<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended DECEMBER 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-11948
CORPORATE PROPERTY ASSOCIATES 5
(Exact name of registrant as specified in its charter)
CALIFORNIA 13-3164925
(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)
Registrant's telephone number, including area code (212) 492-1100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP UNITS
(Title of Class)
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates of
Registrant: There is no active market for Limited Partnership Units.
<PAGE> 2
PART I
Item 1. Business.
Registrant is engaged in the business of investing in commercial and
industrial real estate properties which are net leased to commercial and
industrial entities. Registrant was organized as a California limited
partnership on April 12, 1983. The General Partners of Registrant are Carey
Corporate Property, Inc. (the "Corporate General Partner"), a Delaware
corporation and William Polk Carey (the "Individual General Partner"). The
Corporate General Partner is 79.9% owned by W. P. Carey & Co., Inc. ("W.P.
Carey"), 10.1% owned by William P. Carey ("Carey") and 10% by Lehman Brothers,
Inc. Affiliates of the Corporate General Partner and the Individual General
Partner are also the General Partners of affiliates of Registrant, Corporate
Property Associates ("CPA(R):1"), Corporate Property Associates 2 ("CPA(R):2"),
Corporate Property Associates 3 ("CPA(R):3"), Corporate Property Associates 4, a
California limited partnership ("CPA(R):4"), Corporate Property Associates 6 - a
California limited partnership ("CPA(R):6"), Corporate Property Associates 7 - a
California limited partnership ("CPA(R):7"), Corporate Property Associates 8,
L.P., a Delaware limited partnership ("CPA(R):8"), Corporate Property Associates
9, L.P., a Delaware limited partnership ("CPA(R):9"), and the advisor of
Corporate Property Associates 10 Incorporated ("CPA(R):10"), Carey Institutional
Properties Incorporated ("CIP(TM)") and Corporate Property Associates 12
Incorporated ("CPA(R):12"). Registrant has a management agreement with Carey
Corporate Property Management Company ("Carey Management"), a division of W.P.
Carey. According to the terms of this agreement, Carey Management performs a
variety of management services for Registrant. Registrant has entered into an
agreement with Fifth Rock L.P., an affiliate, for the purpose of leasing office
space. Reference is made to the Prospectus of Registrant dated August 2, 1983,
as supplemented by a Supplement dated September 29, 1983, filed pursuant to
Rules 424(b) and 424(c), respectively, under the Securities Act of 1933 and
incorporated herein by reference (said Prospectus, as so supplemented, is
hereinafter called the "Prospectus").
Registrant has two industry segments consisting of the investment in
and the leasing of industrial and commercial real estate and the operation of a
hotel business at two properties. See Selected Financial Data in Item 6 and
Management's Discussion and Analysis in Item 7 for a summary of Registrant's
operations. By assuming the operation of the hotel businesses from former
tenants, Management intends to preserve the value of the underlying investment
while generating a contribution to Registrant's operating cash flow. Also see
the material contained in the Prospectus under the heading INVESTMENT OBJECTIVES
AND POLICIES.
The properties owned by Registrant are described in Item 2.
Registrant's entire net proceeds from the public offering, less a working
capital reserve have been fully invested in net leased commercial and industrial
real estate since March 17, 1988, the date of Registrant's final real estate
acquisition.
Except for the two hotel properties, Registrant's properties are
leased to corporate tenants under net leases. A net lease generally requires
tenants to pay all operating expenses relating to the leased properties
including maintenance, real estate taxes, insurance and utilities which under
other forms of leases are often paid by the lessor. Lessees are required to
include Registrant as an additional insured party on all insurance policies
relating to the leased properties. In addition, substantially all of the net
leases include indemnification provisions which require the lessees to indemnify
Registrant and the General Partners for liabilities on all matters related to
the leased properties. Registrant believes that the insurance and indemnity
provided on its behalf by its lessees provides adequate coverage for property
damage and any liability claims which may arise against Registrant's ownership
interests. In addition to the insurance and indemnification provisions of the
leases, Registrant has contingent property and liability insurance on its leased
properties and primary property and liability coverages on its two hotel
properties. Management believes that its insurance is adequate. To the extent
that any lessees are not financially able to satisfy indemnification obligations
which exceed insurance reimbursements, Registrant may incur the costs necessary
to repair property and settle liabilities.
As described above, lessees generally retain the obligation for the
operating expenses of their leased properties so that, other than rental income,
there are no significant operating data reportable on Registrant's leased
properties. Current rental income is reported in Note 9 to the Financial
Statements in Item
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<PAGE> 3
8. As discussed in Item 7, Management's Discussion and Analysis, Registrant's
leases generally provide for periodic rent increases which are either fixed or
based on formulas indexed to increases in the Consumer Price Index. Leases
provide for purchase options which are exercisable between 1997 and 1999 on
properties leased to Stoody Deloro Stellite, Inc. ("Stoody"), Arley Merchandise
Corporation and Gould, Inc. ("Gould"), respectively. The purchase options
generally provide for an exercise price based on the greater of fair market
value, as defined in the lease, or a stated amount. Stoody has the option to
purchase its leased property in December 1997 at a purchase price of the greater
of $3,000,000 or fair market value.
As Registrant's objective has been to invest in properties which are
occupied by a single corporate tenant and subject to long-term net leases with
such lease obligation backed by the credit of the corporate lessee, Registrant's
properties are not generally subject to the competitive conditions of local and
regional real estate markets. In selecting its real estate investments,
Registrant's strategy was to identify properties of material importance to the
lessee so that the lessee may be more likely to extend its lease beyond the
initial term or exercise a purchase option if such option was provided for in
the lease agreement. None of Registrant's leases expire until 1998. Registrant
is more likely to be affected by the financial condition of its lessees rather
than the competitive conditions of the real estate marketplace. Registrant's
strategy has been to diversify its investments among tenants, property types and
industries with geographical diversification being only a secondary objective.
The Alpena, and Petoskey businesses are seasonal in nature with occupancy rates
for the year ended December 31, 1996 of 58% and 49%, respectively. The occupancy
rates increased by 6% for Alpena and 14% Petoskey from that of the prior year.
Registrant sold the Rapid City hotel in October 1996.
During 1996, Registrant sold a multi-tenant office building in
Helena, Montana, a property formerly leased to GATX Logistics, Inc. ("GATX") and
the Rapid City, South Dakota hotel. In connection with these sales, the related
mortgages were either assumed by the purchaser or satisfied with sales proceeds.
Additionally, Registrant paid off mortgage loans on the Gould, Exide Electronics
Corporation and Stoody properties.
For the year ended December 31, 1996, revenues from properties
occupied by lease obligors which accounted for 10% or more of the revenues of
the industrial and commercial real estate segment of Registrant were as follows:
Gould 18%; Spreckels Industries, Inc., 15% and DeVlieg Bullard, Inc., 14%. No
other property owned by Registrant accounted for 10% or more of its total real
estate operating revenue during 1996. Revenues from the industrial and
commercial real estate segment represent approximately 50% of total revenues.
See Note 9 to the Financial Statements in Item 8.
For the year ended December 31, 1996, gross revenues from the hotel
operations business segment were $6,360,000 (approximately 48% of total
revenues). The 1996 gross revenues include the operations from the hotel
property in Rapid City, South Dakota through the date of sale, October 1, 1996.
In 1994, Registrant voluntarily conducted Phase II reviews of
certain of its properties based on the results of the Phase I environmental
reviews contracted for in 1993. Registrant believes, based on the results of
such reviews, that its leased properties are in substantial compliance with
Federal and state environmental statutes and regulations. Portions of certain
properties have been documented as having a limited degree of contamination,
principally in connection with either leakage from underground storage tanks or
surface spills from facility activities. Phase II investigations have been
recommended for some properties based upon the Phase I reports. For those
conditions which were identified, Registrant advised its tenants of such
findings and of their obligations, if any, to perform any required remediation.
Tenants are generally subject to environmental statutes and regulations
regarding the discharge of hazardous materials and any related remediation
obligations. In addition, Registrant's leases generally require tenants to
indemnify Registrant from all liabilities and losses related to the leased
properties. Accordingly, Management believes that the ultimate resolution of the
aforementioned environmental matters will not have a material effect on
Registrant's financial condition, liquidity or results of operations.
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<PAGE> 4
Registrant does not have any employees. The Corporate General
Partner of Registrant together with its affiliates employ twelve individuals who
perform accounting, secretarial and transfer services for Registrant. Gemisys,
Inc. performs certain transfer services for Registrant and The Bank of New York
performs certain banking services for Registrant. In addition, Registrant has
entered into an agreement with Carey Management pursuant to which Carey
Management provides certain management services to Registrant. W.P. Carey has
substantially the same officers as the Corporate General Partner.
Item 2. Properties.
<TABLE>
<CAPTION>
LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
- ---------------- ---------------- -------- -----------------
<S> <C> <C> <C>
SPRECKELS INDUSTRIES Manufacturing and Forrest City, Ownership of land
INC. Office Facility Arkansas and building
ARLEY MERCHANDISE Manufacturing Columbia and Ownership of land
CORPORATION Facilities - Sumter, South and buildings (1)
2 locations Carolina
ROCHESTER BUTTON Manufacturing Kenbridge, Ownership of land
COMPANY Facilities - South Boston, and buildings (2)
2 locations Virginia
PENN VIRGINIA Office and Duffield, Ownership of land
CORPORATION Manufacturing Virginia and building (3)
Facilities - Cuyahoga Falls,
3 locations Ohio and
Broomall,
Pennsylvania
(4) Hotels Petoskey and Ownership of 65%
Alpena, interest in land
Michigan and buildings (1)
EXIDE ELECTRONICS Office and Raleigh, Ownership of land
CORPORATION Research Facility North Carolina and building
HARCOURT GENERAL Movie Theater Canton, Ownership of land
CORPORATION Michigan and building (3)
INNO TECH Office, and Manufac- Elyria, Ownership of land
INDUSTRIES, INC. turing Facility Ohio and buildings
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
- ---------------- ---------------- -------- -----------------
<S> <C> <C> <C>
GOULD, INC. Manufacturing and Oxnard, Ownership of land
Research Facility California and building
DEVLIEG BULLARD, INC. Manufacturing Frankenmuth, Ownership of land
Facilities - Michigan and buildings (3)
2 locations McMinnville,
Tennessee
PENBERTHY Manufacturing Prophetstown, Ownership of land
PRODUCTS, INC. Facility Illinois and building (3)
STOODY DELORO Manufacturing Goshen, Ownership of land
STELLITE, INC. Facility Indiana and building
WINN-DIXIE Supermarket Montgomery, Ownership of land
STORES, INC. Alabama and buildings (3)
SUNDS DEFIBRATOR Manufacturing Carthage, Ownership of land
WOODHANDLING, INC. Facility New York and buildings
(formerly FMP/RAUMA, CO.)
</TABLE>
(1) These properties are encumbered by mortgage notes payable.
(2) These properties are subject to a mortgage as collateral for loans issued
by unaffiliated parties to the lessee.
(3) These properties are encumbered by mortgages and/or lease assignments in
connection with mortgage notes payable on other of Registrant's properties.
(4) Registrant operates a hotel business at these properties.
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<PAGE> 6
The material terms of Registrant's leases with its significant
tenants are summarized in the following table:
<TABLE>
<CAPTION>
Registrant's
Share Current Lease
Lease of Current Square Rent Per Expiration Renewal Ownership Terms of Gross
Obligor Annual Rents Footage Sq.Ft. (Mo/Year) Terms Interest Purchase Option Costs (1)
- ------- ------------ ------- -------- ---------- ------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Spreckels $1,020,717 265,000 $3.85 12/12 YES 100% The greater of $5,500,000
Industries, fair market value
Inc. or $5,500,000.
Gould, 1,215,000 142,796 8.51 11/99 YES 100 Fair market value 9,875,087
Inc.
DeVlieg 953,803 409,391 2.33 04/06 YES 100 The greater of 5,092,699
Bullard, fair market value
Inc. or the sum of the
purchase price, of
$5,075,000, and any
mortgage prepayment
premium.
Arley 600,000 255,600 3.56 06/02 YES 100 The greater of 7,808,555
Merchandise fair market value
Corporation or the unpaid principal
balance due on the
mortgage loan.
Penn Virginia 498,750 116,059 4.30 08/99 YES 100 The greater of 3,703,112
Corporation fair market value
of $3,700,000.
</TABLE>
(1) Includes original cost of investment and net increases or decreases to net
investment subsequent to purchase.
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<PAGE> 7
The material terms on the mortgage debt of Registrant's properties
is summarized in the following table:
<TABLE>
<CAPTION>
Mortgage
Annual Interest Balance Annual Debt Maturity Estimated Payment
Lease Obligor Rate 12/31/95 Service Date Due at Maturity Prepayment Provisions
- ----------------- --------------- -------- ----------- -------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Arley Merchandise
Corporation 10.00% $ 4,754,940 $570,000 06/95 $4,619,000
Alpena, Michigan
hotel property 6.60 - 94,764,500(1) 519,591 9/97-9/15 257,250(1)
Petoskey, Michigan
hotel property 6.60 - 94,764,500(1) 519.591 9/97-9/15 257,250(1)
</TABLE>
(1) Financing consists of a series of bonds maturing between 1997 and 2015 with
interest rates varying from 6.6% to 9%.
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<PAGE> 8
Item 3. Legal Proceedings.
As of the date hereof, Registrant is not party 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, 1996 to a vote of security holders, through the solicitation of
proxies or otherwise.
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 28 of Registrant's Annual Report contained in
Appendix A.
Item 6. Selected Financial Data.
Selected Financial Data are hereby incorporated by reference to page
1 of Registrant'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 5 of Registrant's Annual Report contained in Appendix A.
Item 8. Financial Statements and Supplementary Data.
The following financial statements and supplementary data are hereby
incorporated by reference to pages 6 to 21 of Registrant's Annual Report
contained in Appendix A:
(i) Report of Independent Accountants.
(ii) Balance Sheets as of December 31, 1995 and 1996.
(iii) Statements of Income for the years ended December 31, 1994, 1995 and 1996.
(iv) Statements of Partners' Capital for the years ended December 31, 1994,
1995 and 1996.
(v) Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996.
(vi) Notes to Financial Statements.
Item 9. Disagreements on Accounting and Financial Disclosure.
NONE
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<PAGE> 9
PART III
Item 10. Directors and Executive Officers of the Registrant.
Registrant has no officers or directors. The directors and executive
officers of the Corporate General Partner are as follows:
<TABLE>
<CAPTION>
Has Served as a
Director and/or
Name Age Positions Held Officer Since (1)
---- --- -------------- -----------------
<S> <C> <C> <C>
William Polk Carey 66 Chairman of the Board 4/84
Director
Francis J. Carey 71 President 4/84
Director
George E. Stoddard 80 Chairman of the Investment Committee 4/84
Director
Madelon DeVoe Talley 65 Vice Chairman of the Board 4/86
Director
Lawrence R. Klein 76 Chairman of the Economic Policy 4/84
Committee
Director
Barclay G. Jones III 36 Executive Vice President 4/84
Director
Claude Fernandez 44 Executive Vice President 4/84
Chief Administrative Officer
H. Augustus Carey 39 Senior Vice President 8/88
Anthony S. Mohl 34 Senior Vice President 9/87
John J. Park 32 Senior Vice President 7/91
Treasurer
Michael D. Roberts 45 First Vice President 4/89
Controller
</TABLE>
(1) Each officer and director of the Corporate General Partner will hold office
until the next annual meeting of the Board of Directors and thereafter
until his successor shall have been elected and shall have qualified or
until his prior death, resignation or removal.
William Polk Carey and Francis J. Carey are brothers. H. Augustus
Carey is the nephew of William Polk Carey and the son of Francis J. Carey.
A description of the business experience of each officer and
director of the Corporate General Partner is set forth below:
William Polk Carey, Chairman and Chief Executive Officer, has been
active in lease financing since 1959 and a specialist in net leasing of
corporate real estate property since 1964. Before founding W.P. Carey & Co.,
Inc. ("W.P. Carey") in 1973, he served as Chairman of the Executive Committee of
Hubbard,
-8-
<PAGE> 10
Westervelt & Mottelay (now Merrill Lynch Hubbard), head of Real Estate and
Equipment Financing at Loeb Rhoades & Co. (now Lehman Brothers), head of Real
Estate and Private Placements, Director of Corporate Finance and Vice Chairman
of the Investment Banking Board of duPont Glore Forgan Inc. A graduate of the
University of Pennsylvania's Wharton School of Finance and Commerce, Mr. Carey
is a Governor of the National Association of Real Estate Investment Trusts
(NAREIT). He also serves on the boards of The Johns Hopkins University, The
James A. Baker III Institute for Public Policy at Rice University, Templeton
College of Oxford University and other educational and philanthropic
institutions. He founded the Visiting Committee to the Economics Department of
the University of Pennsylvania and co-founded with Dr. Lawrence R. Klein the
Economics Research Institute at that University. Mr. Carey is also a Director of
CPA(R):10, CIP(TM) and CPA(R):12.
Francis J. Carey was elected President and a Managing Director of
W.P. Carey in April 1987, having served as a Director since its founding in
1973. Prior to joining the firm full-time, he was a senior partner in
Philadelphia, head of the Real Estate Department nationally and a member of the
executive committee of the Pittsburgh based firm of Reed Smith Shaw & McClay,
counsel for Registrant, the General Partners, the CPA(R) Partnerships, W.P.
Carey and some of its affiliates. He served as a member of the Executive
Committee and Board of Managers of the Western Savings Bank of Philadelphia from
1972 until its takeover by another bank in 1982 and is former chairman of the
Real Property, Probate and Trust Section of the Pennsylvania Bar Association.
Mr. Carey served as a member of the Board of Overseers of the School of Arts and
Sciences of the University of Pennsylvania from 1983 through 1990. He has also
served as a member of the Board of Trustees of the Investment Program
Association since 1990 and on the Business Advisory Council of the Business
Council for the United Nations since 1994. He holds A.B. and J.D. degrees from
the University of Pennsylvania. Mr. Carey is also a Director of CPA(R):10 and
CIP(TM).
George E. Stoddard, Chief Investment Officer, was until 1979 head of
the bond department of The Equitable Life Assurance Society of the United
States, with responsibility for all activities related to Equitable's portfolio
of corporate investments acquired through direct negotiation. Mr. Stoddard was
associated with Equitable for over 30 years. He holds an A.B. degree from
Brigham Young University, an M.B.A. from Harvard Business School and an LL.B.
from Fordham University Law School.
Madelon DeVoe Talley, Vice Chairman, is a member of the New York
State Controller's Investment Committee, a Commissioner of the Port Authority of
New York and New Jersey, former CIO of New York State Common Retirement Fund and
a Trustee of the New York State Teachers Retirement System. She also served as a
managing director of Rothschild, Inc. and as the President of its asset
management division. Mrs. Talley was also a former Governor of the N.A.S.D. and
a director of Biocraft Laboratories, a New York Stock Exchange company. She is
an alumna of Sarah Lawrence College and the graduate school of International and
Public Affairs at Columbia University.
Lawrence R. Klein, Chairman of the Economic Policy Committee since
1984, is Benjamin Franklin Professor of Economics Emeritus at the University of
Pennsylvania, having joined the faculty of Economics and the Wharton School in
1958. He holds earned degrees from the University of California at Berkeley and
Massachusetts Institute of Technology and has been awarded the Nobel Prize in
Economics as well as over 20 honorary degrees. Founder of Wharton Econometric
Forecasting Associates, Inc., Dr. Klein has been counselor to various
corporations, governments, and government agencies including the Federal Reserve
Board and the President's Council of Economic Advisers.
Barclay G. Jones III, Executive Vice President, Managing Director,
and head of the Investment Department. Mr. Jones joined W.P. Carey as Assistant
to the President in July 1982 after his graduation from the Wharton School of
the University of Pennsylvania, where he majored in Finance and Economics. He
was elected to the Board of Directors of W.P. Carey in April 1992. Mr. Jones is
also a Director of the Wharton Business School Club of New York.
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<PAGE> 11
Claude Fernandez, Chief Administrative Officer, Managing Director,
and Executive Vice President, joined W.P. Carey in 1983. Previously associated
with Coldwell Banker, Inc. for two years and with Arthur Andersen & Co., he is a
Certified Public Accountant. Mr. Fernandez received his B.S. degree in
accounting from New York University in 1975 and his M.B.A. in finance from
Columbia University Graduate School of Business in 1981.
H. Augustus Carey, Senior Vice President, returned to W.P. Carey in
1988 and is President of W.P. Carey's broker-dealer subsidiary. Mr. Carey
previously worked for W.P. Carey from 1979 to 1981 as Assistant to the
President. Prior to rejoining W.P. Carey, Mr. Carey served as a loan officer of
the North American Department of Kleinwort Benson Limited in London, England.
He received an A.B. from Amherst College in 1979 and an M.Phil. in Management
Studies from Oxford University in 1984. Mr. Carey is a trustee of the Oxford
Management Centre Associates Council.
Anthony S. Mohl, Senior Vice President and Director of Portfolio
Management, joined W.P. Carey & Co., in 1987 as Assistant to the President after
receiving his M.B.A. from the Columbia University Graduate School of Business.
Mr. Mohl was employed as an analyst in the strategic planning group at Kurt
Salmon Associates after receiving an undergraduate degree from Wesleyan
University.
John J. Park, Senior Vice President, Treasurer and Director of
Research, joined W.P. Carey as an Investment Analyst in December 1987. Mr. Park
received his undergraduate degree from Massachusetts Institute of Technology and
his M.B.A. in Finance from New York University.
Michael D. Roberts joined W. P. Carey as a Second Vice President and
Assistant Controller in April 1989 and is currently First Vice President and
Controller. Prior to joining W.P. Carey, Mr. Roberts was employed by Coopers &
Lybrand for over 8 years, where he attained the title of audit manager. A
certified public accountant, Mr. Roberts received a B.A. in sociology from
Brandeis University and an M.B.A. from Northeastern University.
The officers and directors of W.P. Carey are substantially the same
as above.
Item 11. Executive Compensation.
Under the Amended Agreement of Limited Partnership of Registrant
(the "Agreement"), 5% of Distributable Cash From Operations is payable to the
Corporate General Partner and 1% of Distributable Cash From Operations is
payable to the Individual General Partner. The Corporate General Partner and the
Individual General Partner received $222,847 and $44,570 respectively, from
Registrant as their share of Distributable Cash From Operations during the year
ended December 31, 1996. As owner of 200 Limited Partnership Units, the
Corporate General Partner received cash distributions of $7,402 during the year
ended December 31, 1996. See Item 6 for the net income allocated to the General
Partners under the Agreement. Registrant is not required to pay, and has not
paid, any remuneration to the officers or directors of the Corporate General
Partner, W.P. Carey or any other affiliate of Registrant during the year ended
December 31, 1996.
In the future, the Corporate General Partner will continue to
receive 5% of Distributable Cash From Operations, the Individual General Partner
will continue to receive 1% of Distributable Cash From Operations and each
General Partner will continue to be allocated the same percentage of the profits
and losses of Registrant as had been allocated in the past. For a description of
the subordinated interest of the Corporate General Partner and the Individual
General Partner in Cash From Sales and Cash From Financings, reference is made
to the materials contained in the Prospectus under the heading MANAGEMENT
COMPENSATION.
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<PAGE> 12
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of December 31, 1996, no person owned of record or was known by
Registrant to own beneficially more than 5% of the Limited Partnership Units of
Registrant.
The following table sets forth as of March 15, 1997 certain
information as to the ownership by directors and executive officers of
securities of Registrant:
<TABLE>
<CAPTION>
Number of Units
Name of and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- -------------- ---------------- -------------------- --------
<S> <C> <C> <C>
Limited
Partnership Units William Polk Carey (1) 210 units .19%
Francis J. Carey
George E. Stoddard
Madelon DeVoe Talley
Barclay G. Jones III
Lawrence R. Klein
Claude Fernandez
H. Augustus Carey
Anthony S. Mohl
John J. Park
Michael D. Roberts
--- ---
All executive officers
and directors as a
group (11 persons) 210 units .19%
=== ===
</TABLE>
(1) As of March 15, 1997, the Corporate General Partner, Carey Corporate
Property, Inc. ("Carey Property"), owned 200 Limited Partnership Units of
Registrant. William Polk Carey, the majority shareholder of Carey
Property, is the beneficial owner of these Units.
There exists no arrangement, known to Registrant, the operation of
which may at a subsequent date result in a change of control of Registrant.
Item 13. Certain Relationships and Related Transactions.
For a description of transactions and business relationships between
Registrant and its affiliates and their directors and officers, see Notes 2
and 3 to the Financial Statements in Item 8. Michael B. Pollack, Senior Vice
President and Secretary of the Corporate General Partner, is a partner of Reed
Smith Shaw & McClay which is engaged to perform legal services for Registrant.
No officer or director of the Corporate General Partner, W.P. Carey
or any other affiliate of Registrant or any member of the immediate family or
associated organization of any such officer or director was indebted to
Registrant at any time since the beginning of Registrant's last fiscal year.
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<PAGE> 13
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements:
The following financial statements are filed as a part of this
Report:
Report of Independent Accountants.
Balance Sheets as of December 31, 1995 and 1996.
Statements of Income for the years ended December 31, 1994, 1995 and 1996.
Statements of Partners' Capital for the years ended December 31, 1994, 1995
and 1996.
Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996.
Notes to Financial Statements.
The financial statements are hereby incorporated by reference to pages 6
to 21 of Registrant's Annual Report contained in Appendix A.
(a) 2. Financial Statement Schedule:
The following schedule is filed as a part of this Report:
Schedule III -Real Estate and Accumulated Depreciation as of December 31,
1996.
Notes to Schedule III.
Schedule III and notes thereto are hereby incorporated by reference to pages
22 to 25 of Registrant's Annual Report contained in Appendix A.
Financial Statement Schedules other than those listed above
are omitted because the required information is given in the Financial
Statements or the Notes thereto, or because the conditions requiring their
filing do not exist.
-12-
<PAGE> 14
(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 Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
3.1 Amended Agreement of Limited Partnership of Exhibit 3(B) to Amendment
Registrant dated as of June 1, 1983. No. 2 to Registration
Statement (Form S-11)
No. 2-83092
4.4 $4,500,000 Mortgage Note dated January 2, Exhibit 4.6 to Form 10-K
1984 from Registrant to Empire of America filed April 10, 1984
FSA ("Empire").
4.5 Deed of Trust, Mortgage, Deed to Secure Exhibit 4.7 to Form 10-K
Debt, Security Agreement and Assignment filed April 10, 1984
dated January 2, 1984 from Registrant
to Empire.
4.6 Assignment of Rents and Lessor's Interest Exhibit 4.8 to Form 10-K
in Lease dated January 2, 1984 from filed April 10, 1984
Registrant to Empire.
4.7 $2,400,000 Deed of Trust Note dated Filed as Exhibit 4.7 to
April 11, 1984 from Registrant to Mellon Registrant's Report on
Bank, N.A. Form 8-K dated April 25,
1984
4.8 Deed of Trust and Security Agreement dated Filed as Exhibit 4.8 to
April 11, 1984 from Registrant to Registrant's Report on
Robert A. Johnson and John L. Ostby, as Form 8-K dated April 25,
trustees for Mellon Bank, N.A., and 1984
Mellon Bank.
4.9 Assignment of Rentals and Leases dated Filed as Exhibit 4.9 to
April 11, 1984 from Registrant, as assignor, Registrant's Report on
to Mellon Bank, N.A., as assignee. Form 8-K dated April 25,
1984
4.10 $3,000,000 Promissory Note dated June 29, Filed as Exhibit 4.1 to
1984 from Registrant to TRW Inc. Registrant's Report on
Form 8-K dated July 26,
1984
4.11 $5,000,000 Promissory Note dated July 13, Filed as Exhibit 4.2 to
1984 from Registrant to FCA American Registrant's Report on
Mortgage Corporation ("FCA"). Form 8-K dated July 26,
1984
4.16 Mortgage, Security Agreement and Filed as Exhibit 4.7 to
Assignment of Leases and Rents dated Registrant's Report on
July 13, 1984 by Registrant to FCA. Form 8-K dated July 26,
1984
</TABLE>
-13-
<PAGE> 15
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
4.17 $3,000,000 Promissory Note dated Filed as Exhibit 4.17 to
April 30, 1984 from Registrant to FCA. Registrant's Annual Report
on Form 10-K dated
March 29, 1985
4.18 Mortgage and Security Agreement dated Filed as Exhibit 4.18 to
April 30, 1984 by Registrant to FCA. Registrant's Annual Report
on Form 10-K dated
March 29, 1985
4.19 Collateral Assignment of Leases and Rents Filed as Exhibit 4.19 to
dated April 30, 1984 from Registrant Registrant's Annual Report
to FCA. on Form 10-K dated
March 29, 1985
4.45 Agreement to Assign Contract of Sale Filed as Exhibit 4.1 to
dated July 2, 1985 between American Registrant's Form 10-Q
Industrial Warehouses, Inc. ("AIW") dated August 15, 1985
and Registrant.
4.46 Assignment of Rights in Contract of Filed as Exhibit 4.2 to
Sale dated July 16, 1985 between AIW Registrant's Form 10-Q
and Registrant. dated August 15, 1985
4.47 $4,600,000 Promissory Note dated Filed as Exhibit 4.1 to
August 30, 1985 from Registrant to Registrant's Report on
Mellon Bank, N.A. ("Mellon"). Form 8-K dated
September 12, 1985
4.56 Seller's/Lessee's Certificate dated Filed as Exhibit 4.1 to
November 25, 1985 from Gould Inc. to Registrant's Report on
Registrant. Form 8-K dated
December 9, 1985
4.57 Assignment of Rights in Purchase Filed as Exhibit 4.2 to
Agreement dated November 21, 1985 Registrant's Report on
between JB Properties, as Assignor, Form 8-K dated
and Registrant as Assignee. December 9, 1985
4.60 Mortgage, Assignment of Leases and Filed as Exhibit 4.2 to
Security Agreement dated January 30, Registrant's Report on
1986 between Registrant, as Form 8-K dated
Mortgagor, and Lloyds and Texas March 4, 1986
Commerce, collectively as Mortgagee,
on Broomall, PA property.
</TABLE>
-14-
<PAGE> 16
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
4.61 Modification Agreement dated March 1, Exhibit 4.61 to Form 10-K
1986 in connection with the Mortgage, Filed April 18, 1986
Assignment of Leases and Security Agreement
dated January 30, 1986 on Broomall, PA
property.
4.62 Mortgage, Assignment of Leases and Filed as Exhibit 4.3 to
Security Agreement dated January 30, Registrant's Report on
1986 between Registrant, as Form 8-K dated
Mortgagor, and Lloyds and Texas March 4, 1986
Commerce, collectively as Mortgagee,
on Cuyahoga Falls, OH property.
4.63 Modification Agreement dated March 1, Exhibit 4.63 to Form 10-K
1986 in connection with the Mortgage, Filed April 18, 1986
Assignment of Leases and Security Agreement
dated January 30, 1986 on Cuyahoga Falls,
OH property.
4.64 Deed of Trust, Assignment of Leases Filed as Exhibit 4.4 to
and Security Agreement dated January Registrant's Report on
30, 1986, between Registrant, as Form 8-K dated
Grantor, and Lawyers Title Insurance, March 4, 1986
as Trustee on Duffield, VA property.
4.65 Deed of Trust Modification Agreement Exhibit 4.65 to Form 10-K
dated March 1, 1986 in connection Filed April 18, 1986
with the Deed of Trust, Assignment of
Leases and Security Agreement dated
January 30, 1986 on Duffield, VA
property.
4.66 Trust Indenture dated as of January Filed as Exhibit 4.5 to
1, 1986 between Michigan Strategic Registrant's Report on
Fund ("MSF") and Texas Commerce. Form 8-K dated March
4, 1986
4.74 $3,700,000 Promissory Note dated Filed as Exhibit 4.9 to
January 30, 1986 from CPA(R):5, as Registrant's Report on
Payee, to Registrant and CPA(R):6, Form 8-K dated March
collectively as Payor. 4, 1986
4.75 Deed of Trust, Assignment of Rents, Filed as Exhibit 4.10 to
dated February 14, 1986 from Form 8-K dated March
Registrant, as Trustor, to Chicago 4, 1986
Title Insurance Company, as Trustee,
for the benefit of New York Life
Insurance Company ("New York Life"),
as Beneficiary.
4.76 $7,000,000 Promissory Note Secured by Filed as Exhibit 4.11 to
Deed of Trust, dated February 18, Registrant's Report on
1986 from Registrant to New York Life. Form 8-K dated March
4, 1986
</TABLE>
-15-
<PAGE> 17
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
4.77 Assignment of Lessor's Interest in Filed as Exhibit 4.12 to
Lease with Assignment of Rents, Registrant's Report on
Income and Cash Collateral, dated Form 8-K dated March
February 14, 1986, from Registrant to 4, 1986
New York Life.
4.78 $1,500,000 Promissory Note from Exhibit 4.78 to Form 10-K
Registrant to First Southern Federal Filed April 18, 1986
Savings and Loan Association ("First
Southern") dated March 10, 1986.
4.79 Deed of Trust, Assignment of Rents Exhibit 4.79 to Form 10-K
and Security Agreement between Filed April 18, 1986
Registrant, William A. Mann, Trustee
and for the benefit of First Southern
dated March 10, 1986.
4.80 Estoppel Certificate and Exhibit 4.80 to Form 10-K
Subordination Attornment and Filed April 18, 1986
Recognition Agreement between First
Southern and Exide dated March 10, 1986.
4.92 $1,500,000 First Mortgage Note dated Filed as Exhibit 4.1 to
December 22, 1986 from the Registrant, as Registrant's Report on
Borrower, to 1st Source Bank ("1st Source"), Form 8-K dated
as Lender. January 7, 1987
4.93 Mortgage and Security Agreement dated Filed as Exhibit 4.2 to
December 22, 1986 between the Registrant, Registrant's Report on
as Borrower, and 1st Source, as Lender Form 8-K dated
and Secured Party. January 7, 1987
4.94 $5,000,000 Promissory Note dated December 14, Filed as Exhibit 4.1 to
1987, from Registrant, as Borrower, to Registrant's Report on
Prudential, as Lender. Form 8-K dated
December 28, 1987
4.95 Unconditional Guaranty of Payment and Filed as Exhibit 4.2 to
Performance dated December 14, 1987 from Registrant's Report on
Arley, as Guarantor, to Prudential, as Form 8-K dated
Lender. December 28, 1987
4.96 Mortgage and Security Agreement dated Filed as Exhibit 4.3 to
December 14, 1987 between Registrant, as Registrant's Report on
Mortgagor, and Prudential, as Mortgagee. Form 8-K dated
December 28, 1987
4.97 Assignment of Leases, Rents, Issues, Filed as Exhibit 4.4 to
Income and Profits dated December 14, 1987 Registrant's Report on
from Registrant, as Assignor, to Form 8-K dated
Prudential, as Assignee. December 28, 1987
10.1 Agreement of Sale dated December 30, 1983 Exhibit 10.1 to Form 10-K
between Eaton Corporation and Registrant. filed April 10, 1984
</TABLE>
-16-
<PAGE> 18
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.2 Lease Agreement dated December 30, 1983 Exhibit 10.2 to Form 10-K
between Registrant, as landlord, and Yale filed April 10, 1984
Industrial Products, Inc. ("Yale"), as
tenant.
10.6 Management Agreement between Registrant and Exhibit 10(B) to Amendment
Carey Corporate Property Management, Inc. No. 2 to Registration
Statement (Form S-11)
No. 2-83092
10.7 Support Agreement among Registrant, Exhibit 10(C) to Amendment
Fifth Carey Corporate Property, Inc. No. 2 to Registration
and W.P. Carey & Co., Inc. Statement (Form S-11)
No. 2-83092
10.8 Lease Agreement dated April 11, 1984 Filed as Exhibit 10.5
between Registrant, as Landlord, and to Registrant's Report
Rochester Button Company, Inc., on Form 8-K dated
("Rochester") as Tenant. April 25, 1984
10.13 Agreement Concerning Lease dated July 13, Filed as Exhibit 10.4 to
1984 by Shapiro & Son Bedspread Corp. as to Registrant's Report
Tenant, Registrant as Borrower and FCA on Form 8-K dated
as Lender. July 26, 1984
10.14 Guaranty dated July 13, 1984 from Filed as Exhibit 10.5
Hampshire Textile Corp. to Registrant. to Registrant's Report
on Form 8-K dated
July 26, 1984
10.15 Agreement Concerning Guaranty dated Filed as Exhibit 10.6
July 13, 1984 by Hampshire Textile to Registrant's Report
Corp. as Guarantor, Registrant as on Form 8-K dated
Borrower and FCA as Lender. July 26, 1984
10.16 Agreement Amending Lease Agreement Filed as Exhibit 10.16
dated April 30, 1984 between Registrant to Registrant's Annual
and Yale. Report on Form 10-K dated
March 29, 1985
10.17 Subordination, Non-Disturbance and Filed as Exhibit 10.17
Attornment Agreement dated April 30, to Registrant's Annual
1984 among FCA, Registrant and Yale. Report on Form 10-K dated
March 29, 1985
10.18 Lease Agreement dated August 7, 1984 Filed as Exhibit 10.18
between Registrant, as Landlord and to Registrant's Annual
Penn Virginia Resources Corporation Report on Form 10-K dated
("Resources") and Pennsylvania Crusher March 29, 1985
Corporation ("Crusher"), as Tenants.
10.19 Memorandum of Lease dated August 7, Filed as Exhibit 10.19
1984 between Registrant and Crusher to Registrant's Annual
recorded in Summit County, Ohio. Report on Form 10-K dated
March 29, 1985
</TABLE>
-17-
<PAGE> 19
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.20 Memorandum of Lease dated August 7, Filed as Exhibit 10.20
1984 between Registrant and Crusher to Registrant's Annual
recorded in Delaware County, Report on Form 10-K dated
Pennsylvania. March 29, 1985
10.21 Memorandum of Lease dated August 7, Filed as Exhibit 10.21
1984 between Registrant and Resources to Registrant's Annual
recorded in Scott County, Virginia. Report on Form 10-K dated
March 29, 1985
10.22 Lease Guaranty dated August 7, 1984 Filed as Exhibit 10.22
by Penn Virginia Corporation ("Penn to Registrant's Annual
Virginia") to Registrant. Report on Form 10-K dated
March 29, 1985
10.27 Lease Agreement between Filed as Exhibit 10.1 to
Registrant as Landlord and Registrant's Report on
Exide Electronics Corporation Form 8-K dated July 2,
("Exide") as Tenant dated June 1985
20, 1985.
10.28 Memorandum of Lease between Filed as Exhibit 10.2 to
Registrant and Exide dated Registrant's Report on
June 20, 1985. Form 8-K dated July 2,
1985
10.29 Guaranty from Exide Electronics Filed as Exhibit 10.3 to
Group, Inc. ("Exide Registrant's Report on
Electronics") to Registrant Form 8-K dated July 2,
dated June 20, 1985. 1985
10.33 Lease Agreement dated July 11, Filed as Exhibit 10.1 to
1985 between Registrant as Registrant's Form
landlord and General Cinema 10-Q dated August
Corp. ("GCC") as tenant. 15, 1985
10.34 Lease Guaranty dated July 16, Filed as Exhibit 10.2 to
1985 between Registrant and GCC. Registrant's Form
10-Q dated August
15, 1985
10.35 Memorandum of Lease dated Filed as Exhibit 10.3 to
July 11, 1985 between Registrant's Form
Registrant and GCC. 10-Q dated August
15, 1985
10.40 Lease Agreement dated November Filed as Exhibit 10.1 to
25, 1985 between Registrant, as Registrant's Report on
Lessor, and Gould Inc., as Form 8-K dated December 9,
Lessee. 1985
</TABLE>
-18-
<PAGE> 20
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.41 Memorandum of Lease dated Filed as Exhibit 10.2 to
November 21, 1985, between Registrant's Report on
Registrant, as Landlord, and Form 8-K dated December 9,
Gould Inc., as Tenant. 1985
10.42 Joint Venture Agreement dated Filed as Exhibit 10.1 to
January 30, 1986 between Registrant's Report on
Registrant and CPA(R):6. Form 8-K dated March 4,
1986
10.43 Lease Agreement dated as of Filed as Exhibit 10.2 to
January 30, 1986 by and between Registrant's Report on
Registrant and CPA(R):6, Form 8-K dated March 4,
collectively as Landlord, and 1986
Great Lakes Hotel Corporation
("Great Lakes"), as Tenant.
10.44 Lease Agreement as of March 6, Exhibit 10.44 to Form 10-K
1986 by and between Registrant filed April 18, 1984
and CPA(R):6, collectively as
Landlord, and Northwoods Hotel
Corporation ("Northwoods"), as Tenant.
10.45 Memorandum of Lease dated Filed as Exhibit 10.3 to
January 30, 1986 between Registrant's Report on
Registrant and CPA(R):6, as Form 8-K dated March 4,
Landlord, and Northwoods, as Tenant. 1986
10.46 Memorandum of Lease dated March Exhibit 10.46 to Form 10-K
6, 1986 between Registrant and CPA(R):6, filed April 18, 1984
as Landlord, and Northwoods, as Tenant.
10.47 Lease Guaranty dated January Filed as Exhibit 10.4 to
30, 1986 from Landmark Hotel Registrant's Report on
Corporation ("Landmark"), as Form 8-K dated March 4,
Guarantor, to Registrant and 1986
CPA(R):6, collectively, as Landlord.
10.48 Lease Guaranty dated March 6, Exhibit 10.48 to Form 10-K
1986 from Landmark, as filed April 18, 1984
Guarantor, to Registrant and
CPA(R):6, collectively as Landlord.
10.49 Lease Agreement dated April 3, 1987 Filed as Exhibit 10.5 to
by and between Registrant, as Landlord, Registrant's Report on
and Stanwich, as Tenant. Form 8-K dated April 17,
1986
</TABLE>
-19-
<PAGE> 21
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
10.50 Memorandum of Lease dated April 3, Filed as Exhibit 10.6 to
1986 between Registrant, as Landlord, Registrant's Report on
and Stanwich, as Tenant. Form 8-K dated April 17,
1986
10.53 Lease Agreement dated December 22, 1987 Filed as Exhibit 10.1 to
by and between Registrant, as Landlord, Registrant's Report on
and Stoody, as Tenant. Form 8-K dated
January 7, 1987
10.54 First Amendment to Lease dated December 14, Filed as Exhibit 10.1 to
1987 by and between Registrant, as Landlord, Registrant's Report on
and Arley, as Tenant. Form 8-K dated
December 28, 1987
10.55 Lease Subordination Agreement dated December Filed as Exhibit 10.2 to
14, 1987 by and among Registrant, as Landlord, Registrant's Report on
Arley, as Tenant, and Prudential, as Lender. Form 8-K dated
December 28, 1987
10.56 Lease Agreement dated March 10, 1988 by Filed as Exhibit 10.56 to
and between Registrant, as Landlord, Form 10-K dated
and Winn-Dixie, as Tenant. April 15, 1988
10.57 Lease Guaranty dated March 10, 1988 from Filed as Exhibit 10.57 to
Winn-Dixie Stores, as Guarantor, to Form 10-K dated
Registrant, as Lessor. April 15, 1988
10.58 Lease dated September 13, 1995 between G.I. Filed as Exhibit 10.1 to
Pastek Limited Partnership, as Tenant, and Registrant's Form 8-K
G.I. Plastek Industrial Properties Limited dated September 29, 1995
Partnership, as Landlord.
28.1 General Warranty Deed dated December 28, Filed as Exhibit 28.1
1983 from Eaton Corporation to to Registrant's Report
Registrant. on Form 8-K dated
April 25, 1984
28.2 Quitclaim Deed dated January 31, 1984 Filed as Exhibit 28.2
from Eaton Corporation to Registrant. to Registrant's Report
on Form 8-K dated
April 25, 1984
28.5 General Warranty Deeds dated April 11, Filed as Exhibit 28.5
from Rochester to Registrant. to Registrant's Report
on Form 8-K dated
April 25, 1984
28.6 Bill of Sale dated April 11, 1984 Filed as Exhibit 28.6
from Rochester to Registrant. to Registrant's Report
on Form 8-K dated
April 25, 1984
28.10 Deed dated July 13, 1984 from Shapson Filed as Exhibit 28.4
Realty Corp. to Registrant. to Registrant's Report
on Form 8-K dated
July 26, 1984
</TABLE>
-20-
<PAGE> 22
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
28.11 Deed dated July 13, 1984 from Shapson Filed as Exhibit 28.5
Realty Corp. to Registrant. to Registrant's Report
on Form 8-K dated
July 26, 1984
28.12 Bill of Sale dated July 13, 1984 Filed as Exhibit 28.6
from Shapson Realty Corp. to Registrant. to Registrant's Report
on Form 8-K dated
July 26, 1984
28.13 Deed dated August 7, 1984 from Filed as Exhibit 28.13
Resources to Registrant. to Registrant's Annual
Report on Form 10-K dated
March 29, 1985
28.14 General Warranty deed dated August 7, Filed as Exhibit 28.14
1984 from Crusher to Registrant. to Registrant's Annual
Report on Form 10-K dated
March 29, 1985
28.15 Deed dated August 7, 1984 from Crusher Filed as Exhibit 28.15
to Registrant. to Registrant's Annual
Report on Form 10-K dated
March 29, 1985
28.16 Warranty Deed dated April 24, 1985 Filed as Exhibit 28.4 to
between Adventure Restaurant Corp. Registrant's Report on
("Adventure") and Registrant. Form 8-K dated May 8, 1985
28.17 Bill of Sale dated April 24, 1985 Filed as Exhibit 28.5 to
from Adventure to Registrant. Registrant's Report on
Form 8-K dated May 8, 1985
28.27 Warranty Deed dated July 11, 1985 Filed as Exhibit 28.1 to
from GCC to Registrant. Registrant's Form 10-Q
dated August 15, 1985
28.28 Bill of Sale dated July 16, 1985 Filed as Exhibit 28.2 to
from GCC as seller to Registrant as Registrant's Form 10-Q
buyer. dated August 15, 1985
28.43 Deed dated November 25, 1985 from Filed as Exhibit 28.1 to
Gould Inc. to Registrant. Registrant's Report on
Form 8-K dated
December 9, 1985
28.44 Bill of Sale dated November 25, Filed as Exhibit 28.2 to
1985 from Gould Inc. to Registrant. Registrant's Report on
Form 8-K dated
December 9, 1985
</TABLE>
-21-
<PAGE> 23
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
28.45 Purchase Agreement dated July 25, Filed as Exhibit 28.3 to
1985 by Gould Inc., as Seller, with Registrant's Report on
JB Properties, as Buyer. Form 8-K dated December
9, 1985
28.46 Warranty Deed dated January 30, 1986 Filed as Exhibit 28.1 to
among Adventure Restaurant Corporation Registrant's Report on
("Adventure"), Registrant and CPA(R):6. Form 8-K dated March 4,
1986
28.47 Warranty Deed dated March 6, 1987 Exhibit 28.47 to Form 10-K
among Adventure, Registrant and CPA(R):6. Filed April 17, 1986
28.48 Bill of Sale dated January 30, 1987 Filed as Exhibit 28.2 to
from Adventure to Registrant and CPA(R):6. Registrant's Report on
Form 8-K dated March
4, 1986
28.49 Bill of Sale dated March 6, 1987 Exhibit 28.49 to Form 10-K
from Adventure to Registrant and CPA(R):6. Filed April 17, 1986
28.50 Bill of Sale dated April 3, 1986 from Filed as Exhibit 28.3 to
Stanwich to Registrant. Registrant's Report on
Form 8-K dated April 17,
1986
28.51 Warranty Deed dated April 3, 1986 from Filed as Exhibit 28.4 to
Stanwich to Registrant (Frankenmuth, Registrant's Report on
MI property). Form 8-K dated April 17,
1986
28.52 Warranty Deed dated April 3, 1986 from Filed as Exhibit 28.5 to
Stanwich to Registrant (Prophetstown, Registrant's Report on
IL property). Form 8-K dated April 17,
1986
28.53 Warranty Deed dated April 3, 1986 from Filed as Exhibit 28.6 to
Stanwich to Registrant (McMinnville, Registrant's Report on
TN property). Form 8-K dated April 17,
1986
28.54 Seller/Lessee's Certificate dated Filed as Exhibit 28.7 to
April 3, 1986 from Stanwich, as Seller, Registrant's Report on
to Registrant, as Purchaser, and Form 8-K dated April 17,
Security Pacific, as Lender. 1986
28.58 Bill of Sale dated December 22, 1987 Filed as Exhibit 28.1 to
from Stoody to Registrant. Registrant's Report on
Form 8-K dated
January 7, 1987
28.59 Corporate Warranty Deed made as of December Filed as Exhibit 28.2 to
22, 1986 by Stoody, as Grantor, and Registrant's Report on
Registrant, as Grantee. Form 8-K dated
January 7, 1987
</TABLE>
-22-
<PAGE> 24
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
28.60 Seller/Lessee's Certificate dated Filed as Exhibit 28.3 to
December 22, 1986 from Stoody, as Seller, Registrant's Report on
to Registrant, as Purchaser. Form 8-K dated
January 7, 1987
28.61 Indemnification Agreement by and between Filed as Exhibit 28.4 to
the Registrant, as Borrower, 1st Source, Registrant's Report on
as Lender, and Stoody, as Tenant. Form 8-K dated
January 7, 1987
28.62 Agreement of Sale dated December 1, 1987 by Filed as Exhibit 28.1 to
and between Registrant, as Seller, and Registrant's Report on
Brondy, as Buyer. Form 8-K dated
January 14, 1988
28.63 First Amendment to Agreement of Sale dated Filed as Exhibit 28.2 to
December 1, 1987 by and between Registrant, Registrant's Report on
as Seller, and Brondy, as Buyer. Form 8-K dated
January 14, 1988
28.64 Bill of Sale dated December 31, 1992 from Filed as Exhibit 28.3 to
Registrant to Brondy. Registrant's Report on
Form 8-K dated
January 14, 1988
28.65 Bargain and Sale Deed dated December 30, 1987 Filed as Exhibit 28.4 to
from Registrant, as party of the first part, Registrant's Report on
to Brondy, as party of the second part. Form 8-K dated
January 14, 1988
28.66 Warranty Deed dated March 10, 1988 between Filed as Exhibit 28.66
Winn-Dixie, as Grantor, and Registrant, Form 10-K dated
as Grantee. April 15, 1988
28.67 Bill of Sale dated March 10, 1988 from Filed as Exhibit 28.67
Winn-Dixie, as Seller, to Registrant, Form 10-K dated
as Purchaser. April 15, 1988
28.68 Seller's Certificate dated March 10, 1988 Filed as Exhibit 28.68
from Winn-Dixie, as Seller, to Registrant, Form 10-K dated
as Purchaser. April 15, 1988
28.69 Prospectus of Registrant Filed as Exhibit 28.69
dated August 2, 1983. to Form 10K/A dated
September 24, 1993
28.70 Supplement dated September 29, 1983 Filed as Exhibit 28.70
to Prospectus dated August 2, 1983. to Form 10K/A dated
September 24, 1993
28.71 Press release dated June 30, 1993 Exhibit 28.1 to Form 8-K
announcing the suspension of secondary dated July 12, 1993
market sales of Limited Partnership Units.
</TABLE>
-23-
<PAGE> 25
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
<S> <C> <C>
28.72 Agreement of Limited Partnership of G.I. Filed as Exhibit 28.1 to
Plastek Limited Partnership dated September Registrant's Form 8-K
8, 1995. dated September 29, 1995
</TABLE>
(b) Reports on Form 8-K
During the quarter ended December 31, 1996 the Registrant was not
required to file any reports on Form 8-K.
-24-
<PAGE> 26
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.
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
BY: CAREY CORPORATE PROPERTY, INC.
04/3/97 BY: /s/ Claude Fernandez
- ------------- ----------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative 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.
BY: CAREY CORPORATE PROPERTY, INC.
William P. Carey
Chairman of the Board
and Director
(Principal Executive Officer)
Francis J. Carey
President and Director
George E. Stoddard BY: /s/ George E. Stoddard
Chairman of the Investment ----------------------
Committee and Director George E. Stoddard
Attorney in fact
Dr. Lawrence R. Klein April 3, 1997
Chairman of the Economic Policy
Committee and Director
Madelon DeVoe Talley
Vice Chairman of the Board of
Directors and Director
04/3/97 BY: /s/ Claude Fernandez
- ------------- ----------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
04/3/97 BY: /s/ Michael D. Roberts
- ------------- ----------------------------
Date Michael D. Roberts
First Vice President and Controller
(Principal Accounting Officer)
-25-
<PAGE> 27
APPENDIX A TO FORM 10-K
CORPORATE PROPERTY ASSOCIATES 5
(A CALIFORNIA LIMITED PARTNERSHIP)
1996 ANNUAL REPORT
<PAGE> 28
SELECTED FINANCIAL DATA
(In thousands except per unit amounts)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Revenues $18,195 $18,261 $18,125 $15,768 $13,205
Net income 5,857 4,496 5,557 1,913 7,776
Net income allocated:
To General Partners 351 270 1,011 201 463
To Limited Partners 5,506 4,226 4,546 1,712 7,314
Per unit 48.64 37.34 40.16 15.12 64.61
Distributions attributable (1):
To General Partners 348 350 352 365 244
To Limited Partners 5,445 5,489 5,516 7,635 3,816
Per unit 48.10 48.49 48.73 67.45(2) 33.71
Payment of mortgage
principal (3) 915 826 725 463 365
BALANCE SHEET DATA:
Total assets 95,637 93,950 92,366 72,268 52,652
Long-term
obligations (4) 42,463 34,949 31,310 24,505 10,446
</TABLE>
(1) Includes distributions attributable to the fourth quarter of each fiscal
year payable in the following fiscal year less distributions in the first
fiscal quarter attributable to the prior year.
(2) 1995 distributions include a special distribution of $20 per Limited
Partnership Unit.
(3) Represents scheduled mortgage amortization paid.
(4) Represents mortgage and note payable obligations due after more than one
year.
-1-
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Net income for the year ended December 31, 1996 increased by
$5,864,000 as compared with the prior year. Such increase was primarily due to
gains realized on the sale of Partnership properties. Income before gains, and
excluding (i) the effects of noncash charges for writedowns of assets to their
estimated net realizable values in both 1996 and 1995 and (ii) nonrecurring
items in 1995 included in other income in the accompanying financial statements,
would have reflected an increase of $683,000.
The increase in income, as adjusted, was due to decreases in
interest, depreciation, general and administrative and property expenses and was
partially offset by a decrease in lease revenues. The decrease in interest
expense resulted from the combination of (i) satisfying mortgage loans in
connection with property dispositions and (ii) using proceeds from these
property sales to pay off mortgage debt on other Partnership properties which
are still subject to leases. The loans on the properties which remain occupied
were paid off as the loans were scheduled to mature with substantial balloon
payments in 1996 and 1997. The decrease in depreciation expense was solely due
to the disposition of properties resulting in a reduction in the balances of
assets subject to depreciation. The decrease in general and administrative
expense was due to lower state tax and office occupancy expenses in 1996. Prior
to selling the Helena, Montana office building in January 1996, the Partnership
absorbed a portion of the operating expenses for that property. In 1995, such
costs, net of tenant reimbursements, were approximately $82,000. Accordingly,
property expense decreased due to the sale of the Helena property and because of
legal costs incurred in 1995 in connection with a dispute regarding the final
determination for the sales price of a property. The decrease in lease revenues
is entirely due to the sale of properties in 1995 and 1996.
The 1996 gain on the sale of properties resulted from the sales of
the office building in Helena, Montana, a warehouse facility in Hodgkins,
Illinois leased to GATX Logistics, Inc. ("GATX") and the Holiday Inn in Rapid
City, South Dakota which had been operated by the Partnership. IBM Corporation,
("IBM"), the primary tenant at the Helena property, occupied 40% of the leasable
space at the property with several other tenants occupying the remaining 60% of
the space. The IBM lease was scheduled to expire in April 2003. A renovation, a
significant portion of which had been subsidized by a local utility company, had
just been completed. Management believes that the offer of $4,800,000 reflected
a favorable valuation of the property. If the Partnership were to have continued
to own the property, future market value could have been negatively affected by
the uncertainty as to whether IBM would continue to lease space after the end of
its current lease term. The GATX lease provided annual rents of $1,399,000 and
was scheduled to expire in October 1999 with only one five-year renewal term, at
the option of the lessee. Accordingly, Management believed the value of the
property in the future would have been affected by the uncertainty as to whether
the lease would be renewed in November 1999. As more fully described in Note 12
of the accompanying financial statements, the Partnership had committed in
October 1995 to use its best efforts to sell the Rapid City property. Management
previously concluded that investing an estimated $1,950,000 to upgrade the hotel
to meet the core modernization plan of Holiday Inn and retain the Holiday Inn
affiliation would not provide an adequate return on the additional investment.
On the other hand, revenues and profitability of the Rapid City operation would
be expected to decrease after any change in hotel chain affiliation.
Earnings from the hotel operations for the year ended December 31,
1996 are not directly comparable to the results of operations for the year ended
December 31, 1995 due to the sale of the Rapid City hotel in October 1996. The
Rapid City hotel contributed 46% of hotel revenue and 58% of hotel earnings in
1996. Management believes that this will be representative of the decreases in
revenue and earnings from the hotel operation in future periods. For the year
ended December 31, 1996, revenues, excluding Rapid City, increased by 4%.
Revenues from all the hotel properties, including Rapid City, are seasonal with
most revenues earned during the second and third quarters. Operating income for
the remaining hotels in Alpena and Petoskey, Michigan increased 7% and 11%,
respectively, for the year ended December 31, 1996 as compared with 1995.
Although the average room rate remained stable at the Alpena hotel, there was a
6% increase in the occupancy rate resulting in both a 5% increase in room
revenue and a 4% increase in food and beverage revenue. There was a 14% increase
in the occupancy rate at the Petoskey hotel; however, the average room rate
decreased 9%. Petoskey also benefited from a decrease in operating expenses. The
decrease in Petoskey room rates was the result of increased competition from
other resorts.
-2-
<PAGE> 30
Net income for the year ended December 31, 1995 decreased by
$3,526,000 as compared with net income for the year ended December 31, 1994.
Income before gains in 1995 reflected a decrease of $3,016,000 when compared to
1994. Of such decrease, $1,981,000 was the result of noncash writedowns of
assets. The decrease in earnings was also attributable to a decrease in lease
revenues and an increase in general and administrative expenses and was
partially offset by decreases in interest and property expenses and an increase
in other interest income. Of the $2,890,000 decrease in lease revenues,
$2,738,000 was due to the disposition of properties leased to Pace Membership
Warehouse, Inc. ("Pace") and Liberty Fabrics of New York ("Liberty Fabrics") in
1994 and Industrial General Corporation ("IGC") in 1995. In addition, lease
revenues also decreased as the result of lower rentals from GATX. In November
1994 a short-term lease with GATX expired at which time GATX and the Partnership
replaced the short-term lease with a new five-year lease agreement. As
previously described, the property was sold in 1996. The increase in general and
administrative expense was due to an increase in partnership level franchise
taxes and the Partnership's office costs. The increase in office expenses was
due, in part, to nonrecurring costs in connection with the relocation of the
Partnership's offices. The decrease in interest expense was primarily due to the
payoff in 1994 of mortgages on the Pace, Liberty Fabrics and Spreckels
Industries, Inc. ("Spreckels") properties in 1994 and the satisfaction of the
mortgage loan on the IGC properties in 1995. The decrease in property expenses
was due to costs incurred in 1994 in connection with the Partnership's
assessment of its liquidity alternatives which included environmental reviews
and property valuations. Other interest income increased due to higher cash
balances held by the Partnership earlier in the year prior to the payment of a
special distribution to partners of $2,287,000.
Earnings from the Partnership's hotel operations for 1995 decreased
by 7% as compared with 1994. The occupancy rate at the Petoskey, Michigan hotel
declined to 43% in 1995 from 47% in 1994. As a result of this decrease which was
caused by increased competition from a nearby resort area, the Partnership was
only able to increase the average room rate at Petoskey by 0.6% in 1995. The
occupancy rates at the Alpena, Michigan hotel property remained stable at 55%
and the Partnership was able to increase the average room rate by slightly less
than 5%. The Rapid City hotel's occupancy rate increased by approximately 2% to
57% with an increase in the average room rate of 2.5%. The overall increase in
hotel revenues was entirely offset by an increase of 6% in operating costs.
A decrease in leasing revenues can be expected as the GATX property,
which was sold in the second quarter of 1996, contributed $381,000 to 1996
revenues. The lease agreement with Rochester Button Company ("RBC") will reduce
annual rentals by $106,000. Management believes that such reduction may enable
RBC to improve its financial position. With the stock warrants granted by RBC,
the Partnership could benefit from any potential improvement in RBC's business
operations. These revenue decreases will not be fully offset by the 1996 rent
increases on the leases with DeVlieg Bullard, Inc. ("DeVlieg") and Penberthy
Products, Inc. totaling $150,000 annually and a short-term lease for the Elyria,
Ohio property which will provide annual rents of $60,000. Rent increases are
scheduled for properties leased to Stoody Deloro Stellite, Inc. ("Stoody") and
Arley Merchandise Corporation ("Arley") in 1997 and Spreckels and Gould, Inc. in
1998.
Interest expense will decrease due to the satisfaction of mortgage
debt of $18,562,000 in connection with property sales and paying balloon
payments on high interest rate mortgage loans. The only mortgage loans
outstanding are the mortgage loan collateralized by the properties leased to
Arley and bond financings on the Alpena and Petoskey hotel properties which are
cross-collateralized by eight other Partnership properties. As discussed below,
the Arley loan is in default. Interest expense on these loans and the note
payable to an affiliate should be approximately $1,460,000 in 1997 as compared
with interest expense of $2,075,000 in 1996. Annual cash flow increased by
$740,000 from the payoff of mortgage loans on properties which remain occupied.
Cash flow from the GATX and Rapid City properties after payment of mortgage debt
service in 1996 was $465,000. Cash flow will also benefit if Partnership
receives distributions from its investment in a limited partnership, GI Plastek
Limited Partnership. As the limited partnership is a start-up operation, the
Partnership does not expect to receive distributions in the coming year.
Because of the net and long-term nature of the Partnership's leases,
inflation and changing prices have not unfavorably affected the Partnership's
revenues and net income. Except for the Penn Virginia Corporation ("Penn
Virginia") lease, all of the Partnership's net leases have provisions providing
for rent increases based on formulas indexed to increases in the Consumer Price
Index ("CPI") and may include caps on such CPI increases, sales overrides or
scheduled mandatory increases which could increase operating revenues in the
future. Future rent increases may be affected by changes in the method of the
calculation of
-3-
<PAGE> 31
the CPI. Although there are indications that there may be legislation which
considers changes to the CPI methodology, the Partnership cannot predict the
outcome of proposed changes relating to the CPI formula. As the rate of
inflation has been moderate in recent years, the Partnership believes that hotel
operations may not be significantly impacted by changing prices. Management
believes that reasonable increases in costs may be partially or entirely passed
through by increases in room rates.
Financial Condition
Other than the two hotel properties operated by the Partnership, all
of the Partnership's properties are leased to corporate tenants under net leases
which generally require tenants to pay all operating expenses relating to the
leased properties. The Partnership depends on relatively stable operating cash
flow from its net leases and operating properties to meet operating expenses,
service its debt, fund distributions and maintain adequate cash reserves. The
Partnership maintains a working capital reserve to fund major outlays such as
capital improvements on its properties and balloon debt payments. Such
expenditures may also be funded from additional borrowing on the Partnership's
real estate portfolio. The Partnership's cash and cash equivalents were
$5,238,000 at December 31, 1996.
As a real estate limited partnership, the Partnership has
distributed, since its inception, a substantial portion of its cash flow to its
partners. The Partnership's current strategy has been to utilize its cash flow
from operations and its cash reserves to pay quarterly distributions and meet
scheduled principal payment installments on its mortgage debt service With the
disposition of the Rapid City hotel, use of cash reserves to fund necessary
capital improvements is expected to decrease. Based on an evaluation of cash
flow, the distribution rate was reduced in April 1996 to bring distributions
more in line with cash flow from operations. In 1995, excluding a $2,287,000
special distribution, quarterly distributions exceeded operating cash flow by
more than $1,000,000. Since the reduction in April 1996, the distribution rate
has increased each quarter. During 1996, cash provided from operations of
$5,606,000 was sufficient to fund quarterly distributions to partners of
$4,457,000 and pay scheduled principal payments of $365,000 on the Partnership's
mortgage debt. During the five-year period ended December 31, 1996,
distributions to partners exceeded reported earnings in each year except 1996.
Management gives primary consideration to projections of the Partnership's cash
flow provided from operations and/or investing activities as well as current
cash balances and commitments for the use of such cash in determining
distributions.
The Partnership's investing activities during 1996 included $172,000
of costs incurred in connection with the completion of renovations necessary to
bring the Alpena and Petoskey hotels in compliance with the Holiday Inn hotel
modernization plan and replacement of furniture, fixture and equipment ("FF&E")
at the hotels. Alpena and Petoskey maintain a reserve of $85,000 for on-going
FF&E purchases. The Partnership realized proceeds of $18,592,000 on property
sales in 1996.
The Partnership's financing activities primarily consisted of paying
quarterly distributions to partners and meeting scheduled principal payment
installments on its mortgage debt. The Partnership used $18,562,000 to satisfy
mortgage loans. As a result, the leverage of the Partnership's properties has
decreased substantially which provides the Partnership with increased borrowing
potential and flexibility in structuring any new financing. The Partnership,
however, is not currently seeking to borrow additional funds. The $4,755,000
mortgage loan on the Arley properties is currently in default and the
Partnership has entered into discussions with the lender for the purpose of
restructuring the loan. There is no assurance that any agreement will be reached
with the lender. As the Arley loan is a nonrecourse mortgage loan, the lender's
sole recourse is to the properties collateralized by such mortgage debt and an
assignment of the Arley lease to the lender. If the Partnership is unable to
reach an agreement with the lender, the Partnership's alternatives include, but
are not limited to, seeking to refinance the mortgage on the Arley property with
another lender or structuring alternative financing using the flexibility
created by the overall reduction in the Partnership's leverage over the past
several years.
-4-
<PAGE> 32
Stoody has an option to purchase its lease property in December 1997
at a purchase price of the greater of $3,000,000 or fair market value. The
Stoody property is not encumbered by mortgage debt and provides for annual rent
of $393,000. If Stoody does not exercise its option, the lease term will
continue until 2010. The initial term of the Partnership's lease with Penn
Virginia ends in 1999, and Penn Virginia has not indicated whether it will
exercise its option to renew the lease. Annual cash flow from the Penn Virginia
property is $499,000.
In 1994, the Partnership voluntarily conducted Phase II reviews of
certain of its properties based on the results of the Phase I environmental
reviews conducted in 1993. The Partnership believes, based on the results of
such reviews, that its leased properties are in substantial compliance with
Federal and state environmental statutes and regulations. Portions of certain
properties have been documented as having a limited degree of contamination,
principally in connection with either leakage from underground storage tanks or
surface spills from facility activities. For those conditions which were
identified, the Partnership advised its tenants of such findings and of their
obligations, if any, to perform any required remediation.
All of the Partnership's properties are subject to environmental
statutes and regulations regarding the discharge of hazardous materials and any
related remediation obligations. Except for the two hotel properties, all of the
properties are currently net leased to corporate tenants. The Partnership
normally structures its leases to require tenants to comply with all laws. In
addition, substantially all of the Partnership's net leases include
indemnification provisions which require tenants to indemnify the Partnership
from all liabilities and losses related to their operations at the leased
properties. If the Partnership undertakes to clean up or remediate any of its
leased properties, the General Partners believe that in most cases the
Partnership will be entitled to full reimbursement from tenants for such costs.
Further, in the event that the Partnership either is responsible or becomes
responsible for such costs because of a tenant's failure to fulfill its
obligations the General Partners believe that the ultimate resolution of the
aforementioned environmental matters will not have a material adverse effect on
the Partnership's financial condition, liquidity or results of operations.
The General Partners are continuing to investigate ways to provide
liquidity for limited partners on a tax-effective basis.
-5-
<PAGE> 33
REPORT of INDEPENDENT ACCOUNTANTS
To the Partners of
Corporate Property Associates 5:
We have audited the accompanying balance sheets of Corporate
Property Associates 5 (a California limited partnership) as of December 31, 1995
and 1996, and the related statements of income, partners' capital and cash flows
for each of the three years in the period ended December 31, 1996. We have also
audited the financial statement schedule included on pages 22 to 25 of this
Annual Report. These financial statements and financial statement schedule are
the responsibility of the General Partners. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
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. An audit
also includes assessing the accounting principles used and significant estimates
made by the General Partners, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Corporate Property
Associates 5 (a California limited partnership) as of December 31, 1995 and
1996, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. In addition, in our opinion, the Schedule of
Real Estate and Accumulated Depreciation as of December 31, 1996, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the financial information required to
be included therein pursuant to Securities and Exchange Commission Regulation
S-X Rule 12-28.
/s/Coopers & Lybrand L.L.P.
New York, New York
March 21, 1997
-6-
<PAGE> 34
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
BALANCE SHEETS
December 31, 1995 and 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
ASSETS:
<S> <C> <C>
Real estate leased to others:
Accounted for under the
operating method:
Land $ 4,722,767 $ 3,960,767
Buildings 34,271,786 22,753,408
------------ ------------
38,994,553 26,714,175
Accumulated depreciation 12,371,727 9,111,827
------------ ------------
26,622,826 17,602,348
Net investment in direct financing leases 19,352,938 19,298,726
------------ ------------
Real estate leased to others 45,975,764 36,901,074
Operating real estate, net of accumulated depreciation
of $4,265,218 in 1995 and $4,637,421 in 1996 7,735,809 7,463,300
Real estate held for sale 10,388,398
Cash and cash equivalents 2,300,682 5,237,995
Funds in escrow 2,977,622 575,051
Other assets, net of accumulated amortization of
$130,589 and reserve for uncollected
rent of $165,164 in 1995 2,890,127 2,474,117
------------ ------------
Total assets $ 72,268,402 $ 52,651,537
============ ============
LIABILITIES:
Mortgage notes payable $ 36,065,145 $ 14,283,940
Note payable to affiliate 1,151,000 1,151,000
Accrued interest payable 170,877 45,707
Accounts payable and accrued expenses 572,267 433,842
Accounts payable to affiliates 144,553 111,526
Deferred gains, net of accumulated amortization of
$245,788 in 1995 and $180,278 in 1996 1,366,593 901,390
Other liabilities 1,051,904 658,542
------------ ------------
Total liabilities 40,522,339 17,585,947
------------ ------------
Commitments and contingencies
PARTNERS' CAPITAL:
General Partners (262,961) (67,666)
Limited Partners (113,200 Limited Partnership
Units issued and outstanding) 32,009,024 35,133,256
------------ ------------
Total partners' capital 31,746,063 35,065,590
------------ ------------
Total liabilities and
partners' capital $ 72,268,402 $ 52,651,537
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-7-
<PAGE> 35
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
STATEMENTS of INCOME
For the years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $ 5,606,618 $ 4,642,686 $ 3,225,129
Interest income from direct financing leases 5,805,643 3,879,125 3,409,166
Other interest income 117,325 307,951 210,913
Revenue of hotel operations 6,595,570 6,768,268 6,359,758
Other income 170,107
----------- ----------- -----------
18,125,156 15,768,137 13,204,966
----------- ----------- -----------
Expenses:
Interest 4,534,425 3,495,872 2,075,230
Depreciation 2,181,422 2,065,781 1,331,028
General and administrative 571,189 841,920 460,948
Property expenses 1,516,194 810,581 579,189
Amortization 63,932 33,599 13,301
Writedown to net realizable value 1,980,550 1,300,000
Operating expense of hotel operations 4,959,699 5,241,370 4,952,959
----------- ----------- -----------
13,826,861 14,469,673 10,712,655
----------- ----------- -----------
Income before gains on sale 4,298,295 1,298,464 2,492,311
Gains on sale of real estate, net 1,140,891 614,234 5,284,165
----------- ----------- -----------
Net income $ 5,439,186 $ 1,912,698 $ 7,776,476
=========== =========== ===========
Net income allocated to:
Individual General Partner $ 171,409 $ 52,520 $ 119,855
=========== =========== ===========
Corporate General Partner $ 832,262 $ 148,208 $ 342,857
=========== =========== ===========
Limited Partners $ 4,435,515 $ 1,711,970 $ 7,313,764
=========== =========== ===========
Net income per Limited
Partnership Unit
(113,200 Units outstanding) $ 39.18 $ 15.12 $ 64.61
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-8-
<PAGE> 36
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
STATEMENTS of PARTNERS' CAPITAL
For the years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Partners' Capital Accounts
Limited
Partners'
General Limited Amount Per
Total Partners Partners Unit (a)
----- -------- -------- ---- ---
<S> <C> <C> <C> <C>
Balance, December 31, 1993 $ 38,311,475 $ (746,920) $ 39,058,395 $ 345
Distributions (5,862,314) (351,738) (5,510,576) (49)
Net income, 1994 5,439,186 1,003,671 4,435,515 39
------------ ----------- ------------ -----
Balance, December 31, 1994 37,888,347 (94,987) 37,983,334 335
Distributions (8,054,982) (368,702) (7,686,280) (68)
Net income, 1995 1,912,698 200,728 1,711,970 15
------------ ----------- ------------ -----
Balance, December 31, 1995 31,746,063 (262,961) 32,009,024 282
Distributions (4,456,949) (267,417) (4,189,532) (37)
Net income, 1996 7,776,476 462,712 7,313,764 65
------------ ----------- ------------ -----
Balance, December 31, 1996 $ 35,065,590 $ (67,666) $ 35,133,256 $ 310
============ =========== ============ =====
</TABLE>
(a) Based on 113,200 Units issued and outstanding during all periods.
The accompanying notes are an integral part of the financial statements.
-9-
<PAGE> 37
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
STATEMENTS of CASH FLOWS
For the years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,439,186 $ 1,912,698 $ 7,776,476
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,245,354 2,099,380 1,344,329
Amortization of deferred gains (71,609) (71,678) (64,974)
Cash receipts on operating and financing
leases greater than straight-line adjustments and
amortization of unearned income 8,388 13,162 54,212
Writedown to net realizable value 1,980,550 1,300,000
Net gain on sale of real estate (1,140,891) (614,234) (5,284,165)
Net change in operating assets and liabilities (187,595) (631,808) 480,432
------------ ------------ ------------
Net cash provided by operating
activities 6,292,833 4,688,070 5,606,310
------------ ------------ ------------
Cash flows from investing activities:
Issuance of note receivable (188,910)
Additional capitalized costs (407,538) (1,078,951) (172,447)
Proceeds on sale and transfer of real estate 16,939,000 3,387,362 18,592,329
Purchase of limited partnership interests (1,750,175)
------------ ------------ ------------
Net cash provided by investing activities 16,342,552 558,236 18,419,882
------------ ------------ ------------
Cash flows from financing activities:
Distributions to partners (5,862,314) (8,054,982) (4,456,949)
Release of escrow funds in
connection with mortgage prepayment 2,295,000
Prepayments of mortgage payable (10,413,985) (2,200,000) (18,561,812)
Payments on mortgage principal (725,239) (463,487) (365,118)
Partial prepayment of note payable to affiliate (144,000)
Deferred financing costs (1,247) (10,000)
------------ ------------ ------------
Net cash used in financing activities (17,002,785) (10,872,469) (21,088,879)
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents 5,632,600 (5,626,163) 2,937,313
Cash and cash equivalents, beginning of year 2,294,245 7,926,845 2,300,682
------------ ------------ ------------
Cash and cash equivalents, end of year $ 7,926,845 $ 2,300,682 $ 5,237,995
============ ============ ============
</TABLE>
Supplemental Schedule of noncash investing and financing activity:
In connection with the sales of properties, purchasers assumed a mortgage
loan obligation of $2,854,275 and accrued interest thereon of $12,049 in 1996
and a mortgage loan obligation of $720,401 and accrued interest thereon of
$5,780 in 1995 in lieu of paying cash.
The accompanying notes are an integral part of the financial statements.
-10-
<PAGE> 38
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles 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 date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. 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.
Corporate Property Associates 5 (the "Partnership") diversifies its real
estate investments among various corporate tenants engaged in
different industries and by property type throughout the United
States.
The leases are accounted for under either the direct financing or
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 Partnership's net investment in the lease.
Operating method - Under this method, real estate is recorded at
cost, revenue is recognized as rentals are earned and expenses
(including depreciation) are charged to operations as incurred.
When scheduled rents vary during the lease term, income is
recognized on a straight-line basis so as to produce a constant
periodic rent.
The Partnership assesses the recoverability of its real estate assets,
including residual interests, based on projections of undiscounted
cash flows over the life of such assets. In the event that such cash
flows are insufficient, the assets are adjusted to their estimated
net realizable value.
Substantially all of the Partnership's leases provide for either
scheduled rent increases, periodic rent increases based on formulas
indexed to increases in the Consumer Price Index or sales overrides.
Operating Real Estate:
Land, buildings and personal property are carried at cost. Major
renewals and improvements are capitalized to the property accounts,
while replacements, maintenance and repairs which do not improve or
extend the lives of the respective assets are expensed currently.
Real Estate Held for Sale:
Real estate held for sale is accounted for at the lower of cost or fair
value less cost of sale.
Continued
-11-
<PAGE> 39
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
Depreciation:
Depreciation is being computed using the straight-line method over the
estimated useful lives of components of the particular properties,
which range from 5 to 30 years.
Cash Equivalents:
The Partnership 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 Partnership's cash and
cash equivalents at December 31, 1995 and 1996 were held in the
custody of three financial institutions.
Other Assets and Liabilities:
Included in other assets are deferred charges incurred in connection
with mortgage note financings and refinancings and an investment in a
limited partnership. Deferred charges are amortized on a
straight-line basis over the terms of the mortgages. The
Partnership's 17.5% investment in an unaffiliated limited partnership
is accounted for under the cost method, i.e., income is recorded
based on distributions received from net accumulated earnings.
Included in other liabilities is deferred rental income for the
aggregate difference on an operating method lease between scheduled
rents which vary during the lease term and rent recognized on a
straight-line basis.
Deferred Gains:
Deferred gains consist of assets acquired in excess of liabilities
assumed in connection with acquiring the operations of a hotel
property in Rapid City, South Dakota and certain funds received in
connection with the two loan refinancings. The deferred gain from the
refinancings is being amortized on a straight-line basis over 24
years. The deferred gain on acquisition had been amortized on a
straight-line basis on a 20-year schedule until sale of the property
in October 1996, at which time the remaining unamortized gain was
recognized.
Income Taxes:
A partnership is not liable for Federal income taxes as each partner
recognizes his proportionate share of the partnership income or loss
in his tax return. Accordingly, no provision for income taxes is
recognized for financial statement purposes.
Reclassifications:
Certain 1994 and 1995 amounts have been reclassified to conform to the
1996 financial statement presentation.
2. Partnership Agreement:
The Partnership was organized on April 12, 1983 under the Uniform
Limited Partnership Act of the State of California for the purpose of
engaging in the business of investing in and leasing industrial and
commercial real estate. The Corporate General Partner purchased 200
Limited Partnership Units in connection with the Partnership's public
offering. All the Units were sold prior to December 21, 1983, at
which time the offering terminated. The Partnership will terminate on
Continued
-12-
<PAGE> 40
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
December 31, 2005, or sooner, in accordance with the terms of the
Amended Agreement of Limited Partnership (the "Agreement").
The Agreement provides that the General Partners are allocated 6% (1% to
the Individual General Partner, William P. Carey, and 5% to the
Corporate General Partner, Carey Corporate Property, Inc.) and the
Limited Partners are allocated 94% of the profits and losses, except
as described below, as well as distributions of Distributable Cash
From Operations, as defined. The General Partners may be entitled to
receive a subordinated preferred return, measured based upon the
cumulative proceeds arising from the sale of Partnership assets.
Pursuant to the subordination provisions of the Agreement, the
preferred return may be paid after the limited partners receive 100%
of their initial investment from the proceeds of asset sales and a
cumulative annual return of 6% since the inception of the
Partnership. The General Partners interest in such preferred return
amounts to approximately $1,423,000 based upon the cumulative
proceeds from the sale of assets since the inception of the
Partnership through December 31, 1996. The Partnership's ability to
satisfy the subordination provisions of the Agreement may not be
determinable until liquidation of a substantial portion of the
Partnership's assets has been made.
In accordance with the Agreement, the General Partners, due to having
negative capital balances at the beginning of each year, were
allocated a portion of the 1994, 1995 and 1996 gains on sale of
property as well as the related tax gain in order to reduce their
negative balances. The Partnership paid a special distribution in
1995 of proceeds from a property sale which distribution was
allocated 1% to the Individual General Partner and 99% to the Limited
Partners in accordance with the Agreement.
3. Transactions with Related Parties:
The Partnership holds a 65% interest as tenants-in-common in hotel
properties in Alpena and Petoskey, Michigan with Corporate Property
Associates 6 ("CPA(R):6"), an affiliate which owns the remaining 35%
interest. The Partnership accounts for its interest in the Alpena and
Petoskey properties on a proportional basis.
Under the Agreement, W.P. Carey & Co., Inc. ("W.P. Carey") and other
affiliates are also entitled to receive a property management fee and
reimbursement of certain expenses incurred in connection with the
Partnership's operations. General and administrative expense
reimbursements consist primarily of the actual cost of personnel
needed in providing administrative services necessary to the
operation of the Partnership.
Property management fee and general and administrative expense
reimbursements are summarized as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Property management fee $156,947 $116,825 $ 76,763
General and administrative
expense reimbursements 178,840 117,584 113,288
-------- -------- --------
$335,787 $234,409 $190,051
======== ======== ========
</TABLE>
During 1994, 1995 and 1996, fees aggregating $339,112, $180,242 and
$91,265 respectively, were incurred for legal services performed by a
firm in which the Secretary of the Corporate General Partner and
other affiliates is a partner.
The mortgage loans on the Alpena and Petoskey properties consist of
tax-exempt bond obligations of $7,330,000 for each property of which
the Partnership's share of each is $4,764,500. The bonds are also
collateralized by mortgage and/or lease assignments on eight other
Partnership properties. In the event of default, the bondholders have
recourse to the Partnership's collateral
Continued
-13-
<PAGE> 41
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
to the full extent of the outstanding balance of the bonds including
the portion of the obligation applicable to CPA(R)6. In connection
with restructuring the bond obligation in 1992, the Partnership
received cash and other consideration from CPA(R)6.
The Partnership is a participant in an agreement with W.P. Carey and
other affiliates for the purpose of leasing office space used for the
administration of real estate entities and W.P. Carey and for sharing
the associated costs. Pursuant to the terms of the agreement, the
Partnership's share of rental, occupancy and leasehold improvement
costs is based on adjusted gross revenues, as defined. Net expenses
incurred in 1994, 1995 and 1996 were $76,426, $182,843 and $83,533,
respectively. Net expenses in 1995 included certain nonrecurring
items.
4. Real Estate Leased to Others Accounted for Under the Operating Method and
Operating Real Estate:
A. Real Estate Leased to Others:
Scheduled future minimum rents, exclusive of renewals, under
noncancellable operating leases amount to approximately $2,850,000 in
1997, $2,822,000 in 1998, $2,647,000 in 1999, $1,077,000 in both of
the years 2000 and 2001, and aggregate approximately $16,650,000
through 2010.
Contingent rents were approximately $106,000, $5,000 and $6,000 in 1994,
1995 and 1996, respectively.
B. Operating Real Estate:
Operating real estate, at cost, is summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1996
---- ----
<S> <C> <C>
Land $ 479,050 $ 479,050
Buildings 9,603,750 9,603,750
Personal property 1,918,227 2,017,921
----------- -----------
12,001,027 12,100,721
Less: Accumulated depreciation 4,265,218 4,637,421
----------- -----------
$ 7,735,809 $ 7,463,300
=========== ===========
</TABLE>
5. Net Investment in Direct Financing Leases:
Net investment in direct financing leases is summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1996
---- ----
<S> <C> <C>
Minimum lease payments receivable $34,887,327 $32,483,668
Unguaranteed residual value 17,495,677 17,495,677
----------- -----------
52,383,004 49,979,345
Less: Unearned income 33,030,066 30,680,619
----------- -----------
$19,352,938 $19,298,726
=========== ===========
</TABLE>
Scheduled future minimum rents, exclusive of renewals, under
noncancellable financing leases amount to approximately $2,585,000 in
each of the years from 1997 to 2001 and aggregate approximately
$32,484,000 through 2017.
Continued
-14-
<PAGE> 42
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
Contingent rents were approximately $995,000, $758,000 and $776,000 in
1994, 1995 and 1996, respectively.
6. Mortgage Notes Payable and Note Payable to Affiliate:
A. Mortgage Notes Payable
The Partnership's mortgage notes payable are limited recourse
obligations and are collateralized by lease assignments and by real
property with a carrying amount of approximately $32,914,000, before
accumulated depreciation (also see Note 3). As of December 31, 1996,
mortgage notes payable bear interest at rates varying from 6.6% to
10% per annum and mature from 1997 to 2015.
Scheduled principal payments during each of the next five years following
December 31, 1996 and thereafter, including a mortgage loan subject
to acceleration, are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C> <C>
1997 $ 4,988,940
1998 253,500
1999 266,500
2000 286,000
2001 312,000
Thereafter 8,177,000
-----------
Total $14,283,940
===========
</TABLE>
B. Note Payable to Affiliate:
A note payable to CPA(R):6 of $1,151,000 provides for payments of
interest only at a rate of 13.48% per annum through August 1, 1999,
at which time the interest rate will reset to the Applicable Federal
Rate (as defined in the Internal Revenue Code of 1986). The note,
which is a recourse obligation of the Partnership, matures on May 1,
2012, at which time a balloon payment for any unpaid principal is
due. The note may be prepaid in part or whole at any time.
Interest paid on mortgage notes payable and the note payable to
affiliate was $4,642,849, $3,554,413 and $2,254,150 in 1994, 1995 and
1996, respectively.
7. Distributions to Partners:
Distributions declared and paid to partners are summarized as follows:
<TABLE>
<CAPTION>
Limited
Year Ending Distributions Paid to Distributions Paid to Partners' Per
December 31, General Partners Limited Partners Unit Amount
------------ ---------------- ---------------- -----------
<S> <C> <C> <C>
1994 $351,738 $5,510,576 $48.68
1995:
Quarterly distributions $345,833 $5,422,280 $47.90
Special distribution 22,869 2,264,000 20.00
-------- ---------- ------
Total 1995 $368,702 $7,686,280 $67.90
======== ========== ======
1996 $267,417 $4,189,532 $37.01
======== ========== ======
</TABLE>
Distributions of $61,056 to the General Partners and $956,540 to the
Limited Partners for the quarter ended December 31, 1996 were
declared and paid in January 1997.
Continued
-15-
<PAGE> 43
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
8. Income for Federal Tax Purposes:
Income for financial statement purposes differs from income for Federal
income tax purposes because of the difference in the treatment of
certain items for income tax purposes and financial statement
purposes. A reconciliation of accounting differences is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net income per Statements of Income $ 5,439,186 $ 1,912,698 $ 7,776,476
Excess tax depreciation (2,979,063) (2,399,357) (1,980,182)
Writedowns of assets 1,980,550 1,300,000
Difference in gains or losses on
dispositions of property 8,776,856 (157,203) 3,475,585
Other (351,394) 284,878 (544,552)
------------ ----------- ------------
Income reported for Federal
income tax purposes $ 10,885,585 $ 1,621,566 $ 10,027,327
============ =========== ============
</TABLE>
9. Industry Segment Information:
The Partnership's operations consist primarily of the investment in and
the leasing of industrial and commercial real estate and the
operations of three hotel properties.
In 1994, 1995 and 1996, the Partnership earned its total leasing
revenues (rental income plus interest income from financing leases)
from the following lease obligors:
<TABLE>
<CAPTION>
1994 % 1995 % 1996 %
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Gould, Inc. $ 1,125,000 10% $1,132,500 13% $1,215,000 18%
Spreckels Industries, Inc. 880,264 8 1,020,717 12 1,020,717 15
DeVlieg Bullard, Inc. 830,984 7 830,984 10 912,864 14
Arley Merchandise
Corporation 600,000 5 600,000 7 600,000 9
Exide Electronics
Corporation 485,726 4 528,926 6 572,130 9
Penn Virginia Corporation 498,750 5 498,750 6 498,750 8
Stoody Deloro Stellite, Inc. 380,325 3 404,719 5 390,068 6
GATX Logistics, Inc. 1,834,350 16 1,398,600 16 380,730 6
Harcourt General Corporation 233,750 2 233,750 3 233,750 4
Rochester Button Company 204,743 2 199,968 2 225,706 3
Penberthy Products, Inc. 182,529 2 182,529 2 200,514 3
Winn Dixie Stores, Inc. 191,534 2 191,534 2 191,534 3
Sunds Defibrator Woodhandling, Inc.
(formerly FMP/Rauma Company) 124,430 1 131,033 2 144,239 2
Other 146,342 1 212,383 2 31,602
IBM Corporation 318,097 3 318,097 4 16,691
Industrial General Corporation 1,385,643 12 637,321 8
Pace Membership Warehouse, Inc. 601,718 5
Liberty Fabrics of New York 1,388,076 12
----------- --- ---------- --- --------- ---
$11,412,261 100% $8,521,811 100% $6,634,295 100%
=========== ==== ========== ==== ========== ====
</TABLE>
Continued
-16-
<PAGE> 44
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
The Partnership's share of the operating results for the three hotel
properties are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenues $ 6,595,570 $ 6,768,268 $ 6,359,758
Fees to hotel management
company (131,911) (143,498) (134,872)
Other operating expenses (4,827,788) (5,097,872) (4,818,087)
----------- ----------- -----------
Hotel operating income $ 1,635,871 $ 1,526,898 $ 1,406,799
=========== =========== ===========
</TABLE>
10. Rochester Button Company:
In June 1992, the Partnership and Rochester Button Company ("RBC")
entered into restructuring and lease modification agreements for
properties leased by RBC in South Boston and Kenbridge, Virginia.
Under the restructuring agreement, the Partnership agreed to exchange
a $300,000 subordinated promissory note from RBC for 300 shares of
preferred stock ($1,000 par value, 5%). In January 1994, the
Partnership agreed to lend $250,000 to RBC at an annual interest rate
of 9% evidenced by a subordinated promissory note. In 1995, the
Partnership incurred a charge of $288,910 in writing off the note
receivable and preferred stock as a result of RBC experiencing
financial difficulties and its inability to pay dividends and debt
service installments in a timely manner. The Partnership had
previously written down the investment in the preferred stock. In
addition, the Partnership incurred charges on uncollected rents of
$165,164 and $235,314 for the years ended December 31, 1995 and 1996,
respectively.
On December 30, 1996, the Partnership entered into a new lease agreement
with RBC and agreed to forgive all previously uncollected rents. The
lease amendment provides for a reduction of annual rent from $286,000
to $180,000. Additionally, RBC granted the Partnership warrants which
are exercisable at any time prior to December 31, 2006, to purchase
up to 273.5 shares of RBC common stock, representing 40% of the
outstanding common stock of RBC, at an exercise price of $18.28 per
share prior to December 31, 2006.
The South Boston and Kenbridge properties are pledged as collateral for
$400,000 of bond financings issued to RBC by industrial development
authorities.
Continued
-17-
<PAGE> 45
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
11. Funds in Escrow:
Funds in escrow at December 31, 1995 and 1996 consist of reserves and
escrow funds for the hotel properties and related mortgage debt.
<TABLE>
<CAPTION>
December 31,
1995 1996
---- ----
<S> <C> <C>
Security reserve on Rapid City
property $1,895,000
Debt service escrow account and bond
reserves on Alpena and Petoskey
properties 412,100 $490,100
Hotel furniture, fixture
and equipment reserves 270,522 84,951
Special escrow accounts
on Rapid City hotel property 400,000
---------- ---------
$2,977,622 $ 575,051
========== =========
</TABLE>
12. Gains and Losses on the Sale of Real Estate:
Pace Membership Warehouse, Inc.:
On November 10, 1994, Pace Membership Warehouse, Inc. ("Pace"),
purchased its leased property in Tampa, Florida from the Partnership
for $7,000,000. A portion of the Partnership's proceeds from the sale
was used to satisfy the remaining $3,290,437 mortgage balance on the
Tampa property. In connection with the sale, the Partnership
recognized a gain of $2,027,891.
Industrial General Corp.:
In August 1985, the Partnership purchased from and net leased to
Industrial General Corporation ("IGC") and certain of its
wholly-owned subsidiaries, seven properties located in Elyria and
Bellville, Ohio; Forrest City and Bald Knob, Arkansas; Carthage, New
York; and Newburyport, Massachusetts. Subsequent to the purchase, the
Partnership agreed to exchange the Saginaw property for an expansion
of the Newburyport facility, severed the Carthage property from the
lease and entered into a lease with FMP/Rauma Company ("FMP"). In
December 1994, the Partnership sold the Forrest City property for
$650,000 and recognized a loss of $887,000.
In July 1995, IGC filed a voluntary petition of bankruptcy under Chapter
11 of the United States Bankruptcy Code. In connection with an asset
acquisition of the plastics division of IGC, on September 14, 1995,
the Partnership entered into a series of transactions which resulted
in the termination of the IGC lease, the sale of the Bald Knob,
Bellville and Newburyport properties and the full satisfaction of the
mortgage loan obligation collateralized by all of the IGC properties
and the FMP property which had been scheduled to mature on September
1, 1995. In connection with the sale of the Bald Knob property to
IGC, the Partnership received cash of $987,362 and IGC, with the
consent of the mortgage lender, assumed a mortgage obligation from
the Partnership of $720,401 and accrued interest thereon of $5,780.
Additionally, IGC agreed to pay an additional $200,000 in
installments to the Partnership of which $185,000 had been received
as of December 31, 1996. The Bellville and Newburyport properties
were sold for $2,400,000 in cash to G.I. Plastek Industrial
Properties Limited Partnership ("Plastek Properties"), an affiliate
of G.I. Plastek Limited Partnership ("Plastek") which acquired the
assets of the IGC plastics division.
Continued
-18-
<PAGE> 46
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
The Partnership used $2,200,000 of the proceeds to pay off the
remaining balance on the matured mortgage loan obligation on the IGC
and FMP properties. In connection with the sale of the three
properties, the Partnership realized a loss of $1,719,828.
The Partnership also purchased limited partnership interests in Plastek.
The Partnership made capital contributions of $175 and $1,750,000 for
Class A and Class B limited partnership interests, respectively. The
Class A interest provides for a 17.5% participation in the profits
and losses of Plastek after payment of preferred returns to Class B
interests. Class B interests are entitled to a cumulative preferred
return of 10% on their contributions; however, it does not
participate in nor receive other allocations of any gains or losses
of Plastek. The Class B interest is redeemable on September 8, 2000.
As of December 31, 1996, the Partnership has not received any
distributions.
The Partnership retains ownership of the Elyria property. In 1995, based
on the appraised value of the property and the costs that would need
to be incurred to prepare the property for sale or lease after IGC
vacated, the Partnership wrote off the value of the property and
recognized a charge of $691,640. The Elyria property is presently
leased to InnoTech Industries, Inc. through April 1998 for an annual
rental of $60,000.
Liberty Fabrics of New York:
In January 1984, the Partnership purchased properties in Gordonsville,
Virginia and in North Bergen, New Jersey and entered into a net lease
with Liberty Fabrics of New York ("Liberty"). In December 1993,
Liberty notified the Partnership of its intention to exercise its
purchase option on the properties. Pursuant to the lease, the
purchase price would be the greater of $7,000,000, the Partnership's
purchase price for the property, or fair market value as encumbered
by the lease.
On December 29, 1994, the Partnership and Liberty terminated the lease
and agreed that the properties would be transferred to Liberty for
$9,359,000, subject to a final determination of the fair value of the
property. Liberty would have the right within 30 days of the
determination to rescind the transfer, in which case all proceeds
would be returned to Liberty, title of the properties transferred
back to the Partnership and Liberty would pay all rents in arrears
for the period from the initial transfer of title if the fair market
value was determined to be greater than $9,359,000. The final
determination was made with no adjustment made to the fair market
value thereby completing the sale. As a result, the Partnership
recognized a gain of $2,334,062 in 1995 on the sale of the
properties.
Rapid City Hotel:
In 1985, the Partnership purchased a hotel in Rapid City, South Dakota,
which it operated as a Holiday Inn, with $6,800,000 of tax-exempt
bonds which were supported by a letter of credit issued by a third
party. In September 1994, the Partnership was advised by Holiday Inn
that it would need to upgrade the hotel's physical plant by January
1997 in order to meet the requirements of a modernization plan
adopted by Holiday Inn or surrender its Holiday Inn license. As the
cost of such upgrade was estimated to be $1,925,000, Management
concluded that such additional investment would not justify
compliance with the modernization plan. Although Management was
considering an affiliation with another national hotel chain,
earnings were expected to decline after any change in affiliation.
Continued
-19-
<PAGE> 47
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
In 1995, under an agreement with the issuer of the letter of credit
supporting the $6,800,000 tax-exempt mortgage bond on the Rapid City
property, the Partnership agreed to use its best efforts to sell the
hotel property in exchange for an extension of the letter of credit
from October 1995 to October 1997. Annual cash flow from the hotel
(hotel earnings, adjusted for depreciation and amortization, less
debt service on the tax-exempt bonds) for 1995, the last full year of
operations, was $305,000. In 1995, the Partnership reevaluated the
net realizable value of the property and recognized a noncash charge
of $1,000,000 on the writedown. In the second quarter of 1996, the
Partnership charged an additional $1,300,000 as a writedown to net
realizable value to an amount Management believed would approximate
the proceeds from a sale.
On October 1, 1996, the Partnership sold the property and the operating
assets and liabilities of the hotel for $4,105,000. The Partnership
recognized a gain of $784,618 on the sale. The bond was paid off by
utilizing the net proceeds from the sale, $302,000 of cash and
various escrow accounts which had been held by the bond trustee or
issuer of the letter of credit. The gain includes the recognition of
the release of unamortized deferred gains relating to the acquisition
of the hotel operation in 1991 from the former lessee.
Helena, Montana Office Building :
In May 1985, the Partnership purchased an office building in Helena,
Montana and was assigned an existing net lease with IBM Corporation
("IBM") as lessee. In 1992, the lease with IBM and the mortgage loan
on the property were modified at which time IBM reduced its occupancy
from 100% to 40% of the leasable space. The Partnership subsequently
leased the remaining space to various other tenants.
On January 19, 1996, the Partnership sold the property for $4,800,000
including the purchaser's assumption of the existing mortgage loan on
the property. Net of closing costs, the Partnership received cash
proceeds of $1,741,261, assigned the mortgage loan obligation of
$2,854,275 and accrued interest thereon of $12,049 to the purchaser
and recognized a gain of $90,356 on the sale.
GATX Logistics, Inc.:
In June 1985, the Partnership purchased a warehouse property in
Hodgkins, Illinois leased to General Motors Corporation ("GM"). In
November 1993, GM terminated its lease and the Partnership entered
into a short-term lease with GATX Logistics, Inc.("GATX").
Subsequently, in November 1994, GATX and the Partnership entered into
a new lease which provided for a five-year term and a renewal term of
five years at GATX's option.
On April 9, 1996, the Partnership sold the Hodgkins property for
$13,200,000 and assigned the GATX lease, as lessor, to the purchaser.
Net of costs and amounts necessary to pay the remaining $3,208,526
balance on the property's mortgage loan, the Partnership received
cash proceeds of $9,428,270 and recognized a gain on sale of
$4,409,191.
Continued
-20-
<PAGE> 48
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES to FINANCIAL STATEMENTS, Continued
13. Environmental Matters:
All of the Partnership's properties, other than the hotel properties are
currently leased to corporate tenants, all of which are subject to
environmental statutes and regulations regarding the discharge of
hazardous materials and related remediation obligations. The
Partnership generally structures a lease to require the tenant to
comply with all laws. In addition, substantially all of the
Partnership's net leases include provisions which require tenants to
indemnify the Partnership from all liabilities and losses related to
their operations at the leased properties. The costs for remediation,
which are expected to be performed and paid by the affected tenant,
are not expected to be material. In the event that the Partnership
absorbs a portion of any costs because of a tenant's failure to
fulfill its obligations, the General Partners believe such
expenditures will not have a material adverse effect on the
Partnership's financial condition, liquidity or results of
operations.
In 1994, based on the results of Phase I environmental reviews performed
in 1993, the Partnership voluntarily conducted Phase II environmental
reviews on certain of its properties. The Partnership believes, based
on the results of Phase I and Phase II reviews, that its leased
properties are in substantial compliance with Federal and state
environmental statutes and regulations. Portions of certain
properties have been documented as having a limited degree of
contamination, principally in connection with surface spills from
facility activities and leakage from underground storage tanks. For
those conditions which were identified, the Partnership advised the
affected tenants of the Phase II findings and of their obligations to
perform required remediation.
14. Disclosure on Fair Value of Financial Instruments:
The carrying amounts of cash, receivables and accounts payable and
accrued expenses approximate fair value because of the short maturity
of these items.
The Partnership estimates that the fair value of mortgage notes payable
approximates $13,914,000 at December 31, 1996. The fair value of debt
instruments was evaluated using a discounted cash flow model with
discount rates which take into account the credit of the tenants and
interest rate risk.
The carrying amount of the Partnership's limited partnership investment
in Plastek, which interest was purchased in September 1995 and which
is accounted for under the cost method, approximates fair value.
-21-
<PAGE> 49
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1996
<TABLE>
<CAPTION>
Initial Cost to Partnership Costs
--------------------------- Capitalized Decrease
Personal Subsequent to in Net
Description Encumbrances Land Buildings Property Acquisition (a) Investment (b)
----------- ------------ ---- --------- -------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Operating method:
Manufacturing facilities
leased to Arley
Merchandise Corporation $4,754,940 $ 256,000 $ 7,544,000 $ 8,555
Manufacturing and office
leased to Penn
Virginia Corporation 453,192 3,246,808 3,112
Land leased to
Exide Electronics
Corporation 1,170,000
Motion picture theater leased
to Harcourt General
Corporation 243,000 1,927,000 25,424
Office and research facility
leased to Gould, Inc. 1,422,000 8,418,500 34,587
Retail store leased to
Winn Dixie Stores, Inc. 414,700 1,525,872 21,425
Office/Manufacturing leased
to Inno Tech Industries, Inc. 122,884 568,756 $(691,640)
---------- ---------- ----------- ---------- ---------
$4,754,940 $4,081,776 $23,230,936 $ 93,103 $(691,640)
========== ========== =========== ---------- ---------
Operating real estate (e):
Hotel properties located in
Alpena, Michigan $4,764,500 $ 136,500 $ 4,905,875 $482,625 $ 629,009
Petoskey, Michigan 4,764,500 342,550 4,684,875 497,575 421,712
---------- --------- ----------- -------- ----------
$9,529,000 $ 479,050 $ 9,590,750 $980,200 $1,050,721
========== ========= =========== ======== ==========
<CAPTION>
Life on which
Gross Amount at which Carried Depreciation in
at Close of Period (c)(d) Latest
----------------------------- Statement
Personal Accumulated of Income
Description Land Buildings Property Total Depreciation(d) Date Acquired is Computed
----------- ---- --------- -------- ----- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating method:
Manufacturing facilities
leased to Arley
Merchandise Corporation $ 256,000 $ 7,552,555 $7,808,555 $2,391,593 July 13, 1984 30 YRS.
Manufacturing and office
leased to Penn
Virginia Corporation 453,192 3,249,920 3,703,112 2,391,080 August 7, 1984 5-30 YRS.
Land leased to
Exide Electronics
Corporation 1,170,000 1,170,000 June 20, 1985
Motion picture theater leased
to Harcourt General
Corporation 243,000 1,952,424 2,195,424 745,715 July 17, 1985 30 YRS.
Office and research facility
leased to Gould, Inc. 1,423,875 8,451,212 9,875,087 3,125,698 November 25, 1985 30 YRS.
Retail store leased to
Winn Dixie Stores, Inc. 414,700 1,547,297 1,961,997 457,741 March 17, 1988 30 YRS.
Office/Manufacturing leased
to Inno Tech Industries, Inc. August 30, 1995 N/A
---------- ----------- ----------- ----------
$3,960,767 $22,753,408 $26,714,175 $9,111,827
========== =========== =========== ==========
Operating real estate (e):
Hotel properties located in
Alpena, Michigan $ 136,500 $ 4,912,375 $1,105,134 $ 6,154,009 $2,335,883 March 6, 1987 7-30 YRS.
Petoskey, Michigan 342,550 4,691,375 912,787 5,946,712 2,301,538 January 30, 1987 7-30 YRS.
---------- ----------- ---------- ----------- ----------
$ 479,050 $ 9,603,750 $2,017,921 $12,100,721 $4,637,421
========== =========== ========== =========== ==========
</TABLE>
See accompanying notes to Schedule.
-22-
<PAGE> 50
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1996
<TABLE>
<CAPTION>
Gross Amount
Cost at which
Initial Cost to Capitalized Decrease in Carried
Partnership Subsequent to Net at Close of
Description Encumbrances Land Buildings Acquisition (a) Investment (b) Period (c) Date Acquired
----------- ------------ ---- --------- --------------- -------------- ------ --- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Direct financing method:
Manufacturing facility
to Spreckels
Industries, Inc. $ 444,730 $ 5,055,270 $ 5,500,000 December 30, 1983
Manufacturing facility
leased to Rochester
Button Company, Inc. 86,663 2,815,596 $ 4,429 $(1,003,639) 1,903,049 April 11, 1984
Office and research
facility leased to
Exide Electronics
Corporation 2,030,000 1,500 2,031,500 June 20, 1985
Manufacturing
facilities leased to
DeVlieg Bullard, Inc. 310,032 4,782,667 5,092,699 April 3, 1986
Manufacturing
facilities leased to
Penberthy Products, Inc. 48,968 1,028,333 1,077,301 April 3, 1986
Manufacturing
facilities leased
to Stoody Company 200,000 2,800,000 3,000,000 December 22, 1986
Manufacturing
facilities leased
to Sunds Defibrator
Woodhandling, Inc. 24,750 669,427 694,177 August 30, 1985
---------- ----------- ------- ----------- -----------
$1,115,143 $19,181,293 $ 5,929 $(1,003,639) $19,298,726
========== =========== ======= =========== ===========
</TABLE>
See accompanying notes to Schedule.
-23-
<PAGE> 51
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES TO SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
(a) Consists of additional costs capitalized and acquisition costs,
including legal fees, appraisal fees, title costs and other related
professional fees, property acquired in connection with acquiring hotel
assets and purchases of equipment for hotel operations.
(b) The decrease in net investment is due to the amortization of unearned
income producing constant periodic rate on the net investment in direct
financing leases, which is less than lease payments received and the
writedown of properties to net realizable value.
(c) At December 31, 1996, the aggregate cost of real estate owned for
Federal income tax purposes is $58,715,975.
(d)
Reconciliation of Real Estate Accounted
for Under the Operating Method
<TABLE>
<CAPTION>
December 31,
------------------
1995 1996
---- ----
<S> <C> <C>
Balance at beginning
of year $45,541,835 $38,994,553
Additions 403,126
Sale of property (12,280,378)
Reclassification to
real estate held for sale (6,950,408)
----------- -----------
Balance at close of
year $38,994,553 $26,714,175
=========== ===========
</TABLE>
Reconciliation of Accumulated Depreciation
<TABLE>
<CAPTION>
December 31,
------------------
1995 1996
---- ----
<S> <C> <C>
Balance at beginning
of year $13,182,621 $12,371,727
Depreciation expense 1,359,240 840,660
Sale of property (4,100,560)
Reclassification to
real estate held for sale (2,170,134)
----------- -----------
Balance at close of year $12,371,727 $ 9,111,827
=========== ===========
</TABLE>
-24-
<PAGE> 52
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES TO SCHEDULE OF REAL ESTATE AND ACCUMULATED
DEPRECIATION- Continued
(e) Reconciliation of Operating Real Estate
<TABLE>
<CAPTION>
December 31,
------------------
1995 1996
---- ----
<S> <C> <C>
Balance at beginning of year $21,768,149 $12,001,027
Disposals
Additions 675,825 99,694
Reclassification to real estate
held for sale (9,442,947)
Writedown to net
realizable value (1,000,000)
----------- -----------
Balance at close of year
$12,001,027 $12,100,721
=========== ===========
</TABLE>
Reconciliation of Accumulated Depreciation for
Operating Real Estate
<TABLE>
<CAPTION>
December 31,
-------------------
1995 1996
---- ----
<S> <C> <C>
Balance at beginning of year $ 7,393,500 $4,265,218
Reclassification to real estate
held for sale (3,834,823) (118,166)
Depreciation expense 706,541 490,368
----------- ----------
Balance at close of year $ 4,265,218 $ 4,637,420
=========== ===========
</TABLE>
-25-
<PAGE> 53
PROPERTIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- -----------------
<S> <C> <C> <C>
SPRECKELS INDUSTRIES Manufacturing and Forrest City, Ownership of land
INC. Office Facility Arkansas and building
ARLEY MERCHANDISE Manufacturing Columbia and Ownership of land
CORPORATION Facilities - Sumter, South and buildings (1)
2 locations Carolina
ROCHESTER BUTTON Manufacturing Kenbridge, Ownership of land
COMPANY Facilities - South Boston, and buildings (2)
2 locations Virginia
PENN VIRGINIA Office and Duffield, Ownership of land
CORPORATION Manufacturing Virginia and building (3)
Facilities - Cuyahoga Falls,
3 locations Ohio and
Broomall,
Pennsylvania
(4) Hotels Petoskey and Ownership of 65%
Alpena, interest in land
Michigan and buildings (1)
EXIDE ELECTRONICS Office and Raleigh, Ownership of land
CORPORATION Research Facility North Carolina and building
HARCOURT GENERAL Movie Theatre Canton, Ownership of land
CORPORATION Michigan and building (3)
INNO TECH INDUSTRIES, Office, and Elyria, Ownership of land
INC. Manufacturing Ohio and building
Facility
GOULD, INC. Manufacturing and Oxnard, Ownership of land
Research Facility California and building
DEVLIEG BULLARD, INC. Manufacturing Frankenmuth, Ownership of land
Facilities - Michigan and buildings (3)
2 locations McMinnville,
Tennessee
PENBERTHY Manufacturing Prophetsown, Ownership of land
PRODUCTS, INC. Facility Illinois and building (3)
STOODY DELORO Manufacturing Goshen, Ownership of land
STELLITE, INC. Facility Indiana and building
</TABLE>
-26-
<PAGE> 54
<TABLE>
<CAPTION>
LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- -----------------
<S> <C> <C> <C>
WINN-DIXIE Supermarket Montgomery, Ownership of land
STORES, INC. Alabama and buildings (3)
SUNDS DEFIBRATOR
WOODHANDLING, INC.
(formerly FMP/RAUMA, Manufacturing Carthage, Ownership of land
CO.) Facility New York and buildings
</TABLE>
(1) These properties are encumbered by mortgage notes payable.
(2) These properties are subject to a mortgage as collateral for loans issued
by unaffiliated parties to the lessee.
(3) These properties are encumbered by mortgages and/or lease assignments in
connection with mortgage notes payable on other of the Partnership's
properties.
(4) The Partnership operates a hotel business at these properties.
-27-
<PAGE> 55
MARKET FOR THE PARTNERSHIP'S EQUITY AND RELATED
UNITHOLDER MATTERS
- --------------------------------------------------------------------------------
Except for limited or sporadic transactions, there is no established
public trading market for the Limited Partnership Units of the Partnership. As
of December 31, 1996, there were 3,577 holders of record of the Limited
Partnership Units of the Partnership.
In accordance with the requirements of the Partnership's Amended
Agreement of Limited Partnership (the "Agreement") the Corporate General Partner
expects to continue to make quarterly distributions of Distributable Cash From
Operations, as defined, in the Agreement. The following table shows the
frequency and amount of distributions paid per Unit since 1993:
<TABLE>
<CAPTION>
Cash Distributions Paid Per Unit
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
First quarter $12.15 $12.20 $11.75
Second quarter 12.16 32.21 (a) 8.40
Third quarter 12.18 11.74 8.42
Fourth quarter 12.19 11.75 8.44
------ ------ ------
$48.68 $67.90 $37.01
====== ====== ======
</TABLE>
(a) Includes a special distribution of $20 per Unit.
REPORT ON FORM 10-K
- --------------------------------------------------------------------------------
The Corporate General Partner will supply to any owner of Limited
Partnership Units, upon written request and without charge, a copy of the Annual
Report on Form 10-K for the year ended December 31, 1996 as filed with the
Securities and Exchange Commission.
-28-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10K FOR
THE YEAR-ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERECE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,237,995
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,237,995
<PP&E> 58,113,622
<DEPRECIATION> 13,749,248
<TOTAL-ASSETS> 52,651,537
<CURRENT-LIABILITIES> 591,075
<BONDS> 15,434,940
0
0
<COMMON> 0
<OTHER-SE> 35,065,590
<TOTAL-LIABILITY-AND-EQUITY> 52,651,537
<SALES> 0
<TOTAL-REVENUES> 13,204,966
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,324,124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,075,230
<INCOME-PRETAX> 7,776,476
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,776,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,776,476
<EPS-PRIMARY> 64.61
<EPS-DILUTED> 64.61
</TABLE>
