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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________.
COMMISSION FILE NUMBER: 001-13779
W. P. CAREY & CO. LLC
("WPC")
(FORMERLY CAREY DIVERSIFIED LLC)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3912578
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
50 ROCKEFELLER PLAZA 10020
NEW YORK, NEW YORK 10020 (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBERS:
INVESTOR RELATIONS (212) 492-8920
(212) 492-1100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) oF THE ACT
LISTED SHARES, NO PAR VALUE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: NONE
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. Yes|X| No | |
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained in this report, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. |X|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |X| No | |.
As of June 28, 2002, the aggregate market value of the Registrants' Listed
Shares held by non-affiliates was $571,556,700.
As of March 25, 2003, there are 36,031,022 Listed Shares of Registrant
outstanding.
WPC incorporates by reference its definitive Proxy Statement with respect
to its 2003 Annual Meeting of Shareholders, to be filed with the Securities and
Exchange Commission within 120 days following the end of its fiscal year, into
Part III of this Report.
PART I
Item 1. Business.
W. P. Carey & Co. LLC (the "Company" or "WPC") is a real estate investment and
advisory company that acquires and owns commercial properties leased to
companies nationwide, primarily on a triple net basis and earns fees as the
advisor to four affiliated CPA(R) REITs that each make similar investments.
Under the advisory agreements with the CPA(R) REITs, the Company performs
services related to the day-to-day management of the CPA(R) REITs and
transaction-related services. In addition, the Company's broker-dealer
subsidiary earns fees in connection with the public offerings of CPA(R) REIT
shares. W. P. Carey & Co. LLC both owns and manages commercial and industrial
properties located in 43 states and Europe, net leased to more than 250 tenants.
As of December 31, 2002, WPC's portfolio consisted of 164 properties in the
United States and 6 properties in Europe and totaled more than 19 million square
feet. In addition, W. P. Carey & Co. LLC manages over 300 additional net leased
properties on behalf the CPA(R) REITs: Carey Institutional Properties
Incorporated, Corporate Property Associates 12 Incorporated, Corporate Property
Associates 14 Incorporated and Corporate Property Associates 15 Incorporated
("CPA(R):15"). In April 2002, Carey Institutional Properties acquired the
business operations of Corporate Property Associates 10 Incorporated
("CPA(R):10"), a REIT that was also managed by WPC, in a stock-for-stock merger.
WPC's core real estate investment strategy for itself and on behalf of the
CPA(R) REITs is to purchase properties leased to a variety of companies on a
single tenant net lease basis that are either owned outright or owned by an
entity managed by WPC.
These leases generally place the economic burden of ownership on the tenant by
requiring them to pay the costs of maintenance, insurance, taxes, structural
repairs and other operating expenses. WPC also generally seeks to include in its
leases:
- clauses providing for mandated rent increases or periodic rent
increases tied to increases in the consumer price index or other
indices or, when appropriate, increases tied to the volume of sales
at the property;
- covenants restricting the activity of the tenant to reduce the risk
of a change in credit quality;
- indemnification of WPC for environmental and other liabilities; and
- guarantees from parent companies or other entities.
Under the advisory agreements with the CPA(R) REITs, the Company performs
services related to the day-to-day management of the CPA(R) REITs and
transaction-related services in connection with structuring and negotiating real
estate acquisitions and mortgage financing. In addition, the Company's
broker-dealer subsidiary earns fees in connection with the "best efforts" public
offering of the CPA(R) REITs. The Company earns an asset management fee at a per
annum rate of 1/2 of 1% of Average Invested Assets, as defined in the Advisory
Agreements of the CPA(R) REIT and, based upon specific performance criteria for
each CPA(R) REIT, may be entitled to receive a performance fee of 1/2 of 1% of
Average Invested Assets. Fees for transaction-related services are only earned
for completed transactions. The Company is reimbursed for the cost of personnel
provided for the administration of the CPA(R) REITs.
The Company was formed as a limited liability company under the laws of Delaware
on July 15, 1996. Since January 1, 1998, the Company has been consolidated with
nine Corporate Property Associates limited partnerships and their successors and
is the General Partner and owner of all of the limited partnership interests in
each partnership. The Company's shares began trading on the New York Stock
Exchange on January 21, 1998. As a limited liability company, WPC is not subject
to federal income taxation as long as it satisfies certain requirements relating
to its operations.
WPC's principal executive offices are located at 50 Rockefeller Plaza, New York,
NY 10020 and its telephone number is (212) 492-1100. WPC's website address is
http://www.wpcarey.com. As of December 31, 2002, WPC employed no employees
directly, however a wholly-owned subsidiary of WPC employs over 120 individuals
who perform services for WPC.
BUSINESS OBJECTIVES AND STRATEGY
WPC's objective is to increase shareholder value and its funds from operations
through prudent management of its real estate assets and opportunistic
investments and through the expansion of its asset and private equity management
business. WPC expects to evaluate a number of different opportunities in a
variety of property types and geographic locations and to pursue the most
attractive based upon its analysis of the risk/return tradeoffs. WPC will
continue to own properties as long as it believes ownership helps attain its
objectives.
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WPC presently intends to:
- seek additional investment and other opportunities that leverage
core management skills (which include in-depth credit analysis,
asset valuation and sophisticated structuring techniques)
- increase revenues from the management business by increasing assets
under management as the CPA(R) REITs acquire additional property and
organize new investment entities;
- optimize the current portfolio of properties through expansion of
existing properties, timely dispositions and favorable lease
modifications;
- utilize its size and access to capital to refinance existing debt;
and
- increase its access to capital.
DEVELOPMENTS DURING 2002
During 2002, WPC and affiliates structured more than $981,000,000 of
acquisitions on behalf of the CPA(R) REITs as compared with $395,000,000 in
2001, which resulted in structuring fees earned by WPC's management business
increasing by approximately $29,845,000.
CPA(R):15 completed a "best efforts" public offering of $400,000,000 of its
common stock, and will attempt to raise up to an additional $690,000,000 in 2003
pursuant to a registration statement currently on file with the Securities and
Exchange Commission. In 2002, CPA(R):15 entered into sales agreements with two
additional major broker-dealers, UBS Paine Webber and A. G. Edwards. WPC's
broker-dealer subsidiary earned fees of approximately $1,918,000, net of amounts
re-allowed to broker-dealers.
During September 2002, WPC completed a commercial mortgage-backed securitization
which obtained $172,335,000 of limited recourse mortgage financing, primarily on
behalf of three CPA(R) REITs. The loans were pooled into a trust, Carey
Commercial Mortgage Trust, a non-affiliate, whose assets consist solely of the
loans. The trust offered $148,206,000 as collateralized mortgage obligations in
a private placement to institutional investors. A subordinated interest of
$24,129,000 was retained by the CPA(R) REITs (of which a 1% interest is held by
WPC). Through this securitization, WPC enabled the CPA(R) REITs to obtain
limited recourse mortgage financing on favorable terms for properties that are
difficult to finance and to find a potential new source of future mortgage
financing.
Pursuant to its merger agreement for the management services operations and in
connection with meeting specified performance criteria as of December 31, 2001,
500,000 shares were issued during the first quarter of 2002. For the year ended
December 31, 2002, WPC met one of the targets and, as a result, 400,000 shares
will be issued in 2003.
In connection with the acquisition of the majority interests in the CPA(R)
partnerships on January 1, 1998, a CPA(R) partnership had not yet achieved the
specified cumulative return as of the acquisition date. The subordinated
preferred return was payable currently only if WPC achieved a closing price
equal to or in excess of $23.11 for five consecutive trading days. On December
31, 2001, the closing price criterion was met and the $1,423,000 subordinated
preferred return was paid in January 2002.
In January 2002, The Gap, Inc. a lessee of two properties located in Erlanger,
Kentucky, notified WPC that it would not renew its leases which expired in
February 2003 and contributed annual rent of $2,205,000. In October 2002, WPC
reached an agreement with the Gap for a lease termination settlement pursuant to
a make-whole provision in the Gap lease. Under the make-whole provision, WPC
received a payment from the Gap of $2,250,000 in February 2003.
In June 2002, Wozniak Industries, Inc. notified WPC that it would not renew its
lease, which expires in 2003 and contributes annual rent of $497,000. In
February 2003, WPC entered into an agreement for the sale of the Wozniak
property for approximately $2,400,000, subject to due diligence by the buyer,
and the sale was completed in March 2003.
In December 2001, Thermadyne Holdings Corp. filed a petition of bankruptcy and
subsequently vacated WPC's City of Industry, California property in February
2002. Annual rents from Thermadyne were $2,525,000. In December 2002, WPC
entered into an agreement, to re-lease a portion of the space for $873,000 to
the tenant that was occupying the space on a month-to-month basis, and is
re-marketing the remaining space. In April 2002, Pillowtex Corporation
terminated its lease under its plan of reorganization, and vacated WPC's
property in Salisbury, North Carolina in April. Pillowtex's annual rent was
$691,000. WPC is continuing to seek a new tenant for the Pillowtex property.
Two leases with Federal Express Corporation on properties located in Corpus
Cristi, and College Station, Texas were extended for five years, a lease with
Verizon Communications, Inc. on WPC's Milton, Vermont property was extended for
ten years, and leases with Honeywell, Inc. for a portion of two properties in
Houston, Texas was extended for three years.
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Annual rental income under the Federal Express, Verizon and Honeywell leases is
$804,000. New leases, each with ten-year terms, were entered into with Petrocon
Engineering, Inc. and Tooling Systems, LLC, for a portion of a property in
Beaumont, Texas and Frankenmuth, Michigan, respectively. Annual rental income
from the two leases is $580,000. Both had been tenants under short-term leases.
Two leases with Lockheed Martin Corporation for a portion of properties located
in Oxnard, California and Houston, Texas have been extended through December
2003 and December 2007, respectively, with an additional extension on the Oxnard
property if Lockheed Martin has certain government contracts renewed. Annual
rents under the two Lockheed leases are $891,000. Lockheed also leases a
property in King of Prussia, Pennsylvania which term expires in July 2003 and
provides annual rent of $974,000. Lockheed Martin is in the process of extending
the King of Prussia lease for five years at an annual rent of $797,000. Pre
Finish Metals Incorporated renewed its lease, which had been scheduled to expire
in June 2003, for five years at an annual rent of $892,000.
In July 2002, WPC sold six properties leased to Saint-Gobain Corporation located
in New Haven, Connecticut; Mickelton, NJ; Aurora, Ohio; Mantua, Ohio and
Bristol, Rhode Island for $26,000,000. WPC used a portion of the sales proceeds
to pay off a limited recourse mortgage of $10,751,000 on the properties. WPC
placed the remaining proceeds of the sale in an escrow account for the purpose
of entering into a Section 1031 noncash exchange which, under the Internal
Revenue Code, the Company acquired like-kind property, and deferred a taxable
gain until the new property is sold.
In September 2002, WPC used $14,379,000 from the escrow account funded from the
Saint-Gobain sale to purchase properties in Lenexa, Kansas, Winston-Salem, North
Carolina and Dallas, Texas and entered into a master net lease with BE
Aerospace, Inc. The lease has an initial term of fifteen years with two ten-year
renewal options and initial annual rent is approximately $1,421,000 with stated
annual increases of 1.5%.
In December 2002, WPC purchased a 36% interest in two properties leased to
Hologic, Inc. from CPA(R):15 for $11,714,000. The properties, land and buildings
located in Danbury, Connecticut and Bedford, Massachusetts, were purchased by
CPA(R):15 in August 2002. The lease has an initial term of 20 years with four
five-year renewal terms. Annual rent is $3,155,940 with the first rent increase
on the fifth anniversary of the lease and every five years thereafter.
During 2002, WPC sold twelve additional properties for approximately $40,579,000
including the sale of a property located in Los Angeles, California for
$24,000,000. The other properties sold were in Fredericksburg, Virginia;
Petoskey, Michigan; Urbana, Illinois; Maumelle, Arkansas; Burnsville, Minnesota;
Colville, Washington; McMinnville, Tennessee; Frankenmuth, Michigan; College
Station, Texas and Casa Grande and Glendale, Arizona
In September 2002, WPC purchased 1.5 acres of land in Broomfield, Colorado for
$640,000. The land is adjacent to WPC's existing properties. WPC intends to
redevelop the property, with various alternatives currently being evaluated.
In 1999, subsequent to the termination of a lease, WPC commenced redeveloping
its property in Los Angeles, California. In June 2002, WPC sold the property to
the Los Angeles Unified School District ("LAUSD"). Subsequent to the sale of the
property in Los Angeles to LAUSD in June 2002, a subsidiary of WPC entered into
a build-to-suit development management agreement with LAUSD with respect to the
development and construction of a new high school on the property. The
subsidiary, in turn, engaged a general contractor to undertake the construction
project. Under the build-to-suit agreement, the subsidiary's role is that of a
development manager pursuant to provisions of the California Education Code.
Liability for completion of the school is the responsibility of the general
contractor, who is providing payment and performance bonds for the benefit of
the School District and the subsidiary, although the subsidiary may be
contingently liable to LAUSD. WPC's maximum liability under the build-to-suit
agreement is the amount of build-to-suit management fees paid to WPC, up to
$3,500,000. Upon delivery of the school, WPC is to be released from all
contractual liability and in any event the general contractor is liable for all
construction warranties. Under the build-to-suit agreement, the subsidiary and
WPC expressly have no liability. Under the construction agreement with the
general contractor, a subsidiary is acting as a conduit for the payments made by
LAUSD and is only obligated to make payments to the general contractor based on
payments received, except for a maximum guarantee of up to $2,000,000 for
nonpayment. The build-to-suit development agreement provides for fees of up to
$4,700,000 and an early completion incentive fee of $2,000,000 if the project is
completed before September 1, 2004. The subsidiary would be obligated to share
10% of the early completion fee with its joint venture partner in the project.
The joint venture partner does not participate in the other fees received from
LAUSD or any income or loss of the subsidiary.
In January 2002, WPC received proceeds of $9,366,000 from funds that were being
held in an escrow account from the July 2001 sale of its property in Arkansas
leased to Duff-Norton Company, Inc. WPC had placed the proceeds from the sale in
an escrow account for the purpose of entering into a Section 1031 noncash
exchange. The funds were transferred to WPC in January 2002 as the proposed
exchange was not completed.
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In June 2002, WPC paid off $12,580,000 in mortgages notes payable on its Alpena
and Petoskey hotel properties. The Petoskey property was subsequently sold in
August 2002. The Alpena and Petoskey bonds were also collateralized by mortgages
and lease assignments on eight other properties. WPC obtained new limited
recourse mortgage financing of $7,000,000 on a property leased to Quebecor, Inc.
and $9,200,000 collateralized by the BE Aerospace properties which mature in
April 2007 and November 2012, respectively.
In December 2002, WPC entered into a series of agreements with Faurecia Exhaust
Systems, Inc., the lessee of two properties in Toledo, Ohio. In consideration
for terminating the existing lease and vacating one of the properties, WPC
received a promissory note of $4,240,000, which matured in January 2003 at which
time it was paid. The term of the original lease had been scheduled to expire in
2007. In connection with vacating this property, WPC was assigned rights, by
Faurecia, as landlord, to a sublease at the property. The sublease agreement
provides for annual rents of $357,000 through November 2005, and has been
guaranteed by Faurecia. The terminated lease provided for annual rental income
of $1,617,000. WPC will recognize the restructuring consideration over a period
equivalent to the former lease term. WPC is remarketing 750,000 square feet at
the property. Simultaneously, Faurecia entered into a separate lease agreement
for the remaining property. The new Faurecia lease has a 20-year term at an
annual rent of $336,000.
ACQUISITION STRATEGIES
WPC has a well-developed process with established procedures and systems for
acquiring net leased property for itself and in its capacity as advisor to the
CPA(R) REITs. As a result of its reputation and experience in the industry and
the contacts maintained by its professionals, WPC has a presence in the net
lease market that has provided it with the opportunity to invest in a
significant number of transactions on an ongoing basis. In evaluating
opportunities, WPC carefully examines the credit, management and other
attributes of the tenant and the importance of the property under consideration
to the tenant's operations. Careful credit analysis is a crucial aspect of every
transaction. WPC believes that it has one of the most extensive underwriting
processes in the industry and has an experienced staff of professionals involved
with underwriting transactions. WPC seeks to identify those prospective tenants
whose creditworthiness is likely to improve over time. WPC believes that its
experience in structuring sale-leaseback transactions to meet the needs of a
prospective tenant enables it to obtain a higher return for a given level of
risk than would typically be available by purchasing a property subject to an
existing lease.
WPC's strategy in structuring net lease investments is to:
- combine the stability and security of long-term lease payments,
including rent increases, with the appreciation potential inherent
in the ownership of real estate;
- enhance current returns by utilizing varied lease structures;
- reduce credit risk by diversifying investments by tenant, type of
facility, geographic location and tenant industry; and
- increase potential returns by obtaining equity enhancements from the
tenant when possible, such as warrants to purchase tenant common
stock.
FINANCING STRATEGIES
Consistent with its investment policies, WPC uses leverage when available on
favorable terms. WPC has in place a credit facility of up to $185 million (with
an option to increase the facility to $225 million), which it has used and
intends to continue to use for, but not limited to, acquiring additional
properties, funding build-to-suit projects and refinancing existing debt. As of
December 31, 2002, WPC also had approximately $186 million in property-level
debt outstanding and $49 million outstanding under the line of credit. WPC
continually seeks opportunities and considers alternative financing techniques
to refinance debt, reduce interest expense or improve its capital structure,
such as the mortgage securitization completed on behalf of the CPA(R) REITs
described above.
TRANSACTION ORIGINATION
In analyzing potential acquisitions for itself and on behalf of the CPA(R)
REITs, WPC reviews and structures many aspects of a transaction, including the
tenant, the real estate and the lease, to determine whether a potential
acquisition can be structured to satisfy its acquisition criteria. The aspects
of a transaction which are reviewed and structured by WPC include the following:
Tenant Evaluation. WPC evaluates each potential tenant for its credit,
management, position within its industry, operating history and profitability.
WPC seeks tenants it believes will have stable or improving credit. By leasing
properties to these tenants, WPC can generally charge rent that is higher than
the rent charged to tenants with recognized credit and thereby
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enhance its current return from these properties as compared with properties
leased to companies whose credit potential has already been recognized by the
market. Furthermore, if a tenant's credit does improve, the value of WPC's or
the CPA(R) REIT's property will likely increase (if all other factors affecting
value remain unchanged). WPC may also seek to enhance the likelihood of a
tenant's lease obligations being satisfied, such as through a letter of credit
or a guaranty of lease obligations from the tenant's corporate parent. This
credit enhancement provides WPC and the CPA(R) REITs with additional financial
security. In evaluating a possible investment, the creditworthiness of a tenant
generally will be a more significant factor than the value of the property
absent the lease with such tenant. While WPC will select tenants it believes are
creditworthy, tenants will not be required to meet any minimum rating
established by an independent credit rating agency. WPC's and the investment
committee's standards for determining whether a particular tenant is
creditworthy vary in accordance with a variety of factors relating to specific
prospective tenants. The creditworthiness of a tenant is determined on a tenant
by tenant, case by case basis. Therefore, general standards for creditworthiness
cannot be applied.
Leases with Increasing Rent. WPC seeks to include a clause in each lease that
provides for increases in rent over the term of the lease. These increases are
generally tied to increases in indices such as the consumer price index. In the
case of retail stores, the lease may provide for participation in gross sales
above a stated level. The lease may also provide for mandated rental increases
on specific dates or other methods that may not be in existence or contemplated
by us as of the date of this report. WPC seeks to avoid entering into leases
that provide for contractual reductions in rents during their primary term.
Properties Important to Tenant Operations. WPC generally seeks to acquire
properties with operations that are essential or important to the ongoing
operations of the tenant. WPC believes that these properties provide better
protection in the event a tenant files for bankruptcy, since leases on
properties essential or important to the operations of a bankrupt tenant are
less likely to be terminated by a bankrupt tenant. WPC also seeks to assess the
income, cash flow and profitability of the business conducted at the property so
that, if the tenant is unable to operate its business, it and the CPA(R) REITs
can either continue operating the business conducted at the property or re-lease
the property to another entity in the industry which can operate the property
profitably.
Lease Provisions that Enhance and Protect Value. When appropriate, WPC attempts
to include provisions in its leases that require its consent to specified tenant
activity or require the tenant to satisfy specific operating tests. These
provisions include, for example, operational and financial covenants of the
tenant, prohibitions on a change in control of the tenant and indemnification
from the tenant against environmental and other contingent liabilities. These
provisions protect WPC's and the CPA(R) REITs' investment from changes in the
operating and financial characteristics of a tenant that may impact its ability
to satisfy its obligations to WPC and the CPA(R) REITs or could reduce the value
of their properties.
Diversification. WPC will attempt to diversify its and the CPA(R) REITs'
portfolio to avoid dependence on any one particular tenant, type of facility,
geographic location or tenant industry. By diversifying the portfolios, WPC
reduces the adverse effect of a single under-performing investment or a downturn
in any particular industry or geographic region.
WPC uses a variety of other strategies in connection with its acquisitions.
These strategies include attempting to obtain equity enhancements in connection
with transactions. Typically, these equity enhancements involve warrants to
purchase stock of the tenant or the stock of the parent of the tenant. If the
value of the stock exceeds the exercise price of the warrant, equity
enhancements help WPC and the CPA(R) REITs to achieve their goal of increasing
funds available for the payment of distributions.
As a transaction is structured, it is evaluated by the chairman of WPC's
investment committee. Before a property is acquired, the transaction is reviewed
by the investment committee to ensure that it satisfies WPC's and the CPA(R)
REIT's investment criteria. The investment committee is not directly involved in
originating or negotiating potential acquisitions, but instead functions as a
separate and final step in the acquisition process. WPC places special emphasis
on having experienced individuals serve on its investment committee and does not
invest in a transaction unless it is approved by the investment committee.
WPC believes that the investment committee review process gives it a unique
competitive advantage over other net lease companies because of the substantial
experience and perspective that the investment committee has in evaluating the
blend of corporate credit, real estate and lease terms that combine to make an
acceptable risk.
The following people serve on the investment committee:
- George E. Stoddard, Chairman, was formerly responsible for the
direct corporate investments of The Equitable Life Assurance Society
of the United States and has been involved with the CPA(R) programs
for over 20 years.
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- Frank J. Hoenemeyer, Vice Chairman, was formerly Vice Chairman,
Director and Chief Investment Officer of The Prudential Insurance
Company of America. As Chief Investment Officer, Mr. Hoenemeyer was
responsible for all of Prudential's investments, including stocks,
bonds, private placements, real estate and mortgages.
- Nathaniel S. Coolidge previously served as Senior Vice President --
Head of Bond & Corporate Finance Department of the John Hancock
Mutual Life Insurance Company. His responsibility included
overseeing fixed income investments for Hancock, its affiliates and
outside clients.
- Lawrence R. Klein is the Benjamin Franklin Professor of Economics
Emeritus at the University of Pennsylvania and its Wharton School.
Dr. Klein has been awarded the Alfred Nobel Memorial Prize in
Economic Sciences and currently advises various governments and
government agencies.
ASSET MANAGEMENT
WPC believes that effective management of net lease assets is essential to
maintain and enhance property values. Important aspects of asset management
include restructuring transactions to meet the evolving needs of current
tenants, re-leasing properties, refinancing debt, selling properties and
knowledge of the bankruptcy process. WPC monitors, on an ongoing basis,
compliance by tenants with their lease obligations and other factors that could
affect the financial performance of any of its properties. Monitoring involves
receiving assurances that each tenant has paid real estate taxes, assessments
and other expenses relating to the properties it occupies and confirming that
appropriate insurance coverage is being maintained by the tenant. WPC reviews
financial statements of its tenants and undertakes regular physical inspections
of the condition and maintenance of its properties. Additionally, WPC
periodically analyzes each tenant's financial condition, the industry in which
each tenant operates and each tenant's relative strength in its industry.
COMPETITION
WPC faces competition for the acquisition of office and industrial properties in
general, and such properties net leased to major corporations in particular,
from insurance companies, credit companies, pension funds, private individuals,
investment companies and CPA(R) REITs. WPC also faces competition from
institutions that provide or arrange for other types of commercial financing
through private or public offerings of equity or debt or traditional bank
financings. WPC believes its management's experience in real estate, credit
underwriting and transaction structuring will allow it to compete effectively
for office and industrial properties.
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, regulations and
ordinances, current or former owners of real estate, as well as other parties,
may be required to investigate and clean up hazardous or toxic chemicals,
substances or waste or petroleum product or waste, releases on, under, in or
from a property. These parties may be held liable to governmental entities or to
third parties for specified damages and for investigation and cleanup costs
incurred by these parties in connection with the release or threatened release
of hazardous materials. These laws typically impose responsibility and liability
without regard to whether the owner knew of or was responsible for the presence
of hazardous materials, and the liability under these laws has been interpreted
to be joint and several under some circumstances. WPC's leases often provide
that the tenant is responsible for all environmental liability and for
compliance with environmental regulations relating to the tenant's operations.
WPC typically undertakes an investigation of potential environmental risks when
evaluating an acquisition. Phase I environmental assessments are performed by
independent environmental consulting and engineering firms for all properties
acquired by WPC and the CPA(R) REITs. Where warranted, Phase II environmental
assessments are performed. Phase I assessments do not involve subsurface
testing, whereas Phase II assessments involve some degree of soil and/or
groundwater testing. WPC or the CPA(R) REITs may acquire a property which is
known to have had a release of hazardous materials in the past, subject to a
determination of the level of risk and potential cost of remediation. WPC and
the CPA(R) REITs normally require property sellers to indemnify them fully
against any environmental problem existing as of the date of purchase.
Additionally, WPC often structures leases to require the tenant to assume most
or all responsibility for compliance with the environmental provisions of the
lease or environmental remediation relating to the tenant's operations and to
provide that non-compliance with environmental laws is a lease default. In some
cases, WPC may also require a cash reserve, a letter of credit or a guarantee
from the tenant, the tenant's parent company or a third party to assure lease
compliance and funding of remediation. The value of any of these protections
depends on the amount of the collateral and/or financial strength of the entity
providing the protection. Such a contractual arrangement does not eliminate
statutory liability or preclude claims against WPC and the CPA(R) REITs by
governmental authorities or persons who are not a party to the arrangement.
Contractual arrangements in leases may provide a basis for WPC and the CPA(R)
REITs to recover from the tenant damages or costs for which it has been found
liable.
-6-
Some of the properties are located in urban and industrial areas where fill or
current or historic industrial uses of the areas may have caused site
contamination at the properties. In addition, WPC is aware of environmental
conditions at certain of the properties that require some degree of remediation.
All such environmental conditions are primarily the responsibility of the
respective tenants under their leases. WPC and its consultants estimate that the
majority of the aggregate cost of addressing environmental conditions known to
require remediation at the properties is covered by existing letters of credit
and corporate guarantees. WPC believes that the tenants are taking or will soon
be taking all required remedial action with respect to any material
environmental conditions at the properties. However, WPC and the CPA(R) REITs
could be responsible for some or all of these costs if one or more of the
tenants fails to perform its obligations or to indemnify WPC and the CPA(R)
REITs, as applicable. Furthermore, no assurance can be given that the
environmental assessments that have been conducted at the properties disclosed
all environmental liabilities, that any prior owner did not create a material
environmental condition not known to the Company, or that a material condition
does not otherwise exist as to any of the properties.
OPERATING SEGMENTS
WPC operates in two operating segments, real estate operations, with investments
in the United States and Europe, and management services operations. For the
year ended December 31, 2002, no lessee represented 10% or more of the total
operating revenue of WPC. Substantially all of the revenue from the management
services operations is for services performed on behalf of the CPA(R) REITs.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The provisions of the Private Securities Litigation Reform Act of 1995 (the
"Act") became effective in December 1995. The Act provides a "safe harbor" for
companies which make forward-looking statements providing prospective
information. The "safe harbor" under the Act relates to protection for companies
with respect to litigation filed on the basis of such forward-looking
statements.
WPC wishes to take advantage of the "safe harbor" provisions of the Act and is
therefore including this section in its Annual Report on Form 10-K. The
statements contained in this Annual Report, if not historical, are
forward-looking statements and involve risks and uncertainties which are
described below that could cause actual results to differ materially from the
results, financial or otherwise, or other expectations described in such
forward-looking statements. These statements are identified with the words
"anticipated," "expected," "intends," "seeks" or "plans" or words of similar
meaning. Therefore, forward-looking statements should not be relied upon as a
prediction of actual future results or occurrences.
Future results may be affected by certain risks and uncertainties including the
following:
The revenue streams from the investment advisory agreements with the CPA(R)
REITs are subject to limitation or cancellation.
The agreements under which we provide investment advisory services may generally
be terminated by each CPA(R) REIT upon 60 days notice, with or without cause. In
addition, the fees payable under each agreement are subject to a variable annual
cap based on a formula tied to the assets and income of that CPA(R) REIT. This
cap may limit the growth of the management fees. There can be no assurance that
these agreements will not be terminated or that our income will not be limited
by the cap on fees payable under the agreements. The elimination of or any cap
on fees could have a material adverse effect on our business, results of
operations and financial condition.
Our advisory business exposes us to more volatility in earnings than our real
estate investment business.
The growth in revenue from the management business is dependent in large part on
future capital raising in existing or future managed entities, which is subject
to uncertainty and is subject to capital market and real estate market
conditions. This uncertainty can create more volatility in our earnings because
of the resulting increased volatility in revenue from the real estate advisory
and management business as compared to historic revenue from ownership of real
estate subject to triple net leases, which historically has been less volatile.
The inability of a tenant in a single tenant property to pay rent will reduce
our revenues.
We expect that most of our properties and those of the CPA(R) REITs will each be
occupied by a single tenant and, therefore, the success of the investments is
materially dependent on the financial stability of such tenants. Lease payment
defaults by tenants could cause us to reduce the amount of distributions to
shareholders, either from a direct loss of revenue or reduced fees payable by
the CPA(R) REITs. A default of a tenant on its lease payments to would cause us
or a CPA(R) REITs to lose the
-7-
revenue from the property and require the locating of an alternative source of
revenue to meet any mortgage payment and prevent a foreclosure if the property
is subject to a mortgage. In the event of a default, we and the CPA(R) REITs may
experience delays in enforcing their rights as landlord and may incur
substantial costs in protecting the investment and reletting the property. If a
lease is terminated, there is no assurance that we or the CPA(R) REITs will be
able to lease the property for the rent previously received or sell the property
without incurring a loss.
We depend on major tenants.
Revenues from several of our tenants and/or their guarantors constitute a
significant percentage of our consolidated rental revenues. Our five largest
tenants/guarantors, which occupy 10 properties, represent 24% of lease revenues.
The default, financial distress or bankruptcy of any of the tenants of these
properties could cause interruptions in the receipt of lease revenues from these
tenants and/or result in vacancies in the respective properties, which would
reduce our revenues until the affected property is re-let, and could decrease
the ultimate sale value of each such property.
If our tenants are highly leveraged, they may have a higher possibility of
filing for bankruptcy.
Of tenants that experience downturns in their operating results due to adverse
changes to their business or economic conditions, those that are highly
leveraged may have a higher possibility of filing for bankruptcy. In bankruptcy,
a tenant has the option of vacating a property instead of paying rent. Until
such a property is released from bankruptcy, our revenues would be reduced and
could cause us to reduce distributions to shareholders. We have highly leveraged
tenants at this time, and we may have additional highly leveraged tenants in the
future.
The bankruptcy of tenants may cause a reduction in revenue.
Bankruptcy of a tenant could cause:
- the loss of lease payments;
- an increase in the costs incurred to carry the property;
- a reduction in the value of shares; and
- a decrease in distributions to shareholders.
Under bankruptcy law, a tenant who is the subject of bankruptcy proceedings has
the option of continuing or terminating any unexpired lease. If the tenant
terminates the lease, any claim we have for breach of the lease (excluding
collateral securing the claim) will be treated as a general unsecured claim. The
maximum claim will be capped at the amount owed for unpaid rent prior to the
bankruptcy unrelated to the termination, plus the greater of one year's lease
payments or 15% of the remaining lease payments payable under the lease (but no
more than three years' lease payments). In addition, due to the long-term nature
of our leases and terms providing for the repurchase of a property by the
tenant, a bankruptcy court could recharacterize a net lease transaction as a
secured lending transaction. If that were to occur, we would not be treated as
the owner of the property, but might have additional rights as a secured
creditor.
We and the CPA(R) REITs have had tenants file for bankruptcy protection and are
involved in litigation. Four of the prior thirteen CPA(R) REITs reduced the rate
of distributions to their investors as a result of adverse developments
involving tenants.
Our tenants generally do not have a recognized credit rating, which may create a
higher risk of lease defaults and therefore lower revenues than if our tenants
had a recognized credit rating.
Generally, no credit rating agencies evaluate or rank the debt or the credit
risk of our tenants, as we seek tenants that we believe will have improving
credit profiles. Our long-term leases with certain of these tenants may
therefore pose a higher risk of default than would long term leases with tenants
whose credit potential has already been recognized by the market.
We can borrow a significant amount of funds. The CPA(R) REITs may also borrow a
significant amount of funds.
We have incurred, and may continue to incur, indebtedness (secured and
unsecured) in furtherance of our activities. Neither our operating agreement nor
any policy statement formally adopted by our board of directors limits either
the total amount of indebtedness or the specified percentage of indebtedness
(based upon our total market capitalization) which may be incurred. Accordingly,
we could become more highly leveraged, resulting in increased risk of default on
our obligations and in an increase in debt service requirements which could
adversely affect our financial condition and results of operations and our
ability to pay distributions. Our current unsecured revolving credit facility
with Chase Manhattan Bank, as agent, contains various covenants which limit the
amount of secured and unsecured indebtedness we may incur.
-8-
Each of the CPA(R) REITs we advise and manage may also incur significant debt.
This significant debt load could restrict their ability to pay fees owed to us
when due, due to either liquidity problems or restrictive covenants contained in
their borrowing agreements.
We may not be able to refinance balloon payments on our mortgage debts.
Some of our financing may require us to make a lump-sum or "balloon" payment at
maturity, including mortgages on properties and the outstanding balance on WPC's
credit facility which expires in March 2004. Our ability to make any balloon
payment is uncertain and may depend upon our ability to obtain additional
financing or our ability to sell the property encumbered by the mortgage
obligation. At the time the balloon payment is due, we may or may not be able to
refinance the balloon payment on terms as favorable as the original loan or sell
the property at a price sufficient to make the balloon payment. A refinancing or
sale could affect the rate of return to shareholders and the projected time of
disposition of our assets. Scheduled balloon payments, including our pro rata
share of mortgages on equity investments and the outstanding balance on WPC's
credit facility, for the next five years are as follows:
2003 - $4.0 million; 2004 - $65.7 million; 2005 - $0 million; 2006 - $22.3
million and 2007 - $6.0 million.
Our ability to make such balloon payments will depend upon our ability either to
refinance the obligation when due, increase the borrowings on our line of
credit, invest additional equity in the property or to sell the related
property. Our ability to accomplish these goals will be affected by various
factors existing at the relevant time, such as the state of the national and
regional economies, local real estate conditions, available mortgage rates, our
equity in the mortgaged properties, our financial condition, the operating
history of the mortgaged properties and tax laws.
International investments involve additional risks.
We and the CPA(R) REITs may purchase property located outside the United States.
These investments may be affected by factors peculiar to the laws of the
jurisdiction in which the property is located. These laws may expose us to risks
that are different from and in addition to those commonly found in the United
States. Foreign investments could be subject to the following risks:
- changing governmental rules and policies;
- enactment of laws relating to the foreign ownership of property and
laws relating to the ability of foreign persons or corporations to
remove profits earned from activities within the country to the
person's or corporation's country of origin;
- variations in the currency exchange rates;
- adverse market conditions caused by changes in national or local
economic conditions;
- changes in relative interest rates;
- change in the availability, cost and terms of mortgage funds
resulting from varying national-economic policies;
- changes in real estate and other tax rates and other operating
expenses in particular countries;
- changes in land use and zoning laws; and
- more stringent environmental laws or changes in such laws.
We may incur costs to finish build-to-suit properties.
We and the CPA(R) REITs may sometimes acquire undeveloped or partially developed
land parcels for the purpose of owning to-be-built facilities for a prospective
tenant. Oftentimes, completion risk, cost overruns and on-time delivery are the
obligations of the prospective tenant. To the extent that the tenant or the
third-party developer experiences financial difficulty or other complications
during the construction process we or the CPA(R) REIT may be required to incur
project costs to complete all or part of the project within a specified time
frame. The incurrence of these costs or the non-occupancy by the tenant may
reduce the project's and our portfolio returns.
We may have difficulty selling or re-leasing our properties.
Real estate investments are relatively illiquid compared to most financial
assets and this illiquidity will limit our ability to quickly change our
portfolio in response to changes in economic or other conditions. The net leases
we or the CPA(R) REITs may enter into or acquire may be for properties that are
specially suited to the particular needs of the tenant. With these properties,
if the current lease is terminated or not renewed, we or the CPA(R) REITs may be
required to renovate the property or to make rent concessions in order to lease
the property to another tenant. In addition, in the event we or the CPA(R) REITs
are forced to sell the property, it may be difficult to sell to a party other
than the tenant due to the special purpose for which the property may have been
designed. These and other limitations may affect the ability to sell properties
-9-
without adversely affecting returns to shareholders. WPC's lease expirations, as
a percentage of annualized revenues for the next five years, are as follows:
2003 - 6.4%; 2004 - 4.4%; 2005 - 4.8%; 2006 - 4.8%; 2007 - 2.9%
Our participation in joint ventures creates additional risk.
We may participate in joint ventures or purchase properties jointly with other
entities, some of which may be unaffiliated with us. There are additional risks
involved in these types of transactions. These risks include the potential of
our joint venture partner becoming bankrupt and the possibility of diverging or
inconsistent economic or business interests of us and our partner. These
diverging interests could result in, among other things, exposing us to
liabilities of the joint venture in excess of our proportionate share of these
liabilities. The partition rights of each owner in a jointly owned property
could reduce the value of each portion of the divided property. In addition, the
fiduciary obligation that we or our board may owe to our partner in an
affiliated transaction may make it more difficult for us to enforce our rights.
We do not control the management of our properties.
The tenants or managers are responsible for maintenance and other day-to-day
management of the properties. Because our revenues are largely derived from
rents and advisory fees, which in turn, are derived from rents collected by the
CPA(R) REITs, our financial condition is dependent on the ability of third-party
tenants or managers that we do not control to operate the properties
successfully. If tenants or managers are unable to operate the properties
successfully, the tenants may not be able to pay their rent, which could
adversely affect our financial condition.
We are subject to possible liabilities relating to environmental matters.
We own industrial and commercial properties and are subject to the risk of
liabilities under federal, state and local environmental laws. Some of these
laws could impose the following on us:
- Responsibility and liability for the cost of investigation and
removal or remediation of hazardous substances released on our
property, generally without regard to our knowledge or
responsibility of the presence of the contaminants;
- Liability for the costs of investigation and removal or remediation
of hazardous substances at disposal facilities for persons who
arrange for the disposal or treatment of such substances; and
- Potential liability for common law claims by third parties based on
damages and costs of environmental contaminants.
- These responsibilities and liabilities also exist for properties
owned by the CPA(R) REITs and in the event they become liable for
these costs, their ability to pay our fees could be materially
affected.
We may be unable to make acquisitions on an advantageous basis.
A significant element of our business strategy is the enhancement of our
portfolio and the CPA(R) REIT portfolios through acquisitions of additional
properties. The consummation of any future acquisition will be subject to
satisfactory completion of our extensive analysis and due diligence review and
to the negotiation of definitive documentation. There can be no assurance that
we will be able to identify and acquire additional properties or that we will be
able to finance acquisitions in the future. In addition, there can be no
assurance that any such acquisition, if consummated, will be profitable for us
or the CPA(R) REITs. If we are unable to consummate the acquisition of
additional properties in the future, there can be no assurance that we will be
able to increase the cash available for distribution to our shareholders, either
through net income on properties we own or through net income generated by the
advisory business.
We may suffer uninsured losses.
There are certain types of losses (such as due to wars or some natural
disasters) that generally are not insured because they are either uninsurable or
not economically insurable. Should an uninsured loss or a loss in excess of the
limits of our insurance occur, we could lose capital invested in a property, as
well as the anticipated future revenues from a property, while remaining
obligated for any mortgage indebtedness or other financial obligations related
to the property. Any such loss would adversely affect our financial condition.
Changes in market interest rates could cause our stock price to go down.
The trading prices of equity securities issued by real estate companies have
historically been affected by changes in broader market interest rates, with
increases in interest rates resulting in decreases in trading prices, and
decreases in interest rates
-10-
resulting in increases in such trading prices. An increase in market interest
rates could therefore adversely affect the trading prices of any equity
securities issued by us.
We face intense competition.
We face competition for the acquisition of office and industrial properties in
general, and such properties not leased to major corporations in particular,
from insurance companies, credit companies, pension funds, private individuals,
investment companies and other REITs. We also face competition from institutions
that provide or arrange for other types of commercial financing through private
or public offerings of equity or debt or traditional bank financings.
The value of our real estate is subject to fluctuation.
We are subject to all of the general risks associated with the ownership of real
estate. In particular, we face the risk that rental revenue from the properties
will be insufficient to cover all corporate operating expenses and debt service
payments on indebtedness we incur. Additional real estate ownership risks
include:
- Adverse changes in general or local economic conditions,
- Changes in supply of or demand for similar or competing properties,
- Changes in interest rates and operating expenses,
- Competition for tenants,
- Changes in market rental rates,
- Inability to lease properties upon termination of existing leases,
- Renewal of leases at lower rental rates,
- Inability to collect rents from tenants due to financial hardship,
including bankruptcy,
- Changes in tax, real estate, zoning and environmental laws that may
have an adverse impact upon the value of real estate,
- Uninsured property liability, property damage or casualty losses,
- Unexpected expenditures for capital improvements or to bring
properties into compliance with applicable federal, state and local
laws, and
- Acts of God and other factors beyond the control of our management.
We depend on key personnel for our future success.
We depend on the efforts of the executive officers and key employees. The loss
of the services of these executive officers and key employees could have a
material adverse effect on our operations.
WPC's business, results of operations or financial condition could be materially
adversely affected by the above conditions.
The risk factors may have affected, and in the future could affect, WPC's actual
operating and financial results and could cause such results to differ
materially from those in any forward-looking statements. You should not consider
this list exhaustive. New risk factors emerge periodically, and the Company
cannot completely assure you that the factors described above list all material
risks to WPC at any specific point in time. The Company has disclosed many of
the important risk factors discussed above in its previous filings with the
Securities and Exchange Commission.
-11-
Item 2. Properties.
Set forth below is certain information relating to the Company's properties
owned as of December 31, 2002:
RENT SHARE OF
PER CURRENT
LEASE OBLIGOR/ SQUARE SQUARE ANNUAL INCREASE LEASE MAXIMUM
LOCATION FOOTAGE FOOT RENTS(a) FACTOR TERM TERM
- --------------------- --------- ------- --------- -------- --------- ---------
DR PEPPER BOTTLING COMPANY OF TEXAS
Irving and Houston, Texas 721,947 6.08 4,420,937 CPI Jun. 2014 Jun. 2029
DETROIT DIESEL CORPORATION(b)
Detroit, MI 2,730,750 1.52 4,157,524 PPI Jun. 2020 Jun. 2040
GIBSON GREETINGS, INC.
BEREA, KY AND CINCINNATI, OH 1,194,840 3.11 3,720,000 Stated Nov. 2013 Nov. 2023
BOUYGUES TELECOM SA(b)
Tours, France 105,055 10.59 1,056,442(h) INSEE(i) Sep. 2009 Sep. 2012
Illkirch, France 107,180 22.27 2,148,523(t) INSEE(i) Jul. 2013 Jul. 2013
--------- ---------
Total: 212,235 3,204,965
FEDERAL EXPRESS CORPORATION
College Station, TX 12,080 5.51 66,600 Stated Apr. 2007 Apr. 2009
Colliersville, TN (b) (e) 390,380 16.83 2,628,933 CPI Aug. 2019 Aug. 2029
Corpus Christi, TX 30,212 6.29 189,986 Stated May 2007 May 2017
--------- ---------
Total: 432,672 2,885,519
ORBITAL SCIENCES CORPORATION(b)
Chandler, AZ 335,307 7.92 2,655,320 CPI Sep. 2009 Sep. 2029
AMERICA WEST HOLDINGS CORPORATION(b) (d)
Tempe, AZ 218,000 15.61 2,538,805 CPI Apr. 2014 Apr. 2024
QUEBECOR PRINTING INC.
Doraville, GA (b) 432,559 3.52 1,522,498 CPI Dec. 2009 Dec. 2034
Olive Branch, MS (b) 285,500 3.41 973,255 CPI Jun. 2008 Jun. 2033
--------- ---------
Total: 718,059 2,495,753
AUTOZONE, INC.(b) (g)
31 Locations :
NC, TX, AL, GA, IL, LA, MO 175,730 7.52 1,321,567 % Sales Jan. 2011 Jan. 2026
11 Locations:
FL, GA, NM, SC, TX 54,000 9.71 524,388 % Sales Aug. 2013 Aug. 2038
12 Locations :
FL, LA, MO, NC, TN 72,500 5.11 370,636 % Sales Aug. 2012 Aug. 2037
--------- ---------
Total: 302,230 2,216,591
THE GAP, INC.(b) (p)
Erlanger, KY (2) 753,750 2.93 2,205,385 CPI Feb. 2003 N/A
SYBRON INTERNATIONAL CORPORATION
Dubuque, IA; Portsmouth, NH and
Rochester, NY 494,100 4.38 2,163,816 CPI Dec. 2013 Dec. 2038
CHECKFREE HOLDINGS, INC.(o) (b)
Norcross, GA 220,675 18.92 2,128,372 CPI Dec. 2015 Dec. 2015
LIVHO, INC.
Livonia, MI 158,000 11.39 1,800,000 Stated Dec. 2003 Dec. 2003
-12-
RENT SHARE OF
PER CURRENT
LEASE OBLIGOR/ SQUARE SQUARE ANNUAL INCREASE LEASE MAXIMUM
LOCATION FOOTAGE FOOT RENTS(a) FACTOR TERM TERM
- --------------- ------- ------ -------- -------- ------ --------
UNISOURCE WORLDWIDE, INC.
Anchorage, AK 44,712 7.34 328,360 Stated Dec. 2009 Dec. 2029
Commerce, CA(b) 411,561 3.46 1,422,080 Stated Apr. 2010 Apr. 2030
--------- ---------
Total: 456,273 1,750,440
CSS INDUSTRIES, INC.
Memphis, TN 1,006,566 1.72 1,735,352 CPI Dec. 2005 Dec. 2015
PEERLESS CHAIN COMPANY (q)
Winona, MN 357,760 4.63 1,657,790 CPI N/A N/A
INFORMATION RESOURCES, INC.(b) (f)
Chicago, IL 252,000 19.58 1,643,604 CPI Oct. 2010 Oct. 2035
COMARK, INC. 36,967 8.32 307,541 Stated May 2003 May 2003
GENERAL SERVICES ADMINISTRATION 3,949 16.70 65,948 Stated Apr. 2006 Apr. 2006
UNITED STATES POSTAL SERVICE 60,320 20.44 1,233,000 Stated Apr. 2006 Apr. 2006
--------- ---------
Total for property in Bloomingdale, IL: 101,236 1,606,489
BRODART CO.(b)
Williamsport, PA (2) 521,240 2.91 1,519,253 CPI Jun. 2008 Jun. 2028
SYBRON DENTAL SPECIALTIES, INC.
Glendora, CA and Romulus, MI 245,000 5.97 1,463,096 CPI Dec. 2018 Dec. 2043
SPRINT SPECTRUM L.P. (b)
Albuquerque, NM 94,731 15.04 1,424,561 CPI May 2011 Sep. 2021
BE AEROSPACE, INC. (b)
Lenexa, KS 130,094 4.54 590,812 Stated Sep. 2017 Sep. 2037
Winston-Salem, NC 274,216 2.62 717,557 Stated Sep. 2017 Sep. 2037
Dallas, TX 22,680 4.96 112,536 Stated Sep. 2017 Sep. 2037
--------- ---------
Total: 426,990 1,420,905
EAGLE HARDWARE & Garden, Inc.(b) (g)
Bellevue, WA 127,360 9.94 1,265,900 CPI & Aug. 2017 Aug. 2017
% Sales
AT&T CORPORATION
Bridgeton, MO 85,510 13.60 1,162,546 Stated Jun. 2011 Jun. 2021
HOLOGIC, INC. (s)
Danbury, CT 62,042 9.42 210,526 CPI Aug. 2022 Aug. 2042
Bedford, MA 207,000 12.42 925,612 CPI Aug. 2022 Aug. 2042
--------- ---------
Total: 269,042 1,136,138
BELLSOUTH TELECOMMUNICATIONS, INC.(b)
Lafayette Parish, LA 64,803 16.92 1,096,170 Stated Dec. 2009 Dec. 2039
CENDANT OPERATION, INC.(b)
Moorestown, NJ 65,567 16.69 1,094,432 Stated Jun. 2004 Jun. 2004
-13-
RENT SHARE OF
PER CURRENT
LEASE OBLIGOR/ SQUARE SQUARE ANNUAL INCREASE LEASE MAXIMUM
LOCATION FOOTAGE FOOT RENTS(A) FACTOR TERM TERM
-------------- --------- ------ ---------- -------- --------- ---------
JOHNSON ENGINEERING CORPORATION 31,114 9.89 307,800 Stated Dec. 2007 Dec. 2012
LOCKHEED MARTIN CORPORATION 39,464 9.30 366,936 Stated Jul. 2007 Jul. 2007
UNITED SPACE ALLIANCE LLC 38,000 10.00 380,004 Stated Apr. 2006 Apr. 2011
------- ---------
Total for property in
Houston, TX: (b) 108,578 1,054,740
ANTHONY'S MANUFACTURING COMPANY, INC.
San Fernando, CA 182,845 5.57 1,019,047 CPI May 2007 May 2012
LOCKHEED MARTIN CORPORATION
King of Prussia, PA 84,926 11.47 974,358 Market Jul. 2003 Jul. 2008
WAL-MART STORES, INC.(b)
West Mifflin, PA 118,125 8.05 950,905 CPI Jan. 2007 Jan. 2037
UNITED STATIONERS SUPPLY COMPANY
New Orleans, LA; Memphis, TN and San
Antonio, TX 197,098 4.64 915,834 CPI Mar. 2010 Mar. 2030
PRE FINISH METALS INCORPORATED
Walbridge, OH 313,704 2.84 892,091 CPI Jun. 2008 Jun. 2028
SWAT-FAME, INC.
City of Industry, CA 220,401 3.95 872,786 CPI Dec. 2010 Dec. 2020
ALPENA HOLIDAY INN
Alpena, MI 96,333 870,410(c) Dec. 2009 Dec. 2029
LOCKHEED MARTIN CORPORATION 66,000 7.94 523,908 Stated Feb. 2003 Feb. 2003
MERCHANTS HOME DELIVERY, INC. 22,716 12.06 274,044 Stated Jun. 2004 Jun. 2014
------- ---------
Total for property in
Oxnard, CA: 88,716 797,952
NVR L.P.
Thurmont, MD and
Farmington, NY 179,741 4.30 773,370 CPI Mar. 2014 Mar. 2039
WINN-DIXIE STORES, INC.(g)
Bay Minette, AL 34,887 3.68 128,470 % Sales Jun. 2007 Jun. 2032
Brewton, AL 30,625 4.39 134,500 % Sales Oct. 2010 Oct. 2030
Leeds, AL 26,470 5.47 144,713 % Sales Feb. 2004 Feb. 2034
Montgomery, AL 32,690 5.86 191,534 % Sales Mar. 2008 Mar. 2038
Panama City, FL 33,837 5.04 170,399 % Sales Mar. 2008 Mar. 2038
--------- ---------
Total: 158,509 769,616
AMS HOLDING GROUP
College Station, TX 52,552 14.56 765,101 None Dec. 2004 Dec. 2009
FAURECIA EXHAUST SYSTEMS, INC. (b)
Toledo, OH 56,192 5.68 336,000 CPI Nov. 2022 Nov. 2042
Toledo, OH (n) 350,000 1.02 357,500 Stated Nov. 2005 Nov. 2007
--------- ---------
Total: 406,192 693,500
DATCON INSTRUMENT COMPANY
Lancaster, PA 70,724 9.60 679,083 CPI Nov. 2013 Nov. 2038
-14-
RENT SHARE OF
PER CURRENT
LEASE OBLIGOR/ SQUARE SQUARE ANNUAL INCREASE LEASE MAXIMUM
LOCATION FOOTAGE FOOT RENTS(a) FACTOR TERM TERM
-------------- --------- ------ ---------- -------- --------- --------
EXIDE ELECTRONICS CORPORATION
Raleigh, NC 27,770 23.22 644,937 CPI Jul. 2006 Jul. 2031
PANTIN, FRANCE - MULTI-TENANT (b) 68,951 11.46 592,456(j) INSEE(i) Various
EXCEL COMMUNICATIONS, INC.
Reno, NV 53,158 10.93 580,800 Stated Dec. 2006 Dec. 2016
WESTERN UNION FINANCIAL SERVICES, INC.
Bridgeton, MO 78,080 7.34 573,221 Stated Nov. 2006 Nov. 2016
UNITED SPACE ALLIANCE LLC 88,200 5.73 505,020 Stated Sep. 2006 Sep. 2016
FACILITY MANAGEMENT SOLUTIONS, LLC 3,600 8.40 30,240 Stated Dec. 2005 Dec. 2005
--------- ---------
Webster, TX 91,800 535,260
TITAN CORPORATION(b) (k)
San Diego, CA 166,403 16.43 506,783 CPI Jul. 2007 Jul. 2027
DS GROUP LIMITED
Goshen, IN 54,270 9.22 500,212 CPI Feb. 2010 Feb. 2035
WOZNIAK INDUSTRIES, INC.
Schiller Park, IL 84,197 5.91 497,400 Stated Dec. 2003 Dec. 2023
TELLIT ASSURANCES(b)
Rouen, France 36,791 17.92 494,164(j) INSEE(i) Aug. 2004 Aug. 2009
CHILDTIME CHILDCARE, INC.(b) (l)
12 Locations: AZ, CA, MI, TX 83,912 15.45 472,307 CPI Jan. 2016 Jan. 2041
YALE SECURITY, INC.
Lemont, IL 130,000 3.53 459,000 Stated Mar. 2011 Mar. 2011
SOCIETE DE TRAITEMENTS 69,470 4.42 245,379(m) INSEE(i) Jun. 2005 Jun. 2008
DSM FOOD SPECIALITIES 37,337 7.15 213,508(m) INSEE(i) Jun. 2005 Jun. 2008
-------- ---------
Total for property in Indre
et Loire, France: (b) 106,807 458,887(m)
BELLSOUTH ENTERTAINMENT, INC.
Ft. Lauderdale, FL 80,450 5.14 413,748 CPI Jun. 2009 Jun. 2019
HONEYWELL, INC. 119,320 2.03 242,400 Stated Sep. 2005 Sep. 2005
CONTINENTAL AIRLINES, INC. 25,125 5.67 142,560 Stated Jul. 2003 Jul. 2008
-------- ---------
Total for property in
Houston, TX: 144,445 384,960
PENN CRUSHER CORPORATION
Cuyahoga Falls, OH and Broomall, PA 103,255 3.65 377,234 Market Jan. 2005 Jan. 2020
VARIOUS TENANTS (b)
Broomfield, CO 64,609 5.47 353,260 Various Various Various
OLMSTEAD KIRK PAPER COMPANy 5,760 6.56 37,800 Stated Dec. 2007 Dec. 2007
INDUSTRIAL DATA SYSTEMS CORPORATION
(PETROCON ENGINEERING, INC.) 34,300 8.16 279,888 Stated Dec. 2011 Dec. 2011
-15-
RENT SHARE OF
PER CURRENT
LEASE OBLIGOR/ SQUARE SQUARE ANNUAL INCREASE LEASE MAXIMUM
LOCATION FOOTAGE FOOT RENTS(a) FACTOR TERM TERM
-------------- --------- ------ --------- -------- --------- --------
Total for property in
Beaumont, TX: 40,060 317,688
R & S DISTRIBUTION, INC. (v) 588,235 .51 300,000 None May. 2003 May. 2003
Cincinnati, OH
BIKE BARN HOLDING COMPANY, INC. 6,216 10.42 64,800 Stated Aug. 2005 Aug. 2015
Sears Roebuck and Co. 21,069 10.60 223,331 Stated Sep. 2005 Sep. 2015
------- ---------
Total for property in
Houston, TX(b): 27,285 288,131
THE ROOF CENTERS, INC.
Manassas, VA 60,446 4.44 268,631 Stated Jul. 2009 Jul. 2009
TOOLING SYSTEMS, LLC
Frankenmuth, MI 128,400 2.06 264,400 Stated Aug. 2012 Aug. 2017
GAMES WORKSHOP, INC.
Glen Burnie, MD 45,300 5.83 264,178 Stated Apr. 2006 Apr. 2016
DIRECTION REGIONAL DES AFFAIRES
SANITAIRES ET SOCIALES
Rouen, France (b) 25,228 12.78 241,733(j) INSEE(i) Oct. 2004 Oct. 2004
PENBERTHY PRODUCTS, INC.
Prophetstown, IL 161,878 1.47 237,486 CPI Apr. 2006 Apr. 2026
HARCOURT GENERAL, INC.(g)
Canton, MI 29,818 7.84 233,750 % Sales Jul. 2005 Jul. 2030
ADR BOOKPRINT INC. 3,330 7.56 25,176 Stated May 2003 May 2003
TRANS AMERICAN AUTOMATION INC. 5,632 7.92 44,604 Stated Feb. 2007 Feb. 2012
CUSTOM TRAINING GROUP, INC. 11,740 8.23 96,600 Stated Aug. 2006 Aug. 2006
WORK READY, INC. 7,306 9.20 67,200 Stated Aug. 2006 Aug. 2006
------- ---------
Total for property in
Houston, TX: 28,008 233,580
VERIZON COMMUNICATIONS, INC.
Milton, VT 30,624 7.54 231,000 Stated Feb. 2013 Feb. 2023
NORTHERN TUBE, INC.
Pinconning, MI 220,588 1.02 225,000 CPI Dec. 2007 Dec. 2022
ROCHESTER BUTTON COMPANY, INC.
South Boston and Kenbridge, VA 81,387 2.21 180,000 None Dec. 2016 Dec. 2036
PEPSICO, INC.
Houston, TX 17,725 6.29 111,557 Stated Oct. 2004 Oct. 2004
PENN VIRGINIA COAL COMPANY
Duffield, VA 12,804 5.78 73,999 CPI Nov. 2004 Nov. 2019
RECLAMATION FOODS, INC. 11,780 2.25 26,505 CPI Jun. 2006 Jun. 2016
J & D CARDS & GIFTS, INC. 3,220 7.94 25,551 Stated Jan. 2012 Jan. 2012
------- ---------
Total for property in
Apache Junction, AZ 15,000 52,056
SHINN SYSTEMS, INC. (u)
Salisbury, NC 13,284 2.00 26,568 CPI Nov. 2003 Nov. 2006
VACANT PROPERTIES
McMinnville, TN 276,991
Garland, TX 150,203
Webster, TX 10,960
Travelers Rest, SC 85,959
Broomfield, CO (r) 12.5 acres
Land
Only
-16-
(a) Share of Current Annual Rents is the product of the Square Footage,
the Rent per Square Foot, and any ownership interest percentage as
noted below.
(b) These properties are encumbered by mortgage notes payable.
(c) The Company operates a hotel business at this property. Amount
represents net operating income of the business.
(d) Current annual rent represents the 74.583% ownership interest as a
tenancy in common in this property.
(e) Current annual rent for the Colliersville, TN property represents
the 40% ownership interest in a limited liability company owning
land and building.
(f) Current annual rent represents the 33.33% ownership interest in a
limited partnership owning land and building.
(g) Current annual rent does not include percentage of sales rent,
payable under the lease contract.
(h) Current annual rent represents the 95% ownership interest in a
foreign partnership owning land and building. Rents are collected in
French Francs, conversion rate at December 31, 2002 used.
(i) INSEE construction index, an index published quarterly by the French
Government.
(j) Current annual rent represents the 75% ownership interest in a
foreign partnership owning land and building. Rents are collected in
French Francs, conversion rate at December 31, 2002 used.
(k) Current annual rent represents the 18.54% ownership interest in a
limited partnership owning land and building.
(l) Current annual rent represents the 33.93% ownership interest in a
limited partnership owning land and building.
(m) Current annual rent represents the 80% ownership interest in a
foreign partnership owning land and building. Rents are collected in
French Francs, conversion rate at December 31, 2002 used.
(n) The property is mostly vacant, except for one tenant who is
occupying approximately 33% of the property under a sublease that
was assigned to WPC.
(o) Current annual rent represents the 50% ownership interest in a
limited liability company owning land and building.
(p) Tenant vacated property at end of lease term in February 2003.
(q) Property subsequently sold in 2003.
(r) Property is currently under development.
(s) Current annual rent represents the 36% ownership interest as a
tenancy in common in this property.
(t) Current annual rent represents the 90% ownership interest in a
foreign partnership owning a building. Rents are collected in French
Francs, conversion rate at December 31, 2002 used.
(u) The property is mostly vacant, except for one tenant occupying
approximately 4% of the property.
(v) Tenant is occupying the property under a license agreement.
Item 3. Legal Proceedings.
As of the date hereof, the Company is not a party to any material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the year ended December 31,
2002 to a vote of security holders, through the solicitation of proxies or
otherwise.
-17-
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 50 of the Company's Annual Report contained in Appendix A.
Item 6. Selected Financial Data.
Selected Financial Data are hereby incorporated by reference to page 1 of the
Company'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 15 of the Company's Annual Report contained in Appendix A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk:
$145,515 of WPC's long-term debt bears interest at fixed rates, and therefore
the fair value of these instruments is affected by changes in the market
interest rates. The following table presents principal cash flows based upon
expected maturity dates of the debt obligations and the related weighted-average
interest rates by expected maturity dates for the fixed rate debt. The interest
rate on the variable rate debt as of December 31, 2002 ranged from 2.59% to
6.44%. The interest on the fixed rate debt as of December 31, 2002 ranged from
6.11% to 9.55%.
Advances from the line of credit bear interest at an annual rate of either (i)
the one, two, three or six-month LIBOR, plus a spread which ranges from 0.6% to
1.45% depending on leverage or corporate credit rating or (ii) the greater of
the bank's Prime Rate and the Federal Funds Effective Rate, plus .50%, plus a
spread of up to .125% depending on WPC's leverage.
(in thousands)
2003 2004 2005 2006 2007 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
Fixed rate debt $ 9,827 $ 23,738 $ 6,572 $ 22,986 $ 12,481 $ 69,911 $145,515 $148,390
Weighted average
interest rate 7.75% 8.03% 7.47% 7.27% 7.17% 7.27%
Variable rate debt $ 1,353 $ 50,653 $ 1,692 $ 1,908 $ 2,119 $ 31,809 $ 89,534 $ 89,534
WPC conducts business in France. The foreign operations were not material to
WPC's consolidated financial position, results of operations or cash flows
during the three-year period ended December 31, 2002. Additionally, foreign
currency translation gains and losses were not material to our results of
operations for the three-year period ended December 31, 2002. Accordingly, we
were not subject to material foreign currency exchange rate risk from the
effects that exchange rate movements of foreign currencies would have on our
future costs or on future cash flows we would receive from our foreign
subsidiaries. To date, we have not entered into any foreign currency forward
exchange contracts or other derivative financial instruments to hedge the
effects of adverse fluctuations in foreign currency exchange rates. Scheduled
future minimum rents, exclusive of renewals, under non-cancelable operating
leases resulting from WPC's foreign operations are as follows:
(in thousands) 2003 2004 2005 2006 2007 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
Minimum Rents (1) $ 5,966 $ 5,256 $ 4,440 $ 4,186 $ 4,149 $ 16,419 $ 40,416
Scheduled principal payments for the mortgage notes payable during each of the
next five years following December 31, 2002 and thereafter are as follows:
(in thousands) 2003 2004 2005 2006 2007 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
Mortgage notes
Payable(1) $ 1,353 $ 1,653 $ 1,692 $ 1,908 $ 2,119 $ 31,809 $ 40,534
(1) Based on December 31, 2002 exchange rate for the Euro.
-18-
Item 8. Consolidated Financial Statements and Supplementary Data:
The following consolidated financial statements and supplementary data of the
Company are hereby incorporated by reference to pages 16 to 49 of the Company's
Annual Report contained in Appendix A:
(i) Report of Independent Accountants.
(ii) Consolidated Balance Sheets as of December 31, 2002 and 2001
(iii) Consolidated Statements of Operations for the years ended December
31, 2002, 2001 and 2000
(iv) Consolidated Statements of Members' Equity for the years ended
December 31, 2000, 2001 and 2002
(v) Consolidated Statements of Cash Flows for the years ended December
31, 2002, 2001 and 2000
(vi) Notes to Consolidated Financial Statements
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
This information will be contained in Company's definitive Proxy Statement with
respect to the Company's 2003 Annual Meeting of Shareholders, to be filed with
the Securities and Exchange Commission within 120 days following the end of the
Company's fiscal year, and is hereby incorporated by reference.
Item 11. Executive Compensation.
This information will be contained in Company's definitive Proxy Statement with
respect to the Company's 2003 Annual Meeting of Shareholders, to be filed with
the Securities and Exchange Commission within 120 days following the end of the
Company's fiscal year, and is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
This information will be contained in Company's definitive Proxy Statement with
respect to the Company's 2003 Annual Meeting of Shareholders, to be filed with
the Securities and Exchange Commission within 120 days following the end of the
Company's fiscal year, and is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions.
This information will be contained in Company's definitive Proxy Statement with
respect to the Company's 2003 Annual Meeting of Shareholders, to be filed with
the Securities and Exchange Commission within 120 days following the end of the
Company's fiscal year, and is hereby incorporated by reference.
Item 14. Controls and Procedures
The Co-Chief Executive Officers and Chief Financial Officer of the Company have
conducted a review of the Company's disclosure controls and procedures as of
December 31, 2002.
The Company's disclosure controls and procedures include the Company's controls
and other procedures designed to ensure that information required to be
disclosed in this and other reports filed under the Securities Exchange Act of
1934, as amended (the "Exchange Act") is accumulated and communicated to the
Company's management, including its co-chief executive officers and chief
financial officer, to allow timely decisions regarding required disclosure and
to ensure that such information is recorded, processed, summarized and reported,
within the required time periods.
Based upon this review, the Company's co-chief executive officers and chief
financial officer have concluded that the Company's disclosure controls (as
defined in pursuant to Rule 13a-14(c) promulgated under the Exchange Act) are
sufficiently effective to ensure that the information required to be disclosed
by the Company in the reports it files under the Exchange Act is recorded,
processed, summarized and reported with adequate timeliness.
-19-
PART IV
Item 15. 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.
Consolidated Balance Sheets as of December 31, 2002 and
2001.
Consolidated Statements of Operations for the years
ended December 31, 2002, 2001, and 2000.
Consolidated Statements of Members' Equity for the years
ended December 31, 2000, 2001, and 2002.
Consolidated Statements of Cash Flows for the years
ended December 31, 2002, 2001, and 2000.
Notes to Consolidated Financial Statements.
The consolidated financial statements are hereby incorporated by reference to
pages 16 to 49 of the Company's Annual Report contained in Appendix A.
(a). 2. Financial Statement Schedule:
The following schedule is filed as a part of this Report:
Report of Independent Accountants.
Schedule III - Real Estate and Accumulated Depreciation
as of December 31, 2002.
Notes to Schedule III.
Schedule III and notes thereto are contained herein on
pages 26 to 33 of this Form 10-K.
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.
-20-
(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 and Restated Limited Liability Company Exhibit 3.1 to Registration
Agreement of Carey Diversified LLC. Statement on Form S-4 (No.
333-37901) dated October
15, 1997
3.2 Bylaws of Carey Diversified LLC. Exhibit 3.2 to Registration
Statement on Form S-4
(No. 333-37901) dated October
15, 1997
4.1 Form of Listed Share Stock Certificate. Exhibit 4.1 to Registration
Statement on Form S-4
(No. 333-37901) dated
October 15, 1997
10.1 Management Agreement Between Carey Management LLC Exhibit 10.1 to Registration
and the Company. Statement on Form S-4
(No. 333-37901) dated
October 15, 1997
10.2 Non-Employee Directors' Incentive Plan. Exhibit 10.2 to Registration
Statement on Form S-4
(No. 333-37901) dated October
15, 1997
10.3 1997 Share Incentive Plan. Exhibit 10.3 to Registration
Statement on Form S-4
(No. 333-37901) dated October
15, 1997
10.4 Investment Banking Engagement Letter between Exhibit 10.4 to Registration
W. P. Carey & Co. and the Company. Statement on Form S-4
(No. 333-37901) dated October
15, 1997
10.5 Non-Statutory Listed Share Option Agreement. Exhibit 10.5 to Registration
Statement on Form S-4
(No. 333-37901) dated October
15, 1997
10.6 Second Amended and Restated Credit Agreement Exhibit 10.6 to Form 10-K,
dated as of March 23, 2001 dated March 18, 2002
21.1 List of Registrant Subsidiaries Filed herewith
23.1 Consent of PricewaterhouseCoopers LLP Filed herewith
99.1 Chief Executive Officer's Certification Pursuant to Section 906 Filed herewith
of the Sarbanes-Oxley Act of 2002.
-21-
Exhibit Method of
No. Description Filing
- ------- ----------- ---------------------
99.2 Chief Financial Officer's Certification Pursuant to Section 906 Filed herewith
of the Sarbanes-Oxley Act of 2002.
99.13 Amended and Restated Agreement of Limited Partnership Exhibit 99.13 to Registration
of CPA(R):1. Statement on Form S-4
(No. 333-37901) dated October
15, 1997
99.16 Amended and Restated Agreement of Limited Partnership Exhibit 99.16 to Registration
of CPA(R):4. Statement on Form S-4
(No. 333-37901) dated October
15, 1997
99.18 Amended and Restated Agreement of Limited Partnership Exhibit 99.18 to Registration
of CPA(R):6. Statement on Form S-4
(No. 333-37901) dated October
15, 1997
99.21 Amended and Restated Agreement of Limited Partnership Exhibit 99.21 to Registration
of CPA(R):9. Statement on Form S-4
(No. 333-37901) dated October
15, 1997
99.22 Listed Share Purchase Warrant. Exhibit 99.22 to Registration
Statement on Form S-4
(No. 333-37901) dated October
15, 1997
(b). Report on Form 8-K:
During the quarter ended December 31, 2002, the Company was not required to
file any reports on Form 8-K.
-22-
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. W. P. CAREY & CO. LLC
3/25/2003 BY: /s/ John J. Park
--------- --------------------------------------
Date John J. Park
Managing Director and Chief 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. LLC
3/25/2003 BY: /s/ William P. Carey
--------- --------------------------------------------
Date William P. Carey
Chairman of the Board, Co-Chief Executive
Officer and Director
3/25/2003 BY: /s/ Francis J. Carey
--------- --------------------------------------------
Date Francis J. Carey
Vice Chairman of the Board, Chairman of the
Executive Committee and Director
3/25/2003 BY: /s/ Gordon F. DuGan
--------- --------------------------------------------
Date Gordon F. DuGan
President, Co-Chief Executive Officer,
Chief Acquisitions Officer and Director
3/25/2003 BY: /s/ George E. Stoddard
--------- --------------------------------------------
Date George E. Stoddard
Senior Executive Vice President, Chairman
of the Investment Committee, and Director
3/25/2003 BY: /s/ Nathaniel S. Coolidge
--------- --------------------------------------------
Date Nathaniel S. Coolidge
Chairman of the Audit Committee and Director
3/25/2003 BY: /s/ Eberhard Faber IV
--------- --------------------------------------------
Date Eberhard Faber IV
Chairman of Nomination & Corporate Governance
Committee and Director
3/25/2003 BY: /s/ Dr. Lawrence R. Klein
--------- --------------------------------------------
Date Dr. Lawrence R. Klein
Chairman of the Economic Policy Committee
and Director
3/25/2003 BY: /s/ Charles C. Townsend, Jr.
--------- --------------------------------------------
Date Charles C. Townsend, Jr.
Chairman of the Compensation Committee and
Director
3/25/2003 BY: /s/ Reginald Winssinger
--------- --------------------------------------------
Date Reginald Winssinger
Director
3/25/2003 BY: /s/ John J. Park
--------- --------------------------------------------
Date John J. Park
Managing Director and Chief Financial Officer
3/25/2003 BY: /s/ Claude Fernandez
--------- --------------------------------------------
Date Claude Fernandez
Managing Director and Chief Accounting Officer
-23-
CERTIFICATIONS
We, William Polk Carey and Gordon F. DuGan, certify that:
1. We have reviewed this annual report on Form 10-K of W. P. Carey & Co. LLC
(the "Registrant");
2. Based on our knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on our knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this annual report;
4. The Registrant's other certifying officers and we are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and we have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit committee
of Registrant's board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officers and we have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date 3/25/2003 Date 3/25/2003
/s/ William Polk Carey /s/ Gordon F. DuGan
----------------------------- ----------------------------
William Polk Carey Gordon F. DuGan
Chairman President
(Co-Chief Executive Officer) (Co-Chief Executive Officer)
-24-
CERTIFICATIONS (Continued)
I, John J. Park, certify that:
1. I have reviewed this annual report on Form 10-K of W. P. Carey & Co.LLC
(the "Registrant");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this annual report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date 3/25/2003
/s/ John J. Park
-----------------------------
John J. Park
Chief Financial Officer
-25-
REPORT of INDEPENDENT ACCOUNTANTS
on FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of
W. P. CAREY & CO. LLC:
Our audits of the consolidated financial statements referred to in our report
dated March 19, 2003 appearing in the 2002 Annual Report to Shareholders of W.
P. CAREY & CO. LLC (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 15(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 19, 2003
-26-
W. P. CAREY & CO. LLC
SCHEDULE III - REAL ESTATE and ACCUMULATED DEPRECIATION
as of December 31, 2002
Initial Cost to Company
-----------------------
Costs
Capitalized Increase
Personal Subsequent to (decrease) in Net
Description Encumbrances Land Buildings Property Acquisition(a) Investments (b)
----------- ------------ ---- --------- -------- -------------- ---------------
Operating Method:
Office, warehouse and
manufacturing buildings
leased to various
tenants in Broomfield,
Colorado $1,668,104 $ 247,993 $ 2,538,263 $1,200,000
Distribution facilities
and warehouses leased
to The Gap, Inc. 12,091,275 1,525,593 21,427,148 141,235
Supermarkets leased to
Winn-Dixie Stores, Inc. 855,196 6,762,374 (2,535,810)
Warehouse and manufac-
turing plant leased to
Pre Finish Metals
Incorporated 324,046 8,408,833
Land leased to Unisource
Worldwide, Inc. 4,573,360
Centralized telephone
bureau leased to Excel
Communications, Inc. 925,162 4,023,627 101,983
Office building in
Beaumont, Texas leased
to Industrial Data
Systems Corporation and
Olmstead Kirk Paper
Company 164,113 2,343,849 35,549
Computer center leased to
AT&T Corporation 269,700 5,099,964 4,165,742 (2,612)
Office, manufacturing and
warehouse buildings
leased to AMS Holding
Group 1,389,951 5,337,002 92,326 (1,039,757)
Warehouse and
distribution leased to
Shinn Systems, Inc. in
Salisbury, NC 246,949 5,034,911 1,363,829
Manufacturing and office
buildings leased to
Penn Virginia Coal
Company 240,072 609,267
Land leased to Exide
Electronics Corporation 1,638,012 (809,735)
Motion picture theaters
leased to Harcourt
General, Inc. 1,527,425 5,709,495 (4,752,521)
Warehouse/ office
research facilities
leased to
Gross Amount at which Carried at Close of Period (d)
----------------------------------------------------
Life on