SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 9, 1996
CORPORATE PROPERTY ASSOCIATES 5, A CALIFORNIA LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
CALIFORNIA 0-15778 13-3327950
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(State of Organization) (Commission File No.) (IRS Employer
Identification Number)
50 Rockefeller Plaza, 2nd Floor
New York, NY 10020
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(Address of principal executive offices)
(212) 492-1100
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(Registrant's telephone number, including area code)
ITEM 2. DISPOSITION OF PROPERTY
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On April 9, 1996, Corporate Property Associates 5, a California
limited partnership (the "Partnership"), sold to Centerpoint Properties
Corporation ("Centerpoint") an improved parcel of real property located in
Hodgkins, Illinois (the "GATX Property"), the Equipment and all intangible
property associated with the GATX Property for a gross sales price of
$13,200,000.
The Partnership applied approximately $3,448,650 (including payment of
principal accrued interest and certain other costs) of the net sale proceeds to
repayment of the remaining debt on the GATX Property, which debt was held by
Aegon USA Realty advisors, a Georgia partnership. The remaining proceeds were
used to pay off two mortgage loans encumbered by two other Partnership
properties with the remainder applied to cash reserves.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(B) PRO FORMA FINANCIAL INFORMATION
Pro Forma Balance Sheet, March 31, 1996
Pro Forma Statement of Income for Quarter Ended March 31, 1996
Fro Forma Statement of Income for the Year Ended December 31, 1995
Pro Forma Annualized Statement of Taxable Operations and Cash Generated for the
Year Ended December 31, 1995 (Unaudited)
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements for the
Partnership have been prepared based upon certain pro forma adjustments to the
historical financial statements of the Company.
The statement covers only the properties or interests in entities owning
properties which have been disposed of by the Company and does not cover any
properties which the Company may acquire or dispose of in the future or any
future financings of these properties.
CORPORATE PROPERTY ASSOCIATES 5 INCORPORATED
PRO FORMA BALANCE SHEET
March 31, 1996
(unaudited)
Historical Pro Forma Adjustments Pro Forma
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Assets: GATX Exide/Gould
Land $ 3,960,767 $ 3,960,767
Buildings 22,753,409 22,753,409
Accumulated depreciation (8,554,708) (8,554,708)
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Real estate accounted for under the operating method 18,159,468 18,159,468
Net investment in direct financing leases 19,339,895 19,339,895
Operating real estate 7,678,286 7,678,286
Real estate held for sale 13,772,271 ($8,179,820) 5,592,451
Cash and cash equivalents 3,592,721 9,466,874 ($7,530,189) 5,529,406
Funds in escrow 2,707,100 2,707,100
Other assets 2,968,601 (55,317) 2,913,284
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Total assets $68,218,342 $1,231,737 ($7,530,189) $61,919,890
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Liabilities and Shareholders' Equity:
Liabilities
Mortgage notes payable $33,120,919 ($3,218,682) ($7,478,698) $22,423,539
Note payable to affiliate 1,151,000 1,151,000
Accrued interest payable 147,743 (23,124) (51,491) 73,128
Accounts payable and accrued expenses 510,210 510,210
Accounts payable to affiliates 117,618 117,618
Deferred gains & other liabilities 2,134,498 2,134,498
Prepaid rental income 110,951 110,951
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Total liabilities 37,292,939 (3,241,806) (7,530,189) 26,520,944
Shareholders' Equity
General partners (227,266) 269,729 42,463
Limited partners 31,152,669 4,203,814 35,356,483
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Total shareholders' equity 30,925,403 4,473,543 - 35,398,946
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Total liabilities and shareholders' equity $68,218,342 $1,231,737 ($7,530,189) $61,919,890
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CORPORATE PROPERTY ASSOCIATES 5 INCORPORATED
PRO FORMA STATEMENT OF INCOME
For the Quarter Ended March 31, 1996
(Unaudited)
Historical Pro Forma Adjustments Pro Forma
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Revenues: GATX Helena Exide/Gould
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Rental income $ 1,071,969 ($349,650) ($8,752) $ 713,567
Interest income from direct financing leases 823,158 823,158
Other interest income 28,511 28,511
Revenue of hotel operations 1,293,606 1,293,606
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3,217,244 (349,650) (8,752) 2,858,842
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Expenses:
Interest $ 759,171 (69,620) (12,049) ($233,700) $ 443,802
Depreciation 454,234 (95,873) 358,361
General and administrative 142,885 142,885
Property expenses 117,134 (5,338) (9,825) 101,971
Amortization 9,792 (6,146) 3,646
Operating expenses of hotel operations 1,230,044 1,230,044
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2,713,260 (176,977) (21,874) (233,700) $ 2,280,709
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Income before net gains on sale of real estate 503,984 (172,673) 13,122 233,700 578,133
Net gains on sale of real estate 90,356 (90,356)
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Net income $ 594,340 ($172,673) ($77,234) $ 233,700 578,133
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CORPORATE PROPERTY ASSOCIATES 5 INCORPORATED
PRO FORMA STATEMENT OF INCOME
For the Year Ended December 31, 1995
(Unaudited)
Historical Pro Forma Adjustments Pro Forma
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Revenues: Industrial
GATX Helena General Exide/Gould Liberty
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Rental income $4,642,686 ($1,398,000) ($530,480) $2,714,206
Interest income from direct
financing leases 3,879,125 ($637,322) 3,241,803
Other interest income 307,951 307,951
Revenue of hotel operations 6,768,268 6,768,268
Other income 170,107 (5,933) 164,174
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15,768,137 (1,398,000) (530,480) (643,255) 13,196,402
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Expenses:
Interest 3,495,872 (284,774) (200,752) (232,240) ($865,118) 1,912,988
Depreciation 2,065,781 (383,684) (224,894) 1,457,203
General and administrative 841,920 841,920
Property expenses 810,581 (4,800) (82,526) (110,692) ($174,936.0) 437,627
Amortization 33,599 (24,585) 9,014
Writedown to net realizable value 1,980,550 1,980,550
Operating expenses of hotel
operations 5,241,370 5,241,370
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14,469,673 (697,843) (508,172) (342,932) (865,118) (174,936) 11,880,672
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Income before net gains on sale
of real estate 1,298,464 (700,157) (22,308) (300,323) 865,118 174,936 1,315,730
Net gains on sale of real estate 614,234 1,719,828 (2,334,062) -
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Net income $1,912,698 ($700,157.0) ($22,308.0) $1,419,505 $865,118 ($2,159,126) $1,315,730
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CORPORATE PROPERTY ASSOCIATES 5 INCORPORATED AND SUBSIDIARIES
PRO FORMA STATEMENT OF TAXABLE INCOME FOR THE YEAR
ENDED DECEMBER 31, 1995 AND AFTER TAX CASH FLOW (UNAUDITED)
Net income per consolidated pro forma
income for December 31, 1995 $ 1,315,730
Differences in depreciation (1,827,201)
Amortization of deferred gains (71,687)
Straight-line lease adjustments 49,032
Writedowns to net realizable value 1,980,550
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Pro forma taxable income 1,446,424
Add: Depreciation 3,284,404
Less: Principal amortization (57,150)
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Pro forma after tax cash flow $ 4,673,678
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1. Basis of Presentation:
The unaudited pro forma financial statements of Corporate Property
Associates 5 (the "Partnership") have been prepared based on the historical
financial statements of the Partnership. The pro forma balance sheet of the
Partnership has been prepared as if the sale of a property leased to GATX
Logistics, Inc. ("GATX") in Hodgkins, Illinois had been completed at March 31,
1996 and the proceeds from the sale had been used to satisfy the mortgage loan
encumbering the GATX property. In addition, the pro forma financial statement
has been prepared as if a portion of the excess proceeds generated from the GATX
property sale were used to pay off and satisfy mortgage loans encumbered by
properties leased to Exide Electronics Corporation ("Exide") and Gould, Inc.
("Gould"). In January 1996, the Partnership sold a multi-tenant office building
in Helena, Montana for $4,800,000 including the assignment of an existing
mortgage lease on the property. In September 1995, the Partnership terminated
its lease with Industrial General Corporation ("IGC") and sold three of the four
properties which had been leased to IGC. The pro forma financial statements
have been prepared to give effect to the Helena and IGC transactions. The pro
forma income statement and pro forma statement of taxable income and after tax
cash flow have been prepared as if the dispositions of the GATX and Helena
properties and the above-mentioned mortgage satisfactions had occurred on
January 1, 1995. The pro forma financial information should be read in
conjunction with the historical financial statements of the Partnership. The pro
forma financial statement should be read in conjunction with the historical
financial statements of the Partnership. The pro forma financial results are not
necessarily indicative of the financial position of the results of operations
had the dispositions occurred on January 1, 1995, nor are they necessarily
indicative of the financial position or results of operations for future
periods.
2. Pro Forma Adjustments
A. The net carrying value of the GATX property was reclassified to real estate
held for sale at March 31, 1995. After paying off the mortgage loan on the
property and writing off deferred financing costs related to such mortgage loan,
the gain on the sale will be first allocated to any partners with a negative
capital balance and, thereafter, allocated 99% to the Limited Partners and 1% to
the Individual General Partner in accordance with the Amended Agreement of
Limited Partnership.
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B. The mortgage payable balances on the Exide and Gould properties at March 31,
1996 were $1,387,877 and $6,090,822, respectively, with accrued interest thereon
of $12,577 and $38,913, respectively.
C. The GATX lease provided for annual rentals of $1,398,000. The property at
disposition had a depreciable basis of $11,518,378 with depreciation calculated
on a straight-line basis using a 30-year depreciable life; certain improvements
were capitalized during the period, accordingly, a full period's depreciation
has not been taken on such improvements. Interest expense was calculated based
on a loan with an initial balance of $3,500,000 at an annual interest rate of
8.625% and which provided for monthly payment of principal and interest of
$33,290 and an amortization schedule of 16 and one-half years. Property
expenses consist of certain costs which were specifically identified as relating
to the GATX property. Amortization expense was based on deferred financing
costs of $122,926 which were being amortized over the 5-year term of the
mortgage.
D. The Helena property is a multi-tenant facility and includes a lease with
International Business Machines Corporation ("IBM") for approximately 60% of the
leasable area. IBM rent was $282,227 annually and was adjusted for financial
reporting purposes to reflect straight line rent, primarily due to a lump sum
rental payment received in January 1993 which was being recognized as income
over the term of the IBM lease. Such adjustment increased IBM's rent for
financial reporting purposes by $35,870 for 1995. The remaining 6 tenants
contributed $212,383 of rentals. Depreciation expense was based on depreciable
assets of $6,623,794 using the 30-year straight line method with improvements of
approximately $363,000 placed in service throughout 1995. Interest was
calculated based on a mortgage loan with an initial balance of $2,937,000 at an
annual interest rate of 7% with monthly payments of principal and interest of
$18,800. Property expenses were based on expenses directly attributable to the
property, net of reimbursements received from IBM for its share of such
expenses. The leases with the other tenants at the property were not net
leases; accordingly, certain property expenses were the obligation of the
Partnership.
E. In September 1995, the Company terminated its lease with IGC and sold three
properties and satisfied a mortgage which collateralized the IGC properties and
a property leased to FMP/Rama Company. Rental income, interest expense and
property expense relating to IGC has been eliminated. As the IGC lease was a
direct financing lease, depreciation was not recorded for financial reporting
purposes.
F. Interest expense on the Exide and Gould mortgage loans were calculated as
follows. The Exide loan which had an initial balance of A$1,500,000 provided
for monthly payments of interest and principal of $14,854.50 based on a thirty-
year amortization schedule and an annual interest rate of 11.50%. The Gould
loan which had an initial balance of $700,000 provided for monthly payments of
principal and interest of $71,153 based on a twenty-five year amortization
schedule at an annual interest rate of 11.5%.
G. In December 1994 the Company transferred two properties to its lessee,
Liberty Fabrics of New York ("Liberty") even though a final determination of the
purchase price had not been determined. No gain was recognized at that time as
Liberty, subject to certain conditions, could rescind the property transfer.
The contingencies were subsequently resolved, resulting in such transfer being
irrevocable and the gain on sale recognized. The costs related to resolving the
contingency and the gain recognized at the time of such resolution have been
eliminated from pro forma net income.
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H. Adjustments for pro forma taxable income are as follows:
1. Depreciation differs between tax and financial reporting as (i)
depreciation is taken for tax purposes on all real properties while no
depreciation is taken for financial reporting purposes on real property which
has been classified as a direct financing lease, and (ii) the depreciable lives
for tax purposes differ from the depreciable lives for financial reporting
purposes on real property which has been classified as an operating method
lease.
2. Certain gains which were deferred for financing reporting purposes
and are being amortized were not deferred for tax reporting purposes.
Accordingly, the benefit realized for financial reporting purposes was
recognized in prior periods for tax reporting purposes and has been eliminated.
3. Straight line lease adjustments are not recognized for tax purposes.
This adjustment relating to the IBM lease has not been included (see 2D).
4. Writedowns to net realizable value are based on management's
judgment pursuant to Statement of Financial Accounting Standard No. 121. Such
writedowns are not deductible for tax purposes.
5. The depreciation adjustment for after-tax cash flow consists of the
sum of (i) pro forma financial reporting depreciation for the year ended
December 31, 1995 and (ii) the adjustment for differences in depreciation
described above.
6. Principal amortization is based on actual amortization reported in
the Partnership's Statement of Cash Flows for the year ended December 31, 1995
and reduced for principal amortization on the GATX, Helena, Exide, Gould and IGC
mortgage loans.
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(C) EXHIBITS
The following exhibits are filed as part of this Current Report on Form 8-K:
Exhibit No. Exhibit Page No.
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10.1 Purchase Agreement dated March 28, 1996
between Corporate Property Associates 5,
the seller, CenterPoint Properties
Corporation as purchaser
10.2 Amendment to Purchase Agreement dated
April 3, 1996 between Corporate Property
Associates 5, the seller, CenterPoint
Properties Corporation as purchaser
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on this
28th day of May, 1996.
CORPORATE PROPERTY ASSOCIATES 5
By: W.P. Carey & Co., Inc.,
its managing general partner
By: \s\Michael D. Roberts
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Michael D. Roberts
First Vice President and
Controller
EXHIBIT INDEX
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Exhibit No. Exhibit Page No.
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10.1 Purchase Agreement dated March 28, 1996 between
Corporate Property Associates 5, the seller,
CenterPoint, Properties Corporation as
purchaser.
10.2 Amendment to Purchase Agreement dated
April 3, 1996 between Corporate Property
Associates 5, the seller, CenterPoint
Properties Corporation as purchaser