Capital Properties profits continue to decline in Q2
CAPITAL PROPERTIES INC. reported a significant drop in second-quarter profit, as its contract with Global Companies to operate its East Providence petroleum storage facility lapsed, and the tanks were drained.
EAST PROVIDENCE – Capital Properties Inc. profits plummeted in the second quarter of 2013, falling 56.6 percent to $251,000, or 4 cents per share, from $578,000, or 9 cents per share, the company announced Monday.
Total revenue slid from $2.08 million to $1.55 million year to year, as total expenses ticked up slightly, from $1.12 million to $1.14 million.
Revenue from the real estate that Capital Properties leases in the Capitol Center area of Providence — one of the company’s two principal revenue streams — rose 10.9 percent year to year to $1.21 million, primarily because of scheduled increases in rents. Leasing expenses dropped 44.8 percent to $149,000 from $270,000, after real property taxes fell when the parcels in downtown Providence were reassessed.
But revenue from the East Providence petroleum storage facility that Capital Properties leases fell 65.5 percent to $340,000, accounting for most of the company’s decrease in revenue and profit. Expenses remained roughly constant, as a decrease in maintenance and repairs counteracted an increase in real property taxes.
Capital Properties operated the storage facility for Global Companies LLC until April 30, when its lease expired. In May 2012, Capital Properties announced that it would not renew the contract — but Global had already triggered an option to purchase. After Capital Properties offered an initial adjusted book value of $19.7 million, the two companies conducted separate appraisals but arrived at very different numbers: Capital Properties’ appraiser set a value of $46.2 million, while Global’s appraiser came back with $15.4 million.
Despite a third appraisal, the companies could not bridge the gap, so Global did not exercise the option to purchase. The tanks now sit empty, Barbara J. Dreyer, Capital Properties treasurer, told PBN, accounting for the sharp decline in revenue.
“The board of directors approved a marketing plan, and we’re currently marketing the terminal” to find another buyer, Dreyer said, but she could not provide further specifics.
Another primary source of the decline in profits was a new $144,000 charge for interest on dividend notes that did not exist in the second quarter of 2012. The interest resulted from an extraordinary dividend issued at the end of 2012, just before capital gains tax rates increased, when the company refinanced the $2.7 million balance of its 2010 debt to the Bank and borrowed another $3.03 million to pay the dividend.
In the second quarter of 2013, Capital Properties was reimbursed $96,000 for costs incurred through the appraisal of the facility in 2012.
Year to year, second-quarter general and administrative expenses remained roughly the same.