##### 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, 2006
 OR
 o
    
    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 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
  o o þ
 o þ




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity and Related Stockholder MattersItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market SecuritiesItem 8. Consolidated Financial Statements and Supplementary DataItem 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors, Executive Officers and Corporate Governance of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions and Director IndependenceItem 14. Principal Accountant Fees and ServicesItem 15. Exhibits and Financial Statement SchedulesSIGNATUREEX-20.1 Map of Company's parcels in Downtown Providence, Rhode IslandEX-20.2 Map of Company's petroleum storage facilityEX-21 Subsidiaries of the CompanyEX-31.1 Section 302 Certification of P.E.O.EX-31.2 Section 302 Certification of P.F.O.EX-32.1 Section 906 Certification of P.E.O.EX-32.2 Section 906 Certification of P.F.O.    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
    2




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##### Table of Contents



Lamar Lease
     Parcels in Capital Center Area2
    
    3S
    
    5
    

6, Phase I
    
    7A
    
    8
    
    9
    
    LamarDescription of Usage
    
    Residential
    
    Office
    
    Residential
    
    Residential
    
    Garage
    
    Office
    
    Office
    
    BillboardTerm of Lease
    
    103 Yrs.
    
    99 Yrs.
    
    149 Yrs.
    
    99 Yrs.
    
    99 Yrs.
    
    99 Yrs.
    
    149 Yrs.
    
    27 Yrs.Termination Date
    
    2108
    
    2087
    
    2142
    
    2103
    
    2104
    
    2090
    
    2153
    
    2033Options to Extend
Lease
    
    Two
75-Year
    
    None
    
    None
    
    Two
50-Year
    
    Two
75-Year
    
    None
    
    None
    
    See Lamar Lease
aboveCurrent Annual 
Contractual Rental
    
    $
    36,000
    
    
    $
    468,000
    
    
    $
    345,000
    
    
    $
    24,000
    
    
    $
    100,000
    
    
    $
    223,000
    
    
    $
    100,000
    
    
    $
    723,000Contingent Rent
    
    None
    
    None
    
    1% Gross
Revenues
    
    None
    
    None
    
    None
    
    None
    
    See Lamar Lease
aboveNext Periodic 
Rental Adjustment
    
    2008
    
    2009
    
    2013
    
    2008
    
    2010
    
    2010
    
    2011
    
    2007Amount and/or Type
of Next Adjustment
    
    $
    36,000
    
    
    Appraisal
    
    Appraisal
    
    $
    24,000
    
    
    Cost of Living
Adjustment
    
    Appraisal and 1%
Gross Receipts Rent
    
    $
    260,000
    
    
    $
    20,000
 3




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##### Table of Contents



Competition
  Employees
  Petroleum Storage
 Terminal and Pier Facility
  Environmental
      4




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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
  5




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##### Table of Contents



Leasing Segment
 Geographic Concentration
 Undeveloped Properties
  Reliance on Senior Management
 Reliance on Single Tenant
 Insurance Coverage
 Environmental
 Petroleum Storage Segment
 Single Tenant for the Facility
 Environmental Concerns
 6




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##### Table of Contents



Reliance on the Pier and Related Pipeline.
 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
  7




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PART II
 
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters
  Trading Prices
    
    
    DividendsHigh
    
    
    Low
    
    
    Paid20051st Quarter
    
    
    22.00
    
    
    
    18.00
    
    
    
    .032nd Quarter
    
    
    24.60
    
    
    
    18.10
    
    
    
    .033rd Quarter
    
    
    24.20
    
    
    
    23.23
    
    
    
    .034th Quarter
    
    
    27.95
    
    
    
    23.75
    
    
    
    .0320061st Quarter
    
    
    32.00
    
    
    
    27.50
    
    
    
    .032nd Quarter
    
    
    33.30
    
    
    
    29.27
    
    
    
    .033rd Quarter
    
    
    29.74
    
    
    
    23.50
    
    
    
    .044th Quarter
    
    
    24.70
    
    
    
    22.60
    
    
    
    .04
    8




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##### Table of Contents



Performance Graph
 Prepared by Burnham Securities Inc. for Capital Properties, Inc.
 
 
 Fiscal Years Ended December 31
 2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006CPI
    
    
    100.0
    
    
    
    116.3
    
    
    
    175.0
    
    
    
    160.0
    
    
    
    174.9
    
    
    
    97.9Dow Jones wilshire Real
EstateSecurities Index®
    
    
    100.0
    
    
    
    95.5
    
    
    
    123.0
    
    
    
    157.7
    
    
    
    171.3
    
    
    
    223.2Russell 2000 Index®
    
    
    100.0
    
    
    
    75.9
    
    
    
    110.3
    
    
    
    129.1
    
    
    
    139.2
    
    
    
    161.2
  9




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Item 6. Selected Financial Data
  Income statement data:
 Years Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Total revenues and other income
    
    $
    5,789,000
    
    
    $
    6,463,000
    1
    
    $
    7,075,000
    2
    
    $
    6,918,000
    3
    
    $
    4,738,000Total expenses4
    
    $
    3,574,000
    
    
    $
    3,707,000
    
    
    $
    4,504,000
    
    
    $
    5,458,000
    
    
    $
    5,685,000Income taxes (benefit)
    
    $
    896,000
    
    
    $
    1,093,000
    
    
    $
    1,010,000
    
    
    $
    576,000
    
    
    $
    (274,000
    )Net income (loss)
    
    $
    1,319,000
    
    
    $
    1,663,000
    
    
    $
    1,561,000
    
    
    $
    884,000
    
    
    $
    (673,000
    )Basic income (loss) per common share
    
    $
    0.40
    
    
    $
    0.50
    
    
    $
    0.47
    
    
    $
    0.27
    
    
    
    ($0.20
    )Dividends per common share
    
    $
    0.14
    
    
    $
    0.12
    
    
    $
    0.30
    
    
    $
    0.03
    
    
    $
    0.03
 Balance sheet data:
 December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Properties and equipment
    
    $
    18,471,000
    
    
    $
    16,756,000
    
    
    $
    16,527,000
    
    
    $
    14,879,000
    
    
    $
    15,184,000Total assets
    
    $
    21,858,000
    
    
    $
    21,492,000
    
    
    $
    19,531,000
    
    
    $
    18,411,000
    
    
    $
    18,020,000Shareholders equity
    
    $
    16,017,000
    
    
    $
    15,160,000
    
    
    $
    13,893,000
    
    
    $
    13,322,000
    
    
    $
    12,537,000
 
 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; see Note 4 to
Notes to Consolidated Financial Statements in Item 8.3
    
    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 results
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. 10




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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
 11




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Segments:
     Changes in capital structure:
    12




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2 Results of operations:
 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:
  Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
 Leasing segment:
 2005
    
    
    2004
    
    
    DifferenceLeasing revenues
    
    $
    2,663,000
    
    
    $
    3,049,000
    
    
    $
    (386,000
    )Leasing expense
    
    
    778,000
    
    
    
    1,590,000
    
    
    $
    (812,000
    )$
    1,885,000
    
    
    $
    1,459,000
  13




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Petroleum storage segment:
 2005
    
    
    2004
    
    
    DifferencePetroleum storage facility revenues
    
    $
    2,549,000
    
    
    $
    2,074,000
    
    
    $
    475,000Petroleum storage facility expense
    
    
    1,713,000
    
    
    
    1,876,000
    
    
    $
    (163,000
    )$
    836,000
    
    
    $
    198,000
   Other income:
   General:
  
    
    Professional fees incurred in an assessment of the Companys risk insurance needs;
    
    Higher payroll and related costs;
    
    Higher directors fees;
    
    Costs associated with the conversion of the Companys Class B common stock to Class A
common stock; and
    
    Expenses associated with responding to a tender offer to acquire the Companys stock.
 3. Liquidity and capital resources:
   2006
    
    
    2005
    
    
    2004Operating activities
    
    $
    1,542,000
    
    
    $
    2,245,000
    
    
    $
    569,000Investing activities
    
    $
    (2,399,000
    )
    
    $
    627,000
    
    
    $
    (385,000
    )Financing activities
    
    $
    (462,000
    )
    
    $
    (396,000
    )
    
    $
    (990,000
    )
 14




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Operating activities:
  Investing activities:
  Financing activities:
  Cash and cash equivalents and cash commitments:
       
 Item 7A. Quantitative and Qualitative Disclosures About Market Securities
  15




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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
    
    
    17Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    18Consolidated Statements of Income and Retained Earnings for the
Years Ended December 31, 2006, 2005 and 2004
    
    
    19Consolidated Statements of Cash Flows for the Years Ended
December 31, 2006, 2005 and 2004
    
    
    20Notes to Consolidated Financial Statements
    
    
    21-31Schedule II  Valuation and Qualifying Accounts
    
    
    32Schedule III  Real Estate and Accumulated Depreciation
    
    
    33-34
 16




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/s/ Lefkowitz, Garfinkel, Champi & DeRienzo P.C.March 22, 2007
 17




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CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 December 31,2006
    
    
    2005ASSETSProperties and equipment (net of accumulated depreciation)
    
    $
    18,471,000
    
    
    $
    16,756,000Cash and cash equivalents
    
    
    2,992,000
    
    
    
    4,311,000Accrued leasing revenues
    
    
    44,000
    
    
    
    232,000Prepaid and other
    
    
    351,000
    
    
    
    193,000$
    21,858,000
    
    
    $
    21,492,000LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Accounts payable and accrued expenses:Property taxes
    
    $
    298,000
    
    
    $
    294,000Environmental remediation
    
    
    82,000
    
    
    
    110,000Other (including $106,000 in 2005 relating to tank
under construction)
    
    
    137,000
    
    
    
    295,000Deferred leasing revenues
    
    
    448,000
    
    
    
    306,000Income taxes:Current
    
    
    18,000
    
    
    
    682,000Deferred, net
    
    
    4,858,000
    
    
    
    4,645,0005,841,000
    
    
    
    6,332,000Shareholders equity (Note 7):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
    
    
    4,189,000
    
    
    
    3,332,00016,017,000
    
    
    
    15,160,000$
    21,858,000
    
    
    $
    21,492,000
  18




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CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
 Years Ended December 31,2006
    
    
    2005
    
    
    2004Revenues and other income:Revenues:Leasing
    
    $
    2,493,000
    
    
    $
    2,663,000
    
    
    $
    3,049,000Petroleum storage facility
    
    
    3,187,000
    
    
    
    2,549,000
    
    
    
    2,074,0005,680,000
    
    
    
    5,212,000
    
    
    
    5,123,000Other income:Gain on sale of parking garage
    
    
    
    
    
    
    1,057,000
    
    
    
    Gain on sale of billboard permit
    
    
    
    
    
    
    100,000
    
    
    
    Condemnation proceeds, including interest of $244,000
    
    
    
    
    
    
    
    
    
    
    1,672,000Attorneys fee judgment
    
    
    
    
    
    
    
    
    
    
    258,000Interest
    
    
    109,000
    
    
    
    94,000
    
    
    
    22,0005,789,000
    
    
    
    6,463,000
    
    
    
    7,075,000Expenses:Leasing
    
    
    663,000
    
    
    
    778,000
    
    
    
    1,590,000Petroleum storage facility
    
    
    1,798,000
    
    
    
    1,713,000
    
    
    
    1,876,000General and administrative
    
    
    1,113,000
    
    
    
    1,216,000
    
    
    
    1,038,0003,574,000
    
    
    
    3,707,000
    
    
    
    4,504,000Income before income taxes
    
    
    2,215,000
    
    
    
    2,756,000
    
    
    
    2,571,000Income tax expense:Current
    
    
    683,000
    
    
    
    976,000
    
    
    
    149,000Deferred
    
    
    213,000
    
    
    
    117,000
    
    
    
    861,000896,000
    
    
    
    1,093,000
    
    
    
    1,010,000Net income
    
    
    1,319,000
    
    
    
    1,663,000
    
    
    
    1,561,000Retained earnings, beginning
    
    
    3,332,000
    
    
    
    2,065,000
    
    
    
    1,494,000Dividends on common stock ($.14, $.12 and $.30 per share
in 2006, 2005 and 2004, respectively)
    
    
    (462,000
    )
    
    
    (396,000
    )
    
    
    (990,000
    )Retained earnings, ending
    
    $
    4,189,000
    
    
    $
    3,332,000
    
    
    $
    2,065,000Basic income per share
    
    $
    .40
    
    
    $
    .50
    
    
    $
    .47
  19




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CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,2006
    
    
    2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    1,319,000
    
    
    $
    1,663,000
    
    
    $
    1,561,000Adjustments
to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    551,000
    
    
    
    431,000
    
    
    
    410,000Gain on sale of parking garage
    
    
    
    
    
    
    (1,057,000
    )
    
    
    Gain on sale of billboard permit
    
    
    
    
    
    
    (100,000
    )
    
    
    Condemnation proceeds
    
    
    
    
    
    
    
    
    
    
    (1,672,000
    )Reversal of accrued leasing revenues
    
    
    159,000
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    213,000
    
    
    
    117,000
    
    
    
    861,000Changes in assets and liabilities:Increase in:Receivables
    
    
    
    
    
    
    
    
    
    
    (213,000
    )Prepaid and other
    
    
    (158,000
    )
    
    
    
    
    
    
    (156,000
    )Current income taxes payable
    
    
    
    
    
    
    647,000
    
    
    
    Deferred leasing revenues
    
    
    142,000
    
    
    
    306,000
    
    
    
    Decrease in:Receivables
    
    
    
    
    
    
    413,000
    
    
    
    Accrued leasing revenues
    
    
    29,000
    
    
    
    94,000
    
    
    
    91,000Prepaid and other
    
    
    
    
    
    
    237,000
    
    
    
    Accounts payable and accrued expenses
    
    
    (49,000
    )
    
    
    (506,000
    )
    
    
    (250,000
    )Current income taxes payable
    
    
    (664,000
    )
    
    
    
    
    
    
    (63,000
    )Net cash provided by operating activities
    
    
    1,542,000
    
    
    
    2,245,000
    
    
    
    569,000Cash flows from investing activities:Payments for properties and equipment
    
    
    (2,399,000
    )
    
    
    (1,973,000
    )
    
    
    (2,057,000
    )Proceeds from:Sale of parking garage
    
    
    
    
    
    
    2,500,000
    
    
    
    Sale of billboard permit
    
    
    
    
    
    
    100,000
    
    
    
    Condemnation
    
    
    
    
    
    
    
    
    
    
    1,672,000Net cash provided by (used in) investing activities
    
    
    (2,399,000
    )
    
    
    627,000
    
    
    
    (385,000
    )Cash used in financing activities, payment of dividends
    
    
    (462,000
    )
    
    
    (396,000
    )
    
    
    (990,000
    )Increase (decrease) in cash and cash equivalents
    
    
    (1,319,000
    )
    
    
    2,476,000
    
    
    
    (806,000
    )Cash and cash equivalents, beginning
    
    
    4,311,000
    
    
    
    1,835,000
    
    
    
    2,641,000Cash and cash equivalents, ending
    
    $
    2,992,000
    
    
    $
    4,311,000
    
    
    $
    1,835,000Supplemental disclosure, cash paid for income taxes
    
    $
    1,357,000
    
    
    $
    152,000
    
    
    $
    378,000
  20




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CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 1.
    
    Description of business:Capital Properties, Inc. and its wholly-owned subsidiaries, Tri-State Displays, Inc., Capital
Terminal Company and Dunellen, LLC (collectively referred to as the Company), operate in two
segments: (1) Leasing and (2) Petroleum Storage.The leasing segment consists of the long-term leasing of certain of its real estate interests in
downtown Providence, Rhode Island (upon the commencement of which the tenants are required to
construct buildings thereon, with the exception of a parking garage, and to pay real property
taxes) 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
and adjacent to the Capital Center area will consist primarily of long-term ground leases. Pending
this development, the Company leases these parcels for public parking purposes under short-term
cancellable leasing arrangements.The petroleum storage segment consists of the operating of the petroleum storage terminal (the
Terminal) and the Wilkesbarre Pier (the Pier), collectively referred to as the Facility,
located in East Providence, Rhode Island, for Global Companies, LLC (Global) which stores and
distributes petroleum products.The principal difference between the two segments relates to the nature of the operations. The
tenants in the leasing segment incur substantially all of the development and operating costs of
the assets constructed on the Companys land, whereas the Company is responsible for the operating
and maintenance expenditures as well as capital improvements at the Facility.2.
    
    Summary of significant accounting policies:Principles of consolidation:The accompanying consolidated financial statements include the accounts and transactions of the
Company and its subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.Use of estimates:The preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States 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.Fair value of financial instruments:The Company believes that the fair value of financial instruments, including cash and cash
equivalents and accounts payable and accrued expenses, approximate their respective book values at
December 31, 2006 and 2005.Cash and cash equivalents:The Company considers all highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents. At December 31, 2006 and 2005, cash equivalents consisted of an
overnight uninsured sweep with the Companys principal bank totaling $2,787,000 and $3,936,000,
respectively.Properties and equipment:Properties and equipment are stated at cost. Acquisitions and additions are capitalized while
routine maintenance and repairs, which do not improve the asset or extend its life, are charged to
expense when incurred. Depreciation is being provided by the straight-line method over the
estimated useful lives of the respective assets.
 21




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##### Table of Contents



Environmental remediation:
  Revenues and other income:
       Income taxes:
   New accounting standards:
   22




---



##### Table of Contents



3.
    
    Properties and equipment:Properties and equipment consists of the following:
 EstimatedUseful Life
    
    
    December 31,in Years
    
    
    2006
    
    
    2005Properties on lease or held for lease, land
and land improvements
    
    
    
    
    
    $
    3,991,000
    
    
    $
    3,956,000Petroleum storage facility, on lease:Land and land improvements
    
    
    
    
    
    
    5,398,000
    
    
    
    5,262,000Buildings and structures
    
    
    33
    
    
    
    1,338,000
    
    
    
    1,120,000Tanks and equipment (including $106,000 in 2005
relating to tank under construction)
    
    
    15-20
    
    
    
    14,322,000
    
    
    
    12,446,00021,058,000
    
    
    
    18,828,000Office equipment
    
    
    5-10
    
    
    
    97,000
    
    
    
    96,00025,146,000
    
    
    
    22,880,000Less accumulated depreciation:Properties on lease or held for lease
    
    
    
    
    
    
    12,000
    
    
    
    11,000Petroleum storage facility, on lease
    
    
    
    
    
    
    6,576,000
    
    
    
    6,027,000Office equipment
    
    
    
    
    
    
    87,000
    
    
    
    86,0006,675,000
    
    
    
    6,124,000$
    18,471,000
    
    
    $
    16,756,000
  4.
    
    Litigation judgments:Disputes with Amtrak regarding condemnations:In 1998, as part of the electrification of the Northeast Corridor, National Railroad Passenger
Corporation (Amtrak) erected towers and a signal bridge within the air rights owned by the
Company. In 1999, Amtrak condemned a three-year temporary easement of all the air rights owned by
the Company and the Company received $335,000 from Amtrak. In 2001, Amtrak permanently condemned
the air rights and a parcel of land adjacent to the air rights (with a book value of $625,000) and
the Company received $925,000 from Amtrak. The Company believed that the condemnation amounts paid
by Amtrak were inadequate and accordingly brought suit against Amtrak in the United States District
Court for the District of Rhode Island seeking additional compensation. In 2002, the Court awarded
the Company $1,378,000 plus interest for additional damages resulting from the aforementioned
condemnations. In 2003, Amtrak appealed the decision to the United States Court of Appeals for the
First Circuit. The First Circuit affirmed the judgment of the District Court, and in 2004 the
Company received $1,622,000.In 2004, Amtrak also permanently condemned a small portion of land surrounding a pole erected by
Amtrak on one of the Companys parcels. The Company and Amtrak entered into an agreement in full
settlement of this matter for which the Company received $50,000 in 2004.Claim against City of Providence for attorneys fees:In 1997, the City of Providence revalued certain of the Companys properties within the Capital
Center area and reached back six years to assess over $13,000,000 in back taxes, interest and
penalties on the properties based upon a retroactive increase in the assessed values. These
increases were not a part of a city-wide revaluation. The Company contended that this action by
the City was both unprecedented and illegal.
 23




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##### Table of Contents



5.
    
    Description of leasing arrangements:As of December 31, 2006, the Company had entered into five long-term land leases for five separate
parcels upon which the improvements have been completed (developed parcels), including the lease
for the land under the parking garage discussed in Note 3. The Company has entered into two
additional long-term land leases (undeveloped parcels) with commencement dates of January 1, 2005
and May 1, 2005, respectively. Construction of the improvements has commenced on both parcels.Under the seven land leases, the tenants are required to pay real property taxes, which amounts are
excluded from leasing revenues and leasing expense on the accompanying consolidated statements of
income and retained earnings. The real property taxes attributable to the Companys land under
these leases are as follows:
 Year Ending December 31,
    
    No. of Leases
    
    Real Property Taxes2006
    
    
    7
    
    
    $
    1,302,0002005
    
    
    7
    
    
    $
    1,277,0002004
    
    
    4
    
    
    $
    488,000
     24




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##### Table of Contents



Year ending December 31,2007
    
    $
    2,016,0002008
    
    
    2,069,0002009
    
    
    2,101,0002010
    
    
    2,206,0002011
    
    
    2,810,0002012 to 2153
    
    
    678,626,000$
    689,828,000
  2006
    
    
    2005Cumulative excess of straight-line over contractual rentals
    
    $
    25,998,000
    
    
    $
    21,918,000Amount management has not been able to conclude is collectible
    
    
    25,954,000
    
    
    
    21,686,000Accrued leasing revenues
    
    $
    44,000
    
    
    $
    232,000
   6.
    
    Petroleum storage facility:Current operations:The Company and Global are parties to a lease agreement whereby the Company operates the entire
Facility for Global. The Company is responsible for labor, insurance, property taxes and other
operating expenses, as well as capital improvements.The lease provides as follows:
 
    
    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 $102,000
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).
 
 25




---



##### Table of Contents



Effective
    
    
    
    Amount of
    
    NewDate
    
    Reason for Increase
    
    Increase
    
    Monthly RentMay 2004
    
    Starting rent
    
    $
    
    
    
    $
    150,000October 2004
    
    Completion of 152,000 barrel tank
    
    
    35,000
    
    
    
    185,000May 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
    
    
    
    277,000
 Wilkesbarre Pier
 Environmental remediation:
   Environmental incident:
   Wilkesbarre Pier:
  26




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##### Table of Contents



7.
    
    Shareholders equity:In December 2001, the Company amended its Articles of Incorporation to create three classes of $.01
par value stockClass A Common Stock, Class B Common Stock, and Excess Stock. The Company
converted the then outstanding 3,000,000 shares of $1.00 par value common shares into 3,000,000
shares of Class A Common Stock. In addition, the Company issued (in the form of a stock dividend)
299,956 shares of Class B Common Stock (one share for each ten shares of Class A Common Stock
held). No fractional Class B shares were issued.The amended Articles of Incorporation prohibited any shareholder from acquiring more than a 5%
interest in the Companys classes of common stock and prohibited the two shareholders who each
beneficially then owned in excess of 5% of the Companys classes of common stock from increasing
their percentage ownership of each class of common stock. The purpose of the amendment of the
Articles of Incorporation was to provide the Company with the necessary flexibility to qualify to
be taxed as a real estate investment trust (REIT). The amendment provided that if the Company
did not make an election to be taxed as a REIT on or before March 31, 2005, the restrictions on
share ownership would automatically lapse and shares of Class B Common Stock would automatically be
converted into shares of Class A Common Stock on a one for one basis.The Company did not make the election and on March 31, 2005, the shares of Class B Common Stock
were converted into shares of Class A Common Stock, resulting in the Company having 3,299,956
shares of Class A Common Stock outstanding. No Excess Stock was issued and it is no longer
authorized.8.
    
    Income taxes:In 2004, the Company received condemnation proceeds from Amtrak totaling $1,428,000 which qualify
for deferred reinvestment for income tax reporting purposes pursuant to which the Company elected
to reduce the income tax basis of qualifying subsequent acquisitions, thereby avoiding paying
income taxes on the proceeds, subject to certain restrictions. The Companys 2004 income tax
returns made such election, thereby reducing its cash outlay for income taxes for 2004 by
approximately $570,000. Through December 31, 2006, the Company has made qualifying acquisitions
totaling $250,000. However, the Company will be required to reinvest the remaining condemnation
proceeds in qualifying assets by December 31, 2007, unless this date is extended by the Internal
Revenue Service. The Company intends to apply for an extension of the reinvestment period to
December 31, 2008. The Company will be required to pay the income tax and interest on any
unexpended proceeds.
 27




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004Current:Federal
    
    $
    528,000
    
    
    $
    771,000
    
    
    $
    43,000State
    
    
    155,000
    
    
    
    205,000
    
    
    
    106,000683,000
    
    
    
    976,000
    
    
    
    149,000Deferred:Federal
    
    
    152,000
    
    
    
    70,000
    
    
    
    736,000State
    
    
    61,000
    
    
    
    47,000
    
    
    
    125,000213,000
    
    
    
    117,000
    
    
    
    861,000$
    896,000
    
    
    $
    1,093,000
    
    
    $
    1,010,000
  2006
    
    
    2005
    
    
    2004Computed expected tax
    
    $
    753,000
    
    
    $
    937,000
    
    
    $
    874,000Increase (decrease) in expected tax resulting from:State income tax, net of Federal income tax benefit
    
    
    133,000
    
    
    
    165,000
    
    
    
    160,000Statutory and other
    
    
    10,000
    
    
    
    (9,000
    )
    
    
    (24,000
    )$
    896,000
    
    
    $
    1,093,000
    
    
    $
    1,010,000
  December 31,2006
    
    
    2005Gross deferred tax liabilities:Property having a financial statement basis in excess of tax basis:Cost differences
    
    $
    3,150,000
    
    
    $
    3,136,000Depreciation differences
    
    
    1,578,000
    
    
    
    1,237,0004,728,000
    
    
    
    4,373,000Condemnation proceeds
    
    
    470,000
    
    
    
    484,000Accrued leasing revenues
    
    
    18,000
    
    
    
    93,000Insurance premiums
    
    
    74,000
    
    
    
    62,0005,290,000
    
    
    
    5,012,000Gross deferred tax assets
    
    
    (432,000
    )
    
    
    (367,000
    )$
    4,858,000
    
    
    $
    4,645,000
 9.
    
    Operating segment disclosures:The Company operates in two segments: (1) Leasing and (2) Petroleum Storage.The Company makes decisions relative to the allocation of resources and evaluates performance based
on each segments respective income before income taxes, excluding interest income, condemnation
proceeds and certain corporate expenses.Inter-segment revenues are immaterial in amount. The Company did not incur interest expense during
the years ended December 31, 2006, 2005 and 2004.
 28




---



##### Table of Contents



December 31,2006
    
    
    2005
    
    
    2004Leasing:Revenues and other income:Revenues:Long-term leases:Contractual
    
    $
    2,010,000
    
    
    $
    1,983,000
    
    
    $
    1,705,000Contingent
    
    
    140,000
    
    
    
    145,000
    
    
    
    156,000Option
    
    
    
    
    
    
    81,000
    
    
    
    405,000Excess of contractual over straight-line rentals
    
    
    (29,000
    )
    
    
    (94,000
    )
    
    
    (91,000
    )Non-cash reversal of accrued leasing revenues
    
    
    (159,000
    )
    
    
    
    
    
    
    Short-term leases
    
    
    531,000
    
    
    
    548,000
    
    
    
    874,0002,493,000
    
    
    
    2,663,000
    
    
    
    3,049,000Other income:Gain on sale of parking garage
    
    
    
    
    
    
    1,057,000
    
    
    
    Gain on sale of billboard permit
    
    
    
    
    
    
    100,000
    
    
    
    Attorneys fee judgment
    
    
    
    
    
    
    
    
    
    
    258,000Total revenues and other income
    
    $
    2,493,000
    
    
    $
    3,820,000
    
    
    $
    3,307,000Property tax expense
    
    $
    543,000
    
    
    $
    574,000
    
    
    $
    1,326,000Depreciation
    
    $
    1,000
    
    
    $
    14,000
    
    
    $
    64,000Income before income taxes
    
    $
    1,830,000
    
    
    $
    3,042,000
    
    
    $
    1,717,000Assets
    
    $
    4,179,000
    
    
    $
    4,271,000
    
    
    $
    6,036,000Properties and equipment:Additions
    
    $
    35,000
    
    
    $
    
    
    
    $
    216,000Deletion, parking garage
    
    $
    
    
    
    $
    (2,500,000
    )
    
    $
    Petroleum storage:Revenues:Contractual
    
    $
    3,046,000
    
    
    $
    2,426,000
    
    
    $
    1,934,000Contingent
    
    
    141,000
    
    
    
    123,000
    
    
    
    140,000Total revenues
    
    $
    3,187,000
    
    
    $
    2,549,000
    
    
    $
    2,074,000Property tax expense
    
    $
    107,000
    
    
    $
    95,000
    
    
    $
    76,000Depreciation
    
    $
    549,000
    
    
    $
    415,000
    
    
    $
    342,000Income before income taxes
    
    $
    1,389,000
    
    
    $
    836,000
    
    
    $
    198,000Assets
    
    $
    14,871,000
    
    
    $
    13,273,000
    
    
    $
    11,814,000Properties and equipment, additions
    
    $
    2,230,000
    
    
    $
    2,103,000
    
    
    $
    1,830,000
 29




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##### Table of Contents



2006
    
    
    2005
    
    
    2004Revenues and other income:Revenues and other income for operating segments:Leasing
    
    $
    2,493,000
    
    
    $
    3,820,000
    
    
    $
    3,307,000Petroleum storage
    
    
    3,187,000
    
    
    
    2,549,000
    
    
    
    2,074,0005,680,000
    
    
    
    6,369,000
    
    
    
    5,381,000Condemnation proceeds, including interest
    
    
    
    
    
    
    
    
    
    
    1,672,000Interest income
    
    
    109,000
    
    
    
    94,000
    
    
    
    22,000Total consolidated revenues and other income
    
    $
    5,789,000
    
    
    $
    6,463,000
    
    
    $
    7,075,000Property tax expense:Property tax expense for operating segments:Leasing
    
    $
    543,000
    
    
    $
    574,000
    
    
    $
    1,326,000Petroleum storage
    
    
    107,000
    
    
    
    95,000
    
    
    
    76,000650,000
    
    
    
    669,000
    
    
    
    1,402,000Unallocated corporate property tax expense
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000Total consolidated property tax expense
    
    $
    651,000
    
    
    $
    670,000
    
    
    $
    1,403,000Depreciation:Depreciation for operating segments:Leasing
    
    $
    1,000
    
    
    $
    14,000
    
    
    $
    64,000Petroleum storage
    
    
    549,000
    
    
    
    415,000
    
    
    
    342,000550,000
    
    
    
    429,000
    
    
    
    406,000Unallocated corporate depreciation
    
    
    1,000
    
    
    
    2,000
    
    
    
    4,000Total consolidated depreciation
    
    $
    551,000
    
    
    $
    431,000
    
    
    $
    410,000Income before income taxes:Income for operating segments:Leasing
    
    $
    1,830,000
    
    
    $
    3,042,000
    
    
    $
    1,717,000Petroleum storage
    
    
    1,389,000
    
    
    
    836,000
    
    
    
    198,0003,219,000
    
    
    
    3,878,000
    
    
    
    1,915,000Condemnation proceeds
    
    
    
    
    
    
    
    
    
    
    1,672,000Interest income
    
    
    109,000
    
    
    
    94,000
    
    
    
    22,000Unallocated corporate expenses
    
    
    (1,113,000
    )
    
    
    (1,216,000
    )
    
    
    (1,038,000
    )Total consolidated income before income taxes
    
    $
    2,215,000
    
    
    $
    2,756,000
    
    
    $
    2,571,000Assets:Assets for operating segments:Leasing
    
    $
    4,179,000
    
    
    $
    4,271,000
    
    
    $
    6,036,000Petroleum storage
    
    
    14,871,000
    
    
    
    13,273,000
    
    
    
    11,814,00019,050,000
    
    
    
    17,544,000
    
    
    
    17,850,000Corporate cash and cash equivalents
    
    
    2,787,000
    
    
    
    3,936,000
    
    
    
    1,667,000Other unallocated amounts
    
    
    21,000
    
    
    
    12,000
    
    
    
    14,000Total consolidated assets
    
    $
    21,858,000
    
    
    $
    21,492,000
    
    
    $
    19,531,000Additions to properties and equipment:Additions to properties and equipment:Leasing
    
    $
    35,000
    
    
    $
    
    
    
    $
    216,000Petroleum storage
    
    
    2,230,000
    
    
    
    2,103,000
    
    
    
    1,830,0002,265,000
    
    
    
    2,103,000
    
    
    
    2,046,000Unallocated corporate additions
    
    
    1,000
    
    
    
    
    
    
    
    12,000Total consolidated additions
    
    $
    2,266,000
    
    
    $
    2,103,000
    
    
    $
    2,058,000Deletion to properties and equipment, parking garage, leasing
operating segment and total consolidated deletion
    
    $
    
    
    
    $
    (2,500,000
    )
    
    $
    
 30




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##### Table of Contents



2006
    
    
    2005
    
    
    2004Leasing segment:A
    
    $
    605,000
    
    
    $
    718,000
    
    
    $
    717,000B
    
    
    531,000
    
    
    
    548,000
    
    
    
    874,000C
    
    
    468,000
    
    
    
    468,000
    
    
    
    392,000D
    
    
    406,000
    
    
    
    403,000
    
    
    
    403,000$
    2,010,000
    
    
    $
    2,137,000
    
    
    $
    2,386,000Petroleum storage segment (one customer)
    
    $
    3,187,000
    
    
    $
    2,549,000
    
    
    $
    2,074,000
 10.
    
    Selected quarterly financial data (unaudited):The following table sets forth selected financial data for each quarter of 2006 and 2005. 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, 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
 Year Ended December 31, 2005,First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterTotal revenues and other income
    
    $
    2,419,000
    
    
    $
    1,382,000
    
    
    $
    1,392,000
    
    
    $
    1,270,000Net income
    
    $
    810,000
    
    
    $
    241,000
    
    
    $
    330,000
    
    
    $
    282,000Basic income per common share
    
    $
    0.25
    
    
    $
    0.07
    
    
    $
    0.10
    
    
    $
    0.08
 Total revenues and other income for the first quarter of 2005 include a gain of $1,057,000 on the
sale of a parking garage.
 31




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##### Table of Contents



Capital Properties, Inc. and Subsidiaries
Valuation and Qualifying Accounts
December 31, 2006, 2005 and 2004
 Schedule
II
 Description:Cummulative 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 12/31/06:
    
    $
    21,686,000
    
    
    $
    
    
    
    $
    4,274,000
    
    
    $
    (6,000
    )
    
    $
    25,954,000Year ended 12/31/05:
    
    $
    17,680,000
    
    
    $
    
    
    
    $
    4,013,000
    
    
    $
    (7,000
    )
    
    $
    21,686,000Year ended 12/31/04:
    
    $
    15,140,000
    
    
    $
    
    
    
    $
    2,547,000
    
    
    $
    (7,000
    )
    
    $
    17,680,000
 32




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##### Table of Contents



Capital Properties, Inc. and Subsidiaries
Real Estate and Accumulated Depreciation
December 31, 2006
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
    
    
    
    
    
    
    
    5/31/88BillboardEasementsMA and RI
    
    
    70,000
    
    
    
    
    
    
    
    
    13,000
    
    
    
    
    
    
    
    
    83,000
    
    
    
    
    
    
    
    83,000
    
    
    
    
    12,000
    
    
    
    
    
    
    
    12/31/87
    
    
    21 Years$
    2,228,000
    
    
    
    
    
    
    
    $
    1,763,000
    
    
    
    
    
    
    
    $
    3,991,000
    
    
    
    
    
    
    $
    3,991,000
    
    
    
    $
    12,000
 33




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##### Table of Contents



Capital Properties, Inc. and Subsidiaries
Real Estate and Accumulated Depreciation (continued)
December 31, 2006
Schedule III
 Cost:Balance, January 1, 2004
    
    $
    6,240,000Acquisitions
    
    
    216,000Balance, December 31, 2004
    
    
    6,456,000Cost of parking garage sold
    
    
    (2,500,000
    )Balance, December 31, 2005
    
    
    3,956,000Acquisitions
    
    
    35,000Balance, December 31, 2006
    
    $
    3,991,000Accumulated depreciation:Balance, January 1, 2004
    
    $
    990,000Depreciation
    
    
    64,000Balance, December 31, 2004
    
    
    1,054,000Depreciation
    
    
    14,000Accumulated depreciation on parking garage sold
    
    
    (1,057,000
    )Balance, December 31, 2005
    
    
    11,000Depreciation
    
    
    1,000Balance, December 31, 2006
    
    $
    12,000
 
 (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, 2006 is $2,207,000. 34




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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
   
 Item 9B. Other Information
  35




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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
    
    74
    
    Chairman, Capital Properties, Inc.
    
    1995Ronald P. Chrzanowski
    
    64
    
    President, Capital Properties, Inc.
    
    1997Barbara J. Dreyer
    
    68
    
    Treasurer, Capital Properties, Inc.
    
    1997Stephen J. Carlotti
    
    64
    
    Secretary, Capital Properties, Inc.
    
    1998Avery L. Noe
    
    63
    
    President, Capital Terminal Company
    
    1996
  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
  36




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
  
 Item 15. Exhibits and Financial Statement Schedules
 (a) and (c)
 (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 (incorporated by reference to Exhibit 3(b) to the registrants quarterly
report on Form 10-QSB for the quarter ended September 30, 1999).10
    
    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
 37




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##### Table of Contents



SIGNATURE
  CAPITAL PROPERTIES, INC.By
    /s/ Robert H. EderRobert H. EderChairman of the Board and  
Principal Executive Officer   /s/ Robert H. Eder

Robert H. Eder
    
    March 22, 2007Chairman and DirectorPrincipal Executive Officer/s/ Ronald P. Chrzanowski

Ronald P. Chrzanowski
    
    March 22, 2007President and Director/s/ Barbara J. Dreyer

Barbara J. Dreyer
    
    March 22, 2007Treasurer, Principal Financial Officerand Principal Accounting Officer/s/ Alfred J. Corso

Alfred J. Corso, Director
    
    March 22, 2007
 38