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EX-32 - EXHIBIT 32 - CORPORATE PROPERTY ASSOCIATES 18 GLOBAL INCcpa18201910-kexh32.htm
EX-31.2 - EXHIBIT 31.2 - CORPORATE PROPERTY ASSOCIATES 18 GLOBAL INCcpa18201910-kexh312.htm
EX-31.1 - EXHIBIT 31.1 - CORPORATE PROPERTY ASSOCIATES 18 GLOBAL INCcpa18201910-kexh311.htm
EX-23.1 - EXHIBIT 23.1 - CORPORATE PROPERTY ASSOCIATES 18 GLOBAL INCcpa18201910-kexh231.htm
EX-21.1 - EXHIBIT 21.1 - CORPORATE PROPERTY ASSOCIATES 18 GLOBAL INCcpa18201910-kexh211.htm
EX-4.2 - EXHIBIT 4.2 - CORPORATE PROPERTY ASSOCIATES 18 GLOBAL INCcpa18201910-kexh42.htm


 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the fiscal year ended December 31, 2019
or
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: 000-54970
cpa18logoa01a01a35.jpg
CORPORATE PROPERTY ASSOCIATES 18 – GLOBAL INCORPORATED
(Exact name of registrant as specified in its charter)
Maryland
 
90-0885534
(State of incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
50 Rockefeller Plaza
 
 
New York, New York
 
10020
(Address of principal executive offices)
 
(Zip Code)
Investor Relations (212) 492-8920
(212) 492-1100
(Registrant’s telephone numbers, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $0.001 Per Share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ
 
 
(Do not check if a smaller reporting company)
 
 
 
Smaller reporting company o
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 has no active market for its common stock. Non-affiliates held 110,567,519 and 32,002,614 of Class A and Class C shares, respectively, of outstanding common stock at June 30, 2019.
As of February 21, 2020 there were 118,196,797 shares of Class A common stock and 32,527,727 shares of Class C common stock of registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant incorporates by reference its definitive Proxy Statement with respect to its 2020 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of its fiscal year, into Part III of this Annual Report on Form 10-K.





 
INDEX
 
 
 
Page No
PART I
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
 
 
Item 15.
Item 16.
 
 




CPA:18 – Global 2019 10-K 1


Forward-Looking Statements

This Annual Report on Form 10-K (this “Report”), including Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of Part II of this Report, contains forward-looking statements within the meaning of the federal securities laws.

These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements include, but are not limited to, statements regarding: our corporate strategy, the timing of any future liquidity event, underlying assumptions about our portfolio (e.g. occupancy rate, lease terms, and tenant credit quality, including our expectations about tenant bankruptcies and interest coverage), potential holding periods for our investments (including possible acquisitions and dispositions), and our international exposure; our future capital expenditure levels, including any plans to fund our future liquidity needs, and future leverage and debt service obligations; statements that we make regarding our ability to remain qualified for taxation as a real estate investment trust (“REIT”); and the impact of recently issued accounting pronouncements and other regulatory activity. It is important to note that our actual results could be materially different from those projected in such forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on our business, financial condition, liquidity, results of operations, Modified funds from operations (“MFFO”), and prospects. You should exercise caution in relying on forward-looking statements as they involve known and unknown risks, uncertainties, and other factors that may materially affect our future results, performance, achievements, or transactions. Information on factors that could impact actual results and cause them to differ from what is anticipated in the forward-looking statements contained herein is included in this Report as well as in our other filings with the Securities and Exchange Commission (“SEC”), including but not limited to those described in Item 1A. Risk Factors of this Report. Moreover, because we operate in a very competitive and rapidly changing environment, new risks are likely to emerge from time to time. Given these risks and uncertainties, shareholders are cautioned not to place undue reliance on these forward-looking statements as a prediction of future results, which speak only as of the date of this Report, unless noted otherwise. Except as required by federal securities laws and the rules and regulations of the SEC, we do not undertake to revise or update any forward-looking statements.

All references to “Notes” throughout the document refer to the footnotes to the consolidated financial statements of the registrant in Part II, Item 8. Financial Statements and Supplementary Data.



CPA:18 – Global 2019 10-K 2


PART I

Item 1. Business.

General Development of Business

Overview

Corporate Property Associates 18 – Global Incorporated (“CPA:18 – Global”) and, together with its consolidated subsidiaries, we, us, or our, is a publicly owned, non-traded REIT that primarily invests in a diversified portfolio of income-producing commercial properties leased to companies, both domestically and outside the United States. In addition, our portfolio includes self-storage and student housing investments. 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 and the level of our distributions, among other factors. We conduct substantially all of our investment activities and own all of our assets through CPA:18 Limited Partnership, a Delaware limited partnership, which is our Operating Partnership. In addition to being a general partner and a limited partner of the Operating Partnership, we also own a 99.97% capital interest in the Operating Partnership. WPC–CPA:18 Holdings, LLC (“CPA:18 Holdings” or the “Special General Partner”), a subsidiary of our sponsor, W. P. Carey Inc. (“WPC”), holds the remaining 0.03% special general partner interest in the Operating Partnership.

Our primary investment strategy is to acquire, own, and manage a portfolio of commercial real estate properties. Our net-leased properties are leased to a diversified group of companies on a net-leased basis and generally require the tenant to pay substantially all of the costs associated with operating and maintaining the property, such as maintenance, insurance, taxes, structural repairs, and other operating expenses.

In addition, our portfolio as of December 31, 2019 included self-storage and student housing properties, which we refer to as our Operating Properties. During the year ended December 31, 2019, our portfolio also included our last multi-family residential property, which was sold on January 29, 2019. After that date, we no longer earned any revenue from multi-family residential properties (which were primarily from leases of one year or less with individual tenants).

We are managed by WPC through certain of its subsidiaries (collectively, our “Advisor”). WPC is a diversified REIT and leading owner of commercial real estate listed on the New York Stock Exchange under the symbol “WPC.” In addition, WPC also manages the portfolios of certain non-traded investment programs. Pursuant to an advisory agreement, our Advisor provides both strategic and day-to-day management services for us, including asset management, dispositions of assets, investor relations, investment research and analysis, investment financing and other investment-related services, and administrative services. Our Advisor also provides office space and other facilities for us. We pay asset management fees and certain transactional fees to our Advisor and also reimburse our Advisor for certain expenses incurred in providing services to us, including expenses associated with personnel provided for administration of our operations. The current advisory agreement has a term of one year and may be renewed for successive one-year periods. As of December 31, 2019, our Advisor also served in this capacity for Carey Watermark Investors Incorporated and Carey Watermark Investors 2 Incorporated, which are publicly owned, non-traded REITs that invest in hotel and lodging-related properties (together with us, the “Managed REITs”). WPC also advises Carey European Student Housing Fund I, L.P. (together with the Managed REITs, the “Managed Programs”), a limited partnership formed for the purpose of developing, owning, and operating student housing properties in Europe.

We were formed as a Maryland corporation on September 7, 2012. We commenced our initial public offering in May 2013 and raised aggregate gross proceeds of $1.2 billion through the closing of the offering in April 2015. In addition, from inception through December 31, 2019, $183.9 million and $52.5 million of distributions to our shareholders were reinvested in our Class A and Class C common stock, respectively, through our Distribution Reinvestment Plan (“DRIP”). Although we have substantially invested all of the proceeds from our offering, we intend to continue to use our cash reserves and cash generated from operations to manage a portfolio of commercial properties leased to a diversified group of companies, as well as self-storage and student housing operating properties and development projects.

Our estimated net asset values per share (“NAVs”) as of September 30, 2019 were $8.67 per share for both Class A and Class C common stock. See Significant Developments in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for more details regarding our NAVs.

We have no employees. As of December 31, 2019, our Advisor had 204 employees available to perform services under our advisory agreement (Note 3).



CPA:18 – Global 2019 10-K 3


Business Objectives and Strategy

Our objectives are to:

provide attractive risk-adjusted returns for our stockholders;
generate sufficient cash flow over time to provide investors with increasing distributions;
seek investments with potential for capital appreciation; and
use leverage to enhance returns on our investments.

We seek to achieve these objectives by investing in a diversified portfolio of income-producing commercial properties as well as self-storage and student housing properties.

Our Portfolio

As of December 31, 2019, our net lease portfolio was comprised of full or partial ownership interests in 47 properties, substantially all of which were fully occupied and triple-net leased to 61 tenants, and totaled approximately 9.6 million square feet. The remainder of our portfolio was comprised of full or partial ownership interests in 68 self-storage properties, 12 student housing development projects and two student housing operating properties, totaling 5.5 million square feet. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Portfolio Overview for more information about our portfolio.

Asset Management
 
Our Advisor is generally responsible for all aspects of our operations, including selecting our investments, formulating and evaluating the terms of each proposed acquisition, arranging for the acquisition of the investment, negotiating the terms of borrowings, managing our day-to-day operations, and arranging for and negotiating sales of assets. With respect to our net-leased investments, asset management functions include entering into new or modified transactions to meet the evolving needs of current tenants, re-leasing properties, credit and real estate risk analysis, building expansions and redevelopments, refinancing debt, and selling assets. With respect to our self-storage and student housing investments, asset management functions include engaging unaffiliated third parties for management and operation of our investments, active oversight of property developers and managers, credit and real estate risk analysis, building expansions and redevelopments, refinancing debt, and selling assets. Working with the third-party managers it engages, our Advisor reviews and approves operating and capital budgets, inspects properties, and provides input on business strategy at the property.

Our Advisor monitors, on an ongoing basis, compliance by tenants with their lease obligations and other factors that could affect the financial performance of any of our properties. Monitoring involves verifying that each tenant has paid real estate taxes, assessments, and other expenses relating to the properties it occupies and confirming that appropriate insurance coverage is being maintained by the tenant. Our Advisor also utilizes third-party asset managers for certain domestic and international investments. Our Advisor reviews financial statements of our tenants and undertakes physical inspections of the condition and maintenance of our properties. Additionally, our Advisor periodically analyzes each tenant’s financial condition, the industry in which each tenant operates, and each tenant’s relative strength in its industry.


CPA:18 – Global 2019 10-K 4



Holding Period

We generally intend to hold our investments in real property for an extended period depending on the type of investment. The determination of whether a particular property should be sold or otherwise disposed of will be made after consideration of relevant factors, including prevailing economic conditions, with a view to achieving maximum capital appreciation for our stockholders or avoiding increases in risk. No assurance can be given that these objectives will be realized.
        
One of our objectives is ultimately to provide our stockholders with the opportunity to obtain liquidity for their investments in us. We may provide liquidity for our stockholders through sales of assets (either on a portfolio basis or individually), a listing of our shares on a stock exchange, a merger (which may include a merger with WPC or its affiliates), an enhanced redemption program or another transaction approved by our board of directors. We are under no obligation to liquidate our portfolio within any particular period since the precise timing will depend on real estate and financial markets, economic conditions of the areas in which the properties are located, and tax effects on stockholders that may prevail in the future. Furthermore, there can be no assurance that we will be able to consummate a liquidity event. In the three most recent instances in which stockholders of non-traded REITs managed by our Advisor were provided with liquidity, Corporate Property Associates 15 Incorporated, Corporate Property Associates 16 – Global Incorporated, and Corporate Property Associates 17 – Global Incorporated merged with and into subsidiaries of WPC on September 28, 2012, January 31, 2014, and October 31, 2018, respectively.

Financing Strategies

Consistent with our investment policies, we use leverage when available on terms we believe are favorable. We will generally borrow in the same currency that is used to pay rent on the property. This enables us to hedge a significant portion of our currency risk on international investments. We, through the subsidiaries we form to make investments, will generally seek to borrow on a non-recourse basis and in amounts that we believe will maximize the return to our stockholders, although we may also borrow at the corporate level. The use of non-recourse financing may allow us to improve returns to our stockholders and to limit our exposure on any investment to the amount invested.

Aggregate borrowings on our portfolio as a whole may not exceed, on average, the lesser of 75% of the total costs of all investments or 300% of our net assets, unless the excess is approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report, along with justification for the excess.

Our charter currently provides that we will not borrow funds from our directors, WPC, our Advisor or any of their respective affiliates unless the transaction is approved by a majority of our directors (including a majority of the independent directors) who do not have an interest in the transaction, as being fair, competitive, and commercially reasonable and not less favorable than those prevailing for loans between unaffiliated third parties under the same circumstances. In July 2016, it was approved by our and WPC’s board of directors to allow for unsecured loans from WPC to us, of up to $50.0 million in the aggregate (at the sole discretion of WPC’s management), at a rate equal to which WPC can borrow funds under its senior credit facility.

Investment Strategies

Long-Term, Net-Leased Assets

In analyzing potential net-lease investments for our real estate portfolio, our Advisor reviews various aspects of a transaction, including the tenant and the underlying real estate fundamentals, to determine whether a potential investment and lease can be structured to satisfy our investment criteria. In evaluating net-leased transactions, our Advisor generally considers, among other things, the following aspects of each transaction:



CPA:18 – Global 2019 10-K 5


Tenant/Borrower Evaluation — Our Advisor evaluates each potential tenant or borrower for its creditworthiness, typically considering factors such as management experience, industry position and fundamentals, operating history, and capital structure. Our Advisor also rates each asset based on its market, liquidity, and criticality to the tenant’s operations, as well as other factors that may be unique to a particular investment. Our Advisor seeks opportunities in which it believes the tenant may have a stable or improving credit profile or credit potential that has not been fully recognized by the market. Our Advisor defines creditworthiness as a risk-reward relationship appropriate to its investment strategies, which may or may not coincide with ratings issued by the credit rating agencies. Our Advisor has a robust internal credit rating system and may designate a tenant as “implied investment grade” even if the credit rating agencies have not made a rating determination. As of December 31, 2019, we had nine tenants that were rated investment grade, as well as 47 below-investment grade tenants (with a weighted-average internal credit rating of 3.3). The aforementioned credit rating data does not include our student housing operating properties and development projects.

Lease Terms — Generally, the net-leased properties in which we invest will be leased on a full-recourse basis to the tenants or their affiliates. In addition, our Advisor seeks to include a clause in each lease that provides for increases in rent over the term of the lease. These increases are either fixed (i.e., mandated on specific dates) or tied to increases in inflation indices (e.g., Consumer Price Index (“CPI”), or similar indices in the jurisdiction where the property is located), but may contain caps or other limitations, either on an annual or overall basis. In the case of retail stores and hotels, the lease may provide for participation in gross revenues of the tenant above a stated level (“percentage rent”).

Transaction Provisions to Enhance and Protect Value — Our Advisor attempts to include provisions in our leases it believes may help to protect our investment from changes in the tenant’s operating and financial characteristics, which may affect the tenant’s ability to satisfy its obligations to us or reduce the value of our investment. Such provisions include covenants requiring our consent for certain activities, requiring indemnification protections and/or security deposits, and requiring the tenant to satisfy specific operating tests.

Operating Properties and Other

Self-Storage Investments — Our Advisor combines a rigorous underwriting process and active oversight of property managers with a goal to generate attractive risk-adjusted returns. We had full ownership interests in 68 self-storage properties as of December 31, 2019. Our self-storage investments are managed by unaffiliated third parties who have been engaged by our Advisor. Our Advisor’s internal asset management personnel oversee the third-party managers with detailed performance reviews, budget review and approval, and business strategy review.

Student Housing Investments — We have strategic relationships with third parties for the purpose of sourcing and managing investment opportunities in this sector, both domestically and internationally. We combine a rigorous underwriting process and active oversight of property developers and managers with a goal to generate attractive risk-adjusted returns. As of December 31, 2019, we had full or partial ownership interests in 12 student housing development projects and two student housing operating properties.

Diversification 

Our Advisor attempts to diversify our portfolio to avoid undue dependence on any one particular tenant, borrower, collateral type, geographic location, or industry. By diversifying the portfolio, our Advisor seeks to reduce the adverse effect of a single under-performing investment or a downturn in any particular industry or geographic region. While our Advisor has not endeavored to maintain any particular standard of diversity in our owned portfolio, we believe that it is reasonably well-diversified. Our Advisor also assesses the relative risk of our portfolio on a quarterly basis.

Real Estate Evaluation

Our Advisor reviews and evaluates the physical condition of the property and the market in which it is located. Our Advisor considers a variety of factors, including current market rents, replacement cost, residual valuation, property operating history, demographic characteristics of the location and accessibility, competitive properties, and suitability for re-leasing. Our Advisor obtains third-party environmental and engineering reports and market studies when required. When considering an investment outside the United States, our Advisor will also consider factors particular to a country or region, including geopolitical risk, in addition to the risks normally associated with real property investments.



CPA:18 – Global 2019 10-K 6


Available Information
 
We will supply to any stockholder, upon written request and without charge, a copy of this Report as filed with the SEC. Our filings can also be obtained for free on the SEC’s website at http://www.sec.gov. All filings we make with the SEC, including this Report, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, as well as any amendments to those reports, are available for free on our website, http://www.cpa18global.com, as soon as reasonably practicable after they are filed with or furnished to the SEC. We are providing our website address solely for the information of investors and do not intend for it to be an active link. We do not intend to incorporate the information contained on our website into this Report or other documents filed or furnished with the SEC. Our Code of Business Conduct and Ethics, which applies to all employees, including our chief executive officer and chief financial officer, is available on the Corporate Governance portion of our website, http://www.cpa18global.com. We intend to make available on our website any future amendments or waivers to our Code of Business Conduct and Ethics within four business days after any such amendments or waivers.



CPA:18 – Global 2019 10-K 7


Item 1A. Risk Factors.

Our business, results of operations, financial condition, and ability to pay distributions at the current rate could be materially adversely affected by various risks and uncertainties, including those enumerated below. These risk factors may have affected, and in the future could affect, our actual operating and financial results and could cause such results to differ materially from those in any forward-looking statements. You should not consider this list exhaustive. New risk factors emerge periodically and we cannot assure you that the factors described below list all risks that may become material to us at any later time.

The price of shares being offered through our DRIP is determined by our board of directors based upon our NAVs from time to time and may not be indicative of the price at which the shares would trade if they were listed on an exchange or actively traded by brokers.

The price of the shares currently being offered through our DRIP is determined by our board of directors in the exercise of its business judgment based upon our NAVs from time to time. The valuation methodologies underlying our NAVs involve subjective judgments. Valuations of real properties do not necessarily represent the price at which a willing buyer would purchase our properties; therefore, there can be no assurance that we would realize the values underlying our NAVs if we were to sell our assets and distribute the net proceeds to our stockholders. In addition, the values of our assets and debt are likely to fluctuate over time. This price may not be indicative of (i) the price at which shares would trade if they were listed on an exchange or actively traded by brokers, (ii) the proceeds that a stockholder would receive if we were liquidated or dissolved, or (iii) the value of our portfolio at the time you dispose of your shares. Since our NAVs are estimates and may be impacted by various factors (including elements that are outside our control, such as changes in interest and/or exchange rates, as well as real estate markets fluctuations), there is no assurance that a stockholder will realize such NAVs in connection with any liquidity event.

We may be unable to pay or maintain cash distributions or increase distributions over time.

The amount of cash we have available for distribution to stockholders is affected by many factors, such as the performance of our Advisor in selecting investments for us to make, selecting tenants for our properties, and securing financing arrangements; our ability to buy properties; the amount of rental income from our properties; our operating expense levels; as well as many other variables. We may not always be in a position to pay distributions to our stockholders and any distributions we do make may not increase over time. Our board of directors, in its sole discretion, will determine on a quarterly basis the amount of cash to be distributed to our stockholders based on a number of considerations, including, but not limited to, our results of operations, cash flow and capital requirements; economic and tax considerations; our borrowing capacity; applicable provisions of the Maryland General Corporation Law; and other factors. Our actual results may differ significantly from the assumptions used by our board of directors in establishing the distribution rate to our stockholders. There is also a risk that we may not have sufficient cash from operations to make a distribution required to maintain our REIT status. Consequently, our distribution levels are not guaranteed and may fluctuate.

Our distributions in the past have exceeded, and may in the future exceed, our funds from operations (“FFO”).

Over the life of our company, the regular quarterly cash distributions we pay are expected to be principally sourced from our FFO. However, we have funded a portion of our cash distributions to date using net proceeds from our public offering and there can be no assurance that our FFO will be sufficient to cover our future distributions. For the year ended December 31, 2019, our FFO covered approximately 76.8% of total distributions declared, with the balance funded from other sources, including our DRIP. For the year ended December 31, 2019, net cash provided by operating activities fully covered total distributions declared. If our properties are not generating sufficient cash flow or our other expenses require it, we may need to use other sources of funds, such as proceeds from asset sales or borrowings to fund distributions in order to satisfy REIT requirements. If we fund distributions from borrowings, such financing will incur interest costs and need to be repaid.

Our charter permits us to make distributions from any source, including the sources described above. Because the amount we pay out in distributions has in the past exceeded, and may in the future continue to exceed, our FFO, distributions to stockholders may not reflect the current performance of our properties or our current operating cash flows. To the extent distributions exceed cash flow from operations, distributions may be treated as a return of investment and could reduce a stockholder’s basis in our stock. A reduction in a stockholder’s basis in our stock could result in the stockholder recognizing more gain upon the disposition of his or her shares, which in turn could result in greater taxable income to such stockholder.



CPA:18 – Global 2019 10-K 8


Stockholders’ equity interests may be diluted.

Our stockholders do not have preemptive rights to any shares of common stock issued by us in the future. Therefore, (i) when we sell shares of common stock in the future, including those issued pursuant to our DRIP, (ii) when we issue shares of common stock to our independent directors or to our Advisor and its affiliates for payment of fees in lieu of cash, or (iii) if we issue additional common stock or other securities that are convertible into our common stock, then existing stockholders and investors that purchased their shares in our initial public offering will experience dilution of their percentage ownership in us. Depending on the terms of such transactions, most notably the offering price per share, which may be less than the price paid per share in our initial public offering, and the value of our properties and other investments, existing stockholders might also experience a dilution in the book value per share of their investment in us.

If we recognize substantial impairment charges on our properties or investments, our net income may be reduced.

We may incur substantial impairment charges, which we are required to recognize: (i) whenever we sell a property for less than its carrying value or we determine that the carrying amount of the property is not recoverable and exceeds its fair value; (ii) for direct financing leases, whenever losses related to the collectability of receivables are both probable and reasonably estimable or there has been a permanent decline in the current estimate of the residual value of the property; and (iii) for equity investments, whenever the estimated fair value of the investment’s underlying net assets in comparison with the carrying value of our interest in the investment has declined on an other-than-temporary basis. By their nature, the timing or extent of impairment charges are not predictable. We may incur non-cash impairment charges in the future, which may reduce our net income, although they do not necessarily affect our FFO, which is the metric we use to evaluate our distribution coverage.

Our board of directors may change our investment policies without stockholder approval, which could alter the nature of your investment.

Our investment policies may change over time and may also vary as new investment techniques are developed. Except as otherwise provided in our charter, our investment policies, the methods for their implementation, as well as our other objectives, policies, and procedures, may be altered by a majority of our directors (including a majority of the independent directors), without the approval of our stockholders. As a result, the nature of your investment could change without your consent. Material changes in our investment focus will be described in our periodic reports filed with the SEC; however, these reports would typically be filed after changes in our investment focus have been made, and in some cases, several months after such changes. A change in our investment strategy may, among other things, increase our exposure to interest rate risk, default risk, and commercial real property market fluctuations, all of which could materially adversely affect our ability to achieve our investment objectives.

We are not required to meet any diversification standards; therefore, our investments may become subject to concentration risks.

Subject to our intention to maintain our qualification as a REIT, we are not required to meet any diversification standards. Therefore, our investments may become concentrated in type or geographic location, which could subject us to significant risks with potentially adverse effects on our investment objectives.

Our success is dependent on the performance of our Advisor.

Our ability to achieve our investment objectives and to pay distributions is largely dependent upon the performance of our Advisor in the acquisition of investments, the selection of tenants, the determination of any financing arrangements, the completion of our build-to-suit and development projects, and the management of our assets. In addition, our Advisor may not be as familiar with the potential risks of investments outside our existing property types, which could lead to diminished investment performance and adversely affect our revenues, NAVs, and distributions to our stockholders.

Finally, the performance of past programs managed by our Advisor may not be indicative of our Advisor’s performance with respect to us. We cannot guarantee that our Advisor will be able to successfully manage and achieve liquidity for us to the extent it has done so for prior programs.



CPA:18 – Global 2019 10-K 9


We could be adversely affected if WPC sells, transfers or otherwise discontinues its investment management business.

WPC has exited non-traded retail fundraising activities and no longer sponsors new investment programs, although it currently expects to continue serving as our Advisor through the end of our life cycle. If WPC sells, transfers or otherwise discontinues its investment management business entirely, we would have to find a new Advisor, who may not be familiar with our company, may not provide the same level of services as our Advisor, and may charge fees that are higher than the fees we pay to our Advisor, all of which may materially adversely affect our performance and delay or otherwise negatively impact our ability to effect a liquidity event. If we terminate the advisory agreement and repurchase the Special General Partner’s interest in our Operating Partnership, which we would have the right to do in such circumstances, the costs to us could be substantial.

If we internalize our management functions, stockholders’ interests could be diluted and we could incur significant self-management costs.

In the future, our board of directors may consider internalizing the functions currently performed for us by our Advisor by, among other methods, acquiring our Advisor. The method by which we could internalize these functions could take many forms. There is no assurance that internalizing our management functions will be beneficial to us and our stockholders. There is also no assurance that the key employees of our Advisor who perform services for us would elect to work directly for us, instead of remaining with our Advisor or another affiliate of WPC. An acquisition of our Advisor could also result in dilution of your interests as a stockholder and could reduce earnings per share. Additionally, we may not realize the perceived benefits, be able to properly integrate a new staff of managers and employees, or be able to effectively replicate the services provided previously by our Advisor. Internalization transactions, including the acquisition of advisors or property managers affiliated with entity sponsors, have also, in some cases, been the subject of litigation. Even if these claims are without merit, we could be forced to spend significant resources defending claims, which would reduce the amount of funds available for us to invest in properties or other investments and to pay distributions. All of these factors could have a material adverse effect on our results of operations, financial condition, and ability to pay distributions.

We may be deterred from terminating the advisory agreement or engaging in certain business combination transactions because, upon certain events, our Operating Partnership must decide whether to repurchase all or a portion of WPC’s interest in our Operating Partnership.

While the advisory agreement has a term of one year (which may be renewed for successive one-year periods) and we may terminate the advisory agreement upon 60 days’ written notice without cause or penalty, the termination or resignation of our Advisor, including by non-renewal of the advisory agreement and replacement with an entity that is not an affiliate of our Advisor, would give our Operating Partnership the right, but not the obligation, to repurchase all or a portion of WPC’s special general partner interest in our Operating Partnership (which is held through its subsidiary CPA:18 Holdings) at a value based on the lesser of: (i) five times the amount of the last completed fiscal year’s special general partner distributions, and (ii) the discounted present value of the estimated future special general partner distributions until March 2025. This repurchase could be prohibitively expensive and require the Operating Partnership to sell assets in order to complete the repurchase. If our Operating Partnership does not exercise its repurchase right and WPC’s interest is converted into a special limited partnership interest, we might be unable to find another entity that would be willing to act as our Advisor while WPC owns a significant interest in the Operating Partnership. Even if we do find another entity to act as our Advisor, we may be subject to higher fees than those charged by Carey Asset Management Corp. These considerations could deter us from terminating the advisory agreement.

In addition, in the event of a merger or other extraordinary corporate transaction in which the advisory agreement is terminated and an affiliate of WPC does not replace our Advisor, the Operating Partnership must either repurchase WPC’s special general partner interest in our Operating Partnership at the value described above or obtain WPC’s consent to the merger. This obligation may limit opportunities for stockholders to receive a premium for their shares that might otherwise exist if a third party attempted to acquire us through a merger or other extraordinary corporate transaction.

The termination or replacement of our Advisor could trigger a default or repayment event under the financing arrangements for some of our assets.

Lenders for certain financing arrangements related to our assets may request change of control provisions in their loan documentation that would make the termination or replacement of WPC or its affiliates as our Advisor an event of default or an event triggering the immediate repayment of the full outstanding balance of the loan. If an event of default or a repayment event occurs with respect to any of our loans, our revenues and distributions to our stockholders may be adversely affected.



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Payment of fees to our Advisor and distributions to our Special General Partner will reduce cash available for investment and distribution.

Our Advisor performs services for us in connection with the selection and acquisition of our investments, the management and leasing of our properties, and the administration of our other investments. Pursuant to the advisory agreement, asset management fees payable to our Advisor may be paid in cash or shares of our Class A common stock at our option, after consultation with our Advisor. If our Advisor receives all or a portion of its fees in cash, we will pay our Advisor substantial cash fees for these services. In addition, our Special General Partner is entitled to certain distributions from our Operating Partnership. The payment of these fees and distributions will reduce the amount of cash available for investments or distribution to our stockholders.

We have limited independence from our Advisor and its affiliates, who may be subject to conflicts of interest.

We delegate our management functions to our Advisor, for which it earns fees pursuant to the advisory agreement. Although at least a majority of our board of directors must be independent, we have limited independence from our Advisor due to this delegation. As part of its duties, our Advisor manages our business and selects our investments. Our Advisor and its affiliates have potential conflicts of interest in their dealings with us. Circumstances under which a conflict could arise between us and our Advisor and its affiliates include:

our Advisor is compensated for certain transactions on our behalf (e.g., acquisitions of investments and sales), which may cause our Advisor to engage in transactions that generate higher fees, rather than transactions that are more appropriate or beneficial for our business;
agreements between us and our Advisor, including agreements regarding compensation, are not negotiated on an arm’s-length basis, as would occur if the agreements were with unaffiliated third parties; 
acquisitions of single assets or portfolios of assets from WPC and its affiliates, subject to our investment policies and procedures, in the form of a direct purchase of assets, a merger, or another type of transaction; 
competition with WPC for investments, which are resolved by our Advisor (although our Advisor is required to use its best efforts to present a continuing and suitable investment program to us, allocation decisions present conflicts of interest, which may not be resolved in the manner most favorable to our interests);
decisions regarding asset sales, which could impact the timing and amount of fees payable to our Advisor, as well as allocations and distributions payable to CPA:18 Holdings pursuant to its special general partner interests (e.g., our Advisor receives asset management fees and may decide not to sell an asset; however, CPA:18 Holdings will be entitled to certain profit allocations and cash distributions based upon sales of assets as a result of its Operating Partnership profits interest);
decisions regarding potential liquidity events and business combination transactions (including a merger with WPC), which may entitle our Advisor and its affiliates to receive additional fees and distributions in relation to the liquidations;  
a recommendation by our Advisor that we declare distributions at a particular rate because our Advisor and CPA:18 Holdings may begin collecting subordinated fees once the applicable preferred return rate has been met; and
the negotiation or termination of the advisory agreement and other agreements with our Advisor and its affiliates.

Our NAVs are computed by our Advisor relying in part on information that our Advisor provides to a third party.

Our NAVs are computed by our Advisor relying in part upon third-party appraisals of the fair market value of our real estate (we began using a rolling appraisal process starting with our September 30, 2016 quarterly NAVs, whereby approximately 25% of our real estate portfolio, based on asset value, is appraised each quarter) and third-party estimates of the fair market value of our debt. Any valuation includes the use of estimates and our valuation may be influenced by the information provided to the third party by our Advisor.



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The value of our real estate is subject to fluctuation.

We are subject to all of the general risks associated with the ownership of real estate. While the revenues from our leases are not directly dependent upon the value of the real estate owned, significant declines in real estate values could adversely affect us in many ways, including a decline in the residual values of properties at lease expiration, difficulty refinancing mortgage loans at maturity, possible lease abandonments by tenants, and a decline in the attractiveness of triple-net lease transactions to potential sellers. We also face the risk that lease revenue will be insufficient to cover all corporate operating expenses and debt service payments we incur. General risks associated with the ownership of real estate include:

adverse changes in general or local economic conditions, including changes in interest rates or foreign exchange rates;
changes in the supply of, or demand for, similar or competing properties;
competition for tenants and changes in market rental rates;
inability to lease or sell properties upon termination of existing leases, or renewal of leases at lower rental rates;
inability to collect rents from tenants due to financial hardship, including bankruptcy;
changes in tax, real estate, zoning, or environmental laws that adversely impact the value of real estate;
failure to comply with federal, state, and local legal and regulatory requirements, including the Americans with Disabilities Act or fire and life-safety requirements;
uninsured property liability, property damage, or casualty losses;
changes in operating expenses or unexpected expenditures for capital improvements;
exposure to environmental losses; and
force majeure and other factors beyond the control of our management.

In addition, the initial appraisals that we obtain on our properties are generally based on the value of the properties when they are leased. If the leases on the properties terminate, the value of the properties may fall significantly below the appraised value, which could result in impairment charges on the properties.

Our ability to fully control the management of our net-leased properties may be limited.

The tenants or managers of net-leased properties are responsible for maintenance and other day-to-day management of the properties. If a property is not adequately maintained in accordance with the terms of the applicable lease, we may incur expenses for deferred maintenance expenditures or other liabilities once the property becomes free of the lease. While our leases generally provide for recourse against the tenant in these instances, a bankrupt or financially troubled tenant may be more likely to defer maintenance and it may be more difficult to enforce remedies against such a tenant. In addition, to the extent tenants are unable to successfully conduct their operations, their ability to pay rent may be adversely affected. Although we endeavor to monitor, on an ongoing basis, compliance by tenants with their lease obligations and other factors that could affect the financial performance of our properties, such monitoring may not always ascertain or forestall deterioration either in the condition of a property or the financial circumstances of a tenant.

Our participation in joint ventures creates additional risk.

From time to time, we have participated in joint ventures to purchase assets and we may do so in the future. There are additional risks involved in joint venture transactions. As a co-investor in a joint venture, we would not be in a position to exercise sole decision-making authority relating to the property, the joint venture, or our investment partner. In addition, there is the potential that our joint venture partner may become bankrupt or that we may have diverging or inconsistent economic or business interests. These diverging interests could, among other things, expose us to liabilities in the joint venture in excess of our proportionate share of those liabilities. The partition rights of each owner in a jointly owned property could reduce the value of each portion of the divided property.

We may have difficulty selling or re-leasing our properties and this lack of liquidity may limit our ability to quickly change our portfolio in response to changes in economic or other conditions.

Real estate investments are generally less liquid than many other financial assets, which may limit our ability to quickly adjust our portfolio in response to changes in economic or other conditions. Some of our net lease investments involve properties that are designed for the particular needs of a tenant. With these properties, we may be required to renovate or make rent concessions in order to lease the property to another tenant. In addition, if we are forced to sell these properties, we may have difficulty selling it to a party other than the tenant due to the property’s unique design. These and other limitations may affect our ability to sell properties without adversely affecting returns to our stockholders.



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Our accounting policies and methods are fundamental to how we record and report our financial position and results of operations, and they require us to make estimates, judgments, and assumptions about matters that are inherently uncertain.

Our accounting policies and methods are fundamental to how we record and report our financial position and results of operations. We have identified several accounting policies as being critical to the presentation of our financial position and results of operations because they require management to make particularly subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be recorded under different conditions or using different assumptions. Due to the inherent uncertainty of the estimates, judgments, and assumptions associated with these critical accounting policies, we cannot provide any assurance that we will not make significant subsequent adjustments to our consolidated financial statements. If our judgments, assumptions, and allocations prove to be incorrect, or if circumstances change, our business, financial condition, revenues, operating expense, results of operations, liquidity, ability to pay dividends, or stock price may be materially adversely affected.

We use derivative financial instruments to hedge against interest rate and currency fluctuations, which could reduce the overall return on our investments.

We use derivative financial instruments to hedge exposures to changes in interest rates and currency rates. These instruments involve risk, such as the risk that counterparties may fail to perform under the terms of the derivative contract or that such arrangements may not be effective in reducing our exposure to interest rate changes. In addition, the use of such instruments may reduce the overall return on our investments. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of the 75% or 95% REIT income test. See “Because the REIT provisions of the Internal Revenue Code limit our ability to hedge effectively, the cost of our hedging may increase, and we may incur tax liabilities” below.

Because we invest in properties located outside the United States, we are exposed to additional risks.
 
We have invested, and may continue to invest in, properties located outside the United States. As of December 31, 2019, our triple-net lease real estate properties located outside of the United States represented 56% of consolidated contractual minimum annualized base rent (“ABR”). These investments may be affected by factors particular to the local jurisdiction where the property is located and may expose us to additional risks, including:
 
enactment of laws relating to the foreign ownership of property (including expropriation of investments), or laws and regulations relating to our ability to repatriate invested capital, profits, or cash and cash equivalents back to the United States;
legal systems where the ability to enforce contractual rights and remedies may be more limited than under U.S. law;
difficulty in complying with conflicting obligations in various jurisdictions and the burden of complying with a wide variety of foreign laws, which may be more stringent than U.S. laws (including land use, zoning, environmental, financial, and privacy laws and regulations, such as the European Union’s General Data Protection Regulation);
tax requirements vary by country and existing foreign tax laws and interpretations may change (e.g., the on-going implementation of the European Union’s Anti-Tax Avoidance Directives), which may result in additional taxes on our international investments;
changes in operating expenses in particular countries; and
geopolitical risk and adverse market conditions caused by changes in national or regional economic or political conditions (which may impact relative interest rates and the terms or availability of mortgage funds), including with regard to Brexit (discussed below).

In addition, the lack of publicly available information in certain jurisdictions could impair our ability to analyze transactions and may cause us to forego an investment opportunity. It may also impair our ability to receive timely and accurate financial information from tenants necessary to meet our reporting obligations to financial institutions or governmental and regulatory agencies. Certain of these risks may be greater in less developed countries. Further, our Advisor’s expertise to date has primarily been in the United States and certain countries in Europe and Asia. Our Advisor has less experience in other international markets and may not be as familiar with the potential risks to our investments in these areas, which could cause us to incur losses as a result.
 
Our Advisor may engage third-party asset managers in international jurisdictions to monitor compliance with legal requirements and lending agreements with respect to properties we own. Failure to comply with applicable requirements may expose us or our operating subsidiaries to additional liabilities.


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Economic conditions and regulatory changes surrounding the United Kingdom’s exit from the European Union could have a material adverse effect on our business and results of operations.

The United Kingdom initiated the process to leave the European Union (“Brexit”) on March 29, 2017, which formally occurred on January 31, 2020. The United Kingdom is currently in a transition period until December 31, 2020, during which it negotiates the terms of its future relationship with the European Union, while preserving membership in the European Union’s internal market and customs union and relinquishing representation in the European Union’s institutions.

The real estate industry faces substantial uncertainty regarding the impact of Brexit. Adverse consequences could include, but are not limited to: global economic uncertainty and deterioration, volatility in currency exchange rates, adverse changes in regulation of the real estate industry, disruptions to the markets we invest in and the tax jurisdictions we operate in (which may adversely impact tax benefits or liabilities in these or other jurisdictions), and/or negative impacts on the operations and financial conditions of our tenants or the operations of our student housing properties. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replace or replicate. As of December 31, 2019, 6% and 24% of our consolidated total revenue was from the United Kingdom and other European Union countries, respectively (although these percentages will likely increase upon the completion of our student housing development projects located in the United Kingdom and other European Union countries).

Given the ongoing uncertainty surrounding the transition period negotiations (including the potential implementation of a free trade agreement versus a “no-deal Brexit”), we cannot predict how the Brexit process will finally be implemented and are continuing to assess the potential impact, if any, of these events on our operations, financial condition, and results of operations.

The anticipated replacement of LIBOR with an alternative reference rate, may adversely affect our interest expense.

Certain instruments within our debt profile are indexed to the London Interbank Offered Rate (“LIBOR”), which is a benchmark rate at which banks offer to lend funds to one another in the international interbank market for short term loans. Concerns regarding the accuracy and integrity of LIBOR led the United Kingdom to publish a review of LIBOR in September 2012. Based on the review, final rules for the regulation and supervision of LIBOR by the Financial Conduct Authority (the “FCA”) were published and came into effect on April 2, 2013. On July 27, 2017, the FCA announced its intention to phase out LIBOR rates by the end of 2021.

We cannot predict the impact of these changes as regulators and the global financial markets debate the transition to a successor benchmark. Assuming that LIBOR becomes unavailable after 2021, the interest rates on our LIBOR-indexed debt (comprised of our non-recourse mortgage loan with carrying amount of $25.1 million, which is not subject to interest rate swaps or caps, as of December 31, 2019) will fall back to various alternative methods, any of which could result in higher interest obligations than under LIBOR. Further, the same costs and risks that may lead to the discontinuation or unavailability of LIBOR may make one or more of the alternative methods impossible or impracticable to determine. There is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates or borrowing costs to borrowers, any of which could have an adverse effect on our financing costs, liquidity, results of operations, and overall financial condition.

Fluctuations in exchange rates may adversely affect our results and our NAVs.

We are subject to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar (our principal foreign currency exposures are to the euro and, to a lesser extent, the Norwegian krone and British pound sterling). We attempt to mitigate a portion of the currency fluctuation risk by financing our properties in the local currency denominations, although there can be no assurance that this will be effective. Since we have historically placed both our debt obligations and tenants’ rental obligations to us in the same currency, our results of our foreign operations are adversely affected by a stronger U.S. dollar relative to foreign currencies (i.e., absent other considerations, a stronger U.S. dollar will reduce both our revenues and our expenses), which may in turn adversely affect our NAVs.



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Because we use debt to finance investments, our cash flow could be adversely affected.

Most of our investments were made by borrowing a portion of the total investment and securing the loan with a mortgage on the property. We generally borrow on a non-recourse basis to limit our exposure on any property to the amount of equity invested in the property. If we are unable to make our debt payments as required, a lender could foreclose on the property or properties securing its debt. Additionally, lenders for our international mortgage loan transactions typically incorporate various covenants and other provisions (including loan to value ratio, debt service coverage ratio, and material adverse changes in the borrower’s or tenant’s business) that can cause a technical loan default. Accordingly, if the real estate value declines or the tenant defaults, the lender would have the right to foreclose on its security. If any of these events were to occur, it could cause us to lose part or all of our investment, which could reduce the value of our portfolio and revenues available for distribution to our stockholders.

Some of our financing may also require us to make a balloon payment at maturity. Our ability to make such balloon payments will depend upon our ability to refinance the obligation, invest additional equity, or sell the underlying property. When a balloon payment is due, however, we may be unable to refinance the balloon payment on terms as favorable as the original loan, make the payment with existing cash or cash resources, or sell the property at a price sufficient to cover the payment. Our ability to accomplish these goals will be affected by various factors existing at the relevant time, such as the state of national and regional economies, local real estate conditions, available mortgage or interest rates, availability of credit, our equity in the mortgaged properties, our financial condition, the operating history of the mortgaged properties, and tax laws. A refinancing or sale could affect the rate of return to stockholders and the projected disposition timing of our assets.

Because most of our properties are occupied by a single tenant, our success is materially dependent upon their financial stability.
 
Most of our properties are occupied by a single tenant; therefore, the success of our investments is materially dependent on the financial stability of these tenants. Revenues from several of our tenants/guarantors constitute a significant percentage of our revenues. For the year ended December 31, 2019, our five largest tenants/guarantors represented approximately 21.7% of our total consolidated revenue. Lease payment defaults by tenants could negatively impact our net income and reduce the amounts available for distribution to our stockholders. As some of our tenants may not have a recognized credit rating, these tenants may have a higher risk of lease defaults than tenants with a recognized credit rating.

The bankruptcy or insolvency of tenants may cause a reduction in our revenue and an increase in our expenses. 

We have had and may in the future have tenants file for bankruptcy protection. Bankruptcy or insolvency of a tenant could cause: the loss of lease or interest and principal payments, an increase in the carrying cost of the property, and litigation. If one or a series of bankruptcies or insolvencies is significant enough (more likely during a period of economic downturn), it could lead to a reduction in our NAVs, and/or a decrease in amounts available for distribution to our stockholders.

Under U.S. bankruptcy law, a tenant that is the subject of bankruptcy proceedings has the option of assuming or rejecting any unexpired lease. If the tenant rejects the lease, any resulting claim we have for breach of the lease (excluding collateral securing the claim) will be treated as a general unsecured claim and the maximum claim will be capped. In addition, due to the long-term nature of our leases and, in some cases, terms providing for the repurchase of a property by the tenant, a bankruptcy court could recharacterize a net lease transaction as a secured lending transaction.

Insolvency laws outside the United States may be more or less favorable to reorganization or the protection of a debtor’s rights as in the United States (e.g., the Croatian government’s adoption of the Act on Extraordinary Administration Proceedings in Companies of Systemic Importance for the Republic of Croatia in April 2017 in reaction to the financial difficulties of the Agrokor group). In circumstances where the bankruptcy laws of the United States are considered to be more favorable to debtors and/or their reorganization, entities that are not ordinarily perceived as U.S. entities may seek to take advantage of U.S. bankruptcy laws.



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We may incur costs to finish build-to-suit and development projects.

We have acquired undeveloped land or partially developed buildings in order to construct build-to-suit facilities for a prospective tenant. The primary risks of build-to-suit projects are the potential for failing to meet an agreed-upon delivery schedule and cost-overruns, which may, among other things, cause total project costs to exceed the original budget and may depress our NAVs and distributions until the projects come online. While some prospective tenants will bear these risks, we may be required to bear these risks in other instances, which means that (i) we may have to advance funds to cover cost-overruns that we would not be able to recover through increased rent payments or (ii) we may experience delays in the project that delay commencement of rent. We will attempt to minimize these risks through guaranteed maximum price contracts, review of contractor financials, and completing plans and specifications prior to commencement of construction. The incurrence of the additional costs described above or any non-occupancy by a prospective tenant upon completion may reduce the project’s and our portfolio’s returns or result in losses, which may adversely affect our NAVs.

Development and construction risks could affect our profitability.

We have and may continue to invest in student housing development projects and operating properties. Currently, we have 12 ongoing student housing development projects, with estimated funding commitments totaling $457.4 million. Such investments can involve long timelines and complex undertakings, including due diligence, entitlement, environmental remediation, and dense urban construction. We may abandon opportunities that we have begun to explore for a number of reasons (including changes in local market conditions or increases in construction or financing costs) and, as a result, fail to recover expenses already incurred in exploring those opportunities. We may also be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy, or other required governmental or third-party permits and authorizations, which could result in increased costs or missing the beginning of the academic year or the delay or abandonment of opportunities. We project construction costs based on market conditions at the time we prepare our budgets and, while we include anticipated changes, we cannot predict costs with certainty or guarantee that market rents in effect at the time that the development is completed will be sufficient to offset the effects of any increased costs. Occupancy rates and rents may fail to meet our original expectations for a number of reasons, including competition from similar developments and other changes in market and economic conditions beyond our control.

We are subject to risks posed by fluctuating demand and significant competition in the self-storage industry.

A decrease in the demand for self-storage space would likely have an adverse effect on revenues from our operating portfolio. Demand for self-storage space has been and could be adversely affected by weakness in national, regional, and local economies; changes in supply of, or demand for, similar or competing self-storage facilities in an area; and the excess amount of self-storage space in a particular market. To the extent that any of these conditions occur, they are likely to affect market rents for self-storage space, which could cause a decrease in our revenues. For the year ended December 31, 2019, revenue generated from our self-storage investments represented approximately 31% of our consolidated total revenue.

Our self-storage facilities compete with other self-storage facilities in their geographic markets. As a result of competition, the self-storage facilities could experience a decrease in occupancy levels and rental rates, which would decrease our cash available for distribution. We compete in operations and for acquisition opportunities with companies that have substantial financial resources. Competition may reduce the number of suitable acquisition opportunities offered to us and increase the bargaining power of property owners seeking to sell. The self-storage industry has at times experienced overbuilding in response to perceived increases in demand. A recurrence of overbuilding may cause our self-storage properties to experience a decrease in occupancy levels, limit their ability to increase rents, and compel them to offer discounts.



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We depend on the abilities of the property managers of our self-storage facilities and student housing operating properties.

We contract with independent property managers to operate our self-storage facilities and student housing operating properties on a day-to-day basis. Although we consult with the property managers with respect to strategic business plans, we may be limited, depending on the terms of the applicable management agreement, in our ability to direct the actions of the independent property managers, particularly with respect to daily operations. Thus, even if we believe that our self-storage facilities or our student housing operating properties are being operated inefficiently or in a manner that does not result in satisfactory occupancy rates or operating profits, we may not have sufficient rights under a particular management agreement to force the property manager to change its method of operation. We can only seek redress if a property manager violates the terms of the applicable management agreement, and then only to the extent of the remedies provided in the agreement. We are, therefore, substantially dependent on the ability of the independent property managers to successfully operate our self-storage facilities and student housing operating properties. Some of our management agreements may have lengthy terms, may not be terminable by us before the agreement’s expiration and may require the payment of termination fees. In the event that we are able to and do replace any of our property managers, we may experience significant disruptions at the self-storage facilities or student housing operating properties, which may adversely affect our results of operations.

Short-term leases may expose us to the effects of declining market rent.

We currently own, and may continue to acquire, certain types of properties (e.g., self-storage and student housing properties) that typically have short-term leases (generally one year or less) with tenants. There is no assurance that we will be able to renew these leases as they expire or attract replacement tenants on comparable terms, if at all, which may expose us to the effects of declining market rent.

Potential liability for environmental matters could adversely affect our financial condition.

We have invested, and may in the future invest, in real properties historically used for industrial, manufacturing, and other commercial purposes, and some of our tenants may handle hazardous or toxic substances, generate hazardous wastes, or discharge regulated pollutants to the environment. Buildings and structures on the properties we purchase may have known or suspected asbestos-containing building materials. We may invest in properties located in countries that have adopted laws or observe environmental management standards that are less stringent than those generally followed in the United States, which may pose a greater risk that releases of hazardous or toxic substances have occurred. We therefore may own properties that have known or potential environmental contamination as a result of historical or ongoing operations, which may expose us to liabilities under environmental laws. Some of these laws could impose the following on us:

responsibility and liability for the costs of investigation and removal (including at appropriate disposal facilities)
or remediation of hazardous or toxic substances in, on, or migrating from our real property, generally without regard to our knowledge of, or responsibility for, the presence of these contaminants;
liability for claims by third parties based on damages to natural resources or property, personal injuries, or costs of removal or remediation of hazardous or toxic substances in, on, or migrating from our property; and 
responsibility for managing asbestos-containing building materials and third-party claims for exposure to those materials.

Costs relating to investigation, remediation, or removal of hazardous or toxic substances, or for third-party claims for damages, may be substantial and could exceed any amounts estimated and recorded within our consolidated financial statements. The presence of hazardous or toxic substances on one of our properties, or the failure to properly remediate a contaminated property, could (i) give rise to a lien in favor of the government for costs it may incur to address the contamination or (ii) otherwise adversely affect our ability to sell or lease the property or to borrow using the property as collateral. In addition, environmental liabilities, or costs or operating limitations imposed on a tenant by environmental laws, could affect its ability to make rental payments to us. And although we endeavor to avoid doing so, we may be required, in connection with any future divestitures of property, to provide buyers with indemnification against potential environmental liabilities. With respect to our self-storage and student housing investments, we may be liable for costs associated with environmental contamination in the event any such circumstances arise after we acquire the property and there is no tenant or other party to provide indemnification under a net-lease arrangement.



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The occurrence of cyber incidents to our Advisor, or a deficiency in our Advisor’s cyber security, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of information resources. More specifically, a cyber incident could be an intentional attack (which could include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information) or an unintentional accident or error. Our Advisor uses information technology and other computer resources to carry out important operational activities and to maintain business records. In addition, our Advisor may store or come into contact with sensitive information and data. If our Advisor and its third-party service providers fail to comply with applicable privacy or data security laws in handling this information, including the new General Data Protection Regulation and the California Consumer Privacy Act, we could face significant legal and financial exposure to claims of governmental agencies and parties whose privacy is compromised, including sizable fines and penalties.

As our Advisor’s reliance on technology has increased, so have the risks posed to our Advisor’s systems, both internal and outsourced. Our Advisor has implemented processes, procedures, and controls intended to address ongoing and evolving cyber security risks, but these measures, as well as our increased awareness of a risk of a cyber incident, do not guarantee that our financial results will not be negatively impacted by such an incident. Although our Advisor and its third-party service providers employ what they believe are adequate security, disaster recovery and other preventative and corrective measures, their security measures, may not be sufficient for all possible situations and could be vulnerable to, among other things, hacking, employee error, system error, and faulty password management.

The primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our tenants, and private data exposure. A significant and extended disruption could damage our business or reputation; cause a loss of revenue; have an adverse effect on tenant relations; cause an unintended or unauthorized public disclosure; or lead to the misappropriation of proprietary, personal identifying and confidential information; all of which could result in us and our Advisor incurring significant expenses to address and remediate or otherwise resolve these kinds of issues. We and our Advisor maintain insurance intended to cover some of these risks, but it may not be sufficient to cover the losses from any future breaches of our Advisor’s systems.

The lack of an active public trading market for our shares, combined with the ownership limitation on our shares, may discourage a takeover and make it difficult for stockholders to sell shares quickly or at all.
 
There is no active public trading market for our shares and we do not expect one to develop. Moreover, we are not required to complete a liquidity event by a specified date. To assist us in meeting the REIT qualification rules, among other things, our charter also prohibits the ownership by one person or an affiliated group of (i) more than 9.8% in value of our shares of stock of any class or series (including common shares or any preferred shares) or (ii) more than 9.8% in value or number, whichever is more restrictive, of our outstanding shares of common stock, unless exempted by our board of directors. This ownership limitation may discourage third parties from making a potentially attractive tender offer for your shares, thereby inhibiting a change of control in us. In addition, you should not rely on our redemption plan as a method to sell shares promptly because it includes numerous restrictions that limit your ability to sell your shares to us and our board of directors may amend, suspend, or terminate the plan without advance notice. In particular, the redemption plan provides that we may redeem shares only if we have sufficient funds available for redemption and to the extent the total number of shares for which redemption is requested in any quarter, together with the aggregate number of shares redeemed in the preceding three fiscal quarters, does not exceed 5% of the total number of our shares outstanding as of the last day of the immediately preceding fiscal quarter. Given these limitations, it may be difficult for investors to sell their shares promptly or at all. In addition, the price received for any shares sold prior to a liquidity event is likely to be less than the proportionate value of the real estate we own. Investor suitability standards imposed by certain states may also make it more difficult for investors to sell their shares to someone in those states. As a result, our shares should only be purchased as a long-term investment.



CPA:18 – Global 2019 10-K 18


Conflicts of interest may arise between holders of our common stock and holders of partnership interests in our Operating Partnership.

Our directors and officers have duties to us and our stockholders under Maryland law in connection with their management of us. At the same time, our Operating Partnership was formed in Delaware and we, as general partner, have duties under Delaware law to our Operating Partnership and any other limited partners in connection with our management of our Operating Partnership. Our duties as general partner of our Operating Partnership may come into conflict with the duties of our directors and officers to us and our stockholders.

Under Delaware law, a general partner of a Delaware limited partnership owes its limited partners the duties of good faith and fair dealing. Other duties, including fiduciary duties, may be modified or eliminated in the partnership’s partnership agreement. The partnership agreement of our Operating Partnership provides that, for so long as we own a controlling interest in our Operating Partnership, any conflict that cannot be resolved in a manner not adverse to either our stockholders or the limited partners will be resolved in favor of our stockholders. The provisions of Delaware law that allow the fiduciary duties of a general partner to be modified by a partnership agreement have not been tested in a court of law and we have not obtained an opinion of counsel covering the provisions set forth in the partnership agreement that purport to waive or restrict our fiduciary duties.

In addition, the partnership agreement expressly limits our liability by providing that we and our officers, directors, agents, employees, and designees will not be liable or accountable to our Operating Partnership for losses sustained, liabilities incurred, or benefits not derived if we or our officers, directors, agents, employees, or designees, as the case may be, acted in good faith. Furthermore, our Operating Partnership is required to indemnify us and our officers, directors, agents, employees, and designees to the extent permitted by applicable law from, and against, any and all claims arising from operations of our Operating Partnership, unless it is established that: (i) the act or omission was committed in bad faith, was fraudulent, or was the result of active and deliberate dishonesty; (ii) the indemnified party actually received an improper personal benefit in money, property, or services; or (iii) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that the act or omission was unlawful. These limitations on liability do not supersede the indemnification provisions of our charter.

Maryland law could restrict a change in control, which could have the effect of inhibiting a change in control even if a change in control were in our stockholders interest.

Provisions of Maryland law applicable to us prohibit business combinations with:

any person who beneficially owns 10% or more of the voting power of our outstanding voting stock, referred to as an interested stockholder; 
an affiliate or associate who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of our outstanding stock, also referred to as an interested stockholder; or 
an affiliate of an interested stockholder.

These prohibitions last for five years after the most recent date on which the interested stockholder became an interested stockholder. Thereafter, any business combination must be recommended by our board of directors and approved by the affirmative vote of at least 80% of the votes entitled to be cast by holders of our outstanding voting stock and two-thirds of the votes entitled to be cast by holders of our voting stock (other than voting stock held by the interested stockholder or by an affiliate or associate of the interested stockholder). These requirements could have the effect of inhibiting a change in control even if a change in control were in our stockholders’ interest. These provisions of Maryland law do not apply, however, to business combinations that are approved or exempted by our board of directors prior to the time that someone becomes an interested stockholder. In addition, a person is not an interested stockholder if the board of directors approved in advance the transaction by which he or she otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.



CPA:18 – Global 2019 10-K 19


Our charter permits our board of directors to issue stock with terms that may subordinate the rights of the holders of our current common stock or discourage a third party from acquiring us.

Our board of directors may determine that it is in our best interest to classify or reclassify any unissued stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications, and terms or conditions of redemption of any such stock. Thus, our board of directors could authorize the issuance of such stock with terms and conditions that could subordinate the rights of the holders of our common stock or have the effect of delaying, deferring, or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock. However, the issuance of preferred stock must also be approved by a majority of independent directors not otherwise interested in the transaction, who will have access at our expense to our legal counsel or to independent legal counsel. In addition, the board of directors, with the approval of a majority of the entire board and without any action by the stockholders, may amend our charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series that we have authority to issue. If our board of directors determines to take any such action, it will do so in accordance with the duties it owes to holders of our common stock.

Risks Related to REIT Structure

While we believe that we are properly organized as a REIT in accordance with applicable law, we cannot guarantee that the Internal Revenue Service will find that we have qualified as a REIT.

We believe that we are organized in conformity with the requirements for qualification as a REIT under the Internal Revenue Code beginning with our 2013 taxable year and that our current and anticipated investments and plan of operation will enable us to meet and continue to meet the requirements for qualification and taxation as a REIT. Investors should be aware, however, that the Internal Revenue Service or any court could take a position different from our own. Given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we will qualify as a REIT for any particular year.

Furthermore, our qualification and taxation as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership, and other requirements on a continuing basis. Our ability to satisfy the quarterly asset tests under applicable Internal Revenue Code provisions and Treasury Regulations will depend in part upon our board of directors’ good faith analysis of the fair market values of our assets, some of which are not susceptible to a precise determination. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis. While we believe that we will satisfy these tests, we cannot guarantee that this will be the case on a continuing basis.

The Internal Revenue Service may treat sale-leaseback transactions as loans, which could jeopardize our REIT qualification.

The Internal Revenue Service may take the position that specific sale-leaseback transactions that we treat as true leases are not true leases for U.S. federal income tax purposes but are, instead, financing arrangements or loans. If a sale-leaseback transaction were so recharacterized, we might fail to satisfy the qualification requirements applicable to REITs.

If we fail to remain qualified as a REIT, we would be subject to federal income tax at corporate income tax rates and would not be able to deduct distributions to stockholders when computing our taxable income.

If, in any taxable year, we fail to qualify for taxation as a REIT and are not entitled to relief under the Internal Revenue Code, we will:

not be allowed a deduction for distributions to stockholders in computing our taxable income;
be subject to federal and state income tax, including any applicable alternative minimum tax (for taxable years ending prior to January 1, 2018), on our taxable income at regular corporate rates; and
be barred from qualifying as a REIT for the four taxable years following the year when we were disqualified.



CPA:18 – Global 2019 10-K 20


Any such corporate tax liability could be substantial and would reduce the amount of cash available for distributions to our stockholders, which in turn could have an adverse impact on the value of our common stock. This adverse impact could last for five or more years because, unless we are entitled to relief under certain statutory provisions, we will be taxed as a corporation beginning the year in which the failure occurs and for the following four years.

If we fail to qualify for taxation as a REIT, we may need to borrow funds or liquidate some investments to pay the additional tax liability. If this were to occur, funds available for investment would be reduced. REIT qualification involves the application of highly technical and complex provisions of the Internal Revenue Code to our operations, as well as various factual determinations concerning matters and circumstances not entirely within our control. There are limited judicial or administrative interpretations of these provisions. Although we plan to continue to operate in a manner consistent with the REIT qualification rules, we cannot assure you that we will qualify in a given year or remain so qualified.

If we fail to make required distributions, we may be subject to federal corporate income tax.

We intend to declare regular quarterly distributions, the amount of which will be determined, and is subject to adjustment, by our board of directors. To continue to qualify and be taxed as a REIT, we will generally be required to distribute at least 90% of our REIT taxable income (determined without regard to the dividends-paid deduction and excluding net capital gain) each year to our stockholders. Generally, we expect to distribute all, or substantially all, of our REIT taxable income. If our cash available for distribution falls short of our estimates, we may be unable to maintain the proposed quarterly distributions that approximate our taxable income and we may fail to qualify for taxation as a REIT. In addition, our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes or the effect of nondeductible expenditures (e.g. capital expenditures, payments of compensation for which Section 162(m) of the Internal Revenue Code denies a deduction, the creation of reserves, or required debt service or amortization payments). To the extent we satisfy the 90% distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. We will also be subject to a 4.0% nondeductible excise tax if the actual amount that we pay out to our stockholders for a calendar year is less than a minimum amount specified under the Internal Revenue Code. In addition, in order to continue to qualify as a REIT, any C corporation earnings and profits to which we succeed must be distributed as of the close of the taxable year in which we accumulate or acquire such C corporation’s earnings and profits.

Because we are required to satisfy numerous requirements imposed upon REITs, we may be required to borrow funds, sell assets, or raise equity on terms that are not favorable to us.

In order to meet the REIT distribution requirements and maintain our qualification and taxation as a REIT, we may need to borrow funds, sell assets, or raise equity, even if the then-prevailing market conditions are not favorable for such transactions. If our cash flows are not sufficient to cover our REIT distribution requirements, it could adversely impact our ability to raise short- and long-term debt, sell assets, or offer equity securities in order to fund the distributions required to maintain our qualification and taxation as a REIT. Furthermore, the REIT distribution requirements may increase the financing we need to fund capital expenditures, future growth, and expansion initiatives, which would increase our total leverage.

In addition, if we fail to comply with certain asset ownership tests at the end of any calendar quarter, we must generally correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification. As a result, we may be required to liquidate otherwise attractive investments. These actions may reduce our income and amounts available for distribution to our stockholders.

Because the REIT rules require us to satisfy certain rules on an ongoing basis, our flexibility or ability to pursue otherwise attractive opportunities may be limited.

To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets (including mandatory holding periods prior to disposition), the amounts we distribute to our stockholders, and the ownership of our common stock. Compliance with these tests will require us to refrain from certain activities and may hinder our ability to make certain attractive investments or dispositions, including the purchase of non-qualifying assets, the expansion of non-real estate activities, and investments in the businesses to be conducted by our taxable REIT subsidiaries (“TRSs”), thereby limiting our opportunities and the flexibility to change our business strategy. Furthermore, acquisition opportunities in domestic and international markets may be adversely affected if we need or require target companies to comply with certain REIT requirements prior to closing on acquisitions.



CPA:18 – Global 2019 10-K 21


To meet our annual distribution requirements, we may be required to distribute amounts that may otherwise be used for our operations, including amounts that may be invested in future acquisitions, capital expenditures, or debt repayment; and it is possible that we might be required to borrow funds, sell assets, or raise equity to fund these distributions, even if the then-prevailing market conditions are not favorable for such transactions.

Because the REIT provisions of the Internal Revenue Code limit our ability to hedge effectively, the cost of our hedging may increase and we may incur tax liabilities.

The REIT provisions of the Internal Revenue Code limit our ability to hedge assets and liabilities that are not incurred to acquire or carry real estate. Generally, income from hedging transactions that have been properly identified for tax purposes (which we enter into to manage interest rate risk with respect to borrowings to acquire or carry real estate assets) and income from certain currency hedging transactions related to our non-U.S. operations, do not constitute “gross income” for purposes of the REIT gross income tests (such a hedging transaction is referred to as a “qualifying hedge”). In addition, if we enter into a qualifying hedge, but dispose of the underlying property (or a portion thereof) or the underlying debt (or a portion thereof) is extinguished, we can enter into a hedge of the original qualifying hedge, and income from the subsequent hedge will also not constitute “gross income” for purposes of the REIT gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of the REIT gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRSs could be subject to tax on income or gains resulting from such hedges or limit our hedging and therefore expose us to greater interest rate risks than we would otherwise want to bear. In addition, losses in any of our TRSs generally will not provide any tax benefit, except for being carried forward for use against future taxable income in the TRSs.

We use TRSs, which may cause us to fail to qualify as a REIT.

To qualify as a REIT for federal income tax purposes, we hold our non-qualifying REIT assets and conduct our non-qualifying REIT income activities in or through TRSs. The net income of our TRSs is not required to be distributed to us and income that is not distributed to us will generally not be subject to the REIT income distribution requirement. However, there may be limitations on our ability to accumulate earnings in our TRSs and the accumulation or reinvestment of significant earnings in our TRSs could result in adverse tax treatment. In particular, if the accumulation of cash in our TRSs causes the fair market value of our TRS interests and certain other non-qualifying assets to exceed 20% of the fair market value of our assets, we would lose tax efficiency and could potentially fail to qualify as a REIT.

Because the REIT rules limit our ability to receive distributions from TRSs, our ability to fund distribution payments using cash generated through our TRSs may be limited.

Our ability to receive distributions from our TRSs is limited by the rules we must comply with in order to maintain our REIT status. In particular, at least 75% of our gross income for each taxable year as a REIT must be derived from real estate-related sources, which principally includes gross income from the leasing of our properties. Consequently, no more than 25% of our gross income may consist of dividend income from our TRSs and other non-qualifying income types. Thus, our ability to receive distributions from our TRSs is limited and may impact our ability to fund distributions to our stockholders using cash flows from our TRSs. Specifically, if our TRSs become highly profitable, we might be limited in our ability to receive net income from our TRSs in an amount required to fund distributions to our stockholders commensurate with that profitability.

Our ownership of TRSs will be subject to limitations that could prevent us from growing our portfolio and our transactions with our TRSs could cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on an arm’s-length basis.

Overall, no more than 20% of the value of a REIT’s gross assets, may consist of interests in TRSs; compliance with this limitation could limit our ability to grow our portfolio. In addition, the Internal Revenue Code limits the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The Internal Revenue Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. We will monitor the value of investments in our TRSs in order to ensure compliance with TRS ownership limitations and will structure our transactions with our TRSs on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the TRS ownership limitation or be able to avoid application of the 100% excise tax.



CPA:18 – Global 2019 10-K 22


Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from C corporations, which could cause investors to perceive investments in REITs to be relatively less attractive.

The maximum U.S. federal income tax rate for certain qualified dividends payable by C corporations to U.S. stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, are generally not eligible for the reduced qualified dividend rate. However, for taxable years beginning after December 31, 2017 and before January 1, 2026, under the recently enacted Tax Cuts and Jobs Act, noncorporate taxpayers may deduct up to 20% of certain qualified business income, including "qualified REIT dividends" (generally, dividends received by a REIT shareholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations, resulting in an effective maximum U.S. federal income tax rate of 29.6% on such income. Although the reduced U.S. federal income tax rate applicable to qualified dividends from C corporations does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends, together with the recently reduced corporate tax rate (21%), could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends.

Even if we continue to qualify as a REIT, certain of our business activities will be subject to corporate level income tax and foreign taxes, which will continue to reduce our cash flows, and we will have potential deferred and contingent tax liabilities.

Even if we qualify for taxation as a REIT, we may be subject to certain (i) federal, state, local, and foreign taxes on our income and assets (including alternative minimum taxes for taxable years ending prior to January 1, 2018); (ii) taxes on any undistributed income and state, local, or foreign income; and (iii) franchise, property, and transfer taxes. In addition, we could be required to pay an excise or penalty tax under certain circumstances in order to utilize one or more relief provisions under the Internal Revenue Code to maintain qualification for taxation as a REIT, which could be significant in amount.

Any TRS assets and operations would continue to be subject, as applicable, to federal and state corporate income taxes and to foreign taxes in the jurisdictions in which those assets and operations are located. Any of these taxes would decrease our earnings and our cash available for distributions to stockholders.

We will also be subject to a federal corporate level tax at the highest regular corporate rate (currently 21%) on all or a portion of the gain recognized from a sale of assets formerly held by any C corporation that we acquire on a carry-over basis transaction occurring within a five-year period after we acquire such assets, to the extent the built-in gain based on the fair market value of those assets on the effective date of the REIT election is in excess of our then tax basis. The tax on subsequently sold assets will be based on the fair market value and built-in gain of those assets as of the beginning of our holding period. Gains from the sale of an asset occurring after the specified period will not be subject to this corporate level tax. We expect to have only a de minimis amount of assets subject to these corporate tax rules and do not expect to dispose of any significant assets subject to these corporate tax rules.

Because dividends received by foreign stockholders are generally taxable, we may be required to withhold a portion of our distributions to such persons.

Ordinary dividends received by foreign stockholders that are not effectively connected with the conduct of a U.S. trade or business are generally subject to U.S. withholding tax at a rate of 30%, unless reduced by an applicable income tax treaty. Additional rules with respect to certain capital gain distributions will apply to foreign stockholders that own more than 10% of our common stock.

The ability of our board of directors to revoke our REIT election, without stockholder approval, may cause adverse consequences for our stockholders.

Our organizational documents permit our board of directors to revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to be a REIT, we will not be allowed a deduction for dividends paid to stockholders in computing our taxable income, and we will be subject to U.S. federal income tax at regular corporate rates and state and local taxes, which may have adverse consequences on the total return to our stockholders.



CPA:18 – Global 2019 10-K 23


Federal and state income tax laws governing REITs and related interpretations may change at any time, and any such legislative or other actions affecting REITs could have a negative effect on us and our stockholders.

Federal and state income tax laws governing REITs or the administrative interpretations of those laws may be amended at any time. Federal, state, and foreign tax laws are under constant review by persons involved in the legislative process, at the Internal Revenue Service and the U.S. Department of the Treasury, and at various state and foreign tax authorities. Changes to tax laws, regulations, or administrative interpretations, which may be applied retroactively, could adversely affect us or our stockholders. We cannot predict whether, when, in what forms, or with what effective dates, the tax laws, regulations, and administrative interpretations applicable to us or our stockholders may be changed. Accordingly, we cannot assure you that any such change will not significantly affect our ability to qualify for taxation as a REIT and/or the attendant tax consequences to us or our stockholders.

Changes to U.S. tax laws could have a negative impact on our business.

On December 22, 2017, the President signed a tax reform bill into law, referred to herein as the “Tax Cuts and Jobs Act,” which among other things:

reduces the corporate income tax rate from 35% to 21% (including with respect to our TRSs);    
reduces the rate of U.S. federal withholding tax on distributions made to non-U.S. shareholders by a REIT that are attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%;
allows for an immediate 100% deduction of the cost of certain capital asset investments (generally excluding real estate assets), subject to a phase-down of the deduction percentage over time;     
changes the recovery periods for certain real property and building improvements (e.g., 30 years (previously 40 years) for residential real property);
restricts the deductibility of interest expense by businesses (generally, to 30% of the business’s adjusted taxable income) except, among others, real property businesses electing out of such restriction; generally, we expect our business to qualify as such a real property business;
requires the use of the less favorable alternative depreciation system to depreciate real property in the event a real property business elects to avoid the interest deduction restriction above;    
restricts the benefits of like-kind exchanges that defer capital gains for tax purposes to exchanges of real property;
permanently repeals the “technical termination” rule for partnerships, meaning sales or exchanges of the interests in a partnership will be less likely to, among other things, terminate the taxable year of, and restart the depreciable lives of assets held by, such partnership for tax purposes;     
requires accrual method taxpayers to take certain amounts in income no later than the taxable year in which such income is taken into account as revenue in an applicable financial statement prepared under in accordance with U.S. generally accepted accounting principles (“GAAP”), which, with respect to certain leases, could accelerate the inclusion of rental income;    
eliminates the federal corporate alternative minimum tax;    
implements a one-time deemed repatriation tax on corporate profits (at a rate of 15.5% on cash assets and 8% on non-cash assets) held offshore, which profits are not taken into account for purposes of the REIT gross income tests;     
reduces the highest marginal income tax rate for individuals to 37% from 39.6% (excluding, in each case, the 3.8% Medicare tax on net investment income);    
generally allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income), generally resulting in a maximum effective federal income tax rate applicable to such dividends of 29.6% compared to 37% (excluding, in each case, the 3.8% Medicare tax on net investment income), although regulations may restrict the ability to claim this deduction for non-corporate shareholders depending upon their holding period in our stock; and     
limits certain deductions for individuals, including deductions for state and local income taxes, and eliminates deductions for miscellaneous itemized deductions (including certain investment expenses).



CPA:18 – Global 2019 10-K 24


The Tax Cuts and Jobs Act is a complex revision to the U.S. federal income tax laws with impacts on different categories of taxpayers and industries, which will require subsequent rulemaking and interpretation in a number of areas. In addition, many provisions in the Tax Cuts and Jobs Act, particularly those affecting individual taxpayers, expire at the end of 2025. The long-term impact of the Tax Cuts and Jobs Act on the overall economy, government revenues, our tenants, us, and the real estate industry cannot be reliably predicted at this time. Furthermore, the Tax Cuts and Jobs Act may negatively impact the operating results, financial condition, and future business plans for some or all of our tenants. The Tax Cuts and Jobs Act may also result in reduced government revenues, and therefore reduced government spending, which may negatively impact some of our tenants that rely on government funding. There can be no assurance that the Tax Cuts and Jobs Act will not negatively impact our operating results, financial condition, and future business operations.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our principal corporate offices are located in the offices of our Advisor at 50 Rockefeller Plaza, New York, NY 10020.

See Item 1. Business — Our Portfolio for a discussion of the properties we hold for rental operations and Part II, Item 8. Financial Statements and Supplementary Data — Schedule III — Real Estate and Accumulated Depreciation for a detailed listing of such properties.

Item 3. Legal Proceedings.

As of December 31, 2019, we were not involved in any material litigation.

Various claims and lawsuits arising in the normal course of business may be 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.

Item 4. Mine Safety Disclosures.

Not applicable.



CPA:18 – Global 2019 10-K 25


PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Unlisted Shares and Distributions

There is no active public trading market for our shares. At February 21, 2020, there were 27,947 holders of record of our shares of common stock.
 
We are required to distribute annually at least 90% of our distributable REIT net taxable income to maintain our status as a REIT. Quarterly distributions declared per share for the past two years are as follows:
 
Years Ended December 31,
 
2019
 
2018
 
Class A
 
Class C
 
Class A
 
Class C
First quarter
$
0.1563

 
$
0.1373

 
$
0.1563

 
$
0.1375

Second quarter
0.1563

 
0.1376

 
0.1563

 
0.1378

Third quarter
0.1563

 
0.1376

 
0.1563

 
0.1374

Fourth quarter
0.1563

 
0.1374

 
0.1563

 
0.1376

 
$
0.6252

 
$
0.5499

 
$
0.6252

 
$
0.5503


We currently intend to continue paying cash dividends consistent with our historical practice; however, our Board determines the amount and timing of any future dividend payments to our stockholders based on a variety of factors.

Unregistered Sales of Equity Securities

During the three months ended December 31, 2019, we issued 165,190 shares of our Class A common stock to our Advisor as consideration for asset management fees, which were issued at our most recently published NAV at the date of issuance. The shares issued in October 2019 (54,348 shares) were based on the NAV as of June 30, 2019 ($8.91), and the shares issued in November and December 2019 (110,842 shares) were based on the NAV as of September 30, 2019 ($8.67). In acquiring our shares, our Advisor represented that such interests were being acquired by it for investment purposes and not with a view to the distribution thereof. As previously discussed in our filings with the SEC, over the past three years, we have issued 30,573 shares of our common stock to our directors from time to time. Since none of these transactions were considered to have involved a “public offering” within the meaning of Section 4(a)(2) of the Securities Act of 1933, the shares issued were deemed to be exempt from registration.

All other prior sales of unregistered securities have been reported in our previously filed quarterly and annual reports on Form 10-Q and Form 10-K, respectively.


CPA:18 – Global 2019 10-K 26




Issuer Purchases of Equity Securities

The following table provides information with respect to repurchases of our common stock pursuant to our redemption plan during the three months ended December 31, 2019:
 
 
Class A
 
Class C
 
 
 
 
2019 Period
 
Total number of Class A
shares purchased
(a)
 
Average price
paid per share
 
Total number of Class C
shares purchased
(a)
 
Average price
paid per share
 
Total number of shares
purchased as part of
publicly announced plans or program 
(a)
 
Maximum number (or
approximate dollar value)of shares that may yet be
purchased under the plans or program 
(a)
October 1-31
 

 

 

 

 
N/A
 
N/A
November 1-30
 

 

 

 

 
N/A
 
N/A
December 1-31
 
425,780

 
$
8.42

 
159,714

 
$
8.27

 
N/A
 
N/A
Total
 
425,780

 
 
 
159,714

 
 
 
 
 
 
___________
(a)
Represents shares of our Class A and Class C common stock requested to be repurchased under our redemption plan, pursuant to which we may elect to redeem shares at the request of our stockholders, subject to certain exceptions, conditions, and limitations. The maximum amount of shares purchasable by us in any period depends on a number of factors and is at the discretion of our board of directors. During the three months ended December 31, 2019, we received 109 and 37 redemption requests for Class A and Class C common stock, respectively. As of the date of this Report, we have fulfilled all of the valid redemption requests that we received during the three months ended December 31, 2019. We generally receive fees in connection with share redemptions. The average price paid per share will vary depending on the number of redemption requests that were made during the period, the number of redemption requests that qualify for special circumstances, and the most recently published quarterly NAV. For shares redeemed under such special circumstances, the redemption price was the greater of the price paid to acquire the shares from us or 95% of our most recently published quarterly NAVs.


CPA:18 – Global 2019 10-K 27




Item 6. Selected Financial Data.
 
The following selected financial data should be read in conjunction with the consolidated financial statements and related notes in Item 8 (in thousands, except per share data):
 
Years Ended December 31,
 
2019
 
2018
 
2017
 
2016
 
2015
Operating Data
 
 
 
 
 
 
 
 
 
Total revenues
$
197,439

 
$
216,716

 
$
205,634

 
$
184,323

 
$
135,943

Net income (loss) (a)
44,004

 
117,290

 
39,817

 
(19,785
)
 
(49,326
)
Net income attributable to noncontrolling interests (a)
(11,432
)
 
(20,562
)
 
(13,284
)
 
(10,299
)
 
(8,406
)
Net income (loss) attributable to
   CPA:18 – Global
32,572

 
96,728

 
26,533

 
(30,084
)
 
(57,732
)
 
 
 
 
 
 
 
 
 
 
Income (loss) per share:
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to
   CPA:18 – Global Class A
0.22

 
0.67

 
0.19

 
(0.22
)
 
(0.45
)
Net income (loss) attributable to
   CPA:18 – Global Class C
0.22

 
0.66

 
0.18

 
(0.23
)
 
(0.44
)
 
 
 
 
 
 
 
 
 
 
Distributions per share declared to CPA:18 – Global Class A
0.6252

 
0.6252

 
0.6252

 
0.6252

 
0.6250

Distributions per share declared to CPA:18 – Global Class C
0.5499

 
0.5503

 
0.5526

 
0.5467

 
0.5333

Balance Sheet Data
 
 
 
 
 
 
 
 
 
Total assets
$
2,234,803

 
$
2,304,553

 
$
2,330,997

 
$
2,209,446

 
$
2,134,683

Net investments in real estate
1,946,720

 
1,936,236

 
2,062,451

 
1,953,153

 
1,862,969

Long-term obligations (b)
1,208,256

 
1,249,977

 
1,287,847

 
1,180,138

 
1,035,354

Other Information
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
$
90,820

 
$
97,703

 
$
88,425

 
$
66,747

 
$
37,537

Net cash used in investing activities
(22,675
)
 
(8,980
)
 
(63,226
)
 
(214,598
)
 
(893,421
)
Net cash (used in) provided by financing activities
(96,244
)
 
16,588

 
(34,063
)
 
102,708

 
559,829

Cash distributions paid
89,845

 
87,609

 
85,174

 
81,677

 
75,936

Distributions declared
90,326

 
88,187

 
85,865

 
82,594

 
78,385

___________
(a)
The year ended December 31, 2019 includes gains on sale of real estate totaling $24.8 million (which includes a $2.9 million gain attributable to noncontrolling interests). The year ended December 31, 2018 includes gains on sale of real estate totaling $78.7 million (inclusive of a tax benefit of $2.0 million), as well as a gain on insurance proceeds totaling $16.6 million (inclusive of a tax benefit of $3.5 million). The gains on sale of real estate and insurance proceeds include amounts attributable to noncontrolling interest of $8.3 million and $2.3 million, respectively (Note 13).
(b)
Represents non-recourse secured debt obligations, deferred acquisition fee installments (including interest), and the annual distribution and shareholder servicing fee liability.



CPA:18 – Global 2019 10-K 28




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

Management’s Discussion and Analysis of Financial Condition and Results of Operations 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. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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.

We operate in three reportable business segments: Net Lease, Self Storage, and Other Operating Properties. Our Net Lease segment includes our investments in net-leased properties, whether they are accounted for as operating leases or direct financing leases. Our Self Storage segment is comprised of our investments in self-storage properties. Our Other Operating Properties segment is comprised of our investments in student housing development projects, student housing operating properties and multi-family residential properties (our last multi-family residential property was sold in January 2019). In addition, we have an All Other category that includes our notes receivable investments, one of which was repaid during the second quarter of 2019 (Note 14).

The following discussion should be read in conjunction with our consolidated financial statements included in Item 8 of this Report and the matters described under Item 1A. Risk Factors. Please see our Annual Report on Form 10-K for the year ended December 31, 2018 for discussion of our results of operations for the year ended December 31, 2017.

Business Overview

We are a publicly owned, non-traded REIT that invests in a diversified portfolio of income-producing commercial properties leased to companies, and other real estate-related assets, both domestically and outside the United States. In addition, our portfolio includes self-storage and student housing properties. Our last multi-family residential property was sold on January 29, 2019. After that date, we no longer earned any revenue from multi-family residential properties (which were primarily from leases of one year or less with individual tenants). 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, primarily on a triple-net lease basis, which requires the tenant to pay substantially all of the costs associated with operating and maintaining the property. We derive self-storage revenue from rents received from customers who rent storage space, primarily under month-to-month leases for personal or business use. We earn student housing revenue primarily from leases of one year or less with individual students. Revenue is subject to fluctuation because of the timing of new transactions, completion of build-to-suit and development projects, lease terminations, lease expirations, contractual rent adjustments, tenant defaults, sales of properties, and foreign currency exchange rates. We commenced operations in May 2013 and are managed by our Advisor. We hold substantially all of our assets and conduct substantially all of our business through our Operating Partnership. We are the general partner of, and own 99.97% of the interests in, the Operating Partnership. The remaining interest in the Operating Partnership is held by a subsidiary of WPC.

Significant Developments

On December 20, 2019, CPA:18 – Global executed a framework agreement with a third party (“Framework Agreement”) to enter into 11 net lease agreements for our student housing properties located in Spain and Portugal for 25 years upon completion of construction. The student housing operating property located in Barcelona, Spain that was placed into service during the third quarter of 2019 became a net lease property effective as of the date of the Framework Agreement. The remaining ten student housing projects under construction are scheduled for completion throughout 2020 and 2021. Additionally, the Framework Agreement includes an option for the third party to purchase all the properties (on an all or none basis) for fixed purchase prices by September 23, 2023 or earlier under certain other circumstances specified in the Framework Agreement.

Management Changes

On December 11, 2019, Ms. ToniAnn Sanzone, the chief financial officer of WPC, was appointed as our chief financial officer, succeeding Ms. Mallika Sinha, who resigned from that position, effective as of that same date.



CPA:18 – Global 2019 10-K 29




Net Asset Values

Our Advisor calculates our NAVs as of each quarter-end by relying in part on rolling update appraisals covering approximately 25% of our real estate portfolio each quarter, adjusted to give effect to the estimated fair value of our debt (all provided by an independent third party) and for other relevant factors. Since our quarterly NAVs are not based on an appraisal of our full portfolio, to the extent any new quarterly NAV adjustments are within 1% of our previously disclosed NAVs, our quarterly NAVs will remain unchanged. We monitor properties not appraised during the quarter to identify any that may have experienced a significant event and obtain updated third-party appraisals for such properties. Our NAVs are based on a number of variables, including individual tenant credits, lease terms, lending credit spreads, foreign currency exchange rates, share counts, tenant defaults, and development projects that are not yet generating income, among others. We do not control all of these variables and, as such, cannot predict how they will change in the future. Costs associated with our development projects (which are not yet generating income) are not appraised quarterly and are carried at cost, which approximates fair value. These costs are included in Real Estate under construction in our consolidated financial statements. Our NAVs as of September 30, 2019 were $8.67 for both our Class A and Class C common stock. Please see our Current Report on Form 8-K dated November 20, 2019 for additional information regarding the calculation of our NAVs. Our Advisor currently intends to determine our quarterly NAVs as of December 31, 2019 during the first quarter of 2020.

The accrued distribution and shareholder servicing fee payable has been valued using a hypothetical liquidation value and, as a result, the NAVs do not reflect any obligation to pay future distribution and shareholder servicing fees. As of December 31, 2019, the liability balance for the distribution and shareholder servicing fee was $1.9 million, which includes $0.5 million related to the fourth quarter 2019. We currently expect that we will cease incurring the distribution and shareholder servicing fee during the third quarter of 2020, at which time the total underwriting compensation paid in respect of the offering will reach 10.0% of the gross offering proceeds (Note 3).

Financial Highlights

During the year ended December 31, 2019, we completed the following, as further described in the consolidated financial statements.

Acquisition Activity

We entered into a new student housing development project transaction for an aggregate amount of $29.7 million (amount based on the exchange rate of the euro on the acquisition date), inclusive of unfunded future commitments and acquisition related costs and fees (Note 4).

Projects Placed into Service

Upon the substantial completion of the student housing development property located in Barcelona, Spain, we reclassified $31.4 million from Real estate under construction to Operating real estate — Land, buildings and improvements on our consolidated financial statements. Subsequent to the completion of this project, on December 20, 2019, we entered into a Framework Agreement with a third party to net-lease this property, as discussed above. As such, we reclassified $30.8 million from Operating real estate — Land, buildings and improvements to Real estate — Land, buildings and improvements (Note 4).

Disposition Activity

Operating Real Estate — We sold our 97% interest in our last multi-family residential property to one of our joint venture partners for total proceeds of $13.1 million, net of closing costs, and recognized a gain on sale of $15.4 million (which includes a $2.9 million gain attributable to noncontrolling interests). The buyer assumed the related mortgage loan outstanding on this property totaling $24.2 million (Note 13).

Real Estate — We sold the 11 properties in our United Kingdom trade counter portfolio (the “Truffle portfolio”) for total proceeds of $39.3 million, net of closing costs, and recognized an aggregate gain on sale of $10.3 million (amounts based on the exchange rate of the British pound sterling at the dates of sale). At closing, we repaid the $22.7 million non-recourse mortgage loan encumbering these properties (Note 13).



CPA:18 – Global 2019 10-K 30


Financing Activity

On November 8, 2019, we obtained a non-recourse mortgage loan of $75.6 million, related to the two student housing operating properties located in the United Kingdom (Note 9). The loan bears a variable rate interest rate (3.0% at the date of financing), in which interest only payments are due through the scheduled maturity date of November 2022. At closing, we repaid the $74.9 million construction loans previously encumbering these properties. Amounts are based on the exchange rate of the British pound sterling at the date of financing.

On March 4, 2019, we obtained a construction loan of $51.7 million for a student housing development project located in Austin, Texas. The loan bears a variable interest rate on outstanding drawn balances (3.9% at December 31, 2019) and is scheduled to mature in March 2023. We have the option to extend this loan one year from the original maturity date to March 2024. As of December 31, 2019, we had drawn $25.1 million on the construction loan (Note 9).

Consolidated Results

(in thousands)
 
Years Ended December 31,
 
2019
 
2018
 
2017
Total revenues
$
197,439

 
$
216,716

 
$
205,634

Net income attributable to CPA:18 – Global
32,572

 
96,728

 
26,533

 
 
 
 
 
 
Cash distributions paid
89,845

 
87,609

 
85,174

 
 
 
 
 
 
Net cash provided by operating activities
90,820

 
97,703

 
88,425

Net cash used in investing activities
(22,675
)
 
(8,980
)
 
(63,226
)
Net cash (used in) provided by financing activities
(96,244
)
 
16,588

 
(34,063
)
 
 
 
 
 
 
Supplemental financial measures:
 
 
 
 
 
FFO attributable to CPA:18 – Global (a)
69,413

 
86,437

 
85,138

MFFO attributable to CPA:18 – Global (a)
65,864

 
65,223

 
61,344

Adjusted MFFO attributable to CPA:18 – Global (a)
65,672

 
62,546

 
59,068

__________
(a)
We consider the performance metrics listed above, including FFO, MFFO, and Adjusted modified funds from operations (“Adjusted MFFO”), which are supplemental measures that are not defined by GAAP (“non-GAAP measures”), to be important measures in the evaluation of our operating performance. See Supplemental Financial Measures below for our definitions of these non-GAAP measures and reconciliations to their most directly comparable GAAP measures.

Revenues and Net Income Attributable to CPA:18 – Global

Total revenues decreased by $19.3 million during 2019 as compared to 2018, primarily as a result of our dispositions and the impact of foreign currency exchange rates, partially offset by an increase in operating property revenues primarily driven by the full year impact of two student housing operating properties placed into service in September 2018, as well as the student housing operating property placed into service in July 2019.

Net income attributable to CPA:18 – Global decreased by $64.2 million during 2019 as compared to 2018, primarily due to the gains on sale of real estate and insurance proceeds recognized during 2018, as well as a decrease in total revenues. These decreases were partially offset by the gains on sale recognized during 2019 as well as reduced property and interest expenses (primarily as a result of our properties sold or transferred in 2018 and 2019).



CPA:18 – Global 2019 10-K 31


FFO, MFFO, and Adjusted MFFO Attributable to CPA:18 – Global

FFO, MFFO, and Adjusted MFFO are non-GAAP measures that we use to evaluate our business. For definitions of MFFO and Adjusted MFFO, and a reconciliation to Net income attributable to CPA:18 – Global, see Supplemental Financial Measures below.

For the year ended December 31, 2019 compared to 2018, FFO decreased by $17.0 million primarily due to the gain on insurance proceeds recognized during 2018, the negative impact from our properties sold during 2018 and 2019, and a decrease in interest income as a result of the Mills Fleet Farm Group LLC (“Mills Fleet”) mezzanine loan repayment in the second quarter of 2019 (Note 5). These decreases were partially offset by an increase in capitalized interest on our student housing development projects.

For the year ended December 31, 2019 compared to 2018, MFFO and Adjusted MFFO increased by $0.6 million and $3.1 million, respectively, primarily due to the lease restructure during the second quarter of 2019 with our tenant, Fortenova (formerly Agrokor), and the impact of our student housing projects placed into service during 2018 and 2019. An additional increase resulted from the capitalized interest on our student housing development projects in 2019. These increases were partially offset by the negative impact of our 2018 and 2019 dispositions as well as a decrease in interest income as a result of the Mills Fleet mezzanine loan repayment in the second quarter of 2019 and the weakening of foreign currency exchange rates in relation to the U.S. dollar between the years.



CPA:18 – Global 2019 10-K 32




Portfolio Overview

We hold a diversified portfolio of income-producing commercial real estate properties, and other real estate-related assets. We make investments both domestically and internationally. In addition, our portfolio includes self-storage, student housing, and multi-family residential properties (our last multi-family residential property was sold on January 29, 2019) for the periods presented below. Portfolio information is provided on a pro rata basis, unless otherwise noted below, to better illustrate the economic impact of our various jointly owned, net-leased and operating investments. See Terms and Definitions below for a description of pro rata amounts.

Portfolio Summary
 
December 31,
 
2019
 
2018
Number of net-leased properties
47

 
57

Number of operating properties (a)
70

 
72

Number of development projects
12

 
12

Number of tenants (net-leased properties)
61

 
93

Total square footage (in thousands)
15,130

 
15,660

Occupancy (net-leased properties)
99.4
%
 
98.3
%
Weighted-average lease term (net-leased properties, in years)
9.4

 
10.2

Number of countries
12

 
12

Total assets (consolidated basis in thousands)
$
2,234,803

 
$
2,304,553

Net investments in real estate (consolidated basis in thousands)
1,946,720

 
1,936,236

Debt, net — pro rata (in thousands)
1,126,326

 
1,156,060

 
Years Ended December 31,
(dollars in thousands, except exchange rates)
2019
 
2018
 
2017
Acquisition volume — consolidated (b)
$
29,736

 
$
390,975

 
$
145,519

Acquisition volume — pro rata (c)
29,736

 
369,921

 
160,773

Financing obtained — consolidated
113,444

 
163,186

 
94,119

Financing obtained — pro rata
110,098

 
166,954

 
100,064

Average U.S. dollar/euro exchange rate
1.1196

 
1.1813

 
1.1292

Average U.S. dollar/Norwegian krone exchange rate
0.1137

 
0.1230

 
0.1210

Average U.S. dollar/British pound sterling exchange rate
1.2767

 
1.3356

 
1.2882

Change in the U.S. CPI (d)
2.3
%
 
1.9
%
 
2.1
%
Change in the Netherlands CPI (d)
2.7
%
 
2.0
%
 
1.3
%
Change in the Norwegian CPI (d)
1.4
%
 
3.4
%
 
1.6
%
__________
(a)
As of December 31, 2019, our operating portfolio consisted of 68 self-storage properties and two student housing operating properties, all of which are managed by third parties.
(b)
Includes development project transactions and related budget amendments, which are reflected as the total commitment for the development project funding, and excludes investments in unconsolidated joint ventures.
(c)
Includes development project transactions and related budget amendments, which are reflected as the total commitment for the development project funding, and includes investments in unconsolidated joint ventures, which include our equity investment in real estate (Note 4).
(d)
Many of our lease agreements include contractual increases indexed to changes in the U.S. CPI, Netherlands CPI, Norwegian CPI, or other similar indices in the jurisdictions where the properties are located.



CPA:18 – Global 2019 10-K 33




The tables below present information about our portfolio on a pro rata basis for the year ended December 31, 2019. See Terms and Definitions below for a description of Pro Rata Metrics, Stabilized NOI, and ABR.

Portfolio Diversification by Property Type
(dollars in thousands)
Property Type
 
Stabilized NOI
 
Percent
Net-Leased
 
 
 
 
Office
 
$
39,227

 
31
%
Hospitality
 
14,266

 
11
%
Warehouse
 
12,933

 
11
%
Industrial
 
8,695

 
7
%
Retail
 
7,549

 
6
%
Net-Leased Total
 
82,670

 
66
%
 
 
 
 
 
Operating
 
 
 
 
Self storage
 
37,057

 
29
%
Other operating properties
 
6,329

 
5
%
Operating Total
 
43,386

 
34
%
Total
 
$
126,056

 
100
%

Portfolio Diversification by Geography
(dollars in thousands)
Region
 
Stabilized NOI

Percent
United States
 
 
 
 
South
 
$
29,987

 
24
%
Midwest
 
23,385

 
19
%
West
 
12,411

 
10
%
East
 
9,476

 
8
%
U.S. Total
 
75,259

 
61
%
 
 
 
 
 
International
 
 
 
 
Norway
 
11,179

 
9
%
Germany
 
10,466

 
8
%
Netherlands
 
8,409

 
7
%
United Kingdom
 
6,330

 
5
%
Mauritius
 
4,980

 
4
%
Poland
 
4,275

 
3
%
Croatia
 
2,615

 
2
%
Slovakia
 
2,303

 
1
%
Canada
 
240

 
%
International Total
 
50,797

 
39
%
Total
 
$
126,056

 
100
%



CPA:18 – Global 2019 10-K 34




Top Ten Tenants by Total Stabilized NOI
(dollars in thousands)
Tenant/Lease Guarantor
 
Property Type
 
Tenant Industry
 
Location
 
Stabilized NOI
 
Percent
Fentonir Trading & Investments Limited (a)
 
Hospitality
 
Hotel, Gaming, and Leisure
 
Munich and Stuttgart, Germany
 
$
7,590

 
6
%
Sweetheart Cup Company, Inc.
 
Warehouse
 
Containers, Packaging and Glass
 
University Park, Illinois
 
6,213

 
5
%
Rabobank Groep NV (a)
 
Office
 
Banking
 
Eindhoven, Netherlands
 
5,465

 
5
%
Albion Resorts (Club Med) (a)
 
Hospitality
 
Hotel, Gaming, and Leisure
 
Albion, Mauritius
 
4,980

 
4
%
Bank Pekao S.A. (a)
 
Office
 
Banking
 
Warsaw, Poland
 
4,275

 
4
%
Siemens AS (a)
 
Office
 
Capital Equipment
 
Oslo, Norway
 
4,235

 
4
%
State Farm Automobile Co.
 
Office
 
Insurance
 
Austin, Texas
 
3,892

 
3
%
Orbital ATK, Inc.
 
Office
 
Metals and Mining
 
Plymouth, Minnesota
 
3,591

 
3
%
State of Iowa Board of Regents
 
Office
 
Sovereign and Public Finance
 
Coralville and Iowa City, Iowa
 
3,472

 
3
%
COOP Ost AS (a)
 
Retail
 
Grocery
 
Oslo, Norway
 
3,462

 
3
%
Total
 
 
 
 
 
 
 
$
47,175

 
40
%
__________
(a)
Stabilized NOI amounts for these properties are subject to fluctuations in foreign currency exchange rates.



CPA:18 – Global 2019 10-K 35




Net-Leased Portfolio

The tables below represent information about our net-leased portfolio on a pro rata basis and, accordingly, exclude all operating properties as of December 31, 2019. See Terms and Definitions below for a description of Pro Rata Metrics, Stabilized NOI and ABR.

Portfolio Diversification by Tenant Industry
(dollars in thousands)
Industry Type
 
ABR
 
Percent
Hotel, Gaming, and Leisure
 
$
14,634

 
16
%
Banking
 
10,325

 
11
%
Grocery
 
6,872

 
8
%
Containers, Packaging, and Glass
 
6,213

 
7
%
Insurance
 
4,845

 
5
%
Capital Equipment
 
4,525

 
5
%
Utilities: Electric
 
3,922

 
4
%
Oil and Gas
 
3,762

 
4
%
Retail
 
3,626

 
4
%
Sovereign and Public Finance
 
3,547

 
4
%
Metals and Mining
 
3,531

 
4
%
Business Services
 
3,430

 
4
%
Media: Advertising, Printing, and Publishing
 
3,398

 
4
%
High Tech Industries
 
3,258

 
4
%
Healthcare and Pharmaceuticals
 
2,639

 
3
%
Automotive
 
1,984

 
3
%
Construction and Building
 
1,521

 
2
%
Non-Durable Consumer Goods
 
1,239

 
1
%
Telecommunications
 
1,095

 
1
%
Electricity
 
1,057

 
1
%
Wholesale
 
1,049

 
1
%
Residential
 
990

 
1
%
Cargo Transportation
 
977

 
1
%
Consumer Services
 
685

 
1
%
Other (a)
 
722

 
1
%
Total
 
$
89,846

 
100
%
__________
(a)
Includes ABR from tenants in the following industries: durable consumer goods and environmental industries.




CPA:18 – Global 2019 10-K 36




Lease Expirations
(dollars in thousands)
Year of Lease Expiration (a)
 
Number of Leases Expiring
 
ABR
 
Percent
2020
 
3

 
$
714

 
1
%
2021
 
2

 
1,021

 
1
%
2022
 
2

 
113

 
%
2023
 
12

 
15,241

 
17
%
2024
 
14

 
5,286

 
6
%
2025
 
3

 
4,810

 
5
%
2026
 
5

 
7,494

 
8
%
2027
 
6

 
6,120

 
7
%
2028
 
4

 
5,310

 
6
%
2029
 
3

 
9,085

 
10
%
2030
 
2

 
3,961

 
4
%
2031
 
4

 
5,027

 
6
%
2032
 
3

 
7,913

 
9
%
Thereafter (>2032)
 
12

 
17,751

 
20
%
Total
 
75

 
$
89,846

 
100
%
__________
(a)
Assumes tenant does not exercise renewal option.

Lease Composition and Leasing Activities

Substantially all of our leases provide for either scheduled rent increases, periodic rent adjustments based on formulas indexed to changes in the CPI or similar indices, or percentage rents. As of December 31, 2019, approximately 50.7% of our leases (based on ABR) provided for adjustments based on formulas indexed to changes in the U.S. CPI (or similar indices for the jurisdiction in which the property is located), some of which are subject to caps and/or floors. In addition, 47.4% of our leases (based on ABR) have fixed rent adjustments, for a scheduled average ABR increase of 3.4% over the next 12 months. Lease revenues from our international investments are subject to exchange rate fluctuations, primarily from the euro. We recognize rents from percentage rents as reported by the lessees, which is after the level of sales requiring a rental payment to us is reached. Percentage rents are insignificant for the periods presented.



CPA:18 – Global 2019 10-K 37




Operating Properties

As of December 31, 2019, our operating portfolio consisted of 68 self-storage properties and two student housing operating properties. As of December 31, 2019, our operating portfolio was comprised as follows (square footage in thousands):
Location
 
Number of Properties
 
Square Footage
Florida
 
21

 
1,779

Texas
 
12

 
843

California
 
10

 
860

Nevada
 
3

 
243

Delaware
 
3

 
241

Georgia
 
3

 
171

Illinois
 
2

 
100

Hawaii
 
2

 
95

Kentucky
 
1

 
121

North Carolina
 
1

 
121

Washington D.C.
 
1

 
67

South Carolina
 
1

 
62

New York
 
1

 
61

Louisiana
 
1

 
59

Massachusetts
 
1

 
58

Missouri
 
1

 
41

Oregon
 
1

 
40

U.S. Total
 
65

 
4,962

Canada
 
3

 
316

United Kingdom
 
2

 
215

International Total
 
5

 
531

Total
 
70

 
5,493





CPA:18 – Global 2019 10-K 38




Development Projects

As of December 31, 2019, we had the following 12 consolidated student housing development projects, including joint-ventures, which remain under construction (dollars in thousands):
Location
 
Ownership Percentage (a)
 
Number of Buildings
 
Square Footage
 
Estimated Project Totals (b)
 
Amount Funded (b) (c)
 
Estimated Completion Date
Malaga, Spain (d)
 
100.0
%
 
2

 
230,329

 
$
39,136

 
$
10,735

 
Q3 2020
Austin, Texas
 
90.0
%
 
1

 
185,720

 
74,469

 
47,802

 
Q3 2020
San Sebastian, Spain (d)
 
100.0
%
 
1

 
126,075

 
33,998

 
17,277

 
Q3 2020
Porto, Portugal (d)
 
98.5
%
 
1

 
102,112

 
22,957

 
7,077

 
Q3 2020
Barcelona, Spain (d)
 
100.0
%
 
3

 
77,504

 
29,474

 
17,479

 
Q3 2020
Seville, Spain (d)
 
75.0
%
 
1

 
163,477

 
41,343

 
14,060

 
Q1 2021
Coimbra, Portugal (d)
 
98.5
%
 
1

 
135,076

 
24,820

 
9,996

 
Q1 2021
Bilbao, Spain (d)
 
100.0
%
 
1

 
179,279

 
49,109

 
10,076

 
Q3 2021
Valencia, Spain (d)
 
98.7
%
 
1

 
100,423

 
25,201

 
7,142

 
Q3 2021
Pamplona, Spain (d)
 
100.0
%
 
1

 
91,363

 
28,064

 
10,024

 
Q3 2021
Granada, Spain (d)
 
98.5
%
 
1

 
75,557

 
21,742

 
4,399

 
Q3 2021
Swansea, United Kingdom (e)
 
97.0
%
 
1

 
176,496

 
67,077

 
26,287

 
Q2 2022
 
 
 
 
15

 
1,643,411

 
$
457,390

 
182,354

 
 
Third-party contributions (f)
 
 
 
 
 
 
 
 
 
(7,069
)
 
 
Total
 
 
 
 
 
 
 
 
 
$
175,285

 
 
__________
(a)
Represents our expected ownership percentage upon the completion of each respective development project.
(b)
Amounts related to our 11 international development projects are denominated in a foreign currency. For these projects, amounts are based on their respective exchange rates as of December 31, 2019.
(c)
Amounts exclude capitalized interest, accrued costs, and capitalized acquisition fees paid to our Advisor, which are all included in Real estate under construction on our consolidated balance sheets.
(d)
Included as part of the executed Framework Agreement to become a net-leased property upon completion of construction (Note 14).
(e)
Amount funded for the project includes $7.3 million right-of-use (“ROU”) land lease asset that is included in In-place lease and other intangible assets on our consolidated balance sheets.
(f)
Amount represents the funds contributed from our joint-venture partners.



CPA:18 – Global 2019 10-K 39




Terms and Definitions

Pro Rata Metrics The portfolio information above contains certain metrics prepared under the pro rata consolidation method (“Pro Rata Metrics”). We have a number of investments in which our economic ownership is less than 100%. Under the full consolidation method, we report 100% of the assets, liabilities, revenues, and expenses of those investments that are deemed to be under our control or for which we are deemed to be the primary beneficiary, even if our ownership is less than 100%. Also, for all other jointly owned investments, which we do not control, we report our net investment and our net income (loss) from that investment. Under the pro rata consolidation method, we generally present our proportionate share, based on our economic ownership of these jointly owned investments, of the portfolio metrics of those investments. Multiplying each of our jointly owned investments’ financial statement line items by our percentage ownership and adding or subtracting those amounts from our totals, as applicable, may not accurately depict the legal and economic implications of holding an ownership interest of less than 100% in our jointly owned investments.

ABR ABR represents contractual minimum annualized base rent for our net-leased properties, net of receivable reserves as determined by GAAP, and reflects exchange rates as of December 31, 2019. If there is a rent abatement, we annualize the first monthly contractual base rent following the free rent period. ABR is not applicable to operating properties.

NOI — Net operating income (“NOI”) is a non-GAAP measure intended to reflect the performance of our entire portfolio of properties. We define NOI as rental revenues less non-reimbursable property expenses as determined by GAAP. We believe that NOI is a helpful measure that both investors and management can use to evaluate the financial performance of our properties and it allows for comparison of our portfolio performance between periods and to other REITs. While we believe that NOI is a useful supplemental measure, it should not be considered as an alternative to Net income as an indication of our operating performance.

Stabilized NOI — We use Stabilized NOI, a non-GAAP measure, as a metric to evaluate the performance of our entire portfolio of properties. Stabilized NOI for development projects and newly acquired operating properties that are not yet substantially leased up are not included in our portfolio information until one year after the project has been substantially completed and placed into service, or the property has been substantially leased up (and the project or property has not been disposed of during or prior to the current period). In addition, any newly acquired stabilized operating property is included in our portfolio of
Stabilized NOI information upon acquisition. Stabilized NOI for a net-leased property is included in our portfolio information upon acquisition or in the period when it is placed into service (as the property will already have a lease in place).

Stabilized NOI is adjusted for corporate expenses, such as asset management fees and cash distributions to the Special General Partner, as well as other gains and (losses) that are calculated and reported at the corporate level and not evaluated as part of any property’s operating performance. Additionally, non-cash adjustments (such as straight-line rent adjustments) and interest income related to our Notes receivable (which is non-property related) are not included in Stabilized NOI. Lastly, non-core income is excluded from Stabilized NOI as this income is generally not recurring in nature.

We believe that Stabilized NOI is a helpful measure that both investors and management can use to evaluate the financial performance of our properties and it allows for comparison of our portfolio performance between periods and to other REITs. While we believe that Stabilized NOI is a useful supplemental measure, it should not be considered as an alternative to Net income (loss) as an indication of our operating performance.



CPA:18 – Global 2019 10-K 40




Reconciliation of Net Income (GAAP) to Net Operating Income Attributable to CPA:18 – Global (non-GAAP) (in thousands):
 
Years Ended December 31,
 
2019
 
2018
 
2017
Net Income (GAAP)
$
44,004

 
$
117,290

 
$
39,817

Adjustments:
 
 
 
 
 
Depreciation and amortization
65,498

 
66,436

 
75,174

Interest expense
48,019

 
53,221

 
48,994

Gain on sale of real estate, net
(24,773
)
 
(78,657
)
 
(14,209
)
Other (gains) and losses
(4,715
)
 
(21,276
)
 
(19,969
)
Equity in losses of equity method investment in real estate
2,185

 
1,072

 
871

Provision for (benefit from) income taxes
210

 
(1,952
)
 
(1,506
)
NOI related to noncontrolling interests (1)
(12,835
)
 
(12,313
)
 
(12,128
)
NOI related to equity method investment in real estate (2)
200

 
692

 
75

Net Operating Income Attributable to CPA:18 – Global (Non-GAAP)
$
117,793

 
$
124,513

 
$
117,119

 
 
 
 
 
 
(1) NOI related to noncontrolling interests:
 
 
 
 
 
Net income attributable to noncontrolling interests (GAAP)
$
(11,432
)
 
$
(20,562
)
 
$
(13,284
)
Depreciation and amortization
(7,389
)
 
(6,673
)
 
(6,430
)
Interest expense
(4,770
)
 
(4,884
)
 
(4,703
)
Gain on sale of real estate, net
2,898

 
8,259

 
3,627

Other gains and (losses)
(366
)
 
1,934

 
174

Benefit from (provision for) income taxes
92

 
(79
)
 
(162
)
Available Cash Distributions to a related party (Note 3)
8,132

 
9,692

 
8,650

NOI related to noncontrolling interests
$
(12,835
)
 
$
(12,313
)
 
$
(12,128
)
 

 

 

(2) NOI related to equity method investment in real estate:
 
 
 
 
 
Equity in losses of equity method investment in real estate (GAAP)
$
(2,185
)
 
$
(1,072
)
 
$
(871
)
Depreciation and amortization
1,771

 
549

 
334

Interest expense
1,780

 
943

 
641

Gain on sale of real estate, net
(1,122
)
 

 

Other gains and (losses)
(58
)
 
7

 
(11
)
Benefit from (provision for) income taxes
14

 
265

 
(18
)
NOI related to equity method investment in real estate
$
200

 
$
692

 
$
75




CPA:18 – Global 2019 10-K 41




Reconciliation of Stabilized NOI to Net Operating Income Attributable to CPA:18 – Global (Non-GAAP) (pro rata, in thousands):
 
Years Ended December 31,
 
2019
 
2018
 
2017
Net-leased
$
82,670

 
$
86,176

 
$
81,436

Self storage
37,057

 
36,090

 
33,232

Other operating properties
6,329

 
2,397

 
11,508

Stabilized NOI
126,056

 
124,663

 
126,176

Other NOI:
 
 
 
 
 
Corporate (a)
(19,593
)
 
(20,281
)
 
(22,757
)
Notes receivable
4,075

 
7,234

 
7,158

Straight-line rent adjustments
3,461

 
4,712

 
5,184

Non-core income (b)
2,457

 

 

Disposed properties
1,516

 
7,477

 
1,241

 
117,972

 
123,805

 
117,002

Recently-opened operating properties (c)
(148
)
 
906

 
165

Build-to-Suit and Development Projects (d)
(31
)
 
(198
)
 
(48
)
Net Operating Income Attributable to CPA:18 – Global (Non-GAAP)
$
117,793

 
$
124,513

 
$
117,119

_________
(a)
Includes expenses such as asset management fees and cash distributions to the Special General Partner as well as other gains and (losses) that are calculated and reported at the corporate level and not evaluated as part of any property’s operating performance.
(b)
Includes NOI related to back rents collected from tenants that were previously reserved in prior periods.
(c)
The year ended December 31, 2019 includes NOI for the student housing operating property located in Barcelona, Spain, which was placed into service during the third quarter of 2019. This property became net lease upon the execution of the Framework Agreement with a third party in December 2019 (Note 14). The years ended December 31, 2018 and 2017 include NOI relating to the student housing operating properties located in Portsmouth and Cardiff, United Kingdom, which were completed and began operating during the third quarter of 2018.
(d)
All years include NOI for our ongoing student housing development projects. Refer to the Development Projects table above for a listing of all current projects. The years ended December 31, 2018 and 2017, include NOI for our Canadian self-storage development projects which were all substantially completed as of December 31, 2018.

Results of Operations

We evaluate our results of operations with a focus on: (i) our ability to generate the cash flow necessary to meet our objectives of funding distributions to stockholders and (ii) increasing the value of our real estate investments. As a result, our assessment of operating results gives less emphasis to the effect of unrealized gains and losses, which may cause fluctuations in net income for comparable periods but have no impact on cash flows, and to other non-cash charges, such as depreciation and impairment charges.



CPA:18 – Global 2019 10-K 42




Property Level Contribution

The following table presents the property level contribution for our consolidated net-leased and operating properties, as well as a reconciliation to net income attributable to CPA:18 – Global (in thousands):
 
Years Ended December 31,
 
2019
 
2018
 
Change
 
2018
 
2017
 
Change
Existing Net-Leased Properties
 
 
 
 
 
 
 
 
 
 
 
Lease revenues
$
100,050

 
$
104,651

 
$
(4,601
)
 
$
104,651

 
$
103,302

 
$
1,349

Depreciation and amortization
(44,185
)
 
(39,778
)
 
(4,407
)
 
(39,778
)
 
(40,865
)
 
1,087

Reimbursable tenant cots
(11,492
)
 
(11,493
)
 
1

 
(11,493
)
 
(10,902
)
 
(591
)
Property expenses
(5,803
)
 
(10,352
)
 
4,549

 
(10,352
)
 
(8,110
)
 
(2,242
)
Property level contribution
38,570

 
43,028

 
(4,458
)
 
43,028

 
43,425

 
(397
)
Recently Acquired Net-Leased Properties
 
 
 
 
 
 
 
 
 
 
 
Lease revenues
17,019

 
17,741

 
(722
)
 
17,741

 
7,172

 
10,569

Depreciation and amortization
(5,031
)
 
(5,474
)
 
443

 
(5,474
)
 
(2,448
)
 
(3,026
)
Reimbursable tenant costs
(1,515
)
 
(1,720
)
 
205

 
(1,720
)
 
(436
)
 
(1,284
)
Property expenses
(700
)
 
(619
)
 
(81
)
 
(619
)
 
(405
)
 
(214
)
Property level contribution
9,773

 
9,928

 
(155
)
 
9,928

 
3,883

 
6,045

Existing Operating Properties
 
 
 
 
 
 
 
 
 
 
 
Operating property revenues
60,763

 
57,909

 
2,854

 
57,909

 
55,098

 
2,811

Operating property expenses
(23,628
)
 
(22,133
)
 
(1,495
)
 
(22,133
)
 
(21,782
)
 
(351
)
Depreciation and amortization
(11,911
)
 
(12,840
)
 
929

 
(12,840
)
 
(22,460
)
 
9,620

Property level contribution
25,224

 
22,936

 
2,288

 
22,936

 
10,856

 
12,080

Recently Acquired Operating Properties
 
 
 
 
 
 
 
 
 
 
 
Operating property revenues
10,195

 
2,627

 
7,568

 
2,627

 
12

 
2,615

Operating property expenses
(3,715
)
 
(1,662
)
 
(2,053
)
 
(1,662
)
 
1

 
(1,663
)
Depreciation and amortization
(3,683
)
 
(700
)
 
(2,983
)
 
(700
)
 

 
(700
)
Property level contribution
2,797

 
265

 
2,532

 
265

 
13

 
252

Properties Sold, Transferred, or Held for Sale
 
 
 
 
 
 
 
 
 
 
 
Lease revenues
2,031

 
7,265

 
(5,234
)
 
7,265

 
7,501

 
(236
)
Depreciation and amortization
(688
)
 
(7,644
)
 
6,956

 
(7,644
)
 
(9,401
)