Capital Properties Inc. Files 2024 10-K, Details Leases and Litigation

TL;DR

CPT 10-K out: Land leases strong, but watch out for Sprague litigation.

AI Summary

Capital Properties Inc. (CPT) filed its 2024 10-K on February 7, 2025, reporting on its real estate leasing operations. The company's primary assets include land and land improvements held for lease, with significant leases to entities like Lamar Outdoor Advertising LLC. The filing also details financial activities such as interest income and a line of credit with BAnkRI, and mentions ongoing litigation related to the Sprague Petroleum segment.

Why It Matters

This filing provides investors with a comprehensive overview of Capital Properties Inc.'s financial health, operational performance, and potential risks for the fiscal year ending December 31, 2024.

Risk Assessment

Risk Level: medium — The company faces risks related to customer concentration, ongoing litigation, and the general real estate market.

Key Numbers

• 1231 — Fiscal Year End (Indicates the period covered by the report.)
• 20250207 — Filing Date (Shows when the report was submitted to the SEC.)

Key Players & Entities

• CAPITAL PROPERTIES INC /RI/ (company) — Filer
• 2024-12-31 (date) — Fiscal Year End
• 20250207 (date) — Filing Date
• Lamar Outdoor Advertising LLC (company) — Major Tenant
• BAnkRI (company) — Lender
• Sprague Litigation (legal_case) — Ongoing Litigation

FAQ

Key Financial Figures

• $59,000 — 31, 2024, the Company incurred costs of $59,000 which were charged against the environm
• $343,000 — ion accrual resulting in a liability of $343,000 at December 31, 2024. Any subsequent in
• $427,000 — 2019, Sprague asserted that it was owed $427,000 and the Company asserted that its oblig
• $104,000 — on under the Agreement could not exceed $104,000. Mediation efforts were unsuccessful an
• $173,000 — d judgment for Sprague in the amount of $173,000 which includes, as required by law, pre
• $18.9 million — justments) under the lease ranging from $18.9 million to $363.0 million. Given the length of
• $363.0 million — the lease ranging from $18.9 million to $363.0 million. Given the length of the remaining leas
• $850,000 — ompany had cash and cash equivalents of $850,000 and $652,000 at December 31, 2024 and 2
• $652,000 — sh and cash equivalents of $850,000 and $652,000 at December 31, 2024 and 2023, respecti
• $761,000 — sive of a money market account totaling $761,000 and $461,000 in each of the aforementio
• $461,000 — ey market account totaling $761,000 and $461,000 in each of the aforementioned years. Ad
• $1,294,000 — ents that mature in March 2025 totaling $1,294,000 along with a $2,000,000 unused line of
• $2,000,000 — h 2025 totaling $1,294,000 along with a $2,000,000 unused line of credit (see Note 6 in th
• $250,000 — t Insurance Corporation to a maximum of $250,000. The Company periodically evaluates the
• $8,847 M — ase Type of Adjustment Parcel 2 $8,847 May 1, 2023 COLA Parcel 3S $14,236

Filing Documents

• cptp-20241231.htm (10-K) — 1378KB
• cptp-ex20.htm (EX-20) — 1KB
• cptp-ex21.htm (EX-21) — 7KB
• cptp-ex31_1.htm (EX-31.1) — 15KB
• cptp-ex31_2.htm (EX-31.2) — 15KB
• cptp-ex32_1.htm (EX-32.1) — 7KB
• cptp-ex32_2.htm (EX-32.2) — 7KB
• img33393992_0.jpg (GRAPHIC) — 456KB
• 0000950170-25-016420.txt ( ) — 6023KB
• cptp-20241231.xsd (EX-101.SCH) — 774KB
• cptp-20241231_htm.xml (XML) — 824KB

Business

Business 3 Item 2.

Properties

Properties 6 Item 3.

Legal Proceedings

Legal Proceedings 6 Item 4. Mine Safety Disclosure 6 PART II Item 5. Markets for Registrant's Common Equity and Related Shareholder Matters 7 Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 8.

Financial Statements and Supplementary Data

Financial Statements and Supplementary Data 10 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 23 Item 9A.

Controls and Procedures

Controls and Procedures 23 Item 9B. Other Information 23 Item 9C. Disclosures Regarding Foreign Jurisdictions That Prevents Inspections 23 PART III Item 10. Directors, Executive Officers and Corporate Governance 24 Item 11.

Executive Compensation

Executive Compensation 24 Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 24 Item 13. Certain Relationships and Related Transactions and Director Independence 24 Item 14. Principal Accountant Fees and Services 24 PART IV Item 15. Exhibits and Financial Statement Schedules 25

Signatures

Signatures 26 2 PART I FORWARD-LOOKI NG 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 rent when due over the terms of the long-term 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; cyber-penetrations; the long-term impact of the hybrid workplace model on future development, existing tenants, parking operations and the Company's financial performance, and exposure to remediation and other costs associated with its former ownership of a petroleum storage facility. The Company does not undertake the obligation to update forward-looking statements in response to new information, future events or otherwise.

Business

Item 1. Business Organizational History The Company 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. In 1984, the Company's name was changed to Capital Properties, Inc. Business: The Company operates in one segment that consists principally of the leasing of Company-owned land in Capital Center ("Capital Center") and property adjacent to Capital Center (Parcel 20) in downtown Providence, Rhode Island under long-term ground leases with terms of 99 years or more.* (Hereinafter, the land in Capital Center and Parcel 20 are referred to as parcels within the "Capital Center Area"). The Company owns approximately 18 acres in Capital Center consisting of 13 individual parcels. Capital Center (approximately 77 acres of land) is the result of a development project undertaken by the State of Rhode Island, the City of Providence, the National Railroad Passenger Corporation ("Amtrak") and the Company during the 1980's in which two rivers, the Moshassuck and the Woonasquatucket, were moved, Amtrak's Northeast Corridor rail line was relocated, a new Amtrak/commuter railroad station was constructed and significant public improvements were made to improve pedestrian and vehicular traffic in the area. The Company has not acted, and does not intend to act, as a developer with respect to any Company-owned parcels. Under the Company's standard Ground Leases, the tenant is responsible for all property related operating expenses, such as real estate taxes, maintenance and insurance as well as all costs associated with the development and construction of the related improvements. Each Ground Lease contains provisions permitting the tenant to develop the parcel under certain terms and conditions and provides for periodic rent increases based on either a specific

Cybersecurity

Item 1C. Cybersecurity Risk Management The Company's corporate information technology, communication networks, and accounting and financial reporting platforms are necessary for the operation of its business. The Company uses these systems, along with others, to manage its tenant and vendor relationships, for internal and external communications and for accounting to operate recordkeeping and reporting functions. The 5 Company has implemented and maintains various information security processes designed to identify, assess and manage material risks from cybersecurity threats to its critical computer networks, third-party hosted services, communications systems, hardware and software, and our critical data, including confidential information. Management works primarily with third parties (principally professional services and consulting firms) to assist them in identifying, assessing, and managing cybersecurity risks. To operate its business, the Company utilizes certain third-party service providers to perform a variety of functions and seeks to engage reliable, reputable service providers that maintain cybersecurity programs. The Company is not aware of any risks from cybersecurity threats, including as a result of any cybersecurity incidents, which have materially affected or are reasonably likely to materially affect it, including its business strategy, results of operations, or financial condition. Governance: The Board of Directors oversees the Company's strategy and risk management, including material risks related to cybersecurity threats. The Board has delegated to the Audit Committee oversight of cybersecurity matters. Management is responsible for day-to-day assessment and management of cybersecurity risks. The Treasurer has primary oversight of material risks from cybersecurity threats and works primarily with third parties to identify, assess, and manage cybersecurity risks. The Treasurer meets with the Audit Committee periodically to rev

P roperties

Item 2. P roperties The Company owns approximately 18 acres and a historic building in the Capital Center Area of Providence, Rhode Island. With the exception of Parcel 6C and Parcel 20 (the term of which will commence on the happening of certain events), all of the Company's real property is leased either under long-term leases or short-term leases as more particularly described in Item 1, Business. The Company also owns or controls 23 locations in Rhode Island and Massachusetts on which 44 billboard faces have been constructed. All but one of these locations are owned by the Company under permanent easements from the Railroad; the remaining location is leased from an unrelated third party whose lease provides for an option to extend the term through June 30, 2030.

Legal Pr oceedings

Item 3. Legal Pr oceedings In connection with the sale of the Company's petroleum storage terminal in 2017, the Company and Sprague entered into an agreement relating to the construction of a breasting dolphin pursuant to which any construction costs incurred in excess of the contract cost of the construction would be shared equally between the Company and Sprague subject to certain limitations. 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, 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 matter went before the Superior Court in May 2024. On October 28, 2024, the Superior Court rendered its decision and found that the Company's obligation with respect to the increased cost of constructing the breasting dolphin is $104,000. On January 24, 2025 the Superior Court entered judgment for Sprague in the amount of $173,000 which includes, as required by law, prejudgment interest at 12% per annum. The $173,000 judgment was paid on January 29, 2025. The Company does not intend to appeal unless Sprague files an appeal.

Mine Safety Disc losure – Not applicable

Item 4. Mine Safety Disc losure – Not applicable 6 PART II

Market for Registrant's Common Equity and Related Stockholder Matters

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The Company's Class A Common Stock is traded on the OTCQX, symbol "CPTP." The following table shows the high and low trading prices for the Company's Class A Common Stock during the quarterly periods indicated as obtained from the OTCQX, together with cash dividends paid per share during such periods. Trading Prices Dividends High Low Declared 2024 1st Quarter $ 12.00 $ 10.30 $ 0.07 2nd Quarter 10.93 10.05 0.07 3rd Quarter 10.51 9.88 0.07 4th Quarter 10.95 9.85 0.07 2023 1st Quarter $ 12.20 $ 10.55 $ 0.07 2nd Quarter 12.00 10.70 0.07 3rd Quarter 13.00 11.12 0.07 4th Quarter 12.52 11.35 0.07 At February 7, 2025, there were 315 holders of record of the Company's Class A Common Stock. 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The following discussion of our financial condition and results of operations excludes the results of our discontinued operations unless otherwise noted. See Note 9, "Discontinued operations and environmental incident" in the accompanying Consolidated Financial Statements for further discussion of these operations. 1. Overview: Critical accounting estimates: The Securities and Exchange Commission ("SEC") has issued guidance for the disclosure of "critical accounting estimates." The SEC defines such estimates as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. The Company's significant accounting policies are described in Note 2 in the accompanying Consolidated Financial Statements. Not all of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates. Management believes that the Company's revenue recognition policy for long-term leases with scheduled rent increases meets the SEC definition of "critical." The Company's long-term leases (land and billboard) have original terms of 30 to 149 years. The Company follows GAAP in accounting for its leases by recognizing rental income on the straight-line basis over the term of the leases. Where the straight-line income exceeds the actual contractual payments ("Excess"), the Company evaluates the collectability of the entire stream of remaining lease payments on a lease-by-lease basis. If the remaining lease payments are not deemed to be probable of collection, in accordance with GAAP, lease revenue is recorded at the lower of strai

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