OMB APPROVAL
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OMB NUMBER 3235-0070
EXPIRES OCTOBER 31, 1995
ESTIMATED AVERAGE BURDEN
HOURS PER RESPONSE 190.00
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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 MARCH 31, 1995
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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 0-14551
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CORPORATE PROPERTY ASSOCIATES 6
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(Exact name of registrant as specified in its charter)
CALIFORNIA 13-3247122
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
INDEX
Page No.
--------
PART I
------
Item 1. - Financial Information*
Consolidated Balance Sheets, December 31, 1994 and
March 31, 1995 2
Consolidated Statements of Income for the three
months ended March 31, 1994 and 1995 3
Consolidated Statements of Cash Flows for the three
months ended March 31, 1994 and 1995 4
Notes to Consolidated Financial Statements 5-8
Item 2. - Management's Discussion of Operations 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, March 31,
1994 1995
------------- ------------
(Note) (UNAUDITED)
ASSETS:
Land, buildings and personal property,
net of accumulated depreciation of
$13,405,377 at December 31, 1994 and
$13,785,258 at March 31, 1995 $45,342,342 $44,967,478
Net investment in direct
financing lease 36,920,755 36,920,755
Cash and cash equivalents 4,412,869 3,238,506
Notes receivable from affiliate 1,295,000 1,295,000
Accrued interest and rents receivable 79,510 352,802
Other assets 2,135,538 2,397,274
----------- -----------
Total assets $90,186,014 $89,171,815
=========== ===========
LIABILITIES:
Mortgage notes payable $51,433,354 $44,479,606
Note payable 6,000,000
Accrued interest payable 876,506 995,363
Accounts payable and accrued expenses 481,110 290,545
Accounts payable to affiliates 34,190 40,323
Prepaid rental income and other liabilities 360,238 329,009
----------- -----------
Total liabilities 53,185,398 52,134,846
----------- -----------
PARTNERS' CAPITAL:
General Partners (345,685) (341,938)
Limited Partners (47,950 and 47,930
Limited Partnership Units issued and
outstanding at December 31, 1994 and
March 31, 1995) 37,346,301 37,378,907
----------- -----------
Total partners' capital 37,000,616 37,036,969
----------- -----------
Total liabilities and
partners' capital $90,186,014 $89,171,815
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
Note: The consolidated balance sheet at December 31, 1994 has been
derived from the audited financial statements at that date.
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CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
March 31, 1994 March 31, 1995
-------------- --------------
Revenues:
Rental income from operating leases $1,366,233 $1,366,233
Interest from direct financing leases 1,349,888 1,344,269
Other interest income 83,219 91,803
Revenue of hotel operations 1,020,912 1,078,409
Other income 224,138 47,956
---------- ----------
4,044,390 3,928,670
---------- ----------
Expenses:
Interest on mortgages and note payable 1,274,476 1,154,198
Depreciation 408,433 379,881
General and administrative 112,845 177,476
Property expense 136,199 74,534
Amortization 40,252 41,044
Operating expenses of
hotel operations 822,400 865,697
---------- ----------
2,794,605 2,692,830
---------- ----------
Net income $1,249,785 $1,235,840
========== ==========
Net income allocated to
General Partners $ 74,987 $ 74,150
========== ==========
Net income allocated to
Limited Partners $1,174,798 $1,161,690
========== ==========
Net income per Unit
(47,930 Limited
Partnership Units) $24.50 $24.24
====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
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CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
--------------------------
1994 1995
------------ ------------
Cash flows from operating activities:
Net income $ 1,249,785 $ 1,235,840
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 448,685 420,925
Note receivable received in connection
with bankrupcty settlement (172,414)
Net change in operating assets and liabilities (175,650) (456,705)
----------- -----------
Net cash provided by operating activities 1,350,406 1,200,060
----------- -----------
Cash flows from investing activities:
Additional capitalized costs (22,539) (5,017)
----------- -----------
Net cash used in investing activities (22,539) (5,017)
----------- -----------
Cash flows from financing activities:
Distributions to partners (1,174,386) (1,179,487)
Retirement of Limited Partner Units (20,000)
Proceeds from note payable 6,000,000
Prepayment of mortgage payable (6,615,148)
Payments on mortgage principal (335,386) (338,600)
Deferred financing costs (216,171)
----------- -----------
Net cash used in financing activities (1,509,772) (2,369,406)
----------- -----------
Net decrease in cash and
cash equivalents (181,905) (1,174,363)
Cash and cash equivalents, beginning of period 5,464,578 4,412,869
----------- -----------
Cash and cash equivalents, end of period $ 5,282,673 $ 3,238,506
=========== ===========
Supplemental disclosure of cash flows
information:
Interest paid $ 1,222,139 $ 1,035,341
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
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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, 1994.
Note 2. Distributions to Partners:
-------------------------
Distributions declared and paid to partners during the three months ended
March 31, 1995 are summarized as follows:
Per Limited Partner
Quarter Ended General Partners Limited Partners Unit
---------------- ---------------- ---------------- -------------------
December 31, 1994 $70,403 $1,109,084 $23.13
======= ========== ======
A distribution of $23.15 per Limited Partner Unit for the quarter ended
March 31, 1995 was declared and paid in April 1995.
Note 3. Transactions with Related Parties:
---------------------------------
For the three-month periods ended March 31, 1994 and 1995, the Partnership
incurred management fees of $26,831 and $23,422, respectively, and general
and administrative expense reimbursements of $44,750 and $37,676,
respectively, payable to an affiliate.
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 three months
ended March 31, 1994 and 1995 were $13,726 and $46,727, respectively.
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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 three-month periods ended March 31, 1994 and
1995, the Partnership earned its total real estate lease revenues (rental
income plus interest income from financing leases) as follows:
1994 % 1995 %
---------- ---- ---------- ----
Stoody Deloro Stellite, Inc. $ 427,831 16% $ 471,403 18%
AP Parts Manufacturing, Inc. 381,596 14 381,596 14
Anthony's Manufacturing Company, Inc. 337,027 12 337,027 12
AutoZone, Inc. 378,095 14 328,904 12
Peerless Chain Company 317,363 12 317,363 12
Wal-Mart Stores, Inc. 206,815 8 206,815 8
Kinney Shoe Corporation 168,192 6 168,192 6
Folger Adam Company 141,477 5 141,477 5
Motorola, Inc. 125,000 5 125,000 5
Harcourt General Corporation 116,875 4 116,875 4
Lockheed Martin Corporation 73,250 3 73,250 3
Winn-Dixie Stores, Inc. 42,600 1 42,600 1
---------- --- ---------- ---
$2,716,121 100% $2,710,502 100%
========== === ========== ===
Operating results of three hotels for the three-month periods ended March
31, 1994 and 1995 are summarized as follows:
1994 1995
----------- -----------
Revenue $1,020,912 $1,078,409
Fees paid to hotel management company (17,509) (16,612)
Other operating expenses (804,891) (849,085)
---------- ----------
Hotel operating income $ 198,512 $ 212,712
========== ==========
Note 5. Properties Leased to Anthony's Manufacturing Company, Inc.:
----------------------------------------------------------
Anthony's Manufacturing Company, Inc. ("Anthony's") leases manufacturing,
warehouse and office facilities in San Fernando, California from the
Partnership. Since March 1992, Anthony's has not paid a scheduled monthly
rent increase of $10,485 and, in addition, the Partnership has received
base rents from Anthony's for only two months since February 1994,
resulting in a rent arrearage of $1,487,415 as of March 31, 1995. Of such
arrearage, the Partnership had established a reserve for uncollected rents
as of December 31, 1994 of $1,150,388 which is reflected in the
accompanying consolidated balance sheet. In May 1995, the Partnership and
Anthony's reached an agreement in principle in which Anthony's has agreed
to pay $1,550,000 in settlement of all arrearages through May 1, 1995. In
exchange for such settlement payment, the Partnership and Anthony's have
agreed to modify the terms of the existing lease. Under the proposed
modification, Anthony's monthly rental payment will decrease from $112,342
to $73,000. The amended lease will provide for rental increases every
three years based on a formula indexed to increases in the Consumer Price
Index. On May 10, 1995, Anthony's paid the Partnership $155,000 towards
the settlement with the remaining $1,395,000 due upon execution of the
lease modification agreement which is expected to occur prior to June 1,
1995. Such agreement is subject to satisfactory documentation and receipt
by the Partnership of the entire settlement amount.
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CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
The Partnership has entered into an agreement with the lender to satisfy
the mortgage loan collateralized by the Anthony's properties for a payment
of $5,440,000. At March 31, 1995, the Anthony's mortgage loan had an
outstanding principal balance of $6,893,966 and accrued interest thereon of
$705,387. In April 1995, the Partnership made a nonrefundable deposit of
$544,000 which will be applied towards the $5,440,000 payment. Under the
agreement, the payoff of the loan must occur prior to May 22, 1995. The
Partnership currently intends to utilize the settlement proceeds of
$1,550,000 and new financing of $4,000,000 to fund the $5,440,000 payment.
The Partnership is currently negotiating to increase the amount available
under its credit facility for such new financing (see Note 6).
Note 6. Debt Refinancing:
----------------
On March 10, 1995, the Partnership made a balloon payment of $6,615,148 to
satisfy the nonrecourse mortgage loan collateralized by the Partnership's
property leased to Stoody Deloro Stellite, Inc., which matured on March 1,
1995. A portion of the funds necessary for the payment of the mortgage
loan were obtained from a new loan of $6,000,000, pursuant to a credit
agreement. The new loan provides for quarterly interest only payments
commencing July 1, 1995 at a variable interest rate based on the three-
month LIBOR plus 4.25% per annum. The Partnership must offer as a
prepayment to the lender the proceeds from the sale of any Partnership
properties; however, the lender may decline such proceeds. The Partnership
must maintain ratios of Free Operating Cash Flow to debt service on the
loan ranging from 3.4:1 to 3:1 over the life of the agreement and maintain
a consolidated net worth and appraised property values of $25,000,000, as
adjusted. Under the terms of the credit agreement, the Partnership also
has agreed that it may obtain new nonrecourse debt on any of its properties
only for the purpose of refinancing existing mortgage debt. Mortgage
indebtedness may not exceed $46,806,850 less an adjustment for subsequent
scheduled principal amortization on existing mortgage loans plus closing
costs on any new loans.
The $6,000,000 credit agreement loan is a recourse obligation of the
Partnership and matures on July 1, 1999. Except for the application of
proceeds from the sale of properties and other limited circumstances, no
loan prepayments may be made until January 1, 1999. The Partnership is
negotiating to increase the loan amount to $10,000,000 in connection with
paying off the Anthony's mortgage loan.
- 7 -
CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATION
----------------------------------------------
Net income for the three-month period ended March 31, 1995 decreased by
$14,000 as compared with net income for the three-month period ended March
31, 1994. The decrease in net income is due primarily to a decrease in
other income and to a lesser extent to an increase in general and
administrative expense. This was partially offset by decreases in interest
and property expenses. Other income generally represents income from
nonrecurring items; other income in 1994 resulted from amounts received in
connection with a settlement agreement from an affiliate of the former
lessee of the Livonia hotel property. The decrease in property expense was
due to costs incurred in connection with the assessment of liquidity
alternatives in 1994 that were not incurred in 1995. The decrease in
interest expense is due to the decreasing interest component of the
Partnership's fixed rate mortgages and the payoff of the Stoody Deloro
Stellite, Inc. ("Stoody") mortgage loan which bore interest at the rate of
13% per annum and was paid off with a variable rate recourse obligation.
Operating results for the hotel operations were substantially similar for
the comparable periods.
There has been no material change in the Partnership's financial
condition since December 31, 1994 and Management believes that the current
cash balance of $3,239,0000 and cash provided from operating activities
will be sufficient to meet the Partnership's current cash requirements
which consist primarily of paying quarterly distributions and meeting
scheduled debt service obligations. During the period, the Partnership
utilized $831,000 of cash reserves to satisfy the balloon payment on the
Stoody mortgage loan and pay financing costs of obtaining a $6,000,000
loan. All of the proceeds from the note were used in paying off the Stoody
loan. As such note is a recourse obligation of the Partnership, the
Partnership is now required to meet certain financial covenants. The
Partnership has not yet reached a decision as to whether it intends to
comply with the Holiday Inn modernization plan at its three hotel
properties. The Partnership's share of costs necessary to upgrade the
hotel properties is estimated to amount to $500,000, which Management
believes could be funded from existing cash reserves. Such costs may need
to be incurred over the next several years for the hotels to remain
competitive even if the hotels do not retain their affiliation with Holiday
Inn. In the event that the Anthony's Manufacturing Company, Inc.
("Anthony's") lease is modified and the necessary financing is obtained to
purchase the existing mortgage loan on the Anthony's properties at a
discount, the net annual cash from the Anthony's properties should
approximate between $450,000 and $500,000. During the current three-month
period, no operating cash flow was generated from the Anthony's properties.
Although Management believes that the Anthony's lease modification will be
executed and that the necessary financing will be available to pay off the
existing mortgage loan, there can be no assurance that such transactions
will be executed.
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CORPORATE PROPERTY ASSOCIATES 6
- a California limited partnership
PART II
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Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
(a) Exhibits:
None
(b) Reports on Form 8-K:
During the quarter ended March 31, 1995, the Partnership was
not required to file any reports on Form 8-K.
- 9 -
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.
05/12/95 By: /s/ Claude Fernandez
-------------- ------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
05/12/95 By: /s/ Michael D. Roberts
-------------- -------------------------------
Date Michael D. Roberts
First Vice President and Controller
(Principal Accounting Officer)
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