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 March 31, 1996
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 I.R.S. Employer
of Incorporation or Organization Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson 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
At March 31, At December 31,
1996 1995
Assets
Real estate investments:
Land $ 27,137,084 $ 27,137,084
Buildings and improvements 217,293,446 214,497,059
244,430,530 241,634,143
Less accumulated depreciation (60,421,267) (58,172,619)
184,009,263 183,461,524
Cash and cash equivalents 1,438,471 4,673,561
Restricted cash 1,044,727 1,065,455
U.S. Treasuries and Agencies 2,463,652 2,458,794
Rent and other receivables (net of
allowance for doubtful accounts of
$220,164 in 1996 and $150,880 in 1995) 999,519 938,101
Deferred rent receivable 10,150,794 9,597,899
Other assets, net of accumulated amortization
of $6,414,309 in 1996 and $6,513,970 in 1995 12,050,369 10,818,003
Total Assets $212,156,795 $213,013,337
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 3,173,474 $ 1,816,543
Deferred income 7,284,584 7,530,747
Due to affiliates 1,905,796 2,650,348
Security deposits payable 1,044,727 1,065,455
Accrued interest payable 655,031 621,854
Mortgages payable 70,105,324 70,044,524
Notes payable to affiliates 2,230,000 2,230,000
Total Liabilities 86,398,936 85,959,471
Minority interest 40,127,818 40,388,146
Partners' Capital (Deficit):
General Partners (10,357) ---
Special Limited Partner --- ---
Limited Partners (395,169 units outstanding) 85,640,398 86,665,720
Total Partners' Capital 85,630,041 86,665,720
Total Liabilities and Partners' Capital $212,156,795 $213,013,337
Consolidated Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1996
Special
Limited General Limited
Partners Partners Partner Total
Balance at December 31, 1995 $86,665,720 $ --- --- $ 86,665,720
Net loss (1,025,322) (10,357) --- (1,035,679)
Balance at March 31, 1996 $85,640,398 $ (10,357) --- $ 85,630,041
Consolidated Statements of Operations
For the three months ended March 31,
1996 1995
Income
Rent $ 8,070,917 $ 7,654,405
Interest 27,899 17,797
Total Income 8,098,816 7,672,202
Expenses
Property operating 4,790,883 4,800,180
Depreciation and amortization 2,698,632 2,587,884
Interest 1,825,138 2,338,541
General and administrative 80,170 99,107
Total Expenses 9,394,823 9,825,712
Loss before minority interest (1,296,007) (2,153,510)
Minority interest in loss of
consolidated venture 260,328 404,285
Net Loss $(1,035,679) $(1,749,225)
Net Loss Allocated:
To the General Partners $ (10,357) $ (17,492)
To the Special Limited Partner --- ---
To the Limited Partners (1,025,322) (1,731,733)
$(1,035,679) $(1,749,225)
Per limited partnership unit
(395,169) outstanding $(2.59) $(4.38)
Consolidated Statements of Cash Flows
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities
Net loss $(1,035,679) $(1,749,225)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 2,698,632 2,587,884
Minority interest in loss of consolidated venture (260,328) (404,285)
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Restricted cash 20,728 547,109
U.S. Treasuries and Agencies (4,858) ---
Rent and other receivables (61,418) 351,642
Deferred rent receivable (552,895) 259,857
Other assets (1,682,350) (1,934,315)
Accounts payable and accrued expenses 12,717 (1,759,869)
Deferred income (246,163) ---
Due to affiliates (744,552) (527,114)
Security deposits payable (20,728) (171,146)
Accrued interest payable 33,177 337,645
Net cash used for operating activities (1,843,717) (2,461,817)
Cash Flows From Investing Activities
Additions to real estate assets (2,796,387) (949,886)
Accounts payable - real estate assets 1,344,214 ---
Net cash used for investing activities (1,452,173) (949,886)
Cash Flows From Financing Activities
Proceeds from mortgage and notes payable 60,800 ---
Net cash used for financing activities 60,800 ---
Net decrease in cash and cash equivalents (3,235,090) (3,411,703)
Cash and cash equivalents, beginning of period 4,673,561 8,347,080
Cash and cash equivalents, end of period $ 1,438,471 $ 4,935,377
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest $ 1,791,961 $ 2,000,896
Notes to the Consolidated Financial Statements
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1995 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 present a fair statement of financial position as of March 31,
1996 and the results of operations and cash flows for the three months ended
March 31, 1996 and 1995 and the statement of partners' capital (deficit) for
the three months ended March 31, 1996. Results of operations for the period
are not necessarily indicative of the results to be expected for the full year.
No significant events have occurred subsequent to fiscal year 1995, and no
material contingency exists which would require disclosure in this interim
report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
Reclassification Certain 1995 amounts have been reclassified to conform with
the financial statement presentation used in 1996.
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 in recent years after a prolonged
period of depressed conditions beginning in 1988 and into the early 1990s.
However, the significant cost of tenant improvements required to be funded
under both new and renewal leases and the resulting demand for capital by
landlords, including the Partnership, has remained high. In order to conserve
its limited resources, the Partnership has pursued a strategy intended to
position each of the Partnership's 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 three months ended March 31, 1996, the Partnership funded operating
costs, the cost of tenant improvements, leasing commissions, and building
capital improvements from four sources: (i) cash flow 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") and the Partnership's leasehold
interest in the property located at 330 West 34th Street, New York, New York
(the "34th Street Property"), (ii) Partnership reserves, (iii) the deferral of
property management fees and leasing commissions with respect to certain of the
properties by Mendik Realty Company, Inc., an affiliate of Mendik Corporation,
and (iv) proceeds from the non- recourse line of credit secured by a first
leasehold mortgage on the Partnership's leasehold interest in the Saxon Woods
Corporate Center (the "Saxon Woods Line of Credit"). It is expected that funds
from each of these sources may be reduced or unavailable in the future.
Park Avenue Property - As of March 31, 1996, the Park Avenue Property was
approximately 98% leased. In order to fund tenant improvements and leasing
commissions for leases signed in recent years as well as certain other leases
currently under negotiation, the Partnership utilized or committed to utilize
substantially all of the property's cash reserves which at March 31, 1996
totalled approximately $563,911. However, it is expected that these leases
will increase the property's cash flow, which cash flow will be available to
re-establish reserves.
The Park Avenue Property currently generates, and is expected to generate over
the near term, sufficient cash flow to cover operating expenses and current
debt service charges. The indebtedness secured by the Park Avenue Property
currently matures in December 1998. Although the lender has the option to
accelerate the maturity of the loans to December 1996 upon 180 days written
notice, the lender has, to date, given neither formal notice nor any indication
that it will or intends to accelerate the maturity date of the loans. If the
maturity of the loans is accelerated, the Partnership will explore other
options, including either a refinancing with a new lender or a possible sale of
the property. However, no assurances can be given that the Partnership would
be able to refinance or sell the property on terms acceptable to the
Partnership.
Major tenants at the Park Avenue Property are The Times Mirror Company Inc.
which leases 271,850 square feet (29% of total leasable area in the property)
under a lease which was recently extended through September 30, 2010 and
National Benefit Life Insurance Company which leases 99,839 square feet (11% of
total leasable area in the property) under a lease expiring May 30, 1998.
Although National Benefit Life Insurance Company has notified the Partnership
that it will vacate its space once the current lease expires, the Partnership
has been negotiating with the subtenants of National Benefit, which occupy
approximately 30,000 square feet, to continue their occupancy under primary
leases after May 1998.
34th Street Property - As of March 31, 1996, the 34th Street Property was
approximately 92% leased. The largest tenant in the property is the City of
New York Human Resources Administration (the "City") occupying approximately
47% of the total leasable area under a lease which is scheduled to expire in
February 2001. 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 over a base year. As
with most leases with the City of New York, the tenant has the right to
terminate its lease on a floor by floor basis upon one year's notice although
it must reimburse the Partnership's unamortized costs of tenant improvements
associated with the lease. To date, the Partnership has not received any
indication that the City intends to terminate any portion of the lease.
However, the City has retained a real estate brokerage firm to evaluate its
space needs at various locations in New York City, including the 34th Street
Property. The Partnership has had preliminary discussions with the brokerage
firm in connection with a long-term extension of the City's lease.
The 34th Street Property is no longer encumbered by a mortgage obligation. The
previous mortgage was paid off in June 1995 for a discounted amount of $1.75
million, or approximately 10% of the property's outstanding debt balance of
approximately $18 million, including principal and accrued interest. The
successful payoff of the mortgage allowed the Partnership to retain its
interest in the property and have the opportunity to benefit from any
improvement in the market. Funding for the payoff was provided by an affiliate
of the Partnership's NY Real Estate Services 1 Inc. general partner (the "NYRES
1 Loan"). The NYRES 1 loan bears interest at the prime rate less one and
one-quarter percent and matures upon the earlier of December 31, 2025 or the
termination of the Partnership. Accrued interest and principal are payable on
a current basis to the extent there is net cash flow available from the
property. The loan is not secured by a mortgage on the property, but is an
unsecured obligation of the Partnership. In connection with the loan, Mendik
Realty Company Inc., an affiliate of the Mendik Corporation general partner,
agreed to continue to defer its management fees and leasing commissions with
respect to the property. At present, the property is generating sufficient
cash flow to meet operating expenses.
Saxon Woods Corporate Center - The Saxon Woods Corporate Center consists of two
office buildings, which had a combined leased rate of approximately 83% as of
March 31, 1996. Individually, the 550 Mamaroneck building was 95% leased and
the 600 Mamaroneck building was 73% leased. The Partnership expects that cash
flow from the Saxon Woods Corporate Center will cover operating expenses and
current debt service obligations over the remainder of 1996. 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 Partnership is permitted to borrow
only $6.08 million based on the most recent appraisal of the Saxon Woods
Corporate Center which was $15.2 million as of December 31, 1995. 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. However, there can
be no assurance that the property's appraised value will increase in the
future. As of March 31, 1996, the Partnership had borrowed $5,105,324 under
the Saxon Woods Line of Credit.
In light of the scheduled maturity of the Saxon Woods Line of Credit in
September 1996, the Partnership commenced discussions with the lender in the
latter part of 1995 in an effort to extend the maturity of the indebtedness. As
a result of such efforts, the Partnership has reached a tentative agreement
with the lender to extend the maturity of the debt obligation for a term of one
year from the previous scheduled expiration date in September 1996. The
General Partners are hopeful that the agreement will be executed by the end of
the second quarter of 1996. However, in the event an agreement with the lender
cannot be finalized prior to the scheduled maturity of the loan, the
Partnership will pursue other options, including a refinancing with a new
lender or a possible sale of the property. There can be no assurance, however,
that such efforts would be successful.
Operating Cash Reserves and Other Assets
The Partnership's consolidated cash reserves decreased by $3,235,090 to
$1,438,471 at March 31, 1996 from $4,673,561 at December 31, 1995. The
decrease is primarily attributable to payments for tenant improvements at the
Park Avenue Property and also the payment of real estate taxes in January 1996.
During the three months ended March 31, 1996, approximately $1.5 million of
cash was utilized for property improvements at the Park Avenue Property, the
34th Street Property and Saxon Woods Corporate Center in connection with
leasing activity and other building improvements.
The Partnership's restricted cash balance at March 31, 1996, which is comprised
of tenant security deposits, was $1,044,727, largely unchanged from $1,065,455
at December 31, 1995.
Deferred rent receivable totalled $10,150,794 at March 31, 1996, compared to
$9,597,899 at December 31, 1995. The $552,895 increase is primarily
attributable to the addition of several new tenants at the 34 Street Property
with free rent periods and The Times Mirror Company Inc. lease modification in
the fourth quarter of 1995, as discussed further in the Partnership's 1995 Form
10-K.
Other assets increased from $10,818,003 at December 31, 1995 to $12,050,369 at
March 31, 1996. The $1,232,366 increase is primarily attributable to the
prepayment of real estate taxes through June 30, 1996.
Short- and Long-term Liabilities
Accounts payable and accrued expenses increased by $1,356,931 to $3,173,474 at
March 31, 1996, compared to $1,816,543 at December 31, 1995. The increase is
primarily attributable to expenses incurred by the Partnership in connection
with property improvements completed at the 34th Street Property as a result of
the execution of several new leases during the fourth quarter of 1995.
Due to affiliates decreased from $2,650,348 at December 31, 1995 to $1,905,796
at March 31, 1996. The $744,552 decrease is primarily attributable to prepaid
cleaning and related service charges netted against other amounts due to
affiliates primarily consisting of deferred management fees and leasing
commissions.
Results of Operations
For the three months ended March 31, 1996, the Partnership used $1,843,717 in
net cash for operating activities compared to $2,461,817 for the corresponding
period in 1995. The decrease is primarily attributable to the Partnership
using less cash to meet accounts payable and accrued expenses during the first
quarter of 1996 as compared to the first quarter of 1995. The Partnership
generated a net loss after depreciation and amortization of $1,035,679 for the
three months ended March 31, 1996, compared to $1,749,225 for the corresponding
period in 1995. The decrease in net loss realized by the Partnership during
the 1996 period is primarily attributable to an increase in rental income and a
decrease in interest expense.
Rental income for the three months ended March 31, 1996 totalled $8,070,917,
compared to $7,654,405 for the three months ended March 31, 1995. The $416,512
increase is due primarily to an increase in the overall occupancy at the 34th
Street Property during the 1996 period primarily due to significant leasing
activity during the fourth quarter of 1995.
Property operating expenses totalled $4,790,883 for the three months ended
March 31, 1996, largely unchanged from $4,800,180 for the three months ended
March 31, 1995.
Interest expense for the three months ended March 31, 1996 totalled $1,825,138,
compared to $2,338,541 for the three months ended March 31, 1995. The decrease
is due primarily to: (i) the $10 million paydown of the outstanding principal
balance of the mortgages secured by the Park Avenue Property in the fourth
quarter of 1995 and (ii) the June 1995 discounted payoff of the 34 Street
Property mortgage.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended March 31, 1996
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: May 15, 1996 BY: /s/ Kenneth L. Zakin
Name: Kenneth L. Zakin
Title: President and Director
Date: May 15, 1996 BY: /s/ Mark Sawicki
Name: Mark Sawicki
Title: Vice President and
Chief Financial Officer
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<ARTICLE> 5
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<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Mar-31-1996
<CASH> 1,438,471
<SECURITIES> 000
<RECEIVABLES> 11,150,313
<ALLOWANCES> 220,164
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 244,430,530
<DEPRECIATION> 60,421,267
<TOTAL-ASSETS> 212,156,795
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
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000
<OTHER-SE> 85,630,041
<TOTAL-LIABILITY-AND-EQUITY> 212,156,795
<SALES> 8,070,917
<TOTAL-REVENUES> 8,098,816
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 7,569,685
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 1,825,138
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
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<NET-INCOME> (1,035,679)
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