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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN GOVERNING INSTRUMENT)
50 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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H. AUGUSTUS CAREY
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
50 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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COPY TO:
MICHAEL B. POLLACK, ESQUIRE
REED SMITH SHAW & MCCLAY LLP
2500 ONE LIBERTY PLACE
PHILADELPHIA, PENNSYLVANIA 19103
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If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to rule 415 under the Securities Act of
1933 check the following box: [X]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OPENING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
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Common Stock...................... 40,000,000 $10.00 $400,000,000 $111,200
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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CPA LOGO WPCAREY LOGO
CORPORATE PROPERTY ASSOCIATES 14
INCORPORATED
40,000,000 shares
$10.00 per share
Minimum Investment:
250 Shares
200 shares for IRAs and Keogh Plans
(Minimum Investment may be higher in certain states)
Corporate Property Associates 14 Incorporated is a real estate investment
trust. We own 10 properties located in seven states leased to 10 tenants. We are
focused on investing in and owning net leased industrial and commercial real
property. This prospectus describes an investment in the shares of CPA(R):14.
Carey Property Advisors L.P. manages our business.
We are offering and selling 40,000,000 shares of common stock with this
prospectus for $10 each. You must purchase at least 250 shares for $2,500,
except in special circumstances described in this prospectus.
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER BEFORE YOU INVEST IN THE COMMON STOCK BEING SOLD WITH
THIS PROSPECTUS.
In particular, you should consider the following risks:
-- The value of the properties we own may go down, sometimes due to a
bankruptcy of one or more of our tenants or for other reasons.
-- The amount of any distributions we make may be reduced.
-- It is likely that if you have to sell your shares soon after you buy
them, you will have to sell them for less than $10 per share.
-- Carey Property Advisors may be subject to some conflicts of interest
in managing our business which could affect the distributions you
receive and the fees received by Carey Property Advisors.
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PER SHARE TOTAL
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Public Price................................... $10.00 $400,000,000
Selling Commissions............................ $ 0.60 $ 24,000,000
Proceeds to CPA(R):14.......................... $ 9.40 $376,000,000
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-- The sales agent, Carey Financial Corporation, is our affiliate. Carey
Financial will receive selling commissions of up to 6% on the sale of
shares. The other broker-dealers it selects to participate in this
offering will be paid selling commissions of up to 6% on their sale of
shares out of the 6% received by Carey Financial.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PROJECTIONS AND FORECASTS CANNOT BE USED IN THIS OFFERING. NO ONE IS
PERMITTED TO MAKE ANY WRITTEN OR ORAL PREDICTIONS ABOUT HOW MUCH CASH YOU WILL
RECEIVE FROM YOUR INVESTMENT OR THE TAX BENEFITS THAT YOU MAY RECEIVE.
The money from the sale of shares will be promptly deposited into an
interest bearing escrow account at The United States Trust Company of New York.
The interest earned in this account will be paid to investors. Money will be
transferred from the escrow account to us from time to time, generally
quarterly. Investors who have purchased shares will become shareholders when
their funds are transferred from the escrow account to our account. We may sell
our shares until they have all been sold, unless we decide to stop selling them
sooner.
CAREY FINANCIAL CORPORATION
This prospectus is dated , 1999
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TABLE OF CONTENTS
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Prospectus Summary.......................................... 9
Risk Factors................................................ 14
We are Subject to General Real Estate Ownership
Risks................................................. 14
We may have Difficulty Selling or Re-leasing our
Properties............................................ 14
We are Dependent on Tenants for our Revenue............ 14
The Bankruptcy of Tenants would Cause of Reduction in
Revenue............................................... 14
Our Tenants that are Highly Leveraged may be Unable to
Pay Rent.............................................. 15
Liability for Uninsured Losses Could Adversely Affect
our Financial Conditions.............................. 15
Potential Liability for Environmental Matters Could
Adversely Affect our Financial
Condition............................................ 15
Our Use of Debt to Finance Acquisitions Could Adversely
Affect our Cash Flow.................................. 16
Failure to Qualify as a REIT Could Adversely Affect our
Operations and Ability to Make Distributions.......... 16
A Limit on the Number of Shares a Person May Own May
Discourage a Takeover................................. 16
It will be Difficult to Sell Shares.................... 17
Our Success will be Dependent on the Performance of
Carey Property Advisors............................... 17
Carey Property Advisors May be Subject to Conflicts of
Interest.............................................. 17
Maryland Law Could Restrict Change in Control.......... 17
Our Participation in Joint Ventures Creates Additional
Risk.................................................. 18
Special Considerations for Pension or Profit-Sharing
Trusts, Keoghs or IRAs................................ 18
Our Systems and our Tenant's Systems may not be Year
2000 Compliant........................................ 18
International Investments Involve Additional Risks..... 19
Suitability Standards....................................... 19
Estimated Use of Proceeds................................... 21
Management Compensation..................................... 23
Conflicts of Interest....................................... 31
Prior Offerings by Affiliates............................... 35
Management.................................................. 40
Directors and Executive Officers of CPA(R):14. ........ 42
Carey Property Advisors................................ 45
Directors and Principal Officers of Carey Fiduciary
Advisors.............................................. 45
Shareholdings.......................................... 47
Management Decisions................................... 48
Limited Liability and Indemnification of Directors,
Officers, Employees and Other Agents.................. 48
Advisory Agreement..................................... 49
Investment Procedures, Objectives and Policies.............. 52
Investment Procedures.................................. 52
Investment Objectives.................................. 54
Types of Investments................................... 54
Investments in Loans................................... 55
Joint Ventures and Wholly-Owned Subsidiaries........... 56
Other Investments...................................... 57
Use of Borrowing....................................... 59
Other Investment Policies.............................. 60
Investment Limitations................................. 61
Change in Investment Objectives and Limitations........ 62
Holders of Shares of the Company............................ 63
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 64
Overview............................................... 64
Financial Condition.................................... 64
Results of Operations.................................. 66
Distributions............................................... 67
Description of the Properties............................... 67
Advanced Micro Devices, Inc. .......................... 68
Contraves Brashear Systems, L.P. ...................... 68
Best Buys Co. Inc. .................................... 69
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Etec Systems, Inc. .................................... 69
Metagenics Incorporated................................ 70
Burlington Motor Carriers Inc. ........................ 70
The Benjamin Ansehl Co. ............................... 71
Intesys Technologies, Inc. ............................ 71
CompuCom Systems, Inc. ................................ 72
Production Resources Group, L.L.P. .................... 72
Warrants............................................... 73
Acquisition Fees....................................... 73
United States Federal Income Tax Considerations............. 73
Opinion of Counsel..................................... 74
Requirements for Qualification......................... 75
Election to Retain Our Long-Term Capital Gains......... 78
Deficiency Distributions............................... 79
Failure to Qualify as a REIT........................... 79
Sale-Leaseback Transactions............................ 79
Taxation of Domestic Shareholders...................... 80
Treatment of Tax-Exempt Shareholders................... 81
Special Tax Considerations for Foreign Shareholders.... 81
Information Reporting Requirements and Backup
Withholding Tax For Domestic Shareholders............. 83
Backup Withholding Tax for Foreign Shareholders........ 83
Statement of Stock Ownership........................... 83
State and Local Tax.................................... 84
ERISA Considerations........................................ 84
Plan Assets............................................ 85
Other Prohibited Transactions.......................... 86
Investment in Escrow Account........................... 86
Annual Valuation....................................... 86
Description of Shares....................................... 87
General Description of Shares.......................... 87
Meetings and Special Voting Requirements............... 88
Restriction on Ownership of Shares..................... 89
Distributions.......................................... 90
Repurchase of Excess Shares............................ 90
Redemption of Shares................................... 90
Restrictions on Roll-up Transaction.................... 92
Transfer Agent......................................... 93
The Offering................................................ 93
Escrow Arrangements.................................... 96
Reports to Shareholders..................................... 96
Legal Opinions.............................................. 96
Experts..................................................... 97
Sales Literature............................................ 97
Further Information......................................... 97
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QUESTIONS AND ANSWERS ABOUT
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED'S
PUBLIC OFFERING
Q: WHAT IS CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED?
A. CPA(R):14 is a real estate investment trust, or a REIT, that was formed in
1997 to acquire commercial and industrial properties and lease them on a
long-term, triple-net basis.
Q: WHAT IS A REIT?
A: In general, a REIT is a company that:
-- combines the capital of many investors to acquire or provide financing
for real estate;
-- offers benefits of a diversified real estate portfolio under
professional management;
-- must pay distributions to investors of at least 95% of its taxable
income; and
-- typically is not subject to federal corporate income taxes on its net
income, provided certain income taxes requirements are satisfied. This
treatment substantially eliminates the "double taxation" (at both the
corporate and shareholder levels) that generally results from
investments in a corporation.
Q: WHAT KIND OF OFFERING IS THIS?
A: We are offering up to 40,000,000 shares of common stock on a "best efforts"
basis.
Q: HOW DOES A "BEST EFFORTS" OFFERING WORK?
A: When shares are offered to the public on a "best efforts" basis, we are not
guaranteeing that any minimum number of shares will be sold. If you choose
to purchase stock in this offering, you will fill out a Subscription
Agreement, like the one attached to this prospectus as Appendix , for a
specific number of shares and pay for the shares at the time you subscribe.
The purchase price will be placed into escrow with United States Trust
Company of New York. United States Trust Company will hold your funds, along
with those of other subscribers, in an interest-bearing account until the
time you are admitted by us as a shareholder. Interest earned on your money
held in escrow will be distributed to you soon after you become a
shareholder. Generally, we admit shareholders on a quarterly basis.
Q: HOW LONG WILL THE OFFERING LAST?
A: The offering will not last beyond , 2001.
Q: WHO CAN BUY SHARES?
A: Anyone who receives this prospectus can buy shares provided that they have a
net worth of at least $45,000 and an annual gross income of at least
$45,000; or, a net worth of at least $150,000. For this purpose, net worth
does not include your home, your home furnishings and personal automobiles.
The purchaser of shares given as a gift must satisfy the suitability
requirements but the gift recipient is not required to satisfy the
suitability standards. These minimum levels may vary from state to state, so
you should carefully read the more detailed description in the "Suitability
Standards" section of this prospectus.
Q: IS THERE ANY MINIMUM INVESTMENT REQUIRED?
A: Yes. Generally, individuals must invest at least $2,500 and IRA, Keogh or
other qualified plans must invest at least $2,000. Investors who already own
shares can make additional purchases for less than the minimum investment.
These minimum investment levels may vary from state to state, so you should
carefully read the more detailed description of the minimum investment
requirements appearing later in the "Suitability Standards" section of this
prospectus.
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Q: AFTER I SUBSCRIBE FOR SHARES, CAN I CHANGE MY MIND AND WITHDRAW MY MONEY?
A: Once you have subscribed for shares and your money has been deposited with
The United States Trust Company of New York, your subscription may not be
withdrawn, unless we permit you to revoke your subscription.
Q: IF I BUY SHARES IN THE OFFERING, HOW CAN I SELL THEM?
A: At the time you purchase them, the shares will not be listed for trading on
any national securities exchange or over-the-counter market. In fact, we
expect that there will not be any public market for the shares when you
purchase them, and we cannot be sure if one will ever develop. As a result,
you may find that it is difficult to sell your shares and realize a return
on your investment.
If we have not listed the shares on a national securities exchange or
over-the-counter market within eight years after the proceeds from this
offering are fully invested, market conditions permitting, we plan to sell
the properties and other assets and return the proceeds from these sales to
our shareholders through distributions.
Beginning one year after you purchase your shares, provided we have
sufficient funds available, you may request that we redeem your shares. The
redemption procedures are described in the "Description of
Shares -- Redemption of Shares" section of this prospectus. The redemption
will be subject to a surrender charge.
Q: WHAT WILL YOU DO WITH THE PROCEEDS FROM THIS OFFERING?
A: We plan to use approximately 86% of the proceeds from this offering to
purchase properties and approximately 14% for working capital, to pay fees
and expenses of this offering and for acquisition-related expenses. The
payment of these fees will not reduce your invested capital. Your initial
invested capital amount will be $10 per share.
Until we invest the proceeds of this offering in real estate, we will invest
them in short-term, highly liquid investments. These short-term investments
will not earn as high a return as we expect to earn on our real estate
investments, and we cannot know how long it will be before we will be able
to fully invest the proceeds in real estate. We intend to invest or commit
to investment substantially all of the money raised in this offering within
two years of the close of the offering, subject to market conditions.
We commenced our initial public offering of common stock in an offering very
similar to this one on November , 1997. We received approximately
$160,382,000 in gross offering proceeds from the initial public offering, of
which approximately $137,842,000 was or is expected to be invested in
properties. Our initial public offering was completed on , 1999.
Q: WHAT ARE THE TERMS OF YOUR LEASES?
A: Generally, the leases we have entered into to date, and the leases we expect
to enter into in the future, are long-term (meaning generally 10 to 20
years, plus renewal options for an additional 10 to 20 years), "triple-net"
leases. "Triple-net" means that the tenant, not CPA(R):14, is responsible
for repairs, maintenance, property taxes, utilities and insurance. Under our
leases, the tenant must pay us minimum, base rent on a regular basis. In
addition, our leases usually require the tenant to pay rent increases tied
to an index like the Consumer Price Index at specified times during the term
of the lease or some percentage of sales at the property over an agreed-upon
base. We may enter into leases where we have responsibility for replacement
of specific parts of a property like a roof or parking lot. We do not expect
that these leases will make up a significant portion of the portfolio.
Q: HOW WELL HAVE CPA(R):14'S INVESTMENTS DONE SO FAR?
A: As of the date of this prospectus, we have purchased ten properties. These
purchases were made between June 1998 and March 1999. To date, all scheduled
rent payments have been received. Carey Property Advisors, our manager, and
its affiliates have been managing entities like CPA(R):14 since 1979. The
performance of these entities is fully described in this prospectus and its
appendices.
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Q: WHAT IS THE EXPERIENCE OF CPA(R):14'S OFFICERS AND DIRECTORS?
A: Our management team has extensive previous experience investing in real
estate and triple net leases. Our directors and investment committee members
are listed below.
Directors
-- William P. Carey -- founded W. P. Carey & Co., Inc. in 1973 and has
been involved in net leasing since 1959.
-- George E. Stoddard -- formerly responsible for direct corporate
investment at The Equitable Life Assurance Society.
-- William Ruder -- principal in a public relations firm since 1948.
-- Charles C. Townsend -- former Chairman of Morgan Stanley Realty
Corporation
-- Warren G. Wintrub -- former partner at Coopers & Lybrand L.L.P., now
PricewaterhouseCoopers LLP
-- Thomas E. Zacharias -- a Senior Vice President with Lend Lease
Development U.S.
Investment Committee
In addition to Mr. Stoddard, who serves as Chairman, the following
individuals serve on the investment committee of Carey Property Advisors:
-- Frank J. Hoenemeyer -- formerly Vice Chairman, Director and Chief
Investment Officer of Prudential Insurance Company of America
-- Nathaniel S. Coolidge -- formerly Senior Vice President -- Head of
Bond Corporate Finance Department of the John Hancock Mutual Life
Insurance Company.
-- Dr. Lawrence R. Klein -- an alternate member, won the Nobel Prize in
Economics in 1980.
Q: HOW WILL YOU CHOOSE WHICH INVESTMENTS TO MAKE?
A: Carey Property Advisors is our advisor and generally has the authority to
make all of our investment decisions. Carey Property Advisors' investment
committee must approve all acquisitions. Members of the investment committee
have over 130 years of combined experience in evaluating credit, an
important element in a long-term net lease transaction.
Q: IS CAREY PROPERTY ADVISORS INDEPENDENT OF CPA(R):14?
A: No. Some of our officers and directors are officers and directors of Carey
Property Advisors. The conflicts of interest CPA(R):14 and Carey Property
Advisors face are discussed under the heading "Conflicts of Interest" later
in this prospectus.
Q: IF I BUY SHARES, WILL I RECEIVE DISTRIBUTIONS AND HOW OFTEN?
A: We have made and intend to continue to make quarterly distributions to our
shareholders. The amount of each distribution is determined by the board of
directors and typically depends on the amount of distributable funds,
current and projected cash requirements, tax considerations and other
factors. However, in order to remain qualified as a REIT, we must make
distributions of at least 95% of our REIT taxable income each year.
Historically, we have paid cash distributions every quarter since our
operations commenced. Our quarterly distribution in April, 1999 was $0.1625
per share.
Q: ARE DISTRIBUTIONS I RECEIVE TAXABLE?
A: Yes. Generally, distributions that you receive will be considered ordinary
income to the extent they are from current and accumulated earnings and
profits. In addition, because depreciation expense reduces taxable income
but does not reduce cash available for distribution, we expect a portion of
your
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distributions will be considered a return of capital for tax purposes. These
amounts will not be subject to tax immediately but will instead reduce the
tax basis of your investment. This in effect defers a portion of your tax
until your investment is sold or CPA(R):14 is liquidated, at which time you
will be taxed at the capital gains rate. However, because each investor's
tax considerations are different, we suggest you consult with your tax
advisor. You should also review the section of the prospectus entitled
"United States Federal Income Tax Aspects."
Q: WILL I BE NOTIFIED ABOUT HOW MY INVESTMENT IS DOING?
A: You will receive periodic updates on the performance of your investment in
CPA(R):14, including:
-- Four detailed quarterly distribution reports
-- Three quarterly financial reports
-- An annual report
-- A Form 1099 report
Q: WHEN WILL I GET MY TAX INFORMATION?
A: Your 1099 tax information will be mailed by January 31 of each year.
Q: WHO IS THE TRANSFER AGENT FOR CPA(R):14?
A: Resource Phoenix(R)
2401 Kerner Boulevard
San Rafael, CA 94901-5529
1-888-241-3737
To ensure that any account changes are made promptly and accurately, all
changes including shareholder address, ownership type and distribution mailing
address should be directed to the transfer agent.
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WHO CAN HELP ANSWER YOUR QUESTIONS?
If you have more questions about the offering or
if you would like additional copies of this prospectus,
you should contact your registered representative or:
CPA(R):14 ANSWER LINE
Carey Financial Corporation
50 Rockefeller Plaza
New York, NY 10020
(800) WP CAREY
[email protected]
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PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. It may not
include all of the information that is important to you. To understand this
offering fully, you should read the entire prospectus carefully, including the
risk factors and the financial statements.
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
Corporate Property Associates 14 Incorporated is a REIT that owns net
leased industrial and commercial property. We own 10 properties in seven states
leased to 10 tenants. Our office is at 50 Rockefeller Plaza, New York, NY. Our
phone number is (212) 492-1100. We refer to Corporate Property Associates 14
Incorporated as CPA(R):14 in this prospectus.
THE ADVISOR
Carey Property Advisors L.P. is our advisor. They are responsible for
managing CPA(R):14 on a day-to-day basis. They are also responsible for
identifying and making acquisitions on our behalf. Carey Property Advisors L.P.
is referred to as Carey Property Advisors in this prospectus.
OUR REIT STATUS
As a REIT, we generally are not subject to federal income tax on income
that we distribute to our shareholders. Under the Internal Revenue Code, REITs
are subject to numerous organizational and operational requirements, including a
requirement that they distribute at least 95% of their taxable income, as
calculated on an annual basis. If we fail to qualify for taxation as a REIT in
any year, our income will be taxed at regular corporate rates, and we may not be
able to qualify for treatment as a REIT for that year and the next four years.
Even if we qualify as a REIT for federal income tax purposes, we may be subject
to federal, state and local taxes on our income and property and to federal
income and excise taxes on our undistributed income.
OUR MANAGEMENT
We have retained Carey Property Advisors to provide us with management,
acquisition, advisory and administrative services. The six members of our board
of directors oversee the management of CPA(R):14. Four of the directors are
independent of Carey Property Advisors and have responsibility for reviewing its
performance. The directors are elected annually by the shareholders.
All investment decisions made by Carey Property Advisors must be approved
unanimously by Carey Property Advisors' investment committee. The following
people serve on the investment committee:
-- George E. Stoddard, Chairman, was formerly responsible for the $33
billion in direct corporate investments of The Equitable Life
Assurance Society of the United States;
-- Frank J. Hoenemeyer, Vice Chairman, was formerly Vice-Chairman,
Director and Chief Investment Officer of the Prudential Insurance
Company of America and had responsibility for Prudential's $100
billion investment portfolio;
-- Nathaniel S. Coolidge was Senior Vice President -- head of Bond and
Corporate Finance Department of the John Hancock Mutual Life Insurance
Company where his responsibilities included overseeing $21 billion of
fixed income investments;
-- Dr. Lawrence R. Klein, an alternate member of the committee, won the
Nobel Prize in economics in 1980 and is Benjamin Franklin Professor
Emeritus at the University of Pennsylvania.
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All of the officers and directors of Carey Property Advisors also are
officers or directors of CPA(R):14. Carey Property Advisors has responsibility
for all aspects of the operations of CPA(R):14 including:
-- selecting the properties that we will acquire, formulating and
evaluating the terms of each proposed acquisition, and arranging for
the acquisition of the property by CPA(R):14, subject to the approval
of the investment committee;
-- negotiating the terms of any borrowing by CPA(R):14, including lines
of credit and any long-term, permanent financing;
-- managing the day-to-day operations of CPA(R):14 including accounting,
property management and investor relations; and
-- arranging for and negotiating the sale of assets.
See the "Management" section of this prospectus for a description of the
business background of the individuals responsible for the management of
CPA(R):14 and Carey Property Advisors, as well as for a description of the
services Carey Property Advisors will provide.
RISK FACTORS
AN INVESTMENT IN CPA(R):14 HAS MANY RISKS. THE "RISK FACTORS" SECTION OF
THIS PROSPECTUS CONTAINS A DETAILED DISCUSSION OF THE MOST IMPORTANT RISKS.
PLEASE REFER TO THE "RISK FACTORS" SECTION FOR A MORE DETAILED DISCUSSION OF THE
RISKS SUMMARIZED BELOW:
-- There is currently no public trading market for the shares, and there
is no assurance that one will develop.
-- You will not have the opportunity to evaluate all of the properties
that will be in our portfolio.
-- We rely on Carey Property Advisors with respect to all investment
decisions.
-- Carey Property Advisors and its affiliates are or will be engaged in
other activities that will result in potential conflicts of interest
with the services that Carey Property Advisors and affiliates will
provide to us.
-- Market and economic conditions that we cannot control will affect the
value of our investments.
-- We may make investments that will not appreciate in value over time.
-- If our tenants default, we will have less income with which to make
distributions.
-- If the shares are not listed or intended to be listed on a national
securities exchange or over-the-counter market within eight years of
the investment of all of the money raised in this offering, we will
sell our assets and distribute the proceeds, market conditions
permitting.
-- In connection with any borrowing, we will likely mortgage or pledge a
specific asset, which would put us at risk of losing that asset if we
are unable to pay that debt.
-- In order to maintain our status as a REIT, we may incur debt to make
distributions to shareholders.
-- The vote of shareholders owning at least a majority but less than all
of the shares of common stock will bind all of the shareholders as to
matters like the election of directors and amendment of CPA(R):14's
governing documents.
-- Restrictions on ownership of more than 9.8% of the shares of common
stock by any single shareholder or some related shareholders may have
the effect of inhibiting a change in control of CPA(R):14, even if a
change in control is in the interest of a majority of the
shareholders.
-- We may not remain qualified as a REIT for federal income tax purposes,
which would subject us to federal income tax on our taxable income at
regular corporate rates, thereby reducing the amount of funds
available for paying distributions to shareholders.
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-- Our inability to find suitable investments may impact our ability to
achieve our investment objectives and may effect the amount of
distributions to shareholders.
OUR INVESTMENT OBJECTIVES
Our primary investment objectives are:
-- to pay quarterly distributions at an increasing rate that, for taxable
shareholders, may be partially free from current taxation;
-- to invest in a portfolio of real estate that will increase in value;
-- to increase our equity in real estate by making regular mortgage
principal payments;
-- to provide you with liquidity for your investment, within eight years
after the proceeds of this offering are fully invested, either through
listing our shares on a national securities exchange or over-
the-counter market or if listing does not occur within eight years
after the proceeds of this offering are fully invested, selling our
assets and distributing the proceeds.
See the "Investment Procedures, Objectives and Policies" sections of this
prospectus for a more complete description of our business and objectives.
CONFLICTS OF INTEREST
Some of our officers and directors, who are also officers or directors of
Carey Property Advisors, may experience conflicts of interest in their
management of CPA(R):14. These arise principally from their involvement in other
activities that may conflict with our business and interests, including matters
related to
-- allocation of new investments and management time and services between
us and various other clients of Carey Property Advisors;
-- the timing and terms of the investment in or sale of an asset;
-- investments with affiliates of Carey Property Advisors;
-- compensation to Carey Property Advisors;
-- our relationship with the managing dealer, Carey Financial
Corporation, which is an affiliate of CPA(R):14 and Carey Property
Advisors; and
-- the fact that our securities and tax counsel also services as
securities and tax counsel for some of our affiliates, which means
neither CPA(R):14 nor the shareholders will have separate counsel.
The "Conflicts of Interest" section discusses in more detail the more
significant of these potential conflicts of interest, as well as the procedures
that have been established to resolve a number of these potential conflicts.
OUR AFFILIATES
The "Prior Offerings by Affiliates" section of this prospectus contains a
narrative discussion of the public and private real estate programs sponsored by
our affiliates and affiliates of Carey Property Advisors in the past, including
nine public limited partnerships and three unlisted public REITs. As of December
31, 1998, these entities, which invest in industrial and commercial properties
that are leased on a "triple-net" basis had purchased 447 properties.
Statistical data relating to the public limited partnerships and the unlisted
REITs are contained in Appendix C -- Prior Performance Tables.
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<PAGE> 13
THE OFFERING
Offering Size..................$400,000,000
Minimum Investments............Individuals -- $2,500.
IRA, Keogh and other Qualified Plans -- $2,000.
Suitability Standards..........Net worth of at least $45,000 and annual gross
income of at least $45,000;
OR
Net worth of at least $150,000. (For this
purpose, net worth excludes home, furnishings and
personal automobiles)
Suitability standards may vary from state to
state. Please see the "Suitability Standards"
section, which begins on page .
Holding Period of Properties...If we have not listed the shares on a national
securities exchange or over-the-counter market
within eight years after the proceeds from this
offering are fully invested, market conditions
permitting, we plan to sell the properties and
other assets and return the proceeds from these
sales to our shareholders through distributions.
Distribution Policy............Consistent with our objective of qualifying as a
REIT, we expect to pay quarterly distributions
and distribute at least 95% of our REIT taxable
income.
Our Advisor....................Carey Property Advisors L.P. will administer our
day-to-day operations and select our real estate
investments.
Estimated Use of Proceeds......86% -- to acquire properties
14% -- for working capital and to pay fees and
expenses
MANAGEMENT COMPENSATION
CPA(R):14 will pay Carey Property Advisors and its affiliated companies
fees for its services and will reimburse Carey Property Advisors for some
expenses. Outlined below are the most significant items of compensation.
-- For identifying, structuring and arranging the financing for real
estate acquisitions, Carey Property Advisors will be paid acquisition
fees not to exceed 2.5% of the total purchase price of all properties
purchased by us. Carey Property Advisors will also be paid a
subordinated acquisition fee which, when aggregated with all other
subordinated acquisition fees, will not exceed 2.0% of the total
purchase price of all properties purchased by us. This subordinated
acquisition fee will accrue but will be withheld for any quarter
through which the return paid to shareholders is less than 6%.
-- Carey Property Advisors will be paid a monthly asset management fee at
the annual rate of 0.5% of the total amount invested by us in real
estate. Carey Property Advisors will also be paid quarterly a
subordinated fee at the annual rate of 0.5% of the total amount we
invest in real estate. This fee will accrue but will not be paid in
any quarter through which we have not achieved a cumulative rate of
cash flow from operations (as determined in accordance with generally
accepted accounting principles) of at least 7% per year through that
quarter. Carey Property Advisors has the option to be paid this
performance fee in cash or restricted stock of CPA(R):14.
-- Carey Property Advisors will be paid 15% of any appreciation in the
value of the real estate when we sell a property. This fee will be
paid only after we have returned all of the money invested by
shareholders plus a cumulative non-compounded return of 6% per year.
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<PAGE> 14
There are many additional conditions and restrictions on the payment of
fees to Carey Property Advisors. There are also a number of other smaller items
of compensation and expense reimbursement that Carey Property Advisors and its
affiliates may receive during the life of CPA(R):14. For a more complete
explanation of the fees and expenses and an estimate of the dollar amount of
these payments, please see the "Management Compensation" section of this
prospectus.
DESCRIPTION OF PROPERTIES
Please refer to the "Description of Properties" section of this prospectus
for a description of the properties we have purchased as of the date of this
prospectus. Carey Property Advisors is evaluating additional potential property
acquisitions. When it appears likely that we will purchase one or more
additional properties, a description of those properties will be made available
to all potential investors in a document called a supplement. Investors should
not assume that transactions described in a supplement will necessarily be
completed. It is possible that after the supplement is distributed, we or the
seller will decide not to complete the sale.
ERISA CONSIDERATIONS
The section of this prospectus entitled "ERISA Considerations" describes
the effect the purchase of shares will have on retirement plans and individual
retirement accounts ("IRAs") subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") and/or the Internal Revenue Code. ERISA is a
federal law that regulates the operation of certain tax-advantaged retirement
plans. Any retirement plan trustee or individual considering purchasing shares
for a retirement plan or IRA should read this section very carefully.
DESCRIPTION OF SHARES
General
We will not issue stock certificates. A shareholder's investment will be
recorded on our books. If you wish to sell your shares, you will be required to
send only an executed transfer form to us. We will provide the required form
upon request.
Shareholder Voting Rights and Limitations
Shareholders will meet each year for the election of directors. Other
business matters may be presented at the annual meeting or at special
shareholder meetings. You are entitled to one vote for each share you own. All
shareholders will be bound by the decision of the majority of shareholders on
each question voted upon.
Limitation on Share Ownership
The articles of incorporation of CPA(R):14 restrict ownership by one person
of more than 9.8% of the outstanding shares. See "Description of
Shares -- Restriction on Ownership of Shares." These restrictions are designed
to enable us to comply with share accumulation restrictions imposed on REITs by
the Internal Revenue Code.
For a more complete description of the shares, including limitations on the
ownership of shares, please refer to the "Description of Shares" section of this
prospectus.
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<PAGE> 15
RISK FACTORS
BEFORE YOU INVEST IN OUR SECURITIES, YOU SHOULD BE AWARE THAT THERE ARE
VARIOUS RISKS, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CONSIDER CAREFULLY
THESE RISK FACTORS TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED IN THIS
PROSPECTUS BEFORE YOU DECIDE TO PURCHASE OUR SECURITIES.
WE ARE SUBJECT TO GENERAL REAL ESTATE OWNERSHIP RISKS
Our properties consist predominantly of net leased industrial and
commercial properties located in the United States. An investment in CPA(R):14
is subject to risks incident to the ownership and operation of these types of
properties, including:
-- changes in the general economic climate,
-- changes in local conditions such as an oversupply of space or
reduction in demand for real estate,
-- changes in interest rates and the availability of financing,
-- competition from other available space, and
-- changes in laws and governmental regulations, including those
governing real estate usage, zoning and taxes.
WE MAY HAVE DIFFICULTY SELLING OR RE-LEASING OUR PROPERTIES
Real estate investments are relatively illiquid compared to most financial
assets and this illiquidity will limit our ability to quickly change our
portfolio in response to changes in economic or other conditions. Many of the
net leases we enter into or acquire are for properties that are specially suited
to the particular needs of our tenant. With these properties, if the current
lease is terminated or not renewed, we may be required to renovate the property
or to make rent concessions in order to lease the property to another tenant. In
addition, in the event we are forced to sell the property, we may have
difficulty selling it to a party other than the tenant due to the special
purpose for which the property may have been designed. In addition, provisions
of the Internal Revenue Code relating to REITS limit our ability to sell
properties held for fewer than four years. These and other limitations may
affect our ability to sell properties without adversely affecting returns to our
shareholders.
WE ARE DEPENDENT ON TENANTS FOR OUR REVENUE
Most of our properties are occupied by a single tenant and, therefore, the
success of our investments are materially dependant on the financial stability
of our tenants. Lease payment defaults by tenants could cause us to reduce the
amount of distributions to shareholders. A default of a tenant on its lease
payments to us would cause us to lose the revenue from the property and cause us
to have to find an alternative source of revenue to meet the mortgage payment
and prevent a foreclosure if the property is subject to a mortgage. In the event
of a default, we may experience delays in enforcing our rights as landlord and
may incur substantial costs in protecting our investment and reletting our
property. If a lease is terminated, there is no assurance that we will be able
to lease the property for the rent previously received or sell the property
without incurring a loss.
THE BANKRUPTCY OF TENANTS WOULD CAUSE A REDUCTION IN REVENUE
A tenant in bankruptcy could cause
-- the loss of lease payments;
-- an increase in the costs incurred to carry the property;
-- a reduction in the value of shares; and
-- a decrease in distributions to shareholders.
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<PAGE> 16
Under bankruptcy law, a tenant who is the subject of bankruptcy proceedings has
the option of continuing or terminating any unexpired lease. If the tenant
terminates the lease, any claim we have for breach of the lease (excluding
collateral securing the claim) will be treated as a general unsecured claim. The
maximum claim will be capped at the amount owed for unpaid rent prior to the
bankruptcy unrelated to the termination, plus the greater of one year's lease
payments or 15% of the remaining lease payments payable under the lease (but no
more than three years' lease payments). In addition, due to the long-term nature
of our leases and terms providing for the repurchase of a property by the
tenant, a bankruptcy court could recharacterize a net lease transaction as a
secured lending transaction. If that were to occur, we would not be treated as
the owner of the property, but might have additional rights as a secured
creditor.
Some of the programs managed by Carey Property Advisors or its affiliates
have had tenants file for bankruptcy protection and are involved in litigation.
Four CPA(R) programs had to reduce the rate of distributions to their partners
as a result of adverse developments involving tenants. See "Prior Offerings by
Affiliates."
OUR TENANTS THAT ARE HIGHLY LEVERAGED MAY BE UNABLE TO PAY RENT
A tenant that has been recently restructured may be unable to pay its rent
if there are adverse changes to their business or economic conditions. We
anticipate providing financing to companies involved in acquisitions,
recapitalizations or other financial restructurings through the use of a sale
lease back transaction. Often the tenant in this type of transaction will have
substantially greater debt and substantially lower net worth than it had prior
to the transaction. In addition, the payment of rent and debt service may reduce
the working capital available to it and prevent it from devoting the resources
necessary to keep itself competitive in its industry. Furthermore, in situations
where management of the tenant will change after the transaction, it may be
difficult for Carey Property Advisors to determine the likelihood of the
tenant's business success and of it being able to pay rents throughout the term
of a lease with us. These companies are more vulnerable to adverse conditions in
their business or industry, economic conditions generally and increases in
interest rates.
LIABILITY FOR UNINSURED LOSSES COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
We generally require our tenants to carry comprehensive liability, fire,
flood and extended coverage insurance with respect to our properties with policy
specifications and insured limits customarily carried for similar properties.
There are, however, types of losses from disaster-type occurrences (such as wars
or earthquakes) that may be either uninsurable or not insurable on economically
viable terms. Should an uninsured loss occur, we could lose our capital
investment and/or anticipated profits and cash flow from one or more properties.
POTENTIAL LIABILITY FOR ENVIRONMENTAL MATTERS COULD ADVERSELY AFFECT OUR
FINANCIAL CONDITION
We own industrial and commercial properties and are subject to the risk of
liabilities under federal, state and local environmental laws. Some of these
laws could impose the following on CPA(R):14:
-- Responsibility and liability for the cost of removal or remediation of
hazardous substances released on our property, generally without
regard to our knowledge or responsibility of the presence of the
contaminants.
-- Liability for the costs of removal or remediation of hazardous
substances at disposal facilities for persons who arrange for the
disposal or treatment of these substances.
-- Potential liability for common law clams by third parties based on
damages and costs of environmental contaminants.
We generally include provisions in our leases that provide that the tenant
is responsible for all environmental liabilities and for compliance with
environmental regulation, and must reimburse us for damages or costs for which
we have been found liable. However, these provisions do not eliminate our
statutory liability or preclude third party claims against us and, even if a we
had a cause of action against
15
<PAGE> 17
the tenant to enable us to recover any amounts we pay, there are no assurances
that we would be able to collect any money from the tenant. Our costs of
investigation, remediation or removal of hazardous substances may be
substantial. In addition, the presence of hazardous substances on one of our
properties, or the failure to properly remediate a contaminated property, could
adversely affect our ability to sell or lease the property or to borrow using
the property as collateral.
OUR USE OF DEBT TO FINANCE ACQUISITIONS COULD ADVERSELY AFFECT OUR CASH FLOW
Increased Risk Of Insufficient Cash Flow
Most of our property acquisitions will be made by borrowing a portion of
the purchase price and securing the loan with a mortgage on the property. If we
are unable to make our debt payments as required, a lender could foreclose on
the property or properties securing its debt. This could cause us to lose part
or all of our investment which in turn could cause the value of the shares and
distributions to shareholders to be reduced. In addition, payments of principal
and interest made to service our debts may leave us with insufficient cash to
pay the distributions that we are required to pay to maintain our qualification
as a REIT.
Financial Covenants Could Place Restrictions On Operations
In connection with the making of a mortgage loan with respect to a
property, a lender could impose restrictions on us which affect our ability to
incur additional debt and our distribution and operating policies. The mortgages
on our properties contain customary negative covenants which may limit our
ability to further mortgage the property, to discontinue insurance coverage,
replace Carey Property Advisors as our advisor or impose other limitations.
Balloon Payment Obligations May Adversely Affect our Financial Condition
Some of our financing requires us to make a lump-sum or "balloon" payment
at maturity. We intend to finance more properties in this manner. Our ability to
make a balloon payment at maturity is uncertain and may depend upon our ability
to obtain additional financing or our ability to sell the property. At the time
the balloon payment is due, we may or may not be able to refinance the balloon
payment on terms as favorable as the original loan or sell the property at a
price sufficient to make the balloon payment. The effect of a refinancing or
sale could affect the rate of return to shareholders and the projected time of
disposition of our assets.
FAILURE TO QUALIFY AS A REIT COULD ADVERSELY AFFECT OUR OPERATIONS AND ABILITY
TO MAKE DISTRIBUTIONS
If we fail to qualify as a REIT for any taxable year, we would be subject
to federal income tax on our taxable income at corporate rates. In addition, we
would generally be disqualified from treatment as a REIT for the four taxable
years following the year of losing our REIT status. Losing our REIT status would
reduce our net earnings available for investment or distribution to shareholders
because of the additional tax liability. In addition, distributions to
shareholders would no longer qualify for the distributions paid deduction and we
would no longer be required to make distributions. We might be required to
borrow funds or liquidate some investments in order to pay the applicable tax.
Qualification as a REIT is subject to the satisfaction of tax requirements
and various factual matters and circumstances which are not entirely within our
control. New legislation, regulations, administrative interpretations or court
decisions could change the tax laws with respect to qualification as a REIT or
the federal income tax consequences of being a REIT.
A LIMIT ON THE NUMBER OF SHARES A PERSON MAY OWN MAY DISCOURAGE A TAKEOVER
Our articles of incorporation restrict ownership of more than 9.8% of the
outstanding shares by one person. These restrictions may discourage a change of
control of CPA(R):14 and may deter individuals or
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<PAGE> 18
entities from making tender offers for shares, which offers might be financially
attractive to shareholders or which may cause a change in the management of
CPA(R):14. See "Description of Shares -- Restriction on Ownership of Shares."
IT WILL BE DIFFICULT TO SELL SHARES
There is no current public market for the shares and, therefore, it will be
difficult for shareholders to sell their shares promptly. In addition, the price
received for any shares sold is likely to be less than the proportionate value
of the real estate we own. The shares should be purchased as a long-term
investment only. See "Redemption of Shares" for a description of our share
redemption program.
OUR SUCCESS WILL BE DEPENDENT ON THE PERFORMANCE OF CAREY PROPERTY ADVISORS
Our ability to achieve our investment objectives and to pay distributions
is dependent upon the performance of Carey Property Advisors in the acquisition
of investments, the selection of tenants and the determination of any financing
arrangements. Except for the investments described in this prospectus, you will
have no opportunity to evaluate the terms of transactions or other economic or
financial data concerning our investments. You must rely entirely on the
management ability of Carey Property Advisors and the oversight of the board of
directors.
CAREY PROPERTY ADVISORS MAY BE SUBJECT TO CONFLICTS OF INTEREST
Carey Property Advisors manages our business and selects our real estate
investments. Carey Property Advisors has some conflicts of interest in its
management of CPA(R):14 which arise primarily from the involvement of Carey
Property Advisors and its affiliates in other activities that may conflict with
CPA(R):14. The activities in which a conflict could arise between CPA(R):14 and
Carey Property Advisors are:
-- the receipt of commissions, fees and other compensation by Carey
Property Advisors and its affiliates for property purchases, leases,
sales and financing for CPA(R):14,
-- non-arms length agreements between CPA(R):14 and Carey Property
Advisors or any of its affiliates, and
-- purchases and loans from affiliates, subject to CPA(R):14's investment
procedures, objectives and policies.
Inherent in these transactions is the conflict of interest that arises due to
the potential impact of the transaction on the amount of fees received by Carey
Property Advisors and/or its affiliates and the distributions to shareholders.
MARYLAND LAW COULD RESTRICT CHANGE IN CONTROL
Provisions of Maryland law applicable to us prohibit business combinations
with:
-- any person who beneficially owns 10% or more of the voting power of
outstanding shares,
-- an affiliate of us who, at any time within the two-year period prior
to the date in question, was the beneficial owner of 10% or more of
the voting power of our outstanding shares ("an interested
shareholder"), or
-- an affiliate of an interested shareholder.
These prohibitions last for five years after the most recent date on which
the interested shareholder became an interested shareholder. Thereafter, any
business combination must be recommended by our board of directors and approved
by the affirmative vote of at least 80% of the votes entitled to be cast by
holders of our outstanding shares and two-thirds of the votes entitled to be
cast by holders of our shares other than shares held by the interested
shareholder. These requirements could have the effect of inhibiting a change in
control even if a change in control were in shareholders' interest. These
provisions of Maryland
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law do not apply, however, to business combinations that are approved or
exempted by our board of directors prior to the time that someone becomes an
interested shareholder.
OUR PARTICIPATION IN JOINT VENTURES CREATES ADDITIONAL RISK
We participate in joint ventures with other entities, some of which may be
unaffiliated with us. There are additional risks involved in these types of
transactions. These risks include, the potential of our joint venture partner
becoming bankrupt and the possibility of diverging or inconsistent economic or
business interests of us and our partner which could result in, among other
things, subjecting us to liabilities in excess of those contemplated under the
joint venture agreement and/or exposing us to liabilities of the joint venture
in excess of our proportionate share of these liabilities.
In some of our joint venture relationships with publicly registered
investment programs or other entities sponsored by Carey Property Advisors or
one of its affiliate, we enter into investments as tenants-in-common. This poses
risks in addition to those mentioned above. The partition rights of each
co-tenant in a tenancy in common could reduce the value of each portion of the
divided property. In addition, the fiduciary obligation that Carey Property
Advisors or our board may owe to our partner in an affiliated transaction may
make it more difficult for us to enforce our rights.
SPECIAL CONSIDERATIONS FOR PENSION OR PROFIT-SHARING TRUSTS, KEOGHS OR IRAS
If you are investing the assets of a pension, profit sharing, 401(k), Keogh
or other retirement plan, IRA or benefit plan in CPA(R):14, you should consider:
-- whether your investment is consistent with the applicable provisions
of ERISA or the Internal Revenue Code,
-- whether your investment will produce unrelated business taxable income
to the benefit plan, and
-- your need to value the assets of the benefit plan annually.
We have obtained an opinion of Reed Smith Shaw & McClay LLP that, under
current ERISA law and regulations, our assets should not be treated as "plan
assets" of a benefit plan subject to ERISA and/or Section 4975 of the Internal
Revenue Code which purchases shares. However, the opinion of Reed Smith is based
on the facts and assumptions described in this prospectus, on our articles of
incorporation and on our representations to them, and is not binding on the
Internal Revenue Service or the Department of Labor. If our assets were
considered to be plan assets, our assets would be subject to ERISA under Section
4975 of the Internal Revenue Code, and some of the transactions we have entered
into with Carey Property Advisors and its affiliates could be considered
"prohibited transactions" which could cause us, Carey Property Advisors and its
affiliates to be subject to liabilities and excise taxes. In addition, Carey
Property Advisors could be deemed to be a fiduciary under ERISA and subject to
other conditions, restrictions and prohibitions under Part 4 of Title I of
ERISA. Even if our assets are not considered to be plan assets, a prohibited
transaction could occur if we, Carey Financial, any selected dealer, the escrow
agent or any of their affiliates is a fiduciary (within the meaning of ERISA)
with respect to a purchase by a benefit plan and, therefore, unless an
administrative or statutory exemption applies in the event such persons are
fiduciaries (within the meaning of ERISA) with respect to your purchase, shares
should not be purchased.
OUR SYSTEMS AND OUR TENANT'S SYSTEMS MAY NOT BE YEAR 2000 COMPLIANT
The Year 2000 issue exists because many software systems, which use only
two digits to identify a year in a date field, were designed without considering
the impact of the upcoming change in the century. There is significant
uncertainty concerning the scope and magnitude of problems associated with the
century change. Some of systems critical to our operations could fail or
function improperly if not made Year 2000 compliant.
Our books and records are maintained by Carey Property Advisors. An
affiliate of Carey Property Advisors services the computer system used for
maintaining these books and records. The affiliate has
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completed a preliminary assessment of Year 2000 issues. Based on the results of
that assessment, the affiliate believes that Year 2000 issues will not
materially affect our operations. The assessment is not complete and there can
be no assurance that the affiliate will identify and remedy all potential Year
2000 issues in a timely fashion. Computer problems could interfere with our
operations.
It is also possible that our tenants' computer systems may not be Year 2000
compliant. If their systems fail, our tenant's financial condition and their
ability to pay rent and other property expenses could be adversely affected if
their computer systems fail. This failure could adversely affect our business.
We also face risks that any third parties with which we transact business
may not be Year 2000 compliant. We rely on our bank and transfer agent for
certain computer-related services and we have entered into discussions regarding
their Year 2000 readiness. If the Year 2000 issue prevents these or any other
third parties from delivering the products or services we require, our
operations could be adversely affected.
INTERNATIONAL INVESTMENTS INVOLVE ADDITIONAL RISKS
We may purchase property located outside the United States. These
investments may be affected by factors peculiar to the laws of the jurisdiction
in which the property is located. These laws may include
-- land use and zoning laws;
-- environmental laws; and
-- laws relating to the foreign ownership of property and laws relating
to the ability of foreign persons or corporations to remove profits
earned from activities within the country to the person's or
corporation's country of origin.
These laws may expose us to risks that are different from and in addition to
those commonly found in the United States. In addition, these foreign
investments could be subject to the risks of adverse market conditions caused by
changes in national or local economic conditions, changes in interest rates and
in the availability, cost and terms of mortgage funds resulting from varying
national economic policies, changes in real estate and other tax rates and other
operating expenses in particular countries and changing governmental rules and
policies.
SUITABILITY STANDARDS
The shares we are offering are suitable only as a long-term investment for
persons of adequate financial means. Initially, there is not expected to be any
public market for the shares, which means that it may be difficult to sell them.
You should not buy these shares if you need to sell them immediately or will
need to sell them quickly in the future.
In consideration of these factors, we have established suitability
standards for initial shareholders and subsequent transferees. These suitability
standards require that a purchaser of shares have either
-- a net worth of at least $150,000; or
-- a gross annual income of at least $45,000 and a net worth (excluding
the value of a purchaser's home, furnishings and automobiles) of at
least $45,000.
Arizona, North Carolina, Michigan, Pennsylvania, Ohio and Missouri have
established suitability standards different from those we have established.
Shares will be sold only to investors in those states who meet the special
suitability standards set forth below.
MISSOURI -- Investors must have either (i) a net worth of at least $250,000
or (ii) gross annual income of $75,000 and a net worth of at least $75,000.
ARIZONA AND NORTH CAROLINA -- Investors must have either (i) a minimum net
worth of at least $225,000 or (ii) gross annual income of $60,000 and a net
worth of at least $60,000.
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MICHIGAN, PENNSYLVANIA AND OHIO -- In addition to our suitability
requirements, investors must have a net worth of at least ten times their
investment in CPA(R):14.
In the case of sales to fiduciary accounts, these suitability standards
must be met by the fiduciary account, by the person who directly or indirectly
supplied the funds for the purchase of the shares or by the beneficiary of the
account. These suitability standards are intended to help ensure that, given the
long-term nature of an investment in CPA(R):14, our investment objectives and
the relative illiquidity of the shares, a purchase of shares is an appropriate
investment for certain investors. Each selected dealer must make every
reasonable effort to determine that the purchase of shares is a suitable and
appropriate investment for each shareholder based on information provided by the
shareholder. Each selected dealer is required to maintain for six years records
of the information used to determine that an investment in the shares is
suitable and appropriate for a shareholder.
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ESTIMATED USE OF PROCEEDS
The following table presents information about how the money raised in this
offering will be used. Information is provided assuming the maximum number of
shares are sold. Many of the numbers in the table are estimates because all
expenses cannot be determined precisely at this time. The actual use of the
capital we raise is likely to be different than the figures presented in the
table. We expect that approximately 86% of the money invested by shareholders
will be used to buy real estate, while the remaining 14% will be used for
working capital and to pay expenses and fees, including the payment of fees to
Carey Advisors and its affiliates.
<TABLE>
<CAPTION>
MAXIMUM OFFERING
SALE OF 40,000,000 SHARES
---------------------------------
PERCENT OF PUBLIC
AMOUNT OFFERING PROCEEDS
------------ -----------------
<S> <C> <C>
Public Offering Proceeds.................................... $400,000,000 100.00%
------------ ------
Less Offering Expenses
Selling Commissions(1).................................... 24,000,000 6.00%
Other Organization and Offering Expenses(2)............... 16,000,000 4.00%
------------ ------
Total Offering Expenses........................... 40,000,000 10.00%
------------ ------
Amount of Public Offering Proceeds Available for
Investment................................................ $360,000,000 90.00%
============ ======
*Acquisition Fees(3)........................................ $ 8,850,000 2.21%
Acquisition Expenses(4)..................................... 2,000,000 0.50%
Working Capital Reserve..................................... 4,000,000 1.00%
------------ ------
Total Proceeds to be Invested in Real Estate................ $345,150,000 86.29%
============ ======
</TABLE>
- ---------------
* Subordinated acquisition fees, which are intended to be paid from our funds
from operations and not from proceeds of this offering, have not been
included in the table. Subordinated acquisition fees (excluding interest
thereon), will not exceed 2% of the aggregate purchase price of the
properties. Assuming we do not borrow money to purchase properties, the
subordinated acquisition fees will not exceed $7,080,000 (1.77% of the
offering proceeds), in the event 40,000,000 shares are sold. These fees with
respect to any property are payable in equal amounts over an eight year
period following the acquisition of a property, assuming a cumulative return
of 6% has been paid. Other terms of the subordinated acquisition fees are
described in the "Management Compensation" section of this prospectus.
(1) We will generally pay a selling commission of $0.60 per share sold. See "The
Offering" for a description of volume discounts.
(2) "Other Organization and Offering Expenses" represent all expenses incurred
in connection with our formation, qualification and registration of our
shares and in marketing and distributing the shares under applicable federal
and state law, and any other expenses actually incurred and directly related
to the offering and sale of the shares, except selling commissions. The
total underwriting compensation to be paid to Carey Financial and the
selected dealers in connection with this offering, including selling
commissions and expense reimbursements, cannot exceed 10% of the gross
amount raised in the offering. However, an additional 0.5% of gross proceeds
from sales made by Carey Financial and each selected dealer may be paid for
bona fide due diligence expenses. To the extent 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 4.0% of the amount raised in this offering, the
excess will be paid by Carey Property Advisors with no recourse by
CPA(R):14. See "Management Compensation." See "The Offering" for a complete
description of the fees and expense reimbursements payable to Carey
Financial and the selected dealers.
(3) Acquisition fees include all fees and commissions paid in connection with
the purchase, development or construction of properties and any related
mortgage financing. Acquisition fees exclude any develop-
21
<PAGE> 23
ment fee or construction fee paid to a person who is not our affiliate in
connection with the actual development and construction of a project after
our acquisition of the land. For purposes of the table only, subordinated
acquisition fees have not been included as part of "Acquisition Fees"
because these fees will be paid from funds from operations of CPA(R):14 and
not from the proceeds of the offering. The presentation in the table is
based on the assumption that we will not borrow any money to purchase
properties. Although it is assumed that all the foregoing fees will be paid
by the sellers of property, sellers generally fix the selling price at a
level sufficient to cover the cost of any acquisition fee so that, in
effect, we, as purchaser, will bear such fee as part of the purchase price.
We will not purchase any property that has a total property cost (generally,
the sum of the costs of purchasing, developing, constructing and improving
the property plus the acquisition fees paid in connection with the purchase)
in excess of the property's appraised value. See "Management Compensation"
for a complete description of the terms, conditions and limitations of the
payment of fees to Carey Property Advisors and its affiliates.
(4) "Acquisition Expenses" represent an estimate of all expenses related to our
selection and acquisition of properties, whether or not the properties are
acquired. These fees include but are not limited to legal fees and expenses,
travel and communications expenses, costs of appraisals, non-refundable
option payments on property not acquired, accounting fees and expenses,
title insurance and miscellaneous expenses. "Acquisition Expenses" do not
include acquisition fees.
22
<PAGE> 24
MANAGEMENT COMPENSATION
The following table sets forth the type and, to the extent possible,
estimates of the amounts of all fees, compensation, income, distributions and
other payments that Carey Property Advisors and its affiliates will or may
receive in connection with this offering and our operation. These payments
initially will result from non-arm's-length bargaining. See "Conflicts of
Interest." References to Carey Property Advisors also include affiliates of
Carey Property Advisors.
<TABLE>
<CAPTION>
Entity Receiving Form and Method
Compensation of Compensation Estimated Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ORGANIZATION AND OFFERING STAGE
Carey Property Advisors Reimbursement for organization and The actual amounts to be paid will
offering expenses, including depend upon the actual amount of
identified wholesaling expenses organization and offering expenses
incurred on our behalf; provided, incurred by Carey Property Advisors
however, that if the aggregate of all and its affiliates in connection with
organization and offering expenses this offering which is not determina-
and the wholesaling fee referred to ble at this time. These expenses are
below (excluding selling commis- estimated to be $16,000,000 if
sions, and any fees paid or expenses 40,000,000 shares are sold.
reimbursed to the selected dealers)
that are paid on behalf of the
selected dealers exceeds 4.0% of the
gross offering proceeds, Carey
Property Advisors will be responsible
for the excess.
Carey Financial Selling commissions equal to $0.60 The estimated amount payable to Carey
per share sold. Carey Financial may, Financial is $24,000,000 if
in turn, reallow up to $0.60 per 40,000,000 shares are sold in this
share of the commissions to selected offering, a portion of which will be
dealers. reallowed to the selected dealers.
Carey Financial 0.5% Wholesaling Fee The estimated amount payable to Carey
Financial is $2,000,000 if 40,000,000
shares are sold in this offering.
ACQUISITION STAGE
Carey Property Advisors Interest on loans made to CPA(R):14. The actual amount of loans made to us
On short-term loans, the interest by Carey Property Advisors or its
rate will be the lesser of (i) 1% affiliates is not determinable at
above the prime rate of interest this time. Accordingly, the actual
published in The Wall Street Journal amount of interest payable to Carey
and (ii) the rate that we would be Property Advisors, if any, is not de-
charged by unrelated lending institu- terminable at this time.
tions on comparable loans for the
same purpose in the locality of the
property. See "Conflicts of Interest"
and "Investment Procedures,
Objectives and Policies."
</TABLE>
23
<PAGE> 25
<TABLE>
<CAPTION>
Entity Receiving Form and Method
Compensation of Compensation Estimated Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carey Property Advisors Acquisition Fees. Total Acquisition The actual amount to be paid to Carey
Fees (which include real estate Property Advisors will depend upon
brokerage fees, mortgage placement the aggregate total property cost of
fees, lease-up fees and transaction the properties, which in turn is
structuring fees), other than dependent upon the gross offering
subordinated acquisition fees, proceeds and the amount of mortgage
payable by either sellers of property financing we used in acquiring the
or us may not exceed 2.5% of the ag- properties, and accordingly is not
gregate purchase price of the determinable at this time. If the
properties.(1)(2) properties acquired from the proceeds
of this offering are 60% leveraged,
the acquisition fees payable to Carey
Property Advisors are estimated to be
approximately $22,125,000 if
40,000,000 shares are sold. See
"Conflicts of Interest."
Carey Property Advisors Subordinated Acquisition Fees. Total The actual amount to be paid to Carey
subordinated acquisition fees payable Property Advisors will depend upon
by either the sellers of properties the aggregate cost of the properties
or us may not exceed 2.0% of the acquired with the proceeds of this
aggregate purchase price of the offering, which in turn is dependent
properties. This fee is payable in upon the gross offering proceeds of
equal annual installments on January this offering and the amount of
1 of each of the eight calendar years mortgage financing we used in
commencing with January 1 following acquiring the properties, and
the first anniversary of the date a accordingly is not determinable at
property was purchased. The unpaid this time. If the properties acquired
portion of the subordinated with the proceeds of this offering
acquisition fee with respect to any are 60% leveraged, subordinated
property will bear interest at the acquisition fees payable to Carey
rate of 6% per annum from the date of Property Advisors are estimated to be
acquisition of the property until the approximately $17,700,000 if
portion of the fee is paid. The 40,000,000 shares are sold. See
accrued interest is payable on the "Conflicts of Interest."
date of each annual installment of
the fees. Our portion of the
subordinated acquisition fee payable
in any year, and accrued interest
thereon, will be subordinated to a
cumulative return to shareholders of
6%. All subordinated acquisition
fees, and accrued interest thereon,
shall become due and payable at the
time the shares become listed for
trading on a national securities ex-
change or included for quotation on
Nasdaq.(1)(2)
</TABLE>
24
<PAGE> 26
<TABLE>
<CAPTION>
Entity Receiving Form and Method
Compensation of Compensation Estimated Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONAL STAGE
Carey Property Advisors Reimbursement for expenses incurred Not determinable at this time.
in connection with the administration
of CPA(R):14. The amounts of any
reimbursement will not exceed amounts
which would be paid to non-affiliated
third parties in the same locality
for similar products. Our operating
expenses may not exceed the greater
of two percent of our average
invested assets or 25% of our net
income in any 12-month period. To the
extent that we incur operating
expenses in excess of this amount and
the independent directors find that
the excess expenses were the result
of unusual and nonrecurring fac-
tors, Carey Property Advisors may be
reimbursed in future years for the
full amount of these excess expenses,
or any portion thereof, but only to
the extent the reimbursement would
not cause our operating expenses to
exceed the limitation in the year
they are paid.
Carey Property Advisors Asset management fee, payable monthly If the maximum number of shares is
in an amount equal to one-twelfth of sold and CPA(R):14 achieves its
0.5% of our average invested assets borrowing goal of 60%, average
for the preceding month. Payment of invested assets as a result of this
the asset management fee will be offering would be approximately
deferred if our operating expenses, $885,000,000 and the annual asset
including the asset management fee, management fee on these assets would
exceeds the greater of two percent of be approximately $4,425,000.
our average invested assets or 25% of
our net income.(2)(3)(4)(5)
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
Entity Receiving Form and Method
Compensation of Compensation Estimated Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carey Property Advisors Performance fee, payable in cash or If the maximum number of shares is
restricted stock at the option of sold and we achieve our borrowing
Carey Property Advisors, calculated goal of 60%, average invested assets
monthly on the basis of one-twelfth as a result of this offering would be
of 0.5% of the average invested approximately $885,000,000 and the
assets for the preceding month, annual performance fee on these
payable quarterly. Payment of this assets would be approximately
fee for any quarter will be $4,425,000.
subordinated to the cumulative rate
of cash flow from operations
(computed in accordance with
generally accepted accounting
principles) of 7%. Payment of this
fee will also be deferred if our
operating expenses, including the
performance fee, exceed the greater
of two percent of our average in-
vested assets or 25% of our net
income.(2)(3)(4)(5)(6)
Carey Property Advisors Loan Refinancing Fee. Fees payable by The actual amount to be paid to Carey
either the tenant of a Property or Property Advisors will depend upon
CPA(R):14 may not exceed 1% of the the aggregate amount of the
principal amount of any refinancing refinancing we obtain.
obtained by CPA(R):14 for which Carey
Property Advisors renders substantial
services and for which no fees are
paid to a third party. The loan
refinancing fee will be payable only
if (i) the new loan is approved by a
majority of the independent direc-
tors and found to be in the best
interests of CPA(R):14, and (ii) the
terms of the new loan represent an
improvement over the terms of the
refinanced loan, the new loan
materially increases the total debt
secured by a particular property, or
the maturity date of the refinanced
loan (which must have had an initial
term of five years or more) is less
than one year from the date of the
refinancing. See "Conflicts of
Interest."
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
Entity Receiving Form and Method
Compensation of Compensation Estimated Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIQUIDATION STAGE
Carey Property Advisors Subordinated disposition fee shall be Not determinable at this time.
payable in an amount equal to the
lesser of (i) 50% of the competitive
real estate commission and (ii) 3% of
the contract sales price of a
property (if Carey Property Advisors
provides a substantial amount of
services in the sale of a prop-
erty). The subordinated disposition
fee shall be deferred until
shareholders have received total
distributions equal to 100% of their
initial investment plus a 6%
cumulative return, commencing with
the initial closing date. To the
extent that we do not pay the
subordinated disposition fee because
of the foregoing limitation, the
unpaid commissions will be accrued
and paid at the time the limitation
has been satisfied. The total real
estate commissions we pay shall not
exceed an amount equal to the lesser
of (i) 6% of the contract sales price
of a property or (ii) the commission
paid in a competitive market for the
purchase or sale of a property that
is reasonable and competitive in
light of the size, type and location
of the property.
Carey Property Advisors Subordinated incentive fee shall be The actual amount to be received will
payable in an amount equal to 15% of depend upon the results of our
the balance from cash we receive from operations and the amounts received
the sale and refinancing of upon the sale or other disposition of
properties remaining after the the properties and are not determi-
shareholders have received nable at this time.
distributions totaling 100% of their
initial investment plus a 6%
cumulative return. (7)
</TABLE>
27
<PAGE> 29
<TABLE>
<CAPTION>
Entity Receiving Form and Method
Compensation of Compensation Estimated Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carey Property Advisors Termination Fee shall be payable in Not determinable at this time.
an amount equal to 15% of the amount,
if any, by which (i) the appraised
value of the properties on the date
of termination of the advisory agree-
ment less amounts of all indebtedness
secured by the properties, exceeds
(ii) investors' initial capital plus
a 6% cumulative return less all
distributions we pay through the date
of termination. (5)
</TABLE>
- ---------------
(1) The total acquisition fees (not including subordinated acquisition fees)
payable to Carey Property Advisors or paid by us may not exceed 2.5% of the
aggregate property cost of all properties we purchase with the proceeds of
this offering. The total of all acquisition fees (including subordinated
acquisition fees and interest thereon) and acquisition expenses we pay must
be reasonable and may not exceed 6% of the aggregate contract purchase price
of all properties we purchase with the proceeds of this offering. A majority
of the directors (including a majority of the independent directors) not
otherwise interested in any transaction may approve fees in excess of these
limits if they find the excess commercially competitive, fair and reasonable
to us.
(2) Our objective is to achieve total borrowings of approximately 60% of the
purchase price of all properties. The CPA(R) programs have had similar
leverage goals but have achieved leverage of only approximately 55%. The
actual leverage percentage we achieve will impact the amount of acquisition
fees earned by Carey Property Advisors because these fees are based
primarily on the total dollars invested in properties and the amount
available for investment will be affected by the amount we borrow (i.e., the
more that is borrowed, the more funds available for investment in
properties). If 40,000,000 shares are sold and the properties are 75%
leveraged, acquisition fees (not including subordinated acquisition fees)
payable to Carey Property Advisors as a result of this offering (assuming an
aggregate total property cost of all properties of approximately
$1,416,000,000) are estimated to be approximately $35,400,000 and
subordinated acquisition fees are estimated to be approximately $28,320,000.
We do not expect our properties to be 75% leveraged. The advisory agreement
between us and Carey Property Advisors provides that Carey Property Advisors
will not earn acquisition fees or subordinated acquisition fees on the
reinvestment of proceeds from the sale or refinancing of properties, unless
the shares are listed or are expected to be listed.
(3) There are currently no specific arrangements for the provision of property
management services to us by Carey Property Advisors. These services will be
provided by Carey Property Advisors only if a property becomes vacant or
requires more active management than contemplated at the time the property
is acquired. However, if Carey Property Advisors deems these services to be
necessary in order to preserve the value of the property, Carey Property
Advisors with the approval of the board (including a majority of the
independent directors), may provide these services. The maximum property
management fee which may be paid to Carey Property Advisors is 6% of gross
revenues from commercial properties (plus reimbursed expenses), where Carey
Property Advisors performs property management and leasing, re-leasing and
leasing related services, or 3% of gross revenues, where the entity provides
only property management services. In the case of industrial and commercial
properties which are leased for ten or more years on a triple net lease
basis, the maximum property management fee is 1% of our gross revenues over
the term of each lease plus a one-time leasing fee of 3% of the total base
rents payable for the first five years of the lease term, payable in five
equal annual installments. The property management fees paid to Carey
Property Advisors may not exceed the usual and customary amounts charged for
similar services in the same geographic region.
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<PAGE> 30
(4) If at any time the shares become listed on a national securities exchange or
included for quotation on Nasdaq, we will negotiate in good faith with Carey
Property Advisors a fee structure appropriate for an entity with a perpetual
life. A majority of the independent directors must approve the new fee
structure negotiated with Carey Property Advisors. In negotiating a new fee
structure, the independent directors shall consider all of the factors they
deem relevant, including but not limited to:
-- the size of the advisory fee in relation to the size, composition and
profitability of our portfolio;
-- the success of Carey Property Advisors in generating opportunities
that meet our investment objectives;
-- the rates charged to other REITs and to investors other than REITs by
advisors performing similar services;
-- additional revenues realized by Carey Property Advisors through their
relationship with us;
-- the quality and extent of service and advice furnished by Carey
Property Advisors;
-- the performance of our investment portfolio, including income,
conservation or appreciation of capital, frequency of problem
investments and competence in dealing with distress situations; and
-- the quality of our portfolio in relationship to the investments
generated by Carey Property Advisors for the account of other clients.
The board, including a majority of the independent directors, may not
approve a new fee structure that is, in its judgment, more favorable to
Carey Property Advisors than the current fee structure.
(5) Following our termination of the advisory agreement, Carey Property Advisors
will be entitled to receive payment of any earned but unpaid compensation
and expense reimbursements accrued as of the date of termination. If the
advisory agreement is terminated
-- in connection with our change of control,
-- by us for any reason other than cause as defined in the advisory
agreement, or
-- by Carey Property Advisors for good reason as defined in the advisory
agreement,
Carey Property Advisors also shall be entitled to the payment of the
termination fee and any subordinated acquisition fees that have not
accrued. Carey Property Advisors shall be entitled to receive all accrued
but unpaid compensation and expense reimbursements in cash within 30 days
of the effective date of the termination. All other amounts payable to
Carey Property Advisors in the event of a termination shall be evidenced by
a promissory note. The termination fee shall be paid in 12 equal quarterly
installments with interest on the unpaid balance. Notwithstanding the
preceding sentence, any amounts which may be deemed payable at the date the
obligation to pay the termination fee is incurred which relate to the
appreciation of the properties
-- shall be an amount which provides compensation to the terminated
advisor only for that portion of the holding period for the respective
properties during which the terminated advisor provided services to
us,
-- shall not be due and payable until the property to which the fees
relate is sold or refinanced, and
-- shall not bear interest until the property to which the fees relate is
sold or refinanced.
Carey Property Advisors shall not be entitled to payment of the termination
fee in the event the advisory agreement is terminated because of the
failure of us and Carey Property Advisors to establish a fee structure
appropriate for a perpetual-life entity in the event the shares are listed
on a national securities exchange or are included for quotation on Nasdaq.
The termination fee is an amount equal to 15% of the amount, if any, by
which (i) the appraised value of the properties on the date of termination
of the advisory agreement, less the amount of all indebtedness secured by
the properties, exceeds (ii) the total of the total capital invested in
CPA(R):14 plus an amount equal to a cumulative return of 6% through the
termination date reduced by the total distributions paid by us from our
inception through the termination date.
29
<PAGE> 31
(6) Carey Property Advisors may choose to take the performance fee in cash or
restricted shares. For purposes of calculating the value per share of
restricted stock given for payment of the performance fee, the price per
share shall be (i) the net asset value per share as determined by the most
recent appraisal performed by an independent third party or, if an appraisal
has not yet been performed, (ii) $10 per share. The restricted stock will
vest ratably over a period of five years and is non-transferable during this
vesting period.
(7) In the event the shares are listed on a national securities exchange or
included for quotation on Nasdaq, Carey Property Advisors shall be paid the
subordinated incentive fee. The fee will vary based on the return received
by shareholders. The return will be calculated by adding the total
distributions paid by CPA(R):14 and the market value of CPA(R):14,
calculated on the basis of the average market value of the shares over the
30 trading days beginning 180 days after the shares are first listed on a
stock exchange. This total will be divided by the sum of the total amount of
capital raised by CPA(R):14 and the total cash flow necessary to generate a
6% cumulative return as of the date the return is calculated. This return is
referred to as the "Hypothetical Return" in the following table. The fee is
paid on the excess of the actual return over the Hypothetical Return. The
subordinated incentive fee will be paid as follows:
<TABLE>
<CAPTION>
HYPOTHETICAL RETURN
-----------------------------------
FEE (PERCENTAGE OF GREATER THAN OR
EXCESS RETURN) EQUAL TO LESS THAN
- ------------------ --------------- AND ---------
<S> <C> <C> <C>
12%................................... 6% 7%
13%................................... 7% 8%
14%................................... 8% 9%
15%................................... 9% --
</TABLE>
CPA(R):14 has the option to pay the fee in the form of stock, cash, a
promissory note or any combination thereof. In the event the subordinated
incentive fee is paid to Carey Property Advisors as a result of the listing
of the shares, no termination fee will be paid to Carey Property Advisors
if the advisory agreement is terminated after the listing.
30
<PAGE> 32
CONFLICTS OF INTEREST
There will be various conflicts of interest in the operation of our
business. The independent directors will have an obligation to function on our
behalf in all situations in which a conflict of interest may arise and will have
a fiduciary obligation to act on behalf of the shareholders. Possible conflicts
of interest include the following:
RECEIPT OF COMMISSIONS, FEES AND OTHER COMPENSATION BY CAREY PROPERTY
ADVISORS AND ITS AFFILIATES. A transaction involving the purchase, financing,
lease and sale of any property by CPA(R):14 may result in the immediate
realization by Carey Property Advisors and its affiliates of substantial
commissions, fees, compensation and other income. In most cases, Carey Property
Advisors has discretion with respect to all decisions relating to any such
transaction. Potential conflicts may arise in connection with a decision by
Carey Property Advisors (on our behalf) of whether to hold or sell a property.
This decision could impact the timing and amount of fees payable to Carey
Property Advisors. We may purchase, sell or finance properties through
affiliates of Carey Property Advisors engaged in the real estate brokerage
business or through our other affiliates.
NON-ARM'S-LENGTH AGREEMENTS. Except as otherwise provided below, all
agreements and arrangements, including those relating to compensation, between
us and Carey Property Advisors or any of its affiliates will not be the result
of arm's-length negotiations. Certain provisions of our bylaws require that
compensation to Carey Property Advisors and its affiliates be approved by a
majority of the independent directors and that terms of future transactions with
affiliates be no less favorable to us than terms which could be obtained from
unaffiliated entities providing similar services as an ongoing activity in the
same geographical location. The initial independent directors were selected by
the sponsor and have subsequently been reelected by the shareholders.
PURCHASES AND LOANS FROM AFFILIATES. We may purchase properties from
affiliates of Carey Property Advisors if the purchase is consistent with the
investment procedures, our objectives and policies and if other conditions are
met. See "Investment Procedures, Objectives and Policies." We also may borrow
funds from Carey Property Advisors or its affiliates
-- if, at any time when proceeds of this offering are being held by the
escrow agent, we do not have sufficient funds to provide the equity
portion of a particular investment, or
-- to provide the debt portion of a particular investment if we are
unable to obtain a permanent loan at that time or, in the judgment of
the board, it is not in our best interest to obtain a permanent loan
at the interest rates then prevailing and the board has reason to
believe that we will be able to obtain a permanent loan on or prior to
the end of the loan term provided by Carey Property Advisors or the
affiliate.
See "Investment Procedures, Objectives and Policies." We may borrow funds
on a short-term basis from Carey Property Advisors or its affiliates.
We may not invest in other REITs advised or managed, directly or through
affiliates, by the sponsor, its subsidiaries or William P. Carey and with
respect to which the sponsor, its subsidiaries or William P. Carey receive
separate fees. Additionally, we will not sell properties to the sponsor, Carey
Property Advisors or any director or any of their respective affiliates, except
in the case of an exercise of a right of first refusal by an affiliated joint
venture partner.
Every transaction entered into between us and Carey Property Advisors or
its affiliates is subject to an inherent conflict of interest. The board may
encounter conflicts of interest in enforcing our rights against any affiliate in
the event of a default by or disagreement with an affiliate or in invoking
powers, rights or options pursuant to any agreement between us and any
affiliates. Each transaction between us and Carey Property Advisors or any of
its affiliates must be approved by a majority of the independent directors who
are otherwise disinterested in the transaction as being fair and reasonable to
us and on terms and conditions no less favorable to us than those available from
unaffiliated third parties.
31
<PAGE> 33
COMPETITION WITH CPA(R):14 FROM AFFILIATES OF CAREY PROPERTY ADVISORS IN
THE PURCHASE, SALE, LEASE AND OPERATION OF PROPERTIES. W.P. Carey & Co., Inc.
specializes in providing lease financing services to major corporations and,
therefore, may be in competition with us with respect to properties, potential
purchasers, sellers and lessees of properties, and mortgage financing for
properties. W.P. Carey & Co., Inc., its subsidiaries and William P. Carey
currently manage or advise private real estate investment partnerships, REITs
and limited liability companies whose investment and rate of return objectives
are substantially similar to ours. In addition, they expect to manage or advise,
directly or through affiliates, additional REITs, public and private investment
partnerships and other investment entities.
The CPA(R) programs have investment policies similar to ours and,
therefore, may be in competition with us for properties, potential purchasers,
sellers and lessees of properties, and mortgage financing for properties.
Affiliates of Carey Property Advisors intend to offer interests in other REITs,
partnerships or public or private investment entities, some of which may have
similar investment objectives as ours and may be in a position to acquire
properties at the same time as us. Affiliates of Carey Property Advisors may
have an ownership interest in the other REITS.
Carey Property Advisors will use its best efforts to present suitable
investments to us consistent with our investment procedures, objectives and
policies. If Carey Property Advisors or any of its affiliates is presented with
a potential investment in a property which might be made by more than one
investment entity which it advises or manages, the decision as to the
suitability of the property for investment by a particular entity will be based
upon a review of the investment portfolio of each entity and upon factors such
as:
-- cash flow from the property;
-- the effect of the acquisition of the property on the diversification
of each entity's portfolio;
-- rental payments during any renewal period;
-- the estimated income tax effects of the purchase on each entity;
-- the amount of equity required to make the investment;
-- the policies of each entity relating to leverage;
-- the funds of each entity available for investment; and
-- the length of time the funds have been available for investment and
the manner in which the potential investment can be structured by each
entity.
Consideration will be given to joint ownership (e.g., tenancy-in-common or
joint venture arrangement) of a particular property determined to be suitable
for more than one investment entity in order to achieve diversification of each
entity's portfolio and efficient completion of an entity's portfolio. In joint
ownership, the investment of each entity will be on substantially similar terms
and conditions, compensation to the organizer of each investment entity will be
similar and each investment entity will have a right of first refusal to
purchase the interest of the other if a sale of that interest is contemplated.
See "Risk Factors -- Our Participation in Joint Ventures Creates Additional
Risks." To the extent that a particular property might be determined to be
suitable for more than one investment entity, priority generally will be given
to the investment entity having uninvested funds for the longest period of time.
It is the responsibility of the directors (including the independent directors)
to insure that the method used to allocate transactions is applied fairly to us.
ADJACENT PROPERTIES. Although it is not expected to occur, if Carey
Property Advisors or any of its affiliates acquires properties that are adjacent
to one of our properties, the value of such properties may be enhanced by our
interests. It also is possible that these properties could be in competition
with our properties for prospective tenants.
32
<PAGE> 34
COMPETITION FROM AFFILIATES OF CAREY PROPERTY ADVISORS FOR THE TIME AND
SERVICES OF OFFICERS AND DIRECTORS. We depend on the board and Carey Property
Advisors for our operations and for the acquisition, operation and disposition
of our investments. Carey Property Advisors has entered into the advisory
agreement with us pursuant to which it will perform certain functions relating
to the investment of our funds and our day-to-day management. See
"Management -- Advisory Agreement." Most officers of Carey Fiduciary Advisors,
Inc., the general partner of Carey Property Advisors, are also officers,
directors and/or employees of W.P. Carey & Co., Inc. Some officers of affiliates
of Carey Property Advisors will be performing similar services for the
CPA(R)programs and may perform these services for REITs, partnerships or other
investment entities offered or managed in the future by affiliates of Carey
Property Advisors. The manager of Carey Diversified LLC is an affiliate of Carey
Property Advisors. Carey Property Advisors serves in the same advisory capacity
for Corporate Property Associates 10 Incorporated (or "CPA(R):10"), Corporate
Property Associates 12 Incorporated (or "CPA(R):12") Carey Institutional
Properties Incorporated (or "CIP(R)") as it does for CPA(R):14. Carey Fiduciary
Advisors, Carey Property Advisors and their affiliates will devote the time to
our affairs as they, within their sole discretion, exercised in good faith,
determine to be necessary for our benefit and the shareholders. See
"Management." Neither Carey Financial, Carey Property Advisors nor any of their
affiliates are restricted from acting as general partner, advisor, underwriter,
selling agent or broker-dealer in public or private offerings of securities in
REITs, real estate partnerships or other entities which may have objectives
similar to ours and which are sponsored by affiliated or non-affiliated persons.
AFFILIATED SALES AGENT. Carey Financial, a subsidiary of W.P. Carey & Co.
and an affiliate of Carey Property Advisors, will receive a selling commission
for each share sold by it (except for sales made to Carey Property Advisors, its
employees or its affiliates) and annual servicing fees with respect to shares
held by its clients, and will receive reimbursement for specified expenses. See
"The Offering."
COMMON COUNSEL. Reed Smith Shaw & McClay LLP, our counsel in connection
with this offering, is also counsel to Carey Property Advisors, Carey Financial
and various affiliates, including the CPA(R) programs and W.P. Carey & Co. In
the event any legal controversy arises in which our interests appear to be in
conflict with those of Carey Property Advisors, Carey Financial or their
affiliates, other counsel will be retained for one or more parties.
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<PAGE> 35
The following chart shows the relationship among Carey Property Advisors,
its general partner, its affiliates and CPA(R):14. See "Management."
[W.P. CAREY ORGANIZATIONAL CHART]
34
<PAGE> 36
PRIOR OFFERINGS BY AFFILIATES
THE INFORMATION IN THIS SECTION AND THE TABLES REFERENCED HEREIN SHOULD NOT
BE CONSIDERED AS INDICATIVE OF HOW WE WILL PERFORM. IN ADDITION, THE TABLES
INCLUDED AS EXHIBITS TO THIS PROSPECTUS DO NOT MEAN THAT WE WILL MAKE
INVESTMENTS COMPARABLE TO THOSE REFLECTED IN SUCH TABLES. IF YOU PURCHASE SHARES
IN CPA(R):14, YOU WILL NOT HAVE ANY OWNERSHIP INTEREST IN ANY OF THE REAL ESTATE
PROGRAMS DESCRIBED IN THE TABLES (UNLESS YOU ARE ALSO AN INVESTOR IN THOSE REAL
ESTATE PROGRAMS).
Affiliates of Carey Property Advisors have organized the limited
partnerships listed below:
-- Corporate Property Associates
-- Corporate Property Associates 2
-- Corporate Property Associates 3
-- Corporate Property Associates 4, a California limited partnership
-- Corporate Property Associates 5
-- Corporate Property Associates 6 -- a California limited partnership
-- Corporate Property Associates 7 -- a California limited partnership
-- Corporate Property Associates 8, L.P., a Delaware limited partnership
-- Corporate Property Associates 9, L.P.
On January 1, 1998, these nine partnerships were combined to form Carey
Diversified LLC, a New York Stock Exchange listed limited liability company. The
partnerships no longer operate as independent entities. The trading symbol of
Carey Diversified is "CDC."
Affiliates of Carey Property Advisors have also organized the REITs listed
below (in addition to CPA(R):14):
-- Corporate Property Associates 10 Incorporated
-- Carey Institutional Properties, Incorporated
-- Corporate Property Associates 12 Incorporated
These REITs and the CPA(R) limited partnerships are referred to as the
CPA(R) Programs. The primary investment objectives of the CPA(R) programs are
similar to ours.
The following is information relating to the CPA(R) Programs as of December
31, 1998:
<TABLE>
<S> <C>
Total equity raised: $1,094,458,000
Total investors: 58,000
Number of Properties Purchased: 447
Aggregate Purchase Price of Properties: $1,882,493,000
Total Equity Investment in Properties: $ 979,343,000
Total Mortgage Financing: $ 903,150,000
</TABLE>
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<PAGE> 37
The CPA(R) programs have invested in the following types of properties:
PROPERTY TYPE DIVERSIFICATION
[PROPERTY TYPE DIVERSIFICATION CHART]
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<PAGE> 38
The properties owned by the CPA(R) programs are located throughout the
United States as shown on the chart below.
REGIONAL DIVERSIFICATION
PIE CHART
Carey Diversified also owns three properties in France.
When acquired by the CPA(R) programs, approximately 21.62% of the
properties had newly constructed buildings or buildings being constructed and
approximately 78.38% had previously constructed buildings (based on the purchase
price). When purchased by the CPA(R) programs, all of the properties were
single-tenant commercial, industrial and governmental real property (or
interests therein). The CPA(R) programs have made no loans or participating
loans and have entered into 30 joint ventures with affiliated programs (23% of
all transactions entered into by the CPA(R) programs). More detailed information
with respect to investments by the CPA(R) programs is separately presented in
tabular form for the CPA(R) programs in Exhibit 99 to Part II of the
registration statement. Upon written request to the Director of Investor
Relations, 50 Rockefeller Plaza, NY, NY 10020, (800) 972-2739, CPA(R):14 will
provide, at no fee, copies of Exhibit 99.
The leveraged percentage achieved by the CPA(R) REITs are as follows:
<TABLE>
<S> <C>
CPA(R):10: 45.3%
CIP(R): 41.5%
CPA(R):12: 27.9%
</TABLE>
The CPA(R) programs, including Carey Diversified, have sold all or a
portion of 71 properties as of December 31, 1998.
<TABLE>
<S> <C>
Total Properties sold: 71
Original Purchase Price of Properties sold: $227,566,000
Equity Investment in Properties sold: $ 98,794,000
Amount received from sale of properties: $236,335,000
Net proceeds from sales (after expenses and payment of
mortgage debt): $140,411,000
</TABLE>
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<PAGE> 39
More detailed information with respect to the properties sold by the CPA(R)
programs between January 1, 1994 and December 31, 1998 is presented in tabular
form in Table V (Sales or Dispositions of Properties) in Exhibit A to this
prospectus.
Some CPA(R) programs have experienced adverse business developments which
have included the filing by some tenants for protection from creditors under the
bankruptcy code, the vacating of facilities by a tenant at the end of an initial
lease term, and litigation with tenants involving lease defaults and sales of
properties. These developments have caused a reduction in cash flow and/or an
increase in administrative expenses of the affected CPA(R) program for certain
periods of time, but, with four exceptions described below, have not caused the
affected CPA(R) program to reduce their rate of distributions to partners. See
Table III (Operating Results of Prior Programs) in Exhibit A to this prospectus
for overall results of operations of the affected CPA(R) programs.
The management of the affected CPA(R) program has undertaken a number of
measures to mitigate the adverse effects of some adverse business developments,
such as re-leasing properties vacated by initial tenants; refinancing mortgage
loans and restructuring terms of existing mortgage loans; restructuring lease
terms; selling properties; and, in the case of litigation, vigorously defending
the interests of affected CPA(R) programs and, where appropriate, settling
litigation. Of the approximately 150 tenants with which the CPA(R) programs have
entered into leases, 15 have subsequently sought protection from creditors in
bankruptcy. Properties formerly leased to nine of these tenants have been
re-leased or sold. Four other tenants have affirmed their leases and the leases
of the remaining two tenants are currently the subject of negotiations described
below.
Most CPA(R) programs in which adverse developments have occurred have been
able to meet their obligations and maintain distributions to their investors,
primarily as a result of the efforts of management described above and below and
the existence of a working capital reserve established at the inception of each
CPA(R) program. Although several CPA(R) programs have experienced the types of
adverse business developments described above, only four CPA(R) Programs,
CPA(R):1, CPA(R):5, CPA(R):7 and CPA(R):10 have had to reduce the rate of
distributions to their partners or shareholders as a result of adverse
developments. The adverse developments which were primarily responsible for
causing these reductions in the rate of distributions are, in the case of
CPA(R):1, the bankruptcy filing by Storage Technology, in the case of CPA(R):5,
the sale of two properties, in the case of CPA(R):7, the bankruptcy filings of
Yellow Front Stores, Inc. and NV Ryan L.P. and in the case of CPA(R):10, the
expiration of one lease and the bankruptcy of Harvest Foods. The reductions in
distribution rates in each of CPA(R):1, CPA(R):5, CPA(R):7 and CPA(R):10 were
followed by increases in the distribution rates. The distribution rate of
CPA(R):7 exceeded the rate in effect before the reductions when it was merged
with Carey Diversified while the distribution rate of CPA(R):1 and CPA(R):5 had
not reached the rate in effect before the reduction at the time of the merger.
Most of the adverse developments which have occurred have been resolved.
These include the filings for protection from creditors under the bankruptcy
code by the following tenants of the following CPA(R) programs:
-- Saxon Industries, Inc. (CPA(R):1 and CPA(R):2);
-- Storage Technology Corporation (CPA(R):1);
-- The Leslie Fay Company (CPA(R):3);
-- Knudsen Corporation (CPA(R):3 and CPA(R):4);
-- Gulf Consolidated Services, Inc. (CPA(R):4);
-- Three Guys Inc. Ltd. (CPA(R):4);
-- Williams Hand Tool, Inc. (CPA(R):5);
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<PAGE> 40
-- American Trim Products Inc. (CPA(R):5);
-- Yellow Front Stores, Inc. (CPA(R):7);
-- NVRyan L.P. (CPA(R):7, CPA(R):8 and CPA(R):9);
-- Harvest Foods, Inc. (CPA(R):10 and CIP(R));
-- SportsTown, Inc. (CIP(R)); and
-- Lanxide (CPA(R):12).
The management of these programs has addressed these bankruptcies primarily
by re-leasing the properties to new tenants or by restructuring the original
leases at a reduced rental. Certain of the properties have been sold at a loss
or transferred in exchange for a release of the related mortgage debt. In the
case of the bankruptcy filing by Saxon Industries, Inc., however, its two leases
were affirmed in bankruptcy. In the case of the bankruptcy filing by Knudsen
Corporation, seven of the eight properties which had been leased to Knudsen
Corporation were sold at a gain, generating more than enough cash to retire the
entire mortgage debt on all eight properties. The remaining property was leased
to a new tenant. In addition, as a result of vigorous litigation efforts pursued
by the general partners, some programs have been awarded substantial awards from
bankruptcy settlements. CPA(R):1 received a settlement of cash and securities
with a market value of approximately $2.3 million in connection with the Storage
Technology Corporation bankruptcy. CPA(R):7 and CPA(R):8 were paid a
restructuring fee of $2.6 million in exchange for amending some leases and
CPA(R):9 received approximately $456,000, in each case in connection with
settlement of bankruptcy claims against NVRyan L.P. New Valley has agreed to
affirm two of its three leases with CPA(R):2 and CPA(R):3 and the third property
has been leased.
In June 1996, Harvest Foods, Inc. filed a voluntary bankruptcy petition
and, in March 1997, the Bankruptcy Court approved Harvest's motion to disaffirm
the master lease. Under its ruling, the Bankruptcy Court allowed the CPA(R):10
and CIP(R) to establish its unsecured claim for lease rejection damages at
$10,000,000 and ordered Harvest to pay $150,000 in full satisfaction and
settlement of any post-petition obligation for real estate taxes. Harvest
subsequently vacated the properties.
On March 15, 1997, CPA(R):10 and CIP(R) entered into a net lease with The
Kroger Co. for two supermarkets in Conway and North Little Rock, Arkansas.
CPA(R):10 and CIP(R) also entered into net leases with affiliated Foods
Southwest, Inc. for two stores in Hope and Little Rock, Arkansas. CPA(R):10 and
CIP(R) are currently evaluating various offers for the lease or purchase of the
vacated properties and are continuing their efforts to remarket the properties.
In August 1998, CIP(R) and CPA(R):10 entered into a lease with Affiliated for a
fourth supermarket in Little Rock. In 1997 CPA(R):10 and CIP(R) sold three
properties for $2,400,000.
On June 24, 1997, CPA(R):10 and CIP(R) entered into a transaction whereby
each purchased a 50% participation in the first priority mortgage loan
collateralized by the 15 properties formerly leased to Harvest. The mortgage
loan, which has an outstanding balance of $8,554,894, was purchased for
$7,700,000. On December 22, 1998, the holder of the $3,000,000 subordinated
mortgage note agreed to accept a payment of $500,000 from CIP(R) and CPA(R):10
in satisfaction of the mortgage loan obligation of $3,000,000 and accrued
interest of $776,750.
Additional information concerning the CPA(R) Programs is set forth in
tabular form in Exhibit A to this prospectus. See "Experience in Raising and
Investing Funds" in Table I; "Compensation to W. P. Carey & Co." in Table II;
"Operating Results of Prior Programs" in Table III; "Results of Completed
Programs" in Table IV and "Sales or Dispositions of Properties" in Table V. In
addition, upon written request to the Director of Investor Relations, 50
Rockefeller Plaza, New York, NY 10020, (800) 972-2739, CPA(R):14 will provide,
at no fee, the most recent annual report (on Form 10-K) filed by any of the
CPA(R) Programs and, at a reasonable fee, the exhibits to the annual report.
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<PAGE> 41
MANAGEMENT
We operate under the direction of the board, the members of which are
accountable to us and our shareholders as fiduciaries. A majority of the
independent directors and a majority of the directors have reviewed and ratified
the articles of incorporation and have adopted the bylaws. The board is
responsible for the management and control of our affairs. The board has
retained Carey Property Advisors to manage our day-to-day affairs and the
acquisition and disposition of investments, subject to the board's supervision.
We currently have seven directors; it must have at least three and may have no
more than nine directors.
A majority of the board must be comprised of independent directors, except
for a period of 90 days after the death, removal or resignation of an
independent director. An independent director may not, directly or indirectly
(including through a member of his immediate family), own any interest in, be
employed by, have any material business or professional relationship with, or
serve as an officer or director of, W. P. Carey & Co., Carey Property Advisors
or any of their affiliates, except that an independent director may serve as a
director, officer or trustee for not more than two other REITs organized by W.
P. Carey & Co. or advised by Carey Property Advisors. An independent director
may not perform material services for CPA(R):14, except to carry out the
responsibilities of director. Three of the directors are affiliates of Carey
Property Advisors and four are independent directors. An independent director is
a director who is not and has not for the last two years been associated with W.
P. Carey & Co., Carey Property Advisors or any of its affiliates other than up
to two other public REITs sponsored by W. P. Carey & Co. All of the initial
directors were recommended by W. P. Carey & Co.
Proposed transactions are often discussed before being brought to a final
board vote. During these discussions, independent directors often offer ideas
for ways in which deals can be changed to make them acceptable and these
suggestions are taken into consideration when structuring transactions. No
independent director of any prior CPA(R) program has ever voted against a
property acquisition recommendation on a final vote. Each director will hold
office until the next annual meeting of shareholders or until his successor has
been duly elected and qualified. Although the number of directors may be
increased or decreased, a decrease shall not have the effect of shortening the
term of any incumbent director.
Any director may resign at any time and may be removed with or without
cause by the shareholders upon the affirmative vote of at least a majority of
all the votes entitled to be cast at a meeting called for the purpose of the
proposed removal. The notice of the meeting shall indicate that the purpose, or
one of the purposes, of the meeting is to determine if the director shall be
removed. The term "cause" as used in this context is a term used in the Maryland
Corporation and Association Code. This code does not include a definition of
this term and Maryland case law suggests that the term be defined on a
case-by-case basis. The effect of the Maryland Code's lack of a definition of
cause is that we cannot provide investors with a definition for "cause." As a
result of this uncertainty, investors may not know what actions by a director
may be grounds for removal.
Unless filled by a vote of the shareholders as permitted by Maryland law, a
vacancy created by an increase in the number of directors or the death,
resignation, removal, adjudicated incompetence or other incapacity of a director
shall be filled by a vote of a majority of the remaining directors and,
-- in the case of a director who is not an independent director (an
"affiliated director"), by a vote of a majority of the remaining
affiliated directors, or
-- in the case of an independent director, by a vote of a majority of the
remaining independent directors
unless there are no remaining affiliated directors or independent directors, as
the case may be, to so fill a vacancy, in which case a majority vote of the
remaining directors shall be sufficient. If at any time there are no independent
or affiliated directors in office, successor directors shall be elected by the
shareholders. Each director will be bound by the articles of incorporation and
the bylaws.
The directors are not required to devote all of their time to us and are
only required to devote the time to our affairs as their duties require. The
directors will meet quarterly or more frequently if necessary. It is not
expected that the directors will be required to devote a substantial portion of
their time to discharge
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<PAGE> 42
their duties as directors. Consequently, in the exercise of their fiduciary
responsibilities, the directors will be relying heavily on Carey Property
Advisors. The board is empowered to fix the compensation of all officers that it
selects and may pay remuneration to directors for services rendered to us in any
other capacity. We pay to each independent director a quarterly fee of $2,750
and a meeting fee of $1,000 per meeting. It is estimated that the aggregate
compensation payable to the independent directors as a group for a full fiscal
year will be approximately $60,000. We will not pay any compensation to our
officers or directors who also serve as officers or directors of Carey Property
Advisors. The board may change the compensation of directors.
Our general investment and borrowing policies are set forth in this
prospectus. The directors may establish further written policies on investments
and borrowings and shall monitor the administrative procedures, investment
operations and performance of us and Carey Property Advisors to assure that the
policies are in the best interest of the shareholders and are fulfilled. We will
follow the policies on investments and borrowings set forth in this prospectus
unless and until they are modified by the directors.
The board is also responsible for reviewing our fees and expenses on at
least an annual basis and with sufficient frequency to determine that the
expenses incurred are in the best interests of the shareholders. In addition, a
majority of the independent directors and a majority of directors not otherwise
interested in the transaction must approve all transactions with Carey Property
Advisors or its affiliates (other than other publicly-registered entities, in
which case only the allocation of interests in the transaction must be approved
by the independent directors). The independent directors also will be
responsible for reviewing the performance of Carey Property Advisors and
determining that the compensation to be paid to Carey Property Advisors is
reasonable in relation to the nature and quality of services to be performed and
that the provisions of the advisory agreement are being carried out.
Specifically, the independent directors will consider factors such as
-- the amount of the fee paid to Carey Property Advisors in relation to
the size, composition and performance of CPA(R):14's investments;
-- the success of Carey Property Advisors in generating appropriate
investment opportunities;
-- rates charged to other REITs and other investors by advisers
performing similar services;
-- additional revenues realized by Carey Property Advisors and its
affiliates through their relationship with us, whether we pay them or
they are paid by others with whom we do business;
-- the quality and extent of service and advice furnished by Carey
Property Advisors, the performance of our investment portfolio; and
-- the quality of our portfolio relative to the investments generated by
Carey Property Advisors for its other clients.
Neither the directors nor their affiliates will vote or consent to the
voting of shares they now own or hereafter acquire on matters submitted to the
shareholders regarding either (i) the removal of Carey Property Advisors, any
director or any affiliate; or (ii) any transaction between us and Carey Property
Advisors, any director or any affiliate.
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DIRECTORS AND EXECUTIVE OFFICERS OF CPA(R):14
Our directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME OFFICE
---- ------
<S> <C>
William P. Carey........................... Chairman of the Board and Director
H. Augustus Carey.......................... President
George E. Stoddard......................... Senior Executive Vice President and
Director
William Ruder.............................. Director*
Charles C. Townsend........................ Director*
Warren G. Wintrub.......................... Director*
Thomas E. Zacharias........................ Director*
Steven M. Berzin........................... Executive Vice President and Chief
Financial Officer
Claude Fernandez........................... Executive Vice President and Chief
Administration Officer
Gordon F. DuGan............................ Executive Vice President
Gordon J. Whiting.......................... Executive Vice President and Portfolio
Manager
Debra E. Bigler............................ Senior Vice President and Regional Director
Ted G. Lagreid............................. Senior Vice President and Regional Director
Anthony S. Mohl............................ Senior Vice President -- Acquisitions
John J. Park............................... Senior Vice President -- Finance and
Treasurer
Michael D. Roberts......................... Senior Vice President and Controller
Susan C. Hyde.............................. First Vice President and Secretary
Frank S. Owens............................. First Vice President
</TABLE>
- ---------------
* Independent Director
The following is a biographical summary of the experience of our directors
and executive officers:
William P. Carey, age 68, elected Chairman in June 1997, 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. 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, Rhoades & Co. (now Lehman Brothers) and 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, Mr. Carey served as a Governor of the National
Association of Real Estate Investment Trusts ("NAREIT"). He currently serves on
the boards of The Johns Hopkins University and its School of Advanced
International Studies and as Chairman of the Boards of Trustees of the St. Elmo
Foundation and the W.P. Carey Foundation. He founded the Visiting Committee to
the Economics Department of the University of Pennsylvania and co-founded with
Dr. Lawrence Klein the Economics Research Institute at that university. With Sir
John Templeton, he helped to establish the program in management education at
Oxford University. Mr. Carey also serves as Chairman of the Board and Chief
Executive Officer of CPA(R):10, CIP(R), CPA(R):12 and Carey Diversified. Mr.
Carey is an uncle of H. Augustus Carey.
H. Augustus Carey, age 41, elected President in October 1998, returned to
W.P. Carey & Co. as a Vice President in August 1988 and was elected First Vice
President in April 1992, Senior Vice President in October 1995 and Managing
Director in January 1996. Mr. Carey previously worked for W.P. Carey & Co. from
1979 to 1981 as Assistant to the President. From 1984 to 1987, Mr. Carey served
as a loan officer in the North American Department of Kleinwort Benson Limited
in London, England. He received his A.B. in Asian Studies from Amherst College
in 1979 and a M.Phil. in Management Studies from Oxford University
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<PAGE> 44
in 1984. Mr. Carey is Chairman of the Corporate Advisory Council for the
International Association for Investment Planners and a Trustee for the Oxford
Management Center Advisory Council. He is the nephew of William P. Carey.
George E. Stoddard, age 82, elected to the Board of Directors in June 1997,
was until 1979 officer-in-charge of the Direct Placement Department of The
Equitable Life Assurance Society of the United States ("Equitable"), 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 also serves as a Managing Director of W.P.
Carey & Co.
William Ruder, age 77, elected Director in June 1997, is Chairman of the
Board of William Ruder Incorporated, a consulting firm founded in 1981. From
1948 to 1981, Mr. Ruder was in partnership with David Finn at the firm of Ruder
& Finn, an international public relations company. 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 of Economic Priorities. He is a member of the Board
of Overseers of the Wharton School of the University of Pennsylvania and 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 Tobe Lecturer at
Harvard Graduate School of Business and is associated with several other
businesses, civic and cultural organizations. He received a B.S.S. degree from
the City College of New York. Mr. Ruder served as a director of W.P. Carey & Co.
from 1987 to 1990. Mr. Ruder is a director of CPA(R):10 and CPA(R):12.
Charles C. Townsend, Jr., age 71, elected Director in June 1997, currently
is an Advisory Director of Morgan Stanley & Co., having held such position since
1979. Mr. Townsend was a Partner and a Managing Director of Morgan Stanley & Co.
from 1963 to 1978 and served as Chairman of Morgan Stanley Realty Corporation
from 1977 to 1982. Mr. Townsend holds a B.S.E.E. from Princeton University and
an M.B.A. from Harvard University. Mr. Townsend is a director of CIP(R) and
Carey Diversified.
Warren G. Wintrub, age 65, elected Director in June 1997, retired in 1992
from Coopers & Lybrand after 35 years. Mr. Wintrub was elected a partner in
Coopers & Lybrand in 1963 and specialized in tax matters and served on that
firm's Executive Committee from 1976 to 1988 and as a Chairman of its Retirement
Committee from 1979 to 1992. Mr. Wintrub holds a B.S. degree from Ohio State
University and an LL.B. from Harvard Law School. He currently serves as a
director of Chromcraft Revington, Inc. and Getty Petroleum Co. Mr. Wintrub is a
director of CPA(R):10 and CIP(R).
Thomas E. Zacharias, age 45, elected Director in June 1997, is currently a
Senior Vice President at Lend Lease Development U.S., Inc., a subsidiary of Lend
Lease Corporation, a global financial services, property and management company.
Mr. Zacharias was Vice President of Corporate Property Investors from 1986 to
1998. Corporate Property Investors, a party which is unaffiliated with
CPA(R):14, is one of the largest equity-oriented REITS in the U.S. with
approximately $4.4 billion under management. Prior to joining Corporate Property
Investors in 1981, Mr. Zacharias was Project Director for the New York State
Urban Development Corporation from 1980-1981, and served as the Assistant to the
Chief Operating Officer from 1979-1980. Mr. Zacharias received his undergraduate
degree, magna cum laude, from Princeton University in 1976 and a Master of
Public and Private Management from the Yale School of Management in 1979. Mr.
Zacharias is a director of CIP(R) and CPA(R):12.
Steven M. Berzin, age 48, was elected Executive Vice President, Chief
Financial Officer and Chief Legal Officer of CPA(R):14 and a Managing Director
of W.P. Carey & Co. in July 1997. 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 was associated
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<PAGE> 45
with the law firm of Cravath, Swaine & Moore from 1977 to 1985 and from 1976 to
1977, he served as law clerk to the Honorable Anthony M. Kennedy, then a U.S.
Circuit Court Judge. Mr. Berzin received a B.A. and an 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 a director
of Carey Diversified.
Gordon F. DuGan, age 32, elected Executive Vice President in June 1997, was
elected Managing Director of W.P. Carey & Co. in June 1997. Having originally
joined W.P. Carey & Co. in 1988 and until September 1995 a Senior Vice President
in the Acquisitions Department of W.P. Carey & Co., Mr. DuGan rejoined W.P.
Carey as Deputy Head of Acquisitions in February 1997. Prior to rejoining W.P.
Carey & Co., he served as Chief Financial Officer of Superconducting Core
Technologies, a Colorado wireless communications equipment manufacturer from
October 1995 until February 1997. Mr. DuGan received his B.S. degree in Finance
from the University of Pennsylvania. Mr. DuGan is a director of Carey
Diversified.
Claude Fernandez, age 46, elected Executive Vice President and Chief
Administrative Officer in June 1997, joined W.P. Carey & Co. as Assistant
Controller in March 1983, was elected Controller in July 1983, Vice President in
April 1986 and is now a Managing Director, Executive Vice President and Chief
Administrative Officer. Prior to joining W.P. Carey & Co., Mr. Fernandez was
associated with Coldwell Banker, Inc. in New York for two years and with Arthur
Andersen & Co. in New York for over three years. Mr. Fernandez, a Certified
Public Accountant, received his B.S. degree in accounting from New York
University in 1975 and his M.B.A. in Finance from Columbia University Graduate
School of Business in 1981.
Gordon J. Whiting, age 33, elected Senior Vice President of W.P. Carey &
Co., Inc. in April, 1998. Mr. Whiting joined W.P. Carey & Co., Inc. in September
1994, as a Second Vice President after receiving an M.B.A. from the Columbia
University Graduate School of Business, where he concentrated in finance. Mr.
Whiting was elected a Vice President of W.P. Carey & Co., Inc. in October 1995
and a First Vice President in April 1997. Mr. Whiting founded an import/export
company based in Hong Kong after receiving a B.S. in Business Management and
Marketing from Cornell University.
Debra E. Bigler, age 46, elected Senior Vice President in June 1997, became
Vice President and Marketing Director of W.P. Carey & Co. in July 1991 and a
First Vice President in October 1995. A regional marketing director responsible
for investor services in the south and south central United States, Ms. Bigler
joined W.P. Carey & Co. 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, age 47, elected Senior Vice President in June 1997, joined
W.P. Carey & Co. 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 Shurgard Capital Group then from January
1991 to July 1993, for SunAmerica where he was an executive in 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, age 37, became a Senior Vice President in June 1997. Mr.
Mohl joined W.P. Carey & Co. as Assistant to the President in September 1987
after receiving an M.B.A. from the Columbia University Graduate School of
Business and became a Second Vice President in January 1990 and a Vice President
in April 1992. Mr. Mohl was employed as an analyst in the strategic planning
group of Kurt Salmon Associates after receiving an undergraduate degree from
Wesleyan University.
John J. Park, age 34, elected Senior Vice President in June 1997, became a
First Vice President of W.P. Carey & Co. in April 1993 and Senior Vice President
in October 1995. Mr. Park joined W.P. Carey & Co. as an Investment Analyst in
December 1987 and became a Vice President in July 1991. Mr. Park received his
undergraduate degree from the Massachusetts Institute of Technology in 1986 and
an M.B.A. from New York University in 1991.
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<PAGE> 46
Michael D. Roberts, age 47, elected Senior Vice President in June 1997,
joined W.P. Carey & Co. 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 February 1983 and from
September 1983 to April 1989, he was employed by Coopers & Lybrand and held the
position of Audit Manager at the time of his departure. A Certified Public
Accountant, Mr. Roberts received his undergraduate degree from Brandeis
University and his M.B.A. from Northeastern University.
Susan C. Hyde, age 30, is a First Vice President and a Director of Investor
Relations of W.P. Carey & Co. Ms. Hyde joined W.P. Carey & Co. in 1990, became a
Second Vice President in April 1995 and a Vice President in April 1997. Ms. Hyde
graduated from Villanova University in 1990 where she received a B.S. degree in
Business Administration with a concentration in marketing and a B.A. degree in
English.
Frank S. Owens, age 40, joined W. P. Carey and Co. as a First Vice
President and Director of Asset Management in July 1998. From January 1997 to
January 1998, Mr. Owens was Vice President, Asset Management for Devon
Properties, Inc. And from October 1992 to December 1996 he was Vice President,
Real Estate Group, UBS Asset Management, Inc. Mr. Owens previously held asset
management and development positions at Jones Lang Wootton Realty Advisors and
The Prudential Realty Group. Mr. Owens received a B.S. in Mathematics from St.
Lawrence University, a B.S. in Civil and Environmental Engineering from Clarkson
University, and an M.B.A. from Cornell University.
Some of our directors and officers act as directors or officers of the
general partners of other CPA(R) programs and may own interests in those CPA(R)
programs.
CAREY PROPERTY ADVISORS
The general partner of Carey Property Advisors is Carey Fiduciary Advisors,
Inc., a corporation wholly-owned by William P. Carey. Mr. Carey also owns 100%
of W.P. Carey & Co., Inc. W.P. Carey & Co. is a private company that specializes
in arranging private financing for major corporations, principally net lease
financings of real property, and the officers of W.P. Carey & Co. have an
extensive background in this area. Properties financed with the assistance of
W.P. Carey & Co. have included office buildings, manufacturing plants,
distribution and retail facilities, warehouses, movie theaters and hotels.
DIRECTORS AND PRINCIPAL OFFICERS OF CAREY FIDUCIARY ADVISORS
The directors and principal officers of Carey Fiduciary Advisors are as
follows:
<TABLE>
<CAPTION>
NAME OFFICE
---- ------
<S> <C>
William P. Carey........................... Chairman of the Board and Director
George E. Stoddard......................... Chairman of the Investment Committee and
Director
Frank J. Hoenemeyer........................ Vice Chairman of the Investment Committee
and Director
Lawrence R. Klein.......................... Chairman of the Economic Policy Committee
and Director
Nathaniel S. Coolidge...................... Director
Steven M. Berzin........................... Executive Vice President, Chief Financial
Officer and Chief Legal Officer
Claude Fernandez........................... Executive Vice President and Chief
Administrative Officer
Gordon F. DuGan............................ Executive Vice President
H. Augustus Carey.......................... Senior Vice President and Secretary
Debra E. Bigler............................ Senior Vice President and Regional Director
Ted G. Lagreid............................. Senior Vice President and Regional Director
Anthony S. Mohl............................ Senior Vice President
John J. Park............................... Senior Vice President and Treasurer
</TABLE>
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<PAGE> 47
<TABLE>
<CAPTION>
NAME OFFICE
---- ------
<S> <C>
Michael D. Roberts......................... Senior Vice President and Controller
Gordon J. Whiting.......................... Senior Vice President
Anne R. Coolidge........................... First Vice President
Susan C. Hyde.............................. First Vice President
Edward V. LaPuma........................... First Vice President
David W. Marvin............................ First Vice President and Regional Director
Frank S. Owens............................. First Vice President
W. Sean Sovak.............................. First Vice President
David S. Eberle............................ Vice President and Regional Director
Robert C. Kehoe............................ Vice President
Mary Ann Kelly............................. Vice President and Regional Director
David G. Termine........................... Vice President
Matthew B. Walley.......................... Vice President
</TABLE>
The following is a biographical summary of the experience of the directors
and executive officers of Carey Fiduciary Advisors:
Information regarding Messrs. W. P. Carey, Stoddard, Berzin, DuGan,
Fernandez, H.A. Carey, Park, Mohl, Lagreid, Roberts, Whiting, Owens, Ms. Bigler
and Ms. Hyde is set forth under "Management -- Directors and Principal Officers
of CPA(R):14."
Frank J. Hoenemeyer, age 79, elected Vice Chairman of the Investment
Committee and Director in May 1992, was Vice Chairman, Director and Chief
Investment Officer of The Prudential Insurance Company of America until his
retirement in November 1984. As Chief Investment Officer he was responsible for
all of Prudential's investments in stocks, bonds, private placements, leveraged
buyouts, venture capital, real estate ownership and mortgages. Mr. Hoenemeyer
was graduated with a B.S. in Economics from Xavier University, Cincinnati, Ohio
and an M.B.A. from the Wharton School of the University of Pennsylvania, and
joined Prudential in 1947. Under his direction as Chief Investment Officer,
Prudential built the world's largest real estate and securities investment
portfolio (valued at over $200 billion in 1989) and became a leader in
investments including the purchase and development of real estate, leveraged
buyouts and venture capital. Mr. Hoenemeyer serves on the Boards of American
International Group and Mitsui Trust Bank (U.S.A.) and is formerly a director of
Corporate Property Investors, a $3 billion private real estate investment trust.
He has also been active in community affairs and at present is Chairman of the
Turrell Fund and a Trustee and Chairman of the Finance Committee of the Robert
Wood Johnson Foundation.
Dr. Lawrence R. Klein, age 78, is the Benjamin Franklin Professor Emeritus
of Economics and Finance at the University of Pennsylvania and its Wharton
School, having joined the faculty of the University in 1958. He is a holder of
earned degrees from the University of California at Berkeley and the
Massachusetts Institute of Technology and has been awarded the Alfred Nobel
Memorial Prize in Economic Sciences as well as a number of honorary degrees.
Founder of Wharton Econometric Forecasting Associates, Inc., Dr. Klein has been
counselor to various corporations, governments and government agencies,
including the Federal Reserve Board and the President's Council of Economic
Advisers. Dr. Klein joined W.P. Carey & Co. in 1984 as Chairman of the Economic
Policy Committee and as a director.
Nathaniel S. Coolidge
Anne R. Coolidge, age 30, a First Vice President, joined W.P. Carey & Co.
in 1993 as Assistant to the Chairman and was elected a Vice President in April
1998 and First Vice President in March 1999. Ms. Coolidge received an A.B. from
Harvard College magna cum laude and an M.B.A. from Columbia University's
Graduate School of Business.
Edward V. LaPuma, age 26, became a First Vice President of W.P. Carey & Co.
in April, 1998. Mr. LaPuma joined W.P. Carey & Co. as an Assistant to the
Chairman in July 1995, became a Second Vice
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<PAGE> 48
President in July 1996 and a Vice President and Research Officer in April 1997.
A graduate of the University of Pennsylvania, Mr. LaPuma received a B.A. in
Global Economic Strategies from The College of Arts and Sciences and a B.S. in
Economics with a concentration in Finance from the Wharton School.
David W. Marvin, age 47, became a First Vice President of W.P. Carey & Co.
in April, 1998. Mr. Marvin joined W.P. Carey & Co. in 1995 as a Vice President
regional marketing director for the northeastern United States. Previously he
spent 15 years at Prudential-Bache and Kidder-Peabody, as well as was a national
director of sales with Cigna Corporation. Mr. Marvin received his B.A. from the
University of Massachusetts at Amherst.
W. Sean Sovak, age 26, a First Vice President, joined W.P. Carey & Co. as
Assistant to the Chairman in 1994. He was appointed to First Vice President in
April 1998. Mr. Sovak was graduated summa cum laude from the University of
Pennsylvania's Wharton School, where he concentrated in Finance.
David S. Eberle, age 33, joined W.P. Carey & Co., Inc. in May 1995 as Vice
President and Regional Director for the Midwest region. Prior to joining W.P.
Carey he was Manager, Wholesale Sales for Bowen Real Estate Group from November
1994 through May 1995. From November 1992 through November 1995 Mr. Eberle was
Managing Director of all West Coast region of Vesnor Inc. Mr. Eberle received
his B.S. in Management from St. John's University.
Robert Kehoe, age 38, a Vice President of W.P. Carey & Co., joined W.P.
Carey & Co. as a Senior Accountant in 1987. Mr. Kehoe became a Second Vice
President of W.P. Carey & Co. in April 1992 and a Vice President in July 1997.
Prior to joining W.P. Carey & Co., Mr. Kehoe was associated with Deloitte
Haskins & Sells for three years and was Manager of Financial Controls at CBS
Educational and Professional Publishing for two years. Mr. Kehoe received his
B.S. degree in Accounting from Manhattan College in 1982 and his M.B.A. from
Pace University in 1993.
Mary Ann Kelly, age 39, joined W.P. Carey & Co. in 1995 as a Vice President
and regional marketing director for the mountain states area. From March 1993
through October 1994 Ms. Kelly was employed by Related Capital Company as a
regional director in the southeastern United States. From December 1989 through
February 1993 Ms. Kelly was a Regional Marketing Representative, Northeast, for
Phoenix Leasing. Ms. Kelly received her B.B.A. from Hofstra University where she
concentrated in International Business.
David G. Termine, age 39, a Vice President, joined W.P. Carey & Co. in
1991. Earlier, he held a similar position at Lepereq Capital Partners (The LCP
Group) and was Assistant Controller for Lazard Realty Corp., a subsidiary of
Lazard Freres & Co. After receiving a B.S. in Accounting from Brooklyn College,
Mr. Termine started his career in public accounting, working for diverse real
estate clients, notably Rudin Management Co.
Matthew B. Walley, age 33, Vice President and Director of Corporate
Communications, worked for W.P. Carey & Co. at the beginning of his career and
returned to the firm in 1996. He was elected a Vice President in April 1998.
Prior to rejoining, he served as a member of the institutional fixed income
department of Paine Webber in London, where he had responsibility for
Institutional clients and European central banks. In addition, he worked at
Unilever, implementing strategic marketing in London, Amsterdam, Toronto and New
York. He holds an M.A. from Oxford University and an M.B.A. from New York
University's Stern School of Business.
The principal officers of Carey Fiduciary Advisors and the offices to which
they have been elected substantially are the same as those for CPA(R):14. All of
the officers and directors of Carey Fiduciary Advisors have been elected to
serve until the next annual meeting of Carey Fiduciary Advisors to be held in
1999.
SHAREHOLDINGS
Carey Property Advisors currently owns 20,000 shares, which constitutes
0.17% of the outstanding shares as of December 31, 1998. Carey Property Advisors
may not sell any of these shares during the period
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<PAGE> 49
it serves as our advisor. Furthermore, any resale of the 20,000 shares that
Carey Property Advisors currently owns and the resale of any shares which may be
acquired by our affiliates are subject to the provisions of Rule 144 promulgated
under the Securities Act of 1933, which rule limits the number of shares that
may be sold at any one time and the manner of such resale. Although Carey
Property Advisors is not prohibited from acquiring additional shares, Carey
Property Advisors has no options or warrants to acquire any additional shares
and has no current plans to acquire additional shares. There is no limitation on
the ability of Carey Property Advisors or its affiliates to resell any shares
they may acquire in the future. If 40,000,000 shares are sold, Carey Property
Advisors will own less than 0.07% of the shares. Carey Property Advisors has
agreed to abstain from voting any shares it now owns or hereafter acquires in
any vote for the election of directors or any vote regarding the approval or
termination of any contract with Carey Property Advisors or any of its
affiliates.
MANAGEMENT DECISIONS
All of the activities of Carey Property Advisors will be managed by Carey
Fiduciary Advisors. The primary responsibility for the selection our investments
and the negotiation for these investments will reside in William P. Carey,
George E. Stoddard, Gordon F. DuGan, Gordon J. Whiting, W. Sean Sovak, Edward V.
LaPuma and Anne R. Coolidge, all of whom are officers or directors of Carey
Fiduciary Advisors. Each potential investment will be submitted for review to
the investment committee. George E. Stoddard, Chairman, Frank J. Hoenemeyer and
Nathaniel S. Coolidge currently serve as members of the investment committee.
The board of directors of Carey Fiduciary Advisors has empowered the investment
committee to authorize and approve our investments on behalf of Carey Fiduciary
Advisors, provided that the members of the committee agree unanimously on the
action to be taken. However, the board of Carey Fiduciary Advisors retains
ultimate authority to authorize and approve our investments on behalf of Carey
Property Advisors and may make these investments on our behalf without the
approval of, and irrespective of any adverse recommendation by, the investment
committee or any other person, except our board.
LIMITED LIABILITY AND INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
OTHER AGENTS
We maintain a directors and officers liability insurance policy. The
organizational documents limit the personal liability of our directors and
officers for monetary damages to the fullest extent permitted under current
Maryland law and provide that a director or officer may be indemnified to the
fullest extent required or permitted by Maryland law. Maryland law allows
directors and officers to be indemnified against judgments, penalties, fines,
settlements, and expenses actually incurred in a proceeding unless the following
can be established:
-- the act or omission of the director or officer was material to the
cause of action adjudicated in the proceeding, and was committed in
bad faith or was the result of active and deliberate dishonesty;
-- the director or officer actually received an improper personal benefit
in money, property or services; or
-- with respect to any criminal proceeding, the director or officer had
reasonable cause to believe his act or omission was unlawful.
Any indemnification or any agreement to hold harmless is recoverable only out of
our assets and not from the shareholders. Indemnification could reduce the legal
remedies available to us and the shareholders against the indemnified
individuals.
This provision does not reduce the exposure of directors and officers to
liability under federal or state securities laws, nor does it limit the
shareholder's ability to obtain injunctive relief or other equitable remedies
for a violation of a director's or an officer's duties to us or our
shareholders, although the equitable remedies may not be an effective remedy in
some circumstances.
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<PAGE> 50
Notwithstanding the foregoing, the directors, Carey Property Advisors and
their affiliates will be indemnified by us for losses arising from our operation
only if all of the following conditions are met:
-- the directors, Carey Property Advisors or their affiliates have
determined, in good faith, that the course of conduct which caused the
loss or liability was in our best interests;
-- the directors, Carey Property Advisors or their affiliates were acting
on our behalf or performing services for us;
-- the liability or loss was not the result of negligence or misconduct
by the directors, Carey Property Advisors or their affiliates; and
-- the indemnification or agreement to hold harmless is recoverable only
out of our net assets and not from its shareholders.
In addition to any indemnification to which directors and officers shall be
entitled pursuant to the General Corporation Law of Maryland, the organizational
documents provide that we shall indemnify other employees and agents to the
extent authorized by the directors, whether they are serving us or, at our
request, any other entity. We have agreed to indemnify and hold harmless Carey
Property Advisors and its affiliates performing services for us from specific
claims and liabilities arising out of the performance of its obligations under
the advisory agreement. As a result, we and our shareholders may be entitled to
a more limited right of action than they would otherwise have if these
indemnification rights were not included in the advisory agreement.
The general effect to investors of any arrangement under which any
controlling person, director or officer of CPA(R):14 is insured or indemnified
against liability is a potential reduction in distributions resulting from our
payment of premiums associated with insurance. In addition, indemnification
could reduce the legal remedies available to CPA(R):14 and the shareholders
against the officers and directors.
The Securities and Exchange Commission takes the position that
indemnification against liabilities arising under the Securities Act of 1933 is
against public policy and unenforceable. Indemnification of the directors,
officers, Carey Property Advisors or their affiliates will not be allowed for
liabilities arising from or out of a violation of state or federal securities
laws. Indemnification will be allowed for settlements and related expenses of
lawsuits alleging securities laws violations and for expenses incurred in
successfully defending any lawsuits, provided that a court either
-- approves the settlement and finds that indemnification of the
settlement and related costs should be made; or
-- there has been a dismissal with prejudice or a successful adjudication
on the merits of each count involving alleged securities law
violations as to the particular indemnitee and a court approves the
indemnification.
ADVISORY AGREEMENT
Many of the services to be performed by Carey Property Advisors and its
affiliates in managing our day-to-day activities are summarized below. This
summary is provided to illustrate the material functions which Carey Property
Advisors and its affiliates will perform for us and it is not intended to
include all of the services which may be provided to us by third parties.
Under the terms of the advisory agreement, Carey Property Advisors
undertakes to use its best efforts to present to us investment opportunities
consistent with our investment policies and objectives as adopted by the board.
In its performance of this undertaking, Carey Property Advisors, either directly
or indirectly by engaging an affiliate, shall (subject to the authority of the
board):
-- find, present and recommend to us a continuing series of real estate
investment opportunities consistent with our investment policies and
objectives;
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-- provide advice to us, and act on our behalf with respect to the
acquisition, financing, refinancing, holding, leasing and disposition
of real estate investments;
-- make investments on our behalf in compliance with our investment
procedures, objectives and policies;
-- take the action and obtain the services necessary to effectuate the
acquisition, financing, refinancing, holding, leasing and disposition
of real estate investments; and
-- provide day-to-day management of our business activities and the other
administrative services for us requested by the board.
The board has authorized Carey Property Advisors to make investments in any
property on our behalf without the approval of the board if the following
conditions are satisfied:
-- Carey Property Advisors must obtain an appraisal for the property
indicating that the total property cost of the property does not
exceed the appraised value of the property; and
-- Carey Property Advisors must provide us with a representation that the
property, in conjunction with our other investments and proposed
investments, is reasonably expected to fulfill our investment
procedures, objectives and policies as established by the board and
then in effect.
The term of the advisory agreement ends on December 31, 1999 and thereafter
will be automatically renewed for successive one-year periods unless either
party shall give the other party notice of non-renewal not less than 60 days
before the end of any one-year period. Additionally, the advisory agreement may
be terminated
-- immediately by us for "cause" or upon the bankruptcy of Carey Property
Advisors or a material breach of the advisory agreement by Carey
Property Advisors,
-- without cause by a majority of the independent directors or
shareholders upon 60 days' notice, or
-- immediately with good reason by Carey Property Advisors.
"Good reason" is defined in the advisory agreement to mean either
-- any failure to obtain a satisfactory agreement from any successor to
us to assume and agree to perform our obligations under the advisory
agreement or
-- any material breach of the advisory agreement of any nature whatsoever
by us.
"Cause" is defined in the advisory agreement to mean fraud, criminal conduct,
willful misconduct or willful or negligent breach of fiduciary duty by Carey
Property Advisors or a breach of the advisory agreement by Carey Property
Advisors.
Carey Property Advisors and its affiliates expect to engage in other
business ventures and, as a result, their resources will not be dedicated
exclusively to our business. However, pursuant to the advisory agreement, Carey
Property Advisors must devote sufficient resources to the administration of
CPA(R):14 to discharge its obligations. The advisory agreement is not assignable
or transferable by either party without the consent of the other party, except
that Carey Property Advisors may assign the advisory agreement to an affiliate
that has a net worth of $5,000,000 or more or for whom W. P. Carey & Co. agrees
to guarantee its obligations to us. Either we or Carey Property Advisors may
assign or transfer the advisory agreement to a successor entity.
Carey Property Advisors may not make any loans on our behalf without the
prior approval of a majority of the independent directors. The actual terms and
conditions of transactions involving investments in properties shall be
determined in the sole discretion of Carey Property Advisors, subject at all
times to compliance with the foregoing requirements.
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Some types of transactions require the prior approval of the board,
including a majority of the independent directors, including the following:
-- investments in properties in respect of which the requirements
specified above have not been satisfied;
-- investments made through joint venture arrangements with affiliates of
Carey Property Advisors;
-- investments which are not contemplated by the terms of this
prospectus;
-- transactions that present issues which involve conflicts of interest
for Carey Property Advisors (other than conflicts involving the
payment of fees or the reimbursement of expenses);
-- investments in equity securities (other than warrants acquired in
connection with net lease transactions); and
-- the lease of assets to W. P. Carey & Co., any director or Carey
Property Advisors.
We will reimburse Carey Property Advisors for all of the costs it incurs in
connection with the services it provides to us, including, but not limited to:
-- organization and offering expenses, which include expenses
attributable to preparing the registration statement, formation and
organization of CPA(R):14, qualification of the shares for sale in the
states, escrow arrangements, filing fees and expenses attributable to
selling the shares (including, but not limited to, selling
commissions, advertising expenses, expense reimbursement, counsel and
accounting fees);
-- the annual cost of goods and materials used by us and obtained from
entities not affiliated with W. P. Carey & Co., including brokerage
fees paid in connection with the purchase and sale of securities;
-- administrative services (including personnel costs, provided, however,
that no reimbursement shall be made for costs of personnel to the
extent that personnel are used in transactions for which Carey
Property Advisors receives a separate fee);
-- rent, depreciation, leasehold improvement costs, utilities or other
administrative items generally constituting Carey Property Advisors'
overhead; and
-- acquisition expenses, which are defined to include expenses related to
the selection and acquisition of properties.
Carey Property Advisors must reimburse us at least annually for the amount
by which our operating expenses exceed the greater of 2% of our average invested
assets or 25% of our net income. To the extent that operating expenses payable
or reimbursable by us exceed this limit and the independent directors determine
that the excess expenses were justified based on unusual and nonrecurring
factors which they deem sufficient, Carey Property Advisors may be reimbursed in
future years for the full amount of the excess expenses, or any portion thereof,
but only to the extent the reimbursement would not cause our operating expenses
to exceed the limitation in any year. Within 60 days after the end of any of our
fiscal quarters for which total operating expenses for the 12 months then ended
exceed the limitation, there shall be sent to the shareholders a written
disclosure, together with an explanation of the factors the independent
directors considered in arriving at the conclusion that the excess expenses were
justified.
Carey Property Advisors or its affiliates will be paid fees in connection
with services provided to us. See "Management Compensation." In the event the
advisory agreement is not renewed by us or is terminated by us without cause or
with good reason by Carey Property Advisors, Carey Property Advisors will be
paid all accrued and unpaid fees and expense reimbursements, any unaccrued
subordinated acquisition fees and in some circumstances will also be paid a
termination fee. See "Management Compensation." We will not reimburse Carey
Property Advisors or its affiliates for services for which Carey Property
Advisors or its affiliates are entitled to compensation in the form of a
separate fee.
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INVESTMENT PROCEDURES, OBJECTIVES AND POLICIES
INVESTMENT PROCEDURES
We invest primarily in single-tenant commercial, industrial and
governmental real property, either existing or under construction sometimes
including the attached property. Generally, our properties will be net leased to
entities Carey Property Advisors deems creditworthy under leases which will be
full recourse obligations of our tenants or their affiliates. In most cases,
each lease will require the tenant to pay all of the costs of maintenance,
insurance and real estate taxes.
In analyzing potential acquisitions, Carey Property Advisors reviews and
structures many aspects of a transaction, including the tenant, the real estate
and the lease to determine whether a potential acquisition can be structured to
satisfy our acquisition criteria. Carey Property Advisors considers the
following aspects of each transaction:
Tenant Evaluation. Carey Property Advisors evaluates each potential tenant
for its credit, management, position within its industry, operating history
and profitability. Carey Property Advisors seeks tenants it believes will
have stable or improving credit. By leasing properties to these tenants, we
can generally charge rent that is higher than the rent charged to tenants
with recognized credit and thereby enhance its current return from these
properties as compared with properties leased to companies whose credit
potential has already been recognized by the market. Furthermore, if a
tenant's credit does improve, the value of our property will likely increase
(if all other factors affecting value remain unchanged). Carey Property
Advisors may also seek to enhance the likelihood of a tenant's lease
obligations being satisfied, such as through a letter of credit or a
guaranty of lease obligations from the tenant's corporate parent. This
credit enhancement provides us with additional financial security. In
evaluating a possible investment, the creditworthiness of a tenant generally
will be a more significant factor than the value of the property absent the
lease with such tenant. While Carey Property Advisors will select tenants it
believes are creditworthy, tenants will not be required to meet any minimum
rating established by an independent credit rating agency. Carey Property
Advisors' and the investment committee's standards for determining whether a
particular tenant is creditworthy vary in accordance with a variety of
factors relating to specific prospective tenants. The creditworthiness of a
tenant is determined on a tenant by tenant, case by case basis. Therefore,
general standards for creditworthiness cannot be applied.
Leases with Increasing Rent. Carey Property Advisors seeks to include a
clause in each lease that provides for increases in rent over the term of
the lease. These increases are generally tied to increases in indices such
as the consumer price index. In the case of retail stores, the lease may
provide for participation in gross sales above a stated level. The lease may
also provide for mandated rental increases on specific dates or other
methods that may not have been in existence or contemplated by us as of the
date of this prospectus. Carey Property Advisors seeks to avoid entering
into leases that provide for contractual reductions in rents during their
primary term.
Properties Important to Tenant Operations. Carey Property Advisors
generally seeks to acquire properties with operations that are essential or
important to the ongoing operations of the tenant. Carey Property Advisors
believes that these properties provide better protection in the event a
tenant files for bankruptcy, since leases on properties essential or
important to the operations of a bankrupt tenant are less likely to be
terminated by a bankrupt tenant. Carey Property Advisors also seeks to
assess the income, cash flow and profitability of the business conducted at
the property so that, if the tenant is unable to operate its business, we
can either continue operating the business conducted at the property or
re-lease the property to another entity in the industry which can operate
the property profitably.
Lease Provisions that Enhance and Protect Value. When appropriate, Carey
Property Advisors attempts to include provisions in its leases that require
its consent to specified tenant activity or require the tenant to satisfy
specific operating tests. These provisions include, for example, operational
and financial covenants of the tenant, prohibitions on a change in control
of the tenant and
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indemnification from the tenant against environmental and other contingent
liabilities. These provisions protect our investment from changes in the
operating and financial characteristics of a tenant that may impact its
ability to satisfy its obligations to us or could reduce the value of our
properties.
Diversification. Carey Property Advisors will attempt to diversify our
portfolio to avoid dependence on any one particular tenant, type of
facility, geographic location or tenant industry. By diversifying our
portfolio, Carey Property Advisors reduces the adverse effect of a single
under-performing investment or a downturn in any particular industry or
geographic region.
Carey Property Advisors uses a variety of other strategies in connection
with its acquisitions. These strategies include attempting to obtain equity
enhancements in connection with transactions. Typically, these equity
enhancements involve warrants to purchase stock of the tenant to which the
property is leased or the stock of the parent of the tenant. If the value of the
stock exceeds the exercise price of the warrant, equity enhancements helps us to
achieve our goal of increasing funds available for the payment of distributions.
As a transaction is structured, it is evaluated by the chairman of Carey
Property Advisors' investment committee. Before a property is acquired, the
transaction is reviewed by the investment committee to ensure that it satisfies
our investment criteria. The investment committee is not directly involved in
originating or negotiating potential acquisitions, but instead functions as a
separate and final step in the acquisition process. Carey Property Advisors
places special emphasis on having experienced individuals serve on its
investment committee and does not invest in a transaction unless it is approved
by the investment committee.
We believe that the investment committee review process gives us a unique
competitive advantage over other net lease companies because of the substantial
experience and perspective that the investment committee has in evaluating the
blend of corporate credit, real estate and lease terms that combine to make an
acceptable risk.
The following people serve on the investment committee:
-- George E. Stoddard, Chairman, was formerly responsible for the direct
corporate investments of The Equitable Life Assurance Society of the
United States and has been involved with the CPA(R) programs for over
19 years.
-- Frank J. Hoenemeyer, Vice Chairman, was formerly Vice Chairman,
Director and Chief Investment Officer of The Prudential Insurance
Company of America. As Chief Investment Officer, Mr. Hoenemeyer was
responsible for all of Prudential's investments, including stocks,
bonds, private placements, real estate and mortgages.
-- Nathaniel S. Coolidge previously served as Senior Vice
President -- Head of Bond & Corporate Finance Department of the John
Hancock Mutual Life Insurance Company. His responsibility included
overseeing fixed income investments for Hancock, its affiliates and
outside clients.
-- Lawrence R. Klein is the Benjamin Franklin Professor of Economics
Emeritus at the University of Pennsylvania and its Wharton School. Dr.
Klein has been awarded the Alfred Nobel Memorial Prize in Economic
Sciences and currently advises various governments and government
agencies. Dr. Klein is an alternate member of the investment
committee.
Each property purchased by us will be appraised by an independent
appraiser. We will not purchase any property that has a total property cost (the
purchase price of the property plus all acquisition fees) which is in excess of
its appraised value. These appraisals may take into consideration, among other
things, the terms and conditions of the particular lease transaction, the
quality of the lessee's credit and the conditions of the credit markets at the
time the lease transaction is negotiated. The appraised value may be greater
than the construction cost or the replacement cost of a property, and the actual
sale price of a property if sold by us may be greater or less than the appraised
value.
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Carey Property Advisors' practices include performing evaluations of the
physical condition of properties and performing environmental surveys in an
attempt to determine potential environmental liabilities associated with a
property prior to its acquisition. We intend to exercise due diligence to
discover potential environmental liabilities prior to the acquisition of any
property, although there can be no assurance that hazardous substances or wastes
(as defined by present or future Federal or state laws or regulations) will not
be discovered on the Property. See "Risk Factors -- Potential Liability for
Environmental Matters Could Adversely Affect our Financial Condition." We will
also consider factors peculiar to the laws of foreign countries, in addition to
the risk normally associated with real property investments, when considering an
investment located outside the United States. See "Risk Factors -- International
Investments Involve Additional Risks."
INVESTMENT OBJECTIVES
Our objectives are:
-- TO PAY QUARTERLY DISTRIBUTIONS AT AN INCREASING RATE THAT FOR TAXABLE
SHAREHOLDERS MAY BE PARTIALLY FREE FROM CURRENT TAXATION. Our
distribution rate is calculated by dividing quarterly cash
distribution from operations by the amount of equity raised less
amounts distributed to investors from the sale of properties and
financings. Although the cash amount of a distribution may go down
during the life of CPA(R):14, the distribution rate may continue to
increase. If the total amount received by us from the sale of our
properties is less than the total amount we invested, a portion of the
distributions will represent a return of the money originally invested
and not a return on the investment. There can be no assurance that we
will pay regular distributions or that the distribution rate will
increase. While prior CPA(R)programs have occasionally used working
capital to pay a portion of some distributions, cash flows from
operating activities have generally exceeded distributions paid. See
"Distributions."
-- TO PURCHASE A PORTFOLIO OF REAL ESTATE THAT WILL INCREASE IN
VALUE. An individual investing directly in real estate would not have
to pay the organization and offering expenses we will pay. Therefore,
we must realize a greater level of operating income from, and/or
appreciation in the value of, our real estate in order for an investor
to realize the same return he would realize if an investor invested
directly in and operated the real estate purchased by us.
-- TO INCREASE THE EQUITY IN OUR REAL ESTATE BY MAKING REGULAR MORTGAGE
PRINCIPAL PAYMENTS. We will realize our objective of increasing our
equity in our properties by making regular mortgage principal payments
from income generated from the properties only if properties are sold
by us for an amount equal to or greater than the original equity
investment plus the remaining mortgage balance.
There can be no assurance that all or any of these objectives will be
achieved or that all of these objectives will be achieved with respect to each
property. See "Prior Offerings by Affiliates" for a description of the
experience of the CPA(R) programs in making investments similar to our
investment objectives. See "Risk Factors" for a description of risks associated
with our investments. We also may make loans on income-producing properties,
which loans may have some form of equity participation.
The primary investment objectives of the CPA(R) programs are similar to
ours. The first nine CPA(R) programs have been consolidated into Carey
Diversified LLC. Based on the trading price of the shares of Carey Diversified
at the time of the consolidation and distributions made before the
consolidation, the value of all but one of the portfolios of the first nine
CPA(R) programs exceeded the aggregate purchase price of the properties.
TYPES OF INVESTMENTS
Substantially all of our investments will be income-producing property
which is, upon acquisition, improved or being developed or which is being or
will be developed within a reasonable period after its acquisition. Investments
will not be restricted as to geographical areas, but it is expected that most of
the investments will be made within the United States. See "Risk Factors --
International Investments Involve
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Additional Risks." With the exception of proposed investments described in this
prospectus or a supplement to this prospectus, prospective investors will not be
able to evaluate the merits of our investments or the terms of any dispositions.
See "Risk Factors -- Our Success will be Dependent on the Performance of Carey
Property Advisors."
It is anticipated that many of the properties we purchase will be acquired
from entities that simultaneously lease the properties from us. These
sale-leaseback transactions provide the lessee company with a source of capital
as an alternative to other financing sources such as borrowing, mortgaging real
property, issuing bonds or selling shares of common stock. The prospects for the
seller/lessee's enterprise and the financial strength of the seller/lessee will
be important aspects of the sale and leaseback of a property, particularly a
property specifically suited to the needs of the lessee. Carey Property Advisors
will examine the financial statements of the lessee, if available, to evaluate
the financial capability of the lessee and its ability to perform the terms of
the purchase and leaseback agreement and, where appropriate, will examine the
available operating results of properties to determine whether or not projected
rental levels are likely to be met. Whether a prospective tenant is creditworthy
will be determined by Carey Property Advisors or the board. Creditworthy does
not necessarily mean "investment grade."
We anticipate that some of our sale-leasebacks will be in conjunction with
acquisitions, recapitalizations and other financial restructurings. In some of
these transactions, the acquiring entities typically purchase all or
substantially all of the stock or assets of a company, and the acquired company
or its successor in interest becomes obligated on the substantial loans
necessary to finance the acquisition. We may act as one of several sources of
financing for these transactions by purchasing real property from the seller of
the subject company and net leasing it to the company or its successor in
interest (the lessee). See "Risk Factors -- Our Tenants that are Highly Leverage
may be Unable to Pay Rent."
In selecting properties in which to make investments, Carey Property
Advisors will consider the extent to which a particular property may generate
depreciation. Depreciation deductions may reduce our taxable income which may
enable us to pay distributions which are partially free from current taxation.
We depreciate our real estate for tax purposes on a straight line basis over a
40-year period, except where the Internal Revenue Code requires a different
depreciation period, as it may with respect to property leased to governments
and to foreign lessees. See "United States Federal Income Tax Aspects."
Carey Property Advisors may structure some lease transactions so that the
leases will not be recognized as leases for federal income tax purposes. To the
extent a lease is not considered a lease for federal income tax purposes, we
would not be able to depreciate the property subject to the lease and may lose
some other tax benefits. See "United States Federal Income Tax
Aspects -- Sale-Leaseback Transactions." In structuring these lease
transactions, Carey Property Advisors will attempt to obtain additional
consideration from the tenant to compensate us for any lost tax benefits.
However, there can be no assurance that any additional consideration will be
received or, if received, that it will be sufficient to fully compensate us for
lost tax benefits.
In some circumstances, we grant tenants a right to purchase the property
leased by the tenant. The option purchase price is generally the greater of the
contract purchase price and the fair market value of the property at the time
the option is exercised.
Investments in Loans
Carey Property Advisors may structure an investment as a loan in situations
in which a standard net lease transaction would have an adverse impact on the
seller of a property or otherwise would be inappropriate for us. Carey Property
Advisors would attempt to structure any loan in a manner that would provide us
with an economic return similar to that which we could expect to receive had the
investment been structured as a net lease transaction. Any transaction
structured as a loan must otherwise meet our investment criteria. The directors,
including a majority of the independent directors, must approve any transaction
structured as a loan.
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Some of the loans made, purchased or otherwise acquired by us, in addition
to providing for base interest at a fixed or variable rate, may allow us to
participate in the economic benefits of any increase in the value of the
property securing repayment of the loan, as though we were an equity owner of a
portion of the property. In addition, it is possible that the participations may
take other forms where available or deemed appropriate. See "United States
Federal Income Tax Aspects -- Requirements for Qualification." The forms and
extent of the participations we receive will vary with each transaction
depending on factors such as the equity investment, if any, of the borrower,
credit support provided by the borrower, the interest rate on our loans and the
anticipated and actual cash flow from the underlying real property. Our loans
may include first mortgage loans, leasehold mortgage loans and conventional
mortgage loans without equity enhancements. Loans are not expected to comprise a
significant portion of our portfolio.
Any loans will be secured by various types of real property as well as
personal or mixed property connected with the real property. The loans generally
will be secured by property with a demonstrable income-producing potential. In
determining whether to make loans, Carey Property Advisors will analyze relevant
property and financial factors which may include the condition and use of the
subject property, its income-producing capacity and the quality, experience and
creditworthiness of the owner of the property.
We anticipate that our loans will either include provisions permitting us
to cause the entire unpaid principal amount to become due within 15 years or be
fully amortized within that period. Our lending activity may consist of the
origination of loans or the purchase of existing loans. We may make both long-
term and short-term loans. We will not make or invest in loans that are
subordinate to any mortgage held by W. P. Carey & Co., Carey Property Advisors,
the directors or their affiliates.
We will require that a mortgagee's title insurance policy or commitment as
to the lien priority of a mortgage or the condition of title be obtained. We
will obtain independent appraisals for underlying real property, which we will
maintain in our records for at least five years and will be available for
inspection and duplication by any shareholder at our offices. However, Carey
Property Advisors generally will rely on its own independent analysis and not
exclusively on appraisals in determining whether to make a particular loan. It
should be noted that appraisals are estimates of value and should not be relied
upon as measures of true worth or realizable value. We will not make a loan when
the amount we advance plus the amount of any existing loans that are equal or
senior to our loan exceeds 100% of the appraised value of the underlying real
property. In making loans that exceed 85% of the appraised value of any
underlying real property, Carey Property Advisors will consider additional
underwriting criteria such as the net worth of the borrower, the borrower's
credit rating, if any, the anticipated cash flow of the borrower, any additional
collateral provided by the borrower and other factors Carey Property Advisors
deems appropriate.
Joint Ventures and Wholly-Owned Subsidiaries
We may enter into joint ventures or general partnerships and other
participations with real estate developers, owners and others for the purpose of
obtaining an equity interest in a property or properties in accordance with our
investment policies. These investments permit us to own interests in large
properties without unduly restricting the diversity of our portfolio. We will
not enter into a joint venture to make an investment that we would not be
permitted to make on our own. In making equity investments with third parties,
we are prohibited from participating with non-affiliates unless we acquire a
controlling interest in the investment. A "controlling interest" means an equity
interest possessing the power to direct or cause the direction of the management
and policies of the joint venture or general partnership. In transactions in
which both non-affiliated entities and our affiliates are participants, a
controlling interest is determined by aggregating our equity interests with any
affiliate participating in the transaction, provided the affiliate has
investment objectives substantially similar to ours. See "Risk Factors -- Our
Participation in Joint Ventures Creates Additional Risks."
We may participate jointly with publicly registered investment programs or
other entities sponsored or managed by Carey Property Advisors in investments as
tenants-in-common or in some other joint venture arrangement. Joint ventures
with affiliated programs will be permitted only if:
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-- a majority of the directors (including a majority of the independent
directors) not otherwise interested in the transaction approve the
transaction as being fair and reasonable to us;
-- the affiliated program or entity makes its investment on substantially
the same terms and conditions as us; and
-- we and the affiliated program or entity each have a right of first
refusal to purchase the investment if the other program wishes to sell
the investment.
It is not likely that we will have money available to exercise this right of
first refusal and we have made no determination as to whether it would borrow
funds or liquidate assets in order to exercise any option. We will not otherwise
participate in joint investments with Carey Property Advisors or its affiliates.
The cost of structuring joint investments will be shared ratably by us and
participating investors.
We have and will form wholly-owned subsidiary corporations to purchase
properties in some jurisdictions where the acquisition of properties through the
use of a separate entity would have a beneficial effect on our taxable income
for state tax purposes or for other reasons deemed to be beneficial. These
subsidiary corporations are usually formed for the sole purpose of acquiring a
specific property or properties located in one or more states and would have
organizational documents
-- that are substantially similar to our organizational documents;
-- that comply with all applicable state securities laws and regulations;
and
-- that comply with the applicable terms and conditions set forth in this
prospectus.
We have made and will make loans to our wholly-owned subsidiaries and we have
and will guaranty the obligations of these subsidiaries.
Other Investments
We may invest up to 10% of our net equity in unimproved or
non-income-producing real property and in "equity interests." Investment in
equity interests in the aggregate will not exceed 5% of our net equity. "Equity
interests" are defined generally to mean stock, warrants or other rights to
purchase the stock of, or other interests in, a tenant of a property, an entity
to which we lend money or a parent or controlling person of a borrower or
tenant. We will invest in unimproved or non-income-producing property which
Carey Property Advisors believes will appreciate in value or which will increase
the value of an adjoining or neighboring properties we own. There can be no
assurance that these expectations will be realized. We anticipate that most
equity interests will be "restricted securities" as defined in Rule 144
promulgated under the Securities Act of 1933. Under this rule, we may be
prohibited from reselling the equity securities without limitation until we have
fully paid for and held the securities for one year. The issuer of equity
interests in which we invest may never register the interests under the
Securities Act of 1933. Whether an issuer registers its securities under the
Securities Act of 1933 may depend on the success of its operations.
We will exercise warrants or other rights to purchase stock only if the
value of the stock at the time the rights are exercised exceeds the exercise
price. Payment of the exercise price shall not be deemed an investment subject
to the above described limitations. We may borrow funds to pay the exercise
price on warrants or other rights or may pay the exercise price from funds held
for working capital and then repay the loan or replenish the working capital
upon the sale of the securities or interests purchased. We will not pay
distributions out of the proceeds of the sale of these interests until any funds
borrowed to purchase the interest have been fully repaid. We will invest in
equity interests which Carey Property Advisors believes will appreciate in
value. There can be no assurance, however, that this expectation will be
realized.
We will not invest in real estate contracts of sale unless the contracts of
sale are in recordable form and are appropriately recorded in the applicable
chain of title, provided, however, that in no event shall investments in these
contracts exceed 1% of total assets.
There can be no assurance as to when our capital may be fully invested in
properties. See "United States Federal Income Tax Aspects -- Requirements for
Qualification." Pending investment, the balance of
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the proceeds of this offering will be invested in permitted temporary
investments, which include short-term U.S. Government securities, bank
certificates of deposit and other short-term liquid investments. To maintain its
REIT status, we also may invest in securities that qualify as "real estate
assets" and produce qualifying income under the REIT provisions of the Internal
Revenue Code. Any investments in other REITs in which W. P. Carey & Co., Carey
Property Advisors or any director is an affiliate must be approved as being fair
and reasonable by a majority of the directors (including a majority of the
independent directors) who are not otherwise interested in the transaction. If
all the proceeds derived from this offering are not invested or committed to be
invested by us prior to the expiration of the later of twenty-four months after
the date of this prospectus or one year after the termination of this offering,
then the proceeds not so invested or committed will, promptly after the
expiration of such period, be distributed pro rata to the shareholders as a
return of capital, without any deductions for organizational and offering
expenses or acquisition expenses. For the purpose of this provision, funds will
be deemed to have been committed to investment as required and will not be
returned to shareholders if written agreements in principle have been executed
at any time prior to the expiration of the period, regardless of whether the
investments are made, and also to the extent any funds have been reserved to
make contingent payments in connection with any property, regardless of whether
the payments are made.
If at any time the character of our investments would cause us to be deemed
an "investment company" for purposes of the Investment Company Act of 1940, we
will take the necessary action to ensure that we are not deemed to be an
"investment company." Carey Property Advisors will continually review our
investment activity to attempt to ensure that we do not come within the
application of the Investment Company Act of 1940. Among other things, they will
attempt to monitor the proportion of our portfolio that is placed in various
investments so that we do not come within the definition of an investment
company under the act. We have been advised by counsel that if we operate in
accordance with the description of our proposed business in this prospectus, we
will not be deemed an "investment company" for purposes of the Investment
Company Act of 1940.
Our working capital and other reserves will be invested in permitted
temporary investments. Carey Property Advisors will evaluate the relative risks
and rate of return, our cash needs and other appropriate considerations when
making short-term investments on our behalf. The rate of return of permitted
temporary investments may be less than or greater than would be obtainable from
real estate investments.
We may purchase property from W. P. Carey & Co., Carey Property Advisors,
the directors or their affiliates only if:
-- a majority of the independent directors and a majority of the
directors who otherwise are not interested in the transaction approve
the transaction as being fair and reasonable to us;
-- the property was acquired by W. P. Carey & Co., Carey Property
Advisors, director or affiliate for the purpose of facilitating its
purchase by us, facilitating the borrowing of money or the obtaining
of financing for us or any other purpose related to our business;
-- the property is purchased by us for a price no greater than the cost
to the affiliate (provided, however, that the price may be greater
than the cost to the affiliate, but in no event more than the
appraised value, if the affiliate has taken significant action or has
made an additional investment with regard to the property after its
purchase which action or investment has increased the value of the
property); and
-- there is no adverse difference in the interest rates of the loans
secured by the property at the time acquired by W. P. Carey & Co.,
Carey Property Advisors, director or affiliate and at the time
purchased by us nor any other detriment to us arising out of the
transaction.
We will receive all profits or losses from any property held on an interim basis
by W. P. Carey & Co., Carey Property Advisors, director or affiliate thereof
other than an affiliate that is a public program or entity.
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We will not sell properties to W. P. Carey & Co., Carey Property Advisors,
a director or any affiliate of any of the foregoing except pursuant to the
exercise of a right of first refusal by an affiliated joint venture partner.
USE OF BORROWING
While one our investment objectives will be diversification, the number of
different properties we can acquire will be affected by the amount of funds
available to it. Our goal, subject to the availability of mortgage financing, is
to borrow approximately 60% of the purchase price of all properties, but there
is no limit on borrowings on individual properties.
Our ability to increase our diversification through borrowing could be
adversely impacted by the reduced availability of financing secured by
commercial real estate generally and specifically by single-tenant net-leased
real property, whether due to fewer financing sources, such as commercial banks
and insurance companies, or due to the reduced lending activity by those sources
continuing in that line of business. When interest rates on mortgage loans are
high or financing is otherwise unavailable on a timely basis, we may purchase
certain properties for cash with the intention of obtaining a mortgage loan for
a portion of the purchase price at a later time. While the number of lenders
making loans secured by commercial real estate has decreased in recent years,
the CPA(R) programs have not encountered significant difficulty in obtaining
mortgage financing from institutional lenders such as insurance companies to
replace financing which previously might have been obtained from commercial
banks or savings and loans. However, there can be no assurance that we will be
able to achieve its borrowing objective.
There is no limitation on the amount we may invest in any single improved
property or on the amount we can borrow for the purchase of any property.
Aggregate borrowings as of the time that the net proceeds of the offering have
been fully invested and at the time of each subsequent borrowing may not exceed
75% of the value of all properties unless the excess is approved by a majority
of the independent directors and disclosed to shareholders in our next quarterly
report, along with the reason for the excess. For purposes of determining the
maximum allowable amounts of indebtedness, "value" means the lesser of
-- the total appraised value of the properties as reflected in the most
recently obtained appraisal for each property or
-- the total value of our assets as reflected in the most recently
completed valuation.
It is expected that, by operating on a leveraged basis, we will have more
funds available and, therefore, will make more investments than would otherwise
be possible, resulting in a more diversified portfolio. Although our liability
for the repayment of indebtedness is expected to be limited to the value of the
property securing the liability and the rents or profits derived therefrom,
leveraging increases risks to us because mortgage principal and interest
payments as well as other fixed charges must be paid in order to prevent
foreclosure on leveraged properties by mortgagees regardless of the generation
of income by properties. See "Risk Factors -- Real Estate Investment
Risks -- Risks Associated with Borrowing." To the extent that we do not obtain
mortgage loans on our properties, our ability to acquire additional properties
will be restricted. Carey Property Advisors will use its best efforts to obtain
financing on the most favorable terms available to us. Lenders may have recourse
to our other assets in limited circumstances not related to the repayment of the
indebtedness.
Lenders may also seek to include in the terms of mortgage loans provisions
making the termination or replacement of Carey Property Advisors an event of
default or an event requiring the immediate repayment of the full outstanding
balance of the loan. We will not agree to the inclusion of these provisions and
will attempt to negotiate loan terms allowing us to replace or terminate Carey
Property Advisors if the action is ordered by the board. The replacement or
termination may, however, require the prior consent of the mortgage lenders.
Carey Property Advisors will refinance properties during the term of a loan
only in limited circumstances, such as when a decline in interest rates makes it
profitable to prepay an existing mortgage, when an existing mortgage matures or
if an attractive investment becomes available and the proceeds from the
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refinancing can be used to purchase such investment. The benefits of the
refinancing may include an increased cash flow resulting from reduced debt
service requirements, an increase in distributions from proceeds of the
refinancing, if any, and/or an increase in property ownership if some
refinancing proceeds are reinvested in real estate.
OTHER INVESTMENT POLICIES
General
If at any time we do not have sufficient funds to provide that portion of
the total property cost of any property normally paid with our equity but would
have sufficient funds if we could use the offering proceeds being held in
escrow, funds may be borrowed from affiliates of Carey Property Advisors or from
third parties on a short-term basis. Any financing obtained from Carey Property
Advisors or its affiliates may not have terms less advantageous to us than those
available from independent third parties and may not require a prepayment charge
or penalty. The interest rate charged on any financing obtained from Carey
Property Advisors or its affiliates will be equal to the lesser of 1% above the
prime rate of interest published in the Wall Street Journal or the rate that
would be charged to us by unrelated lending institutions on comparable loans for
the same purpose. See "Conflicts of Interest -- Purchases and Loans from
Affiliates." We may assign, as security for borrowings made from third parties,
our right to receive up to 85% of the offering proceeds being held in escrow
(excluding interest and amounts held on behalf of qualified plans and IRAs). See
"The Offering -- Escrow Arrangements."
At any time, subject to the approval of a majority of the independent
directors, we may borrow funds from affiliates of either Carey Property Advisors
or third parties on a short-term basis sufficient to provide the portion of the
purchase price of any property not paid with net offering proceeds (i.e., the
debt portion) if
-- we are unable to obtain a permanent loan or, in our judgment or in the
judgment of Carey Property Advisors, it is not in our best interests
to obtain a permanent loan at the interest rates then prevailing, and
-- Carey Property Advisors has reason to believe that we will be able to
obtain a permanent loan on or prior to the end of the loan term.
These short-term loans may be fully or partially amortized, may provide for the
payment of interest only during the term of the loan or may provide for the
payment of principal and interest only upon maturity. In addition, these loans
may be secured by a first or junior mortgage on the property to be acquired or
by a pledge of or security interest in the offering proceeds that are being held
in escrow which are to be received from the sale of our shares. Any short-term
loan from affiliates of Carey Property Advisors will bear interest at a rate
equal to the lesser of 1% above the prime rate of interest published in the Wall
Street Journal or the rate that would be charged to us by unrelated lending
institutions on comparable loans for the same purpose in the locality of the
property. See "Conflicts of Interest -- Loans from Affiliates."
Holding Period for Investments and Application of Proceeds of Sales or
Refinancings
We intend to hold each property we acquire for an extended period. However,
circumstances might arise which could result in the early sale of some
properties. A property may be sold before the end of the expected holding period
if
-- the lessee has involuntarily liquidated;
-- in the judgment of Carey Property Advisors, the value of a property
might decline radically;
-- an opportunity has arisen to improve other properties;
-- we can increase cash flow through the disposition of the property;
-- the lessee is in default under the lease; or
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-- in our judgment or in the judgment of Carey Property Advisors, the
sale of the property is in our best interests.
The determination of whether a particular property should be sold or
otherwise disposed of will be made after consideration of relevant factors,
including prevailing economic conditions, with a view to achieving maximum
capital appreciation. No assurance can be given that the foregoing objective
will be realized. The selling price of a property which is net leased will be
determined in large part by the amount of rent payable under the lease. If a
tenant has a repurchase option at a formula price, we may be limited in
realizing any appreciation. In connection with our sales of properties we may
lend the purchaser all or a portion of the purchase price. In these instances,
our taxable income may exceed the cash received in the sale. See "United States
Federal Income Tax Aspects -- Qualification as a REIT -- Distribution
Requirement." The terms of payment will be affected by custom in the area in
which the property being sold is located and the then prevailing economic
conditions. To the extent that we receive purchase money mortgages rather than
cash in connection with sales of properties, there may be a delay in making
distributions to shareholders. A decision to provide financing to such
purchasers would be made after an investigation into and consideration of the
same factors regarding the purchaser, such as creditworthiness and likelihood of
future financial stability, as are undertaken when we consider a net lease
transaction. See "United States Federal Income Tax Aspects."
If our shares are not listed for trading on a national securities exchange
or included for quotation on Nasdaq (which listing or inclusion for quotation
must be approved by the directors, a majority of the independent directors and
the Carey Fiduciary Advisors board), the properties generally will be liquidated
within eight years after the net proceeds of this offering are fully invested.
In making the decision to apply for listing of the shares, the board will try to
determine whether listing the shares or liquidating will result in greater value
for the shareholders. It cannot be determined at this time the circumstances, if
any, under which the directors will agree to list the shares. CPA(R):10, CIP(R)
and CPA(R):12 have listing provisions similar to provisions for the listing of
the shares and as of the date of the prospectus, none of them have listed their
shares. Even if the shares are not listed or included for quotation, we are
under no obligation to liquidate its portfolio within this period since the
precise timing will depend on real estate and financial markets, economic
conditions of the areas in which the properties are located and federal income
tax effects on shareholders which may prevail in the future. Furthermore, there
can be no assurance that we will be able to liquidate its portfolio and it
should be noted that we will continue in existence until all properties are sold
and its other assets are liquidated.
We continually may reinvest the proceeds of property sales in investments
that we or Carey Property Advisors believes will satisfy our investment
policies. If the shares are not listed for trading on a national securities
exchange or included for quotation on Nasdaq, we will cease reinvesting our
capital beginning eight years after the proceeds from the offering are fully
invested unless the directors (including a majority of the independent
directors) determine that, in light of our expected life at any given time, it
is deemed to be in the best interest of the shareholders to reinvest proceeds
from property sales or refinancings. See "United States Federal Income Tax
Aspects."
INVESTMENT LIMITATIONS
Numerous limitations are placed on the manner in which we may invest its
funds. These limitations cannot be changed unless the Bylaws are amended, which
requires the approval of the shareholders. Unless the bylaws are amended, we
will not:
-- invest in commodities or commodity futures contracts, with this
limitation not being applicable to futures contracts when used solely
for the purpose of hedging in connection with our ordinary business of
investing in real estate assets and mortgages;
-- invest in contracts for the sale of real estate unless the contract is
in recordable form and is appropriately recorded in the chain of
title;
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<PAGE> 63
-- engage in any short sale or borrow on an unsecured basis, if the
borrowing will result in asset coverage of less than 300%. "Asset
coverage," for the purpose of this clause means the ratio which the
value of our total assets, less all liabilities and indebtedness for
unsecured borrowings, bears to the aggregate amount of all of our
unsecured borrowings;
-- make investments in unimproved property or indebtedness secured by a
deed of trust or mortgage loans on unimproved property in excess of
10% of our total assets. "Unimproved real property" means property
which has the following three characteristics:
] an equity interest in property which was not acquired for the purpose
of producing rental or other operating income;
] no development or construction is in process on the property; and
] no development or construction on the property is planned in good
faith to commence on the property within one year of acquisition;
-- issue equity securities on a deferred payment basis or other similar
arrangement;
-- issue debt securities in the absence of adequate cash flow to cover
debt service;
-- issue equity securities which are non-voting or assessable;
-- issue "redeemable securities" as defined in Section 2(a)(32) of the
Investment Company Act of 1940;
-- grant warrants and/or options to purchase shares to Carey Property
Advisors, directors or affiliates thereof except on the same terms as
the options or warrants are sold to the general public and the amount
of the options or warrants does not exceed an amount equal to 10% of
the outstanding shares on the date of grant of the warrants and
options;
-- engage in trading, as compared with investment activities, or engage
in the business of underwriting or the agency distribution of
securities issued by other persons;
-- invest more than 5% of the value of our assets in the securities of
any one issuer if the investment would cause us to fail to qualify as
a REIT;
-- invest in securities representing more than 10% of the outstanding
voting securities of any one issuer if the investment would cause us
to fail to qualify as a REIT;
-- acquire securities in any company holding investments or engaging in
activities prohibited in the foregoing clauses;
-- lend money to or lease property to or from Carey Property Advisors or
its affiliates;
-- sell property to W. P. Carey & Co., Carey Property Advisors, a
director or any affiliate of any of the foregoing;
-- offer shares in exchange for property;
-- make or invest in mortgage loans that are subordinate to any mortgage
or equity interest of Carey Property Advisors, directors, W. P. Carey
& Co. or our affiliates;
-- make loans where the amount advanced by us plus the amount of any
existing loans that are equal or senior to our loan exceeds 100% of
the appraised value of the property; or
-- invest more than 20% of the net proceeds from the offering for the
purchase of land separate from the improvements thereon or expected to
be constructed thereon.
CHANGE IN INVESTMENT OBJECTIVES AND LIMITATIONS
The bylaws require that the independent directors review our investment
policies at least annually to determine that the policies we are following are
in the best interest of the shareholders. Each determination
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<PAGE> 64
and the basis therefor shall be set forth in our minutes. The methods of
implementing our investment policies also may vary as new investment techniques
are developed. The methods of implementing our investment procedures, objectives
and policies, except as otherwise provided in the organizational documents, may
be altered by a majority of the directors (including a majority of the
independent directors) without the approval of the shareholders.
HOLDERS OF SHARES OF THE COMPANY
As of December 31, 1998, we had issued 11,837,901 shares, of which 20,000
shares were held by Carey Property Advisors.
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<PAGE> 65
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the consolidated
financial statements and notes thereto for 1998. The following discussion
includes forward looking statements. Forward looking statements, which are based
on certain assumptions, describe our future plans, strategies and expectations.
These statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or achievement to be
materially different from the results of operations or plan expressed or implied
by these forward looking statements. Accordingly, this information should not be
regarded as representations that the results or condition described in these
statements or objectives and plans will be achieved.
Corporate Property Associates 14 Incorporated was formed in 1997 for the
purpose of engaging in the business of investing in and owning commercial and
industrial real estate. In December 1997, we commenced a public offering of
common stock at $10 per share on a "best efforts" basis for up to 30,000,000
shares ($300,000,000). As of December 31, 1998, we had issued 11,817,901 shares
($118,179,010).
We are using the proceeds from the public offerings, and intend to use
limited recourse mortgage financing, to purchase properties and enter into
long-term net leases with corporate tenants. A net lease is structured to place
some of the economic burdens of ownership on these corporate tenants by
requiring them to pay the costs of maintenance and repair, insurance and real
estate taxes. The leases have generally been structured to include periodic rent
increases that are stated or based on increases in the consumer price index or,
for retail properties, provide for additional rents based on sales in excess of
a specified base amount.
Our primary objectives are to provide rising cash flow and property values,
protecting our investors from the effects of inflation through rent escalation
provisions, property appreciation, tenant credit improvement and regular paydown
of limited recourse mortgage debt. In addition, we have successfully negotiated
grants of common stock warrants from selected tenants and expect to realize the
benefits of appreciation from those grants. We cannot guarantee that our
objectives will be ultimately achieved.
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments of
an Enterprise and Related Information", which is effective for fiscal years
beginning after December 15, 1997. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. Management evaluates the performance of
our portfolio of properties as a whole, rather than by identifying discrete
operating segments. This evaluation includes assessing our ability to meet
distribution objectives, increase the dividend and increase value by evaluating
potential investments in single tenant net lease real estate and by seeking
favorable limited recourse mortgage financing opportunities.
FINANCIAL CONDITION
We are using the net proceeds from our offering (except for approximately
1% to establish a working capital reserve) along with limited recourse mortgage
financing to purchase a diversified portfolio of commercial and industrial real
estate and 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 expenses related to the leased property in order to limit our exposure to
the effects of increases in real estate taxes and property maintenance and
insurance costs. Our leases, which we expect to have initial lease terms of 15
to 25 years, typically include rent increase provisions which are fixed or based
upon increases in the Consumer Price Index. As of December 31, 1998, we have
raised over $105,700,000, net of costs, and had used approximately $79,189,000
to purchase real estate and interests in two single purpose entities formed with
affiliates
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<PAGE> 66
that have purchased real estate and entered into net leases. The affiliates have
the same investment objectives as us. Since December 31, 1998, the Company has
issued an additional 4,190,272 shares of common stock ($41,902,720) and invested
an additional $17,445,000 in real estate.
We have devoted a substantial portion of our resources to build-to-suit
projects because CPA(R):14's Advisor, Carey Property Advisors, has concluded
that they should provide a much better return on investment than many other
opportunities being evaluated by our Advisor. To date, we have has entered into
build-to-suit commitments in connection with our lease with Metagenics
Incorporated for a property in San Clemente, California and a building in
Hayward, California leased to Etec Systems, Inc. that we own with an affiliate
through an interest in a limited liability company. Remaining costs on the
Metagenics property are $7,152,000. The Etec project is expected to be completed
during the quarter ended June 30, 1999. We have funded $26,970,000 towards our
49.99% interest in the Etec project. Our equity contribution for the Etec
project, which is expected to be completed in May 1999, will be approximately
$11,178,000 after proceeds from a mortgage commitment on the property are
distributed. After completion of the Etec project, our share of annual cash flow
(rents less mortgage debt service) from this investment is expected to be
approximately $1,234,000. In addition, our share of the annual cash flow from
our investment with two affiliates in a property in Sunnyvale, California net
leased to Advanced Micro Devices, Inc. is $1,066,000. The Advanced Micro Devices
property was purchased in December 1998.
We intend to use the cash flow from our net leases to fund quarterly
dividends at an increasing rate, and pay debt service installments on limited
recourse mortgage debt. For 1998, cash flow from operations of $1,706,000 was
sufficient to pay quarterly dividends of $1,324,000. We entered into our first
net lease in June 1998 and paid our first quarterly dividend in July 1998. We
did not obtain any mortgage financing in 1998.
In connection with the purchase of our properties, we require the sellers
to perform environmental reviews. Management believes, based on the results of
these reviews, that our properties were in substantial compliance with Federal
and state environmental statutes at the time the properties were acquired.
Tenants are generally subject to environmental statutes and regulations
regarding the discharge of hazardous materials and any related remediation
obligations. In addition, our leases generally require tenants to indemnify us
fully from all liabilities and losses related to the leased properties with
provisions of the indemnification specifically addressing environmental matters.
The leases generally include provisions that allow for periodic environmental
assessments, paid for by the tenant, and allow us to extend leases until a
tenant has satisfied its environmental obligations. We 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 are, in our estimation, in excess of specified amounts. Accordingly,
we believe that the ultimate resolution of any environmental matters would not
have a material adverse effect on our financial condition, liquidity or results
of operations.
The "Year 2000 issue" refers to the series of problems that have resulted
or may result from the inability of some 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. We have no computer systems of our own, but are dependent
upon the systems maintained by an affiliate of our Advisor and some other third
parties including our banks and transfer agent.
We along with our affiliates are actively evaluating our readiness relating
to the Year 2000 issue. In 1998, our Advisor, and its affiliates commenced an
assessment of their local area network of personal computers and related
equipment and are in the process of replacing or upgrading the equipment that
has been identified as not being Year 2000 compliant. The program is expected to
be substantially completed in the second quarter of 1999. Our affiliates have
also engaged outside consultants experienced in diagnosing systems and software
applications and addressing Year 2000 issues, and with the help of these
consultants currently are remediating as necessary.
At the same time, our Advisor and its affiliates are evaluating their
applications software, all of which are commercial "off the shelf" programs that
have not been customized. During 1998, we along with our affiliates commenced a
project to select a comprehensive integrated real estate accounting and asset
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<PAGE> 67
management software package to replace their existing applications. A commercial
Windows-based integrated accounting and asset management based application is
being tested and is scheduled to be installed during the third quarter of 1999.
This software has been designed to use four digits to define a year. Because our
primary operations consist of investing in and receiving rents on long-term net
leases of real estate, while the failure of our Advisor and its affiliates to
correct fully Year 2000 issues could disrupt our administrative operations, the
resulting disruptions would not likely have a material impact on our results of
operations, financial condition or liquidity. Contingency plans to address
potential disruptions are in the process of being developed. Our share of costs
associated with required modifications to become Year 2000 compliant is not
expected to be material to our financial position. Our share of the estimated
total cost of the Year 2000 project is expected to be approximately $25,000,
none of which has been paid to date.
Although we believe that we will address our internal Year 2000 issues in a
timely manner, there is a risk that the inability of third-party suppliers and
lessees to meet Year 2000 readiness issues could have an adverse impact on us.
We have identified our critical suppliers and are requiring that these suppliers
communicate their plans and progress in addressing Year 2000 readiness. The most
critical processes provided by third-party suppliers are our bank and transfer
agent. Our operations may be significantly affected if these providers are
ineffective or untimely in addressing Year 2000 issues.
We have contacted each of our lessees regarding Year 2000 readiness and
have emphasized the need to address Year 2000 issues. Generally, lessees 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, we believe that the risks
and costs of upgrading systems related to operations of the buildings that
contain technology affected by Year 2000 issues will generally be absorbed by
lessees rather than by us. Our major risk is that Year 2000 issues have such an
adverse effect on the financial condition of a lessee that its ability to meet
its lease obligations, including the timely payment of rent, is impaired. In
this event, we 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.
RESULTS OF OPERATIONS
Our results of operations for 1998 are not comparable with the results for
1997. During 1997, we had no real estate operations and had no revenues. The
commencement of our public offering did not begin until December, 1997. During
1998, we issued our initial shares of common stock pursuant to the common stock
offering, and purchased our first property in June 1998. The trend of
acquisitions activity started to accelerate during the fourth quarter of 1998
and thereafter. The results for 1998, therefore, are not representative of
results for future periods. Results for future periods will reflect increases in
lease revenues, equity income, depreciation, and general and administrative and
property expenses as our portfolio of properties increases and the full year's
effect of 1998 transactions are reflected in the results of operations. When we
obtain limited recourse mortgage loans on our properties, mortgage interest will
also be a significant expense. Use of limited recourse mortgage financing is
intended to limit risk as the lender has recourse only to the property
collateralizing the debt and not to any of our other assets. We obtained our
first limited recourse mortgage loan in March 1999.
During the offering period, interest income is likely to increase as we
will invest funds in money market instruments while we are evaluating potential
real estate purchases. Interest income will eventually decrease and will not be
a significant component of revenues after the net offering proceeds are fully
invested in real estate.
Generally accepted accounting principles require that construction period
rents on build-to-suit projects be recorded as a reduction of cost rather than
rental income. As a result, rents on build-to-suit projects are not currently
being reflected in income or cash flow from operations even though we believe
that these projects provide an economic return on our investment during the
construction period. The results for 1998, therefore, did not reflect earnings
from our investments in the Metagenics or Etec projects. If the number of
build-to-suit projects represents a significant percentage of our investment
during our initial acquisitions stage, net income will accordingly be adversely
effected on a short-term basis. We believe
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that the return on investment on our build-to-suit projects will produce
long-term returns that are superior to those of other opportunities that we have
evaluated.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS No. 133 is effective for all quarters of fiscal years beginning after June
15, 1999. We believe adoption of SFAS No. 133 will not have a material impact on
the consolidated financial statements.
DISTRIBUTIONS
Since July 1998, the Company has paid the following dividends to
shareholders who held their shares for the full quarter preceding the payment of
the dividend:
<TABLE>
<CAPTION>
DATE AMOUNT
- ---- -------
<S> <C>
July 1998................................................... $.15
October 1998................................................ $.16
January 1999................................................ $.16
April 1999.................................................. $ .1625
</TABLE>
Largely because of deductions for depreciation, on a GAAP basis, 14% of the
dividends paid in 1998 represented a return of capital.
DESCRIPTION OF THE PROPERTIES
We have purchased 10 properties located in seven states leased to 10
tenants. The cost of each of the properties will be depreciated for tax purposed
over a 40-year period on a straight line basis. CPA(R):14 believes all of the
properties are adequately covered by insurance and are suitable for their
intended purposes. The following table provides certain additional information
about these properties:
<TABLE>
<CAPTION>
RENT
PURCHASE PROPERTY SQUARE INCREASE LEASE
LESSEE PROPERTY LOCATION PRICE TYPE* FOOTAGE ANNUAL RENT FACTOR EXPIRATION
- ------ ----------------- ----------- -------- ------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Advanced Micro Devices,
Inc.(1)........................ Sunnyvale, CA $95,287,958 3 362,000 $ 9,145,500 CPI 12/18
The Benjamin Ansehl Co.......... Overland, MO $ 6,021,000 1 154,760 $ 649,750 CPI 11/13
Best Buys Co. Inc............... Torrance, CA $19,582,000 4 102,470 1,741,990 Stated 1/05
Burlington Motor Carrier Inc.... Daleville, IN $ 7,539,267 3 106,372 $ 792,000 CPI 6/18
CompuCom Systems, Inc.(1)....... Dallas, TX $39,790,500 3 250,000 $ 3,914,000 CPI 3/19
Contraves Brashear Systems,
L.P............................ Pittsburgh, PA $ 6,806,283 1/3 146,103 $ 643,750 CPI 12/13
Etec Systems, Inc.(2)........... Hayward, CA $24,037,000 1 129,000 * CPI 5/14
Intesys Technologies, Inc.(3)... Gilbert, AZ $23,560,000 3 243,370 $ 2,274,750 CPI 2/19
9% of cost of(4)
Metagenics Incorporated......... San Clemente, CA $11,500,000 3 133,600 construction Stated 5/10
Production Resources Group
L.L.P.......................... Las Vegas, NV $ 8,380,000 1/3 105,000 $ 884,000 CPI 4/14
<CAPTION>
MAXIMUM AMOUNT OF DATE OF
LESSEE TERM FINANCING ACQUISITION
- ------ ------- ----------- -----------
<S> <C> <C> <C>
Advanced Micro Devices,
Inc.(1)........................ 2/38 $68,250,000 12/22/98
The Benjamin Ansehl Co.......... 11/13 [3,100,000] 11/24/98
Best Buys Co. Inc............... 2/10 -- 7/27/98
Burlington Motor Carrier Inc.... 6/28 -- 6/30/98
CompuCom Systems, Inc.(1)....... 3/29 $23,000,000 3/31/99
Contraves Brashear Systems,
L.P............................ 2/23 $ 4,225,000 12/28/98
Etec Systems, Inc.(2)........... 5/34 $30,000,000 2/3/98
Intesys Technologies, Inc.(3)... 2/39 -- 2/3/99
Metagenics Incorporated......... 5/20 -- 7/29/98
Production Resources Group
L.L.P.......................... 4/24 -- 3/31/99
</TABLE>
* PROPERTY TYPES ARE CODED AS FOLLOWS: 1 -- INDUSTRIAL/MANUFACTURING;
2 -- DISTRIBUTION/WAREHOUSE; 3 -- OFFICE/RESEARCH; 4 -- RETAIL
- ---------------
(1) CPA(R):14 owns a one-third interest in this property. CIP(R) and CPA(R):12
each own a one-third interest.
(2) CPA(R):14 owns a 49.99% interest in this property. This property is part of
a four building campus leased to Etec. CPA(R):12 owns the remaining 50.01%
of the building described in this chart and 100% of the remaining
properties.
(3) The company is building this property for Metagenics, and rent will based on
the cost of construction for the first term of the lease, 12 years. Annual
rent during this period will be nine percent (9%) per year on amounts
advanced to by CPA(R):14 or its subsidiary for the cost of construction.
(4) CPA(R):14 owns a 50% interest in this property. CPA(R):12 owns the remaining
50% interest.
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The following is a description of our tenants' businesses and a summary of
their financial information.
ADVANCED MICRO DEVICES, INC.
AMD is a global supplier of integrated circuits for the personal and
networked computer and communications market. AMD produces processors, flash
memories, programmable logic devices and products for communications and
networking applications.
Financial statements for AMD are on file with the Securities and Exchange
Commission. The following is a summary of selected financial information for
AMD:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 28,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF INCOME
Net sales................................ $2,542,141 $2,356,375 $1,953,019
Expenses................................. 2,705,783 2,447,028 2,206,329
Operating income......................... (163,642) (90,653) (253,310)
Net income............................... (103,960) (21,090) (68,950)
Net income per common share (Basic)...... (0.72) (0.15) (0.51)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 28,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
BALANCE SHEET DATA
Cash and short-term investments.......... $ 697,025 $ 467,032 $ 586,198
Total current assets..................... 1,562,027 1,175,267 1,029,077
Property, plant and equipment, net....... 2,268,468 1,990,689 1,787,402
Total assets............................. 4,252,968 3,515,271 3,145,283
Total current liabilities................ 840,719 726,770 583,473
Total shareholders' equity............... 2,005,049 2,029,543 2,021,878
</TABLE>
CONTRAVES BRASHEAR SYSTEMS, L.P.
Contraves designs and manufactures electro-optical and electro-mechanical
systems and instruments for commercial and defense markets. The company operates
in four product areas: telescope systems, optical components, electro-optical
systems for fire control, tracking and surveillance and small arms fire control
systems.
Contraves was incorporated in September, 1997. The following is a summary
of selected financial data for Contraves for the last year:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 27, 1998
------------------
(IN THOUSANDS)
<S> <C>
STATEMENT OF OPERATIONS
Contract revenue...................................... $21,704
Cost of sales......................................... 18,977
Interest expense...................................... 128
Net income............................................ 501
</TABLE>
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<TABLE>
<CAPTION>
AS OF SEPTEMBER 27, 1998
------------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA
Cash and investments............................. $ 445
Total assets..................................... 13,198
Long liabilities................................. 8,690
Partners' capital................................ 3,500
Total equity..................................... 4,508
</TABLE>
BEST BUY CO. INC
Best Buy is the nation's largest volume specialty retailer of name brand
consumer electronics, home office equipment, entertainment software and
appliances.
Financial statements for Best Buy are on file with the Securities and
Exchange Commission. The following is a summary of selected financial data for
Best Buy for the last three years:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
--------------------------------------
FEBRUARY 28, MARCH 1, MARCH 2,
1998 1997 1996(1)
------------ ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF EARNINGS
Revenues................................... $8,358,212 $7,770,683 $7,217,448
Gross Profit............................... 1,332,138 1,058,881 936,571
Selling general and administrative
expenses................................. 1,145,280 1,005,675 813,988
Operating income........................... 186,858 53,206 122,583
Net earnings............................... 94,453 1,748 48,019
</TABLE>
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
--------------------------------------
FEBRUARY 28, MARCH 1, MARCH 2,
1998 1997 1996(1)
------------ ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA
Working capital............................ $ 676,601 $ 567,456 $ 586,841
Total assets............................... 2,056,346 1,734,307 1,890,832
Long-term debt, including current
portion.................................. 225,322 238,016 229,855
Convertible preferred securities........... 229,854 230,000 230,000
Shareholders' equity....................... 557,746 438,315 431,614
</TABLE>
- ---------------
(1) Fiscal year 1996 contains 53 weeks. All other periods contain 52 weeks.
ETEC SYSTEMS, INC.
Etec is a leading producer of electron beam and laser lithography
equipment. These systems are used in the manufacturing of masks for
semiconductor manufacturing industry. Etec's shareholders include DuPont, IBM,
Perkin Elmer Grumman, and Micron Technology.
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Financial Statements of Etec System are on file with the Securities and
Exchange Commission. The following is a summary of selected financial data for
Etec System for the last three years:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue....................................... $288,327 $240,914 $145,645
Cost of revenue............................... 135,170 124,287 80,042
Gross profit.................................. 153,157 116,627 65,603
Operating expenses............................ 86,035 66,186 44,940
Net income.................................... 46,767 34,439 35,783
</TABLE>
<TABLE>
<CAPTION>
AS OF JULY 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA
Total assets.................................. $358,514 $284,543 $208,871
Total liabilities............................. 111,845 86,902 92,994
Total shareholders' equity.................... $246,667 $197,641 $115,877
</TABLE>
METAGENICS INCORPORATED
Metagenics produces and distributes nutritional supplements for resale by
licensed health care practitioners, health and natural product retailers, and
other specialty retailers.
The following is a summary of selected financial information for Metagenics
for the last two years:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
STATEMENT OF INCOME
Total revenue........................................ $25,258,789 $28,355,402
Cost of goods sold................................... 11,677,832 12,870,785
Total operating expenses............................. 13,169,512 14,441,681
Net income........................................... 273,361 1,008,192
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
BALANCE SHEET DATA
Cash................................................... $ 25,463 $ 67,872
Accounts receivable.................................... 2,384,943 2,808,634
Total assets........................................... 7,678,250 8,667,446
Long term debt......................................... 229,329 3,401,963
Total shareholders equity.............................. 2,165,199 2,826,324
</TABLE>
BURLINGTON MOTOR CARRIERS INC.
Burlington Motor Carriers, Inc. was incorporated on November 7, 1997 and
operates as a common carrier providing truck load services throughout the
continental United States, to and from Mexico and certain provinces in Canada.
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The following is a summary of selected financial data for Burlington for
the last two years:
<TABLE>
<CAPTION>
PERIOD
NOVEMBER 7, 1996
YEAR ENDED THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS
Operating Revenue......................... $201,118 $ 4,908
Total Operating Expenses.................. 193,680 5,205
Operating Income (loss)................... 7,438 (297)
Net loss.................................. (547) (1,650)
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA
Cash...................................... $ 1,177 $ 1,378
Receivable................................ 24,677 19,104
Total assets.............................. 29,978 27,878
Long term debt............................ 68,438 68,186
Total shareholders' equity................ 27,262 27,809
</TABLE>
THE BENJAMIN ANSEHL CO.
Ansehl is a diversified manufacturer/marketer of liquid filled health and
beauty care products. The following is a summary of selected financial data for
Ansehl for the last three years:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
MARCH 31,
-----------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF EARNINGS
Revenues......................................... $50,543 $43,552 $25,180
Gross profit..................................... 8,200 7,749 5,779
Selling, general and administrative expenses..... 5,467 4,761 3,500
Operating income................................. 1,619 1,946 1,435
Net income....................................... (196) (206) 359
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
-----------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA
Total assets..................................... $29,025 $31,150 $16,568
Long-term debt................................... 14,260 6,886 3,877
Shareholders' equity............................. 4,593 4,789 1,724
</TABLE>
INTESYS TECHNOLOGIES, INC.
Founded in 1972 as Pixlly-Richards West, Inc., Intesys designs, produces
and assembles plastic components for use in other companies' end products.
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<PAGE> 73
The following is a summary of selected financial data for Intesys for three
years:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF INCOME
Gross revenue................................. $142,757 $156,744 $122,332
Operating income.............................. 13,714 14,714 9,668
Income (loss) before extraordinary item....... 1,714 865 (2,457)
Net income (loss)............................. (496) 451 (3,306)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA
Cash and equivalents.......................... $ 955 $ 43 $ 166
Accounts receivable........................... 14,200 23,738 18,739
Total assets.................................. 60,344 70,301 68,574
Accounts payable.............................. 8,814 16,231 10,888
Long term debt................................ 100,050 92,778 99,352
Total shareholder's equity.................... (57,044) (55,948) (56,400)
</TABLE>
COMPUCOM SYSTEMS, INC.
CompuCom provides network integration services and desktop products for
large corporate customers.
Financial statements for CompuCom are on file with the Securities and
Exchange Commission. The following is a summary of selected financial
information for CompuCom for the past two years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF INCOME
Total revenue............................ $2,254,465 $1,949,802 $1,995,191
Gross Margin............................. 283,960 267,545 240,963
Total Operating Expenses................. 264,550 199,564 184,321
Net earnings............................. 401 35 ,194 30,471
Earnings per common share (Basic)........ $0.01 $0.75 $0.66
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
BALANCE SHEET DATA
Cash........................................ $ 4,526 $ 4,456 $ 4,320
Total current assets........................ 415,422 382,435 618,890
Property, plant and equipment, net.......... 72,004 63,359 54,308
Total assets................................ 545,489 462,590 692,985
Long term debt.............................. 81,929 97,400 236,450
Total stockholders' equity.................. 210,281 210,200 171,098
</TABLE>
PRODUCTION RESOURCES GROUP, L.L.P.
PRG is a designer and producer of sets for themed events and Broadway shows
as well as a lessor of equipment for corporate themed events.
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<PAGE> 74
Financial Statements for PRG are on file with the Securities and Exchange
Commission. The following is a summary of selected financial information for
PRG:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996
---------- --------- ------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF INCOME
Revenues.................................... $174,603 $75,180 $1,953,019
Total costs................................. 119,114 52,312 2,206,329
Gross profit................................ 55,489 22,868 (253,310)
Net income (loss)........................... (5,967) (7,771) (68,950)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------
1998 1997 1996
-------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents.................... $ 6,014 $ 27,164 $ 719
Total current assets......................... 59,902 56,658 3,858
Property, plant and equipment, net........... 82,096 49,236 7,784
Total assets................................. 196,106 128,252 11,969
Total current liabilities.................... 46,759 21,426 3,320
Total long-term debt......................... 149,195 103,743 1,113
</TABLE>
WARRANTS
In connection with the purchase of some of the properties, CPA(R):14
received warrants to purchase shares of the tenant companies. The following
table describes the warrants received as of the date of this prospectus:
<TABLE>
<CAPTION>
PERCENTAGE
COMPANY NUMBER OF SHARES OWNERSHIP EXERCISE PRICE TERM
------- ---------------- ---------- -------------- ----
<S> <C> <C> <C> <C>
Benjamin Ansehl Co...... -- 1.5 $26.738 15
Burlington Motor
Carriers.............. 4,667 -- $ 100 Length of Lease
</TABLE>
ACQUISITION FEES
In connection with the acquisition described in this prospectus, affiliates
of Carey Property Advisors received acquisition fees. The total fees received in
connection with these acquisitions was $2,330,544. In addition, these affiliates
are entitled to receive $1,864,430 per year over the next eight years provided
that shareholders receive a cumulative return of 6%.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material federal income tax
considerations associated with an investment in the shares. In this section when
we refer to "the Code" we mean the Internal Revenue Code, as amended. This
summary is not exhaustive of all possible tax considerations and is not tax
advice. Moreover, this summary does not deal with all tax aspects that might be
relevant to you, as a particular prospective shareholder in light of your
personal circumstances; nor does it deal with particular types of shareholders
that are subject to special treatment under the Code, such as insurance
companies, financial institutions and broker-dealers. The Code provisions
governing the federal income tax treatment of REITs are highly technical and
complex. This summary is qualified in its entirety by the applicable Code
provisions, rules and regulations promulgated thereunder, and administrative and
judicial interpretations thereof. The following discussion is based on current
law.
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<PAGE> 75
WE URGE YOU, AS A PROSPECTIVE INVESTOR, TO CONSULT YOUR OWN TAX ADVISER
REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND
SALE OF THE SHARES AND OF OUR ELECTION TO BE TAXED AS A REIT, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE,
OWNERSHIP AND SALE.
OPINION OF COUNSEL
In the opinion of our counsel, Reed Smith Shaw & McClay LLP, commencing
with our taxable year ended December 31, 1998, we qualified to be taxed as a
REIT under the Code, provided that we operated and continue to operate in
accordance with various assumptions and factual representations we made
concerning our business, properties and operations. It must be emphasized that
Reed Smith Shaw & McClay LLP's opinion is based on various assumptions and is
conditioned upon the assumptions and representations we made concerning our
business and properties. Moreover, our qualification and taxation as a REIT
depends on our ability to meet the various qualification tests imposed under the
Code discussed below, the results of which will not be reviewed by Reed Smith
Shaw & McClay LLP. Accordingly, no assurance can be given that the actual
results of our operations for any one taxable year will satisfy these
requirements. See "Risk Factors -- Failure to Qualify as a REIT."
The opinion of Reed Smith Shaw & McClay LLP is also based upon existing law
as currently applicable, Internal Revenue Service regulations, currently
published administrative positions of the Internal Revenue Service and judicial
decisions, which are subject to change either prospectively or retroactively. We
cannot assure you that any changes will not modify the conclusions expressed in
their opinion. Moreover, an opinion of counsel is not binding on the Internal
Revenue Service and we cannot assure you that the Internal Revenue Service will
not successfully challenge our status as a REIT.
If we qualify for taxation as a REIT, we generally will not be subject to
federal corporate income taxes on that portion of our ordinary income or capital
gain that we distribute currently to our shareholders. The REIT provisions of
the Code generally allow a REIT to deduct distributions paid to its
shareholders. This substantially eliminates the federal "double taxation" on
earnings (taxation at both the corporate level and shareholder level) that
usually results from investments in a corporation.
Even if we qualify for taxation as a REIT, we will be subject to federal
income tax, as follows:
-- we will be taxed at regular corporate rates on our undistributed REIT
taxable income, including undistributed net capital gains;
-- under some circumstances, we will be subject to "alternative minimum
tax";
-- if we have net income from the sale or other disposition of
"foreclosure property" that is held primarily for sale to customers in
the ordinary course of business or other non-qualifying income from
foreclosure property, we will be subject to tax at the highest
corporate rate on that income;
-- if we have net income from prohibited transactions (which are, in
general, sales or other dispositions of property other than
foreclosure property held primarily for sale to customers in the
ordinary course of business), the income will be subject to a 100%
tax;
-- if we fail to satisfy either the 75% or 95% gross income test
(discussed below) but have nonetheless maintained our qualification as
a REIT because certain other requirements have been met, we will be
subject to a 100% tax on the net income attributable to the greater of
the amount by which we fail the 75% or 95% test, multiplied by a
fraction intended to reflect our profitability;
-- if we fail to distribute during each year at least the sum of (i) 85%
of our REIT ordinary income for the year, (ii) 95% of our REIT capital
gain net income for such year and (iii) any undistributed taxable
income from prior periods, we will be subject to a 4% excise tax on
the excess of the required distribution over the amounts actually
distributed; and
-- if we acquire any asset from a C corporation (i.e., a corporation
generally subject to full corporate-level tax) in a carryover-basis
transaction and we subsequently recognize gain on the disposition of
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<PAGE> 76
the asset during the ten-year period beginning on the date on which we
acquired the asset, then a portion of the gains may be subject to tax
at the highest regular corporate rate, pursuant to guidelines issued
by the Internal Revenue Service (the "Built-In-Gain Rules").
REQUIREMENTS FOR QUALIFICATION
We elected to be taxable as a REIT for our taxable year ended December 31,
1998. In order for us to have qualified as a REIT, we had to meet and we must
continue to meet the requirements discussed below relating to our organization,
source of income, nature of assets and distributions of income to our
shareholders.
Organizational Requirements
Definition of REIT under the Code
In order to qualify for taxation as a REIT under the Code, we
-- must be a domestic corporation;
-- must be managed by one or more trustees or directors;
-- must have transferable shares;
-- cannot be a financial institution or an insurance company;
-- must have at least 100 shareholders for at least 335 days of each
taxable year of 12 months; and
-- must not be closely held.
We will be closely held only if five or fewer individuals or certain tax-exempt
entities own, directly or indirectly, more than 50% (by value) of our shares at
any time during the last half of our taxable year. However, for purposes of the
closely-held test, the Code generally permits a look-through for pension funds
and certain other tax-exempt entities to the beneficiaries of the entity to
determine if the REIT is closely held. However, if a tax-exempt shareholder owns
more than 25% of our shares or one or more tax-exempt shareholders, each own at
least 10 percent of CPA(R):14, and in the aggregate own more than 50 percent of
our shares, those shareholder(s) may be required to treat all or a portion of
their distributions from us as unrelated business taxable income. See "Taxation
of Tax-Exempt Shareholders."
As a Maryland corporation, we satisfy the first requirement. In addition,
we are managed by a board of directors, we have transferable shares and we do
not intend to operate as a financial institution or insurance company.
Additionally, we have more than 100 shareholders. We may refuse to transfer our
shares to any person if the sale or transfer would jeopardize our ability to
satisfy the REIT ownership requirements. However, there can be no assurance that
a refusal to transfer will be effective. Based on the foregoing, we should
satisfy the organizational and structural requirements as well as the share
ownership tests.
Our Ownership of Interests in Partnerships and Qualified REIT Subsidiaries
In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT is deemed to own its proportionate share
(based on its interest in partnership capital) of the assets of the partnership
and is deemed to be entitled to the income of the partnership attributable to
its share. Also, if a REIT owns a qualified REIT subsidiary, it will be deemed
to own all of the subsidiary's assets and liabilities and it will be deemed to
be entitled to the income of that subsidiary. In addition, the character of the
assets and gross income of the partnership or qualified REIT subsidiary shall
retain the same character in the hands of the REIT for purposes of the Code,
including satisfying the gross income tests and asset tests.
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<PAGE> 77
Income Tests
Gross Income Requirements
To maintain our qualification as a REIT, we must satisfy annually two gross
income requirements.
-- At least 75% of our gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived
directly or indirectly from investments relating to real property or
mortgages on real property. Gross income includes "rents from real
property" and, in some circumstances, interest, but excludes gross
income from disposition or property held primarily for sale to
customers in the ordinary course of a trade or business ("prohibited
transactions"). This is the 75% Income Test.
-- At least 95% of our gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from
the real property investments described above and from distributions,
interest and gains from the sale or disposition of stock or securities
or from any combination of the foregoing. This is the 95% Income Test.
Rents from Real Property
The rents we receive or that we are deemed to receive qualify as "rents
from real property" in satisfying the gross income requirements for a REIT
described above only if the following conditions are met.
-- The amount of rent generally must not be based in whole or in part on
the income of profits of any person. An amount received or accrued
generally will not be excluded from the term "rents from real
property," solely by reason of being based on a fixed percentage or
percentages of gross receipts or sales.
-- The Code provides that rents received from a tenant will not qualify
as "rents from real property" in satisfying the gross income tests if
the REIT, or an owner of 10% or more of the REIT, directly or
constructively owns 10% or more of the tenant (a "Related Party
Tenant") or a subtenant of the tenant (in which case only rent
attributable to the subtenant is disqualified).
-- If rent attributable to personal property leased in connection with a
lease of real property is greater than 15% of the total rent received
under the lease, then the portion of rent attributable to the personal
property will not qualify as "rents from real property."
-- The REIT must not operate or manage the property or furnish or render
services to tenants, other than through an "independent contractor"
who is adequately compensated and from whom the REIT does not derive
any income. However, a REIT may provide services with respect to its
properties and the income will qualify as "rents from real property"
if the services are "usually or customarily rendered" in connection
with the rental of space only and are not otherwise considered
"rendered to the occupant." Even if the services with respect to a
property are impermissible tenant services the income will qualify as
"rent from real property" if the income from these services does not
exceed one percent of all amounts received or accrued with respect to
that property.
If we acquire ownership of property by reason of the default of a borrower
on a loan or possession of property by reason of a tenant default, if the
property qualifies and we elect to treat it as foreclosure property, the income
from the property will qualify under the 75% Income Test and the 95% Income Test
notwithstanding its failure to satisfy these requirements for two years, or if
extended for good cause, up to a total of five years. In that event, we must
satisfy a number of complex rules, one of which is a requirement that it operate
the property through an independent contractor. We will be subject to tax on
that portion of our net income from foreclosure property that does not otherwise
qualify under the 75% Income Test.
Prior to the making of investments in properties, we may satisfy the 75%
Income Test and the 95% Income Test by investing in liquid assets such as
government securities or certificates of deposit, but earnings from those types
of assets are qualifying income under the 75% Income Test only for one year from
the receipt of proceeds. Accordingly, to the extent that offering proceeds have
not been invested in
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<PAGE> 78
properties prior to the expiration of this one-year period, in order to satisfy
the 75% Income Test, we may invest the offering proceeds in less liquid
investments such as mortgage-backed securities, maturing mortgage loans
purchased from mortgage lenders or shares in other REITs. We expect to receive
proceeds from the offering in a series of closings and to trace those proceeds
for purposes of determining the one-year period for "new capital investments."
No rulings or regulations have been issued under the provisions of the Code
governing "new capital investments," so that there can be no assurance that the
Internal Revenue Service will agree with this method of calculation.
Except for amounts received with respect to certain investments of cash
reserves, we anticipate that substantially all of our gross income will be from
sources that will allow us to satisfy the income tests described above; however,
no assurance can be given in this regard.
Eligibility for Relief Under the Code if We Fail to Qualify as a REIT
If we fail to satisfy one or both of the 75% Income Test or the 95% Income
Test for any taxable year, we may still qualify as a REIT for that year if we
are eligible for relief under specific provisions of the Code. These relief
provisions generally will be available if:
-- our failure to meet these tests was due to reasonable cause and not
due to willful neglect;
-- we attach a schedule of our income sources to our federal income tax
return; and
-- any incorrect information on the schedule is not due to fraud with
intent to evade tax.
It is not possible, however, to state whether, in all circumstances, we would be
entitled to the benefit of these relief provisions. For example, if we fail to
satisfy the gross income tests because nonqualifying income that we
intentionally earn exceeds the limits on this income, the Internal Revenue
Service could conclude that our failure to satisfy the tests was not due to
reasonable cause. As discussed above in "Opinion of Tax Counsel," even if these
relief provisions apply, a tax would be imposed with respect to the excess net
income.
Asset Tests
At the close of each quarter of our taxable year, we also must satisfy
three tests relating to the nature and diversification of our assets.
-- First, at least 75% of the value of our total assets must be
represented by real estate assets, cash, cash items and government
securities.
-- Second, no more than 25% of our total assets may be represented by
securities other than those in the 75% asset class.
-- Third, of the investments included in the 25% asset class, the value
of any one issuer's securities that we own may not exceed 5% of the
value of our total assets. Additionally, we may not own more than 10%
of any one issuer's outstanding voting securities.
The 5% test must generally be met for any quarter in which we acquire
securities of an issuer. After initially meeting the asset tests at the close of
any quarter, we will not lose our status as a REIT for failure to satisfy the
asset tests at the end of a later quarter solely by reason of changes in asset
values. If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, we can cure the failure by
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. We maintain, and will continue to maintain, adequate records of
the value of our assets to ensure compliance with the asset tests and will take
other action within 30 days after the close of any quarter as may be required to
cure any noncompliance.
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<PAGE> 79
Annual Distribution Requirements
In order to be taxed as a REIT, we are required to make distributions
(other than capital gain distributions) to our shareholders. The amount of these
distributions must be at least equal to:
-- the sum of 95% of our REIT Taxable Income (computed without regard to
the distributions-paid deduction and our capital gain) and 95% of the
net income, if any, from foreclosure property in excess of the special
tax on income from foreclosure property, minus
-- the sum of specific items of noncash income
This is known as the 95 Percent Test.
We must pay distributions in the taxable year to which they relate.
Alternatively, we may pay these distributions in the following taxable year if
declared before we timely file our federal income tax return for that year and
if paid on or before the first regular distribution payment after the
declaration.
Even if we satisfy the foregoing distribution requirements, to the extent
that we do not distribute all of our net capital gain or REIT Taxable Income as
adjusted, we will be subject to tax thereon at regular capital gains or ordinary
corporate tax rates. Furthermore, if we fail to distribute during each calendar
year at least the sum of
-- 85% of our ordinary income for that year,
-- 95% of our capital gain net income other than the capital gain net
income which we elect to retain and pay tax on for that year, and
-- any undistributed taxable income from prior periods,
we would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.
ELECTION TO RETAIN OUR LONG-TERM CAPITAL GAINS
We may elect to retain, rather than distribute our net long-term capital
gains. The effect of this election is that:
-- we are required to pay the tax on these gains;
-- shareholders, while required to include their proportionate share of
the undistributed long-term capital gains in income, will receive a
credit or refund for their share of the tax paid by the REIT; and
-- the basis of the shareholder's shares would be increased by the amount
of the undistributed long-term capital gains (minus the amount of
capital gains tax we pay) included in the domestic shareholders'
long-term capital gains.
We believe we have made and we intend to continue to make timely
distributions sufficient to satisfy the annual distribution requirements. We
expect that our REIT taxable income will be less than our cash flow due to
depreciation and other non-cash charges. Accordingly, we anticipate that we will
generally have sufficient cash or liquid assets to enable us to satisfy the 95%
Distribution Test. It is possible, however, that we may not have sufficient cash
or other liquid assets to meet the 95% Distribution Test or to distribute a
greater amount as may be necessary to avoid income and excise taxation. This
could occur as a result of timing differences between
-- the actual receipt of income and actual payment of deductible
expenses, and
-- the inclusion of income and deduction of these expenses in arriving at
our taxable income, or as a result of nondeductible expenses such as
principal amortization or capital expenditures in excess of noncash
deductions.
In the event that timing differences occur, we may find it necessary to arrange
for borrowings or, if possible, pay taxable stock distributions in order to meet
the distribution requirement.
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<PAGE> 80
DEFICIENCY DISTRIBUTIONS
In some circumstances, we may be able to rectify a failure to meet the
distribution requirement for a year by paying "deficiency distributions" to our
shareholders in a later year, which may be included in our deduction for
distributions paid for the earlier year. Thus, we may be able to avoid being
taxed on amounts distributed as deficiency distributions. We will, however, be
required to pay interest based upon the amount of any deduction taken for
deficiency distributions.
In computing our REIT taxable income, we will use the accrual method of
accounting and depreciate depreciable property under the alternative
depreciation system. We are required to file an annual federal income tax
return, which, like other corporate returns, is subject to Internal Revenue
Service examination. Because the tax law requires us to make many judgments
regarding the proper treatment of a transaction or an item of income or
deduction, it is possible that the Internal Revenue Service will challenge
positions we take in computing our REIT taxable income and its distributions.
Issues could arise, for example, with respect to the allocation of the purchase
price of properties between depreciable or amortizable assets and nondepreciable
or non-amortizable assets such as land and the current deductibility of fees
paid to Carey Property Advisors or its affiliates. Were the Internal Revenue
Service to challenge successfully our characterization of a transaction or
determination of our REIT taxable income, we could be found not to have
satisfied a requirement for qualification as a REIT and mitigation provisions
might not apply. See "Sale-Leaseback Transactions." If, as a result of a
challenge, we are is determined not to have satisfied the 95% Distribution Test,
we would be disqualified as a REIT (unless it were to pay a deficiency
distribution and pay interest and a penalty) as provided by the Code. A
deficiency distribution cannot be used to satisfy the 95% Distribution Test if
the failure to meet the test was not due to a later adjustment to our income by
the Internal Revenue Service.
FAILURE TO QUALIFY AS A REIT
If we fail to qualify as a REIT in any taxable year and the relief
provisions do not apply, we will be subject to tax (including any applicable
alternative minimum tax) on our taxable income at regular corporate rates. We
will not be able to deduct distributions to our shareholders in any year in
which we fail to qualify as a REIT. We also will be disqualified from taxation
as a REIT for the four taxable years following the year during which
qualification was lost unless we are entitled to relief under specific statutory
provisions. Furthermore, while we have no intention of doing so, we may revoke
its election voluntarily. See "Risk Factors -- Failure to Qualify as a REIT
Would Cause Us to be Taxed as a Corporation."
SALE-LEASEBACK TRANSACTIONS
Many of our investments are and will be in the form of sale-leaseback
transactions. In most instances, depending on the economic terms of the
transaction, we will be treated for federal income tax purposes as either the
owner of the property or the holder of a debt secured by the property. We do not
expect to request an opinion of counsel concerning the status of any leases of
properties as true leases for federal income tax purposes.
The Internal Revenue Service may take the position that specific
sale-leaseback transactions we will treat as true leases are not true leases for
federal income tax purposes but are, instead, financing arrangements or loans.
We may also structure some sale-leaseback transactions as loans. In this event,
for purposes of the asset tests and the 75% Income Test, each such loan likely
would be viewed as secured by real property to the extent of the fair market
value of the underlying property. It is expected that, for this purpose, the
fair market value of the underlying property would be determined without taking
into account our lease. If a sale-leaseback transaction were so recharacterized,
we might fail to satisfy the Asset Tests or the Income Tests and consequently
lose our REIT status effective with the year of recharacterization.
Alternatively, the amount of our REIT Taxable Income could be recalculated which
could cause us to fail.
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<PAGE> 81
TAXATION OF DOMESTIC SHAREHOLDERS
Definition
In this section, the phrase "domestic shareholder" means a holder of shares
that for federal income tax purposes:
-- is a citizen or resident of the United States;
-- is a corporation, partnership or other entity created or organized in
or under the laws of the United States or of any political subdivision
thereof;
-- is an estate or trust, the income of which is subject to United States
federal income taxation regardless of its source; or
-- a trust if a United States court is able to exercise primary
supervision over the administration of the trust and one or more
United States persons have the authority to control all substantial
decisions of the trust.
For any taxable year for which we qualify for taxation as a REIT, amounts
distributed to taxable domestic shareholders will be taxed as described below.
Distributions Generally
Distributions to domestic shareholders, other than capital gain
distributions discussed below, will constitute distributions up to the amount of
our current or accumulated earnings and profits and will be taxable to the
shareholders as ordinary income. These distributions are not eligible for the
distributions-received deduction for corporations. To the extent that we make a
distribution in excess of our current or accumulated earnings and profits, the
distribution will be treated first as a tax-free return of capital, reducing the
tax basis in each domestic shareholder's shares, and the amount of each
distribution in excess of a domestic shareholder's tax basis in its shares will
be taxable as gain realized from the sale of its shares. Distributions that we
declare in October, November or December of any year payable to a shareholder of
record on a specified date in any of these months will be treated as both paid
by us and received by the shareholder on December 31 of the year, provided that
we actually pay the distribution during January of the following calendar year.
Shareholders may not include any of our losses on their own federal income tax
returns.
We will be treated as having sufficient earnings and profits to treat as a
distribution any distribution by us up to the amount required to be distributed
in order to avoid imposition of the 4% excise tax, discussed in the section
titled "Opinion of Tax Counsel" above. Moreover, any "deficiency distribution"
will be treated as an ordinary or capital gain distribution, as the case may be,
regardless of our earnings and profits. As a result, shareholders may be
required to treat some distributions that would otherwise result in a tax-free
return of capital as taxable distributions.
Capital Gain Distributions
Distributions to domestic shareholders that we properly designate as
capital gain distributions will be treated as long-term capital gains (to the
extent they do not exceed our actual net capital gain) for the taxable year
without regard to the period for which the shareholder has held his stock.
Passive Activity Loss and Investment Interest Limitations
Our distributions and gain from the disposition of the shares will not be
treated as passive activity income, and therefore shareholders may not be able
to apply any "passive losses" against this income. Our distributions (to the
extent they do not constitute a return of capital) will generally be treated as
investment income for purposes of the investment income limitation. Net capital
gain from the disposition of shares and capital gain distributions generally
will be included in investment income for purposes of the
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investment interest deduction limitations only if and to the extent you so
elect, in which case these capital gains will be taxed as ordinary income.
Certain Dispositions of the Shares
In general, any gain or loss realized upon a taxable disposition of shares
by a shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than 12 months and as
short-term capital gain or loss if the shares have been held for 12 months or
less. If, however, a shareholder has received any capital gains distributions
with respect to his shares, any loss realized upon a taxable disposition of
shares held for six months or less, to the extent of the capital gains
distributions received with respect to his shares, will be treated as long-term
capital loss. Also, the Internal Revenue Service is authorized to issue
regulations that would subject a portion of the capital gain a shareholder
recognizes from selling his shares or from a capital gain distribution to a tax
at a 25% rate, to the extent the capital gain relates to depreciation we
deducted.
TREATMENT OF TAX-EXEMPT SHAREHOLDERS
Our distributions to a tax-exempt employee pension trust or other domestic
tax-exempt shareholder generally, will not constitute unrelated business taxable
income unless the shareholder has borrowed to acquire or carry its shares.
Qualified trusts that hold more than 10% (by value) of the shares of REITs held
predominantly by qualified trusts, may be required to treat a certain percentage
of the REIT's distributions as unrelated business taxable income. We do not
expect to be held predominantly by trusts and our articles of incorporation
prohibit the required concentration of ownership.
For social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts and qualified group legal services plans exempt from
federal income taxation under Code Sections 501(c)(7), (c)(9), (c)(17) and
(c)(20), respectively, income from an investment in CPA(R):14 will constitute
unrelated business taxable income unless the organization is able to deduct
amounts set aside or placed in reserve for certain purposes so as to offset the
unrelated business taxable income generated by its investment in CPA(R):14.
Prospective tax-exempt shareholders should consult their own tax advisors
concerning these "set aside" and reserve requirements.
SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS
The rules governing United States income taxation of non-resident alien
individuals, foreign corporations, foreign partnerships and foreign trusts and
estates (collectively, "foreign shareholders") are complex. The following
discussion is intended only as a summary of these rules. Foreign investors
should consult with their own tax advisors to determine the impact of federal,
state and local income tax laws on an investment in CPA(R):14, including any
reporting requirements.
Taxation if Effectively Connected With a United States Trade or Business
In general, foreign shareholders will be subject to regular United States
federal income tax with respect to their investment in CPA(R):14 if the
investment is "effectively connected" with the foreign shareholder's conduct of
a trade or business in the United States. A corporate foreign shareholder that
receives income that is (or is treated as) effectively connected with a United
States trade or business also may be subject to the branch profits tax under
section 884 of the Code, which is payable in addition to regular United States
federal corporate income tax. The following discussion will apply to foreign
shareholders whose investment in CPA(R):14 is not so effectively connected.
Distributions Not Attributable to Gain From the Sale or Exchange of a
United States Real Property Interest
A distribution that is not attributable to our gain from the sale or
exchange of a United States real property interest and that we do not designate
as a capital gain distribution will be treated as an ordinary income
distribution to the extent that it is made out of current or accumulated
earnings and profits.
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Generally, any ordinary income distribution will be subject to a United States
federal income tax equal to 30% of the gross amount of the distribution unless
this tax is reduced by an applicable tax treaty. Such a distribution in excess
of our earnings and profits will be treated first as a return of capital that
will reduce each foreign shareholder's basis in its shares (but not below zero)
and then as gain from the disposition of those shares, the tax treatment of
which is described under the rules discussed below with respect to dispositions
of shares.
Distributions Attributable to Gain From the Sale or Exchange of a United
States Real Property Interest
Distributions that are attributable to gain from the sale or exchange of a
United States real property interest will be taxed to a foreign shareholder
under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under
FIRPTA, these distributions are taxed to a foreign shareholder as if the
distributions were gains "effectively connected" with a United States trade or
business. Accordingly, a foreign shareholder will be taxed at the normal capital
gain rates applicable to a domestic shareholder (subject to any applicable
alternative minimum tax and a special alternative minimum tax in the case of
non-resident alien individuals). Distributions subject to FIRPTA also may be
subject to a 30% branch profits tax when made to a foreign corporate shareholder
that is not entitled to treaty exemptions.
Withholding Obligations From Distributions to Foreign Shareholders
Although tax treaties may reduce our withholding obligations, we generally
will be required to withhold from distributions to foreign shareholders, and
remit to the Internal Revenue Service,
-- 35% of designated capital gain distributions or, if greater, 35% of
the amount of any distributions that could be designated as capital
gain distributions, and
-- 30% of ordinary distributions paid out of earnings and profits.
In addition, if we designate prior distributions as capital gain distributions,
subsequent distributions, up to the amount of the prior distributions, will be
treated as capital gain distributions for purposes of withholding. A
distribution in excess of our earnings and profits will be subject to 30%
distribution withholding if at the time of the distribution it cannot be
determined whether the distribution will be in an amount in excess of our
current or accumulated earnings and profits. If the amount of tax we withheld
with respect to a distribution to a foreign shareholder exceeds the
shareholder's United States tax liability with respect to that distribution, the
foreign shareholder may file for a refund of the excess from the Internal
Revenue Service.
Sale of Our Shares by a Foreign Shareholder
A sale of our shares by a foreign shareholder generally will be subject to
United States federal income taxation unless our shares constitute a "United
States real property interest" within the meaning of FIRPTA. Our shares will not
constitute a United States real property interest if we are a "domestically
controlled REIT." A "domestically controlled REIT" is a REIT that at all times
during a specified testing period has less than 50% in value of its shares held
directly or indirectly by foreign shareholders. We currently anticipate that we
will be a domestically controlled REIT. Therefore, sales of our shares should
not be subject to taxation under FIRPTA. However, no assurance can be given that
we will continue to be a domestically controlled REIT. If we were not a
domestically controlled REIT, whether a foreign shareholder's sale of our shares
would be subject to tax under FIRPTA as a sale of a United States real property
interest would depend on whether our shares were "regularly traded" on an
established securities market and on the size of the selling shareholder's
interest in CPA(R):14. Our shares currently are not "regularly traded" on an
established securities market. If the gain on the sale of shares were subject to
taxation under FIRPTA, a foreign shareholder would be subject to the same
treatment as a domestic shareholder with respect to the gain (subject to any
applicable alternative minimum tax and a special alternative minimum tax in the
case of non-resident alien individuals). In addition, distributions that are
treated as gain from the disposition of shares and are subject to tax under
FIRPTA also may be subject to a 30% branch profit tax when made to a corporate
foreign shareholder that is not entitled to treaty exemptions. Under FIRPTA the
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purchaser of our shares may be required to withhold 10% of the purchase price
and remit this amount to the Internal Revenue Service. Capital gains not subject
to FIRPTA will be taxable to a foreign shareholder if the foreign Shareholder is
a non-resident alien individual who is present in the United States for 183 days
or more during the taxable year and some other conditions apply, in which case
the non-resident alien individual will be subject to a 30% tax on his or her
U.S. source capital gains.
Recently promulgated Treasury regulations may alter the procedures for
claiming the benefits of an income tax treaty. Our foreign shareholders should
consult their tax advisors concerning the effect, if any, of the new Treasury
regulations on an investment in our shares.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX FOR DOMESTIC
SHAREHOLDERS
Under some circumstances, domestic shareholders may be subject to backup
withholding at a rate of 31% on payments made with respect to, or cash proceeds
of a sale or exchange of, shares. Backup withholding will apply only if the
shareholder:
-- fails to furnish his or her taxpayer identification number (which, for
an individual, would be his or her Social Security Number);
-- furnishes an incorrect tax identification number;
-- is notified by the Internal Revenue Service that he or she has failed
properly to report payments of interest and distributions or is
otherwise subject to backup withholding; or
-- under some circumstances, fails to certify, under penalties of
perjury, that he or she has furnished a correct tax identification
number and (a) that he or she has not been notified by the Internal
Revenue Service that he or she is subject to backup withholding for
failure to report interest and distribution payments or (b) that he or
she has been notified by the Internal Revenue Service that he or she
is no longer subject to backup withholding.
Backup withholding will not apply with respect to payments made to some
shareholders, such as corporations and tax-exempt organizations.
Domestic shareholders should consult their own tax advisors regarding their
qualifications for exemption from backup withholding and the procedure for
obtaining an exemption. Backup withholding is not an additional tax. Rather, the
amount of any backup withholding with respect to a payment to a domestic
shareholder will be allowed as a credit against the domestic shareholder's
United States federal income tax liability and may entitle the domestic
shareholder to a refund, provided that the required information is furnished to
the Internal Revenue Service.
BACKUP WITHHOLDING TAX FOR FOREIGN SHAREHOLDERS
Additional issues may arise for information reporting and backup
withholding for foreign shareholders. Foreign shareholders should consult their
tax advisors with regard to U.S. information reporting and backup withholding.
STATEMENT OF STOCK OWNERSHIP
We are required to demand annual written statements from the record holders
of designated percentages of our shares disclosing the actual owners of the
shares. Any record shareholder who, upon our request, does not provide us with
required information concerning actual ownership of the shares is required to
include specified information relating to his shares in his federal income tax
return. We also must maintain, within the Internal Revenue District in which we
are required to file our federal income tax return, permanent records showing
the information we have received about the actual ownership of shares and a list
of those persons failing or refusing to comply with our demand.
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STATE AND LOCAL TAX
We and our operating subsidiaries may be subject to state and local tax in
states and localities in which we or they do business or own property. The tax
treatment of CPA(R):14, our operating subsidiaries and the holders of our shares
in local jurisdictions may differ from the federal income tax treatment
described above.
ERISA CONSIDERATIONS
The following is a summary of some non-tax considerations associated with
an investment in CPA(R):14 by a qualified plan, Keogh Plan or an IRA. This
summary is based on provisions of ERISA and the Code, as amended through the
date of this prospectus, and relevant regulations and opinions issued by the
Department of Labor. No assurance can be given that legislative or
administrative changes or court decisions may not be forthcoming which would
significantly modify the statements expressed herein. Any changes may or may not
apply to transactions entered into prior to the date of their enactment.
In considering using the assets of an employee benefit plan subject to
ERISA to purchase shares, such as a profit-sharing, 401(k), or a pension plan,
or of any other retirement plan or account subject to Section 4975 of the Code
such as an IRA or Keogh Plan (collectively, "Benefit Plans"), a fiduciary,
taking into account the facts and circumstances of such Benefit Plan, should
consider, among other matters,
-- whether the investment is consistent with the applicable provisions of
ERISA and the Code,
-- whether the investment will produce unrelated business taxable income
to the Benefit Plan (see "United States Federal Income Tax
Aspects -- Taxation of Tax-Exempt Entities"), and
-- the need to value the assets of the Benefit Plan annually.
Under ERISA, a plan fiduciary's responsibilities include the duty
-- to act solely in the interest of plan participants and beneficiaries
and for the exclusive purpose of providing benefits to them, as well
as defraying reasonable expenses of plan administration;
-- to invest plan assets prudently;
-- to diversify the investments of the plan unless it is clearly prudent
not to do so; and
-- to comply with plan documents insofar as they are consistent with
ERISA.
ERISA also requires that the assets of an employee benefit plan be held in trust
and that the trustee (or a duly authorized named fiduciary or investment
manager) have exclusive authority and discretion to manage and control the
assets of the plan.
In addition, Section 406 of ERISA and Section 4975 of the Code prohibit
specified transactions involving assets of a Benefit Plan and any "party in
interest" or "disqualified person" with respect to that Benefit Plan. These
transactions are prohibited regardless of how beneficial they may be for the
Benefit Plan. The prohibited transactions include the sale, exchange or leasing
of property, the lending of money or the extension of credit between a Benefit
Plan and a party in interest or disqualified person, and the transfer to, or use
by, or for the benefit of, a party in interest, or disqualified person, of any
assets of a Benefit Plan. A fiduciary of a Benefit Plan also is prohibited from
engaging in self-dealing, acting for a person who has an interest adverse to the
plan (other than in the case of most IRAs and some Keogh Plans), or receiving
any consideration for its own account from a party dealing with the plan in a
transaction involving plan assets.
Furthermore, Section 408 of the Code states that assets of an IRA trust may
not be commingled with other property except in a common trust fund or common
investment fund.
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PLAN ASSETS
Neither ERISA nor the Code define the term "plan assets." However, on
November 13, 1986, the Department of Labor published a final regulation
describing what constitutes the assets of a Benefit Plan when it invests in
specific kinds of entities (29 C.F.R. Section 2510.3-101, the "Regulation"). The
Regulation was generally effective as of March 13, 1987. As discussed below, we
have received an opinion of counsel that, under the final regulations issued by
the Department of Labor, our assets should not be deemed to be "plan assets" if
Benefit Plans invest in shares, assuming the conditions set forth in the opinion
are satisfied.
Under the Regulation, the assets of corporations, partnerships, or other
entities in which a Benefit Plan makes an equity investment will be deemed to be
assets of the Benefit Plan unless the entity satisfies at least one of the
exceptions to this general rule. The Regulation provides as one exception that
the underlying assets of entities such as CPA(R):14 will not be treated as
assets of a Benefit Plan if the interest the Benefit Plan acquires is a
"publicly-offered security." A publicly-offered security must be
-- "freely transferable,"
-- part of a class of securities that is owned by 100 or more persons who
are independent of the issuer and one another, and
-- sold as part of a public offering registered under the Securities Act
of 1933 and be part of a class of securities registered under the
Securities Exchange Act of 1934, as amended, within a specified time
period.
The shares are being sold as part of an offering of securities to the
public pursuant to an effective registration statement under the Securities
Exchange Act, and we have represented that the shares will be part of a class
registered under the Securities Exchange Act within the specified time frames.
Any shares purchased, therefore, should satisfy the third criterion of the
publicly offered exemption.
We have over 100 shareholders. Thus, the second criterion of the publicly
offered exception will be satisfied.
Whether a security is freely transferable depends upon the particular facts
and circumstances. The shares will be subject to restrictions intended to ensure
that we continue to qualify for federal income tax treatment as a REIT.
According to the Regulation, where the minimum investment in a public offering
of securities is $10,000 or less, the presence of a restriction on
transferability intended to prohibit transfers which would result in a
termination or reclassification of the entity for state or federal tax purposes
will not ordinarily affect a determination that such securities are freely
transferable. The minimum investment in shares is less than $10,000. Thus, the
restrictions imposed to maintain our status as a REIT should not cause the
shares to not be freely transferable.
We have obtained an opinion from counsel that the shares should constitute
"publicly-offered securities" and that our underlying assets should not be
considered plan assets under the Regulation assuming the offering takes place as
described in this prospectus.
In the event that our underlying assets were treated by the Department of
Labor as assets of a Benefit Plan, our management would be treated as
fiduciaries with respect to Benefit Plan shareholders and the prohibited
transaction restrictions of ERISA and the Code would apply to any transaction
involving our management and assets, unless an administrative or statutory
exemption under ERISA applies. These restrictions could, for example, require
that we avoid transactions with entities that are affiliated with us or our
affiliates or restructure our activities in order to obtain an exemption from
the prohibited transaction restrictions. Alternatively, we might provide Benefit
Plan shareholders with the opportunity to sell their shares to us or we might
dissolve or terminate.
If our underlying assets were treated as assets of a Benefit Plan, the
investment in CPA(R):14 also might constitute an ineffective delegation of
fiduciary responsibility to Carey Property Advisors and expose the fiduciary of
the plan to co-fiduciary liability under ERISA for any breach by Carey Property
Advisors of its
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ERISA fiduciary duties. Finally, an investment by an IRA in CPA(R):14 might
result in an impermissible commingling of plan assets with other property.
If a prohibited transaction were to occur, the Code imposes an excise tax
equal to 15 percent of the amount involved and authorizes the Internal Revenue
Service to impose an additional 100% excise tax if the prohibited transaction is
not "corrected." These taxes would be imposed on any disqualified person who
participates in the prohibited transaction. In addition, Carey Property Advisors
and possibly other fiduciaries of Benefit Plan shareholders subject to ERISA who
permitted the prohibited transaction to occur or who otherwise breached their
fiduciary responsibilities, or a non-fiduciary participating in a prohibited
transaction could be required to restore to the plan any profits they realized
as a result of the transaction or breach, and make good to the plan any losses
incurred by the plan as a result of the transaction or breach. With respect to
an IRA that invests in CPA(R):14, the occurrence of a prohibited transaction
involving the individual who established the IRA, or his or her beneficiary,
would cause the IRA to lose its tax-exempt status under Section 408(e)(2) of the
Code.
In the opinion of counsel, as discussed above, our assets should not
constitute plan assets following an investment in shares by Benefit Plans.
Accordingly, the problems discussed in the preceding three paragraphs are not
expected to arise.
OTHER PROHIBITED TRANSACTIONS
Regardless of whether the shares qualify for the "publicly-offered
security" exception of the Regulation, a prohibited transaction could occur if
we, any selected dealer, the escrow agent or any of their affiliates is a
fiduciary (within the meaning of Section 3(21)) of ERISA with respect to the
purchase of the shares. Accordingly, unless an administrative or statutory
exemption applies, shares should not be purchased by a Benefit Plan to which any
of the above persons is a fiduciary with respect to the purchase. A person is a
fiduciary to a plan under Section 3(21) of ERISA if, among other things, the
person has discretionary authority or control with respect to plan assets or
provides investment advice for a fee with respect to the assets. Under a
regulation issued by the Department of Labor, a person would be deemed to be
providing investment advice if that person renders advice as to the advisability
of investing in shares and that person regularly provides investment advice to
the plan pursuant to a mutual agreement or understanding (written or otherwise)
that (i) the advice will serve as the primary basis for investment decisions and
(ii) the advice will be individualized for the plan based on its particular
needs.
INVESTMENT IN ESCROW ACCOUNT
The escrow agent will establish two separate escrow accounts. Benefit Plan
funds will be deposited in one account while funds from all other investors will
be deposited in another account. Pending issuance of the shares to a Benefit
Plan, the escrow agent will invest Benefit Plan funds in a money market account
maintained by the escrow agent. On each closing date, the funds paid by each
Benefit Plan will be released from the Benefit Plan escrow account and exchanged
for the applicable number of shares. Any interest earned by that account prior
to any such closing date will be paid to the investing Benefit Plan.
In considering an investment in CPA(R):14, a plan fiduciary should consider
whether the escrow account arrangement as well as the ultimate investment in
CPA(R):14 would be consistent with fiduciary standards applicable to that
Benefit Plan.
ANNUAL VALUATION
A fiduciary of an employee benefit plan subject to ERISA is required to
determine annually the fair market value of each asset of the plan as of the end
of the plan's fiscal year and to file a report reflecting that value. When no
fair market value of a particular asset is available, the fiduciary is to make a
good faith determination of that asset's "fair market value" assuming an orderly
liquidation at the time the determination is made. In addition, a trustee or
custodian of an IRA must provide an IRA participant with a statement of the
value of the IRA each year. In discharging its obligation to value assets of a
plan, a
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fiduciary subject to ERISA must act consistently with the relevant provisions of
the plan and the general fiduciary standards of ERISA.
Unless and until the shares are listed on a national securities exchange or
are included for quotation on Nasdaq, it is not expected that a public market
for the shares will develop. To date, neither the Internal Revenue Service nor
the Department of Labor has promulgated regulations specifying how a plan
fiduciary should determine the "fair market value" of the shares under those
circumstances, namely when the fair market value of the shares is not determined
in the marketplace. Therefore, to assist fiduciaries in fulfilling their
valuation and annual reporting responsibilities with respect to ownership of
shares, we intend to provide reports of our annual determinations of the current
value of our net assets per outstanding share to those fiduciaries (including
IRA trustees and custodians) who identify themselves to us and request the
reports. Prior to and for the year ending December 31, 2002, we intend to use
the offering price of shares as the per share net asset value. Thereafter,
beginning with the year 2003, the value of the properties and our other assets
will be based on a valuation. Such valuation will be performed by a person
independent of us and of Carey Property Advisors.
We anticipate that we will provide annual reports of the determination (i)
to IRA trustees and custodians not later than January 15 of each year, and (ii)
to other qualified plan trustees and custodians within 75 days after the end of
each calendar year. Each determination may be based upon valuation information
available as of October 31 of the preceding year, updated for any material
changes occurring between October 31 and December 31.
We intend to revise these valuation procedures to conform with any relevant
guidelines that the Internal Revenue Service or the Department of Labor may
hereafter issue. Meanwhile, there can be no assurance
-- that the value could or will actually be realized by us or by
shareholders upon liquidation (in part because appraisal or estimated
value do not necessarily indicate the price at which assets could be
sold and because no attempt will be made to estimate the expenses of
selling any of our assets),
-- that shareholders could realize this value if they were to attempt to
sell their shares, or
-- that this value would comply with the ERISA or IRA requirements
described above.
DESCRIPTION OF SHARES
The following description of the shares does not purport to be complete but
contains a summary of portions of the articles of incorporation and is qualified
in its entirety by reference to the articles of incorporation.
GENERAL DESCRIPTION OF SHARES
We are authorized to issue 120,000,000 shares, each share having a par
value of $.001. Each share is entitled to participate equally in distributions
when and as declared by the directors and in the distribution of our assets upon
liquidation. Each share is entitled to one vote and will be fully paid and
non-assessable by CPA(R):14 upon issuance and payment therefor. Shares, other
than excess shares, which are defined in the organizational documents to mean
shares held by an investor in excess of 9.8% of the total number of shares
issued and outstanding at the time the shares are acquired, are not subject to
redemption. The shares have no preemptive rights which rights are intended to
insure that a shareholder maintains the same ownership interest (on a percentage
basis) before and after the issuance of additional securities or cumulative
voting rights (which are intended to increase the ability of smaller groups of
shareholders to elect directors). We currently do not intend to issue any
securities other than the shares discussed in this prospectus, although it may
do so at any time. We have the authority to issue shares of any class or
securities convertible into shares of any class or classes, to classify or to
reclassify any unissued stock by setting or changing the preferences, conversion
or other rights, voting powers, restrictions, limitations as to distributions,
qualifications and terms and conditions of redemption of the stock, all as
determined by the directors.
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We may apply to list the shares for trading on a national securities
exchange or to include them for quotation on Nasdaq unless the board of
directors (including a majority of the independent directors) deems the listing
or quotation not to be in the best interest of the shareholders. There can be no
assurance that our application will be accepted if made. If the shares are not
listed or included for quotation, the properties generally will be liquidated
beginning within eight years after the net proceeds of this offering are
substantially invested. In making the decision to apply for listing of the
shares, the board will try to determine whether listing the shares or
liquidating CPA(R):14 will result in greater value for the shareholders. Even if
the shares are not so listed or included for quotation, we are under no
obligation to liquidate our portfolio within this period since the precise
timing will depend on real estate and financial markets, economic conditions of
the areas in which the properties are located and federal income tax effects on
shareholders which may prevail in the future. Furthermore, there can be no
assurance that we will be able to liquidate our portfolio and it should be noted
that we will continue our existence until all of our properties are sold and our
other assets are liquidated.
We will not issue certificates. Shares will be held in "uncertificated"
form which will eliminate the physical handling and safekeeping responsibilities
inherent in owning transferable stock certificates and eliminate the need to
return a duly executed stock certificate to the transfer agent to effect a
transfer. Transfers can be effected simply by mailing to us a duly executed
stock power. Upon the issuance of our shares, we will send to each shareholder a
written statement which will include all information that is required to be
written upon stock certificates under Maryland law.
MEETINGS AND SPECIAL VOTING REQUIREMENTS
An annual meeting of the shareholders will be held each year, not fewer
than 30 days after delivery of our annual report. Special meetings of
shareholders may be called only upon the request of a majority of the directors,
a majority of the independent directors, the chairman, the president or upon the
written request of shareholders entitled to cast at least 10% of all the votes
entitled to be cast at a meeting. In general, the presence in person or by proxy
of a majority of the outstanding shares, exclusive of excess shares, shall
constitute a quorum. Generally, the affirmative vote of a majority of the votes
entitled to be voted at a meeting at which a quorum is present is necessary to
take shareholder action, except that a plurality of all votes cast at such a
meeting is sufficient to elect a director.
Our articles of incorporation may be amended by a majority of the board of
directors (including a majority of the independent directors) and approval of
the shareholders at a duly held meeting at which a quorum is present. Amendments
affecting the provisions on indemnification of directors and officers,
limitation of personal liability of directors and officers, and limitation on
ownership of shares of CPA(R):14, must be approved by a vote of two-thirds of
the shareholders. In general, our bylaws may be amended by a majority vote of
the shareholders. The limitations on share ownership may only be amended by a
two-thirds majority vote of all outstanding shares. Any amendment to the bylaws
that would reduce the priority of payment or the amount payable to the
shareholders upon liquidation of CPA(R):14 or that would diminish or eliminate
any voting rights require the approval of a two-thirds majority of shares
entitled to vote. Shareholders may, by the affirmative vote of a majority of the
shareholders entitled to vote on such matter, elect to remove a director from
the board or dissolve CPA(R):14. Shareholders do not have the ability to vote to
replace Carey Property Advisors or to select a new advisor.
The affirmative vote of a majority of all shares entitled to be cast is
required to approve any merger or sale of substantially all of our assets other
than in the ordinary course of business. The term "substantially all" as used in
this context is a term used in the Maryland Corporation and Association Code.
This code does not include a definition of this term and Maryland case law
suggests that the term be defined on a case-by-case basis. The effect for
investors of the Maryland Code's lack of definition is that we cannot provide
investors with a definition for "substantially all" and therefore shareholders
will not know whether a sale of assets will constitute a sale of substantially
all of the assets or whether or not they will have the right to approve any
particular sale. Shareholders objecting to the approval of any merger or sale of
assets are permitted under Maryland law to petition a court for the appraisal
and payment of the fair value of their shares. In an appraisal proceeding, the
court appoints appraisers who attempt to determine the fair value of
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the stock as of the date of the shareholder vote on the merger or sale of
assets. The appraisers' report is considered by the court which makes the final
determination of the fair value to be paid to the shareholder and which decides
whether the award of interest from the date of the merger or sale of assets and
costs of the proceeding are to be awarded to the dissenting shareholder.
Shareholders are entitled to receive a copy of our shareholder list upon
request provided that the requesting shareholder represents to us that the list
will not be used to pursue commercial interests. The list provided by us will
include the name, address and telephone number (if available) of, and number of
shares owned by, each shareholder and will be in alphabetical order, on white
paper and in easily readable type size and will be sent within ten days of the
receipt by us of the request (or five days if the shareholder first requests a
copy of the representation and returns it to us within 30 days). A shareholder
requesting a list will be required to pay our reasonable cost of postage and
duplication. We will pay the costs incurred and any actual damages suffered by a
shareholder who must compel the production of a list and is successful. Any
shareholder who breaches the terms of the representation provided to us will be
liable to us for any costs or damages resulting from such breach. The list will
be updated at least quarterly to reflect changes in the information contained
therein.
The rights of shareholders described above are in addition to and do not
adversely affect rights provided to investors under Rule 14a-7 promulgated under
the Securities Exchange Act, which provides that, upon request of investors and
the payment of the expenses of the distribution, we are required to distribute
specific materials to shareholders in the context of the solicitation of proxies
for voting on matters presented to shareholders, or, at our option, provide
requesting shareholders with a copy of the list of shareholders so that the
requesting shareholders may make the distribution themselves.
RESTRICTION ON OWNERSHIP OF SHARES
In order for us to qualify as a REIT, not more than 50% of our outstanding
shares may be owned by any five or fewer individuals (including some tax-exempt
entities) during the last half of each taxable year, and the outstanding shares
must be owned by 100 or more persons independent of us and each other during at
least 335 days of a 12-month taxable year or during a proportionate part of a
shorter taxable year for which an election to be treated as a REIT is made. We
may prohibit certain acquisitions and transfers of shares so as to facilitate
our continued qualification as a REIT under the Code. However, there can be no
assurance that this prohibition will be effective.
The articles of incorporation, in order to assist the board in preserving
our status as a REIT, contain an ownership limit which prohibits any person or
group of persons from acquiring, directly or indirectly, beneficial ownership of
more than 9.8% of the outstanding shares. Shares owned by a person or a group of
persons in excess of the ownership limit are deemed "excess shares." Shares
owned by a person who individually owns of record less than 9.8% of outstanding
shares may nevertheless be excess shares if the person is deemed part of a group
for purposes of this restriction.
The articles of incorporation stipulate that any purported issuance or
transfer of shares shall be valid only with respect to those shares that do not
result in the transferee-shareholder owning shares in excess of the ownership
limit. If the transferee-shareholder acquires excess shares, the person is
considered to have acted as our agent and holds the excess shares on behalf of
the ultimate shareholder.
The ownership limit does not apply to offerors which, in accordance with
applicable federal and state securities laws, make a cash tender offer, where at
least 85% of the outstanding shares (not including shares or subsequently issued
securities convertible into common stock which are held by the tender offeror
and/or any "affiliates" or "associates" thereof within the meaning of the
Securities Exchange Act) are duly tendered and accepted pursuant to the cash
tender offer. The ownership limit also does not apply to the underwriter in a
public offering of the shares. The ownership limit does not apply to a person or
persons which the directors so exempt from the ownership limit upon appropriate
assurances that our qualification as a REIT is not jeopardized.
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All persons who own 5% or more of the outstanding shares during any taxable
year will be asked to deliver a statement or affidavit setting forth the number
of shares beneficially owned, directly or indirectly, by these persons. See
"United States Federal Income Tax Aspects -- Statement of Stock Ownership."
DISTRIBUTIONS
We intend to declare distributions before each issuance of shares during
this offering and on a quarterly basis. Distributions will be paid to investors
who are shareholders as of the record date selected by the directors.
Distributions will be paid on a quarterly basis regardless of the frequency with
which such distributions are declared. We are required to make distributions
sufficient to satisfy the REIT requirements. Generally, income distributed as
distributions will not be taxable to us under federal income tax laws unless we
fail to comply with the REIT requirements.
Distributions will be paid at the discretion of the directors, in
accordance with our earnings, cash flow and general financial condition. The
directors' discretion will be directed, in substantial part, by their obligation
to cause us to comply with the REIT requirements. Because we may receive income
from interest or rents at various times during its fiscal year, distributions
may not reflect our income earned in that particular distribution period but may
be made in anticipation of cash flow which we expect to receive during a later
quarter and may be made in advance of actual receipt in an attempt to make
distributions relatively uniform. We can borrow to make distributions if the
borrowing is necessary to maintain our REIT status or if the borrowing is part
of a liquidation strategy to partially or completely liquidate investments in
properties by borrowing against those properties.
We are not prohibited from distributing our own securities in lieu of
making cash distributions to shareholders, provided that the securities
distributed to shareholders are readily marketable. Shareholders who receive
marketable securities in lieu of cash distributions may incur transaction
expenses in liquidating the securities.
REPURCHASE OF EXCESS SHARES
We have the authority to redeem excess shares immediately upon becoming
aware of existence of excess shares or after giving the person in whose hands
shares are excess shares 30 days to transfer the excess shares to a person whose
ownership of such shares would not exceed the ownership limit and, therefore,
would no longer be considered excess shares. The price paid upon redemption by
us shall be the lesser of the price paid for such excess shares by the
shareholder in whose possession the redeemed shares were formerly excess shares
or the fair market value of the excess shares. We may purchase excess shares or
otherwise repurchase shares if the repurchase does not impair our capital or
operations.
W.P. Carey & Co., Carey Property Advisors and their affiliates may not
receive a fee on the purchase of shares.
REDEMPTION OF SHARES
Prior to the time, if any, as the shares are listed on a national
securities market, any shareholder (other than Carey Property Advisors) that has
held his or her shares for at least one year may present all or any portion of
their shares to us for redemption at any time, in accordance with the procedures
outlined herein. At that time, we may, at our option, subject to the conditions
described below, redeem the shares presented for redemption for cash to the
extent we have sufficient funds available, as determined by the board of
directors in its sole discretion. There is no assurance that there will be
sufficient funds available for redemption and, accordingly, a shareholder's
shares may not be redeemed. In addition, Carey Property Advisors will assist
with the identification of prospective third-party buyers.
The board of directors will determine on a quarterly basis whether we have
sufficient excess cash to repurchase shares. Shareholders may offer shares to us
for purchase and we will purchase the offered shares
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if it has sufficient cash. We will impose a surrender charge on repurchased
shares in accordance with the following schedule:
<TABLE>
<CAPTION>
HOLDING PERIOD OF SHARES SURRENDER CHARGE
------------------------ ----------------
<S> <C>
1-3 years......................................... 12% of net asset value
4 years........................................... 11% of net asset value
5 years........................................... 10% of net asset value
6 years........................................... 9% of net asset value
7 years........................................... 8% of net asset value
8 years........................................... 7% of net asset value
9 years........................................... 6% of net asset value
10 years.......................................... 5% of net asset value
11 years or more.................................. 4% of net asset value
</TABLE>
The net asset value, for purposes of calculating the purchase price, shall
be $10 per share until we begin having appraisals performed by an independent
third party as of December 31, 2003, at which time the net asset value will be
as determined by the appraiser. The board of directors reserves the right to
adjust the net asset value on a quarterly basis to account for significant
capital transactions.
If we have sufficient funds to purchase some but not all of the shares
offered, the shareholders holding their shares for the longest amount of time
will be given priority. We will only be able to repurchase shares if it
maintains a currently effective registration statement. While we intend to
maintain an effective registration statement, there can be no assurance that it
will be able to do so. Furthermore, there can be no assurance that we will have
sufficient funds to repurchase any shares.
A shareholder who wishes to have his or her shares redeemed must mail or
deliver a written request on a form provided by us and executed by the
shareholder, our trustee or authorized agent. Within 30 days following our
receipt of the shareholder's request, we will forward to the shareholder the
documents necessary to effect the redemption, including any signature guarantee
we may require. Any redemption will be completed for a calendar quarter provided
that we receive the properly completed redemption documents from the shareholder
at least one calendar month prior to the last day of the current calendar
quarter and we have sufficient funds to redeem the shares. The effective date of
any redemption will be the last date during a quarter during which we receive
the properly completed redemption documents. As a result, we anticipate that,
assuming sufficient funds, the effective date of redemptions will be no later
than thirty days after the quarterly determination of the availability of funds.
A shareholder may present fewer than all his or her shares to us for
redemption, provided, however, that if the shareholder retains any shares, he or
she must retain at least 250 shares (200 shares for an IRA, Keogh Plan or
pension plan). Shares transferred by reason of death will be deemed to have been
held from the time the shares were first acquired.
The directors, in their sole discretion, may amend or suspend the
redemption plan at any time they determine any amendment or suspension is in our
best interest. The directors may suspend the redemption of shares if
-- they determine, in their sole discretion, that the redemption impairs
our capital or operations;
-- they determine, in their sole discretion, that an emergency makes the
redemption not reasonably practical;
-- any governmental or regulatory agency with jurisdiction over us so
demands for the protection of the shareholders;
-- they determine, in their sole discretion, that the redemption would be
unlawful; or
-- they determine, in their sole discretion, that the redemption, when
considered with all other redemptions, sales, assignments, transfers
and exchanges of our shares, could cause direct or indirect
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ownership of our shares to become concentrated to an extent which
would prevent us from qualifying as a REIT under the Code.
For a discussion of the tax treatment of redemptions, see "United States Federal
Income Tax Considerations -- Taxation of Shareholders."
RESTRICTIONS ON ROLL-UP TRANSACTIONS
In connection with any proposed transaction considered a "Roll-up
Transaction" involving us and the issuance of securities of an entity (a
"Roll-up Entity") that would be created or would survive after the successful
completion of the Roll-up Transaction, an appraisal of all properties shall be
obtained from a competent independent appraiser. The properties shall be
appraised on a consistent basis, and the appraisal shall be based on the
evaluation of all relevant information and shall indicate the value of the
properties as of a date immediately prior to the announcement of the proposed
Roll-up Transaction. The appraisal shall assume an orderly liquidation of
properties over a 12-month period. The terms of the engagement of the
independent appraiser shall clearly state that the engagement is for our benefit
and the shareholders. A summary of the appraisal, indicating all material
assumptions underlying the appraisal, shall be included in a report to
shareholders in connection with a proposed Roll-up Transaction. A "Roll-up
Transaction" is transaction involving the acquisition, merger, conversion or
consolidation, directly or indirectly, of CPA(R):14 and the issuance of
securities of a Roll-up Entity. This term does not include:
-- a transaction involving our securities that have been for at least 12
months listed on a national securities exchange or included for
quotation on Nasdaq National Market System; or
-- a transaction involving the conversion to corporate, trust, or
association form of only CPA(R):14 if, as a consequence of the
transaction there will be no significant adverse change in any of the
following: Shareholder voting rights; the term of our existence;
compensation to W. P. Carey & Co. or Carey Property Advisors; or our
investment objectives of CPA(R):14.
In connection with a proposed Roll-up Transaction, the person sponsoring
the Roll-up Transaction must offer to shareholders who vote "no" on the proposal
the choice of:
(i) accepting the securities of a Roll-up Entity offered in the
proposed Roll-up Transaction; or
(ii) one of the following:
(A) remaining as shareholders of CPA(R):14 and preserving their
interests therein on the same terms and conditions as existed
previously, or
(B) receiving cash in an amount equal to the shareholder's pro rata
share of the appraised value of our net assets.
We are prohibited from participating in any proposed Roll-up Transaction:
(a) which would result in the shareholders having democracy rights in
a Roll-up Entity that are less than those provided in the bylaws and
described elsewhere in this prospectus, including rights with respect to
the election and removal of directors, annual reports, annual and special
meetings, amendment of the articles of incorporation, and dissolution of
CPA(R):14. See "Management," "Reports to Shareholders" and "Description of
Shares;"
(b) which includes provisions that would operate to materially impede
or frustrate the accumulation of shares by any purchaser of the securities
of the Roll-up Entity (except to the minimum extent necessary to preserve
the tax status of the Roll-up Entity), or which would limit the ability of
an investor to exercise the voting rights of its securities of the Roll-up
Entity on the basis of the number of shares held by that investor;
(c) in which investor's rights to access of records of the Roll-up
Entity will be less than those provided in the section of this prospectus
entitled "Description of Shares -- Meetings and Special Voting
Requirements;" or
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(d) in which any of the costs of the Roll-up Transaction would be
borne by us if the Roll-up Transaction is not approved by the shareholders.
TRANSFER AGENT
The transfer agent and registrar for the shares will be
Resource/Phoenix(R). The transfer agent's address is 2401 Kerner Boulevard, San
Rafael, California 94901-5529, and its phone number is 888-241-3737.
THE OFFERING
Subject to the conditions set forth in this prospectus and in accordance
with the terms and conditions of the Sales Agency Agreement, we are offering to
the public through Carey Financial and selected dealers, on a best efforts
basis, a maximum of $400,000,000 of shares of common stock consisting of
40,000,000 shares priced at $10 per share. The minimum subscription is 250
shares or $2,500 (200 shares or $2,000 for an IRA or a Keogh Plan except for
Iowa tax exempt investors which must make a minimum investment of 250 shares or
$2,500). See "Terms of the Offering." Carey Financial and American Express
Financial Services, Inc. are expected to sell a significant number of shares.
Carey Financial will receive a selling commission in an amount equal to
$0.60 per share, whether sold directly by it or by one of the selected dealers,
all of whom must be members in good standing of the National Association of
Securities Dealers, Inc. Carey Financial may, in turn, reallow up to $0.60 per
share of the selling commissions to selected dealers for shares they sell. We
also will reimburse Carey Financial for the amount of any selected dealer fee
paid to selected dealers, which fee may not exceed 1% of the price of each share
sold by the selected dealer. Carey Financial has agreed to pay a selected dealer
fee of 1% to all selected dealers and Carey Financial will receive a selected
dealer fee of 1% for shares sold directly by Carey Financial. We will also pay
Carey Financial a management fee of $.05 per share for managing the offering. In
addition, Carey Financial or selected dealers, in their sole discretion, may
elect not to accept any selling commission we offer for shares that they sell.
In that event, these shares shall be sold to the investor net of all selling
commissions, at a price per share of $9.40. We have agreed to indemnify Carey
Financial and selected dealers against specified liabilities, including
liabilities under the Securities Act of 1933.
We will offer a reduced share purchase price to "single purchasers" on
orders of more than $250,000 and selling commissions paid to Carey Financial and
selected dealers will be reduced by the amount of the share purchase price
discount. The share purchase price will be reduced for each incremental share
purchased in the total volume ranges set forth in the table below. The reduced
purchase price will not affect the amount we receive for investment. The
following table sets forth the reduced share purchase price and selling
commissions payable to Carey Financial:
<TABLE>
<CAPTION>
SELLING COMMISSION
PURCHASE PRICE PER SHARE
PER SHARE FOR ON TOTAL SALE FOR
FOR A "SINGLE INCREMENTAL SHARE IN INCREMENTAL SHARE IN
PURCHASER" VOLUME DISCOUNT RANGE VOLUME DISCOUNT RANGE
------------- --------------------- ---------------------
<C> <S> <C> <C> <C>
$ 2,000 -- $250,000 $10.00 $0.60
250,001 -- 500,000 9.85 0.50
500,001 -- 750,000 9.70 0.35
750,001 -- 1,000,000 9.60 0.25
1,000,001 -- 5,000,000 9.50 0.15
</TABLE>
Selling commissions for purchases of $5,000,000 or more will, in our sole
discretion, be reduced to $0.10 per share or less but in no event will the
proceeds to us be less than $9.35 per share. Selling commissions paid will in
all cases be the same for the same level of sales. In the event of a sale of
$5,000,000 or more, we will supplement this prospectus to include (i) the
aggregate amount of the sale, (ii) the price per share paid by the purchaser and
(iii) a statement that other investors wishing to purchase at least the amount
described in (i) will pay no more per share than the initial purchaser.
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Orders may be combined for the purpose of determining the total commissions
payable with respect to applications made by a "single purchaser." The amount of
total commissions thus computed will be apportioned pro rata among the
individual orders on the basis of the respective amounts of the orders being
combined. As used herein, the term "single purchaser" will include
(1) any person or entity, or persons or entities, acquiring shares as joint
purchasers,
(2) all profit-sharing, pension and other retirement trusts maintained by a
given corporation, partnership or other entity,
(3) all funds and foundations maintained by a given corporation,
partnership or other entity,
(4) all profit-sharing, pension and other retirement trusts and all funds
or foundations over which a designated bank or other trustee, person or
entity (except an investment adviser registered under the Investment
Advisers Act of 1940) exercises discretionary authority with respect to
an investment in CPA(R):14, and
(5) all clients of an investment adviser registered under the Investment
Advisers Act of 1940 who have been advised by that adviser on an
ongoing basis regarding investments other than in CPA(R):14, and who
have been advised by such adviser regarding an investment in CPA(R):14.
In the event a single purchaser described in categories (2) through (5)
above wishes to have its orders so combined, that purchaser will be required to
request the treatment in writing, which request must set forth the basis for the
discount and identify the orders to be combined. Any request will be subject to
our verification that all of the orders were made by a single purchaser.
Orders also may be combined for the purpose of determining the commissions
payable in the case of orders by any purchaser described in category (1) through
(5) above who, subsequent to its initial purchase of shares, orders additional
shares. In this event, the commission payable with respect to the subsequent
purchase of shares will equal the commission per share which would have been
payable in accordance with the commission schedule set forth above if all
purchases had been made simultaneously. Any reduction of the 6% selling
commission otherwise payable to Carey Financial or a selected dealer will be
credited to the purchaser as additional whole shares. Unless investors indicate
that orders are to be combined and provide all other requested information, we
cannot be held responsible for failing to combine orders properly.
Carey Property Advisors, its affiliates and their employees and the
selected dealers and their employees may purchase shares net of selling
commissions and we will pay no selling commissions on these shares. Any
purchases by Carey Property Advisors, its affiliates and their employees and the
selected dealers and their employees will be for investment purposes only and
not with the intent to resell the shares. There is no limit on the number of
shares such persons may purchase. There is no limit on the number of shares
purchased by affiliates of Carey Property Advisors and their employees and the
selected dealers and their employees. Any resale of the 20,000 shares currently
owned by Carey Property Advisors or shares it or our affiliates may purchase are
subject to Rule 144 promulgated under the Securities Act of 1933, which limits
the number of shares which may be resold at any one time and the manner of the
resale.
We will reimburse Carey Financial for its identified expenses and for
identified expenses of selected dealers reimbursed by Carey Financial, including
the costs of any sales and information meetings of the employees of Carey
Financial and the selected dealers (to the extent Carey Financial reimburses the
selected dealers for the expenses) relating to this offering. Subject to the
satisfactory completion of any regulatory reviews and examinations which may be
required, the rules of the National Association of Securities Dealers, Inc. and
the prior review and approval by the National Association of Securities Dealers,
Inc. and Carey Financial, the selected dealers (as appropriate), CPA(R):14,
Carey Property Advisors or any of their affiliates may establish sales incentive
programs for associated persons of Carey Financial or selected dealers or may
reimburse Carey Financial and selected dealers for sales incentive programs
established by them. Sales incentives will be deemed to be additional
underwriting compensation. Sales incentives will not be paid in cash and the
aggregate value of the non-cash incentives paid by us and Carey Property
Advisors directly to associated persons during this offering will not exceed
$100 per year.
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Carey Financial or other entities will provide wholesaling services to us.
All entities performing wholesaling activities will be required to be properly
licensed to engage in the securities business. These services will include
developing and preparing sales material, conducting broker/dealer seminars,
holding informational meetings and providing information and answering any
questions concerning this offering. We will reimburse Carey Financial for its
identified expenses incurred in coordinating wholesaling activities, including,
but not limited to
-- travel and entertainment expenses;
-- compensation of employees of Carey Financial in connection with
wholesaling activities;
-- expenses incurred in coordinating broker-dealer seminars and meetings;
and
-- wholesaling fees and wholesaling expense reimbursements paid to Carey
Financial or other entities.
In no event shall the total underwriting compensation to be paid to Carey
Financial and selected dealers from any source in connection with this offering,
including selling commissions, specified expense reimbursements and payments to
Carey Financial and selected dealers for the wholesaling services referred to
above, exceed 10% of the gross offering proceeds of the offering (plus 0.5% for
bona fide due diligence expenses). The total wholesaling expenses will not
exceed 3% of the gross offering proceeds. Carey Financial and we will monitor
the payment of all fees and expense reimbursements, including the servicing
fees, to assure that this limit is not exceeded.
In the event all organization and offering expenses, other than selling
commissions, and fees paid and expenses reimbursed to or paid on behalf of the
selected dealers, exceed 4.0% of the gross offering proceeds, the excess will be
paid by Carey Property Advisors with no recourse by or reimbursement to Carey
Property Advisors.
Every prospective investor desiring to purchase shares will be required to
comply with the procedures for ordering shares we imposed, Carey Financial and
the selected dealer from whom the investor intends to purchase shares. Carey
Financial and certain selected dealers will require an order form, a specimen of
which is attached to this prospectus, to be completed and delivered together
with a check payable to the escrow agent for the aggregate purchase price of the
shares ordered. Residents of Iowa, Maine, Massachusetts, Minnesota, Michigan,
Missouri, Nebraska, and North Carolina must complete and execute an order form.
Selected dealers will submit the checks directly to the escrow agent by noon of
the business day following receipt. Some selected dealers may offer investors
alternate procedures for purchasing shares. Under the alternative procedures,
the investor must maintain an account with the selected dealers or open the
account at no charge. An investor may then purchase shares by contacting his or
her broker and indicating the amount of his or her desired investment in shares.
If the investor has not already received a copy of this prospectus, Carey
Financial or a selected dealer will forward a copy of this prospectus to the
investor. Carey Financial or a selected dealer will notify the investor that the
full amount of the purchase price payment must be in the investor's account by a
specified settlement date, which shall occur within five business days after the
notice to the investor. An investor's account will be charged the amount of the
investment on the settlement date. For investors in all jurisdictions, by noon
of the next business day following the date funds are debited, the funds debited
from the investor's account will be sent to the escrow agent for deposit in the
escrow account we established for this offering. In addition, investors may be
able to direct that any distributions we pay be invested directly into a mutual
fund. Prior to the settlement date, the investor may withdraw his order by
notifying his broker at Carey Financial or the selected dealer.
On or after the settlement date, investors will have no right to withdraw
any funds submitted to the escrow agent during this offering period. We have the
unconditional right in our sole discretion to accept or reject any order or any
part thereof within 30 days of receipt of the order. If we reject any order or
any part thereof, we will notify the investor in writing thereof and arrange for
the escrow agent to promptly return to the investor the entire purchase price or
portion thereof which was rejected, along with any interest earned thereon.
Shares will be evidenced on our books and records, which will include a list of
shareholders' names, addresses and number of shares owned. An investor will not
receive a share certificate or other evidence of
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his interest in CPA(R):14 unless the shares are listed on a national securities
exchange or included for quotation on Nasdaq.
ESCROW ARRANGEMENTS
All funds received by Carey Financial and the selected dealers from orders
will be placed promptly in an interest-bearing escrow account with the escrow
agent at our expense until these funds are released as described below. Separate
escrow accounts will be established for benefit plan funds and all other funds.
Payment for shares are to be sent to the escrow agent at The United States Trust
Company of New York, 114 West 47th Street, New York, New York 10036-1532,
Attention: Pat Stermer. These funds will be held in trust for the benefit of
investors to be used for the purposes set forth in this prospectus. The escrow
agent will be given the right to invest non-benefit plan funds in United States
government securities, certificates of deposit or other time or demand deposits
of commercial banks which have a net worth of at least $100,000,000 or in which
the certificates or deposits are fully insured by any Federal or state
government agency. Benefit plan funds will be invested in a money market account
maintained by the escrow agent. The interest, if any, earned on escrow funds
prior to the transmittal of the proceeds to us will not become part of our
capital. Instead, within 15 days following each issuance of shares, CPA(R):14
will cause the escrow agent to make distributions to shareholders of all
interest earned on their escrowed funds used to purchase the shares. We may, as
security for borrowings made from third parties, assign its right to receive up
to 85% of the funds then held in escrow (not including funds held on behalf of
benefit plans).
Funds received by us from prospective investors will continue to be placed
in escrow during this offering and we will issue additional shares periodically
(but not less often than quarterly) as agreed between us and Carey Financial.
This offering will terminate at the time all shares being offered are sold or
unsold shares are withdrawn from registration by order of the board, but in no
case later than .
REPORTS TO SHAREHOLDERS
We provide periodic reports to shareholders regarding our operations over
the course of the year. Financial information contained in all reports to
shareholders will be prepared on the accrual basis of accounting in accordance
with generally accepted accounting principles. Tax information will be mailed to
the shareholders by January 31 of each year. Our annual report, which will
include financial statements audited and reported upon by independent public
accountants, will be furnished within 120 days following the close of each
fiscal year. The annual financial statements will contain or be accompanied by a
complete statement of any transactions with W. P. Carey & Co., Carey Property
Advisors or its affiliates and of compensation and fees paid or payable by us to
Carey Property Advisors and its affiliates. Summary information regarding our
quarterly financial results will be furnished to shareholders on a quarterly
basis.
Investors have the right under applicable Federal and Maryland laws to
obtain information about us and, at their expense, may obtain a list of names
and addresses of all of the shareholders. See "Description of Shares -- Meetings
and Special Voting Requirements." Shareholders also have the right to inspect
and duplicate our appraisal records. In the event that the Securities and
Exchange Commission promulgates rules and/or in the event that the applicable
guidelines of the North American Securities Administrators Association, Inc. are
amended so that, taking these changes into account, our reporting requirements
are reduced, we may cease preparing and filing some of the aforementioned
reports if the directors determine this action to be in the best interests of
CPA(R):14 and if this cessation is in compliance with the rules and regulations
of the Securities and Exchange Commission and state securities law and
regulations, both as then amended.
LEGAL OPINIONS
Certain legal matters, including the legality of the shares, will be passed
upon for us by Reed Smith Shaw & McClay LLP, 2500 One Liberty Place,
Philadelphia, Pennsylvania 19103. Reed Smith Shaw &
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McClay LLP will rely as to all matters of Maryland law on an opinion of Piper &
Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The (i) consolidated balance sheets as of December 31, 1997 and 1998 and
the consolidated statements of operations, shareholders' equity and cash flows
for the period from inception (June 4, 1997) to December 31, 1997 and the year
ended December 31, 1998, of Corporate Property Associates 14 Incorporated and
Subsidiaries and (ii) balance sheet as of December 31, 1998 and the statements
of income members' equity and cash flows from inception (February 2, 1998) to
December 31, 1998 of ET LLP included in this prospectus, have been included
herein in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts at accounting and
auditing.
SALES LITERATURE
In addition to and apart from this prospectus, we will use sales material
in connection with this offering. This material includes an investor sales
promotion brochure, prospecting letters or mailers and seminar invitations,
media advertising inviting seminar attendance, a brochure describing the
investment committee, a presentation using a computer, reprints of articles
about us or the net lease or sale-leaseback industry, fact sheets describing our
acquisitions, a slide presentation and studies of the prior performance of
entities managed by Carey Property Advisors and its affiliates as well as other
net lease investment programs. In some jurisdictions the sales material will not
be available. Other than as described herein, we have not authorized the use of
other sales material. This offering is made only by means of this prospectus.
Although the information contained in the material does not conflict with any of
the information contained in this prospectus, the material does not purport to
be complete and should not be considered as a part of this prospectus or the
registration statement of which this prospectus is a part, or as incorporated in
this prospectus or said registration statement by reference, or as forming the
basis of this offering.
FURTHER INFORMATION
This prospectus does not contain all the information set forth in the
registration statement and the exhibits relating thereto which we have filed
with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933, and to which reference is hereby made. Copies of the
Exhibits and all reports filed by the Registrant are on file at the offices of
the Commission in Washington, D.C. and its regional offices and may be obtained,
upon payment of the fee prescribed by the Commission, or may be examined without
charge at the Public Reference Section of the Commission, Washington, D.C.
20549, the Commission's Northwest Regional office, 7 World Trade Center, Suite
1300, New York, NY 10048, the Commission's Midwest Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60611-2511 or the
Commission's Web Site: http://www.sec.gov.
All summaries contained herein of documents which are filed as exhibits to
the registration statement are qualified in their entirety by this reference to
those exhibits. We have not knowingly made any untrue statement of a material
fact or omitted to state any fact required to be stated in the registration
statement, including this prospectus, or necessary to make the statements
therein not misleading.
97
<PAGE> 99
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Corporate Property Associates 14 Incorporated and Subsidiaries:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, shareholders' equity and cash
flows present fairly, in all material respects, the financial position of
Corporate Property Associates 14 Incorporated and Subsidiaries at December 31,
1997 and 1998, and the results of their operations and their cash flows for the
period from inception (June 4, 1997) to December 31, 1997 and the year ended
December 31, 1998, in conformity with generally accepted accounting principles.
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 audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits 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, assessing the
accounting principles used and significant estimates made by the Advisor, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 5, 1999
F-1
<PAGE> 100
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
-------- ------------
<S> <C> <C>
ASSETS:
Real estate leased to others:
Accounted for under the operating method
Land................................................... $ 19,018,980
Buildings.............................................. 25,723,022
------------
44,742,002
Accumulated depreciation............................... 175,977
------------
44,566,025
Equity investments.......................................... 36,097,004
Cash and cash equivalents................................... $200,000 26,747,058
Other assets................................................ 545,842
-------- ------------
Total assets........................................... $200,000 $107,955,929
======== ============
LIABILITIES:
Accounts payable to affiliates.............................. $ 4,255 $ 537,874
Accounts payable and accrued expenses....................... 8,000 169,735
Prepaid rental income and security deposits................. 343,767
Deferred acquisition fees payable to affiliate.............. 1,628,828
Dividends payable........................................... 1,365,622
-------- ------------
Total liabilities...................................... 12,255 4,045,826
-------- ------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; authorized, 40,000,000
shares;
issued and outstanding, 20,000 and 11,837,901 shares at
December 31, 1997 and 1998................................ 20 11,838
Additional paid-in capital.................................. 199,980 105,705,582
Dividends in excess of accumulated earnings................. (12,255) (1,643,957)
-------- ------------
187,745 104,073,463
Less, treasury stock at cost, 16,900 shares at December 31,
1998...................................................... (163,360)
-------- ------------
Total shareholders' equity............................. 187,745 103,910,103
-------- ------------
Total liabilities and shareholders' equity............. $200,000 $107,955,929
======== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE> 101
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JUNE 4, 1997) TO DECEMBER 31, 1997
AND THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
1997 1998
-------- ----------
<S> <C> <C>
Revenues:
Rental income............................................. $1,296,441
Other interest income..................................... 912,759
----------
2,209,200
----------
Expenses:
Interest expense.......................................... 20,745
Depreciation.............................................. 175,977
General and administrative................................ $ 12,255 702,828
Property expense.......................................... 272,582
-------- ----------
12,255 1,172,132
-------- ----------
(Loss) income before income from equity investments.... (12,255) 1,037,068
Income from equity investments.............................. 21,200
-------- ----------
Net (loss) income................................. $(12,255) $1,058,268
======== ==========
Basic (loss) income per share............................... $ (.61) $ .25
======== ==========
Weighted average shares outstanding -- basic................ 20,000 4,273,311
======== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 102
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JUNE 4, 1997) TO DECEMBER 31, 1997
AND THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DIVIDENDS IN
ADDITIONAL EXCESS OF
COMMON PAID-IN ACCUMULATED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
------- ------------ ------------ --------- ------------
<S> <C> <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
11,817,901 shares issued
$.001 par, at $10 per
share, net of offering
costs..................... 11,818 105,505,602 105,517,420
Dividends declared.......... (2,689,970) (2,689,970)
Purchase of treasury stock,
16,900 shares............. $(163,360) (163,360)
Net income.................. 1,058,268 1,058,268
------- ------------ ----------- --------- ------------
Balance at
December 31, 1998......... $11,838 $105,705,582 $(1,643,957) $(163,360) $103,910,103
======= ============ =========== ========= ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 103
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 4, 1997) TO DECEMBER 31, 1997
AND THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
1997 1998
-------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income......................................... $(12,255) $ 1,058,268
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation........................................... 175,977
Straight-line rent adjustments......................... (65,686)
Income from equity investments......................... (21,200)
Change in operating assets and liabilities, net(a)..... 12,255 558,965
-------- ------------
Net cash provided by operating activities............ -- 1,706,324
-------- ------------
Cash flows from investing activities:
Purchase of equity investments, net(b).................... (35,440,551)
Purchases of real estate and other capitalized costs,
net(b)................................................. (43,748,427)
-------- ------------
Net cash used in investing activities................ -- (79,188,978)
-------- ------------
Cash flows from financing activities:
Proceeds from stock issuance, net of costs................ 200,000 105,517,420
Dividends paid............................................ (1,324,348)
Purchase of treasury stock................................ (163,360)
-------- ------------
Net cash provided by financing activities............ 200,000 104,029,712
-------- ------------
Net increase in cash and cash equivalents............ 200,000 26,547,058
Cash and cash equivalents, beginning of period.............. -- 200,000
-------- ------------
Cash and cash equivalents, end of period.................... $200,000 $ 26,747,058
======== ============
</TABLE>
Supplemental Disclosure of noncash investing activities:
- ---------------
(a) Excludes changes in accounts payable and accrued expenses and accounts
payable to affiliates balances that relate to the raising of capital
(financing activities) rather than the Company's real estate operations.
<TABLE>
<S> <C>
(b) Deferred acquisition fee payable to affiliate......... $ 1,628,828
============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 104
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation
The consolidated financial statements include the accounts of Corporate
Property Associates 14 Incorporated and its wholly-owned subsidiaries
(collectively, the "Company"). All material inter-entity transactions have been
eliminated.
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 and investments. Actual results could
differ from those estimates.
Real Estate Leased to Others:
Real estate is leased 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 are accounted for under the operating and direct financing
methods as described below:
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.
The Company assesses the recoverability of its real estate assets and
investments, including residual interests 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.
Depreciation is computed using the straight-line method over the estimated
useful lives of the properties -- generally 40 years.
Substantially all of the Company's leases for either scheduled rent
increases or periodic rent increases based on formulas indexed to increases in
the Consumer Price Index ("CPI").
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.
Equity Investments:
The Company's interests in two limited liability companies in which its
ownership interests are 50% or less are accounted for under the equity method,
i.e. at cost, increased or decreased by the Company's share of earnings or
losses, less distributions.
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.
F-6
<PAGE> 105
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Items classified as cash equivalents include commercial paper and money market
funds. At December 31, 1998, the Company's cash and cash equivalents were held
in the custody of two financial institutions, and which balances at times exceed
federally insurable limits. The Company mitigates this risk by depositing funds
with major financial institutions.
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.
Other Assets:
Included in other assets is deferred rental income which is the aggregate
difference for operating leases between scheduled rents which vary during the
lease term and rent recognized on a straight-line basis.
Treasury Stock:
Treasury stock is recorded at cost
Deferred Acquisition Fees:
Fees are payable for services provided by Carey Property Advisors (the
"Advisor") to the Company relating to the identification, evaluation,
negotiation, financing and purchase of properties. A portion of such fees are
deferred and are 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 (see Note 3).
Earnings Per Share:
The Company has a simple equity capital structure with only common stock
outstanding. As a result, the Company has presented basic per-share amounts only
for all periods presented in the accompanying consolidated financial statements.
Federal Income Taxes:
The Company qualifies as a Real Estate Investment Trust ("REIT") for the
year ended December 31, 1998. The Company is not subject to Federal income
taxes, provided it distributes at least 95% of its REIT taxable income to its
shareholders and meets other conditions necessary to retain REIT status.
Operating Segments
The Financial Accounting Standards Board ("FASB") issued statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments of
an Enterprise and Related Information". SFAS No. 131, effective for fiscal years
beginning after December 15, 1997, establishes accounting standards for the way
public business enterprises report selected information about operating segments
and guidelines for defining the operating segment of an enterprise. Based on the
definition of an operating segment in SFAS No. 131, the Company has concluded
that it engages in a single operating segment.
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 The Advisor.
F-7
<PAGE> 106
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Advisor will be entitled to certain incentive fees in the event of the
liquidation of the Company, subject to certain conditions.
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. Through December 31, 1998, 11,817,901 Shares
were issued for $118,179,010.
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.
In connection with performing services relating to the Company's real
estate purchases, affiliates of the Company received acquisition fees of
$581,726 in 1998.
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
fees and compensation in connection with the offering and the operation of the
Company as described in the Prospectus of the Company.
In 1998, an affiliate of the Company received structuring and development
fees of $1,454,315. Fees are only paid in connection with completed
transactions. The affiliate is also entitled to receive deferred acquisition
fees of $1,628,828 over a period of no less than eight years.
The Company's interests in properties jointly held with affiliates range
from 33 1/3% to 50%. Ownership interests in two limited liability companies
owned with affiliates, are accounted for under the equity method as such
ownership interest is 50% or less. The Company will account for any individual
interests in assets and liabilities relating to tenants-in-common interests on a
proportional basis.
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 of the Company. Until 7% cumulative rate of cash flow from
operations, as defined in the Prospectus, is achieved, the Advisor will not be
entitled to receive the performance fee. The Company, however, is recognizing
performance fee expense currently. 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. As of December 31, 1998, the
cumulative return criterion had not been achieved. For the year ended December
31, 1998, the Company incurred asset management fees of $129,746. Performance
fees were in like amount. General and administrative expense reimbursement
consists primarily of the actual cost of personnel needed in providing
administrative services. For the year ended December 31, 1998 general and
administrative reimbursements were $370,000. 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.
F-8
<PAGE> 107
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. REAL ESTATE LEASED TO OTHERS ACCOUNTED FOR UNDER THE OPERATING METHOD:
Scheduled future minimum rents, exclusive of renewals, under noncancellable
operating leases amount to approximately $3,827,000 in 1999; $4,015,000 in 2000;
$4,032,000 in each of the years 2001 through 2003 and aggregate approximately
$46,410,000 through 2018.
No contingent rents were realized in 1998.
5. DIVIDENDS PAYABLE:
A dividend of $.00175 per share per day ($1,365,622) in the period from
October 1, 1998 through December 31, 1998 was declared in December 1998 and was
paid in January 1999.
6. COMMITMENTS AND CONTINGENCIES:
The Company is liable for certain expenses of the offering described in the
Prospectus of the Company, including but not limited to filing, legal,
accounting, printing and escrow fees, which are being 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 is reimbursing 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
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
reimbursed to the Company by the Advisor.
7. LEASE REVENUES:
The Company's operations consist of the investment in and the leasing of
industrial and commercial real estate. For the year ended December 31, 1998, the
financial reporting sources are as follows:
<TABLE>
<S> <C>
Per Statements of Income
Rental income............................................. $1,296,441
Adjustment:
Share of lease revenues from equity investment............ 84,672
----------
$1,381,113
==========
</TABLE>
In 1998, the Company earned its share of net lease revenues from its direct
and indirect ownership of real estate from the following lease obligations:
<TABLE>
<CAPTION>
%
---
<S> <C> <C>
Best Buy Co. Inc............................................ $ 824,582 60%
Burlington Motor Carriers, Inc. ............................ 398,200 29
Advanced Micro Devices, Inc................................. 84,672 6
The Benjamin Ansehl Company................................. 66,607 5
Contraves Brashear Systems, L.P............................. 7,052
---------- ---
$1,381,113 100%
========== ===
</TABLE>
F-9
<PAGE> 108
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. ACQUISITIONS OF REAL ESTATE:
The Benjamin Ansehl Company
On November 24, 1998, the Company purchased land and a building in St.
Louis, Missouri for $6,021,000 and entered into a net lease agreement with The
Benjamin Ansehl Company ("Benjamin"). The lease has a term of fifteen years
through November 30, 2013 with no renewal terms. The lease provides for annual
rent of $649,750, with rent increases every two years based on a formula indexed
to increases in the CPI.
In connection with the purchase of the property, the Company received
warrants to purchase 2,064 shares of common stock of Benjamin at an exercise
price of $26.738 per share. The warrant agreement also provides the Company the
right to make a cashless exercise for fewer shares. The exercise period for the
warrants is the entire term of the lease and the warrant agreement provides for
the Company to sell the warrants back to Benjamin under certain circumstances.
Contraves Brashear System L.P.
On December 28, 1998, the Company purchased land and building in
Pittsburgh, Pennsylvania for $6,806,000 and entered into a net lease agreement
with Contraves Brashear Systems L.P. ("Contraves").
The Contraves lease provides for an initial lease term of fifteen years
through December 31, 2013 followed by two five-year renewal terms. Annual rent
is initially $643,750 with rent increases every three years based on a formula
indexed to increases in the CPI, capped at 9.27% for each rent increase. The
lease also provides for a purchase option exercisable during the final six
months of the initial lease term at an exercise price the greater of (i) fair
market value, as defined, and (ii) the Company's acquisition cost for the
property plus any prepayment premium that would be due on a mortgage loan on the
property.
On March 22, 1999, the Company obtained $4,225,000 of limited recourse
mortgage financing collateralized by the Contraves property and the assignment
of the Contraves lease. The mortgage loan provides for monthly payments of
interest and principal of $31,222 at an annual interest rate of 7.5% based on a
25-year amortization schedule. The loan matures on April 1, 2009 with a balloon
payment due of approximately $3,358,000.
9. EQUITY INVESTMENTS:
Etec Systems, Inc.
In February 1995, Corporate Property Associates 12 Incorporated
("CPA(R):12"), an affiliate purchased land and buildings in Hayward, California
for $11,860,000 and entered into a net lease with Etec Systems, Inc. ("Etec").
In February 1998, CPA(R):12 entered into a series of transactions including
paying off the existing limited recourse mortgage loan of the Etec property,
purchasing additional improvements at the Etec property, entering into a
commitment and construction agency agreement to fund additional improvements
("Project II") of up to $52,356,000, amending the existing lease with Etec and
transferring ownership of the Etec property to a limited liability company in
which the Company acquired an ownership interest. Under the limited liability
agreement, the Company will have a 49.99% interest in the Project II
improvements only, and CPA(R):12 will not be obligated to share any of the
economic benefits from the existing buildings with the Company. The limited
liability company, has received a commitment of $30,000,000 of limited recourse
financing for the Project II improvements that will be made available upon the
completion of construction. The Company has funded approximately $26,970,000
towards its interest in the Project II improvements. The Company's equity
contribution, after proceeds from the mortgage are distributed, is expected to
be approximately $11,178,000.
F-10
<PAGE> 109
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 additional
improvements, assuming that the entire funding commitment is needed, annual rent
applicable to the Project II improvements will be $5,727,000 with increases
every three years based on increases in the CPI. The commitment for limited
recourse mortgage financing provides for monthly payments of principal and
interest of $271,495 at an interest rate of 7.11% based on a twenty-year
amortization schedule. The Company share of annual cash flow (rent less mortgage
debt service) is expected to approximate $1,234,000.
Advanced Micro Devices, Inc.
On December 22, 1998, the Company and two of its affiliates, Carey
Institutional Properties Incorporated ("CIP") and CPA(R):12, through a
newly-formed limited liability company, Delaware Chip LLC ("Chip"), purchased
land and a building in Sunnyvale, California and entered into a net lease
agreement with Advanced Micro Devices, Inc. ("AMD"). The purchase price of the
property was $95,287,958 of which $68,250,000 was financed by limited recourse
debt. The Company, CIP and CPA(R):12 each own a 33 1/3% interest in Chip.
The AMD lease provides for an initial lease term of twenty years through
December 2018 with two ten-year renewal terms at AMD's option. Annual rent is
$9,145,500, with rent increases every three years based on a formula indexed to
increases in the Consumer Price Index ("CPI"). The $68,250,000 limited recourse
mortgage loan is collateralized by a deed of trust on the property and an
assignment of the lease. The loan bears interest at an annual interest rate of
7.78% with monthly principal and interest payments based on a 30-year
amortization schedule. The loan matures in January 2009, when a balloon payment
will be due.
Summarized financial information of the Company's equity investees is as
follows:
<TABLE>
<CAPTION>
1998
----
(IN THOUSANDS)
<S> <C>
ET LLC
Assets.......................................... $55,977
Liabilities..................................... 16,207
Capital......................................... 39,770
Revenues........................................ 2,723
Expenses........................................ 1,281
Net income...................................... 1,442
Chip
Assets.......................................... $91,350
Liabilities..................................... 68,251
Capital......................................... 23,099
Revenues........................................ 254
Expenses........................................ 185
Net income...................................... 69
</TABLE>
10. SUBSEQUENT EVENT:
On February 3, 1999, the Company and CPA(R):12, each acquired 50% ownership
interests in a newly formed limited liability company, and purchased land and
building in Gilbert, Arizona for $23,560,000 and entered into a with a net lease
with Intesys Technologies, Inc. ("Intesys").
F-11
<PAGE> 110
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Intesys lease has an initial term of twenty years with two ten-year
renewal terms at the option of Intesys. The lease provides for annual rent
payments of $2,274,750 with rent increases every three years based on a formula
indexed to the increase in the CPI, with any single increase capped at 9%.
11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts of cash, receivables and accounts payable and accrued
expenses approximate fair value because of the short maturity of these items.
In conjunction with its leases with Burlington Motor Carriers, Inc. and the
Benjamin Ansehl Company, the Company was granted warrants that will allow the
company to purchase common stock of the tenant company at a stated price.
Because the tenant companies are not publicly traded companies, the warrants
were judged at the time of issuance to be speculative in nature and a nominal
cost basis is attributed to them. The Company believes that it is not
practicable to estimate the fair value of its stock warrants for closely-held
companies.
12. ACCOUNTING PRONOUNCEMENT:
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS No. 133 is effective for all quarters of fiscal years beginning after June
15, 1999. The Company believes that SFAS No. 133 will not have a material impact
on the consolidated financial statements.
F-12
<PAGE> 111
CORPORATE PROPERTY ASSOCIATES 14, INCORPORATED
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
INITIAL COST TO COST GROSS AMOUNT AT WHICH CARRIED
COMPANY CAPITALIZED AT CLOSE OF PERIOD(B)
------------------------- SUBSEQUENT TO ---------------------------------------
DESCRIPTION ENCUMBRANCES LAND BUILDINGS ACQUISITION(A) LAND BUILDINGS TOTAL
- ----------- ------------ ----------- ----------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Method:
Trucking facility leased
to Burlington Motor
Carriers, Inc......... $ 2,100,000 $ 5,439,267 $ 2,100,000 $ 5,439,267 $ 7,539,267
Retail store leased to
Bestbuy Co............ 13,059,980 6,933,851 35,266 13,059,980 6,969,117 20,029,097
Research and development
facility leased to
Metagenics, Inc.
(under
construction)......... 2,390,000 $1,956,355 2,390,000 1,956,355 4,346,355
Manufacturing facility
leased to Benjamin
Ansehl Co............. 849,000 5,172,000 849,000 5,172,000 6,021,000
Manufacturing facility
leased to Contraves
Systems, L.P.......... 620,000 6,186,283 620,000 6,186,283 6,806,283
----------- ----------- ---------- ----------- ----------- -----------
$19,018,980 $23,731,401 $1,991,621 $19,018,980 $25,723,022 $44,742,002
=========== =========== ========== =========== =========== ===========
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF
ACCUMULATED INCOME
DESCRIPTION DEPRECIATION DATE ACQUIRED IS COMPUTED
- ----------- ------------ ----------------- -------------
<S> <C> <C> <C>
Operating Method:
Trucking facility leased
to Burlington Motor
Carriers, Inc......... $ 73,657 June 29, 1998 40 yrs.
Retail store leased to
Bestbuy Co............ 79,714 July 28, 1998 40 yrs.
Research and development
facility leased to
Metagenics, Inc.
(under
construction)......... July 29, 1998 40 yrs.
Manufacturing facility
leased to Benjamin
Ansehl Co............. 16,162 November 24, 1998 40 yrs.
Manufacturing facility
leased to Contraves
Systems, L.P.......... 6,444 December 28, 1998 40 yrs.
--------
$175,977
========
</TABLE>
F-13
<PAGE> 112
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED AND SUBSIDIARIES
NOTES TO SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
(a) Consists of the costs of improvements subsequent to purchase and
acquisition costs including legal fees, appraisal fees, title costs and
other related professional fees.
(b) At December 31, 1998, the aggregate cost of real estate owned by
CPA(R):14 and its subsidiaries for Federal income tax purposes is
$44,742,002.
(c)
<TABLE>
<CAPTION>
RECONCILIATION OF
REAL ESTATE ACCOUNTED
FOR UNDER THE
OPERATING METHOD
DECEMBER 31, 1998
------------------------
<S> <C>
Balance at beginning of year
Additions.............................................. $44,742,002
-----------
Balance at close of year............................... $44,742,002
===========
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF
ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
------------------------
<S> <C>
Balance at beginning of year
Depreciation expense................................... $ 175,977
-----------
Balance at close of year............................... $ 175,977
===========
</TABLE>
F-14
<PAGE> 113
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
ET LLC:
In our opinion, the financial statements listed in the index appearing
under Item 14(a)(2) on page 14 of the Annual Report on Form 10-K present fairly,
in all material respects, the financial position of ET LLC at December 31, 1998,
and the results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the schedule of real estate and accumulated depreciation listed in the
index appearing under Item 14(a)(2) on page 14 of the Annual Report on Form 10-K
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of Carey Property Advisors, a Pennsylvania limited partnership
("the Advisor"); our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
March 5, 1999
F-15
<PAGE> 114
ET LLC
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
1998
-----------
<S> <C>
ASSETS:
Land........................................................ $ 1,272,444
Buildings, net of accumulated depreciation as of $602,619... 53,948,529
Other assets................................................ 756,848
-----------
Total assets................................................ $55,977,821
===========
LIABILITIES:
Mortgage note payable....................................... $14,729,468
Deferred acquisition fee payable to affiliate............... 1,047,016
Other liabilities........................................... 431,108
-----------
Total liabilities........................................... 16,207,592
-----------
Members' equity............................................. 39,770,229
-----------
Total liabilities and members' equity....................... $55,977,821
===========
</TABLE>
ET LLC
STATEMENT OF INCOME
FOR THE PERIOD FROM INCEPTION (FEBRUARY 2, 1998) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
1998
----------
<S> <C>
Revenue:
Rental income............................................... $2,723,365
----------
Expenses:
Interest.................................................... 667,360
Depreciation................................................ 602,619
Amortization................................................ 10,982
State and local taxes....................................... 800
----------
1,281,761
----------
Net income................................................ $1,441,604
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE> 115
ET LLC
STATEMENT OF MEMBERS' EQUITY
FOR THE PERIOD FROM INCEPTION (FEBRUARY 2, 1998) TO DECEMBER 31, 1998
<TABLE>
<S> <C>
Capital contribution of assets, net of liabilities.......... $13,339,439
Capital contributions -- cash............................... 26,407,070
Distributions............................................... (1,417,884)
Net income.................................................. 1,441,604
-----------
Balance, December 31, 1998.................................. $39,770,229
===========
</TABLE>
ET LLC
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (FEBRUARY 2, 1998) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
1998
------------
<S> <C>
Cash flows from operating activities:
Net income................................................ $ 1,441,604
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization............................. 613,601
Change in operating assets and liabilities, net........... (384,263)
------------
Net cash provided by operating activities............ 1,670,942
------------
Cash flows from investing activities:
Additional capitalized costs.............................. (41,104,348)
------------
Net cash used in investing activities................ (41,104,348)
------------
Cash flows from financing activities:
Distributions paid........................................ (1,417,884)
Payments of mortgage principal............................ (270,532)
Proceeds from issuance of mortgages....................... 15,000,000
Deferred financing costs.................................. (285,248)
Capital contributions from partners....................... 26,407,070
------------
Net cash provided by financing activities............ 39,433,406
------------
Net increase in cash and cash equivalents............ --
Cash and cash equivalents, beginning of period.............. --
------------
Cash and cash equivalents, end of period............... $ --
------------
Interest paid............................................... $ 579,633
============
Schedule of noncash investing and financing activity:
At the inception of the Company, Corporate Property
Associates 12 Incorporated contributed assets, net of
liabilities with a net carrying cost of $13,339,439.
Land and buildings contributed....................... $ 13,672,228
Liabilities, net of other assets..................... (332,789)
------------
$ 13,339,439
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE> 116
ET LLC
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS:
ET LLC (the "Company") was formed on February 2, 1998 for the purpose of
engaging in the business of investing in and owning industrial and commercial
real estate. The Company's business consists of leasing land and buildings in
Hayward, California to Etec Systems, Inc. As amended on February 2, 1998, the
lease has an initial term through May 2014 with three five-year renewal options.
Annual rent on the property is currently $2,988,000.
In connection with the lease amendment, the Company and Etec entered into a
construction agency agreement to fund up to $52,356,000 of new improvements
including construction of a new building (the "Project II Improvements"). The
Project II Improvements are scheduled to be completed during the second quarter
of 1999. Assuming that the entire funding is used, annual rent applicable to the
Project II improvements will be $5,726,987.
The Company is owned by wholly-owned subsidiaries of Corporate Property
Associates 12 Incorporated ("CPA(R):12") and Corporate Property Associates 14
Incorporated ("CPA(R):14"). Upon formation, CPA(R):12, through its wholly-owned
subsidiary, made an initial contribution of the existing Etec properties and
certain other assets, net of liabilities, all valued at historical cost, and
CPA(R):14, through its wholly-owned subsidiary, made a commitment to fund 49.99%
of Project II Improvements subject to certain conditions which have been met as
of December 31, 1998. Pursuant to the Company's Membership Agreement, the
CPA(R):14 subsidiary will have a 49.99% interest in the Project II Improvements
only and CPA(R):12 will have all remaining interests.
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. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Real Estate Leased to Others Under the Operating Method:
Real estate is recorded at cost, rental revenue is recognized on a
straight-line basis over the term of the lease, and expenses (including
depreciation) are charged to operations as incurred.
Real Estate Leased Under Construction:
For the property under construction, rentals received are recorded as a
reduction of capitalized project (i.e., construction) costs.
Depreciation:
Depreciation is computed using the straight-line method over the estimated
useful life of the properties -- 40 years.
Federal Income Taxes:
The Company is a partnership for Federal and state income tax purposes. A
partnership is not liable for federal income taxes as each partner recognizes
his proportional share of the Partnership income or loss in his tax return.
Accordingly, no provision for income taxes is recognized for financial statement
purposes.
F-18
<PAGE> 117
ET LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. REAL ESTATE LEASED TO OTHERS ACCOUNTED FOR UNDER THE OPERATING METHOD:
The scheduled minimum future rentals exclusive of renewals under the
Company's noncancellable operating lease amount to approximately $5,851,000 in
1999 and $8,715,000 in each of the years 2000 through 2003 and aggregate
$124,766,000 through 2014.
4. MORTGAGE NOTE PAYABLE:
The Company's mortgage loan is a limited recourse obligation and is
collateralized by an assignment of the lease and by real property with a
carrying value of approximately $55,220,973 before accumulated depreciation. The
mortgage note payable bears interest at the rate of 7.11% and fully amortizes in
December 2013.
Scheduled principal payments during each of the next five years following
December 31, 1998 and thereafter are as follows:
<TABLE>
<S> <C>
1999...................................................... $ 570,695
2000...................................................... 612,621
2001...................................................... 657,626
2002...................................................... 705,938
2003...................................................... 757,797
Thereafter................................................ 11,424,791
-----------
Total................................................... $14,729,468
===========
</TABLE>
The Company has received a commitment for an additional $30,000,000 of
limited recourse mortgage financing which will be available upon completion of
the Project II Improvements.
6. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts of cash and accounts payable and accrued expenses
approximate fair value because of the short maturity of these items.
The Partnership estimates that the fair value of its mortgage note payable
at December 31, 1998 approximates the carrying value of such mortgage. The fair
value of the mortgage notes payable was evaluated using a cash flow model with a
discount rate that takes into account the credit of the tenant and interest rate
risk.
F-19
<PAGE> 118
ET LLC
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
INITIAL COST TO COSTS GROSS AMOUNT AT WHICH CARRIED
COMPANY CAPITALIZED AT CLOSE OF PERIOD(B)(C)
------------------------ SUBSEQUENT TO --------------------------------------
DESCRIPTION ENCUMBRANCES LAND BUILDINGS ACQUISITION(A) LAND BUILDINGS TOTAL
- ----------- ------------ ---------- ----------- -------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Method:
Office and research
facility............. $14,729,468 $1,272,444 $12,399,784 $42,151,364 $1,272,444 $54,551,148 $55,823,592
<CAPTION>
LIFE ON
WHICH
DEPRECIATION
IN LATEST
INCOME
STATEMENT
ACCUMULATED DATE IS
DESCRIPTION DEPRECIATION ACQUIRED COMPUTED
- ----------- ------------ -------- ------------
<S> <C> <C> <C>
Operating Method:
Office and research
facility............. $602,619 February 16, 40 yrs.
1995
</TABLE>
- ---------------
(a) Consists of costs of completion of construction and acquisition costs
including legal fees, appraisal fees, title costs and other related
professional fees.
(b) At December 31, 1998, the aggregate cost of real estate owned by the
Partnership for Federal income tax purposes is $56,619,873.
<TABLE>
<CAPTION>
RECONCILIATION OF
REAL ESTATE ACCOUNTED
FOR UNDER THE
OPERATING METHOD
DECEMBER 31, 1998
---------------------
<S> <C>
Contributed property........................................ $13,672,228
Additions during period -- cash............................. 42,151,364
-----------
Balance at close of period.................................. $55,823,592
===========
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF
ACCUMULATED
DEPRECIATION
DECEMBER 31, 1998
-----------------
<S> <C>
Balance at beginning of period
Depreciation expense for the period......................... $602,619
--------
Balance at close of period.................................. $602,619
========
</TABLE>
F-20
<PAGE> 119
EXHIBIT A
PRIOR PERFORMANCE TABLES
The information presented in the following tables represents the historical
experience of the CPA(R) Programs for which the Affiliates of the Advisor of the
Company serve as general partners and the record of CPA(R) Programs in meeting
their investment objectives. These tables should be carefully reviewed by a
potential investor in considering an investment in the Company. These tables are
as follows:
Table I -- Experience in Raising and Investing Funds (on a percentage
basis)
Table II -- Compensation to Sponsor
Table III -- Operating Results of Prior Programs
Table V -- Sales or Dispositions of Properties
PERSONS WHO PURCHASE SHARES IN THE COMPANY WILL NOT THEREBY ACQUIRE ANY
OWNERSHIP INTEREST IN ANY OF THE CPA(R) PROGRAMS TO WHICH THESE TABLES RELATE.
IT SHOULD NOT BE ASSUMED THAT INVESTORS IN THE COMPANY WILL EXPERIENCE RESULTS
COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN THE CPA(R) PROGRAMS. SEE "PRIOR
OFFERINGS BY AFFILIATES" ELSEWHERE IN THIS PROSPECTUS.
The investment objectives of the Company and CPA(R) Programs are similar.
Additional information regarding prior public CPA(R) Programs can be
obtained from the Advisor by written request to the Director of Investor
Relations, 5 Rockefeller Plaza, New York, NY 10020, (800) 972-2739, for a copy
of the most recent Annual Report filed on Form 10-K with the SEC or a copy of
Table VI -- Acquisition of Real Properties by Prior Public Programs included in
Part II of the Registration Statement to which this Prospectus relates, free of
charge.
The following terms used throughout the Prior Performance Tables are
defined below:
"Total acquisition cost" means the original mortgage financing at date
of purpose, cash payments (equity), and prepaid items and fees related to
purchase of property.
"GAAP" means generally accepted accounting principles.
"Cash generated from operations" means the excess or deficiency of
partnership operating cash receipts including interest on short-term
investments over partnership operating case expenditures.
A-1
<PAGE> 120
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS AS OF DECEMBER 31, 1997
ON A PERCENTAGE BASIS
Table I includes information showing how investors' funds have been dealt
with in Prior Programs, the offerings of which have closed since January 1,
1994, particularly focusing on the percentage of the amount raised available for
investment (or total acquisition cost), the percentage of leverage used in
purchasing properties and the time frame for raising and investing funds. THE
INFORMATION IN THIS TABLE SHOULD NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE
PERFORMANCE OF THE COMPANY. PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS
WILL NOT HAVE ANY OWNERSHIP IN THE CPA(R) PROGRAMS. MORTGAGE FINANCING FOR THE
CPA(R) PROGRAMS MAY HEREAFTER OCCUR WHICH WOULD MAKE AVAILABLE ADDITIONAL FUNDS
FOR INVESTMENT BY SUCH PROGRAMS. ANY ADDITIONAL INVESTMENTS COULD SIGNIFICANTLY
ALTER CERTAIN OF THE INFORMATION PRESENTED IN THIS TABLE.
<TABLE>
<CAPTION>
CPA(R):10 CIP(R) CPA:12
--------- ------ ------
<S> <C> <C> <C>
Dollar amount offered (net of discounts and
individual general partner contributions)....... $72,049,908 $141,590,601 $282,740,030
Dollar amount raised.............................. 100% 100% 100%
Less offering expenses:
Selling commissions............................. 6.82% 6.94% 5.79%
Organization expenses........................... 7.17% 5.31% 4.20%
Reserves (working capital)........................ 1.00% 1.00% 1.00%
Percent available for investment in real estate... 85.01% 86.75% 89.01%
Acquisition costs:
Cash down payments.............................. 71.12% 77.44% 60.67%
Other costs capitalized......................... 0.82% 0.24% 1.75%
Acquisition fees................................ 10.05% 9.03% 5.18%
Total acquisition costs (includes debt
financing)................................... 220.44% 195.99% 109.32%
Percent leverage (mortgage financing divided by
total acquisition costs)........................ 63% 56%(1) 38%(1)
Date offering began............................... 6/20/90(2) 8/19/91(3) 2/18/94(4)
Length of offering (in months).................... 12 mos. 24 mos. 43 mos.
Months to invest 90% of amount available for
investment (from beginning of offering)......... 30 mos. 31 mos. N/A(5)
</TABLE>
FOOTNOTES
(1) Does not represent fully invested portfolio. Leverage percentage is
applicable only to initial property acquisitions.
(2) Remaining shares withdrawn 8/14/91.
(3) Remaining shares withdrawn 11/4/93.
(4) Remainings shares withdrawn 3/14/96, includes a second offering which
commenced 2/2/96.
(5) Program has not reached investment of 90% of amount available for
investment.
A-2
<PAGE> 121
TABLE II
COMPENSATION TO SPONSOR AS OF DECEMBER 31, 1997
Table II provides information as to Prior Programs that will enable an
investor to understand the significance of compensation paid to the sponsor and
its affiliates, as well as to understand how the compensation is spread over the
cycle of the programs. The information presented below is for compensation paid
since January 1, 1995. THE INFORMATION PRESENTED IN THIS TABLE SHOULD NOT BE
CONSIDERED AS INDICATIVE OF THE COMPENSATION WHICH WILL BE RECEIVED BY THE
ADVISOR AND AFFILIATES OF THE ADVISOR. THE COMPENSATION PAYABLE TO THE GENERAL
PARTNERS AND AFFILIATES OF THE CPA(R) PARTNERSHIPS DIFFERS FROM THE ENTITLEMENT
AND ALLOCATION OF COMPENSATION TO THE ADVISOR AND AFFILIATES OF THE ADVISOR. SEE
"MANAGEMENT COMPENSATION" AND "ESTIMATED USE OF PROCEEDS". PURCHASERS OF SHARES
OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY OWNERSHIP IN THE CPA(R) PROGRAMS.
<TABLE>
<CAPTION>
CPA(R):1-
CPA(R):10 CIP(R) CPA(R):12
--------- ------ ---------
<S> <C> <C> <C>
Date offering(s) commenced........................ 1/16/79-6/20/90 8/19/91 2/18/94
2/2/96
Dollar amount raised (net of discounts and
individual general partner contributions)....... $472,763,521 $141,590,601 $282,740,030
Amount paid to sponsor from proceeds of offering:
Underwriting fees...............................
Acquisition fees-real estate commissions and
mortgage placement fees(1)................... 930,000 3,221,556 14,643,362
Other Fees
Dollar amount of cash generated from operations
before deducting payments to sponsor............ 200,060,964 56,059,949 38,101,480
Amount paid to sponsor from operations:
Property management, leasing and asset
management fees(2)........................... 7,069,355 10,272,024 4,250,310
Reimbursements(2)............................... 4,895,829 2,479,593 2,487,388
Other (cash distributions to General
Partners)(2).................................... 7,854,838 -- --
Dollar amount of property sales and re-financing
before deducting payments to sponsor(2)......... 117,592,951 31,599,220 8,375,000
Amount paid to sponsor from property sales and
refinancing.....................................
</TABLE>
FOOTNOTES
(1) Represents acquisition fees paid to sponsor and its affiliates from January
1, 1995 through December 31, 1997
(2) Represents actual performance or payments for the period from January 1,
1995 through December 31, 1997.
A-3
<PAGE> 122
TABLE III (1 OF 10)
OPERATING RESULTS OF PRIOR PROGRAMS
Table III includes information showing the start-up and operational phase
of Prior Programs, the offerings of which have been closed since December 31,
1979. This Table is designed to provide the investor with information on the
financial operations of such Prior Programs. The results shown in this Table are
in all cases for years ended December 31. THE INFORMATION PRESENTED IN THIS
TABLE SHOULD NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE
COMPANY. PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY
OWNERSHIP IN THE CPA(R) PARTNERSHIPS. MORTGAGE FINANCING FOR THE CPA(R)
PARTNERSHIPS MAY HEREAFTER OCCUR WHICH WOULD MAKE AVAILABLE ADDITIONAL FUNDS FOR
INVESTMENT BY SUCH PARTNERSHIPS. ANY ADDITIONAL INVESTMENTS COULD SIGNIFICANTLY
ALTER CERTAIN OF THE INFORMATION PRESENTED IN THIS TABLE.
<TABLE>
<CAPTION>
CPA(R):1
------------------------------------------------------------------------------
1979 1980 1981 1982 1983 1984
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gross Revenues..................................... $2,636,185 $3,843,588 $4,427,993 $4,376,655 $4,322,546 $4,331,105
Profit (loss) on sale of properties................ N/A N/A N/A N/A 22,180(1) N/A
Extraordinary charge on extinguishment of debt.....
Write-down of property............................. N/A N/A N/A N/A N/A N/A
Less:
Operating expenses................................ 160,387 252,758 238,058 181,922 169,613 145,516
Interest expense.................................. 1,415,410 1,895,624 2,409,242 2,386,388 2,328,716 2,300,677
Depreciation...................................... 821,484 1,275,778 1,275,792 1,275,792 1,275,792 1,272,999
Net income (loss) GAAP Basis....................... 238,904 419,428 504,901 532,553 570,605 611,913
Taxable income (Loss):
-- from operations................................ 392,689 219,214 (108,663) (158,919) (173,788) (72,288)
-- from gain (loss) on sale....................... 0 0 0 0 22,180(1) 0
Cash generated from operations(6).................. 985,982 1,512,434 1,504,769 1,500,263 1,438,191 1,481,113
Cash proceeds from sales........................... 0 0 0 0 60,335(1) 0
Cash generated from refinancing.................... 0 0 0 0 0 0
Cash generated from operations, sales and
refinancing....................................... 985,982 1,512,434 1,504,769 1,500,263 1,498,526 1,481,113
Less Cash distribution to investors................
-- from operating cash flow(7).................... 591,479 1,480,000 1,501,819 1,504,648 1,504,646 1,504,646
-- from sales and refinancing..................... 0 0 0 0 0 0
Cash generated (deficiency) after cash
distribution...................................... 394,503 32,434 2,950 (4,385) (6,120) (23,533)
Less special items................................. 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items................... 394,503 32,434 2,950 (4,385) (6,120) (23,533)
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)............................ $23.65 $10.85 $(5.38) $(7.87) $(8.60) $(3.58)
Capital gain (loss)............................... 0 0 0 0 1.10 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income.............................. 14.39 20.76 24.99 26.36 27.15 30.29
-- Return of capital.............................. 21.23 52.50 49.35 48.12 47.33 44.19
Source (on cash basis):
-- Sales.......................................... 0 0 0 0 0 0
-- Refinancing.................................... 0 0 0 0 0 0
-- Operations..................................... 35.62 73.26 74.34 74.48 74.48 74.48
Amount (in percentage terms) remaining invested in
program properties at the end of the last year
reported in the Table (original total acquisition
cost of properties retained divided by original
total acquisition cost of all properties in
program).......................................... N/A 100% 100% 100% 100% 100%
<CAPTION>
CPA(R):1
-----------------------------------------------------------------
1985 1986 1987 1988 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Gross Revenues..................................... $4,187,199 $3,513,411 $6,584,410 $4,487,838 $4,167,975
Profit (loss) on sale of properties................ N/A (38,915)(2) N/A N/A (231,288)(3)
Extraordinary charge on extinguishment of debt.....
Write-down of property............................. N/A N/A N/A N/A 300,000(4)
Less:
Operating expenses................................ 276,287 630,225 766,707 811,685 418,278
Interest expense.................................. 2,254,996 2,296,520 2,320,731 2,339,046 1,916,134
Depreciation...................................... 1,266,962 1,507,133 1,520,842 1,318,492 1,159,216
Net income (loss) GAAP Basis....................... 388,954 (959,382) 1,976,130 18,615 143,059
Taxable income (Loss):
-- from operations................................ (49,859) (1,135,524) (125,052) 482,093 1,175,040
-- from gain (loss) on sale....................... 0 (38,915)(2) 0 0 (538,771)(3)
Cash generated from operations(6).................. 1,221,045 736,214 1,078,838 1,908,203 1,964,408
Cash proceeds from sales........................... 0 500,000(2) 0 0 0
Cash generated from refinancing.................... 0 0 0 0 0
Cash generated from operations, sales and
refinancing....................................... 1,221,045 1,238,214 1,078,838 1,908,203 1,964,408
Less Cash distribution to investors................
-- from operating cash flow(7).................... 1,504,646 1,055,354 1,063,838 1,074,748 1,092,527
-- from sales and refinancing..................... 0 0 0 0 0
Cash generated (deficiency) after cash
distribution...................................... (283,601) 180,860 15,000 23,455 871,881
Less special items................................. 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items................... (283,601) 180,860 15,000 23,455 871,881
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)............................ $(2.47) $(56.21) $(6.19) $23.86 $58.16
Capital gain (loss)............................... 0 (1.92) 0 0 (26.67)
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income.............................. 19.25 0 52.66 53.20 7.08
-- Return of capital.............................. 55.23 52.24 0 0 47.00
Source (on cash basis):
-- Sales.......................................... 0 0 0 0 0
-- Refinancing.................................... 0 0 0 0 0
-- Operations..................................... 74.48 52.24 52.66 53.20 54.08
Amount (in percentage terms) remaining invested in
program properties at the end of the last year
reported in the Table (original total acquisition
cost of properties retained divided by original
total acquisition cost of all properties in
program).......................................... 100% 98.75% 98.75% 98.75% 83.14%
<CAPTION>
CPA(R):1
------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gross Revenues..................................... $4,162,465 $4,093,556 $4,102,112 $4,418,370 $4,480,460 $4,830,618
Profit (loss) on sale of properties................ N/A (13,296)(5) N/A N/A N/A N/A
Extraordinary charge on extinguishment of debt.....
Write-down of property............................. N/A N/A N/A N/A N/A N/A
Less:
Operating expenses................................ 411,712 298,435 302,200 465,548 666,955 374,238
Interest expense.................................. 1,840,553 1,750,596 1,682,798 1,672,658 1,598,614 1,524,837
Depreciation...................................... 1,044,720 1,041,634 1,059,255 1,120,162 1,106,712 1,089,758
Net income (loss) GAAP Basis....................... 865,480 989,595 1,057,059 1,160,002 1,108,179 1,841,695
Taxable income (Loss):
-- from operations................................ 1,199,289 852,971 812,956 1,098,352 930,049 1,841,051
-- from gain (loss) on sale....................... 0 52,204(5) 0 0 0 0
Cash generated from operations(6).................. 1,901,459 2,062,138 2,046,299 2,291,177 2,216,472 2,666,179
Cash proceeds from sales........................... 0 160,000(5) 0 0 0 0
Cash generated from refinancing.................... 0 0 0 0 0 0
Cash generated from operations, sales and
refinancing....................................... 1,901,459 2,222,138 2,046,299 2,291,177 2,216,472 2,666,179
Less Cash distribution to investors................
-- from operating cash flow(7).................... 1,162,424 1,226,667 1,242,828 1,258,990 1,269,699 1,313,535
-- from sales and refinancing..................... 0 0 0 0 0 0
Cash generated (deficiency) after cash
distribution...................................... 739,035 995,471 803,471 1,032,187 946,773 1,352,644
Less special items................................. 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items................... 739,035 995,471 803,471 1,032,187 946,773 1,352,644
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)............................ $59.36 $42.22 $40.24 $54.37 $46.04 $91.13
Capital gain (loss)............................... 0 0 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income.............................. 42.84 48.98 52.36 57.42 54.85 65.02
-- Return of capital.............................. 14.70 11.74 9.16 4.90 8.00 0
Source (on cash basis):
-- Sales.......................................... 0 0 0 0 0 0
-- Refinancing.................................... 0 0 0 0 0 0
-- Operations..................................... 57.54 60.72 61.52 62.32 62.85 65.02
Amount (in percentage terms) remaining invested in
program properties at the end of the last year
reported in the Table (original total acquisition
cost of properties retained divided by original
total acquisition cost of all properties in
program).......................................... 83.14% 82.74% 82.74% 82.74% 82.74% 82.74%
<CAPTION>
CPA(R):1
--------------------------
1996 1997
---------- ----------
<S> <C> <C>
Gross Revenues..................................... $4,589,145 $4,825,055
Profit (loss) on sale of properties................ (22,871)(5) 607,861(7)
Extraordinary charge on extinguishment of debt..... (255,438)(6) --
Write-down of property............................. N/A
Less:
Operating expenses................................ 388,484 1,104,473
Interest expense.................................. 1,280,995 1,062,706
Depreciation...................................... 969,570 905,816
Net income (loss) GAAP Basis....................... 1,671,787 2,359,921
Taxable income (Loss):
-- from operations................................ 1,540,197 2,256,416
-- from gain (loss) on sale....................... 153,615 630,826
Cash generated from operations(6).................. 2,826,531 2,820,490
Cash proceeds from sales........................... 355,958 1,042,200
Cash generated from refinancing.................... 0 0
Cash generated from operations, sales and
refinancing....................................... 3,182,489 3,862,690
Less Cash distribution to investors................
-- from operating cash flow(7).................... 1,417,554 1,977,926
-- from sales and refinancing..................... 0
Cash generated (deficiency) after cash
distribution...................................... 1,764,935 1,884,764
Less special items................................. 0 0
Cash generated (deficiency) after cash
distributions and special items................... 1,764,935 1,884,764
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)............................ $76.24 111.69
Capital gain (loss)............................... 7.60 31.23
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income.............................. 70.17 97.91
-- Return of capital.............................. 0 0
Source (on cash basis):
-- Sales.......................................... 0 0
-- Refinancing.................................... 0 0
-- Operations..................................... 70.17 97.91
Amount (in percentage terms) remaining invested in
program properties at the end of the last year
reported in the Table (original total acquisition
cost of properties retained divided by original
total acquisition cost of all properties in
program).......................................... 82.46% 81.44%
</TABLE>
A-4
<PAGE> 123
TABLE III (2 OF 10)
OPERATING RESULTS OF PRIOR PROGRAMS
Table III includes information showing the start-up and operational phase of
Prior Programs, the offerings of which have been closed since December 31, 1979.
This Table is designed to provide the investor with information on the financial
operations of such Prior Programs. The results shown in this Table are in all
cases for years ended December 31. THE INFORMATION PRESENTED IN THIS TABLE
SHOULD NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE
COMPANY. PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY
OWNERSHIP IN THE CPA(R) PARTNERSHIPS. MORTGAGE FINANCING FOR THE CPA(R)
PARTNERSHIPS MAY HEREAFTER OCCUR WHICH WOULD MAKE AVAILABLE ADDITIONAL FUNDS FOR
INVESTMENT BY SUCH PARTNERSHIPS. ANY ADDITIONAL INVESTMENTS COULD SIGNIFICANTLY
ALTER CERTAIN OF THE INFORMATION PRESENTED IN THIS TABLE.
<TABLE>
<CAPTION>
CPA(R):2
---------------------------------------------------------------------------
1980 1981 1982 1983 1984 1985
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross Revenues............................. $1,658,322 $4,092,794 $6,422,836 $9,793,731 $9,895,531 $9,960,370
Profit on sale of properties............... N/A N/A N/A N/A N/A N/A
Extraordinary charge on extinguishment of
debt...................................... N/A N/A N/A N/A N/A N/A
Write-down of property.....................
Less:
Operating expenses........................ 181,613 291,223 290,558 307,165 346,920 364,373
Interest expense.......................... 197,038 606,089 3,341,880 6,511,201 6,349,960 6,307,664
Depreciation.............................. 14,421 127,460 157,900 154,909 154,909 155,782
Net Income-GAAP Basis...................... 1,265,250 3,068,022 2,632,498 2,820,456 3,043,742 3,132,551
Taxable Income (Loss):
-- from operations........................ 630,885 2,003,000 (9,093) (1,168,795) (885,102) (532,969)
-- from gain on sale...................... 0 0 0 0 0 0
-- from extraordinary charge.............. 0 0 0 0 0 0
Cash generated from operations(3).......... 1,149,636 2,853,883 2,460,169 2,574,532 2,804,385 2,881,848
Cash generated from sales.................. 0 0 0 0 0 0
Cash generated from refinancing............ 0 0 0 0 0 0
Cash generated from operations, sales and
refinancing............................... 1,149,636 2,853,883 2,460,169 2,574,532 2,804,385 2,881,848
Less: Cash distribution to investors:
-- from operating cash flow(4)............ 473,028 2,229,443 2,440,555 2,525,000 2,547,000 2,657,778
-- from sales and refinancing............. 0 0 0 0 0 0
Cash generated after cash distributions and
special items............................. 676,608 624,440 19,614 49,532 257,385 224,070
Less: Special items........................ 0 0 0 0 0 0
Cash generated after cash distributions and
special items............................. 676,608 624,440 19,614 49,532 257,385 224,070
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income (loss)................... $ 48.95 $ 72.11 $ (.33) $ (42.08) $ (30.78) $ (19.19)
Capital gain (loss)...................... 0 0 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income..................... 36.70 80.25 87.86 90.90 91.70 95.68
-- Return of capital..................... 0 0 0 0 0 0
Source (on cash basis):
-- Sales................................. 0 0 0 0 0 0
-- Refinancing........................... 0 0 0 0 0 0
-- Operations............................ 36.70 80.25 87.86 90.90 91.70 95.68
Amount (in percentage terms) remaining
invested in program properties at the end
of the last year reported in the Table
(original total acquisition cost of
properties retained divided by original
total acquisition cost of all properties
in program)............................... N/A N/A 100% 100% 100% 100%
<CAPTION>
CPA(R):2
------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross Revenues............................. $9,954,236 $9,694,869 $9,754,664 $10,013,889 $9,732,269 $9,756,071
Profit on sale of properties............... 920,577(1) N/A N/A N/A N/A N/A
Extraordinary charge on extinguishment of
debt...................................... (894,945)(2) N/A N/A N/A N/A N/A
Write-down of property.....................
Less:
Operating expenses........................ 393,350 480,635 489,806 540,777 685,927 691,505
Interest expense.......................... 4,916,744 4,204,623 4,074,729 3,856,045 3,771,706 3,595,406
Depreciation.............................. 314,560 475,162 475,162 479,598 480,393 478,388
Net Income-GAAP Basis...................... 4,355,214 4,534,449 4,714,967 5,137,469 4,794,243 4,990,772
Taxable Income (Loss):
-- from operations........................ 260,572 1,604,613 1,997,924 2,600,538 2,461,101 2,874,398
-- from gain on sale...................... 2,035,116(1) 0 0 0 0 0
-- from extraordinary charge.............. (239,948)(2) 0 0 0 0 0
Cash generated from operations(3).......... 4,325,850 5,084,085 5,096,066 5,502,770 5,298,252 5,389,873
Cash generated from sales.................. 5,441,434(1) 0 0 0 0 0
Cash generated from refinancing............ 0 0 0 0 0 0
Cash generated from operations, sales and
refinancing............................... 9,767,234 5,084,085 5,096,066 5,502,770 5,298,252 5,389,873
Less: Cash distribution to investors:
-- from operating cash flow(4)............ 3,691,774 3,435,000 3,506,667 3,645,000 3,773,333 3,832,222
-- from sales and refinancing............. 4,950,000 0 0 0 0 0
Cash generated after cash distributions and
special items............................. 1,125,510 1,649,085 1,589,399 1,857,770 1,524,919 1,557,651
Less: Special items........................ 0 0 0 0 0 0
Cash generated after cash distributions and
special items............................. 1,125,510 1,649,085 1,589,399 1,857,770 1,524,919 1,557,651
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income (loss)................... $ .73 $ 57.77 $ 71.93 $ 93.62 $ 88.60 $ 103.48
Capital gain (loss)...................... 73.27 0 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income..................... 156.79 123.66 126.24 131.22 135.84 137.96
-- Return of capital..................... 156.11 0 0 0 0 0
Source (on cash basis):
-- Sales................................. 180.00 0 0 0 0 0
-- Refinancing........................... 0 0 0 0 0 0
-- Operations............................ 132.90 123.66 126.24 131.22 135.84 137.96
Amount (in percentage terms) remaining
invested in program properties at the end
of the last year reported in the Table
(original total acquisition cost of
properties retained divided by original
total acquisition cost of all properties
in program)............................... 93.24% 93.24% 93.24% 93.24% 93.24% 93.24%
<CAPTION>
CPA(R):2
--------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross Revenues............................. $9,763,695 $ 6,665,727 $5,161,447 $5,185,804 $4,590,963 $4,919,703
Profit on sale of properties............... N/A 8,377,679(5) 23,451(7) N/A N/A N/A
Extraordinary charge on extinguishment of
debt...................................... N/A (520,979)(6) N/A N/A N/A N/A
Write-down of property..................... (841,889)(8) (445,551)(9)
Less:
Operating expenses........................ 983,060 846,569 911,755 718,035 735,018 857,919
Interest expense.......................... 3,337,825 2,142,199 1,593,880 1,351,797 731,843 542,304
Depreciation.............................. 476,279 501,762 501,657 519,891 499,320 519,460
Net Income-GAAP Basis...................... 4,966,531 10,190,008 1,732,055 2,596,081 2,624,782 3,000,020
Taxable Income (Loss):
-- from operations........................ 3,574,899 1,924,220 1,368,123 5,114,606 1,967,557 2,683,925
-- from gain on sale...................... 0 21,777,693 40,237 0 0 0
-- from extraordinary charge.............. 0 0 0 0 0 0
Cash generated from operations(3).......... 5,513,940 3,977,769 2,770,535 6,164,009 2,791,872 3,365,082
Cash generated from sales.................. 0 15,972,862 124,615 0 0 0
Cash generated from refinancing............ 0 0 0 0 0 0
Cash generated from operations, sales and
refinancing............................... 5,513,940 19,950,631 2,895,150 6,164,009 2,791,872 3,365,082
Less: Cash distribution to investors:
-- from operating cash flow(4)............ 3,898,333 2,691,111 1,458,890 1,491,667 2,303,728 2,167,890
-- from sales and refinancing............. 0 14,300,312 0 0 0 0
Cash generated after cash distributions and
special items............................. 1,615,607 2,959,208 1,436,260 4,672,342 488,144 1,197,192
Less: Special items........................ 0 0 0 0 0 0
Cash generated after cash distributions and
special items............................. 1,615,607 2,959,208 1,436,260 4,672,342 488,144 1,197,192
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income (loss)................... $ 128.70 $ 69.27 $ 49.25 $ 184.46 $ 70.96 $ 96.80
Capital gain (loss)...................... 0 784.00 1.45 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income..................... 140.34 366.84 52.52 53.72 83.09 78.19
-- Return of capital..................... 0 250.04 0.00 0 0 0
Source (on cash basis):
-- Sales................................. 0 520.00 0 0 0 0
-- Refinancing........................... 0 0 0 0 0 0
-- Operations............................ 140.34 96.88 52.52 53.72 83.09 78.19
Amount (in percentage terms) remaining
invested in program properties at the end
of the last year reported in the Table
(original total acquisition cost of
properties retained divided by original
total acquisition cost of all properties
in program)............................... 93.24% 61.97% 61.65% 61.65% 61.65% 61.65%
</TABLE>
A-5
<PAGE> 124
TABLE III (3 OF 10)
OPERATING RESULTS OF PRIOR PROGRAMS
Table III includes information showing the start-up and operational phase or
Prior Programs, the offerings of which have been closed since December 31, 1979.
This Table is designed to provide the investor with information on the financial
operations of such Prior Programs. The results shown in this Table are in all
cases for years ended December 31. THE INFORMATION PRESENTED IN THIS TABLE
SHOULD NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE
COMPANY. PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY
OWNERSHIP IN THE CPA(R) PARTNERSHIPS. MORTGAGE FINANCING FOR THE CPA(R)
PARTNERSHIPS MAY HEREAFTER OCCUR WHICH WOULD MAKE AVAILABLE ADDITIONAL FUNDS FOR
INVESTMENT BY SUCH PARTNERSHIPS. ANY ADDITIONAL INVESTMENTS COULD SIGNIFICANTLY
ALTER CERTAIN OF THE INFORMATION PRESENTED IN THIS TABLE.
<TABLE>
<CAPTION>
CPA(R):3
--------------------------------------------------------------------------
1981 1982 1983 1984 1985 1986
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross Revenues.......................... $173,916 $7,746,826 $8,618,753 $8,798,595 $8,792,622 $ 8,720,462
Profit on sale of properties............ N/A N/A N/A N/A N/A 540,765(1)
Extraordinary charges on extinguishment
of debt................................ N/A N/A N/A N/A N/A (1,256,013)(2)
Write-down of property.................. N/A N/A N/A N/A N/A N/A
Other income............................
Less:
Operating expenses..................... 54,011 384,169 369,246 506,660 502,561 496,570
Interest expense....................... 60,855 4,224,538 4,341,435 3,921,936 3,845,445 3,296,710
Depreciation........................... 0 0 0 0 0 20,502
Net Income-GAAP Basis................... 59,050 3,138,119 3,908,072 4,369,999 4,444,615 4,191,432
Taxable Income (Loss):
-- from operations..................... (190,312) (516,798) (194,879) 277,458 375,653 708,829
-- from gain on sale................... 0 0 0 0 0 3,373,025(1)
-- from extraordinary charge........... 0 0 0 0 0 (852,511)(2)
Cash generated from operations(3)....... 41,249 2,698,796 3,523,610 3,979,272 3,995,421 5,009,304
Cash generated from sales............... 0 0 0 0 0 5,302,208(1)
Cash generated from refinancing......... 0 0 0 0 0 0
Cash generated from other............... 0 0 0 0 0 0
Cash generated from operations, sales,
refinancing and other.................. 41,249 2,698,796 3,523,610 3,979,272 3,995,421 10,311,512
Less: Cash distribution to investors:
-- from operating cash flow(4)......... 0 1,906,688 3,388,225 3,787,592 3,889,970 4,125,001
-- from sales and refinancing.......... 0 0 0 0 0 0
-- other............................... 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions.......................... 41,249 792,108 135,385 191,680 105,451 6,186,511
Less: Special items..................... 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items........ 41,249 792,108 135,385 191,680 105,451 6,186,511
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income........................ $ (25.06) $ (19.36) $ (5.79) $ 8.24 $ 11.16 $ (3.21)
Capital gain........................... 0 0 0 0 0 101.19
Cash Distributions to Investors:
Source (on GAAP basis)
-- Investment income.................. 0 71.42 100.62 112.48 116.52 122.50
-- Return of capital.................. 0 0 0 0 0 0
Source (on cash basis):
-- Sales............................... 0 0 0 0 0 0
-- Refinancing......................... 0 0 0 0 0 0
-- Other............................... 0 0 0 0 0 0
-- Operations.......................... 0 71.42 100.62 112.48 116.52 122.50
Amount (in percentage terms) remaining
invested in program properties at the
end of the last year reported in the
Table (original total acquisition cost
of properties retained divided by
original total acquisition cost of all
properties in program)................. N/A N/A 100% 100% 100% 84.41%
<CAPTION>
CPA(R):3
----------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross Revenues.......................... $ 8,394,566 $8,582,478 $8,774,232 $8,713,691 $8,699,175 $8,478,263
Profit on sale of properties............ N/A N/A N/A N/A N/A N/A
Extraordinary charges on extinguishment
of debt................................ N/A N/A N/A N/A N/A N/A
Write-down of property.................. N/A N/A N/A N/A N/A N/A
Other income............................
Less:
Operating expenses..................... 583,208 568,793 622,281 713,979 855,729 1,533,036
Interest expense....................... 2,459,640 2,376,215 2,332,100 2,184,359 2,073,632 1,936,878
Depreciation........................... 108,357 108,208 108,911 108,434 108,272 108,132
Net Income-GAAP Basis................... 5,243,361 5,529,262 5,710,940 5,706,919 5,631,542 4,900,217
Taxable Income (Loss):
-- from operations..................... 2,492,141 2,938,913 3,240,014 3,295,198 3,439,197 5,452,217
-- from gain on sale................... 0 0 0 0 0 0
-- from extraordinary charge........... 0 0 0 0 0 0
Cash generated from operations(3)....... 5,458,974 5,743,427 5,749,481 5,785,928 5,712,639 5,252,425
Cash generated from sales............... 0 0 0 0 0 0
Cash generated from refinancing......... 0 0 0 0 0 0
Cash generated from other............... 0 0 0 0 0 8,533,614(5)
Cash generated from operations, sales,
refinancing and other.................. 5,458,974 5,743,427 5,749,481 5,785,928 5,712,639 13,786,039
Less: Cash distribution to investors:
-- from operating cash flow(4)......... 4,073,945 3,830,020 4,131,061 4,469,143 4,649,632 4,925,081
-- from sales and refinancing.......... 5,280,000 0 0 0 0 0
-- other............................... 0 0 0 0 0 3,333,333(5)
Cash generated (deficiency) after cash
distributions.......................... (3,894,971) 1,913,407 1,618,420 1,316,785 1,063,007 5,527,625
Less: Special items..................... 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items........ (3,894,971) 1,913,407 1,618,420 1,316,785 1,063,007 5,527,625
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income........................ $ 74.01 $ 87.28 $ 96.22 $ 97.86 $ 102.13 $ 161.91
Capital gain........................... 0 0 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis)
-- Investment income.................. 155.71 113.74 122.68 132.72 138.08 145.52
-- Return of capital.................. 123.68 0 0 0 0 100.74
Source (on cash basis):
-- Sales............................... 160.0 0 0 0 0 0
-- Refinancing......................... 0 0 0 0 0 0
-- Other............................... 0 0 0 0 0 100.00(5)
-- Operations.......................... 119.40 113.74 122.68 132.72 138.08 146.26
Amount (in percentage terms) remaining
invested in program properties at the
end of the last year reported in the
Table (original total acquisition cost
of properties retained divided by
original total acquisition cost of all
properties in program)................. 84.41% 84.41% 84.41% 84.41% 84.41% 84.41%
<CAPTION>
CPA(R):3
-----------------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Revenues.......................... $ 7,554,227 $7,391,852 $7,249,265 $5,730,082 $8,104,707
Profit on sale of properties............ N/A N/A N/A N/A N/A
Extraordinary charges on extinguishment
of debt................................ N/A N/A N/A N/A N/A
Write-down of property.................. (1,302,318)(6) (697,325)(7) (146,184)(8) N/A N/A
Other income............................ 11,499,187(9) N/A N/A
Less:
Operating expenses..................... 1,441,186 1,719,172 1,173,053 1,031,997 1,227,688
Interest expense....................... 1,734,434 1,602,175 1,255,047 75,158 17,744
Depreciation........................... 147,229 158,367 198,590 188,893 215,272
Net Income-GAAP Basis................... 2,929,060 3,214,813 15,975,567 4,434,034 6,644,003
Taxable Income (Loss):
-- from operations..................... 5,504,655 4,461,854 23,951,874 2,988,189 5,502,953
-- from gain on sale................... 0 0 157,910 0
-- from extraordinary charge........... 0 0 0
Cash generated from operations(3)....... 4,387,721 4,647,375 12,917,577 3,906,606 4,587,044
Cash generated from sales............... 0 0 5,435,869(9) 1,853,816(10) 0
Cash generated from refinancing......... 0 0
Cash generated from other............... 2,260,792 2,286,195 0 0 0
Cash generated from operations, sales,
refinancing and other.................. 6,648,513 6,933,570 18,353,446 5,760,422 4,587,044
Less: Cash distribution to investors:
-- from operating cash flow(4)......... 4,606,531 4,656,367 4,722,367 3,319,280 4,214,958
-- from sales and refinancing.......... 0 0 0 0 0
-- other............................... 0 0 8,000,000 0 0
Cash generated (deficiency) after cash
distributions.......................... 2,041,982 2,277,203 5,631,079 2,441,142 372,086
Less: Special items..................... 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items........ 2,041,982 2,277,203 5,361,079 2,441,142 372,086
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income........................ $ 163.47 $ 132.50 $ 711.33 $ 88.74 $ 163.42
Capital gain........................... 0 0 0 4.69 0
Cash Distributions to Investors:
Source (on GAAP basis)
-- Investment income.................. 86.98 95.47 376.83 98.57 125.17
-- Return of capital.................. 48.83 41.82 0 0 0
Source (on cash basis):
-- Sales............................... 0 0 0 0 0
-- Refinancing......................... 0 0 0 0 0
-- Other............................... 0 0 0 0 0
-- Operations.......................... 136.80 138.28 140.24 98.57 125.17
Amount (in percentage terms) remaining
invested in program properties at the
end of the last year reported in the
Table (original total acquisition cost
of properties retained divided by
original total acquisition cost of all
properties in program)................. 84.41% 84.41% 84.41% 68.83% 68.83%
</TABLE>
A-6
<PAGE> 125
TABLE III (4 OF 10)
OPERATING RESULTS OF PRIOR PROGRAMS
Table III includes information showing the start-up and operational phase of
Prior Programs, the offerings of which have been closed since December 31, 1979.
This Table is designed to provide the investor with information on the financial
operations of such Prior Programs. The results shown in this Table are in all
cases for years ended December 31. THE INFORMATION PRESENTED IN THIS TABLE
SHOULD NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE
COMPANY. PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY
OWNERSHIP IN THE CPA(R) PARTNERSHIPS. MORTGAGE FINANCING FOR THE CPA(R)
PARTNERSHIPS MAY HEREAFTER OCCUR WHICH WOULD MAKE AVAILABLE ADDITIONAL FUNDS FOR
INVESTMENT BY SUCH PARTNERSHIPS. ANY ADDITIONAL INVESTMENTS COULD SIGNIFICANTLY
ALTER CERTAIN OF THE INFORMATION PRESENTED IN THIS TABLE.
<TABLE>
<CAPTION>
CPA(R):4
-------------------------------------------------------------------------------
1982 1983 1984 1985 1986 1987
-------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross Revenues............................... $ 5,916 $7,136,840 $10,976,004 $10,950,473 $10,021,241 $ 8,733,350
Profit on sale of properties................. N/A N/A N/A N/A 1,454,064(1) N/A
Extraordinary gain........................... N/A N/A N/A N/A N/A N/A
Write-down of property....................... N/A N/A N/A N/A (2,266,656)(2) N/A
Extraordinary charge on extinguishment of
debt........................................ N/A N/A N/A N/A N/A N/A
Other........................................ N/A N/A N/A N/A N/A N/A
Less:
Operating expenses.......................... 9,137 274,260 245,150 278,838 529,941 566,780
Interest expense............................ 5,784 3,180,356 5,453,442 5,395,023 5,149,287 4,101,592
Depreciation................................ 1,302 346,155 808,870 828,303 1,059,071 1,628,118
Net Income (Loss)-GAAP Basis................. (10,307) 3,336,069 4,468,542 4,448,309 2,470,350 2,436,860
Taxable Income (Loss):
-- from operations.......................... (2,604) 781,413 (281,447) (98,623) (402,328) (433,637)
-- from gain on sale........................ 0 0 0 0 4,047,994(1) 0
-- from extraordinary charge................ 0 0 0 0 0 0
-- other.................................... 0 0 0 0 0 0
Cash generated from operations(6)............ (3,135) 3,471,621 4,787,836 4,728,701 4,857,156 4,115,421
Cash generated from sales.................... 0 0 0 0 4,483,969(1) 0
Cash generated from refinancing.............. 0 0 0 0 0 0
Cash generated from other.................... 0 0 0 0 0 0
Cash generated from operations, sales,
refinancing and other....................... (3,135) 3,471,621 4,787,836 4,728,701 9,341,125 4,115,421
Less: Cash distribution to investors:
-- from operating cash flow(8).............. 0 2,345,537 4,565,144 4,603,376 4,639,789 4,594,265
-- from sales and refinancing............... 0 0 0 0 0 1,711,359
Cash generated (deficiency) after cash
distributions............................... 0 1,126,084 222,692 125,325 4,701,336 (2,190,203)
Less: Special items.......................... 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items............. 0 1,126,084 222,692 125,325 4,701,336 (2,190,203)
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)...................... $ 0 $ 21.01 $ (6.18) $ (2.17) $ (8.84) $ (9.52)
Other....................................... 0 0 0 0 0 0
Capital gain................................ 0 0 0 0 88.94 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income........................ 0 63.06 98.18 97.73 54.28 53.53
-- Return of capital........................ 0 0 2.12 3.41 47.66 87.02
Source (on cash basis):
-- Sales.................................... 0 0 0 0 0 40.00
-- Refinancing.............................. 0 0 0 0 0 0
-- Operations............................... 0 63.06 100.30 101.14 101.94 100.55
Amount (in percentage terms) remaining
invested in program properties at the end of
the last year reported in the Table
(original total acquisition cost of
properties retained divided by original
total acquisition cost of all properties in
program).................................... N/A N/A 100% 100% 85.20% 85.20%
<CAPTION>
CPA(R):4
---------------------------------------------------------------------
1988 1989 1990 1991 1992
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Gross Revenues............................... $9,117,527 $9,393,587 $ 9,694,000 $9,653,180 $9,959,144
Profit on sale of properties................. N/A N/A N/A N/A N/A
Extraordinary gain........................... N/A N/A 2,080,304(3) N/A N/A
Write-down of property....................... N/A N/A (2,080,304)(2) N/A N/A
Extraordinary charge on extinguishment of
debt........................................ (160,000)(4) (70,266)(5) N/A N/A N/A
Other........................................ N/A N/A N/A N/A (44,308)(7)
Less:
Operating expenses.......................... 538,523 614,235 752,499 790,950 1,647,627
Interest expense............................ 3,805,805 3,552,960 3,504,016 3,441,293 3,309,359
Depreciation................................ 1,468,317 1,243,008 1,207,776 1,184,801 1,259,693
Net Income (Loss)-GAAP Basis................. 3,144,882 3,913,118 4,229,709 4,236,136 3,698,157
Taxable Income (Loss):
-- from operations.......................... 561,034 1,408,950 1,518,550 1,702,996 1,737,637
-- from gain on sale........................ 0 0 0 0 0
-- from extraordinary charge................ (160,000)(4) (70,266)(5) 0 0 0
-- other.................................... 0 0 0 0 (14,801)(7)
Cash generated from operations(6)............ 4,763,309 5,289,802 5,611,039 5,479,320 5,071,063
Cash generated from sales.................... 0 0 0 0 0
Cash generated from refinancing.............. 0 0 0 0 0
Cash generated from other.................... 0 0 0 0 14,195(7)
Cash generated from operations, sales,
refinancing and other....................... 4,763,309 5,289,802 5,611,039 5,479,320 5,085,258
Less: Cash distribution to investors:
-- from operating cash flow(8).............. 4,522,360 4,564,233 4,627,954 4,729,905 4,819,116
-- from sales and refinancing............... 0 0 0 0 0
Cash generated (deficiency) after cash
distributions............................... 240,949 725,569 983,085 749,415 266,142
Less: Special items.......................... 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items............. 240,949 725,569 983,085 749,415 266,142
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)...................... $ 12.33 $ 29.41 $ 33.36 $ 37.42 $ 38.18
Other....................................... 0 0 0 0 (0.33)
Capital gain................................ 0 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income........................ 69.10 85.97 92.93 93.07 81.25
-- Return of capital........................ 30.26 14.31 8.75 10.85 24.63
Source (on cash basis):
-- Sales.................................... 0 0 0 0 0
-- Refinancing.............................. 0 0 0 0 0
-- Operations............................... 99.36 100.28 101.68 103.92 105.88
Amount (in percentage terms) remaining
invested in program properties at the end of
the last year reported in the Table
(original total acquisition cost of
properties retained divided by original
total acquisition cost of all properties in
program).................................... 85.20% 85.20% 85.20% 85.20% 85.20%
<CAPTION>
CPA(R):4
-------------------------------------------------------------------------
1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross Revenues............................... $12,450,374 $11,570,621 $11,896,324 $ 9,322,373(12) $10,225,363
Profit on sale of properties................. N/A N/A 3,330,098(10) N/A N/A
Extraordinary gain........................... 345,000(9) N/A N/A N/A N/A
Write-down of property....................... N/A N/A N/A N/A (2,316,000)(13)
Extraordinary charge on extinguishment of
debt........................................ N/A N/A N/A N/A N/A
Other........................................ N/A N/A N/A 1,118,318(11) 681,316(14)
Less:
Operating expenses.......................... 3,375,359 3,590,081 3,299,454 1,090,215 1,299,302
Interest expense............................ 2,987,868 2,396,017 2,098,857 1,515,248 847,596
Depreciation................................ 1,346,641 1,141,143 1,149,525 921,702 835,836
Net Income (Loss)-GAAP Basis................. 5,085,506 4,443,380 8,678,586 6,913,526 5,607,945
Taxable Income (Loss):
-- from operations.......................... 3,540,526 2,462,537 7,224,511 5,049,765 5,998,404
-- from gain on sale........................ 957,340 0 9,318,375 0 0
-- from extraordinary charge................ 0 0 0 0 0
-- other.................................... 0 0 0 0 0
Cash generated from operations(6)............ 6,231,586 5,772,103 6,099,480 7,167,641 7,465,721
Cash generated from sales.................... 0 0 9,477,492 0 0
Cash generated from refinancing.............. 0 0 0 0 0
Cash generated from other.................... 0 0 0 0 0
Cash generated from operations, sales,
refinancing and other....................... 6,231,586 5,772,103 15,576,972 7,167,641 7,465,721
Less: Cash distribution to investors:
-- from operating cash flow(8).............. 4,854,619 4,878,286 4,780,885 4,452,597 6,727,737
-- from sales and refinancing............... 0 0 4,321,616 0 0
Cash generated (deficiency) after cash
distributions............................... 1,376,967 893,817 6,474,471 2,715,044 737,984
Less: Special items.......................... 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items............. 1,376,967 893,817 6,474,471 2,715,044 737,984
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)...................... $ 77.79 $ 54.10 $ 158.73 $ 110.95 $ 131.79
Other....................................... 0 0 0 0 0
Capital gain................................ 21.03 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income........................ 106.66 97.62 190.68 97.83 123.21
-- Return of capital........................ 0 9.56 9.31 0 24.60
Source (on cash basis):
-- Sales.................................... 0 0 0 0 0
-- Refinancing.............................. 0 0 0 0 0
-- Operations............................... 106.66 107.18 105.04 97.83 147.81
Amount (in percentage terms) remaining
invested in program properties at the end of
the last year reported in the Table
(original total acquisition cost of
properties retained divided by original
total acquisition cost of all properties in
program).................................... 85.20% 85.20% 70.68% 70.68% 70.68%
</TABLE>
A-7
<PAGE> 126
TABLE III (5 OF 10)
OPERATING RESULTS OF PRIOR PROGRAMS
Table III includes information showing the start-up and operational phase of
Prior Programs, the offerings of which have been closed since December 31, 1979.
This Table is designed to provide the investor with information on the financial
operations of such Prior Programs. The results shown in this Table are in all
cases for years ended December 31. THE INFORMATION PRESENTED IN THIS TABLE
SHOULD NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE
COMPANY. PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY
OWNERSHIP IN THE CPA(R) PARTNERSHIPS. MORTGAGE FINANCING FOR THE CPA(R)
PARTNERSHIPS MAY HEREAFTER OCCUR WHICH WOULD MAKE AVAILABLE ADDITIONAL FUNDS FOR
INVESTMENT BY SUCH PARTNERSHIPS. ANY ADDITIONAL INVESTMENTS COULD SIGNIFICANTLY
ALTER CERTAIN OF THE INFORMATION PRESENTED IN THIS TABLE.
<TABLE>
<CAPTION>
CPA(R):5
--------------------------------------------------------------------------------
1983 1984 1985 1986 1987 1988
-------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross Revenues.......................... $151,212 $7,692,603 $9,285,385 $12,857,025 $14,405,568 $15,061,441
Other................................... N/A N/A N/A N/A N/A N/A
Profit (loss) on sale or disposition of
properties............................. N/A N/A N/A N/A (457,484)(1) N/A
Extraordinary charge on extinguishment
of debt................................ N/A N/A N/A N/A N/A N/A
Write-down of property.................. N/A N/A N/A (860,000)(4) N/A N/A
Less:
Operating expenses..................... 81,016 195,585 363,490 493,702 1,327,685 758,159
Interest expenses...................... 1,041 1,828,708 3,557,103 6,447,584 7,050,466 6,926,712
Depreciation........................... 0 90,662 890,342 2,300,987 2,506,914 2,637,104
Minority Interest...................... N/A N/A N/A 80,834 165,810 197,354
Net Income-GAAP Basis................... 69,155 5,577,648 4,474,450 2,673,918 2,897,209 4,542,112
Taxable Income (Loss):
-- from operations..................... 83,341 4,180,317 2,173,368 277,783 (1,015,507) 406,029
-- from gain (loss) on sale or
disposition........................... 0 0 0 0 (1,065,808) 0
-- from other.......................... 0 0 0 0 0 0
Cash generated from operations(10)...... 77,254 5,612,247 5,157,259 6,550,334 5,622,209 6,571,710
Cash generated from sales............... 0 0 0 0 500,000(1) 0
Cash generated from refinancing......... 0 0 0 0 0 0
Cash generated from operations, sales
and refinancing........................ 77,254 5,612,247 5,157,259 6,550,334 6,122,209 6,571,710
Less: Cash distribution to investors:
-- from operating cash flow(11)........ 0 5,150,600 5,324,013 5,481,771 5,535,961 5,587,744
-- from sales and refinancing.......... 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions.......................... 77,254 461,647 (166,754) 1,068,563 586,248 983,966
Less: special items.....................
Cash generated (deficiency) after cash
distributions and special items........ 77,254 461,647 (166,754) 1,068,563 586,248 983,966
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income (loss)................. $ 1.38 $ 69.43 $ 36.09 $ 4.61 $ (16.87) $ 6.74
Capital gain (loss).................... 0 0 0 0 (17.69) 0
Other.................................. 0 0 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income................... 0 85.54 74.31 44.41 48.12 75.43
-- Return of capital................... 0 0 14.11 46.63 43.82 17.37
Source (on cash basis):
-- Sales............................... 0 0 0 0 0 0
-- Refinancing......................... 0 0 0 0 0 0
-- Operations.......................... 0 85.54 88.42 91.04 91.94 92.80
Amount (in percentage terms) remaining
invested in program properties at the
end of the last year reported in the
Table (original total acquisition cost
of properties retained divided by
original total acquisition cost of all
properties in program.................. N/A N/A N/A N/A N/A 98.51%
<CAPTION>
CPA(R):5
-------------------------------------------------------------------------
1989 1990 1991 1992 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross Revenues.......................... $15,324,326 $14,912,517 $15,167,339 $18,195,423(8) $18,260,614
Other................................... N/A N/A (103,595)(5) 1,872,534 214,978(12)
Profit (loss) on sale or disposition of
properties............................. 47,319(2) N/A (35,987)(6) (488,795)(9) N/A
Extraordinary charge on extinguishment
of debt................................ N/A (32,714)(3) N/A N/A N/A
Write-down of property.................. N/A N/A (300,000)(7) N/A (323,611)(13)
Less:
Operating expenses..................... 1,305,074 1,503,721 3,354,854 6,111,874 6,417,993
Interest expenses...................... 7,052,901 6,512,534 6,042,335 5,293,044 4,941,889
Depreciation........................... 2,632,299 2,620,793 2,622,033 2,317,013 2,295,887
Minority Interest...................... 17,714 114,721 (174,657) N/A N/A
Net Income-GAAP Basis................... 4,363,657 4,128,034 2,883,192 5,857,231 4,496,212
Taxable Income (Loss):
-- from operations..................... 799,445 857,331 1,077,650 1,530,150 2,039,288
-- from gain (loss) on sale or
disposition........................... 87,421(2) 488,066 (2,674)(6) 871,676 0
-- from other.......................... 0 0 (154,918)(5) 2,617,784(8) 0
Cash generated from operations(10)...... 6,911,989 5,895,617 5,278,070 6,202,200 6,241,041
Cash generated from sales............... 239,362(2) 0 120,000(6) 0 0
Cash generated from refinancing......... 0 0 0 0 0
Cash generated from operations, sales
and refinancing........................ 7,151,351 5,895,617 5,398,070 6,202,200 6,241,041
Less: Cash distribution to investors:
-- from operating cash flow(11)........ 5,635,916 5,684,084 5,732,256 5,780,425 5,828,596
-- from sales and refinancing.......... 0 0 0 0 0
Cash generated (deficiency) after cash
distributions.......................... 1,515,435 211,533 (334,186) 421,775 412,445
Less: special items..................... 0
Cash generated (deficiency) after cash
distributions and special items........ 1,515,435 211,533 (334,186) 421,775 412,445
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income (loss)................. $ 13.28 $ 14.24 $ 17.90 $ 25.41 $ 33.87
Capital gain (loss).................... 1.45 0 (0.04) 14.48 0
Other.................................. 0 0 0 43.48 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income................... 72.47 68.56 47.88 96.00 74.67
-- Return of capital................... 21.13 25.84 47.32 0 22.13
Source (on cash basis):
-- Sales............................... 0 0 0 0 0
-- Refinancing......................... 0 0 0 0 0
-- Operations.......................... 93.60 94.40 95.20 96.00 96.80
Amount (in percentage terms) remaining
invested in program properties at the
end of the last year reported in the
Table (original total acquisition cost
of properties retained divided by
original total acquisition cost of all
properties in program.................. 98.51% 97.60% 97.45% 94.12% 94.12%
<CAPTION>
CPA(R):5
--------------------------------------------------------------
1994 1995 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross Revenues.......................... $18,125,156 $15,768,137 $13,204,966 $ 9,749,000
Other................................... N/A N/A N/A N/A
Profit (loss) on sale or disposition of
properties............................. 1,242,614(14) 614,234(16) 5,284,165(18) 956,829(20)
Extraordinary charge on extinguishment
of debt................................ (117,619)(15) N/A N/A N/A
Write-down of property.................. 0 (1,980,550)(17) (1,300,000)(19) (1,350,000)(21)
Less:
Operating expenses..................... 7,111,014 6,927,470 6,006,397 4,176,004
Interest expenses...................... 4,518,529 3,495,872 2,075,230 1,363,680
Depreciation........................... 2,181,432 2,065,781 1,331,028 1,131,397
Minority Interest...................... N/A N/A N/A N/A
Net Income-GAAP Basis................... 5,439,186 1,912,698 7,776,476 2,685,448
Taxable Income (Loss):
-- from operations..................... 866,115 1,621,566 1,690,288 1,481,174
-- from gain (loss) on sale or
disposition........................... 10,019,470 0 8,338,765 2,927,201
-- from other.......................... 0 0 0 0
Cash generated from operations(10)...... 6,292,833 4,688,070 7,901,310 4,393,646
Cash generated from sales............... 0 1,187,362(16) 8,583,803 0
Cash generated from refinancing......... 0 0 0 0
Cash generated from operations, sales
and refinancing........................ 6,292,833 5,875,432 16,485,113 4,393,646
Less: Cash distribution to investors:
-- from operating cash flow(11)........ 5,862,314 8,054,982 4,456,949 5,175,122
-- from sales and refinancing.......... 0 0 0 792,400(18)
Cash generated (deficiency) after cash
distributions.......................... 430,519 (2,179,550) 12,028,164 (1,573,876)
Less: special items..................... 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items........ 430,519 (2,179,550) 12,028,164 (1,573,876)
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income (loss)................. $ 14.87 $ 26.93 $ 28.07 $ 24.60
Capital gain (loss).................... 166.40 0 141.45 48.61
Other.................................. 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income................... 90.33 31.77 74.02 44.60
-- Return of capital................... 7.03 102.01 0 54.51
Source (on cash basis):
-- Sales............................... 0 0 0 0
-- Refinancing......................... 0 0 0 0
-- Operations.......................... 97.36 133.78 74.02 99.11
Amount (in percentage terms) remaining
invested in program properties at the
end of the last year reported in the
Table (original total acquisition cost
of properties retained divided by
original total acquisition cost of all
properties in program.................. 92.97% 81.82% 63.06% 46.45%
</TABLE>
A-8
<PAGE> 127
TABLE III (6 OF 10)
OPERATING RESULTS OF PRIOR PROGRAMS
Table III includes information showing the start-up and operational phase of
Prior Programs, the offerings of which have been closed since December 31, 1979.
This Table is designed to provide the investor with information on the financial
operations of such Prior Programs. The results shown in this Table are in all
cases for years ended December 31. THE INFORMATION PRESENTED IN THIS TABLE
SHOULD NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE
COMPANY. PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY
OWNERSHIP IN THE CPA(R) PARTNERSHIPS. MORTGAGE FINANCING FOR THE CPA(R)
PARTNERSHIPS MAY HEREAFTER OCCUR WHICH WOULD MAKE AVAILABLE ADDITIONAL FUNDS FOR
INVESTMENT BY SUCH PARTNERSHIPS. ANY ADDITIONAL INVESTMENTS COULD SIGNIFICANTLY
ALTER CERTAIN OF THE INFORMATION PRESENTED IN THIS TABLE.
<TABLE>
<CAPTION>
CPA(R):6
-----------------------------------------------------------------------------------
1985 1986 1987 1988 1989 1990
---------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross Revenues.......................... $4,200,601 $6,432,252 $9,898,043 $11,197,061 $10,904,247 $11,092,133
Gain on sale............................ 0 0 0 0 0 0
Other................................... 0 0 0 0 0 0
Extraordinary (charge) gain............. 0 0 0 0 0 0
Less:
Operating expenses..................... 215,852 333,030 573,786 558,887 575,222 802,183
Interest expense....................... 792,434 2,111,626 4,736,879 5,416,130 5,388,140 5,269,354
Depreciation........................... 5,709 278,305 1,095,292 1,405,857 1,418,340 1,418,339
Net Income-GAAP Basis................... 3,186,606 3,709,291 3,492,083 3,816,187 3,522,545 3,602,257
Taxable Income:
-- from operations..................... 2,650,283 2,577,849 982,403 1,219,990 1,218,257 1,338,235
-- from gain on sale................... 0 0 0 0 0 0
-- from extraordinary charge........... 0 0 0 0 0 0
-- from other.......................... 0 0 0 0 0 0
Cash generated from operations(4)....... 3,194,889 4,509,489 5,239,285 4,983,579 5,032,548 5,201,952
Cash generated from sales............... 0 0 0 0 0 0
Cash generated from refinancing......... 0 0 0 0 0 0
Cash generated from other............... 0 0 0 0 0 0
Cash generated from operations, sales,
refinancing and other.................. 3,194,889 4,509,489 5,239,285 4,983,579 5,032,548 5,201,952
Less: Cash distribution to investors:
-- from operating cash flow(5)......... 2,422,433 4,274,550 4,154,307 4,198,176 4,247,146 4,316,026
-- from sales and refinancing.......... 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions.......................... 772,456 234,939 1,084,978 785,403 785,402 885,926
Less: Special items.................... 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items........ 772,456 234,939 1,084,978 785,403 785,402 885,926
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income (loss)................. $ 51.96 $ 50.54 $ 19.26 $ 23.92 $ 23.88 $ 26.23
Other.................................. 0 0 0 0 0 0
Capital gain........................... 0 0 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income.................. 47.49 72.72 68.46 74.81 69.06 70.62
-- Return of capital.................. 0 7.85 12.98 7.49 14.20 13.99
Source (on cash basis):
-- Sales.............................. 0 0 0 0 0 0
-- Refinancing........................ 0 0 0 0 0 0
-- Operations......................... 47.49 80.57 81.44 82.30 83.26 84.61
Amount (in percentage terms) remaining
invested in program properties at the
end of the last year reported in the
Table (original total acquisition cost
of properties retained divided by
original total acquisition cost of all
properties in program)................. N/A N/A N/A 100% 100% 100%
<CAPTION>
CPA(R):6
-------------------------------------------------------------------------------
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross Revenues.......................... $11,406,582 $14,177,113 $15,387,180 $15,693,853 $16,737,899
Gain on sale............................ 0 0 0 0 0
Other................................... (55,783)(1) (75,211)(3) N/A N/A N/A
Extraordinary (charge) gain............. (13,559)(2) 0 N/A N/A 2,088,268(6)
Less:
Operating expenses..................... 1,078,174 2,858,645 4,706,491 5,933,070 4,942,528
Interest expense....................... 5,222,844 5,319,971 5,122,703 5,040,589 4,499,692
Depreciation........................... 1,418,968 1,668,951 1,637,678 1,621,029 1,525,011
Net Income-GAAP Basis................... 3,617,254 4,254,335 3,920,308 3,099,165 7,858,936
Taxable Income:
-- from operations..................... 1,831,848 2,227,427 2,091,787 1,156,303 7,871,636
-- from gain on sale................... 0 0 0 0 0
-- from extraordinary charge........... (13,559)(2) 0 0 0 0
-- from other.......................... (250,032)(1) 27,303(3) 0 0 0
Cash generated from operations(4)....... 5,719,005 6,066,705 5,531,994 5,094,336 11,133,036
Cash generated from sales............... 0 0 0 0 0
Cash generated from refinancing......... 870,913 2,414,076 0 0 0
Cash generated from other............... 0 17,008(3) 0 0 0
Cash generated from operations, sales,
refinancing and other.................. 6,589,918 8,497,789 5,531,994 5,094,336 11,133,036
Less: Cash distribution to investors:
-- from operating cash flow(5)......... 4,421,586 4,633,297 4,676,223 4,704,691 4,736,359
-- from sales and refinancing.......... 0 0 0 0 0
Cash generated (deficiency) after cash
distributions.......................... 2,168,332 3,864,492 855,771 389,645 6,396,677
Less: Special items.................... 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items........ 2,168,332 3,864,492 855,771 389,645 6,396,677
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income (loss)................. $ 35.65 $ 43.67 $ 41.01 $ 22.67 $ 154.38
Other.................................. 0 0.54 0 0 0
Capital gain........................... 0 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income.................. 70.91 83.40 76.85 60.76 92.89
-- Return of capital.................. 15.77 7.43 14.82 31.47 0
Source (on cash basis):
-- Sales.............................. 0 0 0 0 0
-- Refinancing........................ 0 0 0 0 0
-- Operations......................... 86.68 90.83 91.67 92.23 92.89
Amount (in percentage terms) remaining
invested in program properties at the
end of the last year reported in the
Table (original total acquisition cost
of properties retained divided by
original total acquisition cost of all
properties in program)................. 100% 100% 100% 100% 100%
<CAPTION>
CPA(R):6
------------------------------
1996 1997
----------- -----------
<S> <C> <C>
Gross Revenues.......................... $16,537,296 $17,384,088
Gain on sale............................ 70,878(7) N/A
Other................................... N/A N/A
Extraordinary (charge) gain............. N/A N/A
Less:
Operating expenses..................... 4,914,538 5,048,701
Interest expense....................... 4,003,726 3,715,143
Depreciation........................... 1,664,514 1,780,317
Net Income-GAAP Basis................... 6,025,396 6,839,927
Taxable Income:
-- from operations..................... 3,450,345 4,530,411
-- from gain on sale................... 242,713 0
-- from extraordinary charge........... 0 0
-- from other.......................... 0 0
Cash generated from operations(4)....... 7,615,526 8,075,717
Cash generated from sales............... 0 0
Cash generated from refinancing......... 0 0
Cash generated from other............... 0 0
Cash generated from operations, sales,
refinancing and other.................. 7,615,526 8,075,717
Less: Cash distribution to investors:
-- from operating cash flow(5)......... 4,880,911 7,002,505
-- from sales and refinancing..........
Cash generated (deficiency) after cash
distributions.......................... 2,734,615 1,073,212
Less: Special items.................... 0 0
Cash generated (deficiency) after cash
distributions and special items........ 2,734,615 1,073,212
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income (loss)................. $ 67.67 $ 88.85
Other.................................. 0 0
Capital gain........................... 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income.................. 95.72 134.14
-- Return of capital.................. 0 3.19
Source (on cash basis):
-- Sales.............................. 0 0
-- Refinancing........................ 0 0
-- Operations......................... 95.72 137.33
Amount (in percentage terms) remaining
invested in program properties at the
end of the last year reported in the
Table (original total acquisition cost
of properties retained divided by
original total acquisition cost of all
properties in program)................. 99.79% 99.79%
</TABLE>
A-9
<PAGE> 128
TABLE III (7 OF 10)
OPERATING RESULTS OF PRIOR PROGRAMS
Table III includes information showing the start-up and operational phase
of Prior Programs, the offerings of which have been closed since December 31,
1979. This Table is designed to provide the investor with information on the
financial operations of such Prior Programs. The results shown in this Table are
in all cases for years ended December 31. THE INFORMATION PRESENTED IN THIS
TABLE SHOULD NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE
COMPANY. PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY
OWNERSHIP IN THE CPA(R) PARTNERSHIPS. MORTGAGE FINANCING FOR THE CPA(R)
PARTNERSHIPS MAY HEREAFTER OCCUR WHICH WOULD MAKE AVAILABLE ADDITIONAL FUNDS FOR
INVESTMENT BY SUCH PARTNERSHIPS. ANY ADDITIONAL INVESTMENTS COULD SIGNIFICANTLY
ALTER CERTAIN OF THE INFORMATION PRESENTED IN THIS TABLE.
<TABLE>
<CAPTION>
CPA(R):7
----------------------------------------------------------------
1986 1987 1988 1989 1990
-------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross Revenues.............................................. $ 90,399 $4,119,934 $9,066,142 $14,071,843 $13,725,684
Profit (loss) on sale of properties......................... N/A N/A N/A N/A 58,172(1)
Gain on sale of securities.................................. N/A N/A 1,766,185(3) 48,158(3) 69,544(3)
Extraordinary gain charge...................................
Write-down of property...................................... N/A N/A N/A N/A (500,000)(2)
Other....................................................... N/A N/A N/A N/A N/A
Less:
Operating expenses......................................... 46,413 326,846 1,848,463 5,576,552 6,194,008
Interest expense........................................... 22,911 1,389,385 3,479,631 4,657,478 4,718,573
Depreciation............................................... 0 131,567 1,009,247 1,422,116 1,567,896
Net Income-GAAP Basis....................................... 21,075 2,272,136 4,494,986 2,463,855 872,923
Taxable Income (Loss):
-- from operations......................................... (51,877) 1,203,013 1,585,180 1,195,514 3,689
-- from gain (loss) on sales............................... 0 0 1,766,185(3) 48,158(3) 127,716(1)(3)
-- other................................................... 0 0 0 0 0
Cash generated from operations.............................. 1,550,648 1,115,274 4,136,538 3,745,289 3,153,131
Cash generated from sales................................... 0 0 1,766,185(3) 48,158(3) 245,324
Cash generated from refinancing............................. 0 0 0 0 0
Cash generated from other................................... 0 0 0 0 0
Cash generated from operations, sales, refinancing and
other...................................................... 1,550,648 1,115,274 5,902,723 3,793,447 3,398,455
Less: Cash distribution to investors:
-- from operating cash flow(6)............................. 0 1,363,271 3,902,233 3,940,765 3,992,781
-- from sales and refinancing.............................. 0 0 0 0 0
Cash generated (deficiency) after cash distributions........ 1,550,648 (247,997) 2,000,490 (147,318) (594,326)
Less: Special items......................................... 0 0 0 0 0
Cash generated (deficiency) after cash distributions and
special items.............................................. 1,550,648 (247,997) 2,000,490 (147,318) (594,326)
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)..................................... $ (4.29) $ 24.98 $ 32.91 $ 24.82 $ .08
Other...................................................... 0 0 0 0 0
Capital gain............................................... 0 0 36.67 1.00 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income....................................... 0 60.60 81.02 51.16 18.12
-- Return of capital....................................... 0 0 0 30.66 64.78
Source (on cash basis):
-- Sales................................................... 0 0 0 0 0
-- Refinancing............................................. 0 0 0 0 0
-- Operations.............................................. 0 60.60 81.02 81.82 82.90
Amount (in percentage terms) remaining invested in program
properties at the end of the last year reported in the
Table (original total acquisition cost of properties
retained divided by original total acquisition cost of
all properties in program)............................... N/A N/A N/A 100% 99.86%
<CAPTION>
CPA(R):7
-------------------------------------------------------------
1991 1992 1993 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross Revenues.............................................. $13,648,275 $14,502,032 $12,243,029 $13,840,052
Profit (loss) on sale of properties......................... 54,197(4) N/A (552,383)(8) 7,814,474(10)
Gain on sale of securities.................................. N/A N/A N/A N/A
Extraordinary gain charge................................... 879,433(12) (511,503)
Write-down of property...................................... N/A N/A (3,303,228)(9) (641,731)(11)
Other....................................................... N/A (141,723)(5) 435,106(3) 986,155
Less:
Operating expenses......................................... 6,170,575 6,404,695 4,485,628 4,336,235
Interest expense........................................... 4,471,097 4,155,956 3,324,398 3,537,640
Depreciation............................................... 1,607,889 1,616,335 1,647,397 1,619,726
Net Income-GAAP Basis....................................... 1,452,911 2,183,323 244,534 11,993,846
Taxable Income (Loss):
-- from operations......................................... 746,150 1,534,247 11,218,042 2,452,425
-- from gain (loss) on sales............................... 54,197(4) 0 2,093,467 10,460,324
-- other................................................... 0 51,875(5) 283,740 682,500
Cash generated from operations.............................. 3,303,198 4,489,865 4,135,048 5,347,231
Cash generated from sales................................... 183,430(4) 0 283,740 14,662,004
Cash generated from refinancing............................. 978,087 0 1,047,890 700,000
Cash generated from other................................... 0 32,313(5) 3,578 38,281
Cash generated from operations, sales, refinancing and
other...................................................... 4,464,715 4,522,178 5,470,256 20,747,516
Less: Cash distribution to investors:
-- from operating cash flow(6)............................. 3,303,198 3,388,324(7) 2,948,590 3,246,729
-- from sales and refinancing.............................. 503,673 0 0 0
Cash generated (deficiency) after cash distributions........ 657,844 1,133,854 2,521,666 17,500,787
Less: Special items......................................... 0 0 0 0
Cash generated (deficiency) after cash distributions and
special items.............................................. 657,844 1,133,854 2,521,666 17,500,787
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)..................................... $ 15.49 $ 31.85 $ 232.91 $ 50.92
Other...................................................... 0 1.08 5.89 14.17
Capital gain............................................... 0 0 43.47 217.18
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income....................................... 30.17 45.33 5.08 67.41
-- Return of capital....................................... 53.03 20.86 56.14 0
Source (on cash basis):
-- Sales................................................... 0 0 0 0
-- Refinancing............................................. 10.46 0 0 0
-- Operations.............................................. 72.74 66.19 61.22 67.41
Amount (in percentage terms) remaining invested in program
properties at the end of the last year reported in the
Table (original total acquisition cost of properties
retained divided by original total acquisition cost of
all properties in program)............................... 99.70% 99.70% 97.86% 83.50%
<CAPTION>
CPA(R):7
-----------------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Gross Revenues.............................................. $12,196,252 $12,731,328 $12,706,396
Profit (loss) on sale of properties......................... 1,019,362(13) 74,729(17) N/A
Gain on sale of securities.................................. 1,323,858(13) N/A N/A
Extraordinary gain charge................................... -- N/A
Write-down of property...................................... (319,685)(14) -- (139,999)(18)
Other....................................................... 111,226(15) (128,879)(15) (128,649)(19)
Less:
Operating expenses......................................... 4,986,585 5,181,249 5,921,214
Interest expense........................................... 2,456,129 1,942,737 1,868,189
Depreciation............................................... 1,361,952 1,154,088 1,213,286
Net Income-GAAP Basis....................................... 5,526,347 4,399,104 3,435,066
Taxable Income (Loss):
-- from operations......................................... 3,451,813 3,856,378 3,268,674
-- from gain (loss) on sales............................... 0 (188,980) (144,260)
-- other................................................... 0 0 0
Cash generated from operations.............................. 5,089,776 5,499,073 4,682,499
Cash generated from sales................................... 1,546,019(13) 617,867(17) 200,000
Cash generated from refinancing............................. -- --
Cash generated from other................................... 31,457(16) 27,761(16) 30,787
Cash generated from operations, sales, refinancing and
other...................................................... 6,667,252 6,144,701 4,913,286
Less: Cash distribution to investors:
-- from operating cash flow(6)............................. 10,434,626 3,483,017 3,751,664
-- from sales and refinancing.............................. 0 0 0
Cash generated (deficiency) after cash distributions........ (3,767,490) 2,661,684 1,161,622
Less: Special items......................................... 0 0
Cash generated (deficiency) after cash distributions and
special items.............................................. (3,767,490) 2,661,684 1,161,622
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)..................................... $ 71.77 $ 80.18 $ 67.95
Other...................................................... 0 0 (3.00)
Capital gain............................................... 0 (4.14) 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income....................................... 114.82 91.47 71.42
-- Return of capital....................................... 101.98 0 6.58
Source (on cash basis):
-- Sales................................................... 0 0
-- Refinancing............................................. 0 0
-- Operations.............................................. 216.80 72.42 78.00
Amount (in percentage terms) remaining invested in program
properties at the end of the last year reported in the
Table (original total acquisition cost of properties
retained divided by original total acquisition cost of
all properties in program)............................... 73.82% 73.16% 73.16%
</TABLE>
A-10
<PAGE> 129
TABLE III (8 OF 10)
OPERATING RESULTS OF PRIOR PROGRAMS
Table III includes information showing the start-up and operational phase of
Prior Programs, the offerings of which have been closed since December 31, 1979.
This Table is designed to provide the investor with information on the financial
operations of such Prior Programs. The results shown in this Table are in all
cases for years ended December 31. THE INFORMATION PRESENTED IN THIS TABLE
SHOULD NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE
COMPANY. PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY
OWNERSHIP IN THE CPA(R) PROGRAMS. MORTGAGE FINANCING FOR THE CPA(R) PROGRAMS MAY
HEREAFTER OCCUR WHICH WOULD MAKE AVAILABLE ADDITIONAL FUNDS FOR INVESTMENT BY
SUCH PROGRAMS. ANY ADDITIONAL INVESTMENTS COULD SIGNIFICANTLY ALTER CERTAIN OF
THE INFORMATION PRESENTED IN THIS TABLE.
<TABLE>
<CAPTION>
CPA(R):8
------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross Revenues..................... $2,877,969 $11,744,379 $14,120,755 $14,396,115 $15,176,928 $18,060,581
Profit on sale of properties....... N/A N/A N/A 1,736(1) N/A N/A
Other.............................. N/A N/A N/A N/A (51,219)(2) 21,111
Extraordinary charge............... N/A N/A N/A N/A N/A N/A
Less:
Operating expenses................ 322,625 934,022 912,831 1,214,634 2,227,334 4,151,151
Interest expense.................. 939,460 4,871,609 6,917,234 7,095,848 6,943,303 6,737,293
Depreciation...................... 214,618 877,918 1,204,389 1,490,532 1,642,518 1,935,624
Minority Interest................. N/A N/A N/A N/A N/A N/A
Net Income-GAAP Basis.............. 1,401,266 5,060,830 5,086,301 4,596,837 4,312,554 5,257,624
Taxable Income (Loss):
-- from operations................ 1,043,085 3,268,042 2,910,667 2,819,692 3,009,471 5,060,536
-- from gain on sale..............
-- from other..................... 0 0 0 1,736(1) (17,110)(2) 0
-- from extraordinary charge...... 0 0 0 0 0 0
Cash generated from operations..... 1,697,043 5,752,461 6,303,966 6,285,116 6,321,159 8,376,844
Cash generated from sales.......... 0 0 0 7,991(1) 0 0
Cash generated from refinancing.... 0 0 0 0 0 0
Cash generated from other.......... 0 0 0 0 16,408(2) 253,858
Cash generated from operations,
sales, refinancing and other...... 1,697,043 5,752,461 6,303,966 6,293,107 6,337,567 8,630,702
Less: Cash distribution to
investors:
-- from operating cash flow(4).... 728,786 5,575,793 6,165,188 6,225,409 6,285,600 6,327,785
-- from sales and refinancing..... 0 0 0 0 0 0
Cash generated (deficiency) after
cash distributions................ 968,257 176,668 138,778 67,698 51,697 2,302,917
Less: Special items................ 0 0 0 0 0 0
Cash generated (deficiency) after
cash distributions and special
items............................. 968,257 176,668 138,778 67,698 51,697 2,302,917
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income (loss).......... $ 16.97 $ 43.41 $ 38.67 $ 37.46 $ 39.98 $ 67.23
Other........................... 0 0 0 0.02(1) (0.23)(2) 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income............ 20.91 67.23 67.57 61.07 57.29 69.84
-- Return of capital............ 0 6.84 14.33 21.63 26.21 14.22
Source (on cash basis):
-- Sales........................ 0 0 0 0 0 0
-- Refinancing.................. 0 0 0 0 0 0
-- Operations................... 20.91 74.07 81.90 82.70 83.50 84.06
Amount (in percentage terms)
remaining invested in program
properties at the end of the last
year reported in the Table
(original total acquisition cost
of properties retained divided by
original total acquisition cost of
all properties in program)........ N/A N/A 100% 99.99% 99.99% 99.99%
<CAPTION>
CPA(R):8
-----------------------------------------------------------
1994 1995 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross Revenues..................... $18,804,769 $19,886,284 $16,207,400(5) $14,927,898
Profit on sale of properties....... N/A N/A 21,697(6) N/A
Other.............................. 83,736 (62,359)(4) 1,239,400(4) 738,979(7)
Extraordinary charge............... (120,000)(3) N/A N/A N/A
Less:
Operating expenses................ 4,445,083 3,774,470 1,242,655 4,543,266
Interest expense.................. 6,266,275 5,799,127 5,232,928 1,325,929
Depreciation...................... 1,997,946 1,912,503 1,539,737 1,213,286
Minority Interest................. N/A N/A N/A N/A
Net Income-GAAP Basis.............. 5,892,029 8,337,825 9,453,177 7,878,911
Taxable Income (Loss):
-- from operations................ 4,565,116 7,475,178 7,792,097 6,578,096
-- from gain on sale.............. 50,641 0
-- from other..................... 0 0 0 0
-- from extraordinary charge...... 0 0 0 0
Cash generated from operations..... 8,627,436 10,271,234 10,947,671 9,261,145
Cash generated from sales.......... 0 154,499 0
Cash generated from refinancing.... 0 0 0 0
Cash generated from other.......... 289,805 282,992(4) 161,795(4) 366,663
Cash generated from operations,
sales, refinancing and other...... 8,917,241 10,554,226 11,263,965 9,627,808
Less: Cash distribution to
investors:
-- from operating cash flow(4).... 6,357,899 6,413,927 6,549,558 7,357,886
-- from sales and refinancing..... 0 0 0 0
Cash generated (deficiency) after
cash distributions................ 2,559,342 4,140,299 4,714,407 2,269,922
Less: Special items................ 0 0 0 0
Cash generated (deficiency) after
cash distributions and special
items............................. 2,559,342 4,140,299 4,714,407 2,269,922
Tax and Distribution Data Per $1000
Invested
Federal Income Tax Results:
Ordinary income (loss).......... $ 60.64 $ 99.55 $ 103.77 $ 87.60
Other........................... 0 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income............ 78.27 85.34 87.22 97.99
-- Return of capital............ 6.19 0 0 0
Source (on cash basis):
-- Sales........................ 0 0 0 0
-- Refinancing.................. 0 0 0 0
-- Operations................... 84.46 85.34 87.22 97.99
Amount (in percentage terms)
remaining invested in program
properties at the end of the last
year reported in the Table
(original total acquisition cost
of properties retained divided by
original total acquisition cost of
all properties in program)........ 97.69% 97.69% 97.25% 97.25%
</TABLE>
A-11
<PAGE> 130
TABLE III (9 OF 10)
OPERATING RESULTS OF PRIOR PROGRAMS
Table III includes information showing the start-up and operational phase of
Prior Programs, the offerings of which have been closed since December 31, 1979.
This Table is designed to provide the investor with information on the financial
operations of such Prior Programs. The results shown in this Table are in all
cases for years ended December 31. THE INFORMATION PRESENTED IN THIS TABLE
SHOULD NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE
COMPANY. PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY
OWNERSHIP IN THE CPA(R) PROGRAMS. MORTGAGE FINANCING FOR THE CPA(R) PROGRAMS MAY
HEREAFTER OCCUR WHICH WOULD MAKE AVAILABLE ADDITIONAL FUNDS FOR INVESTMENT BY
SUCH PROGRAMS. ANY ADDITIONAL INVESTMENTS COULD SIGNIFICANTLY ALTER CERTAIN OF
THE INFORMATION PRESENTED IN THIS TABLE.
<TABLE>
<CAPTION>
CPA(R):9
------------------------------------------------------------------
1989 1990 1991 1992 1993
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross Revenues.............. $2,543,943 $10,284,029 $12,514,907 $12,280,669 $12,216,612
Profit on sale of
properties................. N/A N/A 1,731(1) N/A N/A
Other....................... N/A N/A N/A N/A 658,052
Write-down of property......
Extraordinary charge........ N/A N/A N/A N/A N/A
Less:
Operating expenses......... 432,917 808,315 887,820 1,308,664 963,533
Interest expense........... 1,122,585 5,063,322 6,631,202 6,425,597 6,347,577
Depreciation............... 29,901 1,141,461 1,697,599 1,697,599 1,697,599
Minority Interest.......... N/A N/A N/A N/A N/A
Net Income-GAAP Basis....... 958,540 3,270,931 3,300,017 2,848,809 3,865,955
Taxable Income (Loss):
-- from operations......... 710,320 2,624,917 2,816,278 2,612,003 3,316,011
-- from gain on sale.......
-- from other.............. 0 0 1,731(1) 0 0
-- from extraordinary
charge.................... 0 0 0 0 0
Cash generated from
operations................. 1,784,343 3,895,420 5,662,385 5,211,896 5,906,190
Cash generated from sales... 0 0 1,897 0 522,878
Cash generated from
refinancing................ 0 0 0 0 0
Cash generated from other... 0 0 0 0 0
Cash generated from
operations, sales,
refinancing and other...... 1,784,343 3,895,420 5,664,282 5,211,896 6,429,068
Less: Cash distribution to
investors:
-- from operating cash
flow(4)................... 551,330 4,802,863 5,476,956 5,526,795 5,562,850
-- from sales and
refinancing............... 0 0 0 0 0
Cash generated (deficiency)
after cash distributions... 1,233,013 (907,443) 187,326 (314,899) 866,218
Less: Special items......... 0 0 0 0 0
Cash generated (deficiency)
after cash distributions
and special items.......... 1,233,013 (907,443) 187,326 (314,899) 866,218
Tax and Distribution Data
Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss).... $ 12.64 $ 39.38 $ 42.30 $ 39.24 $ 49.81
Capital gain..............
Other..................... 0 0 0.03(1) 0 0
Cash Distributions to
Investors:
Source (on GAAP basis):
-- Investment income...... 20.12 49.07 49.57 42.79 58.07
-- Return of capital...... 0 22.98 32.65 40.23 25.49
Source (on cash basis):
-- Sales.................. 0 0 0 0 0
-- Refinancing............ 0 0 0 0 0
-- Operations............. 20.12 72.05 82.22 83.02 83.56
Amount (in percentage terms)
remaining invested in
program properties at the
end of the last year
reported in the Table
(original total acquisition
cost of properties retained
divided by original total
acquisition cost of all
properties in program)..... N/A N/A 99.99% 99.99% 99.99%
<CAPTION>
CPA(R):9 CPA(R):10
------------------------------------------------------- ---------------------------------------
1994 1995 1996 1997 1990 1991 1992
----------- ----------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Revenues.............. $11,612,360 $11,946,610 $12,074,578 $11,986,186 $1,783,676 $11,169,869 $15,889,968
Profit on sale of
properties................. N/A N/A 45,066(11) N/A N/A N/A N/A
Other....................... 669,020 (535,337)(6) 658,416(9) 687,423(9) N/A N/A N/A
Write-down of property...... N/A
Extraordinary charge........ (480,000)(4) N/A N/A N/A N/A (40,818)(2) N/A
Less:
Operating expenses......... 949,925 998,762 564,905 1,415,642 393,287 1,358,840 2,241,255
Interest expense........... 5,726,296 5,525,604 5,360,760 5,121,709 711,223 5,149,717 7,460,861
Depreciation............... 1,697,599 1,697,599 1,677,253 1,450,319 230,176 1,242,512 1,756,126
Minority Interest.......... N/A N/A N/A 0 72,594 492,191 570,880
Net Income-GAAP Basis....... 3,427,560 3,189,308 5,175,142 4,685,939 376,396 2,885,791 3,860,846
Taxable Income (Loss):
-- from operations......... 3,030,197 3,805,214 4,431,434 4,410,918 452,075 2,958,235 3,059,213
-- from gain on sale....... 106,024 (1,037,083)
-- from other.............. 0 0 0 0 0 0 0
-- from extraordinary
charge.................... 0 0 0 0 0 (40,818)(2) 0
Cash generated from
operations................. 5,807,477 5,921,560 6,162,302 6,568,323 496,208 4,881,135 6,071,495
Cash generated from sales... 0 0 324,126(11) 0 0 0 0
Cash generated from
refinancing................ 0 0 0 0 0 0 0
Cash generated from other... 484,044 463,274(7) 388,329(7) 350,364 0 0 0
Cash generated from
operations, sales,
refinancing and other...... 6,291,521 6,384,834 6,874,757 6,918,687 496,208 4,881,135 6,071,495
Less: Cash distribution to
investors:
-- from operating cash
flow(4)................... 5,589,709 5,616,322 5,643,736 6,779,152 0 4,266,821 5,860,479
-- from sales and
refinancing............... 0 0 0 0 0 0 0
Cash generated (deficiency)
after cash distributions... 701,812 768,512 1,231,021 139,535 496,208 614,314 211,016
Less: Special items......... 0 0 0 0 0 0 0
Cash generated (deficiency)
after cash distributions
and special items.......... 701,812 768,512 1,231,021 139,535 496,208 614,314 211,016
Tax and Distribution Data
Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss).... $ 45.51 $ 57.16 $ 66.56 $ 66.25 $ 9.38 $ 40.42 $ 42.39
Capital gain.............. 0 (15.58)
Other..................... 0 0 0 0 0 0.00 0
Cash Distributions to
Investors:
Source (on GAAP basis):
-- Investment income...... 51.48 47.90 77.73 70.38 0 45.13 53.49
-- Return of capital...... 32.48 36.45 7.04 31.44 0 21.60 27.71
Source (on cash basis):
-- Sales.................. 0 0 0 0 0 0 0
-- Refinancing............ 0 0 0 0 0 0 0
-- Operations............. 83.96 84.36 84.77 101.82 0 101.82 81.20
Amount (in percentage terms)
remaining invested in
program properties at the
end of the last year
reported in the Table
(original total acquisition
cost of properties retained
divided by original total
acquisition cost of all
properties in program)..... 99.99% 99.99% 92.90% 92.90% N/A N/A N/A
<CAPTION>
CPA(R):10
----------------------------------------------------------------------
1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross Revenues.............. $16,128,694 $16,386,307 $16,131,750 $15,505,748 $14,665,622
Profit on sale of
properties................. N/A 1,177,284(5) N/A 1,051,823(13) (362,038)(14)(16)
Other....................... 1,478,086 1,529,736 1,595,406(9) 1,718,797(9) 1,806,760(9)
Write-down of property...... (7,519,431)(8) (1,753,139)(12) N/A
Extraordinary charge........ N/A (253,902)
Less:
Operating expenses......... 2,511,268 2,894,710 2,887,021 3,030,780 3,850,490(15)
Interest expense........... 8,082,223 8,151,222 8,310,440 7,911,209 3,277,006
Depreciation............... 1,944,589 1,945,769 1,967,631 2,007,557 6,467,266
Minority Interest.......... 587,472 599,839 (1,881,218) 583,283 2,023,890
Net Income-GAAP Basis....... 4,481,228 5,247,885 (1,076,149) 2,990,400 607,472
Taxable Income (Loss):
-- from operations......... 2,697,330 2,618,952 3,778,032 3,529,835 7,585,200
-- from gain on sale....... 129,811 6,100,391
-- from other.............. 0 823,905 0 0
-- from extraordinary
charge.................... 0 0 0 0 0
Cash generated from
operations................. 6,284,822 6,311,466 6,263,624 6,656,840 6,481,196
Cash generated from sales... 0 0 5,122,501(10) 7,781,582(13) 1,480,259(14)
Cash generated from
refinancing................ 0 0 0 0 0
Cash generated from other... 0 0 0 0 0
Cash generated from
operations, sales,
refinancing and other...... 6,284,822 6,311,466 11,386,125 14,438,422 7,961,455
Less: Cash distribution to
investors:
-- from operating cash
flow(4)................... 5,916,386 5,950,669 5,975,481 5,981,514 5,294,000
-- from sales and
refinancing............... 0 0 0 0 0
Cash generated (deficiency)
after cash distributions... 368,436 360,797 5,410,644 8,456,908 2,667,455
Less: Special items......... 0 0 0 0 0
Cash generated (deficiency)
after cash distributions
and special items.......... 368,436 360,797 5,410,644 8,456,908 2,667,455
Tax and Distribution Data
Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss).... $ 37.37 $ 36.29 $ 52.35 $ 48.98 $ 84.65
Capital gain.............. 1.80 0
Other..................... 0 11.42 0 0 0
Cash Distributions to
Investors:
Source (on GAAP basis):
-- Investment income...... 62.09 72.71 (14.93) 41.50 73.46
-- Return of capital...... 19.88 9.74 97.81 41.50 0
Source (on cash basis):
-- Sales.................. 0 0 0 0 0
-- Refinancing............ 0 0 0 0 0
-- Operations............. 81.98 82.45 82.88 83.00 73.46
Amount (in percentage terms)
remaining invested in
program properties at the
end of the last year
reported in the Table
(original total acquisition
cost of properties retained
divided by original total
acquisition cost of all
properties in program)..... 100% 93.93% 93.93% 82.27% 81.45%
</TABLE>
A-12
<PAGE> 131
TABLE III (10 OF 10)
OPERATING RESULTS OF PRIOR PROGRAMS
Table III includes information showing the start-up and operational phase of
Prior Programs, the offerings of which have been closed since December 31, 1979.
This Table is designed to provide the investor with information on the financial
operations of such Prior Programs. The results shown in this Table are in all
cases for years ended December 31. THE INFORMATION PRESENTED IN THIS TABLE
SHOULD NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE
COMPANY. PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY
OWNERSHIP IN THE CPA(R) PROGRAMS. MORTGAGE FINANCING FOR THE CPA(R) PROGRAMS MAY
HEREAFTER OCCUR WHICH WOULD MAKE AVAILABLE ADDITIONAL FUNDS FOR INVESTMENT BY
SUCH PROGRAMS. ANY ADDITIONAL INVESTMENTS COULD SIGNIFICANTLY ALTER CERTAIN OF
THE INFORMATION PRESENTED IN THIS TABLE.
<TABLE>
<CAPTION>
CIP(R)
----------------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Revenues.............................................. $ 92,097 $5,306,275 $17,637,235 $25,958,329 $29,238,322
Profit (loss) on sale of properties......................... NA 1,535,763(2) 0
Other....................................................... 1,478,086 1,613,451 2,800,337(4)
Extraordinary charge........................................ NA NA (401,269)(3)
Write-down of property......................................
Less:
Operating expenses......................................... 207,640 1,638,870 3,456,274 4,490,683 5,654,751
Interest expense........................................... 22,790 1,338,083 6,652,011 11,027,689 13,512,254
Depreciation............................................... 9,799 312,609 1,018,886 1,514,114 2,493,366
Minority Interest.......................................... 0 459,583 748,841
Net Income (Loss) -- GAAP Basis............................. (148,132) 2,016,713 7,990,823 11,615,474 9,228,178
Taxable Income (Loss):
-- from gain on sale.......................................
-- from operations......................................... (148,132) 1,880,687 6,450,406 7,806,855 9,638,818
-- from other.............................................. 0 0 0
-- from extraordinary charge............................... 0 0 0
Cash generated from operations.............................. 73,399 2,913,159 0 12,086,809 13,008,549
Cash generated from sales................................... 0 12,008,853 5,927,217(5)
Cash generated from refinancing............................. 0 160,000
Cash generated from other................................... 0 0 2,003,099(4)
Cash generated from operations, sales, refinancing and
other...................................................... 73,399 0 10,717,806 24,255,662 20,938,865
Less: Cash distribution to investors:
-- from operating cash flow(1)............................. 2,915,819 8,122,156 11,358,858 11,452,669
-- from sales and refinancing.............................. 0 0 0
Cash generated (deficiency) after cash distributions........ 73,399 (2,660) 2,595,650 12,896,804 9,486,196
Less: Special items......................................... 0 0 0
Cash generated (deficiency) after cash distributions and
special items.............................................. 73,399 (2,660) 2,595,650 12,896,804 9,486,196
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)..................................... $ (84.90) $ 29.24 $ 52.14 $ 55.10 $ 68.09
Capital Gain...............................................
Other...................................................... 0 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income....................................... 31.35 64.59 80.17 65.19
-- Return of capital....................................... 13.98 1.06 0 15.71
Source (on cash basis):
-- Sales................................................... 0 0 0
-- Refinancing............................................. 0 0 0
-- Operations.............................................. 45.33 65.65 80.17 80.90
Amount (in percentage terms) remaining invested in program
properties at the end of the last year reported in the
Table (original total acquisition cost of properties
retained divided by original total acquisition cost of all
properties in program)..................................... N/A N/A N/A N/A N/A
<CAPTION>
CIP(R)
-----------------------------
1996 1997
---- ----
<S> <C> <C>
Gross Revenues.............................................. $32,546,638 $34,247,395
Profit (loss) on sale of properties......................... (7,630)(6) (343,963)(8)(10)
Other....................................................... 3,633,869(4)(7) 3,109,120(4)
Extraordinary charge........................................ (275,000)(3) 427,448(9)
Write-down of property...................................... (1,753,455)
Less:
Operating expenses......................................... 6,022,323 7,942,880
Interest expense........................................... 14,241,203 14,202,295
Depreciation............................................... 2,968,173 3,435,128
Minority Interest.......................................... 766,582 773,317
Net Income (Loss) -- GAAP Basis............................. 10,146,141 11,086,326
Taxable Income (Loss):
-- from gain on sale....................................... 81,144
-- from operations......................................... 10,048,321 11,157,568
-- from other.............................................. 656,796 0
-- from extraordinary charge............................... 0 0
Cash generated from operations.............................. 15,346,178 14,953,605
Cash generated from sales................................... 2,044,260(6) 1,194,272(8)
Cash generated from refinancing............................. -- --
Cash generated from other................................... 835,243(7) --
Cash generated from operations, sales, refinancing and
other...................................................... 18,225,681 16,147,877
Less: Cash distribution to investors:
-- from operating cash flow(1)............................. 12,488,221 13,681,539
-- from sales and refinancing.............................. 0 0
Cash generated (deficiency) after cash distributions........ 5,737,460 2,466,338
Less: Special items......................................... 0 0
Cash generated (deficiency) after cash distributions and
special items.............................................. 5,737,460 2,466,338
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)..................................... $ 63.43 $ 64.87
Capital Gain............................................... 4.15 .47
Other...................................................... 0 0
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income....................................... 64.05 64.46
-- Return of capital....................................... 14.79 15.09
Source (on cash basis):
-- Sales................................................... 0 0
-- Refinancing............................................. 0 0
-- Operations.............................................. 78.84 79.55
Amount (in percentage terms) remaining invested in program
properties at the end of the last year reported in the
Table (original total acquisition cost of properties
retained divided by original total acquisition cost of all
properties in program)..................................... N/A N/A
<CAPTION>
CPA(R):12
--------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Revenues.............................................. $ 2,558 $465,327 $3,993,647 $11,433,627 $ 25,313,419
Profit (loss) on sale of properties......................... --
Other....................................................... 554,571 1,322,990(11) 2,042,400(11) 2,086,993(11)
Extraordinary charge........................................ --
Write-down of property...................................... --
Less:
Operating expenses......................................... 5,211 900,393 1,551,098 2,792,846 5,074,248
Interest expense........................................... 147,256 1,260,189 3,525,774 6,499,865
Depreciation............................................... 390,307 947,206 3,022,683
Minority Interest..........................................
Net Income (Loss) -- GAAP Basis............................. (2,653) (27,751) 2,115,043 6,210,201 12,803,616
Taxable Income (Loss):
-- from gain on sale....................................... -- 6,900
-- from operations......................................... (2,653) 390,164 2,375,613 5,670,787 15,389,092
-- from other..............................................
-- from extraordinary charge............................... --
Cash generated from operations.............................. 2,807 591,308 3,661,087 7,747,104 19,955,591
Cash generated from sales................................... 1,375,000(11) -- 138,960,203
Cash generated from refinancing.............................
Cash generated from other...................................
Cash generated from operations, sales, refinancing and
other...................................................... 2,807 591,308 5,036,087 7,747,104 158,915,794
Less: Cash distribution to investors:
-- from operating cash flow(1)............................. 2,350,687 6,779,669 15,081,819
-- from sales and refinancing.............................. -- --
Cash generated (deficiency) after cash distributions........ 2,807 591,308 2,685,400 967,435 143,833,975
Less: Special items......................................... --
Cash generated (deficiency) after cash distributions and
special items.............................................. 2,807 591,308 2,685,400 967,435 143,833,975
Tax and Distribution Data Per $1000 Invested
Federal Income Tax Results:
Ordinary income (loss)..................................... $ (.13) $ 14.36 $ 59.14 $ 54.71 $ 54.44
Capital Gain............................................... .02
Other......................................................
Cash Distributions to Investors:
Source (on GAAP basis):
-- Investment income....................................... $ 52.66 $ 59.91 $ 45.30
-- Return of capital....................................... 5.87 5.49 8.06
Source (on cash basis):
-- Sales...................................................
-- Refinancing.............................................
-- Operations.............................................. 58.53 65.40 53.36
Amount (in percentage terms) remaining invested in program
properties at the end of the last year reported in the
Table (original total acquisition cost of properties
retained divided by original total acquisition cost of all
properties in program)..................................... N/A N/A N/A N/A N/A
</TABLE>
A-13
<PAGE> 132
FOOTNOTES TO CPA(R):1
(1) Results from the sale of a one acre portion of the land which was a part of
the property net leased to Varo, Inc. The net proceeds from the sale of this
land were applied to repay a portion of the outstanding principal balance of
the mortgage loan to CPA(R):1 used to finance the acquisition of the
Property.
(2) Results from the sale of 11.37 acres of land which was a part of the
property net leased to the Gap Stores, Inc.
(3) Represents loss on disposition of the 2400 Industrial Lane Property as a
result of the transfer of the Partnership's interest in the Property.
(4) Represents write-down of the 2400 Industrial Lane Property.
(5) Results from the sale of properties net leased to Kobacker Stores, Inc.
(6) Result of refinancing mortgage loan on property leased to the Gap Inc.
(7) Results from the sale of the property net leased to Winn-Dixie Stores, Inc.
(8) For the years up to and including 1985, the figures for cash generated from
operations were derived from the Statements of Changes in Financial
Position, whereas for the years after 1985, the figures were derived from
the Statements of Cash Flows in accordance with SFAS, No. 95. In determining
Cash from Operations pursuant to the Statement of Cash Flows, the effects of
changes primarily in accrued liabilities, receivables and other assets are
taken into account but other items such as principal amortization of loans
are not included. Cash from operations pursuant to the Statement of Changes
in Financial Position includes the effect of loan amortization, but excludes
the effects of changes in accrued liabilities, receivables and other assets.
(9) To the extent "cash distribution to investors from operating cash flow"
exceeds "cash generated from operations" in any given year, such excess
represents the distribution of cash generated from partnership operations in
prior years that has not previously been distributed.
NOTES TO CPA(R):1
(1) CPA(R):1 made quarterly distributions in the following amounts per $1,000
invested on the dates specified: December, 1997 -- $27.66 and April,
1998 -- $18.00.
FOOTNOTES TO CPA(R):2
(1) Results from the sale of 3,441 square feet of land net leased to G.D. Searle
& Co. and sale of the property net leased to General Refractories Company.
(2) Represents unamortized balance of deferred charges in connection with
refinancing of mortgage loans on properties leased to Heekin Can Inc., Paper
Corporation of America and Gibson Greeting Cards, Inc.
(3) For the years up to and including 1985, the figures for cash generated from
operations were derived from the Statements of Changes in Financial
Position, whereas for the years after 1985, the figures were derived from
the Statements of Cash Flows in accordance with SFAS No. 95. In determining
Cash from Operations pursuant to the Statement of Cash Flows, the effects of
changes primarily in accrued liabilities, receivables and other assets are
taken into account but other items such as principal amortization of loans
are not included. Cash from operations pursuant to the Statement of Changes
in Financial Position includes the effect of loan amortization, but excludes
the effects of changes in accrued liabilities, receivables and other assets.
(4) To the extent "cash distribution to investors from operating cash flow"
exceeds "cash generated from operations" in any given year, such excess
represents the distribution of cash generated from partnership operations in
prior years that has not previously been distributed.
(5) Results from the sale of properties leased to Heekin Can, Inc.
(6) In connection with the sale of the Heekin properties, CPA(R):2 incurred an
extraordinary charge upon paying off the related mortgage loan.
(7) Results from the sale of property in Hammond, Louisiana leased to G.D.
Searle and Company.
(8) Represents write-down of the Moorestown, N.J. property.
(9) Represents write-down of the Reno, Nevada property.
NOTES TO CPA(R):2
(1) CPA(R):2 made quarterly distributions in the following amounts per $1,000
invested on the dates specified: December, 1997 -- $27.38 and April,
1998 -- $12.94.
FOOTNOTES TO CPA(R):3
(1) Results from the sale of properties net leased to Commodities Corporation
and Knudsen Corporation.
(2) Represents unamortized balance of deferred charges in connection with
refinancing of mortgage loan on property net leased to Gibson Greeting
Cards, Inc. and pay-off of mortgage loan on property net leased to The
Leslie Fay Company.
A-14
<PAGE> 133
(3) For the years up to and including 1985, the figures for cash generated from
operations were derived from the Statements of Changes in Financial
Position, whereas for the years after 1985, the figures were derived from
the Statements of Cash Flows in accordance with SFAS. No. 95. In
determining Cash from Operations pursuant to the Statement of Cash Flows,
the effects of changes primarily in accrued liabilities, receivables and
other assets are taken into account but other items such as principal
amortization of loans are not included. Cash from operations pursuant to
the Statement of Changes in Financial Position includes the effect of loan
amortization, but excludes the effects of changes in accrued liabilities,
receivables and other assets.
(4) To the extent "cash distribution to investors from operating cash flow"
exceeds "cash generated from operations" in any given year, such excess
represents the distribution of cash generated from partnership operations
in prior years that has not previously been distributed.
(5) Represents deposit received from Leslie Fay Co. in the amount of $8,533,614
for partial payment due under a purchase option for property it leases in
Wilkes Barre, Pennsylvania. $3,333,333 of this amount was distributed to
partners in July 1992.
(6) Represents write-down of the Moorestown, N.J. property.
(7) Represents write-down of the Reno, Nevada property.
(8) Represents write-down of the Leslie Fay property to net sales proceeds.
(9) Results of settlement with Leslie Fay.
(10) Represents sales proceeds of property in Wilkes Barre, Pennsylvania.
NOTES TO CPA(R):3
(1) CPA(R):3 made quarterly distributions in the following amounts per $1,000
invested on the dates specified: December, 1997 -- $26.38 and April
1998 -- $25.00.
FOOTNOTES TO CPA(R):4
(1) Results from the sale of properties net leased to Knudsen Corporation.
(2) Represents writedown of Beaumont, Texas property, formerly net leased to
Gulf Consolidated Services, Inc.
(3) Represents gain on restructuring of debt on Beaumont, Texas property
formerly net leased to Gulf Consolidated Services, Inc.
(4) Represents prepayment charge resulting from refinancing of the original
loan for property net leased to Simplicity Manufacturing, Inc.
(5) Represents prepayment charge resulting from refinancing of the original
loan for property net leased to Brodart Co.
(6) For the years up to and including 1985, the figures for cash generated from
operations were derived from the Statements of Changes in Financial
Position, whereas for the years after 1985, the figures were derived from
the Statements of Cash Flows in accordance with SFAS No. 95. In determining
Cash from Operations pursuant to the Statement of Cash Flows, the effects
of changes primarily in accrued liabilities, receivables and other assets
are taken into account, but other items such as principal amortization of
loans are not included. Cash from operations pursuant to the Statement of
Changes in Financial Position includes the effect of loan amortization, but
excludes the effects of changes in accrued liabilities, receivables and
other assets.
(7) Represents acquisition of hotel operations for a property formerly leased
to Integra-A Hotel and Restaurant Company.
(8) To the extent "cash distribution to investors from operating cash flow"
exceeds "cash generated from operations" in any given year, such excess
represents the distribution of cash generated from partnership operations
in prior years that has not previously been distributed.
(9) Represents extinguishment of debt on the property located in Beaumont,
Texas.
(10) Results from sale of property net leased to Genesco, Inc.
(11) Includes equity income and net hotel operating results for 1996.
(12) Results from the exchange of a hotel property in Kenney, Louisiana for an
investment in American General Hospitality Operating Partnership L.P.
(13) Represents writedown of the property net leased to Simplicity
Manufacturing, Inc.
(14) Represents equity income for 1997.
NOTES TO CPA(R):4
(1) CPA(R):4 made quarterly distributions in the following amounts per $1,000
invested on the dates specified: December, 1997 -- $52.68; April,
1998 -- $24.64 and a liquidating distribution of $120.38.
FOOTNOTES TO CPA(R):5
(1) Represents sale of Buffalo, New York property formerly net leased to
Williams Hand Tool, Inc.
(2) Represents exchange of property net leased to Industrial General
Corporation.
(3) Represents prepayment charge resulting from refinancing of the original
loan for property net leased to Pace Membership Warehouse, Inc.
A-15
<PAGE> 134
(4) Represents write-down of Buffalo, New York property formerly net leased to
Williams Hand Tool, Inc.
(5) Represents acquisition of hotel operations for properties formerly leased
to subsidiaries of Landmark Hotel Corporation.
(6) Results from the sale of a 3.0815 acre parcel of land which was a portion
of the property net leased to Industrial General Corporation.
(7) Represents write-down of Columbus, Georgia property leased to Williams Hand
Tool, Inc.
(8) Represents a gain on release of mortgage escrow funds and related interest
income earned in the escrow reserve accounts for the hotel properties
located in Alpena and Petoskey, Michigan.
(9) Represents disposition of Columbus, Georgia property formerly leased to
Williams Hand Tool, Inc. and sale of a parcel of land in Elyria, Ohio
formerly leased to Industrial General Corporation.
(10) For the years up to and including 1985, the figures for cash generated from
operations were derived from the Statements of Changes in Financial
Position, whereas for the years after 1985, the figures were derived from
the Statements of Cash Flows in accordance with SFAS No. 95. In determining
Cash from Operations pursuant to the Statement of Cash Flows, the effects
of changes primarily in accrued liabilities, receivables and other assets
are taken into account but other items such as principal amortization of
loans are not included. Cash from operations pursuant to the Statement of
Changes in Financial Position includes the effect of loan amortization, but
excludes the effects of changes in accrued liabilities, receivables and
other assets.
(11) To the extent "cash distribution to investors from operating cash flow"
exceeds "cash generated from operations" in any given year, such excess
represents the distribution of cash generated from partnership operations
in prior years that has not previously been distributed.
(12) Results from the settlement and lease termination agreement for the hotel
properties in Michigan.
(13) Represents write-down of the preferred stock investment and the estimated
residual value of the South Boston and Kenbridge, Virginia properties.
(14) Results from sale of the Tampa, Florida and the Forrest City, Arkansas
properties.
(15) Represents the extinguishment of debt on the Tampa, Florida property and
properties located in Gordonsville, Virginia and North Bergen, NJ.
(16) Results from sale of properties in Bold Knob, Arkansas, Ballville, Ohio,
Newburyport, Massachusetts, Gardensville, Virginia and North Bergen, New
Jersey.
(17) Represents the writedown of hotel property in Rapid City, South Dakota and
the property on Elepia, Ohio; and writing off the note receivable and
preferred stock of Rochester Butten Company.
(18) Represents sale of property in Hodgkins, Illinois leased to GATX Logistics,
Inc., property in Helena, Montana and a hotel property in Rapid City, South
Dakota.
(19) Represents write-down of hotel property in Rapid City, South Dakota. A
special distribution of $792,400 was declared and paid in January 1997.
(20) Results from foreclosure on the properties net leased to Arley Merchandise
Corporation.
(21) Represents writedown of properties net leased to Arley Merchandise
Corporation.
NOTES TO CPA(R):5
(1) CPA(R):5 made quarterly distributions in the following amounts per $1,000
invested on the dates specified: December, 1997 -- $20.22 and
April -- $16.68 and a liquidating distribution of $46.48.
FOOTNOTES TO CPA(R):6
(1) Represents acquisition of hotel operations for properties formerly leased to
subsidiaries of Landmark Hotel Corporation.
(2) Represents unamortized balance of deferred charges in connection with the
refinancing of the mortgage loan secured by a property leased to Martin
Marrietta Corporation.
(3) Represents acquisition of hotel operations for property formerly leased to
Integra-A Hotel and Restaurant Company.
(4) For the years up to and including 1985, the figures for cash generated from
operations were derived from the Statements of Changes in Financial
Position, whereas for the years after 1985, the figures were derived from
the Statements of Cash Flows in accordance with SFAS No. 95. In determining
Cash from Operations pursuant to the Statement of Cash Flows, the effects of
changes primarily in accrued liabilities, receivables and other assets are
taken into account, but other items such as principal amortization of loans
are not included. Cash from operations pursuant to the Statement of Changes
in Financial Position includes the effect of loan amortization, but excludes
the effects of changes in accrued liabilities, receivables and other assets.
(5) To the extent "cash distribution to investors from operating cash flow"
exceeds "cash generated from operations" in any given year, such excess
represents the distribution of cash generated from partnership operations in
prior years that has not previously been distributed.
A-16
<PAGE> 135
(6) Represents gain on restructuring of debt on the property leased to Anthony's
Manufacturing Company, Inc.
(7) Result from the sale of two properties leased to Autozone, Inc.
NOTES TO CPA(R):6
(1) CPA(R):6 made quarterly distributions in the following amounts per $1,000
invested on the dates specified: December, 1997 -- $43.09 and April,
1998 -- $24.40.
FOOTNOTES TO CPA(R):7
(1) Results from the sale of approximately 10 acres of land which was a portion
of the property net leased to Emb-Tex Corporation.
(2) Represents write-down of 10 properties formerly net leased to Yellow Front
Stores, Inc.
(3) Represents the gain on the sale of securities of Mid-Continent Bottlers,
Inc. and income from equity investments.
(4) Results of the sale of .22 acres of land formerly part of a property
located in Scottsdale, Arizona. See Table V.
(5) Represents acquisition of hotel operations for property formerly leased to
Integra-A Hotel and Restaurant Company.
(6)To the extent "cash distribution to investors from operating cash flow"
exceeds "cash generated from operations" in any given year, such excess
represents the distribution of cash generated from partnership operations in
prior years that has not previously been distributed.
(7) Includes $200,364 of distributions paid to the Corporate General Partner
attributable to 1991.
(8) Results from sale of properties located in Travelers Rest, South Carolina
and Phoenix, Arizona.
(9) Represents write-down of the Jupiter and Plant City, Florida properties.
(10) Results from sale of properties leased to Mid-Continent, Bottlers, Inc.
(11) Represents write-down of properties located in Fredricksburg, Virginia and
Jefferson, Georgia.
(12) Represents an extraordinary gain upon extinguishment of the Yellow Front
Stores, Inc. loan.
(13) Result of sale of the Jupiter, Florida Property.
(14) Represents writedown of Monte Vista, Colorado property.
(15) Represents earnings from discontinued operations and loss from equity
investments.
(16) Represents cash distributed from equity investments.
(17) Result of sale of property in Denham Springs, Louisiana leased to AutoZone,
Inc. and a property in Monte Vista, Colorado formerly leased to Yellow
Front Stores, Inc.
(18) Represents writedown on properties net leased to Swiss M-Tex, L.P.
(19) Represents equity income for 1997.
NOTES TO CPA(R):7
(1) CPA(R):7 made quarterly distributions in the following amounts per $1,000
invested on the dates specified: December, 1997 -- $5.07 and April,
1998 -- $18.34, and a liquidity distribution of $50.63.
FOOTNOTES TO CPA(R):8
(1) Results from the sale of a parcel of land which was a portion of the
property net leased to Furon Company.
(2) Represents acquisition of hotel operations for property formerly leased to
Integra-A Hotel and Restaurant Company.
(3) Results from the refinancing of property leased to Detroit Diesel
Corporation.
(4) Includes of equity income for 1993, 1994, 1995 and 1996 income (loss) and
hotel operating results for 1996.
(5) Results from the exchange of a hotel property in Kennes, Louisiana for an
investment in American General Hospitality Operating Partnership L.P.
(6) Results from the sale of two properties leased to Furon Company.
(7) Represents equity income for 1997.
NOTES TO CPA(R):8
(1) CPA(R):8 made quarterly distributions in the following amounts per $1,000
invested on the dates specified: December, 1997 -- $10.96 and April,
1998 -- $22.06, and a liquidating distribution of $56.63.
A-17
<PAGE> 136
FOOTNOTES TO CPA(R):9 & CPA(R):10
(1) Results from the sale of a parcel of land which was a portion of the
property net leased to Furon Company.
(2) Represents loan prepayment charge resulting from refinancing of loan
secured by property located in Denton, Texas leased to K mart Corporation.
(3) To the extent "cash distribution to investors from operating cash flow"
exceeds "cash generated from operations" in any given year, such excess
represents the distribution of cash generated from partnership operations
in prior years that has not previously been distributed.
(4) Results from the refinancing of property leased to Detroit Diesel
Corporation.
(5) Results from sale of properties leased to Data Documents Inc. and the Pace
Membership Warehouse, Inc.
(6) Represents write-off of investment in Limited Partnership and income from
Equity investments.
(7) Represents cash distributions from Equity investments in excess of income.
(8) Represents write-down of the Stamford, Connecticut property.
(9) Results of Equity investments for 1993, 1994, 1995 and 1996.
(10) Results of sale of Data Documents property.
(11) Results from the sale of two properties leased to Furon Company.
(12) Represents write-down of the Harvest Foods, Inc. properties.
(13) Results from the sale of properties leased to Safeway Stores Incorporated,
Empire of America Realty Credit Corp. and Best Buy Co., Inc.
(14) Results from the sale of Enviro Works, Inc. securities, and the sale of
properties formerly leased to Harvest Foods, Inc.
(15) Results from the transfer of CPA:10's general partnership interest in Hope
Street Connecticut to CPA:9 and the extinguishment of debt on a first
priority mortgage loan on properties formerly leased to Harvest Foods, Inc.
(16) Results include subordinated disposition fees.
NOTES TO CPA(R):9 & CPA(R):10
(1) CPA(R):9 made quarterly distributions in the following amounts per $1,000
invested on the dates specified: December, 1997 -- $18.74 and April,
1998 -- $21.28.
(2) CPA(R):10 made quarterly distributions in the following amounts per $1,000
invested on the dates specified: January, 1998 -- $17.61 and April,
1998 -- $17.63.
FOOTNOTES TO CIP(R) & CPA(R):12
(1) To the extent "cash distribution to investors from operating cash flow"
exceeds "cash generated from operations" in any given year, such excess
represents the distribution of cash generated from partnership operations
in prior years that has not previously been distributed.
(2) Results from sale of property leased to Data Documents, Inc.
(3) Result of refinancing mortgage loans on property leased to TBWA Chait/Day.
(4) Results of Equity Investments for 1993, 1994, 1995 and 1996 income (loss)
and cash distributed.
(5) Results of Sale of Data Documents property.
(6) Loss on sale of properties based to Safeway Stores, Incorporated.
(7) Gain on sale of 22,500 Garden Ridge Corporation common stock warrants.
(8) Results of sale of properties formerly leased to Harvest Foods, Inc.
(9) Gain on the extinguishment of debt on a first priority mortgage loan on
properties formerly leased to Harvest Foods, Inc.
(10) Results include subordinated disposition fees.
(11) Results of equity investments income (loss) and cash distributed.
NOTES TO CIP(R) & CPA(R):12
(1) CIP(R) made quarterly distributions in the following amounts per $1,000
invested on the dates specified: January, 1998 -- $20.60; and April,
1998 -- $20.62.
(2) CPA(R):12 made quarterly distributions in the following amounts per $1,000
invested on the dates specified: January, 1998 -- $20.23 and April,
1998 -- $20.25.
A-18
<PAGE> 137
TABLE IV
RESULTS OF COMPLETED PROGRAMS
Table IV provides information on Prior Programs that have completed
operations since January 1, 1993. THE INFORMATION PRESENTED IN THIS TABLE SHOULD
NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE COMPANY.
<TABLE>
<CAPTION>
CPA(R):1 CPA(R):2 CPA(R):3 CPA(R):4 CPA(R):5 CPA(R):6 CPA(R):7
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Dollar Amount Raised......... $20,000,000 $27,500,000 $33,000,000 $42,784,000 $56,600,000 $47,930,000 $45,274,000
Number of Properties
Purchased.................. 24 19 17 12 36 54 53
Date of Closing of
Offering................... 9/30/79 9/23/80 5/13/82 6/16/83 3/31/84 2/13/85 9/17/87
Date of First Sale of
Property................... 6/6/89 7/15/86 10/22/86 10/22/86 12/31/87 4/28/95 12/3/93
Date of Final Sale of
Property(1)................ 1/1/98 1/1/98 1/1/98 1/1/98 1/1/98 1/1/98 1/1/98
Tax and Distribution Data per
$1000 Investment Through
Federal Income Tax Results:
Ordinary income (loss)... $ 547.51 $ 1,044.25 $ 1,844.85 $ 678.36 $ 300.55 $ 649.69 $ 629.58
-- from operations..... 0.00 0.00 0.00 (0.33) 0.00 0.00 0.00
Capital Gain (loss)...... $ 11.34 $ 858.72 $ 105.88 $ 109.97 $ 354.66 $ 0.00 $ 291.18
-- Other............... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 43.48 $ 0.54 $ 21.14
Cash Distributions to
Investors
Source (on Gaap basis)
-- Investment Income..... 765.68 2,069.50 2,115.01 1,405.10 928.11 1,017.83 636.60
-- Return of Capital..... 1,517.49 1,524.35 1,832.07 1,591.09 1,136.70 1,509.79 1,441.83
Source (on Cash basis)
-- Sales................. 1,051.80 1,818.20 1,677.00 1,358.60 734.80 1,380.60 1,107.80
-- Refinancing........... 0.00 0.00 0.00 0.00 0.00 0.00 10.46
-- Operations............ 1,231.37 1,775.65 100.00 1,542.63 1,330.01 1,147.02 941.13
-- Other................. 0.00 0.00 1,935.48 0.00 0.00 0.00 0.00
<CAPTION>
CPA(R):8 CPA(R):9
----------- -----------
<S> <C> <C>
Dollar Amount Raised......... $67,749,000 $59,990,000
Number of Properties
Purchased.................. 47 33
Date of Closing of
Offering................... 6/30/89 4/30/91
Date of First Sale of
Property................... 4/15/94 9/5/96
Date of Final Sale of
Property(1)................ 1/1/98 1/1/98
Tax and Distribution Data per
$1000 Investment Through
Federal Income Tax Results:
Ordinary income (loss)... $ 595.28 $ 418.85
-- from operations..... 0.00 0.00
Capital Gain (loss)...... $ 0.00 $ (15.58)
-- Other............... $ (0.21) $ 0.03
Cash Distributions to
Investors
Source (on Gaap basis)
-- Investment Income..... 692.73 467.11
-- Return of Capital..... 1,480.42 1,281.36
Source (on Cash basis)
-- Sales................. 1,391.00 1,052.60
-- Refinancing........... 0.00 0.00
-- Operations............ 782.15 695.89
-- Other................. 0.00 0.00
</TABLE>
FOOTNOTES
(1) Date of exchange of Partnership units for listed shares of Carey Diversified
LLC.
(2) Assumes $20 value for the shares of Carey Diversified LLC distributed in
connection with the consolidation of the CPA(R) Partnerships.
A-19
<PAGE> 138
TABLE V
SALES OR DISPOSITIONS OF PROPERTIES AS OF DECEMBER 31, 1997
Table V provides information on the sales and dispositions of property held
by Prior Programs since January 1, 1994. THE INFORMATION IN THIS TABLE SHOULD
NOT BE CONSIDERED AS INDICATIVE OF THE POSSIBLE PERFORMANCE OF THE COMPANY.
PURCHASERS OF THE SHARES OFFERED BY THIS PROSPECTUS WILL NOT HAVE ANY OWNERSHIP
IN THE CPA(R) PARTNERSHIPS.
<TABLE>
<CAPTION>
SELLING PRICE NET OF CLOSING COSTS AND GAAP ADJUSTMENTS
-------------------------------------------------------
PURCHASE
CASH MONEY ADJUSTMENTS
RECEIVED MORTGAGE MORTGAGE RESULTING
NET OF BALANCE TAKEN FROM
DATE DATE OF CLOSING AT TIME BACK BY APPLICATION
PROPERTY ACQUIRED SALE COSTS OF SALE PROGRAM OF GAAP
-------- -------- ------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
G.D. Searle and Co.(1)............................. 5/15/80 1/4/94 $ 124,615 $ 0 0 None
Plant City, Florida(2)............................. 3/31/89 4/15/94 1,200,000 0 0 None
Jefferson, Georgia(3).............................. 3/31/89 8/5/94 844,778 0 0 None
Mid Continental Bottlers, Inc.(4).................. 12/31/86 10/14/94 13,904,680 3,895,320 0 None
Pace Membership Warehouse, Inc.(5)................. 8/12/86 11/10/94 3,639,563 3,290,437 0 None
Pace Membership Warehouse, Inc.(6)................. 12/23/92 11/10/94 3,466,100 3,500,000 0 None
Data Documents, Inc.(7)............................ 3/18/93 11/28/94 7,710,740 7,721,000 0 None
Industrial General Corporation(8).................. 8/30/85 12/30/94 4,062 645,938 0 None
Industrial General Corporation(12)................. 8/30/85 9/14/95 466,961 2,920,401 0 None
Liberty Fabrics of New York(13).................... 1/3/84 12/3/95 5,509,000 3,850,000 0 None
Genesco, Inc.(14).................................. 6/2/83 6/30/95 9,477,492 5,722,508 0 None
Jupiter, Florida(15)............................... 12/11/86 12/20/95 1,546,020 2,602,883 0 None
Leslie Fay Company(16)............................. 4/30/82 1/10/96 14,053,816 0 0 None
Helena, Montana(17)................................ 5/1/85 1/19/96 1,741,261 2,866,324 0 None
Autozone, Inc.(18)................................. 5/2/86 1/26/96 0 627,106 0 None
Safeway Stores, Inc.(19)........................... 12/19/91 1/26/96 4,649,270 0 0 None
& 2/15/96
Autozone, Inc.(20)................................. 8/24/87 2/12/96 431,779 0 0 None
Monte Vista, Colorado(21).......................... 1/29/88 2/14/96 186,090 0 0 None
Empire of America Credit Corp.(22)................. 6/28/91 3/15/96 3,583,013 4,442,872 0 None
GATX Logistics, Inc.(23)........................... 6/7/86 4/9/96 9,428,270 3,208,526 0 None
Best Buy Co. Inc.(24).............................. 10/16/92 5/16/96 1,593,559 1,509,371 0 None
Furon Company(25).................................. 1/29/90 9/9/96 478,626 892,180 0 None
Rapid City, South Dakota(26)....................... 4/24/85 10/1/96 (290,728) 4,505,000 0 None
Kobacker Stores, Inc.(27).......................... 1/17/79 10/17/96 216,451 139,507 0 None
Winn-Dixie Stores, Inc.(28)........................ 12/28/79 8/11/97 1,042,200 0 0 None
Harvest Foods, Inc.(29)............................ 2/21/92 9/3/97 2,388,544 0 0 None
& 9/30/97
Arley Merchandise Corporation(30).................. 7/13/84 11/17/97 0 4,754,940 0 None
Swiss M-Tex, L.P.(31).............................. 8/26/87 11/26/97 200,000 0 0 None
----------- -----------
$87,596,162 $57,094,313 0 --
=========== ===========
<CAPTION>
COST OF PROPERTIES INCLUDING
CLOSING AND SOFT COSTS(11)
SELLING PRICE NET OF CLOSING COSTS AND GAAP ADJUSTMENTS
----------- TOTAL
ACQUISITION EXCESS
COST, (DEFICIENCY)
TOTAL CAPITAL OF OPERATING
PROCEEDS ORIGINAL ORIGINAL IMPROVEMENT, RECEIPTS OVER
RECEIVED EQUITY MORTGAGE CLOSING AND CASH
PROPERTY FROM SALE INVESTMENT FINANCING SOFT COSTS EXPENDITURES(9)
-------- --------- ---------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
G.D. Searle and Co.(1)............................. $ 124,615 $ 218,038 $ 0 $ 218,038 $ 249,998
Plant City, Florida(2)............................. 1,200,000 934,075 1,370,064 2,304,139 964,989
Jefferson, Georgia(3).............................. 844,778 893,466 1,310,496 2,203,962 855,611
Mid Continental Bottlers, Inc.(4).................. 17,800,000 4,945,126 5,040,000 9,985,126 10,004,008
Pace Membership Warehouse, Inc.(5)................. 6,930,000 2,433,500 3,400,000 5,833,500 2,485,104
Pace Membership Warehouse, Inc.(6)................. 6,966,100 3,149,314 3,500,000 6,649,314 439,632
Data Documents, Inc.(7)............................ 15,431,740 5,455,634 8,000,000 13,455,634 941,446
Industrial General Corporation(8).................. 650,000 759,902 777,352 1,537,254 1,143,549
Industrial General Corporation(12)................. 3,387,362 3,055,324 3,124,940 6,180,264 4,596,363
Liberty Fabrics of New York(13).................... 9,359,000 2,500,000 4,500,000 7,000,000 6,139,226
Genesco, Inc.(14).................................. 15,200,000 5,102,128 6,600,000 11,702,128 12,865,450
Jupiter, Florida(15)............................... 4,148,903 2,766,322 4,000,000 7,855,572 1,207,991
Leslie Fay Company(16)............................. 14,053,816 4,000,000 5,400,000 9,400,000 17,810,804
Helena, Montana(17)................................ 4,607,585 4,012,908 2,937,500 6,950,408 4,923,483
Autozone, Inc.(18)................................. 627,106 242,508 280,136 522,644 254,234
Safeway Stores, Inc.(19)........................... 4,649,270 5,541,790 0 5,541,790 1,852,277
Autozone, Inc.(20)................................. 431,779 357,050 0 357,050 303,583
Monte Vista, Colorado(21).......................... 186,090 259,422 358,869 618,291 96,429
Empire of America Credit Corp.(22)................. 8,025,885 2,830,000 4,500,000 7,463,792 1,571,108
GATX Logistics, Inc.(23)........................... 12,636,796 8,780,378 3,500,000 12,280,378 16,661,862
Best Buy Co. Inc.(24).............................. 3,102,930 835,000 1,600,000 2,538,839 520,071
Furon Company(25).................................. 1,370,806 618,777 932,240 1,551,017 416,119
Rapid City, South Dakota(26)....................... 4,214,272 3,100,000 6,800,000 10,515,701 3,470,494
Kobacker Stores, Inc.(27).......................... 355,958 166,882 211,949 378,831 209,139
Winn-Dixie Stores, Inc.(28)........................ 1,042,200 1,101,904 0 1,101,904 1,708,409
Harvest Foods, Inc.(29)............................ 2,388,544 1,026,210 1,593,224 2,619,434 509,403
Arley Merchandise Corporation(30).................. 4,754,940 2,808,555 5,000,000 7,808,555 3,241,515
Swiss M-Tex, L.P.(31).............................. 200,000 215,852 277,524 493,510 --(10)
----------- ----------- ----------- ------------ -----------
$144,690,475 $68,110,065 $75,014,294 $145,067,075 $95,442,297
=========== =========== =========== ============ ===========
</TABLE>
A-20
<PAGE> 139
FOOTNOTES
(1) On May 15, 1980, CPA(R):2 purchased an improved property and net leased it
to G.D. Searle and Co. On January 4, 1994 the property was sold for
$124,615, net of closing costs representing a loss of $93,423 over the
$218,038 cost basis of the property.
(2) On March 31, 1989 CPA(R):7 and CPA(R):8 purchased six improved properties
and net leased them to NV Ryan L.P. with 37.037% and 62.963%, respectively.
On April 15, 1994 the Plant City, Florida property was sold for $1,200,000
representing a loss of $1,104,139 over the $2,304,139 cost basis of the
property.
(3) On August 5, 1994 the Jefferson, Georgia property which was formerly leased
to NV Ryan L.P. by CPA(R):7 and CPA(R):8 was sold for $844,778, net of
closing costs representing a loss of $1,359,184 over the $2,203,962 cost
basis of the property.
(4) On December 31, 1986, CPA(R):7 purchased eight improved properties and net
leased them to Mid-Continent Bottlers, Inc. and subsequently transferred
the interest in one property to another tenant. On October 14, 1994, the
remaining seven properties were sold for $17,800,000 representing a gain of
$7,814,874 over the $9,985,126 cost basis of the property.
(5) On August 12, 1986, CPA(R):5 purchased an improved property which was
subsequently leased to Pace Membership Warehouse, Inc. On November 10,
1994, the property was sold for $6,930,000 net of closing costs
representing a gain of $1,096,500 over the $5,833,500 cost basis of the
property.
(6) On December 23, 1992, CPA(R)10 purchased an improved property and net
leased it to Pace Membership Warehouse, Inc. On November 10, 1994, the
property was sold for $6,966,100 net of closing costs, representing a gain
of $316,786 over the $6,649,314 cost basis of the property.
(7) On March 18, 1993 CPA(R):10 and CIP(R) purchased five improved properties
and net leased them to Data Documents, Inc. with 22.22% and 77.78%
interests, respectively. On November 28, 1994, the properties were sold for
$15,431,740 net of closing costs representing a gain of $1,976,706 over the
$13,455,034 cost basis of the property.
(8) On August 30, 1985, CPA(R):5 purchased seven improved properties and net
leased them to Industrial General Corporation. On December 30, 1994, the
Forrest City, Arkansas property was sold for $650,000 net of closing costs,
representing a loss of $887,254 over the $1,537,254 cost basis of the
property.
(9) Operating receipts include rental income from the properties as well as
certain receipts from the settlement of bankruptcy claims, where
applicable. The net excess (deficiency) presented is for the entire period
the property was owned by the applicable Partnership. No amounts are
presented for partial land sales since such amounts are negligible.
(10) The property sold represented only a portion of the property owned by the
partnership and no receipts or expenses have been separately allocated.
(11) The term "soft costs" refers to miscellaneous closing costs such as
accounting fees, legal fees, title insurance costs and survey costs.
(12) On August 30, 1985, CPA(R):5 purchased seven properties and net leased
them to Industrial General Corporation. On September 14, 1995, the Bald
Knob, Belville and Newbury port properties were sold for $3,387,362 net of
closing cost, representing a loss of $2,792,902 over the $6,180,264 cost
basis of the property.
(13) On January 3, 1984, CPA(R):5 purchased properties in Gardensville,
Virginia and in North Bergen, New Jersey and leased them to Liberty
Fabrics. On December 31, 1995, CPA recognized a gain on sale of $2,359,000
in connection with the sale.
(14) On June 2, 1983 CPA(R):4 purchased a property in Allentown, Pennsylvania
and leased it to Genesco, Inc. On June 30, 1995 the property was sold for
$15,200,000 net of closing costs representing a gain of $3,497,872 over
the $11,702,128 costs basis of the property.
A-21
<PAGE> 140
(15) On December 11, 1986 CPA(R):7 purchased a food service facility. On
December 20, 1995 the facility and operations were sold for $4,148,903
representing a loss of $3,706,669 over the $7,855,572 cost basis of the
property.
(16) On April 30, 1993, CPA(R):3 purchased a warehouse property in
Wilkes-Barre, Pennsylvania and leased it to the Leslie Fay Company. On
January 10, 1996 CPA(R):3 sold the property recognizing a gain of
$4,653,816 over the cost basis of the property. Cash received net of
closing cost of $14,303,816, included two lump sum payments of $7,200,000
and $5,000,000 from Leslie Fay in connection with settlement agreement
regarding a purchase option which did not ultimately result in the sale of
the property to Leslie Fay. A third purchased the property for $1,853,816,
net of selling costs.
(17) On May 1, 1985, CPA(R):5 purchased an office building in Helena, Montana
and was assigned an existing net lease with IBM Corporation which
subsequently reduced its occupancy from 100% to 40% leasable space.
CPA(R):5 subsequently leased the remaining space to various other tenants.
On January 19, 1996 CPA(R):5 recognized a loss of $2,342,023 over cost
basis of the property.
(18) On May 2, 1986 CPA(R):6 purchased property in Dalton, Georgia and
Birmingham, Alabama and leased them to Autozone, Inc. On January 26, 1996
and April 26, 1996 the properties were sold for $627,106 net of selling
cost. CPA(R):6 recognized gains on sales over the cost basis of the
properties of $104,462 in connection with sales.
(19) On December 19, 1991, CPA(R):10 and CIP(R) purchased three supermarkets
subject to existing net leases with Safeway Stores, Inc. as
tenants-in-common, each with 50% ownership interests. On January 26, 1996
and February 15, 1996 CPA(R):10 and CIP(R) sold the Glendale, Arizona and
Escondido, California properties, respectively. CPA(R):10 and CIP(R)
recognized a net loss on both sales of $892,250 over the cost basis of the
properties.
(20) On August 28, 1987, CPA(R):7 purchased seven improved properties and net
leased them to Autozone, Inc. On February 12, 1996 the Denham Spring,
Louisiana property and was sold for $431,779 representing a gain of
$74,729 over the $357,050 cost basis of the property.
(21) On January 29, 1988 CPA(R):7 purchased 10 improved properties and net
leased them to Yellow Front Stores, Inc. The Yellow Front lease was
ultimately terminated and the property was released. On February 14, 1996
the Monte Vista, Colorado property was sold for $186,090, net of closings
costs representing a loss of $432,201 over the $618,291 cost basis of the
property.
(22) On June 28, 1991, CPA(R):10 purchased an office building occupied by
Empire of America Realty Credit Corp. ("Empire") for $7,330,000 of which
$4,500,000 was financed by a mortgage loan. On March 15, 1996, CPA(R):10
accepted Empire's purchase offer of $8,500,000 and recognized a net gain
on sale of $562,093 over the original cost of the property.
(23) On June 7, 1985, CPA(R):5 purchased a warehouse property in Hodgkins,
Illinois which was net leased to General Motors Corporation. In November
1993, the General Motors Corporation lease terminated and CPA(R):5 entered
into a new lease with GATX Logistics, Inc. On April 4, 1996, CPA(R):5
recognized a gain on sale of $356,418 over the cost basis of the property.
(24) On October 16, 1992, CPA(R):10 purchased land and a retail store for
$2,435,000 subject to an existing net lease with Sports Town, Inc. Best
Buy Co., Inc. subsequently assumed the lease. CPA(R):10 obtained a
$1,600,000 mortgage loan for this property in September 1993. On May 16,
1996, CPA(R):10 sold the retail store for $3,250,000 and recognized a gain
of $564,091 over the original cost basis of the property.
(25) On January 29, 1990 CPA(R):8 and CPA(R):9 purchased nine properties as
tenants-in-common and leased them to the Furon Company. On September 9,
1996, two properties were sold in Liverpool, Pennsylvania and the other in
Twinsburg, Ohio, CPA(R):8 and 9 recognized a loss of $189,211 over the
cost basis of the two properties.
(26) On April 24, 1985, CPA(R):5 purchased a hotel in Rapid City, South Dakota
which it operated as a Holiday Inn. On October 1, 1996, the hotel property
and its operations were sold for $4,105,000. CPA(R):5 recognized a loss of
$6,301,429 over the cost basis of the property. The mortgage balance at
A-22
<PAGE> 141
the time of sale of $6,800,000 is presented net of sinking fund reserves
of $2,295,000 which were applied as principal payments at the time of
sale. The net cash received on sale was $290,728 less than the amount
necessary to pay the remaining mortgage principal balance.
(27) On January 17, 1979, CPA(R):1 purchased fifteen properties located in
California, Ohio and Indiana and net leased these properties to Kobacker
Stores, Inc. On October 17, 1996, Kobacker exercised options under the
terms of its leases for properties in Eastlake and Cleveland, Ohio to
purchase such properties for stated purchase prices of $165,000 and
$200,000, respectively, resulting in a loss of $22,873 over the cost basis
of the properties.
(28) On December 28, 1979, CPA(R):1 purchased a supermarket in Louisville,
Kentucky and net leased it to Winn-Dixie Stores, Inc. On August 11, 1997,
CPA:1 sold the property and recognized a gain of $607,861.
(29) On February 21, 1992, CPA:(R)10 and CIP(R) purchased as tenants-in-common,
each with undivided 50% ownership interests, 13 supermarkets and two
office buildings and entered into a master lease with Harvest Foods, Inc.
In September 1997, CPA(R):10 and CIP(R) sold three properties and
recognized a gain of $105,131 each.
(30) On July 13, 1984, CPA(R):5 purchased two properties in Sumter and
Columbia, South Carolina and net leased them to Arley Merchandise
Corporation ("Arley"). In July 1997, the Arley lease was terminated by the
Bankruptcy Court in connection with Arley's voluntary petition of
bankruptcy. In May 1997, the lender on the limited recourse mortgage loan
collateralized by the Arley properties made a demand for payment for the
entire outstanding principal balance of the loan of $4,754,940. The lender
initiated a lawsuit for the purpose of foreclosing on the Arley
properties, which CPA(R):5 did not contest. On November 17, 1997, the
ownership of the Arley properties was transferred to the lender and the
loan obligation was canceled. In connection with the foreclosure, CPA(R):5
recognized a gain of $956,829 on the difference between liabilities
forgiven and assets surrendered.
(31) On August 26, 1987, CPA(R):7 purchased properties in Travelers Rest and
Liberty, South Carolina and net leased them to Swiss M-Tex, L.P. On
November 26, 1997, CPA(R):7 sold the Liberty property for $200,000. In
connection with the sale, CPA(R):7 wrote down the Liberty property to an
estimated net realizable value of $200,000 and incurred a charge of
$139,999 on the writedown.
A-23
<PAGE> 142
EXHIBIT B
CPA LOGO
CORPORATE PROPERTY ASSOCIATES 14
INCORPORATED
ORDER FORM
[SPECIMEN LOGO]
B-1
<PAGE> 143
INSTRUCTIONS FOR COMPLETION
OF CPA(R):14 ORDER FORM
INSTRUCTIONS TO INVESTORS
YOU MUST COMPLETE ALL ITEMS AND SIGN THE ORDER FORM IN ITEM 7. INVESTORS ARE
ENCOURAGED TO READ THE PROSPECTUS IN ITS ENTIRETY FOR A COMPLETE EXPLANATION
OF AN INVESTMENT IN THE COMPANY.
Item 1 Check the appropriate box to indicate form of ownership. If the
investor is a Custodian, Corporation, Partnership or Trust, please provide the
additional requested information and/or documents.
Item 2 Indicate the number of shares you are purchasing (250 Shares is the
minimum for investors other than IRAs and KEOGHS; 200 Shares is the minimum for
investors who are IRAs or KEOGHS (250 shares if you are resident of Iowa)) and
the dollar amount of your investment. Check the appropriate box to indicate
whether this is an initial or additional investment and whether the order is to
be combined with that of another investor for the purpose of obtaining a volume
discount available to "single purchasers."
Item 3 Please print name(s) in which Shares are to be registered and
provide address and telephone numbers. Check appropriate box if you are a
non-resident alien, a U.S. citizen residing outside U.S. or subject to back up
withholding (if the latter applies to you, cross out clause (ii) in the
paragraph appearing immediately above Item 1). IRAs and KEOGHs should provide
the taxpayer identification number of the account AND the social security number
of the accountholder. Trusts should provide their taxpayer identification
number. Custodians should provide the minor's social security number. All
individual investors should provide their social security number. Other entities
should provide their taxpayer identification number. If you have an account with
the broker/dealer named on the reverse side of the form, provide your account
number.
Item 4 Provide mailing address of beneficiary of a Trust, IRA or KEOGH if
so desired so that duplicate copies of shareholder reports can be sent to such
beneficiary.
Item 5 Provide dividend payment preference.
Item 6 Print the two-letter abbreviation of your state of residence (if an
IRA or KEOGH, state of residence of beneficiary).
Item 7 You MUST sign the form in Item 7. Signature(s) must be witnessed
and the date of signing must be inserted on the line provided.
AFTER FOLLOWING THE ABOVE INSTRUCTIONS, DETACH THE ORDER FORM ALONG THE
PERFORATION AND RETURN THE ORDER FORM TO THE BROKER WHO SOLICITED YOUR ORDER
TOGETHER WITH A CHECK MADE PAYABLE TO "THE U.S. TRUST COMPANY OF NEW YORK AS
ESCROW AGENT" (OR, INSTEAD OF A CHECK, A REQUEST TO THE BROKER IN THE AMOUNT OF
YOUR ORDER). TRUSTS should furnish a copy of the trust instrument and all
amendments thereto. CORPORATIONS should furnish an appropriate corporation
resolution authorizing the purchase of the Shares. PARTNERSHIPS should furnish a
copy of the partnership agreement.
INSTRUCTIONS TO BROKERS
Please be sure to verify all investor information on the Order Form. YOU
MUST COMPLETE ITEM 8 AND SIGN THE ORDER FORM FOR THE ORDER TO BE ACCEPTED.
Please verify that investors have signed Item 7.
Please send check(s) payable to "The U.S. Trust Company of New York, as
Escrow Agent" and completed Order Form(s) to The U.S. Trust Company of New York,
770 Broadway, 13th Floor, New York, New York 10003, Attention: Barbara Schoemig.
For wiring instructions, contact The U.S. Trust Company of New York at
212-852-1665 prior to wiring funds.
[Specimen Logo]
B-2
<PAGE> 144
CORPORATE PROPERTY ASSOCIATES 14
INCORPORATED
ORDER FORM
The investor named below, under penalties of perjury, certifies that (i) the
number shown under Item 3 on this Order Form is his correct Taxpayer
Identification Number (or he is waiting for a number to be issued to him) and
(ii) he is not subject to backup withholding either because he has not been
notified by the Internal Revenue Service ("IRS") that he is subject to backup
withholding as a result of a failure to report all interest or dividends, or the
IRS has notified him that he is no longer subject to backup withholding [NOTE:
CLAUSE (ii) IN THIS CERTIFICATION SHOULD BE CROSSED OUT IF THE APPROPRIATE BOX
IN ITEM 3 BELOW HAS BEEN CHECKED].
<TABLE>
<S> <C>
1. FORM OF OWNERSHIP Mark only one box.
[ ] IRA
[ ] SINGLE PERSON
[ ] KEOGH
[ ] HUSBAND AND WIFE AS COMMUNITY PROPERTY
(In Item 7, both signatures must appear) [ ] PENSION OR PROFIT SHARING PLAN
[ ] JOINT TENANTS WITH RIGHT OF SURVIVORSHIP [ ] TRUST (Trust Agreement MUST be enclosed)
(In Item 7, both signatures must appear) ALL SECTIONS MUST BE FILLED IN
Trustee name(s)
[ ] TENANTS IN COMMON ----------------------------------------------
Trust date----------------------
[ ] A MARRIED PERSON SEPARATE PROPERTY (In Item 7, Month Day Year
only one signature must appear)
[ ] For the benefit of
[ ] CUSTODIAN ------------------------------------------
Custodian for
- ------------------------------------------------- [ ] OTHER
Under Uniform Gift to Minors Act of the State of
--------------- [ ] ESTATE
[ ] CORPORATION OR PARTNERSHIP [ ] CHARITABLE REMAINDER TRUST
(Corporate Resolution or Partnership Agreement MUST be
enclosed) [ ] NON-PROFIT ORGANIZATION
</TABLE>
2. PURCHASE INFORMATION
<TABLE>
<S> <C> <C>
No. of Shares--minimum 250 (or Dollar Amount
200 for an IRA or KEOGH) ------------------------ of $
------------------------------
Investment
($10 per Share)
</TABLE>
THIS IS AN (CHECK ONE): [ ] INITIAL INVESTMENT [ ] ADDITIONAL INVESTMENT IN
THIS OFFERING
[ ] Check box if the Shares ordered are to be combined with an order of another
investor for the purpose of obtaining volume discounts to "single
purchasers." Name of other investor(s)
- --------------------------------------------------------------------------------
3. INVESTOR INFORMATION Name(s) and address will be recorded exactly as printed
below.
Name
- --------------------------------------------------------------------------------
Name
of Joint
- --------------------------------------------------------------------------------
Investor
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
City
- ------------------------------------------------------ State
- ------- Zip Code
- ----------------
Investor Business Phone Number
- ---------
- ---------
- ------------ [ ] Check box if you are a non-resident alien
[ ] Check box if you are a U.S. citizen
residing outside the U.S.
[ ] Check box if you are subject to
backup withholding
Investor Home Phone Number
- ---------
- ---------
- ------------
<TABLE>
<S> <C> <C>
- --------------------------------- --------------------------------- ---------------------------------
Investor's Social Security No. Joint Investor's Taxpayer
Social Security No. ID. No.
</TABLE>
Investor's Account Number with Broker Dealer
- ----------------------------------------------------------
(if any)
4. INVESTOR MAILING ADDRESS If you are investing through a Trust, IRA or KEOGH
and want duplicate copies of shareholder reports sent to you, please complete.
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
City
- ------------------------------------------------------ State
- ------- Zip Code
- ----------------
Account number (if any)
- --------------------------------------- Account name
- ---------------------------------------------------
(REVERSE SIDE MUST BE SIGNED BY
BROKER AND BY INVESTOR)
[SPECIMEN LOGO]
DETACH ALONG PERFORATION
B-3
<PAGE> 145
5. DIVIDEND PAYMENT OPTIONS: (NON-QUALIFIED PLANS) INVESTORS MAY CHOOSE EITHER
OPTION A OR B.
A. Please indicate the address(es) to which dividends should be mailed.
Dividends may be split on a percentage basis, between a maximum of two (2)
payees.
Destination
1: ------------%*
Company ------------------------------
Address ------------------------------ ------------------------------
City ------------------------------
State ------------------ Zip
Code ------------------
Account number (if
any) ------------------
Account
name ------------------------------
Destination 2: ------------%*
Company ------------------------------
------------------------------
Address ------------------------------
City ------------------------------
State ------------------ Zip
Code ------------------
Account number (if
any) ------------------
Account
name ------------------------------
* Percentage amount listed above must equal 100%.
B. AUTOMATIC DEPOSITS--Please include a voided check or savings deposit slip.
I authorize Imperial Bank to initiate variable entries to my checking or savings
account. This authority will remain in effect until I notify the CPA(R):14
Investor Relations Department or Resource/Phoenix, the transfer agent for
CPA(R):14, in writing to cancel in such time as to afford a reasonable
opportunity to act on the cancellation.
Financial Institution Name and
Address --------------------------------------------------
Account Type (circle one): Checking Savings Other
Account Number ------------------------------ Bank ABA Routing
Number ------------------------------
6. STATE OF RESIDENCE --------
7. SIGNATURE OF INVESTOR(S)
Signature of investor is required.
- ------------------------ ------------------------ --------------------
SIGNATURE OF WITNESS SIGNATURE OF
INVESTOR DATE
- ------------------------ ------------------------ --------------------
SIGNATURE OF WITNESS SIGNATURE OF
INVESTOR DATE
- ------------------------------------------------------------
- ------------------------------------------------------------
8. BROKER/DEALER INFORMATION THE BROKER MUST SIGN BELOW TO COMPLETE ORDER.
BROKER HEREBY WARRANTS THAT IT IS A DULY
LICENSED BROKER AND MAY LAWFULLY SELL SHARES IN
THE STATE DESIGNATED AS THE INVESTOR'S
RESIDENCE.
Licensed Firm Name ------------------------------
Broker Name ------------------------------
Broker Mailing Address ------------------------------
City -------------------- State ---------- Zip Code ----------
Broker Number ------------------ Telephone Number ------------------
The undersigned confirms by his signature that he (i) has reasonable grounds to
believe that the information and representations concerning the investor
identified herein are true, correct and complete in all respects; (ii) has
discussed such investor's prospective purchase of Shares with such investor;
(iii) has advised such investor of all pertinent facts with regard to the
liquidity and marketability of the Shares; (iv) has delivered a current
Prospectus and related supplements, if any, to such investor; and (v) has
reasonable grounds to believe that the purchase of Shares is a suitable
investment for such investor, that such investor meets the suitability standards
applicable to such investor set forth in the Prospectus and related supplements,
if any, and that such investor is in a financial position to enable such
investor to realize the benefits of such an investment and to suffer any loss
that may occur with respect thereto.
------------------------------ ------------------
Broker
Signature Date
ALL INVESTOR AND BROKER/DEALER INFORMATION MUST BE COMPLETED OR
REGISTRATION CANNOT BE PROCESSED.
- ------------------------------------------------------------
FOR COMPANY USE ONLY:
[Specimen Logo]
B-4
<PAGE> 146
- ------------------------------------------------------------
- ------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.........................
Risk Factors...............................
Suitability Standards......................
Estimated Use of Proceeds..................
Management Compensation....................
Conflicts of Interest......................
Prior Offerings by Affiliates..............
Management.................................
Investment Objectives and Policies.........
Holders of Shares of the Company...........
Management Discussion and Analysis of
Financial Condition......................
Distributions..............................
Description of Properties..................
Income Tax Considerations..................
ERISA Considerations.......................
Description of Shares......................
The Offering...............................
Reports to Shareholders....................
Legal Opinions.............................
Experts....................................
Sales Literature...........................
Further Information........................
Financial Statements....................... F-1
Prior Performance Tables................... A-1
Specimen CPA(R):14 Order
Form -- Exhibit B........................ B-1
</TABLE>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS UNLESS
PRECEDED OR ACCOMPANIED BY THIS PROSPECTUS NOR HAS ANY PERSON BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. HOWEVER, IF
ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE
DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.
WPCAREY LOGO
CPA LOGO
CORPORATE PROPERTY
ASSOCIATES 14
Incorporated
A Maximum of 40,000,000 Shares of Common Stock
PROSPECTUS
CAREY FINANCIAL CORPORATION
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 147
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 111,200
NASD filing fee............................................. 30,500
Legal fees and expenses..................................... 250,000
Printing and engraving...................................... 250,000
Accounting fees and expenses................................ 175,000
Blue sky expenses........................................... 150,500
Escrow and transfer agents' fees and expenses............... 40,000
Advertising and sales literature............................ 375,000
Miscellaneous............................................... 17,800
----------
TOTAL....................................................... $1,400,000
==========
</TABLE>
ITEM 31. SALES TO SPECIAL PARTIES.
None.
ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.
On November 10, 1997 Carey Property Advisors purchased 20,000 shares of
common stock of the Registrant for $200,000 cash.
Since the transaction described above was not considered to have involved a
"public offer" within the meaning of Section 4(2) of the Securities Act of 1933,
as amended, the shares issued were deemed to be exempt from registration under
said Act. The recipient of shares in the Registrant in the foregoing transaction
represented that such interests were being acquired by it for the purposes of
investment and not with a view to the distribution thereof.
ITEM 33. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Indemnification is provided for in Article VI of the Articles of
Incorporation of the Registrant and in Article X of the Bylaws of the
Registrant, and such provisions are incorporated herein by reference.
ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not Applicable.
ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.
(a) 1. CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements are filed as part of
this Report:
Report of Independent Accountants
Consolidated Balance Sheets at December 31, 1997 and 1998.
Consolidated Statements of Operations for the period from Inception
(June 4, 1997) to December 31, 1997 and for the year ended December
31, 1998.
Consolidated Statements of Shareholders' Equity for the period from
Inception (June 4, 1997) to December 31, 1997 and for the year ended
December 31, 1998.
II-1
<PAGE> 148
Consolidated Statements of Cash Flows for the period from Inception
(June 4, 1997) to December 31, 1997 and for the year ended December
31, 1998.
Notes to Consolidated Financial Statements.
(b) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<C> <S>
3.1(1) Amended and Restated Articles of Incorporation of
Registrant.
3.2(1) Form of Bylaws of Registrant.
5 Form of Opinion of Piper & Marbury, L.L.P. as to legality of
securities issued.
8.1 Opinion of Reed Smith Shaw & McClay LLP as to certain tax
matters.
8.2 Opinion of Reed Smith Shaw & McClay LLP as to certain ERISA
matters.
10.2(2) Lease Agreement dated July 27, 1998 by and between Best (CA)
QRS 14-4, as Landlord, and Best Co. Inc., as Tenants.
10.3(2) Lease Agreement dated February 2, 1998 by and between ESI
(CA) QRS 12-6, as Landlord, and Etec Systems, Inc., as
Tenants.
10.4(2) Lease Agreement dated July 29, 1998 by and between META (CA)
QRS 14-16, as Landlord, and Metagenics Incorporated, as
Tenants.
10.5(2) Lease Agreement dated July 30, 1998 by and between TRUCK
(IN) QRS 14-3, as Landlord, and Burlington Motor Carrier
Inc., as Tenants.
10.6(2) Lease Agreement dated November 24, 1998 by and between BAC
(MO) QRS 14-10, as Landlord, and The Benjamin Ansehl Co., as
Tenants.
10.7(2) Lease Agreement dated December 22, 1998 by and between
Conductor (CA) QRS 14-11, as Landlord, and Advanced Micro
Devices, Inc., as Tenants.
10.8(2) Lease Agreement dated December 28, 1998 by and between CBS
(PA) QRS 14-12, as Landlord, and Contraves Brashear Systems,
L.P., as Tenants.
10.28 Form of Sales Agency Agreement.
10.29 Form of Selected Dealer Agreement.
10.30(3) Advisory Agreement.
10.31 Form of Wholesaling Agreement.
10.32 Form of Escrow Agreement.
21.1(4) Subsidiaries of Registrant as of March 24, 1999.
23 Consent of PricewaterhouseCoopers LLP.
99.1 Table VI: Acquisition of Properties by Prior Programs.
</TABLE>
- ---------------
(1) Will be filed by Amendment.
(2) Filed with Report on Form 8-K dated February 2, 1999.
(3) Filed with Form S-11 (Reg. No. 333-31437) filed on July 16, 1997.
(4) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
ITEM 36. UNDERTAKINGS.
(a) Registrant undertakes (1) to file, during any period in which offers or
sales are being made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section (10)(a)(3) of the Securities
Act, (ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement
and (iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement; (2) that, for
the purpose of determining any liability under the
II-2
<PAGE> 149
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at this time shall be deemed to be the initial bona
fide offering thereof; (3) that all post-effective amendments will comply with
the applicable forms, rules and regulations of the Securities and Exchange
Commission in effect at the time such post-effective amendments are filed; and
(4) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Registrant pursuant to foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant unless in the opinion of its counsel the matter has been
settled by controlling precedent, will submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) Registrant undertakes to file a sticker supplement pursuant to rule
424(c) under the Securities Act during the distribution period describing each
Property not identified in the Prospectus at such time as there arises a
reasonable probability that such Property will be acquired and to consolidate
all such stickers into a post-effective amendment filed at least once every
three months, with the information contained in such amendment provided
simultaneously to the existing Shareholders if such information has not
previously been provided. Each sticker supplement should disclose all
compensation and fees received by the Advisor and its affiliates in connection
with any such acquisition. The post-effective amendment shall include audited
financial statements meeting the requirements of Rule 3-14 or Regulation S-X
only for properties acquired during the distribution period, if appropriate.
II-3
<PAGE> 150
POWERS OF ATTORNEY AND SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-11 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York on the 20th day of
April, 1999.
CORPORATE PROPERTY ASSOCIATES 14
INCORPORATED
By: /s/ H. AUGUSTUS CAREY
---------------------------------------
H. Augustus Carey
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints H. Augustus Carey and William P. Carey his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement, and
to file the same, with all exhibit thereto, and any other documents in
connection therewith, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ WILLIAM P. CAREY Chairman of the Board and Chief April 21, 1999
- --------------------------------------------------- Executive Officer (Principal Executive
William P. Carey Officer) of the Registrant
/s/ H. AUGUSTUS CAREY President of the Registrant April 21, 1999
- ---------------------------------------------------
H. Augustus Carey
/s/ WILLIAM RUDER Independent Director of the Registrant April 21, 1999
- ---------------------------------------------------
William Ruder
/s/ GEORGE E. STODDARD Independent Director of the Registrant April 21, 1999
- ---------------------------------------------------
George E. Stoddard
/s/ CHARLES C. TOWNSEND Independent Director of the Registrant April 21, 1999
- ---------------------------------------------------
Charles C. Townsend
/s/ WARREN G. WINTRUB Independent Director of the Registrant April 21, 1999
- ---------------------------------------------------
Warren G. Wintrub
</TABLE>
II-4
<PAGE> 151
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ THOMAS ZACHARIAS Executive Vice President and Chief April 21, 1999
- --------------------------------------------------- Financial Officer of the Registrant
Thomas Zacharias
/s/ STEVEN M. BERZIN Executive Vice President and Chief April 21, 1999
- --------------------------------------------------- Financial Officer of the Registrant
Steven M. Berzin
/s/ GORDON F. DUGAN Executive President of the Registrant April 21, 1999
- ---------------------------------------------------
Gordon F. DuGan
/s/ CLAUDE FERNANDEZ Executive Vice President and Chief April 21, 1999
- --------------------------------------------------- Administrative Officer of the
Claude Fernandez Registrant
/s/ GORDON J. WHITING Executive Vice President and Portfolio April 21, 1999
- --------------------------------------------------- Manager of the Registrant
Gordon J. Whiting
</TABLE>
II-5
<PAGE> 152
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE
- ----------- ------- ----
<C> <S> <C>
3.1(1) Amended and Restated Articles of Incorporation of
Registrant..................................................
3.2(1) Form of Bylaws of Registrant................................
5 Form of Opinion of Piper & Marbury, L.L.P. as to legality of
securities issued...........................................
8.1 Opinion of Reed Smith Shaw & McClay LLP as to certain tax
matters.....................................................
8.2 Opinion of Reed Smith Shaw & McClay LLP as to certain ERISA
matters.....................................................
10.2(2) Lease Agreement dated July 27, 1998 by and between Best (CA)
QRS 14-4, as Landlord, and Best Co. Inc., as Tenants........
10.3(2) Lease Agreement dated February 2, 1998 by and between ESI
(CA) QRS 12-6, as Landlord, and Etec Systems, Inc., as
Tenants.....................................................
10.4(2) Lease Agreement dated July 29, 1998 by and between META (CA)
QRS 14-16, as Landlord, and Metagenics Incorporated, as
Tenants.....................................................
10.5(2) Lease Agreement dated July 30, 1998 by and between TRUCK
(IN) QRS 14-3, as Landlord, and Burlington Motor Carrier
Inc., as Tenants............................................
10.6(2) Lease Agreement dated November 24, 1998 by and between BAC
(MO) QRS 14-10, as Landlord, and The Benjamin Ansehl Co., as
Tenants.....................................................
10.7(2) Lease Agreement dated December 22, 1998 by and between
Conductor (CA) QRS 14-11, as Landlord, and Advanced Micro
Devices, Inc., as Tenants...................................
10.8(2) Lease Agreement dated December 28, 1998 by and between CBS
(PA) QRS 14-12, as Landlord, and Contraves Brashear Systems,
L.P., as Tenants............................................
10.28 Form of Sales Agency Agreement..............................
10.29 Form of Selected Dealer Agreement...........................
10.30(3) Advisory Agreement..........................................
10.31 Form of Wholesaling Agreement...............................
10.32 Form of Escrow Agreement....................................
21.1(4) Subsidiaries of Registrant as of March 24, 1999.............
23 Consent of PricewaterhouseCoopers LLP.......................
99.1 Table VI: Acquisition of Properties by Prior Programs.......
</TABLE>
- ---------------
(1) Will be filed by Amendment.
(2) Filed with Report on Form 8-K dated February 2, 1999.
(3) Filed with Form S-11 (Reg. No. 333-31437) filed on July 16, 1997.
(4) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
II-6
<PAGE> 1
Exhibit 5
FORM OF PIPER & MARBURY OPINION
Reed Smith Shaw & McClay LLP
2500 One Liberty Place
Philadelphia, Pennsylvania 19103
Corporate Property Associates 14 Incorporated
Ladies and Gentleman:
We have acted as special Maryland counsel to Corporate Property
Associates 14 Incorporated, a Maryland Corporation (the "Company"), in
connection with the registration under the Securities Act of 1933, as amended
(the "Act"), pursuant to a Registration Statement on Form S-11 of the Company
(Registration No. 333-_______) (the "Registration Statement") filed on April
_19, 1999 with the Securities and Exchange Commission (the "Commission"), of up
to 40,000,000 shares of Common Stock, par value $.001 per share (the "Shares")
to be issued to the public on a best-efforts basis from time to time through
one or more dealers. This opinion is being furnished to you at your request in
connection with the filing of the Registration Statement.
In rendering the opinion expressed herein, we have examined the
Registration Statement, the Charter and Bylaws of the Company, minutes of the
proceedings of the Company's Board of Directors authorizing the issuance's of
the Shares, and such other documents as we have considered necessary. We have
also examined a Certificate of Secretary of the Company dated April 12, 1999
(the "Certificate").
In such examination we have assumed, without independent investigation,
the genuineness of all signatures, the legal capacity of all individuals who
have executed any of the aforesaid documents, the authenticity of all documents
submitted to us as originals, the conformity with originals of all documents
submitted to us as copies (and the authenticity of the originals of such
copies), and that all public records reviewed are accurate and complete. As to
factual matters, we have relied on the Certificate and have not independently
verified the matters stated therein.
Based upon the foregoing, we are of the opinion and advise you that the
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Maryland; and the Shares have been
duly authorized, and upon the issuance and delivery or the Shares in accordance
with the terms set forth in the Registration Statement, the Shares will be
validly issued, fully paid, and non-assessable.
The opinion expressed above is limited to the laws of the State of
Maryland exclusive of the securities or "blue sky" laws of the State of
Maryland. The opinion is rendered as of the date hereof. We assume no obligation
to update this opinion to reflect any facts or circumstances which may hereafter
occur. This opinion may be relied upon by Reed Smith Shaw & McClay LLP in giving
their legality opinion to be filed as an exhibit to the Registration Statement.
This opinion may not be relied upon by any other person or in any connection
without our prior written approval. The opinion expressed in
Harrisburg, PA McLean, VA Newark, NJ New York, NY
Pittsburgh, PA Princeton, NJ Washington, DC
<PAGE> 2
Reed Smith Shaw & McClay LLP
Page 2
this letter is limited to the matters set forth in this letter, and no other
opinion should be inferred beyond the matters expressly stated.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the Prospectus included in the Registration Statement. In giving our
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Commission thereunder.
Very truly yours,
<PAGE> 1
Exhibit 8.1
[LETTERHEAD REED SMITH SHAW & MCCLAY, L.L.P.]
April , 1999
Corporate Property Associates 14 Incorporated
50 Rockefeller Plaza
New York, New York 10020
Ladies and Gentlemen:
You have requested our opinions with respect to certain Federal income
tax matters in connection with the proposed Offering of 40,000,000 shares of
common stock (the "Shares") of Corporate Property Associates 14 Incorporated, a
Maryland corporation (the "Company"), as a more fully described in the
Registration Statement on Form S-11, Registration 333-_______ ("Registration
Statement"), and the Prospectus included therein, filed by the Company with the
Securities and Exchange Commission. All terms used herein have the respective
meanings set forth in the Prospectus.
We have acted as counsel to the Company with respect to the Offering of
Shares. This letter is for delivery in connection with the proposed Offering of
Shares made by the Prospectus and is intended to confirm as of the date hereof
certain opinions described in the "United States Federal Income Tax
Considerations" section of the Prospectus. This letter and the opinions
expressed or confirmed herein are for delivery to the Company and may be relied
upon only by it and those Shareholders who acquire their Shares on or before
termination of the sale of Shares under the Registration Statement.
In rendering our opinions, we have reviewed and relied upon the
Registration Statement and exhibits to the Registration Statement, including the
Articles of Incorporation and Bylaws, each as amended. In addition, we have
relied upon the letter from the Advisor and the Company to this firm, dated
April 16, 1999 representing the truth and accuracy of the representations
attributed to them in the Prospectus, we have had discussions with executive
personnel of the Advisor, and we have examined and relied upon such records,
documents, certificates, instructions, resolutions, and other matters which, in
our judgment, were necessary in order to enable us to render the opinions herein
set forth.
<PAGE> 2
[LETTERHEAD REED SMITH SHAW & MCCLAY, L.L.P.]
Corporate Property Associates 14 Incorporated
April , 1999
Page 2
Based on and subject to the foregoing, we are of the opinion that under
Federal income tax laws as of the date hereof:
(1) Assuming that the Company: (a) operates in the manner described in the
Registration Statement, (b) operates in accordance with the representations
therein, and (c) will have at least 100 Shareholders and will not be closely
held, its method of operation permits it to meet the requirements for
qualification and taxation as a REIT under the Code; and
(2) The section of the Registration Statement entitled "United States
Federal Income Tax Considerations" accurately reflects, in the aggregate, the
state of Federal income tax law and addresses, in relation to the facts, the
material Federal income tax issues with respect to which there exists a
reasonable likelihood of challenge by the IRS.
With respect to our opinion contained in paragraph (1) above, you
should note that actual qualification of the Company as a REIT will depend upon
the Company's ability, through its actual operations, to meet the various
qualification tests imposed by the Code and that no prediction as to those
actual operating results is implied by our opinion. You should also be aware
that our opinion relates only to matters of Federal income tax law. While there
are a variety of state and local tax laws which could apply to the Company
and/or its Shareholders, our opinion does not purport to address the effect of
any such laws.
Our opinions and the analysis set forth above are based upon the
existing provisions of the Code, regulations promulgated thereunder, existing
published revenue rulings, procedures and releases issued by the IRS and
relevant judicial decisions, any of which could be changed at any time. Any such
changes may be retroactive with respect to transactions entered into prior to
the date of such changes and, therefore, could require a modification of our
opinions. You should also note that Congress from time to time has directed its
attention toward reforming Subchapter C of the Code, which includes the
framework for all corporations. It is possible that any legislative proposals
will address the taxation of certain corporations, such as REITs and regulated
investment companies, which are treated differently under the Code from regular
corporations.
<PAGE> 3
[LETTERHEAD REED SMITH SHAW & MCCLAY, L.L.P.]
Corporate Property Associates 14 Incorporated
April , 1999
Page 3
We hereby consent to the filing of this opinion as Exhibit 8.1 to the
Registration Statement and to the references to Reed Smith Shaw & McClay LLP in
the Registration Statement and in the Prospectus forming part of the
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended.
Very truly yours,
REED SMITH SHAW & McCLAY LLP
<PAGE> 1
Exhibit 8.2
[Reed Smith Shaw & McClay letterhead]
(215) 851-8182
April , 1999
Corporate Property Associates 14 Incorporated
50 Rockefeller Plaza
New York, New York 10020
Re: Corporate Property Associates 14 Incorporated
Gentlemen:
Corporate Property Associates 14 Incorporated (the "Company") is a
Maryland corporation which has qualified as a real estate investment trust
("REIT") for Federal income tax purposes. The Company intends to make a public
offering of 40,000,000 shares of its common stock, $.001 par value (the
"Shares"). The Company has requested our opinion as to whether pursuant to the
Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. sections
1001-1461 ("ERISA"), the assets of the Company would be treated as the assets
of an employee benefit plan by virtue of that plan's purchase of Shares.
In rendering our opinion, we have reviewed the Registration Statement on
Form S-11, Registration No. 333-______ (the "Registration Statement"), and the
Prospectus included therein, filed by the Company with the Securities and
Exchange Commission, the Company's Articles of Incorporation and Bylaws, each
as amended. We have assumed the authenticity of the documents provided and have
not attempted to verify independently any factual information.
Based on and subject to the foregoing, we are of the opinion that as of
the date hereof:
1) Assuming the offering takes place as described in the Registration
Statement, the Shares should constitute "publicly-offered securities," as that
term is used in regulations
<PAGE> 2
[Reed Smith Shaw & McClay letterhead]
Corporate Property Associates 14 Incorporated
November 10, 1997]
Page 2
promulgated by the Department of Labor (the "Department") and codified at 29
C.F.R. 2510.3-101, and the underlying assets of the Company should not be
considered to be plan assets by virtue of an employee benefit plan's purchase
of Shares; and
2) The discussions contained in the portions of the Registration
Statement entitled "Risk Factors--Other Investment Risks--Investment by Pension
or Profit-Sharing Trusts, Keoghs or IRAs" and "ERISA Considerations" (all of
which are incorporated by reference into this opinion) accurately reflect the
relevant state of the law affecting employee benefit plans and their
fiduciaries.
This opinion is based on existing law which is to a large extent the
result of a regulation and administrative interpretations by the Department. No
assurance can be given that administrative opinions or judicial decisions may
not be forthcoming which would modify the conclusions expressed in this opinion.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm under the captions "ERISA
Considerations" and "Risk Factors" therein concerning this opinion.
Sincerely,
REED SMITH SHAW & McCLAY LLP
MBP/jrg
<PAGE> 1
Exhibit 10.28
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
50 ROCKEFELLER PLAZA
NEW YORK, NY 10020
SALES AGENCY AGREEMENT
April , 1999
Carey Financial Corporation
50 Rockefeller Plaza
New York, NY 10020
Ladies and Gentlemen:
Corporate Property Associates 14 Incorporated, a Maryland corporation
(the "Company"), hereby confirms its agreement with you as follows:
1. Introduction. This Agreement sets forth the understandings and
agreements between the Company and you whereby you will offer and sell on a best
efforts basis for the account and risk of the Company, along with a group of
selected dealers (the "Selected Dealers") and registered investment advisers
(the "Selected Investment Advisers") to be formed with your assistance,
40,000,000 shares of common stock of the Company (the "Shares") at $10 per share
(subject to certain volume discounts).
2. Representations and Warranties of the Company
The Company represents, warrants and agrees that:
(a) Registration Statement and Prospectus. The Company has filed with the
Securities and Exchange Commission (the "Commission") a registration statement
and amendments on Form S-11 (No. 333-______), each containing a related
preliminary prospectus, for the registration of the Shares under the Securities
Act of 1933, as amended (the "Act") and the regulations thereunder (the
"Regulations"), and will prepare and file with the Commission any amendments to
the registration statement necessary for it to become effective, including an
amended preliminary prospectus. The registration statement, as amended, and the
amended prospectus on file with the Commission at the time the
<PAGE> 2
registration statement becomes effective (including financial statements,
exhibits and all other documents filed as a part thereof or incorporated
therein), are herein called the "Registration Statement" and the "Prospectus",
respectively, except that if the Registration Statement is amended by a
post-effective amendment, the term "Registration Statement" shall, from and
after the declaration of effectiveness of such post-effective amendment, refer
to the Registration Statement as so amended and the term "Prospectus" shall
refer to the prospectus as so amended, and if the Prospectus filed by the
Company pursuant to Rule 424(b) or 424(c) of the Regulations shall differ from
the Prospectus on file at the time the Registration Statement or any
post-effective amendment shall become effective, the term "Prospectus" shall
refer to the Prospectus filed pursuant to either of such Rules from and after
the date on which it shall have been mailed for filing with the Commission.
(b) Compliance with the Act. The Registration Statement has been
prepared and filed by the Company in conformity with the Act and the applicable
instructions and Regulations. The Commission has not issued any order preventing
or suspending the use of any prospectus or preliminary prospectus filed with the
Registration Statement or any amendments thereto. At the time the Registration
Statement becomes effective (the "Effective Date") and at the time that any
post-effective amendment thereto becomes effective and at all times subsequent
thereto up to the Termination Date (as defined in Section 3(d) hereof), the
Registration Statement and Prospectus (as amended or as supplemented) will
contain all statements which are required to be stated therein in accordance
with the Act and the Regulations and will in all respects conform to the
requirements of the Act and the Regulations, and will not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and each preliminary
prospectus filed as part of the Registration Statement as originally filed or as
part of any amendment thereto, or filed pursuant to Rule 424 under the Act,
complied when so filed in all material respects with the Act and Regulations and
did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
-2-
<PAGE> 3
(c) The Company. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Maryland with full power and authority to conduct the business in which it is
engaged in as described in the Prospectus. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or transacts
business of a type, that would make such qualification necessary.
(d) The Shares. The Shares, when issued, will be duly and validly
issued, fully paid and non-assessable and will conform to the description
thereof contained in the Prospectus; no holder thereof will be subject to
personal liability for the obligations of the Company solely by reason of being
such a holder; such Shares are not subject to the preemptive rights of any
stockholder of the Company; and all corporate action required to be taken for
the authorization, issue and sale of such Shares has been validly and
sufficiently taken.
(e) Violations. The Company is not in violation of its Articles of
Incorporation ("Articles") or Bylaws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument to which it is a party or by which it or any of
its properties is bound.
(f) Taxes. The Company has filed all Federal, state and foreign income
tax returns which have been required to be filed on or before the due date
(taking into account all extensions of time to file) and has paid or provided
for the payment of all taxes indicated by said returns and all assessments
received by the Company to the extent that such taxes or assessment have become
due.
(g) Pending Action. There is no action, suit or proceeding pending or,
to the best of the knowledge, information and belief of the Company, threatened
to which the Company is a party, before or by any court or governmental agency
or body.
(h) Financial Statements. The financial statements of the Company filed
as part of the Registration Statement and those included in the Prospectus
present fairly the financial position of the Company as of the date indicated
and the results of its operations for the periods specified; said financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a
-3-
<PAGE> 4
consistent basis; and PricewaterhouseCoopers LLP, whose report is filed with the
Commission as a part of the Registration Statement, are independent accountants
as required by the Act and the Regulations.
(i) No Subsequent Material Events. Since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
except as may otherwise be stated in or contemplated by the Registration
Statement and the Prospectus, (a) there has not been any material adverse change
in the condition (financial or otherwise) of the Company or in the earnings,
affairs or business prospects of the Company, whether or not arising in the
ordinary course of business, and (b) there have not been any material
transactions entered into by the Company except in the ordinary course of
business.
(j) Investment Company Act. The Company does not intend to conduct its
business so as to be an "investment company" as that term is defined in the
Investment Company Act of 1940, as amended and the rules and regulations
thereunder, and it will exercise reasonable diligence to ensure that it does not
become an "investment company" within the meaning of the Investment Company Act
of 1940.
(k) Authorization of Agreement. This Agreement and the Advisory
Agreement (the "Advisory Agreement") between the Company and Carey Property
Advisors (the "Advisor") have been duly and validly authorized, executed and
delivered by the Company and constitute the valid agreements of the Company
enforceable in accordance with their terms. The execution and delivery of this
Agreement and the Advisory Agreement, the consummation of the transactions
herein and therein contemplated and the compliance with the terms of this
Agreement and the Advisory Agreement by the Company will not conflict with or
constitute a default under the Articles or Bylaws or any indenture, mortgage,
deed of trust, lease or other agreement or instrument to which the Company is a
party, or any law, order, rule or regulation, writ, injunction or decree of any
government, governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company, or any of its property, except to the extent that
the enforceability of the indemnity and/or contribution provisions contained in
Section 8 of this Agreement may be limited under applicable securities law; and
no consent, approval, authorization or order of any court or other governmental
agency or body has been or is required for the performance of this Agreement or
the Advisory Agreement by the Company, or for the consummation of the
transactions
-4-
<PAGE> 5
contemplated hereby and thereby (except such as have been obtained under the Act
or as may be required under state securities or "blue sky" laws in connection
with the distribution of the Shares).
(l) Description of Agreements. The Company is not a party to or bound
by any contract or other instrument of a character required to be described in
the Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described and filed as required.
(m) Qualification as a Real Estate Investment Trust. The Company
intends to satisfy the requirements of the Internal Revenue Code of 1986 as
amended (the "Code") for qualification of the Company as a real estate
investment trust. The Company has elected to be treated as a real estate
investment trust under the Code and will direct the investment of the proceeds
of the offering of the Shares in such a manner, and will otherwise operate the
business of the Company, so as to comply with such requirements.
(n) Description of Properties. On the Effective Date and at all times
subsequent thereto up to the Termination Date, the section of the Prospectus
entitled "Description of Properties" will include, among other things, the
location and general character of all materially important real properties held
or intended to be acquired by the Company, the nature of the Company's title to
or other interest in such properties and the nature and amount of all material
mortgages or other liens or encumbrances against such properties and the
principal terms of any lease of any such properties and the lessee thereof and
such descriptions will be correct in all material respects.
3. Sales of Shares. On the basis of the representations, warranties and
covenants herein contained, but subject to the terms and conditions herein set
forth, the Company hereby appoints you as its sales agent ("Sales Agent") to
solicit purchasers, along with the Selected Dealers and Selected Investment
Advisers (as defined in Section 3(c)), for up to 40,000,000 Shares during the
period (the "Effective Term") from the Effective Date to the Termination Date in
the manner described in the Registration Statement. Subject to the performance
by the Company of all obligations to be performed by it hereunder and the
completeness and accuracy of all of its representations and warranties, you
agree to use your best efforts as Sales Agent, promptly following written or
telegraphic receipt of
-5-
<PAGE> 6
notice of the Effective Date from the Company, to offer and sell such number of
Shares as contemplated by this Agreement at the price stated in the Prospectus.
(a) Purchase of Shares. The purchase of Shares must be made during the
offering period described in the Prospectus (each such purchase hereinafter
defined as an "Order"). Persons desiring to purchase Shares are required to (i)
deliver to you, the appropriate Selected Dealer or Selected Investment Adviser a
check in the amount of $10 per Share purchased payable to The United States
Trust Company of New York, as escrow agent (the "Escrow Agent"), or (ii)
authorize a debit of such amount to the account such purchaser maintains with
you, the appropriate Selected Dealer or Selected Investment Adviser. For
investors residing in certain states, an order form in the form attached to the
Prospectus (each an "Order Form") must be completed and submitted to the
Company. On a daily basis, you will submit all checks received from investors
and transfer, via Federal Reserve bank wire, the total amount debited from
investor accounts for the purchase of Shares along with a list including the
name, address and telephone number of, the social security number or taxpayer
identification number of, the brokerage account number of (if applicable), the
number of Shares purchased by and the total dollar amount of investment by, each
investor on whose behalf checks are submitted or the wire transfer is made. You
also will forward all Order Forms to the Company. You shall use your best
efforts to wire such funds or transmit checks to the Escrow Agent not later than
noon of the next business day after receipt by you from your customer of each
Order. You will advise the Escrow Agent whether the funds you are submitting are
attributable to individual retirement accounts, Keogh plans, or any other
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974 or from some other type of investor.
All Orders solicited by you will be strictly subject to review and
acceptance by the Company and the Company reserves the right in its absolute
discretion to reject any Order or to accept or reject Orders in the order of
their receipt by the Company or otherwise. Within 30 days of receipt of an
Order, the Company must accept or reject such Order. If the Company elects to
reject such Order, within 10 business days after such rejection, it will notify
the purchaser of such fact and cause the return of such purchaser's funds
submitted with such application and any interest earned thereon. If no notice of
rejection is received by you within the foregoing
-6-
<PAGE> 7
time limits or if funds submitted by the purchaser are released from escrow to
the Company within the foregoing time limits, the Order shall be deemed
accepted. You agree to make every reasonable effort to determine that the
purchase of Shares is a suitable and appropriate investment for each potential
purchaser of Shares based on information provided by such purchaser regarding
such purchaser's financial situation and investment objectives. You agree to
maintain, for at least six years, records of the information used by you to
determine whether an investment in Shares is suitable and appropriate for a
potential purchaser of Shares.
(b) Closing Dates and Delivery of Shares. In no event shall a sale of
shares to an investor be completed until at least five business days after the
date the investor receives a copy of the Prospectus. On the date Shares are
first issued to Shareholders (such date being herein referred to as the "Initial
Closing Date"), the Escrow Agent will at such time and place as instructed by
you and the Company (which instruction shall be subject to the satisfaction on
such date of the conditions contained herein), deliver to the Company or its
designee immediately available funds in an amount equal to the Escrow Funds on
deposit in the Escrow Account prior to the date designated by the Company. If,
after the Initial Closing Date, additional sales of Shares are made, on each
such date (each such date being referred to as an "Additional Closing Date") and
at each such time and place as instructed by you and the Company (which
instruction shall be subject to the satisfaction on each such date of the
conditions contained herein), the Escrow Agent shall be required to deliver to
the Company or its designee immediately available funds in an amount equal to
the Escrow Funds on deposit in the Escrow Account prior to the date specified by
the Company. The Initial Closing Date and each Additional Closing Date are each
herein referred to as a "Closing Date".
(c) Selected Dealers. The Shares offered and sold under this Agreement
shall be offered and sold only by you as Sales Agent and by a selling group of
brokers or dealers (the "Selected Dealers"), all of whom must be members in good
standing of the National Association of Securities Dealers, Inc. (the "NASD")
who execute Selected Dealer Agreements with you substantially in the form
attached hereto as Exhibit A and Selected Investment Advisers, all of whom are
acceptable to the Company and you (which acceptance shall not be unreasonably
withheld by you). You will assist the Company in
-7-
<PAGE> 8
forming the selling group of Selected Dealers and Selected Investment Advisers.
No firm shall be invited to join the selling group of Selected Dealers or
Selected Investment Advisers if it is (i) currently subject to any suspension or
expulsion pursuant to the rules and regulations of the Commission, the state
securities commissions of any of the fifty states, the New York Stock Exchange,
Inc. or the American Stock Exchange, Inc. as those rules and regulations relate
to broker-dealers and registered investment advisers, or the rules and
regulations of the NASD or (ii) a "discount broker" as that term is commonly
understood in the brokerage industry. The Company and the Advisor or an
affiliate thereof agree to participate in your marketing efforts to the extent
that you may reasonably request and, without limiting the generality of the
foregoing, agree to visit the offices of Selected Dealers and Selected
Investment Advisers as you may reasonably designate.
(d) Compensation. (i) Selling Commission. In consideration for your
execution of this Agreement, and for the performance of your obligations
hereunder, the Company agrees to pay or cause to be paid to you a selling
commission (the "Selling Commission") of 6% ($0.60) of the price of each Share
sold by you or by a Selected Dealer only, no commissions shall be paid for
shares sold by Selected Investment Advisers; provided, however, that your
Selling Commission shall be reduced with respect to volume sales of Shares to
"Single Purchasers" (as defined in the Prospectus). In the case of such volume
sales to Single Purchasers, on orders of $250,000 or more your Selling
Commission shall be reduced by the amount of the Share purchase price discount.
In the case of such volume sales to Single Purchasers, your selling commission
will be reduced for each incremental share purchase in the total volume ranges
set forth in the table below. Such reduced share price will not effect the
amount received by the Company for investment. The following table sets forth
the reduced Share purchase price and Selling Commission payable to you:
-8-
<PAGE> 9
<TABLE>
<CAPTION>
Purchase Price Per Selling Commission Per
Volume Discount Share for Incremental Share on Total Sale For
Range for a Share In Volume Incremental Share In
Single Purchaser Discount Range Volume Discount Range
---------------- -------------- ---------------------
<S> <C> <C>
$ 2,000 - $ 250,000 $10.00 $0.60
$ 250,001 - $ 500,000 $9.85 $0.45
$ 500,001 - $ 750,000 $9.70 $0.30
$ 750,001 - $1,000,000 $9.60 $0.20
$ 1,000,001 - $5,000,000 $9.50 $0.15
</TABLE>
As an example, a single purchaser would receive 50,761 Shares rather
than 50,000 Shares for his investment of $500,000 and the Selling Commission
would be $25,380.50. A refund will be made to the purchaser for any fractional
Shares based on the public offering price if such refund is in excess of $1.00.
In the foregoing example, $4.21 would be refunded for the fractional Share.
Selling Commissions for purchases of $5,000,000 or more will, in the
sole discretion of the Company, be reduced to $0.10 per Share or less but in no
event will the proceeds to the Company be less than $9.35 per Share. Selling
Commissions paid will in all cases be the same for the same level of sales.
The Company will pay to you for reallowance to Selected Dealers only,
the amount of any due diligence fee to the Selected Dealers (the "Selected
Dealer Fee") which you have agreed to pay in amount of up to .5% of the price of
each Share sold by each Selected Dealer to which you have agreed to pay such a
fee.
From your total commissions, you agree to reallow to each Selected
Dealer with whom you have entered into a Selected Dealer Agreement (no such
reallowance will be made for Selected Investment Advisers) an amount of up to
$0.60 commission per Share sold by the Company pursuant to Orders solicited by
such Selected Dealer and the full amount of any Selected Dealer Fee paid to you
by the Company on behalf of any Selected Dealer. No payment of commissions will
be made by the Company with respect to Orders placed by the Selected Investment
Advisers and Orders (or portions thereof) which are rejected by the Company.
Purchases of Shares by the Advisor, its Affiliates (as defined in the
Prospectus), any Selected Dealer, any Selected Investment Adviser or any
employee of any Selected Dealer or
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Investment Adviser shall be net of Selling Commissions and the Company will pay
no Selling Commissions on such Orders. Selling Commissions will be paid on any
Closing Date with respect to the Shares sold to purchasers whose Shares are
issued on such Closing Date. The Company represents that neither it nor any of
its Affiliates have offered or sold any Shares pursuant to this Offering and
agrees that, through the date on which the Offering is terminated (the
"Termination Date"), the Company will not offer or sell any Shares otherwise
than through you as herein provided.
(e) Finders Fee. Neither the Company, any Selected Dealer nor any
Selected Investment Adviser participating in the Offering shall, directly or
indirectly, pay or award any finder's fees, commissions or other compensation to
any person engaged by a potential investor for investment advice as an
inducement to such adviser to advise the purchase of Shares; provided, however,
that normal Selling Commissions payable to a registered broker-dealer or other
properly licensed person for selling Shares shall not be prohibited hereby.
4. Covenants. The Company covenants to you and each Selected Dealer
that it will:
(a) Commission Orders. Use its best efforts to cause the Registration
Statement and any subsequent amendments thereto to become effective as promptly
as possible, and will notify you immediately, and confirm the notice in writing,
(i) when the Registration Statement and any post-effective amendment thereto
becomes effective, (ii) of the issuance by the Commission of any stop order or
of the initiation, or the threatening, of any proceedings for that purpose or of
the suspension of the qualification of the Shares for offering or sale in any
jurisdiction or of the institution or threatening of any proceedings for any of
such purposes, (iii) of the receipt of any comments from the Commission with
respect to the Registration Statement, and (iv) of any request by the Commission
for any amendment to the Registration Statement as filed or any amendment or
supplement to the Prospectus or for additional information relating thereto. The
Company will make every reasonable effort to prevent the issuance by the
Commission of a stop order or a suspension order and if the Commission shall
enter a stop order or suspension order at any time, the Company will make every
reasonable effort to obtain the lifting of such order at the earliest possible
moment.
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<PAGE> 11
(b) Registration Statement. Deliver to you, Selected Dealers and
Selected Investment Advisers without charge such number of copies of each
preliminary prospectus filed with the Registration Statement and each amendment
thereto, and as soon as the Registration Statement or any amendment or
supplement thereto becomes effective, such number of copies of the Prospectus
(as amended or supplemented), the Registration Statement and supplements and
amendments thereto, if any (without exhibits), as you may reasonably request.
The Company hereby consents to the use of the Prospectus or any amendment or
supplement thereto by you, the Selected Dealers and Selected Investment Advisers
both in connection with the Offering and for such period of time thereafter as
the Prospectus is required to be delivered in connection therewith.
(c) "Blue Sky" Qualifications. Endeavor in good faith, in cooperation
with you, the Selected Dealers and counsel to the Selected Dealers, at or prior
to the time the Registration Statement becomes effective, to seek the approval
of the Offering by the NASD, and to qualify the Shares for offering and sale
under the securities laws of all 50 states and the District of Columbia, except
in those jurisdictions you may reasonably designate (the "Designated
Jurisdictions"), provided, however, the Company shall not be obligated to
subject itself to taxation as a party doing business in any such jurisdiction.
In each jurisdiction where such qualification shall be effected, the Company
will, unless you agree that such action is not at the time necessary or
advisable, file and make such statements or reports as are or may reasonably be
required by the laws of such jurisdiction.
(d) Amendments and Supplements. If during the time when a Prospectus is
required to be delivered under the Act, any event relating to the Company shall
occur as a result of which it is necessary, in the opinion of the Company's
counsel, to amend or supplement the Prospectus in order to make the Prospectus
not misleading in light of the circumstances existing at the time it is
delivered to an investor, the Company will forthwith prepare and furnish to you,
the Selected Dealers and Selected Investment Advisers, without expense to you,
the Selected Dealers or the Selected Investment Advisers, a reasonable number of
copies of an amendment or amendments of, or a supplement or supplements to, the
Prospectus which will amend or supplement the Prospectus so that as amended or
supplemented it will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
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<PAGE> 12
necessary in order to make the statements therein, in the light of the
circumstances existing at the time the Prospectus is delivered to an investor,
not misleading. During the time when a Prospectus is required to be delivered
under the Act, the Company shall comply so far as it is able with all
requirements imposed upon it by the Act, as from time to time in force, so far
as necessary to permit the continuance of sales of the Shares in accordance with
the provisions hereof and the Prospectus.
(e) Copies of Reports. During the period the Shares remain outstanding,
furnish you the following:
(i) as soon as practicable after they have been sent by the Company
to the Shareholders or to any class of security holders of the Company
or filed with the Commission, two copies of each annual and interim
financial and each other report, application or document;
(ii) as soon as practicable, two copies of every press release
issued by the Company and every material news item and article in
respect of the Company or its affairs released by the Company; and
(iii) such additional documents and information with respect to the
Company and its affairs as you may from time to time reasonably request.
(f) Sales Material. Will deliver to you from time to time, all
advertising and supplemental sales material (whether designated solely for
broker-dealer use or otherwise) proposed to be used or delivered in connection
with the Offering, prior to the use or delivery to third parties of such
material, and will not so use or deliver, in connection with the Offering, any
such material to which you or your counsel shall reasonably object or disapprove
within seven days of delivery of such material to you or which shall be
reasonably disapproved by your counsel within such seven-day period.
(g) Use of Proceeds. Apply the proceeds from the sale of Shares as set
forth in the section of the Prospectus entitled "Estimated Use of Proceeds" and
operate the business of the Company in accordance with the descriptions of its
business set forth in the Prospectus.
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<PAGE> 13
(h) Prospectus Delivery. In case you, any Selected Dealer or Selected
Investment Adviser is required to deliver a Prospectus in connection with sales
of any of the Shares at any time nine months or more after the Effective Date,
upon your or such Selected Dealer or Selected Investment Adviser's request, the
Company will, at its expense, prepare and deliver to you, such Selected Dealer
or Selected Investment Adviser as many copies as you may request of an amended
or supplemented Prospectus complying with Section 10(a)(3) of the Act.
(i) Financial Statements. Make generally available to its security
holders as soon as practicable, but not later than 60 days after the close of
the period covered thereby, an earnings statement of the Company (in form
complying with the provisions of Rule 158 under the Act) covering a period of 12
months beginning after the Effective Date but not later than the first day of
the Company's fiscal quarter next following the Effective Date.
(j) Compliance with Exchange Act. Comply with the requirements of the
Exchange Act relating to the Company's obligation to file periodic reports
including annual reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K.
5. Covenants of the Sales Agent. You covenant and agree with the
Company as follows;
(a) Compliance with Laws. In connection with the offer and sale of
Shares, you shall comply with any applicable requirements of the Act, the
Exchange Act and the applicable state securities or "blue sky" laws, and the
rules and regulations thereunder.
(b) Accuracy of Information. No information supplied by you for use in
the Registration Statement will contain any untrue statements of a material fact
or omit to state any material fact necessary to make such information not
misleading.
(c) No Additional Information. You will not give any information or
make any representation in connection with the offering of the Shares other than
that contained in the Prospectus.
(d) Sale of Shares. You shall act as Sales Agent and solicit, directly
or through Selected Dealers and Selected Investment Advisers, purchasers of the
Shares only in the jurisdictions in which you have been advised by the Company
that such solicitations can be
-13-
<PAGE> 14
made, and in which you, the soliciting Selected Dealer or Selected Investment
Adviser, as the case may be, are qualified to so act.
6. Payment of Expenses.
(a) Expenses. Whether or not the transactions contemplated in this
Agreement are consummated or if this Agreement is terminated, the Company will
pay, in addition to the underwriting compensation described in Section 3(d)
(which you may retain up to the point of termination unless this agreement is
terminated without any shares being sold, in which case no such underwriting
compensation shall be paid), all fees and expenses incurred in connection with
the formation, qualification and registration of the Company and in marketing,
distributing and processing the Shares under applicable Federal and state law,
and any other fees and expenses actually incurred and directly related to the
offering and sale of the Shares, including such fees and expenses as (i) the
preparing, printing, filing and delivering of the Registration Statement (as
originally filed and all amendments thereto) and of any preliminary prospectus
and of the Prospectus and any amendments thereof or supplements thereto and the
preparing and printing of the Selected Dealer Agreements, this Agreement and
Order Forms, including the cost of all copies thereof and any financial
statements or exhibits relating to the foregoing supplied to you, Selected
Dealers and Selected Investment Advisers in quantities reasonably requested by
you, (ii) the preparing and printing of the solicitation material and related
documents and the filing and/or recording of such certified certificates or
other documents necessary to comply with the laws of the State of Maryland for
the formation of a corporation and thereafter for the continued good standing of
a Company, (iii) the issuance and delivery of the Shares, including any transfer
or other taxes payable thereon, (iv) any escrow arrangements in connection with
the transactions described herein, including any compensation or reimbursement
to an escrow agent for its services as such, (v) the qualification or
registration of the Shares under state securities or "blue sky" laws, (vi) the
filing fees payable to the Commission and to the NASD, (vii) the preparation and
printing of advertising material in connection with and relating to the
Offering, including the cost of all sales literature and investor and
broker-dealer sales and information meetings, (viii) the cost and expenses of
counsel and accountants of the Company and (ix) any other expenses of issuance
and distribution of the Shares.
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<PAGE> 15
(b) Sales Incentive Programs. Subject to the satisfactory completion of
any regulatory reviews and examinations which may be required, the prior review
and approval and the rules of the NASD and approval by the Company or the
Advisor, the Company, the Advisor and Affiliates of the Advisor may establish
sales incentive programs for your associated persons or the associated persons
of Selected Dealers only. Sales incentives will be deemed to be additional
underwriting compensation. The aggregate value of incentives paid directly to an
individual associated person during the Offering will not exceed $100 in any
given year.
(c) Limitation. Notwithstanding the foregoing, the total underwriting
compensation paid to the Sales Agent and Selected Dealers from any source in
connection with the Offering pursuant to Section 3(d) hereof and this Section 6
shall not exceed 10% of the gross proceeds of the sale of the Shares, plus 0.5%
of such gross proceeds for bona fide due diligence expenses. The Company and you
agree to monitor the payment of all fees and expense reimbursements to assure
that this limit is not exceeded.
7. Conditions of Your Obligations. Your obligations hereunder shall be
subject to the continued accuracy throughout the Effective Term of the
representations, warranties and agreements of the Company, to the performance by
the Company of its obligations hereunder and to the following terms and
conditions:
(a) Effectiveness of Registration Statement. The Registration Statement
shall have initially become effective not later than 5:30 P.M., eastern time, on
the date of this Agreement or such later date and time as shall be consented to
in writing by you and, at any time during the term of this Agreement, no stop
order shall have been issued or proceedings therefor initiated or threatened by
the Commission; and all requests for additional information on the part of the
Commission and state securities administrators shall have been complied with to
the reasonable satisfaction of your counsel and no stop order or similar order
shall be in effect in any jurisdiction in which the Company intends to offer
Shares (except in the Designated Jurisdictions).
(b) Opinion of Counsel. At the Effective Date, you shall receive the
favorable opinion of Reed Smith Shaw & McClay LLP, counsel for the Company,
dated the Effective Date, addressed to you substantially to the effect that:
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<PAGE> 16
(i) the Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Maryland and is duly qualified to do business as a foreign corporation
and is in good standing in each other jurisdiction in which it owns or
leases property of a nature, or transacts business of a type, that
would make such qualification necessary;
(ii) the Shares have been duly authorized and, after being duly
issued and sold in accordance with the terms set forth in the
Registration Statement, will be validly issued, fully paid and
non-assessable Shares; and no holder thereof is or will be subject to
personal liability for the obligations of the Company solely by reason
of being such a holder; such Shares are not subject to the preemptive
rights of any stockholder of the Company, and all corporate action
required to be taken for the authorization, issue and sale of such
Shares has been validly and sufficiently taken;
(iii) this Agreement has been duly and validly authorized, executed
and delivered by or on behalf of the Company and constitutes the valid,
binding and enforceable agreement of the Company except (A) as may be
subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally, (B) that the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings may be brought,
and (C) that rights to indemnity may be limited by federal or state
securities laws or the public policy underlying such laws;
(iv) the Registration Statement is effective under the Act and, to
the best of such counsel's knowledge, no stop order has been issued nor
are proceedings for a stop order pending or threatened under the Act;
(v) the Advisory Agreement has been duly and validly authorized,
executed and delivered by or on behalf of the Company and the Advisor
and constitutes the valid, binding and enforceable agreement of the
Company and the Advisor except (A) as may be subject to bankruptcy,
insolvency,
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<PAGE> 17
reorganization, moratorium or other similar laws relating to creditors'
rights generally, and (B) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings may be brought;
(vi) to the best of such counsel's knowledge and information, there
is no litigation or governmental proceeding pending or threatened
against the Company which might materially and adversely affect the
business, properties, condition (financial or otherwise) or earnings of
the Company, except as referred to in the Prospectus, and no consent,
approval, authorization, registration, qualification, license or order
of any court, regulatory or other governmental agency or body is
required in connection with the consummation of the transactions
contemplated by this Agreement or the Registration Statement and the
Prospectus, except such as may be necessary under the Act or state
"blue sky" or securities laws in connection with the Offering or such
as may have been previously obtained;
(vii) neither the execution and delivery of this Agreement or the
Advisory Agreement nor compliance with the terms and provisions hereof
or thereof will, and consummation of the transactions contemplated
herein and in the Prospectus do not and will not, result in any
violation of the Articles or Bylaws, conflict with or result in a
breach of or default (or an event which with the giving of notice or
lapse of time or both would constitute a default) under, any of the
terms, provisions or conditions of any statute, order, judgment, writ,
injunction, decree, agreement, rule, regulation, instrument or
organizational document known to such counsel, to which the Company is
a party or, to the best of such counsel's knowledge and information, by
which the Company is bound;
(viii) the Advisor has been duly formed and is validly existing as
a limited partnership in good standing under the laws of the
Commonwealth of Pennsylvania as a limited partnership with full power
and authority to conduct the business in which it proposes to engage as
described in the Prospectus and is duly qualified to do business and is
in
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<PAGE> 18
good standing in each other jurisdiction in which it transacts business
of a type that would make such qualification necessary;
(ix) Carey Fiduciary Advisors, Inc. has been duly incorporated and
is validly existing as a corporation in good standing under the laws of
the Commonwealth of Pennsylvania with full power and authority to
conduct the business in which it engages in as described in the
Prospectus and is duly qualified to do business as a foreign
corporation and is in good standing in each other jurisdiction in which
it owns or leases property of the nature or transacts business of a
type, that would make such qualification necessary;
(x) the statements in the Prospectus under the captions "Risk
Factors -- Tax Risks --REIT Status for Tax Purposes", "Description of
Shares" and "Income Tax Aspects" insofar as they are, or refer to,
statements of law or legal conclusions, are correct and fairly present
the information required to be shown therein; and
(xi) at the time the Registration Statement was filed and at the
time it initially became effective, such Registration Statement and the
Prospectus (other than the financial statements and the prior
performance tables included therein, as to which no opinion is
rendered) complied as to form in all material respects with the
requirements of the Act and the Regulations and nothing came to such
counsel's attention which would lead such counsel to believe that
either the Registration Statement or the Prospectus, at the time they
initially became effective, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In rendering the opinions set forth above, counsel may rely, as to matters of
law of states other than Pennsylvania, upon the opinions of other counsel, in
each case satisfactory in form and substance to you, and counsel shall state
such opinions are satisfactory in form and scope to them and that they believe
you may rely on them, and as to matters of fact, upon communications, statements
and certificates from
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<PAGE> 19
public officials, and certifications and statements from officers of the
Company.
(c) Accountant's Letter. On the Effective Date you shall have received
from PricewaterhouseCoopers LLP a letter, in form and substance satisfactory to
you in all respects (including the nonmaterial nature of the changes and
decreases, if any, referred to in clause (iii) herein), advising that:
(i) they are independent certified public accountants as required
by the Act and the Regulations and the answer to Item 27 of the
Registration Statement does not require any statement relating to them;
(ii) it is their opinion that the financial statements and
supporting schedules filed as part of the Registration Statement and
those included in the Prospectus, and covered by their opinions
therein, comply as to form in all material respects with the applicable
accounting requirements of the Act and the Regulations relating to
financial statements in registration statements on Form S-11;
(iii) based on the limited review set forth in detail in such
letter, nothing came to their attention that caused them to believe
that during the period from the date of the balance sheet of the
Company contained in the Prospectus to a specified date not more than
five (5) days prior to the date on which the Registration Statement
initially becomes effective, there was any change in the stockholder's
equity, liabilities or net assets of the Company as compared with the
amounts shown in such balance sheet other than as such change may have
been contemplated by or set forth in the Registration Statement or
Prospectus;
(iv) based on procedures consisting of a reading of the percentages
and dollar amounts and related text set forth in the Prospectus and the
Registration Statement under the captions "Prior Offerings by
Affiliates" and "Prior Performance Tables" (including Table VI included
as an exhibit to the Registration Statement), and all dollar amounts in
the related notes referenced therein, inquiry of officers and other
employees of the corporate general
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<PAGE> 20
partner of Corporate Property Associates, Corporate Property Associates
2, Corporate Property Associates 3, Corporate Property Associates 4, a
California limited partnership, Corporate Property Associates 5,
Corporate Property Associates 6 - a California limited partnership,
Corporate Property Associates 7 - a California limited partnership,
Corporate Property Associates 8, L.P., and Corporate Property
Associates 9, L.P., (collectively the "CPA(R) Partnerships") and the
officers and other employees of Corporate Property Associates 10
Incorporated, Carey Institutional Properties Incorporated and Corporate
Property Associates 12 Incorporated (collectively the "CPA(R) REITS"),
and counsel for the CPA(R) Partnerships and the CPA(R) REITS, they have
found such percentages and dollar amounts to be in agreement with the
respective relevant accounting and financial records of the CPA(R)
Partnerships and CPA(R) REITS; and
(v) they have conducted such other procedures as may be mutually
agreed by the Company, Selected Dealers and Selected Investment
Advisers.
(d) Stop Orders. On the Effective Date and during the Effective Term no
order suspending the sale of the Shares in any jurisdiction (except the
Designated Jurisdictions) nor any stop order issued by the Commission shall have
been issued, and on the Effective Date and during the Effective Term no
proceedings relating to any such suspension or stop orders shall have been
instituted, or to the knowledge of the Company, shall be contemplated.
(e) Information Concerning the Advisor. On the Effective Date, you
shall receive a letter dated the Effective Date from the Advisor, confirming
that (1) the Advisory Agreement has been duly and validly authorized, executed
and delivered by the Advisor and constitutes a valid agreement of the Advisor
enforceable in accordance with its terms; (2) the execution and delivery of the
Advisory Agreement, the consummation of the transactions therein contemplated
and compliance with the terms of the Advisory Agreement by the Advisor will not
conflict with or constitute a default under its partnership agreement or any
indenture, mortgage, deed of trust, lease or other agreement or instrument to
which the Advisor is a party, or any law, order, rule or regulation, writ,
injunction or decree of any government, governmental instrumentality or court,
domestic or
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<PAGE> 21
foreign, having jurisdiction over the Advisor, or any of its property;
(3) no consent, approval, authorization or order of any court or other
governmental agency or body has been or is required for the performance
of the Advisory Agreement by the Advisor, or for the consummation of
the transactions contemplated thereby; and (4) the Advisor is a limited
partnership duly formed, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania and is duly qualified to
do business as a foreign limited partnership in each other jurisdiction
in which the nature of its business would make such qualification
necessary.
If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as required by this Agreement, this Agreement and all
your obligations hereunder may be canceled by you by notifying the Company of
such cancellation in writing or by telecopy at any time, and any such
cancellation or termination shall be without liability of any party to any other
party except as otherwise provided in Sections 3(d), 6, 8, 9 and 10 hereof.
All certificates, letters and other documents referred to in this
Section 7 will be in compliance with the provisions hereof only if they are
reasonably satisfactory in form and substance to you and your counsel. The
Company will furnish you with conformed copies of such certificates, letters and
other documents as you shall reasonably request.
8. Indemnification.
(a) Indemnification by Company. Subject to the conditions set forth
below and those included in the Articles and Bylaws, the Company agrees to
indemnify and hold harmless you, each Selected Dealer, each Selected Investment
Adviser and each person, if any, who controls you, any such Selected Dealer or
Selected Investment Adviser within the meaning of Section 15 of the Act, from
and against any and all loss, liability, claim, damage and expense whatsoever
(including but not limited to any and all expenses whatsoever reasonably
incurred in investigating, preparing for, defending against or settling any
litigation, commenced or threatened, or any claim whatsoever) arising out of or
based upon (1) any untrue or alleged untrue statement of a material fact
contained (x) in the Registration Statement or the Prospectus (as from time to
time amended or supplemented) or any related preliminary prospectus; or (y) in
any application or other document (in this Section 8 collectively called
"application")
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executed by the Company or based upon information furnished by the Company and
filed in any jurisdiction in order to qualify the Shares under the securities
laws thereof or (2) the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
in light of the circumstances under which they were made not misleading, unless
any such statement or omission was made in reliance upon and in conformity with
written information furnished to the Company by you expressly for use in the
Registration Statement or related preliminary prospectus or Prospectus or any
amendment or supplement thereof or in any of such applications or in any such
sales as the case may be. Notwithstanding the foregoing, the Company shall not
indemnify the Sales Agent for any losses, liabilities or expenses arising from
or out of an alleged violation of federal or state securities laws unless (i)
there has been a successful adjudication on the merits of each count involving
alleged securities law violations as to the particular indemnitee, (ii) such
claims have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee or (iii) a court of competent
jurisdiction approves a settlement of the claims against a particular indemnitee
and finds that indemnification of the settlement and the related costs should be
made, and the court considering the request for indemnification has been advised
of the position of the Commission and of the published position of any state
securities regulatory authority in which securities of the Company were offered
or sold as to indemnification for violations of Securities laws.
(b) Indemnification by You. Subject to the conditions set forth below,
you agree to indemnify and hold harmless the Company, each of its directors,
those of its officers who have signed the Registration Statement and each other
person, if any, who controls the Company within the meaning of Section 15 of the
Act to the same extent as the foregoing indemnity from the Company but only with
respect to an untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact in the Registration
Statement (as from time to time amended or supplemented) or Prospectus, or any
related preliminary prospectus, any application made in reliance upon or, in
conformity with, written information furnished by you expressly for use in such
Registration Statement or Prospectus or any amendment or supplement thereto, in
any related preliminary prospectus or in any of such applications.
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<PAGE> 23
(c) Procedure for Making Claims. Each indemnified party shall give
prompt notice to each indemnifying party of any claim or action (including any
governmental investigation) commenced against it in respect of which indemnity
may be sought hereunder, but failure to so notify any indemnifying party shall
not relieve it from any liability that it may have otherwise than on account of
this indemnity agreement. The indemnifying party, jointly with any other
indemnifying parties receiving such notice, shall assume the defense of such
action with counsel chosen by it and approved by the indemnified parties
defendant in such action, unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to them
which are different from or in addition to those available to such indemnifying
party. Any indemnified party shall have the right to employ a separate counsel
in any such action and to participate in the defense thereof but the fees and
expenses of such counsel shall be borne by such party unless such party has
objected in accordance with the preceding sentence, in which event such fees and
expenses shall be borne by the indemnifying parties. Except as set forth in the
preceding sentence, if an indemnifying party assumes the defense of such action,
the indemnifying party shall not be liable for any fees and expenses of separate
counsel for the indemnified parties incurred thereafter in connection with such
action. In no event shall the indemnifying parties be liable for the fees and
expenses of more than one counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. The
indemnity agreements contained in this Section 8 and the warranties and
representations contained in this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of the indemnified
party and shall survive any termination of this Agreement. An indemnifying party
shall not be liable to an indemnified party on account of any settlement of any
claim or action effected without the consent of such indemnifying party. The
Company agrees promptly to notify you of the commencement of any litigation or
proceedings against the Company in connection with the issue and sale of the
Shares or in connection with the Registration Statement or Prospectus.
(d) Contribution. Subject to the limitations set forth in Section 8(a)
hereof and in order to provide for just and equitable contribution where the
indemnification provided for in this Section 8 is unavailable to or insufficient
to hold harmless an indemnified
-23-
<PAGE> 24
party under subsection (a) or (b) above in respect of any losses, liabilities,
claims, damages or expenses (or actions in respect thereof) referred to therein,
except by reason of the terms thereof, the Company on the one hand and you on
the other shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and you on the other
from the Offering based on the public offering price of the Shares sold and the
Selling Commissions received by you with respect to such Shares sold. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits referred to above but also the relative
fault of the Company on the one hand and you on the other in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and you on the other shall be deemed to be in the same
proportion as the total proceeds from the Offering (net of underwriting
commissions but before deducting expenses) received by the Company bear to the
total underwriting commissions received by you. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company on the one hand or you on the
other. The Company agrees with you that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation, or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
liabilities, claims, damages or expenses (or action in respect thereof) referred
to above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), you shall not be required to contribute any
amount in excess of the amount by which the total price of the Shares sold by
you to the public exceeds the amount of any damages which you have otherwise
been required to pay by
-24-
<PAGE> 25
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act or Section 10(b) of the '34 Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section, any person that controls you
within the meaning of Section 15 of the Act shall have the same right to
contribution as you, and each person who controls the Company within the meaning
of Section 15 of the Act shall have the same right to contribution as the
Company.
9. Representations and Agreements to Survive. All representations,
warranties and agreements contained in this Agreement or in certificates shall
remain operative and in full force and effect regardless of any investigation
made by any party, and shall survive the Termination Date.
10. Effective Date, Term and Termination of this Agreement.
(a) This Agreement shall become effective as of the date it is executed
by all parties hereto. You or the Company may elect to terminate this Agreement
prior to the time the Registration Statement is declared effective by the
Commission without liability of any party to any other party, except as provided
in Section 10(e) hereof.
(b) You shall have the right to terminate this Agreement at any time
during the Effective Term without liability of any party to any other party
except as provided in Section 10(e) hereof if (i) any representations or
warranties hereunder shall be found to have been incorrect or misleading, or
(ii) the Company shall fail, refuse or be unable to perform any condition of its
obligations hereunder, or (iii) the Prospectus shall have been amended or
supplemented despite your objection to such amendment or supplement as provided
in subsection (a) of Section 2 hereof, or (iv) all trading on the New York Stock
Exchange or the American Stock Exchange shall have been suspended, or minimum or
maximum prices for trading generally shall have been fixed, or maximum ranges
for prices for all securities shall have been required, on the New York Stock
Exchange or the American Stock Exchange by such exchanges or by order of the
Commission or any other governmental authority having jurisdiction, or (v) the
United States shall have become involved in a war or major hostilities, or (vi)
a banking moratorium shall have been declared by a state or federal authority or
person, or (vii) the Company shall have sustained a material or substantial loss
by fire, flood, accident, hurricane,
-25-
<PAGE> 26
earthquake, theft, sabotage or other calamity or malicious act which, whether or
not said loss shall have been insured, will in your opinion make it inadvisable
to proceed with the offering and sale of the Shares, or (viii) there shall have
been, subsequent to the dates information is given in the Registration Statement
and the Prospectus, such change in the business, properties, affairs, condition
(financial or otherwise) or prospects of the Company whether or not in the
ordinary course of business or in the condition of securities markets generally
as in your sole judgment would make it inadvisable to proceed with the offering
and sale of the Shares, or which would materially adversely affect the
operations of the Company.
(c) If this Agreement shall be terminated for reason of any failure on
the part of the Company to perform any undertaking or satisfy any condition of
this Agreement to be performed or satisfied by them pursuant to Section 7
hereof, you may elect to terminate this Agreement without liability of any party
to any other party except as provided in Section 10(e) hereof.
(d) The Company shall have the right to terminate this Agreement
without cause on 60 days' notice in writing to you without penalty, subject to
liability as provided in Section 10(e) hereof.
(e) In the event this Agreement is terminated by any party pursuant to
Sections 10(a), 10(b), 10(c) or 10(d) hereof, the Company shall pay all expenses
of the Offering as required by Section 6 hereof and no party will have any
additional liability to any other party except for any liability which may exist
under Section 8 hereof; and provided further, that if you terminate your
participation in the Offering in other than good faith, the Company shall not be
responsible for the expenses described in clause (vii) of subsection (a) of
Section 6 hereof other than expenses of counsel to the Selected Dealers or
Selected Investment Advisers. In no event will the Company be liable to
reimburse you for expenses other than your actual out-of-pocket expenses.
(f) If you elect to terminate this Agreement as provided in this
Section 10, the Company shall be notified promptly by you by telephone or
telegram with confirmation by letter. If the Company elects to terminate this
Agreement as provided in this Section 10, you shall be notified promptly by the
Company by telephone or telegram with confirmation by letter.
-26-
<PAGE> 27
11. Notices.
(a) All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to you shall be mailed,
or personally delivered, to you at 50 Rockefeller Plaza, New York, NY 10020 and
if sent to the Company shall be mailed, or personally delivered, to the Company
at 50 Rockefeller Plaza, New York, New York 10020, Attention: Mr. William P.
Carey.
(b) Notice shall be deemed to be given by you to the Company or by the
Company to you when it is mailed or personally delivered as provided in
subsection (a) of this Section 11.
12. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon you, the Company, and the controlling persons, directors
and officers referred to in Section 8 hereof, and their respective successors,
legal representatives and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained,
except that the Selected Dealers and Selected Investment Advisers shall have the
rights granted to them pursuant to Section 8 hereof. Notwithstanding the
foregoing, this Agreement may not be assigned without the consent of the parties
hereto.
13. Construction. This Agreement shall be construed in accordance with
the laws of the State of New York applicable to agreements to be made and
performed entirely within such state.
14. Finders' Fees. You shall have no liability for any finders' fees
owed in connection with the transactions contemplated by this Agreement.
15. Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provisions in
any other jurisdiction.
If the foregoing correctly sets forth the understanding
between you and the Company, please so indicate in the space provided
-27-
<PAGE> 28
below for that purpose, whereupon this letter shall constitute a binding
agreement between us.
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
By:
----------------------------------------
Accepted as of the
date first above
written:
CAREY FINANCIAL CORPORATION
By:
-------------------------
Exhibit Index
Exhibit A - Selected Dealer Agreement
-28-
<PAGE> 1
Exhibit 10.29
Carey Financial Corporation
50 Rockefeller Plaza
New York, NY 10020
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
SELECTED DEALER AGREEMENT
April ___, 1999
Ladies and Gentlemen:
We have agreed to use our best efforts to sell, along with a group of
selected dealers (collectively, the "Selected Dealers") to be formed with our
assistance, up to 40,000,000 shares (the "Shares") of Corporate Property
Associates 14 Incorporated (the "Company"). The Shares are being offered by us,
as Sales Agent for the Company, and by the Selected Dealers. The terms of the
offering of the Shares (the "Offering") are more fully described in the enclosed
prospectus (the "Prospectus"), receipt of which you hereby acknowledge.
We are hereby inviting you to act as a Selected Dealer for the
Offering, subject to the other terms and conditions set forth below. You hereby
confirm that you are a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"), that you have complied with all
applicable federal and state broker-dealer registration requirements and that
you are not a "discount broker" as that term is commonly understood in the
brokerage industry. Upon execution of this Selected Dealer Agreement, you agree
to be bound by the terms and conditions of the Sales Agency Agreement between
us, as Sales Agent and the Company (the "Sales Agency Agreement") (to the extent
such terms apply to the Selected Dealers), a copy of which is attached hereto as
Exhibit A and of which this Selected Dealer Agreement is a part.
Capitalized terms used herein and not otherwise defined herein shall
have the same meaning as in the Sales Agency Agreement.
Upon notification by us, you may offer the Shares at the public
offering price stated in the Prospectus, subject to
<PAGE> 2
the terms and conditions hereof. The public offering price of the Shares and the
amount of your Selling Commission that is re-allowed by us to you with respect
to volume sales of Shares to "single purchasers" on orders of $250,000 or
more(as defined in the Prospectus) shall be reduced by the amount of the Share
purchase price discount. In the case of such volume sales to single purchasers,
your Selling Commission will be reduced for each incremental Share purchase in
the total volume ranges set forth in the table below. Such reduced Share price
purchase price will not affect the amount received by the company for
investment. The following table sets forth the reduced Share purchase price and
Selling Commission payable to you:
<TABLE>
<CAPTION>
Volume Discount Purchase Price Selling
Range for a Per Share For Commission Per
"Single Purchaser" Incremental Share Share on Total
In Volume Sale for
Discount Range Incremental Share
in Volume
Discount Range
<S> <C> <C>
$ 2,000 - $ 250,000 $10.00 $0.60
$ 250,001 - $ 500,000 $ 9.85 $0.45
$ 500,001 - $ 750,000 $ 9.70 $0.30
$ 750,001 - $ 1,000,000 $ 9.60 $0.20
$ 1,000,001 - $ 5,000,000 $ 9.50 $0.10
</TABLE>
As an example, a single purchaser would receive 50,761 Shares (rather
than 50,000 Shares) for his investment of $500,000 and the Selling Commission
would be $22,842. A refund will be made to the purchaser for any fractional
Shares based on the public offering price if such refunds in excess of $1.00. In
the example, $4.15 would be refunded for the fractional Share.
Selling Commissions for purchases of $5,000,000 or more are negotiable
but in no event will the proceeds to the Company be less than $9.35 per Share.
We agree to re-allow to you a Selected Dealer Fee of 1% of the full price of
each Share sold by you.
No payment of commissions or the Selected Dealer Fee will be made in
respect of Orders (or portions thereof) which are rejected by the Company,
Selling Commissions and the Selected Dealer Fee will be paid on each Closing
Date with respect to Shares sold to purchasers whose Shares are issued on such
Closing Date. Selling Commissions and the Selected Dealer Fee will be payable
only with respect to transactions lawful in the
2
<PAGE> 3
jurisdictions where they occur. In the event Minimum Sales are not made, and, as
a result, the Sales Agency Agreement is terminated, you shall not received any
Selling Commissions or a Selected Dealer Fee. Purchases of Shares by Carey
Property Advisors, its Affiliates or any Selected Dealer or any of their
employees shall be net of commissions.
In no event shall the aggregate underwriting compensation to be paid to
us, you and the other Selected Dealers in connection with the Offering and sale
of the Shares exceed 10% of the gross proceeds of the Offering (not including
due diligence expenses of up to 0.5% of the gross proceeds of the Offering).
Orders for Shares (each an "Order") must be made during the offering
period described in the Prospectus. An order form, in the form attached to the
Prospectus, (each an "Order Form") must be used in placing an Order for
investors residing in certain states and, for all other investors, Orders may be
placed through such procedures as are normally used by you for the sale of REIT
shares and agreed to by the Company. Persons desiring to purchase Shares are
required to comply with such procedures and, in certain states, to execute or
have executed on their behalf one coy of the Order Form. On a daily basis, you
will deliver via overnight delivery service a check payable to The United States
Trust Company of New York, Escrow Agent, or other acceptable form of payment,
for the full amount of each Order along with an Order Form for each such Order
and a list showing the name, address and telephone number of, the social
security number or taxpayer identification number of, the number of Shares
purchased and the total dollar amount of the investment by, each investor on
whose behalf a check or other payment is delivered. You will advise The United
States Trust Company of New York whether the funds you are submitting are
attributable to individual retirement accounts, Keogh plans, or any other
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974 or from some other type of investor.
All Orders solicited by you will be strictly subject to review and
acceptance by the Company, and the Company reserves the right in its absolute
discretion to reject any such Order or to accept or reject Orders in the order
of their receipt by the Company or otherwise. You agree to maintain, for at
least six years, records of the information used by you to determine whether an
investment in Shares is suitable and appropriate for a potential investor in
Shares.
3
<PAGE> 4
If the Company elects to reject an Order (such rejection to occur
within 30 days after receipt by the Company of such Order), the Company shall,
within 10 business days after such rejection, inform you of such rejection and
return the funds (and any interest earned thereon) and other documents submitted
by the rejected purchaser to you for transmission to such purchaser. If no
notice of rejection is received by you with the foregoing time limits or if
funds submitted by the purchaser are released from escrow to the Company within
the foregoing time limits, the Order shall be deemed accepted.
You agree that you will use your best efforts in offering the Shares
and will offer the Shares only in jurisdictions in which you are currently
registered as a securities dealer and only in accordance with the securities
laws of such jurisdictions.
You covenant and agree with respect to your participation in the
Offering to comply with any applicable requirements of the Securities Act of
1933 (the "'33 Act") and of the Securities Exchange Act of 1934 (the "'34 Act"),
and the published rules and regulations of the Securities and Exchange
Commission thereunder, and the Rules of Fair Practice of the NASD.
We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the Offering. Neither you nor
any other person is authorized to give any information or make any
representations other than those contained in the Prospectus and sales
literature furnished by the Company in connection with the Offering, and you
agree not to give any such information or make any such representations. You
acknowledge that we will rely upon your agreements in this paragraph and in the
preceding paragraph in connection with the Sales Agency Agreement. No Selected
Dealer is authorized to act as agent for us when offering any of the Shares to
the public or otherwise, it being understood that you and each other Selected
Dealer are independent contractors with us. Nothing herein contained shall
constitute you or the Selected Dealers an association, unincorporated business,
partnership or separate entity with each other or an association or partner with
us. Nothing contained in this paragraph is intended to operate as, and the
provisions of this paragraph shall not constitute, a waiver by you of compliance
with any provision of the '33 Act or of the rules and regulations thereunder.
4
<PAGE> 5
The Company will provide you with such number of copies of the enclosed
Prospectus and such number of copies of amendments and supplements thereto, and
certain supplemental sales material prepared by the Company, as you may
reasonably request for use by you in connection with the offer and sales of the
Shares. In the event you elect to use any such supplemental sales material, you
agree that such material shall not be used in connection with the offer and sale
of the Shares unless accompanied or preceded by the Prospectus as then currently
in effect and as it may be amended or supplemented in the future, and you
expressly agree not to prepare or use any sales material other than the approved
sales material. To the extent that information is provided to you marked "For
Broker/Dealer Use Only," "Internal Use Only" or with other similar language, you
covenant and agree not to provide such information to prospective investors. You
agree that you will not use any other offering materials without the prior
written consent of the Company and us.
This Agreement shall terminate at the close of business on the 45th day
after the completion of the sale of all of the Shares by the Company, unless
earlier terminated or unless the Sales Agency Agreement is terminated, in which
event this Agreement will automatically terminate. Either party may terminate
this Agreement at any time by written notice, and we shall notify you promptly
in the event of any early termination of this Agreement.
We will furnish to you a Blue Sky Memorandum naming the jurisdictions
in which we believe the Shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such jurisdictions,
but we assume no responsibility or obligation as to your right to sell Shares in
any jurisdiction.
Under Sections 2, 4, 7,8, 9, 10 and 11 of the Sales Agency Agreement,
the Company is making certain representations, warranties, covenants and
agreements to or with us for your benefit and ours. Under Section 8 of the Sales
Agency Agreement, the Company is providing to us and to Selected Dealers who are
not affiliates of the Company (as the term "Affiliate" is defined in the '33
Act), and to persons controlling us and such Selected Dealers, certain rights of
indemnity and contribution against liabilities insofar as such liabilities arise
out of or are based upon untrue statements or omissions or alleged untrue
statements or omissions of material fact in the Prospectus. Subject to the terms
and conditions stated in the aforesaid Sections, the
5
<PAGE> 6
Company confirms to you for your benefit by execution of a copy of this letter
the rights, representations, warranties, covenants, agreements and rights of
indemnity and contribution contain in such Sections shall continue to apply. By
executing this Agreement, you agree to accept such indemnification on the terms
provided in the Sales Agency Agreement.
The liabilities assumed by us in the preceding paragraph shall be in
addition to any liabilities we may otherwise have to each other.
Your obligations under this Selected Dealer Agreement shall be subject
to the continued accuracy throughout the Effective Term of the representations,
warranties and agreements of the Company under the Sales Agency Agreement and
such Selected Dealer Agreement to the performance by the Company of its
obligations under such agreements and to the terms and conditions set forth in
Section 7 of the Sales Agency Agreement.
You confirm that you are familiar with '33 Act Release No. 4968 and
Rule 15c2-8 under the '34 Act, relating to the distribution of preliminary and
final prospectuses, and confirm that you have complied, and will comply,
therewith. You shall not directly or indirectly pay or award any finder's fees,
commissions or other compensation to any persons engaged by an investor for
investment advice as an inducement to such adviser to advise a potential
investor to purchase Shares. In addition, you agree not to receive any rebates
or give-ups or to participate in any reciprocal business arrangements (other
than for the underwriting arrangements described herein) which would violate any
restrictions on the Company contained in the Prospectus.
All representations, warranties and agreements contained in this
Selected Dealer Agreement, the Sales Agency Agreement or in certificates
submitted to you pursuant to this Agreement or the Sales Agency Agreement shall
remain operative and in full force and effect, regardless of any investigation
made by, or on behalf of, you or any person who controls you, and shall survive
the initial closing and termination of the Offering.
Any communication from you should be in writing addressed to Carey
Financial Corporation, 50 Rockefeller Plaza, New York, NY 10020. Any notice from
us to you shall be deemed to have been duly given if mailed or telegraphed to
you at the address to which this Agreement is mailed.
6
<PAGE> 7
Please confirm your agreement hereto by signing and returning at once
to us the enclosed duplicate of this Agreement, including the information
requested in Schedule A attached thereto. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such state.
Very truly yours,
CAREY FINANCIAL CORPORATION
Sales Agency
By:__________________________
Its:_________________________
CORPORATE PROPERTY ASSOCIATES
14 INCORPORATED, the Company
By:__________________________
Its:_________________________
CAREY PROPERTY ADVISORS,
a Pennsylvania limited partnership
By: CAREY FIDUCIARY ADVISORS,
INC., general partner
By:__________________________
Its:_________________________
7
<PAGE> 8
ACCEPTED, as of _______________
[NAME OF SELECTED DEALER]
By:__________________________
Its:_________________________
8
<PAGE> 9
SCHEDULE A TO SELECTED DEALER AGREEMENT
SELECTED DEALER INFORMATION
[PLEASE PRINT OR TYPE ALL REQUESTED INFORMATION]
SELECTED/DEALER NAME:
----------------------------------------
SELECTED/DEALER ADDRESS:
--------------------------------------
- --------------------------------------------------------------
- --------------------------------------------------------------
PHONE NUMBER:
-------------------------------------------------
NAME OF PERSON SIGNING SELECTED DEALER AGREEMENT:
-------------
- --------------------------------------------------------------
TITLE OF PERSON SIGNING SELECTED DEALER AGREEMENT:
-------------
- --------------------------------------------------------------
9
<PAGE> 1
Exhibit 10.31
WHOLESALING AGREEMENT
THIS WHOLESALING AGREEMENT (this "Agreement") dated as of April --,
1999, by and between CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED, a Maryland
corporation (the "Company"), and CAREY FINANCIAL CORPORATION, a Delaware
corporation ("Carey").
WHEREAS, the Company proposes to raise up to $400,000,000 through the
sale of shares of common stock of the Company (the "Shares") for investment in
real property as described in a Registration Statement on Form S-11 (No.
333-31437) filed with the Securities and Exchange Commission (the "Registration
Statement"); and
WHEREAS, the Company desires to retain Carey and Carey desires to
undertake to coordinate the performance of certain wholesaling services for the
Company pursuant to this Agreement on the terms and subject to the conditions
hereinafter set forth and subject to the limitations, if any, set forth in the
final Prospectus which will be included in the Registration Statement.
NOW THEREFORE, in consideration of the mutual promises herein made and
for other good and valuable consideration, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. The Company hereby retains Carey to provide the following services
for the Company:
(a) Carey shall develop and prepare sales literature to be used by
the Company in the offer and sale of the Shares (the "Offering"), which
sales literature shall comply with the Securities Act of 1933, as
amended, and the regulations thereunder, the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. and the "blue sky"
laws of any jurisdiction in which such material is used. The sales
literature may include, but not be limited to, a slide presentation, a
property acquisition report, a brochure and seminar invitations for
presentation and distribution to the public and an audio program, a
video program and a brochure for presentation and distribution to
broker-dealers.
(b) Carey shall assist broker-dealers and registered investment
advisors participating in the Offering by coordinating broker-dealer
and registered investment advisor seminars, informational meetings,
preparing and distributing
<PAGE> 2
brochures and other sales literature designed for broker-dealers and
registered investment advisors and providing information and answering
any questions with regard to the Offering.
(c) Carey shall assist the Company in enlisting broker-dealers and
registered investment advisors to participate in the Offering as
selected dealers.
2. In consideration for providing the above services, Carey shall
receive reimbursement for identified expenses incurred in connection with its
wholesaling activities described in Section 1 above, including but not limited
to (a) travel and entertainment expenses; (b) the cost of compensation paid to
employees of Carey in connection with wholesaling activities; (c) expenses
incurred in coordinating broker-dealer and registered investment advisor
seminars and meetings; and (d) wholesaling fees and wholesaling expense
reimbursements paid to it or its Affiliates or other entities.
3. The Company shall, at the direction of Carey, reimburse directly all
other entities for marketing and wholesaling expenses of the type described in
clauses (a), (b) and (c) of Section 2 hereof incurred directly by those entities
at the request of Carey.
4. Carey shall adopt procedures which it, in its sole discretion, deems
adequate to monitor compliance with the limitation in Rule 2740 of the NASD
Rules of Fair practice and IM 2740 thereto on aggregate compensation to it and
all broker-dealers participating in the Offering. In no event will the amounts
paid hereunder, when combined with all other underwriting compensation paid in
connection with the offering, exceed 10% of Gross Offering Proceeds plus 0.5%
for bona fide due diligence expenses.
5. The Company hereby represents and warrants to Carey that the
representations and warranties of it set forth in Section 2 of the Sales Agency
Agreement, dated the date hereof, between the Company and Carey, as Sales Agent
(the "Sales Agency Agreement"), are true and correct in all respects, and that
such representations and warranties are hereby incorporated by reference herein
(together with all related definitions and cross-references) as if set forth in
full herein.
6. The Company hereby covenants to Carey that it will honor and perform
each of the covenants made by it in Section 4
-2-
<PAGE> 3
of the Sales Agency Agreement, and agrees that such covenants are incorporated
by reference herein (together with all related definitions and cross-references)
as if set forth in full herein.
7. The term of this Agreement shall commence on the date hereof and
shall continue until such time as the Offering is completed. Notwithstanding the
foregoing, this Agreement may be terminated without the payment of any penalty
by either party upon not less than 60 days' notice in writing to the other
party, except for the payment to Carey of unreimbursed expenses incurred by it
prior to the date of termination.
8. Carey may assign any of its rights or delegate the performance of
any of its obligations hereunder to its Affiliates or any other entity,
provided, however, that no such delegation shall relieve Carey of its
obligations hereunder.
9. The parties hereto agree that they have not created a joint venture
or partnership relationship between them, that Carey shall be deemed to be an
independent contractor and not for any purpose to be an employee of the Company.
10. This Agreement represents the entire agreement of the parties
hereto relating to the subject matter hereof and may not be amended, modified or
changed except in a writing signed by the parties hereto.
11. Subject to the limitations on assignment contained herein, the
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
12. This Agreement shall be governed by the laws of the State of New
York applicable to agreements made and to be performed entirely within such
state.
13. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, and all such
counterparts together shall constitute but one and the same instrument.
14. Any provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions hereof, and any such invalidity or unenforceability in any
-3-
<PAGE> 4
jurisdiction shall not invalidate or render unenforceable such provisions in any
other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CORPORATE PROPERTY ASSOCIATES 14
INCORPORATED
By:
---------------------------------
Claude Fernandez,
Executive Vice President
CAREY FINANCIAL CORPORATION
By:
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H. Augustus Carey,
President
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Exhibit 10.32
ESCROW AGREEMENT
ESCROW AGREEMENT made as of April __, 1999 by and among CORPORATE
PROPERTY ASSOCIATES 14 INCORPORATED, a Maryland corporation (the "Company"),
CAREY FINANCIAL CORPORATION, a Delaware corporation (the "Sales Agent"), and THE
UNITED STATES TRUST COMPANY OF NEW YORK, a New York corporation (the "Escrow
Agent").
WHEREAS, the Company has filed a Registration Statement on Form S-11
(the "Registration Statement") with the Securities and Exchange Commission (the
"Commission"), bearing registration number 333-31437.
WHEREAS, the Company and the Sales Agent will enter into a Sales Agency
Agreement (the "Sales Agency Agreement"), pursuant to which the Sales Agent and
a group of selected dealers (each a "Selected Dealer") will offer and sell to
the public on a best efforts basis a maximum of 40,000,000 shares of common
stock of the Company (the "Shares") at $10 per Share.
WHEREAS, the Company has sole discretion in determining whether to
accept or reject any orders for the Shares;
WHEREAS, the Company, in compliance with the terms of the proposed
offering described in the Registration Statement and Rule 15c2-4 under the
Securities Exchange Act of 1934, as amended, proposes to establish an escrow
account with the Escrow Agent for the deposit of payments for the Shares; and
WHEREAS, the foregoing recitals are statements of the Company and the
Sales Agent and not of the Escrow Agent;
NOW, THEREFORE, in consideration of the mutual promises herein made and
for other good and valuable consideration, the parties hereby agree as follows:
1. Subject to Section [6] hereof, for the period commencing on the date
of the Prospectus and terminating not later than 60 days following (a) the date
two years from the date of the Prospectus or (b) the date on which the offering
of the Shares otherwise terminates, whichever first occurs, but in no case prior
to 60 days after the final disposition of the money and property held in escrow
hereunder, the parties hereby appoint the Escrow Agent in accordance with the
terms and conditions set forth herein, and the Escrow Agent hereby accepts such
appointment and
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agrees to receive, hold and disburse the proceeds from the sale of the Shares in
accordance herewith. The Company and the Sales Agent agree to promptly notify
the Escrow Agent of the date of the Prospectus (or if the offering of the Shares
is extended, the date of termination of such extension) and the date, if any,
referred to in clause (b) above.
2. (a) The Sales Agent shall deliver, and shall cause each Selected
Dealer to directly or indirectly deliver, proceeds (the "Escrow Funds") received
from purchasers of the Shares (each an "Investor") to the Escrow Agent at The
United States Trust Company of New York, 114 W. 47 Street, New York, NY
10036-1532. The Escrow Agent shall have no obligation or responsibility to
determine whether the Sales Agent or any Selected Dealer has delivered to the
Escrow Agent all or any part of the proceeds received from an Investor. All
deliveries of proceeds shall be accompanied by (i) the name and address of, the
social security number or taxpayer identification number of, the brokerage
account number of (if applicable), the number of Shares purchased by and the
total dollar amount of the investment by, each Investor on whose behalf proceeds
are delivered to the Escrow Agent and (ii) a statement advising the Escrow Agent
of the aggregate amount of Escrow Funds delivered attributable to individual
retirement accounts, Keogh plans, or any other employee benefit plan subject to
Title I of the Employee Retirement Income Security Act of 1974 (collectively
referred to as "Plan Investors") or from some other type of investor ("Non-Plan
Investors"). Funds delivered to the Escrow Agent may be in the form of checks
payable to "The United States Trust Company of New York, as Escrow Agent" and
drawn on an account of an Investor or Selected Dealer or wire transfer from the
Sales Agent or certain Selected Dealers identified to the Escrow Agent by the
Company or the Sales Agent. The Company shall comply fully with the Interest and
Dividend Tax Compliance Act of 1983 and the Escrow Agent shall have no
responsibility thereunder.
(b) Prior to the delivery of any payments from Investors, the Company
shall deliver to the Escrow Agent a copy of the Prospectus, certified by the
Company to be a true copy, and a copy of the order of the Commission declaring
effective the Registration Statement as soon as practicable after the Company's
receipt thereof. It is understood that the copy of the Prospectus is being
delivered to the Escrow Agent solely for the purpose of notifying the Escrow
Agent of the effective date of the Registration Statement and that the Escrow
Agent is not charged with any duty to review the Prospectus or to inquire into
the effectiveness of the Registration Statement.
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(c) All funds received from Plan Investors shall be deposited and
maintained in a separate account opened by the Escrow Agent ("Plan Subaccount").
All funds received from Non-Plan Investors shall be deposited and maintained in
a separate account opened by the Escrow Agent ("Non-Plan Subaccount").
(d) All Escrow Funds shall be invested in the U. S. Trust Government
Money Fund. All investments attributable to Escrow Funds shall be made by the
Escrow Agent in the name of "The United States Trust Company of New York, as
Escrow Agent." The income derived from such investments shall be distributed to
the Investors or, in the case of Investors ("AMEX Investors") solicited by
American Express Financial Advisors, Inc. ("AMEX"), to AMEX for the account of
such AMEX Investors, in either case as Escrow Interest in accordance with the
provisions of Section 3(a), (b) or (c) hereof, whichever shall be applicable.
The Escrow Agent shall issue to each Investor (including each AMEX Investor) a
Form 1099 for each year in which such Investor had Escrow Funds on deposit with
the Escrow Agent.
3. (a) Upon receipt by the Escrow Agent of (i) an opinion from counsel
to the Company stating that all conditions necessary for the release of Escrow
Funds have been satisfied and that the offering of the Shares has not been
terminated by withdrawal of the Registration Statement and (ii) instructions
signed by the Sales Agent and the Company, the Escrow Agent will from time to
time pay to the Company and/or to any other person designated in such
instructions the Escrow Funds in accordance with such instructions. Such
instructions also shall include the times and places at which such Escrow Funds
are to be paid and the amount and method of payment. The Company shall give the
Escrow Agent three business days advance oral notification of the contents of
such instructions. Within 15 calendar days after the first date on which Escrow
Funds are paid to the Company or other designated person pursuant to the
instructions described above, the Escrow Agent shall remit interest earned on
such Escrow Funds ("Escrow Interest") to Investors on whose behalf such Escrow
Funds were deposited or, in the case of AMEX Investors, to AMEX for the account
of such AMEX Investors, as applicable, as follows:
(A) In the case of an Plan Investor, the interest earned on all
Escrow Funds maintained in the Plan Subaccount opened in accordance
with Section 2(c) hereof based on the length of time its
subscription payment has been held by the Escrow Agent. Such
remission shall be made either directly to, or pursuant to
instruction received from, the Plan Investor or an investment
Adviser acting on behalf of such Investor, or in the
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case of AMEX Plan Investors, in a lump sum directly to AMEX for the
account of such AMEX Investors. The payment of Escrow Interest to AMEX
shall be accompanied by a listing, in a form acceptable to AMEX, of the
AMEX Plan Investors to whom interest should be paid and their
respective AMEX account numbers.
(B) In the case of a Non-Plan Investor, its pro rata share of interest
earned on all Escrow Funds maintained in the Non-Plan Subaccount opened
in accordance with Section 2(c) hereof based on the length of time its
subscription payments have been held by the Escrow Agent. Such
remission shall be made either directly to, or pursuant to instructions
received from, the Non-Plan Investor or an agent acting on behalf of
such Investor, or, in the case of AMEX Non-Plan Investors, in a lump
sum directly to AMEX for the account of such AMEX Investors. The
payment of Escrow Interest to AMEX shall be accompanied by a listing,
in a form acceptable to AMEX, of the AMEX Non-Plan Investors to whom
interest should be paid and their respective AMEX account number.
(b) If, during the period any Escrow Funds are held by the Escrow
Agent, the Company determines that (i) an Investor will not be issued Shares
because the Company determines that such Investor is not acceptable, or (ii) a
portion of an Investor's order is rejected, the Company shall (A) furnish the
Escrow Agent with the name of such Investor and the amount of such Investor's
order which must be returned, and (B) direct the Escrow Agent to, and the Escrow
Agent shall, return to such Investor or, in the case of an AMEX Investor, to
AMEX for the account of such Investor, within eight business days of the Escrow
Agent's receipt of such information, the amount of such Investor's order
(including any Escrow Interest attributable to such amount) which must be
returned.
(c) In the event that, prior to the date, one year from the date of the
Prospectus (the "Anniversary Date"), the Registration Statement is withdrawn
from registration with the Commission or, if not so withdrawn, the Escrow Agent
has not received the opinion of counsel and instructions described in Section
3(a) hereof, the Escrow Agent shall, within 10 business days following the
Anniversary Date, or after receipt of written notice from the Company and the
Sales Agent that the Registration Statement has been withdrawn, as the case may
be, remit to or for the account of each Investor its respective share of the
Escrow Funds then held by the Escrow Agent on behalf of such Investor,
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together with such Investor's respective share of Escrow Interest, based on the
length of time such Investor's payments have been held by the Escrow Agent and
determined in accordance with Section 3(a) hereof. Such remission shall be made
either directly to, or pursuant to instructions received from, the Investor or
an agent acting on behalf of such Investor or, in the case of AMEX Investors, in
a lump sum to AMEX for the account of such AMEX Investors. Notwithstanding the
foregoing, the Escrow Agent shall use its best efforts to remit such Escrow
Funds and Escrow Interest to or for the account of each Investor within five
business days following the earlier of the dates specified above.
4. (a) The Escrow Agent shall perform the following functions with
respect to funds it receives from the Sales Agent or Selected Dealers by check
drawn on an Investor's account or wire transfers on behalf of Investors:
(i) Collect the mail received at the address referred to Section
2(a) hereof prior to 12:00 noon on each business day;
(ii) Stamp each such check with a date and a sequential accession
number;
(iii) Before the close of business on the business day on which funds
are received from Non-Plan Investors, deposit checks or wire
transfers attributable to such Non-Plan Investors into the
Non-Plan Subaccount established pursuant to Section 2(c) hereof;
(iv) Before the close of business on the business day on which funds
are received from an Plan Investor, deposit such funds into the
Plan Subaccount established pursuant to Section 2(c) hereof;
(v) Verify that, for each Investor whose name was submitted to the
Escrow Agent by the Sales Agent or any Selected Dealer in
connection with the delivery of funds to the Escrow Agent,
payment for the Shares subscribed for by such Investor has been
made either by check or by wire transfer as described in Section
2(a) hereof and notify the Company in writing as soon as
practicable if any such payment is not received or if payment on
any check is refused by the bank or financial institution on
which such check is drawn.
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(vi) Within 48 hours of the close of business on the business day on
which funds are received, send to the Company and to the
Company's transfer agent by Express Mail or other next day
delivery service, the aggregate face amount of all checks and
the amount of wire transfers received.
(b) On each business day during the period any Escrow Funds are held by
the Escrow Agent, the Escrow Agent shall notify the Company by telephone of the
then current per annum rate at which interest is accruing on the Escrow Funds,
both with respect to Plan Investors and Non-Plan Investors. Such notification
shall be confirmed in writing in the form of a weekly report which shall be sent
to the Company by hand delivery or by first class U.S. mail.
5. (a) Notwithstanding anything to the contrary contained in this
Escrow Agreement, the Escrow Agent shall in no case or event be liable for the
failure of any of the conditions of this Escrow Agreement or damage caused by
the exercise of its duties, if acting in good faith, in any particular manner,
or for any reason (including, without limitation, the liquidation of investments
of the Escrow Funds), for any mistake of fact or law, for any error of judgment,
or for any action taken or omitted by it, or any action suffered by it to be
taken or omitted, except gross negligence or willful misconduct with reference
to the Escrow Funds or Escrow Interest, and the Escrow Agent, if acting in good
faith, shall not be liable or responsible for its failure to ascertain the terms
or conditions, or to comply with any of the provisions, of any agreement,
contract or other document delivered to it or referred to herein, nor shall the
Escrow Agent, if acting in good faith, be liable or responsible for forgeries or
false personation or for its good faith determination of the authority of any
person executing this Escrow Agreement or for the value or validity or
genuineness or collection of any check from an Investor delivered to the Escrow
Agent hereunder. The Escrow Agent shall have no responsibility with respect to
the use or application of any funds or other property paid or delivered by the
Escrow Agent to the Company pursuant to the provisions hereof. The Escrow Agent
shall not be liable to the other parties hereto or to anyone else for any loss
which may be incurred by reason of any investment of any monies it holds
hereunder in its capacity as Escrow Agent.
(b) In the absence of gross negligence or willful misconduct on the
part of the Escrow Agent, the Escrow Agent may rely conclusively upon and shall
not be liable for, and shall be indemnified and held harmless for, acting upon
any order, notice,
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demand, certificate, opinion or advice of counsel (including counsel chosen by
the Escrow Agent), statement, instrument, report or other paper or document (not
only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth, completeness and acceptability of any
information therein contained) which is believed by the Escrow Agent to be
genuine and to be signed or presented by the proper person or persons. The
Escrow Agent shall not be bound by any notice or demand, or any waiver,
modification, termination or rescission of this Escrow Agreement or any of the
terms hereof, unless evidenced by a writing delivered to the Escrow Agent signed
by the proper party or parties and, if the duties or rights of the Escrow Agent
are affected, unless it shall give its prior written consent thereto.
(c) The Escrow Agent shall have the right to assume, in the absence of
written notice to the contrary from the proper person or persons, that a fact or
an event by reason of which an action would or might be taken by the Escrow
Agent does not exist or has not occurred, without incurring liability for any
action taken or omitted, or any action taken or omitted by it or to be taken or
omitted, in good faith and in the exercise of its own best judgment, in reliance
upon such assumption.
(d) To the extent that the Escrow Agent becomes liable for the payment
of taxes, including withholding taxes, in respect of income derived from the
investment of funds held hereunder or any payment made hereunder, the Escrow
Agent may pay such taxes from the funds held. The Escrow Agent may withhold from
any payment of monies held by it hereunder such amount as the Escrow Agent
estimates to be sufficient to provide for the payment of such taxes not yet
paid, and may use the sum withheld for that purpose. The Escrow Agent shall be
indemnified and held harmless against any liability for taxes and for any
penalties or interest in respect of taxes on such investment income or payments
in the manner provided in Section 6(e) hereof. The Escrow Agent shall provide to
each Investor, or, in the case of AMEX Investors, to AMEX all information
necessary regarding on whose behalf such withholdings have been made so that the
proper adjustments may be made to the escrow interest payment received by the
Investor or to the Investor's AMEX account.
(e) The Escrow Agent shall be indemnified and held harmless by the
Company and the Sales Agent, jointly and severally, from and against any costs,
liabilities, claims, judgments and other expenses, including reasonable counsel
fees and disbursements, or loss suffered by the Escrow Agent in connection with
or directly or indirectly arising out of or
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relating to this Escrow Agreement, the services of the Escrow Agent hereunder,
the money or other property held by it hereunder or any income earned from
investment of such money, provided, however, that such indemnification shall not
apply to any such expenses, losses, claims or demands caused by the gross
negligence or willful misconduct of the Escrow Agent or its officers, employees
or agents. Promptly after the receipt by the Escrow Agent of notice of any
demand or claim or the commencement of any action, suit or proceeding, the
Escrow Agent shall, if a claim in respect thereof is to be made against any of
the other parties hereto, notify such other parties thereof in writing; but the
failure by the Escrow Agent promptly to give such notice shall not relieve any
party from any liability which such party may have to the Escrow Agent
hereunder. For the purposes hereof, the term "expense or loss" shall include all
amounts paid or payable to satisfy any claim, demand or liability, or in
settlement of any claim, demand, action, suit or proceeding settled with the
express written consent of the Escrow Agent, all reasonable costs and expenses,
including, but not limited to, counsel fees and disbursements, paid or incurred
in investigating or defending against any claim, demand, action, suit or
proceeding. Anything in this subsection (e) to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any such claim,
demand, action, suit or proceeding effected without its written consent.
(f) Should any dispute or conflicting claims arise with respect to the
payment or ownership or right of possession of the Escrow Funds or Escrow
Interest, the Escrow Agent shall be entitled, in its sole discretion, to refuse
to comply with any and all claims, demands, or instructions with respect to, and
to retain possession of, such Escrow Funds or Escrow Interest so long as such
dispute or conflict shall continue and the Escrow Agent shall not be liable for
its failure or refusal to comply with such conflicting claims, demands or
instructions. The Escrow Agent shall be entitled to refuse to act until such
disputes or conflicting claims have been settled either by mutual agreement
among the parties concerned or by the final order, decree or judgment of a court
or other tribunal of competent jurisdiction in the United States of America and
the expiration of time for appeal without perfection of any appeal, but the
Escrow Agent shall be under no duty whatsoever to institute or defend any such
proceeding.
(g) The Escrow Agent's duties are only such as are herein specifically
provided, being purely ministerial in nature, and that the Escrow Agent shall
use reasonable diligence in the performance of its obligations hereunder, but
shall incur no
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liability whatever, except for willful misconduct or gross negligence, so long
as the Escrow Agent has acted in good faith. The Escrow Agent shall have no duty
to enforce any obligation of any person to make any payment or delivery, or to
direct or cause any payment or delivery to be made, or to enforce any obligation
of any person to perform any other act. The Escrow Agent shall be under no
liability to the other parties hereto or to anyone else by reason of any failure
on the part of any party hereto or any maker, guarantor, endorser or other
signatory of any document or any other person to perform such person's
obligations under any such document. Except for amendments to this agreement
referred to below and except for joint instructions given to the Escrow Agent by
the other parties hereto relating to the escrow deposit under this agreement,
the Escrow Agent shall not be obligated to recognize any agreement between any
or all of the persons referred to herein, notwithstanding that references
thereto may be made herein and whether or not it has knowledge thereof. The
Escrow Agent is not a party to, and is not bound by, any agreement or other
document out of which this Escrow Agreement may arise or any other agreement or
other document in connection with the Company.
6. Notwithstanding anything to the contrary contained in this Escrow
Agreement, the Escrow Agent (a) may resign from its duties under this Escrow
Agreement by giving 30 calendar days' prior written notice of such resignation
to the other parties hereto and (b) may be discharged from its duties under this
Escrow Agreement upon the receipt from each of the other parties hereto of 30
calendar days' prior written notice of such discharge. Upon the resignation or
discharge of the Escrow Agent, the Company shall retain a substitute escrow
agent to perform the functions theretofore performed by the Escrow Agent under
this Escrow Agreement. As soon as practicable after its resignation, the Escrow
Agent shall turn over to a successor escrow agent appointed by the other parties
hereto all money and property held hereunder upon presentation of a document
appointing the new escrow agent and its acceptance thereof. If no new escrow
agent is so appointed prior to the effectiveness of such resignation or
discharge, the Escrow Agent may deposit the aforesaid money and property with
any court it deems appropriate.
7 (a) The Company shall compensate the Escrow Agent in accordance with
the fee schedule attached hereto as Exhibit A.
(b) It is understood that fees and usual charges agreed upon for the
Escrow Agent's services hereunder shall be considered compensation for its
ordinary services as contemplated by this Escrow Agreement and in the event the
conditions of this Escrow Agreement are not promptly fulfilled by parties other
than the
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Escrow Agent or that the Escrow Agent renders any service hereunder not provided
for in, or contemplated by, this Escrow Agreement, or that there is any
modification hereof, or that any controversy arises hereunder or that the Escrow
Agent is made a party to, or intervenes in, or that there is, any litigation
pertaining to this Escrow Agreement or the subject matter thereof, the Escrow
Agent and its legal counsel shall be reasonably compensated for services
rendered in connection with, and reimbursed for all reasonable costs and
expenses occasioned by, such events and the Escrow Agent shall have the right to
retain all documents and/or other things of value at any time held by it
hereunder, except Escrow Funds, Escrow Interest or subscription material, until
such fees, costs and expenses shall be paid. The Company hereby promises to pay
the foregoing sums upon demand.
(c) It is understood that from time to time on and after the date
hereof, the other parties hereto shall deliver or cause to be delivered to the
Escrow Agent such further documents and instruments and shall do and cause to be
done such further acts as the Escrow Agent reasonably shall request (it being
understood that the Escrow Agent shall have no obligation to make any such
request) to carry out more effectively the provisions and purposes of this
Escrow Agreement, to evidence compliance herewith or to assure itself that it is
protected in acting hereunder.
8. If, after the receipt by the Escrow Agent of any check or instrument
pursuant hereto, the Escrow Agent shall inform the Company and the Sales Agent
that such check or instrument has been entered for collection by it hereunder
and is uncollectable and payment of the funds represented by such check or
instrument has been made pursuant to the terms of this Escrow Agreement, then
the Company shall immediately reimburse the Escrow Agent for such payment plus
interest thereon, and the Escrow Agent shall deliver the returned check or
instrument to the Company provided, however, that nothing contained herein shall
require the Escrow Agent to invest or pay out funds which it has reason to
believe are uncollectable or prior to funds respecting such check or instrument
having been paid (it being understood that the Escrow Agent shall be under no
duty to investigate the collectability of any such funds). The Escrow Agent
shall have no duty or responsibility to enforce collection of any check
delivered to the Escrow Agent hereunder. Notwithstanding anything to the
contrary contained herein, the Escrow Agent shall not be required to advance its
own funds to the Company, the Sales Agent or any Selected Dealer or any Investor
for any purpose under this Agreement.
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9. All distributions of payments for Shares by the Escrow Agent to
Investors or to any other person or entity pursuant to this Escrow Agreement
shall be made by check, payable in accordance with Section 3(a) hereof. All
payments by the Escrow Agent to the Company shall be made in immediately
available funds, if and to the extent that the funds on deposit with the Escrow
Agent are immediately available at the time of such payment.
10. The Company may at any time assign its right to receive up to 85%
of the amount of the Escrow Funds attributable to Non-Plan Investors as security
for borrowings from third parties, provided that any such assignment shall be
subordinate to the rights of Investors to receive, and no such assignment shall
in any way prevent the return to Investors of, the Escrow Funds and Escrow
Interest in accordance with Sections 3(a) and (b) hereof. The Escrow Agent shall
accept and acknowledge instructions for the payment of the Escrow Funds in
accordance with the provisions of Section 3(a) hereof designating any such third
party for such payment. It is specifically understood that, in order for the
parties hereto to change such instructions pursuant to this Escrow Agreement,
any party that has been assigned the right to receive Escrow Funds shall join in
the execution of an agreement changing such instructions or shall otherwise give
its written consent to such agreement. The Escrow Agent may rely on any
instructions it receives pursuant to this Section 10 until it receives properly
executed instructions which specifically supersede such previously received
instructions. The Company hereby agrees not to submit instructions altering
previously submitted instructions concerning payment of Escrow Funds to third
parties unless such new instructions are signed or consented to in writing by
such third party. All reasonable expenses incurred by the Escrow Agent as a
result of any such assignment referred to above shall be paid by the Company.
11. All notices, requests, demands, communications and instructions
required or desired to be given under this Escrow Agreement shall be in writing
and shall be deemed to be duly given if delivered personally or sent by
registered or certified U.S. mail, postage prepaid, return receipt requested, to
the following addresses:
To the Escrow Agent:
The United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
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Attention: Barbara Schoening
To the Company:
Corporate Property Associates 14 Incorporated
50 Rockefeller Plaza
New York, New York 10020
Attention: Susan Hyde, First Vice President
To the Sales Agent:
Carey Financial Corporation
50 Rockefeller Plaza
New York, NY 10020
Attention: H. Augustus Carey, President
or to such other address and to the attention of such other person as any of the
above may have furnished to the other parties by personal delivery or registered
or certified mail, return receipt requested.
12. The Company shall deliver to the Escrow Agent a certificate of the
secretary of the Company as to (a) the authority of certain officers thereof to
act on behalf of the Company both in connection with this Escrow Agreement and
(b) the incumbency and signatures of such officers, and the Escrow Agent may act
in reliance on such certificate and upon the instructions or directions, or any
other certificate, communication or other document, given to it in accordance
with the terms of this Escrow Agreement by the Company through a person
authorized so to act in such certificate.
13. The Sales Agent shall deliver to the Escrow Agent a certificate of
the secretary or any assistant secretary of the Sales Agent as to (a) the
authority of certain officers thereof to act on behalf of the Sales Agent in
connection with this Escrow Agreement and (b) the incumbency and signatures of
such officers, and the Escrow Agent may act in reliance on such certificate and
upon the instructions or directions, or any other certificate, communication or
other document, given to it in accordance with the terms of this Escrow
Agreement by the Sales Agent through a person authorized so to act in such
certificate.
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14. Nothing in this Escrow Agreement is intended to or shall confer
upon anyone other than the parties hereto any legal or equitable right, remedy
or claim. This Escrow Agreement shall be deemed to be an agreement made under
the laws of the State of New York and for all purposes shall be construed and
enforced in accordance with and governed by the laws of New York applicable to
agreements made and to be wholly performed within such State. Notwithstanding
the foregoing, each party recognizes that each Investor is a third party
beneficiary of this Escrow Agreement. Each of the other parties hereto hereby
irrevocably consents to the jurisdiction of the courts of the State of New York
and of any Federal court located in such state in connection with any action,
suit or other proceeding arising out of or relating to this Escrow Agreement or
any action taken or omitted hereunder, and waives personal service of any
summons, complaint or other process and agrees that the service thereof may be
made by certified or registered mail directed to such person at such person's
address for purposes of notices hereunder. Should the person so served fail to
appear or answer within the time prescribed by law, that person shall be deemed
in default and judgment may be entered by the Escrow Agent against that person
for the amount of other relief as demanded in any summons, complaint or other
process so served.
15. This Escrow Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and all such counterparts shall
constitute but one and the same instrument.
16. This agreement shall terminate on the final disposition of the
monies and property held in escrow hereunder, provided that the rights of the
Escrow Agent and the obligations of the other parties hereto under Sections 5, 7
and 14 hereof shall survive the termination hereof.
17. The Escrow Agent represents and warrants to the Company and the
Sales Agent that it satisfies the requirements of Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended, and the requirements of NASD Notice
to Members 84-7 with respect to qualifications of escrow agents.
18. (a) All amounts referred to herein are expressed in United States
Dollars and all payments by the Escrow Agent shall be made in such dollars.
(b) If, for any reasons, the escrow deposit is not received by the
Escrow Agent as contemplated herein, the other parties hereto shall reimburse
the Escrow Agent for all
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expenses, including counsel fees and disbursements, paid or incurred by it, in
making preparations for providing the services contemplated hereby.
(c) This Escrow Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing such
instrument to be drafted. The terms "hereby", "hereof", "hereto", "hereunder"
and any similar terms, as used in this agreement, refer to this agreement in its
entirety and not only to the particular portion of this agreement where the term
is used. The word "person" shall mean any natural person, partnership,
corporation, government and any other form of business or legal entity. All
words or terms used in this agreement, regardless of the number or gender in
which they are used, shall be deemed to include any other number and any other
gender as the context may require. This agreement shall not be admissible in
evidence to construe the provision of any prior agreement. The rule of ejusdem
generis shall not be applicable herein to limit a general statement, which is
followed by or referable to an enumeration of specific matters, to matters
similar to the matters specifically mentioned.
(d) This agreement and the rights and obligations hereunder of any
party hereto may be assigned by those parties only to a successor to the
relevant party's entire business with the prior written consent of all other
parties. This agreement shall be binding upon and inure to the benefit of each
party's respective successors, heirs and permitted assigns. No other person
shall acquire or have any rights under or by virtue of this agreement. This
Escrow Agreement constitutes the entire agreement of the parties and supersedes
all other prior agreements or understandings, written or oral, among the parties
with respect to the subject matter hereof and may not be waived or modified, in
whole or in part, except by a writing signed by each of the parties hereto. No
waiver of any provision of this Escrow Agreement in any instance shall be deemed
to be a waiver of the same or any other provision in any other instance. Failure
of any party to enforce any provision of this Escrow Agreement shall not be
construed as a waiver of its rights under such provision.
(e) The representations and warranties contained in this agreement
shall survive the execution and delivery hereof.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above written.
CORPORATE PROPERTY ASSOCIATES 14
INCORPORATED
By:
----------------------------------
Name:
Title:
THE UNITED STATES TRUST COMPANY OF
NEW YORK
By:
----------------------------------
Name:
Title:
CAREY FINANCIAL CORPORATION
By:
----------------------------------
Name:
Title:
Exhibit Index
Exhibit A - Fee Schedule
-15-
<PAGE> 16
EXHIBIT A
Fee Schedule
Initial Fee $2,500.00
Covers acceptance of appointment as Escrow Agent, including complete study of
drafts of Escrow Agreement and all supporting documents in connection therewith,
conferences until final Agreement is agreed upon, execution of final Agreement,
deposit of funds into the Plan Subaccount and the Non-Plan Subaccount and
maintenance and custody thereof.
<TABLE>
<S> <C>
Annual Administration Fee: $3,500.00
(Payable each year in advance)
Payment by check, per check $ 1.25
Wire transfer of funds, per wire $ 25.00
Preparation and filing appropriate
federal tax forms, per 1099 $ 1.00
</TABLE>
NOTE:
Charges for any services not specifically covered in this schedule will be
billed commensurate with the services rendered. This schedule reflects charges
which are now in effect for the normal and regular services of the Escrow Agent
and are minimal only, subject to modification where unusual conditions or
requirements prevail, and does not include counsel fees or expenses and
disbursements, which will be billed at cost. The Escrow Agent does not
anticipate incurring counsel expense unless an unusual problem or disagreement
needing legal interpretation should arise.
-16-
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-11 of our
reports dated March 5, 1999, on (i) our audit of the consolidated financial
statements and financial statement schedule of Corporate Property Associates 14
Incorporated and Subsidiaries as of December 31, 1997 and 1998 and for the
period from inception (June 4, 1997) to December 31, 1997 and the year ended
December 31, 1998, and (ii) our audit of the financial statements and financial
statement schedule of ET LLC as of December 31, 1998 and for the period from
inception (February 2, 1998) to December 31, 1998, We also consent to the
reference to our firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
New York, New York
April 15, 1999
<PAGE> 1
EXHIBIT 99.1
TABLE VI (1 OF 5)
ACQUISITION OF PROPERTIES BY
CORPORATE PROPERTY ASSOCIATES 12, INC. AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROSS
LEASABLE ORIGINAL CASH DOWN
TYPE OF SPACE DATE OF MORTGAGE PAYMENT-
OCCUPANT/GUARANTOR PROPERTY LOCATION (SQ.FT.) PURCHASE FINANCING EQUITY
- ------------------ ------------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Big V Holding Corp.(3)............. 45% interest Ellenville 133,554 7/13/94 3,334,416 3,077,187
in and Warwick,
Supermarkets NY
Wal-Mart Stores, Inc. ............. Distribution Greenfield, 82,620 2/10/95 2,500,000 1,278,781
facility Indiana
Elec Systems, Inc.................. Office/ Hayward, 153,531 2/16/95 15,000,000 9,408,792
Manufacturing California
facility
Q Clubs, Inc. (formerly Sports &
Fitness Club, Inc.)............... Health club Austin, Texas 43,935 5/8/95 2,750,000 2,747,000
The Garden Companies............... Manufacturing Chattanooga, 242,317 6/20/95 3,500,000 3,475,000
facility Tennessee
Del Monte Foods, Inc. ............. Warehouses Mendota, 239,850 11/9/95 6,250,000 4,453,200
and special Illinois; 210,000
purpose Plover, 274,750
facility Wisconsin; 11,165
Toppenish and
Yakima,
Washington
Applied Bioscience................. Warehouse/ Austin, Texas 173,000 11/13/95 7,500,000 5,068,295
office/research
facility
Rheometric Scientific, Inc......... Office/ Piscataway, 104,120 2/23/1996 6,300,000
Manufacturing New Jersey
facility
Telos Corporation.................. Office Loudon 192,775 3/11/1996 6,250,000 5,897,000
facility County,
Virginia
**Lanoxide Corporation............. Research and Newark, 162,220 3/28/1995 4,400,000 4,272,000
development Delaware
facility
Q Clubs, Inc....................... Health club Houston, 46,733 7/25/1996 0 6,180,000
Texas
<CAPTION>
CONTRACT
PURCHASE PRICE
PLUS OTHER CASH OTHER TOTAL COST
ACQUISITION EXPENDITURES CAPITALIZED OF
OCCUPANT/GUARANTOR FEES EXPENSED EXPENDITURES(1)(2) PROPERTY
- ------------------ -------------- ------------ ------------------ ----------
<S> <C> <C> <C> <C>
Big V Holding Corp.(3)............. 6,411,603 0 56,940 6,470,543
Wal-Mart Stores, Inc. ............. 3,778,761 0 12,921 3,791,702
Elec Systems, Inc.................. 24,406,792 0 5,241,343 29,650,135
Q Clubs, Inc. (formerly Sports &
Fitness Club, Inc.)............... 5,497,000 0 0 5,497,000
The Garden Companies............... 6,975,000 0 0 5,975,000
Del Monte Foods, Inc. ............. 10,703,200 0 (159,903) 10,543,297
Applied Bioscience................. 12,568,295 0 27,856 12,596,151
Rheometric Scientific, Inc......... 6,300,000 0 4,500 6,304,500
Telos Corporation.................. 12,147,000 0 5,500 12,152,500
**Lanoxide Corporation............. 8,672,000 0 7,421 8,679,421
Q Clubs, Inc....................... 6,180,000 0 0 6,180,000
</TABLE>
1
<PAGE> 2
TABLE VI (2 OF 5)
ACQUISITION OF PROPERTIES BY
CORPORATE PROPERTY ASSOCIATES 12, INC. AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROSS
LEASABLE ORIGINAL CASH DOWN
TYPE OF SPACE DATE OF MORTGAGE PAYMENT-
OCCUPANT/GUARANTOR PROPERTY LOCATION (SQ.FT.) PURCHASE FINANCING EQUITY
- ------------------ ------------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Celadon Group, Inc................. Distribution/ Indianapolis, 60,938 8/19/1996 0 6,801,000
warehouse Indiana
facility
Spectrian Corporation.............. Office/ Sunnyvale, 81,318 11/19/1996 10,000,000 7,643,979
research California
facility
Garden Ridge Corporation........... Retail store Tulsa, 141,284 12/16/1998 4,600,000 3,462,530
Oklahoma
Knogo North America, Inc........... Office/ Hauppauge, 68,333 12/24/1996 0 4,925,000
distribution New York
facility
Scott Companies, Inc............... Office/ San Leandro, 270,000 1/23/97 10,300,000 7,610,060
Research California
facility
Childtime Childcare, Inc........... Childcare Chandler, 33,684 1/29/1997 2,500,000 5,862,120
Centers Arizona
(under Fleming
construction) Island,
Florida
Sugar Land
and New
Territory,
Texas,
Ackworth,
Georgia
Silverdale,
Washington
Hauppauge, NY
Hampton, VA
Patchaque, NY
QMS, Inc. ......................... Office/ Mobile, 277,000 2/16/1997 5,900,000 7,974,346
Research Alabama
Facility
The Bon-Ton Stores, Inc. .......... Retail and Allentown, 398,175 4/10/997 6,900,000 5,141,865
Distribution Pennsylvania
facilities Johnstown, 80,654
Pennsylvania
Silgan Containers Corporation...... Technology/ Manomonie and 226,381 5/13/97 0 12,389,345
Manufacturing
facilities Oconomowoc,
Wisconsin
<CAPTION>
CONTRACT
PURCHASE PRICE
PLUS OTHER CASH OTHER TOTAL COST
ACQUISITION EXPENDITURES CAPITALIZED OF
OCCUPANT/GUARANTOR FEES EXPENSED EXPENDITURES(1)(2) PROPERTY
- ------------------ -------------- ------------ ------------------ ----------
<S> <C> <C> <C> <C>
Celadon Group, Inc................. 6,501,000 0 40,000 6,641,000
Spectrian Corporation.............. 17,643,979 0 4,119 17,645,095
Garden Ridge Corporation........... 5,062,530 0 0 6,062,530
Knogo North America, Inc........... 4,925,000 0 0 4,925,000
Scott Companies, Inc............... 17,910,000 0 5,356 17,915,356
Childtime Childcare, Inc........... 8,362,120 0 (181,525) 8,200,585
QMS, Inc. ......................... 13,674,346 0 0 13,674,346
The Bon-Ton Stores, Inc. .......... 12,041,885 0 0 12,041,885
Silgan Containers Corporation...... 12,389,345 0 0 12,389,345
</TABLE>
2
<PAGE> 3
TABLE VI (3 OF 5)
ACQUISITION OF PROPERTIES BY
CORPORATE PROPERTY ASSOCIATES 12, INC. AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROSS
LEASABLE ORIGINAL CASH DOWN
TYPE OF SPACE DATE OF MORTGAGE PAYMENT-
OCCUPANT/GUARANTOR PROPERTY LOCATION (SQ.FT.) PURCHASE FINANCING EQUITY
- ------------------ ------------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Pagg Corporation................... Office/ Milford, 106,125 7/08/1997 3,200,000 2,349,738
Research Massachusetts
facility
Vermont Teddy Bear Co.............. Office/ Shelburne, 55,446 7/18/97 3,311,509 2,552,365
Manufacturing Vermont
facility
Texas Freezer Company, Inc. ....... Warehouse/ Dallas, Texas 219,814 9/23/97 4,500,000 4,415,123
Special
Purpose
facility
(under
construction)
GDE Systems, Inc. ................. Research San Diego, 123,200 9/23/97 0 12,766,810
facility California
Westell Technologies Inc........... Office/ Aurora, 185,410 9/29/97 0 17,435,000
Manufacturing Illinois
facility
Brown Institute, Ltd............... Administration/ Mendota 118,241 11/12/97 0 9,990,486
Classroom Heights,
facility Minnesota
Randall International, Inc. ....... Office/ Carlsbald, 11/26/97 0 4,749,442
Manufacturing California
and
Warehouse
facility
(under
construction)
Perry Graphic Communications,
Inc............................... Printing Baraboo and 895,356 12/16/97 11,000,000 8,109,948
facilities Waterloo,
Wisconsin
Sandwich Bankcorp, Inc. ........... Office/ Boume, 21,606 12/30/97 0 1,820,000
Banking Sandwich and
facilities Wareham,
Massachusetts
Nutramax Products, Inc. ........... Manufacturing/ Houston, 246,960 3/28/1998 0 7,323,953
Distribution Texas
facilities
<CAPTION>
CONTRACT
PURCHASE PRICE
PLUS OTHER CASH OTHER TOTAL COST
ACQUISITION EXPENDITURES CAPITALIZED OF
OCCUPANT/GUARANTOR FEES EXPENSED EXPENDITURES(1)(2) PROPERTY
- ------------------ -------------- ------------ ------------------ ----------
<S> <C> <C> <C> <C>
Pagg Corporation................... 5,549,736 0 0 5,549,738
Vermont Teddy Bear Co.............. 5,863,874 0 1,640 5,865,514
Texas Freezer Company, Inc. ....... 8,915,123 0 (397,221) 8,517,902
GDE Systems, Inc. ................. 12,786,810 0 446,911 13,213,721
Westell Technologies Inc........... 17,435,000 0 17,055 17,452,055
Brown Institute, Ltd............... 9,990,486 0 1,795,262 11,785,768
Randall International, Inc. ....... 4,749,442 0 (211,446) 4,537,396
Perry Graphic Communications,
Inc............................... 19,109,943 0 8,000 19,117,948
Sandwich Bankcorp, Inc. ........... 1,820,000 0 0 1,820,000
Nutramax Products, Inc. ........... 7,323,953 0 4,016 7,327,969
</TABLE>
3
<PAGE> 4
TABLE VI (4 OF 5)
ACQUISITION OF PROPERTIES BY
CORPORATE PROPERTY ASSOCIATES 12, INC. AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROSS
LEASABLE ORIGINAL CASH DOWN
TYPE OF SPACE DATE OF MORTGAGE PAYMENT-
OCCUPANT/GUARANTOR PROPERTY LOCATION (SQ.FT.) PURCHASE FINANCING EQUITY
- ------------------ ------------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
International Management
Consulting, Inc. ................. Office/Light Asburn, 69,983 5/18/1998 0 5,331,602
assembly Virginia
facilities
Balance Care Corporation........... Office Mechanicburg, 42,000 6/23/1998 0 2,311,434
facilities Pennsylvania
--------- ---------
113,695,825 183,143,361
========= =========
Investment in BB Property
Company(4)
Best Buy Co., Inc. ................ 37% interest Ft. Collins 558,695 5/13/94 12,136,000 4,970,210
as Limited and Denver,
Partner in Colorado;
Partnership Bloomingdale,
which owns Matteson,
retail stores Bedford Park,
Aurora and
Schaumburg,
Illinois;
Omaha,
Nebraska;
Albuquerque,
New Mexico;
Beaumont, El
Paso,
Houston, Fort
Worth,
Arlington,
Plano and
Dallas,
Texas;
Madison,
Wisconsin
Investment in GENA Property
Company(5)
Gensis, Inc. ...................... 50% interest San Diego, 144,311 10/14/94 6,500,000 5,237,498
in a California
partnership
which owns an
Office/
Research and
Development
facility
<CAPTION>
CONTRACT
PURCHASE PRICE
PLUS OTHER CASH OTHER TOTAL COST
ACQUISITION EXPENDITURES CAPITALIZED OF
OCCUPANT/GUARANTOR FEES EXPENSED EXPENDITURES(1)(2) PROPERTY
- ------------------ -------------- ------------ ------------------ ----------
<S> <C> <C> <C> <C>
International Management
Consulting, Inc. ................. 5,331,602 0 (118,063) 5,213,539
Balance Care Corporation........... 2,311,434 0 (66,039) 2,245,385
---------- -- ---------- ----------
306,839,266 0 6,546,663 313,385,949
========== == ========== ==========
Investment in BB Property
Company(4)
Best Buy Co., Inc. ................ 17,106,210 0 595 17,106,605
Investment in GENA Property
Company(5)
Gensis, Inc. ...................... 11,737,498 0 (272,961) 11,464,537
</TABLE>
4
<PAGE> 5
TABLE VI (5 OF 5)
ACQUISITION OF PROPERTIES BY
CORPORATE PROPERTY ASSOCIATES 12, INC. AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROSS
LEASABLE ORIGINAL CASH DOWN
TYPE OF SPACE DATE OF MORTGAGE PAYMENT-
OCCUPANT/GUARANTOR PROPERTY LOCATION (SQ.FT.) PURCHASE FINANCING EQUITY
- ------------------ ------------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment in CARDS LLC(6)
The Upper Deck Company............ 50% interest Carlsbad, 294,779 01/04/1996 7,500,000 5,327,225
in a limited California
liability
company which
owns
Manufacturing/
Office
buildings
Investment in Delaware Chip
LLC(7)............................ 33.33% Sunnyvale, 362,000 12/23/1998 22,750,000 9,012,653
interest in a California
limited
--------- ---------
liability company which owns
Manufacturing buildings
162,581,325 217,080,947
<CAPTION>
CONTRACT
PURCHASE PRICE
PLUS OTHER CASH OTHER TOTAL COST
ACQUISITION EXPENDITURES CAPITALIZED OF
OCCUPANT/GUARANTOR FEES EXPENSED EXPENDITURES(1)(2) PROPERTY
- ------------------ -------------- ------------ ------------------ ----------
<S> <C> <C> <C> <C>
Investment in CARDS LLC(6)
The Upper Deck Company............ 12,827,225 0 85,183 12,915,408
Investment in Delaware Chip
LLC(7)............................ 31,762,653 0 0 31,762,853
-- ---------- ----------
liability company which owns
Manufacturing buildings
6,362,480 386,636,350
</TABLE>
FOOTNOTES
(1) Consists of cost of improvements subsequent to acquisitions and closing
costs relating to the acquisition or properties such as the costs of
appraisals and other closing costs such as attorneys' fees and accountants'
fees and costs of title reports, transfer and recording taxes and title
insurance.
(2) For properties under construction, interest on mortgages is capitalized
rather than expensed and rentals received are recorded as a reduction of the
basis in the properties.
(3) CPA:12 has a 45% ownership in this property. The remaining 55% is owned by
CIP, an affiliate of CPA:12, CPA:12 and CIP hold title to their respective
interests as tenants-in-common.
(4) CPA:12 has a 37% interest as a limited partner in a partnership with CIP
which owns 63% as a general partner.
(5) CPA:12 has 50% ownership in this property. The remaining 50% is owned by
CIP. CIP and CPA:12 hold title to their respective interests as
tenants-in-common.
(6) CPA:12 has a 50% ownership in these properties. The remaining 50% is owned
by CIP. CIP and CPA:12 hold title to their respective interests as
tenants-in-common. All dollar figures shown reflect CPA-12's interest in the
property.
(7) CPA:12 has a 33.33% ownership in these properties. The remaining 66.67% is
owned by CIP and CPA:14. CIP, CPA:12 and CPA:14 hold title to their
respective interests as tenants-in-common.
All dollar figures shown reflect CPA:12's interest in the property.
** Lanoxide writedown not included
5
