-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, KDHaV2jwBPWP0BEUFoLaKTJy0AIXQjR3Y7qZvh/urO3Bgy7BrMBf91uhLoigrcSO OsxNvlgH3owV9CYN3oqthw== 0000950109-95-001817.txt : 19950530 0000950109-95-001817.hdr.sgml : 19950530 ACCESSION NUMBER: 0000950109-95-001817 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORPORATE PROPERTY ASSOCIATES 2 CENTRAL INDEX KEY: 0000312918 STANDARD INDUSTRIAL CLASSIFICATION: 6512 IRS NUMBER: 133022196 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09727 FILM NUMBER: 95537507 BUSINESS ADDRESS: STREET 1: 50 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2124921100 MAIL ADDRESS: STREET 1: 620 FIFTHAVE CITY: NEW YORK STATE: NY ZIP: 10020 10-Q 1 FORM 10-Q OMB APPROVAL ---------------------------- OMB Number 3235-0070 UNITED STATES Expires October 31,1995 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Estimated average burden FORM 10-Q hours per response 190.00 ---------------------------- (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 ------------------------------------------------- or [ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to ____________________________ Commission file number 0-9727 ---------------------------------------------------------- CORPORATE PROPERTY ASSOCIATES 2 - - - - - - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 13-3022196 - - - - - - - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020 - - - - - - - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 492-1100 - - - - - - - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - - - - - - - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [_] No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [_] Yes [_] No CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) INDEX Page No. -------- PART I ------ Item 1. - Financial Information* Balance Sheets, December 31, 1994 and March 31, 1995 2 Statements of Income for the three months ended March 31, 1994 and 1995 3 Statements of Cash Flows for the three months ended March 31, 1994 and 1995 4 Notes to Financial Statements 5-6 Item 2. - Management's Discussion of Operations 7 PART II ------- Item 1. - Legal Proceedings 8 Item 6. - Exhibits and Reports on Form 8-K 8 Signatures 9 *The summarized financial information contained herein is unaudited; however in the opinion of management, all adjustments necessary for a fair presentation of such financial information have been included. -1- CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) PART I ------ Item 1. - FINANCIAL INFORMATION ------------------------------- BALANCE SHEETS
December 31, March 31, 1994 1995 ------------- ------------ (Note) (Unaudited) ASSETS: Land and buildings, net of accumulated depreciation of $4,831,468 at December 31, 1994 and $4,963,949 at March 31, 1995 $12,567,627 $12,435,146 Net investment in direct financing leases 23,265,769 23,271,037 Cash and cash equivalents 4,185,923 3,237,641 Accrued interest and rents receivable 461,360 449,651 Other assets 90,063 59,496 ----------- ----------- Total assets $40,570,742 $39,452,971 =========== =========== LIABILITIES: Mortgage notes payable $15,757,586 $14,499,540 Accrued interest payable 182,839 172,836 Accounts payable and accrued expenses 249,991 123,592 Accounts payable to affiliates 53,037 79,148 Prepaid rental income and security deposits 316,677 350,339 ----------- ----------- Total liabilities 16,560,130 15,225,455 ----------- ----------- PARTNERS' CAPITAL: General Partners 185,844 188,013 Limited Partners (55,000 Limited Partnership Units issued and outstanding) 23,824,768 24,039,503 ----------- ----------- Total partners' capital 24,010,612 24,227,516 ----------- ----------- Total liabilities and partners' capital $40,570,742 $39,452,971 =========== ===========
The accompanying notes are an integral part of the financial statements. Note: The balance sheet at December 31, 1994 has been derived from the audited financial statements at that date. -2- CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended March 31, 1994 March 31, 1995 ------------------ -------------- Revenues: Rental income from operating leases $ 431,882 $ 407,507 Interest income from direct financing leases 859,534 816,283 Other interest income 36,416 54,739 Other income 22,572 50,244 Gain on sale of real estate 23,451 ---------- ---------- 1,373,855 1,328,773 ---------- ---------- Expenses: Interest on mortgages 406,129 384,240 Depreciation 125,414 132,481 General and administrative 67,986 72,241 Property expenses 85,406 151,942 Amortization 4,298 4,298 ---------- ---------- 689,233 745,202 ---------- ---------- Net income $ 684,622 $ 583,571 ========== ========== Net income allocated to General Partners $ 6,846 $ 5,836 ========== ========== Net income allocated to Limited Partners $ 677,776 $ 577,735 ========== ========== Net income per Unit: (55,000 Limited Partnership Units) $12.32 $10.50 ====== ======
The accompanying notes are an integral part of the financial statements. -3- CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, -------------------- 1994 1995 ---- ---- Cash flows from operating activities: Net income $ 684,622 $ 583,571 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 129,712 136,779 Other noncash items (3,954) (5,268) Gain on sale of real estate (23,451) Net change in operating assets and liabilities (10,226) (38,651) --------- ----------- Net cash provided by operating activities 776,703 676,431 --------- ----------- Cash flows from investing activities: Proceeds from sale of real estate 124,615 --------- Net cash provided by investing activities 124,615 --------- Cash flows from financing activities: Distributions to partners (363,889) (366,667) Prepayment of mortgage notes payable (852,003) Payments on mortgage principal (389,622) (406,043) --------- ----------- Net cash used in financing activities (753,511) (1,624,713) --------- ----------- Net increase (decrease) in cash and cash equivalents 147,807 (948,282) Cash and cash equivalents, beginning of period 4,367,127 4,185,923 ---------- ----------- Cash and cash equivalents, end of period $4,514,934 $ 3,237,641 ========== =========== Supplemental disclosure of cash flows information: Interest paid $ 409,926 $ 394,243 ========== ===========
The accompanying notes are an integral part of the financial statements. -4- CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Note 1. Basis of Presentation: --------------------- The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1994. Note 2. Distributions to Partners: ------------------------- Distributions declared and paid to partners during the three months ended March 31, 1995 are summarized as follows: Quarter Ended General Partners Limited Partners Per Limited Partner Unit ------------- ---------------- ---------------- ------------------------ December 31, $3,667 $363,000 $6.60 1994 ====== ======== ===== A distribution of $6.66 per Limited Partner Unit for the quarter ended March 31, 1995 was declared and paid in April 1995. Note 3. Transactions with Related Parties: --------------------------------- For the three-month periods ended March 31, 1994 and 1995, the Partnership incurred management fees of $21,277 and $10,889, respectively, and general and administrative expense reimbursements of $15,396 and $14,131, respectively, payable to an affiliate. The Partnership, in conjunction with certain affiliates, is a participant in a cost sharing agreement for the purpose of renting and occupying office space. Under the agreement, the Partnership pays its proportionate share of rent and other costs of occupancy. Net expenses incurred for the three months ended March 31, 1994 and 1995 were $10,431 and $22,264, respectively. Note 4. Industry Segment Information: ---------------------------- The Partnership's operations consist of the investment in and the leasing of industrial and commercial real estate. For the three-month periods ended March 31, 1994 and 1995, the Partnership earned its total operating revenues (rental income plus interest income from financing leases) from the following lease obligors:
1994 % 1995 % ---------- ---- ---------- ---- Gibson Greetings, Inc. $ 461,928 36% $ 461,928 38% Unisource Worldwide, Inc. 328,560 25 328,560 27 Pre Finish Metals Incorporated 216,785 17 233,347 19 AT&T Corporation 73,831 6 73,903 6 New Valley Corporation 102,647 8 59,324 5 Other 107,665 8 40,728 3 Maybelline Products Co., Inc. 26,000 2 ---------- --- ---------- --- $1,291,416 100% $1,223,790 100% ========== === ========== ===
-5- CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) Note 5. Property in Maumelle, Arkansas: ------------------------------ On January 10, 1995 and March 7, 1995, the Partnership executed lease agreements with Maybelline Products Co., Inc. ("Maybelline") and A-Pak Packaging, Inc. ("A-Pak"), respectively, to occupy 100% of the leasable space at the Partnership's distribution facility in Maumelle, Arkansas. The Maybelline lease was effective as of February 1, 1995 with the lease term ending December 31, 1996 and provides for monthly rentals of $13,000. The A-Pak lease is effective on March 20, 1995, with the lease term expiring on February 28, 1998, and provides for monthly rentals of $11,333 in 1995 and increasing by $1,667 in each lease year thereafter. The property had previously been leased to Family Dollar Stores, Inc. which occupied the property until March 31, 1994. Under the Maybelline and A-Pak leases, the tenants are obligated to reimburse the Partnership for the cost of maintenance and insurance. Note 6. Prepayment of Mortgage Notes Payable: ------------------------------------ On February 23, 1995, the Partnership paid off three mortgage loans on properties formerly leased to New Valley Corporation ("New Valley") in Moorestown, New Jersey and Reno, Nevada and a property in Bridgeton, Missouri, currently leased to New Valley. The aggregate prepayment made by the Partnership was $852,003. As a result of the prepayment, the Partnership's annual debt service will decrease by $359,215. The loans had been scheduled to fully amortize between April 1997 and May 1998. Note 7. Property in Moorestown, New Jersey: ---------------------------------- On April 7, 1995, the Partnership and Corporate Property Associates 3 ("CPA(R):3"), an affiliate, which own the Moorestown, New Jersey property as tenants-in-common, entered into a net lease for the property with Sports & Recreation, Inc. ("Sports & Recreation") which intends to convert the facility into a retail store. The lease provides for a feasibility period through September 30, 1995 which is extendable through December 31, 1995 followed by an initial term of 16 years. If, during the feasibility period, Sports & Recreation is unable to meet conditions necessary to retrofit the facility to its specifications or obtain certain approvals from the municipal authorities, it has the right to terminate the lease. During the feasibility period, the Partnership and CPA(R):3 will reimburse Sports & Recreation for certain planning costs up to a maximum of $24,000. Sports & Recreation will incur all costs of retrofitting the facility; however, the Partnership and CPA(R):3 will reimburse Sports & Recreation for the cost of removing and disposing of the roof and HVAC system, replacement of the HVAC system and installing a new roof and drainage system. During the 16 year lease term, which is scheduled to commence at the end of the feasibility period, annual rentals will initially be $308,750 (of which the Partnership's share is approximately $121,000) during the first five lease years with stated increases every five years thereafter. There is no assurance that the lease will extend beyond the feasibility period. Note 8. Resolution of Litigation: ------------------------ In April 1995, the Partnership received notification that a favorable judgment had been rendered on March 15, 1995 by the Court of Common Pleas of Montgomery County, Pennsylvania in connection with certain litigation commenced by Ascott Investment Company ("Ascott") against the Partnership and General Refactories Company ("GRX"). Ascott had sought damages relating to the Partnership's sale of a property to GRX in 1986. The Court ruled that the Partnership and GRX had acted in good faith in executing the transfer of the property and dismissed all of Ascott's complaints. -6- CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS ----------------------------------------------- Net income for the three-month period ended March 31, 1995 decreased by $101,000 as compared with the three-month period ended March 31, 1994. The decrease was primarily attributable to a decrease in lease revenues and an increase in property expenses. The decrease in lease revenues is due to termination of the lease with New Valley Corporation ("New Valley") on December 31, 1994 for a property in Reno, Nevada and lower revenues on the Maumelle, Arkansas distribution facility property in 1995 as compared with 1994. The Maumelle property had been occupied until March 1994 by Family Dollar Stores, Inc. and contributed $78,000 of lease revenues during the quarter ended March 31, 1994; however, the property was vacant until new leases were executed with Maybelline Products Co., Inc. and A-Pak Packaging, Inc. during the quarter ended March 31, 1995. The increase in property expense is due to the carrying costs incurred during the current period for the Reno and Maumelle properties. Interest expense decreased as the result of paying off three mortgage loans in February 1995. Although the Partnership benefited from other income of $50,000 from a nonrecurring source in 1995, the Partnership's results of operations for the period ended March 31, 1994 also reflected $46,000 of income from nonrecurring items. There has been no material change in the Partnership's financial condition since December 31, 1994 and Management believes that the current cash balance of $3,238,000 and cash provided from operating activities will be sufficient to meet the Partnership's current cash requirements which currently consist solely of paying quarterly distributions and meeting scheduled debt service obligations. During the current quarter, the Partnership satisfied its obligations on three mortgage loans by using $852,003 of its cash reserves to prepay three loans. As a result of these prepayments, annual debt service will decrease by $359,000. To the extent that Sports & Recreation, Inc. is able to meet the conditions necessary to retrofit the Moorestown property to use as a retail store, the Partnership will be committed to pay its share of costs for rehabilitation of the roof and heating, ventilation and air conditioning systems. Although such costs are in the process of being determined, Management believes that such costs can be funded from existing cash reserves, if necessary. As a result of the terminations of the New Valley leases for the Reno and Moorestown properties in December 1994 and May 1993, respectively, pursuant to New Valley's petition of voluntary bankruptcy, the Partnership anticipates that it will receive a payment of its claim against New Valley; however, the amount of such payment has not yet been determined. -7- CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) PART II ------- Item 1. - LEGAL PROCEEDINGS --------------------------- During 1982, one of Registrant's tenants, GRX Refractories Company ("GRX"), indicated that it desired to terminate its lease and relocate its headquarters from Registrant's building in Bala Cynwyd, Pennsylvania, to another location in order to consolidate its operations. For this and other reasons, the General Partners decided to seek a buyer for the building. Registrant had previously held only a leasehold interest in the land and building subleased to GRX. To better market the building, Registrant purchased the underlying land and building in November 1983 with funds from its working capital reserve. On March 22, 1984, Registrant signed a Purchase and Sale Agreement to sell the GRX land and building (the "GRX Property") to Ascott Investment Corporation ("Ascott"). On March 27, 1984, GRX commenced litigation against Registrant, the Corporate General Partner and Ascott. GRX, in its Amended Complaint filed on August 22, 1984, requested, among other relief, that the proposed sale of the GRX Property be enjoined, that the sublease between GRX and Registrant be cancelled, and that any profits from Registrant's sale of the building (assuming the sale is consummated) be split equally between GRX and Registrant. On July 23, 1985, the Registrant, the Corporate General Partner and GRX entered into a settlement agreement in which GRX agreed to dismiss this litigation. On December 31, 1984, Ascott commenced litigation against Registrant, the Corporate General Partner and GRX alleging in its Complaint, among other things, that the Registrant had breached its duty of good faith and fair dealing with respect to the proposed purchase and that the Registrant engaged in a conspiracy with the other defendants to enrich themselves at the expense of Ascott. Ascott was seeking $1,000,000 in compensatory damages and punitive damages in an unspecified amount. On March 15, 1995, the Court of Common Pleas of Montgomery County entered a ruling in favor of Registrant and the other defendants with regard to all of Ascott's claims. Ascott has the right to appeal this ruling but the Registrant does not expect such an appeal or if an appeal is filed, for such an appeal to be successful. Furthermore, the above mentioned settlement agreement with GRX provides that the Registrant, upon the satisfaction by it of certain conditions, will be indemnified and held harmless by GRX for any damages and expenses as may ever be adjudicated in favor of Ascott in this suit. Item 6. - EXHIBITS AND REPORTS ON FORM 8-K ------------------------------------------ (a) Exhibits: None (b) Reports on Form 8-K: During the quarter ended March 31, 1995, the Partnership was not required to file any reports on Form 8-K. -8- CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) By: W.P. CAREY & CO., INC. 05/10/95 By: /s/ Claude Fernandez ---------- ------------------------------ Date Claude Fernandez Executive Vice President and Chief Administrative Officer (Principal Financial Officer) 05/10/95 By: /s/ Michael D. Roberts ---------- ------------------------------- Date Michael D. Roberts First Vice President and Controller (Principal Accounting Officer) -9- EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Form 10-Q for the quarterly period ended March 31, 1995 and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 3,237,641 0 449,651 0 0 59,496 40,670,132 4,963,949 39,452,971 725,915 14,499,540 0 0 0 24,227,516 39,452,971 0 1,328,773 0 0 360,962 0 384,240 583,571 0 583,571 0 0 0 583,571 10.50 10.50
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