<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, 1997
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 0-19156
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 13-3559213
(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>
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:
SHARES OF COMMON STOCK
(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 common stock of Registrant at March
26, 1998. Non-affiliates held 7,161,233 shares of common stock, $.001 Par Value
outstanding at March 26, 1998.
<PAGE> 2
PART I
Item 1. Business.
Registrant is engaged in the business of investing in
commercial and industrial real estate properties that are net leased to
commercial and industrial entities. Registrant was organized as a Maryland
corporation on March 7, 1990 and is qualified as a real estate investment trust
("REIT") for Federal income tax purposes. Registrant's operations are managed by
Carey Property Advisors (the "Advisor"), a Pennsylvania limited partnership,
pursuant to an advisory agreement between Registrant and the Advisor. According
to the terms of this agreement, the Advisor performs a variety of management
services for Registrant. The general partner of the Advisor is Carey Fiduciary
Advisors, Inc., a Pennsylvania corporation ("CFA"). The Advisor is also the
advisor of Carey Institutional Properties Incorporated ("CIP(TM)"), Corporate
Property Associates 12 Incorporated ("CPA(R):12") and Corporate Property
Associates 14 Incorporated ("CPA(R):14"). An affiliate, Carey Diversified LLC,
is the general partner of nine CPA(R) Partnerships. Reference is made to the
Prospectus of Registrant dated June 11, 1990 filed pursuant to Rule 424(b), as
supplemented by Supplements dated August 14, 1990, January 17, 1991 and March
26, 1991 under the Securities Act of 1933 and incorporated herein by reference
(said Prospectus, as so supplemented, is hereinafter called the "Prospectus").
A maximum of 20,000,000 Shares were offered to the public on a
"best efforts" basis by Carey Financial Corporation ("Carey Financial") and
other selected dealers at a price of $10 per Share. Sales of the Shares to the
public commenced on June 20, 1990. Issuances of Shares pursuant to the offering
occurred between September 14, 1990 and June 17, 1991, for an aggregate of
7,197,294 Shares. Additionally, the Advisor purchased 20,000 Shares for $200,000
prior to the commencement of the public offering. Registrant filed a
post-effective amendment to its registration statement with the Securities and
Exchange Commission during 1991 withdrawing from registration the balance of the
unsold Shares.
The properties owned by Registrant are described in Item 2.
All net offering proceeds not currently invested in real estate are invested in
cash and cash equivalents. Registrant invested such funds except for the funds
utilized to establish a working capital reserve in real estate. Registrant had
previously obtained a line of credit. In November 1997, Registrant's line of
credit matured at which time Registrant determined not to renew it.
A portion of Registrant's property acquisitions have been made
in conjunction with acquisitions, recapitalizations and other financial
restructurings. In some of these transactions, an acquiring entity may have
purchased all or substantially all of the stock or assets of a company and the
acquired company or its successor in interest thereby may have become obligated
on the substantial loans necessary to finance the acquisition. In such
instances, Registrant may act as one of several sources of financing by
purchasing real property from the seller of the subject company and net leasing
it to such company or its successor. This type of lessee typically will have
substantially greater debt and substantially lower net worth than that
attributable to the company prior to the transaction. Consequently, such lessees
may be particularly vulnerable to adverse conditions in the lessee's business or
industry, adverse economic conditions generally and increases in interest rates,
which increases directly or indirectly may result in higher payments under the
debt portion of the lessee's lease with Registrant. In addition, the lessee's
payment of lease rentals and debt service may prevent the lessee from investing
in new equipment and from devoting resources to research and development or
making other expenditures that are necessary to keep the lessee competitive in
its industry. Furthermore, if the lessee plans to replace existing management,
it will be more difficult for the Advisor to determine the likelihood of the
lessee's being successful in its business and of being able to pay rentals
throughout the term of a lease with Registrant.
Registrant has only one industry segment which consists of the
investment in and the leasing of industrial and commercial real estate. See
Selected Financial Data in Item 6 and Management's Discussion and Analysis in
Item 7 for a summary of Registrant's operations. Also see the material contained
in the Prospectus under the heading INVESTMENT OBJECTIVES AND POLICIES.
For the year ended December 31, 1997, Registrant's share of
revenues from properties occupied by Marriott International, Inc. ("Marriott"),
Information Resources, Inc. ("IRI") and Titan Corporation amounted to 26%, 17%
and 12%, respectively, of the total operating revenues of Registrant.
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See Note 8 to the Consolidated Financial Statements in Item 8. No other property
owned by Registrant accounted for 10% or more of its total operating revenue
during 1997. Marriott's audited financial statements for the fiscal year ended
January 3, 1997, reported revenues of $10,172,000,000, net income of
$306,000,000, total assets of $5,075,000,000 and shareholders' equity of
$1,260,000,000. Marriott's financial statements for the twenty-four weeks ended
June 20, 1997, reported revenues of $5,482,000,000, net income of $160,000,000,
total assets of $6,627,000,000 and shareholders' equity of $1,417,000,000.
Marriott is a publicly-traded company with its financial statements on file with
the United States Securities and Exchange Commission.
Except for certain properties formerly leased to Harvest
Foods, Inc. ("Harvest") vacated in March 1997, all of Registrant's real estate
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 that require the lessees to
indemnify Registrant, its directors and officers and the Advisor 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 secured contingent
property and liability insurance on the properties owned. To the extent that any
lessees are not financially able to satisfy indemnification obligations that
exceed insurance reimbursements, Registrant may incur the costs necessary to
repair property and settle liabilities. Currently, there are no claims pending
for property damages or liability claims. Primary insurance coverages have been
obtained for the Harvest properties.
As described above, lessees 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 8 to the Financial
Statements in Item 8. As discussed in Registrant's Management's Discussion and
Analysis in Item 7, Registrant's leases generally provide for periodic rent
increases or percentage rents based on specified sales levels. The periodic rent
increases are either stated, based on percentage of sales or based on formulas
indexed to increases in the Consumer Price Index or Producer Price Index. Except
for the terminated Harvest master lease, which was terminated in March 1997
pursuant to a voluntary petition of bankruptcy, no leases were materially
modified or amended during the year ended December 31, 1997. Since termination
of the Harvest lease, the Company has re-leased five properties, sold three
properties and is remarketing the remaining seven properties for sale or lease.
Registrant's leases provide for multiple renewal terms with initial terms on its
leases expiring between 2001 and 2017.
Since Registrant's objective is to invest in properties that
are occupied by a single corporate tenant and subject to long-term net leases
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. Competitive conditions of local and regional real estate markets
may have a more material affect on Registrant as leases terminate. No initial
term of a lease expires until after the year 2000. Because Registrant is
generally more significantly affected by the financial conditions 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 in addition to achieving geographical
diversification.
In connection with the purchase of its properties, Registrant
requires sellers of such properties to perform environmental reviews. Management
believes, based on the results of such reviews, that Registrant's properties
were in substantial compliance with Federal and state environmental statutes at
the time the properties were acquired. However, portions of certain properties
have been subject to some degree of contamination, principally in connection
with either leakage from underground storage tanks, surface spills from facility
activities or on-site historical activities. In most instances where
contamination has been identified, tenants are actively engaged in the
remediation process and addressing identified conditions. 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
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to the leased properties with provisions of such indemnification specifically
addressing environmental matters. The leases generally include provisions which
allow for periodic environmental assessments, paid for by the tenant, and allow
Registrant to extend leases until such time as a tenant has satisfied its
environmental obligations. Certain of the leases allow Registrant to require
financial assurances from tenants such as performance bonds or letters of credit
if the costs of remediating environmental conditions, in the estimation of
Registrant, are in excess of specified amounts. Accordingly, Management believes
that the ultimate resolution of environmental matters will not have a material
adverse effect on Registrant's financial condition, liquidity or results of
operations.
Registrant's Advisor has responsibility for maintaining
Registrant's books and records. An affiliate of the Advisor services the
computer systems used for maintaining such books and records. In its preliminary
assessment of Year 2000 issues the affiliate believes that such issues will not
have a material effect on Registrant's operations; however, such assessment has
not been completed. Registrant relies on its bank and transfer agent for certain
computer-related services and has initiated discussions to determine whether
they are addressing Year 2000 issues that may affect Registrant.
Registrant does not have any employees. An affiliate of the
Advisor performs accounting, secretarial and transfer services for Registrant.
Resource Phoenix Corporation performs certain transfer services for Registrant
and The Chase Manhattan Bank performs certain banking services for Registrant.
In addition, Registrant has an agreement with the Advisor pursuant to which the
Advisor provides certain management services for Registrant.
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<PAGE> 5
Item 2. Properties.
<TABLE>
<CAPTION>
LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- --------
<S> <C> <C> <C>
US WEST Office/Repair Scottsdale, Ownership of land
COMMUNICATIONS Facility Arizona and building
INC.
INFORMATION Office Buildings Chicago, Ownership of a 66.67%
RESOURCES INC. Illinois interest in a limited
partnership owning land
and buildings (1)
K MART Retail Stores Denton, Texas; Ownership of land and
CORPORATION - 3 locations Drayton Plains, buildings
Michigan; and
Citrus Heights,
California
CHILDTIME Child Daycare Westland - 2 and Ownership of a 66.07%
CHILDCARE, INC. Centers Sterling Heights, interest in land and
- 12 locations Michigan; Chandler buildings (1)
and Tuscon, Arizona;
Duncanville, Carrollton
and Lewisville, Texas;
Chino, Garden Grove,
Alhambra and
Tustin/Santa Ana,
California
NEW WAI, L.P./ Warehouse Lima, Ohio Ownership of land and
WAREHOUSE Facility buildings (1)
ASSOCIATES
TITAN CORPORATION Office Building San Diego, Ownership of an 81.46%
California interest in a Limited
Partnership owning land
and building (1)
WAL-MART STORES, INC. Retail Stores Center, Groves, Ownership of a 50%
- 6 locations Silsbee and Vidor, interest in land
Texas; and buildings (1)
Weatherford,
Oklahoma;
Fort Smith, Arkansas;
</TABLE>
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<TABLE>
<CAPTION>
LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- --------
<S> <C> <C> <C>
SAFEWAY STORES Supermarket Broken Arrow, Ownership of a 50%
INCORPORATED Oklahoma interest in land
and buildings
MARRIOTT Hotels Irvine, Sacramento, Ownership of a 23.67%
INTERNATIONAL, INC. - 13 locations and San Diego, interest in a real estate
California; investment trust owning
Orlando - 2, land and buildings (1)
Florida;
Des Plains,
Illinois;
Indianapolis,
Indiana;
Louisville, Kentucky;
Linthicum, Maryland;
Las Vegas, Nevada;
Newark, New Jersey;
Albuquerque,
New Mexico;
Spokane, Washington
Properties Retail Stores Little Rock - 2, Ownership of a 50%
formerly leased to and Office Hot Springs, interest in land
HARVEST FOODS, Buildings - 7 locations Texarkana and and buildings
INCORPORATED Jonesboro, Arkansas; except as noted (1)(2)
Ruston, Louisiana;
Clarksdale,
Mississippi
KROGER CO. Retail Stores North Little Rock Ownership of a 50%
- 2 locations and Conway, Arkansas interest in land
and buildings
except as noted (1)(2)
AFFILIATED FOODS Retail Stores Little Rock - 2, and Ownership of a 50%
SOUTHWEST, INC. - 3 locations Hope, Arkansas interest in land
and buildings
except as noted (1)(2)
CALCOMP TECHNOLOGY, Office/ Austin, Ownership of a 50%
INC. Manufacturing Texas interest in land and
Facility buildings (1)
NEODATA Distribution/ Louisville, Ownership of a 20%
CORPORATION Warehouse/Office Colorado interest in land and
Facility buildings (1)
ENVIROWORKS, INC. Manufacturing/ Apopka, Florida Ownership of land
Distribution Facility and buildings (1)
</TABLE>
(1) These properties are encumbered by mortgage notes payable.
(2) Ownership of buildings with ground leases of land for one property in
Little Rock, Arkansas and properties in Hot Springs, North Little Rock
and Jonesboro, Arkansas.
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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
Obligor Annual Rents Footage Sq.Ft.(1) (Mo/Year) Terms Interest Purchase Option
- ----------- ------------ ------- --------- --------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Information $2,916,014 (2) 252,000 $17.36 9/05 YES 66.67% general N/A
Resources, partnership interest;
Inc. remaining limited
partnership interest
owned by Corporate
Property Associates 9
("CPA(R):9")
Titan 2,131,336 (2) 166,403 15.72 7/07 YES 81.46% general N/A
Corporation partnership interest;
remaining limited
partnership interest
owned by CPA(R):9
New WAI 1,454,000 (2) 534,121 2.72 3/16 YES 100% The greater of
L.P./ fair market value
Warehouse or the sum of
Associates $12,026,000 and
prepayment penalty
under the note.
EnviroWorks, 1,387,757 (2) 374,289 3.71 3/10 YES 100% N/A
Inc.
Wal-Mart 758,886 (2) 454,251 3.34 1/08 YES 50% interest; N/A
Stores, Inc. remaining
interest owned
by CIP(TM)
Childtime 805,454 (2) 83,694 14.57 1/16 YES 66.07% interest; N/A
Childcare remaining
Inc. interest owned
by CPA(R):9
Neodata 587,728 (2) 403,871 7.28 12/14 YES 20% interest; The greater of fair
Corporation remaining market value or the
interest owned sum of approximately
by CIP(TM) $4,030,000 less any
tenant loan outstanding.
</TABLE>
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<TABLE>
<CAPTION>
Registrant's
Share Current Lease
Lease of Current Square Rent Per Expiration Renewal Ownership Terms of
Obligor Annual Rents Footage Sq.Ft.(1) (Mo/Year) Terms Interest Purchase Option
- ----------- ------------ ------- --------- --------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
K mart $ 390,000 278,839 $ 2.17 5/01 YES 100% N/A
Corporation
</TABLE>
(1) Represents annualized rate for rent per square foot when combined with
rents applicable to tenants-in-common or minority interests in limited
partnerships.
(2) These properties are encumbered by limited recourse mortgages.
Item 3. Legal Proceedings.
As of the date hereof, Registrant is not a 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, 1997 to a vote of security holders, through the solicitation
of proxies or otherwise.
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters.
Information with respect to Registrant's common stock is
hereby incorporated by reference to page 27 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 4 of Registrant's Annual Report contained in Appendix
A.
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Item 8. Consolidated Consolidated Financial Statements and Supplementary Data.
The following consolidated financial statements and
supplementary data are hereby incorporated by reference to pages 5 to 20 of
Registrant's Annual Report contained in Appendix A:
(i) Report of Independent Accountants.
(ii) Consolidated Balance Sheets as of December 31, 1996 and 1997.
(iii) Consolidated Statements of Operations for the years ended December 31,
1995, 1996 and 1997.
(iv) Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1996 and 1997.
(v) Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997.
(vi) Notes to Consolidated Financial Statements.
Item 9. Disagreements on Accounting and Financial Disclosure.
NONE
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PART III
Item 10. Directors and Executive Officers of the Registrant.
The directors and senior officers of Registrant and members of
the Investment Committee of the Board of Directors of the Advisor are as
follows:
<TABLE>
<CAPTION>
Has Served as a
Director and/or
Name Age Positions Held Officer Since
---- --- -------------- -------------
<S> <C> <C> <C>
William P. Carey 67 Chairman of the Board 3/90
Director
Ralph G. Coburn (1) 88 Director 3/90
William Ruder (1) 76 Director 3/90
George E. Stoddard 81 Chairman of Investment Committee 3/90
Director
Warren G. Wintrub (1) 63 Director 10/92
Barclay G. Jones III 37 President 3/90
Steven M. Berzin 47 Executive Vice President 7/97
Chief Financial Officer
Chief Legal Officer
Gordon F. DuGan 31 Executive Vice President 2/97
Claude Fernandez 45 Executive Vice President 3/90
Chief Administrative Officer
H. Augustus Carey 40 Senior Vice President 3/90
National Marketing Director
Secretary
Anthony S. Mohl 35 Senior Vice President 3/90
Director of Portfolio Management
John J. Park 33 Senior Vice President - Finance 7/91
Director of Research
Treasurer
</TABLE>
(1) Independent Director of Registrant.
H. Augustus Carey is the nephew of William Polk Carey.
A description of the business experience of each director of
Registrant is set forth below:
William Polk Carey, Chairman of the Board and Director, 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, 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
Carey Institutional Properties Incorporated ("CIP(TM)"), Corporate Property
Associates 12 Incorporated ("CPA(R):12"), Corporate Property Associates 14
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<PAGE> 11
Incorporated ("CPA:(R)14") and Carey Diversified LLC ("Carey Diversified").
Ralph G. Coburn, Independent Director of CIP(TM) and
CPA(R):12, Rear Admiral USNR (Ret.), is former President and Chief Executive
Officer of Hubbard Real Estate Investments (now HRE Properties), a $100,000,000
NYSE equity REIT, sponsored by Merrill Lynch. Admiral Coburn had been engaged in
a variety of real estate activities for over 30 years. A graduate of Harvard
College, Harvard Law School and the Naval War College, Admiral Coburn previously
served as CEO of the National Association of Real Estate Investment Trusts
(NAREIT), representing the multi-billion dollar REIT industry.
William Ruder, Independent Director of CPA(R):12 and
CPA(R):14, is Chairman of the Board of William Ruder Incorporated, a consulting
firm founded in 1981. From 1948 to 1981, Mr. Ruder was Chairman of Ruder & Finn,
an international public relations company which he co-founded. He is a former
Assistant Secretary of Commerce of the United States and is on the Board of
Directors of the United Nations Association of the United States of America,
Junior Achievement and the Council on Economic Priorities. A member of the Board
of Overseers of the Wharton School at the University of Pennsylvania for a
number years, he has also served as a consultant to the Communications Advisory
Board to the White House Press Secretary, the Committee for Economic Development
and the Office of Overseas Schools for the U.S. State Department. Mr. Ruder is a
lecturer at Harvard Graduate School of Business and is associated with several
other business, civic and cultural organizations.
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. Mr. Stoddard is also a Director of
CIP , CPA(R):12 and CPA(R):14
Warren G. Wintrub, Independent Director of CIP(TM) and
CPA(R):14 and Chairman of the Audit Committee, became a partner at Coopers &
Lybrand LLP in 1963. He specializes in taxation and served on Coopers & Lybrand
LLP's Executive Committee from 1976 to 1988 and chaired its Retirement Committee
from 1979-1992. Mr. Wintrub serves as a director of Getty Petroleum Corp. and
Chromcraft Revington, Inc. He received a B.S. degree from Ohio State University
and an LL.B. degree from Harvard Law School.
Barclay G. Jones III, President, 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.
Mr. Jones is a Director of Carey Diversified.
Steven M. Berzin, Executive Vice President, Chief Financial
Officer and Chief Legal Officer, was elected Executive Vice President, Chief
Financial Officer, Chief Legal Officer and a Managing Director of W.P. Carey in
July 1997. From 1993 to 1997, Mr. Berzin was Vice President - Business
Development of General Electric Capital Corporation in the office of the
Executive Vice President and, more recently, in the office of the President,
where he was responsible for business development activities and acquisitions.
From 1985 to 1992, Mr. Berzin held various positions with Financial Guaranty
Insurance Company, the last two being managing Director, Corporate Development,
Senior Vice President and Chief Financial Officer. Mr. Berzin associated with
the law firm of Cravath, Swaine & Moore from 1978 to 1985 and from 1976 to 1977,
he served as law clerk to the Honorable Anthony M. Kennedy, then a United States
Circuit Judge. Mr. Berzin received a B.A. and M.A. in Applied Mathematics from
Harvard University, a B.A. in Jurisprudence and an M.A. from Oxford University
and a J.D. from Harvard Law School. Mr. Berzin is also a Director of Carey
Diversified.
Gordon F. DuGan, Executive President, was elected Executive
Vice President and a Managing Director of W.P. Carey in June 1997. Mr. Dugan
rejoined W.P. Carey as Deputy Head of Acquisitions in February 1997. Mr. Dugan
joined W.P. Carey as Assistant to the Chairman in May 1988, after graduating
from the Wharton School at the University of Pennsylvania where he concentrated
in Finance. From October 1995 until February 1997, Mr. Dugan was Chief Financial
Officer of Superconducting Core Technologies, Inc., a Colorado-based wireless
communications equipment manufacturer. Mr. Dugan is also a Director of Carey
Diversified.
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<PAGE> 12
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 a B.S. degree
in accounting from New York University in 1975 and an M.B.A. in finance from
Columbia University Graduate School of Business in 1981.
H. Augustus Carey, Senior Vice President, National Marketing
Director and Secretary, 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, in 1987 as Assistant to the President
after receiving an 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 an undergraduate degree from Massachusetts Institute of Technology and
an M.B.A. in Finance from New York University.
Item 11. Executive Compensation.
This information will be contained in Registrant's definitive
Proxy Statement with respect to the Company's 1998 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission within 120
days following the end of the Company's fiscal year, and is hereby incorporated
by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
This information will be contained in Registrant's definitive
Proxy Statement with respect to the Company's 1998 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission within 120
days following the end of the Company's fiscal year, and is hereby incorporated
by reference.
Item 13. Certain Relationships and Related Transactions.
This information will be contained in Registrant's definitive
Proxy Statement with respect to the Company's 1998 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission within 120
days following the end of the Company's fiscal year, and is hereby incorporated
by reference.
-11-
<PAGE> 13
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) 1. Consolidated Financial Statements:
The following consolidated financial statements are
filed as a part of this Report:
Report of Independent Accountants.
Consolidated Balance Sheets as of December 31, 1996 and 1997.
Consolidated Statements of Operations for the years ended December 31, 1995,
1996 and 1997.
Consolidated Statements of Shareholders' Equity for the years ended December
31, 1995, 1996 and 1997.
Consolidated Statements of Cash Flows for the years ended December 31, 1995,
1996 and 1997.
Notes to Consolidated Financial Statements.
The consolidated financial statements are hereby incorporated by reference
to pages 5 to 20 of Registrant's Annual Report contained in Appendix A.
(a) 2. Financial Statements of Material Equity Investee:
Marcourt Investments Incorporated
Report of Independent Accountants.
Balance Sheets, December 31, 1996 and 1997.
Statements of Income for the years ended December 31, 1995, 1996 and 1997.
Statement of Shareholders' Equity for the years ended December 31, 1995,
1996 and 1997.
Statements of Cash Flows for the years ended December 31, 1995, 1996 and
1997.
Notes to Financial Statements.
Schedule III -Real Estate and Accumulated Depreciation as of December 31,
1997 of Marcourt Investments Incorporated.
The financial statements of material equity investees is contained herewith
in Item 14 on pages 14 to 22.
The separate financial statements of material equity investees have been
audited as of December 31, 1997 and for the year then ended in accordance with
Rule 3-09 of Regulation S-X.
-12-
<PAGE> 14
(a) 3. 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,
1997.
Notes to Schedule III.
Schedule III and notes therein are hereby
incorporated by reference to pages 21 to 23 of Registrant's Annual Report in
Appendix A. Financial Statement Schedules of Material Equity Investees are
contained herewith in Item 14.
Financial Statement Schedules other than those
listed above are omitted because the required information is given in the
Consolidated Financial Statements, including the Notes thereto, or because the
conditions requiring their filing do not exist.
-13-
<PAGE> 15
REPORT of INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Marcourt Investments Incorporated:
We have audited the accompanying balance sheets of Marcourt Investments
Incorporated (the "Company") as of December 31, 1996 and 1997, and the related
statements of income, shareholders' equity and cash flows for the years ended
December 31, 1995, 1996 and 1997. These financial statements and financial
statement schedule are the responsibility of the Company's management. 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
management, 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 Marcourt Investments
Incorporated as of December 31, 1996 and 1997, and the results of its operations
and its cash flows for the years ended December 31, 1995, 1996 and 1997, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the Schedule of Real Estate and Accumulated Depreciation as of December
31, 1997, 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
January 27, 1998
-14-
<PAGE> 16
MARCOURT INVESTMENTS INCORPORATED
BALANCE SHEETS
December 31, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
---- ----
ASSETS:
<S> <C> <C>
Net investment in direct
financing lease $148,831,067 $148,698,339
Cash and cash equivalents 172,537 95,864
Other assets 690,747 618,668
------------ ------------
Total assets $149,694,351 $149,412,871
============ ============
LIABILITIES:
Mortgage notes payable $104,304,209 $101,218,909
Accrued interest payable 1,522,897 1,468,491
Accounts payable and accrued expenses 136,076 110,259
Accounts payable to affiliates 4,000 3,500
State and local taxes payable 35,000 25,000
------------ ------------
Total liabilities 106,002,182 102,826,159
------------ ------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, Class A; $.01 par value; authorized,
999,750 shares; issued and outstanding, 369,850
shares; Class B; $.01 par value; authorized, 250
shares; issued and outstanding,
150 shares 3,700 3,700
Additional paid-in capital 36,996,300 36,996,300
Accumulated earnings in excess of dividends 6,692,169 9,586,712
------------ ------------
Total shareholders' equity 43,692,169 46,586,712
------------ ------------
Total liabilities and
shareholders' equity $149,694,351 $149,412,871
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-15-
<PAGE> 17
MARCOURT INVESTMENTS INCORPORATED
STATEMENTS OF INCOME
For the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
Revenue:
<S> <C> <C> <C>
Interest income on
direct financing lease $17,733,841 $17,722,059 $17,694,122
Percentage rents 564,069 629,681 851,731
Other income 1,948 197,077 104,758
----------- ----------- -----------
18,299,858 18,548,817 18,650,611
----------- ----------- -----------
Expenses:
Interest on mortgages 11,301,049 11,055,265 10,729,644
General and administrative 57,129 44,019 68,238
State and local taxes 11,941 (1,976) 29,426
----------- ----------- -----------
11,370,119 11,097,308 10,827,308
----------- ----------- -----------
Net income $ 6,929,739 $ 7,451,509 $ 7,823,303
=========== =========== ===========
Net income per share
of common stock, 370,000
common shares outstanding
(Class A and Class B) $18.73 $20.14 $21.14
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-16-
<PAGE> 18
MARCOURT INVESTMENTS INCORPORATED
STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
Additional Earnings in
Common Paid-in Excess of
Stock Capital Dividends Total
----- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $3,700 $36,996,300 $ 2,255,160 $39,255,160
Dividends (5,151,106) (5,151,106)
Net income 6,929,739 6,929,739
------ ----------- ----------- -----------
Balance, December 31, 1995 3,700 36,996,300 4,033,793 41,033,793
Dividends (4,793,133) (4,793,133)
Net income 7,451,509 7,451,509
------ ----------- ----------- -----------
Balance, December 31, 1996 3,700 36,996,300 6,692,169 43,692,169
Dividends (4,928,760) (4,928,760)
Net income 7,823,303 7,823,303
------ ----------- ----------- -----------
Balance, December 31, 1997 $3,700 $36,996,300 $ 9,586,712 $46,586,712
====== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-17-
<PAGE> 19
MARCOURT INVESTMENTS INCORPORATED
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Rentals received from lessee $ 18,390,919 $ 18,456,531 $ 18,678,581
Interest paid on mortgage loans (11,266,536) (11,011,673) (10,711,971)
Interest received on cash and cash equivalents 1,573 6,680 6,158
General and administrative expenses paid (47,554) (54,270) (60,988)
Taxes paid, net of refunds received (12,329) 35,686 (39,426)
Other, net 48,366 48,607 (33,567)
------------ ------------ ------------
Net cash provided by operating activities 7,114,439 7,481,561 7,838,787
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from easement 190,397 98,600
------------ ------------
Net cash provided by investing activities 190,397 98,600
------------ ------------
Cash flows from financing activities:
Dividends paid (5,151,106) (4,793,133) (4,928,760)
Payment of mortgage principal (1,910,192) (2,785,599) (3,085,300)
------------ ------------ ------------
Net cash used in financing activities (7,061,298) (7,578,732) (8,014,060)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 53,141 93,226 (76,673)
Cash and cash equivalents, beginning of period 26,170 79,311 172,537
------------ ------------ ------------
Cash and cash equivalents, end of period $ 79,311 $ 172,537 $ 95,864
============ ============ ============
Reconciliation of net income to net cash provided
by operating activities:
Net income $ 6,929,739 $ 7,451,509 $ 7,823,303
Adjustments to reconcile net income to net
cash provided by operating activities:
Cash receipts on direct financing lease
greater than revenues recognized 93,009 104,791 132,728
Other income from sale of easement (190,397) (98,600)
Amortization of deferred interest 79,986 74,095 72,079
Decrease (increase) in other assets (129,975) 129,975
Increase (decrease) in accounts payable
and accrued expenses 61,041 35,881 (25,817)
Decrease in accrued interest payable (45,473) (30,503) (54,406)
Increase (decrease) in state and
local taxes payable 124,612 (91,290) (10,000)
Increase (decrease) in accounts payable
to affiliates 1,500 (2,500) (500)
------------ ------------ ------------
Net cash provided by operating
activities $ 7,114,439 $ 7,481,561 $ 7,838,787
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-18-
<PAGE> 20
MARCOURT INVESTMENTS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
1. Organization and Business:
Marcourt Investments Incorporated (the "Company") was formed on January
2, 1992 under the General Corporation Law of Maryland. Under its by-laws, the
Company was organized for the purpose of engaging in the business of investing
in and owning industrial and commercial real estate. It is intended that the
Company carry on business as a real estate investment trust ("REIT") as defined
under the Internal Revenue Code of 1986.
The Company's business consists of the leasing of 13 hotel properties to
a wholly-owned subsidiary of Marriott International, Inc. ("Marriott") pursuant
to a master lease. The master lease has an initial term of 20 years through
February 10, 2012, followed by a 10-year renewal term and two 5-year renewal
terms. During the initial lease term, minimum annual rentals are $17,826,850
with the lease providing for additional rent of 4% of annual sales in excess of
$36,000,000 with such additional rent capped at $1,766,717. In connection with
the restructuring of Marriott Corporation in 1993, Marriott assumed a guarantee
of the lease obligations. In addition, Host Marriott Corporation has also
provided a guarantee of the lease obligation for the greater of 10 years from
the Marriott Corporation restructuring or until the resolution of all claims and
litigation with respect to such restructuring.
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.
2. Summary of Significant Accounting Policies:
Real Estate Leased to Others:
The Company's master lease for land and thirteen hotel properties is
accounted for under the direct financing method whereby the gross investment in
the lease consists of minimum lease payments to be received plus the estimated
value of the properties at the end of the lease. Unearned income, representing
the difference between gross investment and actual cost of the leased
properties, is amortized to income over the lease term so as to produce a
constant periodic rate of return.
The Company 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 fair value.
Cash Equivalents:
The Company considers all short-term highly liquid investments that are
both readily convertible to cash and have a maturity of three months or less at
the time of purchase to be cash equivalents. Items classified as cash
equivalents may include commercial paper and money market funds. The Company had
$52,974 and $94,133 in a money market fund at December 31, 1996 and 1997,
respectively.
Federal Income Taxes:
The Company is qualified as a REIT as defined under the Internal Revenue
Code as of December 31, 1997. The Company is not subject to Federal income taxes
on amounts distributed to shareholders provided it distributes at least 95% of
its REIT taxable income to its shareholders and meets other conditions necessary
to retain its REIT status.
-19-
<PAGE> 21
MARCOURT INVESTMENTS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
Other Assets:
Included in other assets are deferred charges which resulted from
increased interest obligations on the Company's mortgage notes payable in a
prior period and are being amortized on an effective interest method over the
remaining term of the mortgage notes.
Earnings Per Share:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS
No. 128") which establishes standards for computing and presenting earnings per
share. The adoption of SFAS No. 128 had no impact on the Company's financial
statements because the Company has a simple capital structure, that is, one with
only common stock outstanding. As a result, the Company has presented basic
per-share amounts in the statements of income.
3. Transactions with Related Parties:
An affiliate of W.P. Carey & Co., Inc. ("W.P. Carey") is the advisor to
two shareholders whose ownership interest in the Company represents
approximately 47% of the Company's outstanding shares. The Company has entered
into a service agreement with W. P. Carey which has been engaged to perform
various administrative services which include, but are not limited to,
accounting and cash management. The agreement provides that W.P. Carey be
reimbursed for its costs incurred in connection with performing the necessary
services under the agreement. For the years ended December 31, 1995, 1996 and
1997, the Company incurred expenses of $9,153, $5,789 and $7,237, respectively,
under the agreement.
Frontier Equity Partners II, Ltd. and an affiliate ("Frontier") own
approximately 53% of the outstanding shares of the Company. The Company has also
agreed to reimburse Frontier for certain costs incurred in connection with the
physical inspection of the Company's leased properties. For the years ended
December 31, 1995, 1996 and 1997, the Company incurred expenses of $6,752,
$6,971 and $6,994, respectively, in connection with reimbursement for such
physical inspections.
4. Net Investment in Direct Financing Lease:
The net investment in the direct financing lease is summarized as
follows:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Minimum lease payments
receivable $267,402,749 $249,575,900
Unguaranteed residual value 146,045,268 146,045,268
------------ ------------
413,448,017 395,621,168
Less, unearned income 264,616,950 246,922,829
------------ ------------
$148,831,067 $148,698,339
============ ============
</TABLE>
The anticipated minimum future rentals, exclusive of renewals and any
rents based on percentage of sales, amount to $17,826,850 in each of the years
1998 through 2002 and aggregate $249,575,900 through 2011.
-20-
<PAGE> 22
MARCOURT INVESTMENTS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
5. Mortgage Notes Payable:
The Company's mortgage notes payable are collateralized by the
Company's thirteen hotel properties and by the rights of assignment on the
Company's master lease on the properties. $65,039,146 of the mortgage notes bear
interest at a rate of 9.94% per annum with the remaining $36,179,763 bearing
interest at a rate of 11.18% per annum. The mortgage will fully amortize in
November 2011.
Scheduled principal payments during each of the next five years
following December 31, 1997 and thereafter are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1998 $ 3,417,356
1999 3,785,273
2000 4,192,937
2001 4,644,658
2002 5,145,213
Thereafter 80,033,472
------------
Total $101,218,909
============
</TABLE>
6. Dividend Paid:
Dividends paid to shareholders consist of ordinary income and a return
of capital for income tax purposes. For the three years ended December 31, 1997,
dividends paid per share were reported as follows for income tax purposes:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Ordinary income $ 8.95 $10.38 $11.46
Return of capital 4.97 2.57 1.86
------ ------ ------
$13.92 $12.95 $13.32
====== ====== ======
</TABLE>
Dividends of $999,550 and $1,998 payable to Class A and Class B
shareholders, respectively, were declared and paid in February 1998.
7. Disclosure About Fair Value of Financial Instruments:
The carrying amounts of cash and accounts payable and accrued expenses
approximate fair value because of the short maturity of these items.
The fair value of the Company's mortgage notes payable at December 31,
1997 is approximately $119,900,000. Based on projections of settlement costs,
including prepayment charges, the Company would not realize a benefit from
refinancing the existing mortgage debt.
-21-
<PAGE> 23
MARCOURT INVESTMENTS INCORPORATED
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1997
<TABLE>
<CAPTION>
Initial Cost to
Company Costs
------------------------------------ Capitalized Increase In
Personal Subsequent to Net
Description Encumbrances Land Property Buildings Acquisition (a) Investment (b) Total (c)
----------- ------------ ---- --------- --------- --------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Direct Financing
Method:
Hotels leased to
Marriott Inter-
national, Inc. $104,304,209 $27,559,637 $14,199,292 $104,241,071 $45,268 $2,653,071 $148,698,339
============ =========== =========== ============ ======= ========== ============
</TABLE>
<TABLE>
<CAPTION>
Description Date Acquired
----------- -------------
<S> <C>
Direct Financing
Method:
Hotels leased to
Marriott Inter- February 10,
national, Inc. 1992
</TABLE>
(a) Consists of acquisition costs including legal fees, appraisal fees,
title costs and other related professional fees.
(b) The increase in net investment is due to the amortization of unearned
income producing a constant periodic rate of return on the net
investment which is more than the lease payments received.
(c) At December 31, 1997, the aggregate cost of real estate owned by
Marcourt Investments Incorporated for Federal income tax purposes is
$146,045,268.
-22-
<PAGE> 24
(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 Articles of Incorporation of Registrant. Exhibit 3(A) to Regis-
tration Statement (Form
S-11) No. 33-514
3.2 Bylaws of Registrant. Exhibit 3(B) to Regis-
tration Statement (Form
S-11) No. 33-514
10.1 Advisory Agreement between Registrant and Exhibit 10(B) to
Carey Property Advisors. Registration Statement
(Form S-11) No. 33-514
10.2 Contract of Sale between Registrant Filed as Exhibit 10(E)(1)
and H MA Properties Co., L.P. ("H MA") to Registrant's Post
dated August 24, 1990. Effective Amendment No. 1
to Form S-11
10.3 Special Warranty Deed from H MA to Filed as Exhibit 10(E)(2)
Registrant dated September 18, 1990. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.4 Bill of Sale from H MA to Registrant Filed as Exhibit 10(E)(3)
dated September 18, 1990. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.5 Assignment and Assumption of Lease Agreement Filed as Exhibit 10(E)(4)
(between BetaWest Properties Inc. and The Mountain to Registrant's Post
States Telephone and Telegraph Company ("Mountain Effective Amendment No. 1
Bell") dated December 16, 1986) from H MA to to Form S-11
Registrant dated September 18, 1990.
10.6 Agreement of Exchange and Sale ("Texas Agreement") Filed as Exhibit 10(F)(1)
by and among Joanne Talenfeld Rubinoff, both to Registrant's Post
individually and as Trustee of the Murray A. Effective Amendment No. 1
Talenfeld Residuary Trust (collectively "Denton Seller"), to Form S-11
Registrant and the E.H. Talenfeld Real Estate
Company ("Agent") dated September 28, 1990.
10.7 Agreement of Sale between D/S St. Lucis Joint Filed as Exhibit 10(F)(2)
Venture and Registrant ("Florida Agreement") to Registrant's Post
dated October 8, 1990. Effective Amendment No. 1
to Form S-11
</TABLE>
-23-
<PAGE> 25
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.8 Assignment of Florida Agreement from Filed as Exhibit 10(F)(3)
Registrant to Seller dated October 8, 1990. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.9 Assignment of Texas Agreement from Registrant Filed as Exhibit 10(F)(4)
to Denton (TX) QRS 10-2, Inc. ("Denton QRS"), a to Registrant's Post
Texas corporation and wholly-owned subsidiary of Effective Amendment No. 1
Registrant, dated October 19, 1990. to Form S-11
10.10 Purchase and Sale Agreement between HRE Properties Filed as Exhibit 10(G)(1)
("HRE") and Registrant regarding properties in to Registrant's Post
Citrus Heights, California (the "K mart California Effective Amendment No. 1
Property) and Drayton Plains, Michigan (the "K mart to Form S-11
Michigan Property").
10.11 Grant Deed from HRE to Registrant for the Filed as Exhibit 10(G)(2)
K mart California Property. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.12 Deed from HRE to Registrant for the Filed as Exhibit 10(G)(3)
K mart Michigan Property. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.13 Assumption and Assignment Agreement between Filed as Exhibit 10(G)(4)
HRE and Registrant regarding the Lease Agreement to Registrant's Post
between HRE and S.S. Kresge Company (n/k/a K mart Effective Amendment No. 1
Corporation) ("K mart") for property located in to Form S-11
Citrus Heights, California (the "K mart
California Lease") dated March 16, 1976.
10.14 Assumption and Assignment Agreement between Filed as Exhibit 10(G)(5)
HRE and Registrant regarding the Lease Agreement to Registrant's Post
between HRE and S.S. Kresge Company for property Effective Amendment No. 1
located in Drayton Plains, Michigan (the "K mart to Form S-11
Michigan Lease") dated March 16, 1976.
10.15 Assignment of Leases and Rents of the K mart Filed as Exhibit 10(G)(6)
California Property from Registrant to New to Registrant's Post
England Mutual Life Insurance Company ("New Effective Amendment No. 1
England"). to Form S-11
10.16 Assignment of Leases and Rents of the K mart Filed as Exhibit 10(G)(7)
Michigan Property from Registrant to New England. to Registrant's Post
Effective Amendment No. 1
to Form S-11
</TABLE>
-24-
<PAGE> 26
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.17 Guaranty of Performance dated September 27, 1990 Filed as Exhibit 10(H)(1)
by Registrant, as Guarantor, to the Mutual to Registrant's Post
Life Insurance Company of New York ("MONY"). Effective Amendment No. 1
to Form S-11
10.18 General Warranty Deed from Gerber Children's Filed as Exhibit 10(I)(1)
Centers Inc. ("Gerber") to Registrant and to Registrant's Post
Corporate Property Associates 9, L.P. ("CPA(R):9") Effective Amendment No. 2
for the Chandler, Arizona Gerber property. to Form S-11
10.19 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(2)
Registrant and CPA(R):9 for the Tucson, to Registrant's Post
Arizona Gerber property. Effective Amendment No. 2
to Form S-11
10.20 Corporation Grant from Gerber to Filed as Exhibit 10(I)(3)
Registrant and CPA(R):9 for the Alhambra, to Registrant's Post
California Gerber property. Effective Amendment No. 2
to Form S-11
10.21 Corporation Grant from Gerber to Filed as Exhibit 10(I)(4)
Registrant and CPA(R):9 for the Chino, to Registrant's Post
California Gerber property. Effective Amendment No. 2
to Form S-11
10.22 Corporation Grant from Gerber to Filed as Exhibit 10(I)(5)
Registrant and CPA(R):9 for the Garden to Registrant's Post
Grove, California Gerber property. Effective Amendment No. 2
to Form S-11
10.23 Corporation Grant from Gerber to Filed as Exhibit 10(I)(6)
Registrant and CPA(R):9 for the Tustin/ to Registrant's Post
Santa Ana, California Gerber property. Effective Amendment No. 2
to Form S-11
10.24 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(7)
Registrant and CPA(R):9 for the Sterling to Registrant's Post
Heights, Michigan Gerber property. Effective Amendment No. 2
to Form S-11
10.25 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(8)
Registrant and CPA(R):9 for the Westland to Registrant's Post
Michigan-I Gerber property. Effective Amendment No. 2
to Form S-11
10.26 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(9)
Registrant and CPA(R):9 for the Westland to Registrant's Post
Michigan-II Gerber property. Effective Amendment No. 2
to Form S-11
</TABLE>
-25-
<PAGE> 27
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.27 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(10)
Registrant and CPA(R):9 for the Carrollton, to Registrant's Post
Texas Gerber property. Effective Amendment No. 2
to Form S-11
10.28 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(11)
Registrant and CPA(R):9 for the Duncanville, to Registrant's Post
Texas Gerber property. Effective Amendment No. 2
to Form S-11
10.29 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(12)
Registrant and CPA(R):9 for the Lewisville, to Registrant's Post
Texas Gerber property. Effective Amendment No. 2
to Form S-11
10.30 Bill of Sale from Gerber to Registrant Filed as Exhibit 10(I)(13)
and CPA(R):9. to Registrant's Post
Effective Amendment No. 2
to Form S-11
10.31 Co-Tenancy Agreement between Registrant Filed as Exhibit 10(I)(14)
and CPA(R):9 as tenants-in-common on to Registrant's Post
properties leased to Gerber. Effective Amendment No. 2
to Form S-11
10.32 Lease Agreement between Registrant and Filed as Exhibit 10(I)(15)
CPA(R):9, as landlord, and Gerber, as Tenant. to Registrant's Post
Effective Amendment No. 2
to Form S-11
10.33 Real Estate Note from Registrant and CPA(R):9 Filed as Exhibit 10(I)(16)
to Pan-American Life Insurance Company to Registrant's Post
("Pan American"). Effective Amendment No. 2
to Form S-11
10.34 Master Mortgage, Deed of Trust, Security Filed as Exhibit 10(I)(17)
Agreement and Assignment of Leases, Rents and to Registrant's Post
Profits by and among Registrant, CPA(R):9, Theodore Effective Amendment No. 2
Tumminello, Chicago Title Agency of Arizona, to Form S-11
Chicago Title Company and Pan American.
10.35 Lease Agreement dated July 9, 1991 by Filed as Exhibit 10.1
and between Torrey Pines Limited to Registrant's Form 8-K
Partnership, a California limited dated July 25, 1991
partnership ("Torrey Pines"), as Landlord
and The Titan Corporation ("Titan"), as Tenant.
</TABLE>
-26-
<PAGE> 28
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.36 $11,700,000.00 Promissory Note dated July 9, 1991 Filed as Exhibit 10.2
from Torrey Pines as Borrower to The Northwestern to Registrant's Form 8-K
Mutual Life Insurance Company ("Northwestern"), as Lender. dated July 25, 1991
10.37 Deed of Trust and Security Agreement, dated July 9, 1991 Filed as Exhibit 10.3
between Torrey Pines and Northwestern. to Registrant's Form 8-K
dated July 25, 1991
10.38 Absolute Assignment of Leases and Rents, dated July 9, Filed as Exhibit 10.4
1991 from Torrey Pines as Assignor to Northwestern as to Registrant's Form 8-K
Assignee. dated July 25, 1991
10.39 Indemnity Agreement dated July 9, 1991 between Torrey Filed as Exhibit 10.5
Pines, CPA(R):9 and Registrant. to Registrant's Form 8-K
dated July 25, 1991
10.40 Amended Advisory Agreement dated September 14, 1990. Filed as Exhibit 10(B)(2)
to Registrant's Post
Effective Amendment No. 3
to Form S-11
10.41 Lease between Marcourt Investments Filed as Exhibit 10.1
Incorporated ("Marcourt") and CTYD to Registrant's Form 8-K
III Corporation ("CTYD"). dated February 24, 1992
10.42 Series A-2 9.94% Secured Note from Marcourt to the Filed as Exhibit 10.2
registered owner of note (Various Series A-1 9.94% Notes to Registrant's Form 8-K
in an aggregate amount of $38,750,000, substantially in the dated February 24, 1992
form of the Series A-1 9.94% Note attached, were issued by
Marcourt in connection with the Financing).
10.43 Series A-2 11.18% Secured Note from Marcourt to the Filed as Exhibit 10.3
registered owner of the note (Various notes in an to Registrant's Form 8-K
aggregate amount of $70,250,000, substantially in the dated February 24, 1992
form of the Series A-2 11.18% Note attached, were issued
by Marcourt in connection with the Financing.
10.44 Indenture between Marcourt, as borrower, to First Fidelity Filed as Exhibit 10.4
Bank, National Association, New Jersey, as trustee ("Trustee"). to Registrant's Form 8-K
dated February 24, 1992
10.45 Real Estate Deed of Trust from Marcourt to Albuquerque Title Filed as Exhibit 10.5
Company, as trustee for benefit of the Trustee filed in New to Registrant's Form 8-K
Mexico, securing Series A-1 9.94% Notes and Series A-2 11.18% dated February 24, 1992
notes allocated to Albuquerque, New Mexico Marriott property
(Deeds of Trust or Mortgages substantially similar to this Deed
of Trust were filed in all other jurisdictions in which Marriott
Properties are located. Such other deeds of trust or mortgages
secure the principal amount of Series A-1 9.94% Notes and Series
A-2 11.18% Notes allocated to the Marriott Properties located in
such other jurisdictions).
</TABLE>
-27-
<PAGE> 29
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.46 Second Real Estate Deed of Trust from Marcourt to Albuquerque Filed as Exhibit 10.6
Title Company as trustee for the benefit of the Trustee, to Registrant's Form 8-K
filed in New Mexico, securing all Series A-1 9.94% Notes and dated February 24, 1992
Series A-2 11.18% Notes other than those notes allocated to the
Albuquerque, New Mexico Marriott property (Deeds of trust or
mortgages substantially similar to this Second Real Estate Deed
of Trust were filed in all other jurisdictions in which the
remaining Marriott Properties are located. Such other deeds of
trust or mortgages secure the principal amount of Series A-1
9.94% Notes and Series A-2 11.18% Notes allocated to all
Marriott Properties not located in the jurisdiction in which
such other deeds of trust were filed for recording).
10.47 Guaranty from the Registrant, Carey Institutional Properties Filed as Exhibit 10.7
Incorporated ("CPA(R):11"), Trammell Crow Equity Partners II, to Registrant's Form 8-K
Ltd. ("TCEP II") and PA/First Plaza Limited Partnership dated February 24, 1992
("First Plaza") as guarantors, to the Trustee.
10.48 Shareholders Agreement between the Registrant, CPA(R):11, Filed as Exhibit 10.8
TCEP II and First Plaza. to Registrant's Form 8-K
dated February 24, 1992
10.49 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.10
located in Ft. Smith, Arkansas. to Registrant's Form 8-K
dated February 24, 1992
10.50 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.12
located in Broken Arrow, Oklahoma. to Registrant's Form 8-K
dated February 24, 1992
10.51 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.13
located in Weatherford, Oklahoma. to Registrant's Form 8-K
dated February 24, 1992
10.52 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.14
located in Center, Texas. to Registrant's Form 8-K
dated February 24, 1992
10.53 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.15
located in Groves, Texas. to Registrant's Form 8-K
dated February 24, 1992
10.54 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.16
located in Silsbee, Texas. to Registrant's Form 8-K
dated February 24, 1992
</TABLE>
-28-
<PAGE> 30
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.55 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.17
located in Vidor, Texas. to Registrant's Form 8-K
dated February 24, 1992
10.56 Lease Amendments for the Ft. Smith, Arkansas and Weatherford, Filed as Exhibit 10.18
Oklahoma properties. to Registrant's Form 8-K
dated February 24, 1992
10.57 Promissory Note from subsidiaries of the Registrant and Filed as Exhibit 10.19
CPA(R):11 to The New England Mutual Life Insurance Company to Registrant's Form 8-K
("New England"). dated February 24, 1992
10.58 Mortgage/Deed of Trust from subsidiaries of the Registrant Filed as Exhibit 10.20
and CPA(R):11 to New England encumbering the property in to Registrant's Form 8-K
Ft. Smith, Arkansas. dated February 24, 1992
10.59 Mortgage/Deed of Trust from subsidiaries of the Registrant Filed as Exhibit 10.21
and CPA(R):11 to New England encumbering the property in to Registrant's Form 8-K
Weatherford, Oklahoma. dated February 24, 1992
10.60 Mortgage/Deed of Trust from subsidiaries of the Registrant Filed as Exhibit 10.22
and CPA(R):11 to New England encumbering the properties in to Registrant's Form 8-K
Center, Groves, Silsbee, and Vidor, Texas. dated February 24, 1992
10.61 Lease Agreement between QRS 10-9 (AR), Filed as Exhibit 10.1
Inc. ("QRS 10-9") and QRS 11-2(AR), Inc. to Registrant's Form 8-K
("QRS 11-2") as landlord and Acadia Stores 63, dated April 3, 1992
Inc. ("Tenant") as tenant.
10.62 Co-Tenancy Agreement between QRS 10-9 and QRS 11-2. Filed as Exhibit 10.2
to Registrant's Form 8-K
dated April 3, 1992
10.63 Note of QRS 10-9 and QRS 11-2 to Second Lender. Filed as Exhibit 10.7
to Registrant's Form 8-K
dated April 3, 1992
10.64 Mortgage/Deed of Trust from QRS 10-9 and QRS 11-2 Filed as Exhibit 10.8
to Second Lender for the following jurisdictions: to Registrant's Form 8-K
dated April 3, 1992
a. Arkansas
b. Louisiana
c. Mississippi
10.65 Purchase and Sale Agreement between Neoserv (CO) Filed as Exhibit 10.1
QRS 10-13, Inc. ("QRS:10") and Neoserv (CO) to Registrant's Form 8-K
QRS 11-8, Inc. ("QRS:11) as purchasers and Homart dated October 29, 1992
Development Co. ("Homart").
10.66 Co-Tenancy Agreement between QRS:10 and QRS:11. Filed as Exhibit 10.5
to Registrant's Form 8-K
dated October 29, 1992
</TABLE>
-29-
<PAGE> 31
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.67 Lease from QRS:10 and QRS:11 as lessor and Neodata Filed as Exhibit 10.6
Services, Inc. ("Neodata") as lessee. to Registrant's Form 8-K
dated October 29, 1992
10.68 Guaranty Agreement from Neodata Corporation as guarantor Filed as Exhibit 10.7
to QRS:10 and QRS:11. to Registrant's Form 8-K
dated October 29, 1992
10.69 Promissory Note of QRS:10 and QRS:11 to Neodata. Filed as Exhibit 10.8
to Registrant's Form 8-K
dated October 29, 1992
10.70 Deed of Trust from QRS:10 and QRS:11 for benefit of Neodata. Filed as Exhibit 10.9
to Registrant's Form 8-K
dated October 29, 1992
10.71 Construction Contract between QRS:10 and QRS:11 as owners Filed as Exhibit 10.10
and Austin Commercial, Inc. ("Austin") as contractor. to Registrant's Form 8-K
dated October 29, 1992
10.72 Guaranty from Austin to QRS:10 and QRS:11. Filed as Exhibit 10.11
to Registrant's Form 8-K
dated October 29, 1992
10.73 Construction Agency Agreement between QRS:10 and QRS:11 Filed as Exhibit 10.12
as owners and Neodata as agent. to Registrant's Form 8-K
dated October 29, 1992
10.74 Agreement of Purchase and Sale between Milestone Filed as Exhibit 10.1
Properties, Inc. ("Milestone"), as seller, and to Registrant's Form 8-K
Registrant. dated April 12, 1993
21.1 Subsidiaries of Registrant as of March 24, 1997. Filed herewith
28.1 Lease Agreement between BetaWest Properties Filed as Exhibit 28(A)(1)
Inc. and Mountain Bell dated December 16, 1986. to Registrant's Post
Effective Amendment No. 1
to Form S-11
28.2 Lease Agreement (the "K mart Texas Lease") Filed as Exhibit 28(B)(1)
between Clark Development Company - Denton to Registrant's Post
("Clark") and S.S. Kresge Company for property Effective Amendment No. 1
located in Denton, Texas (the "K mart Texas to Form S-11
Property") dated February 9, 1977.
28.3 Assignment of the K mart Texas Lease from Filed as Exhibit 28(B)(2)
Clark to Murray A. Talenfeld and Joanne to Registrant's Post
Talenfeld (n/k/a/ Joanne Talenfeld Rubinoff) Effective Amendment No. 1
dated December 14, 1976. to Form S-11
28.4 Deed from Denton Seller to Denton QRS for the Filed as Exhibit 28(B)(5)
K mart Texas Property dated October 19, 1990. to Registrant's Post
Effective Amendment No. 1
to Form S-11
</TABLE>
-30-
<PAGE> 32
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
28.5 Agreement for Assignment and Assumption Filed as Exhibit 28(B)(6)
of Real Property Lease from Denton Seller to to Registrant's Post
Denton QRS dated October 19, 1990. Effective Amendment No. 1
to Form S-11
28.6 The K mart California Lease. Filed as Exhibit 28(C)(1)
to Registrant's Post
Effective Amendment No. 1
to Form S-11
28.7 The K mart Michigan Lease. Filed as Exhibit 28(C)(2)
to Registrant's Post
Effective Amendment No. 1
to Form S-11
28.8 Agreement of Limited Partnership dated Filed as Exhibit 28(D)(1)
September 21, 1990 between 564 Randolph to Registrant's Post
Co. #2 (564 Randolph) and North Clinton Effective Amendment No. 1
Corporation ("NCC"). to Form S-11
28.9 Assignment of Partnership Interests dated Filed as Exhibit 28(D)(2)
September 27, 1990 from 564 Randolph and NCC, to Registrant's Post
as Assignors, to CPA(R):9 and QRS 10-1 (ILL), Inc. Effective Amendment No. 1
("QRS 10-1"), as Assignees. to Form S-11
28.10 Amended and Restated Agreement of Limited Filed as Exhibit 28(D)(3)
Partnership dated September 27, 1990 to Registrant's Post
between CPA(R):9 and QRS 10-1, joined by Effective Amendment No. 1
564 Randolph and NCC. to Form S-11
28.11 Warranty Deed dated September 27, 1990 from 564 Filed as Exhibit 28(D)(4)
Randolph to Randolph/Clinton Limited Partnership to Registrant's Post
("Randolph/Clinton"), Trustee's Deed dated Effective Amendment No. 1
September 20, 1990 from American National Bank and to Form S-11
Trust Company of Chicago to Randolph/Clinton,
Trustee's Deed dated September 20, 1990 from LaSalle
National Trust, N.A., as Successor Trustee to LaSalle
National Bank, Trustee, to 564 Randolph.
28.12 Bill of Sale dated September 25, 1990 from 564 Filed as Exhibit 28(D)(5)
Randolph to Randolph/Clinton; Bill of Sale dated to Registrant's Post
September 25, 1990 from NCC to Randolph/Clinton; Bill Effective Amendment No. 1
of Sale dated September 25, 1990 from Information to Form S-11
Resources, Inc. ("IRI") to 564 Randolph.
28.13 $23,500,000 Note Secured by First Real Estate Filed as Exhibit 28(D)(6)
Lien dated September 27, 1990 from Randolph/ to Registrant's Post
Clinton, as Maker, to MONY, as Payee. Effective Amendment No. 1
to Form S-11
28.14 Mortgage and Security Agreement dated Filed as Exhibit 28(D)(7)
September 27, 1990 from Randolph/Clinton, to Registrant's Post
as Mortgagor, to MONY, as Mortgagee. Effective Amendment No. 1
to Form S-11
</TABLE>
-31-
<PAGE> 33
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
28.15 Assignment of Lessor's Interest in Leases Filed as Exhibit 28(D)(8)
dated September 27, 1990 from Randolph/ to Registrant's Post
Clinton, as Assignor, to MONY, as Assignee. Effective Amendment No. 1
to Form S-11
28.16 Lease Agreement dated September 27, 1990 Filed as Exhibit 28(D)(9)
between Randolph/Clinton, as Landlord, to Registrant's Post
and IRI, as Tenant. Effective Amendment No. 1
to Form S-11
28.17 Assignment of Subleases and Rents dated Filed as Exhibit 28(D)(10)
September 27, 1990 from IRI, as Assignor, to Registrant's Post
and Randolph/Clinton, as Assignee. Effective Amendment No. 1
to Form S-11
28.18 General Warranty Deed dated July 9, 1991 from Titan Filed as Exhibit 28.1
Linkabit Corporation to Torrey Pines. to Registrant's Form 8-K
dated July 25, 1991
28.19 Bill of Sale dated July 9, 1991 from Titan Linkabit Filed as Exhibit 28.2
Corporation to Torrey Pines. to Registrant's Form 8-K
dated July 25, 1991
28.20 Guaranty from Harvest Foods, Inc., a Delaware Filed as Exhibit 28.1
corporation ("Harvest"), to QRS 10-9 and QRS 11-2. to Registrant's Form 8-K
dated April 3, 1992
28.21 Guaranty from Harvest Foods, Inc., an Arkansas Filed as Exhibit 28.2
corporation, to QRS 10-9 and QRS 11-2. to Registrant's Form 8-K
dated April 3, 1992
28.22 Deeds from Safeway Inc. and Property Development Filed as Exhibit 28.3
Associates to QRS 10-9 and QRS 11-2 for: to Registrant's Form 8-K
dated April 3, 1992
a. Stores 179 and 258
b. 255
c. 269
d. 4120
28.23 Deed from Acadia Stores 60, Inc. to QRS 10-9 and Filed as Exhibit 28.4
QRS 11-2 for Corporate and Annex premises. to Registrant's Form 8-K
dated April 3, 1992
28.24 Deed from Acadia Stores 61, Inc. to QRS 10-9 and Filed as Exhibit 28.5
QRS 11-2 for Store 194. to Registrant's Form 8-K
dated April 3, 1992
</TABLE>
-32-
<PAGE> 34
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
28.25 Deeds from Acadia Stores 62, Inc. ("AS-62") to Filed as Exhibit 28.6
QRS 10-9 and QRS 11-2 for: to Registrant's Form 8-K
a. Store 287 dated April 3, 1992
b. Store 289
28.26 Deed from Harvest to QRS 10-9 and QRS 11-2 for Store 4426. Filed as Exhibit 28.7
to Registrant's Form 8-K
dated April 3, 1992
28.27 Deed of Improvements from Harvest to QRS 10-9 and Filed as Exhibit 28.8
QRS 11-2 for: to Registrant's Form 8-K
a. Store 4281 dated April 3, 1992
b. Store 4409
28.28 Leasehold Deed of Trust from Neodata for benefit of Filed as Exhibit 28.1
General Electric Capital Corporation. to Registrant's Form 8-K
dated October 29, 1992
28.29 Prospectus of Registrant Filed as Exhibit 28.38
dated June 11, 1990. to Registrant's Form 10-K/A
dated September 24, 1993
28.30 Supplement dated August 14, 1990 Filed as Exhibit 28.39
to Prospectus dated June 11, 1990. to Registrant's Form 10-K/A
dated September 24, 1993
28.31 Supplement dated January 17, 1991 Filed as Exhibit 28.40
to Prospectus dated June 11, 1990. to Registrant's Form 10-K/A
dated September 24, 1993
28.32 Supplement dated March 26, 1991 Filed as Exhibit 28.41
to Prospectus dated June 11, 1990. to Registrant's Form 10-K/A
dated September 24, 1993
</TABLE>
(b) Reports on Form 8-K
During the quarter ended December 31, 1997 the Registrant was
not required to file any reports on Form 8-K.
-33-
<PAGE> 35
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 10 INCORPORATED
a Maryland corporation
04/02/98 BY: /s/ Steven M. Berzin
- ----------------- ------------------------------------
Date Steven M. Berzin
Executive Vice President, Chief Legal
Officer and Chief Financial 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.
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
04/02/98 BY: /s/ William P. Carey
- ------------------ ------------------------------------
Date William P. Carey
Chairman of the Board
and Director
(Principal Executive Officer)
04/02/98 BY: /s/ Barclay G. Jones, III
- ------------------ ------------------------------------
Date Barclay G. Jones, III
President
04/02/98 BY: /s/ Ralph G. Coburn
- ------------------ ------------------------------------
Date Ralph G. Coburn
Director
04/02/98 BY: /s/ George E. Stoddard
- ------------------ ------------------------------------
Date George E. Stoddard
Director
04/02/98 BY: /s/ William Ruder
- ------------------ ------------------------------------
Date William Ruder
Director
04/02/98 BY: /s/ Warren G. Wintrub
- ------------------ ------------------------------------
Date Warren G. Wintrub
Director
04/02/98 BY: /s/ Steven M. Berzin
- ------------------ ------------------------------------
Date Steven M. Berzin
Executive Vice President, Chief Legal
Officer and Chief Financial Officer
(Principal Financial Officer)
04/02/98 BY: /s/ Claude Fernandez
- ------------------ ------------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
-34-
<PAGE> 36
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
AND SUBSIDIARIES
1997 ANNUAL REPORT
<PAGE> 37
SELECTED FINANCIAL DATA
(In thousands except per share amounts)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues $ 16,129 $ 16,386 $ 16,132 $ 15,506 $ 14,666
Income (loss) before
extraordinary items 4,481 5,501 (1,076) 2,990 3,734
Net income (loss) 4,481 5,248 (1,076) 2,990 7,585
Basic earnings (loss)
per share before .62 .76 (.15) .41 .52
extraordinary items (2)
Basic earnings (loss)
per share (2) .62 .73 (.15) .41 1.05
Dividends paid 5,916 5,951 5,976 5,982 5,294
Dividends declared
per share .82 .82 .83 .83 .73
Payment of mortgage
principal (1) 635 802 931 1,142 1,172
BALANCE SHEET DATA:
Total consolidated
assets 148,358 145,124 141,438 127,755 121,039
Long-term
obligations (3) 81,515 69,679 71,527 60,042 58,749
</TABLE>
(1) Represents scheduled mortgage principal amortization paid.
(2) The Company has a simple capital structure that is, one with only
common stock outstanding. As a result, the Company has presented basic
per share amounts only.
(3) Represents mortgage obligations due after more than one year.
-1-
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Net income for the year ended December 31, 1997 increased by
$4,595,000 as compared with the year ended December 31, 1996. Of such increase,
$3,850,000 reflected an extraordinary item from the recognition of a gain on a
1996 transaction, which gain had been deferred pending the outcome of other
events. The results for the prior year include the effect of a noncash charge of
$1,753,000 for the writedown of properties to their estimated fair value and
gains of $1,052,000 from sales of real estate. Excluding these items as well as
other income of $137,000, gains on sales of $391,000 and an accrual for
subordinated disposition fees of $753,000 in 1997, income for 1997, as adjusted,
would have reflected an increase of $268,000 from 1996. The increase was
attributable to lower interest expense and the continuing trend of increased
earnings from the Company's equity investment in a real estate investment trust,
managed by an affiliate that is the net lessor of thirteen Courtyard by Marriott
hotels. These effects were partially offset by a decrease in lease revenues
(rental income and interest income from direct financing leases).
The decrease in interest expense was due to (i) the
satisfaction of the first priority mortgage loan collateralized by the former
Harvest Foods, Inc. properties in June 1997, (ii) paying off several mortgages
in 1996, including two mortgages satisfied in connection with property sales and
the payoff of a mortgage loan collateralized by a property leased to Kmart
Corporation, (iii) the continuing amortization of the Company's other mortgage
loans and (iv) the benefit of refinancing the mortgage loan collateralized by
the Childtime Childcare, Inc. properties in December 1996 at a lower rate of
interest. The increasing trend of earnings from the equity investment in the
Courtyard by Marriott real estate investment trust reflected higher percentage
rents and lower interest expense. The master lease for the Marriott properties
requires rental payments as a percentage of revenues at each of the thirteen
hotels in excess of a base amount; such percentage rents increased by 35% from
the prior year. Percentage rents for 1998 are expected to be in excess of the
amounts collected in 1997, but the rate of increase is expected to moderate. The
purchase of the thirteen Courtyard hotels in 1992 was highly leveraged, with
approximately 75% of the purchase price financed with limited recourse mortgage
debt. The payment schedule on this debt requires that amortizing principal
payments commence in 1995 and that such loan fully amortize over 16-3/4 years,
prior to the end of the lease term. As the principal balance of the mortgage
loan on the Courtyard hotels decreases, interest expense decreases accordingly.
The decrease in the Company's lease revenues was due to the sale of the Best Buy
Co., Inc., Empire of America Realty Credit Corp. and Safeway Stores, Inc.
properties in 1996 and the effect of the termination of the Harvest Foods lease
in 1997. Of the 15 former Harvest Foods properties, five properties are leased
as supermarkets to Kroger Co. and Affiliated Foods Southwest, Inc., three
properties were sold at a gain of $105,000 and the Company is remarketing the
remaining properties. Leases are being negotiated at several of the properties.
There is no assurance; however, that the negotiations will be successful. The
Company realized a gain of $286,000, in 1997 from the sale of warrants of
EnviroWorks, Inc. The Company had received these warrants in 1995 in connection
with the structuring of the lease transaction with EnviroWorks. In connection
with the acquisition of EnviroWorks by Fiskars, Inc., the Company was also able
to negotiate the unconditional guarantee of EnviroWorks' lease obligations by
the new parent company. Management believes this guarantee will enhance the
credit quality of the lease. In 1998, the parent company of EnviroWorks also
provided to the Company an irrevocable letter of credit of $2,100,000 in
connection with its guarantee of the EnviroWorks lease obligation.
The extraordinary gains in 1997 include the gain from the
effect of purchasing the Harvest Foods priority loan at a substantial discount
from its face value and recording a gain on the 1996 transfer of a property to
an affiliate. As more fully described in Note 10 to the accompanying
Consolidated Financial Statements, a gain on the transfer of property in
Stamford, Connecticut had been deferred pending resolution of certain issues.
Such issues were resolved in 1997.
Net income for the year ended December 31, 1996 reflected an
increase of $4,067,000 as compared with the net loss incurred in 1995. Excluding
the effect of noncash charges in 1995 and 1996 in connection with the writedowns
of property to fair value and gains on property sales in 1996, income would have
decreased by $352,000 as compared with 1995.
The decrease in income before gains, as adjusted for the
writedowns, was due to decreases in lease revenues and an increase in property
expenses. These were partially offset by increases in other interest income,
equity income and a decrease in interest expense. Lease revenues decreased as a
result of sales of properties leased to Empire of America, Safeway Supermarkets
Incorporated and Best Buy in 1996 and the expiration of the Xerox lease in
August 1995. Lease revenue benefited from the lease with EnviroWorks, the
initial term of which commenced in
-2-
<PAGE> 39
September 1995, and a rent increase, effective October 1995, on the lease with
Information Resources, Inc. Other interest income increased due to interest
earned on the proceeds held from the property sales. Equity income from the
Courtyard by Marriott investment increased as a result of lower interest on the
mortgage loan and higher percentage rents.
Future cash flow will be affected by the ability of the
Company to re-lease properties formerly leased to Harvest Foods as the Company
has no rent increases scheduled until 2000. The Company's leases with Wal-Mart
Stores, Inc. and Kmart for nine retail properties include percentage rent
provisions and increased sales at these properties could provide additional cash
flow. There has been a positive, but moderate, trend of increase in percentage
rents from these retail leases over the past several years. There is no
certainty; however, that this trend will continue. In an effort to enhance cash
flow opportunities, Management will continue to evaluate refinancing
opportunities on the existing portfolio of limited recourse mortgage loan
obligations.
Because of the long-term nature of the Company's net leases,
inflation and changing prices have not unfavorably affected the Company's
revenues and net income. The Company's net leases have rent increases based on
formulas indexed to increases in the Consumer Price Index, sales overrides, or
other periodic increases which are designed to increase lease revenues in the
future.
Financial Condition
Except for certain of the former Harvest Food properties
vacated in March 1997, all of the Company's properties are leased to corporate
tenants and are subject to long-term net leases that generally require tenants
to pay substantially all operating expenses relating to the leased properties.
The Company's objective is to use the cash flow from its net leases to fund
dividends to shareholders and meet scheduled principal payments on the Company's
mortgage debt. The Company maintains a cash reserve to fund major outlays such
as capital improvements and balloon debt payments. Such expenditures may also be
funded from additional borrowing on the Company's real estate portfolio. The
Company's cash balances decreased by $3,844,000 in 1997 primarily due to the
prepayment of debt.
The Company's cash provided by operations of $6,481,000 was
used to fund dividend payments of $5,294,000 and pay the Company's scheduled
mortgage principal payments of $1,172,000. The Company's cash position has been
favorably affected by the Advisor's continuing its voluntary deferral of asset
management and performance fees which totaled $4,552,000 at December 31, 1997.
Although the Advisor may continue deferring such collection, it has no
obligation to do so. Management has been considering proposing to the Company's
Board of Directors that the Company issue stock to the Advisor to pay off such
deferred fees in lieu of a cash payment for such fees. Any issuance of stock to
satisfy this obligation would be at a per share amount based on an independent
valuation of the Company's assets.
The ability of the Company to sustain its current level of
cash flow is subject to the ability of the Company to successfully lease or sell
seven vacant properties that were leased to Harvest Foods. In April 1997, the
Company reduced its dividend rate in order to maintain an appropriate level of
cash reserves. Since this reduction, the Board has subsequently approved three
consecutive increases in the quarterly dividend rate. Management projects that
the dividend rate can continue to increase at moderate levels and continue to be
sustained solely from cash flow from operations after payment of scheduled
principal payment installments.
During 1997, the Company received $1,480,000 of cash from the
sale of three former Harvest Foods, Inc. properties and the sale of the
EnviroWorks warrants. In addition, the Company received the final installment
from the 1996 sale of one of its Safeway properties. For 1998, the Company is
scheduled to receive $254,000 currently in an escrow account from the sale of
the warrants. The Company anticipates using approximately $400,000 to fund
certain improvements at its Kmart properties as the Company retains certain
maintenance and repair obligations pursuant to the Kmart leases.
During 1997, the Company took an advance of $1,600,000 under
its unsecured credit agreement to pay off a maturing mortgage loan on one of the
Kmart properties. During the year, the Company also paid off this outstanding
advance and subsequently determined not to renew the credit agreement. As noted,
the Company also paid off one of the mortgage loans on the former Harvest
properties. The Company has a balloon payment, scheduled for February 1999, of
$6,910,000 collateralized by six properties leased to Wal-Mart. Management
believes that the prospects for refinancing the Wal-Mart properties mortgage
loan are good because the Wal-Mart leases have terms
-3-
<PAGE> 40
through January 2008. There may be an opportunity to refinance this loan at a
more attractive interest rate than the current fixed rate of 9.42% per annum.
The Company continues to monitor the credit quality of Kmart as any improvements
in Kmart's credit rating may give the Company the opportunity to releverage the
three Kmart properties.
In the case of mortgage financing that does not amortize fully
over its term or is subject to acceleration, the Company would be responsible
for the balloon payment required only to the extent of its interest in the
encumbered properties because the holder of each such obligation has recourse
only to the properties collateralizing such debt. In the event that balloon
payments come due, the Company could seek to refinance the loans, restructure
the debt with existing lenders, evaluate its ability to satisfy the mortgages
from existing cash reserves or sell the property and use the sales proceeds to
satisfy the mortgage debt. To the extent that the remaining term of a lease will
remain in place for a number of years, the Company believes that the financing
prospects are good. The limited recourse refinancing prospects are conditional,
in part, on the credit rating of the lessee.
In connection with the purchase of its properties, the Company
requires sellers of such properties to perform environmental reviews. Management
believes, based on the results of such reviews, that the Company's properties
were in substantial compliance with Federal and state environmental statutes at
the time the properties were acquired. However, portions of certain properties
have been subject to some degree of contamination, principally in connection
with either leakage from underground storage tanks, surface spills from facility
activities or historical on-site activities. In most instances where
contamination has been identified, tenants are actively engaged in the
remediation process and addressing identified conditions. Tenants are generally
subject to environmental statutes and regulations regarding the discharge of
hazardous materials and any related remediation obligations. In addition, the
Company's leases generally require tenants to indemnify the Company from all
liabilities and losses related to the leased properties with provisions of such
indemnification specifically addressing environmental matters. The leases
generally include provisions which allow for periodic environmental assessments,
paid for by the tenant, and allow the Company to extend leases until such time
as a tenant has satisfied its environmental obligations. Certain of the leases
allow the Company to require financial assurances from tenants such as
performance bonds or letters of credit if the costs of remediating environmental
conditions, in the estimation of the Company, are in excess of specified
amounts. Accordingly, Management believes that the ultimate resolution of
environmental matters will not have a material adverse effect on the Company's
financial condition, liquidity or results of operations.
The Company's Advisor has responsibility for maintaining the
Company's books and records. An affiliate of the Advisor services the computer
systems used for maintaining such books and records. In its preliminary
assessment of Year 2000 issues the affiliate believes that such issues will not
have a material effect on the Company's operations; however, such assessment has
not been completed. The Company relies on its bank and transfer agent for
certain computer-related services and has initiated discussions to determine
whether they are addressing Year 2000 issues that may affect the Company.
In June 1997, the FASB issued Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in full set general
purpose financial statements. SFAS No. 130 is required to be adopted in 1998.
The Company is currently evaluating the impact, if any, of SFAS No. 130.
-4-
<PAGE> 41
REPORT of INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Corporate Property Associates 10 Incorporated
and Subsidiaries:
We have audited the accompanying consolidated balance sheets
of Corporate Property Associates 10 Incorporated and Subsidiaries as of December
31, 1996 and 1997, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. We have also audited the financial statement schedule
included on pages 21 to 23 of this Annual Report. These financial statements are
the responsibility of Carey Property Advisors, a Pennsylvania limited
partnership (the "Advisor"). 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 Advisor, 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 consolidated financial position of
Corporate Property Associates 10 Incorporated and Subsidiaries as of December
31, 1996 and 1997, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the Schedule of Real Estate and Accumulated Depreciation as of December
31, 1997, 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 31, 1998
-5-
<PAGE> 42
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
---- ----
ASSETS:
<S> <C> <C>
Real estate leased to others:
Accounted for under the
operating method
Land $ 17,970,759 $ 19,370,043
Buildings 77,452,437 81,728,919
------------ ------------
95,423,196 101,098,962
Accumulated depreciation 9,484,029 11,498,122
------------ ------------
85,939,167 89,600,840
Net investment in direct financing leases 23,563,052 16,758,447
------------ ------------
Real estate leased to others 109,502,219 106,359,287
Equity investment 11,016,708 11,657,088
Cash and cash equivalents 6,452,554 2,608,523
Other assets, net of accumulated amortization of
$182,123 in 1996 and $100,712 in 1997 and net of
reserve for uncollected rents of $107,223 in 1997 783,245 414,332
------------ ------------
Total assets $127,754,726 $121,039,230
============ ============
LIABILITIES:
Limited recourse mortgage notes payable $ 68,586,254 $ 61,536,571
Accrued interest payable 553,985 678,446
Accounts payable and accrued expenses 231,555 245,126
Accounts payable to affiliates 3,974,450 5,523,241
Deferred gain 3,423,043
Prepaid rental income 42,682
------------ ------------
Total liabilities 76,811,969 67,983,384
------------ ------------
Minority interest 4,048,527 3,870,416
------------ ------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; authorized,
40,000,000 shares; 7,217,294 shares issued
and outstanding 7,217 7,217
Additional paid-in capital 62,160,058 62,160,058
Dividends in excess of earnings (15,184,953) (12,893,753)
------------ ------------
46,982,322 49,273,522
Less, common stock in treasury at cost,
10,652 shares (88,092) (88,092)
------------ ------------
Total shareholders' equity 46,894,230 49,185,430
------------ ------------
Total liabilities and
shareholders' equity $127,754,726 $ 121,039,230
============ =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-6-
<PAGE> 43
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
CONSOLIDATED STATEMENTS of OPERATIONS
For the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $ 12,105,236 $ 11,812,148 $ 11,888,835
Interest income from direct financing leases 3,843,593 3,362,406 2,407,527
Other interest income 182,921 331,194 231,946
Other income 137,314
------------ ------------ ------------
16,131,750 15,505,748 14,665,622
------------ ------------ ------------
Expenses:
Interest 8,310,440 7,911,209 6,467,266
Depreciation 1,967,631 2,007,557 2,023,890
General and administrative 1,033,182 965,983 1,176,887
Property expenses 1,787,577 2,008,468 2,028,904
Amortization 66,262 56,329 71,215
Writedown to fair value 7,519,431 1,753,139
------------ ------------ ------------
20,684,523 14,702,685 11,768,162
------------ ------------ ------------
(Loss) income before minority interest,
equity income, gain on sale
and extraordinary items (4,552,773) 803,063 2,897,460
Minority interest in loss (income) 1,881,218 (583,283) (607,472)
------------ ------------ ------------
(Loss) income before equity income, gain
on sale and extraordinary items (2,671,555) 219,780 2,289,988
Income from equity investment 1,595,406 1,718,797 1,806,760
------------ ------------ ------------
(Loss) income before gains on sales and
extraordinary items (1,076,149) 1,938,577 4,096,748
Gain on sale of securities 285,987
Subordinated disposition fees (753,156)
Gain on sale of real estate 1,051,823 105,131
------------ ------------ ------------
(Loss) income before extraordinary items (1,076,149) 2,990,400 3,734,710
Extraordinary gains 3,850,490
------------ ------------ ------------
Net (loss) income $ (1,076,149) $ 2,990,400 $ 7,585,200
============ ============ ============
Basic (loss) earnings per common share:
(Loss) income before extraordinary item $ (.15) $ .41 $ .52
Extraordinary Item .53
------------ ------------ ------------
Net (loss) income per common share $ (.15) $ .41 $ 1.05
============ ============ ============
Weighted average shares outstanding 7,209,269 7,206,642 7,206,642
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-7-
<PAGE> 44
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
CONSOLIDATED STATEMENTS of SHAREHOLDERS' EQUITY
For the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
Additional Dividends
Common Paid-in In Excess Of Treasury
Stock Capital Earnings Stock Total
------ ----------- ------------ -------- -------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $7,217 $62,160,058 $ (5,142,209) $57,025,066
Dividends (5,975,481) (5,975,481)
Repurchase of 10,652 shares $(88,092) (88,092)
Net loss, 1995 (1,076,149) (1,076,149)
------ ----------- ------------ -------- -----------
Balance at December 31, 1995 7,217 62,160,058 (12,193,839) (88,092) 49,885,344
Dividends (5,981,514) (5,981,514)
Net income, 1996 2,990,400 2,990,400
------ ----------- ------------ -------- -----------
Balance at December 31, 1996 7,217 62,160,058 (15,184,953) (88,092) 46,894,230
Dividends (5,294,000) (5,294,000)
Net income, 1997 7,585,200 7,585,200
------ ----------- ------------ -------- ------------
Balance at December 31, 1997 $7,217 $62,160,058 $(12,893,753) $(88,092) $49,185,430
====== =========== ============ ======== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-8-
<PAGE> 45
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
CONSOLIDATED STATEMENTS of CASH FLOWS
For the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (1,076,149) $ 2,990,400 $ 7,585,200
Adjustments to reconcile net (loss)income
to net cash provided by operating activities:
Depreciation and amortization 2,033,893 2,063,886 2,095,105
Straight-line adjustments and other noncash
rent adjustments 51,219 104,180 74,577
Minority interest in (loss) income (1,881,218) 583,283 607,472
Distributions paid to minority interest (849,551) (795,196) (785,583)
Income from equity investment in excess of
dividends received (376,365) (584,527) (640,380)
Extraordinary gains (3,850,490)
Provision for uncollected rents 107,223
Writedown to fair value 7,519,431 1,753,139
Gain on sale of real estate and securities (1,051,823) (391,118)
Accrual of subordinated disposition fees 753,156
Net change in operating assets and liabilities 842,364 1,593,498 926,034
------------ ------------ ------------
Net cash provided by operating activities 6,263,624 6,656,840 6,481,196
------------ ------------ ------------
Cash flows from investing activities:
Purchases of real estate and other capitalized costs (12,091,080) (370,043)
Proceeds from sales of real estate and securities 13,733,825 1,480,259
Decrease in escrow funds 5,751,808
Issuance of note receivable in connection with sale (560,750)
Payments received on note receivable 450,000 110,750
------------ ------------ ------------
Net cash (used in) provided by
investing activities (6,339,272) 13,253,032 1,591,009
----------- ------------ ------------
Cash flows from financing activities:
Proceeds from mortgages 12,000,000 2,510,660
Advances on line of credit 2,480,000 1,600,000
Payments on mortgage principal (930,647) (1,141,876) (1,172,236)
Purchase of treasury stock (88,092)
Prepayments of mortgage payable and
advances on line of credit (6,000,000) (13,347,113) (7,050,000)
Deferred financing costs (48,209) (226,790)
Dividends paid (5,975,481) (5,981,514) (5,294,000)
------------ ------------- -------------
Net cash used in financing activities (1,042,429) (15,706,633) (11,916,236)
------------ ------------ ------------
Net (decrease) increase in cash
and cash equivalents (1,118,077) 4,203,239 (3,844,031)
Cash and cash equivalents, beginning of year 3,367,392 2,249,315 6,452,554
------------ ------------ ------------
Cash and cash equivalents, end of year $ 2,249,315 $ 6,452,554 $ 2,608,523
============ ============ ============
</TABLE>
(Continued)
The accompanying notes are an integral part of the consolidated financial
statements.
-9-
<PAGE> 46
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
CONSOLIDATED STATEMENTS of CASH FLOWS, Continued
For the years ended December 31, 1995, 1996 and 1997
Schedule of noncash investing and financing activity:
A. During the year ended December 31, 1996, the Company transferred a property
to an affiliate and assigned a mortgage note payable and interest thereon as
follows:
<TABLE>
<S> <C>
Mortgage note payable $ 6,300,000
Accrued interest payable 790,678
Land and building, net
of minority interest (3,667,635)
-----------
Deferred gain $ 3,423,043
===========
</TABLE>
B. During the year ended December 31, 1997, the Company recognized an
extraordinary gain which had been deferred (see A above)
The accompanying notes are an integral part of the consolidated financial
statements.
-10-
<PAGE> 47
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Basis of Consolidation:
The consolidated financial statements include the accounts of
Corporate Property Associates 10 Incorporated, its wholly-owned
subsidiaries, and majority interests in limited partnerships
(collectively, the "Company") in which the Company is general
partner with an affiliate, Corporate Property Associates 9, L.P.
("CPA(R):9") owning the minority interest as the limited partner.
All material inter-entity transactions have been eliminated.
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 dates of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. The most significant estimates relate to the assessment
of recoverability of real estate assets. 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.
The Company 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 Company's net
investment in the lease.
Operating method - Real estate is recorded at cost, rental
revenue is recognized on a straight-line basis over the
term of the leases and expenses (including depreciation)
are charged to operations as incurred.
The Company 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 fair value.
Substantially all of the Company'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.
Continued
-11-
<PAGE> 48
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
Depreciation:
Depreciation is computed using the straight-line method over the
estimated useful lives of the properties - 40 years.
Cash Equivalents:
The Company 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
Company's cash and cash equivalents at December 31, 1996 and 1997
were held in the custody of three financial institutions.
Equity Investment:
The Company's 23.7% interest in a real estate investment trust
("REIT") is accounted for under the equity method, i.e., at cost,
increased or decreased by the Company's share of earnings or
losses, less distributions.
Treasury Stock:
Treasury stock is recorded at cost.
Other Assets:
Included in other assets are deferred rental income and deferred
charges. Deferred rental income is the aggregate difference for
operating method leases between scheduled rents which vary during
the lease term and rent recognized on a straight-line basis.
Deferred charges are costs incurred in connection with mortgage
financing and refinancing and are amortized over the terms of the
mortgages.
Earnings Per Share:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per
Share" ("SFAS No. 128") which establishes standards for computing
and presenting earnings per share. The adoption of SFAS No. 128
had no impact on the Company's financial statements because the
Company has a simple capital structure, that is, one with only
common stock outstanding. As a result, the Company has presented
basic per-share amounts in the accompanying consolidated
statements of income.
Federal Income Taxes:
The Company qualifies and intends to continue to qualify as a REIT
under the Internal Revenue Code of 1986, and accordingly, is not
subject to Federal income taxes on amounts distributed to
shareholders provided it distributes at least 95% of its REIT
taxable income to its shareholders and meets certain other
conditions.
Continued
-12-
<PAGE> 49
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
Reclassification:
Certain 1995 and 1996 amounts have been reclassified to conform to
the 1997 financial statement presentation.
2. Organization and Offering:
The Company was formed on March 7, 1990 under the General
Corporation Law of Maryland for the purpose of engaging in the
business of investing in and owning industrial and commercial
real estate. Pursuant to a public offering, 7,217,294
($72,172,940) shares of common stock were issued by the Company
between September 14, 1990 and June 17, 1991. Subject to certain
restrictions and limitations, the business of the Company is
managed by Carey Property Advisors, a Pennsylvania limited
partnership (the "Advisor"). The Advisor will be entitled to
certain incentive fees in the event of the liquidation of the
Company, subject to certain conditions.
3. Transactions with Related Parties:
The Company's asset management and performance fees are both 1/2 of
1% per annum of Average Invested Assets, as defined in the
Prospectus of the Company. General and administrative expense
reimbursements consist primarily of the actual cost of personnel
needed in providing administrative services necessary to the
operation of the Company. Asset management fees were $779,829,
$858,793 and $746,250 in 1995, 1996 and 1997, respectively, with
performance fees for such periods in like amounts. General and
administrative expense reimbursements were $365,778, $378,221 and
$600,514 in 1995, 1996 and 1997, respectively. Effective January
1996, for the purpose of determining the asset management and
performance fees, Average Invested Assets are based on an
independent valuation of the Company's real estate assets.
The Advisor will be entitled to receive subordinated disposition
fees measured based upon the cumulative proceeds arising from the
sale of Company assets since the inception of the Company,
subject to certain conditions. Pursuant to the subordination
provisions of the advisory agreement, the disposition fees may be
paid only after the shareholders receive 100% of their initial
investment from the proceeds of asset sales and a cumulative
annual return of 6% since the inception of the Company. The
Affiliate's interest in such disposition fees amounts to $789,156
through December 31, 1997. Payment of such amount; however,
cannot be made until the subordination provisions are met. In
1997, Management concluded that payment of such disposition fees
is probable. Such amount is included in accounts payable to
affiliates in the accompanying consolidated financial statements
as of December 31, 1997.
Pursuant to the advisory agreement, the Advisor performs certain
services for the Company including the identification,
evaluation, negotiation, purchase and disposition of property,
the day-to-day management of the Company and the performance of
certain administrative services. If in any year when the
operating expenses of the Company exceed the 2%/25% Guidelines
(the greater of 2% of Average Invested Assets and 25% of net
income) as defined in the Prospectus, the Advisor will have an
obligation to reimburse the Company for such excess, subject to
certain conditions.
Continued
-13-
<PAGE> 50
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
In connection with the Company's acquisitions of real estate and
obtaining of mortgage financing, W.P. Carey & Co., Inc.
("W.P. Carey") received $800,000 and $54,000 in 1995 and 1996,
respectively, as development, structuring, financing and
acquisition fees. No such fees were paid in 1997.
For the years ended December 31, 1995, 1996 and 1997, fees
aggregating $32,855, $27,585 and $52,609, respectively, were
incurred for legal services provided by a firm in which the
Secretary, until July 1997, of the Company is a partner.
The Company is a participant in an agreement with W.P. Carey and
certain 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 Company's share of rental, occupancy and leasehold
improvement costs is based on adjusted gross revenues, as
defined. Expenses incurred in 1995, 1996 and 1997 were $151,744,
$132,207 and $115,002, respectively.
The Company's ownership interests in certain properties are jointly
held with affiliated entities. The Company's interests in jointly
held properties range from 20% to 81.46%. The Company's share of
its undivided interests in assets and liabilities relating to
tenants-in-common interests are accounted for on a proportional
basis.
4. Real Estate Leased to Others Accounted for Under the Operating Method:
Scheduled future minimum rents, exclusive of renewals, under
noncancellable operating leases amount to approximately
$10,872,000 in 1998, $10,873,000 in 1999, $10,879,000 in 2000;
$10,637,000 in 2001; $10,048,000 in 2002; and aggregate
approximately $102,610,000 through 2016.
Contingent rents were approximately $583,000, $586,000 and $995,000
in 1995, 1996 and 1997, respectively.
5. Net Investment in Direct Financing Leases:
Net investment in direct financing leases is summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------
1996 1997
---- ----
<S> <C> <C>
Minimum lease payments
receivable $60,627,524 $37,699,586
Unguaranteed residual value 23,644,330 16,886,552
----------- -----------
84,271,854 54,586,138
Less, Unearned income 60,708,802 37,827,691
----------- -----------
$23,563,052 $16,758,447
=========== ===========
</TABLE>
Scheduled future minimum rents, exclusive of renewals, under
noncancellable direct financing leases amount to approximately
$2,059,000 in each of the years 1998 through 2002 and aggregate
approximately $37,700,000 through 2017.
Continued
-14-
<PAGE> 51
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
The Company is committed under long-term ground leases that have
expiration dates ranging from June 2004 to January 2011 for
certain properties formerly occupied by Harvest Foods, Inc.
Future minimum ground lease rent obligations aggregate
approximately $1,592,000.
Contingent rents were approximately $132,000 in each of the years
1996 and 1997. No contingent rents were realized in 1995.
6. Mortgage Notes Payable:
Mortgage notes payable, all of which are limited recourse
obligations, are collateralized by the assignment of various
leases and by real property with a carrying amount of
approximately $106,431,000, before accumulated depreciation. As
of December 31, 1997, mortgage notes payable have interest rates
varying from 8.75% to 13% per annum and mature between 1999 and
2013.
Scheduled principal payments, including mortgages subject to
acceleration, during each of the next five years following
December 31, 1997 and thereafter are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1998 $ 2,787,865
1999 9,745,142
2000 22,890,041
2001 8,161,314
2002 995,134
Thereafter 16,957,075
-----------
Total $61,536,571
===========
</TABLE>
Interest paid was $8,309,308, $8,208,210 and $6,342,805, in 1995,
1996 and 1997, respectively.
The Company's revolving credit agreement matured in 1997.
7. Dividends:
Dividends paid to shareholders consist of ordinary income, capital
gains, return of capital or a combination thereof for income tax
purposes. For the years ended December 31, 1995, 1996 and 1997,
dividends paid per share reported for tax purposes were as
follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Ordinary income $0.47 $0.49 $ .59
Capital gains 0.06 .03
Return of capital 0.30 0.34 .11
----- ----- -----
$0.83 $0.83 $0.73
===== ===== =====
</TABLE>
A dividend of $.1761 per share for the quarter ended December 31, 1997
was declared and paid in January 1998.
Continued
-15-
<PAGE> 52
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. Industry Segment Information:
The Company's operations consist of the investment in and the
leasing of industrial and commercial real estate. The financial
reporting sources of leasing revenues are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Per Statements of operations:
Rental income from operating leases $12,105,236 $11,812,148 $11,888,835
Interest income from direct financing leases 3,843,593 3,362,406 2,407,527
Adjustments:
Rental income attributable to
minority interests (2,129,058) (1,917,313) (1,927,963)
Share of interest income from equity
investment's direct financing lease 4,330,176 4,342,921 4,387,948
----------- ----------- -----------
$18,149,947 $17,600,162 $16,756,347
=========== =========== ===========
</TABLE>
For the years ended December 31, 1995, 1996 and 1997, the Company
earned its share of net leasing revenues from its direct and
indirect ownership of real estate from the following lease
obligors:
<TABLE>
<CAPTION>
1995 % 1996 % 1997 %
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Marriott International, Inc. (1) $ 4,330,176 24% $ 4,342,921 25% $ 4,387,948 26%
Information Resources
Incorporated (2) 2,786,293 16 2,916,014 17 2,916,014 17
Titan Corporation (2) 2,019,033 11 2,019,033 11 2,065,826 12
New WAI, L.P./
Warehouse Associates 1,442,303 8 1,483,640 8 1,452,530 9
EnviroWorks, Inc. 407,505 2 1,387,757 8 1,387,757 8
Wal-Mart Stores, Inc. 976,287 6 994,433 6 970,948 6
Kmart Corporation 785,314 4 823,301 5 860,465 5
Childtime Childcare Inc. 742,458 4 742,458 4 800,205 5
Neodata Corporation 555,826 3 574,435 3 587,728 4
CalComp Technology, Inc. 440,902 2 381,412 2 443,024 3
Harvest Foods, Inc. (3) 1,238,403 7 1,239,206 7 302,044 2
US West Communications, Inc. 222,600 1 222,600 1 222,600 1
Kroger Co. (3) 164,555 1
Safeway Stores Incorporated 393,750 2 167,212 1 141,750 1
Affiliated Foods Southwest, Inc. (3) 51,953
Best Buy Co., Inc. 315,013 2 117,418 1
Xerox Corporation (2) 590,069 3
Empire of America Realty
Credit Corp. 904,015 5 188,322 1
Other 1,000
----------- ---- ----------- ---- ----------- ----
$18,149,947 100% $17,600,162 100% $16,756,347 100%
=========== ==== =========== ==== =========== ====
</TABLE>
(1) Represents the Company's share of revenue from its 23.7% equity
interest in Marcourt Investments Incorporated.
(2) Net of the minority interest attributable to CPA(R):9.
(3) Net of ground lease expenses of approximately $158,000 for each of the
years 1995 through 1997.
Continued
-16-
<PAGE> 53
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
9. Equity Investment in Marcourt Investments Incorporated:
The Company owns an approximate 23.7% interest in Marcourt
Investments Incorporated ("Marcourt") which, pursuant to a master
lease, net leases 13 hotel properties to a wholly-owned
subsidiary of Marriott International, Inc. Summarized audited
financial information of Marcourt is as follows:
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Assets $149,910 $149,694 $149,413
Liabilities 108,876 106,002 102,826
Shareholders' equity 41,034 43,692 46,587
Revenues 18,300 18,549 18,650
Interest and other expenses 11,370 11,097 10,827
Net income 6,930 7,452 7,823
Dividends paid 5,151 4,793 4,929
Cash provided from operating activities 7,114 7,482 7,839
</TABLE>
10. Property in Stamford, Connecticut:
In January 1991, the Company and CPA(R):9 formed a limited
partnership with a 68.085% general partnership interest and a
31.915% limited partnership interest, respectively, Hope Street
Connecticut, which assumed an existing net lease, as lessor, with
Xerox Corporation ("Xerox"), as lessee. The Xerox lease had an
initial term through August 31, 1995 and provided for two
five-year renewals at Xerox's option. A limited recourse mortgage
loan assumed in connection with the purchase was scheduled to
mature on September 1, 1995 with a balloon payment of $6,300,000
due at that time.
In August 1995, the initial term ended and Xerox vacated the
property. The Company was unsuccessful in its efforts to remarket
the property and find a new lessee even at a substantially lower
annual rental. Based on the then current conditions in the
Stamford market, Management concluded that the fair value of the
property was less than the outstanding balance of the mortgage
loan. The Company attempted to negotiate with the lender and
proposed various alternatives. The lender did not agree to any
these proposals. Given these circumstances, in 1995, the Company
wrote down the property to its estimated fair value of
$2,490,000.
In December 1996, the Boards of Directors of the Corporate General
Partner of CPA(R):9 and the Company approved a transaction that
allowed the Company to transfer the Company's entire general
partnership interest in the limited partnership to CPA(R):9 and a
wholly-owned subsidiary of CPA(R):9 for nominal consideration.
For financial reporting purposes, a gain of $3,423,043
Continued
-17-
<PAGE> 54
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
resulting from the transfer of liabilities in excess of assets
was deferred pending the disposition of the Stamford property by
CPA(R):9. For tax reporting purposes, a capital loss was
recognized on the disposition of the general partnership interest
in Hope St. in 1996. In September 1997, the lender completed a
foreclosure action against Hope Street at which time CPA(R):9's
ownership of the property was transferred to the lender in
satisfaction of the mortgage debt, and, as a result, the
conditions requiring the Company's deferral of the gain were
eliminated. Accordingly, the Company has recognized an
extraordinary gain in 1997 of $3,423,043.
11. Gains on Sale of Real Estate and Securities:
In December 1991, the Company and CIP(TM), purchased three
supermarkets leased to Safeway Stores Incorporated ("Safeway") as
tenants in-common, each with 50% undivided ownership interests.
In 1996, the Company and CIP(TM) sold Safeway properties in
Glendale, Arizona and Escondido, California. On January 26, 1996,
the Glendale store was sold for $1,950,000. On February 15, 1996,
the Escondido property was sold for $3,450,000. A net loss of
$11,017 was recognized on the sales at that time. The final
installment on the promissory note, was received in January 1997.
In June 1991, the Company purchased land and an office building
occupied by Empire of America Realty Credit Corp. ("Empire")
located in Buffalo, New York. In November 1995, the Company
declared that Empire was in default under the lease as Empire had
previously notified the Company of its intention to vacate the
property. The lease required Empire to make an irrevocable
purchase offer in the event of a default and, in February 1996,
the Company accepted Empire's $8,500,000 purchase offer. In
connection with the sale of the property to Empire on March 15,
1996, the Company recognized a gain, net of transaction costs, of
$558,665.
In October 1992, the Company purchased land and a retail store in
Charlotte, North Carolina, subject to an existing net lease with
SportsTown, Inc. The lease was subsequently assumed by Best Buy
Co., Inc. On May 16, 1996, the Company sold the property for
$3,250,000 and recognized a gain of $504,175 on the sale.
During 1997, the Company sold three properties formerly leased to
Harvest Foods, Inc. ("Harvest") and recognized a gain on sales of
$105,131 (see Note 12).
In March 1995, the Company entered into a net lease with EnviroWorks
Inc. ("EnviroWorks") at which time it received warrants to
purchase 577,000 shares of EnviroWork's common stock at $1.50 per
share. In connection with consenting to the acquisition of
EnviroWork's parent company in December 1997 by Fiskars, Inc.,
the Company exercised the warrants and simultaneously sold the
shares for $539,867 realizing a gain on sale of $285,987. As of
December 31, 1997, $253,880 of the sales proceeds remained in
escrow, and will be released upon satisfaction of certain
conditions under the acquisition agreement. Such amount has not
been included in the gain for 1997.
Continued
-18-
<PAGE> 55
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
12. Harvest Foods, Inc.:
In February 1992, the Company and CIP(TM) purchased as
tenants-in-common, each with undivided 50% ownership interests,
13 supermarkets and two office buildings and entered into a
master lease with Harvest as lessee. In connection with the
purchase, the Company and CIP(TM) each obtained $6,132,500 of
limited recourse mortgage financing from two lenders, a first
priority limited recourse mortgage loan of $4,632,500 and a
limited recourse mortgage loan of $1,500,000 from an affiliate of
Harvest.
In June 1996, Harvest filed a voluntary bankruptcy petition. In
March 1997, the Bankruptcy Court approved Harvest's motion to
terminate the master lease. Under its ruling, the Bankruptcy
Court allowed the Company and CIP(TM) to establish its unsecured
claim for lease rejection damages at $10,000,000 and ordered
Harvest to pay $150,000 in full satisfaction and settlement of
any post-petition obligation for real estate taxes. The Company's
share of the settlement payment received is included in other
income in the accompanying consolidated financial statements.
Harvest subsequently vacated the properties. The Company's share
of annual rent under the Harvest lease was the sum of (i)
$607,806 and (ii) an amount equal to the Company's share of debt
service on the two loans. Based on the Company's expectation at
that time that future cash flow from the properties would be
reduced, Management concluded that there had been an impairment
to the value of the properties. Based on a writedown of the
properties to an estimated fair value of $8,250,000, the Company
incurred a charge of $1,753,139 in 1996.
In March 1997, the Company and CIP(TM) entered into net leases with
The Kroger Co. for two supermarkets in Conway and North Little
Rock, Arkansas and with Affiliated Foods Southwest, Inc. for
three stores in Hope and Little Rock, Arkansas.
In June 1997, the Company and CIP(TM) entered into a transaction
whereby each purchased a 50% participation as a holder of the
first priority mortgage loan. For financial reporting purposes,
the purchase of the participation has been recorded as a mortgage
prepayment. The mortgage loan, which had an outstanding balance
of $8,554,894, was satisfied with a payment of $7,700,000 (of
which the Company's share was $4,277,448 and $3,850,000,
respectively). In connection with such prepayment, the Company
recognized an extraordinary gain on the extinguishment of debt of
$427,448.
The Company and CIP(TM) have entered into discussions with the
holder of a subordinated mortgage loan of $3,000,000 (of which
the Company's share is $1,500,000) in an attempt to reach a
settlement for the satisfaction of the loan. The holder of the
subordinated mortgage loan is an affiliate of Harvest, and
because of provisions in the subordinated mortgage, the Company
and CIP(TM) have exercised their right to defer debt service
payments. As a result of the termination of the Harvest lease,
debt service payments on the subordinated mortgage loan may be
deferred until the maturity date of the loan which as a result of
Harvest's lease default has been extended to December 2006.
In September 1997, the Company and CIP(TM) sold three properties at
an aggregate price of $2,400,000 (of which the Company's share
was $1,200,000). In connection with the sales, the Company
recognized a gain of $105,131. The Company and CIP(TM) are
currently evaluating various offers for the lease or purchase of
the vacated properties and are continuing their remarketing
efforts on the former Harvest properties.
Continued
-19-
<PAGE> 56
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. Disclosures About Fair Value of Financial Instruments:
The carrying amounts of cash, accounts receivable, accounts payable
and accrued expenses approximate fair value because of the short
maturity of these items.
The Company estimates that the fair value of mortgage notes payable
at December 31, 1996 and 1997 was approximately $70,110,000 and
$63,061,000, respectively. The fair value of debt instruments was
evaluated using a discounted cash flow model with discount rates
that take into account the credit of the tenants and interest
rate risk.
In conjunction with executing several of its leases, the Company was
granted warrants to purchase common stock or limited partnership
units of the lessee or lease guarantor. To the extent that the
lessee is not a publicly traded entity, the warrants are judged
at the time of issuance to be speculative in nature and a nominal
cost basis is attributed to them. The Company believes it is not
practicable to estimate the fair value of warrants for closely
held entities. At December 31, 1996 and 1997, the Company had
warrants to purchase 81,460 shares of stock of the Titan
Corporation ("Titan"), a publicly traded company, at $5.30 per
share, with such warrants expiring on July 11, 1998. The quoted
prices of Titan's common stock as of December 31, 1996 and 1997,
were $3.25 and $6.25, respectively. The Titan warrants have no
ready market and are carried on the books at a nominal value.
14. Accounting Pronouncements:
In June 1997, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses,
gains and losses) in full set general purpose financial
statements. SFAS No. 130 is required to be adopted in 1998.
The Company is currently evaluating the impact, if any, of
SFAS No. 130.
-20-
<PAGE> 57
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
SCHEDULE of REAL ESTATE and ACCUMULATED DEPRECIATION
as of December 31, 1997
<TABLE>
<CAPTION>
Initial Cost to Costs
Company Capitalized
----------------------- Subsequent to Decrease in
Description Encumbrances Land Buildings Acquisition(a) Net Investments(b)
----------- ------------ ---- --------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
Operating Method:
Office/repair facility
leased to The US West
Communications, Inc. $ 498,557 $ 1,563,299 $ 45,465
Office buildings leased
to Information
Resources, Inc. $22,350,898 4,992,173 26,857,893 3,792,980
Retail stores leased
to Kmart Corporation 2,896,663 4,308,345 821,510
Land leased to Childtime
Childcare, Inc. 1,011,353 2,279,146 957
Office building leased
to Titan Corporation 10,349,393 3,906,546 15,883,454 17,948
Retail stores leased to
Wal-Mart Stores, Inc. 7,034,363 807,423 6,864,802 87,746
Supermarket leased
to Safeway Stores
Incorporated 334,595 943,790 14,621
Office/manufacturing
facilities leased to
CalComp Technology, Inc. 1,663,332 751,453 2,536,047
Manufacturing/warehouse/
office facilities leased
to Neodata Services, Inc. 2,683,032 379,917 497,114 3,159,798
Manufacturing/distribution
facility leased to
EnviroWorks, Inc. 5,584,259 1,045,856 10,135,098
Supermarket/office
buildings formerly leased
to Harvest Foods, Inc. 1,010,000 925,600 4,859,400 1,341 (1,225,704)
Supermarkets leased
to Affiliated Foods
Southwest, Inc. 247,000 226,320 1,188,180 328 (299,699)
---------- ----------- ----------- ----------- -----------
$51,933,630 $19,044,249 $65,502,324 $18,077,792 $(1,525,403)
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Life on which
Depreciation
Gross Amount at which Carried in Latest
at Close of Period (c)(d) Statement of
------------------------------------------ Accumulated Operations
Description Land Buildings Total Depreciation(d) Date Acquired is Computed
----------- ---- --------- ----- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Operating Method:
Office/repair facility
leased to The
US West
Communications, Inc. $ 509,550 $ 1,597,771 $ 2,107,321 $ 291,177 September 18, 1990 40 yrs.
Office buildings leased
to Information
Resources, Inc. 4,992,731 30,650,315 35,643,046 5,329,421 September 28, 1990 40 yrs.
Retail stores leased
to Kmart Corporation 2,944,072 5,082,446 8,026,518 823,335 October 19 & 29, 1990 40 yrs.
Land leased to Childtime
Childcare, Inc. 2,280,103 2,280,103 January 4, 1991 N/A
Office building leased
to Titan Corporation 3,910,145 15,897,803 19,807,948 2,566,739 July 9, 1991 40 yrs.
Retail stores leased to
Wal-Mart Stores, Inc. 816,658 6,943,313 7,759,971 1,048,713 December 19, 1991 40 yrs.
Supermarket leased
to Safeway Stores
Incorporated 340,274 952,732 1,293,006 143,899 December 19, 1991 40 yrs.
Office/manufacturing
facilities leased to
CalComp Technology, Inc. 751,453 2,536,047 3,287,500 356,632 May 28, 1992 40 yrs.
Manufacturing/warehouse/
office facilities leased
to Neodata Services, Inc. 379,917 3,656,912 4,036,829 279,768 October 1, 1992 40 yrs.
Manufacturing/distribution
facility leased to
EnviroWorks, Inc. 1,045,856 10,135,098 11,180,954 580,656 March 22, 1995 40 yrs.
Supermarket/office
buildings formerly leased
to Harvest Foods, Inc. 1,124,364 3,436,273 4,560,637 62,498 February 21, 1992 40 yrs.
Supermarkets leased
to Affiliated Foods
Southwest, Inc. 274,920 840,209 1,115,129 15,284 February 21, 1992 40 yrs.
----------- ------------ ------------ -----------
$19,370,043 $ 81,728,919 $101,098,962 $11,498,122
=========== ============ ============ ===========
</TABLE>
See accompanying notes to Schedule.
-21-
<PAGE> 58
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
SCHEDULE of REAL ESTATE and ACCUMULATED DEPRECIATION
as of December 31, 1997
<TABLE>
<CAPTION>
Initial Cost to Costs Gross Amount at which Carried
Company Capitalized Decrease In at Close of Period (c)
------------------------ Subsequent to Net -----------------------------
Description Encumbrances Land Buildings Acquisition (a) Investment (b) Total
----------- ------------ ---- --------- --------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Direct Financing Method:
Child daycare centers
leased to Childtime
Childcare, Inc. $ 1,455,361 $ 3,284,644 $ 1,379 $ 3,286,023
Office/warehouse
facility leased
to New WAI L.P./
Warehouse Associates 7,904,580 $ 307,745 10,442,255 1,277,029 12,027,029
Supermarket leased
to Kroger Company. 243,000 251,760 1,321,740 $(128,105) 1,445,395
----------- ---------- ----------- ----------- --------- -----------
$ 9,602,941 $ 559,505 $15,048,639 $ 1,278,408 $(128,105) $16,758,447
=========== ========== =========== =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Description Date Acquired
----------- -------------
<S> <C>
Direct Financing Method:
Child daycare centers
leased to Childtime
Childcare, Inc. January 4, 1991
Office/warehouse
facility leased
to New WAI L.P./
Warehouse Associates March 27, 1991
Supermarket leased
to Kroger Company. February 21, 1992
</TABLE>
See accompanying notes to Schedule.
-22-
<PAGE> 59
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to SCHEDULE of REAL ESTATE
and ACCUMULATED DEPRECIATION
(a) Consists of improvements subsequent to acquisition and acquisition
costs including legal fees, appraisal fees, title costs and other
related professional fees.
(b) The decrease in net investment is due to writedowns to fair value.
(c) At December 31, 1997, the aggregate cost of real estate owned by the
Company and its subsidiaries for Federal income tax purposes is
$64,156,194.
Reconciliation of Real Estate Accounted
for Under the Operating Method
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
-------------- -------------
<S> <C> <C>
Balance at beginning
of year $ 100,100,266 $ 95,423,196
Additions 370,043
Dispositions (5,047,113) (1,062,938)
Reclassification from investment in
direct financing lease 6,738,704
------------- -------------
Balance at close of
year $ 95,423,196 $ 101,098,962
============= =============
</TABLE>
Reconciliation of Accumulated Depreciation
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------ ------------
<S> <C> <C>
Balance at beginning
of year $ 8,686,779 $ 9,484,029
Depreciation expense 2,007,557 2,023,890
Dispositions (1,210,307) (9,797)
------------ ------------
Balance at close of
year $ 9,484,029 $ 11,498,122
============ ============
</TABLE>
-23-
<PAGE> 60
PROPERTIES
<TABLE>
<CAPTION>
NAME OF LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
- -------------- ---------------- -------- -----------------
<S> <C> <C> <C>
US WEST Office/Repair Scottsdale, Ownership of land
COMMUNICATIONS, Facility Arizona and building
INC.
INFORMATION Office Buildings Chicago, Ownership of a 66.67%
RESOURCES INC. Illinois interest in a limited
partnership owning land
and buildings (1)
KMART Retail Stores Denton, Texas; Ownership of land and
CORPORATION - 3 locations Drayton Plains, buildings
Michigan; and
Citrus Heights,
California
CHILDTIME Child Daycare Westland - 2 and Ownership of a 66.07%
CHILDCARE, INC. Centers Sterling Heights, interest in land and
- 12 locations Michigan; Chandler buildings (1)
and Tuscon, Arizona;
Duncanville, Carrollton
and Lewisville, Texas;
Chino, Garden Grove,
Alhambra and
Tustin/Santa Ana,
California
NEW WAI, L.P./ Office/Warehouse Lima, Ohio Ownership of land and
WAREHOUSE Facility buildings (1)
ASSOCIATES
TITAN CORPORATION Office Building San Diego, Ownership of an 81.46%
California interest in a Limited
Partnership owning land
and building (1)
</TABLE>
-24-
<PAGE> 61
<TABLE>
<CAPTION>
NAME OF LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
- -------------- ---------------- -------- -----------------
<S> <C> <C> <C>
WAL-MART STORES, INC. Retail Stores Center, Groves, Ownership of a 50%
- 6 locations Silsbee and Vidor, interest in land
Texas; and buildings (1)
Weatherford,
Oklahoma;
Fort Smith,
Arkansas
SAFEWAY STORES Supermarket Broken Arrow, Ownership of a 50%
INCORPORATED Oklahoma interest in land
and buildings
MARRIOTT Hotels Irvine, Sacramento, Ownership of a 23.67%
INTERNATIONAL, INC. - 13 locations and San Diego, interest in a real estate
California; investment trust owning land
Orlando - 2, and buildings (1)
Florida;
Des Plains,
Illinois;
Indianapolis,
Indiana;
Louisville,
Kentucky;
Linthicum,
Maryland;
Las Vegas, Nevada;
Newark, New Jersey;
Albuquerque,
New Mexico;
Spokane,
Washington
Properties Retail Stores Little Rock - 2, Ownership of a 50%
formerly leased to and Office Hot Springs, interest in land
HARVEST FOODS, Buildings - 7 locations Texarakana and and buildings
INCORPORATED Jonesboro, Arkansas; except as noted (1)(2)
Ruston, Louisiana;
Clarksdale,
Mississippi
KROGER CO. Retail Stores North Little Rock
- 2 locations and Conway, Arkansas Ownership of a 50%
interest in land
and buildings
except as noted (1)(2)
AFFILIATED FOODS Retail Stores Little Rock - 2, and Ownership of a 50%
SOUTHWEST, INC. - 3 locations Hope, Arkansas interest in land
and buildings
except as noted (1)(2)
CALCOMP TECH- Office/ Austin, Ownership of a 50%
NOLOGY, INC. Manufacturing Texas interest in land and
Facility buildings (1)
</TABLE>
-25-
<PAGE> 62
<TABLE>
<CAPTION>
NAME OF LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
- -------------- ---------------- -------- -----------------
<S> <C> <C> <C>
NEODATA Distribution/ Louisville, Ownership of a 20%
CORPORATION Warehouse/Office Colorado interest in land and
Facility buildings (1)
ENVIROWORKS, INC. Manufacturing/ Apopka, Florida Ownership of land
Distribution Facility and buildings (1)
</TABLE>
(1) These properties are encumbered by mortgage notes payable.
(2) Ownership of buildings with ground leases of land for one property in
Little Rock, Arkansas and properties in Hot Springs, North Little Rock
and Jonesboro, Arkansas.
-26-
<PAGE> 63
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Except for limited or sporadic transactions, there is no
established public trading market for the Shares of the Company. As of December
31, 1997, there were 4,475 holders of record of the Shares of the Company.
The Company is required to distribute annually its
Distributable REIT Taxable Income, as defined in the Prospectus, to maintain its
status as a REIT.
In accordance with the Prospectus of the Company, dividends
will be paid quarterly regardless of the frequency with which such dividends are
declared. The following shows the frequency and amount of dividends paid since
1994.
<TABLE>
<CAPTION>
Cash Dividends Paid Per Share
-----------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
First quarter $.20675 $.20750 $.20750
Second quarter .20700 .20750 .17550
Third quarter .20725 .20750 .17570
Fourth quarter .20750 .20750 .17590
------- ------- -------
$.82850 $.83000 $.73460
======= ======= =======
</TABLE>
REPORT ON FORM 10-K
The Advisor will supply to any shareholder, upon written
request and without charge, a copy of the Annual Report on Form 10-K for the
year ended December 31, 1997 as filed with the Securities and Exchange
Commission.
-27-
<PAGE> 64
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
3.1 Articles of Incorporation of Registrant. Exhibit 3(A) to Regis-
tration Statement (Form
S-11) No. 33-514
3.2 Bylaws of Registrant. Exhibit 3(B) to Regis-
tration Statement (Form
S-11) No. 33-514
10.1 Advisory Agreement between Registrant and Exhibit 10(B) to
Carey Property Advisors. Registration Statement
(Form S-11) No. 33-514
10.2 Contract of Sale between Registrant Filed as Exhibit 10(E)(1)
and H MA Properties Co., L.P. ("H MA") to Registrant's Post
dated August 24, 1990. Effective Amendment No. 1
to Form S-11
10.3 Special Warranty Deed from H MA to Filed as Exhibit 10(E)(2)
Registrant dated September 18, 1990. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.4 Bill of Sale from H MA to Registrant Filed as Exhibit 10(E)(3)
dated September 18, 1990. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.5 Assignment and Assumption of Lease Agreement Filed as Exhibit 10(E)(4)
(between BetaWest Properties Inc. and The Mountain to Registrant's Post
States Telephone and Telegraph Company ("Mountain Effective Amendment No. 1
Bell") dated December 16, 1986) from H MA to to Form S-11
Registrant dated September 18, 1990.
10.6 Agreement of Exchange and Sale ("Texas Agreement") Filed as Exhibit 10(F)(1)
by and among Joanne Talenfeld Rubinoff, both to Registrant's Post
individually and as Trustee of the Murray A. Effective Amendment No. 1
Talenfeld Residuary Trust (collectively "Denton Seller"), to Form S-11
Registrant and the E.H. Talenfeld Real Estate
Company ("Agent") dated September 28, 1990.
10.7 Agreement of Sale between D/S St. Lucis Joint Filed as Exhibit 10(F)(2)
Venture and Registrant ("Florida Agreement") to Registrant's Post
dated October 8, 1990. Effective Amendment No. 1
to Form S-11
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.8 Assignment of Florida Agreement from Filed as Exhibit 10(F)(3)
Registrant to Seller dated October 8, 1990. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.9 Assignment of Texas Agreement from Registrant Filed as Exhibit 10(F)(4)
to Denton (TX) QRS 10-2, Inc. ("Denton QRS"), a to Registrant's Post
Texas corporation and wholly-owned subsidiary of Effective Amendment No. 1
Registrant, dated October 19, 1990. to Form S-11
10.10 Purchase and Sale Agreement between HRE Properties Filed as Exhibit 10(G)(1)
("HRE") and Registrant regarding properties in to Registrant's Post
Citrus Heights, California (the "K mart California Effective Amendment No. 1
Property) and Drayton Plains, Michigan (the "K mart to Form S-11
Michigan Property").
10.11 Grant Deed from HRE to Registrant for the Filed as Exhibit 10(G)(2)
K mart California Property. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.12 Deed from HRE to Registrant for the Filed as Exhibit 10(G)(3)
K mart Michigan Property. to Registrant's Post
Effective Amendment No. 1
to Form S-11
10.13 Assumption and Assignment Agreement between Filed as Exhibit 10(G)(4)
HRE and Registrant regarding the Lease Agreement to Registrant's Post
between HRE and S.S. Kresge Company (n/k/a K mart Effective Amendment No. 1
Corporation) ("K mart") for property located in to Form S-11
Citrus Heights, California (the "K mart
California Lease") dated March 16, 1976.
10.14 Assumption and Assignment Agreement between Filed as Exhibit 10(G)(5)
HRE and Registrant regarding the Lease Agreement to Registrant's Post
between HRE and S.S. Kresge Company for property Effective Amendment No. 1
located in Drayton Plains, Michigan (the "K mart to Form S-11
Michigan Lease") dated March 16, 1976.
10.15 Assignment of Leases and Rents of the K mart Filed as Exhibit 10(G)(6)
California Property from Registrant to New to Registrant's Post
England Mutual Life Insurance Company ("New Effective Amendment No. 1
England"). to Form S-11
10.16 Assignment of Leases and Rents of the K mart Filed as Exhibit 10(G)(7)
Michigan Property from Registrant to New England. to Registrant's Post
Effective Amendment No. 1
to Form S-11
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.17 Guaranty of Performance dated September 27, 1990 Filed as Exhibit 10(H)(1)
by Registrant, as Guarantor, to the Mutual to Registrant's Post
Life Insurance Company of New York ("MONY"). Effective Amendment No. 1
to Form S-11
10.18 General Warranty Deed from Gerber Children's Filed as Exhibit 10(I)(1)
Centers Inc. ("Gerber") to Registrant and to Registrant's Post
Corporate Property Associates 9, L.P. ("CPA(R):9") Effective Amendment No. 2
for the Chandler, Arizona Gerber property. to Form S-11
10.19 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(2)
Registrant and CPA(R):9 for the Tucson, to Registrant's Post
Arizona Gerber property. Effective Amendment No. 2
to Form S-11
10.20 Corporation Grant from Gerber to Filed as Exhibit 10(I)(3)
Registrant and CPA(R):9 for the Alhambra, to Registrant's Post
California Gerber property. Effective Amendment No. 2
to Form S-11
10.21 Corporation Grant from Gerber to Filed as Exhibit 10(I)(4)
Registrant and CPA(R):9 for the Chino, to Registrant's Post
California Gerber property. Effective Amendment No. 2
to Form S-11
10.22 Corporation Grant from Gerber to Filed as Exhibit 10(I)(5)
Registrant and CPA(R):9 for the Garden to Registrant's Post
Grove, California Gerber property. Effective Amendment No. 2
to Form S-11
10.23 Corporation Grant from Gerber to Filed as Exhibit 10(I)(6)
Registrant and CPA(R):9 for the Tustin/ to Registrant's Post
Santa Ana, California Gerber property. Effective Amendment No. 2
to Form S-11
10.24 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(7)
Registrant and CPA(R):9 for the Sterling to Registrant's Post
Heights, Michigan Gerber property. Effective Amendment No. 2
to Form S-11
10.25 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(8)
Registrant and CPA(R):9 for the Westland to Registrant's Post
Michigan-I Gerber property. Effective Amendment No. 2
to Form S-11
10.26 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(9)
Registrant and CPA(R):9 for the Westland to Registrant's Post
Michigan-II Gerber property. Effective Amendment No. 2
to Form S-11
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.27 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(10)
Registrant and CPA(R):9 for the Carrollton, to Registrant's Post
Texas Gerber property. Effective Amendment No. 2
to Form S-11
10.28 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(11)
Registrant and CPA(R):9 for the Duncanville, to Registrant's Post
Texas Gerber property. Effective Amendment No. 2
to Form S-11
10.29 General Warranty Deed from Gerber to Filed as Exhibit 10(I)(12)
Registrant and CPA(R):9 for the Lewisville, to Registrant's Post
Texas Gerber property. Effective Amendment No. 2
to Form S-11
10.30 Bill of Sale from Gerber to Registrant Filed as Exhibit 10(I)(13)
and CPA(R):9. to Registrant's Post
Effective Amendment No. 2
to Form S-11
10.31 Co-Tenancy Agreement between Registrant Filed as Exhibit 10(I)(14)
and CPA(R):9 as tenants-in-common on to Registrant's Post
properties leased to Gerber. Effective Amendment No. 2
to Form S-11
10.32 Lease Agreement between Registrant and Filed as Exhibit 10(I)(15)
CPA(R):9, as landlord, and Gerber, as Tenant. to Registrant's Post
Effective Amendment No. 2
to Form S-11
10.33 Real Estate Note from Registrant and CPA(R):9 Filed as Exhibit 10(I)(16)
to Pan-American Life Insurance Company to Registrant's Post
("Pan American"). Effective Amendment No. 2
to Form S-11
10.34 Master Mortgage, Deed of Trust, Security Filed as Exhibit 10(I)(17)
Agreement and Assignment of Leases, Rents and to Registrant's Post
Profits by and among Registrant, CPA(R):9, Theodore Effective Amendment No. 2
Tumminello, Chicago Title Agency of Arizona, to Form S-11
Chicago Title Company and Pan American.
10.35 Lease Agreement dated July 9, 1991 by Filed as Exhibit 10.1
and between Torrey Pines Limited to Registrant's Form 8-K
Partnership, a California limited dated July 25, 1991
partnership ("Torrey Pines"), as Landlord
and The Titan Corporation ("Titan"), as Tenant.
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.36 $11,700,000.00 Promissory Note dated July 9, 1991 Filed as Exhibit 10.2
from Torrey Pines as Borrower to The Northwestern to Registrant's Form 8-K
Mutual Life Insurance Company ("Northwestern"), as Lender. dated July 25, 1991
10.37 Deed of Trust and Security Agreement, dated July 9, 1991 Filed as Exhibit 10.3
between Torrey Pines and Northwestern. to Registrant's Form 8-K
dated July 25, 1991
10.38 Absolute Assignment of Leases and Rents, dated July 9, Filed as Exhibit 10.4
1991 from Torrey Pines as Assignor to Northwestern as to Registrant's Form 8-K
Assignee. dated July 25, 1991
10.39 Indemnity Agreement dated July 9, 1991 between Torrey Filed as Exhibit 10.5
Pines, CPA(R):9 and Registrant. to Registrant's Form 8-K
dated July 25, 1991
10.40 Amended Advisory Agreement dated September 14, 1990. Filed as Exhibit 10(B)(2)
to Registrant's Post
Effective Amendment No. 3
to Form S-11
10.41 Lease between Marcourt Investments Filed as Exhibit 10.1
Incorporated ("Marcourt") and CTYD to Registrant's Form 8-K
III Corporation ("CTYD"). dated February 24, 1992
10.42 Series A-2 9.94% Secured Note from Marcourt to the Filed as Exhibit 10.2
registered owner of note (Various Series A-1 9.94% Notes to Registrant's Form 8-K
in an aggregate amount of $38,750,000, substantially in the dated February 24, 1992
form of the Series A-1 9.94% Note attached, were issued by
Marcourt in connection with the Financing).
10.43 Series A-2 11.18% Secured Note from Marcourt to the Filed as Exhibit 10.3
registered owner of the note (Various notes in an to Registrant's Form 8-K
aggregate amount of $70,250,000, substantially in the dated February 24, 1992
form of the Series A-2 11.18% Note attached, were issued
by Marcourt in connection with the Financing.
10.44 Indenture between Marcourt, as borrower, to First Fidelity Filed as Exhibit 10.4
Bank, National Association, New Jersey, as trustee ("Trustee"). to Registrant's Form 8-K
dated February 24, 1992
10.45 Real Estate Deed of Trust from Marcourt to Albuquerque Title Filed as Exhibit 10.5
Company, as trustee for benefit of the Trustee filed in New to Registrant's Form 8-K
Mexico, securing Series A-1 9.94% Notes and Series A-2 11.18% dated February 24, 1992
notes allocated to Albuquerque, New Mexico Marriott property
(Deeds of Trust or Mortgages substantially similar to this Deed
of Trust were filed in all other jurisdictions in which Marriott
Properties are located. Such other deeds of trust or mortgages
secure the principal amount of Series A-1 9.94% Notes and Series
A-2 11.18% Notes allocated to the Marriott Properties located in
such other jurisdictions).
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.46 Second Real Estate Deed of Trust from Marcourt to Albuquerque Filed as Exhibit 10.6
Title Company as trustee for the benefit of the Trustee, to Registrant's Form 8-K
filed in New Mexico, securing all Series A-1 9.94% Notes and dated February 24, 1992
Series A-2 11.18% Notes other than those notes allocated to the
Albuquerque, New Mexico Marriott property (Deeds of trust or
mortgages substantially similar to this Second Real Estate Deed
of Trust were filed in all other jurisdictions in which the
remaining Marriott Properties are located. Such other deeds of
trust or mortgages secure the principal amount of Series A-1
9.94% Notes and Series A-2 11.18% Notes allocated to all
Marriott Properties not located in the jurisdiction in which
such other deeds of trust were filed for recording).
10.47 Guaranty from the Registrant, Carey Institutional Properties Filed as Exhibit 10.7
Incorporated ("CPA(R):11"), Trammell Crow Equity Partners II, to Registrant's Form 8-K
Ltd. ("TCEP II") and PA/First Plaza Limited Partnership dated February 24, 1992
("First Plaza") as guarantors, to the Trustee.
10.48 Shareholders Agreement between the Registrant, CPA(R):11, Filed as Exhibit 10.8
TCEP II and First Plaza. to Registrant's Form 8-K
dated February 24, 1992
10.49 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.10
located in Ft. Smith, Arkansas. to Registrant's Form 8-K
dated February 24, 1992
10.50 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.12
located in Broken Arrow, Oklahoma. to Registrant's Form 8-K
dated February 24, 1992
10.51 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.13
located in Weatherford, Oklahoma. to Registrant's Form 8-K
dated February 24, 1992
10.52 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.14
located in Center, Texas. to Registrant's Form 8-K
dated February 24, 1992
10.53 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.15
located in Groves, Texas. to Registrant's Form 8-K
dated February 24, 1992
10.54 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.16
located in Silsbee, Texas. to Registrant's Form 8-K
dated February 24, 1992
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.55 Assignment and Assumptions of Lease Agreement for property Filed as Exhibit 10.17
located in Vidor, Texas. to Registrant's Form 8-K
dated February 24, 1992
10.56 Lease Amendments for the Ft. Smith, Arkansas and Weatherford, Filed as Exhibit 10.18
Oklahoma properties. to Registrant's Form 8-K
dated February 24, 1992
10.57 Promissory Note from subsidiaries of the Registrant and Filed as Exhibit 10.19
CPA(R):11 to The New England Mutual Life Insurance Company to Registrant's Form 8-K
("New England"). dated February 24, 1992
10.58 Mortgage/Deed of Trust from subsidiaries of the Registrant Filed as Exhibit 10.20
and CPA(R):11 to New England encumbering the property in to Registrant's Form 8-K
Ft. Smith, Arkansas. dated February 24, 1992
10.59 Mortgage/Deed of Trust from subsidiaries of the Registrant Filed as Exhibit 10.21
and CPA(R):11 to New England encumbering the property in to Registrant's Form 8-K
Weatherford, Oklahoma. dated February 24, 1992
10.60 Mortgage/Deed of Trust from subsidiaries of the Registrant Filed as Exhibit 10.22
and CPA(R):11 to New England encumbering the properties in to Registrant's Form 8-K
Center, Groves, Silsbee, and Vidor, Texas. dated February 24, 1992
10.61 Lease Agreement between QRS 10-9 (AR), Filed as Exhibit 10.1
Inc. ("QRS 10-9") and QRS 11-2(AR), Inc. to Registrant's Form 8-K
("QRS 11-2") as landlord and Acadia Stores 63, dated April 3, 1992
Inc. ("Tenant") as tenant.
10.62 Co-Tenancy Agreement between QRS 10-9 and QRS 11-2. Filed as Exhibit 10.2
to Registrant's Form 8-K
dated April 3, 1992
10.63 Note of QRS 10-9 and QRS 11-2 to Second Lender. Filed as Exhibit 10.7
to Registrant's Form 8-K
dated April 3, 1992
10.64 Mortgage/Deed of Trust from QRS 10-9 and QRS 11-2 Filed as Exhibit 10.8
to Second Lender for the following jurisdictions: to Registrant's Form 8-K
dated April 3, 1992
a. Arkansas
b. Louisiana
c. Mississippi
10.65 Purchase and Sale Agreement between Neoserv (CO) Filed as Exhibit 10.1
QRS 10-13, Inc. ("QRS:10") and Neoserv (CO) to Registrant's Form 8-K
QRS 11-8, Inc. ("QRS:11) as purchasers and Homart dated October 29, 1992
Development Co. ("Homart").
10.66 Co-Tenancy Agreement between QRS:10 and QRS:11. Filed as Exhibit 10.5
to Registrant's Form 8-K
dated October 29, 1992
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
10.67 Lease from QRS:10 and QRS:11 as lessor and Neodata Filed as Exhibit 10.6
Services, Inc. ("Neodata") as lessee. to Registrant's Form 8-K
dated October 29, 1992
10.68 Guaranty Agreement from Neodata Corporation as guarantor Filed as Exhibit 10.7
to QRS:10 and QRS:11. to Registrant's Form 8-K
dated October 29, 1992
10.69 Promissory Note of QRS:10 and QRS:11 to Neodata. Filed as Exhibit 10.8
to Registrant's Form 8-K
dated October 29, 1992
10.70 Deed of Trust from QRS:10 and QRS:11 for benefit of Neodata. Filed as Exhibit 10.9
to Registrant's Form 8-K
dated October 29, 1992
10.71 Construction Contract between QRS:10 and QRS:11 as owners Filed as Exhibit 10.10
and Austin Commercial, Inc. ("Austin") as contractor. to Registrant's Form 8-K
dated October 29, 1992
10.72 Guaranty from Austin to QRS:10 and QRS:11. Filed as Exhibit 10.11
to Registrant's Form 8-K
dated October 29, 1992
10.73 Construction Agency Agreement between QRS:10 and QRS:11 Filed as Exhibit 10.12
as owners and Neodata as agent. to Registrant's Form 8-K
dated October 29, 1992
10.74 Agreement of Purchase and Sale between Milestone Filed as Exhibit 10.1
Properties, Inc. ("Milestone"), as seller, and to Registrant's Form 8-K
Registrant. dated April 12, 1993
21.1 Subsidiaries of Registrant as of March 24, 1997. Filed herewith
28.1 Lease Agreement between BetaWest Properties Filed as Exhibit 28(A)(1)
Inc. and Mountain Bell dated December 16, 1986. to Registrant's Post
Effective Amendment No. 1
to Form S-11
28.2 Lease Agreement (the "K mart Texas Lease") Filed as Exhibit 28(B)(1)
between Clark Development Company - Denton to Registrant's Post
("Clark") and S.S. Kresge Company for property Effective Amendment No. 1
located in Denton, Texas (the "K mart Texas to Form S-11
Property") dated February 9, 1977.
28.3 Assignment of the K mart Texas Lease from Filed as Exhibit 28(B)(2)
Clark to Murray A. Talenfeld and Joanne to Registrant's Post
Talenfeld (n/k/a/ Joanne Talenfeld Rubinoff) Effective Amendment No. 1
dated December 14, 1976. to Form S-11
28.4 Deed from Denton Seller to Denton QRS for the Filed as Exhibit 28(B)(5)
K mart Texas Property dated October 19, 1990. to Registrant's Post
Effective Amendment No. 1
to Form S-11
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
28.5 Agreement for Assignment and Assumption Filed as Exhibit 28(B)(6)
of Real Property Lease from Denton Seller to to Registrant's Post
Denton QRS dated October 19, 1990. Effective Amendment No. 1
to Form S-11
28.6 The K mart California Lease. Filed as Exhibit 28(C)(1)
to Registrant's Post
Effective Amendment No. 1
to Form S-11
28.7 The K mart Michigan Lease. Filed as Exhibit 28(C)(2)
to Registrant's Post
Effective Amendment No. 1
to Form S-11
28.8 Agreement of Limited Partnership dated Filed as Exhibit 28(D)(1)
September 21, 1990 between 564 Randolph to Registrant's Post
Co. #2 (564 Randolph) and North Clinton Effective Amendment No. 1
Corporation ("NCC"). to Form S-11
28.9 Assignment of Partnership Interests dated Filed as Exhibit 28(D)(2)
September 27, 1990 from 564 Randolph and NCC, to Registrant's Post
as Assignors, to CPA(R):9 and QRS 10-1 (ILL), Inc. Effective Amendment No. 1
("QRS 10-1"), as Assignees. to Form S-11
28.10 Amended and Restated Agreement of Limited Filed as Exhibit 28(D)(3)
Partnership dated September 27, 1990 to Registrant's Post
between CPA(R):9 and QRS 10-1, joined by Effective Amendment No. 1
564 Randolph and NCC. to Form S-11
28.11 Warranty Deed dated September 27, 1990 from 564 Filed as Exhibit 28(D)(4)
Randolph to Randolph/Clinton Limited Partnership to Registrant's Post
("Randolph/Clinton"), Trustee's Deed dated Effective Amendment No. 1
September 20, 1990 from American National Bank and to Form S-11
Trust Company of Chicago to Randolph/Clinton,
Trustee's Deed dated September 20, 1990 from LaSalle
National Trust, N.A., as Successor Trustee to LaSalle
National Bank, Trustee, to 564 Randolph.
28.12 Bill of Sale dated September 25, 1990 from 564 Filed as Exhibit 28(D)(5)
Randolph to Randolph/Clinton; Bill of Sale dated to Registrant's Post
September 25, 1990 from NCC to Randolph/Clinton; Bill Effective Amendment No. 1
of Sale dated September 25, 1990 from Information to Form S-11
Resources, Inc. ("IRI") to 564 Randolph.
28.13 $23,500,000 Note Secured by First Real Estate Filed as Exhibit 28(D)(6)
Lien dated September 27, 1990 from Randolph/ to Registrant's Post
Clinton, as Maker, to MONY, as Payee. Effective Amendment No. 1
to Form S-11
28.14 Mortgage and Security Agreement dated Filed as Exhibit 28(D)(7)
September 27, 1990 from Randolph/Clinton, to Registrant's Post
as Mortgagor, to MONY, as Mortgagee. Effective Amendment No. 1
to Form S-11
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
28.15 Assignment of Lessor's Interest in Leases Filed as Exhibit 28(D)(8)
dated September 27, 1990 from Randolph/ to Registrant's Post
Clinton, as Assignor, to MONY, as Assignee. Effective Amendment No. 1
to Form S-11
28.16 Lease Agreement dated September 27, 1990 Filed as Exhibit 28(D)(9)
between Randolph/Clinton, as Landlord, to Registrant's Post
and IRI, as Tenant. Effective Amendment No. 1
to Form S-11
28.17 Assignment of Subleases and Rents dated Filed as Exhibit 28(D)(10)
September 27, 1990 from IRI, as Assignor, to Registrant's Post
and Randolph/Clinton, as Assignee. Effective Amendment No. 1
to Form S-11
28.18 General Warranty Deed dated July 9, 1991 from Titan Filed as Exhibit 28.1
Linkabit Corporation to Torrey Pines. to Registrant's Form 8-K
dated July 25, 1991
28.19 Bill of Sale dated July 9, 1991 from Titan Linkabit Filed as Exhibit 28.2
Corporation to Torrey Pines. to Registrant's Form 8-K
dated July 25, 1991
28.20 Guaranty from Harvest Foods, Inc., a Delaware Filed as Exhibit 28.1
corporation ("Harvest"), to QRS 10-9 and QRS 11-2. to Registrant's Form 8-K
dated April 3, 1992
28.21 Guaranty from Harvest Foods, Inc., an Arkansas Filed as Exhibit 28.2
corporation, to QRS 10-9 and QRS 11-2. to Registrant's Form 8-K
dated April 3, 1992
28.22 Deeds from Safeway Inc. and Property Development Filed as Exhibit 28.3
Associates to QRS 10-9 and QRS 11-2 for: to Registrant's Form 8-K
dated April 3, 1992
a. Stores 179 and 258
b. 255
c. 269
d. 4120
28.23 Deed from Acadia Stores 60, Inc. to QRS 10-9 and Filed as Exhibit 28.4
QRS 11-2 for Corporate and Annex premises. to Registrant's Form 8-K
dated April 3, 1992
28.24 Deed from Acadia Stores 61, Inc. to QRS 10-9 and Filed as Exhibit 28.5
QRS 11-2 for Store 194. to Registrant's Form 8-K
dated April 3, 1992
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------- ----------------
<S> <C> <C>
28.25 Deeds from Acadia Stores 62, Inc. ("AS-62") to Filed as Exhibit 28.6
QRS 10-9 and QRS 11-2 for: to Registrant's Form 8-K
a. Store 287 dated April 3, 1992
b. Store 289
28.26 Deed from Harvest to QRS 10-9 and QRS 11-2 for Store 4426. Filed as Exhibit 28.7
to Registrant's Form 8-K
dated April 3, 1992
28.27 Deed of Improvements from Harvest to QRS 10-9 and Filed as Exhibit 28.8
QRS 11-2 for: to Registrant's Form 8-K
a. Store 4281 dated April 3, 1992
b. Store 4409
28.28 Leasehold Deed of Trust from Neodata for benefit of Filed as Exhibit 28.1
General Electric Capital Corporation. to Registrant's Form 8-K
dated October 29, 1992
28.29 Prospectus of Registrant Filed as Exhibit 28.38
dated June 11, 1990. to Registrant's Form 10-K/A
dated September 24, 1993
28.30 Supplement dated August 14, 1990 Filed as Exhibit 28.39
to Prospectus dated June 11, 1990. to Registrant's Form 10-K/A
dated September 24, 1993
28.31 Supplement dated January 17, 1991 Filed as Exhibit 28.40
to Prospectus dated June 11, 1990. to Registrant's Form 10-K/A
dated September 24, 1993
28.32 Supplement dated March 26, 1991 Filed as Exhibit 28.41
to Prospectus dated June 11, 1990. to Registrant's Form 10-K/A
dated September 24, 1993
</TABLE>
<PAGE> 1
EXHIBIT 21.2
SUBSIDIARIES OF REGISTRANT
QRS 10-1 (ILL), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS AND DOING BUSINESS UNDER
THE NAME QRS 10-1 (ILL), INC.
DENTON (TX) QRS 10-2, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS AND DOING BUSINESS
UNDER THE NAME DENTON (TX) QRS 10-2, INC.
QRS 10-3 (CT), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF CONNECTICUT AND DOING BUSINESS UNDER
THE NAME QRS 10-3 (CT), INC.
QRS 10-5 (OH), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF OHIO AND DOING BUSINESS UNDER THE
NAME QRS 10-5 (OH), INC.
TORREY PINES QRS 10-6 (CA), INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA AND DOING
BUSINESS UNDER THE NAME TORREY PINES QRS 10-6 (CA), INC.
QRS 10-7 (NY), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK AND DOING BUSINESS UNDER
THE NAME QRS 10-7 (NY), INC.
WALSAFE (CA) QRS 10-8, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA AND DOING
BUSINESS UNDER THE NAME WALSAFE (CA) QRS 10-8, INC.
QRS 10-9 (AR), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF ARKANSAS AND DOING BUSINESS UNDER
THE NAME QRS 10-9 (AR), INC.
QRS 10-11 (MD), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND AND DOING BUSINESS UNDER
THE NAME QRS 10-11 (MD), INC.
QRS 10-12 (TX), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS AND DOING BUSINESS UNDER THE
NAME QRS 10-12 (TX), INC.
NEOSERV (CO) QRS 10-13, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO AND DOING
BUSINESS UNDER THE NAME NEOSERV (CO) QRS 10-13, INC.
STI (NC) QRS 10-14, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA AND DOING
BUSINESS UNDER THE NAME STI (NC) QRS 10-14, INC.
DDI (NE) QRS 10-15, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF NEBRASKA AND DOING
BUSINESS UNDER THE NAME DDI (NE) QRS 10-15, INC.
PMWI (IA) QRS 10-16, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF IOWA AND DOING BUSINESS
UNDER THE NAME PMWI (IA) QRS 10-16, INC.
QRS 10-18 (FL), INC., A WHOLLY-OWNED SUBSIDIARY OF REGISTRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA AND DOING BUSINESS UNDER THE
NAME QRS 10-18 (FL), INC.
QRS 10-PAYING AGENT, INC., A WHOLLY-OWNED SUBSIDIARY OF
REGISTRANT INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK AND DOING
BUSINESS UNDER THE NAME QRS 10-PAYING AGENT, INC.
-35-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,608,523
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,608,523
<PP&E> 117,857,409
<DEPRECIATION> 11,498,122
<TOTAL-ASSETS> 121,039,230
<CURRENT-LIABILITIES> 6,446,813
<BONDS> 61,536,571
0
0
<COMMON> 7,217
<OTHER-SE> 49,178,213
<TOTAL-LIABILITY-AND-EQUITY> 121,039,230
<SALES> 0
<TOTAL-REVENUES> 14,665,622
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,193,673
<LOSS-PROVISION> 107,223
<INTEREST-EXPENSE> 6,467,266
<INCOME-PRETAX> 3,734,710
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,734,710
<DISCONTINUED> 0
<EXTRAORDINARY> 3,850,490
<CHANGES> 0
<NET-INCOME> 7,585,200
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.05
</TABLE>
