1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(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
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or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
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Commission file number 0-9727
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CORPORATE PROPERTY ASSOCIATES 2
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(Exact name of registrant as specified in its charter)
CALIFORNIA 13-3022196
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
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(Address of principal executive offices) (Zip Code)
(212) 492-1100
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(Registrant's telephone number, including area code)
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(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 2
(a California limited partnership)
PART I
Item 1. - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1996 1997
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(Note) (Unaudited)
ASSETS:
Land and buildings, net of
accumulated depreciation of
$5,850,679 at December 31, 1996 and $11,756,075 $11,922,163
$6,110,389 at June 30, 1997
Net investment in direct
financing leases 20,259,530 20,368,452
Cash and cash equivalents 1,066,861 1,168,955
Other assets 600,057 794,119
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Total assets $33,682,523 $34,253,689
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LIABILITIES:
Mortgage notes payable $ 7,787,061 $ 7,349,574
Accrued interest payable 75,233 72,490
Accounts payable and accrued expenses 66,050 101,391
Prepaid rental income and security deposits 283,694 309,670
Accounts payable to affiliates 63,447 140,952
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Total liabilities 8,275,485 7,974,077
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PARTNERS' CAPITAL:
General Partners 208,334 217,060
Limited Partners (54,900 Limited Partnership
Units issued and outstanding) 25,198,704 26,062,552
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Total partners' capital 25,407,038 26,279,612
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Total liabilities and
partners' capital $33,682,523 $34,253,689
=========== ===========
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
financial statements at that date.
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CORPORATE PROPERTY ASSOCIATES 2
(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
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Revenues:
Rental income from
operating leases $ 450,480 $ 535,597 $ 876,062 $1,070,583
Interest from direct
financing leases 670,006 681,171 1,342,235 1,357,272
Other interest income 9,158 11,517 19,868 27,344
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1,129,644 1,228,285 2,238,165 2,455,199
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Expenses:
Interest 277,042 140,153 456,990 281,358
Depreciation 124,696 129,855 249,929 259,710
General and administrative 91,668 76,999 161,619 146,874
Property expense 42,407 112,485 176,337 184,067
Amortization 1,101 1,786 3,276 3,571
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536,914 461,278 1,048,151 875,580
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Net income $ 592,730 $ 767,007 $1,190,014 $1,579,619
========== ========== ========== ==========
Net income allocated
to General Partners $ 5,927 $ 7,670 $ 11,900 $ 15,796
========== ========== ========== ==========
Net income allocated
to Limited Partners $ 586,803 $ 759,337 $1,178,114 $1,563,823
========== ========== ========== ==========
Net income per Unit:
(54,900 Limited
Partnership Units) $ 10.69 $ 13.83 $ 21.46 $ 28.48
========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
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CORPORATE PROPERTY ASSOCIATES 2
(a California limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30,
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1996 1997
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Cash flows from operating activities:
Net income $ 1,190,014 $ 1,579,619
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 253,205 263,281
Other noncash items (95,823) (108,922)
Net change in operating assets and liabilities 37,927 (61,554)
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Net cash provided by operating activities 1,385,323 1,672,424
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Cash flows from investing activities:
Additional capitalized costs (5,000) (425,798)
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Net cash used in investing activities (5,000) (425,798)
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Cash flows from financing activities:
Distributions to partners (1,598,901) (707,045)
Prepayment of mortgage notes payable (5,539,072)
Proceeds from issuance of mortgage note payable 7,000,000
Payments on mortgage principal (518,903) (437,487)
Payments on note payable to affiliate (1,250,000)
Proceeds from issuance of note payable to affiliate 1,000,000
Deferred financing costs (72,324)
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Net cash used in financing activities (979,200) (1,144,532)
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Net increase in cash and cash equivalents 401,123 102,094
Cash and cash equivalents, beginning of period 577,506 1,066,861
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Cash and cash equivalents, end of period $ 978,629 $ 1,168,955
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Supplemental disclosure of cash flows information:
Interest paid $ 464,948 $ 284,101
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The accompanying notes are an integral part of the consolidated financial
statements.
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CORPORATE PROPERTY ASSOCIATES 2
(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, 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
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December 31, 1996 $3,532 $349,713 $6.37
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March 31, 1997 $3,538 $350,262 $6.38
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A distribution of $6.39 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 $18,558 and $41,018, respectively, and
general and administrative expense reimbursements of $11,549 and $26,728,
respectively, payable to an affiliate. For the three-month and six-month periods
ended June 30, 1997, the Partnership incurred property management fees of
$37,228 and $70,363, respectively, and general and administrative expense
reimbursements of $21,874 and $32,213, respectively, payable to an affiliate.
Management believes that ultimate payment of a preferred return to the General
Partners of $1,048,845, based upon cumulative proceeds of sales of assets, is
reasonably possible but not probable, as defined pursuant to Statement of
Financial Accounting Standards No. 5.
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 $26,141 and $17,076, respectively.
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CORPORATE PROPERTY ASSOCIATES 2
(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. For the six-month periods ended June 30,
1996 and 1997, the Partnership earned its total operating revenues (rental
income plus interest income from financing leases) from the following lease
obligors:
1996 % 1997 %
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Unisource Worldwide, Inc. $ 658,338 30% $ 661,206 28%
Prefinish Metals Incorporated 478,271 21 483,243 20
Gibson Greetings, Inc. 411,592 19 417,383 17
Cleo, Inc. 220,736 10 227,164 9
AT&T Corporation 147,989 7 148,156 6
Western Union Financial Services, Inc.
(assigned by New Valley Corporation) 118,442 5 118,226 5
Excel Communications, Inc. 104,483 4
B&G Contract Packaging, Inc. 42,000 2 84,000 3
Maybelline Products Co., Inc. 78,000 3 78,000 3
Sports & Recreation, Inc. 60,546 3
Other 62,929 3 45,448 2
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$2,218,297 100% $2,427,855 100%
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CORPORATE PROPERTY ASSOCIATES 2
(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 2
(a California limited partnership)
By: W.P. CAREY & CO., INC.
09/03/97 By: /s/ Steven M. Berzin
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Date Steven M. Berzin
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
09/03/97 By: /s/ Claude Fernandez
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Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
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