Questions and Answers about this offering
- What is ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P.?
- What does ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P. do?
- How will we select potential investments?
- What will be the terms of our investments?
- What can you expect to happen after you make an investment in our Interests?
- How do our planned cash distributions compare to fixed income investments?
- Are there tax considerations of this investment of which you need to be aware?
- Can you have your distributions redirected elsewhere each month?
- What ability will you have to sell your investment in our Interests?
- Where can I get more information?
1. What is ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P.?
We are a form of investment opportunity that is commonly referred to as an equipment leasing and finance fund. These types of funds provide investors with the opportunity to invest in equipment leases and loans and other types of investments in equipment that are leased, owned or operated by domestic and global businesses, which are otherwise typically invested in by large financial institutions, banks, and hedge funds. These funds may be considered a nontraditional (or alternative) asset class because the assets in these funds are not correlated to traditional assets such as stocks and bonds. Accordingly, these funds may offer benefits to investors in the form of investment portfolio diversification and asset allocation.
In an equipment leasing and finance fund, the capital you invest is pooled with the capital contributed by other investors. This pool of cash is then used to make investments, to pay fees and expenses and to establish a small reserve. We will invest the majority of the cash we receive in a diverse pool of business-essential equipment and corporate infrastructure (collectively, "Capital Assets") that are critical to the operations of domestic and global businesses, portfolios of Capital Assets, loans that are secured by Capital Assets and other investments in Capital Assets that our General Partner believes will provide us with a satisfactory rate of return.
2. What does ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P. do?
We will use a substantial portion of the offering proceeds to invest in Capital Assets, including, but not limited to, Capital Assets that are already subject to lease, Capital Assets that we purchase and lease to domestic and global businesses, loans that are secured by Capital Assets, and acquire ownership rights to leased Capital Assets at lease expiration. Although the makeup of our potential investment portfolio cannot be determined in advance, in other equipment leasing and finance funds that our General Partner’s affiliates have managed, such funds have invested in marine vessels, commercial aircraft, information technology equipment, railcars, power plants, production facilities, store fixtures and many other types of Capital Assets. We are not able to determine who will be the future borrowers, lessees, and other counterparties of the Capital Asset transactions in which we invest, but in recent equipment leasing and finance funds sponsored by affiliates of our General Partner, the lessees, borrowers, and other counterparties were often Fortune 500 companies, large domestic and foreign businesses, and other creditworthy businesses.
3. How will we select potential investments?
We will seek to make investments in Capital Assets that we believe will provide you with a satisfactory rate of return on your investment from (a) current cash flow generated by the payment of rent in the case of leases and principal and/or interest in the case of secured loans, (b) deferred cash flow from the realization of the value of the Capital Assets or interests therein at the maturity of the investment or the exercise of the option or (c) a combination of both.
With respect to (a) above, we will seek to make investments in Capital Assets subject to lease and in secured loans with lessees and borrowers, respectively, that we believe to be creditworthy based on such lessees’ and borrowers’ financial position, business, industry, and the underlying value of the Capital Assets. In our opinion, this increases the probability that all of the scheduled rental or loan payments, as applicable, will be paid when due. In the case of leases where there is significant current cash flow generated during the primary term of the lease and the value of the Capital Assets at the end of the term will be minimal or is not considered a primary reason for making the investment, the rental payments due under the lease are expected to be, in the aggregate, sufficient to provide a return of and a return on the purchase price of the leased Capital Assets. In the case of secured loans, the principal and interest payments due under the loan are expected to provide a return of and a return on the amount we lend to borrowers.
With respect to (b) above, we will seek to make investments in Capital Assets subject to operating leases and leveraged leases, interests or options to purchase interests in the residual value of Capital Assets, and other investments in Capital Assets that we expect will generate enough net proceeds from either the sale or re-lease of such Capital Assets, as applicable, to provide a satisfactory rate of return. In the case of these types of investments, we will seek to make investments in Capital Assets that decline in value at a slow rate due to the long economic life of such assets. In the case of operating leases (leases where there is limited cash flow during the primary term of the lease and the value of the Capital Assets at the end of the term was the primary reason for making the investment), most, if not all, of the return of and return on that investment will generally be realized upon the sale or re-lease of the Capital Assets. In the case of leveraged leases (leases where a substantial portion of the cash flow and potentially a portion of the residual value has been pledged to a lender on a non-recourse basis and the value will be realized upon the sale or re-lease of the Capital Assets), the rental income received in cash will be less than the purchase price of the Capital Assets because we will structure these transactions to utilize some or all of the lease rental payments to reduce the amount of non-recourse indebtedness used to acquire such assets. In our experience, the residual value may provide a return of and a return on the purchase price of the equipment even if all rental payments received during the initial term were paid to a lender.
In some cases, with respect to the above investments, we may acquire equity interests, as well as warrants or other rights to acquire equity interests in the borrower or lessee that may increase our expected return on our investment.
For a more detailed discussion of our investment objectives, please refer to the "Investment Objectives" section beginning on page 62.
4. What will be the terms of our investments?
We expect our leases, loans, and other financing transactions to meet economic and legal standards that our General Partner and its affiliates have derived from their experience in the equipment leasing and finance business. In general, we expect that the investment documents will be enforceable contracts that create non-cancelable obligations of the lessee, borrower or other counterparty with respect to timely payments, proper maintenance of Capital Assets, and, if applicable, the return of such Capital Assets in a specified condition. Often such investment documents will create rights for us in the event of a failure of the lessee, borrower or other counterparty to perform its payment and other obligations over and above the obligation to cure such a failure. In addition, such investment documents may also include guarantees by parent companies, affiliates, and individual owners of such lessees, borrowers, and other counterparties of such entities’ obligations to us under the investment documents.
5. What can you expect to happen after you make an investment in our Interests?
We have three phases of different lengths. It is very important to be aware of how we will operate during these three phases so you can evaluate this investment opportunity and have appropriate expectations.
We call the period when we are raising money from investors the offering period. This period will not exceed two years. The more quickly we raise money, the shorter the offering period will be. After we have raised $1,200,000, we will begin investing the offering proceeds. This investment will continue until all offering proceeds have been spent on investments, fees and expenses, and the establishment of a small reserve.
Upon the completion of the offering period, the operating period begins. Unless extended, it will last for five years. No new investors will be admitted during this period. The operating period is when we expect to spend cash generated from operations on additional investments to the extent that cash is available after distributions are made and expenses are paid, including reserves.
In both the offering and operating periods, we plan to make monthly distributions of cash to investors. Cash is expected to be distributed in the early part of each month, commencing shortly after you make an investment and once we have raised $1,200,000. Cash distributions are expected to continue each month for the entire offering and operating periods. However, the amount and rate of cash distributions could vary and is not guaranteed.
Upon the completion of the operating period, the liquidation period begins. Unless extended, the liquidation period will last for two years. It is during the liquidation period that we will gradually dispose of our assets. If Capital Assets are still on lease at the start of the liquidation period, such Capital Assets will typically be sold when the lease expires rather than re-leased to third parties, if market conditions permit. If we believe that it would be in the best interests of our investors to reinvest the proceeds received from our investments in additional investments during the liquidation period, we may do so, but our Investment Manager will not receive any acquisition fees in connection with such investments.
6. How do our planned cash distributions compare to fixed income investments?
You should carefully review the Risk Factors section of this prospectus to see how an investment in our Interests differs from more conservative alternatives. Among other things, you are not guaranteed a return of or a return on your investment in our Interests. The amount of distributions made to you during the offering and operating periods may vary depending on the performance of our investments. We will determine the amount of distributions made to you during these periods and, at least initially, distributions will not be based on the operations of or income from our investments. Such distributions are expected to be a return of capital. Distributions made to you during the liquidation period will be irregular and there is no guarantee that, when combined with prior distributions, they will add up to more than 100% of your investment. The possibility that the internal rate of return from our Interests may be more or less than the initial distribution rate, as determined by us in our sole discretion, is an important difference between an investment in our Interests and fixed income alternatives. Understanding the opportunities and risks of our Interests prior to investing is very important and you should not invest if you believe that you do not understand the opportunities and risks related to an investment in our Interests.
7. Are there tax considerations of this investment of which you need to be aware?
The material federal tax consequences of an investment in our Interests are described beginning on page 75. You should consult your tax advisor if you have questions about the appropriateness of this investment for your own tax situation. The following is a summary of some of the issues described herein.
Investing in Capital Assets ordinarily has the following federal tax characteristics. We will generate (a) gross income from the receipt of lease payments, interest, and other payments received on account of the leases and gain or loss on sales of leased Capital Assets and (b) gross income from interest received from loans secured by Capital Assets and/or interest equivalents if we acquire such loans at a discount. We may also generate gain or loss if we dispose of loans before maturity. In the early years, part of this income may be offset by deductions for depreciation, interest and other expenses. The result may be that, in the offering period and early years of the operating period, you will receive cash distributions in which the tax is deferred or that are not fully subject to income tax. Distributions not fully subject to income tax during the offering period and early years of the operating period are likely to be comprised mainly of a return of capital for tax purposes. You will receive a Form K-1 early each year, which tells you what share of our income and deductions you will need to include on your individual tax return for the previous year.
This is not an appropriate investment if you are seeking to shelter other sources of income from taxation, although in some instances passive activity losses from this investment may offset passive activity income from other investments. Based upon the experience of the management of our General Partner’s affiliates in managing other equipment leasing and finance funds, in the early years you will receive distributions, but may pay current income tax on only a portion of those distributions. By the time we are in liquidation, the total tax you pay in the aggregate may likely be consistent with the tax you would pay with respect to other taxable investments. The benefit of paying taxes later instead of currently is commonly referred to as "tax deferral." We use the term "tax deferral" to mean that, in the early years of the investment, only a small portion of the cash distributed to you will be considered a return on investment. To the extent in later years the portion considered a return on investment grows, it will be taxable at that time. This is not the same as a tax deferral commonly associated with qualified plans or IRAs where even the portion of your portfolio performance considered a return on investment is not taxable when distributed to the qualified plan or IRA and such earnings remain untaxed until withdrawn. An investment in our Interests should not be made solely because of the potential for tax deferral. In addition, in some cases other taxes or loss disallowance rules may offset the deferral benefit. Again, seethe tax discussion beginning on page 75, as well as the discussion of UBTI on page 26, which will apply if you invest in us through a qualified plan or IRA.
8. Can you have your distributions redirected elsewhere each month?
Investors can specify a number of different accounts to which their distributions will be deposited. You may also have the opportunity to participate in our DRIP Plan, which provides that all, but not less than all, of the distributions you receive during the offering period are invested in additional Interests. See "Subscriptions" and "Distribution Reinvestment Plan."
9. What ability will you have to sell your investment in our Interests?
An investment in our Interests is an illiquid investment, and your ability to sell our Interests will be extremely limited. You should only invest money that you can afford to have tied up for at least nine years, net of distributions that are expected to be made to you during those years. Our Interests will not be listed on any national securities exchange at any time and we will take steps to assure that no public trading market develops for our Interests. We have a repurchase plan that, after you have held our Interests for one year, allows you to request that we repurchase your investment in our Interests from time to time, which plan is more fully described on page 110. You should assume that the financial result of a repurchase or sale, consisting of repurchase proceeds and distributions you received prior to repurchase, may be for less than your original investment.
10. Where can I get more information?
We have filed a registration statement on Form S-1 with the SEC regarding the Interests offered pursuant to this prospectus and we will file periodic reports and other information with the SEC. Once filed with the SEC, these documents are available free-of-charge on the SEC’s website at http://www.sec.gov. After you are an investor in Fund Fourteen, you may contact our Investor Relations department at (800) 343- 3736 regarding your account information, distributions, and other requests for information and reports. You are urged to thoroughly discuss an investment in our Interests with your financial, tax, and legal advisors. For a more detailed discussion, please refer to the "Where You Can Find More Information" section of this prospectus beginning on page 119.
