<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended JUNE 30, 2000
of
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
CPA(R):12
A MARYLAND Corporation
IRS Employer Identification No. 13-3726306
SEC File Number 033-68728
50 ROCKEFELLER PLAZA,
NEW YORK, NEW YORK 10020
(212) 492-1100
CPA(R):12 has SHARES OF COMMON STOCK registered pursuant to Section 12(g) of the
Act.
CPA(R):12 is not registered on any exchanges.
CPA(R):12 does not have any Securities registered pursuant to Section 12(b) of
the Act.
CPA(R):12 is unaware of any delinquent filers pursuant to Item 405 of Regulation
S-K.
CPA(R):12 (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.
CPA(R):12 has no active market for common stock at August 8, 2000.
28,637,275 shares of common stock, $.001 par value outstanding at August 8,
2000.
<PAGE> 2
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I
Item 1. - Financial Information*
Condensed Consolidated Balance Sheets, as of December 31, 1999
and June 30, 2000 2
Condensed Consolidated Statements of Income for the three
and six months ended June 30, 1999 and 2000 3
Condensed Consolidated Statements of Comprehensive Income
for the three and six months ended June 30, 1999 and 2000 3
Condensed Consolidated Statement of Cash Flows for the six
months ended June 30, 1999 and 2000 4
Notes to Condensed Consolidated Financial Statements 5-9
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-11
PART II - Other Information
Item 3. - Quantitative and Qualitative Disclosure About Market Risk 12
Item 4. - Submission of Matters to a Vote of Security Holders 12
Item 6. - Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
* The summarized financial information contained herein is unaudited; however,
in the opinion of management, all adjustments necessary for a fair presentation
of such financial information have been included.
- 1 -
<PAGE> 3
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
AND SUBSIDIARIES
PART I
Item 1. - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1999 June 30, 2000
----------------- -------------
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land and buildings,
net of accumulated depreciation of
$16,002,192 at December 31, 1999 and
$18,678,676 at June 30, 2000 $ 316,492,829 $ 326,468,228
Net investment in direct financing leases 40,479,390 41,027,735
Equity investments 45,068,997 40,669,710
Cash and cash equivalents 8,847,449 9,631,576
Other assets 7,199,306 6,809,859
------------- -------------
Total assets $ 418,087,971 $ 424,607,108
============= =============
LIABILITIES:
Limited recourse mortgage notes payable $ 138,361,131 $ 145,656,938
Accrued interest 422,598 935,181
Accounts payable to affiliates 2,885,052 3,259,047
Accounts payable and accrued expenses 487,020 376,574
Dividends payable 5,852,519 5,854,136
Prepaid rental income and security deposits 5,520,543 4,372,533
Deferred acquisition fees payable to an affiliate 7,911,752 7,351,650
------------- -------------
Total liabilities 161,440,615 167,806,059
------------- -------------
Minority interest 22,397,277 23,196,961
------------- -------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; authorized,
40,000,000 shares; issued and outstanding
28,909,098 and 29,038,380 shares at
December 31, 1999 and June 30, 2000 28,909 29,038
Additional paid-in capital 259,581,829 260,459,504
Accumulated other comprehensive income 483,269 --
Dividends in excess of accumulated earnings (23,346,983) (23,762,006)
------------- -------------
236,747,024 236,726,536
Less: common stock in treasury at cost,
285,051 and 345,971 shares at December 31, 1999
and June 30, 2000 (2,496,945) (3,122,448)
------------- -------------
Total shareholders' equity 234,250,079 233,604,088
------------- -------------
Total liabilities and shareholders' equity $ 418,087,971 $ 424,607,108
============= =============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Note: The balance sheet at December 31, 1999 has been derived from the audited
consolidated financial statements at that date.
- 2 -
<PAGE> 4
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 7,623,026 $ 9,872,970 $ 14,980,116 $ 19,461,797
Interest income from direct
financing leases 1,200,739 1,264,086 2,294,851 2,526,453
Other interest income 101,687 147,026 388,651 256,516
------------ ------------ ------------ ------------
8,925,452 11,284,082 17,663,618 22,244,766
------------ ------------ ------------ ------------
Expenses:
Interest 2,284,548 2,933,485 4,589,108 5,623,617
Depreciation and amortization 1,523,949 1,901,937 2,955,254 4,003,169
General and administrative 802,724 881,989 1,433,640 1,481,605
Property expenses 1,297,537 1,870,430 2,383,761 3,404,695
------------ ------------ ------------ ------------
5,908,758 7,587,841 11,361,763 14,513,086
------------ ------------ ------------ ------------
Income before minority
interest, income from equity
investments, and gain on
sale of securities and real
estate 3,016,694 3,696,241 6,301,855 7,731,680
Minority interest in income -- (299,468) -- (595,699)
------------ ------------ ------------ ------------
Income before income from
equity investments and gain
on sale of securities and
real estate 3,016,694 3,396,773 6,301,855 7,135,981
Income from equity investments 1,081,132 845,944 1,965,258 1,973,523
------------ ------------ ------------ ------------
Income before gain on sale of
securities and real estate 4,097,826 4,242,717 8,267,113 9,109,504
Gain on sale of securities -- 191,000 -- 969,946
Gain on sale of real estate -- 1,212,886 -- 1,212,886
------------ ------------ ------------ ------------
Net income $ 4,097,826 $ 5,646,603 $ 8,267,113 $ 11,292,336
============ ============ ============ ============
Basic income per common share $ .14 $ .19 $ .29 $ .39
============ ============ ============ ============
Weighted average shares
outstanding - basic 28,551,907 28,692,548 28,558,957 28,682,999
============ ============ ============ ============
</TABLE>
- 3 -
<PAGE> 5
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 4,097,826 $ 5,646,603 $ 8,267,113 $ 11,292,336
------------ ------------ ------------ ------------
Other comprehensive income:
Change in unrealized gain on
marketable securities during
the period 248,535 -- (440,027) 295,677
Change in unrealized appreciation
resulting from sale of securities -- -- -- (778,946)
------------ ------------ ------------ ------------
Other comprehensive income: 248,535 -- (440,027) (483,269)
------------ ------------ ------------ ------------
Comprehensive income $ 4,346,361 $ 5,646,603 $ 7,827,086 $ 10,809,067
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
- 4 -
<PAGE> 6
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 2000
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,267,113 $ 11,292,336
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,955,254 4,003,169
Straight-line rent adjustments and other
noncash rent adjustments (580,561) (508,579)
Fees paid by issuance of stock 495,084 1,292,819
Minority interest in income -- 595,699
Gains on sale of securities and real estate -- (2,182,831)
Provision for uncollected rent 129,563 --
Change in operating assets and liabilities, net (76,919) 644,827
------------ ------------
Net cash provided by operating activities 11,189,534 15,137,440
------------ ------------
Cash flows from investing activities:
Distributions from equity investments in excess of equity income 137,677 1,006,644
Capital distribution from equity investments -- 4,195,380
Purchases of real estate and equity investments and additional
capitalized costs (44,164,483) (11,312,804)
Repayment of security deposit in connection with sale of property -- (1,296,710)
Proceeds from sale of securities and real estate -- 15,449,405
Payment of deferred acquisition fees (1,529,131) (560,102)
------------ ------------
Net cash (used in) provided by investing activities (45,555,937) 7,481,813
------------ ------------
Cash flows from financing activities:
Proceeds from mortgages 2,500,000 --
Prepayment of mortgage payable -- (7,370,926)
Payments on mortgage principal (1,348,223) (1,921,926)
Distributions to minority interest partner -- (279,837)
Contributions from minority interest partner 17,732,313 483,822
Deferred financing costs and mortgage deposits (567,502) --
Costs of raising capital -- (415,014)
Dividends paid (11,616,952) (11,705,742)
Purchase of treasury stock (406,565) (625,503)
------------ ------------
Net cash provided by (used in) financing activities 6,293,071 (21,835,126)
------------ ------------
Net (decrease) increase in cash and cash equivalents (28,073,332) 784,127
Cash and cash equivalents, beginning of period 37,790,505 8,847,449
------------ ------------
Cash and cash equivalents, end of period $ 9,717,173 $ 9,631,576
============ ============
</TABLE>
Noncash investing and financing activities:
In connection with the acquisition of properties during the six-months ended
June 30, 2000, the Company assumed mortgage obligations of $16,588,659.
The accompanying notes are an integral part of the condensed consolidated
financial statements.
- 5 -
<PAGE> 7
CORPORATE PROPERTY ASSOCIATES 12 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
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.
Note 2. Transactions with Related Parties:
The Company incurred asset management fees of $509,777 and $675,772 for the
three months ended June 30, 1999 and 2000, respectively, and $1,004,861 and
$1,349,522 for the six months ended June 30, 1999 and 2000, respectively, with
performance fees in like amount. General and administrative expense
reimbursements were $188,291 and $268,553 for the three months ended June 30,
1999 and 2000, respectively, and $382,333 and $555,010 for the six months ended
June 30, 1999 and 2000, respectively. Effective commencing June 29, 2000, W.P.
Carey & Co. LLC ("WPC"), an affiliate of the Company, acquired the business
operations of the Advisor, Carey Property Advisors, pursuant to a merger. In
connection with the merger, WPC became the Advisor of the Company. All officers
of Carey Property Advisors serve in the same capacity for the new Advisor.
Note 3. Lease Revenues:
The Company's operations consist of the investment in and the leasing of
industrial and commercial real estate. The financial reporting sources of the
leasing revenues below for the six-month periods ended June 30, 1999 and 2000
are as follows:
<TABLE>
<CAPTION>
1999 2000
------------ ------------
<S> <C> <C>
Per Statements of Income:
Rental income from operating leases $ 14,980,116 $ 19,461,797
Interest from direct financing leases 2,294,851 2,526,453
Adjustment:
Share of leasing revenue applicable to
minority interest -- (1,436,345)
Share of leasing revenue from equity
investments 4,519,507 5,615,995
------------ ------------
$ 21,794,474 $ 26,167,900
============ ============
</TABLE>
- 6 -
<PAGE> 8
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
For the six-month periods ended June 30, 1999 and 2000, the Company earned its
proportionate net leasing revenues from its investments from the following lease
obligors:
<TABLE>
<CAPTION>
1999 % 2000 %
----------- ----- ----------- -----
<S> <C> <C> <C> <C>
Applied Materials, Inc. (a) $ 1,493,855 7% $ 2,930,775 11%
Advanced Micro Devices, Inc. (b) 1,524,250 7 1,524,250 6
BAE Systems, Inc. 631,015 3 1,305,332 5
Perry Graphic Communications, Inc.
and Judd's Incorporated 1,095,783 5 1,095,783 4
Scott Companies Inc. 970,425 5 1,021,021 4
Spectrian Corporation 962,500 4 992,673 4
Westell Technologies, Inc. 958,193 4 958,193 4
Best Buy Co., Inc. (b) 890,795 4 886,469 3
QMS, Inc. 844,688 4 879,389 3
Career Education Corporation 868,404 4 868,404 3
Telos Corporation 747,564 3 771,629 3
Sicor, Inc. (b) 654,500 3 736,368 3
Q Clubs, Inc. 704,804 3 711,496 3
Applied Bioscience International, Inc. 695,857 3 695,857 3
The Upper Deck Company (b) 659,938 3 659,938 3
Compucom Systems, Inc. (b) 329,880 2 652,333 2
The Bon-Ton Stores, Inc. 635,375 3 648,270 2
Del Monte Corporation 643,125 3 643,125 2
Silgan Containers Corporation 637,500 3 637,500 2
Childtime Childcare, Inc. 479,347 2 589,198 2
Intesys Technologies, Inc. (b) 460,144 2 568,688 2
Big V Holding Corp. 416,526 2 533,157 2
Garden Ridge Corporation 497,882 2 497,882 2
Texas Freezer Company, Inc. 465,375 2 465,375 2
Rheometric Scientific, Inc. 414,452 2 423,852 2
NutraMax Products, Inc. 413,865 2 421,758 2
The Garden Companies, Inc. 408,200 2 408,200 2
Other 2,290,232 11 3,640,985 14
----------- ---- ----------- ----
$21,794,474 100% $26,167,900 100%
=========== ==== =========== ====
</TABLE>
(a) Net of Corporate Property Associates 14 Incorporated's minority
interest in the Etec Systems, Inc. property. A lease guarantee
has been provided by Applied Materials, Inc.
(b) Represents the Company's proportionate share of lease revenues
from its equity investments.
- 7 -
<PAGE> 9
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Note 4. Equity Investments:
The Company holds interests in eight entities in which its ownership interest is
50% or less. All of the entities were formed and are owned with affiliates that
have similar investment objectives as the Company. The Company's ownership in
entities that net lease to the following tenants is as follows: Best Buy Co.,
Inc., 37%; Intesys Technologies, Inc., 50%; Sicor, Inc., 50%; Ameriserve Food
Distribution, Inc., 40%, The Upper Deck Company, 50%; Advanced Micro Devices,
Inc., 33.33% and Compucom Systems, Inc., 33.33%. Combined summarized financial
information on the Company's equity investments is as follows:
<TABLE>
<CAPTION>
(In thousands) December 31, 1999 June 30, 2000
----------------- -------------
<S> <C> <C>
Assets (primarily real estate) $296,378 $286,390
Liabilities (primarily mortgage notes
payable) 189,151 188,704
Partners' and members' equity 107,227 97,686
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 June 30, 2000
------------- -------------
<S> <C> <C>
Revenues (primarily rental revenue) $ 11,519 $ 14,469
Expenses (primarily interest on
mortgages and depreciation) (6,663) (9,455)
-------- --------
Net income $ 4,856 $ 5,014
======== ========
</TABLE>
Note 5. Gains on Sale of Real Estate and Securities:
In February 1997, the Company purchased land and building in Mobile, Alabama for
$13,874,000 and entered into a net lease agreement with QMS, Inc. ("QMS"). On
June 13, 2000, the Company sold the QMS property for $14,479,000 and recognized
a gain on sale of $1,212,886. The Company's annual cash flow (rent less mortgage
debt service) from the QMS property was $1,085,306.
In connection with structuring a build-to-suit transaction with Texas Freezer
Company, Inc. ("Texas Freezer") in September 1997, the Company was granted
warrants to purchase 30,390 shares of Texas Freezer common stock, exercisable at
$5.30 per share. Texas Freezer is negotiating the sale of substantially all of
its assets to Pacific Logistics, L.P. and P&O Cold Logistics, LLC. As a result,
in June 2000, the Company received $191,000 in satisfaction of its rights under
the warrant agreement.
In February 1995, the Company was granted warrants to purchase 159,314 shares of
Etec Systems, Inc. ("Etec") common stock, exercisable at $0.45 share, in
connection with structuring its net lease with Etec. The Company agreed
subsequently to cancel its rights to 90,546 warrants for $2,634,000 and used
such funds to prepay a portion of the then outstanding mortgage loan on the Etec
property. In September 1997, the Company exercised a cashless conversion for
68,261 shares of Etec stock. In December 1999, the Company sold 57,000 shares of
Etec stock, and sold its remaining 11,261 Etec shares in January 2000. The
Company recognized a gain of $778,946 in 2000 on the sale of the 11,261 shares.
Etec subsequently was acquired by Applied Materials Inc. which has provided the
Company with an unconditional guarantee of Etec's lease obligations.
- 8 -
<PAGE> 10
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Note 6. Acquisition of Real Estate:
On June 29, 2000, the Company acquired two properties located in Fairfax,
Virginia and Lombard, Illinois subject to existing net leases with Galyan's
Trading Company for $24,204,421, of which $16,588,659 was financed by the
assumption of existing limited recourse mortgage debt on the two properties. The
Fairfield and Lombard leases currently provide for combined annual rent of
$2,350,000, with stated annual increases of 1.5% beginning in September 2000.
The leases have initial terms through August 31, 2019, followed by eight
five-year renewal options.
The limited recourse mortgage loans on the Fairfax and Lombard properties, which
have remaining balances as of the date of acquisition of $8,257,015 and
$8,331,644, respectively, provide for monthly payments of interest and principal
of $66,059 and $66,668, respectively, at annual interest rates of 8.751% and
8.753%, respectively. The loans mature on September 10, 2009, at which time
balloon payments totaling $14,881,850 will be due.
- 9 -
<PAGE> 11
CORPORATE PROPERTY ASSOCIATES 12 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 Corporate Property
Associates 12, Incorporated's ("CPA(R):12") condensed consolidated financial
statements and notes thereto as of June 30, 2000 included in this quarterly
report and CPA(R):12'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 CPA(R):12 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 CPA(R):12 that the results or conditions
described in such statements or the objectives and plans of CPA(R):12 will be
achieved.
RESULTS OF OPERATIONS:
Net income for the three and six month periods ended June 30, 2000 increased
$1,549,000 and $3,025,000 as compared with the three and six month periods ended
June 30, 1999. Excluding the effect of gains on sale of securities and real
estate in 2000, income would have reflected increases of $145,000 and $842,000
for the three-month and six-month periods ended June 30, 2000, respectively. The
increase in income before gains was due to the increase in lease revenues
(rental income and interest income from direct financing leases), and was
partially offset by increases in property expense and depreciation.
Lease revenues increased as a result of the completion of build-to-suit projects
at the Applied Materials, Inc., Balanced Care Corporation and BAE Systems, Inc.
properties in 1999 and scheduled rent increases during 1999 and 2000 on several
other properties. As a result of completing the Applied Materials, Balanced Care
and BAE properties, annual rentals increased $4,286,000. Interest expense has
increased primarily as a result of a $30,000,000 limited recourse mortgage loan
that was obtained in September 1999, on the $52,000,000 expansion to the Applied
Materials property subsequent to its occupancy in July 1999. Depreciation
expense has also increased, also as a result of the completion of the Applied
Materials expansion in July 1999. Property expenses have increased as a result
of increases in asset management and performance fees due to an increase in
CPA(R):12's real estate asset values, based on an independent valuation as of
December 31, 1999. Until this initial valuation was performed, CPA(R):12's fees
were calculated based on the historical cost of real estate assets. Income from
equity investments for the three-month periods has decreased as a result of
interest expense on mortgage financing obtained on the Intesys Technologies,
Inc. property in July 1999 which reduced CPA(R):12's equity income from its
investment. The proceeds of the mortgage obtained on the Intesys property were
distributed to CPA(R):12 and Corporate Property Associates 14 Incorporated
(CPA(R):14) in proportion to their ownership interests. Income from equity
investments for the six-month periods remained stable. Minority interest in
income has increased following the completion of the Applied Materials
$52,000,000 build-to-suit project, of which CPA(R):14 holds a 49.99% interest.
Management continues to monitor the bankruptcy of Ameriserve Food Distribution,
Inc. CPA(R):12 owns a 40% interest in four Ameriserve properties, with CPA(R):14
owning the remaining 60% interest. The joint ownership of properties with
affiliates such as CPA(R):14 and the use of limited recourse mortgage debt has
allowed for the diversification of the portfolio and helped reduce exposure to
the risks of any single lessee. In March 2000, one of the Ameriserve property
lenders released funds from an escrow account of $10,488,000, of which CPA(R):12
received $4,195,000, with the remaining amounts distributed to CPA(R):14. As of
June 30, 2000, CPA(R):12's equity in the Ameriserve property (land and building
less limited recourse mortgage debt and CPA(R):14's 60% ownership interest), was
approximately $4,197,000. CPA(R):12 and CPA(R):14 hold an $8,700,000 letter of
credit from Ameriserve from which funds may be received, subject to the consent
of the lender, if Ameriserve does not meet certain obligations under its lease.
Ameriserve pays its rent quarterly in advance installments and is currently
meeting its rental obligations. Management is continuing to monitor the
developments relating to Ameriserve's reorganization closely.
- 10 -
<PAGE> 12
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
AND SUBSIDIARIES
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
FINANCIAL CONDITION:
Cash flows from operations of $15,137,000 were sufficient to pay quarterly
dividends of $11,706,000, scheduled mortgage principal installments of
$1,922,000, and distributions of $280,000 to the minority interest partners in
the Applied Materials property.
CPA(R):12's investing activities included using $7,717,000 to acquire two
properties leased to Galyan's Trading Company and $3,596,000 to fund the
completion of two build-to-suit projects that went into service in 1999 and
other capital costs. CPA(R):12 paid an annual installment of $560,000 to its
Advisor for deferred acquisition fees in accordance with CPA(R):12's advisory
agreement. CPA(R):12 received $4,195,000 from the release of an escrow held by
one of the Ameriserve lenders, thereby representing a return of capital on
CPA(R):12's equity investment in the Ameriserve properties. CPA(R):12 received
proceeds of $14,153,000, net of refunding a security deposit, from the sale of
securities and the QMS, Inc. property in Mobile, Alabama.
In addition to paying dividends, minority interest distributions, and scheduled
mortgage principal payment installments, CPA(R):12's financing activities
included using $5,062,000 from the QMS sale proceeds to pay off the mortgage
loan on the property, making a scheduled mortgage balloon payment of $2,309,000
on a maturing mortgage, and paying $626,000 in stockholder redemptions.
CPA(R):12's $40,000,000 credit facility which expired in June 2000 was extended
for $20,000,000 through June 2001. The credit facility may be used to fund
acquisitions. No advances have yet been made under the facility. Any advances
under the facility are recourse obligations of CPA(R):12 and are subject to
CPA(R):12 meeting specific financial covenants. CPA(R):12 is in compliance with
its financial covenants.
- 11 -
<PAGE> 13
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
AND SUBSIDIARIES
PART II
Item 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Approximately $131,068,000 of CPA(R):12'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 June 30, 2000 ranged
from LIBOR plus 3.5% to the lender's prime rate plus 2.0%. There has been
material change since December 31, 1999.
<TABLE>
<CAPTION>
(in thousands)
2000 2001 2002 2003 2004 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate debt $ 1,845 $ 3,932 $ 4,255 $ 4,578 $ 4,988 $ 111,470 $131,068 $133,131
Average interest rate 7.49% 7.50% 7.51% 7.51% 7.53% 7.73%
Variable rate debt $ 5,716 $ 372 $ 396 $ 5,480 $ 2,625 -- $ 14,589 $ 14,589
</TABLE>
As of June 30, 2000, CPA(R):12 had no other material exposure to market risk.
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual Shareholders meeting was held on June 15, 2000, at which time
a vote was taken to elect CPA(R):12's directors through the
solicitation of proxies. The following directors were elected for a
one-year term:
<TABLE>
<CAPTION>
Total Shares Shares
Name of Director Shares Voting Voting Yes Voting No
---------------- ------------- ---------- ---------
<S> <C> <C> <C>
William P. Carey 14,760,036 14,595,709 164,327
Ralph G. Coburn 14,760,036 14,467,327 292,709
William Ruder 14,760,036 14,576,819 183,217
George E. Stoddard 14,760,036 14,527,679 232,357
Thomas E. Zacharias 14,760,036 14,601,025 159,011
</TABLE>
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K:
During the quarter ended June 30, 2000, CPA(R):12 was not
required to file any reports on Form 8-K
- 12 -
<PAGE> 14
CORPORATE PROPERTY ASSOCIATES 12 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.
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
AND SUBSIDIARIES
8/10/00 By: /s/ John J. Park
--------- ---------------------------------------------
Date John J. Park
Executive Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
8/10/00 By: /s/ Claude Fernandez
--------- ---------------------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
- 13 -
