Item 1. Business.
Registrant is engaged in the business of investing in commercial and industrial real estate properties which are net leased to commercial and industrial entities. Registrant was organized as a California limited partnership on July 23, 1984. The General Partners of Registrant are Carey Corporate Property, Inc. (the "Corporate General Partner"), a Delaware corporation, and William Polk Carey (the "Individual General Partner"). The Corporate General Partner is 79.9% owned by W. P. Carey & Co., Inc. ("W.P. Carey"), 10.1% owned by William P. Carey ("Carey") and 10% by Lehman Brothers, Inc. Affiliates of the Corporate General Partner and the Individual General Partner are also the General Partners of affiliates of Registrant, Corporate Property Associates ("CPA(R):1"), Corporate Property Associates 2 ("CPA(R):2"), Corporate Property Associates 3 ("CPA(R):3"), Corporate Property Associates 7 - a California limited partnership ("CPA(R):7"), Corporate Property Associates 8, L.P., a Delaware limited partnership ("CPA(R):8"), Corporate Property Associates 9, L.P., a Delaware limited partnership ("CPA(R):9"), and the advisor of Corporate Property Associates 10 Incorporated ("CPA(R):10"), Carey Institutional Properties Incorporated ("CIP(TM)") and Corporate Property Associates 12 Incorporated ("CPA(R):12"). Registrant has a management agreement with Carey Corporate Property Management Company (formerly Carey Corporate Property Management, Inc.) ("Carey Management"), a division of W.P. Carey. According to the terms of this agreement, Carey Management performs a variety of management services for Registrant. Registrant has entered into an agreement with Fifth Rock L.P., an affiliate, for the purpose of leasing office space. Reference is made to the Prospectus of Registrant dated November 30, 1984, filed pursuant to Rules 424(b) and 424(c), respectively, under the Securities Act of 1933 and incorporated herein by reference (said Prospectus, as so supplemented, is hereinafter called the "Prospectus").
The properties owned by Registrant are described in Item 2.
Item 2. Properties. ----------
(1) These properties are encumbered by mortgage notes payable. (2) These properties are operated with affiliates.
The material terms of Registrant's leases with its significant tenants are summarized in the following table:
(1) Includes original cost of investment and net increases or decreases to net investment subsequent to purchase.
The material terms on the mortgage debt of Registrant's properties is summarized in the following table:
(1) Variable rate based on 64% of lender's prime rate. (2) Variable rate based on 3.5% over 90-day London Inter-Bank Offered Rate. (3) Financing consists of a series of bonds maturing between 1997 and 2015 with interest rates varying from 6.6% to 9%. (4) Estimate based on current interest rates. (5) Operated by Registrant.
Item 3.
Item 3. Legal Proceedings. ------------------
As of the date hereof, Registrant is not a party to any material pending legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders. ----------------------------------------------------
No matter was submitted during the fourth quarter of the year ended December 31, 1996 to a vote of security holders, through the solicitation of proxies or otherwise.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related ------------------------------------------------- Stockholder Matters. --------------------
Information with respect to Registrant's common equity is hereby incorporated by reference to page 26 of Registrant's Annual Report contained in Appendix A.
Item 6.
Item 6. Selected Financial Data. ------------------------
Selected Financial Data are hereby incorporated by reference to page 1 of Registrant's Annual Report contained in Appendix A.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition ----------------------------------------------------------- and Results of Operations. --------------------------
Management's Discussion and Analysis are hereby incorporated by reference to pages 2 to 4 of Registrant's Annual Report contained in Appendix A.
Item 8.
Item 8. Consolidated Financial Statements and Supplementary Data. ---------------------------------------------------------
The following consolidated financial statements and supplementary data are hereby incorporated by reference to pages 5 to 19 of Registrant's Annual Report contained in Appendix A:
(i) Report of Independent Accountants. (ii) Consolidated Balance Sheets as of December 31, 1995 and 1996. (iii) Consolidated Statements of Income for the years ended December 31, 1994, 1995 and 1996. (iv) Consolidated Statements of Partners' Capital for the years ended December 31, 1994, 1995 and 1996. (v) Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996. (vi) Notes to Consolidated Financial Statements.
Item 9.
Item 9. Disagreements on Accounting and Financial Disclosure. -----------------------------------------------------
NONE
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant. --------------------------------------------------
Registrant has no officers or directors. The senior officers and directors of the Corporate General Partner are as follows:
(1) Each officer and director of the Corporate General Partner will hold office until the next annual meeting of the Board of Directors and thereafter until his successor shall have been elected and shall have qualified or until his prior death, resignation or removal.
William Polk Carey and Francis J. Carey are brothers. H. Augustus Carey is the nephew of William Polk Carey and the son of Francis J. Carey.
A description of the business experience of each officer and director of the Corporate General Partner is set forth below:
William Polk Carey, Chairman and Chief Executive Officer, has been active in lease financing since 1959 and a specialist in net leasing of corporate real estate property since 1964. Before founding W.P. Carey & Co., Inc. ("W.P. Carey") in 1973, he served as Chairman of the Executive Committee of Hubbard,
Westervelt & Mottelay (now Merrill Lynch Hubbard), head of Real Estate and Equipment Financing at Loeb Rhoades & Co. (now Lehman Brothers), head of Real Estate and Private Placements, Director of Corporate Finance and Vice Chairman of the Investment Banking Board of duPont Glore Forgan Inc. A graduate of the University of Pennsylvania's Wharton School of Finance and Commerce, Mr. Carey is a Governor of the National Association of Real Estate Investment Trusts (NAREIT). He also serves on the boards of The Johns Hopkins University, The James A. Baker III Institute for Public Policy at Rice University, Templeton College of Oxford University and other educational and philanthropic institutions. He founded the Visiting Committee to the Economics Department of the University of Pennsylvania and co-founded with Dr. Lawrence R. Klein the Economics Research Institute at that University. Mr. Carey is also a Director of CPA(R):10, CIP(TM) and CPA(R):12.
Francis J. Carey was elected President and a Managing Director of W.P. Carey in April 1987, having served as a Director since its founding in 1973. Prior to joining the firm full-time, he was a senior partner in Philadelphia, head of the Real Estate Department nationally and a member of the executive committee of the Pittsburgh based firm of Reed Smith Shaw & McClay, counsel for Registrant, the General Partners, the CPA(R) Partnerships, W.P. Carey and some of its affiliates. He served as a member of the Executive Committee and Board of Managers of the Western Savings Bank of Philadelphia from 1972 until its takeover by another bank in 1982 and is former chairman of the Real Property, Probate and Trust Section of the Pennsylvania Bar Association. Mr. Carey served as a member of the Board of Overseers of the School of Arts and Sciences of the University of Pennsylvania from 1983 through 1990. He has also served as a member of the Board of Trustees of the Investment Program Association since 1990 and on the Business Advisory Council of the Business Council for the United Nations since 1994. He holds A.B. and J.D. degrees from the University of Pennsylvania. Mr. Carey is also a Director of CPA(R):10 and CIP(TM).
George E. Stoddard, Chief Investment Officer, was until 1979 head of the bond department of The Equitable Life Assurance Society of the United States, with responsibility for all activities related to Equitable's portfolio of corporate investments acquired through direct negotiation. Mr. Stoddard was associated with Equitable for over 30 years. He holds an A.B. degree from Brigham Young University, an M.B.A. from Harvard Business School and an LL.B. from Fordham University Law School.
Madelon DeVoe Talley, Vice Chairman, is a member of the New York State Controller's Investment Committee, a Commissioner of the Port Authority of New York and New Jersey, former CIO of New York State Common Retirement Fund and a Trustee of the New York State Teachers Retirement System. She also served as a managing director of Rothschild, Inc. and as the President of its asset management division. Mrs. Talley was also a former Governor of the N.A.S.D. and a director of Biocraft Laboratories, a New York Stock Exchange company. She is an alumna of Sarah Lawrence College and the graduate school of International and Public Affairs at Columbia University.
Lawrence R. Klein, Chairman of the Economic Policy Committee since 1984, is Benjamin Franklin Professor of Economics Emeritus at the University of Pennsylvania, having joined the faculty of Economics and the Wharton School in 1958. He holds earned degrees from the University of California at Berkeley and Massachusetts Institute of Technology and has been awarded the Nobel Prize in Economics as well as over 20 honorary degrees. Founder of Wharton Econometric Forecasting Associates, Inc., Dr. Klein has been counselor to various corporations, governments, and government agencies including the Federal Reserve Board and the President's Council of Economic Advisers.
Barclay G. Jones III, Executive Vice President, Managing Director, and head of the Investment Department. Mr. Jones joined W.P. Carey as Assistant to the President in July 1982 after his graduation from the Wharton School of the University of Pennsylvania, where he majored in Finance and Economics. He was elected to the Board of Directors of W.P. Carey in April 1992. Mr. Jones is also a Director of the Wharton Business School Club of New York.
Claude Fernandez, Chief Administrative Officer, Managing Director, and Executive Vice President, joined W.P. Carey in 1983. Previously associated with Coldwell Banker, Inc. for two years and with Arthur Andersen & Co., he is a Certified Public Accountant. Mr. Fernandez received his B.S. degree in accounting from New York University in 1975 and his M.B.A. in finance from Columbia University Graduate School of Business in 1981.
H. Augustus Carey, Senior Vice President, returned to W.P. Carey in 1988 and is President of W.P. Carey's broker-dealer subsidiary. Mr. Carey previously worked for W.P. Carey from 1979 to 1981 as Assistant to the President. Prior to rejoining W.P. Carey, Mr. Carey served as a loan officer of the North American Department of Kleinwort Benson Limited in London, England. He received an A.B. from Amherst College in 1979 and an M.Phil. in Management Studies from Oxford University in 1984. Mr. Carey is a trustee of the Oxford Management Centre Associates Council.
Anthony S. Mohl, Senior Vice President and Director of Portfolio Management, joined W.P. Carey & Co., in 1987 as Assistant to the President after receiving his M.B.A. from the Columbia University Graduate School of Business. Mr. Mohl was employed as an analyst in the strategic planning group at Kurt Salmon Associates after receiving an undergraduate degree from Wesleyan University.
John J. Park, Senior Vice President, Treasurer and Director of Research, joined W.P. Carey as an Investment Analyst in December 1987. Mr. Park received his undergraduate degree from Massachusetts Institute of Technology and his M.B.A. in Finance from New York University.
Michael D. Roberts joined W. P. Carey as a Second Vice President and Assistant Controller in April 1989 and is currently First Vice President and Controller. Prior to joining W.P. Carey, Mr. Roberts was employed by Coopers & Lybrand for over 8 years, where he attained the title of audit manager. A certified public accountant, Mr. Roberts received a B.A. in sociology from Brandeis University and an M.B.A. from Northeastern University.
Item 11.
Item 11. Executive Compensation. -----------------------
Under the Amended Agreement of Limited Partnership of Registrant (the "Agreement"), 5% of Distributable Cash From Operations, as defined, is payable to the Corporate General Partner and 1% of Distributable Cash From Operations is payable to the Individual General Partner. The Corporate General Partner and the Individual General Partner received $229,577 and $46,220, respectively, from the Registrant as their share of Distributable Cash From Operations during the year ended December 31, 1996. As owner of 100 Limited Partnership Units, the Corporate General Partner received cash distributions of $9,608 ($96.08 per Unit) during the year ended December 31, 1996. See Item 6 for the net income allocated to the General Partners under the Agreement. Registrant is not required to pay, and has not paid, any remuneration to the officers or directors of the Corporate General Partner, W.P. Carey or any other affiliate of Registrant during the year ended December 31, 1996.
In the future, the Corporate General Partner will continue to receive 5% of Distributable Cash From Operations, the Individual General Partner will continue to receive 1% of Distributable Cash From Operations and each General Partner will continue to be allocated the same percentage of the profits and losses of Registrant as had been allocated in the past. For a description of the subordinated interest of the Corporate General Partner and the Individual General Partner in Cash From Sales and Cash From Financings, reference is made to the materials contained in the Prospectus under the heading MANAGEMENT COMPENSATION.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and --------------------------------------------------- Management. ----------
As of December 31, 1996, no person owned of record, or was known by Registrant to own beneficially more than 5% of the Limited Partnership Units of Registrant.
The following table sets forth as of March 15, 1997 certain information as to the ownership by directors and executive officers of securities of Registrant:
(1) As of March 15, 1997, the Corporate General Partner, Carey Corporate Property, Inc., owned 100 Limited Partnership Units of Registrant. William Polk Carey, the majority shareholder of the Corporate General Partner, is the beneficial owner of these Units.
There exists no arrangement, known to Registrant, the operation of which may at a subsequent date result in a change of control of Registrant.
Item 13.
Item 13. Certain Relationships and Related Transactions. -----------------------------------------------
For a description of transactions and business relationships between Registrant and its affiliates and their directors and officers, see Notes 2 and 3 to the Consolidated Financial Statements contained in Item 8. Michael B. Pollack, Senior Vice President and Secretary of the Corporate General Partner, is a partner of Reed Smith Shaw & McClay which is engaged to perform legal services for Registrant.
No officer or director of the Corporate General Partner, W.P. Carey or any other affiliate of Registrant or any member of the immediate family or associated organization of any such officer or director was indebted to Registrant at any time since the beginning of Registrant's last fiscal year.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on ------------------------------------------------------ Form 8-K. --------- (a) 1. Financial Statements: --------------------- The following financial statements are filed as a part of this Report:
Report of Independent Accountants.
Consolidated Balance Sheets, December 31, 1995 and 1996.
Consolidated Statements of Income for the years ended December 31, 1994, 1995 and 1996.
Consolidated Statements of Partners' Capital for the years ended December 31, 1994, 1995 and 1996.
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996.
Notes to Consolidated Financial Statements.
The financial statements are hereby incorporated by reference to pages 5 to 19 of Registrant's Annual Report contained in Appendix A.
(a) 2. Financial Statement Schedule: -----------------------------
The following schedule is filed as a part of this Report:
Schedule III -Real Estate and Accumulated Depreciation as of December 31, 1996.
Notes to Schedule III.
Schedule III and notes thereto are hereby incorporated by reference to pages 20 to 23 of Registrant's Annual Report contained in Appendix A.
Financial Statement Schedules other than those listed above are omitted because the required information is given in the Consolidated Financial Statements or the Notes thereto, or because the conditions requiring their filing do not exist.
(a) 3. Exhibits: ---------
The following exhibits are filed as part of this Report. Documents other than those designated as being filed herewith are incorporated herein by reference.
(b) Reports on Form 8-K -------------------- During the quarter ended December 31, 1996 the Registrant was not required to file any reports on Form 8-K.
SIGNATURES ----------
Pursuant to the requirements of Section 13 or 15(d) 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.
04/03/97 BY: /s/ Claude Fernandez -------- ------------------------------ Date Claude Fernandez Executive Vice President and Chief Administrative Officer (Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
APPENDIX A TO FORM 10-K
CORPORATE PROPERTY ASSOCIATES 6 - A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
1996 ANNUAL REPORT
SELECTED FINANCIAL DATA - -------------------------------------------------------------------------------- (In thousands except per unit amounts)
(1) Net income for 1995 includes an extraordinary gain on the extinguishment of debt of $2,088,000. (2) Includes distributions attributable to the fourth quarter of each fiscal year payable in the following fiscal year less distributions in the first fiscal quarter applicable to the prior year. (3) Represents scheduled payment of mortgage principal paid. (4) Represents mortgage and note payable obligations due after more than one year.
MANAGEMENT'S DISCUSSION AND ANALYSIS - --------------------------------------------------------------------------------
Results of Operations --------------------- Net income for the year ended December 31, 1996 decreased by $1,834,000 as compared with net income in 1995. Excluding the effects of a nonrecurring other income item of $688,000 and an extraordinary gain of $2,088,000 both in 1995, income would have increased by $942,000. The increase in income, as adjusted was primarily due to decreases in interest, property and general and administrative expenses and an increase in lease revenues. This was partially offset by an increase in depreciation expense.
The decrease in interest expense was due to the satisfaction of the mortgage loans on the Stoody Deloro Stellite, Inc. ("Stoody"), Anthony's Manufacturing, Inc. ("Anthony's") and the Peerless Chain Company ("Peerless") properties in 1995 and the refinancing of an existing mortgage loan on the property leased to Wal-Mart Stores, Inc. ("Wal-Mart") in 1996. The Stoody and Anthony's loans were paid off, in part by obtaining $10,000,000 of recourse financing; however, overall interest on this obligation was lower than the interest incurred on the retired mortgage loans. The decrease in property expenses was primarily due to the provision for uncollected rents incurred on the lease with Folger Adam Company ("Folger Adam") in 1995 and the legal costs incurred in connection with the settlement of the Anthony's dispute in 1995. The decrease in general and administrative expenses was due to a decrease in legal costs, provisions for state taxes and office occupancy costs. Lease revenues increased due to rent increases on the Partnership's leases with Peerless, Wal-Mart and Armel Inc. in 1996 and leases with Motorola Inc. ("Motorola") and Stoody in 1995. Lease revenues also benefited from increased rent from the A.P. Parts Manufacturing ("AP Parts") lease in connection with the Partnership's funding of improvements in January 1996 at one of the A.P. Parts properties. The increase in depreciation expense was due to the classification of the new lease with Yale Security, Inc. ("Yale") as an operating lease. In March 1996, Yale entered into a lease with the Partnership for the Partnership's property in Lemont, Illinois after purchasing the operations of Folger Adam in a bankruptcy proceeding. Depreciation also increased due to the funding of $1,700,000 of improvements at A.P. Parts.
Earnings from the Partnership's hotel operations increased by $120,000 to $1,154,000 as compared with 1995, an increase of approximately 12%. Operating income from the Alpena and Petoskey hotels increased 7% and 11%, respectively, for the year ended December 31, 1996 as compared with 1995. The average room rate remained stable at the Alpena hotel with the occupancy rate increasing by 6% resulting in both a 5% increase in room revenue and a 4% increase in food and beverage revenue. There was a 14% increase in the occupancy rate at the Petoskey hotel; however, the average room rate decreased by 9%. Petoskey also benefited from a decrease in operating expenses. The decrease in Petoskey room rates was the result of increased competition from other resorts. The earnings of the Livonia hotel increased by 13% as a result of a 6% increase in revenues and only a 3% increase in expenses. The increase in revenues was due to an increase of 10% in overall average room rates, with increases sustained in each room rate category. The ability to raise rates was due to favorable economic and business conditions in the Detroit metropolitan area.
Net income for the year ended December 31, 1995 increased by $4,760,000 as compared with net income for the year ended December 31, 1994. Of the increase, $2,776,000 was due to the Partnership's successful settlement of its dispute with Anthony's and the related gain on the prepayment of the mortgage loan on the Anthony's properties, which was paid off at a substantial discount. Excluding the effect of these settlement transactions and $225,000 that the Partnership received in 1994 as a settlement relating to the 1992 lease termination at the Livonia, Michigan hotel property, income reflected an increase of $2,209,000 from the prior year.
The increase in income, as adjusted for 1995, was primarily due to a decrease in property expenses and, to a lesser extent, an increase in lease revenues and a decrease in interest expense. The decrease in property expenses was due to costs incurred in 1994 in connection with (i) the Partnership's assessment of liquidity alternatives which included environmental reviews and property valuations, (ii) costs incurred in the Anthony's dispute prior to the commencement of settlement negotiations and (iii) charges incurred for uncollected Anthony's rent. As a result of the Anthony's settlement in May 1995, the Partnership ultimately collected most of such uncollected rents. The increase in lease revenues was due to rental
increases on the Partnership's leases with Stoody and the Folger Adam and increased rent resulting from a modification of the AutoZone, Inc. ("AutoZone") lease. The decrease in interest expense was due to lower overall loan balances as the result of the satisfaction of the mortgage loans on the Stoody and Anthony's properties, the payoff of which was partially funded with a new loan that is a recourse obligation of the Partnership.
Earnings from the Partnership's hotel operations decreased by $41,000 to $1,034,000 as compared with 1994, a decrease of approximately 4%. The occupancy rate at the Petoskey, Michigan hotel declined to 43% in 1995 from 47% in 1994 due to increased competition from a nearby resort area. The Partnership was only able to increase the average room rate at Petoskey by slightly less than 1% in 1995. Occupancy rates at the Alpena, Michigan hotel property remained stable at 55% and the Partnership was able to increase the average room rate by slightly less than 5%. Occupancy and average room rates at the Livonia hotel increased by 2% and 8%, respectively. The operations in Alpena and Petoskey are seasonal in nature with the largest proportion of income being earned in the summer months. The operations of the Livonia hotel which represented 61% of hotel revenues and 72% of hotel earnings are not seasonal in nature, but, as noted, are affected by the economic conditions in the Detroit metropolitan area.
In connection with funding of the expansion of the A.P. Parts property in Toledo, Ohio, the Partnership refinanced an existing mortgage loan on the A.P. Parts properties and entered into a lease modification agreement. The effect of the lease modification and new mortgage financing increased cash flow from the A.P. Parts properties by $336,500 annually. Future cash flow will benefit from rent increases on the Partnership's leases with Anthony's in 1998, and Motorola and Lockheed Martin Corporation in 1999. Cash flow also benefited from the reamortization of the AutoZone mortgage loan after such loan was partially prepaid with proceeds from the sale of two properties. The Partnership's $10,000,000 note payable is a variable rate obligation and interest will vary based on the short-term interest rate environment.
Because of the long-term nature of the Partnership's net leases, inflation and changing prices should not unfavorably affect the Partnership's revenues and net income or have an impact on the continuing operations of the Partnership's properties. The Partnership's net leases have rent increases based on the Consumer Price Index ("CPI") and may have caps on such CPI increases, or sales overrides, which should increase operating revenues in the future. The moderate increases in the CPI over the past several years will affect the rate of such future rent increases. Although there are indications that there may be legislation which considers changes to the CPI methodology, the Partnership cannot predict the outcome of any proposal relating to the CPI formula. Management believes that hotel operations will not be significantly impacted by changing prices. In addition, Management believes that reasonable increases in hotel operating costs may be partially or entirely offset by increases in room rates. As noted, based on the conditions of the Livonia hotel, the Partnership has increased room rates by amounts in excess of increase in costs.
Financial Condition -------------------
Other than its interest in the three hotel properties, all of the Partnership's properties are leased to corporate tenants under long-term net leases which generally require tenants to pay all operating expenses relating to the leased properties. The Partnership depends on relatively stable operating cash flow from its net leases and hotel operations to meet operating expenses, service its debt, fund distributions and maintain adequate cash reserves. In addition, the Partnership maintains cash reserves to fund major outlays such as capital improvements and balloon debt payments.
The Partnership's cash flow from operating activities of $7,616,000 in 1996 was sufficient to fund distributions to partners of $4,881,000 and $1,156,000 of scheduled principal payment installments on the Partnership's mortgage debt.
The Partnership's investing activities in 1996 consisted of receiving $603,000 from selling two AutoZone properties and funding $1,728,000 of improvements to the A.P. Parts property. The Partnership also used $169,000 to (i) fund improvements needed to meet the requirements of the Holiday Inn core modernization plan at the Alpena and Petoskey hotels and (ii) for replacing furniture, fixtures and equipment at the hotels in the ordinary course of business. Other assets at December 31, 1996 included approximately $289,000 of reserves which is available to fund replacements and improvements at the hotel properties. These
reserves are funded by an allocation of hotel revenues. The Partnership does not anticipate utilizing any funds in excess of amounts set aside in the reserve account to fund improvements or replacements within the next 12 months. The Partnership has no current plans to fund improvements at any other of its leased properties.
The Partnership's financing activities in 1996 consisted primarily of using cash flow from operations to pay distributions and meeting scheduled principal payment installment obligations. The Partnership obtained $3,500,000 in connection with refinancing the mortgage loan on the Wal-Mart property at which time it paid off an existing loan on the property of $3,420,000 which had been scheduled to mature in May 1997. The Partnership obtained a new limited recourse mortgage loan of $6,000,000 on the A.P. Parts properties which was used to fund the improvements and pay off an existing loan of $4,000,000. The Partnership used cash reserves to pay a balloon payment of $1,500,000 on a limited recourse loan encumbered by the Winn Dixie Stores Inc., property. The proceeds from the sale of the two AutoZone properties were used to make mandatory partial prepayments on the AutoZone mortgage loan.
The Partnership has several balloon payments scheduled over the next several years including payments of $2,609,000 on the Livonia Hotel mortgage loan in 1997 and $8,618,000 on the AutoZone loan in 1998. The Partnership negotiated short-term extensions of the maturity of mortgage loans on the Motorola and Yale Security properties which had been scheduled to mature in 1996. The Motorola loan of $2,188,000 and the Yale Security loan of $1,885,000 are now scheduled to mature in 1997. The Partnership does not currently have the cash necessary to pay all of these loans. Management believes the prospects for refinancing the properties servicing these loans are good as these loans will remain subject to leases for a number of years and in the case of the hotel, generate substantial cash flow from operations. The Partnership currently has sufficient capacity to borrow against several of its unleveraged properties while still remaining in compliance with the covenants of the recourse loan. In the case of limited recourse mortgage financing which does not fully amortize over its term, the Partnership would be responsible for the balloon payment required only to the extent of its interest in the encumbered property because the holder of each such obligation has recourse only to the property collateralizing such debt. In the event that balloon payments come due, the Partnership's alternatives include seeking to refinance the loans, restructuring the debt with the existing lenders, evaluating its ability to satisfy the mortgages from existing cash reserves or selling the property and using the sales proceeds to satisfy the mortgage debt.
Anthony's and Wal-Mart have options exercisable in 1997 to purchase their leased properties. The purchase options are exercisable at the greater of (i) the Partnership's cost of acquiring such properties, including improvements funded subsequent to purchase, and any premium that would be incurred on paying off mortgage loans on the properties or (ii) the fair market value of the properties as encumbered by the lease. In the event that both options were exercised in 1997, the Partnership would receive net proceeds of no less than $14,377,000. If exercised, annual cash flow (rents less mortgage debt service) would be reduced by $1,372,000.
Except for the three hotel properties, all of the properties are currently leased to corporate tenants. All of the properties are subject to environmental statutes and regulations regarding the discharge of hazardous materials and any related remediation obligations. The Partnership normally structures its leases to require tenants to comply with all laws. In addition, substantially all of the Partnership's net leases include indemnification provisions which require tenants to indemnify the Partnership from all liabilities and losses related to their operations at the leased properties. If the Partnership undertakes to clean up or remediate any of its leased properties, the General Partners believe that in most cases the Partnership will be entitled to full reimbursement from tenants for such costs. Further, in the event that the Partnership either is responsible or becomes responsible for such costs because of a tenant's failure to fulfill its obligations the General Partners believe that the ultimate resolution of the aforementioned environmental matters will not have a material adverse effect on the Partnership's financial condition, liquidity or results of operations.
The General Partners are continuing to investigate ways to provide liquidity for limited partners on a tax-effective basis.
REPORT of INDEPENDENT ACCOUNTANTS
To the Partners of Corporate Property Associates 6 - a California limited partnership and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Corporate Property Associates 6 - a California limited partnership and Subsidiaries as of December 31, 1995 and 1996, and the related consolidated statements of income, partners' capital and cash flows for each of the three years in the period ended December 31, 1996. We have also audited the financial statement schedule included on pages 20 to 23 of this Form 10-K. These financial statements and financial statement schedule are the responsibility of the General Partners. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Corporate Property Associates 6 - a California limited partnership and Subsidiaries as of December 31, 1995 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. In addition, in our opinion, the Schedule of Real Estate and Accumulated Depreciation as of December 31, 1996, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the financial information required to be included therein pursuant to Securities and Exchange Commission Regulation S-X Rule 12-28.
/s/Coopers & Lybrand L.L.P.
New York, New York March 21, 1997
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS December 31, 1995 and 1996
The accompanying notes are an integral part of the consolidated financial statements.
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
CONSOLIDATED STATEMENTS of INCOME
For the years ended December 31, 1994, 1995 and 1996
The accompanying notes are an integral part of the consolidated financial statements.
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
CONSOLIDATED STATEMENTS of PARTNERS' CAPITAL
For the years ended December 31, 1994, 1995 and 1996
(a) Based on weighted average Units issued and outstanding.
The accompanying notes are an integral part of the consolidated financial statements.
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
CONSOLIDATED STATEMENTS of CASH FLOWS For the years ended December 31, 1994, 1995 and 1996
(Continued)
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
CONSOLIDATED STATEMENTS of CASH FLOWS, Continued For the years ended December 31, 1994, 1995 and 1996
Supplemental disclosure of financing activities:
During the year ended December 31, 1995, the Partnership recognized an extraordinary gain on the extinguishment of debt.
The accompanying notes are an integral part of the consolidated financial statements.
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies: ------------------------------------------- Basis of Consolidation: ----------------------- The consolidated financial statements include the accounts of Corporate Property Associates 6 and two 99% owned subsidiaries, CPA(R) Burnhaven Limited Partnership and CPA(R) Peerless Limited Partnership, (collectively, the "Partnership").
Use of Estimates: ----------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Real Estate Leased to Others: ----------------------------- Real estate is leased to others on a net lease basis, whereby the tenant is generally responsible for all operating expenses relating to the property, including property taxes, insurance, maintenance, repairs, renewals and betterments.
The Partnership diversifies its real estate investments among various corporate tenants engaged in different industries and by property type throughout the United States.
The leases are accounted for under either the direct financing or operating methods. Such methods are described below:
Direct financing method - Leases accounted for under the ----------------------- direct financing method are recorded at their net investment (Note 5). Unearned income is deferred and amortized to income over the lease terms so as to produce a constant periodic rate of return on the Partnership's net investment in the lease.
Operating method - Real estate is recorded at cost, revenue is ---------------- recognized as rentals are earned and expenses (including depreciation) are charged to operations as incurred.
The Partnership assesses the recoverability of its real estate assets, including residual interests, based on projections of undiscounted cash flows over the life of such assets. In the event that such cash flows are insufficient, the assets are adjusted to their estimated net realizable value.
Substantially all of the Partnership's leases provide for either scheduled rent increases, periodic rent increases based on formulas indexed to increases in the Consumer Price Index ("CPI") or sales overrides.
Operating Real Estate: ---------------------- Land, buildings and personal property are carried at cost. Major renewals and improvements are capitalized to the property accounts, while replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are expensed currently.
Continued
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
Depreciation: ------------- Depreciation is computed using the straight-line method over the estimated useful lives of the components of the particular properties, which range from 5 to 30 years.
Cash Equivalents: ----------------- The Partnership considers all short-term, highly liquid investments that are both readily convertible to cash and have a maturity of generally three months or less at the time of purchase to be cash equivalents. Items classified as cash equivalents include commercial paper and money market funds. Substantially all of the Partnership's cash and cash equivalents at December 31, 1995 and 1996 were held in the custody of three financial institutions.
Other Assets: ------------- Included in the assets are deferred charges incurred in connection with mortgage note financings which are deferred and amortized on a straight-line basis over the terms of the mortgages.
Income Taxes: -------------
A partnership is not liable for Federal income taxes as each partner recognizes his proportionate share of the partnership income or loss in his tax return. Accordingly, no provision for income taxes is recognized for financial statement purposes.
Deferred Rental Income: -----------------------
A lease amendment fee of $3,800,000 received in 1995 in connection with the amendment of one of the Partnership's leases is being amortized as deferred rental income from the date of the amendment through the end of the initial term of the lease (15 1/2 years).
Reclassifications: ------------------
Certain 1994 and 1995 amounts have been reclassified to conform to the 1996 financial statement presentation.
2. Partnership Agreement: ---------------------- The Partnership was organized on July 23, 1984 under the Revised Uniform Limited Partnership Act of the State of California for the purpose of engaging in the business of investing in and leasing industrial and commercial real estate. The Corporate General Partner purchased 100 Limited Partnership Units in connection with the Partnership's public offering. The Partnership will terminate on December 31, 2004, or sooner, in accordance with the terms of the Amended Agreement of Limited Partnership (the "Agreement").
Continued
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
The Agreement provides that the General Partners are allocated 6% (1% to the Individual General Partner, William P. Carey, and 5% to the Corporate General Partner, Carey Corporate Property, Inc. ("Carey Property"), an affiliate of the General Partner), and the Limited Partners are allocated 94% of the profits and losses as well as distributions of Distributable Cash From Operations, as defined. The partners are also entitled to receive net proceeds from the sale of the Partnership properties as defined in the Agreement. In accordance with the Agreement, the General Partners, were allocated the gain on the sale of real estate as well as the related tax gain in order to reduce their negative balances because they had negative capital balances at the beginning of the year.
The General Partners may be entitled to receive a subordinated preferred return, measured based upon the cumulative proceeds arising from the sale of Partnership assets. Pursuant to the subordination provisions of the Agreement, the preferred return may be paid only after the limited partners receive 100% of their initial investment from the proceeds of asset sales and a cumulative annual return of 6% since the inception of the Partnership. The General Partners interest in such preferred return amounts to $18,099 based upon the cumulative proceeds from the sale of assets since the inception of the Partnership through December 31, 1996. The Partnership's ability to satisfy the subordination provisions of the Agreement may not be determinable until liquidation of a substantial portion of the Partnership's assets has been made.
3. Transactions with Related Parties: ----------------------------------
The Partnership holds its 35% interest in hotel properties in Alpena and Petoskey, Michigan and its 34.4828% ownership interest in a hotel property in Livonia, Michigan as tenants-in-common with affiliates who own the remaining interests. The Partnership's interests in the assets and liabilities of the hotel properties are accounted for on a proportional basis.
The Partnership holds a $1,151,000 note receivable made by Corporate Property Associates 5 ("CPA(R):5"), an affiliate. The note bears interest at the rate of 13.48% through August 1, 1999, at which time the interest rate will reset to the Applicable Federal Rate (as defined in the Internal Revenue Code of 1986) at that date. The note matures on May 1, 2012, at which time the entire outstanding principal balance will be due. Under certain circumstances, the principal balance on the note may be reduced.
Under the Agreement, W.P. Carey & Co., Inc. ("W.P. Carey") and other affiliates are entitled to receive a property management fee and reimbursement of certain expenses incurred in connection with the Partnership's operations. General and administrative expense reimbursements consist primarily of the actual cost of personnel needed in providing administrative services necessary to the operation of the Partnership. Property management fee and general and administrative expense reimbursements are summarized as follows:
During 1994, 1995 and 1996, fees aggregating $96,539, $102,893 and $44,215, respectively, were incurred for legal services performed by a firm in which the Secretary of W.P. Carey, Carey Property and other affiliates is a partner.
Continued
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
The Partnership is a participant in an agreement with W.P. Carey and other affiliates for the purpose of leasing office space used for the administration of real estate entities and W.P. Carey and for sharing the associated costs. Pursuant to the terms of the agreement, the Partnership's share of rental, occupancy and leasehold improvement costs is based on adjusted gross revenues as defined. Net expenses incurred in 1994, 1995 and 1996 were $61,327, $94,719 and $108,362, respectively.
4. Real Estate Leased to Others Accounted for Under the Operating Method and ------------------------------------------------------------------------- Operating Real Estate: ---------------------
A. Real Estate Leased to Others: ----------------------------
Scheduled future minimum rents, exclusive of renewals, under noncancellable operating leases amount to approximately $5,700,000 in both 1997 and 1998; $5,783,000 in 1999; $5,794,000 in 2000; $4,839,000 in 2001; and aggregate approximately $55,502,000 through 2011.
Contingent rents were approximately $262,000, $171,000 and $378,000 in 1994, 1995 and 1996, respectively.
B. Operating Real Estate: ---------------------
Operating real estate, at cost, is summarized as follows:
5. Net Investment in Direct Financing Leases: -----------------------------------------
Net investment in direct financing leases is summarized as follows:
Continued
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
Scheduled future minimum rents, exclusive of renewals, under noncancellable financing leases amount to approximately $4,206,000 in each of the years 1997 to 2001 and aggregate approximately $55,194,000 through the year 2011.
Contingent rents were approximately $576,000, $1,113,000 and $1,138,000 in 1994, 1995 and 1996, respectively.
6. Mortgage Notes Payable and Note Payable: ---------------------------------------
A. Mortgage notes payable, all of which are limited recourse obligations, are collateralized by the assignment of various leases and by real property with a carrying amount of approximately $61,480,000, before accumulated depreciation. As of December 31, 1996, mortgage notes payable bear interest at rates varying from 6.35% to 10.5% per annum and mature from 1997 to 2015.
. Scheduled principal payments, during each of the next five years following December 31, 1996 and thereafter are as follows:
Year Ending December 31, ----------------------- 1997 $ 7,778,111 1998 9,410,818 1999 841,942 2000 910,103 2001 9,142,001 Thereafter 3,974,113 ----------- Total $ 32,057,088
B. The Partnership's $10,000,000 note payable requires quarterly payments of interest only at the variable interest rate of the three-month London Inter-Bank Offered Rate ("LIBOR") plus 4.25% per annum and is subject to the following conditions: 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, as defined, 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 limited recourse debt on any of its properties only for the purpose of refinancing existing mortgage debt. Total mortgage indebtedness may not exceed $37,952,884, at the inception of the loan, as adjusted for subsequent scheduled principal amortization on existing mortgage loans plus closing costs on any new loans. At December 31, 1996, the Partnership is in compliance with such terms.
Continue
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
The $10,000,000 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.
Interest paid on mortgage notes payable and note payable was $4,554,644, $4,894,003 and $4,046,843 in 1994, 1995 and 1996, respectively.
7. Distributions to Partners: -------------------------
Distributions are declared and paid to partners quarterly and are summarized as follows:
Distributions of $70,142 to the General Partners and $1,162,303 to the Limited Partners for the quarter ended December 31, 1996 were declared and paid in January 1997.
8. Income for Federal Tax Purposes: -------------------------------
Income for financial statement purposes differs from income for Federal income tax purposes because of the difference in the treatment of certain items for income tax purposes and financial statement purposes. A reconciliation of accounting differences is as follows:
Continue
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
9. Industry Segment Information: ----------------------------
The Partnership's operations consist of the investment in and the leasing of industrial and commercial real estate and its participation in the operation of three hotels.
In 1994, 1995 and 1996, the Partnership earned its total leasing revenues (rental income plus interest income from financing leases) from the following lease obligors:
Summarized operating results of the Partnership's share of the operations of three hotels are:
10. Hotel Property in Livonia, Michigan: -----------------------------------
In November 1987, the Partnership and Corporate Property Associates 7 ("CPA(R):7"), an affiliate, purchased a Holiday Inn in Livonia, Michigan with 34.4828% and 65.5172% interests, respectively, as tenants-in-common and entered into a net lease with Brock Hotel Corporation which subsequently changed its name to Integra - A Hotel and Restaurant Company ("Integra"). Integra subsequently assigned its interest in the lease to a wholly-owned subsidiary, Livonia Inn Management, Inc. while Integra remained the guarantor of the lease. Continue
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
As a result of Integra's financial condition, the subsidiary stopped paying rent in May 1992 with Integra subsequently filing a voluntary bankruptcy petition in July 1992. Both of these events were defaults under the lease as well as under the mortgage note collateralized by the Livonia property. In August 1992, pursuant to a letter of agreement, the Partnership and CPA(R):7 assumed control of the hotel operations.
In March 1994, the Partnership and CPA(R):7 executed a settlement agreement with the Hallwood Group, Inc. ("Hallwood Group"), Integra's largest shareholder, under which the Partnership and CPA(R):7 agreed to surrender a promissory note made by Hallwood Group, which had been pledged by Integra to the Partnership and CPA(R):7 as additional collateral to Integra's lease obligation, in exchange for $150,000 in cash, a $500,000 promissory note from Hallwood Group and an equity participation having a potential value of up to $500,000 from the Hallwood Group. The $500,000 note bears interest at 8% per annum and matures no later than March 8, 1998 and, subject to certain conditions, is redeemable at an earlier date. The note is collateralized by the Hallwood Group's pledge of 89,269 of its limited partnership units of Hallwood Realty Partners, L.P. ("Hallwood Realty"), a publicly traded limited partnership. The pledged units represent 5.2% of all outstanding limited partnership units of Hallwood Realty. Under the settlement agreement, the Hallwood Group has the obligation to pay to the Partnership and CPA(R):7 an amount equal to 25% of the increase in value of the Hallwood Realty units up to $500,000, from March 1994 to the note maturity date. If the price per unit increases to $45 or greater, the Partnership and CPA(R):7 may, subject to certain restrictions, receive a payment from the Hallwood Group representing the 25% appreciation of the pledged units prior to the note maturity date. At December 31, 1996, the pledged limited partnership units had a market value of $24 1/2 per unit. The Partnership's share of the cash proceeds and the note receivable of $224,138 are included in other income 1994.
During 1996, the Partnership and CPA(R):7 received $221,000 (of which the Partnership's share was $77,000) from the bankruptcy trustee in partial settlement of the Partnership's and CPA(R):7's claim against Integra.
11. Extraordinary Gain on Extinguishment of Debt: -------------------------------------------- In May 1995, the Partnership and Anthony's Manufacturing Company, Inc. ("Anthony's") entered into a settlement agreement at which time the Partnership withdrew its eviction suit against Anthony's. The Partnership had filed an eviction notice because Anthony's had not paid a scheduled monthly rent increase of $10,485 which had been effective since March 1992 and had made only two monthly rental payments between February 1994 and April 1995. In connection with the settlement agreement, Anthony's made lump sum payments aggregating $1,550,000 in settlement of a rent arrearage of $1,712,098. Of the $1,550,000 received $561,710 was applied to 1995 rents receivable for the period from January 1, 1995 through May 31, 1995 with the remaining $988,290 applied to prior period rents. The amounts related to prior periods, had been included in the Partnership's reserve for uncollected rents. Net of the legal costs of the settlement of $300,476, the Partnership recognized $687,814 on the settlement which was included as other income in 1995. Under the settlement, the Partnership and Anthony's agreed to modify the existing lease. Under the lease modification agreement, Anthony's monthly rental payment decreased from $112,342 to $73,000 and the expiration of the initial term of the lease was extended to May 2007 from February 2002. The amended lease also provides for rental increases in 1998, 2001 and 2005.
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
In May 1995, the Partnership paid off and satisfied the mortgage loan collateralized by the Anthony's properties. The lender accepted a payment of $5,440,000 to satisfy an outstanding principal balance of $6,853,966 and accrued interest thereon of $705,387. In connection with the satisfaction of the debt, the Partnership recognized an extraordinary gain on the extinguishment of debt of $2,088,268, net of certain related legal costs in 1995. To pay off the mortgage obligation, the Partnership used the $1,550,000 received from Anthony's under the settlement agreement and obtained $4,000,000 of financing from its credit agreement (see Note 6B).
12. Gain on Sales of Real Estate: ----------------------------
On January 26, 1996 and April 26, 1996, the Partnership sold property in Dalton, Georgia and Birmingham Alabama, respectively, leased to AutoZone, Inc. ("AutoZone"), at an aggregate price of $603,285, net of selling costs, realizing a gain of $70,878 on the sales. AutoZone's leases allow it to sever properties from its leases and purchase such properties which it judges to be unsuitable for its retail business. The Partnership was required to assign the proceeds of the sales to its lender as a partial prepayment on the mortgage loan collateralized by the AutoZone property. In connection with the sales, annual rent of the AutoZone lease was reduced by $67,635; however, cash flow increased as annual debt service on the mortgage loan was reduced by $98,197 as a result of a reamortization of the loan.
13. Environmental Matters: ---------------------
All of the Partnership's properties, other than the hotel properties, are currently leased to corporate tenants. All of the properties are subject to environmental statutes and regulations regarding the discharge of hazardous materials and related remediation obligations. The Partnership generally structures a lease to require the tenant to comply with all laws. In addition, substantially all of the Partnership's net leases include provisions which require tenants to indemnify the Partnership from all liabilities and losses related to their operations at the leased properties. The costs for remediation, which are expected to be performed and paid by the affected tenant, are not expected to be material. In the event that the Partnership absorbs a portion of any costs because of a tenant's failure to fulfill its obligations, the General Partners believe such expenditures will not have a material adverse effect on the Partnership's financial condition, liquidity or results of operations.
In 1994, based on the results of Phase I environmental reviews performed in 1993, the Partnership voluntarily conducted Phase II environmental reviews on various of its properties. The Partnership believes, based on the results of such Phase I and Phase II reviews, that its properties are in substantial compliance with Federal and state environmental statutes and regulations. Portions of certain properties have been documented as having a limited degree of contamination, principally in connection with leakage from underground storage tanks or surface spills. For those conditions which were identified, the Partnership advised the affected tenant of the Phase II findings and of its obligation to perform required remediation.
14. Disclosures About Fair Value of Financial Instruments: -----------------------------------------------------
The carrying amounts of cash, receivables and accounts payable and accrued expenses approximate fair value because of the short maturity of these items.
The Partnership estimates that the fair value of mortgage notes payable approximates the carrying amount of such mortgage notes at December 31, 1996. The fair value of debt instruments was evaluated using a discounted cash flow with discount rates which take into account the credit of the tenants and interest rate risk. The Partnership note payable is a variable rate obligation indexed to the three-month LIBOR. Accordingly, the carrying amount of the note payable approximates fair value as of December 31, 1996.
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
SCHEDULE of REAL ESTATE and ACCUMULATED DEPRECIATION
as of December 31, 1996
See accompanying notes to Schedule.
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership
and SUBSIDIARIES
SCHEDULE of REAL ESTATE and ACCUMULATED DEPRECIATION
as of December 31, 1996
See accompanying notes to Schedule.
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership and SUBSIDIARIES
NOTES TO SCHEDULE of REAL ESTATE and ACCUMULATED DEPRECIATION
(a) Consists of acquisition costs including legal fees, appraisal fees, title costs and other related professional fees and purchase of furniture, fixtures, equipment and improvements at the hotel properties.
(b) Decrease in net investment consists of decreases due to sale of properties.
(c) At December 31, 1996, the aggregate cost of real estate owned for Federal income tax purposes is $96,957,899.
(d)
Reconciliation of Real Estate Accounted --------------------------------------- for Under the Operating Method ------------------------------ December 31, ----------- 1995 1996 ---- ---- Balance at beginning of year $46,333,108 $46,333,108
Sale of real estate (199,307)
Additions 1,728,087
Reclassification of direct financing lease to operating lease 3,700,000 ----------- ----------- Balance at close of year $46,333,108 $51,561,888 =========== ===========
Reconciliation of Accumulated Depreciation ------------------------------------------ December 31, ----------- 1995 1996 ---- ---- Balance at beginning of year $ 9,489,233 $10,653,598
Depreciation expense 1,164,365 1,302,166 ----------- -----------
Balance at close of year $10,653,598 $11,955,764 =========== ===========
CORPORATE PROPERTY ASSOCIATES 6 - a California limited partnership
and SUBSIDIARIES
NOTES TO SCHEDULE of REAL ESTATE and ACCUMULATED DEPRECIATION
(e) Reconciliation of Operating Real Estate --------------------------------------- December 31, ----------- 1995 1996 ---- ----- Balance at beginning of year $12,414,611 $12,832,631
Additions 418,020 168,935 ----------- -----------
Balance at close of year $12,832,631 $13,001,566 =========== ===========
Reconciliation of Accumulated Depreciation ------------------------------------------ for Operating Real Estate ------------------------- December 31, ------------ 1995 1996 ---- ---- Balance at beginning of year $3,916,144 $4,276,790
Depreciation expense 360,646 362,348 ---------- ----------
Balance at close of year $4,276,790 $4,639,138 ========== ==========
PROPERTIES
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