<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from _____________________ to ______________________
Commission file number 0-11948
CORPORATE PROPERTY ASSOCIATES 5
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
CALIFORNIA 13-3164925
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
(Address of principal executive offices) (Zip Code)
</TABLE>
(212) 492-1100
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
<PAGE> 2
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
INDEX
Page No.
--------
PART I
Item 1. - Financial Information*
Balance Sheets, December 31, 1996 and
March 31, 1997 2
Statements of Operations for the three
months ended March 31, 1996 and 1997 3
Statements of Cash Flows for the three
months ended March 31, 1996 and 1997 4
Notes to Financial Statements 5-6
Item 2. - Management's Discussion of Operations 7
PART II
Item 6. - Exhibits and Reports on Form 8-K 8
Signatures 9
*The summarized financial information contained herein is unaudited; however in
the opinion of management, all adjustments necessary for a fair presentation of
such financial information have been included.
-1-
<PAGE> 3
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
PART I
Item 1. - FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31
1996 1997
------------ ------------
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land and buildings, net of accumulated
depreciation of $13,749,248 at
December 31, 1996 and
$14,026,319 at March 31, 1997 $ 25,065,648 $ 24,911,729
Net investment in direct
financing leases 19,298,726 19,288,743
Cash and cash equivalents 5,237,995 4,334,883
Escrow funds 575,051 633,551
Other assets 2,474,117 2,576,095
------------ ------------
Total assets $ 52,651,537 $ 51,745,001
============ ============
LIABILITIES:
Mortgage notes payable $ 14,283,940 $ 14,283,940
Note payable to affiliate 1,151,000 1,151,000
Accrued interest payable 45,707 45,707
Accounts payable and accrued expenses 433,842 396,750
Accounts payable to affiliates 111,526 99,334
Deferred gains 901,390 890,123
Other liabilities 658,542 608,110
------------ ------------
Total liabilities 17,585,947 17,474,964
------------ ------------
PARTNERS' CAPITAL:
General Partners (67,666) (67,856)
Limited Partners (113,200 Limited
Partnership Units outstanding) 35,133,256 34,337,893
------------ ------------
Total partners' capital 35,065,590 34,270,037
------------ ------------
Total liabilities and
partners' capital $ 52,651,537 $ 51,745,001
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date.
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<PAGE> 4
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental income from operating leases $1,071,969 $ 714,026
Interest income from direct financing leases 823,158 872,633
Other interest income 28,511 33,919
Revenue of hotel operations 1,293,606 874,428
---------- ----------
3,217,244 2,495,006
---------- ----------
Expenses:
Interest on mortgages 759,171 341,237
Depreciation 454,234 277,071
General and administrative 142,885 115,416
Property expenses 117,134 36,500
Amortization 9,792
Operating expenses of
hotel operations 1,230,044 710,338
---------- ----------
2,713,260 1,480,562
---------- ----------
Income before gain on sale of
real estate 503,984 1,014,444
Gain on sale of real estate 90,356
---------- ----------
Net income $ 594,340 $1,014,444
========== ==========
Net income allocated to
General Partners $ 120,595 $ 60,867
========== ==========
Net income allocated to
Limited Partners $ 473,745 $ 953,577
========== ==========
Net income per Unit
(113,200 Limited
Partnership Units) $ 4.19 $ 8.42
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE> 5
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 594,340 $ 1,014,444
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 464,026 277,071
Other noncash items (2,385) (1,284)
Gain on sale of real estate (90,356)
Net change in operating assets and liabilities 187,604 (260,194)
----------- -----------
Net cash provided by operating activities 1,153,229 1,030,037
----------- -----------
Cash flows from investing activities:
Additional capitalized costs (97,500) (123,152)
Proceeds from sale of real estate 1,741,261
----------- -----------
Net cash provided by (used in) investing activities 1,643,761 (123,152)
----------- -----------
Cash flows from financing activities:
Distributions to partners (1,415,000) (1,809,997)
Payments of mortgage principal (89,951)
----------- -----------
Net cash used in financing activities (1,504,951) (1,809,997)
----------- -----------
Net increase (decrease) in cash and cash equivalents 1,292,039 (903,112)
Cash and cash equivalents, beginning of period 2,300,682 5,237,995
----------- -----------
Cash and cash equivalents, end of period $ 3,592,721 $ 4,334,883
=========== ===========
Supplemental disclosure of cash flows information:
Interest paid $ 781,524 $ 352,504
=========== ===========
</TABLE>
Supplemental schedule of noncash investing and financing activities:
In connection with the January 1996 sale of a Partnership property, the
purchaser assumed a mortgage obligation of $2,854,275 and accrued interest
thereon of $12,049 from the Partnership.
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE> 6
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Basis of Presentation:
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. For
further information, refer to the financial statements and footnotes thereto
included in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1996.
Note 2. Distributions to Partners:
Distributions declared and paid to partners during the three months ended March
31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
Quarter Ended General Partners Limited Partners Per Limited Partner Unit
- ----------------- ---------------- ---------------- ------------------------
<S> <C> <C> <C>
December 31, 1996 $61,057 $ 956,540 $8.45
======= ========== =====
</TABLE>
A special distribution of $7 per Limited Partner Unit ($792,400) was declared
and paid in January 1997.
A distribution of $8.34 per Limited Partner Unit for the quarter ended March 31,
1997 was declared and paid in April 1997.
Note 3. Transactions with Related Parties:
For the three-month periods ended March 31, 1996 and 1997, the Partnership
incurred management fees of $29,364 and $15,121 respectively, and general and
administrative expense reimbursements of $29,921 and $20,287, respectively.
The Partnership, in conjunction with certain affiliates, is a participant in an
agreement for the purpose of renting and occupying office space. Under the
agreement, the Partnership pays its proportionate share of rent and other costs
of occupancy. Net expenses incurred for the three months ended March 31, 1996
and 1997 were $25,201 and $27,739, respectively.
-5-
<PAGE> 7
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Note 4. Industry Segment Information:
The Partnership's operations consist primarily of the investment in and the
leasing of industrial and commercial real estate and the operation of two hotel
properties. For the three-month periods ended March 31, 1996 and 1997, the
Partnership earned its total lease revenues (rental income plus interest income
from financing leases) from the following lease obligors:
<TABLE>
<CAPTION>
1996 % 1997 %
---- ---- ---- ---
<S> <C> <C> <C> <C>
Gould, Inc. $ 303,750 16% $ 303,750 19%
Spreckels Industries, Inc. 255,179 13 255,179 16
DeVlieg Bullard, Inc. 207,746 11 238,451 15
Arley Merchandise Corporation 150,000 8 150,000 10
Exide Electronics Corporation 143,033 8 143,033 9
Stoody Deloro Stellite, Inc. 100,568 5 126,785 8
Penn Virginia Corporation 124,688 7 124,688 8
Harcourt General Corporation 58,438 3 58,438 4
Penberthy Products, Inc. 45,632 2 52,377 3
Winn-Dixie Stores, Inc. 47,884 3 47,884 3
FMP/Rauma Company 36,060 2 36,060 2
Rochester Button Company 49,208 3 35,014 2
Other 23,291 1 15,000 1
GATX Logistics, Inc. 349,650 18
---------- --- ---------- ---
$1,895,127 100% $1,586,659 100%
========== === ========== ===
</TABLE>
Operating results of the three hotel properties for the three-month periods
ended March 31, 1996 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1996 1997
----------- ----------
<S> <C> <C>
Revenues $ 1,293,606 $ 874,428
Fees paid to hotel management company (27,663) (20,870)
Other operating expenses (1,202,381) (689,468)
----------- ----------
Hotel operating income $ 63,562 $ 164,090
=========== ==========
</TABLE>
-6-
<PAGE> 8
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS
Results of Operations:
Net income for the three-month period ended March 31, 1997 increased by
$420,000 as compared with net income for the three-month period ended December
31, 1996. Excluding the effect of a $90,000 gain on the sale of real estate in
1996, such increase was $510,000. The increase in income was due to decreases in
interest, depreciation, general and administrative and property expenses and an
increase in hotel operating income. This was partially offset by a decrease in
lease revenues.
The decrease in interest expense was due to the satisfaction of mortgage
loans in connection with the sale of properties in 1996 and the prepayment of
three mortgage loans on properties which remain subject to leases, also in 1996.
Of the $418,000 decrease in interest expense, $162,000 was due to the
satisfaction of mortgages in connection with the sales of properties and
$241,000 was due to the three mortgage loan prepayments. The decrease in
depreciation expense was due to the disposition of the warehouse property in
Hodgkins, Illinois in the second quarter of 1996 which was leased to GATX
Logistics, Inc. and the Rapid City, South Dakota hotel property in the fourth
quarter of 1996. The decrease in general and administrative expense was due to
lower partnership level state taxes as a result of disposing of the GATX
property. The decrease in property expenses was due to $63,000 of charges in
1996 for uncollected rent from Rochester Button Company. As a result of the
modification of the Rochester Button lease agreement in December 1996, Rochester
Button is currently able to pay its rent in a timely manner. The decrease in
lease revenues was solely due to the disposition of the GATX property.
Hotel operating income for the three-month periods is not directly
comparable due to the sale of the Rapid City hotel. During the three-month
period ended March 31, 1996, the Rapid City operation contributed revenues of
$509,000 and incurred a net loss of $13,000. For the three-month period ended
March 31, 1997, revenues for the Alpena and Petoskey, Michigan operations
increased from $785,000 to $874,000 and earnings increased from $77,000 to
$164,000 as compared with 1996. The occupancy rate of the Alpena hotel increased
from 53% to 57% and the average room rate increased by 5%, and the occupancy
rate of the Petoskey hotel increased from 47% to 51% and the average room rate
increased by 5%. The increase in expenses for the two hotels was less than 1%.
The hotel business is seasonal in nature with the most significant portions of
earnings generated during the third quarter. Accordingly, the results for the
quarter ended March 31, 1997 are not necessarily indicative of results for the
yearly operating cycle.
Financial Condition:
There has been no material change in the Partnership's financial condition
since December 31, 1996. Cash flow from operations of $1,030,000 was sufficient
to pay quarterly distributions of $1,018,000. In addition, a special
distribution of $7 per Limited Partner Unit totaling $792,400 was paid during
the quarter. Accordingly, the decrease in the Partnership's cash balances was
due to the special distribution. Although the April 1997 distribution per
Limited Partnership Unit decreased from $8.45 to $8.34, the distribution rate
per Unit based on adjusted capital, as defined in the Amended Agreement of
Limited Partnership, reflected an increase. The Partnership's cash flow is
subject to fluctuation due to the uncertainties related to operating the hotels,
including the need to use cash to replace furniture, fixtures and equipment on
an on-going basis.
The General Partners are currently investigating ways to provide liquidity
for limited partners on a tax-effective basis.
-7-
<PAGE> 9
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
PART II
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
During the quarter ended March 31, 1997, the Partnership was not
required to file any reports on Form 8-K.
-8-
<PAGE> 10
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES 5
(a California limited partnership)
By: CAREY CORPORATE PROPERTY, INC.
05/14/97 By: /s/ Claude Fernandez
-------- ----------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
05/14/97 By: /s/ Michael D. Roberts
-------- ----------------------------
Date Michael D. Roberts
First Vice President and Controller
(Principal Accounting Officer)
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,334,883
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,334,883
<PP&E> 58,226,791
<DEPRECIATION> 14,026,319
<TOTAL-ASSETS> 51,745,001
<CURRENT-LIABILITIES> 1,149,901
<BONDS> 15,434,940
0
0
<COMMON> 0
<OTHER-SE> 34,270,037
<TOTAL-LIABILITY-AND-EQUITY> 51,745,001
<SALES> 0
<TOTAL-REVENUES> 2,495,006
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,139,325
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 341,237
<INCOME-PRETAX> 1,014,444
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,014,444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,014,444
<EPS-PRIMARY> 8.42
<EPS-DILUTED> 8.42
</TABLE>
