-----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, I5ywSxqkqBEWx2o6486A60dI3qBqII5pMJq2ZtdOiozrQyTf4YEOw6yTPBJntNL1 b207Zi9jKebmutzdaBE+qg== 0000950130-96-003098.txt : 19960813 0000950130-96-003098.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950130-96-003098 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 6 CENTRAL INDEX KEY: 0000750456 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133247122 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14551 FILM NUMBER: 96608230 BUSINESS ADDRESS: STREET 1: 50 ROCKEFELLER PLZ 2ND FL 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 0-14551 ------------------------------------------------------ CORPORATE PROPERTY ASSOCIATES 6 - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 13-3247122 - -------------------------------------------------------------------------------- (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 CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership INDEX Page No. -------- PART I ------ Item 1. - Financial Information* Consolidated Balance Sheets, December 31, 1995 and June 30, 1996 2 Consolidated Statements of Income for the three and six months ended June 30, 1995 and 1996 3 Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and 1996 4 Notes to Consolidated Financial Statements 5-7 Item 2. - Management's Discussion of Operations 8-9 PART II Item 6. - Exhibits and Reports on Form 8-K 10 Signatures 11 *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 6 - a California limited partnership PART I Item 1. - FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS
December 31, June 30, 1995 1996 ------------ ------------ (Note) (Unaudited) ASSETS: Land, buildings and personal property, net of accumulated depreciation of $14,930,388 at December 31, 1995 and $15,716,888 at June 30, 1996 $44,235,351 $48,716,152 Net investment in direct financing leases 36,920,755 32,887,655 Cash and cash equivalents 3,476,915 4,191,445 Notes receivable from affiliate 1,151,000 1,151,000 Accrued interest and rents receivable 28,251 19,973 Other assets 2,609,407 2,744,407 ----------- ----------- Total assets $88,421,679 $89,710,632 =========== =========== LIABILITIES: Mortgage notes payable $33,263,097 $34,146,598 Note payable 10,000,000 10,000,000 Accrued interest payable 482,195 463,741 Accounts payable and accrued expenses 353,851 318,170 Accounts payable to affiliates 75,323 107,616 Prepaid rental income and other liabilities 354,235 412,452 Deferred rental income 3,789,785 3,667,204 ----------- ----------- Total liabilities 48,318,486 49,115,781 ----------- ----------- PARTNERS' CAPITAL: General Partners (156,867) (51,753) Limited Partners (47,930 Limited Partnership Units issued and outstanding) 40,260,060 40,646,604 ----------- ----------- Total partners' capital 40,103,193 40,594,851 ----------- ----------- Total liabilities and partners' capital $88,421,679 $89,710,632 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. Note: The consolidated balance sheet at December 31, 1995 has been derived from the audited financial statements at that date. -2- CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 1995 1996 1995 1996 -------- -------- -------- -------- Revenues: Rental income from operating leases $1,335,102 $1,443,022 $2,701,335 $2,745,961 Interest from direct financing leases 1,481,734 1,377,229 2,826,003 2,782,939 Other interest income 42,067 68,415 133,870 158,351 Revenue of hotel operations 1,166,258 1,173,653 2,244,667 2,309,540 Other income 725,920 773,876 ---------- ---------- ---------- ---------- 4,751,081 4,062,319 8,679,751 7,996,791 ---------- ---------- ---------- ---------- Expenses: Interest 1,100,534 1,018,738 2,254,732 2,058,253 Depreciation 382,214 396,068 762,095 786,500 General and administrative 132,599 142,813 310,075 244,069 Property expenses 202,985 83,435 277,519 130,279 Amortization 53,914 75,875 94,958 133,434 Operating expenses of hotel operations 907,285 885,614 1,772,982 1,798,296 ---------- ---------- ---------- ---------- 2,779,531 2,602,543 5,472,361 5,150,831 ---------- ---------- ---------- ---------- Income before extraordinary item and gain on sales of real estate 1,971,550 1,459,776 3,207,390 2,845,960 Gain on sales of real estate 39,422 70,878 ---------- ---------- ---------- ---------- Income before extaordinary item 1,971,550 1,499,198 3,207,390 2,916,838 Extraordinary gain on extinguishment of debt 2,088,268 2,088,268 ---------- ---------- ---------- ---------- Net income $4,059,818 $1,499,198 $5,295,658 $2,916,838 ========== ========== ========== ========== Net income allocated to General Partners $ 243,589 $ 156,578 $ 317,739 $ 241,636 ========== ========== ========== ========== Net income allocated to Limited Partners $3,816,229 $1,342,620 $4,977,919 $2,675,202 ========== ========== ========== ========== Net income per Unit (47,930 Limited Partnership Units): Income before extraordinary gain $ 38.67 $ 28.01 $ 62.91 $ 55.81 Extraordinary gain 40.95 40.95 ---------- ---------- ---------- ---------- $ 79.62 $ 28.01 $ 103.86 $ 55.81 ========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. -3- CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, ---------------- 1995 1996 ---- ---- Cash flows from operating activities: Net income $ 5,295,658 $ 2,916,838 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 857,053 919,934 Amortization of deferred rental income (122,581) Gain on sales of real estate (70,878) Extraordinary gain on extinguishment of debt (2,088,268) Other noncash items (11,845) Net change in operating assets and liabilities 9,818 62,817 ------------ ------------ Net cash provided by operating activities 4,074,261 3,694,285 ------------ ------------ Cash flows from investing activities: Amounts received on partial prepayment of note receivable from affiliate 144,000 Additional capitalized costs (48,443) (1,766,609) Proceeds from sales of real estate 603,286 ------------ ------------ Net cash provided by (used in) investing activities 95,557 (1,163,323) ------------ ------------ Cash flows from financing activities: Distributions to partners (2,359,502) (2,425,180) Repurchase of Limited Partner Units (20,000) Proceeds from issuance of mortgage 6,000,000 Proceeds from issuance of note payable 10,000,000 Prepayment of mortgages payable (12,055,148) (4,257,315) Payments on mortgage principal (670,975) (859,184) Deferred financing costs (266,471) (274,753) ------------ ------------ Net cash used in financing activities (5,372,096) (1,816,432) ------------ ------------ Net (decrease) increase in cash and cash equivalents (1,202,278) 714,530 Cash and cash equivalents, beginning of period 4,412,869 3,476,915 ------------ ------------ Cash and cash equivalents, end of period $ 3,210,591 $ 4,191,445 ============ ============ Supplemental disclosure of cash flows information: Interest paid $ 1,921,116 $ 2,076,707 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. -4- CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. Basis of Presentation: The accompanying unaudited consolidated 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 $66,660 $1,138,338 $23.75 ======= ========== ====== March 31, 1996 $69,862 $1,150,320 $24.00 ======= ========== ======
A distribution of $24.13 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 $69,381 and $92,803, respectively, and general and administrative expense reimbursements of $20,961 and $58,637, respectively. For the three-month and six-month periods ended June 30, 1996, the Partnership incurred management fees of $27,636 and $54,737, respectively, and general and administrative expense reimbursements of $35,612 and $62,154, 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, 1995 and 1996 were $58,327 and $60,482, respectively. -5- CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership NOTES TO CONSOLIDATED 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 three hotel properties. For the six-month periods ended June 30, 1995 and 1996, the Partnership earned its total real estate lease revenues (rental income plus interest income from financing leases) as follows:
1995 % 1996 % ---- ---- ---- -- Stoody Deloro Stellite, Inc. $1,029,951 19% $1,117,095 20% AP Parts Manufacturing, Inc. 763,193 14 857,044 16 Peerless Chain Company 634,726 11 757,307 14 AutoZone, Inc. 718,342 13 676,111 12 Anthony's Manufacturing Company, Inc. 634,711 11 438,000 8 Wal-Mart Stores, Inc. 413,632 7 413,632 7 Kinney Shoe Corporation 336,380 6 336,380 6 Motorola, Inc. 250,000 5 270,000 5 Harcourt General Corporation 233,750 4 233,750 4 Lockheed Martin Corporation 146,500 3 149,333 3 Yale Security, Inc. 126,092 2 Winn-Dixie Stores, Inc. 85,199 2 85,199 2 Folger Adam Company 282,954 5 68,957 1 ---------- --- ---------- --- $5,529,338 100% $5,528,900 100% ========== ==== ========== ====
Operating results of the three hotels for the six-month periods ended June 30, 1995 and 1996 are summarized as follows:
1995 1996 ---- ---- Revenue $ 2,244,667 $ 2,309,540 Fees paid to hotel management company (52,517) (57,483) Other operating expenses (1,720,465) (1,740,813) ----------- ----------- Hotel operating income $ 471,685 $ 511,244 =========== ===========
Note 5. Properties Leased to AutoZone, Inc.: The Partnership's master leases with AutoZone, Inc. ("AutoZone") allows AutoZone to offer to purchase properties which it judges to be unsuitable for its continued use. On April 26, 1996, citing this lease provision, AutoZone purchased the Partnership's property in Birmingham, Alabama for $369,580, net of costs. The Partnership recognized a gain on the sale of $39,422. As a result of the sale, AutoZone's annual rental obligation will be reduced by $38,763. The Partnership was required to assign the proceeds of the sale to its lender as a partial prepayment on the mortgage loan collateralized by the AutoZone properties. As a result of the prepayment, annual debt service will be reduced by $69,605. Accordingly, as a result of this transaction, annual cash flow from the AutoZone properties will increase by $30,842. -6- CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) Note 6. Subsequent Event: On August 2, 1996, the Partnership refinanced at a lower rate of interest an existing mortgage loan collateralized by the Partnership's property leased to Wal-Mart Stores, Inc. ("Wal-Mart"). The new loan of $3,500,000 provides for monthly installments of principal and interest of $32,888 at an annual interest rate of 8.25% based on a 16-year amortization schedule commencing September 1996. The loan may be prepaid at any time subject to a 1% prepayment charge. The loan matures in August 2003 at which time a balloon payment for the entire outstanding principal balance of approximately $2,517,000 will be due. The original loan provided for monthly payments of principal and interest of $30,600 at an annual interest rate of 9.625% based on a 30-year amortization schedule. It was due to mature in May of 1997 at which time a balloon payment was scheduled to be paid. Solely as a result of refinancing the debt on the Wal-Mart property, annual debt service will increase by approximately $27,000. The effect of increased debt service will be offset by an annual rent increase of $63,865 on the Wal-Mart lease, effective September 1, 1996. -7- CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership Item 2. - MANAGEMENT'S DISCUSSION OF OPERATION Results of Operations: Net income for the three-month and six-month periods ended June 30, 1996 decreased by $2,561,000 and $2,379,000, respectively, as compared with the same periods ended June 30, 1995 due to nonrecurring other income and extraordinary gains recognized in the prior periods, as described below. Income, excluding the nonrecurring items and 1996 gain on sales, would have reflected increases of $176,000 and $327,000 for the three-month and six-month periods ended June 30, 1996. These increases were primarily due to decreases in interest and property expenses. The decrease in interest expense was due to the satisfaction of mortgage loans on the Stoody Deloro Stellite, Inc. and Anthony's Manufacturing, Inc. ("Anthony's") properties which were paid off in the first and second quarter of 1995, respectively, in part, from the proceeds of a $10,000,000 loan as well as the payoff of the mortgage loan on the Peerless Chain Company ("Peerless") property in the fourth quarter of 1995. Property expenses decreased after the settlement with Anthony's as costs were incurred in connection with the Partnership protecting its interests, as lessor, in a dispute with Anthony's. Since December 31, 1995, the Partnership has had rent increases on its leases with Peerless, Lockheed Martin Corporation and Motorola, Inc. Solely as a result of these increases, annual revenues will increase by $251,000. In addition, rent increases are scheduled in September 1996 and October 1996 on the Wal-Mart Stores, Inc. ("Wal-Mart") and Kinney Shoe Corporation leases. The annual rents on the Wal-Mart lease will increase by $64,000; however, annual debt service on the Wal-Mart mortgage loan will increase by $27,000. These increases will offset the decrease of $267,000 in annual rentals resulting from the releasing of the Folger Adam Company ("Folger Adam") property to Yale Security, Inc. ("Yale") after Yale purchased Folger Adam's operations pursuant to an order of the Bankruptcy Court. Cash flow has also benefitted from a January 1996 transaction which resulted in funding improvements, refinancing an existing mortgage loan and amending the lease with AP Parts Manufacturing, Inc. ("AP Parts") as well as the reamortization of the AutoZone, Inc. ("AutoZone") mortgage loan after such loan was partially prepaid with proceeds from the sale of two properties. The net effect of the aforementioned transactions and rent adjustments will increase annual cash flow by $418,000. Income in 1995 benefitted from the settlement with Anthony's and the related extraordinary gain on paying off the mortgage loan collateralized by the Anthony's properties. Anthony's paid the Partnership a settlement resulting in other income of $688,000, net of costs, and the Partnership recorded an extraordinary gain of $2,088,000 when it paid off the mortgage loan and accrued interest thereon at a substantial discount. The settlement resulted in Anthony's annual rent being reduced by $472,000 but the Partnership's cash flow from the property increased as annual debt service on the loan had been $731,000 and has now been eliminated. The settlement eliminated the prospect of Anthony's vacating the leased properties and, instead, the initial lease term was extended an additional 5 years until 2007. Earnings from the hotel operations reflected increases of 8%. Earnings from the Alpena hotel were stable. Revenues at the Petoskey hotel decreased in spite of a 5% increase in the occupancy rate as the average room rate decreased. Livonia's earnings increased due to higher average room rates which offset a slight decrease in the occupancy rate. The operations of the Alpena and Petoskey hotels are seasonal with their earnings and occupancy rates historically reaching their highest levels in the third quarter so that earnings will be affected if Alpena and Petoskey do not maintain such historical levels. -8- CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership Item 2. - MANAGEMENT'S DISCUSSION OF OPERATION- Continued Financial Condition: There has been no material change in the Partnership's financial condition since December 31, 1995. Cash flow from operations of $3,694,000 was more than sufficient to fund distributions to partners of $2,425,000 and payments of scheduled mortgage principal payment installments of $859,000. As discussed above, cash flow is projected to continue to increase as a result of scheduled rent increases. Although cash flow from operations decreased for the six-month period ended June 30, 1996, 1995 cash flow from operations reflects the effect of nonrecurring other income of $774,000, which included the settlement payment received from Anthony's. Excluding these items, cash flow from operations would have reflected an increase. The Partnership benefitted from the sale of two AutoZone properties for $603,000. The sales proceeds were used to make mandatory partial prepayments on the AutoZone mortgage loan. Although AutoZone rentals will decrease, the reamortization of the loan and related reduction in debt service have actually resulted in slightly increased cash flow (rentals less debt service on the mortgage) from the AutoZone properties. As noted above, the Partnership purchased improvements at the AP Parts property in Toledo, Ohio with such purchase funded by a refinancing of the mortgage loan. To the extent the Partnership generates net proceeds from the sale of assets, the Partnership is obligated to offer such proceeds to the lender of the $10,000,000 note payable. The Partnership has a commitment to fund improvements in order for the Alpena and Petoskey properties to comply with the Holiday Inn core modernization plan. Such improvements, which are in the process of being completed, are being funded from the Partnership's cash reserves. Costs of completion are estimated to amount to $80,000. Three of the Partnership's mortgage loans are scheduled to mature by the end of 1996 with balloon payments totalling $5,609,000. The limited recourse loans encumber properties leased to Winn-Dixie Stores, Inc., Motorola, Inc. and Yale. Management believes, based on the credit quality of these tenants, that it is likely that these loans can be refinanced. If necessary, the Partnership could use a portion of its cash reserves to pay off a portion of the amounts coming due. -9- CORPORATE PROPERTY ASSOCIATES 6 - 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. -10- CORPORATE PROPERTY ASSOCIATES 6 - 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 6 - 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) -11- 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 4,191,445 0 1,170,973 0 0 5,362,418 97,320,695 15,176,888 89,710,632 1,301,979 44,146,598 0 0 0 40,594,851 89,710,632 0 7,996,791 0 0 1,294,282 0 2,058,253 2,916,838 0 2,916,838 0 0 0 2,916,838 55.81 55.81
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