-----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, BK397bGIVT8TS+Qg0U0gIKGO+QrXPf3F3McpGKxIlXL4C7bYY/uur3vbJkMK/e4q t6LsmqhKNEl6cQC+2LC7kw== 0000950123-97-003293.txt : 19970418 0000950123-97-003293.hdr.sgml : 19970418 ACCESSION NUMBER: 0000950123-97-003293 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19970417 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORPORATE PROPERTY ASSOCIATES 4 CENTRAL INDEX KEY: 0000706005 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 133126150 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-11982 FILM NUMBER: 97582506 BUSINESS ADDRESS: STREET 1: 50 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2124921100 MAIL ADDRESS: STREET 1: 50 ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10020 10-Q/A 1 AMENDMENT #1 TO FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A AMENDMENT NO. 1 (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 0-11982 CORPORATE PROPERTY ASSOCIATES 4, A CALIFORNIA LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) CALIFORNIA 13-3126150 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer 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 4, 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 March 31, 1995 and 1996 3 Statements of Cash Flows for the three months ended March 31, 1995 and 1996 4 Notes to Financial Statements 5-7 Item 2. - Management's Discussion of Operations 8 PART II 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 4, 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 $13,362,508 at December 31, 1995 and $12,842,758 at March 31, 1996 $21,472,233 $14,222,203 Net investment in direct financing leases 18,224,428 18,217,194 Real estate held for sale 6,976,809 Cash and cash equivalents 7,579,071 7,808,057 Other assets 1,232,343 1,297,288 ----------- ----------- Total assets $48,508,075 $48,521,551 =========== =========== LIABILITIES: Mortgage notes payable $19,486,882 $19,256,266 Accrued interest payable 136,087 132,873 Accounts payable and accrued expenses 435,977 448,105 Accounts payable to affiliates 87,461 90,780 Prepaid rental income 45,600 ----------- ----------- Total liabilities 20,146,407 19,973,624 ----------- ----------- PARTNERS' CAPITAL: General Partners 62,061 74,177 Limited Partners (85,568 Limited Partnership Units issued and outstanding) 28,299,607 28,473,750 ----------- ----------- Total partners' capital 28,361,668 28,547,927 ----------- ----------- Total liabilities and partners' capital $48,508,075 $48,521,551 =========== ===========
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- 4 CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended March 31, 1995 March 31, 1996 -------------- -------------- Revenues: Rental income from operating leases $ 808,127 $ 835,341 Interest income from direct financing leases 1,353,017 828,134 Other interest income 26,658 95,356 Revenue from hotel operations 996,893 1,024,083 Other income 42,792 ---------- ---------- 3,227,487 2,782,914 ---------- ---------- Expenses: Interest on mortgages 594,519 435,472 Depreciation 289,009 276,615 General and administrative 140,263 90,888 Property expenses 93,130 67,060 Operating expenses of hotel operations 589,468 591,290 Amortization 31,150 25,767 ---------- ---------- 1,737,539 1,487,092 ---------- ---------- Net income $1,489,948 $1,295,822 ========== ========== Net income allocated to General Partners $ 89,397 $ 77,749 ========== ========== Net income allocated to Limited Partners $1,400,551 $1,218,073 ========== ========== Net income per Unit (85,568 Limited Partnership Units) $ 16.37 $ 14.24 ========== ==========
The accompanying notes are an integral part of the financial statements. -3- 5 CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, --------------------------- 1995 1996 ----------- ----------- Cash flows from operating activities: Net income $ 1,489,948 $ 1,295,822 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 320,159 302,382 Other noncash items 3,152 2,803 Net change in operating assets and liabilities (245,542) (28,448) ----------- ----------- Net cash provided by operating activities 1,567,717 1,572,559 ----------- ----------- Cash flows from investing activities: Additional capitalized costs (15,936) (3,394) ----------- ----------- Net cash used in investing activities (15,936) (3,394) ----------- ----------- Cash flows from financing activities: Distributions to partners (1,222,530) (1,109,563) Payments on mortgage principal (332,794) (230,616) ----------- ----------- Net cash used in financing activities (1,555,324) (1,340,179) ----------- ----------- Net (decrease) increase in cash and cash equivalents (3,543) 228,986 Cash and cash equivalents, beginning of period 2,509,451 7,579,071 ----------- ----------- Cash and cash equivalents, end of period $ 2,505,908 $ 7,808,057 =========== =========== Supplemental disclosure of cash flows information: Interest paid $ 599,340 $ 438,686 =========== ===========
The accompanying notes are an integral part of the financial statements. -4- 6 CORPORATE PROPERTY ASSOCIATES 4, 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:
Quarter Ended General Partners Limited Partners Per Limited Partner Unit ------------- ---------------- ---------------- ------------------------ December 31, 1995 $65,633 $1,043,930 $12.20 ======= ========== ======
A distribution of $12.22 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 $27,003 and $22,024, respectively, and general and administrative expense reimbursements of $32,340 and $22,941, 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 $44,386 and $18,412, respectively. -5- 7 CORPORATE PROPERTY ASSOCIATES 4, 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 and operation of a hotel business (see Note 5). For the three-month periods ended March 31, 1995 and 1996, the Partnership earned its total lease revenues (rental income plus interest income from financing leases) from the following lease obligors:
1995 % 1996 % ---- --- ---- --- Simplicity Manufacturing, Inc. $ 499,178 23% $ 499,178 30% Hughes Markets, Inc. 357,355 17 378,797 23 Brodart Co. 330,085 15 328,956 20 Continental Casualty Company 185,727 9 189,962 11 Family Dollar Stores, Inc. 136,800 6 136,800 8 Petrocon Engineering, Inc. 92,066 4 93,604 6 Winn-Dixie Stores, Inc. 36,178 2 36,178 2 Genesco, Inc. 523,755 24 ---------- --- ---------- --- $2,161,144 100% $1,663,475 100% ========== === ========== ===
Note 5. Hotel Property in Kenner, Louisiana: The Partnership and Corporate Property Associates 8 ("CPA(R):8"), an affiliate, own a hotel property in Kenner, Louisiana as tenants-in-common with 46.383% and 53.617% interests, respectively. On April 17, 1996, the Investment Committee of the Corporate General Partners of the Partnership and CPA(R):8 approved a proposal to transfer ownership of the hotel property to the operating partnership of a newly-formed real estate investment trust formed by an affiliate of American General Hospitality Corp. ("AGH"), the hotel management company which is currently engaged by the Partnership and CPA(R):8, to manage the hotel property. In exchange for the contribution of the hotel to the operating partnership, the Partnership and CPA(R):8 will receive an equity interest in the operating partnership with an expected initial value of approximately $18,000,000, of which the Partnership's share would be approximately $8,350,000. In addition, the operating partnership will assume the existing loan obligation on the property of approximately $7,365,000, of which the Partnership's share is currently approximately $3,415,000. The value of the consideration received by the Partnership and CPA(R):8 will be dependent upon the price of the stock issued by AGH in its initial public offering. The Partnership and CPA(R):8 purchased the property in June 1988 (of which the Partnership contributed equity of approximately $3,480,000) including $10,000,000 of mortgage financing, and assumed operating control of the hotel in 1992 when they evicted the lessee due to its financial difficulties. The exchange transaction is subject to the ability of AGH to complete an initial public offering for the newly-formed real estate investment trust. It is intended that the exchange of the hotel property for securities initially be treated as a nonmonetary exchange for tax and financial reporting purposes and that the Partnership retain the funds included in the hotel furniture, fixture and equipment reserves. After one year, the Partnership will have the right to convert its equity interest in the operating partnership to shares of the publicly-traded real estate investment trust. The Partnership does not anticipate incurring any significant costs in connection with completing the proposed exchange. In connection with the proposed transaction, the $6,976,809 carrying value of the hotel property has been reclassified as real estate held for sale. -6- 8 CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) Operating results of the hotel for the three-month periods ended March 31, 1995 and 1996 are summarized as follows:
1995 1996 --------- ---------- Revenues $ 996,893 $1,024,083 Fees paid to hotel management company ( 36,425) (39,005) Other operating expenses (553,043) (552,285) --------- ---------- Hotel operating income $ 407,425 $ 432,793 ========= ==========
Note 6. Property Leased to Hughes Markets, Inc.: The Partnership and Corporate Property Associates 3 ("CPA(R):3"), an affiliate, own a dairy processing facility in Los Angeles, California as tenants-in-common with 16.76% and 83.24% ownership interests, respectively. On May 1, 1996, the Partnership and CPA(R):3 entered into a lease amendment agreement with the lessee, Hughes Markets, Inc. ("Hughes"), to extend the lease term from April 30, 1996 to April 30, 1998. Under the extension agreement, monthly rent will increase to $336,166 (of which the Partnership's share will be $279,824) from $151,686 (of which the Partnership's share was $126,266). At the end of the two-year period, Hughes will make a lump sum payment of $3,500,000 (of which the Partnership's share will be approximately $2,910,000). Hughes is obligated to provide the Partnership and CPA(R):3 a letter of credit, cash deposit or other form of security acceptable at the Partnership and CPA(R):3's sole discretion to ensure payment of the $3,500,000. Hughes may extend the lease on a month-to-month basis for up to six months at a rental of $500,000 per month. -7- 9 CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS Results of Operations: Net income decreased by $194,000 for the three-month period ended March 31, 1996 as compared with the same period ended March 31, 1995. The decreases were due to the sale of a property leased to Genesco, Inc. ("Genesco") in June 1995. Earnings from the Genesco property, consisting of rentals less interest on the limited recourse loan collateralized by the Genesco properties and other costs directly attributable to the Genesco property, contributed approximately $380,000 to the results of operations for the three-month period ended March 31, 1995. Excluding the earnings from Genesco and certain nonrecurring other income in 1995 of $42,800, income from comparable continuing operations would have increased by $203,000, an increase of approximately 30%. Of such increase, $68,000 was due to an increase in other interest income reflecting higher average cash balances and moderate decreases in interest, general and administrative and property expenses. The decrease in interest expense of $26,000 (net of $133,000 of interest incurred on the Genesco property mortgage loan in 1995) was due to the continuing amortization of the Partnership's mortgage loans. General and administrative expenses benefited, in part, from an expected decrease in the Partnership's share of office expenses. The decrease in property expense was due to several factors, none of which were significant. Excluding the rent from Genesco, lease revenues increased modestly, primarily due to an increase of the Hughes Markets, Inc. ("Hughes") rent in the fourth quarter of 1995. Income from the hotel operation, which the Partnership has made formal plans to exchange for an investment, as described below, increased by 6%. The increase was entirely due to an increase in revenues as hotel operating expenses were unchanged for the comparable periods. The hotel realized the revenue increase even though the occupancy rate for the quarter decreased by 2%. Higher average room rates were realized as a result of the hotel's ability to increase rates and changes in usage. In 1996, corporate rates represented 39% of available rooms versus 34% in 1995, while group business decreased to 11% from 19% of available rooms. This change in usage was beneficial to earnings as the average room rate for corporate business is substantially higher than the rates negotiated by groups and associations. The Partnership's lease with Hughes for the dairy processing plant in Los Angeles, California has been extended through April 30, 1998. Annual cash flow will increase by $1,843,000 during the two-year extension. In addition, the Partnership will receive a lump sum payment of approximately $2,910,000 at the end of the two-year period. Financial Condition: There has been no material change in the Partnership's financial condition since December 31, 1995. Cash flow from operations was sufficient to fund payments of distributions to partners and scheduled principal payments on the Partnership's mortgage debt. If the exchange of the Kenner, Louisiana hotel property and related assumption of the mortgage loan obligation for equity interests in the operating partnership of a real estate investment trust is completed, the Partnership would expect to receive a relatively stable cash flow from such investment as the objective of the real estate investment trust and the underlying partnership is to distribute at least 95% of its taxable income so that it can maintain its tax status as a real estate investment trust. With this investment, the Partnership will eliminate the uncertainty related to operating a hotel business with a single hotel and replace such uncertainty with a stable cash flow from the operating partnership's distributions which comprise of the operation of many hotels which are initially estimated to be approximately $700,000 annually. Although cash flow from the hotel operations when combined with debt service on the property mortgage was approximately $1,024,000 in 1995, the Partnership funded improvements of nearly $1,000,000 in the prior year. Funding major capital improvements at the hotel property is needed to remain competitive; therefore, if ownership of the hotel were retained, the Partnership would be required to use funds for additional improvements in the future. Accordingly, cash flow from the hotel could vary significantly from year to year. The Partnership had operated the hotel since 1992, subsequent to evicting the lessee. At that time, the Partnership's objectives were to generate positive cash flow from the hotel operation and enhance the underlying property value. If the proposed transaction is consummated, the Partnership may realize these objectives. -8- 10 CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership PART II 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 4, a California limited partnership By: CAREY CORPORATE PROPERTY, INC. 4/10/97 By: /s/ Claude Fernandez ----------- ----------------------------- Date Claude Fernandez Executive Vice President and Chief Administrative Officer (Principal Financial Officer) 4/10/97 By: /s/ Michael D. Roberts ----------- ----------------------------- Date Michael D. Roberts First Vice President and Controller (Principal Accounting Officer) -9- -----END PRIVACY-ENHANCED MESSAGE-----