W. P. Carey Inc. [WPC] Filings

10-Q 1 wpc-20240630.htm 10-Q wpc-20240630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2024

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

For the transition period from__________ to __________

Commission File Number: 001-13779

W. P. Carey Inc.

(Exact name of registrant as specified in its charter)


Maryland		45-4549771
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

One Manhattan West, 395 9th Avenue, 58th Floor
New York,	New York	10001
(Address of principal executive offices)		(Zip Code)

Investor Relations (212) 492-8920

(212) 492-1100

(Registrant’s telephone numbers, including area code)

(Former name or former address, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 Par Value

WPC

New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Registrant has 218,847,015 shares of common stock, $0.001 par value, outstanding at July 26, 2024.

INDEX


		Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
	Consolidated Balance Sheets as of June 30 , 2024 and December 31, 2023	3
	Consolidated Statements of Income for the Three and Six Months Ended June 30 , 2024 and 2023	4
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30 , 2024 and 2023	5
	Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2024 and 2023	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023	8
	Notes to Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		36
Item 3. Quantitative and Qualitative Disclosures About Market Risk		56
Item 4. Controls and Procedures		58

PART II — OTHER INFORMATION
Item 6. Exhibits		59
Signatures		60

W. P. Carey 6/30/2024 10-Q – 1

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”), including Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of Part I of this Report, contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements include, but are not limited to, statements regarding: the NLOP Spin-Off (as defined herein); our expectations surrounding the impact of the broader macroeconomic environment and the ability of tenants to pay rent; our financial condition, liquidity, results of operations, and prospects; our future capital expenditure and leverage levels, debt service obligations, and plans to fund our liquidity needs; prospective statements regarding our access to the capital markets, including our “at-the-market” program (“ATM Program”); statements that we make regarding our ability to remain qualified for taxation as a real estate investment trust (“REIT”); and the impact of recently issued accounting pronouncements and other regulatory activity.

These statements are based on the current expectations of our management. It is important to note that our actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Other unknown or unpredictable risks or uncertainties, like the risks related to fluctuating interest rates, the impact of inflation on our tenants and us, the effects of pandemics and global outbreaks of contagious diseases, and domestic or geopolitical crises, such as terrorism, military conflict, war or the perception that hostilities may be imminent, political instability or civil unrest, or other conflict, could also have material adverse effects on our business, financial condition, liquidity, results of operations, and prospects. You should exercise caution in relying on forward-looking statements as they involve known and unknown risks, uncertainties, and other factors that may materially affect our future results, performance, achievements, or transactions. Information on factors that could impact actual results and cause them to differ from what is anticipated in the forward-looking statements contained herein is included in this Report, as well as in our other filings with the Securities and Exchange Commission (“SEC”), including but not limited to those described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 9, 2024 (the “2023 Annual Report”). Moreover, because we operate in a very competitive and rapidly changing environment, new risks are likely to emerge from time to time. Given these risks and uncertainties, potential investors are cautioned not to place undue reliance on these forward-looking statements as a prediction of future results, which speak only as of the date of this Report, unless noted otherwise. Except as required by federal securities laws and the rules and regulations of the SEC, we do not undertake to revise or update any forward-looking statements.

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

W. P. Carey 6/30/2024 10-Q – 2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

W. P. CAREY INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)


	June 30, 2024		December 31, 2023
Assets
Investments in real estate:
Land, buildings and improvements — net lease and other	$	12,341,979	$	12,095,458
Land, buildings and improvements — operating properties	1,238,340		1,256,249
Net investments in finance leases and loans receivable	667,667		1,514,923
In-place lease intangible assets and other	2,256,793		2,308,853
Above-market rent intangible assets	676,666		706,773
Investments in real estate	17,181,445		17,882,256
Accumulated depreciation and amortization	(3,096,516)		(3,005,479)
Assets held for sale, net	7,743		37,122
Net investments in real estate	14,092,672		14,913,899
Equity method investments	356,220		354,261
Cash and cash equivalents	1,085,967		633,860
Other assets, net	1,261,222		1,096,474
Goodwill	973,204		978,289
Total assets (a)	$	17,769,285	$	17,976,783
Liabilities and Equity
Debt:
Senior unsecured notes, net	$	6,519,887	$	6,035,686
Unsecured term loans, net	1,100,356		1,125,564
Unsecured revolving credit facility	15,005		403,785
Non-recourse mortgages, net	467,200		579,147
Debt, net	8,102,448		8,144,182
Accounts payable, accrued expenses and other liabilities	548,397		615,750
Below-market rent intangible liabilities, net	128,710		136,872
Deferred income taxes	155,716		180,650
Dividends payable	194,515		192,332
Total liabilities (a)	9,129,786		9,269,786
Commitments and contingencies (Note 11)

Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued	—		—
Common stock, $0.001 par value, 450,000,000 shares authorized; 218,831,869 and 218,671,874 shares, respectively, issued and outstanding	219		219
Additional paid-in capital	11,782,157		11,784,461
Distributions in excess of accumulated earnings	(2,975,236)		(2,891,424)
Deferred compensation obligation	78,379		62,046
Accumulated other comprehensive loss	(252,640)		(254,867)
Total stockholders’ equity	8,632,879		8,700,435
Noncontrolling interests	6,620		6,562
Total equity	8,639,499		8,706,997
Total liabilities and equity	$	17,769,285	$	17,976,783

__________

(a)See Note 2 for details related to variable interest entities (“VIEs”).

See Notes to Consolidated Financial Statements.

W. P. Carey 6/30/2024 10-Q – 3

W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except share and per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues
Real Estate:
Lease revenues	$	324,104	$	369,124	$	646,355	$	721,460
Income from finance leases and loans receivable	14,961		27,311		40,754		48,066
Operating property revenues	38,715		50,676		75,358		91,562
Other lease-related income	9,149		5,040		11,304		18,413
	386,929		452,151		773,771		879,501
Investment Management:
Asset management revenue	1,686		303		3,579		642
Other advisory income and reimbursements	1,057		124		2,120		225
	2,743		427		5,699		867
	389,672		452,578		779,470		880,368
Operating Expenses
Depreciation and amortization	137,481		143,548		256,249		299,957
General and administrative	24,168		24,912		52,036		51,461
Operating property expenses	18,565		26,919		36,515		48,168
Impairment charges — real estate	15,752		—		15,752		—
Reimbursable tenant costs	14,004		20,523		26,977		42,499
Property expenses, excluding reimbursable tenant costs	13,931		5,371		26,104		18,143
Stock-based compensation expense	8,903		8,995		17,759		16,761
Merger and other expenses	206		1,419		4,658		1,443
	233,010		231,687		436,050		478,432
Other Income and Expenses
Interest expense	(65,307)		(75,488)		(133,958)		(142,684)
Gain on sale of real estate, net	39,363		1,808		54,808		179,557
Non-operating income	9,215		4,509		24,720		9,135
Earnings from equity method investments	6,636		4,355		11,500		9,591
Other gains and (losses)	2,504		(1,366)		16,343		6,734
	(7,589)		(66,182)		(26,587)		62,333
Income before income taxes	149,073		154,709		316,833		464,269
Provision for income taxes	(6,219)		(10,129)		(14,893)		(25,248)
Net Income	142,854		144,580		301,940		439,021
Net loss (income) attributable to noncontrolling interests	41		40		178		(21)
Net Income Attributable to W. P. Carey	$	142,895	$	144,620	$	302,118	$	439,000

Basic Earnings Per Share	$	0.65	$	0.67	$	1.37	$	2.06
Diluted Earnings Per Share	$	0.65	$	0.67	$	1.37	$	2.05
Weighted-Average Shares Outstanding
Basic	220,195,910		215,075,114		220,113,753		213,522,150
Diluted	220,214,118		215,184,485		220,261,525		213,875,471

See Notes to Consolidated Financial Statements.

W. P. Carey 6/30/2024 10-Q – 4

W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net Income	$	142,854	$	144,580	$	301,940	$	439,021
Other Comprehensive (Loss) Income
Unrealized (loss) gain on derivative instruments	(119)		(4,937)		6,313		(12,200)
Foreign currency translation adjustments	(24)		9,479		(4,362)		15,936
	(143)		4,542		1,951		3,736
Comprehensive Income	142,711		149,122		303,891		442,757

Amounts Attributable to Noncontrolling Interests
Net loss (income)	41		40		178		(21)
Foreign currency translation adjustments	19		85		276		113
Comprehensive loss attributable to noncontrolling interests	60		125		454		92
Comprehensive Income Attributable to W. P. Carey	$	142,771	$	149,247	$	304,345	$	442,849

See Notes to Consolidated Financial Statements.

W. P. Carey 6/30/2024 10-Q – 5

W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(in thousands, except share and per share amounts)


	W. P. Carey Stockholders
						Distributions				Accumulated
	Common Stock			Additional		in Excess of		Deferred		Other		Total
	$0.001 Par Value			Paid-in		Accumulated		Compensation		Comprehensive		W. P. Carey		Noncontrolling
	Shares	Amount		Capital		Earnings		Obligation		Loss		Stockholders		Interests		Total
Balance at April 1, 2024	218,823,907	$	219	$	11,772,948	$	(2,926,085)	$	78,491	$	(252,516)	$	8,673,057	$	6,118	$	8,679,175
Shares issued upon delivery of vested restricted share awards	4,037	—		(4)								(4)				(4)
Shares issued upon purchases under employee share purchase plan	3,925	—		198								198				198
Amortization of stock-based compensation expense				8,903								8,903				8,903
Delivery of deferred vested shares, net				112				(112)				—				—
Dividends declared ($0.870 per share)						(192,046)						(192,046)				(192,046)
Net income						142,895						142,895		(41)		142,854
Contributions from noncontrolling interests												—		622		622
Distributions to noncontrolling interests												—		(60)		(60)
Other comprehensive loss:
Unrealized loss on derivative instruments										(119)		(119)				(119)
Foreign currency translation adjustments										(5)		(5)		(19)		(24)
Balance at June 30, 2024	218,831,869	$	219	$	11,782,157	$	(2,975,236)	$	78,379	$	(252,640)	$	8,632,879	$	6,620	$	8,639,499


	W. P. Carey Stockholders
						Distributions				Accumulated
	Common Stock			Additional		in Excess of		Deferred		Other		Total
	$0.001 Par Value			Paid-in		Accumulated		Compensation		Comprehensive		W. P. Carey		Noncontrolling
	Shares	Amount		Capital		Earnings		Obligation		Loss		Stockholders		Interests		Total
Balance at April 1, 2023	213,890,620	$	214	$	11,948,910	$	(2,425,031)	$	62,046	$	(284,558)	$	9,301,581	$	17,781	$	9,319,362
Shares issued upon delivery of vested restricted share awards	5,815	—		(292)								(292)				(292)
Shares issued upon purchases under employee share purchase plan	4,735	—		294								294				294
Amortization of stock-based compensation expense				8,995								8,995				8,995
Acquisition of noncontrolling interest				1,153								1,153		(1,153)		—
Dividends declared ($1.069 per share)						(230,405)						(230,405)				(230,405)
Net income						144,620						144,620		(40)		144,580
Distributions to noncontrolling interests												—		(144)		(144)
Other comprehensive loss:
Foreign currency translation adjustments										9,564		9,564		(85)		9,479
Unrealized loss on derivative instruments										(4,937)		(4,937)				(4,937)
Balance at June 30, 2023	213,901,170	$	214	$	11,959,060	$	(2,510,816)	$	62,046	$	(279,931)	$	9,230,573	$	16,359	$	9,246,932

(Continued)

W. P. Carey 6/30/2024 10-Q – 6

W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(Continued)

(in thousands, except share and per share amounts)


	W. P. Carey Stockholders
						Distributions				Accumulated
	Common Stock			Additional		in Excess of		Deferred		Other		Total
	$0.001 Par Value			Paid-in		Accumulated		Compensation		Comprehensive		W. P. Carey		Noncontrolling
	Shares	Amount		Capital		Earnings		Obligation		Loss		Stockholders		Interests		Total
Balance at January 1, 2024	218,671,874	$	219	$	11,784,461	$	(2,891,424)	$	62,046	$	(254,867)	$	8,700,435	$	6,562	$	8,706,997
Shares issued upon delivery of vested restricted share awards	156,070	—		(6,865)								(6,865)				(6,865)
Shares issued upon purchases under employee share purchase plan	3,925	—		198								198				198
Amortization of stock-based compensation expense				17,759								17,759				17,759
Deferral of vested shares, net				(14,445)				14,445				—				—
Dividends declared ($1.735 per share)				1,049		(385,930)		1,888				(382,993)				(382,993)
Net income						302,118						302,118		(178)		301,940
Contributions from noncontrolling interests												—		622		622
Distributions to noncontrolling interests												—		(110)		(110)
Other comprehensive income:
Unrealized gain on derivative instruments										6,313		6,313				6,313
Foreign currency translation adjustments										(4,086)		(4,086)		(276)		(4,362)
Balance at June 30, 2024	218,831,869	$	219	$	11,782,157	$	(2,975,236)	$	78,379	$	(252,640)	$	8,632,879	$	6,620	$	8,639,499


	W. P. Carey Stockholders
						Distributions				Accumulated
	Common Stock			Additional		in Excess of		Deferred		Other		Total
	$0.001 Par Value			Paid-in		Accumulated		Compensation		Comprehensive		W. P. Carey		Noncontrolling
	Shares	Amount		Capital		Earnings		Obligation		Loss		Stockholders		Interests		Total
Balance at January 1, 2023	210,620,949	$	211	$	11,706,836	$	(2,486,633)	$	57,012	$	(283,780)	$	8,993,646	$	14,998	$	9,008,644
Shares issued under ATM Program, net	3,081,867	3		249,860								249,863				249,863
Shares issued upon delivery of vested restricted share awards	193,619	—		(13,618)								(13,618)				(13,618)
Shares issued upon purchases under employee share purchase plan	4,735	—		294								294				294
Amortization of stock-based compensation expense				16,761								16,761				16,761
Deferral of vested shares, net				(4,521)				4,521				—				—
Acquisition of noncontrolling interest				1,153								1,153		(1,153)		—
Dividends declared ($2.136 per share)				2,295		(463,183)		513				(460,375)				(460,375)
Net income						439,000						439,000		21		439,021
Contributions from noncontrolling interests												—		2,886		2,886
Distributions to noncontrolling interests												—		(280)		(280)
Other comprehensive income:
Foreign currency translation adjustments										16,049		16,049		(113)		15,936
Unrealized loss on derivative instruments										(12,200)		(12,200)				(12,200)
Balance at June 30, 2023	213,901,170	$	214	$	11,959,060	$	(2,510,816)	$	62,046	$	(279,931)	$	9,230,573	$	16,359	$	9,246,932

See Notes to Consolidated Financial Statements.

W. P. Carey 6/30/2024 10-Q – 7

W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six Months Ended June 30,
	2024		2023
Cash Flows — Operating Activities
Net income	$	301,940	$	439,021
Adjustments to net income:
Depreciation and amortization, including intangible assets and deferred financing costs	265,654		309,988
Gain on sale of real estate, net	(54,808)		(179,557)
Straight-line rent adjustments	(35,893)		(35,965)
Stock-based compensation expense	17,759		16,761
Impairment charges — real estate	15,752		—
Distributions of earnings from equity method investments	12,147		9,931
Earnings from equity method investments	(11,500)		(9,591)
Gain on repayment of secured loan receivable	(10,650)		—
Amortization of rent-related intangibles and deferred rental revenue	9,697		19,793
Decrease in allowance for credit losses	(5,097)		(3,629)
Deferred income tax (benefit) expense	(2,765)		1,643
Net realized and unrealized gains on equity securities, extinguishment of debt, foreign currency exchange rate movements, and other	(633)		(2,126)
Proceeds from sales of net investments in sales-type leases	807,080		—
Net changes in other operating assets and liabilities	(52,088)		(35,935)
Net Cash Provided by Operating Activities	1,256,595		530,334
Cash Flows — Investing Activities
Purchases of real estate	(448,088)		(895,034)
Proceeds from sales of real estate	195,022		44,061
Investments in loans receivable	(83,816)		—
Funding for real estate construction, redevelopments, and other capital expenditures on real estate	(47,207)		(62,135)
Value added taxes paid in connection with acquisition of real estate	(29,097)		(5,543)
Proceeds from repayment of loans receivable	24,000		—
Value added taxes refunded in connection with acquisition of real estate	8,728		6,767
Capital contributions to equity method investments	(5,024)		(23,677)
(Release) receipt of tenant-funded escrow for investing activities	(4,959)		29,787
Other investing activities, net	2,474		(9,787)
Return of capital from equity method investments	803		9,943
Net Cash Used in Investing Activities	(387,164)		(905,618)
Cash Flows — Financing Activities
Repayments of Unsecured Revolving Credit Facility	(1,248,701)		(1,577,153)
Proceeds from issuance of Senior Unsecured Notes	1,098,314		—
Proceeds from Unsecured Revolving Credit Facility	868,422		1,820,608
Repayment of Senior Unsecured Notes	(500,000)		—
Dividends paid	(380,810)		(456,171)
Payments of mortgage principal	(127,683)		(138,764)
Other financing activities, net	(12,351)		2,359
Payment of financing costs	(8,853)		(166)
Payments for withholding taxes upon delivery of equity-based awards	(6,866)		(13,618)
Contributions from noncontrolling interests	622		2,886
Distributions to noncontrolling interests	(110)		(280)
Proceeds from term loans	—		546,014
Proceeds from shares issued under forward equity, net of selling costs	—		249,806
Net Cash (Used in) Provided by Financing Activities	(318,016)		435,521
Change in Cash and Cash Equivalents and Restricted Cash During the Period
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(13,716)		1,909
Net increase in cash and cash equivalents and restricted cash	537,699		62,146
Cash and cash equivalents and restricted cash, beginning of period	691,971		224,141
Cash and cash equivalents and restricted cash, end of period	$	1,229,670	$	286,287

See Notes to Consolidated Financial Statements.

W. P. Carey 6/30/2024 10-Q – 8

W. P. CAREY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Business and Organization

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

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

We elected to be taxed as a REIT under Section 856 through 860 of the Internal Revenue Code effective as of February 15, 2012. As a REIT, we are not subject to federal income taxes on income and gains that we distribute to our stockholders as long as we satisfy certain requirements, principally relating to the nature of our income and the level of our distributions, as well as other factors. We also own real property in jurisdictions outside the United States through foreign subsidiaries and are subject to income taxes on our pre-tax income earned from properties in such countries.

In September 2023, we announced a plan to exit the office assets within our portfolio by (i) spinning off 59 office properties into Net Lease Office Properties (“NLOP”), so that it became a separate publicly-traded real estate investment trust (the “Spin-Off”), and (ii) implementing an asset sale program to dispose of certain office properties retained by us (the “Office Sale Program”), which is substantially completed.

On November 1, 2023, we completed the Spin-Off, contributing 59 office properties to NLOP. Following the closing of the Spin-Off, NLOP operates as a separate publicly-traded REIT, which we externally manage pursuant to certain advisory agreements (the “NLOP Advisory Agreements”). Through the date of this Report, we have disposed of 85 of the office properties subject to the Office Sale Program (Note 14, Note 15). The final property is under a binding contract for sale scheduled to close in December 2024, which will complete the Office Sale Program.

Effective January 1, 2024, we no longer separately analyze our business between real estate operations and investment management operations, and instead view the business as one reportable segment, since our investment management operations have been determined to be both quantitatively and qualitatively insignificant to the Company’s business. Our business is characterized as investing in operationally-critical, single-tenant commercial real estate properties that are leased on a long-term basis. These economic characteristics are similar across various property types, geographic locations, and industries in which our tenants operate and therefore considered one operating segment. The operating results of both the real estate and investment management activities are regularly reviewed, in the aggregate, by our chief operating decision maker to evaluate performance and allocate resources. Accordingly, all operations have been considered to represent one reportable segment, which are reported on our consolidated statements of income and our consolidated balance sheets. As a result of this change, we have conformed prior period segment information to reflect how we currently view our business.

Lease revenues from our real estate investments generate the vast majority of our earnings. We invest primarily in commercial properties located in the United States and Northern and Western Europe, which are leased to companies on a triple-net lease basis. At June 30, 2024, our portfolio was comprised of our full or partial ownership interests in 1,291 properties, totaling approximately 170 million square feet, substantially all of which were net leased to 346 tenants, with a weighted-average lease term of 12.0 years and an occupancy rate of 98.8%. In addition, at June 30, 2024, our portfolio was comprised of full or partial ownership interests in 95 operating properties, including 89 self-storage properties, four hotels, and two student housing properties, totaling approximately 7.3 million square feet.

W. P. Carey 6/30/2024 10-Q – 9

Notes to Consolidated Financial Statements (Unaudited)

Note 2. Basis of Presentation

Basis of Presentation

Our interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a complete statement of our consolidated financial position, results of operations, and cash flows in accordance with generally accepted accounting principles in the United States (“GAAP”). In the opinion of management, the unaudited financial information for the interim periods presented in this Report reflects all normal and recurring adjustments necessary for a fair presentation of financial position, results of operations, and cash flows. Our interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2023, which are included in the 2023 Annual Report, as certain disclosures that would substantially duplicate those contained in the audited consolidated financial statements have not been included in this Report. Operating results for interim periods are not necessarily indicative of operating results for an entire year.

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

Basis of Consolidation

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

When we obtain an economic interest in an entity, we evaluate the entity to determine if it should be deemed a VIE and, if so, whether we are the primary beneficiary and are therefore required to consolidate the entity. There have been no significant changes in our VIE policies from what was disclosed in the 2023 Annual Report.

During the six months ended June 30, 2024, we declassified ten entities as VIEs, primarily related to the completion of certain tax-deferred like-kind exchanges under Section 1031 of the Internal Revenue Code (“1031 Exchange”) and dispositions.

At June 30, 2024 and December 31, 2023, we considered 12 and 21 entities, respectively, to be VIEs, of which we consolidated seven and 15, respectively, as we are considered the primary beneficiary. The following table presents a summary of selected financial data of the consolidated VIEs included in our consolidated balance sheets (in thousands):


	June 30, 2024		December 31, 2023
Land, buildings and improvements — net lease and other	$	126,223	$	237,858
Land, buildings and improvements — operating properties	—		39,422
Net investments in finance leases and loans receivable	159,103		595,524
In-place lease intangible assets and other	11,402		40,650
Above-market rent intangible assets	3,894		6,828
Accumulated depreciation and amortization	(17,302)		(23,580)
Total assets	303,241		947,509

Non-recourse mortgages, net	$	50,793	$	59,715
Below-market rent intangible liabilities, net	28		32
Total liabilities	67,580		101,047

W. P. Carey 6/30/2024 10-Q – 10

Notes to Consolidated Financial Statements (Unaudited)

At June 30, 2024 and December 31, 2023, our five and six unconsolidated VIEs, respectively, included our interests in (i) three unconsolidated real estate investments, 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), and (ii) two unconsolidated investments in equity securities, which we accounted for as investments in shares of the entities at fair value. In addition, at December 31, 2023, we had a variable interest in NLOP, which we also deemed a VIE, due to our guarantee of a non-recourse mortgage loan with approximately $19.0 million principal balance outstanding as of December 31, 2023 encumbering a property that was derecognized in the Spin-Off (Note 1). This non-recourse mortgage loan was repaid by NLOP during the first quarter of 2024 and as a result, NLOP is not deemed a VIE as of June 30, 2024. As of June 30, 2024, and December 31, 2023, the net carrying amount of our investments in these entities was $732.6 million and $729.8 million, respectively, and our maximum exposure to loss in these entities was limited to our investments.

Reclassifications

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

Reimbursable costs from affiliates (revenues) are now included within Other advisory income and reimbursements. Reimbursable affiliate costs (expenses) are now included within General and administrative expenses. Previously, such amounts were presented in their own financial statement line items on the consolidated statements of income.

Revenue Recognition

There have been no significant changes in our policies for revenue from contracts under Accounting Standards Codification (“ASC”) 606 from what was disclosed in the 2023 Annual Report. ASC 606 does not apply to our lease revenues, which constitute a majority of our revenues, but primarily applies to (i) revenues generated from our hotel operating properties and (ii) investment management revenues. Revenue from contracts primarily represented hotel operating property revenues of $12.4 million and $24.7 million for the three months ended June 30, 2024 and 2023, respectively, and $22.5 million and $40.2 million for the six months ended June 30, 2024 and 2023, respectively, generated from 13 hotels located in the United States (12 of which were reclassified from net leases to operating properties in the first quarter of 2023; eight of these properties were sold during 2023 and one was sold during the second quarter of 2024). Investment management revenue from contracts under ASC 606 is discussed in Note 3.

Cash and Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the consolidated statements of cash flows (in thousands):


	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	1,085,967	$	633,860
Restricted cash (a)	143,703		58,111
Total cash and cash equivalents and restricted cash	$	1,229,670	$	691,971

__________

(a)Restricted cash is included within Other assets, net on our consolidated balance sheets. The amount as of June 30, 2024 includes $106.9 million of proceeds from certain dispositions, which are held by an intermediary and have been designated for future 1031 Exchange transactions.

Note 3. Agreements and Transactions with Related Parties

Advisory Agreements and Partnership Agreements with NLOP and CESH

We currently have advisory arrangements with NLOP and CESH, pursuant to which we earn fees and are entitled to receive reimbursement for certain administrative expenses.

W. P. Carey 6/30/2024 10-Q – 11

Notes to Consolidated Financial Statements (Unaudited)

The following tables present a summary of revenue earned and reimbursable costs received/accrued from NLOP and CESH for the periods indicated, included in the consolidated financial statements (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Asset management revenue (a) (b)	$	1,686	$	303	$	3,579	$	642
Administrative reimbursements (a) (c)	1,000		—		2,000		—
Reimbursable costs from affiliates (a) (c)	57		124		120		225
	$	2,743	$	427	$	5,699	$	867


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
NLOP	$	2,599	$	—	$	5,403	$	—
CESH	144		427		296		867
	$	2,743	$	427	$	5,699	$	867

__________

(a)Amounts represent revenues from contracts under ASC 606.

(b)Included within Asset management revenue in the consolidated statements of income.

(c)Included within Other advisory income and reimbursements in the consolidated statements of income.

The following table presents a summary of amounts due from affiliates, which are included within Other assets, net in the consolidated financial statements (in thousands):


	June 30, 2024		December 31, 2023
Asset management fees receivable	$	542	$	1,349
Accounts receivable	514		768
Reimbursable costs	52		59
	$	1,108	$	2,176

Asset Management Revenue

Under the advisory agreement with CESH, we earn asset management revenue at a rate of 1.0% based on its gross assets at fair value, paid in cash. Under the advisory agreement with NLOP, we earn an asset management fee, which was initially set at an annual amount of $7.5 million and is being reduced proportionately following the disposition of each portfolio property.

Administrative Reimbursements

Under the advisory agreement with NLOP, we earn a base administrative amount of approximately $4.0 million annually, for certain administrative services, including day-to-day management services, investor relations, accounting, tax, legal, and other administrative matters, paid in cash.

Reimbursable Costs from Affiliates

CESH reimburses us in cash for certain personnel and overhead costs that we incur on its behalf, based on actual expenses incurred.

Back-End Fees and Interests in CESH

Under our advisory arrangements with CESH, we may also receive compensation in connection with providing a liquidity event for its investors. Such back-end fees or interests include interests in disposition proceeds. There can be no assurance as to whether or when any back-end fees or interests will be realized.

W. P. Carey 6/30/2024 10-Q – 12

Notes to Consolidated Financial Statements (Unaudited)

Other Transactions with Affiliates and Related Parties

Other

At June 30, 2024, we owned interests in eight jointly owned investments in real estate, with the remaining interests held by third parties. We consolidate four such investments and account for the remaining four investments under the equity method of accounting (Note 7). In addition, we owned limited partnership units of CESH at that date. We elected to account for our investment in CESH under the fair value option (Note 7).

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

Land, Buildings and Improvements — Net Lease and Other

Land and buildings leased to others, which are subject to operating leases, and real estate under construction, are summarized as follows (in thousands):


	June 30, 2024		December 31, 2023
Land	$	2,299,528	$	2,248,300
Buildings and improvements	10,004,871		9,801,596
Real estate under construction	37,580		45,562
Less: Accumulated depreciation	(1,589,966)		(1,509,730)
	$	10,752,013	$	10,585,728

During the six months ended June 30, 2024, the U.S. dollar strengthened against the euro, as the end-of-period rate for the U.S. dollar in relation to the euro decreased by 3.1% to $1.0705 from $1.1050. As a result of this fluctuation in foreign currency exchange rates, the carrying value of our Land, buildings and improvements — net lease and other decreased by $111.7 million from December 31, 2023 to June 30, 2024.

In connection with changes in lease classifications due to extensions of the underlying leases or entering into a new lease, we reclassified 14 properties with an aggregate carrying value of $105.5 million from Net investments in finance leases and loans receivable to Land, buildings and improvements — net lease and other during the six months ended June 30, 2024 (Note 5).

Depreciation expense, including the effect of foreign currency translation, on our buildings and improvements subject to operating leases was $72.5 million and $79.7 million for the three months ended June 30, 2024 and 2023, respectively, and $144.1 million and $171.0 million for the six months ended June 30, 2024 and 2023, respectively.

W. P. Carey 6/30/2024 10-Q – 13

Notes to Consolidated Financial Statements (Unaudited)

Acquisitions of Real Estate

During the six months ended June 30, 2024, we entered into the following investments, which were deemed to be real estate asset acquisitions (dollars in thousands):


Property Location(s)	Number of Properties	Date of Acquisition	Property Type	Total Capitalized Costs
Doncaster, United Kingdom (a)	2	1/9/2024	Retail	$	30,055
Various, Italy (a)	5	1/30/2024	Industrial, Warehouse	148,130
Laval, Canada (a)	1	3/26/2024	Industrial	2,604
Commercial Point, Ohio	1	4/5/2024	Warehouse	94,220
Tucson, Arizona	1	5/13/2024	Warehouse	38,784
Portfolio Acquisition:
Various, United States	5	5/15/2024	Industrial, Warehouse	44,400
Various, United States	4	5/15/2024	Industrial	23,330
Sylacauga, Alabama	1	5/15/2024	Industrial	5,852
Moxee, Washington and La Porte, Indiana (b)	2	6/26/2024	Industrial	37,019
Portfolio Total	12			110,601
Mesa and Laveen, Arizona	2	6/3/2024	Retail	26,964
	24			$	451,358

__________

(a)Amount reflects the applicable exchange rate on the date of transaction.

(b)In connection with this acquisition, we assumed a non-recourse mortgage loan encumbering the properties with an outstanding principal balance of $21.9 million (Note 10).

The aggregate purchase price allocation for investments disclosed above is as follows (dollars in thousands):


	Total Capitalized Costs
Land	$	82,449
Buildings and improvements	311,003
Intangible assets and liabilities:
In-place lease (weighted-average expected life of 14.9 years)	56,855
Below-market rent (expected life of 12.8 years)	(408)
Debt discount and deferred financing costs on non-recourse mortgage loan assumed	1,459
	$	451,358

Real Estate Under Construction — Net Lease and Operating Properties

During the six months ended June 30, 2024, we capitalized real estate under construction totaling $24.2 million. The number of construction projects in progress with balances included in real estate under construction was three and 11 as of June 30, 2024 and December 31, 2023, respectively. Aggregate unfunded commitments totaled approximately $92.6 million and $71.8 million as of June 30, 2024 and December 31, 2023, respectively.

W. P. Carey 6/30/2024 10-Q – 14

Notes to Consolidated Financial Statements (Unaudited)

During the six months ended June 30, 2024, we completed the following construction projects (dollars in thousands):

Property Location(s)

Primary Transaction Type

Number of Properties

Date of Completion

Property Type

Total Capitalized Costs

Salisbury, North Carolina

Expansion

3/8/2024

Industrial

14,737

Little Rock, Arkansas

Expansion

4/10/2024

Self-Storage (Operating)

3,280

Irvine, California

Redevelopment

6/27/2024

Industrial

15,222

33,239

During the six months ended June 30, 2024, we committed to fund a redevelopment project for $44.1 million. We currently expect to complete the project in 2025.

Capitalized interest incurred during construction was $0.2 million and less than $0.1 million for the three months ended June 30, 2024 and 2023, respectively, and $0.4 million and $0.1 million for the six months ended June 30, 2024 and 2023, respectively, which reduces Interest expense in the consolidated statements of income.

Dispositions of Properties

During the six months ended June 30, 2024, we sold 14 properties, which were classified as Land, buildings and improvements — net lease and other. As a result, the carrying value of our Land, buildings and improvements — net lease and other decreased by $102.9 million from December 31, 2023 to June 30, 2024 (Note 14).

Other Lease-Related Income

2024 — For the three and six months ended June 30, 2024, other lease-related income on our consolidated statements of income included other lease-related settlements totaling $8.9 million and $10.7 million, respectively.

2023 — For the three and six months ended June 30, 2023, other lease-related income on our consolidated statements of income included: (i) other lease-related settlements totaling $4.3 million and $5.6 million, respectively and (ii) lease termination income totaling $11.4 million for the six months ended June 30, 2023, received from two tenants in connection with the sales of the properties they occupied.

Leases

Operating Lease Income

Lease income related to operating leases recognized and included in the consolidated statements of income is as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Lease income — fixed	$	287,709	$	324,468	$	573,883	$	632,534
Lease income — variable (a)	36,395		44,656		72,472		88,926
Total operating lease income	$	324,104	$	369,124	$	646,355	$	721,460

__________

(a)Includes (i) rent increases based on changes in the U.S. Consumer Price Index and other comparable indices and (ii) reimbursements for property taxes, insurance, and common area maintenance services.

W. P. Carey 6/30/2024 10-Q – 15

Notes to Consolidated Financial Statements (Unaudited)

Land, Buildings and Improvements — Operating Properties

At June 30, 2024, Land, buildings and improvements — operating properties consisted of our investments in 80 consolidated self-storage properties, four consolidated hotels, and two consolidated student housing properties. At December 31, 2023, Land, buildings and improvements — operating properties consisted of our investments in 80 consolidated self-storage properties, five consolidated hotels, and two consolidated student housing properties. Below is a summary of our Land, buildings and improvements — operating properties (in thousands):


	June 30, 2024		December 31, 2023
Land	$	147,170	$	150,084
Buildings and improvements	1,091,170		1,104,635
Real estate under construction	—		1,530
Less: Accumulated depreciation	(88,885)		(80,057)
	$	1,149,455	$	1,176,192

During the six months ended June 30, 2024, we sold one hotel operating property, which was classified as Land, buildings and improvements — operating properties. As a result, the carrying value of our Land, buildings and improvements — operating properties decreased by $14.3 million from December 31, 2023 to June 30, 2024 (Note 14).

Depreciation expense, including the effect of foreign currency translation, on our buildings and improvements attributable to operating properties was $7.4 million and $7.7 million for the three months ended June 30, 2024 and 2023, respectively, and $14.7 million and $14.9 million for the six months ended June 30, 2024 and 2023, respectively.

Assets Held for Sale, Net

Below is a summary of our properties held for sale (in thousands):


	June 30, 2024		December 31, 2023
Land, buildings and improvements — net lease and other	$	10,676