-----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, GmjpkuxFSgkZw8c/Nvu4W0dMCh6O7dt42Bd+4zFgQAN8bMY60eEvk8dHFJazArOK ZXZisRTktat+hW59MMqEMw== 0000950123-97-006639.txt : 19970812 0000950123-97-006639.hdr.sgml : 19970812 ACCESSION NUMBER: 0000950123-97-006639 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970811 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORPORATE PROPERTY ASSOCIATES 7 CENTRAL INDEX KEY: 0000789459 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133327950 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15778 FILM NUMBER: 97655802 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 CORPORATE PROPERTY ASSOCIATES 7 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 0-15778 CORPORATE PROPERTY ASSOCIATES 7, A CALIFORNIA LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter)
CALIFORNIA 13-3327950 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer 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 2 CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership INDEX
Page No. -------- PART I Item 1. - Financial Information* Consolidated Balance Sheets, December 31, 1996 and June 30, 1997 2 Consolidated Statements of Income for the three and six months ended June 30, 1996 and 1997 3 Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1997 4 Notes to Consolidated 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 - 3 CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership PART I Item 1. - FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS
December 31, June 30, 1996 1997 ---- ---- (Note) Unaudited) ASSETS: Land, buildings and personal property, net of accumulated depreciation of $11,101,853 at December 31, 1996 and $11,691,609 at June 30, 1997 $33,276,821 $32,755,005 Net investment in direct financing leases 15,542,368 10,844,344 Cash and cash equivalents 5,591,985 6,065,650 Real estate held for sale 4,698,024 Other assets 1,020,950 1,469,470 ----------- ----------- Total assets $55,432,124 $55,832,493 =========== =========== LIABILITIES: Mortgage notes payable $10,314,828 $10,118,118 Note payable 9,606,837 9,606,837 Accrued interest payable 324,737 328,478 Accounts payable and accrued expenses 676,737 652,620 Accounts payable to affiliates 113,485 89,132 Prepaid and deferred rental income 371,116 392,375 ----------- ----------- Total liabilities 21,407,740 21,187,560 ----------- ----------- PARTNERS' CAPITAL: General Partners 161,740 198,973 Limited Partners (45,209 Limited Partnership Units issued and outstanding) 33,862,644 34,445,960 ----------- ----------- Total partners' capital 34,024,384 34,644,933 ----------- ----------- Total liabilities and partners' capital $55,432,124 $55,832,493 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. Note: The balance sheet at December 31, 1996 has been derived from the audited consolidated financial statements at that date. - 2 - 4 CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership CONSOLIDATED STATEMENTS OF INCOME (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 $ 1,077,086 $ 1,113,789 $ 2,128,766 $ 2,225,703 Interest from direct financing leases 554,596 631,312 1,111,616 1,183,156 Other interest income 68,358 73,801 131,140 139,840 Other income 241,272 Revenue of hotel operations 1,437,277 1,489,766 2,792,618 2,888,115 ----------- ----------- ----------- ----------- 3,137,317 3,308,668 6,164,140 6,678,086 ----------- ----------- ----------- ----------- Expenses: Interest 487,819 447,975 985,546 911,079 Operating expenses of hotel operations 1,030,732 1,025,972 2,040,324 2,048,675 Depreciation 287,547 298,554 573,917 589,756 General and administrative 116,089 215,332 220,089 372,459 Property expenses 114,692 173,057 219,804 284,790 Amortization 24,780 14,719 31,996 29,438 ----------- ----------- ----------- ----------- 2,061,659 2,175,609 4,071,676 4,236,197 ----------- ----------- ----------- ----------- Income before loss from equity investments and gain on sales of real estate 1,075,658 1,133,059 2,092,464 2,441,889 Loss from equity investments (32,980) (31,658) (65,783) (62,037) ----------- ----------- ----------- ----------- Income before gain on sales of real estate 1,042,678 1,101,401 2,026,681 2,379,852 Gain on sales of real estate 74,729 ----------- ----------- ----------- ----------- Net income $ 1,042,678 $ 1,101,401 $ 2,101,410 $ 2,379,852 =========== =========== =========== =========== Net income allocated to General Partners $ 62,561 $ 66,084 $ 122,348 $ 142,791 =========== =========== =========== =========== Net income allocated to Limited Partners $ 980,117 $ 1,035,317 $ 1,979,062 $ 2,237,061 =========== =========== =========== =========== Net income per Unit: (45,209 Limited Partnership Units) $ 21.68 $ 22.90 $ 43.78 $ 49.48 =========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. - 3 - 5 CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership CONSOLIDATED STATEMENTS of CASH FLOWS (UNAUDITED)
Six Months Ended June 30, --------------------- 1996 1997 ---- ---- Cash flows from operating activities: Net income $ 2,101,410 $ 2,379,852 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 605,913 619,194 Other noncash items 74,566 74,566 Loss from equity investments 65,783 62,037 Gain on sales of real estate (74,729) Net change in operating assets and liabilities (276,102) (654,956) ----------- ----------- Net cash provided by operating activities 2,496,841 2,480,693 ----------- ----------- Cash flows from investing activities: Additional capitalized costs (109,262) (67,940) Distributions from equity investments 16,456 16,925 Net proceeds from sales of real estate 617,867 ----------- ----------- Net cash by provided by (used in) investing activities 525,061 (51,015) ----------- ----------- Cash flows from financing activities: Distributions to partners (1,732,367) (1,759,303) Payments on mortgage principal (448,694) (196,710) ----------- ----------- Net cash used in financing activities (2,181,061) (1,956,013) ----------- ----------- Net increase in cash and cash equivalents 840,841 473,665 Cash and cash equivalents, beginning of period 4,968,410 5,591,985 ----------- ----------- Cash and cash equivalents, end of period $ 5,809,251 $ 6,065,650 =========== =========== Supplemental disclosure of cash flows information: Interest paid $ 1,003,510 $ 907,338 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. - 4 - 6 CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership NOTES TO CONSOLIDATED 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 there to 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 $52,750 $826,421 $18.28 ======= ======== ====== March 31, 1997 $52,808 $827,324 $18.30 ======= ======== ======
A distribution of $18.32 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 $25,574 and $49,294, respectively, and general and administrative expense reimbursements of $30,444 and $67,943, respectively. For the three-month and six-month periods ended June 30, 1997, the Partnership incurred property management fees of $28,738 and $57,844, respectively, and general and administrative expense reimbursements of $35,006 and $87,603, 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, 1996 and 1997 were $40,920 and $30,217, respectively. - 5 - 7 CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership NOTES TO CONSOLIDATED 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 three and six-month periods ended June 30, 1996 and 1997, the Partnership earned its lease revenues (rental income plus interest income from financing leases) from the following lease obligors:
1996 % 1997 % ---- ---- ---- -- Advanced System Applications, Inc. $ 780,090 24% $ 762,221 22% KSG, Inc. 410,842 13 486,687 14 The Gap, Inc. 463,784 14 463,784 14 Sybron Acquisition Company 409,581 13 409,581 12 Swiss M-Tex, L.P. 265,496 8 260,677 8 AutoZone, Inc. 203,594 6 196,800 6 Other 154,242 5 195,306 6 Northern Automotive, Inc. 194,415 6 194,415 6 NVRyan L.P. 145,778 5 145,778 4 United States Postal Service 40,525 1 121,575 4 NYNEX Corporation 107,800 3 107,800 3 Winn-Dixie Stores, Inc. 64,235 2 64,235 1 ---------- ---- ---------- --- $3,240,382 100% $3,408,859 100% ========== ==== ========== ====
Results for the Partnership's hotel operations of a Holiday Inn in Livonia, Michigan for the six-month periods ended June 30, 1996 and 1997 are summarized as follows:
1996 1997 ---- ---- Revenues $ 2,792,618 $ 2,888,115 Fees paid to hotel management company (74,065) (86,940) Other operating expenses (1,966,259) (1,961,735 ----------- ----------- Hotel operating income $ 752,294 $ 839,440 =========== ===========
- 6 - 8 CORPORATE PROPERTY ASSOCIATES 7 - 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, 1997 increased by $59,000 and $278,000, respectively, as compared with the similar periods ended June 30, 1996. Excluding the gain from sales of real estate of $75,000 in 1996 and nonrecurring other income of $241,000 in 1997, representing a distribution from a bankruptcy claim, income for the six-month period would have reflected an increase of $112,000. The increases in income were due to higher earnings from the hotel operation, decreases in interest expense and increases in lease revenues. These benefits were partially offset by increases in property and general and administrative expenses. The increases in hotel operating earnings for the Livonia, Michigan Holiday Inn were due to the Partnership's maintaining its strategy of sustaining a high average room rate in the favorable economic climate for the Detroit metropolitan area. Accordingly, for the comparable three-month and six-month periods, hotel revenues increased by 3% even though the overall year-to-date occupancy rate decreased by 1% to 75%. In addition, the direct expenses of the hotel operations were stable. The decreases in interest expense were due to the payoff of a mortgage loan on the Winn-Dixie Stores, Inc. property in the third quarter of 1996 and the continuing amortization of the Partnership's limited recourse mortgage loans. The increase in lease revenues was due to the commencement of a lease in May 1996 with the United States Postal Service at the Partnership's property in Bloomingdale, Illinois, new leases commencing in 1996 at two properties formerly leased to Yellow Front Stores, Inc. and a rent increase on the KSG, Inc. property in 1997. As discussed below, the KSG property will be sold no later than March 8, 1998, and; therefore, the KSG rent increase will not provide any significant long-term benefit to the Partnership's operating cash flow or lease revenues. The increases in property expenses were due to the carrying costs related to operating the Bloomingdale property, which has not been subject to a net lease since the second quarter of 1996. The increase in general and administrative expenses were primarily due to an increase in partnership level state taxes, particularly for the State of Michigan as a result of higher taxable earnings related to the Livonia property. The Partnership's annual lease revenues will decrease by approximately $1,520,000 as the result of the June 30, 1997 expiration of the Partnership's lease with Advanced System Applications, Inc. at the Bloomingdale property. Under a 1994 modification agreement, the Partnership consented to a termination of the Advanced System Applications lease in 1997 rather than 2003 in consideration for an increase of $1,120,000 in annual rents. A portion of the increase was used to accelerate payment on the Bloomingdale property's mortgage loan so that it fully amortized in March 1996. Since May 1996, 34% of the property has been leased to the Postal Service at an annual rent of approximately $243,000. On June 30, 1997, the Postal Service agreed to lease additional space at the Bloomingdale property, effective July 1, 1997. Under this lease amendment, the Postal Service's annual rent will increase by approximately $122,000 with its occupancy of the property increasing to 52% of the leasable space. The Postal Service lease requires the Partnership, rather than the lessee, to pay most costs related to maintaining the property. The Partnership is actively seeking new tenants for the unoccupied space. The Postal Service has a right of first refusal for any vacant leasable space. KSG has exercised its purchase option on the property it currently occupies. The property is expected to be transferred to KSG no later than March 8, 1998. The KSG purchase option provides for an exercise price of the greater of $4,698,000 or fair market value as encumbered by the lease. An appraisal process to determine fair market value has commenced. Annual cash flow from the KSG property is approximately $970,000. - 7 - 9 CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS, Continued Financial Condition: There has been no material change in the Partnership's financial condition since December 31, 1996. Cash flow from operations and equity investments of $2,497,000 was sufficient to fund distributions of $1,759,000 and scheduled mortgage principal installments of $197,000. Pursuant to the lease for additional space with the Postal Service at the Bloomingdale property, the Partnership is obligated to fund tenant improvements of up to approximately $110,000. Balloon payments of $1,652,000 and $4,923,000 on the Partnership's limited recourse mortgage loans on two properties leased to Swiss M-Tex L.P. and the Livonia, Michigan hotel property, respectively, are scheduled for September and November 1997, respectively. If necessary, the Partnership has sufficient funds to pay off the Swiss M-Tex mortgage loan from cash reserves. Based on the operating performance of the Livonia hotel operation, the Partnership believes that the prospects for refinancing the loan are favorable. The General Partners are currently investigating ways to provide liquidity for limited partners on a tax-effective basis. - 8 - 10 CORPORATE PROPERTY ASSOCIATES 7 - 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. - 9 - 11 CORPORATE PROPERTY ASSOCIATES 7 - 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 7 - a California limited partnership By: SEVENTH 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 - 10 - 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 JAN-01-1997 JUN-30-1997 6,055,650 0 0 0 0 6,055,650 55,290,958 11,691,609 55,832,493 1,462,605 19,724,955 0 0 0 34,644,933 55,832,493 0 6,678,086 0 0 3,325,118 0 911,079 2,379,852 0 2,379,852 0 0 0 2,379,852 49.48 49.48
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