<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
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 0-9727
CORPORATE PROPERTY ASSOCIATES 2
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
CALIFORNIA 13-3022196
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
(Address of principal executive offices) (Zip Code)
</TABLE>
(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> 2
CORPORATE PROPERTY ASSOCIATES 2
(a California limited partnership)
PART I
Item 1. - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
----------- -----------
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land and buildings, net of
accumulated depreciation of
$5,850,679 at December 31, 1996 and $11,756,075 $11,020,427
$5,844,629 at March 31, 1997
Net investment in direct
financing leases 20,259,530 20,314,462
Real estate held for sale 1,024,095
Cash and cash equivalents 1,066,861 850,828
Other assets 600,057 719,674
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Total assets $33,682,523 $33,929,486
=========== ===========
LIABILITIES:
Mortgage notes payable $ 7,787,061 $ 7,570,856
Accrued interest payable 75,233 72,155
Accounts payable and accrued expenses 66,050 78,670
Prepaid rental income and security deposits 283,694 283,694
Accounts payable to affiliates 63,447 57,706
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Total liabilities 8,275,485 8,063,081
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PARTNERS' CAPITAL:
General Partners 208,334 212,928
Limited Partners (54,900 Limited Partnership
Units issued and outstanding) 25,198,704 25,653,477
----------- -----------
Total partners' capital 25,407,038 25,866,405
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Total liabilities and
partners' capital $33,682,523 $33,929,486
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date.
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CORPORATE PROPERTY ASSOCIATES 2
(a California limited partnership)
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental income from operating leases $ 425,582 $ 534,986
Interest income from direct financing leases 672,229 676,101
Other interest income 10,710 15,827
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1,108,521 1,226,914
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Expenses:
Interest 179,948 141,205
Depreciation 125,233 129,855
General and administrative 69,951 69,875
Property expenses 133,930 71,582
Amortization 2,175 1,785
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511,237 414,302
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Net income $ 597,284 $ 812,612
========== ==========
Net income allocated
to General Partners $ 5,973 $ 8,126
========== ==========
Net income allocated
to Limited Partners $ 591,311 $ 804,486
========== ==========
Net income per Unit:
(54,900 Limited
Partnership Units) $ 10.77 $ 14.65
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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CORPORATE PROPERTY ASSOCIATES 2
(a California limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1996 1997
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 597,284 $ 812,612
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 127,408 131,640
Interest income on direct financing leases
In excess of scheduled rents (46,986) (54,932)
Net change in operating assets and liabilities (26,916) (117,601)
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Net cash provided by operating activities 650,790 771,719
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Cash flows from investing activities:
Additional capitalized costs (418,302)
-----------
Net cash used in investing activities (418,302)
-----------
Cash flows from financing activities:
Distributions to partners (385,556) (353,245)
Payments of note payable to affiliate (250,000)
Payments on mortgage principal (256,142) (216,205)
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Net cash used in financing activities (891,698) (569,450)
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Net decrease in
cash and cash equivalents (240,908) (216,033)
Cash and cash equivalents, beginning of period 577,506 1,066,861
--------- -----------
Cash and cash equivalents, end of period $ 336,598 $ 850,828
========= ===========
Supplemental disclosure of cash flows information:
Interest paid $ 182,864 $ 144,283
========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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CORPORATE PROPERTY ASSOCIATES 2
(a California limited partnership)
NOTES TO CONSOLIDATED 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 (consisting of 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, 1996.
Note 2. Distributions to Partners:
Distributions declared and paid to partners during the three months ended March
31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
Quarter Ended General Partners Limited Partners Per Limited Partner Unit
- ----------------- ---------------- ---------------- ------------------------
<S> <C> <C> <C>
December 31, 1996 $3,532 $349,713 $6.37
====== ======== =====
</TABLE>
A distribution of $6.38 per Limited Partner Unit for the quarter ended March 31,
1997 was declared and paid in April 1997.
Note 3. Transactions with Related Parties:
For the three-month periods ended March 31,1996 and 1997, the Partnership
incurred management fees of $22,460 and $33,135, respectively, and general and
administrative expense reimbursements of $15,179 and $15,354, respectively,
payable to an affiliate. Management believes that ultimate payment of a
preferred return to the General Partners of $1,048,845, based upon cumulative
proceeds of sales of assets, is reasonably possible but not probable, as defined
pursuant to Statement of Financial Accounting Standards No. 5.
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 three months ended March
31, 1996 and 1997 were $16,084 and $12,028, respectively.
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CORPORATE PROPERTY ASSOCIATES 2
(a California limited partnership)
NOTES TO CONSOLIDATED 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 three-month periods ended March
31, 1996 and 1997, the Partnership earned its total operating revenues (rental
income plus interest income from financing leases) from the following lease
obligors:
<TABLE>
<CAPTION>
1996 % 1997 %
---- --- ---- ---
<S> <C> <C> <C> <C>
Unisource Worldwide, Inc. $ 329,168 30% $ 329,168 27%
Prefinish Metals Incorporated 238,052 22 241,316 20
Gibson Greetings, Inc. 207,281 19 208,006 17
Cleo, Inc. 109,994 10 113,152 9
AT&T Corporation 73,984 7 74,073 6
New Valley Corporation 59,233 5 59,132 5
Excel Telecommunications, Inc. 52,241 4
B&G Contract Packaging, Inc. 42,000 4
Maybelline Products Co., Inc. 39,000 3 39,000 3
Sports & Recreation, Inc. 30,273 3
Other 41,099 4 22,726 2
---------- --- ---------- ---
$1,097,811 100% $1,211,087 100%
========== === ========== ===
</TABLE>
Note 5. Property in Moorestown, New Jersey:
In April 1997, the Partnership and Corporate Property Associates 3 ("CPA:3"), an
affiliate, who own a property in Moorestown, New Jersey as tenants-in-common
with 39% and 61% interests, respectively, entered into an agreement to sell the
property for $4,500,000 (of which the Partnership's share is approximately
$1,755,000), less selling costs.
The property is currently subject to a net lease with Sports & Recreation, Inc.
("Sports & Recreation"). During 1996, Sports & Recreation indicated to the
Partnership and CPA:3 that it had decided not to occupy the property and would
seek to terminate the lease. Sports & Recreation has continued to meet its lease
obligations.
The sales agreement provides the purchaser a period of 90 days to complete the
inspection of the property. If based on the inspections, the purchaser is not
satisfied, the purchaser may elect to terminate the sales agreement. The sale is
also contingent upon reaching a lease termination agreement with Sports and
Recreation and obtaining permits and approvals from the Township of Moorestown
prior to October 1, 1997. If all of the conditions are met, the sale will occur
between August 1, 1997 and December 15, 1997. There is no assurance that the
sale will be completed.
In connection with the proposed sale, the $1,024,095 carrying value of the
property has been classified as real estate held for sale.
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CORPORATE PROPERTY ASSOCIATES 2
(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 2
(a California limited partnership)
By: W.P. CAREY & CO., INC.
09/03/97 BY: /s/ Steven M. Berzin
- ---------------- ------------------------------------
Date Steven M. Berzin
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
09/03/97 BY: /s/ Claude Fernandez
- ---------------- ------------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
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