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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to __________
Commission File Number: 001-13779
wpchighreslogo29.jpg
W. P. Carey Inc.
(Exact name of registrant as specified in its charter)
Maryland45-4549771
(State of incorporation)(I.R.S. Employer Identification No.)
One Manhattan West, 395 9th Avenue, 58th Floor
New York,New York10001
(Address of principal executive offices)(Zip Code)
 
Investor Relations (212) 492-8920
(212) 492-1100
(Registrant’s telephone numbers, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 Par ValueWPCNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Registrant has 218,824,708 shares of common stock, $0.001 par value, outstanding at April 26, 2024.



INDEX
Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
PART II — OTHER INFORMATION
Item 6. Exhibits
W. P. Carey 3/31/2024 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 3/31/2024 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)
March 31, 2024December 31, 2023
Assets
Investments in real estate:
Land, buildings and improvements — net lease and other$12,260,873 $12,095,458 
Land, buildings and improvements — operating properties1,256,171 1,256,249 
Net investments in finance leases and loans receivable660,585 1,514,923 
In-place lease intangible assets and other2,278,593 2,308,853 
Above-market rent intangible assets693,294 706,773 
Investments in real estate17,149,516 17,882,256 
Accumulated depreciation and amortization(3,067,292)(3,005,479)
Assets held for sale, net 37,122 
Net investments in real estate14,082,224 14,913,899 
Equity method investments355,668 354,261 
Cash and cash equivalents776,966 633,860 
Other assets, net1,422,597 1,096,474 
Goodwill974,052 978,289 
Total assets (a)
$17,611,507 $17,976,783 
Liabilities and Equity
Debt:
Senior unsecured notes, net$5,969,622 $6,035,686 
Unsecured term loans, net1,107,164 1,125,564 
Unsecured revolving credit facility291,621 403,785 
Non-recourse mortgages, net504,808 579,147 
Debt, net7,873,215 8,144,182 
Accounts payable, accrued expenses and other liabilities575,832 615,750 
Below-market rent intangible liabilities, net131,517 136,872 
Deferred income taxes158,820 180,650 
Dividends payable192,948 192,332 
Total liabilities (a)
8,932,332 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; 218,823,907 and 218,671,874 shares, respectively, issued and outstanding
219 219 
Additional paid-in capital11,772,948 11,784,461 
Distributions in excess of accumulated earnings(2,926,085)(2,891,424)
Deferred compensation obligation78,491 62,046 
Accumulated other comprehensive loss(252,516)(254,867)
Total stockholders’ equity8,673,057 8,700,435 
Noncontrolling interests6,118 6,562 
Total equity8,679,175 8,706,997 
Total liabilities and equity$17,611,507 $17,976,783 
__________
(a)See Note 2 for details related to variable interest entities (“VIEs”).

See Notes to Consolidated Financial Statements.
W. P. Carey 3/31/2024 10-Q 3



W. P. CAREY INC. 
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except share and per share amounts)
Three Months Ended March 31,
20242023
Revenues
Real Estate:
Lease revenues$322,251 $352,336 
Income from finance leases and loans receivable25,793 20,755 
Operating property revenues36,643 40,886 
Other lease-related income2,155 13,373 
386,842 427,350 
Investment Management:
Asset management revenue1,893 339 
Other advisory income and reimbursements1,063 101 
2,956 440 
389,798 427,790 
Operating Expenses
Depreciation and amortization118,768 156,409 
General and administrative27,868 26,549 
Operating property expenses17,950 21,249 
Reimbursable tenant costs12,973 21,976 
Property expenses, excluding reimbursable tenant costs12,173 12,772 
Stock-based compensation expense8,856 7,766 
Merger and other expenses4,452 24 
203,040 246,745 
Other Income and Expenses
Interest expense(68,651)(67,196)
Non-operating income15,505 4,626 
Gain on sale of real estate, net15,445 177,749 
Other gains and (losses)13,839 8,100 
Earnings from equity method investments4,864 5,236 
(18,998)128,515 
Income before income taxes167,760 309,560 
Provision for income taxes(8,674)(15,119)
Net Income159,086 294,441 
Net loss (income) attributable to noncontrolling interests137 (61)
Net Income Attributable to W. P. Carey$159,223 $294,380 
Basic Earnings Per Share$0.72 $1.39 
Diluted Earnings Per Share$0.72 $1.39 
Weighted-Average Shares Outstanding
Basic220,031,597 211,951,930 
Diluted220,129,870 212,345,047 

See Notes to Consolidated Financial Statements.
W. P. Carey 3/31/2024 10-Q 4



W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands) 
 Three Months Ended March 31,
 20242023
Net Income$159,086 $294,441 
Other Comprehensive Income (Loss)
Unrealized gain (loss) on derivative instruments6,432 (7,263)
Foreign currency translation adjustments(4,338)6,457 
2,094 (806)
Comprehensive Income161,180 293,635 
Amounts Attributable to Noncontrolling Interests
Net loss (income)137 (61)
Foreign currency translation adjustments257 28 
Comprehensive loss (income) attributable to noncontrolling interests394 (33)
Comprehensive Income Attributable to W. P. Carey$161,574 $293,602 
 
See Notes to Consolidated Financial Statements.
W. P. Carey 3/31/2024 10-Q 5



W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
(in thousands, except share and per share amounts)
W. P. Carey Stockholders
DistributionsAccumulated
Common StockAdditionalin Excess ofDeferredOtherTotal
$0.001 Par ValuePaid-inAccumulatedCompensationComprehensiveW. P. CareyNoncontrolling
SharesAmountCapitalEarningsObligationLossStockholdersInterestsTotal
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 awards152,033 — (6,861)(6,861)(6,861)
Amortization of stock-based compensation expense8,856 8,856 8,856 
Deferral of vested shares, net(14,557)14,557—  
Dividends declared ($0.865 per share)
1,049 (193,884)1,888(190,947)(190,947)
Net income159,223 159,223 (137)159,086 
Distributions to noncontrolling interests— (50)(50)
Other comprehensive income:
Unrealized gain on derivative instruments6,432 6,432 6,432 
Foreign currency translation adjustments(4,081)(4,081)(257)(4,338)
Balance at March 31, 2024218,823,907 $219 $11,772,948 $(2,926,085)$78,491 $(252,516)$8,673,057 $6,118 $8,679,175 

W. P. Carey Stockholders
DistributionsAccumulated
Common StockAdditionalin Excess ofDeferredOtherTotal
$0.001 Par ValuePaid-inAccumulatedCompensationComprehensiveW. P. CareyNoncontrolling
SharesAmountCapitalEarningsObligationLossStockholdersInterestsTotal
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 forward equity, net3,081,867 3 249,860 249,863 249,863 
Shares issued upon delivery of vested restricted share awards187,804 — (13,326)(13,326)(13,326)
Amortization of stock-based compensation expense7,766 7,766 7,766 
Deferral of vested shares, net(4,521)4,521 —  
Dividends declared ($1.067 per share)
2,295 (232,778)513 (229,970)(229,970)
Net income294,380 294,380 61 294,441 
Contributions from noncontrolling interests— 2,886 2,886 
Distributions to noncontrolling interests— (136)(136)
Other comprehensive loss:
Unrealized loss on derivative instruments(7,263)(7,263)(7,263)
Foreign currency translation adjustments6,485 6,485 (28)6,457 
Balance at March 31, 2023213,890,620 $214 $11,948,910 $(2,425,031)$62,046 $(284,558)$9,301,581 $17,781 $9,319,362 
See Notes to Consolidated Financial Statements.
W. P. Carey 3/31/2024 10-Q 6



W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended March 31,
20242023
Cash Flows — Operating Activities
Net income$159,086 $294,441 
Adjustments to net income:
Depreciation and amortization, including intangible assets and deferred financing costs123,487 161,314 
Straight-line rent adjustments
(20,044)(15,948)
Gain on sale of real estate, net(15,445)(177,749)
Gain on repayment of secured loan receivable(10,650) 
Stock-based compensation expense8,856 7,766 
Earnings from equity method investments(4,864)(5,236)
Amortization of rent-related intangibles and deferred rental revenue4,142 10,765 
Decrease in allowance for credit losses(4,003)(3,420)
Distributions of earnings from equity method investments3,687 5,248 
Deferred income tax (benefit) expense(1,373)4,366 
Net realized and unrealized losses (gains) on equity securities, extinguishment of debt, foreign currency exchange rate movements, and other674 (4,755)
Proceeds from sales of net investments in sales-type leases807,544  
Net changes in other operating assets and liabilities(15,550)5,935 
Net Cash Provided by Operating Activities1,035,547 282,727 
Cash Flows — Investing Activities
Purchases of real estate (193,744)(143,645)
Investments in loans receivable(83,731) 
Proceeds from sales of real estate60,868 41,025 
Value added taxes paid in connection with acquisition of real estate(27,197)(2,622)
Proceeds from repayment of loans receivable24,000  
Funding for real estate construction, redevelopments, and other capital expenditures on real estate(19,557)(35,221)
Value added taxes refunded in connection with acquisition of real estate4,504 3,332 
Capital contributions to equity method investments(1,835)(13,716)
Other investing activities, net(693)391 
Return of capital from equity method investments413 472 
Investment deposit (467,075)
Tenant-funded escrow for investing activities 29,787 
Net Cash Used in Investing Activities(236,972)(587,272)
Cash Flows — Financing Activities
Repayments of Unsecured Revolving Credit Facility(740,453)(635,648)
Proceeds from Unsecured Revolving Credit Facility637,587 1,018,971 
Dividends paid(190,331)(226,697)
Payments of mortgage principal(69,276)(90,263)
Other financing activities, net(9,653)1,444 
Payments for withholding taxes upon delivery of equity-based awards(6,862)(13,326)
Distributions to noncontrolling interests(50)(136)
Proceeds from shares issued under forward equity, net of selling costs 249,943 
Contributions from noncontrolling interests 2,886 
Net Cash (Used in) Provided by Financing Activities(379,038)307,174 
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(7,485)4,061 
Net increase in cash and cash equivalents and restricted cash412,052 6,690 
Cash and cash equivalents and restricted cash, beginning of period691,971 224,141 
Cash and cash equivalents and restricted cash, end of period$1,104,023 $230,831 
See Notes to Consolidated Financial Statements.
W. P. Carey 3/31/2024 10-Q 7



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

Note 1. Business and Organization
 
W. P. Carey Inc. (“W. P. Carey”) is a REIT that, together with our consolidated subsidiaries, invests primarily in operationally-critical, single-tenant commercial real estate properties located in the United States and Northern and Western Europe 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 87 office properties retained by us (the “Office Sale Program”), which is targeted to be substantially completed in the first half of 2024.

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 80 of the 87 office properties subject to the Office Sale Program (Note 14).

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 March 31, 2024, our portfolio was comprised of our full or partial ownership interests in 1,282 properties, totaling approximately 168 million square feet, substantially all of which were net leased to 335 tenants, with a weighted-average lease term of 12.2 years and an occupancy rate of 99.1%. In addition, at March 31, 2024, our portfolio was comprised of full or partial ownership interests in 96 operating properties, including 89 self-storage properties, five hotels, and two student housing properties, totaling approximately 7.3 million square feet.

W. P. Carey 3/31/2024 10-Q 8


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 three months ended March 31, 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 March 31, 2024 and December 31, 2023, we considered 11 and 21 entities, respectively, to be VIEs, of which we consolidated six 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):
March 31, 2024December 31, 2023
Land, buildings and improvements — net lease and other$124,791 $237,858 
Land, buildings and improvements — operating properties 39,422 
Net investments in finance leases and loans receivable144,103 595,524 
In-place lease intangible assets and other11,312 40,650 
Above-market rent intangible assets3,859 6,828 
Accumulated depreciation and amortization(16,263)(23,580)
Total assets288,577 947,509 
Non-recourse mortgages, net$56,056 $59,715 
Below-market rent intangible liabilities, net29 32 
Total liabilities73,555 101,047 

W. P. Carey 3/31/2024 10-Q 9


Notes to Consolidated Financial Statements (Unaudited)
At March 31, 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 March 31, 2024. As of March 31, 2024, and December 31, 2023, the net carrying amount of our investments in these entities was $732.0 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 $10.2 million and $15.5 million for the three months ended March 31, 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). 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):
March 31, 2024December 31, 2023
Cash and cash equivalents
$776,966 $633,860 
Restricted cash (a)
327,057 58,111 
Total cash and cash equivalents and restricted cash
$1,104,023 $691,971 
__________
(a)Restricted cash is included within Other assets, net on our consolidated balance sheets. The amount as of March 31, 2024 includes $283.8 million of proceeds from the disposition of a portfolio of 78 net-leased self-storage properties during the first quarter of 2024 (Note 5), 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 3/31/2024 10-Q 10


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 March 31,
 20242023
Asset management revenue (a) (b)
$1,893 $339 
Administrative reimbursements (a) (c)
1,000  
Reimbursable costs from affiliates (a) (c)
63 101 
$2,956 $440 
Three Months Ended March 31,
20242023
NLOP$2,804 $ 
CESH152 440 
$2,956 $440 
__________
(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):
March 31, 2024December 31, 2023
Asset management fees receivable$684 $1,349 
Accounts receivable467 768 
Reimbursable costs74 59 
$1,225 $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 a 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 3/31/2024 10-Q 11


Notes to Consolidated Financial Statements (Unaudited)
Other Transactions with Affiliates and Related Parties

Other

At March 31, 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):
March 31, 2024December 31, 2023
Land$2,292,183 $2,248,300 
Buildings and improvements9,929,902 9,801,596 
Real estate under construction38,788 45,562 
Less: Accumulated depreciation(1,563,571)(1,509,730)
$10,697,302 $10,585,728 

During the three months ended March 31, 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 2.2% to $1.0811 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 $79.5 million from December 31, 2023 to March 31, 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 three months ended March 31, 2024 (Note 5).

Depreciation expense, including the effect of foreign currency translation, on our buildings and improvements subject to operating leases was $71.6 million and $91.3 million for the three months ended March 31, 2024 and 2023, respectively.

Acquisitions of Real Estate

During the three months ended March 31, 2024, we entered into the following investments, which were deemed to be real estate asset acquisitions (dollars in thousands):
Property Location(s)Number of PropertiesDate of AcquisitionProperty TypeTotal Capitalized Costs
Doncaster, United Kingdom (a)
21/9/2024Retail $30,055 
Various, Italy (a)
51/30/2024Industrial, Warehouse 148,130 
Laval, Canada (a)
13/26/2024Industrial2,604 
8$180,789 
__________
(a)Amount reflects the applicable exchange rate on the date of transaction.

W. P. Carey 3/31/2024 10-Q 12


Notes to Consolidated Financial Statements (Unaudited)
The aggregate purchase price allocation for investments disclosed above is as follows (dollars in thousands):
Total Capitalized Costs
Land$48,071 
Buildings and improvements111,460 
Intangible assets:
In-place lease (weighted-average expected life of 18.2 years)
21,258 
$180,789 

Real Estate Under Construction — Net Lease and Operating Properties

During the three months ended March 31, 2024, we capitalized real estate under construction totaling $9.4 million. The number of construction projects in progress with balances included in real estate under construction was 10 and 11 as of March 31, 2024 and December 31, 2023, respectively. Aggregate unfunded commitments totaled approximately $107.5 million and $71.8 million as of March 31, 2024 and December 31, 2023, respectively.

During the three months ended March 31, 2024, we completed the following construction projects (dollars in thousands):
Property Location(s)Primary Transaction TypeNumber of PropertiesDate of CompletionProperty TypeTotal Capitalized Costs
Salisbury, NCExpansion13/8/2024Industrial $14,737 
1$14,737 

During the three months ended March 31, 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 $0.3 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively, which reduces Interest expense in the consolidated statements of income.

Dispositions of Properties

During the three months ended March 31, 2024, we sold three 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 $19.2 million from December 31, 2023 to March 31, 2024 (Note 14).

Other Lease-Related Income

2024 — For the three months ended March 31, 2024, other lease-related income on our consolidated statements of income included other lease-related settlements totaling $1.8 million.

2023 — For the three months ended March 31, 2023, other lease-related income on our consolidated statements of income included: (i) lease termination income totaling $11.4 million received from two tenants in connection with the sales of the properties they occupied and (ii) other lease-related settlements totaling $1.3 million.

W. P. Carey 3/31/2024 10-Q 13


Notes to Consolidated Financial Statements (Unaudited)
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 March 31,
20242023
Lease income — fixed
$286,174 $308,066 
Lease income — variable (a)
36,077 44,270 
Total operating lease income$322,251 $352,336 
__________
(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.

Land, Buildings and Improvements — Operating Properties

At both March 31, 2024 and 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):
March 31, 2024December 31, 2023
Land$148,860 $150,084 
Buildings and improvements1,104,556 1,104,635 
Real estate under construction2,755 1,530 
Less: Accumulated depreciation(87,350)(80,057)
$1,168,821 $1,176,192 

Depreciation expense, including the effect of foreign currency translation, on our buildings and improvements attributable to operating properties was $7.3 million and $7.2 million for the three months ended March 31, 2024 and 2023, respectively.
Assets Held for Sale, Net

Below is a summary of our properties held for sale (in thousands):
March 31, 2024December 31, 2023
Land, buildings and improvements — net lease and other
$ $46,986 
In-place lease intangible assets and other 5,222 
Above-market rent intangible assets 8,374 
Accumulated depreciation and amortization (23,460)
Assets held for sale, net$ $37,122 

At December 31, 2023 we had two properties classified as Assets held for sale, net, with an aggregate carrying value of $37.1 million. These properties were sold in January 2024.

W. P. Carey 3/31/2024 10-Q 14


Notes to Consolidated Financial Statements (Unaudited)
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 finance leases and loans receivable (net of allowance for credit losses). Operating leases are not included in finance receivables.

Finance Receivables

Net investments in finance leases and loans receivable are summarized as follows (in thousands):
Maturity DateMarch 31, 2024December 31, 2023
Net investments in direct financing leases (a)
2024 – 2036$326,590 $431,328 
Sale-leaseback transactions accounted for as loans receivable (b)
2038 – 2052312,903 236,611 
Net investments in sales-type leases (c)
202421,092 835,734 
Secured loans receivable (d)
N/A 11,250 
$660,585 $1,514,923 
__________
(a)Amounts are net of allowance for credit losses, as disclosed below under Net Investments in Direct Financing Leases.
(b)These investments are accounted for as loans receivable in accordance with ASC 310, Receivables and ASC 842, Leases. Maturity dates reflect the current lease maturity dates. Amounts are net of allowance for credit losses of $6.1 million and $0.8 million as of March 31, 2024 and December 31, 2023, respectively.
(c)These investments are assessed for credit loss allowances but no such allowances were recorded as of March 31, 2024 or December 31, 2023.
(d)Amounts are net of allowance for credit losses of $2.1 million as of December 31, 2023. See below under Loans Receivable for discussion of the repayment of this secured loan receivable.

Net Investments in Direct Financing Leases
 
Net investments in direct financing leases is summarized as follows (in thousands):
March 31, 2024December 31, 2023
Lease payments receivable$206,230 $285,512 
Unguaranteed residual value309,214 434,234 
515,444 719,746 
Less: unearned income(175,997)(251,441)
Less: allowance for credit losses (a)
(12,857)(36,977)
$326,590 $431,328 
__________
(a)During the three months ended March 31, 2024 and 2023, we recorded a net release of allowance for credit losses of $7.1 million and $3.4 million, respectively, on our net investments in direct financing leases due to changes in expected economic conditions, which was included within Other gains and (losses) in our consolidated statements of income. In addition, during the three months ended March 31, 2024, we reduced the allowance for credit losses balance by $17.0 million, in connection with the reclassification of certain properties from Net investments in finance leases and loans receivable to Land, buildings and improvements — net lease and other, as described below.

Income from direct financing leases, which is included in Income from finance leases and loans receivable in the consolidated financial statements, was $8.9 million and $12.7 million for the three months ended March 31, 2024 and 2023, respectively.

During the three months ended March 31, 2024, 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 in connection with changes in lease classifications due to extensions of the underlying leases or entering into a new lease. During the three months ended March 31, 2024, the U.S. dollar strengthened against the euro, resulting in a $12.2 million decrease in the carrying value of Net investments in finance leases and loans receivable from December 31, 2023 to March 31, 2024.

W. P. Carey 3/31/2024 10-Q 15


Notes to Consolidated Financial Statements (Unaudited)
Loans Receivable

During the three months ended March 31, 2024, we entered into the following sale-leaseback, which was deemed to be a loan receivable in accordance with ASC 310, Receivables and ASC 842, Leases (dollars in thousands):
Property Location(s)Number of PropertiesDate of AcquisitionProperty TypeTotal Investment
Various, Italy (a)
43/26/2024Industrial, Warehouse $83,890 
4$83,890 
__________
(a)Amount reflects the applicable exchange rate on the date of transaction.

In March 2024, a secured loan receivable was repaid to us for $24.0 million. In connection with this repayment, we recorded a release of allowance for credit losses of $2.1 million since the loan principal was fully repaid. In addition, we collected $1.4 million of unpaid interest related to a prior year upon repayment of this secured loan receivable, which was included in Income from finance leases and loans receivable on the consolidated statements of income for the three months ended March 31, 2024.

Earnings from our loans receivable are included in Income from finance leases and loans receivable in the consolidated financial statements, and totaled $5.9 million and $4.8 million for the three months ended March 31, 2024 and 2023, respectively.

Net Investments in Sales-Type Leases

During the three months ended March 31, 2024, we completed the sale of a portfolio of 78 net-lease self-storage properties located in the United States, which was accounted for as net investments in sales-type leases and included in Net investments in finance leases and loans receivable in the consolidated balance sheets. As a result, the carrying value of Net investments in finance leases and loans receivable decreased by $451.4 million from December 31, 2023 to March 31, 2024 (Note 14). The tenant had previously provided notice of its intention to exercise its option to repurchase the properties during the first quarter of 2023. We recognized an aggregate Gain on sale of real estate, net, of $176.2 million during the three months ended March 31, 2023 related to this transaction.

During the three months ended March 31, 2024, we completed the sale of a portfolio of 70 net-lease office properties located in Andalusia, Spain, to the tenant occupying the properties, which was accounted for as net investments in sales-type leases and included in Net investments in finance leases and loans receivable in the consolidated balance sheets. As a result, the carrying value of Net investments in finance leases and loans receivable decreased by $359.3 million from December 31, 2023 to March 31, 2024 (Note 14). We had previously entered into an agreement to sell the portfolio to the tenant occupying the properties during the fourth quarter of 2023. We recognized an aggregate Gain on sale of real estate, net, of $59.1 million during the three months ended December 31, 2023 related to this transaction.

Earnings from our net investments in sales-type leases are included in Income from finance leases and loans receivable in the consolidated financial statements, and totaled $11.0 million and $3.2 million for the three months ended March 31, 2024 and 2023, respectively. Prior to the respective reclassifications to net investments in sales-type leases, earnings from such investments were recognized in Lease revenues in the consolidated financial statements.

Net investments in sales-type leases is summarized as follows (in thousands):
March 31, 2024December 31, 2023
Lease payments receivable (a)
$22,253 $849,881 
22,253 849,881 
Less: unearned income(1,161)(14,147)
$21,092 $835,734 
__________
(a)Includes estimated purchase price and total rents owed.

W. P. Carey 3/31/2024 10-Q 16


Notes to Consolidated Financial Statements (Unaudited)
Credit Quality of Finance Receivables
 
We generally invest in facilities that we believe are critical to a tenant’s business and therefore have a lower risk of tenant default. At both March 31, 2024 and December 31, 2023, no material balances of our finance receivables were past due. Other than the lease extensions and new lease noted under Net Investments in Direct Financing Leases above, there were no material modifications of finance receivables during the three months ended March 31, 2024.

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. A credit quality of one through three indicates a range of investment grade to stable. A credit quality of four through five indicates a range of inclusion on the watch list to risk of default. The credit quality evaluation of our finance receivables is updated quarterly.

A summary of our finance receivables by internal credit quality rating, excluding our allowance for credit losses, is as follows (dollars in thousands):
Number of Tenants / Obligors atCarrying Value at
Internal Credit Quality IndicatorMarch 31, 2024December 31, 2023March 31, 2024December 31, 2023
1 – 31718$601,490 $1,338,877 
46878,022 215,953 
5  
$679,512 $1,554,830 

Note 6. Goodwill and Other Intangibles

We have recorded lease and internal-use software development intangibles that are being amortized over periods ranging from one year to 48 years. In-place lease intangibles, at cost are included in In-place lease intangible assets and other in the consolidated financial statements. Above-market rent intangibles, at cost are included in Above-market rent intangible assets in the consolidated financial statements. Accumulated amortization of in-place lease and above-market rent intangibles is included in Accumulated depreciation and amortization in the consolidated financial statements. Internal-use software development intangibles are included in Other assets, net in the consolidated financial statements. Below-market rent intangibles are included in Below-market rent intangible liabilities, net in the consolidated financial statements.

Net lease intangibles recorded in connection with property acquisitions during the three months ended March 31, 2024 are described in Note 4.

Goodwill decreased by $4.2 million during the three months ended March 31, 2024 due to foreign currency translation adjustments.

W. P. Carey 3/31/2024 10-Q 17


Notes to Consolidated Financial Statements (Unaudited)
Intangible assets, intangible liabilities, and goodwill are summarized as follows (in thousands):
March 31, 2024December 31, 2023
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Finite-Lived Intangible Assets
Internal-use software development costs
$2,045 $(613)$1,432 $20,745 $(19,569)$1,176 
2,045 (613)1,432 20,745 (19,569)1,176 
Lease Intangibles:
In-place lease2,141,444 (937,149)1,204,295 2,168,739 (934,138)1,234,601 
Above-market rent693,294 (479,222)214,072 706,773 (481,554)225,219 
2,834,738 (1,416,371)1,418,367 2,875,512 (1,415,692)1,459,820 
Goodwill
Goodwill974,052 — 974,052 978,289 — 978,289 
Total intangible assets$3,810,835 $(1,416,984)$2,393,851 $3,874,546 $(1,435,261)$2,439,285 
Finite-Lived Intangible Liabilities
Below-market rent$(202,807)$71,290 $(131,517)$(203,413)$66,541 $(136,872)
Total intangible liabilities$(202,807)$71,290 $(131,517)$(203,413)$66,541 $(136,872)

During the three months ended March 31, 2024, the U.S. dollar strengthened against the euro, resulting in a decrease of $9.4 million in the carrying value of our net intangible assets from December 31, 2023 to March 31, 2024.

Net amortization of intangibles, including the effect of foreign currency translation, was $42.6 million and $67.5 million for the three months ended March 31, 2024 and 2023, respectively. Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to Lease revenues and amortization of internal-use software development and in-place lease intangibles is included in Depreciation and amortization.

Note 7. Equity Method Investments
 
Interests in Unconsolidated Real Estate Investments and CESH

We own interests in certain unconsolidated real estate investments with third parties and in CESH. There have been no significant changes in our equity method investment policies from what was disclosed in the 2023 Annual Report.

We own equity interests in properties that are generally leased to companies through noncontrolling interests in partnerships and limited liability companies that we do not control but over which we exercise significant influence. The underlying investments are jointly owned with third parties. We account for these investments under the equity method of accounting. We account for our interest in CESH under the equity method because, as its advisor, we do not exert control over, but we do have the ability to exercise significant influence over, CESH.

W. P. Carey 3/31/2024 10-Q 18


Notes to Consolidated Financial Statements (Unaudited)
The following table sets forth our ownership interests in our equity method investments and their respective carrying values (dollars in thousands):
Carrying Value at
Lessee/Fund/DescriptionOwnership InterestMarch 31, 2024December 31, 2023
Las Vegas Retail Complex (a)
N/A$238,598 $235,979 
Johnson Self Storage90.00%63,521 63,934 
Kesko Senukai (b)
70.00%28,027 28,860 
Harmon Retail Corner (c)
15.00%24,205 24,229 
CESH (d)
2.43%1,317 1,259 
$355,668 $354,261 
__________
(a)On June 10, 2021, we entered into an agreement to fund a construction loan of approximately $261.9 million (as of March 31, 2024) for a retail complex in Las Vegas, Nevada. Through March 31, 2024, we funded $233.2 million, including $1.8 million during the three months ended March 31, 2024. Equity income from this investment was $3.1 million and $3.3 million for the three months ended March 31, 2024 and 2023, respectively, which was recognized within Earnings from equity method investments in our consolidated statements of income.
(b)The carrying value of this investment is affected by fluctuations in the exchange rate of the euro.
(c)This investment is reported using the hypothetical liquidation at book value model, which may be different than pro rata ownership percentages, primarily due to the capital structure of the partnership agreement.
(d)We have elected to account for our investment in CESH at fair value by selecting the equity method fair value option available under GAAP. We record our investment in CESH on a one quarter lag; therefore, the balance of our equity method investment in CESH recorded as of March 31, 2024 is based on the estimated fair value of our investment as of December 31, 2023.

We received aggregate distributions of $4.1 million and $5.7 million from our unconsolidated real estate investments for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024 and December 31, 2023, the aggregate unamortized basis differences on our unconsolidated real estate investments were $17.7 million and $18.0 million, respectively. We received a distribution from CESH during the three months ended March 31, 2023 of $0.5 million. We did not receive a distribution from CESH during the three months ended March 31, 2024.

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, and foreign currency collars; and Level 3, for securities 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.

Derivative Assets and Liabilities — Our derivative assets and liabilities, which are included in Other assets, net and Accounts payable, accrued expenses and other liabilities, respectively, in the consolidated financial statements, are comprised of foreign currency collars, interest rate swaps, interest rate caps, and stock warrants (Note 9).

W. P. Carey 3/31/2024 10-Q 19


Notes to Consolidated Financial Statements (Unaudited)
The valuation of our derivative instruments (excluding stock warrants) is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves, spot and forward rates, and implied volatilities. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative instruments for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. These derivative instruments 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 valuation models that incorporate market inputs and our own assumptions about future cash flows. We classified these assets as Level 3 because these assets are not traded in an active market.

Equity Method Investment in CESH We have elected to account for our investment in CESH, which is included in Equity method investments in the consolidated financial statements, at fair value by selecting the equity method fair value option available under GAAP (Note 7). We classified this investment as Level 3 because we primarily used valuation models that incorporate unobservable inputs to determine its fair value.

Investment in Shares of Lineage — We have elected to apply the measurement alternative under Accounting Standards Update 2016-01, Financial Instruments — Overall (Subtopic 825-10) to account for our investment in shares of Lineage (a cold storage REIT), which is included in Other assets, net in the consolidated financial statements. Under this alternative, the carrying value is adjusted for any impairments or changes in fair value resulting from observable transactions for similar or identical investments in the issuer. We classified this investment as Level 3 because it is not traded in an active market. During the three months ended March 31, 2024, we received cash dividends of $3.0 million from our investment in shares of Lineage, which was recorded within Non-operating income in the consolidated financial statements. The fair value of this investment was $404.9 million at both March 31, 2024 and December 31, 2023.

Investment in Shares of GCIF We account for our investment in shares of Guggenheim Credit Income Fund (“GCIF”), which is included in Other assets, net in the consolidated financial statements, at fair value. We classified this investment as Level 2 because we used a quoted price from an inactive market to determine its fair value. The fair value of our investment in shares of GCIF was $0.8 million at both March 31, 2024 and December 31, 2023.

We did not have any transfers into or out of Level 1, Level 2, and Level 3 category of measurements during either the three months ended March 31, 2024 or 2023. Gains and losses (realized and unrealized) recognized on items measured at fair value on a recurring basis included in earnings are reported within Other gains and (losses) on our consolidated financial statements.

Our other material financial instruments had the following carrying values and fair values as of the dates shown (dollars in thousands):
March 31, 2024December 31, 2023
LevelCarrying ValueFair ValueCarrying ValueFair Value
Senior Unsecured Notes, net (a) (b) (c)
2 and 3
$5,969,622 $5,514,639 $6,035,686 $5,598,423 
Non-recourse mortgages, net (a) (b) (d)
3504,808 499,693 579,147 572,553 
__________
(a)The carrying value of Senior Unsecured Notes, net (Note 10) includes unamortized deferred financing costs of $19.7 million and $21.0 million at March 31, 2024 and December 31, 2023, respectively. The carrying value of Non-recourse mortgages, net includes unamortized deferred financing costs of less than $0.1 million at December 31, 2023. There were no unamortized deferred financing costs on our Non-recourse mortgages, net as of March 31, 2024.
(b)The carrying value of Senior Unsecured Notes, net includes unamortized discount of $18.8 million and $20.1 million at March 31, 2024 and December 31, 2023, respectively. The carrying value of Non-recourse mortgages, net includes unamortized discount of $3.4 million and $4.3 million at March 31, 2024 and December 31, 2023, respectively.
(c)For those Senior Unsecured Notes for which there are no observable market prices (specifically, our private placement Senior Unsecured Notes (Note 10)), we used a discounted cash flow model that estimates the present value of future loan payments by discounting such payments at current estimated market interest rates. We consider these notes to be within the Level 3 category. For all other Senior Unsecured Notes, we determined the estimated fair value using observed market prices in an open market, which may experience limited trading volume. We consider these notes to be within the Level 2 category.
W. P. Carey 3/31/2024 10-Q 20


Notes to Consolidated Financial Statements (Unaudited)
(d)We determined the estimated fair value of our non-recourse mortgage loans 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 consider interest rate risk and the value of the underlying collateral, which includes quality of the collateral, the credit quality of the tenant/obligor, and the time until maturity.

We estimated that our other financial assets and liabilities, including amounts outstanding under our Senior Unsecured Credit Facility and Unsecured Term Loan due 2026 (Note 10), but excluding finance receivables (Note 5), had fair values that approximated their carrying values at both March 31, 2024 and December 31, 2023.

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. There have been no significant changes in our impairment policies from what was disclosed in the 2023 Annual Report.

During the three months ended March 31, 2024 and 2023, we did not incur any impairment charges.
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 our Senior Unsecured Credit Facility (Note 10) and unhedged variable-rate non-recourse mortgage loans. 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, Senior Unsecured Notes, and other securities, due to changes in interest rates or other market factors. We own investments in North America, Europe, and Japan and are subject to risks associated with fluctuating foreign currency exchange rates.

W. P. Carey 3/31/2024 10-Q 21


Notes to Consolidated Financial Statements (Unaudited)
Derivative Financial Instruments

There have been no significant changes in our derivative financial instrument policies from what was disclosed in the 2023 Annual Report. At both March 31, 2024 and December 31, 2023, no cash collateral had been posted nor received for any of our derivative positions.

The following table sets forth certain information regarding our derivative instruments (in thousands):
Derivatives Designated as Hedging Instruments
Balance Sheet LocationDerivative Assets Fair Value atDerivative Liabilities Fair Value at
March 31, 2024December 31, 2023March 31, 2024December 31, 2023
Foreign currency collars
Other assets, net
$16,793 $14,103 $— $— 
Interest rate swaps
Other assets, net
910 995 — — 
Foreign currency collars
Accounts payable, accrued expenses and other liabilities
— — (1,390)(4,029)
Interest rate swaps
Accounts payable, accrued expenses and other liabilities
 (1,678)
17,703 15,098 (1,390)(5,707)
Derivatives Not Designated as Hedging Instruments
Foreign currency collarsOther assets, net276  — — 
Foreign currency collarsAccounts payable, accrued expenses and other liabilities— —  (217)
276   (217)
Total derivatives$17,979 $15,098 $(1,390)$(5,924)

The following tables present the impact of our derivative instruments in the consolidated financial statements (in thousands):
Amount of Gain (Loss) Recognized on Derivatives in
 Other Comprehensive Income (Loss) (a)
Three Months Ended March 31,
Derivatives in Cash Flow Hedging Relationships 20242023
Foreign currency collars$5,328 $(6,226)
Interest rate swaps1,630 (630)
Interest rate cap (7)
Total$6,958 $(6,863)
Amount of Gain (Loss) on Derivatives Reclassified from
 Other Comprehensive Income (Loss)
Derivatives in Cash Flow Hedging Relationships
Location of Gain (Loss) Recognized in Income
Three Months Ended March 31,
20242023
Foreign currency collarsNon-operating income$2,189 $4,305 
Interest rate swaps and capInterest expense828 370 
Total$3,017 $4,675 
__________
(a)Excludes net losses of $0.5 million and $0.4 million recognized on unconsolidated jointly owned investments for the three months ended March 31, 2024 and 2023, respectively.

Amounts reported in Other comprehensive income (loss) related to interest rate derivative contracts 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 Non-operating income when the hedged foreign currency contracts are settled. As of March 31, 2024, we estimate that an additional $0.6 million and $9.9 million will be reclassified as Interest expense and Non-operating income, respectively, during the next 12 months.

W. P. Carey 3/31/2024 10-Q 22


Notes to Consolidated Financial Statements (Unaudited)
The following table presents the impact of our derivative instruments in the consolidated financial statements (in thousands):
Amount of Gain (Loss) on Derivatives Recognized in Income
Derivatives in Cash Flow Hedging Relationships
Location of Gain (Loss) Recognized in Income
Three Months Ended March 31,
20242023
Foreign currency collarsNon-operating income$928 $(199)
Interest rate swaps
Interest expense
(860)(406)
Derivatives Not in Cash Flow Hedging Relationships
Foreign currency collarsOther gains and (losses)492 (139)
Total$560 $(744)

See below for information on our purposes for entering into derivative instruments.

Interest Rate Swaps and Caps

We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we generally seek long-term debt financing on a fixed-rate basis. However, from time to time, we have obtained, and may in the future obtain, variable-rate (i) non-recourse mortgage loans and (ii) unsecured term loans (Note 10) and, as a result, we have entered into, and may continue to enter into, interest rate swap agreements or interest rate cap agreements with counterparties. Interest rate swaps, which effectively convert the variable-rate debt service obligations of 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 in downward shifts in interest rates. Our objective in using these derivatives is to limit our exposure to interest rate movements.