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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 10/27/23 Capital Properties Inc./RI 10-Q 9/30/23 42:3M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 782K
2: EX-31.1 Certification -- §302 - SOA'02 HTML 19K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 19K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 15K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 15K
11: R1 Document and Entity Information HTML 63K
12: R2 Condensed Consolidated Balance Sheets HTML 81K
13: R3 Condensed Consolidated Balance Sheets HTML 24K
(Parenthetical)
14: R4 Condensed Consolidated Statements of Income and HTML 118K
Shareholders' Equity
15: R5 Condensed Consolidated Statements of Income and HTML 22K
Shareholders' Equity (Parenthetical)
16: R6 Condensed Consolidated Statements of Cash Flows HTML 62K
17: R7 Description of business HTML 18K
18: R8 Basis of presentation and summary of significant HTML 28K
accounting policies
19: R9 Properties and equipment HTML 48K
20: R10 Liabilities, other HTML 36K
21: R11 Notes Payable HTML 25K
22: R12 Description of Leasing Arrangements HTML 37K
23: R13 Income taxes, continuing operations HTML 67K
24: R14 Discontinued operations HTML 22K
25: R15 Subsequent events HTML 19K
26: R16 Basis of presentation and summary of significant HTML 37K
accounting policies (Policies)
27: R17 Properties and equipment (Tables) HTML 47K
28: R18 Liabilities, other (Tables) HTML 35K
29: R19 Income taxes, continuing operations (Tables) HTML 64K
30: R20 Basis of presentation and summary of significant HTML 33K
accounting policies - Additional Information
(Detail)
31: R21 Properties and Equipment - Properties and HTML 32K
Equipment (Detail)
32: R22 Liabilities, Other - Summary of Liabilities, Other HTML 26K
(Detail)
33: R23 Note Payable - Revolving Credit Line - Additional HTML 48K
Information (Details)
34: R24 Description of Leasing Arrangements - Additional HTML 63K
Information (Detail)
35: R25 Income Taxes, Continuing Operations - Deferred Tax HTML 40K
Assets and Liabilities (Detail)
36: R26 Discontinued Operations - Additional Information HTML 36K
(Detail)
37: R27 Subsequent Events - Additional Information HTML 26K
(Detail)
40: XML IDEA XML File -- Filing Summary XML 66K
38: XML XBRL Instance -- cptp-20230930_htm XML 524K
39: EXCEL IDEA Workbook of Financial Report Info XLSX 55K
10: EX-101.CAL XBRL Calculations -- cptp-20230930_cal XML 85K
8: EX-101.DEF XBRL Definitions -- cptp-20230930_def XML 185K
7: EX-101.LAB XBRL Labels -- cptp-20230930_lab XML 602K
9: EX-101.PRE XBRL Presentations -- cptp-20230930_pre XML 383K
6: EX-101.SCH XBRL Schema -- cptp-20230930 XSD 86K
41: JSON XBRL Instance as JSON Data -- MetaLinks 214± 336K
42: ZIP XBRL Zipped Folder -- 0000950170-23-055798-xbrl Zip 123K
| Page | (sequential) | (alphabetic) | ↑Top | ||
|---|---|---|---|---|---|
| 1 | 1st Page – Filing Submission | ||||
| " | Financial Statements | ||||
| " | Management's Discussion and Analysis of Financial Condition and Results of Operations | ||||
| " | Controls and Procedures | ||||
| " | Exhibits | ||||
| " | Signatures | ||||
| 10-Q |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM i 10-Q
i ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i September 30, i 2023 /
OR
i ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number i 001-08499
i CAPITAL PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
i Rhode Island |
|
i 05-0386287 |
(State or other jurisdiction of |
|
(IRS Employer |
incorporation or organization) |
|
identification No.) |
|
i 5 Steeple Street, Unit 303 |
|
|
i Providence, i Rhode Island |
i 02903 |
|
(Address of principal executive offices) |
(Zip Code) |
( i 401) i 435-7171
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12 (g) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
|
|
|
i Class A Common Stock, $.01 par value |
i CPTP |
OTCQX |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of the "large accelerated filer," "accelerated filer," "non-accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer |
☐ |
Accelerated Filer |
☐ |
i Non-Accelerated Filer |
☐ |
Smaller reporting company |
i ☒ |
|
|
Emerging Growth Company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. i ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes i ☐ No ☒
As of September 30, 2023, the Company had i 6,599,912 shares of Class A Common Stock outstanding.
CAPITAL PROPERTIES, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2023
|
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Page |
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PART I – FINANCIAL INFORMATION |
|
|
|
|
Item 1. |
3 |
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 |
Item 4. |
12 |
|
|
|
|
|
PART II – OTHER INFORMATION |
|
|
|
|
Item 6. |
13 |
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|
|
|
|
14 |
2
PART I
Item 1. Financial Statements
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
September 30, 2023 (Unaudited) |
|
|
|
|||
ASSETS |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Properties and equipment (net of accumulated depreciation) |
|
$ |
i 6,520,000 |
|
|
$ |
i 6,584,000 |
|
Cash and cash equivalents |
|
|
i 2,127,000 |
|
|
|
i 1,476,000 |
|
Prepaid and other |
|
|
i 136,000 |
|
|
|
i 224,000 |
|
Prepaid income taxes |
|
|
- |
|
|
|
i 21,000 |
|
Deferred income taxes associated with discontinued operations (Note 8) |
|
|
i 110,000 |
|
|
|
i 110,000 |
|
|
|
$ |
i 8,893,000 |
|
|
$ |
i 8,415,000 |
|
|
|
|
|
|
|
|
||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Liabilities: |
|
|
|
|
|
|
||
Property taxes |
|
$ |
i 340,000 |
|
|
$ |
i 260,000 |
|
Other |
|
|
i 406,000 |
|
|
|
i 366,000 |
|
Income taxes payable |
|
|
i 108,000 |
|
|
|
- |
|
Deferred income taxes, net |
|
|
i 201,000 |
|
|
|
i 271,000 |
|
Liability associated with discontinued operations (Note 8) |
|
|
i 406,000 |
|
|
|
i 406,000 |
|
|
|
|
i 1,461,000 |
|
|
|
i 1,303,000 |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Shareholders’ equity: |
|
|
|
|
|
|
||
Class A common stock, $ i i .01 / par; authorized i i 10,000,000 / shares; |
|
|
|
|
|
|
||
issued and outstanding i i i i 6,599,912 / / / shares |
|
|
i 66,000 |
|
|
|
i 66,000 |
|
Capital in excess of par |
|
|
i 782,000 |
|
|
|
i 782,000 |
|
Retained earnings |
|
|
i 6,584,000 |
|
|
|
i 6,264,000 |
|
|
|
|
i 7,432,000 |
|
|
|
i 7,112,000 |
|
|
|
$ |
i 8,893,000 |
|
|
$ |
i 8,415,000 |
|
|
|
|
|
|
|
|
||
See notes to condensed consolidated financial statements.
3
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SHAREHOLDERS’ EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
|
$ |
i 1,313,000 |
|
|
$ |
i 1,206,000 |
|
|
$ |
i 4,056,000 |
|
|
$ |
i 3,821,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating |
|
|
|
i 227,000 |
|
|
|
i 282,000 |
|
|
|
i 659,000 |
|
|
|
i 821,000 |
|
General and administrative |
|
|
|
i 332,000 |
|
|
|
i 311,000 |
|
|
|
i 1,007,000 |
|
|
|
i 976,000 |
|
|
|
|
|
i 559,000 |
|
|
|
i 593,000 |
|
|
|
i 1,666,000 |
|
|
|
i 1,797,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from operations before income taxes |
|
|
|
i 754,000 |
|
|
|
i 613,000 |
|
|
|
i 2,390,000 |
|
|
|
i 2,024,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Current |
|
|
|
i 218,000 |
|
|
|
i 187,000 |
|
|
|
i 732,000 |
|
|
|
i 649,000 |
|
Deferred |
|
|
|
- |
|
|
|
( i 19,000 |
) |
|
|
( i 70,000 |
) |
|
|
( i 94,000 |
) |
|
|
|
|
i 218,000 |
|
|
|
i 168,000 |
|
|
|
i 662,000 |
|
|
|
i 555,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations |
|
|
|
i 536,000 |
|
|
|
i 445,000 |
|
|
|
i 1,728,000 |
|
|
|
i 1,469,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on sale of discontinued operations, net of tax (Note 8) |
|
|
|
( i 2,000 |
) |
|
|
( i 55,000 |
) |
|
|
( i 22,000 |
) |
|
|
( i 106,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income |
|
|
|
i 534,000 |
|
|
|
i 390,000 |
|
|
|
i 1,706,000 |
|
|
|
i 1,363,000 |
|
Retained earnings, beginning |
|
|
|
i 6,512,000 |
|
|
|
i 6,374,000 |
|
|
|
i 6,264,000 |
|
|
|
i 6,325,000 |
|
Dividends on common stock ($ i i i i .07 / / / per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
based upon i i 6,599,912 / shares outstanding |
|
|
|
( i 462,000 |
) |
|
|
( i 462,000 |
) |
|
|
( i 1,386,000 |
) |
|
|
( i 1,386,000 |
) |
Retained earnings, ending |
|
|
|
i 6,584,000 |
|
|
|
i 6,302,000 |
|
|
|
i 6,584,000 |
|
|
|
i 6,302,000 |
|
Class A common stock |
|
|
|
i 66,000 |
|
|
|
i 66,000 |
|
|
|
i 66,000 |
|
|
|
i 66,000 |
|
Capital in excess of par |
|
|
|
i 782,000 |
|
|
|
i 782,000 |
|
|
|
i 782,000 |
|
|
|
i 782,000 |
|
Shareholders' equity, ending |
|
|
$ |
i 7,432,000 |
|
|
$ |
i 7,150,000 |
|
|
$ |
i 7,432,000 |
|
|
$ |
i 7,150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic income (loss) per common share based upon 6,599,912 shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Continuing operations |
|
|
$ |
i 0.08 |
|
|
$ |
i 0.07 |
|
|
$ |
i 0.26 |
|
|
$ |
i 0.22 |
|
Discontinued operations |
|
|
|
( i 0.00 |
) |
|
|
( i 0.01 |
) |
|
|
( i 0.00 |
) |
|
|
( i 0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic income per common share based upon i i i i 6,599,912 / / / shares outstanding |
|
|
$ |
i 0.08 |
|
|
$ |
i 0.06 |
|
|
$ |
i 0.26 |
|
|
$ |
i 0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
See notes to condensed consolidated financial statements.
4
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
|
|
Nine Months Ended |
|
|||||
|
|
|
|
2022 |
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Continuing operations: |
|
|
|
|
|
|
||
Income from continuing operations |
|
$ |
i 1,728,000 |
|
|
$ |
i 1,469,000 |
|
Adjustments to reconcile income from continuing operations to net |
|
|
|
|
|
|
||
Depreciation |
|
|
i 64,000 |
|
|
|
i 64,000 |
|
Deferred income taxes |
|
|
( i 70,000 |
) |
|
|
( i 94,000 |
) |
Income taxes |
|
|
i 129,000 |
|
|
|
i 102,000 |
|
Other, net changes in prepaids, property tax payable and other |
|
|
i 208,000 |
|
|
|
i 306,000 |
|
Net cash provided by operating activities, continuing operations |
|
|
i 2,059,000 |
|
|
|
i 1,847,000 |
|
|
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Investments: |
|
|
|
|
|
|
||
Purchase |
|
|
( i 1,000,000 |
) |
|
|
- |
|
Maturity |
|
|
i 1,000,000 |
|
|
|
- |
|
Net cash provided by investing activities, continuing operations |
|
|
- |
|
|
|
- |
|
Discontinued operations: |
|
|
|
|
|
|
||
Cash used to settle obligations |
|
|
( i 22,000 |
) |
|
|
( i 192,000 |
) |
Noncash adjustment to loss on sale of discontinued operations |
|
|
- |
|
|
|
i 24,000 |
|
Net cash used in investing activities, discontinued operations |
|
|
( i 22,000 |
) |
|
|
( i 168,000 |
) |
Cash used in investing activities |
|
|
( i 22,000 |
) |
|
|
( i 168,000 |
) |
|
|
|
|
|
|
|
||
Cash flows used in financing activities, payment of dividends |
|
|
( i 1,386,000 |
) |
|
|
( i 1,386,000 |
) |
|
|
|
|
|
|
|
||
Increase in cash and cash equivalents |
|
|
i 651,000 |
|
|
|
i 293,000 |
|
Cash and cash equivalents, beginning |
|
|
i 1,476,000 |
|
|
|
i 1,443,000 |
|
Cash and cash equivalents, ending |
|
$ |
i 2,127,000 |
|
|
$ |
i 1,736,000 |
|
|
|
|
|
|
|
|
||
Supplemental disclosure: |
|
|
|
|
|
|
||
Cash paid for income taxes |
|
$ |
i 595,000 |
|
|
$ |
i 485,000 |
|
|
|
|
|
|
|
|
||
See notes to condensed consolidated financial statements.
5
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
The operations of Capital Properties, Inc. and its wholly-owned subsidiary, Tri-State Displays, Inc. (collectively “the Company”) consist of the long-term leasing of certain of its real estate interests in the Capital Center area in downtown Providence, Rhode Island (upon the commencement of which the tenants have been required to construct buildings thereon, with the exception of the parking garage), 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 the Capital Center area will consist primarily of long-term ground leases. Pending this development, the Company leases these undeveloped parcels (other than Parcel 6C) for public parking to Metropark, Ltd.
Principles of consolidation:
The accompanying condensed consolidated financial statements include the accounts and transactions of the Company. All significant intercompany accounts and transactions have been eliminated in consolidation.
The accompanying condensed consolidated balance sheet as of December 31, 2022 has been derived from audited financial statements. 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 accounting principles generally accepted in the United States (“GAAP”) 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 consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest Form 10-K for the year ended December 31, 2022.
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 September 30, 2023 and the results of operations for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022.
The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Use of estimates:
The preparation of consolidated financial statements in conformity with GAAP 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. Estimates also affect the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Environmental incidents:
The Company accrues a liability when an environmental incident has occurred and the costs are estimable. The Company does not record a receivable for recoveries from third parties for environmental matters until it has determined that the amount of the collection is reasonably assured. The accrued liability is relieved when the Company pays the liability or a third party assumes the liability. Upon determination that collection is reasonably assured or a third party assumes the liability, the Company records the amount as a reduction of expense.
Fair value of financial instruments:
The Company believes that the fair values of its financial instruments, including cash and cash equivalents, investments, receivables and payables, approximate their respective book values because of their short-term nature. The fair values described herein were determined using quoted prices in an active market (Level 1) and significant other observable inputs (Level 2) as defined by GAAP.
Reclassification of Prior Period Presentation:
General and administrative expenses for the three and nine months ended September 30, 2022 have been reduced by $ i 75,000 and $ i 145,000, respectively to reclassify costs associated with the litigation of the cost sharing provision of the Terminal Sales Agreement (Note 8) to loss from sale of discontinued operations. This change results in reporting of a loss from sale of discontinued operations of $ i 55,000 and $ i 106,000 for the three and nine months ended September 30, 2022, respectively, which amounts are net of an income tax benefit of $ i 20,000 and $ i 39,000 for the same periods presented. The change also increased net cash provided by operating activities and cash used in investing activities by $ i i 106,000 / for the nine months ended September 30, 2022.
/6
Properties and equipment consist of the following:
|
|
|
|
|
||||
Properties on lease or held for lease: |
|
|
|
|
|
|
||
Land and land improvements |
|
$ |
i 4,439,000 |
|
|
$ |
i 4,439,000 |
|
Building and improvements, Steeple Street |
|
|
i 2,582,000 |
|
|
|
i 2,582,000 |
|
|
|
|
i 7,021,000 |
|
|
|
i 7,021,000 |
|
Less accumulated depreciation: |
|
|
|
|
|
|
||
Land improvements on lease or held for lease |
|
|
i 93,000 |
|
|
|
i 93,000 |
|
Steeple Street property |
|
|
i 408,000 |
|
|
|
i 344,000 |
|
|
|
|
i 501,000 |
|
|
|
i 437,000 |
|
|
|
$ |
i 6,520,000 |
|
|
$ |
i 6,584,000 |
|
Liabilities, other consist of the following:
|
|
|
|
|
||||
Accrued professional fees |
|
$ |
i 147,000 |
|
|
$ |
i 155,000 |
|
Deposits and prepaid rent |
|
|
i 180,000 |
|
|
|
i 93,000 |
|
Accrued payroll and related costs |
|
|
i 35,000 |
|
|
|
i 75,000 |
|
Other |
|
|
i 44,000 |
|
|
|
i 43,000 |
|
|
|
$ |
i 406,000 |
|
|
$ |
i 366,000 |
|
In March 2021, the Company entered into a financing agreement (“Agreement”) with BankRI that provides for a revolving line-of-credit (“Line”) with a maximum borrowing capacity of $ i 2,000,000 through March 2024. i After June 30, 2023, amounts outstanding under the Agreement bear interest at the rate of the Secured Overnight Financing Rate ("SOFR") plus the one-month SOFR Spread Adjustment of i .11448%, but not less than i 3.25% or, at the option of the Company, the Wall Street Journal Prime Rate. / i Borrowings under the Line are secured by a First Mortgage on Parcel 5 in the Capital Center District in Providence, Rhode Island (the “Property”). The Line requires the maintenance of a debt service coverage ratio of not less than i 1.25 to i 1.0 on the Property and i 1.20 to i 1.0 for the Company. i The Agreement contains other restrictive covenants, including, among others, a $ i 250,000 limitation on the purchase of its outstanding capital stock in any twelve-month period. / i No advances have been made under the Line.
/Long-term land leases:
Through September 30, 2023 the Company had entered into i eight long-term land leases, all of which have completed construction of improvements thereon. The Company’s leases generally have a term of i 99 years or more, are triple net and provide for periodic rent adjustments of various types depending on the particular lease, and otherwise contain terms and conditions normal for such instruments.
Under the i eight land leases, the tenants may negotiate tax stabilization treaties or other arrangements, appeal any changes in real property assessments, and must pay real property taxes assessed on land and improvements. Accordingly, real property taxes payable by the tenants are excluded from both leasing revenues and leasing expenses on the accompanying condensed consolidated statements of income and shareholders’ equity. For the three and nine months ended September 30, 2023 real property taxes attributable to the Company’s land leases totaled $ i 236,000 and $ i 708,000, respectively, and were $ i 174,000 and $ i 522,000 for the same periods in 2022.
Under i two of the long-term land leases, the Company receives contingent rentals (based on a fixed percentage of gross revenue received by the tenants) which totaled $ i 24,000 and $ i 84,000 for the three and nine months ended September 30, 2023, respectively and were $ i 21,000 and $ i 63,000 for the same periods in 2022.
7
Tri-State Displays Inc. leases i 23 outdoor advertising locations containing i 44 billboard faces along interstate and primary highways in Rhode Island and Massachusetts to Lamar under a lease which expires in i 2049. The Lamar lease provides, among other things, for the following: (1) the base rent will increase annually at the rate of i 2.75% for each leased billboard location on June 1 of each year, and (2) in addition to base rent, for each i 12-month period commencing each June 1 (each 12-month period a “Lease Year”), Lamar must pay to the Company within i thirty days after the close of the Lease Year, i 30% of the gross revenues from each standard billboard and i 20% of the gross revenues from each electronic billboard for such Lease Year, reduced by the sum of (a) commissions paid to unrelated third parties and (b) base rent paid to the Company for each leased billboard location. Leasing revenue includes $ i 189,000 and $ i 235,000 for the nine months ended September 30, 2023 and 2022, respectively, related to this agreement.
Parking lease:
The Company leases the undeveloped parcels of land in the Capital Center area (other than Parcel 6C) and Parcel 20 for public parking purposes to Metropark under a i ten-year lease (the “Parking Lease”). The Parking Lease is cancellable as to all or any portion of the leased premises at any time on i thirty days’ written notice in order for the Company or any new tenant of the Company to develop all or any portion of the leased premises. The Parking Lease provides for contingent rentals (based on a fixed percentage of gross revenue in excess of the base rent). There was i i i i no / / / contingent rent for the three and nine months ended September 30, 2023 and 2022.
The move by many companies to a hybrid workplace model (one that mixes in-office and remote work) has resulted in lower demand for parking spaces and continues to have an adverse impact on Metropark’s parking operations. The Company and Metropark continue to operate under the June 30, 2020 revenue sharing agreement that provides for revenue sharing at various percentages until parking revenues received by Metropark equal or exceed $ i 70,000 per month whereupon Metropark would be obligated to resume regularly scheduled rental payments under its lease. Upon resumption of regularly scheduled rent payments, Metropark and the Company will share fifty ( i 50) percent of the revenue in excess of $ i 70,000 until the arrearage has been paid in full. If prior to payment in full of the arrearage one or more of the lots is removed from the Metropark lease for development, the amount of the then unpaid arrearage in the ratio of the number of parking spaces on the removed lot to the total parking spaces on all lots prior to such lot’s removal shall be deemed paid in full.
At September 30, 2023 the receivable from Metropark equaled $ i 1,115,000 and was fully reserved. The Company continues to recognize Metropark’s rent on a cash basis and will continue to do so until the resumption of regularly scheduled rental payments under its lease. Included in leasing revenue on the accompanying condensed consolidated statements of income and retained earnings for the three and nine months ended September 30, 2023 are cash collections from Metropark totaling $ i 111,000 and $ i 324,000, respectively, and $ i 71,000 and $ i 187,000 for the same periods in 2022.
Historically, the Company has made financial statement footnote disclosure of the excess of straight-line rentals over contractual payments and its determination of collectability of such excess. To the extent the Company determines that, with respect to any of its leases, the excess of straight-line rentals over contractual payments is not collectible, such excess is not recognized as revenue. Consistent with prior conclusions, the Company has determined that, at this time, the excess of straight-line rentals over contractual payments is not probable of collection. Accordingly, the Company has not included any part of that amount in revenue. As a matter of information only, as of September 30, 2023 the excess of straight-line rentals (calculated by excluding variable payments) over contractual payments was $ i 91,900,000.
/8
Deferred income taxes are recorded based upon differences between financial statement and tax basis amounts of assets and liabilities. i The tax effects of temporary differences for continuing operations which give rise to deferred tax assets and liabilities are as follows:
|
|
|
|
|
||||
Gross deferred tax liabilities: |
|
|
|
|
|
|
||
Property having a financial statement basis in excess of tax basis |
|
$ |
i 364,000 |
|
|
$ |
i 361,000 |
|
Accounts receivable |
|
|
i 318,000 |
|
|
|
i 289,000 |
|
Deferred income - conversion to cash basis of accounting for tax purposes |
|
|
i 5,000 |
|
|
|
i 19,000 |
|
Insurance premiums |
|
|
i 18,000 |
|
|
|
i 50,000 |
|
|
|
|
i 705,000 |
|
|
|
i 719,000 |
|
Gross deferred tax assets: |
|
|
|
|
|
|
||
Allowance for doubtful accounts |
|
|
( i 302,000 |
) |
|
|
( i 279,000 |
) |
Prepaid rent |
|
|
( i 49,000 |
) |
|
|
( i 25,000 |
) |
Accounts payable and accrued expenses |
|
|
( i 61,000 |
) |
|
|
( i 74,000 |
) |
Accrued property taxes |
|
|
( i 92,000 |
) |
|
|
( i 70,000 |
) |
|
|
|
( i 504,000 |
) |
|
|
( i 448,000 |
) |
|
|
$ |
i 201,000 |
|
|
$ |
i 271,000 |
|
|
|
|
|
|
|
|
||
Prior to February 2017, the Company operated a petroleum storage facility (“Terminal”) through i two wholly owned subsidiaries. On February 10, 2017, the Terminal was sold to Sprague Operating Resources, LLC (“Sprague”). In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, the sale of the Terminal was accounted for as a discontinued operation.
As part of the Terminal Sale Agreement, the Company agreed to retain and pay for the environmental remediation costs associated with a 1994 storage tank leak which allowed the escape of a small amount of fuel oil. The Company continues the remediation activities set forth in the Remediation Action Work Plan (“RAWP”) filed with the Rhode Island Department of Environmental Management (“RIDEM”). The estimated future cost associated with the remediation is $ i 406,000 and is reported separately on the consolidated balance sheets as liability associated with discontinued operations. Any subsequent increases or decreases to the expected cost of remediation will be recorded in the Company’s condensed consolidated statements of income as gain or loss from sale of discontinued operations. The Terminal Sale Agreement also contained a cost sharing provision for the breasting dolphin whereby any construction costs incurred more than the contract cost of construction would be borne equally by Sprague and the Company subject to certain limitations, including, in the Company’s opinion, a i 20% cap on the increase from the initial estimate, subject to a sharing arrangement. In November 2019, Sprague asserted that it was owed $ i 427,000 and the Company asserted that its obligation under the Agreement cannot exceed $ i 104,000. Mediation efforts were unsuccessful and in July 2021, Sprague commenced an action against the Company in the Rhode Island Superior Court (Superior Court) seeking monetary damages of $ i 427,000, interest and attorney’s fees. In December 2022, the Superior Court denied Sprague’s Motion for Summary Judgment filed in September 2022 and granted in part and denied in part the Company’s Cross Motion for Summary Judgment also filed in September 2022. The Company anticipates that the matter will go to trial in the spring of 2024. The Company intends to vigorously defend against the claims being asserted by Sprague.
/At its i October 25, 2023 regularly scheduled quarterly Board meeting, the Board of Directors voted to declare a quarterly dividend of $ i .07 per share for shareholders of record on i November 10, 2023, payable i November 20, 2023.
/9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD LOOKING STATEMENTS
Certain portions of this report, and particularly the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contain forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities Exchange Act of 1934, as amended, which represent the Company’s expectations or beliefs concerning future events. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the following: the ability of the Company to generate adequate amounts of cash; the collectability of the excess of straight-line over contractual rents when due over the terms of the long-term leases; tenant default under one or more of the leases; the commencement of additional long-term land leases; changes in economic conditions that may affect either the current or future development on the Company’s parcels; the impact of the hybrid workplace model on future development, existing tenants and parking operations, and exposure to remediation and other costs associated with its former operation of the petroleum storage facility. The Company does not undertake the obligation to update forward-looking statements in response to new information, future events or otherwise.
Critical accounting policies:
The Company believes that its revenue recognition policy for long-term leases with scheduled rent increases meets the definition of a critical accounting policy which is discussed in the Company’s Form 10-K for the year ended December 31, 2022. There have been no changes to the application of this accounting policy since December 31, 2022.
Historically, the Company has had adequate liquidity to fund its operations.
Cash and cash commitments:
At September 30, 2023, the Company had cash and cash equivalents of $2,127,000 inclusive of $1,228,000 of U.S. Treasury Bills that yield 5.30% and mature on December 7, 2023. The Company and its subsidiary each maintain checking accounts and a money market account in one bank, all of which are insured by the Federal Deposit Insurance Corporation to a maximum of $250,000. The Company periodically evaluates the financial stability of the financial institutions at which the Company’s funds are held.
To date, all tenants have paid their monthly rent in accordance with their lease agreements except for Metropark, the tenant that operates public parking on the Company's undeveloped parcels other than Parcel 6C. The Company continues to report revenue from Metropark on a cash basis as the hybrid workplace model has reduced demand for parking spaces. At September 30, 2023 its total rent arrearage is $1,115,000 and has been fully reserved. Though there has been an upward trend in cash collections from Metropark in 2023, the Company does not know when or if Metropark’s operations will return to pre-pandemic levels. Accordingly, the Company will continue to recognize revenue from Metropark on a cash basis for the foreseeable future.
For the three and nine months ended September 30, 2023, cash collections from Metropark totaled $111,000 and $324,000, respectively and were $71,000 and $187,000 for the same period in 2022.
The Terminal Sale Agreement and related documentation provides that the Company is required to secure an approved remediation plan and to remediate contamination caused by a leak in 1994 from a storage tank at the Terminal. At September 30, 2023, the Company’s accrual for the remaining cost of remediation was $406,000 of which $50,000 is expected to be incurred in last quarter of 2023. Any subsequent increases or decreases to the expected cost of remediation will be recorded in gain (loss) on sale of discontinued operations, net of taxes.
10
The Terminal Sale Agreement also contained a cost sharing provision for a breasting dolphin whereby any construction costs in excess of the contract cost of construction would be borne equally by Sprague and the Company subject to certain limitations, including, in the Company’s opinion, a 20% cap on the increase from the initial estimate subject to the sharing arrangement. In November 2019, Sprague asserted that it was owed $427,000 and the Company asserted that its obligation under the Agreement could not exceed $104,000. Mediation efforts were unsuccessful and in July 2021, Sprague commenced an action against the Company in the Rhode Island Superior Court (Superior Court) seeking monetary damages of $427,000, plus interest and attorney’s fees. In December 2022, the Superior Court denied Sprague’s Motion for Summary Judgment filed in September 2022 and granted in part and denied in part the Company’s Cross Motion for Summary Judgment also filed in September 2022. The Company anticipates that the matter will go to trial in the spring of 2024. The Company intends to vigorously defend against the claims being asserted by Sprague.
The declaration of future dividends will depend on future earnings and financial performance.
Three months ended September 30, 2023 compared to three months ended September 30, 2022:
Revenue increased $107,000 from 2022 and consists of increased cash collections from Metropark ($40,000), scheduled rent increases ($27,000), interest income ($20,000) and a net increase in other sources of revenue ($20,000).
Operating expenses decreased $55,000 due principally to a reduction in property taxes as a result of the Company's successful appeal of the City's revaluation in 2022.
General and administrative expense increased $21,000 due principally to an increase in payroll related costs ($35,000) offset by a net decrease in various other expenses ($14,000).
Nine months ended September 30, 2023 compared to nine months ended September 30, 2022:
Leasing revenue increased $235,000 from 2022 due principally to increased cash collections from Metropark ($136,000), interest income ($50,000), scheduled rent increases and contingent rent associated with our land leases ($73,000) and a net increase in other leasing revenue ($22,000) offset by a decline in contingent rent from Lamar ($46,000) .
Operating expenses decreased $162,000 due the reduction in property taxes as a result of the Company's successful appeal of the City’s revaluation ($128,000), expenses related to the ongoing operation of the Steeple Street building ($11,000) and a net decrease in various other leasing related expenses ($23,000).
General and administrative expense increased $31,000 due principally to an increase in payroll related costs.
For the nine months ended September 30, 2023 and 2022, the Company’s effective income tax rate is approximately 27% of income from continuing operations before income taxes.
11
Item 4. Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's principal executive officer and the Company's principal financial officer. Based upon that evaluation, the principal executive officer and the principal financial officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.
There was no significant change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to affect, the Company's internal control over financial reporting.
12
PART II – OTHER INFORMATION
Item 6. Exhibits
(b) Exhibits:
3.1 |
||
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|
3.2 |
||
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|
10 |
||
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|
Lease between Metropark, Ltd. and Company: |
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|
|
|
|
|
|
|
(b) |
Loan Agreement between Bank Rhode Island and Company dated March 30, 2021. |
|
|
|
31.1 |
Rule 13a-14(a) Certification of Chairman and Principal Executive Officer |
|
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|
|
31.2 |
Rule 13a-14(a) Certification of Treasurer and Principal Financial Officer |
|
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|
|
32.1 |
||
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|
|
32.2 |
||
|
|
|
101 |
The following financial information from the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2023, filed with the Securities and Exchange Commission on August 3, 2023 formatted in iXBRL(“Inline eXtensible Business Reporting Language”): |
|
|
|
|
|
(i) |
Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 |
|
(ii) |
Condensed Consolidated Statements of Income and Shareholders’ Equity for the Three and Six Months ended September 30, 2023 and 2022 |
|
(iii) |
Condensed Consolidated Statements of Cash Flows for the Six Months ended September 30, 2023 and 2022 |
|
(iv) |
Notes to Condensed Consolidated Financial Statements. |
|
|
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
|
|
|
13
SIGNATURES
In accordance with the requirements of the Exchange Act, the Issuer caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
CAPITAL PROPERTIES, INC. |
|
|
|
|
|
By |
/s/ Robert H. Eder |
|
|
|
|
|
Chairman and Principal Executive Officer |
|
|
|
|
By |
/s/ Susan R. Johnson |
|
|
|
|
|
Treasurer and Principal Financial Officer |
DATED: October 27, 2023
14
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 3/31/24 | ||||
| 12/7/23 | ||||
| 11/20/23 | ||||
| 11/10/23 | ||||
| Filed on: | 10/27/23 | |||
| 10/25/23 | ||||
| For Period end: | 9/30/23 | |||
| 8/3/23 | 10-Q | |||
| 6/30/23 | 10-Q | |||
| 12/31/22 | 10-K, 5 | |||
| 9/30/22 | 10-Q | |||
| 6/30/20 | 10-Q | |||
| 2/10/17 | 8-K | |||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 10/28/22 Capital Properties Inc./RI 10-Q 9/30/22 44:3M ActiveDisclosure/FA 3/19/18 Capital Properties Inc./RI 10-K 12/31/17 55:3.4M Donnelley … Solutions/FA 10/25/17 Capital Properties Inc./RI 8-K:5,8,9 10/25/17 2:51K Hinckley Allen & Sn… LLP 4/24/13 Capital Properties Inc./RI 8-K:5,9 4/23/13 2:120K Hinckley Allen & Sn… LLP |