<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended DECEMBER 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to ____________________
Commission file number 333-31437
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
(Exact name of registrant as specified in its charter)
MARYLAND 13-3951476
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 492-1100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
SHARES OF COMMON STOCK
(Title of Class)
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
/X/ Yes / / No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. / X /
Aggregate market value of the voting stock held by non-affiliates of
Registrant: There is no active market for common stock of Registrant at April 6,
1998. Non-affiliates held 2,651,661 shares of common stock, $.001 Par Value
outstanding at April 6, 1997.
<PAGE> 2
PART I
Item 1. Business.
Registrant was organized as a Maryland corporation on June 4, 1997.
Registrant intends to engage in the business of investing in commercial and
industrial real estate. Registrant intends to qualify as a real estate
investment trust for Federal income tax purposes for the year ended December 31,
1998. Registrant's operations are managed by Carey Property Advisors (the
"Advisor"), a Pennsylvania limited partnership, pursuant to an advisory
agreement between Registrant and the Advisor. The general partner of the Advisor
is Carey Fiduciary Advisors, Inc., a Pennsylvania corporation ("CFA"). The
Advisor is also the advisor of Corporate Property Associates 10 Incorporated
("CPA(R):10"), Carey Institutional Properties Incorporated ("CIP(TM)") and
Corporate Property Associates 12 Incorporated ("CPA(R):12"). An affiliate, Carey
Diversified LLC, is the general partner of nine CPA(R) Partnerships. Reference
is made to the Prospectus of Registrant dated November 10, 1997 filed pursuant
to Rule 424(b) under the Securities Act of 1933, and such Prospectus is
incorporated herein by reference.
A maximum of 30,000,000 Shares are being offered to the public on a
"best efforts" basis by Carey Financial Corporation ("Carey Financial") and
other selected dealers at a price of $10 per Share. Sale of the Shares to the
public commenced on December 11, 1997. On April 3, 1998, 2,651,661 Shares were
issued for $26,495,178, net of discounts. As of April 13, 1998, the Company had
acquired a 0.01% in a limited liability company that leases property to Etec
Systems, Inc. ("Etec").
Registrant currently intends to conduct business in one industry
segment consisting of the investment in and the leasing of industrial and
commercial real estate. Registrant currently has no operating history in this
industry segment. Under a net lease, the tenant is required to pay substantially
all expenses relating to the leased property.
Because Registrant's objective is to invest in properties that are
occupied by a single corporate tenant that are subject to net leases backed by
the credit of the corporate lessee, Registrant's properties will not initially
be subject to the competitive conditions of local and regional real estate
markets. Because Registrant would be affected by the financial conditions of its
lessees rather than the competitive conditions of the real estate marketplace,
Registrant's strategy will be to diversify its investments among tenants,
property types and industries in addition to achieving geographical
diversification. Registrant faces competition for acquisition of commercial and
industrial properties net leased to corporate tenants from financial
institutions and real estate investment trusts. Registrant also faces
competition from institutions that provide or arrange for other types of
commercial financing through private or public offerings of equity or debt or
traditional bank financings. Registrant believes that the expertise of the
Advisor in credit underwriting and transaction structuring will allow Registrant
to compete effectively. In underwriting a net lease transaction, Registrant
undertakes an analysis of the subject real estate and a credit analysis of the
prospective lessee. Registrant evaluates the prospective lessee's business and
financial outlook to determine the prospective lessee's ability to meet its
ongoing obligations. In performing this analysis, Registrant evaluates a number
of factors, including, but not limited to, the position of the prospective
lessee in its industry, its business franchise and the importance of the
property to its business.
It is anticipated that a portion of Registrant's property acquisitions
will be made in conjunction with acquisitions, recapitalizations and other
financial restructurings. In some of these transactions, an acquiring entity may
purchase all or substantially all of the stock or assets of a company and the
acquired company or its successor in interest thereby may become obligated on
the substantial loans necessary to finance the acquisition. Registrant may act
as one of several sources of financing by purchasing real property from the
seller of the subject company and net leasing it to such company or its
successor. The lessee typically will have substantially greater debt and
substantially lower net worth than that attributable to the company prior to the
transaction. Consequently, the lessee may be particularly vulnerable to adverse
conditions in the lessee's business or industry, adverse economic conditions
generally and increases in interest rates, which may result in higher payments
under the debt portion of the lessee's lease with Registrant. In addition, the
lessee's payment of lease rentals and debt service may prevent the lessee from
investing in new equipment and from devoting resources to research and
development or making other expenditures that are necessary to keep the lessee
competitive in its industry. Furthermore, if the lessee plans to replace
existing management, it will be more difficult for the Advisor to determine the
likelihood of the lessee's being successful in its business and of being able to
pay rentals throughout the term of a lease with Registrant.
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<PAGE> 3
In connection with the purchase of its properties, Registrant will
require sellers of such properties to perform environmental reviews and intends
that its properties will be in substantial compliance with Federal and state
environmental statutes at the time they are acquired. In addition, Registrant
intends to structure leases to require tenants to indemnify Registrant from all
liabilities and losses related to the leased properties with provisions of such
indemnification specifically addressing environmental matters. The leases
generally will include provisions that allow for periodic environmental
assessments, paid for by the tenant, and allow Registrant to extend leases until
such time as a tenant has satisfied its environmental obligations. Registrant
will attempt to negotiate leases that will require financial assurances from
tenants such as performance bonds or letters of credit if the costs of
remediating environmental conditions, in the estimation of Registrant, are in
excess of specified amounts.
Registrant's Advisor has responsibility for maintaining Registrant's
books and records. An affiliate of the Advisor services the computer systems
used for maintaining such books and records. In its preliminary assessment of
Year 2000 issues, the affiliate believes that such issues will not have a
material effect on Registrant's operations. Such assessment; however, has not
been completed. Registrant relies on its bank and transfer agent for certain
computer-related services and has initiated discussions to determine whether
they are addressing Year 2000 issues that may affect Registrant.
Registrant does not have any employees. An affiliate of the Advisor
performs accounting, secretarial and transfer services for Registrant. Resource
Phoenix Corporation performs certain transfer services for Registrant and The
Chase Manhattan Bank performs certain banking services for Registrant. In
addition, Registrant has an agreement with the Advisor pursuant to which the
Advisor provides certain management services for Registrant.
In February 1998, Registrant purchase a 0.01% interest in a limited
liability company in which the remaining interest is owned by CPA(R):12. The
limited liability company owns land and buildings leased to Etec. Registrant and
CPA(R):12 are committed to construct $52,356,000 of improvements, including
fees, at the property. Pursuant to the limited liability company agreement,
Registrant is committed to increase its ownership interest to 49.99%. Such
increase; however, cannot require Registrant to invest equity that would
represent more than 10% of its offering proceeds.
Item 2. Properties.
As of April 13, 1998, Registrant owns a 0.01% interest in a limited
liability company that owns property in Heyward, California leased to Etec
Systems, Inc. As more fully described in Note 5 to the Financial Statements in
Item 8, improvements to the property are currently under construction.
Item 3. Legal Proceedings.
As of the date hereof, Registrant is not a party to any material
pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the year ended
December 31, 1997 to a vote of security holders, through the solicitation of
proxies or otherwise.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
As of April 13, 1998, there was no market for Registrant's stock. On
April 3, 1998, Registrant issued 2,651,661 shares of common stock pursuant to
its offering.
-2-
<PAGE> 4
Item 6. Selected Financial Data.
FOR THE PERIOD FROM INCEPTION (JUNE 4, 1997) TO DECEMBER 31, 1997:
<TABLE>
<S> <C>
Revenues (1) $ 0
Net loss (12,255)
Basic loss per share (.61)
Weighted average number
of Shares outstanding - basic 20,000
Dividends paid 0
BALANCE SHEET DATA:
Total assets $ 200,000
Long-term obligations --
</TABLE>
(1) Registrant had no revenues.
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<PAGE> 5
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company was formed in June 1997 for the purpose of investing in net
lease commercial and industrial real estate, and has no operating history. The
Company is dependent upon proceeds from its Offering to conduct its proposed
activities. A maximum of 30,000,000 shares of common stock are being offered to
the public on a "best efforts" basis at a price of $10 per share. On April 3,
1998, the Company issued 2,651,661 shares ($26,495,178, net of discounts)
pursuant to the Offering. Other than the costs related to the Offering and
establishing a working capital reserve to satisfy liquidity requirements, the
net proceeds will be used, along with limited recourse mortgage debt, to acquire
properties. Generally, a property will be leased to one tenant deemed to be
creditworthy by the Company under a lease that in most cases requires such
tenant to pay all costs of operating the property such as insurance, maintenance
and real estate taxes. It is anticipated that approximately 86% of the money
raised in the offering will be used to purchase real estate.
The Company's investment objectives are to pay quarterly dividends at
an increasing rate with such dividends funded from operating cash flow, use the
net proceeds of the offering and limited recourse mortgage debt to invest in a
diversified portfolio of real estate that will increase in value and to increase
the Company's equity in its real estate by making regular mortgage principal
payments on its limited recourse mortgage debt. In addition, in structuring
lease transactions, the Company will attempt to negotiate grants of common stock
warrants in order to realize benefits of appreciation that may occur if the
credit rating of a tenant improves or the tenant completes an initial public
offering of common stock. There is no assurance; however, that these objectives
will be realized.
As described in Note 5 to the accompanying financial statements the
Company has entered into a commitment with an affiliate to fund improvements to
a property leased to Etec Systems, Inc. Etec and the affiliate entered into
their initial transaction in 1995.
The Company anticipates that inflation and changing prices will not
unfavorably affect the Company's revenues and net income. The Company intends to
structure its net leases with rent increase provisions based on either formulas
indexed to increases in the Consumer Price Index, sales overrides or other
periodic increases that are designed to increase lease revenues in the future.
As described above, the costs of operating properties will generally be absorbed
by the Company's tenants.
In connection with the purchase of its properties, the Company will
require sellers of such properties to perform environmental reviews. The Company
intends that its properties will be in substantial compliance with Federal and
state environmental statutes at the time they are acquired. Tenants will be
subject to environmental statutes and regulations regarding the discharge of
hazardous materials and any related remediation obligations. In addition, the
Company's leases will be structured to require tenants to indemnify the Company
from all liabilities and losses related to the leased properties with provisions
of such indemnification specifically addressing environmental matters. The
leases will generally include provisions that allow for periodic environmental
assessments, paid for by the tenant, and allow the Company to extend leases
until such time as a tenant has satisfied its environmental obligations. The
Company will also attempt to negotiate lease provisions to require financial
assurances from tenants such as performance bonds or letters of credit if the
costs of remediating environmental conditions, in the estimation of the Company,
are in excess of specified amounts.
The Company's Advisor has responsibility for maintaining the Company's
books and records. An affiliate of the Advisor services the computer systems
used for maintaining such books and records. In its preliminary assessment of
Year 2000 issues the affiliate believes that such issues will not have a
material effect on the Company's operations. Such assessment; however, has not
been completed. The Company relies on its bank and transfer agent for certain
computer-related services and has initiated discussions to determine whether
they are addressing Year 2000 issues that may affect the Company.
In June 1997, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in full set general purpose
financial statements. SFAS No. 130 is required to be adopted in 1998. The
Company is currently evaluating the impact, if any, of SFAS No. 130.
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<PAGE> 6
Item 8. Financial Statements and Supplementary Data.
(i) Opinion of Coopers & Lybrand L.L.P.
(ii) Balance Sheet at December 31, 1997.
(iii) Statement of Operations for the period from Inception (June 4, 1997) to
December 31, 1997.
(iv) Statement of Shareholders' Equity for the period from Inception (June
4, 1997) to December 31, 1997.
(v) Statement of Cash Flows for the period from Inception (June 4, 1997) to
December 31, 1997.
(vi) Notes to Financial Statements.
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<PAGE> 7
REPORT of INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Corporate Property Associates 14 Incorporated:
We have audited the accompanying balance sheet of Corporate Property
Associates 14 Incorporated as of December 31, 1997, and the related statements
of operations, shareholders' equity and cash flows for the period from inception
(June 4, 1997) to December 31, 1997. These financial statements are the
responsibility of Carey Property Advisors, a Pennsylvania limited partnership
(the "Advisor"). Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Advisor, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Corporate Property
Associates 14 Incorporated as of December 31, 1997, and the results of its
operations and its cash flows for the period from inception (June 4, 1997) to
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
New York, New York
April 13, 1998
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<PAGE> 8
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
BALANCE SHEET
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Cash and cash equivalents $ 200,000
---------
Total assets $ 200,000
=========
LIABILITIES:
Accounts payable to affiliates $ 4,255
Accounts payable and accrued expenses 8,000
---------
Total liabilities 12,255
---------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; authorized,
40,000,000 shares; issued and outstanding,
20,000 shares at December 31, 1997 20
Additional paid-in capital 199,980
Accumulated loss (12,255)
---------
Total shareholders' equity 187,745
---------
Total liabilities and
shareholders' equity $ 200,000
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 9
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
STATEMENT of OPERATIONS
For the period from Inception (June 4, 1997) to December 31, 1997
<TABLE>
<CAPTION>
1997
----
<S> <C>
Revenues: $ --
--------
Expenses:
General and administrative 12,255
--------
Net loss $(12,255)
========
Basic loss per share $ (.61)
--------
Weighted average shares outstanding - basic 20,000
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-8-
<PAGE> 10
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
STATEMENT of SHAREHOLDERS' EQUITY
For the period from Inception (June 4, 1997) to December 31, 1997
<TABLE>
<CAPTION>
Additional
Common Paid-in Accumulated
Stock Capital Loss Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
20,000 Shares issued
$.001 Par, at $10 per share $ 20 $ 199,980 $ 200,000
Net loss $ 12,255 (12,255)
--------- --------- --------- ---------
Balance at December 31, 1997 $ 20 $ 199,980 $ (12,255) $ 187,745
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 11
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
STATEMENT of CASH FLOWS
For the period from Inception (June 4, 1997) to December 31, 1997
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Cash flows from operating activities:
Net loss $ (12,255)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Increase in accounts payable and
accrued expenses 8,000
Increase in accounts payable to affiliates 4,255
---------
Net cash provided by operating activities --
---------
Cash flows from financing activities:
Proceeds from stock issuance 200,000
Net cash provided by financing activities 200,000
---------
Net increase in cash and cash equivalents 200,000
Cash and cash equivalents, beginning of period --
---------
Cash and cash equivalents, end of period $ 200,000
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 12
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
NOTES to FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. The most significant estimates will relate
to the assessment of recoverability of real estate assets.
Actual results could differ from those estimates.
The assessment of the recoverability of long-lived assets,
including residual interests of real estate assets, will be
based on projections of undiscounted cash flows over the life
of such assets. In the event that such cash flows are
insufficient, the assets will be adjusted to their estimated
fair value.
Real Estate Leased to Others:
Corporate Property Associates 14 Incorporated (the "Company")
intends to lease real estate to others on a net lease basis,
whereby the tenant is generally responsible for all operating
expenses relating to the property, including property taxes,
insurance, maintenance, repairs, renewals and improvements.
The leases will be accounted for under the operating and
direct financing methods.
Operating method - Real estate is recorded at cost,
revenue is recognized on a straight-line basis over
the terms of the lease and expenses (including
depreciation) are charged to operations as incurred.
Direct financing method - Leases accounted for under
the direct financing method are recorded at their net
investment. Unearned income is deferred and amortized
to income over the lease terms so as to produce a
constant periodic rate of return on the Company's net
investment in the lease.
Depreciation will be computed using the straight-line method
over the estimated useful lives of the properties - 40 years.
For properties under construction, interest charges will be
capitalized rather than expensed and rentals received will be
recorded as a reduction of capitalized project (i.e.,
construction) costs in accordance with Statement of Financial
Standard No. 67.
Cash Equivalents:
The Company considers all short-term, highly liquid
investments that are both readily convertible to cash and have
a maturity of generally three months or less at the time of
purchase to be cash equivalents. Items classified as cash
equivalents include commercial paper and money market funds.
At December 31, 1997, the Company's cash and cash equivalents
were held in the custody of one financial institution.
Continued
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<PAGE> 13
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
NOTES to FINANCIAL STATEMENTS, Continued
Offering Costs:
Costs incurred in connection with the raising of capital
through the sale of common stock will be charged to
shareholders' equity upon the issuance of shares to
shareholders.
Earnings Per Share:
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128
"Earnings Per Share" ("SFAS No. 128") which establishes
standards for computing and presenting earnings per share. The
adoption of SFAS No. 128 had no impact on the Company's
financial statements because the Company has a simple capital
structure, that is, one with only common stock outstanding. As
a result, the Company has presented basic per-share amounts
presented in the accompanying statement of operations.
Federal Income Taxes:
The Company did not elect to qualify as a real estate
investment trust ("REIT") for the year ended December 31, 1997
under the Internal Revenue Code of 1986. The Company intends
to elect to qualify as a REIT for 1998. The Company should not
be subject to Federal income taxes in future years, provided
it distributes at least 95% of its REIT taxable income to its
shareholders and meets other conditions necessary to retain
REIT status.
2. Organization and Offering:
The Company was formed on June 4, 1997 under the General
Corporation Law of Maryland for the purpose of engaging in the
business of investing in and owning industrial and commercial
real estate. Subject to certain restrictions and limitations,
the business of the Company is managed by Carey Property
Advisors, a Pennsylvania limited partnership (the "Advisor").
A maximum of 30,000,000 Shares are being offered to the public
on a "best efforts" basis by Carey Financial Corporation
("Carey Financial") and other selected dealers at a price of
$10 per Share. Sale of the Shares to the public commenced on
December 11, 1997. On April 3, 1998, 2,651,661 Shares were
issued for $26,495,178, net of discounts.
On June 30, 1997, the Advisor purchased 20,000 shares of
common stock ("Shares") for $200,000 and became the initial
shareholder of the Company.
3. Transactions with Related Parties:
The Company has entered into an advisory agreement with the
Advisor pursuant to which the Advisor performs certain
services for the Company including the identification,
evaluation, negotiation, purchase and disposition of property,
the day-to-day management of the Company and the performance
of certain administrative services. The Advisor and certain
affiliates will receive substantial fees and compensation in
connection with the offering and the operation of the Company
as described in the Prospectus of the Company.
In the future, real property may be acquired by limited
partnerships, REITs or other entities formed by affiliates of
the Company and, accordingly, transactions with related
parties may arise between the Company and affiliated entities.
The Company's asset management and performance fees payable to
the Advisor are each one-half of 1% per annum of Average
Invested Assets, as defined in the Prospectus. Until
Shareholders have received a cumulative dividend return of 6%,
the Advisor will not be entitled to receive the
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<PAGE> 14
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
NOTES to FINANCIAL STATEMENTS, Continued
performance fee. At such time as the Advisor is entitled to
receive the performance fee, the Advisor will have the option
of receiving such fee in cash or restricted shares of the
Company. General and administrative expense reimbursement
consists primarily of the actual cost of personnel, needed in
providing administrative services, necessary to the prudent
operation of the Company. No fees or reimbursements were
incurred in 1997.
The Advisor shall reimburse the Company at least annually for
the amount by which operating expenses of the Company exceed
the 2%/25% Guidelines (2% of Average Invested Assets or 25% of
net income) as defined in the Prospectus. To the extent that
operating expenses payable or reimbursable by the Company
exceed the 2%/25% Guidelines and the independent directors
find that such expenses were justified based on such unusual
and nonrecurring factors which they deem sufficient, the
Advisor may be reimbursed in future years for the full amount
or any portion of such excess expenses, but only to the extent
such reimbursement would not cause the Company's operating
expenses to exceed the 2%/25% Guidelines in any such year.
Fees are payable for services provided by the Advisor to the
Company relating to the identification, evaluation,
negotiation, financing and purchase of properties. A portion
of such fees will be deferred and payable in annual
installments with each installment equal to .25% of the
purchase price of the properties over no less than eight years
following the first anniversary of the date a property was
purchased. Payment of such fees is subject to the 2%/25%
Guidelines.
4. Commitments and Contingencies:
The Company will be liable for certain expenses of the
offering (the "Offering") described in the Prospectus of the
Company, including but not limited to filing, legal,
accounting, printing and escrow fees, which are to be deducted
from the gross proceeds of the Offering and are presently
estimated to aggregate a maximum of $10,500,000 assuming the
sale of 30,000,000 Shares. The Company will also be liable for
selling commissions of up to $0.65 (6.5%) per Share sold
except for any Shares sold to the Advisor, its Affiliates, the
selected dealers or any of their employees for their own
accounts. The Company will pay a selected dealer fee not to
exceed 1% of the price of each Share sold by the selected
dealer. The Company will reimburse Carey Financial for
expenses (including fees and expenses of its counsel) and for
the costs of sales, wholesaling services and information
meetings of Carey Financial's employees relating to the
Offering. To the extent, if any, that all organization and
offering expenses, excluding selling commissions, and any fees
paid and expenses reimbursed to the selected dealers or paid
on behalf of the selected dealers, exceed 3.5% of the gross
proceeds of the Offering, such excess will be paid by the
Advisor with no recourse to or reimbursement by the Company.
5. Subsequent Event:
In February 1995, Corporate Property Associates 12
Incorporated ("CPA(R):12"), an affiliate, purchased property
in Heyward, California and entered into a net lease with Etec
Systems, Inc. ("Etec"). In February 1998, CPA(R):12 entered
into a series of transactions that included the contribution
of the Etec properties to a limited liability company, ET LLC,
entering into a commitment and construction agency agreement
to fund additional improvements (the "Project II
Improvements") of up to $52,356,000 and amending the Etec
lease. On April 3, 1998, ET LLC received a commitment for
$45,000,000 of limited recourse financing on the Etec
properties.
Continued
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<PAGE> 15
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
NOTES to FINANCIAL STATEMENTS, Continued
Under the ET LLC limited liability company agreement,
CPA(R):12 and the Company will initially have 99.99% and .01%
interests, respectively, in the Project II Improvements with
the Company having the commitment to increase its interests in
the Project II Improvements to 49.99%. Such increase in the
Company's equity interest in ET LLC, however, is limited to
10% of the gross offering proceeds of the Offering.
The Etec lease, as amended, has an initial term through May
2014 with three five-year renewal terms at Etec's option.
After completion of the Project II Improvements, assuming that
the entire funding commitment is needed, annual rent
applicable to the Project II Improvements will be
approximately $5,727,000 with increases every three years
based on increases in the Consumer Price Index.
6. Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income." SFAS No. 130 establishes
standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in
full set general purpose financial statements. SFAS No. 130 is
required to be adopted in 1998. The Company is currently
evaluating the impact, if any, of SFAS No. 130.
-14-
<PAGE> 16
Item 9. Disagreements on Accounting and Financial Disclosure.
NONE
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<PAGE> 17
PART III
Item 10. Directors and Executive Officers of the Registrant.
The directors and executive officers of Registrant are as follows:
<TABLE>
<CAPTION>
Has Served as a
Director and/or
Name Age Positions Held Officer Since (1)
---- --- -------------- -----------------
<S> <C> <C> <C>
William P. Carey 67 Chairman of the Board 10/97
Director
William Ruder (1) 76 Director 10/97
George E. Stoddard 81 Director and 10/97
Chairman of Investment Committee
Charles C. Townsend, Jr. (1) 70 Director 10/97
Warren G. Wintrub (1) 63 Director 10/97
Thomas E. Zacharias (1) 43 Director 10/97
Barclay G. Jones III 37 President 10/97
Steven M. Berzin 47 Executive Vice President, 10/97
Chief Financial Officer and
Chief Legal Officer
Gordon F. DuGan 31 Executive Vice President 10/97
Claude Fernandez 45 Executive Vice President and 10/97
Chief Administrative Officer
Debra E. Bigler 44 Senior Vice President and 10/97
Regional Marketing Director
H. Augustus Carey 40 Senior Vice President, 10/97
National Marketing Director and
Secretary
Ted G. Lagreid 45 Senior Vice President and 10/97
Regional Marketing Director
Anthony S. Mohl 35 Senior Vice President - 10/97
Asset Management
John J. Park 33 Senior Vice President, 10/97
Director of Research and
Treasurer
Michael D. Roberts 46 Senior Vice President and 10/97
Controller
Gordon G. Whiting 31 Senior Vice President 10/97
</TABLE>
(1) Independent Director of Registrant.
H. Augustus Carey is the nephew of William Polk Carey.
A description of the business experience of each director of Registrant
is set forth below:
William Polk Carey, Chairman of the Board and Director, has been active
in lease financing since 1959 and a specialist in net leasing of corporate real
estate property since 1964. Before founding W.P. Carey & Co., Inc. ("W.P.
Carey") in 1973, he served as Chairman of the Executive Committee of Hubbard,
Westervelt & Mottelay (now Merrill Lynch Hubbard), head of Real Estate and
Equipment Financing at Loeb
-16-
<PAGE> 18
Rhoades & Co. (now Lehman Brothers), head of Real Estate and Private Placements,
Director of Corporate Finance and Vice Chairman of the Investment Banking Board
of duPont Glore Forgan Inc. A graduate of the University of Pennsylvania's
Wharton School of Finance and Commerce, Mr. Carey is a Governor of the National
Association of Real Estate Investment Trusts (NAREIT). He also serves on the
boards of The Johns Hopkins University, The James A. Baker III Institute for
Public Policy at Rice University, Templeton College of Oxford University and
other educational and philanthropic institutions. He founded the Visiting
Committee to the Economics Department of the University of Pennsylvania and
co-founded with Dr. Lawrence R. Klein the Economics Research Institute at that
University. Mr. Carey is also Chairman and a Director of Corporate Property
Associates 10 Incorporated ("CPA(R):10") Carey Institutional Properties
Incorporated ("CIP(TM)"), Corporate Property Associates 12 Incorporated
("CPA(R):12") and Chairman of the Executive Committee and Director of Carey
Diversified LLC ("Carey Diversified").
William Ruder, Independent Director of CPA(R):10 and CPA(R):12, is
Chairman of the Board of William Ruder Incorporated, a consulting firm founded
in 1981. From 1948 to 1981, Mr. Ruder was Chairman of Ruder & Finn, an
international public relations company which he co-founded. He is a former
Assistant Secretary of Commerce of the United States and is on the Board of
Directors of the United Nations Association of the United States of America,
Junior Achievement and the Council on Economic Priorities. A member of the Board
of Overseers of the Wharton School at the University of Pennsylvania for a
number years, he has also served as a consultant to the Communications Advisory
Board to the White House Press Secretary, the Committee for Economic Development
and the Office of Overseas Schools for the U.S. State Department. Mr. Ruder is a
lecturer at Harvard Graduate School of Business and is associated with several
other business, civic and cultural organizations.
George E. Stoddard, Director, was until 1979 head of the bond
department of The Equitable Life Assurance Society of the United States, with
responsibility for all activities related to Equitable's portfolio of corporate
investments acquired through direct negotiation. Mr. Stoddard was associated
with Equitable for over 30 years. He holds an A.B. degree from Brigham Young
University, an M.B.A. from Harvard Business School and an LL.B. from Fordham
University Law School. Mr. Stoddard is also a Director of CPA(R):10, CIP(TM) and
CPA(R):12.
Charles C. Townsend, Jr., Independent Director of CIP(TM) and Vice
Chairman of it's Board, was formerly Managing Director in charge of the
Corporate Finance Department at Morgan Stanley & Co. and Chairman of Morgan
Stanley Realty Corporation. Mr. Townsend holds a B.S.E.E. from Princeton
University and an MBA from Harvard University. Mr. Townsend is also a Director
of Carey Diversified.
Warren G. Wintrub, Independent Director of CPA(R):10 and CIP(TM),
became a partner at Coopers and Lybrand in 1963, specializing in taxation. He
served on Coopers and Lybrand's Executive Committee from 1976 to 1988 and a
Chairman of the Retirement Committee from 1979 until his retirement from the
firm in 1992. Mr. Wintrub serves as a director of Chromcraft Revingtron, Inc.
and Getty Petroleum Corp. He received a B.S. degree from Ohio State University
and an LL.B. degree from Harvard Law School.
Thomas E. Zacharias, Independent Director of CIP(TM) and CPA(R):12, is
currently a Vice President of Corporate Property Investors ("CPI") and a Vice
President of Corporate Realty Consultants. Mr. Zacharias, who joined CPI in
1981, is responsible for the asset management of $1.2 billion of real estate
assets. In addition, Mr. Zacharias is the Managing Member of the Mall of
Georgia, LLC, the largest regional mall development in the Southeastern U.S.
that is scheduled to open in August 1999. Prior to joining CPI in 1981, Mr.
Zacharias worked for the New York State Urban Development Corporation between
1979 and 1981 as Project Director for a number of economic development projects
and Assistant to the Chief Operating Officer. Mr. Zacharias graduated from
Princeton University in 1976 and received a Master in Public and Private
Management from the Yale School of Management in 1979. He is a member of The
National Association of Real Estate Investment Trusts, Urban Land Institute and
International Council of Shopping Centers.
Barclay G. Jones III, President, joined W.P. Carey as Assistant to the
President in July 1982 after his graduation from the Wharton School of the
University of Pennsylvania, where he majored in Finance and Economics. He was
elected to the Board of Directors of W.P. Carey in April 1992. Mr. Jones is also
a Director of the Wharton Business School Club of New York and Carey
Diversified.
-17-
<PAGE> 19
Steven M. Berzin, Executive Vice President, Chief Financial Officer and
Chief Legal Officer, joined W.P. Carey in July 1997 as Executive Vice President,
Chief Financial Officer, Chief Legal Officer and a Managing Director. From 1993
to 1997, Mr. Berzin was Vice President - Business Development of General
Electric Capital Corporation in the office of the Executive Vice President and,
more recently, in the office of the President, where he was responsible for
business development activities and acquisitions. From 1985 to 1992, Mr. Berzin
held various positions with Financial Guaranty Insurance Company, the last two
being managing Director, Corporate Development and Senior Vice President and
Chief Financial Officer. Mr. Berzin associated with the law firm of Cravath,
Swaine & Moore from 1978 to 1985 and from 1976 to 1977, he served as law clerk
to the Honorable Anthony M. Kennedy, then a United States Circuit Judge. Mr.
Berzin received a B.A. and M.A. in Applied Mathematics from Harvard University,
a B.A. in Jurisprudence and an M.A. from Oxford University and a J.D. from
Harvard Law School. Mr. Berzin is also Vice Chairman, Chief Legal Officer and a
Director of Carey Diversified.
Gordon F. DuGan, Executive Vice President, was elected Executive Vice
President and a Managing Director of W.P. Carey in June 1997. Mr. Dugan rejoined
W.P. Carey as Deputy Head of Acquisitions in February 1997. Mr. Dugan was until
September 1995 a Senior Vice President in the Acquisitions Department of W.P.
Carey. Mr. Dugan joined W.P. Carey as Assistant to the Chairman in May 1988,
after graduating from the Wharton School at the University of Pennsylvania where
he concentrated in Finance. From October 1995 until February 1997, Mr. Dugan was
Chief Financial Officer of Superconducting Core Technologies, Inc., a
Colorado-based wireless communications equipment manufacturer. Mr. Dugan is also
President and Director of Carey Diversified.
Claude Fernandez, Executive Vice President and Chief Administrative
Officer, is a Managing Director of W.P. Carey and joined W.P. Carey in 1983 as
Assistant Controller. Previously associated with Coldwell Banker, Inc. for two
years and with Arthur Andersen & Co., he is a certified public accountant. Mr.
Fernandez received a B.S. degree in accounting from New York University in 1975
and an M.B.A. in finance from Columbia University Graduate School of Business in
1981.
H. Augustus Carey, Senior Vice President, returned to W.P. Carey in
1988 and is President of W.P. Carey's broker-dealer subsidiary. Mr. Carey
previously worked for W.P. Carey from 1979 to 1981 as Assistant to the
President. Prior to rejoining W.P. Carey, Mr. Carey served as a loan officer of
the North American Department of Kleinwort Benson Limited in London, England. He
received an A.B. from Amherst College in 1979 and an M.Phil. in Management
Studies from Oxford University in 1984. Mr. Carey is a trustee of the Oxford
Management Centre Associates Council.
Debra E. Bigler, elected Senior Vice President in April 1998, joined
W.P. Carey in March 1989 as Assistant Marketing Director and became Vice
President and Marketing Director of W.P. Carey in July 1991 and a First Vice
President in October 1995. A regional marketing director responsible for
investor services n the south and south central United States, Ms. Bigler joined
W.P. Cary in March 1989 as Assistant Marketing Director. Ms. Bigler was employed
as a Marketing Associate with E.F. Hutton & Company Inc. from July 1980 to
January 1989.
Ted G. Lagreid, elected Senior Vice President in April 1998, joined
W.P. Carey as Marketing Director in 1994 and became a First Vice President in
October 1995. Mr. Lagreid is a regional marketing director responsible for
investor services in the western United States. Prior to joining the firm, from
July 1993 through October 1994, he was employed by the Shugard Capital Group
then from January 1991 to July 1993, for SunAmerica where he was an executive of
its mutual funds group. He earned an A.B. from the University of Washington,
received an M.P.A. from the University of Puget Sound and then spent eight years
in the City of Seattle's Department of Community Development. Mr. Lagreid was a
commissioner of the City of Oakland, California, having served on its Community
and Economic Development Advisory Commission.
Anthony S. Mohl, Senior Vice President and Director - Asset Management,
joined W.P. Carey in 1987 as Assistant to the President after receiving his
M.B.A. from the Columbia University Graduate School of Business. Mr. Mohl was
employed as an analyst in the strategic planning group at Kurt Salmon Associates
after receiving an undergraduate degree from Wesleyan University.
John J. Park, Senior Vice President, Treasurer and Director of
Research, joined W.P. Carey as an Investment Analyst in December 1987. Mr. Park
received an undergraduate degree from Massachusetts Institute of Technology and
an M.B.A. in Finance from New York University.
-18-
<PAGE> 20
Michael D. Roberts, elected Senior Vice President in April 1998, joined
W.P. Carey in April 1989 as a Second Vice President and Assistant Controller and
was named Vice President and Controller in October 1989 and First Vice President
in July 1990. From August 1980 to April 1989, he was employed by Coopers &
Lybrand L.L.P. and held the position of Audit Manager at the time of his
departure. A certified public accountant, Mr. Roberts received a B.A. in
Sociology from Brandeis University and an M.B.A. from Northeastern University.
Gordon G. Whiting, elected Senior Vice President in April 1998, joined
the Acquisitions Department of W.P. Carey as a Second Vice President in
September 1994 after receiving an M.B.A. from the Columbia University Graduate
School of Business where he concentrated in finance. Mr. Whiting founded an
import/export company based in Hong Kong after receiving a B.S. from Cornell
University.
Item 11. Executive Compensation.
Under Registrant's Advisory Agreement with Carey Property Advisors, a
Pennsylvania limited partnership (the "Advisor"), the Advisor earns asset
management and performance fees each equal to one-half of 1% per annum of
Average Invested Assets for the preceding twelve months, as defined. For the
period ended December 31, 1997, the Advisor did not earn any asset management
and performance fees.
Registrant is required to pay directors' fees to Independent Directors
of Registrant but is not required to pay, and has not paid, any cash
remunerations to the officers or other directors of Registrant, directors or
officers of the Corporate General Partner of the Advisor or of any of the
affiliates of Registrant during the year ended December 31, 1997. Independent
Directors of Registrant as a group received no compensation during the year
ended December 31, 1997.
For a description of the subordinated interest of the Advisor and its
affiliates, reference is made to the material contained in the Prospectus under
the heading MANAGEMENT COMPENSATION.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of December 31, 1997, no person owned of record, or was known by
Registrant to own beneficially more than 5% of the Shares of Registrant.
The following table sets forth as of April 6, 1998 certain information
as to the security ownership of Registrant:
<TABLE>
<CAPTION>
Number of Shares
Name of and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
<S> <C> <C> <C>
Common Stock of
Registrant William Polk Carey 20,000 (1) .75%
William Ruder
George E. Stoddard
Charles C. Townsend
Warren G. Wintrub
Thomas E. Zacharias
Common Stock of
Registrant All directors and executive
officers as a group (17 persons) 20,000 .75
</TABLE>
(1) As of April 6, 1998, the Advisor owned 20,000 Shares of Registrant
representing approximately .75% of the outstanding Shares and is
beneficially owned by William P. Carey.
-19-
<PAGE> 21
William Polk Carey owns 100% of the outstanding stock of Carey
Fiduciary Advisors, the General Partner of Carey Property Advisors, L.P.
There exists no arrangement, known to Registrant, the operation of
which may at a subsequent date result in a change of control of Registrant.
Item 13. Certain Relationships and Related Transactions.
No officer or director of the Advisor, or any other affiliate of
Registrant or any member of the immediate family or associated organization of
any such officer or director was indebted to Registrant at any time since the
beginning of Registrant's last fiscal year.
-20-
<PAGE> 22
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements:
The following financial statements are filed as a part of this
Report:
Report of Independent Accountants.
Balance Sheet, December 31, 1997.
Statement of Operations for the period from Inception (June 4, 1997) to
December 31, 1997.
Statement of Shareholders' Equity for the period from Inception (June
4, 1997) to December 31, 1997.
Statement of Cash Flows for the period from Inception (June 4, 1997) to
December 31, 1997.
Notes to Financial Statements.
(a) 2. Financial Statement Schedule:
Financial Statement Schedules are omitted because the required
information is given in the Financial Statements, including the Notes thereto,
or because the conditions requiring their filing do not exist.
-21-
<PAGE> 23
(a) 3. Exhibits:
The following exhibits are filed as part of this Report. Documents
other than those designated as being filed herewith are incorporated herein by
reference.
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
<S> <C> <C>
3.1 Articles of Amendment and Restatement. Exhibit 3(A) to Regis-
tration Statement (Form
S-11) No. 333-31437
3.2 Amended Bylaws of Registrant. Exhibit 3(B) to Regis-
tration Statement (Form
S-11) No. 333-31437
10.1 Amended Advisory Agreement . Exhibit 10(A)(2) to
Registration Statement
(Form S-11) No. 333-31437
23.1 Consent of Coopers & Lybrand L.L.P. Filed herewith
Dated April 13, 1998
</TABLE>
(b) Reports on Form 8-K
During the quarter ended December 31, 1997 the Registrant was not
required to file any reports on Form 8-K.
-22-
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
a Maryland corporation
04/13/98 BY: /s/ Steven M. Berzin
- ------------------- -------------------------------------
Date Steven M. Berzin
Executive Vice President, Chief Legal
Officer and Chief Financial Officer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
04/13/98 BY: /s/ William P. Carey
- ------------------- -------------------------------------
Date William P. Carey
Chairman of the Board and Director
(Principal Executive Officer)
04/13/98 BY: /s/ Barclay G. Jones, III
- ------------------- -------------------------------------
Date Barclay G. Jones, III
President and Director
04/13/98 BY: /s/ William Ruder
- ------------------- -------------------------------------
Date William Ruder
Director
04/13/98 BY: /s/ George E. Stoddard
- ------------------- -------------------------------------
Date George E. Stoddard
Director
04/13/98 BY: /s/ Charles C. Townsend, Jr.
- ------------------- -------------------------------------
Date Charles C. Townsend, Jr.
Director
04/13/98 BY: /s/ Warren G. Wintrub
- ------------------- -------------------------------------
Date Warren G. Wintrub
Director
04/13/98 BY: /s/ Thomas E. Zacharias
- ------------------- -------------------------------------
Date Thomas E. Zacharias
Director
04/13/98 BY: /s/ Steven M. Berzin
- ------------------- -------------------------------------
Date Steven M. Berzin
Executive Vice President, Chief Legal
Officer and Chief Financial Officer
(Principal Financial Officer)
04/13/98 BY: /s/ Claude Fernandez
- ------------------- -------------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
-23-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Corporate Property Associates 14 Incorporated on Form S-11 (File No. 333-31437)
of our report dated April 13, 1998, on our audit of the financial statements of
Corporate Property Associates 14 Incorporated as of December 31, 1997 and for
the period from inception (June 4, 1997), which report is included in the Annual
Report on Form 10-K.
/s/Coopers & Lybrand L.L.P.
New York, New York
April 13, 1998
-24-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 200,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 200,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 200,000
<CURRENT-LIABILITIES> 12,255
<BONDS> 0
0
0
<COMMON> 20
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 200,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,255
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (12,255)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,255)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,255)
<EPS-PRIMARY> (.61)
<EPS-DILUTED> (.61)
</TABLE>
