##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the fiscal year ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For the transition period from  to
 Commission File Number 0-9380
 CAPITAL PROPERTIES, INC.
  Rhode Island
    
    05-0386287(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 100 Dexter Road
East Providence, Rhode Island 02914
 (401) 435-7171
  Title of each class
    
    Name of each exchange on which registeredClass A Common Stock, $.01 par value
    
    American Stock Exchange
 
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer
o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company
þ
 o þ




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##### 



CAPITAL PROPERTIES, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007
 TABLE OF CONTENTS
 
 PART I
 PageItem 1. Business
    
    3Item 1A. Risk Factors
    
    7Item 2. Properties
    
    9Item 3. Legal Proceedings
    
    9Item 4. Submission of Matters to a Vote of Security Holders
    
    9
 
 PART II
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters
    
    10Item 6. Selected Financial Data
    
    12Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    13Item 7A. Quantitative and Qualitative Disclosures About Market Securities
    
    17Item 8. Consolidated Financial Statements and Supplementary Data
    
    18Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
    
    36Item 9A. Controls and Procedures
    
    36
 
 Part III
 Item 10. Directors, Executive Officers and Corporate Governance of the Registrant
    
    37Item 11. Executive Compensation
    
    37Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    37Item 13. Certain Relationships and Related Transactions and Director Independence
    
    37Item 14. Principal Accountant Fees and Services
    
    38
 
 PART IV
 Item 15. Exhibits and Financial Statement Schedules
    
    38
 Signatures
    
    39EX-3.2 By-Laws, as amended December 10, 2007EX-20.1 Map of Company's Downtown Providence, RIEX-20.2 Map of the Company's East Providence, RIEX-21 Subsidiaries of the CompanyEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO
  2




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##### Table of Contents



PART I
 FORWARD LOOKING STATEMENTS
 Certain portions of this report, and particularly the Managements Discussion and
Analysis of Financial Condition and Results of Operations, and the Notes to
Consolidated Financial Statements, contain forward-looking statements 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 collectibility of
the accrued leasing revenues when due over the terms of the long-term land 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;
and exposure to contamination, remediation or similar costs associated with the
operation of the petroleum storage facility.
 
 Item 1 Business
 Business Development
  Segments
  Leasing
 Capital Center
    3




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
    
    On the southerly portion of one of the parcels, an underground parking garage and
two buildings containing 193 condominiums are under construction with an expected
completion date in the spring of 2008. On the northerly portion of the same parcel, a
10-story, 307,000 gross square foot building is under construction with an expected
completion date of 2010 and will be the headquarters of Blue Cross and Blue Shield of
Rhode Island.
    
    On the other undeveloped parcel, two residential buildings are under construction.
One building containing 96 condominiums is expected to be completed in the fall of
2008. The other building containing 153 apartments is in the early stages of
construction.
  Parcel 20 Adjacent to the Capital Center
   Lamar Lease
    4




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##### Table of Contents



Parcels in Capital Center Area2
    
    3S
    
    5
    
    6, Phase I
    
    6, Phase II
    
    7A
    
    8
    
    9
    
    LamarDescription of Usage
    
    Residential/
    
    Office
    
    Residential
    
    Residential
    
    Residential
    
    Garage
    
    Office
    
    Office
    
    BillboardOfficeTerm of Lease
    
    103 Yrs.
    
    99 Yrs.
    
    149 Yrs.
    
    99 Yrs.
    
    99 Yrs.
    
    99 Yrs.
    
    99 Yrs.
    
    149 Yrs.
    
    27 Yrs.Termination Date
    
    2108
    
    2087
    
    2142
    
    2103
    
    2103
    
    2104
    
    2090
    
    2153
    
    2033Options to Extend
    
    Two
    
    None
    
    None
    
    Two
    
    Two
    
    Two
    
    None
    
    None
    
    See LamarLease aboveLease
    
    75-Year
    
    
    
    
    
    50-Year
    
    50-Year
    
    75-YearCurrent Annual
Contractual Rental
    
    $36,000
    
    $468,000
    
    $345,000
    
    $48,000
    
    $24,000
    
    $100,000
    
    $223,000
    
    $100,000
    
    $723,000Contingent Rent
    
    None
    
    None
    
    1%Gross
    
    None
    
    None
    
    None
    
    None
    
    None
    
    See LamarLease aboveRevenuesNext Periodic
Rental Adjustment
    
    2008
    
    2009
    
    2013
    
    2010
    
    2009
    
    2010
    
    2010
    
    2011
    
    2007Amount and/or Type
    
    
    
    
    
    
    
    
    
    
    
    Cost of Living
    
    Appraisal andof Next Adjustment
    
    $36,000
    
    Appraisal
    
    Appraisal
    
    $252,000
    
    $24,000
    
    Adjustment
    
    1%Gross
    
    $260,000
    
    $20,000Receipts Rent
 5




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Competition
  Employees
  Petroleum Storage
 Terminal and Pier Facility
  Environmental
     6




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Insurance
  Competition
  Employees
  
 Item 1A. Risk Factors
 General Risk Factors
 Control
 Succession; Senior Management Personnel
 Lack of Liquidity
 Cost of Compliance with Federal Securities Laws
 Leasing Segment
 Geographic Concentration
 7




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##### Table of Contents



Undeveloped Properties
  Reliance on Senior Management
 Reliance on Single Tenant
 Insurance Coverage
 Environmental
 Newly-acquired property
 Petroleum Storage Segment
 Single Tenant for the Facility
 Environmental Concerns
 Reliance on the Pier and Related Pipeline.
 8




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Insurance
 Terrorism
 Potential for Increased Governmental Regulation
 
 Item 2. Properties
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  9




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PART II
 
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters
  Trading Prices
    
    DividendsHigh
    
    Low
    
    Paid20071st Quarter
    
    
    24.21
    
    
    
    21.81
    
    
    
    .052nd Quarter
    
    
    24.20
    
    
    
    21.00
    
    
    
    .053rd Quarter
    
    
    32.85
    
    
    
    23.50
    
    
    
    .064th Quarter
    
    
    25.55
    
    
    
    23.05
    
    
    
    .0620061st Quarter
    
    
    32.00
    
    
    
    27.50
    
    
    
    .032nd Quarter
    
    
    33.30
    
    
    
    29.27
    
    
    
    .033rd Quarter
    
    
    29.74
    
    
    
    23.50
    
    
    
    .044th Quarter
    
    
    24.70
    
    
    
    22.60
    
    
    
    .04
   10




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Performance Graph
 Prepared by Burnham Securities Inc. for Capital Properties, Inc.
 
 
 Fiscal Years Ended December 31
 2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    2007CPI
    
    
    100.0
    
    
    
    175.0
    
    
    
    160.1
    
    
    
    174.9
    
    
    
    97.9
    
    
    
    113.2Dow Jones Wilshire Real
    
    
    100.0
    
    
    
    123.0
    
    
    
    157.7
    
    
    
    171.3
    
    
    
    223.2
    
    
    
    176.2Estate Securities Index®Russell 2000 Index®
    
    
    100.0
    
    
    
    110.3
    
    
    
    129.1
    
    
    
    139.2
    
    
    
    161.2
    
    
    
    200.0
  11




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Item 6. Selected Financial Data




Income statement data: Years Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Total revenues and other income
    
    $
    6,695,000
    
    
    $
    5,789,000
    
    
    $
    6,463,000
    1
    
    $
    7,075,000
    2
    
    $
    6,918,000
    3Total expenses4
    
    $
    4,388,000
    
    
    $
    3,574,000
    
    
    $
    3,707,000
    
    
    $
    4,504,000
    
    
    $
    5,458,000Income taxes
    
    $
    922,000
    
    
    $
    896,000
    
    
    $
    1,093,000
    
    
    $
    1,010,000
    
    
    $
    576,000Net income
    
    $
    1,385,000
    
    
    $
    1,319,000
    
    
    $
    1,663,000
    
    
    $
    1,561,000
    
    
    $
    884,000Basic income per common share
    
    $
    0.42
    
    
    $
    0.40
    
    
    $
    0.50
    
    
    $
    0.47
    
    
    $
    0.27Dividends per common share
    
    $
    0.22
    
    
    $
    0.14
    
    
    $
    0.12
    
    
    $
    0.30
    
    
    $
    0.03
 Balance sheet data:
 December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Properties and equipment, net
    
    $
    20,717,000
    
    
    $
    18,471,000
    
    
    $
    16,756,000
    
    
    $
    16,527,000
    
    
    $
    14,879,000Total assets
    
    $
    23,037,000
    
    
    $
    21,858,000
    
    
    $
    21,492,000
    
    
    $
    19,531,000
    
    
    $
    18,411,000Shareholders equity
    
    $
    16,676,000
    
    
    $
    16,017,000
    
    
    $
    15,160,000
    
    
    $
    13,893,000
    
    
    $
    13,322,000
 
 1
    
    Includes a $1,057,000 gain from the sale of the parking
garage; see Note 3 to Notes to Consolidated Financial Statements in Item 8.2
    
    Includes $1,672,000 in condemnation proceeds received
from Amtrak and $258,000 from the City of Providence for reimbursement of
attorneys fees.3
    
    Includes $1,700,000 received from the City of
Providence in settlement of tax appeals from the period 1995 to 2002.4
    
    The downward trend in total expenses between 2003 and
2006 resulted principally from the assumption of the payment of real estate
taxes by tenants under long-term land leases entered into in 2004 and 2005 and
the tax settlement with the City of Providence in 2003. The increase in 2007
from 2006 results principally from increased depreciation relating to the
construction of tanks at the petroleum storage facility and bonuses paid to two
retiring employees. 12




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 1 Overview:
 Critical accounting policies:
     th th
   th
 th
 13




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Segments:
     Changes in capital structure:
    14




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##### Table of Contents



2.
    
    Results of operations:
 Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Leasing segment:
 2007
    
    
    2006
    
    
    DifferenceLeasing revenues
    
    $
    2,853,000
    
    
    $
    2,493,000
    
    
    $
    360,000Leasing expense
    
    
    566,000
    
    
    
    663,000
    
    
    $
    (97,000
    )$
    2,287,000
    
    
    $
    1,830,000
  
    
    In June 2007, the Company entered into a settlement agreement with a former tenant
concerning amounts due the Company resulting from the tenants prematurely terminating its
lease with the Company in 2003 and received $100,000 in settlement, which amount is
included in leasing revenues.
    
    Effective June 1, 2006, the Company entered into an Amended and Restated Agreement of
Lease with Lamar, which changed the contractual rental payments thereby extending the
turnaround date until 2022. As a result, the Company concluded that it should not
presently record a receivable resulting from reporting leasing revenue on straight-line
basis. However, prior to June 1, 2006, the Company had been recognizing revenue on this
lease on a straight-line basis and, accordingly, had recorded a reduction in leasing
revenue of $187,000 for the year ended December 31, 2006.
    
    Increases in rentals under the short-term leases, including rentals from the
newly-acquired building.
  Petroleum storage segment:
 2007
    
    
    2006
    
    
    DifferencePetroleum storage facility revenues
    
    $
    3,714,000
    
    
    $
    3,187,000
    
    
    $
    527,000Petroleum storage facility expense
    
    
    2,451,000
    
    
    
    1,798,000
    
    
    $
    653,000$
    1,263,000
    
    
    $
    1,389,000
  
    
    Rent for the new 175,000 barrel tank effective August 2006;
    
    Higher monthly rent resulting from the annual cost-of-living adjustments;
    
    Higher contingent revenue; and
    
    Rental of $97,000 resulting from the increase in real property taxes as required by the
lease, which amount resulted principally from an increase in the assessment on the
petroleum storage facility.
  
    
    Payroll and related costs resulting from the hiring of a new employee and the payment
of a bonus to the retiring president of the petroleum storage facility;
    
    Higher depreciation related to the new tank built in 2006;
    
    Higher real estate taxes resulting principally from an increased assessment on the
petroleum storage facility, which amount was substantially reimbursed by the tenant; and
    
    Higher legal fees associated with a Wilkesbarre Pier litigation.
 General:
  15




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Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Leasing segment:
 2006
    
    
    2005
    
    
    DifferenceLeasing revenues
    
    $
    2,493,000
    
    
    $
    2,663,000
    
    
    $
    (170,000
    )Leasing expense
    
    
    663,000
    
    
    
    778,000
    
    
    $
    (115,000
    )$
    1,830,000
    
    
    $
    1,885,000
   Petroleum storage segment:
 2006
    
    
    2005
    
    
    DifferencePetroleum storage facility revenues
    
    $
    3,187,000
    
    
    $
    2,549,000
    
    
    $
    638,000Petroleum storage facility expense
    
    
    1,798,000
    
    
    
    1,713,000
    
    
    $
    85,000$
    1,389,000
    
    
    $
    836,000
   Other income:
  General:
  3.
    
    Liquidity and capital resources:
   2007
    
    
    2006
    
    
    2005Operating activities
    
    $
    2,502,000
    
    
    $
    1,542,000
    
    
    $
    2,245,000Investing activities
    
    $
    (2,794,000
    )
    
    $
    (2,399,000
    )
    
    $
    627,000Financing activities
    
    $
    (726,000
    )
    
    $
    (462,000
    )
    
    $
    (396,000
    )
 16




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##### Table of Contents



Operating activities:
  Investing activities:
  Financing activities:
  Cash and cash equivalents and cash commitments:
       
 Item 7A. Quantitative and Qualitative Disclosures About Market Securities
  17




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Item 8. Consolidated Financial Statements and Supplementary Data
 CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    19Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    
    20Consolidated Statements of Income and Retained Earnings for the
Years Ended December 31, 2007, 2006 and 2005
    
    
    21Consolidated Statements of Cash Flows for the Years Ended
December 31, 2007, 2006 and 2005
    
    
    22Notes to Consolidated Financial Statements
    
    
    23-32Schedule II  Valuation and Qualifying Accounts
    
    
    33Schedule III  Real Estate and Accumulated Depreciation
    
    
    34-35
 18




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Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
 
   
      19




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CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2007
    
    
    2006ASSETSProperties and equipment (net of accumulated depreciation)
    
    $
    20,717,000
    
    
    $
    18,471,000Cash and cash equivalents
    
    
    1,974,000
    
    
    
    2,992,000Income taxes receivable
    
    
    12,000
    
    
    
    Prepaid and other
    
    
    334,000
    
    
    
    395,000$
    23,037,000
    
    
    $
    21,858,000LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Accounts payable and accrued expenses:Property taxes
    
    $
    276,000
    
    
    $
    298,000Environmental remediation
    
    
    81,000
    
    
    
    82,000Other
    
    
    333,000
    
    
    
    137,000Deferred leasing revenues
    
    
    520,000
    
    
    
    448,000Income taxes:Current
    
    
    
    
    
    
    18,000Deferred, net
    
    
    5,151,000
    
    
    
    4,858,0006,361,000
    
    
    
    5,841,000Shareholders equity:Class A common stock, $.01 par; authorized 6,000,000 shares;
issued and outstanding 3,299,956 shares
    
    
    33,000
    
    
    
    33,000Capital in excess of par
    
    
    11,795,000
    
    
    
    11,795,000Retained earnings
    
    
    4,848,000
    
    
    
    4,189,00016,676,000
    
    
    
    16,017,000$
    23,037,000
    
    
    $
    21,858,000
  20




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CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Revenues and other income:Revenues:Leasing
    
    $
    2,853,000
    
    
    $
    2,493,000
    
    
    $
    2,663,000Petroleum storage facility
    
    
    3,714,000
    
    
    
    3,187,000
    
    
    
    2,549,0006,567,000
    
    
    
    5,680,000
    
    
    
    5,212,000Other income:Gain on sale of parking garage
    
    
    
    
    
    
    
    
    
    
    1,057,000Gain on sale of billboard permit
    
    
    
    
    
    
    
    
    
    
    100,000Interest
    
    
    128,000
    
    
    
    109,000
    
    
    
    94,0006,695,000
    
    
    
    5,789,000
    
    
    
    6,463,000Expenses:Leasing
    
    
    566,000
    
    
    
    663,000
    
    
    
    778,000Petroleum storage facility
    
    
    2,451,000
    
    
    
    1,798,000
    
    
    
    1,713,000General and administrative
    
    
    1,371,000
    
    
    
    1,113,000
    
    
    
    1,216,0004,388,000
    
    
    
    3,574,000
    
    
    
    3,707,000Income before income taxes
    
    
    2,307,000
    
    
    
    2,215,000
    
    
    
    2,756,000Income tax expense:Current
    
    
    629,000
    
    
    
    683,000
    
    
    
    976,000Deferred
    
    
    293,000
    
    
    
    213,000
    
    
    
    117,000922,000
    
    
    
    896,000
    
    
    
    1,093,000Net income
    
    
    1,385,000
    
    
    
    1,319,000
    
    
    
    1,663,000Retained earnings, beginning
    
    
    4,189,000
    
    
    
    3,332,000
    
    
    
    2,065,000Dividends on common stock
($.22, $.14 and $.12 per share
in 2007, 2006 and 2005,
respectively)
    
    
    (726,000
    )
    
    
    (462,000
    )
    
    
    (396,000
    )Retained earnings, ending
    
    $
    4,848,000
    
    
    $
    4,189,000
    
    
    $
    3,332,000Basic income per share
    
    $
    .42
    
    
    $
    .40
    
    
    $
    .50
  21




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CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    1,385,000
    
    
    $
    1,319,000
    
    
    $
    1,663,000Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    664,000
    
    
    
    551,000
    
    
    
    431,000Gain on sale of parking garage
    
    
    
    
    
    
    
    
    
    
    (1,057,000
    )Gain on sale of billboard permit
    
    
    
    
    
    
    
    
    
    
    (100,000
    )Reversal of accrued leasing revenues
    
    
    
    
    
    
    159,000
    
    
    
    Deferred income taxes
    
    
    293,000
    
    
    
    213,000
    
    
    
    117,000Changes in assets and liabilities:Increase in:Income taxes receivable
    
    
    (12,000
    )
    
    
    
    
    
    
    Prepaid and other
    
    
    
    
    
    
    (158,000
    )
    
    
    Current income taxes payable
    
    
    
    
    
    
    
    
    
    
    647,000Deferred leasing revenues
    
    
    72,000
    
    
    
    142,000
    
    
    
    306,000Decrease in:Receivables
    
    
    
    
    
    
    
    
    
    
    413,000Accrued leasing revenues
    
    
    
    
    
    
    29,000
    
    
    
    94,000Prepaid and other
    
    
    61,000
    
    
    
    
    
    
    
    237,000Accounts payable and accrued expenses
    
    
    57,000
    
    
    
    (49,000
    )
    
    
    (506,000
    )Current income taxes payable
    
    
    (18,000
    )
    
    
    (664,000
    )
    
    
    Net cash provided by operating activities
    
    
    2,502,000
    
    
    
    1,542,000
    
    
    
    2,245,000Cash flows from investing activities:Payments for properties and equipment
    
    
    (2,794,000
    )
    
    
    (2,399,000
    )
    
    
    (1,973,000
    )Proceeds from:Sale of parking garage
    
    
    
    
    
    
    
    
    
    
    2,500,000Sale of billboard permit
    
    
    
    
    
    
    
    
    
    
    100,000Net cash provided by (used in) investing activities
    
    
    (2,794,000
    )
    
    
    (2,399,000
    )
    
    
    627,000Cash used in financing activities, payment of dividends
    
    
    (726,000
    )
    
    
    (462,000
    )
    
    
    (396,000
    )Increase (decrease) in cash and cash equivalents
    
    
    (1,018,000
    )
    
    
    (1,319,000
    )
    
    
    2,476,000Cash and cash equivalents, beginning
    
    
    2,992,000
    
    
    
    4,311,000
    
    
    
    1,835,000Cash and cash equivalents, ending
    
    $
    1,974,000
    
    
    $
    2,992,000
    
    
    $
    4,311,000Supplemental disclosure, cash paid for income taxes
    
    $
    647,000
    
    
    $
    1,357,000
    
    
    $
    152,000
  22




---



##### Table of Contents



CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
 1.
    
    Description of business:
     2.
    
    Summary of significant accounting policies:
 Principles of consolidation:
  Use of estimates:
  Fair value of financial instruments:
  Cash and cash equivalents:
  Properties and equipment:
  23




---



##### Table of Contents



Environmental remediation:
  Revenues and other income:
       Income taxes:
   New accounting standards:
   24




---



##### Table of Contents



3.
    
    Properties and equipment:
  EstimatedUseful Life
    
    
    December 31,in Years
    
    
    2007
    
    
    2006Properties on lease or held for lease:Land and land improvements
    
    
    
    
    
    $
    4,621,000
    
    
    $
    3,991,000Building
    
    
    39
    
    
    
    1,699,000
    
    
    
    6,320,000
    
    
    
    3,991,000Petroleum storage facility, on lease:Land and land improvements
    
    
    
    
    
    
    5,561,000
    
    
    
    5,398,000Buildings and structures
    
    
    33
    
    
    
    1,406,000
    
    
    
    1,338,000Tanks and equipment
    
    
    15-20
    
    
    
    14,569,000
    
    
    
    14,322,00021,536,000
    
    
    
    21,058,000Office equipment
    
    
    5-10
    
    
    
    126,000
    
    
    
    97,00027,982,000
    
    
    
    25,146,000Less accumulated depreciation:Properties on lease or held for lease
    
    
    
    
    
    
    16,000
    
    
    
    12,000Petroleum storage facility, on lease
    
    
    
    
    
    
    7,160,000
    
    
    
    6,576,000Office equipment
    
    
    
    
    
    
    89,000
    
    
    
    87,0007,265,000
    
    
    
    6,675,000$
    20,717,000
    
    
    $
    18,471,000
   4.
    
    Description of leasing arrangements:
 Long-term land leases:
   Year Ended December 31,
    
    Real Property Taxes2007
    
    $1,434,0002006
    
    $1,302,0002005
    
    $1,277,000
  25




---



##### Table of Contents



Year ending December 31,2008
    
    $
    2,093,0002009
    
    
    2,137,0002010
    
    
    2,278,0002011
    
    
    2,858,0002012
    
    
    3,135,0002013 to 2153
    
    
    714,542,000$
    727,043,000
  2007
    
    
    2006Cumulative excess of straight-line over contractual rentals
    
    $
    30,539,000
    
    
    $
    25,998,000Amount management has not been able to conclude is collectible
    
    
    30,496,000
    
    
    
    25,954,000Accrued leasing revenues, which are included in prepaid and
other on the accompanying consolidated balance sheets
    
    $
    43,000
    
    
    $
    44,000
 26




---



##### Table of Contents



Short-term leases:
   5.
    
    Petroleum storage facility:
 Current operations:
   
    
    The lease expires April 30, 2013, but will continue thereafter on a year-to-year
basis unless terminated by either party upon ninety days written notice;
    
    Global may terminate the lease on or after April 30, 2008, upon one years written
notice;
    
    Global will pay a monthly rent as shown in the following schedule, subject to
annual cost-of-living adjustments;
    
    Global will reimburse the Company for real property taxes in excess of $106,000
annually; and
    
    The Company will receive an additional $.10 per barrel for every barrel in excess
of 4,000,000 barrels of throughput in any lease year (contingent revenue).
   Effective
    
    
    
    Amount of
    
    NewDate
    
    Reason for Increase
    
    Increase
    
    Monthly RentMay 2005
    
    Annual cost-of-living adjustment
    
    $
    6,000
    
    
    $
    191,000December 2005
    
    Completion of 152,000 barrel tank
    
    
    36,000
    
    
    
    227,000May 2006
    
    Annual cost-of-living adjustment
    
    
    7,000
    
    
    
    234,000August 2006
    
    Completion of 175,000 barrel tank
    
    
    43,000
    
    
    
    277,000May 2007
    
    Annual cost-of-living adjustment
    
    
    8,000
    
    
    
    285,000
 Wilkesbarre Pier
 Environmental remediation:
  27




---



##### Table of Contents



Environmental incident:
   Wilkesbarre Pier:
    6.
    
    Income taxes:
  28




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    519,000
    
    
    $
    528,000
    
    
    $
    771,000State
    
    
    110,000
    
    
    
    155,000
    
    
    
    205,000629,000
    
    
    
    683,000
    
    
    
    976,000Deferred:Federal
    
    
    218,000
    
    
    
    152,000
    
    
    
    70,000State
    
    
    75,000
    
    
    
    61,000
    
    
    
    47,000293,000
    
    
    
    213,000
    
    
    
    117,000$
    922,000
    
    
    $
    896,000
    
    
    $
    1,093,000
  2007
    
    
    2006
    
    
    2005Computed expected tax
    
    $
    784,000
    
    
    $
    753,000
    
    
    $
    937,000Increase (decrease) in expected tax resulting from:State income tax, net of Federal income tax benefit
    
    
    140,000
    
    
    
    133,000
    
    
    
    165,000Statutory and other
    
    
    (2,000
    )
    
    
    10,000
    
    
    
    (9,000
    )$
    922,000
    
    
    $
    896,000
    
    
    $
    1,093,000
  December 31,2007
    
    
    2006Gross deferred tax liabilities:Property having a financial statement basis in excess of tax basis:Cost differences
    
    $
    3,517,000
    
    
    $
    3,150,000Depreciation differences
    
    
    1,874,000
    
    
    
    1,578,0005,391,000
    
    
    
    4,728,000Condemnation proceeds
    
    
    
    
    
    
    470,000Insurance premiums
    
    
    80,000
    
    
    
    74,0005,471,000
    
    
    
    5,272,000Gross deferred tax assets
    
    
    (320,000
    )
    
    
    (414,000
    )$
    5,151,000
    
    
    $
    4,858,000
 7.
    
    Operating segment disclosures:
    29




---



##### Table of Contents



December 31,2007
    
    
    2006
    
    
    2005Leasing:Revenues and other income:Revenues:Long-term leases:Contractual
    
    $
    2,053,000
    
    
    $
    2,010,000
    
    
    $
    1,983,000Contingent
    
    
    130,000
    
    
    
    140,000
    
    
    
    145,000Option
    
    
    100,000
    
    
    
    
    
    
    
    81,000Excess of contractual over straight-line rentals
    
    
    (1,000
    )
    
    
    (29,000
    )
    
    
    (94,000
    )Non-cash reversal of accrued leasing revenues
    
    
    
    
    
    
    (159,000
    )
    
    
    Short-term leases
    
    
    571,000
    
    
    
    531,000
    
    
    
    548,0002,853,000
    
    
    
    2,493,000
    
    
    
    2,663,000Other income:Gain on sale of parking garage
    
    
    
    
    
    
    
    
    
    
    1,057,000Gain on sale of billboard permit
    
    
    
    
    
    
    
    
    
    
    100,000Total revenues and other income
    
    $
    2,853,000
    
    
    $
    2,493,000
    
    
    $
    3,820,000Property tax expense
    
    $
    447,000
    
    
    $
    543,000
    
    
    $
    574,000Depreciation
    
    $
    4,000
    
    
    $
    1,000
    
    
    $
    14,000Income before income taxes
    
    $
    2,287,000
    
    
    $
    1,830,000
    
    
    $
    3,042,000Assets
    
    $
    6,498,000
    
    
    $
    4,179,000
    
    
    $
    4,271,000Properties and equipment:Additions
    
    $
    2,329,000
    
    
    $
    35,000
    
    
    $
    Deletion, parking garage
    
    $
    
    
    
    $
    
    
    
    $
    (2,500,000
    )Petroleum storage:Revenues:Contractual
    
    $
    3,543,000
    
    
    $
    3,046,000
    
    
    $
    2,426,000Contingent
    
    
    171,000
    
    
    
    141,000
    
    
    
    123,000Total revenues
    
    $
    3,714,000
    
    
    $
    3,187,000
    
    
    $
    2,549,000Property tax expense
    
    $
    204,000
    
    
    $
    107,000
    
    
    $
    95,000Depreciation
    
    $
    657,000
    
    
    $
    549,000
    
    
    $
    415,000Income before income taxes
    
    $
    1,263,000
    
    
    $
    1,389,000
    
    
    $
    836,000Assets
    
    $
    14,625,000
    
    
    $
    14,871,000
    
    
    $
    13,273,000Properties and equipment:Additions
    
    $
    551,000
    
    
    $
    2,230,000
    
    
    $
    2,103,000Deletion
    
    
    (73,000
    )
    
    
    
    
    
    
    $
    478,000
    
    
    $
    2,230,000
    
    
    $
    2,103,000
 30




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Revenues and other income:Revenues and other income for operating segments:Leasing
    
    $
    2,853,000
    
    
    $
    2,493,000
    
    
    $
    3,820,000Petroleum storage
    
    
    3,714,000
    
    
    
    3,187,000
    
    
    
    2,549,0006,567,000
    
    
    
    5,680,000
    
    
    
    6,369,000Interest income
    
    
    128,000
    
    
    
    109,000
    
    
    
    94,000Total consolidated revenues and other income
    
    $
    6,695,000
    
    
    $
    5,789,000
    
    
    $
    6,463,000Property tax expense:Property tax expense for operating segments:Leasing
    
    $
    447,000
    
    
    $
    543,000
    
    
    $
    574,000Petroleum storage
    
    
    204,000
    
    
    
    107,000
    
    
    
    95,000651,000
    
    
    
    650,000
    
    
    
    669,000Unallocated corporate property tax expense
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000Total consolidated property tax expense
    
    $
    652,000
    
    
    $
    651,000
    
    
    $
    670,000Depreciation:Depreciation for operating segments:Leasing
    
    $
    4,000
    
    
    $
    1,000
    
    
    $
    14,000Petroleum storage
    
    
    657,000
    
    
    
    549,000
    
    
    
    415,000661,000
    
    
    
    550,000
    
    
    
    429,000Unallocated corporate depreciation
    
    
    3,000
    
    
    
    1,000
    
    
    
    2,000Total consolidated depreciation
    
    $
    664,000
    
    
    $
    551,000
    
    
    $
    431,000Income before income taxes:Income for operating segments:Leasing
    
    $
    2,287,000
    
    
    $
    1,830,000
    
    
    $
    3,042,000Petroleum storage
    
    
    1,263,000
    
    
    
    1,389,000
    
    
    
    836,0003,550,000
    
    
    
    3,219,000
    
    
    
    3,878,000Interest income
    
    
    128,000
    
    
    
    109,000
    
    
    
    94,000Unallocated corporate expenses
    
    
    (1,371,000
    )
    
    
    (1,113,000
    )
    
    
    (1,216,000
    )Total consolidated income before income taxes
    
    $
    2,307,000
    
    
    $
    2,215,000
    
    
    $
    2,756,000Assets:Assets for operating segments:Leasing
    
    $
    6,498,000
    
    
    $
    4,179,000
    
    
    $
    4,271,000Petroleum storage
    
    
    14,625,000
    
    
    
    14,871,000
    
    
    
    13,273,00021,123,000
    
    
    
    19,050,000
    
    
    
    17,544,000Corporate cash and cash equivalents
    
    
    1,866,000
    
    
    
    2,787,000
    
    
    
    3,936,000Other unallocated amounts
    
    
    48,000
    
    
    
    21,000
    
    
    
    12,000Total consolidated assets
    
    $
    23,037,000
    
    
    $
    21,858,000
    
    
    $
    21,492,000Additions and deletions to properties and equipment:Additions and deletions to properties and equipment:Leasing
    
    $
    2,329,000
    
    
    $
    35,000
    
    
    $
    (2,500,000
    )Petroleum storage
    
    
    478,000
    
    
    
    2,230,000
    
    
    
    2,103,0002,807,000
    
    
    
    2,265,000
    
    
    
    (397,000
    )Unallocated corporate additions to properties and equipment
    
    
    29,000
    
    
    
    1,000
    
    
    
    Total consolidated additions (deletions)
    
    $
    2,836,000
    
    
    $
    2,266,000
    
    
    $
    (397,000
    )
 31




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Leasing segment:Metropark, Ltd.
    
    $
    805,000
    
    
    $
    605,000
    
    
    $
    718,000Lamar Outdoor Advertising, LLC
    
    
    558,000
    
    
    
    531,000
    
    
    
    548,000Gramercy Capital Corp
    
    
    468,000
    
    
    
    468,000
    
    
    
    468,000AvalonBay Communities, Inc.
    
    
    404,000
    
    
    
    406,000
    
    
    
    403,000$
    2,235,000
    
    
    $
    2,010,000
    
    
    $
    2,137,000Petroleum storage segment, Global Companies, LLC
    
    $
    3,714,000
    
    
    $
    3,187,000
    
    
    $
    2,549,000
 8.
    
    Fourth quarter transactions for 2007:In December 2007, the president of Capital Properties, Inc. retired and was paid a bonus totaling
$125,000, which amount is recorded in general and administrative expense on the accompanying
statement of income and retained earnings for the year ended December 31, 2007. In December 2007,
the president of Capital Terminal Company also retired and was paid a bonus totaling $109,000,
which amount is recorded in petroleum storage facility expense on the accompanying statement of
income and retained earnings for the year ended December 31, 2007.9.
    
    Selected quarterly financial data (unaudited):The following table sets forth selected financial data for each quarter of 2007 and 2006. The
information for each of these quarters is unaudited but includes all normal recurring adjustments
that the Company considers necessary for a fair presentation. These results, however, are not
necessarily indicative of results for any future period. The sum of the quarterly basic income per
common share may vary from the total for the year due to rounding.
 Year Ended December 31, 2007,First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterTotal revenues and other income
    
    $
    1,665,000
    
    
    $
    1,776,000
    
    
    $
    1,565,000
    
    
    $
    1,689,000Net income
    
    $
    380,000
    
    
    $
    489,000
    
    
    $
    333,000
    
    
    $
    183,000Basic income per common share
    
    $
    0.12
    
    
    $
    0.15
    
    
    $
    0.10
    
    
    $
    0.06
 Year Ended December 31, 2006,First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterTotal revenues and other income
    
    $
    1,470,000
    
    
    $
    1,320,000
    
    
    $
    1,471,000
    
    
    $
    1,528,000Net income
    
    $
    321,000
    
    
    $
    252,000
    
    
    $
    373,000
    
    
    $
    373,000Basic income per common share
    
    $
    0.10
    
    
    $
    0.07
    
    
    $
    0.11
    
    
    $
    0.11
 Total revenues and other income for the second quarter of 2007 include option revenue of $100,000
resulting from the settlement of a dispute with a former tenant. As discussed in Note 8 above, two
bonuses were recorded in the fourth quarter of 2007.
 32




---



##### Table of Contents



Capital Properties, Inc. and Subsidiaries
Valuation and Qualifying Accounts
December 31, 2007, 2006 and 2005
 
 Schedule II
 Description:Cumulative Excess of Straight-line overContractual Rentals Which Management Has
    
    Balance at
    
    Charged to
    
    Charged to Accrued
    
    
    
    
    
    Balance atNot Been Able to Conclude is Collectible
    
    Beginning of Period
    
    Revenues
    
    Leasing Revenues
    
    Deductions
    
    End of PeriodYear ended 12/31/07:
    
    $
    25,954,000
    
    
    $
    
    
    
    $
    4,548,000
    
    
    $
    (6,000
    )
    
    $
    30,496,000Year ended 12/31/06:
    
    $
    21,686,000
    
    
    $
    
    
    
    $
    4,274,000
    
    
    $
    (6,000
    )
    
    $
    25,954,000Year ended 12/31/05:
    
    $
    17,680,000
    
    
    $
    
    
    
    $
    4,013,000
    
    
    $
    (7,000
    )
    
    $
    21,686,000
 33




---



##### Table of Contents



Capital Properties, Inc. and Subsidiaries
Real Estate and Accumulated Depreciation
December 31, 2007
 
 Schedule III
 Costs CapitalizedSubsequent to
    
    
    Gross Amount at Which Carried
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Life onInitial Cost
    
    
    Acquisition
    
    
    at Close of Period (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    whichBuildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    Accumulated
    
    Date of
    
    Date
    
    DepreciationDescription
    
    Land
    
    and Other
    
    
    Land
    
    and Other
    
    
    Land
    
    and Other
    
    Total
    
    
    Depreciation
    
    Construction
    
    Acquired
    
    is ComputedProv RIParcel 2
    
    $
    191,000
    
    
    $
    
    
    
    
    $
    236,000
    
    
    $
    
    
    
    
    $
    427,000
    
    
    $
    
    
    
    $
    427,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    12/29/82Parcel 3E
    
    
    44,000
    
    
    
    
    
    
    
    
    19,000
    
    
    
    
    
    
    
    
    63,000
    
    
    
    
    
    
    
    63,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    12/29/82Parcel 3S
    
    
    88,000
    
    
    
    
    
    
    
    
    23,000
    
    
    
    
    
    
    
    
    111,000
    
    
    
    
    
    
    
    111,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    12/29/82Parcel 3W
    
    
    73,000
    
    
    
    
    
    
    
    
    40,000
    
    
    
    
    
    
    
    
    113,000
    
    
    
    
    
    
    
    113,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    12/29/82Parcel 4E
    
    
    44,000
    
    
    
    
    
    
    
    
    19,000
    
    
    
    
    
    
    
    
    63,000
    
    
    
    
    
    
    
    63,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    12/29/82Parcel 4W
    
    
    103,000
    
    
    
    
    
    
    
    
    40,000
    
    
    
    
    
    
    
    
    143,000
    
    
    
    
    
    
    
    143,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    12/29/82Parcel 5
    
    
    118,000
    
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    
    148,000
    
    
    
    
    
    
    
    148,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    12/29/82Parcel 6
    
    
    573,000
    
    
    
    
    
    
    
    
    723,000
    
    
    
    
    
    
    
    
    1,296,000
    
    
    
    
    
    
    
    1,296,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    12/29/82Parcel 7A
    
    
    162,000
    
    
    
    
    
    
    
    
    31,000
    
    
    
    
    
    
    
    
    193,000
    
    
    
    
    
    
    
    193,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    12/29/82Parcel 8
    
    
    73,000
    
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    
    93,000
    
    
    
    
    
    
    
    93,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    12/29/82Parcel 9
    
    
    17,000
    
    
    
    
    
    
    
    
    33,000
    
    
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    50,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    9/28/89Parcel 20
    
    
    672,000
    
    
    
    
    
    
    
    
    536,000
    
    
    
    
    
    
    
    
    1,208,000
    
    
    
    
    
    
    
    1,208,000
    
    
    
    
    N/A
    
    
    
    
    
    
    
    5/31/882007 Addition
    
    
    
    
    
    
    
    
    
    
    
    630,000
    
    
    
    1,699,000
    
    
    
    
    630,000
    
    
    
    1,699,000
    
    
    
    2,329,000
    
    
    
    $
    4,000
    
    
    
    
    
    
    
    11/30/07
    
    
    39 YearsBillboard
Easements
MA and RI
    
    
    70,000
    
    
    
    
    
    
    
    
    13,000
    
    
    
    
    
    
    
    
    83,000
    
    
    
    
    
    
    
    83,000
    
    
    
    
    12,000
    
    
    
    
    
    
    
    12/31/87
    
    
    21 Years$
    2,228,000
    
    
    $
    
    
    
    
    $
    3,393,000
    
    
    $
    1,699,000
    
    
    
    $
    4,621,000
    
    
    $
    1,699,000
    
    
    $
    6,320,000
    
    
    
    $
    16,000
 34




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##### Table of Contents



Capital Properties, Inc. and Subsidiaries
Real Estate and Accumulated Depreciation (continued)
December 31, 2007
Schedule III
 Cost:Balance, January 1, 2005
    
    $
    6,456,000Cost of parking garage sold
    
    
    (2,500,000
    )Balance, December 31, 2005
    
    
    3,956,000Acquisitions
    
    
    35,000Balance, December 31, 2006
    
    
    3,991,000Acquisitions
    
    
    2,329,000Balance, December 31, 2007
    
    $
    6,320,000Accumulated depreciation:Balance, January 1, 2005
    
    $
    1,054,000Depreciation
    
    
    14,000Accumulated depreciation on parking garage sold
    
    
    (1,057,000
    )Balance, December 31, 2005
    
    
    11,000Depreciation
    
    
    1,000Balance, December 31, 2006
    
    
    12,000Depreciation
    
    
    4,000Balance, December 31, 2007
    
    $
    16,000
 
 (1)
    
    The Encumbrance column has been deleted since not applicable.(2)
    
    The aggregate cost for Federal income tax reporting purposes of the above assets at December
31, 2007 is $3,361,000. 35




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
  Managements Annual Report on Internal Control over Financial Reporting.
      Changes in Internal Control Over Financial Reporting.
  36




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance of the Registrant
   Date of FirstName
    
    Age
    
    Office Held
    
    Election to OfficeRobert H. Eder
    
    
    75
    
    
    President, Capital Properties, Inc.
    
    
    1995Barbara J. Dreyer
    
    
    69
    
    
    Treasurer, Capital Properties, Inc.
    
    
    1997Stephen J. Carlotti
    
    
    65
    
    
    Secretary, Capital Properties, Inc.
    
    
    1998Todd D. Turcotte
    
    
    36
    
    
    President, Capital Terminal Company
and Vice President, Capital Properties, Inc.
    
    
    2008
  Code of Ethics:
   
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions and Director Independence
  37




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    and (c)The consolidated financial statements and supplementary data (including financial
statement schedules) are included in Item 8.
 (b) Exhibits:
 3.1
    
    Amended Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the
registrants report on Form 8-K filed December 10, 2001).3.2
    
    By-laws, as amended December 10, 200710
    
    Material contracts:
 (a)
    
    Lease between Metropark, Ltd. and Company:(i)
    
    Dated January 1, 2005 (incorporated by reference to Exhibit 10(a)
to the registrants annual report on Form 10-KSB for the year ended December 31,
2004), as amended.(b)
    
    Miscellaneous contract:(i)
    
    Option Agreement to Purchase Real Property and Related Assets, dated June
9, 2003, by and between Dunellen, LLC and Global Companies, LLC
(incorporated by reference to Exhibit 10(b)(i) to the registrants Report on Form
10-QSB/A for the quarterly period ended June 30, 2003), as amended.
 20.1
    
    Map of the Companys parcels in Downtown Providence, Rhode Island20.2
    
    Map of the Companys petroleum storage facility in East Providence, Rhode Island21
    
    Subsidiaries of the Company31.1
    
    Rule 13a-14(a) Certification of Chairman of the Board and Principal Executive Officer31.2
    
    Rule 13a-14(a) Certification of Treasurer and Principal Financial Officer32.1
    
    Certification of Chairman of the Board and Principal Executive Officer pursuant to
18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
200232.2
    
    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
 38




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##### Table of Contents



SIGNATURES
  CAPITAL PROPERTIES, INC.By
    
    /s/ Robert H. EderRobert H. EderPresident and Principal Executive Officer
   /s/ Robert H. Eder
    
    March 25, 2008Robert H. EderPresident and DirectorPrincipal Executive Officer/s/ Barbara J. Dreyer
    
    March 26, 2008Barbara J. DreyerTreasurer, Principal Financial Officerand Principal Accounting Officer/s/ Ronald P. Chrzanowski
    
    March 26, 2008Ronald P. Chrzanowski, Director/s/ Alfred J. Corso
    
    March 26, 2008Alfred J. Corso, Director
 39