"The company has commenced providing information in response to the subpoenas," WP Carey said in its quarterly filing. The allegations involved were discussed in more detail in the company's 2003 annual report, filed on March 15. The allegations as characterized in that filing, and what response Carey included in the filing, are:•That shares in a second offering for the Corporate Property Associates 15 Inc. were sold before their registration became effective. Carey stated that "pending effectiveness of the registration statement investor funds were delivered into escrow and not CPA:15 or Carey Financial."
•That the prospectus for the first offering "contained material misstatements and omissions because that prospectus did not disclose that the proceeds of the Phase I offering would be used to advance commissions and expenses payable with respect to the Phase II offering." Carey said that "Carey Financial has reimbursed CPA:15 for the interest cost of advancing the commissions that were later recovered from the Phase II offering proceeds."
•That the REIT's "offering documents contained material misstatements and omissions because they did not include a discussion of the manner in which dividends would be paid to the initial investors in the Phase II offering." The filing offers no reaction or explanation on Carey's behalf.
•That four employees failed to transfer their broker-dealer licenses to Carey Financial before beginning to work there. Carey stated that "These licenses have since been transferred to Carey Financial."
•That Carey Financial violated NASD conduct rules by "providing registered broker-dealers associated with its retail distributors who sold shares of CPA:15 with non-cash sales incentives in excess of $100." Carey stated that the SEC "only cited this violation in general terms. The company is in the process of ascertaining the specific factual details forming the basis for these allegations."
A WP Carey spokesman would only say that "we are cooperating fully with the SEC," though he did share an Aug. 10 research report from AG Edwards, that states, "We do not anticipate any material impact to the financial condition of WPC from these allegations, based on discussions with the company and others. We believe WPC management is working through the issues and will take the necessary corrective action to resolve this matter."
Meanwhile, the company's acquisitions continue, particularly in its drive into the European market. It most recently announced the purchase of five office and industrial properties throughout France that are triple-net leased to Thales Group SA, a military contractor. The price for the 1.2-million-sf portfolio was $103 million. CPA:15 is taking a 65% interest in the portfolio, with the remainder going to Corporate Property Associates 16-Global, another of Carey's publicly registered but non-traded REITs. Carey now has more than 7.8 million sf of properties managed in France and overall has completed about $690 million of sale-leasebacks year-to-date.
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