<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended SEPTEMBER 30, 2000
of
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
CIP(R)
A MARYLAND Corporation
IRS Employer Identification No. 13-3602400
SEC File Number 0-20016
50 ROCKEFELLER PLAZA,
NEW YORK, NEW YORK 10020
(212) 492-1100
CIP(R) has SHARES OF COMMON STOCK registered pursuant to Section 12(g) of the
Act.
CIP(R) is not registered on any exchanges.
CIP(R) does not have any Securities registered pursuant to Section 12(b) of the
Act.
CIP(R) is unaware of any delinquent filers pursuant to Item 405 of Regulation
S-K.
CIP(R) (1) has filed all reports required by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for 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.
CIP(R) has no active market for common stock at November 10, 2000.
CIP(R) has 22,004,952 shares of common stock, $.001 par value outstanding at
November 10, 2000.
<PAGE> 2
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
PART I
------
<S> <C>
Item 1. - Financial Information*
Condensed Consolidated Balance Sheets, as of December 31, 1999
and September 30, 2000 2
Condensed Consolidated Statements of Income for the three and
nine months ended September 30, 1999 and 2000 3
Condensed Consolidated Statements of Comprehensive Income
for the three and nine months ended September 30, 1999 and 2000 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1999 and 2000 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
PART II - Other Information
-------
Item 3. - Quantitative and Qualitative Disclosures About Market Risk 11
Item 4. - Submission of Matters to a Vote of Security Holders 11
Item 6. - Exhibits and Reports on Form 8-K 11
Signatures 12
</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
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
PART I
Item 1. - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1999 September 30, 2000
--------------------------- ---------------------------
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land and buildings,
net of accumulated depreciation of
$19,521,518 at December 31, 1999 and
$23,382,693 at September 30, 2000 $222,300,958 $223,737,427
Net investment in direct financing leases 102,999,373 103,497,090
Real estate under construction leased to others - 2,516,585
Assets held for sale - 625,000
Equity investments 38,895,662 39,497,891
Cash and cash equivalents 14,100,580 8,919,340
Other assets 3,414,212 2,769,400
--------------------------- ---------------------------
Total assets $381,710,785 $381,562,733
=========================== ===========================
LIABILITIES:
Limited recourse mortgage notes payable $166,640,359 $166,290,221
Accrued interest payable 642,793 1,199,875
Accounts payable and accrued expenses 825,489 1,120,117
Accounts payable to affiliates 1,394,734 1,834,997
Dividends payable 4,540,035 4,563,261
Prepaid rental income and security deposits 1,600,779 1,806,808
--------------------------- ---------------------------
Total liabilities 175,644,189 176,815,279
--------------------------- ---------------------------
Minority interest 5,500,939 5,751,290
--------------------------- ---------------------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value;
authorized, 40,000,000 shares; issued and outstanding,
22,215,675 shares at December 31, 1999 and
22,500,401 shares at September 30, 2000 22,216 22,500
Additional paid-in capital 220,747,880 224,467,603
Dividends in excess of accumulated earnings (16,728,182) (18,767,773)
Accumulated other comprehensive income (loss) 23,757 (335,904)
--------------------------- ---------------------------
204,065,671 205,386,426
Less, common stock in treasury, at cost, 351,308
shares at December 31, 1999 and 592,004 shares at
September 30, 2000 (3,500,014) (6,390,262)
--------------------------- ---------------------------
Total shareholders' equity 200,565,657 198,996,164
--------------------------- ---------------------------
Total liabilities and
shareholders' equity $381,710,785 $381,562,733
=========================== ===========================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Note: The condensed consolidated balance sheet at December 31, 1999 has been
derived from the audited financial statements at that date.
- 2 -
<PAGE> 4
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1999 2000
------------------------- -----------------------
<S> <C> <C>
Revenues:
Rental income $6,581,614 $6,812,838
Interest income from direct
financing leases 2,790,685 3,094,571
Other interest and
miscellaneous income 1,499,849 270,668
------------------------- -----------------------
10,872,148 10,178,077
------------------------- -----------------------
Expenses:
Interest 3,524,072 3,649,915
Depreciation and amortization 1,248,028 1,343,502
General and administrative 544,719 708,289
Property expenses 1,756,473 1,579,756
Writedown to fair value 386,954 143,918
------------------------- -----------------------
7,460,246 7,425,380
------------------------- -----------------------
Income before minority
interest, income from
equity investments, and
gain on sale 3,411,902 2,752,697
Minority interest in income (221,561) (213,103)
------------------------- -----------------------
Income before income
from equity investments
and gain on sale 3,190,341 2,539,594
Income from equity investments 1,065,905 1,168,145
------------------------- -----------------------
Income before gain on sale 4,256,246 3,707,739
Gain on sale of real estate - -
------------------------- -----------------------
Net income $4,256,246 $3,707,739
========================= =======================
Basic earnings per share $.20 $.17
============= =============
Diluted earnings per share $.19 $.17
============= =============
Weighted average common
shares outstanding-basic 21,745,143 21,918,925
========================= =======================
Weighted average common
shares outstanding-diluted 22,132,511 22,273,820
========================= =======================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 2000
------------------------- --------------------------
<S> <C> <C>
Revenues:
Rental income $19,456,078 $20,733,259
Interest income from direct
financing leases 8,339,548 9,246,929
Other interest and
miscellaneous income 2,034,217 545,699
------------------------- --------------------------
29,829,843 30,525,887
------------------------- --------------------------
Expenses:
Interest 10,290,655 10,853,630
Depreciation and amortization 3,606,780 4,070,896
General and administrative 2,059,794 2,194,716
Property expenses 5,111,179 4,822,808
Writedown to fair value 853,629 143,918
------------------------- --------------------------
21,922,037 22,085,968
------------------------- --------------------------
Income before minority
interest, income from
equity investments, and
gain on sale 7,907,806 8,439,919
Minority interest in income (634,102) (622,872)
------------------------- --------------------------
Income before income
from equity investments
and gain on sale 7,273,704 7,817,047
Income from equity investments 3,389,572 3,761,711
------------------------- --------------------------
Income before gain on sale 10,663,276 11,578,758
Gain on sale of real estate - 24,269
------------------------- --------------------------
Net income $10,663,276 $11,603,027
========================= ==========================
Basic earnings per share $.49 $.53
============= =============
Diluted earnings per share $.49 $.52
============= =============
Weighted average common
shares outstanding-basic 21,618,801 21,896,578
========================= ==========================
Weighted average common
shares outstanding-diluted 21,970,674 22,251,473
========================= ==========================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
- 3 -
<PAGE> 5
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1999 2000
----------------------- ------------------------
<S> <C> <C>
Net income $4,256,246 $3,707,739
Other comprehensive income (loss):
Change in unrealized gains
and losses on marketable
securities during the period 249,255 -
Change in foreign currency translation
adjustment - (157,771)
----------------------- ------------------------
Comprehensive income $4,505,501 $3,549,968
======================= ========================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 2000
-------------------------- -----------------------
<S> <C> <C>
Net income $10,663,276 $11,603,027
Other comprehensive income (loss):
Change in unrealized gains
and losses on marketable
securities during the period (180,710) -
Change in foreign currency translation
adjustment - (359,661)
-------------------------- -----------------------
Comprehensive income $10,482,566 $11,243,366
========================== =======================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
- 4 -
<PAGE> 6
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 2000
--------------------------- --------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $10,663,276 $11,603,027
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,606,780 4,070,896
Income from equity investments in excess of dividends
and distributions received (288,550) (602,229)
Minority interest in income 634,102 622,872
Straight-line rent adjustments and other
noncash rent adjustments (550,404) (474,540)
Provision for uncollected rent 623,294 74,950
Gain on sale of real estate - (24,269)
Writedown to fair value 853,629 143,918
Issuance of shares in satisfaction of performance fees 1,282,459 2,034,465
Net change in operating assets and liabilities 1,480,316 1,920,283
--------------------------- --------------------------
Net cash provided by operating activities 18,304,902 19,369,373
--------------------------- --------------------------
Cash flows from investing activities:
Proceeds from sale of real estate 218,250 24,269
Acquisition of real estate and equity investments and
additional capitalized costs (29,104,790) (9,724,666)
--------------------------- --------------------------
Net cash used in investing activities (28,886,540) (9,700,397)
--------------------------- --------------------------
Cash flows from financing activities:
Purchase of treasury stock (484,927) (2,890,248)
Prepayment of mortgage payable (5,413,727) (590,301)
Proceeds from mortgages 13,200,000 4,100,720
Proceeds from stock issuance 2,831,389 1,685,542
Payments of mortgage principal (3,119,618) (3,164,017)
Distributions paid to minority partner (293,932) (372,521)
Deferred financing costs (432,101) -
Dividends paid (13,174,949) (13,619,391)
--------------------------- --------------------------
Net cash used in financing activities (6,887,865) (14,850,216)
--------------------------- --------------------------
Net decrease in cash and cash equivalents (17,469,503) (5,181,240)
Cash and cash equivalents, beginning of period 36,787,777 14,100,580
--------------------------- --------------------------
Cash and cash equivalents, end of period $19,318,274 $ 8,919,340
=========================== ==========================
Supplemental disclosure of cash flows information:
Interest paid $10,323,059 $10,296,548
=========================== ==========================
Noncash operating and financing activities:
Issuance of common stock to Advisor in
satisfaction of prior periods' performance fees $11,115,588
===========================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
- 5 -
<PAGE> 7
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. All significant intercompany balances
and transactions have been eliminated. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of the results of the interim periods presented have been
included. The results of operations for the interim periods are not necessarily
indicative of results for the full year. 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, 1999.
The Company has adopted the provisions of Staff Accounting Bulletin No. 101 -
Revenue Recognition ("SAB 101"). The adoption of SAB 101 has not had a material
effect on the Company's financial position and results of operations.
Note 2. Earnings Per Share:
Basic and diluted earnings per common share for the Company for the three-month
and nine-month periods ended September 30, 1999 and 2000 were calculated as
follows:
<TABLE>
<CAPTION>
Three Months Ended September 30,
1999 2000
-------------------------- ------------------------
<S> <C> <C>
Net income $4,256,246 $3,707,739
========================== ========================
Weighted average shares - basic 21,745,143 21,918,925
Effect of dilutive securities:
Stock warrants 387,368 354,895
-------------------------- ------------------------
Weighted average shares - diluted 22,132,511 22,273,820
========================== ========================
Basic earnings per share $.20 $.17
============= =============
Diluted earnings per share $.19 $.17
============= =============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 2000
-------------------------- ------------------------
<S> <C> <C>
Net income $10,663,276 $11,603,027
========================== ========================
Weighted average shares - basic 21,618,801 21,896,578
Effect of dilutive securities:
Stock warrants 351,873 354,895
-------------------------- ------------------------
Weighted average shares - diluted 21,970,674 22,251,473
========================== ========================
Basic earnings per share $.49 $.53
============= =============
Diluted earnings per share $.49 $.52
============= =============
</TABLE>
Note 3. Transactions with Related Parties:
The Company incurred asset management fees of $668,350 and $681,981,
respectively, for the three-month periods ended September 30, 1999 and 2000 and
$1,950,817 and $2,045,806 for the nine-month periods ended September 30, 1999
and 2000, respectively, with performance fees in like amounts. General and
administrative expense reimbursements were $161,542 and $275,767 for the three
months ended September 30, 1999, and 2000, respectively, and $645,250 and
$835,076 for the nine months ended September 30, 1999 and 2000, respectively.
- 6 -
<PAGE> 8
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Note 4. Lease Revenues:
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>
1999 2000
---- ----
<S> <C> <C>
Per Statements of Income:
Rental income from operating leases $19,456,078 $20,733,259
Interest from direct financing leases 8,339,548 9,246,929
Adjustments:
Share of leasing revenue applicable
to minority interest (1,336,023) (1,329,446)
Share of leasing revenue from equity investments 8,357,180 8,780,339
-------------------------- -------------------------
$34,816,783 $37,431,081
========================== =========================
</TABLE>
For the nine-month periods ended September 30, 1999 and 2000, the Company earned
its proportionate net lease revenues from its investments as follows:
<TABLE>
<CAPTION>
1999 % 2000 %
------------------------ ----------- ------------------------ -----------
<S> <C> <C> <C> <C>
Marriott International, Inc. (a) $ 3,415,813 10% $3,421,006 9%
Omnicom Group, Inc. 3,198,721 9 3,199,034 8
Advanced Micro Devices, Inc. (a) 2,286,375 6 2,286,375 6
Best Buy Co., Inc. (b) 2,274,850 6 2,263,650 6
Centrobe, Inc. 1,769,196 5 1,769,196 5
Big V Holding Corp. 1,319,515 3 1,537,484 4
Lucent Technologies, Inc. 1,389,621 4 1,389,621 4
Garden Ridge, Inc. 1,092,959 3 1,122,163 3
Sicor, Inc. (a) 1,009,039 3 1,104,552 3
Merit Medical Systems, Inc. 977,468 3 1,085,543 3
Barnes & Noble, Inc. 1,047,708 3 1,058,946 3
Michigan Mutual Insurance Company 1,022,119 3 1,022,164 3
Q Clubs, Inc. 983,751 3 1,007,529 3
The Upper Deck Company (a) 989,906 3 989,906 3
Compucom Systems, Inc. (a) 656,047 2 978,500 3
Del Monte Corporation 964,688 3 964,688 2
UTI Holdings, Inc. (formerly Lincoln
Technical Institute of Arizona, Inc.) 905,215 3 931,101 2
Plexus Corp. 888,307 3 895,331 2
Wal-Mart Stores, Inc. 880,510 3 849,542 2
Waban, Inc./BJ's Warehouse Club 838,767 2 838,767 2
Bell Sports Corp. 816,050 2 831,256 2
Detroit Diesel Corporation 633,750 2 651,179 2
Gloystarne & Co. - - 633,531 2
PSC Scanning, Inc. 318,270 1 623,700 2
Custom Food Products, Inc. 649,753 2 620,533 2
Humco Holdings Corp. 540,244 2 618,825 2
Nicholson Warehouse, L.P. 603,896 2 611,325 1
Other 3,344,245 9 4,125,634 11
------------------------ ----------- ------------------------ -----------
$34,816,783 100% $37,431,081 100%
======================== =========== ======================== ===========
</TABLE>
(a) Represents the Company's proportionate share of lease revenues from its
equity investments.
(b) Net of amounts applicable to minority interests owned by Corporate
Property Associates 12 Incorporated ("CPA(R):12").
- 7 -
<PAGE> 9
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -
(CONTINUED)
Note 5. Equity Investments:
The Company holds interests in five investments in which its ownership interest
is 50% or less. All of the underlying investments are entities that were formed
solely for the purpose of entering into a long-term net lease with a single
tenant. As of September 30, 2000, the Company owns (i) an approximate 23.7%
interest in a real estate investment trust that net leases 13 Courtyard by
Marriott hotels to a wholly-owned subsidiary of Marriott International, Inc.,
(ii) 50% interests in general partnerships that net lease properties to Sicor,
Inc. and the Upper Deck Company and (iii) 33.33% interests in entities that net
lease property to Advanced Micro Devices, Inc. and Compucom Systems, Inc.
Summarized combined financial information of the Company's equity investees is
as follows:
(in thousands)
<TABLE>
<CAPTION>
December 31, 1999 September 30, 2000
-------------------------- ------------------------
<S> <C> <C>
Assets (primarily real estate) $323,347 $321,412
Liabilities (primarily mortgage notes payable) 211,058 206,814
Shareholders' and members' equity 112,289 114,598
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 2000
-------------------------- ------------------------
<S> <C> <C>
Revenues (primarily rental income and interest from
direct financing leases) $ 27,250 $28,440
Expenses (primarily interest on mortgage and depreciation) (15,678) (15,929)
-------------------------- ------------------------
Net income $ 11,572 $12,511
========================== ========================
</TABLE>
Note 6. Acquisition of Real Estate:
On September 29, 2000, the Company purchased land and building for $2,451,963 in
Glendale Heights, Illinois and entered into a net lease with UTI Holdings, Inc.
("UTI"). The Company and UTI also entered into a construction agreement to fund
improvements and renovate the existing building. The Company's maximum share of
additional project costs is $925,000 with UTI having an obligation to fund costs
in excess of such amount. The project is expected to be completed by April 2001.
The lease has an initial lease term of fifteen years which commences at the end
of the construction period, followed by three five-year renewal terms at UTI's
option. UTI will also have an option to terminate the lease after ten and
one-half years upon 18 months' notice. The lease provides for annual rent during
the initial lease term in an amount equal to 12.15% of the Company's share of
project costs. Based on the Company's total costs of $3,376,963, annual rent is
expected to be $410,301 during the first two lease years with annual rent
increases thereafter.
In connection with the lease, the Company and UTI amended the lease for an
existing facility in Glendale Heights, Illinois. The lease amendment provides
for a two-year extension on the initial lease term through November 2010. Under
the lease amendment, if UTI exercises its right to terminate under the lease on
the new building, the lease term on the existing property will automatically be
extended for an additional eight years.
Note 7. Writedown to Fair Value:
The Company and Corporate Property Associates 10 Incorporated, an affiliate,
which own a property in Texarkana, Arkansas as tenants-in-common, have entered
into an agreement-in-principle to sell the property to an unaffiliated third
party. The Company's share of proceeds, net of costs, is anticipated to be
$625,000. In connection with the proposed sale, the Company has written down its
carrying value in the Texarkana property to an amount equal to its share of the
anticipated net sales proceeds, and has recognized an impairment loss of
$143,918. There is no assurance that the proposed sale will be completed. The
Texarkana property has been vacant since the termination of the Harvest Foods,
Inc. lease in March 1997.
- 8 -
<PAGE> 10
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with CIP(R)'s condensed
consolidated financial statements and notes thereto as of September 30, 2000
included in this quarterly report and CIP(R)'s Annual Report on Form 10-K for
the year ended December 31, 1999. This quarterly report contains forward looking
statements. Such statements involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance, or achievement of
CIP(R) to be materially different from the results of operations or plan
expressed or implied by such forward looking statements. Accordingly, such
information should not be regarded as representations by CIP(R) that the results
or conditions described in such statements or the objectives and plans of CIP(R)
will be achieved.
RESULTS OF OPERATIONS:
Net income for the three-month and nine-month periods ended September 30, 2000
decreased $548,000 and increased $940,000 as compared to the three-month and
nine-month periods ended September 30, 1999. Excluding the effect of lease
termination income of $1,250,000 in 1999 and writedowns of properties to
estimated fair market value in 1999 and 2000, income would have reflected
increases of $459,000 and $1,480,000 for the comparable three-month and
nine-month periods.
The increase in income was primarily due to increases in lease revenues and
income from equity investments. The effect of these increases was partially
offset by increases in interest expense, depreciation expense and general and
administrative expense. Lease revenues increased as a result of expansions on
the Hibbett Sporting Goods, Inc. and Big V Holding Corp. properties, completed
in the fourth quarter of 1999 and the first quarter of 2000, respectively, the
acquisition in 1999 and 2000 of properties leased to Bolder Technology, Inc.,
PSC Scanning, Inc., Gloystarne & Co. and ISA International plc., and several
scheduled rent increases. The increase in equity income was due to the
acquisition, with two affiliates, of a property leased to Compucom Systems, Inc.
in March 1999, a rent increase in August 1999 on the lease with Sicor, Inc. and
lower interest expense on the mortgage loan on the thirteen Courtyard by
Marriott Hotels. Interest expense increased primarily as a result of placing
limited recourse mortgage debt on the newly-acquired properties. This
acquisition of properties and completion of expansions between April 1999 and
March 2000 contributed to the increases in depreciation. General and
administrative expense increased due to increases in general and administrative
expense reimbursements. Property expense decreased as a result of a reduction in
the provision for uncollected rents.
FINANCIAL CONDITION:
Cash flows from operations of $19,369,000 were sufficient to pay dividends to
shareholders of $13,619,000 and scheduled mortgage principal installments of
$3,164,000 and to distribute $373,000 to the minority interest owner of the Best
Buy Co., Inc. properties. Distributions to the minority interest owner are paid
solely based on cash flow from the Best Buy properties.
CIP(R)'s investing activities included using $9,725,000 to acquire the ISA
International property and a property under construction leased to UTI Holdings,
Inc., and funding the completion of the expansion of the Warwick, New York
property leased to Big V. The ISA International property is CIP(R)'s second
acquisition in the United Kingdom and the Company expects to complete additional
international acquisitions. As of September 30, 2000, CIP(R) and its affiliate,
Corporate Property Associates 10 Incorporated ("CPA(R):10"), have an
agreement-in-principle to sell a vacant property in Texarkana, Arkansas which it
owns with an affiliate. CIP(R)'s anticipated sales proceeds, net of costs, is
$625,000. There is no assurance that the sale will be completed.
In addition to dividend payments to shareholders and principal payments on
mortgage debt, CIP(R)'s financing activities included using $2,890,000 to
purchase treasury stock, paying a scheduled balloon payment of $310,000 to
satisfy the mortgage loan on a vacant property in Austin, Texas and obtaining
mortgage proceeds of $4,101,000 from limited recourse mortgage financing in
connection with purchasing the ISA International property. CIP(R) issued common
stock of $1,685,000 from its dividend reinvestment plan.
- 9 -
<PAGE> 11
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-
continued
CIP(R) and CPA(R):10, its affiliate, own six Wal-Mart Stores, Inc. retail
properties which are encumbered by a mortgage loan which initially matured in
January 1999. CIP(R) and CPA(R):10 are in the process of finalizing an agreement
with the lender which would extend the maturity through December 31, 2002. Under
the terms of the agreement, the annual interest rate would increase from 9.42%
to 10.42% over the remaining extended term. Monthly debt service installments of
interest and principal will not change from the current amount; however, CIP(R)
and CPA(R):10 will be required to direct Wal-Mart's annual percentage rents to
the lender in lieu of an increase in monthly debt service. If CIP(R)'s share of
percentage rents from the Wal-Mart leases is less than $200,000, CIP(R) will be
required to pay the difference between its share of percentage rent and $200,000
annually. In addition, CIP(R) used $280,000, an amount equal to percentage rents
that it received in 2000 from the six Wal-Mart properties, as a partial
principal prepayment of the loan. As of September 30, 2000, CIP(R)'s share of
the outstanding balance on the Wal-Mart properties mortgage loan was $6,383,000.
CIP(R) is also currently negotiating the restructure and extension of a limited
recourse mortgage loan which matures in November 2000 on properties leased to
Del Monte Corporation. As of September 30, 2000, the outstanding balance on the
Del Monte loan is $5,505,000. A balloon payment of approximately $2,209,000 is
due in December 2000 on a limited recourse mortgage loan for a property leased
to Superior Telecommunications, Inc. CIP(R) expects to refinance the loan and
currently has sufficient cash reserves to pay it off if necessary.
- 10 -
<PAGE> 12
CAREY INSTITUTIONAL PROPERTIES INCORPORATED
AND SUBSIDIARIES
PART II
Item 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(in thousands)
Approximately $136,892 of CIP(R)'s long-term debt bears interest at fixed rates,
and therefore the fair value of these instruments is affected by changes in the
market interest rates. The following table presents principal cash flows based
upon expected maturity dates of the debt obligations and the related
weighted-average interest rates by expected maturity dates for the fixed rate
debt. The interest rate on the variable rate debt as of September 30, 2000
ranged from LIBOR plus 1.625% to the lender's prime rate plus 2%. There has been
no material change since December 31, 1999.
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate debt $ 788 $3,430 $ 9,811 $11,097 $12,142 $99,624 $136,892 $140,257
Weighted average
interest rate 8.82% 8.84% 9.81% 8.92% 9.53% 8.22%
Variable rate debt $8,016 $5,178 $13,143 $ 164 $ 2,897 - $ 29,398 $ 29,398
</TABLE>
As of September 30, 2000, the Company had no other material exposure to market
risk.
Item 4. - SUBMISSION OF MATTERS 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 September 30, 2000, the Company
was not required to file any reports on Form 8-K.
- 11 -
<PAGE> 13
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
11/10/00 By: /s/ John J. Park
------------ ---------------------------------------------
Date John J. Park
Executive Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
11/10/00 By: /s/ Claude Fernandez
------------ ---------------------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
- 12 -
