<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended JUNE 30, 1999
of
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
CPA(R):14
A MARYLAND Corporation
IRS Employer Identification No. 13-3951476
SEC File Number 000-25771
50 ROCKEFELLER PLAZA,
NEW YORK, NEW YORK 10020
(212) 492-1100
CPA(R):14 has SHARES OF COMMON STOCK registered pursuant to
Section 12(g) of the Act.
CPA(R):14 is not registered on any exchanges.
CPA(R):14 does not have any Securities registered pursuant to
Section 12(b) of the Act.
CPA(R):14 is unaware of any delinquent filers pursuant to Item
405 of Regulation S-K.
CPA(R):14 (1) has filed all reports required by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for 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.
CPA(R):14 has no active market for common stock at August 9,
1999. 22,458,395 shares of common stock, $.001 Par Value
outstanding at August 9, 1999.
<PAGE> 2
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I
Item 1. - Financial Information*
Condensed Consolidated Balance Sheets, December 31, 1998
and June 30, 1999 2
Condensed Consolidated Statements of Income for the three
and six months ended June 30, 1998 and 1999 3
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1999 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II - Other Information
Item 3. - Quantitative and Qualitative Disclosures About Market Risk 10
Item 4. - Submission of Matters to a Vote of Security Holders 10
Item 6. - Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
* The summarized financial information contained herein is unaudited; however,
in the opinion of management, all adjustments necessary for a fair presentation
of such financial information have been included.
-1-
<PAGE> 3
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
PART I
Item 1. - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
---- ----
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land and buildings, net of accumulated
depreciation of $175,977 at December 31, 1998
and $518,269 at June 30, 1999 $ 44,566,025 $ 58,284,824
Equity investments 36,097,004 78,256,457
Cash and cash equivalents 26,747,058 77,696,135
Other assets 545,842 1,521,026
------------- -------------
Total assets $ 107,955,929 $ 215,758,442
============= =============
LIABILITIES:
Limited recourse mortgage notes payable $ 9,690,338
Accrued interest 26,346
Accounts payable to affiliates $ 537,874 891,110
Accounts payable and accrued expenses 169,735 105,994
Deferred acquisition fees payable to affiliate 1,628,828 2,456,646
Dividends payable 1,365,622 2,603,735
Prepaid rental income and security deposits 343,767 408,767
------------- -------------
Total liabilities 4,045,826 16,182,936
------------- -------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; authorized, 40,000,000
shares; issued and outstanding, 11,837,901 and
22,458,395 shares at December 31, 1998 and
June 30, 1999 11,838 22,458
Additional paid-in capital 105,705,582 203,929,867
Distributions in excess of accumulated earnings (1,643,957) (4,111,516)
------------- -------------
104,073,463 199,840,809
Less treasury stock at cost, 16,900 and 27,745
shares at December 31, 1998 and June 30, 1999 (163,360) (265,303)
------------- -------------
Total shareholders' equity 103,910,103 199,575,506
------------- -------------
Total liabilities and
shareholders' equity $ 107,955,929 $ 215,758,442
============= =============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Note: The balance sheet at December 31, 1998 has been derived from the
audited consolidated financial statements at that date.
-2-
<PAGE> 4
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS of INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1999 June 30, 1998 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 2,200 $ 1,225,382 $ 2,200 $ 2,245,540
Other interest income 318,586 290,669 318,586 543,975
----------- ----------- ----------- -----------
320,786 1,516,051 320,786 2,789,515
----------- ----------- ----------- -----------
Expenses:
Depreciation and amortization 5,666 189,777 5,666 345,199
Interest 25 123,027 25 158,206
General and administrative 129,958 283,191 246,587 447,524
Property expenses 11,113 349,238 11,113 598,743
----------- ----------- ----------- -----------
146,762 945,233 263,391 1,549,672
----------- ----------- ----------- -----------
Income before income from
equity investments 174,024 570,818 57,395 1,239,843
Income from equity investments 612,934 945,856
----------- ----------- ----------- -----------
Net income $ 174,024 $ 1,183,752 $ 57,395 $ 2,185,699
=========== =========== =========== ===========
Basic and diluted earnings per share $ .06 $ .07 $ .04 $ .15
=========== =========== =========== ===========
Weighted average shares outstanding
- basic and diluted 2,811,656 16,071,527 1,423,540 14,349,579
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
-3-
<PAGE> 5
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 57,395 $ 2,185,699
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 5,666 345,199
Straight-line rent adjustments (78,823)
Increase in other assets (63,100) (46,649)
Increase in accrued interest 26,346
Increase (decrease) in accounts payable and
accrued expenses 62,150 (63,741)
Increase in accounts payable to affiliates 251,325 154,823
Increase in prepaid rental income and
security deposits 198,000 65,000
------------- -------------
Net cash provided by operating activities 511,436 2,587,854
------------- -------------
Cash flows from investing activities:
Acquisitions of real estate and equity investments
and other capitalized costs (7,388,482) (55,804,696)
Equity distributions received in excess of
equity income (3,181,895) 411,970
------------- -------------
Net cash used in investing activities (10,570,377) (55,392,726)
------------- -------------
Cash flows from financing activities:
Proceeds from sale of stock, net of costs 43,417,183 98,234,905
Dividends paid (3,415,145)
Proceeds from mortgages 9,700,000
Payment of mortgage principal (9,662)
Deferred financing costs and mortgage deposits (654,206)
Purchase of treasury stock (101,943)
------------- -------------
Net cash provided by financing activities 43,417,183 103,753,949
------------- -------------
Net change in cash and cash equivalents 33,358,242 50,949,077
Cash and cash equivalents, beginning of period 200,000 26,747,058
------------- -------------
Cash and cash equivalents, end of period $ 33,558,242 $ 77,696,135
============= =============
Interest paid $ 131,860
=============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
-4-
<PAGE> 6
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements of
Corporate Property Associates 14 Incorporated and its wholly-owned subsidiaries
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Article 10 of Regulation S-X of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. All significant intercompany balances and transactions
have been eliminated. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the results of the interim period presented have been included. The results of
operations for the interim period are not necessarily indicative of results for
the full year. For further information, refer to the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
Note 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"), an affiliate of the
Advisor, and selected dealers at a price of $10 per share. The offering
commenced November 10, 1997. Since the inception of the offering, 22,438,395
shares ($224,383,950) have been issued including 10,620,494 shares issued since
December 31, 1998. In April 1999, the Company filed an offering with the
Securities and Exchange Commission to sell up to an additional 40,000,000 shares
on a best efforts basis.
Note 3. Transactions with Related Parties:
The Company's asset management and performance fees payable to the Advisor are
each 1/2 of 1% per annum of Average Invested Assets, as defined in the
Prospectus. Until the Company has achieved a 7% cumulative rate of cash flow
from operations, as defined in the Prospectus, the Advisor will not be entitled
to receive the 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. Asset management fees for the
three-month and six-month periods ended June 30, 1999 were $155,512 and
$276,809, respectively, with performance fees in like amount, and general and
administrative reimbursements were $88,436 and $130,523, respectively. For both
the three-month and six-month periods ended June 30, 1998, asset management fees
were $5,557, with performance fees in like amount, and general and
administrative reimbursements were $20,000 and $100,000, respectively.
Note 4. Commitments and Contingencies:
The Company is liable for certain expenses of the offering which are being
deducted from the gross proceeds of the offering up to a maximum of $10,500,000
assuming the sale of 30,000,000 Shares. The Company is currently paying selling
commissions of $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 is paying a selected dealer fee not to exceed 1%
of the price of each share sold by the selected dealer. The Company is
reimbursing Carey Financial for expenses (including fees and expenses of its
counsel) and for the costs of sales and wholesaling services. 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.
-5-
<PAGE> 7
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 5. Lease Revenues:
The Company's operations consist of the investment in and the leasing of
industrial and commercial real estate. The financial reporting sources of the
lease revenues for the six month periods ended June 30, 1998 and 1999 are as
follows:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Per Statements of Income
Rental income $2,200 $2,245,540
Adjustment:
Share of leasing revenues
from equity investments 2,410,436
------ ----------
$2,200 $4,655,976
====== ==========
</TABLE>
For the six-month period ended June 30, 1998 and 1999, the Company earned its
proportionate net lease revenues from its investments as follows:
<TABLE>
<CAPTION>
1998 % 1999 %
---- - ---- -
<S> <C> <C> <C> <C>
Advanced Micro Devices, Inc. (a) $1,524,250 33%
Best Buy Co., Inc. 979,493 21
Intesys Technologies, Inc. (a) 460,144 10
Burlington Motor Carrier, Inc. $2,200 100% 396,000 8
Compucom Systems, Inc. (a) 329,880 7
The Benjamin Ansehl Company 324,875 7
Contraves Brashear Systems L.P. 321,750 7
Production Resource Group LLC 223,422 5
CheckFree Holdings Corporation (a) 96,162 2
------ --- ---------- ---
$2,200 100% $4,655,976 100%
====== === ========== ===
</TABLE>
(a) Represents the Company's proportionate share of lease revenues from its
equity investments
Note 6. Equity Investments:
The Company holds interests in five entities at June 30, 1999 (and two at
December 31, 1998) in which its ownership interest is 50% or less. All of the
underlying investments were formed and are owned with affiliates that have
similar investment objectives as the Company. The Company owns a 33.33% interest
in an entity that in December 1998 purchased property and is net leased to
Advanced Micro Devices, Inc.. The Company holds interests of 50%, 33.33% and 50%
in entities that entered into net leases with Intesys Technologies, Inc.,
Compucom Systems, Inc. and CheckFree Holdings Corporation, respectively, during
the six-month period ended June 30, 1999 and an interest in a limited liability
company that net leases a property to Etec Systems, Inc. ("Etec"). The interest
in the Etec investment is limited to a 49.99% interest in a building under
construction on the Etec property with Corporate Property Associates 12
Incorporated ("CPA(R):12"), an affiliate, owning all remaining interests in the
property. Summarized combined financial information of the Company's equity
investees is as follows:
<TABLE>
<CAPTION>
(In thousands) December 31, 1998 June 30,1999
----------------- ------------
<S> <C> <C>
Assets (primarily real estate) $56,069 $257,403
Liabilities (primarily mortgage notes payable) 16,276 124,304
Members' equity 39,793 133,099
Six Months Ended
June 30,1999
------------
Revenues (primarily rental revenues) $ 8,169
Expenses (primarily interest on mortgage and depreciation) 4,995
Net income 3,174
</TABLE>
-6-
<PAGE> 8
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 7. Acquisitions:
A. On June 3, 1999, the Company and Carey Diversified LLC ("CDC"), an
affiliate, both through 50% ownership interests in a limited liability
company purchased land and building in Norcross, Georgia for $30,785,340
and assumed existing net leases with CheckFree Corporation, Inc.
("CheckFree"). CheckFree's lease obligations have been unconditionally
guaranteed by its parent company, CheckFree Holdings, Inc.
The CheckFree leases have remaining terms through December 31, 2015. The
annual combined rent on the leases is currently $2,564,321. The annual rent
on the land lease with CheckFree provides for annual rent of $76,577 with
stated rent increases effective January 2000, 2005 and 2010. Annual rent on
the building lease is $2,487,744 with rent increases scheduled for January
2004 and each year thereafter based on a formula indexed to increases in
the Consumer Price Index ("CPI"), capped at 2.5% per year.
The purchase of the CheckFree property was financed with a limited recourse
mortgage loan of $15,800,000 collateralized by a deed of trust on the
CheckFree property and lease assignments. The loan bears interest at an
annual variable rate of interest equal to the sum of the London InterBank
Offered Rate ("LIBOR") and 2.5% and provides for scheduled principal
payments that approximate a twenty-five year amortization schedule. The
loan is scheduled to mature on June 1, 2006 at which time a balloon payment
will be due. The loan is prepayable at any time without premium.
The Company and CDC also assumed an existing agreement to construct an
additional office building at the CheckFree property on a build-to-suit
basis at a cost not to exceed $11,060,745. Upon completion of construction,
which is scheduled for June, 2000, CheckFree's annual rent will increase by
approximately $1,550,000. The Company and CDC have obtained limited
recourse mortgage financing of $7,500,000 that will be used to partially
fund the construction. The loan bears interest at an annual variable rate
equal to the sum of LIBOR and 2.5% with principal payment installments,
effective August 1, 2000, based on a twenty-five year amortization
schedule. This loan will also mature on August 1, 2000 at which time a
balloon payment will be due.
The Company will account for its interests in the CheckFree limited
liability company under the equity method of accounting.
B. On June 29, 1999, the Company purchased a property in Harrisburg, North
Carolina for $7,805,807 upon which a build-to-suit facility will be
constructed and net leased to Builders' Supply and Lumber Co., Inc
("Builders' Supply"). A deposit of $5,035,510 has been made in a
construction escrow account. Completion of construction is expected to
occur in February 2000 at which time an initial lease term of twenty years
will commence. Annual rent initially will be $760,000 with rent increases
each year based on a formula indexed to increases in the CPI, capped at 2%
per year. The lease provides for a renewal term of ten years at the option
of Builders' Supply.
Note 8. Subsequent Events:
On July 19, 1999, the Company purchased land and building in Gardenia,
California for $6,282,723 and entered into a net lease with Scott Co. of
California ("Scott"). The lease obligations of Scott are unconditionally
guaranteed by its parent company, The Scott Companies, Inc. The Scott lease has
an initial term of twenty years with three five-year renewal terms at Scott's
option. Annual rent is $681,000 with rent increases every three years based on a
formula indexed to increases in the CPI.
In connection with the Scott purchase, the Company obtained $3,000,000 of
limited recourse mortgage financing collateralized by a deed of trust and a
lease assignment. The loan provides for monthly payments of interest and
principal of $22,709 at an annual interest rate of 8.21%. The loan matures in
August 2009 at which time a balloon payment will be due.
-7-
<PAGE> 9
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the Company's
condensed consolidated financial statements and notes thereto as of June 30,
1999 included in this quarterly report and the Company's Annual Report on Form
10-K for the year ended December 31, 1998. This quarterly report contains
forward looking statements. Such statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievement of the Company to be materially different from the results of
operations or plan expressed or implied by such forward looking statements.
Accordingly, such information should not be regarded as representations by the
Company that the results or conditions described in such statements or the
objectives and plans of the Company will be achieved.
RESULTS OF OPERATIONS:
The Company was formed in June 1997 for the purpose of investing in net
lease commercial and industrial real estate. During the fourth quarter of 1997,
the Company commenced an offering of up to 30,000,000 shares of common stock on
a "best efforts" basis at a price of $10 per share. The initial issuance of
shares pursuant to the offering was on April 3, 1998, and the Company purchased
its first property on June 29, 1998. Because the Company has a limited operating
history, the results of operations for the three-month and six-month periods
ended June 30, 1998 and 1999 are not comparable. The Company is still raising
capital and evaluating potential investments that are expected to increase the
Company's asset base substantially. Therefore, the operating results for the
current three-month and six-month periods are not expected to be indicative of
future results. As the asset base increases and the portfolio becomes more
diversified, revenues and expenses are expected to increase substantially. The
Company intends to leverage most of its acquired properties with limited
recourse mortgage debt, and to use the proceeds from mortgage financings for the
purchase of additional real estate. As a result, interest expense will also
increase substantially. Earnings from the Company's current holdings will
increase because the Company purchased investments in real estate leased to
Intesys Technologies, Inc., Compucom Systems, Inc., Production Resource Group
L.L.C., CheckFree Corporation and The Scott Companies, Inc. since December 31,
1998. This will also have the effect of reducing the concentration of revenues
from transactions completed in 1998. Accordingly, the current six-month period
does not reflect a full six months operating results from these investments. In
addition, investments in properties leased to Metagenics, Inc. and Builders'
Supply and Lumber Company are under construction and, therefore, are not yet
contributing to earnings. The Company's interest in a build-to-suit project for
Etec Systems, Inc. has been substantially completed, effective August 1, 1999.
Since the inception of its offering, the Company has raised equity capital
of approximately $224,000,000 which it is using along with limited recourse
financing to purchase a diversified real estate portfolio and to enter into
long-term leases with corporate tenants on a net lease, single tenant basis.
Under a net lease, a tenant is generally required to pay all operating expenses
related to the leased property. The tenant's responsibility for operating
expenses limits the Company's exposure to the effects of increases in real
estate taxes, insurance and maintenance costs that are generally borne by
landlords. The leases are generally structured to include rent increase
provisions which have periodic, stated increases or are based upon increases in
the Consumer Price Index.
FINANCIAL CONDITION:
Cash flow from operations and distributions from equity investments
totalling $3,000,000 were not sufficient to fund fully the quarterly dividends
of $3,415,000. Because the funds currently invested in build-to-suit projects
under construction do not produce a return that is reflected in cash flow from
operations, operating cash flow from the current portfolio is lower than if the
funds used for these investments had been used to purchase completed projects.
The Company believes that the build-to-suit projects in its portfolio, including
the commitment to build an additional facility at the CheckFree property, will
provide greater long-term results than other potential investments that it
evaluated. A main objective of the Company is to fund fully dividends from its
operating cash flow and equity investment distributions. In order to meet this
objective, the Company will ultimately need to invest its cash balances because
the rate of return on real estate investments is higher than the return on
uninvested cash. The Company believes that to meet long-term objectives, it is
necessary to analyze proposed transactions prudently and deliberately and to
invest its funds with long-term diversification and return considerations in
mind.
-8-
<PAGE> 10
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The Company's investing activities consisted of using $55,805,000 for the
purchase of the equity interests in Intesys, Compucom and CheckFree, to fund the
build-to-suit projects on the Metagenics, Etec, Builders' Supply and CheckFree
properties and to purchase the Production Resource Group property. As of June
30, 1999, the Company had approximately $73,000,000 of cash available for
investment. Available cash for investment will increase as additional offering
proceeds are received and limited recourse financing on existing properties is
obtained. Since June 30, 1999, the Company has used $6,283,000 to purchase
property net leased to Scott Co. of California.
In addition to paying dividends, the Company's financing activities
included raising new equity capital of $98,235,000 and obtaining limited
recourse mortgage loans of $9,700,000 on the properties leased to the Contraves
Brashear Systems L.P. and Production Resources. Since June 30, 1999, the Company
has obtained $3,000,000 of limited recourse financing on the Scott property and
a distribution of approximately $6,565,000 from its equity investment in a
property leased to Intesys, Inc. as a result of placing mortgage financing on
the Intesys property. The Company has also filed a registration statement with
the U.S. Securities and Exchange Commission for a public offering of up to
40,000,000 shares of common stock on a "best efforts" basis at a price of $10
per share. The offering would commence after the completion of the current
offering. The current offering will conclude by no later than November 21, 1999.
YEAR 2000 ISSUES:
The "Year 2000 issue" refers to the series of problems that have
resulted or may result from the inability of certain computer software and
embedded processes to properly process dates. This shortcoming could result in
the failure of major systems or miscalculations causing major disruptions to
business operations. The Company has no information technology systems of its
own, but is dependent upon systems maintained by an affiliate of its Advisor,
and certain other third parties including banks and its transfer agent.
The Company and its affiliates have been evaluating their readiness
relating to Year 2000 issues since 1998. The affiliates' core information
technology systems used in administering the Company's business operations have
been upgraded or replaced, as needed, to become Year 2000 compliant. These
systems include desktop computers, network servers, operating systems and
applications software. A new, compliant, integrated accounting and asset
management system is currently being installed and is expected to be functional
in the fourth quarter of this year. Compliance of these systems with Year 2000
requirements has been determined through a combination of internal testing,
where feasible, and vendor representations. Non-core information technology
systems are currently being reviewed for compliance with Year 2000 requirements.
Such systems, although not critical to the Company's business operations, are
expected to be substantially upgraded or replaced before the end of 1999.
The Company has contacted and is evaluating documentation from its
critical third party vendors and suppliers including banks, transfer agents and
telecommunications service providers regarding their Year 2000 compliance. The
responses received have generally been positive although the Company cannot be
assured that such providers have adequately considered the impact of Year 2000
issues on their systems.
The Company has contacted its tenants regarding Year 2000 readiness and
emphasized the need to address Year 2000 issues. Generally, tenants are
contractually required to maintain their leased properties in good working order
and to make necessary alterations, foreseen or unforeseen, to meet their
contractual obligations. Because of those obligations, the Company believes that
the risks and costs of upgrading systems related to operations of the buildings
and that contain technology affected by Year 2000 issues will generally be
absorbed by tenants rather than the Company. The major risk is that Year 2000
issues have such an adverse effect on the financial condition of a tenant that
its ability to meet its lease obligations, including the timely payment of rent,
is impaired. In such an event, the Company may ultimately incur the costs for
Year 2000 readiness at the affected properties. The potential materiality of any
impact is not known at this time.
The Company will continue to monitor critical third party vendors and
suppliers to determine its vulnerability to potential disruptions caused by year
2000 issues. Limited scope contingency plans are currently being developed to
address potential disruptions of a temporary nature that may affect the Company.
Because it is not possible to anticipate all of the possible disruptions that
may be caused by Year 2000 events, there can be no assurance that the Company
will not be adversely affected if such disruptions occur.
-9-
<PAGE> 11
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
PART II
Item 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 1999 the Company has limited recourse
mortgage notes payable of $9,690,338 that bears interest at
fixed-rates. The carrying amount of the mortgage notes
payable approximates fair value. As of June 30, 1999 the
Company had no other material exposures to market risk.
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual Shareholders meeting was held on June 7, 1999, at
which time a vote was taken to elect the Company's directors
through the solicitation of proxies. The following directors
were elected for a one-year term:
<TABLE>
<CAPTION>
Total Shares Shares
Name Of Director Shares Voting Voting Yes Voting No
---------------- ------------- ---------- ---------
<S> <C> <C> <C>
William P. Carey 8,432,001 8,320,974 111,027
William Ruder 8,432,001 8,295,174 136,827
George E. Stoddard 8,432,001 8,288,266 143,735
Charles C. Townsend, Jr. 8,432,001 8,316,574 115,427
Warren G. Wintrub 8,432,001 8,322,974 109,027
Thomas E. Zacharias 8,432,001 8,326,474 105,527
</TABLE>
An amendment to the Company's Advisory Agreement was
approved which allows the Company, with the consent of the
Advisor, to issue 40,000,000 shares of common stock on a
"best efforts" basis at a price of $10 per share.
<TABLE>
<CAPTION>
Shares Shares Shares
Total Shares Voting Voting Yes Voting No Abstaining
------------------- ---------- --------- ----------
<S> <C> <C> <C>
8,432,001 7,507,579 577,549 346,873
</TABLE>
-10-
<PAGE> 12
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
PART II (Continued)
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Pursuant to Rule 701 of Regulation S-K, the use of proceeds
from the Company's offering of common stock which commenced
February 2, 1996 (File # 33-31437) is as follows as of June
30, 1999:
<TABLE>
<CAPTION>
<S> <C>
Shares registered: 30,000,000
Aggregate price of offering amount registered: $300,000,000
Shares sold: 22,438,395
Aggregated offering price of amount sold: $224,383,950
Direct or indirect payments to directors, officers, general
partners of the issuer or their associates, to persons
owning ten percent or more of any class of equity
securities of the issuer and to affiliates of
the issuer: $ 2,597,073
Direct or indirect payments to others: $ 18,034,551
Net offering proceeds to the issuer after
deducting expenses: $203,752,326
Purchases of real estate: $134,581,704
Working capital reserves: $ 2,243,840
Temporary investments in cash and cash
equivalents: $ 66,926,782
</TABLE>
(b) Reports on Form 8-K:
During the quarter ended June 30, 1999, the Company was not
required to file any reports on form 8-K.
-11-
<PAGE> 13
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
AND SUBSIDIARIES
08 /09/99 By: /s/ John J. Park
--------- ----------------------------------------
Date John J. Park
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
08/09/99 By: /s/ Claude Fernandez
--------- ----------------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q
for the six months ended June 30, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 77,696,135
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,521,026
<PP&E> 58,803,093
<DEPRECIATION> 518,269
<TOTAL-ASSETS> 215,758,442
<CURRENT-LIABILITIES> 4,035,952
<BONDS> 9,690,338
0
0
<COMMON> 22,458
<OTHER-SE> 199,553,048
<TOTAL-LIABILITY-AND-EQUITY> 215,758,442
<SALES> 0
<TOTAL-REVENUES> 2,789,515
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,391,466
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 158,206
<INCOME-PRETAX> 2,185,699
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,185,699
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,185,699
<EPS-BASIC> .15
<EPS-DILUTED> .15
</TABLE>
