UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

    ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   

For the quarterly period ended ~~September~~March 3031, ~~2023~~2024

    ☐ 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 001-08499

CAPITAL PROPERTIES, INC.

(Exact name of registrant as specified in its charter)


Rhode Island		05-0386287
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		identification No.)


	5 Steeple Street, Unit 303
	Providence, Rhode Island	02903
	(Address of principal executive offices)	(Zip Code)

(401) 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

Class A Common Stock, $.01 par value	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. 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.) 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	☐
Non-Accelerated Filer	☐	Smaller reporting company	☒
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~September~~March 3031, ~~2023~~2024, the Company had 6,599,912 shares of Class A Common Stock outstanding.

CAPITAL PROPERTIES, INC.

FORM 10-Q

FOR THE QUARTER ENDED ~~SEPTEMBER~~MARCH 3031, ~~2023~~2024

TABLE OF CONTENTS

		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 4.	Controls and Procedures	12
	PART II – OTHER INFORMATION
Item 6.	Exhibits	13
	Signatures	1416

PART I

Item 1. Financial Statements

CAPITAL PROPERTIES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2023 (Unaudited)		December 31,2022
	March 31, 2024 (Unaudited)		December 31,2023
ASSETS
Properties and equipment (net of accumulated depreciation)	$	6,520,000	$	6,584,000
Properties and equipment (net of accumulated depreciation) (Note 4)	$	6,477,000	$	6,498,000
Cash and cash equivalents		2893,~~127,~~000		1652,~~476,~~000
Prepaid and other		136,000		224,000
Investments		1,244,000		1,244,000
Prepaid income taxes		-		21,000
Prepaid and other		395,000		387,000
Deferred income taxes associated with discontinued operations (Note 8)		110,000		110,000
Prepaid income taxes		-		57,000
	$	8,893,000	$	8,415,000
Deferred income taxes, discontinued operations		104,000		109,000
	$	9,113,000	$	8,947,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Property taxes	$	340,000	$	~~260~~340,000
Other		~~406~~398,000		~~366~~330,000
Income taxes payable		108,000		-
Income tax payable		103,000		-
Deferred income taxes, net		~~201~~268,000		~~271~~284,000
Liability associated with discontinued operations (Note 8)		406,000		406,000
Environmental remediation accrual, discontinued operations (Note 9)		387,000		402,000
		1,461,000		1,303,000
		1,496,000		1,356,000
Shareholders’ equity:
Class A common stock, $.01 par; authorized 10,000,000 shares;
Class A common stock, $.01 par; authorized 10,000,000 shares; issued and outstanding 6,599,912 shares		66,000		66,000
issued and outstanding 6,599,912 shares		66,000		66,000
Capital in excess of par		782,000		782,000
Retained earnings		6,~~584~~769,000		6,~~264~~743,000
		7,432,000		7,112,000
		7,617,000		7,591,000
	$	89,~~893~~113,000	$	8,~~415~~947,000

See notes to condensed consolidated financial statements.

CAPITAL PROPERTIES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SHAREHOLDERS’ EQUITY

THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2023~~2024 AND ~~2022~~2023

(Unaudited)

		Three Months Ended September 30,							Nine Months Ended September 30,
	Three Months Ended March 31,
		2023				2022			2023			2022
	2024				2023
Revenue	$	$1,342,000	~~1,313,000~~		$	$1,251,000	~~1,206,000~~		$	~~4,056,000~~		$	~~3,821,000~~
Expenses:
Operating		259,000	~~227,000~~			225,000	~~282,000~~			~~659,000~~			~~821,000~~
General and administrative		368,000	~~332,000~~			352,000	~~311,000~~			~~1,007,000~~			~~976,000~~
			559,000				593,000			1,666,000			1,797,000
		627,000				577,000
Income from operations before income taxes			754,000				613,000			2,390,000			2,024,000
Income from continuing operations before income taxes		715,000				674,000
Income tax expense (benefit):
Income tax expense:
Current		188,000	~~218,000~~			212,000	~~187,000~~			~~732,000~~			~~649,000~~
Deferred		(16,000	-)			(23,000	~~(19,000~~)	)		~~(70,000~~	)		~~(94,000~~	)
			218,000				168,000			662,000			555,000
		172,000				189,000
Income from continuing operations		543,000	~~536,000~~			485,000	~~445,000~~			~~1,728,000~~			~~1,469,000~~
Loss on sale of discontinued operations, net of tax (Note 8)			(2,000	)			(55,000	)		(22,000	)		(106,000	)
Loss on sale of discontinued operations, net of tax (Note 9)		(55,000	)			-
Net Income			534,000				390,000			1,706,000			1,363,000
Net income		488,000				485,000
Retained earnings, beginning		6,743,000	~~6,512,000~~			6,264,000	~~6,374,000~~			~~6,264,000~~			~~6,325,000~~
Dividends on common stock ($.07 per share)
Dividends on common stock based on 6,599,912 shares outstanding		(462,000	)			(462,000	)
based upon 6,599,912 shares outstanding			(462,000	)			(462,000	)		(1,386,000	)		(1,386,000	)
Retained earnings, ending	$	6,769,000			$	6,287,000
Retained earnings, ending			6,584,000				6,302,000			6,584,000			6,302,000
Basic income (loss) per common share based upon 6,599,912 shares outstanding:
Class A common stock			66,000				66,000			66,000			66,000
Continuing operations	$	0.08			$	0.07
Capital in excess of par			782,000				782,000			782,000			782,000
Discontinued operations		(0.01	)			-
Shareholders' equity, ending		$	7,432,000			$	7,150,000		$	7,432,000		$	7,150,000
Total basic income per common share	$	0.07			$	0.07
Basic income (loss) per common share based upon 6,599,912 shares outstanding
Continuing operations		$	0.08			$	0.07		$	0.26		$	0.22
Discontinued operations			(0.00	)			(0.01	)		(0.00	)		(0.01	)
Basic income per common share based upon 6,599,912 shares outstanding		$	0.08			$	0.06		$	0.26		$	0.21

See notes to condensed consolidated financial statements.

CAPITAL PROPERTIES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~NINE~~THREEMONTHS ~~MONTHS~~ ENDED ~~SEPTEMBER~~MARCH 3031, ~~2023~~2024 AND ~~2022~~2023

(Unaudited)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2023			2022
	2024			2023
Cash flows from operating activities:
Continuing operations:
Income from continuing operations	$	1543,~~728,~~000		$	1485,~~469,~~000
Adjustments to reconcile income from continuing operations to net cash provided by operating activities, continuing operations:
Depreciation		6421,000			6421,000
Deferred income taxes		(7016,000	)		(9423,000	)
Income taxes		129,000			102,000
Changes in assets and liabilities:
Other, net changes in prepaids, property tax payable and other		208,000			306,000
Income taxes		160,000			204,000
Net cash provided by operating activities, continuing operations		2,059,000			1,847,000
Other		60,000			67,000
Net cash provided by operating activities, continuing operations		768,000			754,000
Cash flows from investing activities:
Investments:
Purchase of investments					(1,000,000	)
Purchase		(1,000,000	)		-
Maturity		1,000,000			-
Net cash provided by investing activities, continuing operations		-			-
Discontinued operations:
Cash used to settle obligations		(22,000	)		(192,000	)
Loss on sale of discontinued operation		(55,000	)		-
Noncash adjustment to loss on sale of discontinued operations		-(10,000	)		~~24,000~~-
Net cash used in investing activities, discontinued operations		(22,000	)		(168,000	)
Net cash used in investing activities		(65,000	)		(1,000,000	)
Cash used in investing activities		(22,000	)		(168,000	)
Cash flows used in financing activities, payment of dividends		(462,000	)		(462,000	)
Cash flows used in financing activities, payment of dividends		(1,386,000	)		(1,386,000	)
Increase (decrease) in cash and cash equivalents		241,000			(708,000	)
Increase in cash and cash equivalents		651,000			293,000
Cash and cash equivalents, beginning		652,000			1,476,000
Cash and cash equivalents, beginning		1,476,000			1,443,000
Cash and cash equivalents, ending	$	893,000		$	768,000
Cash and cash equivalents, ending	$	2,127,000		$	1,736,000
Supplemental disclosures:
Supplemental disclosure:
Cash paid for income taxes	$	7,000		$	7,000
Cash paid for income taxes	$	595,000		$	485,000

See notes to condensed consolidated financial statements.

CAPITAL PROPERTIES, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2023~~2024 AND ~~2022~~2023

(Unaudited)

Description of business:

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.

Basis of presentation and summary of significant accounting policies:

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~~2023 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~~2023.

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~~March 3031, ~~2023~~2024 and the results of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, and cash flows for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023.

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~~Investments:

~~General~~Investments ~~and~~consist ~~administrative~~of ~~expenses~~U.S. ~~for~~Treasury ~~the~~securities ~~three~~that ~~and~~yield ~~nine~~5.04% ~~months~~and ~~ended~~mature ~~September~~in ~~30,~~April ~~2022~~2024. The ~~have~~Company ~~been~~classifies ~~reduced~~its byU. ~~$75,000~~S. ~~and~~Treasury ~~$145,000,~~securities ~~respectively~~as held-to-maturity ~~reclassify~~in ~~costs~~accordance ~~associated~~ with ~~the~~ASC ~~litigation~~320 of"Investments ~~the~~- ~~cost~~Debt ~~sharing~~and ~~provision~~Equity ~~of the Terminal Sales Agreement (Note 8) to loss from sale of discontinued operations~~Securities". ~~This~~Held-to-maturity ~~change~~securities ~~results~~are inthose ~~reporting~~securities ofwhich athe ~~loss~~Company ~~from~~has ~~sale of discontinued operations of $55,000 and $106,000 for~~ the ~~three~~ability and ~~nine~~intent ~~months~~to ~~ended~~hold ~~September~~until ~~30,~~maturity. Held-to-maturity ~~2022,~~treasury ~~respectively,~~securities ~~which amounts~~ are ~~net~~recorded ofat anamortized ~~income~~cost ~~tax~~on ~~benefit of $20,000 and $39,000 for~~ the ~~same~~accompanying ~~periods~~consolidated ~~presented. The~~balance ~~change~~sheet ~~also increased net cash provided by operating activities~~ and ~~cash~~adjusted ~~used in investing activities by $106,000~~ for the ~~nine~~amortization ~~months~~or ~~ended~~accretion ~~September~~of ~~30,~~premiums ~~2022~~or discounts.

Properties and equipment:

Properties and equipment consist of the following:

	September 30,2023			December 31,2022
		March 31,2024			December 31,2023
Properties on lease or held for lease:
Land and land improvements on lease or held for lease		$	4,439,000		$	4,439,000
Land and land improvements	$	4,439,000		$	4,439,000
Building and improvements, Steeple Street (Note 7)			2,582,000			2,582,000
Building and improvements, Steeple Street		2,582,000			2,582,000
			7,021,000			7,021,000
		7,021,000			7,021,000
Less accumulated depreciation:
Less accumulated depreciation:
Land improvements on lease or held for lease			93,000			93,000
Land improvements on lease or held for lease		93,000			93,000
Steeple Street property (Note 7)			451,000			430,000
Steeple Street property		408,000			344,000
			544,000			523,000
		501,000			437,000
		$	6,477,000		$	6,498,000
	$	6,520,000		$	6,584,000

Liabilities, other:

Liabilities, other consist of the following:

	September 30,2023		December 31,2022
	March 31,2024		December 31,2023
Accrued professional fees	$	~~147~~135,000	$	~~155~~157,000
Deposits and prepaid rent		~~180~~173,000		93146,000
Accrued payroll and related costs		35,000		75,000
Other		90,000		27,000
Other		44,000		43,000
	$	398,000	$	330,000
	$	406,000	$	366,000

Note Payable - Revolving Credit Line:

InThe ~~March 2021, the~~ Company's ~~entered into a~~ financing agreement (“Agreement”) with BankRI ~~that~~ provides for a revolving line-of-credit (“Line”) with a maximum borrowing capacity of $2,000,000 through March ~~2024~~2027. ~~After~~Amounts ~~June 30, 2023, amounts~~ outstanding under the Agreement bear interest at the ~~rate of the~~ Secured Overnight Financing Rate ("SOFR") plus ~~the~~200 ~~one-month~~basis ~~SOFR Spread Adjustment of~~ points.~~11448%,~~ ~~but not less than 3.25% or, at the option of the Company, the Wall Street Journal Prime Rate.~~ 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 1.25 to 1.0 on the Property and 1.20 to 1.0 for the Company. The Agreement contains other restrictive covenants, including, among others, a $250,000 limitation on the purchase of its outstanding capital stock in any twelve-month period. No advances have been made under the Line.

Description of leasing arrangements:

Long-term land leases:

Through ~~September~~March 3031, ~~2023~~2024 the Company had entered into ~~eight~~nine long-term land leases, ~~all~~eight of which have completed construction of improvements thereon. The Company’s leases generally have a term of 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 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~~March 3031, 2024 and 2023, real property taxes attributable to the Company’s land ~~leases~~under lease totaled $236,000 ~~and $708,000, respectively, and were $174,000 and $522,000 for the same periods in 2022~~.

~~Under~~On ~~two~~January of25, 2024, the Company entered into a long-term ~~land~~ground ~~leases,~~lease of Parcel 20. Under the ~~Company~~terms ~~receives~~of ~~contingent~~the ~~rentals~~lease, ~~(based~~tenant's onpossession awill ~~fixed~~not ~~percentage~~occur ofuntil ~~gross~~such ~~revenue~~time as the tenant has received byall ~~the~~necessary ~~tenants)~~approvals ~~which~~for ~~totaled~~construction ~~$24~~of not less than 100,000 ~~and~~square ~~$84~~feet of mixed use improvements. Prior to transfer of possession,~~000~~ ~~for~~no rent is being paid by the ~~three~~tenant and ~~nine~~the ~~months~~Company ~~ended~~receives ~~September~~all ~~30,~~rents ~~2023,~~from ~~respectively~~existing tenants and ~~were~~parking ~~$21,000~~lease revenue and ~~$63~~remains responsible for all expenses,~~000~~ including real estate taxes, related to Parcel 20. Following tenant's possession, tenant is obligated to pay ground rent for the ~~same~~parcel ~~periods~~and into ~~2022~~purchase the historic building presently located on the premises for an additional amount payable monthly over twenty years.

~~Tri-State~~Under ~~Displays~~two ~~Inc.~~of leases 23 outdoor advertising locations containing 44 billboard faces along interstate and primary highways in Rhode Island and Massachusetts to Lamar under a lease which expires in 2049. The Lamar lease provides, among other things, for the ~~following: (1) the base rent will increase annually at the rate of 2.75% for each leased billboard location on June 1 of each year, and (2) in addition to base rent, for each 12~~long-~~month~~term ~~period~~land ~~commencing each June 1 (each 12-month period a “Lease Year”)~~leases, ~~Lamar must pay to~~ the Company ~~within~~receives ~~thirty~~contingent ~~days~~rentals ~~after~~(based ~~the~~on ~~close~~a offixed ~~the~~percentage ~~Lease Year, 30%~~ of ~~the~~ gross ~~revenues~~revenue ~~from~~received ~~each standard billboard and 20% of the gross revenues from each electronic billboard for such Lease Year, reduced~~ by the ~~sum of (a~~tenants) ~~commissions~~which ~~paid~~totaled ~~to unrelated third parties and (b) base rent paid to the Company for each leased billboard location. Leasing revenue includes~~ $~~189~~29,000 and $~~235~~27,000 for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, respectively~~, related to this agreement~~.

Tri-State Displays Inc. leases 23 outdoor advertising locations containing 44 billboard faces along interstate and primary highways in Rhode Island and Massachusetts to Lamar under a lease which expires in 2053. The Lamar lease provides, among other things, for the following: (1) the base rent will increase annually at the rate of 2.75% for each leased billboard location on June 1 of each year, and (2) in addition to base rent, for each 12-month period commencing each June 1 (each 12-month period a “Lease Year”), Lamar must pay to the Company within thirty days after the close of the Lease Year, 30% of the gross revenues from each standard billboard and 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.

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 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 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 no contingent rent for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023.

The COVID-19 pandemic had an adverse impact on Metropark’s parking operations as 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~~From ~~and Metropark continue to operate under the~~ June ~~30,~~ 2020 ~~revenue~~through ~~sharing~~December ~~agreement~~31, ~~that provides for~~ 2023 revenue ~~sharing~~was atrecognized ~~various~~on ~~percentages~~a ~~until~~cash ~~parking~~basis ~~revenues~~with ~~received~~the bydifference ~~Metropark~~between ~~equal~~the ~~or exceed $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~~amounts ~~Company~~paid ~~will share fifty~~ (50"deferred rent") ~~percent~~recorded ofas ~~the~~an ~~revenue~~accounts inreceivable ~~excess~~and ofwas ~~$70,000~~fully ~~until the arrearage has been paid in full~~reserved. If ~~prior~~At toMarch ~~payment~~31, in2023 ~~full of~~ the ~~arrearage~~receivable ~~one or more of the lots is removed~~ from ~~the~~ Metropark ~~lease~~was ~~for development~~$1,070,000 ~~the~~and ~~amount~~was offully ~~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~~reserved.

AtOn ~~September~~January 309, ~~2023~~2024, Capital Properties, Inc. (the ~~receivable~~“Company”) ~~from~~entered into a Second Amendment to its Lease Agreement whereby Metropark ~~equaled~~agreed to return to a fixed monthly rental payment of $157,~~115,~~000 ~~and~~per ~~was~~month ~~fully~~effective ~~reserved.~~January ~~The~~1, ~~Company~~2024 ~~continues~~subject to ~~recognize~~adjustment in accordance with the Lease Agreement. Additionally, the Company and Metropark settled the Company’s ~~rent~~claim onfor adeferred ~~cash~~rent ~~basis~~for ~~and~~all ~~will~~prior ~~continue~~periods which amounted to do$1,127,000 so(fully ~~until~~reserved by the ~~resumption~~Company) offor ~~regularly~~$150,000 ~~scheduled~~payable ~~rental~~by ~~payments~~Metropark ~~under~~in ~~its~~twenty ~~lease.~~(20) ~~Included~~equal inquarterly ~~leasing~~installments ~~revenue~~commencing on ~~the~~April ~~accompanying~~1, ~~condensed~~2024 ~~consolidated~~together ~~statements~~with ofinterest ~~income~~on ~~and~~the ~~retained~~unpaid ~~earnings~~balance ~~for~~in the ~~three~~amount ~~and~~of ~~nine~~4.73% ~~months~~per ~~ended~~annum. The ~~September 30~~$150,000 ~~2023~~settlement ~~are~~is ~~cash~~included ~~collections~~in ~~from~~Prepaid ~~Metropark~~and ~~totaling~~other ~~$111,000~~in ~~and~~the ~~$324,000,~~accompanying ~~respectively,~~consolidated ~~and~~balance ~~$71,000~~sheets ~~and~~at ~~$187~~March 31,~~000~~ ~~for~~2024 ~~the~~and ~~same~~December ~~periods~~31, ~~in 2022~~2023.

~~Historically,~~For the ~~Company~~three ~~has~~months ~~made~~ended ~~financial~~March ~~statement~~31, ~~footnote~~2024 ~~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~~2023, ~~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~~includes ~~with prior conclusions~~$171,000 ~~the~~and ~~Company has determined that~~$132, ~~at this time~~000, ~~the excess of straight-line rentals over contractual payments is not probable of collection. Accordingly~~respectively, ~~the~~from ~~Company has not included any part of that amount in revenue~~Metropark. ~~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 $91,900,000.~~

Historically, the Company has made financial statement 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 March 31, 2024 the excess of straight-line rentals (calculated by excluding variable payments) over contractual payments was $93,562,000.

Income taxes, continuing operations:

Deferred income taxes are recorded based upon differences between financial statement and tax basis amounts of assets and liabilities. The tax effects of temporary differences for continuing operations which give rise to deferred tax assets and liabilities are as follows:

	September 30,2023			December 31,2022
	March 31,2024			December 31,2023
Gross deferred tax liabilities:
Property having a financial statement basis in excess of tax basis	$	364,000		$	~~361~~364,000
Accounts receivable		~~318~~57,000			~~289~~52,000
Deferred income - conversion to cash basis of accounting for tax purposes		5,000			19,000
Insurance premiums and accrued leasing revenues		47,000			49,000
Insurance premiums		18,000			50,000
		468,000			465,000
		705,000			719,000
Gross deferred tax assets:
Allowance for doubtful accounts		(302,000	)		(279,000	)
Prepaid rent		(47,000	)		(40,000	)
Prepaid rent		(49,000	)		(25,000	)
Accounts payable and accrued expenses		(61,000	)		(49,000	)
Accounts payable and accrued expenses		(61,000	)		(74,000	)
Accrued property taxes		(92,000	)		(92,000	)
Accrued property taxes		(92,000	)		(70,000	)
		(200,000	)		(181,000	)
		(504,000	)		(448,000	)
	$	268,000		$	284,000
	$	201,000		$	271,000

Discontinued operations:

Prior to February 2017, the Company operated a petroleum storage facility (“Terminal”) through 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 $~~406~~387,000 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 20% cap on the increase from the initial estimate, subject to a sharing arrangement. In November 2019, Sprague asserted that it was owed $427,000 and the Company asserted that its obligation under the Agreement cannot 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 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 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 20% cap on the increase from the initial estimate, subject to a sharing arrangement. In November 2019, Sprague asserted that it was owed $427,000 and the Company asserted that its obligation under the Agreement cannot 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 Company anticipates that the matter will go to trial in May of 2024. The Company intends to vigorously defend against the claims being asserted by Sprague.

10.

Subsequent events:

At its ~~October~~April 2524, ~~2023~~2024 regularly scheduled quarterly Board meeting, the Board of Directors voted to declare a quarterly dividend of $.07 per share for shareholders of record on ~~November~~May 10, ~~2023~~2024, payable ~~November~~May 2031, ~~2023~~2024.

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; cyber penetrations; the long-term impact of the hybrid workplace model on future development, existing tenants and parking operations, and the Company's financial performance, 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.

Overview:

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~~2023. There have been no changes to the application of this accounting policy since December 31, ~~2022~~2023.

Liquidity and capital resources:

Historically, the Company has had adequate liquidity to fund its operations.

Cash and cash commitments:

At ~~September~~March 3031, ~~2023~~2024, the Company had cash and cash equivalents of $2,~~127~~137,000 inclusive of $1,~~228~~244,000 of U.S. Treasury Bills that yield 5.3004% and mature onin ~~December~~April ~~7, 2023~~2024. 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 Terminal Sale Agreement and related documentation provides that the ~~three~~Company is required to secure an approved remediation plan and ~~nine~~to ~~months~~remediate ~~ended~~contamination ~~September~~caused ~~30,~~by ~~2023,~~a ~~cash~~leak ~~collections~~in 1994 from ~~Metropark~~a ~~totaled~~storage ~~$111,000~~tank ~~and~~at ~~$324~~the Terminal. At March 31,~~000~~ 2024, ~~respectively~~the ~~and~~Company’s ~~were~~accrual for the remaining cost of remediation was $71387,000 ~~and~~of which $~~187~~36,000 ~~for~~is expected to be incurred during the ~~same~~balance ~~period~~of 2024. Any subsequent increases or decreases to the expected cost of remediation will be recorded in ~~2022~~gain (loss) on sale of discontinued operations, net of taxes.

The Terminal Sale Agreement ~~and~~also ~~related~~contained ~~documentation~~a ~~provides~~cost ~~that~~sharing provision for a breasting dolphin whereby any construction costs in excess of the ~~Company~~contract iscost ~~required~~of toconstruction ~~secure~~would anbe ~~approved~~borne ~~remediation~~equally ~~plan~~by Sprague and the Company subject to ~~remediate~~certain ~~contamination~~limitations, ~~caused~~including, byin the Company’s opinion, a ~~leak~~20% incap ~~1994~~on the increase from athe ~~storage~~initial ~~tank~~estimate atsubject to the ~~Terminal~~sharing arrangement. AtIn ~~September~~November 302019, ~~2023~~Sprague asserted that it was owed $427,000 and the Company’s ~~accrual~~asserted ~~for~~that ~~the~~its ~~remaining~~obligation ~~cost~~under ofthe ~~remediation~~Agreement ~~was~~could not exceed $~~406~~104,000. Mediation ofefforts ~~which~~were ~~$50~~unsuccessful and in July 2021,~~000~~ isSprague ~~expected~~commenced toan beaction ~~incurred~~against the Company in ~~last~~the ~~quarter~~Rhode Island Superior Court (Superior Court) seeking monetary damages of ~~2023~~$427,000, plus interest and attorney’s fees. ~~Any~~ ~~subsequent~~In ~~increases~~December or2022, ~~decreases~~the toSuperior Court denied Sprague’s Motion for Summary Judgment filed in September 2022 and granted in part and denied in part the ~~expected~~Company’s ~~cost~~Cross ofMotion ~~remediation~~for ~~will~~Summary beJudgment ~~recorded~~also filed in ~~gain~~September ~~(loss)~~2022. The onCompany ~~sale~~anticipates ofthat ~~discontinued~~the ~~operations,~~matter ~~net~~will go to trial in May of ~~taxes~~2024. The Company intends to vigorously defend against the claims being asserted by Sprague.

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.

Results of operations:

Three months ended ~~September~~March 3031, ~~2023~~2024 compared to three months ended ~~September~~March 3031, ~~2022~~2023:

Revenue increased $~~107~~91,000 from ~~2022~~2023 and consists of increased ~~cash~~revenue ~~collections~~ from Metropark ($4039,000), scheduled rent increases ($27,000), interest income ($2010,000) and a net increase in other sources of revenue ($2015,000).

Operating expenses ~~decreased~~increased $5534,000 due principally to aprofessional ~~reduction~~fees inrelated ~~property~~to ~~taxes as a result of~~ the Company's ~~successful~~billboard ~~appeal of the City's revaluation in 2022~~operations.

General and administrative expense increased $2116,000 due principally to an increase in payroll related costs ($3518,000) offset by a net decrease in various other expenses ($142,000).

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.

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.

PART II – OTHER INFORMATION

Item 6. Exhibits

(b) Exhibits:

3.1	Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s report on Form 8-K filed on April 24, 2013)
3.2	By-laws, as amended, October 25, 2017 (incorporated by reference to Exhibit 3.2 to the registrant’s report on Form 8-K filed October 25, 2017)
10	Material contracts:
	(a)	Lease between Metropark, Ltd. and the Company:
		(i) Dated January 1, 2017 (incorporated by reference to Exhibit 10 to the registrant’s annual report on Form 10-K for the year ended December 31, 2017)
		(ii) Letter agreement dated July 31, 2020 between the Company and Metropark, LTD modifying the rental obligations of Metropark.
		(ii) First Amendment dated January 1, 2018
	(b)	Loan Agreement between Bank Rhode Island and Company dated March 30, 2021.
		(iii) Letter agreement dated July 31, 2020 between the Company and Metropark, LTD modifying the rental obligations of Metropark (incorporated by reference to Exhibit 10(a)(ii) to the registrant's report on Form 10Q for the quarter ended June 30, 2022).
		(iv) Second Amendment dated January 9, 2024 (incorporated by reference to Form 8-K filed January 10, 2024)
	(b)	Loan Agreement between Bank Rhode Island and the Company:
		(i) Loan Agreement dated March 30, 2021 (incorporated by reference to the registrant's Form 8K dated March 31, 2021).
		(ii) Loan Agreement dated February 29, 2024
31.1	Rule 13a-14(a) Certification of Chairman and Principal Executive Officer
31.2	Rule 13a-14(a) Certification of Treasurer and Principal Financial Officer
32.1	Certification of Chairman and Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Treasurer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from the Company’s Quarterly Report on Form 10-Q for the Quarter ended ~~September~~March 3031, ~~2023~~2024, filed with the Securities and Exchange Commission on ~~August~~April 326, ~~2023~~2024 formatted in iXBRL(“Inline eXtensible Business Reporting Language”):
	(i)	Condensed Consolidated Balance Sheets as of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023
	(ii)	Condensed Consolidated Statements of Income and Shareholders’ Equity for the Three ~~and Six~~ Months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023
	(iii)	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023
	(iv)	Notes to Condensed Consolidated Financial Statements.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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
		Robert H. Eder
		Chairman and Principal Executive Officer

	By	/s/ Susan R. Johnson
		Susan R. Johnson
		Treasurer and Principal Financial Officer

DATED: ~~October~~April 2726, ~~2023~~2024

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Filing Compare · CAPITAL PROPERTIES INC /RI/