<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1996
_________________________________________________
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from _______________________ to _____________________
Commission file number 0-18750
__________________________________________________________
CORPORATE PROPERTY ASSOCIATES 9, L.P., a DELAWARE LIMITED PARTNERSHIP
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 13-3489133
________________________________________________________________________________
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(212) 492-1100
________________________________________________________________________________
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [_] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[_] Yes [_] No
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
INDEX
Page No.
--------
PART I
- - ------
Item 1. - Financial Information*
Balance Sheets, December 31, 1995 and
March 31, 1996 2
Statements of Income for the three
months ended March 31, 1995 and 1996 3
Statements of Cash Flows for the three
months ended March 31, 1995 and 1996 4
Notes to Financial Statements 5-8
Item 2. - Management's Discussion of Operations 9
PART II
- - -------
Item 6. - Exhibits and Reports on Form 8-K 10
Signatures 11
*The summarized financial information contained herein is unaudited;
however in the opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included.
-1-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
PART I
------
Item 1. - FINANCIAL INFORMATION
-------------------------------
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
------------- -------------
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land and buildings, net of
accumulated depreciation of
$9,659,357 at December 31, 1995 and
$9,916,280 at March 31, 1996 $ 60,944,732 $ 59,637,090
Net investment in direct
financing leases 31,538,834 31,578,394
Equity investments 5,849,154 5,750,199
Real estate held for sale 883,242
Cash and cash equivalents 1,657,504 1,689,893
Accrued interest and rents receivable 333,285 338,788
Other assets 748,056 698,415
------------ ------------
Total assets $101,071,565 $100,576,021
============ ============
LIABILITIES:
Mortgage notes payable $ 59,726,129 $ 59,373,359
Accrued interest payable 376,498 360,748
Accounts payable and accrued expenses 117,890 112,619
Accounts payable to affiliates 1,584,863 1,597,798
Prepaid rental income 34,477 10,514
------------ ------------
Total liabilities 61,839,857 61,455,038
------------ ------------
PARTNERS' CAPITAL:
General Partners (1,225,950) (1,240,145)
Limited Partners (59,918 Limited
Partnership Units issued and
outstanding) 40,457,658 40,361,128
------------ ------------
Total partners' capital 39,231,708 39,120,983
------------ ------------
Total liabilities and
partners' capital $101,071,565 $100,576,021
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
Note: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date.
-2-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1995 March 31, 1996
-------------- --------------
<S> <C> <C>
Revenues:
Rental income from operating leases $2,034,219 $2,101,037
Interest income from direct financing leases 891,089 933,832
Other interest income 22,396 15,015
---------- ----------
2,947,704 3,049,884
---------- ----------
Expenses:
Interest on mortgages 1,384,736 1,352,429
Depreciation 424,400 424,400
General and administrative 137,752 101,605
Property expense 96,539 24,116
Amortization 9,578 9,578
---------- ----------
2,053,005 1,912,128
---------- ----------
Income before income from
equity investments 894,699 1,137,756
Income from equity investments 175,244 163,068
---------- ----------
Net income $1,069,943 $1,300,824
========== ==========
Net income allocated to
General Partners $ 106,994 $ 130,082
========== ==========
Net income allocated to
Limited Partners $ 962,949 $1,170,742
========== ===========
Net income per Unit
(59,918 Limited
Partnership Units) $ 16.07 $ 19.54
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------
1995 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,069,943 $1,300,824
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 433,978 433,978
Other noncash items (73,834) (34,063)
Net change in operating assets and liabilities (23,306) (2,986)
---------- ----------
Net cash provided by operating activities 1,406,781 1,697,753
---------- ----------
Cash flows from investing activities:
Distributions received in excess of income
from equity investments 117,866 98,955
----------- ----------
Net cash provided by investing activities 117,866 98,955
----------- ----------
Cash flows from financing activities:
Distributions to partners (1,401,422) (1,411,549)
Payments on mortgage principal (138,629) (352,770)
----------- -----------
Net cash used in financing activities (1,540,051) (1,764,319)
----------- -----------
Net (decrease) increase in cash and cash equivalents (15,404) 32,389
Cash and cash equivalents, beginning of period 1,655,454 1,657,504
----------- -----------
Cash and cash equivalents, end of period $ 1,640,050 $ 1,689,893
=========== ===========
Supplemental disclosure of cash flows information:
Interest paid $ 1,385,192 $ 1,368,179
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Basis of Presentation:
---------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. For
further information, refer to the financial statements and footnotes thereto
included in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1995.
Note 2. Distributions to Partners:
-------------------------
Distributions declared and paid or payable to partners during the three months
ended March 31, 1996 are as follows:
Quarter Ended General Partners Limited Partners Per Limited Partnership Unit
- - ------------- ---------------- ---------------- ----------------------------
December 31, 1995 $144,277 $1,267,272 $21.15
======== ========== ======
A distribution of $21.18 per Limited Partnership Unit for the quarter ended
March 31, 1996 was declared and paid in April 1996.
Note 3. Transactions with Related Parties:
---------------------------------
For the three-month periods ended March 31, 1995 and 1996, the Partnership
incurred leasing fees of $52,625 and $3,574, respectively, and general and
administrative expense reimbursements of $30,184 and $22,406, respectively,
payable to an affiliate.
The Partnership, in conjunction with certain affiliates, is a participant in a
cost sharing agreement for the purpose of renting and occupying office space.
Under the agreement, the Partnership pays its proportionate share of rent and
other costs of occupancy. Net expenses incurred for the three months ended March
31, 1995 and 1996 were $46,866 and $25,637, respectively.
-5-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Note 4. Industry Segment Information:
----------------------------
The Partnership's operations consist of the direct and indirect investment in
and the leasing of industrial and commercial real estate. The financial
reporting sources of leasing revenues for the three-month periods ended March
31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Per Statements of Income:
Rental income from operating leases $2,034,219 $2,101,037
Interest from direct financing leases 891,089 933,832
Adjustments:
Share of rental income from equity
investments' operating leases 652,755 570,648
---------- ----------
$3,578,063 $3,605,517
========== ==========
</TABLE>
For the three-month periods ended March 31, 1995 and 1996, the Partnership
earned its proportionate net leasing revenues from its investments from the
following lease obligors:
<TABLE>
<CAPTION>
1995 % 1996 %
---------- ------- ---------- ----
<S> <C> <C> <C> <C>
Lease Obligor:
Detroit Diesel Corporation $ 665,620 19% $ 729,077 20%
Dr Pepper Bottling Company of Texas 499,750 14 499,750 14
Furon Company 429,776 12 435,284 12
Information Resources, Inc. (a) 342,830 10 364,447 10
Red Bank Distribution, Inc. 328,369 9 350,141 10
Orbital Sciences Corporation 294,090 8 294,090 8
Amerisig, Inc. (formerly ASG Acquisition Corp.) 290,343 8 288,207 8
NVRyan L.P. 253,112 7 274,072 8
The Titan Corporation (a) 114,881 3 114,881 3
Child Time Childcare, Inc. 95,322 3 95,322 3
General Electric Company (a) 91,320 3 91,320 3
Federal Express Corporation 44,373 1 44,373 1
PepsiCo, Inc. 24,553 24,553
Xerox Corporation (a) 103,724 3
---------- ------ ---------- -----
$3,578,063 100% $3,605,517 100%
========== ====== ========== ===
</TABLE>
(a) Represents the Partnership's proportionate share of rental
revenue from an equity investment in which the above named
company is the lease obligor.
-6-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Note 5. Equity Investments :
-------------------
Summarized combined financial information of the Partnership's equity
investments is as follows:
<TABLE>
<CAPTION>
(in thousands)
December 31, March 31,
1995 1996
---------------- ----------
<S> <C> <C>
Land and buildings, net of
accumulated depreciation $56,128 $55,783
Other assets, net of amortization 531 479
Mortgage notes payable 37,151 37,021
Other liabilities 325 324
Partners' capital 19,183 18,917
<CAPTION>
Three Months Ended
March 31, 1995 March 31, 1996
------------------------------
<S> <C> <C>
Revenue $ 2,156 $ 1,896
Interest and other expenses (1,133) (965)
Depreciation and amortization (399) (346)
------- -------
Net income $ 624 $ 585
======= =======
</TABLE>
Note 6. Property leased to ASG Acquisition Corp.:
----------------------------------------
The Partnership owns a 73.57% interest as a tenant-in-common with Corporate
Property Associates 8 ("CPA(R):8"), an affiliate, which owns the remaining
interest in a property in Dekalb County, Georgia which had been leased to a
subsidiary of ASG Acquisition Corp. ("ASG"). The Partnership and CPA(R):8
entered into litigation against Heller Financial, Inc. ("Heller"), a creditor of
ASG, asserting that in 1992 the assets of ASG and the subsidiary were
transferred to a newly formed operating company controlled by Heller in lieu of
foreclosure. The newly formed subsidiary entered into a short-term sublease for
the property. The Partnership and CPA(R):8 informed Heller at that time that its
actions were contrary to the lease, and, therefore, not permissible. The
Partnership's offer to allow the operating company formed by Heller to assume
the lease and for Heller to provide a guaranty of the lease obligation was
rejected. The Partnership and CPA(R):8 also alleged that the sublease was made
with the intent of defrauding the Partnership and CPA(R):8.
On May 2, 1996, the Partnership and CPA(R):8 reached a settlement with Heller
and its wholly-owned subsidiary, Amerisig, Inc. ("Amerisig"), the successor
company to ASG. Under the settlement, all parties have agreed to mutual releases
which will result in the withdrawal of all litigation among the parties. A new
lease was executed, and Amerisig executed a guaranty and suretyship agreement
which unconditionally guarantees the lease obligation.
The annual rent on the Dekalb property will remain at $797,000 (of which the
Partnership's share is approximately $586,360) plus debt service on the mortgage
loan; however, there will be no rent increases until January 2005. The lease
term will expire in 2009, which was the scheduled expiration under the prior ASG
lease.
-7-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Also on May 2, 1996, the mortgage lender agreed to extend the maturity on the
mortgage loan collateralized by the Dekalb property from January 1997 to April
2001. As restated, the loan provides for monthly principal installments along
with interest payable at an annual rate of the London Inter-Bank Offered Rate
plus 3%. The loan currently has a balance of $6,397,435 (of which the
Partnership's share is $4,706,593).
Note 7. Properties leased to Furon Company:
----------------------------------
In January 1990, the Partnership and CPA(R):8 purchased nine properties as
tenants-in-common with 67.72% and 32.28% ownership interests, respectively, and
entered into a master lease with Furon Company ("Furon"). In August 1993, the
Partnership and CPA(R):8 consented to Furon's sublease of two properties in
Liverpool and Twinsburg, Ohio to IER Industries, Inc. ("IER") through July 2007,
the end of Furon's initial lease term. In connection with consenting to the
sublease, the Partnership granted IER a purchase option on the two subleased
properties in consideration for an irrevocable payment of $75,000 (of which the
Partnership's share was $50,790). The $75,000 paid in 1993 would be credited to
the IER's purchase price for the properties if the option were exercised.
On February 15, 1996, IER notified the Partnership and CPA(R):8 that it was
exercising its option and would seek to complete the purchase on or about July
8, 1996. The sublease provides that the purchase price will be the greater of
fair market value determined pursuant to an appraisal process or the sum of (i)
$1,450,000 and (ii) any prepayment premium resulting from any mandatory
prepayment to the lender on the mortgage loan collateralized by the nine Furon
properties. The appraisal process has been started; however, no determination
has yet been made as to fair market value. In the event that the properties are
sold, the Partnership's share of Furon's rent will be reduced by $115,993. In
connection with the proposed transaction, the $883,242 carrying value of the
Twinsburg and Liverpool properties has been reclassified as real estate held for
sale.
-8-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS
-----------------------------------------------
Results of Operations:
- - ---------------------
Net income for the three-month period ended March 31, 1996 increased by $231,000
(22%) as compared with the prior year's three-month period. The increase in net
income was due to an increase in lease revenues and decreases in interest,
general and administrative and property expenses. Lease revenues benefitted from
rent increases in July 1995, August 1995 and January 1996 on the Partnership's
leases with Detroit Diesel Corporations ("Detroit Diesel"), Red Bank
Distribution, Inc. ("Red Bank") and NVRyan, L.P. The decrease in interest
expense was due to the commencement of principal payments on the Detroit Diesel
mortgage loan in December 1995 and continuing amortization of other of the
Partnership's mortgage loans. The decrease in general and administrative
expenses was due to the lower Partnership office expenses, and the decrease in
property expenses was due to expiration of the five-year leasing fee period on
substantially all of the Partnership's leases. Approximately $1,500,000 of the
fees incurred to date has not yet been paid to the Corporate General Partner.
The decrease in equity income is due to the loss of income from the
Partnership's investment in a property formerly leased to Xerox Corporation. The
Partnership's equity investment in this property was written off in September
1995. The reduction in equity income was partially offset by a rent increase on
the Partnership's equity investment in a property leased to Information
Resources, Inc.
Financial Condition:
- - -------------------
There has been no material change in the Partnership's financial condition since
December 31, 1995. Cash provided from operations and equity investments was
sufficient to pay distributions and mortgage principal installments. The
Partnership has resolved the uncertainties relating to the Amerisig, Inc.
("Amerisig") property by entering into a settlement agreement. Under the
settlement agreement, a disputed short-term sublease was eliminated, a lease was
executed which lease term extends through 2009 and Amerisig provided an
unconditional guarantee of the lease obligation. In addition, the maturity of
the mortgage loan collateralized by the Amerisig property has been extended from
1997 until 2001. The ability of the Partnership to maintain its current cash
position is affected by whether the Partnership can pay off a limited recourse
loan on the Red Bank property of approximately $2,800,000 which is due on demand
and the Corporate General Partner's continued voluntary deferral of leasing fees
of $1,500,000. The Red Bank lender has not made demands for payment and the
Partnership has continued to pay monthly debt service. The Partnership can seek
to refinance the loan or seek alternative financing. The Partnership's ability
to retain its rate of distributions could be impacted by this uncertainty.
-9-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
PART II
-------
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
- - ------------------------------------------
(a) Exhibits:
None.
(b) Reports on Form 8-K:
During the quarter ended March 31, 1996, the Partnership was not
required to file any reports on Form 8-K.
-10-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Partnership has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
By: NINTH CAREY CORPORATE PROPERTY, INC.
5/13/96 By: /s/ Claude Fernandez
-------------- ------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
5/13/96 By: /s/ Michael D. Roberts
-------------- -------------------------------
Date Michael D. Roberts
First Vice President and Controller
(Principal Accounting Officer)
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1689893
<SECURITIES> 0
<RECEIVABLES> 338788
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 698415
<PP&E> 102015006
<DEPRECIATION> 9916280
<TOTAL-ASSETS> 100576021
<CURRENT-LIABILITIES> 2081679
<BONDS> 59373359
0
0
<COMMON> 0
<OTHER-SE> 39120983
<TOTAL-LIABILITY-AND-EQUITY> 100576021
<SALES> 0
<TOTAL-REVENUES> 3049884
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 559699
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1352429
<INCOME-PRETAX> 1300824
<INCOME-TAX> 0
<INCOME-CONTINUING> 1300824
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1300824
<EPS-PRIMARY> 19.54
<EPS-DILUTED> 19.54
</TABLE>
