Glossary of Terms

Charges and commissions paid out for the selection or purchase of property. Some examples are real estate commission, acquisition expense, and development/construction fees.

A valuation of property (e.g. real estate, a business, an antique) by the estimate of an authorized person.

A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security.

B-Notes are loans secured by a first mortgage and subordinated to a senior interest, referred to as an A-Note. The subordination of a B-Note is generally evidenced by a co-lender or participation agreement between the holders of the related A-Note and the B-Note. In some instances, the B-Note lender may require a security interest in the stock or partnership interests of the borrower as part of the transaction. B-Note lenders have the same obligations, collateral and borrower as the A-Note lender, but typically are subordinated in recovery upon a default. B-Notes share certain credit characteristics with second mortgages, in that both are subject to the greater credit risk with respect to the underlying mortgage collateral than the corresponding first mortgage or A-Note, and in consequence generally carry a higher rate of interest.

A market condition in which the prices of securities are falling or are expected to fall. Although figures can vary, a downturn of 15-20% or more in multiple indexes (Dow or S&P 500) is considered an entry into a bear market.

An adjective used to describe an opinion or outlook where one anticipates decline in price of the general market, of an underlying stock or of both.

A triple-net lease in which the tenant must repurchase the facility case of a condemnation or repurchase or rebuild the facility in case of a casualty.

A method of leasing property in which the landlord makes improvements to a space or builds the facility from the ground up based on the tenant's specifications. The cost of construction is generally factored into the lease terms. Most build-to-suit provisions apply to long-term (10-year) leases.

A financial market of a certain group of securities in which prices are rising or are expected to rise. The term bull market is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies, commodities, etc.

Describing an opinion or outlook that a rise in price is expected either in the general market or in the individual security.

Ratio of rental income from a property to its market value, expressed as a percentage. This rate is used in comparing rate of return from a property with the rate of return from alternative investments.

Average Cap Rate -- Calculated by dividing the sum of the yearly cap rates for a transaction by the number of years in the lease term.

Lease in which the rental payments are reflected on a company’s balance sheet as long and short-term liabilities.

Chief Financial Officer

Chief Executive Officer

A bankruptcy proceeding in which a company stops all operations and goes completely out of business. A trustee is appointed to liquidate (sell) the company's assets, and the money is used to pay off debt.

Named after the U.S. bankruptcy code 11, Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor's business affairs and assets. It is generally filed by corporations which require time to restructure their debts.

Chapter 11 gives the debtor a fresh start, subject to the debtor's fulfillment of its obligations under its plan of reorganization.

A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debtholders have been paid in full.

Also referred to as a “non-disclosure agreement” or a NDA, this is a legal contract between two or more parties that signifies a confidential relationship exists between the parties involved. The confidential relationship often will refer to information that is to be shared between the parties but should not be made available to the general public.

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living.

The CPI is published monthly and is sometimes called the cost-of-living index.

A legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses; that is, a corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes.

The most important aspect of a corporation is limited liability. That is, shareholders have the right to participate in the profits, through dividends and/or the appreciation of stock, but are not held personally liable for the company's debts.

An amount of money borrowed by one party from another. Many corporations/individuals use debt as a method for making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.

A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.

Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.

A lease agreement that designates the lessee (the tenant) as having partial financial responsibility relating to the property in addition to the rent fee applied under the lease. Typically, this means that landlord is responsible for the maintenance and repair of roof and structure, but may include other items.

The portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability.

Calculated as:

In the EPS calculation, it is more accurate to use a weighted-average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period.

Diluted EPS expands on the basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number.

The electronic filing system created by the Securities and Exchange Commission (SEC) for the purpose of increasing efficiency and accessibility to corporate filings. This system is used by all publicly traded companies when submitting required documents to the SEC. Corporate documents are time sensitive, and the creation of EDGAR has greatly decreased the time it takes for corporate documents to become publicly available.

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.

Also known as "shares" or "equity".

A holder of stock (a shareholder) has a claim to a part of the corporation's assets and earnings. In other words, a shareholder is an owner of a company. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares.

A ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted performance. The Sharpe ratio is calculated by subtracting the risk-free rate - such as that of the 10-year U.S. Treasury bond - from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been.

A government commission created by Congress to regulate the securities markets and protect investors. In addition to regulation and protection, it also monitors the corporate takeovers in the U.S. The SEC is composed of five commissioners appointed by the U.S. President and approved by the Senate. The statutes administered by the SEC are designed to promote full public disclosure and to protect the investing public against fraudulent and manipulative practices in the securities markets. Generally, most issues of securities offered in interstate commerce, through the mail or on the internet must be registered with the SEC.

The Securities Exchange Act of 1934 was created to provide governance of securities transactions on the secondary market (after issue) and regulate the exchanges and broker-dealers in order to protect the investing public.

Financial market where previously issued securities (such as bonds, notes, shares) and financial instruments (such as bills of exchange and certificates of deposit) are bought and sold. All commodity and stock exchanges, and over-the-counter markets, serve as secondary markets which (by providing an avenue for resale) help in reducing the risk of investment and in maintaining liquidity in the financial system.

An arrangement where an owner sells an asset or property to a leasing firm and, at the same time, leases it (as a lessee) on a long-term basis to retain exclusive possession and use.

Include but are not limited to:

• 10-Q
  • A comprehensive report of a company's performance that must be submitted quarterly by all public companies to the Securities and Exchange Commission. In the 10-Q, firms are required to disclose relevant information regarding their financial position. The form must be submitted on time and the information should be available to all interested parties. The 10-Q is due 35 days (it used to be 45 days) after each of the first three fiscal quarters.
• 10-Q/A
  •  Amendment to the 10-Q
• 10-K
  • A comprehensive summary report of a company's performance that must be submitted annually to the Securities and Exchange Commission. Typically, the 10-K contains much more detail than the annual report. It includes information such as company history, organizational structure, equity, holdings, earnings per share, subsidiaries, etc. The 10-K must be filed within 60 days (it used to be 90 days) after the end of the fiscal year
• 10-K/A
  • Amendment to the 10-K
• 8-K
  • A report of unscheduled material events or corporate changes at a company that could be of importance to the shareholders or the Securities and Exchange Commission.
• Form S-4
  • A form that must be submitted to the Securities and Exchange Commission in the event of a merger or an acquisition between two companies. The form must also be submitted for exchange offers.
• S-4/A
  • Pre-effective amendment
• Form 425
  • Filing under Securities Act Rule 425 of certain prospectuses and communications in connection with business combination (merger) transactions (SEE S-4). Note: Form 425 can be filed as part of Form 8-K.
• Form 3
  • A document that must be filed with the Securities and Exchange Commission (SEC) by an insider affiliated with a public company's operation or by any investor owning 10% or more of the company's outstanding shares.
• Form 4
  • A document that must be filed with the Securities and Exchange Commission (SEC) whenever there is a material change in the holdings of company insiders (including shareholders owning 10% or more of the company's outstanding stock).
• Form 5
  • A document that must be filed with the Securities and Exchange Commission (SEC) by an insider who has conducted insider transactions during the year which were not previously reported via a Form 4 submission.

A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.

REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate.

Equity REITs: Equity REITs invest in and own properties (thus responsible for the equity or value of their real estate assets). Their revenues come principally from their properties' rents.

Mortgage REITs: Mortgage REITs deal in investment and ownership of property mortgages. These REITs loan money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities. Their revenues are generated primarily by the interest that they earn on the mortgage loans.

Hybrid REITs: Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages.

To qualify as a REIT, an entity must fulfill certain requirements.

1. It must be managed by one or more trustees or directors;
2. It must have transferable shares or certificates of beneficial interest;
3. It cannot be a bank or insurance company;
4. It must have at least 100 shareholders, and
5. It cannot be closely held.

Acquiring a new (usually larger)loan that retires an older (usually smaller) loan over a longer-term, using the same asset(s) as collateral.

The sale of equity shares or other financial instruments by an organization to the public in order to raise funds for business expansion and investment. Public offerings of corporate securities in the U.S. must be registered with and approved by the SEC and are normally conducted by an investment underwriter.

A formal power of attorney document that may be signed by a shareholder to authorize another shareholder, a representative of the shareholder or the company's management, to vote on behalf of the shareholder at the annual meeting.

A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details about an investment offering for sale to the public. A prospectus should contain the facts that an investor needs to make an informed investment decision.

Also known as an "offer document".

A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:

For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).

EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.

Also sometimes known as "price multiple" or "earnings multiple."

Lease in which the rental payments are not reflected on a company’s balance sheet. Often times, a company prefers this lease structure because it improves their debt-to-equity ratio, making it more attractive to lenders.

A debt security, usually maturing in one to 10 years.

A mutual fund's (or in W. P. Carey’s case, a REIT’s) price per share or exchange-traded fund's per-share value. In both cases, the per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding.

New York Stock Exchange. A corporation, operated by a board of directors, responsible for listing securities, setting policies and supervising the stock exchange and its member activities. The NYSE also oversees the transfer of members' seats on the Exchange, judging whether a potential applicant is qualified to be a specialist.

National Association of Securities Dealers Automated Quotation. US electronic securities market that quotes prices through a computer network, and allows brokers to conduct trades online or via telephone. Since there is no physical 'exchange' involved, it is referred to as an over the counter market.

National Association of Securities Dealers – consolidated with NYSE Member Regulation in 2007 to form FINRA, the Financial Industry Regulatory Authority.

A debt instrument that is secured by the collateral of specified real estate property and that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses to make large purchases of real estate without paying the entire value of the purchase up front.

A hybrid of debt and equity financing. Mezzanine financing is typically used to finance the expansion of existing companies, and it is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. It is generally subordinated to debt provided by senior lenders such as banks and venture capital companies.

1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.
2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged.

A letter that describes in detail a corporation's intention to act on something. In W. P. Carey’s case, it is a bid or offer to purchase a facility or facilities, which information such as the proposed purchase price, lease term, type of lease, renewal options, mortgage contingency and terms, terms of a security deposit, warrant position, fees and expenses, etc.

An agreement in which one party gains a long-term rental agreement and the other party receives a form of secured long-term debt.

A financial intermediary that performs a variety of services. This includes underwriting, acting as an intermediary between an issuer of securities and the investing public, facilitating mergers and other corporate reorganizations, and also acting as a broker for institutional clients.

As defined by the Investment Advisors Act of 1940, any person or group that makes investment recommendations or conducts securities analysis in return for a fee, whether through direct management of client assets or via written publications.

An investment advisor who has sufficient assets to be registered with the SEC is known as a Registered Investment Advisor, or RIA. Investment advisors are prohibited from disseminating advice known to be deceitful or fraudulent, and from acting as a principal on their own accounts by buying and selling securities between themselves and a client without prior written consent.

The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first.

For W. P. Carey’s purposes, the IRR represents the discount rate at which the net present value of the lease cash flows over the life of the lease term equals zero. For pre-tax IRR, taxes have not been deducted from the cash flows before calculating the IRR. For post-tax, as the names implies, taxes have been deducted.

1. The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.
2. The amount of ownership a stockholder has in a company, usually expressed as a percentage.

Created in 1974 by the Employee Retirement Income Security Act (ERISA), an IRA is an investing tool used by individuals to earn and earmark funds for retirement savings. There are several types of IRAs: Traditional IRAs, Roth IRAs, SIMPLE IRAs and SEP IRAs.

Traditional and Roth IRAs are established by individual taxpayers, who are allowed to contribute 100% of compensation (self-employment income for sole proprietors and partners) up to a set maximum dollar amount. Contributions to the Traditional IRA may be tax deductible depending on the taxpayer's income, tax filing status and coverage by an employer-sponsored retirement plan. Roth IRA contributions are not tax-deductible.

SEPs and SIMPLEs are retirement plans established by employers. Individual participant contributions are made to SEP IRAs and SIMPLE IRAs.

Method of arriving at the appraisal value of a property on the basis of its opportunity cost. It compares the net income the property would earn if rented out over its remaining useful life with the income that could be earned if the amount of its purchase price was invested in ventures of comparable risk. Also called income approach.

Initial Public Offering. The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.

In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market.

A figure used by real estate investment trusts (REITs) to define the cash flow from their operations. It is calculated by adding depreciation and amortization expenses to earnings, and sometimes quoted on a per share basis.

The value of a building unencumbered by another interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, escheat. For the purposes of W. P. Carey, it is the value of a building unencumbered by a lease.

The Financial Industry Regulatory Authortity – formerly the NASD and NYSE Member Regulation – is the largest non-governmental regulator for all securities firms doing business in the United States.

Generally Accepted Accounting Principles (“GAAP”) accounting standard governing the treatment of leases. It includes the following criteria:

Classification	Criteria	Accounting Treatment
Capital Lease	Meets one or more of the following: Asset’s ownership transfers to Lessee by the end of the lease term Lease contains a bargain purchase option at the end of the least term Lease term is at least 75% of the estimated life of the Asset Present value of the lease payments equals or exceeds 90% of the asset’s fair market value.	Capitalized asset and related liability are shown on the balance sheet. Lease amortization expense and interest expense are reported and the income statement
Operating Lease	Does not meet any of the four criteria for a capital lease.	No asset or liability is shown on the balance sheet Lease payments are shown as rent expense on the income statement.

1. A stock or any other security representing an ownership interest.
2. On a company's balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as "shareholders' equity".
3. In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage.
4. In the context of real estate, the difference between the current market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage.
5. In terms of investment strategies, equity (stocks) is one of the principal asset classes. The other two are fixed-income (bonds) and cash/cash-equivalents. These are used in asset allocation planning to structure a desired risk and return profile for an investor's portfolio.

When measuring performance, the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time.

When measuring performance, the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time.

A lease agreement that designates the lessee (the tenant) as being solely responsible for all of the costs relating to the asset being leased in addition to the rent fee applied under the lease. The structure of this type of lease requires the lessee to pay for net real estate taxes on the leased asset, net building insurance and net common area maintenance. The lessee has to pay the net amount of three types of costs, which how this term got its name.

The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).

A that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue as a "sweetener" to entice investors.