-----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, ODV38fpXqAH4MtnKfP4S54V08hgeBTVoSDGKThaHCPuQ82kSZ0otGKbzS1q/8RZK YHfpPfU6OQRiCWfL99u8GA== 0000950123-97-006703.txt : 19970813 0000950123-97-006703.hdr.sgml : 19970813 ACCESSION NUMBER: 0000950123-97-006703 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORPORATE PROPERTY ASSOCIATES 5 CENTRAL INDEX KEY: 0000718075 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133164925 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11948 FILM NUMBER: 97656635 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 1 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, 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 0-11948 CORPORATE PROPERTY ASSOCIATES 5 (Exact name of registrant as specified in its charter) CALIFORNIA 13-3164925 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 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 5 (a California limited partnership) INDEX
Page No. PART I Item 1. - Financial Information* Balance Sheets, December 31, 1996 and June 30, 1997 2 Statements of Operations for the three and six months ended June 30, 1996 and 1997 3 Statements of Cash Flows for the six months ended June 30, 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 - 3 CORPORATE PROPERTY ASSOCIATES 5 (a California limited partnership) PART I Item 1. - FINANCIAL INFORMATION BALANCE SHEETS
December 31, June 30, 1996 1997 ----------- ---------- (Note) (Unaudited) ASSETS: Land and buildings, net of accumulated depreciation of $13,749,248 at December 31, 1996 and $14,347,833 at June 30, 1997 $25,065,648 $23,301,410 Net investment in direct financing leases 19,298,726 19,278,575 Cash and cash equivalents 5,237,995 4,091,246 Escrow funds 575,051 687,974 Other assets 2,474,117 2,772,715 ----------- ----------- Total assets $52,651,537 $50,131,920 =========== =========== LIABILITIES: Mortgage notes payable $14,283,940 $14,283,940 Note payable to affiliate 1,151,000 1,151,000 Accrued interest payable 45,707 45,707 Accounts payable and accrued expenses 433,842 277,063 Accounts payable to affiliates 111,526 102,914 Deferred gains 901,390 878,855 Other liabilities 658,542 674,503 ----------- ----------- Total liabilities 17,585,947 17,413,982 ----------- ----------- PARTNERS' CAPITAL: General Partners (67,666) (160,981) Limited Partners (113,200 Limited Partnership Units outstanding) 35,133,256 32,878,919 ----------- ----------- Total partners' capital 35,065,590 32,717,938 ----------- ----------- Total liabilities and partners' capital $52,651,537 $50,131,920 =========== ===========
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 - 4 CORPORATE PROPERTY ASSOCIATES 5 (a California limited partnership) STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended June 30, 1996 June 30, 1997 June 30, 1996 June 30, 1997 ------------- ------------- ------------- ------------- Revenues: Rental income from operating leases $ 730,107 $ 714,027 $ 1,802,076 $ 1,428,053 Interest from direct financing leases 847,016 886,683 1,670,174 1,759,316 Other interest income 60,990 33,309 89,501 67,228 Revenue of hotel operations 1,644,627 831,975 2,938,233 1,706,403 Other income 4,750 10,000 4,750 10,000 ----------- ---------- ----------- ----------- 3,287,490 2,475,994 6,504,734 4,971,000 ----------- ---------- ----------- ----------- Expenses: Interest 494,182 351,627 1,253,353 692,864 Depreciation 300,990 321,514 755,224 598,585 General and administrative 99,059 260,665 241,944 376,081 Property expenses 210,482 56,176 327,616 92,676 Amortization 2,218 12,010 Operating expenses of hotel operations 1,231,749 683,763 2,461,793 1,394,101 Writedown to net realizable value 1,300,000 1,350,000 1,300,000 1,350,000 ----------- ---------- ----------- ----------- 3,638,680 3,023,745 6,351,940 4,504,307 ----------- ---------- ----------- ----------- Income (loss) before gain on sales of real estate (351,190) (547,751) 152,794 466,693 Gain on sales of real estate 4,408,467 4,498,823 ----------- ---------- ----------- ---------- Net income (loss) $ 4,057,277 $ (547,751) $ 4,651,617 $ 466,693 =========== ========== =========== =========== Net income (loss) allocated to General Partners $ 193,893 $ (32,865) $ 314,488 $ 28,002 =========== ========== =========== =========== Net income (loss) allocated to Limited Partners $ 3,863,384 $ (514,886) $ 4,337,129 $ 438,691 =========== ========== =========== =========== Net income (loss) per Unit (113,200 Limited Partnership Units) $34.12 $(4.55) $38.31 $3.87 ====== ====== ====== =====
The accompanying notes are an integral part of the financial statements. -3- 5 CORPORATE PROPERTY ASSOCIATES 5 (a California limited partnership) STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, ------------------------------------ 1996 1997 ---- ---- Cash flows from operating activities: Net income $ 4,651,617 $ 466,693 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 767,234 598,585 Other noncash items (9,385) (2,384) Gain on sale of real estate (4,498,823) Writedown to net realizable value 1,300,000 1,350,000 Net change in operating assets and liabilities (168,730) (560,951) ------------ ----------- Net cash provided by operating activities 2,041,913 1,851,943 ------------ ----------- Cash flows from investing activities: Additional capitalized costs (101,665) (184,347) Proceeds from sale of real estate 14,378,057 ------------ ----------- Net cash provided by (used in) investing activities 14,276,392 (184,347) ------------ ----------- Cash flows from financing activities: Distributions to partners (2,426,575) (2,814,345) Payments on mortgage principal (117,618) Payments of mortgages payable (10,685,612) ------------ ----------- Net cash used in financing activities (13,229,805) (2,814,345) ------------ ----------- Net increase (decrease) in cash and cash equivalents 3,088,500 (1,146,749) Cash and cash equivalents, beginning of period 2,300,682 5,237,995 ------------ ----------- Cash and cash equivalents, end of period $ 5,389,182 $ 4,091,246 ============ =========== Supplemental disclosure of cash flows information: Interest paid $ 1,374,757 $ 715,399 ============ ===========
Supplemental schedule of noncash investing and financing activities: In connection with the January 1996 sale of a Partnership property, the purchaser assumed a mortgage obligation of $2,854,275 and accrued interest thereon of $12,049 from the Partnership. The accompanying notes are an integral part of the financial statements. - 4 - 6 CORPORATE PROPERTY ASSOCIATES 5 (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 six months ended June 30, 1997 are summarized as follows:
Quarter Ended General Partners Limited Partners Per Limited Partner Unit - ----------------- ---------------- ---------------- ------------------------ December 31, 1996 $61,057 $ 956,540 $8.45 ======= ========== ===== March 31, 1997 $60,260 $ 944,088 $8.34 ======= ========== =====
A special distribution of $7 per Limited Partner Unit ($792,400) was declared and paid in January 1997. A distribution of $8.34 per Limited Partner Unit for the quarter ended June 30, 1997 was declared and paid in July 1997. Note 3. Transactions with Related Parties: For the three-month and six-month periods ended June 30, 1996, the Partnership incurred property management fees of $17,999 and $47,363, respectively, and general and administrative expense reimbursements of $40,624 and $70,545, respectively. For the three-month and six-month periods ended June 30, 1997, the Partnership incurred property management fees of $16,396 and $31,517, respectively, and general and administrative expense reimbursements of $72,472 and $92,759, respectively. The Partnership, in conjunction with certain affiliates, is a participant in an 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 1996 and 1997 were $48,587 and $36,571, respectively. - 5 - 7 CORPORATE PROPERTY ASSOCIATES 5 (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) Note 4. Industry Segment Information: The Partnership's operations consist primarily of the investment in and the leasing of industrial and commercial real estate and the operation of two hotel properties. For the six-month periods ended June 30, 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 % ---- --- ---- --- Gould, Inc. $ 607,500 17% $ 607,500 19% Spreckels Industries, Inc. 510,359 15 510,359 16 DeVlieg Bullard, Inc. 435,962 12 476,902 15 Arley Merchandise Corporation 300,000 9 300,000 10 Exide Electronics Corporation 286,065 8 286,065 9 Stoody Deloro Stellite, Inc. 200,363 6 267,804 8 Penn Virginia Corporation 249,375 7 249,375 8 Harcourt General Corporation 116,875 3 116,875 4 Penberthy Products, Inc. 95,761 3 104,753 3 Winn-Dixie Stores, Inc. 95,767 3 95,767 3 Sunds Defibrator Woodhandling, Inc. 72,120 2 72,120 2 Rochester Button Company 98,082 3 69,849 2 Other 23,291 1 30,000 1 GATX Logistics, Inc. 380,730 11 ---------- --- ---------- ---- $3,472,250 100% $3,187,369 100% ========== ==== ========== ====
Operating results of the three hotel properties for the six-month periods ended June 30, 1996 and 1997 are summarized as follows:
1996 1997 ----------- ----------- Revenues $ 2,938,233 $ 1,706,403 Fees paid to hotel management company (62,084) (43,919) Other operating expenses (2,399,709) (1,350,182) ----------- ----------- Hotel operating income $ 476,440 $ 312,302 =========== ===========
Note 5. Properties Leased to Arley Merchandise Corporation: The Partnership owns two properties in Sumter and Columbia, South Carolina leased to Arley Merchandise Corporation ("Arley"). A limited recourse mortgage loan of $4,764,500, collateralized by the properties and an assignment of the Arley lease, matured in January 1993. The Partnership and the lender entered into a forbearance agreement at that time and attempted to reach an agreement to restructure the loan. Such agreement was not reached and the forbearance agreement expired on July 1, 1995. On May 15, 1997, the lender made a demand for payment of the entire outstanding principal balance of the loan. Although the Partnership made certain offers to the lender, the lender rejected such offers and, on June 18, 1997, the lender initiated a lawsuit for the purpose of foreclosing on the Arley properties. The Partnership is evaluating whether it will contest the foreclosure action. In connection with such foreclosure the Partnership has estimated that the fair value of the Arley properties is approximately $3,940,000 and has recorded a writedown of $1,350,000, representing the excess of the properties' carrying value over their estimated fair value. As the loan is limited recourse, the lender's sole recourse is to the Arley properties. - 6 - 8 CORPORATE PROPERTY ASSOCIATES 5 (a California limited partnership) Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS Results of Operations: As a result of the sales of the property leased to GATX Logistics, Inc. and the hotel property in Rapid City, South Dakota in the second and fourth quarters of 1996, respectively, the results of operations for the three-month and six-month periods ended June 30, 1997 are not fully comparable with the results for the three-month and six-month periods ended June 30, 1996. For the last full fiscal year that the Partnership owned the GATX and Rapid City properties, the GATX lease represented 16% of annual lease revenues and the Rapid City hotel represented 51% of annual hotel revenues as well as 70% of the Partnership's hotel operating income. In addition, earnings for the prior-year three-month and six-month periods include the benefit of a $4,408,000 gain on the sale of the GATX property. Income before gain on the sales of real estate increased by $314,000 for the comparable six-month periods and decreased by $196,000 for the comparable three-month periods. For the comparable six-month periods, the increase in income before gain was due to decreases in interest, depreciation and property expenses. Of the decrease of $560,000 in interest expense from 1996, $243,000 of such decrease was due to interest expense incurred on the GATX and Rapid City mortgage loans, which loans were retired in connection with the sale of the properties. The remaining decrease was due to the Partnership's paying off other mortgage loans on properties which are leased to Gould, Inc., Exide Electronics Corporation and Stoody Deloro Stellite, Inc. The decrease in depreciation expense was due solely to the disposition of properties in 1996. The decrease in property expenses was due to the writeoff of certain property-related receivables in 1996. The decrease in hotel operating income was due solely to the sale of the Rapid City hotel. For the comparable six-month periods, revenues for the Alpena and Petoskey hotels increased by 8% while expenses were substantially unchanged. For the comparable six-month periods, hotel operating earnings from the remaining two hotels increased by $92,000. The occupancy rate of the Alpena and Petoskey hotels increased by approximately 1% and 5% to 58% and 47%, respectively. The average room rates of Alpena and Petoskey increased by 5% and 2%, respectively. Historically, the earnings of the Alpena and Petoskey hotels are seasonal in nature with occupancy rates higher in the third quarter than in the other periods. Accordingly, hotel earnings for the six-month period are not necessarily indicative of a full year's operating cycle. Lease revenues decreased solely as a result of the GATX property sale. This was partially offset by rent increases in 1996 on the Partnership's leases with DeVlieg Bullard, Inc. and Penberthy Products, Inc. and in 1997 on the Partnership's lease with Stoody Deloro Stellite. The Partnership also incurred noncash charges in both 1996 and 1997 in connection with the writedown of properties to estimated net realizable value. The results for the current three-month period also reflect the aforementioned benefits of decreases in interest, depreciation and property expenses; however, such benefits were offset by an increase in general and administrative expenses. The increase was primarily due to higher partnership-level state taxes primarily as a result of projected increases in taxable income. Financial Condition: There has been no material change in the Partnership's condition since December 31, 1996. Cash flow from operations of $1,852,000 was not sufficient to fully fund quarterly distributions of $2,022,000 and a special distribution of $792,000, paid in January 1997. Accordingly, the General Partners will continue to monitor the Partnership's cash flows in order to determine whether the current distribution rate can be sustained. The limited recourse mortgage lender on the Arley Merchandise Corporation property has initiated foreclosure proceedings as such loan has matured. The General Partners have concluded that the estimated fair value on the properties is less than the outstanding mortgage balance on the mortgage loan and are evaluating whether to continue their efforts to reach a restructuring agreement with the lender. If no restructuring agreement is reached, the lender's sole recourse is to the mortgaged properties. As the Arley properties lender had previously exercised its right of assignment to collect Arley rents, there will be no effect on the Partnership's annual cash flow if the ownership of the properties is transferred to the lender to satisfy the mortgage debt. Prior to such exercise, annual cash flow from the Arley properties (rent less mortgage debt service) was $60,000. The General Partners are currently investigating ways to provide liquidity for limited partners on a tax-effective basis. - 7 - 9 CORPORATE PROPERTY ASSOCIATES 5 (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, 1997, the Partnership was not required to file any reports on Form 8-K. - 8 - 10 CORPORATE PROPERTY ASSOCIATES 5 (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 5 (a California limited partnership) By: CAREY CORPORATE PROPERTY, INC. 08/11/97 By: /s/ Steven M. Berzin -------- --------------------------------------- Date Steven M. Berzin Executive Vice President and Chief Financial Officer (Principal Financial Officer) 08/11/97 By: /s/ Claude Fernandez -------- --------------------------------------- Date Claude Fernandez Executive Vice President and Chief Administrative Officer (Principal Accounting Officer) 08/11/97 By: /s/ Michael D. Roberts -------- --------------------------------------- Date Michael D. Roberts First Vice President and Controller - 9 - EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE SIX-MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1997 JUN-01-1997 JUN-30-1997 4,091,246 0 0 0 0 4,091,246 56,927,818 14,347,833 50,131,920 1,100,187 15,434,940 0 0 0 32,717,938 50,131,920 0 4,971,000 0 0 2,461,443 1,350,000 692,864 466,693 0 466,693 0 0 0 466,693 3.87 3.87
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