# W. P. Carey Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [W. P. Carey Inc.](/companies/wpc.md) (CIK 1025378)
- Form: 10-Q
- Filed: 2023-11-03
- Accepted by EDGAR: Nov 3, 2023, 16:24 ET
- Period: 2023-09-30
- Accession: 0001628280-23-036734
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1025378/000162828023036734/wpc-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1025378/000162828023036734/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $448.6m | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $1.33bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $97.0k | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $322.0k | us-gaap:CostOfRevenue |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $77.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $219.7m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $5.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $30.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $125.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $564.0m | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 215,252,969 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 214,427,425 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $812.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $686.2m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-09-30 | $136.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-09-30 | $18.63bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $9.48bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $8.29bn | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-09-30 | $9.13bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 69,997 characters.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial statements and the reasons for changes in certain key components of our financial statements from period to period. This item also provides our perspective on our financial position and liquidity, as well as certain other factors that may affect our future results. The discussion also breaks down the financial results of our business by segment to provide a better understanding of how these segments and their results affect our financial condition and results of operations. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the 2022 Annual Report and subsequent reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Refer to Item 1 of the 2022 Annual Report for a description of our business.

### Significant Developments

### Strategic Plan to Exit Office Portfolio

In September 2023, we announced a plan to exit the office assets within our portfolio by (i) spinning-off 59 office properties into Net Lease Office Properties (“NLOP”), so that it will become a separate publicly-traded REIT (the “Spin-Off”), and (ii) implementing an asset sale program to dispose of 87 office properties retained by us (the “Office Sale Program”), which is targeted to be substantially completed in early 2024.

#### NLOP Spin-Off

On November 1, 2023, we completed the Spin-Off of 59 office properties into NLOP, as described in further detail in Note 17. Following the closing of the Spin-Off, NLOP operates as a separate publicly-traded REIT, for which we will serve as advisor pursuant to the NLOP Advisory Agreements executed in connection with the Spin-Off.

NLOP’s portfolio of 59 office properties totals approximately 9.3 million leasable square feet (including 0.6 million of operating square footage for a parking garage at a domestic property) primarily leased to corporate tenants on a single-tenant net lease basis. The vast majority of the office properties owned by NLOP are located in the United States, with the balance in Europe. NLOP’s portfolio consists of 62 corporate tenants operating in a variety of industries, generating ABR totaling approximately $145 million as of September 30, 2023.

In September 2023, NLOP entered into a new $455 million debt facility, which was executed by NLOP and funded upon the closing of the Spin-Off on November 1, 2023. Approximately $350 million of this amount (net of transaction expenses) was retained by us in connection with the Spin-Off (Note 11, Note 17).

#### Office Sale Program

In addition to the Spin-Off, 87 of our office properties will be sold under the Office Sale Program, which is targeted to be substantially completed in early 2024. These properties generated ABR totaling approximately $76 million as of September 30, 2023 or June 30, 2023, as applicable (one property was sold in July 2023). Four of the 87 properties have been sold as of the date of this Report, for gross proceeds of approximately $143 million.

### Financial Highlights

During the nine months ended September 30, 2023, we completed the following (as further described in the consolidated financial statements):

### Real Estate

#### Investments

- We acquired eight investments totaling $907.9 million (Note 5).
- We completed two construction projects at a cost totaling $34.5 million (Note 5).
- We funded approximately $36.6 million for a construction loan to build a retail complex in Las Vegas, Nevada, during the nine months ended September 30, 2023. Through September 30, 2023, we have funded $229.8 million (Note 8).
- We committed to fund four redevelopment or expansion projects totaling $84.1 million. We currently expect to complete the projects in 2024 and 2025 (Note 5).
- We committed to purchase two retail (car wash) facilities in the United States for approximately $8.7 million, which is expected to take place during the fourth quarter of 2023.

#### Dispositions

- We disposed of 14 properties for total proceeds, net of selling costs, of $187.7 million (Note 15). Three of the properties sold were hotel operating properties.

### Financing and Capital Markets Transactions

- In January 2023, we entered into a Third Amendment to the Credit Agreement to transition from LIBOR to SOFR. In connection with this amendment, we also increased the aggregate principal amount (of revolving and term loans) available under the Senior Unsecured Credit Facility to an amount not to exceed the U.S. dollar equivalent of $3.05 billion, subject to the conditions to increase set forth in the credit agreement (Note 11).
- In April 2023, we entered into a new €500.0 million unsecured term loan maturing on April 2026, which was drawn in full at closing. The amount available under the term loan may be increased up to an amount not to exceed €750.0 million, subject to the conditions to increase set forth in the related credit agreement. In conjunction with the closing of this new term loan, we executed variable-to-fixed interest rate swaps that fix the total per annum interest rate at 4.34% through the end of 2024 (Note 11).
- We settled portions of our ATM Forwards by delivering 3,081,867 shares of common stock for net proceeds of $249.8 million (Note 13). In October 2023, we settled our remaining ATM Forwards (Note 17).
- We reduced our mortgage debt outstanding by prepaying or repaying at maturity a total of $326.3 million of non-recourse mortgage loans with a weighted-average interest rate of 4.8% (Note 11).

### Dividends to Stockholders

We declared cash dividends totaling $3.207 per share during the nine months ended September 30, 2023, comprised of three quarterly dividends per share of $1.067, $1.069, and $1.071 (Note 13).

### Consolidated Results

#### (in thousands, except shares)

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Revenues from Real Estate | $448,262 | $382,081 | $1,327,763 | $1,065,959 |
| Revenues from Investment Management | 291 | 1,541 | 1,158 | 10,498 |
| Total revenues | 448,553 | 383,622 | 1,328,921 | 1,076,457 |
| Net income from Real Estate attributable to W. P. Carey | 124,167 | 111,375 | 562,084 | 381,461 |
| Net income (loss) from Investment Management attributable to W. P. Carey | 873 | (6,447) | 1,956 | 8,140 |
| Net income attributable to W. P. Carey | 125,040 | 104,928 | 564,040 | 389,601 |
| Dividends declared | 230,862 | 222,350 | 691,237 | 633,745 |
| Net cash provided by operating activities |  |  | 812,687 | 702,528 |
| Net cash used in investing activities |  |  | (792,526) | (1,019,425) |
| Net cash (used in) provided by financing activities |  |  | (29,420) | 364,057 |
| Supplemental financial measures (a): |  |  |  |  |
| Adjusted funds from operations attributable to W. P. Carey (AFFO) — Real Estate | 284,198 | 273,567 | 855,678 | 772,827 |
| Adjusted funds from operations attributable to W. P. Carey (AFFO) — Investment Management | 194 | 4,155 | 1,239 | 18,095 |
| Adjusted funds from operations attributable to W. P. Carey (AFFO) | 284,392 | 277,722 | 856,917 | 790,922 |
| Diluted weighted-average shares outstanding | 215,252,969 | 204,098,116 | 214,427,425 | 197,264,509 |

(a) We consider Adjusted funds from operations (“AFFO”), a supplemental measure that is not defined by GAAP (a “non-GAAP measure”), to be an important measure in the evaluation of our operating performance. See Supplemental Financial Measures below for our definition of this non-GAAP measure and a reconciliation to its most directly comparable GAAP measure.

#### Revenues

Total revenues increased for the three and nine months ended September 30, 2023 as compared to the same periods in 2022. Real Estate revenue increased primarily due to higher lease revenues (substantially as a result of property acquisition activity and rent escalations, as well as the net-leased properties we acquired in the CPA:18 Merger on August 1, 2022) and higher operating property revenues (primarily from the operating properties we acquired in the CPA:18 Merger on August 1, 2022 and the 12 hotel properties that converted from net-lease to operating properties during the first quarter of 2023).

#### Net Income Attributable to W. P. Carey

Net income attributable to W. P. Carey increased for the three and nine months ended September 30, 2023 as compared to the same periods in 2022. Net income from Real Estate attributable to W. P. Carey increased primarily due to the impact of real estate acquisitions (including from properties acquired in the CPA:18 Merger on August 1, 2022), partially offset by higher interest expense. In addition, we recognized a higher gain on sale of real estate for the three and nine months ended September 30, 2023 as compared to the same periods in 2022 (Note 6, Note 15). We recognized a gain on change in control of interests during the prior year periods in connection with the CPA:18 Merger (Note 3). We also recognized an impairment charge on goodwill within our Investment Management segment during the prior year periods (Note 9).

#### AFFO

AFFO increased for the three and nine months ended September 30, 2023 as compared to the same periods in 2022, primarily due to investment activity and rent escalations, as well as the accretive impact of the CPA:18 Merger, partially offset by higher interest expense. AFFO for the nine months ended September 30, 2023 also included certain non-recurring items that resulted in lower non-reimbursed property expenses (due to the reversal of certain property tax accruals) and a higher provision for income taxes (due to the settlement a tax audit on a portfolio of properties in Europe). In addition, AFFO from Investment Management attributable to W. P. Carey decreased primarily due to the cessation of fees and distributions previously earned from CPA:18 – Global prior to the CPA:18 Merger.

### Portfolio Overview

Our portfolio is comprised of operationally-critical, commercial real estate assets net leased to tenants located primarily in the United States and Northern and Western Europe. We invest in high-quality single tenant industrial, warehouse, retail, and self-storage properties subject to long-term net leases with built-in rent escalators. Portfolio information is provided on a pro rata basis, unless otherwise noted below, to better illustrate the economic impact of our various net-leased jointly owned investments. See Terms and Definitions below for a description of pro rata amounts.

### Portfolio Summary

| Net-leased Properties | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| ABR (in thousands) | $1,459,174 | $1,381,899 |
| Number of net-leased properties | 1,472 | 1,449 |
| Number of tenants | 395 | 392 |
| Total square footage (in thousands) | 179,232 | 175,957 |
| Occupancy | 98.9% | 98.8% |
| Weighted-average lease term (in years) | 11.0 | 10.8 |
| **Operating Properties** |  |  |
| Number of operating properties: | 98 | 87 |
| Number of self-storage operating properties | 86 | 84 |
| Number of hotel operating properties (a) | 10 | 1 |
| Number of student housing operating properties | 2 | 2 |
| Occupancy (self-storage operating properties) | 90.5% | 91.0% |
| Number of countries | 26 | 26 |
| Total assets (in thousands) | $18,630,239 | $18,102,035 |
| Net investments in real estate (in thousands) | 15,916,731 | 15,488,898 |

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Acquisition volume (in millions) (b) | $944.5 | $1,107.8 |
| Construction projects completed (in millions) | 34.5 | 147.3 |
| Average U.S. dollar/euro exchange rate | 1.0830 | 1.0652 |
| Average U.S. dollar/British pound sterling exchange rate | 1.2439 | 1.2589 |

(a) During the first quarter of 2023, the master lease expired on certain hotel properties previously classified as net-leased properties, which converted to operating properties. As a result, during the nine months ended September 30, 2023, we reclassified 12 consolidated hotel properties from net leases to operating properties (Note 5). We sold three of these hotel properties during the third quarter of 2023 (Note 15).

(b) Amounts for the nine months ended September 30, 2023 and 2022 include $36.6 million and $65.2 million, respectively, of funding for a construction loan (Note 8). Amount for the nine months ended September 30, 2022 excludes properties acquired in the CPA:18 Merger (Note 3).

### Net-Leased Portfolio

The tables below represent information about our net-leased portfolio at September 30, 2023 on a pro rata basis and, accordingly, exclude all operating properties. See Terms and Definitions below for a description of pro rata amounts and ABR.

#### Top Ten Tenants by ABR

#### (dollars in thousands)

| Tenant/Lease Guarantor | Description | Number of Properties | ABR | ABR Percent | Weighted-Average Lease Term (Years) |
| --- | --- | ---: | ---: | ---: | ---: |
| U-Haul Moving Partners Inc. and Mercury Partners, LP (a) | Net lease self-storage properties in the U.S. | 78 | $38,751 | 2.6% | 0.5 |
| Apotex Pharmaceutical Holdings Inc. (b) | Pharmaceutical R&D and advanced manufacturing properties in Canada | 11 | 31,528 | 2.2% | 19.5 |
| State of Andalucía (c) | Government office properties in Spain | 70 | 31,196 | 2.1% | 11.2 |
| Metro Cash & Carry Italia S.p.A. (c) | Business-to-business wholesale stores in Italy and Germany | 20 | 29,099 | 2.0% | 5.0 |
| Hellweg Die Profi-Baumärkte GmbH & Co. KG (c) | Do-it-yourself retail properties in Germany | 35 | 28,937 | 2.0% | 13.4 |
| Extra Space Storage, Inc. | Net lease self-storage properties in the U.S. | 27 | 25,036 | 1.7% | 20.6 |
| ABC Technologies Holdings Inc. (b) (d) | Automotive component manufacturing properties in North America | 23 | 24,251 | 1.7% | 19.6 |
| OBI Group (c) | Do-it-yourself retail properties in Poland | 26 | 23,738 | 1.6% | 7.7 |
| Nord Anglia Education, Inc. | K-12 private schools in the U.S. | 3 | 22,245 | 1.5% | 20.0 |
| Fortenova Grupa d.d. (c) | Grocery stores and warehouses in Croatia | 19 | 21,444 | 1.5% | 10.6 |
| **Total** |  | 312 | $276,225 | 18.9% | 12.2 |

(a) As of September 30, 2023, Mercury Partners, LP (a related party of U-Haul Moving Partners Inc.) provided notice that it intends to exercise its option to repurchase the 78 properties it is leasing (Note 6).

(b) ABR from these properties is denominated in U.S. dollars.

(c) ABR amounts are subject to fluctuations in foreign currency exchange rates.

(d) Of the 23 properties leased to ABC Technologies Holdings Inc., nine are located in Canada, eight are located in the United States, and six are located in Mexico.

#### Portfolio Diversification by Geography

#### (in thousands, except percentages)

| Region United States South | ABR | ABR Percent | Square Footage (a) | Square Footage Percent |
| --- | ---: | ---: | ---: | ---: |
| Texas | $120,554 | 8.3% | 12,613 | 7.0% |
| Florida | 53,283 | 3.7% | 4,380 | 2.4% |
| Georgia | 28,088 | 1.9% | 4,385 | 2.4% |
| Tennessee | 26,912 | 1.8% | 4,296 | 2.4% |
| Alabama | 21,515 | 1.5% | 3,346 | 1.9% |
| Other (b) | 16,223 | 1.1% | 2,402 | 1.3% |
| **Total South** | 266,575 | 18.3% | 31,422 | 17.4% |
| **Midwest** |  |  |  |  |
| Illinois | 74,046 | 5.1% | 10,582 | 5.9% |
| Minnesota | 34,922 | 2.4% | 3,405 | 1.9% |
| Ohio | 33,681 | 2.3% | 7,008 | 3.9% |
| Indiana | 29,814 | 2.0% | 5,137 | 2.9% |
| Michigan | 28,991 | 2.0% | 4,595 | 2.6% |
| Wisconsin | 18,942 | 1.3% | 3,276 | 1.8% |
| Other (b) | 43,924 | 3.0% | 6,204 | 3.5% |
| **Total Midwest** | 264,320 | 18.1% | 40,207 | 22.5% |
| **East** |  |  |  |  |
| North Carolina | 39,651 | 2.7% | 8,404 | 4.7% |
| Pennsylvania | 33,531 | 2.3% | 3,569 | 2.0% |
| New York | 20,200 | 1.4% | 2,257 | 1.2% |
| South Carolina | 18,739 | 1.3% | 4,949 | 2.8% |
| Massachusetts | 18,607 | 1.3% | 1,387 | 0.8% |
| Kentucky | 17,740 | 1.2% | 2,980 | 1.7% |
| Virginia | 15,347 | 1.1% | 1,854 | 1.0% |
| Other (b) | 38,602 | 2.6% | 4,662 | 2.6% |
| **Total East** | 202,417 | 13.9% | 30,062 | 16.8% |
| **West** |  |  |  |  |
| California | 66,042 | 4.5% | 6,100 | 3.4% |
| Arizona | 30,884 | 2.1% | 3,437 | 1.9% |
| Utah | 15,155 | 1.0% | 2,085 | 1.2% |
| Colorado | 14,793 | 1.0% | 1,106 | 0.6% |
| Other (b) | 44,893 | 3.1% | 4,040 | 2.3% |
| **Total West** | 171,767 | 11.7% | 16,768 | 9.4% |
| **United States Total** | 905,079 | 62.0% | 118,459 | 66.1% |
| **International** |  |  |  |  |
| Germany | 72,778 | 5.0% | 6,839 | 3.8% |
| Spain | 61,825 | 4.2% | 5,179 | 2.9% |
| The Netherlands | 59,680 | 4.1% | 7,054 | 3.9% |
| Poland | 58,416 | 4.0% | 8,635 | 4.8% |
| United Kingdom | 51,602 | 3.5% | 4,742 | 2.7% |
| Canada (c) | 50,807 | 3.5% | 5,087 | 2.8% |
| Italy | 32,056 | 2.2% | 3,354 | 1.9% |
| Denmark | 24,364 | 1.7% | 3,039 | 1.7% |
| Croatia | 22,239 | 1.5% | 2,063 | 1.2% |
| France | 21,111 | 1.4% | 1,679 | 0.9% |
| Norway | 15,330 | 1.1% | 742 | 0.4% |
| Other (d) | 83,887 | 5.8% | 12,360 | 6.9% |
| **International Total** | 554,095 | 38.0% | 60,773 | 33.9% |
| **Total** | $1,459,174 | 100.0% | 179,232 | 100.0% |

*W. P. Carey 9/30/2023 10-Q –* **47**

#### Portfolio Diversification by Property Type

#### (in thousands, except percentages)

| Property Type | ABR | ABR Percent | Square Footage (a) | Square Footage Percent |
| --- | ---: | ---: | ---: | ---: |
| Industrial | $426,720 | 29.2% | 67,519 | 37.7% |
| Warehouse | 342,735 | 23.5% | 62,942 | 35.1% |
| Retail (e) | 244,935 | 16.8% | 20,256 | 11.3% |
| Office | 226,567 | 15.5% | 15,244 | 8.5% |
| Self Storage (net lease) | 63,786 | 4.4% | 5,810 | 3.2% |
| Other (f) | 154,431 | 10.6% | 7,461 | 4.2% |
| **Total** | $1,459,174 | 100.0% | 179,232 | 100.0% |

(a) Includes square footage for any vacant properties.

(b) Other properties within South include assets in Louisiana, Arkansas, Oklahoma, and Mississippi. Other properties within Midwest include assets in Iowa, Missouri, Kansas, Nebraska, South Dakota, and North Dakota. Other properties within East include assets in New Jersey, Maryland, Connecticut, West Virginia, New Hampshire, and Maine. Other properties within West include assets in Oregon, Nevada, Washington, Hawaii, Idaho, Montana, New Mexico, and Wyoming.

(c) $46.8 million (92%) of ABR from properties in Canada is denominated in U.S. dollars, with the balance denominated in Canadian dollars.

(d) Includes assets in Mexico, Lithuania, Finland, Belgium, Hungary, Mauritius, Slovakia, Portugal, the Czech Republic, Austria, Sweden, Latvia, Japan, and Estonia.

(e) Includes automotive dealerships.

(f) Includes ABR from tenants within the following property types: education facility, laboratory, hotel (net lease), research and development, specialty, fitness facility, student housing (net lease), theater, funeral home, restaurant, land, parking, and outdoor advertising.

#### Portfolio Diversification by Tenant Industry

#### (in thousands, except percentages)

| Industry Type | ABR | ABR Percent | Square Footage | Square Footage Percent |
| --- | ---: | ---: | ---: | ---: |
| Retail Stores (a) | $290,733 | 19.9% | 36,172 | 20.2% |
| Consumer Services | 126,851 | 8.7% | 8,507 | 4.8% |
| Beverage and Food | 109,282 | 7.5% | 15,759 | 8.8% |
| Automotive | 95,253 | 6.5% | 14,648 | 8.2% |
| Healthcare and Pharmaceuticals | 91,104 | 6.2% | 7,740 | 4.3% |
| Grocery | 86,876 | 6.0% | 8,404 | 4.7% |
| Cargo Transportation | 65,070 | 4.5% | 9,550 | 5.3% |
| Capital Equipment | 56,457 | 3.9% | 8,238 | 4.6% |
| Business Services | 51,729 | 3.5% | 4,115 | 2.3% |
| Containers, Packaging, and Glass | 49,920 | 3.4% | 8,266 | 4.6% |
| Construction and Building | 48,434 | 3.3% | 9,158 | 5.1% |
| Durable Consumer Goods | 47,583 | 3.3% | 10,299 | 5.7% |
| Sovereign and Public Finance | 44,927 | 3.1% | 3,560 | 2.0% |
| Hotel and Leisure | 41,443 | 2.8% | 2,024 | 1.1% |
| High Tech Industries | 35,839 | 2.5% | 3,486 | 1.9% |
| Chemicals, Plastics, and Rubber | 35,383 | 2.4% | 6,186 | 3.5% |
| Insurance | 30,917 | 2.1% | 1,961 | 1.1% |
| Non-Durable Consumer Goods | 26,258 | 1.8% | 5,971 | 3.3% |
| Metals | 25,863 | 1.8% | 4,515 | 2.5% |
| Telecommunications | 17,615 | 1.2% | 1,686 | 0.9% |
| Banking | 15,618 | 1.1% | 1,008 | 0.6% |
| Other (b) | 66,019 | 4.5% | 7,979 | 4.5% |
| **Total** | $1,459,174 | 100.0% | 179,232 | 100.0% |

(a) Includes automotive dealerships.

(b) Includes ABR from tenants in the following industries: aerospace and defense, wholesale, media: advertising, printing, and publishing, oil and gas, media: broadcasting and subscription, utilities: electric, environmental industries, consumer transportation, forest products and paper, electricity, finance, and real estate. Also includes square footage for vacant properties.

#### Lease Expirations

#### (in thousands, except percentages, number of leases, and number of tenants)

| Year of Lease Expiration (a) | Number of Leases Expiring | Number of Tenants with Leases Expiring | ABR | ABR Percent | Square Footage | Square Footage Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Remaining 2023 | 14 | 12 | $14,883 | 1.0% | 2,588 | 1.5% |
| 2024 (b) | 40 | 34 | 89,193 | 6.1% | 10,927 | 6.1% |
| 2025 | 53 | 33 | 64,663 | 4.4% | 7,101 | 4.0% |
| 2026 | 46 | 37 | 67,566 | 4.6% | 9,089 | 5.1% |
| 2027 | 56 | 33 | 83,173 | 5.7% | 8,639 | 4.8% |
| 2028 | 50 | 32 | 71,890 | 4.9% | 5,425 | 3.0% |
| 2029 | 57 | 29 | 70,023 | 4.8% | 8,470 | 4.7% |
| 2030 | 34 | 30 | 69,601 | 4.8% | 5,719 | 3.2% |
| 2031 | 37 | 21 | 72,202 | 5.0% | 8,749 | 4.9% |
| 2032 | 41 | 22 | 46,043 | 3.2% | 6,200 | 3.5% |
| 2033 | 29 | 22 | 79,474 | 5.5% | 11,115 | 6.2% |
| 2034 | 50 | 19 | 91,985 | 6.3% | 9,023 | 5.0% |
| 2035 | 16 | 15 | 31,218 | 2.1% | 5,059 | 2.8% |
| 2036 | 46 | 19 | 70,654 | 4.8% | 10,995 | 6.1% |
| Thereafter (\>2036) | 281 | 120 | 536,606 | 36.8% | 68,173 | 38.0% |
| Vacant | — | — | — | —% | 1,960 | 1.1% |
| **Total** | 850 |  | $1,459,174 | 100.0% | 179,232 | 100.0% |

(a) Assumes tenants do not exercise any renewal options or purchase options.

(b) Includes ABR of $38.8 million from Mercury Partners, LP (a related party of U-Haul Moving Partners Inc.) that as of September 30, 2023 provided notice of its intention to exercise its option to repurchase the 78 properties it is leasing (Note 6).

### Terms and Definitions

*Pro Rata Metrics —* The portfolio information above contains certain metrics prepared on a pro rata basis. We refer to these metrics as pro rata metrics. We have certain investments in which our economic ownership is less than 100%. On a full consolidation basis, 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 or loss from that investment. On a pro rata basis, 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 and reflects exchange rates as of September 30, 2023. 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.

### Results of Operations

We operate in two reportable segments: Real Estate and Investment Management. We evaluate our results of operations with a primary focus on increasing and enhancing the value, quality, and number of properties in our Real Estate segment. We focus our efforts on accretive investing and improving portfolio quality through re-leasing efforts, including negotiation of lease renewals, or selectively selling assets in order to increase value in our real estate portfolio. Through our Investment Management segment, we expect to continue to earn fees and other income from the management of the portfolio of CESH until it reaches the end of its life cycle. Refer to Note 16 for tables presenting the comparative results of our Real Estate and Investment Management segments.

### Real Estate

### Revenues

The following table presents revenues within our Real Estate segment (in thousands):

| Real Estate Revenues Lease revenues from: | Three Months Ended September 30, 2023 | 2022 | Change | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Existing net-leased properties | $303,483 | $279,982 | $23,501 | $902,162 | $851,847 | $50,315 |
| Recently acquired net-leased properties | 43,690 | 15,964 | 27,726 | 106,667 | 24,237 | 82,430 |
| Net-leased properties acquired in the CPA:18 Merger | 20,296 | 13,297 | 6,999 | 62,029 | 13,297 | 48,732 |
| Net-leased properties sold, held for sale, or reclassified to operating properties or sales-type leases | 1,690 | 22,659 | (20,969) | 19,761 | 64,600 | (44,839) |
| Total lease revenues (includes reimbursable tenant costs) | 369,159 | 331,902 | 37,257 | 1,090,619 | 953,981 | 136,638 |
| Income from finance leases and loans receivable | 27,575 | 20,637 | 6,938 | 75,641 | 56,794 | 18,847 |
| Operating property revenues from: |  |  |  |  |  |  |
| Operating properties acquired in the CPA:18 Merger | 23,559 | 15,415 | 8,144 | 70,428 | 15,415 | 55,013 |
| Operating properties sold or held for sale | 9,750 | — | 9,750 | 29,648 | — | 29,648 |
| Operating properties recently reclassified from net-leased properties or recently acquired | 9,291 | — | 9,291 | 22,888 | — | 22,888 |
| Existing operating properties | 6,618 | 5,935 | 683 | 17,816 | 14,864 | 2,952 |
| Total operating property revenues | 49,218 | 21,350 | 27,868 | 140,780 | 30,279 | 110,501 |
| Other lease-related income | 2,310 | 8,192 | (5,882) | 20,723 | 24,905 | (4,182) |
|  | $448,262 | $382,081 | $66,181 | $1,327,763 | $1,065,959 | $261,804 |

*W. P. Carey 9/30/2023 10-Q –* **51**

#### Lease Revenues

“Existing net-leased properties” are those that we acquired or placed into service prior to January 1, 2022 and that were not sold or held for sale during the periods presented. For the periods presented, there were 1,079 existing net-leased properties.

For the three and nine months ended September 30, 2023 as compared to the same periods in 2022, lease revenues from existing net-leased properties increased due to the following items (in millions):

(a) Excludes fixed minimum rent increases, which are reflected as straight-line rent adjustments within lease revenues.

(b) Primarily comprised of higher reimbursable maintenance costs at certain properties.

“Recently acquired net-leased properties” are those that we acquired or placed into service subsequent to December 31, 2021 and that were not sold or held for sale during the periods presented. Since January 1, 2022, we acquired 28 investments (comprised of 172 properties) and placed two properties into service.

“Net-leased properties acquired in the CPA:18 Merger” on August 1, 2022 (Note 3) consisted of 37 net-leased properties that were not sold or held for sale during the periods presented.

“Net-leased properties sold, held for sale, or reclassified to operating properties or sales-type leases” include:

- 14 net-leased properties disposed of during the nine months ended September 30, 2023;
- three net-leased properties classified as held for sale at September 30, 2023, all of which were sold in October 2023 (Note 17);
- 23 net-leased properties disposed of during the year ended December 31, 2022;
- a portfolio of 12 net-leased hotel properties that converted to operating properties in the first quarter of 2023 upon expiration of the master lease with the Marriott Corporation, after which we began recognizing operating property revenues and expenses from these properties (Note 5) (three of these properties were sold during the third quarter of 2023 and five were held for sale as of September 30, 2023); and
- a portfolio of 78 net-leased self-storage properties that were reclassified to net investments in sales-type leases in the first quarter of 2023, since the tenant provided notice of its intention to exercise its option to repurchase the properties; following this transaction, we began recognizing earnings from these properties within Income from finance leases and loans receivable in the consolidated financial statements (Note 6).

Our dispositions are more fully described in Note 15.

#### Income from Finance Leases and Loans Receivable

For the three and nine months ended September 30, 2023 as compared to the same periods in 2022, income from finance leases and loans receivable increased due to the following items (in millions):

#### Operating Property Revenues and Expenses

“Operating properties acquired in the CPA:18 Merger” consisted of 65 self-storage properties and two student housing properties, which contributed operating property revenues, depreciation and amortization, and operating property expenses since August 1, 2022, the date of the CPA:18 Merger (Note 3).

“Operating properties sold or held for sale” are comprised of the three hotel operating properties sold during the three months ended September 30, 2023 and five hotel operating properties classified as held for sale as of September 30, 2023, three of which were sold in October 2023 (Note 17).

“Operating properties recently reclassified from net-leased properties or recently acquired” include (i) four net-leased hotel properties that converted to operating properties in the first quarter of 2023 (after which we began recognizing operating property revenues and expenses from these properties (Note 5)) and (ii) two self-storage operating properties acquired during the nine months ended September 30, 2023 (Note 5).

“Existing operating properties” are those that we acquired or placed into service prior to January 1, 2022 and that were not sold or held for sale during the periods presented. For the periods presented, we recorded operating property revenues from 11 existing operating properties, comprised of ten self-storage operating properties (which excludes nine self-storage properties accounted for under the equity method) and one hotel operating property, as well as a parking garage attached to one of our existing net-leased properties. For our existing hotel operating property, revenues and expenses increased by (i) $0.6 million and $0.4 million, respectively, for the three months ended September 30, 2023 as compared to the same period in 2022, and (ii) $1.9 million and $1.2 million, respectively, for the nine months ended September 30, 2023 as compared to the same period in 2022, reflecting higher occupancy.

#### Other Lease-Related Income

Other lease-related income is described in Note 5.

### Operating Expenses

#### Depreciation and Amortization

For the three and nine months ended September 30, 2023 as compared to the same periods in 2022, depreciation and amortization expense increased primarily due to the impact of net acquisition activity (including properties acquired in the CPA:18 Merger).

#### General and Administrative

All general and administrative expenses are attributed to our Real Estate segment.

For the three and nine months ended September 30, 2023 as compared to the same periods in 2022, general and administrative expenses increased by $1.0 million and $8.3 million, respectively, primarily due to higher compensation expense, increased employee benefits expense, increased professional fees and expenses resulting from the assets acquired in the CPA:18 Merger (Note 1), and no longer receiving reimbursements from CPA:18 – Global.

#### Impairment Charges — Real Estate

Our impairment charges on real estate are more fully described in Note 9.

#### Property Expenses, Excluding Reimbursable Tenant Costs

For the three months ended September 30, 2023 as compared to the same periods in 2022, property expenses, excluding reimbursable tenant costs, increased by $1.8 million, primarily due to the recovery of property taxes in the prior year period due to a successful court ruling and higher property expenses related to certain properties acquired in the CPA:18 Merger.

For the nine months ended September 30, 2023 as compared to the same periods in 2022, property expenses, excluding reimbursable tenant costs, decreased by $5.7 million primarily due to the reimbursement for previously incurred legal fees and the release of real estate taxes accrued for a cash basis tenant during the current year period. The tenant was previously not current on real estate taxes due, and repaid the outstanding amount in the second quarter of 2023. These decreases were partially offset by the recovery of property taxes in the prior year period due to a successful court ruling and higher property expenses related to certain properties acquired in the CPA:18 Merger.

#### Stock-based Compensation Expense

Stock-based compensation expense is fully recognized within our Real Estate segment.

For the three and nine months ended September 30, 2023 as compared to the same periods in 2022, stock-based compensation

expense increased by $3.5 million and $2.7 million, respectively, primarily due to changes in the projected payout for performance share units.

#### Merger and Other Expenses

For the three and nine months ended September 30, 2023, merger and other expenses are primarily comprised of costs incurred in connection with the Spin-Off transaction that was announced in September 2023 and completed in November 2023 (Note 17).

For the three and nine months ended September 30, 2022, merger and other expenses are primarily comprised of costs incurred in connection with the CPA:18 Merger (Note 3) that was completed in August 2022.

### Other Income and (Expenses), and Provision for Income Taxes

#### Interest Expense

For the three and nine months ended September 30, 2023 as compared to the same periods in 2022, interest expense increased by $18.0 million and $68.2 million, respectively, primarily due to (i) $8.3 million and $29.1 million of interest expense incurred during the three and nine months ended September 30, 2023, respectively, related to non-recourse mortgage loans assumed in the CPA:18 Merger, (ii) higher outstanding balances and interest rates on our Senior Unsecured Credit Facility, (iii) our Unsecured Term Loan due 2026 that we entered into in April 2023 (Note 11), and (iv) two senior unsecured notes issuances totaling $334.8 million (based on the exchange rate of the euro on the dates of issuance) with a weighted-average interest rate of 3.6% completed in September 2022, partially offset by the reduction of our mortgage debt outstanding by prepaying or repaying at or close to maturity a total of $441.4 million of non-recourse mortgage loans with a weighted-average interest rate of 4.7% since January 1, 2022 (Note 11).

The following table presents certain information about our outstanding debt (dollars in thousands):

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Average outstanding debt balance | $8,595,115 | $7,827,346 | $8,473,580 | $7,193,779 |
| Weighted-average interest rate | 3.3% | 2.6% | 3.2% | 2.5% |

*W. P. Carey 9/30/2023 10-Q –* **56**

#### Earnings from Equity Method Investments in Real Estate

Our equity method investments in real estate are more fully described in Note 8. The following table presents earnings from equity method investments in real estate (in thousands):

| Earnings from Equity Method Investments in Real Estate Existing Equity Method Investments: | Three Months Ended September 30, 2023 | 2022 | Change | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Earnings from Las Vegas Retail Complex (a) | $3,201 | $2,860 | $341 | $9,069 | $6,228 | $2,841 |
| Earnings from Johnson Self Storage | 1,204 | 1,163 | 41 | 3,428 | 3,190 | 238 |
| Earnings from Kesko Senukai | 360 | 1,902 | (1,542) | 1,433 | 3,132 | (1,699) |
| Earnings from Harmon Retail Center | 213 | 258 | (45) | 639 | 789 | (150) |
|  | 4,978 | 6,183 | (1,205) | 14,569 | 13,339 | 1,230 |
| Equity Method Investments Consolidated after the CPA:18 Merger: |  |  |  |  |  |  |
| Proportionate share of impairment charge recognized on Bank Pekao | — | — | — | — | (4,610) | 4,610 |
| Other | — | 264 | (264) | — | 1,460 | (1,460) |
|  | — | 264 | (264) | — | (3,150) | 3,150 |
|  | $4,978 | $6,447 | $(1,469) | $14,569 | $10,189 | $4,380 |

(a) Increases for the three and nine months ended September 30, 2023 as compared to the same periods in 2022 are primarily due to funding of this construction loan since January 1, 2022, which has an interest rate of 6.0%.

(b) Decreases for the three and nine months ended September 30, 2023 as compared to the same periods in 2022 are primarily due to higher rent collections at these retail properties during the prior year periods, where certain rents were previously disputed and subsequently collected.

#### Non-Operating Income

Non-operating income primarily consists of realized gains and losses on derivative instruments, dividends from securities, and interest income on our loans to affiliates and cash deposits.

The following table presents non-operating income within our Real Estate segment (in thousands):

| Non-Operating Income | Three Months Ended September 30, 2023 | 2022 | Change | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Realized gains on foreign currency collars (Note 10) | $3,739 | $8,724 | $(4,985) | $11,591 | $17,970 | $(6,379) |
| Interest income related to our loans to affiliates and cash deposits | 1,123 | 540 | 583 | 2,393 | 591 | 1,802 |
| Cash dividends from our investment in Lineage Logistics (Note 9) | — | — | — | — | 4,308 | (4,308) |
| Cash dividends from our investment in preferred shares of WLT (Note 9) | — | — | — | — | 912 | (912) |
|  | $4,862 | $9,264 | $(4,402) | $13,984 | $23,781 | $(9,797) |

#### Gain on Sale of Real Estate, Net

Gain on sale of real estate, net, consists of gains and losses on the sale of properties that were (i) disposed of, (ii) subject to a purchase option, or (iii) included in assets held for sale and subject to a revised estimated purchase price, during the reporting period, as more fully described in Note 5, Note 6 and Note 15.

#### Other Gains and (Losses)

Other gains and (losses) primarily consists of gains and losses on (i) the mark-to-market fair value of equity securities, (ii) extinguishment of debt, and (iii) foreign currency exchange rate movements, as well as changes in the allowance for credit losses on finance receivables. The timing and amount of such gains or losses cannot always be estimated and are subject to fluctuation. Certain of our foreign currency-denominated unsecured debt instruments were designated as net investment hedges during the three and nine months ended September 30, 2023 and 2022. Therefore, no gains and losses on foreign currency exchange rate movements were recognized on the remeasurement of such instruments during those periods (Note 10).

The following table presents other gains and (losses) within our Real Estate segment (in thousands):

| Other Gains and (Losses) | Three Months Ended September 30, 2023 | 2022 | Change | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Change in allowance for credit losses on finance receivables (Note 6) | $2,484 | $16,184 | $(13,700) | $6,113 | $17,164 | $(11,051) |
| Net realized and unrealized (losses) gains on foreign currency exchange rate movements (a) | (364) | (36,288) | 35,924 | 1,010 | (84,392) | 85,402 |
| (Loss) gain on extinguishment of debt | (275) | 2,342 | (2,617) | 2,387 | 1,301 | 1,086 |
| Gain on repayment of secured loan receivable (b) | — | 10,613 | (10,613) | — | 10,613 | (10,613) |
| Write-off of an insurance receivable acquired as part of a prior merger (c) | — | (9,358) | 9,358 | — | (9,358) | 9,358 |
| Non-cash unrealized gains related to an increase in the fair value of our investment in common shares of WLT (Note 9) | — | — | — | — | 43,397 | (43,397) |
| Realized gains in connection with the redemption of our investment in preferred shares of WLT (Note 9) | — | — | — | — | 18,688 | (18,688) |
| Other | 335 | 2,547 | (2,212) | (634) | 2,890 | (3,524) |
|  | $2,180 | $(13,960) | $16,140 | $8,876 | $303 | $8,573 |

(a) Remeasurement of certain monetary assets and liabilities that are held by our subsidiaries in currencies other than their functional currency are included in other gains and (losses). This includes foreign currency-denominated intercompany loans to our foreign subsidiaries that are scheduled for settlement. Beginning in the first quarter of 2023, our intercompany loans subject to remeasurement were hedged by certain of our foreign currency-denominated unsecured debt that we de-designated as net investment hedges.

(b) We acquired a secured loan receivable with a fair value of $23.4 million in our merger with a former affiliate, Corporate Property Associates 17 – Global Incorporated, in October 2018 (“CPA:17 Merger”), for which the outstanding principal of $34.0 million was fully repaid to us in September 2022. Therefore, we recorded a $10.6 million gain on repayment of this secured loan receivable.

(c) This insurance receivable was acquired in the CPA:17 Merger.

#### Gain on Change in Control of Interests

In connection with the CPA:18 Merger, during the three and nine months ended September 30, 2022, we acquired the remaining interests in four investments in which we already had a joint interest and accounted for under the equity method. Due to the change in control of these four jointly owned investments, we recorded a gain on change in control of interests of $11.4 million reflecting the difference between our carrying values and the preliminary estimated fair values of our previously held equity interests on August 1, 2022. Subsequent to the CPA:18 Merger, we consolidated these wholly owned investments (Note 3).

#### Provision for Income Taxes

For the three and nine months ended September 30, 2023 as compared to the same periods in 2022, provision for income taxes within our Real Estate segment increased by $1.5 million and $14.2 million, respectively, primarily due to (i) deferred tax benefits recognized during the prior year periods related to the release of valuation allowances on certain foreign properties, (ii) higher current taxes as a result of rent increases driven by CPI adjustments at existing international properties, (iii) the impact of international property acquisitions, and (iv) the release of deferred tax assets in connection with the tax restructuring of certain international properties during the nine months ended September 30, 2023.

### Investment Management

We earn revenue as the advisor to the Managed Programs. For the periods presented, we acted as advisor to the following Managed Programs: CPA:18 – Global (through August 1, 2022) and CESH. Upon completion of the CPA:18 Merger on August 1, 2022, the advisory agreement with CPA:18 – Global was terminated, and we ceased earning revenue from CPA:18 – Global.

Upon closing of the Spin-Off on November 1, 2023, we externally manage NLOP and earn revenue for certain asset management, property disposition support, and various related services (Note 17).

### Revenues

The following table presents revenues within our Investment Management segment (in thousands):

| Investment Management Revenues Asset management revenue | Three Months Ended September 30, 2023 | 2022 | Change | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| CESH | $194 | $346 | $(152) | $836 | $1,128 | $(292) |
| CPA:18 – Global | — | 851 | (851) | — | 6,956 | (6,956) |
|  | 194 | 1,197 | (1,003) | 836 | 8,084 | (7,248) |
| Reimbursable costs from affiliates |  |  |  |  |  |  |
| CESH | 97 | 78 | 19 | 322 | 374 | (52) |
| CPA:18 – Global | — | 266 | (266) | — | 2,040 | (2,040) |
|  | 97 | 344 | (247) | 322 | 2,414 | (2,092) |
|  | $291 | $1,541 | $(1,250) | $1,158 | $10,498 | $(9,340) |

#### Asset Management Revenue

During the periods presented, we earned asset management revenue from (i) CPA:18 – Global (prior to the CPA:18 Merger) based on the value of its real estate-related assets under management and (ii) CESH based on its gross assets under management at fair value. For 2023, we earned asset management revenue from CESH in cash. Asset management revenues from CESH are expected to decline as assets are sold.

### Other Income and (Expenses) and (Provision for) Benefit from Income Taxes

#### Gain on Change in Control of Interests

In connection with the CPA:18 Merger, during the three and nine months ended September 30, 2022, we recognized a gain on change in control of interests of $22.5 million within our Investment Management segment related to the difference between the carrying value and the preliminary estimated fair value of our previously held equity interest in shares of CPA:18 – Global’s common stock (Note 3).

#### Earnings from Equity Method Investments in the Managed Programs

The following table presents the details of our earnings from equity method investments in the Managed Programs (Note 8) (in thousands):

| Earnings from equity method investments in the Managed Programs: | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Distributions of Available Cash from CPA:18 – Global (a) | $— | $3,345 | $— | $8,746 |
| Earnings from equity method investments in the Managed Programs (a) | — | 1,512 | — | 4,542 |
| Earnings from equity method investments in the Managed Programs | $— | $4,857 | $— | $13,288 |

(a) As a result of the completion of the CPA:18 Merger on August 1, 2022, we no longer recognize equity income from our investment in shares of common stock of CPA:18 – Global or receive distributions of Available Cash from CPA:18 – Global.

#### Provision for (Benefit from) Income Taxes

For the three and nine months ended September 30, 2023 as compared to the same periods in 2022, provision for (benefit from) income taxes within our Investment Management segment decreased by $4.6 million and $5.5 million, respectively, primarily due to one-time current taxes incurred during the prior year periods upon the recognition of taxable income associated with the accelerated vesting of shares previously issued by CPA:18 – Global to us for asset management services performed, in connection with the CPA:18 Merger.

### Liquidity and Capital Resources

### Sources and Uses of Cash During the Period

We use the cash flow generated from our investments primarily to meet our operating expenses, service debt, and fund dividends to stockholders. Our cash flows fluctuate periodically due to a number of factors, which may include, among other things: the timing of our equity and debt offerings; the timing of purchases and sales of real estate; the timing of the repayment of mortgage loans and receipt of lease revenues; the timing and amount of other lease-related payments; the timing of settlement of foreign currency transactions; changes in foreign currency exchange rates; and the timing of distributions from equity method investments. We no longer receive certain fees and distributions from CPA:18 – Global following the completion of the CPA:18 Merger on August 1, 2022 (Note 1). Despite these fluctuations, we believe that we will generate sufficient cash from operations to meet our normal recurring short-term and long-term liquidity needs. We may also use existing cash resources, available capacity under our Senior Unsecured Credit Facility, proceeds from term loans or other bank debt, proceeds from dispositions of properties (including expected proceeds from the exercise of purchase options and the Office Sale Program (Note 1)), and the issuance of additional debt or equity securities, such as issuances of common stock through our ATM Forwards (Note 13), in order to meet these needs. We assess our ability to access capital on an ongoing basis. Our sources and uses of cash during the period are described below.

*Operating Activities —* Net cash provided by operating activities increased by $110.2 million during the nine months ended September 30, 2023 as compared to the same period in 2022, primarily due to an increase in cash flow generated from net investment activity (including properties acquired in the CPA:18 Merger (Note 1)) and scheduled rent increases at existing properties, partially offset by higher interest expense.

*Investing Activities —* Our investing activities are generally comprised of real estate-related transactions (purchases and sales) and funding for build-to-suit activities and other capital expenditures on real estate.

*Financing Activities —* Our financing activities are generally comprised of borrowings and repayments under our Unsecured Revolving Credit Facility and Unsecured Term Loans, issuances of the Senior Unsecured Notes, payments and prepayments of non-recourse mortgage loans, and payments of dividends to stockholders. In addition to these types of transactions, during the nine months ended September 30, 2023, we received $249.8 million in net proceeds from the issuance of common stock under our ATM Forwards (Note 13).

### Summary of Financing

The table below summarizes our Senior Unsecured Notes, our non-recourse mortgages, our Unsecured Revolving Credit Facility, and our Unsecured Term Loans (dollars in thousands):

| Carrying Value Fixed rate: | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Senior Unsecured Notes (a) | $5,902,854 | $5,916,400 |
| Non-recourse mortgages (a) (b) | 645,767 | 907,303 |
| Unsecured Term Loans subject to interest rate swaps (a) | 525,943 | — |
|  | 7,074,564 | 6,823,703 |
| Variable rate: |  |  |
| Unsecured Term Loans (a) | 557,654 | 552,539 |
| Unsecured Revolving Credit Facility | 516,513 | 276,392 |
| Non-recourse mortgages (a): |  |  |
| Floating interest rate mortgage loans | 138,983 | 213,958 |
| Amount subject to interest rate caps | — | 11,156 |
|  | 1,213,150 | 1,054,045 |
|  | $8,287,714 | $7,877,748 |
| **Percent of Total Debt** |  |  |
| Fixed rate | 85% | 87% |
| Variable rate | 15% | 13% |
|  | 100% | 100% |
| **Weighted-Average Interest Rate at End of Period** |  |  |
| Fixed rate | 3.0% | 2.9% |
| Variable rate (c) | 5.3% | 3.5% |
| Total debt | 3.3% | 3.0% |

(a) Aggregate debt balance includes unamortized discount, net, totaling $31.5 million and $35.9 million as of September 30, 2023 and December 31, 2022, respectively, and unamortized deferred financing costs totaling $22.5 million and $26.0 million as of September 30, 2023 and December 31, 2022, respectively.

(b) Includes non-recourse mortgages subject to variable-to-fixed interest rate swaps totaling $44.6 million and $83.0 million as of September 30, 2023 and December 31, 2022, respectively.

(c) The impact of our interest rate caps is reflected in the weighted-average interest rates.

### Cash Resources

At September 30, 2023, our cash resources consisted of the following:

- cash and cash equivalents totaling $136.4 million. Of this amount, $112.7 million, at then-current exchange rates, was held in foreign subsidiaries, and we could be subject to restrictions or significant costs should we decide to repatriate these amounts;
- our Unsecured Revolving Credit Facility, with available capacity of approximately $1.3 billion (net of amounts reserved for standby letters of credit totaling $1.9 million);
- available proceeds under our ATM Forwards of approximately $383.6 million, which were fully settled in October 2023 (Note 17); and
- unleveraged properties that had an aggregate asset carrying value of approximately $14.3 billion at September 30, 2023, although there can be no assurance that we would be able to obtain financing for these properties.

We may also access the capital markets through additional debt (denominated in both U.S. dollars and euros) and equity offerings, as well as term loans and other bank debt.

Our cash resources can be used for working capital needs and other commitments and may be used for future investments.

### Cash Requirements and Liquidity

As of September 30, 2023, we had (i) $136.4 million of cash and cash equivalents, (ii) approximately $1.3 billion of available capacity under our Unsecured Revolving Credit Facility (net of amounts reserved for standby letters of credit totaling $1.9 million), and (iii) available proceeds under our ATM Forwards of approximately $383.6 million, which were fully settled in October 2023 (Note 17). In addition, in September 2023, NLOP entered into a new $455 million debt facility, which was executed by NLOP and funded upon the closing of the Spin-Off on November 1, 2023. Approximately $350 million of this amount (net of transaction expenses) was retained by us in connection with the Spin-Off (Note 11, Note 17). Our Senior Unsecured Credit Facility includes a $1.8 billion Unsecured Revolving Credit Facility and Unsecured Term Loans outstanding totaling $557.7 million as of September 30, 2023 (Note 11), and is scheduled to mature on February 20, 2025 (Note 11). Our Unsecured Term Loan due 2026 had $525.9 million outstanding as of September 30, 2023, and is scheduled to mature on April 24, 2026. As of September 30, 2023, scheduled debt principal payments total $111.2 million through December 31, 2023 and $1.3 billion through December 31, 2024 (Note 11).

During the next 12 months following September 30, 2023 and thereafter, we expect that our significant cash requirements will include:

- funding acquisitions of new investments (Note 5);
- funding future capital commitments and tenant improvement allowances (Note 5);
- making scheduled principal and balloon payments on our debt obligations, including (i) $500 million of senior notes due in April 2024 and (ii) €500 million of senior notes due in July 2024 (Note 11);
- making scheduled interest payments on our debt obligations (future interest payments total $841.2 million, with $245.8 million due during the next 12 months; interest on unhedged variable-rate debt obligations was calculated using the applicable annual variable interest rates and balances outstanding at September 30, 2023); and
- other normal recurring operating expenses.

We expect to fund these cash requirements through cash generated from operations, cash received from dispositions of properties, the use of our cash reserves or unused amounts on our Unsecured Revolving Credit Facility (as described above), proceeds from term loans or other bank debt, issuances of common stock through our ATM Program (Note 13), and potential issuances of additional debt or equity securities. We may also choose to prepay certain of our non-recourse mortgage loan obligations, depending on our capital needs and market conditions at that time.

Our liquidity could be adversely affected by unanticipated costs and greater-than-anticipated operating expenses. To the extent that our working capital reserve is insufficient to satisfy our cash requirements, additional funds may be provided from cash from operations to meet our normal recurring short-term and long-term liquidity needs. We may also use existing cash resources, available capacity under our Unsecured Revolving Credit Facility, mortgage loan proceeds, and the issuance of additional debt or equity securities to meet these needs.

Certain amounts disclosed above are based on the applicable foreign currency exchange rate at September 30, 2023.

### Supplemental Financial Measures

In the real estate industry, analysts and investors employ certain non-GAAP supplemental financial measures in order to facilitate meaningful comparisons between periods and among peer companies. Additionally, in the formulation of our goals and in the evaluation of the effectiveness of our strategies, we use Funds from Operations (“FFO”) and AFFO, which are non-GAAP measures defined by our management. We believe that these measures are useful to investors to consider because they may assist them to better understand and measure the performance of our business over time and against similar companies. A description of FFO and AFFO and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are provided below.

#### Funds from Operations and Adjusted Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has promulgated a non-GAAP measure known as FFO, which we believe to be an appropriate supplemental measure, when used in addition to and in conjunction with results presented in accordance with GAAP, to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental non-GAAP measure. FFO is not equivalent to, nor a substitute for, net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as restated in December 2018. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property, impairment charges on real estate or other assets incidental to the company’s main business, gains or losses on changes in control of interests in real estate, and depreciation and amortization from real estate assets; and after adjustments for unconsolidated partnerships and jointly owned investments. Adjustments for unconsolidated partnerships and jointly owned investments are calculated to reflect FFO.

We also modify the NAREIT computation of FFO to adjust GAAP net income for certain non-cash charges, such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line rent and related reserves, other non-cash rent adjustments, non-cash allowance for credit losses on loans receivable and finance leases, stock-based compensation, non-cash environmental accretion expense, amortization of discounts and premiums on debt, and amortization of deferred financing costs. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short-term fluctuations in net income but have no impact on cash flows. Additionally, we exclude non-core income and expenses, such as gains or losses from extinguishment of debt and merger and acquisition expenses. We also exclude realized and unrealized gains/losses on foreign currency exchange rate movements (other than those realized on the settlement of foreign currency derivatives), which are not considered fundamental attributes of our business plan and do not affect our overall long-term operating performance. We refer to our modified definition of FFO as AFFO. We exclude these items from GAAP net income to arrive at AFFO as they are not the primary drivers in our decision-making process and excluding these items provides investors a view of our portfolio performance over time and makes it more comparable to other REITs that are currently not engaged in acquisitions, mergers, and restructuring, which are not part of our normal business operations. AFFO also reflects adjustments for unconsolidated partnerships and jointly owned investments. We use AFFO as one measure of our operating performance when we formulate corporate goals, evaluate the effectiveness of our strategies, and determine executive compensation.

We believe that AFFO is a useful supplemental measure for investors to consider as we believe it will help them to better assess the sustainability of our operating performance without the potentially distorting impact of these short-term fluctuations. However, there are limits on the usefulness of AFFO to investors. For example, impairment charges and unrealized foreign currency losses that we exclude may become actual realized losses upon the ultimate disposition of the properties in the form of lower cash proceeds or other considerations. We use our FFO and AFFO measures as supplemental financial measures of operating performance. We do not use our FFO and AFFO measures as, nor should they be considered to be, alternatives to net income computed under GAAP, or as alternatives to net cash provided by operating activities computed under GAAP, or as indicators of our ability to fund our cash needs.

Consolidated FFO and AFFO were as follows (in thousands):

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income attributable to W. P. Carey | $125,040 | $104,928 | $564,040 | $389,601 |
| Adjustments: |  |  |  |  |
| Depreciation and amortization of real property | 144,111 | 131,628 | 442,911 | 360,607 |
| Impairment charges — real estate | 15,173 | — | 15,173 | 26,385 |
| (Gain) loss on sale of real estate, net (a) | (2,401) | 4,736 | (181,958) | (37,631) |
| Gain on change in control of interests (b) (c) | — | (33,931) | — | (33,931) |
| Impairment charges — Investment Management goodwill (d) | — | 29,334 | — | 29,334 |
| Proportionate share of adjustments to earnings from equity method investments (e) (f) | 2,950 | 2,242 | 8,439 | 12,859 |
| Proportionate share of adjustments for noncontrolling interests (g) | 34 | (189) | (533) | (197) |
| Total adjustments | 159,867 | 133,820 | 284,032 | 357,426 |
| FFO (as defined by NAREIT) attributable to W. P. Carey | 284,907 | 238,748 | 848,072 | 747,027 |
| Adjustments: |  |  |  |  |
| Straight-line and other leasing and financing adjustments | (18,662) | (14,326) | (52,798) | (39,665) |
| Stock-based compensation | 9,050 | 5,511 | 25,811 | 23,102 |
| Above- and below-market rent intangible lease amortization, net | 7,835 | 11,186 | 27,520 | 32,738 |
| Amortization of deferred financing costs | 4,805 | 5,223 | 15,649 | 11,498 |
| Tax (benefit) expense — deferred and other | (4,349) | 1,163 | (2,706) | (434) |
| Merger and other expenses (h) | 4,152 | 17,667 | 5,595 | 17,329 |
| Other (gains) and losses (i) | (2,859) | 15,020 | (9,593) | 1,021 |
| Other amortization and non-cash items | 584 | 359 | 1,583 | 1,441 |
| Proportionate share of adjustments to earnings from equity method investments (f) | (691) | (2,156) | (1,872) | (2,451) |
| Proportionate share of adjustments for noncontrolling interests (g) | (380) | (673) | (344) | (684) |
| Total adjustments | (515) | 38,974 | 8,845 | 43,895 |
| AFFO attributable to W. P. Carey | $284,392 | $277,722 | $856,917 | $790,922 |
| **Summary** |  |  |  |  |
| FFO (as defined by NAREIT) attributable to W. P. Carey | $284,907 | $238,748 | $848,072 | $747,027 |
| AFFO attributable to W. P. Carey | $284,392 | $277,722 | $856,917 | $790,922 |

*W. P. Carey 9/30/2023 10-Q –* **64**

FFO and AFFO from Real Estate were as follows (in thousands):

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income from Real Estate attributable to W. P. Carey | $124,167 | $111,375 | $562,084 | $381,461 |
| Adjustments: |  |  |  |  |
| Depreciation and amortization of real property | 144,111 | 131,628 | 442,911 | 360,607 |
| Impairment charges — real estate | 15,173 | — | 15,173 | 26,385 |
| (Gain) loss on sale of real estate, net (a) | (2,401) | 4,736 | (181,958) | (37,631) |
| Gain on change in control of interests (b) | — | (11,405) | — | (11,405) |
| Proportionate share of adjustments to earnings from equity method investments (e) (f) | 2,950 | 2,242 | 8,439 | 12,859 |
| Proportionate share of adjustments for noncontrolling interests (g) | 34 | (189) | (533) | (197) |
| Total adjustments | 159,867 | 127,012 | 284,032 | 350,618 |
| FFO (as defined by NAREIT) attributable to W. P. Carey — Real Estate | 284,034 | 238,387 | 846,116 | 732,079 |
| Adjustments: |  |  |  |  |
| Straight-line and other leasing and financing adjustments | (18,662) | (14,326) | (52,798) | (39,665) |
| Stock-based compensation | 9,050 | 5,511 | 25,811 | 23,102 |
| Above- and below-market rent intangible lease amortization, net | 7,835 | 11,186 | 27,520 | 32,738 |
| Amortization of deferred financing costs | 4,805 | 5,223 | 15,649 | 11,498 |
| Tax benefit — deferred and other | (4,349) | (2,789) | (2,706) | (4,302) |
| Merger and other expenses (h) | 4,152 | 17,667 | 5,595 | 17,326 |
| Other (gains) and losses (i) | (2,180) | 13,960 | (8,876) | (303) |
| Other amortization and non-cash items | 584 | 359 | 1,583 | 1,441 |
| Proportionate share of adjustments to earnings from equity method investments (f) | (691) | (938) | (1,872) | (403) |
| Proportionate share of adjustments for noncontrolling interests (g) | (380) | (673) | (344) | (684) |
| Total adjustments | 164 | 35,180 | 9,562 | 40,748 |
| AFFO attributable to W. P. Carey — Real Estate | $284,198 | $273,567 | $855,678 | $772,827 |
| **Summary** |  |  |  |  |
| FFO (as defined by NAREIT) attributable to W. P. Carey — Real Estate | $284,034 | $238,387 | $846,116 | $732,079 |
| AFFO attributable to W. P. Carey — Real Estate | $284,198 | $273,567 | $855,678 | $772,827 |

*W. P. Carey 9/30/2023 10-Q –* **65**

FFO and AFFO from Investment Management were as follows (in thousands):

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) from Investment Management attributable to W. P. Carey | $873 | $(6,447) | $1,956 | $8,140 |
| Adjustments: |  |  |  |  |
| Impairment charges — Investment Management goodwill (d) | — | 29,334 | — | 29,334 |
| Gain on change in control of interests (c) | — | (22,526) | — | (22,526) |
| Total adjustments | — | 6,808 | — | 6,808 |
| FFO (as defined by NAREIT) attributable to W. P. Carey — Investment Management | 873 | 361 | 1,956 | 14,948 |
| Adjustments: |  |  |  |  |
| Other (gains) and losses | (679) | 1,060 | (717) | 1,324 |
| Tax benefit — deferred and other | — | 3,952 | — | 3,868 |
| Merger and other expenses | — | — | — | 3 |
| Proportionate share of adjustments to earnings from equity method investments (f) | — | (1,218) | — | (2,048) |
| Total adjustments | (679) | 3,794 | (717) | 3,147 |
| AFFO attributable to W. P. Carey — Investment Management | $194 | $4,155 | $1,239 | $18,095 |
| **Summary** |  |  |  |  |
| FFO (as defined by NAREIT) attributable to W. P. Carey — Investment Management | $873 | $361 | $1,956 | $14,948 |
| AFFO attributable to W. P. Carey — Investment Management | $194 | $4,155 | $1,239 | $18,095 |

(a) Amount for the nine months ended September 30, 2023 includes a gain on sale of real estate of $176.2 million recognized upon receiving notice of the exercise of a purchase option for a portfolio of 78 net-lease self-storage properties and the reclassification of the investment to net investments in sales-type leases (Note 6).

(b) Amounts for the three and nine months ended September 30, 2022 represent a gain recognized on the remaining interests in four investments acquired in the CPA:18 Merger, which we had previously accounted for under the equity method (Note 3).

(c) Amounts for the three and nine months ended September 30, 2022 represent a gain recognized on our previously held interest in shares of CPA:18 – Global common stock in connection with the CPA:18 Merger (Note 3).

(d) Amounts for the three and nine months ended September 30, 2022 represent an impairment charge recognized on goodwill within our Investment Management segment, since future Investment Management cash flows are expected to be minimal (Note 9).

(e) Amount for the nine months ended September 30, 2022 includes our $4.6 million proportionate share of an impairment charge recognized on an equity method investment in real estate.

(f) Equity income, including amounts that are not typically recognized for FFO and AFFO, is recognized within Earnings (losses) from equity method investments on the consolidated statements of income. This represents adjustments to equity income to reflect FFO and AFFO on a pro rata basis.

(g) Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis. This adjustment reflects our FFO or AFFO on a pro rata basis.

(h) Amounts for the three and nine months ended September 30, 2023 are primarily comprised of costs incurred in connection with the Spin-Off (Note 1, Note 17). Amounts for the three and nine months ended September 30, 2022 are primarily comprised of costs incurred in connection with the CPA:18 Merger (Note 3).

(i) Primarily comprised of gains and losses on extinguishment of debt, the mark-to-market fair value of equity securities, and foreign currency exchange rate movements, as well as non-cash allowance for credit losses on loans receivable and finance leases.

While we believe that FFO and AFFO are important supplemental measures, they should not be considered as alternatives to net income as an indication of a company’s operating performance. These non-GAAP measures should be used in conjunction with net income as defined by GAAP. FFO and AFFO, or similarly titled measures disclosed by other REITs, may not be comparable to our FFO and AFFO measures.

## Market risk

As filed, 6,940 characters.

#### Market Risk

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, and equity prices. The primary market risks that we are exposed to are interest rate risk and foreign currency exchange risk; however, we do not use derivative instruments to hedge credit/market risks or for speculative purposes. From time to time, we may enter into foreign currency collars to hedge our foreign currency cash flow exposures.

We are also exposed to further market risk as a result of tenant concentrations in certain industries and/or geographic regions, since adverse market factors can affect the ability of tenants in a particular industry/region to meet their respective lease obligations. In order to manage this risk, we view our collective tenant roster as a portfolio and we attempt to diversify such portfolio so that we are not overexposed to a particular industry or geographic region.

#### Interest Rate Risk

The values of our real estate and related fixed-rate debt obligations, as well as the values of our unsecured debt obligations, are subject to fluctuations based on changes in interest rates. The value of our real estate is also subject to fluctuations based on local and regional economic conditions and changes in the creditworthiness of lessees, which may affect our ability to refinance property-level mortgage debt when balloon payments are scheduled, if we do not choose to repay the debt when due. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political conditions, and other factors beyond our control. An increase in interest rates would likely cause the fair value of our assets to decrease. Increases in interest rates may also have an impact on the credit profile of certain tenants.

We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we generally seek long-term debt financing on a fixed-rate basis. However, we are subject to variable-rate interest on our Unsecured Term Loans, Unsecured Revolving Credit Facility, and certain of our non-recourse mortgage debt. We have entered into, and may continue to enter into, interest rate swap agreements or interest rate cap agreements with counterparties related to certain of our variable-rate debt (Note 11). See Note 10 for additional information on our interest rate swaps and caps.

Our debt obligations are more fully described in Note 11 and Liquidity and Capital Resources — Summary of Financing in Item 2 above. The following table presents principal cash flows based upon expected maturity dates of our debt obligations outstanding at September 30, 2023 (in thousands):

|  | 2023 (Remainder) | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | Fair Value |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Fixed-rate debt (a) (b) | $13,754 | $1,223,399 | $788,492 | $1,509,747 | $530,368 | $3,063,067 | $7,128,827 | $6,380,480 |
| Variable-rate debt (a) | $97,420 | $— | $1,115,310 | $— | $— | $— | $1,212,730 | $1,211,760 |

(a) Amounts are based on the exchange rate at September 30, 2023, as applicable.

(b) Amounts include non-recourse mortgages and unsecured term loans subject to variable-to-fixed interest rate swaps. Amounts after 2023 are primarily comprised of principal payments for our Senior Unsecured Notes (Note 11).

The estimated fair value of our fixed-rate debt and our variable-rate debt is affected by changes in interest rates. Annual interest expense on our unhedged variable-rate debt that does not bear interest at fixed rates at September 30, 2023 would increase or decrease by $6.7 million for our euro-denominated debt, by $3.3 million for our British pound sterling-denominated debt, by $1.6 million for our U.S. dollar-denominated debt, by $0.4 million for our Norwegian krone-denominated debt, and by $0.2 million for our Japanese yen-denominated debt, for each respective 1% change in annual interest rates.

#### Foreign Currency Exchange Rate Risk

We own international investments, primarily in Europe, Canada, and Japan, and as a result are subject to risk from the effects of exchange rate movements in various foreign currencies, primarily the euro, the British pound sterling, the Canadian dollar, the Japanese yen, and certain other currencies which may affect future costs and cash flows. We have obtained, and may in the future obtain, non-recourse mortgage financing in the local currency. We have also completed several offerings of euro-denominated senior notes, and have borrowed under our Senior Unsecured Credit Facility and Unsecured Term Loan due 2026 in foreign currencies, including the euro, British pound sterling, and Japanese yen (Note 11). Volatile market conditions arising from certain macroeconomic factors may result in significant fluctuations in foreign currency exchange rates. To the extent that currency fluctuations increase or decrease rental revenues, as translated to U.S. dollars, the change in debt service (comprised of principal and interest, excluding balloon payments), as translated to U.S. dollars, will partially offset the effect of fluctuations in revenue and, to some extent, mitigate the risk from changes in foreign currency exchange rates. We estimate that, for a 1% increase or decrease in the exchange rate between the euro, British pound sterling, or Japanese yen and the U.S. dollar, there would be a corresponding change in the projected estimated cash flow (scheduled future rental revenues, net of scheduled future debt service payments for the next 12 months) for our consolidated foreign operations at September 30, 2023 of $2.4 million, $0.3 million, and less than $0.1 million, respectively, excluding the impact of our derivative instruments.

In addition, we may use currency hedging to further reduce the exposure to our equity cash flow. We are generally a net receiver of these currencies (we receive more cash than we pay out), and therefore our foreign operations benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar, relative to the foreign currency.

We enter into foreign currency collars to hedge certain of our foreign currency cash flow exposures. See Note 10 for additional information on our foreign currency collars.

#### Concentration of Credit Risk

Concentrations of credit risk arise when a number of tenants are engaged in similar business activities or have similar economic risks or conditions that could cause them to default on their lease obligations to us. We regularly monitor our portfolio to assess potential concentrations of credit risk. While we believe our portfolio is well-diversified, it does contain concentrations in certain areas. There have been no material changes in our concentration of credit risk from what was disclosed in the 2022 Annual Report.

## Controls and procedures

As filed, 1,519 characters.

#### Disclosure Controls and Procedures

Our disclosure controls and procedures include internal controls and other procedures designed to provide reasonable assurance that information required to be disclosed in this and other reports filed under the Exchange Act is recorded, processed, summarized, and reported within the required time periods specified in the SEC’s rules and forms; and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures. It should be noted that no system of controls can provide complete assurance of achieving a company’s objectives and that future events may impact the effectiveness of a system of controls.

Our chief executive officer and chief financial officer, after conducting an evaluation, together with members of our management, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of September 30, 2023 at a reasonable level of assurance.

#### Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 1,451 characters.

We are including the following additional risk factor, which should be read in conjunction with our description of risk factors provided in Part I, Item 1A. Risk Factors in our 2022 Annual Report:

***We may not achieve some or all the expected benefits of the Spin-Off and the Office Sale Program.***

We may not be able to achieve the full strategic and financial benefits expected to result from the Spin-Off and the Office Sale Program, or such benefits may be delayed due to a variety of circumstances, not all of which may be under our control. We may not achieve the anticipated benefits of the Spin-Off or the Office Sale Program for a variety of reasons, including, among others: (i) the transactions may not generate the anticipated improvements in our cost of or access to capital; (ii) we may be subject to unexpected costs related to the Spin-Off, including as a result of our indemnification obligations under the Separation and Distribution Agreement or obligations related to indebtedness associates with transfer of NLOP assets and any guaranties related thereto; and (iii) we may face challenges in completing the Office Sale Program at the prices in the timeframe we expect or at all. Failure to achieve some or all the benefits expected to result from the Spin-Off and the Office Sale Program, or a delay in realizing such benefits, may have a material adverse effect on our business, financial condition and results of operations.

Filed Nov 3, 2023.
Source: SEC EDGAR, the filing index for accession 0001628280-23-036734. Last ingested by Listed: Oct 27, 2026, 16:14 ET. No prices; not investment advice.