|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
2016
(a)
(b)
|
|
|
Real estate – Land, buildings and improvements
|
|
$
|
109,426
|
|
$
|
225,347
|
|
|
Operating real estate – Land, buildings and improvements
|
|
|
80,658
|
|
|
11,388
|
|
|
Net investments in direct financing leases
|
|
|
312,234
|
|
|
315,251
|
|
|
In-place lease intangible assets
|
|
|
8,650
|
|
|
8,795
|
|
|
Accumulated depreciation and amortization
|
|
|
(26,395
|
)
|
|
(25,000
|
)
|
|
Other assets, net
|
|
|
73,620
|
|
|
52,565
|
|
|
Total assets
|
|
|
567,929
|
|
|
590,526
|
|
|
Mortgage debt, net
|
|
$
|
104,213
|
|
$
|
192,839
|
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
12,693
|
|
|
11,187
|
|
|
Deferred income taxes
|
|
|
12,374
|
|
|
15,687
|
|
|
Total liabilities
|
|
|
129,662
|
|
|
220,077
|
|
-
(a)
-
In
the second quarter of 2017, we reclassified certain line items in our consolidated balance sheets, as described below. As a result, amounts for certain line items
included within Net investments in real estate have been reclassified to conform to the current period presentation.
-
(b)
-
The
consolidated financial statements as of and for the year ended December 31, 2016 accurately reflect the correct accounting treatment for VIEs. In the
second quarter of 2017, we identified an error in the notes to the consolidated financial statements as of December 31, 2016 related to the VIE tabular disclosure above in which we improperly
classified four consolidated entities as VIEs. We concluded that the disclosure error to the table above was not material to the notes to the consolidated financial statements. As such, we have
corrected the information as of December 31, 2016 in the table above to correctly exclude these four entities, which reduced (i) Real estate – land, buildings
and improvements by $111.1 million; (ii) in-place lease intangible assets by $21.8 million; (iii) accumulated depreciation and amortization by $21.6 million;
(iv) other assets, net by $13.0 million; (v) total assets by $124.4 million; (vi) mortgage debt, net by $73.0 million;
15
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Summary of Significant Accounting Policies (Continued)
(vii) accounts
payable, accrued expenses and other liabilities by $3.3 million; and (viii) total liabilities by $76.6 million.
At
December 31, 2017 and 2016, we had 11 and 13 unconsolidated VIEs, respectively, all of which we account for under the equity method of accounting. We do not consolidate these
entities because we are not the primary beneficiary and the nature of our involvement in the activities of these entities allows us to exercise significant influence on, but does not give us power
over, decisions that significantly affect the economic performance of these entities. As of December 31, 2017 and 2016, the net carrying amount of our investments in these entities was
$282.0 million and $377.4 million, respectively, and our maximum exposure to loss in these entities was limited to our investments.
At
December 31, 2017, we had an investment in a tenancy-in-common interest in a portfolio of international properties. Consolidation of this investment is not required as such
interest does not qualify as a VIE and does not meet the control requirement for consolidation. Accordingly, we account for this investment using the equity method of accounting. We use the equity
method of accounting because the shared decision-making involved in a tenancy-in-common interest investment provides us with significant influence on the operating and financial decisions of this
investment.
At
times, the carrying value of our equity investments may fall below zero for certain investments. We intend to fund our share of the jointly owned investments' future operating
deficits should the need arise. However, we have no legal obligation to pay for any of the liabilities of such investments nor do we have any legal obligation to fund operating deficits. At
December 31, 2017, none of our equity investments had carrying values below zero.
Reclassifications
– Certain prior year amounts have been reclassified to conform to the current year
presentation.
In
the second quarter of 2017, we reclassified in-place lease intangible assets, net and other intangible assets, net to be included within Net investments in real estate in our
consolidated balance sheets. The accumulated amortization on these assets is now included in Accumulated depreciation and amortization in our consolidated balance sheets. In addition, we reclassified
goodwill, which was previously included in other intangibles, net to be included in Other assets, net. Prior period balances have been reclassified to conform to the current period presentation.
Real Estate and Operating Real Estate
– We carry land, buildings, and personal property at cost less accumulated
depreciation. We capitalize improvements and significant renovations that extend the useful life of the properties, while we expense replacements, maintenance, and repairs that do not improve or
extend the lives of the respective assets as incurred.
Real Estate Under Construction
– For properties under construction, operating expenses, including interest
charges and other property expenses (e.g. real estate taxes, insurance and legal costs) are capitalized rather than expensed. We capitalize interest by applying the interest rate applicable to
any funding specific to the property or the interest rate applicable to outstanding borrowings to the average amount of accumulated qualifying expenditures for properties under construction during the
period.
16
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Summary of Significant Accounting Policies (Continued)
Acquisition, Development, and Construction Loans
– We provide funding to developers for the acquisition,
development, and construction of real estate, or ADC Arrangements. Under such ADC Arrangements, we may participate in the residual profits of the project through the sale or refinancing of the
property. We evaluate these arrangements to determine if they have characteristics similar to a loan or if the characteristics are more similar to a joint venture or partnership, such as participating
in the risks and rewards of the project as an owner or an investment partner. For those arrangements with characteristics of a loan, we follow the accounting guidance for loans and disclose within our
Finance Receivables footnote (
Note 5
). When we determine that the characteristics are more similar to a jointly owned investment or partnership,
we account for those arrangements under the equity method of accounting (
Note 6
). Once the investment or partnership begins operations, we use
the hypothetical liquidation at book value method to calculate income or loss (which considers the principal and interest under the loan to be a preferential return).
Loans Receivable
– For investments in mortgage notes and loan participations, the loans are initially reflected
at acquisition cost, which consists of the outstanding balance, net of the acquisition discount or premium. We amortize any discount or premium as an adjustment to increase or decrease, respectively,
the yield realized on these loans over the life of the loan. As such, differences between carrying value and principal balances outstanding do not represent embedded losses or gains as we generally
plan to hold such loans to maturity. Our loans receivable are included in Other assets, net in the consolidated financial statements. We generate revenue in the form of interest payments from the
borrower, which are recognized in Other interest income in the consolidated financial statements.
Allowance for Doubtful Accounts
– We consider rents due under leases and payments under loans receivable to be
past-due or delinquent when a contractually required rent, principal payment, or interest payment is not remitted in accordance with the provisions of the underlying agreement. We evaluate each
account individually and set up an allowance when, based upon current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual
terms and the amount can be reasonably estimated.
Cash and Cash Equivalents
– We consider all short-term, highly liquid investments that are both readily
convertible to cash and have a maturity of three months or less at the time of purchase to be cash equivalents. Items classified as cash equivalents include commercial paper and money market funds.
Our cash and cash equivalents are held in the custody of several financial institutions, and these balances, at times, exceed federally-insurable limits. We seek to mitigate this risk by depositing
funds only with major financial institutions.
Debt Securities
– We have investments, such as CMBS, that were designated as securities held to maturity on the
date of acquisition, in accordance with current accounting guidance. We carry these securities at cost, net of unamortized premiums and discounts, which are recognized in interest income using an
effective yield or "interest" method, and assess them for other-than-temporary impairment on a quarterly basis.
Other Assets and Liabilities
– We include prepaid expenses, deferred rental income, tenant receivables, deferred
charges, escrow balances held by lenders, restricted cash balances, deferred tax assets, marketable debt securities, derivative assets, and loans receivable in Other assets, net in the consolidated
financial statements. We include derivative liabilities, amounts held on behalf of tenants, asset retirement obligations, and deferred revenue in Accounts payable, accrued expenses and other
17
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Summary of Significant Accounting Policies (Continued)
liabilities
in the consolidated financial statements. Deferred charges include costs incurred in connection with the Revolver in the Senior Credit Facility that are amortized over the term of the
facility and included in Interest expense in the consolidated financial statements. Deferred rental income for operating leases is the aggregate cumulative difference between scheduled rents that vary
during the lease term and rent recognized on a straight-line basis.
Deferred Acquisition Fees Payable to Affiliate
– Fees payable to our Advisor for structuring and negotiating
investments and related mortgage financing on our behalf are included in Due to affiliates (
Note 3
). This fee, together with its accrued
interest, is payable in three equal annual installments on the first business day of the fiscal quarter immediately following the fiscal quarter in which an investment is made, and the first business
day of the corresponding fiscal quarter in each of the subsequent two fiscal years. The timing of the payment of such fees is subject to preferred return criterion, a non-compounded cumulative
distribution return of 5% per annum (based initially on our invested capital).
Share Repurchases
– Share repurchases are recorded as a reduction of common stock par value and additional
paid-in capital under our redemption plan, pursuant to which we may elect to
redeem shares at the request of our stockholders, subject to certain exceptions, conditions, and limitations. The maximum amount of shares purchasable by us in any period depends on a number of
factors and is at the discretion of our board of directors.
Noncontrolling Interests
– We account for the special general partner interest in our Operating Partnership as a
noncontrolling interest (
Note 3
). The special general partner interest in our Operating Partnership entitles W. P. Carey Holdings, LLC, or
Carey Holdings, also known as the Special General Partner, to cash distributions and, in the event there is a termination or non-renewal of the advisory agreement, redemption rights. Cash
distributions to the Special General Partner are accounted for as an allocation to net income attributable to noncontrolling interest.
Revenue Recognition
– We lease real estate to others primarily on a triple-net leased basis whereby the tenant
is generally responsible for operating expenses relating to the property, including property taxes, insurance, maintenance, repairs, and improvements. For the years ended December 31, 2017,
2016, and 2015, our tenants, pursuant to their lease obligations, have made direct payment to the taxing authorities of real estate taxes of approximately $26.3 million, $22.9 million,
and $23.6 million, respectively.
Substantially
all of our leases provide for either scheduled rent increases, periodic rent adjustments based on formulas indexed to changes in the Consumer Price Index, or CPI, or
similar indices, or percentage rents. CPI-based adjustments are contingent on future events and are therefore not included as minimum rent in straight-line rent calculations. We recognize rents from
percentage rents as reported by the lessees, which is after the level of sales requiring a rental payment to us is reached. Percentage rents were insignificant for the periods presented.
For
our operating leases, we record real estate at cost less accumulated depreciation; we recognize future minimum rental revenue on a straight-line basis over the non-cancelable lease
term of the related leases and charge expenses to operations as incurred (
Note 4
).
We
record leases accounted for under the direct financing method as a net investment in leases (
Note 5
). The net investment is
equal to the cost of the leased assets. The difference between the cost
18
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Summary of Significant Accounting Policies (Continued)
and
the gross investment, which includes the residual value of the leased asset and the future minimum rents, is unearned income. We defer and amortize unearned income to income over the lease term so
as to produce a constant periodic rate of return on our net investment in the lease.
Asset Retirement Obligations
– Asset retirement obligations relate to the legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction, development, and/or normal operation of a long-lived asset. The fair value of a liability for an asset retirement
obligation is recorded in the period in which it is incurred and the cost of such liability is recorded as an increase in the carrying amount of the related long-lived asset by the same amount. The
liability is accreted each period in Property expenses on our consolidated financial statements and the capitalized cost is depreciated over the estimated remaining life of the related long-lived
asset. Revisions to estimated retirement obligations result in adjustments to the related capitalized asset and corresponding liability.
In
order to determine the fair value of the asset retirement obligations, we make certain estimates and assumptions including, among other things, projected cash flows, the borrowing
interest rate, and an assessment of market conditions that could significantly impact the estimated fair value. These estimates and assumptions are subjective.
Depreciation
– We compute depreciation of building and related improvements using the straight-line method over
the estimated remaining useful lives of the properties (not to exceed 40 years) and furniture, fixtures, and equipment (generally up to seven years). We compute depreciation of tenant
improvements using the straight-line method over the lesser of the remaining term of the lease or the estimated useful life.
Interest Capitalized in Connection with Real Estate Under Construction
– Interest directly related to
build-to-suit projects is capitalized. We consider a build-to-suit project as substantially completed upon the completion of improvements. If discrete portions of a project are substantially completed
and occupied and other portions have not yet reached that stage, the substantially completed portions are accounted for separately. We allocate costs incurred between the portions under construction
and the portions substantially completed and only capitalize those costs associated with the portion under construction. We determine an interest rate to be applied for capitalizing interest based on
a blended rate of our debt obligations.
Foreign Currency Translation and Transaction Gains and Losses
– We have interests in real estate investments
primarily in Europe, for which the functional currency is either the euro or the British pound sterling. We perform the translation from euro or the British pound sterling to the U.S. dollar for
assets and liabilities using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted-average exchange rate during the year. We report the gains
and losses resulting from such translation as a component of other comprehensive loss in equity. These translation gains and losses are released to net income when we have substantially exited from
all investments in the related currency.
A
transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later), realized upon settlement of a foreign currency
transaction generally will be included in net income for the period in which the transaction is settled. Also, intercompany foreign currency transactions that are scheduled for settlement, consisting
primarily of
19
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Summary of Significant Accounting Policies (Continued)
accrued
interest and the translation to the reporting currency of short-term subordinated intercompany debt with scheduled principal payments, are included in the determination of net income.
Intercompany
foreign currency transactions of a long-term nature (that is, settlement is not planned or anticipated in the foreseeable future), in which the entities to the transactions
are consolidated or accounted for by the equity method in our consolidated financial statements, are not included in net income but are reported as a component of other comprehensive income in equity.
Net
realized gains or (losses) are recognized on foreign currency transactions in connection with the transfer of cash from foreign operations of subsidiaries to the parent company. For
the year ended December 31, 2017, we recognized net realized gains on such transactions of $2.9 million and losses on such transactions of $2.3 million for both the years ended
December 31, 2016, and 2015.
Derivative Instruments
– We measure derivative instruments at fair value and record them as assets or
liabilities, depending on our rights or obligations under the applicable derivative contract. Derivatives that are not designated as hedges must be adjusted to fair value through earnings. For a
derivative designated and that qualifies as a cash flow hedge, the effective portion of the change in fair value of the derivative is recognized in Other comprehensive income (loss) until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings. For a derivative designated, and that qualifies, as a net
investment hedge, the effective portion of the change in the fair value and/or the net settlement of the derivative are reported in Other comprehensive income (loss) as part of the cumulative foreign
currency translation adjustment. The ineffective portion of the change in fair value of the derivative is recognized directly in earnings. Amounts are reclassified out of Other comprehensive income
(loss) into earnings when the hedged investment is either sold or substantially liquidated. In accordance with fair value measurement guidance, counterparty credit risk is measured on a net portfolio
position basis.
Income Taxes
– We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal
Revenue Code. In order to maintain our qualification as a REIT, we are required, among other things, to distribute at least 90% of our REIT net taxable income to our stockholders and meet certain
tests regarding the nature of our income and assets. As a REIT, we are not subject to federal income taxes on our income and gains that we distribute to our stockholders as long as we satisfy certain
requirements, principally relating to the nature of our income and the level of our distributions, as well as other factors. We believe that we have operated, and we intend to continue to operate, in
a manner that allows us to continue to qualify as a REIT.
We
conduct business in various states and municipalities within the United States, Europe, and Asia and, as a result, we or one or more of our subsidiaries file income tax returns in the
United States federal jurisdiction and various state and certain foreign jurisdictions. As a result, we are subject to certain foreign, state, and local taxes and a provision for such taxes is
included in the consolidated financial statements.
We
elect to treat certain of our corporate subsidiaries as taxable REIT subsidiaries, or TRSs. In general, a TRS may perform additional services for our tenants and generally may engage
in any real estate or non-real estate-related business (except for the operation or management of health care facilities or lodging facilities or providing to any person, under a franchise, license or
otherwise, rights to any brand name under which any lodging facility or health care facility is operated). A TRS is subject to corporate federal income tax.
20
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Summary of Significant Accounting Policies (Continued)
Significant
judgment is required in determining our tax provision and in evaluating our tax positions. We establish tax reserves based on a benefit recognition model, which we believe
could result in a greater amount of benefit (and a lower amount of reserve) being initially recognized in certain circumstances. Provided that the tax position is deemed more likely than not of being
sustained, we recognize the largest amount of tax benefit that is greater than 50% likely of being ultimately realized upon settlement. We derecognize the tax position when it is no longer more likely
than not of being sustained.
Our
earnings and profits, which determine the taxability of distributions to stockholders, differ from net income reported for financial reporting purposes due primarily to differences
in depreciation, including our hotel property, and timing differences of rent recognition and certain expense deductions, for federal income tax purposes. Deferred income taxes relate primarily to our
TRSs and foreign properties, and are accounted for using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the financial
reporting bases of assets and liabilities of our TRSs and their respective tax bases, and for their operating loss and tax credit carryforwards based on enacted tax rates expected to be in effect when
such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available
evidence, including tax planning strategies and other factors (
Note 13
).
We
recognize deferred income taxes in certain of our subsidiaries taxable in the United States or in foreign jurisdictions. Deferred income taxes are generally the result of temporary
differences (items that are treated differently for tax purposes than for U.S. GAAP purposes as described in
Note 13
). In addition,
deferred tax assets arise from unutilized tax net operating losses, generated in prior years. Deferred income taxes are computed under the asset and liability method. The asset and liability method
requires the recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between tax bases and financial bases of assets and liabilities. We provide a valuation allowance against our deferred income tax assets when we believe that it
is more likely than not that all or some portion of the deferred income tax asset may not be realized. Whenever a change in circumstances causes a change in the estimated realizability of the related
deferred income tax asset, the resulting increase or decrease in the valuation allowance is included in deferred income tax expense.
Earnings Per Share
– We have a simple equity capital structure with only common stock outstanding. As a result,
earnings per share, as presented, represents both basic and dilutive per-share amounts for all periods presented in the consolidated financial statements. Income per basic and diluted share of common
stock is calculated by dividing net income by the weighted-average number of shares of common stock issued and outstanding during such period.
Use of Estimates
– The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our consolidated financial statements and the accompanying notes. Actual results could differ
from those estimates.
21
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
Pronouncements Adopted as of December 31, 2017
In October 2016, the Financial Accounting Standards Board, or FASB, issued
ASU 2016-17, Consolidation (Topic
810): Interests Held through Related Parties That Are under Common Control
. ASU 2016-17 changes how a reporting entity that is a decision maker should consider indirect
interests in a VIE held through an entity under common control. If a decision maker must evaluate whether it is the primary beneficiary of a VIE, it will only need to consider its proportionate
indirect interest in the VIE held through a common control party. ASU 2016-17 amends ASU 2015-02, which we
adopted on January 1, 2016, and which currently directs the decision maker to treat the common control party's interest in the VIE as if the decision maker held the interest itself.
ASU 2016-17 is effective for public business entities in fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted
ASU 2016-17 as of January 1, 2017 on a prospective basis. The adoption of this standard did not have a material impact on our consolidated financial statements.
In
January 2017, the FASB issued
ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business
.
ASU 2017-01 intends to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions
(or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business: inputs, processes, and outputs. While an integrated set
of assets and activities, collectively referred to as a "set," that is a business usually has outputs, outputs are not required to be present. ASU 2017-01 provides a screen to determine when a
set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of
similar identifiable assets, the set is not a business. ASU 2017-01 will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim
periods within those fiscal years, with early adoption permitted. We elected to early adopt ASU 2017-01 on January 1, 2017 on a prospective basis. While our acquisitions have
historically been classified as either business combinations or asset acquisitions, certain acquisitions that were classified as business combinations by us likely would have been considered asset
acquisitions under the new standard. As a result, all transaction costs incurred during the year ended December 31, 2017 were capitalized since our acquisitions during the year were classified
as asset acquisitions. Most of our future acquisitions are likely to be classified as asset acquisitions under this new standard. In addition, goodwill that was previously allocated to businesses that
were sold or held for sale will no longer be allocated and written off upon sale if future sales were deemed to be sales of assets and not businesses.
In
January 2017, the FASB issued
ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment
. ASU 2017-04 removes step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now
be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged.
Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. ASU 2017-04 will be effective for public business
entities in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years in which a goodwill impairment test is performed, with early adoption permitted.
We adopted ASU 2017-04 as of
22
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Summary of Significant Accounting Policies (Continued)
April 1,
2017 on a prospective basis. The adoption of this standard did not have a material impact on our consolidated financial statements.
Pronouncements to be Adopted after December 31, 2017
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is a comprehensive
new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in
exchange for those goods or services. ASU 2014-09 does not apply to our lease revenues, which constitute a majority of our revenues, but will primarily apply to revenues generated from our
operating properties. We adopted this guidance for our interim and annual periods beginning January 1, 2018 using the modified retrospective method. We performed a comprehensive evaluation of
the impact of the new standard across our revenue streams, and determined that the timing of revenue recognition and its classification in our consolidated financial statements will remain
substantially unchanged.
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 outlines a new model for accounting by lessees, whereby their rights and obligations
under substantially all leases, existing and new, would be capitalized and recorded on the balance sheet. For lessors, however, the accounting remains largely unchanged from the current model, with
the distinction between operating and financing leases retained, but updated to align with certain changes to the lessee model and the new revenue recognition standard. The new standard also replaces
existing sale-leaseback guidance with a new model applicable to both lessees and lessors. In addition, it also requires lessors to record gross revenues and expenses associated with activities that do
not transfer services to the lessee (such as real estate taxes and insurance). Additionally, the new standard requires extensive quantitative and qualitative disclosures. Early application will be
permitted for all entities. The new standard must be adopted using a modified retrospective transition of the new guidance and provides for certain practical expedients. Transition will require
application of the new model at the beginning of the earliest comparative period presented. We will adopt this guidance for our interim and annual periods beginning January 1, 2019. The
ASU is expected to impact our consolidated financial statements as we have certain land lease arrangements for which we are the lessee. We are evaluating the impact of the new standard and have
not yet determined if it will have a material impact on our business or our consolidated financial statements.
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. ASU 2016-13 introduces a new model for estimating credit losses
based on current expected credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities, and net investments in direct financing leases,
amongst other financial instruments. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity's
assumptions, models, and methods for estimating the allowance for losses. ASU 2016-13 will be effective for public business entities in fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years, with early application of the guidance permitted. We are in the process of evaluating the impact of adopting ASU 2016-13 on our consolidated
financial statements.
In
August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 intends to
reduce diversity in
23
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Summary of Significant Accounting Policies (Continued)
practice
for certain cash flow classifications, including, but not limited to (i) debt prepayment or debt extinguishment costs, (ii) contingent consideration payments made after a
business combination, (iii) proceeds from the settlement of insurance claims, and (iv) distributions received from equity method investees. ASU 2016-15 will be effective for
public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early application of the guidance permitted. We adopted
this guidance for our interim and annual periods beginning January 1, 2018. The adoption of ASU 2016-15 is not expected to have a material impact on our consolidated financial
statements, with the exception of debt prepayment or debt extinguishment cost reclassifications between operating and financing cash flow activities.
In
November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 intends to reduce diversity in practice for the
classification and presentation of changes in restricted cash on the statement of cash flows. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the
total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash
equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be
effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We adopted this
guidance for our interim and annual periods beginning January 1, 2018. The adoption of ASU 2016-18 is not expected to have a material impact on our consolidated financial statements.
In
February 2017, the FASB issued ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20).
ASU 2017-05 clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. The amendments define the term "in
substance nonfinancial asset," in part, as a financial asset promised to a counterparty in a contract if substantially all of the fair value of the assets (recognized and unrecognized) that are
promised to the counterparty in the contract is concentrated in nonfinancial assets. If substantially all of the fair value of the assets that are promised to the counterparty in a contract is
concentrated in nonfinancial assets, then all of the financial assets promised to the counterparty are in substance nonfinancial assets within the scope of Subtopic 610-20. This amendment also
clarifies that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent company may
transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. ASU 2017-05 is effective for periods beginning after December 15, 2017, with
early application permitted for fiscal years beginning after December 15, 2016. We are in the process of evaluating the impact of ASU 2017-05 on our consolidated financial statements and
will adopt the standard for the fiscal year beginning January 1, 2018.
In
August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 will make
more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess hedge effectiveness. It
is intended to more closely align hedge accounting with companies' risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of
hedging programs. ASU 2017-12 will be effective in fiscal years beginning after December 15, 2018, including interim
24
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Summary of Significant Accounting Policies (Continued)
periods
within those fiscal years, with early adoption permitted. We are in the process of evaluating the impact of adopting ASU 2017-12 on our consolidated financial statements, and expect to
adopt the standard for the fiscal year beginning January 1, 2019.
Note 3. Agreements and Transactions with Related Parties
Transactions with Our Advisor
We have an advisory agreement with our Advisor whereby our Advisor performs certain services for us under a fee arrangement, including the
identification, evaluation, negotiation,
purchase, and disposition of real estate and related assets and mortgage loans; day-to-day management; and the performance of certain administrative duties. We also reimburse our Advisor for general
and administrative duties performed on our behalf. The advisory agreement has a term of one year and may be renewed for successive one-year periods. We may terminate the advisory agreement upon
60 days' written notice without cause or penalty.
The
following tables present a summary of fees we paid, expenses we reimbursed, and distributions we made to our Advisor and other affiliates in accordance with the relevant agreements
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Amounts Included in the Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
Asset management fees
|
|
$
|
29,363
|
|
$
|
29,705
|
|
$
|
29,192
|
|
|
Available Cash Distributions
|
|
|
26,675
|
|
|
24,765
|
|
|
24,668
|
|
|
Personnel and overhead reimbursements
|
|
|
8,878
|
|
|
9,684
|
|
|
12,199
|
|
|
Director compensation
|
|
|
310
|
|
|
310
|
|
|
310
|
|
|
Interest expense on deferred acquisition fees and loan from affiliate
|
|
|
273
|
|
|
238
|
|
|
309
|
|
|
Acquisition expenses
|
|
|
—
|
|
|
2,844
|
|
|
430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,499
|
|
$
|
67,546
|
|
$
|
67,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition Fees Capitalized
|
|
|
|
|
|
|
|
|
|
|
|
Current acquisition fees
|
|
$
|
5,284
|
|
$
|
3,985
|
|
$
|
8,180
|
|
|
Deferred acquisition fees
|
|
|
4,228
|
|
|
3,188
|
|
|
6,325
|
|
|
Personnel and overhead reimbursements
|
|
|
849
|
|
|
584
|
|
|
858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,361
|
|
$
|
7,757
|
|
$
|
15,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3. Agreements and Transactions with Related Parties (Continued)
The
following table presents a summary of amounts included in Due to affiliates in the consolidated financial statements (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
2016
|
|
|
Due to Affiliates
|
|
|
|
|
|
|
|
|
Deferred acquisition fees, including interest
|
|
$
|
6,564
|
|
$
|
6,584
|
|
|
Asset management fees payable
|
|
|
2,435
|
|
|
2,250
|
|
|
Reimbursable costs
|
|
|
2,162
|
|
|
2,299
|
|
|
Accounts payable
|
|
|
175
|
|
|
360
|
|
|
Current acquisition fees
|
|
|
131
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,467
|
|
$
|
11,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition and Disposition Fees
We pay our Advisor acquisition fees for structuring and negotiating investments and related mortgage financing on our behalf, a portion of which
is payable upon acquisition of
investments, with the remainder subordinated to the achievement of a preferred return, which is a non-compounded cumulative distribution of 5.0% per annum (based initially on our invested capital).
Acquisition fees payable to our Advisor with respect to our long-term, net-leased investments are 4.5% of the total cost of those investments and are comprised of a current portion of 2.5%, typically
paid upon acquisition, and a deferred portion of 2.0%, typically paid over three years and subject to the 5.0% preferred return described above. The preferred return was achieved as of each of the
cumulative periods ended December 31, 2017, 2016, and 2015. For certain types of non-long term net-leased investments, initial acquisition fees are between 1.0% and 1.75% of the equity invested
plus the related acquisition fees, with no portion of the payment being deferred. Unpaid installments of deferred acquisition fees are included in Due to affiliates in the consolidated financial
statements. Unpaid installments of deferred acquisition fees bear interest at an annual rate of 5.0%. The cumulative total acquisition costs, including acquisition fees paid to our Advisor, may not
exceed 6.0% of the aggregate contract purchase price of all investments, which is measured at the end of each year. Our cumulative total acquisition costs have not exceeded the amount that would
require our Advisor to reimburse us.
Our
Advisor may be entitled to receive a disposition fee equal to the lesser of (i) 50.0% of the competitive real estate commission (as defined in the advisory agreement) or
(ii) 3.0% of the contract sales price of the investment being sold; however, payment of such fees is subordinated to the 5.0% preferred return. These fees are payable at the discretion of our
board of directors.
Asset Management Fees
As described in the advisory agreement, we pay our Advisor asset management fees that vary based on the nature of the underlying investment. We
pay 0.5% per annum of average market value for long-term net leases and certain other types of real estate investments, and 1.5% to 1.75% per annum of average equity value for certain types of
securities. Asset management fees are payable in cash and/or shares of our common stock at our option, after consultation with our Advisor. If our Advisor receives all or a portion of its fees in
shares, the number of shares issued is determined by dividing the dollar amount of fees by our most recently published estimated net asset value per share, or NAV,
26
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3. Agreements and Transactions with Related Parties (Continued)
which
was $10.11 as of December 31, 2016. For 2017 we paid our Advisor 100.0% of its asset management fees in shares of our common stock. For 2016 and 2015, we paid our Advisor 50% of its asset
management fees in cash and 50.0% in shares of our common stock. At December 31, 2017, our Advisor owned 14,647,412 shares (4.2%) of our common stock. Asset management fees are included in
Property expenses in the consolidated financial statements.
Available Cash Distribution
WPC's interest in the Operating Partnership entitles it to receive distributions of up to 10.0% of available cash generated by the Operating
Partnership, referred to as the Available Cash Distribution, which is defined as cash generated from operations, excluding capital proceeds, as reduced by operating expenses and debt service,
excluding prepayments and balloon payments. Available Cash Distributions are included in Net income attributable to noncontrolling interests in the consolidated financial statements.
Personnel and Overhead Reimbursements
Under the terms of the advisory agreement, our Advisor allocates a portion of its personnel and overhead expenses to us and the other entities
that are managed by our Advisor, including Corporate Property Associates 18 – Global Incorporated; Carey Watermark Investors Incorporated; Carey Watermark Investors 2
Incorporated; and Carey European Student Housing Fund I, L.P.; collectively referred to as the Managed Programs. Our Advisor also allocated a portion of its personnel and overhead expenses to
Carey Credit Income Fund (now known as Guggenheim Credit Income Fund) prior to September 11, 2017, which was the effective date of its resignation as the advisor to that fund. Our Advisor
allocates these expenses to us on the basis of our trailing four quarters of reported revenues in comparison to those of WPC and other entities managed by WPC and its affiliates.
We
reimburse our Advisor for various expenses it incurs in the course of providing services to us. We reimburse certain third-party expenses paid by our Advisor on our behalf, including
property-specific costs, professional fees, office expenses, and business development expenses. In addition, we reimburse our Advisor for the allocated costs of personnel and overhead in managing our
day-to-day operations, including accounting services, stockholder services, corporate management, and property management and operations. We do not reimburse our Advisor for the cost of personnel if
these personnel provide services for transactions for which our Advisor receives a transaction fee, such as for acquisitions and dispositions. As per the advisory agreement, the amount of applicable
personnel costs allocated to us is capped at 2.0% and 2.2% for 2017 and 2016, respectively, of pro rata lease revenues for each year. Beginning in 2018, the cap decreases to 1.0% of pro rata lease
revenues for that year. Costs related to our Advisor's legal transactions group are based on a schedule of expenses relating to services performed for different types of transactions, such as
financings, lease amendments, and dispositions, among other categories, and includes 0.25% of the total investment cost of an acquisition. In general, personnel and overhead reimbursements are
included in General and administrative expenses in the consolidated financial statements. However, we capitalize certain of the costs related to our Advisor's legal transactions group if the costs
relate to a transaction that is not considered to be a business combination.
27
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3. Agreements and Transactions with Related Parties (Continued)
Excess Operating Expenses
Our Advisor is obligated to reimburse us for the amount by which our operating expenses exceeds the "2%/25% guidelines" (the greater of 2% of
average invested assets or 25% of net income) as defined in the advisory agreement for any 12-month period, subject to certain conditions. For the most recent trailing four quarters, our operating
expenses were below this threshold.
Jointly Owned Investments and Other Transactions with Affiliates
At December 31, 2017, we owned interests ranging from 6% to 97% in jointly owned investments, with the remaining interests held by
affiliates or by third parties. We consolidate certain of these investments and account for the remainder under the equity method of accounting. We also owned an interest in a jointly controlled
tenancy-in-common interest in several properties, which we account for under the equity method of accounting (
Note 6
). At December 31,
2017, we had $0.2 million due from an affiliate primarily related to one of our jointly owned investments, which is included in Other assets, net on our consolidated financial statements. At
December 31, 2016, we had $0.9 million due from an affiliate primarily related to one of our jointly owned investments, which was subsequently repaid.
Note 4. Real Estate, Operating Real Estate, and Assets Held for Sale
Real Estate – Land, Buildings and Improvements
Real estate, which consists of land and buildings leased to others, at cost, and which are subject to operating leases, is summarized as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
2016
|
|
|
Land
|
|
$
|
567,113
|
|
$
|
563,050
|
|
|
Buildings and improvements
|
|
|
2,200,901
|
|
|
2,182,374
|
|
|
Real estate under construction
|
|
|
4,597
|
|
|
—
|
|
|
Less: Accumulated depreciation
|
|
|
(354,668
|
)
|
|
(280,657
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,417,943
|
|
$
|
2,464,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the year ended December 31, 2017, the U.S. dollar weakened against the euro, as the end-of-period rate for the U.S. dollar in relation to the euro increased by 13.8% to
$1.1993 from $1.0541. As a result, the carrying value of our real estate increased by $145.9 million from December 31, 2016 to December 31, 2017.
Depreciation
expense, including the effect of foreign currency translation, on our real estate for the years ended December 31, 2017, 2016, and 2015 was $64.6 million,
$63.1 million, and $57.9 million, respectively.
Acquisitions of Real Estate During 2017
On February 2, 2017, we acquired an office facility in Buffalo Grove, Illinois, which was deemed to be a real estate asset acquisition,
at a total cost of $11.5 million, including land of $2.0 million, building of $7.5 million (including acquisition-related costs of $0.5 million, which were capitalized),
and an intangible asset of $2.0 million (
Note 7
).
28
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Real Estate, Operating Real Estate, and Assets Held for Sale (Continued)
On
July 19, 2017, we acquired a parcel of land located in Zary, Poland for $0.4 million, which is adjacent to an industrial facility we previously acquired. The land will
be used to construct an expansion to the existing facility, which is currently expected to cost $5.9 million (amounts are based on the exchange rate of the euro on the date of acquisition and
includes capitalized acquisition related costs of $0.3 million) and to be completed in 2018. See Real Estate Under Construction below for additional information.
On
October 27, 2017, we agreed to fund the expansion of a distribution facility in Dillon, South Carolina, which is adjacent to a distribution facility we previously acquired. The
expansion of the facility is currently expected to cost $47.1 million (including capitalized acquisition related costs of $2.3 million) and to be completed in 2018. See Real Estate Under
Construction below for additional information.
On
December 8, 2017, we agreed to fund the expansion of a facility located in Zabia Wola, Poland, which is adjacent to a facility we previously acquired. The expansion to the
existing facility is currently expected to cost $5.5 million (amount is based on the exchange rate of the euro on the date of acquisition and includes capitalized acquisition related costs of
$0.3 million) and to be completed in 2019. See Real Estate Under Construction below for additional information.
Acquisitions of Real Estate During 2016
During the year ended December 31, 2016, we acquired the following investments, which were deemed to be business combinations because we
assumed the existing leases on the properties, at a total cost of $51.2 million, including land of $6.7 million, buildings of $40.2 million, and net lease intangibles of
$4.3 million:
-
•
-
$17.3 million for a student housing accommodation in Jacksonville, Florida on January 8, 2016;
-
•
-
$4.2 million for an industrial facility in Houston, Texas on February 10, 2016;
-
•
-
$16.9 million for an office building in Oak Creek, Wisconsin on September 1, 2016; and
-
•
-
$12.8 million for a warehouse and light manufacturing building in Perrysburg, Ohio on September 30, 2016.
In
connection with these investments, we expensed acquisition-related costs and fees totaling $2.6 million, which are included in Acquisition expenses in the consolidated
financial statements.
During
the year ended December 31, 2016, we capitalized $10.4 million of building improvements with existing tenants of our net-leased properties.
During
2016, we entered into the following investments, which were deemed to be real estate asset acquisitions because we acquired the sellers' properties and simultaneously entered into
new leases in connection with these acquisitions, at a total cost of $134.8 million, including land of $8.6 million, buildings of $97.0 million (including acquisition-related
costs of $7.1 million, which were capitalized), and net intangibles of $29.2 million:
-
•
-
an investment of $38.2 million for five distribution centers located in Tiffin, Ohio; Kalamazoo, Michigan; Andersonville, Tennessee;
Shelbyville, Indiana; and Millwood, West Virginia on November 1, 2016;
29
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Real Estate, Operating Real Estate, and Assets Held for Sale (Continued)
-
•
-
an investment of $32.6 million for a facility located in Zabia Wola, Poland on November 29, 2016. In addition, we recorded a
deferred tax liability of $2.1 million partially offset by intangible assets of $2.0 million and land of $0.1 million related to this transaction (amounts are based on the
exchange rate of the euro on the date of acquisition); and
-
•
-
an investment of $64.0 million for a facility located in Kaunas, Lithuania on December 14, 2016. In addition, we recorded a
deferred tax liability of $0.5 million partially offset by building and improvements and intangible assets (amounts are based on the exchange rate of the euro on the date of acquisition).
Scheduled Future Minimum Rents
Scheduled future minimum rents, exclusive of renewals, expenses paid by tenants, and future CPI-based adjustments, under non-cancelable
operating leases at December 31, 2017 are as follows (in thousands):
|
|
|
|
|
|
|
Years Ending December 31,
|
|
Total
|
|
|
2018
|
|
$
|
283,901
|
|
|
2019
|
|
|
285,026
|
|
|
2020
|
|
|
287,210
|
|
|
2021
|
|
|
289,060
|
|
|
2022
|
|
|
288,150
|
|
|
Thereafter
|
|
|
2,231,027
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,664,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Under Construction
As noted above, during 2017 we acquired three build-to-suit investments, which were still under construction as of December 31, 2017. The
aggregate unfunded commitment on our build-to-suit investments and certain other tenant improvements totaled approximately $56.5 million at December 31, 2017. As of December 31,
2017, real estate under construction totaled $4.6 million and is included within Real estate – Land, buildings and improvements on our consolidated financial
statements.
Operating Real Estate – Land, Buildings and Improvements
Operating real estate, which consists of our wholly owned domestic self-storage operations and a majority ownership in one hotel, at cost, is
summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
2016
|
|
|
Land
|
|
$
|
90,042
|
|
$
|
55,645
|
|
|
Buildings and improvements
|
|
|
250,730
|
|
|
203,326
|
|
|
Less: Accumulated depreciation
|
|
|
(26,087
|
)
|
|
(18,876
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
314,685
|
|
$
|
240,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Real Estate, Operating Real Estate, and Assets Held for Sale (Continued)
Depreciation
expense on our operating real estate for the years ended December 31, 2017, 2016, and 2015 was $6.7 million, $7.8 million, and $8.4 million,
respectively.
Acquisitions of Operating Real Estate During 2017
In 2012, we funded a domestic build-to-suit project for the construction and redevelopment of the Shelborne hotel located in Miami, Florida. The
funding of the hotel was provided in the form of a $125.0 million loan (which subsequently increased to $174.0 million including accrued interest), which we refer to as the Shelborne
Loan. In addition to providing the loan, we acquired a 33% equity interest in the build-to-suit investment. The remaining 67% equity interest was held by two third-party joint venture partners.
Pursuant to the accounting guidance regarding ADC Arrangements, we accounted for the Shelborne Loan under the equity method of accounting as the characteristics of the arrangement with the third-party
developer were more similar to a jointly owned investment or partnership rather than a loan (
Note 6
). During 2014, construction was completed and
the hotel was placed into service.
During
September 2017, the Shelborne hotel sustained estimated damages of $31.2 million from Hurricane Irma, all of which is expected to be covered by insurance, with exception to
the estimated insurance deductible of $1.8 million. Of this amount, $1.7 million was recorded prior to the restructuring within Equity in earnings of equity method investments in real
estate on our consolidated financial statements (
Note 6
).
On
October 3, 2017, we restructured our Shelborne hotel investment. All equity interests in the investment were transferred to us in satisfaction of the Shelborne Loan.
Simultaneously, we transferred a 4.5% minority interest back to one of the original equity partners in exchange for a cash contribution of $4.0 million from that partner. As a result of the
restructuring, we became the managing member with the controlling financial interest in the investment. The minority interests have no decision-making control. Since the construction is now completed
and the Shelborne Loan has been satisfied, we determined that this investment should no longer be accounted for as an ADC Arrangement (
Note 6
)
and, as a result, we consolidate this investment after October 3, 2017.
We
deemed this to be an asset acquisition as substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset group. Due to the change in
control resulting from the acquisition of this controlling interest, we accounted for this acquisition using the purchase method of accounting. We recorded a non-cash loss on change in control of
interests of $13.9 million during 2017, which was the difference between the carrying value from our previously held equity investment of $118.7 million and the fair value of our 95.5%
ownership interest on the date of restructuring of $104.9 million. We determined the following purchase price allocation based on an
31
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Real Estate, Operating Real Estate, and Assets Held for Sale (Continued)
appraisal
provided by an independent valuation firm performed as of the date of acquisition (in thousands):
|
|
|
|
|
|
|
|
Shelborne Hotel
|
|
|
|
October 3, 2017
|
|
|
Assets acquired at fair value:
|
|
|
|
|
|
Land
|
|
$
|
34,397
|
|
|
Buildings and improvements
|
|
|
46,261
|
|
|
Other assets, net
(a)
|
|
|
32,695
|
|
|
|
|
|
|
|
|
|
|
|
113,353
|
|
|
|
|
|
|
|
|
Liabilities assumed at fair value:
|
|
|
|
|
|
Other liabilities assumed
|
|
|
(2,777
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,777
|
)
|
|
|
|
|
|
|
|
Total identifiable net assets
|
|
|
110,576
|
|
|
Noncontrolling interest contribution
(b)
|
|
|
(9,529
|
)
|
|
Net cash received
|
|
|
3,829
|
|
|
|
|
|
|
|
|
Fair value of our majority interest in investment
|
|
|
104,876
|
|
|
Carrying value of previously held equity investment
|
|
|
(118,727
|
)
|
|
|
|
|
|
|
|
Loss on change in control of interest
|
|
$
|
(13,851
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
insurance receivables of $29.4 million related to the damage caused by Hurricane Irma, which excludes remediation costs of $1.4 million noted
below.
-
(b)
-
Includes
a non-cash contribution of $5.5 million from the joint-venture partner.
Subsequent
to restructuring, and through December 31, 2017, we incurred additional costs of $1.4 million related to remediation work at the hotel, which is covered by our
insurance policy. In addition, we recognized $2.7 million in costs related to our insurance adjuster, which is recorded within Other income and (expenses) on our consolidated financial
statements. As of December 31, 2017, insurance receivables outstanding relating to the hurricane damage were $30.8 million, which is included in Other assets, net and represents our
estimate of the net proceeds for damages to be received under our insurance policy related to this property.
We
are still assessing the impact of the hurricane to this hotel, and the final damages incurred could vary significantly from our estimate and additional remediation work may be
performed. Any changes in estimates for property damage will be recorded in the periods in which they were determined and any additional work will be recorded in the periods in which it is performed.
Acquisitions of Operating Real Estate During 2016
In 2013, we acquired a 45% equity interest and 40% indirect economic interest in Madison Storage NYC, LLC and Veritas Group
IX-NYC, LLC, which were previously accounted for under the equity method of accounting and included in Equity investments in real estate in the consolidated financial statements. On
April 11, 2016, we acquired the remaining 15% controlling interest in these entities at a total cost of $22.0 million and, as a result, gained 100% of the economic interest and
consolidated this
32
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Real Estate, Operating Real Estate, and Assets Held for Sale (Continued)
investment.
In connection with this business combination, we expensed acquisition-related costs and fees of $3.7 million, which are included in Acquisition expenses in the consolidated
financial statements. Due to the change in control resulting from the acquisition of this controlling interest, we accounted for this acquisition using the purchase method of accounting. We recorded a
non-cash gain on change in control of interests of $49.9 million during 2016, which was the difference between the carrying value of $15.1 million and the fair value of
$64.9 million from our previously held equity interest on April 11, 2016. On October 26, 2016, we exercised our option to purchase the additional 40% indirect economic interest in
Madison Storage NYC, LLC from CIF Storage LLC, and as a result, we directly owned 100% of these four entities at both December 31, 2017 and 2016. There was no cash transfer for
this additional interest as we previously owned this 40% interest indirectly. At December 31, 2016, we had a 45% equity interest and 40% indirect economic interest in the Veritas Group
IX-NYC, LLC property, which was deemed to be a VIE. In March 2017, we exercised our call option on this property, and as a result, we now own 100% of the entity. As such, since that date we no
longer classify this entity as a VIE.
The
following tables present a summary of assets acquired and liabilities assumed, and revenues and earnings thereon since the date of acquisition through December 31, 2016 (in
thousands):
|
|
|
|
|
|
|
|
Madison Storage
NYC, LLC and
Veritas Group
IX-NYC, LLC
|
|
|
Cash consideration
|
|
$
|
11,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired at fair value:
|
|
|
|
|
|
Land
|
|
$
|
26,941
|
|
|
Buildings
|
|
|
109,399
|
|
|
In-place lease intangible assets
|
|
|
9,783
|
|
|
Other assets acquired
|
|
|
1,705
|
|
|
|
|
|
|
|
|
|
|
|
147,828
|
|
|
|
|
|
|
|
|
Liabilities assumed at fair value:
|
|
|
|
|
|
Non-recourse debt, net
|
|
|
(70,578
|
)
|
|
Other liabilities assumed
|
|
|
(831
|
)
|
|
|
|
|
|
|
|
|
|
|
(71,409
|
)
|
|
|
|
|
|
|
|
Total identifiable net assets
|
|
|
76,419
|
|
|
Gain on change in control of interests
|
|
|
(49,922
|
)
|
|
Carrying value of previously held equity investment
|
|
|
(15,134
|
)
|
|
|
|
|
|
|
|
|
|
$
|
11,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Real Estate, Operating Real Estate, and Assets Held for Sale (Continued)
|
|
|
|
|
|
|
|
Madison Storage
NYC, LLC and
Veritas Group
IX-NYC, LLC
|
|
|
|
April 11, 2016
through
December 31,
2016
|
|
|
Revenues
|
|
$
|
7,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
(a)
(b)
|
|
$
|
(9,021
|
)
|
|
|
|
|
|
|
|
Net loss attributable to CPA:17 – Global
(a)
(b)
|
|
$
|
(9,021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Excludes
a $49.9 million gain on change in control of interests.
-
(b)
-
Includes
equity in losses of equity method investments in real estate of $0.4 million.
Pro Forma Financial Information
The following consolidated pro forma financial information presents our financial results as if this business combination had occurred as of
January 1, 2015. The pro forma financial information is not necessarily indicative of what the actual results would have been had the acquisition actually occurred on January 1, 2015,
nor does it purport to represent the results of operations for future periods.
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
2015
|
|
|
Pro forma total revenues
|
|
$
|
442,972
|
|
$
|
437,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income
(a)
|
|
$
|
184,487
|
|
$
|
165,489
|
|
|
Pro forma net income attributable to noncontrolling interests
|
|
|
(38,863
|
)
|
|
(39,915
|
)
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income attributable to CPA:17 – Global
|
|
$
|
145,624
|
|
$
|
125,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted weighted-average shares outstanding
|
|
|
342,147,444
|
|
|
334,468,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro-forma basic and diluted income per share
|
|
$
|
0.43
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Pro
forma net income for 2015 includes a gain on change in control of interests of $49.9 million and transaction costs of $3.7 million as if they were
recognized on January 1, 2015.
Dispositions and Assets Held for Sale
Below is a summary of our properties held for sale (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
2016
|
|
|
Real estate, net
|
|
$
|
—
|
|
$
|
14,850
|
|
|
|
|
|
|
|
|
|
|
|
Assets held for sale
|
|
$
|
—
|
|
$
|
14,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Real Estate, Operating Real Estate, and Assets Held for Sale (Continued)
At
December 31, 2016, we had a property classified as Assets held for sale (
Note 14
). On March 13, 2017, we sold this
property for $14.1 million, net of closing costs. In addition, during the year ended December 31, 2017, we sold three net-leased properties, two of which were accounted for as direct
financing leases (
Note 5
,
Note 14
).
I-drive Property Disposition and I-drive Wheel Restructuring
In 2012, we entered into a contract for the construction of a domestic build-to-suit project with IDL Master Tenant, LLC, a developer,
for the construction of an entertainment complex, which we refer to as the I-drive Property, and an observation wheel, which we refer to as the I-drive Wheel, at the I-drive Property. We had accounted
for the construction of the I-drive Property as Real estate under construction. The funding for the construction of the I-drive Wheel was provided by us in the form of a $50.0 million loan,
which we refer to as the Wheel Loan. Pursuant to the accounting guidance regarding ADC Arrangements, we accounted for the Wheel Loan under the equity method of accounting as the characteristics of the
arrangement with the third-party developer were more similar to a jointly-owned investment or partnership rather than a loan (
Note 6
). During
2015, the construction on both the I-drive Property and the I-drive Wheel were completed and placed into service.
On
March 17, 2017, the developer exercised its purchase option and acquired the I-drive Property for a purchase price of $117.5 million
(
Note 14
). The $60.0 million non-recourse mortgage loan encumbering the I-drive Property was repaid at closing by the buyer
(
Note 10
). In connection with the disposition, we provided seller financing in the form of a $34.0 million mezzanine loan
(
Note 5
), which was considered to be a non-cash investing activity, and the sale was accounted for under the cost recovery method. As a result,
the $2.1 million gain on sale was deferred and will be recognized into income upon recovery of the cost of the property from the future cash proceeds. As a result of the sale of the I-drive
Property, we no longer consider this entity to be a VIE at December 31, 2017.
During
2016, we sold 34 self-storage properties (
Note 14
).
Asset Retirement Obligations
We have recorded asset retirement obligations for the removal of asbestos and environmental waste in connection with certain of our investments.
We estimated the fair value of the asset retirement obligations based on the estimated economic lives of the properties and the estimated removal costs provided by the inspectors. The liability was
discounted using the weighted-average interest rate on the associated fixed-rate mortgage loans at the time the liability was incurred.
35
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Real Estate, Operating Real Estate, and Assets Held for Sale (Continued)
The
following table provides the activity of our asset retirement obligations, which are included in Accounts payable, accrued expenses and other liabilities in the consolidated
financial statements (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
|
|
2017
|
|
2016
|
|
|
Beginning balance
|
|
$
|
17,749
|
|
$
|
25,424
|
|
|
Reductions due to dispositions
|
|
|
(2,038
|
)
|
|
(10,541
|
)
|
|
Accretion expense
(a)
|
|
|
991
|
|
|
1,292
|
|
|
Foreign currency translation adjustments and other
|
|
|
230
|
|
|
(314
|
)
|
|
Additions
|
|
|
—
|
|
|
1,888
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
16,932
|
|
$
|
17,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Accretion
of the liability is included in Property expenses in the consolidated financial statements and recognized over the economic life of the properties.
Note 5. Finance Receivables
Assets representing rights to receive money on demand or at fixed or determinable dates are referred to as finance receivables. Our finance receivables portfolio consists of our Net
investments in direct financing leases and loans receivable. Operating leases are not included in finance receivables as such amounts are not recognized as an asset in the consolidated financial
statements. Our loans receivable are included in Other assets, net in the consolidated financial statements. Earnings from our loans receivable are included in Other interest income in the
consolidated financial statements.
Net Investments in Direct Financing Leases
Net investments in direct financing leases is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
2016
|
|
|
Minimum lease payments receivable
|
|
$
|
732,092
|
|
$
|
790,111
|
|
|
Unguaranteed residual value
|
|
|
188,517
|
|
|
189,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
920,609
|
|
|
979,803
|
|
|
Less: unearned income
|
|
|
(411,381
|
)
|
|
(471,411
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
509,228
|
|
$
|
508,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the year ended December 31, 2017, the U.S. dollar weakened against the euro, as the end-of-period rate for the U.S. dollar in relation to the euro increased by 13.8% to
$1.1993 from $1.0541. As a result, the carrying value of our net investment in direct financing leases increased by $5.7 million from December 31, 2016 to December 31, 2017.
In
June 2017, we sold two net-leased properties located in Lima and Miamisburg, Ohio, back to the tenant, Civitas Media, LLC, for net proceeds of $6.1 million
(
Note 14
). These properties were
36
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 5. Finance Receivables (Continued)
previously
accounted for as direct financing leases. We retained the remaining four net-leased properties leased to this tenant.
On
February 10, 2016, we entered into a net lease financing transaction for an industrial facility in Houston, Texas for $4.2 million. In connection with this business
combination, we expensed acquisition-related costs and fees of $0.3 million, which are included in Acquisition expenses in the consolidated financial statements.
On
April 8, 2016, we entered into a net lease financing transaction for six newspaper printing facilities in Ohio, North Carolina, Pennsylvania, and Missouri for
$12.0 million, including capitalized acquisition-related costs and fees of $0.5 million.
Scheduled Future Minimum Rents
Scheduled future minimum rents, exclusive of renewals, expenses paid by tenants, and future CPI-based adjustments, under non-cancelable direct
financing leases at December 31, 2017 are as follows (in thousands):
|
|
|
|
|
|
|
Years Ending December 31,
|
|
Total
|
|
|
2018
|
|
$
|
58,257
|
|
|
2019
(a)
|
|
|
306,525
|
|
|
2020
|
|
|
31,696
|
|
|
2021
|
|
|
32,072
|
|
|
2022
|
|
|
32,548
|
|
|
Thereafter
|
|
|
270,994
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
732,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
$250.0 million for a bargain purchase option. In January 2018, the tenant, The New York Times Company, exercised its bargain purchase option to
acquire the property for $250.0 million, which is expected to occur on December 1, 2019 (
Note 17
).
Loans Receivable
In connection with the I-drive Property disposition (
Note 4
,
Note 14
), on
March 17, 2017 we provided seller financing in the form of a $34.0 million mezzanine loan
(
Note 4
) to the developer of the I-drive Property, which has an interest rate of 9.0% and is scheduled to mature in April 2019 with an option to
extend to April 2020.
In
addition to the sale of the I-drive Property, we restructured the Wheel Loan (
Note 4
) on March 17, 2017. Under the
original ADC Arrangement that was accounted for as an equity method investment (
Note 6
), (i) we provided all the equity for the initial
construction and carried all of the risk, (ii) all interest and fees on the Wheel Loan were added to the Wheel Loan balance, and (iii) we participated in the residual profits of the
I-drive Wheel post-construction through rents we received pursuant to a ground lease. The original $50.0 million Wheel Loan was restructured as
follows:
-
•
-
$5.0 million of principal was repaid.
37
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 5. Finance Receivables (Continued)
-
•
-
$10.0 million of principal was converted into separate loans to two individuals associated with the developer. These loans are
guaranteed by their 80.0% equity interest in the I-Shops Property that we originally owned and sold back to the developer in 2014. The loans have an interest rate of 6.5% and are scheduled to mature
in December 2018 with an option to extend to April 2020.
-
•
-
We reduced the interest rate to 6.5% on the remaining $35.0 million and extended the maturity in December 2018 with an option to extend
to December 2020.
In
connection with the restructuring of the Wheel Loan, we determined that the loan no longer qualifies as an ADC Arrangement and should no longer be accounted for as an equity
investment since (i) the construction was completed, (ii) the borrowers contributed cash and equity pledges as security, which substantially reduced our risk, and (iii) we no
longer participate in the residual profits through the ground lease rents (pursuant to the aforementioned I-drive Property disposition mentioned in
Note 4
). As a result, we reclassified the
aggregate loan balance noted above to loans receivable, included in Other Assets, net, which was a
non-cash investing activity. A deferred gain of $16.4 million was recorded during the first quarter, which was the difference between the fair value of the remaining $35.0 million loan
and the $18.6 million carrying value of our previously held equity investment on March 17, 2017. The deferred gain related to the restructuring of the Wheel Loan will be recognized into
income upon recovery of the cost of the Wheel Loan from future cash proceeds.
At
December 31, 2017 and 2016, we had five loans and one loan receivable with outstanding balances of $110.5 million and $31.5 million, respectively, which are
included in Other assets, net in the consolidated financial statements.
1185 Broadway LLC
– On January 8, 2015, we provided a mezzanine loan of $30.0 million to a
subsidiary of 1185 Broadway LLC for the development of a hotel on a parcel of land in New York, New York. The mezzanine loan is collateralized by an equity interest in a subsidiary of 1185
Broadway LLC. It has an interest rate of 10% and is scheduled to mature on April 3, 2018. The agreement also contains rights to certain fees upon maturity and an equity interest in the
underlying entity that has been recorded in Other assets, net in the consolidated financial statements. At December 31, 2017, the balance of the loan receivable including interest thereon was
$31.5 million.
Credit Quality of Finance Receivables
We generally seek investments in facilities that we believe are critical to a tenant's business and have a low risk of tenant default. At
December 31, 2017, we had $1.1 million of finance receivable balances that were past due, of which we established an allowance for credit losses of $0.7 million. At
December 31, 2016, we did not have any finance receivable balances that were past due. Additionally, there were no modifications of finance receivables during the years ended
December 31, 2017 and 2016. We evaluate the credit quality of our finance receivables utilizing an internal five-point credit rating scale, with one representing the highest credit quality and
five representing the lowest. The credit quality evaluation of our finance receivables was last updated in the fourth quarter of 2017.
38
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 5. Finance Receivables (Continued)
A
summary of our finance receivables by internal credit quality rating is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Tenants /
Obligors
at December 31,
|
|
Carrying Value at December 31,
|
|
|
Internal Credit
Quality Indicator
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
1
|
|
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
2
|
|
|
2
|
|
|
2
|
|
|
62,744
|
|
|
61,949
|
|
|
3
|
|
|
8
|
|
|
9
|
|
|
379,621
|
|
|
412,075
|
|
|
4
|
|
|
8
|
|
|
5
|
|
|
165,413
|
|
|
65,868
|
|
|
5
|
|
|
1
|
|
|
—
|
|
|
11,950
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
619,728
|
|
$
|
539,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 6. Equity Investments in Real Estate
We own equity interests in net-leased properties that are generally leased to companies through noncontrolling interests (i) in partnerships and limited liability companies that
we do not control but over which we exercise significant influence or (ii) as tenants-in-common subject to common control. Generally, the underlying investments are jointly owned with
affiliates. We account for these
investments under the equity method of accounting. Earnings for each investment are recognized in accordance with each respective investment agreement and, where applicable, based upon an allocation
of the investment's net assets at book value as if the investment were hypothetically liquidated at the end of each reporting period.
As
required by current authoritative accounting guidance, we periodically compare an investment's carrying value to its estimated fair value and recognize an impairment charge to the
extent that the carrying value exceeds fair value and such decline is determined to be other than temporary. Additionally, we provide funding to developers for ADC Arrangements, under which we have
provided loans to third-party developers of real estate projects, which we account for as equity investments as the characteristics of the arrangement with the third-party developers are more similar
to a jointly owned investment or partnership rather than a loan.
39
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6. Equity Investments in Real Estate (Continued)
The
following table presents Equity in earnings of equity method investments in real estate, which represents our proportionate share of the income or losses of these investments, as
well as amortization of basis differences related to purchase accounting adjustments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Equity Earnings from Equity Investments:
|
|
|
|
|
|
|
|
|
|
|
|
Net Lease
(a)
|
|
$
|
9,369
|
|
$
|
15,271
|
|
$
|
21,692
|
|
|
Self Storage
|
|
|
—
|
|
|
(394
|
)
|
|
(1,703
|
)
|
|
All Other
(b)
|
|
|
(6,274
|
)
|
|
(5,010
|
)
|
|
(1,762
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,095
|
|
|
9,867
|
|
|
18,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of Basis Differences on Equity Investments:
|
|
|
|
|
|
|
|
|
|
|
|
Net Lease
|
|
|
(2,260
|
)
|
|
(3,077
|
)
|
|
(2,263
|
)
|
|
Self Storage
|
|
|
—
|
|
|
(39
|
)
|
|
(155
|
)
|
|
All Other
|
|
|
(574
|
)
|
|
(3,489
|
)
|
|
(1,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,834
|
)
|
|
(6,605
|
)
|
|
(3,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of equity method investments in real estate
|
|
$
|
261
|
|
$
|
3,262
|
|
$
|
14,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
For
the years ended December 31, 2017 and 2016, amounts include impairment charges of $10.6 million and $1.9 million, respectively, related to
certain of our equity investments (
Note 8
).
-
(b)
-
As
of December 31, 2016, the carrying value of one of our investments was reduced to reflect a $22.8 million impairment of goodwill at the investee
level to its fair value (
Note 8
). In addition, we recorded $10.6 million of income recognized in conjunction with the termination of a
management agreement and a $10.6 million gain representing the portion of losses guaranteed by the previous management company under the terms of the management agreement.
40
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6. Equity Investments in Real Estate (Continued)
The
following table sets forth our ownership interests in our equity method investments in real estate and their respective carrying values, along with those ADC Arrangements that are
recorded as equity investments (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Value at
December 31,
|
|
|
|
|
|
Ownership Interest at
December 31, 2017
|
|
|
Lessee/Equity Investee
|
|
Co-owner
|
|
2017
|
|
2016
|
|
|
Net Lease:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hellweg Die Profi-Baumärkte GmbH & Co. KG (referred to as Hellweg 2)
(a)
(b)
(c)
|
|
WPC
|
|
|
37
|
%
|
$
|
109,933
|
|
$
|
10,125
|
|
|
Kesko Senukai
(a)
(d)
|
|
Third Party
|
|
|
70
|
%
|
|
58,136
|
|
|
—
|
|
|
Jumbo Logistiek Vastgoed B.V.
(a)
(e)
|
|
WPC
|
|
|
85
|
%
|
|
55,162
|
|
|
54,621
|
|
|
U-Haul Moving Partners, Inc. and Mercury Partners, LP
(b)
|
|
WPC
|
|
|
12
|
%
|
|
35,897
|
|
|
37,601
|
|
|
Bank Pekao S.A.
(a)
(b)
|
|
CPA:18 – Global
|
|
|
50
|
%
|
|
25,582
|
|
|
23,025
|
|
|
BPS Nevada, LLC
(b)
(f)
|
|
Third Party
|
|
|
15
|
%
|
|
23,455
|
|
|
23,036
|
|
|
State Farm Automobile Co.
(b)
|
|
CPA:18 – Global
|
|
|
50
|
%
|
|
16,072
|
|
|
17,603
|
|
|
Berry Global Inc.
(b)
|
|
WPC
|
|
|
50
|
%
|
|
14,476
|
|
|
14,974
|
|
|
Tesco Global Aruhazak Zrt.
(a)
(b)
(g)
|
|
WPC
|
|
|
49
|
%
|
|
10,707
|
|
|
10,807
|
|
|
Eroski Sociedad Cooperativa – Mallorca
(a)
|
|
WPC
|
|
|
30
|
%
|
|
7,629
|
|
|
6,576
|
|
|
Apply Sørco AS (referred to as Apply)
(a)
(h)
|
|
CPA:18 – Global
|
|
|
49
|
%
|
|
6,298
|
|
|
12,528
|
|
|
Dick's Sporting Goods, Inc.
(b)
|
|
WPC
|
|
|
45
|
%
|
|
3,750
|
|
|
4,367
|
|
|
Konzum d.d. (referred to as Agrokor)
(a)
(b)
(i)
|
|
CPA:18 – Global
|
|
|
20
|
%
|
|
3,433
|
|
|
7,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
370,530
|
|
|
222,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BG LLH, LLC
(b)
(f)
|
|
Third Party
|
|
|
6
|
%
|
|
38,724
|
|
|
36,756
|
|
|
Shelborne Operating Associates, LLC (referred to as Shelborne)
(b)
(f)
(j)
(k)
(l)
|
|
Third Party
|
|
|
N/A
|
|
|
—
|
|
|
127,424
|
|
|
IDL Wheel Tenant, LLC
(m)
|
|
Third Party
|
|
|
N/A
|
|
|
—
|
|
|
37,124
|
|
|
BPS Nevada, LLC – Preferred Equity
(b)
(n)
|
|
Third Party
|
|
|
N/A
|
|
|
—
|
|
|
27,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,724
|
|
|
228,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
409,254
|
|
$
|
451,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
The
carrying value of this investment is affected by the impact of fluctuations in the exchange rate of the applicable foreign currency.
-
(b)
-
This
investment is a VIE.
-
(c)
-
In
January 2017, our Hellweg 2 jointly owned equity investment repaid non-recourse mortgage loans with an aggregate principal balance of approximately
$243.8 million, of which we contributed
41
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6. Equity Investments in Real Estate (Continued)
$90.3 million
(amounts are based on the exchange rate of the euro as of the date of repayment). This contribution was accounted for as a capital contribution to equity investments in real
estate.
-
(d)
-
On
May 23, 2017, we entered into a joint venture investment to acquire a 70% interest in a real estate portfolio for a total cost of $141.5 million,
which excludes our portion of mortgage financing totaling $88.0 million (dollar amounts are based on the exchange rate of the euro on the date of acquisition). In addition, we recorded
$7.2 million of basis difference, which was primarily attributable to acquisition costs. This was structured as a sale-leaseback transaction in which the tenant retained the remaining 30%
ownership interest in the real estate portfolio. The portfolio includes 18 retail stores and one warehouse collectively located in Lithuania, Latvia, and Estonia, which we will account for as an
equity method investment as the minority shareholders have significant influence. All major decisions that significantly impact the economic performance of the entity require a unanimous decision vote
from all of the shareholders and, therefore, we do not have control over this investment.
-
(e)
-
This
investment represents a tenancy-in-common interest, whereby the property is encumbered by debt for which we are jointly and severally liable. The co-obligor is
WPC and the amount due under the arrangement was approximately $76.2 million at December 31, 2017. Of this amount, $64.8 million represents the amount we are liable for and is
included within the carrying value of this investment at December 31, 2017.
-
(f)
-
This
investment is reported using the hypothetical liquidation at book value model, which may be different then pro rata ownership percentages, primarily due to the
complex capital structures of the partnership agreements.
-
(g)
-
On
July 29, 2016, this investment refinanced a non-recourse mortgage loan that had an outstanding balance of $33.8 million with new financing of
$34.6 million, of which our proportionate share was $17.0 million. The previous loan had an interest rate of 5.9% and a maturity date of July 31, 2016, while the new loan has an
interest rate of Euro Interbank Offered Rate plus a margin of 3.3% and a term of five years.
-
(h)
-
During
the year ended December 31, 2017, we recognized an impairment charge of $6.3 million related to our Apply equity method investment
(
Note 8
).
-
(i)
-
During
the year ended December 31, 2017, we recognized an impairment charge of $4.3 million related to our Agrokor equity method investment
(
Note 8
).
-
(j)
-
On
October 3, 2017, we restructured our Shelborne hotel investment by converting the underlying loan to equity when each of the partners transferred their
equity interest in the investment to us in full satisfaction for the loan. We then transferred a 4.5% noncontrolling interest back to one of the original joint venture partners for a cash contribution
of $4.0 million. As a result, we obtained approximately 95.5% (increased from 33%) of the interest in the entity. As a result of the restructuring, we determined that this investment should no
longer be accounted for as an ADC Arrangement (
Note 4
) and we therefore consolidate this investment. During the year ended December 31,
2017, we recognized a loss on change in control of interests of $13.9 million as a result of this restructuring.
-
(k)
-
During
the year ended December 31, 2017, as a result of Hurricane Irma and prior to the restructuring of this investment, we incurred damage at the Shelborne
hotel, which is currently
42
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6. Equity Investments in Real Estate (Continued)
expected
to be covered by insurance proceeds after the estimated deductible is paid (
Note 4
). We recognized this charge within Equity in earnings
of equity method investments in real estate on our consolidated financial statements.
-
(l)
-
The
carrying value as of December 31, 2016 includes a $22.8 million impairment charge to reduce goodwill at the investee level to its fair value,
partially offset by $10.6 million of income recognized in conjunction with the termination of a management agreement and a $10.6 million gain representing the portion of losses
guaranteed by the previous management company under the terms of the management agreement.
-
(m)
-
As
of December 31, 2016, the carrying value included our investment in the Wheel Loan (
Note 5
) that was
considered to be a VIE and was reported using the hypothetical liquidation at book value model. The Wheel Loan was restructured on March 17, 2017 and, as a result, we have reclassified the
equity investment to a loan receivable, included in Other assets, net and no longer consider this to be a VIE.
-
(n)
-
This
investment represents a preferred equity interest, with a preferred rate of return of 12%. On May 19, 2017, we received the full repayment of our
preferred equity interest totaling $27.0 million; therefore, the preferred equity interest is now retired.
The
following tables present combined summarized investee financial information of our equity method investment properties. Amounts provided are the total amounts attributable to the
investment properties and do not represent our proportionate share (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31 or September 30
(as applicable),
(a)
(b)
(c)
|
|
|
|
2017
|
|
2016
|
|
|
Net investments in real estate
(d)
|
|
$
|
3,850,204
|
|
$
|
3,569,612
|
|
|
Other assets
(d)
|
|
|
595,352
|
|
|
497,198
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,445,556
|
|
|
4,066,810
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
2,584,248
|
|
|
2,619,153
|
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
374,040
|
|
|
447,944
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,958,288
|
|
|
3,067,097
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
$
|
1,487,268
|
|
$
|
999,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31 or
September 30 (as applicable),
(a)
(b)
(c)
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Revenues
|
|
$
|
888,159
|
|
$
|
815,161
|
|
$
|
779,875
|
|
|
Expenses
|
|
|
927,121
|
|
|
865,706
|
|
|
791,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(38,962
|
)
|
$
|
(50,545
|
)
|
$
|
(11,349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
We
record our investments in BPS Nevada, LLC and BG LLH, LLC on a one quarter lag. Therefore, amounts in our financial statements for the years ended
December 31, 2017, 2016, and
43
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6. Equity Investments in Real Estate (Continued)
2015
are based on balances and results of operations from the aforementioned investments is as of and for the 12 months ended September 30, 2017, 2016, and 2015, respectively.
-
(b)
-
Our
investment in IDL Wheel Tenant, LLC was restructured on March 17, 2017, and as a result, we no longer account for this investment as an equity
method investment as of that date. Prior to the restructuring, we recorded this investment on a one quarter lag. Therefore, amounts in our financial statements for the years ended December 31,
2016 and 2015 are based on balances and results of operations from IDL Wheel Tenant, LLC as of and for the 12 months ended September 30, 2016 and 2015, respectively. Therefore,
amounts in our financial statements for the year ended December 31, 2017, only include operations from this investment for the three months ended December 31, 2016.
-
(c)
-
Our
investment in Shelborne hotel was restructured on October 3, 2017, and as a result, we no longer account for this investment as an equity method
investment as of that date. Prior to the restructuring, we recorded this investment on a one quarter lag. Therefore, amounts in our financial statements for the years ended December 31, 2016
and 2015 are based on balances and results of operations from Shelborne hotel as of and for the 12 months ended September 30, 2016 and 2015, respectively. Therefore, amounts for the year
ended December 31, 2017 in the table above, only include operations from this investment for the 12 months ended September 30, 2017.
-
(d)
-
In
the second quarter of 2017, we reclassified certain line items in our consolidated balance sheets. As a result, amounts for certain line items included within Net
investments in real estate as of December 31, 2016 have been revised to the current year presentation (
Note 2
).
Aggregate
distributions from our interests in other unconsolidated real estate investments were $54.5 million, $57.8 million, and $52.1 million for the years ended
December 31, 2017, 2016, and 2015, respectively. At December 31, 2017 and 2016, the unamortized basis differences on our equity investments were $26.3 million and
$19.1 million, respectively.
Note 7. Intangible Assets and Liabilities
In-place lease intangibles are included in In-place lease intangible assets in the consolidated financial statements. Above-market rent and below-market ground lease and other (as
lessee) intangibles are included in Other intangible assets in the consolidated financial statements. Goodwill is included in Other assets, net in the consolidated financial statements. Below-market
rent and above-market ground lease (as lessor) intangibles are included in Below-market rent and other intangible liabilities, net in the consolidated financial statements.
In
connection with our investment activity during 2017 (
Note 4
), we recorded an In-place lease intangible of $2.0 million,
which has an expected life of 20 years.
44
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 7. Intangible Assets and Liabilities (Continued)
Intangible assets and liabilities are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
|
|
|
Amortization
Period
(Years)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
|
Finite-Lived Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-place lease
|
|
4 - 53
|
|
$
|
629,961
|
|
$
|
(213,641
|
)
|
$
|
416,320
|
|
$
|
620,149
|
|
$
|
(181,598
|
)
|
$
|
438,551
|
|
|
Above-market rent
|
|
5 - 40
|
|
|
98,162
|
|
|
(31,533
|
)
|
|
66,629
|
|
|
91,895
|
|
|
(24,599
|
)
|
|
67,296
|
|
|
Below-market ground leases and other
|
|
55 - 94
|
|
|
12,842
|
|
|
(726
|
)
|
|
12,116
|
|
|
12,023
|
|
|
(508
|
)
|
|
11,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
740,965
|
|
|
(245,900
|
)
|
|
495,065
|
|
|
724,067
|
|
|
(206,705
|
)
|
|
517,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-Lived Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
304
|
|
|
—
|
|
|
304
|
|
|
304
|
|
|
—
|
|
|
304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
|
|
$
|
741,269
|
|
$
|
(245,900
|
)
|
$
|
495,369
|
|
$
|
724,371
|
|
$
|
(206,705
|
)
|
$
|
517,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finite-Lived Intangible Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below-market rent
|
|
7 - 53
|
|
$
|
(82,259
|
)
|
$
|
22,121
|
|
$
|
(60,138
|
)
|
$
|
(120,725
|
)
|
$
|
39,025
|
|
$
|
(81,700
|
)
|
|
Above-market ground lease
|
|
49 - 88
|
|
|
(1,145
|
)
|
|
61
|
|
|
(1,084
|
)
|
|
(1,145
|
)
|
|
46
|
|
|
(1,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible liabilities
|
|
|
|
$
|
(83,404
|
)
|
$
|
22,182
|
|
$
|
(61,222
|
)
|
$
|
(121,870
|
)
|
$
|
39,071
|
|
$
|
(82,799
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of below-market rent and above-market rent intangibles is recorded as an adjustment to Rental income; amortization of below-market ground lease and other and above-market
ground lease intangibles is included in Property expenses; and amortization of in-place lease intangibles is included in Depreciation and amortization expense on our consolidated financial statements.
Amortization of below- and above-market rent intangibles, including the effect of foreign currency translation, increased Rental income by $17.8 million, $14.2 million and
$3.6 million for the years ended December 31, 2017, 2016, and 2015, respectively. The year ended December 31, 2017 includes the impact of a below-market rent intangible liability
write off of $15.7 million recognized in conjunction with the KBR lease modification (
Note 14
) that occurred during the current year. Net
amortization expense of all of our other net intangible assets totaled $43.7 million, $51.2 million, and $40.3 million for the years ended December 31, 2017, 2016, and
2015, respectively.
We
performed our annual test for impairment of goodwill during the fourth quarter of 2017 and no impairment was indicated. Goodwill resides within our Net Lease segment, which is also
the reporting unit for goodwill impairment testing.
45
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 7. Intangible Assets and Liabilities (Continued)
Based
on the intangible assets and liabilities recorded at December 31, 2017, scheduled annual net amortization of intangibles for the next five calendar years and thereafter is
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
|
Net Decrease
(Increase) in
Rental Income
|
|
Increase to
Amortization/
Property
Expenses
|
|
Net
|
|
|
2018
|
|
$
|
1,374
|
|
$
|
37,007
|
|
$
|
38,381
|
|
|
2019
|
|
|
1,374
|
|
|
36,740
|
|
|
38,114
|
|
|
2020
|
|
|
1,367
|
|
|
36,563
|
|
|
37,930
|
|
|
2021
|
|
|
1,369
|
|
|
36,435
|
|
|
37,804
|
|
|
2022
|
|
|
1,375
|
|
|
36,141
|
|
|
37,516
|
|
|
Thereafter
|
|
|
(368
|
)
|
|
244,466
|
|
|
244,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,491
|
|
$
|
427,352
|
|
$
|
433,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 8. Fair Value Measurements
The fair value of an asset is defined as the exit price, which is the amount that would either be received when an asset is sold or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The guidance establishes a three-tier fair value hierarchy based on the inputs used in measuring fair value. These tiers are: Level 1, for
which quoted market prices for identical instruments are available in active markets, such as money market funds, equity securities, and U.S. Treasury securities; Level 2, for which there are
inputs other than quoted prices included within Level 1 that are observable for the instrument, such as certain derivative instruments including interest rate caps, interest rate swaps, foreign
currency forward contracts, and foreign currency collars; and Level 3, for securities and other derivative assets that do not fall into Level 1 or Level 2 and for which little or
no market data exists, therefore requiring us to develop our own assumptions.
Items Measured at Fair Value on a Recurring Basis
The methods and assumptions described below were used to estimate the fair value of each class of financial instrument. For significant
Level 3 items, we have also provided the unobservable inputs along with their weighted-average ranges.
Derivative Assets
– Our derivative assets, which are included in Other assets, net in the consolidated financial
statements, are comprised of interest rate caps, interest rate swaps, foreign currency forward contracts, stock warrants, and foreign currency collars
(
Note 9
). The interest rate caps, interest rate swaps, foreign currency forward contracts, and foreign currency collars were measured at fair
value using readily observable market inputs, such as quotations on interest rates, and were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank
counterparties that are not traded in an active market. The stock warrants were measured at fair value using internal valuation models that incorporated market inputs and our own assumptions about
future cash flows. We classified these assets as Level 3 because they are not traded in an active market.
Derivative Liabilities
– Our derivative liabilities, which are included in Accounts payable, accrued expenses
and other liabilities in the consolidated financial statements, are comprised of interest rate swaps and foreign currency collars (
Note 9
). These
derivative instruments were measured at fair value
46
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 8. Fair Value Measurements (Continued)
using
readily observable market inputs, such as quotations on interest rates, and were classified as Level 2 because they are custom, over-the-counter contracts with various bank counterparties
that are not traded in an active market.
We
did not have any transfers into or out of Level 1, Level 2, and Level 3 measurements during the years ended December 31, 2017, 2016, or 2015. Gains and
losses (realized and unrealized) recognized on items measured at fair value on a recurring basis included in earnings are reported within Other income and (expenses) on our consolidated financial
statements.
Our
other financial instruments had the following carrying values and fair values as of the dates shown (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
|
|
|
Level
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
|
Mortgage debt, net
(a)
(b)
|
|
|
3
|
|
$
|
1,849,459
|
|
$
|
1,864,043
|
|
$
|
2,022,250
|
|
$
|
2,053,353
|
|
|
Loans receivable
(b)
|
|
|
3
|
|
|
110,500
|
|
|
110,500
|
|
|
31,500
|
|
|
31,500
|
|
|
CMBS
(c)
|
|
|
3
|
|
|
6,548
|
|
|
7,237
|
|
|
4,027
|
|
|
7,470
|
|
-
(a)
-
The
carrying value of Mortgage debt, net includes unamortized deferred financing costs of $7.9 million and $9.3 million at December 31, 2017 and
2016, respectively.
-
(b)
-
We
determined the estimated fair value of these financial instruments using a discounted cash flow model that estimates the present value of the future loan payments
by discounting such payments at current estimated market interest rates. The estimated market interest rates take into account interest rate risk and the value of the underlying collateral, which
includes quality of the collateral, the credit quality of the tenant/obligor, certain guarantees, and the time until maturity.
-
(c)
-
At
December 31, 2017 and 2016, we had two and three separate tranches of CMBS investments, respectively. The carrying value of our CMBS is inclusive of
impairment charges for the years ended December 31, 2017 and 2016, as well as accretion related to the estimated cash flows expected to be received.
We
estimated that our other financial assets and liabilities (excluding net investments in direct financing leases) had fair values that approximated their carrying values at both
December 31, 2017 and 2016.
Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges)
We periodically assess whether there are any indicators that the value of our real estate investments may be impaired or that their carrying
value may not be recoverable. For investments in real estate held for use for which an impairment indicator is identified, we follow a two-step process to determine whether the investment is impaired
and to determine the amount of the charge. First, we compare the carrying value of the property's asset group to the future undiscounted net cash flows that we expect the property's asset group will
generate, including any estimated proceeds from the eventual sale of the property's asset group. If this amount is less than the carrying value, the property's asset group is considered to be not
recoverable. We then measure the impairment charge as the excess of the carrying value of the property's asset group over the estimated fair value of the property's asset group, which is primarily
determined using market information such as recent comparable sales, broker quotes,
47
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 8. Fair Value Measurements (Continued)
or
third-party appraisals. If relevant market information is not available or is not deemed appropriate, we perform a future net cash flow analysis, discounted for inherent risk associated with each
investment. We determined that the significant inputs used to value these investments fall within Level 3
for fair value reporting. As a result of our assessments, we calculated impairment charges based on market conditions and assumptions. The valuation of real estate is subject to significant judgment
and actual results may differ materially if market conditions or the underlying assumptions change.
The
following table presents information about the assets for which we recorded an impairment charge that was measured at fair value on a non-recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
|
Fair Value
Measurements
|
|
Total
Impairment
Charges
|
|
Fair Value
Measurements
|
|
Total
Impairment
Charges
|
|
Fair Value
Measurements
|
|
Total
Impairment
Charges
|
|
|
Impairment Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investments in real estate
|
|
$
|
10,242
|
|
$
|
10,576
|
|
$
|
12,528
|
|
$
|
1,919
|
|
$
|
—
|
|
$
|
—
|
|
|
Real estate
|
|
|
7,525
|
|
|
8,276
|
|
|
14,850
|
|
|
29,183
|
|
|
—
|
|
|
—
|
|
|
CMBS
|
|
|
258
|
|
|
683
|
|
|
400
|
|
|
523
|
|
|
1,478
|
|
|
1,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,535
|
|
|
|
|
$
|
31,625
|
|
|
|
|
$
|
1,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
charges, and their related triggering events and fair value measurements, recognized during 2017, 2016, and 2015 were as follows:
Equity Investments in Real Estate
During the year ended December 31, 2017, we recognized an other-than-temporary impairment charge of $6.3 million on our Apply
Sørco AS investment (
Note 6
), to reduce the carrying value of a property held by the jointly owned investment to its estimated fair
value due to a lease restructuring with the tenant that was executed in September 2017. The fair value measurement related to the impairment charge was determined by estimating discounted cash flows
using three significant unobservable inputs, which are the cash flow discount rate, the residual discount rate, and the residual capitalization rate equal to 9.3%, 7.8%, and 6.8%, respectively.
Significant increases or decreases to these inputs in isolation would result in a significant change in the fair value measurement.
During
the year ended December 31, 2017, we recognized an other-than-temporary impairment charge of $4.3 million on our Agrokor investment, to reduce the carrying value of
a property held by the jointly owned investment to its estimated fair value due to a decline in market conditions (
Note 6
). The fair value
measurement related to the impairment charge was determined by estimating discounted cash flows using three significant unobservable inputs, which are the cash flow discount rate, the residual
discount rate, and the residual capitalization rate equal to 12.4%, 10.9%, and 10.4%, respectively. Significant increases or decreases to these inputs in isolation would result in a significant change
in the fair value measurement.
During
the year ended December 31, 2016, we recognized an other-than-temporary impairment charge of $1.9 million on our Agrokor equity investment, to reduce the carrying
value of a property
48
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 8. Fair Value Measurements (Continued)
held
by the jointly owned investment to its estimated fair value due to a decline in market conditions (
Note 6
). The fair value measurement
related to the impairment charge was determined by estimating discounted cash flows using three significant unobservable inputs, which are the cash flow discount rate, the residual discount rate, and
the residual capitalization rate equal to 8.8%, 7.8%, and 6.8%, respectively. Significant increases or decreases to these inputs in isolation would result in a significant change in the fair value
measurement.
During
the year ended December 31, 2016, our Shelborne equity method investment recorded a $22.8 million impairment charge to reduce goodwill at the investee level to its
fair value (
Note 6
). The fair value measurement related to the impairment charge was determined by estimating discounted cash flows using three
significant unobservable inputs, which are the cash flow discount rate, the residual discount rate, and the residual capitalization rate equal to 8.0%, 8.0%, and 6.8%, respectively. Significant
increases or decreases to these inputs in isolation would result in a significant change in the fair value measurement.
Real Estate
During the year ended December 31, 2017, the Croatian government passed a special law assisting the restructuring of companies considered
of systematic significance in Croatia. This law directly impacts our Agrokor tenant, which is currently experiencing financial distress and recently received a credit downgrade from both
Standard & Poor's and Moody's. As a result of this information, we recognized an impairment charge of $3.8 million on a property within the Agrokor portfolio (amount is based on the
exchange rate of the euro at the date of impairment). The fair value
of the property after the impairment charge approximated $2.8 million. The fair value measurement related to the impairment charge were determined by estimating discounted cash flows using
three significant unobservable inputs, which are the cash flow discount rate, the residual discount rate , and the residual capitalization rate equal to 11.8%, 10.5%, and 9.8%, respectively.
Significant increases or decreases to these inputs in isolation would result in a significant change in the fair value measurement.
During
the year ended December 31, 2017, we were notified by the tenant currently occupying a property that we own with an affiliate, located in Waldaschaff, Germany, that the
tenant will not be renewing its lease. As a result of this information, and with our expectation that we will not be able to replace the tenant upon the lease expiration primarily due to, among other
things, the remote location of the facility and certain environmental concerns, we recognized an impairment charge of $4.5 million, which included $1.5 million attributed to a
noncontrolling interest (amounts are based on the exchange rate of the euro at the date of impairment). The fair value of the property after the impairment charge approximated $4.7 million. The
fair value measurement related to the impairment charge was determined by estimating discounted cash flows using a cash flow discount rate of 9.75%, which is considered a significant unobservable
input. Significant increases or decreases to this input would result in a significant change in the fair value measurement.
49
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 8. Fair Value Measurements (Continued)
During the year ended December 31, 2016, as a result of entering into a purchase agreement to sell one of our investments located in Houston Texas, which was classified as held
for sale at that date and sold in the first quarter of 2017, we recognized an impairment charge of $29.2 million in order to reduce the carrying value of the property to its estimated fair
value. The fair value measurements for the property approximated its estimated selling price, less estimated cost to sell. We used available information, including third-party broker information and
internal discounted cash flow models (Level 3 inputs), in determining the fair value of this property.
CMBS
During the years ended December 31, 2017, 2016, and 2015, we incurred other-than-temporary impairment charges on certain tranches in our
CMBS portfolio totaling $0.7 million, $0.5 million, and $1.0 million, respectively, to reduce their carrying values to their estimated fair values as a result of non-performance.
The fair value measurements related to the impairment charges were derived from third-party appraisals, which were based on input from dealers, buyers, and other market participants, as well as
updates on prepayments, losses, and delinquencies within our CMBS portfolio.
Note 9. Risk Management and Use of Derivative Financial Instruments
Risk Management
In the normal course of our ongoing business operations, we encounter economic risk. There are four main components of economic risk that impact
us: interest rate risk, credit risk, market risk, and foreign currency risk. We are primarily subject to interest rate risk on our interest-bearing liabilities, including the Senior Credit Facility
(
Note 10
). Credit risk is the risk of default on our operations and our tenants' inability or unwillingness to make contractually required
payments. Market risk includes changes in the value of our properties and related loans, as well as changes in the value of our other investments due to changes in interest rates or other market
factors. We own investments in Europe and Asia and are subject to risks associated with fluctuating foreign currency exchange rates.
Derivative Financial Instruments
When we use derivative instruments, it is generally to reduce our exposure to fluctuations in interest rates and foreign currency exchange rate
movements. We have not entered into, and do not plan to enter into, financial instruments for trading or speculative purposes. In addition to entering into derivative instruments on our own behalf, we
may also be a party to derivative instruments that are embedded in other contracts and we may be granted common stock warrants by lessees when structuring lease transactions, which are considered to
be derivative instruments. The primary risks related to our use of derivative instruments include a counterparty to a hedging
arrangement defaulting on its obligation and a downgrade in the credit quality of a counterparty to such an extent that our ability to sell or assign our side of the hedging transaction is impaired.
While we seek to mitigate these risks by entering into hedging arrangements with large financial institutions that we deem to be creditworthy, it is possible that our hedging transactions, which are
intended to limit losses, could adversely affect our earnings. Furthermore, if we terminate a hedging arrangement, we may be obligated to pay certain costs, such as transaction or breakage fees. We
have established policies and procedures for risk assessment and the approval, reporting, and monitoring of derivative financial instrument activities.
50
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9. Risk Management and Use of Derivative Financial Instruments (Continued)
We
measure derivative instruments at fair value and record them as assets or liabilities, depending on our rights or obligations under the applicable derivative contract. Derivatives
that are not designated as hedges must be adjusted to fair value through earnings. For a derivative designated, and that qualified, as a cash flow hedge, the effective portion of the change in fair
value of the derivative is recognized in Other comprehensive income (loss) until the hedged item is recognized in earnings. For a derivative designated, and that qualified, as a net investment hedge,
the effective portion of the change in the fair value and/or the net settlement of the derivative is reported in Other comprehensive income (loss) as part of the cumulative foreign currency
translation adjustment. The ineffective portion of the change in fair value of any derivative is immediately recognized in earnings.
All
derivative transactions with an individual counterparty are governed by a master International Swap and Derivatives Association agreement, which can be considered as a master netting
arrangement; however, we report all our derivative instruments on a gross basis on our consolidated financial statements. At both December 31, 2017 and 2016, no cash collateral had been posted
or received for any of our derivative positions.
The
following table sets forth certain information regarding our derivative instruments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives Fair
Value at
|
|
Liability Derivatives Fair
Value at
|
|
|
Derivatives Designated as
Hedging Instruments
|
|
Balance Sheet Location
|
|
December 31,
2017
|
|
December 31,
2016
|
|
December 31,
2017
|
|
December 31,
2016
|
|
|
Foreign currency forward contracts
|
|
Other assets, net
|
|
$
|
14,382
|
|
$
|
38,735
|
|
$
|
—
|
|
$
|
—
|
|
|
Interest rate swaps
|
|
Other assets, net
|
|
|
314
|
|
|
54
|
|
|
—
|
|
|
—
|
|
|
Interest rate caps
|
|
Other assets, net
|
|
|
201
|
|
|
79
|
|
|
—
|
|
|
—
|
|
|
Foreign currency collars
|
|
Other assets, net
|
|
|
—
|
|
|
522
|
|
|
—
|
|
|
—
|
|
|
Interest rate swaps
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
—
|
|
|
—
|
|
|
(3,852
|
)
|
|
(6,011
|
)
|
|
Foreign currency collars
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
—
|
|
|
—
|
|
|
(1,431
|
)
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as
Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock warrants
|
|
Other assets, net
|
|
|
1,815
|
|
|
1,848
|
|
|
—
|
|
|
—
|
|
|
Foreign currency forward contracts
|
|
Other assets, net
|
|
|
86
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Swaption
|
|
Other assets, net
|
|
|
—
|
|
|
264
|
|
|
—
|
|
|
—
|
|
|
Interest rate swap
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
—
|
|
|
—
|
|
|
(128
|
)
|
|
(173
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
|
|
$
|
16,798
|
|
$
|
41,502
|
|
$
|
(5,411
|
)
|
$
|
(6,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9. Risk Management and Use of Derivative Financial Instruments (Continued)
The
following tables present the impact of our derivative instruments in the consolidated financial statements (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (Loss) Gain Recognized
on Derivatives in Other
Comprehensive Income (Loss)
(Effective Portion)
(a)
|
|
|
|
Years Ended December 31,
|
|
|
Derivatives in Cash Flow Hedging Relationships
|
|
2017
|
|
2016
|
|
2015
|
|
|
Foreign currency forward contracts
|
|
$
|
(20,620
|
)
|
$
|
(2,224
|
)
|
$
|
18,126
|
|
|
Interest rate swaps
|
|
|
2,385
|
|
|
4,174
|
|
|
2,715
|
|
|
Foreign currency collars
|
|
|
(1,919
|
)
|
|
628
|
|
|
(107
|
)
|
|
Interest rate caps
|
|
|
(509
|
)
|
|
4
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in Net Investment Hedging Relationships
(b)
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
|
(156
|
)
|
|
(241
|
)
|
|
417
|
|
|
Foreign currency collars
|
|
|
(17
|
)
|
|
(5
|
)
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(20,836
|
)
|
$
|
2,336
|
|
$
|
21,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss)
Reclassified from Other
Comprehensive (Loss) Income
into Income (Effective Portion)
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
Location of Gain (Loss)
Reclassified to Income
|
|
|
Derivatives in Cash Flow Hedging Relationships
|
|
2017
|
|
2016
|
|
2015
|
|
|
Foreign currency forward contracts
|
|
Other income and (expenses)
|
|
$
|
7,170
|
|
$
|
7,558
|
|
$
|
8,083
|
|
|
Interest rate swaps
|
|
Interest expense
|
|
|
(2,443
|
)
|
|
(6,339
|
)
|
|
(7,837
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
4,727
|
|
$
|
1,219
|
|
$
|
246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Excludes
net gains of $0.2 million recognized on unconsolidated jointly owned investments for both the years ended December 31, 2017 and 2015 and net
losses of $1.2 million on unconsolidated jointly owned investments for year ended December 31, 2016.
-
(b)
-
The
effective portion of the change in fair value and the settlement of these contracts are reported in the foreign currency translation adjustment section of Other
comprehensive income (loss) until the underlying investment is sold, at which time we reclassify the gain or loss to earnings.
Amounts
reported in other comprehensive income (loss) related to interest rate swaps will be reclassified to Interest expense as interest is incurred on our variable-rate debt. Amounts
reported in Other comprehensive income (loss) related to foreign currency derivative contracts will be reclassified to Other income and (expenses) when the hedged foreign currency contracts are
settled. At December 31, 2017, we estimated that an additional $1.5 million and $5.5 million will be reclassified as interest expense and as other income and (expenses),
respectively, during the next 12 months.
52
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9. Risk Management and Use of Derivative Financial Instruments (Continued)
The
following table presents the impact of our derivative instruments in the consolidated financial statements (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss)
Recognized in Income
on Derivatives
|
|
|
|
|
|
Years Ended
December 31,
|
|
|
|
Location of Gain (Loss)
Recognized in Income
|
|
|
Derivatives Not in Cash Flow Hedging Relationships
|
|
2017
|
|
2016
|
|
2015
|
|
|
Swaption
|
|
Other income and (expenses)
|
|
$
|
(220
|
)
|
$
|
(45
|
)
|
$
|
(196
|
)
|
|
Stock warrants
|
|
Other income and (expenses)
|
|
|
(33
|
)
|
|
66
|
|
|
(66
|
)
|
|
Interest rate swap
|
|
Interest expense
|
|
|
11
|
|
|
6
|
|
|
—
|
|
|
Foreign currency forward contracts
|
|
Other income and (expenses)
|
|
|
10
|
|
|
—
|
|
|
(16
|
)
|
|
Embedded credit derivatives
|
|
Other income and (expenses)
|
|
|
—
|
|
|
—
|
|
|
177
|
|
|
Foreign currency collars
|
|
Other income and (expenses)
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in Cash Flow Hedging Relationships
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
(a)
|
|
Interest expense
|
|
|
121
|
|
|
463
|
|
|
302
|
|
|
Foreign currency collars
|
|
Other income and (expenses)
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
(123
|
)
|
$
|
490
|
|
$
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Relates
to the ineffective portion of the hedging relationship.
See
below for information regarding why we enter into our derivative instruments and concerning derivative instruments owned by unconsolidated investments, which are excluded from the
tables above.
Interest Rate Swaps, Caps, and Swaption
We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we attempt to obtain
mortgage financing on a long-term, fixed-rate basis. However, from time to time, we or our investment partners may obtain variable-rate, non-recourse mortgage loans and, as a result, we have entered
into, and may continue to enter into, interest rate swap agreements, interest rate cap agreements or swaptions with counterparties. Interest rate swaps, which effectively convert the variable-rate
debt service obligations of a loan to a fixed rate, are agreements in which one party exchanges a stream of interest payments for a counterparty's stream of cash flow over a specific period. The
notional, or face, amount on which the swaps are based is not exchanged. Interest rate caps limit the effective borrowing rate of variable rate debt obligations while allowing participants to share
downward shifts in interest rates. A swaption gives us the right but not the obligation to enter into an interest rate swap, of which the terms and conditions are set on the trade date, on a specified
date in the future. Our objective in using these derivatives is to limit our exposure to interest rate movements.
53
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9. Risk Management and Use of Derivative Financial Instruments (Continued)
The
interest rate swaps and caps that our consolidated subsidiaries had outstanding at December 31, 2017 are summarized as follows (currency in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Derivatives
|
|
Number of
Instruments
|
|
Notional
Amount
|
|
Fair Value at
December 31, 2017
(a)
|
|
|
Designated as Cash Flow Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
12
|
|
123,536 USD
|
|
$
|
(3,074
|
)
|
|
Interest rate swaps
|
|
|
5
|
|
69,345 EUR
|
|
|
(464
|
)
|
|
Interest rate caps
|
|
|
4
|
|
132,770 EUR
|
|
|
177
|
|
|
Interest rate cap
|
|
|
1
|
|
6,394 GBP
|
|
|
13
|
|
|
Interest rate cap
|
|
|
1
|
|
75,000 USD
|
|
|
11
|
|
|
Not Designated as Hedging Instrument
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
|
1
|
|
4,843 EUR
|
|
|
(128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(3,465
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Fair
value amount is based on the exchange rate of the euro or British pound sterling at December 31, 2017, as applicable.
Foreign Currency Contracts
We are exposed to foreign currency exchange rate movements, primarily in the euro and, to a lesser extent, the British pound sterling, the
Japanese yen, and the Norwegian krone. We manage foreign currency exchange rate movements by generally placing our debt service obligation on an investment in the same currency as the tenant's rental
obligation to us. This reduces our overall exposure to the net cash flow from that investment. However, we are subject to foreign currency exchange rate movements to the extent that there is a
difference in the timing and amount of the rental obligation and the debt service. Realized and unrealized gains and losses recognized in earnings related to foreign currency transactions are included
in Other income and (expenses) in the consolidated financial statements.
In
order to hedge certain of our foreign currency cash flow exposures, we enter into foreign currency forward contracts and collars. A foreign currency forward contract is a commitment
to deliver a certain amount of currency at a certain price on a specific date in the future. A foreign currency collar consists of a written call option and a purchased put option to sell the foreign
currency at a range of predetermined exchange rates. By entering into forward contracts and holding them to maturity, we are locked into a future currency exchange rate for the term of the contract. A
foreign currency collar guarantees that the exchange rate of the currency will not fluctuate beyond the range of the options' strike prices. Our foreign currency forward contracts and foreign currency
collars have maturities of 77 months or less.
54
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9. Risk Management and Use of Derivative Financial Instruments (Continued)
The
following table presents the foreign currency derivative contracts we had outstanding and their designations at December 31, 2017 (currency in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Derivatives
|
|
Number of
Instruments
|
|
Notional
Amount
|
|
Fair Value at
December 31, 2017
|
|
|
Designated as Cash Flow Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
|
43
|
|
88,173 EUR
|
|
$
|
14,325
|
|
|
Foreign currency collars
|
|
|
2
|
|
15,100 EUR
|
|
|
(1,395
|
)
|
|
Foreign currency collars
|
|
|
3
|
|
2,000 NOK
|
|
|
(16
|
)
|
|
Not Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
|
9
|
|
6,521 NOK
|
|
|
86
|
|
|
Designated as Net Investment Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
|
2
|
|
4,329 NOK
|
|
|
57
|
|
|
Foreign currency collar
|
|
|
1
|
|
2,500 NOK
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Risk-Related Contingent Features
We measure our credit exposure on a counterparty basis as the net positive aggregate estimated fair value of our derivatives, net of any
collateral received. No collateral was received as of December 31, 2017. At December 31, 2017, our total credit exposure was $12.8 million and the maximum exposure to any single
counterparty was $6.0 million.
Some
of the agreements with our derivative counterparties contain cross-default provisions that could trigger a declaration of default on our derivative obligations if we default, or are
capable of being declared in default, on certain of our indebtedness. At December 31, 2017, we had not been declared in default on any of our derivative obligations. The estimated fair value of
our derivatives that were in a net liability position was $5.6 million and $6.7 million at December 31, 2017 and 2016, respectively, which included accrued interest and any
nonperformance risk adjustments. If we had breached any of these provisions at December 31, 2017 or 2016, we could have been required to settle our obligations under these agreements at their
aggregate termination value of $5.7 million and $7.3 million, respectively.
Portfolio Concentration Risk
Concentrations of credit risk arise when a number of tenants are engaged in similar business activities or have similar economic risks or
conditions that could cause them to default on their lease obligations to us. We regularly monitor our portfolio to assess potential concentrations of credit risk. See
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations – Portfolio Overview
for
more information about our portfolio concentration risk.
For
the year ended December 31, 2017, our KBR Inc. tenant contributed 12% of our total revenues, which included $15.7 million for the year ended December 31,
2017 as a result of a write-off of a below-market lease intangible liability that increased rental income (
Note 14
).
55
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10. Debt
Mortgage Debt, Net
Mortgage debt, net consists of mortgage notes payable, which are collateralized by the assignment of real estate properties. For a list of our
encumbered properties, see
Schedule III – Real Estate and Accumulated Depreciation
. At December 31, 2017, our
mortgage notes payable bore interest at fixed annual rates ranging from 1.9% to 7.4% and variable contractual annual rates ranging from 1.3% to 6.0%, with maturity dates ranging from 2018 to 2039.
Financing Activity During 2017
During 2017, we drew down on two non-recourse mortgage loans totaling $25.1 million that have a weighted-average annual interest rate and
term to maturity of 3.1% and seven years, respectively. In addition, we refinanced two non-recourse mortgage loans totaling $157.7 million with new loans of $180.0 million that have a
weighted-average annual interest rate and term to maturity of 2.8% and three years, respectively.
During
2017, we repaid 13 non-recourse mortgage loans totaling $261.4 million, 11 of which were scheduled to mature in 2017 and two of which were scheduled to mature in 2018
(amount is based on the exchange rate of the euro as of the date of repayment, as applicable). Of that amount, $60.0 million
pertained to the non-recourse mortgage loan that was repaid in full at closing by the buyer in connection with the I-drive Property disposition
(
Note 4
,
Note 14
), on which we recognized a loss on extinguishment of debt of
$1.3 million. In addition, in connection with our disposition of a property located in Pordenone, Italy, which was part of a larger portfolio of properties located throughout Italy leased to a
single tenant, we repaid a portion of the principal balance of the mortgage loan on that portfolio for a total of $9.3 million (amount is based on the exchange rate of the euro as of the date
of repayment).
In
March 2017, we completed the sale of the KBR II property (
Note 14
), which had a non-recourse mortgage loan of
$31.2 million at the time of sale. This mortgage loan, which has an interest rate 4.9% and is scheduled to mature in January 2024, has since been recollateralized with two of our existing
net-lease properties. As a result of the swapping of the collateral of this loan, this debt is now considered to be a recourse mortgage loan to us in the event of a default.
Financing Activity During 2016
During 2016, we obtained seven new non-recourse mortgage financings and completed two additional drawdowns on already existing mortgage
financings totaling $170.9 million net of discounts with a weighted-average annual interest rate and term to maturity of 2.0% and 7.1 years, respectively.
Additionally,
in connection with the acquisition of the remaining 15% interest in a self-storage portfolio that we now control
(
Note 4
), we now consolidate the outstanding mortgage debt of this investment, which totaled $69.8 million net of discounts with a
weighted-average annual interest rate of 4.5% and term to maturity of 1.1 years.
During
2016, we defeased seven non-recourse mortgage loans with outstanding principal balances totaling $121.9 million net of discounts and recognized losses on extinguishment of
debt totaling $23.6 million primarily comprised of prepayment penalties and defeasance costs. These mortgage loans had a weighted-average interest rate and remaining term to maturity of 4.9%
and 5.7 years, respectively, and encumbered a total of 52 self-storage properties, 34 of which were sold (
Note 14
) and
56
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10. Debt (Continued)
18
of which were refinanced with new non-recourse mortgage loans totaling $65.9 million. These loans have a weighted-average interest rate and term to maturity of 3.0% and 4.8 years,
respectively.
Additionally,
during 2016, we refinanced four non-recourse mortgage loans totaling $206.4 million with new non-recourse mortgage financing totaling $211.8 million and
recognized a loss on extinguishment of debt of $0.8 million. These mortgage loans have a weighted-average interest rate and term to maturity of 2.0% and 4.7 years, respectively.
Senior Credit Facility
On August 26, 2015, we entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as
syndication agent, and a syndicate of other lenders, which we refer to herein as the Credit Agreement. The Credit Agreement was amended on March 31, 2016 to clarify the Restricted Payments
covenant (see below); no other terms were changed. The Credit Agreement provides for a $200.0 million senior unsecured revolving credit facility, or the Revolver, and a $50.0 million
delayed-draw term loan facility, or the Term Loan. We refer to the Revolver and the Term Loan together as the Senior Credit Facility, which has a maximum aggregate principal amount of
$250.0 million and, subject to lender approval, an accordion feature of $250.0 million. The Senior Credit Facility is scheduled to mature on August 26, 2018, and may be extended
by us for two 12-month periods.
The
Senior Credit Facility provides for an annual interest rate of either (i) the Eurocurrency Rate or (ii) the Base Rate, in each case plus the Applicable Rate (each as
defined in the Credit Agreement). With respect to the Revolver, the Applicable Rate on Eurocurrency loans and letters of credit ranges from 1.50% to 2.25% (based on London Interbank Offered Rate, or
LIBOR) and the Applicable Rate on Base Rate loans ranges from 0.50% to 1.25% (as defined in the Credit Agreement), depending on our leverage ratio. With respect to the Term Loan, the Applicable Rate
on Eurocurrency loans and letters of credit ranges from 1.45% to 2.20% (based on LIBOR) and the Applicable Rate on Base Rate loans ranges from 0.45% to 1.20% (as defined in the Credit Agreement),
depending on our leverage ratio. In addition, we pay a fee of either 0.15% or 0.30% on the unused portion of the Senior Credit Facility. If usage of the Senior Credit Facility is equal to or greater
than 50% of the Aggregate Commitments, the Unused Fee Rate will be 0.15%, and if usage of the Senior Credit Facility is less than 50% of the Aggregate Commitments, the Unused Fee Rate will be 0.30%.
In connection with the transaction, we incurred costs of $1.9 million, which are being amortized to interest expense over the remaining term of the Senior Credit Facility.
57
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10. Debt (Continued)
The
following table presents a summary of our Senior Credit Facility (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Balance
at December 31,
|
|
|
|
Interest Rate at
December 31, 2017
|
|
|
Senior Credit Facility, net
|
|
2017
|
|
2016
|
|
|
Term Loan
(a)
|
|
LIBOR + 1.45%
|
|
$
|
49,915
|
|
$
|
49,751
|
|
|
Revolver:
|
|
|
|
|
|
|
|
|
|
|
Revolver – borrowing in euros
(b)
|
|
1.50%
|
|
|
29,969
|
|
|
—
|
|
|
Revolver – borrowing in yen
(c)
|
|
1.50%
|
|
|
22,047
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
101,931
|
|
$
|
49,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
unamortized deferred financing costs and discounts.
-
(b)
-
Amount
is based on the exchange rate of the euro at December 31, 2017.
-
(c)
-
Amount
is based on the exchange rate of the yen at December 31, 2017.
On
September 30, 2016, we exercised the delayed draw option on our Term Loan and borrowed $50.0 million. The Term Loan bears interest at LIBOR + 1.45% and is
scheduled to mature on August 26, 2018, unless extended pursuant to its terms. The Revolver and Term Loan are used for our working capital needs and for new investments, as well as for general
corporate purposes. During the year ended December 31, 2017, we drew down a total of $119.2 million from our Senior Credit Facility (amount is based on the exchange rate of the euro on
the date of each draw), of which we have since repaid $69.0 million.
We
are required to ensure that the total Restricted Payments (as defined in the amended Credit Agreement) in an aggregate amount in any fiscal year does not exceed the greater of 95% of
Modified funds from operations, or MFFO, and the amount of Restricted Payments required in order for us to (i) maintain our REIT status and (ii) avoid the payment of federal or state
income or excise tax. Restricted Payments include quarterly dividends and the total amount of shares repurchased by us, if any, in excess of $100.0 million per year. In addition to placing
limitations on dividend distributions and share repurchases, the Credit Agreement also stipulates certain customary financial covenants. We were in compliance with all such covenants at
December 31, 2017.
58
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10. Debt (Continued)
Scheduled Debt Principal Payments
Scheduled debt principal payments for each of the next five calendar years following December 31, 2017 and thereafter through 2039 are as
follows (in thousands):
|
|
|
|
|
|
|
Years Ending December 31,
|
|
Total
|
|
|
2018
(a)
|
|
$
|
173,644
|
|
|
2019
|
|
|
74,452
|
|
|
2020
|
|
|
427,354
|
|
|
2021
|
|
|
452,057
|
|
|
2022
|
|
|
350,859
|
|
|
Thereafter through 2039
|
|
|
486,485
|
|
|
|
|
|
|
|
|
Total principal payments
|
|
|
1,964,851
|
|
|
Deferred financing costs
|
|
|
(8,003
|
)
|
|
Unamortized discount, net
|
|
|
(5,458
|
)
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,951,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
the $50.0 million Term Loan and $52.0 million Revolver outstanding at December 31, 2017 under our Senior Credit Facility, which is
scheduled to mature on August 26, 2018, unless extended pursuant to its terms.
Certain
amounts in the table above are based on the applicable foreign currency exchange rate at December 31, 2017. The carrying value of our Debt, net increased by
$79.0 million from December 31, 2016 to December 31, 2017 due to the weakening of the U.S. dollar relative to foreign currencies, particularly the euro, during the same period.
Debt Covenants
As of December 31, 2017, we were in breach of a loan-to-value, or LTV, covenant on one of our non-recourse mortgage loans. On
January 22, 2018, we repaid $6.1 million (amount is based on the exchange rate of the euro as of the date of repayment) of principal on this loan to cure the covenant breach
(
Note 17
).
Note 11. Commitments and Contingencies
At December 31, 2017, we were not involved in any material litigation. Various claims and lawsuits arising in the normal course of business are pending against us. The results of
these proceedings are not expected to have a material adverse effect on our consolidated financial position or results of operations. See
Note 4
for unfunded construction commitments.
Note 12. Equity
Distributions
Distributions paid to stockholders consist of ordinary income, capital gains, return of capital, or a combination thereof for income tax
purposes. The following table presents annualized distributions per share, declared and paid during the years ended December 31, 2017, 2016 and 2015, reported for tax
59
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 12. Equity (Continued)
purposes
and serves as a designation of capital gain distributions, if applicable, pursuant to Internal Revenue Code Section 857(b)(3)(C) and Treasury Regulation
§ 1.857-6(e):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Ordinary income
|
|
$
|
0.3091
|
|
$
|
0.1994
|
|
$
|
0.3220
|
|
|
Return of capital
|
|
|
0.3409
|
|
|
0.1403
|
|
|
0.3280
|
|
|
Capital gain
|
|
|
—
|
|
|
0.3103
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions paid
|
|
$
|
0.6500
|
|
$
|
0.6500
|
|
$
|
0.6500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the fourth quarter of 2017, our board of directors declared a quarterly distribution of $0.1625 per share, which was paid on January 16, 2018 to stockholders of record on
December 29, 2017, in the amount of $56.9 million.
During
the year ended December 31, 2017, our board of directors declared distributions in the aggregate amount of $226.0 million, which equates to $0.6500 per share.
60
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 12. Equity (Continued)
Reclassifications Out of Accumulated Other Comprehensive Loss
The following tables present a reconciliation of changes in Accumulated other comprehensive loss by component for the periods presented (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains and
(Losses)
on Derivative
Instruments
|
|
Gains and
(Losses)
on Marketable
Investments
|
|
Foreign
Currency
Translation
Adjustments
|
|
Total
|
|
|
Balance at January 1, 2015
|
|
$
|
7,311
|
|
$
|
(106
|
)
|
$
|
(88,212
|
)
|
$
|
(81,007
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications
|
|
|
21,135
|
|
|
29
|
|
|
(81,037
|
)
|
|
(59,873
|
)
|
|
Amounts reclassified from accumulated other comprehensive loss to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
7,837
|
|
|
—
|
|
|
—
|
|
|
7,837
|
|
|
Other income and (expenses)
|
|
|
(8,083
|
)
|
|
—
|
|
|
—
|
|
|
(8,083
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(246
|
)
|
|
—
|
|
|
—
|
|
|
(246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period Other comprehensive loss
|
|
|
20,889
|
|
|
29
|
|
|
(81,037
|
)
|
|
(60,119
|
)
|
|
Net current-period Other comprehensive loss attributable to noncontrolling interests
|
|
|
—
|
|
|
—
|
|
|
1,321
|
|
|
1,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
28,200
|
|
|
(77
|
)
|
|
(167,928
|
)
|
|
(139,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications
|
|
|
2,568
|
|
|
29
|
|
|
(18,785
|
)
|
|
(16,188
|
)
|
|
Amounts reclassified from accumulated other comprehensive loss to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
6,339
|
|
|
—
|
|
|
—
|
|
|
6,339
|
|
|
Other income and (expenses)
|
|
|
(7,558
|
)
|
|
—
|
|
|
—
|
|
|
(7,558
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(1,219
|
)
|
|
—
|
|
|
—
|
|
|
(1,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period Other comprehensive loss
|
|
|
1,349
|
|
|
29
|
|
|
(18,785
|
)
|
|
(17,407
|
)
|
|
Net current-period Other comprehensive loss attributable to noncontrolling interests
|
|
|
—
|
|
|
—
|
|
|
536
|
|
|
536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
|
29,549
|
|
|
(48
|
)
|
|
(186,177
|
)
|
|
(156,676
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income before reclassifications
|
|
|
(15,735
|
)
|
|
33
|
|
|
100,948
|
|
|
85,246
|
|
|
Amounts reclassified from accumulated other comprehensive income to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
2,443
|
|
|
—
|
|
|
—
|
|
|
2,443
|
|
|
Other income and (expenses)
|
|
|
(7,170
|
)
|
|
—
|
|
|
—
|
|
|
(7,170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(4,727
|
)
|
|
—
|
|
|
—
|
|
|
(4,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period Other comprehensive income
|
|
|
(20,462
|
)
|
|
33
|
|
|
100,948
|
|
|
80,519
|
|
|
Net current-period Other comprehensive income attributable to noncontrolling interests
|
|
|
—
|
|
|
—
|
|
|
(2,263
|
)
|
|
(2,263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
$
|
9,087
|
|
$
|
(15
|
)
|
$
|
(87,492
|
)
|
$
|
(78,420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 13. Income Taxes
We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code. We believe we have operated, and we intend to continue to operate, in a manner
that allows us to continue to qualify as a REIT. Under the REIT operating structure, we are permitted to deduct distributions paid to our stockholders and generally will not be required to pay U.S.
federal income taxes. Accordingly, the only provision of income taxes in the consolidated financial statements relates to our TRSs. The Tax Cuts and Jobs Act, which was signed into law on
December 22, 2017, lowered the U.S. corporate income tax rate from 35% to 21%. As a result, we recognized a deferred tax benefit of $6.6 million for the year ended December 31,
2017.
We
conduct business in various states and municipalities within the United States, Europe, and Asia, and as a result, we file income tax returns in the U.S. federal jurisdiction
and various states and certain foreign jurisdictions. Our tax returns are subject to audit by taxing authorities. Such audits can often take years to complete and settle.
The
components of our (benefit from) provision for income taxes for the periods presented are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
190
|
|
$
|
130
|
|
$
|
110
|
|
|
Deferred
|
|
|
(3,577
|
)
|
|
4,327
|
|
|
954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,387
|
)
|
|
4,457
|
|
|
1,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and Local
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
838
|
|
|
(26
|
)
|
|
840
|
|
|
Deferred
|
|
|
765
|
|
|
312
|
|
|
1,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,603
|
|
|
286
|
|
|
2,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
2,959
|
|
|
3,677
|
|
|
3,787
|
|
|
Deferred
|
|
|
(1,688
|
)
|
|
57
|
|
|
1,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,271
|
|
|
3,734
|
|
|
5,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (Benefit) Provision
(a)
|
|
$
|
(513
|
)
|
$
|
8,477
|
|
$
|
8,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
We
recorded a deferred tax benefit of $2.6 million for certain of our equity investments in 2017. We recorded deferred tax provisions of $4.0 million
and $2.3 million for certain of our equity investments in 2016 and 2015, respectively.
We
account for uncertain tax positions in accordance with Accounting Standards Codification 740,
Income Taxes
. Our taxable subsidiaries
recognize tax positions in the financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical
merits of the position. A position that meets this standard is measured at the
largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the
financial statements.
62
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 13. Income Taxes (Continued)
The
following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
|
|
2017
|
|
2016
|
|
|
Beginning balance
|
|
$
|
—
|
|
$
|
198
|
|
|
Addition based on tax positions related to the current year
|
|
|
437
|
|
|
—
|
|
|
Decrease due to lapse in statute of limitations
|
|
|
—
|
|
|
(198
|
)
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
437
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2017 we had unrecognized tax benefits as presented in the table above that, if recognized, would have a favorable impact on our effective income tax rate in future
periods. We recognize interest and penalties related to uncertain tax positions in income tax expense. At December 31, 2017 and 2016, we had no significant accrued interest related to uncertain
tax positions.
Tax
authorities in the relevant jurisdictions may select our tax returns for audit and propose adjustments before the expiration of the statute of limitations. Our tax returns filed for
tax years 2011 through 2016 remain open to adjustment in the major tax jurisdictions.
Deferred Income Taxes
Our deferred tax assets before valuation allowances were $31.8 million and $33.0 million at December 31, 2017 and 2016,
respectively. Our deferred tax liabilities were $30.5 million and $32.7 million at December 31, 2017 and 2016, respectively. We determined that $26.3 million and
$28.1 million of our deferred tax assets did not meet the criteria for recognition under the accounting guidance for income taxes and accordingly, we established valuation allowances in those
amounts at December 31, 2017 and 2016, respectively. Our deferred tax asset, net of valuation allowance, is recorded in Other assets, net on our consolidated balance sheet. Our deferred tax
assets and liabilities at December 31, 2017 and 2016 are primarily the result of temporary differences related to:
-
•
-
basis differences between tax and GAAP for real estate assets and equity investments (For income tax purposes, certain acquisitions have
resulted in us assuming the seller's basis, or the carry-over basis, in assets and liabilities for tax purposes. In accordance with purchase accounting requirements under GAAP, we record all of the
acquired assets and liabilities at their estimated fair values at the date of acquisition. For our subsidiaries subject to income taxes in the United States or in foreign jurisdictions, we
recognize deferred income tax liabilities representing the tax effect of the difference between the tax basis and the fair value of the tangible and intangible assets recorded at the date of
acquisition for GAAP.);
-
•
-
timing differences generated by differences in the GAAP basis and the tax basis of assets such as those related to capitalized acquisition
costs, straight-line rent, prepaid rents, and intangible assets; and
-
•
-
tax net operating losses in foreign jurisdictions that may be realized in future periods if we generate sufficient taxable income.
63
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 13. Income Taxes (Continued)
At
December 31, 2017, we had net operating losses in U.S. federal, state, and foreign jurisdictions of approximately $48.9 million, $31.9 million, and
$40.5 million, respectively. At December 31, 2016, we had net operating losses in U.S. federal, state and foreign jurisdictions of approximately $35.1 million,
$21.3 million, and $19.9 million, respectively. If not utilized, the U.S. federal net operating loss carryforwards will begin to expire in 2032. The state and local net operating loss
carryforwards will begin to expire in 2027. The foreign net operating loss carryforwards will begin to expire in 2018. The utilization of net operating losses may be subject to certain limitations
under the tax laws of the relevant jurisdiction.
Note 14. Property Dispositions
From time to time, we may decide to sell a property. We have an active capital recycling program, with a goal of extending the average lease term through reinvestment, improving
portfolio credit quality through dispositions and acquisitions of assets, increasing the asset criticality factor in our portfolio, and/or executing strategic dispositions of assets. We may decide to
dispose of a property due to vacancy, tenants electing not to renew their leases, tenant insolvency, or lease rejection in the bankruptcy process. In such cases, we assess whether we can obtain the
highest value from the property by selling it, as opposed to re-leasing it. We may also sell a property when we receive an unsolicited offer or negotiate a price for an investment that is consistent
with our strategy for that investment. When it is appropriate to do so, we classify the property as an asset held for sale on our consolidated balance sheet.
Property Dispositions
The results of operations for properties that have been sold or classified as held for sale are included in the consolidated financial
statements and are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Revenues
|
|
$
|
7,245
|
|
$
|
46,928
|
|
$
|
47,737
|
|
|
Operating expenses (excluding impairment charges)
|
|
|
(3,150
|
)
|
|
(25,944
|
)
|
|
(29,365
|
)
|
|
Impairment charges
|
|
|
—
|
|
|
(29,183
|
)
|
|
—
|
|
|
Interest expense
|
|
|
(1,108
|
)
|
|
(7,485
|
)
|
|
(6,996
|
)
|
|
Other income and (expenses)
|
|
|
—
|
|
|
—
|
|
|
676
|
|
|
Loss on extinguishment of debt
|
|
|
(1,364
|
)
|
|
(15,807
|
)
|
|
—
|
|
|
Equity in losses of equity method investments
|
|
|
(688
|
)
|
|
(3,137
|
)
|
|
(2,789
|
)
|
|
Provision for income taxes
|
|
|
(2
|
)
|
|
(24
|
)
|
|
(4
|
)
|
|
Gain on sale of real estate, net of tax
|
|
|
2,879
|
|
|
132,858
|
|
|
2,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from properties sold or classified as held for sale, net of income taxes
|
|
$
|
3,812
|
|
$
|
98,206
|
|
$
|
11,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
– During the second quarter of 2017, we sold three properties for total proceeds of $14.6 million,
net of selling costs, and recorded an aggregate gain on sale of $1.2 million (amounts are based on the euro exchange rate on the applicable date of disposition), which was recorded under the
full accrual method.
64
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 14. Property Dispositions (Continued)
In
March 2017, we sold one of our net-lease properties to the developer that constructed the I-drive Property for net proceeds of $23.5 million, inclusive of $34.0 million
of financing provided by us to the developer in the form of a mezzanine loan. This sale was accounted for under the cost recovery method. As a result, we recorded a deferred gain on sale of
$2.1 million, which will be recognized into income upon recovery of the cost of the property (
Note 4
,
Note 5
). The developer repaid the
$60.0 million non-recourse mortgage loan encumbering the I-drive Property in full at closing
(
Note 10
). In addition, in connection with the I-drive Wheel restructuring, we recorded a deferred gain of $16.4 million, which will be
recognized into income upon recovery of the cost of the Wheel Loan (
Note 5
).
In
August 2016, we simultaneously entered into two agreements with one of our tenants, KBR, Inc., to amend the lease at one property and terminate the lease at another property,
both located in Houston, Texas. The lease modification and lease termination were contingent upon one another and became effective upon disposing of one net-lease property on March 13, 2017,
which was previously classified as held for sale as of December 31, 2016 prior to its sale in the first quarter of 2017. Upon disposition, we received proceeds of $14.1 million, net of
closing costs, and recognized a gain on sale of $1.6 million, which was recorded under the full accrual method. In addition, as a result of the aforementioned lease modification, contractual
rents were renegotiated to be at market and the existing below-market rent lease liability of $15.7 million was written off and recognized in Rental income during the year ended
December 31, 2017 (
Note 7
). In addition, as a result of the termination of the lease noted above, we accelerated the below-market lease
intangible liabilities of $3.3 million and $13.9 million that were also recognized in Rental income during the year ended December 31, 2017 and 2016, respectively. At
December 31, 2016, the land and building for this property were classified as held for sale and we recognized an impairment charge of $29.2 million during the year ended
December 31, 2016 to reduce the carrying value of the property to its estimated fair value (
Note 8
).
2016
– During 2016, we sold 34 self-storage properties for total proceeds of $259.1 million, net of
selling costs and recognized a gain on the sale of these assets of $132.9 million in the aggregate.
Proceeds from the sales were used to repay non-recourse mortgage loans encumbering the properties with outstanding principal balances aggregating $84.7 million, and as a result, we recorded a
loss on extinguishment of debt of $15.8 million.
2015
– We did not have any dispositions during 2015. However, we recognized a gain on sale of real estate of
$2.2 million during that year related to an equity interest option (on a property that was previously disposed of), which expired on January 31, 2015.
None
of our property dispositions during 2017, 2016, or 2015 qualified for classification as a discontinued operation.
65
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 15. Segment Reporting
We operate in two reportable business segments: Net Lease and Self Storage. Our Net Lease segment includes our domestic and foreign investments in net-leased properties, whether they are
accounted for as operating or direct financing leases. Our Self Storage segment is comprised of our investments in self-storage properties. In addition, we have investments in loans receivable, CMBS,
one hotel, and certain other properties, which are included in our All Other category. The following tables present a summary of comparative results and assets for these business segments (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Net Lease
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
(a)
|
|
$
|
397,766
|
|
$
|
389,709
|
|
$
|
366,904
|
|
|
Operating expenses
(b)
(c)
|
|
|
(157,206
|
)
|
|
(180,376
|
)
|
|
(136,838
|
)
|
|
Interest expense
|
|
|
(77,503
|
)
|
|
(87,703
|
)
|
|
(85,138
|
)
|
|
Other income and (expenses), excluding interest expense
(d)
|
|
|
5,839
|
|
|
10,412
|
|
|
18,508
|
|
|
Provision for income taxes
|
|
|
(718
|
)
|
|
(2,887
|
)
|
|
(7,458
|
)
|
|
Gain on sale of real estate, net of tax
|
|
|
2,872
|
|
|
—
|
|
|
2,197
|
|
|
Net income attributable to noncontrolling interests
|
|
|
(13,530
|
)
|
|
(14,098
|
)
|
|
(15,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to CPA:17 – Global
|
|
$
|
157,520
|
|
$
|
115,057
|
|
$
|
142,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-Storage
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
35,935
|
|
$
|
43,979
|
|
$
|
46,418
|
|
|
Operating expenses
|
|
|
(26,235
|
)
|
|
(36,094
|
)
|
|
(32,575
|
)
|
|
Interest expense
|
|
|
(7,638
|
)
|
|
(8,744
|
)
|
|
(7,655
|
)
|
|
Other income and (expenses), excluding interest expense
(e)
(f)
|
|
|
(260
|
)
|
|
25,920
|
|
|
(1,858
|
)
|
|
Provision for income taxes
|
|
|
(163
|
)
|
|
(183
|
)
|
|
(167
|
)
|
|
Gain on sale of real estate, net of tax
|
|
|
7
|
|
|
132,858
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to CPA:17 – Global
|
|
$
|
1,646
|
|
$
|
157,736
|
|
$
|
4,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
13,953
|
|
$
|
6,674
|
|
$
|
13,625
|
|
|
Operating expenses
|
|
|
(5,482
|
)
|
|
(633
|
)
|
|
(1,712
|
)
|
|
Interest expense
|
|
|
—
|
|
|
(5
|
)
|
|
404
|
|
|
Other income and (expenses), excluding interest expense
(g)
(h)
|
|
|
(23,428
|
)
|
|
(8,419
|
)
|
|
(1,691
|
)
|
|
Benefit from (provision for) income taxes
|
|
|
2,741
|
|
|
(4,671
|
)
|
|
(150
|
)
|
|
Net loss attributable to noncontrolling interests
|
|
|
1,323
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to CPA:17 – Global
|
|
$
|
(10,893
|
)
|
$
|
(7,054
|
)
|
$
|
10,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated Corporate Overhead
(i)
|
|
$
|
(24,311
|
)
|
$
|
(50,629
|
)
|
$
|
(48,694
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests – Available Cash Distributions
|
|
$
|
(26,675
|
)
|
$
|
(24,765
|
)
|
$
|
(24,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
447,654
|
|
$
|
440,362
|
|
$
|
426,947
|
|
|
Operating expenses
|
|
|
(234,326
|
)
|
|
(263,802
|
)
|
|
(218,892
|
)
|
|
Interest expense
|
|
|
(88,270
|
)
|
|
(98,813
|
)
|
|
(93,551
|
)
|
|
Other income and (expenses), excluding interest expense
|
|
|
7,719
|
|
|
27,080
|
|
|
16,304
|
|
|
Benefit from (provision for) income taxes
|
|
|
513
|
|
|
(8,477
|
)
|
|
(8,885
|
)
|
|
Gain on sale of real estate, net of tax
|
|
|
2,879
|
|
|
132,858
|
|
|
2,197
|
|
|
Net income attributable to noncontrolling interests
|
|
|
(38,882
|
)
|
|
(38,863
|
)
|
|
(39,915
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to CPA:17 – Global
|
|
$
|
97,287
|
|
$
|
190,345
|
|
$
|
84,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 15. Segment Reporting (Continued)
|
|
|
|
|
|
|
|
|
|
|
Total Assets at December 31,
|
|
|
|
2017
|
|
2016
|
|
|
Net Lease
(j)
|
|
$
|
3,980,445
|
|
$
|
3,905,402
|
|
|
Self-Storage
|
|
|
241,438
|
|
|
252,195
|
|
|
All Other
(k)
|
|
|
277,702
|
|
|
266,231
|
|
|
Corporate
|
|
|
87,885
|
|
|
275,095
|
|
|
|
|
|
|
|
|
|
|
|
Total Company
|
|
$
|
4,587,470
|
|
$
|
4,698,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Amount
for the year ended December 31, 2017 includes a $15.7 million write-off of a below-market rent lease liability, pertaining to our
KBR Inc., properties that were recognized in Rental income as a result of a lease modification (
Note 14
). In addition, as a result of a
lease termination, we accelerated the below-market rent lease intangible liabilities of $3.3 million and $13.9 million that were also recognized in Rental income during the year ended
December 31, 2017 and 2016, respectively.
-
(b)
-
Includes
impairment charges of $8.3 million and $29.2 million incurred during the year ended December 31, 2017 and 2016, respectively
(
Note 8
).
-
(c)
-
In
April 2017, the Croatian government passed a special law assisting the restructuring of companies considered of systematic significance in Croatia. This law
directly impacts our Agrokor tenant, which is currently experiencing financial distress and recently received a credit downgrade from both Standard & Poor's and Moody's. As a result of the
financial difficulties and the uncertainty regarding future rent collections from the tenant, we recorded bad debt expense of $8.1 million during the year ended December 31, 2017.
-
(d)
-
For
the years ended December 31, 2017 and 2016, amounts include impairment charges of $10.6 million and $1.9 million, respectively, related to
certain of our equity investments (
Note 8
).
-
(e)
-
Includes
a gain on change in control of interests of $49.9 million for the year ended December 31, 2016
(
Note 4
).
-
(f)
-
Includes
loss on extinguishment of debt of $23.6 million for the year ended December 31, 2016
(
Note 10
).
-
(g)
-
Includes
a loss on change in control of interests of $13.9 million for the year ended December 31, 2017
(
Note 4
). In addition, as a result of Hurricane Irma damage incurred at the Shelborne hotel investment
(
Note 4
), this amount includes an estimated insurance deductible of $1.8 million and $2.7 million of costs incurred related to our
insurance adjuster.
-
(h)
-
For
the year ended December 31, 2016, our Shelborne equity method investment recorded a $22.8 million impairment charge to reduce goodwill at the
investee level to its fair value, partially offset by $10.6 million of income recognized in conjunction with the termination of a management agreement and a $10.6 million gain
representing the portion of losses guaranteed by the previous management company under the terms of the management agreement.
-
(i)
-
Included
in unallocated corporate overhead are asset management fees, and general and administrative expenses, as well as interest expense and other charges related
to our Senior Credit
67
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 15. Segment Reporting (Continued)
Facility.
These expenses are calculated and reported at the portfolio level and not evaluated as part of any segment's operating performance.
-
(j)
-
Includes
the impact of the I-drive Property disposition (
Note 4
,
Note 14
), the sale of a property classified as Assets held for sale as of
December 31, 2016, and the sale of three other net-leased
properties that occurred during the year ended December 31, 2017 (
Note 14
).
-
(k)
-
Includes
the impact of the I-drive Wheel restructuring during the year ended December 31, 2017 (
Note 5
,
Note 6
,
Note 14
).
Our
portfolio is comprised of domestic and international investments. The following tables present the geographic information (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Year Ended December 31, 2017
|
|
Texas
|
|
New York
|
|
Other
Domestic
|
|
International
(a)
|
|
Total
|
|
|
Revenues
|
|
$
|
67,317
|
|
$
|
45,430
|
|
$
|
208,562
|
|
$
|
126,345
|
|
$
|
447,654
|
|
|
Operating expenses
|
|
|
(28,389
|
)
|
|
(12,211
|
)
|
|
(121,672
|
)
|
|
(72,054
|
)
|
|
(234,326
|
)
|
|
Interest expense
|
|
|
(10,053
|
)
|
|
(6,937
|
)
|
|
(50,087
|
)
|
|
(21,193
|
)
|
|
(88,270
|
)
|
|
Other income and (expenses), excluding interest expense
|
|
|
688
|
|
|
(257
|
)
|
|
(665
|
)
|
|
7,953
|
|
|
7,719
|
|
|
Benefit from income taxes
|
|
|
(53
|
)
|
|
162
|
|
|
1,532
|
|
|
(1,128
|
)
|
|
513
|
|
|
Gain on sale of real estate, net of tax
|
|
|
1,647
|
|
|
—
|
|
|
755
|
|
|
477
|
|
|
2,879
|
|
|
Net income attributable to noncontrolling interests
|
|
|
—
|
|
|
(11,222
|
)
|
|
(27,206
|
)
|
|
(454
|
)
|
|
(38,882
|
)
|
|
Net income attributable to CPA:17 – Global
|
|
|
31,157
|
|
|
14,965
|
|
|
11,219
|
|
|
39,946
|
|
|
97,287
|
|
|
Long-lived assets
(b)
|
|
|
308,195
|
|
|
388,336
|
|
|
1,694,242
|
|
|
1,346,148
|
|
|
3,736,921
|
|
|
Equity investments in real estate
|
|
|
16,072
|
|
|
—
|
|
|
116,302
|
|
|
276,880
|
|
|
409,254
|
|
|
Debt, net
|
|
|
216,542
|
|
|
179,775
|
|
|
981,081
|
|
|
573,992
|
|
|
1,951,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Year Ended December 31, 2016
|
|
Texas
|
|
New York
|
|
Other
Domestic
|
|
International
(a)
|
|
Total
|
|
|
Revenues
|
|
$
|
67,860
|
|
$
|
42,912
|
|
$
|
213,027
|
|
$
|
116,563
|
|
$
|
440,362
|
|
|
Operating expenses
(c)
|
|
|
(75,455
|
)
|
|
(13,152
|
)
|
|
(124,776
|
)
|
|
(50,419
|
)
|
|
(263,802
|
)
|
|
Interest expense
|
|
|
(11,774
|
)
|
|
(7,098
|
)
|
|
(54,760
|
)
|
|
(25,181
|
)
|
|
(98,813
|
)
|
|
Other income and (expenses), excluding interest expense
|
|
|
(2,859
|
)
|
|
49,483
|
|
|
(10,428
|
)
|
|
(9,116
|
)
|
|
27,080
|
|
|
Provision for income taxes
|
|
|
(67
|
)
|
|
(682
|
)
|
|
(4,102
|
)
|
|
(3,626
|
)
|
|
(8,477
|
)
|
|
Gain on sale of real estate, net of tax
|
|
|
10,565
|
|
|
—
|
|
|
122,293
|
|
|
—
|
|
|
132,858
|
|
|
Net income attributable to noncontrolling interests
|
|
|
—
|
|
|
(10,972
|
)
|
|
(26,608
|
)
|
|
(1,283
|
)
|
|
(38,863
|
)
|
|
Net income attributable to CPA:17 – Global
|
|
|
(11,730
|
)
|
|
60,491
|
|
|
114,646
|
|
|
26,938
|
|
|
190,345
|
|
|
Long-lived assets
(b)
|
|
|
337,379
|
|
|
395,508
|
|
|
1,770,506
|
|
|
1,242,073
|
|
|
3,745,466
|
|
|
Equity investments in real estate
|
|
|
17,603
|
|
|
—
|
|
|
308,741
|
|
|
124,761
|
|
|
451,105
|
|
|
Debt, net
|
|
|
249,336
|
|
|
173,823
|
|
|
1,012,929
|
|
|
635,913
|
|
|
2,072,001
|
|
68
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 15. Segment Reporting (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2015
|
|
Texas
|
|
New York
|
|
Other
Domestic
|
|
International
(a)
|
|
Total
|
|
|
Revenues
|
|
$
|
63,933
|
|
$
|
37,567
|
|
$
|
212,394
|
|
$
|
113,053
|
|
$
|
426,947
|
|
|
Operating expenses
|
|
|
(42,934
|
)
|
|
(1,624
|
)
|
|
(131,013
|
)
|
|
(43,321
|
)
|
|
(218,892
|
)
|
|
Interest expense
|
|
|
(12,465
|
)
|
|
(3,602
|
)
|
|
(52,853
|
)
|
|
(24,631
|
)
|
|
(93,551
|
)
|
|
Other income and (expenses), excluding interest expense
|
|
|
787
|
|
|
(1,857
|
)
|
|
15,277
|
|
|
2,097
|
|
|
16,304
|
|
|
Provision for income taxes
|
|
|
(4
|
)
|
|
—
|
|
|
(3,354
|
)
|
|
(5,527
|
)
|
|
(8,885
|
)
|
|
Gain on sale of real estate, net of tax
|
|
|
—
|
|
|
—
|
|
|
2,197
|
|
|
—
|
|
|
2,197
|
|
|
Net income attributable to noncontrolling interests
|
|
|
—
|
|
|
(11,068
|
)
|
|
(26,105
|
)
|
|
(2,742
|
)
|
|
(39,915
|
)
|
|
Net income attributable to CPA:17 – Global
|
|
|
9,317
|
|
|
19,416
|
|
|
16,543
|
|
|
38,929
|
|
|
84,205
|
|
-
(a)
-
All
years include investments in Poland, Italy, Croatia, Spain, Germany, the United Kingdom, the Netherlands, Japan, the Czech Republic, Slovakia, Norway, and
Hungary; 2017 and 2016 include investments in Lithuania; and 2017 includes investments in Latvia and Estonia.
-
(b)
-
Consists
of Net investments in real estate. In the second quarter of 2017, we reclassified certain line items in our consolidated balance sheets. As a result,
amounts for certain line items included within Net investments in real estate as of December 31, 2016 have been revised to the current year presentation
(
Note 2
).
-
(c)
-
Amount
for Texas includes an impairment charge of $29.2 million recognized on one property for the year ended December 31, 2016
(
Note 8
).
Note 16. Selected Quarterly Financial Data (Unaudited)
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2017
|
|
June 30, 2017
|
|
September 30,
2017
|
|
December 31,
2017
|
|
|
Revenues
|
|
$
|
123,005
|
|
$
|
106,513
|
|
$
|
107,396
|
|
$
|
110,740
|
|
|
Expenses
(a)
|
|
|
59,615
|
|
|
55,581
|
|
|
53,313
|
|
|
65,817
|
|
|
Net income
(a)
(b)
(c)
|
|
|
47,146
|
|
|
41,725
|
|
|
33,810
|
|
|
13,488
|
|
|
Net income attributable to noncontrolling interests
|
|
|
(9,135
|
)
|
|
(10,919
|
)
|
|
(9,081
|
)
|
|
(9,747
|
)
|
|
Net income attributable to CPA:17 – Global
(a)
(b)
(c)
|
|
|
38,011
|
|
|
30,806
|
|
|
24,729
|
|
|
3,741
|
|
|
Earnings per share attributable to CPA:17 – Global
|
|
$
|
0.11
|
|
$
|
0.09
|
|
$
|
0.07
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions declared per share
|
|
$
|
0.1625
|
|
$
|
0.1625
|
|
$
|
0.1625
|
|
$
|
0.1625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 16. Selected Quarterly Financial Data (Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2016
|
|
June 30, 2016
|
|
September 30,
2016
|
|
December 31,
2016
|
|
|
Revenues
|
|
$
|
107,226
|
|
$
|
109,185
|
|
$
|
110,076
|
|
$
|
113,875
|
|
|
Expenses
(d)
|
|
|
56,205
|
|
|
60,037
|
|
|
87,442
|
|
|
60,118
|
|
|
Net income
(e)
|
|
|
55,617
|
|
|
91,241
|
|
|
67,045
|
|
|
15,305
|
|
|
Net income attributable to noncontrolling interests
|
|
|
(10,194
|
)
|
|
(9,383
|
)
|
|
(8,827
|
)
|
|
(10,459
|
)
|
|
Net income attributable to CPA:17 – Global
(d)
(e)
|
|
|
45,423
|
|
|
81,858
|
|
|
58,218
|
|
|
4,846
|
|
|
Earnings per share attributable to CPA:17 – Global
|
|
$
|
0.13
|
|
$
|
0.24
|
|
$
|
0.17
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions declared per share
|
|
$
|
0.1625
|
|
$
|
0.1625
|
|
$
|
0.1625
|
|
$
|
0.1625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Amounts
for the three months ended December 31, 2017 and March 31, 2017 include impairment charges of $4.2 million and $4.5 million,
respectively, on our consolidated real estate investments (
Note 8
).
-
(b)
-
Amounts
for the three months ended December 31, 2017, September 30, 2017, and June 30, 2017 include impairment charges of $1.8 million,
$6.3 million, and $2.5 million, respectively, on our equity investments on real estate (
Note 8
).
-
(c)
-
Amount
for the three months ended December 31, 2017 includes loss on change of control of interests of $13.9 million that was recognized in connection
with the restructuring of the Shelborne hotel (
Note 4
).
-
(d)
-
Amount
for the three months ended September 30, 2016, includes an impairment charge of $29.2 million
(
Note 8
).
-
(e)
-
Amount
for the three months ended June 30, 2016 includes gains on change of control of interests of $49.9 million, recognized in connection our
acquisition of the remaining 15% controlling interest in a jointly owned investment in five self-storage properties (
Note 4
). Amounts for the
three months ended March 31, 2016, June 30, 2016, and September 30, 2016 include gain on sale of real estate, net of tax totaling $25.4 million, $25.0 million, and
$82.3 million, respectively, recognized in connection with the disposition of certain self-storage properties that occurred during these periods. Amounts for the three months ended
March 31, 2016, June 30, 2016, September 30, 2016, and December 31, 2016 include a loss on extinguishment of debt of $2.5 million, $5.1 million,
$16.0 million, and $0.8 million, respectively (
Note 10
). During the three months ended December 31, 2016, our Shelborne
equity investment incurred a $22.8 million impairment charge to reduce goodwill at the investee level to its fair value, partially offset by $10.6 million of income recognized in
conjunction with the termination of a management agreement. Additionally, we recorded $10.6 million of losses guaranteed by the previous management company under the terms of the management
agreement (
Note 6
).
70
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 17. Subsequent Events
On January 22, 2018, we repaid $6.1 million (amount is based on the exchange rate of the euro as of the date of repayment) of principal on one of our non-recourse mortgage
loans to cure the LTV covenant breach that existed at December 31, 2017 (
Note 10
).
In
January 2018, a tenant, The New York Times Company, exercised its bargain purchase option to acquire the property it leases from us for $250.0 million, which is expected to
occur on December 1, 2019.
71
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
Years Ended
December 31, 2017, 2016, and 2015
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance at
Beginning
of Year
|
|
Other Additions
|
|
Deductions
|
|
Balance at
End of Year
|
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation reserve for deferred tax assets
|
|
$
|
28,150
|
|
$
|
3,406
|
|
$
|
(5,303
|
)
|
$
|
26,253
|
|
|
Valuation for tenant receivables
|
|
|
36
|
|
|
8,565
|
|
|
(36
|
)
|
|
8,565
|
|
|
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation reserve for deferred tax assets
|
|
$
|
29,001
|
|
$
|
5,151
|
|
$
|
(6,002
|
)
|
$
|
28,150
|
|
|
Valuation for tenant receivables
|
|
|
1,750
|
|
|
24
|
|
|
(1,738
|
)
|
|
36
|
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation reserve for deferred tax assets
|
|
$
|
13,103
|
|
$
|
21,211
|
|
$
|
(5,313
|
)
|
$
|
29,001
|
|
|
Valuation for tenant receivables
|
|
|
—
|
|
|
1,750
|
|
|
—
|
|
|
1,750
|
|
72
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life on which
Depreciation in
Latest
Statement of
Income
is Computed
|
|
|
|
|
Initial Cost to
Company
|
|
|
|
|
|
Gross Amount at which
Carried at Close of Period
(c)
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease)
in Net
Investments
(b)
|
|
|
|
|
|
|
|
|
|
|
Cost Capitalized
Subsequent to
Acquisition
(a)
|
|
Accumulated
Depreciation
(d)
|
|
Date of
Construction
|
|
Date
Acquired
|
|
Description
|
|
Encumbrances
|
|
Land
|
|
Buildings
|
|
Land
|
|
Buildings
|
|
Total
|
|
Real Estate Under Operating Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial facility in Norfolk, NE
|
|
$
|
1,340
|
|
$
|
625
|
|
$
|
1,713
|
|
$
|
—
|
|
$
|
107
|
|
$
|
625
|
|
$
|
1,820
|
|
$
|
2,445
|
|
$
|
582
|
|
1975
|
|
Jun. 2008
|
|
30 yrs.
|
|
Office facility in Soest, Germany and warehouse facility in Bad Wünnenberg, Germany
|
|
|
—
|
|
|
3,193
|
|
|
45,932
|
|
|
—
|
|
|
(11,903
|
)
|
|
2,419
|
|
|
34,803
|
|
|
37,222
|
|
|
8,800
|
|
1982; 1996
|
|
Jul. 2008
|
|
36 yrs.
|
|
Education facility in Chicago, IL
|
|
|
11,782
|
|
|
6,300
|
|
|
20,509
|
|
|
—
|
|
|
(527
|
)
|
|
6,300
|
|
|
19,982
|
|
|
26,282
|
|
|
6,329
|
|
1912
|
|
Jul. 2008
|
|
30 yrs.
|
|
Industrial facilities in Sergeant Bluff, IA; Bossier City, LA; and Alvarado, TX
|
|
|
27,730
|
|
|
2,725
|
|
|
25,233
|
|
|
28,116
|
|
|
(3,395
|
)
|
|
4,701
|
|
|
47,978
|
|
|
52,679
|
|
|
9,055
|
|
Various
|
|
Aug. 2008
|
|
25 - 40 yrs.
|
|
Industrial facility in Waldaschaff, Germany
|
|
|
—
|
|
|
10,373
|
|
|
16,708
|
|
|
—
|
|
|
(16,744
|
)
|
|
2,987
|
|
|
7,350
|
|
|
10,337
|
|
|
5,269
|
|
1937
|
|
Aug. 2008
|
|
15 yrs.
|
|
Fitness facilities in Phoenix, AZ and Columbia, MD
|
|
|
33,367
|
|
|
14,500
|
|
|
48,865
|
|
|
—
|
|
|
(2,062
|
)
|
|
14,500
|
|
|
46,803
|
|
|
61,303
|
|
|
10,833
|
|
2006
|
|
Sep. 2008
|
|
40 yrs.
|
|
Office facility in Birmingham, United Kingdom
|
|
|
17,056
|
|
|
3,591
|
|
|
15,810
|
|
|
949
|
|
|
(3,279
|
)
|
|
2,990
|
|
|
14,081
|
|
|
17,071
|
|
|
2,830
|
|
2009
|
|
Sep. 2009
|
|
40 yrs.
|
|
Retail facility in Gorzow, Poland
|
|
|
—
|
|
|
1,095
|
|
|
13,947
|
|
|
—
|
|
|
(2,767
|
)
|
|
895
|
|
|
11,380
|
|
|
12,275
|
|
|
2,352
|
|
2008
|
|
Oct. 2009
|
|
40 yrs.
|
|
Office facility in Hoffman Estates, IL
|
|
|
25,817
|
|
|
5,000
|
|
|
21,764
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
|
21,764
|
|
|
26,764
|
|
|
4,391
|
|
2009
|
|
Dec. 2009
|
|
40 yrs.
|
|
Office facility in The Woodlands, TX
|
|
|
34,828
|
|
|
1,400
|
|
|
41,502
|
|
|
—
|
|
|
—
|
|
|
1,400
|
|
|
41,502
|
|
|
42,902
|
|
|
8,387
|
|
2009
|
|
Dec. 2009
|
|
40 yrs.
|
|
Retail facilities located throughout Spain
|
|
|
—
|
|
|
32,574
|
|
|
52,101
|
|
|
—
|
|
|
(11,943
|
)
|
|
28,057
|
|
|
44,675
|
|
|
72,732
|
|
|
8,930
|
|
Various
|
|
Dec. 2009
|
|
20 yrs.
|
|
Industrial facilities in Middleburg Heights and Union Township, OH
|
|
|
5,318
|
|
|
1,000
|
|
|
10,793
|
|
|
2
|
|
|
—
|
|
|
1,000
|
|
|
10,795
|
|
|
11,795
|
|
|
2,137
|
|
1990; 1997
|
|
Feb. 2010
|
|
40 yrs.
|
|
Industrial facilities in Phoenix, AZ; Colton, Fresno, Los Angeles, Orange, Pomona, and San Diego, CA; Safety Harbor, FL; Durham, NC; and Columbia,
SC
|
|
|
12,185
|
|
|
19,001
|
|
|
13,059
|
|
|
—
|
|
|
—
|
|
|
19,001
|
|
|
13,059
|
|
|
32,060
|
|
|
2,982
|
|
Various
|
|
Mar. 2010
|
|
27 - 40 yrs.
|
|
Industrial facility in Evansville, IN
|
|
|
14,936
|
|
|
150
|
|
|
9,183
|
|
|
11,745
|
|
|
—
|
|
|
150
|
|
|
20,928
|
|
|
21,078
|
|
|
3,805
|
|
2009
|
|
Mar. 2010
|
|
40 yrs.
|
|
Warehouse facilities in Bristol, Cannock, Liverpool, Luton, Plymouth, Southampton, and Taunton, United Kingdom
|
|
|
3,905
|
|
|
8,639
|
|
|
2,019
|
|
|
—
|
|
|
(1,511
|
)
|
|
7,358
|
|
|
1,789
|
|
|
9,147
|
|
|
491
|
|
Various
|
|
Apr. 2010
|
|
28 yrs.
|
|
Warehouse facility in Zagreb, Croatia
|
|
|
—
|
|
|
31,941
|
|
|
45,904
|
|
|
—
|
|
|
(6,576
|
)
|
|
29,077
|
|
|
42,192
|
|
|
71,269
|
|
|
10,795
|
|
2001
|
|
Apr. 2010
|
|
30 yrs.
|
|
Office facilities in Tampa, FL
|
|
|
30,948
|
|
|
18,300
|
|
|
32,856
|
|
|
1,342
|
|
|
—
|
|
|
18,323
|
|
|
34,175
|
|
|
52,498
|
|
|
6,397
|
|
1985; 2000
|
|
May 2010
|
|
40 yrs.
|
|
Warehouse facility in Bowling Green, KY
|
|
|
24,864
|
|
|
1,400
|
|
|
3,946
|
|
|
33,809
|
|
|
—
|
|
|
1,400
|
|
|
37,755
|
|
|
39,155
|
|
|
5,979
|
|
2011
|
|
May 2010
|
|
40 yrs.
|
|
Land in Elorrio, Spain
|
|
|
—
|
|
|
19,924
|
|
|
3,981
|
|
|
—
|
|
|
246
|
|
|
24,151
|
|
|
—
|
|
|
24,151
|
|
|
—
|
|
N/A
|
|
Jun. 2010
|
|
N/A
|
|
Warehouse facility in Gadki, Poland
|
|
|
—
|
|
|
1,134
|
|
|
1,183
|
|
|
7,611
|
|
|
(1,491
|
)
|
|
960
|
|
|
7,477
|
|
|
8,437
|
|
|
1,261
|
|
2011
|
|
Aug. 2010
|
|
40 yrs.
|
|
Industrial and office facilities in Elberton, GA
|
|
|
—
|
|
|
560
|
|
|
2,467
|
|
|
—
|
|
|
—
|
|
|
560
|
|
|
2,467
|
|
|
3,027
|
|
|
521
|
|
1997; 2002
|
|
Sep. 2010
|
|
40 yrs.
|
|
Warehouse facilities in Rincon and Unadilla, GA
|
|
|
24,254
|
|
|
1,595
|
|
|
44,446
|
|
|
—
|
|
|
—
|
|
|
1,595
|
|
|
44,446
|
|
|
46,041
|
|
|
7,964
|
|
2000; 2006
|
|
Nov. 2010
|
|
40 yrs.
|
|
Office facility in Hartland, WI
|
|
|
2,996
|
|
|
1,402
|
|
|
2,041
|
|
|
—
|
|
|
—
|
|
|
1,402
|
|
|
2,041
|
|
|
3,443
|
|
|
418
|
|
2001
|
|
Nov. 2010
|
|
35 yrs.
|
73
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life on which
Depreciation in
Latest
Statement of
Income
is Computed
|
|
|
|
|
Initial Cost to
Company
|
|
|
|
|
|
Gross Amount at which
Carried at Close of Period
(c)
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease)
in Net
Investments
(b)
|
|
|
|
|
|
|
|
|
|
|
Cost Capitalized
Subsequent to
Acquisition
(a)
|
|
Accumulated
Depreciation
(d)
|
|
Date of
Construction
|
|
Date
Acquired
|
|
Description
|
|
Encumbrances
|
|
Land
|
|
Buildings
|
|
Land
|
|
Buildings
|
|
Total
|
|
Retail facilities in Kutina, Slavonski Brod, Spansko, and Zagreb, Croatia
|
|
|
—
|
|
|
6,700
|
|
|
24,114
|
|
|
194
|
|
|
(5,624
|
)
|
|
5,316
|
|
|
20,068
|
|
|
25,384
|
|
|
5,182
|
|
2000; 2002; 2003
|
|
Dec. 2010
|
|
30 yrs.
|
|
Warehouse and office facilities located throughout the United States
|
|
|
104,062
|
|
|
31,735
|
|
|
129,011
|
|
|
855
|
|
|
(9,861
|
)
|
|
28,511
|
|
|
123,229
|
|
|
151,740
|
|
|
24,696
|
|
Various
|
|
Dec. 2010
|
|
40 yrs.
|
|
Office facility in Madrid, Spain
|
|
|
59,012
|
|
|
22,230
|
|
|
81,508
|
|
|
—
|
|
|
(9,013
|
)
|
|
20,295
|
|
|
74,430
|
|
|
94,725
|
|
|
13,035
|
|
2002
|
|
Dec. 2010
|
|
40 yrs.
|
|
Office facility in Houston, TX
|
|
|
3,055
|
|
|
1,838
|
|
|
2,432
|
|
|
—
|
|
|
20
|
|
|
1,838
|
|
|
2,452
|
|
|
4,290
|
|
|
688
|
|
1982
|
|
Dec. 2010
|
|
25 yrs.
|
|
Retail facility in Las Vegas, NV
|
|
|
39,766
|
|
|
26,934
|
|
|
31,037
|
|
|
26,048
|
|
|
(44,166
|
)
|
|
5,070
|
|
|
34,783
|
|
|
39,853
|
|
|
4,809
|
|
2012
|
|
Dec. 2010
|
|
40 yrs.
|
|
Warehouse facilities in Oxnard and Watsonville, CA
|
|
|
40,106
|
|
|
16,036
|
|
|
67,300
|
|
|
—
|
|
|
(7,149
|
)
|
|
16,036
|
|
|
60,151
|
|
|
76,187
|
|
|
11,722
|
|
1975; 1994; 2002
|
|
Jan. 2011
|
|
10 - 40 yrs.
|
|
Warehouse facility in Dillon, SC
|
|
|
16,970
|
|
|
1,355
|
|
|
15,620
|
|
|
1,600
|
|
|
(123
|
)
|
|
1,232
|
|
|
17,220
|
|
|
18,452
|
|
|
2,821
|
|
2001
|
|
Mar. 2011
|
|
40 yrs.
|
|
Warehouse facility in Middleburg Heights, OH
|
|
|
—
|
|
|
600
|
|
|
1,690
|
|
|
—
|
|
|
—
|
|
|
600
|
|
|
1,690
|
|
|
2,290
|
|
|
286
|
|
2002
|
|
Mar. 2011
|
|
40 yrs.
|
|
Office facility in Martinsville, VA
|
|
|
7,847
|
|
|
600
|
|
|
1,998
|
|
|
11,331
|
|
|
—
|
|
|
600
|
|
|
13,329
|
|
|
13,929
|
|
|
2,038
|
|
2011
|
|
May 2011
|
|
40 yrs.
|
|
Land in Chicago, IL
|
|
|
4,643
|
|
|
7,414
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,414
|
|
|
—
|
|
|
7,414
|
|
|
—
|
|
N/A
|
|
Jun. 2011
|
|
N/A
|
|
Industrial facility in Fraser, MI
|
|
|
3,787
|
|
|
928
|
|
|
1,392
|
|
|
6,193
|
|
|
(80
|
)
|
|
928
|
|
|
7,505
|
|
|
8,433
|
|
|
1,182
|
|
2012
|
|
Sep. 2011
|
|
35 yrs.
|
|
Retail facilities located throughout Italy
|
|
|
178,792
|
|
|
91,691
|
|
|
262,377
|
|
|
—
|
|
|
(49,384
|
)
|
|
79,856
|
|
|
224,828
|
|
|
304,684
|
|
|
38,757
|
|
Various
|
|
Sep. 2011
|
|
29 - 40 yrs.
|
|
Retail facilities in Delnice, Pozega, and Sesvete, Croatia
|
|
|
—
|
|
|
2,687
|
|
|
24,820
|
|
|
15,378
|
|
|
(5,533
|
)
|
|
3,562
|
|
|
33,790
|
|
|
37,352
|
|
|
6,849
|
|
2011
|
|
Nov. 2011
|
|
30 yrs.
|
|
Retail facility in Orlando, FL
|
|
|
—
|
|
|
32,739
|
|
|
—
|
|
|
19,959
|
|
|
(32,739
|
)
|
|
5,577
|
|
|
14,382
|
|
|
19,959
|
|
|
1,354
|
|
2011
|
|
Dec. 2011
|
|
40 yrs.
|
|
Land in Hudson, NY
|
|
|
704
|
|
|
2,080
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,080
|
|
|
—
|
|
|
2,080
|
|
|
—
|
|
N/A
|
|
Dec. 2011
|
|
N/A
|
|
Office facilities in Aurora, Eagan, and Virginia, MN
|
|
|
104,499
|
|
|
13,546
|
|
|
110,173
|
|
|
—
|
|
|
993
|
|
|
13,546
|
|
|
111,166
|
|
|
124,712
|
|
|
22,491
|
|
Various
|
|
Jan. 2012
|
|
32 - 40 yrs.
|
|
Industrial facility in Chmielów, Poland
|
|
|
17,536
|
|
|
1,323
|
|
|
5,245
|
|
|
30,804
|
|
|
(443
|
)
|
|
1,977
|
|
|
34,952
|
|
|
36,929
|
|
|
3,792
|
|
2012
|
|
Apr. 2012
|
|
40 yrs.
|
|
Office facility in St. Louis, MO
|
|
|
5,374
|
|
|
954
|
|
|
4,665
|
|
|
1,685
|
|
|
—
|
|
|
954
|
|
|
6,350
|
|
|
7,304
|
|
|
897
|
|
1995
|
|
Jul. 2012
|
|
38 yrs.
|
|
Industrial facility in Avon, OH
|
|
|
3,325
|
|
|
926
|
|
|
4,975
|
|
|
—
|
|
|
—
|
|
|
926
|
|
|
4,975
|
|
|
5,901
|
|
|
823
|
|
2001
|
|
Aug. 2012
|
|
35 yrs.
|
|
Industrial facility in Elk Grove Village, IL
|
|
|
8,638
|
|
|
1,269
|
|
|
11,317
|
|
|
163
|
|
|
—
|
|
|
1,269
|
|
|
11,480
|
|
|
12,749
|
|
|
2,892
|
|
1961
|
|
Aug. 2012
|
|
40 yrs.
|
|
Education facilities in Montgomery, AL and Savannah, GA
|
|
|
15,110
|
|
|
5,255
|
|
|
16,960
|
|
|
—
|
|
|
—
|
|
|
5,255
|
|
|
16,960
|
|
|
22,215
|
|
|
2,751
|
|
1969; 2002
|
|
Sep. 2012
|
|
40 yrs.
|
|
Automotive dealerships in Huntsville, AL; Bentonville, AR; Bossier City, LA; Lee's Summit, MO; Fayetteville, TN; and Fort Worth, TX
|
|
|
—
|
|
|
17,283
|
|
|
32,225
|
|
|
—
|
|
|
(32
|
)
|
|
17,269
|
|
|
32,207
|
|
|
49,476
|
|
|
7,603
|
|
Various
|
|
Sep. 2012
|
|
16 yrs.
|
|
Office facility in Warrenville, IL
|
|
|
18,101
|
|
|
3,698
|
|
|
28,635
|
|
|
—
|
|
|
—
|
|
|
3,698
|
|
|
28,635
|
|
|
32,333
|
|
|
4,360
|
|
2002
|
|
Sep. 2012
|
|
40 yrs.
|
|
Office and warehouse facility in Zary, Poland
|
|
|
3,003
|
|
|
356
|
|
|
1,168
|
|
|
6,910
|
|
|
(680
|
)
|
|
327
|
|
|
7,427
|
|
|
7,754
|
|
|
898
|
|
2013
|
|
Sep. 2012
|
|
40 yrs.
|
|
Industrial facility in Sterling, VA
|
|
|
—
|
|
|
3,118
|
|
|
14,007
|
|
|
5,071
|
|
|
—
|
|
|
3,118
|
|
|
19,078
|
|
|
22,196
|
|
|
2,981
|
|
1980
|
|
Oct. 2012
|
|
35 yrs.
|
|
Office facility in Houston, TX
|
|
|
127,853
|
|
|
19,331
|
|
|
123,084
|
|
|
7,482
|
|
|
2,899
|
|
|
19,331
|
|
|
133,465
|
|
|
152,796
|
|
|
22,722
|
|
1973
|
|
Nov. 2012
|
|
30 yrs.
|
|
Education facility in Eagan, MN
|
|
|
8,867
|
|
|
2,104
|
|
|
11,462
|
|
|
—
|
|
|
(85
|
)
|
|
1,994
|
|
|
11,487
|
|
|
13,481
|
|
|
1,769
|
|
2003
|
|
Dec. 2012
|
|
35 yrs.
|
74
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life on which
Depreciation in
Latest
Statement of
Income
is Computed
|
|
|
|
|
Initial Cost to
Company
|
|
|
|
|
|
Gross Amount at which
Carried at Close of Period
(c)
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease)
in Net
Investments
(b)
|
|
|
|
|
|
|
|
|
|
|
Cost Capitalized
Subsequent to
Acquisition
(a)
|
|
Accumulated
Depreciation
(d)
|
|
Date of
Construction
|
|
Date
Acquired
|
|
Description
|
|
Encumbrances
|
|
Land
|
|
Buildings
|
|
Land
|
|
Buildings
|
|
Total
|
|
Warehouse facility in Saitama Prefecture, Japan
|
|
|
—
|
|
|
17,292
|
|
|
28,575
|
|
|
—
|
|
|
(12,392
|
)
|
|
12,620
|
|
|
20,855
|
|
|
33,475
|
|
|
4,204
|
|
2007
|
|
Dec. 2012
|
|
26 yrs.
|
|
Retail facilities in Bjelovar, Karlovac, Krapina, Krizevci, Metkovic, Novigrad, Porec, Umag, and Vodnjan, Croatia
|
|
|
21,041
|
|
|
5,059
|
|
|
28,294
|
|
|
6,634
|
|
|
(3,453
|
)
|
|
6,531
|
|
|
30,003
|
|
|
36,534
|
|
|
3,997
|
|
Various
|
|
Dec. 2012
|
|
32 - 40 yrs.
|
|
Industrial facility in Portage, WI
|
|
|
4,524
|
|
|
3,338
|
|
|
4,556
|
|
|
502
|
|
|
—
|
|
|
3,338
|
|
|
5,058
|
|
|
8,396
|
|
|
962
|
|
1970
|
|
Jan. 2013
|
|
30 yrs.
|
|
Retail facility in Dallas, TX
|
|
|
9,431
|
|
|
4,441
|
|
|
9,649
|
|
|
87
|
|
|
—
|
|
|
4,441
|
|
|
9,736
|
|
|
14,177
|
|
|
1,207
|
|
1913
|
|
Feb. 2013
|
|
40 yrs.
|
|
Warehouse facility in Dillon, SC
|
|
|
25,856
|
|
|
3,096
|
|
|
2,281
|
|
|
37,989
|
|
|
(566
|
)
|
|
2,530
|
|
|
40,270
|
|
|
42,800
|
|
|
3,608
|
|
2013
|
|
Mar. 2013
|
|
40 yrs.
|
|
Land in Chicago, IL
|
|
|
—
|
|
|
15,459
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,459
|
|
|
—
|
|
|
15,459
|
|
|
—
|
|
N/A
|
|
Apr. 2013
|
|
N/A
|
|
Office facility in Northbrook, IL
|
|
|
5,369
|
|
|
—
|
|
|
942
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
942
|
|
|
942
|
|
|
284
|
|
2007
|
|
May 2013
|
|
40 yrs.
|
|
Industrial facility in Wageningen, Netherlands
|
|
|
18,853
|
|
|
4,790
|
|
|
24,301
|
|
|
47
|
|
|
(2,402
|
)
|
|
4,438
|
|
|
22,298
|
|
|
26,736
|
|
|
2,565
|
|
2013
|
|
Jul. 2013
|
|
40 yrs.
|
|
Warehouse facilities in Gadki, Poland
|
|
|
33,703
|
|
|
9,219
|
|
|
48,578
|
|
|
121
|
|
|
(4,706
|
)
|
|
8,469
|
|
|
44,743
|
|
|
53,212
|
|
|
5,466
|
|
2007; 2010
|
|
Jul. 2013
|
|
40 yrs.
|
|
Automotive dealership in Lewisville, TX
|
|
|
9,145
|
|
|
3,269
|
|
|
9,605
|
|
|
—
|
|
|
—
|
|
|
3,269
|
|
|
9,605
|
|
|
12,874
|
|
|
1,465
|
|
2004
|
|
Aug. 2013
|
|
39 yrs.
|
|
Office facility in Auburn Hills, MI
|
|
|
5,806
|
|
|
789
|
|
|
7,163
|
|
|
—
|
|
|
—
|
|
|
789
|
|
|
7,163
|
|
|
7,952
|
|
|
823
|
|
2012
|
|
Oct. 2013
|
|
40 yrs.
|
|
Office facility in Haibach, Germany
|
|
|
9,249
|
|
|
2,544
|
|
|
11,114
|
|
|
—
|
|
|
(1,534
|
)
|
|
2,258
|
|
|
9,866
|
|
|
12,124
|
|
|
1,547
|
|
1993
|
|
Oct. 2013
|
|
30 yrs.
|
|
Office facility in Tempe, AZ
|
|
|
14,550
|
|
|
—
|
|
|
16,996
|
|
|
4,272
|
|
|
—
|
|
|
—
|
|
|
21,268
|
|
|
21,268
|
|
|
2,373
|
|
2000
|
|
Dec. 2013
|
|
40 yrs.
|
|
Office facility in Tucson, AZ
|
|
|
—
|
|
|
2,440
|
|
|
11,175
|
|
|
—
|
|
|
—
|
|
|
2,440
|
|
|
11,175
|
|
|
13,615
|
|
|
1,355
|
|
2002
|
|
Feb. 2014
|
|
38 yrs.
|
|
Industrial facility in Drunen, Netherlands
|
|
|
10,296
|
|
|
990
|
|
|
6,328
|
|
|
7,922
|
|
|
1,693
|
|
|
1,470
|
|
|
15,463
|
|
|
16,933
|
|
|
1,025
|
|
2014
|
|
Apr. 2014
|
|
40 yrs.
|
|
Industrial facility in New Concord, OH
|
|
|
1,532
|
|
|
784
|
|
|
2,636
|
|
|
—
|
|
|
—
|
|
|
784
|
|
|
2,636
|
|
|
3,420
|
|
|
337
|
|
1999
|
|
Apr. 2014
|
|
35 - 40 yrs.
|
|
Office facility in Krakow, Poland
|
|
|
5,669
|
|
|
2,771
|
|
|
6,549
|
|
|
—
|
|
|
(682
|
)
|
|
2,568
|
|
|
6,070
|
|
|
8,638
|
|
|
571
|
|
2003
|
|
Sep. 2014
|
|
40 yrs.
|
|
Retail facility in Gelsenkirchen, Germany
|
|
|
14,232
|
|
|
2,060
|
|
|
17,534
|
|
|
123
|
|
|
(985
|
)
|
|
1,956
|
|
|
16,776
|
|
|
18,732
|
|
|
1,682
|
|
2000
|
|
Oct. 2014
|
|
35 yrs.
|
|
Office facility in Plymouth, Minnesota
|
|
|
22,117
|
|
|
2,601
|
|
|
15,599
|
|
|
5,835
|
|
|
926
|
|
|
2,601
|
|
|
22,360
|
|
|
24,961
|
|
|
2,665
|
|
1999
|
|
Dec. 2014
|
|
40 yrs.
|
|
Office facility in San Antonio, TX
|
|
|
13,919
|
|
|
3,131
|
|
|
13,124
|
|
|
—
|
|
|
—
|
|
|
3,131
|
|
|
13,124
|
|
|
16,255
|
|
|
1,148
|
|
2002
|
|
Jan. 2015
|
|
40 yrs.
|
|
Warehouse facilities in Mszczonów and Tomaszów Mazowiecki, Poland
|
|
|
33,497
|
|
|
10,108
|
|
|
35,856
|
|
|
8
|
|
|
2,719
|
|
|
10,704
|
|
|
37,987
|
|
|
48,691
|
|
|
3,785
|
|
1995; 2000
|
|
Feb. 2015
|
|
31 yrs.
|
|
Retail facilities in Joliet, IL; Fargo, ND; and Ashwaubenon, Brookfield, Greendale, and Wauwatosa, WI
|
|
|
41,388
|
|
|
20,936
|
|
|
34,627
|
|
|
332
|
|
|
—
|
|
|
20,936
|
|
|
34,959
|
|
|
55,895
|
|
|
3,708
|
|
Various
|
|
Jun. 2015
|
|
27 - 29 yrs.
|
|
Warehouse facility in Sered, Slovakia
|
|
|
17,867
|
|
|
4,059
|
|
|
15,297
|
|
|
9,920
|
|
|
2,557
|
|
|
4,425
|
|
|
27,408
|
|
|
31,833
|
|
|
1,712
|
|
2004
|
|
Jul. 2015
|
|
36 yrs.
|
|
Industrial facility in Tuchomerice, Czech Republic
|
|
|
18,294
|
|
|
9,424
|
|
|
21,860
|
|
|
256
|
|
|
1,619
|
|
|
10,381
|
|
|
22,778
|
|
|
33,159
|
|
|
1,411
|
|
1998
|
|
Dec. 2015
|
|
40 yrs.
|
|
Office facility in Warsaw, Poland
|
|
|
41,189
|
|
|
—
|
|
|
54,296
|
|
|
9
|
|
|
5,518
|
|
|
—
|
|
|
59,823
|
|
|
59,823
|
|
|
3,170
|
|
2015
|
|
Dec. 2015
|
|
40 yrs.
|
|
Net-lease student housing facility in Jacksonville, FL
|
|
|
11,939
|
|
|
870
|
|
|
15,787
|
|
|
—
|
|
|
—
|
|
|
870
|
|
|
15,787
|
|
|
16,657
|
|
|
824
|
|
2015
|
|
Jan. 2016
|
|
40 yrs.
|
|
Warehouse facilities in Houston, TX
|
|
|
—
|
|
|
2,210
|
|
|
1,362
|
|
|
—
|
|
|
—
|
|
|
2,210
|
|
|
1,362
|
|
|
3,572
|
|
|
89
|
|
1972
|
|
Feb. 2016
|
|
38 yrs.
|
|
Office facility in Oak Creek, WI
|
|
|
—
|
|
|
2,801
|
|
|
11,301
|
|
|
—
|
|
|
—
|
|
|
2,801
|
|
|
11,301
|
|
|
14,102
|
|
|
546
|
|
2000
|
|
Sep. 2016
|
|
35 yrs.
|
75
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life on which
Depreciation in
Latest
Statement of
Income
is Computed
|
|
|
|
|
Initial Cost to
Company
|
|
|
|
|
|
Gross Amount at which
Carried at Close of Period
(c)
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease)
in Net
Investments
(b)
|
|
|
|
|
|
|
|
|
|
|
Cost Capitalized
Subsequent to
Acquisition
(a)
|
|
Accumulated
Depreciation
(d)
|
|
Date of
Construction
|
|
Date
Acquired
|
|
Description
|
|
Encumbrances
|
|
Land
|
|
Buildings
|
|
Land
|
|
Buildings
|
|
Total
|
|
Warehouse facility in Perrysburg, OH
|
|
|
—
|
|
|
774
|
|
|
11,756
|
|
|
—
|
|
|
—
|
|
|
774
|
|
|
11,756
|
|
|
12,530
|
|
|
594
|
|
1974
|
|
Sep. 2016
|
|
30 yrs.
|
|
Warehouse facilities in Shelbyville, IN; Kalamazoo, MI; Tiffin, OH; Andersonville, TN; and Millwood, WV
|
|
|
—
|
|
|
2,706
|
|
|
24,178
|
|
|
10,622
|
|
|
—
|
|
|
3,086
|
|
|
34,420
|
|
|
37,506
|
|
|
1,405
|
|
Various
|
|
Nov. 2016
|
|
28 - 40 yrs.
|
|
Warehouse facility in Zabia Wola, Poland
|
|
|
18,876
|
|
|
3,441
|
|
|
20,654
|
|
|
118
|
|
|
3,214
|
|
|
3,897
|
|
|
23,530
|
|
|
27,427
|
|
|
701
|
|
1999
|
|
Nov. 2016
|
|
40 yrs.
|
|
Warehouse facility in Kaunas, Lithuania
|
|
|
43,141
|
|
|
2,194
|
|
|
42,109
|
|
|
167
|
|
|
5,636
|
|
|
2,472
|
|
|
47,634
|
|
|
50,106
|
|
|
1,325
|
|
2008
|
|
Dec. 2016
|
|
40 yrs.
|
|
Office facility in Buffalo Grove, IL
|
|
|
—
|
|
|
2,035
|
|
|
7,444
|
|
|
—
|
|
|
—
|
|
|
2,035
|
|
|
7,444
|
|
|
9,479
|
|
|
208
|
|
1992
|
|
Feb. 2017
|
|
38 yrs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,493,859
|
|
$
|
646,783
|
|
$
|
2,044,703
|
|
$
|
302,211
|
|
$
|
(225,683
|
)
|
$
|
567,113
|
|
$
|
2,200,901
|
|
$
|
2,768,014
|
|
$
|
354,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Cost to
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease)
in Net
Investments
(b)
|
|
Gross Amount at
which Carried at
Close of Period
Total
|
|
|
|
|
|
|
|
|
Cost Capitalized
Subsequent to
Acquisition
(a)
|
|
Date of
Construction
|
|
Date
Acquired
|
|
Description
|
|
Encumbrances
|
|
Land
|
|
Buildings
|
|
Direct Financing Method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial and office facilities in Nagold, Germany
|
|
$
|
—
|
|
$
|
6,012
|
|
$
|
41,493
|
|
$
|
—
|
|
$
|
(27,418
|
)
|
$
|
20,087
|
|
1937; 1994
|
|
Aug. 2008
|
|
Industrial facilities in Mayodan, Sanford, and Stoneville, NC
|
|
|
—
|
|
|
3,100
|
|
|
35,766
|
|
|
—
|
|
|
(3,152
|
)
|
|
35,714
|
|
1992; 1997; 1998
|
|
Dec. 2008
|
|
Industrial facility in Glendale Heights, IL
|
|
|
16,562
|
|
|
3,820
|
|
|
11,148
|
|
|
18,245
|
|
|
3,172
|
|
|
36,385
|
|
1991
|
|
Jan. 2009
|
|
Office facility in New York City, NY
|
|
|
100,426
|
|
|
—
|
|
|
233,720
|
|
|
—
|
|
|
15,680
|
|
|
249,400
|
|
2007
|
|
Mar. 2009
|
|
Industrial facilities in Colton, Fresno, Los Angeles, Orange, Pomona, and San Diego, CA; Holly Hill, FL; Rockmart, GA; Ooltewah, TN; and Dallas,
TX
|
|
|
8,973
|
|
|
1,730
|
|
|
20,778
|
|
|
—
|
|
|
(1,094
|
)
|
|
21,414
|
|
Various
|
|
Mar. 2010
|
|
Warehouse facilities in Bristol, Leeds, Liverpool, Luton, Newport, Plymouth, and Southampton, United Kingdom
|
|
|
8,780
|
|
|
508
|
|
|
24,009
|
|
|
—
|
|
|
(5,052
|
)
|
|
19,465
|
|
Various
|
|
Apr. 2010
|
|
Retail facilities in Dugo Selo and Samobor, Croatia
|
|
|
—
|
|
|
1,804
|
|
|
11,618
|
|
|
—
|
|
|
(1,472
|
)
|
|
11,950
|
|
2002; 2003
|
|
Dec. 2010
|
|
Warehouse facility in Oxnard, CA
|
|
|
5,658
|
|
|
—
|
|
|
8,957
|
|
|
—
|
|
|
137
|
|
|
9,094
|
|
1975
|
|
Jan. 2011
|
|
Industrial facilities in Bartow, FL; Momence, IL; Smithfield, NC; Hudson, NY; and Ardmore, OK
|
|
|
20,454
|
|
|
3,750
|
|
|
50,177
|
|
|
—
|
|
|
6,553
|
|
|
60,480
|
|
Various
|
|
Apr. 2011
|
|
Industrial facility in Clarksville, TN
|
|
|
3,971
|
|
|
600
|
|
|
7,291
|
|
|
—
|
|
|
451
|
|
|
8,342
|
|
1998
|
|
Aug. 2011
|
|
Industrial facility in Countryside, IL
|
|
|
1,920
|
|
|
425
|
|
|
1,800
|
|
|
—
|
|
|
38
|
|
|
2,263
|
|
1981
|
|
Dec. 2011
|
|
Industrial facility in Bluffton, IN
|
|
|
1,834
|
|
|
264
|
|
|
3,407
|
|
|
—
|
|
|
19
|
|
|
3,690
|
|
1975
|
|
Apr. 2014
|
|
Retail facilities in Joliet, Illinois and Greendale, Wisconsin
|
|
|
15,568
|
|
|
—
|
|
|
19,002
|
|
|
2
|
|
|
626
|
|
|
19,630
|
|
1970; 1978
|
|
Jun. 2015
|
|
Warehouse facility in Houston, TX
|
|
|
—
|
|
|
—
|
|
|
4,233
|
|
|
—
|
|
|
48
|
|
|
4,281
|
|
1972
|
|
Feb. 2016
|
|
Industrial facilities in Sedalia, MO; Lumberton and Mount Airy, NC; and Wilkes-Barre, PA
|
|
|
—
|
|
|
2,142
|
|
|
10,085
|
|
|
50
|
|
|
(5,244
|
)
|
|
7,033
|
|
Various
|
|
Apr. 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
184,146
|
|
$
|
24,155
|
|
$
|
483,484
|
|
$
|
18,297
|
|
$
|
(16,708
|
)
|
$
|
509,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life on which
Depreciation in
Latest
Statement of
Income
is Computed
|
|
|
|
|
Initial Cost to
Company
|
|
|
|
|
|
Gross Amount at which
Carried at Close of
Period
(c)
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease)
in Net
Investments
(b)
|
|
|
|
|
|
|
|
|
|
|
Cost Capitalized
Subsequent to
Acquisition
(a)
|
|
Accumulated
Depreciation
(d)
|
|
Date of
Construction
|
|
Date
Acquired
|
|
Description
|
|
Encumbrances
|
|
Land
|
|
Buildings
|
|
Land
|
|
Buildings
|
|
Total
|
|
Operating Real Estate – Self-Storage Facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fort Worth, TX
|
|
$
|
3,539
|
|
$
|
610
|
|
$
|
2,672
|
|
$
|
62
|
|
$
|
36
|
|
$
|
610
|
|
$
|
2,770
|
|
$
|
3,380
|
|
$
|
594
|
|
2004
|
|
Apr. 2011
|
|
33 yrs.
|
|
Palm Springs, CA
|
|
|
5,932
|
|
|
1,287
|
|
|
3,124
|
|
|
106
|
|
|
36
|
|
|
1,287
|
|
|
3,266
|
|
|
4,553
|
|
|
750
|
|
1989
|
|
Jun. 2011
|
|
30 yrs.
|
|
Kailua-Kona, HI
|
|
|
3,803
|
|
|
1,000
|
|
|
1,108
|
|
|
70
|
|
|
38
|
|
|
1,000
|
|
|
1,216
|
|
|
2,216
|
|
|
343
|
|
1987
|
|
Jun. 2011
|
|
30 yrs.
|
|
Chicago, IL
|
|
|
3,483
|
|
|
600
|
|
|
4,124
|
|
|
217
|
|
|
10
|
|
|
600
|
|
|
4,351
|
|
|
4,951
|
|
|
872
|
|
1916
|
|
Jun. 2011
|
|
25 yrs.
|
|
Chicago, IL
|
|
|
2,490
|
|
|
400
|
|
|
2,074
|
|
|
229
|
|
|
4
|
|
|
400
|
|
|
2,307
|
|
|
2,707
|
|
|
478
|
|
1968
|
|
Jun. 2011
|
|
30 yrs.
|
|
Rockford, IL
|
|
|
1,807
|
|
|
548
|
|
|
1,881
|
|
|
51
|
|
|
22
|
|
|
548
|
|
|
1,954
|
|
|
2,502
|
|
|
526
|
|
1979
|
|
Jun. 2011
|
|
25 yrs.
|
|
Rockford, IL
|
|
|
586
|
|
|
114
|
|
|
633
|
|
|
139
|
|
|
41
|
|
|
114
|
|
|
813
|
|
|
927
|
|
|
242
|
|
1979
|
|
Jun. 2011
|
|
25 yrs.
|
|
Rockford, IL
|
|
|
2,298
|
|
|
380
|
|
|
2,321
|
|
|
68
|
|
|
(98
|
)
|
|
337
|
|
|
2,334
|
|
|
2,671
|
|
|
618
|
|
1957
|
|
Jun. 2011
|
|
25 yrs.
|
|
Kihei, HI
|
|
|
5,064
|
|
|
2,523
|
|
|
7,481
|
|
|
818
|
|
|
26
|
|
|
2,523
|
|
|
8,325
|
|
|
10,848
|
|
|
1,388
|
|
1991
|
|
Aug. 2011
|
|
40 yrs.
|
|
National City, CA
|
|
|
2,409
|
|
|
3,158
|
|
|
1,483
|
|
|
185
|
|
|
17
|
|
|
3,158
|
|
|
1,685
|
|
|
4,843
|
|
|
400
|
|
1987
|
|
Aug. 2011
|
|
28 yrs.
|
|
Mundelein, IL
|
|
|
3,405
|
|
|
1,080
|
|
|
5,287
|
|
|
264
|
|
|
69
|
|
|
1,080
|
|
|
5,620
|
|
|
6,700
|
|
|
1,474
|
|
1991
|
|
Aug. 2011
|
|
25 yrs.
|
|
Pearl City, HI
|
|
|
6,145
|
|
|
—
|
|
|
5,141
|
|
|
774
|
|
|
22
|
|
|
—
|
|
|
5,937
|
|
|
5,937
|
|
|
1,843
|
|
1977
|
|
Aug. 2011
|
|
20 yrs.
|
|
Palm Springs, CA
|
|
|
1,968
|
|
|
1,019
|
|
|
2,131
|
|
|
435
|
|
|
7
|
|
|
1,019
|
|
|
2,573
|
|
|
3,592
|
|
|
583
|
|
1987
|
|
Sep. 2011
|
|
28 yrs.
|
|
Loves Park, IL
|
|
|
1,127
|
|
|
394
|
|
|
3,390
|
|
|
137
|
|
|
(122
|
)
|
|
394
|
|
|
3,405
|
|
|
3,799
|
|
|
1,069
|
|
1997
|
|
Sep. 2011
|
|
20 yrs.
|
|
Mundelein, IL
|
|
|
684
|
|
|
535
|
|
|
1,757
|
|
|
157
|
|
|
21
|
|
|
535
|
|
|
1,935
|
|
|
2,470
|
|
|
622
|
|
1989
|
|
Sep. 2011
|
|
20 yrs.
|
|
Chicago, IL
|
|
|
3,025
|
|
|
1,049
|
|
|
5,672
|
|
|
254
|
|
|
7
|
|
|
1,049
|
|
|
5,933
|
|
|
6,982
|
|
|
1,237
|
|
1988
|
|
Sep. 2011
|
|
30 yrs.
|
|
Beaumont, CA
|
|
|
2,586
|
|
|
1,616
|
|
|
2,873
|
|
|
94
|
|
|
14
|
|
|
1,616
|
|
|
2,981
|
|
|
4,597
|
|
|
600
|
|
1992
|
|
Nov. 2011
|
|
40 yrs.
|
|
San Bernardino, CA
|
|
|
990
|
|
|
698
|
|
|
1,397
|
|
|
95
|
|
|
15
|
|
|
698
|
|
|
1,507
|
|
|
2,205
|
|
|
292
|
|
1989
|
|
Nov. 2011
|
|
40 yrs.
|
|
Peoria, IL
|
|
|
3,009
|
|
|
549
|
|
|
2,424
|
|
|
37
|
|
|
6
|
|
|
549
|
|
|
2,467
|
|
|
3,016
|
|
|
634
|
|
1990
|
|
Nov. 2011
|
|
35 yrs.
|
|
East Peoria, IL
|
|
|
2,281
|
|
|
409
|
|
|
1,816
|
|
|
64
|
|
|
8
|
|
|
409
|
|
|
1,888
|
|
|
2,297
|
|
|
457
|
|
1986
|
|
Nov. 2011
|
|
35 yrs.
|
|
Loves Park, IL
|
|
|
1,712
|
|
|
439
|
|
|
998
|
|
|
251
|
|
|
155
|
|
|
439
|
|
|
1,404
|
|
|
1,843
|
|
|
339
|
|
1978
|
|
Nov. 2011
|
|
35 yrs.
|
|
Hesperia, CA
|
|
|
843
|
|
|
648
|
|
|
1,377
|
|
|
151
|
|
|
8
|
|
|
648
|
|
|
1,536
|
|
|
2,184
|
|
|
313
|
|
1989
|
|
Dec. 2011
|
|
40 yrs.
|
|
Cherry Valley, IL
|
|
|
1,658
|
|
|
1,076
|
|
|
1,763
|
|
|
35
|
|
|
18
|
|
|
1,076
|
|
|
1,816
|
|
|
2,892
|
|
|
690
|
|
1988
|
|
Jul. 2012
|
|
20 yrs.
|
|
Fayetteville, NC
|
|
|
3,093
|
|
|
1,677
|
|
|
3,116
|
|
|
67
|
|
|
10
|
|
|
1,677
|
|
|
3,193
|
|
|
4,870
|
|
|
743
|
|
2001
|
|
Sep. 2012
|
|
34 yrs.
|
|
Cathedral City, CA
|
|
|
1,288
|
|
|
—
|
|
|
2,275
|
|
|
17
|
|
|
15
|
|
|
—
|
|
|
2,307
|
|
|
2,307
|
|
|
428
|
|
1990
|
|
Mar. 2013
|
|
34 yrs.
|
|
Hilo, HI
|
|
|
7,758
|
|
|
296
|
|
|
4,996
|
|
|
45
|
|
|
—
|
|
|
296
|
|
|
5,041
|
|
|
5,337
|
|
|
587
|
|
2007
|
|
Jun. 2013
|
|
40 yrs.
|
|
Clearwater, FL
|
|
|
3,684
|
|
|
924
|
|
|
2,966
|
|
|
66
|
|
|
14
|
|
|
924
|
|
|
3,046
|
|
|
3,970
|
|
|
463
|
|
2001
|
|
Jul. 2013
|
|
32 yrs.
|
|
Winder, GA
|
|
|
954
|
|
|
546
|
|
|
30
|
|
|
7
|
|
|
8
|
|
|
546
|
|
|
45
|
|
|
591
|
|
|
16
|
|
2006
|
|
Jul. 2013
|
|
31 yrs.
|
|
Winder, GA
|
|
|
3,281
|
|
|
495
|
|
|
1,253
|
|
|
55
|
|
|
9
|
|
|
495
|
|
|
1,317
|
|
|
1,812
|
|
|
323
|
|
2001
|
|
Jul. 2013
|
|
25 yrs.
|
|
Orlando, FL
|
|
|
5,614
|
|
|
1,064
|
|
|
4,889
|
|
|
195
|
|
|
18
|
|
|
1,064
|
|
|
5,102
|
|
|
6,166
|
|
|
701
|
|
2000
|
|
Aug. 2013
|
|
35 yrs.
|
|
Palm Coast, FL
|
|
|
3,372
|
|
|
1,749
|
|
|
3,285
|
|
|
117
|
|
|
155
|
|
|
1,749
|
|
|
3,557
|
|
|
5,306
|
|
|
691
|
|
2001
|
|
Sep. 2013
|
|
29 yrs.
|
|
Holiday, FL
|
|
|
2,218
|
|
|
1,829
|
|
|
1,097
|
|
|
652
|
|
|
9
|
|
|
1,829
|
|
|
1,758
|
|
|
3,587
|
|
|
314
|
|
1975
|
|
Nov. 2013
|
|
23 yrs.
|
78
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
December 31, 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life on which
Depreciation in
Latest
Statement of
Income
is Computed
|
|
|
|
|
Initial Cost to
Company
|
|
|
|
|
|
Gross Amount at which
Carried at Close of
Period
(c)
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease)
in Net
Investments
(b)
|
|
|
|
|
|
|
|
|
|
|
Cost Capitalized
Subsequent to
Acquisition
(a)
|
|
Accumulated
Depreciation
(d)
|
|
Date of
Construction
|
|
Date
Acquired
|
|
Description
|
|
Encumbrances
|
|
Land
|
|
Buildings
|
|
Land
|
|
Buildings
|
|
Total
|
|
New York City, NY
|
|
|
12,704
|
|
|
5,692
|
|
|
16,076
|
|
|
9
|
|
|
—
|
|
|
5,692
|
|
|
16,085
|
|
|
21,777
|
|
|
694
|
|
1963
|
|
Apr. 2016
|
|
40 yrs.
|
|
New York City, NY
|
|
|
21,908
|
|
|
5,823
|
|
|
31,032
|
|
|
3
|
|
|
—
|
|
|
5,823
|
|
|
31,035
|
|
|
36,858
|
|
|
1,350
|
|
2005
|
|
Apr. 2016
|
|
40 yrs.
|
|
New York City, NY
|
|
|
23,376
|
|
|
6,184
|
|
|
35,188
|
|
|
18
|
|
|
—
|
|
|
6,184
|
|
|
35,206
|
|
|
41,390
|
|
|
1,558
|
|
2007
|
|
Apr. 2016
|
|
40 yrs.
|
|
New York City, NY
|
|
|
15,908
|
|
|
8,120
|
|
|
18,502
|
|
|
5
|
|
|
—
|
|
|
8,120
|
|
|
18,507
|
|
|
26,627
|
|
|
922
|
|
1948
|
|
Apr. 2016
|
|
35 yrs.
|
|
New York City, NY
|
|
|
5,452
|
|
|
1,157
|
|
|
10,167
|
|
|
80
|
|
|
—
|
|
|
1,157
|
|
|
10,247
|
|
|
11,404
|
|
|
447
|
|
1928
|
|
Apr. 2016
|
|
40 yrs.
|
|
Operating Real Estate – Hotel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miami, FL
|
|
|
—
|
|
|
34,397
|
|
|
46,261
|
|
|
—
|
|
|
—
|
|
|
34,397
|
|
|
46,261
|
|
|
80,658
|
|
|
486
|
|
1940
|
|
Oct. 2017
|
|
40 yrs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
171,454
|
|
$
|
90,085
|
|
$
|
244,060
|
|
$
|
6,029
|
|
$
|
598
|
|
$
|
90,042
|
|
$
|
250,730
|
|
$
|
340,772
|
|
$
|
26,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Consists
of the cost of improvements subsequent to acquisition and acquisition costs, including construction costs on build-to-suit transactions, legal fees,
appraisal fees, title costs, and other related professional fees. For business combinations, transaction costs are excluded.
-
(b)
-
The
increase (decrease) in net investment was primarily due to (i) changes in foreign currency exchange rates, (ii) sales of properties,
(iii) impairment charges, and (iv) the amortization of unearned income from net investment in direct financing leases, which produces a periodic rate of return that at times may be
greater or less than lease payments received.
-
(c)
-
Excludes
(i) gross lease intangible assets of $741.0 million and the related accumulated amortization of $245.9 million, (ii) gross lease
intangible liabilities of $83.4 million and the related accumulated amortization of $22.2 million, and (iii) real estate under construction of $4.6 million.
-
(d)
-
A
reconciliation of real estate and accumulated depreciation follows:
79
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Real Estate Subject to
Operating Leases
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Beginning balance
|
|
$
|
2,745,424
|
|
$
|
2,658,877
|
|
$
|
2,396,715
|
|
|
Foreign currency translation adjustment
|
|
|
145,945
|
|
|
(36,617
|
)
|
|
(99,252
|
)
|
|
Dispositions
|
|
|
(127,577
|
)
|
|
—
|
|
|
—
|
|
|
Additions
|
|
|
9,481
|
|
|
142,142
|
|
|
222,739
|
|
|
Impairment charges
|
|
|
(7,065
|
)
|
|
(29,183
|
)
|
|
—
|
|
|
Reclassification from real estate under construction
|
|
|
1,024
|
|
|
21,825
|
|
|
129,225
|
|
|
Improvements
|
|
|
782
|
|
|
7,262
|
|
|
9,450
|
|
|
Reclassification to assets held for sale
|
|
|
—
|
|
|
(18,882
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
2,768,014
|
|
$
|
2,745,424
|
|
$
|
2,658,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Accumulated
Depreciation for Real Estate Subject
to Operating Leases
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Beginning balance
|
|
$
|
280,657
|
|
$
|
225,867
|
|
$
|
175,478
|
|
|
Depreciation expense
|
|
|
64,676
|
|
|
62,808
|
|
|
57,831
|
|
|
Foreign currency translation adjustment
|
|
|
15,045
|
|
|
(3,986
|
)
|
|
(7,442
|
)
|
|
Dispositions
|
|
|
(5,710
|
)
|
|
—
|
|
|
—
|
|
|
Reclassification to assets held for sale
|
|
|
—
|
|
|
(4,032
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
354,668
|
|
$
|
280,657
|
|
$
|
225,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Operating Real Estate
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Beginning balance
|
|
$
|
258,971
|
|
$
|
275,521
|
|
$
|
272,859
|
|
|
Additions
|
|
|
80,658
|
|
|
137,958
|
|
|
—
|
|
|
Improvements
|
|
|
1,143
|
|
|
2,443
|
|
|
2,662
|
|
|
Dispositions
|
|
|
—
|
|
|
(156,951
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
340,772
|
|
$
|
258,971
|
|
$
|
275,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Accumulated
Depreciation for Operating
Real Estate
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Beginning balance
|
|
$
|
18,876
|
|
$
|
30,308
|
|
$
|
22,217
|
|
|
Depreciation expense
|
|
|
7,211
|
|
|
7,791
|
|
|
8,091
|
|
|
Dispositions
|
|
|
—
|
|
|
(19,223
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
26,087
|
|
$
|
18,876
|
|
$
|
30,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2017, the aggregate cost of real estate that we and our consolidated subsidiaries own for federal income tax purposes was approximately $4.2 billion.
80
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
SCHEDULE IV – MORTGAGE LOANS ON REAL ESTATE
December 31, 2017
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Interest Rate
|
|
Final Maturity Date
|
|
Fair Value
|
|
Carrying Amount
|
|
|
Financing agreement – 1185 Broadway LLC
|
|
|
10.0
|
%
|
Apr. 2018
|
|
$
|
31,500
|
|
$
|
31,500
|
|
|
Financing agreement – I-drive
|
|
|
9.0
|
%
|
Apr. 2019
|
|
|
34,000
|
|
|
34,000
|
|
|
Financing agreement – I-drive Wheel
|
|
|
6.5
|
%
|
Dec. 2018
|
|
|
35,000
|
|
|
35,000
|
|
|
Financing agreement – I-drive developer
|
|
|
6.5
|
%
|
Dec. 2018
|
|
|
5,000
|
|
|
5,000
|
|
|
Financing agreement – I-drive developer
|
|
|
6.5
|
%
|
Dec. 2018
|
|
|
5,000
|
|
|
5,000
|
|
81
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED
NOTES TO SCHEDULE IV – MORTGAGE LOANS ON REAL ESTATE
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Mortgage Loans on
Real Estate
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Balance
|
|
$
|
31,500
|
|
$
|
44,044
|
|
$
|
40,000
|
|
|
Additions
|
|
|
79,000
|
|
|
—
|
|
|
42,600
|
|
|
Repayment
|
|
|
—
|
|
|
(12,600
|
)
|
|
(40,000
|
)
|
|
Accretion
|
|
|
—
|
|
|
56
|
|
|
1,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
110,500
|
|
$
|
31,500
|
|
$
|
44,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
QuickLinks
Report of Independent Registered Public Accounting Firm
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share amounts)
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands)
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED CONSOLIDATED STATEMENTS OF EQUITY Years Ended December 31, 2017, 2016, and 2015 (in thousands, except share and per share amounts)
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 2017, 2016, and 2015 (in thousands)
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED SCHEDULE IV – MORTGAGE LOANS ON REAL ESTATE December 31, 2017 (dollars in thousands)
CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED NOTES TO SCHEDULE IV – MORTGAGE LOANS ON REAL ESTATE (in thousands)
