UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2010
or
|
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o |
|
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: 000-52891
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
(Exact name of registrant as specified in its charter)
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Maryland
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20-8429087 |
(State of incorporation)
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(I.R.S. Employer Identification No.) |
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50 Rockefeller Plaza |
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New York, New York
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10020 |
(Address of principal executive office)
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(Zip Code) |
Investor Relations (212) 492-8920
(212) 492-1100
(Registrants telephone numbers, including area code)
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
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 and post such files). Yes
o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer þ
(Do not check if a smaller reporting company)
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
Registrant had 101,930,846 shares of common stock, $.001 par value, outstanding at May 7, 2010.
INDEX
Forward Looking Statements
This Quarterly Report on Form 10-Q, including Managements 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. It is important to note that our actual results could be
materially different from those projected in such forward-looking statements. 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 which 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
(the SEC), including but not limited to those described in Item 1A. Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2009 as filed with the SEC on March 26, 2010
(the 2009 Annual Report). We do not undertake to revise or update any forward-looking statements.
Additionally, a description of our critical accounting estimates is included in the Managements
Discussion and Analysis of Financial Condition and Results of Operations section of our 2009 Annual
Report. There has been no significant change in our critical accounting estimates.
CPA®:17 Global 3/31/2010 10-Q 1
PART I
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|
Item 1. |
|
Financial Statements |
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share amounts)
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March 31, 2010 |
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December 31, 2009 |
|
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Assets |
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Investments in real estate: |
|
|
|
|
|
|
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|
Real estate, at cost |
|
$ |
411,258 |
|
|
$ |
326,507 |
|
Accumulated depreciation |
|
|
(7,726 |
) |
|
|
(5,957 |
) |
|
|
|
|
|
|
|
Net investments in properties |
|
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403,532 |
|
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320,550 |
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Net investment in direct financing leases |
|
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357,220 |
|
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|
303,250 |
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Real estate under construction |
|
|
|
|
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31,037 |
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Equity investments in real estate |
|
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42,039 |
|
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43,495 |
|
|
|
|
|
|
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|
Net investments in real estate |
|
|
802,791 |
|
|
|
698,332 |
|
Cash and cash equivalents |
|
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337,857 |
|
|
|
281,554 |
|
Intangible assets, net |
|
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77,178 |
|
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46,666 |
|
Other assets, net |
|
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37,688 |
|
|
|
41,320 |
|
|
|
|
|
|
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|
Total assets |
|
$ |
1,255,514 |
|
|
$ |
1,067,872 |
|
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|
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Liabilities and Equity |
|
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|
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Liabilities: |
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Debt |
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$ |
366,650 |
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$ |
300,908 |
|
Accounts payable, accrued expenses and other liabilities |
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6,179 |
|
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|
4,533 |
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Prepaid and deferred rental income |
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16,272 |
|
|
|
13,236 |
|
Due to affiliates |
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11,709 |
|
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|
8,383 |
|
Distributions payable |
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13,945 |
|
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|
11,675 |
|
|
|
|
|
|
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Total liabilities |
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414,755 |
|
|
|
338,735 |
|
|
|
|
|
|
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Commitments and contingencies (Note 11) |
|
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Equity: |
|
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|
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CPA®:17 Global shareholders equity: |
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Preferred stock, $0.001 par value; 50,000,000 shares authorized; none issued |
|
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|
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Common stock, $0.001 par value; 400,000,000 shares authorized; 94,818,474 and
80,135,401 shares issued, respectively |
|
|
97 |
|
|
|
82 |
|
Additional paid-in capital |
|
|
848,714 |
|
|
|
718,057 |
|
Distributions in excess of accumulated earnings |
|
|
(60,940 |
) |
|
|
(53,118 |
) |
Accumulated other comprehensive loss |
|
|
(14,874 |
) |
|
|
(4,902 |
) |
|
|
|
|
|
|
|
|
|
|
772,997 |
|
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|
660,119 |
|
Less, treasury stock at cost, 354,702 and 248,833 shares, respectively |
|
|
(3,298 |
) |
|
|
(2,314 |
) |
|
|
|
|
|
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|
Total
CPA®:17
Global shareholders equity |
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769,699 |
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|
657,805 |
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Noncontrolling interests |
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71,060 |
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|
71,332 |
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|
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Total equity |
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840,759 |
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729,137 |
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Total liabilities and equity |
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$ |
1,255,514 |
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$ |
1,067,872 |
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Note: |
|
Substantially all our assets and liabilities are held through our operating partnership.
See Note 2 for further information. |
See Notes to Consolidated Financial Statements.
CPA®:17 Global 3/31/2010 10-Q 2
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except share and per share amounts)
|
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Three months ended March 31, |
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2010 |
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2009 |
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Revenues |
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Rental income |
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$ |
8,412 |
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$ |
4,271 |
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Interest income from direct financing leases |
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|
9,367 |
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|
3,765 |
|
Interest income from commercial mortgage-backed securities |
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517 |
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|
673 |
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|
|
|
|
|
|
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18,296 |
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|
8,709 |
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|
|
|
|
|
|
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|
|
|
|
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|
Expenses |
|
|
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|
|
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Depreciation and amortization |
|
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(2,332 |
) |
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|
(1,086 |
) |
General and administrative |
|
|
(977 |
) |
|
|
(1,242 |
) |
Property expenses |
|
|
(1,195 |
) |
|
|
(1,362 |
) |
|
|
|
|
|
|
|
|
|
|
(4,504 |
) |
|
|
(3,690 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Other Income and Expenses |
|
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|
|
|
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|
Income from equity investments in real estate |
|
|
398 |
|
|
|
391 |
|
Other income and (expenses) |
|
|
64 |
|
|
|
(1,562 |
) |
Interest expense |
|
|
(5,316 |
) |
|
|
(2,092 |
) |
|
|
|
|
|
|
|
|
|
|
(4,854 |
) |
|
|
(3,263 |
) |
|
|
|
|
|
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|
Income before income taxes |
|
|
8,938 |
|
|
|
1,756 |
|
Benefit from (provision for) income taxes |
|
|
468 |
|
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|
(241 |
) |
|
|
|
|
|
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Net Income |
|
|
9,406 |
|
|
|
1,515 |
|
|
|
|
|
|
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|
Less: Net income attributable to noncontrolling interests |
|
|
(3,283 |
) |
|
|
(1,217 |
) |
|
|
|
|
|
|
|
Net Income Attributable to CPA®:17 Global Shareholders |
|
$ |
6,123 |
|
|
$ |
298 |
|
|
|
|
|
|
|
|
Earnings Per Share |
|
|
|
|
|
|
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|
Net income attributable to CPA®:17 Global shareholders |
|
$ |
0.07 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Weighted Average Shares Outstanding |
|
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87,261,461 |
|
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|
38,152,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Distributions Declared Per Share |
|
$ |
0.1600 |
|
|
$ |
0.1562 |
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
CPA®:17 Global 3/31/2010 10-Q 3
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Net Income |
|
$ |
9,406 |
|
|
$ |
1,515 |
|
Other Comprehensive Loss: |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
(9,643 |
) |
|
|
(2,461 |
) |
Change in unrealized loss on derivative instrument |
|
|
(1,490 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(11,133 |
) |
|
|
(2,463 |
) |
|
|
|
|
|
|
|
Comprehensive loss |
|
|
(1,727 |
) |
|
|
(948 |
) |
|
|
|
|
|
|
|
Amounts Attributable to Noncontrolling Interests: |
|
|
|
|
|
|
|
|
Net income |
|
|
(3,283 |
) |
|
|
(1,217 |
) |
Foreign currency translation adjustment |
|
|
638 |
|
|
|
795 |
|
Change in unrealized loss on derivative instruments |
|
|
523 |
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to noncontrolling interests |
|
|
(2,122 |
) |
|
|
(422 |
) |
|
|
|
|
|
|
|
Comprehensive Loss Attributable to CPA®:17 Global Shareholders |
|
$ |
(3,849 |
) |
|
$ |
(1,370 |
) |
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
CPA®:17 Global 3/31/2010 10-Q 4
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
For the three months ended March 31, 2010 and the year ended December 31, 2009
(in thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
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|
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|
CPA®:17 Global Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
|
Accumulated |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
Additional |
|
|
in Excess of |
|
|
Other |
|
|
|
|
|
|
CPA®:17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Treasury |
|
|
Global |
|
|
Noncontrolling |
|
|
|
|
|
|
Shares |
|
|
Stock |
|
|
Capital |
|
|
Earnings |
|
|
Loss |
|
|
Stock |
|
|
Shareholders |
|
|
Interests |
|
|
Total |
|
Balance at January 1, 2009 |
|
|
34,625,497 |
|
|
$ |
35 |
|
|
$ |
310,732 |
|
|
$ |
(11,056 |
) |
|
$ |
(2,288 |
) |
|
$ |
|
|
|
$ |
297,423 |
|
|
$ |
30,074 |
|
|
$ |
327,497 |
|
Shares issued, net of
offering costs |
|
|
45,244,803 |
|
|
|
45 |
|
|
|
404,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
404,696 |
|
|
|
|
|
|
|
404,696 |
|
Shares issued to affiliates |
|
|
265,101 |
|
|
|
2 |
|
|
|
2,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,676 |
|
|
|
|
|
|
|
2,676 |
|
Contributions from
noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,364 |
|
|
|
103,364 |
|
Distributions declared
($0.6324 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,361 |
) |
|
|
|
|
|
|
|
|
|
|
(34,361 |
) |
|
|
|
|
|
|
(34,361 |
) |
Distributions to
noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(71,946 |
) |
|
|
(71,946 |
) |
Net loss (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,701 |
) |
|
|
|
|
|
|
|
|
|
|
(7,701 |
) |
|
|
9,881 |
|
|
|
2,180 |
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(848 |
) |
|
|
|
|
|
|
(848 |
) |
|
|
166 |
|
|
|
(682 |
) |
Change in unrealized loss
on derivative instrument |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(261 |
) |
|
|
|
|
|
|
(261 |
) |
|
|
(207 |
) |
|
|
(468 |
) |
Impairment loss on
commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,505 |
) |
|
|
|
|
|
|
(1,505 |
) |
|
|
|
|
|
|
(1,505 |
) |
Repurchase of shares |
|
|
(248,833 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,314 |
) |
|
|
(2,314 |
) |
|
|
|
|
|
|
(2,314 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
|
79,886,568 |
|
|
|
82 |
|
|
|
718,057 |
|
|
|
(53,118 |
) |
|
|
(4,902 |
) |
|
|
(2,314 |
) |
|
|
657,805 |
|
|
|
71,332 |
|
|
|
729,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued, net of
offering costs |
|
|
14,621,409 |
|
|
|
15 |
|
|
|
130,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,055 |
|
|
|
|
|
|
|
130,055 |
|
Shares issued to affiliates |
|
|
61,664 |
|
|
|
|
|
|
|
617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
617 |
|
|
|
|
|
|
|
617 |
|
Distributions declared
($0.1600 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,945 |
) |
|
|
|
|
|
|
|
|
|
|
(13,945 |
) |
|
|
(2,394 |
) |
|
|
(16,339 |
) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,123 |
|
|
|
|
|
|
|
|
|
|
|
6,123 |
|
|
|
3,283 |
|
|
|
9,406 |
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,005 |
) |
|
|
|
|
|
|
(9,005 |
) |
|
|
(638 |
) |
|
|
(9,643 |
) |
Change in unrealized loss
on derivative instrument |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(967 |
) |
|
|
|
|
|
|
(967 |
) |
|
|
(523 |
) |
|
|
(1,490 |
) |
Repurchase of shares |
|
|
(105,869 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(984 |
) |
|
|
(984 |
) |
|
|
|
|
|
|
(984 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010 |
|
|
94,463,772 |
|
|
$ |
97 |
|
|
$ |
848,714 |
|
|
$ |
(60,940 |
) |
|
$ |
(14,874 |
) |
|
$ |
(3,298 |
) |
|
$ |
769,699 |
|
|
$ |
71,060 |
|
|
$ |
840,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
CPA®:17 Global 3/31/2010 10-Q 5
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Cash Flows Operating Activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
9,406 |
|
|
$ |
1,515 |
|
Adjustments to net income: |
|
|
|
|
|
|
|
|
Depreciation and amortization, including intangible assets |
|
|
2,334 |
|
|
|
1,086 |
|
Straight-line rent adjustments and amortization of rent-related intangibles |
|
|
(1,157 |
) |
|
|
(520 |
) |
Income from equity investment in real estate in excess of distributions received |
|
|
(56 |
) |
|
|
(256 |
) |
Issuance of shares to affiliate in satisfaction of fees due |
|
|
617 |
|
|
|
458 |
|
Amortization of discount on commercial mortgage-backed securities |
|
|
|
|
|
|
156 |
|
Realized loss on foreign currency transactions |
|
|
|
|
|
|
1,692 |
|
Unrealized loss on foreign currency transactions |
|
|
65 |
|
|
|
|
|
Allowance for uncollectible amounts |
|
|
|
|
|
|
878 |
|
Increase in accounts receivable and prepaid expenses |
|
|
(587 |
) |
|
|
(958 |
) |
Increase in accounts payable and accrued expenses |
|
|
841 |
|
|
|
43 |
|
Increase (decrease) in prepaid and deferred rental income |
|
|
3,287 |
|
|
|
(665 |
) |
Increase in due to affiliates |
|
|
2,015 |
|
|
|
177 |
|
Change in other operating assets and liabilities, net |
|
|
(1,435 |
) |
|
|
(131 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
15,330 |
|
|
|
3,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Investing Activities |
|
|
|
|
|
|
|
|
Distributions received from equity investments in real estate in excess of equity income |
|
|
332 |
|
|
|
|
|
Acquisitions of real estate and direct financing leases and other capital expenditures (a) |
|
|
(147,311 |
) |
|
|
(245,447 |
) |
Contributions to equity investments in real estate (a) |
|
|
(60 |
) |
|
|
(2,125 |
) |
Value added taxes recoverable on purchases of real estate |
|
|
(1,142 |
) |
|
|
|
|
Repayment of notes receivable |
|
|
7,000 |
|
|
|
|
|
Funds for construction released from escrow |
|
|
186 |
|
|
|
|
|
Payment of deferred acquisition fees to an affiliate |
|
|
(1,133 |
) |
|
|
(155 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(142,128 |
) |
|
|
(247,727 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Financing Activities |
|
|
|
|
|
|
|
|
Distributions paid |
|
|
(11,675 |
) |
|
|
(4,507 |
) |
Contributions from noncontrolling interests |
|
|
|
|
|
|
103,363 |
|
Distributions to noncontrolling interests |
|
|
(2,394 |
) |
|
|
(886 |
) |
Proceeds from mortgage notes payable |
|
|
71,678 |
|
|
|
|
|
Scheduled payments of mortgage principal |
|
|
(1,357 |
) |
|
|
(759 |
) |
Payment of mortgage deposits, net of deposits refunded |
|
|
(1,662 |
) |
|
|
|
|
Proceeds from issuance of shares, net of offering costs |
|
|
130,055 |
|
|
|
65,927 |
|
Purchase of treasury stock |
|
|
(984 |
) |
|
|
(83 |
) |
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
183,661 |
|
|
|
163,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Cash and Cash Equivalents During the Period |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
(560 |
) |
|
|
(1,675 |
) |
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
56,303 |
|
|
|
(82,872 |
) |
Cash and cash equivalents, beginning of period |
|
|
281,554 |
|
|
|
161,569 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
337,857 |
|
|
$ |
78,697 |
|
|
|
|
|
|
|
|
Noncash investing and financing activities:
|
|
|
(a) |
|
The cost basis of real estate investments acquired during the three months ended March
31, 2010 and 2009, including equity investments in real estate, also includes deferred
acquisition fees payable of $3.0 million and $3.3 million, respectively. |
See Notes to Consolidated Financial Statements.
CPA®:17 Global 3/31/2010 10-Q 6
CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Organization and Offering
Organization
Corporate Property Associates 17 Global Incorporated (together with its consolidated
subsidiaries, we, us or our) is a publicly owned, non-listed real estate investment trust
(REIT) that invests primarily in commercial properties leased to companies domestically and
internationally. As a REIT, we are not subject to United States (U.S.) federal income taxation as
long as we satisfy certain requirements, principally relating to the nature of our income, the
level of our distributions and other factors. We earn revenue principally by leasing the properties
we own to single corporate tenants, on a triple-net leased basis, which requires the tenant to pay
substantially all of the costs associated with operating and maintaining the property. Revenue is
subject to fluctuation because of the timing of new lease transactions, lease terminations, lease
expirations, contractual rent increases, tenant defaults and sales of properties. At March 31,
2010, our portfolio was comprised of our full or partial ownership interests in 72 fully occupied
properties, substantially all of which were triple-net leased to 19 tenants, and totaled
approximately 7 million square feet (on a pro rata basis). We were formed in 2007 and conduct
substantially all of our investment activities and own all of our assets through our operating
partnership, CPA:17 Limited Partnership. We are a general partner and a limited partner and
anticipate that we will own a 99.985% capital interest in the operating partnership. W. P. Carey
Holdings, LLC (Carey Holdings), a subsidiary of W. P. Carey & Co. LLC (WPC), holds a special
general partner interest in the operating partnership. We refer to WPC, together with certain of
its subsidiaries and Carey Holdings, as the advisor.
On February 20, 2007, WPC purchased 22,222 shares of our common stock for $0.2 million and was
admitted as our initial shareholder. WPC purchased its shares at $9.00 per share, net of
commissions and fees, which would have otherwise been payable to Carey Financial, LLC (Carey
Financial), our sales agent and a subsidiary of WPC. In addition, in July 2008, we received a
capital contribution from the advisor of $0.3 million.
Public Offering
In November 2007, our registration statement on Form S-11 (File No. 333-140842), covering an
initial public offering of up to 200,000,000 shares of common stock at $10.00 per share, was
declared effective by the SEC under the Securities Act of 1933, as amended. The registration
statement also covers the offering of up to 50,000,000 shares of common stock at $9.50 pursuant to
our distribution reinvestment and stock purchase plan. Our shares are initially being offered on a
best efforts basis by Carey Financial and selected other dealers. We commenced our initial public
offering in late December 2007. Since inception through the date of this Report, we have raised a
total of more than $975 million.
We intend to use the net proceeds of the offering to acquire, own and manage a portfolio of
commercial properties leased to a diversified group of companies primarily on a single tenant net
lease basis.
Note 2. Basis of Presentation
Our interim consolidated financial statements have been prepared, without audit, in accordance with
the instructions to Form 10-Q and therefore do not necessarily include all information and
footnotes necessary for a fair statement of our consolidated financial position, results of
operations and cash flows in accordance with accounting principles generally accepted in the U.S.
(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 statement of
results of operations, financial position 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, 2009, which are included in our 2009 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 fiscal 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
The consolidated financial statements affect all of our accounts, including those of our
majority-owned and/or controlled subsidiaries. The portion of equity in a subsidiary that is not
attributable, directly or indirectly, to us is presented as noncontrolling interests. All
significant intercompany accounts and transactions have been eliminated.
CPA®:17 Global 3/31/2010 10-Q 7
Notes to Consolidated Financial Statements
In June 2009, the Financial Accounting Standard Board (FASB) issued amended guidance related to
the consolidation of variable interest entities (VIEs). The amended guidance affects the overall
consolidation analysis, changing the approach taken by companies in identifying which entities are
VIEs and in determining which party is the primary beneficiary, and requires an enterprise to
qualitatively assess the determination of the primary beneficiary of a VIE based on whether the
entity (1) has the power to direct matters that most significantly impact the activities of the
VIE, and (2) has the obligation to absorb losses or the right to receive benefits of the VIE that
could potentially be significant to the VIE. The amended guidance changes the consideration of
kick-out rights in determining if an entity is a VIE, which may cause certain additional entities
to now be considered VIEs. Additionally, the guidance requires an ongoing reconsideration of the
primary beneficiary and provides a framework for the events that trigger a reassessment of whether
an entity is a VIE. We adopted this amended guidance on January 1, 2010, which did not require
consolidation of any additional VIEs. The adoption of this amended guidance did not affect our
financial position and results of operations.
In connection with the adoption
of the amended guidance on consolidating VIEs, we performed an
analysis of all of our subsidiary entities, including our venture entities with other parties, to
determine whether they qualify as VIEs and whether they should be consolidated or accounted for as
equity investments in an unconsolidated venture. As a result of our quantitative and qualitative
assessment to determine whether these entities are VIEs, we determined that CPA:17 Limited
Partnership, our operating partnership, through which we conduct substantially all of our
investment activities and own all of our assets, was deemed to be a
VIE due to the decision-making rights of the advisor and the financial terms of the special
general partner
interest in the operating partnership. We also determined that our subsidiary that
owns our interest in The New York Times Company venture was
deemed to be a VIE, as the third party tenant that leases property
from this entity has the right to repurchase the property during the
term of its lease at a fixed price. At March 31, 2010 and December 31, 2009, this
subsidiary had total assets of $376.5 million and $373.0 million, respectively, and total
liabilities of $121.1 million and $121.7 million, respectively.
After
making the determination that our New York Times venture subsidiary was a VIE, we performed an assessment
as to which party would be considered the primary beneficiary of this
entity and would be
required to consolidate its balance sheet and results of operations. This assessment was based upon
which party (1) had the power to direct activities that most significantly impact the entitys
economic performance and (2) had the obligation to absorb the expected losses of or right to
receive benefits from the VIE that could potentially be significant to the VIE. Based on our
assessment, it was determined that we would continue to consolidate
this VIE. Activities that we considered significant in our assessment included which entity had control over
investment and financing decisions, management of day-to-day operations, and ability to sell the
entitys assets.
In February 2010, the FASB
issued further guidance, which provided a limited scope
deferral for an interest in an entity that meets all of the following conditions: (a) the entity
has all the attributes of an investment company as defined under AICPA Audit and Accounting Guide,
Investment Companies, or does not have all the attributes of an investment company but is an entity
for which it is acceptable based on industry practice to apply measurement principles that are
consistent with the AICPA Audit and Accounting Guide, Investment Companies, (b) the reporting
entity does not have explicit or implicit obligations to fund any losses of the entity that could
potentially be significant to the entity, and (c) the entity is not a securitization entity,
asset-based financing entity or an entity that was formerly considered a qualifying special-purpose
entity. We evaluated our involvement with our operating partnership and concluded that all three
of the above conditions were met for the limited scope deferral to
apply. Accordingly, we continued to
perform our consolidation analysis for the operating partnership in accordance with previously
issued guidance on VIEs.
CPA®:17 Global 3/31/2010 10-Q 8
Notes to Consolidated Financial Statements
Because we conduct substantially all of our investment activities and own all of our assets through
the operating partnership, substantially all of the assets and
liabilities presented in our consolidated balance sheets are attributable to the operating partnership. The following table
presents amounts included in the consolidated balance sheets that are not attributable to the
operating partnership but rather are attributable to Corporate Property Associates 17 Global
Incorporated, the primary beneficiary of the operating partnership (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
December 31, 2009 |
|
Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents not attributable to consolidated VIE |
|
$ |
1,449 |
|
|
$ |
61 |
|
Other assets, net not attributable to consolidated VIE |
|
|
4,820 |
|
|
|
4,307 |
|
|
|
|
|
|
|
|
Total assets not attributable to consolidated VIE |
|
$ |
6,269 |
|
|
$ |
4,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Due to affiliates not attributable to consolidated VIE |
|
$ |
1,162 |
|
|
$ |
170 |
|
Distributions payable not attributable to consolidated VIE |
|
|
13,945 |
|
|
|
11,675 |
|
|
|
|
|
|
|
|
Total liabilities not attributable to consolidated VIE |
|
$ |
15,107 |
|
|
$ |
11,845 |
|
|
|
|
|
|
|
|
Because we generally utilize non-recourse debt, our maximum exposure to the operating partnership
is limited to the equity we have in the operating partnership. We have not provided financial or
other support to the operating partnership and there were no guarantees or other commitments from
third parties that would affect the value or risk of our interest in this entity.
Acquisition Costs
In accordance with the FASBs revised guidance for business combinations, which we adopted on
January 1, 2009, we immediately expense all acquisition costs and fees associated with transactions
deemed to be business combinations, but we capitalize these costs for transactions deemed to be
acquisitions of an asset. To the extent we make investments that are deemed to be business
combinations, our results of operations will be negatively impacted by the immediate expensing of
acquisition costs and fees incurred in accordance with the revised guidance, whereas in the past
such costs and fees would generally have been capitalized and allocated to the cost basis of the
acquisition. Post acquisition, there will be a subsequent positive impact on our results of
operations through a reduction in depreciation expense over the estimated life of the properties.
Historically, we have not acquired investments that would be deemed business combinations. During
the three months ended March 31, 2010 and 2009, we capitalized acquisition costs and fees of $7.0
million and $10.6 million, respectively, in connection with our investment activity. Costs and fees
capitalized for the three months ended March 31, 2009 are inclusive of amounts attributable to
noncontrolling interests of $2.9 million.
Information about International Geographic Areas
At March 31, 2010, our international investments were comprised of investments in the European
Union. Revenues from these investments totaled $4.0 million and $2.0 million for the three months
ended March 31, 2010 and 2009, respectively. Our net investments in real estate for these
investments totaled $218.7 million and $191.7 million at March 31, 2010 and December 31, 2009,
respectively.
Note 3. Agreements and Transactions with Related Parties
We have an advisory agreement with the advisor whereby the advisor performs certain services for us
for a fee. Under the terms of this agreement, which was amended and renewed effective October 1,
2009, the advisor structures and negotiates the purchase and sale of investments and debt placement
transactions for us, for which we pay the advisor structuring and subordinated disposition fees,
and manages our day-to-day operations, for which we pay the advisor asset management fees and
certain cash distributions. In addition, we reimburse the advisor for organization and offering
costs incurred in connection with our offering and for certain administrative duties performed on
our behalf. We also have certain agreements with joint ventures. These transactions are described
below.
Transaction Fees
We pay the advisor acquisition fees for structuring and negotiating investments and related
mortgage financing on our behalf, a portion of which is payable upon acquisition of investments
with the remainder subordinated to a preferred return. The preferred return is a non-compounded
cumulative distribution return of 5% per annum (based initially on our invested capital).
Acquisition fees payable to the advisor with respect to our long-term net lease investments may be
up to an average of 4.5% of the total cost of those investments and are comprised of a current
portion of 2.5%, typically paid when the investment is purchased, and a deferred portion of 2%,
typically paid over three years, once the preferred return criterion has been met. For certain
types of non-long term net lease investments, initial acquisition fees may range from 0% to 1.75%
of the equity invested plus the related acquisition fees, with no portion of the fee being
deferred.
CPA®:17 Global 3/31/2010 10-Q 9
Notes to Consolidated Financial Statements
For the three months ended March 31, 2010 and 2009, we incurred current acquisition fees of
$3.7 million and $4.1 million, respectively, and deferred acquisition fees of $3.0 million and
$3.3 million, respectively. We made payments of deferred acquisition fees to the advisor totaling
$1.1 million and $0.2 million during the three months ended March 31, 2010 and 2009, respectively.
Unpaid installments of deferred acquisition fees totaling $9.8 million and $7.9 million at
March 31, 2010 and December 31, 2009, respectively, are included in Due to affiliates in the
consolidated financial statements.
The advisor may also receive subordinated disposition fees of up to 3% of the contract sales price
of an investment for services provided in connection with the disposition; however, payment of such
fees is subordinated to a preferred return. We have not incurred any subordinated disposition fees
at March 31, 2010 as we have not disposed of any investments.
Asset Management Fee and Cash Distributions
We pay the advisor an annual asset management fee ranging from 0.5% of average market value for
long-term net leases and certain other types of real estate investments to 1.75% of average equity
value for certain types of securities. The asset management fee is payable in cash or restricted
shares of our common stock at the option of the advisor. If the advisor elects to receive all or a
portion of its fees in restricted shares, the number of restricted shares issued is determined by
dividing the dollar amount of fees by our most recently published estimated net asset value per
share as approved by our board of directors. For 2010 and 2009, the advisor elected to receive its
asset management fees in restricted shares. We incurred asset management fees of $0.9 million and
$0.5 million during the three months ended March 31, 2010 and 2009, respectively. At March 31, 2010
the advisor owned 403,549 restricted shares (less than 1%) of our common stock.
We also pay the advisor up to 10% of distributions of available cash of the operating partnership,
depending on the type of investments we own. We made distributions of $0.5 million and $0.6 million
to the advisor during the three months ended March 31, 2010 and 2009, respectively.
Organization and Offering Expenses
We are liable for expenses incurred in connection with the offering of our securities. These
expenses are deducted from the gross proceeds of our offering. Total organization and offering
expenses, including underwriting compensation, will not exceed 15% of the gross proceeds of our
offering. Under the terms of a sales agency agreement between Carey Financial and us, Carey
Financial receives a selling commission of up to $0.65 per share sold, a selected dealer fee of up
to $0.20 per share sold and a wholesaling fee of up to $0.15 per share sold. Carey Financial will
re-allow all selling commissions to selected dealers participating in the offering and may re-allow
up to the full selected dealer fee to the selected dealers. Under the terms of a selected
investment advisor agreement among Carey Financial, a selected investment advisor, and us, Carey
Financial also receives a wholesaling fee of up to $0.15 per share sold to clients of selected
investment advisors. Carey Financial will use any retained portion of the selected dealer fee
together with the selected dealer or investment advisor wholesaling fees to cover other
underwriting costs incurred in connection with the offering. Total underwriting compensation paid
in connection with our offering, including selling commissions, the selected dealer fee, the
wholesaling fee and reimbursements made by Carey Financial to selected dealers and investment
advisors, cannot exceed the limitations prescribed by the Financial Industry Regulatory Authority
(FINRA). The limit on underwriting compensation is currently 10% of gross offering proceeds. We
may also reimburse Carey Financial up to an additional 0.5% of offering proceeds for bona fide due
diligence expenses. We reimburse the advisor or one of its affiliates for other organization and
offering expenses (including, but not limited to, filing fees, legal, accounting, printing and
escrow costs). The advisor has agreed to be responsible for the payment of organization and
offering expenses (excluding selling commissions, selected dealer fees and wholesaling fees) that
exceed 4% of the gross offering proceeds.
The total costs paid by the advisor and its affiliates in connection with the organization and
offering of our securities were $9.3 million from inception through March 31, 2010, of which $8.0
million had been reimbursed as of March 31, 2010. Unpaid costs are included in Due to affiliates in
the consolidated financial statements. During the offering period, we accrue costs incurred in
connection with the raising of capital as deferred offering costs. Upon receipt of offering
proceeds and reimbursement to the advisor for costs incurred, we charge the deferred costs to
equity. Such reimbursements will not exceed regulatory cost limitations as described above.
CPA®:17 Global 3/31/2010 10-Q 10
Notes to Consolidated Financial Statements
Other Expenses
We reimburse the advisor for various expenses it incurs in the course of providing services to us.
We reimburse certain third-party expenses paid by the advisor on our behalf, including
property-specific costs, professional fees, office expenses and business development expenses. In
addition, we reimburse the advisor for the allocated costs of personnel and overhead in providing
management of our day-to-day operations, including accounting services, shareholder services,
corporate management, and property management and operations. We do not reimburse the advisor for
the cost of personnel if these personnel provide services for transactions for which the advisor
receives a transaction fee, such as acquisitions, dispositions and refinancings.
For the three months ended March 31, 2010 and 2009, we incurred personnel reimbursements of $0.2
million and $0.1 million, respectively, which are included in General and administrative expenses
in the consolidated financial statements.
Joint Ventures and Other Transactions with Affiliates
Together with certain affiliates, we participate in an entity that leases office space used for the
administration of real estate entities. This entity does not have any significant assets,
liabilities or operations other than its interest in the office lease. Under the terms of an office
cost-sharing agreement among the participants in this entity, rental, occupancy and leasehold
improvement costs are allocated among the participants based on gross revenues and are adjusted
quarterly. Our share of expenses incurred was less than $0.1 million for each of the three months
ended March 31, 2010 and 2009. Based on current gross revenues, our current share of future minimum
lease payments under this agreement would be $0.1 million annually through 2016; however, we
anticipate that our share of future annual minimum lease payments will increase significantly as we
continue to invest the proceeds of our offering.
We own interests in entities ranging from 49% to 70%, with the remaining interests held by
affiliates. We consolidate certain of these entities and account for the remainder under the equity
method of accounting.
Note 4. Net Investments in Properties
Net Investments in Properties
Net investments in properties, which consists of land and buildings leased to others, at cost, and
accounted for as operating leases, is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
December 31, 2009 |
|
Land |
|
$ |
95,497 |
|
|
$ |
62,597 |
|
Buildings |
|
|
315,761 |
|
|
|
263,910 |
|
Less: Accumulated depreciation |
|
|
(7,726 |
) |
|
|
(5,957 |
) |
|
|
|
|
|
|
|
|
|
$ |
403,532 |
|
|
$ |
320,550 |
|
|
|
|
|
|
|
|
Amounts below are based upon the applicable exchange rate at the date of acquisition where
appropriate.
Acquisitions of Real Estate
2010 During the three months ended March 31, 2010, we entered into three domestic investments and
one investment in Spain, which were classified as operating leases, at a total cost of $126.6
million, including net lease intangible assets totaling $32.9 million (see Other below). We
classified an additional portion of one of the domestic investments as a net investment in direct
financing lease (Note 5). The investment in Spain represents a follow-on transaction to an
investment that we completed in the fourth quarter of 2009. In connection with these investments,
which we deemed to be real estate acquisitions under current authoritative accounting guidance, we
capitalized acquisition-related costs and fees totaling $5.5 million.
Real Estate Under Construction
2009 At December 31, 2009, Real estate under construction consisted of $31.0 million in costs
incurred and/or capitalized on a domestic build-to-suit project that we classified as a net
investment in direct financing lease and placed into service in January 2010 (Note 5).
Other
In connection with our acquisition of properties, we have recorded net lease intangibles of $72.1
million, including $32.9 million of net lease intangibles acquired in connection with our
investment activity during the three months ended March 31, 2010. These intangible assets and
liabilities are being amortized over periods ranging from 16 years to 40 years. Amortization of
below-market and above-market rent intangibles is recorded as an adjustment to lease revenues,
while amortization of in-place lease and tenant relationship intangibles is included in
Depreciation and amortization. Below-market rent intangibles are included in Prepaid and deferred
rental income and security deposits in the consolidated financial statements. Net amortization of
intangibles, including the effect of foreign currency translation, was $0.6 million and $0.2
million for the three months ended March 31, 2010 and 2009, respectively.
CPA®:17 Global 3/31/2010 10-Q 11
Notes to Consolidated Financial Statements
Note 5. Net Investment in Direct Financing Leases
2010 In March 2010, we completed a domestic net lease financing transaction for $22.5 million. In
connection with this investment, which was deemed to be a real estate acquisition under current
authoritative accounting guidance, we capitalized costs and fees totaling $1.6 million. We
classified an additional portion of this investment as an operating lease (Note 4).
In January 2010, we completed a domestic build-to-suit project and reclassified it from Real estate
under construction to Net investment in direct financing lease (Note 4). Costs incurred and/or
capitalized in connection with the project totaled $32.3 million and $31.0 million at the
completion of the project in January 2010 and at December 31, 2009, respectively. We entered into
this build-to-suit project in March 2009, at which time we capitalized costs and fees totaling $1.9
million as we deemed the project to be a real estate acquisition under current authoritative
accounting guidance.
2009 In March 2009, an entity in which we, our affiliate, Corporate Property Associates 16 -
Global Incorporated (CPA®:16 Global), and our advisor hold 55%, 27.25% and 17.75%
interests, respectively, completed a net lease financing transaction with respect to a leasehold
condominium interest, encompassing approximately 750,000 rentable square feet, in the office
headquarters of The New York Times Company for approximately $233.7 million, inclusive of amounts
attributable to noncontrolling interests of $104.1 million and acquisition fees payable to the
advisor. The lease has an initial term of 15 years and provides the tenant with one 10-year renewal
option and two additional five-year renewal options. In the tenth year of the initial term of the
lease, The New York Times Company has an option to purchase the building for approximately
$250.0 million. This purchase option, together with the other terms of the net lease and related
transaction documents, allows the transaction to be accounted for as a financing lease for
financial reporting purposes. In connection with this investment, which was deemed to be a real
estate acquisition under current authoritative accounting guidance, we capitalized
acquisition-related costs and fees totaling $8.7 million, inclusive of amounts attributable to
noncontrolling interests of $2.9 million.
Note 6. Equity Investments in Real Estate
We own interests in single-tenant net leased properties leased to corporations through
noncontrolling interests in (i) partnerships and limited liability companies in which our ownership
interests are 50% or less but over which we exercise significant influence, and (ii)
tenants-in-common subject to common control. The underlying investments are generally owned with
affiliates. We account for these investments under the equity method of accounting (i.e., at cost,
increased or decreased by our share of earnings or losses, less distributions, plus contributions).
The following table sets forth our ownership interests in our equity investments in real estate and
their respective carrying values. The carrying value of these ventures is affected by the timing
and nature of distributions (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership |
|
|
|
|
|
|
Interest at |
|
|
Carrying Value at |
|
Lessee |
|
March 31, 2010 |
|
|
March 31, 2010 |
|
|
December 31, 2009 |
|
Berry Plastics (a) |
|
|
50 |
% |
|
$ |
21,149 |
|
|
$ |
21,414 |
|
Tesco plc (b) |
|
|
49 |
% |
|
|
20,890 |
|
|
|
22,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
42,039 |
|
|
$ |
43,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
In February 2009, this venture repaid its $39.0 million outstanding balance on a non-recourse
mortgage loan at a discount for $32.5 million and recognized a corresponding gain of $6.5
million. Our $3.2 million share of the gain was reduced by $2.9 million as a result of an
other-than-temporary impairment charge recognized to reduce the carrying value of our
investment to the estimated fair value of the ventures underlying properties (Note 8). In
connection with this transaction, the venture obtained non-recourse mortgage financing of
$29.0 million with a variable annual interest rate capped at 10% through the use of an
interest rate cap and a term of three years, with two one-year extensions. |
|
(b) |
|
Carrying value of investment is affected by the impact of fluctuations in the exchange rate
of the Euro. We acquired our interest in this investment in July 2009. |
CPA®:17 Global 3/31/2010 10-Q 12
Notes to Consolidated Financial Statements
The following tables present combined summarized financial information of our venture properties.
Amounts provided are the total amounts attributable to the venture properties and do not represent
our proportionate share (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
December 31, 2009 |
|
Assets |
|
$ |
175,597 |
|
|
$ |
181,600 |
|
Liabilities |
|
|
(81,562 |
) |
|
|
(84,522 |
) |
|
|
|
|
|
|
|
Partners/members equity |
|
$ |
94,035 |
|
|
$ |
97,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Revenue |
|
$ |
3,594 |
|
|
$ |
1,660 |
|
Expenses |
|
|
(2,970 |
) |
|
|
(1,614 |
) |
Gain on extinguishment of debt |
|
|
|
|
|
|
6,512 |
|
|
|
|
|
|
|
|
Net income |
|
$ |
624 |
|
|
$ |
6,558 |
|
|
|
|
|
|
|
|
We recognized income from our equity investments in real estate of $0.4 million for both the three
months ended March 31, 2010 and 2009. These amounts represent our proportionate share of the income
or loss of the ventures as well as certain depreciation and amortization adjustments related to
other-than-temporary impairment charges.
Note 7. Securities Held to Maturity
In 2008, we acquired investments in five investment grade pools of commercial mortgage-backed
securities (CMBS). The CMBS investments bear initial pass-through coupon rates approximating 6.2%
and have final expected payout dates ranging from December 2017 to September 2020. We account for
these CMBS investments, which are included in Other assets in the consolidated financial
statements, as held-to-maturity securities because we have the intent and ability to hold these
securities to maturity.
At the date of acquisition, the $20.0 million cost of the five CMBS pools represented a
$13.3 million discount to their $33.3 million face value. This discount was accreted into Interest
income from commercial mortgage-backed securities on an effective yield method, adjusted for actual
prepayment activity over the average life of the related securities as a yield adjustment, and
therefore, we accreted $0.2 million into Interest income from commercial mortgage-backed securities
for the three months ended March 31, 2009. During the fourth quarter of 2009, we determined that
our CMBS investments were other-than-temporarily impaired and recognized impairment charges
totaling $17.1 million to reduce the cost basis of these investments to their estimated fair
values, of which $15.6 million was related to credit factors and was recognized in earnings and
$1.5 million was related to non-credit factors and was recognized in Other comprehensive loss in
equity. We will accrete the difference between the new cost basis of the CMBS investments and cash
flows expected to be collected to Interest income from commercial mortgage-backed securities over
the remaining expected lives of the securities. Following the recognition of the impairment charges
during the fourth quarter of 2009, the carrying value of the CMBS investments at March 31, 2010 was
equal to the amount of cash flows we expect to collect, and, therefore, no amounts were accreted
into income during the three months ended March 31, 2010.
The following is a summary of our securities held to maturity, which consisted entirely of CMBS at
March 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description |
|
Face Value |
|
|
Amortized Cost |
|
|
Unrealized Gain |
|
|
Estimated Fair Value |
|
CMBS |
|
$ |
33,284 |
|
|
$ |
3,812 |
|
|
$ |
367 |
|
|
$ |
4,179 |
|
The following is a summary of the underlying credit ratings of our CMBS investments at March 31,
2010 (in thousands):
|
|
|
|
|
Rating (a) |
|
Amortized Cost |
|
B |
|
$ |
1,749 |
|
B+ |
|
|
1,304 |
|
BB- |
|
|
759 |
|
|
|
|
|
|
|
$ |
3,812 |
|
|
|
|
|
|
|
|
(a) |
|
Ratings are those of Standard & Poors Ratings Services, a division of The McGraw-Hill Companies, Inc. |
CPA®:17 Global 3/31/2010 10-Q 13
Notes to Consolidated Financial Statements
Note 8. Fair Value Measurements
Under current authoritative accounting guidance for fair value measurements, the fair value of an
asset is defined as the exit price, which is the amount that would either be received when an asset
is sold or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. The guidance establishes a three-tier fair value hierarchy based on the
inputs used in measuring fair value. These tiers are: Level 1, for which quoted market prices for
identical instruments are available in active markets, such as money market funds, equity
securities and U.S. Treasury securities; Level 2, for which there are inputs other than quoted
prices included within Level 1 that are observable for the instrument, such as certain derivative
instruments including interest rate caps and swaps; and Level 3, for which little or no market data
exists, therefore requiring us to develop our own assumptions, such as certain marketable
securities.
Items Measured at Fair Value on a Recurring Basis
The following tables set forth our assets and liabilities that were accounted for at fair value on
a recurring basis at March 31, 2010 and December 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using: |
|
|
|
|
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for |
|
|
Significant Other |
|
|
Unobservable |
|
|
|
|
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
|
Inputs |
|
Description |
|
March 31, 2010 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
312,870 |
|
|
$ |
312,870 |
|
|
$ |
|
|
|
$ |
|
|
Derivative assets |
|
|
1,822 |
|
|
|
|
|
|
|
1,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
314,692 |
|
|
$ |
312,870 |
|
|
$ |
1,822 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
$ |
(328 |
) |
|
$ |
|
|
|
$ |
(328 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using: |
|
|
|
|
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for |
|
|
Significant Other |
|
|
Unobservable |
|
|
|
|
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
|
Inputs |
|
Description |
|
December 31, 2009 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
278,566 |
|
|
$ |
278,566 |
|
|
$ |
|
|
|
$ |
|
|
Derivative assets |
|
|
2,985 |
|
|
|
|
|
|
|
2,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
281,551 |
|
|
$ |
278,566 |
|
|
$ |
2,985 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
$ |
(20 |
) |
|
$ |
|
|
|
$ |
(20 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and liabilities presented above exclude assets and liabilities owned by unconsolidated
ventures.
Our financial instruments had the following carrying values and fair values as of the dates shown
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
December 31, 2009 |
|
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
Debt |
|
$ |
366,650 |
|
|
$ |
360,102 |
|
|
$ |
300,908 |
|
|
$ |
291,737 |
|
CMBS (a) |
|
|
3,812 |
|
|
|
4,179 |
|
|
|
3,818 |
|
|
|
3,818 |
|
|
|
|
(a) |
|
Carrying value represents historical cost, inclusive of impairment charges
recognized during 2009 (Note 7). |
CPA®:17 Global 3/31/2010 10-Q 14
Notes to Consolidated Financial Statements
We determined the estimated fair value of our debt instruments using a discounted cash flow model
with rates that take into account the credit of the tenants and interest rate risk. We estimated
that our other financial assets and liabilities (excluding net investments in direct financing
leases) had fair values that approximated their carrying values at both March 31, 2010 and December
31, 2009.
Items Measured at Fair Value on a Non-Recurring Basis
We
performed a quarterly assessment of the value of certain of our real estate investments in
accordance with current authoritative accounting guidance. As part of
that assessment, we determined the valuation of these
assets using widely accepted valuation techniques, including discounted cash flow on the expected
cash flows of each asset as well as the income capitalization approach, which considers prevailing
market capitalization rates. We reviewed each investment based on the highest and best use of the
investment and market participation assumptions. We determined that the significant inputs used to
value these investments fall within Level 3. We did not recognize any impairment charges during the
three months ended March 31, 2010. We calculated the impairment charges recorded during the three
months ended March 31, 2009 based on market conditions and assumptions at March 31, 2009. Actual
results may differ materially if market conditions or the underlying assumptions change.
During the three months ended March 31, 2009, we recorded an other-than-temporary impairment charge
of $2.9 million related to an equity investment in real estate that had a fair value measurement of
$24.2 million following the recognition of the impairment charge. We measured this impairment
charge using unobservable inputs (Level 3). None of our nonfinancial assets or liabilities were
measured on a fair value basis for the three months ended March 31, 2010.
Note 9. Risk Management and Use of Derivative Financial Instruments
Risk Management
In the normal course of our on-going business operations, we encounter economic risk. There are
three main components of economic risk: interest rate risk, credit risk and market risk. We are
subject to interest rate risk on our interest-bearing liabilities and our CMBS investments. Credit
risk is the risk of default on our operations and tenants inability or unwillingness to make
contractually required payments. Market risk includes changes in the value of the properties and
related loans as well as changes in the value of our CMBS investments due to changes in interest
rates or other market factors. In addition, we own investments in the European Union and are
subject to the risks associated with changing foreign currency exchange rates.
Commercial Mortgage-Backed Securities
We own CMBS that are fully collateralized by a portfolio of commercial real estate mortgages or
commercial mortgage-related securities to the extent consistent with the requirements for
qualification as a REIT. CMBS are instruments that directly or indirectly represent a participation
in, or are secured by and payable from, one or more mortgage loans secured by commercial real
estate. In most cases, CMBS distribute principal and interest payments on the mortgage loans to
investors. Interest rates on these instruments can be fixed or variable. Some classes of CMBS may
be entitled to receive mortgage loan prepayments before other classes do. Therefore, the prepayment
risk for a particular instrument may be different than for other CMBS. The value of our CMBS
investments is also subject to fluctuation based on changes in interest rates, economic conditions
and the creditworthiness of lessees at the mortgaged properties. The carrying value of our CMBS at
March 31, 2010 reflects the impact of other-than-temporary impairment charges of $17.1 million
recognized during the fourth quarter of 2009 to reduce the carrying value of our CMBS investments
to their estimated fair values (Note 7). At March 31, 2010, our CMBS investments did not comprise a
significant proportion of our real-estate related assets.
Foreign Currency Exchange
We are exposed to foreign currency exchange rate movements in the Euro and British Pound Sterling.
We manage foreign currency exchange rate movements by generally placing both our debt obligation to
the lender and the tenants rental obligation to us in the same currency, but we are subject to
foreign currency exchange rate movements to the extent of the difference in the timing and amount
of the rental obligation and the debt service. We also face challenges with repatriating cash from
our foreign investments. We may encounter instances where it is difficult to repatriate cash
because of jurisdictional restrictions or because repatriating cash may result in current or future
tax liabilities. Realized and unrealized gains and losses recognized in earnings related to foreign
currency transactions are included in Other income and (expenses) in the consolidated financial
statements.
Use of Derivative Financial Instruments
When we use derivative instruments, it is generally to reduce our exposure to fluctuations in
interest rates. We have not entered, and do not plan to enter into financial instruments for
trading or speculative purposes. In addition to derivative instruments that we entered into on our
own behalf, we may also be a party to derivative instruments that are embedded in other contracts,
and we may own common stock warrants, granted to us by lessees when structuring lease transactions,
that are considered to be derivative instruments. The primary risks related to our use of
derivative instruments are that a counterparty to a hedging arrangement could default on its
obligation or that the credit quality of the counterparty may be downgraded to such an extent that
it impairs our ability to sell or assign our side of the hedging transaction. While we seek to
mitigate these risks by entering into hedging arrangements with counterparties that are large
financial institutions that we deem to be credit worthy, it is possible that our hedging
transactions, which are intended to limit losses, could adversely affect our earnings. Furthermore,
if we terminate a hedging arrangement, we may be obligated to pay certain costs, such as
transaction or breakage fees. We have established policies and procedures for risk assessment and
the approval, reporting and monitoring of derivative financial instrument activities.
CPA®:17 Global 3/31/2010 10-Q 15
Notes to Consolidated Financial Statements
We measure derivative instruments at fair value and record them as assets or liabilities, depending
on our rights or obligations under the applicable derivative contract. Derivatives that are not
designated as hedges must be adjusted to fair value through earnings. If a derivative is designated
as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will
either be offset against the change in fair value of the hedged asset, liability, or firm
commitment through earnings or recognized in Other comprehensive loss (OCL) until the hedged item
is recognized in earnings. The ineffective portion of a derivatives change in fair value is
immediately recognized in earnings.
The following table sets forth certain information regarding our derivative instruments at
March 31, 2010 and December 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives Fair Value at |
|
Derivatives Designated as Hedging Instruments |
|
Balance Sheet Location |
|
March 31, 2010 |
|
|
December 31, 2009 |
|
Interest rate cap |
|
Other assets |
|
$ |
1,822 |
|
|
$ |
2,985 |
|
Interest rate swap |
|
Other liabilities |
|
|
(328 |
) |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,494 |
|
|
$ |
2,965 |
|
|
|
|
|
|
|
|
|
|
At March 31, 2010 and December 31, 2009, we also had an embedded credit derivative that is not
designated as a hedging instrument. This instrument had a fair value of $0 at both March 31, 2010
and December 31, 2009.
The following tables present the impact of derivative instruments on the consolidated financial
statements (in thousands):
|
|
|
|
|
|
|
Amount of |
|
|
|
Loss Recognized |
|
|
|
in OCL on Derivatives |
|
|
|
(Effective Portion) |
|
|
|
Three months |
|
|
|
ended March 31, |
|
Derivatives in Cash Flow Hedging Relationships |
|
2010 |
|
Interest rate cap (a) |
|
$ |
(1,163 |
) |
Interest rate swap |
|
|
(308 |
) |
|
|
|
|
Total |
|
$ |
(1,471 |
) |
|
|
|
|
|
|
|
(a) |
|
Includes loss of $0.5 million attributable to noncontrolling interests. |
We had no interest rate cap or swap instruments on our consolidated investments during the three
months ended March 31, 2009.
See below for information on our purposes for entering into derivative instruments, including those
not designated as hedging instruments, and for information on derivative instruments owned by
unconsolidated ventures, which are excluded from the tables above.
Interest Rate Swaps and Caps
We are exposed to the impact of interest rate changes primarily through our borrowing activities.
To limit this exposure, we attempt to obtain mortgage financing on a long-term, fixed-rate basis.
However, from time to time, we or our venture partners may obtain variable rate non-recourse
mortgage loans and, as a result, may enter into interest rate swap agreements or interest rate cap
agreements with counterparties. Interest rate swaps, which effectively convert the variable rate
debt service obligations of the loan to a fixed rate, are agreements in which one party exchanges a
stream of interest payments for a counterpartys 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.
CPA®:17 Global 3/31/2010 10-Q 16
Notes to Consolidated Financial Statements
The interest rate swap and interest rate cap derivative instruments that we had outstanding at
March 31, 2010 were designated as cash flow hedges and are summarized as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
|
Effective |
|
|
Effective |
|
Expiration |
|
Fair Value at |
|
|
|
Type |
|
Amount |
|
|
Interest Rate |
|
|
Date |
|
Date |
|
March 31, 2010 |
|
3-Month LIBOR |
|
Pay-fixed swap (a) |
|
$ |
26,931 |
|
|
|
3.7 |
% |
|
1/2010 |
|
12/2019 |
|
$ |
(328 |
) |
3-Month LIBOR |
|
Interest rate cap (b) |
|
|
118,541 |
|
|
|
8.8 |
% |
|
8/2009 |
|
8/2014 |
|
|
1,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
We entered into this interest rate swap in December 2009. |
|
(b) |
|
The applicable interest rate of the related debt was 5.0%, which was below the effective
interest rate of the cap at March 31, 2010. Inclusive of noncontrolling interests in the
notional amount and fair value of the swap of $53.3 million and $0.8 million, respectively. |
An unconsolidated venture that leases properties to Berry Plastics, and in which we hold a 50%
ownership interest, had a non-recourse mortgage loan with a total carrying value of $29.0 million
at both March 31, 2010 and December 31, 2009. The financing bears interest at an annual interest
rate of LIBOR plus 5%, with a minimum rate of 6% and a maximum rate that has been capped at 10%
through the use of an interest rate cap designated as a cash flow hedge. The applicable interest
rate of the related debt of 6.6% was below the interest rate cap at March 31, 2010. The interest
rate cap expires in March 2015 and had an estimated total fair value of less than $0.1 million at
both March 31, 2010 and December 31, 2009. The venture
recognized de minimis losses in OCL related to this instrument during both the three months ended
March 31, 2010 and 2009. Amounts provided represent the entire amount attributable to the venture,
not our proportionate share.
Embedded Credit Derivative
In August 2008, a venture in which we and an affiliate have 67% and 33% interests, respectively,
and which we consolidate, acquired an investment in Germany. In connection with the investment, the
venture obtained non-recourse mortgage financing for which the interest rate has both fixed and
variable components. In connection with providing the financing, the lender entered into an
interest rate swap agreement on its own behalf through which the fixed interest rate component on
the financing was converted into a variable interest rate instrument. Through the venture, we have
the right, at our sole discretion, to prepay this debt at any time and to participate in any
realized gain or loss on the interest rate swap at that time. This participation right is deemed to
be an embedded credit derivative. The derivative had an estimated fair value of $0 at both
March 31, 2010 and December 31, 2009. This derivative did not generate gains or losses during
either the three months ended March 31, 2010 or 2009.
Other
Amounts reported in OCL related to derivatives will be reclassified
to interest expense as interest payments are made on our variable-rate debt. At March 31, 2010, we
estimate that $1.0 million, inclusive of amounts attributable to noncontrolling interests of less
than $0.1 million, will be reclassified as interest expense during the next twelve months.
We have agreements with certain of our derivative counterparties that contain certain credit
contingent provisions that could result in a declaration of default against us regarding our
derivative obligations if we either default or are capable of being declared in default on certain
of our indebtedness. At March 31, 2010, we had not been declared in default on any of our
derivative obligations. The estimated fair value of our derivatives that were in a net liability
position was $0.3 million and less than $0.1 million at March 31, 2010 and December 31, 2009,
respectively, which includes accrued interest but excludes any adjustment for nonperformance risk.
If we had breached any of these provisions at March 31, 2010 or December 31, 2009, we could have
been required to settle our obligations under these agreements at their termination value of
$0.3 million or less than $0.1 million, respectively.
Portfolio Concentration Risk
Concentrations of credit risk arise when a group of tenants is engaged in similar business
activities or is subject to similar economic risks or conditions that could cause them to default
on their lease obligations to us. We regularly monitor our portfolio to assess potential
concentrations of credit risk. Our portfolio contains concentrations in excess of 10% of current
annualized lease revenues in certain areas, as described below, because we have a limited number of
investments. Although we view our exposure from properties that we purchased together with our
affiliates based on our ownership percentage in these properties, the percentages below are based
on our consolidated ownership and not on our actual ownership percentage in these investments.
CPA®:17 Global 3/31/2010 10-Q 17
Notes to Consolidated Financial Statements
At March 31, 2010, the majority of our directly owned real estate properties were located in the
U.S. (77%), with New York (32%) representing the most significant domestic concentration based on
percentage of our annualized contractual minimum base rent for the first quarter of 2010. All of
our directly owned international properties were located in the European Union, with Spain (10%)
representing the most significant concentration based on percentage of our annualized contractual
minimum base rent for the first quarter of 2010. The following tenants represent more than 10% of
our total current annualized lease revenues: The New York Times Company (32%) (inclusive of amounts
attributable to noncontrolling interests). At March 31, 2010, our directly owned real estate
properties contained concentrations in the following asset types: office (46%), industrial (29%)
and retail (19%); and in the following tenant industries: media printing and publishing (32%),
textiles, leather and apparel (16%) and retail stores (12%).
Note 10. Debt
2010 During the first quarter of 2010, we obtained non-recourse mortgage financing totaling $71.7
million at a weighted average fixed annual interest rate and term of 6.0% and 7.8 years,
respectively. Of the total financing, $52.2 million relates to a transaction in Spain, with the
first tranche completed in the fourth quarter of 2009 and the second tranche completed in the first
quarter of 2010 (Note 4), while $19.5 million relates to a domestic build-to-suit project that we
placed into service in January 2010 (Note 5). Amounts are based upon the exchange rate of the Euro
at the date of financing where appropriate.
Note 11. Commitments and Contingencies
Various claims and lawsuits arising in the normal course of business are pending against us. The
results of these proceedings are not expected to have a material adverse effect on our consolidated
financial position or results of operations.
Note 12. Income Taxes
We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code
of 1986, as amended. We believe we have operated, and we intend to continue to operate, in a manner
that allows us to continue to qualify as a REIT. Under the REIT operating structure, we are
permitted to deduct distributions paid to our shareholders and generally will not be required to
pay U.S. federal income taxes. Accordingly, no provision has been made for U.S. federal income
taxes in the consolidated financial statements.
We conduct business in various states and municipalities within the U.S. and the European Union
and, as a result, we file income tax returns in the U.S. federal jurisdiction and various state and
certain foreign jurisdictions.
We account for uncertain tax positions in accordance with current authoritative accounting
guidance. At March 31, 2010, we had a de minimis amount of unrecognized tax benefits, that, if
recognized, would have a favorable impact on the effective income tax rate in future periods. We
had no such unrecognized tax benefits at December 31, 2009. We recognize interest and penalties
related to uncertain tax positions in income tax expense. At both March 31, 2010 and December 31,
2009, we had no accrued interest or penalties related to uncertain tax positions. Our tax returns
are subject to audit by taxing authorities. These audits can often take years to complete and
settle. The tax years 2009 2010 remain open to examination by the major taxing jurisdictions to
which we are subject.
Note 13. Pro Forma Financial Information
The following consolidated pro forma financial information has been presented as if our
acquisitions made and new financing obtained since January 1, 2009 had occurred on January 1, 2010
and 2009 for the three months ended March 31, 2010 and 2009, respectively. The pro forma financial
information is not necessarily indicative of what the actual results would have been, nor does it
purport to represent the results of operations for future periods.
CPA®:17 Global 3/31/2010 10-Q 18
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Pro forma total revenues |
|
$ |
20,498 |
|
|
$ |
21,970 |
|
|
|
|
|
Pro forma net income |
|
$ |
10,700 |
|
|
$ |
9,180 |
|
Less: Net income attributable to noncontrolling interests |
|
|
(3,283 |
) |
|
|
(2,464 |
) |
|
|
|
|
|
|
|
Pro forma net income attributable to CPA®:17 - Global shareholders |
|
$ |
7,417 |
|
|
$ |
6,716 |
|
|
|
|
|
|
|
|
Pro forma earnings per share: |
|
|
|
|
|
|
|
|
Net income attributable to CPA®:17 - Global shareholders |
|
$ |
0.08 |
|
|
$ |
0.07 |
|
The pro forma weighted average shares outstanding for the three months ended March 31, 2010 and
2009 totaled 94,463,772 shares and were determined as if all shares issued since our inception
through March 31, 2010 were issued on January 1, 2009.
Note 14. Subsequent Events
In April
and May 2010, we entered into two international investments and one domestic investment at a total
cost of approximately $153.0 million. In connection with our
2010 investment activity, in April
and May 2010, we obtained non-recourse mortgage financing totaling $65.3 million, at a weighted
average fixed annual interest rate and term of 6.7% and 10.2 years, respectively. Amounts are based
on the exchange rate of the foreign currency at the date of acquisition or financing, as
applicable.
CPA®:17 Global 3/31/2010 10-Q 19
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and Results of Operations |
Managements discussion and analysis of financial condition and results of operations (MD&A) is
intended to provide the reader with information that will assist in understanding our financial
statements and the reasons for changes in certain key components of our financial statements from
period to period. MD&A also provides the reader with our perspective on our financial position and
liquidity, as well as certain other factors that may affect our future results. Our MD&A should be
read in conjunction with our 2009 Annual Report.
Business Overview
We are a publicly owned, non-listed REIT that invests primarily in commercial properties leased to
companies domestically and internationally. As a REIT, we are not subject to U.S. federal income
taxation as long as we satisfy certain requirements, principally relating to the nature of our
income, the level of our distributions and other factors. We earn revenue principally by leasing
the properties we own to single corporate tenants, on a triple-net lease basis, which requires the
tenant to pay substantially all of the costs associated with operating and maintaining the
property. Revenue is subject to fluctuation because of the timing of new lease transactions, lease
terminations, lease expirations, contractual rent increases, tenant defaults and sales of
properties. We were formed in 2007 and are managed by the advisor.
Financial Highlights
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Total revenues |
|
$ |
18,296 |
|
|
$ |
8,709 |
|
Net income attributable to CPA®:17 Global shareholders |
|
|
6,123 |
|
|
|
298 |
|
Cash flow provided by operating activities |
|
|
15,330 |
|
|
|
3,475 |
|
|
|
|
|
|
|
|
|
|
Supplemental performance measure: |
|
|
|
|
|
|
|
|
Adjusted cash flow from operating activities |
|
|
9,147 |
|
|
|
2,513 |
|
Distributions paid |
|
|
11,675 |
|
|
|
4,507 |
|
For the three months ended March 31, 2010 and 2009, total revenues, net income attributable to
CPA®:17 Global shareholders and cash flow provided by operating activities
reflect the results of our investment activity during 2009 and 2010.
Our daily cash distribution for the first quarter of 2010 was $0.0017778 per share and was paid on
April 15, 2010 to shareholders of record as of the close of business on each day during the first
quarter, or $0.64 per share on an annualized basis. Our board of directors has declared that our
daily cash distribution for the second quarter of 2010 will be $0.0017583 per share and will be
paid on or about July 15, 2010 to shareholders of record as of the close of business on each day
during the second quarter, or $0.64 per share on an annualized basis.
We consider the performance metrics listed above, including certain non-GAAP performance metrics
such as adjusted cash flow from operating activities, to be important measures in the evaluation of
our results of operations, liquidity and capital resources. We evaluate our results of operations
with a primary focus on the ability to generate cash flow necessary to meet our objectives of
funding distributions to shareholders. Please see Adjusted Cash Flow
from Operating Activities below for our definition of
this measure and a reconciliation to its most directly comparable
GAAP measure cash flow provided by operating activities.
CPA®:17 Global 3/31/2010 10-Q 20
Current Trends
As of the date of this Report, we believe that general economic conditions and conditions in the
credit and real estate financing markets are continuing to improve, albeit slowly. As a result, we
are benefiting from increased investment opportunities and improved financing conditions. However,
the lingering effects of the recent challenging economic environment continue to affect us in
several ways, including continued financial stress on tenants and low inflation rates, which will
likely limit rent increases in upcoming periods because most of our leases provide for rent
adjustments indexed to changes in the consumer price index (CPI). In addition, we are seeing
increased competition for the type of investments we make. Despite recent indicators that the
economy is beginning to recover, the full magnitude, effects and duration of the crisis cannot be
predicted, and the current trends that affect our business remain dependent on the rate and scope
of the recovery, rendering any discussion of the impact of these trends highly uncertain.
Nevertheless, as of the date of this Report, the impact of current financial and economic trends on
our business, and our response to those trends, is presented below.
Investment Opportunities
Our ability to complete investments fluctuates based on the pricing of transactions, the
availability of financing for our tenants, and competition from third parties for investments,
among other factors.
As a result of the recent improving economic conditions, we have seen improvements in pricing on
sale-leaseback investment opportunities that we believe will allow us to complete transactions on
favorable terms, including in circumstances where we complete transactions without financing, if
necessary. In addition, we believe that the continued slow pace of the recovery in the credit
markets has encouraged corporations that have difficulty obtaining financing through traditional
channels to seek alternative financing in the form of our sale-leaseback transactions. To the
extent that these trends continue during 2010, we believe that our investment volume will benefit.
However, we are seeing an increasing level of competition for the investments we make, both
domestically and internationally, although the number of investors who seek to provide
sale-leaseback financing to sellers remains lower than at levels we saw prior to the economic
crisis.
We completed investments totaling $149.1 million during the first quarter of 2010, 33% of which
were international transactions. We currently expect that international transactions will continue
to form a significant portion of the investments we structure, although the percentage of
international investments in any given period will vary.
Until we
are able to consummate additional investments, we expect to hold significant cash balances, which
generate lower returns than our real estate investments.
Financing Conditions
Since the onset of the credit crisis, lenders for both domestic and international investments
typically offered loans to us at shorter maturities and subject to variable interest rates.
However, we believe we are beginning to see an easing in these trends, with more willingness by
lenders to offer loans to us at fixed rates of interest and with longer maturities. During the
first quarter of 2010, we obtained non-recourse mortgage financing totaling $71.7 million at a
fixed weighted average annual interest rate and term of 6.0% and 7.8 years, respectively. When we
are unable to obtain fixed-rate debt, we generally attempt to obtain interest rate caps or swaps to
mitigate the impact of variable rate financing.
Neither we nor our unconsolidated ventures have any balloon payments scheduled until 2012. Our
property level debt is generally non-recourse, which means that if we default on a mortgage loan
obligation, our exposure is limited to our equity invested in that property.
Tenant Defaults
Tenant defaults can reduce our results of operations and cash flow from operations. Tenants
experiencing financial difficulties may become delinquent on their rent and/or default on their
leases and, if they file for bankruptcy protection, may reject our lease in bankruptcy court, all
of which may require us to incur impairment charges. Even where a default has not occurred and a
tenant is continuing to make the required lease payments, we may restructure or renew leases on
less favorable terms, or the tenants credit profile may deteriorate, which could affect the value
of the leased asset and could in turn require us to incur impairment charges.
During 2009, two of our tenants experienced financial difficulties that have affected us. One of
these tenants terminated its existing lease with us and signed a new lease on substantially the
same terms, while the second tenant has been paying rent to us, albeit at a significantly reduced
rate, while new lease terms are being negotiated. It is possible that additional tenants may file
for bankruptcy or default on their leases during 2010. Based on
recent tenant activity, including lease amendments and lease rejections in bankruptcy court, we currently expect that 2010
lease revenue will decrease by approximately 4% as compared with 2009 lease revenue. However, this
amount may increase or decrease based on additional tenant activity and changes in economic
conditions, both of which are outside of our control. We would expect that our tenants would
benefit from continued improvements in general business conditions, which should result in reduced
tenant defaults in the future; however, if economic conditions deteriorate, it is likely that our
tenants financial condition would deteriorate as well.
CPA®:17 Global 3/31/2010 10-Q 21
To mitigate the risks, we have invested in assets that we believe are critically
important to a tenants operations and have attempted to diversify our portfolio by tenant and
tenant industry. We also monitor tenant performance through review of rent delinquencies as a
precursor to a potential default, meetings with tenant management and review of tenants financial
statements and compliance with any financial covenants. When necessary, our asset management
process includes restructuring transactions to meet the evolving needs of tenants, re-leasing
properties, refinancing debt and selling properties, where possible, as well as protecting our
rights when tenants default or enter into bankruptcy.
Fundraising
While fundraising trends are difficult to predict, our recent fundraising has remained strong. We
raised $140.0 million in the first quarter of 2010 and, through the date of this Report, have
raised more than $975 million since beginning fundraising in December 2007. We have made a
concerted effort to broaden our distribution channels and are seeing a greater portion of our
fundraising come from multiple channels as a result of these efforts. Our initial offering will
terminate in November 2010, unless it is extended.
Inflation and Foreign Exchange Rates
Our leases generally have rent adjustments based on formulas indexed to changes in the CPI or other
similar indices for the jurisdiction in which the property is located. Because these rent
adjustments may be calculated based on changes in the CPI over a multi-year period, changes in
inflation rates can have a delayed impact on our results of operations. Rent adjustments during
2009 and, to a lesser extent, the first quarter of 2010 generally benefited from increases in
inflation rates during the years prior to the scheduled rent adjustment date. However, we expect
that rent increases will be significantly lower in coming years as a result of the current
historically low inflation rates in the U.S. and the Euro zone.
We have foreign investments and as a
result are subject to risk from the effects of exchange rate
movements. Our results of foreign operations benefit from a weaker U.S. dollar, and are adversely
affected by a stronger U.S. dollar, relative to foreign currencies. Our primary foreign currency
exposure is to the Euro. Investments denominated in the Euro accounted for approximately 21% of
our annualized lease revenues for the first quarter of both 2010 and 2009.
The following table presents the exchange rates used to translate our Euro-denominated foreign
operations to U.S. dollars in our consolidated financial statements for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Average
conversion rate from Euro to U.S. dollar |
|
|
1.3856 |
|
|
|
1.3083 |
|
As shown in the table above, the average rate for the U.S. dollar in relation to the Euro during
the first quarter of 2010 weakened by approximately 6% in comparison to the same period in 2009,
resulting in a modestly positive impact on our results of operations in the current period from our
Euro-denominated investments. However, the U.S. dollar has recently strengthened against the Euro,
as the conversion rate at March 31, 2010 decreased approximately 6% to 1.3455 from 1.4333 at
December 31, 2009. This recent strengthening had a modestly negative impact on our balance sheet at
March 31, 2010. A significant decline in the value of the Euro could have a material negative
impact on our future results and cash flows.
Results of Operations
We were formed in 2007 and have a limited operating history. The results of operations presented
below for the three months ended March 31, 2010 are not expected to be representative of future
results because we anticipate that our asset base will increase substantially as we continue to
raise capital and invest the proceeds of our initial public offering. As our asset base increases,
we expect that property-related revenues and expenses, as well as general and administrative
expenses and other revenues and expenses, will increase.
We are dependent upon proceeds received from our initial public offering to conduct our proposed
activities. The capital required to make investments will be obtained from the offering and from
any mortgage indebtedness that we may incur in connection with our investment activity.
We own interests in consolidated ventures ranging from 49% to 70%, including our 55% interest in
the New York Times Company transaction. Although we consolidate the results of operations of these
ventures, because our effective ownership interests in these ventures are generally low, a
significant portion of the results of operations from these ventures is reduced by our
noncontrolling partners interests.
Our evaluation of the sources of lease revenues is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Rental income |
|
$ |
8,412 |
|
|
$ |
4,271 |
|
Interest income from direct financing leases |
|
|
9,367 |
|
|
|
3,765 |
|
|
|
|
|
|
|
|
|
|
$ |
17,779 |
|
|
$ |
8,036 |
|
|
|
|
|
|
|
|
CPA®:17 Global 3/31/2010 10-Q 22
The following table sets forth the net lease revenues (i.e., rental income and interest income
from direct financing leases) that we earned from lease obligations through our direct ownership of
real estate (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
Lessee (Date Acquired or Placed in Service) |
|
2010 |
|
|
2009 |
|
The New York Times Company (3/2009) (a) |
|
$ |
6,659 |
|
|
$ |
1,850 |
|
LifeTime Fitness, Inc. (9/2008) |
|
|
1,680 |
|
|
|
1,680 |
|
Eroski Sociedad Cooperativa (12/2009, 2/2010) (b) |
|
|
1,398 |
|
|
|
|
|
Frontier Spinning Mills, Inc. (12/2008) (a) |
|
|
1,118 |
|
|
|
1,109 |
|
US Oncology, Inc. (12/2009) |
|
|
1,047 |
|
|
|
|
|
Actebis Peacock GmbH (7/2008) (a) (b) |
|
|
1,008 |
|
|
|
949 |
|
Kronos Products, Inc. (3/2010) |
|
|
995 |
|
|
|
|
|
Waldaschaff Automotive GmbH and Wagon Automotive Nagold GmbH (8/2008)
(a) (b) (c) |
|
|
729 |
|
|
|
1,047 |
|
Mori Seiki USA, Inc. (12/2009) |
|
|
703 |
|
|
|
|
|
Laureate Education, Inc. (7/2008) |
|
|
709 |
|
|
|
709 |
|
Sabre Communications Corporation and Cellxion, LLC (8/2008) |
|
|
630 |
|
|
|
632 |
|
National Express Limited (12/2009) (b) |
|
|
485 |
|
|
|
|
|
OBI Group Holding GmbH, OBI Holding GmbH and OBI AG (10/2009) (b) |
|
|
294 |
|
|
|
|
|
Other |
|
|
324 |
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
$ |
17,779 |
|
|
$ |
8,036 |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
These revenues are generated in consolidated ventures with our affiliates and include lease
revenues applicable to noncontrolling interests totaling $4.0 million and $1.9 million for the
three months ended March 31, 2010 and 2009, respectively. |
|
(b) |
|
Amounts are subject to fluctuations in foreign currency exchange rates. |
|
(c) |
|
In connection with entering in Administration, Wagon Automotive GmbH terminated its lease
with us in May 2009 and a successor company, Waldaschaff Automotive GmbH, took over the
business and has been paying rent to us, albeit at a significantly reduced rate, while new
lease terms are being negotiated. In addition, in October 2009, we terminated the existing
lease with another tenant, Wagon Automotive Nagold GmbH, and signed a new lease with this
tenant on substantially the same terms. |
In addition, we recognize income from two equity investments in real estate, of which lease
revenues are a significant component. We own a 50% interest in a venture that leases properties to
Berry Plastics and a 49% interest in a venture that leases properties to Tesco plc. The Berry
Plastics venture earned total net lease revenues of $1.7 million for the three months ended
March 31, 2010 and 2009. The Tesco venture, which we acquired in July 2009, earned total net lease
revenues of $1.9 million for the three months ended March 31, 2010. Amounts provided are the total
amounts attributable to the ventures and do not represent our proportionate share.
Lease Revenues
Our net leases generally have rent adjustments based on formulas indexed to changes in the CPI or
other similar indices for the jurisdiction in which the property is located, sales overrides or
other periodic increases, which are intended to increase lease revenues in the future. We own
international investments and, therefore, lease revenues from these investments are subject to
fluctuations in exchange rate movements in foreign currencies. In certain cases, although we
recognize lease revenue in connection with our tenants obligation to pay rent, we may also
increase our uncollected rent expense if tenants are experiencing financial distress and have not
paid the rent to us that they owe, as described in Property expenses below.
For the three months ended March 31, 2010 as compared to the same period in 2009, lease revenues
increased by $9.7 million, substantially all of which was due to our investment activity during
2009 and 2010. Lease revenues from the New York Times transaction contributed $4.8 million of the
increase in lease revenues, inclusive of amounts attributable to noncontrolling interests totaling
$2.2 million.
Depreciation and Amortization
For the three months ended March 31, 2010 as compared to the same period in 2009, depreciation and
amortization increased by $1.2 million as a result of investments we entered into during 2009 and
2010.
CPA®:17 Global 3/31/2010 10-Q 23
General and Administrative
For the three months ended March 31, 2010 as compared to the same period in 2009, general and
administrative expense decreased by $0.3 million, primarily due to a reduction of $0.5 million in
business development expenses, which consist primarily of costs incurred in connection with
potential investments that ultimately were not consummated, partially offset by an increase in
investor-related costs of $0.2 million as a result of the growth of our investor base.
Property Expenses
For the three months ended March 31, 2010 as compared to the same period in 2009, property expenses
decreased by $0.2 million, primarily due to a net reduction in uncollected rent expense and
property carrying costs of $0.7 million, which was partially offset by an increase in asset
management fees payable to the advisor of $0.4 million. During the three months ended March 31,
2009, we recorded uncollected rent expense of $0.9 million related to two German tenants, Wagon
Automotive GmbH and Wagon Automotive Nagold GmbH, both of which had then ceased making rent
payments as a result of experiencing financial difficulties. The increase in asset management fees
occurred as a result of investment activity during 2009 and 2010.
Income from Equity Investments in Real Estate
Income from equity investments in real estate represents our proportionate share of net income or
loss (revenue less expenses) from investments entered into with affiliates or third parties in
which we have a noncontrolling interest but exercise significant influence.
For the three months ended March 31, 2010 as compared to the same period in 2009, income from our
equity investments in real estate did not fluctuate significantly. For the current year period,
income from equity investments in real estate reflects the results of two ventures that lease
property to Berry Plastics and Tesco. We acquired our interest in the Tesco venture in July 2009.
For the prior year period, income from equity investments in real estate of $0.4 million relates
solely to the Berry Plastics venture, which recognized a gain on extinguishment of debt of
$6.5 million in connection with the repayment of its existing $39.0 million non-recourse mortgage
at a discount for $32.5 million. Our share of the gain on extinguishment of debt was $3.2 million;
however, our share of the gain was reduced by $2.9 million as a result of an other-than-temporary
impairment charge that we recognized to reduce the carrying value of our investment to the
estimated fair value of the ventures underlying properties.
Other Income and (Expenses)
Other income and (expenses) generally consists of gains and losses on foreign currency transactions
and derivative instruments. We and certain of our foreign consolidated subsidiaries have
intercompany debt and/or advances that are not denominated in the entitys functional currency.
When the intercompany debt or accrued interest thereon is remeasured against the functional
currency of the entity, a gain or loss may result. For intercompany transactions that are of a
long-term investment nature, the gain or loss is recognized as a cumulative translation adjustment
in OCL. We also recognize gains or losses on foreign currency transactions
when we repatriate cash from our foreign investments. In addition, we have embedded credit
derivatives for which realized and unrealized gains and losses are included in earnings. The timing
and amount of such gains and losses cannot always be estimated and are subject to fluctuation.
For the three months ended March 31, 2010, we recognized net other income of less than $0.1 million
as compared with net other expenses of $1.6 million during the three months ended March 31, 2009.
During the prior year period, we recognized realized losses on foreign currency transactions of
$1.7 million as a result of changes in foreign currency exchange rates on deposits that had been
held for new investments but that were released to us because the transactions were not
consummated.
Interest Expense
For the three months ended March 31, 2010 as compared to the same period in 2009, interest expense
increased by $3.2 million, primarily as a result of mortgage financing obtained in connection with
our investment activity during 2010 and 2009. During the second quarter of 2009, we obtained
mortgage financing in connection with the New York Times transaction, which accounts for
$1.5 million of the increase in interest expense, inclusive of amounts attributable to
noncontrolling interests totaling $0.7 million.
Benefit from (Provision for) Income Taxes
For the three months ended March 31, 2010, we recognized a benefit from income taxes of $0.5
million as compared with a provision for income taxes of $0.2 million during the same period in
2009, primarily due to a reduction in estimated income taxes payable on our German investments.
During the three months ended March 31, 2010, we revised our estimates of income taxes payable on
our investments in Germany based on actual returns filed during the period.
Net Income Attributable to CPA®:17 Global Shareholders
For the three months ended March 31, 2010 as compared to the same period in 2009, the resulting net
income attributable to CPA®:17 Global shareholders increased by
$5.8 million.
CPA®:17 Global 3/31/2010 10-Q 24
Financial Condition
Sources and Uses of Cash During the Period
Our initial public offering will terminate in November 2010, unless it is extended. We expect to
continue to invest the proceeds of the offering in a diversified portfolio of income-producing
commercial properties and other real estate related assets. Once we have fully invested these
proceeds, we expect that our primary source of operating cash flow will be cash flow from our net
leases and other real estate related assets. We expect that these cash flows will fluctuate period
to period due to a number of factors, which may include, among other things, the timing of
purchases and sales of real estate, timing of proceeds from non-recourse mortgage loans and receipt
of lease revenues, the advisors annual election to receive fees in restricted shares of our common
stock or cash, changes in foreign currency exchange rates and the timing and characterization of
distributions from equity investments in real estate. Despite this fluctuation, we believe our net
leases and other real estate related assets will generate sufficient cash from operations and from
equity distributions in excess of equity income in real estate to meet our short-term and long-term
liquidity needs. However, until we have fully invested the proceeds of our initial public offering,
we expect to use a portion of the offering proceeds to fund our operating activities (see Financing
Activities below). Our sources and uses of cash during the period are described below.
Operating Activities
During three months ended March 31, 2010, we used cash flows provided by operating activities of
$15.3 million to fund distributions to shareholders of $11.7 million, pay distributions of $2.4
million to affiliates who hold noncontrolling interests in various entities with us and make
scheduled mortgage principal installments of $1.4 million. For 2010, the advisor has elected to
continue to receive its asset management fees in restricted shares of our common stock, and as a
result, we paid performance fees of $0.6 million through the issuance of restricted stock rather
than in cash. See Adjusted Cash Flow from Operating Activities below
for a discussion of how we use this non-GAAP financial measure to
evaluate distributions to shareholders.
Investing Activities
Our investing activities are generally comprised of real estate related transactions (purchases and
sales), payment of deferred acquisition fees to the advisor and capitalized property-related costs.
During the three months ended March 31, 2010, we used $147.3 million to acquire four consolidated
investments and to fund construction costs at a build-to-suit project that was placed into service
during the period. In connection with this investment activity, we paid foreign value added taxes
of $1.1 million, which we expect to recover in future periods. We received $7.0 million from the
repayment of Federal Deposit Insurance Corporation guaranteed unsecured notes that matured during
the period. Payments of deferred acquisition fees to the advisor totaled $1.1 million for the
current period.
Financing Activities
In addition to paying distributions to shareholders and to affiliates that hold noncontrolling
interests in various entities with us and making scheduled mortgage principal payments, our
financing activities for the three months ended March 31, 2010 primarily consisted of the receipt
of $130.1 million in net proceeds from our initial public offering and mortgage proceeds totaling
$71.7 million related to investments completed in 2009 and 2010. In connection with this financing
activity, we incurred deferred financing costs totaling $1.7 million. We used $1.0 million to
repurchase our shares through a redemption plan that allows shareholders to sell shares back to us,
subject to certain limitations as described below.
Our objectives are to generate sufficient cash flow over time to provide shareholders with
increasing distributions and to seek investments with potential for capital appreciation throughout
varying economic cycles. We have funded a portion of our cash distributions to date using net
proceeds from our initial public offering and we may do so in the future, particularly during the
early stages of our offering and until we substantially invest the net offering proceeds. In
determining our distribution policy during the periods we are raising funds and investing capital,
we place primary emphasis on projections of cash flow from operations, together with equity
distributions in excess of equity income in real estate, from our investments, rather than on
historical results of operations (though these and other factors may be a part of our
consideration). In setting a distribution rate, we thus focus primarily on expected returns from
those investments we have already made, as well as our anticipated rate of future investment, to
assess the sustainability of a particular distribution rate over time.
We maintain a quarterly redemption plan pursuant to which we may, at the discretion of our board of
directors, redeem shares of our common stock from shareholders seeking liquidity. We limit the
number of shares we may redeem so that the shares we redeem in any quarter, together with the
aggregate number of shares redeemed in the preceding three fiscal quarters, does not exceed a
maximum of 5% of our total shares outstanding as of the last day of the immediately preceding
quarter. In addition, our ability to effect redemptions is subject to our having available cash to
do so. For the three months ended March 31, 2010, we received requests to redeem 105,869 shares of
our common stock pursuant to our redemption plan, and we used $1.1 million to redeem these requests
at a price per share of $9.30. We funded share redemptions during 2010 from the proceeds of the
sale of shares of our common stock pursuant to our distribution reinvestment and share purchase
plan.
CPA®:17 Global 3/31/2010 10-Q 25
Liquidity would be affected adversely by unanticipated costs and greater-than-anticipated operating
expenses. To the extent that our cash reserves are insufficient to satisfy our cash requirements,
additional funds may be provided from cash generated from operations or through short-term
borrowings. In addition, we may incur indebtedness in connection with the acquisition of any
property, refinancing the debt thereon, arranging for the leveraging of any previously unfinanced
property, or reinvesting the proceeds of financings or refinancings in additional properties.
Summary of Financing
The table below summarizes our non-recourse long-term debt (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
December 31, 2009 |
|
Balance |
|
|
|
|
|
|
|
|
Fixed rate |
|
$ |
221,177 |
|
|
$ |
154,754 |
|
Variable rate (a) |
|
|
145,473 |
|
|
|
146,154 |
|
|
|
|
|
|
|
|
Total |
|
$ |
366,650 |
|
|
$ |
300,908 |
|
|
|
|
|
|
|
|
Percent of total debt |
|
|
|
|
|
|
|
|
Fixed rate |
|
|
60 |
% |
|
|
51 |
% |
Variable rate (a) |
|
|
40 |
% |
|
|
49 |
% |
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
Weighted average interest rate at end of period |
|
|
|
|
|
|
|
|
Fixed rate |
|
|
6.8 |
% |
|
|
7.1 |
% |
Variable rate (a) |
|
|
5.3 |
% |
|
|
5.3 |
% |
|
|
|
(a) |
|
Variable rate debt at March 31, 2010 consisted of (i) $27.0 million that has been effectively
converted to fixed rate debt through interest rate swap derivative instruments and (ii)
$118.5 million that is subject to an interest rate cap, but for which the applicable interest
rate was below the effective interest rate of the cap at March 31, 2010. |
Cash Resources
At March 31, 2010, our cash resources consisted of cash and cash equivalents totaling
$337.9 million, which includes the proceeds of our initial public offering. We currently expect to
continue to raise funds through our initial public offering until November 2010, at which time the
offering will terminate, unless it is extended. Of our total cash and cash equivalents at March 31,
2010, $11.8 million, at then-current exchange rates, was held in foreign bank accounts, and we
could be subject to restrictions or significant costs should we decide to repatriate these amounts.
We also had unleveraged properties that had an aggregate carrying value of $115.5 million, although
given the recent volatility in the real estate financing markets, there can be no assurance that we
would be able to obtain financing for these properties. Our cash resources can be used to fund
future investments as well as for working capital needs and other commitments.
During 2009, we incurred other-than-temporary impairment charges related to our CMBS investments as
a result of increased delinquencies in the portfolio and our expectation of future credit losses.
While we have not yet experienced a reduction in cash flows from these investments, it is likely
that we will do so in the future if the expected credit losses materialize. Our CMBS investments
accounted for 3% of our total revenues for the three months ended March 31, 2010, and we anticipate
that this percentage will decrease as we continue to invest the proceeds of our initial public
offering.
Cash Requirements
During the next twelve months, we expect that cash payments will include paying distributions to
shareholders and to our affiliates who hold noncontrolling interests in entities we control, making
scheduled mortgage principal payments (neither we nor our venture partners have any balloon
payments on our mortgage obligations until 2012), reimbursing the advisor for costs incurred on our
behalf and paying normal recurring operating expenses. We expect to continue to use funds raised
from our public offering to invest in new properties.
CPA®:17 Global 3/31/2010 10-Q 26
Off-Balance Sheet Arrangements and Contractual Obligations
The table below summarizes our off-balance sheet arrangements and contractual obligations at
March 31, 2010 and the effect that these arrangements and obligations are expected to have on our
liquidity and cash flow in the specified future periods (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
|
|
More than |
|
|
|
Total |
|
|
1 Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
5 years |
|
Non-recourse and limited-recourse debt principal |
|
$ |
366,650 |
|
|
$ |
6,056 |
|
|
$ |
15,419 |
|
|
$ |
122,253 |
|
|
$ |
222,922 |
|
Deferred acquisition fees |
|
|
9,791 |
|
|
|
5,243 |
|
|
|
4,548 |
|
|
|
|
|
|
|
|
|
Interest on borrowings and deferred acquisition fees |
|
|
157,511 |
|
|
|
23,289 |
|
|
|
43,951 |
|
|
|
39,212 |
|
|
|
51,059 |
|
Operating and other lease commitments (a) |
|
|
954 |
|
|
|
142 |
|
|
|
291 |
|
|
|
290 |
|
|
|
231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
534,906 |
|
|
$ |
34,730 |
|
|
$ |
64,209 |
|
|
$ |
161,755 |
|
|
$ |
274,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Operating and other lease commitments consist of our share of future minimum rents payable
under an office cost-sharing agreement with certain affiliates for the purpose of leasing
office space used for the administration of real estate entities. Amounts under the
cost-sharing agreement are allocated among the entities based on gross revenues and are
adjusted quarterly. We anticipate that our share of future minimum lease payments will
increase significantly as we continue to invest the proceeds of our offering. |
Amounts in the table above related to our foreign operations are based on the exchange rate of the
local currencies at March 31, 2010. At March 31, 2010, we had no material capital lease obligations
for which we are the lessee, either individually or in the aggregate.
We have investments in unconsolidated ventures that own single-tenant properties net leased to
corporations. All of the underlying investments are owned with our affiliates. Summarized financial
information for these ventures and our ownership interest in the ventures at March 31, 2010 are
presented below. Summarized financial information provided represents the total amount attributable
to the ventures and does not represent our proportionate share (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest at |
|
|
|
|
|
|
Total Third |
|
|
|
|
Lessee |
|
March 31, 2010 |
|
|
Total Assets |
|
|
Party Debt |
|
|
Maturity Date |
|
Berry Plastics |
|
|
50 |
% |
|
$ |
80,821 |
|
|
$ |
29,000 |
|
|
|
3/2012 |
|
Tesco plc (a) |
|
|
49 |
% |
|
|
94,776 |
|
|
|
46,837 |
|
|
|
6/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
175,597 |
|
|
$ |
75,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Dollar amounts shown are based on the exchange rate of the Euro at March 31, 2010. |
Subsequent Events
In April and May 2010, we entered into two international investments and one domestic investment at
a total cost of approximately $153.0 million. In connection with our 2010 investment activity, in
April and May 2010, we obtained non-recourse mortgage financing totaling $65.3 million, at a
weighted average fixed annual interest rate and term of 6.7% and 10.2 years, respectively. Amounts
are based on the exchange rate of the foreign currency at the date of acquisition or financing, as
applicable.
Adjusted Cash Flow from Operating Activities
Adjusted cash flow from operating activities refers to our cash provided by operating activities,
as determined in accordance with GAAP, adjusted primarily to reflect timing differences between the
payment of certain liabilities and receipt of certain receivables in a period other than that in
which the item is recognized, to add cash distributions that we receive from our investments in
unconsolidated real estate joint ventures in excess of our equity investment in the joint ventures,
and to subtract cash distributions that we make to our noncontrolling partners in real estate joint
ventures that we consolidate. We hold a number of interests in real estate joint ventures, and we
believe that adjusting our GAAP cash provided by operating activities to reflect these actual cash
receipts and cash payments may give investors a more accurate picture of our actual cash flow than
GAAP cash provided by operating activities alone and that it is a useful supplemental measure for
investors to consider. We also believe that adjusted cash flow from operating activities is a
useful supplemental measure for assessing the cash flow generated from our core operations, and we
use this measure when evaluating distributions to shareholders. As we are still in our initial
offering and investment stage, we also consider our expectations as to the yields that may be
generated on existing investments and our acquisition pipeline when evaluating distributions to
shareholders. Adjusted cash flow from operating activities should not be considered as an
alternative to cash provided by operating activities computed on a GAAP basis as a measure of our
liquidity. Adjusted cash flow from operating activities may not be comparable to similarly titled
measures of other companies.
CPA®:17 Global 3/31/2010 10-Q 27
Adjusted cash flow from operating activities for the three months ended March 31, 2010 and 2009 is presented below (in thousands, except share amounts):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Cash flow provided by operating activities as reported |
|
$ |
15,330 |
|
|
$ |
3,475 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Distributions received from equity investments in real estate in excess of
equity income, net (a) |
|
|
332 |
|
|
|
|
|
Distributions paid to noncontrolling interests, net (b) |
|
|
(2,394 |
) |
|
|
(873 |
) |
Changes in working capital (c) |
|
|
(4,121 |
) |
|
|
(89 |
) |
|
|
|
|
|
|
|
Adjusted cash from operating activities |
|
$ |
9,147 |
|
|
$ |
2,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions paid |
|
$ |
11,675 |
|
|
$ |
4,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
87,261,461 |
|
|
|
38,152,272 |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
To the extent we receive distributions in excess of equity income that we recognize, we
include such amounts in our evaluation of cash flow from core operations. |
|
(b) |
|
Represents noncontrolling interests share of distributions made by ventures that we
consolidate in our financial statements. |
|
(c) |
|
Timing differences arising from the payment of certain liabilities and the receipt of certain
receivables in a period other than that in which the item is recognized in determining net
income may distort the actual cash flow that our core operations generate. We adjust our GAAP
cash flow provided by operating activities to record such amounts in the period in which the
item was actually recognized. |
CPA®:17 Global 3/31/2010 10-Q 28
|
|
|
Item 3. |
|
Quantitative and Qualitative Disclosures About Market Risk |
Market Risk
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency
exchange rates and equity prices. The primary risks to which we are exposed are interest rate risk
and foreign currency exchange risk. We are also exposed to market risk as a result of
concentrations in certain tenant industries as we have a limited number of investments. We
regularly monitor our portfolio to assess potential concentrations of market risk as we make
additional investments. As we invest the proceeds of our initial public offering, we will seek to
ensure that our portfolio is reasonably well diversified and does not contain any unusual
concentration of market risks.
We do not generally use derivative instruments to manage foreign currency exchange risk exposure
and do not use derivative instruments to hedge credit/market risks or for speculative purposes.
Interest Rate Risk
The value of our real estate, related fixed rate debt obligations and CMBS investments is subject
to fluctuation based on changes in interest rates. The value of our real estate is also subject to
fluctuations based on local and regional economic conditions and changes in the creditworthiness of
lessees, all of which may affect our ability to refinance property-level mortgage debt when balloon
payments are scheduled. Interest rates are highly sensitive to many factors, including governmental
monetary and tax policies, domestic and international economic and political conditions, and other
factors beyond our control. An increase in interest rates would likely cause the value of our owned
assets to decrease. Increases in interest rates may also have an impact on the credit profile of
certain tenants.
We own CMBS that are fully collateralized by a portfolio of commercial mortgages or commercial
mortgage-related securities to the extent consistent with the requirements for qualification as a
REIT. CMBS are instruments that directly or indirectly represent a participation in, or are secured
by and payable from, one or more mortgage loans secured by commercial real estate. In most cases,
CMBS distribute principal and interest payments on the mortgages to investors. Interest rates on
these instruments can be fixed or variable. Some classes of CMBS may be entitled to receive
mortgage prepayments before other classes do. Therefore, the prepayment risk for a particular
instrument may be different than for other CMBS. The value of our CMBS investments is also subject
to fluctuation based on changes in interest rates, economic conditions and the creditworthiness of
lessees at the mortgaged properties.
Although we have not yet experienced any reductions in cash flows on our CMBS investments, we
expect that we will experience credit losses and loan defaults on our CMBS investments. Such
defaults could have an adverse effect on the spreads between interest earning assets and interest
bearing liabilities. During the fourth quarter of 2009, we recognized other-than-temporary
impairment charges totaling $17.1 million related to our CMBS investments, of which $15.1 related
to expected credit losses and $1.5 million related to non-credit factors. At March 31, 2010, our
CMBS investments had a carrying value of $3.8 million, which reflects the impact of these
impairment charges (Note 7).
We are exposed to the impact of interest rate changes primarily through our borrowing activities.
To limit this exposure, we attempt to obtain non-recourse mortgage financing on a long-term,
fixed-rate basis. However, from time to time, we or our venture partners may obtain variable rate
mortgage loans and, as a result, may enter into interest rate swap agreements or interest rate cap
agreements with lenders that effectively convert the variable rate debt service obligations of the
loan to a fixed rate. Interest rate swaps are agreements in which a series of interest rate flows
are exchanged over a specific period, and interest rate caps limit the effective borrowing rate of
variable rate debt obligations while allowing participants to share in downward shifts in interest
rates. These interest rate swaps and caps are derivative instruments designated as cash flow hedges
on the forecasted interest payments on the debt obligation. The notional, or face, amount on which
the swaps or caps are based is not exchanged. Our objective in using these derivatives is to limit
our exposure to interest rate movements. At March 31, 2010, we estimate that the net fair value of
our interest rate cap and interest rate swap, which are included in Other assets, net and Accounts
payable, accrued expenses and other liabilities, respectively, in the consolidated financial
statements, was $1.5 million, inclusive of amounts attributable to noncontrolling interests of $0.8
million (Note 9).
In connection with a German investment in August 2008, a venture in which we and an affiliate have
67% and 33% interests, respectively, and which we consolidate, obtained a participation right in an
interest rate swap obtained by the lender of the non-recourse mortgage financing on the
transaction. This participation right is deemed to be an embedded credit derivative. This
derivative instrument had no fair value at March 31, 2010.
CPA®:17 Global 3/31/2010 10-Q 29
At March 31, 2010, all of our non-recourse debt either bore interest at fixed rates, was swapped to
a fixed rate or was subject to an interest rate cap. The annual interest rates on our fixed rate
debt at March 31, 2010 ranged from 4.5% to 8.0%. The annual interest rates on our variable rate
debt at March 31, 2010 ranged from 5.0% to 6.6%. Our debt obligations are more fully described in
Financial Condition in Item 2 above. The following table presents principal cash flows based upon
expected maturity dates of our debt obligations outstanding at March 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
Thereafter |
|
|
Total |
|
|
Fair value |
|
Fixed rate debt |
|
$ |
2,339 |
|
|
$ |
4,332 |
|
|
$ |
4,687 |
|
|
$ |
5,053 |
|
|
$ |
5,612 |
|
|
$ |
199,154 |
|
|
$ |
221,177 |
|
|
$ |
214,630 |
|
Variable rate debt |
|
$ |
2,162 |
|
|
$ |
3,042 |
|
|
$ |
3,176 |
|
|
$ |
3,317 |
|
|
$ |
108,776 |
|
|
$ |
25,000 |
|
|
$ |
145,473 |
|
|
$ |
145,472 |
|
The estimated fair value of our fixed rate debt and our variable rate debt that currently
bears interest at fixed rates or has effectively been converted to a fixed rate through the use of
interest rate swap agreements is affected by changes in interest rates. A decrease or increase in
interest rates of 1% would change the estimated fair value of this debt at March 31, 2010 by an
aggregate increase of $11.1 million or an aggregate decrease of $10.3 million, respectively. This
debt is generally not subject to short-term fluctuations in interest rates. Annual interest expense
on our variable rate debt that does not bear interest at fixed rates at March 31, 2010 would
increase or decrease by $1.2 million for each respective 1% change in annual interest rates.
Foreign Currency Exchange Rate Risk
We own international investments in the European Union, and as a result are exposed to foreign
currency exchange rate movements in the Euro and to a lesser extent, the British Pound Sterling, which may affect
future costs and cash flows. Although all of our foreign investments through the first quarter of
2010 were conducted in these currencies, we are likely to conduct business in other currencies in
the future as we seek to invest funds from our offering internationally. We manage foreign currency
exchange rate movements by generally placing both our debt obligation to the lender and the
tenants rental obligation to us in the same currency. We are generally a net receiver of these
currencies (we receive more cash than we pay out), and therefore our foreign operations benefit
from a weaker U.S. dollar, and are adversely affected by a stronger U.S. dollar, relative to the
foreign currency. We recognized unrealized foreign currency transaction losses of less than $0.1
million and a de minimis amount of realized foreign currency transaction gains for the three months
ended March 31, 2010. These gains and losses are included in Other income and (expenses) in the
consolidated financial statements and were primarily due to changes in the value of the foreign
currency on accrued interest receivable on notes receivable from consolidated subsidiaries.
Through the date of this Report, we had not entered into any foreign currency forward exchange
contracts to hedge the effects of adverse fluctuations in foreign currency exchange rates. We have
obtained non-recourse mortgage financing at fixed rates of interest in the local currency. To the
extent that currency fluctuations increase or decrease rental revenues as translated to dollars,
the change in debt service, as translated to dollars, will partially offset the effect of
fluctuations in revenue, and, to some extent, mitigate the risk from changes in foreign currency
rates.
|
|
|
Item 4. |
|
Controls and Procedures |
Disclosure Controls and Procedures
Our disclosure controls and procedures include our controls and other procedures designed to
provide reasonable assurance that information required to be disclosed in this and other reports
filed under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed,
summarized and reported within the required time periods specified in the SECs rules and forms and
that such information is accumulated and communicated to management, including our chief executive
officer and acting chief financial officer, to allow timely decisions regarding required
disclosures. It should be noted that no system of controls can provide complete assurance of
achieving a companys objectives and that future events may impact the effectiveness of a system of
controls.
Our chief executive officer and acting chief financial officer, after conducting an evaluation,
together with members of our management, of the effectiveness of the design and operation of our
disclosure controls and procedures at March 31, 2010, have concluded that our disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of March 31,
2010 at a reasonable level of assurance.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during our most
recently completed fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
CPA®:17 Global 3/31/2010 10-Q 30
PART II
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds |
For the three months ended March 31, 2010, we issued 61,664 restricted shares of our common stock
to the advisor as consideration for asset management fees. These shares were issued at $10.00 per
share, which represents our initial offering price. Since none of these transactions were
considered to have involved a public offering within the meaning of Section 4(2) of the
Securities Act, the shares issued were deemed to be exempt from registration. In acquiring our
shares, the advisor represented that such interests were being acquired by it for the purposes of
investment and not with a view to the distribution thereof.
We intend to use the net proceeds of our offering to invest in a diversified portfolio of
income-producing commercial properties and other real estate related assets. The use of proceeds
from our offering of common stock, which commenced in December 2007 pursuant to a registration
statement (No. 333-140842) that was declared effective in November 2007, is as follows at March 31,
2010 (in thousands except share amounts):
|
|
|
|
|
Shares registered |
|
|
200,000,000 |
|
Aggregate price of offering amount registered |
|
$ |
2,000,000 |
|
Shares sold (a) |
|
|
92,107,016 |
|
Aggregated offering price of amount sold |
|
$ |
920,310 |
|
Direct or indirect payments to directors, officers, general partners of the issuer or their
associates;
to persons owning ten percent or more of any class of equity securities of the issuer; and to
affiliates of the issuer |
|
|
(91,969 |
) |
Direct or indirect payments to others |
|
|
(8,044 |
) |
|
|
|
|
Net offering proceeds to the issuer after deducting expenses |
|
|
820,297 |
|
Purchases of real estate related assets |
|
|
(416,120 |
) |
|
|
|
|
Temporary investments in cash and cash equivalents |
|
$ |
404,177 |
|
|
|
|
|
|
|
|
(a) |
|
Excludes shares issued to affiliates, including our advisor, and shares issued pursuant to
our distribution reinvestment and stock purchase plan. |
Issuer Purchases of Equity Securities
The following table provides information with respect to repurchases of our common stock during the
three months ended March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum number (or |
|
|
|
|
|
|
|
|
|
|
|
Total number of shares |
|
|
approximate dollar value) |
|
|
|
|
|
|
|
|
|
|
|
purchased as part of |
|
|
of shares that may yet be |
|
|
|
Total number of |
|
|
Average price |
|
|
publicly announced |
|
|
purchased under the |
|
2010 Period |
|
shares purchased(a) |
|
|
paid per share |
|
|
plans or programs(a) |
|
|
plans or programs(a) |
|
January |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
February |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
March |
|
|
105,869 |
|
|
$ |
9.30 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
105,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Represents shares of our common stock purchased under our redemption plan, pursuant to which
we may elect to redeem shares at the request of our shareholders who have held their shares
for at least one year from the date of their issuance, subject to certain conditions and
limitations. The maximum amount of shares purchasable by us in any period depends on a number
of factors and is at the discretion of our board of directors. The redemption plan will
terminate if and when our shares are listed on a national securities market. |
CPA®:17 Global 3/31/2010 10-Q 31
|
|
|
|
|
|
|
Exhibit No. |
|
Description |
|
Method of Filing |
|
31.1 |
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith |
|
|
|
|
|
|
|
|
31.2 |
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith |
|
|
|
|
|
|
|
|
32 |
|
|
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith |
CPA®:17 Global 3/31/2010 10-Q 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
Corporate Property Associates
17 Global Incorporated
|
|
Date 5/14/2010 |
By: |
/s/ Mark J. DeCesaris
|
|
|
|
Mark J. DeCesaris |
|
|
|
Managing Director and Acting Chief Financial Officer
(Principal Financial Officer) |
|
|
|
|
Date 5/14/2010 |
By: |
/s/ Thomas J. Ridings, Jr.
|
|
|
|
Thomas J. Ridings, Jr. |
|
|
|
Executive Director and Chief Accounting Officer
(Principal Accounting Officer) |
|
|
CPA®:17 Global 3/31/2010 10-Q 33
EXHIBIT INDEX
|
|
|
|
|
|
|
Exhibit No. |
|
Description |
|
Method of Filing |
|
31.1 |
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith |
|
|
|
|
|
|
|
|
31.2 |
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith |
|
|
|
|
|
|
|
|
32 |
|
|
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith |
CPA®:17 Global 3/31/2010 10-Q 34