1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended MARCH 31, 2001
of
W. P. CAREY & CO. LLC
("WPC")
A DELAWARE Limited Liability Company
IRS Employer Identification No. 13-3912578
SEC File Number 001-13779
50 Rockefeller Plaza,
New York, New York 10020
(212) 492-1100
WPC has LISTED SHARES registered pursuant to Section 12(b) of the Act.
WPC is registered on the NEW YORK STOCK EXCHANGE and the PACIFIC STOCK
EXCHANGE.
WPC does not have any Securities registered pursuant to Section 12(g) of
the Act.
WPC (1) has filed all reports required by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
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.
W. P. Carey & Co. LLC has 34,311,565 Listed Shares, no par value
outstanding at May 11, 2001.
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W. P. CAREY & CO. LLC
INDEX
PAGE NO.
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PART I
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Item 1. - Financial Information*
Condensed Consolidated Balance Sheets, as of March 31, 2001
and December 31, 2000 2
Condensed Consolidated Statements of Income for the
three months ended March 31, 2001 and 2000 3
Condensed Consolidated Statements of Comprehensive Income
for the three months ended March 31, 2001 and 2000 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2001 and 2000 5-6
Notes to Condensed Consolidated Financial Statements 7-10
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-12
PART II - Other Information
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Item 3. - Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. - Submission of Matters to a Vote of Security Holders 13
Item 6. - Exhibits and Reports on Form 8-K 13
Signatures 14
*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.
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W. P. CAREY & CO. LLC
PART I
Item 1. - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
March 31, 2001 December 31, 2000
-------------- -----------------
(Unaudited) (Note)
ASSETS:
Real estate leased to others under the operating method, net of
accumulated depreciation of $26,463 and $24,159
at March 31, 2001 and December 31, 2000 $411,583 $414,006
Net investment in direct financing leases 282,264 287,876
Operating real estate, net of accumulated depreciation of $1,600 and
$1,442 at March 31, 2001 and December 31, 2000 6,371 6,502
Real estate under construction and redevelopment 17,866 13,359
Cash and cash equivalents 12,431 10,165
Due from affiliates 10,053 7,945
Equity investments 49,933 47,224
Assets held for sale - 2,573
Intangible assets, net of accumulated amortization 91,019 94,183
Other assets 20,342 20,409
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Total assets $901,862 $904,242
======== ========
LIABILITIES, MINORITY INTEREST AND
MEMBERS' EQUITY:
Liabilities :
Mortgage notes payable $191,013 $196,094
Notes payable 100,000 94,066
Accrued interest 1,241 2,655
Due to affiliates 6,270 15,308
Dividends payable 14,489 14,182
Accrued income taxes 1,814 2,688
Other liabilities 15,233 16,374
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Total liabilities 330,060 341,367
-------- --------
Minority interest 578 802
-------- --------
Commitments and contingencies
Members' equity:
Listed shares, no par value; 34,285,290 and 33,604,716 shares issued and
outstanding at March 31, 2001 and December 31, 2000 656,191 644,749
Distributions in excess of accumulated earnings (76,131) (74,260)
Unearned compensation (5,248) (5,291)
Accumulated other comprehensive loss (3,588) (3,125)
-------- --------
Total members' equity 571,224 562,073
-------- --------
Total liabilities, minority interest and members' equity $901,862 $904,242
======== ========
The accompanying notes are an integral part
of the condensed consolidated financial statements.
Note: The condensed consolidated balance sheet at December 31, 2000 has been
derived from the audited consolidated financial statements at that date.
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W. P. CAREY & CO. LLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share and share amounts)
Three Months Ended March 31,
------------------------------
2001 2000
---- ----
Revenues:
Rental income $ 11,826 $ 12,743
Interest income from direct financing leases 8,189 8,324
Management income from affiliates 7,543 -
Other income 2,711 852
Other interest income 243 35
Revenue from hotel operations 1,385 1,322
-------- --------
31,897 23,276
-------- --------
Expenses:
Interest 5,596 6,010
Depreciation 2,612 2,919
Amortization 3,846 208
General and administrative 6,241 1,685
Property expenses 1,302 1,666
Operating expenses from hotel operations 1,194 1,171
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20,791 13,659
-------- --------
Income before minority interest, income from equity
investments, gain (loss) on sale and income taxes 11,106 9,617
Minority interest in loss (income) 44 (870)
-------- --------
Income before income from equity investments, gain
(loss) on sale and income taxes 11,150 8,747
Income from equity investments 1,452 1,222
-------- --------
Income before gain (loss) on sale and income taxes 12,602 9,969
Gain (loss) on sale of real estate and equity investments 217 (116)
-------- --------
Income before income taxes 12,819 9,853
Provision for income taxes 180 228
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Net income $ 12,639 $ 9,625
======== ========
Basic and diluted earnings per share: $.37 $.38
==== ====
Weighted average shares outstanding:
Basic 34,268,978 25,624,346
========== ==========
Diluted 34,584,163 25,624,346
========== ==========
The accompanying notes are an integral part
of the condensed consolidated financial statements.
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W. P. CAREY & CO. LLC
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
Three Months Ended March 31,
---------------------------
2001 2000
---- ----
Net income: $12,639 $9,625
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Other comprehensive loss:
Change in unrealized gain on marketable securities 125 61
Foreign currency translation loss (588) (861)
------- ------
Other comprehensive loss (463) (800)
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Comprehensive income $12,176 $8,825
======= ======
The accompanying notes are an integral part
of the condensed consolidated financial statements.
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W. P. CAREY & CO. LLC
CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended March 31,
----------------------------
2001 2000
---- ----
Cash flows from operating activities:
Net income $12,639 $ 9,625
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,458 3,127
Amortization of deferred income (283) (98)
(Gain) loss on sale of real estate and equity investments (217) 116
Minority interest in (loss) income (44) 870
Straight-line rent adjustments (242) (493)
Income from equity investments in excess of distributions received (315) (298)
Management income received in shares of affiliates (1,393) -
Costs paid by issuance of shares 70 605
Amortization of unearned compensation 496 -
Provision for uncollected rents 405 355
Structuring fees receivable (835) -
Net change in operating assets and liabilities (2,823) 1,722
------- --------
Net cash provided by operating activities 13,916 15,531
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Cash flows from investing activities
Purchases of real estate and equity investments (4,081) (11,515)
Additional capital expenditures (618) (366)
Proceeds from sale of property and equity investments 7,171 361
Payment of deferred acquisition fees (520) (392)
Other (119) -
------- --------
Net cash provided by (used in) investing activities 1,833 (11,912)
------- --------
Cash flows from financing activities:
Dividends paid (14,202) (10,716)
Distributions to minority interest - (602)
Payments of mortgage principal and notes payable (14,058) (1,638)
Proceeds from note payable 16,000 25,000
Proceeds from mortgages payable 526 -
Payment of financing costs (1,395) (9)
Purchases of treasury stock (325) (8,687)
Other - (30)
--------- --------
Net cash (used in) provided by financing activities (13,454) 3,318
------- --------
Effect of exchange rate changes on cash (29) (25)
------- --------
Net increase in cash and cash equivalents 2,266 6,912
Cash and cash equivalents, beginning of period 10,165 2,297
------- --------
Cash and cash equivalents, end of period $12,431 $ 9,209
======= ========
The accompanying notes are an integral part
of the condensed consolidated financial statements.
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W. P. CAREY & CO. LLC
CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS (UNAUDITED) - CONTINUED
(in thousands, except share amounts)
Noncash operating, investing and financing activities:
A. In connection with the acquisition of Carey Management LLC in June 2000,
the Company has an obligation to issue up to an additional 2,000,000
shares, issuable over four years, if specified performance criteria are
achieved. The performance criteria for the period ended December 31, 2000
were achieved, and as a result, 500,000 shares were issued during the
quarter ended March 31, 2001. In addition, the Company issued 151,964
shares in connection with acquiring the remaining special partner interests
in the CPA(R) Partnerships. The issuance of the shares has been recorded as
follows:
Goodwill $ 9,050
Other assets and liabilities, net 1,906
Shares issued (10,956)
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-
========
B. During the three-month periods ended March 31, 2001 and 2000, the Company
issued restricted shares of $33 and $998, respectively, to affiliated
parties, including directors, in consideration of services rendered.
Restricted shares valued at $529 have been issued to employees and recorded
as unearned compensation. Unvested restricted shares and options of $76
issued in prior periods were forfeited. Included in compensation expense
for the three-month period ended March 31, 2001 was $496 relating to
restricted shares and options held by employees.
C. During the three-month period ended March 31, 2001, the Company obtained an
equity interest in an affiliate by issuing a promissory note for $1,000.
D. In connection with the sale of a property during the quarter ended March
31, 2001, the Company received a note receivable of $700 in partial
consideration for the sale.
The accompanying notes are an integral part
of the condensed consolidated financial statements.
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W. P. CAREY & CO. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollars in thousands, except share and per share amounts)
Note 1: Basis of Presentation/Accounting Policies:
The accompanying unaudited consolidated financial statements of W. P. Carey &
Co. LLC ("the Company") and its subsidiaries have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. All significant inter-entity balances and
transactions have been eliminated. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the results of the interim periods presented have been included.
The results of operations for the interim periods are not necessarily indicative
of results for the full year. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 2000.
Note 2. Transactions with Related Parties:
In connection with the acquisition of the operations of Carey Management LLC
("Carey Management") in June 2000, the purchase agreement provides for a total
of 2,000,000 shares to be issued over four years if certain performance criteria
are achieved. In March 2001, 500,000 shares were issued in connection with the
Company meeting the performance criteria for the period ended December 31, 2000.
Effective January 1, 2001, the Company acquired the remaining minority interests
in the CPA(R) Partnerships by issuing 151,964 shares at $18.50 per share
($2,811) to the remaining minority interest owner of the CPA(R) Partnerships,
William Polk Carey. The acquisition price was determined pursuant to an
independent valuation of the CPA(R) Partnerships as of December 31, 2000.
The Company earns fees as the Advisor to the four affiliated CPA(R) REITs,
Corporate Property Associates 10 Incorporated ("CPA(R):10"), Carey Institutional
Properties Incorporated ("CIP(R)"), Corporate Property Associates 12
Incorporated ("CPA(R):12"), and Corporate Property Associates 14 Incorporated
("CPA(R):14"). Under the advisory agreements with the CPA(R) REITs, the Company
performs services related to the day-to-day management of the CPA(R) REITs and
transaction-related services. In addition, the Company's broker-dealer
subsidiary earns fees in connection with the on-going "best efforts" public
offering of CPA(R):14. The Company earns an asset management fee of 1/2 of 1%
per annum of Average Invested Assets, as defined in the Agreements, for each
CPA(R) REIT and, based upon certain performance criteria for each CPA(R) REIT,
may be entitled to receive a performance fee of 1/2 of 1% of Average Invested
Assets. The Company is reimbursed for the cost of personnel provided for the
administration of the CPA(R) REITs. For the three-month period ended March 31,
2001, asset-based fees and reimbursements earned were $5,511. For the
three-month period ended March 31, 2001, the Company earned transaction fees of
$2,032 in connection with structuring and negotiating real estate acquisitions
and mortgage financing for the CPA(R) REITs.
As a result of the cancellation of the Management Agreement and acquisition of
Carey Management's workforce in June 2000, the Company no longer incurs
management and performance fees and general and administrative reimbursements.
For the three-month period ended March 31, 2000, the Company incurred combined
management and performance fees of $957 and general and administrative
reimbursements of $401.
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W. P. CAREY & CO. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
(dollars in thousands, except share and per share amounts)
Note 3. Lease Revenues:
The Company's operations consist of the investment in and the leasing of
industrial and commercial real estate. The financial reporting sources of the
lease revenues for the three-month periods ended March 31, 2001 and 2000 are as
follows:
2001 2000
---- ----
Per Statements of Income:
Rental income $11,826 $12,743
Interest income from direct financing leases 8,189 8,324
Adjustment:
Share of leasing revenues applicable to minority interests (113) (118)
Share of leasing revenues from equity investments 1,703 806
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$21,605 $21,755
======= =======
For the three months ended March 31, 2001 and 2000, the Company earned its net
leasing revenues (i.e., rental income and interest income from direct financing
leases) from more than 80 lessees. A summary of net leasing revenues is as
follows:
2001 % 2000 %
---- - ---- -
Dr Pepper Bottling Company of Texas $ 1,080 5% $ 1,062 5%
Gibson Greetings, Inc. 1,023 5 1,003 5
Detroit Diesel Corporation 991 5 915 4
Livho, Inc. 717 3 807 4
Orbital Sciences Corporation 664 3 664 3
Federal Express Corporation (a) 643 3 1,041 5
Quebecor Printing, Inc. 640 3 651 3
America West Holdings Corp. 635 3 635 3
Thermadyne Holdings Corporation 631 3 583 3
Furon Company 604 3 604 3
AutoZone, Inc. 584 3 560 3
The Gap, Inc. 551 3 551 2
Sybron International Corporation 541 3 541 2
Lockheed Martin Corporation 537 2 362 1
Checkfree Holdings Corporation Inc. (b) 522 2 321 1
Unisource Worldwide, Inc. 434 2 350 2
BellSouth Telecommunication, Inc. 428 2 306 1
Information Resources, Inc. (b) 411 2 364 2
AP Parts International, Inc. 404 2 404 2
Sybron Dental Specialties Inc. 403 2 366 2
CSS Industries, Inc. 401 2 399 2
Red Bank Distribution, Inc. 395 2 350 2
Brodart, Co. 380 2 380 2
Peerless Chain Company 366 2 366 2
Sprint Spectrum, L.P. 311 1 289 1
Duff-Norton Company, Inc. 291 1 291 1
High Voltage Engineering Corporation 287 1 332 1
Eagle Hardware & Garden, Inc. 272 1 365 2
United States Postal Service 272 1 272 1
Cendant Operations, Inc. 268 1 297 1
Other (c) 5,919 27 6,324 29
------- --- ------- ---
$21,605 100% $21,755 100%
======= === ======= ===
(a) Represents the Company's 40% pro rata equity ownership for the three months
ended March 31, 2001. The Company owned a 100% interest for the three
months ended March 31, 2000.
(b) Represents the Company's proportionate share of lease revenue from its
equity investment.
(c) Includes proportionate share of lease revenues from the Company's
equity investment or applicable to its minority interest owner.
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W. P. CAREY & CO. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
(dollars in thousands, except share and per share amounts)
Note 4. Equity Investments:
The Company owns 780,269 units of the operating partnership of Meristar
Hospitality Corporation ("Meristar"), a publicly traded real estate investment
trust which primarily owns hotels, and which is being accounted for under the
equity method. The Company has the right to convert its units in the operating
partnership to shares of common stock in Meristar at any time on a one-for-one
basis.
Meristar's financial statements for the year ended December 31, 2000 reported
total assets of $3,013,008 and shareholders' equity of $1,134,555 as of December
31, 2000 and revenues of $400,778 and net income of $105,861 for the year then
ended. As of April 24, 2001, Meristar's quoted share price was $19.92, resulting
in an aggregate value of the Company's units of approximately $15,543 if
converted. The carrying value of the equity interest in the Meristar operating
partnership as of March 31, 2001 was $19,361.
The Company owns equity interests with affiliates in four entities that each own
real estate net leased to a single tenant. The entities lease property to
Federal Express Corporation, Information Resources Inc., Checkfree Holdings,
Inc. and Titan Corporation. In addition, the Company owns common stock in the
four REITs with which it has advisory agreements. Combined financial information
of the affiliated equity investees is summarized as follows:
March 31, 2001 December 31, 2000
-------------- -----------------
Assets $1,794,229 $1,745,901
Liabilities 804,383 789,984
---------- ----------
Partners' capital/Shareholders' equity $ 989,846 $ 955,917
========== ==========
Three Months Ended March 31,
----------------------------
2001 2000
---- ----
Revenues $47,853 $2,389
Expenses 30,050 1,415
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Net income $17,803 $ 974
======= ======
Note 5. Line of Credit Agreement:
On March 23, 2001, the Company entered into a new credit agreement for a
$185,000 line of credit with Chase Manhattan Bank and eight other banks. The
line of credit, which matures in 2004, provides the Company a one-time right to
increase the amount available under the line of credit up to $225,000. The new
credit agreement, in effect, extended a three-year agreement that was scheduled
to expire in March 2001. Advances from the line of credit bear interest at an
annual rate indexed to either (i) the one, two, three or six-month LIBOR, as
defined, plus a spread which ranges from 0.6% to 1.45% depending on leverage or
corporate credit rating or (ii) the greater of the bank's Prime Rate and a rate
indexed to the Federal Funds Effective Rate. Advances are prepayable at any
time. The revolving credit agreement has financial covenants that require, among
other things, the Company to (i) maintain minimum equity value of $500,000 plus
85% of amounts received by the Company as proceeds from the issuance of equity
interests and (ii) meet or exceed certain operating and coverage ratios. The
Company is in compliance with these covenants.
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W.P. CAREY & CO. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
(dollars in thousands, except share and per share amounts)
Note 6. Segment Reporting:
The Company operates in two business segments - real estate and the net lease
management operations of affiliates. The management operations were acquired in
June 2000. The two segments are summarized as follows:
Three months ended March 31, Management Real Estate Other(1) Total Company
- ---------------------------- ---------- ----------- ----- -------------
Revenues:
2001 $7,642 $22,870 $1,385 $31,897
2000 - 21,954 1,322 23,276
Operating and interest expenses (excluding depreciation, amortization and
provision for income taxes):
2001 $4,898 $8,241 $1,194 $14,333
2000 - 9,589 1,171 10,760
Income from equity investments:
2001 $38 $1,414 - $1,452
2000 - 1,222 - 1,222
Net operating income(2)(3):
2001 $2,928 $12,466 $191 $15,585
2000 - 9,590 151 9,741
Long-lived assets:
March 31, 2001 $111,947 $750,770 $6,371 $869,088
December 31, 2000 105,504 761,028 7,136 873,668
Total assets:
March 31, 2001 $116,565 $777,179 $8,118 $901,862
December 31, 2000 111,375 784,628 8,239 904,242
(1) Primarily consists of the Company's hotel operations.
(2) Excludes amortization of intangibles and goodwill of $3,163 in 2001.
(3) Net operating income excludes gains and losses on sales.
Note 7. Gain on Sale of Real Estate and Equity Investments:
During the period ended March 31, 2001, the Company sold seven properties and an
equity investment in a real estate partnership for cash of $7,871 and a note
receivable of $700, and recognized net gain on sales of $217.
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W. P. CAREY & CO. LLC
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands, except share and per share amounts)
The following information should be read in conjunction with the condensed
consolidated financial statements and notes thereto as of March 31, 2001 of W.
P. Carey & Co. LLC and its subsidiaries ("WPC") included in this quarterly
report and WPC's Annual Report on Form 10-K for the year ended December 31,
2000. This quarterly report contains forward looking statements. Such statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievement of WPC to be materially different
from the results of operations or plans expressed or implied by such forward
looking statements. Accordingly, such information should not be regarded as
representations by WPC that the results or conditions described in such
statements or the objectives and plans of WPC will be achieved.
RESULTS OF OPERATIONS:
Effective June 29, 2000, WPC acquired the real estate management operations of
an affiliate by issuing 8,000,000 shares. As a result, WPC is now engaged in two
reportable operating segments, real estate operations and management services as
the Advisor to four affiliated real estate investment trusts (the "CPA(R)
REITs"). Accordingly, the results of operations for the three-month periods
ended March 31, 2001 and 2000 are not fully comparable. Net income for the three
months ended March 31, 2001 increased by $3,014 as compared with the three-month
period ended March 31, 2000. The increase in net income was due to improved
results from WPC's real estate operations. Management services incurred a net
loss; however, this was attributable solely to non-cash charges for the
amortization of intangible assets and goodwill.
Net income from real estate operations increased to $12,466 from $9,590 due to
increases in other income and equity income and decreases in interest and
property expenses and depreciation. Other income, which consists of revenues
from real estate operations other than lease revenues and interest, increased by
$1,859 primarily as a result of a $2,500 final settlement of a bankruptcy claim
against a former lessee, New Valley Corporation, relating to the termination of
a lease in 1993 on a property in Moorestown, New Jersey currently leased to
Cendant Operations, Inc. The decrease in interest expense was due to lower
interest incurred on WPC's advances on its line of credit as the result of lower
average outstanding balances for the comparable quarters. The decrease in
property expenses was directly attributable to the termination of the management
contract in connection with the June 2000 acquisition of the real estate
management operations as WPC is no longer charged asset management fees.
Management fees incurred in 2000 were $957. The decrease in depreciation was due
to the disposition of a majority interest in the Federal Express Corporation
property in Colliersville, Tennessee in December 2000 to an affiliate.
Lease revenues (rental income and interest income from direct financing leases)
decreased. The decrease was attributable to the sale of the majority interest in
the Federal Express property. During the quarter ended March 31, 2000, revenues
from the Federal Express lease were $1,041. The remaining interest in the
property is now accounted for under the equity method of accounting. Under the
equity method, WPC recognizes its share of the net income from the Federal
Express investment, but does not record pro rata rents for financial statement
purposes. The application of proceeds from the December 2000 sale of the
majority interest in the Federal Express property to the outstanding balance on
the line of credit directly contributed to the decrease in interest expense.
WPC incurred a net loss of $235 from its management services operations.
Excluding the non-cash charges of $3,163 for the amortization of intangibles and
goodwill, management services would have reflected income of $2,928. Management
fee income earned from affiliates was comprised of transaction fees of $2,032
and asset-based fees and reimbursements of $5,511. Transaction fees included
fees from structuring purchase transactions for three acquisitions and a
refinancing fee on obtaining a new mortgage financing on a property at a lower
rate of interest. Transaction-based fees for the quarter are not necessarily
representative of transaction-based fees for the full year and Management
projects an increase in transaction-based activity for the second half of the
year. Management expects asset-based management fee income to increase as it is
projected that Corporate Property Associates 14 will achieve the criterion that
will result in WPC earning performance fees under the advisory agreement with
Corporate Property Associates 14.
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W. P. CAREY & CO. LLC
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands, except share and per share amounts)
The increase in general and administrative expenses was due to the acquisition
of the workforce in connection with acquiring the management services
operations. Approximately 84% of the increase in general and administrative
costs resulted from increases in personnel-related costs with the remaining
increase primarily due to corporate-level expenses attributable to management
services operations.
WPC acquired a 90% interest in a joint venture that has entered into a
build-to-suit commitment in Strasbourg, France which will be net leased to
Bouygues Telecom S.A., an existing lessee. The expected completion date of the
property is November 2001. The lease will have an initial term of nine and a
half years and annual rents will be approximately $2,000.
Annual rents will decrease by $898 as a result of selling seven properties
during the quarter ended March 31, 2001, including the property leased to High
Voltage Engineering Corporation.
FINANCIAL CONDITION:
Cash flows from operations for the period ended March 31, 2001 of $13,916 were
not fully sufficient to fund dividends to shareholders of $14,202. Cash flows
from operations for the quarter ended March 31, 2001 are not expected to be
representative of cash flows from operations for the full year as
transaction-based revenues are projected to be higher during the next three
quarters. In addition, cash generated from operations was offset by timing
differences in receipts and payments on other operating assets and liabilities,
such as the timing of interest payments on WPC's advances on the line of credit.
Investing activities included using $4,699 for purchases of real estate and
additional capital expenditures, including $3,210 used to commence construction
of the Bouygues Telecom build-to-suit project; $859 for the expansion at the
Sprint property, $426 related to the redevelopment of the former Copeland
Beverage Group property in Los Angeles and a property in Broomfield, Colorado
and $204 to fund other improvements. The Company received $6,835 in cash and a
note receivable of $700 in connection with the sale of seven properties. In
addition, WPC received $1,036 from the sale of an equity investment in a
property in Carlsbad, California. Management continues to evaluate the real
estate portfolio and is actively seeking to sell smaller properties, as such
properties require more intensive asset-management services than larger
single-tenant net lease properties. In January 2001, WPC paid an installment of
deferred acquisition fees for $520 relating to 1998 and 1999 purchases to WPC's
former management company. Deferred acquisition fees are payable over a period
of no less than eight years.
During 2000, WPC committed to fund expansions at the Sprint Spectrum L.P.
property in Rio Rancho, New Mexico and the AT&T Corporation property in
Bridgeton, Missouri. The Sprint expansion has been completed, and annual rent
from Sprint will increase by approximately $270. The funding commitment at the
AT&T property, which is expected to be completed by July 2001 is for up to
$4,000, which will be funded in full upon completion. Costs to complete the
Bouygues Telecom build-to-suit are estimated to be $20,000.
On March 23, 2001, the Company entered into a new line of credit agreement which
in effect renewed and extended its original revolving line of credit for three
years through March 2004 on substantially the same terms. The revolving line of
credit provides for borrowings of up to $185,000, with a one-time right to
increase the commitment to up to $225,000. Borrowings on the credit facility
were stable and have increased by $6,000 to $100,000 since December 31, 2000.
Effective January 1, 2001, WPC acquired the remaining minority interest in the
CPA(R) Partnerships for $2,811 which was paid through the issuance of 151,964
shares. As a result, annual distribution commitments to minority interests of
approximately $300 have been eliminated. Concurrent with the purchase of the
remaining interests, certain CPA(R) Partnerships were merged so that as of
January 1, 2001 the four remaining partnerships will be wholly-owned
subsidiaries. With the reduction in the number of partnerships and the
elimination of the minority interest owners, WPC expects to achieve certain
operating efficiencies. In connection with meeting specified performance
criteria as of December 31, 2000, WPC was obligated to issue 500,000 shares.
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14
W. P. CAREY & CO. LLC
PART II
Item 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(in thousands)
$158,426 of the Company's long-term debt bears interest at fixed rates, and
therefore the fair value of these instruments is affected by changes in the
market interest rates. The following table presents principal cash flows based
upon expected maturity dates of the debt obligations and the related
weighted-average interest rates by expected maturity dates for the fixed rate
debt. The interest rate on the variable rate debt as of March 31, 2001 ranged
from 4.56% to 8.28%.
2001 2002 2003 2004 2005 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
Fixed rate debt $ 5,508 $ 9,637 $10,163 $ 27,122 $ 8,095 $97,901 $158,426 $162,436
Average interest rate 7.83% 7.72% 7.78% 7.71% 7.62% 7.55%
Variable rate debt 12,257 919 950 101,018 1,051 16,392 132,587 132,587
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended March 31, 2001, no matters were submitted to a vote of
Security Holders.
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
During the quarter ended March 31, 2001 the Company was not required to
file any reports on Form 8-K.
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15
W. P. CAREY & CO. LLC
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.
W. P. CAREY & CO. LLC
5/11/01 By: /s/ John J. Park
------------- ----------------------------------------
Date John J. Park
Executive Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
5/11/01 By: /s/ Claude Fernandez
------------- ----------------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
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