UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] 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: 333-42441
---------------------------------
MID-AMERICA CAPITAL PARTNERS, L.P.
----------------------------------
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 62-1717980
--------- ----------
(State of Incorporation) (I.R.S. Employer Identification Number)
6584 POPLAR AVENUE, SUITE 340
MEMPHIS, TENNESSEE 38138
------------------------
(Address of principal executive offices)
(901) 682-6600
--------------
Registrant's telephone number, including area code
N/A
------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities 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.
[X*] Yes [ ]No
* Registration statement on Form S-3 became effective February 17, 1998.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Number of Shares Outstanding
----- ----------------------------
Not applicable Not applicable
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets of Mid-America Capital Partners, L.P.
(the "Partnership") as of March 31, 1998 and December 31, 1997
Statement of Operations of the Partnership for the three months
ended March 31, 1998 and Combined Statement of Operations
of Capital Properties Group ("Predecessor" to Mid-America
Capital Partners, L.P.) for the three months ended March 31, 1997
Statement of Cash Flows of the Partnership for the three months
ended March 31, 1998 and Combined Statement of Cash Flows
of the Predecessor for the three months ended March 31, 1997
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. Financial Information
ITEM 1.
Mid-America Capital Partners, L.P.
(a limited partnership)
Balance Sheets
March 31, 1998 (Unaudited) and December 31, 1997
(Dollars in thousands)
1998 1997
-------- --------
Assets
======
Real estate assets:
Land $ 21,016 $ 21,016
Buildings and improvements 202,514 201,499
Furniture, fixtures and equipment 4,234 3,354
Construction in progress 405 1,739
- ---------------------------------------------------------------------------
228,169 227,608
Less accumulated depreciation (16,049) (13,985)
- ---------------------------------------------------------------------------
Real estate assets, net 212,120 213,623
Cash 3,025 1,570
Restricted cash 866 932
Deferred financing costs 4,787 1,743
Due from limited partner 929 1,264
Other assets 356 231
- ---------------------------------------------------------------------------
Total assets $222,083 $219,363
===========================================================================
Liabilities and Partners' Capital
=================================
Liabilities:
Bonds payable $142,000 $ 0
Bridge notes payable - 140,000
Accounts payable 1,134 390
Accrued expenses and other liabilities 2,389 2,875
Due to affiliate 929 1,596
Security deposits 715 713
- ---------------------------------------------------------------------------
Total liabilities 147,167 145,574
Partners' Capital:
General Partner 2,374 2,363
Limited Partner 72,542 71,426
- ---------------------------------------------------------------------------
Total partners' capital 74,916 73,789
- ---------------------------------------------------------------------------
Total liabilities and partners' capital $222,083 $219,363
===========================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
Mid-America Capital Partners, L.P.
(a limited partnership)
Statement of Operations of the Partnership and
Combined Statement of Operations of the Predecessor
Three months ended March 31, 1998 and 1997
(Dollars in thousands)
(Unaudited)
Three months ended March 31,
-------------------------------
Predecessor
-----------
1998 1997
----------- -----------
Revenues:
Rental $ 9,601 $ 7,060
Other 105 61
- --------------------------------------------------------------------------
Total revenues 9,706 7,121
- --------------------------------------------------------------------------
Expenses:
Personnel 1,049 715
Building repairs and maintenance 402 268
Real estate taxes and insurance 949 685
Utilities 390 266
Landscaping 241 189
Other operating 398 323
Depreciation and amortization
real estate assets 2,056 1,463
Depreciation and amortization
non-real estate assets 8 6
General and administrative 370 285
Interest 2,345 371
Amortization of deferred financing costs 285 9
- --------------------------------------------------------------------------
Total expenses 8,493 4,580
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Income before extraordinary item 1,213 2,541
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- --------------------------------------------------------------------------
Extraordinary item:
Loss on debt extinguishment (86) -
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Net income $ 1,127 $ 2,541
==========================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
Mid-America Capital Partners, L.P.
(a limited partnership)
Statement of Cash Flows of the Partnership and
Combined Statement of Cash Flows of the Predecessor
Three months ended March 31, 1998 and 1997
(Dollars in thousands)
(Unaudited)
Predecessor
-----------
1998 1997
-------- --------
Cash flows from operating activities:
Net income $ 1,127 $ 2,541
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,349 1,478
Changes in assets and liabilities:
Restricted cash 66 224
Due from limited partner 335 -
Other assets (125) (52)
Accounts payable 744 (414)
Accrued expenses and other liabilities (486) (344)
Due to affiliate (667) -
Security deposits 2 -
- --------------------------------------------------------------------------
Net cash provided by operating activities 3,345 3,433
Cash flows from investing activities:
Purchases of real estate assets - (19,064)
Improvements to properti (561) (1,399)
- --------------------------------------------------------------------------
Net cash used in investing activities (561) (20,463)
Cash flows from financing activities:
Proceeds from notes payable 142,000 -
Principal payments on bridge notes payable (140,000) -
Principal payments on notes payable - (67)
Deferred financing costs (3,329) -
Capital contributions, net (Predecessor) - 17,060
- --------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (1,329) 16,993
- --------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 1,455 (37)
- --------------------------------------------------------------------------
Cash and cash equivalents, beginning of period 1,570 134
- --------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 3,025 $ 97
==========================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 2,530 $ 947
- --------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1.
The accompanying unaudited financial statements have been
prepared in accordance with the accounting policies in effect as
of December 31, 1997, as set forth in the annual financial
statements of Mid-America Capital Partners, L.P. (the
"Partnership"), as of such date. In the opinion of management,
all adjustments necessary for a fair presentation of the
financial statements have been included and all such adjustments
were of a normal recurring nature. The results of operations for
the three-month period ended March 31, 1998 are not necessarily
indicative of the results to be expected for the full year.
The Partnership is a special purpose Delaware limited
partnership. The Partnership was formed on November 24, 1997 for
the sole purpose to own and operate 26 apartment communities (the
Mortgaged Properties) and manage, renovate, improve, lease, sell,
transfer, exchange, mortgage and otherwise deal with the
Mortgaged Properties. The sole limited partner of the
Partnership is Mid-America Apartments, L.P., a Tennessee limited
partnership (MAALP), which is a majority owned subsidiary of Mid-
America Apartment Communities, Inc. (MAAC). MAAC owns, directly
or through its subsidiaries, all of the outstanding units of
partnership interest. MAAC is a self-administered and self-
managed umbrella partnership real estate investment trust (REIT).
MAAC conducts a substantial portion of its operation through
MAALP and subsidiaries of MAALP. The sole general partner of the
Partnership is MAACP, Inc., a Tennessee corporation (MAACP), a
wholly-owned subsidiary of MAAC. The term of the Partnership
shall be to December 31, 2020, unless terminated earlier as
provided in the Partnership Agreement or as otherwise provided by
law.
On March 6, 1998 the Partnership issued $142 million aggregate
principal amount of 6.376% Bonds Due 2003 (the Bonds). The
Bonds are secured by a first priority deed of trust, security
agreement and assignment of rents and leases in respect of the
Mortgaged Properties. The net proceeds from the sale of the
Bonds were applied to the bridge notes payable and utilized to
fund costs of the offering.
The Partnership has only limited involvement with derivative
financial instruments and does not use them for trading purposes.
The Partnership occasionally utilizes derivative financial
instruments as hedges in anticipation of future debt transactions
to manage well-defined interest rate risk.
In anticipation of the March 6, 1998 Bonds issuance discussed
above, the Partnership entered into four separate interest rate
contracts in 1997 with notional amounts aggregating $140 million,
the effect of which was to lock the interest rate on $140 million
of the Bonds at an average interest rate of 6.62%. On March 6,
1998 the Partnership realized a $1.4 million realized loss on the
interest rate contracts. The realized loss resulting from the
change in the market value of these contracts are amortized into
interest expense over the life of the related debt issuance.
<PAGE>
PART I. Financial Information
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The following is a discussion of the financial condition and
results of operations of the Partnership for the three
months ended March 31, 1998 and the combined financial
condition and results of operations of the Partnership for
the three months ended March 31, 1997. This discussion
should be read in conjunction with the financial statements
included in this report. These financial statements include
all adjustments which are, in the opinion of management,
necessary to reflect a fair statement of the results for the
interim periods presented, and all such adjustments are of a
normal recurring nature.
RESULTS OF OPERATIONS
COMPARISON OF THE PARTNERSHIP'S THREE MONTHS ENDED MARCH 31, 1997
TO THE PREDECESSOR'S THREE MONTHS MARCH 31, 1997
The total number of apartment units owned at March 31, 1998
was 5,947 in 26 apartment communities, compared to 4,804 in
20 communities at March 31, 1997. Average monthly rental per
apartment unit increased to $565 at March 31, 1998 from $533
at March 31, 1997. Overall occupancy was 95.0% at March 31,
1998 and 94.8% at March 31, 1997.
Total revenues for the three months ended March 31, 1998
increased by approximately $2,585,000 due primarily to (i)
approximately $2,388,000 from the communities acquired in
1997, (ii) approximately $109,000 from the communities
acquired in 1996, and (iii) approximately $88,000 from the
communities owned throughout both periods.
Property operating expenses for the three months ended March
31, 1998 increased by approximately $983,000 due primarily
to (i) approximately $842,000 from the communities acquired
in 1997, (ii) approximately $28,000 from the communities
acquired in 1996, and (iii) approximately $113,000 from the
communities owned throughout both periods. Utility costs
increased to 4.0% of revenue from 3.7% of revenue for the
three months ended March 31, 1998 compared to the same
period a year earlier, due primarily to higher utility costs
per property for the 6 additional properties acquired during
the year ended March 31, 1998.
Depreciation and amortization expense increased
approximately $871,000 for the three months ended March 31,
1998 compared to the same period a year earlier primarily
due to depreciation expense for (i) approximately $482,000
from the communities acquired in 1997, (ii) approximately
$61,000 from the communities acquired in 1996, (iii)
approximately $52,000 from the communities owned throughout
both periods, and (iv) approximately $276,000 of additional
amortization expense for the deferred financing costs
incurred on the March 6, 1998 offering of $142,000,000 bonds
payable (the "First Mortgage Bonds").
Interest expense increased approximately $1,974 during the
three months ended March 31, 1998 compared to the same
period a year earlier primarily due to the issuance of the
First Mortgage Bonds. The borrowing cost of the Partnership
First Mortgage Bonds was 6.62% compared to the average
borrowing cost of the Predecessor's debt of 8.7% at March
31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operating activities increased by
approximately $88,000 for the three months ended March 31,
1998 from approximately $3,433,000 for the three months
ended March 31, 1997. The decrease in net cash flow was
primarily due to a decrease in net income and an increase in
depreciation and amortization, accrued expenses and
liabilities and the due to affiliate.
Net cash flow used in investing activities decreased by
approximately $19,902,000 for the three months ended March
31, 1998 from approximately $20,463,000 for the three months
ended March 31, 1997. Capital improvements to existing
properties totaled approximately $561,000 for the three
months ended March 31, 1998, compared to approximately
$1,399,000 for the same period in 1996. Of the $561,000 in
capital improvements approximately $267,000 was for
recurring capital expenditures, including carpet and
appliances, approximately $104,000 was for revenue enhancing
projects with the remaining balance for other miscellaneous
items. For the three months ended recurring capital
expenditures averaged $277 per apartment stabilized unit on
an annualized basis. During the three months ended March
31, 1997 the Predecessor acquired two properties, Howell
Commons and Westside Creek I, for approximately $19,064,000.
There were no property acquisitions during the three months
ended March 31, 1998.
Net cash flow provided by (used in) financing activities
decreased by approximately $18,322,000 during the three
months ended March 31, 1998 from approximately $16,993,000
for the same period in 1997. The principal uses of cash from
financing activities were approximately $140,000,000 for
repayment of the bridge notes payable and approximately
$3,329,000 for additional deferred financing costs related
to the issuance of $142,000,000 Bonds payable. During the
three months ended March 31, 1997 the Predecessor
contributed $17,060,000 to acquire two properties, Howell
Commons and Westside Creek I. There were no capital
contributions or property acquisitions during the three
months ended March 31, 1998.
The Partnership believes that cash provided by operations is
adequate and anticipates that it will continue to be
adequate in both the short and long-term to meet operating
requirements (including recurring capital expenditures at
the Communities).
INSURANCE
In the opinion of management, property and casualty
insurance is in place which provides adequate coverage to
provide financial protection against normal insurable risks
such that it believes that any loss experienced would not
have a significant impact on the Partnership's liquidity,
financial position, or results of operations.
INFLATION
Substantially all of the resident leases at the Communities
allow, at the time of renewal, for adjustments in the rent
payable thereunder, and thus may enable the Partnership to
seek rent increases. The substantial majority of these
leases are for one year or less. The short-term nature of
these leases generally serves to reduce the risk to the
Partnership of the adverse effects of inflation.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial
Condition and Results of Operations contains certain forward-
looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors created thereby.
These statements include the plans and objectives of
management for future operations, including plans and
objectives relating to capital expenditures and
rehabilitation costs on the apartment communities. The
forward-looking statements included herein are based on
current expectations that involve numerous risks and
uncertainties which are discussed in "Risk Factors" in this
report. Although the Partnership believes that the
assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be inaccurate and,
therefore, there can be no assurance that the forward-
looking statements included in this report will prove to be
accurate. In light of the significant uncertainties inherent
in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a
representation by the Partnership or any other person that
the objectives and plans of the Partnership will be
achieved.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits or Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
MID-AMERICA CAPITAL PARTNERS, L.P.
Date: May 15, 1998 /s/ SIMON R.C. WADSWORTH
------------ -----------------------------
Simon R.C. Wadsworth
President and Director
(Principal Executive Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 3,891 151
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 6,072 189
<PP&E> 228,169 178,748
<DEPRECIATION> 16,049 9,055
<TOTAL-ASSETS> 222,083 170,033
<CURRENT-LIABILITIES> 5,167 2,087
<BONDS> 142,000 16,394
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 74,916 151,552
<TOTAL-LIABILITY-AND-EQUITY> 222,083 170,033
<SALES> 9,601 7,060
<TOTAL-REVENUES> 9,706 7,121
<CGS> 3,429 2,446
<TOTAL-COSTS> 3,429 2,446
<OTHER-EXPENSES> 2,064 1,469
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,630 380
<INCOME-PRETAX> 1,213 2,541
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 1,213 2,541
<DISCONTINUED> 0 0
<EXTRAORDINARY> (86) 0
<CHANGES> 0 0
<NET-INCOME> 1,127 2,541
<EPS-PRIMARY> 0.00 0.00
<EPS-DILUTED> 0.00 0.00
</TABLE>
