<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 JUNE 30, 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
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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 (I.R.S. Employer
incorporation or organization) Identification No.)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 492-1100
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [_] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [_] Yes [_] No
<PAGE>
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
June 30, 1996 2
Statements of Income for the three and six
months ended June 30, 1995 and 1996 3
Statements of Cash Flows for the six
months ended June 30, 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, June 30,
1995 1996
------------- -------------
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land and buildings, net of
accumulated depreciation of
$9,659,357 at December 31, 1995 and
$10,334,198 at June 30, 1996 $ 60,944,732 $ 59,219,472
Net investment in direct
financing leases 31,538,834 31,618,696
Real estate held for sale 883,242
Equity investments 5,849,154 5,653,209
Cash and cash equivalents 1,657,504 1,483,479
Accrued interest and rents receivable 333,285 430,703
Other assets 748,056 743,366
------------ ------------
Total assets $101,071,565 $100,032,167
============ ============
LIABILITIES:
Mortgage notes payable $ 59,726,129 $ 59,010,475
Accrued interest payable 376,498 368,518
Accounts payable and accrued expenses 117,890 78,198
Accounts payable to affiliates 1,584,863 1,606,574
Prepaid rental income 34,477 10,514
------------ ------------
Total liabilities 61,839,857 61,074,279
------------ ------------
PARTNERS' CAPITAL:
General Partners (1,225,950) (1,253,332)
Limited Partners (59,918 Limited
Partnership Units issued and
outstanding) 40,457,658 40,211,220
------------ ------------
Total partners' capital 39,231,708 38,957,888
------------ ------------
Total liabilities and
partners' capital $101,071,565 $100,032,167
============ ============
</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 Six Months Ended
June 30, 1995 June 30, 1996 June 30, 1995 June 30, 1996
------------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income from
operating leases $2,038,285 $2,101,364 $4,072,504 $4,202,401
Interest from direct
financing leases 891,721 934,281 1,782,810 1,868,113
Other interest income 9,404 14,191 31,800 29,206
---------- ---------- ---------- ----------
2,939,410 3,049,836 5,887,114 6,099,720
---------- ---------- ---------- ----------
Expenses:
Interest on mortgages 1,391,513 1,354,648 2,776,249 2,707,077
Depreciation 424,399 417,618 848,799 842,018
General and administrative 122,241 134,554 259,993 236,159
Property expenses 281,656 49,619 378,195 73,735
Amortization 9,579 13,847 19,157 23,425
---------- ---------- ---------- ----------
2,229,388 1,970,286 4,282,393 3,882,414
---------- ---------- ---------- ----------
Income before income
from equity investments 710,022 1,079,550 1,604,721 2,217,306
Income from equity
investments 171,260 163,963 346,504 327,031
---------- ---------- ---------- ----------
Net income $ 881,282 $1,243,513 $1,951,225 $2,544,337
========== ========== ========== ==========
Net income allocated
to General Partners $ 88,128 $ 124,352 $ 195,122 $ 254,434
========== ========== ========== ==========
Net income allocated
to Limited Partners $ 793,154 $1,119,161 $1,756,103 $2,289,903
========== ========== ========== ==========
Net income per Unit
(59,918 Limited
Partnership Units) $13.24 $18.68 $29.31 $38.22
====== ====== ====== ======
</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>
Six Months Ended
June 30
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,951,225 $2,544,337
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 867,956 865,443
Other noncash items (148,299) (68,868)
Net change in operating assets and liabilities 45,347 (177,071)
---------- ----------
Net cash provided by operating activities 2,716,229 3,163,841
---------- ----------
Cash flows from investing activities:
Distributions received in excess of income
from equity investments 236,275 195,945
----------- -----------
Net cash provided by investing activities 236,275 195,945
----------- -----------
Cash flows from financing activities:
Distributions to partners (2,804,841) (2,818,157)
Payments on mortgage principal (278,480) (715,654)
----------- -----------
Net cash used in financing activities (3,083,321) (3,533,811)
----------- -----------
Net decrease in cash and cash equivalents (130,817) (174,025)
Cash and cash equivalents, beginning of period 1,655,454 1,657,504
----------- -----------
Cash and cash equivalents, end of period $ 1,524,637 $ 1,483,479
=========== ===========
Supplemental disclosure of cash flows information:
Interest paid $ 2,773,229 $ 2,715,057
=========== ===========
</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 six
months ended June 30, 1996 are as follows:
<TABLE>
<CAPTION>
Quarter Ended General Partners Limited Partners Per Limited Partner Unit
- ------------- ---------------- ---------------- ------------------------
<S> <C> <C> <C>
December 31, 1995 $140,808 $1,267,272 $21.15
======== ========== ======
March 31, 1996 $141,008 $1,269,069 $21.18
======== ========== ======
</TABLE>
A distribution of $21.20 per Limited Partner Unit for the quarter ended
June 30, 1996 was declared and paid in July 1996.
Note 3. Transactions with Related Parties:
---------------------------------
For the three-month and six-month periods ended June 30, 1995, the
Partnership incurred leasing fees of $46,163 and $98,788, respectively, and
general and administrative expense reimbursements of $12,457 and $42,641,
respectively. For the three-month and six-month periods ended June 30,
1996, the Partnership incurred leasing fees of $3,446 and $7,020,
respectively, and general and administrative expense reimbursements of
$26,487 and $48,893, respectively.
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 six
months ended June 30, 1995 and 1996 were $60,449 and $49,625, 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 six-month periods ended June
30, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Per Statements of Income:
Rental income from operating leases $4,072,504 $4,202,401
Interest from direct financing leases 1,782,810 1,868,113
Adjustments:
Share of rental income from equity
investments' operating leases 1,305,509 1,141,296
---------- ----------
$7,160,823 $7,211,810
========== ==========
</TABLE>
For the six-month periods ended June 30, 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 $1,331,240 19% $1,458,153 20%
Dr Pepper Bottling Company of Texas 999,500 14 999,500 14
Furon Company 859,553 12 873,319 12
Information Resources, Inc. (a) 685,660 10 728,894 10
Red Bank Distribution, Inc. 656,736 9 700,283 10
Orbital Sciences Corporation 588,180 8 588,180 8
Amersig, Inc. (formerly ASG
Acquisition Corp.) 584,755 8 573,699 8
NVRyan L.P. 506,855 7 548,885 8
The Titan Corporation (a) 229,762 3 229,762 3
Child Time Childcare, Inc. 190,643 3 190,643 3
General Electric Company (a) 182,640 3 182,640 3
Federal Express Corporation 88,746 1 88,746 1
PepsiCo, Inc. 49,106 49,106
Xerox Corporation (a) 207,447 3
---------- ------ ---------- ----
$7,160,823 100% $7,211,810 100%
========== ====== ========== ====
</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 financial information of the Partnership's equity investments in
two limited partnerships and a joint venture is as follows:
<TABLE>
<CAPTION>
(in thousands)
December 31, June 30,
1995 1996
------------- --------
<S> <C> <C>
Land and buildings, net of
accumulated depreciation $56,128 $55,437
Other assets, net of amortization 531 428
Mortgage notes payable 37,151 36,889
Other liabilities 325 319
Capital 19,183 18,657
<CAPTION>
Six Months Ended
June 30, June 30,
1995 1996
-------- --------
<S> <C> <C>
Revenue $ 4,312 $ 3,791
Interest, depreciation, amortization
and other expenses 3,078 2,620
------- -------
Net income $ 1,234 $ 1,171
======= =======
</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 at that time 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.
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 litigation among the
parties has been withdrawn and a new lease was executed with a wholly-owned
subsidiary of Amerisig. Amerisig has unconditionally guaranteed the lease
obligations of its subsidiary.
The annual rent on the Amerisig lease, which is equivalent to the rent
under the prior lease, consists of (a) an equity component of $797,000 (of
which the Partnership's share is approximately $586,360) and (b) an amount
equal to the debt service on the mortgage loan. A rent increase scheduled
for January 2005 will be based on a formula indexed to increases in the
Consumer Price Index. The initial term will expire in 2009 with an option
for five five-year renewal terms.
Also on May 2, 1996, the mortgage lender agreed to extend the maturity from
January 1997 to April 2001 on the existing mortgage loan collateralized by
the Dekalb property and by a lease assignment. The restated loan provides
for monthly principal installments of $12,234 along with interest payable
at an annual rate of the London Inter-Bank Offered Rate plus 3%.
- 7 -
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
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
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 purchase option. The sublease provides that the option
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 sales transaction is expected to occur during the third quarter with a
portion of the sales proceeds applied as a mandatory mortgage prepayment on
the Furon mortagage loan. As of June 30, 1996, the $883,242 carrying value
of the Twinsburg and Liverpool properties is classified as real estate held
for sale in the accompanying financial statements. After the sale of the
properties, Furon's annual rental obligation will be reduced by $171,283,
of which the Partnership's share will be $115,993.
- 8 -
<PAGE>
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS
-----------------------------------------------
Results of Operations:
- ---------------------
Net income increased by $362,000 and $593,000 for the three-month and
six-month periods ended June 30, 1996, respectively, as compared with net
income for the three-month and six-month periods ended June 30, 1995. The
increases for the three-month and six-month periods ended June 30, 1996
were due to an increase in lease revenues and decreases in interest and
property expenses. Lease revenues increased due to rent increases during
the third quarter of 1995 on the Partnership's leases with Detroit Diesel
Corporation ("Detroit Diesel") and Red Bank Distribution, Inc. ("Red Bank")
and increases during the first quarter of 1996 on the Partnership's leases
with NV Ryan, L.P. and Furon Company ("Furon"). The decrease in interest
expense was due to the commencement of principal payment installments on
the Detroit Diesel mortgage loan in December 1995 as well as the effect of
continuing amortization of other of the Partnership's mortgage loans. The
decrease in property expenses was due to the expiration of the five-year
leasing fee period on substantially all of the Partnership's leases
throughout 1995 and 1996 and the successful resolution of the Partnership's
dispute with Heller Financial, Inc. ("Heller") in May 1996 in regard to the
status of the ASG Acquisition Corp. ("ASG") lease. Solely as a result of
the aforementioned rent increases, annual cash flow has increased by
$458,000. After the sale of two Furon properties which is expected to
occur in the third quarter, annual rentals will decrease by $116,000.
Financial Condition:
- -------------------
There has been no material change in the Partnership's financial
condition since December 31, 1995. Cash balances decreased by $174,000 as
cash generated by operations and from equity investments were less than the
total of distributions and mortgage principal payment installments paid.
The Partnership expects to realize a reduction in litigation costs and more
stable lease revenues from the resolution of its dispute with Heller. A
new long-term lease was executed with Amerisig, Inc. ("Amerisig"), an
affiliate of Heller, maintaining lease revenues at their prior level and
eliminating the prospect of an early termination of the lease term. In
addition, the maturity of the limited recourse mortgage loan on the
Amerisig property and related balloon payment was rescheduled from 1997 to
2001. As there are no additional rent increases scheduled on any of the
Partnership properties until 1997, the Partnership's cash flow from
operations is not expected to increase; however, the Partnership evaluates
market conditions for debt refinancing opportunities which could serve to
increase cash flow. In addition, the Partnership's cash position will
benefit if the sale of two properties leased to Furon pursuant to a
purchase option by Furon's subtenant is completed.
The Partnership is still subject to the uncertainty related to a limited
recourse mortgage loan of approximately $2,800,000 which is collateralized
by the Partnership's property leased to Red Bank and is due on demand.
Although the loan has matured, the lender is continuing to accept monthly
debt service installments; however, the lender retains the right to demand
payment in full at any time. The Partnership will continue to seek to
restructure the existing loan or refinance the mortgage. The Partnership
may seek recourse financing if no other source of cash is available to pay
the Red Bank loan. The Partnership's ability to sustain the current rate
of distributions is also affected by the Corporate General Partner's
continued deferral of the collection of $1,524,000 of leasing fees. As the
leasing fee period on substantially all leases has expired, the amounts due
to Corporate General Partner are not expected to significantly increase.
- 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 June 30, 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.
8/7/96 By: /s/ Claude Fernandez
-------------- ------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
8/7/96 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 JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,483,479
<SECURITIES> 0
<RECEIVABLES> 430,703
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,914,182
<PP&E> 101,172,366
<DEPRECIATION> 10,334,198
<TOTAL-ASSETS> 100,032,167
<CURRENT-LIABILITIES> 2,063,804
<BONDS> 59,010,475
0
0
<COMMON> 0
<OTHER-SE> 38,957,888
<TOTAL-LIABILITY-AND-EQUITY> 100,032,167
<SALES> 0
<TOTAL-REVENUES> 6,099,720
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,151,912
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,707,077
<INCOME-PRETAX> 2,544,337
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,544,337
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,544,337
<EPS-PRIMARY> 38.22
<EPS-DILUTED> 38.22
</TABLE>
