<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For the year ended DECEMBER 31, 1999
of
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
CPA(R):10
A MARYLAND Corporation
IRS Employer Identification No. 13-3602400
SEC File Number 0-19156
50 ROCKEFELLER PLAZA,
NEW YORK, NEW YORK 10020
(212) 492-1100
CPA(R):10 has SHARES OF COMMON STOCK registered pursuant to Section 12(g) of the
Act.
CPA(R):10 is not registered on any exchanges.
CPA(R):10 does not have any Securities registered pursuant to Section 12(b) of
the Act.
CPA(R):10 is unaware of any delinquent filers pursuant to Item 405 of Regulation
S-K.
CPA(R):10 (1) has filed all reports required by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for 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.
CPA(R):10 has no active market for common stock at March 31, 2000.
Non-affiliates held 7,130,342 shares of common stock, $.001 Par Value
outstanding at March 31, 2000.
<PAGE> 2
PART I
Item 1. Business.
Corporate Property Associates 10 Incorporated is a real estate
investment trust ("REIT") that owns commercial properties leased to companies
nationwide, primarily on a triple net basis. As of December 31, 1999,
CPA(R):10's portfolio consisted of 54 properties leased to 14 tenants and
totaling approximately 4.1 million square feet.
CPA(R):10's leases generally place the economic burden of ownership on
the tenant by requiring them to pay the costs of maintenance, insurance, taxes,
structural repairs and other operating expenses. CPA(R):10 also generally
includes in its leases:
- - Clauses providing for mandated rent increases or periodic rent
increases tied to increases in the consumer price index or other
indices or, when appropriate, increases tied to the volume of sales at
the property;
- - covenants restricting the activity of the tenant to reduce the risk of
a change in credit quality;
- - indemnification of CPA(R):10 for environmental and other liabilities;
- - guarantees from parent companies or other entities.
CPA(R):10 was formed as a Maryland corporation on March 7, 1990.
Between June 1990 and June 1991, CPA(R):10 sold a total of 7,217,294 shares of
common stock for a total of $72,172,940 in gross offering proceeds. These
proceeds have been combined with limited recourse mortgage debt to purchase
CPA(R):10's property portfolio. As a REIT, CPA(R):10 is not subject to federal
income taxation as long as it satisfies certain requirements relating to the
nature of its income, the level of its distributions and other factors.
Carey Property Advisors provides both strategic and day-to-day
management for CPA(R):10, including acquisition services, research, investment
analysis, asset management, capital funding services, disposition of assets,
investor relations and administrative services. Carey Property Advisors also
provides office space and other facilities for CPA(R):10. Carey Property
Advisors has dedicated senior executives in each area of its organization so
that CPA(R):10 functions as a fully integrated operating company. CPA(R):10 pays
asset management fees to Carey Property Advisor and pays certain transactional
fees. CPA(R):10 also reimburses Carey Property Advisors for certain expenses.
Carey Property Advisors also serves in this capacity for Carey Institutional
Properties Incorporated ("CIP(R)"), Corporate Property Associates 12
Incorporated and Corporate Property Associates 14 Incorporated. On November 29,
1999, the Board of Directors of CPA(R):10 approved a pending change of control
of Carey Property Advisors. If the change in control is effectuated, Carey
Property Advisors will become a wholly-owned subsidiary of W.P. Carey & Co. LLC
(currently known as Carey Diversified LLC), a publicly-traded company on the New
York Stock Exchange and Pacific Exchange under the symbol "WPC" ("CDC" prior to
the change of control). This change of control will be completed upon the
approval of the shareholders of Carey Diversified LLC.
CPA(R):10's principal executive offices are located at 50 Rockefeller
Plaza, New York, NY 10020 and its telephone number is (212) 492-1100. As of
December 31, 1999, CPA(R):10 had no employees. An affiliate of Carey Property
Advisors employs 20 individuals who perform services for CPA(R):10.
BUSINESS OBJECTIVES
CPA(R):10's objectives are to:
- - pay quarterly dividends at an increasing rate that for taxable
shareholders may be partially free from current taxation;
- - own a portfolio of real estate that will increase in value; and
- - increase the equity in its real estate by making regular mortgage
principal payments.
CPA(R):10 seeks to achieve these objectives by holding and managing
industrial and commercial properties each net leased to a single corporate
tenant. The properties owned by CPA(R):10 are described in Item 2. All net
offering proceeds not invested in real estate are invested in cash and cash
equivalents. CPA(R):10 uses these funds primarily for working capital.
DEVELOPMENTS DURING 1999
CPA(R):10 and CIP(R), an affiliate, owned as tenants-in-common
properties in Ruston, Louisiana, Jonesboro and Little Rock, Arkansas that had
been leased to Harvest Foods, Inc. The properties had been vacant since the
termination of the Harvest lease in 1997. The properties were sold in 1999 with
CPA(R):10 receiving net proceeds on the sale of approximately $1,153,000.
In January 1999, CalComp Technology, Inc., the lessee of a property in
Austin, Texas in which CPA(R):10 and CIP(R) hold 50% ownership interests as
tenants-in-common, announced its intention to liquidate and stopped paying its
rent. In response to CalComp's action, CPA(R):10 and Carey Institutional
Properties initiated litigation against CalComp seeking judgement for all unpaid
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<PAGE> 3
and future rents plus associated costs. CalComp agreed to pay to CPA(R):10 and
CIP(R) a total of $2,500,000 ($1,250,000 to each) and CPA(R):10 and CIP(R)
agreed to withdraw their lawsuits with prejudice and to terminate the CalComp
lease. The limited recourse mortgage loan collateralized by the Austin property
matured in August 1999 at which time a scheduled balloon payment was due. In
October 1999, CPA(R):10 used the lease termination proceeds to reduce the
outstanding balance on the loan from $1,564,538 to $314,538 and negotiated an
agreement to extend the maturity of the loan until August 2000.
STRATEGY
CPA(R):10 has invested a total of $134,323,000 in net leased
properties. CPA(R):10 owns a total of 54 properties, all but three of which are
subject to net leases. Carey Property Advisors strategy in structuring its net
lease investments in CPA(R):10's portfolio was to:
- - combine the stability and security of long-term lease payments,
including rent increases, with the appreciation potential inherent in
the ownership of real estate;
- - enhance current returns by utilizing varied lease structures;
- - reduce credit risk by diversifying investments by tenant, type of
facility, geographic location and tenant industry; and
- - increase potential returns by obtaining equity enhancements from the
tenant when possible, such as warrants to purchase tenant common stock.
FINANCING STRATEGIES
Consistent with its investment policies, CPA(R):10 uses leverage when
available on favorable terms. As of December 31, 1999, CPA(R):10 has
approximately $56,041,000 in property level debt outstanding. These mortgage
obligations mature between 2000 and 2013 and have interest rates ranging between
8.75% and 10.7%. Carey Property Advisors continually seeks opportunities and
considers alternative financing techniques to finance properties not currently
subject to debt, refinance debt, reduce interest expense or improve its capital
structure.
ASSET MANAGEMENT
CPA(R):10 believes that effective management of its net lease assets is
essential to maintain and enhance property values. Important aspects of asset
management include restructuring transactions to meet the evolving needs of
current tenants, re-leasing properties, refinancing debt, selling properties and
knowledge of the bankruptcy process.
Carey Property Advisors monitors, on an ongoing basis, compliance by
tenants with their lease obligations and other factors that could affect the
financial performance of any of its properties. Monitoring involves receiving
assurances that each tenant has paid real estate taxes, assessments and other
expenses relating to the properties it occupies and confirming that appropriate
insurance coverage is being maintained by the tenant. Carey Property Advisors
reviews financial statements of its tenants and undertakes regular physical
inspections of the condition and maintenance of its properties. Additionally,
Carey Property Advisors periodically analyzes each tenant's financial condition,
the industry in which each tenant operates and each tenant's relative strength
in its industry.
HOLDING PERIOD
CPA(R):10 intends to hold each property it acquires for an extended
period. The determination of whether a particular property should be sold or
otherwise disposed of will be made after consideration of relevant factors with
a view to achieving maximum capital appreciation and after-tax return for the
CPA(R):10 shareholders. If CPA(R):10's common stock is not listed for trading on
a national securities exchange or included for quotation on Nasdaq, CPA(R):10
will generally begin selling properties within ten years after the offering
proceeds were substantially invested, subject to market conditions. The board of
directors will make the decision whether to list the shares, liquidate or devise
an alternative liquidity strategy based on what is likely to result in the
greatest value for the shareholders.
COMPETITION
CPA(R):10 faces competition for tenants in need of office and
industrial properties in general, and such properties net leased to major
corporations in particular, from insurance companies, credit companies, pension
funds, private individuals, investment companies, other REITs and other property
owners. CPA(R):10 believes its management's experience will allow CPA(R):10 to
compete effectively.
ENVIRONMENTAL MATTERS
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Under various federal, state and local environmental laws, regulations
and ordinances, current or former owners of real estate, as well as other
parties, may be required to investigate and clean up hazardous or toxic
chemicals, substances or waste or petroleum product or waste, releases on,
under, in or from a property. These parties may be held liable to governmental
entities or to third parties for specified damages and for investigation and
cleanup costs incurred by these parties in connection with the release or
threatened release of hazardous materials. These laws typically impose
responsibility and liability without regard to whether the owner knew of or was
responsible for the presence of hazardous materials, and the liability under
these laws has been interpreted to be joint and several under some
circumstances. CPA(R):10's leases often provide that the tenant is responsible
for all environmental liability and for compliance with environmental
regulations relating to the tenant's operations.
Phase I environmental assessments are performed by independent
environmental consulting and engineering firms on all properties acquired by
CPA(R):10. Where warranted, Phase II environmental assessments are performed.
Phase I assessments do not involve subsurface testing, whereas Phase II
assessments involve some degree of soil and/or groundwater testing. CPA(R):10
normally requires property sellers to indemnify it fully against any
environmental problem existing as of the date of purchase. Additionally,
CPA(R):10 often structures its leases to require the tenant to assume most or
all responsibility for compliance with the environmental provisions of the lease
or environmental remediation relating to the tenant's operations and to provide
that non-compliance with environmental laws is a lease default. In some cases,
CPA(R):10 may also require a cash reserve, a letter of credit or a guarantee
from the tenant, the tenant's parent company or a third party to assure lease
compliance and funding of remediation. The value of any of these protections
depends on the amount of the collateral and/or financial strength of the entity
providing the protection. A contractual arrangement does not eliminate
CPA(R):10's statutory liability or preclude claims against CPA(R):10 by
governmental authorities or persons who are not a party to the arrangement.
Contractual arrangements in CPA(R):10's leases may provide a basis for CPA(R):10
to recover from the tenant damages or costs for which it has been found liable.
INDUSTRY SEGMENT
CPA(R):10 operates in one industry segment, investment in net leased
real property. For the year ended December 31, 1999, three lessees represented
10% or more of the total operating revenue of CPA(R):10: Marriott International,
Inc.- 27%, Information Resources Incorporated- 17% and Titan Corporation - 13%.
These three tenant companies are publicly traded on the New York Stock Exchange
and file financial statements with the United States Securities and Exchange
Commission.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The provisions of the Private Securities Litigation Reform Act of 1995
(the "Act") became effective in December 1995. The Act provides a "safe harbor"
for companies that make forward-looking statements providing prospective
information. The "safe harbor" under the Act relates to protection for companies
with respect to litigation filed on the basis of such forward-looking
statements.
CPA(R):10 wishes to take advantage of the "safe harbor" provisions of
the Act and is therefore including this section in its Annual Report on Form
10-K. The statements contained in this Annual Report, if not historical, are
forward-looking statements and involve risks and uncertainties which are
described below that could cause actual results to differ materially from the
results, financial or otherwise, or other expectations described in such
forward-looking statements. These statements are identified with the words
"anticipated," "expected," "intends," "seeks" or "plans" or words of similar
meaning. Therefore, forward-looking statements should not be relied upon as a
prediction of actual future results or occurrences.
CPA(R):10's future results may be affected by certain risks and
uncertainties including the following:
SINGLE TENANT LEASES INCREASE OUR EXPOSURE IN THE EVENT OF A FAILURE OF TENANT.
Because our net leased real properties are leased to single tenants,
the financial failure of or other default by a tenant resulting in the
termination of a lease is likely to cause a reduction in the operating cash flow
of CPA(R):10 and might decrease the value of the property leased to such tenant.
WE DEPEND ON MAJOR TENANTS.
Revenues from several of our tenants and/or their guarantors constitute
a significant percentage of our consolidated rental revenues. Our five largest
tenants/guarantors, which occupy 20 properties, represent 75% of annualized
revenues. The default, financial distress or bankruptcy of any of these five
tenants could cause interruptions in the receipt of lease revenues from these
tenants and/or result in vacancies in the respective properties, which would
reduce our revenues until the affected property is re-let, and could decrease
the ultimate sale value of each such property.
WE CAN BORROW A SIGNIFICANT AMOUNT OF FUNDS.
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We have incurred, and may continue to incur, indebtedness (secured and
unsecured) in furtherance of our activities. Neither the certificate of
incorporation, bylaws nor any policy statement formally adopted by the board of
directors limits either the total amount of indebtedness or the specified
percentage of indebtedness (based upon the total market capitalization of
CPA(R):10) that may be incurred. Accordingly, we could become more highly
leveraged, resulting in increased risk of default on our obligations and in an
increase in debt service requirements which could adversely affect our financial
condition and results of operations and our ability to pay distributions.
WE MAY NOT BE ABLE TO REFINANCE BALLOON PAYMENTS ON OUR MORTGAGE DEBTS.
A significant number of our properties are subject to mortgages with
balloon payments. Scheduled balloon payments for the next five years are as
follows:
<TABLE>
<S> <C>
2000 - $29 million;
2001 - $7 million;
2002 - none;
2003 - $8 million; and
2004 - $2 million.
</TABLE>
Our ability to make such balloon payments will depend upon our ability
either to refinance the obligation when due, invest additional equity in the
property or to sell the related property. Our ability to accomplish these goals
will be affected by various factors existing at the relevant time, such as the
state of the national and regional economies, local real estate conditions,
available mortgage rates, our equity in the mortgaged properties, our financial
condition, the operating history of the mortgaged properties and tax laws.
WE MAY BE UNABLE TO RENEW LEASES OR RE-LET VACATED SPACES.
We will be subject to the risks that, upon expiration of leases, the
premises may not be re-let or the terms of re-letting (including the cost of
concessions to tenants) may be less favorable than current lease terms. If we
are unable to re-let promptly all or a substantial portion of our properties or
if the rental rates upon such re-letting were significantly lower than current
rates, our net income and ability to make expected distributions to our
shareholders would be adversely affected. There can be no assurance that we will
be able to retain tenants in any of our properties upon the expiration of their
leases. Our scheduled lease expiration, as a percentage of annualized revenues
for the next five years, are as follows:
<TABLE>
<S> <C>
2000 - 0 %
2001 - 3 %
2002 - 4 %
2003 - 0 %
2004 - 0 %
</TABLE>
WE ARE SUBJECT TO POSSIBLE LIABILITIES RELATING TO ENVIRONMENTAL MATTERS.
We own industrial and commercial properties and are subject to the risk
of liabilities under federal, state and local environmental laws. Some of these
laws could impose the following on CPA(R):10:
- - Responsibility and liability for the cost of investigation and removal
or remediation of hazardous substances released on our property,
generally without regard to our knowledge or responsibility of the
presence of the contaminants;
- - Liability for the costs of investigation and removal or remediation of
hazardous substances at disposal facilities for persons who arrange for
the disposal or treatment of such substances; and
- - Potential liability for common law claims by third parties based on
damages and costs of environmental contaminants.
WE MAY SUFFER UNINSURED LOSSES.
There are certain types of losses (such as due to wars or some natural
disasters), that generally are not insured because they are either uninsurable
or not economically insurable. Should an uninsured loss or a loss in excess of
the limits of our insurance occur, we could lose capital invested in a property,
as well as the anticipated future revenues from a property, while remaining
obligated for any mortgage indebtedness or other financial obligations related
to the property. Any such loss would adversely affect our financial condition.
WE FACE INTENSE COMPETITION.
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The real estate industry is highly competitive. Our principal
competitors include national REITs, many of which are substantially larger and
have substantially greater financial resources than us.
THE VALUE OF OUR REAL ESTATE IS SUBJECT TO FLUCTUATION.
We are subject to all of the general risks associated with the
ownership of real estate. In particular, we face the risk that rental revenue
from the properties will be insufficient to cover all corporate operating
expenses and debt service payments on indebtedness we incur. Additional real
estate ownership risks include:
- - Adverse changes in general or local economic conditions;
- - Changes in supply of or demand for similar or competing properties;
- - Changes in interest rates and operating expenses;
- - Competition for tenants;
- - Changes in market rental rates;
- - Inability to lease properties upon termination of existing leases;
- - Renewal of leases at lower rental rates;
- - Inability to collect rents from tenants due to financial hardship,
including bankruptcy;
- - Changes in tax, real estate, zoning and environmental laws that may
have an adverse impact upon the value of real estate;
- - Uninsured property liability;
- - Property damage or casualty losses;
- - Unexpected expenditures for capital improvements or to bring properties
into compliance with applicable federal, state and local laws; and
- - Acts of God and other factors beyond the control of our management.
WE DEPEND ON KEY PERSONNEL FOR OUR FUTURE SUCCESS.
We depend on the efforts of the executive officers and key employees of
Carey Property Advisors. The loss of the services of these executive officers
and key employees could have a material adverse effect on our operations.
The risk factors may have affected, and in the future could affect, our
actual operating and financial results and could cause such results to differ
materially from those in any forward-looking statements. You should not consider
this list exhaustive. New risk factors emerge periodically, and we cannot
completely assure you that the factors we describe above list all material risks
to CPA(R):10 at any specific point in time. We have disclosed many of the
important risk factors discussed above in our previous filings with the
Securities and Exchange Commission.
YEAR 2000 ISSUES.
In 1999, CPA(R):10 and its affiliates formed a task force to
identify year 2000 problems. The task force developed and implemented a plan
that included inventory, assessment, remediation, testing and contingency
planning. CPA(R):10 experienced no significant disruptions as a result of the
year end date change. The task force intends to monitor other critical dates in
the future, such as quarter-end dates. The impact of the year 2000 issues on the
company will continue to depend on the way the issues have been addressed by
third parties that provide services to CPA(R):10. To date, CPA(R):10 has not
been adversely impacted to any significant extent by the failure of third
parties to address year 2000 issues. The task force has developed contingency
plans to address risks associated with year 2000 issues that may arise. There
can be no assurance that these plans will fully mitigate any problems, if any
arise. The foregoing year 2000 discussions constitute a Year 2000 Readiness
Disclosure within the meaning of the Year 2000 Readiness and Disclosure and
Disclosure Act of 1998.
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Item 2. 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)
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
</TABLE>
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<TABLE>
<CAPTION>
NAME OF LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- --------
<S> <C> <C> <C>
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
Vacant Retail Stores Hot Springs and Ownership of a 50%
- 3 locations Texarakana, Arkansas; interest in land
and Clarksdale, and buildings
Mississippi except as noted (2)
Vacant Office/Manufacturing Austin, Texas Ownership of a 50%
Facility interest in land and
buildings (1)
KROGER CO. Supermarkets North Little Rock
- 2 locations and Conway, Arkansas Ownership of a 50%
interest in land
and buildings
except as noted (3)
AFFILIATED FOODS Supermarkets Little Rock - 3, and Ownership of a 50%
SOUTHWEST, INC. - 4 locations Hope, Arkansas interest in land
and buildings
except as noted (3)
CENTROBE, INC. Distribution/ Louisville, Ownership of a 20%
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 building with ground lease.
(3) Ownership of building with property in Hot Springs, Arkansas ground
leases in North Little Rock and Little Rock, Arkansas.
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The material terms of CPA(R):10's leases with its significant tenants
are summarized as of December 31, 1999 in the following table:
<TABLE>
<CAPTION>
Share Current Lease
Lessee of Current Increase Square Rent Per Renewal Expiration Ownership
Obligor Annual Rents Factor Footage Sq.Ft.(1) Terms (3) (Mo/Year) Interest
------- ------------ ------ ------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Information $2,916,014 CPI 252,000 $17.36 YES 9/05 66.67% general
Resources, partnership interest;
Inc. remaining limited
partnership interest
owned by Corporate
Property Associates 9
("CPA(R):9")
Titan 2,131,336 CPI 166,403 15.72 YES 7/07 81.46% general
Corporation partnership interest;
remaining limited
partnership interest
owned by CPA(R):9
New WAI 1,446,000 CPI 534,121 2.71 YES 3/16 100%
L.P./
Warehouse
Associates
EnviroWorks, 1,499,331 CPI 374,289 4.01 YES 3/10 100%
Inc.
Wal-Mart 1,013,389 % of 454,251 4.46 YES 1/08 50% interest; remaining
Stores, Inc. (2) sales interest owned by Carey
Institutional Properties
Incorporated ("CIP(R)")
Childtime 854,856 CPI 83,694 15.50 YES 1/16 66.07% interest;
Childcare remaining
Inc. interest owned
by CPA(R):9
Neodata 588,563 CPI 403,871 7.29 YES 12/14 20% interest;
Corporation remaining
interest owned
by CIP(R)
K mart 617,844 % of 278,839 2.22 YES 5/01 100%
Corporation (2) sales
</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) Includes percentage of sales rents.
(3) Renewal terms are at the option of the lessee.
Item 3. Legal Proceedings.
As of the date hereof, CPA(R):10 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 1999 to a vote of
security holders, through the solicitation of proxies or otherwise.
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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 24 of the Company's Annual Report contained in
Appendix A.
Item 6. Selected Financial Data.
Selected Financial Data are hereby incorporated by reference to page 1
of the Company'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 5 of the Company's Annual Report contained in Appendix
A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk:
Approximately $54,877,000 of CPA(R):10's long-term debt bears interest
at fixed rates, and therefore the fair value of these instruments is affected by
changes in the market interest rates. The following table presents principal
cash flows based upon expected maturity dates of the debt obligations and the
related weighted-average interest rates by expected maturity dates for the fixed
rate debt. The interest rate on the variable rate debt as of December 31, 1999
ranged from LIBOR plus 4% to the lender's prime rate plus 1%.
<TABLE>
<CAPTION>
(in thousands)
2000 2001 2002 2003 2004 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate $29,568 $ 7,356 $996 $8,829 $2,589 $5,539 $54,877 $55,411
Weighted
average
interest
rate 8.21% 8.89% 9.89% 9.77% 10.00% 9.91%
Variable rate 358 806 -- -- -- -- 1,164 1,164
</TABLE>
As of December 31, 1999, CPA(R):10 had no other material exposure to
market risk.
Item 8. Consolidated Financial Statements and Supplementary Data.
The following consolidated financial statements and supplementary data
are hereby incorporated by reference to pages 6 to 18 of the Company's Annual
Report contained in Appendix A:
(i) Report of Independent Accountants.
(ii) Consolidated Balance Sheets as of December 31, 1998 and 1999.
(iii) Consolidated Statements of Income for the years ended December 31,
1997, 1998 and 1999.
(iv) Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1997, 1998 and 1999.
(v) Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999.
(vi) Notes to Consolidated Financial Statements.
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Item 9. Disagreements on Accounting and Financial Disclosure.
NONE
PART III
Item 10. Directors and Executive Officers of the Registrant.
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's 2000 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 11. Executive Compensation.
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's 2000 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 the Company's definitive Proxy
Statement with respect to the Company's 2000 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 the Company's definitive Proxy
Statement with respect to the Company's 2000 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> 12
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, 1998 and 1999.
Consolidated Statements of Income for the years ended December 31, 1997,
1998 and 1999.
Consolidated Statements of Shareholders' Equity for the years ended December
31, 1997, 1998 and 1999.
Consolidated Statements of Cash Flows for the years ended December 31, 1997,
1998 and 1999.
Notes to Consolidated Financial Statements.
The consolidated financial statements are hereby incorporated by reference
to pages 6 to 18 of the Company '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, 1998 and 1999.
Statements of Income for the years ended December 31, 1997, 1998 and 1999.
Statements of Shareholders' Equity for the years ended December 31, 1997,
1998 and 1999.
Statements of Cash Flows for the years ended December 31, 1997, 1998 and
1999.
Notes to Financial Statements.
Schedule III -Real Estate and Accumulated Depreciation as of December 31,
1999 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, 1999 and for the year then ended in accordance with
Rule 3-09 of Regulation S-X.
-12-
<PAGE> 13
(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,
1999.
Notes to Schedule III.
Schedule III and notes therein are hereby incorporated by reference to
pages 19 to 21 of the Company 's Annual Report in Appendix A. A Financial
Statement Schedule of the Company's Material Equity Investee is 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> 14
REPORT of INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Marcourt Investments Incorporated:
In our opinion, the financial statements listed in the index appearing
under Item 14(a)(2) on page 12 present fairly, in all material respects, the
financial position of Marcourt Investments Incorporated at December 31, 1998 and
1999, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the schedule of real estate and accumulated depreciation listed in the index
appearing under Item 14(a)(2) on page 12 present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. 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 of
these statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 11, 1999
-14-
<PAGE> 15
MARCOURT INVESTMENTS INCORPORATED
BALANCE SHEETS
December 31, 1998 and 1999
<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
ASSETS:
Net investment in direct
financing lease $148,565,328 $148,415,466
Cash and cash equivalents 36,034 8,429
Other assets 548,891 481,525
------------ ------------
Total assets $149,150,253 $148,905,420
============ ============
LIABILITIES:
Mortgage notes payable $ 97,801,553 $ 94,016,280
Accrued interest payable 1,410,542 1,356,081
Accounts payable and accrued expenses 80,774 61,942
Accounts payable to affiliates 7,000 5,000
State and local taxes payable 15,478 12,000
------------ ------------
Total liabilities 99,315,347 95,451,303
------------ ------------
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 12,834,906 16,454,117
------------ ------------
Total shareholders' equity 49,834,906 53,454,117
------------ ------------
Total liabilities and
shareholders' equity $149,150,253 $148,905,420
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-15-
<PAGE> 16
MARCOURT INVESTMENTS INCORPORATED
STATEMENTS OF INCOME
For the years ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Interest income on
direct financing lease $17,694,122 $17,693,839 $17,676,988
Percentage rents 851,731 1,041,461 1,165,455
Other income 104,758 8,350 513
----------- ----------- -----------
18,650,611 18,743,650 18,842,956
----------- ----------- -----------
Expenses:
Interest on mortgages 10,729,644 10,391,810 10,024,907
General and administrative 68,238 69,812 63,179
State and local taxes 29,426 34,718 18,566
----------- ----------- -----------
10,827,308 10,496,340 10,106,652
----------- ----------- -----------
Net income $ 7,823,303 $ 8,247,310 $ 8,736,304
=========== =========== ===========
Basic earnings per share
of common stock, 370,000
common shares outstanding
(Class A and Class B) $ 21.14 $ 22.29 $ 23.61
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-16-
<PAGE> 17
MARCOURT INVESTMENTS INCORPORATED
STATEMENTS OF SHAREHOLDERS' EQUITY For
the years ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Additional Earnings in
Common Paid-in Excess of
Stock Capital Dividends Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
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
Dividends (4,999,116) (4,999,116)
Net income 8,247,310 8,247,310
------------ ------------ ------------ ------------
Balance, December 31, 1998 3,700 36,996,300 12,834,906 49,834,906
Dividends (5,117,093) (5,117,093)
Net income 8,736,304 8,736,304
------------ ------------ ------------ ------------
Balance, December 31, 1999 $ 3,700 $ 36,996,300 $ 16,454,117 $ 53,454,117
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-17-
<PAGE> 18
MARCOURT INVESTMENTS INCORPORATED
STATEMENTS OF CASH FLOWS For the
years ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Rentals received from lessee $ 18,678,581 $ 18,868,311 $ 18,992,305
Interest paid on mortgage loans (10,711,971) (10,379,916) (10,011,999)
Interest received on cash and cash equivalents 6,158 2,350 513
General and administrative expenses paid (60,988) (50,102) (50,589)
Taxes paid (39,426) (44,240) (22,044)
Other, net (33,567) (39,761) (33,425)
------------ ------------ ------------
Net cash provided by operating activities 7,838,787 8,356,642 8,874,761
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from easement 98,600
------------
Net cash provided by investing activities 98,600
------------
Cash flows from financing activities:
Dividends paid (4,928,760) (4,999,116) (5,117,093)
Payment of mortgage principal (3,085,300) (3,417,356) (3,785,273)
------------ ------------ ------------
Net cash used in financing activities (8,014,060) (8,416,472) (8,902,366)
------------ ------------ ------------
Net decrease in cash and cash equivalents (76,673) (59,830) (27,605)
Cash and cash equivalents, beginning of year 172,537 95,864 36,034
------------ ------------ ------------
Cash and cash equivalents, end of year $ 95,864 $ 36,034 $ 8,429
============ ============ ============
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 7,823,303 $ 8,247,310 $ 8,736,304
Adjustments to reconcile net income to net
cash provided by operating activities:
Cash receipts on direct financing lease
greater than revenues recognized 132,728 133,011 149,862
Other income from sale of easement (98,600)
Amortization of deferred interest 72,079 69,843 67,369
Increase in other assets (66) (3)
Decrease in accounts payable
and accrued expenses (25,817) (29,485) (18,832)
Decrease in accrued interest payable (54,406) (57,949) (54,461)
Decrease in state and local taxes
payable (10,000) (9,522) (3,478)
(Decrease) increase in accounts payable
to affiliates (500) 3,500 (2,000)
------------ ------------ ------------
Net cash provided by operating
activities $ 7,838,787 $ 8,356,642 $ 8,874,761
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-18-
<PAGE> 19
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 accounting
principles generally accepted in the United States 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.
Additional rentals based on a percentage of Marriott's sales in excess
of the specified volume and increases in the consumer price index are generally
included in income when reported to the Company or when billed to Marriott.
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. At December 31,
1998 and 1999, the Company had on deposit at two financial institutions
substantially all of its cash and cash equivalents.
Federal Income Taxes:
The Company is qualified as a REIT as defined under the Internal Revenue
Code as of December 31, 1999. 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> 20
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:
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, 1997, 1998 and
1999, the Company incurred expenses of $7,237, $7,204 and $6,905 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, 1997, 1998 and 1999, the Company incurred expenses of $6,994,
$12,046 and $12,015, 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>
1998 1999
------------ ------------
<S> <C> <C>
Minimum lease payments
receivable $231,749,050 $213,922,200
Unguaranteed residual value 146,045,268 146,045,268
------------ ------------
377,794,318 359,967,468
Less, unearned income 229,228,990 211,552,002
------------ ------------
$148,565,328 $148,415,466
============ ============
</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
2000 through 2004 and aggregate $213,922,200 through 2011.
-20-
<PAGE> 21
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. $60,261,014 of the mortgage notes bear
interest at a rate of 9.94% per annum with the remaining $33,755,266 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, 1999 and thereafter are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
<S> <C>
2000 $ 4,192,937
2001 4,644,658
2002 5,145,213
2003 5,699,903
2004 6,314,600
Thereafter 68,018,969
------------
Total $ 94,016,280
============
</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, 1999,
dividends paid per share were reported as follows for income tax purposes:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Ordinary income $ 11.46 $ 12.60 $ 13.71
Return of capital 1.86 .91 .12
-------- -------- --------
$ 13.32 $ 13.51 $ 13.83
======== ======== ========
</TABLE>
Dividends of $1,004,169 and $2,075 payable to Class A and Class B
shareholders, respectively, were declared and paid in February 2000.
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,
1998 and 1999 is approximately $114,000,000 and $100,615,000, respectively.
Based on projections of settlement costs, including prepayment charges, the
Company would not realize a benefit from refinancing the existing mortgage debt.
-21-
<PAGE> 22
MARCOURT INVESTMENTS INCORPORATED
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1999
<TABLE>
<CAPTION>
Initial Cost to Company
-----------------------------------
Personal
Description Encumbrances Land Property Buildings
----------- ------------ ---- --------- ---------
<S> <C> <C> <C> <C>
Direct Financing
Method:
Hotels leased to
Marriott Inter-
national, Inc. $94,016,280 $27,559,637 $14,199,292 $104,241,071
=========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Costs
Capitalized Increase In
Subsequent to Net
Description Acquisition (a) Investment (b) Total (c) Date Acquired
----------- --------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Direct Financing
Method:
Hotels leased to
Marriott Inter- February 10,
national, Inc. $45,268 $2,370,198 $148,415,466 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, 1999, the aggregate cost of real estate owned by
Marcourt Investments Incorporated for Federal income tax purposes is
$146,045,268.
-22-
<PAGE> 23
(a) 4. Exhibits:
The following exhibits are filed as part of this Report.
Documents other than those designated as being filed with this Form 10-K are
incorporated 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> 24
<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> 25
<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> 26
<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> 27
<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> 28
<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> 29
<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> 30
<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 31, 2000 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)
</TABLE>
-30-
<PAGE> 31
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- --------- -------------- -----------------------
<S> <C> <C>
K mart Texas Property dated October 19, 1990. to Registrant's Post
Effective Amendment No. 1
to Form S-11
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
</TABLE>
-31-
<PAGE> 32
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- --------- -------------- -----------------------
<S> <C> <C>
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
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> 33
<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
dated April 3, 1992
a. Store 287
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
dated April 3, 1992
a. Store 4281
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, 1999 the Company was not required
to file any reports on Form 8-K.
-33-
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company 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
04/07/2000 BY: /s/ John J. Park
- ------------- -------------------------------------
Date John J. Park
Executive Vice President 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
Company and in the capacities and on the dates indicated.
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
04/07/2000 BY: /s/ William P. Carey
- ------------- ------------------------------------
Date William P. Carey
Chairman of the Board
and Director
(Principal Executive Officer)
04/07/2000 BY: /s/ H. Augustus Carey
- ------------- ------------------------------------
Date H. Augustus Carey
President
04/07/2000 BY: /s/ Ralph G. Coburn
- ------------- ------------------------------------
Date Ralph G. Coburn
Director
04/07/2000 BY: /s/ George E. Stoddard
- ------------- ------------------------------------
Date George E. Stoddard
Director
04/07/2000 BY: /s/ William Ruder
- ------------- ------------------------------------
Date William Ruder
Director
04/07/2000 BY: /s/ Warren G. Wintrub
- ------------- ------------------------------------
Date Warren G. Wintrub
Director
04/07/2000 BY: /s/ John J. Park
- ------------- ------------------------------------
Date John J. Park
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
04/07/2000 BY: /s/ Claude Fernandez
- ------------- ------------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
-34-
<PAGE> 35
APPENDIX A TO FORM 10-K
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
AND SUBSIDIARIES
1999 ANNUAL REPORT
<PAGE> 36
SELECTED FINANCIAL DATA
(In thousands except per share amounts)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues $ 16,132 $ 15,506 $ 14,666 $ 14,462 $ 15,526
Income (loss) before
extraordinary items (1,076) 2,990 3,735 3,842 5,062
Net income (loss) (1,076) 2,990 7,585 5,480 5,062
Basic earnings (loss)
per share before (.15) .41 .52 .52 .66
extraordinary items (2)
Basic earnings (loss)
per share (2) (.15) .41 1.05 .74 .66
Dividends paid 5,976 5,982 5,294 5,232 5,419
Dividends declared
per share .83 .83 .73 .71 .71
Payment of mortgage
principal (1) 931 1,142 1,172 1,288 1,458
BALANCE SHEET DATA:
Total consolidated
assets 141,438 127,755 121,039 119,256 116,584
Long-term
obligations (3) 71,527 60,042 58,749 49,003 26,114
</TABLE>
(1) Represents scheduled mortgage principal amortization paid.
(2) The Company has a simple equity capital structure 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> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
The following discussion and analysis of financial condition and
results of operations of Corporate Property Associates 10 Incorporated
("CPA(R):10") should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 1999. The following
discussion includes forward looking statements. Forward looking statements,
which are based on certain assumptions, describe future plans, strategies and
expectations of CPA(R):10. Such statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievement of CPA(R):10 to be materially different from the results of
operations or plan expressed or implied by such forward looking statements.
Accordingly, such information should not be regarded as representations by
CPA(R):10 that the results or conditions described in such statements or
objectives and plans of CPA(R):10 will be achieved.
CPA(R):10 was formed in 1990 and used the proceeds from its public
offering of stock along with limited recourse mortgage financing to purchase
properties and enter into long-term net leases with corporate tenants. A
majority of CPA(R):10's net leases have been structured to place certain
economic burdens of ownership on these corporate tenants by requiring them to
pay the costs of maintenance and repair, insurance and real estate taxes. The
leases have generally been structured to include periodic rent increases that
are stated or based on increases in the consumer price index or, for retail
properties, provide for additional rents based on sales in excess of a specified
base amount.
As a real estate investment trust ("REIT"), CPA(R):10 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. A major objective of CPA(R):10 is to use the
cash flow from its net leases to fund dividends to shareholders at a rate in
excess of distributions needed to retain REIT status and meet its scheduled debt
service commitments on CPA(R):10's mortgage debt.
Public business enterprises are required to report financial and
descriptive information about their reportable operating segments. Operating
segments are components of an enterprise about which financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. Management
evaluates the performance of its portfolio of properties as a whole, rather than
by identifying discrete operating segments. This evaluation includes assessing
CPA(R):10's ability to meet distribution objectives, increase the dividend and
increase value by seeking opportunities such as refinancing mortgage debt at
lower rates of interest, restructuring leases or paying off lenders at a
discount to the face value of the outstanding mortgage balance.
Results of Operations
Net income for the years 1999 and 1998 is not fully comparable due to
several nonrecurring items including other income from a lease termination
settlement of $1,250,000, a net gain from dispositions of marketable equity
securities and properties of $124,000 and a noncash writedown of $412,000 in
1999 and an extraordinary gain of $1,638,000 in 1998 in connection with the
payment of a mortgage obligation. Excluding the effects of these items, income
would have reflected an increase of $258,000 or 7% as compared with 1998.
The increase in income as adjusted for the nonrecurring items described
above was primarily due to a decrease in interest expense, and an increase in
the equity income from CPA(R):10's investment in a master lease for thirteen
Courtyard by Marriott hotels. The decrease in interest expense was due to the
payoff in December 1999 of the mortgage loan encumbered by the properties
formerly leased to Harvest Foods, the paydown of a mortgage loan on a property
in Austin, Texas in August 1999 as well as the continuing amortization of
principal on CPA(R):10's limited recourse loans. The increase in equity income
resulted from increased percentage of sales rents from the Courtyard by Marriott
hotels and a continued trend of decreasing interest expense on the mortgage loan
on the Marriott properties. Lease revenues (rental income and interest income
from direct financing leases) decreased as a result of the termination of a
lease with CalComp Technology, Inc. Solely as a result of the termination of the
CalComp lease, annual lease revenues decreased by $446,000; however, percentage
of sales rents from the
-2-
<PAGE> 38
Company's leases for retail stores with Kmart Corporation and Wal-Mart Stores,
Inc. increased by $168,000 from 1998. Property and general and administrative
expenses were stable for the comparable periods.
CPA(R):10 received $1,250,000 from CalComp in connection with the lease
termination. The proceeds from the settlement were used to paydown the mortgage
to $315,000. In connection with paying down the loan, CPA(R):10 was able to
negotiate an extension of the loan maturity for one year until August 2000.
CPA(R):10 is currently remarketing the property. CPA(R):10 realized a $810,000
gain on the sale of its 81,460 shares of common stock of Titan Corporation and
$223,000 on the release from escrow of proceeds from the sale of Enviroworks
warrants. CPA(R):10 had exercised warrants it received in 1991 in connection
with structuring its net lease with Titan Corporation. CPA(R):10 also sold three
of its remaining vacant Harvest Foods properties and disposed of a fourth
property in March 2000. As of March 31, 2000, two former Harvest properties
remain vacant.
Net income for the years 1998 and 1997 is not fully comparable due to
the benefits realized from extraordinary gains in both years and other
nonrecurring items in 1997. Excluding the extraordinary items, the effect of
sales and several nonrecurring items reflected as other income in the
accompanying consolidated financial statements, income for 1998 decreased by
approximately $127,000 or 3%, compared with 1997. The decrease in income was
primarily due to increases in property and general administrative expenses, and,
to a lesser extent, a decrease in other interest income. These effects were
partially offset by a decrease in interest expense and an increase in income
from CPA(R):10's equity investment.
The increase in property expenses resulted primarily from the residual
effects of the termination of the Harvest Foods, Inc. master lease in March
1997. CPA(R):10 absorbed certain costs, such as real estate taxes and ground
lease expense, on vacant properties that had been obligations of the former
tenant. The increase in general and administrative expenses reflected
CPA(R):10's share of consulting costs related to Year 2000 remediation and a
project to make necessary upgrades to management information systems. The
decrease in other interest income was due to lower average cash balances. The
decrease in interest expense was due, in part, to the benefit from paying off
the two mortgage loans in 1997. The increase in equity income was the result of
higher percentage of sales rents from CPA(R):10's investment in a net lease for
13 Courtyard by Marriott hotel properties and decreasing mortgage interest on
its mortgage loan. Lease revenues (rental income from operating leases and
interest income from direct financing leases) were stable for 1998 as compared
with 1997. Annual cash flow benefited from the $59,000 rent increase with
EnviroWorks, Inc. that went into effect in April 1998.
The extraordinary gain in 1998 resulted from the extinguishment of debt
as the result of paying principal and accrued interest on the subordinated
mortgage loan on the former Harvest Foods properties and unpaid interest thereon
in December 1998 at a substantial discount. The lender accepted a payment of
$250,000 from CPA(R):10 in settlement of a $1,500,000 loan and approximately two
years of unpaid interest. By eliminating the remaining mortgages on the Harvest
Foods properties, CPA(R):10 was provided with greater flexibility in remarketing
vacant properties for lease or sale. Subsequently, four properties have been
sold.
Rent increases are scheduled in 2000 on the Information Resources,
Inc., Childtime Childcare, Inc. and Titan Corporation leases and in 2001 on the
Warehouse Associates lease. CPA(R):10 will realize additional operating cash
flow in the future if it is able to re-lease the two vacant properties formerly
leased to Harvest Foods or the former CalComp property in Austin, Texas.
Because of the long-term nature of CPA(R):10's net leases, inflation
and changing prices have not unfavorably affected CPA(R):10's revenues and net
income. CPA(R):10'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
CPA(R):10 uses the cash flow from its net leases to fund dividends to
shareholders and pay scheduled debt service payments on its limited recourse
mortgage debt. CPA(R):10 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 CPA(R):10's real estate portfolio. Cash
balances increased by $1,523,000 in 1999. Cash provided by operations of
$7,979,000 was used to fund dividend payments of $5,419,000 and pay scheduled
mortgage principal payments of $1,310,000.
-3-
<PAGE> 39
Mortgage principal installments of $148,000 were paid from cash
reserves. During 1999, CPA(R):10 realized cash proceeds of $2,471,000 from sales
including the sale of Titan common stock, the sale of three vacant properties
and the release of funds from escrow relating to the sale of warrants in 1997.
The warrants had been granted to CPA:10 in 1995 in connection with the
structuring of the net lease with Enviroworks, Inc.
CPA(R):10 currently has no commitments to fund major capital outlays at
its properties; however, CPA(R):10 is evaluating redevelopment opportunities at
its three vacant properties. To the extent that two of the properties are
unleveraged and the mortgage balance on the former CalComp property could be
paid from cash reserves, CPA(R):10 may be able to obtain mortgage debt to pay
for any necessary improvements. Whether any improvements are funded at these
properties during 2000 and the amount of any such improvements has not yet been
determined. CPA(R):10's leases with Kmart require that CPA(R):10 fund certain
improvements from time to time. No significant expenditures are anticipated at
the Kmart properties in 2000.
A balloon payment of $6,900,000 on a limited recourse loan
collateralized by six properties leased to Wal-Mart which had been scheduled to
be paid in January 1999 had been extended during 1999. CPA(R):10 has not paid
off the loan and continues to pay monthly debt service as it evaluates potential
refinancing opportunities. There is no assurance that CPA(R):10 will be able to
obtain new financing. Although the lender has the right to demand payment for
the entire outstanding balance at any time, the lender has not yet made a demand
for payment of the loan in its entirety. Monthly debt service on the Wal-Mart
loan is in excess of monthly base rent from the Wal-Mart leases; however, net
cash flow (rent less mortgage debt service) from the Wal-Mart leases is positive
solely because of the annual percentage of sales rent that CPA(R):10 receives.
CPA(R):10 currently does not have sufficient cash reserves to pay off
the Wal-Mart loans. It does, however, have unused borrowing capacity as several
of its properties are unleveraged, including a property leased to Safeway Stores
Incorporated and its three Kmart retail properties. The ability to releverage
the Kmart properties will depend on whether Kmart elects to extend its leases
which are currently scheduled for a renewal option in 2001. CPA(R):10 has a
balloon payment of $21,618,000 collateralized by properties net leased to
Information Resources, Inc. scheduled to be paid in October 2000. There is no
assurance that CPA(R):10 will be able to refinance the mortgage; however, the
initial term of the lease is in effect until September 2005. If necessary,
CPA(R):10 could seek recourse financing as well, however, CPA(R):10 does not
currently have plans to seek any form of recourse financing. CPA(R):10's
financing strategy has been to purchase substantially all of its properties with
a combination of equity and limited recourse mortgage debt. A lender on a
limited recourse mortgage loan has recourse only to the property collateralizing
such debt and not to any of CPA(R):10's other assets. This strategy has allowed
CPA(R):10 to diversify its portfolio of properties and, thereby, limit its risk.
In the event that a balloon payment comes due, CPA(R):10 may seek to refinance
the loan, restructure the debt with existing lenders, evaluate its ability to
pay the balloon payment from its cash reserves or sell the property and use the
proceeds to satisfy the mortgage debt.
Two tenants, Warehouse Associates and Neodata Corporation have purchase
options, exercisable in November 2000 and March 2001, respectively. Both options
are exercisable at the greater of (a) fair market value, as defined in the
leases, and (b) CPA(R):10's purchase price for the properties. CPA(R):10 has not
received any indication whether either tenant intends to exercise its option.
Annual cash flow from the Warehouse Associates and Neodata properties is
$565,000 and $262,000, respectively.
In connection with the purchase of its properties, CPA(R):10 requires
the sellers to perform environmental reviews. Management believes, based on the
results of such reviews, that CPA(R):10'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, CPA(R):10's leases generally
require tenants to indemnify CPA(R):10 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
CPA(R):10 to extend leases until such time as a tenant has satisfied its
environmental obligations. Certain of the leases allow CPA(R):10 to require
financial assurances from tenants such as performance bonds or letters of credit
if the costs of remediating environmental conditions are, in the estimation of
CPA(R):10, in excess of specified amounts. Accordingly,
-4-
<PAGE> 40
Management believes that the ultimate resolution of any environmental matter
will not have a material adverse effect on CPA(R):10's financial condition,
liquidity or results of operations.
In 1999, CPA(R):10 and its affiliates formed a task force to identify
year 2000 problems. The task force developed and implemented a plan that
included inventory, assessment, remediation, testing and contingency planning.
CPA(R):10 experienced no significant disruptions as a result of the year end
date change. The task force intends to monitor other critical dates in the
future, such as quarter-end dates. In connection with the procedures, CPA(R):10
incurred expenses of approximately $50,000. The impact of the year 2000 issues
on CPA(R):10 will continue to depend on the way the issues have been addressed
by third parties that provide services to CPA(R):10. To date CPA(R):10 has not
been adversely impacted to any significant extent by the failure of third
parties to address year 2000 issues. The task force has developed contingency
plans to address risks associated with year 2000 issues that may arise. There
can be no assurance that these plans will fully mitigate any problems, if any
arise. The foregoing year 2000 discussions constitute a Year 2000 Readiness
Disclosure within the meaning of the Year 2000 Readiness and Disclosure and
Disclosure Act of 1998.
-5-
<PAGE> 41
REPORT of INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Corporate Property Associates 10 Incorporated
and Subsidiaries:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of Corporate
Property Associates 10 Incorporated and Subsidiaries at December 31, 1998 and
1999, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the schedule of real estate and accumulated depreciation presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule 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 of these statements in
accordance with auditing standards generally accepted in the United States,
which 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, assessing the accounting principles
used and significant estimates made by the Advisor, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
New York, New York
April 7, 2000
-6-
<PAGE> 42
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
ASSETS:
Real estate leased to others:
Accounted for under the
operating method
Land $ 19,370,043 $ 18,741,001
Buildings 81,728,919 79,806,448
------------- -------------
101,098,962 98,547,449
Accumulated depreciation 13,541,345 15,453,482
------------- -------------
87,557,617 83,093,967
Net investment in direct financing leases 16,758,447 16,758,447
------------- -------------
Real estate leased to others 104,316,064 99,852,414
Equity investment 12,382,287 13,195,370
Cash and cash equivalents 1,770,478 3,293,827
Other assets, net of accumulated amortization of $145,939 and $188,725 in 1998
and 1999 and reserve for uncollected rents of $214,847 and
$321,008 in 1998 and 1999 787,077 242,561
------------- -------------
Total assets $ 119,255,906 $ 116,584,172
============= =============
LIABILITIES:
Limited recourse mortgage notes payable $ 58,748,585 $ 56,040,773
Accrued interest 472,220 346,858
Accounts payable and accrued expenses 479,388 373,139
Accounts payable to affiliates 1,912,233 2,809,276
Dividends payable 1,348,268 1,354,369
Prepaid rental income 27,365 59,301
------------- -------------
Total liabilities 62,988,059 60,983,716
------------- -------------
Minority interest 3,665,708 3,517,296
------------- -------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; authorized,
40,000,000 shares; 7,633,558 shares issued
and outstanding at December 31, 1998 and 1999 7,633 7,633
Additional paid-in capital 66,530,408 66,530,408
Dividends in excess of accumulated earnings (13,993,711) (14,357,101)
Accumulated other comprehensive income 155,589
------------- -------------
52,699,919 52,180,940
Less, common stock in treasury at cost,
11,902 shares at December 31, 1998 and 1999 (97,780) (97,780)
------------- -------------
Total shareholders' equity 52,602,139 52,083,160
------------- -------------
Total liabilities and
shareholders' equity $ 119,255,906 $ 116,584,172
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-7-
<PAGE> 43
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
CONSOLIDATED STATEMENTS of INCOME
For the years ended December 31,
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $ 11,888,835 $ 12,152,866 $ 11,963,273
Interest income from direct financing leases 2,407,527 2,196,996 2,191,568
Other interest income 231,946 103,928 106,470
Other income 137,314 8,611 1,265,000
------------ ------------ ------------
14,665,622 14,462,401 15,526,311
------------ ------------ ------------
Expenses:
Interest 6,467,266 6,130,144 5,768,896
Depreciation and amortization 2,095,105 2,088,450 2,067,153
General and administrative 1,176,887 1,334,847 1,399,327
Property expenses 2,028,904 2,339,075 2,313,189
Writedown to fair value 412,067
------------ ------------ ------------
11,768,162 11,892,516 11,960,632
------------ ------------ ------------
Income before minority interest,
equity income, gain (loss) on sale
and extraordinary items 2,897,460 2,569,885 3,565,679
Minority interest in income (607,472) (636,617) (651,949)
------------ ------------ ------------
Income before equity income, gain
on sale and extraordinary items 2,289,988 1,933,268 2,913,730
Income from equity investment 1,806,760 1,908,256 2,024,156
------------ ------------ ------------
Income before gain (loss) on sales and
extraordinary items 4,096,748 3,841,524 4,937,886
Gain on sale of securities 285,987 1,033,415
Gain (loss) on sale of real estate 105,131 (909,260)
Subordinated disposition fees (753,156)
------------ ------------ ------------
Income before extraordinary items 3,734,710 3,841,524 5,062,041
Extraordinary gain on early extinguishment of debt 3,850,490 1,638,375
------------ ------------ ------------
Net income $ 7,585,200 $ 5,479,899 $ 5,062,041
============ ============ ============
Basic earnings per common share:
Income before extraordinary item $ .52 $ .52 $ .66
Extraordinary item .53 .22
------------ ------------ ------------
Net income per common share $ 1.05 $ .74 $ .66
============ ============ ============
Weighted average shares outstanding 7,206,642 7,408,957 7,621,656
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
-8-
<PAGE> 44
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
CONSOLIDATED STATEMENTS of SHAREHOLDERS' EQUITY
For the years ended December 31,
<TABLE>
<CAPTION>
Dividends In Accumulated
Additional Excess Of Other
Common Paid-in Comprehensive Accumulated Comprehensive Treasury
Stock Capital Income Earnings Income Stock Total
----- ------- ------ -------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
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)
Comprehensive income:
Net income $7,585,200 7,585,200 7,585,200
==========
Balance at
------ ----------- ------------ -------- -------- -----------
December 31, 1997 7,217 62,160,058 (12,893,753) (88,092) 49,185,430
416,264 shares issued,
$.001 par 416 4,370,350 4,370,766
Dividends (6,579,857) (6,579,857)
Repurchase of 1,250
shares (9,688) (9,688)
Comprehensive income:
Net income $5,479,899 5,479,899 5,479,899
Other comprehensive
income:
Unrealized appreciation,
of marketable
securities for 1998 155,589 $155,589 155,589
----------
$5,635,488
==========
Balance at
------ ----------- ------------ -------- -------- ------------
December 31, 1998 7,633 66,530,408 (13,993,711) 155,589 (97,780) 52,602,139
Dividends (5,425,431) (5,425,431)
Comprehensive income:
Net income $5,062,041 5,062,041 5,062,041
Other comprehensive income:
Change in unrealized
appreciation resulting
from sale of securities (155,589) (155,589) (155,589)
---------- -------
$4,906,452
==========
Balance at
------ ----------- ------------ -------- -------- -----------
December 31, 1999 $7,633 $66,530,408 $(14,357,101) -- $(97,780) $52,083,160
====== =========== ============ ======== ======== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-9-
<PAGE> 45
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
CONSOLIDATED STATEMENTS of CASH FLOWS
For the years ended December 31,
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,585,200 $ 5,479,899 $ 5,062,041
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,095,105 2,088,450 2,067,153
Straight-line adjustments and other noncash
rent adjustments 74,577 8,811 5,237
Minority interest in income 607,472 636,617 651,949
Income from equity investment in excess of
dividends received (640,380) (725,199) (813,083)
Extraordinary gain on early extinguishment of debt (3,850,490) (1,638,375)
Provision for uncollected rents 107,223 107,624 106,161
Gain on sale of real estate and securities, net (391,118) (124,155)
Accrual of subordinated disposition fees 753,156
Writedown to fair value 412,067
Net change in operating assets and liabilities 926,034 1,109,826 612,127
------------ ------------ ------------
Net cash provided by operating activities 7,266,779 7,067,653 7,979,497
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of real estate and securities 1,480,259 2,471,355
Purchase of marketable securities (285,110)
Payments received on note receivable 110,750
------------ ------------ ------------
Net cash provided by (used in)
investing activities 1,591,009 (285,110) 2,471,355
------------ ------------ ------------
Cash flows from financing activities:
Advances on line of credit 1,600,000
Payments on mortgage principal (1,172,236) (1,287,986) (1,457,812)
Prepayments of mortgage payable and
advances on line of credit (7,050,000) (250,000) (1,250,000)
Purchase of treasury stock (9,688)
Distributions paid to minority partners (785,583) (841,325) (800,361)
Dividends paid (5,294,000) (5,231,589) (5,419,330)
------------ ------------ ------------
Net cash used in financing activities (12,701,819) (7,620,588) (8,927,503)
------------ ------------ ------------
Net (decrease) increase in cash
and cash equivalents (3,844,031) (838,045) 1,523,349
Cash and cash equivalents, beginning of year 6,452,554 2,608,523 1,770,478
------------ ------------ ------------
Cash and cash equivalents, end of year $ 2,608,523 $ 1,770,478 $ 3,293,827
============ ============ ============
</TABLE>
Noncash operating and financing activity:
During the year ended December 31, 1998, the Company issued 416,264 shares of
common stock to the Advisor in settlement of $4,370,766 of performance fees that
had been voluntarily deferred by the Advisor.
The accompanying notes are an integral part of the consolidated financial
statements.
-10-
<PAGE> 46
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
controlling interests in two 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 accounting
principles generally accepted in the United States 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 and investments. 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.
-11-
<PAGE> 47
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 - generally 40 years.
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.
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, 1998 and 1999 were held in the custody of
two financial institutions, and which at times exceed federally
insurable limits. The Company mitigates this risk by depositing funds
with major financial institutions.
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.
The Company's marketable equity securities, which consisted of 81,460
shares of common stock of the Titan Corporation at December 31, 1998,
were classified as available-for-sale securities and were reported at
fair value with the Company's interest in unrealized gains and losses
on these securities reported as a separate component of shareholders'
equity (accumulated other comprehensive income) until realized. As of
December 31, 1998, the Company's cost basis in Titan Corporation common
stock was $285,110 and at fair value reflected unrealized appreciation
of $155,589 at that date. The Company disposed of its marketable equity
securities in 1999.
Treasury Stock:
Treasury stock is recorded at cost.
Earnings Per Share:
The Company has a simple equity capital structure, with only common
stock outstanding. As a result, the Company has presented basic
per-share amounts only in the accompanying consolidated financial
statements.
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.
-12-
<PAGE> 48
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
Operating Segments:
Accounting standards have been established for the way public business
enterprises report selected information about operating segments and
guidelines for defining the operating segment of an enterprise. Based
on the standards' definitions, the Company has concluded that it
engages in a single operating segment.
Reclassification:
Certain 1997 and 1998 amounts have been reclassified to conform to the
1999 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").
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 Advisory
Agreement with the Advisor. Asset management fees, payable to the
Advisor, were $746,250, $807,050 and $798,868 in 1997, 1998 and 1999,
respectively, with performance fees for such periods in like amounts.
Payment of the performance fee is subordinated to achievement of a
cumulative dividend return of 8% (based on an initial issuance of
Company stock at $10 per share). For the period subsequent to September
30, 1997, the cumulative dividend return criterion has not been met and
performance fees aggregating $1,388,065 are not currently payable until
such time as the dividend return criterion is achieved again. The
unpaid performance fees have been accrued and are included in accounts
payable to affiliates in the accompanying consolidated financial
statements.
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. General and
administrative expense reimbursements were $600,514, $603,846 and
$576,918 in 1997, 1998 and 1999, respectively.
The Advisor will be entitled to receive subordinated disposition fees
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 Advisor's interest in such disposition fees amounts to
$824,031 through December 31, 1999. Payment of such amount, however,
cannot be made until the subordination provisions are met. Management
has concluded that payment of such disposition fees is probable and all
fees from completed property sales have been accrued. Subordinated
disposition fees are included in the determination of realized gain or
loss on the sale of properties. The obligation for disposition fees is
included in accounts payable to affiliates in the accompanying
consolidated financial statements.
-13-
<PAGE> 49
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
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 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 Advisory Agreement, the Advisor
will have an obligation to reimburse the Company for such excess,
subject to certain conditions.
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 gross revenues. Expenses incurred in 1997, 1998 and 1999 were
$115,002, $97,128 and $124,629, 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 $11,026,000 in
2000, $10,783,000 in 2001, $10,183,000 in 2002; $9,952,000 in 2003;
$9,960,000 in 2004; and aggregate approximately $82,158,000 through
2016.
Contingent rents were approximately $995,000, $1,202,000 and $1,341,000
in 1997, 1998 and 1999, respectively.
5. Net Investment in Direct Financing Leases:
Net investment in direct financing leases is summarized as follows:
<TABLE>
<CAPTION>
December 31,
1998 1999
---- ----
<S> <C> <C>
Minimum lease payments
receivable $35,640,462 $33,581,337
Unguaranteed residual value 16,886,552 16,886,552
----------- -----------
52,527,014 50,467,889
Less, Unearned income 35,768,567 33,709,442
----------- -----------
$16,758,447 $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 2000 through 2004 and aggregate
approximately $33,851,000 through 2017.
Contingent rents were approximately $132,000, $138,000 and $132,000 in
1997, 1998 and 1999, respectively.
The Company is committed under long-term ground leases that have
expiration dates ranging from June 2004 to January 2011. Future minimum
ground lease rent obligations aggregate approximately $630,000.
-14-
<PAGE> 50
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
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 $87,016,000. As of
December 31, 1999, mortgage notes payable have interest rates varying
from 8.75% to 10.7% per annum and mature between 2000 and 2013.
Scheduled principal payments during each of the five years following
December 31, 1999 and thereafter are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
2000 $29,926,499
2001 8,161,753
2002 995,618
2003 8,828,657
2004 2,588,824
Thereafter 5,539,422
-----------
Total $56,040,773
===========
</TABLE>
Interest paid was $6,342,805, $6,142,995 and $5,894,258, in 1997, 1998
and 1999, respectively.
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, 1997, 1998 and 1999,
dividends paid per share reported for tax purposes were as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Ordinary income $ .59 $ .70 $ .40
Capital gains .03 -- .14
Return of capital .11 .01 .17
----- ----- -----
$ .73 $ .71 $ .71
===== ===== =====
</TABLE>
A dividend of $.1777 per share for the quarter ended December 31, 1999
($1,354,369) was declared in December 1999 and paid in January 2000.
8. Lease Revenues:
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>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Per Statements of operations:
Rental income from operating leases $ 11,888,835 $ 12,152,866 $ 11,963,273
Interest income from direct financing leases 2,407,527 2,196,996 2,191,568
Adjustments:
Rental income attributable to
minority interests (1,927,963) (1,942,872) (1,942,872)
Share of interest income from equity
investment's direct financing lease 4,387,948 4,432,772 4,459,039
------------ ------------ ------------
$ 16,756,347 $ 16,839,762 $ 16,671,008
============ ============ ============
</TABLE>
-15-
<PAGE> 51
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
For the years ended December 31, 1997, 1998 and 1999, 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>
1997 % 1998 % 1999 %
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Marriott International, Inc. (1) $ 4,387,948 26% $ 4,432,772 26% $ 4,459,039 27%
Information Resources
Incorporated (2) 2,916,014 17 2,916,014 17 2,916,004 17
Titan Corporation (2) 2,065,826 12 2,131,336 13 2,131,336 13
New WAI, L.P./
Warehouse Associates 1,452,530 9 1,452,700 9 1,447,272 9
EnviroWorks, Inc. 1,387,757 8 1,431,656 8 1,446,289 9
Wal-Mart Stores, Inc. 970,948 6 1,013,389 6 1,070,245 6
Kmart Corporation 860,465 5 898,077 5 1,009,966 6
Childtime Childcare Inc. 800,205 5 805,454 5 805,454 5
Centrobe, Inc. 587,728 4 588,563 4 589,732 4
Affiliated Foods Southwest,
Inc. (3) 51,953 145,679 1 224,515 1
US West Communications, Inc. 222,600 1 222,600 1 222,600 1
Kroger Co. (3) 164,555 1 206,806 1 206,806 1
Safeway Stores Incorporated 141,750 1 141,750 1 141,750 1
Harvest Foods, Inc. (3) 302,044 2
CalComp Technology, Inc. 443,024 3 446,366 3
Other 1,000 6,600
----------- ---- ----------- ---- ----------- ----
$16,756,347 100% $16,839,762 100% $16,671,008 100%
=========== ==== =========== ==== =========== ====
</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 expense of approximately $158,000 for each of the
years 1997 through 1999.
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,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Assets $149,413 $149,150 $148,905
Liabilities 102,826 99,315 95,451
Shareholders' equity 46,587 49,835 53,454
Revenues 18,650 18,743 18,843
Interest and other expenses 10,827 10,496 10,107
Net income 7,823 8,247 8,736
Dividends paid 4,929 4,999 5,117
Cash provided from operating activities 7,839 8,357 8,875
</TABLE>
-16-
<PAGE> 52
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
10. Gains on Sale of Real Estate and Securities:
In 1997, subsequent to the termination of its master lease with Harvest
Foods, Inc. ("Harvest"), the Company sold three vacant properties and
recognized a gain on sales of $105,131. In 1999, the Company sold three
vacant properties formerly leased to Harvest for $1,152,830 and
recognized a loss on sale of $909,260. The Company sold a vacant
Harvest property in Clarksdale, Mississippi in March 2000 for a nominal
amount and has recognized an impairment loss in 1999 of $412,067 in
connection with the agreement to sell the property.
In March 1995, the Company entered into a net lease with EnviroWorks
Inc. ("EnviroWorks") and in connection with structuring the lease
transaction was granted warrants to purchase 577,000 shares of
EnviroWork's common stock at a per share exercise price of $1.50. In
December 1997 EnviroWorks' parent company was acquired by Fiskars, Inc.
("Fiskars"), and the Company was required to exercise and sell its
shares with the Company realizing a gain on sale of securities in 1997
of $285,987. Additional proceeds from the sale of shares were placed in
an escrow account with release of funds subject to any post-closing
adjustments in connection with Fiskars' purchase price for EnviroWorks.
In May 1999, a final distribution of $223,272 was released from the
escrow account at which time the Company recognized a realized gain
equal to the amount received.
In connection with structuring its net lease with the Titan Corporation
("Titan") in 1991, the Company was granted warrants to purchase 81,460
shares of Titan common stock. The warrants were exercisable at $3.50
per share through July 1998. In 1998, the Company used $285,110 to
exercise the warrants, and in December 1999, the Company sold its Titan
shares for $1,095,253 and recognized a realized gain of $810,143.
11. Extraordinary Gains on Extinguishment of Debt:
In June 1997, the Company paid off the first priority mortgage loan
collateralized by the properties formerly leased to Harvest. The lender
accepted a payment of $3,850,000 as a settlement of an outstanding
balance of $4,277,447. In connection with the prepayment, the Company
recognized an extraordinary gain on the early extinguishment of debt of
$427,447. On December 22, 1998, the holder of a limited recourse
subordinated mortgage note on the former Harvest properties agreed to
accept a payment of $250,000 from the Company in satisfaction of the
$1,500,000 mortgage loan obligation and accrued interest thereon of
$388,375. In connection with the payoff of the subordinated mortgage
loan, the Company recognized an extraordinary gain on the
extinguishment of debt of $1,638,375 in 1998.
In January 1991, the Company and an affiliate, Corporate Property
Associates 9, L.P. ("CPA(R):9") formed a limited partnership with a
68.085% general partnership interest, and a 31.915% limited partnership
interest, respectively, and purchased a property in Stamford
Connecticut. A limited recourse mortgage loan assumed in connection
with the purchase was scheduled to mature on September 1, 1995 with a
balloon payment due at that time. In 1995, the lease for the property
was not renewed and the Company was unsuccessful in its efforts to
remarket the property and find a new lessee. The Company concluded that
the fair value was less than the outstanding balance of the mortgage
loan, and attempted to negotiate a restructuring of the loan, but, the
lender did not agree to any of the Company's proposals. In December
1996, the Boards of Directors of CPA(R):9 and the Company approved a
transaction that allowed the Company to transfer its entire general
partnership interest in the limited partnership to CPA(R):9 for nominal
consideration. The transfer allowed the Company to recognize a capital
loss for tax purposes in 1996, partially offsetting gains from the sale
of other properties. For financial reporting purposes, a gain of
$3,423,043 resulting from the transfer of liabilities in excess of
assets was deferred pending the disposition of the Stamford property by
CPA(R):9. In September 1997, the lender completed a foreclosure action
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 to defer its gain were eliminated.
Accordingly, the Company recognized an extraordinary gain in 1997 of
$3,423,043.
-17-
<PAGE> 53
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
12. Property in Austin, Texas:
In January 1999, CalComp Technology, Inc. ("CalComp"), the lessee of a
property in Austin, Texas announced its intention to liquidate and
stopped paying its rent. In response to CalComp's action, the Company
initiated litigation against CalComp seeking judgment for all unpaid
and future rents plus associated costs. The Company also entered into
discussions with CalComp to negotiate a settlement in recognition of
the fact that it could take an extended period to obtain a resolution
to the litigation. On August 5, 1999, the Company and CalComp agreed to
a settlement. Under the terms of the agreement, the Company agreed to
withdraw its lawsuits with prejudice and to terminate the CalComp lease
in consideration for a lump sum payment from CalComp of $1,250,000.
This amount was recognized in 1999 as other income in the accompanying
consolidated financial statements.
The limited recourse mortgage loan collateralized by the Austin
property matured in August 1999 at which time a scheduled balloon
payment was due. In October 1999, the Company agreed to use the lease
termination proceeds of $1,250,000 to reduce the outstanding balance on
the loan from $1,564,538 to $314,538. In consideration for the payment,
the lender agreed to modify the loan to provide for monthly debt
service installments of interest only rather than installments of
interest and principal and to extend the maturity of the loan until
August 2000 at which time the balloon payment for the outstanding
principal balance is scheduled.
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, 1998 and 1999 was approximately $62,161,000 and
$56,575,000, 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 or
lease guarantor 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.
14. Accounting Pronouncement:
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", effective January 1,
2000, which establishes accounting and reporting standards for
derivative instruments. The Company believes that upon adoption SFAS
will not have a material impact on the consolidated financial
statements.
-18-
<PAGE> 54
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
SCHEDULE of REAL ESTATE and ACCUMULATED DEPRECIATION
as of December 31, 1999
<TABLE>
<CAPTION>
Costs
Initial Cost to Capitalized Decrease in
Company Subsequent to Net
--------------------
Description Encumbrances Land Buildings Acquisition (a) 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. 21,839,878 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. 969,647 2,279,146 957
Office building leased
to Titan Corporation 9,604,882 3,906,546 15,883,454 17,948
Retail stores leased to
Wal-Mart Stores, Inc. 6,774,269 807,423 6,864,802 87,746
Retail store leased
to Safeway Stores
Incorporated 334,595 943,790 14,621
Office/manufacturing
facilities formerly leased to
CalComp Technology, Inc. 314,538 751,453 2,536,047
Manufacturing/warehouse/
office facilities leased to
Centrobe, Inc. Services, Inc. 2,554,268 379,917 497,114 3,159,798
Manufacturing/distribution
facility leased to
EnviroWorks, Inc. 5,091,011 1,045,856 10,135,098
Retail stores - vacant 808,800 4,246,200 1,172 $(3,622,548)
Supermarkets leased
to Affiliated Foods
Southwest, Inc. 343,120 1,801,380 497 (454,368)
----------- ----------- ----------- ----------- -----------
$47,148,493 $19,044,249 $65,502,324 $18,077,792 $(4,076,916)
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Life on which
Depreciation
in Latest
Gross Amount at which Carried Statement of
at Close of Period (c) Accumulated Operations
----------------------------------------
Description Land Buildings Total Depreciation Date Acquired is Computed
----------- ---- --------- ----- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Operating Method:
Office/repair facility
leased to The
US West September 18,
Communications, Inc. $ 509,550 $ 1,597,771 $ 2,107,321 $ 371,066 1990 40 yrs.
Office buildings leased to
Information September 28,
Resources, Inc. 4,992,731 30,650,315 35,643,046 6,861,937 1990 40 yrs.
Retail stores leased October 19 & 29,
to Kmart Corporation 2,944,072 5,082,446 8,026,518 1,077,458 1990 40 yrs.
Land leased to Childtime January 4,
Childcare, Inc. 2,280,103 2,280,103 1991 N/A
Office building leased
to Titan Corporation 3,910,145 15,897,803 19,807,948 3,361,629 July 9, 1991 40 yrs.
Retail stores leased to December 19,
Wal-Mart Stores, Inc. 816,658 6,943,313 7,759,971 1,395,879 1991 40 yrs.
Retail store leased
to Safeway Stores December 19,
Incorporated 340,274 952,732 1,293,006 191,535 1991 40 yrs.
Office/manufacturing
facilities formerly leased to
CalComp Technology, Inc. 751,453 2,536,047 3,287,500 483,434 May 28, 1992 40 yrs.
Manufacturing/warehouse/
office facilities leased to
Centrobe, Inc. Services, Inc. 379,917 3,656,912 4,036,829 462,614 October 1, 1992 40 yrs.
Manufacturing/distribution
facility leased to
EnviroWorks, Inc. 1,045,856 10,135,098 11,180,954 1,087,412 March 22, 1995 40 yrs.
Retail stores - vacant 353,440 1,080,184 1,433,624 73,656 February 21,
1992 40 yrs.
Supermarkets leased
to Affiliated Foods
Southwest, Inc. 416,802 1,273,827 1,690,629 86,862 February 21, 40 yrs.
----------- ----------- ----------- ----------- 1992
$18,741,001 $79,806,448 $98,547,449 $15,453,482
=========== =========== =========== ===========
</TABLE>
See accompanying notes to Schedule.
-19-
<PAGE> 55
CORPORATE PROPERTY ASSOCIATES 10 INCORPORATED
and SUBSIDIARIES
SCHEDULE of REAL ESTATE and ACCUMULATED DEPRECIATION
as of December 31, 1999
<TABLE>
<CAPTION>
Costs
Initial Cost to Capitalized Decrease In
Company Subsequent to Net
Description Encumbrances Land Buildings Acquisition (a) Investment (b)
----------- -------------- ---- --------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Direct Financing Method:
Daycare centers
leased to Childtime
Childcare, Inc. $1,397,430 $ 3,284,644 $ 1,379
Office/warehouse
facility leased
to New WAI L.P./
Warehouse Associates 7,494,850 $ 307,745 10,442,255 1,277,029
Supermarket leased
to Kroger Company 251,760 1,321,740 $(128,105)
---------- ---------- ----------- ---------- ---------
$8,892,280 $ 559,505 $15,048,639 $ 1,278,408 $(128,105)
========== ========= =========== =========== =========
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at which Carried
at Close of Period
Description Total Date Acquired
----------- ----- -------------
<S> <C> <C>
Direct Financing Method:
Daycare centers
leased to Childtime
Childcare, Inc. $ 3,286,023 January 4, 1991
Office/warehouse
facility leased
to New WAI L.P./
Warehouse Associates 12,027,029 March 27, 1991
Supermarket leased
to Kroger Company 1,445,395 February 21, 1992
-----------
$16,758,447
===========
</TABLE>
See accompanying notes to Schedule.
-20-
<PAGE> 56
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, 1999, the aggregate cost of real estate owned by the
Company and its subsidiaries for Federal income tax purposes is
$61,470,183.
Reconciliation of Real Estate Accounted
for Under the Operating Method
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
---- ----
<S> <C> <C>
Balance at beginning
of year $101,098,962 $101,098,962
Writedown to fair value (434,384)
Dispositions (2,117,129)
------------ ------------
Balance at close of
year $101,098,962 $ 98,547,449
============ ============
</TABLE>
Reconciliation of Accumulated Depreciation
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
---- ----
<S> <C> <C>
Balance at beginning
of year $11,498,122 $13,541,345
Depreciation expense 2,043,223 2,024,367
Writedown to fair value (22,317)
Dispositions (89,913)
------------ ------------
Balance at close of
year $13,541,345 $15,453,482
=========== ===========
</TABLE>
-21-
<PAGE> 57
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)
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
</TABLE>
-22-
<PAGE> 58
<TABLE>
<CAPTION>
NAME OF LEASE TYPE OF OWNERSHIP
OBLIGOR TYPE OF PROPERTY LOCATION INTEREST
------- ---------------- -------- --------
<S> <C> <C> <C>
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
Vacant Retail Stores Hot Springs and Ownership of a 50%
-3 locations Texarakana, Arkansas interest in land
and Clarksdale, and buildings
Mississippi except as noted (2)
KROGER CO. Supermarkets North Little Rock
- 2 locations and Conway, Arkansas Ownership of a 50%
interest in land
and buildings
except as noted (1)(2)
AFFILIATED FOODS Supermarkets Little Rock - 3, and Ownership of a 50%
SOUTHWEST, INC. - 4 locations Hope, Arkansas interest in land
and buildings
except as noted (1)(2)
Vacant Office/ Austin, Ownership of a 50%
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 and North Little
Rock.
-23-
<PAGE> 59
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, 1999,
there were 4,290 holders of record of the shares of the company.
The Company is required to distribute annually its distributable REIT
taxable income, as 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
1996.
<TABLE>
<CAPTION>
Cash Dividends Paid Per Share
-----------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
First quarter $.2075 $.1761 $.1769
Second quarter .1755 .1763 .1771
Third quarter .1757 .1765 .1773
Fourth quarter .1759 .1767 .1775
------ ------ ------
$.7346 $.7056 $.7088
====== ====== ======
</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, 1999 as filed with the Securities and Exchange Commission.
-24-
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
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 10-5 (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.
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.
ORS 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,293,827
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,293,827
<PP&E> 115,305,896
<DEPRECIATION> 16,758,447
<TOTAL-ASSETS> 116,584,172
<CURRENT-LIABILITIES> 4,942,943
<BONDS> 56,040,773
0
0
<COMMON> 7,633
<OTHER-SE> 52,075,527
<TOTAL-LIABILITY-AND-EQUITY> 116,584,172
<SALES> 0
<TOTAL-REVENUES> 15,526,311
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,673,508
<LOSS-PROVISION> 518,228
<INTEREST-EXPENSE> 5,768,896
<INCOME-PRETAX> 5,062,041
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,062,041
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,062,041
<EPS-BASIC> .66
<EPS-DILUTED> .66
</TABLE>
