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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, 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 November 5, 2004.
CPA(R):14 has 67,422,519 shares of common stock, $.001 par value
outstanding at November 5, 2004.
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
INDEX
Page No.
--------
PART I
Item 1. - Financial Statements*
Condensed Consolidated Balance Sheets as of September 30, 2004
and December 31, 2003 2
Condensed Consolidated Statements of Income for the three and nine
months ended September 30, 2004 and 2003 3
Condensed Consolidated Statements of Comprehensive Income for the
three and nine months ended September 30, 2004 and 2003 3
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 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 9-13
Item 3. - Quantitative and Qualitative Disclosures About Market Risk 14
Item 4. - Controls and Procedures 14
PART II - Other Information
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds 15
Item 4. - Submission of Matters to a Vote of Security Holders 15
Item 6. - Exhibits 15
Signatures 16
* The summarized condensed consolidated financial statements contained herein
are unaudited; however, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of such financial statements have been included.
1
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
PART I
Item 1. - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
September 30, 2004 December 31, 2003
(Unaudited) (Note)
----------- ------
ASSETS:
Land and buildings, net of accumulated depreciation of $79,568 at
September 30, 2004 and $62,105 at December 31, 2003 $ 990,357 $ 1,010,438
Net investment in direct financing leases 115,482 114,907
Equity investments 134,911 120,388
Cash and cash equivalents 36,616 54,675
Marketable securities 6,851 6,792
Other assets, net 42,026 38,547
----------- -----------
Total assets $ 1,326,243 $ 1,345,747
=========== ===========
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY:
Liabilities:
Mortgage notes payable $ 691,610 $ 702,175
Accrued interest 4,408 4,461
Due to affiliates 4,406 4,559
Accounts payable and accrued expenses 6,443 5,968
Prepaid rental income and security deposits 18,144 19,607
Deferred acquisition fees payable to affiliate 19,984 22,530
Dividends payable 12,820 12,662
----------- -----------
Total liabilities 757,815 771,962
----------- -----------
Minority interest 26,760 27,356
----------- -----------
Commitments and contingencies
Shareholders' equity:
Common stock, $.001 par value; authorized, 120,000,000 shares;
issued and outstanding, 68,636,465 shares at September 30, 2004
and 67,694,702 shares at December 31, 2003 69 68
Additional paid-in capital 616,649 606,380
Dividends in excess of accumulated earnings (74,551) (64,036)
Accumulated other comprehensive income 10,037 11,150
----------- -----------
552,204 553,562
Less, treasury stock at cost, 1,163,338 shares at September 30, 2004
and 802,642 shares at December 31, 2003 (10,536) (7,133)
----------- -----------
Total shareholders' equity 541,668 546,429
----------- -----------
Total liabilities, minority interest and shareholders'
equity $ 1,326,243 $ 1,345,747
=========== ===========
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.
2
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS of INCOME (Unaudited)
(in thousands, except share and per share amounts)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2004 2003 2004 2003
---- ---- ---- ----
Revenues:
Rental income $ 28,354 $ 27,439 $ 84,796 $ 80,751
Interest income from direct financing leases 3,326 3,250 10,033 9,713
Other operating income 1,994 2,550 3,162 5,719
---------- ---------- ---------- ----------
33,674 33,239 97,991 96,183
---------- ---------- ---------- ----------
Operating expenses:
Depreciation 5,863 5,774 17,568 16,987
General and administrative 1,384 1,924 4,738 6,255
Property expenses 6,672 7,256 17,336 16,124
Impairment charge on real estate - 2,900 - 2,900
---------- ---------- ---------- ----------
13,919 17,854 39,642 42,266
---------- ---------- ---------- ----------
Income from continuing operations before
other interest income, minority
interest, equity investments, interest
expense and (loss) gain 19,755 15,385 58,349 53,917
Other interest income 292 484 903 1,310
Minority interest in income (528) (274) (1,340) (1,156)
Income from equity investments 3,729 3,530 10,674 10,022
Interest expense (13,452) (13,472) (40,441) (39,234)
---------- ---------- ---------- ----------
Income from continuing operations before
(loss) gain 9,796 5,653 28,145 24,859
Unrealized (loss) gain on derivative
instruments, net (3) 21 (912) (60)
Gain on foreign currency transactions, net 110 450 564 596
---------- ---------- ---------- ----------
Net income $ 9,903 $ 6,124 $ 27,797 $ 25,395
========== ========== ========== ==========
Basic and diluted earnings per share: $ .15 $ .09 $ .41 $ .38
========== ========== ========== ==========
Weighted average shares outstanding - basic and
diluted 67,525,951 66,706,224 67,332,252 66,546,596
========== ========== ========== ==========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in thousands)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2004 2003 2004 2003
---- ---- ---- ----
Net income $ 9,903 $ 6,124 $ 27,797 $ 25,395
---------- ---------- ---------- ----------
Other comprehensive income (loss):
Change in foreign currency translation
adjustment 588 271 (1,252) 3,360
Change in unrealized appreciation of
marketable securities 225 3 139 628
---------- ---------- ---------- ----------
813 274 (1,113) 3,988
---------- ---------- ---------- ----------
Comprehensive income $ 10,716 $ 6,398 $ 26,684 $ 29,383
========== ========== ========== ==========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS (Unaudited)
(in thousands)
Nine Months Ended September 30,
-------------------------------
2004 2003
---- ----
Cash flows from operating activities:
Net income $ 27,797 $ 25,395
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 18,435 17,861
Straight-line rent adjustments (3,340) (2,952)
Income from equity investments in excess of distributions received (599) (1,822)
Issuance of shares in satisfaction of current and accrued performance fees 6,144 5,204
Minority interest in income 1,340 1,156
Unrealized loss on derivatives, net 912 60
Unrealized loss (gain) on foreign currency transactions, net 285 (271)
Impairment charge on real estate - 2,900
Gain on foreign currency transactions, net (849) (324)
Decrease in prepaid rents and security deposits (1,381) (2,616)
Change in other operating assets and liabilities, net (308) (914)
---------- ----------
Net cash provided by operating activities 48,436 43,677
---------- ----------
Cash flows from investing activities:
Distributions from operations of equity investments in excess of equity income 1,843 988
Purchases of real estate and equity investments and additional capitalized costs (15,817) (48,874)
Distributions of mortgage financing proceeds received from equity investee - 8,722
Payment of value added taxes from purchase of real estate - 911
Payment of deferred acquisition fees (3,266) (2,373)
---------- ----------
Net cash used in investing activities (17,240) (40,626)
---------- ----------
Cash flows from financing activities:
Proceeds from mortgages - 21,582
Funds released by mortgage lenders 167 3,000
(Repayment) proceeds from note (1,617) 1,617
Payments of mortgage principal (8,113) (6,701)
Distributions to minority interest partner (1,936) (2,595)
Proceeds from issuance of shares, net of costs 4,126 456
Deferred financing costs - (47)
Dividends paid (38,154) (37,573)
Purchase of treasury stock (3,403) (1,904)
---------- ----------
Net cash used in financing activities (48,930) (22,165)
---------- ----------
Effect of exchange rate changes on cash (325) 31
---------- ----------
Net decrease in cash and cash equivalents (18,059) (19,083)
Cash and cash equivalents, beginning of period 54,675 74,107
---------- ----------
Cash and cash equivalents, end of period $ 36,616 $ 55,024
========== ==========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
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 adjustments) 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.
Dividends declared per share for the three and nine-month periods ended
September 30, 2004 were $.1899 and $.569, respectively.
Certain prior period amounts have been reclassified to conform to current period
financial statement presentation.
Note 2. Transactions with Related Parties:
In connection with performing services on behalf of the Company, the advisory
agreement ("Advisory Agreement") between the Company and W. P. Carey & Co. LLC
("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 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 $2,147 and $1,901 for the three months
ended September 30, 2004 and 2003, respectively, and $6,383 and $5,644 for the
nine months ended September 30, 2004 and 2003, respectively, with performance
fees in like amounts, both of which are included in property expenses in the
accompanying condensed consolidated financial statements. For the three months
ended September 30, 2004 and 2003, the Company incurred personnel reimbursements
of $616 and $748, respectively, and $2,165 and $2,348 for the nine months ended
September 30, 2004 and 2003, respectively, which are included in general and
administrative expenses in the accompanying condensed consolidated financial
statements.
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
installments each January over no less than eight years following the first
anniversary of the date a property was purchased. Such deferred fees are only
payable if the Preferred Return is met. The unpaid portion of the deferred fees
bears interest at an annual rate of 6% from the date of acquisition until paid.
Current and deferred fees for transactions completed during the nine months
ended September 30, 2004 were $901 and $720, respectively. For transactions that
were completed during the nine months ended September 30, 2003, the current and
deferred fees were $2,166 and $1,733, 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 in which its ownership interests are 50% or less and
the Company exercises significant influence, and (ii) as tenants-in-common
subject to joint control. The ownership interests range from 11.54% 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., Starmark Camhood, LLC, U-Haul Moving Partners, Inc.
("U-Haul") and Mercury Partners, LP ("Mercury"). The interests in the properties
leased to U-Haul and Mercury were acquired in April 2004 and are described
below.
5
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
Summarized financial information of the Company's equity investees is as
follows:
(In thousands) September 30, 2004 December 31, 2003
------------------ -----------------
Assets (primarily real estate) $ 1,118,997 $ 781,144
Liabilities (primarily mortgage notes payable) (678,416) (471,052)
------------ -----------
Partners' and members' equity $ 440,581 $ 310,092
============ ===========
Company's share of equity investees' net assets $ 134,911 $ 120,388
============ ===========
Nine Months Ended September 30,
-------------------------------
2004 2003
---- ----
Revenues (primarily rental income and interest income from
direct financing leases) $ 76,993 $ 60,402
Expenses (primarily interest on mortgages and depreciation) (46,555) (34,152)
-------- --------
Net income $ 30,438 $ 26,250
======== ========
Company's share of net income from equity investments $ 10,674 $ 10,022
======== ========
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 11.54%
interest through a subsidiary, 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, and the truck rental facilities are leased to 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 Mercury lease is guaranteed
by Mercury 99, LLC, an entity that owns a 99% ownership interest in Mercury. 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 of default, termination or
expiration of the U-Haul lease, Mercury 99, LLC will automatically assume the
obligations of the U-Haul lease and Mercury 99, LLC will continue to lease the
self-storage facilities and shall lease the truck rental facilities pursuant to
the terms (with extension) of the U-Haul lease. Upon Mercury 99, LLC's
assumption, the term of the U-Haul lease shall be deemed extended so as to
automatically become co-terminus for the term of the Mercury 99, LLC lease. Each
lease provides for rent increases every five years based on a formula indexed to
the Consumer Price Index.
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 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 September 30, 2004, the fair value of the Company's
interests was $6,851, reflecting an aggregate unrealized gain of $1,037 and
cumulative net amortization of $218 ($80 for the nine months ended September 30,
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 the 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:
6
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
Fair Value as of September 30, 2004 1% Adverse Change 2% Adverse Change
----------------------------------- ----------------- -----------------
Fair value of the interests $6,851 $6,530 $6,228
The above sensitivity analysis 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 direct and indirect investment in and
the leasing of industrial and commercial real estate. The financial reporting
sources of lease revenues for the nine-month periods ended September 30, 2004
and 2003 are as follows:
2004 2003
---- ----
Per Statements of Income:
Rental income from operating leases $ 84,796 $ 80,751
Interest from direct financing leases 10,033 9,713
Adjustment:
Share of lease revenue applicable to minority interest (6,292) (5,935)
Share of lease revenue from equity investments 25,078 22,712
--------- ---------
$ 113,615 $ 107,241
========= =========
For the nine-month periods ended September 30, 2004 and 2003, the Company earned
net lease revenues from its investments as follows:
2004 % 2003 %
---- -- ---- --
Carrefour France, SAS (a) $ 10,069 9% $ 8,392 8%
Starmark Camhood, LLC/Wellbridge Club
Management, Inc. (b) 5,619 5 4,840 5
Nortel Networks Limited. 4,501 4 4,501 4
Petsmart, Inc. (c) 4,359 4 4,359 4
Clear Channel Communications, Inc. (b) 4,245 4 4,245 4
TruServ Corporation (b) 3,799 3 3,792 4
Atrium Companies, Inc. 3,417 3 3,336 3
Advance PCS, Inc. 3,225 3 3,225 3
Federal Express Corporation (c) 2,994 3 2,961 3
Tower Automotive, Inc. 2,921 3 2,921 3
Galyan's Trading Company 2,858 3 2,858 3
Katun Corporation 2,852 3 2,794 3
PerkinElmer, Inc. 2,521 2 2,200 2
Collins & Aikman Corporation 2,512 2 2,459 2
Metaldyne Company LLC 2,453 2 2,395 2
Advanced Micro Devices, Inc. (b) 2,444 2 2,444 2
Applied Materials, Inc. (b) 2,429 2 2,323 2
APW North America Inc. 2,209 2 2,124 2
Amerix Corporation 1,873 2 1,853 2
Mayo Foundation (e) 1,815 2 1,815 2
Buffets, Inc. 1,704 2 1,668 2
Institutional Jobbers Company 1,703 2 1,703 2
Waddington North America, Inc. 1,700 2 1,490 1
Other (b) (c) (d) 39,393 31 36,543 32
--------- ---- --------- ----
$ 113,615 100% $ 107,241 100%
========= ==== ========= ====
7
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
(a) An expansion at a Carrefour France, SAS property was completed in July
2003.
(b) Represents the Company's proportionate share of lease revenues from its
equity investments.
(c) Net of minority interest of an affiliate.
(d) Net of minority interest of an unaffiliated third party.
(e) Lease was assumed from Celestica Corporation effective January 1, 2004.
During the nine months ended September 30, 2003, the Company recorded $2,588 of
other operating income as a result of the forfeiture of a security deposit on
property located in Utah.
Note 6. Unrealized Gains and Losses:
Included in the determination of net income for the nine months ended September
30, 2004 and 2003 are unrealized losses of $1,197 and unrealized gains of $212,
respectively, which reflect changes in the fair value of derivative instruments
and losses on foreign currency transactions. Derivative instruments include an
interest rate swap agreement on a variable rate limited recourse mortgage
obligation, common stock warrants in certain tenant companies, which provide for
net settlement, and a provision in a lease contract which provides the Company
with an option to receive a portion of rent in U.S. dollars or the local
currency. For the period ended September 30, 2004, unrealized losses on
derivatives consist of $804 on the interest rate swap agreement, $101 on common
stock warrants and $7 on the foreign currency option. The interest rate swap
agreement has a notional amount of $8,943 and matures in September 2007.
Note 7. Accounting Pronouncements:
In December 2003, the FASB issued Interpretation No. 46(R), "Consolidation of
Variable Interest Entities" ("FIN 46(R)"), 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"). FIN 46(R) 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(R) requires
additional disclosures. The adoption of FIN 46(R) did not have a material impact
on the financial statements as none of its investments in unconsolidated joint
ventures are VIEs.
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 September 30, 2004
are $12,419 and $18,332, 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.
8
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 September 30, 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.
EXECUTIVE OVERVIEW
How CPA(R):14 Earns Revenue
The primary source of CPA(R):14's revenues are earned from leasing real estate.
CPA(R):14 acquires and owns commercial properties that are then leased to
companies domestically and internationally, primarily on a net lease basis.
Revenue is subject to fluctuation because of lease expirations, lease
terminations, the timing of new lease transactions and sales of property.
How Management Evaluates Results of Operations
Management evaluates the results of CPA(R):14 with a primary focus on the
ability to generate cash flow necessary to meet its objectives of increasing its
distribution rate to its shareholders and overall property appreciation. 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 have no impact on cash flow and on other noncash
charges such as depreciation and impairment charges. 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.
Management's evaluation of CPA(R):14's potential for generating cash flow is
based on long-term assessments.
Current Developments and Trends
If general economic conditions continue to improve, inflation and interest rates
are expected to continue to rise as well. In addition, competition for both real
estate properties and for investors' money continues to increase. These trends
generally present challenges to the real estate leasing market. Management feels
that its objective of maintaining a diverse portfolio of properties with
long-term leases and long-term, fixed rate debt obligations provides investors
protection from these trends. In addition, the majority of lease transactions
include Consumer Price Index escalation clauses or stated rent increases that
are intended to help protect our investors against potential future inflation
and should allow CPA(R):14 to continue to increase its dividend.
9
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)
Management will continue to pursue its objectives through long-term transactions
and continuing to diversify its portfolio. To that end, management is seeking to
continue to invest in the international commercial real estate market as a means
of diversifying its portfolio. While more complex and generally requiring a
longer lead time to complete, international transactions currently provide the
benefits of more favorable interest rates and greater flexibility to leverage
the underlying property.
For the nine months ended September 30, 2004, cash flow generated from
operations and equity investments was sufficient to fund dividends paid and meet
other obligations including paying scheduled mortgage principal payments and
making distributions to minority interests. Management expects based on its
current assessments 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 cash balances of $36,616 as of
September 30, 2004 which can be utilized for working capital needs and other
commitments and may be used for future real estate purchases.
Management believes that as the portfolio matures there is a potential for an
increase in the value of the portfolio and that any increase may not be
reflected in its financial statements.
Current developments include:
In September 2004, the Board of Directors of CPA(R):14 approved and increased
the third quarter dividend to $.18990 per share payable on October 15, 2004 to
shareholders of record as of September 30, 2004.
RESULTS OF OPERATIONS:
Lease Revenues - For the comparable quarters ended September 30, 2004 and 2003,
lease revenues (rental income and interest income from direct financing leases)
increased by $991 as a result of scheduled rent increases at several properties,
new leases, acquisitions and the completion of build-to-suit projects during
2003, and the impact of favorable changes in foreign exchange rates on rents
from foreign properties. Scheduled rent increases at 25 properties contributed
an additional $348 to lease revenues. The rent increases are generally
determined by formulas that are indexed to increases in the Consumer Price
Index. New leases at properties that were only partially occupied contributed an
additional $280. Lease revenues from CPA(R):14's properties in Europe and the
United Kingdom benefited from the changes in foreign exchange rates, with $390
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. Lease revenues also increased by $145 as the
result of funding an expansion in July 2003 at the Carrefour France, SAS
property in LeMans, France. During 2003, CPA(R):14 completed build-to-suit
projects at properties leased to Waddington North America, Inc., Career
Education Group and Rave Motion Pictures LLC, which provided $92 of the increase
in lease revenues during the current quarter. These increases were partially
offset by the termination of the Scott Companies, Inc. lease in 2003. The former
Scott property is currently leased.
For the comparable nine-month periods ended September 30, 2004 and 2003, lease
revenues increased $4,365 primarily due to the same factors as described above.
Additional rental income from new leases at existing properties and the
expansion of the Carrefour property contributed $1,655 of the increase,
completed build-to-suit projects and an acquisition contributed $1,490 of the
increase, scheduled rent increases contributed $1,072 of the increase, and the
positive impact of foreign currency exchange rates accounted for $1,309 of the
increase. These increases were partially reduced by vacancies at a limited
number of properties.
During the first nine months of 2004, CPA(R):14 entered into new net leases with
The Retail Distribution Group and Wavetronix LLC at properties that were
previously vacant or partially vacant. The net lease with Retail Distribution
was entered into in January 2004 for 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. Adjustments to rent will be reduced by any sublease
rentals Retail
10
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)
Distribution receives from the other property. In December 2003,
CPA(R):14 entered into a net lease with Wavetronix for a portion of a partially
vacant property in Lindon, Utah which began contributing $301 of annual lease
revenue in June 2004 when improvements at the property were completed. The lease
has an initial term of five years and seven months. CPA(R):14 entered into a
lease at the former Scott Companies property in September 2004 which provides
for initial annual rent of $356 and provides the lessee an option to purchase
the property at the end of the five-year lease term.
Other Operating Income - For the comparable quarters ended September 30, 2004
and 2003, other operating income decreased $556 primarily due to a decrease in
costs reimbursable by tenants. Such reimbursable costs are recorded as both
revenue and expense and therefore have no impact on net income.
For the comparable nine-month periods ended September 30, 2004 and 2003, other
operating income decreased $2,557 primarily as a result of the recognition of
$2,588 from the forfeiture of a security deposit in the quarter ended March 31,
2003.
Depreciation Expense - For the comparable quarters ended September 30, 2004 and
2003, depreciation expense remained consistent. For the comparable nine-month
periods ended September 30, 2004 and 2003, depreciation expense increased $581
primarily due to acquisitions completed in 2003, the completion of several
build-to-suit projects, and to a lesser extent, increases in average foreign
exchange rates.
General and Administrative Expenses - For the comparable three and nine-month
periods ended September 30, 2004 and 2003, general and administrative expenses
decreased $540 and $1,517, respectively, primarily due to a reduction in several
general and administrative expenses including personnel cost reimbursements,
investor related service costs and, to a lesser extent, acquisition expenses and
partially offset by increased costs for accounting and auditing services.
Property Expenses - For the comparable quarters ended September 30, 2004 and
2003, property expenses decreased by $584, primarily due to a decrease of $999
in real estate taxes. This decrease was offset by a $492 increase in asset
management and performance fees which was caused by both the growth of
CPA(R):14's asset base and the appreciation of existing properties as determined
by CPA(R):14's initial third party valuation of its portfolio as of December 31,
2003.
The increase of $1,212 for the comparable nine-month periods ended September 30,
2004 and 2003, is due primarily to a $1,479 increase in asset management and
performance fees.
Income From Equity Investments - Income from equity investments increased by
$199 for the comparable quarters ended September 30, 2004 and 2003, primarily as
a result of the April 2004 purchase by CPA(R):14 along with two affiliates
through a newly-formed limited partnership of 78 self-storage and truck leasing
facilities and entering into two net leases with lessees that operate the
properties under the U-Haul brand name. The increase of $652 for the comparable
nine-month periods ended September 30, 2004 and 2003, is due primarily to the
U-Haul leases, and to a lesser extent the acquisition of a noncontrolling
interest in properties leased to Starmark Camhood, LLC in February 2003.
Interest Expense - For the comparable quarters ended September 30, 2004 and
2003, there was no significant change in interest expense as it decreased by
$20. There have been no new mortgage financings in 2004 and no significant
change in interest rates on variable rate debt.
For the comparable nine-month periods ended September 30 2004 and 2003, interest
expense increased $1,207 primarily due to increased interest of $962 on new
mortgages obtained during 2003 on properties leased to Carrefour, Career
Education Group and Nascar Technical Institute. Prior year capitalization of
interest of $357 was netted against mortgage interest expense in connection with
build-to-suit projects which had not yet been placed in service. There are
currently no properties under construction.
Net Income - For the quarter ended September 30, 2004, net income increased by
$3,779 to $9,903 as compared with net income of $6,124 for the quarter ended
September 30, 2003. During the current quarter ended September
11
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)
30, 2004, CPA(R):14 benefited from an increase in lease revenues and decreases
in general and administrative expenses and property expenses, as described
above. In addition, the prior year comparable quarter was negatively impacted by
a $2,900 impairment charge on real estate.
For the nine-month period ended September 30, 2004, net income increased by
$2,402 to $27,797 as compared with net income of $25,395 for the comparable
prior year period. During the nine-month period ended September 30, 2004,
CPA(R):14 benefited from increases in total revenue and an overall reduction in
expenses as described above. In addition, net income for the comparable prior
year period was negatively affected by a $2,900 impairment charge on real
estate, which was partially offset by the recognition of $2,588 (included in
other operating income) during the quarter ended March 31, 2003, related to the
forfeiture of a security deposit.
FINANCIAL CONDITION:
Uses of Cash During the Period
There has been no material change in CPA(R):14's financial condition since
December 31, 2003. Cash and cash equivalents totaled $36,616 as of September 30,
2004, a decrease of $18,059 from the December 31, 2003 balance. Management
believes CPA(R):14 has sufficient cash balances to meet its working capital
needs. CPA(R):14's use of cash during the period is described below.
Operating Activities - For the nine-month period ended September 30, 2004, cash
flows from operating activities and equity investments of $50,279 were
sufficient to pay dividends to shareholders of $38,154, meet scheduled principal
payment installments on mortgage debt of $8,113 and distribute $1,936 to
minority partners. Annual operating cash flow is expected to continue to
increase as a result of new leases signed in 2004 including leases with Retail
Distribution, Wavetronix and Moonlight Molded Plastics as well as scheduled rent
increases at existing net leased properties during 2004. These leases will
contribute annual cash flow (lease revenues, net of property-level debt service)
of approximately $905. These three leases also reduce or eliminate CPA(R):14's
risk of continuing to absorb property carrying costs such as real estate taxes
and insurance.
Investing Activities - CPA(R):14's investing activities primarily consist of
real estate purchases and payment of its annual installment of deferred
acquisition fees. In April 2004, CPA(R):14 used $15,000 to purchase its interest
in the U-Haul transaction. Annual cash flow from this transaction (lease
revenues, net of property-level debt service) is expected to approximate $1,500.
Other real estate related payments included $455 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 North America and Rave
Motion Pictures build-to-suit projects, which were placed in service in 2003 and
additional capitalized costs at other properties of $174. The annual installment
of deferred acquisition fees is paid each January and was $3,266 in 2004.
Additionally, $1,617 was used to pay off a payable for refundable value added
taxes in connection with the Carrefour expansion.
Financing Activities - In addition to making scheduled mortgage principal
payments, paying dividends to shareholders and making distributions to minority
partners, CPA(R):14 obtained $4,126 as a result of issuing shares through its
Distribution Reinvestment and Share Purchase Plan, and used $3,403 to purchase
treasury shares, through a redemption plan which allows shareholders to sell
shares back to CPA(R):14, subject to certain limitations.
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 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.
Cash Resources
As of September 30, 2004, CPA(R):14 has $36,616 in cash and cash equivalents
which can be used for working capital needs and other commitments and may be
used for future real estate purchases. In addition, debt may be
12
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)
incurred on unleveraged properties with a carrying value of $56,087 as of
September 30, 2004 and any proceeds may be used to finance future real estate
purchases.
Cash Requirements
During the next twelve months, cash requirements will include scheduled mortgage
principal payment installments (CPA(R):14 has no mortgage balloon payments
scheduled until February 2008), paying dividends to shareholders and making
distributions to minority partners as well as other normal recurring operating
expenses. CPA(R):14 may also seek to use its cash to purchase new properties to
further diversify its portfolio and maintain cash balances sufficient to meet
working capital needs. Based on the projected increase in operating cash flows
from new leases, the completed build-to-suit projects and recent property
acquisitions, cash flow from operations and distributions from operations of
equity investments in excess of equity income is expected 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.
Other Matters
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
quarter. 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 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 September 30, 2004, Carrefour, which leases properties in France,
contributed 9% of lease revenues (see Note 5 to the accompanying condensed
consolidated financial statements). The leverage on the limited recourse
financing of the Carrefour France, SAS investments is higher than the average
leverage on CPA(R):14's domestic real estate investments.
OFF-BALANCE SHEET ARRANGEMENTS, GUARANTEES AND AGGREGATE CONTRACTUAL AGREEMENTS:
A summary of CPA(R):14's contractual obligations and commitments as of
September 30, 2004 is as follows:
(in thousands) Total 2004 2005 2006 2007 2008 Thereafter
----- ---- ---- ---- ---- ---- ----------
Obligations:
Limited recourse mortgage notes
payable (1) $ 691,610 $ 2,799 $ 11,693 $ 12,658 $ 13,608 $ 19,774 $ 631,078
Deferred acquisition fees 19,984 - 3,484 3,573 3,573 3,304 6,050
Subordinated disposition fees 240 - - - - - 240
Commitments:
Share of minimum rents payable
under office cost-sharing
agreement 8,249 86 513 582 687 687 5,694
--------- -------- -------- -------- -------- -------- ----------
$ 720,083 $ 2,885 $ 15,690 $ 16,813 $ 17,868 $ 23,765 $ 643,062
========= ======== ======== ======== ======== ======== ==========
(1) The limited recourse mortgage notes payable were obtained in connection
with the acquisition of properties in the ordinary course of business.
13
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 September
30, 2004, CPA(R):14's interests in CCMT had a fair value of $6,851.
Approximately $663,921 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 September 30, 2004 ranged
from 5.15% to 8.85%. The interest rate on the variable rate debt as of September
30, 2004 ranged from 2.94% to 6.27%.
2004 2005 2006 2007 2008 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
Fixed rate debt $ 2,741 $ 11,455 $ 12,413 $ 13,356 $ 19,514 $ 604,442 $ 663,921 $ 673,104
Weighted average
interest rate 7.15% 7.15% 7.15% 7.15% 7.31% 7.45%
Variable rate debt $ 58 $ 238 $ 245 $ 252 $ 260 $ 26,636 $ 27,689 $ 27,689
Annual interest expense from variable rate debt would increase or decrease by
approximately $277 for each change of 1% in annual interest rates. A change in
interest rates of 1% would impact the fair value of CPA(R):14's fixed rate debt
at September 30, 2004 by approximately $35,200.
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 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.
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, 2004.
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.
There have been no changes during the most recent fiscal quarter in the
Company's internal control over financial reporting that have materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
14
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
PART II
Item 2. - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) For the three and nine-month periods ended September 30, 2004,
188,783 and 543,557 shares, respectively, were issued to the Advisor
as consideration for performance fees and 140,935 and 398,206
shares, respectively, were issued pursuant to the Company's
Distribution Reinvestment and Share Purchase Plan. Shares were
issued at per share amounts which ranged from $10.00 to $11.30.
(c) Issuer Purchases of Equity Securities
Total Number of Shares
Purchased as Part of
Total Number of Average Price Publicly Announced
Period Shares Purchased Paid Per Share Plans or Programs (1)
------ ---------------- -------------- ---------------------
January 1, 2004 - January 31, 2004 47,328 $8.89 N/A
February 1, 2004 - February 29, 2004 28,884 8.85 N/A
March 1, 2004 - March 31, 2004 - - N/A
April 1, 2004 - April 30, 2004 130,987 8.98 N/A
May 1, 2004 - May 31, 2004 2,062 10.17 N/A
June 1, 2004 - June 30, 2004 - - N/A
July 1, 2004 - July 31, 2004 85,319 10.09 N/A
August 1, 2004 - August 31, 2004 66,116 10.09 N/A
September 1, 2004 - September 30, 2004 - - N/A
-------
360,696
=======
(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 Distribution Reinvestment
and Share Purchase 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 September 30, 2004, no matters were submitted to a vote
of Security Holders.
Item 6. - 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
15
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
11/5/2004 By: /s/ John J. Park
--------- --------------------------------------
Date John J. Park
Managing Director and
Chief Financial Officer
(Principal Financial Officer)
11/5/2004 By: /s/ Claude Fernandez
--------- --------------------------------------
Date Claude Fernandez
Managing Director and
Chief Accounting Officer
(Principal Accounting Officer)
-16-