0000950132-95-000287.txt : 19950817 0000950132-95-000287.hdr.sgml : 19950817 ACCESSION NUMBER: 0000950132-95-000287 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORPORATE PROPERTY ASSOCIATES 4 CENTRAL INDEX KEY: 0000706005 STANDARD INDUSTRIAL CLASSIFICATION: 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: 95560712 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 OMB APPROVAL -------------------------- OMB Number 3235-0070 Expires October 31, 1995 Estimated average burden hours per response 190.00 -------------------------- 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, 1995 ------------------------------------------------- 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, 1994 and June 30, 1995 2 Statements of Income for the three and six months ended June 30, 1994 and 1995 3 Statements of Cash Flows for the six months ended June 30, 1994 and 1995 4 Notes to Financial Statements 5-6 Item 2. - Management's Discussion of Operations 7-8 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, 1994 1995 ------------- ------------- (Note) (Unaudited) ASSETS: Land and buildings, net of accumulated depreciation of $12,212,983 at December 31, 1994 and $12,794,134 at June 30, 1995 $22,375,100 $21,884,958 Net investment in direct financing leases 29,952,612 18,238,008 Cash and cash equivalents 2,509,451 11,871,477 Accrued interest and rents receivable 262,998 173,653 Other assets 1,007,653 1,207,633 ----------- ----------- Total assets $56,107,814 $53,375,729 =========== =========== LIABILITIES: Mortgage notes payable $26,367,583 $19,932,932 Accrued interest payable 193,839 144,676 Accounts payable and accrued expenses 610,264 430,439 Prepaid rental income 119,118 45,600 Accounts payable to affiliates 31,427 56,559 ----------- ----------- Total liabilities 27,322,231 20,610,206 ----------- ----------- PARTNERS' CAPITAL: General Partners (486,282) 73,189 Limited Partners (85,568 Limited Partnership Units issued and outstanding) 29,271,865 32,692,334 ----------- ----------- Total partners' capital 28,785,583 32,765,523 ----------- ----------- Total liabilities and partners' capital $56,107,814 $53,375,729 =========== ===========
The accompanying notes are an integral part of the financial statements. Note: The balance sheet at December 31, 1994 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, 1994 June 30, 1995 June 30, 1994 June 30, 1995 ------------- ------------- ------------- ------------- Revenues: Rental income from operating leases $ 800,557 $ 812,363 $1,601,114 $1,620,490 Interest income from direct financing leases 1,353,746 1,352,754 2,707,716 2,705,771 Other interest income 28,197 24,866 52,853 51,524 Revenue of hotel operations 722,163 951,953 1,506,270 1,948,846 Other income 1,972 44,764 ---------- ---------- ---------- ---------- 2,904,663 3,143,908 5,867,953 6,371,395 ---------- ---------- ---------- ---------- Expenses: Interest on mortgages 589,552 605,848 1,184,230 1,200,367 Depreciation 281,528 292,142 564,448 581,151 General and administrative 99,687 103,723 217,869 243,986 Property expense 291,148 79,866 439,667 172,996 Amortization 31,170 31,150 62,300 62,300 Operating expenses of hotel operations 494,867 593,089 998,003 1,182,557 ---------- ---------- ---------- ---------- 1,787,952 1,705,818 3,466,517 3,443,357 ---------- ---------- ---------- ---------- Income before gain on sale of real estate 1,116,711 1,438,090 2,401,436 2,928,038 Gain on sale of real estate 3,497,872 3,497,872 ---------- ---------- ---------- ---------- Net income $1,116,711 $4,935,962 $2,401,436 $6,425,910 ========== ========== ========== ========== Net income allocated to General Partners $ 67,003 $ 616,832 $ 144,086 $ 706,229 ========== ========== ========== ========== Net income allocated to Limited Partners $1,049,708 $4,319,130 $2,257,350 $5,719,681 ========== ========== ========== ========== Net income per Unit (85,568 Limited Partnership Units) $12.27 $50.47 $26.38 $66.84 ========== ========== ========== ==========
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, ------------------------------ 1994 1995 ------------- ------------ Cash flows from operating activities: Net income $ 2,401,436 $ 6,425,910 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 626,748 643,451 Other noncash items 10,531 12,476 Gain on sale of real estate (3,497,872) Net change in operating assets and liabilities (41,715) (450,309) ------------ ----------- Net cash provided by operating activities 2,997,000 3,133,656 ------------ ----------- Cash flows from investing activities: Proceeds from sale of real estate 15,200,000 Additional capitalized costs (646,302) (91,009) ------------ ----------- Net cash (used in) provided by investing (646,302) 15,108,991 ------------ ----------- Cash flows from financing activities: Distributions to partners (2,436,868) (2,445,970) Payments on mortgage principal (524,343) (712,143) Prepayment of mortgage payable (5,722,508) ------------ ----------- Net cash used in financing activities (2,961,211) (8,880,621) ------------ ----------- Net (decrease) increase in cash and cash equivalents (610,513) 9,362,026 Cash and cash equivalents, beginning of period 3,629,949 2,509,451 ------------ ----------- Cash and cash equivalents, end of period $ 3,019,436 $11,871,477 ============ =========== Supplemental disclosure of cash flows information: Interest paid $ 1,209,740 $ 1,249,530 ============ ===========
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, 1994. Note 2. Distributions to Partners: ------------------------- Distributions declared and paid to partners during the six months ended June 30, 1995 are summarized as follows:
Quarter Ended General Partners Limited Partners Per Limited Partner Unit ------------- ---------------- ---------------- ------------------------ December 31, 1994 $73,352 $1,149,178 $13.43 ======= ========== ====== March 31, 1995 $73,406 $1,150,034 $13.44 ======= ========== ======
A distribution of $13.50 per Limited Partner Unit for the quarter ended June 30, 1995 was declared and paid in July 1995. A special distribution of $43,216 to the Individual General Partner and $4,278,400 to the Limited Partners was declared and paid in July 1995. Note 3. Transactions with Related Parties: --------------------------------- For the three-month and six-month periods ended June 30, 1994, the Partnership incurred management fees of $23,587 and $52,279, respectively, and general and administrative expense reimbursements of $39,215 and $88,003, respectively. 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. 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, 1994 and 1995 were $28,343 and $77,092, respectively. The Amended Agreement of Limited Partnership (the "Limited Partnership Agreement") provides that any gains from sales are first allocated to partners with negative capital balances. As a result of their negative capital balances, the General Partners were allocated a portion of the gain on sale of real estate described in Note 5 to the Financial Statement as well as the related tax liability. Pursuant to the Limited Partnership Agreement, the allocation of distributions from sales are allocated 1% to the Individual General Partner and 99% to the Limited Partners. Cash distributions from operations are not affected by the aforementioned allocation of gain. - 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 and the operation of a hotel business. For the six-month periods ended June 30, 1994 and 1995, the Partnership earned its total lease revenues (rental income plus interest income from financing leases) from the following lease obligors:
1994 % 1995 % ---------- ---- ---------- ---- Genesco, Inc. $1,047,510 24% $1,047,510 24% Simplicity Manufacturing, Inc. 998,356 23 998,356 23 Hughes Markets, Inc. 714,710 17 714,710 17 Brodart Co. 661,850 15 659,906 15 Continental Casualty Company 354,514 8 375,689 9 Family Dollar Stores, Inc. 280,800 7 273,600 6 Petrocon Engineering, Inc. 178,734 4 184,134 4 Winn-Dixie Stores, Inc. 72,356 2 72,356 2 ---------- --- ---------- --- $4,308,830 100% $4,326,261 100% ========== === ========== ===
Operating results of the hotel for the six-month periods ended June 30, 1994 and 1995 are summarized as follows:
Six Months Ended June 30, 1994 June 30, 1995 -------------- -------------- Revenues $1,506,370 $ 1,948,846 Fees paid to hotel management (38,649) (69,605) company Other operating expenses (959,354) (1,112,952) ---------- ----------- Hotel operating income $ 508,367 $ 766,289 ========== ===========
Note 5. Gain on Sale of Real Estate: --------------------------- On June 30, 1995, the Partnership sold its property in Allentown, Pennsylvania, which it purchased in June 1983 for $11,702,128, to its lessee, Genesco, Inc. ("Genesco") for $15,200,000 and recognized a gain on the sale of $3,497,872. In connection with the sale, the Partnership paid off an existing nonrecourse mortgage loan on the Genesco property for $5,722,508. All of the costs related to the sale of the property and satisfaction of the loan were paid by Genesco. Pursuant to the Limited Partnership Agreement, an affiliate may receive a real estate commission of up to $456,000 with respect to the sale. Such commission amount will be retained by the Partnership until the subordination provisions of the Limited Partnership Agreement are satisfied. The Genesco lease, which had an initial term scheduled to expire in June 2003, provided annual rentals of $2,095,020 and cash flow of $1,081,744, after annual debt service on the mortgage loan of $1,013,276. The mortgage was also scheduled to fully amortize in June 2003. The Partnership used a portion of the net proceeds of $9,477,492 to pay a special distribution to Limited Partners of $4,278,400 ($50 per Limited Partnership Unit) and $43,216 to the Individual General Partner. The special distribution was declared and paid in July 1995. - 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 and six-month periods ended June 30, 1995 increased by $3,819,000 and $4,024,000, respectively, as compared with net income for the three-month and six-month periods ended June 30, 1994. A substantial portion of the increase was due to the gain of $3,498,000 on the sale of a Partnership property on June 30, 1995. Net of the effect of the sale, income for the comparable three-month and six-month periods would have still reflected increases of $321,000 and $526,000, respectively. Approximately $45,000 of other income for the six-month period ended June 30, 1995 was from a nonrecurring item. For both the three-month and six- month periods, the increase in income before the gain on sale was attributable to increased earnings from the hotel operation and a decrease in property expense. Earnings from the hotel operations have continued to benefit from the ability to sustain the increase in the average daily room rate for noncorporate customers in 1995. The occupancy rate of approximately 85% reflected increases for the periods ended June 30, 1995 as compared with the occupancy rates for the periods ended June 30, 1994. The current occupancy rate is consistent with historical levels. Occupancy rates in 1994 were negatively impacted by renovation work which was performed during 1994 and resulted in a decrease in the occupancy rate to 79% for the three-month period ended June 30, 1994. The decrease in property expense was due to higher costs in 1994 related to the Partnership's assessment of liquidity alternatives. Although the Partnership has generally experienced a trend of decreasing interest expense over the past several years, the current three-month and six-month periods have reported a moderate increase as the result of the floating rate obligation of the mortgage loan cross-collateralized by three of the Partnership's properties and which had an outstanding balance of $7,220,000 at June 30, 1995. As described below, future results of operations and operating cash flow will be significantly affected by the sale of the property leased to Genesco, Inc. ("Genesco"); Genesco contributed 24% of the Partnership's lease revenues and represented approximately 18% of the Partnership's gross investment in real estate. Financial Condition: ------------------- There has been no material change in the Partnership's financial condition since December 31, 1994. Cash balances increased by $9,362,000 to $11,871,000 primarily as the result of the receipt of proceeds from the sale of the Genesco property, net of $9,477,000 paid to satisfy the related mortgage loan obligation. Since June 30, 1995, a special distribution of approximately $4,322,000 has been declared and paid. Cash flow from operating activities for the six-month period ended June 30, 1995 was sufficient to pay quarterly distributions to partners and a substantial portion of principal payment installments on the Partnership's mortgage loans. Management has not yet made a determination as to the most appropriate use for the remaining $5,155,000 generated from the sale of the Genesco property. Alternatives include, but are not limited to, paying off higher interest mortgage debt or maintaining higher cash reserves as the Partnership is faced with some uncertainty with regard to the expiration of the lease in April 1996 with Hughes Markets, Inc. ("Hughes") on the Partnership's property in Los Angeles, California. As a result of the sale of the Genesco property, the Partnership's cash flow will decrease by $1,082,000 (based on Genesco rent, net of the debt service obligation on that property). As future cash flow from operations will decrease as a result of the sale, the dollar amount of quarterly distributions will not reach the same level achieved prior to the sale of the property, however, the distribution rate may continue to increase as the distribution rate takes into account capital returned to limited partners. The special distribution paid in July 1995 of $50 per Limited Partnership Unit and represents a return of 10% of the original capital of $500 per Limited Partnership Unit. - 7 - CORPORATE PROPERTY ASSOCIATES 4, a California limited partnership Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS, Continued ---------------------------------------------------------- Financial Condition, continued: ------------------------------ As noted in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1994, future liquidity may be impacted by the scheduled termination of the Hughes Markets, Inc. ("Hughes") lease in April 1996 and the Partnership's share of annual carrying costs for the property, which, if vacant, is estimated to be $467,000. The Partnership is in the process of remarketing the Hughes property. The Partnership is in the discussion stage with a potential long-term tenant and has entered into preliminary discussions with Hughes regarding a short-term extension. There can be no assurance that a long-term lease or a short-term extension will be executed. As the result of successful discussions with Holiday Inn, the Partnership's hotel at the New Orleans Airport will not be subject to Holiday Inn's core modernization plan as major renovations have been made since 1989. The Partnership is currently committed to retaining the hotel's affiliation with Holiday Inn as a franchisee. Included in other assets on the accompanying balance sheet at June 30, 1995, is a furniture, fixture and equipment reserve account for the hotel of $355,000. The reserve account is funded by allocating 5% of hotel revenues to the reserve account and the Partnership does not anticipate utilizing any funds in excess of the reserve amount to fund any improvements or purchases of furniture, fixtures and equipment within the next 12 months. - 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, 1995, 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. --- ------------------------------ 08/9/95 By: /s/ Claude Fernandez ------------- ------------------------------ Date Claude Fernandez Executive Vice President and Chief Administrative Officer (Principal Financial Officer) 08/9/95 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 SIX MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 11,871,477 0 173,653 0 0 1,207,633 52,917,100 12,794,134 53,375,729 677,274 19,932,932 0 0 0 32,765,523 53,375,729 0 6,371,395 0 0 1,060,433 0 1,200,367 6,425,910 0 6,425,910 0 0 0 6,425,910 66.84 66.84