<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
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or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
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Commission file number 0-14551
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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
incorporation or organization) Identification No.)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
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(Address of principal executive offices) (Zip Code)
(212) 492-1100
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(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 6
- a California limited partnership
INDEX
Page No.
PART I
Item 1. - Financial Information*
Consolidated Balance Sheets, December 31, 1996
and March 31, 1997 2
Consolidated Statements of Income for the three
months ended March 31, 1996 and 1997 3
Consolidated Statements of Cash Flows for the three
months ended March 31, 1996 and 1997 4
Notes to Consolidated 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 6
- a California limited partnership
PART I
Item 1. - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31
1996 1997
----------- -----------
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land, buildings and personal property,
net of accumulated depreciation of
$16,594,902 at December 31, 1996 and
$17,020,169 at March 31, 1997 $47,968,552 $47,649,848
Net investment in direct financing leases 32,887,655 32,887,655
Cash and cash equivalents 3,338,391 3,647,685
Notes receivable from affiliate 1,151,000 1,151,000
Other assets 2,807,973 2,847,803
----------- -----------
Total assets $88,153,571 $88,183,991
=========== ===========
LIABILITIES:
Mortgage notes payable $32,057,088 $31,769,217
Note payable 10,000,000 10,000,000
Accrued interest payable 439,078 431,988
Accounts payable and accrued expenses 372,012 351,804
Accounts payable to affiliates 131,275 166,959
Other liabilities 361,816 221,900
Deferred rental income 3,544,624 3,483,333
----------- -----------
Total liabilities 46,905,893 46,425,201
----------- -----------
PARTNERS' CAPITAL:
General Partners (4,515) 29,956
Limited Partners (47,930 Limited
Partnership Units issued and outstanding) 41,252,193 41,728,834
----------- -----------
Total partners' capital 41,247,678 41,758,790
----------- -----------
Total liabilities and
partners' capital $88,153,571 $88,183,991
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Note: The consolidated 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 6
- a California limited partnership
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental income from operating leases $1,302,939 $1,527,846
Interest from direct financing leases 1,405,710 1,417,174
Other interest income 89,936 67,582
Revenue of hotel operations 1,135,887 1,206,821
Other income 126,985
---------- ----------
3,934,472 4,346,408
---------- ----------
Expenses:
Interest 1,039,515 956,725
Depreciation 390,432 425,267
General and administrative 101,256 177,249
Property expense 46,844 54,192
Amortization 57,559 68,664
Operating expenses of
hotel operations 912,682 920,754
---------- ----------
2,548,288 2,602,851
---------- ----------
Income before gain on
sale of real estate 1,386,184 1,743,557
Gain on sale of real estate 31,456
---------- ----------
Net income $1,417,640 $1,743,557
========== ==========
Net income allocated to
General Partners $ 85,058 $ 104,613
========== ==========
Net income allocated to
Limited Partners $1,332,582 $1,638,944
========== ==========
Net income per Unit
(47,930 Limited Partnership Units) $ 27.80 $ 34.19
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE> 5
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1996 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,417,640 $ 1,743,557
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 447,991 493,931
Other noncash items (61,290) (76,098)
Gain on sales of real estate (31,456)
Net change in operating assets and liabilities 142,073 (225,217)
----------- -----------
Net cash provided by operating activities 1,914,958 1,936,173
----------- -----------
Cash flows from investing activities:
Additional capitalized costs (1,762,598) (106,563)
Proceeds from sales of real estate 257,527
----------- -----------
Net cash used in investing activities (1,505,071) (106,563)
----------- -----------
Cash flows from financing activities:
Distributions to partners (1,204,998) (1,232,445)
Proceeds from mortgage note payable 6,000,000
Prepayment of mortgage notes payable (4,257,315)
Payments on mortgage principal (251,394) (287,871)
Deferred financing costs (270,785)
----------- -----------
Net cash provided by (used in) financing activities 15,508 (1,520,316)
----------- -----------
Net increase in cash and cash equivalents 425,395 309,294
Cash and cash equivalents, beginning of period 3,476,915 3,338,391
----------- -----------
Cash and cash equivalents, end of period $ 3,902,310 $ 3,647,685
=========== ===========
Supplemental disclosure of cash flows information:
Interest paid $ 1,046,085 $ 963,815
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE> 6
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, 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 $70,142 $1,162,303 $24.25
======= ========== ======
</TABLE>
A distribution of $24.27 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 $27,101 and $28,476, respectively, and general and
administrative expense reimbursements of $26,542 and $46,607 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 $36,203 and $32,367 respectively.
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<PAGE> 7
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 three-month periods ended March 31, 1996 and 1997, the
Partnership earned its total real estate lease revenues (rental income plus
interest income from financing leases) as follows:
<TABLE>
<CAPTION>
1996 % 1997 %
---- --- ---- ---
<S> <C> <C> <C> <C>
Stoody Deloro Stellite, Inc. $ 558,548 21% $ 558,548 19%
AP Parts Manufacturing, Inc. 421,303 16 459,134 16
Peerless Chain Company 378,653 14 427,147 15
AutoZone, Inc. 342,489 13 330,392 11
Kinney Shoe Corporation 168,192 6 241,235 8
Wal-Mart Stores, Inc. 206,815 8 222,782 8
Anthony's Manufacturing Company, Inc. 219,000 8 219,000 7
Motorola, Inc. 135,000 5 135,000 5
Harcourt General Corporation 116,875 4 116,875 4
Yale Security, Inc. 114,807 4
Lockheed Martin Corporation 73,250 3 77,500 2
Winn-Dixie Stores, Inc. 42,600 1 42,600 1
Folger Adam Company 45,924 1
---------- --- ---------- ---
$2,708,649 100% $2,945,020 100%
========== === ========== ===
</TABLE>
Operating results of the three hotels for the three-month periods ended March
31, 1996 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Revenue $ 1,135,887 $ 1,206,821
Fees paid to hotel management company (27,564) (32,700)
Other operating expenses (885,118) (888,054)
----------- -----------
Hotel operating income $ 223,205 $ 286,067
=========== ===========
</TABLE>
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<PAGE> 8
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATION
Results of Operations:
Net income for the three-month period ended March 31, 1997 increased by
$326,000 as compared with net income for the three-month period ended March 31,
1996. Excluding nonrecurring other income of $121,000, the Partnership would
have realized an increase in income of $205,000. The increase was due to
increases in lease revenues and hotel operating income and a decrease in
interest expense. This was partially offset by increases in general and
administrative and depreciation expenses.
The increase in lease revenues was due to the commencement of the Yale
Security, Inc. lease in March 1996 and rent increases in 1996 on the
Partnership's leases with Peerless Chain Company, Kinney Shoe Corporation and
Wal-Mart Stores, Inc. and a rent increase in 1997 on the Partnership's lease
with AP Parts Manufacturing, Inc. Solely as a result of the rent increases,
annual cash flow will increase by $516,000. The decrease in interest expense was
due to the payoff of the mortgage loan on the Winn-Dixie Store, Inc. property, a
partial prepayment on the mortgage loan on the Autozone, Inc. properties and the
refinancing of the loan on the Wal-Mart property, all of which occurred during
1996. The increase in general and administrative expenses was primarily due to
certain increases in legal expenses which are expected to be nonrecurring. The
increase in depreciation was due to the reclassification of a lease from direct
financing to operating in April, 1996. The nonrecurring other income was from a
distribution received by the Partnership from its bankruptcy claim against the
former lessee of the Livonia, Michigan hotel property. The Partnership also
received a distribution from its claim in 1996.
The increase in hotel operating income was due to increased revenue from
all three hotels. The increase in earnings at the Livonia hotel was due to the
Partnership's maintaining its strategy of sustaining a high average room rate in
a favorable economic environment. As a result of strengthening in the average
room rate, the hotel's occupancy rate decreased from 74% to 72%. Both the Alpena
and Petoskey, Michigan hotels realized increases of 4% in occupancy rates and
increases of 5% in average room rates. Overall, there was no increase in hotel
operating expenses. The operations of the Alpena and Petoskey hotels are
seasonal in nature with the most significant portion of their earnings
historically 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 $1,936,000 was sufficient
to fund quarterly distributions to partners of $1,232,000, scheduled mortgage
principal payment installments of $288,000 and $107,000 for the replacement of
furniture, fixtures and equipment at the three hotel properties. Mortgage loans
on the properties leased to Motorola, Inc., and Yale Security have matured and
have been extended on a short-term basis to allow the Partnership to seek
refinancing. The outstanding balances on the Motorola and Yale Security loans
were $2,156,000 and $1,877,000, respectively, as of March 31, 1997. Cash
reserves are sufficient to pay off one but not both loans. The Partnership has
several unleveraged properties which could be refinanced without violating the
credit agreement on its $10,000,000, note payable. The Partnership believes that
both loans will be refinanced. Yale Security has over ten years remaining on its
lease, and based on the credit quality of the lessee, Management believes the
prospects for refinancing the loan are favorable. The initial term of the
Motorola lease expires in December 2000, and a lender may consider a maturity
which precedes the lease expiration date with an option to extend the maturity
if Motorola elects to exercise it renewal option.
The General Partners are currently investigating ways to provide liquidity
for limited partners on a tax-effective basis.
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<PAGE> 9
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 quarter ended March 31, 1997, the Partnership was not
required to file any reports on Form 8-K.
- 8 -
<PAGE> 10
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.
05/16/97 By: /s/ Claude Fernandez
------------ -----------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
05/16/97 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-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 3,647,685
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,647,685
<PP&E> 97,557,672
<DEPRECIATION> 17,020,169
<TOTAL-ASSETS> 88,183,991
<CURRENT-LIABILITIES> 1,172,651
<BONDS> 41,769,217
0
0
<COMMON> 0
<OTHER-SE> 41,758,790
<TOTAL-LIABILITY-AND-EQUITY> 88,193,991
<SALES> 0
<TOTAL-REVENUES> 4,346,408
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,577,462
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 926,725
<INCOME-PRETAX> 1,743,557
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,743,557
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,743,557
<EPS-PRIMARY> 34.19
<EPS-DILUTED> 34.19
</TABLE>
