CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED (OTCMKTS:CPPY) Files An 8-K Other Events

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CORPORATE PROPERTY ASSOCIATES 17 GLOBAL INCORPORATED (OTCMKTS:CPPY) Files An 8-K Other Events

Item 8.01 Other Events.

Determination of Estimated Net Asset Value Per Share
Corporate Property Associates 17 Global Incorporated (we, our and
CPA:17 Global) announced today that our estimated net asset value
(NAV) as of December 31, 2016 has been determined to be
approximately $3.5 billion, or $10.11 per share of common stock,
compared to approximately $3.5 billion, or $10.24 per share of
common stock as of December 31, 2015. The NAV was calculated by
our advisor relying in part on an appraisal of the fair market
value of our real estate portfolio and estimates of the fair
market value of our mortgage debt, both at December 31, 2016,
provided by Robert A. Stanger Co., Inc. (Stanger), an independent
consultant and service provider to the real estate industry. Our
advisor then adjusts this amount based on certain factors,
principally for fair value of loans, CMBS and other investments,
our other net assets and liabilities of tangible or monetary
value and an estimate of the advisors interest in disposition
proceeds (if any), which shall be paid to the advisor subject to
the approval of the independent directors of our board of
directors as of December 31, 2016. The estimate produced by this
calculation is then divided by the total shares outstanding as of
December 31, 2016 and rounded to the nearest penny. Our NAV has
been calculated using a methodology conforming to the Investment
Program Associations Practice Guideline for Valuations of
Publicly Registered Non-Listed REITs (April 2013) and fair value
accounting standards under generally accepted accounting
principles in the United States. Our independent directors
approved the engagement of Stanger, reviewed the methodologies
used by Stanger and recommended that the full board of directors
adopt the NAV.
The determination of NAV involves a number of assumptions and
judgments, including estimates of the advisors interest in
disposition proceeds (if any). These assumptions and judgments
may prove to be inaccurate. There can be no assurance that a
stockholder would realize $10.11 per share if we were to
liquidate or engage in another type of liquidity event today. In
particular, our December 31, 2016 NAV does not give effect to
changes in value, investment activities and shares of common
stock issued after December 31, 2016.
The table below sets forth the material items included in the
calculation of our NAV ($ in thousands, except per share amounts)
as of December 31, 2016. A summary of the methodology used by
Stanger, as well as the assumptions and limitations of their work
for us, follows the table.
Real estate appraised value(1)
$
5,309,750
(plus)
Fair value of loans, CMBS and other investments
330,390
(less)
Fair market value of property debt
(2,287,659
)
(less)
Line of credit outstanding balance
(49,751
)
(plus)
Other tangible balance sheet assets and liabilities,
net(2)
202,315
(less)
Advisors interest in disposition proceeds
(31,724
)
NAV(3)
$
3,473,321
Shares outstanding
343,575,840
NAV Per Share(4)
10.11
__________
(1)
Includes acquisitions made in the fourth quarter of 2016 at
their appraised values at acquisition (approximately $134.5
million), using independent third-party appraisal firms
other than Stanger that were approved in advance by the
independent members of our board of directors, and one
property under contract for sale at its contractual sales
price (approximately $15.5 million).
(2)
Comprised substantially of cash and other assets and
liabilities of tangible or monetary value based on audited
balance sheet as of December 31, 2016.
(3)
Numbers may not add up due to rounding.
(4)
Rounded to the nearest $0.01.
The primary factor that contributed to the change in our NAV
was a negative impact on the appraised values of real estate
located outside the United States due to weakening of foreign
currencies (including the euro and British pound sterling)
against the U.S. dollar in 2016, which was partially mitigated
by property level financing in the local currency and partial
hedging of cash flows. The appraised values of our same store
properties, on a constant currency basis, remained relatively
flat from 2015 to 2016.
Appraised Real Estate Value
Summary of Methodology
The real property appraisal was based on the income method of
valuation by applying to the portfolio properties, other than
the fee-simple self-storage properties and hotel property, a
discounted cash flow analysis to: (i) the estimated net cash
flow for each property in the portfolio during the remaining
anticipated lease term unencumbered by mortgage debt; and (ii)
the estimated residual value of each property from a
hypothetical sale of the property upon the assumed expiration
of the lease. The hypothetical sale amount was derived by
capitalizing the estimated stabilized net operating income of
each property for the year following the lease expiration at a
selected capitalization rate and deducting estimated costs of
sale. The discounted cash flow analysis also included
re-tenanting costs at the end of the assumed lease term, as
appropriate, including downtime costs, tenant improvement
allowances, rental concessions and leasing commissions. In
cases where a tenant had a purchase option deemed to be
materially favorable to the tenant, or the tenant had long-term
renewal options at rental rates materially below estimated
market rental rates, the appraisal assumed the exercise of such
purchase option or long-term renewal options in its
determination of residual value. Where a property was deemed to
have excess land, the discounted cash flow analysis included
the estimated excess land value at the assumed expiration of
the lease, based upon an analysis of comparable land sales or
listings in the general market area of the property grown at
estimated market growth rates through the assumed year of lease
expiration. For the self-storage properties owned in fee-simple
by us, a direct capitalization analysis was performed. For the
one hotel property in which we hold an interest, both a direct
capitalization and discounted cash flow analysis was performed
and the resulting value indications were compared to regional
sales of similar hotel properties. In order to determine the
total real estate portfolio value as of the valuation date, the
appraised value of the portfolio was then adjusted to include
the acquisition cost of properties acquired within the three
months preceding the valuation date.
The discount rates and residual capitalization rates used in
the discounted cash flow analysis to value the properties were
selected based on several factors, including the
creditworthiness of the lessees; industry surveys; discussions
with industry professionals; property type, location and age;
current lease rates relative to estimated market lease rates;
anticipated lease duration; and other factors deemed
appropriate.
Low
High
Weighted Average(1)
Discount rates applied to the estimated net cash flow
of each property
5.00
%
15.25
%
7.97
%
Discount rates applied to the estimated residual
value of each property
4.35
%
14.75
%
8.24
%
Residual capitalization rates applied to the
properties
4.50
%
13.75
%
7.58
%
__________
(1) Based on our ownership interest in the properties.
For fee-simple self-storage assets, the capitalization rates
applied were based upon several factors, including industry
surveys; discussions with industry professionals; information
on capitalization rates from sale transactions; property type,
location and age; and other factors deemed appropriate. The
capitalization rates applied to the estimated net operating
income of each such property for the 12-month period following
the valuation date ranged from approximately 5.00% to 7.75%,
with a weighted average of approximately 6.14%. For the one
hotel property in which we hold an interest, the capitalization
rate applied to the estimated net operating income from the
anticipated year of stabilization was based upon several
factors, including industry surveys; discussions with industry
professionals; information on capitalization rates from sale
transactions; property type, location and age; and other
factors deemed appropriate. The
capitalization rate applied was 6.2%. From such direct
capitalization analyses indicated value, deductions were made
to account for the income shortfall relative to the estimated
stabilized net operating income.
Conclusion as to our Real Estate Portfolio Value
The result of the analysis outlined above was then adjusted
where appropriate to reflect our economic ownership interest
in each property and to convert the property value of each
property located outside the United States to U.S. dollars
based upon foreign exchange rates as of the valuation date.
Based on the analyses outlined above, and subject to the
assumptions and limitations below, the as is market value of
our real estate portfolio as of December 31, 2016 was
approximately $5.6 billion, which includes the real estate
appraised value and the fair value of real estate loans and
other investments, reflecting an overall increase of 17.4%
from the original purchase price (excluding acquisition costs
and operating deficits), plus post-acquisition capital
investments. The resulting imputed capitalization rate for
the real estate appraised value before reflecting our
ownership interest, excluding the value adjustment for both
the acquisitions made in the three-months preceding the
valuation date and the one property under contract for sale,
and based on the estimated net operating income of our
portfolio for the 12-month period following the valuation
date, was approximately 6.7%.
Assumptions and Limitations
The appraisal is subject to certain assumptions and limiting
conditions, including: (i) Stanger assumes no responsibility
for matters of a legal nature affecting any of the properties
in our real estate portfolio and assumes that title to each
property is good and marketable and that each property is
free and clear of all liens unless otherwise stated; (ii) the
appraisal assumes (A) responsible ownership and competent
management of each property, (B) no hidden or unapparent
conditions of any propertys subsoil or structure that would
render such property more or less valuable, (C) full
compliance with all applicable federal, state and local
zoning, access and environmental regulations and laws and (D)
all required licenses, certificates of occupancy and other
governmental consents have been, or can be, obtained and
renewed; (iii) the information upon which Stangers appraisal
is based has been provided by, or gathered from, sources
assumed to be reliable and accurate, including information
that has been provided to Stanger by our advisor, and Stanger
is not responsible for the accuracy or completeness of such
information, including the correctness of estimates,
opinions, dimensions, exhibits and other factual matters;
(iv) any necessary repairs or alterations to any property in
our real estate portfolio are assumed to be completed in a
workmanlike manner; (v) the physical attributes and condition
of the property improvements are based on representations by
us, and Stanger assumes no responsibility for the soundness
of structural members or for the condition of mechanical
equipment, plumbing or electrical components; (vi) Stanger
has made no survey of the properties in the portfolio and has
assumed that there are no soil, drainage or environmental
issues that would impair its opinion of value; (vii) any
projections of income and expenses included in the appraisal
and the valuation parameters utilized are not predictions of
the future, rather, they are Stangers best estimate of
current market thinking as of the valuation date relating to
future income and expenses, and Stanger makes no warranty or
representation that any such projections will materialize;
(viii) Stangers opinion of value represents normal
consideration for our portfolio sold unaffected by special
terms, services, fees, costs or credits incurred in a
transaction; (ix) Stanger has no knowledge of the existence
of hazardous materials on or in any property, nor is Stanger
qualified to detect such hazardous substances, and Stanger
assumes no responsibility for the detection or existence of
such conditions; (x) Stanger has assumed that each property
is free of any negative impact with regard to the
Environmental Cleanup Responsibility Act or any other
environmental problems, or with respect to non-compliance
with the Americans with Disabilities Act (ADA), and no
investigation has been made by Stanger with respect to any
potential environmental or ADA problems; (xi) Stangers
opinions of value do not reflect any potential premium or
discount that a potential buyer may assign to an assembled
portfolio of properties or to a group of properties in a
particular local market; and (xii) Stangers opinion of our
real estate portfolio value was based upon Stangers
engagement agreement with us, which called for the sole use
of the income approach to value, and the assumption that the
highest and best use of each property was as currently
improved. Furthermore, we have requested that Stanger adjust
its appraised value of the portfolio for the acquisition
cost, as provided by us, net of any acquisition costs or
fees, of any properties acquired in the three months
preceding the valuation date in order to derive a total real
estate portfolio value as of the valuation date.
Fair Value of Debt
Summary of Methodology
Stanger performed a valuation of our property-level debt by
reviewing available market data for comparable liabilities
and applying selected discount rates to the stream of
future debt payments. The discount rates were selected
based on several factors including U.S. Treasury,
Euro-Swap, U.K. Gilt, London Interbank Offered Rate and
Euro Interbank Offered Rate yields as of the valuation
date, as well as loan specific items such as loan-to-value
ratios, debt service coverage ratios, collateral property
location, age and type, prepayment terms, and maturity and
loan origination date.
The discount rates applied to the future property level
debt payments for the registrant ranged from approximately
1.3% to 11.0%. The weighted average contractual interest
rate was approximately 4.2%, and the estimated market
weighted average interest rate was approximately 3.9%
Conclusion as to Value of Debt
Based on the analysis described above, and subject to the
assumptions and limitations discussed below, Stanger
determined the aggregate fair market value of our
property-level debt to be approximately $2,287,659,000, as
of December 31, 2016.
Assumptions and Limitations
Stangers valuation of the property-level debt is based in
part on the as is market value of our real estate portfolio
as of December 31, 2016 and the estimates of property net
operating income contained therein, and is subject to the
assumptions and limiting conditions related thereto, as
discussed above. In addition, Stangers valuation of the
property-level debt is subject to certain other assumptions
and limiting conditions, including: (i) Stanger has been
provided with loan documents and/or loan summaries, loan
payment schedules and other factual loan information by W.
P. Carey Inc. (the ultimate parent company of our advisor)
and has relied upon and assumed that such information is
correct in all material respects and no warranty is given
by Stanger as to the accuracy of such information; (ii)
each collateral property is assumed to be free and clear of
liens (other than the mortgage being valued); (iii)
information furnished by others, upon which all or portions
of Stangers value opinion is based, is believed to be
reliable but has not been verified, and no warranty is
given as to the accuracy of such information; and (iv) all
mortgages are assumed to be salable, transferable or
assumable between parties and are further assumed not to be
in default. Stangers opinion of the property-level debt
value was predicated on the above assumptions.
Sensitivity Analysis
Assuming all other factors remain unchanged, the table
below presents the estimated increase or decrease to our
NAV for a 25 basis points increase and decrease in the
residual capitalization rates, discount rates and
capitalization rates for operating properties used in
calculating the NAV as of December 31, 2016:
Increase (Decrease) to the $10.11 NAV
per share due to
Increase of 25 bps
Decrease of 25 bps
Residual capitalization rates
$
9.97
$
10.26
Discount rates
$
9.88
$
10.35
Capitalization rates (1)
$
10.07
$
10.15
________
(1)
For operating properties where a direct
capitalization analysis was performed.
Updated NAV
Starting March 2017, the updated NAV per share of $10.11
will be used for purposes of effectuating permitted
redemptions of our common stock and issuing shares to our
distribution reinvestment plan.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits:
Exhibit No.
Description of Exhibit
99.1
Consent of Robert A. Stanger Co., Inc.


CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED (OTCMKTS:CPPY) Recent Trading Information

CORPORATE PROPERTY ASSOCIATES 17 – GLOBAL INCORPORATED (OTCMKTS:CPPY) closed its last trading session 00.00 at 8.50 with 1,252 shares trading hands.

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