EDGAR 10-K Filing

Company CIK: 202947
Filing Year: 2022
Filename: 202947_10-K_2022_0001564590-22-006244.json

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ITEM 1. BUSINESS
Item 1. Business
Organizational History
The Company was organized as a business corporation under the laws of Rhode Island in 1983 as Providence and Worcester Company and is the successor by merger in 1983 to a corporation also named Providence and Worcester Company which was organized under the laws of Delaware in 1979. In 1984, the Company’s name was changed to Capital Properties, Inc.
Business:
The Company’s principal business is the leasing of Company-owned land in Capital Center (“Capital Center”) and property adjacent to the Capital Center (Parcel 20) in downtown Providence, Rhode Island under long-term ground leases with terms of 99 years or more.* (Hereinafter, the land in Capital Center and Parcel 20 are referred to as parcels within the “Capital Center Area”). The Company owns approximately 18 acres in Capital Center consisting of 13 individual parcels. The Capital Center (approximately 77 acres of land) is the result of a development project undertaken by the State of Rhode Island, the City of Providence, the National Railroad Passenger Corporation (“Amtrak”) and the Company during the 1980’s in which two rivers, the Moshassuck and the Woonasquatucket, were moved, Amtrak’s Northeast Corridor rail line was relocated, a new Amtrak/commuter railroad station was constructed and significant public improvements were made to improve pedestrian and vehicular traffic in the area. The Company has not acted, and does not intend to act, as a developer with respect to any Company-owned parcels.
Under the Company’s standard Ground Leases, the tenant is responsible for all property related operating expenses, such as real estate taxes, maintenance and insurance as well as all costs associated with the development and construction of the related improvements. Each Ground Lease contains provisions permitting the tenant to develop the parcel under certain terms and conditions and provides for periodic rent increases based on either a specific percentage, consumer price index (“CPI”), appraisal or combination thereof and sometimes includes percentage rent participation (contingent rent). The Ground Leases also provide that the tenants are responsible for insuring the Company against various hazards and events as well as indemnifying the Company with respect to all of the tenant’s activities on the land. The Ground Leases contain other terms and conditions customary to such instruments.
While seeking developers, the Company also leases Parcels 3E, 3W, 4E, 4W and a portion of Parcel 20 in the Capital Center Area for public parking purposes to Metropark, Ltd.
*Generally speaking, a ground lease is a lease by the owner of the land (in this case, the Company) to the owners/operators of the real estate improvements built thereon (“Ground Leases”).
Parcel 20
Parcel 20 consists of a parcel of land adjacent to the Capital Center, part of which is undeveloped and part of which contains a three/four-story 20,000 square foot building (the “Steeple Street Building”).
On May 14, 2018 the Company and the tenant entered into an Amended and Restated Ground Lease. On December 1, 2018, the tenant took possession of Parcel 20 and the Company conveyed title to the Steeple Street Building to the tenant. In September 2021, the Company sent a Notice of Default (“Default Notice”) to the tenant of Parcel 20 for the nonpayment of September’s rent and the 2021 first quarter property taxes. Subsequently, the tenant cured the rent default. On October 6, 2021 the tenant was sent a Notice of Lease Termination (“Termination Notice”) informing the tenant that the lease would terminate on October 18, 2021 unless the failure to pay the first quarter real estate taxes along with any related penalties and interest was cured. Subsequently, it was agreed that, provided the first and second quarter real estate taxes and any related penalties and interest were paid in full by October 31, 2021, the lease would not be terminated. Since payment was not made, the lease was terminated effective October 31, 2021.
The Parcel 20 Steeple Street Building (“Building”) lease was originally accounted for as a sales-type lease due to the transfer of the Building to the tenant. The land directly under the Building was allocated in the determination of the value of the property transferred in accordance with ASC 360-20, Property, Plant and Equipment - Real Estate Sales. Since the initial investment by the tenant was insufficient to recognize the transaction as a sale, in accordance with ASC 360-20, the Company reported the acquisition period rent and an allocable portion of the ground rent collected as deferred revenue on its consolidated balance sheet. Upon termination of the lease, the $293,000 of deferred revenue through October 31, 2021 was recognized as leasing revenue in the consolidated statement of income and retained earnings. With the termination of the Parcel 20 lease, the Company became obligated for the real property taxes which currently total $134,000 annually.
**********************************************
All of the properties described above are shown on a map contained in Exhibit 20.
Billboard Lease
The Company, through its wholly-owned subsidiary Tri-State Displays, Inc. leases 23 outdoor advertising locations containing 44 billboard faces along interstate and primary highways in Rhode Island and Massachusetts to Lamar Outdoor Advertising, LLC (“Lamar”) under a lease which expires in 2049 (the “Lamar Lease”). All but one of these locations are controlled by the Company through permanent easements granted to the Company pursuant to an agreement between the Company and Providence & Worcester Railroad Company (“Railroad”); the remaining location is leased by the Company from a third party with a remaining term of three years.
Lamar has a right of first refusal for additional billboard location sites acquired by the Company in New England and Metropolitan New York City.
The Lamar lease provides, among other things for annual base rent increases of 2.75% in June for each leased billboard location and participation in the revenue generated by each billboard, as defined in the agreement. The Lamar lease contains other terms and conditions customary to such instruments.
A summary of the long-term leases which have commenced is as follows:
Parcels in Capital Center Area
Parcel Number
Type of Building (s)
Building Gross Square Feet
Number of Residential Units
Term of
Lease
(Years)
Termination
Date
Options
to Extend
Lease
Current
Annual Contractual
Rent
Next Periodic
Rent
Adjustment
Annual Rent After Next Adjustment or Type of Next Adjustment
17-story & 19-story Residential and
307,000
Two 75-Year
$
503,000
COLA
13-story Office
325,000
3S
13-story Office
235,000
None
$
618,000
$
788,000
8-story Residential
454,000
None
$
540,000
*
Appraisal
6A
4-6 story Residential
120,000
Two 50-Year
$
367,000
$
404,000
6B
2-6 story Residential
248,000
Two 50-Year
$
214,000
$
235,000
7A
Underground Public Parking Garage
330 parking spaces
Two 75-Year
$
170,000
COLA
4-story Office
114,000
None
$
290,000
*
COLA
10-Story Office
210,000
None
$
397,000
$
417,000
Billboard Lease
NA
Billboard
**
$
993,000
***
$
1,020,000
COLA
Cost-of-living adjustment
*
Lease provides for rent participation (contingent rent) equal to 1% of Gross Revenue.
**
Lease term is extended for four (4) years if an electronic billboard is constructed on a leased location.
***
Lease provides for rent participation equal to 30% of Revenue, as defined in the agreement for each standard billboard and 20% of Revenue for each electronic billboard.
Major tenants:
The following table sets forth those major tenants whose revenues exceed 10 percent of the Company’s leasing revenues for the years ended December 31, 2021 and 2020:
Parcel
NA
Lamar Outdoor Advertising, LLC
$
1,129,000
$
1,105,000
Parcel 5
HGIT Center Place
618,000
620,000
Parcel 3S
1701 R.C. Sarasota Invest, LLC
618,000
618,000
Parcel 2
Waterplace Condominiums
503,000
503,000
$
2,868,000
$
2,846,000
Competition
The Company competes for tenants with other owners of undeveloped real property in downtown Providence. The Company maintains no listing of other competitive properties and will not engage in a competitive bid arrangement with proposed developers. The Company’s refusal to sell the land that it owns may restrict the number of interested developers.
Employees
As of December 31, 2021, the Company has two full-time and one part-time employee.
Environmental
Prior to February 2017, the Company operated a petroleum storage facility (“Terminal”) through two of its wholly owned subsidiaries. On February 10, 2017, the Terminal was sold to Sprague Operating Resources, LLC (“Sprague”) which results in the Terminal’s operations being classified as discontinued operations for all periods presented. As part of the Terminal Sale Agreement, the Company agreed to complete the environmental remediation and pay for the costs related to a 1994 storage tank fuel oil leak which allowed the escape of a small amount of fuel oil. In February 2020, the Company filed a revised Remediation Action Work Plan (“RAWP”) with Rhode Island Department of Environmental Management (“RIDEM”) to incorporate technical details associated with the preferred remedial activities and to update the 2018 RAWP. As a result of the revised remedial activities included in the 2020 RAWP, the remediation accrual was increased by $846,000 in 2019 primarily due to design changes necessary to meet the requirements of applicable life safety codes. For the years ended December 31, 2021 and 2020, the Company incurred costs of $132,000 and $553,000, respectively resulting in an environmental remediation liability of $358,000 and $490,000 at December 31, 2021 and 2020, respectively. Any subsequent increases or decreases to the expected cost of remediation will be recorded in Company’s consolidated income statement as income or expense from discontinued operations.
Insurance
The Company maintains what management believes to be adequate levels of insurance.

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ITEM 1A. RISK FACTORS

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ITEM 1B. UNRESOLVED STAFF COMMENTS

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ITEM 2. PROPERTIES
Item 2. Properties
The Company owns approximately 18 acres and a historic building in the Capital Center Area of Providence, Rhode Island. With the exception of Parcel 6C and Parcel 20, all of the Company’s real property is leased either under long-term leases or short-term leases as more particularly described in Item 1, Business. Effective August 29, 2020, the Parcel 6C lease was terminated by the tenant and effective October 31, 2021, the Parcel 20 lease was terminated by the Company. The Company also owns or controls 23 locations on which 44 billboard faces have been constructed. All but one of these locations are owned by the Company under permanent easements from the Railroad; the remaining location is leased from an unrelated third party with a remaining term of three years.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
In connection with the sale of the Company’s petroleum storage terminal in 2017, the Company and the buyer, Sprague Operating Resources, LLC (“Sprague”), entered into an agreement relating to the construction of a breasting dolphin pursuant to which the Company and Sprague would share equally all expenses incurred in the construction in excess of $1,040,000, subject to certain limitations, including in the Company’s opinion, a 20% percent cap on cost overruns in excess of $1,040,000. In November 2019 the Company received a demand from Sprague asserting that Sprague was owed $427,000 representing 50% of actual cost of the dolphin in excess of $1,040,000. The Company replied that its obligation could not exceed $104,000 being 50% of 20% of the original estimate. Subsequently, the Company and Sprague engaged in a mediation which did not resolve the dispute. On July 15, 2021 Sprague commenced an action in the Rhode Island Superior Court (Providence County) seeking monetary damages in the amount of $427,000 together with interest and attorney’s fees. The Company filed an answer denying any liability. The parties are presently engaged in discovery.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosure - Not applicable
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
The Company’s Class A Common Stock is traded on the OTCQX, symbol “CPTP.” The following table shows the high and low trading prices for the Company’s Class A Common Stock during the quarterly periods indicated as obtained from the OTCQX, together with cash dividends paid per share during such periods.
Trading Prices
Dividends
High
Low
Declared
1st Quarter
$
12.50
$
11.80
$
0.07
2nd Quarter
14.00
11.48
0.07
3rd Quarter
14.20
11.80
0.07
4th Quarter
15.00
11.75
0.07
1st Quarter
$
16.50
$
12.07
$
0.07
2nd Quarter
15.05
11.20
-
*
3rd Quarter
15.00
12.10
0.07
4th Quarter
14.70
12.35
0.07
* Not declared due to uncertainty of potential coronavirus pandemic impact on Company.
At February 23, 2022, there were 323 holders of record of the Company’s Class A Common Stock.

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ITEM 6. SELECTED FINANCIAL DATA

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The following discussion of our financial condition and results of operations excludes the results of our discontinued operations unless otherwise noted. See Note 8, “Discontinued operations and environmental incident” in the accompanying Consolidated Financial Statements for further discussion of these operations.
1.
Overview:
Critical accounting policies:
The Securities and Exchange Commission (“SEC”) has issued guidance for the disclosure of “critical accounting policies.” The SEC defines such policies as those that require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
The Company’s significant accounting policies are described in Note 2 in the accompanying Consolidated Financial Statements. Not all of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates. Management believes that the Company’s revenue recognition policy for long-term leases with scheduled rent increases meets the SEC definition of “critical.”
The Company’s long-term leases (land and billboard) have original terms of 30 to 149 years. The Company follows GAAP in accounting for its leases by recognizing rental income on the straight-line basis over the term of the leases. Where the straight-line income exceeds the actual contractual payments (“Excess”), the Company evaluates the collectability of the entire stream of remaining lease payments on a lease-by-lease basis. If the remaining lease payments are not deemed to be probable of collection, in accordance with GAAP, lease revenue is recorded at the lower of straight-line rental income or the contractual amount paid.
The number of years remaining on the Company’s leases range from twenty-eight (28) years to one hundred-thirty-two (132) years with total rent yet to be collected (without regard to CPI and appraisal adjustments) under the lease by tenant ranging from $19.7 million to $363.8 million. Given the length of the remaining lease term and the magnitude of the amount yet to be collected, along with the consideration of other factors, the Company has concluded that the remaining stream of lease payments is not probable of collection and as such, reports lease revenue based on the contractual amount paid.
2.
Liquidity and capital resources:
Historically, the Company generates adequate liquidity to fund its operations.
Cash and cash commitments:
At December 31, 2021, the Company had cash and cash equivalents of $1,443,000. At December 31, 2021 and 2020, cash equivalents consist of a money market account totaling $1,355,000 and $1,555,000, respectively. The Company and its subsidiary each maintain checking account and one money market account in a financial institution which is insured by the Federal Deposit Insurance Corporation to a maximum of $250,000. The Company periodically evaluates the financial stability of the financial institutions at which the Company’s funds are held.
Under the terms of each applicable long-term land lease, the contractual rent adjustments for the last two year were:
Parcel
Number
Monthly
Increase
Effective Date of Increase
Type of
Adjustment
Parcel 20
$2,800
June 1, 2020
Base ground rent increase
Parcel 9
$1,575
April 1, 2021
Base ground rent increase
On July 30, 2020, the Company received notice that the tenant of Parcel 6C exercised its right to terminate the ground lease effective August 29, 2020. On the termination date, the annual rent on Parcel 6C was $220,000 and the annual real estate taxes paid by the tenant were $311,000. Upon termination, the real estate taxes became an obligation of the Company effective with the taxes assessed as on December 31, 2020. The Company believed that the assessed value of Parcel 6C as agreed to by the City of Providence (“City”) and the former tenant of Parcel 6C pursuant to a Tax Stabilization Agreement (“TSA”) was much greater than similar parcels in the Capital Center area. Negotiations with the City to reduce the
assessment were initially unsuccessful. Accordingly, the Company filed a complaint against the Providence Tax Assessor in Rhode Island Superior Court asserting that the Company was not a party to the TSA and that the assessed value should be determined based on the value of other Parcels in the Capital Center Area. On December 20, 2021, the Company and the City entered into a consent judgment that dissolved the TSA upon the termination of the ground lease between the Company and the tenant and provided that the taxes assessed on December 31, 2020 would be based on the assessed value as determined by the firm engaged by the City, Vision Government Solutions, Inc. The adjusted assessed value is significantly less than the assessed value provided in the TSA and results in an annual property tax expense of $160,000.
Through February 23, 2022 all tenants have paid their monthly rent in accordance with their lease agreements except for Metropark, the tenant that operates public parking on the Company’s undeveloped parcels other than Parcel 6C. The coronavirus (COVID-19) pandemic has had a significant adverse impact on Metropark. The Company does not know when or if Metropark’s operations will return to normal. Metropark has not fully paid the rent since April 2020. The total rent arrearage as of December 31, 2021 is $766,000 and has been fully reserved by the Company. On July 31, 2020, Metropark and the Company entered into an agreement for revenue sharing at various percentages until parking revenues received by Metropark equal or exceed $70,000 per month whereupon Metropark would be obligated to resume regularly scheduled rental payments under its lease. Upon resumption of regularly scheduled rent payments, Metropark and the Company will share fifty (50) percent of the revenue in excess of $70,000 until the arrearage has been paid in full. If prior to payment in full of the arrearage one or more of the lots is removed from the Metropark lease for development, the amount of the then unpaid arrearage in the ratio of the number of parking spaces on the removed lot to the total parking spaces on all lots prior to such lot’s removal shall be deemed paid in full. Until resumption of regularly scheduled rent payments, the Company will continue to recognize Metropark’s rent on a cash basis.
The Company expects that revenue from Metropark will continue to be recognized on a cash basis for a significant portion of 2022.
The Terminal Sale Agreement and related documentation provides that the Company is required to secure an approved remediation plan and to remediate contamination caused by a leak in 1994 from a storage tank at the Terminal. At December 31, 2021, the Company’s accrual for the remaining cost of remediation was $358,000 of which $87,000 is expected to be incurred in 2022. The Terminal Sale Agreement also contained a cost sharing provision for a breasting dolphin whereby any costs incurred in connection with the construction of the breasting dolphin in excess of the initial estimate of $1,040,000 would be borne equally by Sprague and the Company subject to certain limitations, including, in the Company’s opinion, a 20% cap on the increase from the initial estimate subject to the sharing arrangement. In November 2019, the Company received a demand letter from Sprague asserting that it was owed $427,000, which amount represents 50% of the actual costs incurred ($1,894,008) in excess of $1,040,000. The Company asserts that its obligation cannot exceed $104,000. On June 17, 2021 the Company and Sprague met with a mediator to review Sprague’s claim. Mediation was unsuccessful and on July 15, 2021, Sprague commenced an action against the Company in the Rhode Island Superior Court seeking monetary damages of $427,000, interest and attorney’s fees. The Company intends to vigorously defend against the claims being asserted by Sprague. See Note 8, “Discontinued operations and environmental incident” in the accompanying Consolidated Financial Statements.
In 2021, the Company declared and paid dividends of $1,848,000 or $0.28 per share.
The declaration of future dividends will depend on future earnings and financial performance.
3.
Results of operations:
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020:
Revenue, leasing increased $223,000 from 2020 due to the recognition of deferred revenue associated with the termination of the Parcel 20 lease ($293,000), rent from the tenants of Parcel 20 effective November 1, 2021 ($28,000) and by an increase in rent (contractual and contingent) from tenants ($95,000) offset by a decrease in rent associated with Metropark ($46,000) and the termination of the Parcel 6C lease ($147,000).
Operating expenses increased $279,000 due principally to: increased property tax expense resulting from the termination of the Parcel 6C lease ($107,000) and Parcel 20 lease ($134,000) and an increase in expenses principally related to the on-going operations of Steeple Street Building ($38,000).
General and administrative expense increased $111,000 due principally to an increase in legal fees associated with the Sprague breasting dolphin litigation and other legal matters ($137,000), a net increase in various other expenses ($27,000) offset by a decrease in accounting fees ($53,000).
For the years ended December 31, 2021 and 2020, the Company’s effective income tax rate is 28% and 27%, respectively.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
CAPITAL PROPERTIES, INC. AND SUSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm - Stowe & Degon, LLC
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Income and Retained Earnings for the Years Ended December 31, 2021 and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Capital Properties, Inc.
Providence, Rhode Island
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Capital Properties, Inc. (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income and retained earnings, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition - Refer to Note 2 to the Consolidated Financial Statements
Critical Audit Matter Description
The Company derives revenue from long-term leases with original terms ranging from 39 years to 149 years. Effective January 1, 2019 the Company adopted ASC 842, Leases, and elected the “package of practical expedients” which permits the Company not to reassess under the new standard prior conclusions about lease identification, lease classification, and initial indirect costs and determined that all pre-existing leases were properly accounted for as operating. The long-term leases contain periodic rent increases based on either a specific percentage, market appraisals, changes in the consumer price index or combination thereof. In accordance with generally accepted accounting principles, lease income should be recognized on a straight-line basis. Where straight-line income exceeds the actual contractual payments (the “Excess”), the Excess should only be recognized to the extent it is collectible. In accordance with ASC 842, if collectability of the lease payments is not probable, lease income shall be limited to
the lesser of the income that would be recognized in accordance with ASC 842 (straight-line basis) or the actual lease payment, including variable payments that have been collected from the lessee. The Company evaluates the entire stream of remaining lease payments on a lease-by-lease basis. Analysis of collectability from the lessee (tenant) is subjective and complex and is dependent on many factors including historical experience and the creditworthiness of the tenant. The creditworthiness of the tenant can, and often is, significantly influenced by major factors including the creditworthiness of multiple sub-tenants. The inability to access reliable credit information on all parties impacting the probability of collection creates a collectability constraint. Management updates its collectability analysis of long-term leases annually and has determined that collection of the entire remaining stream of remaining lease payments is not probable. Accordingly lease revenue, including variable payments, is recorded when received from the lessee.
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to the recognition of long-term lease revenue on a straight-line basis included the following, among others:
•
We tested the effectiveness of controls over lease revenue recognition, including managements analysis of and conclusions regarding collection probability.
•
We evaluated the application of the Company’s accounting policies in the context of the applicable accounting standards (ASC842) as adopted on January 1, 2019.
•
We evaluated the appropriateness and consistency of methods and assumptions used by management to determine and support its collection probability conclusion.
•
We considered changes in the lease terms, including tenant payment patterns or other information, and determined such information was properly considered by management in its analysis.
/s/ Stowe & Degon, LLC
We have served as the Company’s auditor since 2016.
Westborough, Massachusetts
February 23, 2022
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
Properties and equipment (net of accumulated depreciation) (Note 3)
$
6,670,000
$
6,756,000
Cash and cash equivalents
1,443,000
1,642,000
Prepaid and other
122,000
101,000
Prepaid income taxes
85,000
48,000
Deferred income taxes, discontinued operations
100,000
132,000
$
8,420,000
$
8,679,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Property taxes
$
277,000
$
210,000
Other
350,000
563,000
Deferred income taxes, net
262,000
234,000
Environmental remediation accrual, discontinued operations (Note 8)
358,000
490,000
1,247,000
1,497,000
Shareholders’ equity:
Class A common stock, $.01 par; authorized 10,000,000 shares; issued and
outstanding 6,599,912 shares
66,000
66,000
Capital in excess of par
782,000
782,000
Retained earnings
6,325,000
6,334,000
7,173,000
7,182,000
$
8,420,000
$
8,679,000
See accompanying notes to Consolidated Financial Statements.
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
December 31,
Revenue and other income:
Revenue, leasing
$
4,808,000
$
4,585,000
Other income, interest
2,000
8,000
4,810,000
4,593,000
Expenses:
Operating
846,000
567,000
General and administrative
1,420,000
1,309,000
2,266,000
1,876,000
Income from continuing operations before income taxes
2,544,000
2,717,000
Income tax expense (benefit):
Current
677,000
810,000
Deferred
28,000
(76,000
)
705,000
734,000
Net income
1,839,000
1,983,000
Retained earnings, beginning
6,334,000
5,737,000
Dividends on common stock based on 6,599,912 shares outstanding
(1,848,000
)
(1,386,000
)
Retained earnings, ending
6,325,000
6,334,000
Basic income per common share based upon 6,599,912 shares
outstanding
$
0.28
$
0.30
See accompanying notes to Consolidated Financial Statements.
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31,
Cash flows from operating activities:
Continuing operations:
Income from continuing operations
$
1,839,000
$
1,983,000
Adjustments to reconcile income from continuing operations to net
cash provided by operating activities, continuing operations:
Depreciation
86,000
93,000
Deferred income taxes
28,000
(76,000
)
Deferred revenue, Parcel 20
(199,000
)
-
Changes in assets and liabilities:
Prepaid and other
(21,000
)
57,000
Property taxes
67,000
53,000
Other
(51,000
)
(43,000
)
Net cash provided by operating activities, continuing operations
1,749,000
2,067,000
Cash flows from investing activities, continuing operations, proceeds from
Deferred revenue, Parcel 20
-
102,000
Discontinued operations:
Cash used to settle obligations
(132,000
)
(553,000
)
Noncash adjustment to gain on sale of discontinued operations
32,000
150,000
(100,000
)
(403,000
)
Net cash (used in) investing activities
(100,000
)
(301,000
)
Cash flows from financing activities, payment of dividends
(1,848,000
)
(1,386,000
)
Increase (decrease) in cash and cash equivalents
(199,000
)
380,000
Cash and cash equivalents, beginning
1,642,000
1,262,000
Cash and cash equivalents, ending
$
1,443,000
$
1,642,000
Supplemental disclosures:
Cash paid for income taxes
$
683,000
$
696,000
See accompanying notes to Consolidated Financial Statements.
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020
1.
Description of business:
The operations of Capital Properties, Inc. and its wholly-owned subsidiary, Tri-State Displays, Inc. (collectively “the Company”) consist of the long-term leasing of certain of its real estate interests in the Capital Center area in downtown Providence, Rhode Island (upon the commencement of which the tenants have been required to construct buildings thereon, with the exception of the parking garage and Parcel 20) and the leasing of locations along interstate and primary highways in Rhode Island and Massachusetts to Lamar Outdoor Advertising, LLC (“Lamar”) which has constructed outdoor advertising boards thereon. The Company anticipates that the future development of its remaining properties in the Capital Center area will consist primarily of long-term ground leases. Pending this development, the Company leases these undeveloped parcels (other than Parcel 6C) for public parking to Metropark, Ltd.
2.
Summary of significant accounting policies:
Principles of consolidation:
The accompanying consolidated financial statements include the accounts and transactions of the Company and its wholly-owned subsidiary. 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 (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Fair value of financial instruments:
The Company believes that the fair values of its financial instruments, including cash and cash equivalents and payables, approximate their respective book values because of their short-term nature. The fair values described herein were determined using significant other observable inputs (Level 2) as defined by GAAP.
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.
The Company reviews properties and equipment for impairment whenever events or changes in circumstances indicate that the net book value of the asset may not be recoverable. An impairment loss will be recognized if the sum of the expected future cash flows (undiscounted and before interest) from the use of the asset is less than the net book value of the asset. Generally, the amount of the impairment loss is measured as the difference between the net book value and the estimated fair value of the asset.
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. Cash equivalents include money market accounts totaling $1,355,000 and $1,555,000, at December 31, 2021 and 2020, respectively. The Company and its subsidiary each maintain a checking account and one money market account in a bank, all of which are insured by the Federal Deposit Insurance Corporation to a maximum of $250,000. The Company has not experienced any losses in such accounts.
Environmental incidents:
The Company accrues a liability when an environmental incident has occurred and the costs are estimable. The Company does not record a receivable for recoveries from third parties for environmental matters until it has determined that the amount of the collection is reasonably assured. The accrued liability is relieved when the Company pays the liability or a third party assumes the liability. Upon determination that collection is reasonably assured or a third party assumes the liability, the Company records the amount as a reduction of expense.
Revenues:
The Company’s properties leased to others are under operating leases. The Company reports leasing revenue when earned under the operating method.
Certain of the Company’s long-term leases (land and billboard) provide for presently known scheduled rent increases over the remaining terms (28 to 132 years). The Company follows GAAP in accounting for leases whereby revenue is recognized on straight-line basis over the terms of the leases when management is able to conclude that all remaining lease payments are collectible. To date, management has recognized revenue on a contractual basis as it has been unable to conclude that the remaining lease payments are realizable (collectible) due to the magnitude of the remaining lease payments to be collected, the length of the lease terms and other related uncertainties.
The Company reports contingent revenue in the period in which the factors occur on which the contingent payments are predicated.
Income taxes:
The Company and its subsidiary file consolidated income tax returns.
The Company provides for income taxes based on income reported for financial reporting purposes.
Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the consolidated financial statements. The Company will report any tax-related interest and penalties related to uncertain tax positions as a component of income tax expense. The Company’s federal and state income tax returns are generally open for examination for the past three years.
Legal fees:
The Company recognizes legal fees as incurred.
Basic earnings per common share:
Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the period.
Recently adopted accounting pronouncements:
In December 2019, the FASB issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance was effective for the Company in the first quarter of 2021 on a prospective basis, and early adoption is permitted. The adoption of this pronouncement did not have a material effect on our consolidated financial statements.
Recently issued accounting pronouncements
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. The Company will adopt the new standard effective January 1, 2023. The Company is currently evaluating the impact of the new guidance on our consolidated financial statements.
3.
Properties and equipment:
Properties and equipment consist of the following:
Estimated Useful
December 31,
Life in Years
Land and land improvements on lease or held for lease:
$
4,439,000
$
4,439,000
Building and improvements, Steeple Street (Note 6)
2,582,000
2,582,000
Office equipment
5-10
67,000
67,000
7,088,000
7,088,000
Less accumulated depreciation:
Land improvements on lease or held for lease
93,000
93,000
Steeple Street property (Note 6)
258,000
172,000
Office equipment
67,000
67,000
418,000
332,000
$
6,670,000
$
6,756,000
4.
Liabilities, other:
Liabilities, other consist of the following:
December 31,
Deferred revenue, Parcel 20
$
-
$
199,000
Accrued professional fees
152,000
152,000
Deposits and prepaid rent
87,000
121,000
Accrued payroll and related costs
75,000
75,000
Other
36,000
16,000
$
350,000
$
563,000
5.
Note Payable - Revolving Credit Line:
In March 2021, the Company entered into a financing agreement (“Agreement”) with BankRI that provides for a revolving line-of-credit (“Line”) with a maximum borrowing capacity of $2,000,000 through March 2024. Amounts outstanding under the Agreement bear interest at the rate of the one-month LIBOR plus 200 basis points but not less than 3.25% or, at the option of the Company, the Wall Street Journal Prime Rate. Borrowings under the Line are secured by a First Mortgage on Parcel 5 in the Capital Center District in Providence, Rhode Island (the “Property”). The Line requires the maintenance of a debt service coverage ratio of not less than 1.25 to 1.0 on the Property and 1.20 to 1.0 for the Company. The Agreement contains other restrictive covenants, including, among others, a $250,000 limitation on the purchase of its outstanding capital stock in any twelve-month period. No advances have been made under the Line.
6.
Description of leasing arrangements:
Long-term land leases:
Through December 31, 2021, excluding Parcel 6C and Parcel 20, the Company had entered into eight long-term land leases, all of which have completed construction of improvements thereon. The leases generally have a term of 99 years or more, are triple net, and provide for periodic adjustment in rent of various types depending on the particular lease, and otherwise contain terms and conditions normal for such instruments.
On July 30, 2020 the tenant of Parcel 6C exercised its right to terminate its lease effective August 29, 2020. In September 2021, the Company sent a Notice of Default (“Default Notice”) to the tenant of Parcel 20 for the nonpayment of September’s rent and the 2021 first quarter property taxes. Subsequently, the tenant cured the rent default. On October 6, 2021 the tenant was sent a Notice of Lease Termination (“Termination Notice”) informing the tenant that the lease would terminate on October 18, 2021 unless the failure to pay the first quarter real estate taxes along with any related penalties and interest was cured. Subsequently, it was agreed that, provided the first and second quarter real estate taxes and any related penalties and interest were paid in full by October 31, 2021, the lease would not be terminated. Since payment was not made, the lease was terminated effective October 31, 2021.
The Parcel 20 Steeple Street Building (“Building”) lease was originally accounted for as a sales-type lease due to the transfer of the Building to the tenant. The land directly under the Building was allocated in the determination of the value of the property transferred in accordance with ASC 360-20, Property, Plant and Equipment - Real Estate Sales. Since the initial investment by the tenant was insufficient to recognize the transaction as a sale, in accordance with ASC 360-20, the Company reported the acquisition period rent and an allocable portion of the ground rent collected as deferred revenue on its consolidated balance sheet. Upon termination of the lease, deferred revenue of $293,000 through October 31, 2021 was recognized as leasing revenue in the consolidated statements of income and retained earnings. With the termination of the Parcel 20 lease, the Company became obligated for the real property taxes which currently total $134,000 annually.
Under the eight land leases, the tenants may negotiate tax stabilization treaties or other arrangements, appeal any changes in real property assessments, and pay real property taxes assessed on land and improvements under these arrangements. Accordingly, real property taxes payable by the tenants are excluded from leasing revenues and leasing expenses on the accompanying consolidated statements of income and retained earnings. For the years ended December 31, 2021 and 2020, the real property taxes attributable to the Company’s land under leases were $1,168,000 and $1,261,000, respectively.
Under two of the long-term land leases, the Company receives contingent rentals (based on a fixed percentage of gross revenue received by the tenants) which totaled $88,000 and $99,000 for the years ended December 31, 2021 and 2020, respectively.
With respect to Parcel 6C lease, on the termination date the annual rent was $220,000 and annual real estate taxes paid by the tenant equaled $311,000. Upon termination, the real estate taxes became an obligation of the Company effective with the taxes assessed as on December 31, 2020. The Company believed that the assessed value of Parcel 6C as agreed to by the City of Providence (“City”) and the former tenant of Parcel 6C pursuant to a Tax Stabilization Agreement (“TSA”) was much greater than similar parcels in the Capital Center area. Negotiations with the City to reduce the assessment were initially unsuccessful. Accordingly, the Company filed a complaint against the Providence Tax Assessor in Rhode Island Superior Court asserting that the Company was not a party to the TSA and that the assessed value should be determined based on the value of other Parcels in the Capital Center Area. On December 20, 2021, the Company and the City entered into a consent judgment that dissolved the TSA upon the termination of the ground lease between the Company and the tenant and provided that the taxes assessed as on December 31, 2020 would be based on the assessed value as determined by the firm engaged by the City, Vision Government Solutions, Inc. The adjusted assessed value results in an annual real estate tax expense of $160,000. For the years ended December 31, 2021 and 2020, operating expenses includes $160,000 and $53,000 for real property taxes attributable to Parcel 6C, respectively on the accompanying consolidated statements of income and retained earnings.
Lamar lease:
Tri-State Display’s, Inc., leases 23 outdoor advertising locations containing 44 billboard faces along interstate and primary highways in Rhode Island and Massachusetts to Lamar under a lease which expires in 2049. The Lamar lease provides, among other things, for the following: (1) the base rent will increase annually at the rate of 2.75% for each leased billboard location on June 1 of each year, and (2) in addition to base rent, for each 12-month period commencing each June 1, Lamar must pay to the Company within thirty days after the close of the lease year 30% of the gross revenues from each standard billboard and 20% of the gross revenues from each electronic billboard for such 12-month period, reduced by the sum of (a) commissions paid to third parties and (b) base monthly rent for each leased billboard display for each 12-month period. For the lease years ended May 31, 2021 and 2020, the percentage rent totaled $136,000 and $139,000, respectively, which amounts are included in operating revenues on the accompanying consolidated statements of income and retained earnings for the years ended December 31, 2021 and 2020.
Parking lease:
The Company leases the undeveloped parcels of land in or adjacent to the Capital Center area (other than Parcel 6C) for public parking purposes to Metropark under a ten-year lease. The lease is cancellable as to all or any portion of the leased premises at any time on thirty day’s written notice in order for the Company or any new tenant of the Company to develop all or any portion of the leased premises. The parking lease provides for contingent rent based on a fixed percentage of gross revenue in excess of the base rent as defined in the agreement. For the year ended December 31, 2020, revenue includes a $34,000 reduction due to the revision of the estimate of 2019’s contingent rent.
The COVID-19 pandemic continues to have a significant adverse impact on Metropark’s parking operations. On July 31, 2020, Metropark and the Company entered into an agreement for revenue sharing at various percentages until parking revenues received by Metropark equal or exceed $70,000 per month whereupon Metropark would be obligated to resume regularly scheduled rental payments under its lease. Upon resumption of regularly scheduled rent payments, Metropark and the Company will share fifty (50) percent of the revenue in excess of $70,000 until the arrearage has been paid in full. If prior to payment in full of the arrearage one or more of the lots is removed from the Metropark lease for development, the amount of the then unpaid arrearage in the ratio of the number of parking spaces on the removed lot to the total parking spaces on all lots prior to such lot’s removal shall be deemed paid in full.
At December 31, 2021 and 2020, the receivable from Metropark equaled $766,000 and $340,000, respectively, and was fully reserved in both years. The Company will continue to recognize Metropark’s rent on a cash basis.
Minimum future contractual rental payments, inclusive of presently known scheduled rent increases to be received from non-cancellable long-term leases as of December 31, 2021 are:
Year ending December 31,
$
4,119,000
4,147,000
4,248,000
4,435,000
4,480,000
2027 - 2153
796,075,000
$
817,504,000
Historically, the Company has made financial statement footnote disclosure of the excess of straight-line rentals over contractual payments and its determination of collectability of such excess. Included in the amount of the excess were payments which under ASC 842 are deemed variable payments. As part of its ongoing review of the requirements of ASC 842, the Company has concluded that under ASC 842 variable rental payments should not be included in the straight-line rental amount. To the extent the Company determines that the excess of straight-line rentals over contractual payments is not collectible, such excess is not recognized as revenue. Consistent with prior conclusions, the Company has determined that, at this time, the excess of straight-line rentals over contractual payments is not probable of collection. Accordingly, the Company has not included any part of that amount in revenue. As a matter of information only, as of December 31, 2021 the excess of straight-line rentals (calculated by excluding variable payments) over contractual payments was $86,076,000.
In the event of tenant default, the Company has the right to reclaim its leased land together with any improvements thereon, subject to the right of any leasehold mortgagee to enter into a new lease with the Company with the same terms and conditions as the lease in default.
The following table sets forth those major tenants whose revenues exceed 10 percent of the Company’s revenues for the years ended December 31, 2021 and 2020:
Lamar Outdoor Advertising, LLC
$
1,129,000
$
1,105,000
HGIT Center Place
618,000
620,000
1701 R.C. Sarasota Invest, LLC
618,000
618,000
Waterplace Condominiums
503,000
503,000
$
2,868,000
$
2,846,000
7.
Income taxes, continuing operations:
For the years ended December 31, 2021 and 2020, income tax expense (benefit) from continuing operations is comprised of the following components:
Current:
Federal
$
489,000
$
598,000
State
188,000
212,000
677,000
810,000
Deferred:
Federal
20,000
(57,000
)
State
8,000
(19,000
)
28,000
(76,000
)
$
705,000
$
734,000
For the years ended December 31, 2021 and 2020, a reconciliation of the income tax provision from continuing operations as computed by applying the United States income tax rate of 21% to income before income taxes is as follows:
Computed "expected" tax
$
534,000
$
570,000
Increase in "expected" tax resulting from state income tax,
net of federal income tax benefit
158,000
141,000
Nondeductible expenses and other
13,000
23,000
$
705,000
$
734,000
Deferred income taxes are recorded based upon differences between financial statement and tax basis amounts of assets and liabilities. The tax effects of temporary differences from continuing operations which give rise to deferred tax assets and liabilities were as follows:
Gross deferred tax liabilities:
Property having a financial statement basis in excess of
tax basis
$
361,000
$
361,000
Accounts receivable
213,000
98,000
Deferred income - Conversion to cash basis of
accounting for tax purposes
38,000
56,000
Insurance premiums and accrued leasing revenues
23,000
19,000
635,000
534,000
Gross deferred tax assets:
Allowance for doubtful accounts
(206,000
)
(91,000
)
Prepaid rent
(23,000
)
(24,000
)
Accounts payable and accrued expenses
(69,000
)
(75,000
)
Accrued property taxes
(75,000
)
(56,000
)
Deferred income, Parcel 20
-
(54,000
)
(373,000
)
(300,000
)
$
262,000
$
234,000
8.
Discontinued operations and environmental incident:
Prior to February 2017, the Company operated a petroleum storage facility (“Terminal”) through two of its wholly owned subsidiaries. On February 10, 2017, the Terminal was sold to Sprague Operating Resources, LLC (“Sprague”). In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations, the sale of the Terminal is accounted for as a discontinued operation.
As part of the Terminal Sale Agreement, the Company agreed to retain and pay for the environmental remediation costs associated with a 1994 storage tank fuel oil leak which allowed the escape of a small amount of fuel oil. The Company continues the remediation activities set forth in the Remediation Action Work Plan (“RAWP”) filed with the Rhode Island Department of Environmental Management (“RIDEM”). In 2021 and 2020, the Company incurred costs of $132,000 and $553,000, respectively, which reduced the remediation liability to $358,000 and $490,000 at December 31, 2021 and 2020.
Any subsequent increases or decreases to the expected cost of remediation will be recorded in the Company’s consolidated income statement as income or expense from discontinued operations.
The Terminal Sale Agreement also contained a cost sharing provision for the breasting dolphin whereby any cost incurred in connection with the construction of the breasting dolphin in excess of the initial estimate of $1,040,000 will be borne equally by Sprague and the Company subject to certain limitations, including, in the Company’s opinion, a 20% cap on the increase from the initial estimate, subject to a sharing arrangement. In November 2019, the Company received a demand letter from Sprague asserting that it was owed $427,000, which amount represents 50% of the actual costs incurred ($1,894,008) in excess of $1,040,000. The Company asserts that its obligation cannot exceed $104,000. The mediation efforts that occurred in June 2021 were unsuccessful and on July 15, 2021, Sprague commenced an action against the Company in the Rhode Island Superior Court seeking monetary damages of $427,000, interest and attorney’s fees. The Company intends to vigorously defend against the claims being asserted by Sprague.
9.
Subsequent event:
At its January 26, 2022 regularly scheduled quarterly Board meeting, the Board of Directors voted to declare a quarterly dividend of $.07 per share for shareholders of record on February 11, 2022, payable February 28, 2022.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no changes in, or disagreements with, accountants on accounting or financial disclosure as defined by Item 304 of Regulation S-K.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Under the supervision of the Company’s management, including its principal executive officer and principal financial officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon this evaluation, the principal executive officer and principal financial officer have concluded that, as of such date, the Company’s disclosure controls and procedures were effective in making them aware on a timely basis of the material information relating to the Company required to be included in the Company’s periodic filings with the Securities and Exchange Commission.
Management's Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of published financial statements in accordance with United States generally accepted accounting principles.
However, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with policies may deteriorate.
Management conducted its evaluation of the effectiveness of its internal control over financial reporting based on the framework in “2013 Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) as of December 31, 2021.
Based on this assessment, the principal executive officer and principal financial officer believe that as of December 31, 2021, the Company’s internal control over financial reporting was effective based on criteria set forth by COSO in “2013 Internal Control-Integrated Framework.”
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2021, there has been no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The information concerning directors required by this item, including the Audit Committee and the Audit Committee financial expert, is incorporated by reference to the Sections entitled “Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Security Ownership of Certain Beneficial Owners and Management” and “Audit Committee Report” in the Company’s Definitive Proxy for the 2022 Annual Meeting of Shareholders to be filed with the SEC.
The following are the executive officers of the Registrant:
Name
Age
Office Held at Capital
Properties, Inc.
Date of First Election to Office
Robert H. Eder
Chairman/President
Susan R. Johnson
Treasurer
Stephen J. Carlotti
Secretary
All officers hold their respective offices until their successors are duly elected and qualified. Mr. Carlotti is a partner in the law firm, Hinckley, Allen & Snyder LLP, which firm provides legal services to the Company.
Code of Ethics:
The Company has adopted a Code of Ethics which applies to all directors, officers and employees of the Company and its subsidiary including the Principal Executive Officer and the Treasurer (who is both the principal accounting and financial officer), which meets the requirement of a “code of ethics” as defined in Item 406 of Regulation S-K. The Company will provide a copy of the Code to shareholders pursuant to any request directed to the Treasurer at the Company’s principal offices. The Company intends to disclose any amendments to, or waiver of, any provisions of the Code for the Principal Executive Officer or Treasurer, or any person performing similar functions.
The additional information required by this item is incorporated by reference to the Section entitled “Corporate Governance” in the Company’s Definitive Proxy Statement for the 2022 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the Sections entitled “Compensation of Directors,” “Compensation Discussion and Analysis,” and “Executive Compensation” in the Company’s Definitive Proxy Statement for the 2022 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to the Section entitled “Security Ownership of Certain Beneficial Owners and Management” in the Company’s Definitive Proxy Statement for the 2022 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this item is incorporated by reference to the Sections entitled “Election of Directors” and “Transactions with Management” in the Company’s Definitive Proxy Statement for the 2022 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to the Section entitled “Independent Registered Public Accountants” in the Company’s Definitive Proxy Statement for the 2022 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(a) and (c)
The consolidated financial statements are included in Item 8.
(b)
Exhibits:
2.1
Asset Purchase Agreement, dated January 24, 2017, by and among Capital Properties, Inc., Dunellen, LLC, Capital Terminal Company and Sprague Operating Resources LLC (incorporated by reference to Exhibit 2.1 to the Registrant’s report on Form 8-K filed on January 26, 2017)*
3.1
Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s report on Form 8-K filed on April 24, 2013)
3.2
By-laws, as amended, October 25, 2017 (incorporated by reference to Exhibit 3.2 to the registrant’s report on Form 8-K filed October 25, 2017)
Material contracts:
(a)
Lease between Metropark, Ltd. and Company:
(i) Dated January 1, 2017 (incorporated by reference to Exhibit 10 to the registrant’s annual report on Form 10-K for the year ended December 31, 2017)
(ii) Letter Agreement dated July 31, 2020 between the Company and Metropark, Ltd. modifying the obligations of Metropark.
Map of the Company's parcels in Downtown Providence, Rhode Island
Subsidiary of the Company
31.1
Rule 13a-14(a) Certification of Chairman and Principal Executive Officer
31.2
Rule 13a-14(a) Certification of Treasurer and Principal Financial Officer
32.1
Certification of Chairman and Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Treasurer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The following financial information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 23, 2022, formatted in eXtensible Business Reporting Language:
(i)
Consolidated Balance Sheets as of December 31, 2021 and 2020
(ii)
Consolidated Statements of Income and Retained Earnings for the Years ended December 31, 2021 and 2020
(iii)
Consolidated Statements of Cash Flows for the Years ended December 31, 2021 and 2020
(iv)
Notes to Consolidated Financial Statements.
The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 has been formatted in Inline XBRL.
*
Pursuant to Item 601(b)(2) of Regulation S-K promulgated by the SEC, certain schedules to the Asset Purchase Agreement have been omitted. The registrant hereby agrees to furnish supplementally to the SEC, upon its request, any or all omitted schedules.