UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended DECEMBER 31, 1995
------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the transition period from to
---------------------- ----------------------
Commission file number 0-10322
--------------------------------------------------------
CORPORATE PROPERTY ASSOCIATES 3
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2708080
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 492-1100
-----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
- -------------------------------- -------------------------------------------
- -------------------------------- -------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP UNITS
- -------------------------------------------------------------------------------
(Title of Class)
- -------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [_] No
Indicate by check mark if disclosure of deliquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Aggregate market value of the voting stock held by non-affiliates of Registrant:
There is no active market for Limited Partnership Units.
PART I
------
Item 1. Business.
---------
Registrant is engaged in the business of investing in commercial and
industrial real estate properties which are net leased to commercial and
industrial entities. Registrant was organized as a California limited
partnership on November 7, 1980. The General Partners of Registrant are W.P.
Carey & Co., Inc. (the "Corporate General Partner" or "W.P. Carey") and William
Polk Carey (the "Individual General Partner"). The Corporate General Partner,
the Individual General Partner and/or affiliates are also the General Partners
of affiliates of Registrant, Corporate Property Associates ("CPA(R):1"),
Corporate Property Associates 2 ("CPA(R):2"), Corporate Property Associates 4, a
California limited partnership ("CPA(R):4"), Corporate Property Associates 5
("CPA(R):5"), Corporate Property Associates 6 - a California limited partnership
("CPA(R):6"), Corporate Property Associates 7 - a California limited partnership
("CPA(R):7"), Corporate Property Associates 8, L.P., a Delaware limited
partnership ("CPA(R):8"), Corporate Property Associates 9, L.P., a Delaware
limited partnership ("CPA(R):9"), the advisor of Corporate Property Associates
10 Incorporated ("CPA(R):10"), Carey Institutional Properties Incorporated
("CIP(TM)") and Corporate Property Associates 12 Incorporated ("CPA(R):12").
Registrant has a management agreement with Carey Corporate Property Management
Company ("Carey Management"), a division of W.P. Carey. According to the terms
of this agreement, Carey Management performs a variety of management services
for Registrant. Registrant has entered into an agreement with Fifth Rock L.P.,
an affiliate, for the purpose of leasing office space. Reference is made to the
Prospectus of Registrant dated July 31, 1981, as supplemented by Supplements
dated December 9, 1981, January 8, 1982 and February 10, 1982, filed pursuant to
Rules 424(b) and 424(c) under the Securities Act of 1933 and such Prospectus and
such Supplements are incorporated herein by reference (said Prospectus, as so
supplemented, is hereinafter called the "Prospectus").
Registrant has only one industry segment which consists of the
investment in and the leasing of industrial and commercial real estate. See
Selected Financial Data in Item 6 for a summary of Registrant's operations. Also
see the material contained in the Prospectus under the heading INVESTMENT
OBJECTIVES AND POLICIES .
The properties owned by Registrant are described in Properties in Item
2. Registrant's entire net proceeds from the public offering, less any return of
capital and the working capital reserve have been fully invested in net leased
commercial and industrial real estate since June 1, 1983, the date of
Registrant's final real estate acquisition.
For the year ended December 31, 1995, revenues from properties occupied
by Gibson Greetings, Inc. ("Gibson") amounted to 81% of the total operating
revenues of Registrant. No other property owned by Registrant accounted for 10%
or more of its total operating revenues during 1993. See Note 9 to the Financial
Statements in Item 8.
Except for an untenanted property in Reno, Nevada, all of Registrant's
properties are leased to corporate tenants under long-term net leases. A net
lease generally requires tenants to pay all operating expenses relating to the
leased properties including maintenance, real estate taxes, insurance and
utilities which under other forms of leases are often paid by the lessor.
Lessees are required to include Registrant as an additional insured party on all
insurance policies relating to the leased properties. In addition, substantially
all of the net leases include indemnification provisions which require the
lessees to indemnify Registrant and the General Partners for liabilities on all
matters relating to the leased properties. Registrant believes that the
insurance and indemnity provided on its behalf by its lessees provides adequate
coverage for property damage and any liability claims which may arise against
Registrant's ownership interests. In addition to the insurance and
indemnification provisions of the lease, Registrant has contingent property and
liability insurance for its leased properties and primary property and liability
coverage on the Moorestown and Reno properties. To the extent that any lessees
are not financially able to satisfy indemnification obligations which exceed
insurance reimbursements, Registrant may incur the costs necessary to repair
property and settle liabilities. Presently there are no claims pending for
property damages or liability claims.
As described above, lessees retain the obligation for the operating
expenses of their leased properties so that, other than rental income, there are
no significant operating data (i.e. expenses) reportable on Registrant's leased
properties. As discussed in Registrant's Management's Discussion and Analysis in
Item
- 1 -
7, Registrant's leases generally provide for periodic rent increases which are
either stated and negotiated at the inception of the lease or based on formulas
indexed to increases in the Consumer Price Index. During the year ended
December 31, 1995, lease terms were modified or the Registrant's lease with
Gibson. In addition, the Company entered into a lease on a property in
Moorestown, New Jersey and agreed to a settlement with Leslie Fay Company
("Leslie Fay"). Other than Registrant's lease with Hughes Markets, Inc.
("Hughes") which represents approximately 4% of Registrant's rental income and
expires in 1996, all of Registrant's lease terms expire between 2001 and 2013
and provide for renewal terms.
As Registrant has generally invested in properties which are occupied by
a single corporate tenant and subject to long-term leases with such lease
obligations backed by the credit of the corporate lessee, most of Registrant's
properties have not been greatly affected by competitive conditions of local and
regional real estate markets. Competitive conditions of such markets have become
more significant due to the vacancy of the Reno, Nevada and the anticipated
expiration of the lease with Hughes for a property in Los Angeles, California.
Registrant is in discussions regarding a lease extension with Hughes. In
selecting real estate investments, Registrant's strategy was to identify
properties which included operations of material importance to the lessee so
that the lessee may be more likely to extend its lease beyond the initial term
or exercise a purchase option if such option was provided for in the lease
agreement. Registrant believes that this strategy reduces its exposure to the
competitive conditions of the local and regional real estate markets. Because
Registrant may be affected by the financial condition of its lessees rather than
the competitive conditions of the real estate marketplace, Registrant's strategy
has been to diversify its investments among tenants, property types and
industries in addition to achieving geographical diversification.
In April 1995, Registrant entered into a lease with Sports & Recreation,
Inc. ("Sports & Recreation") for Registrant's property in Moorestown, New Jersey
which it owns as a tenant-in-common with CPA(R):2 . Sports & Recreation is
currently retrofitting the building for use as retail store. At the earlier of
May 1, 1996 or the end of the construction period, a 16 year lease term will
commence. Registrant's share of annual rentals will be $187,750 during the first
five lease years with stabled increase every five years thereafter. Registrant
and CPA(R):2 have an obligation to reimburse Sports & Recreation for the costs
of replacing the heating, ventilation, and air conditioning systems and
installing a new roof and drainage system. Registrant's share of such costs is
estimated to be approximately $455,000.
In November 1995, Registrant and CPA(R):2 which own three properties
leased to Gibson agreed to restructure the Gibson lease and consented to
severing one of the properties from the master lease and entered into a new
lease for such property with Cleo, Inc. ("Cleo"). In connection with consenting
to the restructuring, Registrant received a one-time lump sum payment of
$8,723,000. As amended, Gibson's lease for the two remaining properties in
Berea, Kentucky and Cincinnati, Ohio have been extended through November 2013
from January 2002. Registrant's share of annual rents on the two remaining
properties will be approximately $2,367,000 with a 20% increase every five
years. In addition, Gibson has purchase options to purchase either or both of
its leased properties in 2005 and 2010. The Cleo lease for the property formerly
leased to Gibson in Memphis, Tennessee provides for a ten year lease term with a
rent increase in January 2001. Registrant's current share of annual rentals is
$1,145,000. Although annual rentals from the three properties decreased as a
result of the modification of the leases, cash flow will increase as a mortgage
loan which was collateralized by the three properties was paid off at the time
the modification agreement was executed.
In September 1995, the United States Bankruptcy Court approved a
compromise and settlement agreement to settle Registrant's dispute with The
Leslie Fay Company ("Leslie Fay"). Under the agreement Leslie Fay was released
from its lease agreement with Registrant for the property, leased in Wilkes
Barre, Pennsylvania and the purchase option was rescinded. In reaching such
settlement, Registrant received a payment of $5,000,000 plus interest of
$174,149 from a surety company which provided coverage to Leslie Fay. In
addition, Registrant retained (i) a lump sum deposit of $7,200,000 it received
from Leslie Fay in 1992 plus monthly installments $6,465,601 which had been
received from Leslie Fay during the period of the dispute, and (ii) ownership of
the property. Registrant sold the property in January 1996.
- 2 -
Registrant has entered into discussion with Hughes regarding a two-year
lease extension; however, there is no assurance that an extension will be
executed. Registrant voluntarily contracted for Phase I environmental reviews of
all of its properties in 1993. Registrant believes, based on the results of such
reviews and Phase II environmental reviews of certain of its properties in 1994,
that its properties are in substantial compliance with Federal and state
environmental statutes and regulations. Phase II reviews were only performed on
certain properties based on the recommendations of the Phase I reviews. Portions
of certain properties have been subject to a limited degree of contamination,
principally in connection with either leakage from underground storage tanks or
surface spills from facility activities. In many instances, tenants are actively
engaged in the remediation process and addressing identified conditions. For
those conditions which were identified, Registrant advised its tenants of such
findings and of their obligations to perform additional investigations and any
required remediation. Tenants are generally subject to environmental statutes
and regulations regarding the discharge of hazardous materials and any related
remediation obligations. In addition, Registrant's leases generally require
tenants to indemnify Registrant from all liabilities and losses related to the
leased properties. Accordingly, Management believes that the ultimate resolution
of the aforementioned environmental matters will not have a material adverse
effect on Registrant's financial condition, liquidity or results of operations.
Registrant does not have any employees. The Corporate General Partner of
Registrant together with its affiliates employ twelve individuals who perform
accounting, secretarial and transfer services for Registrant. Gemisys, Inc.
performs certain transfer services for Registrant and The Bank of New York
performs certain banking services for Registrant. In addition, Registrant has
entered into an agreement with Carey Management pursuant to which Carey
Management provides certain management services to Registrant.
- 3 -
Item 2. Properties.
LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
- ---------------------- ----------------- --------------- -----------------
GIBSON GREETINGS, Land and Manufac- Cincinnati, Ownership of a
INC. turing/Warehouse Ohio and 71.5% interest
Buildings - 2 Berea, Kentucky in land and
locations buildings
CLEO, INC. Land and Manufac- Memphis, Ownership of a 71.5%
turing/Warehouse Tennessee interest in land and
Building building
NEW VALLEY Land and Bridgeton, Ownership of an
CORPORATION Centralized Missouri approximate 61%
Telephone Bureau interest in land
and building
SPORTS & Land and Moorestown, Ownership of an
RECREATION, INC. Building New Jersey approximate 61%
interest in land
and building
(1) Land and Reno, Nevada Ownership of an
Building approximate 61%
interest in land
and building
HUGHES MARKETS, Land and Dairy Los Angeles, Ownership of an
INC. Processing California approximate
Facility 16.76% interest
in land and
building
AT&T CORPORATION Land and a Bridgeton, Ownership of an
Computer Center Missouri approximate 61%
interest in land
and building
(1) This property is vacant.
- 4 -
The material terms of Registrant's leases with its significant tenants are
summarized in the following table: ---
Partnership's
Share Current Lease Terms of
Lease of Current Square Rent Per Expiration Renewal Ownership Purchase Gross
Obligor Annual Rents Footage Sq.Ft.(1) (Mo/Year) Terms Interest Option Costs (2)
- --------------------------- ------------ ---------- -------------- ----------- ------- ------------ ---------- -----------
Gibson $2,366,571 1,194,840 2.59 11/2013 YES 71.5% Fair $9,304,694
Greetings, interest; market
Inc. remaining value as
interest encumbered
owned by the
by lease
Property
Associates
Corporate
2("CPA(R):2")
Cleo, Inc. 1,145,400 1,006,566 1.49 12/2005 YES 71.5% The 7,896,281
interest; greater of
remaining fair
interest market
owned by value
CPA(R):2 capped at
by the $11,618,750
lease or $10,725,000
New Valley 372,987 78,080 7.86 11/2001 YES 61% N/A 3,586,847
Corporation interest;
remaining
interest
owned
by CPA(R):2
AT&T 453,422 55,810 13.37 11/2001 YES 61% N/A 4,503,970
Corporation interest;
remaining
interest
owned
by CPA(R):2
Hughes 305,045 390,000 4.67 04/1996 YES 16.76% N/A 1,969,927
Markets Inc. interest;
remaining
interest owned
by Corporate
Property
Associates 4
Sports & 187,750 (3) 74,066 4.17 5/2012 YES 61% interest; N/A 1,800,000
Recreation remaining
Inc. interest owned
by CPA(R):2
(1) Represents rate for rent per square foot when combined with rents applicable
to tenants-in-common.
(2) Includes original cost of investment and net increases or decreases to net
investment subsequent to purchase.
(3) Commencing of rent is the earlier of May 1, 1996 or completion of
construction.
None of Registrant's properties are encumbered by mortgage debt.
- 5 -
Item 3. Legal Proceedings.
-----------------
On April 1, 1993, New Valley Corporation, ("New Valley"), a tenant of a
property owned by Registrant and formerly a tenant of two other of Registrant's
properties, filed a petition of voluntary bankruptcy seeking reorganization
under Chapter 11 of the United States Bankruptcy Code. In connection with the
filings, Registrant and Corporate Property Associates 2, which together own the
properties as tenants-in-common, filed a bankruptcy claim in the amount of
$6,766,904. New Valley is contesting the claims and Registrant and New Valley
are now in litigation regarding this claim. The matter is expected to go to
trial in May of 1996. No prediction regarding the outcome of this litigation can
be made at this time.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
No matter was submitted during the fourth quarter of the year ended
December 31, 1995 to a vote of security holders, through the solicitation of
proxies or otherwise.
PART II
-------
Item 5. Market for Registrant's Common Equity and Related
-------------------------------------------------
Stockholder Matters.
-------------------
Information with respect to Registrant's common equity is hereby
incorporated by reference to page 22 of Registrant's Annual Report contained in
Appendix A.
Item 6. Selected Financial Data.
------------------------
Selected Financial Data are hereby incorporated by reference to page 1
of Registrant's Annual Report contained in Appendix A.
Item 7. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations.
Management's Discussion and Analysis are hereby incorporated by
reference to pages 2 to 5 of Registrant's Annual Report contained in Appendix A.
Item 8. Financial Statements and Supplementary Data.
--------------------------------------------
The following financial statements and supplementary data are hereby
incorporated by reference to pages 5 to 18 of Registrant's Annual Report
contained in Appendix A:
(i) Report of Independent Accountants.
(ii) Balance Sheets as of December 31, 1994 and 1995.
(iii) Statements of Income for the years ended December 31, 1993, 1994 and
1995.
(iv) Statements of Partners' Capital for the years ended December 31, 1993,
1994 and 1995.
(v) Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995.
(vi) Notes to Financial Statements.
Item 9. Disagreements on Accounting and Financial Disclosure.
-----------------------------------------------------
NONE
- 6 -
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
Registrant has no officers or directors. The executive officers and
directors of the Corporate General Partner are as follows:
Has Served as a
Director and/or
Name Age Positions Held Officer Since (1)
---- --- -------------- ----------------
William Polk Carey 65 Chairman of the Board 11/80
Director
Francis J. Carey 70 President 11/80
Director
George E. Stoddard 79 Chairman of the Investment Committee 11/80
Director
Raymond S. Clark 82 Chairman of the Executive Committee 11/80
Director
Madelon DeVoe Talley 64 Vice Chairman of the Board 4/86
Director
Barclay G. Jones III 35 Executive Vice President 8/82
Director
Lawrence R. Klein 75 Chairman of the Economic Policy 4/84
Committee
Director
Claude Fernandez 43 Executive Vice President 3/83
Chief Administrative Officer
Howard J. Altmann 32 Senior Vice President 8/90
H. Augustus Carey 38 Senior Vice President 8/88
John J. Park 31 Senior Vice President 7/91
Treasurer
Michael D. Roberts 44 First Vice President 4/89
Controller
(1) Each officer and director of the Corporate General Partner will hold office
until the next annual meeting of the Board of Directors and thereafter until
his successor shall have been elected and shall have qualified or until his
prior death, resignation or removal.
William Polk Carey and Francis J. Carey are brothers and Raymond S.
Clark is their brother-in-law. H. Augustus Carey is the nephew of William Polk
Carey and Raymond S. Clark and the son of Francis J. Carey.
A description of the business experience of each officer and director of
the Corporate General Partner is set forth below:
William Polk Carey, Chairman and Chief Executive Officer, has been
active in lease financing since 1959 and a specialist in net leasing of
corporate real estate property since 1964. Before founding W.P. Carey & Co.,
Inc. ("W.P. Carey") in 1973, he served as Chairman of the Executive Committee of
Hubbard,
- 7 -
Westervelt & Mottelay (now Merrill Lynch Hubbard), head of Real Estate and
Equipment Financing at Loeb Rhoades & Co. (now Lehman Brothers), head of Real
Estate and Private Placements, Director of Corporate Finance and Vice Chairman
of the Investment Banking Board of duPont Glore Forgan Inc. A graduate of the
University of Pennsylvania's Wharton School of Finance, Mr. Carey is a Governor
of the National Association of Real Estate Investment Trusts (NAREIT). He also
serves on the boards of The Johns Hopkins University and its medical school, The
James A. Baker III Institute for Public Policy at Rice University, and other
educational and philanthropic institutions. He founded the Visiting Committee
to the Economics Department of the University of Pennsylvania and co-founded
with Dr. Lawrence R. Klein the Economics Research Institute at that university.
Francis J. Carey was elected President and a Managing Director of W.P.
Carey in April 1987, having served as a Director since its founding in 1973. He
served as a member of the Executive Committee and Board of Managers of the
Western Savings Bank of Philadelphia from 1972 until its takeover by another
bank in 1982 and is former chairman of the Real Property, Probate and Trust
Section of the Pennsylvania Bar Association. Mr. Carey served as a member of the
Board of Overseers of the School of Arts and Sciences of the University of
Pennsylvania from 1983 through 1990 and has served as a member of the Board of
Trustees of the Investment Program Association since 1990. From April 1987 until
August 1992, he served as counsel to Reed Smith Shaw & McClay, counsel for
Registrant, the General Partners, the CPA(R) Partnerships and W.P. Carey and
some of its affiliates. A real estate lawyer of more than 30 years' experience,
he holds A.B. and J.D. degrees from the University of Pennsylvania.
George E. Stoddard, Chief Investment Officer, was until 1979 head of the
bond department of The Equitable Life Assurance Society of the United States,
with responsibility for all activities related to Equitable's portfolio of
corporate investments acquired through direct negotiation. Mr. Stoddard was
associated with Equitable for over 30 years. He holds an A.B. degree from
Brigham Young University, an M.B.A. from Harvard Business School and an LL.B.
from Fordham University Law School.
Raymond S. Clark is former President and Chief Executive Officer of the
Canton Company of Baltimore and the Canton Railroad Company. A graduate of
Harvard College and Yale Law School, he is presently a Director and Chairman of
the Executive Committee of W.P. Carey and served as Chairman of the Board of
W.P. Carey from its founding in 1973 until 1982. He is past Chairman of the
Maryland Industrial Development Financing Authority.
Madelon DeVoe Talley, Vice Chairman, is a member of the New York State
Controller's Investment Committee, a Commissioner of the Port Authority of New
York and New Jersey, former CIO of New York State Common Retirement Fund and New
York State Teachers Retirement System. She also served as a managing director of
Rothschild, Inc. and as the President of its asset management division. Besides
her duties at W.P. Carey, Mrs. Talley is also a former Governor of the N.A.S.D.
and is a director of Biocraft Laboratories, a New York Stock Exchange company.
She is an alumna of Sarah Lawrence College and the graduate school of
International Affairs at Columbia University.
Barclay G. Jones III, Executive Vice President, Managing Director, and
co-head of the Investment Department. Mr. Jones joined W.P. Carey as Assistant
to the President in July 1982 after his graduation from the Wharton School of
the University of Pennsylvania, where he majored in Finance and Economics. He
was elected to the Board of Directors of W.P. Carey in April 1992. Mr. Jones is
also a Director of the Wharton Business School Club of New York.
- 8 -
Lawrence R. Klein, Chairman of the Economic Policy Committee since 1984,
is Benjamin Franklin Professor of Economics Emeritus at the University of
Pennsylvania, having joined the faculty of Economics and the Wharton School in
1958. He holds earned degrees from the University of California at Berkeley and
Massachusetts Institute of Technology and has been awarded the Nobel Prize in
Economics as well as over 20 honorary degrees. Founder of Wharton Econometric
Forecasting Associates, Inc., Dr. Klein has been counselor to various
corporations, governments, and government agencies including the Federal Reserve
Board and the President's Council of Economic Advisers.
Claude Fernandez, Chief Administrative Officer, Managing Director, and
Executive Vice President, joined W.P. Carey in 1983. Previously associated with
Coldwell Banker, Inc. for two years and with Arthur Andersen & Co., he is a
Certified Public Accountant. Mr. Fernandez received his B.S. degree in
Accounting from New York University in 1975 and his M.B.A. in Finance from
Columbia University Graduate School of Business in 1981.
Howard J. Altmann, Senior Vice President, Investment Department, joined
W.P. Carey in August 1990. He was a securities analyst at Goldman Sachs & Co.
for the retail industry from 1986 to 1988. Mr. Altmann received his
undergraduate degree in economics and finance from McGill University and his
M.B.A. from the Stanford University Graduate School of Business.
H. Augustus Carey, Senior Vice President, returned to W.P. Carey in
1988. Mr. Carey previously worked for W.P. Carey from 1979 to 1981 as Assistant
to the President. Prior to rejoining W.P. Carey, Mr. Carey served as a loan
officer of the North American Department of Kleinwort Benson Limited in London,
England. He received an A.B. from Amherst College in 1979 and an M.Phil. in
Management Studies from Oxford University in 1984. Mr. Carey is a trustee of the
Oxford Management Centre Associates Council.
John J. Park, Senior Vice President and Treasurer, joined W.P. Carey as
an Investment Analyst in December 1987. Mr. Park received his undergraduate
degree from Massachusetts Institute of Technology and his M.B.A. in Finance from
New York University.
Michael D. Roberts joined W. P. Carey as a Second Vice President and
Assistant Controller in April 1989 and is currently First Vice President and
Controller. Prior to joining W.P. Carey, Mr. Roberts was employed by Coopers &
Lybrand, where he attained the title of audit manager. A certified public
accountant, Mr. Roberts received a B.A. from Brandeis University and an M.B.A.
from Northeastern University.
Item 11. Executive Compensation.
-----------------------
Under the Amended Agreement of Limited Partnership of Registrant (the
"Agreement"), 1.9% of Distributable Cash From Operations, as defined, is payable
to the Corporate General Partner and .1% of Distributable Cash From Operations
is payable to the Individual General Partner. The Corporate General Partner and
the Individual General Partner received $89,725 and $84,722 respectively, from
Registrant as their share of Distributable Cash From Operations during the year
ended December 31 1995. As owner of 200 Limited Partnership Units, the
Corporate General Partner received cash distributions of $38,024 ($190.12 per
Unit) during the year ended December 31, 1995. See Item 6 for the net income
allocated to the General Partners under the Agreement. Registrant is not
required to pay, and has not paid, any remuneration to the officers or directors
of the Corporate General Partner or any other affiliate of Registrant during the
year ended December 31, 1995. Although Registrant is authorized to pay the
Individual General Partner a fee of up to $15,000 in any year beginning after
December 31, 1980, no fee will be paid so long as Mr. Carey is the Individual
General Partner and no fee may be paid to any successor Individual General
Partner appointed by Mr. Carey pursuant to the Agreement.
In the future, the Corporate General Partner will continue to receive
1.9% of Distributable Cash From Operations, the Individual General Partner will
continue to receive .1% of Distributable Cash From Operations and each General
Partner will continue to be allocated the same percentage of the profits and
losses of Registrant as had been allocated in the past. For a description of
the subordinated interest of the Corporate General Partner and the Individual
General Partner in Cash From Sales and Cash From Financing, reference is made to
the materials contained in the Prospectus under the heading MANAGEMENT
COMPENSATION.
- 9 -
Item 12. Security Ownership of Certain Beneficial Owners and
---------------------------------------------------
Management.
-----------
As of December 31, 1995, no person owned of record, or was known by
Registrant to own beneficially, more than 5% of the Limited Partnership Units of
Registrant.
The following table sets forth as of March 20, 1996 certain
information as to the ownership by directors and executive officers of
securities of Registrant:
Number of Units
Name of and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership (1) of Class
- --------------------------- ---------------------- ------------------------ ---------
Limited
Partnership Units William Polk Carey (1) 200 units .30%
Francis J. Carey
George E. Stoddard
Raymond S. Clark 15 .02
Madelon DeVoe Talley
Barclay G. Jones III
Lawrence R. Klein
Claude Fernandez
Howard J. Altmann
H. Augustus Carey
John J. Park
Michael D. Roberts ___ _______
All executive officers
and directors as a
group (12 persons) 215 units .32%
=== =====
(1) As of March 20, 1996, the Corporate General Partner, W. P. Carey & Co.,
Inc., owned 200 Limited Partnership Units of Registrant. William Polk
Carey, the sole shareholder of the Corporate General Partner, is the
beneficial owner of these Units.
There exists no arrangement, known to Registrant, the operation of which
may at a subsequent date result in a change of control of Registrant.
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
For a description of transactions and business relationships between
Registrant and its affiliates and their directors and officers, see Notes 2 and
3 to the Financial Statements contained in Item 8. Michael B. Pollack, First
Vice President and Secretary of the Corporate General Partner, is a partner of
Reed Smith Shaw & McClay which is engaged to perform legal services for
Registrant.
No officer or director of the Corporate General Partner or any other
affiliate of Registrant or any member of the immediate family or associated
organization of any such officer or director was indebted to Registrant at any
time since the beginning of Registrant's last fiscal year.
- 10 -
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on
------------------------------------------------------
Form 8-K
--------
(a) 1. Financial Statements:
---------------------
The following financial statements are filed as a part of this Report:
Report of Independent Accountants.
Balance Sheets, December 31, 1994 and 1995.
Statements of Income for the years ended December 31, 1993, 1994 and 1995.
Statements of Partners' Capital for the years ended December 31, 1993, 1994 and
1995.
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995.
Notes to Financial Statements.
The financial statements are hereby incorporated by reference to pages 7 to 18
of Registrant's Annual Report contained in Appendix A.
(a) 2. Financial Statement Schedule:
-----------------------------
The following schedule is filed as a part of this Report:
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 1995.
Notes to Schedule III.
Schedule III and notes thereto are hereby incorporated by reference to pages
19 to 20 of Registrant's Annual Report contained in Appendix A.
Financial Statement Schedules other than those listed above are omitted
because the required information is given in the Financial Statements, including
the Notes thereto, or because the conditions requiring their filing do not
exist.
- 11 -
(a) 3. Exhibits:
---------
The following exhibits are filed as part of this Report. Documents
other than those designated as being filed herewith are incorporated herein by
reference.
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
3.1 Amended Agreement of Limited Partnership of Exhibit 3(B) to Regis-
Registrant dated as of June 1, 1981. tration Statement (Form
S-11) No. 2-70773
4.1 Deed from Western Union Realty Corporation Exhibit 10(H)(3) to Post-
("WURC") to Corporate Property Associates 2 Effective Amendment No. 1
("CPA(R):2") and Registrant, as tenants in to Registration Statement
common, dated November 16, 1981. (Form S-11) No. 2-70773
4.6 Deed from WURC to CPA(R):2 and Registrant Exhibit 10(H)(13) to Post-
as tenants in common, dated November 16, Effective Amendment No. 1
1981 to Registration Statement
(Form S-11) No. 2-70773
4.10 Deed from WURC to CPA(R):2 and Registrant, as Exhibit 10(H)(23) to Post-
tenants in common, dated November 16, 1981. Effective Amendment No. 1
to Registration Statement
(Form S-11) No. 2-70773
4.15 Deed from WURC to CPA(R):2 and Registrant, as Exhibit 10(H)(33) to Post-
tenants in common, dated November 16, 1981. Effective Amendment No. 1
to Registration Statement
(Form S-11) No. 2-70773
4.43 Agreement for Sale and Sale of Property Exhibit 4.1 to Regis-
and Escrow Instructions, dated October 17, trant's Form 8-K dated
1986, by and between Registrant, CPA(R):4, November 6, 1986
collectively as Seller, and Kraft, Inc.
("Kraft"), as Purchaser.
4.44 Agreement for Sale and Sale of Property Exhibit 4.2 to Regis-
and Escrow Instructions, dated October 17, trant's Form 8-K dated
1986, by and between Registrant, CPA(R):4, November 6, 1986
collectively as Seller, and Hughes Markets,
Inc. ("Hughes"), as Purchaser.
4.45 Letter Agreement dated October 17, 1986 Exhibit 4.3 to Regis-
from Registrant and CPA(R):4, and agreed to trant's Form 8-K dated
and accepted by Kraft and Hughes. November 6, 1986
4.46 Guaranty made as of October 21, 1986 by Exhibit 4.4 to Regis-
Hughes, as Guarantor, to Registrant and trant's Form 8-K dated
CPA(R):4. November 6, 1986
10.1 Contract of Sale dated November 16, 1981 Exhibit 10(H)(1) to Post-
between WURC as seller, and CPA(R):2 and Effective Amendment No. 1
Registrant, as purchasers. to Registration Statement
(Form S-11) No. 2-70773
- 12 -
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
10.2 Indenture of Lease dated September 16, Exhibit 10(H)(1) to Post-
1971 between WURC as landlord, and The Effective Amendment No. 1
Western Union Telegraph Company ("WUTCO"), to Registration Statement
as tenant. (Form S-11) No. 2-70773
10.3 Amendment of Lease dated March 27, 1972 Exhibit 10(H)(5) to Post-
between WURC and WUTCO. Effective Amendment No. 1
to Registration Statement
(Form S-11) No. 2-70773
10.4 Second Amendment of Lease dated November 16, Exhibit 10(H)(6) to Post-
1981 between WURC and WUTCO. Effective Amendment No. 1
to Registration Statement
(Form S-11) No. 2-70773
10.5 Assignment of Lease from WUTCO to CPA(R):2 Exhibit 10(H)(7) to Post-
and Registrant, as tenants in common, Effective Amendment No. 1
dated November 16, 1981. to Registration Statement
(Form S-11) No. 2-70773
10.6 Indenture of Lease dated November 14, Exhibit 10(H)(14) to Post-
1972 between WURC, as landlord, and Effective Amendment No. 1
Western Union Corporation ("WUC"), as to Registration Statement
tenant. (Form S-11) No. 2-70773
10.7 Amendment of Lease dated December 12, Exhibit 10(H)(15) to Post-
1972 between WURC and WUC. Effective Amendment No. 1
to Registration Statement
(Form S-11) No. 2-70773
10.8 Amendment of Lease dated April 30, 1973 Exhibit 10(H)(16) to Post-
between WURC and WUC. Effective Amendment No. 1
to Registration Statement
(Form S-11) No. 2-70773
10.9 Third Amendment of Lease Agreement dated Exhibit 10(H)(17) to Post-
November 12, 1981 between WURC and WUC. Effective Amendment No. 1
to Registration Statement
(Form S-11) No. 2-70773
10.10 Assignment of Lease from WURC to CPA(R):2 and Exhibit 10(H)(18) to Post-
Registrant, as tenants in common, dated Effective Amendment No. 1
November 16, 1981. to Registration Statement
(Form S-11) No. 2-70773
10.11 Indenture of Lease dated July 12, 1972 Exhibit 10(H)(24) to Post-
between WURC, as landlord, and WUC, as Effective Amendment No. 1
tenant. to Registration Statement
(Form S-11) No. 2-70773
10.12 Amendment of Lease dated March 1, 1973 Exhibit 10(H)(25) to Post-
between WURC and WUC. Effective Amendment No. 1
to Registration Statement
(Form S-11) No. 2-70773
- 13 -
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
10.13 Second Amendment of Lease Agreement Exhibit 10(H)(26) to Post-
dated November 16, 1981 between WURC Effective Amendment No. 1
and WUC. to Registration Statement
(Form S-11) No. 2-70773
10.14 Assignment of Lease from WURC to CPA(R):2 Exhibit 10(H)(27) to Post-
and Registrant, as tenants in common, Effective Amendment No. 1
dated November 16, 1981. to Registration Statement
(Form S-11) No. 2-70773
10.15 Indenture of Lease dated December 18, Exhibit 10(H)(34) to Post-
1973 between WURC, as landlord, and WUC, Effective Amendment No. 1
as tenant. to Registration Statement
(Form S-11) No. 2-70773
10.16 Second Amendment of Lease Agreement Exhibit 10(H)(35) to Post-
dated November 16, 1981 between WURC Effective Amendment No. 1
and WUC. to Registration Statement
(Form S-11) No. 2-70773
10.17 Assignment of Lease from WURC to CPA(R):2 Exhibit 10(H)(36) to Post-
and Registrant, as tenants in common, Effective Amendment No. 1
dated November 16, 1981. to Registration Statement
(Form S-11) No. 2-70773
10.19 Lease Agreement dated January 25, 1982 Exhibit 10(J)(4) to Post-
between CPA(R):2 and Registrant, as landlord, Effective Amendment No. 1
and Gibson as tenant. to Registration Statement
(Form S-11) No. 2-70773
10.22 Management Agreement among Registrant, Exhibit 10(C) to Amendment
and Carey Corporate Property Management, No. 1 to Registration
Inc. Statement (Form S-11)
No. 2-70773
10.23 Support Agreement among Registrant, Exhibit 10(D) to Amendment
Third Carey Corporate Property, Inc. No. 1 to Registration
and W.P. Carey & Co., Inc. Statement (Form S-11)
No. 2-70773
10.24 Lease Agreement dated June 1, 1983 Exhibit 10.1 to Form 8-K
between Registrant and CPA(R):4, as dated June 22, 1983 of
landlord, and Knudsen Corporation CPA(R):4 (Commission File
("Knudsen") as tenant. No. 2-79041
10.25 Agreement dated June 1, 1983 between Exhibit 10.2 to Form 8-K
Registrant and CPA(R):4, as landlord, and dated June 22, 1983 of
Knudsen as tenant. CPA(R):4 (Commission File
No. 2-79041
- 14 -
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
10.26 Second Amendment of Lease entered into as Exhibit 10.1 to Regis-
of October 21, 1986, by and between trant's Form 8-K dated
Registrant and CPA(R):4, collectively as November 6, 1986
Landlord, and Santee Dairies, Inc. as
Tenant.
10.27 Lease Agreement dated November 15, 1995 Filed herewith
by and between Registrant and CPA(R):2, as
Landlord, and Cleo, Inc., as Tenant.
10.28 Lease Amendment Agreement dated November 15, 1995 Filed herewith
by and between Registrant and CPA(R):2, as
Landlord, and Gibson Greetings, Inc., as Tenant.
28.2 Press release regarding Pennsylvania Exhibit 28.1 to Form 8-K
Superior Court decision. dated December 10, 1992.
28.3 Prospectus of Registrant Exhibit 28.3 to Form 10-K/A
dated July 31, 1981. dated September 24, 1993
28.4 Supplement dated December 9, 1981 Exhibit 28.4 to Form 10-K/A
to Prospectus dated July 31, 1981. dated September 24, 1993
28.5 Supplement dated January 8, 1982 Exhibit 28.5 to Form 10-K/A
to Prospectus dated July 31, 1981. dated September 24, 1993
28.6 Supplement dated February 10, 1982 Exhibit 28.6 to Form 10-K/A
to Prospectus dated July 31, 1981. dated September 24, 1993
28.8 Press release dated June 30, 1993 Exhibit 28.1 to Form 8-K
announcing the suspension of secondary dated July 12, 1993
market sales of Limited Partnership Units.
28.9 Compromise and Settlement Agreement dated as of Exhibit 28.1 to Form 8-K
May 1, 1995 between The Leslie Fay Companies, Inc., dated May 1, 1995
Registrant and the Official Committee of
Unsecured Creditors of Leslie Fay and
National Union Fire Insurance Company.
(b) Reports on Form 8-K
-------------------
During the quarter ended December 31, 1995 the Registrant was not
required to file any reports on Form 8-K.
- 15 -
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
BY: W. P. CAREY & CO., INC.
04/08/96 BY: /s/ Claude Fernandez
----------- --- ---------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
BY: W. P. CAREY & CO., INC.
William P. Carey
Chairman of the Board
and Director
(Principal Executive Officer)
Francis J. Carey
President and Director
George E. Stoddard BY: /s/ George E. Stoddard
Chairman of the Investment -----------------------
Committee and Director George E. Stoddard
Attorney in fact
April 8, 1996
Dr. Lawrence R. Klein
Chairman of the Economic Policy
Committee and Director
Madelon DeVoe Talley
Vice Chairman of the Board of
Directors and Director
04/08/96 BY: /s/ Claude Fernandez
-------------- --- ---------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
04/08/96 BY: /s/ Michael D. Roberts
-------------- --- -----------------------
Date Michael D. Roberts
First Vice President and Controller
(Principal Accounting Officer)
- 16 -
APPENDIX A TO FORM 10-K
CORPORATE PROPERTY ASSOCIATES 3
(A CALIFORNIA LIMITED PARTNERSHIP)
1995 ANNUAL REPORT
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
(In thousands except per unit amounts)
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
OPERATING DATA:
Revenues $8,669 $ 8,478 $7,554 $7,392 $ 7,249
Net income 5,632 4,900 2,929 3,215 15,976
Net income allocated:
To General Partners 113 98 59 64 320
To Limited Partners 5,519 4,802 2,870 3,151 15,656
Per unit 83.62 72.76 43.49 47.74 237.21
Distributions attributable (1):
To General Partners 95 130 93 93 168
To Limited Partners 4,650 8,032 (2) 4,536 4,568 12,208 (2)
Per unit 70.46 121.70 68.72 69.21 184.97
BALANCE SHEET DATA:
Total assets 55,185 57,978 57,171 57,050 33,223
Long-term
obligations (3) 19,549 17,078 15,624 14,026 -
(1) Includes distributions attributable to the fourth quarter of each fiscal
year payable in the following fiscal year less distributions in the first
fiscal quarter attributable to the prior year.
(2) Include special distributions of $50 and $120 in 1992 and 1995,
respectively, per Limited Partnership Unit.
(3) Represents mortgage obligations due after more than one year.
-1-
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Results of Operations
---------------------
Net income for the year ended December 31, 1995 increased by $12,761,000
as compared with net income for the year ended December 31, 1994, primarily due
to the successful settlement of litigation with the Leslie Fay Company ("Leslie
Fay") which accounted for $11,499,000 of the increase to net income. Excluding
the effect of Leslie Fay, other nonrecurring income of $225,000 and writedowns
of properties to net realizable value in 1995 and 1994 of $146,000 and $697,000,
respectively, the Partnership would have reflected an increase in net income of
$485,000. The increase in income, as adjusted, was due to decreases in interest
and property expenses and an increase in other interest income and was partially
offset by a decrease in lease revenues. The decrease in interest expense
resulted from the $1,320,000 prepayment of mortgage loans on properties leased
or formerly leased to New Valley Corporation ("New Valley") in the first quarter
of 1995 and the prepayment of the mortgage loan on the Gibson Greetings, Inc.
("Gibson") properties in November 1995 in connection with the restructuring of
the Gibson lease. The decrease in property expenses was due to the costs
incurred in 1994 in connection with the Partnership's assessment of its
liquidity alternatives which included environmental reviews and property
valuations. Other interest income increased as the result of the receipt of a
lump sum cash payment of $5,000,000 received upon resolution of the dispute with
Leslie Fay and invested in money market funds, before being distributed to
partners through a special distribution. The decrease in lease revenues was due
to the termination of the New Valley lease on the Reno, Nevada property in
December 1994 and the modification and restructuring of the Gibson lease as
described below. The substantial increase in cash flow provided from operations
was primarily due to the receipt of lump sum payments of $13,732,000 relating to
Gibson and Leslie Fay.
The Partnership realized a net gain of $11,499,000 upon settlement of a
dispute with Leslie Fay, described in Note 10 to the Financial Statements.
Proceeds from the settlement amount to $18,900,000, of which $13,081,000 had
been collected prior to 1995. Pursuant to the settlement, Leslie Fay was
released from all obligations under the lease, relinquished all claims to the
property and vacated the facility. In connection with the settlement, the
Partnership incurred a $7,400,000 writeoff on the property to its net realizable
value, unencumbered by the lease. The Leslie Fay property was purchased by the
Partnership for $9,400,000 in 1982. The vacant property was subsequently sold to
a third party in January 1996 and, in connection with the sale, the Partnership
recognized an additional writeoff of $146,000 to net realizable value in 1995.
Total proceeds from the settlement of the Leslie Fay dispute and the sale of the
property amount to approximately $20,900,000. In addition, as more fully
described in Note 11 to the Financial Statements, the Partnership received
$8,723,000 ($8,150,941, net of costs) in connection with consenting to a
modification of the Gibson lease. The Partnership severed one of three
properties from the Gibson master lease, modified the master lease for the
remaining two properties and entered into a new lease with Cleo, Inc. ("Cleo"),
a new lessee, for the severed property. Annual gross revenues will decrease as a
result of the lease modification; however, net cash flow will increase as a
result of the retirement of the Gibson mortgage which was paid off with proceeds
from the lump sum payment. For financial reporting purposes, income from this
transaction has been deferred and will be recognized over the remaining terms of
the Gibson and Cleo leases.
Net income for the year ended December 31, 1994 increased by $286,000 to
$3,215,000 as compared with net income for the year ended December 31, 1993. In
addition, cash provided from operations for 1994 increased by $260,000 to
$4,647,000 as compared with 1993. The increase in net income was primarily due
to the noncash charges of $1,302,000 in 1993 for the writedown on the
Partnership property in Moorestown, New Jersey as compared with the noncash
charge of $697,000 in 1994 on the writedown of the Partnership's property in
Reno, Nevada. Excluding the effect of the writedowns, income would have
decreased by $319,000 in 1994 as compared with 1993. Such a decrease would have
resulted from the increase in property expenses and a decrease on other interest
income due to the Leslie Fay litigation and bankruptcy proceedings and related
interest incurred on the Leslie Fay installments.
-2-
Net income and cash flow provided by operating activities may be
affected by the uncertainty related to the Hughes Markets, Inc. ("Hughes")
lease. The lease with Hughes for a dairy processing plant in Los Angeles,
California is currently scheduled to expire in April 1996. The Partnership and
Hughes have entered into negotiations for a two-year lease extension; however,
there can be no assurance that such an extension will be executed. The
Partnership is in the process of remarketing the property in the event that
Hughes vacates. The Partnership's share of annual rent from the Hughes lease is
currently $305,000. If the property were vacated, the Partnership estimates that
annual carrying costs for insurance, real estate taxes and maintenance and
security would be approximately $100,000. The Partnership's share of annual
carrying charges on the vacant property in Reno, Nevada is currently $80,000.
The Partnership is continuing its efforts to remarket the Reno property for
either lease or sale.
In May 1996, the Partnership is scheduled to start receiving rent of
$188,000 per year from its lease with Sports & Recreation, Inc. ("Sports &
Recreation") on the Moorestown, New Jersey property. Sports & Recreation is in
the process of retrofitting the Moorestown property for use as a retail store.
Annual rentals on the two Gibson properties and the Cleo property which had
formerly been leased to Gibson are $2,367,000 and $1,145,000, respectively.
Prior to the modification of the Gibson lease, the Partnership's annual rentals
from the property were $5,962,000. Although annual revenues from these
properties will be reduced by $2,450,000, the Partnership had been paying annual
debt service of $2,510,000 on the Gibson mortgage loan. As the result of the
prepayment of the mortgage loan, annual cash flow from the Gibson and Cleo
properties will reflect an increase of $60,000 in spite of the reduction in
rental income. The Gibson mortgage loan had been scheduled to mature with a
balloon payment of $12,582,000 in 1996 and the Partnership would have attempted
to refinance the loan at that time. It is possible that the Partnership would
have realized a reduction in debt service on any refinancing. Prior to the
restructuring, Gibson represented approximately 80% of lease revenues. If the
Hughes lease is extended, Gibson's share of lease revenues will decrease to
approximately 50% of lease revenues, thereby reducing the Partnership's exposure
to any adverse changes in the financial condition of Gibson. By entering into
the lease with Cleo, the Partnership has achieved greater diversification.
Because of the long-term nature of the Partnership's net leases,
inflation and changes in prices have not unfavorably affected the Partnership's
net income or had an impact on the continuing operations of the Partnership's
properties. The leases with Gibson, New Valley, Sports & Recreation and AT&T
Corporation ("AT&T") provide periodic fixed rent increases and the lease with
Cleo provides for periodic rent increases based on formulas indexed to increases
in the Consumer Price Index. No rental increases are scheduled to occur until
1997, when an increase is scheduled on the AT&T lease.
Financial Condition
-------------------
Except for the vacant property in Reno, Nevada, all of the Partnerships
properties are leased to corporate tenants under net leases by which tenants are
generally required to pay all operating expenses relating to the leased
properties. The Partnership depends on a relatively stable operating cash flow
from its net leases to meet operating expenses and fund quarterly distributions
to partners. During 1995, the Partnership significantly modified its capital
structure by liquidating all of its mortgage debt. At the beginning of the
year, the Partnership had a remaining mortgage obligation at the beginning of
the year of approximately $15,600,000. In addition, the Company paid a special
distribution of $8,000,000 (resulting in a $120 return of capital per Limited
Partnership Unit as defined in the Partnership Agreement). As a result, the
Partnership's cash balances decreased from $8,851,000 to $1,158,000.
Cash provided from operating activities of $12,918,000 was sufficient to
pay distributions to partners of $4,722,000 and scheduled mortgage installment
payments of $1,113,000. Approximately $8,151,000 of the cash provided from
operations resulted from nonrecurring lump sum payments, net of the related
costs. Future operating cash flows are subject to various uncertainties
described herein and the ability to sustain or increase the distribution rate is
subject to the outcome of the uncertainty related to the Hughes property.
-3-
Cash flow generated from operating and investing activities has
generally exceeded distributions paid. Distributions paid per Limited
Partnership Unit in 1993 and 1994 exceeded net income per Limited Partnership
Unit by $24.91 and $21.40 in 1993 and 1994, respectively. This is because the
Partnership evaluates its projection of cash flows in determining the
distribution rate. Net income is reduced by charges such as depreciation,
amortization and property writedowns which do not impact cash flows.
The Partnership's financing activities in 1995 included paying off all
of the Partnership's remaining mortgage balances and paying a special
distribution to partners of $8,000,000 as well as paying quarterly distributions
to partners of $4,722,000. As a result of these activities, the Partnership
significantly reduced its cash reserves. Since the inception of the Partnership,
special distributions of $250 per Unit have been paid representing a return of
50% of the original cost of a Unit. Accordingly, the amount of quarterly
distributions per Unit can be expected to decrease even though the distribution
rate on adjusted capital, as defined in the Partnership Agreement, may continue
to increase. The Corporate General Partner advanced a loan of $2,300,000 to help
retire the Gibson mortgage loan. The loan is a demand note and it is anticipated
that the note will be repaid from future operating cash flow. Since December 31,
1995, the Partnership has repaid $1,500,000 of the advance. The Partnership has
ample unused borrowing capacity because all of its properties are unleveraged;
however, no financings are currently being contemplated.
The Partnership's sole investing activity for the periods presented in
the financial statements consisted of the receipt of purchase installments and
settlement payments from Leslie Fay. Pursuant to its lease with Sports and
Recreation, the Partnership has an obligation to reimburse Sports and Recreation
for certain retrofitting costs which are currently estimated to be $458,000. It
is currently anticipated that such costs will be funded from operating cash
flow. In the event that there are insufficient cash reserves, the Partnership
could seek an additional advance from the Corporate General Partner or borrow on
its unleveraged properties.
In connection with the termination of the Moorestown and Reno leases,
the Partnership expects to receive a bankruptcy settlement; however, the amount
of such settlement cannot be estimated and no amounts that the Partnership may
ultimately receive have been recorded in the accompanying financial statements.
Cleo has an option to purchase its property which is exercisable at any
time with at least six months notice.
All of the Partnership's properties are subject to environmental
statutes and regulations regarding the discharge of hazardous materials and
related remediation obligations. All but two of the Partnership's properties are
currently leased to corporate tenants. The Partnership generally structures a
lease to require the tenant to comply with all laws. In addition, substantially
all of the Partnership's net leases include provisions which require tenants to
indemnify the Partnership from all liabilities and losses related to their
operations at the leased properties. If the Partnership undertakes to clean up
or remediate any of its properties, the General Partners believe that in most
cases the Partnership will be entitled to reimbursement from tenants for such
costs. In the event that the Partnership absorbs a portion of such costs because
of a tenant's failure to fulfill its obligations (or because a property
currently has no tenant), the General Partners believe such expenditures will
not have a material adverse effect on the Partnership's financial condition,
liquidity or results of operations.
In 1994, the Partnership voluntarily conducted Phase II environmental
reviews of certain of its properties based on the results of Phase I
environmental reviews conducted in 1993. The Partnership believes, based on the
results of such reviews, that its properties are in substantial compliance with
Federal and state environmental statutes and regulations. Portions of certain
properties have been documented as having a limited degree of contamination,
principally in connection with either leakage from underground storage tanks or
surface spills from facility activities. For those conditions which were
identified, the Partnership advised the affected tenant of the Phase II findings
and of its obligation to perform required remediation.
-4-
Effective January 1, 1995, the Partnership adopted the provisions of
Statement of Financial Accounting Standards No. 121 - Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of ("SFAS
121"). Pursuant to SFAS 121, the Partnership assesses the recoverability of its
real estate assets, including residual interests, based on projections of cash
flows over the life of such assets. In the event that such cash flows are
insufficient, the assets are adjusted to their estimated net realizable value.
The adoption of SFAS 121 did not have a material effect on the Partnership's
financial condition or results of operations.
-5-
REPORT of INDEPENDENT ACCOUNTANTS
To the Partners of
Corporate Property Associates 3:
We have audited the accompanying balance sheets of Corporate Property
Associates 3 (a California limited partnership) as of December 31, 1994 and
1995, and the related statements of income, partners' capital and cash flows for
each of the three years in the period ended December 31, 1995. We have also
audited the financial statement schedule included on pages 19 to 20 of this
Annual Report. These financial statements and financial statement schedule are
the responsibility of the General Partners. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Corporate Property
Associates 3 (a California limited partnership) as of December 31, 1994 and
1995, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles. In addition, in our opinion, the Schedule of
Real Estate and Accumulated Depreciation as of December 31, 1995, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the financial information required to
be included therein pursuant to Securities and Exchange Commission Regulation S-
X Rule 12-28.
/s/ Coopers & Lybrand L.L.P.
NEW YORK, NEW YORK
March 29, 1996
-6-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
BALANCE SHEETS
December 31, 1994 and 1995
1994 1995
---- ----
ASSETS:
Real estate leased to others:
Accounted for under the
operating method:
Land $ 1,255,499 $ 1,255,499
Buildings 4,514,428 4,514,428
----------- -----------
5,769,927 5,769,927
Accumulated depreciation 976,612 1,175,202
----------- -----------
4,793,315 4,594,725
Net investment in direct financing leases 33,415,760 25,291,792
----------- -----------
Real estate leased to others 38,209,075 29,886,517
Real estate held for sale 9,400,000 1,853,816
Cash and cash equivalents 8,851,419 1,158,302
Accrued interest and rents receivable 524,060 210,362
Due from affiliates 29,101
Other assets, net of accumulated amortization
of $193,827 in 1994 35,870 114,160
----------- -----------
Total assets $57,049,525 $33,223,157
=========== ===========
LIABILITIES:
Mortgage notes payable $15,624,196
Note payable to affiliate $ 2,300,000
Accrued interest payable 351,372
Accounts payable and accrued expenses 428,778 86,776
Prepaid rental income 38,695
Accounts payable to affiliates 57,298
Purchase installments 13,080,601
----------- -----------
Total liabilities 29,523,642 2,444,074
----------- -----------
Commitments and contingencies
PARTNERS' CAPITAL:
General Partners 46,541 191,606
Limited Partners (66,000 Limited
Partnership Units issued and
outstanding) 27,479,342 30,587,477
----------- -----------
Total partners' capital 27,525,883 30,779,083
----------- -----------
Total liabilities and
partners' capital $57,049,525 $33,223,157
=========== ===========
The accompanying notes are an integral part of the financial statements.
-7-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
STATEMENTS of INCOME
For the years ended December 31, 1993, 1994 and 1995
1993 1994 1995
---- ---- ----
Revenues:
Rental income $ 287,779 $ 287,779 $ 290,657
Interest income from direct financing leases 7,056,551 7,055,695 6,502,361
Other interest Income 209,897 48,378 230,926
Other income 225,321
---------- ---------- -----------
7,554,227 7,391,852 7,249,265
---------- ---------- -----------
Expenses:
Interest 1,734,434 1,602,175 1,255,047
Depreciation 147,229 158,567 198,590
General and administrative 339,230 309,069 372,006
Property expenses 1,079,551 1,387,498 781,442
Amortization 22,405 22,405 19,605
Writedown to net realizable value 1,302,318 697,325 146,184
---------- ---------- -----------
4,625,167 4,177,039 2,772,874
---------- ---------- -----------
Income before gain on settlement 2,929,060 3,214,813 4,476,391
Gain on settlement, net of $7,400,000
writedown to net realizable value 11,499,176
---------- ---------- -----------
Net income $2,929,060 $3,214,813 $15,975,567
========== ========== ===========
Net income allocated to:
Individual General Partner $ 2,929 $ 3,215 $ 15,976
========== ========== ===========
Corporate General Partner $ 55,652 $ 61,081 $ 303,536
========== ========== ===========
Limited Partners $2,870,479 $3,150,517 $15,656,055
========== ========== ===========
Net income per Unit
(66,000 Limited Partnership
Units outstanding) $43.49 $47.74 $237.21
========== ========== ===========
The accompanying notes are an integral part of the financial statements.
-8-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
STATEMENTS of PARTNERS' CAPITAL
For the years ended December 31, 1993, 1994 and 1995
Partners' Capital Accounts
--------------------------
Limited
Partners'
General Limited Amount Per
Total Partners Partners Unit (a)___
----- -------- --------- --------------
Balance, December 31, 1992 $ 30,644,908 $ 108,922 $ 30,535,986 $ 463
Distributions (4,606,531) (92,131) (4,514,400) (68)
Net income 1993 2,929,060 58,581 2,870,479 43
------------ --------- ------------ -----
Balance, December 31, 1993 28,967,437 75,372 28,892,065 438
Distributions (4,656,367) (93,127) (4,563,240) (69)
Net income 1994 3,214,813 64,296 3,150,517 48
------------ --------- ------------ -----
Balance, December 31, 1994 27,525,883 46,541 27,479,342 417
Distributions (12,722,367) (174,447) (12,547,920) (190)
Net income 1995 15,975,567 319,512 15,656,055 237
------------ --------- ------------ -----
Balance, December 31, 1995 $ 30,779,083 $ 191,606 $ 30,587,477 $ 464
============ ========= ============ =====
(a) Based on 66,000 Units issued and outstanding during all periods.
The accompanying notes are an integral part of the financial statements.
-9-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
STATEMENTS of CASH FLOWS
For the years ended December 31, 1993, 1994 and 1995
1993 1994 1995
---- ---- ----
Cash flows from operating activities:
Net Income $ 2,929,060 $ 3,214,813 $ 15,975,567
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 169,634 180,972 218,195
Gain on settlement, net (11,499,176)
Restructuring fees received, net of costs 8,150,941
Cash receipts on direct financing leases in excess
of (less than) amortization of unearned income 8,193 9,046 (26,973)
Writedown to net realizable value 1,302,318 697,325 146,184
Net change in operating assets and liabilities (21,484) 545,219 (47,161)
----------- ------------ ------------
Net cash provided by operating
activities 4,387,721 4,647,375 12,917,577
----------- ------------ ------------
Cash flows from investing activities:
Proceeds from settlement, net 4,850,869
Payments received in connection with
exercise of purchase option 2,260,792 2,286,195 585,000
----------- ------------ ------------
Net cash provided by
investing activities 2,260,792 2,286,195 5,435,869
----------- ------------ ------------
Cash flows from financing activities:
Distributions to partners (4,606,531) (4,656,367) (12,722,367)
Payment of mortgage principal (1,322,185) (1,453,396) (1,113,283)
Prepayment of mortgage principal (14,510,913)
Proceeds from issuance of note to affiliate 2,300,000
----------- ------------ ------------
Net cash used in
financing activities (5,928,716) (6,109,763) (26,046,563)
----------- ------------ ------------
Net increase (decrease) in cash
and cash equivalents 719,797 823,807 (7,693,117)
Cash and cash equivalents,
beginning of year 7,307,815 8,027,612 8,851,419
----------- ------------ ------------
Cash and cash equivalents,
end of year $ 8,027,612 $ 8,851,419 $ 1,158,302
=========== ============ ============
Supplemental cash flows information:
Interest paid $ 1,744,897 $ 1,613,684 $ 1,357,609
=========== =========== ============
The accompanying notes are an integral part of the financial statements.
-10-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
-------------------------------------------
Real Estate Leased to Others:
----------------------------
Real estate is leased to others on a net lease basis, whereby the tenant is
generally responsible for all operating expenses relating to the
property, including property taxes, insurance, maintenance, repairs,
renewals and improvements.
The Partnership diversifies its real estate investments among various corporate
tenants engaged in different industries and by property type throughout
the United States.
The leases are accounted for under the direct financing or operating methods.
Such methods are described below:
Direct financing method - Leases accounted for under the direct
-----------------------
financing method are recorded at their net investment (Note 5). Unearned
income is deferred and amortized to income over the lease terms so as to
produce a constant periodic rate of return on the Partnership's net
investment in the lease.
Operating method - Real estate is recorded at cost, revenue is
----------------
recognized as rentals are earned and expenses (including depreciation)
are charged to operations as incurred.
Effective January 1, 1995, the Partnership adopted the provisions of Statement
of Financial Accounting Standards No. 121 - Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
("SFAS 121"). Pursuant to SFAS 121, the Partnership assesses the
recoverability of its real estate assets, including residual interests,
based on projections of cash flows over the life of such assets. In the
event that such cash flows are insufficient, the assets are adjusted to
their estimated net realizable value. The adoption of SFAS 121 did not
have a material effect on the Partnership's financial condition or
results of operations.
Substantially all of the Partnership's leases provide for either scheduled rent
increases or periodic rent increases based on formulas indexed to
increases in the Consumer Price Index ("CPI").
Use of Estimates:
- -----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Real Estate Held for Sale:
- --------------------------
Real estate held for sale is accounted for at the lower of cost or fair value
less costs to sell.
Depreciation:
- -------------
Depreciation is computed using the straight-line method over the estimated
useful lives of components of the property, which range from 5 to 36
years.
Cash Equivalents:
- -----------------
Corporate Property Associates 3 (the "Partnership") considers all short-term,
highly-liquid investments that are both readily convertible to cash and
have a maturity of generally three months or less at the time of
purchase to be cash equivalents. Items classified as cash equivalents
include commercial paper and money market funds. Substantially all of
the
Continued
-11-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
Partnership's cash and cash equivalents at December 31, 1994 and 1995
were held in the custody of two financial institutions.
Other Assets:
- -------------
Included in other assets at December 31, 1994 are costs incurred in connection
with mortgage note refinancings which are amortized on a straight-line
basis over the terms of the mortgages.
Income Taxes:
- -------------
A partnership is not liable for income taxes as each partner recognizes his
proportionate share of the partnership income or loss in his tax return.
Accordingly, no provision for income taxes is recognized for financial
statement purposes.
2. Partnership Agreement:
----------------------
The Partnership was organized on November 7, 1980 under the Uniform Limited
Partnership Act of the State of California for the purpose of engaging
in the business of investing in and leasing industrial and commercial
real estate. The Corporate General Partner purchased 200 Limited
Partnership Units in connection with the Partnership's public offering.
The Partnership will terminate on December 31, 2018, or sooner, in
accordance with the terms of the Amended Agreement of Limited
Partnership (the "Agreement").
The Agreement provides that the General Partners are allocated 2% (.1% to the
Individual General Partner, William P. Carey, and 1.9% to the Corporate
General Partner, W. P. Carey & Co., Inc. ("W.P. Carey") and the Limited
Partners are allocated 98% of the profits and losses as well as
distributions of distributable cash from operations, as defined. The
partners are also entitled to receive net proceeds from the sale of the
Partnership properties as defined in the Agreement. An affiliate of the
General Partners may be entitled to incentive fees during the
liquidation stage of the Partnership. A division of W.P. Carey is
engaged in the real estate brokerage business. The Partnership may sell
properties through the division and pay subordinated real estate
commissions as provided in the Agreement. The division could ultimately
earn a real estate commission of up to $675,477 with respect to the
sales of properties, which amounts will be retained by the Partnership
unless the subordination provisions of the Agreement are satisfied.
3. Transactions with Related Parties:
----------------------------------
Under the Agreement, a division of W.P. Carey is also entitled to receive a
property management fee and reimbursement of certain expenses incurred
in connection with the Partnership's operations. Property management
fee in 1995 includes the effects of certain transactions described in
Notes 10 and 11. General and administrative expense reimbursements
consist primarily of the actual cost of personnel needed in providing
administrative services necessary to the operation of the Partnership.
Property management fee and general and administrative expense
reimbursements are summarized as follows:
1993 1994 1995
-------- -------- ----------
Property management fee $175,759 $162,711 $ 930,191
General and administrative
expense reimbursements 86,909 84,839 86,183
-------- -------- ----------
$262,668 $247,550 $1,016,374
======== ======== ==========
During 1993, 1994 and 1995, fees and expenses aggregating $246,406, $32,352 and
$96,306, respectively, were incurred for legal services performed by a
firm in which the Secretary of the Corporate General Partner and other
affiliates is a partner.
Continued
-12-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
The Partnership is a participant in an agreement with W.P. Carey and other
affiliates for the purpose of leasing office space used for the
administration of real estate entities and W.P. Carey and for sharing
the associated costs. Pursuant to the terms of the agreement, the
Partnership's share of rental, occupancy and leasehold improvement costs
is based on adjusted gross revenues as defined. Net expenses incurred
in 1993, 1994 and 1995 were $50,655, $53,757 and $87,907 respectively.
The increase in 1995 is due, in part, to certain nonrecurring costs
incurred in connection with the relocation of the Partnership's offices.
On November 16, 1995, the Partnership borrowed $2,300,000 from W.P. Carey in
connection with the retirement of a mortgage loan (see Note 11). The
loan which is evidenced by a promissory note and bears interest at the
prime rate requires the Partnership to pay the entire principal amount
and accrued interest thereon on demand. The Partnership may prepay the
note, in whole or in part, at any time without penalty. The retired
mortgage loan had a fixed interest rate of 10%. Interest incurred of
$25,586 on the loan is included in interest expense for the year ended
December 31, 1995. Such amount is also included in accounts payable to
affiliates as of December 31,1995. The Partnership repaid $1,500,000 to
W.P. Carey since December 31, 1995.
The Partnership's ownership interests in certain properties are jointly held
with affiliated entities as tenants-in-common with the Partnership's
ownership interests in such jointly held properties ranging from 16.76%
to 71.5%. The Partnership accounts for its assets and liabilities
relating to tenants-in-common interests on a proportional basis.
4. Real Estate Leased to Others Accounted for Under the Operating Method:
----------------------------------------------------------------------
The scheduled minimum future rentals, exclusive of renewals, under a
noncancelable operating lease with Hughes Markets, Inc. aggregate
approximately $84,000 through April 1996 at which time the lease
terminates.
Contingent rentals were approximately $36,000 in both 1993 and 1994 and $39,000
in 1995.
5. Net Investment in Direct Financing Leases:
------------------------------------------
Net investment in direct financing leases is summarized as follows:
December 31,
-----------
1994 1995
---- ----
Minimum lease payments
receivable $34,447,858 $ 72,193,297
Unguaranteed residual value 33,409,444 33,409,444
----------- ------------
67,857,302 105,602,741
Less, Unearned income 34,441,542 80,310,949
----------- ------------
$33,415,760 $ 25,291,792
=========== ============
The scheduled minimum future rentals, exclusive of renewals, under noncancelable
direct financing leases amount to approximately $4,338,000 in 1996,
$4,375,000 in 1997, $4,339,000 in 1998, $4,321,000 in 1999 and
$4,360,000 in 2000 and aggregate approximately $72,193,000 through 2013.
Contingent rentals were approximately $1,904,000 in both 1993 and 1994 and
$1,142,000 in 1995.
6. Distributions:
--------------
Distributions are declared and paid to partners quarterly and are
summarized as follows:
Continued
-13-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
Year Ending Distributions Paid to Distributions Paid to Per Limited
December 31, General Partners Limited Partners Partners Unit
- ----------- --------------------- -------------------- --------------
1993 $ 92,131 $4,514,400 $ 68.40
=========== =========== =======
1994 $ 93,127 $4,563,240 $ 69.14
=========== =========== =======
1995
Quarterly distributions $ 94,447 $4,627,920 $ 70.12
Special distribution
-Note 10 80,000 7,920,000 120.00
----------- ---------- -------
$174,447 $12,547,920 $190.12
=========== =========== =======
Distributions of $15,599 to the General Partners and $804,540 to the Limited
Partners for the quarter ended December 31, 1995 were declared and paid in
January 1996.
7. Income for Federal Tax Purposes:
--------------------------------
Income for financial statement purposes differs from income for Federal income
tax purposes because of the difference in the treatment of certain
items.for income tax purposes and financial statement purposes. A
reconciliation of accounting differences is as follows:
1993 1994 1995
---- ---- ----
Net income per Statements of Income $ 2,929,060 $ 3,214,813 $15,975,567
Excess tax depreciation (1,468,616) (1,423,529) (1,364,376)
Recognition of purchase installments
as operating income 2,286,192 2,286,195 (5,880,601)
Writedown to net realizable value 1,302,318 697,325 7,546,184
Restructuring fee 8,150,941
Other 455,701 (312,950) (474,841)
----------- ----------- -----------
Income reported for Federal income
tax purposes $ 5,504,655 $ 4,461,854 $23,952,874
=========== =========== ===========
8. Industry Segment Information:
-----------------------------
The Partnership's operations consist of the investment in and the leasing of
industrial and commercial real estate.
In 1993, 1994 and 1995, the Partnership earned its total operating revenues
(rental income plus interest income from direct financing leases) from
the following lease obligors:
1993 % 1994 % 1995 %
---- - ---- - ---- -
Gibson Greetings, Inc. $5,962,090 81% $5,962,090 81% $5,525,671 81%
AT&T Corporation 457,394 6 457,818 6 458,275 7
New Valley Corporation 637,067 9 635,786 9 367,530 6
Hughes Markets, Inc. 287,779 4 287,779 4 290,657 4
Cleo, Inc. 150,885 2
---------- ---- ---------- ---- ---------- ---
$7,344,330 100% $7,343,473 100% $6,793,018 100%
========== === ========== === ========== ===
9. Properties Formerly Leased to New Valley Corporation:
-----------------------------------------------------
The Partnership and Corporate Property Associates 2 ("CPA(R):2"), an affiliate,
own approximate 61% and 39% interests, respectively, in three properties
located in Reno, Nevada; Bridgeton,
Continued
-14-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
Missouri and Moorestown, New Jersey. On April 1, 1993, the lessee, New Valley
Corporation ("New Valley"), filed a petition of voluntary bankruptcy
seeking reorganization under Chapter 11 of the United States Bankruptcy
Code. In connection with the bankruptcy filing, the Bankruptcy Court
approved New Valley's termination of its lease with the Partnership and
CPA(R):2 for the Moorestown, New Jersey property in May 1993. In 1993,
the Partnership wrote down the Moorestown property to its estimated net
realizable value of $1,800,000 and recognized a charge of $1,302,318 on
the writedown. In December 1994, the Bankruptcy Court also approved the
termination of New Valley's lease on the Reno property effective
December 31, 1994. In connection with the lease termination, the
Partnership recognized a charge of $697,325 and wrote down the Reno
property in 1994 to its estimated net realizable value of $2,000,000.
On April 7, 1995, the Partnership and CPA(R):2, entered into a net lease for the
property with Sports & Recreation, Inc. ("Sports & Recreation") which is
retrofitting the Moorestown Property into a retail store. The lease
provided for a feasibility period through September 30, 1995 which was
extended through December 31, 1995 and is followed by an initial term of
16 years. Sports & Recreation will commence paying rent at the earlier
of completion of construction or 120 days after the end of the
feasibility period (May 1, 1996). Sports & Recreation will incur all
retrofitting costs; however, the Partnership and CPA(R):2 will reimburse
Sports & Recreation for the cost of replacing the HVAC system and
installing a new roof and drainage system. The Partnership's share of
the cost for replacing the HVAC system and installing a new roof and
drainage system is estimated to be approximately $458,000. Annual
rentals will initially be $308,750 (of which the Partnership's share is
approximately $187,750) during the first five lease years with stated
increases every five years thereafter.
In connection with the termination of the Moorestown and Reno leases, the
Partnership and CPA(R):2 expect to receive a bankruptcy settlement from
New Valley. The amount of such settlement cannot be estimated and no
amounts that the Partnership may ultimately receive have been recorded
in the accompanying financial statements. The Partnership and CPA(R):2
are currently remarketing the Reno property.
10. Gain on Settlement:
-------------------
During 1991, The Leslie Fay Company ("Leslie Fay") informed the Partnership that
it was exercising an option to purchase its leased property from the
Partnership as of April 30, 1992. Under the purchase option in the
lease, Leslie Fay's purchase exercise price was to be the greater of
$9,400,000, the price the Partnership paid for the property in 1982, or
the fair market value of the property as impacted by the lease as of the
option exercise date. The process of determining the fair market value
of the property was underway when Leslie Fay filed suit to ask the court
to intervene in order to determine the contractual interpretation of
fair value. The court ruled in favor of the Partnership and the ruling
was upheld on appeal by the Pennsylvania Superior and Supreme Courts.
Leslie Fay also filed a second lawsuit seeking to transfer the property
and other benefits of ownership. In connection with this second suit,
the court ordered Leslie Fay to pay $7,200,000 to the Partnership as
partial payment for the purchase of the Leslie Fay property, post a
surety bond for $15,000,000 and to continue making its monthly payments
of $190,516 to the Partnership, for application of such payments to the
ultimate purchase price. Effective January 1, 1995, the monthly payment
was reduced to $65,000. For financial reporting purposes, the
$7,200,000 payment and all subsequent monthly payments were recorded as
installment payments at the time such payments were received by the
Partnership pending final resolution of the suits. In addition, Leslie
Fay was entitled to interest on its monthly installments and the
Partnership would be entitled to interest on the difference between the
ultimate purchase price and the initial $7,200,000 payment upon
resolution of the second suit.
Continued
-15-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
On April 5, 1993, Leslie Fay filed a voluntary bankruptcy petition under Chapter
11 of the United States Bankruptcy Code and continued to make monthly
payments to the Partnership for the period subsequent to the filing of
the petition. In July 1995, Leslie Fay, the Partnership, the surety
company and the Official Committee of Unsecured Creditors of Leslie Fay
signed and entered into a compromise and settlement agreement which was
intended to resolve the dispute between Leslie Fay and the Partnership.
The agreement was presented to the bankruptcy court on August 7, 1995
and subsequently approved.
In connection with a compromise and settlement agreement, on August 29, 1995,
the Partnership received $5,250,000 plus interest of $174,149, from the
surety company and, in turn, made a lump sum payment to Leslie Fay of
$250,000. Under the agreement the Partnership unconditionally retained
ownership of the property as well as the aggregate installment payments
received from Leslie Fay of $13,665,601, consisting of the initial
payment of $7,200,000 and $6,465,601 of monthly payments which were
received through September 30, 1995.
As the fair value of the property was no longer impacted by the Leslie Fay
lease, the Partnership wrote down the estimated estimated fair value of
the property, net of anticipated selling costs, to $2,000,000 and
recognized a noncash charge of $7,400,000, which is netted against the
gain on settlement.
In connection with the settlement, the Partnership has recognized a gain of
$11,499,176, which consists of aggregate net cash received from Leslie
Fay and the surety company of $18,839,750 and the waiving of the
$382,706 interest obligation that had been accrued on the Leslie Fay
monthly payments, offset by the writedown of $7,400,000 and aggregate
management fees, payable to an affiliate, of $323,280 on the monthly
payments received from Leslie Fay. Under the compromise and settlement
agreement, Leslie Fay is required to dismiss with prejudice all of its
suits filed against the Partnership, and the Partnership's bankruptcy
claim against Leslie Fay, as an unsecured creditor, has been reduced to
$2,650,000. The Partnership may not realize the full amount of the
bankruptcy claim.
As a result of the settlement, a special distribution of $120 per Limited
Partner Unit ($7,920,000) was declared and paid in October 1995. In
1992, a special distribution of $50 per Limited Partner Unit
($3,300,000) was paid from the receipt of the $7,200,000 installment
from Leslie Fay.
On January 10, 1996, the Partnership sold the vacant property to a third party,
net of transaction costs, for $1,853,816. The Partnership has
recognized an additional writedown on the property to an amount equal to
the net sales proceeds, resulting in a charge to income in 1995 of
$146,184. Accordingly, no gain or loss will be recognized in 1996 in
connection with the sale.
11. Properties Leased to Gibson Greetings, Inc.:
--------------------------------------------
On January 25, 1982, the Partnership and CPA(R):2 entered into a net lease with
Gibson Greetings, Inc. ("Gibson"), for three properties in Memphis,
Tennessee, Berea, Kentucky and Cincinnati, Ohio. In 1988, the
Partnership and CPA(R):2 consented to Gibson's sublease of the Memphis,
Tennessee property to a wholly-owned subsidiary, Cleo, Inc. ("Cleo").
The lease for the three properties had an initial term of 20 years with
two five-year renewal options and provided for minimum annual rentals of
$5,865,000 with increases every five years based on a formula indexed to
the CPI. The lease also provided Gibson with a purchase option which
was exercisable during the tenth year of the lease and at the end of the
initial term. Gibson declined to exercise its option during the tenth
lease year in 1992.
Continued
-16-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
In connection with Gibson's sale of the Cleo subsidiary to CSS Industries, Inc.
("CSS"), the Partnership, CPA(R):2 and Gibson entered into a transaction
on November 15, 1995, whereby the Memphis, Tennessee property occupied
by Cleo was severed from the Gibson master lease, the Gibson lease was
amended and Cleo entered into a separate lease for the Tennessee
property with CSS as the guarantor of Cleo's lease obligations. The
Partnership and CPA(R):2 received $12,200,000 (of which the
Partnership's share was $8,723,000) as a one-time lump sum payment in
consideration for severing the Tennessee property from the Gibson master
lease. Gibson still retains certain specific obligations for any
environmental violations which may be detected and which resulted from
any pre-existing conditions and is ensuring that roof repairs or
replacement are performed on the Tennessee property. Gibson and Cleo
have until May 15, 1996 to complete the roof repair.
The Gibson lease, as amended, on the two remaining properties in Kentucky and
Ohio provides for an initial term which has been extended through
November 30, 2013 and provides for one renewal term of ten years.
Annual rent is $3,100,000 (of which the Partnership's share is
approximately $2,367,000) with stated increases of 20% every five years
through the end of the renewal term. The lease includes new purchase
options, exercisable on November 30, 2005 and 2010 and Gibson has the
right to exercise the purchase option on one of its leased properties or
both. The option is exercisable at fair market value of the properties
as encumbered by the lease.
The Cleo lease provides for a ten-year term through December 31, 2005 with two
five-year renewal terms. Annual rent is $1,500,000 (of which the
Partnership's share is approximately $1,145,000) with a rent increase
effective January 1, 2001. The rent which will be based on a formula
indexed to the CPI, will be at least $1,689,000 but no more than
$1,898,000. Cleo has an option to purchase the property at any time
during the term of the lease including the renewals terms so long as
there is no event of monetary default. Exercise of the purchase option
requires between six and twelve months notice. The exercise price is
the greater of (i) $15,000,000 or (ii) fair market value capped at a
maximum of $16,250,000.
In connection with consenting to sever the Tennessee property from the Gibson
lease, the Partnership has deferred recognition of a gain on
restructuring of $8,150,941, consisting of its $8,723,000 share of the
lump sum payment offset by costs of $572,059, including management fees
of $429,560, payable to an affiliate, and will amortize such deferral
over the remaining initial terms of the Gibson and Cleo direct financing
leases. The net proceeds from the agreement as well as other available
funds were used to pay off the Partnership's share of the mortgage loan
collateralized by the Gibson properties of $13,190,566 in November 1995.
12. Environmental Matters:
----------------------
All of the Partnership's properties are subject to environmental statutes and
regulations regarding the discharge of hazardous materials and related
remediation obligations. All but one of the Partnership's properties
are currently leased to corporate tenants. The Partnership generally
structures a lease to require the tenant to comply with all laws. In
addition, substantially all of the Partnership's net leases include
provisions which require tenants to indemnify the Partnership from all
liabilities and losses related to their operations at the leased
properties. The costs for remediation, which are being performed and
paid for by the affected tenant at three of the properties, are not
expected to be material. In the event that the Partnership absorbs a
portion of
Continued
-17-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
such costs because of a tenant's failure to fulfill its obligations (or because
a property currently has no tenant), the General Partners believe such
expenditures will not have a material adverse effect on the Partnership's
financial condition, liquidity or results of operations.
In 1994, based on the results of Phase I environmental reviews performed in
1993, the Partnership voluntarily conducted Phase II environmental
reviews on four of its properties. The Partnership believes, based on
the results of Phase I and Phase II reviews, that its properties are in
substantial compliance with Federal and state environmental statutes and
regulations. Portions of certain properties have been documented as
having a limited degree of contamination, principally in connection with
surface spills from facility activities. For those conditions which
were identified, the Partnership advised the affected tenants of the
Phase II findings and of their obligations to perform required
remediation.
13. Disclosures About Fair Value of Financial Instruments:
------------------------------------------------------
The carrying amounts of cash, receivables and accounts payable and accrued
expenses approximate fair value because of the short maturity of these
items.
-18-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
SCHEDULE OF REAL ESTATE and ACCUMULATED DEPRECIATION
as of December 31, 1995
Cost Increase
Initial Cost to Capitalized (Decrease) in Gross Amount at which Carried
Partnership Subsequent to Net at Close of Period(c)(d) Accumulated
--------------------- -----------------------------
Description Land Buildings Acquisition(a) Investment(b) Land Buildings Total Depreciation(d)
----------------------------------------------------------------------------------------------------------------------------------
Operating Method:
Dairy processing
facility leased to
Hughes Markets, Inc. $ 340,146 $ 1,625,424 $4,357 $ 344,503 $1,625,424 $ 1,969,927 $ 986,639
Centralized telephone
bureaus formerly
leased to New Valley
Corporation 1,104,487 5,037,432 3,829 $(2,345,748) 910,996 2,889,004 3,800,000 188,563
---------- ----------- ----------- ----------- ---------- ---------- ----------- -----------
$1,444,633 $ 6,662,856 $8,186 $(2,345,748) $1,255,499 $4,514,428 $ 5,769,927 $1,175,202
========== =========== =========== =========== ========== ========== =========== ===========
Direct financing method:
Centralized Telephone
Bureau leased to
New Valley
Corporation $ 542,884 $ 3,069,669 $ (25,706) $ 3,586,847
Computer Center
leased to American
Telephone and
Telegraph Company 224,642 4,245,903 $2,006 31,419 4,503,970
Warehouse and
manufacturing
buildings leased to
Gibson Greetings, Inc. 1,361,493 12,325,776 (4,382,575) 9,304,694
Warehouse and
manufacturing
building leased to
Cleo, Inc. 810,639 10,826,432 (3,740,790) 7,896,281
---------- ----------- ----------- -----------
$2,939,658 $30,467,780 $2,006 $(8,117,652) $25,291,792
========== =========== =========== =========== ===========
Real estate held
for sale:
Warehouse and
Distribution
building formerly leased
to
The Leslie Fay Company $1,075,000 $ 8,325,000 $(7,546,184) $ 1,853,816
========== =========== =========== ===========
Life on which
Depreciation
in Latest
Statement of
Income
Date Acquired is Computed
- ----------------------------------------------------------------------------
Operating Method:
Dairy processing
facility leased to
Hughes Markets, Inc. June 1 1983 5-36 yrs.
Centralized telephone
bureaus formerly
leased to New Valley
Corporation November 24, 1981 30 yrs.
Direct financing method:
Centralized Telephone
Bureau leased to
New Valley
Corporation November 24, 1981
Computer Center
leased to American
Telephone and
Telegraph Company November 24, 1981
Warehouse and
manufacturing
buildings leased to
Gibson Greetings, Inc. January 26, 1982
Warehouse and
manufacturing
building leased to
Cleo, Inc. January 26, 1982
Real estate held
for sale:
Warehouse and
Distribution
building formerly leased
to
The Leslie Fay Company April 30, 1982
See accompanying notes to Schedule.
-19-
CORPORATE PROPERTY ASSOCIATES 3
(a California limited partnership)
NOTES TO SCHEDULE OF REAL ESTATE and ACCUMULATED DEPRECIATION
(a) Consists of acquisition costs including legal fees, appraisal fees, title
costs and other related professional fees, and the purchase of additional
land subsequent to purchase.
(b) The increase (decrease) in net investment is due to the amortization of
unearned income producing a constant periodic rate of return on the net
investment which is greater (less) than lease payments received, the
writedowns to net realizable value of the Moorestown, New Jersey; Reno,
Nevada and Wilkes Barre, Pennsylvania properties and adjustments relating to
deferred gains on lease restructurings.
(c) At December 31, 1995, the aggregate cost of real estate owned for Federal
income tax purposes is $50,925,119.
(d)
Reconciliation of Real Estate Accounted
---------------------------------------
for Under the Operating Method
------------------------------
December 31,
------------
1994 1995
---- ----
Balance at beginning of period $ 3,769,927 $5,769,927
Additions during period
Reclassification from
direct financing
real estate 2,000,000
---------- ---------
Balance at close of period $5,769,927 $5,769,927
========== ==========
Reconciliation of Accumulated Depreciation
------------------------------------------
December 31,
-----------
1994 1995
---- ----
Balance at beginning of period $ 818,045 $ 976,612
Depreciation expense for
the period 158,567 198,590
---------- ----------
Balance at close of period $ 976,612 $1,175,202
=========== ==========
-20-
PROPERTIES
- -------------------------------------------------------------------------------
LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
- ------------------- ----------------- --------------- -----------------
GIBSON GREETINGS, Land and Manufac- Cincinnati, Ownership of a
INC. turing/Warehouse Ohio; and 71.5% interest
Buildings - 2 Berea, Kentucky in land and
locations buildings
CLEO, INC. Land and Manufacturing/ Memphis Ownership of a
Warehouse Buildings Tennessee 71.5% interest
in land and
buildings
NEW VALLEY Land and Bridgeton, Ownership of a
CORPORATION Centralized Missouri 61% interest
Telephone Bureau in land and
buildings
SPORTS & Land and Moorestown, Ownership of an
RECREATION, INC. Building New Jersey approximate 61%
interest in land
and building
(1) Land and Reno, Nevada Ownership of an
Building approximate 61%
interest in land
and building
HUGHES MARKETS, Land and Dairy Pro- Los Angeles, Ownership of an
INC. cessing Facility California approximate
16.76% interest
in land and
building
AT&T CORPORATION Land and a Bridgeton, Ownership of an
Computer Center Missouri approximate 61%
interest in land
and building
(1) Formerly leased to New Valley Corporation.
-21-
MARKET FOR THE PARTNERSHIP'S EQUITY AND RELATED
UNITHOLDER MATTERS
- --------------------------------------------------------------------------------
Except for limited or sporadic transactions, there is no established
public trading market for the Limited Partnership Units of the Partnership. As
of December 31, 1995 there were 2,457 holders of record of the Limited
Partnership Units of the Partnership.
In accordance with the requirements of the Partnership's Amended
Agreement of Limited Partnership (the "Agreement") contained as Exhibit A to the
Prospectus, the Corporate General Partner expects to continue to make quarterly
distributions of Distributable Cash From Operations as defined in the Agreement.
The following table shows the frequency and amount of distributions paid per
Unit since 1992:
Cash Distributions Per Unit
---------------------------
1993 1994 1995
------ ------ -------
First quarter $16.95 $17.27 $ 17.34
Second quarter 17.05 17.28 17.39
Third quarter 17.15 17.29 17.58
Fourth quarter 17.25 17.30 137.81 (a)
------ ------ -------
$68.40 $69.14 $190.12
====== ====== =======
(a) Includes a special distribution of $120 per Unit.
REPORT ON FORM 10-K
- --------------------------------------------------------------------------------
The Corporate General Partner will supply to any owner of Limited
Partnership Units, upon written request and without charge, a copy of the Annual
Report on Form 10-K for the year ended December 31, 1995 as filed with the
Securities and Exchange Commission.
-22-
DIRECTORS AND SENIOR OFFICERS
- -------------------------------------------------------------------------------
The Partnership has no directors or officers. The directors and senior
officers of the Corporate General Partner are as follows:
William Polk Carey Chairman of the Board
Director
Francis J. Carey President
Director
George E. Stoddard Chairman of the Investment Committee
Director
Raymond S. Clark Chairman of the Executive Committee
Director
Madelon DeVoe Talley Vice Chairman of the Board
Director
Barclay G. Jones III Executive Vice President
Director
Lawrence R. Klein Chairman of the Economic Policy
Committee
Director
Claude Fernandez Executive Vice President
Chief Administrative Officer
Howard J. Altmann Senior Vice President
H. Augustus Carey Senior Vice President
John J. Park Senior Vice President
Treasurer
Debra E. Bigler First Vice President
Ted G. Lagried First Vice President
Anthony S. Mohl First Vice President
Michael D. Roberts First Vice President
Controller
The directors and senior officers of W. P. Carey & Co., Inc. are
substantially the same as above.
A description of the business experience of each officer and director of
the Corporate General Partner is set forth below:
William Polk Carey, Chairman and Chief Executive Officer, has been
active in lease financing since 1959 and a specialist in net leasing of
corporate real estate property since 1964. Before founding W.P. Carey & Co.,
Inc. ("W.P. Carey") in 1973, he served as Chairman of the Executive Committee of
Hubbard, Westervelt & Mottelay (now Merrill Lynch Hubbard), head of Real Estate
and Equipment Financing at Loeb Rhoades & Co. (now Lehman Brothers), head of
Real Estate and Private Placements, Director of Corporate Finance and Vice
Chairman of the Investment Banking Board of duPont Glore Forgan Inc. A graduate
of the University of Pennsylvania's Wharton School of Finance, Mr. Carey is a
Governor of the National Association of Real Estate Investment Trusts (NAREIT).
He also serves on the boards of The Johns Hopkins University and its medical
school, The James A. Baker III Institute for Public Policy at Rice University,
and other educational and philanthropic institutions. He founded the Visiting
Committee to the Economics Department of the University of Pennsylvania and co-
founded with Dr. Lawrence R. Klein the Economics Research Institute at that
university.
-23-
Francis J. Carey was elected President and a Managing Director of W.P.
Carey in April 1987, having served as a Director since its founding in 1973. He
served as a member of the Executive Committee and Board of Managers of the
Western Savings Bank of Philadelphia from 1972 until its takeover by another
bank in 1982 and is former chairman of the Real Property, Probate and Trust
Section of the Pennsylvania Bar Association. Mr. Carey served as a member of the
Board of Overseers of the School of Arts and Sciences of the University of
Pennsylvania from 1983 through 1990 and has served as a member of the Board of
Trustees of the Investment Program Association since 1990. From April 1987 until
August 1992, he served as counsel to Reed Smith Shaw & McClay, counsel for
Registrant, the General Partners, the CPA(R) Partnerships and W.P. Carey and
some of its affiliates. A real estate lawyer of more than 30 years' experience,
he holds A.B. and J.D. degrees from the University of Pennsylvania.
George E. Stoddard, Chief Investment Officer, was until 1979 head of the
bond department of The Equitable Life Assurance Society of the United States,
with responsibility for all activities related to Equitable's portfolio of
corporate investments acquired through direct negotiation. Mr. Stoddard was
associated with Equitable for over 30 years. He holds an A.B. degree from
Brigham Young University, an M.B.A. from Harvard Business School and an LL.B.
from Fordham University Law School.
Raymond S. Clark is former President and Chief Executive Officer of the
Canton Company of Baltimore and the Canton Railroad Company. A graduate of
Harvard College and Yale Law School, he is presently a Director and Chairman of
the Executive Committee of W.P. Carey and served as Chairman of the Board of
W.P. Carey from its founding in 1973 until 1982. He is past Chairman of the
Maryland Industrial Development Financing Authority.
Madelon DeVoe Talley, Vice Chairman, is a member of the New York State
Controller's Investment Committee, a Commissioner of the Port Authority of New
York and New Jersey, former CIO of New York State Common Retirement Fund and New
York State Teachers Retirement System. She also served as a managing director
of Rothschild, Inc. and as the President of its asset management division.
Besides her duties at W.P. Carey, Mrs. Talley is also a former Governor of the
N.A.S.D. and is a director of Biocraft Laboratories, a New York Stock Exchange
company. She is an alumna of Sarah Lawrence College and the graduate school of
International Affairs at Columbia University.
Barclay G. Jones III, Executive Vice President, Managing Director, and
co-head of the Investment Department. Mr. Jones joined W.P. Carey as Assistant
to the President in July 1982 after his graduation from the Wharton School of
the University of Pennsylvania, where he majored in Finance and Economics. He
was elected to the Board of Directors of W.P. Carey in April 1992. Mr. Jones is
also a Director of the Wharton Business School Club of New York.
Lawrence R. Klein, Chairman of the Economic Policy Committee since 1984,
is Benjamin Franklin Professor of Economics Emeritus at the University of
Pennsylvania, having joined the faculty of Economics and the Wharton School in
1958. He holds earned degrees from the University of California at Berkeley and
Massachusetts Institute of Technology and has been awarded the Nobel Prize in
Economics as well as over 20 honorary degrees. Founder of Wharton Econometric
Forecasting Associates, Inc., Dr. Klein has been counselor to various
corporations, governments, and government agencies including the Federal Reserve
Board and the President's Council of Economic Advisers.
Claude Fernandez, Chief Administrative Officer, Managing Director, and
Executive Vice President, joined W.P. Carey in 1983. Previously associated with
Coldwell Banker, Inc. for two years and with Arthur Andersen & Co., he is a
Certified Public Accountant. Mr. Fernandez received his B.S. degree in
Accounting from New York University in 1975 and his M.B.A. in Finance from
Columbia University Graduate School of Business in 1981.
Howard J. Altmann, Senior Vice President, Investment Department, joined
W.P. Carey in August 1990. He was a securities analyst at Goldman Sachs & Co.
for the retail industry from 1986 to 1988. Mr. Altmann received his
undergraduate degree in economics and finance from McGill University and his
M.B.A. from the Stanford University Graduate School of Business.
-24-
H. Augustus Carey, Senior Vice President, returned to W.P. Carey in
1988. Mr. Carey previously worked for W.P. Carey from 1979 to 1981 as Assistant
to the President. Prior to rejoining W.P. Carey, Mr. Carey served as a loan
officer of the North American Department of Kleinwort Benson Limited in London,
England. He received an A.B. from Amherst College in 1979 and an M.Phil. in
Management Studies from Oxford University in 1984. Mr. Carey is a trustee of the
Oxford Management Centre Associates Council.
John J. Park, Senior Vice President and Treasurer, joined W.P. Carey as
an Investment Analyst in December 1987. Mr. Park received his undergraduate
degree from Massachusetts Institute of Technology and his M.B.A. in Finance from
New York University.
Debra E. Bigler, First Vice President, joined W.P. Carey in 1989 as an
assistant marketing director, rising to her present position where she bears
responsibility for investor services throughout the southern United States. She
was previously employed by E. F. Hutton & Company for nine years where she began
as a Marketing Associate in Private Placement, Sales and Marketing and was then
promoted to Regional Director.
Ted G. Lagreid, First Vice President, joined W.P. Carey in 1994 and is
regional director responsible for investor services in the western United
States. Prior to joining the firm, he was a Vice President with Shurgard Capital
Group, then for Sun America where he was an executive in its mutual funds group.
He earned an A.B. from the University of Washington, received an M.P.A. from the
University of Puget Sound and then spent eight years in the city of Seattle's
Office of Management and Budget and Department of Community Development. Mr.
Lagreid was a commissioner of the City of Oakland, California, serving on its
Community and Economic Advisory Commission.
Anthony S. Mohl, First Vice President, Director of Portfolio Management,
joined W.P. Carey as Assistant to the President after receiving his M.B.A. from
the Columbia University Graduate School of Business. Mr. Mohl was employed as an
analyst in the strategic planning group at Kurt Salmon Associates after
receiving an undergraduate degree from Wesleyan University.
Michael D. Roberts joined W. P. Carey as a Second Vice President and
Assistant Controller in April 1989 and is currently First Vice President and
Controller. Prior to joining W.P. Carey, Mr. Roberts was employed by Coopers &
Lybrand, where he attained the title of audit manager. A certified public
accountant, Mr. Roberts received a B.A. from Brandeis University and an M.B.A.
from Northeastern University.
-25-