<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 JUNE 30, 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 0-14551
CORPORATE PROPERTY ASSOCIATES 6
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
CALIFORNIA 13-3247122
<S> <C>
(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 6
- a California limited partnership
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I
Item 1. - Financial Information*
Consolidated Balance Sheets, December 31, 1996
and June 30, 1997 2
Consolidated Statements of Income for the three and six
months ended June 30, 1996 and 1997 3
Consolidated Statements of Cash Flows for the six
months ended June 30, 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
</TABLE>
*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, June 30,
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
$17,473,245 at June 30, 1997 $ 47,968,552 $47,121,324
Net investment in direct financing leases 32,887,655 32,887,655
Cash and cash equivalents 3,338,391 2,889,939
Notes receivable from affiliate 1,151,000 1,151,000
Other assets 2,807,973 2,816,132
------------ -----------
Total assets $ 88,153,571 $86,866,050
============ ===========
LIABILITIES:
Mortgage notes payable $ 32,057,088 $29,608,323
Note payable 10,000,000 10,000,000
Accrued interest payable 439,078 423,601
Accounts payable and accrued expenses 372,012 326,729
Accounts payable to affiliates 131,275 408,530
Other liabilities 361,816 374,409
Deferred rental income 3,544,624 3,422,043
------------ -----------
Total liabilities 46,905,893 44,563,635
------------ -----------
PARTNERS' CAPITAL:
General Partners (4,515) 66,379
Limited Partners (47,930 Limited
Partnership Units issued and outstanding) 41,252,193 42,236,036
------------ -----------
Total partners' capital 41,247,678 42,302,415
------------ -----------
Total liabilities and
partners' capital $ 88,153,571 $86,866,050
============ ===========
</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 Six Months Ended
June 30, 1996 June 30, 1997 June 30, 1996 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income from
operating leases $1,443,022 $1,527,843 $2,745,961 $3,055,689
Interest from direct
financing leases 1,377,229 1,512,860 2,782,939 2,930,034
Other interest income 68,415 77,237 158,351 144,819
Revenue of hotel operations 1,173,653 1,232,076 2,309,540 2,438,897
Other income 126,985
---------- ---------- ---------- ----------
4,062,319 4,350,016 7,996,791 8,696,424
---------- ---------- ---------- ----------
Expenses:
Interest 1,018,738 950,939 2,058,253 1,907,664
Depreciation 396,068 453,076 786,500 878,343
General and administrative 142,813 157,640 244,069 334,889
Property expenses 83,435 33,810 130,279 88,002
Amortization 75,875 69,294 133,434 137,958
Operating expenses of
hotel operations 885,614 908,168 1,798,296 1,828,922
---------- ---------- ---------- ----------
2,602,543 2,572,927 5,150,831 5,175,778
---------- ---------- ---------- ----------
Income before gain on
sales of real estate 1,459,776 1,777,089 2,845,960 3,520,646
Gain on sales of real estate 39,422 70,878
---------- ---------- ---------- ----------
Net income $1,499,198 $1,777,089 $2,916,838 $3,520,646
========== ========== ========== ==========
Net income allocated
to General Partners $ 89,952 $ 106,626 $ 175,010 $ 211,239
========== ========== ========== ==========
Net income allocated
to Limited Partners $1,409,246 $1,670,463 $2,741,828 $3,309,407
========== ========== ========== ==========
Net income per Unit:
(47,930 Limited
Partnership Units) $ 29.40 $ 34.85 $ 57.20 $ 69.04
========== ========== ========== ==========
</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>
Six Months Ended
June 30,
----------------------
1996 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,916,838 $ 3,520,646
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 919,934 1,016,301
Other noncash items (11,845) (29,864)
Amortization of deferred rental income (122,581) (122,581)
Gain on sales of real estate (70,878)
Net change in operating assets and liabilities 62,817 (67,165)
----------- -----------
Net cash provided by operating activities 3,694,285 4,317,337
----------- -----------
Cash flows from investing activities:
Additional capitalized costs (1,766,609) (31,115)
Proceeds from sales of real estate 603,286
----------- -----------
Net cash used in investing activities (1,163,323) (31,115)
----------- -----------
Cash flows from financing activities:
Distributions to partners (2,425,180) (2,465,909)
Proceeds from mortgage 6,000,000
Prepayment of mortgage payable (4,257,315) (1,872,107)
Payments on mortgage principal (859,184) (576,658)
Refund of deferred financing costs 180,000
Deferred financing costs (274,753)
----------- -----------
Net cash used in financing activities (1,816,432) (4,734,674)
----------- -----------
Net increase (decrease) in cash and cash equivalents 714,530 (448,452)
Cash and cash equivalents, beginning of period 3,476,915 3,338,391
----------- -----------
Cash and cash equivalents, end of period $ 4,191,445 $ 2,889,939
=========== ===========
Supplemental disclosure of cash flows information:
Interest paid $ 2,076,707 $ 1,923,141
=========== ===========
</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 six months ended June 30,
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
======= ========== ======
March 31, 1997 $70,203 $1,163,261 $24.27
======= ========== ======
</TABLE>
A distribution of $24.29 per Limited Partner Unit for the quarter ended June 30,
1997 was declared and paid in July 1997.
Note 3. Transactions with Related Parties:
For the three-month and six-month periods ended June 30, 1996, the Partnership
incurred property management fees of $27,636 and $54,737, respectively, and
general and administrative expense reimbursements of $35,612 and $62,154,
respectively. For the three-month and six-month periods ended June 30, 1997, the
Partnership incurred property management fees of $32,456 and $58,998,
respectively, and general and administrative expense reimbursements of $42,757
and $89,364, 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 six months ended June 30, 1996 and
1997 were $60,482 and $47,401, 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 and six-month periods ended June 30, 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. $1,117,095 20% $1,117,095 19%
AP Parts Manufacturing, Inc. 857,044 16 918,267 15
Peerless Chain Company 757,307 14 854,293 14
AutoZone, Inc. 676,111 12 756,469 13
Kinney Shoe Corporation 336,380 6 482,471 8
Wal-Mart Stores, Inc. 413,632 7 445,565 7
Anthony's Manufacturing Company, Inc. 438,000 8 438,000 7
Motorola, Inc. 270,000 5 270,000 5
Harcourt General Corporation 233,750 4 233,750 4
Yale Security, Inc. 126,092 2 229,614 4
Lockheed Martin Corporation 149,333 3 155,000 3
Winn-Dixie Stores, Inc. 85,199 2 85,199 1
Folger Adam Company 68,957 1
---------- --- ---------- ----
$5,528,900 100% $5,985,723 100%
========== ==== ========== ====
</TABLE>
Operating results of the three hotels for the six-month periods ended June 30,
1996 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Revenue $ 2,309,540 $ 2,438,897
Fees paid to hotel management company (57,483) (69,406)
Other operating expenses (1,740,813) (1,759,516)
----------- -----------
Hotel operating income $ 511,244 $ 609,975
=========== ===========
</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 and six-month periods ended June 30, 1997
increased by $278,000 and $604,000, respectively, as compared with net income
for the similar periods ended June 30, 1996. The increases were due to increases
in lease revenues and earnings from the Partnership's hotel operations, and
decreases in interest expense.
The increases in lease revenues were due to the commencement of a lease
with Yale Security, Inc. in March 1996 at a property in Lemont, Illinois which
had previously been leased to Folger Adam Company, rent increases in 1996 and
1997 on the Partnership's leases with Wal-Mart Stores, Inc., Kinney Shoe
Corporation , Peerless Chain Company and AP Parts Manufacturing, Inc. and
percentage rent from AutoZone, Inc., based on AutoZone retail sales in excess of
specified base amounts pursuant to the AutoZone leases. Solely as a result of
the aforementioned rent increases, annual cash flow will increase by $516,000.
Of the increases in hotel earnings, approximately 70% of such increases were due
to improved earnings at the Livonia, Michigan Holiday Inn. The increases in
earnings at the Livonia operation were due to the Partnership maintaining its
strategy of sustaining a high average room rate in the favorable economic
climate for the Detroit metropolitan area. Accordingly, for the comparable
three-month and six-month periods, hotel revenues increased by 3% even though
the overall year-to-date occupancy rate decreased by 1% to 75%. In addition,
there were no corresponding increases in Livonia's operating expenses. The
earnings of the Alpena and Petoskey, Michigan hotel operations increased
moderately. The occupancy rate of the Alpena Holiday Inn increased by
approximately 1% to 58% and average room rate increased by approximately 5%. The
occupancy rate for the Petoskey Holiday Inn increased by 5% to 47% with the
average room rate increasing by 2%. Historically, the earnings for Alpena and
Petoskey are seasonal in nature with occupancy rates higher in the third quarter
than during the other periods of the year. Accordingly, hotel earnings for the
six-month period are not necessarily indicative of a full year's operating
cycle. The decreases in interest expense were due to the payoff of the mortgage
loan on the property leased to Winn Dixie in 1996 and the continuing
amortization of the Partnership's limited recourse mortgage loans.
Financial Condition:
There has been no material change in the Partnership's financial condition
since December 31, 1996. Cash flow from operations of $4,317,000 was sufficient
to fund distributions to partners of $2,466,000, scheduled mortgage principal
installments of $577,000 and replacement of furniture and fixtures at the hotel
properties of $31,000.
The Partnership also used $1,872,000 to satisfy the limited recourse
mortgage loan on the Yale Security property which had matured and had been
extended on a short-term basis. The maturity of the limited recourse mortgage on
the property leased to Motorola, Inc. has been extended on a short-term basis to
allow the Partnership to seek refinancing. The outstanding balance on the
Motorola mortgage loan was $2,122,000 as of June 30, 1997, and cash reserves are
not sufficient to pay off the loan. The Partnership has several unleveraged
properties which could be refinanced to provide the necessary funds without
violating the financial covenants of the credit agreement on its $10,000,000
note payable. The Partnership believes that the prospects for refinancing the
Motorola mortgage 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 its renewal option.
The General Partners are currently investigating ways to provide liquidity
for limited partners on a tax-effective basis.
- 7 -
<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 June 30, 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.
08/11/97 By: /s/ Steven M. Berzin
--------------- ----------------------------------------
Date Steven M. Berzin
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
08/11/97 By: /s/ Claude Fernandez
--------------- ----------------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
08/11/97 By: /s/ Michael D. Roberts
--------------- ----------------------------------------
Date Michael D. Roberts
First Vice President and Controller
- 9 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,889,939
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,889,939
<PP&E> 97,482,224
<DEPRECIATION> 17,473,245
<TOTAL-ASSETS> 86,866,050
<CURRENT-LIABILITIES> 1,533,269
<BONDS> 39,608,323
0
0
<COMMON> 0
<OTHER-SE> 42,302,415
<TOTAL-LIABILITY-AND-EQUITY> 86,866,050
<SALES> 0
<TOTAL-REVENUES> 8,696,424
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,268,114
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,907,664
<INCOME-PRETAX> 3,520,646
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,520,646
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,520,646
<EPS-PRIMARY> 69.04
<EPS-DILUTED> 69.04
</TABLE>
