of an acquired management contract in 2000) of $26,556 in 2000
as compared with $35,871 in 1999. The results for 2000 and 1999 include
impairment charges of $11,047 and $5,988, respectively, for writedowns of assets
to estimated fair value. Excluding the effect of the writedowns, operating
income from real estate operations for 2000 would have reflected a decrease of
$4,256.

The decrease in real estate operating income was primarily due to increases in
interest expense and depreciation offset by increases in lease revenues (rental
income and interest income from direct financing leases) and other income.

The increase in interest expense of $7,870 was primarily due to mortgage
financing obtained in 1999 and a change in the use of amounts drawn from the
credit line. Limited recourse financings included a new loan on the America West
property, refinancings of the Gap, Inc. and Orbital Sciences Corporation
properties and obtaining mortgage debt in connection with the December 1999
purchase of the Bell South Telecommunications, Inc. property. Interest expense
from the line of credit increased because a substantial portion of the interest
incurred in 1999 was on borrowings used to fund construction of the America West
and Federal Express projects, and was capitalized rather than expensed, in
accordance with generally accepted accounting principles. Subsequent to the
completion of the projects, interest costs were expensed. The credit facility is
a variable rate obligation and also was affected by increases in interest rates
during 2000.

The increase in depreciation of $3,051 was due to the completion of
build-to-suit projects on properties leased to America West and Federal Express,
the acquisition of the Bell South property, the expansion of the Orbital
Sciences property and the renovation of a property in Moorestown, New Jersey in
1999 now leased to Cendant Operations, Inc.

The increase in lease revenues was primarily due to the completion of
build-to-suit projects with Federal Express Corporation in February 2000 and
America West in May 1999, new leases with Cendant and Bell South in May and

-6-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

(dollar amounts in thousands)

December 1999, respectively, and rent increases on various leases in 2000 and
1999. Lease revenue increases were partially offset by the sale of fourteen
properties in 2000, the sales of the KSG, Inc. and Hotel Corporation of America
properties in 1999 pursuant to the exercise of purchase options by the lessees,
and the termination of the Copeland Beverage Group, Inc. lease in December 1999.
As a result of financial difficulties, Copeland was placed in receivership and
subsequently liquidated. Annual rent from the Copeland lease was $1,800. WPC
drew $1,800 from a letter of credit that had been provided by Copeland which was
used to cover property expenses for the period subsequent to the lease
termination.

Other income in the accompanying consolidated statements consists of income from
real estate operations other than lease revenues. Other income increased by
$1,418 in 2000. The increase in other income in 2000 included bankruptcy
distributions received from a former lessee and termination consideration.

Income from equity investments increased by $996 due to the improved performance
of the operating partnership of MeriStar and an increase in income from the
investment in a net lease with CheckFree Holdings Corp., which is owned with an
affiliate. The increase in income from the CheckFree investment was due to
recognition of a full year's revenues on the property leased to CheckFree which
was purchased in June 1999. Rent on the CheckFree lease also increased in
connection with the completion of an expansion in 2000.

General and administrative expenses increased due to the acquisition of the
management operations, including the personnel and office facilities necessary
to render advisory and administrative services to the REITs. The general and
administrative expense of the real estate operations segment reflected a
decrease. Management and performance fee expenses for periods subsequent to the
merger have been terminated effective June 29, 2000, resulting in a decrease in
property expenses for the year ended December 31, 2000. The provision for income
taxes increased as a result of forming a wholly-owned subsidiary that is
responsible for management operations and all administrative functions.
Formation of the taxable subsidiary allows the Company to maintain its status as
a publicly-traded partnership.

Management monitors its real estate assets and securities on an ongoing basis.
In the event of certain circumstances, including, but not limited to, lease
terminations, vacating of a property by a lessee or nonpayment of rent or
interest, Management evaluates whether an asset has been impaired. In these
instances, when the estimate of fair value is less than the carrying value, a
writedown is recorded for the difference. In 2000 and 1999, WPC recognized
writedowns of $11,047 and $5,988, respectively.

Financial Condition

Management believes that WPC will generate sufficient cash from operations and,
if necessary, from the proceeds of limited recourse mortgage loans, unsecured
indebtedness and the issuance of additional equity securities to meet its
short-term and long-term liquidity needs. WPC assesses its ability to obtain
debt financing on an ongoing basis.

Cash flows from operations and distributions from equity investments for the
year ended December 31, 2001 of $61,645 were sufficient to fund dividends to
shareholders of $58,048. Cash flows from operations are expected to increase as
a result of the expected growth of the management business segment. Annual cash
flow from operations should continue to fully fund distributions; however, the
coverage of distributions will fluctuate on a quarterly basis due to the timing
of certain compensation costs that are paid in the second quarter and the timing
of transaction-related activity. In January 2002, WPC received its first
installment of deferred acquisition fees of $916 in connection with structuring
transactions on behalf of the CPA(R) REITs.

Cash flow from real estate operations will benefit from the completion of the
build-to-suit project in December 2001 for a property leased to Bouygues
Telecom, S.A. in France which will provide annual rentals of $2,000. Expansions
of properties leased to Sprint and AT&T funded by WPC in consideration for
increases in rent and extensions of remaining lease terms were completed in July
2001 and October 2001, respectively, and will provide additional annual cash
flow of approximately $675. These increases to operating cash flow may be
affected by uncertainties relating to the ability to remarket properties where
leases are being terminated and not renewed.

Investing activities included using $27,243 for purchases of real estate and
additional capital expenditures, including $18,520 used for the construction of
the Bouygues Telecom facility, $894 for the Sprint property expansion, $3,676
for the AT & T property expansion, $2,921 related to the redevelopments of the
former Copeland Beverage Group property in Los

-7-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

(dollar amounts in thousands)

Angeles and a property in Broomfield, Colorado and $1,232 to fund other
improvements. The funding commitment at the AT&T property, which was completed
in October 2001, is estimated to amount to $4,100, of which $3,676 has been
funded as of December 31, 2001. WPC received $11,627 in net cash and a note
receivable of $700 in connection with the sales of properties and an equity
investment in a property in Carlsbad, California. WPC sold its property in
Arkansas leased to Duff-Norton Company, Inc. for $9,400. WPC placed the proceeds
in an escrow account for the purpose of entering into a Section 1031 noncash
exchange which, under the Internal Revenue Code, would allow WPC to acquire
like-kind property, and defer a taxable gain to shareholders of approximately
$8,900 until the new property is sold, if certain conditions are met. A gain on
sale was recognized for financial reporting purposes in 2001 on the Duff-Norton
property. In January 2002, the funds in the escrow account were transferred to
the Company as the proposed exchange was not completed. WPC expects to receive
$1,000 from the LAUSD as reimbursement for costs that were capitalized prior to
entering the purchase and sales agreement. Management is evaluating how it will
use these funds. Management continues to evaluate the real estate portfolio and
is actively evaluating opportunities to sell smaller properties, as such
properties require more intensive asset-management services than larger
single-tenant net lease properties.

In January 2001, WPC paid an installment of deferred acquisition fees for $520
relating to 1998 and 1999 purchases to WPC's former management company. The
January 2002 installment was $524. Deferred acquisition fees are payable over a
period of no less than eight years and had a remaining balance of $3,282 at
December 31, 2001. In addition, in connection with the acquisition of the
majority interests in the CPA(R) Partnerships on January 1, 1998 as described in
Note 1, a CPA(R) partnership had not yet achieved the specified cumulative
return as of the acquisition date. The subordinated preferred return was payable
currently only if the Company achieved a closing price equal to or in excess of
$23.11 for five consecutive trading days. On December 31, 2001, the closing
price criterion was met, and the $1,423 subordinated preferred return was paid
in January of 2002.

In March 2001, WPC entered into a revolving credit agreement for a $185,000 line
of credit which renewed and extended its original revolving unsecured line of
credit. The credit agreement has a three-year term through March 2004. WPC has a
one-time right to increase the commitment to up to $225,000. Borrowings on the
credit facility were $95,000 and $81,000 as of December 31, 2001 and March 15,
2002, respectively. The revolving credit agreement has financial covenants that
require WPC to maintain a minimum equity value and to meet or exceed certain
operating and coverage ratios. As advances on the credit facility are not
restricted, WPC believes that the remaining capacity on the credit line will
allow the Company to meet all its liquidity needs on a short-term basis and that
renewing the facility after the current term is likely.

In addition to meeting its commitment to pay dividends to shareholders, WPC's
financing activities in 2001 included using $9,225 for mortgage balloon payments
in May on two properties leased to Quebecor, Inc., obtaining new limited
recourse mortgage financing of $5,000 on a Quebecor property, using $2,318 to
pay off the mortgage on one of its Houston, Texas properties which was scheduled
to mature in January 2002, using $2,993 to pay off mortgages on the Red Bank and
Burnsville properties and making scheduled principal payment installments of
$8,230 on existing mortgages. During 2001, WPC obtained limited recourse
mortgage financing on the Sprint property and the Bouygues Telecom property of
$8,753 and $16,874, respectively. In April 2001, the Company refinanced a
limited recourse mortgage on its Toledo, Ohio property leased to AP Parts
International, Inc., which was originally scheduled to mature in February 2001.
The terms of the loan remain substantially the same and provide for a five year
extension with a maturity date of April 2006. In addition, WPC paid financing
costs of $1,874, primarily related to the renewal of its line of credit
agreement. WPC uses limited recourse mortgages as a substantial portion of its
long-term financing because the cost of this financing is attractive and the
exposure of its assets is limited to the collateral designated for each loan.

WPC received proceeds of $6,495 from the issuance of shares primarily through
WPC's dividend reinvestment plan, stock purchase plan, and the exercise of
options by employees. WPC issued additional shares pursuant to its merger
agreement for the management services operations in connection with meeting
specified performance (500,000 shares valued at $8,145 were issued during 2001
and 500,000 shares valued at $10,440 will be issued in 2002 based on meeting
performance criteria as of December 31, 2000 and 2001, respectively). WPC also
acquired the remaining minority interest in the CPA(R) Partnerships for $2,811
through the issuance of 151,964 shares.

In the case of limited recourse mortgage financing that does not fully amortize
over its term or is currently due, WPC is responsible for the balloon payment
only to the extent of its interest in the encumbered property because the holder
has recourse only to the collateral. In the event that balloon payments come
due, WPC may seek to refinance the loans,

-8-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

(dollar amounts in thousands)

restructure the debt with the existing lenders or evaluate its ability to
satisfy the obligation from its existing resources including its revolving line
of credit, to satisfy the mortgage debt. To the extent the remaining initial
lease term on any property remains in place for a number of years beyond the
balloon payment date, WPC believes that the ability to refinance balloon payment
obligations is enhanced. WPC also evaluates all its outstanding loans for
opportunities to refinance debt at lower interest rates that may occur as a
result of decreasing interest rates or improvements in the credit rating of
tenants. There are no scheduled balloon payments on limited recourse mortgage
notes in 2002 and $2,500 in 2003.

WPC expects to meet its capital requirements to fund future property
acquisitions, construction costs on build-to-suit transactions, capital
expenditures on existing properties and scheduled debt maturities through
long-term limited recourse mortgages and unsecured indebtedness and the possible
issuance of additional equity securities. WPC's remaining commitments on the
expansion of the AT&T property total approximately $454. Commitments for capital
expenditures on the Livonia, Alpena and Petoskey, Michigan hotels are currently
estimated to be approximately $728. Other than its limited mortgage debt and the
credit line, WPC has no other significant commitments. WPC has guaranteed $8,793
loans of officers which are collateralized by shares of WPC owned by the
officers and held by WPC and that were issued in connection with equity
incentive plans and the acquisition of the management operations. WPC is also a
participant in a cost-sharing agreement with its affiliates for its office
space. The remaining minimum rents under the office lease are $6,100 through
September 2006 and WPC's current participation commitment is to pay 37% of such
costs. The participation commitment is adjusted quarterly based on a formula and
is not expected to fluctuate significantly.

A summary of WPC's obligations under contractual arrangements is as follows:

(in thousands) Total 2002 2003 2004 2005 2006 Thereafter
----- ---- ---- ---- ---- ---- ----------

Limited recourse mortgage notes
payable $200,515 $ 10,370 $ 11,224 $28,438 $ 9,453 $ 27,114 $113,916
Unsecured note payable 95,000 95,000
Deferred acquisition fees 3,282 524 524 524 524 524 662
Share of minimum rents payable
under office cost-sharing
agreement 2,257 442 484 484 484 363 --
-------- -------- -------- ------- ------- -------- --------
$301,054 $ 11,336 $107,232 $29,446 $10,461 $ 28,001 $114,578
======== ======== ======== ======= ======= ======== ========

WPC from time to time may offer to sell its Listed Shares, Future Shares and
Warrants pursuant to a registration statement declared effective by the
Securities and Exchange Commission on February 25, 2002. The total amount of
these securities will have an initial aggregate offering price of up to $100,000
although WPC may increase this amount in the future. The shares and/or warrants
may be offered and sold to or through one or more underwriters, dealers and
agents, or directly to purchasers, on a continuous or delayed basis. The
prospectus included as part of the registration statement describes some of the
general terms that may apply to these securities and the general manner in which
they may be offered. The specific terms of any securities to be offered, the
specific manner in which they may be offered and the specific use of proceeds,
will be described in a supplement to this prospectus.

In connection with the purchase of many of its properties, WPC required the
sellers to perform environmental reviews. Management believes, based on the
results of such reviews, that WPC's properties were in substantial compliance
with Federal and state environmental statutes at the time the properties were
acquired. However, portions of certain properties have been subject to some
degree of contamination, principally in connection with leakage from underground
storage tanks, surface spills or historical on-site activities. In most
instances where contamination has been identified, tenants are actively engaged
in the remediation process and addressing identified conditions. Tenants are
generally subject to environmental statutes and regulations regarding the
discharge of hazardous materials and any related remediation obligations. In
addition, WPC's leases generally require tenants to indemnify WPC from all
liabilities and losses related to the leased properties with provisions of such
indemnification specifically addressing environmental matters. The leases
generally include provisions that allow for periodic environmental assessments,
paid for by the tenant, and allow WPC to extend leases until such time as a
tenant has satisfied its environmental obligations. Certain of the leases allow
WPC to require financial assurances from tenants such as performance bonds or
letters of credit if the costs of remediating environmental conditions are, in
the estimation of WPC, in excess of specified amounts. Accordingly, Management
believes that the ultimate resolution of environmental matters will not have a
material adverse effect on WPC's financial condition, liquidity or results of
operations.

-9-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

(dollar amounts in thousands)

In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 141 "Business
Combinations" and No. 142 "Goodwill and Other Intangibles," which establish
accounting and reporting standards for business combinations, certain assets and
liabilities acquired in business combinations and asset acquisitions.

SFAS No. 141 requires that all business combinations initiated after June 30,
2001 be accounted for under the purchase method, establishes specific criteria
for the recognition of intangible assets separately from goodwill and requires
that unallocated negative goodwill be written off immediately as an
extraordinary gain. Use of the pooling-of-interests method for business
combinations is no longer permitted. The adoption of SFAS 141 did not have a
material effect on WPC's financial statements.

SFAS No. 142 primarily addresses the accounting for goodwill and intangible
assets subsequent to their acquisition and the accounting for asset
acquisitions. The provisions of SFAS No. 142 are effective for fiscal years
beginning after December 15, 2001 and must be adopted at the beginning of a
fiscal year. SFAS No. 142 provides that goodwill and indefinite-lived intangible
assets will no longer be amortized but will be tested for impairment at least
annually. Intangible assets acquired and liabilities assumed in business
combinations will only be amortized if such assets or liabilities are capable of
being separated or divided and sold, transferred, licensed, rented or exchanged
or arise from contractual or legal rights (including leases), and will be
amortized over their useful lives. In connection with the implementation of SFAS
No. 142, WPC performed its annual test for impairment in March 2002 of its
management services segment, the reportable unit for measurement, and concluded
that the carrying value of goodwill is not impaired.

WPC will adopt the provisions of SFAS No. 142 for the fiscal year beginning
January 1, 2002. With the acquisition of the real estate management operations
in 2000, WPC allocated a portion of the purchase price to goodwill and other
identifiable intangible assets. In adopting SFAS No. 142, WPC will discontinue
amortization of existing goodwill and certain intangible assets. During the year
ended December 31, 2001, WPC recorded amortization charges of $4,597 which
beginning January 1, 2002, will no longer be expensed under SFAS 142.

SFAS No. 142 requires that goodwill be tested annually for impairment using a
two-step process. The first step is to identify a potential impairment and, in
transition, this step must be measured as of the beginning of the fiscal year.
However, a company has six months from the date of adoption to complete the
first step. The second step of the goodwill impairment test measures the amount
of impairment loss (measured as of the beginning of the year of adoption), if
any, and must be completed by the end of WPC's fiscal year. Intangible assets
deemed to have an indefinite life will be tested for impairment using a one-step
process which compares the fair value to the carrying amount of the asset as of
the beginning of the fiscal year.

In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment of
Long-Lived Assets" which addresses the accounting and reporting for the
impairment and disposal of long-lived assets and supercedes SFAS No. 121 while
retaining SFAS No. 121's fundamental provisions for the recognition and
measurement of impairments. SFAS 144 removes goodwill from its scope, provides
for a probability-weighted cash flow estimation approach for analyzing
situations in which alternative courses of action to recover the carrying amount
of long-lived assets are under consideration and broadens the presentation of
discontinued operations to include a component of an entity. The adoption of
SFAS 144 will not have a material effect on WPC's financial statements; however,
the revenues and expenses relating to an asset held for sale or sold must be
presented as a discontinued operation for all periods presented. The provisions
of SFAS No. 144 are effective for fiscal years beginning after December 15,
2001.

-10-

REPORT of INDEPENDENT ACCOUNTANTS

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

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, members' equity and cash flows present
fairly, in all material respects, the financial position of W. P. Carey & Co.
LLC and its subsidiaries at December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes 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. We
believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York
February 25, 2002

-11-

W. P. CAREY & CO. LLC

CONSOLIDATED BALANCE SHEETS

(In thousands except share amounts) December 31,
------------
2001 2000
---- ----

ASSETS:

Real estate leased to others:
Accounted for under the operating method, net of accumulated
depreciation of $32,401 and $24,159 at December 31, 2001
and 2000 $ 426,842 $ 414,006
Net investment in direct financing leases 258,041 287,876
--------- ---------
Real estate leased to others 684,883 701,882
Operating real estate, net of accumulated depreciation of $2,076 and
$1,442 at December 31, 2001 and 2000 5,990 6,502
Real estate under construction and redevelopment 2,797 13,359
Equity investments 50,629 47,224
Assets held for sale 23,693 2,573
Cash and cash equivalents 8,870 10,165
Due from affiliates 18,789 7,945
Goodwill and intangible assets, net of accumulated amortization of
$17,862 and $5,958 at December 31, 2001 and 2000 92,810 94,183
Other assets, net of accumulated amortization of $1,095 and $1,971 at
December 31, 2001 and 2000 and reserve for uncollected rent of
$3,278 and $2,207 at December 31, 2001 and 2000 27,422 20,409
--------- ---------
Total assets $ 915,883 $ 904,242
========= =========

LIABILITIES, MINORITY INTEREST AND
MEMBERS' EQUITY:

Liabilities :
Mortgage notes payable $ 200,515 $ 196,094
Notes payable 95,000 94,066
Accrued interest 1,312 2,655
Dividends payable 14,836 14,182
Due to affiliates 16,790 15,308
Accrued taxes 3,020 2,688
Deferred taxes 6,608 1,336
Other liabilities 17,343 15,038
--------- ---------
Total liabilities 355,424 341,367
--------- ---------

Minority interest 794 802
--------- ---------

Commitments and contingencies

Members' Equity:
Listed shares, no par value, 34,742,436 and 33,604,716 shares issued
and outstanding at December 31, 2001 and 2000 664,751 644,749
Dividends in excess of accumulated earnings (97,200) (74,260)
Unearned compensation (4,454) (5,291)
Accumulated other comprehensive loss (3,432) (3,125)
--------- ---------
Total members' equity 559,665 562,073
--------- ---------
Total liabilities, minority interest and members' equity $ 915,883 $ 904,242
========= =========

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

-12-

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS of OPERATIONS

(In thousands except share and per share amounts) For the years ended December 31,
--------------------------------
2001 2000 1999
------------ ------------ ------------

Revenues:
Rental income $ 47,763 $ 52,086 $ 46,719
Interest income from direct financing leases 31,808 33,572 33,842
Management income from affiliates 46,911 25,271 --
Other interest income 1,023 452 962
Other income 5,962 2,626 1,208
Revenues of other business operations 5,944 6,244 5,775
------------ ------------ ------------
139,411 120,251 88,506
------------ ------------ ------------
Expenses:
Interest 21,603 27,437 19,567
Depreciation 10,532 13,508 10,457
Amortization 13,857 6,935 8
General and administrative 29,345 16,487 7,293
Property expenses 7,325 5,644 5,433
Impairment loss on real estate and investments 12,643 11,047 5,988
Operating expenses of other business operations 4,671 4,920 4,662
Termination of management contract -- 38,000 --
------------ ------------ ------------
99,976 123,978 53,408
------------ ------------ ------------

Income (loss) before income from equity
investments, gain (loss) on sale,
minority interest and income taxes 39,435 (3,727) 35,098

Income from equity investments 2,827 2,882 1,886
------------ ------------ ------------

Income (loss) before gain (loss) on sale, minority
interest and income taxes 42,262 (845) 36,984

Gain (loss) on sale of real estate and securities, net 1,948 (2,752) 471
------------ ------------ ------------

Income (loss) before minority interest and
income taxes 44,210 (3,597) 37,455

Minority interest in loss (income) 68 (1,517) (2,664)
------------ ------------ ------------

Income (loss) before income taxes 44,278 (5,114) 34,791

Provision for income taxes (8,517) (4,164) (752)
------------ ------------ ------------

Net income (loss) $ 35,761 $ (9,278) $ 34,039
============ ============ ============

Basic earnings (loss) per share $ 1.04 $ (.31) $ 1.33
============ ============ ============

Diluted earnings (loss) per share $ 1.02 $ (.31) $ 1.33
============ ============ ============

Weighted average shares outstanding:
Basic 34,465,217 29,652,698 25,596,793
============ ============ ============
Diluted 34,952,560 29,652,698 25,596,793
============ ============ ============

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

-13-

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS of Members'
EQUITY For the years ended December 31,
2001, 2000 and 1999
In thousands except share amounts

Accumulated
Dividends in Other
Excess of Unearned Comprehen Comprehen
Paid-in Accumulated Compen-d sive Income sive Income Treasury
Shares Capital Earnings sation (Loss) (Loss) Shares Total
------ ------- -------- ------ ------ ------ ------ -----

Balance at
January 1, 1999 25,343,402 517,755 (2,803) (719) 514,233

Cash proceeds on issuance
of shares, net 34,272 652 652
Shares issued in connection
with services rendered and
properties acquired 455,929 7,723 7,723
Dividends declared (42,796) (42,796)
Repurchase of shares (62,300) $ (1,060) (1,060)
Comprehensive income:
Net income 34,039 $ 34,039 34,039
--------

Other comprehensive income:
Change in unrealized
appreciation (depreciation) of
marketable securities 497
Foreign currency
translation adjustment (688)
---------
(191) $ (191) (191)
---------
$ 33,848
=========
Balance at
---------- ------- -------- ---- ------- --------
December 31, 1999 25,771,303 526,130 (11,560) (910) (1,060) 512,600

Shares issued in connection
with services rendered and
properties acquired 226,290 3,169 3,169
Shares issued in
connection with
acquisition 8,104,673 124,630 124,630
Shares and options issued
under share incentive plans 347,100 6,311 $ (6,311) --
Forfeitures (8,050) (160) 160 --
Dividends declared (53,422) (53,422)
Amortization of unearned
compensation 860 860
Repurchase of shares (836,600) (14,271) (14,271)
Cancellation of treasury
shares (15,331) 15,331 --
Comprehensive loss:
Net loss (9,278) $ (9,278) (9,278)
--------

Other comprehensive income:
Change in unrealized depreciation
of marketable securities (1,155)
Foreign currency translation
adjustment (1,060)
--------
(2,215) (2,215) (2,215)
------
$ (11,493)
=========
Balance at
---------- -------- -------- -------- ------- -------- ---------
December 31, 2000 33,604,716 644,749 (74,260) (5,291) (3,125) -- 562,073

- continued -

-14-

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS of Members'
EQUITY For the years ended December
31, 2001, 2000 and 1999
In thousands except share amounts

Balance at
December 31, 2000 33,604,716 644,749 (74,260) (5,291) (3,125) -- 562,073
Cash proceeds on issuance
of shares, net 422,032 6,496 6,496
Shares issued in
connection with services
rendered and properties
acquired 6,825 134 134
Shares issued in
connection with
acquisition 651,964 10,956 10,956
Shares and options issued
under share incentive
plans 63,749 1,235 (1,235)
Forfeitures (6,850) (117) 117
Dividends declared (58,701) (58,701)
Tax benefit of net
operating loss - share
incentive plans 1,298 1,298
Amortization of unearned
compensation 1,955 1,955
Comprehensive income:
Net income 35,761 $ 35,761 35,761
--------

Other comprehensive
income:
Change in unrealized
depreciation of
marketable securities 130
Foreign currency
translation adjustment (437)
--------
(307) (307) (307)
--------- ---- ----
$ 35,454
=========
Balance at
---------- -------- -------- -------- ------- -------- ---------
December 31, 2001 34,742,436 664,751 $(97,200) $ (4,454) $(3,432) $ 559,665
========== ======== ======== ======== ======= ======== =========

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

-15-

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS of CASH FLOWS

(In thousands) For the years ended December 31,
----------------------------------
2001 2000 1999
---- ---- ----

Cash flows from operating activities:
Net income (loss) $ 35,761 $ (9,278) $ 34,039
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 25,191 21,309 11,192
Amortization of deferred income (475) (566) (1,397)
Equity income in excess of distributions (232) (180) (16)
(Gain) loss on sales of real estate and securities, net (1,948) 2,752 (471)
Minority interest in income (68) 1,517 2,664
Straight-line rent adjustments and other noncash rent
adjustments (897) (1,831) (1,646)
Management income received in shares of affiliates (11,489) (2,747) --
Impairment loss on real estate and investments 12,643 11,047 5,988
Structuring fees receivable (6,915) (6,351) --
Provision for uncollected rents 1,520 743 328
Costs paid by issuance of shares 278 1,482 1,647
Writeoff of cumulative straight-line rent adjustment 1,321 -- --
Amortization of unearned compensation 1,955 860 --
Termination of management contract -- 38,000 --
Net changes in operating assets and liabilities, net of assets
and liabilities acquired on acquisition 2,232 1,511 (4,142)
-------- -------- --------
Net cash provided by operating activities 58,877 58,268 48,186
-------- -------- --------

Cash flows from investing activities:
Purchases of real estate (23,290) (21,497) (60,804)
Additional capital expenditures (3,953) (2,078) (3,784)
Payment of deferred acquisition fees (520) (392) --
Proceeds from sales of real estate, equity investments
and securities 11,627 45,617 9,631
Accrued disposition fees payable -- -- (1,007)
Purchases of mortgage receivable and marketable securities -- -- (3,676)
Sale of mortgage receivable -- -- 3,676
Distributions received from equity investments in excess
of equity income 2,768 1,732 791
Capital distribution from equity investment -- 17,544 --
Cash acquired on acquisition of business operations -- 212 --
-------- -------- --------
Net cash (used in) provided by investing activities (13,368) 41,138 (55,173)
-------- -------- --------

Cash flows from financing activities:
Dividends paid (58,048) (49,957) (42,525)
Contributions from (distributions to) minority interest 204 (1,321) (2,344)
Payments of mortgage principal (8,230) (7,590) (6,393)
Proceeds from mortgages and notes payable 97,627 64,397 74,251
Prepayments of mortgages and notes payable (82,665) (83,037) (17,803)
Deferred financing costs (1,874) -- (1,744)
Proceeds from issuance of shares 6,496 -- 652
Repurchase of shares (325) (13,944) (627)
Other -- (46) (75)
-------- -------- --------
Net cash (used in) provided by financing activities (46,815) (91,498) 3,392
-------- -------- --------

Effect of exchange rate changes on cash 11 (40) 219
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (1,295) 7,868 (3,376)
Cash and cash equivalents, beginning of year 10,165 2,297 5,673
-------- -------- --------
Cash and cash equivalents, end of year $ 8,870 $ 10,165 $ 2,297
======== ======== ========

-continued-

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

-16-

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS of CASH FLOWS, Continued

Noncash operating, investing and financing activities:

A. The purchase of Carey Management LLC in June of 2000 consisted of
the acquisition of certain assets and liabilities at fair value in
exchange for the issuance of listed shares as follows:

Intangible assets and goodwill:
Management contracts $ 97,135
Trade name 4,700
Workforce 4,900
Goodwill 22,356
---------
129,091
Other assets and liabilities, net (4,673)
Listed shares issued (124,630)
---------
Net cash acquired $ 212
=========

In connection with the acquisition, the Company has an obligation to
issue up to an additional 2,000,000 shares over four years, if
specified performance criteria are achieved. The performance
criteria for the years ended December 31, 2001 and 2000 were
achieved, and as a result 500,000 shares ($8,145) were issued during
the year ended December 31, 2001 and 500,000 shares will be issued
during 2002. At December 31, 2001, the cost of such issuable shares
($10,440) has been included in goodwill and accounts payable to
affiliates.

Effective January 1, 2001, the CPA(R) Partnerships became
wholly-owned subsidiaries of the Company when 151,964 shares
($2,811) were issued in consideration for acquiring the remaining
special partner interests.

B. The Company issued 6,825, 181,644 and 203,166 restricted shares
valued at $134, $2,424 and $3,311 in 2001, 2000 and 1999,
respectively, to certain directors, officers and affiliates in
consideration of service rendered. Restricted shares and stock
options valued at $1,235 and $6,295 in 2001 and 2000, respectively,
were issued to employees and recorded as unearned compensation of
which $117 and $160, respectively, was forfeited in 2001 and 2000.
$1,955 and $860 of unearned compensation in 2001 and 2000,
respectively, has been amortized and recorded as compensation
expense.

C. In connection with the acquisition of real estate interests in 2000
and 1999, the Company issued shares valued at $778 and $4,412,
respectively, and in 1999 assumed mortgage obligations of $6,098.

D. In 2001, the Company sold a property in Arkansas leased to
Duff-Norton Company, Inc. for approximately $9,400 and placed the
funds in an escrow account for the purpose of entering into a
Section 1031 noncash exchange which, under the Internal Revenue
Code, would allow the Company to acquire like-kind property, and
defer a taxable gain. The funds were released from escrow in 2002.
The Company also received a note of $700 in partial consideration
for the sale of a property.

In connection with the disposition of a property in Topeka, Kansas
in 1999, the property was transferred to the purchaser in exchange
for assumption of the mortgage obligation on the property and
certain other assets and liabilities. The gain on sale was as
follows:

Land, buildings and personal property,
net of accumulated depreciation $(7,654)
Mortgage note payable 8,107
Other (373)
-------
Gain on sale $ 80
=======

E. During 2001 the Company purchased an equity interest in an affiliate, W.
P. Carey International, LLC, in consideration for issuing a promissory
note of $1,000.

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

-17-

W. P. CAREY & CO. LLC

CONSOLIDATED STATEMENTS of CASH FLOWS, Continued

Supplemental Cash Flows Information:

2001 2000 1999
-------- -------- --------

Interest paid, net of
amounts capitalized $ 22,144 $ 24,790 $ 20,055
======== ======== ========
Income taxes paid $ 1,615 $ 1,437 $ 659
======== ======== ========

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

-18-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands except share and per share amounts)

1. Organization:

W. P. Carey & Co. LLC (the "Company") (formerly known as Carey Diversified
LLC) commenced operations on January 1, 1998, pursuant to a consolidation
transaction, when the Company acquired the majority ownership interests in
the nine Corporate Property Associates ("CPA(R)") Partnerships. The former
General Partner interests in the CPA(R) Partnerships were retained by two
special limited partners, William Polk Carey, formerly the Individual
General Partner of the nine CPA(R) Partnerships, and Carey Management LLC
("Carey Management").

On June 28, 2000 the Company acquired the net lease real estate management
operations of Carey Management subsequent to receiving shareholder
approval. The assets acquired include the Advisory Agreements with four
affiliated publicly owned real estate investment trusts (the "CPA(R)
REITs"), the Company's Management Agreement, the stock of an affiliated
broker-dealer, investments in the common stock of the CPA(R) REITs, and
certain office furniture, fixtures, equipment and employees required to
carry on the business operations of Carey Management. The purchase price
consisted of the initial issuance of 8,000,000 shares with an additional
2,000,000 shares issuable over four years if specified performance
criteria are achieved (of which 500,000 shares valued at $8,145 were
issued during 2001 and 500,000 shares valued at $10,440 will be issued in
2002 based on meeting performance criteria as of December 31, 2000 and
2001, respectively). The initial 8,000,000 shares issued are restricted
from resale for a period of up to three years and the additional shares
are subject to Section 144 regulations. The acquisition of the interests
in Carey Management was accounted for as a purchase and was recorded at
the fair value of the initial 8,000,000 shares issued. The total initial
purchase price was approximately $131,300 including the issuance of
8,000,000 shares, transaction costs of $2,605, the acquisition of Carey
Management's special limited partnership minority interests in the CPA(R)
Partnerships and the value of restricted shares and options issued in
respect of the interests of certain officers in a non-qualified deferred
compensation plan of Carey Management. The Company has guaranteed loans of
$8,793 to these officers in connection with their acquisition of equity
interests in the Company. The loans are collateralized by shares of WPC
owned by the officers and held by WPC.

The purchase price has been allocated to the assets and liabilities
acquired based upon their fair market values. Intangible assets acquired,
including the Advisory Agreements with the CPA(R) REITs, the Company's
Management Agreement, the trade name, and workforce, were determined
pursuant to an independent valuation. The value of the Advisory Agreements
and the Management Agreement were based on a discounted cash flow analysis
of the projected fees. The excess of the purchase price over the fair
values of the identified tangible and intangible assets, has been recorded
as goodwill. The acquisition of the Company's Management Agreement was
accounted for as a contract termination and the fair value of the
Management Agreement of $38,000 was expensed as of the date of the merger.
For financial reporting purposes, the value of any additional shares
issued under the acquisition agreement is recognized as additional
purchase price and recorded as goodwill. Issuances based on performance
criteria are valued based on the market price of the shares on the date
when the performance criteria are achieved.

Effective January 1, 2001, the Company acquired all remaining minority
interests in the CPA(R) Partnerships by issuing 151,964 shares at $18.50
per share ($2,811) to the remaining special limited partner of the CPA(R)
Partnerships, William Polk Carey. The acquisition price was determined
pursuant to an independent valuation of the CPA(R) Partnerships as of
December 31, 2000.

2. Summary of Significant Accounting Policies:

Basis of Consolidation:

The consolidated financial statements include the Company and its
wholly-owned and majority-owned subsidiaries including the CPA(R)
Partnerships. All material inter-entity transactions have been
eliminated.

-19-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

Use of Estimates:

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. The most significant estimates relate to the
assessment of recoverability of real estate, intangible assets and
goodwill. Actual results could differ from those estimates.

Real Estate Leased to Others:

Real estate is leased to others on a net lease basis, whereby the
tenant is generally responsible for all operating expenses relating
to the property, including property taxes, insurance, maintenance,
repairs, renewals and improvements. Expenditures for maintenance and
repairs including routine betterments are charged to operations as
incurred. Significant renovations which increase the useful life of
the properties are capitalized.

The Company diversifies its real estate investments among various
corporate tenants engaged in different industries and by property
type. No lessee currently represents 10% or more of total leasing
revenues. The leases are accounted for under either the direct
financing or operating methods. Such methods are described below
(also see Notes 4 and 5):

Direct financing method - Leases accounted for under the direct
financing method are recorded at their net investment (Note 5).
Unearned income is deferred and amortized to income over the lease
terms so as to produce a constant periodic rate of return on the
Company's net investment in the lease.

Operating method - Real estate is recorded at cost less accumulated
depreciation, minimum rental revenue is recognized on a
straight-line basis over the term of the related leases and expenses
(including depreciation) are charged to operations as incurred.

Substantially all of the Company's leases provide for either
scheduled rent increases, periodic rent increases based on formulas
indexed to increases in the Consumer Price Index ("CPI") or sales
overrides. Rents from sales overrides (percentage rents) are
recognized as reported by the lessees, that is, after the level of
sales requiring a rental payment to the Company is reached and are
included in the accompanying consolidated financial statements in
rental income and interest income from direct financing leases.

Operating Real Estate:

Land and buildings and personal property are carried at cost less
accumulated depreciation. Renewals and improvements are capitalized,
while replacements, maintenance and repairs that do not improve or
extend the lives of the respective assets are expensed as incurred.

Real Estate Under Construction and Redevelopment:

For properties under construction, operating expenses including
interest charges are capitalized rather than expensed and rentals
received are recorded as a reduction of capitalized project (i.e.,
construction) costs.

-20-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

Equity Investments:

The Company's interests in entities in which the Company's ownership
is 50% or less and the Company exerts significant influence are
accounted for under the equity method, i.e. at cost, increased or
decreased by the Company's pro rata share of earnings or losses,
less distributions.

Assets Held for Sale:

Assets held for sale are accounted for at the lower of carrying
value or fair value, less costs to dispose. Assets are classified as
held for sale when the Company has committed to a plan to actively
market a property for sale and expects that a sale will be completed
within one year.

The Company recognizes gains and losses on the sale of properties
when among other criteria, 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 closing costs and the carrying value of the
property.

Goodwill and Intangible Assets:

Goodwill represents the excess of the purchase price of the net
lease real estate management operations over the fair value of net
assets acquired. Other intangible assets represent cost allocated to
trade names, advisory contracts with the CPA(R) REITs and the
acquired workforce. Intangible assets are being amortized over their
estimated useful lives which range from 2 1/2 to 16 1/2 years. (See
Note 18.)

Goodwill and intangible assets are as follows:

December 31,
------------
2001 2000
-------- --------

Management contracts $ 59,135 $ 59,135
Workforce 4,700 4,700
Trade name 4,900 4,900
Goodwill 41,937 31,406
-------- --------
110,672 100,141
Less accumulated amortization 17,862 5,958
-------- --------
$ 92,810 $ 94,183
======== ========

Goodwill and Long-Lived Assets:

When events or changes in circumstances indicate that the carrying
amount may not be recoverable, the Company assesses the
recoverability of its goodwill and long-lived assets, including
residual interests of real estate assets and investments and certain
intangible assets, based on projections of undiscounted cash flows,
without interest charges, over the life of such assets. In the event
that such cash flows are insufficient, the assets are adjusted to
their estimated fair value.

Depreciation:

Depreciation is computed using the straight-line method over the
estimated useful lives of the properties (generally forty years) and
for furniture, fixtures and equipment (generally up to seven years).

Foreign Currency Translation:

The Company consolidates its real estate investments in France. The
functional currency for these investments is the French Franc.
Effective January 1, 2002, the functional currency for these
investments will be the Euro. The translation from the French Franc
to U. S. Dollars is performed 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. The gains and losses resulting from such
translation are reported as a component of other comprehensive
income as part of members' equity. The cumulative translation loss
as of December 31, 2001 was $2,668.

-21-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

Cash Equivalents:

The Company considers all short-term, highly liquid investments that
are both readily convertible to cash and have a maturity of
generally 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. Substantially all of the Company's
cash and cash equivalents at December 31, 2001 and 2000 were held in
the custody of three financial institutions and which balances, at
times, exceed federally insurable limits. The Company mitigates this
risk by depositing funds with major financial institutions.

Other Assets and Liabilities:

Included in other assets are accrued rents and interest receivable,
deferred rent receivable, deferred charges and marketable
securities. Included in other liabilities are accrued interest,
accounts payable and accrued expenses and deferred income taxes.
Deferred charges include costs incurred in connection with debt
financing and refinancing and are amortized and included in interest
expense over the terms of the related debt obligations. Deferred
rent receivable is the aggregate difference for operating method
leases between scheduled rents which vary during the lease term and
rent recognized on a straight-line basis. Also included in deferred
rent receivable are lease restructuring fees received which are
recognized over the remainder of the initial lease terms.

Marketable securities are classified as available-for-sale
securities and reported at fair value with the Company's interest in
unrealized gains and losses on these securities reported as a
component of other comprehensive income until realized. Such
marketable securities had a cost basis of $1,124 and $1,362 and
reflected a fair value of $363 and $470 at December 31, 2001 and
2000, respectively.

Due to Affiliates:

Included in due to affiliates are deferred acquisition fees and
amounts related to issuable shares for meeting the performance
criteria in connection with the acquisition of Carey Management.
Deferred acquisition fees are payable for services provided by Carey
Management prior to the termination of the Management Contract,
relating to the identification, evaluation, negotiation, financing
and purchase of properties. The fees are payable in eight equal
annual installments each January 1 following the first anniversary
of the date a property was purchased.

Revenue Recognition:

In connection with the acquisition of Carey Management described in
Note 1, the Company earns transaction and asset-based fees.
Structuring and financing fees are earned for investment banking
services provided in connection with the analysis, negotiation and
structuring of transactions, including acquisitions and dispositions
and the placement of mortgage financing obtained by the CPA(R)
REITs. Asset-based fees consist of property management, leasing and
advisory fees and reimbursement of certain expenses in accordance
with the separate management agreements with each CPA(R) REIT for
administrative services provided for operation of such CPA(R) REIT.
Receipt of the incentive fee portion of the management fee, however,
is subordinated to the achievement of specified cumulative return
requirements by the shareholders of the CPA(R) REITs. The incentive
portion of management fees ("the performance fees") may be collected
in cash or shares of the CPA(R) REIT at the option of the Company.
During 2001, the Company elected to receive its earned performance
fees in CPA(R) REIT shares.

All fees are recognized as earned. Transaction fees are earned upon
the consummation of a transaction and management fees are earned
when services are performed. Fees subject to subordination are
recognized only when the contingencies affecting the payment of such
fees are resolved, that is, when the performance criteria of the
CPA(R) REIT is achieved.

The Company also receives reimbursement of certain marketing costs
in connection with the sponsorship of a CPA(R) REIT that is
conducting a "best efforts" public offering. Reimbursement income is
recorded as the expenses are incurred.

-22-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

Income Taxes:

The Company is a limited liability company and has elected
partnership status for federal income tax purposes. The Company is
not liable for federal income taxes as each member recognizes his or
her proportionate share of income or loss in his or her tax return.
Certain wholly-owned subsidiaries are not eligible for partnership
status and, accordingly, all tax liabilities incurred by these
subsidiaries do not pass through to the members. Accordingly, the
provision for federal income taxes is based on the results of those
consolidated corporate subsidiaries that do not pass through any
share of income or loss to members. The Company is subject to
certain state and local taxes.

Deferred income taxes are provided 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 liabilities and assets for
the expected future tax consequences of temporary differences
between tax bases and financial bases of assets and liabilities (see
Note 16).

Earnings Per Share:

The Company presents both basic and diluted earnings per share
("EPS"). Basic EPS excludes dilution and is computed by dividing net
income available to shareholders by the weighted average number of
shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts
to issue shares were exercised or converted into common stock, where
such exercise or conversion would result in a lower EPS amount.

Basic and diluted earnings (loss) per share were calculated as
follows:

Basic and Diluted
Net Income Weighted Shares Per Share
(Loss) Outstanding Amount
------ ----------- ------

Year Ended December 31, 2001
Basic earnings $ 35,761 34,465,217 $1.04
========= =====
Effect of dilutive securities - stock options
and warrants 487,343
----------
Diluted earnings $ 35,761 34,952,560 $1.02
========= =====

Year Ended December 31, 2000
Basic and diluted net loss $ (9,278) 29,652,698 $(.31)
========= =====

Year Ended December 31, 1999
Basic and diluted net earnings $ 34,039 25,596,793 $1.33
========= =====

For the years ended 2000 and 1999, 4,143,254 and 3,199,280 share
options, respectively, were not reflected because such options were
anti-dilutive, either because the exercise prices of the options
were higher than the average share price or because the Company
incurred a net loss.

The Company repurchased 836,600 and 62,300 of its shares outstanding
during 2000 and 1999, respectively, in connection with an
announcement in December 1999 that it would purchase up to 1,000,000
shares.

Stock Based Compensation:

The Company accounts for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations ("APB No. 25"). Under APB No. 25,
compensation cost is measured as the excess, if any, of the quoted
market price of the Company's shares at the date of grant over the
exercise price of the option granted.

The Company has granted restricted shares and stock options to
substantially all employees. Shares were awarded in the name of the
employee, who has all the rights of a shareholder, subject to
certain

-23-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

restrictions of transferability and a risk of forfeiture. The
forfeiture provisions on the awards expire annually, over periods of
four and three years for the shares and stock options, respectively.
Shares and stock options subject to forfeiture provisions have been
recorded as unearned compensation and are presented as a separate
component of members' equity. Compensation cost for stock options
and restricted stock, if any, is recognized ratably over the vesting
period of three and four years, respectively. Compensation cost for
share plans was $1,955 and $860 in 2001 and 2000, respectively. No
compensation cost was recognized in 1999 in connection with the
Company's share plans.

All transactions with non-employees in which the Company issues
stock as consideration for services received are accounted for based
on the fair value of the stock issued or services received,
whichever is more reliably determinable.

Reclassification:

Certain prior year amounts have been reclassified to conform to the
current year financial statement presentation.

3. Transactions with Related Parties:

As described in Note 1, the Company's Management Agreement with Carey
Management was cancelled effective with the acquisition of the business
operations of Carey Management. The Company is now internally managed and,
as a result of the cancellation of the Management Agreement and
acquisition of Carey Management's workforce as of the date of the
acquisition, no longer incurs management and performance fees nor
reimburses a manager for general and administrative reimbursements,
primarily consisting of the manager's cost of providing administration to
the operation of the Company. For the years ended 2000 and 1999, the
Company incurred combined management and performance fees of $1,924 and
$3,025, respectively, and general and administrative costs of $861 and
$1,457, respectively.

Under the Advisory Agreements with the CPA(R) REITs, the Company performs
various services, including but not limited to the day-to-day management
of the CPA(R) REITs and transaction-related services. In addition, the
Company's broker-dealer subsidiary earns fees in connection with the
on-going "best efforts" public offering of CPA(R):15. The Company earns an
asset management fee of 1/2 of 1% per annum of Average Invested Assets, as
defined in the Advisory Agreements, for each CPA(R) REIT and, based upon
specific performance criteria for each REIT, may be entitled to receive
performance fees, calculated on the same basis as the asset management
fee, and is reimbursed for certain costs, primarily the cost of personnel.
The performance criteria for CPA(R):14 were initially satisfied in 2001,
resulting in the Company's recognition of $2,459 for the period December
1997 through December 31, 2000 which had been deferred. For the years
ended December 31, 2001 and 2000, asset-based fees and reimbursements
earned were $29,751 and $10,377, respectively.

In connection with structuring and negotiating acquisitions and related
mortgage financing for the CPA(R) REITs, the Advisory Agreements provide
for transaction fees based on the cost of the properties acquired. A
portion of the fees are payable in equal annual installments over no less
than eight years, subject to certain limitations. Such unpaid amounts bear
interest at an annual rate of 6% or 7%. The Company may also earn fees
related to the disposition of properties, subject to subordination
provisions and will only be recognized as such subordination provisions
are achieved. For the years ended December 31, 2001 and 2000, the Company
earned transaction fees of $17,160 and $14,894, respectively.

In connection with the acquisition of the majority interests in the CPA(R)
Partnerships on January 1, 1998 described in Note 1, a CPA(R) Partnership
had not achieved the specified cumulative return as of the acquisition
date. The subordinated preferred return was payable only if the Company
achieved a closing price equal to or in excess of $23.11 for five
consecutive trading days. On December 31, 2001, the closing price
criterion was met, and the $1,423 subordinated preferred return was paid
in January of 2002. Such amount is included in due to affiliates.

Prior to the termination of the Management Agreement, Carey Management
performed certain services for the Company and earned transaction fees in
connection with the purchase and disposition of properties. Transaction
fees paid to Carey Management and affiliates were $1,832 in 1999. The
Company is also obligated to pay deferred acquisition fees in equal annual
installments over a period of no less than eight years. As of

-24-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

December 31, 2001 and 2000, unpaid deferred acquisition fees were $3,282
and $3,802, respectively, and bear interest at an annual rate of 6%.
Installments of $520 and $392 were paid in January 2001 and 2002,
respectively.

The Company owns a 33.93% interest in a real estate venture with an
affiliate in which the ownership of real property is held directly by each
investor and not through an incorporated or unincorporated jointly held
affiliate. Title to these properties is held by each investor as tenants
in common. The ownership interest satisfies the criteria for accounting as
undivided interests in real property including: investors in the venture
hold an undivided interest in each asset, investors are severally liable
for any liability, there is no joint control, investors are only entitled
to their proportionate share of income and are liable for their share of
expenses and each investor may sell its interest without the consent of
the other investor. For this investment, the Company reports its
proportionate share of the assets, liabilities and expenses in the
accompanying consolidated financial statements. The joint venture is not
subject to joint control. The Company also owns interests in affiliates
which are accounted for under the equity method (see Note 11).

The Company is a participant in an agreement with certain affiliates for
the purpose of leasing office space used for the administration of the
Company and other affiliated real estate entities and sharing the
associated costs. Pursuant to the terms of the agreement, the Company's
share of rental, occupancy and leasehold improvement costs is based on
gross revenues. Expenses incurred were $528, $348 and $545 in 2001, 2000
and 1999, respectively. The Company's share of minimum lease payments on
the office lease is currently $2,257 through 2006.

An independent director of the Company has an ownership interest in
companies that own the minority interest in the Company's French
majority-owned subsidiaries. The director's ownership interest is subject
to the same terms as all other ownership interests in the subsidiary
companies. An officer of the Company is the sole shareholder of Livho,
Inc., a lessee of the Company (see Note 8).

4. Real Estate Leased to Others Accounted for Under the Operating Method:

Real estate leased to others, at cost, and accounted for under the
operating method is summarized as follows:

December 31,
------------
2001 2000
-------- --------

Land $ 84,199 $ 86,134
Buildings and improvements 375,044 352,031
-------- --------
459,243 438,165
Less: Accumulated depreciation 32,401 24,159
-------- --------
$426,842 $414,006
======== ========

The scheduled future minimum rents, exclusive of renewals, under
noncancelable operating leases amount to $45,300 in 2002, $38,098 in 2003,
$34,009 in 2004, $30,518 in 2005, $27,901 in 2006, and aggregate $275,665
through 2018.

Contingent rentals (including percentage rents and CPI-based increases)
were $815, $621 and $563 in 2001, 2000 and 1999, respectively.

5. Net Investment in Direct Financing Leases:

Net investment in direct financing leases is summarized as follows:

December 31,
------------
2001 2000
-------- --------

Minimum lease payments receivable $236,997 $348,316
Unguaranteed residual value 254,520 284,843
-------- --------
491,517 633,159
Less: Unearned income 233,476 345,283
-------- --------
$258,041 $287,876
======== ========

-25-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

The scheduled future minimum rents, exclusive of renewals, under
noncancelable direct financing leases amount to $24,745 in 2002, $24,668
in 2003, $24,189 in 2004, $22,092 in 2005, $20,634 in 2006, and aggregate
$236,997 through 2018.

Contingent rentals (including percentage rents and CPI-based increases)
were approximately $1,345, $1,491 and $995 in 2001, 2000 and 1999,
respectively.

6. Mortgage Notes Payable and Notes Payable:

Mortgage notes payable, substantially all of which are limited recourse
obligations, are collateralized by the assignment of various leases and by
real property with a carrying value of approximately $367,894.

The interest rate on the variable rate debt as of December 31, 2001 ranged
from 4.56% to 6.44% and mature from 2004 to 2015. The interest rate on the
fixed rate debt as of December 31, 2001 ranged from 5.92% to 10% and
mature from 2002 to 2015.

Scheduled principal payments for the mortgage notes and notes payable
during each of the next five years following December 31, 2001 and
thereafter are as follows:

Year Ending December 31, Total Debt Fixed Rate Debt Variable Rate Debt
---------- --------------- ------------------

2002 $ 10,370 $ 9,444 $ 926
2003 11,224 10,266 958
2004 123,438 27,412 96,026
2005 9,453 8,394 1,059
2006 27,114 25,947 1,167
Thereafter 113,916 98,557 15,359
---------- ----------- -----------
Total $ 295,515 $ 180,020 $ 115,495
========== =========== ===========

The Company has a line of credit of $185,000 pursuant to a revolving
credit agreement with The Chase Manhattan Bank in which numerous lenders
participate. The Company has a one-time right to increase the commitment
up to $225,000. The revolving credit agreement has a remaining term
through March 2004. As of December 31, 2001, the Company had $95,000 drawn
from the line of credit. No additional advances have been drawn from the
line of credit since December 31, 2001, and as of March 15, 2002, the
outstanding balance was $81,000.

Advances, which are prepayable at any time, bear interest at an annual
rate of either (i) the one, two, three or six-month LIBOR, as defined,
plus a spread which ranges from 0.6% to 1.45% depending on leverage or
corporate credit rating or (ii) the greater of the bank's Prime Rate and
the Federal Funds Effective Rate, plus .50%, plus a spread of up to .125%
depending upon the Company's leverage. At December 31, 2001 and 2000, the
average interest rate on advances on the line of credit was 3.22% and
7.86%, respectively. In addition, the Company will pay a fee (a) ranging
between 0.15% and 0.20% per annum of the unused portion of the credit
facility, depending on the Company's leverage, if no minimum credit rating
for the Company is in effect or (b) equal to .15% of the total commitment
amount, if the Company has obtained a certain minimum credit rating.

The revolving credit agreement has financial covenants that require the
Company to (i) maintain minimum equity value of $400,000 plus 85% of
amounts received by the Company as proceeds from the issuance of equity
interests and (ii) meet or exceed certain operating and coverage ratios.
Such operating and coverage ratios include, but are not limited to, (a)
ratios of earnings before interest, taxes, depreciation and amortization
to fixed charges for interest and (b) ratios of net operating income, as
defined, to interest expense.

7. Dividends Payable:

The Company declared a quarterly dividend of $0.427 per share on December
12, 2001 payable on January 15, 2002 to shareholders of record as of
December 31, 2001.

-26-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

8. Lease Revenues:

The Company's operations consist of the investment in and the leasing of
industrial and commercial real estate. The financial reporting sources of
the lease revenues for the years ended December 31, 2001, 2000 and 1999
are as follows:

2001 2000 1999
---- ---- ----

Per Statements of Income:
Rental income $ 47,763 $ 52,086 $ 46,719
Interest income from direct financing leases 31,808 33,572 33,842
Adjustment:
Share of leasing revenues applicable to minority interests (536) (443) (460)
Share of leasing revenues from equity investments 6,820 3,679 2,680
-------- -------- --------
$ 85,855 $ 88,894 $ 82,781
======== ======== ========

For the years ended December 31, 2001, 2000 and 1999, the Company earned
its net leasing revenues (i.e., rental income and interest income from
direct financing leases) from over 80 lessees. A summary of net leasing
revenues including all current lease obligors with more than $1,000 in
annual revenues is as follows:

Years Ended December 31,
------------------------
2001 % 2000 % 1999 %
---- - ---- - ---- -

Dr Pepper Bottling Company of Texas $ 4,354 5% $ 4,283 5% $ 4,123 5%
Detroit Diesel Corporation 4,118 5 3,795 4 3,658 4
Gibson Greetings, Inc. 4,107 5 4,046 5 3,954 5
Federal Express Corporation (a) 2,836 3 5,659 6 247 --
Orbital Sciences Corporation 2,655 3 2,655 3 2,311 3
Livho, Inc. 2,568 3 3,226 4 3,226 4
Quebecor Printing Inc. 2,559 3 2,586 3 2,552 3
America West Holdings Corp. 2,539 3 2,539 3 1,839 2
Thermadyne Holdings Corp. 2,525 3 2,477 3 2,243 3
Saint-Gobain Performance Plastics
Corporation (formerly Furon Company) 2,415 3 2,415 3 2,415 3
AutoZone, Inc. 2,400 3 2,378 3 2,331 3
The Gap, Inc. 2,205 3 2,205 2 2,205 3
Sybron International Corporation 2,164 3 2,164 2 2,181 3
Lockheed Martin Corporation 2,100 2 2,056 2 2,217 3
CheckFree Holdings, Inc. (b) 2,088 2 1,681 2 737 1
Unisource Worldwide, Inc. 1,734 2 1,725 2 1,726 2
Information Resources, Inc. (b) 1,644 2 1,504 2 1,458 2
AP Parts International, Inc. 1,617 2 1,617 2 1,617 2
Sybron Dental Specialties Inc. 1,613 2 1,463 2 1,446 2
CSS Industries, Inc. 1,609 2 1,598 2 1,588 2
Peerless Chain Company 1,561 2 1,463 2 1,463 2
Brodart Co. 1,519 2 1,519 2 1,519 2
Red Bank Distribution, Inc. 1,493 2 1,475 2 1,401 2
Sprint Spectrum L.P. 1,380 2 1,154 1 1,154 1
BellSouth Telecommunications, Inc. 1,224 1 1,224 1 175 --
Eagle Hardware & Garden, Inc. 1,186 1 1,288 2 1,387 2
United States Postal Service 1,165 1 1,090 1 1,090 1
Cendant Operations, Inc. 1,075 1 1,075 1 634 1
Other (c) 25,402 29 26,534 28 29,884 34
------- ------- ------- ------- ------- ---
$85,855 100% $88,894 100% $82,781 100%
======= ======= ======= ======= ======= ===

(a) Represents the Company's 40% proportionate share of lease revenues from
its equity ownership in 2001. The Company owned a 100% interest until
December 2000.
(b) Represents the Company's proportionate share of lease revenue from its
equity investment.
(c) Includes proportionate share of lease revenues from the Company's equity
investments and net of proportionate share applicable to its minority
interest owners.

-27-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

9. Gains and Losses on Sale of Real Estate and Securities:

Significant sales of properties are summarized as follows:

2001

In March 2001, the Company sold its property in Sterling,
Massachusetts, leased to High Voltage Corporation for $5,731, net of
costs, and recognized a gain of $42.

In July, 2001, the Company sold a property in Arkansas leased to
Duff-Norton Company, Inc. ("Duff-Norton") for approximately $9,400,
and recognized a gain of $304. The Company placed the proceeds of
the Duff-Norton sale in an escrow account for the purpose of
entering into a Section 1031 noncash exchange which, under the
Internal Revenue Code, would allow the Company to acquire like-kind
property, and defer a taxable gain until the new property is sold,
upon satisfaction of certain conditions. In January 2002, the funds
in the escrow account were transferred to the Company as the
proposed exchange was not completed. Accordingly, a gain of
approximately $8,900 will be recognized for federal income tax
purposes in 2002.

The Company sold eight other properties and an equity investment in
a real estate partnership in 2001 for $6,330 (including $5,630 in
cash and a note receivable of $700) and recognized a combined net
gain of $1,558 on the sales.

2000

In 1998, the Company acquired land in Colliersville, Tennessee and
entered into a build-to-suit commitment to construct four office
buildings to be occupied by Federal Express Corporation ("Federal
Express") at a cost of up to $77,000. In February 2000, a net lease
with Federal Express with an initial lease term of 20 years
commenced at an annual rent of $6,360. In order to mitigate the
concentration of risk in a single lease, the Company agreed to sell
a 60% majority interest in the subsidiary that owns the Federal
Express property to an affiliate, Corporate Property Associates 14
Incorporated ("CPA(R):14"), at a purchase price based on an
independent appraisal. Based on such independent appraisal, the
Company received $42,287 and recognized a loss of $2,262 in
connection with the sale.

During 2000, the Company sold ten properties formerly leased to The
Kobacker Stores, Inc. a property formerly leased to AutoZone, Inc.
located in Pensacola, Florida, a property in Silver City, New Mexico
and a property in Carthage, New York. In connection with the sales,
the Company received $3,372, net of costs, and incurred combined
losses on the sales of $775.

The Company recognized a gain of $257 on the sale of 18,540 shares
of common stock of Titan Corporation. The Company had previously
exercised warrants that were granted in connection with structuring
its net lease with Titan Corporation in 1991.

1999

In 1999, the Company sold its property in Topeka, Kansas, leased to
Hotel Corporation of America ("Hotel Corp.") and its property in
Hazelwood, Missouri leased to KSG, Inc. for $8,107 and $11,000,
respectively pursuant to Hotel Corp.'s exercise of its purchase
option. In connection with the sales, the Company recognized a
combined $471 gain.

10. Impairment of Real Estate and Investments:

Significant writedowns of properties and investments to estimated fair
value based on an assessment of each asset's recoverability are summarized
as follows:

The Company incurred impairment losses of $12,643, $11,047 and $5,988 in
2001, 2000 and 1999, respectively, in connection with the writedown of
real estate interests and other long-lived assets to estimated fair value
based on the following:

The Company owns 780,269 units of the operating partnership of MeriStar
Hospitality Corporation ("MeriStar"), a publicly traded real estate
investment trust which primarily owns hotels. In 1999, the Company
recognized an impairment charge of $4,830. Because of a continued and
prolonged weakness in the hospitality

-28-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

industry, a substantial decrease in MeriStar's earnings and funds from
operations and the risk that the decrease in MeriStar's distribution rate
are projected to continue, the Company concluded that the underlying value
of its investment in the operating partnership units has undergone an
other than temporary impairment. Accordingly, the Company wrote down its
equity investment in MeriStar by $6,749 in 2001 to reflect the investment
at its estimated fair value based on MeriStar's share price at December
31, 2001.

The Company leased a property in Burnsville, Minnesota to General Cinema
Corporation ("General Cinema"). During 2000, General Cinema filed a
petition of voluntary bankruptcy, and in March 2001 the lease was
terminated. During 2000, the property had been written down to its
estimated fair value and an impairment loss of $1,500 was recognized. In
2001, the Company entered into an agreement to sell the property for
$2,200. In connection with the proposed sale of the property, the Company
recognized an impairment loss of $763 in 2001 to writedown the property to
the anticipated sales price, less estimated costs to sell. The sale was
completed in January 2002. In connection with termination of the General
Cinema lease, the Company received $2,450 as a settlement from Harcourt
General Corporation, the lease guarantor, of which $2,145 is included in
other income in 2001.

In November 2001, the Company evicted Red Bank Distribution, Inc. ("Red
Bank") due to Red Bank's inability to meet its lease obligations and the
Company assumed the management of public warehousing operations at the
property. The Company has recognized an impairment change of $2,000 on the
writedown of the property to its estimated fair value. In connection with
the eviction, the Company and Red Bank have an agreement-in-principle to
terminate the lease and to release the Company from a subordinated
mortgage loan of $2,097 in which Red Bank is the mortgagee.

DeVlieg Bullard, Inc., the former lessee of properties in Frankenmuth,
Michigan and McMinnville, Tennessee terminated its master lease for the
two properties in connection with its petition of voluntary bankruptcy in
1999. The Company recognized impairment losses on the McMinnville property
of $500 and $2,677 for 2001 and 2000, respectively.

The Company owns a property in Garland, Texas leased to Varo, Inc.
("Varo"). The lease ends in October 2002 and although Varo continues to
meet its lease obligations, the property is vacant. As a result, the
Company is actively remarketing the property. The property was written
down to its estimated fair value and an impairment loss of $2,238 was
recognized in 2000.

The Company owns a property in Traveler's Rest, South Carolina formerly
leased to Swiss-M-Tex L.P. ("M-Tex"). Based on M-Tex's weak financial
condition and its inability to meet its lease obligations, the lease was
terminated in 2000. M-Tex was subsequently liquidated. The property was
written down to its estimated fair value and an impairment loss of $2,657
was recognized during 2000.

In 2001 and 2000, the Company also recorded impairment losses of $850 and
$1,514, respectively, on its assessments of the recoverability of a
redeemable preferred limited partnership interest that was acquired in
connection with the sale of a property in 1995 and debentures received in
connection with a bankruptcy settlement with a former lessee.

The Company owned a property in Carthage, New York which was leased to
Sunds Defibrator, Inc. ("Sunds"). During 1999, the Company accepted offers
to sell the property for $300 and to receive a lease termination payment
of $500, payable at the time of sale. In connection with the proposed
sale, the Company recognized an impairment loss of $1,000 on the writedown
of the property to the anticipated sales price, less estimated costs to
sell. The property was subsequently sold in 2000.

In connection with the anticipated sale of four properties in 2002, the
Company has recognized impairment losses of $1,781 in 2001 on the
writedown of the properties to their anticipated sales price, less
estimated costs to sell.

As of December 31, 2001, the Company has classified seven properties as
assets held for sale which the Company anticipates selling within one
year, including three which have been sold since December 31, 2001.
Operating income from the properties was $469 and the effect of suspending
depreciation expense as a result of reclassification was $5.

-29-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

11. Equity Investments:

The Company owns 780,269 units of the operating partnership of MeriStar
Hospitality Corporation ("MeriStar"), a publicly traded real estate investment
trust which primarily owns hotels. The Company has the right to convert its
units in the operating partnership to shares of common stock in MeriStar at any
time on a one-for-one basis. The exchange of units for common stock would be a
taxable transaction in the year of exchange. The Company's interest in the
MeriStar operating partnership is being accounted for under the equity method.
The carrying value of the equity interest in the MeriStar operating partnership
was $11,000 and $18,889 as of December 31, 2001 and 2000, respectively (also see
Note 10).

The audited consolidated financial statements of MeriStar filed with the United
States Securities and Exchange Commission ("SEC") reported total assets of
$3,009,860 and $3,013,008 and shareholders' equity of $1,022,563 and $1,134,555
as of December 31, 2001 and 2000, respectively, and revenues of $1,084,888,
$400,778 and $374,904 and net (loss) income of $(42,762), $105,861 and $98,964
for the years ended December 31, 2001, 2000 and 1999, respectively.

The Company owns equity interests as a limited partner in two limited
partnerships and in two limited liability companies, with the remaining
interests owned by affiliates, that each own real estate net leased to a single
tenant. The Company also purchased a 10% interest in W. P. Carey International,
LLC ("WPCI"), an affiliate, in 2001 for a $1,000 promissory note. WPCI is an
investment banking firm which structures net lease transactions outside of the
United States.

Effective as of June 29, 2000, the Company acquired 20,000 shares of common
stock in four CPA(R) REITs with which it has advisory agreements. Since June 29,
2000, the Company has acquired an additional 265,341, 329,043 and 491,723
shares, respectively, of Carey Institutional Properties Incorporated, Corporate
Property Associates 12 Incorporated, and Corporate Property Associates 14
Incorporated, all CPA(R) REITs, in connection with earning performance fees and
electing to receive restricted shares of common stock rather than cash in
consideration for such fees (see Note 3). As of December 31, 2001, the Company
also owned 20,000 shares of Corporate Property Associates 15 Incorporated's
("CPA(R):15") common stock for $200, representing 100% of its outstanding
shares. As of March 15, 2002, CPA(R):15 has issued 5,861,577 shares of common
stock ($5,862) to investors. The interests in the CPA(R) REITs are accounted for
under the equity method due to the Company's ability to exercise significant
influence as the Advisor to the REITs. The audited consolidated financial
statements of the CPA(R) REITs are filed with the SEC.

Combined financial information of the affiliated equity investees is summarized
as follows:

December 31,
------------
2001 2000
---- ----

Assets (primarily real estate) $2,196,166 $1,745,901
Liabilities (primarily mortgage notes payable) 1,031,445 789,984
---------- ----------
Capital $1,164,721 $ 955,917
========== ==========

Year Ended December 31,
-----------------------
2001 2000 1999
---------- ---------- ------

Revenue (primarily rental revenue)(1) $ 217,075 $ 173,006 $8,465
Expenses (primarily interest on mortgages
and depreciation) 142,601 100,006 5,603
---------- ---------- ------
Net income $ 74,474 $ 73,000 $2,862
========== ========== ======

(1). Includes the net effect of minority interests in income, income from
equity investments and gains (losses) on the sale of real estate and
securities.

-30-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

12. Disclosures About Fair Value of Financial Instruments:

The Company estimates that the fair value of mortgage notes payable and
other notes payable was $295,843 and $294,278 at December 31, 2001 and
2000, respectively (see Note 6). The fair value of fixed rate debt
instruments was evaluated using a discounted cash flow model with rates
that take into account the credit of the tenants and interest rate risk.
The fair value of the note payable from the line of credit approximates
the carrying value as it is a variable rate obligation with an interest
rate that resets to market rates.

13. Selected Quarterly Financial Data (unaudited):

Three Months Ended
------------------
March 31, 2001 June 30, 2001 September 30, 2001 December 31, 2001
-------------- ------------- ------------------ -----------------

Revenues $31,897 $ 35,658 $33,341 $ 38,515

Expenses 20,791 22,021 21,048 36,116

Net income 12,639 11,752 11,237 133

Net income per share -
basic .37 .34 .33 --

diluted .37 .34 .32 --
........
Dividends declared per share .4225 .4250 .4260 .4270

Three Months Ended
------------------
March 31, 2000 June 30, 2000 September 30, 2000 December 31, 2000
-------------- ------------- ------------------ -----------------

Revenues $23,276 $ 26,611 $33,929 $ 36,435

Expenses 13,659 54,744 22,114 33,461

Net income (loss) 9,625 (30,041) 11,375 (237)

Net income (loss) per share -
basic and diluted .38 (1.18) .34 (.01)

Dividends declared per share .4225 .4225 .4225 .4225

14. Stock Options and Warrants:

In January 1998, an affiliate was granted warrants to purchase 2,284,800
shares exercisable at $21 per share and 725,930 shares exercisable at $23
per share as compensation for investment banking services in connection
with structuring the consolidation on the CPA(R) Partnerships. The
warrants are exercisable until January 2009.

The Company maintains stock option incentive plans pursuant to which share
options may be issued. The 1997 Share Incentive Plan (the "Incentive
Plan"), as amended, authorizes the issuance of up to 2,600,000 shares. The
Company Non-Employee Directors' Plan (the "Directors' Plan") authorizes
the issuance of up to 300,000 shares.

The Incentive Plan provides for the grant of (i) share options which may
or may not qualify as incentive stock options, (ii) performance shares,
(iii) dividend equivalent rights and (iv) restricted shares. In 2001,
share options for 465,000 shares were granted at exercise prices ranging
from $16.875 to $21.86 per share. In 2000, 922,152 share options were
granted at exercise prices ranging from $7.69 to $16.50 per share. In
1999, share options for 38,500 shares were granted at an exercise price of
$19.69 per share. The options granted under the Incentive Plan have a
10-year term and are exercisable for one-third of the granted options on
the first, second and third

-31-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

anniversaries of the date of grant. The vesting of grants, however, may be
accelerated upon a change in control of the Company and under certain
other conditions.

The Directors' Plan provides for the same terms as the Incentive Plan.
Share options for 21,822 and 12,704 shares were granted at exercise prices
ranging from $16.38 to $20 per share in 2000 and 1999, respectively.

Share option and warrant activity is as follows:

Weighted Average
Number of Shares Exercise Price
---------------- Per Share
--------

Balance at January 1, 1999 3,148,076 $21.42
Granted 51,204 $19.31
Exercised -- --
Forfeited -- --
---------- ------
Balance at December 31, 1999 3,199,280 $21.38
Granted 943,974 $13.24
Exercised -- --
Forfeited (29,000) ($16.25)
---------- ------
Balance at December 31, 2000 4,114,254 $19.57
Granted 465,000 $18.66
Exercised (229,105) ($12.21)
Forfeited (29,334) ($16.62)
---------- ------
Balance at December 31, 2001 4,320,815 $19.88
========== ======

At December 31, 2001, 2000 and 1999, the range of exercise prices and
weighted-average remaining contractual life of outstanding share options
and warrants was $7.69 to $23.00 and 7.5 years, $7.69 to $23.00 and 8.32
years and $17.25 to $23.00 and 9 years, respectively.

The per share weighted average fair value of share options and warrants
granted during 2001 were estimated to be $1.70 using a Black-Scholes
option pricing formula. The more significant assumptions underlying the
determination of the weighted average fair value include a risk-free
interest rate of 4.87%, a volatility factor of 22.51%, a dividend yield of
8.04% and an expected life of 3.21 years.

The per share weighted average fair value of share options and warrants
granted during 2000 were estimated to be $3.80 using a Black-Scholes
option pricing formula. The more significant assumptions underlying the
determination of the weighted average fair value include a risk-free
interest rate of 6.8%, a volatility factor of 22.53%, a dividend yield of
8.44% and an expected life of ten years.

The per share weighted average fair value of share options granted during
1999 was estimated to be $1.48, using a binomial option pricing formula.
The more significant assumptions underlying the determination of the
weighted average fair value include a risk-free interest rate of 5.54% a
volatility factor of 18.35%, a dividend yield of 7.64% and an expected
life of ten years.

The Company has elected to adopt the disclosure only provisions of SFAS
No. 123. If stock-based compensation cost had been recognized based upon
fair value at the date of grant for options awarded under the two plans in
accordance with the provisions of SFAS No. 123, pro forma net income
(loss) for 2001, 2000 and 1999 would have been $34,979, $(12,770) and
$33,964, respectively, and pro forma basic and diluted earnings (loss) per
share would have been $1.02 and $1.00, respectively, in 2001, $(.45) for
both basic and diluted loss per share for 2000 and unchanged for 1999.

-32-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

15. Segment Reporting:

The Company has determined that it operates in two business segments,
management services and real estate operations with domestic and
international investments. The two segments are summarized as follows:

Management Real Estate Other(2) Total Company
---------- ----------- -------- -------------

Revenues:
2001 $ 46,911 $ 86,556 $5,944 $139,411
2000 25,271 88,736 6,244 120,251
1999 -- 82,731 5,775 88,506

Operating, interest,
depreciation and
amortization expenses(1)
(excluding income taxes):
2001 39,747 55,608 4,621 99,976
2000 15,979 64,993 5,006 85,978
1999 -- 48,746 4,662 53,408

Income from equity investments:
2001 434 2,393 -- 2,827
2000 69 2,813 -- 2,882
1999 -- 1,886 -- 1,886

Net operating income (3):
2001 7,598 33,341 1,323 42,262
2000 9,361 26,556 1,238 37,155
1999 -- 35,871 1,113 36,984

Total assets:
2001 122,156 785,730 7,997 915,883
2000 111,375 784,628 8,239 904,242

Total long-lived assets:
2001 64,286 721,895 5,990 792,171
2000 59,580 758,063 6,502 824,145

(1) Excludes the writeoff of an acquired management contract of $38,000 in
2000.
(2) Primarily consists of the Company's other business operations.
(3) Net operating income excludes gains and losses on sales, income taxes,
minority interest, extraordinary items and the writeoff of an acquired
management contract of $38,000 in 2000 and includes $11,903 and $5,958 of
amortization charges in 2001 and 2000, respectively.

The Company acquired its first international real estate investment in
1998. For 2001, geographic information for the real estate operations
segment is as follows:

Domestic International Total Real Estate
-------- ------------- -----------------

Revenues $ 82,795 $ 3,761 $ 86,556
Operating, interest, depreciation and
amortization expenses (excluding
income taxes)(1) 52,183 3,425 55,608
Income from equity investments 2,393 -- 2,393
Net operating income(2) 33,005 336 33,341
Total assets 736,152 49,578 785,730
Total long-lived assets 675,919 45,976 721,895

-33-

W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

For 2000, geographic information for the real estate operations segment is
as follows:

Domestic International Total Real Estate
-------- ------------- -----------------

Revenues $ 86,311 $ 2,425 $ 88,736
Operating, interest, depreciation and
amortization expenses (excluding
income taxes)(1) 62,290 2,703 64,993
Income from equity investments 2,813 -- 2,813
Net operating income(2) 26,834 (278) 26,556
Total assets 752,126 32,502 784,628
Total long-lived assets 728,260 29,803 758,063

For 1999, geographic information is as follows:

Domestic International Total Real Estate
-------- ------------- -----------------

Revenues $ 80,683 $ 2,048 $ 82,731
Operating, interest, depreciation and
amortization expenses (excluding
income taxes)(1) 47,284 1,462 48,746
Income from equity investments 1,886 -- 1,886
Net operating income(2) 35,285 586 35,871

(1) Excludes the writeoff of an acquired management contract of $38,000 in
2000.
(2) Net (loss) income excludes gains and losses on sales, income taxes,
minority interest, extraordinary items and the writeoff of an acquired
management contract of $38,000 in 2000 and includes $11,903 and $5,958 of
amortization charges in 2001 and 2000, respectively.

16. Income Taxes:

The components of the Company's provision for income taxes for the years
ended December 31, 2001, 2000 and 1999 are as follows:

2001 2000 1999
---- ---- ----

Federal:
Current $ (46) $ 569
Deferred 4,783 848
-------- --------
4,737 1,417
-------- --------
State and local:
Current 1,993 2,176 $ 752
Deferred 1,787 571 --
-------- -------- --------
3,780 2,747 752
-------- -------- --------
Total provision $ 8,517 $ 4,164 $ 752
======== ======== ========

Deferred income taxes as of December 31, 2001 and 2000 consist of the
following:

2001 2000
---- ----

Deferred tax assets:
Net operating loss carry forward $1,531 $ --
Unearned compensation 544 634
Corporate fixed assets 98 142
Other long-term liabilities 115 --
------ ------
2,288 776
------ ------
Deferred tax liabilities:
Receivables from affiliates 4,975 2,112
Investments 3,921 --
------ ------
8,896 2,112
------ ------
Net deferred tax liability $6,608 $1,336
====== ======

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W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

No deferred income taxes were recognized in 1999. The net operating loss
to be carried forward is $3,278 and expires in 2021.

The difference between the tax provision and the tax benefit recorded at
the statutory rate at December 31, 2001 and 2000 is as follows:

2001 2000
---- ----

Income (loss) from taxable subsidiaries before income tax $3,236 $(38,172)

Federal provision (benefit) at statutory tax rate (34%) 1,100 (12,978)
State and local taxes, net of federal benefit 1,137 557
Writeoff of management contract -- 12,920
Amortization of intangible assets 3,458 1,706
Other 794 34
------ --------
Tax provision - taxable subsidiaries 6,489 2,239
Other state and local taxes 2,028 1,925
------ --------
Total tax provision $8,517 $ 4,164
====== ========

17. Employee Benefit Plans:

The Company sponsors a qualified profit-sharing plan and trust covering
substantially all of its full-time employees who have attained age
twenty-one, worked a minimum of 1,000 hours and completed one year of
service. The Company is under no obligation to contribute to the plan and
the amount of any contribution is determined by and at the discretion of
the Board of Directors. The Board of Directors can authorize contributions
to a maximum of 15% of an eligible participant's total compensation,
limited to $25.5 annually per participant. For the years ended December
31, 2001 and 2000, amounts expensed by the Company for contributions to
the trust were $1,388 and $627, respectively. Annual contributions
represent an amount equivalent to 15% of each eligible participant's total
eligible compensation for that period.

18. Accounting Pronouncements:

In July 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations"
and No. 142 "Goodwill and Other Intangibles," which establish accounting
and reporting standards for business combinations, certain assets and
liabilities acquired in business combinations and asset acquisitions.

SFAS No. 141 requires that all business combinations initiated after June
30, 2001 be accounted for under the purchase method, establishes specific
criteria for the recognition of intangible assets separately from goodwill
and requires that unallocated negative goodwill be written off immediately
as an extraordinary gain. Use of the pooling-of-interests method for
business combinations is no longer permitted. The adoption of SFAS 141 did
not have a material effect on the Company's financial statements.

SFAS No. 142 primarily addresses the accounting for goodwill and
intangible assets subsequent to their acquisition and the accounting for
asset acquisitions. The provisions of SFAS No. 142 are effective for
fiscal years beginning after December 15, 2001 and must be adopted at the
beginning of a fiscal year. SFAS No. 142 provides that goodwill and
indefinite-lived intangible assets will no longer be amortized but will be
tested for impairment at least annually. Intangible assets acquired and
liabilities assumed in business combinations will only be amortized if
such assets and liabilities are capable of being separated or divided and
sold, transferred, licensed, rented or exchanged or arise from contractual
or legal rights (including leases), and will be amortized over their
useful lives. In connection with the implementation of SFAS No. 142, WPC
performed its annual test for impairment of its management services
segment, the reportable units for measurement, in March 2002, and
concluded that the carrying value of goodwill is not impaired.

The Company will adopt the provisions of SFAS No. 142 for the fiscal year
beginning January 1, 2002. With the acquisition of the real estate
management operations in 2000, the Company allocated a portion of the

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W. P. CAREY & CO. LLC

NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

purchase price to goodwill and other identifiable intangible assets. In
adopting SFAS No. 142, the Company will discontinue amortization of
existing goodwill. SFAS 142 will have a significant impact on the
Company's financial results based on the historical amortization of
goodwill and certain intangible assets. During the years ended December
31, 2001 and 2000 the Company had amortization expense of $4,597 and
$2,001, respectively, which beginning January 1, 2002, will no longer be
expensed under SFAS 142.

SFAS No. 142 requires that goodwill be tested annually for impairment
using a two-step process. The first step is to identify a potential
impairment and, in transition, this step must be measured as of the
beginning of the fiscal year. However, a company has six months from the
date of adoption to complete the first step. The second step of the
goodwill impairment test measures the amount of impairment loss (measured
as of the beginning of the year of adoption), if any, and must be
completed by the end of the Company's fiscal year. Intangible assets
deemed to have an indefinite life will be tested for impairment using a
one-step process which compares the fair value to the carrying amount of
the asset as of the beginning of the fiscal year.

In August 2001, FASB issued SFAS No. 144 "Accounting for the Impairment of
Long-Lived Assets" which addresses the accounting and reporting for the
impairment and disposal of long-lived assets and supercedes SFAS No. 121
while retaining SFAS No. 121's fundamental provisions for the recognition
and measurement of impairments. SFAS 144 removes goodwill from its scope,
provides for a probability-weighted cash flow estimation approach for
analyzing situations in which alternative courses of action to recover the
carrying amount of long-lived assets are under consideration and broadens
that presentation of discontinued operations to include a component of an
entity. The adoption of SFAS 144 is not expected to have a material effect
on the Company's financial statements; however, the revenues and expenses
relating to an asset held for sale or sold must be presented as a
discontinued operation for all periods presented. The provisions of SFAS
No. 144 are effective for fiscal years beginning after December 15, 2001.

19. Subsequent Events:

In 1999, subsequent to the termination of a lease, the Company commenced
redeveloping its property in Los Angeles, California. In January 2002, the
Company entered into a purchase and sales agreement with the Los Angeles
Unified School District ("LAUSD") for $24,000. The sale is subject to
completion of LAUSD's conducting certain due diligence, environmental
approvals and the approval of the LAUSD Board of Education. If the sale
has not been completed by June 30, 2002, the LAUSD will be required to pay
monthly extension fees at an increasing rate.

The Company also entered into an agreement with the LAUSD to provide
environmental and management services in connection with the development
of the property. Under the agreement which expires in April 2002, the
Company received an initial payment of $200 and will be paid a management
fee of $25 per month. The Company and the LAUSD are currently negotiating
an extension of the agreement. Under the agreement, the LAUSD has agreed
to reimburse the Company for approximately $1,150 of costs which were
incurred in the redevelopment of the property. Such reimbursements will be
applied to the carrying value of the property. The carrying value of the
property of $13,047 is included in assets held for sale in the
accompanying consolidated financial statements as of December 31, 2001.

In January 2002, the Company sold properties in Burnsville, Minnesota,
Urbana, Illinois and Maumelle, Arkansas for $9,400 less closing costs. The
carrying value of the properties of $7,783 is included in assets held for
sale in the accompanying consolidated financial statements. The Burnsville
and Urbana properties were vacant at the time of sale.

The Company from time to time may offer to sell its Listed Shares, Future
Shares and Warrants pursuant to a registration statement declared
effective by the Securities and Exchange Commission on February 25, 2002.
The total amount of these securities will have an initial aggregate
offering price of up to $100,000, although the Company may increase this
amount in the future. The shares and/or warrants may be offered and sold
to or through one or more underwriters, dealers and agents, or directly to
purchasers, on a continuous or delayed basis. The prospectus included as
part of the registration statement describes some of the general terms
that may apply to these securities and the general manner in which they
may be offered. The specific terms of any securities to be offered, the
specific manner in which they may be offered and the specific use of
proceeds, will be described in a supplement to the prospectus.

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MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Listed Shares are listed on the New York Stock Exchange. Trading commenced on
January 21, 1998.

As of December 31, 2001 there were 20,616 shareholders of record.

Dividend Policy

Quarterly cash dividends are usually declared in December, March, June and
September and paid in January, April, July and October. Quarterly cash
dividends paid in 2001, 2000 and 1999 are as follows:

Cash dividends declared per share:

Quarter 2001 2000 1999
------- ---- ---- ----

1 $ .4225 $ .4225 $ .4175
2 .4250 .4225 .4175
3 .4260 .4225 .4175
4 .4270 .4225 .4175
---------- ---------- ----------
Total: $ 1.7005 $ 1.6900 $ 1.6700
========== ========== ==========

Listed Shares

The high, low and closing prices on the New York Stock Exchange for a
Listed Share for each fiscal quarter of 2001, 2000 and 1999 were as
follows (in dollars):

2001 High Low Close
---- ------ ------ ------

First Quarter $20.60 $18.26 $19.35
Second Quarter 21.80 18.50 18.50
Third Quarter 22.05 19.25 21.35
Fourth Quarter 23.80 20.00 23.20

2000 High Low Close
---- ------ ------ ------

First Quarter $16.03 $14.39 $15.45
Second Quarter 17.02 15.51 15.60
Third Quarter 17.15 15.90 17.15
Fourth Quarter 18.10 16.11 18.10

1999 High Low Close
---- ------ ------ ------

First Quarter $17.88 $17.44 $17.69
Second Quarter 17.38 17.06 17.25
Third Quarter 20.00 17.38 20.00
Fourth Quarter 17.19 16.63 16.88

REPORT ON FORM 10-K

The Company will supply to any shareholder, upon written request and without
charge, a copy of the Annual Report on Form 10-K for the year ended December 31,
2001 as filed with the Securities and Exchange Commission.

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