<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended DECEMBER 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from ______________________ to ______________________
Commission file number 0-20016
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 13-3602400
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (212) 492-1100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
SHARES OF COMMON STOCK
(Title of Class)
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of
Registrant: There is no active market for common stock of Registrant at March
26, 1998. Non-affiliates held 17,428,822 shares of common stock, $.001 Par Value
outstanding at March 26, 1998.
<PAGE> 2
PART I
Item 1. Business.
Registrant is engaged in the business of investing in
commercial and industrial real estate properties that are net leased to
commercial and industrial entities. Registrant was organized as a Maryland
corporation on February 15, 1991 and qualified as a real estate investment trust
("REIT") for Federal income tax purposes for the year ended December 31, 1997.
Registrant's day to day operations are managed by Carey Property Advisors (the
"Advisor"), a Pennsylvania limited partnership, in accordance with an advisory
agreement between Registrant and the Advisor pursuant to which the Advisor
performs a variety of management services. The sole general partner of the
Advisor is Carey Fiduciary Advisors, Inc., a Pennsylvania corporation ("CFA").
An affiliate of the Advisor, Carey Diversified LLC, is the sole general partner
of the nine CPA(R) real estate limited partnerships. The Advisor is also the
advisor of Corporate Property Associates 10 Incorporated ("CPA(R):10"),
Corporate Property Associates 12 Incorporated ("CPA(R):12") and Corporate
Property Associates 14 Incorporated ("CPA(R):14"). Reference is made to the
Prospectus of Registrant dated January 21, 1993 (the "Prospectus") filed
pursuant to Rule 424(b) under the Securities Act of 1933, which updates the
initial Prospectus dated August 1, 1991 as supplemented by supplements dated
November 22, 1991, February 6, 1992, June 17, 1992, September 16, 1992 and
October 26, 1992, and to Supplement No. 1 to such Prospectus dated March 17,
1993, Supplement No. 2 dated June 15, 1993 and Supplement No. 3 dated August 11,
1993.
A minimum of 1,500,000 and a maximum of 20,000,000 Shares were
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. The
Offering concluded in August 1993, at which time an aggregate 14,147,581 Shares
had been issued. Additionally, the Advisor purchased 20,000 Shares for $200,000
prior to the commencement of the Offering. Registrant filed a post-effective
amendment on November 5, 1993 withdrawing from registration the balance of the
unsold Shares. In 1995, Registrant established a dividend reinvestment plan.
Through December 31, 1997, 338,332 shares had been issued pursuant to the
dividend reinvestment plan.
In 1995, Registrant's Board of Directors authorized an
offering of 10,000,000 Shares through a private placement offering to a limited
number of institutional investors. As of December 31, 1997, Registrant had
issued 2,430,436 Shares ($26,000,000) pursuant to this private placement.
Registrant has only one industry segment which consists of the
investment in and the leasing of industrial and commercial real estate. See
Management's Discussion and Analysis in Item 7 for a summary of Registrant's
operations. Also see the material contained in the Prospectus under the heading
INVESTMENT OBJECTIVES AND POLICIES. The properties owned by Registrant are
described in Properties in Item 2. A substantial amount of the net offering
proceeds less a working capital reserve representing 1% of offering proceeds
have been invested in net leased commercial and industrial real estate.
A portion of Registrant's property acquisitions have been made
in conjunction with acquisitions, recapitalizations and other financial
restructurings. In some of these transactions, an acquiring entity may have
purchased all or substantially all of the stock or assets of a company and the
acquired company or its successor in interest thereby may have become obligated
on the substantial loans necessary to finance the acquisition. In such
instances, Registrant may act as one of several sources of financing by
purchasing real property from the seller of the subject company and net leasing
it to such company or its successor. This type of lessee typically will have
substantially greater debt and substantially lower net worth than that
attributable to Registrant prior to the transaction. Consequently, such lessees
may be particularly vulnerable to adverse conditions in the lessee's business or
industry, adverse economic conditions generally and increases in interest rates,
which increases directly or indirectly may result in higher payments under the
debt portion of the lessee's lease with Registrant. In addition, the lessee's
payment of lease rentals and debt service may prevent the lessee from investing
in new equipment and from devoting resources to research and development or
making other expenditures that are necessary to keep the lessee competitive in
its industry. Furthermore, if the lessee plans to replace existing management,
it will be more difficult for the Advisor to determine the likelihood of the
lessee's being successful in its business and of being able to pay rentals
throughout the term of a lease with Registrant. Registrant has not been
adversely affected as a result of such property acquisitions.
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<PAGE> 3
For the year ended December 31, 1997, Registrant's share of
revenues from properties occupied by Marriott International, Inc. amounted to
12% of the total net leasing revenues of Registrant. No other property owned
directly or indirectly by Registrant accounted for 10% or more of its net
leasing revenues. See Note 8 to the Consolidated Financial Statements in Item 8.
Except for certain property formerly leased to Harvest Foods,
Inc. ("Harvest"), all of Registrant's present real estate properties are leased
to corporate tenants under long-term net leases. A net lease generally requires
tenants to pay operating expenses relating to the leased properties including
maintenance, real estate taxes, insurance and utilities which under other forms
of leases are often paid by the lessor. Lessees are required to include
Registrant as an additional insured party on all insurance policies relating to
the leased properties. In addition, substantially all of the net leases include
indemnification provisions that require the lessees to indemnify Registrant, its
directors and officers and the Advisors for liabilities on all matters related
to the leased properties. Accordingly, Registrant believes that the insurance
and indemnity provided on its behalf by its lessees provide adequate coverage
for property damage and any liability claims that may arise against Registrant's
ownership interests. In addition to the insurance and indemnification provisions
of the leases, Registrant has contingent property and liability insurance on the
properties owned. To the extent that any lessees are not financially able to
satisfy indemnification obligations that exceed insurance reimbursements,
Registrant may incur the costs necessary to repair property and settle
liabilities. Presently, there are no property damage claims pending. Primary
insurance coverages have been obtained for the Harvest property.
As described above, lessees retain the obligation for the
operating expenses of their leased properties so that, other than rental income,
there are no significant operating data reportable on Registrant's leased
properties. Current rental income is reported in Note 8 to the Financial
Statements in Item 8. As discussed in Registrant's Management's Discussion and
Analysis in Item 7, Registrant's leases generally provide for periodic rent
increases or percentage rents based on specified sales levels. The periodic rent
increases are either stated, based on percentage of sales or based on formulas
indexed to increases in the Consumer Price Index or Producer Price Index. Except
for the terminated Harvest master lease which was terminated in March 1997
pursuant to a voluntary petition of bankruptcy, no leases were materially
modified or amended during the year ended December 31, 1997. Since termination
of the Harvest lease, the Company has re-leased five properties, sold three
properties and is remarketing the remaining seven properties for sale or lease.
Registrant's leases provide for multiple renewal terms with initial terms on its
leases of up to 25 years.
Since Registrant's objective is to execute long-term net
leases for properties that are occupied by a single corporate tenant backed by
the credit of the corporate lessee, Registrant is not generally subject to the
competitive conditions of local and regional real estate markets. Competitive
conditions of local and regional real estate markets may have a more significant
impact on Registrant as leases expire or otherwise terminate in the future.
Because Registrant may be affected by the financial condition of its lessees
rather than the competitive conditions of the real estate marketplace,
Registrant seeks to diversify its investment among tenants, property types and
industries in addition to achieving geographical diversification. Registrant
faces competition for acquisition of commercial and industrial properties net
leased to corporate tenants from financial institutions and other REITs.
Registrant also faces competition from institutions that provide or arrange for
other types of commercial financing through private or public offerings of
equity or debt or traditional bank financings. Registrant believes that its
expertise in credit underwriting and transaction structuring will allow
Registrant to compete effectively. In underwriting a net lease transaction,
Registrant undertakes an analysis of the subject real estate and a credit
analysis of the prospective lessee. Registrant evaluates the prospective
lessee's business and financial outlook to determine the prospective lessee's
ability to meet its ongoing obligations. In performing this analysis, Registrant
evaluates a number of factors, including, but not limited to, the position of
the prospective lessee in its industry, its business franchise and the
importance of the property to its business.
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<PAGE> 4
In connection with the purchase of its properties, Registrant
requires sellers of such properties to perform environmental reviews. Management
believes, based on the results of such reviews, that Registrant's properties
were in substantial compliance with Federal and state environmental statutes at
the time the properties were acquired. Portions of certain properties; however,
have been subject to some degree of contamination, principally in connection
with either leakage from underground storage tanks, surface spills from facility
activities or historical on-site activities. In most instances where
contamination has been identified, tenants are actively engaged in the
remediation process and addressing identified conditions. Tenants are generally
subject to environmental statutes and regulations regarding the discharge of
hazardous materials and any related remediation obligations. In addition,
Registrant's leases generally require tenants to indemnify Registrant from all
liabilities and losses related to the leased properties with provisions of such
indemnification specifically addressing environmental matters. The leases
generally include provisions that allow for periodic environmental assessments,
paid for by the tenant, and allow Registrant to extend leases until such time as
a tenant has satisfied its environmental obligations. Certain of the leases
allow Registrant to require financial assurances from tenants such as
performance bonds or letters of credit if the costs of remediating environmental
conditions, in the estimation of Registrant, are in excess of specified amounts.
Accordingly, Management believes that the ultimate resolution of environmental
matters will not have a material adverse effect on Registrant's financial
condition, liquidity or results of operations.
Registrant leases land and a warehouse in Jacksonville,
Florida to GATX Logistics, Inc. ("GATX Logistics"). Three areas of ground water
and soil contamination were identified at the GATX property and have been
subject to varying degrees of remediation. The remediation of two of the
contaminated areas is the responsibility of a former owner of the property,
Sears Roebuck & Co., which has a contractual obligation to GATX Logistics to
complete remediation procedures at those sites. GATX Corporation, an affiliate
of GATX Logistics, has also agreed to indemnify Registrant with respect to any
costs of remediation at the three sites. Under the GATX Logistics
indemnification, if thirty days prior to termination of the GATX Logistics
lease, remediation requirements under the indemnification agreement are not
fulfilled, GATX Logistics will have been deemed to have made a rejectable offer
to purchase the GATX Logistics property from Registrant for $5,000,000,
Registrant's purchase price for the property in December 1992.
Registrant's Advisor has responsibility for maintaining
Registrant's books and records. An affiliate of the Advisor services the
computer systems used for maintaining such books and records. In its preliminary
assessment of Year 2000 issues, the affiliate believes that such issues will not
have a material effect on Registrant's operations such assessment; however, has
not been completed. Registrant relies on its bank and transfer agent for certain
computer-related services and has initiated discussions to determine whether
they are addressing Year 2000 issues that may affect Registrant.
Registrant does not have any employees. An affiliate of the
Advisor performs accounting, secretarial and transfer services for Registrant.
Resource Phoenix Corporation performs certain transfer services for Registrant
and The Chase Manhattan Bank performs certain banking services for Registrant.
In addition, Registrant has an agreement with the Advisor pursuant to which the
Advisor provides certain management services for Registrant.
-3-
<PAGE> 5
Item 2. Properties.
Registrant's properties are as follows:
<TABLE>
<CAPTION>
LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- --------
<S> <C> <C> <C>
WAL-MART STORES, INC. Retail Stores Center, Groves, Ownership of a 50%
- 6 locations Silsbee and Vidor, interest in land
Texas; and buildings (1)
Weatherford,
Oklahoma;
Fort Smith, Arkansas;
SAFEWAY STORES Supermarket Broken Arrow, Ownership of a 50%
INCORPORATED Oklahoma interest in land
and building
MARRIOTT Hotels Irvine, Sacramento, Ownership of a 23.69%
INTERNATIONAL, - 13 locations and San Diego, interest in a company
INC. California; owning land
Orlando - 2, Florida; and buildings (1)
Des Plains, Illinois;
Indianapolis, Indiana;
Louisville, Kentucky;
Linthicum, Maryland;
Las Vegas, Nevada;
Newark, New Jersey;
Albuquerque, New Mexico;
Spokane, Washington
Properties formerly
leased to HARVEST Retail Stores and Little Rock - 2, Ownership of a 50%
FOODS, INC. Office Buildings Hot Springs, interest in land
- 7 locations Texarkana and and buildings
Jonesboro, Arkansas; (1)(2)
Ruston, Louisiana;
Clarksdale,
Mississippi
KROGER CO. Retail Stores North Little Rock Ownership of a 50%
- 2 locations and Conway, Arkansas interest in land
and buildings
except as noted (1)(2)
AFFILIATED Retail Stores Little Rock - 2, and Ownership of a 50%
SOUTHWEST, INC. - 3 locations Hope, Arkansas interest in land
and buildings
except as noted (1)(2)
CALCOMP TECH- Office/Manufacturing Austin, Ownership of a 50%
NOLOGY, INC. Facilities Texas interest in land and
buildings (1)
NEODATA Manufacturing/ Boulder, Ownership of a 80%
CORPORATION Distribution Colorado interest in land and
Facility building (1)
BELL SPORTS, INC. Warehouse/ Rantoul, Ownership of land
Manufacturing Facility Illinois and building (1)
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- --------
<S> <C> <C> <C>
OSHMAN SPORTING Retail Store Plano, Ownership of land
GOODS, INC. Texas and building
MICHIGAN MUTUAL Office Complex Charleston, Ownership of land
INSURANCE COMPANY South Carolina and building (1)
GATX LOGISTICS, INC. Warehouse Jacksonville, Ownership of land
Florida and building (1)
BIG V HOLDING CORP. Supermarkets Greenport, Ownership of land
Ellenville and and buildings in Greenport
Warwick, and ownership of a 55%
New York interest in land and buildings
in Ellenville and Warwick,
New York (1)
LUCENT Warehouse Charlotte, Ownership of land
TECHNOLOGIES, INC. North Carolina and building (1)
BARNES & NOBLE, INC. Retail Stores Farmington, Ownership of land
Connecticut; and buildings (1)
Braintree,
Massachusetts
BEST BUY CO., INC. Retail Stores Denver and Ownership of a 63%
- 17 locations Fort Collins, general partnership
Colorado; Aurora, interest which owns
Bedford Park, land and buildings (1)
Bloomingdale,
Matteson and
Schaumburg, Illinois;
Omaha, Nebraska;
Albuquerque, New Mexico;
Arlington, Beaumont,
Dallas, El Paso,
Fort Worth, Houston,
Plano, Texas and
Madison, Wisconsin
LINCOLN TECHNICAL Technical Training Glendale Heights, Ownership of land
INSTITUTE OF Institute Illinois and buildings (1)
ARIZONA, INC.
MERIT MEDICAL Office/Warehouse South Jordan, Utah Ownership of land
SYSTEMS, INC. and building (1)
WABAN, INC. Retail Facility Farmingdale, Ownership of land
New York and building (1)
Q CLUBS, INC. Health Clubs Memphis, Ownership of land
Tennessee; and buildings
Bedford, Texas (1-Memphis)
PETSMART, INC. Warehouse Ennis, Texas Ownership of land
and building (1)
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- --------
<S> <C> <C> <C>
GARDEN RIDGE Retail Store Round Rock, Ownership of land
CORPORATION Texas and and building (1)
Oklahoma City,
Oklahoma
NICHOLSON Warehouse Maple Heights, Ownership of land
WAREHOUSE, L.P. Ohio and building (1)
SUPERIOR TELE-. Manufacturing Brownwood, Ownership of land
COMMUNICATIONS, INC. Texas and building (1)
GENSIA, INC. Office/Research and San Diego, Ownership of 50%
Development facility California general partnership
(under construction) interest which owns
land and buildings (1)
CHILDTIME Childcare Centers Newport News, Ownership of land
CHILDCARE, INC. Centreville, Manassas, and buildings
and Century Oaks, VA;
Napeville, IL
PLEXUS CORP. Manufacturing Neenah, WI Ownership of land
and building (1)
CFP GROUP, INC. Food Processing/ Owingsville, KY Ownership of land
Warehouse Facility and building (1)
OMNICOM GROUP, Office Building Venice, CA Ownership of land
INC. and building (1)
DEL MONTE Warehouse and a Mendota, Illinois; Ownership of a 50%
CORPORATION Special Purpose Facility Plover, Wisconsin; interest in land and
Toppemish and buildings (1)
Yakima, Washington
(all under construction)
THE UPPER DECK Office Buildings Carlsbad, Ownership of a 50%
COMPANY California interest in a limited
liability company owning
land and buildings (1)
HIBBETT SPORTING Warehouse/Office Birmingham, Ownership of land and
GOODS, INC. Facility Alabama building (1)
DETROIT DIESEL Distribution/Warehouse Orlando and Ownership of land and
CORPORATION Facilities Hollywood, Florida buildings (1)
</TABLE>
(1) These properties are encumbered by mortgage notes payable.
(2) Ownership of buildings with ground leases of land for one property in
Little Rock, Arkansas and properties in Hot Springs, North Little Rock
and Jonesboro, Arkansas.
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<PAGE> 8
The material terms of Registrant's leases with its significant
tenants are summarized in the following table:
<TABLE>
<CAPTION>
Registrant's
Share Current Lease
Lease of Current Square Rent Per Expiration Renewal Ownership Terms of
Obligor Annual Rents Footage Sq.Ft.(1) (Mo/Year) Terms Interest Purchase Option
- ----------- ------------ ------- --------- --------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Wal-Mart
Stores,
Inc. (2) $ 758,886 454,251 $3.34 1/08 YES 50% interest; N/A
remaining interest
owned by Corporate
Property Associates
10 Incorporated
("CPA(R):10")
Neodata
Corporation 2,350,911 403,871 5.82 6/13 YES 80% interest; The greater of
(2) remaining fair market value
interest owned and the sum of
by CPA(R):10 Landlord's share of
project costs
($17,064,946) less the
outstanding principal
balance of tenant's
purchase money
mortgage plus any .
mortgage prepayment
premium.
Bell
Sports,
Inc. (2) 1,038,545 307,397 3.38 11/12 YES 100% N/A
Michigan
Mutual
Insurance (2) 1,332.252 137,729 9.67 12/07 YES 100% $3,850,000 plus a
final rental payment
of $10,000,000.
GATX
Logistics,
Inc. (2) 804,720 240,000 3.35 12/02 YES 100% N/A
Big V
Holding 636,515 59,772 10.65 12/17 YES 100% N/A
Corp.(2) 847,688 133,554 11.54 10/18 YES 55% interest; N/A
remaining interest
owned by Corporate
Property Associates
12 Incorporated
("CPA(R):12")
Lucent Tech-
nologies, Inc. 1,852,829 568,670 3.26 3/02 YES 100% N/A
(2)
Best Buy
Co., Inc.(2) 3,124,483 558,695 8.88 4/18 YES 63% general N/A
partnership interest;
remaining interest
owned by CPA(R):12
</TABLE>
-7-
<PAGE> 9
<TABLE>
<CAPTION>
Registrant's
Share Current Lease
Lease of Current Square Rent Per Expiration Renewal Ownership Terms of
Obligor Annual Rents Footage Sq.Ft.(1) (Mo/Year) Terms Interest Purchase Option
- ----------- ------------ ------- --------- --------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lincoln
Technical
Institute
of Arizona,
Inc.(2) $1,206,953 74,410 $16.22 11/10 YES 100% N/A
Merit
Medical
Systems,
Inc. (2) 1,303,291 172,925 7.54 01/99 YES 100% The greater of
fair market value
and all project costs
plus $1,033,000.
Waban,
Inc. (2) 1,183,879 114,680 10.32 01/02 YES 100% N/A
Garden
Ridge Corporation -
Texas (2) 591,000 152,500 3.88 12/13 YES 100% The greater of
(a) the fair market value
and (b) the acquisition
cost, including post-
purchase improvements,
plus any prepayment
premium.
Garden
Ridge Corporation -
Oklahoma (2) 770,004 141,284 5.45 12/15 YES 100% The greater of
fair market value and
$6,471,899 plus any
prepayment premium.
Nicholson
Warehouse,
L.P.(2) 804,837 341,282 2.36 12/18 YES 100% The greater of the
fair market value and
$6,915,000, plus any
prepayment premium.
Superior
Telecommunications,
Inc.(2) 636,384 307,850 2.07 12/13 YES 100% The greater of
the fair market value and
$5,000,000 plus any
prepayment premium.
Gensia,
Inc.(2) 1,309,000 144,311 18.14 07/09 YES 50% general N/A
partnership
interest; remaining
interest owned
by CPA(R):12
</TABLE>
-8-
<PAGE> 10
<TABLE>
<CAPTION>
Registrant's
Share Current Lease
Lease of Current Square Rent Per Expiration Renewal Ownership Terms of
Obligor Annual Rents Footage Sq.Ft.(1) (Mo/Year) Terms Interest Purchase Option
- ----------- ------------ ------- --------- --------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Plexus
Corp.(2) 1,184,409 179,000 6.62 08/14 YES 100% N/A
Omnicom
Group, Inc.(2) 1,867,500 77,719 24.03 10/14 YES 100% N/A
The Upper
Deck
Company(2) 1,319,875 294,779 8.96 12/21 YES 50% interest; The greater of
remaining fair market value and
interest owned acquisition cost plus
by CPA(R):12 any prepayment premium.
Del Monte
Corporation 1,286,250 748,000 3.44 6/16 YES 50% interest; The greater of
(2) remaining Fair Market Value and
interest owned $10,995,000 plus any
by CPA(R):12 prepayment premium
Detroit
Diesel
Corporation(2) 845,000 80,310 10.52 12/19 YES 100% N/A
</TABLE>
(1) Represents rate per square foot when combined with rents applicable to
tenants-in-common.
(2) These properties are encumbered by limited recourse mortgages.
-9-
<PAGE> 11
Item 3. Legal Proceedings.
As of the date here of, Registrant is not a party of to any
material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the year
ended December 31, 1997 to a vote of security holders, through the solicitation
of proxies or otherwise.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
Information with respect to Registrant's common equity is
hereby incorporated by reference to page 28 of Registrant's Annual Report
contained in Appendix A.
Item 6. Selected Financial Data.
Selected Financial Data are hereby incorporated by reference
to page 1 of Registrant's Annual Report contained in Appendix A.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Management's Discussion and Analysis are hereby incorporated
by reference to pages 2 to 5 of Registrant's Annual Report contained in Appendix
A.
Item 8. Consolidated Financial Statements and Supplementary Data.
The following consolidated financial statements and
supplementary data are hereby incorporated by reference to pages 6 to 24 of
Registrant's Annual Report contained in Appendix A:
(i) Report of Independent Accountants.
(ii) Consolidated Balance Sheets as of December 31, 1995, 1996 and 1997.
(iii) Consolidated Statements of Income for the years ended December 31, 1995,
1996 and 1997.
(iv) Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1996 and 1997.
(v) Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997.
(vi) Notes to Consolidated Financial Statements.
Item 9. Disagreements on Accounting and Financial Disclosure.
NONE
-10-
<PAGE> 12
PART III
Item 10. Directors and Executive Officers of the Registrant.
The directors and executive officers of Registrant and members
of the Investment Committee of the Board of Directors of the Advisor are as
follows:
<TABLE>
<CAPTION>
Has Served as a
Director and/or
Name Age Positions Held Officer Since
---- --- -------------- ---------------
<S> <C> <C> <C>
William P. Carey 67 Chairman of the Board 2/91
Director
Charles C. Townsend, Jr. (1) 70 Vice Chairman of the Board 2/91
Director
Ralph G. Coburn (1) 88 Director 2/91
George E. Stoddard 81 Chairman of Investment Committee and 2/91
Senior Executive Vice President
Warren G. Wintrub (1) 63 Director 10/92
Thomas E. Zacharias 43 Director 10/97
Barclay G. Jones III 37 President 2/91
Steven M. Berzin 47 Executive Vice President 7/97
Chief Financial Officer
Chief Legal Officer
Gordon F. DuGan 31 Executive Vice President 2/97
Claude Fernandez 45 Executive Vice President 2/91
Chief Administrative Officer
H. Augustus Carey 40 Senior Vice President 2/91
National Marketing Director
Secretary
Anthony S. Mohl 35 Senior Vice President 2/91
Director of Portfolio Management
John J. Park 33 Senior Vice President 2/91
Director of Research
Treasurer
</TABLE>
(1) Independent Director of Registrant.
H. Augustus Carey is the nephew of William Polk Carey.
A description of the business experience of each director of
Registrant is set forth below:
William Polk Carey, Chairman of the Board and Director, has
been active in lease financing since 1959 and a specialist in net leasing of
corporate real estate property since 1964. Before founding W.P. Carey & Co.,
Inc. ("W.P. Carey") in 1973, he served as Chairman of the Executive Committee of
Hubbard, Westervelt & Mottelay (now Merrill Lynch Hubbard), head of Real Estate
and Equipment Financing at Loeb Rhoades & Co. (now Lehman Brothers), head of
Real Estate and Private Placements, Director of Corporate Finance and Vice
Chairman of the Investment Banking Board of duPont Glore Forgan Inc. A graduate
of the University of Pennsylvania's Wharton School of Finance and Commerce, Mr.
Carey is a Governor of the National Association of Real Estate Investment Trusts
(NAREIT). He also serves on the boards of The Johns Hopkins University, The
James A. Baker III Institute for Public Policy at Rice University, Templeton
College of
-11-
<PAGE> 13
Oxford University and other educational and philanthropic institutions. He
founded the Visiting Committee to the Economics Department of the University of
Pennsylvania and co-founded with Dr. Lawrence R. Klein the Economics Research
Institute at that University. Mr. Carey is also a Director of Corporate Property
Associates 10 Incorporated ("CPA(R):10"), Corporate Property Associates 12
Incorporated ("CPA(R):12"), Corporate Property Associates 14 Incorporated
("CPA(R):14") and Carey Diversified LLC ("Carey Diversified").
Charles C. Townsend, Jr., Vice Chairman of the Board, was
formerly Managing Director in charge of the Corporate Finance Department at
Morgan Stanley & Co. and Chairman of Morgan Stanley Realty Corporation. Mr.
Townsend holds a B.S.E.E. from Princeton University and an MBA from Harvard
University. Mr. Townsend is also a Director of CPA(R):14 and Carey Diversified.
Ralph G. Coburn, Rear Admiral USNR (Ret.), is former President
and Chief Executive Officer of Hubbard Real Estate Investments (now HRE
Properties), a $100,000,000 NYSE equity REIT, sponsored by Merrill Lynch.
Admiral Coburn had been engaged in a variety of real estate activities for over
30 years. A graduate of Harvard College, Harvard Law School and the Naval War
College, Admiral Coburn previously served as Chief Executive Officer of the
National Association of Real Estate Investment Trusts (NAREIT), representing the
multi-billion dollar REIT industry. Admiral Coburn is also a Director of
CPA(R):10 and CPA(R):12.
George E. Stoddard, Chief Investment Officer and Director, was
until 1979 head of the bond department of The Equitable Life Assurance Society
of the United States, with responsibility for all activities related to
Equitable's portfolio of corporate investments acquired through direct
negotiation. Mr. Stoddard was associated with Equitable for over 30 years. He
holds an A.B. degree from Brigham Young University, an M.B.A. from Harvard
Business School and an LL.B. from Fordham University Law School. Mr. Stoddard is
also a Director of CPA(R):10, CPA(R):12 and CPA(R):14.
Warren G. Wintrub, Independent Director of CPA(R):10 and
CPA(R):14, became a partner at Coopers & Lybrand in 1963, specializing in
taxation. He served on Coopers & Lybrand's Executive Committee from 1976 to 1988
and as Chairman of the Retirement Committee from 1979 until his retirement from
the firm in 1992. Mr. Wintrub serves as a director of Chromcraft Revington, Inc.
and Getty Petroleum Corp. He received a B.S. degree from Ohio State University
and an LL.B. degree from Harvard Law School.
Thomas E. Zacharias, Independent Director of CPA(R):12 and
CPA(R):14, is currently a Vice President of Corporate Property Investors ("CPI")
and a Vice President of Corporate Realty Consultants. Mr. Zacharias, who joined
CPI in 1981, is responsible for the asset management of $1.2 billion of real
estate assets. In addition, Mr. Zacharias is the Managing Member of the Mall of
Georgia, LLC, the largest regional mall development in the Southeastern U.S.
that is scheduled to open in August 1999. Prior to joining CPI in 1981, Mr.
Zacharias worked for the New York State Urban Development Corporation between
1979 and 1981 as Project Director for a number of economic development projects
and Assistant to the Chief Operating Officer. Mr. Zacharias graduated from
Princeton University in 1976 and received a Master in Public and Private
Management from the Yale School of Management in 1979. He is a member of The
National Association of Real Estate Investment Trusts, Urban Land Institute and
International Council of Shopping Centers.
Barclay G. Jones III, President, joined W.P. Carey as
Assistant to the President in July 1982 after his graduation from the Wharton
School of the University of Pennsylvania, where he majored in Finance and
Economics. He was elected to the Board of Directors of W.P. Carey in April 1992.
Mr. Jones is also a Director of the Wharton Business School Club of New York.
Mr. Jones is a Director of Carey Diversified.
Steven M. Berzin, Executive Vice President, Chief Legal
Officer and Chief Financial Officer, was elected Executive Vice President, Chief
Financial Officer, Chief Legal Officer and a Managing Director of W.P. Carey 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,
Senior Vice President and Chief Financial Officer. Mr. Berzin
-12-
<PAGE> 14
associated with the law firm of Cravath, Swaine & Moore from 1978 to 1985 and
from 1976 to 1977, he served as law clerk to the Honorable Anthony M. Kennedy,
then a United States Circuit Judge. Mr. Berzin received a B.A. and M.A. in
Applied Mathematics from Harvard University, a B.A. in Jurisprudence and an M.A.
from Oxford University and a J.D. from Harvard Law School. Mr. Berzin is also a
Director of Carey Diversified.
Gordon F. DuGan, Executive President, was elected Executive
Vice President and a Managing Director of W.P. Carey in June 1997. Mr. Dugan
rejoined W.P. Carey as Deputy Head of Acquisitions in February 1997. Mr. Dugan
was until September 1995 a Senior Vice President in the Acquisitions Department
of W.P. Carey. Mr. Dugan joined W.P. Carey as Assistant to the Chairman in May
1988, after graduating from the Wharton School at the University of Pennsylvania
where he concentrated in Finance. From October 1995 until February 1997, Mr.
Dugan was Chief Financial Officer of Superconducting Core Technologies, Inc., a
Colorado-based wireless communications equipment manufacturer. Mr. Dugan is a
Director of Carey Diversified.
Claude Fernandez, Chief Administrative Officer, Managing
Director, and Executive Vice President, joined W.P. Carey in 1983. Previously
associated with Coldwell Banker, Inc. for two years and with Arthur Andersen &
Co., he is a Certified Public Accountant. Mr. Fernandez received a B.S. degree
in accounting from New York University in 1975 and an M.B.A. in finance from
Columbia University Graduate School of Business in 1981.
H. Augustus Carey, Senior Vice President, returned to W.P.
Carey in 1988 and is President of W.P. Carey's broker-dealer subsidiary. Mr.
Carey previously worked for W.P. Carey from 1979 to 1981 as Assistant to the
President. Prior to rejoining W.P. Carey, Mr. Carey served as a loan officer of
the North American Department of Kleinwort Benson Limited in London, England. He
received an A.B. from Amherst College in 1979 and an M.Phil. in Management
Studies from Oxford University in 1984. Mr. Carey is a trustee of the Oxford
Management Centre Associates Council.
Anthony S. Mohl, Senior Vice President and Director of
Portfolio Management, joined W.P. Carey, in 1987 as Assistant to the President
after receiving an M.B.A. from the Columbia University Graduate School of
Business. Mr. Mohl was employed as an analyst in the strategic planning group at
Kurt Salmon Associates after receiving an undergraduate degree from Wesleyan
University.
John J. Park, Senior Vice President, Treasurer and Director of
Research, joined W.P. Carey as an Investment Analyst in December 1987. Mr. Park
received an undergraduate degree from Massachusetts Institute of Technology and
an M.B.A. in Finance from New York University.
Item 11. Executive Compensation.
This information will be contained in Registrant's definitive
Proxy Statement with respect to the Company's 1998 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission within 120
days following the end of the Company's fiscal year, and is hereby incorporated
by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
This information will be contained in Registrant's definitive
Proxy Statement with respect to the Company's 1998 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission within 120
days following the end of the Company's fiscal year, and is hereby incorporated
by reference.
Item 13. Certain Relationships and Related Transactions.
This information will be contained in Registrant's definitive
Proxy Statement with respect to the Company's 1998 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission within 120
days following the end of the Company's fiscal year, and is hereby incorporated
by reference.
-13-
<PAGE> 15
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) 1. Consolidated Financial Statements:
The following consolidated financial statements are
filed as a part of this Report:
Report of Independent Accountants.
Consolidated Balance Sheets, December 31, 1995, 1996 and 1997.
Consolidated Statements of Income for the years ended December 31, 1995,
1996 and 1997.
Consolidated Statements of Shareholders' Equity for the years ended December
31, 1995, 1996 and 1997.
Consolidated Statements of Cash Flows for the years ended December 31, 1995,
1996 and 1997.
Notes to Consolidated Financial Statements.
The consolidated financial statements are hereby incorporated by reference
to pages 6 to 24 of Registrant's Annual Report contained in Appendix A.
(a) 2. Financial Statement Schedule:
The following schedule is filed as a part of this
Report:
Report of Independent Accountants.
Schedule III -Real Estate and Accumulated Depreciation as of December 31,
1997.
Notes to Schedule III.
Schedule III and notes thereto are contained herein on pages 35 to 39 of
this Form 10-K.
Financial Statement Schedules other than those listed above
are omitted because the required information is given in the Consolidated
Financial Statements, including the Notes thereto, or because the conditions
requiring their filing do not exist.
-14-
<PAGE> 16
(a) 3. Exhibits:
The following exhibits are filed as part of this Report.
Documents other than those designated as being filed herewith are incorporated
herein by reference.
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
3.1 Articles of Amendment and Restatement. Exhibit 3(A) to Regis-
tration Statement (Form
S-11) No. 33-39409
3.2 Amended Bylaws of Registrant. Exhibit 3(B) to Regis-
tration Statement (Form
S-11) No. 33-39409
10.1 Amended Advisory Agreement. Exhibit 10(A)(2) to
Registration Statement
(Form S-11) No. 33-39409
10.2 Lease between Marcourt Investments Filed as Exhibit 10(D)(1)
Incorporated ("Marcourt") and CTYD to Registrant's Post
III Corporation ("CTYD"). Effective Amendment No. 1
to Form S-11
10.3 Series A-2 9.94% Secured Note from Filed as Exhibit 10(D)(2)
Marcourt to the registered owner of to Registrant's Post
note (Various Series A-1 9.94% Notes Effective Amendment No. 1
in an aggregate amount of 38,750,000 to Form S-11
substantially in the form of the Series
A-1 9.94% Note attached , were issued by
Marcourt in connection with the Financing).
10.4 Series A-2 11.18% Secured Note from Filed as Exhibit 10(D)(3)
Marcourt to the registered owner of to Registrant's Post
note (Various notes in an aggregate Effective Amendment No. 1
amount of 70,250,000 substantially to Form S-11
in the form of the Series A-2 11.18%
Note attached , were issued by Marcourt
in connection with the Financing.
10.5 Indenture between Marcourt, as Filed as Exhibit 10(D)(4)
borrower, to First Fidelity Bank, to Registrant's Post
National Association, New Jersey, as Effective Amendment No. 1
trustee ("Trustee"). to Form S-11
</TABLE>
-15-
<PAGE> 17
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.6 Real Estate Deed of Trust from Filed as Exhibit 10(D)(5)
Marcourt to Albuquerque Title Company, to Registrant's Post
as trustee for benefit of the Trustee Effective Amendment No. 1
filed in New Mexico, securing Series to Form S-11
A-1 9.94% Notes and Series A-2 ll.18%
notes allocated to Albuquerque, New Mexico
Marriott property (Deeds of Trust or
Mortgages substantially similar to this Deed
of Trust were filed in all other
jurisdictions in which Marriott Properties
are located. Such other deeds of trust or
mortgages secure the principal amount of
Series A-1 9.94% Notes and Series A-2 11.18%
Notes allocated to the Marriott Properties
located in such other jurisdictions)
10.7 Second Real Estate Deed of Trust from Filed as Exhibit 10(D)(6)
Marcourt to Albuquerque Title Company as to Registrant's Post
trustee for the benefit of the Trustee, filed Effective Amendment No. 1
in New Mexico, securing all Series A-1 9.94% to Form S-11
Notes and Series A-2 11.18% Notes other than
those notes allocated to the Albuquerque,
New Mexico Marriott property (Deeds of trust
or mortgages substantially similar to this
Second Real Estate Deed of Trust were filed
in all other jurisdictions in which the
remaining Marriott Properties are located.
Such other deeds of trust or mortgages
secure the principal amount of Series A-1
9.94% Notes and Series A-2 11.18% Notes
allocated to all Marriott Properties not
located in the jurisdiction in which such
other deeds of trust were filed for
recording).
10.8 Guaranty from the Registrant, Corporate Filed as Exhibit 10(D)(7)
Property Associates 10 Incorporated, Trammell to Registrant's Post
Crow Equity Partners II, Ltd. ("TCEP II") and Effective Amendment No. 1
PA/First Plaza Limited Partnership ("First to Form S-11
Plaza") as guarantors, to the Trustee.
10.9 Shareholders Agreement between the Filed as Exhibit 10(D)(8)
Registrant, Corporate Property Associates to Registrant's Post
10 Incorporated ("CPA(R):10"), TCEP II and Effective Amendment No. 1
First Plaza. to Form S-11
10.10 Assignment and Assumptions of Lease Agreement Filed as Exhibit 10(E)(1)(a)
for property located in Glendale, Arizona to Registrant's Post
Effective Amendment No. 1
to Form S-11
</TABLE>
-16-
<PAGE> 18
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.11 Assignment and Assumptions of Lease Agreement Filed as Exhibit 10(E)(1)(b)
for property located in Ft. Smith, Arkansas to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.12 Assignment and Assumptions of Lease Agreement for Filed as Exhibit 10(E)(1)(c)
property located in Escondido, California. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.13 Assignment and Assumptions of Lease Agreement for Filed as Exhibit 10(E)(1)(d)
property located in Broken Arrow, Oklahoma. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.14 Assignment and Assumptions of Lease Agreement for Filed as Exhibit 10(E)(1)(e)
property located in Weatherford, Oklahoma. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.15 Assignment and Assumptions of Lease Agreement for Filed as Exhibit 10(E)(1)(f)
property located in Center, Texas. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.16 Assignment and Assumptions of Lease Agreement for Filed as Exhibit 10(E)(1)(g)
property located in Groves, Texas. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.17 Assignment and Assumptions of Lease Agreement for Filed as Exhibit 10(E)(1)(h)
property located in Silsbee, Texas. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.18 Assignment and Assumptions of Lease Agreement for Filed as Exhibit 10(E)(1)(i)
property located in Vidor, Texas. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.19 Lease Amendments for the Ft. Smith, Arkansas and Filed as Exhibit 10(E)(2)
Weatherford, Oklahoma properties. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.20 Promissory Note from subsidiaries of the Registrant and Filed as Exhibit 10(E)(3)
CPA(R):10 to The New England Mutual Life Insurance to Registrant's Post
Company ("New England"). Effective Amendment No. 1
to Form S-11
</TABLE>
-17-
<PAGE> 19
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.21 Mortgage/Deed of Trust from subsidiaries Filed as Exhibit 10(E)(4)(a)
of the Registrant and CPA(R):10 to to Registrant's Post
New England encumbering the property Effective Amendment No. 1
in Ft. Smith, Arkansas to Form S-11
10.22 Mortgage/Deed of Trust from subsidiaries Filed as Exhibit 10(E)(4)(b)
of the Registrant and CPA(R):10 to to Registrant's Post
New England encumbering the property Effective Amendment No. 1
in Weatherford, Oklahoma to Form S-11
10.23 Mortgage/Deed of Trust from Filed as Exhibit 10(E)(4)(c)
subsidiaries of the Registrant and to Registrant's Post
CPA(R):10 to New England encumbering Effective Amendment No. 1
the properties in Center, Groves, to Form S-11
Silsbee, and Vidor, Texas.
10.24 Lease Agreement between QRS 10-9 (AR), Filed as Exhibit 10(F)(1)
Inc. ("QRS 10-9") and QRS 11-2(AR), Inc. to Registrant's Post
("QRS 11-2") as landlord and Acadia Effective Amendment No. 3
Stores 63, Inc. ("Tenant") as tenant. to Form S-11
10.25 Co-Tenancy Agreement between QRS 10-9 Filed as Exhibit 10(F)(2)
and QRS 11-2. to Registrant's Post
Effective Amendment No. 3
to Form S-11
10.26 Term Loan Agreement among The First Filed as Exhibit 10(F)(3)
National Bank of Boston ("First to Registrant's Post
Lender"), QRS 10-9 and QRS 11-2. Effective Amendment No. 3
to Form S-11
10.27 Note of QRS 10-9 and QRS 11-2 to First Filed as Exhibit 10(F)(4)
Lender. to Registrant's Post
Effective Amendment No. 3
to Form S-11
10.28 Fee and Leasehold Mortgages from QRS Filed as Exhibit 10(F)(5)
10-9 and QRS 11-2 to First Lender to Registrant's Post
for the following jurisdictions: Effective Amendment No. 3
to Form S-11
a. Arkansas (one representative fee mortgage
and leasehold mortgage included)
b. Louisiana
c. Mississippi
10.29 Term Loan Agreement among Acadia Filed as Exhibit 10(F)(6)
Partners , L.P. ("Second Lender"), to Registrant's Post
QRS 10-9 and QRS 11-2. Effective Amendment No. 3
to Form S-11
</TABLE>
-18-
<PAGE> 20
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.30 Note of QRS 10-9 and QRS 11-2 to Filed as Exhibit 10(F)(7)
Second Lender. to Registrant's Post
Effective Amendment No. 3
to Form S-11
10.31 Fee Mortgages and Leasehold Mortgages Filed as Exhibit 10(F)(8)
from QRS 10-9 and QRS 11 -2 to Second to Registrant's Post
Lender for the following jurisdictions: Effective Amendment No. 3
to Form S-11
a. Arkansas (one representative fee mortgage
and leasehold mortgage included)
b. Louisiana
c. Mississippi
10.32 Guaranty from Harvest Foods, Inc., a Filed as Exhibit 10(F)(9)
Delaware corporation, to QRS 10-9 and to Registrant's Post
QRS 11-2. Effective Amendment No. 3
to Form S-11
10.33 Guaranty from Harvest Foods, Inc., an Filed as Exhibit 10(F)(10)
Arkansas corporation, to QRS 10-9 and to Registrant's Post
QRS 11-2. Effective Amendment No. 3
to Form S-11
10.34 Lease between QRS 10-12 (TX), Inc. Filed as Exhibit 10(G)(1)
("QRS 10-12"), QRS 11-5 (TX), Inc. to Registrant's Post
("QRS 11-5") and Summagraphics. Effective Amendment No. 3
to Form S-11
10.35 Co-Tenancy Agreement between QRS 10-12, Filed as Exhibit 10(G)(2)
and QRS 11-5. to Registrant's Post
Effective Amendment No. 3
to Form S-11
10.36 $3,700,000 Promissory Note from QRS Filed as Exhibit 10(H)(1)
10-12 (TX), Inc., ("QRS 10-12"), to Registrant's Post
and QRS 11-5 (TX) Inc. ("QRS 11-5"), Effective Amendment No. 4
to Creditanstalt-Bankverein ("Lender"). to Form S-11
10.37 Deed of Trust and Security Agreement Filed as Exhibit 10(H)(2)
from QRS 10- 12 and QRS 11-5 to John O. to Registrant's Post
Langdon, Trustee, for benefit of Lender. Effective Amendment No. 4
to Form S-11
10.38 Guaranty Agreement between Registrant Filed as Exhibit 10(H)(3)
and Corporate Property Associates 10 to Registrant's Post
Incorporated as guarantor and Lender. Effective Amendment No. 4
to Form S-11
10.39 Real Estate Purchase and Sale Contract Filed as Exhibit 10(I)(1)
between Belmet (IL) QRS 11-9, Inc. to Registrant's Post
("QRS 11-9") as purchaser and Mission Effective Amendment No. 4
Leasing and Bank of Rantoul (collectively, to Form S-11
"Seller").
</TABLE>
-19-
<PAGE> 21
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.40 Assignment and Assumption of Lease Filed as Exhibit 10(I)(2)
between QRS 11-9 and Seller. to Registrant's Post
Effective Amendment No. 4
to Form S-11
10.41 Assignment of Permits and Warranties Filed as Exhibit 10(I)(3)
from Seller to QRS 11-9. to Registrant's Post
Effective Amendment No. 4
to Form S-11
10.42 Industrial Building Lease ("Lease") Filed as Exhibit 10(I)(4)
dated November 16, 1989 between Seller to Registrant's Post
and Bell, together with First Amendment Effective Amendment No. 4
to Lease, dated September 19, 1991. to Form S-11
10.43 Second Amendment to Lease. Filed as Exhibit 10(I)(5)
to Registrant's Post
Effective Amendment No. 4
to Form S-11
10.44 Land Purchase Agreement between MMI Filed as Exhibit 10(J)(1)
(SC) QRS 11-11 Inc. ("QRS 11-11") and to Registrant's Post
Amerisure, Inc. regarding three acre Effective Amendment No. 5
parcel. to Form S-11
10.45 Mortgage from Amerisure, Inc. to QRS Filed as Exhibit 10(J)(2)
11-11 regarding three acre parcel. to Registrant's Post
Effective Amendment No. 5
to Form S-11
10.46 Lease Agreement between QRS 11-11, Filed as Exhibit 10(J)(3)
as Landlord. and MMI, as tenant. to Registrant's Post
Effective Amendment No. 5
to Form S-11
10.47 Assignment, Reassignment and Assumption Filed as Exhibit 10(J)(4)
of Lease among Amerisure, Inc., QRS to Registrant's Post
11-11 and UIC. Effective Amendment No. 5
to Form S-11
10.48 Loan Agreement between The Penn Mutual Filed as Exhibit 10(J)(5)
Life Insurance Company ("Penn Mutual") to Registrant's Post
and QRS 11-11. Effective Amendment No. 5
to Form S-11
10.49 $9,500,000 Promissory Note from QRS Filed as Exhibit 10(J)(6)
11-11 to Penn Mutual. to Registrant's Post
Effective Amendment No. 5
to Form S-11
</TABLE>
-20-
<PAGE> 22
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.50 Mortgage and Security Agreement from Filed as Exhibit 10(J)(7)
QRS 11-11 to Penn Mutual. to Registrant's Post
Effective Amendment No. 5
to Form S-11
10.51 Lease Agreement between BVS (NY) QRS Filed as Exhibit 10(K)(1)
11-10, Inc. ("QRS 11-10") as landlord, to Registrant's Post
and BVS, as tenant. Effective Amendment No. 5
to Form S-11
10.52 Reciprocal Easement and Operation Filed as Exhibit 10(K)(2)
Agreement between QRS 11-10 and Fairview to Registrant's Post
Plaza Corporation ("FPC"). Effective Amendment No. 5
to Form S-11
10.53 Lease Agreement between QRS 11-12, (FL), Filed as Exhibit 10(L)(2)
Inc., ("QRS 11-12"), as Landlord, and to Registrant's Post
Unit, as tenant. Effective Amendment No. 5
to Form S-11
10.54 Guaranty and Suretyship Agreement Filed as Exhibit 10(L)(4)
from Unit to QRS 11-12. to Registrant's Post
Effective Amendment No. 5
to Form S-11
10.55 Indemnity Agreement between GATX Filed as Exhibit 10(L)(5)
Corporation and QRS 11-12. to Registrant's Post
Effective Amendment No. 5
to Form S-11
10.56 Assignment and Assumption of Lease by Filed as Exhibit 10(M)(1)
Charlotte Telephone Associates Limited to Registrant's Post
Partnership ("CTA") to QRS 11-14 (NC), Effective Amendment No. 5
Inc. ("QRS 11-14"). to Form S-11
10.57 Purchase and Sale Agreement between Filed as Exhibit 10.1 to
Neoserv (CO) QRS 10-13, Inc. ("QRS:10") Registrant's Form 8-K dated
d Neoserv (CO) QRS 11-8, Inc. ("QRS:11") October 29, 1992
as purchasers and Homart Development Co. ("Homart").
10.58 Promissory Note of QRS:10 and QRS:11 to Filed as Exhibit 10.2 to
Homart. Registrant's Form 8-K dated
October 29, 1992
10.59 Deed of Trust from QRS:10 and QRS:11 for Filed as Exhibit 10.3 to
benefit of Homart. Registrant's Form 8-K dated
October 29, 1992
10.60 Option Agreement between QRS:10 and Filed as Exhibit 10.4 to
QRS:11 as option grantee and Homart as Registrant's Form 8-K dated
option grantor. October 29, 1992
</TABLE>
-21-
<PAGE> 23
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.61 Co-Tenancy Agreement between QRS:10 and Filed as Exhibit 10.5 to
QRS:11. Registrant's Form 8-K dated
October 29, 1992
10.62 Lease from QRS:10 and QRS:11 as lessor Filed as Exhibit 10.6 to
and Neodata Services, Inc. ("Neodata") Registrant's Form 8-K dated
as lessee. October 29, 1992
10.63 Guaranty Agreement from Neodata Filed as Exhibit 10.7 to
Corporation as guarantor to QRS:10 and Registrant's Form 8-K dated
QRS:11. October 29, 1992
10.64 Promissory Note of QRS:10 and QRS:11 to Filed as Exhibit 10.8 to
Neodata. Registrant's Form 8-K dated
October 29, 1992
10.65 Deed of Trust from QRS:10 and QRS:11 for Filed as Exhibit 10.9 to
benefit of Neodata. Registrant's Form 8-K dated
October 29, 1992
10.66 Construction Contract between QRS:10 and Filed as Exhibit 10.10 to
QRS:11 as owners and Austin Commercial, Registrant's Form 8-K dated
Inc. ("Austin") as contractor. October 29, 1992
10.67 Guaranty from Austin to QRS:10 and Filed as Exhibit 10.11 to
QRS:11. Registrant's Form 8-K dated
October 29, 1992
10.68 Construction Agency Agreement between Filed as Exhibit 10.12 to
QRS:10 and QRS:11 as owners and Neodata Registrant's Form 8-K dated
as agent. October 29, 1992
10.69 Land Purchase Agreement between MMI (SC) Filed as Exhibit 10.1 to
QRS 11-11, Inc. ("QRS 11-11") and Registrant's Form 8-K dated
Amerisure, Inc. ("Amerisure") regarding January 5, 1993
three acre parcel.
10.70 Mortgage from Amerisure to QRS 11-11 Filed as Exhibit 10.2 to
regarding three acre parcel. Registrant's Form 8-K dated
January 5, 1993
10.71 Lease Agreement between QRS 11-11, as Filed as Exhibit 10.3 to
Landlord, and MMI as tenant. Registrant's Form 8-K dated
January 5, 1993
10.72 Assignment, Reassignment and Assumption Filed as Exhibit 10.4 to
of Lease among Amerisure, Inc., QRS 11-11 Registrant's Form 8-K dated
and UIC. January 5, 1993
10.73 Loan Agreement between The Penn Mutual Filed as Exhibit 10.5 to
Life Insurance Company ("Penn Mutual") Registrant's Form 8-K dated
and QRS 11-11. January 5, 1993
</TABLE>
-22-
<PAGE> 24
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.74 $9,500,000 Promissory Note from QRS Filed as Exhibit 10.6 to
11-11 to Penn Mutual. Registrant's Form 8-K dated
January 5, 1993
10.75 Mortgage and Security Agreement from Filed as Exhibit 10.7 to
QRS 11-11 to Penn Mutual. Registrant's Form 8-K dated
January 5, 1993
10.76 Lease Agreement between BVS (NY) QRS Filed as Exhibit 10.8 to
11-10, Inc. ("QRS 11-10"), as landlord, Registrant's Form 8-K dated
and BVS, as tenant. January 5, 1993
10.77 Reciprocal Easement and Operation Filed as Exhibit 10.9 to
Agreement between QRS 11-10 and Fairview Registrant's Form 8-K dated
Plaza, Inc. January 5, 1993
10.78 Lease Agreement between QRS 11-12 Filed as Exhibit 10.10 to
(FL), Inc. ("QRS 11-12"), as landlord, Registrant's Form 8-K dated
and Unit, as tenant. January 5, 1993
10.79 Guaranty and Suretyship Agreement from Filed as Exhibit 10.11 to
Unit to QRS 11-12. Registrant's Form 8-K dated
January 5, 1993
10.80 Indemnity Agreement between GATX Filed as Exhibit 10.12 to
Corporation and QRS 11-12. Registrant's Form 8-K dated
January 5, 1993
10.81 Assignment and Assumption of Lease Filed as Exhibit 10.1 to
and Lease Guaranty from Oakbrook Registrant's Form 8-K dated
Development Corp. ("Oakbrook") to April 5, 1993
Books CT QRS 11-15, Inc. ("QRS 11-15").
10.82 Co-Tenancy Agreement between DDI (NE) Filed as Exhibit 10.2 to
QRS 10-15, Inc. ("QRS 10-15") and DDI Registrant's Form 8-K dated
(NE) QRS 11-13, Inc. ("QRS 11-13"). April 5, 1993
10.83 Cross Indemnity Agreement between Filed as Exhibit 10.3 to
QRS 10-15 and QRS 11-13. Registrant's Form 8-K dated
April 5, 1993
10.84 Lease Agreement between QRS 10-15 Filed as Exhibit 10.4 to
and QRS 11-13, as landlord, and Registrant's Form 8-K dated
Data Documents, Inc. ("DDI"), April 5, 1993
as tenant.
10.85 Loan Agreement between QRS 10-15 Filed as Exhibit 10.5 to
and QRS 11-13, as borrower, and Registrant's Form 8-K dated
U S West Financial Services, Inc. April 5, 1993
("US West"), as lender.
</TABLE>
-23-
<PAGE> 25
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.86 $8,000,000 Promissory Note from Filed as Exhibit 10.6 to
QRS 10-15 and QRS 11-13 to Registrant's Form 8-K dated
US West. April 5, 1993
10.87 Deed of Trust from QRS 10-15 and Filed as Exhibit 10.7 to
QRS 11-13 to US West (for filing Registrant's Form 8-K dated
in the states of Colorado, Nebraska April 5, 1993
and Texas).
10.88 Mortgage from QRS 10-15 and QRS 11-13 Filed as Exhibit 10.8 to
to US West (for filing in the state of Registrant's Form 8-K dated
Kansas). April 5, 1993
10.89 Assignment of Parent Guaranty from Filed as Exhibit 10.9 to
QRS 10-15 and QRS 11-13. Registrant's Form 8-K dated
April 5, 1993
10.90 Deed of Trust Note from QRS 11-14 (NC), Filed as Exhibit 10.1 to
Inc. ("QRS 11-14") to Kredietbank N.V. Registrant's Form 8-K dated
("Kredietbank"). April 13, 1993
10.91 Deed of Trust from QRS 11-14 for the Filed as Exhibit 10.2 to
benefit of Kredietbank. Registrant's Form 8-K dated
April 13, 1993
10.92 Assignment of Leases and Rents from Filed as Exhibit 10.3 to
QRS 11-14 to Kredietbank. Registrant's Form 8-K dated
April 13, 1993
10.93 Escrow Agreement between Filed as Exhibit 10.4 to
QRS 11-14 and Kredietbank. Registrant's Form 8-K dated
April 13, 1993
10.94 Lease Agreement between BB Property Filed as Exhibit 10.1 to
Company, as lessor, and Best Buy, Registrant's Form 8-K dated
as lessee. May 6, 1993
10.95 Note Purchase Agreement among BB Filed as Exhibit 10.2 to
Property Company, Best Buy, and Registrant's Form 8-K dated
TIAA. May 6, 1993
10.96 $32,800,000 Note from BB Property Filed as Exhibit 10.3 to
Property Company to TIAA. Registrant's Form 8-K dated
May 6, 1993
10.97 Deed of Trust and Security Agreement Filed as Exhibit 10.4 to
from BB Property Company for the benefit Registrant's Form 8-K dated
of TIAA. May 6, 1993
10.98 $3,200,000 Promissory Note from BVS (NY) Filed as Exhibit 10.5 to
QRS 11-10, Inc. ("BVS") to Orix. Registrant's Form 8-K dated
May 6, 1993
</TABLE>
-24-
<PAGE> 26
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.99 Mortgage, Assignment of Leases and Rents, Filed as Exhibit 10.6 to
Security Agreement and Fixture Filing Registrant's Form 8-K dated
from BVS to Orix. May 6, 1993
10.100 Purchase Agreement between QRS 11-19, Filed as Exhibit 10.2 to
as owner, and Lincoln Technical Registrant's Form 8-K dated
Institute, as buyer. August 13, 1993
10.101 Lease Agreement between Unitech (IL) Filed as Exhibit 10(P)(1) to
QRS 11-19, Inc. ("QRS 11-19"), as Registrant's Post Effective
landlord, and UTI. Amendment No. 6 to Form S-11
10.102 Guaranty and Suretyship Agreement Filed as Exhibit 10(P)(2) to
from Lincoln Technical Institute Registrant's Post Effective
of Arizona, Inc. to QRS 11-19. Amendment No. 6 to Form S-11
10.103 Modification of Loan Documents and Filed as Exhibit 10(P)(3) to
Assumption Agreement among Chicago Registrant's Post Effective
Investment Properties Limited Partnership, Amendment No. 6 to Form S-11
the Guarantors QRS 11-19 and the
Fidelity Mutual Life
Insurance Company.
10.104 Rate Cap Transaction letter Agreement Filed as Exhibit 10(Q)(4) to
between BVS and Chemical Bank Registrant's Post Effective
("Chemical"). Amendment No. 6 to Form S-11
10.105 Consent and Agreement Filed as Exhibit 10(Q)(5) to
between Chemical, Orix and BVS. Registrant's Post Effective
Amendment No. 6 to Form S-11
10.106 Assignment of Interest Rate Filed as Exhibit 10(Q)(6) to
Protection Agreement from BVS Registrant's Post Effective
to Orix. Amendment No. 6 to Form S-11
10.107 Warrant issued by Merit to Filed as Exhibit 10(S)(1) to
the Registrant. Registrant's Post Effective
Amendment No. 6 to Form S-11
10.108 Lease Agreement between QRS 11-20 (UT), Filed as Exhibit 10(S)(2) to
Inc. ("QRS 11-20"), as landlord, and Registrant's Post Effective
Merit, as tenant. Amendment No. 6 to Form S-11
10.109 Guaranty Agreement from the Filed as Exhibit 10(S)(3) to
Registrant to Merit. Registrant's Post Effective
Amendment No. 6 to Form S-11
10.110 Construction Management Agreement Filed as Exhibit 10(S)(4) to
Merit and the Koll Company. Registrant's Post Effective
Amendment No. 6 to Form S-11
</TABLE>
-25-
<PAGE> 27
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.111 Construction Agreement between Merit Filed as Exhibit 10(S)(5) to
and Camco Construction Company, Inc. Registrant's Post Effective
Amendment No. 6 to Form S-11
10.112 Construction Agency Agreement between Filed as Exhibit 10(S)(6) to
Merit and QRS 11-20. Registrant's Post Effective
Amendment No. 6 to Form S-11
10.113 $8,250,000 Promissory Note from QRS 11-20 Filed as Exhibit 10(S)(7) to
to First Interstate Bank of Utah, N.A. Registrant's Post Effective
("Lender"). Amendment No. 6 to Form S-11
10.114 Deed of Trust, Assignment of Rents, Security Filed as Exhibit 10(S)(8) to
Agreement and Financing Statement from Registrant's Post Effective
QRS 11-20 for the benefit of Lender. Amendment No. 6 to Form S-11
10.115 Assignment of Leases and Rents made by Filed as Exhibit 10(S)(9) to
QRS 11-20 in favor of Lender. Registrant's Post Effective
Amendment No. 6 to Form S-11
10.116 Loan Agreement between QRS 11-20 and Filed as Exhibit 10(S)(10) to
Lender. Registrant's Post Effective
Amendment No. 6 to Form S-11
10.117 Assignment and Assumption of Bid dated Filed as Exhibit 10(T)(1) to
as of April 14, 1993 among QRS 11-17 (NY), Registrant's Post Effective
Inc. ("QRS 11-17"), E.B. Properties, Inc. Amendment No. 7 to Form S-11
("EB") and The Dime Savings Bank of New
York, FSB ("Dime"), as amended and
supplemented by the First Supplement dated
April 15, 1993 and by the Second Supplement
dated April 22, 1993 and by letters dated
May 12, June 9 and June 18, 1993.
10.118 Assignment and Assumption Agreement, dated Filed as Exhibit 10(T)(2) to
March 4, 1993, as amended , between Registrant's Post Effective
Dime and EB, as assigned by Assignment Amendment No. 7 to Form S-11
dated April 14, 1993.
10.119 Lease dated as of August 1, 1986 between Filed as Exhibit 10(T)(3) to
D. Grossman and Mormax Corporation (as Registrant's Post Effective
assumed by QRS 11-21, Inc. ("QRS 11-21") Amendment No. 7 to Form S-11
by virtue of documents listed at (10)(T)(1)).
10.120 Promissory Note from QRS 11-17 to Dime Filed as Exhibit 10(T)(4) to
in the amount of $7,000,000. Registrant's Post Effective
Amendment No. 7 to Form S-11
10.121 Mortgage from QRS 11-17 to Dime. Filed as Exhibit 10(T)(5) to
Registrant's Post Effective
Amendment No. 7 to Form S-11
</TABLE>
-26-
<PAGE> 28
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.122 Collateral Assignment of Leases and Rents Filed as Exhibit 10(T)(6) to
by QRS 11-17 in favor of Dime. Registrant's Post Effective
Amendment No. 7 to Form S-11
10.123 Agreement of Indemnity Filed as Exhibit 10(T)(7) to
by QRS 11-17 in favor of Dime. Registrant's Post Effective
Amendment No. 7 to Form S-11
10.124 Lease Agreement between SCF (TN) Filed as Exhibit 10(U)(1) to
QRS 11-21, as landlord, and SCM, Registrant's Post Effective
as tenant. Amendment No. 7 to Form S-11
10.125 Warrant issued by Sports & Fitness Filed as Exhibit 10(U)(2) to
Clubs Inc. ("SFC") to QRS 11-21. Registrant's Post Effective
Amendment No. 7 to Form S-11
10.126 Guaranty and Suretyship Agreement by Filed as Exhibit 10(U)(3) to
SFC and Sports and Fitness Clubs of Registrant's Post Effective
America, Inc. ("SFCA") to QRS 11-21. Amendment No. 7 to Form S-11
10.127 Purchase Agreement between QRS 11-21, Filed as Exhibit 10(U)(4) to
as owner, and SFC, as buyer. Registrant's Post Effective
Amendment No. 7 to Form S-11
10.128 Term Loan Agreement between QRS 11-21, Filed as Exhibit 10(U)(5) to
as borrower, and Union Planters National Registrant's Post Effective
Bank, as lender ("Union Planters"). Amendment No. 7 to Form S-11
10.129 Note in the amount of $2,800,000 dated Filed as Exhibit 10(U)(6) to
July 20, 1993 from QRS 11-21 for the Registrant's Post Effective
benefit of Union Planters. Amendment No. 7 to Form S-11
10.130 Deed of Trust, Assignment of Rents and Filed as Exhibit 10(U)(7) to
Security Agreement from QRS 11-21 for the Registrant's Post Effective
benefit of Union Planters. Amendment No. 7 to Form S-11
10.131 Acknowledgment of Assignment of Lease, Filed as Exhibit 10(U)(8) to
Guaranty and Purchase Agreements between Registrant's Post Effective
SCM, SFC, SFCA, QRS 11-21 and Union Planters. Amendment No. 7 to Form S-11
10.132 Real Estate Contract of Sale between Filed as Exhibit 10(V)(1) to
Abacus Capital Corporation, as seller, Registrant's Post Effective
and Registrant, or its assigns, as Buyer. Amendment No. 7 to Form S-11
10.133 Real Estate Contract of Sale between Filed as Exhibit 10.1 to
Abacus Capital Corporation ("Abacus"), as Registrant's Form 8-K
seller, and Registrant, as buyer. dated February 24, 1994
10.134 Assignment of Real Estate Contract of Filed as Exhibit 10.2 to
Sale from Registrant to the PETsMART Registrant's Form 8-K
Subsidiary. dated February 24, 1994
</TABLE>
-27-
<PAGE> 29
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.135 Assignment and Assumption of Lease Filed as Exhibit 10.3 to
between Abacus and the PETsMART Registrant's Form 8-K
Subsidiary. dated February 24, 1994
10.136 Loan Agreement between NationsBank and Filed as Exhibit 10.4 to
the PETsMART Subsidiary. Registrant's Form 8-K
dated February 24, 1994
10.137 $2,500,000 Promissory Note made by the Filed as Exhibit 10.5 to
PETsMART Subsidiary to NationsBank. Registrant's Form 8-K
dated February 24, 1994
10.138 Deed of Trust, Assignment, Security Filed as Exhibit 10.6 to
Agreement and Financing Statement from Registrant's Form 8-K
the PETsMART Subsidiary to NationsBank. dated February 24, 1994
10.139 Lease Agreement between the Braintree Filed as Exhibit 10.7 to
Subsidiary, as landlord, and Barnes Registrant's Form 8-K
& Noble, as tenant. dated February 24, 1994
10.140 Real Estate Purchase and Sale Contract Filed as Exhibit 10.8 to
between the ELWA Subsidiary, as buyer, Registrant's Form 8-K
and Big V, as seller. dated February 24, 1994
10.141 Lease Agreement between the ELWA Filed as Exhibit 10.9 to
Subsidiary, as landlord, and Registrant's Form 8-K
Big V as tenant. dated February 24, 1994
10.142 Guaranty and Suretyship Agreement Filed as Exhibit 10.10 to
executed by Big V Holding. Registrant's Form 8-K
dated February 24, 1994
10.143 Amended, Restated and Consolidated Bonds Filed as Exhibit 10.11 to
to Key Bank, as lender, from the ELWA Registrant's Form 8-K
Subsidiary, as borrower. dated February 24, 1994
10.144 Amended and Restated Mortgage and Filed as Exhibit 10.12 to
Security Agreement from the ELWA Registrant's Form 8-K
Subsidiary, to Key Bank. dated February 24, 1994
10.145 Limited Guaranty of Payment from the Filed as Exhibit 10.13 to
Company to Key Bank. Registrant's Form 8-K
dated February 24, 1994
10.146 Lease Agreement between the Brownwood Filed as Exhibit 10.14 to
Subsidiary, as landlord, and Superior, Registrant's Form 8-K
as tenant. dated February 24, 1994
10.147 Guaranty and Suretyship Agreement from Filed as Exhibit 10.15 to
Alpine to Registrant. Registrant's Form 8-K
dated February 24, 1994
</TABLE>
-28-
<PAGE> 30
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.148 $2,700,000 Real Estate Note from the Filed as Exhibit 10.16 to
Brownwood Subsidiary, as maker, to Registrant's Form 8-K
Creditanstalt, as holder. dated February 24, 1994
10.149 Deed of Trust and Security Agreement by Filed as Exhibit 10.17 to
the Brownwood Subsidiary, as guarantor Registrant's Form 8-K
to Hazen H. Dempster, as trustee. dated February 24, 1994
10.150 Guaranty and Agreement between the Filed as Exhibit 10.18 to
Company and Creditanstalt. Registrant's Form 8-K
dated February 24, 1994
10.151 Assignment of Contract from Hyde Park Filed as Exhibit 10.19 to
Holdings, Inc. to the Cleveland Registrant's Form 8-K
Subsidiary. dated February 24, 1994
10.152 Lease Agreement between the Cleveland Filed as Exhibit 10.20 to
Subsidiary, as landlord, and Nicholson, Registrant's Form 8-K
as tenant. dated February 24, 1994
10.153 $4,000,000 Cognovit Promissory Note Filed as Exhibit 10.21 to
from the Cleveland Subsidiary to Bank Registrant's Form 8-K
One. dated February 24, 1994
10.154 Mortgage Deed, Security Agreement and Filed as Exhibit 10.22 to
Assignment of Rents and Leases from the Registrant's Form 8-K
Cleveland Subsidiary to Bank One. dated February 24, 1994
10.155 Business Loan Agreement between the Filed as Exhibit 10.23 to
Cleveland Subsidiary, and Bank One. Registrant's Form 8-K
dated February 24, 1994
10.156 Guaranty from Registrant to Bank One. Filed as Exhibit 10.24 to
Registrant's Form 8-K
dated February 24, 1994
10.157 Lease Agreement between the Gensia Filed as Exhibit 10.25 to
Partnership, as landlord, and Gensia, Registrant's Form 8-K
as tenant. dated February 24, 1994
10.158 $13,000,000 Promissory Note from the Filed as Exhibit 10.26 to
Gensia Partnership to Northwestern. Registrant's Form 8-K
dated February 24, 1994
10.159 Deed of Trust, Security Agreement and Filed as Exhibit 10.27 to
Financing Statement from the Gensia Registrant's Form 8-K
Partnership to Northwestern. dated February 24, 1994
10.160 Guarantee of Recourse Obligations from Filed as Exhibit 10.28 to
Registrant and CPA(R):12 to Northwestern. Registrant's Form 8-K
dated February 24, 1994
</TABLE>
-29-
<PAGE> 31
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.161 Assignment of Earnest Money Contract Filed as Exhibit 10.29 to
from Garden Ridge to the Round Rock Registrant's Form 8-K
Subsidiary. dated February 24, 1994
10.162 Lease Agreement between the Round Rock Filed as Exhibit 10.30 to
Subsidiary, as landlord, and Garden Registrant's Form 8-K
Ridge, as tenant. dated February 24, 1994
10.163 $3,465,000 Note from the Round Rock Filed as Exhibit 10.31 to
Subsidiary to Garden Ridge. Registrant's Form 8-K
dated February 24, 1994
10.164 Deed of Trust and Security Agreement Filed as Exhibit 10.32 to
from the Round Rock Subsidiary to Garden Registrant's Form 8-K
Ridge. dated February 24, 1994
10.165 $1,700,000 Promissory Note from the Filed as Exhibit 10.33 to
Plano Subsidiary to National Western. Registrant's Form 8-K
dated February 24, 1994
10.166 Deed of Trust, Security Agreement and Filed as Exhibit 10.34 to
Financing Statement from the Plano Registrant's Form 8-K
Subsidiary to National Western. dated February 24, 1994
10.167 Lease Agreement dated June 15, 1994 between Filed as Exhibit 10.167 to
CTC (VA) QRS 11-32, Inc., as Landlord, and Registrant's Form 10-K for the
Childtime Childcare, Inc., as Tenant. year ended December 31, 1994
dated March 31, 1995
10.168 Construction Agency Agreement dated June 15, 1994 Filed as Exhibit 10.168 to
between Childtime Childcare, Inc. and Registrant's Form 10-K for the
CTC (VA) QRS 11-32, Inc. year ended December 31, 1994
dated March 31, 1995
10.169 Lease Agreement dated August 11, 1994 by and Filed as Exhibit 10.169 to
between Neenah (WI) QRS 11-31, Inc., as Landlord, Registrant's Form 10-K for the
and Exide Electronic Assembly Corporation, as Tenant. year ended December 31, 1994
dated March 31, 1995
10.170 $5,000,000 Real Estate Note dated August 11, 1994 Filed as Exhibit 10.170 to
from Neenah (WI) QRS 11-31, Inc., as Maker, Registrant's Form 10-K for the
and Creditanstalt Corporate Finance, Inc., as Holder. year ended December 31, 1994
dated March 31, 1995
10.171 Lease Agreement dated September 30, 1994 by and Filed as Exhibit 10.171 to
between CFP Associates, as Landlord, and Registrant's Form 10-K for the
Custom Foods Products, Inc., as Tenant. year ended December 31, 1994
dated March 31, 1995
10.172 Loan Agreement dated September 30, 1994 Filed as Exhibit 10.172 to
between CFP Associates, as Borrower, and Registrant's Form 10-K for the
Greyrock Capital Group Inc., as Lender. year ended December 31, 1994
dated March 31, 1995
</TABLE>
-30-
<PAGE> 32
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.173 $2,000,000 Note dated September 30, 1994 Filed as Exhibit 10.173 to
from CFP Associates, as Maker, and Registrant's Form 10-K for the
Greyrock Capital Group Inc., as Payee. year ended December 31, 1994
dated March 31, 1995
10.174 $200,000 Maximum Amount Promissory Note Filed as Exhibit 10.174 to
dated September 30, 1994 from CFP Associates, Registrant's Form 10-K for the
as Maker, to Custom Foods Products, Inc., as Payee. year ended December 31, 1994
dated March 31, 1995
10.175 Lease Agreement dated October 14, 1994 by and Filed as Exhibit 10.175 to
between ADS (CA) QRS 11-34, Inc., as Landlord, Registrant's Form 10-K for the
and Chiat/Day Inc. Advertising, as Tenant. year ended December 31, 1994
dated March 31, 1995
10.176 $6,000,000 Promissory Note dated October 14, 1994 Filed as Exhibit 10.176 to
from ADS (CA) QRS 11-34, Inc., as Borrower, to Registrant's Form 10-K for the
Kearneys Street Real Estate Company, L.P., as Lender. year ended December 31, 1994
dated March 31, 1995
10.177 $3,000,000 Purchase Money Promissory Note secured Filed as Exhibit 10.177 to
by Deed of Trust dated October 14, 1994 from ADS (CA) Registrant's Form 10-K for the
QRS 11-34, Inc., as Maker, to Venice Operating Corp., year ended December 31, 1994
as Holder. dated March 31, 1995
10.178 Lease Agreement dated October 31, 1995 by and between Filed as Exhibit 10.33 to
DELMO (PA) QRS 11-36 and DELMO (PA) QRS 12-10 Registrant's Form 8-K
together as Landlord and Del Monte Corporation, as Tenant. dated March 21, 1996
10.179 Lease Agreement dated December 26, 1995 by and between Filed as Exhibit 2.1 to
Cards Limited Liability Company, as Landlord, and The Upper Registrant's Form 8-K
Deck Company, as Tenant. dated March 21, 1996
10.180 $15,000,000 Promissory Note dated January 3, 1996 Filed as Exhibit 2.2 to
from Cards Limited Liability Company to Registrant's Form 8-K
Column Financial, Inc. dated March 21, 1996
21.1 Subsidiaries of Registrant as of March 24, 1998. Filed herewith
23.1 Consent of Coopers & Lybrand dated Filed herewith
March 27, 1998
28.1 General Warranty Deed from Filed as Exhibit 28(C)(1)
Amerisure, Inc. to (SC) QRS 11-11 to Registrant's Post
Effective Amendment No. 5
to Form S-11
28.2 Amended and Restated Sublease Agreement Filed as Exhibit 28(C)(2)
between MMI, as sublandlord, and Unisun to Registrant's Post Effective
Insurance Company ("UIC"). Amendment No. 5 to Form S-11
28.3 General warranty Deed from FPC to QRS Filed as Exhibit 28(D)(1) to
11-10. Registrant's Post Effective
Amendment No. 5 to Form S-11
</TABLE>
-31-
<PAGE> 33
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
28.4 Deed from Unit to QRS 11-12. Filed as Exhibit 28(E)(1)
to Registrant's Post
Effective Amendment No. 5
to Form S-11
28.5 Lease between Unit, as landlord, and Filed as Exhibit 28(E)(2)
SLS, as tenant, as amended. to Registrant's Post
Effective Amendment No. 5
to Form S-11
28.6 Special warranty Deed from CTA, as Filed as Exhibit 28(F)(1)
Grantor to QRS 11-14, as Grantee. to Registrant's Post
Effective Amendment No. 5
to Form S-11
28.7 Lease Agreement between CTA and AT&T. Filed as Exhibit 28(F)(2)
to Registrant's Post
Effective Amendment No. 5
to Form S-11
28.8 Leasehold Deed of Trust from Neodata for Filed as Exhibit 28.1 to
benefit of General Electric Capital Registrant's Form 8-K dated
Corporation. October 29, 1992
28.9 General Warranty Deed from Amerisure Filed as Exhibit 28.1 to
QRS 11-11. Registrant's Form 8-K dated
January 5, 1993
28.10 Amended and Restated Sublease Agreement Filed as Exhibit 28.2 to
between MMI, as sublandlord, and Unisun Registrant's Form 8-K dated
Insurance Company. January 5, 1993
28.11 General Warranty Deed from Fairview Plaza Filed as Exhibit 28.3 to
Corporation to QRS 11-10. Registrant's Form 8-K dated
January 5, 1993
28.12 Deed from Unit to QRS 11-12. Filed as Exhibit 28.4 to
Registrant's Form 8-K dated
January 5, 1993
28.13 Lease between Unit, as landlord, and Filed as Exhibit 28.5 to
SLS, as tenant, as amended. Registrant's Form 8-K dated
January 5, 1993
28.14 Prospectus dated January 21, 1993 of Filed pursuant to Rule
Registrant. 424(b)(s) on January 26, 1993
(Registration No. 33-39409)
28.15 Supplement No. 1 dated March 17, 1993 Filed pursuant to Rule
to Prospectus dated January 21, 1993. 424(b)(s) on March 17, 1993
(Registration No. 33-39409)
28.16 Quit Claim Deed from Oakbrook to Filed as Exhibit 28.1 to Registrant's
QRS 11-15. Form 8-K dated April 5, 1993
</TABLE>
-32-
<PAGE> 34
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
28.17 Lease Agreement between Oakbrook and Filed as Exhibit 28.2 to Registrant's
B. Dalton Bookseller, Inc. ("B. Dalton"). Form 8-K dated April 5, 1993
28.18 First Amendment between Oakbrook and Filed as Exhibit 28.3 to Registrant's
B. Dalton Bookseller, Inc. Form 8-K dated April 5, 1993
28.19 Lease Guaranty to Oakbrook from Barnes Filed as Exhibit 28.4 to Registrant's
& Noble, Inc. Form 8-K dated April 5, 1993
28.20 Guaranty and Suretyship Agreement from Filed as Exhibit 28.5 to
Data Documents Holdings, Inc. to QRS Registrant's Form 8-K dated
10-15 and QRS 11-13. April 5, 1993
28.21 Guaranty from Corporate Property Filed as Exhibit 28.6 to
Associates 10 Incorporated and Registrant's Form 8-K dated
Registrant to US West. April 5, 1993
28.22 Guaranty from Registrant to Orix. Filed as Exhibit 28.1 to Registrant's
Form 8-K dated May 6, 1993
28.23 Special Warranty Deed from Merit Filed as Exhibit 28(G)(1) to
to QRS 11-20. Registrant's Post Effective
Amendment No. 6 to Form S-11
28.24 Table VI: Acquisitions of Properties Filed as Exhibit 28(H) to
by Prior Programs. Registrant's Post Effective
Amendment No. 6 to Form S-11
28.25 Limited Warranty Deed from Filed as Exhibit 28.1 to
the David F. Bolger Revocable Trust Registrant's Form 8-K
to the Braintree Subsidiary. dated February 24, 1994
28.26 Special Warranty Deed from Superior to Filed as Exhibit 28.2 to
the Brownwood Subsidiary. Registrant's Form 8-K
dated February 24, 1994
28.27 Corporation Grant Deed from Gensia to Filed as Exhibit 28.3 to
the Gensia Partnership. Registrant's Form 8-K
dated February 24, 1994
28.28 Supplement No. 2 dated June 15, 1993 Filed as Exhibit 28.28 to
to Prospectus dated January 21, 1993. Registrant's Form 10-K for the
year ended December 31, 1993
28.29 Supplement No. 3 dated August 11, 1993 Filed as Exhibit 28.29 to
to Prospectus dated January 21, 1993. Registrant's Form 10-K for the
year ended December 31, 1993
</TABLE>
(b) Reports on Form 8-K
During the quarter ended December 31, 1997 the Registrant was
not required to file any reports on Form 8-K.
-33-
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
a Maryland corporation
03/27/98 BY: /s/ Steven M. Berzin
Date Steven M. Berzin
Executive Vice President, Chief Legal
Officer and Chief Financial Officer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
04/2/98 BY: /s/ William P. Carey
Date William P. Carey
Chairman of the Board and Director
(Principal Executive Officer)
04/2/98 BY: /s/ Barclay G. Jones, III
Date Barclay G. Jones, III
President
04/2/98 BY: /s/ Ralph G. Coburn
Date Ralph G. Coburn
Director
04/2/98 BY: /s/ George E. Stoddard
Date George E. Stoddard
Director
04/2/98 BY: /s/ Charles C. Townsend, Jr.
Date Charles C. Townsend, Jr.
Director
04/2/98 BY: /s/ Warren G. Wintrub
Date Warren G. Wintrub
Director
04/2/98 BY: /s/ Thomas E. Zacharias
Date Thomas E. Zacharias
Director
04/2/98 BY: /s/ Steven M. Berzin
Date Steven M. Berzin
Executive Vice President, Chief Legal
Officer and Chief Financial Officer
(Principal Financial Officer)
04/2/98 BY: /s/ Claude Fernandez
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
-34-
<PAGE> 36
APPENDIX A TO FORM 10-K
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
1997 ANNUAL REPORT
<PAGE> 37
SELECTED FINANCIAL DATA
(In thousands except per share amounts)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues $ 17,637 $ 25,958 $ 29,238 $ 32,547 $ 34,247
Income before
extraordinary item 7,991 11,615 9,629 10,421 10,659
Net income 7,991 11,615 9,228 10,146 11,086
Basic and diluted earnings
per share before
extraordinary item .65 .82 .68 .66 .63
Basic and diluted
earnings per share .65 .82 .65 .64 .66
Cash flow from operations 10,718 12,087 13,009 15,346 14,954
Dividends paid 8,122 11,359 11,453 12,488 13,682
Dividends per share (1) .76 .80 .81 .82 .82
Payments of mortgage
principal (2) 1,061 2,489 2,905 3,353 3,658
BALANCE SHEET DATA:
Total assets 254,304 276,266 299,434 320,510 320,485
Long-term obligations (3) 124,555 141,123 150,829 145,836 141,052
</TABLE>
(1) Includes distributions attributable to the fourth quarter paid in the
following fiscal year less distributions in the first fiscal quarter
attributable to the prior year.
(2) Represents scheduled mortgage principal amortization paid.
(3) Represents limited recourse mortgage and note payable obligations due after
more than one year.
-1-
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The Company's primary objectives are to provide rising cash
flow and property values, protecting its 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,
the Company has successfully negotiated grants of common stock warrants from
selected tenants and expects to realize the benefits of appreciation from those
grants. While the Company cannot guarantee that its objectives will be
ultimately realized, annual independent valuations of the Company's assets have
reflected significant appreciation in property values.
Net income for the year ended December 31, 1997 increased by
$940,000 as compared with net income for the year ended December 31, 1996.
Income before the effect of gains and extraordinary items reflected an increase
of $1,239,000 of which $532,000 related to nonrecurring other income items. This
increase, was the result of increases in lease revenues (rental income and
interest income from direct financing leases) and income from equity investments
and the writedown to fair value in the prior year. No such writedown occurred in
1997. These items were partially offset by increases in depreciation, general
and administrative and property expenses as well as an accrual of $449,000 for
subordinated disposition fees.
The increase in lease revenues was due to (i) receiving a full
year's rent in 1997 from the lease with Detroit Diesel Corporation which went
into effect in the fourth quarter of 1996, and increased rent from Custom Food
Products, Inc. as a result of completion of an expansion to the Custom Food
facility in 1996, (ii) completion of the build-to-suit of four special purpose
facilities for Del Monte Corporation in 1996 and (iii) several rent increases on
existing leases in both 1996 and 1997, these lease revenue increases; however,
were partially offset by a reduction in rents that resulted from the termination
of the Harvest Foods, Inc. master lease in March 1997 following Harvest's
voluntary petition for bankruptcy. The increase in equity income reflected the
increasing trend of earnings from the Company's equity interest in the Courtyard
by Marriott master lease for 13 properties. The Marriott lease requires rental
payments based on a percentage of revenues in excess of a base amount at each of
the hotels; such percentage rents increased by 35% from the prior year.
Percentage for 1998 will be at a rate in excess of the amounts collected in
1997, but the rate of increase has moderated. The purchase of the 13 Courtyard
by Marriott hotels in 1992 was highly leveraged, with approximately 75% of the
purchase price financed with limited recourse mortgage debt. The payment
schedule on this debt required that amortizing principal payments commence in
1995 and that such loan amortize fully over 16-3/4 years, prior to the end of
the lease term. As the principal balance on this limited recourse mortgage
decreases, interest expense decreases accordingly. The increase in depreciation
resulted from the full year's depreciation of the Del Monte and Detroit Diesel
properties, both of which were placed in service in 1996. The increase in
general and administrative expenses reflected increased administrative
reimbursements. The increase in property expenses was due primarily to the
change in the formula for determining Average Invested Assets for the purpose of
calculating asset management and performance fees, and to a lesser extent, the
Company's provision for uncollected rents. Effective January 1, 1997 and as
provided for in the Prospectus of the Company, Average Invested Assets were
determined on the results of an independent valuation of the Company's real
estate portfolio. Such a valuation as of December 31,1996 concluded that the
value of the Company's real estate portfolio had appreciated to an amount in
excess of the Company's cost for its properties. The costs for this
comprehensive valuation contributed to the increase in property expenses.
Nonrecurring other income items included a special distribution of $395,000
received relating to the Company's holding of nonvoting stock of an affiliate of
Custom Food. In connection with structuring the Custom Food transaction, the
Company had been granted warrants. The warrants were converted into nonvoting
stock in December 1996. In addition, the Company recognized an extraordinary
gain in 1997 of $427,000 from purchasing back, at a substantial discount, its
interest in the first priority mortgage loan on the former Harvest properties.
-2-
<PAGE> 39
Net income for the year ended December 31, 1996 increased by
$918,000 as compared with the prior year. Excluding the effect of gains from the
sale of assets in both 1995 and 1996, extraordinary charges of $401,000 and
$275,000 in 1995 and 1996, respectively, and a noncash charge of $1,753,000 on
the writedown of properties to fair value, income, as adjusted, would have
reflected an increase of $2,516,000. Such increase was due to increases in lease
revenues and income from equity investments and was partially offset by
increases in interest, depreciation and property expenses.
Lease revenues increased as the result of the completion of
construction on build-to-suit projects in 1995 and 1996 and the acquisitions of
additional properties in 1996. Build-to-suit projects under leases with Custom
Food, Childtime Childcare, Inc. and Garden Ridge Corporation were completed in
1995 and the Del Monte build-to-suit project was completed in 1996. The Company
also acquired properties leased to Q Clubs, Inc., Hibbett Sporting Goods, Inc.
and Detroit Diesel and funded an expansion of the Custom Food facility. The
increase in income from equity investments was due to the purchase, in January
1996, of an interest in a limited liability company that entered into a net
lease with The Upper Deck Company. Equity income from the net leases for 13
Courtyard by Marriott hotels increased as a result of lower interest expense on
the mortgage loan and an increase in percentage rents. Interest expense
increased in 1996 as a result of the Company's obtaining limited recourse
mortgage financing on previously unleveraged and newly acquired properties.
Depreciation expense increased as a result of the increase in real estate
assets. The increase in property expenses was due to higher asset management and
subordinated incentive fees directly attributable to the growth in real estate
assets under management. Net income was also affected by a $275,000
extraordinary charge related to a settlement of a dispute relating to the
prepayment of a mortgage loan in 1995.
Net income for 1995 and 1996 includes gains from the sale of
securities related to common stock warrants granted by Garden Ridge. An
extraordinary charge on extinguishment of debt of $401,000 was incurred in 1995
in connection with refinancing two mortgage loans. The loans, which had annual
interest rates of 9.25% and 10%, were replaced with a mortgage loan with an
annual interest rate of 7.65%.
Lease revenues for 1998 will reflect the benefit of several
rent increases which are scheduled to occur in 1998. Future cash flow will be
also affected by the ability of the Company to re-lease properties formerly
leased to Harvest. Of the 15 former Harvest properties, five properties are net
leased as supermarkets to Kroger Co. and Affiliated Foods Southwest, Inc., three
properties were sold at a gain of $105,000 with the remaining seven properties
are being remarketed. Leases are being negotiated for several of the properties.
There is no assurance; however, that the negotiations will be successful. In
addition, the Company has funds available for the purchase of new properties and
is negotiating with Omnicom Group, Inc. to enter into a commitment for a
build-to-suit project.
Because of the long-term nature of the Company's net leases,
inflation and changing prices should not unfavorably affect the Company's
revenues and net income or have an adverse impact on the continuing operation of
the Company's properties. The Company's net leases have rent increases based on
the Consumer Price Index or the Producer Price Index, rents based on percentage
of sales in excess of a specified level, or other periodic increases which
should increase operating revenues in the future.
Financial Condition
Except for the properties formerly leased to Harvest, the
Company's properties are leased to corporate tenants under long-term net leases
that generally require tenants to pay all operating expenses relating to the
leased properties. The Company's objective is to use the cash flow from net
leases to meet operating expenses, service its debt, maintain adequate cash
reserves and fund an increasing rate of dividends to shareholders. A significant
portion of the cash provided from operations is distributed to the shareholders
in keeping with the Company's objectives. The Company generally structures
leases so that they will provide increases in cash flow over their initial terms
with such terms generally ranging from 10 to 25 years.
Cash provided from operations of $14,954,000 was sufficient to
fund dividend payments of $13,682,000 and $1,272,000 of $3,658,000 of scheduled
mortgage principal installments. Future cash flow will benefit from additional
purchases of real estate and rent increases. Realization of the full effect of
these benefits will depend on the ability to re-lease the properties vacated by
Harvest.
-3-
<PAGE> 40
The Company's investing activities included receiving proceeds
of $1,194,000 from the sale of three properties formerly leased to Harvest and
using $430,000 to convert warrants for 90,000 shares of Garden Ridge common
stock prior to the expiration of such warrants. As of December 31, 1997, the
appreciation in the value of the Company's holdings in Garden Ridge common stock
is in excess of $635,000. The Company has a commitment of $14,700,000 for a
build-to-suit project with Omnicom Group, an existing lessee. The Company has
sufficient cash to fund this project. The Company intends to obtain mortgage
financing subsequent to completion of the project and use such proceeds to
purchase real estate.
The Company's financing activities primarily consisted of
using funds provided from operating activities to pay quarterly dividends and
scheduled debt service requirements. In addition, the Company used $3,850,000 to
pay off the first priority mortgage loan on the former Harvest properties. A
subordinated mortgage loan of $1,500,000 is held by an affiliate of Harvest. The
Company exercised its right to defer debt service payments on the subordinated
loan with such right of deferral due to Harvest's termination of the lease. The
Company raised equity of $8,494,000 in 1997 of which $6,000,000 was contributed
by two institutional investors (at $11.90 per share), with the remainder
representing reinvestment of dividends. Through December 31, 1997, the Company
has raised $32,000,000 pursuant to its private placement offering of up to
10,000,000 shares. The Company has also received commitments from two
institutional investors to purchase common stock which will be available for
additional real estate investments. Because of the availability of equity funds,
Management determined that maintaining a line of credit was no longer necessary.
Accordingly, the Company's credit agreement was not renewed. Management has been
considering proposing to the Company's Board of Directors that the Company issue
stock to the Advisor to pay off deferred asset management fees and performance
fees in lieu of cash. Performance fees will not be payable until the cumulative
dividend return of 8% threshold is met. Any issuance of stock to satisfy
obligations to the Advisor would be at a per-share amount based on an
independent valuation of the Company's assets.
At December 31, 1997, the Company held cash and cash
equivalents of $17,332,000. Although the Company holds a portion of such cash
for working capital purposes, the Company intends to use a substantial portion
of the cash for the acquisition of properties. The Company has $15,595,000
available for the purchase or construction of real estate and funding of capital
improvements. Since December 31, 1997, the Company has used $11,300,000 to
purchase a property that is being retrofitted by Omnicom. Commitments to Omnicom
to complete this retrofitting and to alter and improve an existing property
leased to Omnicom total $14,700,000.
In the case of mortgage financing that does not fully amortize
over its term or is currently due, the Company is responsible for the balloon
payment only to the extent of its interest in the encumbered property because
the holder of each such obligation has recourse only to the collateral. In the
event that balloon payments come due, the Company will seek to refinance the
loans, restructure the debt with the existing lenders, evaluate its ability to
satisfy the obligation from its existing resources or sell the property and use
the sale proceeds to satisfy the mortgage debt. To the extent the remaining
initial lease term on any property remains in place for a number of years beyond
the balloon payment date, the Company believes that the ability to refinance
balloon payment obligations is enhanced. The Company also evaluates all its
outstanding loans for refinancing opportunities that may occur as the result of
changing interest rates or improvements in the credit rating of tenants which
may enable the Company to lower the interest rate on the debt. Two balloon
payments on the Company's mortgages are scheduled in 1998, on two limited
recourse loans with an aggregate balance of $6,000,000. As the properties
collateralizing the two loans are subject to long-term leases, the Company
believes that the prospects for refinancing the loans are good.
In connection with the purchase of its properties, the Company
requires sellers of such properties to perform environmental reviews. Management
believes, based on the results of such reviews, that the Company's properties
were in substantial compliance with Federal and state environmental statutes at
the time the properties were acquired. However, portions of certain properties
have been subject to some degree of contamination, principally in connection
with leakage from underground storage tanks, surface spills or historical
on-site activities. In most instances where contamination has been identified,
tenants are actively engaged in the remediation process and addressing
identified conditions. Tenants are generally subject to environmental statutes
and regulations regarding the discharge of hazardous materials and any related
remediation obligations. In addition, the Company's leases generally require
tenants to indemnify the Company
-4-
<PAGE> 41
from all liabilities and losses related to the leased properties with provisions
of such indemnification specifically addressing environmental matters. The
leases generally include provisions that allow for periodic environmental
assessments, paid for by the tenant, and allow the Company to extend leases
until such time as a tenant has satisfied its environmental obligations. Certain
of the leases allow the Company to require financial assurances from tenants
such as performance bonds or letters of credit if the costs of remediating
environmental conditions, in the estimation of the Company, are in excess of
specified amounts. Accordingly, Management believes that the ultimate resolution
of environmental matters will not have a material adverse effect on the
Company's financial condition, liquidity or results of operations.
In June 1997, the FASB issued Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in full set general
purpose financial statements. SFAS No. 130 is required to be adopted by 1998.
The Company is currently evaluating the impact, if any, of SFAS No. 130.
The Company's Advisor has responsibility for maintaining the
Company's books and records. An affiliate of the Advisor services the computer
systems used for maintaining such books and records. In its preliminary
assessment of Year 2000 issues, the affiliate believes that such issues will not
have a material effect on the Company's operations; however, such assessment has
not been completed. The Company relies on its bank and transfer agent for
certain computer-related services and has initiated discussions to determine
whether they are addressing Year 2000 issues that may affect the Company.
-5-
<PAGE> 42
REPORT of INDEPENDENT ACCOUNTANTS
To the Board of Directors of
CAREY INSTITUTIONAL PROPERTIES Incorporated
and Subsidiaries:
We have audited the accompanying consolidated balance sheets
of CAREY INSTITUTIONAL PROPERTIES Incorporated and Subsidiaries as of December
31, 1995, 1996 and 1997, and the related consolidated statements of income,
shareholders' equity and cash flows for the years ended December 31, 1995, 1996
and 1997. These financial statements are the responsibility of Carey Property
Advisors, a Pennsylvania limited partnership (the "Advisor"). Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Advisor, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CAREY INSTITUTIONAL PROPERTIES Incorporated and Subsidiaries as of December 31,
1995, 1996 and 1997, and the consolidated results of their operations and their
cash flows for the years ended December 31, 1995, 1996 and 1997, in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
New York, New York
March 31, 1998
-6-
<PAGE> 43
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Real estate leased to others:
Accounted for under the operating method:
Land $ 46,359,430 $ 51,923,768 $ 53,323,052
Buildings 106,360,317 133,857,623 138,148,681
------------- ------------- -------------
152,719,747 185,781,391 191,471,733
Accumulated depreciation 5,006,484 7,971,271 11,396,602
------------- ------------- -------------
147,713,263 177,810,120 180,075,131
Net investment in direct financing leases 105,703,258 100,535,180 94,235,594
------------- ------------- -------------
Real estate leased to others 253,416,521 278,345,300 274,310,725
Equity investments 15,992,225 22,034,005 22,835,403
Assets held for sale 2,616,031
Cash and cash equivalents 22,519,656 15,740,583 17,331,710
Short-term investment 1,000,000
Other assets, net of accumulated amortization
of $611,251, $951,470 and $1,257,577,
in 1995, 1996 and 1997, and net of reserves
for uncollected rents of $248,035 in 1997 3,889,692 4,389,640 6,007,626
------------- ------------- -------------
Total assets $ 299,434,125 $ 320,509,528 $ 320,485,464
============= ============= =============
LIABILITIES:
Limited recourse mortgage notes payable $ 150,656,333 $ 162,284,106 $ 154,348,585
Note payable 3,471,899
Accrued interest payable 1,085,483 1,216,678 1,248,886
Accounts payable and accrued expenses 532,274 443,321 523,821
Accounts payable to affiliates 4,279,849 6,118,940 8,483,741
Dividends payable 2,942,124 3,466,189
Prepaid rental income and security deposits 950,558 923,825 1,053,186
------------- ------------- -------------
Total liabilities 163,918,520 170,986,870 169,124,408
------------- ------------- -------------
Minority interest 4,522,053 4,749,158 4,988,932
------------- ------------- -------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; authorized,
40,000,000 shares; 15,480,537, 16,724,941 and
17,440,556 shares issued and outstanding at
December 31, 1995, 1996 and 1997 15,481 16,725 17,440
Additional paid-in capital 137,046,066 151,143,243 159,636,566
Common stock subscribed 2,000,000
Receivable for common stock subscribed (2,000,000)
Dividends in excess of accumulated earnings (6,088,570) (5,488,526) (11,549,928)
Unrealized appreciation 220,892 73,058 638,539
------------- ------------- -------------
131,193,869 145,744,500 148,742,617
Less, common stock in treasury at cost, 22,925
100,272 and 241,404 shares at
December 31, 1995, 1996 and 1997 (200,317) (971,000) (2,370,493)
------------- ------------- -------------
Total shareholders' equity 130,993,552 144,773,500 146,372,124
------------- ------------- -------------
Total liabilities and
shareholders' equity $ 299,434,125 $ 320,509,528 $ 320,485,464
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-7-
<PAGE> 44
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
CONSOLIDATED STATEMENTS of INCOME
For the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Rental income $ 16,926,079 $ 19,711,736 $ 21,834,831
Interest income from direct financing leases 11,693,250 12,117,529 11,236,439
Other interest income 618,993 717,373 643,827
Other income 532,298
------------ ------------ ------------
29,238,322 32,546,638 34,247,395
------------ ------------ ------------
Expenses:
Interest 13,512,254 14,241,203 14,202,295
Depreciation 2,493,366 2,968,173 3,435,128
Amortization 307,810 340,219 306,107
Property expenses 3,415,448 3,656,785 5,104,762
General and administrative 1,931,493 2,025,319 2,532,011
Writedown to fair value 1,753,455
------------ ------------ ------------
21,660,371 24,985,154 25,580,303
------------ ------------ ------------
Income before minority interest,
income from equity investments, (loss) gain 7,577,951 7,561,484 8,667,092
on sale and extraordinary item
Minority interest in income (748,841) (766,582) (773,371)
------------ ------------ ------------
Income before income from equity
investments, (loss) gain on sale and
extraordinary item 6,829,110 6,794,902 7,893,721
Income from equity investments 2,172,238 2,969,438 3,109,120
------------ ------------ ------------
Income before (loss) gain on sale
and extraordinary item 9,001,348 9,764,340 11,002,841
Gain on sale of securities 628,099 664,431
Subordinated disposition fees (449,094)
(Loss) gain on sale of real estate (7,630) 105,131
------------ ------------ ------------
Income before extraordinary item 9,629,447 10,421,141 10,658,878
Extraordinary (charge) gain on extinguishment of debt (401,269) (275,000) 427,448
------------ ------------ ------------
Net income $ 9,228,178 $ 10,146,141 $ 11,086,326
============ ============ ============
Basic and diluted earnings per common share:
Income before extraordinary item $ .68 $ .66 $ .63
Extraordinary item (.03) (.02) .03
------------ ------------ ------------
$ .65 $ .64 $ .66
============ ============ ============
Weighted average shares outstanding-basic 14,235,452 15,840,426 16,698,515
============ ============ ============
Weighted average shares outstanding-diluted 16,790,392
============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-8-
<PAGE> 45
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
CONSOLIDATED STATEMENTS of SHAREHOLDERS' EQUITY
For the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
Dividends
Additional in Excess of
Common Paid-in Accumulated Unrealized Treasury
Stock Capital Earnings Appreciation Stock Total
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 $ 14,168 $ 124,317,820 $ (921,955) $ 123,410,033
1,312,956 Shares issued,
$.001 Par, net of costs 1,313 12,728,246 12,729,559
Repurchase of
22,925 Shares $ (200,317) (200,317)
Change in unrealized
appreciation of market-
able equity securities $ 220,892 220,892
Dividends declared (14,394,793) (14,394,793)
Net income 9,228,178 9,228,178
------------- ------------- ------------- ------------- ------------- -------------
Balance at
December 31, 1995 15,481 137,046,066 (6,088,570) 220,892 (200,317) 130,993,552
1,244,404 Shares issued,
$.001 Par, net of costs 1,244 14,097,177 14,098,421
Repurchase of 77,347 Shares (770,683) (770,683)
Change in unrealized
appreciation of market-
able equity securities (147,834) (147,834)
Dividends declared (9,546,097) (9,546,097)
Net income 10,146,141 10,146,141
------------- ------------- ------------- ------------- ------------- -------------
Balance at
December 31, 1996 16,725 151,143,243 (5,488,526) 73,058 $ (971,000) 144,773,500
715,615 Shares issued,
$.001 Par, net of costs 715 8,493,323 8,494,038
Cost of raising capital
issuance of stock warrants (780,000) (780,000)
Capital contributions
issuance of stock warrants 780,000 780,000
Repurchase of
141,132 Shares (1,399,493) (1,399,493)
Change in unrealized
appreciation of market-
able equity securities 565,481 565,481
Dividends declared (17,147,728) (17,147,728)
Net income 11,086,326 11,086,326
------------- ------------- ------------- ------------- ------------- -------------
Balance at
December 31, 1997 $ 17,440 $ 159,636,566 $ (11,549,928) $ 638,539 $ (2,370,493) $ 146,372,124
============= ============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-9-
<PAGE> 46
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,228,178 $ 10,146,141 $ 11,086,326
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,801,176 3,308,392 3,741,235
Straight-line adjustments and
other noncash rent adjustments (423,510) (330,351) (262,454)
Minority interest in income in excess of
distributions paid 208,155 227,105 239,774
Income from equity investments in excess of
distributions received (242,367) (631,373) (801,398)
Gains on sale of real estate and securities, net (628,099) (656,801) (105,131)
Writedown to fair value 1,753,455
Extraordinary charge (gain) on extinguishment of debt 401,269 275,000 (427,448)
Accrual of subordinated disposition fees 449,094
Provision for uncollected rents 248,035
Net change in operating assets and liabilities 1,663,747 1,254,610 785,572
------------ ------------ ------------
Net cash provided by operating activities 13,008,549 15,346,178 14,953,605
------------ ------------ ------------
Cash flows from investing activities:
Purchases of real estate and other capitalized costs (14,617,959) (29,395,042) (142,683)
Capital distributions from (contributions in)
equity investments 1,375,000 (5,410,407)
Proceeds from sales of real estate and securities 628,099 2,879,503 1,194,272
Release of escrow funds 8,215,650
Proceeds from repayments on note receivable 450,000 110,750
Redemption of short-term investment 1,000,000
Purchases of stock and stock warrants (560,135) (429,750)
------------ ------------ ------------
Net cash (used in) provided by investing activities (4,959,345) (30,475,946) 732,589
------------ ------------ ------------
</TABLE>
(Continued)
The accompanying notes are an integral part of the consolidated financial
statements.
-10-
<PAGE> 47
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
For the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from mortgages 24,430,128 19,650,000
Advances on (repayments of) line of credit 3,471,899 (3,471,899)
Purchase of treasury stock (200,317) (770,683) (1,399,493)
Prepayments of mortgages (14,710,280) (4,669,527) (3,850,000)
Proceeds from issuance of shares, net of costs 12,729,559 14,098,421 8,494,038
Payments of mortgage principal (2,905,238) (3,352,700) (3,658,073)
Dividends paid (11,452,669) (12,488,221) (13,681,539)
Payments made in connection with
extinguishment of debt (401,269) (275,000)
Deferred financing costs (654,779) (369,696)
------------ ------------ ------------
Net cash provided by (used in) financing activities 10,307,034 8,350,695 (14,095,067)
------------ ------------ ------------
Net increase (decrease) in
cash and cash equivalents 18,356,238 (6,779,073) 1,591,127
Cash and cash equivalents, beginning of year 4,163,418 22,519,656 15,740,583
------------ ------------ ------------
Cash and cash equivalents, end of year $ 22,519,656 $ 15,740,583 $ 17,331,710
============ ============ ============
</TABLE>
Supplemental schedule of noncash investing and financing activities:
A. In 1997, the Company granted an affiliate warrants for common stock with a
value of $780,000 as compensation for services provided in raising
capital.
B. In 1997, the Company converted $700,000 of accrued rents receivable from a
lessee to a note receivable.
C. At December 31, 1995 and 1997, dividends declared that were paid in the
subsequent year were $2,942,124 and $3,466,189, respectively.
D. The change in unrealized appreciation of marketable securities was
$220,892, $(147,834) and $565,481 in 1995, 1996 and 1997, respectively.
The accompanying notes are an integral part of the consolidated financial
statements.
-11-
<PAGE> 48
CAREY INSTITUTIONAL PROPERTIES 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 Carey
Institutional Properties Incorporated, its wholly-owned
subsidiaries and majority-owned general partnership interests
(collectively, the "Company"). All material inter-entity
transactions are 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 dates of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. The most significant estimates relate to the assessment
of the realizability of real estate assets. 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 Company diversifies its real estate investments among various
corporate tenants engaged in different industries and by property
type throughout the United States.
The leases are accounted for under either the direct financing or
the operating methods. Such methods are described below:
Direct financing method - Leases accounted for under the
direct financing method are recorded at their net
investment (Note 5). 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.
Operating method - Real estate is recorded at cost, rental
revenue is recognized on a straight-line basis over the
term of the leases and expenses (including depreciation)
are charged to operations as incurred.
The Company assesses the recoverability of its real estate assets,
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 are
adjusted to their estimated fair value.
For properties under construction, interest on mortgages is
capitalized rather than expensed and rentals received are
recorded as a reduction of capitalized project (i.e.,
construction) costs in accordance with Statement of Financial
Accounting Standards No. 67.
Substantially all of the Company's leases provide for either
scheduled rent increases, periodic rent increases based on
formulas indexed to increases in the Consumer Price Index or
Producer Price Index or sales overrides.
Continued
-12-
<PAGE> 49
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
Depreciation:
Depreciation is computed using the straight-line method over the
estimated useful lives of the properties - 40 years.
Assets Held for Sale:
Assets held for sale are stated at the lower of cost or fair value,
less cost to dispose.
Equity Investments:
The Company's interests in a real estate investment trust ("REIT"),
a general partnership and a limited liability company, which
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.
Other Assets:
Included in other assets are deferred charges, deferred rental
income, marketable equity securities and other investments,
primarily marketable equity securities and stock warrants.
Deferred charges are costs incurred in connection with mortgage
note financings and interest rate cap agreements and are deferred
and amortized over the terms of the mortgages or agreements,
respectively. Deferred rental income is the aggregate difference
between scheduled rents that vary during the lease term and
income recognized on a straight-line basis.
The Company's marketable equity securities, which consist of 104,400
shares of common stock of the Garden Ridge Corporation, are
classified as available-for-sale securities and are reported at
fair value with the Company's interest in unrealized gains and
losses on these securities reported as a separate component of
shareholders' equity until realized. As of December 31, 1997, the
Company's cost basis in the Garden Ridge Corporation common stock
is $819,073 and at fair value reflects unrealized appreciation of
$668,627 at such date.
Cash Equivalents:
The Company considers all short-term, highly liquid investments that
are both readily convertible to cash and have a maturity of
generally three months or less at the time of purchase to be cash
equivalents. Items classified as cash equivalents include
commercial paper and money market funds. Substantially all of the
Company's cash and cash equivalents at December 31, 1995, 1996
and 1997 were held in the custody of four financial institutions.
Treasury Stock:
Treasury stock is recorded at cost.
Offering Costs:
Costs incurred in connection with the raising of capital through the
sale of common stock are deferred and charged to shareholders'
equity upon the issuance of Shares to shareholders.
Continued
-13-
<PAGE> 50
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
Federal Income Taxes:
The Company is qualified as a REIT under the Internal Revenue Code
of 1986, and accordingly, is not subject to Federal income taxes
on amounts distributed to shareholders provided it distributes at
least 95% of its REIT taxable income to its shareholders and
meets other conditions necessary to retain its REIT status.
Earnings Per Share:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per
Share" ("SFAS No. 128"), which establishes standards for
computing and presenting earnings per share. SFAS No. 128
requires presentation of basic and diluted earnings per share for
a company with a complex capital structure. Prior to 1997, the
adoption of SFAS No. 128 had no impact on the Company because the
Company was an entity with a simple capital structure, that is,
one with only common stock outstanding. As a result, the Company
has presented basic per-share amounts for 1995 and 1996 in the
consolidated statements of income.
Basic earnings per common share and diluted earnings per common
share for the Company for the year ended December 31, 1997 were
calculated as follows:
<TABLE>
<CAPTION>
Income Available Weighted Average
to Common Shares Per-Share
Shareholders Outstanding Amount
----------- ----------- ----
<S> <C> <C> <C>
Basic earnings per share before
extraordinary items $10,658,878 16,698,515 $.63
Basic earnings per share -
extraordinary items 427,448 16,698,515 .03
----------- ----------- ----
$11,086,326 16,698,515 $.66
=========== ====
Effect of diluted securities-stock warrants 91,877
Diluted earnings per common share
before extraordinary items 10,658,878 16,790,392 .63
Diluted earnings per common share
extraordinary items 427,448 16,790,392 .03
----------- ----------- ----
$11,086,326 16,790,392 $.66
=========== =========== ====
</TABLE>
Reclassifications:
Certain 1995 and 1996 amounts have been reclassified to conform to
the 1997 financial statement presentation.
2. Organization and Offering:
The Company was formed on February 15, 1991 for the purpose of
engaging in the business of investing in and owning industrial
and commercial real estate. Subject to certain restrictions and
limitations, the business of the Company is managed by Carey
Property Advisors (the "Advisor"). Shares were offered to the
public on a "best efforts" basis by Carey Financial Corporation
and other selected dealers at $10 per Share. The offering
concluded in August 1993, at which time an aggregate 14,167,581
Shares ($141,675,810) had been issued. In 1995, the Company
Continued
-14-
<PAGE> 51
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
established a dividend reinvestment plan. Through December 31,
1997, 338,332 Shares have been issued pursuant to the dividend
reinvestment plan.
In connection with services performed relating to the
identification, evaluation, structuring and development of the
Company's investments in real estate, affiliates of the Company
received structuring and development fees of $223,333 and
$1,077,948 in 1995 and 1996, respectively. No such fees were paid
in 1997. Fees are paid only in connection with completed
transactions
3. Transactions with Related Parties:
The Company's asset management and performance fees are each 1/2 of
1% per annum of Average Invested Assets, as defined in the
Prospectus of the Company. Until Shareholders have received a
cumulative dividend return of 8%, which threshold has not yet
been met, the Advisor will not be entitled to receive the
performance fee. Management believes it is likely that this
performance fee will be earned. Accordingly, although such
performance fee will not be payable until the threshold is
reached, $7,645,882 has been accrued and included in accounts
payable to affiliates in the accompanying consolidated financial
statements. Asset management fees paid were $1,477,054 in 1995,
$1,583,958 in 1996 and $2,075,000 in 1997. Performance fees,
which have not been paid, were in like amount. Effective January
1, 1997, for the purpose of determining the asset management and
performance fees, Average Invested Assets are based on an
independent valuation of the Company's real estate assets rather
than the cost of such real estate assets. General and
administrative expense reimbursement consists primarily of the
actual cost of personnel needed in providing administrative
services necessary to the operations of the Company. Such
reimbursements incurred were $632,657, $698,823 and $1,148,113 in
1995, 1996 and 1997, respectively.
The Advisor will be entitled to receive subordinated disposition
fees, measured based upon the cumulative proceeds arising from
the sale of the Company assets since the inception of the
Company. Pursuant to the subordination provisions of the advisory
agreement, the disposition fees may be paid only after the
shareholders receive 100% of their initial investment from the
proceeds of asset sales and a cumulative annual return of 6%
since the inception of the Company. The affiliate's interest in
such disposition fees amounts to $485,094 at December 31, 1997.
Payment of such amount cannot be made until the subordination
provisions are met. In 1997, Management concluded that the
payment of such disposition fees is probable. Accordingly, such
amount is included in accounts payable to affiliates in the
accompanying consolidated financial statements at December 31,
1997.
Pursuant to an advisory agreement, 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. If in any year the operating
expenses exceed the 2%/25% Guidelines (the greater of 2% of
Average Invested Assets or 25% of net income) as defined in the
Prospectus, the Advisor will have an obligation to reimburse the
Company for such excess.
The Company's ownership interests in certain properties are jointly
held with affiliated entities with such interests held as
tenants-in-common and through ownership interests in a real
estate investment trust and two general partnerships. The
Company's interests in jointly held properties range from 23.7%
to 80%. The Company's share of its undivided interests in assets
and liabilities relating to tenants-in-common interests are
accounted for on a proportional basis.
Continued
-15-
<PAGE> 52
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
In connection with performing services relating to the Company's
real estate purchases, affiliates of the Company received fees of
$89,334 and $431,179 in 1995 and 1996, respectively. No such fees
were paid in 1997.
The Company is a participant in an agreement with W.P. Carey & Co.,
Inc. ("W.P. Carey") and certain affiliates for the purpose of
leasing office space used for the administration of real estate
entities and W.P. Carey and for sharing the associated costs.
Pursuant to the terms of the agreement, the Company's share of
rental, occupancy and leasehold improvement costs is based on
adjusted gross revenues, as defined. Expenses incurred in 1995,
1996 and 1997 were $301,895, $219,199 and $226,616, respectively.
For the years ended December 31, 1995, 1996 and 1997, fees and
expenses of $116,508, $102,896 and $75,032, respectively, were
incurred for legal services provided by a firm in which the
Secretary, until July 1997, of the Company and the Corporate
General Partner of the Advisor.
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
$21,298,000 in 1998; $21,303,000 in 1999; $21,318,000 in 2000;
$21,438,000 in 2001; $18,895,000 in 2002; and aggregate
approximately $320,284,000 through 2020.
Contingent rents were approximately $334,000 in 1995, $403,000 in
1996 and $551,000 in 1997.
5. Net Investment in Direct Financing Leases:
Net investment in direct financing leases is summarized as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Minimum lease payments
receivable $240,120,607 $220,898,210 $189,723,489
Unguaranteed residual value 105,086,885 99,657,812 92,900,350
------------ ------------ ------------
345,207,492 320,556,022 282,623,839
Less: Unearned income 239,504,234 220,020,842 188,388,245
------------ ------------ ------------
$105,703,258 $100,535,180 $ 94,235,594
============ ============ ============
</TABLE>
Scheduled future minimum rents, exclusive of renewals, under
noncancellable direct financing leases amount to approximately
$10,541,000 in 1998; $10,719,000 in 1999; $10,712,000 in 2000;
$10,736,000 in 2001; $10,486,000 in 2002; and aggregate
approximately $189,723,000 through 2018.
The Company is committed under long-term ground leases for certain
properties formerly occupied by Harvest Foods, Inc. ("Harvest")
through 2011. Future ground lease rental commitments aggregate
$1,593,000.
Contingent rents were approximately $192,000 in 1995, $277,000 in
1996 and $302,000 in 1997.
Continued
-16-
<PAGE> 53
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. Mortgage Notes Payable:
Mortgage notes payable, all of which are limited recourse
obligations, are collateralized by the assignment of various
leases and by real property with a gross amount of approximately
$269,853,000 before accumulated depreciation. As of December 31,
1997, mortgage notes payable have interest rates varying from
7.5% to 13% per annum and mature from 1998 to 2020.
Scheduled principal payments, including mortgage notes subject to
acceleration, during each of the next five years following
December 31, 1997 and thereafter are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
<S> <C>
1998 $ 13,296,686
1999 17,684,284
2000 11,675,744
2001 8,072,826
2002 14,440,294
Thereafter 89,178,751
------------
Total $154,348,585
============
</TABLE>
Interest paid on mortgage notes payable and the revolving credit
agreement, including capitalized interest, was $13,709,847,
$14,110,088 and $14,170,087 in 1995, 1996 and 1997, respectively.
In connection with the placement of mortgages, fees of $225,583 and
$511,179 were paid to an affiliate of the Company in 1995 and
1996, respectively. No mortgage placement fees were paid in
1997.
The Company's revolving credit agreement matured in 1997.
7. Dividends:
Dividends paid to shareholders consist of ordinary income, capital
gains, return of capital or a combination thereof for income tax
purposes. For the years ended December 31, 1995, 1996 and 1997,
dividends paid per share were reported as follows for tax
purposes:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Ordinary income $.53 $.66 $.67
Capital gains .07 .04
Return of capital .21 .12 .15
---- ---- ----
$.81 $.82 $.82
==== ==== ====
</TABLE>
A dividend of $.20600 per share ($3,466,189) for the quarter ended
December 31, 1997 was declared in December 1997 and paid in
January 1998.
Continued
-17-
<PAGE> 54
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. Industry Segment Information:
The Company's operations consist of the investment in and the
leasing of industrial and commercial real estate. The financial
reporting sources of the leasing revenues are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Per Statements of Income:
Rental income from operating leases $16,926,079 $19,711,736 $21,834,831
Interest income from direct
financing leases 11,693,250 12,117,529 11,236,439
Adjustments:
Share of leasing revenues applicable
to minority interest (1,801,209) (1,797,435) (1,793,239)
Share of leasing revenues from equity
investments 5,639,126 6,964,508 7,017,675
----------- ----------- -----------
$32,457,246 $36,996,338 $38,295,706
=========== =========== ===========
</TABLE>
Continued
-18-
<PAGE> 55
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
The Company earned its share of net leasing revenues in 1995, 1996
and 1997 from its direct and indirect ownership of real estate
from the following lease obligors:
<TABLE>
<CAPTION>
1995 % 1996 % 1997 %
----------- ---- ----------- ---- ----------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Marriott International, Inc. (1) $ 4,330,126 13% $ 4,342,865 12% $ 4,388,800 12%
Best Buy Co., Inc. (2) 3,066,924 10 3,060,497 8 3,053,352 8
Neodata Corporation 2,223,307 7 2,297,743 6 2,350,911 6
Omnicom Group, Inc. 1,867,500 6 1,867,500 5 1,867,500 5
Lucent Technologies, Inc. 1,852,829 6 1,852,829 5 1,852,829 5
Big V Holding Corp. 1,668,402 5 1,691,883 5 1,718,359 5
Michigan Mutual Insurance
Company 1,356,235 4 1,358,702 4 1,361,424 4
Garden Ridge Corporation 628,426 2 1,403,512 4 1,361,004 4
Barnes & Noble, Inc. 1,314,068 4 1,334,565 4 1,357,758 4
The Upper Deck Company (1) 1,312,643 4 1,319,875 3
Gensia, Inc. (1) 1,309,000 4 1,309,000 4 1,309,000 3
Merit Medical Systems, Inc. 1,194,684 4 1,303,291 3 1,303,291 3
Q Clubs, Inc. 656,250 2 1,201,828 3 1,288,875 3
Del Monte Corporation 643,125 2 1,286,250 3
Lincoln Technical Institute
of Arizona, Inc. 1,082,400 3 1,082,400 3 1,155,055 3
Plexus Corp. 1,091,500 3 1,091,500 3 1,122,470 3
Waban, Inc. 1,118,356 3 1,118,356 3 1,118,251 3
Bell Sports, Inc. 981,644 3 1,011,804 3 1,038,545 3
Wal-Mart Stores, Inc. 976,287 3 994,433 3 970,948 3
Custom Food Products, Inc. 337,750 1 767,264 2 869,422 2
Detroit Diesel Corporation 34,073 845,000 2
Nicholson Warehouse L.P. 805,064 3 805,092 2 805,124 2
GATX Logistics, Inc. 794,893 2 794,893 2 794,893 2
Superior Telecommunications, Inc. 636,921 2 619,853 2 667,727 2
Childtime Childcare, Inc. 186,667 1 568,480 1 584,426 2
Petsmart, Inc. 469,334 2 478,927 1 485,113 1
Hibbet Sporting Goods, Inc. 418,992 1 475,784 1
Oshman Sporting Goods, Inc. 435,624 1 442,324 1 449,972 1
CalComp Technology, Inc. 440,902 1 381,412 1 443,024 1
Harvest Foods, Inc. (3) 1,238,403 4 1,239,340 3 291,466 1
Kroger Co. 164,555
Safeway Stores Incorporated 393,750 1 167,212 141,750
Affiliated Foods Southwest, Inc. 51,953
Other 1,000
----------- ---- ----------- ---- ----------- ----
$32,457,246 100% $36,996,338 100% $38,295,706 100%
=========== ==== =========== ==== =========== ====
</TABLE>
(1) Represents the Company's share of revenues from its equity investment.
(2) Net of rental amount applicable to CPA(R):12's 37% minority interest
acquired from the Company in May 1994.
(3) Net of ground lease rental expense of approximately $158,000, in each of
the years 1995, 1996 and 1997.
Continued
-19-
<PAGE> 56
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
9. Equity Investments:
The Company owns a 23.7% interest in Marcourt Investments
Incorporated ("Marcourt") which, pursuant to a master lease, net
leases 13 hotel properties to a wholly-owned subsidiary of
Marriott International, Inc. and 50% equity interests in Gena
Property Company ("Gena"), a general partnership, which owns land
and buildings in San Diego, California, net leased to Gensia
Inc., and Cards Limited Liability Company ("Cards LLC"), which
net leases two office buildings to The Upper Deck Company. The
interest in Cards LLC was purchased in January 1996.
Summarized financial information of Marcourt is as follows:
(In thousands)
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Assets $149,910 $149,694 $149,413
Liabilities 108,876 106,002 102,826
Shareholders' equity 41,034 43,692 46,587
Revenues 18,300 18,549 18,650
Interest and other expenses 11,370 11,097 10,827
Net income 6,930 7,452 7,823
</TABLE>
Summarized financial information of Gena is as follows:
(In thousands)
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Assets $22,287 $21,826 $21,710
Liabilities 12,381 11,832 11,671
Capital 9,906 9,994 10,039
Revenues 2,618 2,618 2,618
Expenses 1,470 1,439 1,387
Net income 1,148 1,179 1,231
</TABLE>
Summarized financial information of Cards LLC is as follows:
(In thousands)
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Assets $26,581 $26,729
Liabilities 15,705 15,511
Capital 10,876 11,218
Revenues 2,632 2,640
Expenses 1,259 1,244
Net income 1,373 1,396
</TABLE>
Continued
-20-
<PAGE> 57
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
10. Gains (Loss) on Sale:
In December 1993, the Company entered into a net lease with Garden
Ridge Pottery Corporation (subsequently renamed Garden Ridge,
Inc.) ("Garden Ridge"). In connection with executing the lease
transaction, Garden Ridge's parent company, Garden Ridge
Corporation ("Garden Ridge Corp."), granted the Company warrants
to purchase 97,200 shares of common stock exercisable at a price
of $6.67 per share. In connection with the initial public
offering of Garden Ridge Corp., the Company exercised its
warrants on the 97,200 shares and simultaneously sold 90,000 of
such shares at $15 per share realizing a gain, net of selling
costs, of $628,099 in 1995.
In connection with entering into a second lease agreement with
Garden Ridge Corp. in 1995, the Company was granted warrants to
purchase 67,500 shares of common stock exercisable at $10 per
share. On April 30, 1996, the Company exercised warrants for
22,500 shares and simultaneously sold such shares realizing a
gain, net of selling costs, of $664,431. Garden Ridge Corp.'s
stock subsequently split on a two-for-one basis. In May 1997, the
Company used $450,000 to exercise warrants for the purchase of
90,000 shares, exercisable at $5 per share, thereby increasing
its holdings in Garden Ridge common stock to 104,400 shares. At
December 31, 1997, the fair value of the Garden Ridge shares
owned by the Company was $1,487,000.
In December 1991, the Company and CPA(R):10 purchased three
supermarkets leased to Safeway Stores Incorporated ("Safeway") as
tenants in-common, each with 50% undivided ownership interests.
In 1996, the Company and CPA(R):10 sold a property in Glendale,
Arizona and a property in Escondido, California. On January 26,
1996, the Glendale store was sold for $1,950,000. On February 15,
1996, the Escondido property was sold for $3,450,000. A net loss
of $7,630 was recognized on the sales. Net of transaction costs,
the Company received $2,044,260 in cash and a promissory note of
$560,750. The final installment on the promissory note, was
received in January 1997.
Gain on the sale of three properties formerly leased to Harvest
Foods, Inc. ("Harvest") is described in Note 12.
11. Extraordinary Charges on Extinguishment of Debt:
In October 1995, the Company refinanced two limited recourse
mortgage loans with annual interest rates of 9.25% and 10%, and
combined balances of $8,910,000, collateralized by the property
leased to Omnicom Group, Inc. In connection with the prepayment
of one of the loans, the Company incurred a prepayment charge of
$401,269 in 1995 as an extraordinary charge on extinguishment of
debt.
In December 1995, the lender filed suit against the Company alleging
that the prepayment premium paid in connection with the
prepayment of one of two loans was understated by approximately
$400,000. The Company reached an agreement with the lender in
November 1996 to settle the dispute for $275,000. Such payment
has been recorded in 1996 as an extraordinary charge on the
extinguishment of debt.
12. Harvest Foods, Inc.:
In February 1992, the Company and CPA(R):10 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 as lessee. In connection with the
purchase, the Company and CPA(R):10 each obtained $6,132,500 of
limited recourse mortgage financing from two lenders, a
Continued
-21-
<PAGE> 58
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
first priority limited recourse mortgage loan of $4,632,500 and a
limited recourse mortgage loan of $1,500,000 from an affiliate of
Harvest.
In June 1996, Harvest filed a voluntary bankruptcy petition. In
March 1997, the Bankruptcy Court approved Harvest's motion to
terminate the master lease. Under its ruling, the Bankruptcy
Court allowed the Company and CPA(R):10 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.
The Company's share of the settlement payment received is
included in other income in the accompanying consolidated
financial statements. Harvest subsequently vacated the
properties. The Company's share of annual rent under the Harvest
lease was the sum of (i) $607,806 and (ii) an amount equal to
debt service on the two loans. Based on the Company's expectation
at that time that future cash flow from the properties will be
reduced, Management concluded that there had been an impairment
to the value of the properties. Based on a writedown of the
properties to their estimated fair value of $8,250,000, the
Company incurred a charge of $1,753,455 in 1996.
In March 1997, the Company and CPA(R):10 entered into a net lease
with The Kroger Co. for two supermarkets in Conway and North
Little Rock, Arkansas and Affiliated Foods Southwest, Inc. for
three stores in Hope and Little Rock, Arkansas.
In June 1997, the Company and CPA(R):10 entered into a transaction
whereby each purchased a 50% participation in the first priority
mortgage loan. For financial reporting purposes, the purchase of
the participation has been recorded as a mortgage prepayment. The
mortgage loan, which had an outstanding balance of $8,554,894,
was purchased for $7,700,000 (of which the Company's share was
$4,277,448 and $3,850,000, respectively). In connection with the
prepayment, the Company has recognized an extraordinary gain on
the extinguishment of debt of $427,448.
The Company and CPA(R):10 have entered into discussions with the
holder of a subordinated mortgage loan of $3,000,000 (of which
the Company's share is $1,500,000) in an attempt to reach a
settlement for the satisfaction of the loan. The holder of the
subordinated mortgage loan is an affiliate of Harvest and because
of provisions in the subordinated mortgage, the Company and
CPA(R):10 have exercised their right to defer all debt service
payments. As a result of the termination of the Harvest lease,
debt service payments on the subordinated mortgage may be
deferred until the maturity date of the loan which as a result of
the Harvest lease default has been extended to December 2006.
In September 1997, the Company and CPA(R):10 sold three properties
at an aggregate price of $2,400,000 (of which the Company's share
was $1,200,000). In connection with the sales, the Company
recognized a gain of $105,131. The Company and CPA(R):10 are
currently evaluating various offers for the lease or purchase of
the vacated properties and are continuing their remarketing
efforts.
13. Stock Warrants:
In 1995, the Company's Board of Directors authorized the offering of
10,000,000 Shares in a private placement to a limited number of
institutional investors. Through December 31, 1997 the Company
had raised $32,000,000 from institutional investors, issuing
2,934,637 Shares. Such equity raising effort was conducted by
W.P. Carey, an affiliate of the Advisor. W.P. Carey did not
receive any compensation at the time such capital was raised.
Continued
-22-
<PAGE> 59
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
On June 10, 1997, the Company's shareholders approved a proposal to
grant warrants for the Company's common stock to W.P. Carey in
lieu of cash compensation. Under the plan, W.P. Carey was granted
866,667 warrants exercisable at $10 per share and 750,000
warrants exercisable at $11.50 per share as compensation for W.P.
Carey's raising $13,000,000 at $10 per share in 1995 and
$13,000,000 at $11.50 per share in 1996 on behalf of the Company.
The options are exercisable over a ten-year period which period
commenced December 10, 1997.
The granting of the options was intended to compensate W.P. Carey in
an amount equivalent to a fee of $780,000, 3% of the capital
raised. The warrants have been valued by an independent
consultant. As the compensation is directly related to raising
capital, such compensation cost has been charged to additional
paid-in capital. Pursuant to Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, the
charge for stock-based compensation has been offset by a credit
to additional paid-in capital.
In January 1998, the Company's Board of Directors granted 243,062
warrants exercisable at $11.90 per share to W.P. Carey as
compensation for an additional $6,000,000 (at $11.90 per share)
raised in 1997 from institutional investors.
14. 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.
The Company estimates that the fair value of mortgage notes payable
approximates the carrying value of such mortgage notes at
December 31, 1996 and 1997. The fair value of debt instruments
was evaluated using a discounted cash flow model with discount
rates which take into account the credit of the tenants and
interest rate risks.
In conjunction with executing several of its leases, the Company was
granted warrants to purchase common stock of the lessee or lease
guarantor. To the extent that the lessee is not a publicly traded
company, the warrants have been judged at the time of issuance to
be speculative in nature and a nominal cost basis has been
attributed to them. The Company believes it is not practicable to
estimate the fair value of its stock warrants for closely held
companies. At December 31, 1996 and 1997, the Company held stock
warrants for 155,461 common shares of Merit Medical Systems, Inc.
("Merit"), a publicly traded company. The fair value of the
Company's stock warrants in Merit as of December 31, 1997, based
on quoted prices for Merit's common stock, is approximately
$117,000. Such warrants are exercisable currently and are carried
at a nominal value.
At December 31, 1996 and 1997, the Company has an interest rate cap
agreement on one of its variable rate limited recourse mortgage
loans with an aggregate notional amount of $3,200,000. The
agreement expires in 1998. The Company has no off-balance sheet
risk of accounting loss on such agreements.
15. Accounting Pronouncements:
In June 1997, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses,
gains and losses) in full set general purpose financial
statements. SFAS No. 130 is required to be adopted in 1998. The
Company is currently evaluating the impact, if any, of SFAS No.
130.
Continued
-23-
<PAGE> 60
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
16. Subsequent Event:
In October 1994, the Company purchased land and building in Los
Angeles, California and entered into a net lease with Chiat/Day,
Inc. The lease was subsequently guaranteed by Omincom Group,
Inc. ("Omnicom"). Annual rent at this property is currently
$1,817,000.
On March 30, 1998, the Company purchased a property in Los Angeles,
California and entered into a net lease with Omnicom for such
property and amended the existing lease on the property purchased
in 1994. The purchase price for the new property was $10,525,130
plus an advance of $2,000,000 to Omnicom as a tenant improvement
allowance. The Company has an obligation to fund an additional
tenant improvement allowance of up to $10,000,000 on the new
property. The lease for the existing property was amended so
that, effective October 1, 1998, the Company will provide Omnicom
a one-time tenant improvement allowance of $4,700,000 to be used
for alterations and improvements.
The lease for the new property has an initial term of 20 years and
six months and provides for two ten-year renewal terms. As
amended the initial term at the existing property ends September
30, 2010 and provides for two ten-year renewal terms. Until
October 1, 1998, Omnicom will pay construction rent at the new
property based on the weighted average of amounts advanced (i.e.,
the net purchase price plus advances from the tenant improvement
allowance). Beginning October 1, 1998, assuming the entire tenant
improvement allowance has been used, annual base rent for the two
properties will be $4,197,023, with rent increases indexed to
increases in the Consumer Price Index ("CPI"), capped at 10.25%.
Such rent increases are scheduled every four years at the
existing property, with the first increase at the new property
scheduled for October 2003 and every four years thereafter.
Beginning on October 1, 2003, Omnicom will pay an additional
annual rent of $150,000 at the new property. In the last year of
the initial term, the base rent will be reduced by the product of
(a) $900,000 and (b) a formula indexed to changes in the CPI
between October 1998 and October 2015. Omnicom has been granted a
purchase option at the new property, exercisable at the end of
the initial term, to purchase its leased property at the greater
of fair value and $26,000,000.
Continued
-24-
<PAGE> 61
PROPERTIES
<TABLE>
<CAPTION>
NAME OF LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- --------
<S> <C> <C> <C>
WAL-MART STORES, INC. Retail Stores Center, Groves, Ownership of a 50%
- 6 locations Silsbee and Vidor, interest in land
Texas; and buildings (1)
Weatherford,
Oklahoma;
Fort Smith,
Arkansas
SAFEWAY STORES Supermarket Broken Arrow, Ownership of a 50%
INCORPORATED Oklahoma interest in land
and building
MARRIOTT Hotels Irvine, Sacramento, Ownership of a 23.69%
INTERNATIONAL, - 13 locations and San Diego, interest in a real estate
INC. California; investment trust owning
Orlando - 2, land and buildings (1)
Florida;
Des Plains, Illinois;
Indianapolis, Indiana;
Louisville,
Kentucky;
Linthicum, Maryland;
Las Vegas, Nevada;
Newark, New Jersey;
Albuquerque,
New Mexico;
Spokane,
Washington
Properties formerly Supermarkets and Little Rock - 2, Ownership of a 50%
leased to Office Buildings Hot Springs, interest in land
HARVEST FOODS, - 7 locations Texarkana and and buildings
INC. Jonesboro, Arkansas; (1)(2)
Ruston, Louisiana;
Clarksdale, Mississippi
KROGER CO. Retail Stores North Little Rock Ownership of a 50%
- 2 locations and Conway, Arkansas interest in land
and buildings
except as noted (1)(2)
AFFILIATED Retail Stores Little Rock - 2, and Ownership of a 50%
SOUTHWEST, INC. - 3 locations Hope, Arkansas interest in land
and buildings
except as noted (1)(2)
CALCOMP TECH- Office/Manufacturing Austin, Ownership of a 50%
NOLOGY, INC. Facilities Texas interest in land and
buildings (1)
</TABLE>
-25-
<PAGE> 62
<TABLE>
<CAPTION>
NAME OF LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- --------
<S> <C> <C> <C>
NEODATA Manufacturing/ Boulder, Ownership of a 80%
CORPORATION Distribution Facility Colorado interest in land and
building (1)
BELL SPORTS, INC. Warehouse/ Rantoul, Ownership of land
Manufacturing Facility Illinois and building
OSHMAN SPORTING
GOODS, INC. Retail Store Plano, Ownership of land
Texas and building (1)
MICHIGAN MUTUAL Office Complex Charleston, Ownership of land
INSURANCE COMPANY South Carolina and building (1)
GATX LOGISTICS, INC. Warehouse Jacksonville, Ownership of land
Florida and building (1)
BIG V HOLDING CORP. Supermarkets Greenport, Ownership of land and
- 3 locations Ellenville, buildings in Greenport and
and Warwick, ownership of a 55% interest in
New York land and buildings in Ellenville
and Warwick, New York (1)
LUCENT Warehouse Charlotte, Ownership of land
TECHNOLOGIES, INC. North Carolina and building (1)
BARNES & NOBLE, INC. Retail Stores Farmington, Ownership of land
- 2 locations Connecticut and buildings (1)
and Braintree,
Massachusetts
BEST BUY CO., INC. Retail Stores Denver and Ownership of a 63%
- 17 locations Fort Collins, interest in a general
Colorado; Aurora, partnership owning land
Bedford Park, and buildings (1)
Bloomingdale,
Matteson and
Schaumburg, Illinois;
Omaha, Nebraska;
Albuquerque, New Mexico;
Arlington, Beaumont,
Dallas, El Paso,
Fort Worth, Houston,
Plano, Texas; and
Madison, Wisconsin
LINCOLN TECHNICAL Technical Training Glendale Heights, Ownership of land
INSTITUTE OF Institute Illinois and buildings (1)
ARIZONA, INC.
MERIT MEDICAL Office/Warehouse South Jordan, Utah Ownership of land
SYSTEMS, INC. and building (1)
WABAN, INC. Retail Facility Farmingdale, Ownership of land
New York and building (1)
Q CLUBS, INC. Health Clubs Memphis, Ownership of land
- 2 locations Tennessee and and buildings
Bedford, Texas (1-Memphis)
</TABLE>
-26-
<PAGE> 63
<TABLE>
<CAPTION>
NAME OF LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- --------
<S> <C> <C> <C>
PETSMART, INC. Warehouse Ennis, Texas Ownership of land
and building (1)
GARDEN RIDGE Retail Stores Round Rock, Texas Ownership of land
CORPORATION and Oklahoma City, and buildings (1)
Oklahoma (under
construction)
NICHOLSON Warehouse Maple Heights, Ownership of land
WAREHOUSE, L.P. Ohio and building (1)
SUPERIOR Manufacturing Brownwood, Ownership of land
TELECOMMUNICATIONS, Texas and building (1)
INC.
GENSIA, INC. Office/Research and San Diego, Ownership of a 50%
Development Facility California interest in a general
partnership owning land
and buildings (1)
CHILDTIME Daycare Centers Newport News, Ownership of a 50%
CHILDCARE, INC. Centreville, Manassas, interest in land
and Century Oaks, VA; and buildings (1)
Napeville, IL
PLEXUS CORP. Manufacturing Neenah, WI Ownership of land
and building (1)
CFP GROUP, INC. Food Processing/ Owingsville, KY Ownership of land
Warehouse Facility and building (1)
OMNICOM GROUP, Office Building Venice, CA Ownership of land
INC. and building (1)
DEL MONTE Warehouses and a Mendota, Illinois; Ownership of a 50%
CORPORATION Special Purpose Facility Plover, Wisconsin; interest in land
Toppenish and and buildings (1)
Yakima, Washington
THE UPPER Office Buildings Carlsbad, Ownership of a 50%
DECK COMPANY California interest in a limited
liability company owning
land and buildings (1)
HIBBETT SPORTING Warehouse/Office Birmingham, Ownership of land
GOODS, INC. Facility Alabama and building (1)
DETROIT DIESEL Distribution/Warehouse Orlando and Ownership of land
CORPORATION Facilities Hollywood, Florida and building
</TABLE>
(1) These properties are encumbered by mortgage notes payable.
(2) Ownership of buildings with ground leases of land for one property in
Little Rock, Arkansas and properties in Hot Springs, North Little Rock
and Jonesboro, Arkansas.
-27-
<PAGE> 64
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Except for limited or sporadic transactions, there is no
established public trading market for the Shares of the Company. As of December
31, 1997, there were 8,905 holders of record of the Shares of the Company.
The Company is required to distribute annually its
Distributable REIT Taxable Income, as defined in the Prospectus, to maintain its
status as a REIT. Quarterly dividends paid by the Company are as follows:
<TABLE>
<CAPTION>
Cash Dividends Paid Per Share
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
First quarter $.20150 $.20350 $.20520
Second quarter .20200 .20400 .20540
Third quarter .20250 .20450 .20560
Fourth quarter .20300 .20500 .20580
------- ------- -------
$.80900 $.81700 $.82200
======= ======= =======
</TABLE>
REPORT ON FORM 10-K
The Advisor will supply to any shareholder, upon written
request and without charge, a copy of the Annual Report on Form 10-K for the
year ended December 31, 1997 as filed with the Securities and Exchange
Commission.
-28-
<PAGE> 65
REPORT of INDEPENDENT ACCOUNTANTS
To the Board of Directors of
CAREY INSTITUTIONAL PROPERTIES Incorporated
and Subsidiaries:
Our report on the consolidated financial statements of CAREY
INSTITUTIONAL PROPERTIES Incorporated and Subsidiaries has been incorporated by
reference in this Form 10-K from page 5 of the 1997 Annual Report to
Shareholders of CAREY INSTITUTIONAL PROPERTIES Incorporated and Subsidiaries. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule on pages 36 to 39 of this Form 10-K.
In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.
/s/Coopers & Lybrand L.L.P.
New York, New York
March 31, 1998
-35-
<PAGE> 66
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1997
<TABLE>
<CAPTION>
Costs
Initial Cost to Capitalized Gross Amount at which Carried
Company Subsequent to at Close of Period (b)(d)
Description Encumbrances Land Buildings Acquisition (a) Land Buildings Total
----------- -------------- ---- --------- --------------- ---- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Method:
Retail stores leased to
Wal-Mart Stores, Inc. $ 7,034,363 $ 807,423 $ 6,864,802 $ 87,746 $ 816,658 $ 6,943,313 $ 7,759,971
Supermarket leased
to Safeway Stores
Incorporated 336,426 941,959 14,621 340,274 952,732 1,293,006
Office/Manufacturing
facility leased to
CalComp Technology, Inc.
(formerly Summagraphics
Corporation) 1,663,332 751,453 2,536,047 841 751,645 2,536,696 3,288,341
Manufacturing/Distributing
facility leased to
Neodata Corporation 10,732,128 1,515,879 503,734 15,125,189 1,519,885 15,624,917 17,144,802
Warehouse/Manufacturing
facility leased to
Bell Sports, Inc. 4,482,500 283,726 5,066,274 3,322,270 283,793 8,388,477 8,672,270
Warehouse leased to GATX
Logistics, Inc. 3,828,744 1,350,444 4,574,557 60,676 1,364,272 4,621,405 5,985,677
Warehouse leased to
Lucent Technologies, Inc. 9,700,000 1,290,631 15,937,369 183,803 1,295,387 16,116,416 17,411,803
Land leased to
Barnes & Noble, Inc. 2,594,798 4,759,017 47,962 4,806,979 4,806,979
Land leased to
Best Buy Co., Inc. 11,954,633 18,579,019 646 18,579,665 18,579,665
Land leased to Lincoln
Technical Institute
of Arizona, Inc. 1,624,602 2,516,671 696 2,517,367 2,517,367
Office/warehouse leased to
Merit Medical Systems, Inc. 6,111,577 380,000 10,505,349 380,000 10,505,349 10,885,349
Retail store leased
to Waban, Inc. 6,602,701 6,119,530 3,630,470 230,327 6,263,907 3,716,420 9,980,327
Land leased to
Q Clubs, Inc. (formerly
Sports & Fitness
Clubs of America, Inc.) 938,733 2,073,578 1,026 2,074,604 2,074,604
<CAPTION>
Life on which
Depreciation
in Latest
Statement of
Accumulated Income
Description Depreciation (d) Date Acquired is Computed
----------- ---------------- ------------- ------------
<S> <C> <C> <C>
Operating Method:
Retail stores leased to December 19,
Wal-Mart Stores, Inc. $ 1,048,697 1991 40 yrs.
Supermarket leased
to Safeway Stores December 19,
Incorporated 143,897 1991 40 yrs.
Office/Manufacturing
facility leased to
CalComp Technology, Inc.
(formerly Summagraphics
Corporation) 356,717 May 28, 1992 40 yrs.
Manufacturing/Distributing
facility leased to October 1,
Neodata Corporation 1,171,869 1992 40 yrs.
Warehouse/Manufacturing
facility leased to November 6,
Bell Sports, Inc. 964,070 1992 40 yrs.
Warehouse leased to GATX December 23,
Logistics, Inc. 582,466 1992 40 yrs.
Warehouse leased to
Lucent Technologies, Inc. 2,027,745 December 30, 1992 40 yrs.
Land leased to February 23, 1993
Barnes & Noble, Inc. and October 1, 1993 N/A
Land leased to
Best Buy Co., Inc. April 15, 1993 N/A
Land leased to Lincoln
Technical Institute
of Arizona, Inc. May 3, 1993 N/A
Office/warehouse leased to
Merit Medical Systems, Inc. 766,015 June 3, 1993 40 yrs.
Retail store leased
to Waban, Inc. 421,358 June 29, 1993 40 yrs.
Land leased to
Q Clubs, Inc. (formerly
Sports & Fitness
Clubs of America, Inc.) July 16, 1993 N/A
</TABLE>
(Continued)
-36-
<PAGE> 67
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1997
<TABLE>
<CAPTION>
Costs
Initial Cost to Capitalized
Company Subsequent to Decrease in
Description Encumbrances Land Buildings Acquisition(a) Net Investments(b)
----------- ------------ ---- --------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
Warehouse facility leased
to Petsmart, Inc. 2,253,838 106,603 4,444,397 42,817
Manufacturing facility
leased to Plexus Corp. 4,615,500 125,340 9,124,660 5,745
Childcare centers leased to
Childtime Childcare, Inc. 2,456,247 1,198,750 3,422,172
Office building leased to
Omnicom Group, Inc. 8,933,980 2,566,880 13,476,120 14,172
Retail stores leased to
Garden Ridge Corporation 7,778,126 2,197,500 4,112,500 5,054,413
Warehouses and special
purpose facility leased to
Del Monte Corporation 5,834,640 304,073 10,066,770
Health club leased to
Q Clubs, Inc. (formerly
Sports & Fitness Clubs
of America, Inc.) 912,855 4,323,145
Warehouse/office leased
to Hibbett Sporting
Goods, Inc. 2,818,372 660,000 4,040,000
Distribution/warehouse
leased to Detroit
Diesel Corporation. 2,782,860 6,542,140
Office buildings and
supermarkets formerly leased
to Harvest Foods, Inc. 1,010,000 925,600 4,859,400 1,340 (1,328,640)
Supermarkets leased
to Affiliated
Southwest, Inc. 247,000 226,320 1,188,180 328 (324,868)
------------ ----------- ----------- ----------- -----------
$103,215,814 $52,770,578 $92,165,754 $48,188,909 $(1,653,508)
============ =========== =========== =========== ===========
<CAPTION>
Life on which
Depreciation
in Latest
Gross Amount at which Carried Statement of
at Close of Period (b)(d) Accumulated Income
Description Land Buildings Total Depreciation(d) Date Acquired is Computed
----------- ---- --------- ----- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Warehouse facility leased
to Petsmart, Inc. 107,606 4,486,211 4,593,817 471,987 October 26, 1993 40 yrs.
Manufacturing facility
leased to Plexus Corp. 125,418 9,130,327 9,255,745 770,371 August 11, 1994 40 yrs.
Childcare centers leased to June 15, 1994 through
Childtime Childcare, Inc. 1,198,750 3,422,172 4,620,922 196,062 November 18, 1994 40 yrs.
Office building leased to
Omnicom Group, Inc. 2,569,147 13,488,025 16,057,172 1,081,852 October 14, 1994 40 yrs.
Retail stores leased to
Garden Ridge Corporation 2,197,998 9,166,415 11,364,413 390,313 May 29, 1995 40 yrs.
Warehouses and special
purpose facility leased to
Del Monte Corporation 374,698 9,996,145 10,370,843 363,011 November 9, 1995 40 yrs.
Health club leased to
Q Clubs, Inc. (formerly
Sports & Fitness Clubs
of America, Inc.) 912,855 4,323,145 5,236,000 202,647 February 6, 1996 40 yrs.
Warehouse/office leased
to Hibbett Sporting
Goods, Inc. 660,000 4,040,000 4,700,000 189,375 February 12, 1996 40 yrs.
Distribution/warehouse
leased to Detroit
Diesel Corporation. 2,782,860 6,542,140 9,325,000 170,368 December 17, 1996 40 yrs.
Office buildings and
supermarkets formerly leased
to Harvest Foods, Inc. 1,124,364 3,333,336 4,457,700 62,498 February 21, 1992 40 yrs.
Supermarkets leased
to Affiliated
Southwest, Inc. 274,920 815,040 1,089,960 15,284 February 21, 1992 40 yrs.
----------- ------------ ------------ ----------
$53,323,052 $138,148,681 $191,471,733 $11,396,602
=========== ============ ============ ===========
</TABLE>
See accompanying notes to Schedule.
-37-
<PAGE> 68
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
and SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1997
<TABLE>
<CAPTION>
Costs Increase
Initial Cost to Capitalized (Decrease) In
Company Subsequent to Net
Description Encumbrances Land Buildings Acquisition(a) Investment(c)(d)
----------- ------------ ---- --------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Direct Financing Method:
Retail store leased to
Oshman Sporting
Goods, Inc. $ 1,549,656 $ 700,356 $2,494,843 $ 37,695 $ 253,185
Office buildings leased
to Michigan Mutual
Insurance Company 9,500,000 1,965,093 11,884,907 5,919 121,066
Supermarkets leased
to Big V Holding Corp. 7,206,296 3,724,889 16,399,261 89,555 (5,231,422)
Retail stores leased to
Barnes & Noble, Inc. 3,013,151 5,525,983 49,806 739,812
Retail stores leased to
Best Buy Co., Inc. 17,793,902 27,653,981 962 (608,473)
Technical training institute
leased to Lincoln Technical
Institute of Arizona, Inc. 3,927,009 6,083,329 1,684
Health club leased to Q Clubs,
Inc. (formerly Sports &
Fitness Clubs of America) 1,589,663 3,511,422 1,737
Warehouse/distribution
facility leased to Nich-
olson Warehouse, Inc. 3,673,601 598,544 6,316,456 1,370 (63,341)
Manufacturing facility leased
to Superior Telecomm-
unications 2,441,593 295,032 4,704,968 1,885 (161,794)
Food processing/warehouse
facility leased to Custom
Food Products, Inc. 194,900 27,000 5,536,384
Office buildings and
supermarkets leased
to Kroger Company 243,000 251,760 1,321,740
----------- ---------- ----------- ----------- -----------
$51,132,771 $7,562,674 $85,896,890 $ 5,726,997 $(4,950,967)
=========== ========== =========== =========== ===========
<CAPTION>
Gross Amount at which
Carried at Close of Period(b)(d)
Description Total Date Acquired
----------- -------------------------------- -------------
<S> <C> <C>
Direct Financing Method:
Retail store leased to
Oshman Sporting
Goods, Inc. 3,486,079 December 10, 1992
Office buildings leased
to Michigan Mutual
Insurance Company 13,976,985 December 21, 1993
Supermarkets leased
to Big V Holding Corp. 14,982,283 December 23, 1993 and
Retail stores leased to October 8, 1993
Barnes & Noble, Inc. 6,315,601 February 23, 1993 and
Retail stores leased to October 1, 1993
Best Buy Co., Inc. 27,046,470 April 15, 1993
Technical training institute
leased to Lincoln Technical
Institute of Arizona, Inc. 6,085,013 May 3, 1993
Health club leased to Q Clubs,
Inc. (formerly Sports &
Fitness Clubs of America) 3,513,159 July 16, 1993
Warehouse/distribution
facility leased to Nich-
olson Warehouse, Inc. 6,853,029 December 13, 1993
Manufacturing facility leased
to Superior Telecomm-
unications 4,840,091 December 16, 1993
Food processing/warehouse
facility leased to Custom
Food Products, Inc. 5,563,384 September 30, 1994
Office buildings and
supermarkets leased
to Kroger Company 1,573,500 February 21, 1992
------------
$ 94,235,594
============
</TABLE>
See accompanying notes to Schedule.
-38-
<PAGE> 69
CAREY INSTITUTIONAL PROPERTIES 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, 1997, the aggregate cost of real estate owned by
Registrant and its subsidiaries for Federal income tax purposes is
$234,300,416.
(c) The increase (decrease) in net investment is due to the amortization
of unearned income producing a constant periodic rate of return on
the net investment which is more (less) than lease payments
received, the sale of a tenancy-in-common interest to an affiliate
in a prior year and a writedown to net realizable value.
(d)
Reconciliation of Real Estate Accounted
for Under the Operating Method
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------- -------------
<S> <C> <C>
Balance at beginning
of year $ 152,719,747 $ 185,781,391
Reclassification to investment
in direct financing lease 5,252,298
Reclassification from investment
in direct financing lease 6,610,598
Additions 27,809,346 142,682
Dispositions (1,062,938)
------------- -------------
Balance at close of
year $ 185,781,391 $ 191,471,733
============= =============
</TABLE>
Reconciliation of Accumulated Depreciation
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------- -------------
<S> <C> <C>
Balance at beginning
of year $ 5,006,484 $ 7,971,271
Depreciation expense 2,968,173 3,435,128
Reclassification to real estate
held for sale (3,386)
Dispositions (9,797)
------------- -------------
Balance at close of
year $ 7,971,271 $ 11,396,602
============= =============
</TABLE>
-39-
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
WALSAFE (CA) QRS 11-1, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA AND DOING
BUSINESS UNDER THE NAME WALSAFE (CA) QRS 11-1, INC.
QRS 11-2 (AR), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF ARKANSAS AND DOING BUSINESS UNDER
THE NAME QRS 11-2 (AR), INC.
QRS 11-3 (MD), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND AND DOING BUSINESS UNDER
THE NAME ORS 11-3 (MD), INC.
QRS 11-5 (TX), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS AND DOING BUSINESS UNDER THE
NAME OF QRS II -5 (TX), INC.
PLANO (TX) ORS 11-7, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS AND DOING BUSINESS
UNDER THE NAME PLANO (TX) QRS 11-7, INC.
NEOSERV (CO) ORS 11-8, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO AND DOING
BUSINESS UNDER THE NAME NEOSERV (CO) QRS 11-8, INC.
BELMET (IL) ORS 11-9, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS AND DOING
BUSINESS UNDER THE NAME BELMET (IL) QRS 11-9, INC.
BVS (NY) QRS 11-10, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK AND DOING
BUSINESS UNDER THE NAME BVS (NY) ORS 11-10, INC.
MMI (SC) QRS 11-11, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF SOUTH CAROLINA AND DOING
BUSINESS UNDER THE NAME MMI (SC) QRS 11-11, INC.
QRS 11-12 (FL), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA AND DOING BUSINESS UNDER THE
NAME QRS 11-12 (FL), INC.
DDI (NE) ORS 11-13, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF NEBRASKA AND DOING
BUSINESS UNDER THE NAME DDI (NE) QRS 11-13, INC.
QRS 11-14 (NC), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA AND DOING BUSINESS
UNDER THE NAME QRS 11-14, (NC), INC.
BOOKS (CT) QRS 11-16, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF CONNECTICUT AND DOING
BUSINESS UNDER THE NAME BOOKS (CT) QRS 11-15, INC.
QRS 11-17 (NY), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK AND DOING BUSINESS UNDER
THE NAME QRS 11-17 (NY), INC.
BBC (NE) QRS 11-18, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF NEBRASKA AND DOING
BUSINESS UNDER THE NAME BBC (NE) QRS 11-18, INC.
UNITECH (IL) QRS 11-19, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS AND DOING
BUSINESS UNDER THE NAME UNITECH (IL) QRS 11-19, INC.
QRS 11-20 (UT), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF UTAH AND DOING BUSINESS UNDER THE
NAME QRS 11-20. (UT), INC.
SFC (TN) QRS 11-21, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF TENNESSEE AND DOING
BUSINESS UNDER THE NAME SFC (TN) QRS 11-21, INC.
PETS (TX) QRS 11-23, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS AND DOING BUSINESS
UNDER THE NAME PETS (TX) QRS 11-23, INC.
ELWA-BV (NY) QRS 11-24, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK AND DOING
BUSINESS UNDER THE NAME ELWA-BV (NY) QRS 11-24, INC.
-40-
<PAGE> 2
SUBSIDIARIES OF REGISTRANT
(CONTINUED)
GENA (CA) QRS 11-25, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA AND DOING
BUSINESS UNDER THE NAME GENA (CA) QRS 11-25, INC.
BN (MA) QRS 11-26, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF MASSACHUSETTS AND DOING
BUSINESS UNDER THE NAME BN (MA) QRS 11-26, INC.
QRS 11-27 (OH), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF OHIO AND DOING BUSINESS UNDER THE
NAME QRS 11-27 (OH), INC.
ALP (TX) QRS 11-28, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS AND DOING BUSINESS
UNDER THE NAME ALP (TX) QRS 11-28, INC.
QRS 11-29 (TX), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS AND DOING BUSINESS UNDER THE
NAME QRS 11-29 (TX), INC.
CFP (MD) ORS 11-30, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND AND DOING
BUSINESS UNDER THE NAME CFP (MD) QRS 11-30, INC.
NEENAH (WI) QRS 11-31, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF WISCONSIN AND DOING
BUSINESS UNDER THE NAME NEENAH (WI) QRS 11-31, INC.
CTC (VA) QRS 11-32, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF VIRGINIA AND DOING
BUSINESS UNDER THE NAME CTC (VA) QRS 11-32, INC.
CFP (MD) QRS 11-33, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND AND DOING
BUSINESS UNDER THE NAME CFP (MD) ORS 11-33, INC.
ADS (CA) QRS 11-34, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA AND DOING
BUSINESS UNDER THE NAME ADS (CA) QRS 11-34, INC.
DELMO (PA) QRS 11-36, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF PENNSYLVANIA AND DOING
BUSINESS UNDER THE NAME DELMO (PA) QRS 11-36, INC.
CARDS (CA) QRS 11-37, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA AND DOING
BUSINESS UNDER THE NAME CARDS (CA) QRS 11-37, INC.
SFC (TX) QRS 11-38, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS AND DOING BUSINESS
UNDER THE NAME SFC (TX) QRS 11-38, INC.
QRS 12-14 (AL), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF ALABAMA AND DOING BUSINESS UNDER THE
NAME QRS 12-14 (AL), INC.
AUTO (FL) QRS 11-39, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA AND DOING
BUSINESS UNDER THE NAME AUTO (FL) QRS 11-39, INC.
CPFLOAN (MD) QRS 11-40, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND AND DOING
BUSINESS UNDER THE NAME CPFLOAN (MD) QRS 11-40, INC.
ORS 11-PAYING AGENT, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK AND DOING
BUSINESS UNDER THE NAME QRS 11-PAYING AGENT, INC.
-41-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Carey Institutional Properties Incorporated and Subsidiaries on Form S-3 (File
No. 33-96294) of our report dated March 31, 1998, on our audits of the
consolidated financial statements and financial statement schedule of Carey
Institutional Properties Incorporated and Subsidiaries as of December 31, 1995,
1996 and 1997 and for the years ended December 31, 1995, 1996 and 1997, which
reports are incorporated by reference in the Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
New York, New York
April 2, 1998
-42-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 17,331,710
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,331,710
<PP&E> 285,707,327
<DEPRECIATION> 11,396,602
<TOTAL-ASSETS> 320,485,464
<CURRENT-LIABILITIES> 14,775,823
<BONDS> 154,348,585
0
0
<COMMON> 17,440
<OTHER-SE> 146,354,684
<TOTAL-LIABILITY-AND-EQUITY> 320,485,464
<SALES> 0
<TOTAL-REVENUES> 34,247,395
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,129,973
<LOSS-PROVISION> 248,035
<INTEREST-EXPENSE> 14,202,285
<INCOME-PRETAX> 10,658,878
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,658,878
<DISCONTINUED> 0
<EXTRAORDINARY> 427,448
<CHANGES> 0
<NET-INCOME> 11,086,326
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
</TABLE>
