<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996.
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to 19
-------- -------, ----.
Commission file number 1-11345
------------------------------
CAPSTONE CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)
Maryland 63-1115479
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Urban Center Drive
Suite 630
Birmingham, Alabama 35242
(Address of principal executive offices)
(205) 967-2092
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant(1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
Registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes X No
----- -----
As of November 5, 1996, 11,423,052 shares of the Registrant's
Common Stock $.001 par value, were outstanding.
================================================================================
<PAGE> 2
CAPSTONE CAPITAL CORPORATION
FORM 10-Q
SEPTEMBER 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I -- Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets..................................
Condensed Consolidated Statements of Income............................
Condensed Consolidated Statements of Cash Flows........................
Notes to Condensed Consolidated Financial Statements...................
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations...........................................................
Part II -- Other Information
Item 6. Exhibits................................................................
Signatures............................................................................
</TABLE>
1
<PAGE> 3
CAPSTONE CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Real estate properties
Land............................................................ $ 29,727,673 $ 24,669,023
Land improvements............................................... 2,350,308 2,350,309
Buildings and improvements...................................... 265,595,461 185,771,380
Construction in progress........................................ 2,516,639 37,409
------------ ------------
300,190,081 212,828,121
Less accumulated depreciation................................... (9,505,592) (5,570,953)
------------ ------------
Real estate properties, net............................. 290,684,489 207,257,168
Mortgage notes receivable......................................... 21,491,573 24,988,753
Cash.............................................................. 566,583 675,568
Other assets...................................................... 13,276,844 7,703,394
------------ ------------
Total assets............................................ $ 326,019,489 $ 240,624,883
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Convertible subordinated debentures............................. $ 27,950,000 $ 43,947,000
Bank credit facility............................................ 91,200,000 30,225,000
Mortgage note payable........................................... 23,257,354 --
Accrued expenses and other liabilities.......................... 4,995,866 2,706,228
------------ ------------
Total liabilities....................................... 147,403,220 76,878,228
------------ ------------
Stockholders' equity
Preferred stock, $.001 par value, 10,000,000 shares authorized;
none issued.................................................. -- --
Common stock, $0.001 par value, 50,000,000 shares authorized;
10,923,731 shares and 9,929,732 shares issued and
outstanding, respectively.................................... 10,924 9,929
Additional paid-in-capital...................................... 178,097,903 162,735,711
Loans to officers to finance stock purchases.................... (286,944) (286,944)
Cumulative net income........................................... 27,929,323 14,471,125
Cumulative dividends............................................ (27,134,937) (13,183,166)
------------ ------------
Total stockholders' equity.............................. 178,616,269 163,746,655
------------ ------------
Total liabilities and stockholders' equity.............. $ 326,019,489 $ 240,624,883
============ ============
</TABLE>
(The accompanying notes are an integral part of this financial statement)
2
<PAGE> 4
CAPSTONE CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rental income............................... $8,570,890 $6,314,376 $22,921,904 $16,271,247
Mortgage interest income.................... 891,775 434,084 2,378,974 1,199,159
Gain from sale of property.................. 3,519 -- 197,191 --
Other income................................ 213,017 23,215 501,450 80,602
---------- ---------- ----------- -----------
Total income........................ 9,679,201 6,771,675 25,999,519 17,551,008
---------- ---------- ----------- -----------
Expenses:
General and administrative.................. 414,116 473,346 1,223,022 1,108,944
Depreciation................................ 1,642,990 1,162,907 4,301,463 2,977,760
Amortization................................ 90,245 167,199 316,706 378,648
Interest.................................... 2,715,328 2,665,206 6,601,717 6,178,296
Property operations......................... 96,256 -- 98,413 --
---------- ---------- ----------- -----------
Total expenses...................... 4,958,935 4,468,658 12,541,321 10,643,648
---------- ---------- ----------- -----------
Net income.......................... $4,720,266 $2,303,017 $13,458,198 $ 6,907,360
========== ========== =========== ===========
Net Income Per Share (Primary)................ $ 0.44 $ 0.38 $ 1.28 $ 1.15
========== ========== =========== ===========
Net Income Per Share (Fully diluted).......... $ 0.42 $ 0.38 $ 1.27 $ 1.15
========== ========== =========== ===========
Weighted Averages Shares Outstanding
Primary..................................... 10,851,964 6,016,898 10,529,286 5,996,534
Fully Diluted............................... 12,820,523 9,204,806 12,819,826 8,165,308
</TABLE>
(The accompanying notes are an integral part of this financial statement)
3
<PAGE> 5
CAPSTONE CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income...................................................... $ 13,458,198 $ 6,907,360
Gain from sale of property...................................... (197,191) --
Depreciation of real estate..................................... 4,281,619 2,959,772
Other depreciation.............................................. 19,844 17,988
Amortization of convertible debenture issuance costs............ 47,155 28,690
Other amortization.............................................. 269,551 349,958
Increase in accrued rental income............................... (1,764,860) (1,020,493)
Construction funding deposit.................................... (768,423) --
Increase in receivables and other assets........................ (1,018,762) (193,674)
Increase in accrued expenses and other liabilities.............. 1,378,251 3,419,481
------------ ------------
Net cash provided by operating activities............... 15,705,382 12,469,082
------------ ------------
Cash flows from investing activities:
Acquisition of real estate properties........................... (87,095,957) (58,850,845)
Proceeds from sale of properties................................ 8,206,289 --
Investment in mortgage notes receivable......................... (4,598,696) (3,175,826)
Collections on mortgage notes receivable........................ 117,728 41,843
------------ ------------
Net cash used in investing activities................... (83,370,636) (61,984,828)
------------ ------------
Cash flows from financing activities:
Increase in bank credit facility................................ 60,975,000 10,700,000
Proceeds from mortgage note payable............................. 19,907,321 --
Principal payments on note payable.............................. (42,646) --
Proceeds from issuance of convertible subordinated debentures... -- 52,000,000
Financing costs related to issuance of convertible subordinated
debentures................................................... -- (2,191,456)
Capital contributions from minority interests................... 680,072 --
Payment of dividends............................................ (13,951,771) (7,762,496)
Costs related to common stock offering.......................... (51,713) --
Proceeds from dividend reinvestment plan........................ 40,006 --
Increase in loans to finance stock purchases.................... -- (94,467)
------------ ------------
Net cash from financing activities...................... 67,556,269 52,651,581
------------ ------------
Increase/(Decrease) in cash....................................... (108,985) 3,135,835
Cash, beginning of period......................................... 675,568 330,654
------------ ------------
Cash, end of period............................................... $ 566,583 $ 3,466,489
============ ============
</TABLE>
(The accompanying notes are an integral part of this financial statement)
4
<PAGE> 6
CAPSTONE CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION AND ORGANIZATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements which are included in the Capstone Capital Corporation (the
"Company") Annual Report on Form 10-K for the period ended December 31, 1995. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. These
financial statements should be read in conjunction with the financial statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995.
Certain reclassifications have been made for the period January 1, 1995
through September 30, 1995 to conform to the 1996 presentation. These
reclassifications had no effect on the results of operations as previously
reported.
The Company is an indefinite life real estate investment trust ("REIT")
which was incorporated in Maryland on March 31, 1994. The Company commenced
operations on June 30, 1994 with the receipt of proceeds from the sale of
5,980,000 shares of common stock. The Company invests in income-producing,
healthcare-related properties through acquisition or development of facilities
for lease or by provision of mortgage financing to healthcare operators.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries and its majority-owned
partnerships. Intercompany accounts and transactions have been eliminated.
Real Estate Properties -- Real estate properties are recorded at cost.
Acquisition costs and transaction fees are added to the purchase price. No
allowance for investment losses is considered necessary. The cost of real estate
properties acquired is allocated among land, land improvements, and buildings
and improvements based upon estimated market values at the time of acquisition.
Depreciation is provided for on a straight-line basis over the following
estimated useful life:
<TABLE>
<S> <C>
Building and improvements................................................ 40.0 years
Land improvements........................................................ 20.0 years
</TABLE>
Federal Income Taxes -- No provision has been made for federal income
taxes. The Company intends at all times to qualify as a real estate investment
trust under sections 856 through 860 of the Internal Revenue Code of 1986, as
amended. The Company must distribute at least 95% of its real estate investment
trust taxable income to its stockholders and meet other requirements to continue
to qualify as a real estate investment trust.
Rental Income -- Rental income is recognized as earned over the life of the
lease agreements. Certain of the leases provide for scheduled annual rent
increases. These rent increases are recognized on a straight-line basis over the
term of the lease.
Mortgage Interest Income -- Mortgage interest income is recognized based on
the interest rates and the outstanding principal amounts of the mortgage notes
receivable. Certain of the mortgage notes receivable provide for scheduled
annual interest rate increases.
5
<PAGE> 7
CAPSTONE CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net Income Per Share -- Net income per share is computed using the weighted
average number of shares outstanding during the period.
Funds From Operations -- Funds from operations is computed as net income
(determined in accordance with generally accepted accounting principles),
excluding rent income recognized on a straight-line basis on those leases with
scheduled rent increases and gains (or losses) from debt restructuring and sales
of properties, plus depreciation and amortization.
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS THREE MONTHS
ENDED ENDED FOR THE NINE FOR THE NINE
SEPTEMBER SEPTEMBER MONTHS ENDED MONTHS ENDED
30, 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Reconciliation of net income to funds from
operations
Net income................................ $4,720,266 $2,303,017 $ 13,458,198 $ 6,907,360
Add: Depreciation & amortization....... 1,733,235 1,330,106 4,618,169 3,356,408
Less: Gain on sale of asset............ (3,519) -- (197,191) --
Less: Straight-line rental income...... (637,548) (527,671) (1,764,860) (1,320,924)
---------- ---------- ----------- -----------
Funds from operations............. $5,812,434 $3,105,452 $ 16,114,316 $ 8,942,844
========== ========== =========== ===========
</TABLE>
NOTE 3. REAL ESTATE PROPERTIES
Real estate properties as of September 30, 1996 total $300,190,081 and
include fourteen ancillary hospital facilities, ten physician clinics, five
ambulatory surgery facilities, four inpatient rehabilitation facilities, three
outpatient rehabilitation facilities, two comprehensive mental health hospitals,
two sub-acute care facilities, two acute care facilities, one long-term care
facility, one assisted living facility and one integrated delivery facility. The
properties are located in thirteen states and are leased to thirteen
healthcare-related entities or their subsidiaries pursuant to long-term leases.
The Company's properties are generally leased pursuant to fixed term
operating leases expiring from 2004 to 2011 and provide for options to extend
the lease terms for at least ten years. The leases generally provide the
lessees, during the terms of the leases and for a short period of time following
expiration, with the right of first refusal to purchase the leased property on
the same terms and conditions as the Company may propose to a third party.
Each lease generally requires the lessee to pay base rent, additional rent
commencing after the first year based either on either a set percentage increase
or on a percentage increase in the consumer price index, and all taxes
(including property taxes), maintenance and other operating costs associated
with the leased property.
NOTE 4. MORTGAGE NOTES RECEIVABLE
As of September 30, 1996, the Company had provided $21,491,573 in mortgage
financing for seven properties located in five states. The mortgage notes
receivable are secured by the real estate of five long-term care facilities, and
two ancillary hospital facilities which are operated by four healthcare
operators.
The mortgage notes receivable require monthly installments of principal and
interest with final payment dates in or before 2010 and bear rates ranging from
9.5 percent to 13.0 percent at September 30, 1996. Substantially all the
mortgage notes provide that the interest be increased annually by either a set
rate or upon an increase in the consumer price index.
The Company had no impaired mortgage notes receivable at September 30, 1996
or during the quarter then ended.
6
<PAGE> 8
CAPSTONE CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. MORTGAGE NOTE PAYABLE
On June 26, 1996, the Company entered into a mortgage note with a life
insurance company for a principal amount of $23.3 million ("Mortgage Note"). The
Mortgage Note bears interest at 8.5% and is payable in 360 monthly payments of
principal and interest. The Mortgage Note is collateralized by an ancillary
hospital facility purchased in January 1996 for $30 million. The balance of the
Mortgage Note as of September 30, 1996 is $23,257,354.
NOTE 6. BANK CREDIT FACILITY
On June 24, 1996, the Company completed an amendment and restatement of its
unsecured line of credit ("Bank Credit Facility") which provides for an increase
to $150 million from its previous principal amount of $100 million, an extension
of the term to June 24, 1999, from June 22, 1997, and an adjustment in the
determination of the interest rate. The Bank Credit Facility is agented by
NationsBank, National Association (South), and is participated in by a
consortium of seven other banks. At September 30, 1996, the Company had drawn
$91,200,000 against the Bank Credit Facility for the purchase of real estate
properties and the funding of mortgage loans.
Borrowing under the amended and restated Bank Credit Facility bears
interest at a rate chosen by the Company from either the Bank's base rate or the
Eurodollar rate plus a percentage rate ranging from 1.00 percent to 1.625
percent depending upon the Company's senior debt to consolidated total capital
ratio for the preceding fiscal quarter. In addition, the Company pays a
commitment fee of 0.20 percent to 0.25 percent per annum on the unused portion
of funds available for borrowing under the Bank Credit Facility. The commitment
fee percentage is based on the Company's senior debt to total capital ratio.
The Bank Credit Facility contains certain representations, warranties and
financial and other covenants customary in such loan agreements.
NOTE 7. CONVERTIBLE SUBORDINATED DEBENTURES
As of September 30, 1996 the Company had $27,950,000 aggregate principal
amount of 10.50% convertible subordinated debentures (the "Debentures")
outstanding. The Debentures are due on April 1, 2002 and interest is payable
semiannually on April 1 and October 1 of each year. During the quarter ended
September 30, 1996, a total of $5,847,000 of principal amount of Debentures was
converted into shares of common stock of the Company at the conversion price of
$16.125 per share. These conversions resulted in an increase of 362,588 in the
outstanding shares of the common stock of the Company, an increase of $5,847,000
in stockholders' equity and a decrease of $5,847,000 in the outstanding balance
of the Debentures. For the nine months ended September 30, 1996, a total of
$15,997,000 of principal amount of Debentures was converted into shares of
common stock of the Company resulting in an increase of 992,042 in the
outstanding shares of the common stock of the Company, an increase of
$15,997,000 in stockholders' equity and a decrease of $15,997,000 in the
outstanding balance of the Debentures.
NOTE 8. COMMITMENTS AND CONTINGENCIES
In July 1996, the Company committed approximately $17.8 million for a
construction and term loan for an acute-care hospital located in Tucson,
Arizona. The loan is secured by a mortgage on the facility. Construction is
expected to be completed during the fourth quarter of 1997. As of September 30,
1996, the Company had funded approximately $1.1 million towards construction.
The Company has entered into a development project with an unrelated
healthcare development entity for the development of an assisted living facility
located in Baytown, Texas. The transaction is structured as a joint venture
between the Company and the unrelated healthcare development entity. During
construction approximately $7.1 million of the facility's $7.4 million
development cost will be financed, on a basis that is
7
<PAGE> 9
CAPSTONE CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
non-recourse to the Company, by an unrelated third party with the balance of
$0.3 million provided by the Company. Upon completion, the Company will invest
an additional $2.0 million and the $5.1 million balance of the total investment
in the facility will be financed by a non-recourse term loan provided by a third
party. Upon completion of construction, the facility will be leased to the
unrelated healthcare development entity. Construction is currently expected to
be complete by the end of the third quarter of 1997.
In September 1996, the Company committed to purchase, upon completion of
construction, a medical office building located in Winter Park, Florida for
approximately $6.2 million. The facility is currently expected to be completed
during the second quarter of 1997.
The Company has committed to fund approximately $4.4 million towards the
development of a medical office building located in Destin, Florida. As of
September 30, 1996, the Company had funded approximately $2.5 million towards
construction. Upon completion of construction, the facility will be leased to
one healthcare operator pursuant to a long term lease. The facility is currently
expected to be complete by the end of 1996.
The Company is developing a $2.77 million expansion to an existing
ambulatory surgery facility owned by the Company. As of September 30, 1996, the
Company had funded $585,355 toward the construction of the expansion. The
remaining balance is expected to be funded by the first quarter of 1997. Tenant
leases are scheduled to commence December 1996.
The Company has committed to provide, upon completion of construction,
mortgage financing of approximately $1.6 million for two assisted living
facilities located in Georgia. Construction financing will be provided by an
unrelated third party. Construction is currently expected to be complete during
the second quarter of 1997.
The Company believes it has sufficient liquidity and financing capabilities
to finance the commitments.
NOTE 9. SUBSEQUENT EVENTS
On October 7, 1996, the Company entered into a mortgage loan for $2.2
million for the expansion of a residential care facility located in Claremont,
California.
On October 22, 1996, the Company declared a dividend of $0.46 per share to
the holders of common stock on November 1, 1996. The dividend will be paid in
cash on November 15, 1996. The dividend related to the quarter ended September
30, 1996.
For the period from October 1 through October 28, 1996, a total of
$7,677,000 of principal amount of Debentures has been converted into shares of
common stock of the Company at the conversion price of $16.125 per share. The
conversions resulted in an increase of 476,077 in the shares of common stock of
the Company, an increase of $7,677,000 in stockholders' equity and a decrease of
$7,677,000 in the outstanding balance of the Debentures.
8
<PAGE> 10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Third Quarter 1996 Compared to Third Quarter 1995
Net income for the three months ended September 30, 1996 increased 104.3%
to $4.7 million compared to $2.3 million for the three months ended September
30, 1995. Net income per share was $0.44 (primary) and $0.42 (diluted) at
September 30, 1996 as compared to $0.38 per share (primary and diluted) at
September 30, 1995.
Total revenues for the quarter ended September 30, 1996 increased 42.6% to
$9.7 million, compared to $6.8 million for the third quarter of 1995. The
increase in revenues is primarily attributable to additional rental and mortgage
interest income from the acquisition and financing of properties subsequent to
September 30, 1995. Specifically, investments in properties increased from $212
million at September 30, 1995 to $300 million at September 30, 1996 and mortgage
loans increased from $16.4 million at September 30, 1995 to $21.5 million at
September 30, 1996.
Total expenses for the quarter ended September 30, 1996 increased 11.1% to
$5.0 million from $4.5 million for the quarter ended September 30, 1995.
Interest expense increased 2% from $2.67 million for the quarter ended September
30, 1995 to $2.72 million for the quarter ended September 30, 1996 primarily due
to increased borrowings under the Company's Bank Credit Facility as well as
interest related to the Company's Mortgage Note Payable that was entered into in
June of 1996. The increase in interest expense was offset in part by a decrease
in interest expense in connection with the conversion of $23.5 million of the
Company's convertible debentures since September 30, 1995. Depreciation for the
quarter ended September 30, 1996 totaled $1.6 million increasing 33.3% over
depreciation of $1.2 million for the quarter ended September 30, 1995, primarily
due to the acquisition of properties subsequent to September 30, 1995.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September
30, 1995
Net income for the nine months ended September 30, 1996 increased 95.6% to
$13.5 million compared to $6.9 million for the nine months ended September 30,
1995. Net income per share was $1.28 (primary) and $1.27 (diluted) at September
30, 1996 as compared to $1.15 (primary and diluted) at September 30, 1995.
Total revenues for the nine months ended September 30, 1996, increased
47.7% to $26.0 million, compared to the $17.6 million the Company reported for
the first nine months of 1995. The increase in revenues is primarily
attributable to additional rental and mortgage interest income from the
acquisition and financing of properties subsequent to September 30, 1995. In
addition, during the nine months ended September 30, 1996, the Company
recognized a gain of $193,672 from the sale of an ancillary hospital facility
located in Philadelphia, Pennsylvania.
Total expenses for the 1996 nine month period increased 17.9% to $12.5
million from $10.6 million for the first nine months of 1995. Interest expense
increased $0.4 million or 6.5% to $6.6 million in the 1996 nine month period as
compared to $6.2 million in the 1995 nine month period. This increase is due
primarily to interest related to the Company's Mortgage Note Payable that was
entered into in June of 1996. Depreciation and amortization increased $1.3
million or 43.3% to $4.3 million for the nine month period ended September 30,
1996 from $3.0 million for the same period in 1995. Depreciation expense
increased as a result of the acquisition of additional properties subsequent to
September 30, 1995. General and administrative expenses for the nine months
ended September 30, 1996 totaled $1.2 million, increasing 9.1% or $0.1 million
over September 30, 1995 general and administrative expenses of $1.1 million. The
increase is due primarily to additional administrative and professional services
related to the additional investments in properties made since September 30,
1995.
9
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
On June 24, 1996, the Company completed an amendment and restatement of its
unsecured line of credit ("Bank Credit Facility") which provides for an increase
to $150 million from its previous principal amount of $100 million, an extension
of the term to June 24, 1999, from June 22, 1997, and an adjustment in the
determination of the interest rate. The Bank Credit Facility is agented by
NationsBank, National Association (South) ("NationsBank"), and is participated
in by a consortium of seven other banks. At September 30, 1996, the Company had
drawn $91,200,000 against the Bank Credit Facility for the purchase of real
estate properties and the funding of mortgage loans.
Borrowings under the Bank Credit Facility bear interest at a rate chosen by
the Company from either the Bank's base rate or the Eurodollar rate plus a
percentage rate ranging from 1.00 percent to 1.625 percent depending upon the
Company's senior debt to consolidated total capital ratio for the preceding
fiscal quarter. In addition, the Company pays a commitment fee of either .20
percent or .25 percent per annum on the unused portion of funds available for
borrowing under the Bank Credit Facility. The commitment fee percentage is based
on the Company's senior debt to total capital ratio.
The Bank Credit Facility contains certain representations, warranties and
financial and other covenants customary in such loan agreements.
The Company's current intention is to utilize the Bank Credit Facility on a
short-term basis to finance future acquisitions and investments. The Company is
currently evaluating various alternatives for additional equity and debt
financing with which to finance those acquisitions and investments on a
long-term basis.
On October 22, 1996, the Company declared a dividend of $0.46 per share to
the holders of common stock on November 1, 1996. The dividend will be paid in
cash on November 15, 1996. The dividend related to the quarter ended September
30, 1996.
10
<PAGE> 12
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibits
27 -- Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the three
months ended September 30, 1996.
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CAPSTONE CAPITAL CORPORATION
By /s/ ANDREW L. KIZER
------------------------------------
Andrew L. Kizer
Vice President -- Finance and
Chief Financial Officer
Date: November 4, 1996
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF CAPSTONE CAPITAL CORPORATION FOR THE QUARTER ENDED SEPTEMBER 30,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 566,583
<SECURITIES> 0
<RECEIVABLES> 675,615
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,003,747
<PP&E> 297,869,677
<DEPRECIATION> 9,505,592
<TOTAL-ASSETS> 326,019,489
<CURRENT-LIABILITIES> 9,003,747
<BONDS> 27,950,000
0
0
<COMMON> 10,924
<OTHER-SE> 178,097,903
<TOTAL-LIABILITY-AND-EQUITY> 326,019,489
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<TOTAL-REVENUES> 25,999,519
<CGS> 0
<TOTAL-COSTS> 12,541,321
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 6,601,717
<INCOME-PRETAX> 13,458,198
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,458,198
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 13,458,198
<EPS-PRIMARY> $1.28
<EPS-DILUTED> $1.27
</TABLE>
