<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1995
---------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
Commission file number 0-14551
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CORPORATE PROPERTY ASSOCIATES 6
---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 13-3247122
---------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
- - ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(212) 492-1100
---------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
<PAGE>
CORPORATE PROPERTY ASSOCIATES 6
-a California limited partnership
INDEX
Page No.
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PART I
------
Item 1. - Financial Information*
Balance Sheets, December 31, 1994 and
September 30, 1995 2
Statements of Income for the three and nine
months ended September 30, 1994 and 1995 3
Statements of Cash Flows for the nine
months ended September 30, 1994 and 1995 4-5
Notes to Financial Statements 6-7
Item 2. - Management's Discussion of Operations 8-9
PART II
-------
Item 6. - Exhibits and Reports on Form 8-K 10
Signatures 11
*The summarized financial information contained herein is unaudited;
however in the opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included.
-1-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
PART I
------
Item 1. - FINANCIAL INFORMATION
-------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, SEPTEMBER 30,
1994 1995
------------- --------------
(Note) (UNAUDITED)
<S> <C> <C>
ASSETS:
Land, buildings and personal property,
net of accumulated depreciation of
$13,405,377 at December 31, 1994 and
$14,548,716 at September 30, 1995 $45,342,342 $44,478,458
Net investment in direct financing leases 36,920,755 36,920,755
Cash and cash equivalents 4,412,869 3,253,997
Notes receivable from affiliate 1,295,000 1,151,000
Accrued interest and rents receivable 79,510 53,844
Other assets 2,135,538 2,685,829
----------- -----------
Total assets $90,186,014 $88,543,883
=========== ===========
LIABILITIES:
Mortgage notes payable $51,433,354 $36,954,650
Note payable 10,000,000
Accrued interest payable 876,506 515,661
Accounts payable and accrued expenses 481,110 272,496
Accounts payable to affiliates 34,190 151,677
Prepaid rental income and other liabilities 360,238 339,075
----------- -----------
Total liabilities 53,185,398 48,233,559
----------- -----------
PARTNERS' CAPITAL:
General Partners (345,685) (144,805)
Limited Partners (47,950 and 47,930 Limited
Partnership Units issued and outstanding at
December 31, 1994 and September 30, 1995) 37,346,301 40,455,129
----------- -----------
Total partners' capital 37,000,616 40,310,324
----------- -----------
Total liabilities and
partners' capital $90,186,014 $88,543,883
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Note: The consolidated balance sheet at December 31, 1994 has been
derived from the audited financial statements at that date.
-2-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1994 SEPTEMBER 30, 1995 September 30, 1994 SEPTEMBER 30, 1995
------------------ ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income from
operating leases $1,366,233 $1,248,207 $ 4,098,699 $ 3,949,542
Interest from direct
financing leases 1,300,697 1,516,521 3,951,282 4,342,524
Other interest income 97,977 119,051 273,473 252,921
Revenue of hotel operations 1,191,249 1,269,516 3,274,403 3,514,183
Other income 28,680 224,138 802,556
---------- ---------- ----------- -----------
3,956,156 4,181,975 11,821,995 12,861,726
---------- ---------- ----------- -----------
Expenses:
Interest 1,219,895 1,133,768 3,768,388 3,388,500
Depreciation 407,252 381,244 1,222,444 1,143,339
General and administrative 97,595 169,646 354,166 479,721
Property expenses 670,967 (37,821) 1,404,318 239,698
Amortization 41,044 57,348 123,925 152,306
Operating expenses of
hotel operations 840,559 899,124 2,513,765 2,672,106
---------- ---------- ----------- -----------
3,277,312 2,603,309 9,387,006 8,075,670
---------- ---------- ----------- -----------
Income before
extraordinary gain 678,844 1,578,666 2,434,989 4,786,056
Extraordinary gain on
extinguishment of debt 2,088,268
----------- ----------- ----------- -----------
Net income $ 678,844 $1,578,666 $ 2,434,989 $ 6,874,324
========== ========== =========== ===========
Net income allocated
to General Partners $ 40,730 $ 94,720 $ 146,099 $ 412,459
========== ========== =========== ===========
Net income allocated
to Limited Partners $ 638,114 $1,483,946 $ 2,288,890 $ 6,461,865
========== ========== =========== ===========
Net income per Unit
(47,930 Limited
Partnership Units):
Income before extra-
ordinary gain $13.31 $30.96 $47.73 $ 93.87
Extraordinary gain 40.95
------ ------ ------ -------
$13.31 $30.96 $47.73 $134.82
====== ====== ====== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-3-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1994 1995
------------ --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,434,989 $ 6,874,324
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,346,369 1,295,645
Extraordinary gain on extinguishment of debt (2,088,268)
Note receivable received in connection
with bankrupcty settlement (172,414)
Net change in operating assets and liabilities 424,198 (130,738)
----------- ------------
Net cash provided by operating activities 4,033,142 5,950,963
----------- ------------
Cash flows from investing activities:
Amounts received on partial prepayment
of note receivable from affiliate 144,000
Additional capitalized costs (85,104) (279,455)
----------- ------------
Net cash used in investing activities (85,104) (135,455)
----------- ------------
Cash flows from financing activities:
Distributions to partners (3,526,733) (3,544,616)
Retirement of Limited Partner Units (20,000)
Proceeds from note payable 10,000,000
Prepayment of mortgages payable (12,055,148)
Payments on mortgage principal (993,394) (1,009,590)
Deferred financing costs (13,069) (345,026)
----------- ------------
Net cash used in financing activities (4,533,196) (6,974,380)
----------- ------------
Net decrease in cash and
cash equivalents (585,158) (1,158,872)
Cash and cash equivalents, beginning of period 5,464,578 4,412,869
----------- ------------
Cash and cash equivalents, end of period $ 4,879,420 $ 3,253,997
=========== ============
</TABLE>
(Continued)
-4-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), Continued
Supplemental disclosure of cash flows information:
A. Interest paid $ 3,446,378 $ 3,043,958
=========== ===========
B. During the nine-month period ended September 30, 1995, the
Partnership recognized an extraordinary gain on the extinguishment of
debt.
Cash payment made in connection with satisfaction
of debt obligation $(5,440,000)
Direct costs of transaction (31,085)
Mortgage note payable balance at extinguishment 6,853,966
Accrued interest on mortgage debt at extinguishment 705,387
-----------
Extraordinary gain on extinguishment of debt $ 2,088,268
===========
The accompanying notes are an integral part of the consolidated financial
statements.
-5-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Basis of Presentation:
---------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. For
further information, refer to the financial statements and footnotes
thereto included in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1994.
Note 2. Distributions to Partners:
-------------------------
Distributions declared and paid to partners during the nine months ended
September 30, 1995 are summarized as follows:
<TABLE>
<CAPTION>
Quarter Ended General Partners Limited Partners Per Limited Partner Unit
- - ------------------------ ---------------- ---------------- ------------------------
<S> <C> <C> <C>
December 31, 1994 $70,403 $1,109,084 $23.13
======= ========== ======
March 31, 1995 $70,435 $1,109,580 $23.15
======= ========== ======
June 30, 1995 $70,741 $1,114,373 $23.25
======= ========== ======
</TABLE>
A distribution of $23.38 per Limited Partner Unit for the quarter ended
September 30, 1995 was declared and paid in October 1995.
Note 3. Transactions with Related Parties:
---------------------------------
For the three-month and nine-month periods ended September 30, 1994, the
Partnership incurred management fees of $25,566 and $75,325, respectively,
and general and administrative expense reimbursements of $36,521 and
$128,150, respectively. For the three-month and nine-month periods ended
September 30, 1995, the Partnership incurred management fees of $(581) and
$92,222, respectively, and general and administrative expense
reimbursements of $65,897 and $124,534, 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 nine months
ended September 30, 1994 and 1995 were $39,431 and $73,283, respectively.
-6-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
NOTES TO CONSOLIDATED 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 three
hotel properties. For the nine-month periods ended September 30, 1994 and
1995, the Partnership earned its total real estate lease revenues (rental
income plus interest income from financing leases) as follows:
<TABLE>
<CAPTION>
1994 % 1995 %
---------- ---- ---------- ----
<S> <C> <C> <C> <C>
Stoody Deloro Stellite, Inc. $1,283,492 16% $1,588,498 19%
AP Parts Manufacturing, Inc. 1,144,790 14 1,144,790 14
AutoZone, Inc. 1,035,905 13 1,122,015 13
Peerless Chain Company 952,090 12 952,090 11
Anthony's Manufacturing Company, Inc. 1,011,080 13 853,710 10
Wal-Mart Stores, Inc. 620,449 8 620,449 8
Kinney Shoe Corporation 504,570 6 504,570 6
Folger Adam Company 424,431 5 432,770 5
Motorola, Inc. 375,000 4 375,000 5
Harcourt General Corporation 350,624 4 350,624 4
Lockheed Martin Corporation 219,750 3 219,750 3
Winn-Dixie Stores, Inc. 127,800 2 127,800 2
---------- --- ---------- ---
$8,049,981 100% $8,292,066 100%
========== === ========== ===
</TABLE>
Operating results of the three hotels for the nine-month periods ended
September 30, 1994 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Revenue $ 3,274,403 $ 3,514,183
Fees paid to hotel management company (68,473) (79,390)
Other operating expenses (2,445,292) (2,592,716)
----------- -----------
Hotel operating income $ 760,638 $ 842,077
=========== ===========
</TABLE>
-7-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATION
Results of Operations:
---------------------
Net income for the three-month and nine-month periods ended September
30, 1995 increased by $900,000 and $4,439,000, respectively, as compared
with the three-month and nine-month periods ended September 30, 1994. The
results of operations for the nine-month period ended September 30, 1995
benefitted from the receipt of a payment in settlement of a dispute with
Anthony's Manufacturing Company, Inc. ("Anthony's) which provided Other
income of $754,000 and a related extraordinary gain of $2,088,000 on the
extinguishment of the mortgage debt collateralized by the Anthony's
properties. Net of the effect of these nonrecurring items, the
Partnership's income for the comparable nine-month periods would have
reflected an increase of $1,597,000. The comparable three-month periods
were not significantly affected by nonrecurring items.
The increase in income, net of the nonrecurring items, for the
comparable nine-month periods was primarily due to a decrease in property
expenses as well as, to a lesser extent, an increase in lease revenues and
a decrease in interest expense. These benefits were partially offset by an
increase in general and administrative expense. The decrease in property
expenses was primarily due to costs incurred in 1994 in connection with the
Partnership's assessment of liquidity alternatives and legal costs incurred
in 1994 related to the Partnership's defending its interests in a dispute
with Anthony's which has since been resolved. The increase in lease
revenues was due to rental increases on the Partnership's leases with
Stoody Deloro Stellite, Inc. ("Stoody") and Folger Adam Company which were
effective in March 1995 and September 1995, respectively, and the
modification of the AutoZone, Inc. ("AutoZone") lease which was
retroactively effective to March 1995. These rent increases were partially
offset by the modification to the Anthony's lease which was executed in May
1995. The decrease in interest expense was due to lower overall loan
balances as the result of the satisfaction of the mortgage loans on the
Stoody and Anthony's properties replaced with a variable rate recourse loan
obligation which has a lower current interest than the interest cost that
would have been recognized on the Anthony's and Stoody loans. General and
administrative costs increased due to certain nonrecurring costs incurred
by the Partnership in connection with the office space cost sharing
agreement and related relocation costs in the first quarter of 1995 and
higher legal costs related to general partnership matters. The increase in
net income for the comparable three-month periods ended September 30, 1994
and 1995 was primarily due to increases in lease revenues and decreases in
interest and property expenses as described above. Property expense also
benefitted from a change in the estimate for certain accruals between the
beginning and end of the fiscal quarter ended September 30, 1995.
Earnings from the Partnership's hotel operations reflected an increase
of approximately 11% for the comparable nine-month periods primarily as the
result of increases of 3% and 13% in the occupancy and average room rates,
respectively, at the Livonia hotel. Operating results for the Alpena and
Petoskey hotels were relatively stable with Alpena realizing a moderate
increase in overall revenues and Petoskey a moderate decrease. The Alpena
and Petoskey operations are seasonal in nature with their most significant
share of earnings realized during the third fiscal quarter. Accordingly,
these two hotels are not expected to contribute significantly to earnings
for the remainder of the year. The operations of the Livonia hotel which
represented 60% of hotel revenues and 67% of hotel earnings for the current
nine-month period are not seasonal in nature, although they are affected by
the economic conditions in the Detroit metropolitan area.
Solely as a result of the rent increases of Stoody, Folger Adam Company
and AutoZone and the modification of the Anthony's lease, annual lease
revenues and cash flow will increase by approximately $765,000 (of which a
benefit of $196,000 from such adjustments is already reflected in the
current nine-month results). In addition, increases in rent on five leases
are scheduled to occur in 1996.
-8-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATION, Continued
Financial Condition:
-------------------
There has been no material change in the Partnership's financial
condition since December 31, 1994. The debt financing structure of the
Partnership has changed significantly as the result of obtaining
$10,000,000 of recourse debt pursuant to a credit agreement that requires
the Partnership to meet certain financial covenants. All of the proceeds
from the issuance of the debt was used to satisfy a balloon payment on the
Stoody mortgage loan which had matured and to pay off the Anthony's
mortgage loan at a substantial discount. Prior to the execution of the
credit agreement, all of the Partnership's debt financing consisted of
nonrecourse mortgage debt. At September 30, 1995, the Partnership was in
compliance with all financial covenants under the credit agreement. For
the nine-month period ended September 30, 1995 cash flow from operating
activities of $5,951,000 was sufficient to fund quarterly distributions to
partners of $3,545,000, payment of scheduled mortgage principal installment
obligations of $1,010,000 as well as paying the costs related to entering
into the credit agreement. Management believes that its cash balance of
$3,254,000 and cash from operating activities will be sufficient to meet
the Partnership's cash requirements which consist primarily of paying
quarterly distributions to partners, meeting scheduled principal payment
obligations on its mortgages and funding the replenishment of furniture,
fixtures and equipment in the ordinary course of business for its hotel
operations.
The Partnership is currently committed to retaining the Livonia,
Michigan hotel's affiliation with Holiday Inn as a franchisee. Included in
other assets on the accompanying balance sheet at September 30, 1995, is a
furniture, fixture and equipment reserve account for the Livonia hotel of
$165,000. The reserve account is funded by allocating 3% of Livonia's
revenues to the account. The Partnership does not anticipate utilizing any
funds in excess of the reserve amount and further regularly scheduled
additions from hotel revenues to fund any existing replacements of
furniture, fixtures and equipment within the next twelve months. In
addition, the Partnership is currently committed to meeting the
requirements of the Holiday Inn core modernization plan for the
Partnership's hotel properties in Alpena and Petoskey, Michigan. The
Partnership's share of costs necessary to meet the requirements of the
modernization plan, as approved by Holiday Inn, are approximately $395,000.
It is anticipated that the improvements required under the plan will be
made over the next two years. The Partnership believes its current cash
reserves will be sufficient to fund the required improvements.
-9-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 6
- 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 quater ended September 30, 1995 the Partnership was
not required to file any reports on Form 8-K.
-10-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 6
- 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 6
- a California limited partnership
By: CAREY CORPORATE PROPERTY, INC.
11/09/95 By: /s/ Claude Fernandez
-------------- ------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
11/09/95 By: /s/ Michael D. Roberts
-------------- -------------------------------
Date Michael D. Roberts
First Vice President and Controller
(Principal Accounting Officer)
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE NINE MOTHNS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,253,997
<SECURITIES> 0
<RECEIVABLES> 1,204,844
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,685,829
<PP&E> 95,947,929
<DEPRECIATION> 14,548,716
<TOTAL-ASSETS> 88,543,883
<CURRENT-LIABILITIES> 0
<BONDS> 46,954,650
<COMMON> 1,278,909
0
0
<OTHER-SE> 40,310,324
<TOTAL-LIABILITY-AND-EQUITY> 88,543,883
<SALES> 0
<TOTAL-REVENUES> 12,861,726
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,391,525
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,388,500
<INCOME-PRETAX> 4,786,056
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,786,056
<DISCONTINUED> 0
<EXTRAORDINARY> 2,088,268
<CHANGES> 0
<NET-INCOME> 6,874,324
<EPS-PRIMARY> 134.82
<EPS-DILUTED> 134.82
</TABLE>
