UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
------ SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 2001
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
------ SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -----------------
Commission File Number 0-9380
CAPITAL PROPERTIES, INC.
-------------------------------------------------------------------------------
(Name of small business issuer in its charter)
RHODE ISLAND 05-0386287
------------------------------- ---------------------------
(State or other jurisdiction of IRS Employer Identification
incorporation or organization) No.
100 DEXTER ROAD, EAST PROVIDENCE, RHODE ISLAND 02914
---------------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (401) 435-7171
--------------------
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange
Title of each class on which registered
----------------------------------- ---------------------------
Class A Common Stock-$.01 par value American Stock Exchange
Securities registered under Section 12(g) of the Exchange Act:
NONE
----------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
For the year ended December 31, 2001, the Issuer's revenues totaled $4,811,000.
As of March 1, 2002, the aggregate market value of the voting stock held by
non-affiliates of the Issuer was $11,315,000, which excludes voting stock held
by directors, executive officers and holders of 5% or more of the voting power
of the Issuer's common stock (without conceding that such persons are
"affiliates" of the Issuer for purposes of federal securities law.) The Issuer
has no outstanding non-voting common equity.
As of March 1, 2002, the Issuer had 3,000,000 shares of Class A Common Stock and
299,956 shares of Class B Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE - Portions of the proxy statement for the
2002 annual meeting of shareholders are incorporated by reference into Part III.
Portions of the annual report to shareholders of Capital Properties, Inc. for
the year ended December 31, 2002 are incorporated by reference into Parts I, II,
and III.
Transitional Small Business Disclosure Format. Yes No X
----- -----
PART I
ITEM 1. - DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
The Issuer was organized as a business corporation under the laws of Rhode
Island in 1983 as Providence and Worcester Company and is the successor by
merger in 1983 to a corporation also named Providence and Worcester Company
which was organized under the laws of Delaware in 1979. The Issuer's corporate
name was changed to Capital Properties, Inc. in 1984.
BUSINESS OF ISSUER
The Issuer owns certain properties in downtown Providence, Rhode Island which it
leases or is holding for lease to third parties (see "Properties Under Long-Term
Leases" and "Properties Under Short-Term Leases," in Item 2 below). The Issuer
is the largest single landowner in the Capital Center Project area but is
nevertheless subject to some measure of competition from other landowners.
The Issuer owns all of the outstanding capital stock in the following companies:
- Tri-State Displays, Inc., (through which the Issuer leases land for
billboards along interstate and primary highways for outdoor
advertising purposes);
- Capital Terminal Company which was incorporated in 1996 (through which
the Issuer operates its petroleum storage facilities). (See "Petroleum
Storage Facilities" in Item 2 below.); and
- Dunellen, LLC which was incorporated in 2000 (through which the Issuer
owns the petroleum storage facilities in East Providence, Rhode
Island).
References hereinafter to the "Issuer" are, unless the context indicates
otherwise, collectively to the Issuer and its wholly-owned subsidiaries and its
predecessors.
MISCELLANEOUS
For information relating to the Issuer's dependence on one or a few major
customers, see Note 11 of Notes to Consolidated Financial Statements in the
Issuer's 2001 Annual Report to shareholders attached hereto as Exhibit 13
(hereinafter referred to as the "2001 Annual Report"), which Note is
incorporated herein by reference.
During the last two years, no monies were expended by the Issuer and its
subsidiary on material research and development activities.
Compliance with federal, state and local provisions which have been enacted or
adopted regulating the discharge of materials into the environment, or otherwise
relating to the protection of the
I-1
environment, has not had a material effect upon the capital expenditures and
competitive position of the Issuer; however, certain ongoing costs are necessary
due to the nature of the operations of the petroleum storage facilities.
On December 31, 2001, the Issuer employed a total of 10 full-time employees and
1 part-time employee.
ITEM 2. - DESCRIPTION OF PROPERTY
PRINCIPAL FACILITIES
The Issuer's principal executive offices are located at its petroleum storage
facilities at 100 Dexter Road, East Providence, Rhode Island 02914.
INVESTMENT POLICIES AND INVESTMENTS IN REAL ESTATE
The Issuer has no established policy for the purchase of additional developed or
undeveloped property. However, should suitable parcels become available in the
general area of the Issuer's current land holdings in downtown Providence, Rhode
Island, the Issuer would consider such an acquisition depending on current
levels of cash, the availability of financing and unused condemnation proceeds
qualifying for deferred reinvestment under the Internal Revenue Code. Any
properties acquired would most likely be leased primarily to developers under
long-term leases. The Issuer periodically invests its excess cash in United
States government and governmental agency obligations maturing in not more than
eighteen months.
DESCRIPTION OF REAL ESTATE AND OPERATING DATA
All of the properties described below (except the petroleum storage facilities)
are shown on a map on page 7 of the Issuer's 2001 Annual Report, which map is
incorporated herein by reference.
All the properties described below are owned in fee by the Issuer. There are no
mortgages, liens or other encumbrances on such properties, except for Parcel 22.
In the opinion of management, all of the properties described below are
adequately covered by insurance. Insurance is also required of all tenants, with
the Issuer being named as an additional insured.
PETROLEUM STORAGE FACILITIES - The Issuer holds title to approximately 10 acres
of land fronting on the Seekonk River in East Providence, Rhode Island which are
shown on a map on page 6 of the Issuer's 2001 Annual Report, which map is
incorporated herein by reference. The property is used and operated primarily as
a petroleum storage facility (Petroleum Facilities).
In January 1998, the Issuer purchased the Wilkesbarre Pier in the Port of
Providence and its deep-water berth for receiving petroleum products by tanker.
In January 1998, the Issuer also purchased the perpetual right to transport
petroleum products from the Pier to its terminal property through pipelines
owned by a third party.
I-2
This property is the only independent petroleum storage facility with deep-water
access in the market area. All of the petroleum storage tanks and buildings are
owned by the Issuer.
In 1996, the Issuer resumed possession of the Facilities. In 1998, the Issuer
entered into a short-term arrangement with Global Companies, L.L.C. under which
the Issuer operates the entire Facilities for Global. In 1999, the Issuer
entered into an agreement with Global extending the arrangement for an
additional three years plus options to extend on an annual basis. In 2000, the
arrangement was extended another year to April 30, 2004.
The following schedule sets forth certain information on the federal tax basis
of that portion of the petroleum terminal property which is depreciated:
Land
Improvements Buildings Tanks Equipment
------------ --------- ---------- ------------
Federal Tax Basis (cost) $976,883 $273,051 $4,406,915 $2,586,696
Rate per year 6.67% 2.56% 20% 20%
Method 150%DB S/L 200%DB 200%DB
Life (Years) 15 39 5 5
The 2001 real estate taxes are $62,955 for the petroleum storage facilities and
$36,647 for the Wilkesbarre Pier at a $23.66 per thousand dollars of assessed
valuation tax rate.
The Company has obtained all the necessary approvals from the City of East
Providence and State of Rhode Island to construct three additional 152,000
barrel tanks; however, the Issuer has no present plans to construct any new
tanks.
PROPERTIES UNDER LONG-TERM LEASES - The Issuer owns approximately 18 acres of
land within the Capital Center Project area in downtown Providence, Rhode
Island. (The land underlying the Parking Garage described below is also included
in this acreage.) See the map on page 7 of the Issuer's 2001 Annual Report,
which map is incorporated herein by reference.
At December 31, 2001, land leases for three separate land parcels within this
area have commenced with remaining terms of up to 141years. These leases have
scheduled rent increases over their terms. For further information on the
development of these parcels by the tenants, reference is made to the
President's Report at pages 2 and 3 in the Issuer's 2001 Annual Report, which
pages are incorporated herein by reference.
The Issuer had entered into three additional land leases as follows:
- In December 1998, the Issuer entered into a lease for 149 years. In
November 2001, this lease was terminated and a new lease was entered
into with a successor developer under which the developer proposes to
construct a building containing 200,000 square feet of office space,
67,000 square feet of retail space and a parking garage containing a
minimum of 250 public parking spaces.
I-3
- In August 2000, the Issuer entered into a lease for 97 years under
which the developer proposes to construct a 250-300 room luxury hotel,
a building containing 75-90 condominium units, a building containing
225 apartments and a parking garage containing 550 public parking
spaces.
- In December 2000, the Issuer entered into a lease for 250 years under
which the developer proposed to construct an apartment tower and a
parking garage on two parcels. The Company also entered into an option
agreement with the same developer for the future development of two
adjacent parcels. At this time, the developer is redesigning and
expanding its initial project to include all four parcels which will
include a parking garage with 600 public parking spaces, a 200-room
hotel and residential.
All of these leases provide a period of time within which each developer may
perform its due diligence, seek the approval of the plans for its complex from
the Capital Center Commission and enter into a tax stabilization agreement with
the City of Providence. There can be no assurance that each developer will be
able to satisfy the conditions precedent to proceeding with the development. The
Issuer is unable to determine at this time when construction will begin and
therefore the time at which the term of each lease will commence.
PROPERTIES UNDER SHORT-TERM LEASES:
PARKING GARAGE - The Issuer owns a 330-car parking garage adjacent to a rail
passenger station in downtown Providence, Rhode Island, together with the
underlying land (the Parking Garage), which is leased under a short-term
cancelable lease to a firm experienced in parking operations. The annual rent is
$138,600 ($.91 per square foot). The federal tax cost basis of the Parking
Garage (exclusive of the underlying land) is $2,500,000, which is being
depreciated on the straight-line method at the rate of 2.5% per year over a
40-year life. The 2001 real estate taxes are $105,691 on the Parking Garage and
$81,757 on the underlying land at a $34.07 per thousand dollars of assessed
valuation tax rate. (For a discussion of the litigation currently pending with
the Federal Railroad Administration concerning the parking rates in the garage,
reference is made to Note 10 to Consolidated Financial Statements in the
Issuer's 2001 Annual Report, which note is incorporated herein by reference.)
Parcels 3E, 3W, 4E, 4W and 6 in the Capital Center Project area and Parcels 21
and 22 immediately adjacent to this area are leased for surface parking purposes
to the same firm that leases the Parking Garage described above. The short-term
leases on Parcels 3E, 4E, 3W and 4W will terminate when construction of one of
the above-described projects commences. The Issuer continues to seek a developer
for the remaining parcel. These leases can be terminated on short notice should
suitable development opportunities arise or when construction on a parcel
commences as described above.
ITEM 3. LEGAL PROCEEDINGS
PETITION FOR ASSESSMENT OF DAMAGES - For a discussion of the litigation
currently pending with the City of Providence, reference is made to Notes 6 and
7 of Notes to Consolidated Financial Statements in the Issuer's 2001 Annual
Report, which notes are incorporated herein by reference.
I-4
For a discussion of the litigation with the National Railroad Passenger
Corporation (Amtrak) currently pending, reference is made to Note 8 of Notes to
Consolidated Financial Statements in the Issuer's 2001 Annual Report, which note
is incorporated herein by reference.
For a discussion of the litigation currently pending with the Federal Railroad
Administration, reference is made to Note 9 of Notes to Consolidated Financial
Statements in the Issuer's 2001 Annual Report, which note is incorporated herein
by reference.
For a discussion of the litigation with an Oil Company currently pending,
reference is made to Note 4 of Notes to Consolidated Financial Statements in the
Issuer's 2001 Annual Report, which note is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
I-5
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
See page 32 of the Issuer's 2001 Annual Report, which page is incorporated
herein by reference.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
See pages 8 through 12 of the Issuer's 2001 Annual Report, which pages are
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS
The following consolidated financial statements of the Issuer and its
subsidiaries, set forth at pages 13 through 29 of the Issuer's 2001 Annual
Report, are incorporated herein by reference:
Consolidated balance sheet--December 31, 2001
Consolidated statements of income (loss) and retained earnings--years ended
December 31, 2001 and 2000
Consolidated statements of cash flows--years ended December 31, 2001 and
2000
Notes to consolidated financial statements--years ended December 31, 2001
and 2000
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
II-1
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
ISSUER
For information with respect to the directors and control persons of the Issuer,
see Pages 2, 3 and 4 of the Issuer's definitive proxy statement for the 2002
annual meeting of its shareholders, which pages are incorporated herein by
reference.
The following are the executive officers of the Issuer:
Date of First
Name Age Office Held Election to Office
---- --- ----------- ------------------
Robert H. Eder 69 Chairman 1995
Ronald P. Chrzanowski 59 President 1997
Barbara J. Dreyer 63 Treasurer 1997
Stephen J. Carlotti 59 Secretary 1998
All officers hold their respective offices until their successors are duly
elected and qualified. Mr. Chrzanowski served as Vice President of the Issuer
from November 12, 1997 to December 31, 1997, and as President since that date.
Ms. Dreyer served as President and Treasurer of the Issuer from 1995 to 1997 and
as Treasurer since that date.
ITEM 10. EXECUTIVE COMPENSATION
See page 3 of the Issuer's definitive proxy statement for the 2002 annual
meeting of its shareholders, which page is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See page 4 of the Issuer's definitive proxy statement for the 2002 annual
meeting of its shareholders, which page is incorporated herein by reference.
III-1
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index of Exhibits:
(3)(a) Amended Articles of Incorporation (incorporated by reference to
Exhibit 3.1 to the Issuer's report on Form 8-K filed December 10,
2001.)
(b) Restated articles of incorporation (incorporated by reference to
Exhibit 3 to the Issuer's report on Form 8A dated June 6, 1997).
(c) By-laws, as amended (incorporated by reference to Exhibit 3(b) to
the Issuer's quarterly report on Form 10-QSB for the quarter
ended September 30, 1999).
(10) Material contracts:
(a) Leases between Metropark, Ltd., and Issuer:
(i) Dated December 12, 2001; see page III-3;
(ii) Dated December 12, 2001; see page III-4;
(iii) Dated December 12, 2001; see page III-5
(iv) Dated December 12, 2001; see page III-6; and
(v) Dated December 12, 2001; see page III-7
(13) Annual report to shareholders for the year ended December 31, 2001;
see page III-8.
(21) Subsidiaries of the Issuer; see page III-9.
(22) (a) Plan of the Issuer's petroleum storage facilities in East
Providence, Rhode Island (incorporated by reference to page 6 of
the Issuer's annual report to shareholders for the year ended
December 31, 2001), filed as Exhibit 13 hereto.
(b) Plan of the Issuer's parcels in Downtown Providence (incorporated
by reference to page 7 of the Issuer's annual report to
shareholders for the year ended December 31, 2001), filed as
Exhibit 13 hereto.
(b) A report on Form 8-K was filed on December 10, 2001 announcing the filing
of Articles of Amendment to the Articles of Incorporation with the
Secretary of State of the State of Rhode Island effective December 6, 2001.
III-2
SIGNATURES
In accordance with Section 13 or 15(d) 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/ Ronald P. Chrzanowski
-------------------------------------
Ronald P. Chrzanowski
President and Principal
Executive Officer
Dated: March 18, 2002
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Issuer and in the capacities and on the
dates indicated.
Signature
---------
/s/ Robert H. Eder March 19, 2002
---------------------------------------
Robert H. Eder
Chairman and Director
/s/ Ronald P. Chrzanowski March 18, 2002
---------------------------------------
Ronald P. Chrzanowski
President and Director
(Principal Executive Officer)
/s/ Barbara J. Dreyer March 18, 2002
---------------------------------------
Barbara J. Dreyer
Treasurer, Principal Financial Officer
and Principal Accounting Officer
/s/ Harris N. Rosen March 21, 2002
---------------------------------------
Harris N. Rosen, Director