<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to _________________
Commission file number 0-18750
CORPORATE PROPERTY ASSOCIATES 9, L.P., A DELAWARE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 13-3489133
<S> <C>
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
(Address of principal executive offices) (Zip Code)
</TABLE>
(212) 492-1100
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
/X/ Yes / / No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
/ / Yes / / No
<PAGE> 2
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I
Item 1. - Financial Information*
Balance Sheets, December 31, 1996 and
June 30, 1997 2
Statements of Income for the three and six
months ended June 30, 1996 and 1997 3
Statements of Cash Flows for the six
months ended June 30, 1996 and 1997 4
Notes to Financial Statements 5-7
Item 2. - Management's Discussion of Operations 8
PART II
Item 6. - Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
*The summarized financial information contained herein is unaudited; however in
the opinion of management, all adjustments necessary for a fair presentation of
such financial information have been included.
- 1 -
<PAGE> 3
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
PART I
Item 1. - FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------ -----------
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land and buildings, net of accumulated
depreciation of $11,169,434 at
December 31, 1996 and
$8,987,764 at June 30, 1997 $ 58,384,238 $ 45,755,820
Net investment in direct
financing leases 31,682,628 43,537,935
Equity investments 5,460,825 5,273,658
Cash and cash equivalents 1,436,555 1,122,813
Other assets 1,553,739 1,879,499
------------ ------------
Total assets $ 98,517,985 $ 97,569,725
============ ============
LIABILITIES:
Mortgage notes payable $ 57,669,975 $ 57,058,416
Accrued interest payable 347,772 301,538
Accounts payable and accrued expenses 78,500 71,212
Accounts payable to affiliates 1,648,110 1,691,817
Prepaid rental income 10,514 10,514
------------ ------------
Total liabilities 59,754,871 59,133,497
------------ ------------
PARTNERS' CAPITAL:
General Partners (1,273,499) (1,306,187)
Limited Partners (59,918 Limited
Partnership Units issued and
outstanding) 40,036,613 39,742,415
------------ ------------
Total partners' capital 38,763,114 38,436,228
------------ ------------
Total liabilities and
partners' capital $ 98,517,985 $ 97,569,725
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date.
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<PAGE> 4
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1997 June 30, 1996 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income from
operating leases $2,101,364 $2,063,483 $4,202,401 $4,125,063
Interest from direct
financing leases 934,281 924,071 1,868,113 1,847,195
Other interest income 14,191 6,632 29,206 17,890
---------- ---------- ---------- ----------
3,049,836 2,994,186 6,099,720 5,990,148
---------- ---------- ---------- ----------
Expenses:
Interest on mortgages 1,354,648 1,299,126 2,707,077 2,609,755
Depreciation 417,618 400,683 842,018 818,302
General and administrative 134,554 193,039 236,159 343,871
Property expenses 49,619 21,464 73,735 29,805
Amortization 13,847 13,826 23,425 23,890
---------- ---------- ---------- ----------
1,970,286 1,928,138 3,882,414 3,825,623
---------- ---------- ---------- ----------
Income before income
from equity investments 1,079,550 1,066,048 2,217,306 2,164,525
Income from equity
investments 163,963 168,406 327,031 336,731
---------- ---------- ---------- ----------
Net income $1,243,513 $1,234,454 $2,544,337 $2,501,256
========== ========== ========== ==========
Net income allocated
to General Partners $ 124,352 $ 123,446 $ 254,434 $ 250,126
========== ========== ========== ==========
Net income allocated
to Limited Partners $1,119,161 $1,111,008 $2,289,903 $2,251,130
========== ========== ========== ==========
Net income per Unit
(59,918 Limited
Partnership Units) $ 18.68 $ 18.54 $ 38.22 $ 37.57
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 5
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1996 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,544,337 $ 2,501,256
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 865,443 842,192
Other noncash items (68,868) (34,197)
Net change in operating assets and liabilities (177,071) (249,881)
------------ ------------
Net cash provided by operating activities 3,163,841 3,059,370
------------ ------------
Cash flows from investing activities:
Distributions received from equity investments
in excess of equity income 195,945 187,167
------------ ------------
Net cash provided by investing activities 195,945 187,167
------------ ------------
Cash flows from financing activities:
Distributions to partners (2,818,157) (2,828,142)
Deferred refinancing costs (120,578)
Proceeds from mortgages 8,600,440
Prepayments of mortgages payable (8,436,142)
Payments on mortgage principal (715,654) (775,857)
------------ ------------
Net cash used in financing activities (3,533,811) (3,560,279)
------------ ------------
Net decrease in cash and cash equivalents (174,025) (313,742)
Cash and cash equivalents, beginning of period 1,657,504 1,436,555
------------ ------------
Cash and cash equivalents, end of period $ 1,483,479 $ 1,122,813
============ ============
Supplemental disclosure of cash flows information:
Interest paid $ 2,715,057 $ 2,655,989
============ ============
During the six-month period ended June 30, 1997, a lease
was reclassified as follows:
Land and buildings, net of accumulated
depreciation of $2,999,972 $(11,810,116)
Net investment in direct
financing leases 11,810,116
------------
$ --
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 6
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, 1996.
Note 2. Distributions to Partners:
Distributions declared and paid or payable to partners during the six months
ended June 30, 1997 are as follows:
<TABLE>
<CAPTION>
Quarter Ended General Partners Limited Partners Per Limited Partner Unit
------------- ---------------- ---------------- ------------------------
<S> <C> <C> <C>
December 31, 1996 $141,407 $1,272,664 $21.24
======== ========== ======
March 31, 1997 $141,407 $1,272,664 $21.24
======== ========== ======
</TABLE>
A distribution of $21.24 per Limited Partner Unit for the quarter ended June 30,
1997 was declared and paid in July 1997.
Note 3. Transactions with Related Parties:
For the three-month and six-month periods ended June 30, 1996, the Partnership
incurred leasing fees of $3,446 and $7,020, respectively, and general and
administrative expense reimbursements of $26,487 and $48,893, respectively. For
the three-month and six-month periods ended June 30, 1997, the Partnership did
not incur any leasing fees and incurred general and administrative expense
reimbursements of $49,585 and $100,293, 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, 1996 and 1997 were $49,625 and $43,375, respectively.
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<PAGE> 7
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,
1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Per Statements of Income:
Rental income from operating leases $4,202,401 $4,125,063
Interest from direct financing leases 1,868,113 1,847,195
Adjustments:
Share of rental income from equity
investments' operating leases 1,141,296 1,141,296
---------- ----------
$7,211,810 $7,113,554
========== ==========
</TABLE>
For the six-month periods ended June 30, 1996 and 1997, the Partnership earned
its proportionate net leasing revenues from its investments from the following
lease obligors:
<TABLE>
<CAPTION>
1996 % 1997 %
---- ---- ---- --
<S> <C> <C> <C> <C>
Lease Obligor:
Detroit Diesel Corporation $1,458,153 20% $1,458,153 20%
Dr Pepper Bottling Company of Texas 999,500 14 999,500 14
Furon Company 873,319 12 818,074 12
Information Resources, Inc. (a) 728,894 10 728,894 10
Red Bank Distribution, Inc. 700,283 10 700,283 10
Orbital Sciences Corporation 588,180 8 588,180 8
Amerisig, Inc. 573,699 8 551,880 8
NVRyan L.P. 548,885 8 514,213 7
The Titan Corporation (a) 229,762 3 229,762 3
Childtime Childcare, Inc. 190,643 3 204,123 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 1
---------- ---- ---------- ---
$7,211,810 100% $7,113,554 100%
========== ==== ========== ====
</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.
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,
1996 1997
---- ----
<S> <C> <C>
Assets $55,073 $54,279
Liabilities 36,932 36,631
Partners' capital 18,141 17,648
</TABLE>
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<PAGE> 8
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1996 June 30, 1997
------------- -------------
<S> <C> <C>
Revenue $3,791 $3,791
Interest, depreciation, amortization
and other expenses 2,620 2,587
------ ------
Net income $1,171 $1,204
====== ======
</TABLE>
Note 6. Properties Leased to Furon Company:
The Partnership and CPA(R):8, an affiliate, own properties leased to Furon
Company ("Furon") with 67.72% and 32.28% interests, respectively. On June 20,
1997, the Furon lease was restated and amended in connection with a transaction
which resulted in the Partnership and CPA(R):8 relinquishing ownership of
properties in Mt. Pleasant, Texas and Milwaukee, Wisconsin in exchange for a
property in Aurora, Ohio. No cash was paid or received in connection with the
exchange. As amended, the initial lease was extended by five years from July
2007 to July 2012. The Partnership's share of annual rent of $1,636,149 was
unchanged and the next rent increase is scheduled for February 1999.
In connection with the exchange of properties, the Partnership and CPA(R):8
refinanced an existing limited recourse loan of $8,436,142 collateralized by the
Furon properties which bore interest at an annual interest rate of 10.40% and
obtained a new limited recourse loan of $8,600,440. The new loan will initially
require monthly payments of interest and principal of $78,403 at an annual
interest rate of 8.42% and is amortized on a 17-1/2 year schedule. If Furon's
credit rating is downgraded, the annual interest rate on the loan may be
increased to 9.02%. In July 2002, the interest rate is scheduled to be reset to
the Treasury Yield Percentage plus 5%. The loan will mature in July 2012, at
which time a balloon payment will be due. The mortgage lenders have the right to
exercise a put option in July 2002 which would, if exercised, require the
Partnership and CPA(R):8 to purchase the loan. The Partnership and CPA(R):8 may
prepay the loan without any prepayment premium on the interest reset date.
As a result of the refinancing, annual cash flow will increase by $54,685. As
the exchange of properties is a nonmonetary transaction for financial reporting
purposes, no gain or loss has been recognized.
Note 7. Property Leased to Red Bank Distribution, Inc.:
On May 26, 1997, the Partnership declared Red Bank Distribution, Inc. ("Red
Bank") in default of its lease obligations as a result of Red Bank's continued
failure to pay its rent in a timely manner. In June 1997, the Partnership filed
suit against Red Bank in the Court of Common Pleas of Hamilton County, Ohio
seeking its remedies against Red Bank as provided for in the Red Bank lease.
Such remedies include, but are not limited to, an acceleration of all future
rents for the remainder of the lease term or requiring Red Bank to make an
irrevocable offer to purchase its leased property. The Partnership has notified
sublessees at the Red Bank property that under the Partnership's rights of
assignment, that all sublease rentals are to be paid directly to the
Partnership.
As a result of the lease default, an outstanding limited recourse mortgage loan
of $2,669,534 is in default and is subject to acceleration. Such loan has been
subject to various short-term extensions and has already matured. The lender has
continued to accept monthly payments and has not given any notice of demand for
the Partnership to make a balloon payment for the outstanding balance. There is
no assurance; however, that the lender will not demand full payment of the loan.
Red Bank continues to pay the portion of rent applicable to this mortgage debt
in a timely manner. A subordinated limited recourse purchase money mortgage loan
of $2,634,120 is held by Red Bank.
As of June 30, 1997, Red Bank's rent arrearage was $240,624. As of August 11,
1997, Red Bank had not responded to the lawsuit, and the Partnership is
determining whether it will seek a default judgment.
- 7 -
<PAGE> 9
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 and six-month periods ended June 30, 1997
reflected decreases of 1% and 2%, respectively, as compared with the three-month
and six-month periods ended June 30, 1996. The decreases were primarily due to
an increase in general and administrative expenses and a decrease in lease
revenues. These effects were partially offset by a decrease in interest and
property expenses. The increase in general and administrative expenses was
primarily due to an increase in administrative reimbursements to affiliates. The
decrease in lease revenues was due to a rent reduction on the Furon Company
lease in the third quarter of 1996 in connection with the sale of two
properties. The decrease in interest expense was due to the partial prepayment
of the mortgage loan on the Furon property from the proceeds of the
aforementioned sale and the December 1996 refinancing of the mortgage loan on
the Childtime Childcare, Inc. properties. The decrease in property expenses was
due to legal costs incurred in 1996 in connection with the resolution of a
dispute with Amerisig, Inc.
Solely as a result of the June 1997 refinancing of the limited recourse
mortgage loan on the Furon properties, annual cash flow will increase by
approximately $55,000.
Financial Condition:
There has been no material change in the Partnership's financial condition
since December 31, 1996. Cash provided from operations and equity investments of
$3,246,000 was sufficient to pay distributions to partners of $2,828,000 and
$418,000 of scheduled mortgage principal installments of $776,000. As such cash
flow was not fully sufficient to fund the entire amount needed for distributions
and mortgage principal installments, there has been no increase in the
distribution rate during 1997. The refinancing of the mortgage loan on the Furon
properties at a lower rate of interest will result in a benefit to cash flow;
however, Management will need to continue to monitor cash flow in order to
determine whether the current distribution rate can be sustained. Cash flow also
continues to be negatively affected by the rent arrearage from Red Bank
Distribution, Inc. The Partnership has commenced action against Red Bank by
declaring the lease in default and filing a lawsuit against Red Bank seeking
remedies for such default. A limited recourse loan on the Red Bank property of
$2,670,000 is subject to acceleration; however, the lender has not given notice
of acceleration. The Partnership's cash position has benefited from the
Corporate General Partner's continuing its voluntary, temporary deferral of the
collection of $1,510,000 of accrued leasing fees. As of June 30, 1997, such
deferred amounts exceed the Partnership's cash balances. Accordingly, the
ability to maintain cash balances at their current level is dependent on the
Corporate General Partner's forbearance in collection of amounts due and the Red
Bank mortgage lender's continuing to accept monthly debt service installments on
the loan subject to acceleration.
The General Partners are continuing to investigate ways to provide
liquidity for limited partners on a tax-effective basis.
- 8 -
<PAGE> 10
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, 1997, the Partnership was not
required to file any reports on Form 8-K.
- 9 -
<PAGE> 11
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.
08/11/97 By: /s/ Steven M. Berzin
--------------- ------------------------------------------
Date Steven M. Berzin
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
08/11/97 By: /s/ Claude Fernandez
--------------- ------------------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
08/11/97 By: /s/ Michael D. Roberts
--------------- ------------------------------------------
Date Michael D. Roberts
First Vice President and Controller
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,122,813
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,122,813
<PP&E> 98,281,519
<DEPRECIATION> 8,989,764
<TOTAL-ASSETS> 97,569,725
<CURRENT-LIABILITIES> 2,075,081
<BONDS> 57,058,416
0
0
<COMMON> 0
<OTHER-SE> 38,436,228
<TOTAL-LIABILITY-AND-EQUITY> 97,569,725
<SALES> 0
<TOTAL-REVENUES> 5,990,148
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,215,868
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,609,755
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,609,755
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,609,755
<EPS-PRIMARY> 37.57
<EPS-DILUTED> 37.57
</TABLE>
