<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
   ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the year ended DECEMBER 31, 2001

                                       of

                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED
                                     CIP(R)

                             A MARYLAND Corporation
                   IRS Employer Identification No. 13-3602400
                             SEC File Number 0-20016

                              50 ROCKEFELLER PLAZA,
                            NEW YORK, NEW YORK 10020
                                 (212) 492-1100

CIP(R) has SHARES OF COMMON STOCK registered pursuant to Section 12(g) of the
Act.

CIP(R)is not registered on any exchanges.

CIP(R) does not have any Securities registered pursuant to Section 12(b) of the
Act.

CIP(R) is unaware of any delinquent filers pursuant to Item 405 of Regulation
S-K.

CIP(R) (1) has filed all reports required by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

CIP(R) has no active market for common stock at March 20, 2002. Non-affiliates
held 20,979,562 shares of common stock, $.001 Par Value outstanding at March 20,
2002.

CIP(R) incorporates by reference its definitive Proxy Statement with respect to
its 2002 Annual Meeting of Shareholders, to be filed with the Securities and
Exchange Commission within 120 days following the end of its fiscal year, into
Part III of this Report.
<PAGE>
                                     PART I

Item 1. Business.

Carey Institutional Properties Incorporated ("CIP(R)") is a real estate
investment trust ("REIT") that acquires and owns commercial properties leased to
companies nationwide, primarily on a triple net basis. As of December 31, 2001,
CIP(R)'s portfolio consisted of 86 properties leased to 42 tenants and totaling
more than 8.9 million square feet.

CIP(R)'s core investment strategy is to purchase and own properties leased to a
variety of companies on a single tenant, net lease basis. These leases generally
place the economic burden of ownership on the tenant by requiring them to pay
the costs of maintenance, insurance, taxes, structural repairs and other
operating expenses. CIP(R) also generally includes in its leases:

      -     clauses providing for mandated rent increases or periodic rent
            increases tied to increases in the consumer price index or other
            indices or, when appropriate, increases tied to the volume of sales
            at the property;
      -     covenants restricting the activity of the tenant to reduce the risk
            of a change in credit quality;
      -     indemnification of CIP(R) for environmental and other liabilities;
            and
      -     guarantees from parent companies or other entities.

On December 14, 2001, Corporate Property Associates 10 Incorporated
("CPA(R):10") entered into a merger agreement with CIP(R). If the transaction is
approved by the holders of two-thirds of the outstanding shares of CPA(R):10 and
CIP(R), CPA(R):10 will merge with and into CIP(R) and CPA(R):10 will cease to
exist. The combined company will own and operate 108 properties encompassing
more than 10.5 million square feet. See "Developments During 2001" below.

CIP(R) was formed as a Maryland corporation on February 15, 1991. Between August
1991 and August 1993, CIP(R) sold a total of 14,167,581 shares of common stock
for a total of $141,675,810 in gross offering proceeds. In 1995, CIP(R)'s board
of directors authorized a private placement of common stock. Through December
31, 1999, CIP(R) had issued a total of 6,250,262 shares for a total of
$74,440,000 in connection with the private placement. Through December 31, 2001,
CIP(R) has also issued 1,236,367 shares through its dividend reinvestment plan.
These proceeds have been combined with limited recourse mortgage debt to
purchase CIP(R)'s property portfolio. As a REIT, CIP(R) is not subject to
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.

Carey Asset Management Corp. provides both strategic and day-to-day management
for CIP(R), including acquisition services, research, investment analysis, asset
management, capital funding services, disposition of assets, investor relations
and administrative services. Carey Asset Management Corp. also provides office
space and other facilities for CIP(R). Carey Asset Management Corp. has
dedicated senior executives in each area of its organization so that CIP(R)
functions as a fully integrated operating company. CIP(R) pays asset management
fees to Carey Asset Management Corp. and pays certain transactional fees. CIP(R)
also reimburses Carey Asset Management Corp. for certain expenses. Carey Asset
Management Corp. also serves in this capacity for Corporate Property Associates
10 Incorporated, Corporate Property Associates 12 Incorporated, Corporate
Property Associates 14 Incorporated and Corporate Property Associates 15
Incorporated. Carey Asset Management Corp. is a wholly-owned subsidiary of W.P.
Carey & Co., a publicly-traded company on the New York Stock Exchange and
Pacific Exchange under the symbol "WPC."

CIP(R)'s principal executive offices are located at 50 Rockefeller Plaza, New
York, NY 10020 and its telephone number is (212) 492-1100. As of December 31,
2001, CIP(R) had no employees. Carey Asset Management Corp. employs 25
individuals who perform services for CIP(R).

BUSINESS OBJECTIVES AND STRATEGY

CIP(R)'s objectives are to:

      -     pay quarterly dividends at an increasing rate that for taxable
            shareholders are partially free from current taxation;
      -     provide inflation protected income;
      -     purchase and own a diversified portfolio of net-leased real estate
            that will increase in value; and
      -     increase the value of its shares by increasing the equity in its
            real estate by making regular mortgage principal payments.

CIP(R) seeks to achieve these objectives by purchasing and holding industrial
and commercial properties each net leased to a single corporate tenant. CIP(R)
intends its portfolio to be diversified by geography, property type and by
tenant.


                                      -1-
<PAGE>
DEVELOPMENTS DURING 2001

In June 2001, CIP(R) sold its interest in a vacant property in Texarkana,
Arkansas for $625,000, less closing costs. With the sale of the Texarkana
property, all of the properties that were formerly leased to Harvest Foods, Inc.
are either currently subject to net leases or have been sold.

In September 2001, CIP(R) and CPA(R):10, each with 50% ownership interests as
tenants-in-common, sold six retail properties leased to Wal-Mart Stores, Inc.
for $14,891,154, net of costs, of which CIP(R)'s share was $7,445,932. CIP(R)
used $5,984,881 to satisfy its share of the outstanding balance of the mortgage
loan.

On December 14, 2001, CIP(R) and Corporate Property Associates 10 Incorporated
("CPA(R):10"), another non-traded REIT managed by W. P. Carey & Co. LLC, entered
into a merger agreement providing for the merger of CPA(R):10 with and into
CIP(R). Under the terms of the merger, CIP(R) will be the surviving company and
will retain the same board of directors and officers.

As a result of the merger, the combined company:

      -     will have greater geographic and tenant diversification;
      -     will realize economies of scale and greater operating and tenant
            synergies;
      -     will have a larger total asset value of more than $715 million; and
      -     will have a stronger balance sheet and enhanced financial
            flexibility.

Under the terms of the merger, CPA(R):10 stockholders will have the option of
receiving either 0.8445 of a share of newly issued CIP(R) common stock for each
CPA(R):10 common share that he or she owns, or, upon election by the
shareholders who owned shares on as of December 13, 2001, a promissory note
bearing interest at the annual rate of 4% payable on December 31, 2004 for
$11.23 per share of CPA(R):10 common stock. Shareholders who became shareholders
of record after December 13, 2001 or those who do not vote in favor of the
merger will not have the option to receive a promissory note and will receive
CIP(R) common stock in the merger.

The merger is conditioned upon several events, including approval by holders of
two-thirds of the outstanding shares of CPA:10(R) and CIP(R) and holders of at
least a majority of the CPA(R):10 shareholders electing to receive CIP(R)
shares.

Following clearance by the Securities Exchange Commission and other state
security authorities, CIP(R) and CPA:10(R) shareholders received proxy materials
necessary to approve the proposed merger.

ACQUISITION STRATEGIES

Carey Asset Management Corp. has a well-developed process with established
procedures and systems for acquiring net leased property on behalf of CIP(R). As
a result of its reputation and experience in the industry and the contacts
maintained by its professionals, Carey Asset Management Corp. has a presence in
the net lease market that has provided it with the opportunity to invest in a
significant number of transactions on an ongoing basis. CIP(R) takes advantage
of Carey Asset Management Corp.'s presence in the net lease market to build its
portfolio. In evaluating opportunities for CIP(R), Carey Asset Management Corp.
carefully examines the credit, management and other attributes of the tenant and
the importance of the property under consideration to the tenant's operations.
Careful credit analysis is a crucial aspect of every transaction. CIP(R)
believes that Carey Asset Management Corp. has one of the most extensive
underwriting processes in the industry and has an experienced staff of
professionals involved with underwriting transactions. Carey Asset Management
Corp. seeks to identify those prospective tenants whose creditworthiness is
likely to improve over time. CIP(R) believes that the experience of Carey Asset
Management Corp.'s management in structuring sale-leaseback transactions to meet
the needs of a prospective tenant enables Carey Asset Management Corp. to obtain
a higher return for a given level of risk than would typically be available by
purchasing a property subject to an existing lease.

Carey Asset Management Corp.'s strategy in structuring its net lease investments
for CIP(R) is to:

      -     combine the stability and security of long-term lease payments,
            including rent increases, with the appreciation potential inherent
            in the ownership of real estate;
      -     enhance current returns by utilizing varied lease structures;
      -     reduce credit risk by diversifying investments by tenant, type of
            facility, geographic location and tenant industry; and
      -     increase potential returns by obtaining equity enhancements from the
            tenant when possible, such as warrants to purchase tenant common
            stock.


                                      -2-
<PAGE>
FINANCING STRATEGIES

Consistent with its investment policies, CIP(R) uses leverage, generally limited
recourse mortgage financing, when available on favorable terms. As of December
31, 2001, CIP(R) had approximately $152,532,000 in property level debt
outstanding. These mortgages mature between the current year and 2021 and, as of
December 31, 2001, have interest rates between 4.26% and 10%. Carey Asset
Management Corp. continually seeks opportunities and considers alternative
financing techniques to finance properties not currently subject to debt,
refinance debt, reduce interest expense or improve its capital structure.

TRANSACTION ORIGINATION

Currently, CIP(R)'s primary source of funds for property acquisitions is the
sale of owned properties and proceeds received from investors through the
Dividend Reimburesement and Share Purcahse Plan. Carey Asset Management
continues to make acquisitions for CIP(R) using these funds. In analyzing
potential acquisitions, Carey Asset Management Corp. reviews and structures many
aspects of a transaction, including the tenant, the real estate and the lease,
to determine whether a potential acquisition can be structured to satisfy
CIP(R)'s acquisition criteria. The aspects of a transaction which are reviewed
and structured by Carey Asset Management Corp. include the following:

      Tenant Evaluation. Carey Asset Management Corp. subjects each potential
      tenant to an extensive evaluation of its credit, management, position
      within its industry, operating history and profitability. Carey Asset
      Management Corp. seeks tenants it believes will have stable or improving
      credit. By leasing properties to these types of tenants, CIP(R) can
      generally charge rent that is higher than the rent charged to tenants with
      recognized credit and, thereby, enhance its current return from these
      properties as compared with properties leased to companies whose credit
      potential has already been recognized by the market. Furthermore, if a
      tenant's credit does improve, the value of CIP(R)'s properties leased to
      that tenant will likely increase (if all other factors affecting value
      remain unchanged). Carey Asset Management Corp. may also seek to enhance
      the likelihood of a tenant's lease obligations being satisfied, such as
      through a letter of credit or a guaranty of lease obligations from the
      tenant's corporate parent. This credit enhancement provides CIP(R) with
      additional financial security.

      Leases with Increasing Rents. Carey Asset Management Corp. seeks to
      include clauses in CIP(R)'s leases that provide for increases in rent over
      the term of the leases. These increases are generally tied to increases in
      certain indices such as the consumer price index, in the case of retail
      stores, participation in gross sales above a stated level, mandated rental
      increases on specific dates and through other methods. CIP(R) seeks to
      avoid entering into leases that provide for contractual reductions in
      rents during their primary term (other than reductions related to
      reductions in debt service).

      Properties Important to Tenant Operations. Carey Asset Management Corp.,
      on behalf of CIP(R), generally seeks to acquire properties with operations
      that are essential or important to the ongoing operations of the tenant.
      CIP(R) believes that these properties provide better protection in the
      event that tenants file for bankruptcy, because leases on properties
      essential or important to the operations of a bankrupt tenant are less
      likely to be rejected and terminated by a bankrupt tenant. Carey Asset
      Management Corp. also seeks to assess the income, cash flow and
      profitability of the business conducted at the property, so that, if the
      tenant is unable to operate its business, CIP(R) can either continue
      operating the business conducted at the property or re-lease the property
      to another entity in the industry which can operate the property
      profitably.

      Lease Provisions that Enhance and Protect Value. When appropriate, Carey
      Asset Management Corp. attempts to include provisions in CIP(R)'s leases
      that require CIP(R)'s consent to certain tenant activity or require the
      tenant to satisfy certain operating tests. These provisions include, for
      example, operational and financial covenants of the tenant, prohibitions
      on a change in control of the tenant and indemnification from the tenant
      against environmental and other contingent liabilities. Including these
      provisions in its leases enables CIP(R) to protect its investment from
      changes in the operating and financial characteristics of a tenant that
      may impact its ability to satisfy its obligations to CIP(R) or could
      reduce the value of CIP(R)'s properties.

      Diversification. Carey Asset Management Corp. tries to diversify CIP(R)'s
      portfolio of properties to avoid dependence on any one particular tenant,
      type of facility, geographic location and tenant industry. By diversifying
      its portfolio, CIP(R) reduces the adverse effect on CIP(R) of a single
      under-performing investment or a downturn in any particular industry or
      geographic location.

Carey Asset Management Corp. employs a variety of other strategies and practices
in connection with CIP(R)'s acquisitions. These strategies include attempting to
obtain equity enhancements in connection with transactions. Typically, these
equity enhancements involve warrants to purchase stock of the tenant to which
the property is leased or the stock of the parent of


                                      -3-
<PAGE>
the tenant. In certain instances, CIP(R) grants to the tenant a right to
purchase the property leased by the tenant, but generally the option purchase
price will be not less than the fair market value of the property. Carey Asset
Management Corp.'s practices include performing evaluations of the physical
condition of properties and performing environmental surveys in an attempt to
determine potential environmental liabilities associated with a property prior
to its acquisition.

As a transaction is structured, it is evaluated by the Chairman of the
Investment Committee with respect to the potential tenant's credit, business
prospects, position within its industry and other characteristics important to
the long-term value of the property and the capability of the tenant to meet its
lease obligations. Before a property is acquired, the transaction is reviewed by
the Investment Committee to ensure that it satisfies CIP(R)'s investment
criteria. Aspects of the transaction that are typically reviewed by the
Investment Committee include the expected financial returns, the
creditworthiness of the tenant, the real estate characteristics and the lease
terms.

The Investment Committee is not directly involved in originating or negotiating
potential acquisitions, but instead functions as a separate and final step in
the acquisition process. Carey Asset Management Corp. places special emphasis on
having experienced individuals serve on its Investment Committee and does not
invest in a transaction unless it is approved by the Investment Committee.

CIP(R) believes that the Investment Committee review process gives it a unique,
competitive advantage over other unaffiliated net lease companies because of the
substantial experience and perspective that the Investment Committee has in
evaluating the blend of corporate credit, real estate and lease terms that
combine to make an acceptable risk.

The following people serve on the Investment Committee:

      -     George E. Stoddard, Chairman, was formerly responsible for the
            direct corporate investments of The Equitable Life Assurance Society
            of the United States and has been involved with the CPA(R) Programs
            for over 20 years.
      -     Frank J. Hoenemeyer, Vice Chairman, was formerly Vice Chairman,
            Director and Chief Investment Officer of The Prudential Insurance
            Company of America. As Chief Investment Officer, Mr. Hoenemeyer was
            responsible for all of Prudential's investments, including stocks,
            bonds, private placements, real estate and mortgages.
      -     Nathaniel S. Coolidge previously served as Senior Vice President -
            Head of Bond & Corporate Finance Department of the John Hancock
            Mutual Life Insurance Company. His responsibilities included
            overseeing $21 billion of Fixed income investments for Hancock, its
            affiliates and outside clients.
      -     Lawrence R. Klein is Benjamin Franklin Professor of Economics
            Emeritus at the University of Pennsylvania and its Wharton School.
            Dr. Klein has been awarded the Alfred Nobel Memorial Prize in
            Economic Sciences and currently advises various governments and
            government agencies.

ASSET MANAGEMENT

CIP(R) believes that effective management of its 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.

Carey Asset Management Corp. monitors, on an ongoing basis, compliance by
tenants with their lease obligations and other factors that could affect the
financial performance of any of its properties. Monitoring involves receiving
assurances that each tenant has paid real estate taxes, assessments and other
expenses relating to the properties it occupies and confirming that appropriate
insurance coverage is being maintained by the tenant. Carey Asset Management
Corp. reviews financial statements of its tenants and undertakes regular
physical inspections of the condition and maintenance of its properties.
Additionally, Carey Asset Management Corp. 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

CIP(R) intends to hold each property it acquires 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 and after-tax return for the CIP(R)
shareholders. If CIP(R)'s common stock is not listed for trading on a national
securities exchange or included for quotation on Nasdaq, CIP(R) will generally
begin selling properties approximately ten years after the proceeds of the
public offering were substantially invested, subject to market conditions. The
board of directors will make the decision whether to list the shares, liquidate
or devise an alternative liquidation strategy which is likely to result in the
greatest value for the shareholders.

COMPETITION


                                      -4-
<PAGE>
CIP(R) faces competition for the acquisition of office and industrial properties
in general, and such properties net leased to major corporations in particular,
from insurance companies, credit companies, pension funds, private individuals,
investment companies and other REITs. CIP(R) also faces competition from
institutions that provide or arrange for other types of commercial financing
through private or public offerings of equity or debt or traditional bank
financings. CIP(R) believes its management's experience in real estate, credit
underwriting and transaction structuring will allow CIP(R) to compete
effectively for office and industrial properties.

ENVIRONMENTAL MATTERS

Under various federal, state and local environmental laws, regulations and
ordinances, current or former owners of real estate, as well as other parties,
may be required to investigate and clean up hazardous or toxic chemicals,
substances or waste or petroleum product or waste, releases on, under, in or
from a property. These parties may be held liable to governmental entities or to
third parties for specified damages and for investigation and cleanup costs
incurred by these parties in connection with the release or threatened release
of hazardous materials. These laws typically impose responsibility and liability
without regard to whether the owner knew of or was responsible for the presence
of hazardous materials, and the liability under these laws has been interpreted
to be joint and several under some circumstances. CIP(R)'s leases often provide
that the tenant is responsible for all environmental liability and for
compliance with environmental regulations relating to the tenant's operations.

CIP(R) typically undertakes an investigation of potential environmental risks
when evaluating an acquisition. Phase I environmental assessments are performed
by independent environmental consulting and engineering firms for all properties
acquired by CIP(R). Where warranted, Phase II environmental assessments are
performed. Phase I assessments do not involve subsurface testing, whereas Phase
II assessments involve some degree of soil and/or groundwater testing. CIP(R)
may acquire a property which is known to have had a release of hazardous
materials in the past, subject to a determination of the level of risk and
potential cost of remediation. CIP(R) normally requires property sellers to
indemnify it fully against any environmental problem existing as of the date of
purchase. Additionally, CIP(R) often structures its leases to require the tenant
to assume most or all responsibility for compliance with the environmental
provisions of the lease or environmental remediation relating to the tenant's
operations and to provide that non-compliance with environmental laws is a lease
default. In some cases, CIP(R) may also require a cash reserve, a letter of
credit or a guarantee from the tenant, the tenant's parent company or a third
party to assure lease compliance and funding of remediation. The value of any of
these protections depends on the amount of the collateral and/or financial
strength of the entity providing the protection. Such a contractual arrangement
does not eliminate CIP(R)'s statutory liability or preclude claims against
CIP(R) by governmental authorities or persons who are not a party to the
arrangement. Contractual arrangements in CIP(R)'s leases may provide a basis for
CIP(R) to recover from the tenant damages or costs for which it has been found
liable.

INDUSTRY SEGMENT

CIP(R) operates in one industry segment, investment in net leased real property.
For the year ended December 31, 2001, no tenant represented 10% or more of the
total operating revenue of CIP(R).

FACTORS AFFECTING FUTURE OPERATING RESULTS

The provisions of the Private Securities Litigation Reform Act of 1995 (the
"Act") became effective in December 1995. The Act provides a "safe harbor" for
companies which make forward-looking statements providing prospective
information. The "safe harbor" under the Act relates to protection for companies
with respect to litigation filed on the basis of such forward-looking
statements.

CIP(R) wishes to take advantage of the "safe harbor" provisions of the Act and
is therefore including this section in its Annual Report on Form 10-K. The
statements contained in this Annual Report, if not historical, are
forward-looking statements and involve risks and uncertainties which are
described below that could cause actual results to differ materially from the
results, financial or otherwise, or other expectations described in such
forward-looking statements. These statements are identified with the words
"anticipated," "expected," "intends," "seeks" or "plans" or words of similar
meaning. Therefore, forward-looking statements should not be relied upon as a
prediction of actual future results or occurrences.

CIP(R)'s future results may be affected by certain risks and uncertainties
including the following:

      Single tenant leases increase our exposure in the event of a failure of
      tenant.

      We focus our acquisition activities on net leased real properties or
      interests therein. Due to the fact that our net leased real properties are
      leased to single tenants, the financial failure of or other default by a
      tenant resulting in the termination of a lease is likely to cause a
      reduction in the operating cash flow of CIP(R) and might decrease the
      value of the property leased to such tenant.


                                      -5-
<PAGE>
      We depend on major tenants.

      Revenues from several of our tenants and/or their guarantors constitute a
      significant percentage of our consolidated rental revenues. Our five
      largest tenants/guarantors, which occupy 28 properties, represent 34% of
      annualized revenues. The default, financial distress or bankruptcy of any
      of the five tenants could cause interruptions in the receipt of lease
      revenues from these tenants and/or result in vacancies in the respective
      properties, which would reduce our revenues until the affected property is
      re-let, and could decrease the ultimate sale value of each property.

      We can borrow a significant amount of funds.

      We have incurred, and may continue to incur, indebtedness (secured and
      unsecured) in furtherance of our activities. Neither the certificate of
      incorporation, bylaws nor any policy statement formally adopted by the
      board of directors limits either the total amount of indebtedness or the
      specified percentage of indebtedness (based upon the total market
      capitalization of CIP(R)) that may be incurred. Accordingly, we could
      become more highly leveraged, resulting in increased risk of default on
      our obligations and in an increase in debt service requirements which
      could adversely affect our financial condition and results of operations
      and our ability to pay distributions.

      We may not be able to refinance balloon payments on our mortgage debts.

      A significant number of our properties are subject to mortgages with
      balloon payments. Scheduled balloon payments for the next five years are
      as follows:

            -     2002 - $12.7 million;
            -     2003 - $7.0 million;
            -     2004 - $11 million;
            -     2005 - $9.9 million; and
            -     2006 - $7.4 million.

      Our ability to make such balloon payments will depend upon our ability
      either to refinance the obligations when due, invest additional equity in
      the property or to sell the related property. Our ability to accomplish
      these goals will be affected by various factors existing at the relevant
      time, such as the state of the national and regional economies, local real
      estate conditions, available mortgage rates, our equity in the mortgaged
      properties, our financial condition, the operating history of the
      mortgaged properties and tax laws.

      We may be unable to renew leases or re-let vacated spaces.

      We will be subject to the risks that, upon expiration of leases, the
      premises may not be re-let or the terms of re-letting (including the cost
      of concessions to tenants) may be less favorable than current lease terms.
      If we are unable to re-let promptly all or a substantial portion of our
      properties or if the rental rates upon such re-letting were significantly
      lower than current rates, our net income and ability to make expected
      distributions to our shareholders would be adversely affected. There can
      be no assurance that we will be able to retain tenants in any of our
      properties upon the expiration of their leases. Our scheduled lease
      expiration, as a percentage of annualized revenues for the next five
      years, are as follows:

            -     2002 - 10%
            -     2003 - 0%
            -     2004 - 0%
            -     2005 - 0%
            -     2006 - 0%

      We are subject to possible liabilities relating to environmental matters.

      We own industrial and commercial properties and are subject to the risk of
      liabilities under federal, state and local environmental laws. Some of
      these laws could impose the following on CIP(R):

            -     Responsibility and liability for the cost of investigation and
                  removal or remediation of hazardous substances released on our
                  property, generally without regard to our knowledge or
                  responsibility of the presence of the contaminants;
            -     Liability for the costs of investigation and removal or
                  remediation of hazardous substances at disposal facilities for
                  persons who arrange for the disposal or treatment of such
                  substances; and
            -     Potential liability for common law claims by third parties
                  based on damages and costs of environmental contaminants.


                                      -6-
<PAGE>
      We may be unable to make acquisitions on an advantageous basis.

      The consummation of any future acquisition will be subject to satisfactory
      completion of our extensive analysis and due diligence review and to the
      negotiation of definitive documentation. There can be no assurance that we
      will be able to identify and acquire additional properties or that we will
      be able to finance acquisitions in the future. In addition, there can be
      no assurance that any such acquisition, if consummated, will be profitable
      for us. If we are unable to consummate the acquisition of additional
      properties in the future, there can be no assurance that we will be able
      to increase the cash available for distribution to our shareholders.

      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.

      We face intense competition.

      The real estate industry is highly competitive. Our principal competitors
      include national REITs, many of which are substantially larger and have
      substantially greater financial resources than us.

      The value of our real estate is subject to fluctuation.

      We are subject to all of the general risks associated with the ownership
      of real estate. In particular, we face the risk that rental revenue from
      the properties will be insufficient to cover all corporate operating
      expenses and debt service payments on indebtedness we incur. Additional
      real estate ownership risks include:

            -     Adverse changes in general or local economic conditions;
            -     Changes in supply of or demand for similar or competing
                  properties;
            -     Changes in interest rates and operating expenses;
            -     Competition for tenants;
            -     Changes in market rental rates;
            -     Inability to lease properties upon termination of existing
                  leases;
            -     Renewal of leases at lower rental rates;
            -     Inability to collect rents from tenants due to financial
                  hardship, including bankruptcy;
            -     Changes in tax, real estate, zoning and environmental laws
                  that may have an adverse impact upon the value of real estate;
            -     Uninsured property liability;
            -     Property damage or casualty losses;
            -     Unexpected expenditures for capital improvements or to bring
                  properties into compliance with applicable federal, state and
                  local laws; and
            -     Acts of God and other factors beyond the control of our
                  management.

      Our participation in joint ventures creates additional risk.

      We participate in joint ventures with other entities, some of which may be
      unaffiliated with us. There are additional risks involved in these types
      of transactions. These risks include the potential of our joint venture
      partner becoming bankrupt and the possibility of diverging or inconsistent
      economic or business interests of us and our partner which could result
      in, among other things, subjecting us to liabilities in excess of those
      contemplated under the joint venture agreement and/or exposing us to
      liabilities of the joint venture in excess of our proportionate share of
      these liabilities.

      In some of our joint venture relationships with publicly registered
      investment programs or other entities sponsored by Carey Asset Management
      Corp. or one of its affiliate, we enter into investments as
      tenants-in-common. This poses risks in addition to those mentioned above.
      The partition rights of each co-tenant in a tenancy-in-common could reduce
      the value of each portion of the divided property. In addition, the
      fiduciary obligation that Carey Asset Management Corp. or our board may
      owe to our partner in an affiliated transaction may make it more difficult
      for us to enforce our rights.

      International investments involve additional risks.

      We own properties in the United Kingdom and France and we may purchase
      additional property located outside the United States. These investments
      may be affected by factors peculiar to the laws of the jurisdiction in
      which the property is located. These laws may expose us to risks that are
      different from and in addition to those commonly found in the United
      States. Foreign investments could be subject to the following risks:

            -     changing governmental rules and policies;


                                      -7-
<PAGE>
            -     enactment of laws relating to the foreign ownership of
                  property and laws relating to the ability of foreign persons
                  or corporations to remove profits earned from activities
                  within the country to the person's or corporation's country of
                  origin;
            -     variations in the currency exchange rates;
            -     adverse market conditions caused by changes in national or
                  local economic conditions;
            -     changes in relative interest rates;
            -     change in the availability, cost and terms of mortgage funds
                  resulting from varying national economic policies;
            -     changes in real estate and other tax rates and other operating
                  expenses in particular countries;
            -     changes in land use and zoning laws; and
            -     more stringent environmental laws or changes in such laws.

      We depend on key personnel for our future success.

      We depend on the efforts of the executive officers and key employees of
      Carey Asset Management Corp. The loss of the services of these executive
      officers and key employees could have a material adverse effect on our
      operations.

      Completion of the Merger is contingent upon several factors.

      The merger cannot be completed without the affirmative vote of the holders
      of two-thirds of the shares of CIP(R) common stock. Also, CPA(R):10 and
      CIP(R) will not complete the merger if the holders of more than 50% of the
      CPA(R):10 common stock elect to receive a promissory note instead of
      CIP(R) shares in the merger. We cannot guaranty that either of these
      conditions will be met. Additional conditions to the closing of the merger
      will be described in the joint proxy statement/prospectus to be
      distributed to shareholders in connection with their approval of the
      merger.

      After the merger with CPA(R):10, we may not realize the expected benefits
      from the merger, such as cost savings, operating efficiencies and other
      synergies.

      CIP(R) and CPA(R):10 entered into the merger agreement with the
      expectation that the merger would result in a number of benefits to the
      combined company, including cost savings, operating efficiencies and other
      synergies. Achieving these benefits will depend in large part on our
      ability to efficiently integrate the properties of CPA(R):10 into CIP(R)'s
      portfolio. Unforeseen difficulties in integrating these portfolios may
      cause the disruption of, or a loss of momentum in, the activities of the
      combined company's business which could affect its ability to achieve
      expected cost savings, operating efficiencies and other synergies, which
      could materially harm the combined company's financial performance.

      As a result of the merger, the combined company may incur transaction
      costs that exceed our estimates.

      CIP(R) and CPA(R):10 estimate that, as a result of the merger, the two
      companies will incur transaction costs totaling approximately $1,400,000,
      including financial advisor, printing, distribution, legal and accounting
      fees. CIP(R) and CPA(R):10 will each bear their own expenses. Actual
      transaction costs may exceed CIP(R)'s and CPA(R):10's estimates.

      CIP(R) can not be certain of the amount of cash it will need in 2004 to
      repay the principal amount of any notes issued to CPA(R):10 shareholders
      in the merger.

      If an unexpectedly large number of CPA(R):10 shareholders elect to receive
      promissory notes in the merger, CIP(R) will be required to make a
      significant cash payment when the notes mature in 2004. We can not
      determine, until the time of the CPA(R):10 special meeting, the number of
      shareholders who will elect to receive promissory notes in the merger, and
      therefore the amount of cash CIP(R) will be required to pay upon maturity
      of the notes. In any event, promissory notes will not be issued for more
      than 50% of the outstanding stock of CPA(R):10, as we will not complete
      the merger if holders of over 50% of the CPA(R):10 common stock elect to
      receive promissory notes. If a large number of shareholders elect to
      receive promissory notes, CIP(R) may need to borrow money or otherwise
      raise funds to pay the notes.

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 we describe above list all material risks
CIP(R) any specific point in time. We have disclosed many of the important risk
factors discussed above in our previous filings with the Securities and Exchange
Commission.


                                      -8-
<PAGE>
Item 2. Properties.

Set forth below is certain information relating to the Company's properties
owned as of December 31, 2001.

<TABLE>
<CAPTION>
LEASE OBLIGOR/                                       OWNERSHIP                      SQUARE            RENT PER
Location                                            INTEREST(1)                    FOOTAGE           SQUARE FOOT
-------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                                 <C>                <C>
MARRIOTT INTERNATIONAL, INC. (3,4)
   Irvine, Sacramento and San Diego, CA;
   Orlando, FL (2); Des Plaines, IL;          23.69% interest in a
   Indianapolis, IN; Louisville, KY;          real estate investment              1,115,923             17.22
   Linthicum, MD; Newark, NJ; Albuquerque,    trust owning land and
   NM; Las Vegas, NV; Spokane, WA             buildings

OMNICOM GROUP, INC. (3)
   Playa Vista, CA                                      100%                        120,000             26.79
   Venice, CA                                           100%                         77,719             12.64
                                                                                    -------
        Total:                                                                      197,719

BEST BUY CO., INC. (3)
   Fort Collins, CO; Matteson and
   Schaumburg, IL; Attleboro, MA; Nashua,     63% interest in a
   NH; Albuquerque, NM; Arlington,            general partnership                   585,593              8.58
   Beaumont, Dallas, Fort Worth and           owning land and buildings
   Houston, TX; Virginia Beach, VA

ADVANCED MICRO DEVICES, INC. (3)
                                              33 1/3% interest in a
   Sunnyvale, CA                              limited liability company             362,000             25.26
                                              owning land and buildings

ELECTRONIC DATA SYSTEMS CORPORATION (3)
   Louisville, CO                                        80%                        403,871              7.87

BIG V HOLDING CORP. (3)
   Greenport, NY                                        100%                         59,772             10.65
   Ellenville and Warwick, NY(3,4)                       55%                        141,428             15.86
                                                                                    -------
        Total:                                                                      201,200

LUCENT TECHNOLOGIES, INC. (3)
   Charlotte, NC                                        100%                        568,670              3.26

UTI HOLDINGS, INC.
   Glendale Heights, IL                                 100%                         74,410             17.26
   Glendale Heights, IL                                 100%                         35,455             11.05
                                                                                    -------
                                                                                    109,865
GARDEN RIDGE, INC. (3)
   Oklahoma City, OK                                    100%                        141,284              5.95
   Round Rock, TX                                       100%                        152,500              4.63
                                                                                    -------
        Total:                                                                      293,784
</TABLE>

<TABLE>
<CAPTION>
LEASE OBLIGOR/                                SHARE OF CURRENT       INCREASE        LEASE                 MAXIMUM
Location                                      ANNUAL RENTS(2)         FACTOR         TERM                   TERM
-------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                    <C>           <C>                    <C>
MARRIOTT INTERNATIONAL, INC. (3,4)
   Irvine, Sacramento and San Diego, CA;
   Orlando, FL (2); Des Plaines, IL;
   Indianapolis, IN; Louisville, KY;              4,553,417          Stated/       Feb. 2012              Feb. 2032
   Linthicum, MD; Newark, NJ; Albuquerque,                           % of sales
   NM; Las Vegas, NV; Spokane, WA

OMNICOM GROUP, INC. (3)
   Playa Vista, CA                                3,214,996          CPI           Sep. 2018              Sep. 2048
   Venice, CA                                       982,028          CPI           Sep. 2010              Sep. 2030
                                                  ---------
        Total:                                    4,197,024

BEST BUY CO., INC. (3)
   Fort Collins, CO; Matteson and
   Schaumburg, IL; Attleboro, MA; Nashua,
   NH; Albuquerque, NM; Arlington,                3,165,596          Stated        Apr. 2018              Apr. 2033
   Beaumont, Dallas, Fort Worth and
   Houston, TX; Virginia Beach, VA

ADVANCED MICRO DEVICES, INC. (3)

   Sunnyvale, CA                                  3,048,500          CPI           Dec. 2018              Dec. 2038


ELECTRONIC DATA SYSTEMS CORPORATION (3)
   Louisville, CO                                 2,543,785          CPI           Dec. 2014              Dec. 2034

BIG V HOLDING CORP. (3)
   Greenport, NY                                    636,515          Stated        Dec. 2017              Dec. 2037
   Ellenville and Warwick, NY(3,4)                1,233,742          Stated        Oct. 2024              Oct. 2044
                                                  ---------
        Total:                                    1,870,257

LUCENT TECHNOLOGIES, INC. (3)
   Charlotte, NC                                  1,852,829          None          Mar. 2005              Mar. 2022

UTI HOLDINGS, INC.
   Glendale Heights, IL                           1,284,609          CPI           Nov. 2010              Nov. 2030
   Glendale Heights, IL                             391,838          Stated        Apr. 2016              Apr. 2031
                                                  ---------
                                                  1,676,447
GARDEN RIDGE, INC. (3)
   Oklahoma City, OK                                840,093          CPI           Apr. 2015              Apr. 2035
   Round Rock, TX                                   706,188          CPI           Dec. 2013              Dec. 2038
                                                  ---------
        Total:                                    1,546,281
</TABLE>


                                      -9-
<PAGE>
<TABLE>
<CAPTION>
LEASE OBLIGOR/                                       OWNERSHIP                      SQUARE            RENT PER
Location                                            INTEREST(1)                    FOOTAGE           SQUARE FOOT
-------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                                  <C>               <C>
SICOR, INC. (3)
                                              50% interest in a
   San Diego, CA                              general partnership                   144,311             20.41
                                              owning land and buildings

MERIT MEDICAL SYSTEMS, INC. (3)
   South Jordan, UT                                     100%                        172,925              8.47

THE UPPER DECK COMPANY (3)
                                              50% interest in a limited
   Carlsbad, CA                               liability company owning              294,779              9.85
                                              land and building

Q CLUBS, INC.
   Bedford, TX                                          100%                         46,658             14.02
   Memphis, TN                                          100%                         43,311             17.68
                                                                                     ------
        Total:                                                                       89,969

MICHIGAN MUTUAL INSURANCE COMPANY (3)
   Charleston, SC                                       100%                        137,729              9.89

COMPUCOM SYSTEMS, INC. (3)
                                              33 1/3% interest in a
   Dallas, TX                                 limited liability company             497,714              7.86
                                              owning land and buildings

DEL MONTE CORPORATION (3)
   Mendota, IL; Plover, Toppenish and                    50%(5)                     748,000              3.44
   Yakima, WA

BARNES & NOBLE, INC. (3)
   Farmington, CT                                       100%                         21,600             31.62
   Braintree, MA                                        100%                         19,661             30.55
                                                                                     ------
        Total:                                                                       41,261

PLEXUS CORP. (3)
   Neenah, WI                                           100%                        179,000              7.09

WABAN, INC./BJ'S WAREHOUSE CLUB (3)
   Farmingdale, NY                                      100%                        114,680             10.61

BELL SPORTS, INC. (3)
   Rantoul, IL                                          100%                        217,012              5.28

GATX LOGISTICS, INC. (3)
   Jacksonville, FL                                     100%                        240,000              3.89

DETROIT DIESEL CORPORATION
   Hollywood and Orlando, FL                            100%                         81,318             11.04

PSC SCANNING, INC. (3)
   Eugene, OR                                           100%                        110,665              7.90

CUSTOM FOOD PRODUCTS, INC. (3)
   Owingsville, KY                                      100%                         37,100             23.50
</TABLE>

<TABLE>
<CAPTION>
LEASE OBLIGOR/                                SHARE OF CURRENT       INCREASE        LEASE                 MAXIMUM
Location                                      ANNUAL RENTS(2)         FACTOR         TERM                   TERM
-------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                    <C>           <C>                    <C>
SICOR, INC. (3)

   San Diego, CA                                  1,472,736          CPI           Jul. 2009              Jul. 2044


MERIT MEDICAL SYSTEMS, INC. (3)
   South Jordan, UT                               1,465,404          CPI           Jan. 2020              Jan. 2040

THE UPPER DECK COMPANY (3)

   Carlsbad, CA                                   1,452,220          CPI           Dec. 2020              Dec. 2040


Q CLUBS, INC.
   Bedford, TX                                      654,325          CPI           Feb. 2016              Feb. 2036
   Memphis, TN                                      765,872          CPI           Jul. 2013              Jul. 2033
                                                  ---------
        Total:                                    1,420,196

MICHIGAN MUTUAL INSURANCE COMPANY (3)
   Charleston, SC                                 1,362,252          Stated        Dec. 2007              Dec. 2027

COMPUCOM SYSTEMS, INC. (3)

   Dallas, TX                                     1,304,667          CPI           Apr. 2019              Apr. 2029


DEL MONTE CORPORATION (3)
   Mendota, IL; Plover, Toppenish and             1,286,250          CPI           Jun. 2016              Jun. 2056
   Yakima, WA

BARNES & NOBLE, INC. (3)
   Farmington, CT                                   683,000          Stated        Feb. 2013              Feb. 2028
   Braintree, MA                                    600,734          Stated        Feb. 2014              Feb. 2024
                                                  ---------
        Total:                                    1,283,734

PLEXUS CORP. (3)
   Neenah, WI                                     1,268,693          CPI           Aug. 2014              Aug. 2044

WABAN, INC./BJ'S WAREHOUSE CLUB (3)
   Farmingdale, NY                                1,217,238          Stated        Jan. 2002              Jan. 2002

BELL SPORTS, INC. (3)
   Rantoul, IL                                    1,146,221          CPI           Nov. 2012              Nov. 2032

GATX LOGISTICS, INC. (3)
   Jacksonville, FL                                 932,640          Stated        Dec. 2002              Dec. 2002

DETROIT DIESEL CORPORATION
   Hollywood and Orlando, FL                        897,934          PPI           Jun. 2010              Jun. 2030

PSC SCANNING, INC. (3)
   Eugene, OR                                       874,796          CPI           May 2014               May 2014

CUSTOM FOOD PRODUCTS, INC. (3)
   Owingsville, KY                                  871,771          CPI           Jun. 2020              Jun. 2035
</TABLE>


                                      -10-
<PAGE>
<TABLE>
<CAPTION>
LEASE OBLIGOR/                                       OWNERSHIP                      SQUARE            RENT PER
Location                                            INTEREST(1)                    FOOTAGE           SQUARE FOOT
---------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                            <C>            <C>
NICHOLSON WAREHOUSE, L.P. (3)
   Maple Heights, OH                                    100%                        341,282              2.50

HUMCO HOLDING GROUP, INC. (3)
   Texarkana, TX; Orem, UT                              100%                        164,565              5.16

HIBBETT SPORTING GOODS, INC. (3)
   Birmingham, AL                                       100%                        141,147              5.56

SUPERIOR TELECOMMUNICATIONS, INC. (3)
   Brownwood, TX                                        100%                        307,850              2.14

CHILDTIME CHILDCARE, INC. (3)
   Naperville, IL; Centreville, Century                 100%                         37,306             17.39
   Oaks, Manassas and Newport News, VA

ISA INTERNATIONAL PLC (6)
   Bradford, West Yorkshire, United Kingdom             100%                         41,932             13.67

GLOYSTARNE & CO., LTD. (6)
   Rotherdam, South Yorkshire,
   United Kingdom                                       100%                        120,000              4.59

PETSMART, INC. (3)
   Ennis, TX                                            100%                        229,950              2.24

OSHMAN SPORTING GOODS, INC. (3)
   Plano, TX                                            100%                         47,000              9.17

AFFILIATED FOODS SOUTHWEST, INC.
   Hope and Little Rock (3), AR                          50%                        144,352              3.36

KROGER CO.
   Conway and
   N. Little Rock, AR                                    50%                         78,075              5.30

SAFEWAY STORES INCORPORATED
   Broken Arrow, OK                                      50%                         50,340              5.63

NORTHSTAR COMPUTER FORMS, INC.
   Golden, CO                                           100%                         23,042              5.18

XEROX CORPORATION                                        50%                         36,850              4.12
PHOTO CENTER                                             50%                            700              6.86
                                                                                     ------
   Total for property in
   Hot Springs, AR:                                                                  37,550

VACANT
   Austin, TX                                            50%                        177,776

SOCIETE HOTELIERE TOURISME GRAND NOBLE
   Toulouse, France                                     100%                         42,000       Under construction
</TABLE>

<TABLE>
<CAPTION>
LEASE OBLIGOR/                                  SHARE OF CURRENT     INCREASE        LEASE                 MAXIMUM
Location                                        ANNUAL RENTS(2)       FACTOR         TERM                   TERM
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                  <C>           <C>                    <C>
NICHOLSON WAREHOUSE, L.P. (3)
   Maple Heights, OH                                854,540          CPI           Dec. 2018              Dec. 2043

HUMCO HOLDING GROUP, INC. (3)
   Texarkana, TX; Orem, UT                          849,853          CPI           Dec. 2016              Dec. 2016

HIBBETT SPORTING GOODS, INC. (3)
   Birmingham, AL                                   784,224          CPI           Feb. 2011              Feb. 2026

SUPERIOR TELECOMMUNICATIONS, INC. (3)
   Brownwood, TX                                    658,879          CPI           Dec. 2013              Dec. 2038

CHILDTIME CHILDCARE, INC. (3)
   Naperville, IL; Centreville, Century             648,892          CPI           Aug. 2015              Aug. 2025
   Oaks, Manassas and Newport News, VA

ISA INTERNATIONAL PLC (6)
   Bradford, West Yorkshire, United Kingdom         573,343(5)       Stated        May 2014               None

GLOYSTARNE & CO., LTD. (6)
   Rotherdam, South Yorkshire,
   United Kingdom                                   550,481(5)       Stated        Dec. 2019              Dec. 2019

PETSMART, INC. (3)
   Ennis, TX                                        514,540          CPI           Jan. 2013              Jan. 2013

OSHMAN SPORTING GOODS, INC. (3)
   Plano, TX                                        431,197          Stated        Jan. 2013              Jan. 2033

AFFILIATED FOODS SOUTHWEST, INC.
   Hope and Little Rock (3), AR                     242,824          CPI           Mar. 2007              Mar. 2037

KROGER CO.
   Conway and
   N. Little Rock, AR                               206,806          CPI           Feb. 2017              Feb. 2037

SAFEWAY STORES INCORPORATED
   Broken Arrow, OK                                 141,750          % of Sales    Jan. 2008              Jan. 2033

NORTHSTAR COMPUTER FORMS, INC.
   Golden, CO                                       119,358          Stated        Sep. 2005              Sep. 2005

XEROX CORPORATION                                    75,911          Stated        May 2011               May 2011
PHOTO CENTER                                          2,400          None          Monthly renewals
                                                     ------
   Total for property in
   Hot Springs, AR:                                  78,311

VACANT
   Austin, TX

SOCIETE HOTELIERE TOURISME GRAND NOBLE
   Toulouse, France                                                  INSEE(7)      Nov. 2012              Nov. 2030
</TABLE>

                                      -11-
<PAGE>
      1.    Percentage of ownership in land and building, except as noted. If
            ownership is less than 100%, ownership is as tenant-in-common unless
            otherwise indicated.
      2.    Share of Current Annual Rents is the product of the Square Footage,
            the Rent per Square Foot, and the Ownership Interest percentage.
      3.    These properties are encumbered by mortgage notes payable.
      4.    Includes percentage of sales rents.
      5.    Mendota, Plover and Toppenish properties are owned through an
            interest in a limited liability company and the Yakima property is
            owned as a tenant-in-common.
      6.    Based on exchange rates at December 31, 2001.
      7.    INSEE construction index, an index published quarterly by the French
            Government.

Item 3. Legal Proceedings.

As of the date hereof, the Company is not a party of to any material pending
legal proceedings.

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

No matter was submitted during the fourth quarter of the year ended December 31,
2001 to a vote of security holders, through the solicitation of proxies or
otherwise.


                                      -12-
<PAGE>
                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

Information with respect to Registrant's common equity is hereby incorporated by
reference to page 25 of the Company's Annual Report contained in Appendix A.

Item 6. Selected Financial Data.

Selected Financial Data are hereby incorporated by reference to page 1 of the
Company's Annual Report contained in Appendix A.

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

Management's Discussion and Analysis are hereby incorporated by reference to
pages 2 to 8 of the Company's Annual Report contained in Appendix A.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk:

Approximately $126,413 of CIP(R)'s long-term debt bears interest at fixed rates,
and therefore the fair value of these instruments is affected by changes in the
market interest rates. The following table presents principal cash flows based
upon expected maturity dates of the debt obligations and the related
weighted-average interest rates by expected maturity dates for the fixed rate
debt. The interest rate on the fixed rate debt as of December 31, 2001 ranged
from 7.09% to 10.00%. The interest rate on the variable rate debt as of December
31, 2001 ranged from 4.26% to 9.63%.

<TABLE>
<CAPTION>
(in thousands)             2002        2003        2004        2005        2006     Thereafter       Total      Fair Value
                           ----        ----        ----        ----        ----     ----------       -----      ----------
<S>                      <C>         <C>         <C>         <C>         <C>        <C>            <C>          <C>
Fixed rate debt          $ 3,617     $11,170     $12,190     $13,673     $11,284     $74,479       $126,413      $128,130
Weighted average
    interest rate          8.79%       8.83%       9.45%       9.09%       8.48%       8.07%
Variable rate debt       $17,256     $   272     $ 3,027     $   152     $   173     $ 5,239       $ 26,119      $ 26,119
</TABLE>

CIP(R) conducts business in the United Kingdom and France. The foreign
operations were not material to CIP(R)'s consolidated financial position,
results of operations or cash flows during the three-year period ended December
31, 2001. Additionally, foreign currency transaction gains and losses were not
material to our results of operations for the three-year period ended December
31, 2001. Accordingly, we were not subject to material foreign currency exchange
rate risk from the effects that exchange rate movements of foreign currencies
would have on our future costs or on future cash flows we would receive from our
foreign subsidiaries. To date, we have not entered into any foreign currency
forward exchange contracts or other derivative financial instruments to hedge
the effects of adverse fluctuations in foreign currency exchange rates.
Scheduled future minimum rents, exclusive of renewals, under non-cancelable
leases resulting from CIP(R)'s foreign operations are as follows:

<TABLE>
<CAPTION>
(in thousands)                        2002        2003         2004         2005        2006       Thereafter       Total
                                      ----        ----         ----         ----        ----       ----------       -----
<S>                                   <C>         <C>          <C>          <C>         <C>        <C>             <C>
Rental income(1)                      $569        $569         $569         $569        $569         $4,115        $ 6,960
Interest income from direct
    financing leases(1)               $547        $547         $568         $634        $634         $9,657        $12,587
</TABLE>

Scheduled principal payments for the mortgage notes payable during each of the
next five years following December 31, 2001 and thereafter are as follows:

<TABLE>
<CAPTION>
(in thousands)                        2002        2003         2004         2005        2006       Thereafter       Total
                                      ----        ----         ----         ----        ----       ----------       -----
<S>                                   <C>         <C>          <C>          <C>         <C>        <C>             <C>
Fixed rate debt(1)                      --        $ 74         $104         $112        $222         $7,036        $7,548
Variable rate debt(1)                  $87        $108         $130         $152        $173         $5,239        $5,889
</TABLE>

(1) Based on December 31, 2001 exchange rate.


                                      -13-
<PAGE>
Item 8. Consolidated Financial Statements and Supplementary Data.

The following consolidated financial statements and supplementary data are
hereby incorporated by reference to pages 9 to 24 of the Company's Annual Report
contained in Appendix A:

  (i) Report of Independent Accountants.
 (ii) Consolidated Balance Sheets as of December 31, 2000 and 2001.
(iii) Consolidated Statements of Income for the years ended December 31, 1999,
      2000 and 2001.
 (iv) Consolidated Statements of Shareholders' Equity for the years ended
      December 31, 1999, 2000 and 2001.
  (v) Consolidated Statements of Cash Flows for the years ended December 31,
      1999, 2000 and 2001.
 (vi) Notes to Consolidated Financial Statements.

Item 9. Disagreements on Accounting and Financial Disclosure.

NONE


                                      -14-
<PAGE>
                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

This information will be contained in the Company's definitive Proxy Statement
with respect to the Company's 2002 Annual Meeting of Shareholders, to be filed
with the Securities and Exchange Commission within 120 days following the end of
the Company's fiscal year, and is hereby incorporated by reference.

Item 11. Executive Compensation.

This information will be contained in the Company's definitive Proxy Statement
with respect to the Company's 2002 Annual Meeting of Shareholders, to be filed
with the Securities and Exchange Commission within 120 days following the end of
the Company's fiscal year, and is hereby incorporated by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

This information will be contained in the Company's definitive Proxy Statement
with respect to the Company's 2002 Annual Meeting of Shareholders, to be filed
with the Securities and Exchange Commission within 120 days following the end of
the Company's fiscal year, and is hereby incorporated by reference.

Item 13. Certain Relationships and Related Transactions.

This information will be contained in the Company's definitive Proxy Statement
with respect to the Company's 2002 Annual Meeting of Shareholders, to be filed
with the Securities and Exchange Commission within 120 days following the end of
the Company's fiscal year, and is hereby incorporated by reference.


                                      -15-
<PAGE>
                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

      (a)   1.    Consolidated Financial Statements:

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

                        Report of Independent Accountants.

                        Consolidated Balance Sheets, December 31, 1999, 2000 and
                        2001.

                        Consolidated Statements of Income for the years ended
                        December 31, 1999, 2000 and 2001.

                        Consolidated Statements of Shareholders' Equity for the
                        years ended December 31, 1999, 2000 and 2001.

                        Consolidated Statements of Cash Flows for the years
                        ended December 31, 1999, 2000 and 2001.

                        Notes to Consolidated Financial Statements.

                  The consolidated financial statements are hereby incorporated
                  by reference to pages 9 to 24 of the Company's Annual Report
                  contained in Appendix A.

      (a)   2.    Financial Statement Schedule:

                  The following schedule is filed as a part of this Report:

                        Report of Independent Accountants.

                        Schedule III - Real Estate and Accumulated Depreciation
                        as of December 31, 2001.

                        Notes to Schedule III.

                  Schedule III and notes thereto are contained herein on pages
                  33 to 37 of this Form 10-K.

                  Financial Statement Schedules other than those listed above
                  are omitted because the required information is given in the
                  Consolidated Financial Statements, including the Notes
                  thereto, or because the conditions requiring their filing do
                  not exist.


                                      -16-
<PAGE>
      (a)   3.    Exhibits:
                  --------

                  The following exhibits are filed as part of this Report.
                  Documents other than those designated as being filed herewith
                  are incorporated herein by reference.

<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
        3.1       Articles of Amendment and Restatement.                               Exhibit 3(A) to Registration
                                                                                       Statement (Form S-11) No. 33-39409

        3.2       Amended Bylaws of Registrant.                                        Exhibit 3(B) to Registration
                                                                                       Statement (Form S-11) No. 33-39409

       10.1       Amended Advisory Agreement.                                          Exhibit 10(A)(2) to Registration
                                                                                       Statement (Form S-11) No. 33-39409

       10.2       Lease between Marcourt Investments Incorporated                      Filed as Exhibit 10(D)(1) to
                  ("Marcourt") and CTYD III Corporation ("CTYD").                      Registrant's Post Effective
                                                                                       Amendment No. 1 to Form S-11

       10.3       Series A-2 9.94% Secured Note from Marcourt to the registered        Filed as Exhibit 10(D)(2) to
                  owner of note (Various Series A-1 9.94% Notes in an aggregate        Registrant's Post Effective
                  amount of 38,750,000 substantially in the form of the Series         Amendment No. 1 to Form S-11
                  A-1 9.94% Note attached , were issued by Marcourt in
                  connection with the Financing).

       10.4       Series A-2 11.18% Secured Note from Marcourt to the registered       Filed as Exhibit 10(D)(3) to
                  owner of note (Various notes in an aggregate amount of               Registrant's Post Effective
                  70,250,000 substantially in the form of the Series A-2 11.18%        Amendment No. 1 to Form S-11
                  Note attached , were issued by Marcourt in connection with the
                  Financing.

       10.5       Indenture between Marcourt, as borrower, to First                    Filed as Exhibit 10(D)(4) to
                  Fidelity Bank, National Association, New Jersey, as                  Registrant's Post Effective
                  trustee ("Trustee").                                                 Amendment No. 1 to Form S-11

       10.6       Real Estate Deed of Trust from Marcourt to Albuquerque               Filed as Exhibit 10(D)(5) to
                  Title Company, as trustee for benefit of the Trustee                 Registrant's Post Effective
                  filed in New Mexico, securing Series A-1 9.94% Notes and             Amendment No. 1 to Form S-11
                  Series A-2 ll.18% notes allocated to Albuquerque, New
                  Mexico Marriott property (Deeds of Trust or Mortgages
                  substantially similar to this Deed of Trust were filed
                  in all other jurisdictions in which Marriott Properties
                  are located.  Such other deeds of trust or mortgages
                  secure the principal amount of Series A-1 9.94% Notes
                  and Series A-2 11.18% Notes allocated to the Marriott
                  Properties located in such other jurisdictions)
</TABLE>


                                      -17-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.7       Second Real Estate Deed of Trust from Marcourt to                    Filed as Exhibit 10(D)(6) to
                  Albuquerque Title Company as trustee for the benefit of              Registrant's Post Effective
                  the Trustee, filed in New Mexico, securing all Series                Amendment No. 1 to Form S-11
                  A-1 9.94% Notes and Series A-2 11.18% Notes other than
                  those notes allocated to the Albuquerque, New Mexico
                  Marriott property (Deeds of trust or mortgages
                  substantially similar to this Second Real Estate Deed of
                  Trust were filed in all other jurisdictions in which the
                  remaining Marriott Properties are located. Such other
                  deeds  of  trust  or  mortgages  secure the principal
                  amount of Series A-1 9.94% Notes and  Series  A-2
                  11.18%  Notes  allocated to all Marriott  Properties
                  not  located  in  the jurisdiction in which such other
                  deeds of trust were filed for recording).

       10.8       Guaranty from the Registrant, Corporate Property                     Filed as Exhibit 10(D)(7) to
                  Associates 10 Incorporated, Trammell Crow Equity                     Registrant's Post Effective
                  Partners II, Ltd. ("TCEP II") and PA/First Plaza Limited             Amendment No. 1 to Form S-11
                  Partnership ("First Plaza") as guarantors, to the
                  Trustee.

       10.9       Shareholders Agreement between the Registrant, Corporate             Filed as Exhibit 10(D)(8) to
                  Property Associates 10 Incorporated ("CPA(R):10"), TCEP II              Registrant's Post Effective
                  and First Plaza.                                                     Amendment No. 1 to Form S-11

       10.10      Assignment and Assumptions of Lease Agreement for                    Filed as Exhibit 10(E)(1)(a) to
                  property located in Glendale, Arizona                                Registrant's Post Effective
                                                                                       Amendment No. 1 to Form S-11

       10.11      Assignment and Assumptions of  Lease Agreement for                   Filed as Exhibit 10(E)(1)(b) to
                  property located in Ft. Smith, Arkansas                              Registrant's Post Effective
                                                                                       Amendment No. 1 to Form S-11

       10.12      Assignment and Assumptions of Lease Agreement for                    Filed as Exhibit 10(E)(1)(c) to
                  property located in Escondido, California.                           Registrant's Post Effective
                                                                                       Amendment No. 1 to Form S-11

       10.13      Assignment and Assumptions of Lease Agreement for                    Filed as Exhibit 10(E)(1)(d) to
                  property located in Broken Arrow, Oklahoma.                          Registrant's Post Effective
                                                                                       Amendment No. 1 to Form S-11

       10.14      Assignment and Assumptions of Lease Agreement for                    Filed as Exhibit 10(E)(1)(e) to
                  property located in Weatherford, Oklahoma.                           Registrant's Post Effective
                                                                                       Amendment No. 1 to Form S-11

       10.15      Assignment and Assumptions of Lease Agreement for                    Filed as Exhibit 10(E)(1)(f) to
                  property located in Center, Texas.                                   Registrant's Post Effective
                                                                                       Amendment No. 1 to Form S-11

       10.16      Assignment and Assumptions of Lease Agreement for                    Filed as Exhibit 10(E)(1)(g) to
                  property located in Groves, Texas.                                   Registrant's Post Effective
                                                                                       Amendment No. 1 to Form S-11

       10.17      Assignment and Assumptions of Lease Agreement for                    Filed as Exhibit 10(E)( 1)(h) to
                  property located in Silsbee, Texas.                                  Registrant's Post Effective
                                                                                       Amendment No. 1 to Form S-11
</TABLE>


                                      -18-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.18      Assignment and Assumptions of Lease Agreement for                    Filed as Exhibit 10(E)(1)(i) to
                  property located in Vidor, Texas.                                    Registrant's Post Effective
                                                                                       Amendment No. 1 to Form S-11

       10.19      Lease Amendments for the Ft. Smith, Arkansas and                     Filed as Exhibit 10(E)(2) to
                  Weatherford, Oklahoma properties.                                    Registrant's Post Effective
                                                                                       Amendment No. 1 to Form S-11

       10.20      Promissory Note from subsidiaries of the Registrant and              Filed as Exhibit 10(E)(3) to
                  CPA(R):10 to The New England Mutual Life Insurance Company           Registrant's Post Effective to Form
                  ("New England").                                                     S-11Amendment No. 1

       10.21      Mortgage/Deed of Trust from subsidiaries of the                      Filed as Exhibit 10(E)(4)(a) to
                  Registrant and CPA(R):10 to New England encumbering the              Registrant's Post Effective
                  property in Ft. Smith, Arkansas                                      Amendment No. 1 to Form S-11

       10.22      Mortgage/Deed of Trust from subsidiaries of the                      Filed as Exhibit 10(E)(4)(b) to
                  Registrant and CPA(R):10 to New England encumbering the              Registrant's Post Effective
                  property in Weatherford, Oklahoma                                    Amendment No. 1 to Form S-11

       10.23      Mortgage/Deed of Trust from subsidiaries of the                      Filed as Exhibit 10(E)(4)(c) to
                  Registrant and CPA(R):10 to New England encumbering the              Registrant's Post Effective
                  properties in Center, Groves, Silsbee, and Vidor, Texas.             Amendment No. 1 to Form S-11

       10.24      Lease Agreement between QRS 10-9 (AR), Inc. ("QRS 10-9")             Filed as Exhibit 10(F)(1) to
                  and QRS 11-2(AR), Inc. ("QRS 11-2") as landlord and                  Registrant's Post Effective
                  Acadia Stores 63, Inc. ("Tenant") as tenant.                         Amendment No. 3 to Form S-11

       10.25      Co-Tenancy Agreement between QRS 10-9 and QRS 11-2.                  Filed as Exhibit 10(F)(2) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 3 to Form S-11

       10.26      Term Loan Agreement among The First National Bank of                 Filed as Exhibit 10(F)(3) to
                  Boston ("First Lender"), QRS 10-9 and QRS 11-2.                      Registrant's Post Effective
                                                                                       Amendment No. 3 to Form S-11

       10.27      Note of QRS 10-9 and QRS 11-2 to First Lender.                       Filed as Exhibit 10(F)(4) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 3 to Form S-11

       10.28      Fee and Leasehold Mortgages from QRS10-9 and QRS 11-2 to             Filed as Exhibit 10(F)(5) to
                  First Lender for the following jurisdictions:                        Registrant's Post Effective
                        a.    Arkansas (one representative fee mortgage and            Amendment No. 3 to Form S-11
                              leasehold mortgage included)
                        b.    Louisiana
                        c.    Mississippi

       10.29      Term Loan Agreement among Acadia Partners , L.P.                     Filed as Exhibit 10(F)(6) to
                  ("Second Lender"), QRS 10-9 and QRS 11-2.                            Registrant's Post Effective
                                                                                       Amendment No. 3 to Form S-11

       10.30      Note of QRS 10-9 and QRS 11-2 to Second Lender.                      Filed as Exhibit 10(F)(7) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 3 to Form S-11
</TABLE>


                                      -19-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.31      Fee Mortgages and Leasehold Mortgages from QRS 10-9 and              Filed as Exhibit 10(F)(8) to
                  QRS 11 -2 to Second Lender for the following                         Registrant's Post Effective
                  jurisdictions:                                                       Amendment No. 3 to Form S-11
                        a.    Arkansas (one representative fee mortgage and
                              leasehold mortgage included)
                        b.    Louisiana
                        c.    Mississippi

       10.32      Guaranty from Harvest Foods, Inc., a Delaware                        Filed as Exhibit 10(F)(9) to
                  corporation, to QRS 10-9 and QRS 11-2.                               Registrant's Post Effective
                                                                                       Amendment No. 3 to Form S-11

       10.33      Guaranty from Harvest Foods, Inc., an Arkansas                       Filed as Exhibit 10(F)(10) to
                  corporation, to QRS 10-9 and QRS 11-2.                               Registrant's Post Effective
                                                                                       Amendment No. 3 to Form S-11

       10.34      Lease between QRS 10-12 (TX), Inc. ("QRS 10-12"), QRS                Filed as Exhibit 10(G)(1) to
                  11-5 (TX), Inc. ("QRS 11-5") and Summagraphics.                      Registrant's Post Effective
                                                                                       Amendment No. 3 to Form S-11

       10.35      Co-Tenancy Agreement between QRS 10-12, and QRS 11-5.                Filed as Exhibit 10(G)(2) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 3 to Form S-11

       10.36      $3,700,000 Promissory Note from QRS 10-12 (TX), Inc.,                Filed as Exhibit 10(H)(1) to
                  ("QRS 10-12"), and QRS 11-5 (TX) Inc. ("QRS 11-5"), to               Registrant's Post Effective
                  Creditanstalt-Bankverein ("Lender").                                 Amendment No. 4 to Form S-11

       10.37      Deed of Trust and Security Agreement from QRS 10- 12 and             Filed as Exhibit 10(H)(2) to
                  QRS 11-5 to John O. Langdon, Trustee, for benefit of                 Registrant's Post Effective
                  Lender.                                                              Amendment No. 4 to Form S-11

       10.38      Guaranty Agreement between Registrant and Corporate                  Filed as Exhibit 10(H)(3) to
                  Property Associates 10 Incorporated as guarantor and                 Registrant's Post Effective
                  Lender.                                                              Amendment No. 4 to Form S-11

       10.39      Real Estate Purchase and Sale Contract between Belmet                Filed as Exhibit 10(I)(1) to
                  (IL) QRS 11-9, Inc. ("QRS 11-9") as purchaser and                    Registrant's Post Effective
                  Mission Leasing and Bank of Rantoul (collectively, to                Amendment No. 4
                  Form S-11"Seller").

       10.40      Assignment and Assumption of Lease between QRS 11-9 and              Filed as Exhibit 10(I)(2) to
                  Seller.                                                              Registrant's Post Effective
                                                                                       Amendment No. 4 to Form S-11

       10.41      Assignment of Permits and Warranties from Seller to QRS              Filed as Exhibit 10(I)(3) to
                  11-9.                                                                Registrant's Post Effective
                                                                                       Amendment No. 4 to Form S-11

       10.42      Industrial Building Lease ("Lease") dated November 16,               Filed as Exhibit 10(I)(4) to
                  1989 between Seller and Bell, together with First                    Registrant's Post Effective
                  Amendment to Lease, dated September 19, 1991.                        Amendment No. 4 to Form S-11

       10.43      Second Amendment to Lease.                                           Filed as Exhibit 10(I)(5) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 4 to Form S-11
</TABLE>


                                      -20-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.44      Land Purchase Agreement between MMI (SC) QRS 11-11 Inc.              Filed as Exhibit 10(J)(1) to
                  ("QRS 11-11") and Amerisure, Inc. regarding three acre               Registrant's Post Effective
                  parcel.                                                              Amendment No. 5 to Form S-11

       10.45      Mortgage from Amerisure, Inc. to QRS 11-11 regarding                 Filed as Exhibit 10(J)(2) to
                  three acre parcel.                                                   Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       10.46      Lease Agreement between QRS 11-11, as Landlord. and MMI,             Filed as Exhibit 10(J)(3) to
                  as tenant.                                                           Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       10.47      Assignment, Reassignment and Assumption of Lease among               Filed as Exhibit 10(J)(4) to
                  Amerisure, Inc., QRS11-11 and UIC.                                   Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       10.48      Loan Agreement between The Penn Mutual Life Insurance                Filed as Exhibit 10(J)(5) to
                  Company ("Penn Mutual") and QRS 11-11.                               Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       10.49      $9,500,000 Promissory Note from QRS 11-11 to Penn Mutual.            Filed as Exhibit 10(J)(6) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       10.50      Mortgage and Security Agreement from QRS 11-11 to Penn               Filed as Exhibit 10(J)(7) to
                  Mutual.                                                              Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       10.51      Lease Agreement between BVS (NY) QRS 11-10, Inc. ("QRS               Filed as Exhibit 10(K)(1) to
                  11-10") as landlord, and BVS, as tenant.                             Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       10.52      Reciprocal Easement and Operation Agreement between QRS              Filed as Exhibit 10(K)(2) to
                  11-10 and Fairview Plaza Corporation ("FPC").                        Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       10.53      Lease Agreement between QRS 11-12, (FL), Inc., ("QRS                 Filed as Exhibit 10(L)(2) to
                  11-12"), as Landlord, and Unit, as tenant.                           Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       10.54      Guaranty and Suretyship Agreement from Unit to QRS 11-12.            Filed as Exhibit 10(L)(4) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       10.55      Indemnity Agreement between GATX Corporation and QRS                 Filed as Exhibit 10(L)(5) to
                  11-12.                                                               Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       10.56      Assignment and Assumption of Lease by Charlotte                      Filed as Exhibit 10(M)(1) to
                  Telephone Associates Limited Partnership ("CTA") to QRS              Registrant's Post Effective
                  11-14 (NC), Inc. ("QRS 11-14").                                      Amendment No. 5 to Form S-11

       10.57      Purchase and Sale Agreement between Neoserv (CO) QRS                 Filed as Exhibit 10.1 to
                  10-13, Inc. ("QRS:10") and Neoserv (CO) QRS 11-8, Inc.               Registrant's Form 8-K dated October
                  ("QRS:11") as purchasers and Homart Development Co.                  29, 1992
                  ("Homart").
</TABLE>


                                      -21-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.58      Promissory Note of QRS:10 and QRS:11 to Homart.                      Filed as Exhibit 10.2 to
                                                                                       Registrant's Form 8-K dated October
                                                                                       29, 1992

       10.59      Deed of Trust from QRS:10 and QRS:11 for benefit of                  Filed as Exhibit 10.3 to
                  Homart.                                                              Registrant's Form 8-K dated October
                                                                                       29, 1992

       10.60      Option Agreement between QRS:10 and QRS:11 as option                 Filed as Exhibit 10.4 to
                  grantee and Homart as option grantor.                                Registrant's Form 8-K dated October
                                                                                       29, 1992

       10.61      Co-Tenancy Agreement between QRS:10 and QRS:11.                      Filed as Exhibit 10.5 to
                                                                                       Registrant's Form 8-K dated October
                                                                                       29, 1992

       10.62      Lease from QRS:10 and QRS:11 as lessor and Neodata                   Filed as Exhibit 10.6 to
                  Services, Inc. ("Neodata") as lessee.                                Registrant's Form 8-K dated October
                                                                                       29, 1992

       10.63      Guaranty Agreement from Neodata Corporation as guarantor             Filed as Exhibit 10.7 to
                  to QRS:10 and QRS:11.                                                Registrant's Form 8-K dated October
                                                                                       29, 1992

       10.64      Promissory Note of QRS:10 and QRS:11 to Neodata.                     Filed as Exhibit 10.8 to
                                                                                       Registrant's Form 8-K dated October
                                                                                       29, 1992

       10.65      Deed of Trust from QRS:10 and QRS:11 for benefit of                  Filed as Exhibit 10.9 to
                  Neodata.                                                             Registrant's Form 8-K dated October
                                                                                       29, 1992

       10.66      Construction Contract between QRS:10 and QRS:11 as                   Filed as Exhibit 10.10 to
                  owners and Austin Commercial, Inc. ("Austin") as                     Registrant's Form 8-K dated October
                  contractor.                                                          29, 1992

       10.67      Guaranty from Austin to QRS:10 and QRS:11.                           Filed as Exhibit 10.11 to
                                                                                       Registrant's Form 8-K dated October
                                                                                       29, 1992

       10.68      Construction Agency Agreement between QRS:10 and QRS:11              Filed as Exhibit 10.12 to
                  as owners and Neodata as agent.                                      Registrant's Form 8-K dated October
                                                                                       29, 1992

       10.69      Land Purchase Agreement between MMI (SC) QRS 11-11, Inc.             Filed as Exhibit 10.1 to
                  ("QRS 11-11") and Amerisure, Inc. ("Amerisure")                      Registrant's Form 8-K dated January
                  regarding three acre parcel.                                         5, 1993

       10.70      Mortgage from Amerisure to QRS 11-11 regarding three                 Filed as Exhibit 10. 2 to
                  acre parcel.                                                         Registrant's Form 8-K dated January
                                                                                       5, 1993

       10.71      Lease Agreement between QRS 11-11, as Landlord, and MMI              Filed as Exhibit 10.3 to
                  as tenant.                                                           Registrant's Form 8-K dated January
                                                                                       5, 1993

       10.72      Assignment, Reassignment and Assumption of Lease among               Filed as Exhibit 10.4 to
                  Amerisure, Inc., QRS 11-11 and UIC.                                  Registrant's Form 8-K dated January
                                                                                       5, 1993

       10.73      Loan Agreement between The Penn Mutual Life Insurance                Filed as Exhibit 10.5 to
                  Company ("Penn Mutual") and QRS 11-11.                               Registrant's Form 8-K dated January
                                                                                       5, 1993

       10.74      $9,500,000 Promissory Note  from QRS 11-11 to Penn                   Filed as Exhibit 10.6 to
                  Mutual.                                                              Registrant's Form 8-K dated January
                                                                                       5, 1993

       10.75      Mortgage and Security Agreement from QRS 11-11 to Penn               Filed as Exhibit 10.7 to
                  Mutual.                                                              Registrant's Form 8-K dated January
                                                                                       5, 1993

       10.76      Lease Agreement between BVS (NY) QRS 11-10, Inc. ("QRS               Filed as Exhibit 10.8 to
                  11-10"), as landlord, and BVS, as tenant.                            Registrant's Form 8-K dated January
                                                                                       5, 1993
</TABLE>


                                      -22-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.77      Reciprocal Easement and Operation Agreement between QRS              Filed as Exhibit 10.9 to
                  11-10 and Fairview Plaza, Inc.                                       Registrant's Form 8-K dated January
                                                                                       5, 1993

       10.78      Lease Agreement between QRS 11-12 (FL), Inc. ("QRS                   Filed as Exhibit 10.10 to
                  11-12"), as landlord, and Unit, as tenant.                           Registrant's Form 8-K dated January
                                                                                       5, 1993

       10.79      Guaranty and Suretyship Agreement from Unit to QRS 11-12.            Filed as Exhibit 10.11 to
                                                                                       Registrant's Form 8-K dated January
                                                                                       5, 1993

       10.80      Indemnity Agreement between GATX Corporation and QRS                 Filed as Exhibit 10.12 to
                  11-12.                                                               Registrant's Form 8-K dated January
                                                                                       5, 1993

       10.81      Assignment and Assumption of Lease and Lease Guaranty                Filed as Exhibit 10.1 to
                  from Oakbrook Development Corp. ("Oakbrook") to Books CT             Registrant's Form 8-K dated April 5,
                  QRS 11-15, Inc. ("QRS 11-15").                                       1993

       10.82      Co-Tenancy Agreement between DDI (NE) QRS 10-15, Inc.                Filed as Exhibit 10.2 to
                  ("QRS 10-15") and DDI (NE) QRS 11-13, Inc. ("QRS 11-13").            Registrant's Form 8-K dated April 5,
                                                                                       1993

       10.83      Cross Indemnity Agreement between QRS 10-15 and QRS                  Filed as Exhibit 10.3 to
                  11-13.                                                               Registrant's Form 8-K dated April 5,
                                                                                       1993

       10.84      Lease Agreement between QRS 10-15 and QRS 11-13, as                  Filed as Exhibit 10.4 to
                  landlord, and Data Documents, Inc. ("DDI"), as tenant.               Registrant's Form 8-K dated April 5,
                                                                                       1993

       10.85      Loan Agreement between QRS 10-15 and QRS 11-13, as                   Filed as Exhibit 10.5 to
                  borrower, and U S West Financial Services, Inc. ("US                 Registrant's Form 8-K dated April 5,
                  West"), as lender.                                                   1993

       10.86      $8,000,000 Promissory Note from QRS 10-15 and QRS 11-13              Filed as Exhibit 10.6 to
                  to US West.                                                          Registrant's Form 8-K dated April 5,
                                                                                       1993

       10.87      Deed of Trust from QRS 10-15 and QRS 11-13 to US West                Filed as Exhibit 10.7 to
                  (for filing in the states of Colorado, Nebraska and                  Registrant's Form 8-K dated April 5,
                  Texas).                                                              1993

       10.88      Mortgage from QRS 10-15 and QRS 11-13 to US West (for                Filed as Exhibit 10.8 to
                  filing in the state of Kansas).                                      Registrant's Form 8-K dated April 5,
                                                                                       1993

       10.89      Assignment of Parent Guaranty from QRS 10-15 and QRS                 Filed as Exhibit 10.9 to
                  11-13.                                                               Registrant's Form 8-K dated April 5,
                                                                                       1993

       10.90      Deed of Trust Note from QRS 11-14 (NC), Inc. ("QRS                   Filed as Exhibit 10.1 to
                  11-14") to Kredietbank N.V. ("Kredietbank").                         Registrant's Form 8-K dated April
                                                                                       13, 1993

       10.91      Deed of Trust from QRS 11-14 for the benefit of                      Filed as Exhibit 10.2 to
                  Kredietbank.                                                         Registrant's Form 8-K dated April
                                                                                       13, 1993

       10.92      Assignment of Leases and Rents from QRS 11-14 to                     Filed as Exhibit 10.3 to
                  Kredietbank.                                                         Registrant's Form 8-K dated April
                                                                                       13, 1993

       10.93      Escrow Agreement between QRS 11-14 and Kredietbank.                  Filed as Exhibit 10.4 to
                                                                                       Registrant's Form 8-K dated April
                                                                                       13, 1993
</TABLE>


                                      -23-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.94      Lease Agreement between BB Property Company, as lessor,              Filed as Exhibit 10.1 to
                  and Best Buy, as lessee.                                             Registrant's Form 8-K dated May 6,
                                                                                       1993

       10.95      Note Purchase Agreement among BB Property Company, Best              Filed as Exhibit 10.2 to
                  Buy, and TIAA.                                                       Registrant's Form 8-K dated May 6,
                                                                                       1993

       10.96      $32,800,000 Note from BB Property Company to TIAA.                   Filed as Exhibit 10.3 to
                                                                                       Registrant's Form 8-K dated May 6,
                                                                                       1993

       10.97      Deed of Trust and Security Agreement from BB Property                Filed as Exhibit 10.4 to
                  Company for the benefit of TIAA.                                     Registrant's Form 8-K dated May 6,
                                                                                       1993

       10.98      $3,200,000 Promissory Note from BVS (NY) QRS 11-10, Inc.             Filed as Exhibit 10.5 to
                  ("BVS") to Orix.                                                     Registrant's Form 8-K dated May 6,
                                                                                       1993

       10.99      Mortgage, Assignment of Leases and Rents, Security                   Filed as Exhibit 10.6 to
                  Agreement and Fixture Filing from BVS to Orix.                       Registrant's Form 8-K dated May 6,
                                                                                       1993

       10.100     Purchase Agreement between QRS 11-19, as owner, and                  Filed as Exhibit 10.2 to
                  Lincoln Technical Institute, as buyer.                               Registrant's Form 8-K dated August
                                                                                       13, 1993

       10.101     Lease Agreement between Unitech (IL) QRS 11-19, Inc.                 Filed as Exhibit 10(P)(1) to
                  ("QRS 11-19"), as landlord, and UTI.                                 Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.102     Guaranty and Suretyship Agreement from Lincoln Technical             Filed as Exhibit 10(P)(2) to
                  Institute of Arizona, Inc. to QRS 11-19.                             Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.103     Modification of Loan Documents and Assumption Agreement              Filed as Exhibit 10(P)(3) to
                  among Chicago Investment Properties Limited Partnership,             Registrant's Post Effective
                  the Guarantors QRS 11-19 and the Fidelity Mutual Life                Amendment No. 6 to Form S-11
                  Insurance Company.

       10.104     Rate Cap Transaction letter Agreement between BVS and                Filed as Exhibit 10(Q)(4) to
                  Chemical Bank ("Chemical").                                          Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.105     Consent and Agreement between Chemical, Orix and BVS.                Filed as Exhibit 10(Q)(5) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.106     Assignment of Interest Rate Protection Agreement from                Filed as Exhibit 10(Q)(6) to
                  BVS to Orix.                                                         Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.107     Warrant issued by Merit to the Registrant.                           Filed as Exhibit 10(S)(1) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.108     Lease Agreement between QRS 11-20 (UT), Inc. ("QRS                   Filed as Exhibit 10(S)(2) to
                  11-20"), as landlord, and Merit, as tenant.                          Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.109     Guaranty Agreement from the Registrant to Merit.                     Filed as Exhibit 10(S)(3) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11
</TABLE>


                                      -24-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.110     Construction Management Agreement between Merit and the              Filed as Exhibit 10(S)(4) to
                  Koll Company.                                                        Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.111     Construction Agreement between Merit and Camco                       Filed as Exhibit 10(S)(5) to
                  Construction Company, Inc.                                           Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.112     Construction Agency Agreement between Merit and QRS                  Filed as Exhibit 10(S)(6) to
                  11-20.                                                               Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.113     $8,250,000 Promissory Note from QRS 11-20 to First                   Filed as Exhibit 10(S)(7) to
                  Interstate Bank of Utah, N.A. ("Lender").                            Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.114     Deed of Trust, Assignment of Rents, Security Agreement               Filed as Exhibit 10(S)(8) to
                  and Financing Statement from QRS 11-20 for the benefit               Registrant's Post Effective
                  of Lender.                                                           Amendment No. 6 to Form S-11

       10.115     Assignment of Leases and Rents made by QRS 11-20 in                  Filed as Exhibit 10(S)(9) to
                  favor of Lender.                                                     Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.116     Loan Agreement between QRS 11-20 and Lender.                         Filed as Exhibit 10(S)(10) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       10.117     Assignment and Assumption of Bid dated as of April 14,               Filed as Exhibit 10(T)(1) to
                  1993 among QRS 11-17 (NY), Inc. ("QRS 11-17"), E.B.                  Registrant's Post Effective
                  Properties, Inc. ("EB") and The Dime Savings Bank of New             Amendment No. 7 to Form S-11
                  York, FSB ("Dime"), as amended and supplemented by the
                  First Supplement dated April 15, 1993 and by the Second
                  Supplement dated April 22, 1993 and by letters dated May
                  12, June 9 and June 18, 1993.

       10.118     Assignment and Assumption Agreement, dated March 4,                  Filed as Exhibit 10(T)(2) to
                  1993, as amended , between Dime and EB, as assigned by               Registrant's Post Effective
                  Assignment  dated April 14, 1993.                                    Amendment No. 7 to Form S-11

       10.119     Lease dated as of August 1, 1986 between D. Grossman and             Filed as Exhibit 10(T)(3) to
                  Mormax Corporation (as assumed by QRS 11-21, Inc. ("QRS              Registrant's Post Effective
                  11-21") by virtue of documents listed at (10)(T)(1)).                Amendment No. 7 to Form S-11

       10.120     Promissory Note from QRS 11-17 to Dime in the amount of              Filed as Exhibit 10(T)(4) to
                  $7,000,000.                                                          Registrant's Post Effective
                                                                                       Amendment No. 7 to Form S-11

       10.121     Mortgage from QRS 11-17 to Dime.                                     Filed as Exhibit 10(T)(5) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 7 to Form S-11

       10.122     Collateral Assignment of Leases and Rents by QRS 11-17               Filed as Exhibit 10(T)(6) to
                  in favor of Dime.                                                    Registrant's Post Effective
                                                                                       Amendment No. 7 to Form S-11
</TABLE>


                                      -25-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.123     Agreement of Indemnity by QRS 11-17 in favor of Dime.                Filed as Exhibit 10(T)(7) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 7 to Form S-11

       10.124     Lease Agreement between SCF (TN) QRS 11-21, as landlord,             Filed as Exhibit 10(U)(1) to
                  and SCM, as tenant.                                                  Registrant's Post Effective
                                                                                       Amendment No. 7 to Form S-11

       10.125     Warrant issued by Sports & Fitness Clubs Inc. ("SFC") to             Filed as Exhibit 10(U)(2) to
                  QRS 11-21.                                                           Registrant's Post Effective
                                                                                       Amendment No. 7 to Form S-11

       10.126     Guaranty and Suretyship Agreement by SFC and Sports and              Filed as Exhibit 10(U)(3) to
                  Fitness Clubs of America, Inc. ("SFCA") to QRS 11-21.                Registrant's Post Effective
                                                                                       Amendment No. 7 to Form S-11

       10.127     Purchase Agreement between QRS 11-21, as owner, and SFC,             Filed as Exhibit 10(U)(4) to
                  as buyer.                                                            Registrant's Post Effective
                                                                                       Amendment No. 7 to Form S-11

       10.128     Term Loan Agreement between QRS 11-21, as borrower, and              Filed as Exhibit 10(U)(5) to
                  Union Planters National Bank, as lender ("Union                      Registrant's Post Effective
                  Planters").                                                          Amendment No. 7 to Form S-11

       10.129     Note in the amount of $2,800,000 dated July 20, 1993                 Filed as Exhibit 10(U)(6) to
                  from QRS 11-21 for the benefit of Union Planters.                    Registrant's Post Effective
                                                                                       Amendment No. 7 to Form S-11

       10.130     Deed of Trust, Assignment of Rents and Security                      Filed as Exhibit 10(U)(7) to
                  Agreement from QRS 11-21 for the benefit of Union                    Registrant's Post Effective
                  Planters.                                                            Amendment No. 7 to Form S-11

       10.131     Acknowledgment of Assignment of Lease, Guaranty and                  Filed as Exhibit 10(U)(8) to
                  Purchase Agreements between SCM, SFC, SFCA, QRS 11-21                Registrant's Post Effective
                  and Union Planters.                                                  Amendment No. 7 to Form S-11

       10.132     Real Estate Contract of Sale between Abacus Capital                  Filed as Exhibit 10(V)(1) to
                  Corporation, as seller, and Registrant, or its assigns,              Registrant's Post Effective
                  as Buyer.                                                            Amendment No. 7 to Form S-11

       10.133     Real Estate Contract of Sale between Abacus Capital                  Filed as Exhibit 10.1 to
                  Corporation ("Abacus"), as seller, and Registrant, as                Registrant's Form 8-K dated February
                  buyer.                                                               24, 1994

       10.134     Assignment of Real Estate Contract of Sale from                      Filed as Exhibit 10.2 to
                  Registrant to the PETSMART Subsidiary.                               Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.135     Assignment and Assumption of Lease between Abacus and                Filed as Exhibit 10.3 to
                  the PETsMART Subsidiary.                                             Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.136     Loan Agreement between NationsBank and the PETsMART                  Filed as Exhibit 10.4 to
                  Subsidiary.                                                          Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.137     $2,500,000 Promissory Note made by the PETsMART                      Filed as Exhibit 10.5 to
                  Subsidiary to NationsBank.                                           Registrant's Form 8-K dated February
                                                                                       24, 1994
</TABLE>


                                      -26-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.138     Deed of Trust, Assignment, Security Agreement and                    Filed as Exhibit 10.6 to
                  Financing Statement from the PETsMART Subsidiary to                  Registrant's Form 8-K dated February
                  NationsBank.                                                         24, 1994

       10.139     Lease Agreement between the Braintree Subsidiary, as                 Filed as Exhibit 10.7 to
                  landlord, and Barnes & Noble, as tenant.                             Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.140     Real Estate Purchase and Sale Contract between the ELWA              Filed as Exhibit 10.8 to
                  Subsidiary, as buyer, and Big V, as seller.                          Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.141     Lease Agreement between the ELWA Subsidiary, as                      Filed as Exhibit 10.9 to
                  landlord, and Big V as tenant.                                       Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.142     Guaranty and Suretyship Agreement executed by Big V                  Filed as Exhibit 10.10 to
                  Holding.                                                             Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.143     Amended, Restated and Consolidated Bonds to Key Bank, as             Filed as Exhibit 10.11 to
                  lender, from the ELWA Subsidiary, as borrower.                       Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.144     Amended and Restated Mortgage and Security Agreement                 Filed as Exhibit 10.12 to
                  from the ELWA Subsidiary, to Key Bank.                               Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.145     Limited Guaranty of Payment from the Company to Key Bank.            Filed as Exhibit 10.13 to
                                                                                       Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.146     Lease Agreement between the Brownwood Subsidiary, as                 Filed as Exhibit 10.14 to
                  landlord, and Superior, as tenant.                                   Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.147     Guaranty and Suretyship Agreement from Alpine to                     Filed as Exhibit 10.15 to
                  Registrant.                                                          Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.148     $2,700,000 Real Estate Note from the Brownwood                       Filed as Exhibit 10.16 to
                  Subsidiary, as maker, to Creditanstalt, as holder.                   Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.149     Deed of Trust and Security Agreement by the Brownwood                Filed as Exhibit 10.17 to
                  Subsidiary, as guarantor to Hazen H. Dempster, as                    Registrant's Form 8-K dated February
                  trustee.                                                             24, 1994

       10.150     Guaranty and Agreement between the Company and                       Filed as Exhibit 10.18 to
                  Creditanstalt.                                                       Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.151     Assignment of Contract from Hyde Park Holdings, Inc. to              Filed as Exhibit 10.19 to
                  the Cleveland Subsidiary.                                            Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.152     Lease Agreement between the Cleveland Subsidiary, as                 Filed as Exhibit 10.20 to
                  landlord, and Nicholson, as tenant.                                  Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.153     $4,000,000 Cognovit Promissory Note from the Cleveland               Filed as Exhibit 10.21 to
                  Subsidiary to Bank One.                                              Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.154     Mortgage Deed, Security Agreement and Assignment of                  Filed as Exhibit 10.22 to
                  Rents and Leases from the Cleveland Subsidiary to Bank               Registrant's Form 8-K dated February
                  One.                                                                 24, 1994

       10.155     Business Loan Agreement between the Cleveland                        Filed as Exhibit 10.23 to
                  Subsidiary, and Bank One.                                            Registrant's Form 8-K dated February
                                                                                       24, 1994
</TABLE>


                                      -27-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.156     Guaranty from Registrant to Bank One.                                Filed as Exhibit 10.24 to
                                                                                       Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.157     Lease Agreement between the Gensia Partnership, as                   Filed as Exhibit 10.25 to
                  landlord, and Gensia, as tenant.                                     Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.158     $13,000,000 Promissory Note from the Gensia Partnership              Filed as Exhibit 10.26 to
                  to Northwestern.                                                     Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.159     Deed of Trust, Security Agreement and Financing                      Filed as Exhibit 10.27 to
                  Statement from the Gensia Partnership to Northwestern.               Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.160     Guarantee of Recourse Obligations from Registrant and                Filed as Exhibit 10.28 to
                  CPA(R):12 to Northwestern.                                             Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.161     Assignment of Earnest Money Contract from Garden Ridge               Filed as Exhibit 10.29 to
                  to the Round Rock Subsidiary.                                        Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.162     Lease Agreement between the Round Rock Subsidiary, as                Filed as Exhibit 10.30 to
                  landlord, and Garden Ridge, as tenant.                               Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.163     $3,465,000 Note from the Round Rock Subsidiary to Garden             Filed as Exhibit 10.31 to
                  Ridge.                                                               Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.164     Deed of Trust and Security Agreement from the Round Rock             Filed as Exhibit 10.32 to
                  Subsidiary to Garden Ridge.                                          Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.165     $1,700,000 Promissory Note from the Plano Subsidiary to              Filed as Exhibit 10.33 to
                  National Western.                                                    Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.166     Deed of Trust, Security Agreement and Financing                      Filed as Exhibit 10.34 to
                  Statement from the Plano Subsidiary to National Western.             Registrant's Form 8-K dated February
                                                                                       24, 1994

       10.167     Lease Agreement dated June 15, 1994 between CTC (VA) QRS             Filed as Exhibit 10.167 to
                  11-32, Inc., as Landlord, and Childtime Childcare, Inc.,             Registrant's Form 10-K for the year
                  as Tenant.                                                           ended December 31, 1994 dated March
                                                                                       31, 1995

       10.168     Construction Agency Agreement dated June 15, 1994                    Filed as Exhibit 10.168 to
                  between Childtime Childcare, Inc. and CTC (VA) QRS                   Registrant's Form 10-K for the year
                  11-32, Inc.                                                          ended December 31, 1994 dated March
                                                                                       31, 1995

       10.169     Lease Agreement dated August 11, 1994 by and between                 Filed as Exhibit 10.169 to
                  Neenah (WI) QRS 11-31, Inc., as Landlord, and Exide                  Registrant's Form 10-K for the year
                  Electronic Assembly Corporation, as Tenant.                          ended December 31, 1994 dated March
                                                                                       31, 1995

       10.170     $5,000,000 Real Estate Note dated August 11, 1994 from               Filed as Exhibit 10.170 to
                  Neenah (WI) QRS 11-31, Inc., as Maker, and Creditanstalt             Registrant's Form 10-K for the year
                  Corporate Finance, Inc., as Holder.                                  ended December 31, 1994 dated March
                                                                                       31, 1995
</TABLE>


                                      -28-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       10.171     Lease Agreement dated September 30, 1994 by and between              Filed as Exhibit 10.171 to
                  CFP Associates, as Landlord, and Custom Foods Products,              Registrant's Form 10-K for the year
                  Inc., as Tenant.                                                     ended December 31, 1994 dated March
                                                                                       31, 1995

       10.172     Loan Agreement dated September 30, 1994 between CFP                  Filed as Exhibit 10.172 to
                  Associates, as Borrower, and Greyrock Capital Group                  Registrant's Form 10-K for the year
                  Inc., as Lender.                                                     ended December 31, 1994 dated March
                                                                                       31, 1995

       10.173     $2,000,000 Note dated September 30, 1994 from CFP                    Filed as Exhibit 10.173 to
                  Associates, as Maker, and Greyrock Capital Group Inc.,               Registrant's Form 10-K for the year
                  as Payee.                                                            ended December 31, 1994 dated March
                                                                                       31, 1995

       10.174     $200,000 Maximum Amount Promissory Note dated September              Filed as Exhibit 10.174 to
                  30, 1994 from CFP Associates, as Maker, to Custom Foods              Registrant's Form 10-K for the year
                  Products, Inc., as Payee.                                            ended December 31, 1994 dated March
                                                                                       31, 1995

       10.175     Lease Agreement dated October 14, 1994 by and between                Filed as Exhibit 10.175 to
                  ADS (CA) QRS 11-34, Inc., as Landlord, and Chiat/Day                 Registrant's Form 10-K for the year
                  Inc. Advertising, as Tenant.                                         ended December 31, 1994 dated March
                                                                                       31, 1995

       10.176     $6,000,000 Promissory Note dated October 14, 1994 from               Filed as Exhibit 10.176 to
                  ADS (CA) QRS 11-34, Inc., as Borrower, to Kearneys                   Registrant's Form 10-K for the year
                  Street Real Estate Company, L.P., as Lender.                         ended December 31, 1994 dated March
                                                                                       31, 1995

       10.177     $3,000,000 Purchase Money Promissory Note secured by                 Filed as Exhibit 10.177 to
                  Deed of Trust dated October 14, 1994 from ADS (CA) QRS               Registrant's Form 10-K for the year
                  11-34, Inc., as Maker, to Venice Operating Corp., as                 ended December 31, 1994 dated March
                  Holder.                                                              31, 1995

       10.178     Lease Agreement dated October 31, 1995 by and between                Filed as Exhibit 10.33 to
                  DELMO (PA) QRS 11-36 and DELMO (PA) QRS 12-10 together               Registrant's Form 8-K dated March
                  as Landlord and Del Monte Corporation, as Tenant.                    21, 1996

       10.179     Lease Agreement dated December 26, 1995 by and between Cards         Filed as Exhibit 2.1 to Registrant's
                  Limited Liability Company, as Landlord, and The Upper Deck           Form 8-K dated March 21, 1996
                  Company, as Tenant.

       10.180     $15,000,000 Promissory Note dated January 3, 1996 from               Filed as Exhibit 2.2 to Registrant's
                  Cards Limited Liability Company to Column Financial, Inc.            Form 8-K dated March 21, 1996

       21.1       Subsidiaries of Registrant as of March 15, 2002                      Filed herewith

       23.1       Consent of PricewaterhouseCoopers LLP dated March 27,                Filed herewith
                  2002

       28.1       General Warranty Deed from Amerisure, Inc. to (SC) QRS               Filed as Exhibit 28(C)(1) to
                  11-11                                                                Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11
</TABLE>


                                      -29-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       28.2       Amended and Restated Sublease Agreement between MMI, as              Filed as Exhibit 28(C)(2) to
                  sublandlord, and Unisun Insurance Company ("UIC").                   Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       28.3       General warranty Deed from FPC to QRS 11-10.                         Filed as Exhibit 28(D)(1) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       28.4       Deed from Unit to QRS 11-12.                                         Filed as Exhibit 28(E)(1) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       28.5       Lease between Unit, as landlord, and SLS, as tenant, as              Filed as Exhibit 28(E)(2) to
                  amended.                                                             Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       28.6       Special warranty Deed from CTA, as Grantor to QRS 11-14,             Filed as Exhibit 28(F)(1) to
                  as Grantee.                                                          Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       28.7       Lease Agreement between CTA and AT&T.                                Filed as Exhibit 28(F)(2) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 5 to Form S-11

       28.8       Leasehold Deed of Trust from Neodata for benefit of                  Filed as Exhibit 28.1 to
                  General Electric Capital Corporation.                                Registrant's Form 8-K dated October
                                                                                       29, 1992

       28.9       General Warranty Deed from Amerisure QRS 11-11.                      Filed as Exhibit 28.1 to
                                                                                       Registrant's Form 8-K dated January
                                                                                       5, 1993

       28.10      Amended and Restated Sublease Agreement between MMI, as              Filed as Exhibit 28.2 to
                  sublandlord, and Unisun Insurance Company.                           Registrant's Form 8-K dated January
                                                                                       5, 1993

       28.11      General Warranty Deed from Fairview Plaza Corporation to             Filed as Exhibit 28.3 to
                  QRS 11-10.                                                           Registrant's Form 8-K dated January
                                                                                       5, 1993

       28.12      Deed from Unit to QRS 11-12.                                         Filed as Exhibit 28.4 to
                                                                                       Registrant's Form 8-K dated January
                                                                                       5, 1993

       28.13      Lease between Unit, as landlord, and SLS, as tenant, as              Filed as Exhibit 28.5 to
                  amended.                                                             Registrant's Form 8-K dated January
                                                                                       5, 1993

       28.14      Prospectus dated January 21, 1993 of Registrant.                     Filed pursuant to Rule 424(b)(s) on
                                                                                       January 26, 1993 (Registration No.
                                                                                       33-39409)

       28.15      Supplement No. 1 dated March 17, 1993 to Prospectus                  Filed pursuant to Rule 424(b)(s) on
                  dated January 21, 1993.                                              March 17, 1993 (Registration No.
                                                                                       33-39409)

       28.16      Quit Claim Deed from Oakbrook to QRS 11-15.                          Filed as Exhibit 28.1 to
                                                                                       Registrant's Form 8-K dated April 5,
                                                                                       1993

       28.17      Lease Agreement between Oakbrook and B. Dalton                       Filed as Exhibit 28.2 to
                  Bookseller, Inc. ("B. Dalton").                                      Registrant's Form 8-K dated April 5,
                                                                                       1993

       28.18      First Amendment between Oakbrook and B. Dalton                       Filed as Exhibit 28.3 to
                  Bookseller, Inc.                                                     Registrant's Form 8-K dated April 5,
                                                                                       1993
</TABLE>


                                      -30-
<PAGE>
<TABLE>
<CAPTION>
      Exhibit
        No.                              Description                                          Method of Filing
        ---                              -----------                                          ----------------
<S>               <C>                                                                  <C>
       28.19      Lease Guaranty to Oakbrook from Barnes & Noble, Inc.                 Filed as Exhibit 28.4 to
                                                                                       Registrant's Form 8-K dated April 5,
                                                                                       1993

       28.20      Guaranty and Suretyship Agreement from Data Documents                Filed as Exhibit 28.5 to
                  Holdings, Inc. to QRS 10-15 and QRS 11-13.                           Registrant's Form 8-K dated April 5,
                                                                                       1993

       28.21      Guaranty from Corporate Property Associates 10                       Filed as Exhibit 28.6 to
                  Incorporated and Registrant to US West.                              Registrant's Form 8-K dated April 5,
                                                                                       1993

       28.22      Guaranty from Registrant to Orix.                                    Filed as Exhibit 28.1 to
                                                                                       Registrant's Form 8-K dated May 6,
                                                                                       1993

       28.23      Special Warranty Deed from Merit to QRS 11-20.                       Filed as Exhibit 28(G)(1) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       28.24      Table VI: Acquisitions of Properties by Prior Programs.              Filed as Exhibit 28(H) to
                                                                                       Registrant's Post Effective
                                                                                       Amendment No. 6 to Form S-11

       28.25      Limited Warranty Deed from the David F. Bolger Revocable             Filed as Exhibit 28.1 to
                  Trust to the Braintree Subsidiary.                                   Registrant's Form 8-K dated February
                                                                                       24, 1994

       28.26      Special Warranty Deed from Superior to the Brownwood                 Filed as Exhibit 28.2 to
                  Subsidiary.                                                          Registrant's Form 8-K dated February
                                                                                       24, 1994

       28.27      Corporation Grant Deed from Gensia to the Gensia                     Filed as Exhibit 28.3 to
                  Partnership.                                                         Registrant's Form 8-K dated February
                                                                                       24, 1994

       28.28      Supplement No. 2 dated June 15, 1993 to Prospectus dated             Filed as Exhibit 28.28 to
                  January 21, 1993.                                                    Registrant's Form 10-K for the year
                                                                                       ended December 31, 1993

       28.29      Supplement No. 3 dated August 11, 1993 to Prospectus                 Filed as Exhibit 28.29 to
                  dated January 21, 1993.                                              Registrant's Form 10-K for the year
                                                                                       ended December 31, 1993
</TABLE>

      (b)   Reports on Form 8-K

            During the quarter ended December 31, 2001 the Company was not
            required to file any reports on Form 8-K.


                                      -31-
<PAGE>
                                   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.

                        CAREY INSTITUTIONAL PROPERTIES INCORPORATED
                        a Maryland corporation


    3/20/2002           BY:      /s/ John J. Park
-----------------               ------------------------------------
      Date                      John J. Park
                                Managing Director and Chief Financial Officer
                                (Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


                        CAREY INSTITUTIONAL PROPERTIES INCORPORATED


    3/20/2002           BY:      /s/ William Polk Carey
-----------------               ------------------------------------
      Date                      William Polk Carey
                                Chairman of the Board and Director
                                (Principal Executive Officer)


    3/20/2002           BY:      /s/ Edward V. LaPuma
-----------------               ------------------------------------
      Date                      Edward V. LaPuma
                                President


    3/20/2002           BY:      /s/ Ralph G. Coburn
-----------------               ------------------------------------
      Date                      Ralph G. Coburn
                                Director


    3/20/2002           BY:      /s/ George E. Stoddard
-----------------               ------------------------------------
      Date                      George E. Stoddard
                                Director


    3/20/2002           BY:      /s/ Ralph Verni
-----------------               ------------------------------------
      Date                      Ralph Verni
                                Director


    3/20/2002           BY:      /s/ Thomas E. Zacharias
-----------------               ------------------------------------
      Date                      Thomas E. Zacharias
                                Director


    3/20/2002           BY:      /s/ John J. Park
-----------------               ------------------------------------
      Date                      John J. Park
                                Managing Director and
                                Chief Financial Officer
                                (Principal Financial Officer)


    3/20/2002           BY:      /s/ Claude Fernandez
-----------------               ------------------------------------
      Date                      Claude Fernandez
                                Managing Director and
                                Chief Administrative Officer
                                (Principal Accounting Officer)


                                      -32-
<PAGE>
                        REPORT of INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
CAREY INSTITUTIONAL PROPERTIES INCORPORATED:

Our audits of the consolidated financial statements referred to in our report
dated March 15, 2002 appearing in the 2001 Annual Report to Shareholders of
CAREY INSTITUTIONAL PROPERTIES INCORPORATED (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.


/s/ PricewaterhouseCoopers LLP

New York, New York
March 15, 2002


                                      -33-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED
                                and SUBSIDIARIES

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                             as of December 31, 2001

<TABLE>
<CAPTION>
                                                            Initial Cost to Company
                                                            -----------------------
                                                                                                Costs
                                                                                             Capitalized
                                                                                            Subsequent to
        Description                Encumbrances           Land             Buildings       Acquisition (a)
        -----------                ------------           ----             ---------       ---------------
<S>                                <C>                 <C>                <C>              <C>
Operating Method:
Retail store leased to
  Safeway Stores
  Incorporated                                            336,426            941,960             30,370
Vacant
  office/manufacturing
  facility in Austin,
  Texas.                                                  751,453          2,536,047             96,524
Manufacturing/distributing
  facility leased to
  Electronic Data Systems
  Corporation                        9,582,977          1,515,879            503,734         15,125,189
Warehouse/manufacturing
  facility leased to
  Bell Sports, Inc.                  3,737,000            283,726          5,066,274          3,322,270
Warehouse leased to GATX
  Logistics, Inc.                    3,410,317          1,350,444          4,574,557             60,676
Warehouse leased to Lucent
  Technologies, Inc.                 7,300,000          1,290,631         15,937,368            232,870
Land leased to
  Barnes & Noble, Inc.               2,049,885          4,759,017                                47,962
Land leased to
  Best Buy Co., Inc.                10,674,193         18,579,019                                   646
Land leased to UTI
  Holdings, Inc.                                        2,516,671                             3,277,765
Office/warehouse leased to
  Merit Medical Systems,
  Inc.                               5,427,729            380,000                            10,505,349
Land leased to Q Clubs,
  Inc.                                                  2,073,578                                 1,026
Manufacturing/warehouse
  facilities leased to
  Humco Holding Group                4,039,441          1,240,000          6,604,324
Office/warehouse facility
  leased to PSC Scanning,
  Inc.                               5,293,791          1,125,000          7,615,414             10,621
Industrial/manufacturing
  facility leased to
  Bolder Technologies
  Corporation                        3,419,991          1,076,000          5,759,878             31,700
Warehouse facility leased
  to Petsmart, Inc.                  1,964,308            106,603          4,444,397             42,817
Manufacturing facility
  leased to Plexus Corp.             4,019,100            125,340          9,124,660              5,745
Childcare centers leased
  to Childtime Childcare,
  Inc.                               2,232,999          1,198,750                             3,422,172
Office buildings leased to
  Omnicom Group, Inc.               24,384,143          6,316,880         27,397,945          9,339,472
Retail stores leased to
  Garden Ridge Corporation           6,946,009          2,197,500          4,112,500          5,054,413
</TABLE>

<TABLE>
<CAPTION>
                                                             Gross Amount at which Carried
                                                                 at Close of Period (c)
                                                                 ----------------------
                                  Decrease in Net
        Description               Investments (b)       Land            Buildings            Total
        -----------               ---------------       ----            ---------            -----
<S>                               <C>                <C>                <C>                <C>
Operating Method:
Retail store leased to
  Safeway Stores
  Incorporated                                          340,273            968,483          1,308,756
Vacant
  office/manufacturing
  facility in Austin,
  Texas.                                                751,645          2,632,379          3,384,024
Manufacturing/distributing
  facility leased to
  Electronic Data Systems
  Corporation                                         1,519,885         15,624,917         17,144,802
Warehouse/manufacturing
  facility leased to
  Bell Sports, Inc.                                     283,793          8,388,477          8,672,270
Warehouse leased to GATX
  Logistics, Inc.                                     1,364,272          4,621,405          5,985,677
Warehouse leased to Lucent
  Technologies, Inc.                                  1,295,387         16,165,482         17,460,869
Land leased to
  Barnes & Noble, Inc.                                4,806,979                             4,806,979
Land leased to
  Best Buy Co., Inc.                                 18,579,665                            18,579,665
Land leased to UTI
  Holdings, Inc.                                      3,147,367          2,647,069          5,794,436
Office/warehouse leased to
  Merit Medical Systems,
  Inc.                                                  380,000         10,505,349         10,885,349
Land leased to Q Clubs,
  Inc.                                                2,074,604                             2,074,604
Manufacturing/warehouse
  facilities leased to
  Humco Holding Group                                 1,240,000          6,604,324          7,844,324
Office/warehouse facility
  leased to PSC Scanning,
  Inc.                               (109,998)        1,125,000          7,516,037          8,641,037
Industrial/manufacturing
  facility leased to
  Bolder Technologies
  Corporation                                         1,076,000          5,791,578          6,867,578
Warehouse facility leased
  to Petsmart, Inc.                                     107,606          4,486,211          4,593,817
Manufacturing facility
  leased to Plexus Corp.                                125,418          9,130,327          9,255,745
Childcare centers leased
  to Childtime Childcare,
  Inc.                                                1,198,750          3,422,172          4,620,922
Office buildings leased to
  Omnicom Group, Inc.                                 6,319,147         36,735,150         43,054,297
Retail stores leased to
  Garden Ridge Corporation                            2,197,998          9,166,415         11,364,413
</TABLE>

<TABLE>
<CAPTION>
                                                                                 Life on which
                                                                                 Depreciation
                                                                                   in Latest
                                                                                 Statement of
                                    Accumulated                                     Income
        Description               Depreciation (d)         Date Acquired          is Computed
        -----------               ----------------         -------------          -----------
<S>                               <C>                    <C>                     <C>
Operating Method:
Retail store leased to
  Safeway Stores
  Incorporated                          269,144          December 19, 1991           40 yrs.
Vacant
  office/manufacturing
  facility in Austin,
  Texas.                              1,314,736          May 28, 1992                40 yrs.
Manufacturing/distributing
  facility leased to
  Electronic Data Systems
  Corporation                         2,734,361          October 1, 1992             40 yrs.
Warehouse/manufacturing
  facility leased to
  Bell Sports, Inc.                   1,802,917          November 6, 1992            40 yrs.
Warehouse leased to GATX
  Logistics, Inc.                     1,044,607          December 23, 1992           40 yrs.
Warehouse leased to Lucent
  Technologies, Inc.                  3,643,580          December 30, 1992           40 yrs.
Land leased to                                           February 23,
  Barnes & Noble, Inc.                                   1993 and October
                                                         1, 1993                     N/A
Land leased to
  Best Buy Co., Inc.                                     April 15, 1993              N/A
Land leased to UTI                                       May 3, 1993 and
  Holdings, Inc.                         46,986          September 29,               N/A
                                                         2000
Office/warehouse leased to
  Merit Medical Systems,
  Inc.                                1,816,550          June 3, 1993                40 yrs.
Land leased to Q Clubs,
  Inc.                                                   July 16, 1993               N/A
Manufacturing/warehouse
  facilities leased to
  Humco Holding Group                   474,686          February 5, 1999            40 yrs.
Office/warehouse facility
  leased to PSC Scanning,
  Inc.                                  499,457          May 12, 1999                40 yrs.
Industrial/manufacturing
  facility leased to
  Bolder Technologies
  Corporation                           389,240          April 16, 1999              40 yrs.
Warehouse facility leased
  to Petsmart, Inc.                     920,608          October 26, 1993            40 yrs.
Manufacturing facility
  leased to Plexus Corp.              1,683,404          August 11, 1994             40 yrs.
Childcare centers leased                                 June 15, 1994
  to Childtime Childcare,                                through November
  Inc.                                  538,279          18, 1994                    40 yrs.
Office buildings leased to
  Omnicom Group, Inc.                 5,111,215          October 14, 1994            11-40 yrs.
Retail stores leased to
  Garden Ridge Corporation            1,306,954          May 29,1995                 40 yrs.
</TABLE>


                                      -34-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED
                                and SUBSIDIARIES

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                             as of December 31, 2001

<TABLE>
<CAPTION>
                                                            Initial Cost to Company
                                                            -----------------------
                                                                                                Costs
                                                                                             Capitalized
                                                                                            Subsequent to
        Description                Encumbrances           Land             Buildings       Acquisition (a)
        -----------                ------------           ----             ---------       ---------------
<S>                               <C>                 <C>               <C>                <C>
Operating Method:
Health club leased to
  Q Clubs, Inc.                                           912,855          4,323,145
Warehouse/office leased to
  Hibbett Sporting Goods,
  Inc.                               2,513,864            660,000          4,040,000          2,323,784
Distribution/warehouse
  leased to Detroit Diesel
  Corporation.                                          2,782,860          6,542,140
Office building leased to
  Xerox Corporation                                       141,881            420,628             10,680
Supermarkets leased to
  Affiliated Southwest,
  Inc.                                                    343,120          1,801,380                497
Distribution/warehouse
  leased to ISA
  International plc                  3,773,900            149,350          6,034,442
                                  ------------        -----------       ------------        -----------
                                  $100,769,647        $52,212,983       $117,780,793        $52,942,548
                                  ============        ===========       ============        ===========

</TABLE>

<TABLE>
<CAPTION>
                                                               Gross Amount at which Carried
                                                                   at Close of Period (c)
                                                                   ----------------------
                                    Decrease in Net
        Description                 Investments (b)       Land            Buildings            Total
        -----------                 ---------------       ----            ---------            -----
<S>                                 <C>               <C>               <C>                <C>
Operating Method:
Health club leased to
  Q Clubs, Inc.                                           912,855          4,323,145          5,236,000
Warehouse/office leased to
  Hibbett Sporting Goods,
  Inc.                                                    660,000          6,363,784          7,023,784
Distribution/warehouse
  leased to Detroit Diesel
  Corporation.                                          2,782,860          6,542,140          9,325,000
Office building leased to
  Xerox Corporation                                       141,881            431,308            573,189
Supermarkets leased to
  Affiliated Southwest,
  Inc.                                 (492,526)          416,802          1,235,669          1,652,471
Distribution/warehouse
  leased to ISA
  International plc                    (130,979)          145,150          5,907,663          6,052,813
                                      ---------       -----------       ------------       ------------
                                      $(733,503)      $52,993,337       $169,209,484       $222,202,821
                                      =========       ===========       ============       ============

</TABLE>

<TABLE>
<CAPTION>
                                                                                   Life on which
                                                                                   Depreciation
                                                                                     in Latest
                                                                                   Statement of
                                      Accumulated                                     Income
        Description                 Depreciation (d)         Date Acquired          is Computed
        -----------                 ----------------         -------------          -----------
<S>                                 <C>                    <C>                     <C>
Operating Method:
Health club leased to
  Q Clubs, Inc.                           634,962          February 6, 1996            40 yrs.
Warehouse/office leased to
  Hibbett Sporting Goods,
  Inc.                                    697,461          February 12, 1996           40 yrs.
Distribution/warehouse
  leased to Detroit Diesel
  Corporation.                            824,582          December 17, 1996           40 yrs.
Office building leased to
  Xerox Corporation                        50,443          February 21, 1992           40 yrs.
Supermarkets leased to
  Affiliated Southwest,
  Inc.                                    141,930          February 21, 1992           40 yrs.
Distribution/warehouse
  leased to ISA
  International plc                       294,224          March 7, 2000               40 yrs.
                                      -----------
                                      $26,240,326
                                      ===========
</TABLE>

See accompanying notes to Schedule.


                                      -35-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED
                                and SUBSIDIARIES

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                             as of December 31, 2001

<TABLE>
<CAPTION>
                                                          Initial Cost to Company
                                                          -----------------------
                                                                                         Costs Capitalized
                                                                                           Subsequent to
       Description                Encumbrances           Land            Buildings        Acquisition (a)
       -----------                ------------           ----            ---------        ---------------
<S>                               <C>                 <C>               <C>              <C>
Direct Financing Method:
Retail store leased to
  Oshman Sporting Goods,
  Inc.                              1,336,578         $  700,356        $ 2,494,843         $   37,695
Office buildings leased to
  Michigan Mutual
  Insurance Company                 9,500,000          1,965,093         11,884,907              5,919

Supermarkets leased to
  Big V Holding Corp.               3,749,931          3,724,889         16,399,261          2,019,945

Retail stores leased to
  Barnes & Noble, Inc.              2,877,751                             5,525,983             49,806
Retail stores leased to
  Best Buy Co., Inc.               15,166,256                            27,653,981                962
Technical training
  institute leased to UTI
  Holdings, Inc.                                                          6,083,329              1,684
Health club leased to
  Q Clubs, Inc.                                                           3,511,422              1,737
Warehouse/distribution
  facility leased to
  Nicholson Warehouse, Inc.         3,208,821            598,544          6,316,456              1,370
Manufacturing facility
  leased to Superior
  Telecommunications, Inc.                               295,032          4,704,968              1,885
Food processing/warehouse
  facility leased to
  Custom Food Products,
  Inc.                                183,652             27,000                             5,536,384
Office buildings and
  supermarkets leased to
  Kroger Company                                         251,760          1,321,740
Warehouse/distribution
  facility leased to
  Gloystarne & Co., Ltd.            3,773,900          1,132,627          6,069,257             14,104
                                    ---------         ----------        -----------         ----------
                                   39,796,889         $8,695,301        $91,966,147         $7,671,491
                                   ==========         ==========        ===========         ==========
</TABLE>

<TABLE>
<CAPTION>
                                                      Gross Amount at which Carried
                                                          at Close of Period (c)
                                                          ----------------------
                                       Increase
                                  (Decrease) in Net
       Description                  Investments (b)               Total               Date Acquired
       -----------                  ---------------               -----               -------------
<S>                               <C>                          <C>                   <C>
Direct Financing Method:
Retail store leased to
  Oshman Sporting Goods,
  Inc.                                $   379,008              $  3,611,902          December 10, 1992
Office buildings leased to
  Michigan Mutual
  Insurance Company                       123,521                13,979,440          December 21, 1993

Supermarkets leased to                                                               December 23, 1993 and
  Big V Holding Corp.                  (4,488,302)               17,655,793          October 8, 1993

Retail stores leased to                                                              February 23, 1993 and
  Barnes & Noble, Inc.                  1,319,915                 6,895,704          October 1, 1993
Retail stores leased to
  Best Buy Co., Inc.                   (1,522,192)               26,132,751          April 15, 1993
Technical training
  institute leased to UTI
  Holdings, Inc.                                                  6,085,013          May 3, 1993
Health club leased to
  Q Clubs, Inc.                                                   3,513,159          July 16, 1999
Warehouse/distribution
  facility leased to
  Nicholson Warehouse, Inc.            (2,224,550)                4,691,820          December 13, 1993
Manufacturing facility
  leased to Superior
  Telecommunica-tions, Inc.              (161,794)                4,840,091          December 16, 1993
Food processing/warehouse
  facility leased to
  Custom Food Products,
  Inc.                                                            5,563,384          September 30, 1994
Office buildings and
  supermarkets leased to
  Kroger Company                                                  1,573,500          February 21, 1992
Warehouse/distribution
  facility leased to
  Gloystarne & Co., Ltd.                 (260,510)                6,955,478          December 8, 1999
                                      -----------              ------------
                                      $(6,834,904)             $101,498,035
                                      ===========              ============
</TABLE>


                                      -36-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED
                                and SUBSIDIARIES

                       NOTES to SCHEDULE III - REAL ESTATE
                          and ACCUMULATED DEPRECIATION

(a)   Consists of the costs of improvements subsequent to purchase and other
      acquisition costs including legal fees, appraisal fees, title costs and
      other related professional fees.

(b)   At December 31, 2001, the aggregate cost of real estate owned by
      Registrant and its subsidiaries for Federal income tax purposes is
      $289,968,229.

(c)   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, the sales of
      properties and of tenancy-in-common interests to an affiliate, foreign
      currency translation adjustments and writedowns to fair value.

(d)

<TABLE>
<CAPTION>
                                           Reconciliation of Real Estate Accounted
                                                for Under the Operating Method
                                                           December 31,
                                                           ------------
                                                       2000            2001
                                                   ------------    ------------
<S>                                                <C>             <C>
Balance at beginning of year                       $241,822,476    $247,246,819
Additions                                             6,595,245       3,409,223
Impairment loss                                        (143,919)     (2,300,000)
Dispositions                                                 --      (7,762,907)
Foreign currency translation adjustment                (346,558)       (175,072)
Reclassification to assets held for sale               (680,425)     (7,680,327)
Reclassification to equity investment                        --     (10,534,915)
                                                   ------------    ------------
Balance at close of year                           $247,246,819    $222,202,821
                                                   ============    ============
</TABLE>

<TABLE>
<CAPTION>
                                            Reconciliation of Accumulated Depreciation
                                                           December 31,
                                                           ------------
                                                       2000            2001
                                                   ------------    ------------
<S>                                                <C>             <C>
Balance at beginning of year                       $ 19,521,518    $ 24,771,906
Depreciation expense                                  5,306,005       5,230,054
Impairment loss                                         (55,425)             --
Dispositions                                                 --      (1,674,173)
Foreign currency translation adjustment                    (192)         (3,208)
Reclassification to asset held for sale                      --        (769,773)
Reclassification to equity investment                        --      (1,314,480)
                                                   ------------    ------------
Balance at close of year                           $ 24,771,906    $ 26,240,326
                                                   ============    ============
</TABLE>


                                      -37-
<PAGE>
                                                         APPENDIX A TO FORM 10-K


                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

                                                              2001 ANNUAL REPORT
<PAGE>
SELECTED FINANCIAL DATA

(In thousands except per share amounts)

<TABLE>
<CAPTION>
                                  1997       1998       1999       2000       2001
                                  ----       ----       ----       ----       ----
<S>                             <C>        <C>        <C>        <C>        <C>
OPERATING DATA:

Revenues                        $ 34,247   $ 35,044   $ 39,599   $ 40,633   $ 41,122

Income before extraordinary
   item                           10,659     12,093     14,836     15,377     15,366

Net income                        11,086     13,732     14,836     15,377     15,366

Basic earnings per share
   before extraordinary item         .63        .64        .68        .70        .70

Diluted earnings per share
   before extraordinary items        .63        .63        .67        .69        .68

Basic earnings per share             .66        .72        .68        .70        .70

Diluted earnings per share           .66        .71        .67        .69        .68

Dividends paid                    13,682     14,958     17,715     18,187     18,550

Dividends paid per share             .82        .83        .83        .83        .84

Payments of mortgage
   principal(1)                    3,658      4,159      4,355      4,322      4,642

BALANCE SHEET DATA:

Total consolidated assets        320,485    372,076    381,711    380,209    369,307

Long-term obligations(2)         141,052    142,389    147,715    149,023    131,659
</TABLE>

(1)   Represents scheduled mortgage principal amortization paid.
(2)   Represents limited recourse mortgage and note payable obligations due
      after more than one year.


                                      -1-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

Overview

The following discussion and analysis of financial condition and results of
operations of Carey Institutional Properties Incorporated ("CIP(R)") should be
read in conjunction with the consolidated financial statements and notes thereto
for the year ended December 31, 2001. The following discussion includes forward
looking statements. Forward looking statements, which are based on certain
assumptions, describe future plans, strategies and expectations of CIP(R). Such
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievement of CIP(R) to be
materially different from the results of operations or plan expressed or implied
by such forward looking statements. Accordingly, such information should not be
regarded as representations by CIP(R) that the results or conditions described
in such statements or objectives and plans of CIP(R) will be achieved.

CIP(R) was formed in 1991 and used the proceeds from its public offering of
shares of common stock along with limited recourse mortgage financing to
purchase properties and enter into long-term net leases with corporate tenants.
CIP(R) has also raised proceeds of $74,440,000, beginning in 1995, from a
private placement of common stock to institutional investors. A majority of
CIP(R)'s net leases have been structured to place certain economic burdens of
ownership on these corporate tenants by requiring them to pay the costs of
maintenance and repair, insurance and real estate taxes. The leases have
generally been structured to include periodic rent increases that are stated or
based on increases in the consumer price index or, for certain retail
properties, provide for additional rents based on sales in excess of a specified
base amount.

As a real estate investment trust ("REIT"), CIP(R) is not subject to federal
income taxes on amounts distributed to shareholders provided it meets certain
conditions including distributing at least 90% of its REIT taxable income to its
shareholders. CIP(R)'s primary objectives are to provide rising cash flow and to
protect its investors from the effects of inflation through rent escalation
provisions, property appreciation, tenant credit improvement and regular paydown
of limited recourse mortgage debt. In addition, CIP(R) has successfully
negotiated grants of common stock warrants from selected tenants and expects to
realize the benefits of appreciation from those grants. While CIP(R) cannot
guarantee that its objectives will be ultimately realized, annual independent
valuations of CIP(R)'s assets have reflected significant appreciation in
property values.

CIP(R) is advised by Carey Asset Management Corp. All transactions with Carey
Asset Management are subject to an Advisory Agreement. CIP(R)'s Advisory
Agreement is renewable annually by Independent Directors who are elected by
CIP(R)'s shareholders. In connection with each renewal, Carey Asset Management
is required to provide the Independent Directors with a comparison of the fee
structure with several similar companies. The Advisory Agreement also provides
that an independent portfolio valuation be performed annually and Average
Invested Assets, the basis for determining asset management and performance
fees, is based on the results of this independent valuation.

The boards of directors of CIP(R) and Corporate Property Associates 10
Incorporated ("CPA(R):10") have each unanimously approved a definitive agreement
under which CIP(R) would acquire CPA(R):10's business in a stock-for-stock
merger. As described in the joint proxy statement dated January 15, 2002, each
CPA(R):10 shareholder will either receive 0.8445 of a share of newly-issued
CIP(R) common stock for each common share of CPA(R):10 that he or she owns or a
promissory note with a face value of $11.23 for each share of CPA(R):10 which
would bear interest at an annual rate of 4% and which would be payable on
December 31, 2004. For the merger to be completed, an affirmative vote of
holders of two-thirds of the shares of common stock issued and outstanding is
required and holders of more than 50% of CPA(R):10's stock must elect to receive
CIP(R) shares in the merger. If 50% of CPA(R):10 shareholders elect to receive
promissory notes, CIP(R) would have an obligation of $42,796,000 and would incur
annual interest of $1,712,000 through the maturity date. If a large number of
CPA(R):10 shareholders elect to receive promissory notes, CIP(R) may need to
borrow funds or otherwise raise funds to redeem the notes. If all CPA(R):10
shareholders elect to receive CIP(R) shares, the newly-issued shares of CIP(R)
common stock would represent 22.5% of the CIP(R) common stock after the merger.
The exchange value was based on an appraisal of the assets of both companies as
of June 30, 2001 and was performed by an independent appraiser at a portfolio
level on a "debt in place" method. Each company engaged a separate investment
banking firm to provide a fairness opinion.


                                      -2-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

Management believes that the combined company will create various benefits
including, but not limited to, operating efficiencies, increased access to
capital in equity and debt markets and greater flexibility to provide additional
liquidity to shareholders. A shareholders meeting is scheduled for April 15,
2002. Certain accounting policies are critical to the understanding of CIP(R)'s
financial condition and results of operations. Management believes that an
understanding of financial condition and results of operations requires an
understanding of accounting policies relating to the use of estimates.

The preparation of financial statements requires that Management make estimates
and assumptions that affect the reported amount of assets, liabilities, revenues
and expenses. For instance, CIP(R) must assess its ability to collect rent and
other tenant-based receivables and determine an appropriate charge for
uncollected amounts. Because CIP(R)'s real estate operations have a limited
number of lessees, Management believes that it is necessary to evaluate specific
situations rather than solely use statistical methods.

CIP(R) also uses estimates and judgments when evaluating whether long-lived
assets are impaired. When events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable, Management performs
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 Management to
make its best estimate of market rents and residual values. In its evaluations,
CIP(R) obtains market information from outside sources; however, such
information requires Management to determine whether the information received is
appropriate to the circumstances. Because CIP(R)'s properties are leased to
single tenants, CIP(R) is more likely to incur significant writedowns when
circumstances affecting a tenant deteriorate because of the possibility that a
property will be vacated in its entirety. Therefore, this risk is different than
the risks related to leasing and managing multi-tenant properties. Events or
changes in circumstances can result in further writedowns and impact the gain or
loss ultimately realized upon sale of the asset.

CIP(R) recognizes rental income from sales overrides when reported by lessees,
that is, after the level of sales requiring a rental payment to CIP(R) is
reached.

CIP(R) and affiliated REITs are investors in certain real estate ventures.
Certain of the investments are held through incorporated or unincorporated
jointly held entities and certain investments are held directly as tenants in
common. Substantially all of these investments represent jointly purchased
properties which were net leased to a single tenant and were structured to
provide diversification and reduce concentration of a risk from a single lessee
for CIP(R) and the affiliated REIT. The placement of an investment in a jointly
held entity or tenancy in common requires the approval of the Independent
Directors. All of the jointly held investments are structured so that CIP(R) and
the affiliated REIT contribute equity, receive distributions and are allocated
profit or loss in amounts that are proportional to their ownership interests.
The presentation of these jointly held investments and their related results in
the accompanying condensed consolidated financial statements is determined based
on accounting principles generally accepted in the United States and is based on
factors such as controlling interest, significant influence and whether each
party has the ability to make independent decisions. All of the jointly held
investments are subject to contractual agreements.

Public business enterprises are required to report financial and descriptive
information about their reportable operating segments. Operating segments are
components of an enterprise about which financial information is available that
is evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Management evaluates the
performance of its portfolio of properties as a whole, rather than by
identifying discrete operating segments. This evaluation includes assessing
CIP(R)'s ability to meet distribution objectives, increase the dividend and
increase value by evaluating potential investments in single tenant net lease
real estate and by seeking opportunities such as refinancing mortgage debt at
lower rates of interest, restructuring leases or paying off lenders at a
discount to the face value of the outstanding mortgage balance. As of December
31, 2000 and 2001, CIP(R) owned real estate in the United States and Europe (in
the United Kingdom and France).


                                      -3-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

Results of Operations

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Net income for the year ended December 31, 2001 decreased $11,000 as compared
with the year ended December 31, 2000. Excluding the effects of gains and
noncash charges for impairment losses, income would have increased $993,000. The
increase in income was primarily due to increases in lease revenues (rental
income and interest income from direct financing leases) and income from equity
investments and a decrease in interest expense. These increases were partially
offset by an increase in property expense and a decrease in interest income.

Lease revenues increased by $646,000 to $40,587,000 as a result of scheduled
rent increases, generally based on increases in the Consumer Price Index
("CPI"), on several leases including leases with Electronic Data Systems
Corporation and Plexus Corp. in 2000 and Q Clubs, Inc. and Garden Ridge
Corporation in 2001. Lease revenues in 2001 also benefited from the completion
in April 2001 of a build-to-suit property leased to UTI Holdings, Inc. and a
full year of rent from a property acquired in March 2000 leased to ISA
International plc. As a result of the rent increases, the new lease with ISA
International and the completion of the UTI build-to-suit, annual rents
increased $1,107,000. Construction of the Holiday Inn Toulouse, France property
was completed in February 2002 and will increase annual lease revenues
approximately $603,000. More than 30 leases have rent increases scheduled in
2002 and 2003. The majority of these rent increases are based on formulas
indexed to increases in the Consumer Price Index ("CPI"). The CPI has increased
moderately over the past several years and as a result, rent increases on leases
which have CPI-based increases will be modest.

As a result of the sale of a portfolio of six Wal-Mart Stores, Inc. properties
in September 2001, annual lease revenues will decrease by $1,039,000 (based on
rents received in 2000 including percentage of sales rents of $280,000). A
mortgage extension agreement on the Wal-Mart property loan required monthly
payments of $65,000 and separate annual payments representing 100% of percentage
of sales rents received, resulting in no cash flow (lease revenues less mortgage
debt service) from the Wal-Mart properties.

CIP(R)'s lease with Waban, Inc. for a BJ's Warehouse retail property expired in
January 2002 and the property is currently being marketed for sale. Waban's has
remained in the property on a month-to-month basis and is expected to vacate
during the third quarter of 2002. Annual cash flow from the Waban property is
$505,000.

The initial terms of CIP(R)'s leases with GATX Logistics, Inc. and Hobby-Lobby
Stores, Inc. expire in December 2002. The GATX lease, which provides annual
rents of $933,000, will not be renewed and CIP(R) is actively remarketing the
property. The Hobby-Lobby lease, which is currently guaranteed by Safeway
Stores, Inc., provides annual rent of $142,000 and CIP(R) has entered into
discussions regarding a renewal of the lease.

The initial term of CIP(R)'s lease with Lucent Technologies, Inc. which was
scheduled to expire on March 31, 2002 has been extended for three years, and
annual rents will increase from $1,853,000 to $2,053,000. As a result of the
liquidation of Bolder Technologies, Inc. in bankruptcy and the related
termination of the Bolder lease, annual lease revenues will decrease by
$561,000. CIP(R) is actively remarketing the former Bolder property in Golden,
Colorado.

Income from equity investments increased by $468,000 to $5,412,000. This
increase was due, in part, to the reclassification of the Del Monte Corporation
properties to an equity investment in October 2001. In connection with
refinancing the mortgage loan on the Del Monte properties, the Del Monte
properties were contributed to a jointly held affiliate from a tenancy in
common. As a result of the change in the form of ownership and to joint control
with an affiliate, accounting for the Del Monte properties changed to the equity
method from recording assets, liabilities, revenues and expenses on a
proportionate basis. The change in presentation, effective as of October 2001,
had no effect on net income.

Income from equity investments also increased as a result of an increase in
earnings for CIP(R)'s 23.7% ownership interest in Marcourt Investments, Inc., a
real estate investment trust which net leases 13 Courtyard by Marriott hotels to
Marriott International, Inc. The increase in Marcourt's net income was primarily
due to an increase in percentage rent from the Marriott hotels and a reduction
in interest expense due to amortizing mortgage debt. The lease with Marriott
includes a provision for additional rents based on a percentage of sales,
including room revenues, in excess of a specified amount at the hotel
properties. Since the inception of the lease in 1992, the percentage of sales
rents have increased each year. CIP(R) received a distribution in 2001 of
$326,000 from Marcourt as its share of percentage


                                      -4-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

of sales rents. Due to current economic conditions, there is no assurance that
such rents will continue to increase. Income from equity investments also
benefited from a rent increase in April 2001 on the lease with The Upper Deck
Company in which CIP(R) owns a 50% interest, with the remaining 50% owned by an
affiliate.

Interest expense decreased $774,000 to $13,810,000 as a result of the
amortization of mortgage debt, lower interest rates on several variable rate
loans, the payoff of mortgage loans on the Wal-Mart properties and the property
leased to Superior Telecommunications, Inc. and, to a lesser extent, the
capitalization of interest charges on build-to-suit properties under
construction prior to being placed in service. While the effect of interest from
the Del Monte loan subsequent to its reclassification as an equity investment is
included in equity income rather than interest expense, the reclassification had
a minimal effect on the decrease in interest expense for the comparable years.

The increase in property expense of $677,000 to $7,157,000 was primarily due to
an increase in CIP(R)'s provision for uncollected rents which strengthened the
reserve for rent arrearages and, to a lesser extent, the carrying costs on the
Bolder property. The increase in the rent provision was primarily due to
deterioration in the financial condition of Nicholson Warehouse, L.P. CIP(R)
also recorded an impairment loss of $2,000,000 on the Nicholson property.
Property expenses are expected to increase if the Waban and Bolder properties
are not successfully remarketed and CIP(R) has to absorb carrying costs for any
extended period. Carrying costs include real estate taxes, insurance and
maintenance. Annual carrying costs for the two properties are estimated to be
$410,000.

The decrease in interest income is a result of a decrease in average cash
balances since December 1999 as cash was used to fund the completion of
build-to-suit projects and purchase properties in 2000 to further diversify
CIP(R)'s portfolio.

CIP(R)'s results for 2001 included net gains of $3,176,000 including a realized
gain of $1,081,000 from the sale of the Wal-Mart properties and an unrealized
gain of $2,128,000 from holding warrants for common stock of certain lessees.
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities" was effective in 2001. Under SFAS
No. 133, warrants for common stock that provide for net settlement (i.e., as a
cashless exercise) or are readily convertible to cash are defined as a
derivative instrument and changes in the value of warrants for common stock
which meet the SFAS No. 133 definition of a derivative instrument are recognized
in earnings. The unrealized gain in 2001 represents the value attributed to
194,326 warrants for common stock of Merit Medical Systems, Inc. that were
granted to CIP(R) in connection with structuring the lease transaction with
Merit Medical in 1993 and meet the criteria for treatment as a derivative
instrument. The value of the Merit Medical warrants was determined using
Black-Scholes and Binomial Tree option pricing methods. Changes in the quoted
price of Merit Medical common stock may fluctuate and cause fluctuation in
CIP(R)'s earnings.

Because of the long-term nature of CIP(R)'s net leases, inflation and changing
prices have not unfavorably affected CIP(R)'s revenues and net income. CIP(R)'s
net leases have rent increases based on formulas indexed to increases in the
CPI, sales overrides, or other periodic increases that are designed to increase
lease revenues in the future. During 2001, Affiliated Foods, Inc. exercised its
option to extend its leases through 2007 which were scheduled to expire in 2003.
There are no lease expirations in 2003.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Net income for the year ended December 31, 2000 increased by $541,000 as
compared with the year ended December 31, 1999. Excluding the effects of gains
and losses, noncash charges for writedowns of properties to fair value and
nonrecurring other income in 1999 relating to a lease termination payment from
CalComp Technology, Inc., the increase in income would have been $1,869,000. The
increase in income, as adjusted, was due to increases in lease revenues and
income from equity investments and a decrease in property expenses, and was
partially offset by an increase in depreciation and interest expense and a
decrease in other interest income.

Lease revenues increased as the result of leases on newly-purchased properties
in 2000 and 1999 including properties leased to PSC Scanning, Inc., Bolder,
Gloystarne & Co. and ISA International, increased rent in connection with
funding an expansion of a supermarket in Warwick, New York leased to Big V
Holding Corp. as well as rent increases at various properties in 2000 and 1999
which have resulted in increases in rent of $2,689,000 on an annualized basis.
The increase in income from equity investments was due to an increased share of
earnings from four equity investments primarily as a result of rent increases or
lower mortgage interest expenses. The decrease in property expenses was due to a
lower provision for uncollected rents, and, to a lesser extent, lower carrying
costs on a vacant property in Austin, Texas. In addition, CIP(R) sold a property
in Jonesboro, Arkansas in


                                      -5-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

1999 on which annual ground rent expense of $60,000 had been paid. The increase
in depreciation and interest expense was due to the properties purchased in 1999
and 2000 and from placing mortgage debt on three of the newly-purchased
properties, respectively. The decrease in other interest income was due to lower
cash balances as cash was used to purchase properties and further diversify
CIP(R)'s portfolio.

Financial Condition

One of CIP(R)'s objectives is to use the cash flow from net leases to meet
operating expenses, service its debt and fund an increasing rate of dividends to
shareholders. A significant portion of the cash provided from operations is
distributed to the shareholders in keeping with this objective. Cash provided
from operations of $23,916,000 and equity investments of $426,000 was sufficient
to fund dividend payments of $18,550,000, scheduled mortgage principal payments
of $4,642,000 and distributions of $488,000 to an affiliate which owns the
minority interest in the Best Buy Co, Inc. properties and is entitled to its pro
rata share of cash flow from the Best Buy investment.

CIP(R)'s investing activities included $7,838,000 used to fund construction at
the Holiday Inn property in Toulouse, France and the UTI Holdings build-to-suit.
CIP(R) received $8,055,000 of sale proceeds from the sale for the six retail
stores leased to Wal-Mart and a vacant property in Texarkana, Arkansas. CIP(R)
received $5,839,000 from its share of mortgage proceeds from the Del Monte
property equity investment in October 2001.

In addition to paying dividends to shareholders, distributions to its minority
interest partners, and scheduled mortgage debt service, CIP(R)'s financing
activities included obtaining $6,263,000 of mortgage proceeds provided by the
construction loan on the Holiday Inn, Toulouse, France property and using
$13,788,0000 to pay off loans on properties leased to Superior
Telecommunications, Inc., Del Monte and Wal-Mart. As a result of paying off the
Superior Telecom loan and refinancing the Del Monte loan, annual cash flow will
increase $327,000. CIP(R)'s issuance of shares through its dividend reinvestment
program and shares issued to its Advisor in lieu of cash payments for incentive
fees provided $2,391,000 of shareholders' equity. Since December 31, 2001,
CIP(R) has also refinanced a mortgage on the Plexus Corp. property which had
matured in August 2001 and had been extended by the lender in order to
facilitate a refinancing.

CIP(R)'s financing strategy has been to purchase substantially all of its
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 CIP(R)'s other assets. This strategy
has allowed CIP(R) to diversify its portfolio of properties and, thereby, limit
its risk. In the event that a balloon payment comes due, CIP(R) may seek to
refinance the loan, restructure the debt with existing lenders, evaluate its
ability to pay the balloon payment from its cash reserves or sell the property
and use the proceeds to satisfy the mortgage debt. CIP(R) may seek to finance
its unencumbered properties and use the proceeds to make additional investments
in real estate. To the extent that CIP(R) obtains such financing, it may
increase CIP(R)'s overall leverage. In 2002, three limited recourse loan balloon
payments are scheduled on properties leased to Bell Sports, Inc., Lucent and
Petsmart, Inc. for approximately $12,688,000. The Lucent lease has been extended
and CIP(R) has negotiated a short-term extension of the loan maturity which
should provide additional time to restructure an extension or refinancing of the
$7,100,000 loan. The remaining lease terms on the Bell Sports and Petsmart
leases are in excess of ten years, and CIP(R) believes that the prospects for
refinancing the loans are good. Balloon payments of approximately $7,000,000 are
scheduled in 2003. CIP(R)'s equity investees use the same financing strategy and
have purchased their properties with a combination of equity and limited
recourse mortgage debt.

CIP(R) expects to meet its capital requirements to fund future property
acquisitions, construction costs on build-to-suit transactions, capital
expenditures on existing properties and scheduled debt maturities through
long-term limited recourse mortgages and possibly unsecured indebtedness. CIP(R)
is not currently seeking additional sources of refinancing such as an unsecured
line of credit; however, its financing strategies could change in the future.
Unsecured financing, if obtained, would require CIP(R) to meet financial
covenants such as maintaining specific operating ratios and leverage ratios.
CIP(R)'s remaining commitment to retrofit a vacant property in Austin, Texas and
fund an expansion at the Holiday Inn Toulouse, France property is $2,444,000.

CIP(R) is also a participant in a cost-sharing agreement with its affiliates for
its office space. The remaining minimum rents under the office lease are
$6,100,000 through September 2006 and CIP(R)'s current participation commitment
is to pay 14% of such costs. The participation commitment is adjusted quarterly
based on a formula and is not expected to fluctuate significantly.


                                      -6-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

A summary of CIP(R)'s obligations under contractual arrangements is as follows:

<TABLE>
<CAPTION>
(in thousands)                      Total          2002         2003         2004         2005         2006     Thereafter
                                    -----          ----         ----         ----         ----         ----     ----------
<S>                                <C>           <C>          <C>          <C>          <C>          <C>        <C>
Limited recourse mortgage
   notes payable                   $152,532      $20,873      $11,441      $15,217      $13,825      $11,457      $79,719
Subordinated disposition fees           768                                                                           768
Ground lease obligations                377           80           80           63           50           50           54
Share of minimum rents
   payable under office
   cost-sharing agreement               849          163          183          183          183          137           --
                                   --------      -------      -------      -------      -------      -------      -------
                                   $154,526      $21,116      $11,704      $15,463      $14,058      $11,644      $80,541
                                   ========      =======      =======      =======      =======      =======      =======
</TABLE>

Due to its rapidly amortizing debt, Marcourt's taxable income exceeds its
distributable cash flow and such excess is projected to increase in the coming
years. The projected inability to distribute 90% of its taxable income may
impair Marcourt's ability to retain its REIT status in future years and result
in the payment of federal income taxes by Marcourt. Management and the other
Marcourt shareholders are evaluating the situation for potential resolutions
including, but not limited to, a potential sale, refinancing or restructuring in
order to enable Marcourt to retain its REIT status. The shareholder agreement of
Marcourt provides for declaration of consent dividends which would allow
Marcourt to meet its dividend requirements but would require shareholders to
recognize dividend income even though Marcourt was not distributing such amounts
currently. Consent dividends will allow Marcourt to retain REIT status; however,
it would affect the amount of taxable income that CIP(R) reports to its
shareholders.

The boards of directors of CPA(R):10 and CIP(R) have each unanimously approved a
definitive agreement under which CIP(R) would acquire CPA(R):10's business in a
stock-for-stock merger, as described above.

In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 141 "Business
Combinations" and No. 142 "Goodwill and Other Intangibles," which establish
accounting and reporting standards for business combinations and certain assets
and liabilities acquired in business combinations.

SFAS No. 141 requires that all business combinations initiated after June 30,
2001 be accounted for under the purchase method, establishes specific criteria
for the recognition of intangible assets separately from goodwill and requires
that unallocated negative goodwill be written off immediately as an
extraordinary gain. Use of the pooling-of-interests method for business
combinations is no longer permitted. The adoption of SFAS 141 did not have a
material effect on CIP(R)'s financial statements.

SFAS No. 142 primarily addresses the accounting for goodwill and intangible
assets subsequent to their acquisition and the accounting for asset
acquisitions. The provisions of SFAS No. 142 are effective for fiscal years
beginning after December 15, 2001 and must be adopted at the beginning of a
fiscal year. SFAS No. 142 provides that goodwill and indefinite-lived intangible
assets will no longer be amortized but will be tested for impairment at least
annually. Intangible assets acquired and liabilities assumed in business
combinations will only be amortized if such assets and liabilities are capable
of being separated or divided and sold, transferred, licensed, rented or
exchanged or arise from contractual or legal rights (including leases), and will
be amortized over their useful lives. The adoption of SFAS 142 is not expected
to have a material effect on CIP(R)'s financial statements.

In August 2001, FASB issued SFAS No. 144 "Accounting for the Impairment of
Long-Lived Assets" which addresses the accounting and reporting for the
impairment and disposal of long-lived assets and supercedes SFAS No. 121 while
retaining SFAS No. 121's fundamental provisions for the recognition and
measurement of impairments. SFAS 144 removes goodwill from its scope, provides
for a probability-weighted cash flow estimation approach for analyzing
situations in which alternative courses of action to recover the carrying amount
of long-lived assets are under consideration and broadens that presentation of
discontinued operations to include a component of an entity. The adoption of
SFAS 144 is not expected to have a material effect on CIP(R)'s financial
statements; however, the revenues and expenses relating to an asset held for
sale or sold must be presented as a discontinued operation for all periods
presented. The provisions of SFAS No. 144 are effective for fiscal years
beginning after December 15, 2001.


                                      -7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

In connection with the purchase of its properties, CIP(R) requires the sellers
to perform environmental reviews. Management believes, based on the results of
such reviews, that CIP(R)'s 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 materials and any related
remediation obligations. In addition, CIP(R)'s leases generally require tenants
to indemnify CIP(R) 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 CIP(R) to
extend leases until such time as a tenant has satisfied its environmental
obligations. Certain of the leases allow CIP(R) to require financial assurances
from tenants such as performance bonds or letters of credit if the costs of
remediating environmental conditions are, in the estimation of CIP(R), in excess
of specified amounts. Accordingly, Management believes that the ultimate
resolution of any environmental matter will not have a material adverse effect
on CIP(R)'s financial condition, liquidity or results of operations.


                                      -8-
<PAGE>
                        REPORT of INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
 CAREY INSTITUTIONAL PROPERTIES INCORPORATED:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of CAREY INSTITUTIONAL
PROPERTIES INCORPORATED and its subsidiaries at December 31, 2000 and 2001, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of Carey Asset Management Corp. (the "Advisor"); our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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 the Advisor, 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 15, 2002


                                      -9-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               December 31,
                                                                               ------------
                                                                          2000               2001
                                                                          ----               ----
<S>                                                                   <C>                <C>
         ASSETS:

Real estate leased to others:
   Accounted for under the operating method:
      Land                                                            $ 59,822,801       $ 52,993,337
      Buildings                                                        187,424,018        169,209,484
                                                                      ------------       ------------
                                                                       247,246,819        222,202,821
      Less, accumulated depreciation                                    24,771,906         26,240,326
                                                                      ------------       ------------
                                                                       222,474,913        195,962,495
   Net investment in direct financing leases                           103,370,717        101,498,035
Real estate under construction                                           4,070,826          7,969,435
                                                                      ------------       ------------
      Real estate leased to others                                     329,916,456        305,429,965
Assets held for sale                                                       625,000          6,910,554
Equity investments                                                      39,379,271         43,776,928
Cash and cash equivalents                                                7,181,199          7,388,480
Other assets, net of accumulated amortization of $988,989
   and $1,101,382 in 2000 and 2001, and net of allowance for
   uncollected rents of $1,506,385 and $2,100,000 in 2000
   and 2001                                                              3,106,695          5,800,715
                                                                      ------------       ------------
         Total assets                                                 $380,208,621       $369,306,642
                                                                      ============       ============

         LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY:

Liabilities:
Limited recourse mortgage notes payable                               $165,291,047       $152,532,007
Accrued interest                                                         1,146,571            874,728
Accounts payable and accrued expenses                                      963,341          1,454,040
Accounts payable to affiliates                                           1,624,123          1,898,009
Dividends payable                                                        4,578,755          4,714,132
Prepaid rental income and security deposits                              1,792,766          2,349,622
                                                                      ------------       ------------
         Total liabilities                                             175,396,603        163,822,538
                                                                      ------------       ------------

Minority interest                                                        5,790,782          7,031,014
                                                                      ------------       ------------

Commitments and contingencies

Shareholders' equity:
Common stock, $.001 par value; authorized, 40,000,000 shares;
   22,596,949 and 22,994,375 shares issued and outstanding at
   December 31, 2000 and 2001                                               22,597             22,994
Additional paid-in capital                                             225,722,640        230,880,420
Dividends in excess of accumulated earnings                            (19,577,430)       (22,897,031)
Accumulated other comprehensive income                                    (230,841)          (411,420)
                                                                      ------------       ------------
                                                                       205,936,966        207,594,963
Less, common stock in treasury at cost, 635,294 and 810,237
   shares at December 31, 2000 and 2001                                 (6,915,730)        (9,141,873)
                                                                      ------------       ------------
         Total shareholders' equity                                    199,021,236        198,453,090
                                                                      ------------       ------------
         Total liabilities and shareholders' equity                   $380,208,621       $369,306,642
                                                                      ============       ============
</TABLE>

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


                                      -10-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

                        CONSOLIDATED STATEMENTS of INCOME

<TABLE>
<CAPTION>
                                                                          For the years ended December 31,
                                                                          --------------------------------
                                                                      1999              2000              2001
                                                                      ----              ----              ----
<S>                                                               <C>               <C>               <C>
Revenues:
   Rental income                                                  $26,038,006       $27,633,916       $28,214,756
   Interest income from direct financing leases                    11,302,619        12,306,721        12,372,019
   Other interest income                                              959,958           498,177           226,126
   Other income                                                     1,298,000           193,771           309,324
                                                                  -----------       -----------       -----------
                                                                   39,598,583        40,632,585        41,122,225
                                                                  -----------       -----------       -----------

Expenses:
   Interest                                                        14,007,042        14,584,287        13,809,810
   Depreciation                                                     4,657,284         5,306,005         5,230,054
   Property expenses                                                6,946,659         6,479,488         7,156,734
   General and administrative                                       2,779,252         2,877,278         2,971,795
   Impairment loss on real estate                                     402,753           143,919         4,300,000
                                                                  -----------       -----------       -----------
                                                                   28,792,990        29,390,977        33,468,393
                                                                  -----------       -----------       -----------

      Income before minority interest, income from equity
         investments and gains (losses)                            10,805,593        11,241,608         7,653,832

Minority interest in income                                          (842,152)         (833,012)         (875,599)
                                                                  -----------       -----------       -----------

      Income before income from equity investments and gains
         (losses)                                                   9,963,441        10,408,596         6,778,233

Income from equity investments                                      4,510,943         4,943,863         5,411,560
                                                                  -----------       -----------       -----------

      Income before gains (losses)                                 14,474,384        15,352,459        12,189,793

Unrealized gain on warrants                                                --                --         2,128,000
Gain on sale of securities                                          1,224,297                --                --
(Loss) gain on sale of real estate, net                              (862,593)           24,269         1,048,335
                                                                  -----------       -----------       -----------

      Net income                                                  $14,836,088       $15,376,728       $15,366,128
                                                                  ===========       ===========       ===========

Basic earnings per common share:                                         $.68              $.70              $.70
                                                                         ====              ====              ====

Diluted earnings per common share:                                       $.67              $.69              $.68
                                                                         ====              ====              ====

Weighted average shares outstanding-basic                          21,674,189        21,916,934        22,105,243
                                                                  ===========       ===========       ===========

Weighted average shares outstanding-diluted                        22,010,100        22,271,829        22,460,138
                                                                  ===========       ===========       ===========
</TABLE>

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


                                      -11-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

                 CONSOLIDATED STATEMENTS of SHAREHOLDERS' EQUITY

              For the years ended December 31, 1999, 2000 and 2001

<TABLE>
<CAPTION>
                                                                        Dividends in   Accumulated
                                                                         Excess of        Other
                         Common        Additional     Comprehensive     Accumulated     Comprehen-     Treasury
                          Stock      Paid-in Capital      Income          Earnings     sive Income       Stock            Total
<S>                      <C>         <C>              <C>               <C>            <C>            <C>              <C>
Balance at
   December 31, 1998     $21,046      $205,320,138                      $(13,718,867)    $121,335     $(2,852,225)     $188,891,427

1,169,251 shares
  issued, $.001 par,
  net of costs             1,170        15,427,742                                                                       15,428,912
Dividends declared                                                       (17,845,403)                                   (17,845,403)

Repurchase of 64,003
  shares                                                                                                 (647,789)         (647,789)
Comprehensive income:
Net income                                             $14,836,088        14,836,088                                     14,836,088
Other comprehensive
  income:
Foreign currency
  translation
  adjustment                                                23,757
Change in unrealized
  appreciation
  resulting from sale
  of securities                                           (121,335)
                                                       -----------
                                                           (97,578)                       (97,578)                          (97,578)
                                                       $14,738,510
                                                       ===========
                         -------      ------------                      ------------    ---------     -----------      ------------
Balance at
   December 31, 1999      22,216       220,747,880                       (16,728,182)      23,757      (3,500,014)      200,565,657

381,275 shares
  issued, $.001 par,
  net of costs               381         4,974,760                                                                        4,975,141
Dividends declared                                                       (18,225,976)                                   (18,225,976)
Repurchase of 283,986
  shares                                                                                               (3,415,716)       (3,415,716)

Comprehensive income:
Net income                                             $15,376,728        15,376,728                                     15,376,728
Other comprehensive
  income:
Foreign currency
  translation
  adjustment                                              (254,598)                      (254,598)                         (254,598)
                                                       -----------
                                                       $15,122,130
                                                       ===========
                         -------      ------------                      ------------    ---------     -----------      ------------
Balance at
   December 31, 2000      22,597       225,722,640                       (19,577,430)    (230,841)     (6,915,730)      199,021,236
                                      ------------                      ------------    ---------     -----------      ------------

396,245 shares
  issued, $.001 par,
  net of costs               397         5,157,780                                                                        5,158,177
Dividends declared                                                       (18,685,729)                                   (18,685,729)
Repurchase of 174,943
  shares                                                                                               (2,226,143)       (2,226,143)

Comprehensive income:
Net income                                             $15,366,128        15,366,128                                     15,366,128
Other comprehensive
  income:
Foreign currency
  translation
  adjustment                                              (180,579)                      (180,579)                         (180,579)
                                                       -----------
                                                       $15,185,549
                                                       ===========
                         -------      ------------                      ------------    ---------     -----------      ------------
Balance at
   December 31, 2001     $22,994      $230,880,420                      $(22,897,031)   $(411,420)    $(9,141,873)     $198,453,090
                         =======      ============                      ============    =========     ===========      ============
</TABLE>

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


                                      -12-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

                      CONSOLIDATED STATEMENTS of CASH FLOWS

<TABLE>
<CAPTION>
                                                                            For the years ended December 31,
                                                                            --------------------------------
                                                                       1999               2000               2001
                                                                       ----               ----               ----
<S>                                                                <C>                <C>                <C>
Cash flows from operating activities:
    Net income                                                     $ 14,836,088       $ 15,376,728       $ 15,366,128
    Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation and amortization of
         financing costs                                              4,845,863          5,510,213          5,436,395
      Straight-line adjustments                                        (118,349)          (170,609)          (207,229)
      Minority interest in income                                       842,152            833,012            875,599
      Income from equity investments in excess of
         distributions received                                      (1,260,670)          (962,968)        (1,430,181)
      Gain on sale of real estate and securities, net                  (361,704)           (24,269)        (1,048,335)
      Impairment loss on real estate                                    402,753            143,919          4,300,000
      Issuance of stock in satisfaction of current year
         performance fee                                              1,950,817          2,716,377          2,767,451
      Provision for uncollected rents                                   819,882             99,852            593,615
      Unrealized gain on warrants                                            --                 --         (2,128,000)
      Net change in operating assets and liabilities                    629,380          1,208,330           (609,355)
                                                                   ------------       ------------       ------------
         Net cash provided by operating activities                   22,586,212         24,730,585         23,916,088
                                                                   ------------       ------------       ------------

Cash flows from investing activities:
   Purchases of real estate and equity investments and
      costs capitalized subsequent to acquisition                   (39,839,329)       (11,383,189)        (7,838,388)
   Proceeds from sales of real estate and securities                  3,166,039             24,269          8,055,093
   Distributions received from equity investments in
      excess of equity income                                           748,381            479,359            426,120
   Capital distributions from equity investments                             --                 --          5,839,315
                                                                   ------------       ------------       ------------
         Net cash (used in) provided by investing activities        (35,924,909)       (10,879,561)         6,482,140
                                                                   ------------       ------------       ------------

Cash flows from financing activities:
   Proceeds from mortgages                                           17,402,900          4,100,720          6,262,563
   Purchase of treasury stock                                          (647,789)        (3,415,716)        (2,226,143)
   Prepayments of mortgages                                          (6,663,727)          (590,301)       (13,788,316)
   Proceeds from issuance of shares, net of costs                     3,644,967          2,258,764          2,390,726
   Payments of mortgage principal                                    (4,354,912)        (4,322,311)        (4,641,965)
   Dividends paid                                                   (17,714,500)       (18,187,256)       (18,550,352)
   Capital contributions from minority partners                              --                 --            902,220
   Distributions paid to minority partners                             (575,139)          (543,169)          (488,294)
   Deferred financing costs                                            (440,300)           (64,290)           (50,000)
                                                                   ------------       ------------       ------------
         Net cash used in financing activities                       (9,348,500)       (20,763,559)       (30,189,561)
                                                                   ------------       ------------       ------------

Effect of exchange rate changes on cash                                      --             (6,846)            (1,386)
                                                                   ------------       ------------       ------------

         Net (decrease) increase in cash and cash equivalents       (22,687,197)        (6,919,381)           207,281

Cash and cash equivalents, beginning of year                         36,787,777         14,100,580          7,181,199
                                                                   ------------       ------------       ------------

         Cash and cash equivalents, end of year                    $ 14,100,580       $  7,181,199       $  7,388,480
                                                                   ============       ============       ============
</TABLE>

Noncash operating and financing activities:

In 1999, the Company issued 744,934 shares of common stock ($9,833,129) to the
   Advisor for performance fees accrued in prior periods (see Note 3 to the
   consolidated financial statements).

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


                                      -13-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

                   NOTES to CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies:

      Basis of Consolidation:

            The consolidated financial statements include the accounts of Carey
            Institutional Properties Incorporated, its wholly-owned subsidiaries
            and controlling majority-owned general partnership interests
            (collectively, the "Company"). All material inter-entity
            transactions are eliminated.

      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 dates of the financial
            statements and the reported amounts of revenues and expenses during
            the reporting period. The most significant estimates relate to the
            assessment of the realizability of real estate assets and
            investments. Actual results could differ from those estimates.

      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 which increase the useful life of
            the properties are capitalized.

            The Company diversifies its real estate investments among various
            corporate tenants engaged in different industries and by property
            type.

            The leases are accounted for under either the direct financing or
            the operating methods. Such methods are described below:

                  Direct financing method - Leases accounted for under the
                  direct financing method are recorded at their net investment
                  (Note 5). Unearned income is deferred and amortized to income
                  over the lease terms so as to produce a constant periodic rate
                  of return on the Company's net investment in the lease.

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

            When events or changes in circumstances indicate that the carrying
            amount of a long-lived asset may not be recoverable, the Company
            assesses the recoverability of its long-lived assets, including
            residual interests of real estate assets and investments, 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 is committed under long-term ground leases for certain
            properties through 2008. Future ground lease rental commitments
            aggregate $377,000.

            For properties under construction, operating expenses including
            interest charges are capitalized rather than expensed and rentals
            received are recorded as a reduction of capitalized project (i.e.,
            construction) costs.

            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 sales
            overrides. Rents from sales overrides (percentage of sales rent) are
            recognized as reported by lessees, that is, after the level of sales
            requiring a rental payment to the Company is reached.


                                      -14-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

      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 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.

      Depreciation:

            Depreciation is computed using the straight-line method over the
            estimated useful lives of the properties - generally 40 years.
            Depreciation of tenant improvements is computed using the
            straight-line method over the remaining term of the leases.

      Equity Investments:

            The Company's ownership interests in entities in which it owns 50%
            or less and has the ability to exercise significant influence, and
            jointly controlled tenancies-in-common are accounted for under the
            equity method; i.e., at cost, increased or decreased by the
            Company's share of earnings or losses, less distributions.

      Foreign Currency Translation:

            The Company consolidates its real estate investments in France and
            the United Kingdom. The functional currency for these investments is
            the French franc and the British pound. The translation from the
            French franc and British pound to U.S. dollars 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.
            Effective January 1, 2002, real estate investments in France will be
            translated using the Euro as its functional currency.

      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. Substantially all of the Company's
            cash and cash equivalents at December 31, 2000 and 2001 were held in
            the custody of two financial institutions, and which balances at
            times exceed federally insurable limits. The Company mitigates this
            risk by depositing funds with major financial institutions.

      Other Assets:

            Included in other assets are deferred charges, deferred rental
            income, marketable equity securities and other investments. Deferred
            charges are costs incurred in connection with mortgage note
            financing and refinancing and are deferred and amortized over the
            terms of the mortgages and included in interest expense in the
            accompanying consolidated financial statements. Deferred rental
            income is the aggregate difference between scheduled rents that vary
            during the lease term and income recognized on a straight-line
            basis.

      Derivative Instruments:

            Statement of Financial Accounting Standards No. 133 ("SFAS No. 133")
            "Accounting for Derivative Instruments and Hedging Activities"
            became effective in 2001 and established accounting and reporting
            standards for derivative instruments. 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


                                      -15-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

            SFAS No. 133, changes in the fair value of such derivative
            instruments as determined using an option pricing model are
            recognized currently in earnings as gains or losses. For the year
            ended December 31, 2001, the Company recognized an unrealized gain
            on warrants of $2,128,000. The Company also holds certain stock
            warrants which are not defined as derivative instruments and have
            been recorded at nominal values. The Company has only recognized
            unrealized gains or losses on stock warrants that are derivative
            instruments.

      Treasury Stock:

            Treasury stock is recorded at cost.

      Offering Costs:

            Costs incurred in connection with the raising of capital through the
            sale of common stock are charged to shareholders' equity upon the
            issuance of shares.

      Federal Income Taxes:

            The Company is qualified as a real estate investment trust ("REIT")
            as of December 31, 2001 as defined under the Internal Revenue Code
            of 1986. The Company is not subject to Federal income taxes on
            amounts distributed to shareholders provided it distributes at least
            90% of its REIT taxable income to its shareholders and meets certain
            other conditions.

      Earnings Per Share:

            The Company presents both basic and diluted earnings per share
            ("EPS"). Basic EPS excludes dilution and is computed by dividing net
            income available to shareholders by the weighted average number of
            shares outstanding for the period. Diluted EPS reflects the
            potential dilution that could occur if securities or other contracts
            to issue shares were executed or converted into common stock, where
            such exercise or conversion would result in a lower EPS amount.

            Basic and diluted earnings per share were calculated as follows:

<TABLE>
<CAPTION>
                                                                                     Weighted Average      Per-Share
                                                                 Net Income         Shares Outstanding       Amount
                                                                 ----------         ------------------       ------
           <S>                                                   <C>                <C>                    <C>
           1999

           Basic earnings                                        $14,836,088            21,674,189           $ .68
                                                                 ===========                                 =====

           Effect of dilutive securities-stock warrants                                    335,911
                                                                                        ----------

           Diluted earnings                                      $14,836,088            22,010,100           $ .67
                                                                 ===========                                 =====

           2000

           Basic earnings                                        $15,376,728            21,916,934           $ .70
                                                                 ===========                                 =====

           Effect of dilutive securities-stock warrants                                    354,895
                                                                                        ----------

           Diluted earnings                                      $15,376,728            22,271,829           $ .69
                                                                 ===========                                 =====

           2001

           Basic earnings                                        $15,366,128            22,105,243           $ .70
                                                                 ===========                                 =====

           Effect of dilutive securities-stock warrants                                    354,895
                                                                                        ----------

           Diluted earnings                                      $15,366,128            22,460,138           $ .68
                                                                 ===========            ----------           =====
</TABLE>


                                      -16-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

      Operating Segments:

            Accounting standards have been established for the way public
            business enterprises report selected information about operating
            segments and guidelines for defining the operating segment of an
            enterprise. Based on the standards' definition, the Company has
            reported its real estate operations both domestically and
            internationally (see Note 13).

      Reclassifications:

            Certain prior year amounts have been reclassified to conform to the
            current year's financial statement presentation.

2. Organization and Offering:

      The Company was formed on February 15, 1991 under the General Corporation
      Law of Maryland for the purpose of engaging in the business of investing
      in and owning industrial real estate. Subject to certain restrictions and
      limitations, the business of the Company is managed by Carey Asset
      Management Corp. (the "Advisor"). Pursuant to a public offering, which
      concluded in August 1993, the Company issued 14,167,581 shares of common
      stock.

3. Transactions with Related Parties:

      The Company's asset management and performance fees are each 1/2 of 1% per
      annum of Average Invested Assets, as defined in the Advisory Agreement
      between the Company and the Advisor. Asset management fees were
      $2,621,388, $2,761,896 and $2,753,759 in 1999, 2000 and 2001,
      respectively, with performance fees for such periods in like amount.
      Payment of the performance fee is subordinated to achievement of a
      cumulative dividend return of 8% (based on an initial issuance of Company
      stock at $10 per share in accordance with the Advisory Agreement). The
      shares issued to pay the performance fee were priced based on the most
      recent independent valuation of the Company's portfolio at the date of
      issuance of such shares.

      General and administrative expense reimbursement consists primarily of the
      actual cost of personnel needed in providing administrative services
      necessary to the operations of the Company. Reimbursements incurred were
      $825,054, $1,107,736 and $1,161,996 in 1999, 2000 and 2001, respectively.

      Pursuant to an Advisory Agreement, the Advisor performs certain services
      for the Company including the identification, evaluation, negotiation,
      purchase and disposition of property, the day-to-day management of the
      Company and the performance of certain administrative services. If in any
      year the operating expenses exceed the 2%/25% Guidelines (the greater of
      2% of Average Invested Assets or 25% of net income) as defined in the
      Advisory Agreement, the Advisor will have an obligation to reimburse the
      Company for such excess.

      The Advisor will be entitled to receive subordinated disposition fees,
      based upon the cumulative proceeds arising from the sale of the Company's
      assets since the inception of the Company. 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 proceeds of asset sales and a cumulative annual return of 6% since the
      inception of the Company. The Advisor's interest in such disposition fees
      amounts to $768,219 through December 31, 2001. Payment of such amount,
      however, cannot be made until the subordination provisions are met.
      Management 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 accounts payable to affiliates in the accompanying financial
      statements.

      In connection with performing services relating to the Company's real
      estate purchases, affiliates of the Company were paid fees of $343,146 and
      $138,993 in 1999 and 2000, respectively. No such fees were paid in 2001.

      In 1995, the Company's Board of Directors authorized the offering of
      10,000,000 Shares in a private placement to a limited number of
      institutional investors. Through December 31, 2001 the Company has raised
      $74,440,000 from institutional investors, issuing 6,250,262 shares. No
      shares were issued in 2001 through private placement. The offering was
      conducted by W.P. Carey & Co., Inc. ("W.P. Carey"), an affiliate of the
      Advisor, through June 2000, at which time the Advisor assumed
      responsibility for raising capital. In 1997, the Company's shareholders


                                      -17-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

      approved a proposal to grant warrants for the Company's common stock in
      lieu of cash compensation in consideration for raising capital. Under the
      plan, W. P. Carey was granted, subject to the approval of the Company's
      Board of Directors, 3,956,447 warrants at exercise prices ranging from $10
      to $12.80 per share. The warrants are exercisable over a ten-year period.
      The exercise prices are based on the share price at the time the shares
      were issued to the institutional investors. The granting of the warrants
      was intended to compensate W. P. Carey in an amount equivalent to a fee of
      3% of the capital raised. The number of warrants issued in consideration
      of the fee have been determined pursuant to a valuation by an independent
      consultant.

      In connection with services performed relating to the identification,
      evaluation, structuring and development of the Company's investments in
      real estate, affiliates of the Company received structuring and
      development fees of $857,865 and $347,482 in 1999 and 2000, respectively.
      In 2001, no such fees were paid.

      The Company is a participant in an agreement 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 gross revenues. Expenses incurred
      in 1999, 2000 and 2001 were $225,321, $167,458 and $205,366, respectively.
      The Company's share of future minimum lease payments is $377,000 through
      2006.

      The Company and its affiliates are investors in certain real estate
      ventures in which the ownership of real property is held directly by each
      investor and not through incorporated or unincorporated jointly held
      affiliates. Title to these properties is held by each investor as tenants
      in common. These ownership interests satisfy the criteria for accounting
      for undivided interests in real property including: Investors in the
      venture hold an undivided interest in each asset, investors are severally
      liable for any liability, there is no joint control, investors are only
      entitled to their share of income and are liable for their proportionate
      share of income and are liable for their share of expenses and each
      investor may sell its interest without the consent of the other investors.
      For these investments, the Company reports its proportionate share of the
      assets, liabilities, revenues and expenses in its financial statements.
      The Company's interest in these properties range from 50% to 80%. These
      joint ventures are not subject to joint control.

4. Real Estate Leased to Others Accounted for Under the Operating Method:

      Scheduled future minimum rents, exclusive of renewals, under
      non-cancelable operating leases amount to approximately $22,668,000 in
      2002; $21,201,000 in 2003; $21,224,000 in 2004; $21,210,000 in 2005;
      $21,149,000 in 2006 and aggregate approximately $293,625,000 through 2020.

      Contingent rents (including percentage rents and CPI-based increases) were
      approximately $870,486, $1,134,103 and $1,731,000 in 1999, 2000 and 2001,
      respectively.

5. Net Investment in Direct Financing Leases:

      Net investment in direct financing leases is summarized as follows:

<TABLE>
<CAPTION>
                                                         December 31,
                                                         ------------
                                                    2000              2001
                                                    ----              ----
            <S>                                 <C>               <C>
            Minimum lease payments receivable   $191,499,834      $180,076,202
            Unguaranteed residual value          101,499,550        99,322,325
                                                ------------      ------------
                                                 292,999,384       279,398,527
            Less: unearned income                189,628,667       177,900,492
                                                ------------      ------------
                                                $103,370,717      $101,498,035
                                                ============      ============
</TABLE>

      Scheduled future minimum rents, exclusive of renewals, under
      non-cancelable direct financing leases amount to approximately $11,422,000
      in 2002; $11,673,000 in 2003; $11,841,000 in 2004; $11,926,000 in 2005;
      $11,915,000 in 2006 and aggregate approximately $180,076,000 through 2024.

      Contingent rents (including CPI-based increases) were approximately
      $456,000, $425,000 and $473,000 in 1999, 2000 and 2001, respectively.


                                      -18-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

6. Mortgage Notes Payable:

      Mortgage notes payable, all of which are limited recourse obligations, are
      collateralized by the assignment of various leases and by real property
      with a carrying value of approximately $249,074,000. As of December 31,
      2001, mortgage notes payable had fixed interest rates ranging from 7.09%
      to 10% per annum and variable interest rates ranging from 4.26% to 9.63%.

      Scheduled principal payments during each of the five years following
      December 31, 2001 and thereafter are as follows:

<TABLE>
<CAPTION>
            Year Ending December 31,                    Total Debt        Fixed Rate Debt       Variable Rate Debt
            ------------------------                    ----------        ---------------       ------------------
                 <S>                                   <C>                  <C>                    <C>
                 2002                                  $ 20,872,865         $  3,617,399           $17,255,466
                 2003                                    11,441,441           11,169,563               271,878
                 2004                                    15,217,256           12,190,191             3,027,065
                 2005                                    13,824,292           13,672,540               151,752
                 2006                                    11,457,354           11,283,923               173,431
                 Thereafter                              79,718,799           74,479,521             5,239,278
                                                       ------------         ------------           -----------
                    Total                              $152,532,007         $126,413,137           $26,118,870
                                                       ============         ============           ===========
</TABLE>

      Interest paid, excluding capitalized interest, was $14,264,348,
      $13,876,301 and $13,875,312 in 1999, 2000 and 2001, respectively.

      In connection with the placement of mortgages, fees of $343,146, $138,993
      and $60,625 were paid to an affiliate of the Company in 1999, 2000 and
      2001, respectively.

7. Dividends:

      Dividends paid to shareholders consist of ordinary income, capital gains,
      return of capital or a combination thereof for income tax purposes. For
      the years ended December 31, 1999, 2000 and 2001, dividends paid per share
      were reported as follows for tax purposes:

<TABLE>
<CAPTION>
                                        1999          2000         2001
                                        ----          ----         ----
            <S>                         <C>           <C>          <C>
            Ordinary income             $.70          $.61          .59
            Capital gains                .06            --          .05
            Return of capital            .07           .22          .20
                                        ----          ----         ----
                                        $.83          $.83         $.84
                                        ====          ====         ====
</TABLE>

      A dividend of $.2125 per share for the quarter ended December 31, 2001
      ($4,714,132) was declared in December 2001 and paid in January 2002.

8. Lease Revenues:

      The Company's operations consist of the investment in and the leasing of
      industrial and commercial real estate. The financial reporting sources of
      the leasing revenues are as follows:

<TABLE>
<CAPTION>
                                                                     1999              2000              2001
                                                                     ----              ----              ----
            <S>                                                   <C>               <C>               <C>
            Per Statements of Income:
                Rental income from operating leases               $26,038,006       $27,633,916       $28,214,756
                Interest income from direct financing leases       11,302,619        12,306,721        12,372,019
            Adjustments:
                Share of leasing revenues applicable to
                  minority interest                                (1,779,485)       (1,770,596)       (1,760,787)
                Share of leasing revenues from equity
                  investments                                      11,189,703        11,611,950        12,076,852
                                                                  -----------       -----------       -----------
                                                                  $46,750,843       $49,781,991       $50,902,840
                                                                  ===========       ===========       ===========
</TABLE>


                                      -19-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

The Company earned its share of net leasing revenues in 1999, 2000 and 2001 from
its direct and indirect ownership of real estate from the following lease
obligors:

<TABLE>
<CAPTION>
                                                    1999           %            2000          %          2001           %
                                                    ----           -            ----          -          ----           -
<S>                                              <C>             <C>         <C>            <C>       <C>             <C>
Marriott International, Inc.(1)                  $ 4,461,891      10%        $ 4,466,178      9%      $ 4,510,253       9%
Omnicom Group, Inc.                                4,265,066       9           4,265,378      9         4,265,378       8
Advanced Micro Devices, Inc.(1)                    3,048,500       7           3,048,500      6         3,048,500       6
Best Buy Co., Inc.(2)                              3,029,933       6           3,014,798      6         2,998,098       6
Electronic Data Systems Corporation                2,358,928       5           2,358,928      5         2,466,762       5
Big V Holding Corp.                                1,831,101       4           2,052,967      4         2,068,860       4
Lucent Technologies, Inc.                          1,852,829       4           1,852,829      4         1,852,829       3
UTI Holdings, Inc.                                 1,206,952       3           1,252,252      2         1,615,056       3
Garden Ridge Corporation                           1,467,013       3           1,496,217      3         1,546,281       3
Sicor, Inc.(1)                                     1,377,224       3           1,472,736      3         1,472,736       3
Merit Medical Systems, Inc.                        1,303,292       3           1,451,894      3         1,465,404       3
Barnes & Noble, Inc.                               1,398,758       3           1,413,962      3         1,431,117       3
The Upper Deck Company(1)                          1,319,875       3           1,319,875      3         1,419,134       3
Q Clubs, Inc.                                      1,319,212       3           1,343,372      3         1,407,393       3
Michigan Mutual Insurance Company                  1,362,833       3           1,362,893      3         1,362,959       3
Compucom Systems, Inc.(1)                            982,213       2           1,304,666      3         1,304,666       2
Del Monte Corporation(1,4)                         1,286,250       3           1,286,250      2         1,286,250       2
Plexus Corp.                                       1,184,409       2           1,212,504      2         1,268,693       2
Bell Sports, Inc.                                  1,088,067       2           1,108,341      2         1,146,221       2
Waban, Inc.                                        1,118,356       2           1,118,356      2         1,118,356       2
Wal-Mart Stores, Inc.                              1,070,232       2           1,039,264      2         1,035,092       2
Detroit Diesel Corporation                           845,000       2             868,239      2           897,934       2
PSC Scanning, Inc.                                   523,273       1             835,221      2           862,833       2
Custom Food Products, Inc.                           928,890       2             833,046      2           855,484       2
Humco Holding Group                                  746,519       2             825,100      2           845,727       2
Gloystarne & Co., Inc.                                40,272      --             836,652      2           827,633       2
Nicholson Warehouse L.P.                             805,200       2             815,414      2           808,069       2
GATX Logistics, Inc.                                 794,893       2             794,893      1           794,893       2
Hibbett Sporting Goods, Inc.                         493,587       1             740,972      1           777,015       2
Bolder Technologies, Inc.                            459,911       1             668,689      1           677,494       1
Childtime Childcare, Inc.                            608,856       1             628,871      1           648,892       1
Superior Telecommunications, Inc.                    640,310       1             647,092      1           648,745       1
ISA International plc                                     --                     479,941     --           569,317       1
Petsmart, Inc.                                       498,636       1             505,586      1           514,716       1
Other                                              1,032,562       2           1,060,115      3         1,084,050       2
                                                 -----------     ---         -----------    ---       -----------     ---
                                                 $46,750,843     100%        $49,781,991    100%      $50,902,840     100%
                                                 ===========     ===         ===========    ===       ===========     ===
</TABLE>

      (1)   Represents the Company's proportionate share of revenues from its
            equity investment.
      (2)   Net of rental amount applicable to Corporate Property Associates 12
            Incorporated's ("CPA(R):12") 37% minority interest.
      (3)   Net of ground lease rental expense of approximately $156,000,
            $74,000 and $80,000 in each of the years 1999, 2000 and 2001,
            respectively.
      (4)   As of October 1, 2001, interest in these properties were transferred
            to a limited liability company and are accounted for under the
            equity method.


                                      -20-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

9. Equity Investments:

      The Company owns a 23.7% interest in Marcourt Investments, Inc.
      ("Marcourt"), a real estate investment trust which net leases 13 hotel
      properties to a wholly-owned subsidiary of Marriott International, Inc., a
      50% equity interest in a general partnership which owns land and buildings
      in San Diego, California, net leased to Sicor Inc., a 50% interest in a
      general partnership which net leases two office buildings in San Diego,
      California to The Upper Deck Company, a 33 1/3% interest in a limited
      liability company which owns land and buildings in Sunnyvale, California,
      net leased to Advanced Micro Devices, Inc., a 33 1/3% interest in a
      limited liability company which owns land and a building in Dallas, Texas
      net leased to Compucom Systems, Inc. and a 50% interest in a limited
      liability company and a jointly controlled tenancy-in-common, both of
      which net lease buildings to Del Monte Corporation.

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

<TABLE>
<CAPTION>
            (In thousands)                                             December 31,
                                                                       ------------
                                                                    2000          2001
                                                                    ----          ----
            <S>                                                   <C>           <C>
            Assets (primarily real estate)                        $320,375      $347,429
            Liabilities (primarily limited recourse mortgage
               notes payable)                                      205,030       220,750
            Capital                                                115,345       126,679
</TABLE>

<TABLE>
<CAPTION>
            (In thousands)                                           Year Ended December 31,
                                                                     -----------------------
                                                                 1999         2000         2001
                                                                 ----         ----         ----
            <S>                                                <C>          <C>          <C>
            Revenues (primarily rental revenues)               $36,332      $37,533      $38,667
            Expenses (primarily interest on mortgages and
               depreciation)                                    21,049       21,159       21,031
                                                               -------      -------      -------
            Net income                                         $15,283      $16,374      $17,636
                                                               =======      =======      =======
</TABLE>

      Marcourt projects that it will not be able to distribute 90% of its REIT
      taxable income in future years, which may impair its ability to retain
      REIT status; however, pursuant to the terms of Marcourt's Shareholder
      Agreement, Marcourt will declare consent dividends to maintain REIT status
      and each shareholder is obligated to include its allocable share of any
      consent dividend in its taxable income.

10. Gains (Losses) on Sale of Real Estate and Securities:

      In 1999, the Company sold three vacant properties formerly leased to
      Harvest Foods, Inc. for $1,127,625 and recognized a loss on sale of
      $862,593.

      In 1993 and 1995, the Company entered into net leases with Garden Ridge
      Corporation ("Garden Ridge") and, in connection with structuring the
      leases, was awarded warrants to purchase 164,000 shares of Garden Ridge
      common stock of which 97,200 warrants were exercisable at $6.67 per share
      and 67,500 warrants were exercisable at $10 per share. The Company
      subsequently exercised all of its warrants and sold 112,500 shares in 1995
      and 1996. Garden Ridge common stock subsequently split on a 2-for-1 basis,
      and in December 1999, the Company sold its remaining 104,400 shares at a
      gain of $369,312. The Company also recognized a gain of $854,985 in 1999
      in connection with the redemption of warrants that had been granted by Q
      Clubs, Inc.

      The Company sold a vacant property in Clarksdale, Mississippi in March
      2000 for a nominal amount. An impairment loss of $412,067 was recognized
      in 1999 in connection with the agreement to sell the property was
      recognized in 1999. A gain of $24,269 was realized in connection with the
      sale.

      In June 2001, the Company sold its interest in a vacant property in
      Texarkana, Arkansas for $609,161, net of closing costs, and incurred a
      realized loss of $38,420 on the sale. An impairment loss of $143,919 was
      recognized in 2000 in connection with the agreement to sell the property.


                                      -21-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

      In September 2001, the Company sold six retail properties leased to
      Wal-Mart Stores, Inc. for $7,445,932, net of costs, and realized a gain on
      sale of $1,086,755.

11. Impairment Losses:

      In June 2001, in connection with a proposed sale of a property in
      Farmingdale, New York, the property was written down to its estimated fair
      value, resulting in an impairment loss of $2,300,000. The sale was subject
      to the purchaser's due diligence review and acquiring a variance to rezone
      the property for residential use. The rezoning application was denied and
      the sale was not completed. The property was leased to Waban, Inc.
      ("Waban") through January 2002 at which time the lease expired. Waban
      elected not to exercise a ten-year renewal option, however, has agreed to
      continue to occupy and rent the property on a month-to-month basis. As of
      December 31, 2001, the $6,910,554 carrying value of the Waban property was
      classified as held for sale. The Company anticipates selling the property
      within the year. Operating income from the Waban property in 2001 was
      $440,005. The reclassification to assets held for sale was effective as of
      December 31, 2001, and, therefore, such reclassification had no effect on
      depreciation expense.

      The Company owns a property in Maple Heights, Ohio leased to Nicholson
      Warehouse, L.P. ("Nicholson"). Because of a prolonged weakness in
      Nicholson's financial condition and the risk that Nicholson will not meet
      its lease obligations, the Company has recorded an impairment loss and
      written down the Nicholson property by $2,000,000 to its estimated fair
      value.

12. Disclosures About Fair Value of Financial Instruments:

      The Company estimates that the fair value of mortgage notes payable at
      December 31, 2000 and 2001 was approximately $170,287,000 and $154,249,000
      respectively. The fair value of debt instruments was evaluated using a
      discounted cash flow model with rates which take into account the credit
      of the tenants and interest rate risks.

13. Segment Information:

      The Company has determined that it operates in one business segment, real
      estate operations with domestic and foreign investments. The Company
      acquired its first foreign real estate investment in December 1999 and
      currently has investments in the United Kingdom and France.

      For 2001, geographic information for the real estate operations segment is
      as follows:

<TABLE>
<CAPTION>
                                                        Domestic                 Foreign               Total Company
                                                        --------                 -------               -------------
      <S>                                             <C>                      <C>                     <C>
      Revenues                                        $ 39,705,964             $ 1,416,261              $ 41,122,225
      Expenses                                          32,186,078               1,282,315                33,468,393
      Income from equity investments                     5,411,560                       -                 5,411,560
      Net operating income(1)                           12,055,847                 133,946                12,189,793
      Total assets                                     346,944,404              22,362,238               369,306,642
      Total long-lived assets                          329,060,109              20,146,784               349,206,893
</TABLE>

      For 2000, geographic information for the real estate operations segment is
      as follows:

<TABLE>
<CAPTION>
                                                        Domestic                 Foreign               Total Company
                                                        --------                 -------               -------------
      <S>                                             <C>                      <C>                     <C>
      Revenues                                        $ 39,304,847             $ 1,327,738              $ 40,632,585
      Expenses                                          28,734,357                 656,620                29,390,977
      Income from equity investments                     4,943,863                       -                 4,943,863
      Net operating income(1)                           14,681,341                 671,118                15,352,459
      Total assets                                     365,571,046              14,637,575               380,208,621
      Total long-lived assets                          355,221,651              14,074,076               369,295,727
</TABLE>


                                      -22-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

      For 1999, geographic information for the real estate operations segment is
      as follows:

<TABLE>
<CAPTION>
                                                         Domestic                 Foreign                Total Company
                                                         --------                 -------                -------------
<S>                                                    <C>                      <C>                      <C>
       Revenues                                        $ 39,558,311             $    40,272              $ 39,598,583
       Expenses                                          28,751,000                  41,990                28,792,990
       Income from equity investments                     4,510,943                       -                 4,510,943
       Net operating income (loss)(1)                    14,476,102                  (1,718)               14,474,384
</TABLE>

      (1) Net operating income (loss) is after minority interest and excludes
      gains and loss and extraordinary items.

14. Accounting Pronouncements:

      In July 2001, the Financial Accounting Standards Board ("FASB") issued
      Statements of Financial Accounting Standards ("SFAS") No. 141 "Business
      Combinations" and No. 142 "Goodwill and Other Intangibles," which
      establish accounting and reporting standards for business combinations and
      certain assets and liabilities acquired in business combinations.

      SFAS No. 141 requires that all business combinations initiated after June
      30, 2001 be accounted for under the purchase method, establishes specific
      criteria for the recognition of intangible assets separately from goodwill
      and requires that unallocated negative goodwill be written off immediately
      as an extraordinary gain. Use of the pooling-of-interests method for
      business combinations is no longer permitted. The adoption of SFAS 141 did
      not have a material effect on the Company's financial statements.

      SFAS No. 142 primarily addresses the accounting for goodwill and
      intangible assets subsequent to their acquisition and the accounting for
      asset acquisitions. The provisions of SFAS No. 142 are effective for
      fiscal years beginning after December 15, 2001 and must be adopted at the
      beginning of a fiscal year. SFAS No. 142 provides that goodwill and
      indefinite-lived intangible assets will no longer be amortized but will be
      tested for impairment at least annually. Intangible assets acquired and
      liabilities assumed in business combinations will only be amortized if
      such assets and liabilities are capable of being separated or divided and
      sold, transferred, licensed, rented or exchanged or arise from contractual
      or legal rights (including leases), and will be amortized over their
      useful lives. The adoption of SFAS 142 is not expected to have a material
      effect on the Company's financial statements.

      In August 2001, FASB issued SFAS No. 144 "Accounting for the Impairment of
      Long-Lived Assets" which addresses the accounting and reporting for the
      impairment and disposal of long-lived assets and supercedes SFAS No. 121
      while retaining SFAS No. 121's fundamental provisions for the recognition
      and measurement of impairments. SFAS 144 removes goodwill from its scope,
      provides for a probability-weighted cash flow estimation approach for
      analyzing situations in which alternative courses of action to recover the
      carrying amount of long-lived assets are under consideration and broadens
      that presentation of discontinued operations to include a component of an
      entity. The adoption of SFAS 144 is not expected to have a material effect
      on the Company's financial statements; however, the revenues and expenses
      relating to an asset held for sale or sold must be presented as a
      discontinued operation for all periods presented. The provisions of SFAS
      No. 144 are effective for fiscal years beginning after December 15, 2001.

15. Proposed Business Combination:

      The boards of directors of the Company and CPA(R):10 have each unanimously
      approved a definitive agreement under which CIP(R) would acquire the
      Company's business in a stock-for-stock merger. As described in the joint
      proxy statement dated January 15, 2002, each shareholder of the CPA(R):10
      will either receive 0.8445 of a share of newly issued Company common stock
      for each common share of the CPA(R):10 that he or she owns or a promissory
      note with a face value of $11.23 for each CPA(R):10 share which would bear
      interest at an annual rate of 4% and which would be payable on December
      31, 2004. For the merger to be completed, an affirmative vote of
      two-thirds of the shares of common stock issued and outstanding is
      required and holders of more than 50% of the CPA(R):10's stock must elect
      to receive Company shares in the merger. If 50% of CPA(R):10 shareholders
      elect to receive promissory note, the Company would have an obligation of
      $42,795,000 and would incur annual interest of $1,711,824 through the
      maturity date. If all CPA(R):10 shareholders elect to receive Company
      shares, the newly issued shares of Company common stock would represent
      22.5% of the Company common stock after the merger. The exchange value was
      based on an appraisal of the assets of both companies as of June 30, 2001
      and was


                                      -23-
<PAGE>
                   CAREY INSTITUTIONAL PROPERTIES INCORPORATED

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

      performed by an independent appraiser at a portfolio level on a "debt in
      place" method. Each company engaged a separate investment banking firm to
      provide a fairness opinion.

      Management believes that the combined company will create various benefits
      including, but not limited to, operating efficiencies, increased access to
      capital in equity and debt markets and greater flexibility to provide
      additional liquidity to shareholders.


                                      -24-
<PAGE>
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

There is no established public trading market for the Shares of the Company. As
of December 31, 2001, there were 8,507 holders of record of the Shares of the
Company.

The Company is required to distribute annually 95% of its Distributable REIT
taxable income to maintain its status as a REIT. Quarterly dividends paid by the
Company since December 31, 1998 are as follows:

<TABLE>
<CAPTION>
                                  Cash Dividends Paid Per Share
                                ---------------------------------
                                  1999         2000         2001
                                  ----         ----         ----
            <S>                 <C>          <C>          <C>
            First quarter       $.20680      $.20760      $.20840
            Second quarter       .20700       .20780       .20860
            Third quarter        .20720       .20800       .21200
            Fourth quarter       .20740       .20820       .21220
                                -------      -------      -------
                                $.82840      $.83160      $.84120
                                =======      =======      =======
</TABLE>

REPORT ON FORM 10-K

The Company 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,
2001 as filed with the Securities and Exchange Commission.


                                      -25-