UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

For the quarterly period ended March 31, 20202021

OR

For the transition period from                   to                  

Commission File Number 001-08499

CAPITAL PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

(401) 435-7171

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 (g) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)   Yes  ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of the "large accelerated filer," "accelerated filer," "non-accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to it management’s assessment of the effectiveness of its internal control over financial reporting under Section 404 (b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued it audit report.   ☐

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

As of March 31, 2020,2021, the Company had 6,599,912 shares of Class A Common Stock outstanding.

CAPITAL PROPERTIES, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 20202021

TABLE OF CONTENTS

PARTPART I

CAPITAL PROPERTIES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to condensed consolidated financial statements.

3

CAPITAL PROPERTIES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SHAREHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 20202021 AND 20192020

(Unaudited)

See notes to condensed consolidated financial statements.

4

CAPITAL PROPERTIES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 20202021 AND 20192020

(Unaudited)

See notes to condensed consolidated financial statements.

5

CAPITAL PROPERTIES, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 20202021 AND 20192020

(Unaudited)

The operations of Capital Properties, Inc.’s and its wholly-owned subsidiary, Tri-State Displays, Inc.’s (collectively “the Company”) operations consist of the long-term leasing of certain of its real estate interests in and adjacent to 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 Parcel 6C 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 and adjacent to 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.

Principles of consolidation:

The accompanying condensed consolidated financial statements include the accounts and transactions of the Company and its wholly-owned subsidiary.Company.  All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying condensed consolidated balance sheet as of December 31, 20192020 has been derived from audited financial statements.  The unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.  It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest Form 10-K for the year ended December 31, 2019. 2020.

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position as of March 31, 20202021 and the results of operations for the three months ended March 31, 20202021 and 2019,2020, and cash flows for the three months ended March 31, 20202021 and 2019.2020.

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Use of estimates:

The preparation of consolidated financial statements in conformity with 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.

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.

Recent accounting pronouncements:

In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update No. 2016-02, which requires lessors to classify leases as sales-type, direct financing, or operating leases.  Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No, 2018-11, Targeted Improvements.  A lease is a sales-type lease if any one of five criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee.  If none of the five criteria are met, but two additional criteria are both met, indicating that the lessor has transferred substantially all of the risks and benefits of the underlying asset to the lessee and a third party, the lease is a direct financing lease.  All leases that are not sales-type or direct financing leases are operating leases.

The new standard was effective for the Company on January 1, 2019.  A modified retrospective transition approach was required by applying the new standard to all leases existing at the date of initial application.   An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented as its date of initial application.  The Company adopted the new standard on January 1, 2019 and used the effective date as our date of initial application.  

The new standard provides a number of practical expedients in transition.  The Company 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 direct costs.  While most of our leases will continue to be classified as operating leases in

accordance with the package of practical expedients, leases that commence on or after the effective date of the new standard, and that would be classified as operating leases under prior GAAP, may be classified as a sales-type lease under the new standard.  The adoption of the new standard did not have a significant impact on our leasing activities.  For additional information on the Company’s leases, see Note 5 to the condensed consolidated financial statements.

The Company also elected the land easement practical expedient which allows the Company to not assess whether all existing land easements that were not previously accounted for under Topic 840 are or contain a lease under Topic 842.

Reclassification of Prior Period Presentation:

The gain from discontinued operations, net of taxes for 2019 has been reclassified for consistency purposes and is now included in gain on sale of discontinued operations, net of taxes. This reclassification had no effect on reported net income. On the condensed consolidated statements of cash flows, this change increased net cash provided by operating activities and decreased net cash provided by investing activities by $15,000 for the three months ended March 31, 2019.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements.  Estimates also affect the reported amounts of income and expenses during the reporting period.  Actual results could differ from those estimates.

Properties and equipment consist of the following:

Liabilities, other consist of the following:

Long-term land leases:

As ofThrough March 31, 2020,2021, excluding the Parcel 6C lease, the Company had entered into tennine long-term land leases.  EightOn July 30, 2020 the tenant of Parcel 6C exercised its right to terminate its lease effective August 29, 2020. As of March 31, 2021, 2020, eight of the tennine parcels (excluding Parcel 6C and Parcel 20)under lease 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 September 28, 2017, the Company entered into a long-term ground lease of Parcel 20.  Under the terms of the lease until the tenant took possession, the Company received all rents from the existing tenants and paid all expenses with respect to Parcel 20.  On May 4, 2018, the Company and the lessee entered into an Amended and Restated Ground Lease (“Restated Lease”).  The lessee took possession of Parcel 20 on December 1, 2018 and the Company conveyed title to the existing building.  In addition to the ground lease rent, for 360 months following December 1, 2018, the lessee will pay acquisition period rent consisting of monthly payments of $7,471 for the first thirty-six months and monthly payments thereafter of $8,488 plus an amount equal to 1/12^th of the product of (a) 5.5% and the difference between (x) $2,750,000 and (y) the aggregate of the prior monthly payments of $8,488.  The Restated Lease is a triple net lease.

The Restated Lease for Parcel 20, as it relates specifically to the Steeple Street Building (“Building”) lease was accounted for as a sales-type lease due to the transfer of the Steeple Street Building to the lessee.tenant.  The land directly under the Steeple Street 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 lesseetenant is and continues to be insufficient to recognize the transaction as a sale, in accordance with ASC 360-20, the Company will report the acquisition period rent and an allocable portion of the ground rent collected as deferred revenue which is included in other liabilities on its condensed consolidated balance sheets,sheet and will continue to include the property transferred in properties and equipment untilequipment.  When the transactionCompany determines that the tenant’s investment is sufficient or payments can be reported as areasonably assured, the sale will be recognized in accordance with GAAP.  The long-term ground lease of the land on Parcel 20 (exclusive of the Steeple Street Building) is accounted for as an operating lease, consistent with the Company’s other long-term ground leases.

7

Under the tennine land leases, the tenants may negotiate tax stabilization treaties or other arrangements, appeal any changes in real property assessments, and must pay real property taxes assessed on land and improvements under these arrangements.  Accordingly, real property taxes payable by the tenants are excluded from both leasing revenues and leasing expenses on the accompanying condensed consolidated statements of income and shareholders’ equity.  RealFor the three months ended March 31, 2021 and 2020, real property taxes attributable to the Company’s land under these leases totaled $263,000 and $341,000, forrespectively.

With respect to Parcel 6C lease, on the three months ended March 31, 2020termination date the annual rent was $220,000 and 2019.   annual real estate taxes paid by the tenant equaled $311,000. The Company believes that the assessed value of Parcel 6C as agreed to by the City of Providence (“City”) and the former tenant of Parcel 6C is much greater than similar parcels in the Capital Center area and accordingly, the Company has commenced negotiations with the City to reduce the assessment.

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 $25,000$21,000 and $27,000$25,000 for the three months ended March 31, 2021 and 2020, and 2019, respectively.

With respect to Parcel 6C, lessee has the right to terminate its lease at any time during the remaining term of the lease upon thirty days’ notice.  To date, no notice of termination has been received by the Company.  The current annual rent on Parcel 6C is $220,000 and annual real estate taxes paid by the lessee equals $311,000.

Lamar lease:

The Company, through a 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 under a lease which expires in 2045.2049.  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 (each 12-month period a “Lease Year”), Lamar must pay to the Company within thirty days after the close of the Lease Year, 30% of the gross revenues from each standard billboard and 20% of the gross revenues from each electronic billboard for such 12-month period,Lease Year, reduced by the sum of (a) commissions paid to unrelated third parties and (b) base monthly rent for each leased billboard display for each 12-month periodlocation for such Lease Year (“percentage rent”).

Parking lease:

The Company leases the undeveloped parcels of land in the Capital Center area (other than Parcel 6C) for public parking purposes to Metropark under a ten year lease.ten-year lease (the “Parking Lease”).  The lease is cancellable as to all or any portion of the leased premises at any time on thirty day’sdays’ 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 leaseParking Lease provides for contingent rentals (based on a fixed percentage of gross revenue in excess of the base rent).   RevenueThere was no contingent rent for the three months ended March 31, 2021 and revenue for the three months ended March 31, 2020 was reduced by $34,000 due to the revision of the estimate of 2019’s contingent rent.  For

The COVID-19 pandemic and stay-at-home orders have had a significant adverse impact on Metropark’s parking operations.  On July 31, 2020, Metropark and the three months endedCompany 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 March 31, 2019, revenue includes $47,000 in continent rent.

With2021 the exception of the Parking Lease, all of the Company’s tenants were current in their lease payment obligations as of May 15, 2020.

receivable from Metropark equaled $472,000 and was fully reserved.  The Company will continue to evaluaterecognize Metropark’s rent on a cash basis.  

Historically, the collectibility of amounts due from all tenants in lightCompany has made financial statement footnote disclosure of the economic uncertainty arising fromexcess of straight-line rentals over contractual payments and its determination of collectability of such excess. Included in the COVID-19 pandemic.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, with respect to any of its leases, the excess of straight-line rentals over contractual payments is not collectible, such excess is not recognized as revenue. Consistent with prior conclusions, the Company has determined that, at this time, the excess of straight-line rentals over contractual payments is not probable of collection.  Accordingly, the Company has not included any part of that amount in revenue. As a matter of information only, as of March 31, 2021 the excess of straight-line rentals (calculated by excluding variable payments) over contractual payments was $83,793,000.

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 for continuing operations which give rise to deferred tax assets and liabilities are as follows:

Prior to February 2017, the Company operated a petroleum storage facility (“Terminal”) through two wholly owned subsidiaries.  On February 10, 2017, the CompanyTerminal was sold its petroleum storage facility and related assets (the “Terminal”) owned or controlled by the Company’s former subsidiaries, Capital Terminal Company and Dunellen, LLC to Sprague Operating Resources, LLC (“Sprague”) for $23 Million subject to certain adjustments.. In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, the sale of the Terminal is accounted for as a discontinued operation.  The liabilities associated with the discontinued operations are separately identified on the Company’s condensed consolidated balance sheets.  These liabilities were not assumed by Sprague and remain obligations of the Company until settled.  The Petroleum Segment discontinued operations is reported after income from continuing operations.     

Pursuant to the Terminal Sale Agreement, the Sale Price was reduced by $1,040,000, the estimated cost of a breasting dolphin to be constructed by Sprague adjacent to the Terminal’s Pier in order that the Pier can berth Panamax sized vessels; $1,725,000vessels.  The Terminal Sale Agreement contained a cost sharing provision for the breasting dolphin whereby any cost incurred in connection with the construction of the Sale Price was placedbreasting dolphin in escrowexcess of the initial estimate of $1,040,000 will be borne equally by Sprague and the Company subject to securecertain limitations, including, in the Company’s indemnity obligations underopinion, a 20% cap on the Sale Agreement and $441,000 in normal closing adjustments, transfer taxes, investment banking and other fees, other than federal and state income taxes.  The net proceeds deliveredincrease from the initial estimate, subject to a sharing arrangement.  In November 2019, the Company amounted to $19.8 Million.  In February 2019, the company received the remaining balance ($862,000)a demand letter from Sprague asserting that they were owed $427,000, which amount represents 50% of the aforementioned escrow plus $23,000actual costs incurred ($1,894,008) in excess of interest associated$1,040,000.  The Company asserts that its obligation cannot exceed $104,000. The Company and Sprague have agreed to engage in mediation with these funds.respect to Sprague’s claim.  The mediation is currently scheduled for early June 2021.  

In accordance withAs part of the Terminal Sale Agreement, the Company has 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.  Since 1994,In February 2020, the Company and its consultants have continued to workfiled a revised Remediation Action Work Plan (“RAWP”) with the Rhode Island Department of Environmental Management (“RIDEM”) throughto describe the various phases of remediation and are now working to complete the final remediation plan. In February 2020, the Company submitted its revised Remedial Action Work Plan (“RAWP”) to RIDEM and is waiting for final approval to proceed.  Based on revised remediation cost estimatestechnical details associated with the preferred remedial activities and to update the previously filed RAWP.  In 2019, the Company incurred remediation costs of $293,000 and, as a result of the revised remedial activities included in the 2020 RAWP, submitted in February 2020, which incorporatesthe remediation accrual was increased by $846,000 primarily due to design changes necessary to meet the requirements of applicable life safety codes the remediation accrual was increased by $846,000 resulting in an accrualenvironmental remediation liability of $1,043,000 at December 31, 2019. Through March 31,In 2020, the Company incurred costs of $51,000$553,000 which decreasedreduced the amount accruedremediation liability to $992,000.$490,000 at December 31, 2020.  For the three months ended March 31, 2021, the Company incurred costs of $53,000 which reduced the remediation liability to $437,000.  Any subsequent increases or decreases to the expected cost of remediation will be recorded in gain (loss) on sale ofthe Company’s consolidated income statement as income or expense from discontinued operations, net of taxes.

The Sale Agreement also contains a cost sharing provision for the breasting dolphin whereby any variance from the initial estimate of $1,040,000 will be borne equally by Sprague andoperations.   On March 9, 2021, the Company subject to certain limitations.  In May 2018 the Company received notice from Sprague that Sprague had received bids for the breasting dolphin and that the costcommenced operation of the construction was estimated at $1,923,284.  Sprague requested that the Company acknowledge that it was obligated to pay 50% of the cost in excess of $1,040,000, or $441,642. The Company replied that pursuant to the letter agreement between the Company and Sprague (the “Letter Agreement”) the Company’s obligation cannot exceed $104,000 assuming, among other things, that Sprague had been timely in securing bids for the breasting dolphin and the scope of the work as bid was consistent with the Letter Agreement. In November 2019, the Company received a demand letter from Sprague asserting that they were owed $427,000, which amount represents 50% of the actual costs incurred ($1,894,000) in excess of $1,040,000.  The Company continues to assert that its obligation cannot exceed $104,000.   Subsequently, representatives from the Company and Sprague met to discuss the claim but no agreement was reached.remediation system.

Gain on sale of discontinued operations for the three months ended March 31, 2020 and 2019 are as follows:

The Company believes that the fair values of its financial instruments, including cash and cash equivalents, receivables 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.

At its April 28, 20202021 regularly scheduled quarterly Board meeting, the Board of Directors after considering the uncertainty of the potential impact of the coronavirus (COVID-19) pandemic on the Company, voted to pass thedeclare a quarterly dividend of $.07 per share.   Asshare for shareholders of record on May 15, 2020, with the exception of Metropark, all of the Company’s tenants are current in terms of required monthly lease payments.  Metropark has not fully paid their lease obligation for April and14, 2021, payable May and the Company is currently in discussion with them concerning payment. The total rent arrearage is $87,000.  28, 2021.

FORWARD LOOKING STATEMENTS

Certain portions of this report, and particularly the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contain forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities Exchange Act of 1934, as amended, which represent the Company’s expectations or beliefs concerning future events.  The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the following:  the ability of the Company to generate adequate amounts of cash; the collectability of the accrued leasing revenuesexcess of straight-line over contractual rents when due over the terms of the long-term land leases; the early termination of the Parcel 6C land lease; tenant default under one or more of the leases; the commencement of additional long-term land leases; changes in economic conditions that may affect either the current or future development on the Company’s parcels; the impact of the COVID-19 pandemic on the economy, parking operations, and the Company’s financial performance; and exposure to remediation costs associated with its former operation of the petroleum storage facility.  The Company does not undertake the obligation to update forward-looking statements in response to new information, future events or otherwise.

Critical accounting policies:

The Company believes that its revenue recognition policy for long-term leases with scheduled rent increases meets the definition of a critical accounting policy which is discussed in the Company’s Form 10-K for the year ended December 31, 2019.2020. There have been no changes to the application of this accounting policy since December 31, 2019.2020.

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

Cash and cash commitments:

At March 31, 2020,2021, the Company had cash and cash equivalents of $1,590,000.$1,792,000.  The Company and its subsidiary each maintain a checking and money market account in two banks, all of which accounts are insured by the Federal Deposit Insurance Corporation to a maximum of $250,000.  The Company periodically evaluates the financial stability of the financial institutions at which the Company’s funds are held.

EffectiveOn July 1, 2019,30, 2020, the Company received notice that the tenant of Parcel 6A, 6B,6C exercised their 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 equaled $311,000. Upon termination, the real estate taxes became an obligation of the Company effective with the taxes assessed as of December 31, 2020.  The Company believes that the assessed value of Parcel 6C leases providedas contained in a treaty between the City of Providence (“City”) and the tenant is much greater than similar parcels in the Capital Center area.  The Company is not a party to the tax treaty.  Accordingly, the Company has commenced negotiations with the City for a costlower assessment.    

As of living adjustment of not less than 10%, the effect of which was an aggregate monthly rent increase of $6,100.  

Through March 31, 2020May 5, 2021, all lesseestenants have paid their monthly rent in accordance with their lease agreements.  Rent for April and May 2020 has been paid by all tenantsagreements except for Metropark.  The coronavirus (COVID-19) pandemic and Rhode Island’s stay-at-home order 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 lessee that operates publicrent from April 2020 through March 2021.  For the three months ended March 31, 2021, Metropark has paid $2,000 of the total rent due of $134,000.  At March 31, 2021, the total rent arrearage equals $472,000 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 Company’s undeveloped parcels.  In mid-March, Metropark closed theirremoved lot to the total parking spaces on all lots as there were few parking customers given the stay-at-home order.   The Company expects Metropark’s operationsprior to slowly return to normal over the next several months as the State has lifted the stay-at-home order and is gradually permitting certain businesses to resume operations. Metropark has availed itself of the stimulus created by the Coronavirus Aid, Relief and Economic Security Act (CARES Act) that was signed into law on March 27, 2020.  In May,such lot’s removal shall be deemed paid in full.  Pending this recovery, the Company received $10,000 as partial payment of April and May’s rent.  The aggregatewill continue to recognize Metropark’s rent arrearage for Metropark is $87,000.  The Company is continuing its payment plan discussions with Metropark.  

Lamar contacted the Company and requestedon a rent reduction ranging from twenty to forty percent for all billboards for a twelve to twenty-four-month period, along with a request to remove several boards that they deem to be non-performing. The Company has rejected the Lamar proposal in its present form.cash basis.      

The Company expects that revenue from contingent rent in 20202021 will materially decline for both Metropark and Lamar.

On February 10, 2017, the Company sold the

The Terminal to Sprague and received $19,794,000 from the sale after giving effect to escrows, a credit to Sprague for the cost of constructing a breasting dolphin adjacent to the Pier, and other customary closing costs.  Pursuant to the Sale Agreement and related documentation provides that the Company is required at its expense, to secure an approved remediation plan and to remediate contamination caused by a 1994 leak in 1994 from a 25,000 barrel storage tank at the Terminal. See Note 7 toAt March 31, 2021, the condensed consolidated financial statements.  At December 31, 2019, the totalCompany’s accrual for the

remaining cost of remediation was $1,043,000.  Through March 31, 2020, the Company$437,000 of which $42,000 is expected to be incurred costs of $51,000 which decreased the amount accrued to $992,000.  The Company anticipates that monitoring costs of approximately $250,000 of the amount accrued will be paid in 2021 and beyond.2021.  Any subsequent increases or decreases to the expected cost of remediation will be recorded in the Company’s condensed consolidated statements of income and shareholders’ equity as a gain (loss) on sale of discontinued operations.operations, net of taxes.   On March 9, 2021, the Company commenced operation of the remediation system.  

The Terminal Sale Agreement also containscontained a cost sharing provision for thea breasting dolphin whereby any variance fromcosts incurred in connection with the construction of the breasting dolphin in excess of the initial estimate of $1,040,000 will1,040,000 would be borne equally by Sprague and the Company subject to certain limitations.  In May 2018limitations, including, in the Company received noticeCompany’s opinion, a 20% cap on the increase from Sprague that Sprague had received bids for the breasting dolphin and that the cost was estimated at $1,923,284.  Sprague requested that the Company acknowledge that it was obligated to pay 50% of the cost in excess of $1,040,000, or $441,642. The Company replied that pursuantinitial estimate subject to the letter agreement between the Company and Sprague (the “Letter Agreement”), the Company’s obligation cannot exceed $104,000 assuming, among other things, that Sprague had been timely in securing bids for the breasting dolphin and the scope of the work as bid was consistent with the Letter Agreement.sharing arrangement.  In November 2019, the Company received a demand letter from Sprague asserting that they were owed $427,000, which amount represents 50% of the actual costs incurred ($1,894,000) in excess of $1,040,000.  Representatives of the Company and Sprague met to discuss the claim but were unable to come to an agreement.  The Company continues to assertasserts that its obligation cannot exceed $104,000. The Company and Sprague have agreed to engage in mediation with respect to Sprague’s claim.  The mediation is currently scheduled for June 2021.  

The declaration of future dividends will depend on future earnings and financial performance.

Three months ended March 31, 20202021 compared to three months ended March 31, 2019:2020:

Leasing revenuesRevenue, leasing from continuing operations decreased $55,000$143,000 from the 2019 level.  The decrease is attributable2020 due principally to an $81,000a decrease in contingent rent associated with Metropark ($100,000) and the parking lotstermination of the Parcel 6C lease ($55,000) offset by scheduledan increase in rent increasesfrom Lamar ($26,000)12,000).  Interest income decreased $30,000 in 2020 principally because $23,000 of interest income in 2019 was received from Sprague as a result of escrowed funds but none was received in 2020.  The remaining difference is due to lower interest rates on and balances in the money market accounts.

Operating expenses decreased $13,000increased $44,000 due principally to lower legal fees associated with tenant insurance compliance reviews ($6,000) and repairincreased property tax expense due to the tenant’s termination of the Parcel 6C lease and maintenance costs ($6,000) as a result of fewer snow storms.  expenses.

General and administrative expense decreased $17,000increased $40,000 due principally to reducedincreased professional fees related to accounting matters ($8,000), legal costs ($19,000) associated with professional servicesthe Sprague breasting dolphin matter and the property taxes associated Parcel 6C, and costs associated with the bank line-of-credit ($17,000), reductions in various other net expenses ($3,000) offset by increased office rent expense ($3,000)10,000).

For the three months ended March 31, 2021 and 2020, the Company’s effective income tax rate is 28% and 26% of income from continuing operations.

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As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report.  This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's principal executive officer and the Company's principal financial officer.  Based upon that evaluation, the principal executive officer and the principal financial officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

There was no significant change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to affect, the Company's internal control over financial reporting.  The Company continues to enhance its internal controls over financial reporting, primarily by evaluating and enhancing process and control documentation.  Management discusses with and discloses these matters to the Audit Committee of the Board of Directors and the Company's auditors.

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PART II – OTHER INFORMATION

SIGNATURESIGNATURES

In accordance with the requirements of the Exchange Act, the Issuer caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DATED: May 15, 20205, 2021

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