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, 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: 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
Incorporation or Organization I.R.S. Employer 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 (unaudited)
At March 31 At December 31
1998 1997
Assets
Property held for disposition $119,905,760 $119,791,043
Cash and cash equivalents 4,778,618 4,786,697
Restricted cash 7,182,391 7,041,844
Rent and other receivables
(net of allowance for doubtful
accounts of $118,611 in 1997) 728,885 903,270
Deferred rent receivable 11,675,725 11,191,096
Other assets, net of
accumulated amortization
of $4,940,857 in 1998 and
$4,941,591 in 1997 12,596,401 8,426,941
Total Assets $156,867,780 $152,140,891
Liabilities and Partners'
Capital (Deficit)
Liabilities:
Accounts payable and
accrued expenses $3,253,190 $1,572,939
Deferred income 6,118,488 5,904,654
Due to affiliates 2,670,246 2,956,140
Security deposits payable 1,160,635 1,116,249
Accrued interest payable 754,416 727,944
Mortgages payable 71,500,000 71,500,000
Notes payable to affiliates 2,230,000 2,230,000
Total Liabilities 87,686,975 86,007,926
Minority interest 22,400,183 21,445,577
Partners' Capital (Deficit):
General Partners (398,851) (419,783)
Limited Partners (395,169
units outstanding) 47,179,473 45,107,171
Total Partners' Capital 46,780,622 44,687,388
Total Liabilities and
Partners' Capital $156,867,780 $152,140,891
Consolidated Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1998 (unaudited)
Special
Limited General Limited
Partners Partners Partner Total
Balance at December 31, 1997 $45,107,171 $(419,783) $_ $44,687,388
Net Income 2,072,302 20,932 _ 2,093,234
Balance at March 31, 1998 $47,179,473 $(398,851) $_ $46,780,622
Consolidated Statements of Operations
For the three months ended March 31, (unaudited) 1998 1997
Income
Rental $9,261,488 $8,607,411
Interest 63,009 12,908
Total Income 9,324,497 8,620,319
Expenses
Property operating 4,797,564 5,045,432
Depreciation and amortization 49,183 1,836,303
Interest 1,387,394 1,744,992
General and administrative 42,516 120,607
Total Expenses 6,276,657 8,747,334
Income (loss) before minority interest 3,047,840 (127,015)
Minority interest in
consolidated venture (954,606) (29,243)
Net Income (Loss) $2,093,234 $(156,258)
Net Income (Loss) Allocated:
To the General Partners $ 20,932 $ (156)
To the Special Limited Partner _ _
To the Limited Partners 2,072,302 (156,102)
$2,093,234 $(156,258)
Per limited partnership unit
(395,169 outstanding) $5.24 $(0.40)
Consolidated Statements of Cash Flows
For the three months ended March 31, (unaudited)
1998 1997
Cash Flows From Operating Activities
Net Income (Loss) $2,093,234 $(156,258)
Adjustments to reconcile
net income (loss) to net cash
provided by (used for)
operating activities:
Depreciation _ 1,500,001
Amortization 49,183 336,302
Minority interest in consolidated venture 954,606 29,243
Increase (decrease) in cash
arising from changes in
operating assets and liabilities:
Restricted cash (140,547) (10,186)
U.S. Treasuries and Agencies _ 5,810
Rent and other receivables 174,385 573,306
Deferred rent receivable (484,629) (181,416)
Other assets (4,218,643) (1,624,472)
Accounts payable and
accrued expenses 1,680,251 469,148
Deferred income 213,834 9,130
Due to affiliates (285,894) (1,376,565)
Security deposits payable 44,386 10,186
Accrued interest payable 26,472 (20,824)
Net cash provided by (used for)
operating activities 106,638 (436,595)
Cash Flows From Investing Activities
Additions to real estate assets (114,717) (316,070)
Accounts payable - real estate assets _ (685,341)
Net cash used for investing activities (114,717) (1,001,411)
Net decrease in cash and cash equivalents (8,079) (1,438,006)
Cash and cash equivalents,
beginning of period 4,786,697 4,727,720
Cash and cash equivalents, end of period $4,778,618 $3,289,714
Supplemental Disclosure of
Cash Flow Information
Cash paid during the period for interest $1,389,269 $1,765,816
Notes to the Consolidated Financial Statements
The unaudited financial statements should be read in conjunction
with the Partnership's annual 1997 audited financial statements
within form 10-K.
The unaudited interim financial statements include all normal and
reoccurring adjustments which are, in the opinion of management,
necessary to present a fair statement of financial position as of
March 31, 1998 and the results of operations and cash flows for
the three months ended March 31, 1998 and 1997 and the statement
of partners' capital (deficit) for the three months ended March
31, 1998. Results of operations for the period are not
necessarily indicative of the results to be expected for the full
year.
Reclassification. Certain prior year amounts have been
reclassified in order to conform to the current year's
presentation.
The following significant event occurred subsequent to fiscal
year 1997 which requires disclosure in this interim report per
Regulation S-X, Rule 10-01, Paragraph (a)(5).
The Partnership has reached an agreement in principle, subject to
final negotiation and execution of a definitive agreement, to sell
the Partnership's Properties for approximately $65 million, net of
existing mortgage debt on the Properties, (the "Proposed
Transaction"). Pursuant to the terms of the Proposed Transaction,
the Partnership's interest in Two Park Avenue is to be purchased by
an affiliate of Vornado Realty Trust for approximately $34.5
million, payable in shares of common stock of Vornado Realty Trust.
Saxon Woods Corporate Center and 330 West 34th Street are to be
purchased for an aggregate price of $30 million in cash by Vornado
Realty, L.P., or an affiliate thereof. Both Vornado Realty Trust
and Vornado Realty, L.P. are affiliates of Mendik RELP Corporation.
After the Proposed Transaction is consummated, the Partnership will
be liquidated.
The Proposed Transaction was agreed to in principle in connection
with, and is conditioned upon, the settlement of three putative
class action lawsuits that have been brought against the General
Partners of the Partnership and certain affiliates of Mendik RELP
Corporation by certain limited partners of the Partnership (the
"Settlement"). The Settlement contemplates the Proposed
Transaction, the subsequent dissolution and liquidation of the
Partnership and the distribution of the Partnership's remaining
assets after the payment of the Partnership's liabilities. The
Settlement is subject to the final negotiation and execution of a
definitive agreement and is also conditioned upon final court
approval of the Settlement. There can be no assurance that the
Proposed Transaction will close as anticipated.
Upon execution of definitive documentation, a notice will be sent
to all Limited Partners which will explain in greater detail the
terms of the Proposed Transaction and Settlement.
Part I, Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations
During the three months ended March 31, 1998, 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 (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 Management Company Inc., an affiliate of Mendik RELP
Corporation, and (iv) the deferral of interest payments on the
NYRES1 Loan. Because certain Properties may be sold, it is
expected that funds from certain of these sources may be reduced
or unavailable in the future.
The Partnership has reached an agreement in principle, subject to
final negotiation and execution of a definitive agreement, to sell
the Partnership's Properties for approximately $65 million, net of
existing mortgage debt on the Properties, (the "Proposed
Transaction"). Pursuant to the terms of the Proposed Transaction,
the Partnership's interest in Two Park Avenue is to be purchased by
an affiliate of Vornado Realty Trust for approximately $34.5
million, payable in shares of common stock of Vornado Realty Trust.
Saxon Woods Corporate Center and 330 West 34th Street are to be
purchased for an aggregate price of $30 million in cash by Vornado
Realty, L.P., or an affiliate thereof. Both Vornado Realty Trust
and Vornado Realty, L.P. are affiliates of Mendik RELP Corporation.
After the Proposed Transaction is consummated, the Partnership will
be liquidated.
The Proposed Transaction was agreed to in principle in connection
with, and is conditioned upon, the settlement of three putative
class action lawsuits that have been brought against the General
Partners of the Partnership and certain affiliates of Mendik RELP
Corporation by certain limited partners of the Partnership (the
"Settlement"). The Settlement contemplates the Proposed
Transaction, the subsequent dissolution and liquidation of the
Partnership and the distribution of the Partnership's remaining
assets after the payment of the Partnership's liabilities. The
Settlement is subject to the final negotiation and execution of a
definitive agreement and is also conditioned upon final court
approval of the Settlement. There can be no assurance that the
Proposed Transaction will close as anticipated.
Upon execution of definitive documentation, a notice will be sent
to all Limited Partners which will explain in greater detail the
terms of the Proposed Transaction and Settlement.
Park Avenue Property - As of March 31, 1998, the Park Avenue
Property was approximately 98% leased. 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. Pursuant to the new Park Avenue mortgage loan,
as discussed below, as of March 31, 1998, the Partnership had
placed approximately $6.0 million in a reserve account to fund the
costs of future leasing commissions and tenant improvements.
The Partnership refinanced the existing loan on the Park Avenue
property in April 1997. Under the new mortgage, which matures on
March 1, 2000, interest is payable at a floating rate (LIBOR plus
150 basis points), which should reduce the Partnership's debt
service costs (assuming short-term LIBOR rates remain stable).
Additionally, there will be no prepayment penalty (other than in
connection with breakage costs of any LIBOR contract), in the
event the Partnership repays the full amount due under the
mortgage prior to maturity, which should provide the Partnership
with flexibility in connection with the Partnership's plan to sell
its 60% interest in Two Park Company (see above).
The remaining 40% interest in the Park Avenue Property is owned
by B & B Park Avenue L.P. ("B&B"), of which Mendik RELP
Corporation was a general partner. On December 13, 1996,
FW/Mendik REIT LLC, an affiliate of Mendik RELP Corporation,
entered into a contract with the partners that owned
substantially all of the interest in B&B to acquire their
interest in B&B. The closing under the contract took place on
April 15, 1997. Following the closing, FW/Mendik REIT LLC
conveyed its interest in B&B to an affiliate of Vornado Realty
Trust ("Vornado"), a real estate investment trust whose shares of
stock are traded on the New York Stock Exchange. The conveyance
to the affiliate of Vornado was in connection with the
consolidation of Vornado and Mendik Realty Company, Inc. and
certain of its affiliates, which consolidation was also
consummated on April 15, 1997. In connection with this
transaction, Mendik Management assumed all property management
and leasing responsibilities at the Properties, which were
formerly performed by Mendik Realty.
Major tenants at the Park Avenue Property are The Times Mirror
Company Inc., which leases approximately 292,000 square feet
(approximately 31% of the total leaseable area in the Property)
under leases expiring on September 30, 2010, and Smith Barney,
Inc. Smith Barney, Inc. leases approximately 100,000 square feet
(approximately 11% of the total leaseable area in the Property)
under a lease expiring on May 30, 1998. Smith Barney has vacated
its space, and as a result, the Partnership has entered into
another lease agreement with a subtenant of Smith Barney for
20,000 square feet. Smith Barney continues to remain current on
its rental payments to the Partnership in accordance with the
terms of its existing lease. In addition, the Partnership
recently executed a lease agreement with United Way, effective
June 1, 1998. United Way will occupy the bulk of the space
(60,572 square feet) that was previously occupied by Smith
Barney, Inc. at rental rates higher than the Smith Barney lease.
Saxon Woods Corporate Center - The Saxon Woods Corporate Center
consists of two office buildings, which had a combined leased
rate of approximately 99% as of March 31, 1998. Individually,
the 550 Mamaroneck building was 100% leased and the 600
Mamaroneck building was 98% leased.
During the third quarter of 1996, the Partnership obtained a one-
year extension of the mortgage indebtedness to September 1997.
Subsequently, three, three-month extensions were obtained to
facilitate a sale of the Property, with a maturity date of June
26, 1998.
34th Street Property - As of March 31, 1998, the 34th Street
Property was 100% leased. The largest tenant in the Property is
the City of New York Human Resources Administration (the "City")
occupying approximately 48% of the total leaseable area under a
lease which was originally scheduled to expire in February 2001.
During the first quarter of 1997, the Partnership reached an
agreement with the City of New York to amend and extend its
existing lease at the property for approximately 300,000 square
feet for a term of approximately ten years from the previous
scheduled expiration date of February 28, 2001. In accordance
with the terms of the lease amendment, the City will have the
right to terminate its lease in whole or in part at any time
after the fifth anniversary (March 21, 2002) of the signing of
the lease amendment, with a cancellation fee equal to the then
unamortized brokerage commissions and architectural fees paid in
connection with the lease amendment. Also in connection with the
lease amendment, the ground lessor has agreed to fund up to
$100,000 in costs associated with tenant improvement work that
will be completed on the space occupied by the City. The terms
of the amended lease call for the City to make annual base rental
payments of approximately $5.4 million for the first five years
of the amended lease, approximately $5.9 million for years six
through ten of the amended lease, and approximately $6.5 million
for years eleven through fifteen of the amended lease. In
addition, the City is required to pay its proportionate share of
increases in real estate taxes and operating expenses over a
predetermined base year amount. Substantially all of the
property's cash flow will be used over the next several years to
fund the costs associated with the City's lease amendment,
including the third party brokerage commission, as well as costs
associated with leases that were previously entered into.
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. Funding for the payoff
was provided by an affiliate of NYRES1. The NYRES1 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 an unsecured obligation of the
Partnership. In connection with the loan, Mendik Management
agreed to continue to defer its management fees and leasing
commissions with respect to the property.
Operating Cash Reserves and Other Assets
The Partnership's consolidated cash reserves were $4,778,618 at
March 31, 1998, largely unchanged from $4,786,697 at December
31, 1997. Restricted cash was $7,182,391 at March 31, 1998 and
$7,041,844 at December 31, 1997.
Rent and other receivables totalled $728,885 at March 31, 1998,
compared to $903,270 at December 31, 1997. The $174,385 decrease
is primarily due to the timing of rental payments made by certain
tenants at the Partnership's properties.
Other assets increased from $8,426,941 at December 31, 1997 to
$12,596,401 at March 31, 1998. The $4,169,460 increase is
primarily attributable to prepaid leasing commissions and real
estate taxes.
Short- and Long-term Liabilities
Accounts payable and accrued expenses increased by $1,680,251 to
$3,253,190 at March 31, 1998, compared to $1,572,939 at December
31, 1997. The increase is primarily attributable to the accrual
of leasing commissions with respect to the 330 West 34th Street
property.
Due to affiliates decreased from $2,956,140 at December 31, 1997
to $2,670,246 at March 31, 1998. The decrease is primarily due
to the payment of cleaning and related expenses.
Results of Operations
For the three months ended March 31, 1998, the Partnership
generated net income of $2,093,234, compared to a net loss of
$156,258 for the corresponding period in 1997. The change from a
net loss to net income is primarily attributable to a decrease of
depreciation and amortization expense as a result of the
properties being "held for sale" as of September 31, 1997, and
an increase in rental income.
Rental income for the three months ended March 31, 1998 totalled
$9,261,488, compared to $8,607,411 for the corresponding period
in 1997. The $654,077 increase is primarily attributable to
increased occupancy and leasing activity.
Property operating expenses totalled $4,797,564 for the three
months ended March 31, 1998, compared to $5,045,432 for the
corresponding period in 1997. The $247,868 decrease is primarily
attributable to lower utilities, repairs and maintenance, and
real estate tax expenses.
Depreciation and amortization expense for the three months ended
March 31, 1998 totalled $49,183, compared to $1,836,303 for the
corresponding period in 1997. Since all of the Properties were
"held for sale," effective September 30, 1997, the Partnership
ceased depreciation as required by Statement of Financial
Accounting Standards No. 121.
Interest expense declined from $1,744,992 for the quarter ended
March 31, 1997 to $1,387,394 for the corresponding period in 1998
as a result of the refinancing of the Two Park Avenue mortgages
as of
April 15, 1997.
General and administrative expenses totalled $42,616 for the
three months ended March 31, 1998, a $77,991 decrease from
$120,607 for the corresponding period in 1997.
Part II Other Information
Item 1 Not applicable.
Item 2 Not applicable.
Item 3 Legal.
The Partnership has reached an agreement in principle, subject to
final negotiation and execution of a definitive agreement, to sell
the Partnership's Properties for approximately $65 million, net of
existing mortgage debt on the Properties, (the "Proposed
Transaction"). Pursuant to the terms of the Proposed Transaction,
the Partnership's interest in Two Park Avenue is to be purchased by
an affiliate of Vornado Realty Trust for approximately $34.5
million, payable in shares of common stock of Vornado Realty Trust.
Saxon Woods Corporate Center and 330 West 34th Street are to be
purchased for an aggregate price of $30 million in cash by Vornado
Realty, L.P., or an affiliate thereof. Both Vornado Realty Trust
and Vornado Realty, L.P. are affiliates of Mendik RELP Corporation.
After the Proposed Transaction is consummated, the Partnership will
be liquidated.
The Proposed Transaction was agreed to in principle in connection
with, and is conditioned upon, the settlement of three putative
class action lawsuits that have been brought against the General
Partners of the Partnership and certain affiliates of Mendik RELP
Corporation by certain limited partners of the Partnership (the
"Settlement"). The Settlement contemplates the Proposed
Transaction, the subsequent dissolution and liquidation of the
Partnership and the distribution of the Partnership's remaining
assets after the payment of the Partnership's liabilities. The
Settlement is subject to the final negotiation and execution of a
definitive agreement and is also conditioned upon final court
approval of the Settlement. There can be no assurance that the
Proposed Transaction will close as anticipated.
Upon execution of definitive documentation, a notice will be sent
to all Limited Partners which will explain in greater detail the
terms of the Proposed Transaction and Settlement.
Item 4 Not applicable.
Item 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, 1998.
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.
A General Partner
Date: May 19, 1998 BY: /s/ Mark Marcucci
Name: Mark Marcucci
Title: President and Director
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<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Mar-31-1998
<CASH> 4,778,618
<SECURITIES> 000
<RECEIVABLES> 12,404,610
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 19,778,792
<PP&E> 119,905,760
<DEPRECIATION> 000
<TOTAL-ASSETS> 156,867,780
<CURRENT-LIABILITIES> 3,253,190
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 46,780,622
<TOTAL-LIABILITY-AND-EQUITY> 156,867,780
<SALES> 9,261,488
<TOTAL-REVENUES> 9,324,497
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 4,889,263
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 1,387,394
<INCOME-PRETAX> 2,093,234
<INCOME-TAX> 000
<INCOME-CONTINUING> 2,093,234
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 2,093,234
<EPS-PRIMARY> 5.24
<EPS-DILUTED> 5.24
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