CORPORATE PROPERTY ASSOCIATES 14 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 MARCH 31, 2004

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: 000-25771

] -------------------------

CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MARYLAND 13-3951476
(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:
COMMON STOCK, $.001 PAR VALUE
-------------------------

CPA(R):14 has SHARES OF COMMON STOCK registered pursuant to Section 12(g)
of the Act.

CPA(R):14 HAS NO SECURITIES registered on any exchanges.

CPA(R):14 does not have any Securities registered pursuant to Section 12(b)
of the Act.

CPA(R):14 (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):14 has no active market for common stock at May 6, 2004.

CPA(R):14 has 67,110,556 shares of common stock, $.001 par value
outstanding at May 6, 2004.

CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

INDEX

Page No.
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PART I
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Item 1. - Financial Information*

Condensed Consolidated Balance Sheets as of March 31, 2004
and December 31, 2003 2

Condensed Consolidated Statements of Income for the three months ended
March 31, 2004 and 2003 3

Condensed Consolidated Statements of Comprehensive Income for the
three months ended March 31, 2004 and 2003 3

Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2004 and 2003 4

Notes to Condensed Consolidated Financial Statements 5-8

Item 2. - Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-12

Item 3. - Quantitative and Qualitative Disclosures About Market Risk 13

Item 4. - Controls and Procedures 13

PART II - Other Information
- -------

Item 2. - Changes in Securities, Use of Proceeds and
Issuer Purchases of Equity Securities 14

Item 4. - Submission of Matters to a Vote of Security Holders 14

Item 6. - Exhibits and Reports on Form 8-K 14

Signatures 15

* The summarized condensed consolidated 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.

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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

PART I

Item 1. - FINANCIAL INFORMATION

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

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

Note: The balance sheet at December 31, 2003 has been derived from the audited
consolidated financial statements at that date.

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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS of INCOME (Unaudited)
(in thousands, except share and per share amounts)

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(in thousands)

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

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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

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

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

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CORPORATE PROPERTY ASSOCIATES 14 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 14 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. All significant intercompany balances and
transactions have been eliminated. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the results of the interim period presented have been included.
The results of operations for the interim period are not necessarily indicative
of results for the full year. These condensed consolidated financial statements
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2003.

Certain prior year amounts have been reclassified to conform to current year
financial statement presentation.

Note 2. Transactions with Related Parties:

In connection with performing services on behalf of the Company, the Advisory
Agreement between the Company and W. P. Carey & Co. LLC (the "Advisor"),
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 Advisor has elected at its option to receive the performance fee
in restricted shares of common stock 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. Asset management fees were
$2,103 and $1,854 for the three months ended March 31, 2004 and 2003,
respectively, with performance fees in like amount. For the three months ended
March 31, 2004 and 2003, the Company incurred personnel reimbursements of $775
and $803, 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 are deferred and are payable in equal
installments over no less than eight years following the first anniversary of
the date a property is purchased. No such fees were incurred during the three
months ended March 31, 2004. Current and deferred fees incurred during the three
months ended March 31, 2003 were $1,825 and $1,460, respectively.

Note 3. Equity Investments:

The Company owns interests in single-tenant net leased properties leased to
corporations through noncontrolling interests (i) in various partnerships and
limited liability companies and (ii) as tenants-in-common subject to joint
control. The ownership interests range from 33.33% to 50%. All of the underlying
investments are owned with affiliates that have similar investment objectives as
the Company. The lessees are Advanced Micro Devices, Inc., Compucom Systems,
Inc., Textron, Inc., CheckFree Holdings, Inc., Special Devices, Inc., Applied
Materials, Inc., TruServ Corporation, Clear Channel Communications, Inc. and
Starmark Camhood, LLC.

Summarized financial information of the Company's equity investees is as
follows:

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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

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

Note 4. Interest in Mortgage Loan Securitization:

The Company is accounting for its subordinated interest in the Carey Commercial
Mortgage Trust mortgage securitization as an available-for-sale marketable
security which is measured at fair value with all gains and losses from changes
in fair value reported as a component of other comprehensive income as part of
shareholders' equity. As of March 31, 2004, the fair value of the Company's
interests was $6,921, reflecting an aggregate unrealized gain of $1,054 and
cumulative net amortization of $164 ($26 for the three months ended March 31,
2004). The fair value of the Company's interests in the trust is determined
using a discounted cash flow model with assumptions of market rates and the
credit quality of the underlying lessees.

One of the key variables in determining fair value of the subordinated interest
is current interest rates. As required by Statement of Financial Accounting
Standards ("SFAS") No. 140, "Accounting for Transfer and Servicing of Financial
Assets and Extinguishments of Liabilities," a sensitivity analysis of the
current value of the interest based on adverse changes in market interest rates
of 1% and 2% is as follows:

The above sensitivity is hypothetical and changes in fair value, based on a 1%
or 2% variation, should not be extrapolated because the relationship of the
change in assumption to the change in fair value may not always be linear.

Note 5. Lease Revenues:

The Company's operations consist of the investment in and the leasing of
industrial and commercial real estate. The financial reporting sources of the
lease revenues for the three-month periods ended March 31, 2004 and 2003 are as
follows:

For the three-month periods ended March 31, 2004 and 2003, the Company earned
its net lease revenues from its investments as follows:

2004 % 2003 %
---- ----

Carrefour France, SAS $3,372 9% $ 2,603 7%
Starmark Camhood, L.L.C. (a) 1,873 5 1,094 3
Nortel Networks Limited. 1,500 4 1,500 4
Petsmart, Inc. (b) 1,453 4 1,453 4
Clear Channel Communications, Inc. (a) 1,415 4 1,415 4
TruServ Corporation (a) 1,264 3 1,264 4
Atrium Companies, Inc. 1,139 3 1,112 3
Advance PCS, Inc. 1,075 3 1,075 3
Federal Express Corporation (b) 997 3 986 3
Tower Automotive, Inc. 974 3 974 3
Galyan's Trading Company 953 3 953 3
Katun Corporation 955 3 925 3
Collins & Aikman Corporation 837 2 819 2
Advanced Micro Devices, Inc. (a) 815 2 815 2
Metaldyne Company LLC 813 2 791 2
Applied Materials, Inc. (a) 789 2 774 2

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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

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

(a) Represents the Company's proportionate share of lease revenues from its
equity investments.
(b) Net of minority interest of an affiliate.
(c) Net of minority interest of an unaffiliated third party.

Note 6. Subsequent Event:

On April 29, 2004, the Company, along with two affiliates, Corporate Property
Associates 15 Incorporated, and Corporate Property Associates 16 - Global
Incorporated through a limited partnership in which the Company owns an
approximate 11% interest through two subsidiaries, one of which is the general
partner, purchased 78 retail self-storage and truck rental facilities and
entered into master lease agreements with two lessees that operate the
facilities under the U-Haul brand name. The self-storage facilities are leased
to Mercury Partners, LP, ("Mercury"), and the truck rental facilities are leased
to U-Haul Moving Partners, Inc., ("U-Haul"). The total cost was $312,445. In
connection with the purchase, the limited partnership obtained $183,000 of
limited recourse mortgage financing collateralized by the properties and lease
assignments.

The Mercury lease has an initial term of 20 years with two 10-year renewal
options and provides for annual rent of $18,551. The U-Haul lease has an initial
term of 10 years with two 10-year renewal options and provides for annual rent
of $9,990. In the event that U-Haul does not renew its lease, Mercury will
assume the lease obligation for the truck rental facilities. Each lease provides
for rent increases every five years based on a formula indexed to the CPI.

The loan provides for monthly payments of principal and interest of $1,230 at a
fixed annual interest rate of 6.449% and based on a 25-year amortization
schedule. The loan matures on May 1, 2014.

Note 7. Accounting Pronouncements:

In November 2002, the Financial Accounting Standards Board ("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 Statement of Financial Accounting Standards
("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.

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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

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

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.
Accordingly, the adoption of SFAS No. 148 did not impact the Company.

In January 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"). In December 2003, the FASB issued a revised FIN 46
which modifies and clarifies various aspects of the original Interpretation. FIN
46 applies when either (1) the equity investors (if any) lack one or more of the
essential characteristics of controlling financial interest, (2) the equity
investment at risk is insufficient to finance that entity's activities without
additional subordinated financial support or (3) the equity investors have
voting rights that are not proportionate to their economic interest. In addition
FIN 46 requires additional disclosures. The adoption of FIN 46 did not have a
material impact on the financial statements as none of its investments in
unconsolidated joint ventures 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 FASB No.
149 did not have a material effect on the financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). In particular, it requires
that mandatorily redeemable financial instruments be classified as liabilities
and reported at fair value and that changes in their fair values be reported as
interest cost.

This statement was effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective for the Company as of July 1,
2003. On November 7, 2003, the FASB indefinitely deferred the classification and
measurement provisions of SFAS No. 150 as they apply to certain mandatorily
redeemable non-controlling interests entered into before November 5, 2003. This
deferral is expected to remain in effect while these provisions are further
evaluated by the FASB. The Company has interests in five limited partnerships
that are consolidated and have minority interests that have finite lives and
were considered mandatorily redeemable noncontrolling interests prior to the
issuance of the deferral. Accordingly, in accordance with the deferral noted
above, these minority interests have not been reflected as liabilities. The
carrying value and fair value of these minority interests at March 31, 2004 are
approximately $12,414 and $18,078, respectively. Based on the FASB's
deferral of this provision, the adoption of SFAS No. 150 did not have a material
effect on the Company's financial statements.

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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except share and per share amounts)

The following discussion and analysis of financial condition and results of
operations of Corporate Property Associates 14 Incorporated ("CPA(R):14") should
be read in conjunction with the condensed consolidated financial statements and
notes thereto as of March 31, 2004 included in this quarterly report and
CPA(R):14's Annual Report on Form 10-K for the year ended December 31, 2003. The
following discussion includes forward-looking statements. Forward-looking
statements, which are based on certain assumptions, describe future plans,
strategies and expectations of CPA(R):14. Forward-looking statements discuss
matters that are not historical facts. Because they discuss future events or
conditions, forward-looking statements may include words such as "anticipate",
"believe", "estimate", "intend", "could", "should", "would", "may", or similar
expressions. Do not unduly rely on forward-looking statements. They give our
expectations about the future and are not guarantees, and speak only as of the
date they are made. Such statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievement of CPA(R):14 to be materially different from the results of
operations or plan expressed or implied by such forward looking statements. The
risk factors are fully described in Item 1 of the Annual Report on Form 10-K for
the year ended December 31, 2003. Accordingly, such information should not be
regarded as representations by CPA(R):14 that the results or conditions
described in such statements or objectives and plans of CPA(R):14 will be
achieved. Additionally, a description of CPA(R):14's critical accounting
estimates is included in the management's discussion and analysis in the Annual
Report on Form 10-K. There has been no significant change in such critical
accounting estimates.

Management evaluates the results of CPA(R):14 with a primary focus on the
ability to generate cash flow necessary to meet its investment objectives of
overall property appreciation and increasing its distribution rate to its
shareholders. As a result, Management's assessment of operating results gives
less emphasis to the effect of unrealized gains and losses which may cause
fluctuations in net income for comparable periods but has no impact on cash flow
and to other noncash charges such as depreciation and impairment charges.
Management believes that as the portfolio matures there is a potential for a
substantial increase in the value of the portfolio and that any increase will
not be reflected in its financial statements until actual sales occur. In
evaluating cash flow from operations, Management includes equity distributions
that are included in investing activities to the extent that the distributions
in excess of equity income are the result of noncash charges such as
depreciation and amortization. Management does not consider unrealized gains and
losses from foreign currency or derivative instruments when evaluating its
ability to fund dividends. For the three months ended March 31, 2004, cash flow
generated from operations was greater than dividends paid and was sufficient to
fully meet other obligations including paying scheduled mortgage principal
payments and making distributions to minority interests which hold ownership
interests in several of CPA(R):14's properties. Management expects based on its
projections that over the long-term, cash flow from operations and equity
investments will meet the objective of increasing the distribution rate and
meeting other cash obligations. CPA(R):14 has more than $15,000 of cash
available for investment in real estate. It is likely that additional
investments will be made with affiliates. These funds are currently invested in
money market instruments and CPA(R):14 expects to invest these funds in real
estate investments which Management and the Investment Committee of the Advisor
believe are suitable. Cash flow from operations and equity investments for the
three months ended March 31, 2004 reflected a moderate increase over the
comparable three-month period ended March 31, 2003. Management's evaluation of
CPA(R):14's potential for generating cash flow is based on long-term
projections.

RESULTS OF OPERATIONS:

Net income for the three-month period ended March 31, 2004 decreased by $1,615
to $8,989 as compared with net income of $10,604 for the three-month period
ended March 31, 2003. Income for the three-month period ended March 31, 2003
included $2,588 recognized from a forfeiture of a security deposit. During the
current period, CPA(R):14 benefited from increases in lease revenues and income
from equity investments as well as a decrease in general and administrative
expense, but these benefits were offset by increases in depreciation, interest
and property expenses.

Lease revenues (rental income and interest income from direct financing leases)
increased by $1,849 for the comparable three-month periods as a result of an
acquisition and the completion of build-to-suit projects during 2003 and the
impact of favorable changes in foreign exchange rates on rents from our foreign
properties. During 2003, CPA(R):14 completed build-to-suit commitments at
properties leased to Waddington North America, Inc.,

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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Dollars in thousands, except share and per share amounts)

Career Education Group and Rave Motion Pictures LLC, which provided $677 of the
increase in lease revenues during the current three-month period. Lease revenues
also increased by $276 as the result of the expansion in July 2003 at a property
in LeMans, France leased to Carrefour S.A. Scheduled rent increases at 30
properties since March 31, 2003 contributed an additional $459 to lease
revenues. Approximately 20 properties have scheduled rent increases during 2004.
The rent increase are generally determined by formulas that are indexed to
increases in the Consumer Price Index. Lease revenues from CPA(R):14's
properties in Europe and the United Kingdom benefited from the changes in
foreign exchange rates, with $643 of the increase in lease revenues attributable
to the favorable changes in the average exchange rates for the Euro and the
British Pound as compared with average exchange rates in 2003.

On January 1, 2004, CPA(R):14 entered into a net lease with The Retail
Distribution Group for a property in Grand Rapids, Michigan in which CPA(R):14
owns a 60% interest. The Grand Rapids property had been vacant since May 2003.
The Retail Distribution lease provides for initial annual rent of $903, of which
CPA(R):14's share is $542, and has an initial term through August 31, 2009. The
Retail Distribution lease provides for adjustments to its rent as it vacated
another property which is still subject to lease in order to lease the Grand
Rapids property. Any adjustments to rent will be reduced by any sublease rentals
Retail Distribution receives from the other property. The Retail Distribution
lease contributed $216 of lease revenues during the current period, of which
CPA(R):14's share is $130. In December 2003, CPA(R):14 entered into a net lease
with Wavetronix LLC for a portion of a property in Lindon, Utah which will
contribute $301 of annual lease revenues upon completion of certain improvements
at the property, expected to occur in May 2004. The lease has an initial term of
five years and seven months. In November 2003, Scott Companies, Inc. entered
into liquidation proceedings and subsequently terminated its lease at its
property in Gardena, California. CPA(R):14 has entered into a lease at the
Gardena property at an initial annual rent of $356. The lease is subject to a
due diligence review through May 12, 2004. If accepted, the lease will have an
initial five-year term and provide for a purchase option on the property.

Interest expense increased by $731 for the comparable three-month periods, of
which $308 was attributable to the change in foreign exchange rates and $317 to
new mortgages obtained during 2003 on properties leased to Carrefour, Career
Education and Nascar Technical Institute, Inc. Of the increase in depreciation
expense of $263, $182 is attributable to depreciation on three build-to-suit
projects completed in 2003 and the Carrefour expansion, while $98 results from
the increase in average exchange rates for the comparable periods. Property
expense increased by $274 as the result of an increase in asset management and
performance fees of $498 over the comparable period in 2003, which was partially
offset by a decrease in charges for uncollectible receivables. The asset-based
fees increased as a result of the growth of CPA(R):14's asset base and the
appreciation of existing properties.

Income from equity investments increased by $229 for the three-month period
ended March 31, 2004, substantially all of which was the result of acquiring a
noncontrolling interest in properties leased to Starmark Camhood, LLC in
February 2003. On April 29, 2004, CPA(R):14 along with two affiliates through a
newly-formed limited partnership purchased 78 self-storage and truck leasing
facilities and entered into two net leases with lessees that operate the
properties under the U-Haul brand name. CPA(R):14's annual cash flow from its
approximate 11% interest is estimated to be $1,516.

FINANCIAL CONDITION:

There has been no material change in CPA(R):14's financial condition since
December 31, 2003. CPA(R):14's cash has decreased by $4,678 since December 31,
2003 to $49,997, primarily as a result of repaying value added taxes related to
the funding of the Carrefour expansion in July 2003, and making a scheduled
payment on deferred acquisition fees payable to an affiliate. CPA(R):14 intends
to use its cash to purchase new properties to further diversify its portfolio
and maintain cash balances sufficient to meet working capital needs. As of May
5, 2004, CPA(R):14 had in excess of $15,000 of cash available for the
acquisition of real estate investments.

For the three months ended March 31, 2004, cash flows from operating activities
and equity investments of $16,222 were sufficient to pay dividends to
shareholders of $12,662, meet scheduled principal payment installments on
mortgage debt of $2,716 and distribute $582 to minority partners. Annual
operating cash flow is expected to continue to increase as a result of signing
the Retail Distribution and Wavetronix leases, acquiring the Carrefour

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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Dollars in thousands, except share and per share amounts)

expansion in July 2003 and completing three build-to-suit projects during 2003.
The Retail Distribution and Wavetronix leases will contribute annual cash flow
(lease revenues, net of property-level debt service) of up to $549. Annual cash
flow from the three build-to-suit projects and the Carrefour expansion, net of
property-level debt service, is approximately $2,360. Based on the projected
increase in operating cash flows from the new leases, the completed
build-to-suit projects and the Carrefour expansion, cash flow from operations
and distributions from operations of equity investments in excess of equity
income is expected to continue to be sufficient to meet operating cash flow
objectives. Accordingly, CPA(R):14 expects to have sufficient cash flow to
continue increasing the distribution rate to its shareholders. Distributions are
determined by Management's long-term projections of cash flow.

CPA(R):14's investing activities included paying its annual installment of
deferred acquisition fees in January 2004 of $3,266. Additionally, $1,617 was
used to pay off a payable for refundable value added taxes ("VAT") due to the
French government in connection with the Carrefour expansion. The payable was
repaid after the VAT had been fully refunded to CPA(R):14 as of December 31,
2003. CPA(R):14 also used $202 to fund leasehold improvements at the Lindon,
Utah building in connection with signing the Wavetronix lease and $166 to pay
final construction costs for the Waddington and Rave Reviews build-to-suit
projects which were placed in service in 2003. Remaining costs to complete the
Wavetronix improvement are estimated to be approximately $260. Since March 31,
2004, CPA(R):14 has used approximately $14,465 to purchase its interest in the
78 U-Haul properties.

In addition to making scheduled mortgage principal payments, paying dividends to
shareholders and making distributions to minority partners, CPA(R):14 obtained
$1,209 as a result of shares issued through its dividend reinvestment plan, and
used $675 to purchase treasury shares. CPA(R):14 has no mortgage balloon
payments scheduled until February 2008. Substantially all of CPA(R):14's
mortgages are limited recourse and bear interest at fixed rates. Accordingly,
CPA(R):14's cash flow should not be adversely affected by increases in interest
rates which are at or near historical lows. A lender on limited recourse
mortgage debt has recourse only to the property collateralizing such debt and
not to any of CPA(R):14's other assets, while unsecured financing would give a
lender recourse to all of CPA(R): 14's assets. The use of limited recourse debt,
therefore, will allow CPA(R):14 to limit its 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):14 to meet its
short-term and long-term liquidity needs and will help to diversify CPA(R):14's
portfolio and, therefore, reduce concentration of risk in any particular lessee.

CPA(R):14 conducts business in Europe and may recognize transaction gains and
losses from its foreign operations. Foreign currency transaction gains and
losses were not material to CPA(R):14's results of operations for the current
three-month period. CPA(R):14 is subject to material foreign currency exchange
rate risk from the effects of changes in exchange rates. To date, CPA(R):14 has
not entered into any foreign currency forward exchange contracts or other
derivative financial instruments to hedge the effects of adverse fluctuations in
foreign currency exchange rates. CPA(R):14 has obtained limited recourse
mortgage financing at fixed rates of interest in the local currency. To the
extent that currency fluctuations increase or decrease rental revenues as
translated to dollars, the change in debt service, as translated to dollars,
will partially offset the effect of fluctuations in revenue, and, to some extent
mitigate the risk from changes in foreign currency rates. As of March 31, 2004,
Carrefour, which leases properties in France, contributed 9% of lease revenues
(see Note 4 to the accompanying condensed consolidated financial statements).
The leverage used on the limited recourse financing of the Carrefour investments
is higher than the average leverage on CPA(R):14's domestic real estate
investments.

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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(Dollars in thousands, except share and per share amounts)

OFF-BALANCE SHEET ARRANGEMENTS, GUARANTEES AND AGGREGATE CONTRACTUAL AGREEMENTS:

A summary of CPA(R):14's contractual obligations and commitments is as follows:

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

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CORPORATE PROPERTY ASSOCIATES 14 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 risks to which CPA(R):14 is exposed are interest rate
risk and foreign currency exchange risk.

The value of CPA(R):14's real estate is subject to fluctuations based on changes
in interest and foreign currency exchange rates, local and regional economic
conditions and changes in the creditworthiness of lessees. These factors may
affect CPA(R):14's ability to refinance its debt when balloon payments are
scheduled.

CPA(R):14 owns marketable securities through its ownership interests in Carey
Commercial Mortgage Trust ("CCMT"). The value of the marketable securities is
subject to fluctuation based on changes in interest rates, economic conditions
and the creditworthiness of lessees at the mortgaged properties. As of March 31,
2004, CPA(R):14's interests in CCMT had a fair value of $6,921.

Approximately $667,370 of CPA(R):14's long-term debt bears interest at fixed
rates, and therefore the fair value of these instruments is affected by changes
in the 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 March 31, 2004 ranged from
6.091% to 8.85%. The interest rate on the variable rate debt as of March 31,
2004 ranged from 2.15% to 6.27%.

Annual interest expense from variable rate debt would increase or decrease by
approximately $281 for each change of 1% in annual interest rates.

CPA(R):14 has foreign operations. Accordingly, CPA(R):14 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):14's
financial position or results of operations. To date CPA(R):14 has not entered
into any foreign currency forward exchange contracts to hedge the effects of
adverse fluctuations in foreign currency exchange. One of CPA(R):14's lease
agreements provides the option to receive a portion of the rent in dollars or
the local currency; this option is considered a derivative financial instrument
and changes in the fair value of the option, which were not significant, are
included in the determination of net income.

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
March 31, 2004.

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.

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CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

PART II

Item 2. - CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES

(c) For the quarter ended March 31, 2004, 168,685 shares were issued
to the Advisor as consideration for performance fees and 126,722
shares were issued pursuant to the Company's Stock Purchase and
Dividend Reinvestment Plan. Shares were issued at per share
amounts which ranged from $10.00 to $11.30.

(e) Issuer Purchases of Equity Securities

(1) All shares were purchased pursuant to the Company's Redemption
Plan. The maximum amount of shares purchasable in any period
depends on the availability of funds generated by the Dividend
Reinvestment Plan and other factors at the discretion of the
Company's Board of Directors.

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

During the quarter ended March 31, 2004, 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 March 31, 2004, the Company furnished a
report on Form 8-K on March 25, 2004, which included an Item 9
disclosure with respect to the Company's dividend.

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CORPORATE PROPERTY ASSOCIATES 14 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 14 INCORPORATED

5/6/2004 By: /s/ John J. Park
------------ ----------------------------------------
Date John J. Park
Managing Director and
Chief Financial Officer
(Principal Financial Officer)

5/6/2004 By: /s/ Claude Fernandez
------------ ----------------------------------------
Date Claude Fernandez
Managing Director and
Chief Accounting Officer
(Principal Accounting Officer)

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