<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 0-20016
_________________________________________________________
CAREY INSTITUTIONAL PROPERTIES INCORPORATED, A MARYLAND CORPORATION
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
MARYLAND 13-3602400
_______________________________________________________________________________
(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
________________________________________________________________________________
(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
15,463,746 shares of common stock; $.001 Par Value
outstanding at May 13, 1996.
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
INDEX
Page No.
--------
PART I
- ------
Item 1. - Financial Information*
Consolidated Balance Sheets, December 31, 1995 and
March 31, 1996 2
Consolidated Statements of Income for the three
months ended March 31, 1995 and 1996 3
Consolidated Statements of Cash Flows for the three months
ended March 31, 1995 and 1996 4
Notes to Consolidated Financial Statements 5-9
Item 2. - Management's Discussion of Operations 10-11
PART II
- -------
Item 4. - Submission of Matters to a Vote of Security Holders 12
Item 6. - Exhibits and Reports on Form 8-K 12
Signatures 13
* 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>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
PART I
------
Item 1. - FINANCIAL INFORMATION
-------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
------------- -------------
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land and buildings, net of accumulated
depreciation of $5,006,484 at December 31, 1995
and $5,660,873 at March 31, 1996 $147,713,263 $160,884,780
Net investment in direct financing leases 105,703,258 106,142,448
Equity investments 15,992,225 21,488,051
Real estate held for sale 2,616,031
Cash and cash equivalents 22,519,656 7,216,922
Short-term investments 1,000,000
Accrued interest and rents receivable 267,779 463,162
Other assets 3,621,913 4,070,548
------------ ------------
Total assets $299,434,125 $300,265,911
============ ============
LIABILITIES:
Limited recourse mortgage notes payable $150,656,333 $149,838,905
Note payable 3,471,899 3,471,899
Accrued interest payable 1,085,483 985,112
Accounts payable and accrued expenses 532,274 565,441
Accounts payable to affiliates 4,279,849 4,964,182
Dividends payable 2,942,124
Prepaid rental income and security deposits 950,558 1,574,049
------------ ------------
Total liabilities 163,918,520 161,399,588
------------ ------------
Minority interest 4,522,053 4,712,965
------------ ------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value;
authorized, 40,000,000 shares; issued and
outstanding, 15,480,537 and 15,463,746 shares
at December 31, 1995 and March 31, 1996 15,481 15,497
Additional paid-in capital 137,046,066 137,207,714
Distributions in excess of accumulated earnings (6,088,570) (3,046,160)
Unrealized appreciation 220,892 269,024
------------ ------------
131,193,869 134,446,075
Less treasury stock, 22,925 and 32,925 shares
at December 31, 1995 and March 31, 1996 (200,317) (292,717)
------------ ------------
Total shareholders' equity 130,993,552 134,153,358
------------ ------------
Total liabilities and
shareholders' equity $299,434,125 $300,265,911
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Note: The balance sheet at December 31, 1995 has been derived from the
audited consolidated financial statements at that date.
-2-
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
March 31, 1995 March 31, 1996
-------------- --------------
Revenues:
Rental income from operating leases $4,368,449 $4,758,720
Interest income from direct financing leases 2,728,739 3,062,811
Other interest income 117,091 154,550
Other income 9,510
---------- ----------
7,214,279 7,985,591
---------- ----------
Expenses:
Interest on mortgages 3,261,931 3,467,997
Depreciation 576,824 654,389
General and administrative 338,779 556,776
Property expenses 742,115 799,607
Amortization 62,698 84,453
---------- ----------
4,982,347 5,563,222
---------- ----------
Income before minority interest in income,
income from equity investments and
loss on sales 2,231,932 2,422,369
Minority interest in income 186,239 190,788
---------- ----------
Income before income from equity
investments and loss on sales 2,045,693 2,231,581
Income from equity investments 643,102 821,850
---------- ----------
Income before net loss on sales 2,688,795 3,053,431
Loss on sales of real estate, net 11,021
---------- ----------
Net income $2,688,795 $3,042,410
========== ==========
Net income per common share $.19 $.20
==== ====
Weighted average number of shares outstanding 14,167,581 15,466,213
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
-3-
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,688,795 $ 3,042,410
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 639,522 738,842
Equity income in excess of distributions received (85,418)
Minority interest in income 186,239 190,788
Cash receipts on operating and financing leases
less than income recognized (478,746) (460,535)
Net loss on sales of real estate 11,021
Net change in operating assets and liabilities (261,135) 1,151,800
----------- ------------
Net cash provided by operating activities 2,774,675 4,588,908
----------- ------------
Cash flows from investing activities:
Purchase of real estate and additional capitalized costs (4,679,101) (13,825,906)
Release of construction escrow funds 2,288,433
Capital contributions to equity investment (5,410,408)
Redemption of short-term investment 1,000,000
Cash distributions in excess of equity income 178,427
Capital distribution from equity investment 1,375,000
Funds released in connection with sale of properties
in prior period 5,927,217
Proceeds from sale of real estate 2,044,260
----------- ------------
Net cash provided by (used in) investing activities 5,089,976 (16,192,054)
----------- ------------
Cash flows from financing activities:
Purchase of treasury stock (133,084) (92,400)
Proceeds from mortgages 6,805,128
Prepayment of mortgage payable (1,750,000)
Payments on mortgage principal (645,361) (817,428)
Proceeds from issuance of shares, net of costs 161,664
Dividends paid (2,854,775) (2,942,124)
Deferred financing costs (162,184) (9,300)
----------- ------------
Net cash provided by (used in) financing activities 1,259,724 (3,699,588)
----------- ------------
Net increase (decrease) in cash and cash equivalents 9,124,375 (15,302,734)
Cash and cash equivalents,beginning of period 4,163,418 22,519,656
----------- ------------
Cash and cash equivalents, end of period $13,287,793 $ 7,216,922
=========== ============
Supplemental disclosure of cash flows information:
Interest paid (including capitalized interest) $ 3,322,442 $ 3,568,368
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-4-
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Basis of Presentation:
---------------------
The accompanying unaudited consolidated 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 Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
Note 2. Transactions with Related Parties:
---------------------------------
The Advisor performs multiple services including providing the management
and administration of the Company for which it is entitled to receive
management and incentive fees. Pursuant to the Advisory Agreement, asset
management fees currently due the Advisor are equal to 0.5% of Average
Invested Assets, as defined. When Shareholders have received a cumulative
distribution return of 8%, which threshold has not yet been met, the
Advisor will also be entitled to receive an incentive fee of 0.5% of
Average Invested Assets. Based upon portfolio projections, Management
believes the cumulative return threshold will be met in 1998; therefore,
though such incentive fee, pursuant to the Advisory Agreement, will not be
paid until the threshold is met, it has been accrued and included in
accounts payable to affiliates and property expenses in the accompanying
consolidated financial statements. For the three month periods ended
March 31, 1995 and 1996, the Company incurred asset management fees of
$363,542 and $392,566, respectively, and subordinated incentive fees, which
are not currently payable, were in like amounts. General and
administrative expense reimbursements were $100,465 and $191,199 for the
three-month periods ended March 31, 1995 and 1996, respectively.
The Company, 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 Company pays its proportionate share of
rent and other costs of occupancy. Net expenses incurred for the three-
month periods ended March 31, 1995 and 1996 were $70,536 and $56,339
respectively.
Note 3. Dividends:
---------
Dividends paid to shareholders during the three months ended March 31, 1996
are summarized as follows:
Quarter Ended Paid Per Share
------------------- ----------------- ---------
December 31, 1995 $2,942,124 $.2035
A dividend of $0.2040 per share was declared and paid in April 1996
for the quarter ended March 31, 1996.
-5-
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Note 4. Industry Segment Information:
----------------------------
The Company's operations consist of the direct and indirect investment
in and the leasing of industrial and commercial real estate. The
financial reporting sources of the lease revenues are as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Per Statements of Income:
Rental income from operating leases $4,368,449 $4,758,720
Interest from direct financing leases 2,728,739 3,062,811
Adjustments:
Share of leasing revenue applicable
to minority interest (451,221) (450,315)
Share of leasing revenue from equity
investments 1,510,139 1,847,726
---------- ----------
$ 8,156,106 $9,218,942
=========== ==========
</TABLE>
For the three-month periods ended March 31, 1995 and 1996, the Company
earned its proportionate net lease revenues from the following lease
obligors:
<TABLE>
<CAPTION>
1995 % 1996 %
------------ ----------- ------------ ---
<S> <C> <C> <C> <C>
Marriott International, Inc. (a) $1,182,889 15% $1,197,739 13%
Best Buy Co., Inc. (b) 768,296 9 766,752 8
Neodata Corporation 555,827 7 555,827 6
Omnicom Group, Inc. 454,375 6 466,875 5
AT&T Resource Management Corporation 463,207 6 463,207 5
Big V Holding Corp. 415,050 5 420,659 5
Wal-Mart Stores, Inc. 407,123 5 407,619 4
Garden Ridge, Inc. 157,113 2 356,536 4
Michigan Mutual Insurance Company 338,840 4 339,435 4
Barnes & Noble, Inc. 326,731 4 331,620 4
Gensia, Inc. (a) 327,250 4 327,250 4
Merit Medical Systems, Inc. 231,088 3 325,823 3
The Upper Deck Company (a) 322,737 3
Harvest Foods, Inc. 309,519 4 309,743 3
Waban, Inc./BJ's Warehouse Club 279,589 3 279,589 3
Plexus Corp. 272,875 3 272,875 3
Lincoln Technical Institute of Arizona, Inc. 270,599 3 270,599 3
Bell Sports Corp. 245,411 3 252,951 3
Sports and Fitness Clubs of America 164,063 2 252,016 3
Nicholson Warehouse, L.P. 201,263 3 201,270 2
GATX Logistics, Inc. 198,723 2 198,723 2
Custom Food Products, Inc. 170,402 2
Superior Telecommunications, Inc. 152,110 2 153,203 2
Childtime Childcare, Inc. 140,000 1
Petsmart, Inc. 117,333 2 119,078 1
Oshman Sporting Goods, Inc. 108,325 1 109,918 1
Summagraphics Corporation 110,069 1 83,442 1
Hibbert Sporting Goods, Inc. 62,154 1
Safeway Stores Incorporated 98,438 1 60,900 1
------- --- -------- --
$ 8,156,106 100% $9,218,942 100%
=========== === ========== ===
</TABLE>
(a) Represents the Company's proportionate share of lease revenues from
its equity investments.
(b) Net of amounts applicable to the minority interest of Corporate
Property Associates 12 Incorporated ("CPA/R/:12").
-6-
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Note 5. Equity Investments:
------------------
The Company owns an approximate 23.68% interest in Marcourt Investments
Incorporated ("Marcourt"), a real estate investment trust, which net leases
13 hotel properties to a wholly-owned subsidiary of Marriott International,
Inc., a 50% interest in Gena Property Company ("GENA"), a general
partnership which net leases two office buildings to Gensia, Inc. and in
Cards Limited Liability Company ("Cards LLC"), which net leases two office
buildings to The Upper Deck Company. Summarized financial information of
GENA, Marcourt and Cards LLC is as follows:
<TABLE>
<CAPTION>
(in thousands)
Gena Marcourt Cards LLC
----------------- --------------------------------- --------------
December 31, 1995 March 31, 1996 December 31, 1995 March 31, 1996 March 31, 1996
----------------- -------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Assets $22,287 $22,172 $149,910 $149,874 $26,571
Liabilities 12,381 12,246 108,876 108,211 15,841
Owners' equity 9,906 9,926 41,034 41,663 10,730
<CAPTION>
For The Three Months Ended
----------------------------
March 31, 1995 March 31, 1996
-------------- --------------
GENA Marcourt GENA Marcourt Cards LLC
---------- ------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 655 $ 4,891 $ 655 $ 5,062 $ 652
Interest 235 2,848 246 2,779 312
Depreciation 115 115
Other expenses 24 29
------- ------- -------- -------- --------
Net income $ 305 $ 2,019 $ 294 $ 2,254 $ 340
------- ------- -------- -------- -------
</TABLE>
Note 6. Purchase of Real Estate:
------------------------
A. On January 4, 1996, the Company and CPA/R/:12, through their 50%
ownership interests in Cards LLC ("Cards"), purchased land and two
office buildings in Carlsbad, California for $25,654,450 and
entered into a net lease with The Upper Deck Company ("Upper
Deck"). Cards financed $15,000,000 of the purchase price with a
limited recourse mortgage loan collateralized by the Upper Deck
properties. In connection with the purchase, both the Company and
CPA/R/:12 made equity contributions of $5,327,225 to Cards. The
Company will account for its 50% interest in Cards under the equity
method of accounting.
The lease provides for an initial term of 25 years followed by four
five-year renewal terms at an annual rent of $2,639,750. The lease
provides for rent increases every five years based on a formula
indexed to increases in the Consumer Price Index ("CPI") with such
increases capped at 5% for any one year. Between the twelfth and
thirteenth lease year, Upper Deck has an option to purchase the
property at fair market value as determined by an independent
appraisal process provided for in the lease.
The $15,000,000 limited recourse note is collateralized by a deed of
trust and lease assignment and provides for monthly payments of
principal and interest of $120,077 at an annual interest rate of
8.43% and is based on a 25-year amortization schedule. After the
seventh year, the
-7-
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
loan may be prepaid in whole, but not in part, subject to a
prepayment charge. The loan matures on February 1, 2011, at which
time a balloon payment will be due.
B. On February 6, 1996, the Company purchased land and a newly
constructed health club facility in Bedford, Texas for $5,236,000
in cash and entered into a net lease with Sports & Fitness Clubs of
America, Inc. An unconditional guarantee of the obligations of the
lease has been provided by the lessee's parent company, Sports &
Fitness Clubs, Inc. The lease provides for an initial term of 20
years followed by four five-year renewal terms at the option of the
lessee at an annual rent of $577,500. The lease provides for rent
increases every five years based on a formula indexed to increases
in the CPI.
C. On February 12, 1996, the Company purchased land and a newly
constructed warehouse/office facility in Birmingham, Alabama for
$4,700,000 and entered into a net lease with Sports Wholesaling,
Inc. An unconditional guarantee of the obligations of the lease
has been provided by the lessee's parent company, Hibbett Sporting
Goods, Inc. The lease provides for an initial term of 15 years
followed by three five-year renewal terms at the option of the
lessee at an annual rent of $475,784. The lease provides for rent
increases every three years based on a formula indexed to increases
in the CPI. The lessee has an option which is exercisable at any
time prior to December 31, 1997 to convert the lease to a financing
lease for income tax purposes whereby the lessee would be entitled
to all depreciation deductions under the Internal Revenue Code. If
this option is exercised, annual rent would be increased by
$47,578; however, such increase in base rent resulting from
exercising such option would not be subject to the rent increase
formula. The Company has received a commitment for $3,000,000 of
limited recourse mortgage financing collateralized by the Hibbett
property. The loan provides for monthly payments of principal and
interest of $25,328 at an annual interest rate of 8.125% for the
first ten years and will fully amortize over its 20-year term;
however, the loan is callable by the lender at the end of the tenth
loan year. During the second ten years the interest rate will
adjust annually to an interest rate of the Moody's A Corporate Rate
Bond Index plus 0.375%.
Note 7. Sales of Real Estate:
---------------------
In December 1991, the Company and CPA/R/:10 purchased three
supermarkets leased to Safeway Stores Incorporated ("Safeway") as
tenants in-common, each with 50% ownership interests.
During the quarter ended March 31, 1996, the Company and CPA/R/:10
sold two of the Safeway properties. On January 26, 1996, the
Glendale, Arizona property was sold for $1,950,000, and on February
15, 1996, the Escondido, California property was sold for
$3,450,000. Net of the costs of sale, the Company's share of net
proceeds from the sales was $2,605,010, including a promissory note
for $560,750. A net loss of $11,021 was recognized on the sales.
The promissory note is collateralized by a first mortgage on the
Glendale property and provides for monthly payments of interest
only at the rate of 8% per annum through January 24, 1997 at which
time the entire unpaid principal balance will be due.
Annual rentals from the two properties were $252,000.
-8-
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Note 8. Litigation:
----------
In connection with the Company's satsifaction of a mortgage loan in
October 1995, the lender of the retired loan filed suit in December
1995 which claims that the prepayment charge paid by the Company of
$401,000 was understated by approximately $400,000. Although the
lender acknowledges that the calculation of the prepayment charge
was determined by the lender, the lender is seeking damages based
on its allegations that the Company was aware of the lender's error
and failed to correct the error and affirmatively misrepresented to
the lender that the calculation was correct. The Company is
vigorously contesting the lender's claim. Management believes that
it is unlikely that the outcome of this case will have a material
adverse effect on the Company's results of operations, financial
position or liquidity.
Note 9. Subsequent Event:
----------------
On May 29, 1995, the Company entered into a lease agreement with
Garden Ridge Corporation ("Garden Ridge") for a retail property in
Oklahoma City, Oklahoma. In connection with entering into the
transaction, Garden Ridge granted the Company warrants to purchase
67,500 shares of Garden Ridge common stock exercisable at $10 per
share. On April 30, 1996, the Company exercised warrants for
22,500 shares of Garden Ridge common stock which it then sold,
realizing net proceeds of $874,600. In connection with the sale,
the Company will recognize a realized gain of approximately
$664,000 in the quarter ending June 30, 1996.
-9-
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS
-----------------------------------------------
Results of Operations:
---------------------
Net income increased by $354,000 for the three-month period ended
March 31, 1996 as compared with the three-month period ended March 31,
1995. Such increase was primarily due to increases in lease revenues and
income from equity investments and was partially offset by increases in
general and administrative, interest and depreciation expenses. The
increase in leasing revenues was due to completion of several build-to-suit
facilities in 1995 and the purchase of additional real estate investments
in 1996. Since the first quarter of 1995, the Company completed
construction of build-to-suit facilities leased to Custom Food Products,
Inc., Childtime Childcare, Inc. and Garden Ridge, Inc. ("Garden Ridge").
In addition, since December 31, 1995, the Company has purchased properties
and entered into net lease agreements with Sports & Fitness Clubs of
America, Inc. ("Sports & Fitness") and Hibbett Sporting Goods, Inc.
("Hibbett") and purchased a 50% equity interest in a limited liability
company which purchased a property and entered into a net lease with The
Upper Deck Company ("Upper Deck"). The increase in interest expense was
primarily due to placement of mortgage financing on previously unleveraged
properties. Since March 31, 1995, the Company has obtained more than
$20,000,000 of new mortgage financing. The increase in interest expense
from new financing was partially offset by reduced interest expense on two
mortgage loans, the proceeds of which were used to satisfy three loans with
higher interest rates. The increase in depreciation expenses is due to the
completion of construction on several of the build-to-suit properties and
new acquisitions. The increase in general and administrative expenses is
due to the marketing effort initiated by the Company in its effort to raise
capital from institutional investors.
Solely as a result of the Company's acquiring interests in the Sports
& Fitness, Hibbett and Upper Deck properties, annual cash flow will
increase by approximately $1,370,000. In addition, annual cash flow will
benefit from the completion of a build-to-suit project leased to Del Monte
Corporation ("Del Monte"), which is expected to be completed during the
next quarter. The additional revenues from these new leases is expected to
more than offset the loss of cash flow and revenue of $252,000 resulting
from the sale of the two supermarkets formerly leased to Safeway Stores,
Inc.
Financial Condition:
-------------------
There has been no material change in the Company's financial condition
since December 31, 1995. The Company has continued to diversify its real
estate portfolio by utilizing more than $15,250,000 of cash to purchase
interests in properties leased to Sports & Fitness, Hibbett and Upper Deck.
In addition, the Company has advanced an additional $4,000,000 towards the
Del Monte build-to-suit project. Subsequent to the completion of the Del
Monte project, which is projected to require a total investment of
$10,995,000, the Company will obtain limited recourse mortgage financing of
$6,250,000 which has been committed to the Company by a lender. The Del
Monte mortgage proceeds will be combined with other funds to be obtained
through other mortgage financings and any equity raised through its private
placement efforts to purchase additional investments in net lease real
estate. The Company has recently received commitments for limited recourse
mortgage financing of $8,000,000 and $3,000,000 which will be
collateralized by two retail properties leased to Garden Ridge and the
property leased to Hibbett, respectively. A portion of the Garden Ridge
mortgage loan will be used to pay off $3,472,000 outstanding on the
Company's $14,250,000 line of credit with the remaining Garden Ridge and
Hibbett loan proceeds totalling $7,528,000 available for investment. The
Company may also seek limited recourse mortgage financing on the newly
acquired Sports & Fitness property. Advances on the Del Monte construction
total approximately $6,100,000; however, the Company's ultimate equity
investment in the Del Monte property is anticipated to be $4,745,000 after
the Company borrows the mortgage funds committed. Accordingly, the Company
believes that it has significant resources which will enable it to continue
to increase its asset base. The Company has continued to actively pursue
-10-
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS, Continued
----------------------------------------------------------
Financial Condition (continued):
-------------------------------
new equity capital through its private placement offering with
institutional investors which it initiated during the third quarter of
1995. To date, the Company has obtained $13,000,000 from two institutional
investors and is actively seeking to increase the number of institutional
shareholders in the Company. The acceptance of funds from institutional
investors is conditioned upon the availability of investment opportunities
which can be projected to benefit all shareholders.
Management believes that its cash balances and its projection of
increases in cash provided from operations will be sufficient to sustain
the current trend of increasing the rate of quarterly dividends and paying
scheduled principal installments. For the three-month period ended March
31, 1996, cash flow from operating activities of $4,589,000 was sufficient
to fund dividends of $2,942,000 and principal payments of $817,000.
-11-
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
PART II
-------
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------------------------------------------------------------
During the quarter ended March 31, 1996 no matters were
submitted to a vote of Security Holders.
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 Company filed a
report on Form 8-K dated March 21, 1996 under Item 2,
Acquisition and Disposition of Assets.
-12-
<PAGE>
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
5/14/96 By: /s/ Claude Fernandez
-------------- ------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
5/14/96 By: /s/ Michael D. Roberts
--------------- -------------------------------
Date Michael D. Roberts
First Vice President and Controller
(Principal Accounting Officer)
-13-
<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 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 7216922
<SECURITIES> 0
<RECEIVABLES> 463162
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4070548
<PP&E> 272688101
<DEPRECIATION> 5660873
<TOTAL-ASSETS> 300265911
<CURRENT-LIABILITIES> 8088784
<BONDS> 153310804
0
0
<COMMON> 134153358
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 300265911
<SALES> 0
<TOTAL-REVENUES> 7985591
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2095225
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3467997
<INCOME-PRETAX> 3042410
<INCOME-TAX> 0
<INCOME-CONTINUING> 3042410
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3042410
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
