PART I
Item 1. Consolidated Financial Statements
CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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June 30, |
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2010 |
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December 31, |
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(unaudited) |
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2009 |
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ASSETS |
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Properties and equipment (net of accumulated depreciation) |
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$ |
22,274,000 |
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$ |
22,069,000 |
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Cash |
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2,712,000 |
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2,315,000 |
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Income taxes receivable |
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318,000 |
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47,000 |
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Prepaid and other |
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453,000 |
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331,000 |
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$ |
25,757,000 |
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$ |
24,762,000 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Liabilities: |
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Note payable |
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$ |
5,975,000 |
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$ |
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Accounts payable and accrued expenses: |
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Property taxes |
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248,000 |
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243,000 |
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Environmental remediation |
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81,000 |
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81,000 |
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Other |
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511,000 |
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514,000 |
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Deferred: |
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Leasing revenues |
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520,000 |
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520,000 |
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Income taxes, net |
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5,407,000 |
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5,305,000 |
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12,742,000 |
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6,663,000 |
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Shareholders equity: |
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Class A common stock, $.01 par; authorized 10,000,000 shares;
issued and outstanding, 3,721,411 shares at June 30, 2010 and
3,654,739 shares at December 31, 2009 |
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37,000 |
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37,000 |
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Class B common stock, $.01 par; authorized 3,500,000 shares;
issued and outstanding, 2,878,501 shares at June 30, 2010 and
2,945,173 shares at December 31, 2009 |
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29,000 |
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29,000 |
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Excess stock, $.01 par; authorized 1,000,000 shares; none
issued and outstanding |
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Capital in excess of par |
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11,762,000 |
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11,762,000 |
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Retained earnings |
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1,187,000 |
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6,271,000 |
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13,015,000 |
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18,099,000 |
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$ |
25,757,000 |
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$ |
24,762,000 |
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CAPITAL PROPERTIES INC /RI/
CIK:202947
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2010-06-30 |
2009-12-31 |
| ASSETS |
| Properties and equipment (net of accumulated depreciation) | $22,274,000 | $22,069,000 |
| Cash | 2,712,000 | 2,315,000 |
| Income taxes receivable | 318,000 | 47,000 |
| Prepaid and other | 453,000 | 331,000 |
| $25,757,000 | $24,762,000 |
| LIABILITIES AND SHAREHOLDERS EQUITY |
| Liabilities: |
| Note payable | $5,975,000 |
| Accounts payable and accrued expenses: |
| Property taxes | 248,000 | 243,000 |
| Environmental remediation | 81,000 | 81,000 |
| Other | 511,000 | 514,000 |
| Deferred: |
| Leasing revenues | 520,000 | 520,000 |
| Income taxes, net | 5,407,000 | 5,305,000 |
| 12,742,000 | 6,663,000 |
| Shareholders equity: |
| Class A common stock, $.01 par; authorized 10,000,000 shares; issued and outstanding, 3,721,411 shares at June 30, 2010 and 3,654,739 shares at December 31, 2009 | 37,000 | 37,000 |
| Class B common stock, $.01 par; authorized 3,500,000 shares; issued and outstanding, 2,878,501 shares at June 30, 2010 and 2,945,173 shares at December 31, 2009 | 29,000 | 29,000 |
| Excess stock, $.01 par; authorized 1,000,000 shares; none issued and outstanding |
| Capital in excess of par | 11,762,000 | 11,762,000 |
| Retained earnings | 1,187,000 | 6,271,000 |
| 13,015,000 | 18,099,000 |
| $25,757,000 | $24,762,000 |
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CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30 |
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June 30 |
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2010 |
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2009 |
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2010 |
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2009 |
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Revenues: |
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Leasing |
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$ |
775,000 |
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$ |
760,000 |
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$ |
1,490,000 |
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$ |
1,474,000 |
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Petroleum storage facility |
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953,000 |
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949,000 |
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1,889,000 |
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1,885,000 |
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1,728,000 |
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1,709,000 |
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3,379,000 |
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3,359,000 |
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Expenses: |
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Leasing |
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228,000 |
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204,000 |
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564,000 |
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407,000 |
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Petroleum storage facility |
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602,000 |
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647,000 |
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1,131,000 |
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1,224,000 |
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General and administrative |
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226,000 |
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231,000 |
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492,000 |
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490,000 |
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Interest |
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64,000 |
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64,000 |
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1,120,000 |
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1,082,000 |
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2,251,000 |
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2,121,000 |
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Income before income taxes |
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608,000 |
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627,000 |
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1,128,000 |
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1,238,000 |
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Income tax expense (benefit): |
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Current |
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114,000 |
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267,000 |
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236,000 |
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522,000 |
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Deferred |
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68,000 |
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(12,000 |
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102,000 |
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(22,000 |
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182,000 |
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255,000 |
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338,000 |
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500,000 |
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Net income |
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$ |
426,000 |
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$ |
372,000 |
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$ |
790,000 |
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$ |
738,000 |
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Basic income per common share based upon
6,599,912 shares outstanding |
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$ |
.06 |
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$ |
.06 |
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$ |
.12 |
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$ |
.11 |
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Dividends per share on common stock based
upon 6,599,912 shares outstanding |
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$ |
.86 |
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$ |
.03 |
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$ |
.89 |
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$ |
.06 |
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CAPITAL PROPERTIES INC /RI/
CIK:202947
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2010-03-30
to
2010-06-30
(3-months) |
2009-03-30
to
2009-06-30
(3-months) |
2009-12-30
to
2010-06-30
(6-months) |
2008-12-30
to
2009-06-30
(6-months) |
| Revenues: |
| Leasing | $775,000 | $760,000 | $1,490,000 | $1,474,000 |
| Petroleum storage facility | 953,000 | 949,000 | 1,889,000 | 1,885,000 |
| 1,728,000 | 1,709,000 | 3,379,000 | 3,359,000 |
| Expenses: |
| Leasing | 228,000 | 204,000 | 564,000 | 407,000 |
| Petroleum storage facility | 602,000 | 647,000 | 1,131,000 | 1,224,000 |
| General and administrative | 226,000 | 231,000 | 492,000 | 490,000 |
| Interest | 64,000 | | 64,000 |
| 1,120,000 | 1,082,000 | 2,251,000 | 2,121,000 |
| Income before income taxes | 608,000 | 627,000 | 1,128,000 | 1,238,000 |
| Income tax expense (benefit): |
| Current | 114,000 | 267,000 | 236,000 | 522,000 |
| Deferred | 68,000 | (12,000) | 102,000 | (22,000) |
| 182,000 | 255,000 | 338,000 | 500,000 |
| Net income | $426,000 | $372,000 | $790,000 | $738,000 |
| Basic income per common share based upon 6,599,912 shares outstanding | $.06 | $.06 | $.12 | $.11 |
| Dividends per share on common stock based upon 6,599,912 shares outstanding | $.86 | $.03 | $.89 | $.06 |
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1.
Description of business:
Capital Properties, Inc. and its wholly-owned subsidiaries, Tri-State Displays, Inc., Capital Terminal Company and Dunellen, LLC (collectively referred to as the Company), operate in two segments: (1) Leasing and (2) Petroleum Storage.
The leasing segment consists of the long-term leasing of certain of its real estate interests in downtown Providence, Rhode Island (upon the commencement of which the tenants are required to construct buildings thereon, with the exception of a parking garage), the leasing of a portion of its building (Steeple Street Building) under short-term leasing arrangements and the leasing of locations along interstate and primary highways in Rhode Island and Massachusetts to Lamar Outdoor Advertising, LLC (Lamar) which has constructed outdoor advertising boards thereon. The Company anticipates that the future development of its remaining properties in and adjacent to the Capital Center area will consist primarily of long-term ground leases. Pending this development, the Company leases these parcels for public parking under short-term leasing arrangements to Metropark, Ltd. (Metropark).
The petroleum storage segment consists of operating the petroleum storage terminal (the Terminal) and the Wilkesbarre Pier (the Pier), collectively referred to as the Facility, located in East Providence, Rhode Island, for Global Companies, LLC (Global) which stores and distributes petroleum products.
The principal difference between the two segments relates to the nature of the operations. In the leasing segment, the tenants under long-term land leases incur substantially all of the development and operating costs of the assets constructed on the Companys land, including the payment of real property taxes on both the land and any improvements constructed thereon; whereas the Company is responsible for the operating and maintenance expenditures, including a portion of the real property taxes, as well as capital improvements at the Facility.
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| 2. |
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Principles of consolidation and basis of presentation: |
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The accompanying condensed consolidated financial statements include the accounts and transactions
of the Company and its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation. |
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The accompanying condensed consolidated balance sheet as of December 31, 2009, has been derived
from audited financial statements and the unaudited interim condensed consolidated financial
statements have been prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to those rules and regulations, although the Company believes that the
disclosures made are adequate to make the information not misleading. It is suggested that these
condensed financial statements be read in conjunction with the consolidated financial statements
and the notes thereto included in the Companys latest Form 10-K. In the opinion of management,
the accompanying condensed consolidated financial statements contain all adjustments (consisting
solely of normal recurring adjustments) necessary to present fairly the financial position as of
June 30, 2010, the results of operations for the three and six months ended June 30, 2010 and 2009,
and cash flows for the six months ended June 30, 2010 and 2009. |
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The results of operations for interim periods are not necessarily indicative of the results to be
expected for the full year. |
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New accounting standards: |
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The Company reviews new accounting standards as issued. Although some of these accounting
standards may be applicable to the Company, the Company has not identified any standards that it
believes merit further discussion. The Company expects that none of the new standards would have a
significant impact on its consolidated financial statements. |
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CAPITAL PROPERTIES INC /RI/
CIK:202947
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June 30,
December 31,
2010
2009
Properties on lease or held for lease:
Land and land improvements
$
4,621,000
$
4,621,000
Building and improvements, Steeple Street
1,961,000
1,772,000
Construction in progress
2,633,000
2,246,000
9,215,000
8,639,000
Petroleum storage facility, on lease:
Land and land improvements
5,591,000
5,591,000
Buildings and structures
1,748,000
1,744,000
Tanks and equipment
14,600,000
14,600,000
21,939,000
21,935,000
Office equipment
131,000
131,000
31,285,000
30,705,000
Less accumulated depreciation:
Properties on lease or held for lease
151,000
104,000
Petroleum storage facility, on lease
8,754,000
8,430,000
Office equipment
106,000
102,000
9,011,000
8,636,000
$
22,274,000
$
22,069,000
In June 2009, the Company commenced the construction of the historic restoration and utility infrastructure of the Steeple Street Building at an original estimated cost of $2,100,000. In July 2010, the restoration was substantially completed at a total cost of $2,633,000 plus tenant improvements not originally budgeted of $189,000.
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| 5. |
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Note payable: |
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In April 2010, the Company borrowed $6,000,000 from a bank. The loan bears interest at the rate of
6 percent per annum and has a term of ten years with repayments on a twenty-year amortization
schedule (monthly principal payments of $25,000 plus interest). The loan matures April 26, 2020
and contains the customary covenants, terms and conditions and permits prepayment, in whole or in
part, at any time without penalty if the prepayment is made from internally generated funds. As
collateral for the loan, the Company granted the bank a mortgage on Parcels 3S and 5 in the Capital
Center. |
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In May 2010, the proceeds from the loan were used principally to fund a special dividend of
$5,478,000 to shareholders, which represented the Companys earnings and profits as calculated for
federal income tax purposes at December 31, 2009. |
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In connection with the borrowing, the Company incurred financing fees totaling $55,000, which are
included in prepaid and other on the accompanying consolidated balance sheet at June 30, 2010.
These fees are being amortized on a straight-line basis over the 10-year term of the note and are
included in interest expense on the accompanying consolidated statements of income for the three
and six months ended June 30, 2010. |
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CAPITAL PROPERTIES INC /RI/
CIK:202947
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| 6. |
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Description of leasing arrangements: |
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Long-term land leases: |
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As of June 30, 2010, the Company had entered into six long-term land leases for six separate
parcels upon which the improvements have been completed (developed parcels). In addition, in
2005 a long-term land lease commenced on an undeveloped parcel on which two residential buildings
were planned. One building was completed in September 2009. The other building has not progressed
beyond the early stages of site preparation and the timing of its construction and completion is
uncertain. |
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Under the seven land leases, the tenants are required to negotiate any tax stabilization treaty or
other arrangements, appeal any changes in real property assessments, and pay real property taxes
assessed under these arrangements. Accordingly, the amounts payable by the tenants are excluded
from leasing revenues and leasing expenses on the accompanying consolidated statements of income.
The real property taxes attributable to the Companys land under these leases totaled $250,000 and
$500,000, respectively, for the three and six months ended June 30, 2010, and $360,000 and
$720,000, respectively, for the three and six months ended June 30, 2009. |
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Under the lease which commenced in 2005, the tenant is entitled to a credit for future rents equal
to a portion of the real property taxes paid by the tenant through April 2007, which credit totaled
$520,000 at June 30, 2010. In connection with Phase I of the tenants project, commencing July 1,
2010, the annual rent increased from $48,000 to $300,000. As a result of the rent credit, the
tenant will not be required to make cash payments for rent for the next 21 months. Each month
during the period of the rent credit, the Company will reclassify $25,000 of deferred leasing
revenues to leasing revenues. |
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Short-term leases: |
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The Company leases the undeveloped parcels of land in or adjacent to the Capital Center area for
public parking purposes to Metropark, Ltd. under a short-term cancellable lease. |
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A former tenant of the Steeple Street Building filed for receivership in November 2009. At
December 31, 2009, the former tenant owed the Company $40,000 and the Company recorded an allowance
for doubtful accounts of $40,000. At March 31, 2010, the former tenant owed the Company an
additional $22,000 and the Company recorded an allowance for doubtful accounts for the additional
amount. In June 2010, the former tenant sold its operations to a new tenant who assumed the lease
and paid the Company in full; the Company has reversed the allowance for doubtful accounts for the
full amount. |
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At June 30, 2010, the Company has two tenants in a portion of the Steeple Street Building
(including the new tenant who assumed the lease) under short-term leases (five years or less) at a
current annual rental of $114,000. The Company is seeking additional tenants for the remaining
available space. |
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CAPITAL PROPERTIES INC /RI/
CIK:202947
|
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| Short-term leases: |
| The Company leases the undeveloped parcels of land in or adjacent to the Capital Center area for public parking purposes to Metropark, Ltd. under a short-term cancellable lease. |
| A former tenant of the Steeple Street Building filed for receivership in November 2009. At December 31, 2009, the former tenant owed the Company $40,000 and the Company recorded an allowance for doubtful accounts of $40,000. At March 31, 2010, the former tenant owed the Company an additional $22,000 and the Company recorded an allowance for doubtful accounts for the additional amount. In June 2010, the former tenant sold its operations to a new tenant who assumed the lease and paid the Company in full; the Company has reversed the allowance for doubtful accounts for the full amount. |
| At June 30, 2010, the Company has two tenants in a portion of the Steeple Street Building (including the new tenant who assumed the lease) under short-term leases (five years or less) at a current annual rental of $114,000. The Company is seeking additional tenants for the remaining available space. |
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6.
Description of leasing arrangements:
Long-term land leases:
As of June 30, 2010, the Company had entered into six long-term land leases for six separate parcels upon which the improvements have been completed (developed parcels). In addition, in 2005 a long-term land lease commenced on an undeveloped parcel on which two residential buildings were planned. One building was completed in September 2009. The other building has not progressed beyond the early stages of site preparation and the timing of its construction and completion is uncertain.
Under the seven land leases, the tenants are required to negotiate any tax stabilization treaty or other arrangements, appeal any changes in real property assessments, and pay real property taxes assessed under these arrangements. Accordingly, the amounts payable by the tenants are excluded from leasing revenues and leasing expenses on the accompanying consolidated statements of income. The real property taxes attributable to the Companys land under these leases totaled $250,000 and $500,000, respectively, for the three and six months ended June 30, 2010, and $360,000 and $720,000, respectively, for the three and six months ended June 30, 2009.
Under the lease which commenced in 2005, the tenant is entitled to a credit for future rents equal to a portion of the real property taxes paid by the tenant through April 2007, which credit totaled $520,000 at June 30, 2010. In connection with Phase I of the tenants project, commencing July 1, 2010, the annual rent increased from $48,000 to $300,000. As a result of the rent credit, the tenant will not be required to make cash payments for rent for the next 21 months. Each month during the period of the rent credit, the Company will reclassify $25,000 of deferred leasing revenues to leasing revenues.
Short-term leases:
The Company leases the undeveloped parcels of land in or adjacent to the Capital Center area for public parking purposes to Metropark, Ltd. under a short-term cancellable lease.
A former tenant of the Steeple Street Building filed for receivership in November 2009. At December 31, 2009, the former tenant owed the Company $40,000 and the Company recorded an allowance for doubtful accounts of $40,000. At March 31, 2010, the former tenant owed the Company an additional $22,000 and the Company recorded an allowance for doubtful accounts for the additional amount. In June 2010, the former tenant sold its operations to a new tenant who assumed the lease and paid the Company in full; the Company has reversed the allowance for doubtful accounts for the full amount.
At June 30, 2010, the Company has two tenants in a portion of the Steeple Street Building (including the new tenant who assumed the lease) under short-term leases (five years or less) at a current annual rental of $114,000. The Company is seeking additional tenants for the remaining available space.
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| 7. |
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Petroleum storage facility: |
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Environmental remediation: |
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In 1994, a leak was discovered in a 25,000 barrel storage tank at the Terminal which allowed the
escape of a small amount of fuel oil. All required notices were made to the State of Rhode Island
Department of Environmental Management (RIDEM). In 2000, the tank was demolished and testing of
the groundwater indicated that there was no large pooling of contaminants. In 2001, RIDEM approved
a plan pursuant to which the Company installed a passive system consisting of three wells and
commenced monitoring the wells. |
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In 2003, RIDEM decided that the passive monitoring system previously approved was not sufficient
and required the Company to design an active remediation system for the removal of product from the
contaminated site. The Company and its consulting engineers began the pre-design testing of the
site in the fourth quarter of 2004. The consulting engineers estimated a total cost of $200,000 to
design, install and operate the system, which amount was accrued in 2004. Through 2006, the
Company had expended $119,000 and has not incurred any additional costs since then. RIDEM has not
taken any action on the Companys proposed plan. As designed, the system will pump out the
contaminants which will be disposed of in compliance with applicable regulations. After a period
of time, the groundwater will be tested to determine if sufficient contaminants have been removed.
While the Company and its consulting engineers believe that the proposed active remediation system
will correct the situation, it is possible that RIDEM could require the Company to expand
remediation efforts, which could result in the Company incurring additional costs. |
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CAPITAL PROPERTIES INC /RI/
CIK:202947
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