<PAGE> 1
Filed pursuant to Rule 424(b)(3)
Registration No. 333-76761
CORPORATE PROPERTY ASSOCIATES 14
INCORPORATED
SUPPLEMENT DATED SEPTEMBER 22, 2000 TO
PROSPECTUS DATED APRIL 28, 2000
(HEREINAFTER THE "PROSPECTUS")
SUMMARY OF THE SUPPLEMENT
ADVISORY AGREEMENT (PAGE 2)
This section sets forth information on the assignment of the advisory
agreement to W.P. Carey & Co. LLC.
MANAGEMENT'S DISCUSSION AND ANAYLSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (PAGE 2)
This section sets forth information on CPA(R):14's financial condition
and results of operation for the quarter ended June 30, 2000.
DESCRIPTION OF THE PROPERTIES (PAGE 4)
This section sets forth information on CPA(R):14's acquisition of an
office, manufacturing and warehouse facility leased to Langeveld International
Inc., two retail facilities and a distribution facility leased to Galyan's
Trading Company, Inc., five manufacturing facilities leased to APW North
America Inc., a build to suit facility leased to Celestica Inc., and the filing
for protection from creditors under the bankruptcy code by Stellex
Technologies, Inc.
THE OFFERING (PAGE 9)
This section sets forth information on the sale of shares and the
issuance of shares to shareholders.
FINANCIAL STATEMENTS (PAGE 9)
This section sets forth CPA(R):14's financial statements for the
quarter ended June 30, 2000.
Capitalized terms not defined herein will have the meanings ascribed
to them in the Prospectus.
<PAGE> 2
ADVISORY AGREEMENT
On June 28, 2000, the shareholders of Carey Diversified LLC voted to
approve the merger between Carey Diversified and W.P. Carey & Co., Inc. The
combined company was renamed W.P. Carey & Co. LLC. W.P. Carey & Co. LLC and
its subsidiary Carey Asset Management Corp. have assumed all of Carey Property
Advisors' rights and obligations under the advisory agreement with CPA(R):14.
This assignment did not change any of the terms of the advisory agreement.
W.P. Carey & Co. LLC is listed on the New York Stock Exchange and
Pacific Exchange under the symbol "WPC." Carey Asset Management Corp. is
managed by the same directors, officers and employees as Carey Property
Advisors.
MANAGEMENT'S DISCUSSION AND ANALYIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with
CPA(R):14's condensed consolidated financial statements and notes thereto as of
June 30, 2000 included in this supplement and CPA(R):14's Annual Report on
Form 10-K for the year ended December 31, 1999. This supplement contains forward
looking statements. Such statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievement of CPA(R):14 to be materially different from the results of
operations or plan expressed or implied by such forward looking statements.
Accordingly, such information should not be regarded as representations by
CPA(R):14 that the results or conditions described in such statements or the
objectives and plans of CPA(R):14 will be achieved.
Financial Condition
CPA(R):14 continues to expand and diversify its portfolio of
commercial and industrial real estate by investing its net offering proceeds
and proceeds from limited recourse mortgage financing and entering into
long-term net leases with corporate tenants on a 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 exposure to the effects of increases in real
estate taxes and property maintenance and insurance costs. CPA(R):14's leases,
which generally have initial lease terms of 15 to 20 years and generally
provide the lessee with options for renewal terms, typically include rent
increase provisions which are fixed or based upon increases in the Consumer
Price Index. As of June 30, 2000, CPA(R):14 has raised $265,000,000, net of
costs, from its first offering and $52,333,000 from its current offering. Since
June 30, 2000, an additional $24,861,000 of capital has been raised through the
issuance of shares. CPA(R):14 has used $83,917,000 during the six-months ended
June 30, 2000, including using mortgage financing of $52,333,000 to purchase
real estate interests in net leases. As of June 30, 2000, CPA(R):14 has
approximately $87,950,000 of cash available for investment. Remaining costs to
complete currently committed build-to-suit projects are estimated to be
$9,700,000. CPA(R):14's build-to-suit commitments include provisions that
require the lessee to fund any cost overruns.
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CPA(R):14 is using the cash flow from its net leases to pay
quarterly dividends at an increasing rate and meet its debt service installment
obligations on limited recourse mortgage debt. For the six-months ended June
30, 2000, cash flow from operations of $8,913,000 was not sufficient to pay
quarterly dividends of $9,557,000 and scheduled mortgage principal payment
installments of $227,000. Cash flow from operations does not include
approximately $300,000 of construction period rents on build-to-suit projects
during the six-months ended June 30, 2000, and therefore does not fully reflect
certain cash flow benefits. As of June 30, 2000, CPA(R):14 had cash balances of
$91,689,000. CPA(R):14 expects cash flow from operations to increase
substantially as this cash is used to complete build-to-suit projects and
purchase additional real estate. As CPA(R):14 continues to issue shares and
invest the proceeds, cash flow from operations is expected to increase
substantially.
Management continues to monitor the bankruptcy of Ameriserve
Food Distribution, Inc. CPA(R):14 owns a 60% interest in four Ameriserve
properties and an affiliate, Corporate Property Associates 12 Incorporated
(CPA(R):12) owns the remaining 40% interest. The joint ownership of properties
with affiliates such as CPA(R):12 and the use of limited recourse mortgage debt
has allowed for the diversification of the portfolio and helped reduce exposure
to the risks of any single lessee. In March 2000, one of the Ameriserve
property lenders released funds from an escrow account of $10,488,000, of which
CPA(R):14 was required to distribute $4,195,000 to CPA(R):12 with the remaining
amounts available to fund construction of the Ameriserve properties. As of June
30, 2000, CPA(R):14's equity in the Ameriserve property (land and building less
limited recourse mortgage debt and CPA(R):12's 40% ownership interest), was
$6,941,000. CPA(R):14 and CPA(R):12 hold an $8,700,000 letter of credit from
Ameriserve from which funds may be received, subject to the consent of the
lender, if Ameriserve does not meet certain obligations under its lease.
Ameriserve pays its rent quarterly in advance installments and is currently
meeting its rental obligations. Management is continuing to monitor the
developments relating to Ameriserve's reorganization closely.
Results of Operations
Since June 30, 1999, CPA(R):14's asset base has increased
substantially from $215,748,000 to $437,880,000; therefore, the results of
operations for the six-month periods ended June 30, 1999 and 2000 are not fully
comparable. Net income for the three-month and six-month periods ended June 30,
2000 was $3,552,000 and $6,773,000, respectively, and $1,184,000 and $2,186,000
for the three and six-month periods ended June 30, 1999, respectively, with
such increases primarily reflecting the effects of the increased asset and
capital base. Because of the funds raised in its continuing offering, cash
balances have remained high, and at times have exceeded $100,000,000. As a
result, other interest income has increased substantially and remains a
significant component of overall revenues. CPA(R):14's objective is to invest
these proceeds in additional real estate investments. As CPA(R):14 becomes more
fully invested, other interest income will be a much less significant component
of overall revenues, and lease revenues (rental income and interest income from
direct financing leases) are expected to represent substantially all revenues.
After CPA(R):14 has fully invested the proceeds of its offerings, it will
generally hold substantially lower cash balances but will continue to earn
interest income from investing such cash in money market instruments.
CPA(R):14's increased
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asset base has resulted in increases in depreciation, property and general
administrative expenses, with interest expense increasing as new limited
recourse mortgage debt is obtained. Since the commencement of the second
offering in November 1999, CPA(R):14 has raised in excess of $74,000,000, net
of the costs of raising capital.
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
reflected in income or cash flow from operations, even though management
believes that these projects provide an economic return on CPA(R):14's
investment during the construction period. If not for the accounting method of
build-to-suit projects, lease revenues recognized currently in net income would
have been approximately $300,000 greater than the net income amount presented
in the accompanying consolidated financial statements. Management believes that
the return on investment on build-to-suit projects will produce long-term
returns that are superior to those of other opportunities that have been
evaluated.
DESCRIPTION OF THE PROPERTIES
PROPERTY LEASED TO LANGEVELD INTERNATIONAL, INC.
General
On June 29, 2000, CPA(R):14 acquired an office, warehouse and
distribution facility from Langeveld International, Inc. The facility, which is
located on approximately 13 acres in Lakewood, New Jersey, will be expanded by
an additional 65,000 square feet and will contain a total of approximately
141,000 square feet upon completion. The facility will be suitable and adequate
for use as an office, warehouse and manufacturing facility. The cost of the
facility, excluding the cost attributable to the purchase of the land, will be
depreciated for tax purposes over a 40-year period on a straight-line basis.
The obligations of Langeveld under the lease are guaranteed by International
Garden Products, Inc., the parent company of Langeveld.
PURCHASE TERMS
The cost of acquiring the facility, including the acquisition fee
payable to W.P. Carey & Co., was approximately $5,075,750, an amount less than
the appraised value of the land and facilities. The cost of expanding the
facility is expected to be approximately $3,563,000. Based on the cost of
acquiring the facility and the expected cost of expanding the facility,
CPA(R):14 paid an acquisition fee of $215,970 to W.P. Carey & Co. W.P. Carey &
Co. will receive a deferred fee of $21,600, payable each of the next eight
years, but only if CPA(R):14 satisfies the preferred return.
DESCRIPTION OF THE LEASE
General
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The lease is absolutely net and bondable and in normal financeable
form. Langeveld will pay maintenance, insurance, 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.
Term
The primary term of the lease began on June 29, 2000, and will
continue until the earlier of the date on which expansion of the facility is
complete or December 31, 2001. Following the primary term of the lease, the
initial term of the lease will commence. The initial term of the lease is
twenty years. The lease has two five-year renewal terms at the option of
Langeveld.
Rent
Annual rent under the lease is approximately $508,950, payable monthly
in equal installments of approximately $42,410. Rent will be increased monthly
based on a percentage of the amount advanced by CPA(R):14 for construction
costs (if the cost of construction is $3,563,000, annual rent under the lease
will be approximately $866,250). Additionally, the lease provides that annual
rent will be increased beginning October 1, 2003 and every three years
thereafter based on increases in the CPI, subject to a cap of 12.49% per
increase.
DESCRIPTION OF FINANCING
CPA(R):14 is currently seeking mortgage financing for the facility.
DESCRIPTION OF LANGEVELD INTERNATIONAL, INC.
Langeveld is a wholly-owed subsidiary of International Garden
Products, Inc. International Garden acquires garden product companies that
grow, process and distribute a variety of herbaceous and woody ornamental
plants, seeds bulbs and other ancillary products sold to garden centers,
nurseries and professional landscapers. For the year ended June 30, 1999,
International Garden had net sales of approximately $64,600,000, net income of
approximately $2,200,000, total assets of approximately $94,000,000 and
shareholder's equity of approximately $1,703,000.
PROPERTIES LEASED TO GALYAN'S TRADING COMPANY, INC.
General
On June 29, 2000, CPA(R):14 acquired two retail facilities and a
distribution facility from Galyan's Trading Company, Inc. The facilities,
containing a total of approximately 401,250 square feet, are located in
Leawood, Kansas; Kennesaw, Georgia; and Plainfield, Indiana. The distribution
facility in Plainfield, Illinois is currently being expanded from approximately
220,310 square feet to approximately 364,310 square feet. Each facility is
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suitable and adequate for use as a retail or distribution facility. The
purchase price of the facilities, excluding the cost attributable to the
purchase of the land, will be depreciated for tax purposes over a 40-year
period on a straight-line basis.
PURCHASE TERMS
The cost of acquiring the facilities, including the acquisition fee
payable to W.P. Carey & Co., was approximately $29,660,000, an amount less than
the appraised value of the land and facilities. CPA(R):14 paid an acquisition
fee of approximately $741,500 to W.P. Carey & Co. W.P. Carey & Co. will
receive a deferred fee of $74,150, 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. Galyan will pay maintenance, insurance and taxes and all other expenses
associated with the operation and maintenance of the facilities. In the opinion
of management, the facilities are adequately covered by insurance.
Term
The initial term of the lease is approximately nineteen years. The
lease has eight five-year renewal terms at the option of Galyan.
Rent
Annual rent under the lease is approximately $2,840,000, payable
monthly in equal installments of approximately $236,700. Additionally, the
lease provides that annual rent will be increased 1.5% every year.
DESCRIPTION OF FINANCING
CPA(R):14 assumed the loans currently on the facilities. The limited
recourse mortgage loans on the Kennesaw, Leawood, and Plainfield properties,
which had an aggregate balance on the date of acquisition of approximately
$19,700,000, provide for combined monthly payments of interest and principal of
approximately $158,000, at annual interest rates ranging from 8.754% to 8.847%.
The loans mature on September 10, 2009, at which time balloon payments totaling
approximately $17,700,000 will be due.
DESCRIPTION OF GALYAN'S TRADING COMPANY, INC.
Galyan is a sporting goods retailer currently operating eighteen
stores in seven markets throughout the mid-western and eastern United States.
For the year ended January 29, 2000, Galyan had net sales of approximately
$328,000,000, net income of approximately $150,000, total assets of
approximately $177,200,000 and shareholder's equity of approximately
$66,580,000.
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PROPERTIES LEASED TO APW NORTH AMERICA INC.
General
On May 30, 2000, CPA(R):14 acquired five manufacturing facilities from
APW North America Inc. The facilities, containing a total of approximately
841,000 square feet, are located in Champlin, Minnesota; Radford, Virginia;
Robbinsville, New Jersey; Monon, Indiana; and North Salt Lake City, Utah. Each
facility will be suitable and adequate for use as a manufacturing facility. The
cost of the facilities, excluding the cost attributable to the purchase of the
land, will be depreciated for tax purposes over a 40-year period on a
straight-line basis. The obligations of APW North America under the lease are
jointly guaranteed by Applied Power Inc. and Wright Line, Inc.
PURCHASE TERMS
The cost of acquiring the facilities, including the acquisition fee
payable to W.P. Carey & Co., was approximately $29,424,000, an amount less than
the appraised value of the land and facilities. CPA(R):14 paid an acquisition
fee of approximately $731,600 to W.P. Carey & Co. W.P. Carey & Co. will
receive a deferred fee of $73,160, payable each of the next eight years, but
only if CPA(R):14 satisfies the preferred return.
DESCRIPTION OF THE LEASES
General
The leases are absolutely net and bondable and in normal financeable
form. APW 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 adequately covered by insurance.
Term
The leases have an initial term of seventeen years. The leases have
two five-year renewal terms at the option of APW.
Rent
Annual rent under the lease is approximately $2,627,400, payable
monthly in equal installments of approximately $219,000. Additionally, the
lease provides that annual rent will be increased beginning the third year of
the lease and every three years thereafter based on increases in the CPI,
subject to a cap of 5.78% for the first increase and 1.89% for each subsequent
increase.
DESCRIPTION OF FINANCING
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CPA(R):14 is currently seeking mortgage financing for the facility.
DESCRIPTION OF APW NORTH AMERICA INC.
APW is a global electronic manufacturing services provided focused on
the integrated electronic enclosure systems market. The lease obligations are
guaranteed by Applied Power Inc. For the year ended August 31, 1999, Applied
Power had net sales of approximately $1,751,000,000, net income of
approximately $79,400,000, total assets of approximately $1,624,800,000 and
shareholder's equity of approximately $417,800,000.
PROPERTY LEASED TO CELESTICA INC.
General
On August 14, 2000, CPA(R):14 purchased approximately 30 acres of land
in Rochester, Minnesota, upon which CPA(R):14 will construct an office,
manufacturing and warehouse facility. Upon completion, the facility will
contain a total of approximately 200,000 square feet. The facility will be
suitable and adequate for use as an office, warehouse and manufacturing
facility. The cost of the facility, excluding the cost attributable to the
purchase of the land, 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 Mortenson Development Company and a
lease with Celestica Inc.
PURCHASE TERMS
The cost of acquiring the land, including the acquisition fee payable
to W.P. Carey & Co., was approximately $3,348,800, an amount less than the
appraised value of the land. The cost of constructing the facility is expected
to be $18,300,000, but cannot exceed approximately $21,570,000. Based upon the
cost of the land and the expected cost of construction, CPA(R):14 paid an
acquisition fee of approximately $539,300 to W.P. Carey & Co. W.P. Carey & Co.
will receive a deferred fee of $53,930, 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. Celestica will pay maintenance, insurance, taxes and all other expenses
associated with the operation and maintenance of the facility. In the opinion
of management, the facility will be adequately covered by insurance.
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Term
The primary term of the lease began on August 14, 2000, and will
continue until the earlier of the date on which construction of the facility is
completed or June 30, 2001. Following the primary term of the lease, the
initial term of the lease will commence. The initial term of the lease is
fifteen years. The lease has two five-year renewal terms at the option of
Celestica.
Rent
Monthly rent during the initial term of the lease is approximately
$19,000 and will be increased monthly based on a percentage of the amount
advanced by CPA(R):14 for construction costs. During the primary term of the
lease, rent will be approximately $2,194,000, payable quarterly in equal
installments of approximately $548,500. Additionally, the lease provides that
annual rent will be increased 10% beginning the fifth year of the lease and
every five years thereafter.
DESCRIPTION OF FINANCING
CPA(R):14 is currently seeking mortgage financing for the facility.
DESCRIPTION OF CELESTICA INC.
Celestica Inc. is a provider of electronics manufacturing services to
original equipment manufacturers worldwide. For the year ended December 31,
1999, Celestica had revenue of approximately $5,297,233,000, net earnings of
approximately $68,426,000, total assets of approximately $2,655,590,000 and
shareholder's equity of approximately $1,658,000.
PROPERTY LEASED TO STELLEX TECHNOLOGIES, INC.
CPA(R):14 purchased a build-to-suit property leased to Stellex. On
September 12, 2000, Stellex filed voluntary petitions for protection from
creditors under the bankruptcy code. Management of Stellex cited the need to
restructure their balance sheets as the primary cause of the filings. Stellex
announced that it has negotiated a $36 million "debtor-in-possession" financing
facility with a bank group, subject to approval of the bankruptcy court.
Stellex is current on its rental obligations to CPA(R):14. In addition,
CPA(R):14 is holding a $2 million letter of credit to secure Stellex's
obligations under it's lease.
THE OFFERING
On July 28, 2000, CPA(R):14 issued 2,486,130 shares to investors in
return for approximately $24,861,300 in net proceeds previously held in escrow.
As of July 28, 2000, CPA(R):14 had issued a total of 38,000,823 shares in
exchange for gross proceeds of approximately $380,008,230.
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FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1999 June 30, 2000
----------------- -------------
Note (Unaudited)
<S> <C> <C>
ASSETS:
Real estate leased to others:
Accounted for under the operating method:
Land $ 36,130,456 $ 52,622,456
Buildings 76,917,819 174,967,768
-------------------- -------------------
113,048,275 227,590,224
Accumulated depreciation 1,152,595 2,658,982
-------------------- -------------------
111,895,680 224,931,242
Net investment in direct financing leases 27,161,841 27,168,895
Real estate under construction leased to others 45,775,407 35,877,784
-------------------- -------------------
Real estate leased to others 184,832,928 287,977,921
Equity investments 50,344,119 51,387,286
Cash and cash equivalents 91,420,457 91,689,278
Other assets 4,465,449 6,825,821
-------------------- -------------------
Total assets $ 331,062,953 $ 437,880,306
==================== ===================
LIABILITIES:
Limited recourse mortgage notes payable $ 49,517,692 $ 106,338,835
Accrued interest 292,118 551,459
Accounts payable to affiliates 2,046,441 2,483,237
Accounts payable and accrued expenses 265,889 684,262
Prepaid rental income and security deposits 1,324,379 2,946,112
Deferred acquisition fees payable to affiliate 5,905,602 7,772,773
Dividends payable 4,515,213 5,679,106
Escrow funds 1,105,530 1,105,530
-------------------- -------------------
Total liabilities 64,972,864 127,561,314
-------------------- -------------------
Minority interest 8,212,097 4,196,991
-------------------- -------------------
Commitment and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value, authorized,
</TABLE>
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<TABLE>
<S> <C> <C>
120,000,000 shares, issued and outstanding,
29,460,594 and 35,534,693 shares at December
31, 1999 and June 30, 2000 29,460 35,535
Additional paid-in capital 265,487,028 317,813,486
Distributions in excess of accumulated earnings (6,896,632) (10,844,674)
--------------------- --------------------
258,619,856 307,004,347
Less common stock in treasury at cost, 79,839
and 95,186 shares at December 31, 1999 and June
30, 2000 (741,864) (882,346)
--------------------- --------------------
Total shareholders' equity $ 331,062,953 $ 437,8810,306
===================== ===================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Note: The balance sheet at December 31, 1999 has been derived from the
audited consolidated financial statements at that date.
CONDENSED CONSOLIDATED STATEMENTS of INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 1,225,382 $ 4,363,521 $ 2,245,540 $ 7,461,209
Interest income from
direct financing leases -- 632,250 -- 1,321,250
Other interest income 290,669 1,785,495 543,975 3,636,561
----------------- ----------------- ----------------- -----------------
1,516,051 6,781,266 2,789,515 12,419,020
----------------- ----------------- ----------------- -----------------
Expenses
Interest 123,027 1,648,957 158,206 2,920,223
Depreciation and
amortization 189,777 910,879 345,199 1,532,575
General administrative 283,191 702,077 447,524 1,140,429
Property expenses 349,238 901,517 598,743 1,562,884
----------------- ----------------- ----------------- -----------------
945,233 4,163,430 1,549,672 7,156,111
----------------- ----------------- ----------------- -----------------
Income before
minority interest in
loss and income
from equity investments 570,818 2,617,836 1,239,843 5,262,909
Minority interest in loss -- 146,766 -- 8,704
----------------- ----------------- ----------------- -----------------
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Income before
income from equity
investments 570,818 2,764,602 1,239,843 5,271,613
Income from equity
investments 612,934 757,682 945,856 1,501,544
----------------- ----------------- ----------------- -----------------
Net income $ 1,183,752 $ 3,522,284 $ 2,185,699 $ 6,773,157
=============== =============== =============== ===============
Basic and diluted earnings
per share $ .07 $ .10 $ .15 $ .21
================= ================= ================= =================
Weighted average shares outstanding
- basic and diluted
16,071,527 34,434,358 14,349,579 32,612,563
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30
1999 2000
---- ----
<S> <C> <C>
Net income $ 2,185,699 $ 6,773,157
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization $ 345,199 1,532,575
Straight-line rent adjustments (78,823) (146,655)
Minority interest in loss (8,704)
Provision for uncollected rent 65,868
Change in operating assets and liabilities, net 135,779 696,957
------------ -------------
Net cash provided by operating activities 2,587,854 8,913,198
============ =============
Cash flows from investing activities:
Acquisitions of real estate and equity investments
and other capitalized costs (55,804,696) (94,405,826)
Funds released from escrow -- 10,488,450
Payment of deferred acquisition fees -- (268,911)
Equity distributions received in excess of
equity income 411,970 57,071
------------ -------------
Net cash used in investing activities (55,392,726) (84,129,216)
------------ -------------
Cash flows from financing activities:
Proceeds from sale of stock, net of costs 98,234,905 52,332,533
Dividends paid (3,415,145) (9,557,306)
Proceeds from mortgages 9,700,000 37,349,727
Payment of mortgage principal (9,662) (226,745)
Distributions paid to minority interest partner -- (4,863,779)
Contributions from minority interest partner -- 857,377
</TABLE>
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<TABLE>
<S> <C> <C>
Deferred financing costs and mortgage deposits (654,206) (266,486)
Purchase of treasury stock (101,943) (140,482)
------------ -------------
Net cash provided by financing activities 103,753,949 75,484,839
------------ -------------
Net change in cash and cash equivalents 50,949,077 268,821
Cash and cash equivalents, beginning of period 26,747,058 91,420,457
------------ -------------
Cash and cash equivalents, end of period $ 77,696,135 $ 91,689,278
============ =============
</TABLE>
Noncash investing and financing activities:
In connection with the acquisition of properties during the six months
ended June 30, 2000, the Company assumed mortgage obligations of
$19,698,161.
The accompanying notes are an integral part of the condensed consolidated
financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements of
Corporate Property Associates 14 Incorporated and its wholly-owned subsidiaries
(the "Company") have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
with the instructions to Article 10 of Regulation S-X of the Securities and
Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements. All significant intercompany
balances and transactions have been eliminated. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation of the results of the interim period presented have
been included. The results of operations for the interim period are not
necessarily indicative of results for the full year. For further information,
refer to the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.
Note 2. Organization and Offering:
The Company was formed on June 4, 1997 under the General Corporation Law of
Maryland for the purpose of engaging in the business of investing in and owning
industrial and commercial real estate. Subject to certain restrictions and
limitations, the business of the Company is managed by Carey Asset Management
Corp. (the "Advisor"). Effective commencing June 29, 2000, W.P. Carey & Co. LLC
("WPC"), an affiliate of the Company, acquired the business operations of the
former Advisor, Carey Property Advisors, pursuant to a merger. In connection
with the merger, Carey Asset Management Corp., a wholly-owned subsidiary of
WPC, became the Advisor of the Company. All officers of Carey Property Advisors
serve in the same capacity for the new Advisor.
An initial offering of the Company's shares which commenced on November 10,
1997 concluded on November 10, 1999, at which time the Company had issued an
aggregate of 29,440,594 shares ($294,405,940). On November 17, 1999, the
Company commenced an offering for a maximum of 40,000,000 shares of common
stock. The shares are being offered to the public on a "best efforts" basis at
a price of $10 per share. The initial issuance of shares under the second
offering occurred on February 23, 2000. During the six months ended June 30,
2000, the Company issued 6,074,099 shares ($60,740,990). An additional
2,486,130 shares ($24,861,300) were issued on July 28, 2000.
Note 3. Transactions with Related Parties:
The Company's asset management and performance fees payable to the Advisor are
each 1/2 of 1% per annum of Average Invested Assets, as defined in the
Prospectus. Until the Company has achieved a 7% cumulative rate of
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<PAGE> 14
cash flow from operations (the "Preferred Return"), as defined in the advisory
agreement of the Company, the Advisor will not be entitled to receive the
performance fee. When the Preferred Return is achieved, the Advisor will have
the option of receiving its performance fee in cash or restricted shares of the
Company. Asset management fees for the three-month and six-month periods ended
June 30, 2000 were $363,070 and $671,159, respectively, with performance fees
in like amount, and general and administrative reimbursements were $248,209 and
$445,453, respectively. For the three-month and six-month periods ended June
30, 1999, asset management fees were $155,512 and $276,809, with performance
fees in like amount, and general and administrative reimbursements were $88,436
and $130,523, respectively.
Note 4. Commitments and Contingencies:
The Company is liable for certain expenses of the offering which are being
deducted from the gross proceeds of the offering up to a maximum of $16,000,000
assuming the sale of 40,000,000 shares. The Company is also liable for selling
commissions of up to $0.60 (6%) 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 and
wholesaling services. To the extent, if any, that all organization and offering
expenses, excluding selling commissions, and any fees paid and expenses
reimbursed to the selected dealers or paid on behalf of the selected dealers,
exceed 3.5% of the gross proceeds of the offering, such excess will be paid by
the Advisor.
Note 5. Lease Revenues:
The Company's operations consist of the investment in and the leasing of
industrial and commercial real estate. The financial reporting sources of the
lease revenues for the six month periods ended June 30, 1999 and 2000 are as
follows:
<TABLE>
<CAPTION>
1999 2000
---- ----
<S> <C> <C>
Per Statements of Income:
Rental income $ 2,245,540 $ 7,461,209
Interest income from direct financing leases -- 1,321,250
Adjustment:
Share of leasing revenues applicable to
minority interests -- (587,948)
Share of leasing revenues from equity investments 2,410,436 4,827,985
----------- -----------
$ 4,655,976 $ 13,022,496
=========== ===========
</TABLE>
For the six-month period ended June 30, 1999 and 2000, the Company earned its
proportionate net lease revenues from its investments as follows:
<TABLE>
<CAPTION>
1999 % 2000 %
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Advanced Micro Devices, Inc. (a) $ 1,524,250 33% $ 1,524,250 12%
Applied Materials, Inc. (a) - - 1,436,345 11
Amerix Corporation - - 1,098,738 8
Atrium Companies, Inc. - - 1,037,500 8
Best Buy Co., Inc. 979,493 21 994,331 8
</TABLE>
- 14 -
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C>
Ameriserve Food Distribution, Inc. (b) - - 881,922 7
Metagenics, Inc. - - 674,219 5
Compucom Systems, Inc. (a) 329,880
7 652,333 5
Checkfree Holdings Corporation, Inc. (a) 96,162 2 646,369 5
Production Resource Group LLC 223,422 5 638,625 5
Stellex Technologies, Inc. - - 632,452 5
Intesys Technologies, Inc. (a) 460,144 10 568,688 4
Burlington Motor Carrier, Inc. 396,000 8 396,000 3
Builders' Supply and Lumber Co., Inc. - - 380,000 3
The Benjamin Ansehl Company 324,875 7 324,875 3
Contraves Brashear Systems L.P. 321,750 7 321,750 2
Scott Companies, Inc. - - 283,750 2
West Union Corporation - - 283,637 2
APW North America Inc. - - 229,540 2
Galyan's Trading Company - - 15,778 -
International Garden Products, Inc. - - 1,394 -
----------- ----------- ----------- -----------
$ 4,655,976 100% 13,022,496 100%
=========== =========== =========== ===========
</TABLE>
(a) Represents the Company's proportionate share of lease revenues from
its equity investments.
(b) Net of Corporate Property Associates 12 Incorporated's minority
interest.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 6. Equity Investments:
The Company holds interests in five limited liability companies in which its
ownership interest is 50% or less. All of the underlying investments were
formed and are owned with affiliates that have similar investment objectives as
the Company. The Company owns a 33.33% interest in properties net leased to
Advanced Micro Devices, Inc. and Compucom Systems, Inc. and 50% interests in
properties net leased to Intesys Technologies, Inc. and CheckFree Holdings
Corporation. The Company owns an interest in a limited liability company that
net leases a property to Etec Systems, Inc. ("Etec"). The interest in the Etec
investment is a 49.99% interest in a building on the Etec property for which
construction was completed in July 1999. Corporate Property Associates 12
Incorporated ("CPA(R):12"), an affiliate, owns all remaining interests in the
Etec property. The Etec lease obligations are unconditionally guaranteed by
Applied Materials, Inc. Summarized combined financial information of the
Company's equity investees is as follows:
<TABLE>
<CAPTION>
December 31, June 30,
(In thousands) 1999 2000
-------------- ---------- --------
<S> <C> <C>
Assets (primarily real estate) $ 260,115 $ 263,380
Liabilities (primarily mortgage notes payable) 169,286 170,618
Partners' and members' equity 90,829 92,762
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 2000
-------- --------
<S> <C> <C>
Revenues (primarily rental revenues) $ 8,169 $ 13,327
</TABLE>
- 15 -
<PAGE> 16
<TABLE>
<S> <C> <C>
Expenses (primarily interest on mortgage and depreciation) 4,995 8,872
-------- --------
Net income $ 3,174 $ 4,455
======== ========
</TABLE>
Note 7. Acquisitions of Real Estate:
On May 30, 2000, the Company purchased five properties for $29,424,084 and
entered into two net leases with APW North America Inc. ("APW"). The lease
obligations of APW are jointly guaranteed by Applied Power Inc. and Wright
Line, Inc. A master lease for four properties, located in Monon, Indiana;
Champlin, Minnesota; Robbinsville, New Jersey; and Radford, Virginia, and a
lease for a fifth property in North Salt Lake City, Utah, provide for annual
rent of $1,809,225 and $818,125, respectively. The leases have initial terms of
17 years through May 31, 2017, with two five-year renewal terms at APW North
America's option, and provide for purchase options beginning on June 1, 2013
and annually thereafter for the remainder of the initial lease term. The
purchase options may be exercised at the higher of (i) fair market value, as
defined, or (ii) acquisition cost plus any prepayment premium related to any
mortgage debt placed on the property by the Company. The leases provide for
annual rent increases beginning in the third year of the lease, based on a
formula indexed to increases in the Consumer Price Index ("CPI"), subject to a
cap of 5.78% for the first increase and of 1.89% for all subsequent increases.
On June 29, 2000, the Company purchased a property in Lakewood, New Jersey and
committed to fund its expansion for a total of $8,638,743, and entered into a
net lease with Langeveld International, Inc. ("Langeveld"). The lease
obligations of Langeveld are unconditionally guaranteed by its parent company,
International Garden Products, Inc. The lease provides for a primary term
ending on the earlier of the completion of the improvements or December 1,
2001, followed by a 20-year initial lease with two five-year renewal terms at
Langeveld's option. Annual rent will initially be $508,942, and will increase
at the inception of the initial term by an amount equal to 10.5% multiplied by
the amounts advanced to fund the expansion. If the entire anticipated
additional cost of $3,563,276 is used for the expansion, the annual rent will
increase to $866,250 at the commencement of the initial term. The lease
provides for rent increases based on a formula indexed to increases in the CPI
on October 1, 2003 and every third year thereafter, subject to a cap of 12.49%.
On June 29, 2000, the Company acquired three properties located in Kennesaw,
Georgia; Leawood, Kansas and Plainfield, Indiana, subject to existing net
leases with Galyan's Trading Company ("Galyan's") for $29,660,686, of which
$19,698,161 was financed by the assumption of existing limited recourse
mortgage debt on the three properties. The leases currently provide for
combined annual rents of $2,840,000 with stated annual increases of 1.5%
beginning in September 2000. The leases have initial terms through August 31,
2019, followed by eight five-year renewal options at Galyan's option.
The limited recourse mortgage loans on the Kennesaw, Leawood, and Plainfield
properties, which had an aggregate balance on the date of acquisition of
$19,698,161, provide for combined monthly payments of interest and principal of
$158,067, at annual interest rates ranging from 8.754% to 8.847%. The loans
mature on September 10, 2009, at which time balloon payments totaling
$17,681,300 will be due.
