-----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, BbA9ieaSfKL2qZSVi/T9VOOa/Pz4pFTm3ejfqzy4ZG2yvilDThVEJ0eAnQ8quPmG ruhJBFle80wzJdJdg1IsNA== 0000950130-96-003094.txt : 19960813 0000950130-96-003094.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950130-96-003094 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NASD 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 SEC ACT: 1934 Act SEC FILE NUMBER: 000-11982 FILM NUMBER: 96608115 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 1 FORM 10-Q 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, 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 (I.R.S. Employer 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 CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership INDEX Page No. -------- PART I - ------ Item 1. - Financial Information* Balance Sheets, December 31, 1995 and June 30, 1996 2 Statements of Income for the three and six months ended June 30, 1995 and 1996 3 Statements of Cash Flows for the six months ended June 30, 1995 and 1996 4 Notes to Financial Statements 5-7 Item 2. - Management's Discussion of Operations 8 PART II - ------- Item 6. - Exhibits and Reports on Form 8-K 9 Signatures 10 *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 4, a California limited partnership PART I ------ Item 1. - FINANCIAL INFORMATION ------------------------------- BALANCE SHEETS
December 31, June 30, 1995 1996 ------------- ------------ (Note) (Unaudited) ASSETS: Land and buildings, net of accumulated depreciation of $13,362,508 at December 31, 1995 and $13,058,958 at June 30, 1996 $21,472,233 $14,006,003 Net investment in direct financing leases 18,224,428 18,209,646 Real estate held for sale 6,981,065 Cash and cash equivalents 7,579,071 7,991,659 Accrued interest and rents receivable 203,651 300,955 Other assets 1,028,692 1,450,458 ----------- ----------- Total assets $48,508,075 $48,939,786 =========== =========== LIABILITIES: Mortgage notes payable $19,486,882 $19,022,525 Accrued interest payable 136,087 126,149 Accounts payable and accrued expenses 435,977 475,610 Accounts payable to affiliates 87,461 159,403 ----------- ----------- Total liabilities 20,146,407 19,783,687 ----------- ----------- PARTNERS' CAPITAL: General Partners 62,061 111,606 Limited Partners (85,568 Limited Partnership Units issued and outstanding) 28,299,607 29,044,493 ----------- ----------- Total partners' capital 28,361,668 29,156,099 ----------- ----------- Total liabilities and partners' capital $48,508,075 $48,939,786 =========== ===========
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 4, a California limited partnership STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended June 30, 1995 June 30, 1996 June 30, 1995 June 30, 1996 ------------------ ---------------- ------------- ------------- Revenues: Rental income from operating leases $ 812,363 $1,387,643 $1,620,490 $2,222,984 Interest from direct financing leases 1,352,754 827,821 2,705,771 1,655,955 Other interest income 24,866 95,010 51,524 190,366 Other income 1,972 44,764 ---------- ---------- ---------- ---------- 2,191,955 2,310,474 4,422,549 4,069,305 ---------- ---------- ---------- ---------- Expenses: Interest on mortgages 605,848 428,939 1,200,367 864,411 Depreciation 292,142 216,199 581,151 492,814 General and administrative 103,723 160,088 243,986 250,976 Property expense 79,866 134,275 172,996 201,335 Amortization 31,150 25,767 62,300 51,534 ---------- ---------- ---------- ---------- 1,112,729 965,268 2,260,800 1,861,070 ---------- ---------- ---------- ---------- Income before gain on sale of real estate and earnings from discontinued operations 1,079,226 1,345,206 2,161,749 2,208,235 Gain on sale of real estate 3,497,872 3,497,872 ---------- ---------- ---------- ---------- Income from continuing operations 4,577,098 1,345,206 5,659,621 2,208,235 Earnings from discontinued operations 358,864 374,352 766,289 807,145 ---------- ---------- ---------- ---------- Net income $4,935,962 $1,719,558 $6,425,910 $3,015,380 ========== ========== ========== ========== Net income allocated to General Partners $ 616,832 $ 103,173 $ 706,229 $ 180,923 ========== ========== ========== ========== Net income allocated to Limited Partners $4,319,130 $1,616,385 $5,719,681 $2,834,457 ========== ========== ========== ========== Net income per Unit (85,568 Limited Partnership Units) Income from continuing operations $46.53 $14.78 $ 58.42 $24.26 Discontinued operations 3.94 4.11 8.42 8.87 ---------- ---------- ---------- ---------- $50.47 $18.89 $ 66.84 $33.13 ========== ========== ========== ==========
The accompanying notes are an integral part of the financial statements. -3- CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, ---------------- 1995 1996 ---- ---- Cash flows from operating activities: Net income $ 6,425,910 $ 3,015,380 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 643,451 544,348 Amortization of unearned income on direct financing leases and straight-line rents on operating leases less (greater) than scheduled rents 12,476 (236,864) Gain on sale of real estate (3,497,872) Net change in operating assets and liabilities (450,309) (217,321) ----------- ----------- Net cash provided by operating activities 3,133,656 3,105,543 ----------- ----------- Cash flows from investing activities: Proceeds from sale of real estate 15,200,000 Additional capitalized costs (91,009) (7,649) ----------- ----------- Net cash provided by (used in) investing activities 15,108,991 (7,649) ----------- ----------- Cash flows from financing activities: Distributions to partners (2,445,970) (2,220,949) Payments on mortgage principal (712,143) (464,357) Prepayment of mortgage payable (5,722,508) ----------- ---------- Net cash used in financing activities (8,880,621) (2,685,306) ----------- ----------- Net increase in cash and cash equivalents 9,362,026 412,588 Cash and cash equivalents, beginning of period 2,509,451 7,579,071 ----------- ----------- Cash and cash equivalents, end of period $11,871,477 $ 7,991,659 =========== =========== Supplemental disclosure of cash flows information: Interest paid $ 1,249,530 $ 874,349 =========== ============
The accompanying notes are an integral part of the financial statements. -4- 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 six months ended June 30, 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 ======= ========== ====== March 31, 1996 $65,745 $1,045,641 $12.22 ======= ========== ======
A distribution of $12.24 per Limited Partner Unit for the quarter ended June 30, 1996 was declared and paid in July 1996. Note 3. Transactions with Related Parties: --------------------------------- For the three-month and six-month periods ended June 30, 1995, the Partnership incurred management fees of $26,491 and $53,494, respectively, and general and administrative expense reimbursements of $10,390 and $42,730, respectively. For the three-month and six-month periods ended June 30, 1996, the Partnership incurred management fees of $59,049 and $81,073, respectively, and general and administrative expense reimbursements of $56,390 and $79,331, respectively. 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, 1995 and 1996 were $77,092 and $35,508, respectively. -5- 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. For the six-month periods ended June 30, 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 % ----------- ---- ----------- ---- Hughes Markets, Inc. $ 714,710 17 $1,307,494 34 Simplicity Manufacturing, Inc. 998,356 23 998,356 25 Brodart Co. 659,906 15 657,600 17 Continental Casualty Company 375,689 9 379,924 10 Family Dollar Stores, Inc. 273,600 6 276,000 7 Petrocon Engineering, Inc. 184,134 4 187,209 5 Winn-Dixie Stores, Inc. 72,356 2 72,356 2 Genesco, Inc. 1,047,510 24 ---------- --- ---------- --- $4,326,261 100% $3,878,939 100% ========== === ========== ===
Note 5. Discontinued Operations: ----------------------- The Partnership and Corporate Property Asociates 8 ("CPA(R):8"), an afilliate, purchased a hotel property in Kenner, Louisiana, in June 1988 as tenants-in-common with 46.383% and 53.617% interests, respectively. The Partnership contributed $3,479,000 in the form of an exchange of another property owned by the Partnership and CPA(R):8 contributed $4,021,000 of equity and $10,000,000 was supplied by mortgage financing. The Partnership and CPA(R):8 assumed operating control of the hotel in 1992 after evicting the lessee due to its financial difficulties. On July 30, 1996, the Partnership and CPA(R):8 entered into a transaction with American General Hospitality Operating Partnership L.P. (the "Operating Partnership"), the operating partnership of a newly-formed real estate investment trust, American General Hospitality, Inc. ("AGH") in which the Partnership and CPA(R):8 received 920,672 limited partnership units (of which the Partnership's share is 427,008 units) in exchange for their ownership interests in the hotel property, a cash contribution of $388,331 (of which the Partnership's share is $180,120) and the Operating Partnership's assumption of the Partnership's and CPA(R):8's mortgage loan obligation collateralized by the hotel property (of which the Partnerhip's share was approximately $3,389,000). The exchange of the hotel property for limited partnership units will initially be treated as a noncash exchange for tax and financial reporting purposes. After one year, the Partnership will have the right to convert its equity interest in the operating partnership to shares of common stock in AGH, which recently completed an initial public offering, with such shares registered with the Securities and Exchange Commission. In connection with the transaction, the $6,981,065 carrying value of the hotel property was classified as real estate held for sale as of June 30, 1996. The Partnership's and CPA(R):8's limited partnership units had a fair value of approximately $16,342,000 (of which the Partnership's share is $7,579,000) at the date of the exchange. -6- CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) Operating results of the hotel for the six-month periods ended June 30, 1995 and 1996 are summarized as follows:
1995 1996 ------------ ------------ Revenues $ 1,948,846 $ 2,003,001 Fees paid to hotel management company (69,605) (78,545) Other operating expenses (1,112,952) (1,117,311) ----------- ----------- Hotel operating income $ 766,289 $ 807,145 =========== ===========
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 83.24% and 16.76% 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 which initial term had expired on April 30, 1996 to April 30, 1998. Under the extension agreement, Hughes' monthly rent increased to $336,166 (of which the Partnership's share is $279,825) from $151,686 (of which the Partnership's share was $126,266). At the end of the lease term, Hughes is obligated to pay a lump sum rental payment of $3,500,000 (of which the Partnership's share will be approximately $2,913,000). Hughes has an option to extend the lease on a month-to-month basis for up to six months at a rental of $500,000 per month. In accordance with the lease amendment agreement, Hughes has provided the Partnership and CPA(R):3 an irrevocable letter of credit of $3,500,000, an amount equal to Hughes' lump sum payment obligation. For financial reporting purposes, the $3,500,000 rental payable due at the end of the lease term is being recognized on a straight-line basis over the term of the lease extension period. -7- CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS ----------------------------------------------- Results of Operations: --------------------- Income from continuing operations decreased by $3,232,000 and $3,451,000 for the three-month and six-month periods ended June 30, 1996, respectively, as compared with the similar periods ended June 30, 1995. Excluding a gain of $3,498,000 realized in June 1995 on the sale of property leased to Genesco, Inc. ("Genesco"), income from continuing operations would have reflected increases of $266,000 and $46,000 for the three-month and six-month periods, respectively. These increases in income were realized even though Genesco contributed 24% of the Partnership's lease revenues prior to the sale and were due to decreases in depreciation and interest expenses and an increase in other interest income. The effect of these items was partially offset for the comparable six-month periods by a decrease in lease revenues. The decrease in interest expense was due to the continuing amortization of the Partnership's mortgage loans and the satisfaction of the loan on the Genesco property at the time of the aforementioned sale. The decrease in depreciation was due to lower charges as a result of classifying the hotel property as real estate held for sale. Other interest income increased as the Partnership had higher average cash balances in 1996 than in 1995. The decrease in lease revenues for the comparable six-month periods was solely attributable to the effect of the Genesco transaction. For the comparable three-month periods, overall lease revenues increased. This increase was due to the lease extension agreement, effective May 1, 1996, with Hughes Markets, Inc. ("Hughes") which lease was extended for two years through April 30, 1988. Annual cash flow will increase by $1,843,000 during the extension period as a result of the new agreement with Hughes. Additionally, the Partnership will receive a lump sum payment of approximately $2,910,000 at the end of this period. Income from the discontinued hotel segment increased by approximately 5%; however, the Partnership ceased operating the hotel on July 30, 1996 when it exchanged its ownership interest in the hotel property for limited partnership units in the operating partnership of a newly-formed real estate investment trust, American General Hospitality, Inc. ("AGH"). The Partnership's annual cash flow from its interest in the operating partnership is initially projected to be approximately $700,000 Financial Condition: ------------------- There has been no material change in the Partnership's financial condition since December 31, 1995. Cash flow from operations of $3,105,000 was sufficient to fund distributions to partners of $2,221,000 and payments of scheduled principal payment installments of $464,000. Mortgage debt service will decrease as the result of the assignment of the mortgage loan obligation on the hotel property in July 1996. Such assignment will reduce the Partnership's outstanding mortgage loan balance by 18%. AGH owns a diversified portfolio of hotel properties, and one of the requirements for a real estate investment trust is to distribute at least 95% of its taxable income in order to retain its special Federal income tax status; therefore, cash flow from the interest in the operating partnership is expected to be relatively stable. The Partnership hopes to eliminate the uncertainty related to operating a single hotel business. Although the Partnership's share of cash flow from the hotel operation after debt service was approximately $1,024,000 in 1995, the Partnership funded improvements in excess of $750,000 in the prior year. Funding major capital improvements at the hotel property was needed to remain competitive. 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 fluctuate significantly from year to year. With the exchange, the Partnership should achieve less fluctuation in cash flow and eliminate the need for allocating funds for capital improvements. -8- CORPORATE PROPERTY ASSOCIATES 4, 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, 1996, the Partnership was not required to file any reports on Form 8-K. -9- CORPORATE PROPERTY ASSOCIATES 4, 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 4, a California limited partnership By: CAREY CORPORATE PROPERTY, INC. 8/8/96 By: /s/ Claude Fernandez -------------- ------------------------------ Date Claude Fernandez Executive Vice President and Chief Administrative Officer (Principal Financial Officer) 8/8/96 By: /s/ Michael D. Roberts -------------- ------------------------------- Date Michael D. Roberts First Vice President and Controller (Principal Accounting Officer) -10- EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 7991659 0 300955 0 0 8292614 45274607 13058958 48939786 761162 19022525 0 0 0 29156099 48939786 0 4069305 0 0 945125 0 864411 2208235 0 2208235 807145 0 0 3015380 33.13 33.13
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