<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) January 23, 1997
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
(Exact name of Registrant as specified in charter)
MARYLAND 33-99994 13-3726306
------------- --------------------- -------------------
(State of (Commission File No.) (IRS Employer
organization) Identification No.)
50 Rockefeller Plaza, 2nd Floor
New York, New York 10020
----------------------------------------
(Address of principal executive offices)
(212) 492-1100
-------------------------------
(Registrant's telephone number)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION
Pro Forma Annualized Statement of Taxable Operations and Cash Generated
(Unaudited).
<PAGE> 3
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------------------------------------------------------------------
ELEC GARDEN
MODIFICATION RIDGE SPECTRIAN KNOGO SCOTT
HISTORICAL (G) (N) (M) (O) (P) PRO FORMA
------------ --------------- --------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Land and buildings....... $ 54,724,975 $ 9,000,000 $ 8,062,295 $ 17,643,979 $ 4,925,000 $ 17,910,000 $112,266,249
Accumulated
depreciation........... (1,004,023) (1,004,023)
------------ ----------- ----------- ------------ ----------- ------------ ------------
Real estate accounted for
under the operating
method................. 53,720,952 9,000,000 8,062,295 17,643,979 4,925,000 17,910,000 111,262,226
Net investment in direct
financing leases....... 40,818,616 40,818,616
Equity investments....... 16,134,096 16,134,096
Cash and cash
equivalents............ 53,433,377 (4,000,000) (3,301,125) (17,291,099) (4,825,000) (17,550,000) 6,466,153
Accrued rents and
interest received...... 348,921 348,921
Other assets............. 2,522,677 2,522,677
------------ ----------- ----------- ------------ ----------- ------------ ------------
Total assets......... $166,978,639 $ 5,000,000 $ 4,761,170 $ 352,880 $ 100,000 $ 360,000 $177,552,689
============ =========== =========== ============ =========== ============ ============
LIABILITIES:
Limited recourse mortgage
notes payable.......... $ 42,340,683 $ 5,000,000 $ 4,600,000 $ 51,940,683
Accrued interest
payable................ 434,363 434,363
Accrued expenses and
accounts payable....... 222,921 222,921
Accounts payable to
affiliates............. 2,635,904 2,635,904
Deferred acquisition fees
payable to
affiliates............. 2,800,048 161,170 $ 352,880 $ 100,000 $ 360,000 3,774,098
Prepaid rental income and
security deposits...... 2,344,705 2,344,705
Dividends payable........ 1,818,988 1,818,988
------------ ----------- ----------- ------------ ----------- ------------ ------------
Total liabilities.... 52,597,612 5,000,000 4,761,170 352,880 100,000 360,000 63,171,662
------------ ----------- ----------- ------------ ----------- ------------ ------------
SHAREHOLDERS' EQUITY:
Common stock............. 13,113 13,113
Additional paid-in
capital................ 116,849,762 116,849,762
Distributions in excess
of accumulated
earnings............... (2,378,140) (2,378,140)
------------ ------------
114,484,735 114,484,735
Less: treasury stock..... (103,708) (103,708)
------------ ------------
Total shareholders'
equity............. 114,381,027 114,381,027
------------ ----------- ----------- ------------ ----------- ------------ ------------
Total liabilities
and shareholders'
equity............. $166,978,639 $ 5,000,000 $ 4,761,170 $ 352,880 $ 100,000 $ 360,000 $177,552,689
============ =========== =========== ============ =========== ============ ============
</TABLE>
1
<PAGE> 4
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------------------------------------------------------------------
DEL MONTE ETEC APBI RSI TELOS LANXIDE SFC#2 CELADON SPECTRIAN
HISTORICAL (J) (G) (B) (A) (D) (E) (K) (L) (M)
---------- --------- -------- ---------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental income from
operating leases......... $3,206,775 $643,125 $596,162 $391,524 $501,667 $1,443,750
Interest income
from direct
financing leases......... 3,239,934 $174,099 $280,064 $259,914
Other interest income..... 1,240,126
---------- -------- -------- ------- -------- -------- -------- -------- -------- ----------
7,686,835 643,125 596,162 -- 174,099 280,064 259,914 391,524 501,667 1,443,750
---------- -------- -------- ------- -------- -------- -------- -------- -------- ----------
Expenses:
Interest expenses......... 2,521,907 298,612 142,296 39,363 3,649 133,879 93,114
Depreciation.............. 613,716 98,682 127,602 64,171 94,214 226,373
General and administrative
expenses................. 1,167,689
Property expenses......... 908,172
Amortization.............. 23,337
---------- -------- -------- ------- -------- -------- -------- -------- -------- ----------
5,234,821 397,294 269,898 39,363 3,649 133,879 93,114 64,171 94,214 226,373
---------- -------- -------- ------- -------- -------- -------- -------- -------- ----------
Income before income from
equity investments....... 2,452,014 245,831 326,264 (39,363) 170,450 146,185 166,800 327,353 407,453 1,217,377
Income from equity
investments.............. 1,526,879
---------- -------- -------- ------- -------- -------- -------- -------- -------- ----------
Net income................ $3,978,893 $245,831 $326,264 ($ 39,363) $170,450 $146,185 $166,800 $327,353 $407,453 $1,217,377
========== ======== ======== ======= ======== ======== ======== ======== ======== ==========
<CAPTION>
GARDEN
RIDGE KNOGO SCOTT OTHER PRO
(N) (O) (P) (Q) FORMA
-------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental income from
operating leases......... $746,823 $393,000 $1,459,388 $9,382,214
Interest income
from direct
financing leases......... 3,954,011
Other interest income..... $(1,240,126) --
-------- -------- ---------- ----------- --------
746,823 393,000 1,459,388 (1,240,126) 13,336,225
-------- -------- ---------- ----------- --------
Expenses:
Interest expenses......... 296,081 72,109 3,601,010
Depreciation.............. 135,104 62,278 228,285 1,650,425
General and administrative
expenses................. 1,167,689
Property expenses......... 548,435 1,456,607
Amortization.............. 23,337
-------- -------- ---------- ----------- --------
431,185 62,278 228,285 620,544 7,899,068
-------- -------- ---------- ----------- --------
Income before income from
equity investments....... 315,638 330,722 1,231,103 (1,860,670) 5,437,159
Income from equity
investments.............. 1,526,879
-------- -------- ---------- ----------- --------
Net income................ $315,638 $330,722 $1,231,103 $(1,860,670) $6,964,036
======== ======== ========== =========== ========
</TABLE>
2
<PAGE> 5
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------------------------------------------------------------------
NK UPPER
WAL-MART ETEC SFC#1 LAWN APBI DEL MONTE DECK RSI
HISTORICAL (F) (G) (H) (I) (B) (J) (C) (A)
---------- --------- -------- -------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental income from operating
leases..................... $2,111,998 $ 43,743 $854,662 $293,737 $1,286,250
Interest income
from direct
financing leases........... 1,221,026 $383,596 $1,128,400 $1,180,000
Other interest income....... 660,623
--------- ---------- -------- -------- -------- -------- -------- -------- --------
3,993,647 43,743 854,662 293,737 383,596 1,128,400 1,286,250 -- 1,180,000
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Expenses:
Interest expense............ 1,260,189 148,636 180,269 105,503 159,353 613,019 621,162 295,391
Depreciation................ 390,307 10,429 192,252 43,366 240,743 267,121
General and administrative
expense.................... 942,074
Property expenses........... 596,227
Amortization................ 12,797
--------- ---------- -------- -------- -------- -------- -------- -------- --------
3,201,594 159,065 372,521 148,869 159,353 853,762 888,283 -- 295,391
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Income before income from
equity investments......... 792,053 (115,322) 482,141 144,868 224,243 274,638 397,967 -- 884,609
Income from equity
investments................ 1,322,990 $ 690,714
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Net Income.................. $2,115,043 $(115,322) $482,141 $144,868 $224,243 $ 274,638 $ 397,967 $ 690,714 $ 884,609
========= ========== ======== ======== ======== ======== ======== ======== ========
<CAPTION>
GARDEN
TELOS LANXIDE SFC#2 CELADON SPECTRIAN RIDGE KNOGO SCOTT
(D) (E) (K) (L) (M) (N) (O) (P)
---------- ---------- -------- ---------- ---------- -------- -------- ----------
<S> <C> <C>
Revenue:
Rental income from operating
leases..................... $694,000 $ 700,000 $1,925,000 $995,764 $524,000 $1,945,850
Interest income
from direct
financing leases........... $1,447,000 $1,030,000
Other interest income.......
-------- -------- -------- -------- ---------- -------- -------- ----------
1,447,000 1,030,000 694,000 700,000 1,925,000 995,764 524,000 $1,945,850
-------- -------- -------- -------- ---------- -------- -------- ----------
Expenses:
Interest expense............ 561,660 445,078 399,008
Depreciation................ 118,474 133,010 301,830 180,139 83,037 340,380
General and administrative
expense....................
Property expenses...........
Amortization................
-------- -------- -------- -------- ---------- -------- -------- ----------
561,660 445,078 118,474 133,010 301,830 579,147 83,037 340,380
-------- -------- -------- -------- ---------- -------- -------- ----------
Income before income from
equity investments......... 885,340 584,922 575,526 566,990 1,623,170 416,617 440,963 1,605,470
Income from equity
investments................
-------- -------- -------- -------- ---------- -------- -------- ----------
Net Income.................. $ 885,340 $ 584,922 $575,526 $ 566,990 $1,623,170 $416,617 $440,963 $1,605,470
======== ======== ======== ======== ========== ======== ======== ==========
<CAPTION>
OTHER PRO
(Q) FORMA
----------- -----------
Revenue:
Rental income from operating
leases..................... $11,375,004
Interest income
from direct
financing leases........... 6,390,022
Other interest income....... $ (660,623)
------------ -----------
(660,623) 17,765,026
------------ -----------
Expenses:
Interest expense............ 158,012 4,947,280
Depreciation................ 2,301,088
General and administrative
expense.................... 942,074
Property expenses........... 1,329,229 1,925,456
Amortization................ 12,797
------------ -----------
1,487,241 10,128,695
------------ -----------
Income before income from
equity investments......... (2,147,864) 7,636,331
Income from equity
investments................ 2,013,704
------------ -----------
Net Income.................. $(2,147,864) $ 9,650,035
============ ===========
</TABLE>
3
<PAGE> 6
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF TAXABLE INCOME
AND AFTER TAX CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
<TABLE>
<S> <C>
Consolidated pro forma net income for the year ended December 31, 1995.............. $ 9,650,035
Depreciation on direct financing leases for tax purposes (Note R)................... (828,406)
Difference between interest accrued on direct financing leases and rental revenue
recognized for tax purposes (Note S).............................................. (236,259)
Adjustment to equity income from GAAP to tax basis (Note T)......................... (501,560)
-----------
Pro forma taxable income..................................................... 8,083,810
Add: Depreciation from direct financing and operating leases (Note U).............. 3,129,494
Distributions from equity investments in excess of share of tax earnings
(Note V).......................................................................... 338,435
Less: Principal paid (Note W)....................................................... (1,693,197)
-----------
Pro forma after tax cash flow................................................ $ 9,858,542
===========
</TABLE>
1. BASIS OF PRESENTATION
The pro forma consolidated financial statements of Corporate Property
Associates 12 Incorporated and subsidiaries (the "Company"), which are
unaudited, have been prepared based on the historical financial statements of
the Company. The pro forma consolidated balance sheet of the Company at
September 30, 1996 has been prepared as if the purchase of properties leased to
Garden Ridge Corporation ("Garden Ridge"), Spectrian Corporation ("Spectrian"),
Knogo North America, Inc. ("Knogo") and Scott Company of California ("Scott")
and completion of expansion of the ETEC Systems, Inc. ("ETEC") property had been
completed. The pro forma statements of income for the year ended December 31,
1995 and the nine-month period ended September 30, 1996 have been prepared as if
the acquisition of the Properties and the related mortgage financing occurred on
January 1, 1995. To the extent that certain properties had been acquired prior
to January 1, 1995, lease revenues depreciation and interest expense are based
on a historical basis.
During 1994, the Company purchased general partnership interests in two
general partnerships which lease properties to Gensia, Inc. ("Gensia") and Best
Buy Co., Inc. ("Best Buy"), respectively, and an interest as a tenant-in-common
in two properties leased to Big V. In 1995, the Company purchased properties
leased to Wal-Mart Stores, Inc. ("Wal-Mart"), ETEC, Sports & Fitness ("Sports &
Fitness" or "SFC"), NK Lawn and Garden & Co. ("NK Lawn and Garden"), Applied Bio
Science Inc. ("APBI") and Del Monte Corporation ("Del Monte"). Since December
31, 1995 but prior to September 30, 1996, the Company purchased properties
leased to Rheometric Scientific, Inc. ("Rheometric"), Telos Corporation
("Telos"), Lanxide Corporation ("Lanxide") a second Sports & Fitness, Celadon
Group Inc. ("Celadon") and a 50% equity interest in a property leased to The
Upper Deck Company ("Upper Deck") and completed construction of four properties
for Del Monte Corporation ("Del Monte"). To the extent that any purchase of
property was completed subsequent to December 31, 1994, the pro forma adjustment
presented is intended to reflect an adjustment for the difference between what
has been recorded in the historical consolidated statements of income relating
to that property and what the effect would have been if the Company held its
ownership interest and obtained related mortgage financing, where applicable as
of January 1, 1995. In addition, adjustments have been presented to reflect the
Company's asset management and performance fees expense and interest accrued on
subordinated acquisition fee payable. In management's opinion, all adjustments
necessary to reflect the effects of the aforementioned acquisitions have been
made. The pro forma financial information should be read in conjunction with the
historical consolidated financial statements of the Company.
The pro forma financial results are not necessarily indicative of the
financial condition or the results of operations had the acquisitions occurred
on January 1, 1995 or prior, nor are they necessarily indicative of the
financial position or results of operations for future periods.
4
<PAGE> 7
2. PRO FORMA ADJUSTMENTS
A. The Rheometric lease provides for annual rent of $1,180,000. For the
nine-month period ended September 30, 1996, pro forma rent is $885,000 of which
$710,901 is included in the historical results of operations. Interest expense
is based on a mortgage loan of $3,300,000, an interest rate of 9.625% per annum
and monthly principal payments of $42,000. For the nine-month period ended
September 30, 1996, pro forma interest expense is $189,709 of which $186,060 is
included in the historical results of operations. As the Rheometric lease is
classified as a direct financing lease, no depreciation expense has been
presented.
B. The APBI lease provides for annual rent of $1,302,000. Included in the
historical results of operations for the year ended December 31, 1995 is
$173,600 of rental income. Annual depreciation expense on the APBI property of
$275,174 per year is computed on a straight-line basis over 40 years and is
based on buildings and improvements with a depreciable basis of $11,006,940.
Included in the historical results of operations for the year ended December 31,
1995 is $34,431 of depreciation expense. In January 1996, the Company obtained
$7,500,000 of limited recourse financing collateralized by the APBI properties.
The loan will bear interest at the rate of 8.25%, based on a twenty-year
amortization schedule, with monthly debt service of $63,905. For the nine-month
period ended September 30, 1996, pro forma interest expense is $451,173 of which
$411,810 is included in historical results of operations.
C. The Company has a 50% interest in a limited liability company (the
"Upper Deck LLC") which leases land and buildings to The Upper Deck Company. The
Company is accounting for this investment under the equity method. The Company's
pro forma equity income in the Upper Deck LLC is based on its share of earnings
resulting from annual rental income of $2,639,750, monthly payments of $120,077
on a $15,000,000 debt which bears interest at a rate of 8.43% and a 25-year
principal amortization schedule and certain state franchise taxes incurred. The
lease has been classified as a direct financing lease for financial reporting
purposes. Accordingly, the effect of depreciation is not reflected in earnings.
The total purchase price of the properties owned by Upper Deck LLC was
$25,654,450. The Company's 50% share of the pro forma share of earnings from the
Upper Deck LLC is $690,714 for the year ended December 31, 1995. None of these
earnings are reflected in the historical results for the year ended December 31,
1995. As the actual results for the nine-month period ended September 30, 1996
approximate pro forma results, no pro forma adjustment has been made.
D. The Telos lease provides for annual rent of $1,447,000. For the
nine-month period ended September 30, 1996, pro forma rent is $1,085,250 of
which $805,186 is included in the historical results of operations. The Company
received limited recourse mortgage financing of $6,250,000. The loan provides
for monthly payments of principal and interest at a floating rate at the London
Inter-Bank Offered Rate ("LIBOR") plus 3.5% per annum and a twenty year
amortization schedule. For pro forma purposes, an annual interest rate of
9.0625% has been utilized. At such rate, the pro forma monthly debt service
payment is $56,484. For the nine-month period ended September 30, 1996, pro
forma interest is $413,386 of which $279,507 is included in the historical
results of operations. As the Telos lease is classified as a direct financing
lease, no depreciation expense has been presented.
E. The Lanxide lease provides for annual rent of $1,030,000. For the
nine-month period ended September 30, 1996 pro forma rent is $772,500 of which
$512,586 is included in the historical results of operations. A first priority
mortgage loan on the property of $4,000,000 provides for monthly payments of
principal and interest with interest based on the lender's prime rate plus 2%
and a 15-year amortization schedule. For pro forma purposes, the monthly payment
is $43,598 and is based on a pro forma, the annual interest rate on the loan was
10.25%. A purchase money mortgage loan of $400,000 provides for quarterly
payments of principal and interest of $13,126 at 10.25% per annum and is based
on a 15-year amortization schedule. For the nine-month period ended September
30, 1996, pro forma interest is $323,855 of which $230,741 is included in the
historical results of operations. As the Lanxide lease is classified as a direct
financing lease, no depreciation expense has been presented.
F. The Wal-Mart lease provides for annual rent of $397,226. Included in the
historical results of operations for the year ended December 31, 1995 is
$353,483 of rental income. Annual depreciation expense on the Wal-Mart property
of $83,432 is computed on a straight-line basis over 40 years and is based on
5
<PAGE> 8
buildings and improvements with a depreciable basis of $3,337,283. Included in
the historical results of operations for the year ended December 31, 1995 is
$73,003 of depreciation expense. Interest expense on the limited recourse loan
on the Wal-Mart property is based on a mortgage loan which had an initial
balance of $2,500,000 and provides for monthly payments ($22,223) based on an
18-year amortization schedule and an annual interest rate of 8.23%. Based on the
pro forma amortization schedule which assumes the mortgage was obtained on
January 1, 1995, pro forma interest is calculated to be $203,398, of which
$54,762 is included in the historical results of operations.
G. The Company purchased the ETEC property in February 1995 with $6,250,000
of limited recourse mortgage financing. In August 1996, the Company entered into
a modification agreement with ETEC. Under this agreement, the Company agreed to
a reduction in the annual rent and agreed to cancel a portion of the ETEC common
stock warrants which were received at the time of the purchase in return for a
refunding of $2,633,473 from the initial purchase price of the ETEC property.
Such refund was applied as a partial repayment on the $6,250,000 mortgage
financing. In connection with the modification agreement, the Company has agreed
to fund improvements of up to $9,000,000 for an expansion of the ETEC facility
of which $5,000,000 will be provided by a modification of the mortgage financing
which has been committed to by the lender.
For pro forma purposes, adjustments are presented as though the expansion
has been completed and the loan has been refinanced on the above terms. Based on
completion of the improvements, annual rent will be $2,065,314. For pro forma
purposes, annual debt service is based on a mortgage loan of $8,616,527 (based
on amount for the initial loan of $6,250,000, additional financing of $5,000,000
and a partial prepayment of $2,633,473), a fixed annual rate of interest of
8.03% and a 13 1/2 year amortization schedule. Actual debt service after the
completion of the improvements and the related refinancing due to amortization
of loan principal between the initial purchase of the property and the
refinancing date.
Included in the historical results of operations for the year ended
December 31, 1995 is $1,210,652 of rental income, accordingly, a pro forma
adjustment of $854,662 has been reflected. Annual depreciation of $423,874 is
based on a depreciable basis of $16,954,963 and computed on a straight-line
basis over 40 years. Included in the historical results of operations for the
year ended December 31, 1995 is depreciation expense of $231,622. Pro forma
interest expense for the year ended December 31, 1995 is $678,525 of which
$498,250 is included in the historical results of operations. Pro forma rent
depreciation and interest for the nine-month period ended September 30,1996 is
$1,548,986, $317,906 and $458,856 of which $952,824, $190,304 and $346,600,
respectively, is included in the historical results of operations.
H. The Company purchased two Sports & Fitness properties, the first of
which was purchased in 1995. The Sports & Fitness lease for the property
purchased in 1995 provides for annual rent of $668,000. Included in the
historical results of operations for the year ended December 31, 1995 is
$374,263 of rental income. Interest expense on the Sports & Fitness property is
based on a mortgage loan which had an initial balance of $2,750,000 and provides
for monthly payments ($28,385) based on a 15-year amortization schedule and an
annual interest rate of 9.3%. Based on the pro forma amortization schedule which
assumes the mortgage was obtained on January 1, 1995, pro forma interest is
calculated to be $252,037, of which $146,534 is included in the historical
results of operations for the year ended December 31, 1995. Annual depreciation
expense on the Sports & Fitness property of $94,617 is computed on a
straight-line basis over 40 years and is based on buildings and improvements
with a depreciable basis of $3,784,684. Included in the historical results of
operations for the year ended December 31, 1995 is $51,251 of depreciation
expense.
I. The NK Lawn & Garden lease provides for annual rent of $816,400.
Included in the historical results of operations for the year ended December 31,
1995 is $432,804 of interest income from direct financing leases. Interest
expense on the limited recourse loan on the NK Lawn & Garden property is based
on a mortgage loan which had an initial balance of $3,500,000 and provides for
monthly payments ($29,778) based on a 20-year amortization schedule and an
annual interest rate of 8.23%. Based on the pro forma amortization schedule
which assumes the mortgage was obtained on January 1, 1995, pro forma interest
is calculated to be $285,376 for the period of which $126,023 is included in the
historical results of operations
6
<PAGE> 9
for the year ended December 31, 1995. As the NK Lawn & Garden lease has been
classified as a direct financing lease for financial reporting purposes, no
depreciation expense has been presented.
J. In July, 1996, the Company completed the construction of properties for
Del Monte. The Del Monte lease provides for annual rent of $1,286,250 and
$964,688 for the year ended December 31, 1995 and the nine-month period ended
September 30, 1996, respectively (of which $321,563 is included in the
historical results from the nine-month period). $6,250,000 of debt financing was
obtained upon completion of construction of the Del Monte facilities. Interest
expense on a $5,500,000 portion of the debt is based on an annual interest rate
of 10%, a 20-year amortization and quarterly payments of principal and interest
of $159,643. Interest expense on the remaining $750,000 portion of the debt is
calculated on the basis of an annual interest rate of 10% (figured on the
current interest rate which is indexed to LIBOR), a 20 year amortization and
quarterly payments of $21,770. Pro forma interest for the year ended December
31, 1995 and the nine-month period ended September 30, 1996 is $621,162 and
$458,813, respectively. For the nine-month period ended September 30, 1996,
interest expense of $160,241 is included in the historical results of
operations. Annual depreciation of $267,121 is computed on a straight line basis
over 40 years and is based on buildings and improvements of $10,684,842 for the
nine-month period ended September 30, 1996, pro forma depreciation expense is
$200,341 of which $101,659 is included in the historical results of operations.
K. The Company purchased a second Sports & Fitness property on July 23,
1996. The Sports & Fitness lease provides for annual rent of $694,000. Annual
depreciation expense on the Sports & Fitness property of $118,474 is computed on
a straight-line basis over 40 years and is based on buildings and improvements
of $4,738,967. For the nine-month period ended September 30, 1996, pro forma
rent and depreciation is $520,500 and $88,856, respectively, of which $128,976
and $24,685, respectively, have been included in the historical results of
operations. Currently, there is no mortgage debt on the property nor has a
commitment from a lender for such debt been obtained.
L. The Celadon lease provides for annual rent of $700,000. Annual
depreciation on the Celadon property of $133,010 is computed on a straight-line
basis over 40 years and is based on buildings and improvements of $5,320,400.
For the nine-month period ended September 30, 1996, pro forma rent and
depreciation is $525,000 and $99,758, respectively, of which $23,333 and $5,544,
respectively, have been included in the historical results of operations.
Currently there is no mortgage debt on the property nor has a commitment from a
lender for such debt been obtained.
M. The Spectrian lease provides for annual rent of $1,925,000. Annual
depreciation of $301,830 is computed on a straight-line basis over 40 years and
is based on buildings and improvements of $12,073,204.
N. The Garden Ridge lease provides for current annual rentals of $854,164;
however, minimum scheduled rents over the term of the lease result in the
straight-lining of rent for financial reporting purposes at an annual amount of
$995,764. Annual depreciation of $180,139 is computed on a straight-line basis
over 40 years and is based on buildings and improvements of $7,205,548. Interest
expense on the limited recourse loan on the Garden Ridge property is based on a
$4,600,000 loan at an annual interest rate of 8.72% with monthly payments of
principal and interest of $37,725 based on a 25-year amortization schedule.
O. The Knogo lease provides for annual rent of $524,000. Annual
depreciation of $83,037 is computed on a straight-line basis over 40 years and
is based on building and improvements of $3,321,480.
P. The Scott lease provides for annual rent of $1,945,850. Annual
depreciation of $340,380 is computed on a straight-line basis over 40 years and
is based on buildings and improvements of $12,175,218. The lease obligations of
Scott are guaranteed by its parent company, Scott Companies, Inc. pursuant to a
guaranty agreement with the Company.
Q. The Company accrues interest on its deferred acquisition fee payable to
an affiliate of $3,774,098 (based on a payable of $2,800,048 at September 30,
1996 plus deferred fees of $974,050 relating to the Garden Ridge, Spectrian,
Knogo and Scott transactions which occurred subsequent to September 30, 1996)
accrues at the rate of 7% per annum. Pro forma interest on the deferred
acquisition fee for the year ended December 31,
7
<PAGE> 10
1995 and the nine-months ended September 30, 1996 is $264,187 and $198,140,
respectively, of which $106,175 and $126,031, respectively, is included in the
historical results of operations.
The asset management and performance fee payable to the Advisor are both
based on 1/2 of 1% of Average Invested Assets of $191,318,835. Average Invested
Assets have been determined by the sum of (1) the total basis for directly owned
properties and (2) the pro rata basis of all properties which are jointly owned
directly or indirectly with affiliates less the noncash component representing
deferred acquisition fees payable to an affiliate. Pro forma combined asset
management and performance fees for the year ended December 31, 1995 and the
nine-months ended September 30, 1995 is $1,913,188 and $1,434,891, respectively,
of which $583,959 and $886,456, respectively, are included in the historical
results of operations.
R. For financial reporting purposes, no depreciation is taken on leases
classified as direct financing leases; however, as such leases are classified as
operating leases for tax reporting purposes, depreciation is computed for such
properties for the purpose of determining REIT taxable income. Depreciation of
$828,406 is computed on a straight-line basis over 40 years and is based on
buildings and improvements for the six direct financing leases with a combined
depreciable basis of $33,136,255.
S. The Company's reported interest income on its direct financing lease
with Big V Supermarkets, Inc. and straight-line adjustment on its operating
lease with Garden Ridge is $94,659 and $141,600, respectively, greater than the
applicable rental income reported for tax purposes.
T. The Company's share of taxable income and GAAP income for the Gensia and
Best Buy Partnerships is based on the actual amounts reported in Federal income
tax returns and audited financial statements. Such difference between GAAP and
tax aggregates $222,174. The Company's share of taxable income from the Upper
Deck LLC differs from its share of GAAP income due to its classification as a
direct financing lease. While depreciation is taken for tax purposes, no
depreciation is taken for financial reporting purposes. Depreciation expense
which is computed on a straight-line basis over 40 years is based on buildings
and improvements with a depreciable basis of $22,350,938. Rental income for tax
purposes does not vary from recognition of rental income for financial reporting
purposes. The net effect of the depreciation adjustment is $558,773 of which the
Company's 50% share is $279,386.
U. This adjustment consists of depreciation from operating leases as
reflected on the pro forma consolidated statement of operations of $2,301,088
and the tax adjustment for depreciation on direct financing leases of $828,406.
V. The difference between tax basis income from equity investments in
general partnerships and the cash available for distribution for the Gensia and
Best Buy partnerships' equity investments is based on the difference between
amounts reported for Federal income tax purposes and actual cash distributions
received by the Company as the Company purchased such interests prior to January
1, 1995. The pro forma adjustment for Upper Deck is as follows:
<TABLE>
<S> <C>
GAAP income on a pro forma basis............................................. $1,381,429
Less: Principal amortization................................................. (183,407)
----------
Cash available for distribution.............................................. $1,198,022
==========
Company's share of cash available............................................ $ 599,011
Company's share of taxable income............................................ 411,328
----------
Cash available in excess of taxable income................................... $ 187,683
==========
</TABLE>
8
<PAGE> 11
W. Principal is deemed to have been paid as follows:
<TABLE>
<S> <C>
NK Lawn & Garden..................................................... $ 71,965
Sports & Fitness..................................................... 88,586
Etec................................................................. 368,941
Big V................................................................ 37,652
Del Monte............................................................ 104,488
Wal-Mart............................................................. 63,280
APBI................................................................. 153,840
Rheometric........................................................... 504,000
Telos................................................................ 116,152
Lanxide.............................................................. 130,602
Knogo................................................................ 53,691
----------
Total................................................................ $1,693,197
==========
</TABLE>
9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES 12
INCORPORATED
By: /s/ Michael D. Roberts
--------------------------------
Michael D. Roberts
First Vice President and
Controller
Dated: March 23, 1997
