-----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, A0aNtclTJs6C2/oefz9oWUwpSiVekgOw7LwS9uFeTGAGaCKCCk+D/WScXtkxV0K0 2jJhj25st9Zx7TPNZwTPbQ== 0000950130-97-002333.txt : 19970514 0000950130-97-002333.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950130-97-002333 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 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: 97602602 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 MARCH 31, 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 0-11982 ------------------------------------------------------ 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 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) CALIFORNIA 13-3126150 CALIFORNIA 13-3126150 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, 1996 and March 31, 1997.......................... 2 Statements of Income for the three months ended March 31, 1996 and 1997.... 3 Statements of Cash Flows for the three months ended March 31, 1996 and 1997.... 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 4, a California limited partnership PART I ------ Item 1. - FINANCIAL INFORMATION ------------------------------- BALANCE SHEETS
December 31, March 31 1996 1997 ------------- ------------ (Note) (Unaudited) ASSETS: Land and buildings, net of accumulated depreciation of $13,487,845 at December 31, 1996 and $13,698,777 at March 31, 1997 $13,577,116 $13,366,184 Net investment in direct financing leases 18,193,555 6,184,984 Real estate held for sale 12,000,000 Cash and cash equivalents 4,668,645 2,654,271 Other assets 1,628,031 2,126,702 Equity investment 3,999,632 3,965,239 ----------- ----------- Total assets $42,066,979 $40,297,380 =========== =========== LIABILITIES: Mortgage notes payable $10,699,799 $ 8,074,656 Accrued interest payable 82,827 63,720 Accounts payable and accrued expenses 288,509 271,164 Accounts payable to affiliates 146,447 130,703 Prepaid rental income 46,800 ----------- ----------- Total liabilities 11,264,382 8,540,243 ----------- ----------- PARTNERS' CAPITAL: General Partners 210,626 267,899 Limited Partners (85,528 Limited Partnership Units issued and outstanding at December 31, 1996 and March 31, 1997) 30,591,971 31,489,238 ----------- ----------- Total partners' capital 30,802,597 31,757,137 ----------- ----------- Total liabilities and partners' capital $42,066,979 $40,297,380 =========== ===========
The accompanying notes are an integral part of the financial statements. Note:The balance sheet at December 31, 1996 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 March 31, 1996 March 31, 1997 -------------- -------------- Revenues: Rental income from operating leases $ 835,341 $1,636,624 Interest income from direct financing leases 828,134 826,794 Other interest income 95,356 51,852 Other income 186,395 ---------- ---------- 1,758,831 2,701,665 ---------- ---------- Expenses: Interest on mortgages 435,472 289,839 Depreciation 276,615 210,932 General and administrative 90,888 154,626 Property expenses 67,060 113,851 Amortization 25,767 7,759 ---------- ---------- 895,802 777,007 ---------- ---------- Income before income from equity investments 863,029 1,924,658 Income from equity investment 147,205 Earnings from hotel operation 432,793 ---------- --------- Net income $1,295,822 $2,071,863 ========== ==========
Net income allocated to General Partners $ 77,749 $ 124,312 ========== ========== Net income allocated to Limited Partners $1,218,073 $1,947,551 ========== ========== Net income per Unit (85,568 and 85,528 Limited Partnership Units at March 31, 1996 and 1997) $14.24 $22.77 ====== ====== 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)
Three Months Ended March 31, ------------------- 1996 1997 ------------------- ------------ Cash flows from operating activities: Net income $ 1,295,822 $ 2,071,863 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 302,382 218,691 Scheduled rents in excess of (less than) income on direct financing leases and straight-line adjustments on operating leases 2,803 (352,650) Net change in operating assets and liabilities (28,448) (244,205) ----------- ----------- Net cash provided by operating activities 1,572,559 1,693,699 ----------- ----------- Cash flows from investing activities: Additional capitalized costs (3,394) Distributions from equity investment in excess of equity income 34,393 ----------- ----------- Net cash (used in) provided by investing activities (3,394) 34,393 ----------- ----------- Cash flows from financing activities: Distributions to partners (1,109,563) (1,117,323) Payments on mortgage principal (230,616) (220,143) Prepayment of mortgage payable (2,405,000) ------------ ----------- Net cash used in financing activities (1,340,179) (3,742,466) ----------- ----------- Net increase (decrease) in cash and cash equivalents 228,986 (2,014,374) Cash and cash equivalents, beginning of period 7,579,071 4,668,645 ----------- ----------- Cash and cash equivalents, end of period $ 7,808,057 $ 2,654,271 =========== =========== Supplemental disclosure of cash flows information: Interest paid $ 438,686 $ 308,946 =========== ===========
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, 1996. Note 2. Distributions to Partners: ------------------------- Distributions declared and paid to partners during the three months ended March 31, 1997 are summarized as follows: Quarter Ended General Partners Limited Partners Per Limited Partner Unit ---------------- ---------------- ---------------- ------------------------ December 31, 1996 $67,039 $1,050,284 $12.28 ======= ========== ====== A distribution of $12.29 per Limited Partner Unit for the quarter ended March 31, 1997 was declared and paid in April 1997. Note 3. Transactions with Related Parties: --------------------------------- For the three-month periods ended March 31, 1996 and 1997, the Partnership incurred management fees of $22,024 and $66,637 respectively, and general and administrative expense reimbursements of $22,941 and $64,833 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, 1996 and 1997 were $18,412 and $22,027 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 three-month periods ended March 31, 1996 and 1997, the Partnership earned its total lease revenues (rental income plus interest income from financing leases) from the following lease obligors:
1996 % 1997 % ---------- ---- ---------- ---- Hughes Markets, Inc. $ 378,797 23% $1,203,649 49% Simplicity Manufacturing, Inc. 499,178 30 499,178 20 Brodart Co. 328,956 20 327,616 13 Continental Casualty Company 189,962 11 189,962 8 Family Dollar Stores, Inc. 136,800 8 140,400 6 Petrocon Engineering, Inc. 93,604 6 66,435 3 Winn-Dixie Stores, Inc 36,178 2 36,178 1 ---------- --- ---------- --- $1,663,475 100% $2,463,418 100% ========== ==== ========== ====
Note 5. Equity Investment: ----------------- The Partnership owns 427,008 limited partnership units in American General Hospitality Operating Partnership, L.P., the operating partnership of American General Hospitality Corporation ("AGH"), a publicly-traded real estate investment trust. The Partnership's investment in the operating partnership is accounted for under the equity method. AGH's audited financial statements reported total assets of $243,115,000 and shareholders' equity of $127,461,000 as of December 31, 1996, and total revenues of $13,496,000 and net income of $5,129,000 for the period from July 31, 1996 through December 31, 1996. Note 6 Real Estate Held For Sale: ------------------------- On March 25, 1997, Simplicity Manufacturing, Inc. ("Simplicity") notified the Partnership that it was exercising its option to purchase the property it leases from the Partnership in Port Washington, Wisconsin on April 1, 1998. The option price will be the greater of $9,684,000 or fair market value, capped at $12,000,000. An appraisal process to determine fair market value has commenced. After paying the limited recourse mortgage loan, the Partnership will realize cash proceeds of up to $7,678,000 and no less than $5,362,000, before any selling costs. Annual cash flow from the property (rent less mortgage debt service on the property) is $934,000. -6- CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS ----------------------------------------------- Results of Operations: - --------------------- Net income for the three-month period ended March 31, 1997 increased by $776,000 as compared with net income for three-month period ended March 31, 1996. The increase in net income was due to an increase in lease revenues, a decrease in interest expense and nonrecurring other income of $186,000. The increase in lease revenues was due to the modification of the Hughes Markets, Inc. lease in May 1996. Under the agreement with Hughes, an extension term of two years was entered into with annual rent substantially increased. Hughes also agreed to pay a lump-sum rental payment at the end of the extension term. The lump sum payment of approximately $2,910,000, is being recognized on a pro rata, straight-line basis over the extension term which ends on April 30, 1998 when the payment is due. Of the $825,000 increase in Hughes lease revenues, $464,000 was due to the increase in monthly rents and $361,000 was due to the straight-line recognition of the final rental payment. Interest expense decreased due to the satisfaction of the mortgage loan on the New Orleans Hotel property in July 1996 in connection with exchanging an interest in the hotel for limited partnership units in the operating partnership of a real estate investment trust, American General Hospitality Corporation, and the prepayment in March 1997 of a mortgage loan which had been collateralized by three of the Partnership's properties. Other income consisted of a distribution on the Partnership's bankruptcy claim against the former lessee of the New Orleans hotel. A distribution was also received in 1996. General and administrative expenses increased due, in part, to certain nonrecurring administrative reimbursements. The increase in property expenses was due to higher property management fees related to the Hughes property. Although the equity income from the investment in the operating partnership was lower than earnings from the hotel operation, the decrease in cash flow resulting from the exchange was approximately $182,000. As more fully described in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1996, the General Partners believe that overall cash flow will significantly benefit as the Partnership periodically was required to use substantial resources to maintain and upgrade the hotel property to remain competitive. As of May 6, 1997, the quoted market value of the common stock of American General Hospitality was $25 1/2 per share. As the limited partnership units will ultimately be convertible to shares of American General Hospitality on a one-for-one basis, the underlying value of the Company's investment is approximately $10,885,000 as of that date. Simplicity Manufacturing, Inc. has notified the Partnership of the exercise of its option to purchase its leased property on April 1, 1998. Annual cash flow from the Simplicity property is $934,000. After paying off the mortgage loan collateralized by the Simplicity property, the Partnership will realize cash proceeds of between $5,362,000 and $7,678,000, before selling costs, based on the anticipated minimum and maximum option prices. Financial Condition: - ------------------- There has been no material change in the Partnership's financial condition since December 31, 1996. Cash flow from operating activities of $1,694,000 was sufficient to fund distributions to partners of $1,117,000 and scheduled mortgage principal payments of $220,000. In March 1997, the Partnership paid off an existing mortgage loan of $2,405,000. The loan had required monthly principal payments of $15,000 at a variable rate of interest indexed to the London Inter-Bank Offered Rate. Accordingly, solely as a result of paying off the loan, annual debt service is projected to decrease by approximately $360,000. In addition, if the Simplicity sale is executed in April 1998, as scheduled, the loan on the Simplicity property will be paid off and only the properties leased to Brodart Co. will be encumbered by mortgage debt. The General Partners are currently investigating ways to provide liquidity to limited partners on a tax-effective basis. -7- 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 March 31, 1997, the Partnership was not required to file any reports on Form 8-K. -8- 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. 5/9/97 By: /s/ Claude Fernandez --------- ------------------------------ Date Claude Fernandez Executive Vice President and Chief Administrative Officer (Principal Financial Officer) 5/9/97 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 THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 2,654,271 0 0 0 0 2,654,271 33,249,945 13,698,777 40,297,380 465,587 8,074,656 0 0 0 31,757,137 40,297,380 0 2,701,665 0 0 479,409 0 289,839 2,071,863 0 2,071,863 0 0 0 2,071,863 22.77 22.77
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