CAPITAL PROPERTIES INC /RI/ - Annual Report: 2009 (Form 10-K)

CAPITAL PROPERTIES INC /RI/ - Annual Report: 2009 (Form 10-K)

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e10vk

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K


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

For the fiscal year ended December 31, 2009


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

For the transition period from to

Commission File Number 001-08499

CAPITAL PROPERTIES, INC.

(Exact name of registrant as specified in its charter)


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

100 Dexter Road
East Providence, Rhode Island 02914
(Address of principal executive offices) (Zip Code)

(401) 435-7171
(Registrant’s telephone number, including area code)

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


Title of each class		Name of each exchange on which registered
Class A Common Stock, $.01 par value		OTCQX (Pink Sheets)

Securities registered pursuant to Section 12(g) of the Act:
NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No þ

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 þ No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted 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 and post such files). Yes o No o.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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


Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
		(Do not check if a smaller reporting company)

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

As of June 30, 2009, the aggregate market value of the Class A and Class B voting stock held by non-affiliates of the Company was $15,689,000, which excludes voting stock held by directors, executive officers and holders of 5 percent or more of the voting power of the Company’s common stock (without conceding that such persons are “affiliates” of the Company for purposes of federal securities laws). The Company has no outstanding non-voting common equity.

As of March 1, 2010, the Company had 3,662,122 shares of Class A Common Stock and 2,937,790 shares of Class B Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s Proxy Statement for the 2010 Annual Meeting of Shareholders to be held on April 27, 2010, are incorporated by reference into Part III of this Form 10-K.

CAPITAL PROPERTIES, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2009

TABLE OF CONTENTS


	Page
PART I

Item 1. Business		3
Item 2. Properties		7
Item 3. Legal Proceedings		8
Item 4. Reserved		8

PART II

Item 5 Market for Registrant’s Common Equity and Related Stockholder Matters		9
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 8 Consolidated Financial Statements		15
Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		30
Item 9A(T) Controls and Procedures		30

Part III

Item 10. Directors, Executive Officers and Corporate Governance of the Registrant		31
Item 11. Executive Compensation		31
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		31
Item 13. Certain Relationships and Related Transactions and Director Independence		31
Item 14. Principal Accountant Fees and Services		31

PART IV

Item 15. Exhibits and Financial Statement Schedules		32

Signatures		33
EX-20.1
EX-20.2
EX-21
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I

FORWARD-LOOKING STATEMENTS

Certain portions of this report, and particularly the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Notes to Consolidated Financial Statements, contain forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities 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 collectibility of the accrued leasing revenues when due over the terms of the long-term land leases; the commencement of additional long-term land leases; changes in economic conditions that may affect either the current or future development on the Company’s parcels; and exposure to contamination, remediation or similar costs associated with the operation of the petroleum storage facility. The Company does not undertake the obligation to update forward-looking statements in response to new information, future events or otherwise.

Item 1. Business

Business Development

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.

General Economic Conditions

The current economic conditions have had limited impact on the Company’s results of operations to date. At the request of Metropark, Ltd., the short-term parking tenant, the Company agreed not to increase the rent for the period January 1 to March 31, 2009 and further agreed to reduce Metropark’s rent by 10% for the balance of 2009. This reduction has been further extended to June 30, 2010, at which time the Company anticipates that the rent will return to the January 1, 2009 level. Lamar Outdoor Advertising, LLC (“Lamar”), a tenant under a long-term land lease for various billboard locations, was granted rent relief on six billboard locations for the period January 1, 2009 to May 31, 2010, at which time the rent will return to the then current level. As none of the Company’s leases require the tenant to provide financial information, the Company has no information concerning the impact of current conditions on its major tenants and, therefore, cannot predict whether any other tenants will request such relief or concessions.

Segments

The Company operates in two segments: leasing and petroleum storage. For financial information, see Note 8 of Notes to Consolidated Financial Statements in Item 8.

Leasing

Capital Center

The leasing segment is principally devoted to the leasing of Company-owned land in the Capital Center area (“Capital Center”) in downtown Providence, Rhode Island under long-term ground leases. The Company owns approximately 18 acres in the Capital Center consisting of 11 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 was relocated, a new railroad station (the “Railroad Station”) was constructed and significant public improvements were made to improve pedestrian and vehicular traffic in the area.

With the exception of the Steeple Street property, the Company has not acted, and does not intend to act, as a developer with respect to any improvements constructed on Company-owned parcels. Rather, the Company offers

individual parcels for lease pursuant to long-term ground leases with terms of 99 years or more. Each lease contains provisions permitting the tenant to develop the parcel under certain terms and conditions. Each lease provides for periodic rent adjustments of various kinds. Under the leases, the tenants are responsible for insuring the Company against various hazards and events. Each tenant is required to indemnify the Company with respect to all of the tenant’s activities on the land. The leases contain other terms and conditions customary to such instruments.

As part of the construction of the Railroad Station, the Federal Railroad Administration constructed a 330-car parking garage on the Company’s land adjacent to the Railroad Station, and the Company paid one-half of the construction cost. Subsequently, the Company became the sole owner of the parking garage. In 2005, the Company sold the parking garage for $2,500,000 in cash and leased the underlying land for 99 years at an initial annual contractual rental of $100,000. Under the lease the buyer is responsible for all real estate taxes and other expenses relating to the parking garage. The sale of the parking garage, while retaining title to the underlying land, is consistent with the Company’s policy not to act as a developer with respect to improvements constructed on land that it currently owns or may hereafter acquire.

The Company first began offering parcels for lease in the Capital Center area in the late 1980’s. As of December 31, 2009, six developed parcels have been leased by the Company under long-term leases of 99 years or more. Located on these parcels are the following:

	•		13-story office building (235,000 gross square feet)

	•		8-story 225-unit apartment building (454,000 gross square feet)

	•		4-story office building (114,000 gross square feet)

	•		10-story office building (210,000 gross square feet)

	•		17-story building and a 19-story building containing 193 condominiums (307,000 gross square feet) and a 10-story office building (307,000 gross square feet), and

	•		330-car public parking garage.

In addition, in 2005 a long-term land lease commenced on an undeveloped parcel on which two residential buildings were planned. One building containing 96 condominiums (118,000 gross square feet) was completed in September 2009. The other building has not progressed beyond the early stages of site preparation, and the timing of construction and completion is uncertain.

While seeking developers, the Company also leases Parcels 3E, 3W, 4E and 4W in the Capital Center area for public parking purposes on a short-term basis to Metropark, Ltd.

Parcel 20 Adjacent to the Capital Center

Since the 1980’s, the Company has owned an undeveloped parcel of land adjacent to the Capital Center containing 20,600 square feet, which is leased out for public parking purposes on a short-term basis. In November 2007, the Company purchased the adjacent parcel containing a three/four-story 18,000 square foot building (the “Steeple Street Building”) and related land for $2,329,000, which, with the previously-owned land, now comprises Parcel 20. The Steeple Street Building is on the State Registry of Historic Buildings. At the time of acquisition, the Steeple Street Building had both residential and commercial tenants. It now has two commercial tenants, one of which is in receivership. While seeking a developer for the entire 26,600 square foot parcel, in June 2009 the Company commenced the historic restoration of the building and utility infrastructure and anticipates the project will be completed in May 2010. The total estimated cost to complete the restoration and various tenant improvements is $2,500,000. The cost of the restoration through 2009 was $2,246,000.

All of the properties described above are shown on a map contained in Exhibit 20.1.

Lamar Lease

The Company, through a wholly-owned subsidiary, leases certain outdoor advertising locations along interstate and primary highways in Rhode Island and Massachusetts to Lamar under a lease which expires in 2033. Presently, there are 24 locations under lease, containing 46 billboard faces. Of these locations, 22 are controlled by the Company through permanent easements granted to the Company pursuant to an agreement between the Company and Providence & Worcester Railroad Company, a related company (“Railroad”), and 2 are leased by the Company from third parties under leases with remaining terms of one year. The term of the Lamar lease is extended for two years for each additional location added. Although no new locations have been added since 2002, one structure was moved to a different location and the lease was extended for two 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.

Effective June 1, 2006, the Company entered into an Amended and Restated Agreement with Lamar which, among other things, provides the following: (1) the base rent will increase annually at the rate of 2.75% for each leased

billboard location commencing June 1, 2006 and on each June 1 thereafter; and (2) in addition to base rent, for each 12-month period commencing each June 1, Lamar must pay to the Company 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) the base monthly rent for each leased billboard display for such 12-month period. In all other respects, the lease remains substantially unchanged.

The Company has the right to require the Railroad to grant to it additional permanent easements for the location of billboards along the Railroad’s right-of-way on commercially reasonable terms.

A summary of the long-term leases which have commenced is as follows:


	Parcels in Capital Center Area
	2	3S	5	6, Phase I	6, Phase II	6, Phase III	7A	8	9	Lamar
Description of Usage	Residential/ Office	Office	Residential	Residential	Residential/ Office	Residential/ Office	Garage	Office	Office	Billboard
Term of Lease	103 Yrs.	99 Yrs.	149 Yrs.	99 Yrs.	99 Yrs.	99 Yrs.	99 Yrs.	99 Yrs.	149 Yrs.	27 Yrs.
Termination Date	2108	2087	2142	2103	2103	2103	2104	2090	2153	2033
Options to Extend Lease	Two 75-Year	None	None	Two 50-Year	Two 50-Year	Two 50-Year	Two 75-Year	None	None	See Lamar Lease above
Current Annual Contractual Rental	$72,000	$485,000	$468,000	$48,000	$48,000	$24,000	$100,000	$223,000	$100,000	$733,000
Contingent Rent	None	None	1% Gross Revenues	None	None	None	None	None	None	See Lamar Lease above
Next Periodic Rental Adjustment	2011	2014	2013	2010	2012	2012	2010	2010	2011	2010
Annual Rent after Next Adjustment and/or Type of Next Adjustment	$456,000	$618,000	Appraisal	$300,000	$175,000	$48,000	Cost of Living Adjustment	Appraisal and 1% Gross Receipts Rent	$360,000	$755,000

Major tenants:

The following table sets forth those major tenants whose revenues exceed 10% of the Company’s leasing segment revenues:


	2009		2008
Lamar Outdoor Advertising, LLC	$	793,000	$	842,000
Metropark, Ltd		543,000		587,000
Gramercy Capital Corp		472,000		468,000
AvalonBay Communities, Inc.		397,000		401,000

	$	2,205,000	$	2,298,000

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. As to the Steeple Street Building, the Company competes for tenants with other office and commercial buildings located in downtown Providence.

Employees

The leasing segment has three employees.

Petroleum Storage

Terminal and Pier Facility

The Company, through its wholly-owned subsidiary, Dunellen, LLC, owns a petroleum storage terminal with a capacity of approximately 1,000,000 barrels (the “Terminal”) and the Wilkesbarre Pier (the “Pier”), collectively referred to as the “Facility,” located in East Providence, Rhode Island. The Facility is leased to Global Companies, LLC (“Global”) for the storage and sale of petroleum distillates. The Terminal utilizes the Pier and pipelines connecting the Pier to the Terminal. The Company operates the Facility for Global pursuant to a contract with another Company subsidiary, Capital Terminal Company. The lease provides for a fixed monthly rent which is subject to annual cost-of-living adjustments. The lease expires April 30, 2013, but will continue thereafter on a year-to-year basis unless terminated by either party upon ninety days’ written notice. Global may terminate the lease on the anniversary date (April 30) provided it gives at least one year’s written notice. The lease includes provisions for additional payments based upon petroleum throughput in any twelve-month period beginning on May 1 of each year and ending on April 30 of the subsequent year at the rate of $.10 per barrel for every barrel in excess of 4,000,000 barrels, and for real property taxes in excess of $106,000 annually. The Company bears all of the operating costs with respect to the Facility, including a portion of the real property taxes and insurance. In addition, Global has an option to purchase the Facility at any time during the term of the lease (other than the last year thereof) on the terms and conditions set forth in a separate option agreement. Under a companion agreement, Global has agreed to pay 50% of the cost of all improvements to the Pier but not more than $1,000,000; to date, Global has paid $889,000.

Environmental

The operation of a petroleum storage facility carries with it the risk of environmental contamination.

In 1994, a leak was discovered in a 25,000 barrel storage tank at the Terminal which allowed the escape of a small amount of fuel oil. All required notices were made to the State of Rhode Island Department of Environmental Management (“RIDEM”). In 2000, the tank was demolished and testing of the groundwater indicated that there was no large pooling of contaminants. In 2001, RIDEM approved a plan pursuant to which the Company installed a passive system consisting of three wells and commenced monitoring the wells.

In 2003, RIDEM decided that the passive monitoring system previously approved was not sufficient and required the Company to design an active remediation system for the removal of product from the contaminated site. The Company and its consulting engineers began the pre-design testing of the site in the fourth quarter of 2004. The consulting engineers estimated a total cost of $200,000 to design, install and operate the system, which the Company reported as an expense in 2004. Through 2006, the Company had expended $119,000 and has not incurred any additional costs since then. RIDEM has not taken any action on the Company’s proposed plan. As designed, the system will pump out the contaminants which will be disposed of in compliance with applicable regulations. After a period of time, the groundwater will be tested to determine if sufficient contaminants have been removed. While the

Company and its consulting engineers believe that the proposed active remediation system will correct the situation, it is possible that RIDEM could require the Company to expand remediation efforts, which could result in the Company incurring additional costs.

In 2002, during testing of monitoring wells at the Terminal, the Company’s consulting engineer discovered free floating phase product in a groundwater monitoring well located on that portion of the Terminal purchased in 2000. Laboratory analysis indicated that the product was gasoline, which is not a product the Company ever stored at the Terminal. However, in the 1950’s gasoline was stored on the Company’s property by a predecessor owner. The Company commenced an environmental investigation and analysis, the results of which indicate that the gasoline did not come from the Terminal. The Company notified RIDEM. RIDEM subsequently identified Power Test Realty Partnership (Power Test), the owner of an adjacent parcel, as a potentially responsible party for the contamination. Power Test challenged that determination and, after an administrative hearing, in October 2008, a RIDEM Hearing Officer determined that Power Test is responsible for the discharge of the petroleum product under the Rhode Island Oil Pollution Control Act, R.I.G.L. Section 46-12.5.1-3 and Rule 6(a) and 12(b) of the Oil Pollution Control Regulations. The RIDEM Decision and Order requires Power Test to remediate the contamination as directed by RIDEM. Getty Properties Corp. is the general partner of Power Test. In November 2008, Power Test appealed the decision to the Rhode Island Superior Court. In addition, in November 2008, Power Test sought, and received, a stay of the Decision and Order of the Hearing Officer pending a clarification by RIDEM of the amount of the proposed fine. There can be no assurance that the Superior Court will affirm the decision of the Administrative Hearing Officer. In April 2009, the Company sued Power Test and Getty Properties Corp. in the Rhode Island Superior Court seeking remediation of the site or, in the alternative, the cost of the remediation. On May 1, 2009, Power Test and Getty Properties Corp. removed the action to the United States District Court for the District of Rhode Island. On May 22, 2009, Power Test and Getty Properties Corp. answered the Complaint and filed a Counterclaim against Dunellen, LLC and Capital Terminal Company alleging that Dunellen, LLC and Capital Terminal Company are responsible for the contamination. Getty Properties Corp. and Power Test have joined Getty Petroleum Marketing, Inc., the tenant under a long-term lease with Getty Properties Corp. of the adjacent property, as a defendant. The parties are now engaged in discovery. There can be no assurance that the Company will prevail in this litigation.

Since January 2003, the Company has not incurred significant costs in connection with this matter, other than ongoing litigation costs, and is unable to determine the costs it might incur to remedy the situation, as well as any costs to investigate, defend and seek reimbursement from the responsible party with respect to this contamination. This situation does not affect current operations at the Facility but may affect the Company’s ability to sell the Facility should it determine to do so.

The Company manages its exposure to contamination, remediation or similar costs associated with the Facility through adherence to established procedures for operations and equipment maintenance.

Insurance

The Company maintains what management believes to be adequate levels of insurance, including environmental insurance. The Company notified its insurance company of the gasoline contamination. The insurance company advised the Company that coverage is only provided under policies in place at the time the contamination occurs.

Competition

The Facility competes with several other similar facilities located on and adjacent to the Providence Harbor. The Terminal has approximately 42% of the total distillate storage capacity in the Providence area. Global competes with other terminal operators on the basis of price, availability, and a willingness to advance credit to local wholesalers. The amount of petroleum throughput at the Terminal is a function of Global’s ability to compete effectively in the marketplace.

Employees

The Terminal employs seven people on a full-time and one person on a part-time basis.


Item 2.		Properties

The Company owns approximately 18.5 acres and a historic building in and adjacent to the Capital Center District in Providence, Rhode Island. All of the property and a portion of the building are leased either under long-term leases or short-term leases as more particularly described in Item 1, Leasing Segment. The Company also owns or controls 24 locations on which billboards have been constructed. Of these, 22 are owned by the Company under permanent easements from a related company, the Railroad, and 2 are leased from unrelated third parties with terms remaining

of one year. The Company owns an approximate 10-acre site in East Providence, Rhode Island on which there are located 9 petroleum storage tanks and related distribution racks together with a 3,000 square foot single story office building in which the Company’s headquarters and other support operations are located. In 2006, the Company completed the development of the land currently owned by the Company at the Terminal. In addition, the Company is the owner of the Pier located in East Providence, Rhode Island. The Pier, which has a deep water draft capacity of -40 feet MLW, can accommodate ships up to eight hundred feet in length. The Company has a permanent right to use the pipelines connecting the Pier to the Terminal.


Item 3.		Legal Proceedings

None.


Item 4.		Reserved

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Since December 11, 2008, the Company’s Class A Common Stock is traded on the OTCQX (Pink Sheets), symbol “CPTP.” Prior to that date, the Company’s Class A Common Stock was traded on the American Stock Exchange, symbol “CPI.” 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 American Stock Exchange and the OTCQX (Pink Sheets), together with cash dividends paid per share during such periods.

In December 2008, the Company issued (in the form of a stock dividend) 3,299,956 shares of Class B Common Stock on a one-for-one basis for each share of Class A Common Stock held. The trading prices and dividends paid in 2008 have been restated to give effect to the additional shares outstanding.


	Trading Prices				Dividends
	High		Low		Paid
2009
1st Quarter		10.01		6.50		.03
2nd Quarter		8.75		6.85		.03
3rd Quarter		8.25		7.22		.03
4th Quarter		10.00		7.01		.03

2008
1st Quarter		11.75		8.875		.03
2nd Quarter		11.00		8.75		.03
3rd Quarter		13.175		11.00		.03
4th Quarter		11.75		6.50		.03

Information with respect to the high and low trading prices for the Class B Common Stock is not available because the stock is not listed on any exchange, is not quoted by any quotation service, and there is no known market for such Class B Common Stock.

At March 1, 2010, there were 724 holders of record of the Company’s Class A Common Stock and 573 holders of record of the Company’s Class B Common Stock.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of 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 of Notes to Consolidated Financial Statements in Item 8. 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 (leasing segment) meets the SEC definition of “critical.”

		Certain of the Company’s long-term land leases have original terms of 30 to 149 years and contain scheduled rent increases where the future dollar increases are known at the time of the commencement of the lease or at a subsequent date.

		The first such lease commenced in 1988, had an original term of 99 years and provides for fixed percentage increases at specified intervals (as well as reappraisal increases). In accordance with the United States generally accepted accounting principles in accounting for leases, rental income related to the fixed percentage increases that are presently known should be recognized on a straight-line basis. To calculate the annual straight-line amount, the 99 known annual rental amounts are totaled and this total is divided by 99.

		In 2009, a scheduled appraisal occurred, resulting in a rental increase. The Company recalculated the future annual straight-line amount using the remaining years under the lease. The turnaround date discussed below did not change.

		For this lease, the calculated annual straight-line amount for 1988 was eight times (multiple) the amount paid by the tenant under the terms of the lease (the “contractual amount”). In subsequent years, as the tenant pays higher rents, the multiple gradually decreases until the 57^th year of the lease, at which time the contractual amount paid by the tenant will exceed the calculated straight-line amount. If the Company were to report annual revenue for this lease using the straight-line amount, it would record a significant receivable for each of the first 56 years, which receivable would grow to approximately $33,000,000. Management does not believe that the Company should record a receivable that would not begin to be collected until the 56^th year (the “turnaround date”) since management could not be assured of collection.

		In 1988, management met with the SEC accounting staff to discuss its concerns in applying United States generally accepted accounting principles as they related to a lease of this length which results in the recording of such a significant receivable that would remain on the Company’s balance sheet and continue to grow on an annual basis with a turnaround date so far in the future. The Company presented the SEC accounting staff with an application of the accounting policy whereby management would evaluate the collectibility of the receivable on an annual basis and report as leasing revenue only that portion of the receivable that management could presently conclude would be collectible. The SEC accounting staff did not object to this application by the Company.

		Through December 31, 2009, the receivable on this lease has grown to $18,572,000 (cumulative excess of straight-line over contractual rentals) and management has not been able to conclude that any portion is collectible as the turnaround date is still 36 years away.

		In 2004, a second such lease commenced with an original term of 149 years and provides for fixed minimum percentage increases at specified intervals (as well as reappraisal increases). For this lease, the contractual amount paid by the tenant will not exceed the calculated straight-line amount until the 94^th year of the lease. Through December 31, 2009, the receivable on this lease is $13,646,000 (cumulative excess of straight-line over contractual rentals) and management has not been able to conclude that any portion is collectible as the turnaround date is 89 years away.

		In 2006, the Company entered into an Amended and Restated Agreement of its lease with Lamar Outdoor Advertising LLC (“Lamar”) with a current remaining term of 26 years which provides for fixed percentage increases annually. For this lease, the contractual amount paid by Lamar will not exceed the calculated straight-line amount until the 16^th year of the lease. Through December 31, 2009, the receivable on this lease is $806,000 (cumulative excess of straight-line over contractual rentals) and management has not been able to conclude that any portion is collectible as the turnaround date is 12 years away.

		Accordingly, the Company has not reported any portion of these amounts as leasing revenue in its consolidated financial statements and does not anticipate that it can reach such a conclusion until the turnaround dates are closer.

		Although the Company’s other long-term land leases provide for scheduled rent increases, the provisions of the leases are such that certain future dollar amounts could not be calculated either at the time of the commencement of the lease or now, as such amounts are based on factors that are not presently known, i.e., future cost-of-living adjustments or future appraised values. The Company is reporting the annual rental revenues under these leases using the contractual amounts in accordance with Unites States generally accepted accounting principles in accounting for leases. The Company has recorded excess of straight-line over contractual revenues on these leases totaling $7,147,000 at December 31, 2009. The Company continues to recognize accrued leasing revenue from two leases which were recorded in prior years.

		Segments:

		The Company operates in two segments: leasing and petroleum storage.

		The leasing segment consists of the long-term leasing of certain of its real estate interests in downtown Providence, Rhode Island (upon the commencement of which the tenants have been required to construct buildings thereon, with the exception of a parking garage), the leasing of a portion of the building acquired in November 2007 under short-term leasing arrangements and the leasing of locations along interstate and primary highways in Rhode Island and Massachusetts to Lamar which has constructed outdoor advertising boards thereon. The Company anticipates that the future development of its remaining properties in and adjacent to the Capital Center area will consist primarily of long-term ground leases. Pending this development, the Company leases these parcels for public parking under short-term leasing arrangements to Metropark, Ltd.

		The petroleum storage segment consists of operating the Facility in East Providence, Rhode Island, for Global Companies, LLC (“Global”).

		The principal difference between the two segments relates to the nature of the operations. In the leasing segment, the tenants under the long-term land leases incur substantially all of the development and operating costs of the assets constructed on the Company’s land, including the payment of real property taxes on both the land and any improvements constructed thereon; whereas the Company is responsible for the operating and maintenance expenses, including a portion of the real property taxes, as well as capital improvements at the Facility.

		Changes in capital structure:

		In November 2008, the Company restated its Articles of Incorporation:

	•		To create a new class of common stock of the Company to be designated Class B Common Stock consisting of 3,500,000 shares, $.01 par value per share;

	•		To increase the number of authorized shares of Class A Common Stock from 6,000,000 to 10,000,000 shares; and

	•		To provide for certain transfer and ownership restrictions as set forth therein.

		In December 2008, the Company issued (in the form of a stock dividend) 3,299,956 shares of Class B Common Stock on a one-for-one basis for each share of Class A Common Stock held.

		The holders of Class A and Class B Common Stock share equally in dividends declared by the Company.

		The holders of Class A and Class B Common Stock vote together as a single class on all matters submitted to the shareholders of the Company except for the election of the Board of Directors and except in connection with certain major corporate actions, including a sale of the Company. The holders of Class A Common Stock, voting as a separate class, elect one-third of the Board of Directors. The holders of Class B Common Stock, voting as a separate class, elect the remainder of the Board of Directors.

		Class B Common Stock is convertible by the record owner thereof into the same number of shares of Class A Common Stock at anytime.

		The Class A Common Stock is listed on the Premier QX Tier of the OTCQX (Pink Sheets). The Class B Common Stock is not listed on any national or regional stock exchange, or on the National Association of Securities Dealers Automated Quotation National Market System or on the OTCQX (Pink Sheets).

		The Company’s Restated Articles of Incorporation prohibits any shareholder from acquiring more than a 5% interest in the Company’s classes of common stock and prohibits any shareholder or any beneficial owner who, at the time of the filing of the Restated Articles of Incorporation owned 5% or more of the Company’s classes of common stock from increasing their aggregate percentage ownership of both classes of common stock. Should a shareholder acquire a number of shares that results in the limitation being exceeded, shares in excess of the limitation would be

		automatically converted into an equal number of shares of Excess Stock, which class was authorized pursuant to the 2001 Amendment to the Company’s Articles of Incorporation. Excess Stock is non-voting and is not entitled to dividends. However, the shareholder may designate a qualifying transferee for shares of Excess Stock, at which time such shares would be converted and reissued as Class A or Class B Common shares as the case may be.

		The purpose for creating the Class B Common Stock was to put the Company in the position to qualify to be taxed as a real estate investment trust (“REIT”). One of the qualifications to be taxed as a REIT is that no more than 50% of the shares of a company can be held by five or fewer individuals during the last half of each taxable year. Currently, the majority shareholder controls 52.3% of the Company’s outstanding common stock and three other shareholders each own more than 5% of the Company’s outstanding common stock. In order for the Company to qualify to be taxed as a REIT, the major shareholders’ ownership of the Company’s issued and outstanding common stock would need to be reduced below the 50% level.

2.		Results of operations:

		Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

		Leasing segment:


					Increase
	2009		2008		(Decrease)
Leasing revenues	$	2,908,000	$	2,980,000	$	(72,000	)
Leasing expense		982,000		696,000	$	286,000

	$	1,926,000	$	2,284,000

		2009 leasing revenue decreased from the 2008 level due to rent relief granted to two tenants. The Company agreed not to increase the rent of Metropark, Ltd. for the period January 1, 2009 to March 31, 2009 and further agreed to reduce the rent by 10% for the balance of 2009. The Company granted Lamar rent relief for the period January 1, 2009 to May 31, 2010. The impact of these two rent reliefs for 2009 was $69,000. In addition, contingent revenue under the billboard lease decreased $28,000 from 2008. These decreases were offset by scheduled increases in rental under long-term land leases. Leasing expense increased due to the hiring of a temporary employee, legal fees in connection with two leases and a bad debt expense. Under one of its long-term land leases, the Company incurred legal fees totaling $77,000 in connection with disputes under the lease which have not been resolved to date. The Company also incurred legal fees totaling $104,000 in disputes with one of its tenants in the Steeple Street Building. The tenant filed for receivership in November 2009, and there has been no determination if this tenant will remain in operation. At December 31, 2009, this tenant owed the Company $40,000 and an allowance for a doubtful account for the full amount has been recorded.

		Petroleum storage segment:


					Increase
	2009		2008		(Decrease)
Petroleum storage facility revenues	$	3,756,000	$	3,777,000	$	(21,000	)
Petroleum storage facility expense		2,325,000		2,187,000	$	138,000

	$	1,431,000	$	1,590,000

		Petroleum storage facility revenue decreased as a result of an $84,000 decrease in contingent revenue in 2009 due to lower throughput, offset in part by higher monthly rent resulting from the annual cost-of-living adjustment May 1, 2008 and payments by Global for certain repairs. Petroleum storage facility expense increased due to the hiring of a new employee, repairs on the Wilkesbarre Pier and litigation against Power Test Realty Partnership in connection with the environmental incident in 2002 in which the Company is seeking remediation of the site, or, in the alternative, the cost of remediation.

		Due to a decrease in the cost-of-living index, there was no rent adjustment under the lease for the petroleum storage facility for the contract year commencing May 1, 2009.

		General:

		General and administrative expense decreased $261,000 from 2008 due principally to costs of $232,000 incurred by the Company in 2008 in connection with the proposed reverse stock split and the amendment to its Articles of Incorporation, including legal, consulting and printing.

		Other income:

		The Company did not earn any interest income in 2009 because it elected in February 2009 to maintain all of its cash in a non-interest bearing checking account which was fully insured by the Federal Deposit Insurance Corporation through year-end.

3.		Liquidity and capital resources:

		Historically, the Company has had adequate liquidity to fund its operations. A summary of cash flows by year is as follows:


	2009			2008
Operating activities	$	1,742,000		$	2,654,000

Investing activities	$	(2,030,000	)	$	(441,000	)

Financing activities	$	(792,000	)	$	(792,000	)

		Operating activities: In 2009, the Company’s operating activities provided $1,742,000 of cash. Cash and cash equivalents decreased $1,080,000 for the same period, principally due to payments for the construction of the Steeple Street Building of $1,962,000 and dividends of $792,000.

		Investing activities: The cash used in investing activities was for the improvement and restoration of properties.

		Financing activities: The cash used in financing activities was for the payment of dividends.

		Cash and cash equivalents and cash commitments:

		At December 31, 2009, the Company had cash and cash equivalents of $2,315,000. Effective February 2009, the Company maintains all of its cash in a non-interest bearing checking account.

		Under the terms of the Company’s long-term land leases, appraisals of the premises are periodically required at various stated intervals to provide the basis for recalculating the annual rent. However, if as a result of such appraisal the annual rent is calculated to be less than the then current rent, the annual rent will remain at the current level.

	•		The first of such scheduled appraisals on Parcel 3S was completed in the second quarter of 2009, resulting in an annual increase in rent from $468,000 to $485,000 ($9.92 per square foot) effective October 1, 2009.

	•		A second appraisal on Parcel 8 commenced in November 2009 to determine what amount, if any, the annual rent will be increased February 1, 2010. The current annual rent is $223,000 ($6.16 per square foot).

		In June 2009, the Company commenced the construction of the historic restoration and utility infrastructure of the Steeple Street Building at an original estimated cost of $2,100,000. The Company anticipates that the restoration will be completed in the spring of 2010 at a total cost of $2,500,000, including tenant improvements not originally budgeted of $153,000. The Company expects to continue paying for the remaining restoration from available cash. Through December 31, 2009, the Company has incurred costs of $2,246,000. The Company anticipates that the expenditures will qualify for Federal historic tax credits in 2010 totaling approximately $350,000. The Company is currently marketing the remaining portions of the building for lease.

		In July 2009, the Company received notice from the holder of the leasehold mortgage on Parcel 8 that the Parcel 8 tenant was in default. A foreclosure sale was held on September 1, 2009, and the building was sold to the leasehold mortgagee. Under the terms of the Parcel 8 long-term land lease, upon the foreclosure of the leasehold mortgage, the Company is required to enter into a new long-term lease with the leasehold mortgagee or its assignee on substantially the same terms and conditions as the existing lease for Parcel 8. No new lease has been entered into to date. In such circumstances, the new tenant is required to cure any prior monetary defaults. The rent has continued to be paid in a timely fashion, and the Company has no reason to believe that the leasehold mortgagee will not continue to pay the rent and property taxes to the City of Providence in a timely fashion.

		The current economic conditions have had limited impact on the Company’s results of operations to date. Leasing revenues decreased due to rent relief granted to two tenants. The Company agreed not to increase Metropark’s rent

		under the short-term parking lease for the period January 1, 2009 to March 31, 2009 and further agreed to reduce the rent by 10% for the balance of 2009. This reduction has been further extended to June 30, 2010, at which time the Company anticipates that the rent will return to the January 1, 2009 level. The Company granted Lamar rent relief under a long-term land lease for various billboard locations for the period January 1, 2009 to May 31, 2010, at which time the rent will return to the then current level. The impact for 2009 of these two rent reliefs was $69,000. As none of the Company’s leases require the tenant to provide financial information, the Company has no information concerning the impact of current conditions on its major tenants and, therefore, cannot predict whether any other tenants will request such relief or concessions.

		The Company leases a portion of the Steeple Street Building to a tenant under a five-year lease at a current annual rental of $85,000. The tenant filed for receivership in November 2009, and there has been no determination if the tenant will remain in operation. At December 31, 2009, the tenant owed the Company $40,000 and the Company cannot determine whether it will collect the past due rent. The Company is monitoring the receivership proceedings to evaluate whether it will continue to accrue rental income.

		Under the Company’s lease with Global, in previous years, the Company has earned contingent revenue based upon petroleum throughput in excess of 4,000,000 barrels in any contract year. In 2008, the contingent revenue earned was $88,000. For the contract year ending April 30, 2009, the Company earned $2,000. The Company does not anticipate earning any contingent revenue for the contract year ending April 30, 2010. Due to a decrease in the cost-of-living index, there was no rent adjustment on May 1, 2009. The Company is unable to determine if there will be an annual cost-of-living adjustment on May 1, 2010.

		Under one of the Company’s long-term leases, the tenant is entitled to a credit for future rents equal to a portion of the real property taxes paid by the tenant through April 2007, which credit now totals $520,000, the maximum amount. In connection with Phase I of the tenant’s project, commencing July 1, 2010, the annual rental will increase from $48,000 to $300,000. At that time, the tenant will not be required to make cash payments for rent for the next 21 months, and the Company will reclassify each month $25,000 of deferred leasing revenues to leasing revenues.

		In January 2010, the Company declared a quarterly dividend of $198,000 ($.03 per common share), which dividend was paid in February 2010. The declaration of future dividends and the amount thereof will depend on the Company’s future earnings, financial factors and other events.

		The Company expects that cash generated from current operations will continue to be sufficient to meet operating expenses, ordinary capital expenditures, the remaining cost of the Steeple Street Building construction and the current level of dividends. In the event temporary additional liquidity is required, the Company believes that a line of credit or other arrangements could be obtained by pledging some or all of its unencumbered assets as collateral.

		At December 31, 2009, the Company has no noncancellable contract obligations other than two operating leases for billboard locations for which the rent expense is not material in amount.

Item 8. Consolidated Financial Statements

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


	Page
Report of Independent Registered Public Accounting Firm		16
Consolidated Balance Sheets as of December 31, 2009 and 2008		17
Consolidated Statements of Income and Retained Earnings for the Years Ended December 31, 2009 and 2008		18
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and 2008		19
Notes to Consolidated Financial Statements		20-30


		Lefkowitz, Garfinkel, Champi & DeRienzo P.C. Certified Public Accountants/Business Consultants

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Board of Directors
Capital Properties, Inc.
East Providence, Rhode Island

We have audited the accompanying consolidated balance sheets of Capital Properties, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income and retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Capital Properties, Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

March 15, 2010

10 Weybosset Street § Suite 700 § Providence, Rhode Island 02903 § Tel (401) 421-4800 § 1-800-927-LGCD § Fax(401) 421-0643

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31,
	2009		2008
ASSETS

Properties and equipment (net of accumulated depreciation)	$	22,069,000	$	20,447,000
Cash and cash equivalents		2,315,000		3,395,000
Income taxes receivable		47,000		—
Prepaid and other		331,000		485,000

	$	24,762,000	$	24,327,000


LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities:
Accounts payable and accrued expenses:
Property taxes	$	243,000	$	238,000
Environmental remediation		81,000		81,000
Other		514,000		416,000
Deferred leasing revenues		520,000		520,000
Income taxes:
Current		—		346,000
Deferred, net		5,305,000		5,269,000

		6,663,000		6,870,000


Commitment (Note 3)

Shareholders’ equity (Note 7):
Class A common stock, $.01 par; authorized 10,000,000 shares; issued and outstanding, 3,654,739 shares and 3,299,956 shares at December 31, 2009 and 2008, respectively		37,000		33,000
Class B common stock, $.01 par; authorized 3,500,000 shares; issued and outstanding, 2,945,173 shares and 3,299,956 shares at December 31, 2009 and 2008, respectively		29,000		33,000
Excess stock, $.01 par; authorized 1,000,000 shares; none issued and outstanding		—		—
Capital in excess of par		11,762,000		11,762,000
Retained earnings		6,271,000		5,629,000

		18,099,000		17,457,000

	$	24,762,000	$	24,327,000

See accompanying notes to consolidated financial statements.

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS


	Years Ended December 31,
	2009			2008
Revenues and other income:
Revenues:
Leasing	$	2,908,000		$	2,980,000
Petroleum storage facility		3,756,000			3,777,000

		6,664,000			6,757,000
Other income, interest		—			21,000

		6,664,000			6,778,000


Expenses:
Leasing		982,000			696,000
Petroleum storage facility		2,325,000			2,187,000
General and administrative		951,000			1,212,000

		4,258,000			4,095,000


Income before income taxes		2,406,000			2,683,000


Income tax expense:
Current		936,000			992,000
Deferred		36,000			118,000

		972,000			1,110,000


Net income		1,434,000			1,573,000

Retained earnings, beginning		5,629,000			4,848,000

Dividends on common stock ($.12 per share based upon 6,599,912 shares outstanding) (Note 7)		(792,000	)		(792,000	)


Retained earnings, ending	$	6,271,000		$	5,629,000


Basic income per share, based upon 6,599,912 shares outstanding (Note 7)	$	.22		$	.24

See accompanying notes to consolidated financial statements.

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Years Ended December 31,
	2009			2008
Cash flows from operating activities:
Net income	$	1,434,000		$	1,573,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		691,000			680,000
Deferred income taxes		36,000			118,000
Changes in assets and liabilities:
Increase in:
Income taxes receivable		(47,000	)		—
Prepaid and other		—			(151,000	)
Accounts payable and accrued expenses		—			76,000
Current income taxes payable		—			346,000
Decrease in:
Prepaid and other		154,000			—
Income taxes receivable		—			12,000
Accounts payable and accrued expenses		(180,000	)		—
Current income taxes payable		(346,000	)		—

Net cash provided by operating activities		1,742,000			2,654,000

Cash used in investing activities, payments for properties and equipment		(2,030,000	)		(441,000	)

Cash used in financing activities, payment of dividends		(792,000	)		(792,000	)


Increase (decrease) in cash and cash equivalents		(1,080,000	)		1,421,000
Cash and cash equivalents, beginning		3,395,000			1,974,000

Cash and cash equivalents, ending	$	2,315,000		$	3,395,000


Supplemental disclosure:
Cash paid for income taxes	$	1,329,000		$	634,000


Non-cash investing and financing activities:
Capital expenditures financed through accounts payable	$	368,000		$	85,000

Conversion of Class B common stock into Class A common stock	$	4,000		$	—

See accompanying notes to consolidated financial statements.

CAPITAL PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 AND 2008

1.		Description of business:

		Capital Properties, Inc. and its wholly-owned subsidiaries, Tri-State Displays, Inc., Capital Terminal Company and Dunellen, LLC (collectively referred to as “the Company”), operate in two segments: (1) Leasing and (2) Petroleum Storage.

		The leasing segment consists of the long-term leasing of certain of its real estate interests in downtown Providence, Rhode Island (upon the commencement of which the tenants are required to construct buildings thereon, with the exception of a parking garage), the leasing of a portion of its building (“Steeple Street Building”) under short-term leasing arrangements and the leasing of locations along interstate and primary highways in Rhode Island and Massachusetts to Lamar Outdoor Advertising, LLC (“Lamar”) which has constructed outdoor advertising boards thereon. The Company anticipates that the future development of its remaining properties in and adjacent to the Capital Center area will consist primarily of long-term ground leases. Pending this development, the Company leases these parcels for public parking under short-term leasing arrangements to Metropark, Ltd.

		The petroleum storage segment consists of the operating of the petroleum storage terminal (the “Terminal”) and the Wilkesbarre Pier (the “Pier”), collectively referred to as the “Facility,” located in East Providence, Rhode Island, for Global Companies, LLC (“Global”) which stores and distributes petroleum distillates.

		The principal difference between the two segments relates to the nature of the operations. In the leasing segment, the tenants under long-term land leases incur substantially all of the development and operating costs of the assets constructed on the Company’s land, including the payment of real property taxes on both the land and any improvements constructed thereon; whereas the Company is responsible for the operating and maintenance expenditures, including a portion of the real property taxes, as well as capital improvements at the Facility.

2.		Summary of significant accounting policies:

		Principles of consolidation:

		The accompanying consolidated financial statements include the accounts and transactions of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

		Use of estimates:

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

		Cash and cash equivalents:

		The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At December 31, 2009, the Company had no cash equivalents. At December 31, 2008, cash equivalents consisted of an overnight uninsured sweep with the Company’s principal bank totaling $3,188,000.

		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 follows Unites States generally accepted accounting principles when accounting for the impairment or disposal of long-lived assets, which requires that properties and equipment held and used by the Company be reviewed 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.

		Environmental remediation:

		The Company accrues a liability when an environmental remediation is probable and the costs are estimable. The Company charges to expense those costs that do not extend the life, increase the capacity or improve the safety or efficiency of the property owned by the Company.

		Revenues and other income:

		Leasing – 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 land leases, including the outdoor advertising locations, provide for presently known scheduled rent increases over the remaining terms (24 to 145 years). The Company follows Unites States generally accepted accounting principles in accounting for leases by recognizing leasing revenue on the straight-line basis over the terms of the leases; however, the Company does not report as revenue that portion of such straight-line rentals which management is unable to conclude is realizable (collectible) due to the length of the lease terms and other related uncertainties.

		Options – The Company reports option revenue when earned.

		Petroleum storage facility – The Company reports revenue from the operations of the Facility when earned and reports as revenue the tenant’s portion of the real property taxes as required by the lease.

		Contingent – 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 subsidiaries file consolidated income tax returns.

		The Company provides for income taxes based on income reported for financial reporting purposes. The provision for income taxes differs from the amounts currently payable because of temporary differences associated with the recognition of certain income and expense items for financial reporting and tax reporting purposes.

		The Company follows United States generally accepted accounting principles in accounting for uncertainty in income taxes. Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the consolidated financial statements.

		Legal fees:

		The Company recognizes legal fees relating to loss contingencies as incurred.

		New accounting standards:

		The Company reviews new accounting standards as issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any standards that it believes merit further discussion. The Company expects that none of the new standards will have a significant impact on its consolidated financial statements.

3.		Properties and equipment:

		Properties and equipment consist of the following:


	Estimated
	Useful Life		December 31,
	in Years		2009		2008
Properties on lease or held for lease:
Land and land improvements		—	$	4,621,000	$	4,621,000
Building, Steeple Street		39		1,772,000		1,772,000
Construction in progress, Steeple Street				2,246,000		—

				8,639,000		6,393,000


Petroleum storage facility, on lease:
Land and land improvements		—		5,591,000		5,591,000
Buildings and structures		33		1,744,000		1,684,000
Tanks and equipment		15-20		14,600,000		14,593,000

				21,935,000		21,868,000


Equipment		5-10		131,000		131,000

				30,705,000		28,392,000

Less accumulated depreciation:
Properties on lease or held for lease				104,000		60,000
Petroleum storage facility, on lease				8,430,000		7,789,000
Equipment				102,000		96,000

				8,636,000		7,945,000

			$	22,069,000	$	20,447,000

		In June 2009, the Company commenced the construction of the historic restoration and utility infrastructure of the Steeple Street Building at an original estimated cost of $2,100,000. The Company anticipates that the restoration will be completed in the spring of 2010 at a total cost of $2,500,000, including tenant improvements not originally budgeted of $153,000. The Company expects to continue paying for the remaining restoration from available cash. Through December 31, 2009, the Company has incurred costs of $2,246,000.

4.		Description of leasing arrangements:

		Long-term land leases:

		As of December 31, 2009, the Company had entered into six long-term land leases for six separate parcels upon which the improvements have been completed (“developed parcels”). In addition, in 2005 a long-term land lease commenced on an undeveloped parcel on which two residential buildings were planned. One building was completed in September 2009. The other building has not progressed beyond the early states of site preparation and the timing of its construction and completion is uncertain.

		Under one of the long-term land leases, the Company receives contingent rentals (based upon a fixed percentage of gross revenue received by the tenant) which totaled $52,000 and $56,000 for the years ended December 31, 2009 and 2008, respectively.

		Under the seven land leases, the tenants are required to negotiate any tax stabilization treaty or other arrangements, appeal any changes in real property assessments, and pay real property taxes assessed under these arrangements. Accordingly, the amounts paid 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, 2009 and 2008, the real property taxes attributable to the Company’s land under these seven leases are $1,199,000 and $1,437,000, respectively.

		Under the lease which commenced in 2005, the tenant is entitled to a credit for future rents equal to a portion of the real property taxes paid by the tenant through April 2007, which credit now totals $520,000, the maximum amount. In connection with Phase I of the tenant’s project, commencing July 1, 2010, the annual rent will increase from $48,000 to $300,000. At that time, the tenant will not be required to make cash payments for rent for the next 21 months, and the Company will reclassify each month $25,000 of deferred leasing revenues to leasing revenues.

		The Company also leases various parcels of land for outdoor advertising purposes to Lamar under a lease having a remaining term of 24 years. Effective June 1, 2006, the Company entered into an Amended and Restated Agreement with Lamar which among other things provides the following: (1) the base rent will increase annually in fixed increases of 2.75% for each leased billboard location commencing June 1, 2006 and on each June 1 thereafter; and (2) in addition to base rent, for each 12-month period commencing each June 1, Lamar must pay to the Company the difference between 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) the base monthly rent for each leased billboard display for such 12-month period (“contingent revenue”). For the years ended December 31, 2009 and 2008, contingent revenues totaled $61,000 and $88,000, respectively. In all other respects, the lease remains substantially unchanged.

		At December 31, 2009, there are 24 locations under lease with 46 billboard faces. Of these locations, 22 are controlled through permanent easements and 2 are leased from third parties under operating leases with remaining terms of one year.

		Minimum future contractual rental payments to be received from noncancellable long-term leases as of December 31, 2009 are:


Year ending December 31,
2010	$	2,296,000
2011		2,904,000
2012		3,194,000
2013		3,290,000
2014		3,368,000
2015 to 2153		753,600,000

	$	768,652,000

For those leases with presently known scheduled rent increases at December 31, 2009 and 2008, the cumulative excess of straight-line over contractual rentals (considering scheduled rent increases over the 30 to 149 year terms of the leases) and the portion of the excess of straight-line over contractual rentals which management has concluded is realizable when payable over the terms of the leases are as follows:


	2009		2008
Cumulative excess of straight-line over contractual rentals	$	40,171,000	$	35,231,000
Amount management has not been able to conclude is collectible		40,128,000		35,189,000

Accrued leasing revenues, which are included in prepaid and other on the accompanying consolidated balance sheets	$	43,000	$	42,000

		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.

		Short-term leases:

		The Company leases the undeveloped parcels of land in or adjacent to the Capital Center area for public parking purposes to Metropark, Ltd. under short-term cancellable leases. The Company also leases a portion of the Steeple Street Building to two tenants under short-term leases (five years or less) at a current annual rental of $110,000. However, one of the tenants, whose annual rental is $85,000, filed for receivership in November 2009, and there has been no determination if this tenant will remain in operation. At December 31, 2009, this tenant owed the Company $40,000 and the Company cannot determine whether it will collect the past due rent and has therefore recorded an allowance for a doubtful account for the full amount. The Company is monitoring the receivership proceedings to evaluate whether it will continue to accrue rental income.

5.		Petroleum storage facility:

		Current operations:

		The Company and Global are parties to a lease agreement whereby the Company operates the entire Facility for Global. The Company is responsible for labor, insurance, property taxes and other operating expenses, as well as capital improvements.

The lease provides as follows:

	•		The lease expires April 30, 2013, but will continue thereafter on a year-to-year basis unless terminated by either party upon ninety days’ written notice;

	•		Global may terminate the lease on the anniversary date (April 30) provided it gives at least one year’s written notice;

	•		Global will pay a monthly rent subject to annual cost-of-living adjustments;

	•		Global will reimburse the Company for real property taxes in excess of $106,000 annually; and

	•		The Company will receive an additional $.10 per barrel for every barrel in excess of 4,000,000 barrels of throughput in any lease year (contingent revenue).

		For the years ended December 31, 2009 and 2008, the Company earned contingent revenue of $2,000 and $86,000, respectively.

		The monthly rent at January 1, 2008 was $285,000 and increased to $296,000 in May 2008 as a result of the scheduled annual cost-of-living adjustments in May of each year. Due to a decrease in the cost-of-living index, there was no rent adjustment in May 2009.

		Effective May 2003, Global has an option to purchase the Facility at any time during the term of the lease (other than the last year thereof) on the terms and conditions set forth in a separate option agreement. Under a companion agreement, Global agreed to make certain improvements at the Pier which totaled $319,000 in 2008. No improvements were made in 2009. [See Wilkesbarre Pier below].

		Environmental remediation:

		In 1994, a leak was discovered in a 25,000 barrel storage tank at the Terminal which allowed the escape of a small amount of fuel oil. All required notices were made to the State of Rhode Island Department of Environmental Management (“RIDEM”). In 2000, the tank was demolished and testing of the groundwater indicated that there was no large pooling of contaminants. In 2001, RIDEM approved a plan pursuant to which the Company installed a passive system consisting of three wells and commenced monitoring the wells.

		In 2003, RIDEM decided that the passive monitoring system previously approved was not sufficient and required the Company to design an active remediation system for the removal of product from the contaminated site. The Company and its consulting engineers began the pre-design testing of the site in the fourth quarter of 2004. The consulting engineers estimated a total cost of $200,000 to design, install and operate the system, which amount was accrued in 2004. Through 2006, the Company had expended $119,000 and has not incurred any additional costs since then. RIDEM has not taken any action on the Company’s proposed plan. As designed, the system will pump out the contaminants which will be disposed of in compliance with applicable regulations. After a period of time, the groundwater will be tested to determine if sufficient contaminants have been removed. While the Company and its consulting engineers believe that the proposed active remediation system will correct the situation, it is possible that RIDEM could require the Company to expand remediation efforts, which could result in the Company incurring additional costs.

		Environmental incident:

		In 2002, during testing of monitoring wells at the Terminal, the Company’s consulting engineer discovered free floating phase product in a groundwater monitoring well located on that portion of the Terminal purchased in 2000. Laboratory analysis indicated that the product was gasoline, which is not a product the Company ever stored at the Terminal. However, in the 1950’s gasoline was stored on the Company’s property by a predecessor owner. The Company commenced an environmental investigation and analysis, the results of which indicate that the gasoline did not come from the Terminal. The Company notified RIDEM. RIDEM subsequently identified Power Test Realty Partnership (Power Test), the owner of an adjacent parcel, as a potentially responsible party for the contamination. Power Test challenged that determination and, after an administrative hearing, on October 20, 2008, a RIDEM Hearing Officer determined that Power Test is responsible for the discharge of the petroleum product under the Rhode Island Oil Pollution Control Act, R.I.G.L. Section 46-12.5.1-3 and Rule 6(a) and 12(b) of the Oil Pollution Control Regulations. The RIDEM Decision and Order requires Power Test to remediate the contamination as directed by RIDEM. Getty Properties Corp. is the general partner of Power Test. In November 2008, Power Test appealed the decision to the Rhode Island Superior Court. In addition, in November 2008, Power Test sought, and received, a stay of the Decision and Order of the Hearing Officer pending a clarification by RIDEM of the amount of the proposed fine. There can be no assurance that the Superior Court will affirm the decision of the Administrative Hearing Officer. In April 2009, the Company sued Power Test and Getty Properties Corp. in the Rhode Island Superior Court seeking remediation of the site or, in the alternative, the cost of the remediation. On May 1, 2009, Power Test and Getty Properties Corp. removed the action to the United States District Court for the

		District of Rhode Island. On May 22, 2009, Power Test and Getty Properties Corp. answered the Complaint and filed a Counterclaim against Dunellen, LLC and Capital Terminal Company alleging that Dunellen, LLC and Capital Terminal Company are responsible for the contamination. Getty Properties Corp. and Power Test have joined Getty Petroleum Marketing, Inc., the tenant under a long-term lease with Getty Properties Corp. of the adjacent property, as a defendant. The parties are now engaged in discovery. There can be no assurance that the Company will prevail in this litigation.

		Since January 2003, the Company has not incurred significant costs in connection with this matter, other than ongoing litigation costs, and is unable to determine the costs it might incur to remedy the situation, as well as any costs to investigate, defend and seek reimbursement from the responsible party with respect to this contamination.

		Wilkesbarre Pier:

		The Pier is a deep-water pier in East Providence, Rhode Island owned by the Company which is integral to the operation of the Terminal. The Pier and the Terminal are connected by two petroleum pipelines which the Company has a permanent right to use. In 1995, the Company and Providence and Worcester Railroad Company (the “Railroad”) (the then owner of the Pier) entered into an agreement which, among other things, gave the Company the right to acquire the Pier for One Dollar ($1.00). The Company acquired the Pier from the Railroad in 1998. The Company and the Railroad have a common controlling shareholder.

6.		Income taxes:

		Income tax expense is comprised of the following components:


	2009		2008
Current:
Federal	$	710,000	$	770,000
State		226,000		222,000

		936,000		992,000


Deferred:
Federal		34,000		85,000
State		2,000		33,000

		36,000		118,000

	$	972,000	$	1,110,000

A reconciliation of the income tax provision as computed by applying the United States income tax rate (34%) to income before income taxes is as follows:


	2009		2008
Computed “expected” tax	$	818,000	$	913,000
Increase in “expected” tax resulting from:
State income tax, net of federal income tax benefit		154,000		164,000
Non-deductible expenses		—		33,000

	$	972,000	$	1,110,000

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 which give rise to deferred tax assets and liabilities were as follows:


	December 31,
	2009			2008
Gross deferred tax liabilities:
Property having a financial statement basis in excess of tax basis:
Cost differences	$	3,517,000		$	3,517,000
Depreciation differences		2,064,000			1,996,000

		5,581,000			5,513,000
Insurance premiums and accrued leasing revenues		69,000			75,000

		5,650,000			5,588,000
Gross deferred tax assets		(345,000	)		(319,000	)

	$	5,305,000		$	5,269,000

The Company’s federal and various state income tax returns for the years 2006, 2007 and 2008 remain subject to examination.

7.		Shareholders’ equity:

		In November 2008, the Company restated its Articles of Incorporation:

	•		To create a new class of common stock of the Company to be designated Class B Common Stock consisting of 3,500,000 shares, $.01 par value per share;

	•		To increase the number of authorized shares of Class A Common Stock from 6,000,000 to 10,000,000 shares; and

	•		To provide for certain transfer and ownership restrictions as set forth therein.

		In December 2008, the Company issued (in the form of a stock dividend) 3,299,956 shares of Class B Common Stock on a one-for-one basis for each share of Class A Common Stock held. The Company accounted for the stock split effective in the form of a dividend by transferring $33,000 from capital in excess of par to Class B Common Stock on December 11, 2008.

		The holders of Class A and Class B Common Stock vote together as a single class on all matters submitted to the shareholders of the Company except for the election of the Board of Directors and except in connection with certain major corporate actions, including a sale of the Company. The holders of Class A Common Stock, voting as a separate class, elect one-third of the Board of Directors. The holders of Class B Common Stock, voting as a separate class, elect the remainder of the Board of Directors.

		Class B Common Stock is convertible by the record owner thereof into the same number of shares of Class A Common Stock at anytime. For the year ended December 31, 2009, 354,783 shares were converted.

		The Class A Common Stock is listed on the Premier QX Tier of the OTCQX (Pink Sheets). The Class B Common Stock is not listed on any national or regional stock exchange, or on the National Association of Securities Dealers Automated Quotation National Market System or on the OTCQX (Pink Sheets).

		The holders of Class A and Class B Common Stock share equally in the earnings of the Company and in dividends declared by the Company.

		The Company’s Restated Articles of Incorporation prohibits any shareholder from acquiring more than a 5% interest in the Company’s classes of common stock and prohibits any shareholder or any beneficial owner who, at the time of the filing of the Restated Articles of Incorporation owned 5% or more of the Company’s classes of common stock from increasing their aggregate percentage ownership of both classes of common stock. Should a shareholder acquire a number of shares that results in the limitation being exceeded, shares in excess of the limitation would be automatically converted into an equal number of shares of Excess Stock, which class was authorized pursuant to the 2001 Amendment to the Company’s Articles of Incorporation. Excess Stock is non-voting and is not entitled to dividends. However, the shareholder may designate a qualifying transferee for shares of Excess Stock, at which time such shares would be converted and reissued as Class A or Class B Common shares as the case may be.

		The purpose for creating the Class B Common Stock was to put the Company in the position to qualify to be taxed as a real estate investment trust (“REIT”). One of the qualifications to be taxed as a REIT is that no more than 50% of the shares of a company can be held by five or fewer individuals during the last half of each taxable year. Currently, the majority shareholder controls 52.3% of the Company’s outstanding common stock and three other shareholders each own more than 5% of the Company’s outstanding common stock. In order for the Company to qualify to be taxed as a REIT, the major shareholders’ ownership of the Company’s issued and outstanding common stock would need to be reduced below the 50% level.

8.		Operating segment disclosures:

		The Company operates in two segments: (1) Leasing and (2) Petroleum Storage.

		The Company makes decisions relative to the allocation of resources and evaluates performance based on each segment’s respective income before income taxes, excluding interest income, and certain corporate expenses.

		Inter-segment revenues are immaterial in amount. The Company did not incur interest expense during the years ended December 31, 2009 and 2008.

The following financial information is used for making operating decisions and assessing performance of the Company’s segments:


	December 31,
	2009		2008
Leasing:
Revenues:
Long-term leases:
Contractual	$	2,140,000	$	2,122,000
Contingent		113,000		144,000
Excess of contractual over straight-line rentals		1,000		(1,000	)
Short-term leases		654,000		715,000

	$	2,908,000	$	2,980,000


Property tax expense	$	486,000	$	476,000


Depreciation	$	44,000	$	44,000


Income before income taxes	$	1,926,000	$	2,284,000


Assets	$	8,726,000	$	6,521,000


Properties and equipment, additions	$	2,246,000	$	73,000


Petroleum storage:
Revenues:
Contractual	$	3,754,000	$	3,691,000
Contingent		2,000		86,000

Total revenues	$	3,756,000	$	3,777,000


Property tax expense	$	212,000	$	205,000


Depreciation	$	641,000	$	629,000


Income before income taxes	$	1,431,000	$	1,590,000


Assets	$	13,917,000	$	14,582,000


Properties and equipment, additions	$	67,000	$	332,000

The following is a reconciliation of the segment information to the amounts reported in the accompanying consolidated financial statements:


	2009		2008
Revenues and other income:
Revenues for operating segments:
Leasing	$	2,908,000	$	2,980,000
Petroleum storage		3,756,000		3,777,000

		6,664,000		6,757,000
Other income, interest		—		21,000

Total consolidated revenues and other income	$	6,664,000	$	6,778,000


Property tax expense:
Property tax expense for operating segments:
Leasing	$	486,000	$	476,000
Petroleum storage		212,000		205,000

		698,000		681,000

Unallocated corporate property tax expense		2,000		1,000

Total consolidated property tax expense	$	700,000	$	682,000


	2009			2008
Depreciation:
Depreciation for operating segments:
Leasing	$	44,000		$	44,000
Petroleum storage		641,000			629,000

		685,000			673,000
Unallocated corporate depreciation		6,000			7,000

Total consolidated depreciation	$	691,000		$	680,000


Income before income taxes:
Income for operating segments:
Leasing	$	1,926,000		$	2,284,000
Petroleum storage		1,431,000			1,590,000

		3,357,000			3,874,000
Interest income		—			21,000
Unallocated corporate expenses		(951,000	)		(1,212,000	)

Total consolidated income before income taxes	$	2,406,000		$	2,683,000


Assets:
Assets for operating segments:
Leasing	$	8,726,000		$	6,521,000
Petroleum storage		13,917,000			14,582,000

		22,643,000			21,103,000
Corporate cash and cash equivalents		2,043,000			3,189,000
Other unallocated amounts		76,000			35,000

Total consolidated assets	$	24,762,000		$	24,327,000


Additions to properties and equipment:
Leasing	$	2,246,000		$	73,000
Petroleum storage		67,000			332,000

		2,313,000			405,000
Unallocated corporate additions to properties and equipment		—			5,000

Total consolidated additions	$	2,313,000		$	410,000

The following table sets forth those customers whose revenues exceed 10% of the Company’s segment revenues:


	2009		2008
Leasing segment:
Lamar Outdoor Advertising, LLC	$	793,000	$	842,000
Metropark, Ltd		543,000		587,000
Gramercy Capital Corp		472,000		468,000
AvalonBay Communities, Inc.		397,000		401,000

	$	2,205,000	$	2,298,000


Petroleum storage segment: Global Companies, LLC	$	3,756,000	$	3,777,000

9.		Fourth quarter transactions in 2008:

		In July 2008, the Company’s Board of Directors unanimously approved recommending to shareholders, among other items, a reverse stock split of 75 to 1 with respect to the Company’s outstanding common stock. In addition, the Directors also unanimously approved an amendment to the Company’s Articles of Incorporation to create a Class B Common Stock (see Note 7). The Board originally anticipated that the reverse stock split would result in the Company having less than 300 shareholders which would permit the Company to suspend the registration of its common stock under the Securities Exchange Act of 1934. As a result of an increase in the number of shareholders following the public announcement of the Board’s recommendations, at a special shareholder meeting held November 21, 2008, the shareholders were asked to approve the reverse stock split and approve granting to the Board of Directors for a period of ninety (90) days following the approval of the reverse stock split, the right to determine whether the reverse stock split should proceed even if it would result in the Company not having less than 300 shareholders. Following the special shareholders meeting, the Board of Directors decided not to implement the

		reverse stock split, given the cost to the Company and the relatively small benefit to be derived. At September 30, 2008, the Company had incurred costs of $160,000, which were included in prepaid and other on the consolidated balance sheet at September 30, 2008 pending the final decision concerning the reverse stock split. Total costs of $232,000 (including the $160,000) were included in general and administrative expense in the fourth quarter.

10.		Subsequent event:

		The Company evaluated subsequent events through the date the financial statements were issued.

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.

Item 9A(T). 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 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 “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) as of December 31, 2009.

Based on this assessment, the principal executive officer and principal financial officer believe that as of December 31, 2009, the Company’s internal control over financial reporting was effective based on criteria set forth by COSO in “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 temporary 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, 2009, 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.

PART III

Item 10. Directors, Executive Officers and Corporate Governance of the Registrant

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 2010 Annual Meeting of the Shareholders to be filed with the SEC.

The following are the executive officers of the Registrant:


				Date of First
Name	Age		Office Held	Election to Office
Robert H. Eder		77	President, Capital Properties, Inc.		1995
Barbara J. Dreyer		71	Treasurer, Capital Properties, Inc.		1997
Stephen J. Carlotti		67	Secretary, Capital Properties, Inc.		1998
Todd D. Turcotte		38	President, Capital Terminal Company and Vice President, Capital Properties, Inc.		2008

All officers hold their respective offices until their successors are duly elected and qualified. Ms. Dreyer served as President and Treasurer of the Registrant from 1995 to 1997 and as Treasurer since that date. 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 subsidiaries 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 2010 Annual Meeting of the Shareholders to be filed with the Securities and Exchange Commission.

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 2010 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission.

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 2010 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission.

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 2010 Annual Meeting of the Shareholders to be filed with the Securities and Exchange Commission.

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 2010 Annual Meeting of the Shareholders to be filed with the Securities and Exchange Commission.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) and (c) The consolidated financial statements are included in Item 8.

(b)

Exhibits:

	3.1		Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s annual report on Form 10-K for the year ended December 31, 2008).

	3.2		By-laws, as amended December 10, 2007 (incorporated by reference to Exhibit 3.2 to the registrant’s annual report on Form 10-K for the year ended December 31, 2007).

	10		Material contracts:

	(a)		Lease between Metropark, Ltd. and Company:

	(i)		Dated January 1, 2005 (incorporated by reference to Exhibit 10(a) to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2004), as amended.

	(b)		Miscellaneous contract:

	(i)		Option Agreement to Purchase Real Property and Related Assets, dated June 9, 2003, by and between Dunellen, LLC and Global Companies, LLC (incorporated by reference to Exhibit 10(b)(i) to the registrant’s report on Form 10-QSB/A for the quarterly period ended June 30, 2003), as amended.

	20.1		Map of the Company’s parcels in Downtown Providence, Rhode Island

	20.2		Map of the Company’s petroleum storage facility in East Providence, Rhode Island

	21		Subsidiaries of the Company

	31.1		Rule 13a-14(a) Certification of President and Principal Executive Officer

	31.2		Rule 13a-14(a) Certification of Treasurer and Principal Financial Officer

	32.1		Certification of President 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

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DATED: March 15, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Company and on the dates indicated.


/s/ Robert H. Eder		March 15, 2010

Robert H. Eder
President and Director
Principal Executive Officer

/s/ Barbara J. Dreyer		March 15, 2010

Barbara J. Dreyer
Treasurer, Principal Financial Officer
and Principal Accounting Officer

/s/ Alfred J. Corso		March 15, 2010

Alfred J. Corso, Director

/s/ Harris N. Rosen		March 15, 2010

Harris N. Rosen, Director

CAPITAL PROPERTIES, INC.

/s/ Robert H. Eder

Robert H. Eder

President and Principal Executive Officer