UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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: 0-15463
MENDIK REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
New York 11-2774249
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 29th Floor, New York, NY 10285
(Address of principal executive offices) (Zip code)
(212) 526-3237
(Registrant's telephone number, including area code)
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. Yes X No
Consolidated Balance Sheets
September 30, December 31,
Assets 1994 1993
Real estate investments,
at cost:
Land $ 27,137,084 $ 27,137,084
Buildings and improvements 199,285,930 200,255,154
----------- -----------
226,423,014 227,392,238
Less-accumulated depreciation (47,559,116) (44,575,753)
----------- -----------
178,863,898 182,816,485
----------- -----------
Properties held for disposition 19,469,640 18,950,000
Less-accumulated depreciation (809,493) -
----------- -----------
18,660,147 18,950,000
----------- -----------
Cash and cash equivalents 9,505,111 10,346,684
Restricted cash 1,600,618 2,390,734
Rents and other receivables
(net of allowance for
doubtful accounts of $569,387
in 1994 and $211,291 in 1993) 491,401 796,644
Deferred rent receivable 14,426,161 14,366,146
Other assets, net of accumulated
amortization of $5,558,130 in
1994 and $5,035,517 in 1993 9,868,343 8,131,577
----------- -----------
Total Assets $ 233,415,679 $ 237,798,270
=========== ===========
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and
accrued expenses $ 1,937,641 $ 1,335,734
Due to affiliates 1,426,541 1,349,919
Security deposits payable 1,037,437 1,007,873
Accrued interest payable 4,071,142 2,090,609
Mortgage and notes payable 107,180,836 107,042,677
Deferred interest payable 798,777 798,777
----------- -----------
Total Liabilities 116,452,374 113,625,589
----------- -----------
Minority interest 41,682,810 42,946,374
----------- -----------
Partners' Capital (Deficit):
General Partners (1,484,818) (1,425,360)
Special Limited Partner (471,998) (471,998)
Limited Partners 77,237,311 83,123,665
----------- -----------
Total Partners'
Capital 75,280,495 81,226,307
----------- -----------
Total Liabilities and
Partners' Capital $233,415,679 $ 237,798,270
=========== ===========
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1994 1993 1994 1993
Rent, net of
allowance for
doubtful accounts $ 8,341,198 $ 8,987,818 $ 24,631,764 $ 25,920,971
Interest 99,490 52,658 208,691 144,689
----------- ----------- ----------- -----------
Total Income 8,440,688 9,040,476 24,840,455 26,065,660
----------- ----------- ----------- -----------
Expenses
Property operating 5,435,509 5,372,706 15,782,337 16,092,858
Depreciation and
amortization 2,585,381 2,624,931 7,937,781 7,851,986
Interest 2,805,416 2,575,859 8,054,725 7,591,714
General and
administrative 101,828 95,675 274,988 350,496
----------- ----------- ----------- -----------
Total Expenses 10,928,134 10,669,171 32,049,831 31,887,054
----------- ----------- ----------- -----------
Loss before
minority interest (2,487,446) (1,628,695) (7,209,376) (5,821,394)
Minority interest
in loss of
consolidated venture 378,032 453,556 1,263,564 1,215,064
----------- ----------- ----------- -----------
Net Loss $ (2,109,414) $ (1,175,139) $ (5,945,812) $ (4,606,330)
=========== =========== =========== ===========
Net Loss Allocated:
To the General
Partners $ (21,094) $ (11,751) $ (59,458) $ (46,063)
To the Limited
Partners (2,088,320) (1,163,388) (5,886,354) (4,560,267)
----------- ----------- ----------- -----------
$ (2,109,414) $ (1,175,139) $ (5,945,812) $ (4,606,330)
=========== =========== =========== ===========
Per limited
partnership unit
(395,169)
outstanding $ (5.29) $ (2.94) $ (14.90) $ (11.54)
=========== =========== =========== ===========
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1994
Special
Limited General Limited Total
Partners' Partners' Partner's Partners'
Capital Deficit Deficit Capital
Balance at
December 31, 1993 $83,123,665 $ (1,425,360) $ (471,998) $81,226,307
Net loss (5,886,354) (59,458) - (5,945,812)
---------- ---------- ---------- ----------
Balance at
September 30, 1994 $77,237,311 $ (1,484,818) $ (471,998) $75,280,495
========== ========== ========== ==========
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1994 and 1993
Cash Flows from Operating
Activities: 1994 1993
Net loss $ (5,945,812) $ (4,606,330)
Adjustments to reconcile
net loss to net cash
provided by (used for)
operating activities:
Depreciation and amortization 7,937,781 7,851,986
Provision for losses on
rents and other receivables 358,096 -
Minority interest in loss
of consolidated venture (1,263,564) (1,215,064)
Increase (decrease) in
cash arising from changes
in operating assets
and liabilities:
Restricted cash 790,116 1,095,504
Rent and other
receivables (52,853) 599,922
Deferred rent
receivable (60,015) (823,123)
Other assets (2,941,206) (3,096,852)
Accounts payable
and accrued expenses 601,907 (996,755)
Due to affiliates 76,622 464,500
Accrued interest payable 1,980,533 168,496
Security deposits payable 29,564 19,175
Deferred interest payable - 39,142
----------- -----------
Net cash provided by (used for)
operating activities 1,511,169 (499,399)
----------- -----------
Cash Flows from Investing Activities:
Additions to real estate assets (2,490,901) (1,661,029)
----------- -----------
Net cash used for investing activities (2,490,901) (1,661,029)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from mortgage
note payable 138,159 1,069,431
----------- -----------
Net cash provided by financing activities 138,159 1,069,431
----------- -----------
Net decrease in cash and cash equivalents (841,573) (1,090,997)
Cash and cash equivalents at beginning
of period 10,346,684 10,429,370
----------- -----------
Cash and cash equivalents at end
of period $ 9,505,111 $ 9,338,373
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period
for interest $ 6,074,192 $ 7,384,076
=========== ===========
Notes to the Consolidated Financial Statements
The unaudited financial statements presented should be read in conjunction with
the Partnership's annual 1993 audited financial statements within form 10-K.
The unaudited interim financial statements include all adjustments consisting
of only normal recurring accruals which are, in the opinion of management,
necessary to fairly present the statement of financial position as of September
30, 1994 and the results of operations, changes in partners' capital (deficit),
and cash flows for the nine months then ended. Results of operations for the
period are not necessarily indicative of the results to be expected for the
full year.
Reclassifications
Certain prior year amounts have been reclassified to conform with the financial
statement presentation used in 1994.
The following significant events have occurred, subsequent to fiscal year 1993,
or the following material contingencies exist, and require disclosure in this
interim report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
The Stamford Property
Effective January 1, 1994, the Partnership executed a ten-year lease
extension with a tenant for approximately 43,000 square feet in 1351
Washington Boulevard, Stamford, Connecticut (the "Stamford Property").
The new rental rate this tenant is paying represents a substantial
reduction from the rate paid previously, reflecting current market
conditions in Stamford. In addition, a major lease for 37,400 square
feet with another tenant in the property expired on June 30, 1994 and
the tenant has signed a renewal lease for only 3,500 square feet.
As a result of the decline in the property's cash flow, the Partnership
was unable to make full payment of debt service due each month from
February 10, 1994 to November 10, 1994 with respect to the non-recourse
first mortgage loan to which the Stamford Property is subject (the
"Stamford Loan"). Consequently, approximately $14.7 million of
principal and accrued and deferred interest was outstanding on the
Stamford Loan at September 30, 1994. As a result of the Partnership's
failure to make full debt service payments, the Partnership is in
default under the terms of the Stamford Loan. The Partnership has been
unsuccessful in its attempt to sell the property at a price sufficient
to pay off the mortgage. As a result, the General Partners are now
preparing an agreement with the lender pursuant to which title to the
property would be transferred to the lender in early 1995. When the
property is transferred to the lender, it will result in the loss of
the Partnership's investment in the property. Mendik Realty Company,
Inc., an affiliate of Mendik Corporation, continues to defer its
management fees and leasing commissions with respect to the Stamford
Property.
330 West 34th Street
On August 15, 1994 an extension of the forbearance agreement was
entered into with The First National Bank of Chicago ("FNBC"), the
property's lender, extending the forbearance period from June 30, 1994
to December 31, 1994. The General Partners are pursuing various
strategies including further extensions of the forbearance agreement as
well as seeking financing to buy out the nonrecourse first mortgage
secured by the Partnership's leasehold interest in the Property or,
alternatively, complete a sale of the Property. Should the Partnership
be unable to pay off the mortgage through a sale of the property or a
refinancing by December 31, 1994 or should a further extension of the
forbearance agreement not be obtained, the forbearance agreement
provides that the Partnership will assign its interest in the property
and in the ground lease to the property to FNBC, at FNBC's election, in
lieu of foreclosure. Should this assignment occur, the Partnership
will lose its investment in the property. Mendik Realty Company, Inc.
continues to defer its management fees and leasing commissions with
respect to the property.
Part I., Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The commercial real estate market in the Greater New York Metropolitan Area has
shown some limited signs of improvement. However, the significant cost of
tenant improvements required to be funded under both new and renewal leases has
sharply increased the demand for capital by landlords, including the
Partnership. Expenditures for tenant improvements have contributed to the
Partnership's reduced liquidity. In order to conserve the Partnership's
limited resources, the General Partners have pursued a strategy intended to
position each of the Partnership's four properties, to the extent possible, to
meet its operating and other expenses as they come due using only the operating
income generated by that Property, and, if necessary, proceeds from borrowings
secured by such Property.
During the nine months ended September 30, 1994, the Partnership funded
operating costs, the cost of tenant improvements, leasing commissions, and
building capital improvements from seven sources: (i) rental revenue generated
by the property located at Two Park Avenue, New York, New York (the "Park
Avenue Property"), the Partnership's leasehold interest in 550/600 Mamaroneck
Avenue, Harrison, New York (the "Saxon Woods Corporate Center"), the property
located at 330 West 34th Street, New York, New York (the "34th Street
Property"), and the Stamford Property, (ii) Partnership reserves, (iii) the
deferral of property management fees and leasing commissions by certain
affiliates of the General Partners, (iv) additional borrowings from the $6.5
million non-recourse line of credit (the "Saxon Woods Line of Credit") secured
by a first leasehold mortgage on the Partnership's leasehold interest in the
Saxon Woods Corporate Center (v) a portion of the $1.25 million security
deposit maintained by the unaffiliated ground lessor for the 34th Street
Property, (vi) the release of lockbox funds required by The First National Bank
of Chicago ("FNBC") pursuant to the terms of the forbearance agreement with the
34th Street Property (see below) and (vii) the release of the escrowed funds
required by New York Life Insurance Company ("New York Life") pursuant to the
previously restructured Stamford Loan. It is expected that the availability of
funds from certain of these sources will be reduced in the future.
Park Avenue Property - Since January 1, 1994, the Partnership has signed new
and renewal leases for approximately 97,000 square feet or approximately 10% of
the leasable area in the property. The largest of the new leases are with
Simplicity Patterns (41,200 square feet), K-III Magazine Corporation (29,500
square feet) and Lila Wallace - Reader's Digest Fund and DeWitt Wallace -
Reader's Digest Fund (25,100 square feet). Although the Partnership continues
to lease space at the property, with the continuing softness in the real estate
market, new and renewal leases generally have been signed at rental rates
significantly less than the rental rates received on leases signed in the
mid-1980s. The property's cash flow, however, is expected to remain stable for
the foreseeable future because rental rate increases negotiated in leases
signed in earlier years have offset the lower market rental rates reflected in
the leases recently signed by the Partnership. The costs of leasing space at
the property are being funded with existing property cash flow and reserves
maintained by the joint venture that owns the Park Avenue Property. With the
signing of the new leases as well as certain other leases currently under
negotiation, the Partnership will utilize substantially all of the property's
cash reserves by year-end 1994. However, it is expected that these leases will
increase the property's cash flow, which cash flow will be available to
reestablish reserves.
The Park Avenue Property currently generates, and is expected to generate in
the future, sufficient revenue to cover operating expenses and debt service
obligations. The indebtedness secured by the Park Avenue Property currently
matures in December 1998 (or December 1996 at the option of the lender). The
Partnership expects, as the maturity of the loan approaches, to commence
negotiations to extend the existing loan, to seek refinancing or sell the
property. However, as a result of the current lack of liquidity in the
financial marketplace, no assurances can be made that the Partnership will be
able to extend with the existing lender or refinance with a new lender, on
terms acceptable to the Partnership or at all. Additionally, the lack of
liquidity may hamper the Partnership's ability to secure a buyer for the
property at a price acceptable to the Partnership.
Saxon Woods Corporate Center - The Partnership expects that cash flow from the
Saxon Woods Corporate Center will cover operating expenses and debt service
obligations in 1994. Although the Saxon Woods Line of Credit is in the amount
of up to $6.5 million, as a result of Section 13(d) (xviii) of the Partnership
Agreement, which prohibits the Partnership from incurring indebtedness secured
by a property in excess of 40% of the then-appraised value of such property (or
40% of the value of such property as determined by the lender as of the date of
financing or refinancing, if such value is lower) (the "Borrowing Limitation"),
the Partnership is permitted to borrow only $6 million based on the most recent
appraisal of the Saxon Woods Corporate Center which as of December 31, 1993 was
$15 million. The loan agreement provides that all available cash flow from the
property will be used for expenses incurred at the property prior to borrowing
any additional funds under the Saxon Woods Line of Credit. The General
Partners expect that additional leasing activity, the costs of which will be
funded in part by borrowing amounts remaining available under the Saxon Woods
Line of Credit, may result in an increase in the appraised value of the
property thereby enabling the Partnership to borrow the additional amounts
available under the Saxon Woods Line of Credit up to the full amount of $6.5
million. There can be no assurance that the property's appraised value will
increase in the future which would enable the Partnership to borrow additional
funds. As of September 30, 1994, the Partnership had borrowed $4,680,836 under
the Saxon Woods Line of Credit. The Partnership has made commitments to borrow
an additional $362,000 which would increase the total borrowings on the Saxon
Woods Line of Credit to $5,042,836.
The indebtedness secured by the Saxon Woods Corporate Center currently matures
in September 1996. The Partnership expects, as the maturity of the loan
approaches, to commence negotiations to extend the existing loan, to seek
refinancing or sell the property. However, as a result of the current lack of
liquidity in the financial marketplace, no assurances can be made that the
Partnership will be able to sell the property or extend with the existing
lender or refinance with a new lender, on terms acceptable to the Partnership
or at all.
34th Street Property - On February 17, 1993, the Partnership signed a long-term
lease with the City of New York (the "City") effective August 1, 1992 for
approximately 300,000 square feet (45% of the property's total leasable space)
in the 34th Street Property. The City has the right to terminate the lease on
a floor by floor basis without penalty provided the City gives the Partnership
one year's prior notice. However, should it terminate the lease with respect
to one or more floors, the City would be required to pay the Partnership for
certain improvement costs as defined in the lease. The terms of the lease call
for the City to make annual base rental payments of approximately $5.4 million
and pay its proportionate share of increases in real estate taxes and operating
expenses. Per the terms of the lease, approximately $1.25 million was spent by
the Partnership for tenant improvements required under the terms of the lease.
In order to fund the tenant improvements required by the City lease, the
Partnership negotiated an agreement with the unaffiliated ground lessor
pursuant to which the ground lessor agreed to make available the $1.25 million
that was being held as security under the ground lease. The ground lessor also
agreed to waive the lease requirement that the Partnership deposit an
additional $1 million as security with the ground lessor in connection with the
increase in the annual ground rent in 1992 to $2.25 million.
During 1992, the cash flow from the 34th Street Property did not cover its debt
service obligations after payment of operating expenses, and it was not
expected to meet its debt service obligations in 1993. As a result, in order
to conserve the Partnership's limited working capital reserves and induce FNBC,
the Property's lender, to modify the mortgage's terms, the Partnership
suspended its interest payments to FNBC beginning in September 1992. On August
12, 1993, the Partnership entered into a forbearance agreement which modified
the terms of the nonrecourse first mortgage secured by the Partnership's
leasehold interest in the 34th Street Property (the "34th Street Line of
Credit"). Pursuant to the forbearance agreement FNBC agreed to forbear through
June 30, 1994 from exercising its remedies under the loan agreement as a result
of the Partnership's failure to pay interest. On August 15, 1994 an extension
of the Forbearance Agreement was entered into with FNBC extending the
forbearance period from June 30, 1994 to December 31, 1994. The forbearance
agreement allows the Partnership to pay off the 34th Street Line of Credit for
$6.5 million at any time through December 31, 1994, a substantial discount to
the 34th Street Line of Credit's current outstanding balance and below the
property's December 31, 1993 appraised value of $9.8 million. Also, through
December 31, 1994, the Partnership will be permitted to make interest payments
to FNBC only to the extent of available cash flow from the 34th Street
Property. Since the forbearance agreement went into effect, the Partnership
has not made any interest payments to FNBC. As of September 30, 1994, there
was $15 million of principal and approximately $2 million of accrued interest
outstanding on the 34th Street Line of Credit.
The forbearance agreement with FNBC provides the Partnership with an
opportunity to pay off the 34th Street Line of Credit at a substantial discount
while at the same time establishing a cost-effective means to ensure an orderly
and efficient transfer of the property to FNBC in the event the 34th Street
Line of Credit cannot be paid off. The Partnership has no assurances that it
will be able to pay off the 34th Street Line of Credit and any such pay off
will depend on numerous factors. Chief among these is the fact that many
traditional sources of real estate financing such as banks, insurance companies
and pension funds have dramatically curtailed their investment in commercial
office properties. Consequently, only a limited number of investors is likely
to be available. As a result, the General Partners are seeking to obtain
either debt or equity financing even if such financing would entail the
Partnership's transferring all or a portion of its interest in the property to
the party providing the financing.
As an alternative to refinancing the debt, the General Partners would consider
selling the property for a price sufficient to pay off the debt. In the event
the Partnership obtains from a third party an offer to purchase the property or
provide financing of less than the $6.5 million required by FNBC, the
Partnership would explore with FNBC a pay off at a further discount below the
$6.5 million. Should the Partnership be unable to pay off the 34th Street Line
of Credit through a sale of the property or a refinancing by December 31, 1994
or should a further extension of the forbearance agreement not be obtained, the
forbearance agreement provides that the Partnership will assign its interest in
the property and in the ground lease to the property to FNBC, at FNBC's
election, in lieu of foreclosure. Should this assignment occur, the
Partnership will lose its investment in the property.
In order to improve the 34th Street Property's cash flow, beginning in January
1992, Mendik Realty Company, Inc. ("Mendik Realty") voluntarily agreed to defer
its management fees of approximately $170,000 a year that would otherwise have
been payable with respect to the 34th Street Property. In addition, Mendik
Realty agreed to defer its leasing commission with respect to the signing of
the long-term lease with the City of New York and any further leasing
commissions associated with additional leasing activity at the property. Both
of these provisions will remain in effect pursuant to the terms of the
forbearance agreement with FNBC. Through September 30, 1994, Mendik Realty has
deferred approximately $682,000 in leasing commissions and management fees with
respect to the 34th Street Property.
The forbearance agreement requires the Partnership to deposit all receipts from
the Property into a lockbox at FNBC. FNBC must approve all releases from the
lockbox to fund property costs. As of September 30, 1994, approximately
$561,000 was in the lockbox account maintained at FNBC.
Stamford Property - The Partnership previously restructured the nonrecourse
loan secured by the Stamford Property in 1991. As part of the terms of the
restructured loan, Mendik Corporation and an affiliate of NY Real Estate
Services 1 Inc. ("NYRES1") loaned $50,000 and $110,000, respectively, to the
Partnership in each of 1991, 1992 and 1993. The loans were required to be
deposited in an escrow account. During the first quarter of 1994, the balance
of these funds totalling approximately $280,000 was transferred from restricted
cash to operating cash to be used to pay costs and expenses related to the
Stamford Property. As part of the restructured agreement, Mendik Realty also
agreed to defer its management fees of approximately $70,000 a year in
connection with the Stamford Property in each of calendar years 1991, 1992 and
1993; Mendik Realty has continued to defer its management fees in 1994.
The restructuring was intended to enable the Stamford Property to generate
sufficient cash flow to meet its operating expenses and debt service
obligations through 1993 without utilizing the Partnership's working capital
reserves in the hope that the Stamford real estate market would recover and
that, as leases at the property expired, the Partnership would be able to enter
into new or renewal leases at rental rates in excess of the rates being paid by
existing tenants under current leases. However, the Stamford real estate
market continued to deteriorate resulting in a further erosion of market lease
rates. While the cash flow from the Stamford Property, together with the loans
by Mendik Corporation and an affiliate of NYRES1 and the management fee
deferrals by Mendik Realty, were sufficient to cover the property's operating
expenses and debt service obligations in 1993, due to a decline in the
property's revenue following the extension of the 43,000 square foot lease with
D&B Computing Services Inc.'s ("D&B"), the Partnership failed to make full
payment of debt service due February 10, 1994 through November 10, 1994 with
respect to the Stamford Loan. A further reduction in the property's cash flow
occurred when the Partnership's lease with Automatic Data Processing Inc.
("ADP") for 37,400 square feet expired on June 30, 1994 and ADP signed a
renewal lease for only 3,500 square feet. In order to preserve its limited
working capital reserves, the Partnership currently does not intend to fund any
operating shortfalls out of reserves. As a result of the Partnership's failure
to make the required interest payments, the Partnership is in default under the
terms of the Stamford Loan and interest is now accruing at the default rate of
15% per annum. The Partnership has been unsuccessful in its attempts to sell
the property at a price sufficient to pay off the mortgage. As a result, the
General Partners are now preparing an agreement with New York Life, pursuant
to which title to the property would be transferred to New York Life in early
1995. When the property is transferred to New York Life it will result in the
loss of the Partnership's investment in the property; however, the Partnership
will not be liable for accrued interest or the principal balance of the
mortgage, even if the property is sold for less than the mortgage balance.
During the latter part of 1992, the General Partners concluded that the
Partnership may be unable to hold the 34th Street Property and the Stamford
Property on a long-term basis. As a result, the Partnership determined to
account for each property as held for disposition. Accordingly, as of December
31, 1993, the carrying value of these properties were reduced to the lower of
their depreciated cost or estimated market value.
Cash Reserves - The Partnership's consolidated cash reserves decreased by
$841,573 to $9,505,111 at September 30, 1994 from $10,346,684 at December 31,
1993. During the nine months ended September 30, 1994, approximately $2
million was expended for property improvements at the Park Avenue Property and
Saxon Woods Corporate Center in connection with leasing activity. These
expenditures were funded by approximately $138,000 in additional borrowings
under the Saxon Woods Line of Credit, a portion of the $1.5 million in cash
flow from operations generated during the nine months ended September 30, 1994
and a portion of the Partnership's cash reserves. During the nine months ended
September 30, 1994, approximately $520,000 was expended for property
improvements at the 330 West 34th Street and Stamford properties in connection
with leasing activity. These improvements were funded by releases of
restricted funds.
Rents and other receivables decreased to $491,401 at September 30, 1994 from
$796,644 at December 31, 1993 primarily due to an increase in the reserve for
doubtful accounts for two tenants at the Park Avenue Property.
Other assets increased by $1,736,766 to $9,868,343 at September 30, 1994 from
$8,131,577 at December 31, 1993. The increase is due primarily to the
prepayment of real estate taxes and insurance and increased leasing commissions
and costs. At December 31, 1993 there were no prepaid real estate taxes or
prepaid insurance.
Accounts payable and accrued expenses increased approximately $602,000 to
$1,937,641 at September 30, 1994 from $1,335,734 at December 31, 1993 primarily
due to accruals for real estate additions and an increase in prepaid rents.
Accrued interest payable increased primarily due to 1994 interest accruals on
the Stamford and 34th Street properties.
Results of Operations
For the nine months ended September 30, 1994, the Partnership generated net
cash from operating activities of $1,511,169 as compared to utilizing $499,399
for operations during the corresponding period in 1993. The Partnership
sustained net losses after depreciation and amortization of approximately $2.1
million and $5.9 million for the three and nine months ended September 30, 1994
as compared to approximately $1.2 million and $4.6 million for the same periods
in 1993.
Rental income for the three and nine months ended September 30, 1994 was
$8,341,198 and $24,631,764, respectively, compared to $8,987,818 and
$25,920,971, respectively, for the corresponding periods in 1993. The
decreases in rental income for the three and nine month periods are primarily
due to the following: (i) establishing a bad debt reserve related to 1994 rent
receivables due from two tenants at the Park Avenue Property which are in
default under their leases, whereas for the three and nine months ended
September 30, 1993, no reserves were necessary for these tenants; (ii) the
signing of new or renewal leases at the Park Avenue Property at rates lower
than those received on expiring leases originally signed in the mid-1980s; and
(iii) a decline due to the lower renewal rate D&B's lease executed January 1,
1994 at the Stamford Property as well as ADP's lease renewal.
Property operating expenses for the nine months ended September 30, 1994
decreased from the corresponding period in 1993 due primarily to reduced real
estate taxes resulting from decreases in assessed property values on the Park
Avenue property and the Saxon Woods Corporate Center. Additionally, decreases
in contract services at the Park Avenue and 34th Street properties resulted in
decreases in property operating expenses. These reductions were partially
offset by increases in utilities and professional fees. For the three months
ended September 30, 1994 property operating expenses were largely unchanged as
compared to the same period in 1993.
Interest expense increased primarily due to the default on the Stamford Loan
which resulted in an increase in the interest rate from 10.3% per annum to 15%
per annum. As the Stamford Loan is nonrecourse, the Partnership will not be
liable for this additional interest if the property is transferred to New York
Life. To a lesser extent, additional borrowings on the Saxon Woods Line of
Credit and a slight increase in 34th Street interest rate contributed to the
increase.
General and administrative expenses decreased for the nine months ended
September 30, 1994 as compared with the same period in 1993 due primarily to
reduced legal costs. General and administrative expenses increased for the
three months ended September 30, 1994 as compared with the same period in 1993
due primarily to increased Partnership administrative fees.
The percentage of leased space at each of the properties as of September 30,
1994 and 1993 were as follows: Park Avenue property - 92% vs. 89%; Saxon Woods
Corporate Center, 550 Mamaroneck - 95% vs. 88%, 600 Mamaroneck Avenue - 61% vs.
56%; 34th Street property - 65% vs. 64%; and the Stamford property - 50% vs.
57%.
PART II OTHER INFORMATION
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits: None
(b) Reports on Form 8-K - No reports on
Form 8-K were filed during the
quarter ended September 30, 1994
SIGNATURES
Pursuant to the requirements 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.
MENDIK REAL ESTATE LIMITED PARTNERSHIP
BY: NY REAL ESTATE SERVICES 1 INC.
General Partner
Date: November 14, 1994 BY: s/Kenneth L. Zakin/
Name: Kenneth L. Zakin
Title: President and Director
Date: November 14, 1994 BY: s/Mark Sawicki/
Name: Mark Sawicki
Title: Vice President and Chief
Financial Officer
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