10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission file number: 000-25771

CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED

(Exact name of registrant as specified in its charter)

Maryland	13-3951476
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
50 Rockefeller Plaza
New York, New York	10020
(Address of principal executive offices)	(Zip code)

Registrant’s telephone numbers, including area code:
Investor Relations (212) 492-8920
(212) 492-1100

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.001 Per Share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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 þ No o

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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o                    Accelerated filer o                    Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

Registrant has no active market for its common stock as of March 16, 2007. Non-affiliates held 82,877,423 shares as of March 16, 2007.

As of March 16, 2007, there are 88,014,799 shares of common stock of registrant outstanding.

The registrant incorporates by reference its definitive Proxy Statement with respect to its 2006 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 Annual Report on Form 10-K.

TABLE OF CONTENTS

PART I	2
Item 1. Business	2
Item 1A. Risk Factors	13
Item 1B. Unresolved Staff Comments	20
Item 2. Properties	20
Item 3. Legal Proceedings	21
Item 4. Submission of Matters to a Vote of Security Holders	22
PART II	22
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6. Selected Financial Data	23
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	37
Item 8. Financial Statements and Supplementary Data	39
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	68
Item 9A. Controls and Procedures	68
Item 9B. Other Information	69
PART III	69
Item 10. Directors, Executive Officers and Corporate Governance	69
Item 11. Executive Compensation	69
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	69
Item 13. Certain Relationships and Related Transactions and Director Independence	69
Item 14. Principal Accountant Fees and Services	69
PART IV	70
Item 15. Exhibits, Financial Statement Schedules	70
SIGNATURES	71
EX-10.2: CREDIT AGREEMENT
EX-21.1: SUBSIDIARIES
EX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS LLP
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATIONS

Forward-Looking Statements

This annual report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part I of this report, contains forward-looking statements that involve risks, uncertainties and assumptions. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan” or similar expressions. Do not unduly rely on forward-looking statements. They give our expectations about the future and are not guarantees, and speak only as of the date they are made. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievement to be materially different from the results of operations or plan expressed or implied by such forward-looking statements. While we cannot predict all of the risks and uncertainties, they include, but are not limited to, those described below in Item 1A — Risk Factors. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved.

As used in this annual report on Form 10-K, the terms “the Company,” “we,” “us” and “our” include Corporate Property Associates 14 Incorporated, its consolidated subsidiaries and predecessors, unless otherwise indicated.

CPA^®:14 2006 10-K — 1

PART I

Financial information in this report is in thousands except share and per share amounts.

Item 1. Business.

(a) General Development of Business

Overview

We are a real estate investment trust (“REIT”) that invests in commercial properties leased to companies domestically and internationally. As a REIT, we are not subject to U.S. federal income taxation as long as we satisfy certain requirements relating to the nature of our income, the level of our distributions and other factors.

Our core investment strategy is to own and manage a portfolio of properties leased to a diversified group of companies on a single tenant net lease basis. Our net leases generally require the tenant to pay substantially all of the costs associated with operating and maintaining the property such as maintenance, insurance, taxes, structural repairs and other operating expenses (referred to as triple-net leases). We generally seek to include in our leases:

• clauses providing for mandated rent increases or periodic rent increases over the term of the lease tied to increases in the consumer price index (“CPI”) or other indices for the jurisdiction in which the property is located or, when appropriate, increases tied to the volume of sales at the property;

• indemnification for environmental and other liabilities;

• operational or financial covenants of the tenant; and

• guarantees of lease obligations from parent companies or letters of credit.

We are managed by W. P. Carey & Co. LLC (“WPC”) through its wholly-owned subsidiaries (collectively, the “advisor”). WPC is a publicly-traded company listed on the New York Stock Exchange under the symbol “WPC.”

The advisor provides both strategic and day-to-day management services for us, including capital funding services, investment research and analysis, investment financing and other investment acquisition related services, asset management, disposition of assets, investor relations and administrative services. The advisor also provides office space and other facilities for us. We pay asset management fees and certain transactional fees to the advisor and also reimburse the advisor for certain costs incurred in providing services, including personnel provided for the administration of our operations. The advisor also serves in this capacity for Corporate Property Associates 15 Incorporated (“CPA^®:15”) and Corporate Property Associates 16 — Global Incorporated (“CPA^®:16 — Global”), and served in this capacity for Corporate Property Associates 12 Incorporated (“CPA^®:12”) until we acquired CPA^®:12 in December 2006, as described below (collectively, including us, the “CPA^® REITs”).

We were formed as a Maryland corporation on June 4, 1997. Between November 1997 and November 2001, we sold a total of 65,794,280 shares of common stock for a total of $657,943 in gross offering proceeds. Through December 31, 2006, we have also issued 2,239,225 shares ($25,938) through our Distribution Reinvestment and Share Purchase Plan. These proceeds were used along with limited recourse mortgage debt to purchase our properties.

Our principal executive offices are located at 50 Rockefeller Plaza, New York, NY 10020 and our telephone number is (212) 492-1100. As of December 31, 2006, we had no employees. WPC employs 122 individuals who are available to perform services for us.

Significant Developments During 2006:

Merger with CPA^®:12 — On December 1, 2006, we completed a merger (the “merger”) with CPA^®:12, an affiliate, pursuant to a merger agreement dated June 29, 2006. The merger provided a liquidation option for CPA^®:12 shareholders and provided us with the opportunity to continue to grow and enhance our investment portfolio. Under the terms of the merger, which was approved by the shareholders of both companies at special meetings of the shareholders of each company held on November 30, 2006, we acquired CPA^®:12’s business on December 1, 2006 and are the surviving company. The total purchase price for CPA^®:12 was $540,500, which was comprised of 18,470,351 shares of our common stock ($218,874 based on a value of $11.85 per share), $102,176 in consideration for CPA^®:12 shareholders who redeemed their interests (9,920,039 shares of CPA^®:12), $215,369 in fair value of debt and other liabilities assumed (including our pro rata share of fair value of debt assumed on investments accounted for under the equity method) and transaction costs of $4,081. Prior to the merger, CPA^®:12 sold certain of its properties or interests in properties to third parties and to the advisor. These properties had remaining lease terms of eight years or less and therefore did not meet our investment objectives. We also owned a 49.99% interest in one of these properties, which was sold to a third party in October 2006, and as a result of the

CPA^®:14 2006 10-K — 2

sale, we made a special cash distribution of $0.04 per share, or $2,773, to our shareholders at the close of the merger (see Special Distributions below).

Under the terms of the merger agreement, CPA^®:12’s shareholders had the right to elect to receive either $10.30 per share in cash or 0.8692 of our shares for each share of CPA^®:12 owned as of October 20, 2006. The value of properties acquired and the exchange rates are based in large part on a third party valuation of the properties belonging to us and to CPA^®:12 as of December 31, 2005 and were subsequently adjusted to reflect the Starmark Holdings LLC (“Starmark”) restructuring (see Tenant Activity below) but did not take into account any additional changes in value that may have occurred subsequent to December 31, 2005.

We have accounted for the merger under the purchase method of accounting. The purchase price has been allocated to the assets acquired and liabilities assumed based upon their fair values. The assets acquired primarily consist of commercial real estate assets net leased to single tenants, lease-related intangible assets, cash, a subordinated interest in a mortgage loan securitization, receivables and deposits. The liabilities assumed primarily consist of mortgage notes payable, accrued interest, accounts payable, security deposits and amounts due to former CPA^®:12 shareholders. The amounts due to former CPA^®:12 shareholders were paid on December 1, 2006. In addition, the advisor owned 2,134,140 shares of CPA^®:12 as of December 1, 2006 and elected to receive $9,861 in cash and 1,022,800 shares of our stock on consummation of the merger.

We have entered into a $150,000 credit facility with Wells Fargo Bank. The credit facility provides for an initial three year term and an annual interest rate of either (i) LIBOR plus a spread which ranges from 135 to 160 basis points depending on our leverage or (ii) the greater of the bank’s prime rate and the Federal Funds Effective Rate, plus 0.50%, plus a spread of up to 0.125% depending on our leverage ratio (see Item 7 — Financial Condition). In connection with the merger, we paid a fee to the lender of $1,033 and drew down $25,000 from our credit facility.

The advisor agreed to make available to us an additional loan of up to $50,000 to be funded using the advisor’s existing credit line. The loan from the advisor had a maturity date of May 2007 and bore interest ranging between LIBOR plus 110 basis points and 145 basis points, which are the same terms as the advisor’s existing credit line. In connection with the consummation of the merger on December 1, 2006, the advisor loaned $24,000 to us to facilitate the merger closing. We repaid the loan on December 5, 2006 with proceeds from our credit facility.

On completion of the merger, CPA^®:12 paid the advisor termination and disposition compensation totaling $49,798. A subsidiary of the advisor has agreed to indemnify us if we were to suffer certain losses arising out of a breach by CPA^®:12 of its representations and warranties under the merger agreement and having a material adverse effect on us after the merger, up to the amount of fees received by this subsidiary of the advisor in connection with the merger. The advisor has also agreed to waive any acquisition fees payable after the merger by us under our advisory agreement with the advisor in respect of the properties being acquired in the merger and has also agreed to waive any disposition fees that may subsequently be payable by us to the advisor upon a sale of such assets. However, we agreed to assume deferred acquisition fees incurred by CPA^®:12 prior to the merger totaling $2,734 that bear interest at an annual rate of 7% and have scheduled installment payments through 2013.

Tenant Activity — We and an affiliate own interests in a venture owning 15 properties formerly leased to Starmark (formerly the parent of Starmark Camhood L.L.C.) under a master lease agreement. We owned a 41% interest in this venture and acquired an additional 15% interest in the venture in the merger. We continue to account for this investment under the equity method of accounting as our affiliate is the managing member in the limited liability company and is required to consolidate the investment under the provisions of EITF 04-05. Our interest in this investment had a carrying value of $34,975 as of December 31, 2006 and accounted for a loss from equity investments in real estate of $7,786 during 2006. The loss in 2006 reflects the recognition of impairment charges and prepayment penalties and debt defeasance costs as described below.

In January 2006, the advisor entered into a cooperation agreement with Starmark. Under this cooperation agreement, the advisor, on behalf of ourselves and our affiliate, agreed to cooperate in Starmark’s efforts to sell its existing individual leasehold interests to third parties and restructure the lease agreements. Additionally, Starmark’s financial covenants were replaced by certain payment restrictions and an agreement to reserve certain of the proceeds of sale of the leasehold interests and other Starmark properties to cover certain costs the venture incurred in connection with transactions under the cooperation agreement.

In June 2006, the advisor approved a plan to restructure the master lease agreement with Starmark. Under the restructuring plan, six properties under the master lease agreement were re-leased to Life Time Fitness, Inc. (“Life Time”), a new tenant unaffiliated with Starmark, and Life Time entered into a commitment to provide $20,000 of improvements to these six properties. In connection with

CPA^®:14 2006 10-K — 3

the restructuring, four properties formerly leased to Starmark were transferred to Life Time in exchange for Life Time’s commitment to use $10,000 to fund a portion of the improvements to the six leased properties. This commitment is secured by letters of credit totaling $10,000. The venture has transferred title of these four properties to Life Time and the venture has no continuing involvement in the transferred properties. No gain or loss was recorded on the transfer of the four properties as the venture had previously written down the four transferred properties to their estimated fair values, as described below. The remaining $10,000 of improvements to the six leased properties will be funded through a rent abatement to the tenant of $2,322 and through security deposits and prepaid rent totaling $7,678 that were released by Starmark prior to the merger (of which our pro rata share is $952 and $3,148, respectively). The $20,000 of improvements (of which our pro rata share, following the merger, is $11,200) are for the benefit of the venture and will be retained by the venture upon expiration of the lease. One additional property was re-leased to Town Sports International Holdings, Inc., a second new tenant unaffiliated with Starmark, on terms similar to the original lease with Starmark. The master lease agreement was amended to remove these properties.

As a result of approving the restructuring plan, during the second quarter of 2006, the venture incurred charges totaling $24,978, including $18,678 to write off intangible assets on the properties leased to Starmark and $6,300 to reduce the carrying value of the four properties to be sold to their estimated fair values. Our pro rata share of these charges totals $10,241. During the third quarter of 2006, the venture also prepaid/defeased the existing debt of $100,857 and incurred prepayment penalties and debt defeasance costs totaling $10,072 (of which our share is $41,351 and $4,130, respectively). During the fourth quarter of 2006, the venture obtained new limited recourse mortgage financing of $80,000 on the Life Time properties at a fixed annual interest rate of 5.75% and with a 10-year term (of which our share is $32,800).

In December 2006, a third party, Fitness Ventures LLC (“Fitness Ventures”) purchased 100% of the existing shareholders’ interests in the ownership of Starmark. At this time, Fitness Ventures issued warrants to the Company and its affiliate to acquire up to 10% of its equity and entered into new leases for the four remaining properties under terms which are similar to the original master lease. Concurrent with these transactions, the cooperation agreement with Starmark was terminated and the venture recognized lease termination income of $8,145, of which $7,678 represents security deposits and prepaid rent from Starmark and $467 represents the release of real estate tax escrows funded by the venture which have been replaced by escrows funded by the new lessees. Our share of the termination income is $4,561.

Our share of the effects of the venture’s transactions will be reflected as part of income from equity investments in our statements of income in the periods described.

In June 2006, we entered into an agreement with a third party in connection with a property in Pennsylvania. Under the terms of the agreement, our existing warehouse facility was demolished and the existing land is being redeveloped as part of the construction of a new retail shopping center. In connection with demolishing the property, we recognized a charge to depreciation expense of $3,730 to fully depreciate the property. Upon completion of construction, the third party will transfer to us a newly constructed retail facility with a tenant in place. We defeased the outstanding limited recourse mortgage obligation of $3,859 as a result of entering into this transaction.

Disposition Activity — During 2006, we completed dispositions of two consolidated properties for $37,628, net of selling costs, and recognized a net gain on these sales of $13,182, excluding impairment charges of $3,810 recognized in prior years. In connection with the sale of one of the properties, we repaid a mortgage obligation of $11,631 and incurred prepayment penalties of $1,586.

In June 2006, a venture in which we and an affiliate held 40% and 60% interests, respectively, sold a property in New York for $200,012, net of selling costs, and recognized a gain on the sale of $41,101, net of a $10,253 writeoff of unrecoverable receivables related to future stated rent increases. In connection with the sale, the venture repaid the existing limited recourse mortgage obligation of $81,166 and incurred a charge for prepayment penalties and related costs totaling $2,981. Our pro rata share of the gain, which was $16,441, and the charge for prepayment penalties of $1,192 are included in income from equity investments in real estate in the accompanying consolidated financial statements.

In October 2006, as described above, a venture through which we and CPA^®:12 held 49.99% and 50.01% interests, respectively, in a property in California sold the property for $56,357 and recognized a gain on sale of $14,362, of which our share is $28,172 and $7,180, respectively. The venture also recognized a gain on the sale of additional properties in which we had no ownership interest. In connection with the sale, the venture repaid the outstanding mortgage obligation on this property of $19,680 and incurred a charge on the early extinguishment of debt of $1,788, of which our share is $9,838 and $894, respectively.

Special Distributions —In connection with our disposition activity, our board of directors approved a special distribution of $0.45 per share that was paid in July 2006, totaling $30,836, to shareholders of record as of June 30, 2006 and approved a second special distribution of $0.04 per share that was paid in January 2007, totaling $2,773, to shareholders of record as of November 30, 2006.

CPA^®:14 2006 10-K — 4

Financing Activity — In March 2006, we prepaid a variable rate mortgage obligation of $8,677 that was scheduled to mature in 2025 but was effectively fixed through an interest rate swap agreement that was scheduled to expire in 2007. In June 2006, we obtained $12,000 of new limited recourse mortgage financing on this property with an annual fixed rate of 6.20% and a 10-year term.

We and the advisor, which each own 50% interests in a property in Norcross, Georgia, paid a $20,599 balloon payment when it came due in June 2006 and refinanced the mortgage obligation for $30,000, of which our share is $10,299 and $15,000, respectively. The new limited recourse mortgage financing has an annual fixed interest rate of 6.18% and a 10-year term. We account for this investment under the equity method of accounting.

Directors — The following changes in our board of directors occurred during 2006:

• In April 2006, James D. Price resigned from the board of directors. Mr. Price remained an independent director of the board of directors of CPA^®:12. Concurrently, Gordon F. DuGan resigned from our board of directors in order to maintain a majority of independent directors on the board of directors, as provided in our bylaws.

• In July 2006, Richard J. Pinola was appointed to the board of directors and serves as an independent director and chairman of the audit committee of the board of directors.

• In December 2006, upon completion of the CPA^®:12 merger, the independent directors of CPA^®:12, Mr. Price and Elizabeth P. Munson, joined our board of directors.

SEC Investigation — WPC and Carey Financial, the wholly-owned broker-dealer subsidiary of WPC, are currently subject to an investigation by the SEC into payments made to third-party broker-dealers in connection with the distribution of REITs managed by WPC and other matters. Although no regulatory action has been initiated against WPC or Carey Financial in connection with the matters being investigated, we expect that the SEC may pursue an action in the future. The potential timing of any action and the nature of the relief or remedies the SEC may seek cannot be predicted at this time. If an action is brought, it could materially affect WPC and the CPA^® REITs managed by WPC, including us. See Item 3 — Legal Proceedings for a discussion of this investigation.

Sarbanes-Oxley — We did not perform compliance testing in accordance with the Sarbanes-Oxley Act for 2006 as, pursuant to clarified SEC interpretations, we are no longer considered an accelerated filer. As a non-accelerated filer, we will be required to perform compliance testing in 2007.

Refer to Subsequent Events in Item 7 for developments that have occurred since December 31, 2006.

(b) Financial Information About Segments

We operate in one industry segment, real estate operations with domestic and foreign investments. Refer to the Segment Information footnote of the accompanying consolidated financial statements for financial information about this segment.

(c) Narrative Description of Business

Business Objectives and Strategy

We invest primarily in income-producing commercial real estate properties, which are upon acquisition, improved or developed or which will be developed within a reasonable time after acquisition.

Our objectives are to:

• own a diversified portfolio of triple-net leased real estate;

• fund distributions to shareholders; and

• increase our equity in our real estate by making regular mortgage principal payments.

We seek to achieve these objectives by investing in and holding commercial properties each triple-net leased to a single corporate tenant. We intend our portfolio to be diversified by tenant, facility type, geographic location and tenant industry.

Our business plan is principally focused on managing our existing portfolio of properties, including those properties we acquired from CPA^®:12. However, we may look to take advantage of increases in real estate prices by selectively disposing of properties, by obtaining new limited recourse mortgage financing on unencumbered assets or by refinancing mortgages on existing properties if we can obtain such financing on attractive terms, and may use these funds along with existing cash resources to make future acquisitions if attractive opportunities arise.

CPA^®:14 2006 10-K — 5

Our Portfolio

As of December 31, 2006, our portfolio consisted of 289 properties leased to 91 tenants and totaled approximately 29.9 million square feet (on a pro rata basis), with a 100% occupancy rate. Our portfolio has the following property and lease characteristics:

Geographic Diversification

Information regarding the geographic Information regarding our property diversification as of December 31, 2006 is set forth below:

	Consolidated Investments					Equity Investments in Real Estate (2)
	Annualized		% of			Annualized		% of
	Contractual		Annualized			Contractual		Annualized
	Lease		Contractual			Lease		Contractual
Region	Revenue (1)		Lease Revenue			Revenue (1)		Lease Revenue
United States
East	$	40,523		25.23	%	$	4,050		10.51	%
South		35,558		22.13			10,879		28.24
Midwest		34,335		21.37			8,043		20.88
West		27,494		17.11			15,545		40.37
Total U.S.		137,910		85.84			38,517		100.00
International
Europe		22,734		14.16			—		—
Total	$	160,644		100.00	%	$	38,517		100.00	%

(1)	Reflects annualized contractual minimum base rent for the fourth quarter of 2006.
(2)	Reflects our pro rata share of annualized contractual minimum base rent for the fourth quarter of 2006 from equity investments in real estate.

Property Diversification

Information regarding our property diversification as of December 31, 2006 is set forth below:

	Consolidated Investments					Equity Investments in Real Estate (2)
	Annualized		% of			Annualized		% of
	Contractual		Annualized			Contractual		Annualized
	Lease		Contractual			Lease		Contractual
Property Type	Revenue (1)		Lease Revenue			Revenue (1)		Lease Revenue
Industrial	$	53,542		33.33	%	$	10,491		27.24	%
Warehouse/distribution		44,706		27.83			7,953		20.65
Office		34,370		21.40			6,107		15.86
Retail		14,795		9.21			2,795		7.26
Other properties		13,231		8.23			11,171		28.99
Total	$	160,644		100.00	%	$	38,517		100.00	%

(1)	Reflects annualized contractual minimum base rent for the fourth quarter of 2006.
(2)	Reflects our pro rata share of annualized contractual minimum base rent for the fourth quarter of 2006 from equity investments in real estate.

CPA^®:14 2006 10-K — 6

Tenant Diversification

Information regarding our tenant diversification as of December 31, 2006 is set forth below:

	Consolidated Investments					Equity Investments in Real Estate (2)
	Annualized		% of			Annualized		% of
	Contractual		Annualized			Contractual		Annualized
	Lease		Contractual			Lease		Contractual
Tenant Industry (3)	Revenue (1)		Lease Revenue			Revenue (1)		Lease Revenue
Retail Stores	$	36,223		22.55	%	$	3,144		8.16	%
Electronics		22,235		13.84			9,999		25.96
Chemicals, Plastics, Rubber, and Glass		14,475		9.01			—		—
Automobile		12,911		8.04			—		—
Construction and Building		11,944		7.44			6,305		16.37
Transportation — Cargo		11,561		7.20			—		—
Consumer and Non-Durable Goods		9,079		5.65			—		—
Leisure, Amusement, Entertainment		8,278		5.15			7,815		20.29
Beverages, Food, and Tobacco		6,788		4.23			1,478		3.84
Business and Commercial Services		6,768		4.21			—		—
Healthcare, Education and Childcare		6,195		3.86			1,671		4.34
Machinery		3,934		2.45			—		—
Hotels and Gaming		2,339		1.46			—		—
Media: Printing and Publishing		2,078		1.29			1,597		4.15
Aerospace and Defense		1,743		1.09			—		—
Self-Storage / Trucking		—		—			2,141		5.56
Telecommunications		—		—			2,302		5.98
Other (4)		4,093		2.53			2,065		5.35
Total	$	160,644		100.00		$	38,517		100.00

(1)	Reflects annualized contractual minimum base rent for the fourth quarter of 2006.
(2)	Reflects our pro rata share of annualized contractual minimum base rent for the fourth quarter of 2006 from equity investments in real estate.
(3)	Based on the Moody’s classification system and information provided by the tenant.
(4)	Includes revenue from tenants in the consumer goods, paper, mining, banking, grocery and personal transportation industries.

CPA^®:14 2006 10-K — 7

Lease Expirations

As of December 31, 2006, lease expirations on our investments, including our pro rata share of equity investments in real estate are as follows:

	Consolidated Investments					Equity Investments in Real Estate (2)
	Annualized		% of			Annualized		% of
	Contractual		Annualized			Contractual		Annualized
	Lease		Contractual			Lease		Contractual
Year of Lease Expiration	Revenue (1)		Lease Revenue			Revenue (1)		Lease Revenue
2007	$	54		0.03	%	$	—		—	%
2008		302		0.19			—		—
2009		1,603		1.00			1,671		4.34
2010		2,152		1.34			—		—
2011		17,745		11.05			—		—
2012		103		0.06			—		—
2013		—		—			—		—
2014		2,447		1.52			1,153		2.99
2015		5,823		3.62			2,302		5.98
2016		13,461		8.38			1,478		3.84
2017-2021		101,646		63.27			13,479		34.99
2022-2026		14,066		8.76			18,434		47.86
2027 and thereafter		1,242		0.78			—		—
Total	$	160,644		100.00	%	$	38,517		100.00	%

(1)	Reflects annualized contractual minimum base rent for the fourth quarter of 2006.
(2)	Reflects our pro rata share of annualized contractual minimum base rent for the fourth quarter of 2006 from equity investments in real estate.

Asset Management

We believe that effective management of our 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.

The advisor monitors, on an ongoing basis, compliance by tenants with their lease obligations and other factors that could affect the financial performance of any of our 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. The advisor reviews financial statements of our tenants and undertakes regular physical inspections of the condition and maintenance of our properties. Additionally, the advisor periodically analyzes each tenant’s financial condition, the industry in which each tenant operates and each tenant’s relative strength in its industry.

Holding Period

We intend to hold each property we invest in for an extended period. The determination of whether a particular property should be sold or otherwise disposed of will be made after consideration of relevant factors with a view to achieving maximum capital appreciation for our shareholders. No assurance can be given that this objective will be realized.

Our intention is to consider alternatives for providing liquidity for our shareholders generally after eight years following the investment of substantially all of the net proceeds from our initial public offering. On this basis, we currently expect that we may begin considering liquidity alternatives in 2008. We may provide liquidity for our shareholders through a liquidity transaction which could include sales of assets, either on a portfolio basis or individually, a listing of our shares on a stock exchange or inclusion of our shares in an automated quotation system, a merger (which may include a merger with one or more of our affiliated CPA^® REITs and/or with the advisor) or another transaction approved by our board of directors. During the period that we are considering liquidity alternatives, we may choose to limit the making of new investments, unless our board of directors, including a majority of our independent directors, determines that, in light of our expected life, it is in our shareholders’ best interests for us to make new investments. We are under no obligation to liquidate our portfolio within any particular period since the precise timing will depend on real estate and financial markets, economic conditions of the areas in which the properties are located and U.S. federal income tax effects on shareholders which may prevail in the future. Furthermore, there can be no assurance that we will be able to consummate a liquidity event. In the most recent instances in which CPA^® REIT shareholders were provided with liquidity, including our merger with CPA^®:12, the liquidating entity merged with another, later-formed CPA^® REIT. In each of these

CPA^®:14 2006 10-K — 8

transactions, shareholders of the liquidating entity were offered the opportunity to exchange their shares either for shares of the merged entity or for cash a short-term note.

Financing Strategies

Consistent with our investment policies, we use leverage when available on favorable terms. As of December 31, 2006, substantially all of our mortgages are limited recourse and provide for monthly or quarterly installments, which include scheduled payments of principal. As of December 31, 2006, 81% of our limited recourse mortgage financing bears interest at fixed rates. The majority of our variable rate debt consists of limited recourse mortgage obligations that currently bear interest at fixed rates but may be reset in the future, pursuant to the terms of the mortgage contracts. Accordingly, our near term cash flow should not be adversely affected by increases in interest rates. The advisor may refinance properties or defease a loan when a decline in interest rates makes it profitable to prepay an existing mortgage, when an existing mortgage matures or if an attractive investment becomes available and the proceeds from the refinancing can be used to purchase the investment. There is no assurance that existing debt will be refinanced at lower rates of interest as the debt matures. The benefits of the refinancing may include an increased cash flow resulting from reduced debt service requirements, an increase in distributions from proceeds of the refinancing, if any, and/or an increase in property ownership if some refinancing proceeds are reinvested in real estate. The prepayment of loans may require us to pay a yield maintenance premium to the lender in order to pay off a loan prior to its maturity.

A lender on limited recourse mortgage debt generally has recourse only to the property collateralizing such debt and not to any of our other assets, while unsecured financing would give a lender recourse to all of our assets. The use of limited recourse debt, therefore, will help us to limit the exposure of all of our assets to any one debt obligation. Lenders may, however, have recourse to our other assets in limited circumstances not related to the repayment of the indebtedness, such as under an environmental indemnity or in the case of fraud.

In connection with the merger, we entered into a $150,000 credit facility with Wells Fargo Bank. The credit facility provides for an initial loan term of three years and an annual interest rate of LIBOR plus 135 to 160 basis points, and will be guaranteed by all of our current and future subsidiaries that own unencumbered assets. In connection with the merger, we paid a fee to the lender of $1,033 and drew down $25,000 from our credit facility (see Item 1 — Significant Developments During 2006).

Investment Strategies

We invest primarily in income-producing properties that are, upon acquisition, improved or being developed or that are to be developed within a reasonable period after acquisition.

Most of our property acquisitions, including the properties acquired in the merger, are through long-term net leased assets, many of which are through long-term sale-leaseback transactions in which we acquire properties from companies that simultaneously lease the properties back from us. These sale-leaseback transactions provide the lessee company with a source of capital that is an alternative to other financing sources such as corporate borrowing, mortgaging real property, or selling shares of common stock.

Our sale-leasebacks may be in conjunction with acquisitions, recapitalizations or other corporate transactions. We may act as one of several sources of financing for these transactions by purchasing real property from the seller and net leasing it to the company or its successor in interest (the lessee). Through the advisor, we actively seek such opportunities.

In analyzing potential net lease investment opportunities, the advisor reviews all aspects of a transaction, including the credit worthiness of the tenant or borrower and the underlying real estate fundamentals to determine whether a potential acquisition satisfies our acquisition criteria. The advisor may consider the following aspects of each transaction:

Tenant/Borrower Evaluation. — The advisor evaluates each potential tenant or borrower for its creditworthiness, typically considering factors such as management experience; industry position and fundamentals; operating history; and capital structure, as well as other factors that may be relevant to a particular investment. In evaluating a possible investment, the creditworthiness of a tenant or borrower often is a more significant factor than the value of the underlying real estate, particularly if the underlying property is specifically suited to the needs of the tenant; however, in certain circumstances where the real estate is attractively valued, the creditworthiness of the tenant may be a secondary consideration. Whether a prospective tenant or borrower is creditworthy is determined by the advisor or the investment committee of the advisor. Creditworthy does not mean “investment grade.”

Properties Important to Tenant/Borrower Operations. — The advisor focuses on properties that it believes are essential or important to the ongoing operations of the tenant. The advisor believes that these properties provide better protection in the event of a bankruptcy, since a tenant/borrower is less likely to risk the loss of a mission critical lease or property in a bankruptcy proceeding.

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Diversification. — The advisor attempts to diversify our portfolio to avoid dependence on any one particular tenant, borrower, collateral type, geographic location or tenant/borrower industry. By diversifying our portfolio, the advisor reduces the adverse effect of a single under-performing investment or a downturn in any particular industry or geographic region.

Lease Terms. — Generally, the net leased properties in which we invest will be leased on a full recourse basis to our tenants or their affiliates. In addition, the advisor will seek to include a clause in each lease that provides for increases in rent over the term of the lease. These increases are fixed or tied generally to increases in indices such as the CPI. In the case of retail stores and hotels, the lease may provide for participation in gross revenues above a stated level. Alternatively, a lease may provide for mandated rental increases on specific dates or other methods.

Collateral Evaluation. — The advisor reviews the physical condition of the property, and conducts a market evaluation to determine the likelihood of replacing the rental stream if the tenant defaults, or of a sale of the property in such circumstances. The advisor also generally conducts, or requires the seller to conduct, Phase I or similar environmental site assessments (including a visual inspection for the potential presence of asbestos) in an attempt to identify potential environmental liabilities associated with a property prior to its acquisition. If potential environmental liabilities are identified, we generally require that identified environmental issues be resolved by the seller prior to property acquisition or, where such issues cannot be resolved prior to acquisition, require tenants contractually to assume responsibility for resolving identified environmental issues post-closing and indemnify us against any potential claims, losses or expenses arising from such matters. Although the advisor generally relies on its own analysis in determining whether to make an investment, each real property purchased by us will be appraised by a third party appraiser that is independent of the advisor, prior to acquisition. The contractual purchase price (plus acquisition fees, but excluding acquisition expenses, payable to the advisor) for a real property we acquire will not exceed its appraised value. The appraisals may take into consideration, among other things, the terms and conditions of the particular lease transaction, the quality of the lessee’s credit and the conditions of the credit markets at the time the lease transaction is negotiated. The appraised value may be greater than the construction cost or the replacement cost of a property, and the actual sale price of a property if sold by us may be greater or less than the appraised value. In cases of special purpose real estate, a property is examined in light of the prospects for the tenant/borrower’s enterprise and the financial strength and the role of that asset in the context of the tenant/borrower’s overall viability. Operating results of properties and other collateral may be examined to determine whether or not projected income levels are likely to be met.

Transaction Provisions that Enhance and Protect Value. — The advisor attempts to include provisions in its leases that require our consent to specified activity, require the tenant to provide indemnification protections, or require the tenant to satisfy specific operating tests. These provisions may help protect our investment from changes in the operating and financial characteristics of a tenant that may affect its ability to satisfy its obligations to us or reduce the value of our investment. The advisor may also seek to enhance the likelihood of a tenant’s lease obligations being satisfied through a guarantee of obligations from the tenant’s corporate parent or a letter of credit. This credit enhancement, if obtained, provides us with additional financial security. However, in markets where competition for net lease transactions is strong, some or all of these provisions may be difficult to negotiate. In addition, in some circumstances, tenants may require a right to purchase the property leased by the tenant. The option purchase price is generally the greater of the contract purchase price and the fair market value of the property at the time the option is exercised.

Other Equity Enhancements. — The advisor may attempt to obtain equity enhancements in connection with transactions. These equity enhancements may involve warrants exercisable at a future time to purchase stock of the tenant or borrower or their parent. If warrants are obtained, and become exercisable, and if the value of the stock subsequently exceeds the exercise price of the warrant, equity enhancements can help us to achieve our goal of increasing investor returns.

Investment Decisions —The advisor’s investment department, under the oversight of its chief investment officer, is primarily responsible for evaluating, negotiating and structuring potential investment opportunities for the CPA^® REITs and WPC. Before an investment is made, the transaction is reviewed by the advisor’s investment committee. The investment committee is not directly involved in originating or negotiating potential investments, but instead functions as a separate and final step in the acquisition process. The advisor places special emphasis on having experienced individuals serve on its investment committee subject to limited exceptions, the advisor generally will not invest in a transaction on our behalf unless it is approved by the investment committee. For transactions that meet the investment criteria of more than one CPA^® REIT, the chief investment officer has discretion as to which CPA^® REIT or REITs will hold the investment. In cases where two or more CPA^® REITs (or one or more CPA^® REIT and the advisor) will hold the investment, the independent directors of each CPA^® REIT investing in the property must also approve the transaction.

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The following people currently serve on the investment committee:

• Nathaniel S. Coolidge, Chairman — Former senior vice president and head of the bond and corporate finance department of John Hancock Mutual Life Insurance. Mr. Coolidge’s responsibilities included overseeing its entire portfolio of fixed income investments.

• Frank Hoenemeyer — Former chairman and chief investment officer, Prudential Insurance Company of America.

• Dr. Lawrence R. Klein — Currently serving as professor emeritus of economics and finance at the University of Pennsylvania and its Wharton School. Recipient of the 1980 Nobel Prize in economic sciences and former consultant to both the Federal Reserve Board and the President’s Council of Economic Advisors.

• George E. Stoddard — Former officer-in-charge of the direct placement department of The Equitable Life Assurance Society of the United States and our former chief investment officer.

• Dr. Karsten von Köller — Currently chairman of Lone Star Germany GmbH and vice chairman of the supervisory board of Allgemeine HypothekenBank Rheinboden AG. Chairman of the board of management of this bank from December 2005 to October 2006. Previously served as chairman of the board of management of Eurohypo AG and was a member of the board of managing directors of Rheinhyp Rheinische Hypothekenbank AG.

Segments

We operate in one industry segment, real estate operations with domestic and foreign investments. For the year ended December 31, 2006, Carrefour France, SAS represented 11.5% of our total lease revenue.

Competition

We face competition for the acquisition of commercial properties in general, and such properties net leased to major corporations in particular, from many sources, including insurance companies, credit companies, pension funds, private individuals, private funds such as hedge funds, financial institutions, finance companies, 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. These institutions may accept greater risk or lower returns, allowing them to offer more attractive terms to prospective tenants. We believe the advisor’s experience in real estate, credit underwriting and transaction structuring should allow us to compete effectively for commercial properties.

Environmental Matters

Our properties generally are currently or historically used for commercial purposes, including industrial and manufacturing properties. Under various federal, state and local environmental laws and regulations, current and former owners and operators of property may have liability for the cost of investigating, cleaning up or disposing of hazardous materials released at, on, under, in or from the property. These laws typically impose responsibility and liability without regard to whether the owner or operator knew of or was responsible for the presence of hazardous materials or contamination, and liability under these laws is often joint and several. Third parties may also make claims against owners or operators of properties for personal injuries and property damage associated with releases of hazardous materials.

While we typically perform assessments of potential environmental risks when evaluating a new acquisition of property, no assurance can be given that we have performed such assessments on all of our properties, or that the environmental assessments we do perform will disclose all potential environmental liabilities and we may purchase a property that contains hazardous materials in the building, or that is known to have or be near soil or groundwater contamination. In addition, new environmental conditions, liabilities or compliance concerns may arise or be discovered during our ownership.

While we frequently obtain contractual protection (indemnities, cash reserves, letters of credit or other instruments) from property sellers, tenants, a tenant’s parent company or another third party to address these known or potential issues, we cannot eliminate our statutory liability or the potential for claims against us by governmental authorities or other third parties. The contractual protection may not cover all potential damages or liabilities, and the indemnifying party may fail to meet its contractual obligations. In addition, the existence of any environmental conditions, liabilities or compliance concerns at or near our properties could adversely affect our ability to rent or sell property or to borrow using the property as collateral and could also adversely affect the tenant’s ability to make rental payments.

As a result of all of the foregoing, we have incurred in the past and will incur in the future costs and liabilities to investigate environmental matters and to address environmental conditions, liabilities and compliance concerns. Although we do not currently anticipate incurring any material liabilities in connection with environmental matters, we cannot assure you that future environmental costs and liabilities will not be material or will not adversely affect our business.

Transactions with Affiliates

We may acquire assets from our affiliates, including the CPA^® REITs, if we believe that doing so is consistent with our investment objectives and we comply with our investment policies and procedures. These transactions may take the form of direct purchases of

CPA^®:14 2006 10-K — 11

assets, mergers or another type of transaction. Like us, the other CPA^® REITs intend to consider alternatives for providing liquidity for their shareholders some years after they have invested substantially all of the net proceeds from their public offerings. As described above, in December 2006 we acquired CPA^®:12 by merger.

Types of Investments

Substantially all of our investments to date have been and will continue to be income-producing properties, which are, upon acquisition, improved or being developed or which will be developed within a reasonable period of time after their acquisition. These investments have primarily been through sale-leaseback transactions, in which we invest in properties from companies that simultaneously lease the properties back from us subject to long-term leases. Investments will not be restricted as to geographical areas.

Ventures With Affiliates and Others — We have and may continue to enter into joint ventures or general partnerships and other participations with real estate developers, owners and others, including other CPA^® REITs, for the purpose of obtaining equity interests in a property or properties in accordance with our investment policies. These investments permit us to own interests in large properties without unduly restricting the diversity of our portfolio. We will not enter into a joint venture to make an investment that we would not be permitted to make on our own.

Other Investments — We may invest up to 10% of our net equity in unimproved or non-income-producing real property and in “equity interests.” Investment in equity interests in the aggregate will not exceed five percent of our net equity. Such “equity interests” are defined generally to mean stock, warrants or other rights to purchase the stock of, or other interests in, a tenant of a property, an entity to which we lend money or a parent or controlling person of a borrower or tenant. We may invest in unimproved or non-income-producing property which the advisor believes will appreciate in value, or which will increase the value of adjoining or neighboring properties we own. There can be no assurance that these expectations will be realized. Often, equity interests will be “restricted securities” as defined in Rule 144 under the Securities Act. Under this rule, we may be prohibited from reselling the equity securities without limitation until we have fully paid for and held the securities for one year. It is possible that the issuer of equity interests in which we invest may never register the interests under the Securities Act. Whether an issuer registers its securities under the Securities Act may depend on the success of its operations.

We will exercise warrants or other rights to purchase stock generally if the value of the stock at the time the rights are exercised exceeds the exercise price. Payment of the exercise price shall not be deemed an investment subject to the above described limitations. We may borrow funds to pay the exercise price on warrants or other rights or may pay the exercise price from funds held for working capital and then repay the loan or replenish the working capital upon the sale of the securities or interests purchased. We will not consider paying distributions out of the proceeds of the sale of these interests until any funds borrowed to purchase the interest have been fully repaid.

We will not invest in real estate contracts of sale unless the contracts of sale are in recordable form and are appropriately recorded in the applicable chain of title.

Cash resources will be invested in permitted temporary investments, which include short-term U.S. Government securities, bank certificates of deposit, other short-term liquid investments and auction-rate securities. Auction-rate securities are purchases of long-term income instruments which provide for frequent resets of stated interest rates. A market exists to provide for redemption of auction-rate securities at the interest reset date, generally at par value; however, there is a risk that a redemption price will be below par value. We had no auction-rate securities in 2006. To maintain our REIT qualification, we also may invest in securities that qualify as “real estate assets” and produce qualifying income under the REIT provisions of the Internal Revenue Code. Any investments in other REITs in which the advisor or any director is an affiliate must be approved as being fair and reasonable by a majority of the directors (including a majority of the independent directors) who are not otherwise interested in the transaction.

If at any time the character of our investments would cause us to be deemed an “investment company” for purposes of the Investment Company Act of 1940, we will take the necessary action to ensure that we are not deemed to be an “investment company.” The advisor will continually review our investment activity, including attempting to monitor the proportion of our portfolio that is placed in various investments, to attempt to ensure that we do not come within the application of the Investment Company Act of 1940.

Our reserves, if any, will be invested in permitted temporary investments. The advisor will evaluate the relative risks and rate of return, our cash needs and other appropriate considerations when making short-term investments on our behalf. The rate of return of permitted temporary investments may be less than would be obtainable from real estate investments.

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(d) Financial Information About Geographic Areas

Refer to the Segment Information footnote of the accompanying consolidated financial statements for financial information pertaining to our segment and geographic operations.

(e) Available Information

All filings we make with the SEC, including our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, and any amendments to those reports, are available for free on our website, http://www.cpa14.com as soon as reasonably practicable after they are filed or furnished to the SEC. Our SEC filings are available to be read or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information regarding the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. Our filings can also be obtained for free on the SEC’s Internet site at http://www.sec.gov. We are providing our website address solely for the information of investors. We do not intend our website to be an active link or to otherwise incorporate the information contained on our website into this report or other filings with the SEC.

Item 1A. Risk Factors.

Our future results may be affected by risks and uncertainties including the following:

We are subject to the risks of real estate ownership, which could reduce the value of our properties.

We are subject to all of the general risks associated with the ownership of real estate. While the revenues from our leases are not directly dependent upon the value of the real estate owned, significant declines in real estate values could adversely affect us in many ways, including a decline in the residual values of properties at lease expiration; possible lease abandonments by tenants; and a decline in the attractiveness of triple-net lease transactions to potential sellers. We also face the risk that lease revenue will be insufficient to cover all corporate operating expenses and debt service payments on indebtedness we incur. General risks associated with the ownership of real estate include:

• adverse changes in general or local economic conditions,

• changes in the 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.

WPC and Carey Financial are the subjects of an ongoing SEC investigation, the effects of which could be materially adverse to them and, possibly, us.

WPC has disclosed in its publicly available reports filed with the SEC, that the Division of Enforcement of the SEC has commenced an investigation into certain activities of WPC and Carey Financial involving other REITs managed by WPC. WPC has announced that it and Carey Financial are cooperating fully with the SEC’s investigation and that they have provided information to the Division of Enforcement in response to subpoenas and document requests. Although no formal regulatory action has been initiated against WPC or Carey Financial in connection with the matters being investigated, WPC has publicly reported that it expects the SEC to pursue an action against WPC or Carey Financial or both in the future which could have a material adverse effect on WPC or Carey Financial or both. If an action is brought, it could have a material adverse effect on WPC and its affiliates and Carey Financial. Any action brought against WPC or Carey Financial could also have a material adverse effect on us because of our dependence on WPC and Carey Financial for a broad range of services.

We may have difficulty selling or re-leasing our properties.

Real estate investments generally lack liquidity compared to other financial assets and this lack of liquidity will limit our ability to quickly change our portfolio in response to changes in economic or other conditions. The triple-net leases we enter into or acquire may be for properties that are specially suited to the particular needs of our tenant. With these properties, if the current lease is terminated or not renewed, we may be required to renovate the property or to make rent concessions in order to lease the property to another

CPA^®:14 2006 10-K — 13

tenant. In addition, if we are forced to sell the property, we may have difficulty selling it 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 our ability to sell or re-lease properties without adversely affecting returns to shareholders. See Our Portfolio section above for scheduled lease expirations.

Our success is dependent on the performance of the advisor.

Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of the advisor in the selection of tenants, the determination of any financing arrangements, and the management of our assets. You have no opportunity to evaluate the terms of transactions or other economic or financial data concerning our investments. You must rely entirely on the management ability of the advisor and the oversight of our board of directors. We cannot guaranty that the advisor will be able to successfully achieve liquidity for us to the extent it has done so for prior programs.

The advisor may be subject to conflicts of interest.

The advisor manages our business and selects our real estate investments. The advisor has some conflicts of interest in its management of us, which arise primarily from the involvement of the advisor in other activities that may conflict with us and the payment of fees by us to the advisor. Unless the advisor elects to receive our common stock in lieu of cash compensation, we will pay the advisor substantial fees for the services it provides, which will reduce the amount of cash available for investment in properties or distribution to our shareholders. Activities in which a conflict could arise between the advisor and us include:

• the receipt of compensation by the advisor for property purchases, leases, sales and financing for us may cause the advisor to engage in transactions that generate higher fees, rather than transactions that are more appropriate or beneficial for our business;

• agreements between us and the advisor, including agreements regarding compensation, have not been negotiated on an arm’s length basis as would occur if the agreements were with unaffiliated third parties;

• sale of single properties or portfolios of our properties to our affiliates, including WPC or the CPA^® REITs may take the form of a direct purchase of our assets by an affiliate, a merger with an affiliate or another type of transaction, which may result in the payment of significant transactional fees to the advisor as well as management fees;

• purchases and loans from affiliates, subject to our investment procedures, objectives and policies, will increase fees and interest payable to affiliates, thereby decreasing our net income and possibly causing us to incur higher leverage levels; and

• disposition, incentive and termination fees, which are based on the sale price of properties, may cause a conflict between the advisor’s desire to sell a property and our plans to hold the property.

We have limited independence from the advisor.

All of our management functions are performed by officers of the advisor pursuant to our advisory agreement with the advisor. Each member of our board of directors, including our chairman, is a director of the advisor or one or more of its affiliates. Our independent directors are initially selected through a process which includes significant input from the advisor and also serve as the independent directors of other advisor-sponsored REITs. As a result of the foregoing, we have limited independence from the advisor. This limited independence, combined with the advisor’s limited equity interests in us, may exacerbate the conflicts of interest described in this section because of the substantial control that the advisor has over us and because of its economic incentives that may differ from those of our shareholders.

There is not, and may never be a public market for our shares, so it will be difficult for shareholders to sell shares quickly.

There is no current public market for our shares. Our charter also prohibits the ownership of more than 9.8% of our stock, unless exempted by our board of directors, which may inhibit large investors from desiring to purchase your shares and may also discourage a takeover. Moreover, our redemption plan includes numerous restrictions that limit your ability to sell your shares to us, and our board of directors may amend, suspend or terminate our redemption plan. Therefore, it will be difficult for you to sell your shares promptly or at all. The price received for any shares sold prior to a liquidity event is likely to be less than the proportionate value of the real estate we own. Investor suitability standards imposed by certain states may also make it more difficult to sell your shares to someone in those states.

We may recognize substantial impairment charges on our properties.

We may incur substantial impairment charges, which we are required to recognize whenever we sell a property for less than its carrying value, or we determine that the property has experienced an other-than-temporary decline in its carrying value (or, for direct financing leases, that the unguaranteed residential value of the underlying property has declined). By their nature, the timing and extent of impairment charges are not predictable. If we incur impairment charges in the future, they will reduce our net income, although they will not necessarily affect our cash flow from operations.

Our net asset value is based on information that the advisor provides to a third party.

The asset management and performance compensation paid to the advisor are based on an annual third party valuation of our real estate. Any valuation includes the use of estimates and our valuation may be influenced by the information provided by the advisor.

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Because net asset value is an estimate and can change as interest rate and real estate markets fluctuate, there is no assurance that a shareholder will realize net asset value in connection with any liquidity event.

Potential liability for environmental matters could adversely affect our financial condition.

We have and in the future may invest in properties historically used for industrial, manufacturing and other commercial purposes. We therefore may own properties that have known or potential environmental contamination as a result of historical operations. Buildings and structures on the properties we purchase may have known or suspected asbestos-containing building materials. Our properties currently are used for industrial, manufacturing, and other commercial purposes, and some of our tenants may handle hazardous or toxic substances, generate hazardous wastes, or discharge regulated pollutants to the environment. We may invest in properties located in countries that have adopted laws or observe environmental management standards that are less stringent than those generally followed in the United States, which may pose a greater risk that releases of hazardous or toxic substances have occurred to the environment. Leasing properties to tenants that engage in these activities, and owning properties historically and currently used for industrial, manufacturing, and other commercial purposes, will cause us to be subject to the risk of liabilities under environmental laws. Some of these laws could impose the following on us:

• Responsibility and liability for the cost of investigation, removal or remediation of hazardous or toxic substances released on or from our property, generally without regard to our knowledge of, or responsibility for, the presence of these contaminants.

• Liability for claims by third parties based on damages to natural resources or property, personal injuries, or costs of removal or remediation of hazardous or toxic substances in, on, or migrating from our property.

• Responsibility for managing asbestos-containing building materials, and third-party claims for exposure to those materials.

Our costs of investigation, remediation or removal of hazardous or toxic substances, or for third-party claims for damages, may be substantial. The presence of hazardous or toxic substances at any of our properties, or the failure to properly remediate a contaminated property, could give rise to a lien in favor of the government for costs it may incur to address the contamination, or otherwise adversely affect our ability to sell or lease the property or to borrow using the property as collateral. While we will attempt to mitigate identified environmental risks by requiring tenants contractually to acknowledge their responsibility for complying with environmental laws and to assume liability for environmental matters, circumstances may arise in which a tenant fails, or is unable, to fulfill its contractual obligations. In addition, environmental liabilities, or costs or operating limitations imposed on a tenant to comply with environmental laws, could affect its ability to make rental payments to us.

Failure to qualify as a REIT would adversely affect our operations and ability to make distributions.

If we fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal income tax on our net taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year we lose our REIT qualification. Losing our REIT qualification would reduce our net earnings available for investment or distribution to shareholders because of the additional tax liability, and we would no longer be required to make distributions. We might be required to borrow funds or liquidate some investments in order to pay the applicable tax.

Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT. In order to qualify as a REIT, we must satisfy a number of requirements regarding the composition of our assets and the sources of our gross income. Also, we must make distributions to our shareholders aggregating annually at least 90% of our net taxable income, excluding net capital gains. Because we have investments in foreign real property, we are subject to foreign currency gains and losses. Foreign currency gains are not qualifying income for purposes of the REIT income requirements. To reduce the risk of foreign currency gains adversely affecting our REIT qualification, we may be required to defer the repatriation of cash from foreign jurisdictions or to employ other structures that could affect the timing, character or amount of income we receive from our foreign investments. No assurance can be given that we will be able to manage our foreign currency gains in a manner that enables us to qualify as a REIT or to avoid U.S. federal and other taxes on our income. In addition, legislation, new regulations, administrative interpretations or court decisions may adversely affect our investors, our ability to qualify as a REIT for U.S. federal income tax purposes or the desirability of an investment in a REIT relative to other investments.

The inability of a tenant in a single tenant property to pay rent will reduce our revenues.

Most of our properties are occupied by a single tenant and, therefore, the success of our investments is materially dependent on the financial stability of these tenants. Lease payment defaults by tenants could cause us to reduce the amount of distributions to our shareholders. A default of a tenant on its lease payments to us could cause us to lose the revenue from the property and cause us to have to find an alternative source of revenue to meet any mortgage payments and prevent foreclosure if the property is subject to a mortgage. In the event of a default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property. If a lease is terminated, there is no assurance that we will be able to re-lease the

CPA^®:14 2006 10-K — 15

property for the rent previously received or sell the property without incurring a loss. In 2006, one tenant, Carrefour France, SAS represented 11.5% of our total lease revenue.

The bankruptcy or insolvency of tenants or borrowers may cause a reduction in revenue.

Bankruptcy or insolvency of a tenant or borrower could cause:

• the loss of lease or interest payments;

• an increase in the costs incurred to carry the property;

• a reduction in the value of our shares; and

• a decrease in distributions to shareholders.

Companies in automotive related industries (manufacturing, parts, services, etc.) are currently experiencing a challenging environment, which has resulted in several companies filing for bankruptcy protection. We currently have six tenants in automotive related industries, of which two are currently operating under bankruptcy protection. The tenants who have filed for bankruptcy protection, Collins & Aikman Corporation and Tower Automotive, Inc., have not indicated whether they will affirm their leases. In 2006, these six tenants accounted for annual lease revenues of approximately $14,730 and income from equity investments in real estate of $822 and have an aggregate carrying value of $120,308 as of December 31, 2006. (We acquired the remaining interest in the equity investment in real estate in the merger.) Of these totals, the two tenants that are operating under bankruptcy protection accounted for approximately $7,812 of lease revenues during 2006 and $58,616 of carrying value as of December 31, 2006. If conditions in this industry worsen, additional tenants may file for bankruptcy protection and may disaffirm their leases as part of their bankruptcy reorganization plans. The net result of these trends may have an adverse impact on our results of operations. In December 2006, Meridian Automotive Systems, Inc. emerged from bankruptcy. Meridian accounted for lease revenue of $1,254 in 2006 and had a carrying value of $9,159 at December 31, 2006.

Other CPA^® REITs managed by the advisor or its affiliates have had tenants file for bankruptcy protection and are involved in litigation (including two international tenants). Four prior CPA^® REITs reduced the rate of distributions to their investors as a result of adverse developments involving tenants.

Our leases may permit tenants to purchase a property at a predetermined price, which could limit our realization of any appreciation or result in a loss.

A significant number of our leases include provisions under which the tenant has a right to purchase the property it leases. The purchase price may be a fixed price or it may be based on a formula or it may be based on market value at the time of exercise. If a tenant exercises its right to purchase the property and the property’s market value has increased beyond that price, we would be limited in fully realizing the appreciation on that property. Additionally, if the price at which the tenant can purchase the property is less than our purchase price or carrying value (for example, where the purchase price is based on an appraised value), we may incur a loss.

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.

A potential change in United States accounting standards regarding operating leases may make the leasing of facilities less attractive to our potential domestic tenants, which could reduce overall demand for our leasing services.

Under Statement of Financial Accounting Standard No. 13, “Accounting for Leases”, a lease is classified by a tenant as a capital lease if the significant risks and rewards of ownership are considered to reside with the tenant. This situation is considered to be met if, among other things, the non-cancellable lease term is more than 75% of the useful life of the asset or if the present value of the minimum lease payments equals 90% or more of the leased property’s fair value. Under capital lease accounting for a tenant, both the leased asset and liability are reflected on the tenant’s balance sheet. If the lease does not meet any of the criteria for a capital lease, the lease is considered an operating lease by the tenant, and the obligation does not appear on the tenant’s balance sheet; rather, the contractual future minimum payment obligations are only disclosed in the footnotes to the tenant’s financial statements. Thus, entering into an operating lease can appear to enhance a tenant’s balance sheet in comparison to direct ownership. In 2005, the SEC conducted a study of off-balance-sheet financing which, among other areas, included lease accounting. This study raised concerns that the current accounting model does not clearly portray the resources and obligations arising from long term lease transactions with sufficient transparency. In July 2006, the Financial Accounting Standards Board and the International Accounting Standards Board announced a joint project to re-evaluate lease accounting. Changes to the accounting guidance could affect both our Company’s accounting for leases as well as that of our current and potential customers. These changes may affect how the real estate leasing business is

CPA^®:14 2006 10-K — 16

conducted both domestically and internationally. For example, if the accounting standards regarding the financial statement classification of operating leases are revised, then companies may be less willing to enter into leases in general or desire to enter into leases with shorter terms because the apparent benefits to their balance sheets could be reduced or eliminated. This in turn could make it more difficult for us to enter into leases on terms we find favorable.

Our use of debt to finance investments could adversely affect our cash flow.

Most of our investments have been made by borrowing a portion of the total investment and securing the loan with a mortgage on the property. If we are unable to make our debt payments as required, a lender could foreclose on the property or properties securing its debt. This could cause us to lose part or all of our investment which in turn could cause the value of our portfolio, and revenues available for distribution to our shareholders, to be reduced. We generally borrow on a limited recourse basis to limit our exposure on any property to the amount of equity invested in the property except for certain circumstances such as environmental matters. There is no limitation on the amount which we can borrow on a single property.

A majority of our financing also requires us to make a lump-sum or “balloon” payment at maturity. Our ability to make balloon payments on debt will depend upon our ability either to refinance the obligation when due, invest additional equity in the property or to sell the related property. When the balloon payment is due, we may be unable 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. 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. A refinancing or sale could affect the rate of return to shareholders and the projected time of disposition of our assets. Scheduled balloon payments for the next five years are as follows:

2007	$	—
2008		17,649
2009		64,089	(1) (2)
2010		71,253	(2)
2011		273,479	(2)

(1)	Does not include amounts that will be due upon maturity of our credit facility as these amounts are prepayable at any time. As of December 31, 2006 we had drawn $25,000 from this credit facility.
(2)	Excludes our pro rata share of mortgage obligations of equity investments in real estate totaling $52,240 in 2009, $4,199 in 2010 and $9,810 in 2011.

Our investments in properties outside of the United States subject us to foreign currency risks which may adversely affect distributions.

We are subject to foreign currency risk due to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar. Our principal currency exposures are to the Euro and the British pound sterling. We attempt to mitigate a portion of the risk of currency fluctuation by financing our properties in the local currency denominations, although there can be no assurance that this will be effective. As a result, changes in the relation of any such foreign currency to U.S. dollars may affect our revenues, operating margins and distributions and may also affect the book value of our assets and the amount of shareholders’ equity. Although we have not done so to date, we anticipate that in the future we may engage in direct hedging activities to mitigate the risks of exchange rate fluctuations. If we were to engage in foreign currency exchange rate hedging activities, any income recognized with respect to these hedges (as well as any unhedged foreign currency gain recognized with respect to changes in exchange rates) will generally not qualify as eligible income for purposes of either the 75% gross income test or the 95% gross income test that we must satisfy annually in order to qualify as a REIT. Changes in foreign currency exchange rates used to value a REIT’s foreign assets may be considered changes in the value of the REIT’s assets. These changes may adversely affect our qualification as a REIT. Further, bank accounts in foreign currency which are not considered cash or cash equivalents may adversely affect our qualification as a REIT.

International investments involve additional risks.We have invested in and may continue to invest in properties located outside the United States. These investments may be affected by factors particular 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, including:

• political and economic instability in some geographical locations;

• lack of uniform accounting standards, including availability of information in accordance with accounting principles generally accepted in the United States of America;

• enactment of laws relating to the foreign ownership of property and laws relating to the ability of foreign entities to remove profits earned from activities within the country to the united states;

• currency transfer restrictions;

CPA^®:14 2006 10-K — 17

• expropriation;

• the difficulty in enforcing obligations in other countries and the burden of complying with a wide variety of foreign laws; and

• potential imposition of adverse or confiscatory taxes.

Each of these risks might adversely affect our performance and impair our ability to make distributions to our shareholders required to maintain our REIT qualification. In addition, the lack of available information in accordance with accounting principles generally accepted in the United States of America could impair our ability to analyze transactions and may cause us to forego an investment opportunity. It may also impair our ability to receive timely and accurate financial information from tenants necessary to meet our reporting obligations to financial institutions or governmental or regulatory agencies.These risks may be greater in emerging markets and less developed countries.

Our participation in joint ventures creates additional risk.

We participate in joint ventures and invest in properties jointly with other entities. To date, the majority of our joint venture partners have been affiliated CPA^® REITs; however, we currently have and may in the future have unaffiliated joint venture partners. There are additional risks involved in joint venture 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 our partner and us. 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 the advisor may owe to our partner in an affiliated transaction may make it more difficult for us to enforce our rights.

We do not fully control the management for our properties.

The tenants or managers of net lease properties are responsible for maintenance and other day-to-day management of the properties. Because our revenues are largely derived from rents, our financial condition is dependent on the ability of our tenants to operate the properties successfully. If tenants are unable to operate the properties successfully, the tenants may not be able to pay their rent, which could adversely affect our financial condition.

Our distributions may exceed our earnings.

The amount of any distributions we may make is uncertain. We have made, and may in the future make distributions in excess of our earnings and profits and, accordingly, such distributions could constitute a return of capital for U.S. federal income tax purposes. We have made, and may in the future make distributions in excess of our income as calculated in accordance with accounting principles generally accepted in the United States of America. We may incur indebtedness if necessary to satisfy the REIT requirement that we distribute at least 90% of our net taxable income, excluding net capital gains, and to avoid the payment of income and excise taxes.

Dividends payable by REITs generally do not qualify for reduced U.S. federal income tax rates because qualifying REITs do not pay U.S. federal income tax on their net income.

The maximum U.S. federal income tax rate for dividends payable by domestic corporations to individual domestic shareholders is 15% (through 2008). Dividends payable by REITs, however, are generally not eligible for the reduced rates, except to the extent that they are attributable to dividends paid by a taxable REIT subsidiary or a C corporation, or relate to certain other activities. This is because qualifying REITs receive an entity level tax benefit from not having to pay U.S. federal income tax on their net income. As a result, the more favorable rates applicable to regular corporate dividends could cause shareholders who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock. In addition, the relative attractiveness of real estate in general may be adversely affected by the reduced U.S. federal income tax rates applicable to corporate dividends, which could negatively affect the value of our properties.

Possible legislative or other actions affecting REITs could adversely affect our RIET qualification and our shareholders.

The Internal Revenue Service, or IRS, may take the position that specific sale-leaseback transactions we will treat as true leases are not true leases for U.S. federal income tax purposes but are, instead, financing arrangements or loans. If a sale-leaseback transaction were so recharacterized, we might fail to satisfy the qualification requirements applicable to REITs. In addition, the rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. Changes to tax laws (which may have retroactive application) could adversely affect our shareholders or us. It cannot be predicted whether, when, in what forms, or with what effective dates, the tax laws applicable to our shareholders or us will be changed.

CPA^®:14 2006 10-K — 18

The ability of our board of directors to change our investment policies or revoke our REIT election without shareholder approval may cause adverse consequences to our shareholders.

Our bylaws require that our independent directors review our investment policies at least annually to determine that the policies we are following are in the best interest of our shareholders. These policies may change over time. The methods of implementing our investment policies may also vary, as new investment techniques are developed. Except as otherwise provided in our bylaws, our investment policies, the methods for their implementation, and our other objectives, policies and procedures may be altered by a majority of the directors (including a majority of the independent directors), without the approval of our shareholders. As a result, the nature of your investment could change without your consent.

Additionally, our organizational documents permit our board of directors to revoke or otherwise terminate our REIT election, without the approval of our shareholders, if it determines that it is not in our best interest to qualify as a REIT. In such a case, we would become subject to U.S. federal income tax on our net taxable income and we would no longer be required to distribute most of our net income to our shareholders, which may have adverse consequences on the total return to our shareholders.

Maryland law could restrict change in control.

Provisions of Maryland law applicable to us prohibit business combinations with:

• any person who beneficially owns 10% or more of the voting power of outstanding shares, referred to as an interested shareholder;

• an affiliate who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of our outstanding shares, also referred to as an interested shareholder; or

• an affiliate of an interested shareholder.

These prohibitions last for five years after the most recent date on which the interested shareholder became an interested shareholder. Thereafter, any business combination must be recommended by our board of directors and approved by the affirmative vote of at least 80% of the votes entitled to be cast by holders of our outstanding shares and two-thirds of the votes entitled to be cast by holders of our shares other than shares held by the interested shareholder or by an affiliate or associate of the interested shareholder. These requirements could have the effect of inhibiting a change in control even if a change in control was in our shareholders’ interest. These provisions of Maryland law do not apply, however, to business combinations that are approved or exempted by our board of directors prior to the time that someone becomes an interested shareholder. In addition, a person is not an interested shareholder if the board of directors approved in advance the transaction by which he or she otherwise would have become an interested shareholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance at or after the time of approval, with any terms and conditions determined by the board.

Our articles of incorporation restrict beneficial ownership of more than 9.8% of the outstanding shares by one person or affiliated group in order to assist us in meeting the REIT qualification rules. These requirements could have the effect of inhibiting a change in control even if a change in control were in our shareholders’ interest.

Shareholders’ equity may be diluted

Our shareholders do not have preemptive rights to any shares of common stock issued by us in the future. Therefore if we issue additional shares of common stock, including issuing additional shares through our distribution reinvestment plan or issuing shares to the advisor for payment of fees in lieu of cash, then existing shareholders will experience dilution of their percentage ownership in us.

In addition, our board of directors may determine that it is in our best interest to classify or reclassify any unissued stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms or conditions of redemption of any of our stock. Thus, our board of directors could authorize the issuance of stock with terms and conditions that could subordinate your rights or have the effect of delaying, deferring or preventing a change in control (including a merger, tender offer or sale of our assets) that might provide a premium price for our shareholders.

Your investment return may be reduced if we are required to register as an investment company under the investment company act.

We do not intend to register as an investment company under the Investment Company Act of 1940, as amended. If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

• limitations on capital structure;

• restrictions on specified investments;

• prohibitions on transactions with affiliates; and

• compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

CPA^®:14 2006 10-K — 19

In general, we expect to be able to rely on the exemption from registration provided by Section 3(c)(5)(C) of the Investment Company Act. In order to qualify for this exemption, at least 55% of our portfolio must be comprised of real property and mortgages and other liens on an interest in real estate (collectively, “qualifying assets”) and at least 80% of our portfolio must be comprised of real estate-related assets. Qualifying assets include mortgage loans, mortgage-backed securities that represent the entire ownership in a pool of mortgage loans and other interests in real estate. In order to maintain our exemption from regulation under the Investment Company Act, we must continue to engage primarily in the business of buying real estate.

To maintain compliance with the Investment Company Act exemption, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have to acquire additional income or loss generating assets that we might not otherwise have acquired or may have to forego opportunities to acquire interests in companies that we would otherwise want to acquire and would be important to our investment strategy. If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court were to require enforcement, and a court could appoint a receiver to take control of us and liquidate our business.

The returns on our investments in net leased properties may not be as great as returns on equity investments in real properties during strong real estate markets.

As an investor in single tenant, long-term net leased properties, the returns on our investments are based primarily on the terms of the lease. Payments to us under our leases do not rise and fall based upon the market value of the underlying properties. In addition, we generally lease each property to one tenant on a long-term basis, which means that we cannot seek to improve current returns at a particular property through an active, multi-tenant leasing strategy. While we will sell assets from time to time and may recognize gains or losses on the sales based on then-current market values, we generally intend to hold our properties on a long-term basis. We view our leases as fixed income investments through which we seek to achieve attractive risk adjusted returns that will support a steady dividend. The value of our assets will likely not appreciate to the same extent as equity investments in real estate during periods when real estate markets are very strong. Conversely, in weak markets, the existence of a long-term lease may positively affect the value of the property, although it is nonetheless possible that, as a result of property declines generally, we may recognize impairment charges on some properties.

There are special considerations for pension or profit-sharing trusts, Keoghs or IRAs.

If you are investing the assets of a pension, profit sharing, 401(k), Keogh or other retirement plan, IRA or any other employee benefit plan subject to ERISA or Section 4975 of the Code in our shares, you should consider:

• whether your investment is consistent with the applicable provisions of ERISA and the Internal Revenue Code;

• whether your investment will produce unrelated business taxable income, referred to as UBTI, to the benefit plan; and

• your need to value the assets of the benefit plan annually.

We believe that, under current ERISA law and regulations, our assets should not be treated as “plan assets” of a benefit plan subject to ERISA and/or Section 4975 of the Internal Revenue Code that purchases shares, and based on our articles of incorporation and on our related representations. Our view is not binding on the Internal Revenue Service or the Department of Labor. If our assets were considered to be plan assets, our assets would be subject to ERISA and/or Section 4975 of the Internal Revenue Code, and some of the transactions we have entered into with the advisor and its affiliates could be considered “prohibited transactions” which could cause us, the advisor and its affiliates to be subject to liabilities and excise taxes. In addition, Carey Asset Management Corp., a wholly-owned subsidiary of WPC, could be deemed to be a fiduciary under ERISA and subject to other conditions, restrictions and prohibitions under Part 4 of Title I of ERISA. Even if our assets are not considered to be plan assets, a prohibited transaction could occur if we, Carey Financial, any selected dealer, the escrow agent or any of their affiliates is a fiduciary (within the meaning of ERISA) with respect to a purchase by a benefit plan and, therefore, unless an administrative or statutory exemption applies in the event such persons are fiduciaries (within the meaning of ERISA) with respect to your purchase, shares should not be purchased.

Our business, results of operations, financial condition or our ability to pay distributions at the current rate could be materially adversely affected by the above conditions. The risk factors may have affected, and in the future could affect, our 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 we cannot completely assure you that the factors described above list all material risks to us at any specific point in time. We have disclosed many of the important risk factors discussed above in our previous filings with the SEC.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our principal offices are located at 50 Rockefeller Plaza, New York, NY 10020. The lease for our primarily corporate office space expires in 2016. We believe that this lease is suitable for our operations for the foreseeable future. We also maintain regional offices in Dallas, Texas and London, England.

Refer to the Our Portfolio section of Item 1 for a discussion of the properties we hold and Schedule III — Real Estate and Accumulated Depreciation of Item 8 for a detail listing of such properties.

CPA^®:14 2006 10-K — 20

Item 3. Legal Proceedings.

As of December 31, 2006, we were not involved in any material litigation.

In March 2004, following a broker-dealer examination of Carey Financial, the wholly-owned broker-dealer subsidiary of WPC, by the staff of the SEC, Carey Financial received a letter from the staff of the SEC alleging certain infractions by Carey Financial of the Securities Act of 1933, the Securities Exchange Act of 1934, the rules and regulations thereunder and those of the National Association of Securities Dealers, Inc. (“NASD”).

The staff alleged that in connection with a public offering of shares of CPA^®:15, Carey Financial and its retail distributors sold certain securities without an effective registration statement. Specifically, the staff alleged that the delivery of investor funds into escrow after completion of the first phase of the offering (the “Phase I Offering”), completed in the fourth quarter of 2002 but before a registration statement with respect to the second phase of the offering (the “Phase II Offering”) became effective in the first quarter of 2003, constituted sales of securities in violation of Section 5 of the Securities Act of 1933. In addition, in the March 2004 letter the staff raised issues about whether actions taken in connection with the Phase II offering were adequately disclosed to investors in the Phase I Offering.

In June 2004, the Division of Enforcement of the SEC (“Enforcement Staff”) commenced an investigation into compliance with the registration requirements of the Securities Act of 1933 in connection with the public offerings of shares of CPA^®:15 during 2002 and 2003. In December 2004, the scope of the Enforcement Staff’s inquiries broadened to include broker-dealer compensation arrangements in connection with CPA^®:15 and other REITs managed by WPC, including us, as well as the disclosure of such arrangements. At that time WPC and Carey Financial received a subpoena from the Enforcement Staff seeking documents relating to payments by WPC, Carey Financial, and REITs managed by WPC to (or requests for payment received from) any broker-dealer, excluding selling commissions and selected dealer fees. WPC and Carey Financial subsequently received additional subpoenas and requests for information from the Enforcement Staff seeking, among other things, information relating to any revenue sharing agreements or payments (defined to include any payment to a broker-dealer, excluding selling commissions and selected dealer fees) made by WPC, Carey Financial or any REIT managed by WPC in connection with the distribution of WPC’s managed REITs or the retention or maintenance of REIT assets. Other information sought by the SEC includes information concerning the accounting treatment and disclosure of any such payments, communications with third parties (including other REIT issuers) concerning revenue sharing, and documents concerning the calculation of underwriting compensation in connection with the REIT offerings under applicable NASD rules.

In response to the Enforcement Staff’s subpoenas and requests, WPC and Carey Financial have produced documents relating to payments made to certain broker-dealers both during and after the offering process, for certain of the REITs managed by WPC (including Corporate Property Associates 10 Incorporated (“CPA^®:10”), Carey Institutional Properties Incorporated (“CIP^®”), CPA^®:12, and CPA^®:15 as well as us), in addition to selling commissions and selected dealer fees.

Among the payments reflected on documents produced to the Staff were certain payments, aggregating in excess of $9,600, made to a broker-dealer which distributed shares of the REITs. The expenses associated with these payments, which were made during the period from early 2000 through the end of 2003, were borne by and accounted for on the books and records of the REITs. Of these payments, CPA^®:10 paid in excess of $40; CIP^® paid in excess of $875; CPA^®:12 paid in excess of $2,455; we paid in excess of $4,990; and CPA^®:15 paid in excess of $1,240. In addition, other smaller payments by the REITs to the same and other broker-dealers have been identified aggregating less than $1,000.

WPC and Carey Financial are cooperating fully with this investigation and have provided information to the Enforcement Staff in response to the subpoenas and requests. Although no formal regulatory action has been initiated against WPC or Carey Financial in connection with the matters being investigated, we expect the SEC may pursue an action against either or both. The nature of the relief or remedies the SEC may seek cannot be predicted at this time. If an action is brought, it could have a material adverse effect on WPC and Carey Financial and the magnitude of that effect would not necessarily be limited to the payments described above but could include other payments and civil monetary penalties. Any action brought against WPC or Carey Financial could also have a material adverse effect on us because of our dependence on WPC and Carey Financial for a broad range of services.

Several state securities regulators have sought information from Carey Financial relating to the matters described above. While one or more states may commence proceedings against Carey Financial in connection with these inquiries, we do not currently expect that these inquiries or proceedings will have a material effect on WPC or Carey Financial incremental to that caused by any SEC action.

CPA^®:14 2006 10-K — 21

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

A special shareholders’ meeting was held on November 30, 2006, at which time a vote was taken to approve the merger with CPA^®:12, as described in the Form S-4 filed by us on October 25, 2006.

Shares voting for:	37,649,128	94.29	%
Shares voting against:	1,376,417	3.45	%
Shares abstaining:	905,223	2.27	%
Total shares voting:	39,930,768	100.00	%

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

There is no established public trading market for our shares. As of March 16, 2007, there were 30,337 holders of record of our shares.

Distributions

We are required to distribute annually at least 90% of our distributable REIT taxable income to maintain our status as a REIT. Quarterly distributions declared by us for the past two years are as follows:

	2006		2005
First quarter	$	0.1924	$	0.1904
Second quarter		0.1929		0.1909
Third quarter		0.1929		0.1914
Fourth quarter		0.1929		0.1919
	$	0.7711	$	0.7646

A quarterly distribution of $0.002097 per day was declared for each day of the period from and including October 1, 2006 through December 31, 2006 on which a shareholder was a shareholder of record and was paid in January 2007. Amounts in the table above exclude a special distribution of $0.45 that was paid in July 2006 to shareholders of record as of June 30, 2006 and a special distribution of $0.04 that was paid in January 2007 to shareholders of record as of November 30, 2006. These special distributions were approved by our board of directors in connection with the dispositions of certain investments in real estate during 2006.

Unregistered Sales of Equity Securities

For the three months ended December 31, 2006, 175,208 shares of common stock were issued to the advisor as consideration for performance fees. Shares were issued at per share amounts of $11.85. Since none of these transactions were considered to have involved a “public offering” within the meaning of Section 4(2) of the Securities Act, as amended, the shares issued were deemed to be exempt from registration. In acquiring our shares, the advisor represented that such interests were being acquired by it for the purposes of investment and not with a view to the distribution thereof. We previously reported other sales of unregistered shares during the past three years in our prior filings.

Issuer Purchases of Equity Securities

							Maximum number (or
					Total number of		approximate dollar value)
					shares purchased as		of shares that may yet be
	Total number of		Average price		part of publicly announced		purchased under the
2006 Period	shares purchased (1)		paid per share		plans or programs(1)		plans or programs (1)
October		—	$	—		N/A		N/A
November		—	$	—		N/A		N/A
December		188,313	$	10.83		N/A		N/A
Total		188,313

(1) All shares were purchased pursuant to our redemption plan. In November 1997, we announced a redemption plan under which we may elect to redeem shares subject to certain conditions and limitations. The maximum amount of shares purchasable in any period depends on the availability of funds generated by the Distribution Reinvestment and Share Purchase Plan and other factors

CPA^®:14 2006 10-K — 22

at the discretion of our Board of Directors. The redemption plan will terminate if and when our shares are listed on a national securities market.

Item 6. Selected Financial Data.

The following selected financial data should be read in conjunction with the accompanying consolidated financial statements and related notes in Item 8.

(In thousands, except per share amounts)

	For the year ended December 31,
	2006		2005		2004		2003		2002
Operating Data:
Revenues from continuing operations	$	135,192	$	131,910	$	127,771	$	123,924	$	107,153
Income from continuing operations		58,080		46,325		37,951		33,002		29,729
Earnings from continuing operations per share		0.83		0.68		0.56		0.50		0.45
Net income		69,618		47,249		38,940		33,820		30,266
Earnings per share		0.99		0.69		0.58		0.51		0.45
Cash distributions paid		83,633		51,905		50,973		50,173		48,581
Cash distributions declared per share		0.7711		0.7646		0.7592		0.7552		0.7493
Payment of mortgage principal (1)		12,580		12,433		11,046		9,234		6,543
Balance Sheet Data:
Total assets	$	1,675,323	$	1,295,036	$	1,346,355	$	1,345,747	$	1,319,897
Long-term obligations (2)		826,459		679,522		723,383		724,705		689,910

(1)	Represents scheduled mortgage principal paid.
(2)	Represents mortgage obligations and deferred acquisition fee installments.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(In thousands, except share and per share amounts)

Executive Overview

Business Overview

As described in more detail in Item 1 of this annual report, we are a real estate investment trust (“REIT”) that invests in commercial properties leased to companies domestically and internationally. The primary source of our revenue is earned from leasing real estate, primarily on a triple-net lease basis. We were formed in 1997 and are managed by W. P. Carey & Co. LLC and its subsidiaries (collectively, the “advisor”). As a REIT, we are not subject to U.S. federal income taxation as long as we satisfy certain requirements relating to the nature of our income, the level of our distributions and other factors.

Current Developments and Trends

Significant business developments that occurred during 2006 are detailed in Item 1 — Significant Developments During 2006.

Current trends include:

Our current business plan is principally focused on managing our existing portfolio of properties, including those properties we acquired from CPA^®:12 in December 2006, and we do not currently expect to make new significant investments in the future. However, we may make future acquisitions if attractive opportunities arise. Competition for triple-net leased real estate remains strong as capital continues to flow into real estate, in general, and net leased real estate, in particular. We believe that low long-term interest rates by historical standards have created greater investor demand for yield-based investments, such as triple-net leased real estate, thus creating increased capital flows and a more competitive investment environment. We currently expect these trends to continue in 2007 but currently believe that several factors may provide us with investment opportunities in 2007, both domestically and internationally. These factors include increased merger and acquisition activity, which may provide additional sale-leaseback opportunities as a source of funding, a continued desire of corporations to divest themselves of real estate holdings and increasing opportunities for sale-leaseback transactions in the international market.

CPA^®:14 2006 10-K — 23

Real estate valuations have risen significantly in recent years. To the extent that disposing of properties fits with our strategic plans, we may look to take advantage of increases in real estate prices by selectively disposing of properties. We may also seek to capitalize on the increased value of our real estate by obtaining new limited recourse mortgage financing on unencumbered assets or by refinancing mortgages on existing properties if we can obtain such financing on attractive terms. Our ability to do so will be affected by the interest rate environment. Increases in long-term interest rates would likely cause the value of our real estate assets to decrease and would compromise the amount and terms of financing we can obtain. We will attempt to mitigate the effect of potential increases in long-term interest rates by seeking mortgage financing with fixed annual interest rates. We constantly evaluate our debt exposure and to the extent we are able to refinance and lock in lower interest rates over a longer term, we may be able to reduce our exposure to short-term interest rate fluctuation.

Increases in interest rates may also have an impact on the credit profile of certain tenants. Rising interest rates would likely cause an increase in inflation and a corresponding increase in the Consumer Price Index (“CPI”). To the extent that the CPI increases, additional rental income streams may be generated for leases with CPI adjustment triggers and partially offset the impact of declining property values.

Companies in automotive related industries (manufacturing, parts, services, etc.) are currently experiencing a challenging environment, which has resulted in several companies filing for bankruptcy protection. We currently have six tenants in automotive related industries, of which two are currently operating under bankruptcy protection. The tenants who have filed for bankruptcy protection, Collins & Aikman Corporation and Tower Automotive, Inc., have not indicated whether they will affirm their leases. In 2006, these six tenants accounted for annual lease revenues of approximately $14,730 and income from equity investments in real estate of $822 and have an aggregate carrying value of $120,308 as of December 31, 2006. (We acquired the remaining interest in the equity investment in real estate in the merger.) Of these totals, the two tenants that are operating under bankruptcy protection account for approximately $7,812 of lease revenues during 2006 and $58,616 of carrying value at December 31, 2006. If conditions in this industry worsen, additional tenants may file for bankruptcy protection and may disaffirm their leases as part of their bankruptcy reorganization plans. The net result of these trends may have an adverse impact on our results of operations. In December 2006, Meridian Automotive Systems emerged from bankruptcy. Meridian accounted for lease revenue of $1,254 in 2006 and had a carrying value of $9,159 at December 31, 2006.

We have foreign operations and as such are subject to risk from the effects of exchange rate movements in the Euro and the British pound sterling, which account for approximately 13% and 1% of annualized contractual lease revenues, respectively. Our results of foreign operations benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to foreign currencies. During 2006, the average rate for the U.S. dollar in relation to both the Euro and the British pound sterling was moderately weaker than 2005, and as a result, we experienced a moderately positive impact on our results of foreign operations for the current year as compared to 2005.

How Management Evaluates Results of Operations

Management evaluates our results of operations with a primary focus on the ability to generate cash flow necessary to meet our objectives of funding distributions to stockholders and increase our equity in our real estate. As a result, management’s assessment of operating results gives less emphasis to the effect of unrealized gains and losses, which may cause fluctuations in net income for comparable periods but have no impact on cash flows, and to other non-cash charges, such as depreciation and impairment charges.

Management considers cash flows from operations, cash flows from investing activities and cash flows from financing activities (as described in Financial Condition, below) to be important measures in the evaluation of our results of operations, liquidity and capital resources. Cash flows from operations are sourced primarily from long-term lease contracts. Such leases are generally triple-net and mitigate, to an extent, our exposure to certain property operating expenses. Management’s evaluation of the amount and expected fluctuation of cash flows from operations is essential in assessing our ability to fund operating expenses, service our debt and fund distributions to stockholders.

Management considers cash flows from operating activities plus cash distributions from equity investments in real estate in excess of equity income as a supplemental measure of liquidity in evaluating our ability to sustain distributions to stockholders. Management considers this measure useful as a supplemental measure to the extent the source of distributions in excess of equity income in real estate is the result of non-cash charges, such as depreciation and amortization, because it allows management to evaluate such cash flows from consolidated and unconsolidated investments in a comparable manner. In deriving this measure, cash distributions from equity investments in real estate that are sourced from the sales of the equity investee’s assets or refinancing of debt are excluded because they are deemed to be returns of investment and not returns on investment.

CPA^®:14 2006 10-K — 24

Management focuses on measures of cash flows from investing activities and cash flows from financing activities in its evaluation of our capital resources. Investing activities typically consist of the acquisition or disposition of investments in real property and the funding of capital expenditures with respect to real properties. Cash flows from financing activities primarily consist of the payment of distributions to stockholders, obtaining limited recourse mortgage financing, generally in connection with the acquisition or refinancing of properties, and the payment of mortgage principal amortization. Our financing strategy has been to purchase substantially all of our properties with a combination of equity and limited recourse mortgage debt. A lender on a limited recourse mortgage loan has recourse only to the property collateralizing such debt and not to any of our other assets. This strategy has allowed us to diversify our portfolio of properties and, thereby, limit our risk. In the event that a balloon payment comes due, we may seek to refinance the loan, restructure the debt with existing lenders, and evaluate our ability to pay the balloon payment from our cash reserves or sell the property and use the proceeds to satisfy the mortgage debt.

Our operations consist of the investment in and the leasing of commercial real estate. Management’s evaluation of the sources of lease revenues for the years ended December 31, 2006, 2005 and 2004 is as follows:

	2006		2005		2004
Rental income	$	116,963	$	113,391	$	110,774
Interest income from direct financing leases		14,353		14,112		13,430
	$	131,316	$	127,503	$	124,204

We earned net lease revenues (i.e., rental income and interest income from direct financing leases) from our direct ownership of real estate from the following lease obligations:

	2006		2005		2004
Carrefour France, SAS (a) (b)	$	15,161	$	14,460	$	13,696
Petsmart, Inc. (c)		8,395		8,303		8,303
Federal Express Corporation (c)		6,816		6,742		6,669
Nortel Networks Limited		6,014		6,001		6,001
Atrium Companies, Inc.		4,922		4,787		4,574
Caremark Rx, Inc.		4,300		4,300		4,300
Tower Automotive, Inc. (d)		4,218		4,099		3,895
Katun Corporation (b)		4,000		3,815		3,815
Metaldyne Company LLC (d)		3,673		3,553		3,307
McLane Company Food Service Inc.		3,662		3,601		3,560
Collins & Aikman Corporation (d)		3,594		3,473		3,373
Perkin Elmer, Inc. (b)		3,430		3,370		3,394
APW North America Inc.		3,084		3,027		2,954
Amerix Corp.		2,928		2,569		2,497
Dick’s Sporting Goods, Inc. (e) (f)		2,706		3,697		3,811
Builders FirstSource, Inc.		2,598		2,521		2,497
Gibson Guitar Corp.		2,460		2,566		2,529
Gerber Scientific, Inc.		2,445		2,361		2,276
Waddington North America, Inc.		2,331		2,321		2,280
Buffets, Inc.		2,290		2,280		2,272
Institutional Jobbers Company		2,271		2,271		2,271
Nexpak Corporation (b)		2,182		2,176		2,121
Best Buy Co.		2,152		2,131		2,004
Career Education Corp.		2,079		2,018		1,967
Other (b) (c) (d) (e)		33,605		31,061		29,838
	$	131,316	$	127,503	$	124,204

(a)	An expansion at this property was completed in July 2005.
(b)	Revenue amounts are subject to fluctuations in foreign currency exchange rates.
(c)	Includes lease revenues applicable to minority interests. Minority interests included in the consolidated amounts above total $6,654, $8,040 and $7,975 for the years ended December 31, 2006, 2005 and 2004, respectively.

CPA^®:14 2006 10-K — 25

(d)	Tenant operates in the automotive industry. Tower Automotive and Collins & Aikman both filed for Chapter 11 bankruptcy protection in 2005. Included in “Other” are lease revenues from American Tire Distributors, Inc. of $1,807, $1,715 and $1,693 for the years ended December 31, 2006, 2005 and 2004, respectively and lease revenues from Meridian Automotive Systems, Inc. of $1,254, $1,216 and $1,180 for the years ended December 31, 2006, 2005 and 2004, respectively.
(e)	Includes lease revenues from properties acquired in the merger.
(f)	Investment reclassified to an equity investment in November 2005 as a result of a transaction with CPA®:16 — Global, an affiliate.

We recognize income from equity investments in real estate of which lease revenues are a significant component. Our ownership interests range from 11.54% to 66.67%. Our share of net lease revenues in the following lease obligations is as follows:

	2006		2005		2004
True Value Company	$	5,246	$	5,065	$	5,065
Starmark Camhood, L.L.C. (a)		4,699		6,668		6,651
Advanced Micro Devices, Inc. (c)		3,774		3,484		3,259
Mercury Partners and U-Haul Moving Partners (b)		3,294		3,294		2,215
CheckFree Holdings, Inc.		2,302		2,247		2,180
Special Devices, Inc. (d)		1,976		2,088		2,039
Life Time Fitness, Inc. (a)		1,725		—		—
Compucom Systems, Inc. (c)		1,642		1,489		1,408
Textron, Inc. (d)		1,238		1,333		1,240
Dick’s Sporting Goods, Inc. (e)		606		113		—
Other (f)		625		—		—
	$	27,127	$	25,781	$	24,057

(a)	In 2006, the advisor approved a restructuring plan with Starmark. Amounts for Starmark exclude the operations of four properties that were transferred to a third party and reclassified as discontinued operations. Six properties were re-leased to Life Time Fitness, Inc. in June 2006. See Item 1 — Significant Developments During 2006.
(b)	Interest in this equity investment in real estate was acquired in April 2004.
(c)	Additional interest in this equity investment in real estate acquired in the merger.
(d)	Property is consolidated effective December 1, 2006 following acquisition of the remaining interest in the property in the merger.
(e)	Investment reclassified to an equity investment in real estate in November 2005 as a result of a transaction with CPA®:16 — Global, an affiliate.
(f)	Consists of our share of net lease revenues from equity investments in real estate acquired in the merger.

Results of Operations

On December 1, 2006, we acquired $540,500 in real estate and equity investments in real estate in connection with the merger. In the merger, we acquired the remaining interests in two investments which had previously been classified as equity investments in real estate and now consolidate them on our financial statements. The results of operations for the year ended December 31, 2006 reflect the results of the properties acquired in the merger and the consolidation of these two investments for the period from December 1, 2006 through December 31, 2006 and are not necessarily indicative of future operating results.

Lease Revenues

2006 vs. 2005 — For the years ended December 31, 2006 and 2005, lease revenues (rental income and interest income from direct financing leases) increased by $3,813. Rent increases at several properties and a new lease at an existing property contributed additional lease revenues of $3,225. Lease revenues increased by $2,331 as a result of the merger, including $526 of lease revenues generated by two investments that we now consolidate following the merger. Lease revenues also benefited as a result of the moderately positive impact of fluctuations in average foreign currency exchange rates as compared to 2005. These increases were partially offset by reductions of $1,237 from the reclassification of a property leased to Dick’s Sporting Goods to an equity investment in real estate and $493 from a lease restructuring. We reclassified the Dick’s Sporting Goods property as an equity investment in real estate in December 2005 in connection with an expansion transaction wherein CPA^®:16 — Global, an affiliate, acquired a 55.1% interest in the property.

CPA^®:14 2006 10-K — 26

During 2006, our tenant Meridian Automotive Systems, which contributed $1,254 in lease revenues during 2006, affirmed its lease with us and emerged from bankruptcy protection. Two additional tenants in automotive related industries, Tower Automotive and Collins and Aikman, which contributed a total of $7,812 in lease revenues during 2006, continue to operate under bankruptcy protection. We cannot predict whether either company will affirm or terminate its lease in connection with its bankruptcy reorganization.

2005 vs. 2004 — For the years ended December 31, 2005 and 2004, lease revenues increased by $3,299 primarily as a result of $2,925 from rent increases at several properties. Rent from new leases and renewals at existing properties also contributed to the increase.

Revenue is subject to fluctuation because of lease expirations, lease terminations, the timing of new lease transactions and sales of property.

Depreciation and Amortization

2006 vs. 2005 — For the years ended December 31, 2006 and 2005, depreciation and amortization expense increased by $4,729, primarily due to a $3,730 depreciation charge incurred in the second quarter of 2006 related to the acceleration of depreciation upon the demolition of a Pennsylvania property in connection with its redevelopment. Depreciation and amortization expense also increased by $984 as a result of the merger, including $234 from two investments that we now consolidate following the merger.

2005 vs. 2004 — For the years ended December 31, 2005 and 2004, depreciation and amortization expense remained relatively unchanged with an increase of $102.

Property Expense

2006 vs. 2005 — For the years ended December 31, 2006 and 2005, property expense decreased by $1,566 primarily due to a decrease in property related expenses totaling $767, reductions in asset management and performance fees of $624, and to a lesser extent, reductions in reimbursable tenant costs. The decrease in property related expenses resulted primarily from leasing activity during 2006 at several properties which were partially vacant in 2005.

Asset management and performance fees declined as a result of an overall reduction in our 2005 portfolio valuation, primarily due to our automotive industry tenants who filed voluntary petitions of bankruptcy in 2005. The amount of asset management and performance fees payable to the advisor is based on the annual third party valuation of our portfolio. We expect that the 2006 valuation, and the amount of asset management and performance fees payable to the advisor, will increase as a result of the acquisition of properties in the merger and the emergence of one of the automotive tenants from bankruptcy during 2006.

2005 vs. 2004 — For the years ended December 31, 2005 and 2004, property expense increased by $2,190 primarily due to an increase in asset management and performance fees of $1,030, an increase in reimbursable tenant costs of $948, professional fees and other costs totaling $185 related to two underperforming properties and a $188 repair expenditure at a property in California. Actual recoveries of reimbursable tenant costs are recorded as both revenue and expense and therefore have no impact on net income.

The increase in the asset management and performance fees paid to the advisor are a result of increases in property values pursuant to the annual third party valuation of our portfolio as of December 31, 2004. We incurred legal and other costs in 2005 related to properties leased to Collins & Aikman and Tower Automotive as both tenants filed for bankruptcy protection in 2005.

Income from Equity Investments in Real Estate

Income from equity investments in real estate represents our proportionate share of net income (revenues and gains less expenses) from investments entered into with affiliates or third parties in which we have been deemed to have a non-controlling interest but exercise significant influence.

2006 vs. 2005 — For the years ended December 31, 2006 and 2005, income from equity investments in real estate increased by $11,612, primarily due to the net positive impact of two property sales, which was partially offset by the impact of the Starmark transaction. Income from equity investments in real estate benefited from the recognition of our pro rata share of gains on the sale of properties in New York and California totaling $23,620 and lease termination income related to the Starmark transaction of $4,561. New equity investments in real estate acquired in the merger also contributed $955 of the increase. These increases were partially offset by the impact of recognition of our pro rata share of the impairment charges related to the Starmark properties of $10,241, by prepayment costs and defeasance penalties totaling $6,216 incurred in connection with the repayment/defeasance of the mortgages on the Starmark properties and the New York and California property sales and a reduction of $1,387 as a result of the Starmark transaction and property sales.

CPA^®:14 2006 10-K — 27

2005 vs. 2004 — For the years ended December 31, 2005 and 2004, income from equity investments in real estate increased by $1,494 primarily due to $743 from rent increases at several properties, $456 from the full-year effect of an acquisition in April 2004 of an 11.54% interest in a limited partnership which purchased 78 self-storage and truck leasing facilities leased under the U-Haul brand name and $92 from the reclassification of our investment in Dick’s Sporting Goods.

Gain (Loss) on Derivative Instruments and Other Gains, Net

From time to time, we may obtain equity enhancements in connection with transactions which may involve warrants exercisable at a future time to purchase stock of the tenant or borrower or their parent. We recognize unrealized gains or losses on these common stock warrants and, if the warrants become exercisable and the value of the stock exceeds the exercise price of the warrant, we may exercise the warrants to obtain additional returns for our investors. The timing and amount of such gains and losses cannot always be estimated and are subject to fluctuation.

2006 vs. 2005 — For the years ended December 31, 2006 and 2005, gain on derivative instruments and other gains, net decreased by $3,196 primarily as a result of a decrease in realized and unrealized gains on common stock warrants. During 2006, we recognized an unrealized gain on common stock warrants in Compucom Systems, Inc. of $2,076 due to Compucom’s improved financial results, as compared with unrealized gains of $2,548 and realized gains of $2,192 on common stock warrants in PW Eagle, Inc. and American Tire Distributors, Inc., respectively, recognized in 2005 (see below).

2005 vs. 2004 — For the years ended December 31, 2005 and 2004, gain on derivative instruments and other gains, net increased by $6,259 primarily as a result of realized and unrealized gains on common stock warrants and a change in the value of an interest rate swap. In April 2005, we recognized a realized gain of $2,192 on common stock warrants as a result of the completion of a redemption transaction by American Tire Distributors. We recognized an unrealized gain of $2,548 in 2005 on common stock warrants in PW Eagle as the result of increases in PW Eagle’s stock price. In December 2005 we exercised our option to convert the PW Eagle warrants into common stock. During 2005, we recognized an unrealized gain of $426 on an interest rate swap contract that does not qualify as a hedge for financial accounting purposes, as compared with a $655 unrealized loss in 2004.

Gain (Loss) on Foreign Currency Transactions, Net

We have foreign operations in Europe and the United Kingdom which are subject to the effects of exchange rate movements of the Euro and the British pound sterling. For these currencies we are a net receiver of the foreign currency (we receive more cash than we pay out) and therefore our foreign investments benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to the foreign currency. We recognize realized foreign currency translation gains (losses) upon the repatriation of cash from our foreign investments and recognize unrealized foreign currency translation gains (losses) due to changes in foreign currency on accrued interest receivable on notes receivable from wholly-owned subsidiaries.

2006 vs. 2005 — For the year ended December 31, 2006 and 2005, we recognized a gain on foreign currency transactions, net, of $930 as compared with a loss of $446 in 2005. This change is primarily due to increases in unrealized gains on foreign currency as the result of the moderate weakening of the U.S. dollar since December 31, 2005, as compared with its strengthening during the comparable 2005 period.

2005 vs. 2004 — For the year ended December 31, 2005, we recognized a net loss on foreign currency transactions of $446 as compared with a gain of $1,438 for the year ended December 31, 2004. The loss was primarily due to the strengthening of the U.S. dollar during 2005 and was partially offset by realized gains on the transfer of cash from foreign subsidiaries.

Interest Expense

2006 vs. 2005 — For the years ended December 31, 2006 and 2005, interest expense decreased by $1,162. The payoff of mortgage balances during 2005 and 2006 resulted in a decrease of $1,208, including a $784 prepayment penalty incurred in 2005 (see below), while scheduled mortgage principal payments resulted in a decrease of $1,013. These decreases were partially offset by additional interest expense totaling $883 on properties acquired in the merger.

2005 vs. 2004 — For the years ended December 31, 2005 and 2004, interest expense decreased by $234 primarily from paying scheduled principal payments, prepayment of mortgage principal obligations and defeasance of the Dick’s Sporting Goods mortgage. These decreases were partially offset by a charge on extinguishment of debt of $784 in the fourth quarter of 2005 in connection with the defeasance of the mortgage on the Dick’s Sporting Goods property.

Income from Discontinued Operations

2006 — For 2006, we recognized income from discontinued operations of $11,538, primarily due to the recognition of a net gain of $13,182 on the sale of a properties in Minnesota and Indiana, partially offset by prepayment penalties incurred totaling $1,586 in connection with the prepayment of the mortgage financing on the Minnesota property.

CPA^®:14 2006 10-K — 28

2005 — For 2005, we recognized income from discontinued operations of $924 related to the results of operations of properties in Indiana, California and Minnesota, including a gain of $196 on the sale of the California property.

2004 — For 2004, we recognized income from discontinued operations of $989 related to the results of operations of properties in Indiana, California and Minnesota.

Net Income

2006 vs. 2005 — For the years ended December 31, 2006 and 2005, net income increased by $22,369, primarily due to the recognition of gains on the sale of real estate totaling $36,802, including our pro rata share of two investments accounted for under the equity method, and our pro rata share of lease termination income of $4,561 related to the Starmark transaction. These increases were partially offset by the recognition of our pro rata share of an impairment charge on the Starmark properties of $10,241 and our pro rata share of prepayment penalties and defeasance costs totaling $6,216, incurred in connection with the sale of properties accounted for under the equity method. These variances are described above.

2005 vs. 2004 — For the years ended December 31, 2005 and 2004, net income increased $8,309, primarily due to increases in lease revenue and income from equity investments in real estate totaling $4,793 and a $6,259 increase in gain (loss) on derivative instruments and other gains, net. These increases were partially offset by an increase in property expense of $2,190. These variances are described above.

Financial Condition

Uses of Cash During the Year

Cash and cash equivalents totaled $18,991 as of December 31, 2006, a decrease of $18,880 from the December 31, 2005 balance. We believe that we have sufficient cash balances to meet our working capital needs. Our sources and use of cash during 2006 are described below.

Operating Activities

One of our objectives is to use the cash flow from net leases to meet operating expenses, service debt and fund distributions to shareholders. For the year ended December 31, 2006, cash flows from operating activities of $102,232 were sufficient to fund distributions to shareholders of $83,633, meet scheduled principal payment installments on mortgage debt of $12,580 and distribute $3,869 to minority partners. In 2006, cash flows from operating activities increased significantly over 2005, primarily due to an increase in our net income following the recognition of gains on the sale of two properties accounted for under the equity method (see Results of Operations above). Distributions to shareholders also increased significantly over 2005, primarily as a result of special distributions totaling $0.49 per share or $33,609 that were paid to shareholders out of proceeds received on property sales in 2006.

Investing Activities

Our investing activities are generally comprised of real estate transactions (purchases and sales), payment of our annual installment of deferred acquisition fees and capitalized property-related costs. Our investment activity in 2006 was primarily comprised of our merger with CPA^®:12 and the disposition of several investments. In connection with the merger, we used $102,176 to redeem the interests of CPA^®:12 shareholders who elected to receive cash and assumed a cash overdraft of $3,950 from CPA^®:12 resulting from its payment of obligations to its shareholders. In addition to our merger related activity, we received $84,934 in capital distributions from equity investments in real estate, including $44,610 related to the sale of the New York property, $37,176 from mortgage refinancings at a property in Georgia and the former Starmark properties that were re-leased to Life Time Fitness, Inc. and $3,148 related to our pro rata share of the release of security deposits and prepaid rent from the former Starmark properties which will primarily be used to fund improvements at certain properties formerly leased by Starmark. Of these amounts, $81,788 represents distributions in excess of cumulative income from equity investments in real estate. During 2006, we received proceeds of $37,628 from the sales of properties in Minnesota and Indiana. Of these proceeds, funds of $21,741 were placed in a restricted account for use in a potential future investment on a tax-deferred basis, but were subsequently released as the contemplated investment was not consummated. In addition, we received net proceeds of $2,986 from the sale of our holdings in PW Eagle, Inc. common stock. During 2006, we also contributed $45,481 to the Starmark venture to fund our pro rata share of the payoff/defeasance of the existing limited recourse mortgage obligation and related prepayment penalties and debt defeasance costs. The annual installment of deferred acquisition fees is paid to the advisor each January and was $3,514 in 2006.

Financing Activities

In addition to making scheduled mortgage principal payments, paying distributions to shareholders and minority partners, we prepaid mortgage obligations totaling $24,167 during 2006, including $11,631 in connection with the sale of a Minnesota property, $3,859 for the defeasance of the mortgage at a Pennsylvania property and $8,677 for the payoff of the mortgage at a Virginia property, which we

CPA^®:14 2006 10-K — 29

subsequently refinanced for $12,000. During 2006, we used gross borrowings under our credit facility of $28,000 primarily to repay a short-term loan from the advisor of $24,000 that we obtained in order to facilitate the merger closing. Gross repayments under the credit facility were $3,000. We also received $10,766 as a result of issuing shares through our Distribution Reinvestment and Share Purchase Plan and used $9,186 to purchase treasury shares through a redemption plan which allows shareholders to sell shares back to us, subject to certain limitations.

We hold a participation in a mortgage pool consisting of $172,335 of mortgage debt collateralized by properties and lease assignments on properties owned by us and two affiliates. With our affiliates, we also purchased subordinated interests of $24,129 in which we own a 25% interest, and we acquired an additional 30% interest in the subordinated interests from CPA^®:12 in connection with the merger. The subordinated interests are payable only after all other classes of ownership receive their stated interest and related principal payments. The subordinated interests, therefore, could be affected by any defaults or nonpayment by lessees. As of December 31, 2006, there have been no defaults.

Summary of Financing

The table below summarizes our mortgage notes payable as December 31, 2006 and 2005, respectively.

	December 31,
	2006			2005
Balance:
Fixed rate	$	657,819		$	636,523
Variable rate (1) (2)		152,996			26,575
Total	$	810,815		$	663,098
Percent of total debt:
Fixed rate		81	%		96	%
Variable rate (2)		19	%		4	%
		100	%		100	%
Weighted average interest rate at end of period:
Fixed rate		7.65	%		7.37	%
Variable rate (1)		6.44	%		5.28	%

(1)

Includes amounts outstanding under our credit facility totaling $25,000 at December 31, 2006.

(2)

Included in variable rate debt at December 31, 2006 is (i) $43,376 in aggregate principal of our credit facility ($25,000) and variable rate mortgages ($18,376) which have not been hedged; (ii) $97,698 in mortgage obligations which currently bear interest at fixed rates but which convert to variable rates during their term and (iii) $11,922 in mortgage obligations which are currently fixed rate but which have interest rate reset features which may change the interest rates to then prevailing market fixed rates at certain points in their term.

Cash Resources

As of December 31, 2006, our cash resources consisted of the following:

• Cash and cash equivalents totaling $18,991, of which $7,981, at current exchange rates, was held in foreign bank accounts to maintain local capital requirements;

• Credit facility with unused capacity of up to $125,000; and

• Unleveraged properties with a carrying value of $96,488, subject to meeting certain financial ratios on our credit facility.

Our cash resources can be used for working capital needs and other commitments and may be used for future investments. We continue to evaluate fixed-rate financing options, such as obtaining limited recourse financing on our unleveraged properties. Any financing obtained may be used for working capital objectives and may be used to pay down existing debt balances.

Credit Facility

In connection with the merger, we entered into a $150,000 credit facility with Wells Fargo Bank in November 2006. The credit facility provides for an initial three year term and an annual interest rate of either (i) LIBOR plus a spread which ranges from 135 to 160 basis points depending on our leverage or (ii) the greater of the bank’s prime rate and the Federal Funds Effective Rate, plus 0.50%, plus a spread of up to 0.125% depending on our leverage ratio. The credit facility is guaranteed by our current and future subsidiaries that own unencumbered assets. The credit facility has financial covenants that require, among other things, us to maintain a minimum

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equity value and to meet or exceed certain operating and coverage ratios. We are in compliance with these covenants as of December 31, 2006. The facility also provides us with the right, on up to two occasions, to increase the amount available under the credit facility by not less than $20,000 and not more than $75,000 up to a maximum of $225,000.

We expect cash flows from operating activities to be affected by several factors in 2007 including:

• The full year impact from properties acquired in the merger, which we estimate will generate annual lease revenue and cash flow of approximately $21,600 and $12,000, respectively, and annual equity investment income of approximately $4,700. There are no scheduled balloon payments on any of the properties acquired from CPA^®:12 until 2008.

• The advisor’s election in 2007 to continue to receive performance fees in restricted shares.

• Scheduled rent increases on several properties during 2006 and 2007 should result in additional cash from operations.

• The full year impact of dispositions completed in 2006 which will reduce cash flow in 2007.

Cash Requirements

During 2007, cash requirements will include scheduled mortgage principal payment installments and paying distributions to shareholders and minority partners as well as other normal recurring operating expenses. We have no balloon payments due until 2008, when a total of $17,649 in balloon payments will be due. We may also seek to use our cash resources to make new investments to further diversify our portfolio, and expect to maintain cash balances sufficient to meet working capital needs.

Aggregate Contractual Agreements

The table below summarizes our contractual obligations as of December 31, 2006 and the effect that such obligations are expected to have on our liquidity and cash flow in future periods.

	Total		Less than 1 Year		1—3 Years		3—5 Years		More than 5 years
Mortgage notes payable — Principal	$	785,815	$	16,707	$	117,377	$	376,219	$	275,512
Mortgage notes payable — Interest (1)		297,648		58,260		109,416		83,308		46,664
Credit facility — Principal		25,000		—		25,000		—		—
Credit facility — Interest (1)		4,958		1,700		3,258		—		—
Deferred acquisition fees — Principal		15,644		4,369		7,106		3,631		538
Deferred acquisition fees — Interest		2,548		1,000		1,130		377		41
Subordinated disposition fees (2)		3,507		—		—		—		3,507
Property improvements (3)		11,200		5,600		5,600		—		—
Operating leases (4)		6,650		544		1,315		1,361		3,430
	$	1,152,970	$	88,180	$	270,202	$	464,896	$	329,692

(1)	Interest on variable rate debt obligations was calculated using the applicable variable interest rate as of December 31, 2006.
(2)	Payable to the advisor, subject to meeting contingencies, in connection with any liquidity event.
(3)	Represents our pro rata share of landlord improvements on the Life Time properties (see Item 1 — Significant Developments During 2006). We acquired an additional 15% interest in these properties in the merger.
(4)	Operating lease obligations consist primarily of our share of future minimum rents payable under an office cost-sharing agreement with certain affiliates for the purpose of leasing office space used for the administration of real estate entities. Such amounts are allocated among the entities based on gross revenues and are adjusted quarterly.

Amounts in the table above related to our foreign operations are based on the exchange rate of the local currencies as of December 31, 2006.

As of December 31, 2006, we have no material capital lease obligations for which we are the lessee, either individually or in the aggregate.

In connection with the purchase of our properties, we require the sellers to perform environmental reviews. We believe, based on the results of such reviews, that our properties were in substantial compliance with Federal and state environmental statutes at the time the properties were acquired. However, portions of certain properties have been subject to some degree of contamination, principally in connection with either leakage from underground storage tanks, surface spills from facility activities or historical on-site activities. In most instances where contamination has been identified, tenants are actively engaged in the remediation process and addressing identified conditions. Tenants are generally subject to environmental statutes and regulations regarding the discharge of hazardous

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materials and any related remediation obligations. In addition, our leases generally require tenants to indemnify us from all liabilities and losses related to the leased properties with provisions of such indemnification specifically addressing environmental matters. The leases generally include provisions which allow for periodic environmental assessments, paid for by the tenant, and allow us to extend leases until such time as a tenant has satisfied its environmental obligations. Certain of the leases allow us to require financial assurances from tenants such as performance bonds or letters of credit if the costs of remediating environmental conditions are, in our estimation, in excess of specified amounts. Accordingly, we believe that the ultimate resolution of any environmental matter should not have a material adverse effect on our financial condition, liquidity or results of operations.

Subsequent Events

In January 2007, we obtained limited recourse mortgage financing on existing properties totaling $26,227, including our pro rata share of mortgage financing on a property accounted for under the equity method. The financing has a weighted average interest rate and term of 5.84% and 12 years, respectively.

Effective April 2, 2007, Trevor Bond is resigning from our board of directors in connection with his appointment to the advisor’s board of directors. Marshall Blume was appointed as an independent director of our board of directors, effective April 2, 2007.

Critical Accounting Estimates

Our significant accounting policies are described in Note 2 to the consolidated financial statements. Many of these accounting policies require certain judgment and the use of certain estimates and assumptions when applying these policies in the preparation of our consolidated financial statements. On a quarterly basis, we evaluate these estimates and judgments based on historical experience as well as other factors that we believe to be reasonable under the circumstances. These estimates are subject to change in the future if underlying assumptions or factors change. Certain accounting policies, while significant, may not require the use of estimates. Those accounting policies that require significant estimation and/or judgment are listed below.

Classification of Real Estate Assets

We classify our directly owned leased assets for financial reporting purposes as either real estate under operating leases or net investment in direct financing leases at the inception of a lease or when significant lease terms are amended. This classification is based on several criteria, including, but not limited to, estimates of the remaining economic life of the leased assets and the calculation of the present value of future minimum rents. In determining the classification of a lease, we use estimates of remaining economic life provided by third party appraisals of the leased assets. The calculation of the present value of future minimum rents includes determining a lease’s implicit interest rate, which requires an estimate of the residual value of leased assets as of the end of the non-cancelable lease term. Different estimates of residual value result in different implicit interest rates and could possibly affect the financial reporting classification of leased assets. The contractual terms of our leases are not necessarily different for operating and direct financing leases; however the classification is based on accounting pronouncements which are intended to indicate whether the risks and rewards of ownership are retained by the lessor or substantially transferred to the lessee. Management believes that it retains certain risks of ownership regardless of accounting classification. Assets classified as net investment in direct financing leases are not depreciated but are written down to expected residual value of the lease term, therefore, the classification of assets may have a significant impact on net income even though it has no effect on cash flows.

Identification of Tangible and Intangible Assets in Connection with Real Estate Acquisitions

In connection with the acquisition of properties, purchase costs are allocated to tangible and intangible assets and liabilities acquired based on their estimated fair values. The value of tangible assets, consisting of land, buildings and tenant improvements, is determined as if vacant. Intangible assets including the above-market value of leases, the value of in-place leases and the value of tenant relationships are recorded at their relative fair values. The below-market values of leases are recorded at their relative fair values and are included in other liabilities in the accompanying financial statements.

The value attributed to tangible assets is determined in part using a discount cash flow model which is intended to approximate what a third party would pay to purchase the property as vacant and rent at current “market” rates. In applying the model, we assume that the disinterested party would sell the property at the end of a market lease term. Assumptions used in the model are property-specific as it is available; however, when certain necessary information is not available, we use available regional and property-type information. Assumptions and estimates include a discount rate or internal rate of return, marketing period necessary to put a lease in place, carrying costs during the marketing period, leasing commissions and tenant improvements allowances, market rents and growth factors of such rents, market lease term and a cap rate to be applied to an estimate of market rent at the end of the market lease term.

Above-market and below-market lease intangibles are based on the difference between the market rent and the contractual rents and are discounted to a present value using an interest rate reflecting our assessment of the risk associated with the lease acquired. If we acquire properties subject to net leases, we consider the credit of the lessee in negotiating the initial rent.

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The total amount of other intangibles is allocated to in-place lease values and tenant relationship intangible values based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with each tenant. Characteristics we consider in allocating these values include the expectation of lease renewals, nature and extent of the existing relationship with the tenant, prospects for developing new business with the tenant and the tenant’s credit quality, among other factors. Intangibles for above-market and below-market leases, in-place lease intangibles and tenant relationships are amortized over their estimated useful lives. In the event that a lease is terminated, the unamortized portion of each intangible, including market rate adjustments, in-place lease values and tenant relationship values, are charged to expense.

Factors considered include the estimated carrying costs of the property during a hypothetical expected lease-up period, current market conditions and costs to execute similar leases. Estimated carrying costs include real estate taxes, insurance, other property operating costs, expectation of funding tenant improvements and estimates of lost rentals at market rates during the hypothetical expected lease-up periods, based on assessments of specific market conditions. Estimated costs to execute leases include commissions and legal costs to the extent that such costs are not already incurred with a new lease that has been negotiated in connection with the purchase of the property.

Basis of Consolidation

When we obtain an economic interest in an entity, we evaluate the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if we are deemed to be the primary beneficiary, in accordance with FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities” (“FIN 46(R)”). We consolidate (i) entities that are VIEs and of which we are deemed to be the primary beneficiary and (ii) entities that are non-VIEs which we control. Entities that we account for under the equity method (i.e. at cost, increased or decreased by our share of earnings or losses, less distributions) include (i) entities that are VIEs and of which we are not deemed to be the primary beneficiary and (ii) entities that are non-VIEs which we do not control, but over which we have the ability to exercise significant influence. We will reconsider our determination of whether an entity is a VIE and who the primary beneficiary is if certain events occur that are likely to cause a change in the original determinations.

In June 2005, the Emerging Issues Task Force issued EITF 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-05”). The scope of EITF 04-05 is limited to limited partnerships or similar entities that are not variable interest entities under FIN 46(R). The Task Force reached a consensus that the general partners in a limited partnership (or similar entity) are presumed to control the entity regardless of the level of their ownership and, accordingly, may be required to consolidate the entity. This presumption may be overcome if the agreements provide the limited partners with either (a) the substantive ability to dissolve (liquidate) the limited partnership or otherwise remove the general partners without cause or (b) substantive participating rights. If it is deemed that the limited partners’ rights overcome the presumption of control by a general partner of the limited partnership, the general partner shall account for its investment in the limited partnership using the equity method of accounting. We adopted EITF 04-05 in June 2005 for all arrangements created or modified after June 29, 2005. For all other arrangements, we adopted EITF 04-05 on January 1, 2006. The adoption of EITF 04-05 had no impact on our financial position or results of operations. Upon completion of the merger, we acquired additional interests in certain limited liability companies and limited partnerships such that our ownership interests now exceed 50% and we exercise significant influence. Because our venture partners, which are affiliates, are the managing members or general partners in the limited partnerships or limited liability companies, respectively and no unaffiliated parties have substantive kick-out or participation rights, the venture partners are required to consolidate the investments under the provisions of EITF 04-05 and, therefore, we account for these investments under the equity method of accounting. All material inter-entity transactions have been eliminated.

Impairments

Impairment charges may be recognized on long-lived assets, including but not limited to, real estate, direct financing leases, equity investments in real estate and assets held for sale. Estimates and judgments are used when evaluating whether these assets are impaired. When events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, we perform projections of undiscounted cash flows, and if such cash flows are insufficient, the assets are adjusted (i.e., written down) to their estimated fair value. An analysis of whether a real estate asset has been impaired requires us to make our best estimate of market rents, residual values and holding periods. In our evaluations, we generally obtain market information from outside sources; however, such information requires us to determine whether the information received is appropriate to the circumstances. As our investment objective is to hold properties on a long-term basis, holding periods used in the analyses generally range from five to ten years. Depending on the assumptions made and estimates used, the future cash flow projected in the evaluation of long-lived assets can vary within a range of outcomes. We will consider the likelihood of possible outcomes in determining the best possible estimate of future cash flows. Because in most cases, each of our properties is leased to one tenant, we are more likely to incur significant writedowns when circumstances change because of the possibility that a property will be vacated in its entirety and, therefore, it is different from the risks related to leasing and managing multi-tenant properties. Events or changes in circumstances can result in further noncash writedowns and impact the gain or loss ultimately realized upon sale of the assets.

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We perform a review of our estimate of residual value of our direct financing leases at least annually to determine whether there has been an other than temporary decline in the current estimate of residual value of the underlying real estate assets (i.e., the estimate of what we could realize upon sale of the property at the end of the lease term). If the review indicates a decline in residual value, that is other than temporary, a loss is recognized and the accounting for the direct financing lease will be revised to reflect the decrease in the expected yield using the changed estimate, that is, a portion of the future cash flow from the lessee will be recognized as a return of principal rather than as revenue. While an evaluation of potential impairment of real estate subject to operating leases is determined by a change in circumstances, the evaluation of a direct financing lease can be affected by changes in long-term market conditions even though the obligations of the lessee are being met. Changes in circumstances include, but are not limited to, vacancy of a property not subject to a lease and termination of a lease. We may also assess properties for impairment because a lessee is experiencing financial difficulty and because management expects that there is a reasonable probability that the lease will be terminated in a bankruptcy proceeding or a property remains vacant for a period that exceeds the period anticipated in a prior impairment evaluation.

Investments in unconsolidated ventures are accounted for under the equity method and are recorded initially at cost as equity investments in real estate and are subsequently adjusted for our proportionate share of earnings and cash contributions and distributions. On a periodic basis, we assess whether there are any indicators that the value of equity investments in real estate may be impaired and whether or not that impairment is other than temporary. To the extent impairment has occurred, the charge is measured as the excess of the carrying amount of the investment over the fair value of the investment.

When we identify assets as held for sale, we discontinue depreciating the assets and estimate the sales price, net of selling costs, of such assets. If in our opinion, the net sales price of the assets which have been identified for sale is less than the net book value of the assets, an impairment charge is recognized and a valuation allowance is established. To the extent that a purchase and sale agreement has been entered into, the allowance is based on the negotiated sales price. To the extent that we have adopted a plan to sell an asset but have not entered into a sales agreement, we will make judgments of the net sales price based on current market information. We will continue to review the initial valuation for subsequent changes in the fair value less cost to sell and will recognize an additional impairment charge or a gain (not to exceed the cumulative loss previously recognized.) If circumstances arise that previously were considered unlikely and, as a result, we decide not to sell a property previously classified as held for sale, the property is reclassified as held and used. A property that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held and used or (b) the fair value at the date of the subsequent decision not to sell.

Provision for Uncollected Amounts from Lessees

On an ongoing basis, we assess our ability to collect rent and other tenant-based receivables and determine an appropriate allowance for uncollected amounts. Because we have a limited number of lessees (24 lessees represented 74% of lease revenue during 2006), we believe that it is necessary to evaluate the collectibility of these receivables based on the facts and circumstances of each situation rather than solely using statistical methods. We generally recognize a provision for uncollected rents and other tenant receivables and measure our allowance against actual arrearages. For amounts in arrears, we make subjective judgments based on our knowledge of a lessee’s circumstances and may reserve for the entire receivable amount from a lessee because there has been significant or continuing deterioration in the lessee’s ability to meet its lease obligations.

Fair Value of Assets and Liabilities

In 2002, we acquired a subordinated interest in a mortgage trust that consists of limited recourse loans on 62 properties that we own or two of our affiliates own. We acquired an additional interest in the mortgage trust in the merger. The fair value of the interests in the trust is determined using a discounted cash flow model with assumptions of market rates and the credit quality of the underlying lessees. If there are adverse changes in either market rates or the credit quality of the lessees, the model and, therefore, the income recognized from the subordinated interests and the fair value would be adjusted.

We measure derivative instruments, including certain derivative instruments embedded in other contracts, if any, at fair value and record them as an asset or liability, depending on our right or obligations under the applicable derivative contract. For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings (i.e., the forecasted event occurs). For derivatives designated as cash flow hedges, the effective portions of the derivatives are reported in other comprehensive income and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in the fair value of derivative instruments not designated as hedging and ineffective portions of hedges are recognized in earnings in the affected period. To determine the value of warrants for common stock which are classified as derivatives, various estimates are included in the options pricing model used to determine the value of a warrant.

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Income Taxes

We have elected and expect to continue to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In order to maintain our qualification as a REIT, we are required, among other things, to distribute at least 90% of our net taxable income to our shareholders (excluding net capital gains) and meet certain tests regarding the nature of our income and assets. As a REIT, we are is not subject to U.S. federal income tax to the extent we distribute our net taxable income annually to our shareholders. Accordingly, no provision for U.S. federal income taxes is included in the accompanying consolidated financial statements. We have and intend to continue to operate so that we meet the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. If we were to fail to meet these requirements, we would be subject to U.S. federal income tax. We are subject to certain state, local and foreign taxes. State, local, franchise and other taxes of $57, $434 and $595 are included in general and administrative expenses for the years ended December 31, 2006, 2005 and 2004, respectively.

Recent Accounting Pronouncements

EITF 04-05

We adopted EITF 04-05 in June 2005 for all limited partnerships created after June 29, 2005 and on January 1, 2006 for all other arrangements. Refer to Basis of Consolidation above for a discussion of the effect of EITF 04-05 on our financial position and results of operations.

FSP FAS 13-1

In October 2005, the FASB issued Staff Position No. 13-1 “Accounting for Rental Costs Incurred during a Construction Period” (“FSP FAS 13-1”). FSP FAS 13-1 addresses the accounting for rental costs associated with operating leases that are incurred during the construction period. FSP FAS 13-1 makes no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period. Therefore, rental costs associated with ground or building operating leases that are incurred during a construction period shall be recognized as rental expense, allocated over the lease term in accordance with SFAS No. 13 and Technical Bulletin 85-3. We adopted FSP FAS 13-1 as required on January 1, 2006 and the initial application of this Staff Position did not have a material impact on our financial position or results of operations.

SFAS 155

In February 2006, the FASB issued Statement No.155, “Accounting for Certain Hybrid Financial Instruments an Amendment of FASB No. 133 and 140” (“SFAS 155”). The purpose of SFAS 155 is to simplify the accounting for certain hybrid financial instruments by permitting fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. SFAS 155 also eliminates the restriction on passive derivative instruments that a qualifying special-purpose entity may hold. We must adopt SFAS 155 effective January 1, 2007 and do not believe that this adoption will have a material impact on our financial position or results of operations.

FIN 48

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income tax positions. This Interpretation requires that the Company recognize in its consolidated financial statements the impact of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. We must adopt FIN 48 effective January 1, 2007. We are currently evaluating the impact of adopting FIN 48 on our consolidated financial statements.

SAB 108

In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB 108 was issued in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements.

Traditionally, there have been two widely-recognized methods for quantifying the effects of financial statement misstatements: the “rollover” method and the “iron curtain” method. The rollover method focuses primarily on the impact of a misstatement on the income statement — including the reversing effect of prior year misstatements — but its use can lead to the accumulation of misstatements in the balance sheet. The iron curtain method, on the other hand, focuses primarily on the effect of correcting the period-end balance sheet with less emphasis on the reversing effects of prior year errors on the income statement. We currently use the iron curtain method for quantifying identified financial statement misstatements.

In SAB 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the Company’s financial statements and the related financial statement disclosures. This model is commonly referred to as a “dual approach” because it requires quantification of errors under both the iron curtain and rollover methods. SAB 108 permits existing public companies to initially apply its provisions either by (i) restating prior financial statements

CPA^®:14 2006 10-K — 35

as if the “dual approach” had always been used or (ii) recording the cumulative effect of initially applying the “dual approach” as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment recorded to the opening balance of retained earnings. Use of the “cumulative effect” transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. We adopted SAB 108 using the cumulative effect transition method in connection with the preparation of our annual financial statements for the year ending December 31, 2006. The adoption of SAB 108 had no impact on our financial position or results of operations.

SFAS 157

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective for our 2008 fiscal year, although early adoption is permitted. We believe that the adoption of SFAS 157 will not have a material effect on our financial position or results of operations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

(In thousands)

Market Risks

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates and equity prices. In pursuing our business plan, the primary risks to which we are exposed are interest rate risk and foreign currency exchange risk.

We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we attempt to obtain mortgage financing on a long-term, fixed-rate basis. However, from time to time, we or our venture partners may obtain variable rate mortgage loans and may enter into interest rate swap agreements with lenders which effectively convert the variable rate debt service obligations of the loan to a fixed rate. These interest rate swaps are derivative instruments designated as cash flow hedges on the forecasted interest payments on the debt obligation. Interest rate swaps are agreements in which a series of interest rate flows are exchanged over a specific period. The notional amount on which the swaps are based is not exchanged. As of December 31, 2006, neither we nor our venture partners have entered into any interest rate swaps.

Our objective in using derivatives is to limit our exposure to interest rate movements. We do not use derivative instruments to hedge foreign exchange rate risk exposure, credit/market risks or for speculative purposes.

Because we transact business in Finland, France, the Netherlands and the United Kingdom, we are also exposed to foreign exchange rate movements. We manage foreign exchange rate movements by generally placing both our debt obligation to the lender and the tenant’s rental obligation to us in the local currency.

Interest Rate Risk

The value of our real estate and related fixed debt obligations are subject to fluctuations based on changes in interest rates. The value of our real estate is also subject to fluctuations based on local and regional economic conditions and changes in the creditworthiness of lessees, all which may affect our ability to refinance property-level mortgage debt when balloon payments are scheduled.

Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political conditions, and other factors beyond our control. An increase in interest rates would likely cause the value of our owned and managed assets to decrease, which would create lower revenues from managed assets lower investment performance for the managed funds. Increases in interest rates may also have an impact on the credit quality of certain tenants.

Although we have not experienced any credit losses on investments in loan participations, in the event of a significant rising interest rate environment and/or economic downturn, loan defaults could increase and result in us recognizing credit losses, which could adversely affect our liquidity and operating results. Further, such defaults could have an adverse effect on the spreads between interest earning assets and interest bearing liabilities.

We own marketable securities through our ownership interests in Carey Commercial Mortgage Trust (“CCMT”). The value of the marketable securities is subject to fluctuation based on changes in interest rates, economic conditions and the creditworthiness of lessees at the mortgaged properties. We acquired an additional interest in the CCMT valued at $7,346 on December 1, 2006 in connection with the merger. As of December 31, 2006, our total interests in CCMT had a fair value of $13,911. We also own marketable equity securities of Core-Mark Holding Company, Inc., which based on its quoted per share price had a fair value of $296 as of December 31, 2006. Warrants issued to us by Consolidated Theaters Holding, G.P., Compucom Systems, Inc., Vermont Teddy Bear Company and Fitness Ventures are classified as derivative instruments and had an aggregate fair value of $4,338 and $665 at December 31, 2006 and 2005, respectively.

The following table presents principal cash flows based upon expected maturity dates and scheduled amortization payments of our debt obligations and the related weighted-average interest rates by expected maturity dates for the fixed rate debt. Annual interest rates on fixed rate debt as of December 31, 2006 ranged from 5.15% to 9.38%. The interest rates on our variable rate debt as of December 31, 2006 ranged from 5.15% to 7.32%.

	2007			2008			2009			2010			2011			Thereafter			Total		Fair value
Fixed rate debt	$	12,276		$	30,485		$	77,238		$	83,840		$	281,623		$	172,357		$	657,819	$	657,107
Weighted average interest rate		7.50	%		7.14	%		8.30	%		8.04	%		7.49	%		7.49	%
Variable rate debt	$	4,431		$	4,713		$	29,941		$	5,253		$	5,503		$	103,155		$	152,996	$	152,996

As more fully described in Summary of Financing above, our current variable rate debt obligations include some obligations which are currently subject to variable interest rates, some obligations which may convert to variable interest rates during their term and some

CPA^®:14 2006 10-K — 37

that reset to then-prevailing market fixed rates at certain points in their term. Based on our current unhedged exposure to variable rates in the next twelve months, annual interest expense from variable rate debt would increase or decrease by approximately $1,530 for each change of 1% in annual interest rates. A change in interest rates of 1% would increase or decrease by an aggregate of $23,635 the combined fair value of our fixed rate debt and our mortgage obligations which currently bear interest at fixed rates but which may convert to variable rates during their term or have interest rate reset features which may change the interest rates to then prevailing market fixed rates at certain points in their term.

Foreign Currency Exchange Rate Risk

We have foreign operations in the United Kingdom, Finland, France and the Netherlands and as such are subject to risk from the effects of exchange rate movements of foreign currencies, which may affect future costs and cash flows. Our foreign operations for the preceding year were conducted in the Euro and the British pound sterling. For these currencies we are a net receiver of the foreign currency (we receive more cash than we pay out) and therefore our foreign investments benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to the foreign currency. Net realized foreign currency translation gains were $417, $334 and $1,357 for the years ended December 31, 2006, 2005 and 2004, respectively and net unrealized foreign currency translation gains (losses) were $513, ($775) and $90 for the years ended December 31, 2006, 2005 and 2004, respectively. Such gains and losses are included in the accompanying consolidated financial statements and are primarily due to changes in foreign currency on accrued interest receivable on notes receivable from wholly-owned subsidiaries.

To date, we have not entered into any foreign currency forward exchange contracts to hedge the effects of adverse fluctuations in foreign currency exchange rates. We have obtained limited recourse mortgage financing at fixed rates of interest in the local currency. To the extent that currency fluctuations increase or decrease rental revenues as translated to dollars, the change in debt service, as translated to dollars, will partially offset the effect of fluctuations in revenue, and, to some extent mitigate the risk from changes in foreign currency rates. For the year ended December 31, 2006, Carrefour France SAS, which leases properties in France, contributed 11.5% of lease revenues. The leverage on the limited recourse financing of the Carrefour investment is higher than the average leverage on our domestic real estate investments.

During each of the next five years following December 31, 2006 and thereafter, scheduled future minimum rents, exclusive of renewals, under non-cancelable leases resulting from our foreign operations are as follows:

Lease Revenues (1)	2007		2008		2009		2010		2011		Thereafter		Total
Euro	$	19,359	$	19,359	$	19,359	$	19,359	$	11,809	$	53,964	$	143,209
British pound sterling		1,357		1,357		1,357		1,482		1,482		38,357		45,392
	$	20,716	$	20,716	$	20,716	$	20,841	$	13,291	$	92,321	$	188,601

Scheduled debt service payments (principal and interest) for the mortgage notes payable during each of the next five years and thereafter from our foreign operations are as follows:

Debt Service (1) (2)	2007		2008		2009		2010		2011		Thereafter		Total
Euro	$	13,671	$	13,696	$	13,605	$	13,579	$	34,237	$	106,433	$	195,221
British pound sterling		557		560		561		561		563		9,524		12,326
	$	14,228	$	14,256	$	14,166	$	14,140	$	34,800	$	115,957	$	207,547

(1)	Based on the applicable December 31, 2006 exchange rate. Contractual rents and debt obligations are denominated in the functional currency of the country of each property.
(2)	Interest on variable rate debt obligations was calculated using the applicable variable interest rate as of December 31, 2006.

As a result of statutory lease durations in France and two balloon payments due in 2011 totaling $21,500, projected debt service obligations exceed projected lease revenues in the years 2011 and thereafter. We currently expect the impact from future lease renewals, including any renewals on our properties in France, will be sufficient to cover our debt service obligations in those years.

CPA^®:14 2006 10-K — 38

Item 8. Financial Statements and Supplementary Data.

The following financial statements and schedule are filed as a part of this Report:

Report of Independent Registered Public Accounting Firm.	40
Consolidated Balance Sheets as of December 31, 2006 and 2005.	41
Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004.	42
Consolidated Statements of Comprehensive Income for the years ended December 31, 2006, 2005 and 2004.	43
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2006, 2005 and 2004.	43
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004.	44
Notes to Consolidated Financial Statements.	46
Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2006.	65
Notes to Schedule III.	68

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.

CPA^®:14 2006 10-K — 39

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Corporate Property Associates 14 Incorporated:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Corporate Property Associates 14 Incorporated and its subsidiaries at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
New York, New York
March 22, 2007

CPA^®:14 2006 10-K — 40

CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

	December 31,
	2006			2005
Assets
Real estate, net	$	1,154,336		$	943,637
Net investment in direct financing leases		137,147			115,513
Equity investments in real estate		200,332			143,417
Cash and cash equivalents		18,991			37,871
Marketable securities		14,207			9,267
Intangible assets, net		92,447			—
Other assets, net		57,863			45,331
Total assets	$	1,675,323		$	1,295,036
Liabilities and Shareholders’ Equity
Liabilities:
Limited recourse in mortgage notes payable	$	785,815		$	663,098
Credit facility		25,000			—
Accrued interest		5,285			4,358
Accounts payable, accrued expenses and other liabilities		8,636			5,887
Due to affiliates		9,587			4,894
Prepaid and deferred rental income and security deposits		30,924			20,296
Deferred acquisition fees payable to affiliate		15,644			16,424
Distributions payable		17,327			13,103
Total liabilities		898,218			728,060
Minority interest in consolidated entities		19,465			25,012
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common stock, $0.001 par value; 120,000,000 shares authorized; 90,514,607 and 70,308,710 shares issued and outstanding, respectively		90			70
Additional paid-in capital		874,370			636,009
Distributions in excess of accumulated earnings		(99,405	)		(81,166	)
Accumulated other comprehensive income		11,801			7,080
		786,856			561,993
Less, treasury stock at cost, 2,861,902 and 2,028,584 shares, respectively		(29,216	)		(20,029	)
Total shareholders’ equity		757,640			541,964
Total liabilities, minority interest and shareholders’ equity	$	1,675,323		$	1,295,036

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

CPA^®:14 2006 10-K — 41

CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)

	For the years ended December 31,
	2006			2005			2004
Revenues:
Rental income	$	116,963		$	113,391		$	110,774
Interest income from direct financing leases		14,353			14,112			13,430
Other operating income		3,876			4,407			3,567
		135,192			131,910			127,771
Operating Expenses:
Depreciation and amortization		(27,834	)		(23,105	)		(23,003	)
Property expense		(22,905	)		(24,471	)		(22,281	)
General and administrative		(6,758	)		(6,371	)		(6,150	)
		(57,497	)		(53,947	)		(51,434	)
Other Income and Expenses:
Income from equity investments in real estate		27,410			15,798			14,304
Other interest income		3,104			2,232			1,239
Minority interest in income		(1,956	)		(2,153	)		(1,805	)
Gain (loss) on derivative instruments and other gains, net		2,344			5,540			(719	)
Gain (loss) on foreign currency transactions, net		930			(446	)		1,438
Interest expense		(51,447	)		(52,609	)		(52,843	)
		(19,615	)		(31,638	)		(38,386	)
Income from continuing operations		58,080			46,325			37,951
Discontinued Operations:
(Loss) income from operations of discontinued properties		(1,644	)		728			989
Gain on sale of real estate, net		13,182			196			—
Income from discontinued operations		11,538			924			989
Net Income	$	69,618		$	47,249		$	38,940
Earnings Per Share:
Income from continuing operations	$	0.83		$	0.68		$	0.56
Income from discontinued operations		0.16			0.01			0.02
Net income	$	0.99		$	0.69		$	0.58
Distributions Declared Per Share	$	0.7711		$	0.7646		$	0.7592
Weighted Average Shares Outstanding		70,421,426			68,208,208			67,447,812

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

CPA^®:14 2006 10-K — 42

CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

	For the years ended December 31,
	2006		2005			2004
Net income	$	69,618	$	47,249		$	38,940
Other comprehensive income:
Foreign currency translation adjustment		4,269		(5,745	)		2,254
Change in unrealized gain (loss) on marketable securities		452		(796	)		217
		4,721		(6,541	)		2,471
Comprehensive income	$	74,339	$	40,708		$	41,411

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

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the years ended December 31, 2006, 2005 and 2004
(in thousands, except share and per share amounts)

					Distributions in
					Excess of			Accumulated Other
	Common		Additional		Accumulated			Comprehensive			Treasury
	Stock		Paid-in Capital		Earnings			Income			Stock			Total
Balance at January 1, 2004	$	68	$	606,380	$	(64,036	)	$	11,150		$	(7,133	)	$	546,429
1,287,321 shares issued $.001 par, at $11.30 per share, net of offering costs		1		13,986											13,987
Distributions declared						(51,205	)								(51,205	)
Net income						38,940									38,940
Change in other comprehensive income									2,471						2,471
Repurchase of 388,848 shares												(3,924	)		(3,924	)
Balance at December 31, 2004		69		620,366		(76,301	)		13,621			(11,057	)		546,698
1,326,687 shares issued $.001 par, at $12.10 per share, net of offering costs		1		15,643											15,644
Distributions declared						(52,114	)								(52,114	)
Net income						47,249									47,249
Change in other comprehensive income									(6,541	)					(6,541	)
Repurchase of 837,094 shares												(8,972	)		(8,972	)
Balance at December 31, 2005		70		636,009		(81,166	)		7,080			(20,029	)		541,964
1,735,546 shares issued $.001 par, at $12.40 and $11.85 per share, net of offering costs		2		19,505											19,507
18,470,351 shares issued in connection with the CPA®:12 merger, $.001 par, at $11.85 per share		18		218,856											218,874
Distributions declared						(87,857	)								(87,857	)
Net income						69,618									69,618
Change in other comprehensive income									4,721						4,721
Repurchase of 833,318 shares												(9,187	)		(9,187	)
Balance at December 31, 2006	$	90	$	874,370	$	(99,405	)	$	11,801		$	(29,216	)	$	757,640

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

CPA^®:14 2006 10-K — 43

CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	For the years ended December 31,
	2006			2005			2004
Cash flows from operating activities:
Net income	$	69,618		$	47,249		$	38,940
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including intangible assets and deferred financing costs		29,366			24,597			24,642
Straight-line rent adjustments		(2,344	)		(3,173	)		(4,349	)
Income (loss) from equity investments in real estate in excess of distributions received		8,989			30			(1,162	)
Minority interest in income		1,956			2,153			1,805
Issuance of shares to affiliate in satisfaction of fees due		8,741			8,947			8,289
Increase (decrease) in prepaid and deferred rental income and security deposits		1,973			(2,232	)		2,584
Realized gain on foreign currency transactions, net		(417	)		(334	)		(1,357	)
Unrealized (gain) loss on foreign currency transactions, net		(513	)		780			(81	)
Realized loss (gain) on sale of securities and warrants		158			(2,192	)		—
Reversal of unrealized (loss) gain on warrants and derivatives		(229	)		7			—
Unrealized (gain) loss on warrants and derivatives, net		(2,273	)		(3,086	)		719
Gain from sale of real estate		(13,182	)		(465	)		—
Settlement proceeds received in the form of marketable securities		—			(223	)		—
Change in other operating assets and liabilities, net		389			(1,163	)		560
Net cash provided by operating activities		102,232			70,895			70,590
Cash flows from investing activities:
Equity distributions received in excess of equity income in real estate		81,788			1,837			2,412
Cash payments to shareholders of acquired company		(102,176	)		—			—
Cash overdraft assumed in acquisition of CPA®:12’s business operations		(3,950	)		—			—
Capital contributions to equity investments in real estate		(45,481	)		—			—
Purchases of real estate and equity investments and other capitalized costs, net (a)		(1,085	)		(3,279	)		(17,195	)
Proceeds from sale of real estate		37,628			5,808			—
Funds placed in restricted account for future investment		(21,741	)		—			—
Funds released from restricted account		21,741			—			—
Purchase of securities		—			—			(10,825	)
Proceeds from sale of securities		2,986			9,432			19,775
Payment of deferred acquisition fees to an affiliate		(3,514	)		(3,420	)		(3,266	)
Net cash (used in) provided by investing activities		(33,804	)		10,378			(9,099	)
Cash flows from financing activities:
Distributions paid		(83,633	)		(51,905	)		(50,973	)
Distributions paid to minority interest partner		(3,869	)		(3,579	)		(2,735	)
Proceeds from mortgages and credit facility		40,000			—			—
Prepayment of mortgage principal and credit facility		(27,167	)		(8,512	)		—
Scheduled payments of mortgage principal		(12,580	)		(12,433	)		(11,046	)
Release of mortgage funds by lenders		—			—			167
Proceeds from loan from affiliate		24,000			—			—
Prepayment of loan from affiliate		(24,000	)
Repayment of proceeds from note		—			—			(1,617	)
Payment of financing costs		(1,731	)		—			—
Proceeds from stock issuance, net of costs		10,766			6,697			5,698
Purchase of treasury stock		(9,187	)		(8,972	)		(3,924	)
Net cash used in financing activities		(87,401	)		(78,704	)		(64,430	)
Effect of exchange rate changes on cash		93			(1,093	)		609
Net (decrease) increase in cash and cash equivalents		(18,880	)		1,476			(2,330	)
Cash and cash equivalents, beginning of year		37,871			36,395			38,725
Cash and cash equivalents, end of year	$	18,991		$	37,871		$	36,395

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

CPA^®:14 2006 10-K — 44

CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share and per share amounts)

Non-cash investing and financing activities:

(a) Included in the cost basis of real estate and equity investments acquired in 2004 are deferred acquisition fees payable to W. P. Carey & Co., LLC of $749. No such fees were incurred in 2005 or 2006.

(b) The merger with Corporate Property Associates 12 Incorporated (“CPA^®:12”), an affiliate, as described in Note 3, consisted of the acquisition and assumption of certain assets and liabilities, respectively, at fair value in exchange for the issuance of shares, a cash payment to CPA^®:12 shareholders who elected to redeem their shares and certain costs, as follows:

Real estate accounted for under the operating method	$	214,858
Net investment in direct financing leases		19,799
Intangible assets		93,019
Equity investments		111,977
Investment in mortgage loan securitization		7,346
Other assets		4,415
Mortgage notes payable (cost $110,041)		(116,082	)
Redemption of CPA®:12 shareholders		(102,176	)
Other liabilities (1)		(13,966	)
Elimination of minority interest		3,634
Issuance of common stock		(218,874	)
Cash overdraft assumed in acquisition of CPA®:12’s business operations	$	(3,950	)

(1) Includes deferred fees of $2,734 payable to the advisor (see Note 4).

As part of the merger, the Company issued 18,470,351 shares of its common stock to CPA^®:12 shareholders in exchange for 21,249,828 shares of common stock of CPA^®:12.

Supplemental cash flow information:

Interest paid was $49,185, $52,019 and $52,923 in 2006, 2005 and 2004, respectively. No capitalized interest was recognized in 2006, 2005 or 2004.

CPA^®:14 2006 10-K — 45

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

Note 1. Business and Organization

Corporate Property Associates 14 Incorporated (the “Company”) is a real estate investment trust (“REIT”) that invests in commercial properties leased to companies domestically and internationally. The primary source of the Company’s revenue is earned from leasing real estate, primarily on a triple-net basis. Revenue is subject to fluctuation because of lease expirations, lease terminations, the timing of new lease transactions, tenant defaults and sales of properties. As of December 31, 2006, the Company’s portfolio consisted of 289 properties leased to 91 tenants and totaled approximately 29.9 million square feet (on a pro rata basis), with a 100% occupancy rate. Subject to certain restrictions and limitations, the business of the Company is managed by W. P. Carey & Co. LLC (“WPC”) and its subsidiaries (collectively, the “advisor”). As of December 31, 2006, the advisor owns 4,948,043 of the Company’s common stock.

An initial offering of the Company’s shares which commenced on November 10, 1997 concluded on November 10, 1999 at which time the Company had issued an aggregate of 29,440,594 shares ($294,406). On November 17, 1999, the Company commenced an offering for a maximum of 40,000,000 shares of common stock. The shares were offered to the public on a “best efforts” basis at a price of $10 per share. The second offering concluded on November 15, 2001, by which time 36,353,686 shares ($363,537) were issued. These proceeds have been combined with limited recourse mortgage financing to purchase the Company’s real estate portfolio. As a REIT, the Company is not subject to U.S. federal income taxation as long as it satisfies certain requirements relating to the nature of its income, the level of its distributions and other factors.

On December 1, 2006, the Company completed a merger (the “merger”) with Corporate Property Associates 12 Incorporated (“CPA^®:12”), an affiliate, for a total purchase price of $540,500. Refer to Note 3 for details of the merger.

Note 2. Summary of Significant Accounting Policies

Basis of Consolidation

When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if the Company is deemed to be the primary beneficiary, in accordance with FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities” (“FIN 46(R)”). The Company consolidates (i) entities that are VIEs and of which the Company is deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company controls. Entities that the Company accounts for under the equity method (i.e., at cost, increased or decreased by the Company’s share of earnings or losses, less distributions) include (i) entities that are VIEs and of which the Company is not deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company does not control, but over which the Company has the ability to exercise significant influence. The Company will reconsider its determination of whether an entity is a VIE and who the primary beneficiary is if certain events occur that are likely to cause a change in the original determinations.

In June 2005, the Emerging Issues Task Force issued EITF 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-05”). The scope of EITF 04-05 is limited to limited partnerships or similar entities that are not variable interest entities under FIN 46(R). The Task Force reached a consensus that the general partners in a limited partnership (or similar entity) are presumed to control the entity regardless of the level of their ownership and, accordingly, may be required to consolidate the entity. This presumption may be overcome if the agreements provide the limited partners with either (a) the substantive ability to dissolve (liquidate) the limited partnership or otherwise remove the general partners without cause or (b) substantive participating rights. If it is deemed that the limited partners’ rights overcome the presumption of control by a general partner of the limited partnership, the general partner shall account for its investment in the limited partnership using the equity method of accounting. The Company adopted EITF 04-05 in June 2005 for all arrangements created or modified after June 29, 2005. For all other arrangements, the Company adopted EITF 04-05 on January 1, 2006. The adoption of EITF 04-05 had no impact on the Company’s financial position or results of operations. Upon completion of the merger, the Company acquired additional interests in certain limited liability companies and limited partnerships such that its ownership interests now exceed 50% and the Company exercises significant influence. Because the Company’s venture partners, which are affiliates, are the managing members or general partners in the limited partnerships or limited liability companies and no unaffiliated parties have substantive kick-out or participation rights, the venture partners are required to consolidate the investments under the provisions of EITF 04-05 and, therefore, the Company accounts for these investments under the equity method of accounting. All material inter-entity transactions have been eliminated.

The Company has interests in six ventures that are consolidated and have minority interests that have finite lives and were considered mandatorily redeemable non-controlling interests prior to the issuance of FSP 150-3. As a result of the deferral provisions of FSP 150-3, these minority interests have not been reflected as liabilities. The carrying value of these minority interests at December 31, 2006

CPA^®:14 2006 10-K — 46

Notes to Consolidated Financial Statements

and 2005 is $12,222 and $12,478, respectively. The fair value of these minority interests at December 31, 2006 and 2005 is $12,494 and $10,678, respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications and Revisions

Certain prior year amounts have been reclassified to conform to the current year’s financial statement presentation. The financial statements included in this Form 10-K have been adjusted to reflect the disposition of certain properties as discontinued operations for all periods presented (see Note 15).

Purchase Price Allocation

In connection with the Company’s acquisition of properties, including properties acquired in the merger, purchase costs are allocated to the tangible and intangible assets and liabilities acquired based on their estimated fair values. The value of the tangible assets, consisting of land, buildings and tenant improvements, is determined as if vacant. Intangible assets including the above-market value of leases, the value of in-place leases and the value of tenant relationships are recorded at their relative fair values. The below-market value of leases is also recorded at the relative fair values and is included in prepaid and deferred rental income and security deposits in the accompanying financial statements.

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

The total amount of other intangibles is allocated to in-place lease values and tenant relationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with each tenant. Characteristics that are considered in allocating these values include the nature and extent of the existing relationship with the tenant, prospects for developing new business with the tenant, the tenant’s credit quality and the expectation of lease renewals among other factors. Third party appraisals or management’s estimates are used to determine these values.

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

Intangibles for both in-place and above-market leases are amortized to expense over the remaining initial lease term while intangibles for both tenant relationships and below-market leases are amortized to expense over the remaining initial lease term and any expected renewal terms. No amortization period for any intangible asset will exceed the remaining depreciable life of the building. In the event that a lease is terminated, the unamortized portion of each intangible is charged to expense. The purchase price allocation in connection with the merger is described in Note 3.

Real Estate Under Construction and Redevelopment

For properties under construction, operating expenses including interest charges and other property expenses, including real estate taxes, are capitalized rather than expensed and incidental revenue is recorded as a reduction of capitalized project (i.e., construction) costs. Interest is capitalized by applying the interest rate applicable to outstanding borrowings to the average amount of accumulated expenditures for properties under construction during the period.

CPA^®:14 2006 10-K — 47

Notes to Consolidated Financial Statements

Cash Equivalents

The Company considers all short-term, highly liquid investments that are both readily convertible to cash and have a maturity of generally three months or less at the time of purchase to be cash equivalents. Items classified as cash equivalents include commercial paper and money-market funds. The Company’s cash and cash equivalents at December 31, 2006 were held in the custody of several financial institutions, including international institutions, and these balances at times exceed federally insurable limits. The Company mitigates this risk by depositing funds only with major financial institutions.

Marketable Securities

Marketable securities, which consist of an interest in collateralized mortgage obligations (see Note 9), common stock in publicly-traded companies and auction-rate securities, are classified as available for sale securities and reported at fair value, with the Company’s interest in unrealized gains and losses on these securities reported as a component of other comprehensive income until realized. The Company had no auction rate securities in 2006.

Other Assets

Included in other assets are deferred charges and deferred rental income. Deferred charges are costs incurred in connection with mortgage financings and refinancings and are amortized over the terms of the mortgages using the effective interest rate method and included in interest expense in the accompanying consolidated financial statements. Deferred rental income is the aggregate cumulative difference for operating leases between scheduled rents, which vary during the lease term, and rent recognized on a straight-line basis.

Deferred Acquisition Fees Payable to Affiliate

Fees are payable for services provided by the advisor, an affiliate, to the Company relating to the identification, evaluation, negotiation, financing and purchase of properties. A portion of such fees is deferred and is payable in annual installments totaling 2% of the purchase price of the properties over no less than eight years following the first anniversary of the date a property was purchased. Payment of such fees is subject to the performance criterion (see Note 4).

Treasury Stock

Treasury stock is recorded at cost.

Real Estate Leased to Others

Real estate is leased to others on a net lease basis, whereby the tenant is generally responsible for all operating expenses relating to the property, including property taxes, insurance, maintenance, repairs, renewals and improvements. Expenditures for maintenance and repairs including routine betterments are charged to operations as incurred. Significant renovations that increase the useful life of the properties are capitalized. For the year ended December 31, 2006, lessees were responsible for the direct payment of real estate taxes of approximately $17,860.

The Company diversifies its real estate investments among various corporate tenants engaged in different industries, by property type and geographically (see Note 11). Substantially all of the Company’s leases provide for either scheduled rent increases, periodic rent increases based on formulas indexed to increases in the Consumer Price Index (“CPI”) or percentage rents. CPI increases are contingent on future events and are therefore not included in straight-line rent calculations. Rents from percentage rents are recognized as reported by the lessees, that is, after the level of sales requiring a rental payment to the Company is reached.

The leases are accounted for as operating or direct financing leases. Such methods are described below:

Operating leases — Real estate is recorded at cost less accumulated depreciation; future minimum rental revenue is recognized on a straight-line basis over the term of the related leases and expenses (including depreciation) are charged to operations as incurred (Note 5).

Direct financing method — Leases accounted for under the direct financing method are recorded at their net investment (Note 6). Unearned income is deferred and amortized to income over the lease terms so as to produce a constant periodic rate of return on the Company’s net investment in the lease.

On an ongoing basis, the Company assesses its ability to collect rent and other tenant-based receivables and determines an appropriate allowance for uncollected amounts. Because the Company has a limited number of lessees (24 lessees represented 74% of lease revenue during 2006), the Company believes that it is necessary to evaluate the collectibility of these receivables based on the facts and circumstances of each situation rather than solely using statistical methods. The Company generally recognizes a provision for uncollected rents and other tenant receivables and measures its allowance against actual arrearages. For amounts in arrears, the

CPA^®:14 2006 10-K — 48

Notes to Consolidated Financial Statements

Company makes subjective judgments based on its knowledge of a lessee’s circumstances and may reserve for the entire receivable amount from a lessee because there has been significant or continuing deterioration in the lessee’s ability to meet its lease obligations.

Depreciation

Depreciation of building and related improvements is computed using the straight-line method over the estimated useful lives of the properties — generally ranging from 16 to 40 years. Depreciation of tenant improvements is computed using the straight-line method over the lesser of the remaining term of the lease or the estimated useful life.

Impairments

When events or changes in circumstances indicate that the carrying amount may not be recoverable, the Company assesses the recoverability of its long-lived assets and certain intangible assets based on projections of undiscounted cash flows, without interest charges, over the life of such assets. In the event that such cash flows are insufficient, the assets are adjusted to their estimated fair value. The Company performs a review of its estimate of residual value of its direct financing leases at least annually to determine whether there has been an other than temporary decline in the Company’s current estimate of residual value of the underlying real estate assets (i.e., the estimate of what the Company could realize upon sale of the property at the end of the lease term). If the review indicates a decline in residual value that is other than temporary, a loss is recognized and the accounting for the direct financing lease will be revised to reflect the decrease in the expected yield using the changed estimate, that is, a portion of the future cash flow from the lessee will be recognized as a return of principal rather than as revenue.

Investments in unconsolidated ventures are accounted for under the equity method and are recorded initially at cost as equity investments in real estate, and are subsequently adjusted for the Company’s proportionate share of earnings and cash contributions and distributions. On a periodic basis, the Company assesses whether there are any indicators that the value of equity investments in real estate may be impaired and whether or not that impairment is other than temporary. To the extent an other than temporary impairment has occurred, the charge is measured as the excess of the carrying amount of the investment over the fair value of the investment.

When the Company identifies assets as held for sale, it discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. If in the Company’s opinion, the net sales price of the assets which have been identified for sale is less than the net book value of the assets, an impairment charge is recognized and a valuation allowance is established. To the extent that a purchase and sale agreement has been entered into, the allowance is based on the negotiated sales price. To the extent that the Company has adopted a plan to sell an asset but has not entered into a sales agreement, it will make judgments of the net sales price based on current market information. The Company will continue to review the initial valuation for subsequent changes in the fair value less costs to sell and will recognize an additional impairment charge or a gain (not to exceed the cumulative loss previously recognized). If circumstances arise that previously were considered unlikely and, as a result, the Company decides not to sell a property previously classified as held for sale, the property is reclassified as held and used. A property that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held and used or (b) the fair value at the date of the subsequent decision not to sell.

Foreign Currency Translation

The Company consolidates its real estate investments in the Netherlands, Finland, France and the United Kingdom. The functional currencies for these investments are the Euro and British pound sterling. The translation from these local currencies to the U.S. dollar is performed for assets and liabilities using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The gains and losses resulting from such translation are reported as a component of other comprehensive income as part of shareholders’ equity. As of December 31, 2006 and 2005, the cumulative foreign currency translation adjustment gain was $11,030 and $6,761, respectively.

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

CPA^®:14 2006 10-K — 49

Notes to Consolidated Financial Statements

reported as a component of other comprehensive income as part of shareholder’s equity. Contributions to any equity investments in real estate may be funded in part through subordinated debt. The Company had no foreign equity investments in real estate during the years ended December 31, 2006, 2005 and 2004.

Foreign currency intercompany transactions that are scheduled for settlement, consisting primarily of accrued interest and the translation to the reporting currency of intercompany subordinated debt with scheduled principal repayments, are included in the determination of net income, and the Company recognized unrealized (losses) gains of $513, ($775) and $90 from such transactions in the years ended December 31, 2006, 2005 and 2004, respectively. In the years ended December 31, 2006, 2005 and 2004, the Company recognized realized gains of $417, $334 and $1,357, respectively, on foreign currency transactions in connection with the transfer of cash from foreign operations of subsidiaries to the parent company.

Derivative Instruments

The Company accounts for its derivative instruments in accordance with FASB No. 133 “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS 133”). Certain stock warrants which were granted to the Company by lessees in connection with structuring the initial lease transactions are defined as derivative instruments because such stock warrants are readily convertible to cash or provide for net settlement upon conversion. Pursuant to SFAS 133, changes in the fair value of such derivative instruments are determined using an option pricing model and are recognized currently in earnings as gains or losses. The Company also holds stock warrants that were not defined as derivative instruments and have been recorded at nominal values.

A lease for a property located in the Netherlands provides the Company with an option to receive a portion of rental payments in Euros or U.S. dollars. Pursuant to the adoption of SFAS 133, the option is a derivative instrument and changes in the fair value of the option are recognized in earnings as gains or losses.

Changes in the fair value of an interest swap instrument on a variable rate loan are included in the determination of net income for the years ended December 31, 2006, 2005 and 2004. The Company entered into the interest rate swap agreement for the purpose of fixing the interest rate on the limited recourse obligation for the term of that obligation; however, the swap agreement did not qualify as a hedge for financial accounting purposes and changes in its value have been reflected in earnings. The interest rate swap agreement was terminated during 2006.

Assets Held for Sale

Assets held for sale are accounted for at the lower of carrying value or fair value less costs to dispose. Assets are classified as held for sale when the Company has committed to a plan to actively market a property for sale and expects that a sale will be completed within one year. The results of operations and the related gain or loss on sale of properties classified as held for sale are included in discontinued operations (see Note 15).

If circumstances arise that previously were considered unlikely and, as a result, the Company decides not to sell a property previously classified as held for sale, the property is reclassified as held and used. A property that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held and used or (b) the fair value at the date of the subsequent decision not to sell.

The Company recognizes gains and losses on the sale of properties when among other criteria, the parties are bound by the terms of the contract, all consideration has been exchanged and all conditions precedent to closing have been performed. At the time the sale is consummated, a gain or loss is recognized as the difference between the sale price less any closing costs and the carrying value of the property.

Income Taxes

The Company has elected and expects to continue to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In order to maintain its qualification as a REIT, the Company is required, among other things, to distribute at least 90% of its net taxable income to its shareholders (excluding net capital gains) and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to U.S. federal income tax to the extent it distributes its net taxable income annually to its shareholders. Accordingly, no provision for U.S. federal income taxes is included in the accompanying consolidated financial statements. The Company has and intends to continue to operate so that it meets the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. If the Company were to fail to meet these requirements, the Company would be subject to U.S. federal income tax. The Company is subject to certain state, local and foreign taxes. State, local, franchise and other taxes of $57, $434 and $595 are included in general and administrative expenses for the years ended December 31, 2006, 2005 and 2004, respectively.

CPA^®:14 2006 10-K — 50

Notes to Consolidated Financial Statements

Earnings Per Share

The Company has a simple equity capital structure with only common stock outstanding. As a result, earnings per share, as presented, represents both basic and dilutive per-share amounts for all periods presented in the accompanying consolidated financial statements.

Recent Accounting Pronouncements

EITF 04-05

The Company adopted EITF 04-05 in June 2005 for all limited partnerships created after June 29, 2005 and on January 1, 2006 for all other arrangements. Refer to Basis of Consolidation above for a discussion of the effect of EITF 04-05 on the Company’s financial position and results of operations.

FSP FAS 13-1

In October 2005, the FASB issued Staff Position No. 13-1 “Accounting for Rental Costs Incurred during a Construction Period” (“FSP FAS 13-1”). FSP FAS 13-1 addresses the accounting for rental costs associated with operating leases that are incurred during the construction period. FSP FAS 13-1 makes no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period. Therefore, rental costs associated with ground or building operating leases that are incurred during a construction period shall be recognized as rental expense, allocated over the lease term in accordance with SFAS No. 13 and Technical Bulletin 85-3. The Company adopted FSP FAS 13-1 as required on January 1, 2006 and the initial application of this Staff Position did not have a material impact on our financial position or results of operations.

SFAS 155

In February 2006, the FASB issued Statement No.155, “Accounting for Certain Hybrid Financial Instruments an Amendment of FASB No. 133 and 140” (“SFAS 155”). The purpose of SFAS 155 is to simplify the accounting for certain hybrid financial instruments by permitting fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. SFAS 155 also eliminates the restriction on passive derivative instruments that a qualifying special-purpose entity may hold. The Company must adopt SFAS 155 effective January 1, 2007 and does not believe that this adoption will have a material impact on its financial position or results of operations.

FIN 48

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income tax positions. This Interpretation requires that the Company recognize in its consolidated financial statements the impact of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. The Company must adopt FIN 48 effective January 1, 2007. The Company is currently evaluating the impact of adopting FIN 48 on its consolidated financial statements.

SAB 108

In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB 108 was issued in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements.

Traditionally, there have been two widely-recognized methods for quantifying the effects of financial statement misstatements: the “rollover” method and the “iron curtain” method. The rollover method focuses primarily on the impact of a misstatement on the income statement — including the reversing effect of prior year misstatements — but its use can lead to the accumulation of misstatements in the balance sheet. The iron curtain method, on the other hand, focuses primarily on the effect of correcting the period-end balance sheet with less emphasis on the reversing effects of prior year errors on the income statement. The Company currently uses the iron curtain method for quantifying identified financial statement misstatements.

In SAB 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the Company’s financial statements and the related financial statement disclosures. This model is commonly referred to as a “dual approach” because it requires quantification of errors under both the iron curtain and rollover methods. SAB 108 permits existing public companies to initially apply its provisions either by (i) restating prior financial statements as if the “dual approach” had always been used or (ii) recording the cumulative effect of initially applying the “dual approach” as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment recorded to the opening balance of retained earnings. Use of the “cumulative effect” transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. The Company adopted SAB 108

CPA^®:14 2006 10-K — 51

Notes to Consolidated Financial Statements

using the cumulative effect transition method in connection with the preparation of our annual financial statements for the year ending December 31, 2006. The adoption of SAB 108 had no impact on the Company’s financial position or results of operations.

SFAS 157

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective for the Company’s 2008 fiscal year, although early adoption is permitted. The Company believes that the adoption of SFAS 157 will not have a material effect on its financial position or results of operations.

Note 3. Business Combination with Corporate Property Associates 12 Incorporated

On December 1, 2006, the Company completed a merger (the “merger”) with Corporate Property Associates 12 Incorporated (“CPA^®:12”) , an affiliate, pursuant to a merger agreement dated June 29, 2006. The merger provided a liquidation option for CPA^®:12 shareholders and provided the Company with the opportunity to continue to grow and enhance its investment portfolio. Under the terms of the merger, which was approved by the shareholders of both companies at special meetings of the shareholders of each company held on November 30, 2006, the Company acquired CPA^®:12’s business on December 1, 2006 and is the surviving company. The total purchase price for CPA^®:12 was $540,500, which was comprised of 18,470,351 shares of the Company’s common stock ($218,874 based on a value of $11.85 per share), $102,176 in consideration for CPA^®:12 shareholders who redeemed their interests (9,920,039 shares of CPA^®:12), $215,369 in fair value of debt and other liabilities assumed (including the Company’s pro rata share of fair value of debt assumed on investments accounted for under the equity method) and transaction costs of $4,081. Prior to the merger, CPA^®:12 sold certain of its properties or interests in properties to third parties and to the advisor which had remaining lease terms of eight years or less and therefore did not meet the Company’s investment objectives. As a result of these sales and prior to the merger, CPA^®:12 paid a special distribution to its shareholders of $99,432 in addition to a distribution of $4,273 from its operations for the period from October 1, 2006 through November 30, 2006. The Company also owned a 49.99% interest in one of these properties, which was sold to a third party in October 2006, and as a result of the sale, the Company made a special cash distribution of $0.04 per share to its shareholders at the close of the merger (see Note 14).

Under the terms of the merger agreement, CPA^®:12’s shareholders had the right to elect to receive either $10.30 per share in cash or 0.8692 of the Company’s shares for each share of CPA^®:12 owned as of October 20, 2006. The value of properties acquired and the exchange rates are based in large part on a third party valuation of the properties belonging to CPA^®:12 as of December 31, 2005 and were subsequently adjusted to reflect the Starmark Holdings LLC (“Starmark”) restructuring (see Note 7) but did not take into account any additional changes in value that may have occurred subsequent to December 31, 2005.

The Company has accounted for the merger under the purchase method of accounting. The purchase price has been allocated to the assets acquired and liabilities assumed based upon their fair values. The assets acquired primarily consist of commercial real estate assets net leased to single tenants, lease-related intangible assets cash, a subordinated interest in a mortgage loan securitization, receivables and deposits. The liabilities assumed primarily consist of mortgage notes payable, accrued interest, accounts payable, security deposits and amounts due to former CPA^®:12 shareholders. The amounts due to former CPA^®:12 shareholders were paid on December 1, 2006. In addition, the advisor owned 2,134,140 shares of CPA^®:12 as of December 1, 2006 and elected to receive elected to receive $9,861 in cash and 1,022,800 shares of the Company’s stock on consummation of the merger.

The Company has entered into a $150,000 credit facility with Wells Fargo Bank. The credit facility provides for an initial three year term and an annual interest rate of either (i) LIBOR plus a spread which ranges from 135 to 160 basis points depending on our leverage or (ii) the greater of the bank’s prime rate and the Federal Funds Effective Rate, plus 0.50%, plus a spread of up to 0.125% depending on our leverage ratio (see Note 12).

The advisor agreed to make available to the Company an additional loan of up to $50,000 to be funded using the advisor’s existing credit line. The loan from the advisor had a maturity date of May 2007 and bore interest ranging between LIBOR plus 110 basis points and 145 basis points, which are the same terms as the advisor’s existing credit line. In connection with the consummation of the merger on December 1, 2006, the advisor loaned $24,000 to the Company to facilitate the merger closing. The loan was repaid on December 5, 2006 with proceeds from the credit facility.

CPA^®:14 2006 10-K — 52

Notes to Consolidated Financial Statements

On completion of the merger, CPA^®:12 paid the advisor termination and disposition compensation totaling $49,798. A subsidiary of the advisor has agreed to indemnify the Company if it were to suffer certain losses arising out of a breach by CPA^®:12 of its representations and warranties under the merger agreement and having a material adverse effect on the Company after the merger, up to the amount of fees received by such subsidiary of the advisor in connection with the merger. The advisor has also agreed to waive any acquisition fees payable after the merger by the Company under its advisory agreement with the advisor in respect of the properties being acquired in the merger and has also agreed to waive any disposition fees that may subsequently be payable by the Company to the advisor upon a sale of such assets. As described in Note 4, the Company assumed deferred acquisition fees incurred by CPA^®:12.

Note 4. Transactions with Related Parties

Pursuant to an advisory agreement between the Company and the advisor, the advisor performs certain services for the Company including the identification, evaluation, negotiation, financing, purchase and disposition of property, the day-to-day management of the Company and the performance of certain administrative duties. The advisory agreement between the Company and the advisor provides that the advisor will receive an asset management fee. The fee is 1% of average invested assets as defined in the advisory agreement, 1/2 of which (the “performance fee”) is subordinated to the performance criterion, a cumulative rate of cash flow from operations of 7% per annum. Effective in 2005, the advisory agreement was amended to allow the advisor to elect to receive restricted common stock for any fees due from the Company. For 2006 and 2005, the advisor has elected to receive the performance fees through the issuance of restricted shares of common stock in the Company.

The advisor is also reimbursed for the allocated cost of personnel needed to provide administrative services necessary to the operations of the Company. The Company incurred base asset management fees of $8,743, $9,055 and $8,540 in 2006, 2005 and 2004, respectively, and performance fees in like amounts, both of which are included in property expenses in the accompanying consolidated financial statements. The Company incurred personnel reimbursements of $2,728, $2,789 and $2,856 in 2006, 2005 and 2004, respectively, which are included in general and administrative expenses in the accompanying consolidated financial statements.

Fees are payable to the advisor for services provided to the Company relating to the identification, evaluation, negotiation, financing and purchase of properties and refinancing of mortgages. A portion of such fees is deferred and payable in equal installments over no less than eight years following the first anniversary of the date a property was purchased. Such deferred fees are only payable if the performance criterion has been met. The unpaid portion of the deferred fees bears interest at an annual rate of 6% from the date of acquisition of a property until paid. In connection with the merger, the Company assumed deferred fees incurred by CPA^®:12 totaling $2,734 that bear interest at an annual rate of 7% and have scheduled installment payments through 2013.

The Company’s annual installment of $3,514 in deferred fees was paid to the advisor in January 2006. For transactions that were completed in 2004, current fees were $936 and deferred fees were $749. No such fees were incurred during 2005 or 2006. In connection with the refinancing of mortgage obligations on existing properties, fees of $270 were incurred and paid during 2006. No such fees were incurred during 2005 and 2004.

The advisor is obligated to reimburse the Company for the amount by which operating expenses of the Company exceed the 2%/25% guidelines (the greater of 2% of average invested assets or 25% of net income) as defined in the advisory agreement for any twelve-month period. If in any year the operating expenses of the Company exceed the 2%/25% guidelines, the advisor will have an obligation to reimburse the Company for such excess, subject to certain conditions. If the independent directors find that such excess expenses were justified based on any unusual and nonrecurring factors which they deem sufficient, the advisor may be paid in future years for the full amount or any portion of such excess expenses, but only to the extent that such reimbursement would not cause the Company’s operating expenses to exceed this limit in any such year. Charges related to asset impairment, bankruptcy of lessees, lease payment defaults, extinguishment of debt or uninsured losses are generally not considered unusual and nonrecurring. A determination that a charge is unusual and nonrecurring, such as the costs of significant litigation that are not associated with day-to day operations, or uninsured losses that are beyond the size or scope of the usual course of business based on the event history and experience of the advisor and independent directors, is made at the sole discretion of the independent directors. The Company will record any reimbursement of operating expenses as a liability until any contingencies are resolved and will record the reimbursement as a reduction of asset management and performance fees at such time that a reimbursement is fixed, determinable and irrevocable. The operating expenses of the Company have not exceeded the amount that would require the advisor to reimburse the Company.

The advisor will be entitled to receive subordinated disposition fees based upon the cumulative proceeds arising from the sale of Company assets since the inception of the Company, subject to certain conditions. Pursuant to the subordination provisions of the advisory agreement, the disposition fees may be paid only after the shareholders receive 100% of their initial investment from the

CPA^®:14 2006 10-K — 53

Notes to Consolidated Financial Statements

proceeds of asset sales and a cumulative annual return of 6% (based on an initial share price of $10) since the inception of the Company. The advisor’s interest in such disposition fees amounts to $3,507 and $412 as of December 31, 2006 and 2005, respectively. Payment of such amount, however, cannot be made until the subordination provisions are met. The Company has concluded that payment of such disposition fees is probable and all fees from completed property sales have been accrued. Subordinated disposition fees are included in the determination of realized gain or loss on the sale of properties. The obligation for disposition fees is included in due to affiliates in the accompanying consolidated financial statements.

The Company owns interests in entities which range from 11.54% to 90% with the remaining interests generally held by affiliates.

The Company is a participant in an entity with certain affiliates for the purpose of leasing office space used for the administration of real estate entities and for sharing the associated costs. Pursuant to the terms of the agreement, the Company’s share of rental, occupancy and leasehold improvement costs is based on the relative gross revenues of the affiliates. Expenses incurred in 2006, 2005 and 2004 were $756, $770 and $500, respectively. The Company’s current share of future annual minimum lease payments is $688 through 2016.

In connection with the merger, the Company borrowed $24,000 from its advisor to facilitate the merger closing. Proceeds from the Company’s credit facility were used to repay the borrowing. The Company incurred interest expense of $22 in connection with the borrowing from its advisor.

Note 5. Real Estate

Real estate, which consists of land and buildings leased to others, at cost, under operating leases is summarized as follows:

	December 31,
	2006			2005
Cost	$	1,291,598		$	1,050,368
Less: Accumulated depreciation		(137,262	)		(106,731	)
	$	1,154,336		$	943,637

In June 2006, the Company entered into an agreement with a third party in connection with a property in Pennsylvania. Under the terms of the agreement, the Company’s existing warehouse facility was demolished and the existing land is being redeveloped as part of the construction of a new retail shopping center. In connection with demolishing the property, the Company recognized a charge to depreciation expense of $3,730 to fully depreciate the property. Upon completion of construction, the third party will transfer to the Company a newly constructed retail facility with a tenant in place. The outstanding limited recourse mortgage obligation of $3,859 was defeased as a result of entering into this transaction.

Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, percentage rents and future CPI—based increases, under non-cancelable operating leases amount are approximately as follows:

Year ending December 31,
2007	$	129,999
2008		130,567
2009		130,349
2010		127,498
2011		122,101
Thereafter through 2024		941,474

CPA^®:14 2006 10-K — 54

Notes to Consolidated Financial Statements

Note 6. Net Investment in Direct Financing Leases

Net investment in direct financing leases is summarized as follows:

	December 31,
	2006			2005
Minimum lease payments receivable	$	223,982		$	221,136
Unguaranteed residual value		133,081			111,752
		357,063			332,888
Less: unearned income		(219,916	)		(217,375	)
	$	137,147		$	115,513

Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, percentage rents and future CPI—based increases, under non-cancelable direct financing leases are approximately as follows:

Year ending December 31,
2007	$	14,517
2008		14,517
2009		14,517
2010		14,684
2011		14,784
Thereafter through 2031		150,963

Percentage rent revenue was approximately $102 and $404 in 2006 and 2005, respectively. There was no percentage rent in 2004.

Note 7. Equity Investments in Real Estate

The Company owns interests in single-tenant net leased properties leased to corporations through noncontrolling interests (i) in various partnerships and limited liability companies in which its ownership interests are 50% or less and the Company exercises significant influence, (ii) as tenants-in-common subject to joint control and (iii) in limited liability companies and limited partnerships in which its ownership interests exceed 50% and the Company exercises significant influence (see Note 2). The ownership interests range from 11.54% to 66.67%. All of the underlying investments are owned with affiliates that have similar investment objectives as the Company.

Upon completion of the merger, the Company acquired investments in properties leased to Best Buy Co., Inc., Sicor, Inc., The Upper Deck Company, Del Monte Corporation and ShopRite Supermarkets, Inc. The Company also acquired the remaining interests in existing investments leased to Textron, Inc. and Special Devices, Inc. which had previously been accounted for under the equity method of accounting, and now consolidates these investments on its consolidated financial statements effective December 1, 2006. In addition, the Company increased its interests in investments leasing properties to Advanced Micro Devices, Inc., Compucom Systems, Inc. and Starmark Camhood, LLC (“Starmark Camhood”) to 66.67%, 66.67% and 56%, respectively but continues to account for these properties under the equity method of accounting under the provisions of EITF 04-05, as described in Note 2. In 2006, the Company terminated the master lease agreement with Starmark Camhood and entered into new lease agreements with Life Time Fitness, Inc. (“Life Time”) and Town Sports International Holdings, Inc. (“Town Sports”) as described below (2).

During 2006, the Company sold its investments in properties leased to Clear Channel Communications, Inc.(3) and Applied Materials, Inc.(4) as described below. The Company also has investments in properties leased to Dick’s Sporting Goods, Inc. (5), CheckFree Holdings, Inc., True Value Company, and U-Haul Moving Partners, Inc. (“U-Haul”) (6) and Mercury Partners, LP (“Mercury”) (6). The interests in the properties leased to U-Haul and Mercury were acquired in April 2004 and are described below.

CPA^®:14 2006 10-K — 55

Notes to Consolidated Financial Statements

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

	December 31,
	2006			2005
Assets (primarily real estate)	$	913,466		$	1,084,354
Liabilities (primarily mortgage notes payable)		(538,085	)		(652,119	)
Partners’ and members’ capital	$	375,381		$	432,235
Company’s share of equity investees’ net assets	$	200,332		$	143,417

	For the year ended December 31,
	2006 (1)			2005			2004
Revenue (primarily rental income and interest income from direct financing leases)	$	105,543		$	117,156		$	105,488
Expenses (primarily interest on mortgages, defeasance costs/prepayment penalties and depreciation) (2)(4)		(86,461	)		(69,698	)		(64,085	)
Gain on sale of real estate (3)(4)		73,590			—			—
Impairment charge (2)		(8,614	)		—			—
Net income	$	84,058		$	47,458		$	41,403
Company’s share of net income from equity investments	$	27,410		$	15,798		$	14,304

(1)	Results for equity investees are presented for the period during which the Company accounted for the investee under the equity method of accounting (that is, for December 1, 2006 through December 31, 2006 for investments acquired during the merger, and for January 1, 2006 through November 30, 2006 for the two investments that are now consolidated following the Company’s acquisition of the remaining interests in the merger). Results for investments owned by the Company as of January 1, 2006, including those investments in which the Company increased its interest in an existing investment in the merger, are presented for the full year.
(2)	The Company and an affiliate own interests in a venture owning 15 properties formerly leased to Starmark (formerly the parent of Starmark Camhood L.L.C.) under a master lease agreement. The Company owned a 41% interest in this venture and acquired an additional 15% interest in the venture in the merger. The Company continues to account for this investment under the equity method of accounting as its affiliate is the managing member in the limited liability company and is required to consolidate the investment under the provisions of EITF 04-05. The Company’s interest in this investment had a carrying value of $34,975 and $29,113 as of December 31, 2006 and 2005, respectively and accounted for ($7,786), $2,835 and $2,682 of (loss) income from equity investments in real estate for the years ended December 31, 2006, 2005 and 2004, respectively. The loss in 2006 reflects the recognition of impairment charges and prepayment penalties and debt defeasance costs as described below.
	In January 2006, the advisor entered into a cooperation agreement with Starmark. Under this cooperation agreement, the advisor, on behalf of ourselves and our affiliate, agreed to cooperate in Starmark’s efforts to sell its existing individual leasehold interests to third parties and restructure the lease agreements. Additionally, Starmark’s financial covenants were replaced by certain payment restrictions and an agreement to reserve certain of the proceeds of sale of the leasehold interests and other Starmark properties to cover certain costs the venture incurred in connection with transactions under the cooperation agreement.
	In June 2006, the advisor approved a plan to restructure the master lease agreement with Starmark. Under the restructuring plan, six properties under the master lease agreement were re-leased to Life Time Fitness, Inc. (“Life Time”), a new tenant unaffiliated with Starmark, and Life Time entered into a commitment to provide $20,000 of improvements to these six properties. In connection with the restructuring, four properties formerly leased to Starmark were transferred to Life Time in exchange for Life Time’s commitment to use $10,000 to fund a portion of the improvements to the six leased properties. This commitment is secured by letters of credit totaling $10,000. The venture has transferred title of these four properties to Life Time and the venture has no continuing involvement in the transferred properties. No gain or loss was recorded on the transfer of the four properties as the venture had previously written down the four transferred properties to their estimated fair values, as described below. The remaining $10,000 of improvements to the six leased properties will be funded through a rent abatement to the tenant of $2,322 and through security deposits and prepaid rent totaling $7,678 that were released by Starmark prior to the merger (of which the Company’s pro rata share is $952 and $3,148, respectively). The $20,000 of improvements (of which the Company’s pro rata share, following the merger, is $11,200) are for the benefit of the venture and will be retained by the venture upon expiration of the

CPA^®:14 2006 10-K — 56

Notes to Consolidated Financial Statements

lease. One additional property was re-leased to Town Sports International Holdings, Inc., a second new tenant unaffiliated with Starmark, on terms similar to the original lease with Starmark. The master lease agreement was amended to remove these properties.

As a result of approving the restructuring plan, during the second quarter of 2006, the venture incurred charges totaling $24,978, including $18,678 to write off intangible assets on the properties leased to Starmark and $6,300 to reduce the carrying value of the four properties to be sold to their estimated fair values. The Company’s pro rata share of these charges totals $10,241. During the third quarter of 2006, the venture also prepaid/defeased the existing debt of $100,857 and incurred prepayment penalties and debt defeasance costs totaling $10,072 (of which the Company’s share is $41,351 and $4,130, respectively). During the fourth quarter of 2006, the venture obtained new limited recourse mortgage financing of $80,000 on the Life Time properties at a fixed annual interest rate of 5.75% and with a 10-year term (of which the Company’s share is $32,800).

In December 2006, a third party, Fitness Ventures purchased 100% of the existing shareholders’ interests in the ownership of Starmark. At this time, Fitness Ventures issued warrants to the Company and its affiliate to acquire up to 10% of its equity and entered into new leases for the four remaining properties under terms which are similar to the original master lease. Concurrent with these transactions, the cooperation agreement with Starmark was terminated and the venture recognized lease termination income of $8,145, of which $7,678 represents security deposits and prepaid rent from Starmark and $447 represents the release of real estate tax escrows funded by the venture which have been replaced by escrows funded by the new lessees. The Company’s share of the termination income is $4,561.

The Company’s share of the effects of the venture’s transactions will be reflected as part of income from equity investments in our statements of income in the periods described.

(3)	In June 2006, a venture in which the Company and an affiliate held 40% and 60% interests, respectively, sold a property in New York, New York leased to Clear Channel for $200,012, net of closing costs, and recognized a gain on the sale of $41,101, net of a $10,253 writeoff of unrecoverable receivables related to future stated rent increases. In connection with the sale, the venture repaid the existing limited recourse mortgage obligation of $81,166 and incurred a charge for prepayment penalties and related costs totaling $2,981. The Company’s pro rata share of the gain, which was $16,441, and the charge for prepayment penalties of $1,192 is included in income from equity investments in real estate in the accompanying consolidated financial statements.
(4)	In October 2006, a venture through which the Company and an affiliate held 49.99% and 50.01% interests, respectively, in a property in California leased to Applied Materials, sold the property for $56,357 and recognized a gain on this sale of $14,362, of which the Company’s share is $28,172 and $7,180, respectively. The venture also recognized a gain on the sale of additional properties in which the Company had no ownership interest. In connection with the sale, the venture repaid the outstanding mortgage obligation on this property of $19,680 in October 2006 and incurred a charge on the early extinguishment of debt of $1,788, of which the Company’s share is $9,838 and $894, respectively.
(5)	In December 2005, the Company contributed a 55.1% interest in a limited liability company, which owns land and building in Plainfield, Indiana. The Company retained a 44.9% interest in the limited liability company and as a result now accounts for its interest under the equity method of accounting.
(6)	On April 29, 2004, the Company, along with two affiliates, Corporate Property Associates 15 Incorporated and Corporate Property Associates 16 — Global Incorporated, through a limited partnership in which the Company owns an 11.54% interest through a subsidiary, purchased 78 retail self-storage and truck rental facilities and entered into master lease agreements with two lessees that operate the facilities under the U-Haul brand name. The self-storage facilities are leased to Mercury, and the truck rental facilities are leased to U-Haul. The total cost was $312,445. In connection with the purchase, the limited partnership obtained $183,000 of limited recourse mortgage financing collateralized by the properties and lease assignments.
	The Mercury lease has an initial term of 20 years with two 10-year renewal options and provides for annual rent of $18,551. The Mercury lease is guaranteed by Mercury 99, LLC, an entity that owns a 99% ownership interest in Mercury. The U-Haul lease has an initial term of 10 years with two 10-year renewal options and provides for annual rent of $9,990. In the event of default, termination or expiration of the U-Haul lease, Mercury 99, LLC will automatically assume the obligations of the U-Haul lease and Mercury 99, LLC will continue to lease the self-storage facilities and shall lease the truck rental facilities pursuant to the terms (with extension) of the U-Haul lease. Upon Mercury 99, LLC’s assumption, the term of the U-Haul lease shall be deemed extended so as to automatically become co-terminus for the term of the Mercury 99, LLC lease. Each lease provides for rent increases every five years based on a formula indexed to the CPI.

CPA^®:14 2006 10-K — 57

Notes to Consolidated Financial Statements

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

Note 8. Intangibles

In connection with its acquisition of properties from CPA^®:12, the Company has recorded net lease intangibles of $87,653 which are being amortized over periods ranging from 9 to 40 years. Amortization of below-market and above-market rent intangibles is recorded as an adjustment to revenue.

Intangibles are summarized as follows:

	December 31, 2006
Lease intangibles
In-place lease	$	35,715
Tenant relationship		10,920
Above-market rent		46,384
Less: accumulated amortization		(572	)
		92,447
Below-market rent		(5,365	)
Less: accumulated amortization		11
		(5,354	)

Net amortization of intangibles was $561 for the year ended December 31, 2006. Based on the intangibles recorded as of December 31, 2006, scheduled annual net amortization of intangibles for each of the next five years is expected to be $6,774.

Note 9. Mortgage Financing Through Loan Securitization

The Company is accounting for its subordinated interest in the Carey Commercial Mortgage Trust (“CCMT”) mortgage securitization as an available-for-sale marketable security, which is measured at fair value with all gains and losses from changes in fair value reported as a component of other comprehensive income as part of shareholders’ equity. Upon completion of the merger, the Company acquired CPA^®:12’s share of the CCMT at a fair value of $7,346. As of December 31, 2006 and 2005, the fair value of the Company’s interest was $13,911 and $6,434, respectively, reflecting an aggregate unrealized gain of $1,623 and $747 and accumulated amortization of $462 and $345 at December 31, 2006 and 2005, respectively. The fair value of the Company’s interest in CCMT is determined using a discounted cash flow model with assumptions for market rates and the credit quality of the underlying lessees.

One of the key variables in determining the fair value of the subordinated interest is current interest rates. As required by SFAS No. 140, “Accounting for Transfer and Servicing of Financial Assets and Extinguishments of Liabilities,” a sensitivity analysis of the current value of the CPA^® Interests based on adverse changes in the market interest rates of 1% and 2% as of December 31, 2006 is as follows:

	Fair value as of		1% adverse		2% adverse
	December 31, 2006		change		change
Fair value of CPA® Interests	$	13,911	$	13,378	$	12,871

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

CPA^®:14 2006 10-K — 58

Notes to Consolidated Financial Statements

Note 10. Disclosures About Fair Value of Financial Instruments

The Company’s mortgage notes payable had a carrying value of $785,815 and $663,098 and a fair value of $785,103 and $718,347 at December 31, 2006 and 2005, respectively. The Company’s marketable securities, including its interest in Carey Commercial Mortgage Trust, had a carrying value of $12,510 and $8,935 and a fair value of $14,207 and $9,267 at December 31, 2006 and 2005, respectively. The fair value of debt instruments was evaluated using a discounted cash flow model with rates that take into account the credit of the tenants and interest rate risk. The fair value of the Company’s other financial assets and liabilities at December 31, 2006 and 2005 approximated their carrying value.

Note 11. Risk Management and Use of Financial Instruments

Risk Management

In the normal course of its on-going business operations, the Company encounters economic risk. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk on its interest-bearing liabilities. Credit risk is the risk of default on the Company’s operations and tenants’ inability or unwillingness to make contractually required payments. Market risk includes changes in the value of the properties and related loans held by the Company due to changes in interest rates or other market factors. In addition, the Company transacts business in Finland, France, the Netherlands and the United Kingdom and is also subject to the risks associated with changing exchange rates.

Use of Derivative Financial Instruments

From time to time, the Company may obtain variable rate mortgage loans and may enter into interest rate swap contracts with lenders which effectively convert the variable rate debt service obligations of the loan to a fixed rate. The Company does not have any interest rate swap agreements in place as of December 31, 2006. In addition, the Company does not use derivative instruments to hedge foreign exchange rate risk exposure, credit/market risks or for speculative purposes.

The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company attempts to obtain mortgage financing on a long-term, fixed-rate basis to mitigate this exposure. As of December 31, 2006, 81% of the Company’s limited recourse mortgage financing bears interest at fixed rates. The majority of the Company’s variable rate debt consists of limited recourse mortgage obligations that currently bear interest at fixed rates but may be reset in the future, pursuant to the terms of the mortgage contracts. The Company is also exposed to foreign exchange rate movements in the Euro and British pound sterling. The Company manages foreign exchange rate movements by generally placing both our debt obligation to the lender and the tenant’s rental obligation to us in the local currency but remain subject to such movements to the extent of the difference.

The Company owns stock warrants that were granted to the Company by lessees in connection with structuring the initial lease transactions or were acquired through the merger which are defined as derivative instruments because these stock warrants are readily convertible to cash or provide for net settlement upon conversion. Warrants issued to the Company by Consolidated Theaters Holding, G.P., Compucom Systems, Inc., Vermont Teddy Bear Company and Fitness Ventures are classified as derivative instruments and had an aggregate fair value of $4,338 and $665 at December 31, 2006 and 2005, respectively.

A lease for a property located in the Netherlands provides the Company with an option to receive a portion of rental payments in Euros or U.S. dollars. Pursuant to the adoption of SFAS 133, this option is deemed a derivative instrument. As of December 31, 2006, the Company’s cumulative unrealized foreign currency gain from this option was $5.

Changes in the fair value of an interest swap instrument on a variable rate loan are included in the determination of net income for the years ended December 31, 2006, 2005 and 2004. The Company entered into the interest rate swap agreement for the purpose of fixing the interest rate on the limited recourse obligation for the term of that obligation; however, the swap agreement did not qualify as a hedge for financial accounting purposes and changes in its value have been reflected in earnings. The interest rate swap agreement was terminated during 2006 at a cost of $147 following the payment of the remaining $8,677 balance of the related variable rate limited recourse mortgage obligation, at which time the Company reversed a cumulative unrealized loss of $229.

CPA^®:14 2006 10-K — 59

Notes to Consolidated Financial Statements

For the years ended December 31, 2006, 2005 and 2004, unrealized gains and losses on derivative instruments were as follows:

	For the year ended December 31,
	2006		2005			2004
Unrealized gain (loss) on common stock warrants (1)	$	2,273	$	2,653		$	(64	)
Unrealized gain (loss) on interest rate swap agreement (2)		229		426			(655	)
Unrealized loss on foreign currency option (3)		—		(5	)		(9	)
	$	2,502	$	3,074		$	(728	)

(1)	During 2005, an unrealized gain of $2,199 related to certain stock warrants of American Tire Distributors, Inc. held by the Company was reversed and a corresponding gain of $2,192 was recognized upon American Tire’s redemption of its outstanding warrants.
(2)	In connection with the termination of an interest rate swap agreement during 2006, the Company reversed a cumulative unrealized loss of $229 recognized during 2005.
(3)	Included in gain (loss) on foreign currency transactions, net in the accompanying consolidated financial statements.

Concentration of Credit Risk

Concentrations of credit risk arise when a number of tenants are engaged in similar business activities, or conduct business in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. The Company regularly monitors its portfolio to assess potential concentrations of credit risk. The Company believes our portfolio is reasonably well diversified and does not contain any unusual concentration of credit risks.

The majority of the Company’s real estate properties and related loans are located in the United States, with Texas (10%) representing the only significant concentration (greater than 10% of annualized lease revenue). The Company’s real estate properties contain significant concentrations in the following asset types as of December 31, 2006: industrial (33%), warehouse/distribution (28%) and office (21%) and the following tenant industries as of December 31, 2006: retail (23%) and electronics (14%). For the year ended December 31, 2006, one tenant, Carrefour France, SAS represented 11.5% of our total lease revenue.

Note 12. Mortgage Notes Payable and Notes Payable

Mortgage notes payable, all of which are limited recourse to the Company, are collateralized by an assignment of real property and direct financing leases with a carrying value of $1,194,995 as of December 31, 2006. Mortgage notes payable had fixed annual interest rates ranging from 5.15% to 9.38% and variable annual interest rates ranging from 5.15% to 7.32% and maturity dates ranging from 2008 to 2027 as of December 31, 2006. As described below, the Company also has a credit facility with a $25,000 outstanding balance as of December 31, 2006.

Scheduled principal payments during each of the five years following December 31, 2006 and thereafter are as follows:

Year ending December 31,	Total Debt		Fixed Rate Debt		Variable Rate Debt
2007	$	16,707	$	12,276	$	4,431
2008		35,198		30,485		4,713
2009 (1)		107,179		77,238		29,941
2010		89,093		83,840		5,253
2011		287,126		281,623		5,503
Thereafter through 2032		275,512		172,357		103,155
Total	$	810,815	$	657,819	$	152,996

(1) Includes maturity of credit facility in November 2009.

Credit Facility

In connection with the merger, the Company entered into a $150,000 credit facility with Wells Fargo Bank in November 2006. The credit facility provides for an initial three year term and an annual interest rate of either (i) LIBOR plus a spread which ranges from

CPA^®:14 2006 10-K — 60

Notes to Consolidated Financial Statements

135 to 160 basis points depending on our leverage or (ii) the greater of the bank’s prime rate and the Federal Funds Effective Rate, plus 0.50%, plus a spread of up to 0.125% depending on our leverage ratio. The credit facility is guaranteed by the Company’s current and future subsidiaries that own unencumbered assets. The credit facility has financial covenants that require, among other things, the Company to maintain a minimum equity value and to meet or exceed certain operating and coverage ratios. The Company is in compliance with these covenants as of December 31, 2006. The facility also provides the Company with the right, on up to two occasions, to increase the amount available under the credit facility by not less than $20,000 and not more than $75,000 up to a maximum of $225,000.

Upon consummation of the merger, the Company paid a fee to the lender of $1,033 and drew down $25,000 from its credit facility. The credit facility bore interest of 6.80% per annum as of December 31, 2006.

Note 13. Commitments and Contingencies

As of December 31, 2006, the Company was not involved in any material litigation.

In March 2004, following a broker-dealer examination of Carey Financial, LLC (“Carey Financial”), the wholly-owned broker-dealer subsidiary of WPC, by the staff of the SEC, Carey Financial received a letter from the staff of the SEC alleging certain infractions by Carey Financial of the Securities Act of 1933, the Securities Exchange Act of 1934, the rules and regulations thereunder and those of the National Association of Securities Dealers, Inc. (“NASD”).

The staff alleged that in connection with a public offering of the shares of Corporate Property Associates 15 Incorporated (“CPA^®:15”), Carey Financial and its retail distributors sold certain securities without an effective registration statement. Specifically, the staff alleged that the delivery of investor funds into escrow after completion of the first phase of the offering (the “Phase I Offering”), completed in the fourth quarter of 2002 but before a registration statement with respect to the second phase of the offering (the “Phase II Offering”) became effective in the first quarter of 2003, constituted sales of securities in violation of Section 5 of the Securities Act of 1933. In addition, in the March 2004 letter the staff raised issues about whether actions taken in connection with the Phase II offering were adequately disclosed to investors in the Phase I Offering.

In June 2004, the Division of Enforcement of the SEC (“Enforcement Staff”) commenced an investigation into compliance with the registration requirements of the Securities Act of 1933 in connection with the public offerings of CPA^®:15’s shares during 2002 and 2003. In December 2004, the scope of the Enforcement Staff’s inquiries broadened to include broker-dealer compensation arrangements in connection with CPA^®:15 and other REITs managed by WPC, including the Company, as well as the disclosure of such arrangements. At that time WPC and Carey Financial received a subpoena from the Enforcement Staff seeking documents relating to payments by WPC, Carey Financial, and REITs managed by WPC to (or requests for payment received from) any broker-dealer, excluding selling commissions and selected dealer fees. WPC and Carey Financial subsequently received additional subpoenas and requests for information from the Enforcement Staff seeking, among other things, information relating to any revenue sharing agreements or payments (defined to include any payment to a broker-dealer, excluding selling commissions and selected dealer fees) made by WPC, Carey Financial or any REIT managed by WPC in connection with the distribution of WPC’s managed REITs or the retention or maintenance of REIT assets. Other information sought by the SEC includes information concerning the accounting treatment and disclosure of any such payments, communications with third parties (including other REIT issuers) concerning revenue sharing, and documents concerning the calculation of underwriting compensation in connection with the REIT offerings under applicable NASD rules.

In response to the Enforcement Staff’s subpoenas and requests, WPC and Carey Financial have produced documents relating to payments made to certain broker-dealers both during and after the offering process, for certain of the REITs managed by WPC (including Corporate Property Associates 10 Incorporated (“CPA^®:10”), Carey Institutional Properties Incorporated (“CIP^®”), CPA^®:12 and CPA^®:15 as well as the Company), in addition to selling commissions and selected dealer fees.

Among the payments reflected on documents produced to the Staff were certain payments, aggregating in excess of $9,600, made to a broker-dealer which distributed shares of the REITs. The expenses associated with these payments, which were made during the period from early 2000 through the end of 2003, were borne by and accounted for on the books and records of the REITs. Of these payments, CPA^®:10 paid in excess of $40; CIP^® paid in excess of $875; CPA^®:12 paid in excess of $2,455; the Company paid in excess of $4,990; and CPA^®:15 paid in excess of $1,240. In addition, other smaller payments by the REITs to the same and other broker-dealers have been identified aggregating less than $1,000.

WPC and Carey Financial are cooperating fully with this investigation and have provided information to the Enforcement Staff in response to the subpoenas and requests. Although no formal regulatory action has been initiated against WPC or Carey Financial in

CPA^®:14 2006 10-K — 61

Notes to Consolidated Financial Statements

connection with the matters being investigated, the Company expects the SEC may pursue such an action against either or both. The nature of the relief or remedies the SEC may seek cannot be predicted at this time. If an action is brought, it could have a material adverse effect on WPC and Carey Financial and the magnitude of that effect would not necessarily be limited to the payments described above but could include other payments and civil monetary penalties. Any action brought against WPC or Carey Financial could also have a material adverse effect on the Company because of our dependence on WPC and Carey Financial for a broad range of services.

Several state securities regulators have sought information from Carey Financial relating to the matters described above. While one or more states may commence proceedings against Carey Financial in connection with these inquiries, the Company does not currently expect that these inquiries or proceedings will have a material effect on WPC or Carey Financial incremental to that caused by any SEC action.

Note 14. Shareholder’s Equity

Distributions

Distributions paid to shareholders consist of ordinary income, capital gains, return of capital or a combination thereof for income tax purposes. For the three years ended December 31, 2006, distributions per share reported for tax purposes were as follows:

	2006		2005		2004
Ordinary income	$	0.31	$	0.56	$	0.57
Capital gains		0.44		0.04		—
Return of capital		—		0.16		0.19
		0.75		0.76		0.76
Spillover distribution (1)		0.02		—		—
	$	0.77	$	0.76	$	0.76

(1) This portion of the distribution is not taxable to the shareholder until 2007; therefore, the taxability and classification of
      this portion will be determined in 2007.

The Company declared a quarterly distribution of $0.002097 per day for each day of the period from and including October 1, 2006 through December 31, 2006 on which a shareholder was a shareholder of record, which was paid in January 2007. Amounts in the table above exclude a special distribution of $0.45 that was paid in July 2006 to shareholders of record as of June 30, 2006 and a special distribution of $0.04 that was paid in January 2007 to shareholders of record as of November 30, 2006. These special distributions were approved by the Company’s board of directors in connection with the dispositions of certain investments in real estate during 2006.

Accumulated Other Comprehensive Income

As of December 31, 2006 and 2005, accumulated other comprehensive income reflected in the Company’s shareholders’ equity is comprised of the following:

	2006		2005
Unrealized appreciation on marketable securities	$	771	$	319
Foreign currency translation adjustment		11,030		6,761
Accumulated other comprehensive (loss) income	$	11,801	$	7,080

Note 15. Discontinued Operations

2006 —The Company sold a property in Indiana for $2,116, net of selling costs and recognized a loss on the sale of $996, exclusive of impairment charges totaling $3,810 previously recognized against the property.

The Company sold a property in Minnesota for $35,512, net of selling costs and recognized a gain on the sale of $14,178. In connection with the sale, the Company prepaid the existing limited recourse mortgage loan of $11,631 and incurred prepayment penalties of $1,586.

2005 — The Company sold a property in California for $4,116, net of selling costs and recognized a gain of $196.

CPA^®:14 2006 10-K — 62

Notes to Consolidated Financial Statements

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the results of operations and gain or loss on sales of real estate for properties held for sale are reflected in the accompanying consolidated financial statements as discontinued operations for all periods presented and are summarized as follows:

	For the year ended December 31,
	2006			2005			2004
Revenues (primarily rental revenues and other operating income):	$	1,003		$	2,676		$	2,889
Expenses (primarily interest on mortgages, prepayment penalties, depreciation and property expenses):		(2,647	)		(1,948	)		(1,900	)
Gain on sales of real estate, net		13,182			196			—
Income from discontinued operations	$	11,538		$	924		$	989

Note 16. Segment Information

The Company has determined that it operates in one business segment, real estate operations, with domestic and foreign investments.

For 2006, geographic information for the real estate operations segment is as follows:

	Domestic			Foreign (1)			Total Company
Revenues	$	110,894		$	24,298		$	135,192
Operating expenses		(50,661	)		(6,836	)		(57,497	)
Income from equity investments in real estate		27,410			—			27,410
Interest expense, net		(39,779	)		(8,564	)		(48,343	)
Other, net (2)		388			930			1,318
Income from continuing operations	$	48,252		$	9,828		$	58,080
Total equity investments in real estate	$	200,332		$	—		$	200,332
Total long-lived assets		1,300,717			191,098			1,491,815
Total assets		1,473,492			201,831			1,675,323

For 2005, geographic information for the real estate operations segment is as follows:

	Domestic			Foreign (1)			Total Company
Revenues	$	108,470		$	23,440		$	131,910
Operating expenses		(47,090	)		(6,857	)		(53,947	)
Income from equity investments in real estate		15,798			—			15,798
Interest expense, net		(41,495	)		(8,882	)		(50,377	)
Other, net (2)		3,382			(441	)		2,941
Income from continuing operations	$	39,065		$	7,260		$	46,325
Total equity investments in real estate	$	143,417		$	—		$	143,417
Total long-lived assets		1,027,312			175,255			1,202,567
Total assets		1,112,722			182,314			1,295,036

For 2004, geographic information for the real estate operations segment is as follows:

	Domestic			Foreign (1)			Total Company
Revenues	$	105,296		$	22,475		$	127,771
Operating expenses		(44,778	)		(6,656	)		(51,434	)
Income from equity investments in real estate		14,304			—			14,304
Interest expense, net		(42,485	)		(9,119	)		(51,604	)
Other, net (2)		(1,147	)		61			(1,086	)
Income from continuing operations	$	31,190		$	6,761		$	37,951
Total equity investments in real estate	$	134,905		$	—		$	134,905
Total long-lived assets		1,048,775			202,334			1,251,109
Total assets		1,130,852			215,503			1,346,355

(1) Consists of operations in the United Kingdom, France, Finland and the Netherlands.

CPA^®:14 2006 10-K — 63

Notes to Consolidated Financial Statements

(2) Consists of minority interest, gain (loss) on derivative instruments and other gains, net and (loss) gain on foreign currency transactions, net.

Note 17. Selected Quarterly Financial Data (unaudited)

	For the three months ended
	March 31, 2006			June 30, 2006			September 30, 2006			December 31, 2006
Revenues	$	32,248		$	32,761		$	34,713		$	35,470
Operating expenses		(12,701	)		(16,439	)		(14,404	)		(13,953	)
Net income		12,074			26,009			7,632			23,903
Earnings per share		0.18			0.38			0.11			0.32
Distributions declared per share		0.1924			0.1929			0.1929			0.1929

	For the three months ended
	March 31, 2005			June 30, 2005			September 30, 2005			December 31, 2005
Revenues	$	32,580		$	32,590		$	34,725		$	32,015
Operating expenses		(12,852	)		(13,484	)		(15,355	)		(12,256	)
Net income		13,011			10,667			10,839			12,732
Earnings per share		0.19			0.16			0.16			0.18
Distributions declared per share		0.1904			0.1909			0.1914			0.1919

Note 18. Pro Forma Financial Information

The following consolidated pro forma financial information for the years ended December 31, 2006 and 2005 has been presented as if properties acquired in connection with the merger, mortgage obligations assumed in the merger and amounts drawn under the Company’s credit facility to effect the merger, had occurred on January 1, 2005. The pro forma financial information is not necessarily indicative of what the actual results would have been, nor does it purport to represent the results of operations for future periods.

	For the years ended December 31,
	2006		2005
Pro forma total revenues	$	166,414	$	165,088
Pro forma income from continuing operations		63,774		52,612
Pro forma income from continuing operations per share		0.73		0.60

For pro forma purposes, the Company’s interest income, other than interest earned from an existing mortgage security in which the Company increased its pro-rata share as a result of the merger, has been eliminated based on an assumption that substantially all of its cash and cash equivalents would be used to facilitate the merger. The Company will likely earn interest on cash generated from operations; however, it is not practicable to make assumptions as to how much interest income would have been earned on such funds during the pro forma periods presented.

Note 19. Subsequent Events

In January 2007, the Company obtained limited recourse mortgage financing on existing properties totaling $26,227, including its pro rata share of mortgage financing on a property accounted for under the equity method. The financing has a weighted average interest rate and term of 5.84% and 12 years, respectively.

Effective April 2, 2007, Trevor Bond is resigning from the Company’s board of directors in connection with his appointment to the advisor’s board of directors. Marshall Blume was appointed as an independent director of the Company’s board of directors, effective April 2, 2007.

CPA^®:14 2006 10-K — 64

SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 2006
(in thousands)

																					Life on which
							Costs		Increase												Depreciation in
							Capitalized		(Decrease)			Gross Amount at which Carried									Latest Statement of
			Initial Cost to Company				Subsequent to		in Net			at Close of Period (e)						Accumulated		Date	Income is
Description	Encumbrances		Land		Buildings		Acquisition (a)		Investments (b)			Land		Buildings		Total		Depreciation (d)		Acquired	Computed
Real Estate Under Operating Leases:
Retail store in Torrance, California	$	—	$	13,060	$	6,934	$	153	$	—		$	13,060	$	7,087	$	20,147	$	1,476	Jul 1998	40 yrs.
Industrial facility in San Clemente, California		—		2,390		—		8,958		53			2,390		9,011		11,401		1,628	Jul 1998	40 yrs.
Industrial facility in Pittsburgh, Pennsylvania		3,675		620		6,186		—		—			620		6,186		6,806		1,244	Dec 1998	40 yrs.
Industrial facility Gilbert, Arizona (c)		12,349		1,310		10,494		10,974		—			1,751		21,027		22,778		2,136	Feb 1999	30.7 yrs.
																				Dec 2006
Industrial and warehouse facilities in Burbank, California and Las Vegas, Nevada		6,899		3,860		8,263		—		2			3,860		8,265		12,125		1,580	Mar 1999	40 yrs.
																				Oct 1999
Warehouse and distribution facilities in Harrisburg, North Carolina; Atlanta, Georgia; Cincinnati, Ohio and Elkwood, Virginia		13,057		3,930		10,398		8,476		9			3,945		18,868		22,813		2,774	Jun 1999	40 yrs.
																				Dec 2001
Industrial facility in Gardena, California		2,773		2,340		3,943		—		(2,899	)		2,340		1,044		3,384		79	Jul 1999	40 yrs.
Warehouse and distribution facilities in Burlington, New Jersey; Shawnee, Kansas and Manassas, Virginia (c)		26,473		3,604		8,613		23,709		—			4,476		31,450		35,926		5,202	Aug 1999	40 yrs.
																				Dec 2006
Warehouse and distribution facility in Grand Rapids, Michigan		—		740		3,043		7,638		—			740		10,681		11,421		1,927	Aug 1999	40 yrs.
Land in Midlothian, Virginia		2,595		3,515		—		—		—			3,515		—		3,515		—	Sep 1999		N/A
Office facility in Columbia, Maryland		13,184		2,623		20,233		3,113		—			2,623		23,346		25,969		4,031	Nov 1999	40 yrs.
Industrial facilities in Welcome, North Carolina; Murrysville, Pennsylvania and Wylie, Texas		14,372		1,596		23,910		323		(125	)		1,596		24,108		25,704		3,293	Nov 1999	40 yrs.
																				Dec 2001
Sports facilities in Salt Lake City, Utah and St. Charles, Missouri		6,702		2,920		8,660		836		—			2,920		9,496		12,416		1,479	Dec 1999	40 yrs.
																				Dec 2000
Warehouse and distribution facility in Tempe, Arizona		3,163		940		4,557		13		—			940		4,570		5,510		776	Jan 2000	40 yrs.
Warehouse and distribution facility in Rock Island, Illinois		6,833		500		9,945		1,887		—			500		11,832		12,332		1,800	Feb 2000	40 yrs.
Industrial facility in North Amityville, New York		10,193		2,932		16,398		18		(4,120	)		1,482		13,746		15,228		2,363	Feb 2000	40 yrs.
Warehouse and distribution facilities in Monon, Indiana; Champlin, Minnesota; Robbinsville, New Jersey; Radford, Virginia and North Salt Lake City, Utah		16,047		4,580		24,844		15		—			4,580		24,859		29,439		4,117	May 2000	40 yrs.
Warehouse and distribution facility in Lakewood, New Jersey		6,364		710		4,531		3,439		—			710		7,970		8,680		1,219	Jun 2000	40 yrs.
Retail facilities in Kennesaw, Georgia and Leadwood, Kansas		13,823		6,230		15,842		108		—			6,230		15,950		22,180		2,608	Jun 2000	40 yrs.
Land in Scottsdale, Arizona		8,228		14,600		—		—		—			14,600		—		14,600		—	Sep 2000		N/A
Industrial facility in Albuquerque, New Mexico		3,311		1,490		4,636		7		—			1,490		4,643		6,133		730	Sep 2000	40 yrs.
Office facility in Houston, Texas		4,735		570		6,760		—		—			570		6,760		7,330		1,063	Sep 2000	40 yrs.
Office facility in Eagan, Minnesota		9,080		4,225		15,518		1		(1,324	)		2,900		15,520		18,420		2,441	Sep 2000	40 yrs.
Warehouse and distribution facility in Kansas City, Missouri		3,605		570		5,870		39		—			570		5,909		6,479		929	Sep 2000	40 yrs.
Warehouse and distribution facilities in Valdosta, Georgia and Johnson City, Tennessee		12,195		650		16,889		410		—			650		17,299		17,949		2,685	Oct 2000	40 yrs.
Land in Elk Grove Village, Illinois		2,244		4,100		—		—		—			4,100		—		4,100		—	Oct 2000		N/A
Industrial facility in Salisbury, North Carolina		6,817		1,370		2,672		6,298		(51	)		1,319		8,970		10,289		1,131	Nov 2000	40 yrs.
Office facility in Lafayette, Louisiana		2,358		660		3,005		19		—			660		3,024		3,684		454	Dec 2000	40 yrs.
Office facility in Collierville, Tennessee		42,027		3,154		70,646		12		—			3,154		70,658		73,812		19,616	Dec 2000	7 - 40 yrs.
Multiplex motion picture theater in Port St. Lucie and Pensacola, Florida		—		3,200		3,066		6,800		(4,112	)		3,685		5,269		8,954		727	Dec 2000	40 yrs.
Retail, warehouse and distribution facilities in York, Pennsylvania		3,222		1,974		10,068		3		—			1,974		10,071		12,045		5,201	Dec 2000	40 yrs.
Office facilities in Lindon, Utah		—		1,390		1,123		8,061		—			1,841		8,733		10,574		1,366	Dec 2000	40 yrs.
Office facility in Houston, Texas		3,814		1,025		4,530		336		—			1,025		4,866		5,891		688	Dec 2000	40 yrs.
Industrial and office facilities in Elgin, Illinois; Bozeman, Montana and Nashville, Tennessee		11,323		3,900		17,937		14		(292	)		3,900		17,659		21,559		2,573	Mar 2001	40 yrs.
Warehouse and distribution facility in Duluth, Georgia		7,449		2,167		11,446		5		—			2,167		11,451		13,618		1,658	Mar 2001	40 yrs.
Industrial facilities in City of Industry, California; Florence, Kentucky; Chelmsford, Massachusetts and Lancaster, Texas		10,265		4,398		13,418		3,745		24			4,643		16,942		21,585		2,229	Apr 2001	7 - 40 yrs.
Industrial facilities in Mesa, Arizona and Moorpark, California (c)		22,462		4,000		14,951		10,128		—			5,945		23,134		29,079		2,155	Jun 2001	34.5 yrs.
																				Dec 2006

CPA^®:14 2006 10-K — 65

SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)

																				Life on which
							Costs		Increase											Depreciation in
							Capitalized		(Decrease)		Gross Amount at which Carried									Latest Statement of
			Initial Cost to Company				Subsequent to		in Net		at Close of Period (e)						Accumulated		Date	Income is
Description	Encumbrances		Land		Buildings		Acquisition (a)		Investments (b)		Land		Buildings		Total		Depreciation (e)		Acquired	Computed
Real Estate Under Operating Leases (Continued):
Industrial facility in Helmond, Netherlands		6,119		2,230		3,360		—		2,607		3,324		4,873		8,197		681	Jun 2001	40 yrs.
Industrial facilities in South Windsor and Manchester, Connecticut		11,922		1,555		18,823		250		27		1,555		19,100		20,655		2,595	Jul 2001		N/A
Industrial and office facilities in Rome, Georgia; Niles, Illinois; Plymouth, Michigan and Twinsburg, Ohio		15,828		4,140		23,822		1,405		—		4,140		25,227		29,367		3,468	Aug 2001	40 yrs.
Industrial facility in Milford, Ohio		9,491		2,000		12,869		—		—		2,000		12,869		14,869		1,702	Sep 2001	40 yrs.
Retail facilities in several cities in the following states: Arizona, California, Florida, Illinois, Massachusetts, Maryland, Michigan, Minnesota and Texas		41,168		17,100		54,743		—		—		17,100		54,743		71,843		7,014	Nov 2001	40 yrs.
Office facility in Richardson, Texas		28,554		3,400		45,054		—		—		3,400		45,054		48,454		5,679	Dec 2001	40 yrs.
Office facility in Turku, Finland		22,353		801		23,390		81		11,403		1,195		34,480		35,675		4,359	Dec 2001	40 yrs.
Educational facilities in Union, New Jersey; Allentown and Philadelphia, Pennsylvania and Grand Prairie, Texas		5,802		2,486		7,602		—		3		2,486		7,605		10,091		959	Dec 2001	40 yrs.
Warehouse, distribution, office and industrial facilities in Perris, California; Eugene, Oregon; West Jordan, Utah and Tacoma, Washington		7,845		6,050		8,198		—		5		6,050		8,203		14,253		1,000	Feb 2002	40 yrs.
Warehouse and distribution facilities in Charlotte and Lincolnton, North Carolina and Mauldin, South Carolina		8,418		1,860		12,852		—		1		1,860		12,853		14,713		1,541	Mar 2002	40 yrs.
Warehouse and distribution facilities in Boe, Carpiquet, Mans, Vendin Le Vieil, Lieusaint, Lagnieu, Luneville and St. Germain de Puy, France		97,698		15,724		75,211		13,755		41,247		24,571		121,366		145,937		13,953	Mar 2002	40 yrs.
Warehouse, distribution and office facilities in Davenport, Iowa and Bloomington, Minnesota		24,909		3,260		26,009		—		—		3,260		26,009		29,269		2,902	Jul 2002	40 yrs.
Industrial facility in Gorinchem, Netherlands		—		2,374		3,864		—		1,993		3,169		5,062		8,231		565	Jul 2002	40 yrs.
Industrial facilities in Granite City, Illinois; Kendallville, Indiana and Clinton Township, Michigan		19,124		4,390		30,336		—		7		4,390		30,343		34,733		3,572	Aug 2002	40 yrs.
Educational facility in Upper Saucon Township, Pennsylvania		11,446		3,200		15,415		1,474		—		3,200		16,889		20,089		1,461	Aug 2002	40 yrs.
Retail facilities in Lombard, Illinois and Fairfax, Virginia (d)		15,478		13,226		18,248		—		—		13,226		18,248		31,474		44	Dec 2006	33.6 yrs.
Retail facility in South Tulsa, Oklahoma (d)		4,736		1,649		3,425		—		—		1,649		3,425		5,074		9	Dec 2006	30 yrs.
Retail and warehouse and distribution facilities in Johnstown and Whitehall, Pennsylvania (d)		5,054		2,115		15,945		—		—		2,115		15,945		18,060		45	Dec 2006	30.3 yrs.
Warehouse and distribution facility in Dallas, Texas (d)		3,695		323		6,784		—		—		323		6,784		7,107		15	Dec 2006	30.8 yrs.
Industrial facility in Shelburne, Vermont (d)		2,362		955		2,919		—		—		955		2,919		3,874		8	Dec 2006	30.6 yrs.
Industrial facilities in Fort Dodge, Indiana and Oconomowoc, Wisconsin (d)		6,700		1,218		11,879		—		—		1,218		11,879		13,097		41	Dec 2006	23.5 yrs.
Industrial facility in Aurora, Illinois (d)		9,967		2,730		10,391		—		—		2,730		10,391		13,121		27	Dec 2006	30.8 yrs.
Industrial facility in Houston, Texas (d)		—		2,299		4,722		—		—		2,299		4,722		7,021		24	Dec 2006	16.3 yrs.
Industrial, warehouse and distribution and office facilities in Waterloo, Wisconsin (d)		9,242		922		16,824		—		—		922		16,824		17,746		68	Dec 2006	20.3 yrs.
Industrial and warehouse and distribution facilities in Westfield, Massachusetts (d)		6,705		1,106		9,952		—		—		1,106		9,952		11,058		24	Dec 2006	34.7 yrs.
Industrial facility in Richmond, Missouri (d)		5,894		530		6,505		—		—		530		6,505		7,035		15	Dec 2006	34.8 yrs.
Retail facilities in Bourne, Sandwich and Chelmsford, Massachusetts (d)		1,538		1,418		2,157		—		—		1,418		2,157		3,575		6	Dec 2006	31.1 yrs.
Industrial facility in Carlsbad, California (d)		4,880		2,618		4,880		—		—		2,618		4,880		7,498		13	Dec 2006	30.8 yrs.
Fitness and recreational facility in Houston, Texas (d)		3,980		1,613		3,398		—		—		1,613		3,398		5,011		9	Dec 2006	29.7 yrs.
Theater in Hickory Creek, Texas (d)		4,033		3,138		6,752		—		—		3,138		6,752		9,890		16	Dec 2006	34 yrs.
Educational facilities in Chandler, Arizona; Fleming Island, Florida; Ackworth, Georgia; Hauppauge and Patchogue, New York; Sugar Land, Texas; Hampton, Virginia and Silverdale, Washington (d)		6,301		4,312		9,963		—		—		4,312		9,963		14,275		27	Dec 2006	29.6 yrs.
Industrial facility in Indianapolis, Indiana (d)		1,949		1,035		6,594		—		—		1,035		6,594		7,629		18	Dec 2006	29.5 yrs.
Warehouse and distribution facilities in Greenville, South Carolina (d)		4,930		625		8,177		—		—		625		8,177		8,802		24	Dec 2006	27.8 yrs.
	$	719,758	$	224,245	$	900,392	$	122,503	$	44,458	$	237,003	$	1,054,595	$	1,291,598	$	137,262

CPA^®:14 2006 10-K — 66

SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)

												Gross Amount at
							Costs Capitalized		Increase			which Carried
			Initial Cost to Company				Subsequent to		(Decrease) in Net			at Close of		Date
Description	Encumbrances (c)		Land		Buildings		Acquisition (a)		Investments (b)			Period Total		Acquired
Direct Financing Method:
Industrial facilities in Dallas and Greenville, Texas	$	11,474	$	460	$	20,427	$	—	$	(3,191	)	$	17,696		11/18/1999
Multiplex theater facility in Midlothian, Virginia		9,326		—		10,819		854		960			12,633		9/22/1999
Office facility in Scottsdale, Arizona		14,323		—		25,415		—		—			25,415		9/21/2000
Warehouse and distribution facility in Elk Grove Village, Illinois		2,287		—		4,172		4		—			4,176		10/30/2000
Multiplex motion picture theater in Pensacola, Florida		—		—		4,112		2,541		—			6,653		12/7/2000
Industrial facility in Doncaster, United Kingdom		6,930		—		8,383		7		4,228			12,618		1/9/2001
Industrial and manufacturing facilities in Manchester, Michigan; Farmville, Old Fort and Albemarie, North Carolina; Holmesville, Ohio and Springfield, Tennessee		15,642		2,961		24,474		20		—			27,455		9/28/2001
Educational facility in Mooresville, North Carolina		6,075		1,600		9,276		130		(304	)		10,702		2/11/2002
Industrial facility in Ashburn Junction, Virginia (d)		—		4,683		15,116		—		—			19,799		12/1/2006
	$	66,057	$	9,704	$	122,194	$	3,556	$	1,693		$	137,147

CPA^®:14 2006 10-K — 67

NOTES TO SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION

(a)	Consists of the costs of improvements subsequent to purchase and acquisition costs including legal fees, appraisal fees, title costs and other related professional fees.
(b)	The increase (decrease) in net investment is due to the amortization of unearned income producing a constant periodic rate of return on the net investment which is more (less) than lease payments received, foreign currency translation adjustments, impairment losses and property sales.

(c) Additional interest in this property acquired in the CPA^®:12 merger on December 1, 2006.

(d)	Property acquired in the CPA®:12 merger on December 1, 2006.
(e)	Reconciliation of real estate and accumulated depreciation:

	Reconciliation of Real Estate Subject to
	Operating Leases
	December 31,
	2006			2005			2004
Balance at beginning of year	$	1,050,368		$	1,086,073		$	1,072,543
Additions		218,017			3,111			2,035
Dispositions		(25,295	)		(1,376	)		—
Reclassification to asset held for sale		—			—			(4,120	)
Foreign currency translation adjustment		17,753			(25,901	)		15,615
Reclassification from (to) equity investment in real estate		30,755			(11,539	)		—
Balance at close of year	$	1,291,598		$	1,050,368		$	1,086,073

	Reconciliation of Accumulated Depreciation
	December 31,
	2006			2005			2004
Balance at beginning of year	$	106,731		$	86,212		$	62,105
Depreciation expense		27,458			23,500			23,426
Depreciation expense from discontinued operations		190			—			64
Dispositions		(2,933	)		—			—
Reclassification to asset held for sale		—			—			(323	)
Foreign currency translation adjustment		1,732			(1,681	)		940
Reclassification from (to) equity investment in real estate		4,084			(1,300	)		—
Balance at close of year	$	137,262		$	106,731		$	86,212

At December 31, 2006, the aggregate cost of real estate owned by the Company and its consolidated subsidiaries for U.S. federal income tax purposes is $1,368,167.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Our disclosure controls and procedures include our controls and other procedures designed to provide reasonable assurance 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 our management, including our chief executive officer and acting 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 specified in the SEC’s rules and forms.

Our chief executive officer and acting chief financial officer have conducted a review of our disclosure controls and procedures as of December 31, 2006. Based upon this review, our chief executive officer and acting chief financial officer have concluded that our disclosure controls (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of December 31, 2006 at a reasonable level of assurance to ensure that the information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms.

CPA^®:14 2006 10-K — 68

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

This information will be contained in our definitive Proxy Statement with respect to our 2006 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year, and is hereby incorporated by reference.

Item 11. Executive Compensation.

This information will be contained in our definitive Proxy Statement with respect to our 2006 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year, and is hereby incorporated by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

This information will be contained in our definitive Proxy Statement with respect to our 2006 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year, and is hereby incorporated by reference.

Item 13. Certain Relationships and Related Transactions and Director Independence.

This information will be contained in our definitive Proxy Statement with respect to our 2006 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year, and is hereby incorporated by reference.

Item 14. Principal Accountant Fees and Services

This information will be contained in our definitive Proxy Statement with respect to our 2006 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year, and is hereby incorporated by reference.

CPA^®:14 2006 10-K — 69

PART IV

Item 15. Exhibits, Financial Statement Schedules.

     (1) and (2) — Financial Statements and schedules — see index to financial statements and schedules included in Item 8.

     (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 No.	Description	Method of Filing
3.1	Articles of Amendment	Exhibit 3.1 to Registration Statement (Form S-11) No. 333-76761
3.1(2)	Articles of Incorporation of Registrant	Exhibit 3.1 to Registration Statement (Form S-11) No. 333-31437
3.2	Form of Bylaws of Registrant	Exhibit 3.2 to Registration Statement (Form S-11) No. 333-31437
4.1	Dividend Reinvestment and Share Purchase Plan	Exhibit 4.1 to Registrant’s Form S-3D dated July 22, 2002
10.1	Amended and Restated Advisory Agreement dated September 30, 2005 between Corporate Property Associates 14 Incorporated and Carey Asset Management Corp	Exhibit 10.1 to Registrant’s Form 10-Q dated November 14, 2005
10.2	Credit Agreement dated as of November 30, 2006 among Corporate Property Associates 14 Incorporated, the lenders party hereto, Wells Fargo Bank, National Association, PNC Bank, National Association, Citizens Bank of Rhode Island, The Bank of New York and Eurohypo AG, New York Branch	Filed herewith
21.1	Subsidiaries of Registrant	Filed herewith
23.1	Consent of PricewaterhouseCoopers LLP	Filed herewith
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

CPA^®:14 2006 10-K — 70

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Corporate Property Associates 14 Incorporated
Date 3/26/2007	By:	/s/ Mark J. DeCesaris
		Mark J. DeCesaris
		Managing Director and acting 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.

Signature	Title	Date
/s/ William P. Carey William P. Carey	Chairman of the Board and Director	3/26/2007
/s/ Gordon F. DuGan Gordon F. DuGan	Chief Executive Officer and Director (Principal Executive Officer)	3/26/2007
/s/ Mark J. DeCesaris Mark J. DeCesaris	Managing Director and acting Chief Financial Officer (acting Principal Financial Officer)	3/26/2007
/s/ Claude Fernandez Claude Fernandez	Managing Director and Chief Accounting Officer (Principal Accounting Officer)	3/26/2007
/s/ Trevor P. Bond Trevor P. Bond	Director	3/26/2007
/s/ Elizabeth P. Munson Elizabeth P. Munson	Director	3/26/2007
/s/ Richard J. Pinola Richard J. Pinola	Chairman of the Audit Committee and Director	3/26/2007
/s/ James D. Price James D. Price	Director	3/26/2007

Report on Form 10-K

The advisor will supply to any shareholder, upon written request and without charge, a copy of the Annual Report on Form 10-K for the year ended December 31, 2006 as filed with the SEC. The 10-K may also be obtained through the SEC’s EDGAR database at www.sec.gov.

CPA^®:14 2006 10-K — 71

EX-10.2

Exhibit 10.2

CREDIT AGREEMENT

dated as of
November 30, 2006

among

CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED,

The Lenders Party Hereto,

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Issuing Bank and Administrative Agent,

PNC BANK, NATIONAL ASSOCIATION,
as Syndication Agent,

Each of

CITIZENS BANK OF RHODE ISLAND,

THE BANK OF NEW YORK,

and

EUROHYPO AG, NEW YORK BRANCH

as a Documentation Agent,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Lead Arranger and Sole Book Runner

TABLE OF CONTENTS

	Page
ARTICLE I. Definitions		1
SECTION 1.1. Defined Terms		1
SECTION 1.2. Classification of Loans and Borrowings		24
SECTION 1.3. Terms Generally		24
SECTION 1.4. Accounting Terms; GAAP		24
ARTICLE II. The Credits		24
SECTION 2.1. Commitments		24
SECTION 2.2. Loans and Borrowings		25
SECTION 2.3. Requests for Borrowings		25
SECTION 2.4. [Reserved]		26
SECTION 2.5. Extension of Maturity Date		26
SECTION 2.6. Letters of Credit		26
SECTION 2.7. Funding of Borrowings		30
SECTION 2.8. Interest Elections		31
SECTION 2.9. Termination and Reduction of Commitments		32
SECTION 2.10. Repayment of Loans; Evidence of Debt		33
SECTION 2.11. Prepayment of Loans		33
SECTION 2.12. Fees		34
SECTION 2.13. Interest		35
SECTION 2.14. Alternate Rate of Interest		36
SECTION 2.15. Increased Costs		36
SECTION 2.16. Break Funding Payments		37
SECTION 2.17. Taxes		38
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs		39
SECTION 2.19. Mitigation Obligations; Replacement of Lenders		41
SECTION 2.20. Increase in Commitment		42
SECTION 2.21. Funds Transfer Disbursements		42
ARTICLE III. Representations and Warranties		44
SECTION 3.1. Organization; Powers		44
SECTION 3.2. Authorization; Enforceability		44
SECTION 3.3. Governmental Approvals; No Conflicts		44
SECTION 3.4. Financial Condition; No Material Adverse Change		45
SECTION 3.5. Properties		46
SECTION 3.6. Litigation and Environmental Matters		46
SECTION 3.7. Compliance with Laws and Agreements		46
SECTION 3.8. Investment Company Status		47
SECTION 3.9. Taxes		47
SECTION 3.10. ERISA		47
SECTION 3.11. Disclosure		47
SECTION 3.12. Insurance		47
SECTION 3.13. [Reserved]		47
SECTION 3.14. SEC Reports		47
SECTION 3.15. Representations and Warranties in Loan Documents		48

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	Page
SECTION 3.16. Organizational Documents		48
SECTION 3.17. REIT Status		48
SECTION 3.18. OFAC		48
ARTICLE IV. Conditions		48
SECTION 4.1. Closing Date		48
SECTION 4.2. Each Credit Event		50
ARTICLE V. Affirmative Covenants		51
SECTION 5.1. Financial Statements and Other Information		51
SECTION 5.2. Notices of Material Events		53
SECTION 5.3. Existence; Conduct of Business		54
SECTION 5.4. Payment of Obligations		55
SECTION 5.5. Maintenance of Properties; Insurance		55
SECTION 5.6. Books and Records; Inspection Rights		55
SECTION 5.7. Compliance with Laws		56
SECTION 5.8. Use of Proceeds and Letters of Credit		56
SECTION 5.9. [Reserved]		56
SECTION 5.10. Solvency of Loan Parties		56
SECTION 5.11. Further Assurances		56
SECTION 5.12. Distributions in the Ordinary Course		57
SECTION 5.13. ERISA Compliance		57
SECTION 5.14. REIT Status		57
SECTION 5.15. New Guarantors		57
SECTION 5.16. Distributions of Income to Borrower		58
ARTICLE VI. Negative Covenants		58
SECTION 6.1. Indebtedness and Other Financial Covenants		58
SECTION 6.2. Liens		60
SECTION 6.3. Fundamental Changes		60
SECTION 6.4. Investments, Loans, Advances, Guarantees and Acquisitions		60
SECTION 6.5. Hedging Agreements		62
SECTION 6.6. ERISA		62
SECTION 6.7. Margin Regulations; Securities Laws		63
SECTION 6.8. Transactions with Affiliates		63
ARTICLE VII. Events of Default		63
SECTION 7.1. Events of Default		63
ARTICLE VIII. The Administrative Agent		66
SECTION 8.1. Appointment and Authorization		66
SECTION 8.2. Wells Fargo as Lender		67
SECTION 8.3. Approvals of Lenders		67
SECTION 8.4. Notice of Defaults		67
SECTION 8.5. Administrative Agent’s Reliance, Etc.		68
SECTION 8.6. Indemnification of Administrative Agent		68
SECTION 8.7. Lender Credit Decision, Etc.		69
SECTION 8.8. Successor Administrative Agent		70
SECTION 8.9. Titled Agents		71
ARTICLE IX. Miscellaneous		71
SECTION 9.1. Notices		71
SECTION 9.2. Waivers; Amendments		72

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	Page
SECTION 9.3. Expenses; Indemnity; Damage Waiver		72
SECTION 9.4. Successors and Assigns		74
SECTION 9.5. Survival		76
SECTION 9.6. Counterparts; Integration; Effectiveness		76
SECTION 9.7. Severability		77
SECTION 9.8. Right of Setoff		77
SECTION 9.9. Governing Law; Jurisdiction; Consent to Service of Process		77
SECTION 9.10. WAIVER OF JURY TRIAL		78
SECTION 9.11. Headings		78
SECTION 9.12. Confidentiality		78
SECTION 9.13. Interest Rate Limitation		79
SECTION 9.14. [Reserved]		79
SECTION 9.15. Electronic Document Delivery		79
SECTION 9.16. USA Patriot Act		80

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SCHEDULES:

Schedule 1	Commitments
Schedule 1.1(a)	CPA REITs
Schedule 1.1(b)	Loan Parties
Schedule 3.2	Ownership Structure
Schedule 3.3	Consents
Schedule 3.4	Existing Indebtedness
Schedule 3.6	Disclosed Matters
Schedule 4.1(f)	Transactions not in the Ordinary Course
EXHIBITS:
Exhibit A	Form of Assignment and Acceptance
Exhibit B	Form of Borrowing Request
Exhibit C	Form of Guaranty
Exhibit D	Form of Interest Rate Election
Exhibit E	Form of Note
Exhibit F-1	Form of Opinion of Reed Smith LLP
Exhibit F-2	Form of Opinion of Local Counsel
Exhibit G	Financial Calculation Schedule Pursuant to Section 5.1
Exhibit H	Form of Intercompany Note
Exhibit I	Form of [Quarterly/Annual] Compliance Certificate to Accompany Reports
Exhibit J	Form of Transfer Authorizer Designation Form

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     THIS CREDIT AGREEMENT (this “Agreement”) dated as of November 30, 2006, among Corporate Property Associates 14 Incorporated, a corporation formed under the laws of the State of Maryland (the “Borrower”), the Lenders party hereto, and Wells Fargo Bank, National Association, as contractual representative of the Lenders (in such capacity, the “Administrative Agent”) and as issuing bank (in such capacity, the “Issuing Bank”), PNC Bank, National Association, as Syndication Agent (each in such capacity, the “Syndication Agent”), each of Citizens Bank of Rhode Island, The Bank of New York, and Eurohypo AG, New York Branch, as a Documentation Agent (each in such capacity, a “Documentation Agent”), and Wells Fargo Bank, National Association, as Lead Arranger and Sole Book Runner (the “Arranger”).

     WHEREAS, the Borrower has entered into that certain Agreement and Plan of Merger dated as of June 29, 2006 (as amended, restated, supplemented or otherwise modified from time to time, the “Merger Agreement”) by and among the Borrower, Corporate Property Associates 12 Incorporated (“CPA 12”), CPA 14 Acquisition Inc., CPA Holdings Incorporated and CPA 12 Merger Sub Inc., pursuant to which CPA 12 is to merge with and into the Borrower with the Borrower continuing as the surviving entity (the “Merger”); and

     WHEREAS, the Borrower has requested the Issuing Bank and the Lenders to make available to the Borrower a revolving credit facility in the initial amount of $150,000,000, which will include a $25,000,000 letter of credit subfacility, on and subject to the terms and conditions contained herein, the proceeds of which the Borrower may use to satisfy certain of its obligations arising in connection with the Merger;

     NOW, THEREFORE, in consideration of the mutual agreements contained herein, the parties hereto agree as follows:

ARTICLE I.

Definitions

     SECTION 1.1. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

     “ABR,” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

     “Accession Agreement” means an Accession Agreement substantially in the form of Annex I to the Guaranty.

     “Adjusted EBITDA” means, for any Person, for any period and without duplication, (a) EBITDA for such Person, for such period, plus (b) to the extent deducted when computing such EBITDA, Performance Fees, minus (c) to the extent not already deducted when computing such EBITDA, the greater of (i) the actual management fees in respect of Projects owned by such Person and its consolidated subsidiaries paid during such period and (ii) an imputed management fee equal to 3.0% of (1) rental income (including income from financing leases) for

all Projects owned by such Person and its consolidated subsidiaries and (2) rental income (including income from financing leases) of Joint Ventures allocable to such Person or its subsidiaries based on their ownership interests in such Joint Ventures.

     “Administrative Agent” means Wells Fargo Bank, National Association, in its capacity as contractual representative of the Lenders hereunder.

     “Administrative Details Form” means an administrative questionnaire in a form supplied by the Administrative Agent.

     “Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

     “Alternate Base Rate” means, for any day, a rate per annum equal to the greater of the Prime Rate in effect on such day and the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

     “Alternate Merger” has the meaning set forth in the Merger Agreement.

     “Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.

     “Applicable Rate” means, for any day, with respect to any ABR Loan or Eurodollar Revolving Loan, as the case may be, the applicable rate per annum set forth below under the caption “ABR Spread” or “Eurodollar Spread”, as the case may be, based upon the range into which the Leverage Ratio then falls in accordance with the following table:

Leverage Ratio	Eurodollar Spread			ABR Spread
less than 55%		1.35	%		0.0	%
55%-less than 60%		1.45	%		0.0	%
60% or higher		1.60	%		0.125	%

     Any change in the Applicable Rate determined in accordance with this definition shall be effective as of the first Business Day of the calendar month following the month that the Borrower delivers to the Administrative Agent a Compliance Certificate pursuant to Sections 5.1(a)(ii) and (b)(ii). In the event the Leverage Ratio in any Compliance Certificate is later determined to have been inaccurate, the Applicable Rate shall be adjusted retroactively to the date of delivery of such inaccurate Compliance Certificate to the percentage corresponding to the correct Leverage Ratio for that date, and such adjusted Applicable Rate shall be applicable

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for the same period as that period during which the Applicable Rate was incorrectly determined based on the original inaccurate Leverage Ratio.

     “Arranger” has the meaning set forth in the preamble.

     “Assignee” has the meaning set forth in Section 9.4(b).

     “Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.4), and accepted by the Administrative Agent, substantially in the form of Exhibit A or any other form approved by the Administrative Agent.

     “Availability Period” means the period from and including the Closing Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments.

     “Average Unused Commitment Percentage” means, for any period, the ratio, expressed as a percentage, of (a) the average daily aggregate amount of the Unused Commitments of the Lenders during such period to (b) the average daily aggregate amount of the Commitments of the Lenders during such period.

     “Board” means the Board of Governors of the Federal Reserve System of the United States of America.

     “Borrower” has the meaning set forth in the preamble.

     “Borrowing” means Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.

     “Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.3, substantially in the form of Exhibit B.

     “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in San Francisco, California are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. Unless specifically referenced in this Agreement or any other Loan Document as a Business Day, all references to “days” in this Agreement and each other Loan Document shall be to calendar days.

     “Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

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     “Capital Lease” means any lease by a Person of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, the obligations under which are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP.

     “Cash and Cash Equivalents” means unrestricted (i) cash, (ii) marketable direct obligations issued or unconditionally guaranteed by the United States government and backed by the full faith and credit of the United States government; and (iii) domestic and Eurodollar certificates of deposit and time deposits, bankers’ acceptances and floating rate certificates of deposit issued by any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies (fully protected against currency fluctuations), which, at the time of acquisition, are rated A-1 (or better) by S&P or P-1 (or better) by Moody’s provided that the maturities of such Cash and Cash Equivalents shall not exceed one year.

     “Change in Control” means (i) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934, as amended, and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) (other than the Borrower, any of its Subsidiaries, any trustee, fiduciary or other person or entity holding securities under any employee benefit plan of the Borrower or any of its Subsidiaries and other than any wholly owned direct or indirect subsidiary of the Borrower), of shares representing more than 10% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; or (ii) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (A) nominated by the board of directors of the Borrower nor (B) appointed by directors so nominated; or (iii) the acquisition of direct or indirect Control of the Borrower by any Person or group (other than any wholly owned direct or indirect subsidiary of the Borrower).

     “Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

     “Closing Date” means the date on which the conditions set forth in Section 4.1 are satisfied (or waived in accordance with Section 9.2).

     “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     “Combined Equity Value” means Total Value less Total Outstanding Indebtedness.

     “Commitment” means, with respect to each Lender, the commitment of such Lender to make Revolving Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Revolving Credit

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Exposure hereunder, as such commitment may be (a) increased pursuant to Section 2.20 or (b) reduced from time to time pursuant to Section 2.9 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.4. The initial amount of each Lender’s Commitment is set forth on Schedule 1, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders’ Commitments is $150,000,000.

     “Consolidated Businesses” means the Borrower and its Subsidiaries, on a consolidated basis (without taking into account any non-wholly owned Person or entity).

     “Contingent Obligation” as to any Person means, without duplication, (i) any contingent obligation of such Person required to be shown on such Person’s balance sheet in accordance with GAAP, and (ii) any obligation required to be disclosed in the footnotes to such Person’s financial statements in accordance with GAAP, guaranteeing partially or in whole any non-recourse Indebtedness, lease, dividend or other obligation, exclusive of contractual indemnities (including, without limitation, any indemnity or price-adjustment provision relating to the purchase or sale of securities or other assets) and guarantees of non-monetary obligations (other than guarantees of completion) which have not yet been called on or quantified, of such Person or of any other Person. The amount of any Contingent Obligation described in clause (ii) shall be deemed to be (a) with respect to a guaranty of interest or interest and principal, or operating income guaranty, the sum of all payments required to be made thereunder (which in the case of an operating income guaranty shall be deemed to be equal to the debt service for the note secured thereby), calculated at the interest rate applicable to such Indebtedness, through (i) in the case of an interest or interest and principal guaranty, the stated maturity date of the obligation (and commencing on the date interest could first be payable thereunder), or (ii) in the case of an operating income guaranty, the date through which such guaranty will remain in effect, and (b) with respect to all guarantees not covered by the preceding clause (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such guaranty is made or, if not stated or determinable, the maximum reasonable anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as recorded on the balance sheet and on the footnotes to the most recent financial statements of the Borrower required to be delivered pursuant hereto. Notwithstanding anything contained herein to the contrary, guarantees of completion and of Nonrecourse Carveouts shall not be deemed to be Contingent Obligations unless and until a claim for payment has been made thereunder, at which time any such guaranty of completion or of Nonrecourse Carveouts shall be deemed to be a Contingent Obligation in an amount equal to any such claim. Subject to the preceding sentence, (i) in the case of a joint and several guaranty given by such Person and another Person (but only to the extent such guaranty is recourse, directly or indirectly to the applicable Person), the amount of the guaranty shall be deemed to be 100% thereof unless and only to the extent that (X) such other Person has delivered Cash or Cash Equivalents to secure all or any part of such Person’s guaranteed obligations or (Y) such other Person holds an Investment Grade Credit Rating from either Moody’s or S&P, and (ii) in the case of a guaranty (whether or not joint and several) of an obligation otherwise constituting Indebtedness of such Person, the amount of such guaranty shall be deemed to be only that amount in excess of the amount of the obligation constituting Indebtedness of such Person. Notwithstanding anything contained herein to the contrary, “Contingent Obligations” shall not be deemed to include guarantees of loan commitments or of construction loans to the extent the same have not been drawn.

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     “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “controlled” have meanings correlative thereto.

     “CPA 12” has the meaning set forth in the recitals of this Agreement.

     “CPA REIT” means (a) a REIT managed or advised by W.P. Carey & Co. LLC (or a wholly-owned Subsidiary thereof) and listed on Schedule 1.1(a) hereto and (b) any other REIT managed or advised by W.P. Carey & Co. LLC (or a wholly-owned Subsidiary thereof) which REIT has investment policies, and assets of classes and qualities, similar in each case to the REITs listed on Schedule 1.1(a).

     “Credit Event” has the meaning set forth in Section 4.2.

     “Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

     “Defaulting Lender” has the meaning set forth in Section 2.18(e).

     “Disclosed Matters” means the actions, suits and proceedings and the environmental matters disclosed in Schedule 3.6.

     “dollars” or “$” refers to lawful money of the United States of America.

     “EBITDA” means, for any Person for any period, the Net Income (Loss) of such Person for such period taken as a single accounting period, plus (a) the sum of the following amounts of such Person and its subsidiaries for such period determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss): (i) depreciation expense, (ii) amortization expense and other non-cash charges, (iii) interest expense, (iv) income tax expense, (v) extraordinary losses (and other losses on asset sales not otherwise included in extraordinary losses determined on a consolidated basis in conformity with GAAP), (vi) minority interests in Unconsolidated Entities and (vii) in the case of the Borrower, the aggregate of all dividends paid on the Borrower’s or any of its consolidated Subsidiaries’ preferred equity interests, less (b) the extraordinary gains of such Person and its subsidiaries determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss) (and in the case of the Borrower and its consolidated subsidiaries, other gains on asset sales not otherwise included in extraordinary gains determined on a consolidated basis in conformity with GAAP); plus (c) the portion allocable to such Person of EBITDA of such Person’s Unconsolidated Entities (taking into account appropriate adjustments, if any, for minority interests).

     “Eligible Assignee” means any Person that is: (a) an existing Lender; (b) a commercial bank, trust company, savings and loan association, savings bank, insurance company, investment bank or pension fund organized under the laws of the United States of America, any state thereof or the District of Columbia, and having total assets in excess of $5,000,000,000; or (c) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Co-operation and Development, or a political subdivision of any

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such country, and having total assets in excess of $10,000,000,000, provided that such bank is acting through a branch or agency located in the United States of America. If such entity is not currently a Lender, such entity’s (or in the case of a bank which is a subsidiary, such bank’s parent’s) senior unsecured long term indebtedness must be rated BBB or higher by S&P, Baa2 or higher by Moody’s or the equivalent or higher of either such rating by another rating agency acceptable to the Administrative Agent.

     “Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material.

     “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

     “ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

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     “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the LIBO Rate.

     “Event of Default” has the meaning set forth in Article VII.

     “Excluded Subsidiary” means:

     (a) a Subsidiary (i) holding title to assets which are or are to become collateral for any Indebtedness that (A) is (or is to be) secured by a Lien on property of such Subsidiary (“Secured Indebtedness”) and (B) is permitted to be incurred pursuant to this Agreement and (ii) which is prohibited from Guaranteeing the Indebtedness of any other Person pursuant to (x) any document, instrument or agreement evidencing or securing such Secured Indebtedness or (y) a provision of such Subsidiary’s organizational documents which provision was included in such Subsidiary’s organizational documents as a condition to the extension of such Secured Indebtedness; or

     (b) a Subsidiary that has no assets (or only a nominal amount of assets); or

     (c) a Subsidiary whose assets consist solely of direct or indirect Joint Venture Holdings issued by Joint Ventures that own Projects subject to mortgage Liens; or

     (d) a Subsidiary that is not incorporated or organized under the laws of any state of the United States or the District of Columbia and that if such Subsidiary were to become a Guarantor, doing so would reasonably be expected to have material adverse tax consequences to the Borrower as a result of the undistributed earnings of such Subsidiary (as determined for United States federal income tax purposes) being treated as a deemed dividend to such Subsidiary’s United States parent.

The parties agree that Marie-Invest s.p.r.l and its Subsidiaries shall each be an “Excluded Subsidiary”.

     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.19(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 2.17(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.17(a).

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     “Fair Market Value” means, with respect to any asset or property, the sale value that would be obtained in an arm’s-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy. Fair Market Value shall be determined by an officer of the Borrower acting in good faith and shall be evidenced by an Officer’s Certificate, except in the case of the determination of Fair Market Value of Permitted REIT Investments which are “restricted securities” (as defined below) having a Fair Market Value in excess of $5,000,000, in which case the determination of such Fair Market Value shall be, at the election of the Borrower, by (i) the board of directors of the Borrower acting in good faith and shall be evidenced by a resolution of the board of directors, or (ii) an appraisal of an independent third-party appraiser which shall be a Person regularly engaged in the valuation of securities of the same type as such Permitted REIT Investment. The Fair Market Value of any readily marketable securities shall be the number of such securities multiplied by the average Market Price per share or per unit of such securities during the five consecutive trading days immediately preceding the date of determination. The “Market Price” of any security on any trading day shall mean, with respect to any security which is listed on a national securities exchange, the last sale price regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case on the New York Stock Exchange, or, if such security is not listed or admitted to trading on such exchange, on the principal national securities exchange on which such security is listed or admitted to trading, or, if such security is not listed or admitted to trading on any national securities exchange but is designated as a national market system security by the National Association of Securities Dealers, the last sale price, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, in either case as reported on the National Association of Securities Dealers Automated Quotation/National Market System, or if such security is not so designated as a national market systems security, the average of the highest reported bid and lowest reported asked prices as furnished by the National Association of Securities Dealers or similar organization if the National Association of Securities Dealers is no longer reporting such information. With respect to operating partnership units of any REIT, such operating partnership units shall in no event have a value greater than the value of the number of shares of the REIT into which such operating partnership units are then convertible. For purposes of this definition, the term “restricted securities” shall mean securities which constitute “restricted securities” or are held by an “affiliate” of the issuer of such securities, in each case in accordance with Rule 144 promulgated under the Securities Act of 1933, as amended, or are otherwise subject to any agreement, arrangement or other understanding in any way limiting or affecting the right of the holder of such securities to dispose of such securities.

     “Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

     “Financial Officer” means, with respect to a Person, the chief financial officer, principal accounting officer, treasurer or controller of such Person.

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     “Financial Statements” means financial statements presenting the consolidated and consolidating financial position of the Borrower and its Subsidiaries as at the date indicated and the results of their operations and cash flow for the period indicated in accordance with GAAP, subject to normal adjustments.

     “Fixed Charges” means, with respect to any period, the sum of (a) Total Interest Expense for such period and (b) the aggregate of all scheduled principal payments on Total Outstanding Indebtedness according to GAAP made or required to be made during such period by the Borrower and its Subsidiaries (with appropriate adjustments for minority interests) or allocable to the Borrower and its Subsidiaries on account of Joint Venture Holdings (but excluding balloon payments of principal due upon the stated maturity of any Indebtedness), and (c) the aggregate of all dividends payable on the Borrower’s or any of its consolidated Subsidiaries’ preferred equity interests (if any).

     “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia.

     “GAAP” means generally accepted accounting principles in the United States of America.

     “Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

     “Ground Lease” means a ground lease containing the following terms and conditions: (a) a remaining term (exclusive of any unexercised extension options) of forty (40) years or more from the date hereof; (b) the right of the lessee to mortgage and encumber its interest in the leased property without the consent of the lessor; (c) the obligation of the lessor either (i) to give the holder of any mortgage Lien on such leased property written notice of any defaults on the part of the lessee and agreement of such lessor that such lease will not be terminated until such holder has had a reasonable opportunity to cure or complete foreclosures, and fails to do so or (ii) upon termination of such ground lease, to enter into a new lease with such lessor containing substantially the same (or more favorable) terms and conditions as the terms and conditions of such ground lease; (d) reasonable transferability of the lessee’s interest under such lease, including ability to sublease; and (e) such other rights customarily required by mortgagees making a loan secured by the interest of the holder of the leasehold estate demised pursuant to a ground lease or master lease. The ground leases currently in effect with respect to the following properties will not be subject to the requirement of clause (a) of this definition:

Building ID	Tenant	Start Date	Expiration Date	Location
WA0031	Del Monte Corporation	5/1/1996	4/30/2016	Yakima, WA
TX0671	McCoy Workplace Solutions, L.P.	11/1/2001	11/30/2011	Houston, TX
TN0081	Federal Express Corporation	2/1/2000	1/31/2020	Collierville, TN

     “Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any

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Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party or applicant in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

     “Guarantor” means any Person that is a party to the Guaranty as a “Guarantor” and in any event shall include all Subsidiaries of the Borrower as of the Closing Date (including any acquired in connection with the Merger but excluding any Excluded Subsidiary).

     “Guaranty” means the Guaranty to which the Guarantors are parties substantially in the form of Exhibit C.

     “Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

     “Hedging Agreement” means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.

     “Improvements” means all buildings, fixtures, structures, parking areas, landscaping and other improvements whether existing now or hereafter constructed, together with all machinery and mechanical, electrical, HVAC and plumbing systems presently located thereon and used in the operation thereof, excluding (a) any such items owned by utility service providers, (b) any such items owned by tenants or other third parties unaffiliated with the Borrower and (c) any items of personal property.

     “Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid (excluding current Taxes, water and sewer charges and assessments and current trade liabilities incurred in the ordinary course of business in accordance with customary terms), (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person (other than current trade liabilities incurred in the ordinary course of business in accordance with customary terms), (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the

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ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others and other Contingent Obligations, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party or applicant in respect of letters of credit and letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, (k) all obligations of such Person to purchase or redeem any shares of equity securities issued by such Person, including obligations under so-called forward equity purchase contracts to the extent such obligations are not payable solely in equity interests, (l) all obligations of such Person in respect of any forward contract, futures contract, swap or other agreement, the value of which is dependent upon interest rates or currency exchange rates, and (m) all obligations of such Person in respect of any so-called “synthetic lease” (i.e., a lease of property which is treated as an operating lease under GAAP and as a loan for U.S. income tax purposes). The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

     “Indemnified Taxes” means Taxes other than Excluded Taxes.

     “Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.8 and substantially in the form of Exhibit D or other form acceptable to the Administrative Agent.

     “Interest Payment Date” means the first day of each calendar month.

     “Interest Period” means with respect to any Eurodollar Borrowing the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect (or such shorter period as contemplated by clause (iii) below); provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, (iii) the Interest Period for Eurodollar Borrowings may, if the same is available to all Lenders, be shorter than one (1) month in order to consolidate two (2) or more Eurodollar Borrowings and (iv) the Interest Period for all Eurodollar Borrowings shall be one (1) month until the earlier of ninety (90) days after the Closing Date or the date on which the Arranger completes the syndication of the total Commitments, as evidenced by written notice from the Arranger to the Borrower as to such completion. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

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     “Investment Grade Credit Rating” means a Debt Rating of BBB- or higher by S&P or Baa3 or higher by Moody’s.

     “Issuing Bank” means Wells Fargo Bank, National Association, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.6(i). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

     “Joint Venture” means a partnership, limited liability company, joint venture (including a tenancy-in-common ownership pursuant to a written agreement providing for substantially the same rights and obligations relating to such property that would be in a joint venture agreement), or corporation.

     “Joint Venture Holding” means an interest in a Joint Venture held or owned by the Borrower (or one of its Subsidiaries) which is not wholly owned by the Borrower (or one of its Subsidiaries).

     “LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of Credit.

     “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.

     “Lease” means a lease, license, concession agreement or other agreement providing for the use or occupancy of any portion of any Project, including all amendments, supplements, modifications and assignments thereof and all side letters or side agreements relating thereto.

     “Lender Affiliate” means, (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

     “Lenders” means the Persons listed on Schedule 1 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance.

     “Letter of Credit” means any letter of credit issued pursuant to this Agreement.

     “Leverage Ratio” as of any date means the ratio, expressed as a percentage, of the Total Liabilities as of such date to the Total Value as of such date.

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     “LIBO Rate” means, for any Eurodollar Borrowing for any Interest Period, the rate per annum, rounded upward, if necessary, to the nearest one one-hundredth of one percent (0.01%) quoted by Wells Fargo Bank, National Association as the London Interbank Offered Rate for deposits in Dollars (being the LIBOR Rate quoted by the British Bankers Association for maturities of 1, 2, 3 or 6 months, so long as the same is published and available) at approximately 9:00 a.m. San Francisco, California time, 2 Business Days prior to the commencement of such Interest Period for purposes of calculating effective rates of interest for loans or obligations making reference thereto for an amount approximately equal to such Eurodollar Borrowing and for a period of time approximately equal to such Interest Period. Each determination of the LIBO Rate by the Administrative Agent shall, in absence of manifest error, be conclusive and binding.

     “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset (excluding, in the case of assets consisting of Real Property owned by the Borrower, its Subsidiaries or a Joint Venture, the lien of a mortgage or deed of trust on the Real Property interest not owned by the Borrower, its Subsidiaries or the Joint Venture; provided, that the ownership or estate interest of the Borrower in such Real Property is not subordinate to such a lien and the Borrower’s interest would not be adversely affected by such lien either through foreclosure thereof or otherwise (e.g., a mortgage on the leasehold interest of a Project owned in fee by a Subsidiary does not constitute a Lien)), (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

     “Loan Parties” means the Borrower and the Guarantors. Schedule 1.1(b) sets forth all of the Loan Parties as of the date of this Agreement.

     “Loan Documents” means this Agreement, the Notes, the Guaranty and all other instruments, agreements and written obligations between the Borrower and any of the Lenders pursuant to or in connection with the transactions contemplated hereby.

     “Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement.

     “Margin Stock” means “margin stock” or “margin securities” as such terms are defined in Regulation U and Regulation X of the Board as in effect from time to time.

     “Marketable Securities” means short-term marketable securities, issued by any entity (other than an Affiliate of the Borrower) organized and existing under the laws of the United States of America, with a long-term unsecured indebtedness rating, at the time when any investment therein is made, with Moody’s or S&P of Baa2/BBB or better, respectively.

     “Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its material obligations under

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the Loan Documents to which it is a party or (c) the rights of or benefits available to the Lenders under the Loan Documents

     “Material Indebtedness” means (a) Indebtedness (other than the Loans, Letters of Credit and Nonrecourse Indebtedness), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower, the other Loan Parties and the other Subsidiaries in an aggregate principal amount exceeding $10,000,000 and (b) Nonrecourse Indebtedness of any one or more of the Borrower, the other Loan Parties and the other Subsidiaries in an aggregate principal amount exceeding $50,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower, any other Loan Party or any other Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower, such other Loan Party or such other Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.

     “Maturity Date” means November 29, 2009, as such date may be extended pursuant to Section 2.5.

     “Merger” has the meaning set forth in the recitals of this Agreement.

     “Merger Agreement” has the meaning set forth in the recitals of this Agreement.

     “Merger Transactions” means the transactions contemplated by the Merger Agreement, including without limitation, (a) the sale of assets by CPA 12 to W.P. Carey & Co. LLC pursuant to the Sale Agreement (as defined in the Merger Agreement); (b) the making of the Special Distribution (as defined in the Merger Agreement) and (c) the Merger.

     “Moody’s” means Moody’s Investors Service, Inc.

     “Mortgage Asset” means Indebtedness owed to the Borrower or a Subsidiary and secured by a mortgage or deed of trust on a fee interest or a leasehold interest in Real Property and all collateral security related thereto.

     “Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

     “Net Asset Value” means the value of a security determined on a net asset value basis by an officer of the Borrower in good faith and evidenced by an Officer’s Certificate, which determination shall be based on an appraisal of an independent third-party appraiser regularly engaged in the valuation of securities of the same type as the securities being valued.

     “Net Income (Loss)” means, for any Person for any period, the aggregate of net income (or loss) of such Person and its subsidiaries for such period, determined on a consolidated basis in conformity with GAAP.

     “Net Offering Proceeds” means all cash or other assets received by the Borrower as a result of the sale of common shares, preferred shares, partnership interests, limited liability

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company interests, convertible securities or other ownership or equity interests in the Borrower, less customary costs and discounts of issuance paid by the Borrower.

     “Nonrecourse Carveouts” means the personal liability of an obligor under Indebtedness for fraud, misrepresentation, misapplication or misappropriation of cash, waste, environmental liability, bankruptcy filing or any other circumstances customarily excluded from non-recourse provisions and non-recourse financing of real estate.

     “Nonrecourse Indebtedness” of any Person means all Indebtedness of such Person with respect to which recourse for payment is limited to specific assets encumbered by a Lien securing such Indebtedness; provided, however, that personal recourse of a holder of Indebtedness against any obligor with respect thereto for fraud, misrepresentation, misapplication or misappropriation of cash, waste, environmental liabilities, and other circumstances customarily excluded from nonrecourse provisions in nonrecourse financing of real estate shall not, by itself, prevent any Indebtedness from being characterized as Nonrecourse Indebtedness; provided, further, that if in connection therewith a personal recourse claim is established by judgment decree or award by any court of competent jurisdiction or arbitrator of competent jurisdiction and execution or enforcement thereof shall not be effectively stayed for 30 consecutive days and such Indebtedness shall not be paid or otherwise satisfied within such 30-day period, then such Indebtedness in an amount equal to the personal recourse claim established by judgment or award shall not constitute Nonrecourse Indebtedness for purposes of this Agreement.

     “Note” means a promissory note in the form attached hereto as Exhibit E payable to a Lender, evidencing certain of the Obligations of the Borrower to such Lender and executed by the Borrower as set forth in Section 2.10(e), as the same may be amended, supplemented, modified or restated from time to time. “Notes” means, collectively, all of such Notes outstanding at any given time.

     “Obligations” means, collectively, the obligations of the Borrower in respect of principal, interest, fees, indemnities, and all other amounts under or in connection with this Agreement or any of the other Loan Documents, including reimbursement obligations in respect of Letters of Credit, in each case whether such obligation arose before or after the commencement of any bankruptcy, insolvency, receivership or other similar proceeding and whether or not the obligation is undersecured or oversecured or deemed allowable, provable or accruing against the Borrower in any such proceeding, including interest calculated from the commencement of any such proceeding at the rate provided in Section 2.13(c).

     “Officer’s Certificate” means a certificate signed by the President, any Vice President or any Financial Officer of any Person, or such other officer as may be specified herein, and delivered to the Administrative Agent hereunder.

     “Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.

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     “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

     “Performance Fees” means, for any Person and for any period, performance fees paid by such Person in equity securities of such Person during such period.

     “Permitted Encumbrances” means:

     (a) liens imposed by law for taxes, assessments, governmental charges or levies that are not yet due or are being contested in compliance with Section 5.4;

     (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.4;

     (c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations or to secure the performance of bids, purchases, contracts (other than for the payment of borrowed money) and surety, appeal and performance bonds;

     (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

     (e) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary; and

     (f) statutory and common law landlord liens;

provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

     “Permitted Investments” means:

     (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

     (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, a rating of not less than A-2 or P-2 from S&P or from Moody’s, respectively;

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     (c) investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

     (d) shares of so called “money market funds” registered with the SEC under the Investment Company Act of 1940, as amended, which maintain a level per share value, invest principally in marketable direct or guaranteed obligations of the United States of America and agencies and instrumentalities thereof and investments in commercial paper having, at such date, a rating of not less than A-1 or P-1 from S&P or from Moody’s, respectively, and have total assets in excess of $50,000,000 provided that any such shares are moved to a qualifying money market fund within thirty (30) days after the Borrower or any Subsidiary has knowledge that any money market fund no longer has total assets in excess of that amount;

     (e) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and

     (f) short-term investments in cash equivalents issued by, or maintained with, a Person not formed under the laws of the United States of America or any State thereof and made in accordance with the Borrower’s customary investment practices for cash management needs of the Borrower and its Subsidiaries.

     “Permitted REIT Investments” means investments by the Borrower or any Subsidiary in publicly traded warrants, publicly traded equity securities and operating partnership units of publicly traded REITS (and excluding in any event investments in the securities of the CPA REITS). For purposes hereof, “publicly traded” shall mean that such investments are traded on a nationally-recognized market with widely distributed standard price quotations.

     “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

     “Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

     “Prime Rate” means the rate of interest per annum publicly announced from time to time by the Lender then acting as Administrative Agent as its prime rate in effect at its principal office; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

     “Project” means any office, industrial/manufacturing facility, educational facility, retail facility, distribution/warehouse facility, assembly or production facility, hotel, day care center,

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storage facility, health care/hospital facility, restaurant, radio or TV station, broadcasting/communication facility (including any transmission facility), any combination of any of the foregoing, or any land to be developed into any one or more of the foregoing pursuant to a written agreement with respect to such land for a transaction involving a Lease, in each case owned, directly or indirectly, by any of the Consolidated Businesses.

     “Property” means any Real Property or personal property, plant, building, facility, structure, equipment, general intangible, receivable, or other asset owned or leased by any Consolidated Business or any Joint Venture in which the Borrower, directly or indirectly, has a Joint Venture Holding.

     “Real Property” means any present and future right, title and interest (including, without limitation, any leasehold estate) in (i) any plots, pieces or parcels of land, (ii) any Improvements of every nature whatsoever (the rights and interests described in clauses (i) and (ii) above being the “Premises”), (iii) all easements, rights of way, gores of land or any lands occupied by streets, ways, alleys, passages, sewer rights, water courses, water rights and powers, and public places adjoining such land, and any other interests in property constituting appurtenances to the Premises, or which hereafter shall in any way belong, relate or be appurtenant thereto, (iv) all hereditaments, gas, oil, minerals (with the right to extract, sever and remove such gas, oil and minerals), and easements, of every nature whatsoever, located in, on or benefiting the Premises and (v) all other rights and privileges thereunto belonging or appertaining and all extensions, additions, improvements, betterments, renewals, substitutions and replacements to or of any of the rights and interests described in clauses (iii) and (iv) above.

     “Register” has the meaning set forth in Section 9.4.

     “REIT” means a domestic trust or corporation that qualifies as a real estate investment trust under the provisions of Sections 856, et seq. of the Code.

     “Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

     “Required Lenders” means, at any time, Lenders having Revolving Credit Exposures and Unused Commitments representing at least 66-2/3% of the sum of the total Revolving Credit Exposures and Unused Commitments at such time, and in any event shall include the Lender then acting as Administrative Agent; provided, that, in the event any Lender shall have failed to fund its Applicable Percentage of any Borrowing requested by the Borrower which such Lender is obligated to fund under the terms of this Agreement and any such failure has not been cured as provided in Section 2.7, then for so long as such failure continues, “Required Lenders” means Lenders (excluding all Lenders whose failure to fund their respective Applicable Percentages of such Borrowings have not been so cured) having Revolving Credit Exposures and Unused Commitments representing at least 66-2/3% of the sum of the total Revolving Credit Exposures and Unused Commitments of such Lenders at such time, and in any event shall include the Lender then acting as Administrative Agent. At all times during which there are two (2) or more Lenders party hereto (excluding all Lenders whose failure to fund their respective Applicable

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Percentages of such Borrowings have not been cured), “Required Lenders” must include at least two (2) Lenders.

     “Restricted Payment” has the meaning set forth in Section 6.1(g).

     “Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Revolving Loans and its LC Exposure at such time.

     “Revolving Loan” means a Loan made pursuant to Sections 2.2 and 2.3.

     “S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc.

     “Secured Indebtedness” means any Indebtedness secured by a Lien (excluding Indebtedness hereunder).

     “Solvent”, when used with respect to any Person, means that at the time of determination:

     (i) the fair saleable value of its assets is in excess of the total amount of its liabilities (including, without limitation, contingent liabilities); and

     (ii) the present fair saleable value of its assets is greater than its probable liability on its existing debts as such debts become absolute and matured; and

     (iii) it is then able and expects to be able to pay its debts (including, without limitation, contingent debts and other commitments) as they mature; and

     (iv) it has capital sufficient to carry on its business as conducted and as proposed to be conducted.

     “subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

     “Subsidiary” means any direct or indirect subsidiary of the Borrower.

     “Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

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     “Tenant Allowance” means a cash allowance paid to a tenant by the landlord pursuant to a Lease.

     “TI Work” means any construction or other “build-out” of tenant leasehold improvements to the space demised to such tenant under Leases (excluding such tenant’s furniture, fixtures and equipment) performed pursuant to the terms of such Leases, whether or not such tenant improvement work is performed by or on behalf of the landlord or as part of a Tenant Allowance.

     “Total Interest Expense” means, for any period, the sum, without duplication, of (i) interest expense of the Borrower and its Subsidiaries paid during such period (with appropriate adjustments for minority interests) and (ii) interest expense of the Borrower and its Subsidiaries accrued and/or capitalized for such period (with appropriate adjustments for minority interests) and (iii) the portion of the interest expense of Joint Ventures allocable to the Borrower and its Subsidiaries in accordance with GAAP on account of ownership of Joint Venture Holdings and paid during such period and (iv) the portion of the interest expense of Joint Ventures allocable to the Borrower and its Subsidiaries in accordance with GAAP on account of ownership of Joint Venture Holdings and accrued and capitalized for such period, in each case including participating interest expense but excluding extraordinary interest expense, and net of amortization of deferred costs associated with new financings or refinancings of existing Indebtedness.

     “Total Liabilities” means, as of a given date, all liabilities which would, in conformity with GAAP, be properly classified as a liability on a consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of such date, and in any event shall include (without duplication): (a) Total Outstanding Indebtedness; (b) the amount of preferred equity interests of the Borrower and its consolidated Subsidiaries; (c) all purchase and repurchase obligations and forward commitments of such Person to the extent such obligations or commitments are evidenced by a binding purchase agreement (forward commitments shall include without limitation (i) forward equity commitments and (ii) commitments to purchase any real property under development, redevelopment or renovation); and (d) all liabilities and obligations of the Borrower, its consolidated Subsidiaries or any other Person in respect of “off-balance sheet arrangements” (as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1933, as amended) which the Borrower would be required to disclose in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Borrower’s report on Form 10-Q or Form 10-K (or their equivalents) which the Borrower is required to file with the Securities and Exchange Commission (or any Governmental Authority substituted therefor).

     “Total Outstanding Indebtedness” means, as of any date, the sum, without duplication, of (i) the amount of Indebtedness of the Borrower and its Subsidiaries set forth on the then most recent quarterly financial statements of the Borrower, prepared in accordance with GAAP, plus any additional Indebtedness incurred by the Borrower and its Subsidiaries since the time of such statements (with appropriate adjustments for minority interests) and (ii) the outstanding amount of Joint Venture Indebtedness allocable in accordance with GAAP on account of ownership of Joint Venture Holdings to any of the Borrower and its Subsidiaries as of the time of determination (with appropriate adjustments for minority interests) and (iii) the Contingent

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Obligations of the Borrower and its Subsidiaries and, to the extent allocable to the Borrower and its Subsidiaries in accordance with GAAP on account of ownership of Joint Venture Holdings, of the Joint Ventures (with appropriate adjustments for minority interests).

     “Total Value” means, as of any date, the sum, without duplication, of (i) in respect of Projects owned or leased pursuant to a Ground Lease by the Borrower and its Subsidiaries for at least four (4) fiscal quarters, the Adjusted EBITDA of the Borrower and its Subsidiaries attributable to such Projects as of the last day of the fiscal quarter immediately preceding the fiscal quarter in which such date occurs for the previous four (4) consecutive fiscal quarters divided by 8.5%; (ii) the investment (at cost without depreciation) in Projects owned or leased pursuant to a Ground Lease by the Borrower and its Subsidiaries for fewer than four fiscal quarters (with appropriate adjustments for minority interests); (iii) the investment (at cost without depreciation) in Joint Venture Holdings for fewer than four fiscal quarters which is allocable to the Borrower and its Subsidiaries based on their ownership interests in the related Joint Ventures in accordance with GAAP (with appropriate adjustments for minority interests); (iv) unrestricted Cash and Cash Equivalents which would be included on the Consolidated Businesses’ consolidated balance sheet as of such date (with appropriate adjustments for minority interests); (v) Real Property under construction of the Borrower and its consolidated Subsidiaries valued at cost; (vi) the Fair Market Value of all Marketable Securities held by the Borrower and its Subsidiaries, and (vii) investments in notes secured by mortgages on the real property of any Person valued at the book value stated on the most recent financial statement. For purposes of this definition, when determining how long the Borrower or one of its Subsidiaries has owned or leased a Project that was owned or leased by CPA 12 or one of its subsidiaries at the time of the Merger, the Borrower or its applicable Subsidiary shall be deemed to have owned or leased such Project from the date CPA 12 or its applicable Subsidiary first owned or leased such Project.

     “Transactions” means the execution, delivery and performance by the Borrower of this Agreement, the borrowing of Loans, the use of the proceeds thereof, the issuance of Letters of Credit hereunder and the execution, delivery and performance by the Borrower or the Subsidiaries (who may be parties to the Loan Documents) of the other Loan Documents, and the transactions contemplated by the Loan Documents.

     “Transfer Authorizer Designation Form” means a form substantially in the form of Exhibit J to be delivered to the Administrative Agent pursuant to Section 4.1, as the same may be amended, restated or modified from time to time.

     “Triple Net Lease” means a Lease representing all or substantially all of the rentable area of a Property where the tenant is responsible for real estate taxes and assessments, repairs and maintenance, insurance and other expenses relating to such Property, provided, that adequate insurance is maintained for such Property either by the tenant, the Borrower, a Subsidiary or a Joint Venture. Notwithstanding the foregoing, a Triple Net Lease may be subject to the landlord’s express contractual obligations with respect to the payment of taxes, assessments, ground rents, utility charges, exterior maintenance and maintenance of all non-interior areas and any capital expenditures related thereto (such as roof, structure and parking) (the “Contractual Obligations”) so long as the capital expenditures have been adequately accounted for in accordance with GAAP; provided, that the projected average annual Contractual Obligations

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shall not exceed 10% of the projected average gross annual rent under such Lease. For purposes of this definition, (a) the obligation of a landlord to make capital improvements or repairs as a condition to a tenant’s occupancy (e.g., build to suit transactions) shall not be deemed to be an undertaking by such landlord of any tenant maintenance or repair obligations and (b) the improvements to be constructed by such landlord described in the immediately preceding clause (a) shall not be included as a capital expenditure.

     “Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the LIBO Rate or the Alternate Base Rate.

     “Unconsolidated Entity” means, with respect to any Person, at any date, any other Person in whom such Person holds an investment, which investment is accounted for in the financial statements of such Person on an equity basis of accounting and whose financial results would not be consolidated under GAAP with the financial results of such Person on the consolidated financial statements of such Person if such statements were prepared as of such date.

     “Unsecured Indebtedness” means any Indebtedness not secured by a Lien, including any Indebtedness hereunder but excluding, to the extent otherwise includable therein, any Indebtedness in respect of Guarantees of Nonrecourse Carveouts.

     “Unused Commitment” means, as of any date, with respect to each Lender, its Commitment less its Revolving Credit Exposure.

     “Unused Commitment Fee Rate” means the applicable rate per annum set forth below under the caption “Unused Commitment Fee Rate” corresponding to the applicable Average Unused Commitment Percentage in accordance with the following table:

	Unused Commitment Fee
Average Unused Commitment Percentage	Rate
less than or equal to 50%		0.125	%
greater than 50%		0.175	%

     “Wells Fargo” means Wells Fargo Bank, National Association and its successors and assigns.

     “wholly-owned Subsidiary” means, with respect to any Person, at any date, any subsidiary of such Person of which 100% of the outstanding shares of capital stock or other equity interests having ordinary voting power is at the time, directly or indirectly, owned by such Person.

     “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part 1 of Subtitle E of Title IV of ERISA.

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     “WP Carey Joint Venture” means a Joint Venture between the Borrower and (a) W.P. Carey & Co. LLC (or one of its wholly-owned subsidiaries) or (b) a CPA REIT managed by W.P. Carey & Co. LLC or one of its subsidiaries.

     SECTION 1.2. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Type (e.g., a “Eurodollar Loan”). Borrowings also may be classified and referred to by Type (e.g., a “Eurodollar Borrowing”).

     SECTION 1.3. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof’ and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

     SECTION 1.4. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

ARTICLE II.

The Credits

     SECTION 2.1. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (a) such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the sum of the total Revolving Credit Exposures exceeding the total Commitments at such time. Within the

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foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, repay and reborrow Revolving Loans. No Loans may be borrowed or reborrowed after the end of the Availability Period.

     SECTION 2.2. Loans and Borrowings. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

     (b) Subject to Section 2.14, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

     (c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.6(e). Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of eight Eurodollar Borrowings outstanding.

     (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert to or continue, any Eurodollar Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date, or if prohibited by Section 2.8(e).

     SECTION 2.3. Requests for Borrowings. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.6(e) may be given not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request substantially in the form set forth in Exhibit B and signed by the Borrower. Each such request shall be accompanied by an Officer’s Certificate as to pro forma financial covenant compliance required by Section 6.1(i). Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.2 and shall constitute a representation that the conditions in Section 4.1 and Section 4.2 have

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been satisfied on such date and will be satisfied on the date of such Borrowing (except, in each case, to the extent waived in accordance with Section 9.2):

     (i) the aggregate amount of the requested Borrowing;

     (ii) the date of such Borrowing, which shall be a Business Day;

     (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

     (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

     (v) the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.7.

     If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Revolving Loan to be made as part of the requested Borrowing.

     SECTION 2.4. [Reserved].

     SECTION 2.5. Extension of Maturity Date.

     So long as no Default has occurred and is continuing, the Borrower may elect, at least 60 days but no more than 120 days prior to the Maturity Date, to extend the Maturity Date for one (1) year by providing written notice of such election to the Administrative Agent (which shall promptly notify each of the Lenders). If (i)(A) on the date of such notice and the effective date of such extension, no Default exists and is continuing and (B) each of the representations and warranties made in this Agreement and the other Loan Documents is true and complete on and as of the date of the date of such notice and the effective date of such extension with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date), (ii) the Borrower pays to the Administrative Agent, for the pro rata benefit of the Lenders based on their Applicable Percentages, an extension fee equal to 0.15% of the then total Commitments, and (iii) the Borrower has given written notice to the Administrative Agent of such election to extend the Maturity Date within the time frame set forth in this Section 2.5, the Maturity Date shall be extended by one year. The Borrower may exercise its rights under this Section only twice.

     SECTION 2.6. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit for its own account, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the period commencing on the Closing Date and ending on the date that is 30 days prior to the Maturity Date, provided that the amount of each Letter of Credit so requested shall be not less than $300,000 and there may not be more than 5 Letters of Credit outstanding at any time. In the event of any inconsistency between the terms and conditions of

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this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

     (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank and the Administrative Agent) to the Issuing Bank and the Administrative Agent (at least four (4) Business Days in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. Each such notice shall be accompanied by an Officer’s Certificate as to pro forma financial covenant compliance required by Section 6.1(i). The Administrative Agent shall provide copies of such notice and Officer’s Certificate to each Lender promptly after receipt thereof. If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $25,000,000 and (ii) the sum of the total Revolving Credit Exposures shall not exceed the total Commitments at such time.

     (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is 30 days prior to the Maturity Date.

     (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Notwithstanding anything to the contrary set forth herein,

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the aggregate amount to be paid by any Lender with respect to any drawing under a Letter of Credit (whether as a payment pursuant to this Section 2.6(d) or a Loan pursuant to Section 2.3) shall not exceed its Applicable Percentage of such drawing.

     (e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.3 that such payment be financed with an ABR Borrowing in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Borrowing. If the Borrower fails to (or is not permitted to) finance such payment with an ABR Borrowing and fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.7 with respect to Loans made by such Lender (and Section 2.7 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Loans as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

     (f) Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason

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of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing (and the agreement of the Borrower in the first sentence of this Section 2.6(f)) shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

     (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to any such LC Disbursement nor shall the Issuing Bank have any liability whatsoever to the Borrower or the Lenders for any failure to give any such notice.

     (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Loans; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraphs (d) or (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

     (i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the

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Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

     (j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing at least 66-2/3% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Issuing Bank and the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Article VII. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of the Lenders with LC Exposure representing at least 66-2/3% of the total LC Exposure), be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower has provided an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived in accordance with the terms of this Agreement.

     SECTION 2.7. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account specified by the Borrower in the Transfer Authorizer Designation Form; provided that ABR Loans made to finance the reimbursement of an LC

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Disbursement as provided in Section 2.6(e) shall be remitted by the Administrative Agent to the Issuing Bank.

     (b) Unless the Administrative Agent shall have received written notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing as of the date of such Borrowing. If any interest is paid by the Borrower as described above for any period with respect to any amount funded by the Administrative Agent pursuant to this paragraph, the Borrower shall not be required to pay interest on such amount pursuant to Section 2.13 in respect of such period.

     SECTION 2.8. Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section; provided, however, that a Eurodollar Borrowing may only be continued on the last day of the then current Interest Period therefor. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.

     (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.3 if the Borrower was requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request.

     (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.2:

     (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be

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specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

     (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

     (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

     (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

     (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

     (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall automatically be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

     SECTION 2.9. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date.

     (b) The Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000, (ii) the Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.11, the sum of the Revolving Credit Exposures would exceed the total Commitments and (iii) the Borrower shall not reduce the total Commitments to an amount less than $100,000,000 unless the Commitments are terminated.

     (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the

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Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.

     SECTION 2.10. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan not later than the Maturity Date.

     (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

     (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

     (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein, provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

     (e) Any Lender may request that Loans made by it be evidenced by a Note. In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns). Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 9.4) be represented by one or more Notes in such form payable to the order of the payee named therein.

     SECTION 2.11. Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section.

     (b) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment and (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with

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a conditional notice of termination of the Commitments as contemplated by Section 2.9, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.9. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.2. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13.

     (c) If at any time from and after the Closing Date: (i) the Borrower merges or consolidates with another Person and the Borrower is not the surviving entity, or (ii) any Person and the Borrower or a Subsidiary merge into the Borrower or a Subsidiary in a transaction in which the Borrower or a Subsidiary is the surviving corporation and an Event of Default has occurred as a result thereof (the date either such event shall occur being the “Prepayment Date”), the Borrower shall be required to prepay the Loans in their entireties as if the Prepayment Date were the Maturity Date and the Commitments thereupon shall be terminated. The Borrower shall immediately make such prepayment together with the interest accrued to the date of the prepayment on the principal amount prepaid and shall return or cause to be returned all Letters of Credit to the Issuing Bank. In connection with the prepayment of any Loan prior to the maturity thereof, the Borrower shall also pay any applicable expenses pursuant to Section 2.16. Each such prepayment shall be applied to prepay ratably the Loans of the Lenders. Amounts prepaid pursuant to this clause (c) may not be reborrowed.

     (d) The Borrower shall prepay Loans to the extent required by Section 5.2(b).

     SECTION 2.12. Fees.

     (a) During the period from and including the Closing Date to but excluding the date on which the Commitment of each Lender terminates, the Borrower agrees to pay to the Administrative Agent for the account of each Lender an unused commitment fee equal to the Unused Commitment Fee Rate on the average daily amount of the Unused Commitment of such Lender (the “Unused Commitment Fee Amount”). Accrued Unused Commitment Fee Amounts shall be payable quarterly in arrears on the last day of March, June, September and December of each year commencing on the first such date after the Closing Date, and on the date on which the Commitments terminate. All fees pursuant to this subsection (a) shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

     (b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Rate as interest on Eurodollar Loans on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Closing Date to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and

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including the Closing Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank’s standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued from and including the Closing Date or the last day of the preceding March, June, September or December, as applicable, to and excluding the last Business Day of March, June, September and December of each year shall be payable, in the case of participation fees, on such last Business Day of such month, in the case of fronting fees, on the third day Business Day following such last Business Day, and in each case, commencing on the first such date to occur after the Closing Date; provided that all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on which the Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

     (c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.

     (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of fees pursuant to paragraph (a) above and participation fees, to the Lenders. Fees paid shall not be refundable under any circumstances.

     SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Rate.

     (b) The Loans comprising each Eurodollar Borrowing shall bear interest at the LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

     (c) Notwithstanding the foregoing, (i) if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (A) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (B) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section and (ii) for so long as an Event of Default has occurred and is continuing, the principal balance of all Loans and other Obligations shall bear interest at a rate per annum equal to 2% plus the rate otherwise applicable to such Loans and other Obligations (which for any amounts other than principal of and interest on Loans shall be the rate applicable to ABR Loans).

     (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a

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prepayment of an ABR Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

     (e) All interest hereunder shall be computed on the basis of a year of 360 days, and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error

     SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

     (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Interest Period; or

     (b) the Administrative Agent is advised by the Required Lenders that the LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

     SECTION 2.15. Increased Costs. (a) If any Change in Law shall:

     (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (including without limitation, Regulation D of the Board or other similar reserve requirement applicable to any other category of liabilities or category of extensions of credit or other assets by reference to which the interest rate on Eurodollar Borrowings is determined) or the Issuing Bank; or

     (ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will

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pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

     (b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

     (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

     (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.

     SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(b) and is revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19, then, in any such event, the Borrower shall pay to the Administrative Agent for the account of each Lender, upon request of the Administrative Agent, such amount or amounts as the Administrative Agent shall determine in its sole discretion to be sufficient to compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar

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Loan, such loss, cost or expense to any Lender shall include an amount determined by the Administrative Agent to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Eurodollar market. The Borrower shall pay to the Administrative Agent such amount as determined by the Administrative Agent within 10 days after the request for payment from the Administrative Agent.

     SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, each Lender or the Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

     (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

     (c) The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.

     (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

     (e) Prior to the date that any Foreign Lender becomes a party hereto, such Foreign Lender shall furnish the Administrative Agent and the Borrower with a properly executed copy

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of either Internal Revenue Service Form W-8ECI or Internal Revenue Service Form W-8BEN and either Internal Revenue Service Form W-8 or Internal Revenue Service Form W-9 and any additional form (or such other form) as is necessary to claim complete exemption from United States withholding taxes on all payments hereunder. At all times each Foreign Lender shall own or beneficially own a Note, such Foreign Lender shall (i) promptly provide to the Administrative Agent and Borrower a new Internal Revenue Service Form W-8ECI or Internal Revenue Service Form W-8BEN and Internal Revenue Service Form W-8 or Internal Revenue Service Form W-9 and any additional form (or such other form) (or any successor form or forms) upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable United States laws and regulations and amendments duly executed and completed by such Lender, and (ii) comply at all times with all applicable United States laws and regulations, including all provisions of any applicable tax treaty, with regard to any withholding tax exemption claimed with respect to any payments hereunder. If any Foreign Lender cannot deliver the forms referred to in the preceding sentence, then Borrower may withhold from payments due under the Loan Documents such amounts as Borrower is able to determine from accurate information provided by such Foreign Lender are required by the Internal Revenue Code.

     SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 2120 E. Park Place, Suite 100, El Segundo, California (or such other location for payment as the Administrative Agent may notify the Borrower), except payments to be made directly to the Issuing Bank as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.3 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.

     (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

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     (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, except pursuant to Section 2.19, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in LC Disbursements resulting to such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and participations in LC Disbursements than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LC Disbursements; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

     (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

     (e) If for any reason any Lender (a “Defaulting Lender”) shall fail or refuse to perform any of its obligations under this Agreement or any other Loan Document to which it is a party within the time period specified for performance of such obligation or, if no time period is specified, if such failure or refusal continues for a period of 2 Business Days after notice from the Administrative Agent, then, in addition to the rights and remedies that may be available to the Administrative Agent or the Borrower under this Agreement or Applicable Law, such Defaulting Lender’s right to participate in the administration of the Loans, this Agreement and the other Loan Documents, including without limitation, any right to vote in respect of, to consent to or to direct any action or inaction of the Administrative Agent or to be taken into account in the calculation of Required Lenders, shall be suspended during the pendency of such failure or refusal. If for any reason a Lender fails to make timely payment to the Administrative

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Agent of any amount required to be paid to the Administrative Agent hereunder (without giving effect to any notice or cure periods), in addition to other rights and remedies which the Administrative Agent or the Borrower may have under the immediately preceding provisions or otherwise, the Administrative Agent shall be entitled (i) to collect interest from such Defaulting Lender on such delinquent payment for the period from the date on which the payment was due until the date on which the payment is made at the greater of Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, (ii) to withhold or setoff and to apply in satisfaction of the defaulted payment and any related interest, any amounts otherwise payable to such Defaulting Lender under this Agreement or any other Loan Document and (iii) to bring an action or suit against such Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest. Any amounts received by the Administrative Agent in respect of a Defaulting Lender’s Loans shall not be paid to such Defaulting Lender and shall be held by the Administrative Agent and paid to such Defaulting Lender upon the Defaulting Lender’s curing of its default.

     SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall, upon the request of the Borrower, use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

     (b) If any Lender requests compensation under Section 2.15 (and the Required Lenders are not also doing the same) or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.4), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Commitment is being assigned, the Issuing Bank), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and

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delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

     SECTION 2.20. Increase in Commitment. (a) Unless a Default has occurred and is continuing, and subject to the satisfaction of the conditions in Section 2.20(b), the Borrower, by written notice to the Administrative Agent (the “Additional Commitment Notice”), may request on up to two (2) occasions during the Availability Period that the total Commitments be increased by an amount not less than $20,000,000 per request and not more than $75,000,000 in the aggregate (such that the total Commitments after such increase shall never exceed $225,000,000); provided that for any such request any Lender which is a party to this Agreement prior to such request for increase, at its sole discretion, may elect to increase its Commitment, but shall not have any obligation to so increase its Commitment. In the event that lenders commit to any such increase, (i) the Commitments of the committed Lenders shall be increased accordingly, (ii) the Applicable Percentages of each of the Lenders shall be adjusted accordingly (or, in the case of a new lender not previously party hereto, added to Schedule 1) and the Borrower shall make such borrowings and repayments as shall be necessary to effect such reallocation of the Commitments, (iii) if requested by any Lender making an additional or new commitment, new Notes shall be issued, and (iv) other changes shall be made by way of supplement, amendment or restatement of any Loan Document as may be necessary or desirable to reflect the aggregate amount, if any, by which Lenders have agreed to increase their respective Commitments or any other lenders have agreed to make new commitments pursuant to this Section 2.20 without the consent of any Lender other than those Lenders increasing their Commitments. The fees payable by the Borrower upon any such increase in Commitments shall be agreed upon by the Arranger and the Borrower at the time of such increase. In the event of any such increase of the Commitments pursuant to this Section 2.20, the aggregate LC Exposure of the Lenders shall remain $25,000,000. Notwithstanding the foregoing, nothing in this Section 2.20 shall constitute or be deemed to constitute an agreement by any Lender to increase its Commitment hereunder.

     (b) Notwithstanding the foregoing, an increase in the aggregate amount of the Commitments shall be effective only if (i) no Default shall have occurred and be continuing on the date of the Additional Commitment Notice and the date such increase is to become effective; (ii) each of the representations and warranties made in this Agreement and the other Loan Documents shall be true and complete on and as of the date of the Additional Commitment Notice and the date such increase is to become effective with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); (iii) the Administrative Agent shall have received (x) such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the authorization of such increase and (y) a favorable written opinion (addressed to the Administrative Agent and the Lenders) of counsel for the Borrower and the other Loan Parties substantially in the form of Exhibit F-1 or F-2, as applicable, after giving effect to such increase; (iv) the Borrower and its Subsidiaries shall be in compliance with Article VI; and (v) the Lenders shall have received all amounts, if any, payable pursuant to Section 2.16 as a result of the repayment described in clause (ii) of Section 2.20(a).

     SECTION 2.21. Funds Transfer Disbursements.

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     (a) Generally. The Borrower hereby authorizes the Administrative Agent to disburse the proceeds of any Loan to any of the accounts designated in the Transfer Authorizer Designation Form. The Borrower agrees to be bound by any transfer request (i) authorized or transmitted by the Borrower or (ii) made in the Borrower’s name and accepted by the Administrative Agent in good faith and in compliance with these transfer instructions, even if not properly authorized by the Borrower. The Borrower further agrees and acknowledges that the Administrative Agent may rely solely on any bank routing number or identifying bank account number or name provided by the Borrower to effect a wire or funds transfer even if the information provided by the Borrower identifies a different bank or account holder than named by the Borrower. The Administrative Agent is not obligated or required in any way to take any actions to detect errors in information provided by the Borrower. If the Administrative Agent takes any actions in an attempt to detect errors in the transmission or content of transfer or requests or takes any actions in an attempt to detect unauthorized funds transfer requests, the Borrower agrees that no matter how many times the Administrative Agent takes these actions the Administrative Agent will not in any situation be liable for failing to take or correctly perform these actions in the future and such actions shall not become any part of the transfer disbursement procedures authorized under this provision, the Loan Documents, or any agreement between the Administrative Agent and the Borrower. The Borrower agrees to notify the Administrative Agent of any errors in the transfer of any funds or of any unauthorized or improperly authorized transfer requests within 14 days after the Administrative Agent’s confirmation to the Borrower of such transfer.

     (b) Funds Transfer. The Administrative Agent will, in its sole discretion, determine the funds transfer system and the means by which each transfer will be made. The Administrative Agent may delay or refuse to accept a funds transfer request if the transfer would: (i) violate the terms of this authorization, (ii) require use of a bank unacceptable to the Administrative Agent or prohibited by government authority, (iii) cause the Administrative Agent to violate any Federal Reserve or other regulatory risk control program or guideline, or (iv) otherwise cause the Administrative Agent to violate any applicable law or regulation.

     (c) Limitation of Liability. The Administrative Agent shall not be liable to the Borrower or any other parties for (i) errors, acts or failures to act of others, including other entities, banks, communications carriers or clearinghouses, through which the Borrower’s transfers may be made or information received or transmitted, and no such entity shall be deemed an agent of the Administrative Agent, (ii) any loss, liability or delay caused by fires, earthquakes, wars, civil disturbances, power surges or failures, acts of government, labor disputes, failures in communications networks, legal constraints or other events beyond the Administrative Agent’s control, or (iii) any special, consequential, indirect or punitive damages, whether or not (x) any claim for these damages is based on tort or contract or (y) the Administrative Agent or the Borrower knew or should have known the likelihood of these damages.

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ARTICLE III.

Representations and Warranties

     The Borrower represents and warrants to the Lenders, the Administrative Agent and the Issuing Bank that:

     SECTION 3.1. Organization; Powers. Each of the Borrower, the other Loan Parties and the Borrower’s other Affiliates is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to own or lease its property and to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

     SECTION 3.2. Authorization; Enforceability. (a) The Transactions have been duly authorized by all necessary corporate action of the Borrower and by all necessary partnership, limited liability company or corporate action of the other Loan Parties. Each of the Loan Parties has the requisite power and authority to perform this Agreement and the other Loan Documents. This Agreement has been duly authorized, executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

     (b) Schedule 3.2 contains a diagram indicating the ownership structure of the Borrower, and any other Person in which the Borrower holds a direct or indirect partnership, joint venture or other equity interest, indicating the nature of such interest with respect to each Person included in such diagram and accurately sets forth (1) the correct legal name of such Person, the jurisdiction of its incorporation or organization and, for each Loan Party, the jurisdictions in which it is qualified to transact business as a foreign corporation, or otherwise, (2) the authorized, issued and outstanding shares or interests of each class of securities of the Borrower and (3) in the case of a Subsidiary, whether such Subsidiary is an Excluded Subsidiary. None of such issued and outstanding securities is subject to any vesting, redemption, or repurchase agreement, and there are no warrants or options outstanding with respect to such securities, except as noted on such Schedule. The outstanding capital stock of the Borrower is duly authorized, validly issued, fully paid and nonassessable.

     SECTION 3.3. Governmental Approvals; No Conflicts. Except as specified on Schedule 3.3, the Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate, and will not require any consent or approval under, any applicable law or regulation or the certificate of formation, limited liability company agreement, certificate of limited partnership, limited partnership agreement or other organizational documents of the Borrower, any other Loan Party or any of the other Subsidiaries or any order, judgment or decree of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the

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Borrower, any other Loan Party or any of the other Subsidiaries or any of their respective assets, or give rise to a right thereunder to require any payment to be made by the Borrower, any other Loan Party or any of the other Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower, any other Loan Party or any of the other Subsidiaries.

     SECTION 3.4. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders (i) its audited financial statements as of December 31, 2005, reported on by PricewaterhouseCoopers LLP, independent public accountants and (ii) its pro forma unaudited balance sheets and statements of income as of September 30, 2006, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to (y) normal and recurring year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above and (z) any pro forma financial statements contained in such consolidated financial statements are not necessarily indicative of the consolidated financial position of the Borrower and its Subsidiaries, as of the respective dates thereof and the consolidated results of operations for the periods indicated.

     (b) Neither the Borrower nor any of its Subsidiaries has any Contingent Obligation or liability for any taxes, long-term leases or commitments, not reflected in its audited financial statements delivered to the Administrative Agent on or prior to the Closing Date (including immediately after giving effect to the Merger) or otherwise disclosed to the Administrative Agent and the Lenders in writing prior to the Closing Date, which will have or is reasonably likely to have a Material Adverse Effect.

     (c) The Borrower has heretofore furnished to the Lenders (i) the audited financial statements of CPA 12 as of December 31, 2005, reported on by PricewaterhouseCoopers LLP, independent public accountants and (ii) the pro forma unaudited balance sheets and statements of income of CPA 12 as of September 30, 2006, certified by the chief financial officer of CPA 12. Such financial statements present fairly, in all material respects, the financial position and results of operations of CPA 12 and its consolidated subsidiaries as of such dates and for such periods in accordance with GAAP, subject to (y) normal and recurring year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above and (z) any pro forma financial statements contained in such consolidated financial statements are not necessarily indicative of the consolidated financial position of CPA 12 and its subsidiaries, as of the respective dates thereof and the consolidated results of operations for the periods indicated.

     (d) The Borrower has heretofore furnished to the Lenders (i) the pro forma consolidated balance sheet of the Borrower as of December 31, 2005 and March 31, 2006 and the pro forma consolidated statements of income of the Borrower for the year ended December 31, 2005 and the three months ended March 31, 2006, in each case giving pro forma effect to the Merger Transactions. Such financial statements have been prepared by the Borrower and CPA 12 based on their respective financial statements for such periods and as of such dates together with available information and certain assumptions which the Borrower believes to be reasonable, and give pro forma effect to the Merger Transactions.

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     (e) Schedule 3.4 sets forth, as of the date hereof (and after giving effect to the Merger), all Indebtedness of the Borrower and its Subsidiaries and, except as set forth on Schedule 3.4, there are no defaults in the payment of principal or interest on any such Indebtedness and no payments thereunder have been deferred or extended beyond their stated maturity and there has been no material change in the type or amount of such Indebtedness.

     (f) Since December 31, 2005, there has been no material adverse change in the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole.

     SECTION 3.5. Properties. (a) Each of the Borrower, the other Loan Parties and the other Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.

     (b) Each of the Borrower, the other Loan Parties and the other Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower, the other Loan Parties and the other Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

     SECTION 3.6. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower, the other Loan Parties or any of the other Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve this Agreement, the Transactions or the Merger Transactions.

     (b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, none of the Borrower, the other Loan Parties or any of the other Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

     SECTION 3.7. Compliance with Laws and Agreements. Each of the Borrower, the other Loan Parties and the other Subsidiaries is in compliance with all laws, regulations and orders, judgments or decrees of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.

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     SECTION 3.8. Investment Company Status. None of the Borrower, the other Loan Parties or any of the other Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

     SECTION 3.9. Taxes. Each of the Borrower, the other Loan Parties and the other Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower, such other Loan Party or such other Subsidiary, as applicable, has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

     SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $250,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $250,000 the fair market value of the assets of all such underfunded Plans.

     SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it, any of the other Loan Parties or any of the other Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the SEC Reports (as defined hereafter) and none of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower, the other Loan Parties and the other Subsidiaries to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary, in the aggregate, to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

     SECTION 3.12. Insurance. The insurance policies and programs in effect as of the Closing Date and thereafter with respect to the Property, assets and business of the Borrower, the other Loan Parties and the other Subsidiaries are in compliance with Section 5.5.

     SECTION 3.13. [Reserved].

     SECTION 3.14. SEC Reports. As of the Closing Date, the Borrower has filed all forms, reports, statements (including proxy statements) and other documents (such filings by the Borrower are collectively referred to as the “SEC Reports”), required to be filed by it with the

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Securities and Exchange Commission. The SEC Reports, including all SEC Reports filed on or prior to the date of this Agreement and filed after the Closing Date, (i) were or will be prepared in all material respects in accordance with the requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as the case may be, and the rules and regulations of the Securities and Exchange Commission thereunder applicable to such SEC Reports at the time of filing thereof and (ii) did not at the time they were filed, or will not at the time they are filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

     SECTION 3.15. Representations and Warranties in Loan Documents. All representations and warranties made by the Borrower and each other Loan Party in the Loan Documents are true and correct in all material respects as of the date of this Agreement (and after giving effect to the Merger) and as of any date that the Borrower is expressly obligated to confirm the same under this Agreement.

     SECTION 3.16. Organizational Documents. The documents delivered pursuant to Section 4.1 constitute, as of the Closing Date (and after giving effect to the Merger), true and correct copies of all of the organizational documents of the Borrower and the other Loan Parties.

     SECTION 3.17. REIT Status. The Borrower qualifies as a REIT and is in compliance with all requirements and conditions imposed under the Code to allow the Borrower to maintain its status as a REIT.

     SECTION 3.18. OFAC. None of the Borrower, any of the other Loan Parties, any of the other Subsidiaries, or any other Affiliate of the Borrower: (i) is a person named on the list of Specially Designated Nationals or Blocked Persons maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) available at http://www.treas.gov/offices/eotffc/ofac/sdn/index.html, or as otherwise published from time to time; (ii) is (A) an agency of the government of a country, (B) an organization controlled by a country, or (C) a person resident in a country that is subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html, or as otherwise published from time to time, as such program may be applicable to such agency, organization or person; or (iii) derives any of its assets or operating income from investments in or transactions with any such country, agency, organization or person; and none of the Letters of Credit and none of the proceeds from the Loans will be used to finance any operations, investments or activities in, or make any payments to, any such country, agency, organization, or person.

ARTICLE IV.

Conditions

     SECTION 4.1. Closing Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.2):

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     (a) The Administrative Agent (or its counsel) shall have received from each Loan Party hereto either (i) a counterpart of all Loan Documents to which such Loan Party is a party, signed on behalf of such Loan Party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of each such Loan Document) that such Loan Party has signed a counterpart of all Loan Documents required to be delivered to the Administrative Agent.

     (b) The Administrative Agent shall have received (i) a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Closing Date) of Reed Smith LLP, counsel for the Borrower and certain of the other Loan Parties, and (ii) a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Closing Date) of local counsel to certain of the Loan Parties (which counsel must be reasonably acceptable to the Administrative Agent), substantially in the forms of Exhibit F-1, and Exhibit F-2, respectively, and covering such other matters relating to the Borrower, the other Loan Parties, this Agreement or the Transactions as the Required Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinions.

     (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Loan Parties and the Borrower’s other Affiliates, the authorization of the Transactions and any other legal matters relating to the Loan Parties and the Borrower’s other Affiliates, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel.

     (d) The Administrative Agent shall have received a certificate, dated the Closing Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.2.

     (e) No change in the business, assets, management, operations, financial condition or prospects of the Borrower, the other Loan Parties or any of their respective Properties shall have occurred since December 31, 2005 which change, in the judgment of the Administrative Agent, will have or is reasonably likely to have a Material Adverse Effect.

     (f) Except as disclosed on Schedule 4.1(f), since December 31, 2005, the Borrower has not and shall not have (i) entered into any (as determined in good faith by the Administrative Agent) commitment or transaction, including, without limitation, transactions for borrowings and capital expenditures, which are not in the ordinary course of the Borrower’s business, (ii) declared or paid any dividends or other distributions, (iii) established compensation or employee benefit plans, or (iv) redeemed or issued any equity securities.

     (g) Since December 31, 2005, no agreement or license relating to the business, operations or employee relations of the Borrower or any of its Properties shall

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have been terminated, modified, revoked, breached or declared to be in default, the termination, modification, revocation, breach or default under which, in the reasonable judgment of the Administrative Agent, would result in a Material Adverse Effect.

     (h) The Administrative Agent shall have received evidence satisfactory to it in its sole discretion that the waivers or consents specified in Schedule 3.3 have been duly obtained.

     (i) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder.

     (j) The Administrative Agent shall have received an Officer’s Certificate duly executed by the President, a Vice President or a Financial Officer of the Borrower certifying as to pro forma compliance with the financial covenants in Section 6.1 as of the Closing Date (taking into account any Credit Event to occur on such date and giving pro forma effect to the Merger).

     (k) [Reserved]

     (l) The Administrative Agent shall have received current certificates of insurance as to all of the insurance maintained by the Borrower and its Subsidiaries on the Properties from the insurer or an independent insurance broker or a schedule of insurance from the Borrower, identifying insurers, types of insurance, insurance limits, and policy terms, and such further information and certificates from the Borrower, its insurers and insurance brokers as the Administrative Agent may reasonably request.

     (m) The Administrative Agent shall have received: (i) a certificate of the chief executive officer, chief financial officer or other senior officer of the Borrower stating that all conditions precedent to the consummation of the Merger Transactions as set forth in the Merger Agreement have been satisfied (or waived with the consent of the Required Lenders) and that the Alternate Merger did not occur, (ii) file-stamped copies of the articles of merger of the Borrower and CPA 12 filed with the Secretary of State of the State of Maryland and (iii) such other documents, agreement and certificates relating to the Merger Transactions as the Administrative Agent may reasonably request.

     (n) The Administrative Agent shall have received the Transfer Authorizer Designation Form effective as of the date hereof.

     The Administrative Agent shall notify the Borrower and the Lenders of the Closing Date, and such notice shall be conclusive and binding.

     SECTION 4.2. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit (such Borrowing, issuance, amendment, renewal or extension referred to herein as a “Credit Event”), is subject to the satisfaction of the following conditions:

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     (a) The representations and warranties set forth in this Agreement and the other Loan Documents shall be true and correct on and as of the date of such Credit Event.

     (b) At the time of and immediately after giving effect to such Credit Event, no Default shall have occurred and be continuing.

     (c) The Borrower shall not have received written notice from the Required Lenders that an event has occurred since the date of this Agreement which has had, and continues to have, or is reasonable likely to have, a Material Adverse Effect.

     (d) The Administrative Agent shall have received an Officer’s Certificate duly executed by the President, a Vice President or a Financial Officer of the Borrower as to the pro forma financial covenant compliance required by Section 6.1(i).

     (e) No law, regulation or order of any Governmental Authority shall prohibit, enjoin or restrain any Lender from making such Borrowing or participating in the issuance, amendment, renewal or extension of such Letter of Credit, as reasonably determined by such Lender.

     Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.

ARTICLE V.

Affirmative Covenants

     Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated or been cancelled by the beneficiaries thereof and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:

     SECTION 5.1. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent and each Lender:

     (a) Quarterly Reports.

     (i) Borrower Quarterly Financial Reports. As soon as practicable, and in any event within forty-five (45) days after the end of each fiscal quarter in each fiscal year (other than the last fiscal quarter in each fiscal year), the Financial Statements of the Borrower and its Subsidiaries on Form 10-Q as at the end of such period and a report setting forth in comparative form the corresponding figures as of the end of and for the corresponding period of the previous fiscal year, certified by a Financial Officer of the Borrower as fairly presenting the consolidated and, for so long as such statements are prepared in the ordinary course of business, consolidating, financial position of the Borrower and its Subsidiaries as at the date indicated and the results of their operations and cash flow for the period indicated in accordance with GAAP, subject to normal quarterly adjustments.

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     (ii) Quarterly Compliance Certificates. Together with each delivery of any quarterly report pursuant to paragraph (a)(i) of this Section 5.1, an Officer’s Certificate of the Borrower (the “Quarterly Compliance Certificates”), signed by a Financial Officer of the Borrower, substantially in the form of Exhibit I hereto, representing and certifying (1) that the Financial Officer of the Borrower signatory thereto has reviewed the terms of the Loan Documents, and has made, or caused to be made, under his/her supervision, a review in reasonable detail of the Transactions and consolidated, and for so long as such statements are prepared in the ordinary course of business, consolidating, financial condition of the Borrower and its Subsidiaries during the fiscal quarter covered by such reports, that such review has not disclosed the existence during or at the end of such fiscal quarter, and that such officer does not have knowledge of the existence as at the date of such Officer’s Certificate, of any condition or event which constitutes a Default or mandatory prepayment event, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Borrower or any of its Subsidiaries has taken, is taking and proposes to take with respect thereto, (2) the calculations, in the form of Exhibit G attached hereto, for the period then ended which demonstrate whether there has been compliance with the covenants and financial ratios set forth in Article VI, (3) a schedule of the Borrower’s outstanding Indebtedness, including the amount, maturity, interest rate and amortization requirements, as well as such other information regarding such Indebtedness as may be reasonably requested by the Administrative Agent, and (4) a schedule of Adjusted EBITDA of the Borrower and its Subsidiaries for the fiscal quarter most recently ended and for the period of the four immediately preceding fiscal quarters then ended.

     (b) Annual Reports.

     (i) Borrower Financial Statements. As soon as practicable, and in any event within ninety (90) days after the end of each fiscal year, (i) the Financial Statements of the Borrower and its Subsidiaries on Form 10-K as at the end of such fiscal year and a report setting forth in comparative form the corresponding figures from the consolidated Financial Statements of the Borrower and its Subsidiaries as of the end of and for the prior fiscal year; (ii) a report with respect thereto of PricewaterhouseCoopers LLP or other independent certified public accountants acceptable to the Administrative Agent, which report shall be unqualified and shall state that such financial statements fairly present the consolidated and, for so long as such statements are prepared in the ordinary course of business, consolidating financial position of each of the Borrower and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except for changes with which PricewaterhouseCoopers LLP or any such other independent certified public accountants, if applicable, shall concur and which shall have been disclosed in the notes to such financial statements) (which report shall be subject to the confidentiality limitations set forth herein); and (iii) in the event that the report referred to in clause (ii) above is qualified, a copy of the management letter or any similar report delivered to the Borrower or to any officer or employee thereof by such independent certified public accountants in connection with such financial statements. The Administrative Agent and each Lender (through the Administrative Agent) may, with the consent of the Borrower (which consent shall not be unreasonably withheld), communicate directly with such accountants, with any such communication to occur together with a representative of the Borrower, at the expense of the Administrative Agent (or the Lender requesting such communication), upon reasonable notice and at reasonable times during normal business hours.

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     (ii) Annual Compliance Certificates. Together with each delivery of any annual report pursuant to clause (i) of this Section 5.1(b), an Officer’s Certificate of the Borrower (the “Annual Compliance Certificate” and, collectively with the Quarterly Compliance Certificate, the “Compliance Certificates”), signed by a Financial Officer of the Borrower, substantially in the form of Exhibit I hereto, representing and certifying (1) that the officer signatory thereto has reviewed the terms of the Loan Documents, and has made, or caused to be made under his/her supervision, a review in reasonable detail of the Transactions and consolidated and, for so long as such statements are prepared in the ordinary course of business, consolidating financial condition of the Borrower and its Subsidiaries, during the accounting period covered by such reports, that such review has not disclosed the existence during or at the end of such accounting period, and that such officer does not have knowledge of the existence as at the date of such Officer’s Certificate, of any condition or event which constitutes a Default or mandatory prepayment event, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Borrower or any of its Subsidiaries has taken, is taking and proposes to take with respect thereto, (2) the calculations, in the form of Exhibit G attached hereto, for the period then ended which demonstrate whether there has been compliance with the covenants and financial ratios set forth in Article VI, (3) a schedule of the Borrower’s outstanding Indebtedness including the amount, maturity, interest rate and amortization requirements, as well as such other information regarding such Indebtedness as may be reasonably requested by the Administrative Agent, and (4) a schedule of Adjusted EBITDA of the Borrower and its Subsidiaries for the fiscal quarter most recently ended and for the period of the four immediately preceding fiscal quarters then ended.

     (c) Tenant Bankruptcy Reports. As soon as practicable, and in any event within ninety (90) days after the end of each fiscal year, a written report, in form reasonably satisfactory to the Administrative Agent, of all bankruptcy proceedings filed by or against any tenants of any of the Projects, if such tenants occupy five percent (5%) or more of the gross leasable area in the Projects in the aggregate. The Borrower shall deliver to the Administrative Agent and the Lenders, promptly upon the Borrower’s learning thereof, notice of any bankruptcy proceedings filed by or against, or the cessation of business or operations of, any tenant of any of the Projects which tenant occupies five percent (5%) or more of the gross leasable area in the Projects in the aggregate.

     (d) Concurrently with any delivery of financial statements under clause (b) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines).

     (e) Promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower, any other Loan Party or any other Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent may reasonably request including without limitation, tax returns, title reports, insurance certificates and environmental site assessments.

     SECTION 5.2. Notices of Material Events. (a) The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following:

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     (i) the occurrence of any Default;

     (ii) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower, any other Loan Party or any other Affiliate of the Borrower that, if adversely determined, could reasonably be expected to result to a Material Adverse Effect;

     (iii) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $250,000;

     (iv) the receipt of any notice or the occurrence of any event that could reasonably be expected to result in an Environmental Liability of the Borrower and its Subsidiaries in an aggregate amount exceeding the greater of (A) $1,000,000 and (B) one percent (1%) of the Total Value; and

     (v) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

     (b) The Borrower shall deliver to the Administrative Agent and the Lenders written notice of each of the following events affecting the Borrower, any other Loan Party or any other Subsidiary not less than five (5) Business Days prior to the occurrence thereof: (i) [reserved], (ii) a sale, transfer or other disposition of assets, in a single transaction or series of related transactions, for consideration in excess of $50,000,000, (iii) an acquisition of assets, in a single transaction or series of related transactions, for consideration in excess of $50,000,000, (iv) [reserved], and (v) the grant of a Lien with respect to assets, in a single transaction or series of related transactions, in connection with Indebtedness aggregating an amount in excess of $50,000,000. In addition, simultaneously with delivery of any such notice, the Borrower shall deliver to the Administrative Agent and the Lenders a certificate of a Financial Officer of the Borrower certifying that the Borrower is in compliance with this Agreement and the other Loan Documents both on a historical basis and on a pro forma basis, exclusive of the property sold, transferred or encumbered and inclusive of the property to be acquired or the indebtedness to be incurred. To the extent such proposed transaction would result in a failure to comply with the financial covenants set forth herein, proceeds of such transaction (together with such additional amounts as may be required), in an amount, as determined by the Administrative Agent, equal to that which would be required to reduce the Obligations so that Borrower will be in compliance with the covenants set forth herein upon the consummation of the contemplated transaction, shall be paid by the Borrower and applied to prepay the Obligations.

Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

     SECTION 5.3. Existence; Conduct of Business. The Borrower will, and will cause each other Loan Party and each of the other Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights,

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licenses, permits, privileges and franchises material to the conduct of its business. The Borrower will not, and will not permit any other Loan Party to, at any time cause or permit its certificate of formation, limited liability company agreement, certificate of limited partnership, partnership agreement, articles of incorporation, by-laws, or other charter documents, as the case may be, to be modified, amended or supplemented in any respect whatsoever, without, in each case, the express prior written consent or approval of the Administrative Agent, if such changes would materially adversely affect the rights of the Administrative Agent or the Lenders hereunder or under any of the other Loan Documents; provided that if such prior consent or approval is not required, the Borrower shall nonetheless notify the Administrative Agent in writing promptly after such event.

     SECTION 5.4. Payment of Obligations. The Borrower will, and will cause each other Loan Party and each of the other Subsidiaries to, pay its respective obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower, such other Loan Parties or such other Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

     SECTION 5.5. Maintenance of Properties; Insurance. (a) The Borrower will, and will cause each other Loan Party and each of the other Subsidiaries to, keep and maintain (or cause to be kept and maintained) all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted.

     (b) The Borrower, the other Loan Parties and the other Subsidiaries will maintain, or will cause tenants of Projects to maintain, with financially sound and reputable insurers, insurance with respect to its properties and its business against general liability, property casualty and such casualties and contingencies as shall be commercially reasonable and in accordance with the customary and general practices of businesses having similar operations and real estate portfolios in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent for such businesses, including without limitation, insurance policies and programs sufficient to cover (i) the replacement value of the improvements at Projects owned by the Borrower, the other Loan Parties and the other Subsidiaries (less commercially reasonable deductible amounts) and (ii) liability risks associated with such ownership (less commercially reasonable deductible amounts).

     SECTION 5.6. Books and Records; Inspection Rights. The Borrower will, and will cause each other Loan Party and each of the other Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each other Loan Party and each of the other Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.

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     SECTION 5.7. Compliance with Laws. The Borrower will, and will cause each other Loan Party and each of the other Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its respective property, including all Environmental Laws, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

     SECTION 5.8. Use of Proceeds and Letters of Credit. No Letters of Credit and no part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. The proceeds of the Loans will be used only for the purposes of:

     (a) acquisition of Projects or Joint Venture Holdings;

     (b) renovation of Properties owned by the Borrower or its consolidated Subsidiaries;

     (c) funding of TI Work and Tenant Allowances;

     (d) financing expansions, renovations and new construction related to Properties owned by the Borrower or its consolidated Subsidiaries;

     (e) refinancing or repayment of existing or future Indebtedness for borrowed money;

     (f) working capital needs of the Borrower and other general corporate purposes;

     (g) investments in Mortgage Assets;

     (h) redemptions or purchases by the Borrower of its common stock; and

     (i) payment of any sums required to be paid by the Borrower in connection with the Merger Transactions plus fees and expenses incurred by the Borrower in connection with the Merger Transactions.

     SECTION 5.9. [Reserved].

     SECTION 5.10. Solvency of Loan Parties. The Borrower and the other Loan Parties are Solvent. The Borrower and the other Loan Parties each acknowledges that, subject to the indefeasible payment and performance in full of the Obligations, the rights of contribution among each of them are in accordance with applicable laws and in accordance with each such Person’s benefits in respect of the Credit Events and under this Agreement.

     SECTION 5.11. Further Assurances. The Borrower will cooperate with, and will cause each of the other Loan Parties and each of the other Subsidiaries to cooperate with, the Administrative Agent and the Lenders and execute such further instruments and documents as the Lenders or the Administrative Agent shall reasonably request to carry out to their reasonable satisfaction the transactions contemplated by this Agreement and the other Loan Documents.

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     SECTION 5.12. Distributions in the Ordinary Course. In the ordinary course of business the Borrower causes all of its Subsidiaries to make transfers of net cash and cash equivalents upstream to the Borrower, and the Borrower shall continue to follow such ordinary course of business. The Borrower shall not make net transfers of cash and cash equivalents downstream to its Subsidiaries except in the ordinary course of business consistent with past practice.

     SECTION 5.13. ERISA Compliance. The Borrower shall, and shall cause each of the other Loan Parties and each of the other Subsidiaries and ERISA Affiliates to, establish, maintain and operate all Plans to comply in all material respects with the provisions of ERISA, the Code, all other applicable laws, and the regulations and interpretations thereunder and the respective requirements of the governing documents for such Plans.

     SECTION 5.14. REIT Status. The Borrower shall at all times maintain its status as a REIT.

     SECTION 5.15. New Guarantors. (a) Requirement to Become Guarantor. Within 10 days of any Person (other than an Excluded Subsidiary) becoming a Subsidiary after the Closing Date, the Borrower shall deliver to the Administrative Agent each of the following items, each in form and substance satisfactory to the Administrative Agent: (i) an Accession Agreement executed by such Subsidiary and (ii) the items that would have been delivered under Sections 4.1(a) through (c) if such Subsidiary had been a Subsidiary on the Closing Date; provided, however, promptly (and in any event within 10 days) upon any Excluded Subsidiary ceasing to be subject to the restriction which prevented it from becoming a Guarantor on the Closing Date or delivering an Accession Agreement pursuant to this Section, as the case may be, such Subsidiary shall comply with the provisions of this Section.

     (b) Release of a Guarantor. The Borrower may request in writing that the Administrative Agent release, and upon receipt of such request the Administrative Agent shall release, a Guarantor from the Guaranty so long as: (i) such Guarantor (x) has ceased to be, or simultaneously with its release from the Guaranty will cease to be, a Subsidiary or (y) qualifies, or will qualify simultaneously with its release from the Guaranty, as an Excluded Subsidiary; (ii) no Default shall then be in existence or would occur as a result of such release; (iii) the representations and warranties made or deemed made by the Borrower and each other Loan Party in the Loan Documents to which any of them is a party, shall be true and correct in all material respects on and as of the date of such release with the same force and effect as if made on and as of such date except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date) and except for changes in factual circumstances not prohibited under the Loan Documents; and (iv) the Administrative Agent shall have received such written request at least 10 Business Days prior to the requested date of release. Delivery by the Borrower to the Administrative Agent of any such request shall constitute a representation by the Borrower that the matters set forth in the preceding sentence (both as of the date of the giving of such request and as of the date of the effectiveness of such request) are true and correct with respect to such request.

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     SECTION 5.16. Distributions of Income to Borrower. The Borrower shall cause all of its Subsidiaries to distribute promptly to the Borrower, whether in the form of dividends, distributions or otherwise, all profits, proceeds or other income relating to or arising from its Subsidiaries’ use, operation, financing, refinancing, sale or other disposition of their respective assets and properties after (a) the payment by each Subsidiary of its applicable operating expenses and debt service and (b) the establishment of reasonable reserves for the payment of operating expenses and debt service not paid on at least a quarterly basis and capital improvements to be made to such Subsidiary’s assets and properties approved by such Subsidiary in the ordinary course of business.

ARTICLE VI.

Negative Covenants

     Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:

     SECTION 6.1. Indebtedness and Other Financial Covenants

     (a) Total Liabilities. As of the last day of each fiscal quarter, Total Liabilities shall not exceed sixty-five percent (65%) of Total Value.

     (b) Minimum Combined Equity Value. The Combined Equity Value as of the Closing Date and as of the last day of each fiscal quarter thereafter shall be not less than $625,000,000, plus an amount equal to eighty-five percent (85%) of the Fair Market Value of all Net Offering Proceeds received by the Borrower after the Closing Date.

     (c) Minimum Consolidated Interest Coverage Ratio. As of the last day of each fiscal quarter, the ratio of (i) the sum of Adjusted EBITDA of the Borrower and its Subsidiaries determined on a consolidated basis for such fiscal quarter, to (ii) Total Interest Expense for such fiscal quarter shall not be less than 1.65 to 1.0.

     (d) Minimum Yield on Debt. As of the last day of each fiscal quarter, the ratio of (i) Adjusted EBITDA of the Borrower and its Subsidiaries determined on a consolidated basis for such fiscal quarter, to (ii) Total Liabilities shall not be less than 12.5%.

     (e) Minimum Fixed Charge Coverage Ratio. As of the last day of each fiscal quarter, the ratio of (i) Adjusted EBITDA of the Borrower and its Subsidiaries determined in a consolidated basis for such fiscal quarter, to (ii) Fixed Charges for the preceding fiscal quarter shall not be less than 1.5 to 1.0

     (f) Maximum Dividend Payout Ratio. The Borrower shall not make any Restricted Payment during any fiscal quarter, which, when added to all Restricted Payments made during such fiscal quarter and the three immediately preceding fiscal quarters, exceeds ninety percent (90%) of Adjusted EBITDA of the Borrower and its

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Subsidiaries determined on a consolidated basis for the four preceding fiscal quarters. Notwithstanding the foregoing, but subject to the following sentence, if an Event of Default exists, the Borrower may only declare or make cash distributions to its shareholders during any fiscal year in an aggregate amount not to exceed the minimum amount necessary for the Borrower to maintain its status as a REIT. If a Default specified in Section 7.1(a), Section 7.1(h) or Section 7.1(i) shall exist, or if as a result of the occurrence of any other Event of Default any of the Loans have been accelerated pursuant to Article VII, the Borrower shall not, and shall not permit any Subsidiary to, make any Restricted Payments to any Person other than to the Borrower or any Subsidiary. For purposes of this provision, “Restricted Payment” means (i) any dividend or other distribution on any equity securities of the Borrower or any Subsidiary (except dividends payable solely in equity securities of the Borrower or any Subsidiary or in rights to subscribe for or purchase equity securities of the Borrower or any Subsidiary) or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any equity securities of the Borrower or any Subsidiary or (b) any option, warrant or other right to acquire equity securities of the Borrower or any Subsidiary.

     (g) Other Indebtedness. The Borrower will not create, incur, assume or permit to exist any Indebtedness other than (i) Indebtedness under the Loan Documents, (ii) Nonrecourse Indebtedness and (iii) Indebtedness that is recourse to the Borrower in an aggregate amount not to exceed 5% of Total Value outstanding at any time. The Borrower will not permit any other Loan Party or any other Subsidiary to, and no other Loan Party or any other Subsidiary shall, create, incur, assume or permit to exist any Indebtedness other than (i) Indebtedness of any Loan Party or other Subsidiary to the Borrower evidenced by a promissory note (an “Intercompany Note”) in the form of Exhibit H hereto, (ii) Nonrecourse Indebtedness, (iii) Indebtedness of a Subsidiary to a Subsidiary (other than Indebtedness of a Subsidiary that is a Guarantor to a Subsidiary that is not a Guarantor) and (iv) Indebtedness that is recourse to an Excluded Subsidiary, but only if such Subsidiary was formed solely to own, and only owns, a particular Project, and does not engage in any business other than the ownership of such Project.

     (h) Negative Pledge. From and after the date hereof, the Borrower shall not, and shall not permit any other Loan Party or any other Subsidiary to, enter into or permit to exist any agreement, other than this Agreement (i) containing any provision prohibiting the creation or assumption of any Lien upon its properties (other than mechanics liens or judgment liens more than 30 days past due and other than with respect to prohibitions on liens set forth in a mortgage on a particular property (or set forth in the documents evidencing or securing Secured Indebtedness so long as the incurrence of such Secured Indebtedness is not otherwise prohibited by this Agreement)), revenues or assets, whether now owned or hereafter acquired, or (ii) restricting the ability of the Borrower or any other Loan Party to amend or modify this Agreement or any other Loan Document, or (iii) restricting the ability of any other Loan Party or any other Subsidiary (other than an Excluded Subsidiary) to make or pay dividends or distributions to the Borrower.

     (i) Pro Forma Calculations. The Borrower shall comply with the financial ratio set forth in Section 6.1(a) as of the date of each Credit Event. The Borrower shall recalculate such financial ratio by adding an amount equal to the Indebtedness associated

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with such Credit Event to the Total Liabilities reflected on the most recently available financial statements, and adding thereto any Total Liabilities incurred since the date of such financial statement and adding to Total Value the value of such assets (determined at cost) acquired with any such Total Liabilities to Total Value. The Borrower shall deliver an Officer’s Certificate, signed by a Financial Officer of the Borrower, certifying that the pro forma calculations as of the date of such Credit Event demonstrate the Borrower’s compliance with the financial ratio set forth in Section 6.1(a).

     SECTION 6.2. Liens. The Borrower will not, and will not permit any other Loan Party or any other Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

     (a) Permitted Encumbrances;

     (b) Liens with respect to Capital Leases of equipment entered into in the ordinary course of business of the Borrower pursuant to which the aggregate Indebtedness under such Capital Leases does not exceed $50,000 for any Project; and

     (c) Liens securing Secured Indebtedness, the incurrence of which is not prohibited by Article VI.

     SECTION 6.3. Fundamental Changes. (a) The Borrower will not, and will not permit any other Loan Party or any other Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets, or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except (i) if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing, any Person may merge into the Borrower, any other Loan Party or any other Subsidiary in a transaction in which the Borrower, another Loan Party or a Subsidiary is the surviving corporation, (ii) any Subsidiary may merge with any other Subsidiary; provided, that if any Subsidiary shall be merged with a Loan Party, the surviving Subsidiary shall be the Loan Party or shall become a Guarantor under this Agreement, and (iii) the sale of stock of a Subsidiary (other than a Guarantor), subject to the requirements set forth in Section 5.2(b).

     (b) The Borrower will not, and will not permit any other Loan Party or any other Subsidiary to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto.

     SECTION 6.4. Investments, Loans, Advances, Guarantees and Acquisitions. The Borrower will not, and will not permit any other Loan Party or any other Subsidiary to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any

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investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except:

(a)	Permitted Investments;
(b)	investments in Real Property (except as otherwise limited in this Section 6.4);
(c)	investments (including loans and advances) in or to the Subsidiaries;
(d)	investments in Joint Ventures which are not Subsidiaries; provided that the aggregate amount of investments in (i) WP Carey Joint Ventures shall not exceed 35% of Total Value and (ii) other Joint Ventures shall not exceed 5% of Total Value;
(e)	investments in Real Property located outside the United States; provided that the aggregate amount of investments in Real Estate located outside of the United States shall not exceed 15% of Total Value;
(f)	investments in notes secured by mortgages on any Real Property of any Person;
(g)	investments in Real Property under construction; provided that the aggregate amount of investments in Real Property under construction shall not exceed 5% of Total Value;
(h)	investments in Real Property consisting of undeveloped land; provided that the aggregate amount of investments in Real Property consisting of undeveloped land shall not exceed 5% of Total Value;
(i)	investments in Permitted REIT Investments; provided that the aggregate amount of investments in Permitted REIT Investments shall not exceed $25,000,000 (valued at historical cost);
(j)	investments in Marketable Securities; provided that the aggregate amount of investments in Marketable Securities shall not exceed $25,000,000;
(k)	investments in securities of tenants under Leases, including any capital stock, warrants, stock options or other equity securities of such tenants and any underlying security thereof, acquired in connection with or arising out of a leasing transaction with such tenant and any subsequent exercise of such warrant or stock options and the ownership of such underlying security thereof;
(l)	Guarantees by the Borrower of the Indebtedness or other obligations of a wholly-owned Subsidiary or of a Joint Venture in which the Borrower owns, directly or indirectly, a Joint Venture Holding, so long as the

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	Indebtedness under such Guarantees is not otherwise prohibited by Section 6.1(g)(iii) or any other provisions of this Article VI (excluding this Section 6.4); and
(m)	Guarantees by the Borrower or a wholly-owned Subsidiary of obligations in respect of Nonrecourse Carveouts of a wholly-owned Subsidiary or of a Joint Venture in which the Borrower owns, directly or indirectly, a Joint Venture Holding.

Notwithstanding the foregoing, the amount of the investments of the types set forth in clauses (d)(ii) through (k) shall not exceed 18% of Total Value in the aggregate. In no event shall the Borrower or any Subsidiary engage in speculative development. Speculative development shall not include the ownership, renovating, repair or rehabilitation of a Property previously leased but which is being renovated, repaired, or rehabilitated to position the Property for re-leasing following a tenant default, lease expiration or lease termination.

     SECTION 6.5. Hedging Agreements. The Borrower will not, and will not permit any other Loan Party or any other Subsidiary to, enter into any Hedging Agreement, other than Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower, such other Loan Party or such other Subsidiary is exposed in the conduct of its business or the management of its liabilities.

     SECTION 6.6. ERISA. The Borrower will not, and will not permit any other Loan Party or any other Subsidiary or ERISA Affiliates to:

     (a) engage in any prohibited transaction described in Sections 406 of ERISA or 4975 of the Code for which a statutory or class exemption is not available or a private exemption has not been previously obtained from the United States Department of Labor, except to the extent engaging in such transaction would not have a Material Adverse Effect;

     (b) permit to exist any accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of the Code), with respect to any Plan, whether or not waived;

     (c) fail to pay timely required contributions or annual installments due with respect to any waived funding deficiency to any Plan;

     (d) terminate any Plan which would result in any liability of the Borrower or any ERISA Affiliate under Title IV of ERISA;

     (e) fail to make any contribution or payment to any Multiemployer Plan which the Borrower or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto, except to the extent such failure would not have a Material Adverse Effect;

     (f) fail to pay any required installment or any other payment required under Section 412 of the Code on or before the due date for such installment or other payment; or

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     (g) amend a Plan resulting in an increase in current liability for the plan year such that the Borrower or any ERISA Affiliate is required to provide security to such Plan under Section 401(a)(29) of the Code.

     SECTION 6.7. Margin Regulations; Securities Laws. The Borrower will not, and will not permit any other Loan Party or any other Subsidiary to, use all or any portion of the proceeds of any credit extended under this Agreement to purchase or carry Margin Stock.

     SECTION 6.8. Transactions with Affiliates. The Borrower will not, and will not permit any other Loan Party or any other Subsidiary to, directly or indirectly enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder or holders of more than five percent (5%) of any class of equity securities of the Borrower, or with any Affiliate of the Borrower which is not its Subsidiary, on terms that are determined by the board of directors of the Borrower to be less favorable to the Borrower or any of its Subsidiaries, as applicable, than those that might be obtained in an arm’s length transaction at the time from Persons who are not such a holder or Affiliate. Nothing contained in this Section 6.8 shall prohibit (a) increases to compensation and benefits for officers and employees of the Borrower or any of its Subsidiaries which are customary in the industry or consistent with the past business practice of the Borrower or such Subsidiary, provided that no Default has occurred and is continuing or would result therefrom; (b) payment of customary partners’ indemnities; (c) performance of any obligations arising under the Loan Documents; and (d) any Restricted Payment permitted by Section 6.1(f).

ARTICLE VII.

Events of Default

     SECTION 7.1. Events of Default. If any of the following events (“Events of Default”) shall occur:

     (a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

     (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement, when and as the same shall become due and payable, or any other Loan Party shall fail to pay when due any obligation owing by such Loan Party under any Loan Document to which it is a party, and such failure shall continue unremedied for a period of three Business Days;

     (c) any representation or warranty made or deemed made by or on behalf of the Borrower, any other Loan Party or any other Subsidiary in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement

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or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, shall prove to have been incorrect when made or deemed made or furnished;

     (d) the Borrower, any other Loan Party or any other Subsidiary shall fail to observe or perform any covenant, condition or agreement contained in Article V or in Article VI or any covenant, condition or agreement in any Loan Document that becomes effective upon an Event of Default;

     (e) the Borrower, any other Loan Party or any other Subsidiary shall fail to observe or perform any covenant, condition or agreement contained in this Agreement or any other Loan Document (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of the Required Lenders);

     (f) the Borrower, any other Loan Party or any other Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable;

     (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to Secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness unless prohibited by this Agreement;

     (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower, any other Loan Party or any other Subsidiary or any of their debts, or of a substantial part of any of their assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower, any other Loan Party or any other Subsidiary or for a substantial part of any of their assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

     (i) the Borrower, any other Loan Party or any other Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver,

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trustee, custodian, sequestrator, conservator or similar official for the Borrower, any other Loan Party or any other Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

     (j) the Borrower, any other Loan Party or any other Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

     (k) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 (excluding judgments entered in respect of Nonrecourse Indebtedness and judgments entered in respect of Indebtedness permitted under clause (iv) of the second sentence of Section 6.1(g)) shall be rendered against the Borrower, any other Loan Party or any other Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Subsidiary to enforce any such judgment;

     (l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower or any Subsidiary in an aggregate amount exceeding (i) $250,000 in any year or (ii) $500,000 for all periods;

     (m) a Change in Control shall occur;

     (n) an event shall occur which has a Material Adverse Effect; or

     (o) the Borrower shall merge or liquidate with or into any other Person and, as a result thereof and after giving effect thereto, (i) the Borrower is not the surviving Person or (ii) such merger or liquidation would effect an acquisition of or investment in any Person not otherwise permitted under the terms of this Agreement;

then, and in every such event (other than an event described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take one or more of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, (iii) require cash collateral as contemplated by Section 2.6(j), and (iv) enforce any rights and exercise any rights and remedies available under any Loan Document or otherwise; and in the case of any event described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then

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outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

ARTICLE VIII.

The Administrative Agent

     SECTION 8.1. Appointment and Authorization. Each Lender hereby irrevocably appoints and authorizes the Administrative Agent to take such action as contractual representative on such Lender’s behalf and to exercise such powers under this Agreement and the other Loan Documents as are specifically delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Not in limitation of the foregoing, each Lender authorizes and directs the Administrative Agent to enter into the Loan Documents for the benefit of the Lenders. Each Lender hereby agrees that, except as otherwise set forth herein, any action taken by the Required Lenders in accordance with the provisions of this Agreement or the other Loan Documents, and the exercise by the Required Lenders of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders. Nothing herein shall be construed to deem the Administrative Agent a trustee or fiduciary for any Lender or to impose on the Administrative Agent duties or obligations other than those expressly provided for herein. Without limiting the generality of the foregoing, the use of the terms “Administrative Agent”, “Agent”, “agent” and similar terms in the Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any Applicable Law. Instead, use of such terms is merely a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. The Administrative Agent will furnish to any Lender, upon the request of such Lender, a copy (or, where appropriate, an original) of any document, instrument, agreement, certificate or notice furnished to the Administrative Agent by the Borrower, any other Loan Party or any other Affiliate of the Borrower, pursuant to this Agreement or any other Loan Document not already delivered to such Lender pursuant to the terms of this Agreement or any such other Loan Document. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of any of the Loans), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders (or all of the Lenders if explicitly required under any other provision of this Agreement), and such instructions shall be binding upon all Lenders; provided, however, that, notwithstanding anything in this Agreement to the contrary, the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or any other Loan Document or Applicable Law. Not in limitation of the foregoing, the Administrative Agent shall exercise any right or remedy it or the Lenders may have under any Loan Document upon the occurrence of a Default unless the Required Lenders (or all of the Lenders if explicitly required under this Agreement) have directed the Administrative Agent otherwise. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting under this Agreement or any of the other

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Loan Documents in accordance with the instructions of the Required Lenders, or where applicable, all the Lenders.

     SECTION 8.2. Wells Fargo as Lender. Wells Fargo, as a Lender, shall have the same rights and powers under this Agreement and any other Loan Document as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include Wells Fargo in each case in its individual capacity. Wells Fargo and its affiliates may each accept deposits from, maintain deposits or credit balances for, invest in, lend money to, act as trustee under indentures of, serve as financial advisor to, and generally engage in any kind of business with, the Borrower, any other Loan Party or any other Affiliate thereof as if it were any other bank and without any duty to account therefor to the other Lenders. Further, the Administrative Agent and any Affiliate thereof may accept fees and other consideration from the Borrower for services in connection with this Agreement and otherwise without having to account for the same to the Lenders. The Lenders acknowledge that, pursuant to such activities, Wells Fargo or its Affiliates may receive information regarding the Borrower, other Loan Parties, other Subsidiaries and other Affiliates of the Borrower (including information that may be subject to confidentiality obligations in favor of such Person) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them.

     SECTION 8.3. Approvals of Lenders. All communications from the Administrative Agent to any Lender requesting such Lender’s determination, consent, approval or disapproval (a) shall be given in the form of a written notice to such Lender, (b) shall be accompanied by a description of the matter or issue as to which such determination, approval, consent or disapproval is requested, or shall advise such Lender where information, if any, regarding such matter or issue may be inspected, or shall otherwise describe the matter or issue to be resolved, (c) shall include, if reasonably requested by such Lender and to the extent not previously provided to such Lender, written materials and a brief summary of all oral information provided to the Administrative Agent by the Borrower relevant to the matter or issue to be resolved, and (d) shall include the Administrative Agent’s recommended course of action or determination in respect thereof. Unless a Lender shall give written notice to the Administrative Agent that it specifically objects to the recommendation or determination of the Administrative Agent (together with a reasonable written explanation of the reasons behind such objection) within 10 Business Days (or such lesser or greater period as may be specifically required under the express terms of the Loan Documents) of receipt of such communication, such Lender shall be deemed to have conclusively approved of or consented to such recommendation or determination.

     SECTION 8.4. Notice of Defaults. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Default unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing with reasonable specificity such Default and stating that such notice is a “notice of default”. If any Lender (excluding the Lender which is also serving as the Administrative Agent) becomes aware of any Default, it shall promptly send to the Administrative Agent such a “notice of default”. Further, if the Administrative Agent receives such a “notice of default,” the Administrative Agent shall give prompt notice thereof to the Lenders.

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     SECTION 8.5. Administrative Agent’s Reliance, Etc. Notwithstanding any other provisions of this Agreement or any other Loan Documents, neither the Administrative Agent nor any of its directors, officers, agents, employees or counsel shall be liable for any action taken or not taken by it under or in connection with this Agreement or any other Loan Document, except for its or their own gross negligence or willful misconduct in connection with its duties expressly set forth herein or therein. Without limiting the generality of the foregoing, the Administrative Agent: may consult with legal counsel (including its own counsel or counsel for the Borrower or any other Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. Neither the Administrative Agent nor any of its directors, officers, agents, employees or counsel: (a) makes any warranty or representation to any Lender or any other Person or shall be responsible to any Lender or any other Person for any statement, warranty or representation made or deemed made by the Borrower, any other Loan Party or any other Person in or in connection with this Agreement or any other Loan Document; (b) shall have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any other Loan Document or the satisfaction of any conditions precedent under this Agreement or any other Loan Document on the part of the Borrower or other Persons or inspect the property, books or records of the Borrower or any other Person; (c) shall be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document, any other instrument or document furnished pursuant thereto or any collateral covered thereby or the perfection or priority of any Lien in favor of the Administrative Agent on behalf of the Lenders in any such collateral; (d) shall have any liability in respect of any recitals, statements, certifications, representations or warranties contained in any of the Loan Documents or any other document, instrument, agreement, certificate or statement delivered in connection therewith; or (e) shall incur any liability under or in respect of this Agreement or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telephone, telecopy or electronic mail) believed by it to be genuine and signed, sent or given by the proper party or parties. The Administrative Agent may execute any of its duties under the Loan Documents by or through agents, employees or attorneys-in-fact and shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

     SECTION 8.6. Indemnification of Administrative Agent. Regardless of whether the transactions contemplated by this Agreement and the other Loan Documents are consummated, each Lender agrees to indemnify the Administrative Agent (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so) pro rata in accordance with such Lender’s respective Applicable Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against the Administrative Agent (in its capacity as Administrative Agent but not as a “Lender”) in any way relating to or arising out of the Loan Documents, any transaction contemplated thereby or any action taken or omitted by the Administrative Agent under the Loan Documents (collectively, “Indemnifiable Amounts”); provided, however, that no Lender shall be liable for any portion of such Indemnifiable Amounts to the extent resulting from the Administrative Agent’s gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final, non-appealable judgment provided, however, that no action

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taken in accordance with the directions of the Required Lenders (or all of the Lenders if expressly required under this Agreement) shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limiting the generality of the foregoing, each Lender agrees to reimburse the Administrative Agent (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so) promptly upon demand for its ratable share of any reasonable out-of-pocket expenses (including the reasonable fees and expenses of the counsel to the Administrative Agent) incurred by the Administrative Agent in connection with the preparation, negotiation, execution, administration, or enforcement (whether through negotiations, legal proceedings, or otherwise) of, or legal advice with respect to the rights or responsibilities of the parties under, the Loan Documents, any suit or action brought by the Administrative Agent to enforce the terms of the Loan Documents and/or collect any Loans, any “lender liability” suit or claim brought against the Administrative Agent and/or the Lenders, and any claim or suit brought against the Administrative Agent and/or the Lenders arising under any Environmental Laws; provided, however, that no Lender shall be liable for any portion of such expenses to the extent resulting from the Administrative Agent’s gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final, non-appealable judgment; provided further, however, that no action taken in accordance with the directions of the Required Lenders (or all of the Lenders if expressly required under this Agreement) shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Such out-of-pocket expenses (including counsel fees) shall be advanced by the Lenders on the request of the Administrative Agent notwithstanding any claim or assertion that the Administrative Agent is not entitled to indemnification hereunder upon receipt of an undertaking by the Administrative Agent that the Administrative Agent will reimburse the Lenders if it is actually and finally determined by a court of competent jurisdiction that the Administrative Agent is not so entitled to indemnification. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder or under the other Loan Documents and the termination of this Agreement. If the Borrower shall reimburse the Administrative Agent for any Indemnifiable Amount following payment by any Lender to the Administrative Agent in respect of such Indemnifiable Amount pursuant to this Section, the Administrative Agent shall share such reimbursement on a ratable basis with each Lender making any such payment.

     SECTION 8.7. Lender Credit Decision, Etc. Each Lender expressly acknowledges and agrees that neither the Administrative Agent nor any of its officers, directors, employees, agents, counsel, attorneys-in-fact or other affiliates has made any representations or warranties to such Lender and that no act by the Administrative Agent hereafter taken, including any review of the affairs of the Borrower, any other Loan Party or any other Subsidiary or Affiliate of the Borrower, shall be deemed to constitute any such representation or warranty by the Administrative Agent to any Lender. Each Lender acknowledges that it has made its own credit and legal analysis and decision to enter into this Agreement and the transactions contemplated hereby, independently and without reliance upon the Administrative Agent, any other Lender or counsel to the Administrative Agent, or any of their respective officers, directors, employees, agents or counsel, and based on the financial statements of the Borrower, the other Loan Parties, the other Subsidiaries and other Affiliates of the Borrower, and inquiries of such Persons, its independent due diligence of the business and affairs of the Borrower, the other Loan Parties, the other Subsidiaries and other Persons, its review of the Loan Documents, the legal opinions required to be delivered to it hereunder, the advice of its own counsel and such other documents and information as it has deemed appropriate. Each Lender also acknowledges that it will,

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independently and without reliance upon the Administrative Agent, any other Lender or counsel to the Administrative Agent or any of their respective officers, directors, employees and agents, and based on such review, advice, documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under the Loan Documents. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Borrower or any other Loan Party of the Loan Documents or any other document referred to or provided for therein or to inspect the properties or books of, or make any other investigation of, the Borrower, any other Loan Party or any other Subsidiary. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent under this Agreement or any of the other Loan Documents, the Administrative Agent shall have no duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrower, any other Loan Party or any other Affiliate thereof which may come into possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or other Affiliates. Each Lender acknowledges that the Administrative Agent’s legal counsel in connection with the transactions contemplated by this Agreement is only acting as counsel to the Administrative Agent and is not acting as counsel to such Lender.

     SECTION 8.8. Successor Administrative Agent. The Administrative Agent may resign at any time as Administrative Agent under the Loan Documents by giving written notice thereof to the Lenders and the Borrower. The Administrative Agent may be removed for cause in the case of its gross negligence or willful misconduct as Administrative Agent under the Loan Documents by all Lenders (other than the Lender then acting as Administrative Agent) and the Borrower upon 30 day’s prior notice. Upon any such resignation or removal, the Required Lenders (which, in the case of the removal of the Administrative Agent as provided in the immediately preceding sentence, shall be determined without regard to the Commitment of the Lender than acting as Administrative Agent) shall have the right to appoint a successor Administrative Agent which appointment shall, provided no Default exists, be subject to the Borrower’s approval, which approval shall not be unreasonably withheld or delayed. If no successor Administrative Agent shall have been so appointed in accordance with the immediately preceding sentence, and shall have accepted such appointment, within 30 days after the current Administrative Agent’s giving of notice of resignation or the Lenders’ removal of the current Administrative Agent, then the current Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a Lender, if any Lender shall be willing to serve, and otherwise shall be an Eligible Assignee. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the current Administrative Agent, and the current Administrative Agent shall be discharged from its duties and obligations under the Loan Documents. After any Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Article VIII. shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under the Loan Documents. Notwithstanding anything contained herein to the contrary, the Administrative Agent may assign its rights and duties under the Loan Documents to any of its affiliates by giving the Borrower and each Lender prior written notice.

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     SECTION 8.9. Titled Agents. Each of the Arranger, the Syndication Agents and the Documentation Agents, (each a “Titled Agent”) in each such respective capacity, assumes no responsibility or obligation hereunder, including, without limitation, for servicing, enforcement or collection of any of the Loans, nor any duties as an agent hereunder for the Lenders. The titles given to the Titled Agents are solely honorific and imply no fiduciary responsibility on the part of the Titled Agents to the Administrative Agent, any Lender, the Borrower or any other Loan Party and the use of such titles does not impose on the Titled Agents any duties or obligations greater than those of any other Lender or entitle the Titled Agents to any rights other than those to which any other Lender is entitled.

ARTICLE IX.

Miscellaneous

     SECTION 9.1. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be, in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

     (a) if to the Borrower, to it at c/o W.P. Carey & Co. LLC, 50 Rockefeller Plaza, New York, New York 10020, Attention of Mark DeCesaris, Chief Financial Officer (Telecopy No. 212-492-8922);

     (b) if to the Administrative Agent, to Wells Fargo Bank, National Association, as Administrative Agent, 40 West 57^th Street, New York, New York 10019, Attention of Jan LaChapelle and Loan Administration (Telecopy No. 212-581-0979), and to Wells Fargo Bank National Association, as Administrative Agent, 2120 East Park Place, Suite 100, El Segundo, California 90245 (Telecopy No. 310-615-1014), Attention of Disbursement Administrator, with copies to Wells Fargo Bank, National Association, as Administrative Agent, Real Estate Group, 420 Montgomery Street, 6^th Floor, San Francisco, California 94111, Attention of Chief Credit Officer – Real Estate Group (Telecopy No. 415-781-8324);

     (c) if to the Issuing Bank, to Wells Fargo Bank, National Association, as Issuing Bank, 40 West 57^th Street, New York, New York 10019, Attention of Jan LaChapelle and Loan Administration, and to Wells Fargo Bank National Association, as Issuing Bank, 2120 East Park Place, Suite 100, El Segundo, California 90245, Attention of Disbursement Administrator, with copies to Wells Fargo Bank, National Association, as Issuing Bank, Real Estate Group, 420 Montgomery Street, 6^th Floor, San Francisco, California 94111, Attention of Chief Credit Officer – Real Estate Group ; and

     (d) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Details Form.

Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other

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communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

     SECTION 9.2. Waivers; Amendments. (a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower or any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.

     (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) change the Commitment of any Lender without the written consent of such Lender (other than a reduction of Commitments under Section 2.9), (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, or permit the expiration date of any Letter of Credit to be after the date specified in Section 2.6(c)(ii), without the written consent of each Lender affected thereby (other than extensions of the Maturity Date in accordance with Section 2.5), (iv) change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, or (vi) except as permitted pursuant to Section 5.15(b), release any Guarantor without the consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Issuing Bank hereunder without, in addition, the prior written consent of the Administrative Agent or the Issuing Bank, as the case may be; provided, further, Schedules 3.2 and 4.1(f) may be amended by the Borrower without the consent of the Required Lenders solely to update the information contained therein.

     SECTION 9.3. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative

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Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, the Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

     (b) The Borrower shall indemnify the Administrative Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned, leased or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or willful misconduct of such Indemnitee.

     (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent or the Issuing Bank under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent or the Issuing Bank, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent or the Issuing Bank in its capacity as such.

     (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

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     (e) All amounts due under this Section shall be payable promptly after written demand therefor.

     SECTION 9.4. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that a Loan Party may not assign or otherwise transfer any of its rights or obligations hereunder or under any other Loan Document without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

     (b) Any Lender may assign to one or more Eligible Assignees (each an “Assignee”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to an existing Lender, the Borrower (so long as no Event of Default has occurred and is continuing), the Administrative Agent and the Issuing Bank must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to an existing Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000 unless each of the Borrower (so long as no Event of Default has occurred and is continuing) and the Administrative Agent otherwise consent and after giving effect to such partial assignment, the assigning Lender shall have retained a Commitment in an amount equal to at least $10,000,000, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, and the Assignee shall pay the Administrative Agent a processing and recordation fee of $4,500, and (v) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Details Form. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement arising from and after the date of such assignment (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.3). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. If the consent of the

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Borrower is required pursuant to this Section 9.4, and the Borrower does not respond to the Administrative Agent’s request for consent within five Business Days of such request, such consent shall be deemed given. Upon consummation of any assignment pursuant to this subsection (b), the assigning Lender, the Administrative Agent and the Borrower shall arrange to issue new Notes to the assigning Lender and Assignee as appropriate.

     (c) The Administrative Agent shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, and the LC Exposure of, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

     (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an Assignee, the Assignee’s completed Administrative Details Form (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

     (e) Any Lender may, without the consent of or notice to the Borrower, the Administrative Agent or the Issuing Bank, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.2(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.8 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Foreign Lender.

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     (f) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.17(e) as though it were a Foreign Lender.

     (g) Any Lender may at any time pledge or assign, or grant a security interest in, all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment or grant to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment or grant of a security interest; provided that no such pledge or assignment or grant of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee or grantee for such Lender as a party hereto.

     SECTION 9.5. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.3 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

     SECTION 9.6. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and thereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof and thereof. This Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns in accordance with Section 9.4. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

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     SECTION 9.7. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

     SECTION 9.8. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, but in the case of a Lender or a Participant subject to receipt of the prior written consent of the Administrative Agent exercised in its sole discretion, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

     SECTION 9.9. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.

     (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction.

     (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

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     (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.1. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

     SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

     SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested or required by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or any other Loan Document or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivatives transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower, (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a non-confidential basis from a source other than the Borrower, or (i) to the extent provided in Section 9.16. For the purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a non-confidential basis prior to disclosure by the Borrower. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to

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maintain the confidentiality of such Information as such Person would accord to its own confidential information.

     SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

     SECTION 9.14. [Reserved]

     SECTION 9.15. Electronic Document Delivery.

     Documents required to be delivered pursuant to the Loan Documents shall be delivered by electronic communication and delivery, including, the Internet, e-mail or intranet websites to which the Administrative Agent and each Lender have access (including a commercial, third-party website such as www.Edgar.com <http://www.Edgar.com> or a website sponsored or hosted by the Administrative Agent or the Borrower) provided that (A) the foregoing shall not apply to notices to any Lender pursuant to Article II and (B) a Lender has not notified the Administrative Agent or the Borrower that it cannot or does not want to receive electronic communications. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic delivery pursuant to procedures approved by it for all or particular notices or communications. Documents or notices delivered electronically shall be deemed to have been delivered twenty-four (24) hours after the date and time on which the Administrative Agent or the Borrower posts such documents or the documents become available on a commercial website and the Administrative Agent or the Borrower notifies each Lender of said posting and provides a link thereto provided if such notice or other communication is not sent or posted during the normal business hours of the recipient, said posting date and time shall be deemed to have commenced as of 9:00 a.m., New York time, on the opening of business on the next business day for the recipient. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the certificate required by Sections 5.1(a)(ii) and (b)(ii) to the Administrative Agent and shall deliver paper copies of any documents to the Administrative Agent or to any Lender that requests such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender. Except for the certificates required by Sections 5.1(a)(ii) and (b)(ii), the Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents delivered electronically, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery. Each

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Lender shall be solely responsible for requesting delivery to it of paper copies and maintaining its paper or electronic documents.

     SECTION 9.16. USA Patriot Act. The USA Patriot Act of 2001 (Public Law 107-56) and federal regulations issued with respect thereto require all financial institutions to obtain, verify and record certain information that identifies individuals or business entities which open an “account” with such financial institution. Consequently, the Administrative Agent for all Lenders hereunder may from time to time request, and the Borrower shall provide to the Administrative Agent and the Lenders, the Borrower’s name, address, tax identification number and/or such other identification information as shall be necessary for Administrative Agent and the Lenders to comply with federal law. An “account” for this purpose may include, without limitation, a deposit account, cash management service, a transaction or asset account, a credit account, a loan or other extension of credit, and/or other financial services product.

[Remainder of Page Intentionally Left Blank]

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     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

BORROWER:
CORPORATE PROPERTY ASSOCIATES 14
	INCORPORATED
By:	/s/ Mark J. DeCesaris
	Name: Mark J. DeCesaris
	Title: Managing Director

[Signatures Continued on Next Page]

Signature Page to Credit Agreement

WELLS FARGO BANK, NATIONAL
ASSOCIATION, individually, as Issuing
Bank and as Administrative Agent
By:	/s/ Jan LaChapelle
	Name:	Jan LaChapelle
	Title:	Relationship Manager

[Signatures Continued on Next Page]

Signature Page to Credit Agreement

PNC BANK, NATIONAL
ASSOCIATION
By:	/s/ Brian P. Kelly
	Name:	Brian P. Kelly
	Title:	Vice President

[Signatures Continued on Next Page]

Signature Page to Credit Agreement

CITIZENS BANK OF RHODE
ISLAND
By:	/s/ Craig E. Schermerhorn
	Name:	Craig E. Schermerhorn
	Title:	Senior Vice President

[Signatures Continued on Next Page]

Signature Page to Credit Agreement

THE BANK OF NEW YORK
By:	/s/ David Applebaum Name: David Applebaum Title: Vice President

[Signatures Continued on Next Page]

Signature Page to Credit Agreement

EUROHYPO AG, NEW YORK BRANCH
By:	/s/ Alfred Koch
	Name:	Alfred Koch
	Title:	Managing Director
By:	/s/ Jeff Page
	Name:	Jeff Page
	Title:	Executive Director

[Signatures Continued on Next Page]

Signature Page to Credit Agreement

KBC BANK NV
By:	/s/ Francis X. Payne
	Name:	FRANCIS X. PAYNE
	Title:	Vice President
By:	/s/ Robart Snauffer
	Name:	Robart Snauffer
	Title:	First Vice President

Signature Page to Credit Agreement

Schedule 1

Commitments

Lender	Commitment
Wells Fargo Bank, National Association	$	40,000,000
PNC Bank, National Association	$	25,000,000
Citizens Bank of Rhode Island	$	25,000,000
The Bank of New York	$	22,500,000
Eurohypo AG, New York Branch	$	22,500,000
KBC Bank NV	$	15,000,000

SCHEDULE 1.1(a)

CPA REITS

1.	Corporate Property Associates 14 Incorporated
2.	Corporate Property Associates 15 Incorporated
3.	Corporate Property Associates 16 Incorporated

SCHEDULE 1.1(b)

LOAN PARTIES

Corporate Property Associates 14 Incorporated

Best (CA) QRS 14-4, Inc.

Truck (IN) QRS 14-3, Inc.

DELMO (PA) QRS 12-10

NUTRA (TX) QRS 12-39, Inc.

META (CA) QRS 14-6, Inc.

Film (FL) QRS 14-44, Inc.

Projector (FL) QRS 14-45, Inc.

Tel (VA) QRS 12-15, Inc.

Bandwidth (UT) QRS 14-58, Inc.

Schedule 3.2

Ownership Structure

(Chart)

SCHEDULE 3.3

CONSENTS

None.

Portfolio Overview Schedule 3.4

Pro forma Mortgage Debt Summary

CPA: 14 (Pro-Rata)

	Interest			Fixed/				9-30-06	Balloon		Maturity
Tenant/Lease Guarantor	Rate			Variable	Original Balance		Balance		Payment		Date
Earle M. Jorgensen Company		7.82	%	Fixed	$	3,800,000	$	3,615,883	$	3,556,956	Feb-08
Gibson Guitar Corporation (82.5%)		7.57	%	Fixed		1,712,322		1,525,461		1,455,135	May-08
Pacific Logistics (Texas Freezer)		5.15	%	Fixed		4,500,000		3,749,539		3,504,001	Jul-08
Perry Graphic Communications, Inc.		7.01	%	Fixed		11,000,000		9,350,390		8,824,493	Aug-08
The Bon-Ton Stores, Inc.		6.50	%	Fixed		6,900,000		5,181,372		4,530,499	Dec-08
Advanced Micro Devices (66.66%)		7.78	%	Fixed		45,500,000		41,571,182		39,893,995	Jan-09
Gensia (50%)		8.13	%	Fixed		6,500,000		1,616,412		—	Jan-09
Brashear, L.P.		7.50	%	Fixed		4,225,000		3,698,780		3,442,126	Apr-09
Compucom Systems, Inc. (66.66%)		7.22	%	Fixed		15,333,333		13,342,640		12,351,558	May-09
Production Resource Group (NV)		8.31	%	Fixed		5,475,000		4,898,607		4,566,197	Jul-09
Intesys Technologies, Inc.		8.08	%	Fixed		13,130,000		12,161,461		11,583,578	Aug-09
Moonlight Molds (fka Scott)		8.21	%	Fixed		3,000,000		2,783,526		2,653,543	Aug-09
McLane Foodservice, Inc. (Ameriserve)		8.51	%	Fixed		32,000,000		23,466,322		24,885,885	Sep-09
Galyan’s Trading Company (2),(3)		8.79	%	Fixed		14,748,889		13,870,378		13,258,846	Sep-09
Galyan’s Trading (Fairfax & Lombard) (2)		8.75	%	Fixed		16,588,659		15,593,642		14,902,267	Sep-09
Atrium Companies (TX)		8.70	%	Fixed		13,123,000		12,561,533		12,093,827	Jan-10
Production Resource Group (CA)		7.50	%	Fixed		2,176,623		2,038,234		1,882,416	Mar-10
Amerix Corporation		8.66	%	Fixed		14,500,000		13,249,559		12,237,419	Apr-10
RockIsland Corporation (West Union)		8.31	%	Fixed		3,300,000		3,172,187		3,010,388	Jul-10
ShopRite Supermarkets, Inc. (45%)		7.50	%	Fixed		4,900,500		4,588,928		4,198,845	Jul-10
Randall International		7.50	%	Fixed		5,549,909		5,197,049		4,732,615	Sep-10
Amtech Systems Corporation		8.09	%	Fixed		3,500,000		3,321,219		3,140,889	Oct-10
Garden Ridge Corporation		7.50	%	Fixed		5,510,978		5,160,592		4,688,062	Oct-10
Institutional Jobbers Company		8.60	%	Fixed		13,416,187		12,259,075		11,026,809	Nov-10
Barjan Products		7.50	%	Fixed		7,151,053		6,855,044		6,446,194	Nov-10
Buffets Holdings, Inc.		8.11	%	Fixed		11,785,000		9,129,467		8,151,860	Dec-10
Advance Paradigm, Inc. (PCS)		8.00	%	Fixed		24,700,000		22,665,785		20,399,141	Jan-11
Federal Express Corporation (60%)		7.50	%	Fixed		27,000,000		25,308,579		23,476,705	Jan-11

	Interest			Fixed/				9-30-06	Balloon		Maturity
Tenant/Lease Guarantor	Rate			Variable	Original Balance		Balance		Payment		Date
Towne Holdings, Inc.		7.70	%	Fixed		4,800,000		4,545,308		4,265,830	Jan-11
Westell		7.40	%	Fixed		12,000,000		10,235,441		8,325,084	Jan-11
McCoy, Inc. (90%)		8.25	%	Fixed		3,780,000		31450,611		3,080,695	Jan-11
Upper Deck Company, The (50%)		8.43	%	Fixed		7,500,000		6,000,646		4,882,776	Feb-11
Bon-Ton Department Stores, Inc., The		7.50	%	Fixed		3,241,555		3,232,040		3,021,286	Mar-11
Nexpak Corporation (GA)		7.33	%	Fixed		7,900,000		7,473,481		6,959,433	Apr-11
24 Hour Fitness (Houston)		7.50	%	Fixed		4,330,319		4,054,999		3,628,989	Apr-11
Celadon		7.50	%	Fixed		2,100,683		1,967,122		1,755,939	May-11
Nexpak B. V. (Helmond, NT)		6.41	%	Fixed		4,813,400		5,927,666		4,956,869	Jun-11
Lennar Corporation (U. S. Home Corporation)		7.42	%	Fixed		5,000,000		4,750,508		4,416,000	Jul-11
Metaldyne Company LLC		7.48	%	Fixed		16,700,000		15,877,554		14,766,439	Jul-11
Special Devices, Inc.		7.87	%	Fixed		17,500,000		16,710,790		15;627,595	Jul-11
Gibson Guitar Corporation (82.5%)		7.49	%	Fixed		8,250,000		7,851,135		7,296,470	Aug-11
Collins & Aikman Corporation		7.35	%	Fixed		17,000,000		15,722,179		13,778,139	Oct-11
DCI Holdings, Inc (New Creative Enterprises)		7.35	%	Fixed		10,000,000		9,520,640		8,814,694	Oct-11
Del Monte Corporation (50%)		7.35	%	Fixed		6,062,500		5,606,737		4,927,386	Oct-11
Jen-Coat		7.30	%	Fixed		7,150,000		6,803,511		6,294,530	Oct-11
Applied Power, Inc.		7.10	%	Fixed		17,500,000		16,131,974		14,076,622	Nov-11
24 Hour Fitness Worldwide (UT)		7.50	%	Fixed		3,293,647		3,084,239		2,709,656	Nov-11
Atrium Companies (NC, PA)		7.25	%	Fixed		14,000,000		13,341,199		12,308,814	Dec-11
PETsMART, Inc. (70%)		7.70	%	Fixed		30,187,500		28,901,573		26,840,151	Dec-11
Orbseal		7.25	%	Fixed		6,175,000		5,884,421		5,429,066	Dec-11
Sunland Distribution		7.50	%	Fixed		5,426,070		5,081,083		4,451,784	Dec-11
Perkin Elmer Inc. 1		6.09	%	Fixed		18,148,874		21,740,790		15,712,984	Dec-11
Lincoln Technical Institute, Inc.		7.58	%	Fixed		6,300;000		5,832,850		5,063,675	Jan-12
Gerber Scientific		7.54	%	Fixed		12,500,000		11,957,463		11,066,232	Jan-12
Nortel Networks Limited		7.35	%	Fixed		30,000,000		28,642,452		26,433,481	Jan-12
Best Buy (37%)		7.49	%	Fixed		10,545,000		9,815,020		8,580,131	Feb-12
Sandwich Bancorp/Compass Bank		7.50	%	Fixed		1,626.518		1,523,104		1,327,084	Feb-12
24 Hour Fitness Worldwide (MO)		7.53	%	Fixed		3,800,000		3,643,740		3,367,245	Mar-12
PW Eagle, Inc.		7.60	%	Fixed		8,200,000		7,868,154		7,278,802	Mar-12
Stellex Paragon / Stellex Monitor		7.50	%	Fixed		10,939,074		10,243,572		8,900,190	Mar-12
Childtime Childcare, Inc.		7.50	%	Fixed		6,871,863		6,434,952		5,591,046	Mar-12
Heainer Tire Group		8.09	%	Fixed		8,750,000		8,439,901		7,854,353	Apr-12
Newpark Resources, Inc.		7.50	%	Fixed		2,530,572		2,369,680		2,053,078	Apr-12

	Interest			Fixed/				9-30-06	Balloon		Maturity
Tenant/Lease Guarantor	Rate			Variable	Original Balance		Balance		Payment		Date
R.J. Tower Corporation (Tower Automotive)		7.89	%	Fixed		19,878,130		19,173,913		17,803,805	May-12
Rave Reviews		7.50	%	Fixed		4,399,119		4,119,425		3,558,846	May-12
Meridian Automotive Systems		7.50	%	Fixed		7,316,265		6,851,100		5,901,714	Jun-12
Katun Corporation (IA, MN)		7.15	%	Fixed		19,000,000		18,236,949		16,664,292	Aug-12
Sitgan Containers Corporation		7.50	%	Fixed		7,236,811		6,776,698		5,803,527	Aug-12
International Garden Products, Inc.		7.50	%	Fixed		6,660,000		6,384,317		5,790,920	Sep-12
Vermont Teddy Bear Co., Inc.		6.75	%	Fixed		2,909,940		2,402,810		1,348,051	Sep-12
Career Education Corporation (Allentown Bus. School) (4)		6.29	%	Variable		12,500,000		11,503,395		10,049,929	Oct-12
TruServ Corporation (50%)		5.83	%	Fixed		13,675,708		13,033,167		11,561,872	Jan-13
TruServ Corporation (50%)		5.83	%	Fixed		10,553,156		10,357,071		9,187,877	Jan-13
TruServ Corporation (50%)		5.83	%	Fixed		13,775,024		13,142,558		11,644,637	Feb-13
U-Haul International/Mercury Partners, LP (U-Haul) (11.54%)		6.45	%	Fixed		21,118,200		20,313,855		16,652,089	May-14
CheckFree Corporation (50°’0)		6.18	%	Fixed		15,000,000		15,000,000		13,367,848	Jun-16
Consolidated Theater		6.20	%	Fixed		12,000,000		11,970,475		9,3881039	Jul-16
Builder’s FirstSource, Inc. (GA, O1-I, VA) (60%)		7.57	%	Fixed		4,560,000		4,248,360		2,968,790	Mar-17
Carrefour France SAS (1) (2) (6)		6.28	%	Fixed		84,655,360		94,787,173		39,728,521	Apr-17
BLP Group PLC (5) lp Group PLC (5)		6.48	%	Variable		5,548,000		6,649,603		4,078,523	Jan-21
Katun Corporation (Gorinchem, NT) (1)		6.50	%	Fixed		5,486,000		6,510,213		3,024,185	Jun-22
Universal Technical Institute, Inc. (NASCAR)		6.23	%	Fixed		6,700,000		6,126,054		—	Aug-23
Waddington North America (expansion)		8.01	%	Fixed		11,125,000		10,314,777		927,518	Jul-26
Builders FirstSource, Inc. (NQ		6.21	%	Fixed		6,500,000		6,043,944		305,863	Oct-27
Total Limited Recourse Mortgage Debt.					$	946,545,740	$	896,545,237	$	740,493,645-

(1)	Current balance based on an exchange rate of 1.2688 USD/EUR at September 30, 2006
(2)	Interest rate reflects weighted average for tranches with common, maturity date
(3)	Dick’s Sporting Goods announced its completed acquisition of Galyan’s Trading Co. on July 29, 2004
(4)	Indicated balloon payment is an estimate
(5)	Current balance based on an exchange rate of 1.8726 USD/GBP at September 30, 2006
(6)	Represents original mortgage and expansion

SCHEDULE 3.6

DISCLOSED MATTERS

None.

Schedule 4.1(f)
Transactions not in the Ordinary Clause

1. The Company paid a dividend of $0.1919 per share, for a. total of approximately $13,106,805, on January 15, 2006.

2. The Company paid a dividend of $0.1924 per share, for a total of approximately $13,167,117, on April 15, 2006.

3. The Company paid a dividend of $0.1929 per share and a special dividend of $0.45 per share, for a total of approximately $44,054,373; on July 15, 2006.

4. The Company paid a dividend of $0.1929 per share, for a total of approximately $13,304,127, on October 15, 2006.

5. The Company will pay a special dividend of $0.04 per share, for a total of approximately $2,759,000, on or about December 15, 2006.

J-9

Exhibit C

FORM OF GUARANTY*

     THIS GUARANTY dated as of                      ___, 2006 executed and delivered by each of the undersigned and the other Persons from time to time party hereto pursuant to the execution and delivery of an Accession Agreement in the form of Annex I hereto (all of the undersigned, together with such other Persons each a “Guarantor” and collectively, the “Guarantors”) in favor of (a) WELLS FARGO BANK, NATIONAL ASSOCIATION, in its capacity as Administrative Agent (the “Administrative Agent”) for the Lenders under that certain Credit Agreement dated as of November 30, 2006 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED (the “Borrower”), the financial institutions party thereto (the “Lenders”), the Administrative Agent, and the other parties thereto, and (b) the LENDERS.

     WHEREAS, pursuant to the Credit Agreement, the Administrative Agent and the Lenders have agreed to make available to the Borrower certain financial accommodations on the terms and conditions set forth in the Credit Agreement;

     WHEREAS, each Guarantor is owned or controlled by the Borrower, or is otherwise an Affiliate of the Borrower;

     WHEREAS, the Borrower, each Guarantor and the other Subsidiaries, though separate legal entities, are mutually dependent on each other in the conduct of their respective businesses as an integrated operation and have determined it to be in their mutual best interests to obtain financing from the Agent and the Lenders through their collective efforts;

     WHEREAS, each Guarantor acknowledges that it will receive direct and indirect benefits from the Administrative Agent and the Lenders making such financial accommodations available to the Borrower under the Credit Agreement and, accordingly, each Guarantor is willing to guarantee the Borrower’s obligations to the Administrative Agent and the Lenders on the terms and conditions contained herein; and

     WHEREAS, each Guarantor’s execution and delivery of this Guaranty is a condition to the Administrative Agent and the Lenders making, and continuing to make, such financial accommodations to the Borrower.

* As of the date of filing of this 10-K, a guaranty in substantially the same form as this Form of Guaranty has been executed and entered into on behalf of Wells Fargo Bank, National Association and the lenders by Best (CA) QRS 14-4, Inc., Truck (IN) QRS 14-3, Inc., DELMO (PA) QRS 12-10, NUTRA (TX) QRS 12-39, Inc., Meta (CA) QRS 14-6, Inc., Film (FL) QRS 14-44, Inc., Projector (FL) QRS 14-45, Inc., Tel (VA) QRS 12-15, Inc. and Bandwidth (UT) QRS 14-58, Inc.

C-1

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Guarantor, each Guarantor agrees as follows:

     Section 1. Guaranty. Each Guarantor, jointly and severally with each other Guarantor, hereby absolutely, irrevocably and unconditionally guaranties the due and punctual payment and performance when due, whether at stated maturity, by acceleration or otherwise, of all of the following (collectively referred to as the “Guarantied Obligations”): (a) all indebtedness and obligations owing by the Borrower to any Lender or the Administrative Agent under or in connection with the Credit Agreement and any other Loan Document to which the Borrower is a party, including without limitation, the repayment of all principal of the Revolving Loans, the reimbursement of the LC Disbursements and the payment of all interest, fees, charges, reasonable attorneys’ fees and other amounts payable to any Lender or the Administrative Agent thereunder or in connection therewith; (b) any and all extensions, renewals, modifications, amendments or substitutions of the foregoing; (c) all expenses, including, without limitation, reasonable attorneys’ fees and disbursements, that are incurred by the Lenders and the Administrative Agent in the enforcement of any of the foregoing or any obligation of such Guarantor hereunder and (d) all other Obligations.

     Section 2. Guaranty of Payment and Not of Collection. This Guaranty is a guaranty of payment, and not of collection, and a debt of each Guarantor for its own account. Accordingly, the Lenders and the Agent shall not be obligated or required before enforcing this Guaranty against any Guarantor: (a) to pursue any right or remedy the Lenders or the Administrative Agent may have against the Borrower, any other Loan Party or any other Person or commence any suit or other proceeding against the Borrower, any other Loan Party or any other Person in any court or other tribunal; (b) to make any claim in a liquidation or bankruptcy of the Borrower, any other Loan Party or any other Person; or (c) to make demand of the Borrower, any other Loan Party or any other Person or to enforce or seek to enforce or realize upon any collateral security held by the Lenders or the Administrative Agent which may secure any of the Guarantied Obligations.

     Section 3. Guaranty Absolute. Each Guarantor guarantees that the Guarantied Obligations will be paid strictly in accordance with the terms of the documents evidencing the same, regardless of any applicable law now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or the Lenders with respect thereto. The liability of each Guarantor under this Guaranty shall be absolute, irrevocable and unconditional in accordance with its terms and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including without limitation, the following (whether or not such Guarantor consents thereto or has notice thereof):

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     (a)(i) any change in the amount, interest rate or due date or other term of any of the Guarantied Obligations, (ii) any change in the time, place or manner of payment of all or any portion of the Guarantied Obligations, (iii) any amendment or waiver of, or consent to the departure from or other indulgence with respect to, the Credit Agreement, any other Loan Document, or any other document or instrument evidencing or relating to any Guarantied Obligations, or (iv) any waiver, renewal, extension, addition, or supplement to, or deletion from, or any other action or inaction under or in respect of, the Credit Agreement, any of the other Loan Documents, or any other documents, instruments or agreements relating to the Guarantied Obligations or any other instrument or agreement referred to therein or evidencing any Guarantied Obligations or any assignment or transfer of any of the foregoing;

     (b) any lack of validity or enforceability of the Credit Agreement, any of the other Loan Documents, or any other document, instrument or agreement referred to therein or evidencing any Guarantied Obligations or any assignment or transfer of any of the foregoing;

     (c) any furnishing to the Administrative Agent or the Lenders of any security for the Guarantied Obligations, or any sale, exchange, release or surrender of, or realization on, any collateral securing any of the Obligations;

     (d) any settlement or compromise of any of the Guarantied Obligations, any security therefor, or any liability of any other party with respect to the Guarantied Obligations, or any subordination of the payment of the Guarantied Obligations to the payment of any other liability of the Borrower or any other Loan Party;

     (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Guarantor, the Borrower, any other Loan Party or any other Person, or any action taken with respect to this Guaranty by any trustee or receiver, or by any court, in any such proceeding;

     (f) any act or failure to act by the Borrower, any other Loan Party or any other Person which may adversely affect such Guarantor’s subrogation rights, if any, against the Borrower to recover payments made under this Guaranty;

     (g) any nonperfection or impairment of any security interest in, or other Lien on, any collateral, if any, securing in any way any of the Obligations;

     (h) any application of sums paid by the Borrower, any Guarantor or any other Person with respect to the liabilities of the Borrower to the Administrative Agent and the Lenders, regardless of what liabilities of the Borrower remain unpaid;

     (i) any defect, limitation or insufficiency in the borrowing powers of the Borrower or in the exercise thereof; or

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     (j) any other circumstance which might otherwise constitute a defense available to, or a discharge of, a Guarantor hereunder (other than indefeasible payment in full).

     Section 4. Action with Respect to Guarantied Obligations. The Lenders and the Administrative Agent may, at any time and from time to time, without the consent of, or notice to, any Guarantor, and without discharging any Guarantor from its obligations hereunder, take any and all actions described in Section 3. and may otherwise: (a) amend, modify, alter or supplement the terms of any of the Guarantied Obligations, including, but not limited to, extending or shortening the time of payment of any of the Guarantied Obligations or changing the interest rate that may accrue on any of the Guarantied Obligations; (b) amend, modify, alter or supplement the Credit Agreement or any other Loan Document; (c) sell, exchange, release or otherwise deal with all, or any part, of any collateral securing any of the Obligations; (d) release any Loan Party or other Person liable in any manner for the payment or collection of the Guarantied Obligations; (e) exercise, or refrain from exercising, any rights against the Borrower, any other Loan Party or any other Person; and (f) apply any sum, by whomsoever paid or however realized, to the Guarantied Obligations in such order as the Lenders shall elect.

     Section 5. Representations and Warranties. Each Guarantor hereby makes to the Administrative Agent and the Lenders all of the representations and warranties made by the Borrower with respect to or in any way relating to such Guarantor in the Credit Agreement and the other Loan Documents, as if the same were set forth herein in full.

     Section 6. Covenants. Each Guarantor will comply with all covenants which the Borrower is to cause such Guarantor to comply with under the terms of the Credit Agreement or any of the other Loan Documents.

     Section 7. Waiver. Each Guarantor, to the fullest extent permitted by applicable law, hereby waives notice of acceptance hereof or any presentment, demand, protest or notice of any kind, and any other act or thing, or omission or delay to do any other act or thing, which in any manner or to any extent might vary the risk of such Guarantor or which otherwise might operate to discharge such Guarantor from its obligations hereunder.

     Section 8. Inability to Accelerate Loan. If the Administrative Agent and/or the Lenders are prevented under applicable law or otherwise from demanding or accelerating payment of any of the Guarantied Obligations by reason of any automatic stay or otherwise, the Administrative Agent and/or the Lenders shall be entitled to receive from each Guarantor, upon demand therefor, the sums which otherwise would have been due had such demand or acceleration occurred.

     Section 9. Reinstatement of Guarantied Obligations. If claim is ever made on the Administrative Agent or any Lender for repayment or recovery of any amount or amounts received in payment or on account of any of the Guarantied Obligations, and the Administrative Agent or such Lender repays all or part of said amount by reason of (a)

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any judgment, decree or order of any court or administrative body of competent jurisdiction, or (b) any settlement or compromise of any such claim effected by the Administrative Agent or such Lender with any such claimant (including the Borrower or a trustee in bankruptcy for the Borrower), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding on it, notwithstanding any revocation hereof or the cancellation of the Credit Agreement, any of the other Loan Documents, or any other instrument evidencing any liability of the Borrower, and such Guarantor shall be and remain liable to the Administrative Agent or such Lender for the amounts so repaid or recovered to the same extent as if such amount had never originally been paid to the Administrative Agent or such Lender.

     Section 10. Subrogation. Upon the making by any Guarantor of any payment hereunder for the account of the Borrower, such Guarantor shall be subrogated to the rights of the payee against the Borrower; provided, however, that such Guarantor shall not enforce any right or receive any payment by way of subrogation or otherwise take any action in respect of any other claim or cause of action such Guarantor may have against the Borrower arising by reason of any payment or performance by such Guarantor pursuant to this Guaranty, unless and until all of the Guarantied Obligations have been indefeasibly paid and performed in full. If any amount shall be paid to such Guarantor on account of or in respect of such subrogation rights or other claims or causes of action, such Guarantor shall hold such amount in trust for the benefit of the Administrative Agent and the Lenders and shall forthwith pay such amount to the Administrative Agent to be credited and applied against the Guarantied Obligations, whether matured or unmatured, in accordance with the terms of the Credit Agreement or to be held by the Administrative Agent as collateral security for any Guarantied Obligations existing.

     Section 11. Payments Free and Clear. All sums payable by each Guarantor hereunder, whether of principal, interest, fees, expenses, premiums or otherwise, shall be paid in full, without set-off or counterclaim or any deduction or withholding whatsoever (including any Taxes), and if such Guarantor is required by applicable law or by any Governmental Authority to make any such deduction or withholding such Guarantor shall pay to the Administrative Agent and the Lenders such additional amount as will result in the receipt by the Administrative Agent and the Lenders of the full amount payable hereunder had such deduction or withholding not occurred or been required.

     Section 12. Set-off. In addition to any rights now or hereafter granted under any of the other Loan Documents or applicable law and not by way of limitation of any such rights, each Guarantor hereby authorizes the Administrative Agent and each Lender, at any time while an Event of Default exists, without any prior notice to such Guarantor or to any other Person, any such notice being hereby expressly waived, but in the case of a Lender subject to receipt of the prior written consent of the Administrative Agent exercised in its sole discretion, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by the Administrative Agent, such Lender or any affiliate of the Administrative Agent or such Lender, to or for the credit or the account of such

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Guarantor against and on account of any of the Guarantied Obligations, although such obligations shall be contingent or unmatured. Each Guarantor agrees, to the fullest extent permitted by applicable law, that any Participant may exercise rights of setoff or counterclaim and other rights with respect to its participation as fully as if such Participant were a direct creditor of such Guarantor in the amount of such participation.

     Section 13. Subordination. Each Guarantor hereby expressly covenants and agrees for the benefit of the Administrative Agent and the Lenders that all obligations and liabilities of the Borrower to such Guarantor of whatever description, including without limitation, all intercompany receivables of such Guarantor from the Borrower (collectively, the “Junior Claims”) shall be subordinate and junior in right of payment to all Guarantied Obligations. If an Event of Default shall exist, then no Guarantor shall accept any direct or indirect payment (in cash, property or securities, by setoff or otherwise) from the Borrower on account of or in any manner in respect of any Junior Claim until all of the Guarantied Obligations have been indefeasibly paid in full.

     Section 14. Avoidance Provisions. It is the intent of each Guarantor, the Administrative Agent and the Lenders that in any Proceeding (as defined in Section 29(a)), such Guarantor’s maximum obligation hereunder shall equal, but not exceed, the maximum amount which would not otherwise cause the obligations of such Guarantor hereunder (or any other obligations of such Guarantor to the Administrative Agent and the Lenders) to be avoidable or unenforceable against such Guarantor in such Proceeding as a result of applicable law, including without limitation, (a) Section 548 of the Bankruptcy Code of 1978, as amended (the “Bankruptcy Code”) and (b) any state fraudulent transfer or fraudulent conveyance act or statute applied in such Proceeding, whether by virtue of Section 544 of the Bankruptcy Code or otherwise. The applicable laws under which the possible avoidance or unenforceability of the obligations of such Guarantor hereunder (or any other obligations of such Guarantor to the Administrative Agent and the Lenders) shall be determined in any such Proceeding are referred to as the “Avoidance Provisions”. Accordingly, to the extent that the obligations of any Guarantor hereunder would otherwise be subject to avoidance under the Avoidance Provisions, the maximum Guarantied Obligations for which such Guarantor shall be liable hereunder shall be reduced to that amount which, as of the time any of the Guarantied Obligations is deemed to have been incurred under the Avoidance Provisions, would not cause the obligations of any Guarantor hereunder (or any other obligations of such Guarantor to the Administrative Agent and the Lenders), to be subject to avoidance under the Avoidance Provisions. This Section is intended solely to preserve the rights of the Administrative Agent and the Lenders hereunder to the maximum extent that would not cause the obligations of any Guarantor hereunder to be subject to avoidance under the Avoidance Provisions, and no Guarantor or any other Person shall have any right or claim under this Section as against the Administrative Agent and the Lenders that would not otherwise be available to such Person under the Avoidance Provisions.

     Section 15. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the financial condition of the Borrower and the other Loan Parties, and of all other circumstances bearing upon the risk of nonpayment of any of the

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Guarantied Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that neither the Administrative Agent nor any Lender shall have any duty whatsoever to advise any Guarantor of information regarding such circumstances or risks.

     Section 16. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

     SECTION 17. WAIVER OF JURY TRIAL.

     (a) EACH GUARANTOR, AND EACH OF THE ADMINISTRATIVE AGENT AND THE LENDERS BY ACCEPTING THE BENEFITS HEREOF, ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY BETWEEN SUCH GUARANTOR, THE ADMINISTRATIVE AGENT OR ANY OF THE LENDERS WOULD BE BASED ON DIFFICULT AND COMPLEX ISSUES OF LAW AND FACT AND WOULD RESULT IN DELAY AND EXPENSE TO THE PARTIES. ACCORDINGLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE GUARANTORS, THE LENDERS AND THE ADMINISTRATIVE AGENT HEREBY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST ANY PARTY HERETO ARISING OUT OF THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR BY REASON OF ANY OTHER SUIT, CAUSE OF ACTION OR DISPUTE WHATSOEVER BETWEEN OR AMONG EACH OF THE GUARANTORS, THE ADMINISTRATIVE AGENT OR ANY OF THE LENDERS OF ANY KIND OR NATURE.

     (b) EACH GUARANTOR, AND EACH OF THE ADMINISTRATIVE AGENT AND THE LENDERS BY ACCEPTING THE BENEFITS HEREOF, HEREBY AGREES THAT THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, SHALL HAVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG THE GUARANTORS, THE ADMINISTRATIVE AGENT OR ANY OF THE LENDERS, PERTAINING DIRECTLY OR INDIRECTLY TO THIS GUARANTY, OR ANY OTHER LOAN DOCUMENT OR TO ANY MATTER ARISING HEREFROM OR THEREFROM. EACH GUARANTOR AND EACH OF THE LENDERS EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS. EACH GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL

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ADDRESSED TO SUCH GUARANTOR AT ITS ADDRESS FOR NOTICES PROVIDED FOR HEREIN. SHOULD A GUARANTOR FAIL TO APPEAR OR ANSWER ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY DAYS AFTER THE MAILING THEREOF, SUCH GUARANTOR SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED AGAINST IT AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. EACH PARTY FURTHER WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND EACH AGREES NOT TO PLEAD OR CLAIM THE SAME. THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE BRINGING OF ANY ACTION BY THE ADMINISTRATIVE AGENT OR ANY LENDER OR THE ENFORCEMENT BY THE ADMINISTRATIVE AGENT OR ANY LENDER OF ANY JUDGMENT OBTAINED IN SUCH FORUM IN ANY OTHER APPROPRIATE JURISDICTION.

     (c) THE PROVISIONS OF THIS SECTION HAVE BEEN CONSIDERED BY EACH PARTY WITH THE ADVICE OF COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF, AND SHALL SURVIVE THE PAYMENT OF THE LOANS AND ALL OTHER AMOUNTS PAYABLE HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS, THE TERMINATION OR EXPIRATION OF ALL LETTERS OF CREDIT AND THE TERMINATION OF THIS GUARANTY.

     Section 18. Loan Accounts. The Administrative Agent and each Lender may maintain books and accounts setting forth the amounts of principal, interest and other sums paid and payable with respect to the Guarantied Obligations, and in the case of any dispute relating to any of the outstanding amount, payment or receipt of any of the Guarantied Obligations or otherwise, the entries in such books and accounts shall constitute prima facie evidence of amounts and other matters set forth therein. The failure of the Administrative Agent or any Lender to maintain such books and accounts shall not in any way relieve or discharge any Guarantor of any of its obligations hereunder.

     Section 19. Waiver of Remedies. No delay or failure on the part of the Administrative Agent or any Lender in the exercise of any right or remedy it may have against any Guarantor hereunder or otherwise shall operate as a waiver thereof, and no single or partial exercise by the Administrative Agent or any Lender of any such right or remedy shall preclude any other or further exercise thereof or the exercise of any other such right or remedy.

     Section 20. Termination. This Guaranty, subject to Section 9, shall remain in full force and effect with respect to each Guarantor until indefeasible payment in full of the Guarantied Obligations and the other Obligations and the termination or cancellation of the Credit Agreement in accordance with its terms.

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     Section 21. Successors and Assigns. Each reference herein to the Administrative Agent or any Lender shall be deemed to include such Person’s respective successors and assigns (including, but not limited to, any holder of the Guarantied Obligations) in whose favor the provisions of this Guaranty also shall inure, and each reference herein to each Guarantor shall be deemed to include such Guarantor’s successors and assigns, upon whom this Guaranty also shall be binding. The Lenders may, in accordance with the applicable provisions of the Credit Agreement, assign, transfer or sell any Guarantied Obligation, or grant or sell participations in any Guarantied Obligations, to any Person without the consent of, or notice to, any Guarantor and without releasing, discharging or modifying any Guarantor’s obligations hereunder. Each Guarantor hereby consents to the delivery by the Administrative Agent and any Lender to any Assignee or Participant (or any prospective Assignee or Participant) of any financial or other information regarding the Borrower or any Guarantor. No Guarantor may assign or transfer its obligations hereunder to any Person without the prior written consent of all Lenders and any such assignment or other transfer to which all of the Lenders have not so consented shall be null and void.

     Section 22. JOINT AND SEVERAL OBLIGATIONS. THE OBLIGATIONS OF THE GUARANTORS HEREUNDER SHALL BE JOINT AND SEVERAL, AND ACCORDINGLY, EACH GUARANTOR CONFIRMS THAT IT IS LIABLE FOR THE FULL AMOUNT OF THE GUARANTIED OBLIGATIONS AND ALL OF THE OBLIGATIONS AND LIABILITIES OF EACH OF THE OTHER GUARANTORS HEREUNDER.

     Section 23. Amendments. This Guaranty may not be amended except in writing signed by the Administrative Agent (acting with the requisite consent of the Lenders as provided in the Credit Agreement) and each Guarantor.

     Section 24. Payments. All payments to be made by any Guarantor pursuant to this Guaranty shall be made in Dollars, in immediately available funds to the Administrative Agent at such location for payment as Administrative Agent may notify such Guarantor, not later than 11:00 a.m. New York time, on the date one Business Day after demand therefor.

     Section 25. Notices. All notices, requests and other communications hereunder shall be in writing (including facsimile transmission or similar writing) and shall be given (a) to each Guarantor at its address set forth below its signature hereto, (b) to the Administrative Agent or any Lender at its address for notices provided for in the Credit Agreement, or (c) as to each such party at such other address as such party shall designate in a written notice to the other parties. Each such notice, request or other communication shall be effective (i) if mailed, when received; (ii) if telecopied, when transmitted; or (iii) if hand delivered, when delivered; provided, however, that any notice of a change of address for notices shall not be effective until received.

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     Section 26. Severability. In case any provision of this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

     Section 27. Headings. Section headings used in this Guaranty are for convenience only and shall not affect the construction of this Guaranty.

     Section 28. Limitation of Liability. Neither the Administrative Agent nor any Lender, nor any affiliate, officer, director, employee, attorney, or agent of the Administrative Agent or any Lender, shall have any liability with respect to, and each Guarantor hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by a Guarantor in connection with, arising out of, or in any way related to, this Guaranty or any of the other Loan Documents, or any of the transactions contemplated by this Guaranty, the Credit Agreement or any of the other Loan Documents. Each Guarantor hereby waives, releases, and agrees not to sue the Administrative Agent or any Lender or any of the Administrative Agent’s or any Lender’s affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Guaranty, the Credit Agreement or any of the other Loan Documents, or any of the transactions contemplated by the Credit Agreement or financed thereby.

     Section 29. Definitions. (a) For the purposes of this Guaranty:

     “Proceeding” means any of the following: (i) a voluntary or involuntary case concerning any Guarantor shall be commenced under the Bankruptcy Code of 1978, as amended; (ii) a custodian (as defined in such Bankruptcy Code or any other applicable bankruptcy laws) is appointed for, or takes charge of, all or any substantial part of the property of any Guarantor; (iii) any other proceeding under any applicable law, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding-up or composition for adjustment of debts, whether now or hereafter in effect, is commenced relating to any Guarantor; (iv) any Guarantor is adjudicated insolvent or bankrupt; (v) any order of relief or other order approving any such case or proceeding is entered by a court of competent jurisdiction; (vi) any Guarantor makes a general assignment for the benefit of creditors; (vii) any Guarantor shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; (viii) any Guarantor shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; (ix) any Guarantor shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or (x) any corporate action shall be taken by any Guarantor for the purpose of effecting any of the foregoing.

     (b) Terms not otherwise defined herein are used herein with the respective meanings given them in the Credit Agreement.

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     IN WITNESS WHEREOF, each Guarantor has duly executed and delivered this Guaranty as of the date and year first written above.

[GUARANTOR]

By:

Name:

Title:

Address for Notices for all Guarantors:

c/o W.P. Carey & Co. LLC
50 Rockerfeller Plaza, New York
New York, New York 10020
Attention: Mark DeCesaris
Telecopier: 212-492-8922
Telephone: 212-492-1140

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ANNEX I

FORM OF ACCESSION AGREEMENT

     THIS ACCESSION AGREEMENT dated as of                     , ___, executed and delivered by                                                             , a                                           (the “New Guarantor”), in favor of (a) WELLS FARGO BANK, NATIONAL ASSOCIATION, in its capacity as Administrative Agent (the “Administrative Agent”) for the Lenders under that certain Credit Agreement dated as of                     , 2006 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among Corporate Property Associates 14 Incorporated (the “Borrower”), the financial institutions party thereto as the Lenders, the Administrative Agent, and the other parties thereto, and (b) the Lenders.

     WHEREAS, pursuant to the Credit Agreement, the Administrative Agent and the Lenders have agreed to make available to the Borrower certain financial accommodations on the terms and conditions set forth in the Credit Agreement;

     WHEREAS, the New Guarantor is owned or controlled by the Borrower or is otherwise an Affiliate of the Borrower;

     WHEREAS, the Borrower, the New Guarantor and the other Subsidiaries, though separate legal entities, are mutually dependent on each other in the conduct of their respective businesses as an integrated operation and have determined it to be in their mutual best interests to obtain financing from the Administrative Agent and the Lenders through their collective efforts;

     WHEREAS, the New Guarantor acknowledges that it will receive direct and indirect benefits from the Administrative Agent and the Lenders making such financial accommodations available to the Borrower under the Credit Agreement and, accordingly, the New Guarantor is willing to guarantee the Borrower’s obligations to the Administrative Agent and the Lenders on the terms and conditions contained herein; and

     WHEREAS, the New Guarantor’s execution and delivery of this Agreement is a condition to the Administrative Agent and the Lenders continuing to make such financial accommodations to the Borrower.

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the New Guarantor, the New Guarantor agrees as follows:

     Section 1. Accession to Guaranty. The New Guarantor hereby agrees that it is a “Guarantor” under the Guaranty and assumes all obligations of a “Guarantor” thereunder, all as if the New Guarantor had been an original signatory to the Guaranty. Without limiting the generality of the foregoing, the New Guarantor hereby:

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     (a) irrevocably and unconditionally guarantees the due and punctual payment and performance when due, whether at stated maturity, by acceleration or otherwise, of all Guarantied Obligations (as defined in the Guaranty);

     (b) makes to the Administrative Agent and the Lenders as of the date hereof each of the representations and warranties contained in Section 5 of the Guaranty and agrees to be bound by each of the covenants contained in Section 6 of the Guaranty; and

     (c) consents and agrees to each provision set forth in the Guaranty.

     SECTION 2. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

     Section 3. Definitions. Capitalized terms used herein and not otherwise defined herein shall have their respective defined meanings given them in the Credit Agreement.

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     IN WITNESS WHEREOF, the New Guarantor has caused this Accession Agreement to be duly executed and delivered under seal by its duly authorized officers as of the date first written above.

[NEW GUARANTOR]
By:
Name:
Title:
	(CORPORATE SEAL)
Address for Notices:
c/o W.P. Carey & Co. LLC 50 Rockerfeller Plaza, New York New York, New York Attention: Mark DeCesaris Telecopier: 212-492-8922 Telephone: 212-492-1140

Accepted:

     WELLS FARGO BANK, NATIONAL

     ASSOCIATION, as Administrative Agent

By:

Name:

Title:

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EX-21.1

Exhibit 21.1

SUBSIDIARIES OF REGISTRANT

Name	State or Country
of Subsidiary	of Incorporation
8930 Member (MD) QRS 14-29, Inc.	Delaware
8930 Stanford Boulevard LLC	Delaware
Aerobic (MO) LLC	Delaware
AFD (KV) LLC	Delaware
AFD (MN) LLC	Delaware
Air (IL) QRS 14-48, Inc.	Delaware
Amtoll (NM) QRS 14-39, Inc.	Delaware
Applied Four (DE) QRS 14-75, Inc.	Delaware
Applied Utah (UT) QRS 14-76, Inc.	Delaware
Assembly (MD)	Maryland
Autosafe Airbag 12 (CA) LP	Delaware
Autosafe Airbag 14 (CA) LP	Delaware
Bandwidth (UT) QRS 14-58, Inc.	Delaware
BB (Multi) Limited Partnership	Delaware
BB 12 (MD)	Maryland
Best (CA) QRS 14-4, Inc.	Delaware
BFS (DE) LP	Delaware
BFS (DE) QRS 14-74, Inc.	Delaware
Bill-GP (TX) QRS 14-56, Inc.	Delaware
Bill-MC 14 LP	Delaware
BM-LP (TX) QRS 14-57, Inc.	Delaware
Bolt (DE) Limited Partnership	Delaware
BP (IL) GP QRS 14-97, Inc.	Delaware
BP (IL) L.P.	Delaware
BP (IL) Trust	Maryland
BSL Caldwell (NC) LLC	Maryland
BT (PA) QRS 12-25, Inc.	Delaware
BVNY (DE) LLC	Delaware
BVNY (DE) M QRS 12-58, Inc.	Delaware
Can (WI) QRS 12-34, Inc.	Delaware
Can-Two (DE) QRS 12-67, Inc.	Wisconsin
Cards (CA) QRS 12-12, Inc.	Delaware
Cards Limited Liability Company	Delaware
Carey Norcross, L.L.C.	Delaware
Catfish (DE) QRS 14-79, Inc.	Delaware
CB (MA) QRS 12-57, Inc.	Delaware
CBS (PA) QRS 14-12, Inc.	Delaware
CC (Multi) GP QRS 12-62, Inc.	Delaware
CC (Multi) Limited Partnership	Delaware
CC (Multi) Trust	Maryland
Chassis (DE) Limited Partnership	Delaware
Cold (DE) QRS 12-50, Inc.	Delaware
Comp (TX) QRS 12-47, Inc.	Delaware
Comp (TX) QRS 14-15, Inc.	Delaware
Comp Delaware LP	Delaware
Conductor (CA) QRS 14-11, Inc.	Delaware
Construct (CA) QRS 14-18, Inc.	Delaware
CP GAL Fairfax, LLC	Delaware
CP GAL Kennesaw, LLC	Delaware
CP GAL Leawood, LLC	Delaware
CP GAL Lombard, LLC	Delaware

Name	State or Country
of Subsidiary	of Incorporation
CP GAL Plainfield, LLC	Delaware
CPA 14 (UK) Finance Company	Delaware
CTS (IN) QRS 12-63, Inc.	Delaware
Cups (DE) LP	Delaware
Delaware Chip LLC	Delaware
Delaware Comp LLC	Delaware
Delaware Frame (TX), LP	Delaware
Deliver (TN) QRS 14-49, Inc.	Delaware
Delmo (PA) QRS 12-10	Pennsylvania
Delmo 11/12 DE LLC	Delaware
Develop (TX) LP	Delaware
Dough (DE) QRS 14-77, Inc.	Delaware
Dough (MD)	Maryland
Drill (DE) Trust	Maryland
Drug (AZ) QRS 14-42, Inc.	Delaware
DSG GP (PA) QRS 14-103, Inc.	Delaware
DSG Landlord (PA) L.P.	Delaware
DSG LP (PA) Trust	Maryland
Dyne (DE) LP	Delaware
Fabric (DE) GP	Delaware
Fast (DE) QRS 14-22, Inc.	Delaware
Film (FL) QRS 14-44, Inc.	Delaware
Fit (TX) GP QRS 12-60, Inc.	Delaware
Fit (TX) LP	Delaware
Fit (TX) Trust	Maryland
Fit (UT) QRS 14-92, Inc.	Delaware
Food (DE) QRS 12-49, Inc.	Delaware
Frame (TX) QRS 14-25, Inc.	Delaware
Freight (IL) LLC	Delaware
Garden (NJ) QRS 14-32, Inc.	Delaware
Gena (CA) QRS 12-1, Inc.	California
Gena Property Company, L.P.	California
Gerb (CT) QRS 14-73, Inc.	Delaware
Gilbert Plastic LLC	Delaware
Goldfish (DE) LP	Delaware
Guitar Mass (TN) QRS 14-36, Inc.	Delaware
Guitar Plus (TN) QRS 14-37, Inc.	Delaware
Hammer (DE) Limited Partnership	Delaware
Hammer (DE) LP QRS 12-65, Inc.	Delaware
Hammer (DE) LP QRS 14-100, Inc.	Delaware
Hammer (DE) Trust	Maryland
Hef (NC-SC) QRS 14-86, Inc.	Delaware
Ice (TX) QRS 12-29, Inc.	Texas
Ijobbers (DE) QRS 14-41, Inc.	Delaware
Ijobbers LLC	Delaware
Initiator (CA) QRS 12-53, Inc.	Delaware
Initiator (CA) QRS 14-62, Inc.	Delaware
Injection (AZ) QRS 12-46, Inc.	Delaware
Jen (MA) QRS 12-54, Inc.	Delaware
Jorg (MO) QRS 14-46, Inc.	Delaware
Labrador (AZ) LP	Delaware

CPA^®:14 2006 10-K — 72

Exhibit 21.1

SUBSIDIARIES OF REGISTRANT (Continued)

Name	State or Country
of Subsidiary	of Incorporation
Learn GP (PA) QRS 14-88, Inc.	Delaware
Leather (DE) QRS 14-72, Inc.	Delaware
Lincoln (DE) LP	Delaware
Lincoln Trust (MD)	Maryland
Lt Landlord (Mn-Fl) LLC	Delaware
LTI (DE) QRS 14-81, Inc.	Delaware
LTI Trust (MD)	Maryland
Marie-Invest Sprl	Belgium
MCPA Mass (TN) Associates	Tennessee
MCPA Plus (TN) Associates	Tennessee
Meri (NC) LLC	Delaware
Meta (CA) QRS 14-6, Inc.	Delaware
Metal (DE) QRS 14-67, Inc.	Delaware
Mold (AZ) QRS 14-13, Inc.	Delaware
More Applied Four (DE) LLC	Delaware
More Applied Utah (UT) LLC	Delaware
Movie (VA) QRS 14-24, Inc.	Delaware
Nail (DE) Trust	Maryland
NCE (OH) LLC	Delaware
Neonatal Finland, Inc.	Delaware
Network (UT) LLC	Delaware
Nex (GA) LP	Delaware
Nex (NETH) QRS 14-66, Inc.	Delaware
Nex-GP (GA) QRS 14-60, Inc.	Delaware
Nor (GA) QRS 14-17, Inc.	Georgia
Nor (MD)	Maryland
NR (LA) QRS 14-95, Inc.	Delaware
Nutra (TX) QRS 12-39, Inc.	Texas
Orb (MO) QRS 12-56, Inc.	Delaware
Panel (UK) QRS 14-54, Inc.	Delaware
Parts (DE) QRS 14-90, Inc.	Delaware
Pets 14 (MD)	Maryland
Plates (DE) QRS 14-63, Inc.	Delaware
Pliers (DE) Trust	Maryland
Popcorn (TX) QRS 14-43, Inc.	Delaware
PR (CA) QRS 14-91, Inc.	Delaware
Print (WI) Qrs 12-40, Inc.	Wisconsin
Product (OH) QRS 14-64, Inc.	Delaware
Projector (FL) QRS 14-45, Inc.	Delaware
Pump (MO) QRS 14-52, Inc.	Delaware
PWE (Multi) QRS 14-85, Inc.	Delaware
QRS 12-Paying Agent, Inc.	Delaware
QRS 14-Paying Agent, Inc.	Delaware
RI(CA) QRS 12-59, Inc.	Delaware
RRC (TX) GP QRS 12-61, Inc.	Delaware
RRC (TX) LP	Delaware
RRC (TX) Trust	Maryland
Rush It LLC	Delaware
SARL CAR-4 I	France

Name	State or Country
of Subsidiary	of Incorporation
SARL CAR-4 II	France
School (PA) LP	Delaware
SCI CAR-4	France
Semi (CA) QRS 12-45, Inc.	Delaware
Serve (MN) QRS 14-38, Inc.	Delaware
SM (NY) QRS 14-93, Inc.	Delaware
SP (CA) QRS 14-94, Inc.	Delaware
Speed (NC) QRS 14-70, Inc.	Delaware
Storage (DE) QRS 14-23, Inc.	Delaware
Stor-Move UH 14 Business Trust	Massachusetts
Sun (SC) QRS 12-68, Inc.	Delaware
Sun Two (SC) QRS 12-69, Inc.	Delaware
Teach (PA)	Maryland
Tel (VA) QRS 12-15, Inc.	Virginia
Terrier (AZ) QRS 14-78, Inc.	Delaware
Theatre (DE) QRS 14-14, Inc.	Delaware
Toner (DE) QRS 14-96, Inc.	Delaware
Tools (DE) QRS 14-87, Inc.	Delaware
Tower (DE) QRS 14-89, Inc.	Delaware
Tower 14 (MD)	Maryland
Uh Storage (De) Limited Partnership	Delaware
UK Panel LLC	Delaware
Ursa (VT) QRS 12-30, Inc.	Vermont
Vinyl (DE) QRS 14-71, Inc.	Delaware
Wadd-Expansion (DE) QRS 14-99, Inc.	Delaware
Weeds (OK) QRS 12-22, Inc.	Oklahoma
Well-Mez (Multi) LLC	Delaware
Well-Prop (Multi) LLC	Delaware
Windough (DE) LP	Delaware
Wireless (TX) LP	Delaware
Wireline (TX) QRS 14-83, Inc.	Delaware
Wrench (DE) Limited Partnership	Delaware
WTI (IL) QRS 12-36, Inc.	Illinois
WU (AZ) QRS 14-27, Inc.	Delaware

CPA^®:14 2006 10-K — 73

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-96869) of Corporate Property Associates 14 Incorporated of our report dated March 22, 2007 relating to the financial statements and financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

New York, New York

March 22, 2007

CPA^®:14 2006 10-K — 74

EX-31.1

Exhibit 31.1

RULE 13a-14(a)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
IN ACCORDANCE WITH
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gordon F. DuGan, certify that:

1. I have reviewed this Annual Report on Form 10-K of Corporate Property Associates 14 Incorporated;

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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and we have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
d)	Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; 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 over financial reporting.

Date 3/26/2007

/s/ Gordon F. DuGan  

Gordon F. DuGan 

Chief Executive Officer 

CPA^®:14 2006 10-K — 75

EX-31.2

Exhibit 31.2

RULE 13a-14(a)
CERTIFICATION OF CHIEF FINANCIAL OFFICER
IN ACCORDANCE WITH
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark J. DeCesaris, certify that:

1. I have reviewed this Annual Report on Form 10-K of Corporate Property Associates 14 Incorporated;

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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and we have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
d)	Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; 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 over financial reporting.

Date 3/26/2007

/s/ Mark J. DeCesaris  

Mark J. DeCesaris 

acting Chief Financial Officer 

CPA^®:14 2006 10-K — 76

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Corporate Property Associates 14 Incorporated on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gordon F. DuGan, Chief Executive Officer of Corporate Property Associates 14 Incorporated, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Corporate Property Associates 14 Incorporated.

/s/ Gordon F. DuGan  

Gordon F. DuGan

Chief Executive Officer 

Date 3/26/2007

In connection with the Annual Report of Corporate Property Associates 14 Incorporated on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark J. DeCesaris, acting Chief Financial Officer of Corporate Property Associates 14 Incorporated, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Corporate Property Associates 14 Incorporated.

/s/ Mark J. DeCesaris  

Mark J. DeCesaris 

acting Chief Financial Officer 

Date 3/26/2007

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Corporate Property Associates 14 Incorporated and will be retained by Corporate Property Associates 14 Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.

CPA^®:14 2006 10-K — 77