<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1995
---------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
Commission file number 0-9174
------
CORPORATE PROPERTY ASSOCIATES
-----------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2572215
---------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
- - ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(212) 492-1100
---------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
<PAGE>
CORPORATE PROPERTY ASSOCIATES
(a California limited partnership)
INDEX
Page No.
--------
PART I
------
Item 1. - Financial Information*
Balance Sheets, December 31, 1994 and
September 30, 1995 2
Statements of Income for the three and nine
months ended September 30, 1994 and 1995 3
Statements of Cash Flows for the nine
months ended September 30, 1994 and 1995 4
Notes to Financial Statements 5-6
Item 2. - Management's Discussion of Operations 7
PART II
-------
Item 6. - Exhibits and Reports on Form 8-K 8
Signatures 9
*The summarized financial information contained herein is unaudited;
however in the opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included.
-1-
<PAGE>
CORPORATE PROPERTY ASSOCIATES
(a California limited partnership)
PART I
------
Item 1. - FINANCIAL INFORMATION
-------------------------------
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, SEPTEMBER 30,
1994 1995
------------- --------------
(Note) (UNAUDITED)
<S> <C> <C>
ASSETS:
Land and buildings, net of
accumulated depreciation of
$16,860,783 at December 31, 1994 and
$17,681,067 at September 30, 1995 $17,472,208 $16,651,924
Net investment in direct financing leases 4,919,462 4,892,114
Cash and cash equivalents 937,631 826,118
Accrued interest and rents receivable 366,095 379,244
Other assets 722,240 896,480
----------- -----------
Total assets $24,417,636 $23,645,880
=========== ===========
LIABILITIES:
Mortgage notes payable $16,306,218 $15,230,383
Accrued interest payable 202,920 193,512
Accounts payable and accrued expenses 181,118 76,353
Prepaid rental income and security deposits 198,611 198,146
Accounts payable to affiliates 31,234
----------- -----------
Total liabilities 16,888,867 15,729,628
----------- -----------
PARTNERS' CAPITAL:
General Partners (103,980) (100,105)
Limited Partners (40,000 Limited
Partnership Units issued and
outstanding) 7,632,749 8,016,357
----------- -----------
Total partners' capital 7,528,769 7,916,252
----------- -----------
Total liabilities and
partners' capital $24,417,636 $23,645,880
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Note: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date.
-2-
<PAGE>
CORPORATE PROPERTY ASSOCIATES
(a California limited partnership)
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
SEPTEMBER 30, 1994 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 SEPTEMBER 30, 1995
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income from
operating leases $ 978,854 $ 997,568 $2,918,227 $2,996,254
Interest from direct
financing leases 129,620 140,050 388,862 397,132
Other interest income 13,779 15,405 37,133 51,052
Other income 161,038
---------- ---------- ---------- ----------
1,122,253 1,153,023 3,344,222 3,605,476
---------- ---------- ---------- ----------
Expenses:
Interest on mortgages 397,095 373,014 1,200,996 1,156,127
Depreciation 276,695 270,387 830,040 820,284
General and
administrative 55,833 44,258 165,109 182,844
Property expense 153,670 19,706 354,805 70,053
Amortization 3,545 6,766 9,744 20,300
---------- ---------- ---------- ----------
886,838 714,131 2,560,694 2,249,608
---------- ---------- ---------- ----------
Net income $ 235,415 $ 438,892 $ 783,528 $1,355,868
========== ========== ========== ==========
Net income allocated
to General Partners $ 2,354 $ 4,389 $ 7,835 $ 13,559
========== ========== ========== ==========
Net income allocated
to Limited Partners $ 233,061 $ 434,503 $ 775,693 $1,342,309
========== ========== ========== ==========
Net income per Unit
(40,000 Limited
Partnership Units) $5.82 $10.87 $19.39 $33.56
===== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
CORPORATE PROPERTY ASSOCIATES
(a California limited partnership)
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1994 1995
------------ --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 783,528 $ 1,355,868
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 839,784 840,584
Other noncash items (21,683) (23,277)
Securities received in connection with settlement (44,561)
Net change in operating assets and liabilities 45,814 (191,767)
----------- -----------
Net cash provided by operating activities 1,647,443 1,936,847
----------- -----------
Cash flows from investing activities:
Purchase of note receivable (77,254)
-----------
Net cash used in investing activities (77,254)
-----------
Cash flows from financing activities:
Distributions to partners (951,516) (972,525)
Payments on mortgage principal (966,105) (1,075,835)
Deferred financing costs (272,746)
Proceeds from mortgage 2,400,000
Prepayment of mortgage payable (2,112,194)
----------- -----------
Net cash used in financing activities (1,902,561) (2,048,360)
----------- -----------
Net decrease in cash and cash equivalents (332,372) (111,513)
Cash and cash equivalents, beginning of period 1,359,019 937,631
----------- -----------
Cash and cash equivalents, end of period $ 1,026,647 $ 826,118
=========== ===========
Supplemental disclosure of cash flows information:
Interest paid $ 1,217,056 $ 1,165,535
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
CORPORATE PROPERTY ASSOCIATES
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Basis of Presentation:
---------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (including normal recurring accruals) considered necessary for
a fair presentation have been included. For further information, refer to
the financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-K for the year ended December 31,
1994.
Pursuant to SFAS No. 115 - Accounting for Certain Investments in Debt and
Equity Securities, marketable securities available for sale are reflected
in the accompanying financial statements at market value, with changes in
unrealized appreciation credited or charged to Partners' Capital. Included
in Partners' Capital at September 30, 1995 is unrealized appreciation of
$4,140.
Note 2. Distributions to Partners:
-------------------------
Distributions declared and paid to partners during the nine months ended
September 30, 1995 are summarized as follows:
<TABLE>
<CAPTION>
Quarter Ended General Partners Limited Partners Per Limited Partner Unit
- - ------------------------ ---------------- ---------------- ------------------------
<S> <C> <C> <C>
December 31, 1994 $3,208 $317,600 $7.94
====== ======== =====
March 31, 1995 $3,232 $320,000 $8.00
====== ======== =====
June 30, 1995 $3,285 $325,200 $8.13
====== ======== =====
</TABLE>
A distribution of $8.44 per Limited Partner Unit for the quarter ended
September 30, 1995 was declared and paid in October 1995.
Note 3. Transactions with Related Parties:
---------------------------------
For the three-month and nine-month periods ended September 30, 1994, the
Partnership incurred management fees of $16,050 and $47,038, respectively,
and general and administrative expense reimbursements of $13,540 and
$39,848, respectively, payable to an affiliate. For the three-month and
nine-month periods ended September 30, 1995, the Partnership incurred
management fees of $17,958 and $46,109, respectively and general and
administrative expense reimbursements of $11,136 and $34,052, respectively,
payable to an affiliate.
The Partnership, in conjunction with certain affiliates, is a participant
in a cost sharing agreement for the purpose of renting and occupying office
space. Under the agreement, the Partnership pays its proportionate share
of rent and other costs of occupancy. Net expenses incurred for the nine
months ended September 30, 1994 and 1995 were $9,848 and $46,242,
respectively.
-5-
<PAGE>
CORPORATE PROPERTY ASSOCIATES
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Note 4. Industry Segment Information:
----------------------------
The Partnership's operations consist of the investment in and the leasing
of industrial and commercial real estate. For the nine-month periods ended
September 30, 1994 and 1995, the Partnership earned its total operating
revenues (rental income plus interest income from financing leases) from
the following lease obligors:
<TABLE>
<CAPTION>
1994 % 1995 %
---------- ---- ---------- ----
<S> <C> <C> <C> <C>
Pre Finish Metals Incorporated $ 998,088 30% $1,056,425 31%
The Gap, Inc. 919,495 28 919,495 27
IMO Industries, Inc. 635,057 19 635,057 19
Unisource Worldwide, Inc. 249,082 8 257,352 7
Kobacker Stores, Inc. 227,655 7 227,655 7
Broomfield Tech Center Corporation 200,912 6 220,602 7
Winn-Dixie Stores, Inc. 76,800 2 76,800 2
---------- --- ---------- ---
$3,307,089 100% $3,393,386 100%
========== === ========== ===
</TABLE>
-6-
<PAGE>
CORPORATE PROPERTY ASSOCIATES
(a California limited partnership)
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS
-----------------------------------------------
Results of Operations:
----------------------
Net income for the three-month and nine-month periods ended September
30, 1995 increased by $203,000 and $572,000, respectively, as compared with
net income for the three-month and nine-month periods ended September 30,
1994. For the nine-month period ended September 30, 1995 approximately
$161,000 of the increase in net income resulted from the effect of
nonrecurring events which are included as Other income in the accompanying
financial statements. Other income included a concession of $42,000
allowed to the Partnership by a vendor during the first quarter which had
been accrued as a payable at December 31, 1994, and $119,000 realized in
connection with the final distribution from the Storage Technology
Corporation ("STC") bankruptcy; STC had been a tenant of three of the
Partnership's properties until 1987, at which time the STC lease was
terminated pursuant to the order of the bankruptcy court. Net of the
effect of the above-mentioned nonrecurring items, net income for the nine-
month period ended September 30, 1995 would have reflected an increase of
$411,000. The nonrecurring items did not impact the comparable three-month
periods.
The increase in income, net of nonrecurring items for both the three-
month and nine-month periods was primarily due to the decrease in property
expense. The decrease was due to costs incurred in 1994 in connection with
the assessment of liquidity alternatives. Property expenses for the three-
month and nine-month periods ended September 30, 1995 are generally
expected to be more representative of future property expenses in the near-
term than the property expenses incurred for the periods ended September
30, 1994. For both the three-month and nine-month periods ended September
30, 1995, the Partnership benefitted from moderate increases in lease
revenues and moderate decreases in interest expense. Lease revenue
increased as a result of an increase in rents received from Pre Finish
Metals Incorporated ("Pre Finish"). Revenue from the Pre Finish lease
increased due to a direct pass through of higher debt service payments on
the related mortgage loan. Increases in debt service on the Pre Finish
mortgage loan were due to increasing principal payments. In addition,
there was an increase in rent from Broomfield Tech Center Corporation
("Broomfield") which increase was negotiated under the 1994 lease
modification agreement with Broomfield. The decrease in interest expense
is due to the declining balances of the Partnership's mortgage loans. The
trend of decreases in interest expense is expected to continue as the
Partnership's mortgages continue to amortize.
Financial Condition:
--------------------
There has been no material change in the Partnership's financial
condition since December 31, 1994 and Management believes that the current
cash balance of $826,000 and cash provided from operating activities will
be sufficient to meet the Partnership's current cash requirements which
consist solely of paying quarterly distributions and meeting scheduled debt
service obligations. Cash provided from operations was sufficient to fund
distributions of $973,000 and $964,000 of the $1,076,000 of principal
payment installments. Amortization of mortgage principal during the
current nine-month period increased to $1,076,000 and represented payment
of 7% of the mortgage principal balance at the beginning of the nine-month
period. In August 1995, the Partnership agreed to extend the maturity of a
$77,253 promissory note, purchased in connection with the 1994 refinancing
of the mortgage loan collateralized by the Broomfield properties, to April
1996. In September 1995, the mortgage loan collateralized by the Unisource
Worldwide, Inc. property fully amortized and, as a result of the
satisfaction of the mortgage, net annual cash flow from that property will
increase by $80,000.
-7-
<PAGE>
CORPORATE PROPERTY ASSOCIATES
(a California limited partnership)
PART II
-------
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
(a) Exhibits:
None
(b) Reports on Form 8-K:
During the quarter ended September 30, 1995, the Partnership was
not required to file any reports on Form 8-K.
-8-
<PAGE>
CORPORATE PROPERTY ASSOCIATES
(a California limited partnership)
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES
(a California limited partnership)
By: W.P. CAREY & CO., INC.
11/09/95 By: /s/ Claude Fernandez
-------------- -----------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
11/09/95 By: /s/ Michael D. Roberts
-------------- ----------------------------
Date Michael D. Roberts
First Vice President and Controller
(Principal Accounting Officer)
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Form 10-Q
for the nine months ended September 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 826,118
<SECURITIES> 48,701
<RECEIVABLES> 379,244
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 847,779
<PP&E> 39,225,105
<DEPRECIATION> 17,681,067
<TOTAL-ASSETS> 23,645,880
<CURRENT-LIABILITIES> 499,245
<BONDS> 15,230,383
<COMMON> 0
0
0
<OTHER-SE> 7,916,252
<TOTAL-LIABILITY-AND-EQUITY> 23,645,880
<SALES> 0
<TOTAL-REVENUES> 3,605,476
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 252,897
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,156,127
<INCOME-PRETAX> 1,355,868
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,355,868
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,355,868
<EPS-PRIMARY> 33.56
<EPS-DILUTED> 33.56
</TABLE>
