-----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, Tjg8TB/rTFP1LbHJ8I7kuDijFk0EGvQD4mzq4LLdlY43w4W6iYgDPIf8uLFNowDy WvnJjRWfQ/vqAGa70/ELRw== 0000950130-95-002396.txt : 19951201 0000950130-95-002396.hdr.sgml : 19951201 ACCESSION NUMBER: 0000950130-95-002396 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORPORATE PROPERTY ASSOCIATES 7 CENTRAL INDEX KEY: 0000789459 STANDARD INDUSTRIAL CLASSIFICATION: 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: 95590045 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 QUARTERLY REPORT 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 SEPTEMBER 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 0-15778 ---------------------------------------------------------- CORPORATE PROPERTY ASSOCIATES 7, A CALIFORNIA LIMITED PARTNERSHIP - - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 13-3327950 ---------- ---------- (State or other jurisdiction (I.R.S. Employer Identification No.) of 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 7 - a California limited partnership INDEX Page No. -------- PART I - - ------ Item 1. - Financial Information* Consolidated Balance Sheets, December 31, 1994 and September 30, 1995 2 Consolidated Statements of Income for the three and nine months ended September 30, 1994 and 1995 3 Consolidated Statements of Cash Flows for the nine months ended September 30, 1994 and 1995 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 7 - a California limited partnership PART I ------ Item 1. - FINANCIAL INFORMATION ------------------------------- CONSOLIDATED BALANCE SHEETS
December 31, SEPTEMBER 30, 1994 1995 ------------- -------------- (Note) (UNAUDITED) ASSETS: Land, buildings and personal property, net of accumulated depreciation of $10,532,608 at December 31, 1994 and $11,554,131 at September 30, 1995 $38,920,078 $38,064,891 Net investment in direct financing leases 15,761,594 15,761,594 Cash and cash equivalents 10,525,885 3,495,427 Accrued interest and rents receivable 97,984 17,841 Other assets 1,559,084 1,473,352 ----------- ----------- Total assets $66,864,625 $58,813,105 =========== =========== LIABILITIES: Mortgage notes payable $17,314,570 $16,199,275 Note payable 9,606,837 9,606,837 Accrued interest payable 403,686 464,372 Accounts payable and accrued expenses 961,073 773,249 Accounts payable to affiliates 69,568 119,559 Prepaid and deferred rental income 450,341 439,600 ----------- ----------- Total liabilities 28,806,075 27,602,892 ----------- ----------- PARTNERS' CAPITAL: General Partners 113,032 47,635 Limited Partners (45,274 and 45,209 Limited Partnership Units issued and outstanding at December 31, 1994 and September 30, 1995) 37,945,518 31,162,578 ----------- ----------- Total partners' capital 38,058,550 31,210,213 ----------- ----------- Total liabilities and partners' capital $66,864,625 $58,813,105 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. Note: The balance sheet at December 31, 1994 has been derived from the audited consolidated financial statements at that date. -2- CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended September 30, 1994 SEPTEMBER 30, 1995 September 30, 1994 SEPTEMBER 30, 1995 ------------------ ------------------ ------------------ ------------------ Revenues: Rental income from operating leases $ 855,216 $1,077,871 $ 2,571,476 $ 3,239,261 Interest from direct financing leases 1,008,478 560,902 2,915,978 1,681,789 Other interest income 53,600 42,963 138,174 157,102 Revenue from food service operations - net of the cost of sales 446,383 425,412 2,259,909 2,274,157 Revenue of hotel operations 1,178,838 1,356,089 3,526,547 4,005,659 Other income 321,000 759,368 ---------- ---------- ----------- ----------- 3,863,515 3,463,237 12,171,452 11,357,968 ---------- ---------- ----------- ----------- Expenses: Interest 939,068 620,773 2,682,354 1,918,708 Operating expenses of food service operations 478,225 474,458 1,853,562 1,883,335 Operating expenses of hotel operations 863,359 972,213 2,658,608 2,932,730 Depreciation 398,538 350,085 1,218,095 1,021,523 General and administrative 91,598 105,483 309,073 448,734 Property expenses 86,502 81,314 229,837 229,074 Writedowns to net realizable value 641,731 Amortization 19,760 17,518 58,769 52,551 ---------- ---------- ----------- ----------- 2,877,050 2,621,844 9,652,029 8,486,655 ---------- ---------- ----------- ----------- Income before loss from equity investment and gains on sale 986,465 841,393 2,519,423 2,871,313 Loss from equity investments 38,399 34,730 114,633 102,502 ---------- ---------- ----------- ----------- Income before gains on sale 948,066 806,663 2,404,790 2,768,811 Gain on sale of securities 682,500 682,500 Gain on sale of real estate 7,814,474 7,814,474 ---------- ---------- ----------- ----------- Net income $9,445,040 $ 806,663 $10,901,764 $ 2,768,811 ========== ========== =========== =========== Net income allocated to General Partners $ 396,181 $ 48,400 $ 483,584 $ 166,129 ========== ========== =========== =========== Net income allocated to Limited Partners $9,048,859 $ 758,263 $10,418,180 $ 2,602,682 ========== ========== =========== =========== Net income per Unit $199.87 $16.77 $230.11 $57.53 ========== ========== =========== =========== Weighted Average Limited Partner Units 45,274 45,209 45,274 45,242 ========== ========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. -3- CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership CONSOLIDATED STATEMENTS of CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, ----------------- 1994 1995 ------------ -------------- Cash flows from operating activities: Net income $10,901,764 $ 2,768,811 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,276,864 1,074,074 Other noncash items (115,962) 111,850 Loss from equity investment 114,633 102,502 Gains on sales of real estate and warrants (8,496,974) Writedowns to net realizable value 641,731 Restructuring fees received in connection with lease modification 722,222 Recognition of deferred rental income on sale of real estate (321,000) Note receivable received in connection with bankruptcy settlement (327,586) Net change in operating assets and liabilities (614,686) (211,957) ----------- ------------ Net cash provided by operating activities 3,781,006 3,845,280 ----------- ------------ Cash flows from investing activities: Additional capitalized costs (94,537) (166,336) Distributions from equity investment 25,286 23,041 Net proceeds from sales of real estate and securities 757,324 ----------- ------------ Net cash provided by (used in) investing activities 688,073 (143,295) ----------- ------------ Cash flows from financing activities: Distributions to partners (2,282,007) (9,575,174) Payments on mortgage principal (508,558) (1,115,295) Retirement of Limited Partner Units (41,974) Deferred financing costs (11,643) ----------- ------------ Net cash used in financing activities (2,802,208) (10,732,443) ----------- ------------ Net increase (decrease) in cash and cash equivalents 1,666,871 (7,030,458) Cash and cash equivalents, beginning of period 3,260,303 10,525,885 ----------- ------------ Cash and cash equivalents, end of period $ 4,927,174 $ 3,495,427 =========== ============ Supplemental disclosure of cash flows information: Interest paid $ 2,479,130 $ 1,858,022 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. -4- 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 thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1994. Certain 1994 amounts have been reclassified to conform to the 1995 financial statement presentation. Note 2. Distributions to Partners: ------------------------- Distributions declared and paid to partners during the nine months ended September 30, 1995 are summarized as follows:
Quarter Ended General Partners Limited Partners Per Limited Partner Unit - - ----------------------------- ---------------- ---------------- ------------------------ December 31, 1994 $60,195 $ 943,057 $ 20.83 ======= ========== ======= March 31, 1995 $51,266 $ 803,161 $ 17.74 ======= ========== ======= June 30, 1995 $51,468 $ 806,330 $ 17.81 ======= ========== ======= Special distribution - January, 1995 $68,597 $6,791,100 $150.00 ======= ========== =======
A distribution of $17.87 per Limited Partner Unit for the quarter ended September 30, 1995 was declared and paid in October 1995. Note 3. Transactions with Related Parties: --------------------------------- For the three-month and nine-month periods ended September 30, 1994, the Partnership incurred management fees of $42,623 and $106,011, respectively, and general and administrative expense reimbursements of $22,172 and $96,671, respectively. For the three-month and nine-month periods ended September 30, 1995, the Partnership incurred management fees of $24,704 and $78,443, respectively, and general and administrative expense reimbursements of $22,428 and $79,900, 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 nine months ended September 30, 1994 and 1995 were $29,586 and $62,551, respectively. -5- 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 food service facility and a hotel business. For the nine-month periods ended September 30, 1994 and 1995, the Partnership earned its lease revenues (rental income plus interest income from financing leases) from the following lease obligors:
1994 % 1995 % ---------- ---- ---------- ---- Advanced System Applications, Inc. $ 533,530 10% $1,183,974 24% The Gap, Inc. 695,676 13 695,676 14 KSG, Inc. 582,583 11 617,713 13 Sybron Acquisition Company 614,372 11 614,372 13 Swiss M-Tex, L.P. 385,313 7 410,878 8 AutoZone, Inc. 353,485 6 325,774 7 Other 312,612 6 304,321 6 Northern Automotive, Inc. 291,556 5 291,623 6 NVRyan L.P. 231,554 4 218,667 4 NYNEX Corporation 161,700 3 161,700 3 Winn-Dixie Stores, Inc. 96,352 2 96,352 2 Mid Continent Bottlers, Inc. 1,228,721 22 ---------- --- ---------- $5,487,454 100% $4,921,050 100% ========== === ========== ===
Operating results for the food service business in Jupiter, Florida for the nine-month periods ended September 30, 1994 and 1995 are summarized as follows:
1994 1995 ------------ ------------ Sales $ 3,193,108 $ 3,210,536 Cost of goods sold (933,199) (936,379) Other operating expenses (1,853,562) (1,883,335) ----------- ----------- Food service operating income $ 406,347 $ 390,822 =========== ===========
-6- CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) Results for the Partnership's hotel operations of a Holiday Inn in Livonia, Michigan for the nine-month periods ended September 30, 1994 and 1995 are summarized as follows:
1994 1995 ------------ ------------ Revenues $ 3,526,547 $ 4,005,659 Fees paid to hotel management company (76,204) (94,950) Other operating expenses (2,582,404) (2,837,780) ----------- ----------- Income from hotel operations $ 867,939 $ 1,072,929 =========== ===========
Note 5. Equity Investment: ----------------- The Partnership and Corporate Property Associates 8, an affiliate, own 50% interests in a limited partnership which owns a hotel property in Topeka, Kansas leased to Hotel Corporation of America. The Partnership's carrying value in its investment at September 30, 1995 is included in Other assets. Summarized financial information of the limited partnership is as follows:
(in thousands) December 31, SEPTEMBER 30, 1994 1995 ------------------- ------------------- Assets, net of accumulated depreciation $8,395 $8,017 Mortgage notes and bonds payable 8,866 8,750 Other liabilities 14 4 Partners' capital (485) (737) Nine Months Ended September 30, 1994 SEPTEMBER 30, 1995 ------------------ ------------------ Revenues $ 633 $ 650 Interest expense (482) (474) Depreciation and amortization (378) (378) Other operating expenses (1) (2) ------ ------ Net loss $ (228) $ (204) ====== ======
-7- CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS ----------------------------------------------- Results of Operations: --------------------- Primarily as a result of $8,497,000 of realized gains from the sale of assets in 1994, net income for the three-month and nine-month periods ended September 30, 1995 decreased by $8,638,000 and $8,133,000, respectively, as compared with net income for the three-month and nine-month periods ended September 30, 1994. The three and nine-month periods ended September 30, 1994 also included $321,000 and $759,000 of other income, respectively, from nonrecurring sources. In addition, the nine-month period ended September 30, 1994 included $642,000 of charges relating to writedowns to net realizable value of property held for sale. Income for the three-month and nine-month periods ended September 30, 1995 would have reflected increases of $180,000 and $482,000, respectively, as compared with income, net of the effects of the items described above, for the three-month and nine-month periods ended September 30, 1994. For both the three-month and the nine-month periods ended September 30, 1995, the increases were due to an increase in earnings from the hotel operations and decreases in interest and depreciation expenses. This was partially offset by a decrease in lease revenues and, for the nine-month period only, an increase in general and administrative expenses. The decrease in lease revenues of $566,000 was attributable to the sale in November 1994 of properties leased to Mid-Continent Bottlers, Inc. ("Mid-Continent") which had contributed 22% of lease revenues for the comparable 1994 period. Lease revenues in the 1995 periods benefitted from the 1994 lease modification with Advanced Systems Applications, Inc. ("ASA") which contributed an additional $217,000 and $650,000 to lease revenues for the current year's three-month and nine-month periods. Interest expense decreased due to the satisfaction of the Mid-Continent mortgage loan in connection with the sale of the properties, the payoff of the mortgage loans on the properties leased to KSG, Inc., AutoZone, Inc., NYNEX Corporation and The Gap Inc. and the prepayment of a portion of the ASA mortgage loan balance during the fourth quarter of 1994. Such decreases were offset by higher interest expense of $232,000 on the mortgage loan on the hotel property and on the Partnership's note payable, both of which are variable rate loans. Depreciation decreased due to the full depreciation in the fourth quarter of 1994 of certain furniture, fixtures and equipment at the hotel property. General and administrative expenses increased for the nine-month period primarily as a result of the increase in state income and franchise taxes for several states incurred at the partnership level. Hotel operating income increased by 24% for the comparable nine-month period as the result of a strong occupancy rate, which increased 3% to 79%, a 9% increase in the average room rate and an increase in banquet and meeting room revenues. The increase in the occupancy and the ability to increase the average room rate reflects improvements in the overall economy of the Detroit Metropolitan area. It is anticipated that future operating results of the hotel will be affected by fluctuations in the regional economy. Earnings from the food service operation were stable with the operation sustaining the increase that was attained in 1994. Historically, the earnings for the third quarter from the food service operation report a loss as the business is seasonal in nature with the greatest portion of earnings realized in the first quarter. Management expects to either incur a moderate loss or break even on food service operations during the fourth quarter. -8- CORPORATE PROPERTY ASSOCIATES 7 - a California limited partnership Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS, Continued ---------------------------------------------------------- Financial Condition: ------------------- Other than paying a special distribution of $6,860,000 in the first quarter of 1995, there has been no material change in the Partnership's financial condition since December 31, 1994. This distribution was from the proceeds of the sale of the Mid-Continent properties in 1994 and represented a return of capital of $150 per Limited Partner Unit, 15% of the original cost of a Limited Partner Unit. The Partnership's cash flow from operating activities of $3,845,000 was sufficient to pay $2,715,000 of quarterly distributions to partners and the Partnership's scheduled mortgage principal payment installments of $1,115,000. The Partnership is currently committed to retaining the hotel's affiliation with Holiday Inn as a franchisee. As a result of successful discussions with Holiday Inn, the Partnership's hotel property will not be required to make any additional improvements in order to comply with the Holiday Inn's core modernization plan. Included in other assets on the accompanying consolidated balance sheet at September 30, 1995, is a furniture, fixture and equipment reserve account of $313,000 which is available for funding necessary improvements or purchases of furniture, fixtures and equipment at the hotel operation. The reserve account is funded by allocating 3% of hotel revenues to the reserve account and the Partnership does not anticipate utilizing any funds in excess of amounts set aside in the reserve amount to fund any replacements of furniture, fixtures and equipment within the next twelve months. A balloon payment of $3,871,000 will be due in December 1995 on two mortgage loans collateralized by the food service facility. The Partnership has the option of extending the loans if it elects to make a partial prepayment of $600,000. The Partnership currently has the cash reserves to fund this payment if it elects to extend the loan. -9- 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 September 30, 1995 the Partnership was not required to file any reports on Form 8-K. -10- 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. 11/10/95 By: /s/ Claude Fernandez -------------- ------------------------------ Date Claude Fernandez Executive Vice President and Chief Administrative Officer (Principal Financial Officer) 11/10/95 By: /s/ Michael D. Roberts -------------- ------------------------------- Date Michael D. Roberts First Vice President and Controller (Principal Accounting Officer) -11- EX-27 2 ARTICLE 5 OF REGULATION S-X
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 3495427 0 17841 0 0 1473352 65380616 11554131 58813105 1796780 25806112 0 0 0 31210213 58813105 3210536 11357968 936379 936379 5493873 0 1918708 2768811 0 2768811 0 0 0 2768811 57.53 57.53
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