<PAGE>
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OMB APPROVAL
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UNITED STATES OMB Number 3235-0070
SECURITIES AND EXCHANGE COMMISSION Expires October 31, 1995
Washington, D.C. 20549 Estimated average burden
hours per response 190.00
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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 March 31, 1995
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or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
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Commission file number 0-11982
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CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership
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(Exact name of registrant as specified in its charter)
CALIFORNIA 13-3126150
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
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(Address of principal executive offices) (Zip Code)
(212) 492-1100
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(Registrant's telephone number, including area code)
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(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 4,
a California limited partnership
INDEX
Page No.
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PART I
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Item 1. - Financial Information*
Balance Sheets, December 31, 1994 and
March 31, 1995 2
Statements of Income for the three
months ended March 31, 1994 and 1995 3
Statements of Cash Flows for the three
months ended March 31, 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 4,
a California limited partnership
PART I
------
Item 1. - FINANCIAL INFORMATION
-------------------------------
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1994 1995
------------- ------------
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land and buildings, net of
accumulated depreciation of
$12,212,983 at December 31, 1994 and
$12,501,992 at March 31, 1995 $22,375,100 $22,102,027
Net investment in direct
financing leases 29,952,612 29,946,506
Cash and cash equivalents 2,509,451 2,505,908
Accrued interest and rents receivable 262,998 323,743
Other assets 1,007,653 1,112,616
----------- -----------
Total assets $56,107,814 $55,990,800
=========== ===========
LIABILITIES:
Mortgage notes payable $26,367,583 $26,034,789
Accrued interest payable 193,839 189,018
Accounts payable and accrued expenses 610,264 512,389
Accounts payable to affiliates 31,427 36,885
Prepaid rental income 119,118 164,718
----------- -----------
Total liabilities 27,322,231 26,937,799
----------- -----------
PARTNERS' CAPITAL:
General Partners (486,282) (470,237)
Limited Partners (85,568 Limited
Partnership Units issued and
outstanding) 29,271,865 29,523,238
----------- -----------
Total partners' capital 28,785,583 29,053,001
----------- -----------
Total liabilities and
partners' capital $56,107,814 $55,990,800
=========== ===========
</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 4,
a California limited partnership
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1994 March 31, 1995
------------------ --------------
<S> <C> <C>
Revenues:
Rental income from operating leases $ 800,557 $ 808,127
Interest income from direct financing
leases 1,353,970 1,353,017
Other interest income 24,656 26,658
Revenue of hotel operations 784,107 996,893
Other income 42,792
---------- ----------
2,963,290 3,227,487
---------- ----------
Expenses:
Interest on mortgages 594,678 594,519
Depreciation 282,920 289,009
General and administrative 118,182 140,263
Property expenses 148,519 93,130
Amortization 31,130 31,150
Operating expenses of hotel
operations 503,136 589,468
---------- ----------
1,678,565 1,737,539
---------- ----------
Net income $1,284,725 $1,489,948
========== ==========
Net income allocated to
General Partners $ 77,083 $ 89,397
========== ==========
Net income allocated to
Limited Partners $1,207,642 $1,400,551
========== ==========
Net income per Unit
(85,568 Limited
Partnership Units) $14.11 $16.37
====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 3 -
<PAGE>
CORPORATE PROPERTY ASSOCIATES 4,
a California limited partnership
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1994 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,284,725 $ 1,489,948
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 314,050 320,159
Other noncash items 5,154 3,152
Net change in operating assets and
liabilities 141,956 (245,542)
----------- -----------
Net cash provided by operating activities 1,745,885 1,567,717
----------- -----------
Cash flows from investing activities:
Additional capitalized costs (274,643) (15,936)
----------- -----------
Net cash used in investing activities (274,643) (15,936)
----------- -----------
Cash flows from financing activities:
Distributions to partners (1,217,979) (1,222,530)
Payments on mortgage principal (257,443) (332,794)
----------- -----------
Net cash used in financing activities (1,475,422) (1,555,324)
----------- -----------
Net decrease in cash and cash
equivalents (4,180) (3,543)
Cash and cash equivalents, beginning of
period 3,629,949 2,509,451
----------- -----------
Cash and cash equivalents, end of period $ 3,625,769 $ 2,505,908
=========== ===========
Supplemental disclosure of cash flows information:
Interest paid $ 613,533 $ 599,340
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 4 -
<PAGE>
CORPORATE PROPERTY ASSOCIATES 4,
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 (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,
1994.
Note 2. Distributions to Partners:
-------------------------
Distributions declared and paid to partners during the three months ended
March 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
Quarter Ended General Partners Limited Partners Per Limited Partner Unit
---------------- ---------------- ---------------- ------------------------
<S> <C> <C> <C>
December 31, 1994 $73,352 $1,149,178 $13.43
======= ========== ======
</TABLE>
A distribution of $13.44 per Limited Partner Unit for the quarter ended
March 31, 1995 was declared and paid in April 1995.
Note 3. Transactions with Related Parties:
---------------------------------
For the three-month periods ended March 31, 1994 and 1995, the Partnership
incurred management fees of $28,692 and $27,003, respectively, and general
and administrative expense reimbursements of $48,788 and $32,340,
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 three
months ended March 31, 1994 and 1995 were $12,411 and $44,386,
respectively.
- 5 -
<PAGE>
CORPORATE PROPERTY ASSOCIATES 4,
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 and the operation of a hotel
business. For the three-month periods ended March 31, 1994 and 1995, the
Partnership earned its total lease revenues (rental income plus interest
income from financing leases) from the following lease obligors:
<TABLE>
<CAPTION>
1994 % 1995 %
---------- ---- ---------- ----
<S> <C> <C> <C> <C>
Genesco, Inc. $ 523,755 24% $ 523,755 24%
Simplicity Manufacturing, Inc. 499,178 23 499,178 23
Hughes Markets, Inc. 357,355 17 357,355 17
Brodart Co. 331,037 15 330,085 15
Continental Casualty Company 177,257 8 185,727 9
Family Dollar Stores, Inc. 140,400 7 136,800 6
Petrocon Engineering, Inc. 89,367 4 92,066 4
Winn-Dixie Stores, Inc. 36,178 2 36,178 2
---------- --- ---------- ---
$2,154,527 100% $2,161,144 100%
========== === ========== ===
</TABLE>
Operating results of the hotel for the three-month periods ended March 31,
1994 and March 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Revenues $ 784,107 $ 996,893
Fees paid to hotel management company (25,857) (36,425)
Other operating expenses (477,279) (553,043)
--------- ---------
Hotel operating income $ 280,971 $ 407,425
========= =========
</TABLE>
Note 5. Property Leased to Agency Management Systems, Inc.:
--------------------------------------------------
The Partnership and Agency Management Systems, Inc. ("Agency Management"),
which leases a property in College Station, Texas, and the lease guarantor,
Continental Casualty Company, agreed to amend the existing lease effective
February 1, 1995, subject to the consent of the property's mortgage lender.
In exchange for the Partnership's funding of approximately $105,000 in
capital improvements at the property, Agency Management's monthly rental
increased from $59,086 to $61,844. The amended lease also provides for a
scheduled rental increase on August 1, 1996 to $64,306 per month through
October 31, 1998 at which time the lease term expires. The mortgage lender
consented to the transaction on April 27, 1995.
- 6 -
<PAGE>
CORPORATE PROPERTY ASSOCIATES 4,
a California limited partnership
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS
-----------------------------------------------
Net income for the three-month period ended March 31, 1995 increased by
$205,000 as compared with net income for the three-month period ended March
31, 1994. The increase is due to an increase in earnings of $126,000 from
hotel operations, other income of $43,000 and a significant decrease in
property expenses. The increase in hotel earnings resulted from the
ability of the hotel's new manager to increase the average daily room rate
for noncorporate customers with no significant change in occupancy rates,
which reflected a modest increase to 86%. Other income reflects a
concession allowed to the Partnership by a vendor which had been accrued as
a payable at December 31, 1994. Property expenses decreased due to costs
incurred in 1994 in connection with the assessment of liquidity
alternatives. Lease revenues were unchanged for the comparable periods.
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 $2,506,000 and cash provided from operating activities will
be sufficient to meet the Partnership's current cash requirements which
currently consist solely of paying quarterly distributions, meeting
scheduled debt service obligations and funding replacements of furniture,
fixtures and equipment for the hotel operations. As noted in the
Partnership's Annual Report on Form 10-K for the year ended December 31,
1994, future liquidity may be impacted by the anticipated termination of
the Hughes Markets, Inc. lease in April 1996 and the Partnership's share of
annual carrying costs for the property, which, if vacant, is estimated to
be $467,000. In addition, the Partnership's share of the upgrade necessary
to meet the Holiday Inn modernization plan is estimated to amount to
$300,000 and would need to be invested over the next two years if the
Partnership decides to retain its current Holiday Inn franchise.
Management believes that such upgrade will be required even if the hotel
does not retain its affiliation as a Holiday Inn. Included in other assets
on the accompanying balance sheet at March 31, 1995, is a furniture,
fixture and equipment reserve account of $339,000 which would be available
to fund any necessary upgrade. The reserve account is funded by allocating
5% of hotel revenues to the reserve account. The Partnership amended its
lease with Agency Management Systems, Inc. in which the Partnership agreed
to fund improvements of approximately $105,000 in exchange for two
scheduled rent increases over the remaining term of the lease.
- 7 -
<PAGE>
CORPORATE PROPERTY ASSOCIATES 4,
a California limited partnership
PART II
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Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
(a) Exhibits:
None
(b) Reports on Form 8-K:
During the quarter ended March 31, 1995, the Partnership was
not required to file any reports on Form 8-K.
- 8 -
<PAGE>
CORPORATE PROPERTY ASSOCIATES 4,
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 4,
a California limited partnership
By: CAREY CORPORATE PROPERTY, INC.
05/10/95 By: /s/ Claude Fernandez
-------------- ------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
05/10/95 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 quarterly period ended March 31, 1995 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,505,908
<SECURITIES> 0
<RECEIVABLES> 323,743
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,112,616
<PP&E> 64,550,525
<DEPRECIATION> 12,501,992
<TOTAL-ASSETS> 55,990,800
<CURRENT-LIABILITIES> 903,010
<BONDS> 26,034,789
<COMMON> 0
0
0
<OTHER-SE> 29,053,001
<TOTAL-LIABILITY-AND-EQUITY> 55,990,800
<SALES> 0
<TOTAL-REVENUES> 3,227,487
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 553,552
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 594,519
<INCOME-PRETAX> 1,489,948
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,489,948
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,489,948
<EPS-PRIMARY> 16.37
<EPS-DILUTED> 16.37
</TABLE>
