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Filed pursuant to Rule 424(b)(3)
Registration No. 333-76761
CORPORATE PROPERTY ASSOCIATES 14
INCORPORATED
SUPPLEMENT DATED MARCH 10, 1999 TO
PROSPECTUS DATED NOVEMBER 16, 1999
(HEREINAFTER THE "PROSPECTUS")
SUMMARY OF THE SUPPLEMENT
MANAGEMENT (PAGE 2)
This section sets forth information on the investment committee.
ADVISORY AGREEMENT (PAGE 2)
This section sets forth information on the proposed assignment of the
advisory agreement to a wholly-owned subsidiary of Carey Diversified LLC.
DESCRIPTION OF THE PROPERTIES (PAGE 2)
This section sets forth information on CPA(R):14's acquisition of three
manufacturing facilities and a build-to-suit facility leased to Atrium
Companies, Inc., a build-to-suit facility leased to 24 Hour Fitness, Inc., a
manufacturing facility leased to West Union Corporation, a build-to-suit
facility leased to Barjan Products, L.P., an expansion of the property leased to
Builders' Supply and Lumber Co., Inc., and the filing for protection from
creditors under the bankruptcy code by AmeriServe.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS (PAGE 10)
This section sets forth information on recent changes to the Internal
Revenue Code which impact REITs.
THE OFFERING (PAGE 10)
This section sets forth information on selling commissions, the sale of
shares and the issuance of shares to shareholders.
Capitalized terms not defined herein will have the meanings ascribed to
them in the Prospectus.
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MANAGEMENT
Dr. Lawrence R. Klein is now a full-time member of the investment committee
of Carey Property Advisors. In addition to Lawrence R. Klein, George E.
Stoddard, Frank J. Hoenemeyer and Nathaniel Coolidge serve as members of the
investment committee. The approval of an investment requires the unanimous
approval of the investment committee. A quorum of three members is required for
committee action.
ADVISORY AGREEMENT
On November 30, 1999, the boards of directors of Carey Diversified and W.P.
Carey & Co., Inc. approved the terms of a merger agreement whereby W.P. Carey &
Co. and certain affiliates, including Carey Property Advisors, will contribute
certain assets, including the Carey Property Advisor's advisory agreement with
CPA(R):14, into a wholly-owned subsidiary of Carey Diversified. A consent
solicitation with respect to such shareholder approval has been filed with the
Securities and Exchange Commission.
The combined company will be renamed W. P. Carey & Co. LLC and will assume
all of Carey Property Advisors' rights and obligations under the advisory
agreement. W.P. Carey & Co. LLC will be managed by the same directors and
employees as W.P. Carey & Co., Inc. W.P. Carey & Co. expects to be listed on the
New York Stock Exchange and the Pacific Exchange under the symbol "WPC." The
completion of the merger is subject to the approval of the shareholders of Carey
Diversified.
The advisory agreement between CPA(R):14 and Carey Property Advisors
requires that any assignment of the agreement be approved by the majority of the
directors of CPA(R):14. On November 30, 1999, the directors of CPA(R):14,
including the independent directors, unanimously approved the assignment of the
advisory agreement from Carey Property Advisors to a wholly-owned subsidiary of
Carey Diversified LLC. This assignment will not change any of the terms of the
advisory agreement.
DESCRIPTION OF THE PROPERTIES
PROPERTIES LEASED TO ATRIUM COMPANIES, INC.
General
On November 24, 1999, CPA(R):14 purchased three manufacturing facilities
from Atrium Companies, Inc. The three existing facilities, containing a total of
approximately 1,001,480 square feet, are located in Dallas, Texas and
Greenville, Texas. In addition, CPA(R):14 purchased from the Wylie Economic
Development Corporation a parcel of land located in Wylie, Texas upon which
CPA(R):14 will construct a build-to-suit facility. The facility will contain
approximately 207,000 square feet upon completion. The existing facilities are
suitable and adequate for uses as a manufacturing facility, and upon completion,
the build-to-suit facility will be suitable and adequate for use as a
manufacturing facility. The cost of the existing facilities and the
build-to-suit facility will be depreciated for tax purposes over a 40-year
period on a straight-line basis.
Purchase Terms
The cost of acquiring the existing facilities and the build-to-suit
facility, including the acquisition fee payable to W.P. Carey & Co., was
approximately $19,937,000, an amount less than the appraised value of the land
and facilities. CPA(R):14 paid an acquisition fee of $733,246 to W.P. Carey &
Co. Carey Property Advisors will receive a deferred fee of $73,325, payable each
of the next eight years, but only if CPA(R):14 satisfies the preferred return.
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DESCRIPTION OF THE LEASES
General
Concurrently with the acquisition of the land and existing facilities,
CPA(R):14 entered into two net leases with Atrium, one for the existing
facilities and one for the build-to-suit facility. The leases are absolutely net
and bondable and in normal financeable form. Atrium will pay maintenance,
insurance, taxes and all other expenses associated with the operation and
maintenance of the facilities. In the opinion of management, the facilities are
or will be adequately covered by insurance.
Term
The initial term of the lease for the existing facilities commenced on
November 18, 1999 and will terminate on July 31, 2020. The initial term of the
lease for the build-to-suit facility will commence from the earlier of August
20, 2000 or the date of completion of the build-to suit facility, and will
terminate no later than July 31, 2020. The leases have two five-year renewal
terms at the option of Atrium.
Rent
Annual rent under the lease for the existing buildings is approximately
$2,075,000, payable monthly in equal installments of approximately $172,920.
Additionally, the lease provides that annual rent will be adjusted beginning the
fifth year of the initial term and every two years thereafter based on increases
in the CPI.
Monthly rent under the lease for the build-to-suit facility is a percentage
of the amount advanced by CPA(R):14 for construction costs and is expected to be
approximately $29,375 per month. Additionally, the lease provides that annual
rent will be adjusted beginning the second year of the initial term and every
two years thereafter based on increases in the CPI.
DESCRIPTION OF FINANCING
CPA(R):14 obtained mortgage financing for the facilities in the amount of
$13,123,000 from GMAC Commercial Mortgage Corporation. The loan has a ten-year
term, an interest rate of 8.7%, and amortizes over a 30-year period. The first
year is interest only.
DESCRIPTION OF ATRIUM COMPANIES, INC.
Atrium is one of the largest manufacturers and distributors of residential
windows and doors in the United States. Financial statements for Atrium are on
file with the Securities and Exchange Commission. The following is a summary of
selected financial information for Atrium:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1998 1997
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(IN THOUSANDS)
<S> <C> <C>
INCOME STATEMENT
Net sales................................................... $211,059 $99,039
Cost of goods sold.......................................... 159,140 78,270
Income from operations...................................... 6,181 4,344
Net income (loss)........................................... (2,813) 696
</TABLE>
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<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1998 1997
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(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents................................... $ -- $ 31
Total current assets........................................ 101,897 23,610
Total assets................................................ 359,869 55,838
Total shareholders' equity.................................. 133,056 10,675
</TABLE>
PROPERTY LEASED TO 24 HOUR FITNESS, INC.
General
On December 29, 1999, CPA(R):14 purchased from TCC-BTS SLC Fitness, Inc. an
existing facility which is currently being expanded. The land, containing
approximately 36,851 square feet, is located in Salt Lake City, Utah. Upon
completion, the facility will be suitable and adequate for use as a fitness
center. The cost of the land and the facility will be depreciated for tax
purposes over a 40-year period on a straight-line basis.
Concurrently with the acquisition of the land, CPA(R):14 entered into a
construction management agreement with TCC. In addition, CPA(R):14 assumed from
TCC a net lease with 24 Hour Fitness. The obligations of 24 Hour Fitness under
the lease are guaranteed by Fitness Holdings, Inc., the parent company of 24
Hour Fitness.
Purchase Terms
The cost of acquiring the facility and the land, including the acquisition
fee payable to W.P. Carey & Co., was approximately $5,017,400, an amount less
than the appraised value of the land. CPA(R):14 paid an acquisition fee of
approximately $225,737 to W.P. Carey & Co. Carey Property Advisors will receive
a deferred fee of $22,574, payable each of the next eight years, but only if
CPA(R):14 satisfies the preferred return.
DESCRIPTION OF THE LEASE
General
The lease is absolutely net and bondable and in normal financeable form. 24
Hour Fitness will pay maintenance, insurance and taxes and all other expenses
associated with the operation and maintenance of the land and the facility. In
the opinion of management, the facility is adequately covered by insurance.
Term
The initial term of the lease is twenty years from the earlier of May 14,
2000 or the date of completion of the facility. The lease has three five-year
renewal terms at the option of 24 Hour Fitness.
Rent
Annual rent under the lease is approximately $526,970, payable monthly in
equal installments of approximately $43,910. Rent will commence on the earlier
of May 14, 2000 or upon completion of the facility. Additionally, the lease
provides annual rent will be adjusted beginning the third year of the lease, and
every two years thereafter. The annual rent will be adjusted to be the lesser of
(i) 104% of the annual rent payable during the immediately preceding year, or
(ii) any increases in the CPI; provided, that no adjustment will result in a
reduction of the current annual rent.
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DESCRIPTION OF FINANCING
CPA(R):14 is currently seeking mortgage financing for the facility.
DESCRIPTION OF 24 HOUR FITNESS, INC.
24 Hour Fitness operates as a health and physical fitness club.
The following is a summary of selected financial data for Fitness Holdings,
the guarantor of the lease, which has been provided by Fitness Holdings:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
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1998 1997
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(IN THOUSANDS)
<S> <C> <C>
INCOME STATEMENT
Total net revenues.......................................... $362,825 $263,265
Total operating expenses.................................... 352,178 268,711
Income (loss) from operations............................... 10,647 (5,446)
Net income (loss)........................................... (7,961) (16,190)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
1998 1997
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(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA
Cash........................................................ $ 3,954 $ 4,584
Total current assets........................................ 56,417 44,085
Total assets................................................ 336,497 246,886
Total shareholders' deficit................................. (113,585) (105,552)
</TABLE>
PROPERTY LEASED TO WEST UNION CORPORATION
General
On January 12, 2000, CPA(R):14 purchased a manufacturing facility from West
Union Corporation. The facility, containing approximately 116,900 square feet,
is located in Tempe, Arizona. The facility is currently being expanded and
construction is scheduled to be completed by the end of February, 2000. The
facility is suitable and adequate for use as a manufacturing facility. The cost
of the facility will be depreciated for tax purposes over a 40-year period on a
straight-line basis.
Purchase Terms
The cost of acquiring the facility, including the acquisition fee payable
to W.P. Carey & Co., was approximately $5,500,000, an amount less than the
appraised value of the land. CPA(R):14 paid an acquisition fee of approximately
$247,380 to W.P. Carey & Co. Carey Property Advisors will receive a deferred fee
of $24,738, payable each of the next eight years, but only if CPA(R):14
satisfies the preferred return.
DESCRIPTION OF THE LEASE
General
Concurrently with the acquisition of the land, CPA(R):14 entered into a net
lease and construction management agreement with West Union for the facility.
The lease is absolutely net and bondable and in normal financeable form. West
Union will pay maintenance, insurance and taxes and all other expenses
associated with the operation and maintenance of the facility. In the opinion of
management, the facility is adequately covered by insurance.
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Term
The initial term of the lease is fifteen years and commenced January 12,
2000. The lease has two ten-year renewal terms at the option of West Union.
Rent
Annual rent under the lease is approximately $530,250, payable quarterly in
equal installments of approximately $132,562. Additionally, the lease provides
annual rent will be increased 14.25% every five years over the life of the
lease.
DESCRIPTION OF FINANCING
CPA(R):14 obtained mortgage financing for the facility in the amount of
$3,500,000 from First Tennessee Bank. The loan has a ten-year term, an interest
rate of 8.25% and amortizes over a 25-year period.
DESCRIPTION OF WEST UNION
West Union is a leading manufacturer of building products in the Southeast
and Southwest. The company manufacturers both aluminum and vinyl windows and
doors and distributes manufactured products as well as wood windows and other
building products.
The following is a summary of selected financial data for West Union which
has been provided by West Union:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1998 1997
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(IN THOUSANDS)
<S> <C> <C>
INCOME STATEMENT
Sales....................................................... $31,081 $26,766
Gross profit................................................ 6,545 5,352
Operating loss.............................................. (859) (697)
Net income (loss)........................................... 1,403 (103)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1998 1997
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(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA
Cash and equivalents........................................ $ 2,416 $ 1,087
Total current assets........................................ 10,914 11,207
Total assets................................................ 20,539 30,545
Total shareholders' equity.................................. 16,846 15,443
</TABLE>
PROPERTY LEASED TO BARJAN PRODUCTS, L.P.
General
On February 3, 2000, CPA(R):14 purchased from Barjan Products, L.P. a
parcel of land and an existing facility which is currently being expanded. The
land, containing approximately 38 acres, is located in Rock Island, Illinois.
Upon completion, the build-to-suit facility will be suitable and adequate for
use as a warehouse. The cost of the land and the facility will be depreciated
for tax purposes over a 40-year period on a straight-line basis.
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Purchase Terms
Concurrently with the acquisition of the land and existing facility,
CPA(R):14 entered into a net lease and construction management agreement with
Barjan. The cost of acquiring the land and existing facility, including the
acquisition fee payable to W.P. Carey & Co., was approximately $5,497,380, an
amount less than the appraised value of the land and facility. CPA(R):14 paid an
acquisition fee of approximately $247,380 to W.P. Carey & Co. Carey Property
Advisors will receive a deferred fee of $24,740, payable each of the next eight
years, but only if CPA(R):14 satisfies the preferred return. The cost of
constructing the facility is expected to be approximately $11,900,000.
DESCRIPTION OF THE LEASE
General
The lease is absolutely net and bondable and in normal financeable form.
Barjan will pay maintenance, insurance and taxes during the term of the lease
and all other expenses associated with the operation and maintenance of the land
and the facility. In the opinion of management, the build-to-suit facility will
be adequately covered by insurance.
Term
The initial term of the lease is sixteen years from the earlier of October
1, 2000 or the date of completion of the build-to-suit facility. The lease has
one ten-year renewal term at the option of Barjan.
Rent
Annual rent under the lease is approximately $1,169,900, payable monthly in
equal installments of approximately $97,490. Additionally, the lease provides
that annual rent will be increased 6% beginning the third year of the lease and
every three years thereafter.
DESCRIPTION OF FINANCING
CPA(R):14 is currently seeking mortgage financing for the facility.
DESCRIPTION OF BARJAN PRODUCTS, L.L.C.
Barjan operates as a supplier of miscellaneous items sold at truck stops
nationwide. The following is a summary of selected financial data for Barjan for
the last three years which has been provided by Barjan:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1998 1997
------------ -----------
<S> <C> <C>
INCOME STATEMENT
Sales....................................................... $103,493,807 $57,277,665
Gross profit................................................ 29,845,876 15,267,056
Operating expenses.......................................... 15,992,792 8,660,078
Net income.................................................. 4,744,422 2,601,922
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
BALANCE SHEET DATA
Cash........................................................ $ 242,398 $ 45,840
Total assets................................................ 75,114,780 43,642,752
Partners' equity............................................ 12,935,156 10,442,340
</TABLE>
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PROPERTY LEASED TO BUILDERS' SUPPLY AND LUMBER CO., INC.
On June 29, 1999, CPA(R):14 purchased approximately 54 acres of land in
Harrisburg, NC from Builders' Supply and Lumber Co., Inc. Concurrently,
CPA(R):14 entered into a net lease and construction management agreement with
Builders' Supply for the build-to-suit facility. On January 27, 2000, CPA(R):14
and Builders' Supply amended the lease and entered into a new construction
management agreement in order to expand the build-to-suit facility. The
build-to-suit facility initially contained approximately 112,000 square feet,
and will now contain approximately 174,000 square feet. Annual rent under the
lease will increase from $760,000 to $1,961,600. The term of the lease will not
change as a result of the expansion.
The cost of expanding the facility, including the acquisition fee payable
to W.P. Carey & Co., was approximately $2,253,600. CPA(R):14 paid an acquisition
fee of approximately $58,995 to W.P. Carey & Co.
PROPERTY LEASED TO AMERISERVE CORPORATION
CPA(R):14 and CPA(R):12 purchased a property leased to AmeriServe. On
January 31, 2000, AmeriServe filed for protection from creditors under the
bankruptcy code. As of the petition date, AmeriServe had meet its obligation
under the lease and construction agency agreement. CPA(R):14 and CPA(R):12 have
entered into discussions with AmeriServe in regards to its lease obligations.
AmeriServe will have approximately sixty days to determine whether to assume the
lease according to its terms or reject the lease and vacate the facility.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
At the end of 1999, a law was enacted that revised several provisions of
the Internal Revenue Code relating to REITs such as CPA(R):14. In relevant part,
these changes include:
1. For CPA(R):14's tax year beginning January 1, 2001:
- in order to maintain its status as a REIT, CPA(R):14 is required to
distribute 90 percent of its REIT taxable income (in contrast to 95
percent before the change);
- CPA(R):14 can own stock in a taxable subsidiary corporation. Stock of
one or more of these subsidiaries can represent up to 20 percent of a
REIT's total assets. These subsidiaries can provide services,
including services to its parent REIT's tenants. However, a subsidiary
cannot directly or indirectly operate or manage lodging or health care
facilities; and
- a REIT generally cannot own securities (with some exceptions) having a
value of more than 10 percent of the total value of the outstanding
securities of any one issuer.
2. Effective for all transactions occurring on or after December 17,
1999, an accrual basis taxpayer, such as CPA(R):14, cannot report gain
using the installment method of accounting.
THE OFFERING
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 an
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
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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
INCREMENTAL SHARE IN INCREMENTAL SHARE IN
FOR A "SINGLE PURCHASER" VOLUME 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 0.10
</TABLE>
Selling commissions for purchase of $5,000,000 or more will, in our sole
discretion, be reduced to $0.05 per share or less but in no event will the
proceeds to us be less than $9.40 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.
In November, 1999, CPA(R):14 completed its first offering. A total of
29,460,594 shares were sold in exchange for gross proceeds of approximately
$294,294,934. A second offering of CPA(R):14 commenced on November 17, 1999. On
February 23, 2000, CPA(R):14 issued 3,383,846 shares to investors in return for
approximately $33,827,536 in net proceeds previously held in escrow.
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