-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Knx4n7/GfwGvMgP2ZRvB0jylIElxjL5spbPPBLZPjtsH3Iq/gIYoMCpUVW8ih05z R1kDrA4wo2ZYORTfInQYXw== 0000950123-97-006634.txt : 19970812 0000950123-97-006634.hdr.sgml : 19970812 ACCESSION NUMBER: 0000950123-97-006634 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970811 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORPORATE PROPERTY ASSOCIATES 2 CENTRAL INDEX KEY: 0000312918 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [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: 97655772 BUSINESS ADDRESS: STREET 1: 50 ROCKEFELLER PLAZA 2ND FL CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2124921100 MAIL ADDRESS: STREET 1: 50 ROCKEFELLER PLAZA 2ND FL CITY: NEW YORK STATE: NY ZIP: 10020 10-Q 1 CORPORATE PROPERTY ASSOCIATES 2 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1997 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 (I.R.S. Employer of incorporation or organization) Identification No.) 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 2 CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) INDEX Page No. PART I Item 1. - Financial Information* Consolidated Balance Sheets, December 31, 1996 and June 30, 1997 2 Consolidated Statements of Income for the three and six months ended June 30, 1996 and 1997 3 Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1997 4 Notes to Consolidated Financial Statements 5-6 Item 2. - Management's Discussion of Operations 7 PART II 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- 3 CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) PART I Item 1. - FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS
December 31, June 30, 1996 1997 ----------- ----------- (Note) (Unaudited) ASSETS: Land and buildings, net of accumulated depreciation of $5,850,679 at December 31, 1996 and $11,756,075 $11,922,163 $6,110,389 at June 30, 1997 Net investment in direct financing leases 20,259,530 20,368,452 Cash and cash equivalents 1,066,861 1,168,955 Other assets 600,057 794,119 ----------- ----------- Total assets $33,682,523 $34,253,689 =========== =========== LIABILITIES: Mortgage notes payable $ 7,787,061 $ 7,349,574 Accrued interest payable 75,233 72,490 Accounts payable and accrued expenses 66,050 101,391 Prepaid rental income and security deposits 283,694 309,670 Accounts payable to affiliates 63,447 140,952 ----------- ----------- Total liabilities 8,275,485 7,974,077 ----------- ----------- PARTNERS' CAPITAL: General Partners 208,334 217,060 Limited Partners (54,900 Limited Partnership Units issued and outstanding) 25,198,704 26,062,552 ----------- ----------- Total partners' capital 25,407,038 26,279,612 ----------- ----------- Total liabilities and partners' capital $33,682,523 $34,253,689 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date. -2- 4 CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended June 30, 1996 June 30, 1997 June 30, 1996 June 30, 1997 ------------- ------------- ------------- ------------- Revenues: Rental income from operating leases $ 450,480 $ 535,597 $ 876,062 $1,070,583 Interest from direct financing leases 670,006 681,171 1,342,235 1,357,272 Other interest income 9,158 11,517 19,868 27,344 ---------- ---------- ---------- ---------- 1,129,644 1,228,285 2,238,165 2,455,199 ---------- ---------- ---------- ---------- Expenses: Interest 277,042 140,153 456,990 281,358 Depreciation 124,696 129,855 249,929 259,710 General and administrative 91,668 76,999 161,619 146,874 Property expense 42,407 112,485 176,337 184,067 Amortization 1,101 1,786 3,276 3,571 ---------- ---------- ---------- ---------- 536,914 461,278 1,048,151 875,580 ---------- ---------- ---------- ---------- Net income $ 592,730 $ 767,007 $1,190,014 $1,579,619 ========== ========== ========== ========== Net income allocated to General Partners $ 5,927 $ 7,670 $ 11,900 $ 15,796 ========== ========== ========== ========== Net income allocated to Limited Partners $ 586,803 $ 759,337 $1,178,114 $1,563,823 ========== ========== ========== ========== Net income per Unit: (54,900 Limited Partnership Units) $ 10.69 $ 13.83 $ 21.46 $ 28.48 ========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. -3- 5 CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, ------------------------------ 1996 1997 ----------- ----------- Cash flows from operating activities: Net income $ 1,190,014 $ 1,579,619 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 253,205 263,281 Other noncash items (95,823) (108,922) Net change in operating assets and liabilities 37,927 (61,554) ----------- ----------- Net cash provided by operating activities 1,385,323 1,672,424 ----------- ----------- Cash flows from investing activities: Additional capitalized costs (5,000) (425,798) ----------- ----------- Net cash used in investing activities (5,000) (425,798) ----------- ----------- Cash flows from financing activities: Distributions to partners (1,598,901) (707,045) Prepayment of mortgage notes payable (5,539,072) Proceeds from issuance of mortgage note payable 7,000,000 Payments on mortgage principal (518,903) (437,487) Payments on note payable to affiliate (1,250,000) Proceeds from issuance of note payable to affiliate 1,000,000 Deferred financing costs (72,324) ----------- ----------- Net cash used in financing activities (979,200) (1,144,532) ----------- ----------- Net increase in cash and cash equivalents 401,123 102,094 Cash and cash equivalents, beginning of period 577,506 1,066,861 ----------- ----------- Cash and cash equivalents, end of period $ 978,629 $ 1,168,955 =========== =========== Supplemental disclosure of cash flows information: Interest paid $ 464,948 $ 284,101 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. -4- 6 CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) NOTES TO CONSOLIDATED 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, 1996. Note 2. Distributions to Partners: Distributions declared and paid to partners during the six months ended June 30, 1997 are summarized as follows:
Quarter Ended General Partners Limited Partners Per Limited Partner Unit ------------- ---------------- ---------------- ------------------------ December 31, 1996 $3,532 $349,713 $6.37 ====== ======== ===== March 31, 1997 $3,538 $350,262 $6.38 ====== ======== =====
A distribution of $6.39 per Limited Partner Unit for the quarter ended June 30, 1997 was declared and paid in July 1997. Note 3. Transactions with Related Parties: For the three-month and six-month periods ended June 30, 1996, the Partnership incurred property management fees of $18,558 and $41,018, respectively, and general and administrative expense reimbursements of $11,549 and $26,728, respectively, payable to an affiliate. For the three-month and six-month periods ended June 30, 1997, the Partnership incurred property management fees of $37,228 and $70,363, respectively, and general and administrative expense reimbursements of $21,874 and $32,213, 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 six months ended June 30, 1996 and 1997 were $26,141 and $17,076, respectively. -5- 7 CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) 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 six-month periods ended June 30, 1996 and 1997, the Partnership earned its total operating revenues (rental income plus interest income from financing leases) from the following lease obligors:
1996 % 1997 % ---- --- ---- --- Unisource Worldwide, Inc. $ 658,338 30% $ 661,206 28% Prefinish Metals Incorporated 478,271 21 483,243 20 Gibson Greetings, Inc. 411,592 19 417,383 17 Cleo, Inc. 220,736 10 227,164 9 AT&T Corporation 147,989 7 148,156 6 Western Union Financial Services, Inc. (assigned by New Valley Corporation) 118,442 5 118,226 5 Excel Communications, Inc. 104,483 4 B&G Contract Packaging, Inc. 42,000 2 84,000 3 Maybelline Products Co., Inc. 78,000 3 78,000 3 Sports & Recreation, Inc. 60,546 3 Other 62,929 3 45,448 2 ---------- --- ---------- --- $2,218,297 100% $2,427,855 100% ========== === ========== ===
-6- 8 CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS Results of Operations: Net income for the three-month and six-month periods ended June 30, 1997 increased by $174,000 and $390,000, respectively, as compared with the three-month and six-month periods ended June 30, 1996. The increases were due to an increase in lease revenue and a decrease in interest expense. The increase in lease revenue was due to the commencement in April 1996, July 1996 and December 1996 of leases with B&G Contract Packaging, Inc., Sports & Recreation, Inc. and Excel Communications, Inc., respectively. The decrease in interest expense was due to the June 1996 refinancing of the limited recourse mortgage loan on Unisource Worldwide, Inc. property at a lower rate of interest and the decreasing principal balance on the mortgage loan on the Prefinish Metals Incorporated property, which will fully amortize in 1998. Maybelline Products Co., Inc. terminated its lease for 50% of the leasable space at the Partnership's warehouse and distribution facility in Maumelle, Arkansas, effective July 31, 1997. B&G Contract Packaging, which occupies the remaining 50% of the property, exercised its right of first refusal for the space and, effective August 1, 1997, has entered into a lease for the space. The lease will have an initial term of one year with two one-year renewal options. Annual rent for the space will initially be $165,000. Property expenses increased during the current three-month period as a result of legal costs incurred relating to the Partnership's bankruptcy claim against New Valley Corporation in connection with the termination of two leases in 1993 and 1994. Although the Partnership believes that it will receive substantial proceeds from its claim, the amount cannot currently be estimated. Financial Condition: There has been no material change in the Partnership's financial condition since December 31, 1996. Cash flow from operations of $1,672,000 was sufficient to fund distributions to partners of $707,000, pay scheduled mortgage principal installments of $437,000 and fully fund the completion of tenant improvements at the Reno, Nevada property leased to Excel. The Partnership has entered into preliminary discussions with AT&T Corporation regarding funding of an expansion of the AT&T property in Bridgeton, Missouri in exchange for an extension of the initial lease term. If necessary, the Partnership has sufficient borrowing capacity to fund any expansion. As of June 30, 1997, only the Unisource and Prefinish Metals properties are encumbered by limited recourse mortgage debt. As noted, the Prefinish Metals mortgage loan will fully amortize in July 1998. In addition, the Unisource mortgage loan, which was refinanced in 1996, will fully amortize in 2010. The sale of the Moorestown, New Jersey property leased to Sports & Recreation will not be completed as the proposed purchaser exercised its option to terminate the transaction. The General Partners are currently investigating ways to provide liquidity for limited partners on a tax-effective basis. -7- 9 CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) PART II Item 6. - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None (b) Reports on Form 8-K: During the quarter ended June 30, 1997, the Partnership was not required to file any reports on Form 8-K. -8- 10 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. 08/11/97 By: /s/ Steven M. Berzin Date ---------------------------------------- Steven M. Berzin Executive Vice President and Chief Financial Officer (Principal Financial Officer) 08/11/97 By: /s/ Claude Fernandez Date ---------------------------------------- Claude Fernandez Executive Vice President and Chief Administrative Officer (Principal Accounting Officer) 08/11/97 By: /s/ Michael D. Roberts Date ---------------------------------------- Michael D. Roberts First Vice President and Controller -9- EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE SIX-MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1,168,955 0 0 0 0 1,168,955 38,401,004 6,710,389 34,253,689 624,503 7,349,574 0 0 0 26,279,612 34,253,689 0 2,455,199 0 0 594,222 0 281,358 1,579,619 0 1,579,619 0 0 0 1,579,619 28.48 28.48
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