<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended DECEMBER 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from___________________to__________________
Commission file number 0-18750
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 492-1100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP UNITS
(Title of Class)
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ]No
Indicate by check mark if disclosure of deliquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates of
Registrant: There is no active market for Limited Partnership Units.
<PAGE> 2
PART II
Item 8. Financial Statements and Supplementary Data.
(i) Report of Independent Accountants.
(ii) Balance Sheets as of December 31, 1995 and 1996.
(iii) Statements of Income for the years ended December 31, 1994, 1995 and
1996. (iv) Statements of Partners' Capital for the years ended
December 31, 1994, 1995 and 1996.
(iv) Statements of Partners' Capital for the years ended December 31,
1994, 1995 and 1996.
(v) Statements of Cash Flows for the years ended December 31, 1994, 1995
and 1996.
(vi) Notes to Financial Statements.
- 8 -
<PAGE> 3
REPORT of INDEPENDENT ACCOUNTANTS
To the Partners of
Corporate Property Associates 9, L.P.:
We have audited the accompanying balance sheets of Corporate
Property Associates 9, L.P., a Delaware limited partnership, as of December 31,
1995 and 1996, and the related statements of income, partners' capital and cash
flows for each of the three years in the period ended December 31, 1996. We have
also audited the financial statement schedule included on pages 19 to 21 of this
Annual Report. These financial statements and financial statement schedule are
the responsibility of the General Partners. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the General Partners, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Corporate
Property Associates 9, L.P., a Delaware limited partnership, as of December 31,
1995 and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
Schedule of Real Estate and Accumulated Depreciation as of December 31, 1996,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the financial information required to
be included therein pursuant to Securities and Exchange Commission Regulation
S-X Rule 12-28.
/s/ Coopers & Lybrand L.L.P.
New York, New York
March 21, 1997
- 5 -
<PAGE> 4
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
BALANCE SHEETS
December 31, 1995 and 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
ASSETS:
Real estate leased to others:
Accounted for under the operating
method:
Land $ 19,676,126 $19,439,437
Buildings 50,927,963 50,114,235
------------ -----------
70,604,089 69,553,672
Accumulated depreciation 9,659,357 11,169,434
------------ -----------
60,944,732 58,384,238
Net investment in direct financing leases 31,538,834 31,682,628
------------ -----------
Real estate leased to others 92,483,566 90,066,866
Equity investments 5,849,154 5,460,825
Cash and cash equivalents 1,657,504 1,436,555
Accrued interest and rents receivable 333,285 556,685
Other assets, net of accumulated
amortization of $128,393 in 1995 and
$166,706 in 1996 748,056 997,054
------------ -----------
Total assets $101,071,565 $98,517,985
============ ===========
LIABILITIES:
Mortgage notes payable $ 59,726,129 $57,669,975
Accrued interest payable 376,498 347,772
Accounts payable and accrued expenses 117,890 78,500
Accounts payable to affiliates 1,584,863 1,648,110
Prepaid rental income 34,477 10,514
------------ -----------
Total liabilities 61,839,857 59,754,871
------------ -----------
Commitments and contingencies
PARTNERS' CAPITAL:
General Partners (1,225,950) (1,273,499)
Limited Partners (59,918
Limited Partnership Units issued
and outstanding) 40,457,658 40,036,613
------------ -----------
Total partners' capital 39,231,708 38,763,114
------------ -----------
Total liabilities and
partners' capital $101,071,565 $98,517,985
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 6 -
<PAGE> 5
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
STATEMENTS of INCOME
For the years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $ 8,010,687 $ 8,278,481 $ 8,345,949
Interest income from direct
financing leases 3,555,659 3,604,478 3,665,739
Other interest income 46,014 63,651 62,890
----------- ----------- -----------
11,612,360 11,946,610 12,074,578
----------- ----------- -----------
Expenses:
Interest on mortgages 5,726,296 5,525,604 5,360,760
Depreciation 1,697,599 1,697,599 1,677,253
General and administrative 404,911 500,879 457,511
Property expense 496,599 459,569 69,081
Amortization 48,415 38,314 38,313
----------- ----------- -----------
8,373,820 8,221,965 7,602,918
----------- ----------- -----------
Income before income from equity
investments, gain on sale of real estate
and extraordinary item 3,238,540 3,724,645 4,471,660
Income from equity investments 669,020 637,806 658,416
Write-off of investment in limited partnership (1,173,143)
----------- ----------- -----------
Income before gain on sale of real estate
and extraordinary item 3,907,560 3,189,308 5,130,076
Gain on sale of real estate 45,066
----------- ----------- -----------
Income before extraordinary item 3,907,560 3,189,308 5,175,142
Extraordinary charge on extinguishment
of debt 480,000
----------- ----------- -----------
Net income $ 3,427,560 $ 3,189,308 $ 5,175,142
=========== =========== ===========
Net income allocated to:
Individual General Partner $ 34,276 $ 31,893 $ 51,751
=========== =========== ===========
Corporate General Partner $ 308,480 $ 287,038 $ 465,763
=========== =========== ===========
Limited Partners $ 3,084,804 $ 2,870,377 $ 4,657,628
=========== =========== ===========
Net income per Unit
(59,918 Limited Partnership
Units outstanding)
Income before extraordinary item $58.69 $47.91 $77.73
Extraordinary item (7.21)
------ ------ ------
$51.48 $47.91 $77.73
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 7 -
<PAGE> 6
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
STATEMENTS of PARTNERS' CAPITAL
For the years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Partners' Capital Accounts
------------------------------------------------------------------------
Limited
Partners'
General Limited Amount Per
Total Partners Partners Unit (a)
----- -------- -------- --------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 $ 43,820,871 $ (767,050) $ 44,587,921 $ 744
Distributions (5,589,709) (558,971) (5,030,738) (84)
Net income, 1994 3,427,560 342,756 3,084,804 52
------------ ------------ ------------ ------------
Balance, December 31, 1994 41,658,722 (983,265) 42,641,987 712
Distributions (5,616,322) (561,616) (5,054,706) (84)
Net income, 1995 3,189,308 318,931 2,870,377 48
------------ ------------ ------------ ------------
Balance, December 31, 1995 39,231,708 (1,225,950) 40,457,658 676
Distributions (5,643,736) (565,063) (5,078,673) (85)
Net income, 1996 5,175,142 517,514 4,657,628 78
------------ ------------ ------------ ------------
Balance, December 31, 1996 $ 38,763,114 $ (1,273,499) $ 40,036,613 $ 669
============ ============ ============ ============
</TABLE>
(a) Based on 59,918 Units issued and outstanding.
The accompanying notes are an integral part of the financial statements.
- 8 -
<PAGE> 7
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
STATEMENTS of CASH FLOWS
For the years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,427,560 $ 3,189,308 $ 5,175,142
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,746,014 1,735,913 1,715,566
Cash receipts on operating and direct financing leases
less than straight-line adjustments and
amortization of unearned income (246,633) (209,275) (121,806)
Extraordinary charge on extinguishment of debt 480,000
Write-off of investment in limited partnership 1,173,143
Gain on sale of real estate (45,066)
Net change in operating assets and liabilities 400,536 32,471 (561,534)
------------ ----------- -----------
Net cash provided by operating activities 5,807,477 5,921,560 6,162,302
------------- ----------- -----------
Cash flows from investing activities:
Cash distributions in excess of income from
equity investments 484,044 463,274 388,329
Proceeds from sale of real estate 928,310
------------ ----------- -----------
Net cash provided by investing activities 484,044 463,274 1,316,639
------------ ----------- -----------
Cash flows from financing activities:
Distributions to partners (5,589,709) (5,616,322) (5,643,736)
Proceeds from mortgages 20,000,000 1,289,340
Prepayment of mortgage payable (19,200,000) (1,880,341)
Deferred financing costs (194,252)
Payment of mortgage principal (530,369) (766,462) (1,465,153)
Payment on extinguishment of debt (480,000)
------------ ----------- ----------
Net cash used in financing activities (5,994,330) (6,382,784) (7,699,890)
------------ ----------- -----------
Net increase (decrease) in cash
and cash equivalents 297,191 2,050 (220,949)
Cash and cash equivalents, beginning of year 1,358,263 1,655,454 1,657,504
------------ ----------- -----------
Cash and cash equivalents, end of year $ 1,655,454 $ 1,657,504 $ 1,436,555
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 9 -
<PAGE> 8
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. 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.
Corporate Property Associates 9, L.P. (the "Partnership")
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 Partnership's
net investment in the lease.
Operating method - Real estate is recorded at cost,
revenue is recognized as rentals are earned and expenses
(including depreciation) are charged to operations as
incurred. When scheduled rentals vary during the lease
term, income is recognized on a straight-line basis so as
to produce a constant periodic rent.
The Partnership 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 net realizable value.
Substantially all of the Partnership's leases provide for either
scheduled rent increases, increases based on increases to the
Consumer Price Index or Producer Price Index or sales overrides.
Depreciation:
Depreciation is computed using the straight-line method over the
estimated useful lives of the properties - 30 years.
Cash Equivalents:
The Partnership 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
Continued
- 10 -
<PAGE> 9
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
funds. Substantially all of the Partnership's cash and cash
equivalents at December 31, 1995 and 1996 were held in the
custody of three financial institutions.
Equity Investments:
The Partnership's interests in a joint venture and two limited
partnerships are accounted for under the equity method; i.e. at
cost, increased or decreased by the Partnership's share of
earnings or loss and reduced by distributions.
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 rents recognized on a straight-line basis.
Deferred charges are costs incurred in connection with mortgage
note financings and refinancings and are deferred and amortized
on a straight-line basis over the terms of the mortgages.
Income Taxes:
A partnership is not liable for Federal income taxes as each
partner recognizes his proportionate share of the partnership
income or loss in his tax return. Therefore, no provision for
income taxes is made in the financial statements of the
Partnership.
2. Partnership Agreement:
The Partnership was organized on October 17, 1988 under the Delaware
Revised Uniform Limited Partnership Act for the purpose of
engaging in the business of investing in and owning industrial
and commercial real estate. In connection with the Partnership's
public offering, the Corporate General Partner purchased 100
Limited Partnership Units. The Partnership will terminate on
December 31, 2050, or sooner, in accordance with the terms of the
Amended Agreement of Limited Partnership (the "Agreement").
The Agreement provides that the General Partners are allocated 10%
(1% to the Individual General Partner, William P. Carey, and 9%
to the Corporate General Partner, Ninth Carey Corporate Property,
Inc. ("Carey Property"), and the Limited Partners are allocated
90% of the profits and losses as well as distributions of
Distributable Cash From Operations, as defined. The partners are
also entitled to receive net proceeds from the sale of the
Partnership properties as defined in the Agreement. The General
Partners may be entitled to receive a subordinated preferred
return, measured based upon the cumulative proceeds arising form
the sale of Partnership assets. Pursuant to the subordination
provisions of the Agreement, the preferred return may be paid
only after the limited partners receive 100% of their initial
investment from the proceeds of assets sales and a cumulative
annual return of 8% since the inception of the Partnership. The
General Partners interest in such preferred return amounts to
$29,830 based upon the cumulative proceeds from the sale of
assets since the inception of the Partnership through December
31, 1996. The Partnership's ability to satisfy the subordination
provisions of the Agreement may not be determinable until
liquidation of a substantial portion of the Partnership's assets
has been made, formal plans of liquidation are adopted or limited
partnership units are converted to other securities which provide
the security holder with greater liquidity than a limited
partnership unit. Management believes that as of the report date,
ultimate payment of the preferred return is reasonably possible
but not probable, as defined pursuant to Statement of Financial
Accounting Standards No. 5.
Continued
- 11 -
<PAGE> 10
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
3. Transactions with Related Parties:
Under the Agreement, Carey Property is entitled to receive a
property leasing fee, generally based on rents received during
the first five years of each lease, and reimbursement of certain
expenses incurred in connection with the Partnership's
operations. General and administrative expense reimbursements
consist primarily of the actual cost of personnel needed to
provide administrative services necessary to the operation of the
Partnership. Property leasing fee and general and administrative
expense reimbursements incurred are summarized as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Property leasing fee $346,802 $131,703 $ 7,354
General and administrative
expense reimbursements 90,304 93,245 109,085
-------- -------- --------
$437,106 $224,948 $116,439
======== ======== ========
</TABLE>
In 1994, 1995 and 1996 fees aggregating $44,537, $49,645 and
$64,543, respectively, were incurred for legal services performed
by a firm in which the Secretary of W.P. Carey, the Corporate
General Partner and other affiliates, is a partner of such firm.
The Partnership is a participant in an agreement with W.P. Carey and
other 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 Partnership's share of rental, occupancy and
leasehold improvement costs is based on adjusted gross revenues,
as defined. Net expenses incurred in 1994, 1995 and 1996 were
$73,126, $119,379 and $95,490, respectively. The increase in 1995
is due, in part, to certain nonrecurring costs incurred in
connection with the relocation of the Partnership's offices.
The Partnership's ownership interests in certain properties are
jointly held with affiliated entities. The interests are held as
tenants-in-common or joint ventures and limited partner interests
with such interests in jointly held properties ranging from
18.54% to 80%. The Partnership accounts for its assets and
liabilities relating to tenants-in-common interests 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
$7,841,000 in both 1997 and 1998; $7,732,000 in 1999; $7,665,000
in both 2000 and 2001; and aggregate approximately $101,986,000
through 2016.
Contingent rents were approximately $52,000 in 1994, $482,000 in
1995 and $527,000 in 1996.
5. Net Investment in Direct Financing Leases:
Net investment in direct financing leases is summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------
1995 1996
---- ----
<S> <C> <C>
Minimum lease payments
receivable $ 78,423,503 $ 74,904,918
Unguaranteed residual value 22,808,279 22,808,279
------------ ------------
101,231,782 97,713,197
Less, Unearned income 69,692,948 66,030,569
------------ ------------
$ 31,538,834 $ 31,682,628
============ ============
</TABLE>
Continued
- 12 -
<PAGE> 11
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
Scheduled future minimum rents, exclusive of renewals, under
noncancellable direct financing leases amount to approximately
$3,574,000 in 1997; $3,589,000 in 1998; $3,634,000 in both 1999
and 2000; $3,653,000 in 2001; and aggregate approximately
$74,905,000 through 2016.
Contingent rents were approximately $3,000 in 1996.
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 $98,306,000, before accumulated depreciation. As of
December 31, 1996, mortgage notes payable bear interest at rates
ranging from 7.16% to 11.85% per annum and mature from 1997 to
2020.
Scheduled principal payments during each of the next five years
following December 31, 1996 and thereafter are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C> <C>
1997 $12,535,478
1998 1,403,181
1999 8,961,499
2000 1,546,376
2001 5,757,007
Thereafter 27,466,434
-----------
Total $57,669,975
===========
</TABLE>
Interest paid was $5,744,139, $5,530,133 and $5,389,486 in 1994,
1995 and 1996, respectively.
In addition, the Partnership's proportionate share of limited
recourse mortgage notes payable at December 31, 1996 on
properties leased to General Electric Company, Information
Resources, Inc. and Titan Corporation and accounted for under the
equity method was approximately $11,191,000 (see Note 10).
7. Distributions to Partners:
Distributions are declared and paid to partners quarterly and are
summarized as follows:
<TABLE>
<CAPTION>
Year Ending Distributions Paid to Distributions Paid to Limited Partners'
December 31, General Partners Limited Partners Per Unit Amount
------------ ---------------- ---------------- ---------------
<S> <C> <C> <C>
1994 $558,971 $5,030,738 $83.96
======== ========== ======
1995 $561,616 $5,054,706 $84.36
======== ========== ======
1996 $565,063 $5,078,673 $84.76
======== ========== ======
</TABLE>
Distributions of $141,407 to the General Partners and $1,272,664 to
the Limited Partners for the quarter ended December 31, 1996 were
declared and paid in January 1997.
Continued
- 13 -
<PAGE> 12
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
8. Income for Federal Tax Purposes:
Income for financial statement purposes differs from income for
Federal income tax purposes because of the difference in the
treatment of certain items for income tax purposes and financial
statement purposes. A reconciliation of accounting differences is
as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net income per Statements of Income $3,427,560 $3,189,308 $5,175,142
Excess tax depreciation (695,277) (695,277) (702,705)
Other 297,914 138,040 65,021
Write-off of investment in limited partnership 1,173,143
---------- ---------- ----------
Income reported for Federal income
tax purposes $3,030,197 $3,805,214 $4,537,458
========== ========== ==========
</TABLE>
9. Industry Segment Information:
The Partnership's operations consist of the investment in and the
leasing of industrial and commercial real estate. The financial
reporting sources of the leasing revenues are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Per Statements of Income:
Rental income from operating leases $ 8,010,687 $ 8,278,481 $ 8,345,949
Interest income from direct financing leases 3,555,659 3,604,478 3,665,739
Adjustments:
Share of rental income from equity
investees' operating leases 2,596,420 2,494,339 2,282,594
----------- ----------- -----------
$14,162,766 $14,377,298 $14,294,282
=========== =========== ===========
</TABLE>
Continued
- 14 -
<PAGE> 13
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
In 1994, 1995 and 1996, the Partnership earned its share of net
leasing revenues from its direct and indirect ownership of real
estate from the following lease obligors:
<TABLE>
<CAPTION>
1994 % 1995 % 1996 %
---- ---- ---- ---- ---- --
<S> <C> <C> <C> <C> <C> <C>
Detroit Diesel Corporation $ 2,802,733 20% $ 2,796,455 19% $ 2,916,308 20%
Dr Pepper Bottling
Company of Texas 1,999,000 14 1,999,000 14 1,999,000 14
Furon Company 1,719,105 12 1,719,105 12 1,712,336 12
Information Resources, Inc. (a) 1,371,320 10 1,392,937 10 1,457,788 10
Red Bank Distribution, Inc. 1,313,475 9 1,349,761 9 1,400,567 10
Orbital Sciences
Corporation 1,091,442 8 1,176,361 8 1,176,361 8
Amerisig, Inc. 979,855 7 1,169,008 8 1,123,392 8
NVRyan L.P. 1,006,341 7 1,016,279 7 1,026,734 7
The Titan Corporation (a) 444,926 3 459,525 3 459,525 3
Childtime Childcare, Inc. 378,692 3 381,287 3 381,287 3
General Electric Company (a) 365,279 2 365,281 3 365,281 3
Federal Express Corporation 177,491 1 177,491 1 177,491 1
PepsiCo, Inc. 98,212 1 98,212 1 98,212 1
Xerox Corporation (a) 414,895 3 276,596 2
----------- --- ----------- --- ----------- ----
$14,162,766 100% $14,377,298 100% $14,294,282 100%
=========== ==== =========== ==== =========== ====
</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 (see Note 10).
10. Equity Investments:
ThePartnership owns equity interests in a joint venture and two
limited partnerships as limited partner with affiliates which own
the remaining interests. An investment in a third limited
partnership was written off in September 1995 (see Note 12). The
joint venture and limited partnerships own land and buildings
which are net leased to corporate tenants.
Summarized financial information for the joint venture and the
limited partnerships is as follows:
(In thousands)
<TABLE>
<CAPTION>
General Electric Titan Information
Lease Obligor: Company Corporation Resources, Inc. Total
- ------------- ----------------- ----------- --------------- -------
<S> <C> <C> <C> <C>
Ownership interest: 50% 18.54% 33.33%
December 31, 1996:
Assets (a) $6,354 $17,639 $31,080 $55,073
Liabilities 3,417 10,745 22,770 36,932
Capital 2,937 6,894 8,310 18,141
December 31, 1995:
Assets (a) 6,777 18,036 31,846 56,659
Liabilities 3,487 11,022 22,967 37,476
Capital 3,290 7,014 8,879 19,183
</TABLE>
Continued
- 15 -
<PAGE> 14
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1995(b) 1996
-------------- ----------- ---------
<S> <C> <C> <C>
Revenue $8,545 $ 8,255 $ 7,583
Expenses 6,190 13,487 5,228
------ ------- -------
Net income (loss) $2,355 $(5,232) $ 2,355
====== ======= =======
</TABLE>
(a) Net of accumulated depreciation and amortization.
(b) Included in the operating results is a writedown of a property to net
realizable value. At that time the Partnership wrote off its investment
in the limited partnership owning the property (see Note 12).
The Partnership's share of the scheduled future minimum rents of the
limited partnerships and joint venture, exclusive of renewals
under its noncancellable operating leases, amount to
approximately $2,273,000 in 1997; $2,078,000 in 1998; $1,806,000
each of the years 1999 through 2001 and aggregate approximately
$17,338,000 through 2007.
The Partnership's share of scheduled principal payments on the
mortgage notes payable of the limited partnerships and joint
venture for the five years following December 31, 1996 and
thereafter amount to approximately $169,000 in 1997; $1,797,000
in 1998; $159,000 in 1999; $7,355,000 in 2000; $84,000 in 2001
and $1,627,000 thereafter. The mortgage notes have interest rates
ranging from 9.75% to 10.70% per annum.
11. Extraordinary Charge on Extinguishment of Debt:
In June 1990, the Partnership and Corporate Property Associates 8,
L.P. ("CPA(R):8"), an affiliate, purchased, as tenants-in-common
with 80% and 20% interests, respectively, 129 acres of land and
six industrial buildings in Detroit and Redford, Michigan and
entered into a net lease with Detroit Diesel Corporation
("Detroit Diesel"). The mortgage loan provided for quarterly
interest only payments at an annual rate of 11.28% with principal
payments which commenced on December 15, 1995.
In May 1994, the Partnership and CPA(R):8 prepaid the existing
$24,000,000 mortgage loan and obtained $25,000,000 of new limited
recourse mortgage financing. The new mortgage loan bears interest
at the rate of 7.16% per annum and provided for quarterly
interest only payments of $447,500 (of which the Partnership's
share is $358,000) through December 15, 1995 at which time
quarterly interest and principal payments of $689,601 (of which
the Partnership's share is $551,681) commenced and which are
payable through June 15, 2010 at which time the loan will be
fully amortized. In connection with paying off the original
mortgage loan, the Partnership incurred an extraordinary charge
on the extinguishment of debt as a result of paying a prepayment
charge of $480,000 on its $19,200,000 share of such debt.
Continued
- 16 -
<PAGE> 15
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
12. Property in Stamford, Connecticut:
In January 1991, the Partnership and Corporate Property Associates
10 Incorporated ("CPA(R):10"), an affiliate, formed a limited
partnership, Hope Street Connecticut Limited Partnership ("Hope
Street"), for the purpose of purchasing land and an office
building in Stamford, Connecticut for $11,000,000. The
Partnership contributed $1,500,000 to Hope Street for a 31.915%
limited partnership interest and CPA(R):10 contributed $3,200,000
for a 68.085% general partnership interest. Hope Street used this
equity and assumed an existing limited recourse mortgage loan of
$6,300,000 collateralized by the property and also assumed an
existing net lease, as lessor, with Xerox Corporation ("Xerox"),
as lessee. The Xerox lease provided for annual rent of $1,300,000
with an initial term through August 31, 1995 and two five-year
renewal terms at Xerox's option. The mortgage loan was an
interest only obligation with annual debt service of $639,450 and
was scheduled to mature on September 1, 1995 with a balloon
payment of $6,300,000 due at that time. Based on its 31.915%
interest, the Partnership accounted for its investment in the
limited partnership under the equity method.
In August 1995, Xerox vacated the property at the end of the initial
term. Hope Street was unsuccessful in its efforts to remarket the
property and find a new lessee even at a substantially lower
annual rental. Given the conditions of the Stamford market in
1995, the general partner concluded that the net realizable value
of the property was less than the outstanding balance of the
mortgage loan. Under these circumstances, the general partner
considered various alternatives, including negotiating with the
lender to extend the maturity, restructure the loan or satisfy
the balloon payment obligation at a substantial discount or
selling the property back to the lender for $10,000 in excess of
the mortgage balance; however, the lender did not agree to any of
these proposals. Since the Partnership did not anticipate
receiving any further cash distributions from Hope Street and the
Partnership did not have any obligation to Hope Street, the
Partnership wrote off its remaining equity investment in Hope
Street and recognized a charge of $1,173,143 in 1995 even though
the limited partnership had not been dissolved.
In December 1996, the Boards of Directors of the Corporate General
Partner of the Partnership and CPA(R):10 approved a transaction
which resulted in CPA(R):10 transferring its interests in Hope
Street to the Partnership (with Hope St., Inc., a wholly-owned
subsidiary formed for the purpose of owning a 1% general partner
interest in Hope Street). The lender has advised the Partnership
of its intention to foreclose on the property. The Partnership
has not been able to restructure the loan on the property and has
agreed with the lender to cooperate in the foreclosure of the
property, in return for a $10,000 payment by the lender. As the
Partnership's control over the property is temporary, Hope Street
continues to be reflected on the equity method and no adjustment
has been made to the Partnership's carrying value of its
investment in Hope Street.
13. Gain on Sale of Real Estate:
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, Pennsylvania and Twinsburg, Ohio to IER Industries,
Inc. ("IER") through July 2007, the end of Furon's initial lease
term. On February 15, 1996, IER notified the Partnership and
CPA(R):8 that it was exercising a purchase option which had been
granted at the time the sublease was agreed to.
Continued
- 17 -
<PAGE> 16
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
On September 9, 1996, the Partnership and CPA(R):8 sold the two
properties to IER for $1,465,495, a purchase price determined
pursuant to an appraisal process provided for in the lease. Net
of its share of $50,790 of consideration received in 1993 in
granting the purchase option and other costs of the transaction,
the Partnership's share of net proceeds from the sale was
$928,310 of which $604,184 was used to pay a mandatory prepayment
on the mortgage loan. In connection with the sale, the
Partnership recognized a gain of $45,066. As a result of the sale
and a reamortization of the mortgage loan, annual rent from Furon
and debt service on the Furon mortgage loan has decreased by
approximately $116,000 and $81,600, respectively.
14. Debt Refinancing:
The Partnership and CPA(R):10 own 12 properties as
tenants-in-common, with 33.93% and 66.07% ownership interests,
respectively, leased, pursuant to a master lease, to Childtime
Childcare, Inc. ("Childtime"). On December 13, 1996, the
Partnership and CPA(R):10 refinanced, at a lower rate of
interest, an existing mortgage loan. The new limited recourse
mortgage loan of $3,800,000 (of which the Partnership's share is
$1,289,000) provides for monthly installments of principal and
interest of $35,546 (of which the Partnership's share is $12,061)
at an annual interest rate of 9.55% based on a 20-year
amortization schedule. The loan may be prepaid at any time
subject to a prepayment charge and matures in December 2006 at
which time a balloon payment for the entire outstanding principal
balance of approximately $2,768,000 (of which the Partnership's
share is $939,000) is scheduled.
The retired loan provided for monthly payments of principal and
interest, of which the Partnership's share was $13,548, at an
annual interest rate of 11.25% based on a 25-year amortization
schedule. The loan had been scheduled to mature in February 1998
at which time a balloon payment was scheduled. Solely as a result
of the refinancing, the Partnership's annual debt service will
decrease by $17,844.
15. Disclosures About Fair Value of Financial Instruments:
The carrying amounts of cash, receivables and accounts payable and
accrued expenses approximate fair value because of the short
maturity of these items.
The Partnership estimates that the fair value of mortgage notes
payable was $56,505,000 at December 31, 1996. The fair value of
debt instruments was evaluated using a discounted cash flow model
with discount rates which take into account the credit of the
tenants and interest rate risk.
The Partnership holds warrants to purchase 18,540 common shares of
The Titan Corporation ("Titan") at an exercise price of $5.30 per
common share with such exercise period ending July 11, 1998. The
quoted price of Titan's common stock, as of December 31, 1996,
was $3.25. The warrants are carried on the books at a nominal
cost.
- 18 -
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
a Delaware limited partnership
BY: NINTH CAREY CORPORATE PROPERTY, INC.
09/3/97 BY: /s/ Steven M. Berzin
------- --------------------
Date Claude Fernandez
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
09/3/97 BY: /s/ Claude Fernandez
------- --------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
- 19 -
