-----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, IRJMTAjBE6I3GtVwKJWB2qUc7bw3uWqEm7lUYVPsvGj2fwRp2DdyZ1gLwUPhkMP/ Wkkzm+OV7Cgiv0WFOK1XmQ== 0000950130-96-001674.txt : 19960514 0000950130-96-001674.hdr.sgml : 19960514 ACCESSION NUMBER: 0000950130-96-001674 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NASD 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: 96562110 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 FOR FIRST QUARTER 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 MARCH 31, 1996 --------------------------------------------- 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 incorporation or (I.R.S. Employer 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 CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) INDEX Page No. -------- PART I ------ Item 1. - Financial Information* Balance Sheets, December 31, 1995 and March 31, 1996 2 Statements of Income for the three months ended 3 Statements of Cash Flows for the three months ended March 31, 1995 and 1996 4 Notes to 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- CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) PART I ------ Item 1. - FINANCIAL INFORMATION ------------------------------- BALANCE SHEETS
December 31, March 31, 1995 1996 ------------- ------------ (Note) (Unaudited) ASSETS: Land and buildings, net of accumulated depreciation of $5,351,359 at December 31, 1995 and $12,054,587 $11,929,354 $5,476,592 at March 31, 1996 Net investment in direct financing leases 20,060,127 20,107,113 Cash and cash equivalents 577,506 336,598 Accrued interest and rents receivable 348,201 374,435 Other assets 82,862 83,057 ----------- ----------- Total assets $33,123,283 $32,830,557 =========== =========== LIABILITIES: Mortgage notes payable $ 7,262,720 $ 7,006,578 Note payable to affiliate 250,000 Accrued interest payable 109,632 106,716 Accounts payable and accrued expenses 74,884 76,806 Distributions payable 823,518 Prepaid rental income and security deposits 282,800 282,800 Accounts payable to affiliates 57,263 59,945 ----------- ----------- Total liabilities 8,037,299 8,356,363 ----------- ----------- PARTNERS' CAPITAL: General Partners 196,888 198,987 Limited Partners (54,900 Limited Partnership Units issued and outstanding at December 31, 1995 and March 31, 1996) 24,889,096 24,275,207 ----------- ----------- Total partners' capital 25,085,984 24,474,194 ----------- ----------- Total liabilities and partners' capital $33,123,283 $32,830,557 =========== ===========
The accompanying notes are an integral part of the financial statements. Note: The balance sheet at December 31, 1995 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, 1995 March 31, 1996 ------------------ -------------- Revenues: Rental income from operating leases $ 407,507 $ 425,582 Interest income from direct financing leases 816,283 672,229 Other interest income 54,739 10,710 Other income 50,244 ---------- ---------- 1,328,773 1,108,521 ---------- ---------- Expenses: Interest on mortgages 384,240 179,948 Depreciation 132,481 125,233 General and administrative 72,241 69,951 Property expenses 151,942 133,930 Amortization 4,298 2,175 ---------- ---------- 745,202 511,237 ---------- ---------- Net income $ 583,571 $ 597,284 ========== ========== Net income allocated to General Partners $ 5,836 $ 5,973 ========== ========== Net income allocated to Limited Partners $ 577,735 $ 591,311 ========== ========== Net income per Unit: (55,000 and 54,900 Limited Partnership Units at March 31, 1995 and 1996) $10.50 $10.77 ====== ======
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, ------------------------ 1995 1996 ------------ ---------- Cash flows from operating activities: Net income $ 583,571 $ 597,284 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 136,779 127,408 Interest income on direct financing leases in excess of scheduled rents (5,268) (46,986) Net change in operating assets and liabilities (38,651) (26,916) ----------- --------- Net cash provided by operating activities 676,431 650,790 ----------- --------- Cash flows from financing activities: Distributions to partners (366,667) (385,556) Payment of note payable to affiliate (250,000) Payment of mortgage notes payable (852,003) Payments on mortgage principal (406,043) (256,142) ----------- --------- Net cash used in financing activities (1,624,713) (891,698) ----------- --------- Net decrease in cash and cash equivalents (948,282) (240,908) Cash and cash equivalents, beginning of period 4,185,923 577,506 ----------- --------- Cash and cash equivalents, end of period $ 3,237,641 $ 336,598 =========== ========= Supplemental disclosure of cash flows information: Interest paid $ 394,243 $ 182,864 =========== =========
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, 1995. Note 2. Distributions to Partners: ------------------------- Distributions declared and paid to partners during the three months ended March 31, 1996 are summarized as follows: Per Limited Partnership Quarter Ended General Partners Limited Partners Unit -------------- ---------------- ---------------- ----------------------- December 31, 1995 $3,856 $381,700 $6.94 ====== ======== ===== A special distribution of $15 per Limited Partnership Unit ($823,500) was declared on March 26, 1996 and paid in April 1996. A distribution of $7.03 per Limited Partner Unit for the quarter ended March 31, 1996 was declared and paid in April 1996. Note 3. Transactions with Related Parties: --------------------------------- For the three-month periods ended March 31,1995 and 1996, the Partnership incurred management fees of $10,889 and $22,460, respectively, and general and administrative expense reimbursements of $14,131 and $15,179, 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, 1995 and 1996 were $22,264 and $16,084, respectively. -5- CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) NOTES TO 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 three-month periods ended March 31, 1995 and 1996, the Partnership earned its total operating revenues (rental income plus interest income from financing leases) from the following lease obligors:
1995 % 1996 % ---------- ---- ---------- ---- Unisource Worldwide, Inc. $ 328,560 27% $ 329,168 30% Pre Finish Metals Incorporated 233,347 19 238,052 22 Gibson Greetings, Inc. 461,928 38 207,281 19 Cleo, Inc. 109,994 10 AT&T 73,903 6 73,984 7 New Valley Corporation 59,324 5 59,233 5 Other 40,728 3 41,099 4 Maybelline Products Co., Inc. 26,000 2 39,000 3 ---------- --- ---------- --- $1,223,790 100% $1,097,811 100% ========== === ========== ===
Note 5. Property in Maumelle, Arkansas: ------------------------------ On April 29, 1996, the Partnership executed a lease agreement which is retroactively effective to February 19, 1996, with B & G Contract Packaging, Inc. ("B & G") to occupy 50% of the leasable space at the Partnership's distribution facility in Maumelle, Arkansas. The lease will initially provide for monthly rentals of $14,000 with an initial term through December 31, 1997 followed by two two-year renewal terms at B & G's option. The remaining leasable space at the Maumelle facility is currently leased to Maybelline Products Co., Inc. -6- CORPORATE PROPERTY ASSOCIATES 2 (a California limited partnership) Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS ----------------------------------------------- Results of Operations: --------------------- The results of operations for the three-month period ended March 31, 1996 reflected a 2% increase in earnings as compared with the three-month period ended March 31, 1995. Excluding the effect of a nonrecurring item of $50,244 reported as other income in 1995, income would have reflected an increase of approximately 11%. The increase in income was due to decreases in interest and property expenses. The decrease in interest expense was the result of paying off four mortgage loans in 1995 and the continuing amortization of the mortgage loans on properties leased to Pre Finish Metals Incorporated and Unisource Worldwide, Inc. ("Unisource"). The decrease in property expenses was due, in part, to the leasing of the Moorestown, New Jersey property to Sports & Recreation, Inc. ("Sports & Recreation"). Leasing revenues decreased as a result of the November 1995 restructuring of the Gibson Greetings, Inc. ("Gibson") lease which included the severing of a property from the Gibson master lease and the leasing of such severed property to Cleo, Inc. ("Cleo"). As a result of paying off the mortgage loan on the Gibson properties at the time of the restructuring, net annual cash flow from the Gibson and Cleo properties will increase by approximately $400,000. Cash flow and revenues will also benefit from the scheduled commencement of monthly rental payments of approximately $10,000 from Sports & Recreation in July 1996 and the new lease of the Maumelle, Arkansas property which will provide for monthly rental payments of $14,000. Financial Condition: ------------------- There has been no material change in the Partnership's financial condition since December 31, 1995. Net cash provided from operating activities of $662,000 was sufficient to fund payments of distributions to partners and scheduled principal installments of $256,000. In addition, the Partnership paid off its note payable to W. P. Carey & Co., Inc. ("W.P. Carey"). On April 8, 1996, the Partnership borrowed an additional $1,000,000 from W.P. Carey, which was used to pay a special distribution of $15 per Limited Partnership Unit ($823,500) which was declared in March 1996. The Partnership is in the process of refinancing the limited recourse mortgage loan on the Unisource property which matured on May 1, 1996. The Partnership has received a commitment for a $7,000,000 loan which would enable the Partnership to pay off both the matured loan, which has a balance of $5,540,000, and the $1,000,000 note from W.P. Carey. As currently structured, the debt service on the $7,000,000 loan would provide for monthly payments of principal and interest of $61,662 at an annual interest rate of 7.24% based on a 16-year amortization schedule. As the matured loan provided for quarterly payments of $278,313 at an annual interest rate of 10%, annual cash flow will increase by $373,000 if the refinancing is consummated. Under certain circumstances which relate to the financial condition of Unisource, the lender would have the right to increase the stated interest rate on the loan. There is no assurance that the refinancing will be completed as described; however, Management believes that completion of such refinancing is highly probable. -7- 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 March 31, 1996, 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. 5/09/96 By: /s/ Claude Fernandez -------------- ------------------------------ Date Claude Fernandez Executive Vice President and Chief Administrative Officer (Principal Financial Officer) 5/09/96 By: /s/ Michael D. Roberts -------------- ------------------------------- Date Michael D. Roberts First Vice President and Controller (Principal Accounting Officer) -9- EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 336,598 0 374,435 0 0 794,090 37,513,059 5,476,592 32,830,557 1,349,785 7,006,578 0 0 0 24,474,194 32,830,557 0 1,108,521 0 0 331,289 0 179,948 597,284 0 597,284 0 0 0 597,284 10.77 10.77
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