CORPORATE PROPERTY ASSOCIATES 15 INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

-------------------------

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______________ TO ______________.

COMMISSION FILE NUMBER: 333-58854

-------------------------

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MARYLAND 52-2298116
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

50 ROCKEFELLER PLAZA 10020
NEW YORK, NEW YORK 10020 (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

REGISTRANT'S TELEPHONE NUMBERS:

INVESTOR RELATIONS (212) 492-8920
(212) 492-1100

-------------------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

-------------------------

CPA(R):15 has SHARES OF COMMON STOCK registered pursuant to Section 12(g)
of the Act.

CPA(R):15 HAS NO SECURITIES registered on any exchanges.

CPA(R):15 does not have any Securities registered pursuant to Section 12(b)
of the Act.

CPA(R):15(1)has filed all reports required by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ].

CPA(R):15 has no active market for common stock at November 10, 2003.

CPA(R):15 has 105,562,280 shares of common stock, $.001 par value
outstanding at November 10, 2003.

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

INDEX

Page No.
--------

PART I

Item 1. - Financial Information*

Condensed Consolidated Balance Sheets, as of September 30, 2003
and December 31, 2002 2

Condensed Consolidated Statements of Operations for the three and nine months
ended September 30, 2003 and 2002 3

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and
nine months ended September 30, 2003 and 2002 3

Condensed Consolidated Statements of Cash Flows for the nine months ended September
30, 2003 and 2002 4

Notes to Condensed Consolidated Financial Statements 5-12

Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 13-22

Item 3. - Quantitative and Qualitative Disclosures about Market Risk 23

Item 4. - Controls and Procedures 23

PART II - Other Information

Item 2(d). - Use of Proceeds of Registered Offering 24

Item 4. - Submission of Matters to a Vote of Security Holders 24

Item 6. - Exhibits and Reports on Form 8-K 24

Signatures 25

* The summarized condensed financial statements contained herein are unaudited;
however, in the opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included.

-1-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

PART I
Item 1. - FINANCIAL INFORMATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

September 30, 2003 December 31, 2002
------------------ -----------------
(Unaudited) (Note)
------------------ -----------------

ASSETS:

Land and buildings, net of accumulated depreciation of $12,372 and $2,323
at September 30, 2003 and December 31, 2002 $ 748,061 $557,198
Net investment in direct financing leases 82,859 21,093
Real estate under construction 61,375 20,061
Equity investments 84,233 75,606
Cash and cash equivalents 481,618 94,762
Intangible assets, net of accumulated amortization of $1,727 10,150 -
Other assets 43,108 37,578
---------- --------
Total assets $1,511,404 $806,298
========== ========

LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY:

Liabilities:
Limited recourse mortgage notes payable $ 480,424 $374,787
Notes payable - 3,705
Accrued interest 2,194 991
Due to affiliates 8,226 7,622
Accounts payable and accrued expenses 12,025 5,910
Prepaid rental income and security deposits 26,568 15,494
Deferred acquisition fees payable to affiliate 20,563 13,012
Dividends payable 15,218 5,789
---------- --------
Total liabilities 565,218 427,310
---------- --------

Minority interest 42,539 28,193
---------- --------

Commitments and contingencies

Shareholders' equity:
Common stock, $.001 par value; authorized 120,000,000 shares; issued and
outstanding, 105,143,661 and 39,966,488 at September 30, 2003 and
December 31, 2002 105 40
Additional paid-in capital 944,561 355,964
Dividend in excess of accumulated earnings (48,876) (6,270)
Accumulated other comprehensive income 7,871 1,061
---------- --------
903,661 350,795
Less, treasury stock at cost, 1,500 shares at September 30, 2003 (14) -
---------- --------
Total shareholders' equity 903,647 350,795
---------- --------
Total liabilities, minority interest and shareholders' equity $1,511,404 $806,298
========== ========

The accompanying notes are an integral part of the condensed consolidated
financial statements.

Note: The balance sheet at December 31, 2002 has been derived from the
audited consolidated financial statements at that date.

-2-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS of OPERATIONS (UNAUDITED)
(in thousands, except share and per share amounts)

Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------

Revenues:
Rental income $ 17,052 $ 3,652 $ 45,888 $ 4,288
Interest income from direct financing leases 1,963 617 4,010 784
Interest and other income 2,527 544 4,984 1,041
------------ ------------ ------------ ------------
21,542 4,813 54,882 6,113
------------ ------------ ------------ ------------
Expenses:
Interest 6,247 1,399 17,504 1,655
Depreciation and amortization of intangibles 5,463 831 11,658 1,001
General and administrative 1,932 400 4,968 687
Property expenses 4,125 472 9,359 639
Impairment charge on real estate 24,000 -- 24,000 --
------------ ------------ ------------ ------------
41,767 3,102 67,489 3,982
------------ ------------ ------------ ------------

(Loss) income before minority interest, equity
investments and gain on sale (20,225) 1,711 (12,607) 2,131

Minority interest in income (1,155) -- (2,850) --
Income from equity investments 2,146 312 6,385 740
------------ ------------ ------------ ------------

(Loss) income before gain on sale (19,234) 2,023 (9,072) 2,871

Unrealized gain on foreign currency transactions 210 -- 210 --
Gain on sale -- -- 961 --
Loss on foreign currency transactions (11) -- (11) --
------------ ------------ ------------ ------------

Net (loss) income $ (19,035) $ 2,023 $ (7,912) $ 2,871
============ ============ ============ ============

Basic and diluted (loss) earnings per share $ (.20) $ .08 $ (.11) $ .21
============ ============ ============ ============

Weighted average shares outstanding - basic and diluted 97,256,074 25,016,087 69,987,670 13,680,360
============ ============ ============ ============

The accompanying notes are an integral part of the condensed consolidated
financial statements.

CONDENSED CONSOLIDATED STATEMENTS of COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(in thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2003 2002 2003 2002
-------- -------- -------- --------

Net (loss) income $(19,035) $ 2,023 $ (7,912) $ 2,871
-------- -------- -------- --------

Other comprehensive income:
Change in foreign currency translation adjustment 3,164 -- 6,810 --
-------- -------- -------- --------

Other comprehensive income 3,164 -- 6,810 --
-------- -------- -------- --------

Comprehensive (loss) income $(15,871) $ 2,023 $ (1,102) $ 2,871
======== ======== ======== ========

The accompanying notes are an integral part of the condensed consolidated
financial statements.

-3-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS (UNAUDITED)
(in thousands)

Nine Months Ended September 30,
-------------------------------
2003 2002
--------- ---------

Cash flows from operating activities:
Net (loss) income $ (7,912) $ 2,871
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Depreciation and amortization 11,776 1,002
Impairment charge on real estate 24,000 --
Equity income in excess of distributions received (1,473) (69)
Straight-line rent adjustments (3,597) (80)
Gain on sale (961) --
Unrealized gain on foreign currency transactions (210) --
Fees paid to affiliate by issuance of stock 2,222 70
Minority interest in income 2,850 --
Increase in other assets (a) 1,054 (1,140)
Increase in accrued interest 1,118 575
Increase in accounts payable and accrued expenses 4,525 694
Increase in due to affiliates (a) 1,513 427
Increase in prepaid rent and security deposits 8,599 2,669
--------- ---------
Net cash provided by operating activities 43,504 7,019
--------- ---------
Cash flows from investing activities:
Distributions from operations of equity investments in excess of equity income 362 427
Distributions of mortgage financing from equity investees 24,162 --
Acquisitions of real estate and equity investments and other
capitalized costs (343,909) (246,075)
VAT taxes recovered in connection with purchases of real estate, net 6,117 --
--------- ---------
Net cash used in investing activities (313,268) (245,648)
--------- ---------
Cash flows from financing activities:

Proceeds from issuance of stock, net of costs of raising capital 586,440 282,847
Dividends paid (25,265) (2,345)
Proceeds from mortgages (b) 94,216 83,972
Mortgage principal payments (3,914) (92)
Prepayment of note payable (3,622) --
Deferred financing costs and mortgage deposits, net of deposits refunded (2,268) (819)
Capital contributions from minority partner 11,916 --
Distributions paid to minority partners (1,765) --
--------- ---------
Net cash provided by financing activities 655,738 363,563
--------- ---------

Effect of exchange rate changes on cash 882 --
--------- ---------

Net increase in cash and cash equivalents 386,856 124,934

Cash and cash equivalents, beginning of period 94,762 188
--------- ---------

Cash and cash equivalents, end of period $ 481,618 $ 125,122
========= =========

Noncash operating and financing activities:

(a) Increases in due to affiliates and other assets excludes amounts which
relate to the raising of capital (financing activities) pursuant to
the Company's public offering.

(b) Net of $1,750 held by lenders to fund escrow accounts during the nine
months ended September 30, 2003.

The accompanying notes are an integral part of the condensed consolidated
financial statements.

-4-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)

Note 1. Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements of
Corporate Property Associates 15 Incorporated (the "Company") have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim financial information and with the instructions to
Article 10 of Regulation S-X of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the results of the interim period presented have been included.
The results of operations for the interim period are not necessarily indicative
of results for the full year. These condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.

Note 2. Organization and Offering:

The Company was formed on February 26, 2001 under the General Corporation Law of
Maryland for the purpose of engaging in the business of investing in and owning
property net leased to creditworthy corporations and other creditworthy
entities. Subject to certain restrictions and limitations, the business of the
Company is managed by Carey Asset Management Corp. (the "Advisor"), a
wholly-owned subsidiary of W. P. Carey & Co. LLC.

On April 2, 2001, the Advisor purchased 20,000 shares of common stock for $200
as the initial shareholder of the Company. An initial offering of the Company's
shares which commenced on November 7, 2001 concluded on November 20, 2002, at
which time the Company had issued an aggregate of 39,954,941 shares ($399,549).
The Company commenced a second offering for a maximum of an additional
69,000,000 shares of common stock on March 19, 2003 which concluded on August 7,
2003, at which time the Company had issued an aggregate of 64,669,596 shares
($646,696). The shares were offered to the public on a "best efforts" basis at a
price of $10 per share.

Note 3. Agreements and Transactions with Related Parties:

In connection with performing services on behalf of the Company, the Advisory
Agreement between the Company and the Advisor, Carey Asset Management Corp, a
wholly-owned subsidiary of W. P. Carey & Co. LLC, provides that the Advisor
receive asset management and performance fees, each of which are -1/2 of 1% of
Average Invested Assets as defined in the Advisory Agreement. The performance
fee is subordinated to the Preferred Return, a cumulative non-compounded
dividend return of 6%. The Advisor has elected at its option to receive the
performance fee in restricted shares of common stock of the Company rather than
cash. The Advisor is also reimbursed for the actual cost of personnel needed to
provide administrative services necessary to the operation of the Company. The
Company incurred asset management fees of $1,083 and $247 for the three months
ended September 30, 2003 and 2002, respectively, and $2,886 and $317 for the
nine months ended September 30, 2003 and 2002, respectively, with performance
fees in like amount. The Company incurred personnel reimbursements of $341 and
$70 for the three months ended September 30, 2003 and 2002, respectively, and
$778 and $119 for the nine months ended September 30, 2003 and 2002,
respectively.

Fees are payable to the Advisor for services provided to the Company relating to
the identification, evaluation, negotiation, financing and purchase of
properties. A portion of such fees is deferred and is payable in equal annual
installments over no less than four years following the first anniversary of the
date a property was purchased. Such deferred fees are only payable if the
Preferred Return has been met. The unpaid portion of the deferred fees bears
interest at an annual rate of 6% from the date of acquisition of a property
until paid. For transactions that were completed during the nine months ended
September 30, 2003, current and deferred fees were $10,728 and $7,551,
respectively. Subject to the Preferred Return, the initial installment of
deferred fees will be paid in January 2004.

-5-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share and per share amounts)

Note 4. Commitments and Contingencies:

The Company is liable for certain expenses of the offerings described in each
Prospectus, which include filing, legal, accounting, printing and escrow fees,
which are to be deducted from the gross proceeds of the offering. The Company is
reimbursing Carey Financial Corporation ("Carey Financial") or one of its
affiliates for expenses (including fees and expenses of its counsel) and for the
costs of any sales and information meetings of Carey Financial's employees or
those of one of its affiliates relating to the offering. Total underwriting
compensation with respect to the offering may not exceed 10% of gross proceeds
of the offering. The Advisor has agreed to be responsible for the payment of (i)
organization and offering expenses (excluding selling commissions to Carey
Financial with respect to Shares held by selected dealers) which exceed 4% of
the gross proceeds of each offering and (ii) organization and offering expenses
(including selling commissions, fees and fees paid and expenses reimbursed to
selected dealers) which exceed 15% of the gross proceeds of each offering. The
total costs paid by the Advisor were $23,512 through September 30, 2003, of
which the Company has reimbursed $17,616. Unpaid costs are included in due to
affiliates in the accompanying condensed consolidated financial statements.

Note 5. Lease Revenues:

The Company's operations consist of the investment in and the leasing of
industrial and commercial real estate. The financial reporting sources of the
leasing revenues for the nine-month periods ended September 30, 2003 and 2002
are as follows:

2003 2002
-------- --------

Per Statements of Income:
Rental income from operating leases $ 45,888 $ 4,288
Interest from direct financing leases 4,010 784

Adjustment:
Share of leasing revenue applicable to
minority interest (7,294) --
Share of leasing revenue from equity
investments 14,410 1,778
-------- --------
$ 57,014 $ 6,850
======== ========

For the nine-month periods ended September 30, 2003 and 2002, the Company earned
its net leasing revenues from its investments from the following lease obligors:

2003 % 2002 %
------- --- ------- ---

Clear Channel Communications, Inc. (b) $ 6,368 11% -- --
Carrefour France, SA (b) 6,297 10 -- --
TruServ Corporation (a) 5,417 10 -- --
Starmark Camhood, L.L.C. (a) 5,194 9 -- --
Fleming Companies, Inc. 4,131 7 $ 1,423 21
Foster Wheeler, Inc. 3,933 7 654 10
Medica - France, SA (b) 2,403 4 -- --
Meadowbrook Meat Company 2,256 4 -- --
Overland Storage, Inc. 2,244 4 -- --
Petsmart, Inc. (a) 1,868 3 1,453 21
Tower Automotive, Inc. 1,767 3 1,112 16
Hologic, Inc. (a) 1,515 3 292 4
Qualceram Shires plc 1,384 2 -- --
BE Aerospace, Inc. 1,220 2 72 1
Racal Instruments, Inc. 1,175 2 546 8
MediMedia USA, Inc. 1,167 2 -- --
Trends Clothing Corp. 1,065 2 264 4
Danka Office Imaging Company 1,054 2 9 --
Advantis Technologies, Inc. 956 2 333 5

-6-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share and per share amounts)

2003 % 2002 %
------- --- ------- ---

IntegraColor, Ltd. 949 2 367 5
Lillian Vernon Corporation 948 2 -- --
Polar Plastics, Inc. 870 2 -- --
Other 2,833 5 325 5
------- --- ------- ---
$57,014 100% $ 6,850 100%
======= === ======= ===

(a) Represents the Company's proportionate share of lease revenues from
its equity investments (see Note 6).

(b) Net of amounts applicable to Corporate Property Associates 12
Incorporated's minority interest.

For the nine-month period ended September 30, 2003, lessees were responsible for
the direct payment of approximately $4,035 of real estate taxes on behalf of the
Company.

Note 6. Equity Investments:

The Company owns interests in single-tenant net leased properties through equity
interests in (i) partnerships and limited liability companies in which its
ownership interests are 50% or less and the Company exercises significant
influence, and (ii) as tenants-in-common subject to common control. The
ownership interests range from 30% to 64%. All of the underlying investments are
owned with affiliates that have similar investment objectives as the Company.
The lessees are Petsmart, Inc.; Builders FirstSource, Inc.; TruServ Corporation;
Hologic, Inc. and Starmark Camhood LLC ("Starmark"). The interest in Starmark
was purchased in February 2003.

Summarized combined financial information of the equity investees is as follows:

(in thousands) September 30, 2003 December 31, 2002
------------------ -----------------

Assets (primarily real estate) $451,048 $255,845
Liabilities (primarily mortgage notes payable) 265,634 102,022
Partners' and members' equity 185,414 153,823

Nine Months Ended September 30,
-------------------------------
2003 2002
-------- --------

Revenues (primarily rental revenues) $ 32,322 $ 7,278
Expenses (primarily interest on mortgages and depreciation) (18,202) (4,229)
-------- --------
Net income $ 14,120 $ 3,049
======== ========

Note 7. Dividends Payable:

A dividend of $0.001701 per share per day in the period from July 1, 2003
through September 30, 2003 was declared in September 2003 and paid in October
2003 ($15,219).

Note 8. Acquisitions of Real Estate:

A. Life Time Fitness, Inc.

On September 30, 2003, the Company purchased land and buildings in
Rochester Hills and Canton, Michigan for $44,921 and entered into a net
lease with Life Time Fitness, Inc. The lease has an initial term of 20
years followed by two ten-year renewal options, and provides for an
annual rent of $4,247 with stated increases every five years.

B. Universal Technical Institute of Arizona, Inc.

On September 15, 2003, the Company purchased land in Avondale, Arizona
and entered into a build-to-suit commitment and net lease with
Universal Technical Institute of Arizona, Inc. The total cost of
construction is estimated to amount to approximately $31,559. Upon the
earlier of completion or July 31, 2004 an initial lease term of 20
years and 11 months will commence. If the entire project costs are
used, initial annual rent

-7-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share and per share amounts)

will be $3,107, with increases every three years based on a formula
indexed to increases in the Consumer Price Index ("CPI"). The lease
provides for four five-year renewal terms.

C. American Pad & Paper LLC

On August 26, 2003, the Company purchased land and buildings in Holyoke
and Westfield, Massachusetts, Mattoon, Illinois and Morristown,
Tennessee for $16,126 and entered into a net lease with American Pad &
Paper LLC. The lease has an initial term of 20 years followed by four
five-year renewal options, and provides for an annual rent of $1,579.
The lease provides for increases to the rent every two years based on a
formula indexed to increases in the CPI. In connection with the
acquisition, the Company obtained $9,400 of limited recourse mortgage
financing collateralized by a deed of trust and mortgage agreement. The
loan provides for monthly payments of principal and interest of $64 at
an annual interest rate of 6.53% and based on a 25-year amortization
schedule. The loan matures on October 1, 2013.

D. Dick's Sporting Goods, Inc.

On August 19, 2003, the Company entered into a construction agency
agreement with Dick's Sporting Goods, Inc. for a property in
Indianapolis, Indiana. The total cost of construction is estimated to
amount to approximately $8,747. Upon the earlier of completion or March
1, 2004, an initial lease term of 20 years and 11 months will commence.
Initial annual rent will be $783 with stated rent increases of 10.4%
every five years. The lease provides for three ten-year renewal terms.

E. Kerr Group, Inc.

On August 13, 2003, the Company purchased land and buildings in
Jackson, Tennessee and Bowling Green, Kentucky for $14,764 and entered
into a net lease with Kerr Group, Inc. The lease has an initial term of
18 years followed by six five-year renewal options, and provides for an
annual rent of $1,331 with stated annual increases of 3%. In connection
with the acquisition, the Company obtained $8,460 of limited recourse
mortgage financing which is collateralized by a deed of trust and
mortgage agreement. The loan provides for monthly payments of principal
and interest of $62 at an annual interest rate of 7.23% and based on an
amortization schedule of 24 years and five months. The loan matures on
October 1, 2018.

F. During the nine-month period ended September 30, 2003, the Company
acquired properties and real estate investments which were previously
described in the Company's Quarterly Reports on Form 10-Q for the
periods ended June 30, 2003 and March 31, 2003. A summary of the
properties and investments acquired is as follows:

Original Annual
Initial Mortgage Debt
Lease Obligor: Cost Location Annual Rent Financing Service Date Acquired
-------------- ---- -------- ----------- --------- ------- -------------

Galyan's Trading Company $22,089 Cheektowaga, NY, $2,251 $8,200 $ 760 (a) August 8, 2003
Greenwood, IN and
Freehold, NJ

Grande Communications 13,822 Corpus Christi, 1,379 7,550 687 August 7, 2003
Networks, Inc. Odessa, San Marcos
and Waco, TX

Qualserv Corporation 6,492 Fort Smith, AR 667 - - July 31, 2003
Lillian Vernon Corporation 38,743 Virginia Beach, VA 3,848 24,000 2,108 July 2, 2003
Qualceram Shires plc 35,062 England, Northern 2,759 - - April 29, 2003
Ireland and Ireland

MediMedia USA, Inc. 23,979 Yardley, PA 2,111 14,000 1,068 April 1, 2003
Oxford Automotive 15,707 McCalla, AL 1,575 - - (b) March 28, 2003
Alabama, Inc.
Pemstar, Inc. 12,565 Rochester, MN 1,278 7,500 664 March 28, 2003

-8-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share and per share amounts)

Original Annual
Initial Mortgage Debt
Lease Obligor: Cost Location Annual Rent Financing Service Date Acquired
-------------- ---- -------- ----------- --------- ------- -------------

Transworld Center, Inc. 21,000 Miami, FL 2,258 - - March 20, 2003
(lease commenced
in November 2003)
Polar Plastics (NC), Inc. 15,602 Mooresville, NC 1,460 9,500 838 February 25, 2003
Waddington North America 6,545 Chattanooga, TN 637 - - February 12, 2003
Business Trust

Starmark Camhood LLC 78,324 15 health club 8,040 47,652 4,441 (c) February 7, 2003
facilities
Insulated Structures, Ltd. 22,021 Birmingham, UK 1,698 - - (d) January 28, 2003

(a) Includes build-to-suit commitment at Freehold, NJ property; lease
scheduled to commence in November 2004.

(b) Build-to-suit commitment; lease scheduled to commence in March 2004.

(c) Accounted for as an equity investment; amounts are pro rata
representing the Company's 44% ownership interest.

(d) Build-to-suit commitment; lease scheduled to commence in October 2003.
Amounts shown are based on the exchange rate for the Great British
Pound as of the date of acquisition ((pound)1 = $1.64330). The Company
has obtained a commitment for a limited recourse mortgage loan which
will provide $15,283 of financing.

Note 9. Impairment Charge on Real Estate:

In June 2002, the Company purchased land and building in Tulsa, Oklahoma and
entered into a net lease with Fleming Companies, Inc. ("Fleming"). Fleming
declared bankruptcy on April 1, 2003, and on August 31, 2003, Fleming's
termination of the lease with the Company was approved by the bankruptcy court
at which time it vacated the property. In connection with the termination of the
lease, the Company has written down the property to its estimated fair value and
recognized an impairment charge of $24,000.

Note 10. Sale of Interest in French Properties:

In December 2002, the Company purchased, in two separate transactions, 13
properties, seven leased to affiliates of Carrefour France, S.A. ("Carrefour")
and six leased to S.A. Medica France ("Medica"). The total cost for the
properties was Euro 144,094 (approximately $147,294 as of the purchase dates)
and was financed with limited recourse mortgage loans of Euro 118,244
(approximately $120,842 as of the purchase dates). On March 12, 2003, the
Company sold a 35% interest in the limited liability company that owns the
Medica and Carrefour properties to CPA(R):12. The purchase price was based on
the appraised value of the properties (based on an exchange rate for the Euro of
$1.0959) adjusted for capitalized costs incurred since the acquisitions
including fees paid to the Advisor, net of mortgage debt. Based on the formula,
CPA(R):12 paid the Company, $11,916 and assumed $1,031 of the Company's deferred
acquisition fee payable to an affiliate.

The sale was approved by the Company's independent directors as being in the
best interests of the Company and was intended to facilitate the Company's
ability to raise capital. The continued holding of 100% of the Medica and
Carrefour interests would have required the Company to obtain and provide
financial information in its 1933 and 1934 Act filings on the lease guarantors
that is in accordance with accounting principles generally accepted in the
United States of America. This information is not available to the Company.

In connection with the sale of the 35% interests, the Company recognized a gain
on sale of $961 of which $672 is attributable to foreign currency gains, as a
result of changes in rates from the dates of the initial purchases of the
properties, $305 is attributable to depreciation for the period from the dates
of the initial purchases of the properties through March 12, 2003, the date of
the sale of the 35% interest, less $16 attributable to costs incurred in
connection with completing the sale.

-9-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share and per share amounts)

Note 11. Accounting Pronouncements:

In June 2001, FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations." SFAS No. 143 was issued to establish standards for the recognition
and measurement of an asset retirement obligation. SFAS No. 143 requires
retirement obligations associated with tangible long-lived assets to be
recognized at fair value as the liability is incurred with a corresponding
increase in the carrying amount of the related long-lived asset. SFAS No. 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. SFAS No. 143 was adopted on January 1, 2003 and did not have a
material effect on the financial statements.

In May 2002, FASB issued SFAS No. 145 "Rescission of SFAS Nos. 4, 44 and 64,
Amendment of SFAS No. 13 and Technical Corrections" which eliminates the
requirement that gains and losses from the extinguishment of debt be classified
as extraordinary items unless it can be considered unusual in nature and
infrequent in occurrence. The Company adopted this Statement effective January
1, 2003 and the adoption did not have a material effect on the Company's
financial statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal
Activities". SFAS No. 146 addresses significant issues regarding the
recognition, measurement, and reporting of costs that are associated with exit
and disposal activities, including restructuring activities that are currently
accounted for pursuant to the guidance that the Emerging Issues Task Force
("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". The provisions of this
Statement are effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. SFAS No. 146 was adopted
on January 1, 2003 and did not have a material effect on the Company's financial
statements.

In October 2002, the FASB issued SFAS No. 147, "Acquisition of Certain Financial
Institutions" which amends SFAS No. 72, SFAS No. 144 and FASB Interpretation No.
9. SFAS No. 147 provides guidance on the accounting for the acquisitions of
certain financial institutions and includes long-term customer relationships as
intangible assets within the scope of SFAS No. 144. SFAS No. 147 was adopted on
January 1, 2003 and did not have a material effect on the financial statements.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others," ("FIN 45") which changes the accounting for, and
disclosure of certain guarantees. Beginning with transactions entered into after
December 31, 2002, certain guarantees are required to be recorded at fair value,
which is different from prior practice, under which a liability was recorded
only when a loss was probable and reasonably estimable. In general, the change
applies to contracts or indemnification agreements that contingently require the
Company to make payments to a guaranteed third-party based on changes in an
underlying asset, liability, or an equity security of the guaranteed party. The
adoption of the accounting provisions of FIN 45 on January 1, 2003 did not have
a material effect on the Company's financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," which amends SFAS No. 123, Accounting
for Stock Based Compensation. SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock based compensation (i.e., recognition of a charge for issuance of
stock options in the determination of income.). However, SFAS No. 148 does not
permit the use of the original SFAS No. 123 prospective method of transition for
changes to the fair value based method made in fiscal years beginning after
December 15, 2003. In addition, this Statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock based
employee compensation, description of transition method utilized and the effect
of the method used on reported results. The transition and annual disclosure
provisions for valuing stock-based compensation of SFAS No. 148 are to be
applied for fiscal years ending after December 15, 2002. The Company does not
have any employees nor any stock-based compensation plans.

On January 17, 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"), the primary objective of which is to
provide guidance on the identification of entities for which control is achieved
through means other than voting rights ("variable interest entities" or "VIEs")
and to determine when and

-10-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share and per share amounts)

which business enterprise should consolidate the VIE (the "primary
beneficiary"). This new model applies when either (1) the equity investors (if
any) do not have a controlling financial interest or (2) the equity investment
at risk is insufficient to finance that entity's activities without additional
financial support. In addition, FIN 46 requires both the primary beneficiary and
all other enterprises with a significant variable interest in a VIE make
additional disclosures. On October 8, 2003, the FASB staff issued a FASB Staff
Position ("FSP") which deferred the effective date of FIN 46 until December 31,
2003 for VIEs created prior to February 1, 2003. The Company's maximum loss
exposure is the carrying value of its equity investments. The Company has
evaluated the potential impact and believes this interpretation will not have a
material impact on its accounting for its investments in unconsolidated joint
ventures as none of these investments are VIEs.

On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging under SFAS No. 133. The
changes in the statement improve financial reporting by requiring that contracts
with comparable characteristics be accounted for similarly. In particular, the
statement (1) clarifies under what circumstances a contract with an initial net
investment meets the characteristics of a derivative instrument discussed in
paragraph 6(b) of SFAS No. 133, (2) clarifies when a derivative contains a
financing component, (3) amends the definition of an underlying to conform it to
language used in FIN 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others", and (4)
amends certain other existing pronouncements. SFAS No. 149 is generally
effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The adoption of SFAS No.
149 did not have a material effect on the financial statements.

On May 30, 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liability and Equity." SFAS No. 150
establishes standards to classify as liabilities certain financial instruments
that are mandatorily redeemable or include an obligation to repurchase. Such
financial instruments will be measured at fair value with changes in fair value
included in the determination of net income. The FASB recently issued FSP 150-3,
which defers the provisions of paragraph 9 and 10 of SFAS No. 150 indefinitely
as they apply to mandatorily redeemable noncontrolling interests associated with
finite-lived entities. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The Company
has an interest in one limited partnership that is consolidated and that is
considered a mandatorily redeemable controlling interest with a finite life. In
accordance with the deferral noted above, these minority interests have not been
reflected as liabilities. The carrying value approximates the fair value of this
minority interest at September 30, 2003.

Note 12. Subsequent Event:

A. On October 30, 2003, the Company purchased land and buildings in
Excelsior Springs, Missouri; St. Petersburg, Florida; West Lafayette,
Indiana; North Versailles Township, Pennsylvania and Buffalo Grove,
Illinois for $29,319 and entered into a net lease with Precise
Technology, Inc. The lease obligations are unconditionally guaranteed
by Precise Technology Group, Inc. The lease has an initial term of 20
years followed by two ten-year renewal options, and provides for an
annual rent of $2,640 with increases every two years based on a formula
indexed to increases in the CPI.

B. On November 4, 2003, the Company purchased land and a building in West
Midlands, United Kingdom for (pound)6,314 ($9,246 based on the exchange
rate for the British pound of $1.4643) and entered into a net lease
with Roundoak Rail Limited and five of its affiliates. The lease has an
initial term of 30 years and provides for an initial annual rent of
(pound)487 ($713) with stated increases every five years. In connection
with the acquisition, the Company obtained (pound)4,250 ($6,223) of
limited recourse mortgage financing collateralized by the property. The
loan bears interest at an annual fixed rate of 5.295% and provides for
stated principal payments which increase over the ten-year term of the
loan. A balloon payment of (pound)3,863 ($5,656) is payable at
maturity.

C. On November 7, 2003, the Company purchased land and buildings in
Atlanta, Georgia and Bel Air, Maryland for $28,272 and entered into a
net lease with Starmark Camhood LLC II. The lease has an initial term
of 20 years followed by three ten-year renewal options, and provides
for an annual rent of $2,633.

-11-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share and per share amounts)

The lease provides for increases to the rent every four years based on
a formula indexed to increases in the CPI. In connection with the
acquisition, the Company obtained $15,500 of limited recourse mortgage
financing collateralized by the properties. The loan provides for
monthly payments of principal and interest of $102 at an annual
interest rate of 6.91% and based on a 30-year amortization schedule.
The loan matures on December 1, 2013.

-12-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in thousands, except share amounts)

Overview

The following discussion and analysis of financial condition and results of
operations of Corporate Property Associates 15 Incorporated ("CPA(R):15") should
be read in conjunction with the financial statements and notes thereto as of
September 30, 2003 included in this quarterly report and CPA(R):15's Annual
Report on Form 10-K for the year ended December 31, 2002. This quarterly report
contains forward looking statements. Forward-looking statements, which are based
on certain assumptions, describe future plans, strategies and expectations of
CPA(R):15. Such statements included known and unknown risks, uncertainties and
other factors that may cause its actual results, performance or achievement to
be materially different from the results of operations or plans expressed or
implied by such forward looking statements. Accordingly, such information should
not be regarded as representations by us that the results or conditions
described in such statements or objectives and plans will be achieved. A
description of CPA(R):15's objectives, acquisition and financing strategies and
factors that may affect future operating results is detailed in Item 1 of the
Annual Report on Form 10-K.

CPA(R):15 was formed in 2001 and is currently using the proceeds from its "best
efforts" public offerings along with limited recourse mortgage financing to
purchase properties and enter into long-term net leases with corporate lessees.
As of September 30, 2003, CPA(R):15 had raised gross proceeds of approximately
$1,046,245 from its two offerings which include an offering that was completed
in August 2003. CPA(R):15 structures the net leases to place certain economic
burdens of ownership on corporate lessees by requiring them to pay the costs of
maintenance and repair, insurance and real estate taxes. The lease obligations
are unconditional. When possible, CPA(R):15 also negotiates guarantees of the
lease obligations from parent companies. CPA(R):15 negotiates leases that may
provide for periodic rent increases that are stated or based on increases in the
Consumer Price Index ("CPI") or, for retail properties, may provide for
additional rents based on sales in excess of a specified base amount. CPA(R):15
has also acquired interests in real estate through joint ventures with
affiliates who have similar investment objectives as CPA(R):15. These joint
ventures also enter into net leases on a single-tenant basis.

Critical Accounting Policies

CPA(R):15 has adopted certain critical accounting policies that are crucial to
an understanding of its financial condition and results of operations. Such
policies include, but are not limited to the following:

The preparation of financial statements requires that Management make estimates
and assumptions that affect the reported amount of assets, liabilities, revenues
and expenses. For instance, CPA(R):15 assesses its ability to collect rent and
other tenant-based receivables and determines an appropriate charge and
allowance for uncollectable amounts. Because CPA(R):15's real estate operations
have a limited number of lessees, Management believes that it will be necessary
to evaluate specific situations rather than solely use statistical methods.
CPA(R):15 recognizes a provision for uncollected rents which typically will
range between 0.25% and 1% of lease revenues (rental income and interest income
from direct financing leases) and measures its allowance for uncollected rents
with actual rent arrearages experience and its judgment regarding collectibility
of arrearages. CPA(R):15 compares its allowance for uncollected receivables to
any arrearages and adjusts the percentage applied, based on its actual
experience.

Real estate accounted for under the operating method is stated at cost less
accumulated depreciation. Costs directly related to build-to-suit projects,
primarily interest, if applicable, are capitalized. CPA(R):15 considers a
build-to-suit project as in service upon the completion of improvements, but no
later than a date that is negotiated and stated in the lease. If portions of a
project are substantially completed and occupied and other portions have not yet
reached that stage, the substantially completed portions are accounted for
separately. CPA(R):15 allocates costs incurred between the portions under
construction and the portions substantially completed and only capitalizes those
costs associated with the portion under construction.

-13-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

In connection with CPA(R):15's acquisition of properties, purchase costs will be
allocated to the tangible and intangible assets and liabilities acquired based
on their estimated fair values in accordance with SFAS No. 141, "Business
Combinations." The value of the tangible assets, consisting of land, buildings
and tenant improvements, will be determined as if vacant. Intangible assets
including the above-market or below-market value of leases, the value of
in-place leases and the value of tenant relationships will be recorded at their
relative fair values.

CPA(R):15 records above-market and below-market in-place lease values for owned
properties based on the present value (using an interest rate reflecting the
risks associated with the leases acquired) of the difference between (i) the
contractual amounts to be paid pursuant to the leases negotiated and in-place at
the time of acquisition of the properties and (ii) an estimate of fair market
lease rates for the property or equivalent property, measured over a period
equal to the remaining non-cancelable term of the lease. The capitalized
above-market lease value is amortized as a reduction of rental income over the
remaining non-cancelable term of each lease. The capitalized below-market lease
value is amortized as an increase to rental income over the initial term and any
fixed rate renewal periods in the respective leases.

The total amount of other intangible assets is allocated to in-place lease
values and tenant relationship intangible values based on CPA(R):15's evaluation
of the specific characteristics of each tenant's lease and its overall
relationship with each tenant. Characteristics considered in allocating these
values include the nature and extent of the existing relationship with the
tenant, prospects for developing new business with the tenant, the tenant's
credit quality and the expectation of lease renewals among other factors. The
aggregate value of other intangible assets acquired is measured based on the
difference between (i) the property valued with an in-place lease adjusted to
market rental rates and (ii) the property valued as if vacant. Independent
appraisals or our estimates are considered in determining these values.

Factors considered in the analysis include the estimated carrying costs of the
property during a hypothetical expected lease-up period, current market
conditions and costs to execute similar leases. CPA(R):15 also considers
information obtained about a property in connection with its pre-acquisition due
diligence. Estimated carrying costs will include real estate taxes, insurance,
other property operating costs and estimates of lost rentals at market rates
during the hypothetical expected lease-up periods, based on an assessment of
specific market conditions. CPA(R):15 estimates costs to execute leases
including commissions and legal costs to the extent that such costs are not
already incurred with a new lease that has been negotiated in connection with
the purchase of the property.

The value of in-place leases are amortized to expense over the remaining initial
term of each lease. The value of tenant relationship intangibles are amortized
to expense over the initial and renewal terms of the leases but no amortization
period for intangible assets will exceed the remaining depreciable life of the
building.

CPA(R):15 uses estimates and judgments when evaluating whether long-lived assets
are impaired. When events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable, Management performs projections of
undiscounted cash flows, and if such cash flows are insufficient, the assets
will be adjusted (i.e., written down) to their estimated fair value. An analysis
of whether a real estate asset has been impaired requires Management to make its
best estimate of market rent, residual value and holding period. As CPA(R):15's
investment objective is to hold properties on a long-term basis, holding period
assumptions will likely range from five to ten years. In its evaluations,
CPA(R):15 generally obtains market information from outside sources; however,
such information requires Management to determine whether the information
received is appropriate to the circumstances. Depending on the assumptions made
and estimates used, the estimated future cash flow projected in the evaluation
of long-lived assets can vary within a range of outcomes. CPA(R):15 considers
the likelihood of possible outcomes in determining the best estimate of future
cash flows. Because CPA(R):15's properties are leased to single tenants,
CPA(R):15 may be more likely to incur significant writedowns when circumstances
deteriorate because of the possibility that a property will be vacated in its
entirety. This makes the risks faced by CPA(R):15 different from the risks faced
by companies that own multi-tenant properties. Events or changes in
circumstances can result in further writedowns and impact the gain or loss
ultimately realized upon sale of the asset. For its direct financing leases,
CPA(R): 15 will perform a review of its estimated residual values of properties
at least annually to determine whether there has been an other than temporary
decline in CPA(R):15's current estimate of residual value.

-14-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

Stated rental revenue is recognized on a straight-line basis, and interest
income from direct financing leases is recognized such that CPA(R):15 earns a
constant rate of interest on its net investment, over the terms of the
respective leases. Unbilled rents receivable represents the amount by which
straight-line rental revenue exceeds rents currently billed in accordance with
the lease agreements. CPI-based and other contingent-type rents are recognized
currently. CPA(R):15 recognizes rental income from sales overrides after the
level of sales requiring a rental payment to CPA(R):15 is reached.

CPA(R):15 and certain affiliates are investors in certain real estate ventures.
It is anticipated that additional properties will be purchased through real
estate ventures. These investments may be held through incorporated or
unincorporated jointly-held entities. Substantially all of these investments
will represent jointly purchased properties which are net leased to a single
tenant and will be structured to provide diversification and reduce
concentration of a risk from a single lessee for CPA(R):15 and the affiliate.
The placement of an investment in a jointly-held entity requires the approval of
CPA(R):15's Independent Directors. All of the jointly held investments will be
structured so that CPA(R):15 and the affiliate contribute equity, receive
distributions and are allocated profit or loss in amounts that are proportional
to their ownership interests. All of the jointly-held investments are subject to
contractual agreements. No fees are payable to affiliates under any of the
limited partnership and joint venture agreements. The presentation of these
jointly held investments and their related results in the accompanying condensed
consolidated financial statements is determined based on factors including, but
not limited to, controlling interest, significant influence and whether each
party has the ability to make independent decisions. Such factors will determine
whether such investments are consolidated in the accounts of CPA(R):15 or
accounted for under the equity method. Equity method investments are reviewed
for impairment in the event of a change in circumstances that is other than
temporary. An investment's value is impaired only if Management's estimate of
the net realizable value of the impairment is less than the carrying value of
the investment. To the extent an impairment loss has occurred, the loss shall be
measured as the excess of the carrying amount of the investment over the fair
value of the investment.

CPA(R):15 classifies its directly-owned leased assets for financial reporting
purposes as either real estate leased under the operating method or net
investments in direct financing leases based on several criteria, including, but
not limited to, estimates of the remaining economic life of the leased assets
and the calculation of the present value of future minimum rents. In determining
the classification of a lease, CPA(R):15 uses estimates of remaining economic
life provided by independent appraisals of the leased assets. The calculation of
the present value of future minimum rents includes determining a lease's
implicit interest rate which requires an estimate of the residual value of
leased assets as of the end of the non-cancelable lease term. Different
estimates of residual value result in different implicit interest rates and
could possibly affect the financial reporting classification of leased assets.
The contractual terms of CPA(R):15 leases are not necessarily different for
operating and direct financing leases; however the classification is based on
accounting pronouncements which are intended to indicate whether the risks and
rewards of ownership are retained by the lessor or transferred to the lessee.
Management believes that CPA(R):15 retains certain risks of ownership regardless
of accounting classification.

When assets are identified by Management as held for sale, CPA(R):15
discontinues depreciating the assets and estimates the sales price, net of
selling costs, of such assets. If, in Management's opinion, the net sales price
of the assets which have been identified for sale is less than the net book
value of the assets, an impairment charge is recognized and a valuation
allowance is established. If circumstances that previously were considered
unlikely occur and, as a result, CPA(R):15 decides not to sell a property
previously classified as held for sale, the property is reclassified as held and
used. A property that is reclassified is measured and recorded individually at
the lower of (a) the carrying value before it was classified as held for sale,
adjusted for any depreciation expense that would have been recognized had the
property been continuously classified as held and used, or (b) the fair value at
the time of the subsequent decision not to sell. As of September 30, 2003, no
assets are held for sale.

To the extent that investments and subsidiaries account for their financial
position and results of operations in a functional currency other than U.S.
dollars, it is necessary for CPA(R):15 to translate from the functional currency
to U.S. dollars. The functional currency is the currency of the primary economic
environment in which the real estate investments or subsidiary operates. The
translation of the functional currency for assets and liabilities uses the
current exchange rate as of the balance sheet date and for revenues and expenses
uses a weighted average exchange rate

-15-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

during the period. Gains and losses resulting from foreign currency translation
adjustments are reported as a component of other comprehensive income as part of
shareholders' equity.

Foreign currency transactions may produce receivables or payables that are fixed
in terms of the amount of foreign currency that will be received or paid. A
change in the exchange rates between the functional currency and the currency in
which a transaction is denominated increases or decreases the expected amount of
functional currency cash flows upon settlement of that transaction. That
increase or decrease in the expected functional currency cash flows is a foreign
currency transaction gain or loss that generally is included in determining net
income for the period in which the exchange rate changes. Likewise, a
transaction gain or loss measured from the transaction date or the most recent
intervening balance sheet date, whichever is later, realized upon settlement of
a foreign currency transaction generally is included in net income from the
period in which the transaction is settled. Foreign currency transactions are
not included in determining net income but are accounted for in the same manner
as foreign currency translation adjustments and reported as a component of other
comprehensive income as part of shareholders' equity if (i) they are designated
as, and are effective as, economic hedges of a net investment and are (ii)
intercompany foreign currency transactions that are of a long-term nature (that
is, settlement is not planned or anticipated in the foreseeable future), when
the entities to the transactions are consolidated or accounted for by the equity
method in the financial statements.

Costs incurred in connection with obtaining mortgages and debt financing are
capitalized and amortized over the term of the related debt and included in
interest expense. Unamortized financing costs are written off and included in
charges for early extinguishment of debt if a loan is retired. Costs incurred in
connection with leases are capitalized and amortized over the non-cancelable
terms of the related leases, and included in property expense. Unamortized
leasing costs are also charged to property expense in the event of an early
termination of a lease.

Public business enterprises are required to report financial and descriptive
information about their reportable operating segments. Operating segments are
components of an enterprise about which financial information is available that
is evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Management evaluates the
performance of its portfolio of properties as a whole, rather than by
identifying discrete operating segments. This evaluation includes assessing
CPA(R):15's ability to meet distribution objectives, increase the dividend and
increase value by evaluating potential investments in single tenant net lease
real estate and by seeking opportunities such as refinancing mortgage debt at
lower rates of interest, restructuring leases or paying off lenders at a
discount to the face value of the outstanding mortgage balance.

Results of Operations

From December 31, 2002 through September 30, 2003, CPA(R):15 invested
approximately $343,909 in real estate. CPA(R):15's asset base has increased from
approximately $806,298 at December 31, 2002 to $1,537,052 at September 30, 2003.
As of November 7, 2003, CPA(R):15 has approximately $404,137 of cash available
for investment. Accordingly, the asset base is projected to continue to increase
until the available cash is deployed fully in real estate. As a result of the
on-going acquisition activity, the results of operations for the three-month and
nine-month periods ended September 30, 2003 are not directly comparable to the
results for the three and nine-month periods ended September 30, 2002 and are
not expected to be indicative of future operating results.

As a result of a noncash impairment charge of $24,000 recognized in September
2003, CPA(R):15's incurred net losses of $19,035 and $7,912 for the three-month
and the nine-month periods ended September 30, 2003. The results for the current
three-month and nine-month periods are not directly comparable with the results
for the three-month and nine-month periods ended September 30, 2002 which
reflected net income of $2,023 and $2,871, respectively. The impairment charge
was incurred as the result of the termination of a lease with Fleming Companies,
Inc. in August 2003 in connection with its bankruptcy. During the nine months
ended September 30, 2003, CPA(R): 15 entered directly into net lease
transactions with 17 tenants, including six build-to-suit transactions, and
acquired an equity ownership interest with two affiliates in a limited liability
company which net leases properties to Starmark Camhood LLC. CPA(R):15's
portfolio as of September 30, 2003 (including the pro rata share

-16-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

of equity investments) is expected to generate, after completion of
build-to-suit construction projects, annual cash flow (contractual rent less
property-level mortgage debt service) of approximately $51,092, as follows:

(In thousands) Annual Annual Estimated
Lease Obligor Contractual Rent Debt Service Cash Flow
- --------------------------------------------------- ---------------- ------------ ---------

Life Time Fitness, Inc. $ 4,247 - $ 4,247
Starmark Camhood L.L.C. (2) 8,040 $ 4,441 3,599
TruServ Corporation (2) 6,004 2,707 3,297
Universal Technical Institute of Arizona, Inc.
(under construction) 3,107 - 3,107
Clear Channel Communications, Inc. (1) 6,549 3,467 3,082
Qualceram Shires plc 3,045 - 3,045
Foster Wheeler, Inc. 5,231 2,253 2,978
Carrefour France, SA (1) 7,577 4,698 2,879
Transworld Center, Inc. (construction completed
subsequent to September 30, 2003) 2,275 - 2,275
Lillian Vernon Corporation 3,848 2,108 1,740
Insulated Structures, Ltd. (under construction) 1,705 - 1,705
Oxford Automotive, Inc. (under construction) 1,575 - 1,575
Meadowbrook Meat Company 2,660 1,306 1,354
Tower Automotive, Inc. 2,356 1,057 1,299
Rave Reviews Cinemas, L.L.C. 1,286 - 1,286
Overland Storage, Inc. 2,621 1,467 1,154
Petsmart, Inc. (2) 2,179 1,107 1,072
MediMedia USA, Inc. 2,111 1,072 1,039
Danka Office Imaging Company 1,966 984 982
Hologic, Inc. (2) 2,020 1,051 969
Medica - France, SA (1) 2,867 1,902 965
American Pad & Paper LLC 1,579 768 811
Dick's Sporting Goods, Inc. (under construction) 783 - 783
BE Aerospace, Inc. 1,468 764 704
IntegraColor, Ltd. 1,257 564 693
Grande Communications Networks, Inc. 1,379 687 692
Qualserv Corporation 667 - 667
Advantis Technologies, Inc. 1,275 610 665
WNA American Plastics Industries, Inc. 637 - 637
Polar Plastics, Inc. 1,460 838 622
Pemstar, Inc. 1,278 664 614
Racal Instruments, Inc. 1,323 733 590
Kerr Group, Inc. 1,331 744 587
Trends Clothing Corp. 1,420 851 569
Galyan's Trading Company 1,283 760 523
SSG Precision Optronics, Inc. 510 - 510
Builders FirstSource, Inc. (2) 554 271 283
Fleming Companies, Inc. (3)
- 2,507 (2,507)
-------- -------- --------
$ 91,473 $ 40,381 $ 51,092
======== ======== ========

(1) Net of minority interest

(2) Pro rata share of equity investment

(3) Lease terminated in August 2003

-17-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

The leases generally have terms of 15 to 25 years with the lessees having
options for renewal terms. CPA(R):15's properties in France leased to Carrefour
and Medica-France have shorter terms (ranging from 7-1/2 to 9 years) with
rolling three-year renewal terms which is a customary practice in that market.
CPA(R):15 has not hedged the risk of foreign currency fluctuations on the cash
flow from its French investments but CPA(R):15 has reduced the risk from
fluctuations by obtaining fixed rate mortgage debt on the properties in the
functional currency. CPA(R):15 also owns properties in the United Kingdom which
currently are unleveraged. CPA(R):15 intends to place mortgage debt on those
properties.

Since September 30, 2003, CPA(R): 15 completed a net lease acquisition, with
Precise Technology Inc. as lessee. Annual rent from this lease is $2,640. In
April 2003, Fleming Companies, Inc., a lessee of a property in Tulsa, Oklahoma,
filed a voluntary petition of bankruptcy. Fleming's lease termination was
approved by the bankruptcy court and Fleming vacated the property. Annual lease
revenues from the Fleming lease were $5,508. CPA(R):15 is aggressively seeking
to re-lease the property.

During the three-month and the nine-month periods ended September 30, 2003,
CPA(R):15 recognized interest and other income of $2,527 and $4,984,
respectively, consisting of $1,136 and $2,217 of interest income on its
uninvested cash and $1,391 and $2,767 of property expense reimbursements
received from lessees. The reimbursements are used to pay property expenses that
a lessee generally incurs under a net lease, and, the reimbursements, net of the
expenses, have no effect on net income. Interest income will decrease as the
proceeds of CPA(R):15's offerings are invested in real estate. After CPA(R):15
is fully invested, it will maintain cash balances which Management believes to
be sufficient for meeting working capital needs.

Property expense for the three-month and the nine-month periods ended September
30, 2003 includes $2,166 and $5,772 of asset management and performance fees and
$1,391 and $2,766 of expenses which have been reimbursed by lessees. Asset
management and performance fees are based on CPA(R):15's assets invested in real
estate and have increased solely as a result of the increase in the asset base.
CPA(R):15's asset base is projected to increase as it has substantial amounts of
cash available for investment and debt capacity as several of its properties are
unleveraged. Annual carrying costs on the former Fleming property are
approximately $1,300.

On March 12, 2003, CPA(R):15 sold a 35% interest in the limited liability
company that owns the Medica-France and Carrefour properties to CPA(R):12. The
purchase price was based on the appraised value of the properties (based on the
current exchange rate for the Euro) adjusted for capitalized costs incurred
since the acquisitions including fees paid to the Advisor, net of mortgage debt.
Based on the formula, CPA(R):12 paid CPA(R):15 $11,916 and assumed $1,031 of
CPA(R):15's deferred acquisition fee payable to an affiliate. CPA(R):15
recognized a gain on the sale of $961, of which $672 represents a foreign
currency gain. CPA(R):15 consolidates its controlling interests in the limited
liability company in its consolidated financial statements, and CPA(R):12's
interest is recognized as a minority interest. The sale was approved by
CPA(R):15's independent directors as being in the best interests of CPA(R):15
and in order to facilitate CPA(R):15's ability to raise capital. The continued
holding of 100% of the Medica-France and Carrefour interests would have required
CPA(R):15 to obtain and provide financial information in its 1933 and 1934 Act
filings on the lease guarantors that is in accordance with accounting principles
generally accepted in the United States of America. This information is not
available to CPA(R):15.

CPA(R):15 completed sales of its second offering of shares of common stock as of
August 7, 2003, at which time the gross amount raised from the two offerings
aggregated approximately $1,000,000. CPA(R):15 is continuing to use the proceeds
of the offerings to make investments in net lease real estate. Management
expects that CPA(R):15's assets will continue to increase substantially over the
next several years. As the asset base of CPA(R):15 increases, lease revenues,
general and administrative, property and depreciation expenses will increase,
while interest expense will increase as mortgage loans are placed on
newly-acquired and existing properties.

Financial Condition

A major objective of CPA(R):15 is to fully invest its funds in real estate in
order to generate cash flow from operations and its equity investments
sufficient to fund dividends to shareholders at an increasing rate, pay
scheduled mortgage principal installments and pay distributions to minority
partners in certain consolidated entities. Cash flows from

-18-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

operations and equity investments of $43,866 were sufficient to pay dividends of
$25,265, scheduled mortgage principal payments of $3,914 and distributions to
minority partners of $1,765. When evaluating cash generated from operations,
Management includes cash provided from equity investments. Under accounting
principles generally accepted in the United States of America, distributions
from equity investments in excess of income from equity investments are a return
of capital and presented as a cash flow from investing activity. The ability of
the equity investees to distribute cash to CPA(R):15 in excess of their income
is primarily due to noncash charges for depreciation. CPA(R):15 evaluates its
ability to pay dividends to shareholders by using its projections of cash flow
(lease revenues, net of property-level debt service) from both its
directly-owned real estate and its equity investments.

CPA(R):15 used $343,909 to acquire properties net leased to seventeen lessees on
a single-tenant basis and to purchase a 44% interest, through a limited
liability company owned with two affiliates, in 15 health club facilities leased
to Starmark. Since September 30, 2003, CPA(R):15 has used an additional $29,319
to acquire properties leased to Precision Technology Inc. CPA(R):15 expects to
use substantially all of the net proceeds of its offerings, along with limited
recourse mortgage debt, to purchase investments in real estate either directly
or with affiliates. Acquisition activity can be expected to continue for at
least one more year, with total real estate assets expected to range from
$1,500,000 to $2,000,000. Management believes that a fully invested, diversified
portfolio of real estate investments will mitigate the risk of nonpayment of
rent from any single lessee. As of November 7, 2003, $46,339 was committed to
complete build-to-suit projects. During the nine months ended September 30,
2003, CPA(R):15 received special distributions of $24,162 from equity investees
in connection with the investees' obtaining mortgage financing on their
properties.

During the nine months ended September 30, 2003, CPA(R):15 raised $586,440, net
of costs, in connection with the its recently completed offering. CPA(R):15 also
received $11,916 from CPA(R):12 in connection with CPA(R):12's purchase of
minority interests in the Medica-France and Carrefour properties. After
CPA(R):15 is fully invested, CPA(R):15 intends to hold cash balances sufficient
to maintain its operations. CPA(R):15 is actively evaluating potential net lease
investments and is using its available cash along with limited recourse mortgage
financing to purchase properties. In connection with purchasing properties,
during the nine months ended September 30, 2003, CPA(R):15 obtained $94,216 of
limited recourse mortgage debt. Currently, all of CPA(R):15's mortgage debt
bears interest at fixed rates with no loans maturing before May 2012. CPA(R):15
has benefited from historically low interest rates. As it continues to place
mortgage debt on its properties, it may be subject to increases in interest
rates. A lender on limited recourse mortgage debt has recourse only to the
property collateralizing such debt and not to any of CPA(R):15's other assets,
while unsecured financing would give a lender recourse to all of CPA(R): 15's
assets. The use of limited recourse debt, therefore, will allow CPA(R):15 to
limit the exposure of all of its assets to any one debt obligation. Management
believes that the strategy of combining equity and limited recourse mortgage
debt will allow CPA(R):15 to meet its short-term and long-term liquidity needs
and will help to diversify CPA(R):15's portfolio and, therefore, reduce
concentration of risk in any particular lessee. Therefore, after CPA(R):15 fully
invests in real estate, it will evaluate on an ongoing basis whether to obtain
additional sources of funds such as lines of credit; however, no consideration
is being given to such additional sources at this time.

CPA(R):15 is investing its available uninvested cash in money market
instruments. The spread between short-term rates on money market instruments and
rates of return on real estate investments has increased significantly,
primarily as the result of low money market interest rates. A significant
portion of CPA(R):15's cash balances represent funds to be invested in real
estate. If these cash balances are not invested in real estate over the next
several months, there is a risk that cash flow from operations and equity
investments will not meet Management's projections. Management believes that any
deficit would be short term and will ultimately be eliminated after available
cash is fully deployed in diversified real estate portfolios.

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

Off-Balance Sheet Arrangements, Guarantees and Aggregate Contractual Agreements:

A summary of CPA(R):15's contractual obligations and commitments as of September
30, 2003 is as follows:

(in thousands) Total 2003 2004 2005 2006 2007 Thereafter
----- ---- ---- ---- ---- ---- ----------

Obligations:
Limited recourse mortgage
notes payable (1) $480,424 $ 1,843 $ 7,756 $ 8,472 $ 9,158 $ 9,959 $443,236
Deferred acquisition fees 20,563 - 3,253 5,141 5,141 5,141 1,887
Commitments:
Build-to-suit obligations 48,860 18,019 30,841
Share of minimum rents
payable under office
cost-sharing agreement 289 6 103 103 77
-------- ------- ------- ------- ------- ------- --------
$550,136 $19,868 $41,953 $13,716 $14,376 $15,100 $445,123
======== ======= ======= ======= ======= ======= ========

(1) The limited recourse mortgage notes payable were obtained in connection
with the acquisition of properties in the ordinary course of business.

Accounting Pronouncements:

In June 2001, FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations." SFAS No. 143 was issued to establish standards for the recognition
and measurement of an asset retirement obligation. SFAS No. 143 requires
retirement obligations associated with tangible long-lived assets to be
recognized at fair value as the liability is incurred with a corresponding
increase in the carrying amount of the related long-lived asset. SFAS No. 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. SFAS No. 143 was adopted on January 1, 2003, and did not have a
material effect on the financial statements.

In May 2002, FASB issued SFAS No. 145 "Rescission of SFAS Nos. 4, 44 and 64,
Amendment of SFAS No. 13 and Technical Corrections" which eliminates the
requirement that gains and losses from the extinguishment of debt be classified
as extraordinary items unless it can be considered unusual in nature and
infrequent in occurrence. CPA(R):15 adopted this statement effective January 1,
2003, and the adoption did not have a material affect on CPA(R):15's financial
statements. CPA(R):15 will not classify gains and losses for the extinguishment
of debt as extraordinary items. CPA(R):15 adopted this Statement effective
January 1, 2003 and it did not have a material effect on CPA(R):15's financial
statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal
Activities". SFAS No. 146 addresses significant issues regarding the
recognition, measurement, and reporting of costs that are associated with exit
and disposal activities, including restructuring activities that are currently
accounted for pursuant to the guidance that the Emerging Issues Task Force
("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". The provisions of this
Statement are effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. SFAS No. 146 was adopted
on January 1, 2003, and did not have a material effect on CPA(R):15's financial
statements.

In October 2002, the FASB issued SFAS No. 147, "Acquisition of Certain Financial
Institutions" which amends SFAS No. 72, SFAS No. 144 and FASB Interpretation No.
9. SFAS No. 147 provides guidance on the accounting for the acquisitions of
certain financial institutions and includes long-term customer relationships as
intangible assets within the scope of SFAS No. 144. SFAS No. 147 was adopted on
January 1, 2003, and did not have a material effect on the financial statements.

-20-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others," ("FIN 45") which changes the accounting for, and
disclosure of certain guarantees. Beginning with transactions entered into after
December 31, 2002, certain guarantees are required to be recorded at fair value,
which is different from prior practice, under which a liability was recorded
only when a loss was probable and reasonably estimable. In general, the change
applies to contracts or indemnification agreements that contingently require
CPA(R):15 to make payments to a guaranteed third-party based on changes in an
underlying asset, liability, or an equity security of the guaranteed party. The
adoption of the accounting provisions of FIN 45 on January 1, 2003 did not have
a material effect on CPA(R):15's financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," which amends SFAS No. 123, Accounting
for Stock Based Compensation. SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock based compensation (i.e., recognition of a charge for issuance of
stock options in the determination of income.). However, SFAS No. 148 does not
permit the use of the original SFAS No. 123 prospective method of transition for
changes to the fair value based method made in fiscal years beginning after
December 15, 2003. In addition, this Statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock based
employee compensation, description of transition method utilized and the effect
of the method used on reported results. The transition and annual disclosure
provisions for valuing stock-based compensation of SFAS No. 148 are to be
applied for fiscal years ending after December 15, 2002. CPA(R):15 does not have
any employees nor any stock-based compensation plans.

On January 17, 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"), the primary objective of which is to
provide guidance on the identification of entities for which control is achieved
through means other than voting rights ("variable interest entities" or "VIEs")
and to determine when and which business enterprise should consolidate the VIE
(the "primary beneficiary"). This new model applies when either (1) the equity
investors (if any) do not have a controlling financial interest or (2) the
equity investment at risk is insufficient to finance that entity's activities
without additional financial support. In addition, FIN 46 requires both the
primary beneficiary and all other enterprises with a significant variable
interest in a VIE make additional disclosures. On October 8, 2003, the FASB
staff issued a FASB Staff Position ("FSP") which deferred the effective date of
FIN 46 until December 31, 2003 for VIEs created prior to February 1, 2003.
CPA(R):15's maximum loss exposure is the carrying value of its equity
investments. CPA(R):15 has evaluated the potential impact and believes this
interpretation will not have a material impact on its accounting for its
investments in unconsolidated joint ventures as none of these investments are
VIEs.

On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging under SFAS No. 133. The
changes in the statement improve financial reporting by requiring that contracts
with comparable characteristics be accounted for similarly. In particular, the
statement (1) clarifies under what circumstances a contract with an initial net
investment meets the characteristics of a derivative instrument discussed in
paragraph 6(b) of SFAS No. 133, (2) clarifies when a derivative contains a
financing component, (3) amends the definition of an underlying to conform it to
language used in FIN 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others", and (4)
amends certain other existing pronouncements. SFAS No. 149 is generally
effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The adoption of SFAS No.
149 did not have a material effect on the financial statements.

On May 30, 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liability and Equity." SFAS No. 150
establishes standards to classify as liabilities certain financial instruments
that are mandatorily redeemable or include an obligation to repurchase. Such
financial instruments will be measured at fair value with changes in fair value
included in the determination of net income. The FASB recently issued FSP 150-3,
which defers the provisions of paragraph 9 and 10 of SFAS No. 150 indefinitely
as they apply to mandatorily redeemable noncontrolling interests associated with
finite-lived entities. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is

-21-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Amounts in thousands, except share amounts)

effective at the beginning of the first interim period beginning after June 15,
2003. CPA(R):15 has an interest in one limited partnership that is consolidated
and that is considered a mandatorily redeemable controlling interest with a
finite life. In accordance with the deferral noted above, these minority
interests have not been reflected as liabilities. The carrying value
approximates the fair value of this minority interest at September 30, 2003.

-22-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

Item 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(in thousands)

Market risk is the exposure to loss resulting from changes in interest rates,
foreign currency exchange rates and equity prices. In pursuing its business
plan, the primary market risk to which CPA(R):15 is exposed is interest rate
risk and foreign currency exchange risk.

The value of CPA(R):15's real estate is subject to fluctuations based on changes
in interest rates, local and regional economic conditions and changes in the
creditworthiness of lessees, and which may affect CPA(R):15's ability to
refinance its debt when balloon payments are scheduled.

All of CPA(R):15's long-term debt of $480,424 bears interest at fixed rates, and
the fair value of these instruments is affected by changes in market interest
rates. The following table presents principal cash flows based upon expected
maturity dates of the debt obligations and the related weighted-average interest
rates by expected maturity dates for the fixed rate debt. The interest rate on
the fixed rate debt as of September 30, 2003 ranged from 5.52% to 7.98%.

2003 2004 2005 2006 2007 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------

Fixed rate debt $1,843 $7,756 $8,472 $9,158 $9,959 $443,236 $480,424 $471,999
Average interest
rate 6.07% 6.08% 6.08% 6.07% 6.07% 6.15%

CPA(R):15 has foreign operations. Accordingly, CPA(R):15 is subject to foreign
currency exchange risk from the effects of exchange rate movements of foreign
currencies and this may affect future costs and cash flows; however, exchange
rate movements to date have not had a significant effect on CPA(R):15's
financial position. While CPA(R):15 does not expect exchange rate movements to
have a significant effect on its results of operations, it recognized $672 of
foreign currency gains from the sale of partial interests in properties in
France. To date CPA(R):15 has not entered into any foreign currency forward
exchange contracts to hedge the effects of adverse fluctuations in foreign
currency exchange.

Item 4. - CONTROLS AND PROCEDURES

The Co-Chief Executive Officers and Chief Financial Officer of the Company have
conducted a review of the Company's disclosure controls and procedures as of
September 30, 2003.

The Company's disclosure controls and procedures include the Company's controls
and other procedures designed to ensure that information required to be
disclosed in this and other reports filed under the Securities Exchange Act of
1934, as amended (the "Exchange Act") is accumulated and communicated to the
Company's management, including its Co-Chief Executive Officers and Chief
Financial Officer, to allow timely decisions regarding required disclosure and
to ensure that such information is recorded, processed, summarized and reported,
within the required time periods.

Based upon this review, the Company's Co-Chief Executive Officers and Chief
Financial Officer have concluded that the Company's disclosure controls (as
defined in Rule 13a-14(c) promulgated under the Exchange Act) are sufficiently
effective to ensure that the information required to be disclosed by the Company
in the reports it files under the Exchange Act is recorded, processed,
summarized and reported with adequate timeliness.

-23-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

PART II

Item 2d. - USE OF PROCEEDS OF REGISTERED OFFERING

Pursuant to Rule 701 of Regulation S-K, the use of proceeds from the Company's
offering of common stock which commenced March 19, 2003 (File #333-100525) is as
follows as of September 30, 2003:

Shares registered: 69,000,000

Aggregate price of offering amount registered: $690,000,000

Shares sold: 64,669,596

Aggregated offering price of amount sold: $646,695,960

Direct or indirect payments to directors, officers, general
partners of the issuer or their associates, to persons
owning ten percent or more of any class of equity
securities of the issuer and to affiliates of the issuer: $ 6,882,525

Direct or indirect payments to others: $ 55,389,657

Net offering proceeds to the issuer after deducting expenses: $584,423,778

Purchases of real estate and equity investments: $129,767,241

Temporary investments in cash and cash equivalents: $454,656,537

Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the quarter ended September 30, 2003, no matters were submitted
to a vote of Security Holders.

Item 6. - EXHIBITS AND REPORTS ON FORM 8-K:

(a) Exhibits:

31.1 Certification of Co-Chief Executive Officers

31.2 Certification of Chief Financial Officer

32.1 Certification of Co-Chief Executive Officers Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K:

During the quarter ended September 30, 2003, the Company was
not required to file any reports on Form 8-K.

-24-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

11/10/2003 By: /s/ John J. Park
Date -----------------------------------
John J. Park
Managing Director and
Chief Financial Officer
(Principal Financial Officer)

11/10/2003 By: /s/ Claude Fernandez
Date -----------------------------------
Claude Fernandez
Managing Director and
Chief Accounting Officer
(Principal Accounting Officer)

-25-