10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 March 31, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 001-08499

CAPITAL PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

Rhode Island	05-0386287
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
100 Dexter Road East Providence, Rhode Island	02914
(Address of principal executive offices)	(Zip Code)

(401) 435-7171

(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 Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of March 31, 2012, the Company had 3,746,132 shares of Class A Common Stock and 2,853,780 shares of Class B Common Stock outstanding.

CAPITAL PROPERTIES, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2012

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 4.	Controls and Procedures		17
PART II – OTHER INFORMATION
Item 6.	Exhibits		18
	Signatures		19
Exhibits 31	Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		20
Exhibits 32	Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		22

2

PART I

Item 1. Consolidated Financial Statements

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31, 2012		December 31, 2011
	(unaudited)
ASSETS
Properties and equipment (net of accumulated depreciation)	$	21,957,000	$	22,097,000
Cash		2,772,000		2,178,000
Income taxes receivable		—		45,000
Prepaid and other		444,000		652,000
	$	25,173,000	$	24,972,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Note payable ($300,000 due within one year)	$	3,925,000	$	4,000,000
Accounts payable and accrued expenses:
Property taxes		364,000		291,000
Environmental incidents:
Pipeline rupture		76,000		76,000
Environmental remediation		81,000		81,000
Other		144,000		242,000
Income taxes payable		123,000		—
Deferred:
Leasing revenues		—		70,000
Income taxes, net		5,576,000		5,641,000
		10,289,000		10,401,000
Shareholders’ equity:
Class A common stock, $.01 par; authorized 10,000,000 shares; issued and outstanding, 3,746,132 shares at March 31, 2012 and 3,744,192 shares at December 31, 2011		37,000		37,000
Class B common stock, $.01 par; authorized 3,500,000 shares; issued and outstanding, 2,853,780 shares at March 31, 2012 and 2,855,720 shares at December 31, 2011		29,000		29,000
Excess stock, $.01 par; authorized 1,000,000 shares; none issued and outstanding		—		—
Capital in excess of par		11,762,000		11,762,000
Retained earnings		3,056,000		2,743,000
		14,884,000		14,571,000
	$	25,173,000	$	24,972,000

See notes to consolidated financial statements.

3

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

THREE MONTHS ENDED MARCH 31, 2012 AND 2011

(Unaudited)

	2012			2011
Revenues:
Leasing	$	1,012,000		$	822,000
Petroleum storage facility		976,000			951,000
		1,988,000			1,773,000
Expenses:
Leasing		270,000			250,000
Petroleum storage facility:
Operating		551,000			578,000
Tank repairs		—			50,000
General and administrative		263,000			256,000
Interest		61,000			88,000
		1,145,000			1,222,000
Income before income taxes		843,000			551,000
Income tax expense (benefit):
Current		397,000			191,000
Deferred		(65,000	)		28,000
		332,000			219,000
Net income		511,000			332,000
Retained earnings, beginning		2,743,000			1,503,000
Dividends on common stock based upon 6,599,912 shares outstanding at $.03 per common share		(198,000	)		(198,000	)
Retained earnings, ending	$	3,056,000		$	1,637,000
Basic income per share based upon 6,599,912 shares outstanding	$	.08		$	.05

See notes to consolidated financial statements.

4

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2012 AND 2011

(Unaudited)

	2012			2011
Cash flows from operating activities:
Net income	$	511,000		$	332,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		213,000			209,000
Amortization of deferred financing fees		2,000			1,000
Deferred:
Income taxes		(65,000	)		28,000
Leasing revenues		(70,000	)		(75,000	)
Other, principally net changes in prepaids, accounts payable, accrued expenses and current income taxes		297,000			(25,000	)
Net cash provided by operating activities		888,000			470,000
Cash flows from investing activities:
Payments for properties and equipment		(73,000	)		(207,000	)
Related party transaction:
Advance		(100,000	)		—
Repayment		152,000			—
Net cash used in investing activities		(21,000	)		(207,000	)
Cash flows from financing activities:
Payments:
Note payable		(75,000	)		(75,000	)
Dividends		(198,000	)		(198,000	)
Cash used in financing activities		(273,000	)		(273,000	)
Increase (decrease) in cash		594,000			(10,000	)
Cash, beginning		2,178,000			2,395,000
Cash, ending	$	2,772,000		$	2,385,000
Supplemental disclosures:
Cash paid for:
Income taxes	$	229,000		$	25,000
Interest	$	61,000		$	87,000
Non-cash investing and financing activities, capital expenditures financed through accounts payable	$	—		$	18,000

See notes to consolidated financial statements.

5

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2012 AND 2011

(Unaudited)

1. Description of business:

Capital Properties, Inc. and its wholly-owned subsidiaries, Tri-State Displays, Inc., Capital Terminal Company and Dunellen, LLC (collectively referred to as “the Company”), operate in two segments, leasing and petroleum storage.

The leasing segment consists of the long-term leasing of certain of its real estate interests in downtown Providence, Rhode Island (upon the commencement of which the tenants are required to construct buildings thereon, with the exception of a parking garage), the leasing of a portion of its building (“Steeple Street Building”) under short-term leasing arrangements and the leasing of locations along interstate and primary highways in Rhode Island and Massachusetts to Lamar Outdoor Advertising, LLC (“Lamar”) which has constructed outdoor advertising boards thereon. The Company anticipates that the future development of its remaining properties in and adjacent to the Capital Center area will consist primarily of long-term ground leases. Pending this development, the Company leases these parcels for public parking under short-term leasing arrangements to Metropark, Ltd. (“Metropark”).

The petroleum storage segment consists of operating the petroleum storage terminal (the “Terminal”) and the Wilkesbarre Pier (the “Pier”), both of which are owned by the Company and are collectively referred to as the “Facility,” located in East Providence, Rhode Island, for Global Companies, LLC (“Global”) which stores and distributes petroleum products.

The principal difference between the two segments relates to the nature of the operations. In the leasing segment, the tenants under long-term land leases incur substantially all of the development and operating costs of the assets constructed on the Company’s land, including the payment of real property taxes on both the land and any improvements constructed thereon; whereas the Company is responsible for the operating and maintenance expenditures, including insurance and a portion of the real property taxes, as well as certain capital improvements at the Facility.

2. Principles of consolidation and basis of presentation:

The accompanying condensed consolidated financial statements include the accounts and transactions of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying condensed consolidated balance sheet as of December 31, 2011, has been derived from audited financial statements and the unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these condensed financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest Form 10-K. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position as of March 31, 2012 and the results of operations and cash flows for the three months ended March 31, 2012 and 2011.

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Environmental incidents:

The Company accrues a liability when an environmental incident has occurred and the costs are estimable. The Company does not record a receivable for recoveries from third parties for environmental matters until it has determined that the amount of the collection is reasonably assured. The accrued liability is relieved when the Company pays the liability or a third party assumes the liability. Upon determination that collection is reasonably assured or a third party assumes the liability, the Company records the amount as a reduction of expense.

The Company charges to expense those costs that do not extend the life, increase the capacity or improve the safety or efficiency of the property owned or used by the Company.

6

New accounting standards:

The Company reviews new accounting standards as issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any standards that it believes merit further discussion. The Company expects that none of the new standards would have a significant impact on its consolidated financial statements.

3. Use of estimates:

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

4. Properties and equipment:

Properties and equipment consists of the following:

	March 31, 2012		December 31, 2011
Properties on lease or held for lease:
Land and land improvements	$	4,701,000	$	4,701,000
Building and improvements, Steeple Street		5,484,000		5,411,000
		10,185,000		10,112,000
Petroleum storage facility, on lease:
Land and land improvements		5,591,000		5,591,000
Buildings and structures		1,833,000		1,833,000
Tanks and equipment		14,625,000		14,625,000
		22,049,000		22,049,000
Office equipment		83,000		83,000
		32,317,000		32,244,000
Less accumulated depreciation:
Properties on lease or held for lease		424,000		374,000
Petroleum storage facility, on lease		9,867,000		9,706,000
Office equipment		69,000		67,000
		10,360,000		10,147,000
	$	21,957,000	$	22,097,000

5. Note payable:

In 2010, the Company borrowed $6,000,000 from a bank. The loan bears interest at an annual rate of 6 percent and has a term of ten years with repayments on a twenty-year amortization schedule (monthly principal payments of $25,000 plus interest) and a balloon payment of $1,500,000 due April 2020 when the loan matures. The note further contains the customary covenants, terms and conditions and permits prepayment, in whole or in part, at any time without penalty if the prepayment is made from internally generated funds. As collateral for the loan, the Company granted the bank a mortgage on Parcels 3S and 5 in the Capital Center.

In 2011, the Company made principal prepayments totaling $1,525,000.

In connection with the borrowing, the Company incurred financing fees totaling $55,000, which are being amortized on a straight-line method over the 10-year term of the note (which approximates the effective interest rate method) and are included in interest expense on the accompanying consolidated statements of income and retained earnings.

7

6. Description of leasing arrangements:

Long-term land leases:

As of March 31, 2012, the Company had entered into six long-term land leases for six separate parcels upon which the improvements have been completed (“developed parcels”). In addition, in 2005 a long-term land lease commenced on an undeveloped parcel on which two residential buildings was planned. One building was completed in September 2009. The other building has not progressed beyond the early stages of site preparation and the timing of its construction and completion is uncertain.

Under the seven land leases, the tenants are required to negotiate any tax stabilization treaties or other arrangements, appeal any changes in real property assessments, and pay real property taxes assessed on land and improvements under these arrangements. Accordingly, real property taxes payable by the tenants are excluded from leasing revenues and leasing expenses on the accompanying consolidated statements of income and retained earnings. The real property taxes attributable to the Company’s land under these leases totaled $315,000 and $293,000, respectively, for the three months ended March 31, 2012 and 2011.

Under the lease which commenced in 2005, the tenant was entitled to a credit for future rents equal to a portion of the real property taxes paid by the tenant through April 2007. In connection with Phase I of the tenant’s project, commencing July 1, 2010, the annual rent increased from $48,000 to $300,000. As a result of the rent credit, the tenant was not required to make cash payments for Phase I rent until March 2012 when the rent credit was fully utilized. Commencing July 1, 2010, the Company reclassified each month $25,000 of deferred leasing revenues to leasing revenues.

Short-term leases:

The Company leases the undeveloped parcels of land in or adjacent to the Capital Center area for public parking purposes to Metropark under a short-term cancellable lease.

At March 31, 2012, the Company has three tenants occupying 56 percent of the Steeple Street Building under short-term leases of five years or less at a current annual rental of $119,000. The Company is recognizing the revenue from these leases on a straight-line basis over the terms of the leases. At March 31, 2012, the excess of straight-line over contractual rentals is $12,000, which is included in prepaid and other on the accompanying consolidated balance sheet at March 31, 2012. The Company also reports as revenue from tenants reimbursements for common area costs and real property taxes. The Company is currently marketing the remaining portions of the building for lease.

7. Petroleum storage facility and environmental incidents:

Pipeline rupture (2011):

On August 31, 2011, while excavating in connection with the construction of a highway for the Rhode Island Department of Transportation (“RIDOT”), Cardi Corporation (“Cardi”) ruptured an underground pipeline controlled and used by the Company for the transportation of Ultra Low Sulfur Diesel (“ULSD”) from the Wilkesbarre Pier to its Petroleum Storage Facility. At the time, the Company was receiving product from a barge and, as a result of the rupture, approximately 70,000 gallons of ULSD were discharged. Pursuant to the Company’s Emergency Response Plan, representatives of the Company took control of the spill site and coordinated the response of various governmental agencies as well as private contractors. Approximately 56,000 gallons of spilled diesel were recovered. On September 6, 2011, the Company turned over the responsibility for the clean-up to Cardi.

The Company notified the required government agencies and its insurance carriers of the rupture.

Management’s estimate of the total cost incurred by the Company in responding to the emergency and repairing the pipeline was $349,000, which amount was accrued as an expense at September 30, 2011, and the Company determined that no receivable could be recorded at that time. In November 2011, Cardi paid the Company $89,000, which amount was offset against the expense previously recorded. At December 31, 2011, the Company determined that $184,000 of the remaining liability was assumed by Cardi. The Company reduced the previously recorded liability and expense by that amount. In February 2012, Cardi paid the $184,000. The Company has determined that no receivable can be recorded at this time for the remaining $76,000. During the fourth quarter of 2011, the Company paid an additional $14,000 in connection with the pipeline rupture for which the Company has not yet received payment and for which no receivable has been recorded.

8

The Company believes that it has no liability with respect to the discharge and has asserted a claim against Cardi and RIDOT for the costs and other damages incurred by the Company.

ULSD incident (2011):

In March 2011, management learned that, during the normal receipt of product from a barge, No. 2 heating oil (high sulfur heating oil) was accidentally pumped into one of the Company’s ULSD petroleum storage tanks (Tank 67), resulting in a mixture with a sulfur content in excess of that allowed by the Environmental Protection Agency (“EPA”). The Company notified Global and its insurance carriers of the incident.

Global informed the Company that it had contacted its customers that received the mixture and commenced a sampling and testing program with certain of its customers to determine (1) if any product should be removed and replaced with conforming product or (2) if the product need only be treated to meet the EPA requirements. In August 2011, Global asserted a claim against the Company of $132,000 for damages incurred by Global arising out of the incident, which amount was accrued as an expense at September 30, 2011. At December 31, 2011, the Company determined that its insurance carrier had assumed this liability, and the Company reduced the previously recorded liability and expense by that amount. In March 2012, the Company’s insurance carrier paid Global the full amount of its claim, and Global released the Company of all liability relating to this incident.

Tank 153 (2010):

In August 2010, during a regular facility inspection of the Terminal, a release of petroleum-contaminated water was discovered from the tank bottom of one of the Company’s 150,000 barrel tanks (Tank 153). The Company notified the Rhode Island Department of Environmental Management (“RIDEM”), the EPA and the United States Coast Guard. It also notified its insurance carriers of the release and the damage to the tank.

The tank was emptied of product and the cleaning of the tank bottom was completed in September 2010. The petroleum-contaminated water released from the tank was contained on the secondary containment liner under the tank bottom, preventing contamination of the groundwater. The Company engaged an outside engineering firm to inspect the tank bottom to determine the cause and location of the release, as well as the extent of the required repairs. The findings of the inspection indicated that aggressive corrosion from inside the tank occurred, causing two holes in the immediate vicinity of the observed release, as well as several other holes or potential holes in other areas of the tank bottom. The report concluded that the corrosion was caused by microbial contamination, which was affirmed by a corrosion specialist.

The final cost of the cleanup, inspection and repair of the tank was $533,000, all of which was recorded as an expense at December 31, 2010. The tank was placed back in service in February 2011. In June 2011, Global paid the Company $458,000. The difference relates to the $75,000 cost of epoxy coating the bottom of Tank 153 which the Company paid.

The testing of certain of the Company’s other tanks revealed the presence of corrosive microbial contaminants in Tanks 151 and 32. Both tanks were treated with a biocide and continue to be monitored and treated as necessary. Since Tank 32 had been inspected in June 2010, the Company believes that the contaminants have not affected the integrity of this tank bottom. However, since Tank 151 had not been inspected since construction in 2006, the Company took this tank out of service in February 2011. The tank was emptied of product, and an inspection of the tank bottom revealed minor corrosion. The Company completed the repairs recommended by the inspectors and applied an epoxy coating to the bottom of Tank 151 at a cost of $50,000, which amount is included in petroleum storage facility expenses, operating on the accompanying consolidated statement of income and retained earnings for the three months ended March 31, 2011. The tank was back in service in May 2011. Exclusive of the epoxy coating, the total cost of cleanup, inspection and repair of the tanks was $40,000 which Global paid the Company in September 2011.

Tank repairs related to this incident have been presented as a separate line item within petroleum storage facility expenses on the accompanying consolidated statement of income and retained earnings for the three months ended March 31, 2011. Routine tank repairs continue to be included with petroleum storage facility operating expenses on the accompanying consolidated statements of income and retained earnings.

Environmental incident (2002):

In 2002, during testing of monitoring wells at the Terminal, the Company’s consulting engineer discovered free floating phase product in a groundwater monitoring well located on that portion of the Terminal purchased in 2000. Laboratory analysis indicated that the product was gasoline, which is not a product the Company ever stored at the Terminal. The Company commenced an environmental investigation and analysis, the results of which indicate that the gasoline did not come from the Terminal. The Company notified RIDEM. RIDEM subsequently identified

9

Power Test Realty Partnership (“Power Test”), the owner of an adjacent parcel, as a potentially responsible party for the contamination. Getty Properties Corp. is the general partner of Power Test. Power Test challenged that determination and, after an administrative hearing, in October 2008 a RIDEM Hearing Officer determined that Power Test is responsible for the discharge of the petroleum product under the Rhode Island Oil Pollution Control Act, R.I.G.L. Section 46-12.5.1-3 and Rule 6(a) and 12(b) of the Oil Pollution Control Regulations. The RIDEM Decision and Order requires Power Test to remediate the contamination as directed by RIDEM and remanded the proposed penalty to RIDEM for recalculation. In November 2008, Power Test appealed the decision to the Rhode Island Superior Court. In addition, in November 2008, Power Test sought, and received, a stay of the Decision and Order of the Hearing Officer pending a clarification by RIDEM of the amount of the proposed penalty. In October 2009, RIDEM issued a recalculated administrative penalty, and, subsequently, the RIDEM Hearing Officer issued a recommended amended decision, which was affirmed as a final decision by the RIDEM Director in December 2009. In January 2010, Power Test appealed that decision to Superior Court. In September 2011, the Superior Court affirmed the decision of the RIDEM director. Power Test has appealed that decision to the Rhode Island Supreme Court.

In April 2009, the Company sued Power Test and Getty Properties Corp. in the Rhode Island Superior Court seeking remediation of the site or, in the alternative, the cost of the remediation. On May 1, 2009, Power Test and Getty Properties Corp. removed the action to the United States District Court for the District of Rhode Island. On May 22, 2009, Power Test and Getty Properties Corp. answered the Complaint and filed a Counterclaim against Dunellen, LLC and Capital Terminal Company alleging that Dunellen, LLC and Capital Terminal Company are responsible for the contamination. Getty Properties Corp. and Power Test have joined Getty Petroleum Marketing, Inc., the tenant under a long-term lease with Getty Properties Corp. of the adjacent property, as a defendant. The Company has amended its Complaint to add Getty Petroleum Marketing, Inc. as a defendant. On December 5, 2011, Getty Petroleum Marketing, Inc., filed for bankruptcy under Chapter 11 of the United States Bankruptcy Act.

The parties are now engaged in discovery. There can be no assurance that the Company will prevail in this litigation.

Since January 2003, the Company has not incurred significant costs in connection with this matter, other than ongoing litigation costs, and is unable to determine the costs it might incur to remedy the situation, as well as any costs to investigate, defend and seek reimbursement from the responsible party with respect to this contamination.

Environmental remediation (1994):

In 1994, a leak was discovered in a 25,000 barrel storage tank at the Terminal which allowed the escape of a small amount of fuel oil. All required notices were made to RIDEM. In 2000, the tank was demolished and testing of the groundwater indicated that there was no large pooling of contaminants. In 2001, RIDEM approved a plan pursuant to which the Company installed a passive system consisting of three wells and commenced monitoring the wells.

In 2003, RIDEM decided that the passive monitoring system previously approved was not sufficient and required the Company to design an active remediation system for the removal of product from the contaminated site. The Company and its consulting engineers began the pre-design testing of the site in the fourth quarter of 2004. The consulting engineers estimated a total cost of $200,000 to design, install and operate the system, which amount was accrued in 2004. Through 2006, the Company had expended $119,000 and has not incurred any additional costs since then. In 2011, RIDEM notified the company to proceed with the next phase of the approval process, notifying the abutters of the proposed remediation system even though RIDEM has not yet taken any action on the Company’s proposed plan. As designed, the system will pump out the contaminants which will be disposed of in compliance with applicable regulations. After a period of time, the groundwater will be tested to determine if sufficient contaminants have been removed. While the Company and its consulting engineers believe that the proposed active remediation system will correct the situation, it is possible that RIDEM could require the Company to expand remediation efforts, which could result in the Company incurring costs in excess of the remaining accrual of $81,000.

10

8. Income taxes:

Deferred income taxes are recorded based upon differences between financial statement and tax basis amounts of assets and liabilities. The tax effects of temporary differences which give rise to deferred tax assets and liabilities were as follows:

	March 31, 2012			December 31, 2011
Gross deferred tax liabilities:
Property having a financial statement basis in excess of tax basis	$	5,641,000		$	5,698,000
Insurance premiums and accrued leasing revenues		73,000			93,000
		5,714,000			5,791,000
Accrued assets		(138,000	)		(150,000	)
	$	5,576,000		$	5,641,000

9. Shareholders’ Equity:

The Company’s Class B Common Stock is convertible by the record owner thereof into the same number of shares of Class A Common Stock at any time. For the three months ended March 31, 2012 and 2011, the number of shares converted was 1,940 shares and 9,088 shares, respectively.

10. Operating segment disclosures:

The Company operates in two segments, leasing and petroleum storage.

The Company makes decisions relative to the allocation of resources and evaluates performance based on each segment’s respective income before income taxes, excluding interest expense and certain corporate expenses.

Inter-segment revenues are immaterial in amount.

The following financial information is used for making operating decisions and assessing performance of each of the Company’s segments for the three months ended March 31, 2012 and 2011:

	2012		2011
Leasing:
Revenues:
Long-term leases:
Contractual	$	799,000	$	632,000
Contingent		17,000		15,000
Short-term leases		196,000		175,000
Total revenues	$	1,012,000	$	822,000
Property tax expense	$	153,000	$	137,000
Depreciation	$	50,000	$	43,000
Income before income taxes	$	742,000	$	572,000
Assets	$	10,012,000	$	9,837,000
Properties and equipment, additions	$	73,000	$	70,000
Petroleum storage:
Revenues, contractual	$	976,000	$	951,000
Property tax expense	$	65,000	$	61,000
Depreciation	$	161,000	$	164,000
Income before income taxes	$	425,000	$	323,000
Assets	$	12,714,000	$	13,198,000
Properties and equipment, additions	$	—	$	37,000

11

The following is a reconciliation of the segment information to the amounts reported in the accompanying consolidated financial statements for the three months ended March 31, 2012 and 2011:

	2012			2011
Revenues for operating segments:
Leasing	$	1,012,000		$	822,000
Petroleum storage		976,000			951,000
Total consolidated revenues	$	1,988,000		$	1,773,000
Property tax expense:
Property tax expense for operating segments:
Leasing	$	153,000		$	137,000
Petroleum storage		65,000			61,000
		218,000			198,000
Unallocated corporate property tax expense		1,000			1,000
Total consolidated property tax expense	$	219,000		$	199,000
Depreciation:
Depreciation for operating segments:
Leasing	$	50,000		$	43,000
Petroleum storage segment:		161,000			164,000
		211,000			207,000
Unallocated corporate depreciation		2,000			2,000
Total consolidated depreciation	$	213,000		$	209,000
Income before income taxes:
Income before income taxes for operating segments:
Leasing	$	742,000		$	572,000
Petroleum storage		425,000			323,000
		1,167,000			895,000
Unallocated corporate expenses		(263,000	)		(256,000	)
Interest expense		(61,000	)		(88,000	)
Total consolidated income before income taxes	$	843,000		$	551,000
Assets:
Assets for operating segments:
Leasing	$	10,012,000		$	9,837,000
Petroleum storage		12,714,000			13,198,000
		22,726,000			23,035,000
Corporate cash		2,431,000			2,170,000
Other unallocated amounts		16,000			624,000
Total consolidated assets	$	25,173,000		$	25,829,000
Properties and equipment:
Additions to properties and equipment for operating segments:
Leasing	$	73,000		$	70,000
Petroleum storage		—			37,000
Total consolidated additions	$	73,000		$	107,000

11. Related party transaction:

The Company and Providence and Worcester Railroad Company (“the Railroad”) have a common controlling shareholder. The Company has the right to use certain pipelines located in the right of way of the Railroad which were constructed by Getty Oil Company (Eastern Operations), Inc. (“GettyEO”). Pursuant to an agreement between the Railroad and GettyEO dated August 6, 1975, the Railroad has the right to relocate any portion of the pipelines

12

located within the Railroad’s right of way. The Company has supported an extension of Waterfront Drive, so-called, up to Dexter Road and adjacent to the Company’s Terminal, which road is being constructed on the Railroad right of way. The State of Rhode Island’s plans for the Waterfront Drive extension required a relocation of a portion of the pipelines which the Railroad has the right to relocate. RIDOT entered into an agreement with the Railroad (the “RIDOT Agreement”) to reimburse the Railroad for reasonable costs incurred by it in relocating the pipelines, which were originally estimated to be $159,000. Any substantial change to the estimate requires the approval of RIDOT.

In May 2011, the Company entered into an agreement with the Railroad to act as the Railroad’s agent with respect to the relocation of the pipelines. The Company, without receiving compensation, is obligated under the agreement to select, direct and supervise all subcontractors subject to the Railroad’s approval. Upon the Railroad’s receipt of invoices from the contractors, the Railroad requires the Company to verify the accuracy of the invoices and submit a check to the Railroad covering the amount of the invoices. The Railroad pays the invoices, using the funds advanced by the Company. The Railroad is then obligated to submit the invoices to RIDOT for reimbursement. Any reimbursements received from RIDOT are required to be paid to the Company in a timely manner. Any shortfall in RIDOT’s reimbursement is borne by the Company.

During 2011, the costs incurred to relocate the pipeline totaled $219,000. The Railroad submitted the total amount to RIDOT in February 2012; in March, RIDOT reimbursed the Railroad $152,000, which the Railroad in turn paid to the Company. The Railroad and the Company have discussed with RIDOT the remaining $67,000 in costs incurred to complete the project. RIDOT is reviewing the excess costs but no acceptance by RIDOT has yet been made. The Company believes, based on its discussions with RIDOT, that reimbursement to the Railroad and ultimately the Company, is reasonably assured.

12. Fair value of financial instruments:

The Company believes that the fair values of its financial instruments, including cash, receivables and payables, approximate their respective book values because of their short-term nature. The fair value of the note payable approximates its book value and was determined using borrowing rates currently available to the Company for loans with similar terms and maturities.

13

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

Certain portions of this report, and particularly the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contain forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities Exchange Act of 1934, as amended, which represent the Company’s expectations or beliefs concerning future events. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the following: the ability of the Company to generate adequate amounts of cash; the collectability of the accrued leasing revenues when due over the terms of the long-term land leases; the commencement of additional long-term land leases; changes in economic conditions that may affect either the current or future development on the Company’s parcels; and exposure to contamination, remediation or similar costs associated with the operation of the petroleum storage facility. The Company does not undertake the obligation to update forward-looking statements in response to new information, future events or otherwise.

1. Overview:

Critical accounting policies:

The Company believes that its revenue recognition policy for long-term leases with scheduled rent increases (leasing segment) meets the definition of a critical accounting policy which is discussed in the Company’s Form 10-K for the year ended December 31, 2011. There have been no changes to the application of this accounting policy since December 31, 2011.

Segments:

The Company operates in two segments, leasing and petroleum storage.

The leasing segment consists of the long-term leasing of certain of its real estate interests in downtown Providence, Rhode Island (upon the commencement of which the tenants are required to construct buildings thereon, with the exception of a parking garage), the leasing of a portion of the Steeple Street Building under short-term leasing arrangements and the leasing of locations along interstate and primary highways in Rhode Island and Massachusetts to Lamar which has constructed outdoor advertising boards thereon. The Company anticipates that the future development of its remaining properties in and adjacent to the Capital Center area will consist primarily of long-term ground leases. Pending this development, the Company leases these parcels for public parking under short-term leasing arrangements to Metropark.

The petroleum storage segment consists of operating the Facility located in East Providence, Rhode Island, for Global.

The principal difference between the two segments relates to the nature of the operations. In the leasing segment, the tenants under the long-term land leases incur substantially all of the development and operating costs of the assets constructed on the Company’s land, including the payment of real property taxes on both the land and any improvements constructed thereon; whereas the Company is responsible for the operating and maintenance expenditures, including a portion of the real property taxes, as well as certain capital improvements at the Facility.

2. Results of operations:

Three months ended March 31, 2012 compared to three months ended March 31, 2011:

Leasing segment:

	2012		2011		Difference
Leasing revenues	$	1,012,000	$	822,000	$	190,000
Leasing expense		270,000		250,000	$	20,000
	$	742,000	$	572,000

14

Leasing revenue increased due to scheduled increases in rentals under long-term land leases. Leasing expense increased due to increases in real property taxes and legal fees in connection with a long-term land lease, offset in part by a decrease in repairs and maintenance of the Steeple Street Building.

Petroleum storage segment:

	2012		2011		Difference
Petroleum storage facility revenues	$	976,000	$	951,000	$	25,000
Petroleum storage facility expense		551,000		628,000	$	(77,000	)
	$	425,000	$	323,000

Petroleum storage facility revenues increased principally due to the May 1, 2011 annual cost-of-living adjustment of $98,000 under the lease for the petroleum storage facility.

Exclusive of $78,000 in costs associated with the emptying, inspection and epoxy coating of a tank in 2011, petroleum storage facility expense remained approximately at the 2011 level.

General:

For the three months ended March 31, 2012, general and administrative expense remained approximately at the 2011 level.

Interest expense:

In 2010, the Company borrowed $6,000,000 from a bank. The loan bears interest at an annual rate of 6 percent and has a term of ten years with repayments on a twenty-year amortization schedule (monthly principal payments of $25,000 plus interest) and a balloon payment of $1,500,000 due April 2020 when the loan matures. In 2011, the Company made principal prepayments totaling $1,525,000; as a result of these prepayments, interest expense decreased.

3. Liquidity and capital resources:

Historically, the Company has had adequate liquidity to fund its operations.

During the first three months of 2012, the Company’s operating activities provided $888,000 of cash. The Company made cash payments of $73,000 for properties and equipment, $198,000 for dividends and $75,000 in principal payments on the note payable. Cash increased $594,000 for the three months.

Cash and cash commitments:

At March 31, 2012, the Company had cash of $2,772,000. The Company maintains all of its cash in a non-interest bearing checking account which is fully insured by the Federal Deposit Insurance Corporation.

Under a lease which commenced in 2005, the tenant was entitled to a credit for future rents equal to a portion of the real property taxes paid by the tenant through April 2007. In connection with Phase I of the tenant’s project, commencing July 1, 2010, the annual rent increased from $48,000 to $300,000. As a result of the rent credit, the tenant was not required to make cash payments for rent until March 2012 when the rent credit was fully utilized.

The current economic conditions have had limited impact on the Company’s results of operations to date. As none of the Company’s leases require the tenant to provide financial information, the Company has no information concerning the impact of current economic conditions on its major tenants.

On April 16, 2012, the Company received notice from the holder of the Leasehold Mortgage on Parcel 3S that the mortgagor was in default of its obligations under the Leasehold Mortgage and that the holder intended to foreclose the mortgage under the power of sale provisions contained therein on June 7, 2012. If the foreclosure occurs, the holder of the Leasehold Mortgage will succeed to the tenant’s rights and obligations under the Parcel 3S lease. The Company does not anticipate that there will be any interruption in the payment of rent to the Company under the long-term land lease and any other tenant monetary obligations.

At March 31, 2012, the Company has three tenants occupying 56 percent of the Steeple Street Building under short-term leases (five years or less) at a current annual rental of $119,000. The Company is currently marketing the remaining portions of the building for lease.

15

Under the Company’s lease with Global, the annual cost-of-living adjustment is $99,000 effective May 1, 2012. From time to time, unanticipated events at the Company’s Terminal can result in short-term cash requirements.

In 2011, the Company prepaid $1,525,000 on its note payable, resulting in a future annual savings of $92,000 in interest expense. Any additional prepayments will depend on the Company’s level of available cash.

On April 24, 2012, the Company declared a quarterly dividend of $198,000 ($.03 per common share) which dividend will be paid in May 2012. The declaration of future dividends and the amount thereof will depend on the Company’s future earnings, financial factors and other events.

The Company expects that cash generated from current operations will continue to be sufficient to meet operating expenses, debt service, ordinary capital expenditures, unanticipated events at the Terminal and the current level of quarterly dividends. In the event temporary liquidity is required, the Company believes that a line of credit or other arrangements could be obtained by pledging some or all of its unencumbered assets as collateral.

16

Item 4. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and the Company’s principal financial officer. Based upon that evaluation, the principal executive officer and the principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

There was no significant change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to affect, the Company’s internal control over financial reporting. The Company continues to enhance its internal controls over financial reporting, primarily by evaluating and enhancing process and control documentation. Management discusses with and discloses these matters to the Audit Committee of the Board of Directors and the Company’s auditors.

17

PART II – OTHER INFORMATION

Item 6. Exhibits

(b) Exhibits:

3.1	Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s annual report on Form 10-K for the year ended December 31, 2008).
3.2	By-laws, as amended (incorporated by reference to Exhibit 3.2 to the registrant’s annual report on Form 10-K for the year ended December 31, 2007).
10	Material contracts:
	(a)	Loan Agreement between Bank Rhode Island and Company:
		(i) Dated April 26, 2010 (incorporated by reference to Exhibit 10.1 to the registrant’s report on Form 8-K filed on April 28, 2010).
	(b)	Lease between Metropark, Ltd. and Company:
		(i) Dated January 1, 2005 (incorporated by reference to Exhibit 10(a) to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2004), as amended.
	(c)	Miscellaneous contract:
		(i) Option Agreement to Purchase Real Property and Related Assets, dated June 9, 2003, by and between Dunellen, LLC and Global Companies, LLC (incorporated by reference to Exhibit 10(b)(i) to the registrant’s Report on Form 10-QSB/A for the quarterly period ended June 30, 2003), as amended.
31.1	Rule 13a-14(a) Certification of President and Principal Executive Officer
31.2	Rule 13a-14(a) Certification of Treasurer and Principal Financial Officer
32.1	Certification of President and Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Treasurer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101†	The following financial information from the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2012, filed with the Securities and Exchange Commission on April 27, 2012, formatted in eXtensible Business Reporting Language:

(i) Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011

(ii) Consolidated Statements of Income and Retained Earnings for the Three Months ended March 31, 2012 and 2011

(iii) Consolidated Statements of Cash Flows for the Three Months ended March 31, 2012 and 2011

(iv) Notes to Consolidated Financial Statements.

† This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C.78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that the Company specifically incorporates it by reference.

18

SIGNATURE

In accordance with the requirements of the Exchange Act, the Issuer caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CAPITAL PROPERTIES, INC.
By	Robert H. Eder
	Robert H. Eder
	President and Principal Executive Officer
By	/s/ Barbara J. Dreyer
	Barbara J. Dreyer
	Treasurer and Principal Financial Officer

DATED: April 27, 2012

19

EX-31.1

Exhibit 31.1

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

Certification Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert H. Eder, President and Principal Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Capital Properties, Inc. and Subsidiaries;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that was materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 27, 2012

/s/ Robert H. Eder

Robert H. Eder

President and Principal Executive Officer

EX-31.2

Exhibit 31.2

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

Certification Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Barbara J. Dreyer, Treasurer and Principal Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Capital Properties, Inc. and Subsidiaries;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant’s as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that was materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 27, 2012

/s/ Barbara J. Dreyer

Barbara J. Dreyer

Treasurer and Principal Financial Officer

EX-32.1

Exhibit 32.1

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Capital Properties, Inc. (the Company) on Form 10-Q for the quarterly period ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert H. Eder, President and Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert H. Eder

Robert H. Eder

President and Principal Executive Officer

April 27, 2012

EX-32.2

Exhibit 32.2

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Capital Properties, Inc. (the Company) on Form 10-Q for the quarterly period ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Barbara J. Dreyer, Treasurer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Barbara J. Dreyer

Barbara J. Dreyer, Treasurer and Principal Financial Officer

April 27, 2012

XML

Use of estimates

3 Months Ended

Mar. 31, 2012

Use of estimates [Abstract]

Use of estimates

3. Use of estimates:

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

XML

Principles of consolidation and basis of presentation

3 Months Ended

Mar. 31, 2012

Principles of consolidation and basis of presentation [Abstract]

Principles of consolidation and basis of presentation

2. Principles of consolidation and basis of presentation:

The accompanying condensed consolidated financial statements include the accounts and transactions of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying condensed consolidated balance sheet as of December 31, 2011, has been derived from audited financial statements and the unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these condensed financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest Form 10-K. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position as of March 31, 2012 and the results of operations and cash flows for the three months ended March 31, 2012 and 2011.

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Environmental incidents:

The Company accrues a liability when an environmental incident has occurred and the costs are estimable. The Company does not record a receivable for recoveries from third parties for environmental matters until it has determined that the amount of the collection is reasonably assured. The accrued liability is relieved when the Company pays the liability or a third party assumes the liability. Upon determination that collection is reasonably assured or a third party assumes the liability, the Company records the amount as a reduction of expense.

The Company charges to expense those costs that do not extend the life, increase the capacity or improve the safety or efficiency of the property owned or used by the Company.

New accounting standards:

The Company reviews new accounting standards as issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any standards that it believes merit further discussion. The Company expects that none of the new standards would have a significant impact on its consolidated financial statements.

XML

Consolidated Balance Sheets (USD $)	Mar. 31, 2012	Dec. 31, 2011
ASSETS
Properties and equipment (net of accumulated depreciation)	$ 21,957,000	$ 22,097,000
Cash	2,772,000	2,178,000
Income taxes receivable	0	45,000
Prepaid and other	444,000	652,000
Total assets	25,173,000	24,972,000
Liabilities:
Note payable ($300,000 due within one year)	3,925,000	4,000,000
Accounts payable and accrued expenses:
Property taxes	364,000	291,000
Environmental incidents:
Pipeline rupture	76,000	76,000
Environmental remediation	81,000	81,000
Other	144,000	242,000
Income taxes payable	123,000	0
Deferred:
Leasing revenues	0	70,000
Income taxes, net	5,576,000	5,641,000
Total liabilities	10,289,000	10,401,000
Shareholders' equity:
Capital in excess of par	11,762,000	11,762,000
Retained earnings	3,056,000	2,743,000
Total shareholders' equity	14,884,000	14,571,000
Total liabilities and shareholders' equity	25,173,000	24,972,000
Common Class A
Shareholders' equity:
Common stock	37,000	37,000
Common Class B
Shareholders' equity:
Common stock	29,000	29,000
Nonvoting Common Stock
Shareholders' equity:
Common stock

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash flows from operating activities:
Net income	$ 511,000	$ 332,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	213,000	209,000
Amortization of deferred financing fees	2,000	1,000
Deferred:
Income taxes	(65,000)	28,000
Leasing revenues	(70,000)	(75,000)
Other, principally net changes in prepaids, accounts payable, accrued expenses and current income taxes	297,000	(25,000)
Net cash provided by operating activities	888,000	470,000
Cash flows from investing activities:
Payments for properties and equipment	(73,000)	(207,000)
Related party transaction:
Advance	(100,000)
Repayment	152,000
Net cash used in investing activities	(21,000)	(207,000)
Payments:
Note payable	(75,000)	(75,000)
Dividends on common stock based upon 6,599,912 shares outstanding at $.03 per common share	(198,000)	(198,000)
Cash used in financing activities	(273,000)	(273,000)
Increase (decrease) in cash	594,000	(10,000)
Cash, beginning	2,178,000	2,395,000
Cash, ending	2,772,000	2,385,000
Cash paid for:
Income taxes	229,000	25,000
Interest	61,000	87,000
Non-cash investing and financing activities, capital expenditures financed through accounts payable		$ 18,000

XML

Description of business

3 Months Ended

Mar. 31, 2012

Description of business [Abstract]

Description of business

1. Description of business:

Capital Properties, Inc. and its wholly-owned subsidiaries, Tri-State Displays, Inc., Capital Terminal Company and Dunellen, LLC (collectively referred to as “the Company”), operate in two segments, leasing and petroleum storage.

The leasing segment consists of the long-term leasing of certain of its real estate interests in downtown Providence, Rhode Island (upon the commencement of which the tenants are required to construct buildings thereon, with the exception of a parking garage), the leasing of a portion of its building (“Steeple Street Building”) under short-term leasing arrangements and the leasing of locations along interstate and primary highways in Rhode Island and Massachusetts to Lamar Outdoor Advertising, LLC (“Lamar”) which has constructed outdoor advertising boards thereon. The Company anticipates that the future development of its remaining properties in and adjacent to the Capital Center area will consist primarily of long-term ground leases. Pending this development, the Company leases these parcels for public parking under short-term leasing arrangements to Metropark, Ltd. (“Metropark”).

The petroleum storage segment consists of operating the petroleum storage terminal (the “Terminal”) and the Wilkesbarre Pier (the “Pier”), both of which are owned by the Company and are collectively referred to as the “Facility,” located in East Providence, Rhode Island, for Global Companies, LLC (“Global”) which stores and distributes petroleum products.

The principal difference between the two segments relates to the nature of the operations. In the leasing segment, the tenants under long-term land leases incur substantially all of the development and operating costs of the assets constructed on the Company’s land, including the payment of real property taxes on both the land and any improvements constructed thereon; whereas the Company is responsible for the operating and maintenance expenditures, including insurance and a portion of the real property taxes, as well as certain capital improvements at the Facility.

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2012	Dec. 31, 2011
Notes payable due within one year	$ 300,000	$ 300,000
Common stock, shares outstanding	6,599,912
Common Class A
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	3,746,132	3,744,192
Common stock, shares outstanding	3,746,132	3,744,192
Common Class B
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	3,500,000	3,500,000
Common stock, shares issued	2,853,780	2,855,720
Common stock, shares outstanding	2,853,780	2,855,720
Nonvoting Common Stock
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	1,000,000	1,000,000
Common stock, shares issued
Common stock, shares outstanding

XML

Related party transaction

3 Months Ended

Mar. 31, 2012

Related party transaction [Abstract]

Related party transaction

11. Related party transaction:

The Company and Providence and Worcester Railroad Company (“the Railroad”) have a common controlling shareholder. The Company has the right to use certain pipelines located in the right of way of the Railroad which were constructed by Getty Oil Company (Eastern Operations), Inc. (“GettyEO”). Pursuant to an agreement between the Railroad and GettyEO dated August 6, 1975, the Railroad has the right to relocate any portion of the pipelines located within the Railroad’s right of way. The Company has supported an extension of Waterfront Drive, so-called, up to Dexter Road and adjacent to the Company’s Terminal, which road is being constructed on the Railroad right of way. The State of Rhode Island’s plans for the Waterfront Drive extension required a relocation of a portion of the pipelines which the Railroad has the right to relocate. RIDOT entered into an agreement with the Railroad (the “RIDOT Agreement”) to reimburse the Railroad for reasonable costs incurred by it in relocating the pipelines, which were originally estimated to be $159,000. Any substantial change to the estimate requires the approval of RIDOT.

In May 2011, the Company entered into an agreement with the Railroad to act as the Railroad’s agent with respect to the relocation of the pipelines. The Company, without receiving compensation, is obligated under the agreement to select, direct and supervise all subcontractors subject to the Railroad’s approval. Upon the Railroad’s receipt of invoices from the contractors, the Railroad requires the Company to verify the accuracy of the invoices and submit a check to the Railroad covering the amount of the invoices. The Railroad pays the invoices, using the funds advanced by the Company. The Railroad is then obligated to submit the invoices to RIDOT for reimbursement. Any reimbursements received from RIDOT are required to be paid to the Company in a timely manner. Any shortfall in RIDOT’s reimbursement is borne by the Company.

During 2011, the costs incurred to relocate the pipeline totaled $219,000. The Railroad submitted the total amount to RIDOT in February 2012; in March, RIDOT reimbursed the Railroad $152,000, which the Railroad in turn paid to the Company. The Railroad and the Company have discussed with RIDOT the remaining $67,000 in costs incurred to complete the project. RIDOT is reviewing the excess costs but no acceptance by RIDOT has yet been made. The Company believes, based on its discussions with RIDOT, that reimbursement to the Railroad and ultimately the Company, is reasonably assured.

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2012
Entity Registrant Name	CAPITAL PROPERTIES INC /RI/
Entity Central Index Key	0000202947
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Common Class A
Entity Common Stock, Shares Outstanding	3,746,132
Common Class B
Entity Common Stock, Shares Outstanding	2,853,780

XML

Fair value of financial instruments

3 Months Ended

Mar. 31, 2012

Fair value of financial instruments [Abstract]

Fair value of financial instruments

12. Fair value of financial instruments:

The Company believes that the fair values of its financial instruments, including cash, receivables and payables, approximate their respective book values because of their short-term nature. The fair value of the note payable approximates its book value and was determined using borrowing rates currently available to the Company for loans with similar terms and maturities.

XML

Consolidated Statements of Income and Retained Earnings (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Revenues:
Leasing	$ 1,012,000	$ 822,000
Petroleum storage facility	976,000	951,000
Total revenues	1,988,000	1,773,000
Expenses:
Leasing	270,000	250,000
Petroleum storage facility:
Operating	551,000	578,000
Tank repairs		50,000
General and administrative	263,000	256,000
Interest	61,000	88,000
Total expenses	1,145,000	1,222,000
Income before income taxes	843,000	551,000
Income tax expense (benefit):
Current	397,000	191,000
Deferred	(65,000)	28,000
Total income tax expense	332,000	219,000
Net income	511,000	332,000
Retained earnings, beginning	2,743,000	1,503,000
Dividends on common stock based upon 6,599,912 shares outstanding at $.03 per common share	(198,000)	(198,000)
Retained earnings, ending	$ 3,056,000	$ 1,637,000
Basic income per share based upon 6,599,912 shares outstanding	$ 0.08	$ 0.05

XML

Description of leasing arrangements

3 Months Ended

Mar. 31, 2012

Description of leasing arrangements [Abstract]

Description of leasing arrangements

6. Description of leasing arrangements:

Long-term land leases:

As of March 31, 2012, the Company had entered into six long-term land leases for six separate parcels upon which the improvements have been completed (“developed parcels”). In addition, in 2005 a long-term land lease commenced on an undeveloped parcel on which two residential buildings was planned. One building was completed in September 2009. The other building has not progressed beyond the early stages of site preparation and the timing of its construction and completion is uncertain.

Under the seven land leases, the tenants are required to negotiate any tax stabilization treaties or other arrangements, appeal any changes in real property assessments, and pay real property taxes assessed on land and improvements under these arrangements. Accordingly, real property taxes payable by the tenants are excluded from leasing revenues and leasing expenses on the accompanying consolidated statements of income and retained earnings. The real property taxes attributable to the Company’s land under these leases totaled $315,000 and $293,000, respectively, for the three months ended March 31, 2012 and 2011.

Under the lease which commenced in 2005, the tenant was entitled to a credit for future rents equal to a portion of the real property taxes paid by the tenant through April 2007. In connection with Phase I of the tenant’s project, commencing July 1, 2010, the annual rent increased from $48,000 to $300,000. As a result of the rent credit, the tenant was not required to make cash payments for Phase I rent until March 2012 when the rent credit was fully utilized. Commencing July 1, 2010, the Company reclassified each month $25,000 of deferred leasing revenues to leasing revenues.

Short-term leases:

The Company leases the undeveloped parcels of land in or adjacent to the Capital Center area for public parking purposes to Metropark under a short-term cancellable lease.

At March 31, 2012, the Company has three tenants occupying 56 percent of the Steeple Street Building under short-term leases of five years or less at a current annual rental of $119,000. The Company is recognizing the revenue from these leases on a straight-line basis over the terms of the leases. At March 31, 2012, the excess of straight-line over contractual rentals is $12,000, which is included in prepaid and other on the accompanying consolidated balance sheet at March 31, 2012. The Company also reports as revenue from tenants reimbursements for common area costs and real property taxes. The Company is currently marketing the remaining portions of the building for lease.

XML

Note payable

3 Months Ended

Mar. 31, 2012

Note payable [Abstract]

Note payable

5. Note payable:

In 2010, the Company borrowed $6,000,000 from a bank. The loan bears interest at an annual rate of 6 percent and has a term of ten years with repayments on a twenty-year amortization schedule (monthly principal payments of $25,000 plus interest) and a balloon payment of $1,500,000 due April 2020 when the loan matures. The note further contains the customary covenants, terms and conditions and permits prepayment, in whole or in part, at any time without penalty if the prepayment is made from internally generated funds. As collateral for the loan, the Company granted the bank a mortgage on Parcels 3S and 5 in the Capital Center.

In 2011, the Company made principal prepayments totaling $1,525,000.

In connection with the borrowing, the Company incurred financing fees totaling $55,000, which are being amortized on a straight-line method over the 10-year term of the note (which approximates the effective interest rate method) and are included in interest expense on the accompanying consolidated statements of income and retained earnings.

XML

Shareholders' Equity

3 Months Ended

Mar. 31, 2012

Shareholders' Equity [Abstract]

Shareholders' Equity

9. Shareholders’ Equity:

The Company’s Class B Common Stock is convertible by the record owner thereof into the same number of shares of Class A Common Stock at any time. For the three months ended March 31, 2012 and 2011, the number of shares converted was 1,940 shares and 9,088 shares, respectively.

XML

Petroleum storage facility and environmental incidents

3 Months Ended

Mar. 31, 2012

Petroleum storage facility and environmental incidents [Abstract]

Petroleum storage facility and environmental incidents

7. Petroleum storage facility and environmental incidents:

Pipeline rupture (2011):

On August 31, 2011, while excavating in connection with the construction of a highway for the Rhode Island Department of Transportation (“RIDOT”), Cardi Corporation (“Cardi”) ruptured an underground pipeline controlled and used by the Company for the transportation of Ultra Low Sulfur Diesel (“ULSD”) from the Wilkesbarre Pier to its Petroleum Storage Facility. At the time, the Company was receiving product from a barge and, as a result of the rupture, approximately 70,000 gallons of ULSD were discharged. Pursuant to the Company’s Emergency Response Plan, representatives of the Company took control of the spill site and coordinated the response of various governmental agencies as well as private contractors. Approximately 56,000 gallons of spilled diesel were recovered. On September 6, 2011, the Company turned over the responsibility for the clean-up to Cardi.

The Company notified the required government agencies and its insurance carriers of the rupture.

Management’s estimate of the total cost incurred by the Company in responding to the emergency and repairing the pipeline was $349,000, which amount was accrued as an expense at September 30, 2011, and the Company determined that no receivable could be recorded at that time. In November 2011, Cardi paid the Company $89,000, which amount was offset against the expense previously recorded. At December 31, 2011, the Company determined that $184,000 of the remaining liability was assumed by Cardi. The Company reduced the previously recorded liability and expense by that amount. In February 2012, Cardi paid the $184,000. The Company has determined that no receivable can be recorded at this time for the remaining $76,000. During the fourth quarter of 2011, the Company paid an additional $14,000 in connection with the pipeline rupture for which the Company has not yet received payment and for which no receivable has been recorded.

The Company believes that it has no liability with respect to the discharge and has asserted a claim against Cardi and RIDOT for the costs and other damages incurred by the Company.

ULSD incident (2011):

In March 2011, management learned that, during the normal receipt of product from a barge, No. 2 heating oil (high sulfur heating oil) was accidentally pumped into one of the Company’s ULSD petroleum storage tanks (Tank 67), resulting in a mixture with a sulfur content in excess of that allowed by the Environmental Protection Agency (“EPA”). The Company notified Global and its insurance carriers of the incident.

Global informed the Company that it had contacted its customers that received the mixture and commenced a sampling and testing program with certain of its customers to determine (1) if any product should be removed and replaced with conforming product or (2) if the product need only be treated to meet the EPA requirements. In August 2011, Global asserted a claim against the Company of $132,000 for damages incurred by Global arising out of the incident, which amount was accrued as an expense at September 30, 2011. At December 31, 2011, the Company determined that its insurance carrier had assumed this liability, and the Company reduced the previously recorded liability and expense by that amount. In March 2012, the Company’s insurance carrier paid Global the full amount of its claim, and Global released the Company of all liability relating to this incident.

Tank 153 (2010):

In August 2010, during a regular facility inspection of the Terminal, a release of petroleum-contaminated water was discovered from the tank bottom of one of the Company’s 150,000 barrel tanks (Tank 153). The Company notified the Rhode Island Department of Environmental Management (“RIDEM”), the EPA and the United States Coast Guard. It also notified its insurance carriers of the release and the damage to the tank.

The tank was emptied of product and the cleaning of the tank bottom was completed in September 2010. The petroleum-contaminated water released from the tank was contained on the secondary containment liner under the tank bottom, preventing contamination of the groundwater. The Company engaged an outside engineering firm to inspect the tank bottom to determine the cause and location of the release, as well as the extent of the required repairs. The findings of the inspection indicated that aggressive corrosion from inside the tank occurred, causing two holes in the immediate vicinity of the observed release, as well as several other holes or potential holes in other areas of the tank bottom. The report concluded that the corrosion was caused by microbial contamination, which was affirmed by a corrosion specialist.

The final cost of the cleanup, inspection and repair of the tank was $533,000, all of which was recorded as an expense at December 31, 2010. The tank was placed back in service in February 2011. In June 2011, Global paid the Company $458,000. The difference relates to the $75,000 cost of epoxy coating the bottom of Tank 153 which the Company paid.

The testing of certain of the Company’s other tanks revealed the presence of corrosive microbial contaminants in Tanks 151 and 32. Both tanks were treated with a biocide and continue to be monitored and treated as necessary. Since Tank 32 had been inspected in June 2010, the Company believes that the contaminants have not affected the integrity of this tank bottom. However, since Tank 151 had not been inspected since construction in 2006, the Company took this tank out of service in February 2011. The tank was emptied of product, and an inspection of the tank bottom revealed minor corrosion. The Company completed the repairs recommended by the inspectors and applied an epoxy coating to the bottom of Tank 151 at a cost of $50,000, which amount is included in petroleum storage facility expenses, operating on the accompanying consolidated statement of income and retained earnings for the three months ended March 31, 2011. The tank was back in service in May 2011. Exclusive of the epoxy coating, the total cost of cleanup, inspection and repair of the tanks was $40,000 which Global paid the Company in September 2011.

Tank repairs related to this incident have been presented as a separate line item within petroleum storage facility expenses on the accompanying consolidated statement of income and retained earnings for the three months ended March 31, 2011. Routine tank repairs continue to be included with petroleum storage facility operating expenses on the accompanying consolidated statements of income and retained earnings.

Environmental incident (2002):

In 2002, during testing of monitoring wells at the Terminal, the Company’s consulting engineer discovered free floating phase product in a groundwater monitoring well located on that portion of the Terminal purchased in 2000. Laboratory analysis indicated that the product was gasoline, which is not a product the Company ever stored at the Terminal. The Company commenced an environmental investigation and analysis, the results of which indicate that the gasoline did not come from the Terminal. The Company notified RIDEM. RIDEM subsequently identified

Power Test Realty Partnership (“Power Test”), the owner of an adjacent parcel, as a potentially responsible party for the contamination. Getty Properties Corp. is the general partner of Power Test. Power Test challenged that determination and, after an administrative hearing, in October 2008 a RIDEM Hearing Officer determined that Power Test is responsible for the discharge of the petroleum product under the Rhode Island Oil Pollution Control Act, R.I.G.L. Section 46-12.5.1-3 and Rule 6(a) and 12(b) of the Oil Pollution Control Regulations. The RIDEM Decision and Order requires Power Test to remediate the contamination as directed by RIDEM and remanded the proposed penalty to RIDEM for recalculation. In November 2008, Power Test appealed the decision to the Rhode Island Superior Court. In addition, in November 2008, Power Test sought, and received, a stay of the Decision and Order of the Hearing Officer pending a clarification by RIDEM of the amount of the proposed penalty. In October 2009, RIDEM issued a recalculated administrative penalty, and, subsequently, the RIDEM Hearing Officer issued a recommended amended decision, which was affirmed as a final decision by the RIDEM Director in December 2009. In January 2010, Power Test appealed that decision to Superior Court. In September 2011, the Superior Court affirmed the decision of the RIDEM director. Power Test has appealed that decision to the Rhode Island Supreme Court.

In April 2009, the Company sued Power Test and Getty Properties Corp. in the Rhode Island Superior Court seeking remediation of the site or, in the alternative, the cost of the remediation. On May 1, 2009, Power Test and Getty Properties Corp. removed the action to the United States District Court for the District of Rhode Island. On May 22, 2009, Power Test and Getty Properties Corp. answered the Complaint and filed a Counterclaim against Dunellen, LLC and Capital Terminal Company alleging that Dunellen, LLC and Capital Terminal Company are responsible for the contamination. Getty Properties Corp. and Power Test have joined Getty Petroleum Marketing, Inc., the tenant under a long-term lease with Getty Properties Corp. of the adjacent property, as a defendant. The Company has amended its Complaint to add Getty Petroleum Marketing, Inc. as a defendant. On December 5, 2011, Getty Petroleum Marketing, Inc., filed for bankruptcy under Chapter 11 of the United States Bankruptcy Act.

The parties are now engaged in discovery. There can be no assurance that the Company will prevail in this litigation.

Since January 2003, the Company has not incurred significant costs in connection with this matter, other than ongoing litigation costs, and is unable to determine the costs it might incur to remedy the situation, as well as any costs to investigate, defend and seek reimbursement from the responsible party with respect to this contamination.

Environmental remediation (1994):

In 1994, a leak was discovered in a 25,000 barrel storage tank at the Terminal which allowed the escape of a small amount of fuel oil. All required notices were made to RIDEM. In 2000, the tank was demolished and testing of the groundwater indicated that there was no large pooling of contaminants. In 2001, RIDEM approved a plan pursuant to which the Company installed a passive system consisting of three wells and commenced monitoring the wells.

In 2003, RIDEM decided that the passive monitoring system previously approved was not sufficient and required the Company to design an active remediation system for the removal of product from the contaminated site. The Company and its consulting engineers began the pre-design testing of the site in the fourth quarter of 2004. The consulting engineers estimated a total cost of $200,000 to design, install and operate the system, which amount was accrued in 2004. Through 2006, the Company had expended $119,000 and has not incurred any additional costs since then. In 2011, RIDEM notified the company to proceed with the next phase of the approval process, notifying the abutters of the proposed remediation system even though RIDEM has not yet taken any action on the Company’s proposed plan. As designed, the system will pump out the contaminants which will be disposed of in compliance with applicable regulations. After a period of time, the groundwater will be tested to determine if sufficient contaminants have been removed. While the Company and its consulting engineers believe that the proposed active remediation system will correct the situation, it is possible that RIDEM could require the Company to expand remediation efforts, which could result in the Company incurring costs in excess of the remaining accrual of $81,000.

XML

Income taxes

3 Months Ended

Mar. 31, 2012

Income taxes [Abstract]

Income taxes

8. Income taxes:

Deferred income taxes are recorded based upon differences between financial statement and tax basis amounts of assets and liabilities. The tax effects of temporary differences which give rise to deferred tax assets and liabilities were as follows:

	March 31, 2012			December 31, 2011
Gross deferred tax liabilities:
Property having a financial statement basis in excess of tax basis	$	5,641,000		$	5,698,000
Insurance premiums and accrued leasing revenues		73,000			93,000
		5,714,000			5,791,000
Accrued assets		(138,000	)		(150,000	)
	$	5,576,000		$	5,641,000

XML

Operating segment disclosures

3 Months Ended

Mar. 31, 2012

Operating segment disclosures [Abstract]

Operating segment disclosures

10. Operating segment disclosures:

The Company operates in two segments, leasing and petroleum storage.

The Company makes decisions relative to the allocation of resources and evaluates performance based on each segment’s respective income before income taxes, excluding interest expense and certain corporate expenses.

Inter-segment revenues are immaterial in amount.

The following financial information is used for making operating decisions and assessing performance of each of the Company’s segments for the three months ended March 31, 2012 and 2011:

	2012		2011
Leasing:
Revenues:
Long-term leases:
Contractual	$	799,000	$	632,000
Contingent		17,000		15,000
Short-term leases		196,000		175,000
Total revenues	$	1,012,000	$	822,000
Property tax expense	$	153,000	$	137,000
Depreciation	$	50,000	$	43,000
Income before income taxes	$	742,000	$	572,000
Assets	$	10,012,000	$	9,837,000
Properties and equipment, additions	$	73,000	$	70,000
Petroleum storage:
Revenues, contractual	$	976,000	$	951,000
Property tax expense	$	65,000	$	61,000
Depreciation	$	161,000	$	164,000
Income before income taxes	$	425,000	$	323,000
Assets	$	12,714,000	$	13,198,000
Properties and equipment, additions	$	—	$	37,000

The following is a reconciliation of the segment information to the amounts reported in the accompanying consolidated financial statements for the three months ended March 31, 2012 and 2011:

	2012			2011
Revenues for operating segments:
Leasing	$	1,012,000		$	822,000
Petroleum storage		976,000			951,000
Total consolidated revenues	$	1,988,000		$	1,773,000
Property tax expense:
Property tax expense for operating segments:
Leasing	$	153,000		$	137,000
Petroleum storage		65,000			61,000
		218,000			198,000
Unallocated corporate property tax expense		1,000			1,000
Total consolidated property tax expense	$	219,000		$	199,000
Depreciation:
Depreciation for operating segments:
Leasing	$	50,000		$	43,000
Petroleum storage segment:		161,000			164,000
		211,000			207,000
Unallocated corporate depreciation		2,000			2,000
Total consolidated depreciation	$	213,000		$	209,000
Income before income taxes:
Income before income taxes for operating segments:
Leasing	$	742,000		$	572,000
Petroleum storage		425,000			323,000
		1,167,000			895,000
Unallocated corporate expenses		(263,000	)		(256,000	)
Interest expense		(61,000	)		(88,000	)
Total consolidated income before income taxes	$	843,000		$	551,000
Assets:
Assets for operating segments:
Leasing	$	10,012,000		$	9,837,000
Petroleum storage		12,714,000			13,198,000
		22,726,000			23,035,000
Corporate cash		2,431,000			2,170,000
Other unallocated amounts		16,000			624,000
Total consolidated assets	$	25,173,000		$	25,829,000
Properties and equipment:
Additions to properties and equipment for operating segments:
Leasing	$	73,000		$	70,000
Petroleum storage		—			37,000
Total consolidated additions	$	73,000		$	107,000

XML

Consolidated Statements of Income and Retained Earnings (Unaudited) (Parenthetical) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Consolidated Statements of Income and Retained Earnings [Abstract]
Common stock, shares outstanding	6,599,912	6,599,912
Common stock dividend per share declared	$ 0.03	$ 0.03
Weighted average number of shares outstanding basic	6,599,912	6,599,912

XML

Properties and equipment

3 Months Ended

Mar. 31, 2012

Properties and equipment [Abstract]

Properties and equipment

4. Properties and equipment:

Properties and equipment consists of the following:

	March 31, 2012		December 31, 2011
Properties on lease or held for lease:
Land and land improvements	$	4,701,000	$	4,701,000
Building and improvements, Steeple Street		5,484,000		5,411,000
		10,185,000		10,112,000
Petroleum storage facility, on lease:
Land and land improvements		5,591,000		5,591,000
Buildings and structures		1,833,000		1,833,000
Tanks and equipment		14,625,000		14,625,000
		22,049,000		22,049,000
Office equipment		83,000		83,000
		32,317,000		32,244,000
Less accumulated depreciation:
Properties on lease or held for lease		424,000		374,000
Petroleum storage facility, on lease		9,867,000		9,706,000
Office equipment		69,000		67,000
		10,360,000		10,147,000
	$	21,957,000	$	22,097,000