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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
------------------------
COMMISSION FILE NUMBER 1-9663
MID-AMERICA REALTY INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 47-0700007
(State of incorporation) (I.R.S. Employee Identification No.)
11506 NICHOLAS STREET, SUITE 100, OMAHA, NEBRASKA 68154
(Address of principal executive offices) (Zip Code)
(402) 496-3300
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK, PAR VALUE $0.01 PER
SHARE NEW YORK STOCK EXCHANGE
(Title of Each Class) (Name of Exchange on which registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to Form 10-K. /X/
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 _
The number of shares of common stock outstanding as of February 28, 1997 was
8,283,779 shares. The aggregate market value of the 8,231,268 shares of common
stock held by non-affiliates on such date was $83,341,589.
The following documents are incorporated into this report by reference: a
portion of the Company's proxy statement for its 1997 Annual Meeting of
Shareholders ("1997 Proxy Statement") is incorporated by reference in Part III.
Total Pages: 52
Exhibit Index on Page: 49
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MID-AMERICA REALTY INVESTMENTS, INC.
1996 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 5
Item 3. Legal Proceedings........................................... 7
Item 4. Submission of Matters to a Vote of Security Holders......... 7
PART II
Item 5. Market for the Company's Common Stock and Related
Shareholder Matters........................................ 7
Item 6. Selected Financial Data..................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 9
Item 8. Financial Statements and Supplementary Data................. 15
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure................................... 15
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 15
Item 11. Executive Compensation...................................... 15
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 15
Item 13. Certain Transactions and Relationships...................... 15
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K........................................................ 16
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL DESCRIPTION OF BUSINESS
Mid-America Realty Investments, Inc. (the "Company") is a self-administered
real estate investment trust ("REIT") which owns, manages and operates
income-producing commercial real estate, primarily enclosed malls and
neighborhood shopping centers. The Company was incorporated under the laws of
Maryland in October 1986. At December 31, 1996, the Company owned 18
neighborhood shopping centers and four enclosed malls located in Nebraska, Iowa,
Illinois, South Dakota, Minnesota, Michigan, Wisconsin, Indiana, Arkansas,
Georgia and Tennessee. Additionally, the Company is a 50% partner in Mid-America
Bethal Limited Partnership ("Mid-America Bethal") which owns two neighborhood
shopping centers and one enclosed mall. Most of the properties are situated in
middle-sized communities and, in many cases, represent the major retail facility
in their trade areas.
The Company's investment objectives are to own and manage income-producing
commercial real estate that will provide cash for distribution to its
shareholders on a quarterly basis and preserve investor capital, while providing
potential for capital appreciation. The Company's policy is to acquire
commercial properties that are capable of generating income through active
management, leasing, re-leasing or development of additional tenant space.
DEVELOPMENTS DURING 1996
WESTVIEW PLAZA--In August 1996, the Company completed the sale of Westview
Plaza in McCook, Nebraska. The gross sales price was $425,000 resulting in a
book loss of approximately $314,000. Proceeds from the sale were used to reduce
bank debt.
MONUMENT MALL--In September 1996, the Company completed its 12,857 square
foot theatre expansion at Monument Mall in Scottsbluff, Nebraska. Total project
costs paid during 1996 were $774,000.
OUTLOT SALES--During 1996, the Company sold one outlot parcel for total
proceeds of approximately $183,000, resulting in a book gain of approximately
$24,400.
LAKEWOOD MALL--During 1996, the Company contracted to expand its five screen
theatre at Lakewood Mall in Aberdeen, South Dakota to nine screens. The 7,800
square foot expansion began in December 1996 and is expected to be operating in
Spring 1997. Total project costs are estimated at approximately $337,500, all of
which will be paid during 1997.
YIELD MAINTENANCE AGREEMENT--During 1996, the Company received total
proceeds of $19,300 under its Yield Maintenance Agreement with the former
related parties. See Note G to the Company's Consolidated Financial Statements.
PROPERTY MANAGEMENT AND LEASING
The Company is a fully integrated real estate company and manages its own
properties through Mid-America Centers Corp. (formerly Dial Enterprises Corp.),
its wholly-owned subsidiary. The management and leasing of the properties is
"hands on" and conducted by experienced professionals with knowledge of local
markets and relationships with local and national retailers.
INDUSTRY AND GEOGRAPHIC FACTORS
The Company is subject to various risks typically associated with the
ownership of real estate, such as defaults or non-renewal of leases, increased
operating costs or costs resulting from leveraging, changes in interest rates
and the availability of favorable financing which may render the sale or
refinancing of
3
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properties difficult or unattractive, environmental problems, problems
attributable to the location of properties, changes in general or local economic
conditions, changes in real estate and zoning laws, and increases in real
property tax rates. Real estate investments tend to be illiquid and,
consequently, the Company could have difficulty responding to adverse changes in
any of the aforementioned factors or similar factors (particularly if adverse
changes occur in Nebraska and the greater Midwest where most of the Company's
properties are located).
CERTAIN SIGNIFICANT TENANTS
The continued success of the Company's anchor tenants is important to the
success of the Company's properties because such anchor tenants attract other
tenants and customers to the shopping center. Wal-Mart, Herberger's, Hy-Vee
grocery stores, Kmart, J.C. Penney, Walgreens, Target and/or Shopko anchored a
total of 17 of the Company's properties either as lessees or as occupants of
buildings adjacent to the properties and lease in the aggregate approximately
39% of the total leasable space in the Company's properties.
Additionally, Kmart, Hy-Vee grocery stores, Herberger's and/or Wal-Mart
anchored all Mid-America Bethal properties as either lessees or as occupants of
buildings adjacent to the properties and lease in the aggregate approximately
38% of the total leasable space in the Mid-America Bethal properties.
The only lessee that occupies more than 10% of the gross leasable space of
the properties owned by the Company at December 31, 1996 is Wal-Mart, whose five
stores at properties owned by the Company account for approximately 15% of total
gross leasable area. Wal-Mart also operates stores adjacent to three of the
Company's properties and to one of Mid-America Bethal's properties.
ENVIRONMENTAL MATTERS
Pursuant to the terms of the Company's leases with its tenants, the Company
does not have control over the operational activities of its tenants, nor does
it monitor its tenants with respect to environmental matters. Although the
Company is not aware of any environmental liabilities in connection with any of
its properties, the owner of real property with latent hazardous waste problems
may be liable for such problems even if such problems were not caused by the
current landowner. Liability for such problems under federal and state law is
generally strict, joint and several.
COMPETITION
The Company competes for acquisitions of real property with a wide variety
of investors, including insurance companies, pension funds, corporate and
individual real estate developers, other REITs and syndicators, many of which
have investment objectives similar to those of the Company and may have greater
financial resources, larger staffs and longer operating histories than those of
the Company. In addition, the Company competes with other owners of similar
properties for tenants on the basis of location, rental rates, amenities and
other factors.
INSURANCE
The Company considers its insurance coverage to be adequate. The Company
carries comprehensive general liability coverage with limits of liability of no
less than $5,000,000 per occurrence to insure against liability claims and
provide for the cost of defense. Similarly, the Company is insured against the
risk of direct physical damage in amounts structured to reimburse the Company on
a replacement cost basis for amounts incurred to repair or rebuild each
property, including loss of rental income during the period of repair or
reconstruction. When considered prudent, the Company insures against losses from
earthquakes, which coverage has a 5% deductible. The Company carries flood
insurance for the properties that are in designated 100-year flood plains.
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EMPLOYEES
The Company and its subsidiary had 94 employees (58 full-time and 36
part-time) at December 31, 1996. The corporate office in Omaha, Nebraska had 24
employees at December 31, 1996.
TAXATION OF THE COMPANY AND ITS SHAREHOLDERS
The Company was organized and intends to conduct its operations so as to
continue to qualify for taxation as a REIT under Sections 856-860 of the
Internal Revenue Code of 1986. A REIT generally is not subject to federal
corporate income tax on its net income if certain requirements are met. To
qualify as a REIT, the Company is required, among other things, to meet certain
stock ownership, income, asset and distribution rules and tests. As a REIT, the
Company distributes to its shareholders substantially all of its cash flow from
operations and, in any event, at least 95% of its real estate investment trust
taxable income.
CERTAIN RESTRICTIONS ON TRANSFER OF COMMON STOCK
Provisions of the Company's Articles of Incorporation, primarily intended to
enable the Company to maintain its status as a REIT, authorize the Company i) to
refuse to transfer common stock to, or prohibit exercise of shareholder rights
by, any person who as a result would beneficially own, directly or indirectly by
attribution, common stock in excess of 9.8% of the total outstanding capital
stock of the Company ("Excess Shares") and ii) to redeem Excess Shares of common
stock, the accumulation of which would jeopardize the status of the Company as a
REIT.
ITEM 2. PROPERTIES
The following tables set forth information concerning each of the properties
that the Company owns directly or has an equity interest in through Mid-America
Bethal as of December 31, 1996.
<TABLE>
<CAPTION>
GROSS LEASED RATE AT YEAR
DATE LEASABLE END(1)
ACQUIRED OR AREA --------------------
COMPLETED (SQ. FT.) 1996 1995
----------- ---------- --------- --------- 1997
BASE RENT(2)
------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
COMPANY PROPERTIES:
ENCLOSED MALLS:
Delta Plaza--Escanaba, Michigan.......................... 12/30/86 188,000 94% 93% $ 834
Lakewood Mall--Aberdeen, South Dakota.................... 08/28/92 232,000 92% 83% 1,520
Monument Mall--Scottsbluff, Nebraska..................... 12/30/86 205,000 95% 93% 1,093
Thunderbird Mall--Virginia, Minnesota.................... 12/30/86 256,000 100% 98% 1,577
---------- --------- --------- ------------
881,000 95% 92% 5,024
</TABLE>
5
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<TABLE>
<CAPTION>
GROSS LEASED RATE AT YEAR
DATE LEASABLE END(1)
ACQUIRED OR AREA --------------------
COMPLETED (SQ. FT.) 1996 1995
----------- ---------- --------- ---------
1997
BASE RENT(2)
------------
(THOUSANDS)
NEIGHBORHOOD SHOPPING CENTERS:
<S> <C> <C> <C> <C> <C>
Bishop Heights--Lincoln, Nebraska........................ 12/30/86 26,000 100% 100% 106
Cornhusker Plaza--South Sioux City, Nebraska............. 06/27/91 63,000 100% 91% 464
Eastville Plaza--Fremont, Nebraska....................... 12/30/86 69,000 86% 100% 430
Edgewood Shopping Center--Lincoln, Nebraska
Phase I................................................ 06/01/87 72,000 96% 96% 451
Phase II............................................... 06/26/91 100,000 99% 99% 724
Fairacres Shopping Center--Oshkosh, Wisconsin............ 12/22/92 74,000 94% 93% 592
Fitchburg Ridge Shopping Center--Fitchburg, Wisconsin.... 08/31/94 50,000 97% 100% 262
Germantown Shopping Center--Jasper, Indiana.............. 12/21/88 232,000 93% 95% 975
Ile de Grand--Grand Island, Nebraska..................... 04/09/87 82,000 99% 98% 530
Kimberly West Shopping Center--Davenport, Iowa........... 12/14/92 97,000 82% 85% 548
Macon County Plaza--Lafayette, Tennessee................. 12/21/88 87,000 82% 79% 244
Meadows Shopping Center--Lincoln, Nebraska............... 06/01/88 68,000 100% 100% 479
Miracle Hills Park Shopping Center--Omaha, Nebraska...... 07/05/88 71,000 93% 96% 599
Moorland Square--New Berlin, Wisconsin................... 11/23/92 84,000 98% 100% 660
Rivergate Shopping Center--Shelbyville, Indiana.......... 12/21/88 133,000 96% 100% 499
Shenandoah Plaza--Newnan, Georgia........................ 12/21/88 141,000 92% 100% 642
Southport Centre--Apple Valley, Minnesota................ 01/01/94 125,000 98% 100% 1,415
Town West Center--Paragould, Arkansas.................... 12/21/88 143,000 94% 98% 398
Twin Oaks Centre--Silvis, Illinois....................... 04/19/95 95,000 92% 91% 656
---------- --------- --------- ------------
1,812,000 94% 96% 10,674
---------- --------- --------- ------------
Total Enclosed Malls and Neighborhood Centers............ 2,693,000 94% 95% $ 15,698
---------- --------- --------- ------------
---------- --------- --------- ------------
MID-AMERICA BETHAL LIMITED PARTNERSHIP PROPERTIES (3):
ENCLOSED MALLS:
Imperial Mall--Hastings, Nebraska........................ 12/01/87 324,000 90% 81% $ 1,570
NEIGHBORHOOD SHOPPING CENTERS:
Stockyards--Omaha, Nebraska
Plaza (Phase I)........................................ 06/01/89 103,000 95% 98% 684
Theaters (Phase II).................................... 07/17/90 26,000 100% 100% 232
Taylor Heights Shopping Center--Sheboygan, Wisconsin..... 07/30/90 85,000 100% 100% 809
---------- --------- --------- ------------
214,000 98% 99% 1,725
---------- --------- --------- ------------
Total Enclosed Malls and Neighborhood Centers............ 538,000 93% 88% $ 3,295
---------- --------- --------- ------------
---------- --------- --------- ------------
</TABLE>
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(1) Leased rate represents the percentage of gross leasable area which is leased
to third-party tenants.
(2) Amounts are based on the 1997 lease terms of existing lessees at December
31, 1996.
(3) The Company owns a 50% partnership interest in Mid-America Bethal Limited
Partnership. All information presented is for the entire center.
6
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ITEM 3. LEGAL PROCEEDINGS
The Company is subject to a number of lawsuits and claims for various
amounts which arise out of the normal course of business. In the opinion of
management, the disposition of claims currently pending will not have a material
adverse effect on the Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during
the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol MDI. The following table sets forth the high and low sale prices of
the Common Stock, as reported on the New York Stock Exchange Composite Tape and
the dividends declared per share of Common Stock by the Company for each
calendar quarter in the periods indicated. Dividends declared for a calendar
quarter were paid in the next calendar quarter. The stock price at the close of
business on December 31, 1996 was $9.50.
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW DECLARED
---------- ----- -------------
<S> <C> <C> <C>
1995:
First Quarter.................................................... $ 8 $ 61/2 $ .22
Second Quarter................................................... $ 9 $ 71/8 $ .22
Third Quarter.................................................... $ 8 $ 73/4 $ .22
Fourth Quarter................................................... $ 81/8 $ 71/4 $ .22
1996:
First Quarter.................................................... $ 83/8 $ 73/4 $ .22
Second Quarter................................................... $ 87/8 $ 81/4 $ .22
Third Quarter.................................................... $ 93/8 $ 8 $ .22
Fourth Quarter................................................... $ 101/8 $ 87/8 $ .22
</TABLE>
At December 31, 1996, there were 8,283,255 shares of common shares issued
and outstanding which were held by approximately 1,935 shareholders of record.
The shareholders of record do not reflect the persons or entities who held their
stock in nominee or "street" name.
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ITEM 6. SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total Revenues................................... $ 23,066 $ 22,333 $ 21,152 $ 18,433 $ 16,510
Net Income (Loss)................................ $ 3,889 $ 3,384 $ (128) $ 2,196 $ 1,221
Dividends Declared:
Ordinary Income................................ $ 5,135 $ 414 $ 2,650 $ 3,222 $ 1,369
Return of Capital.............................. 2,153 6,872 4,637 $ 4,051 4,843
---------- ---------- ---------- ---------- ----------
$ 7,288 $ 7,286 $ 7,287 $ 7,273 $ 6,212
Per Share Amounts:
Net Income (Loss).............................. $ .47 $ .41 $ (.02) $ .27 $ .23
Dividends Declared:
Ordinary Income.............................. $ .62 $ .05 $ .32 $ .39 $ .26
Return of Capital............................ .26 .83 .56 .49 .92
---------- ---------- ---------- ---------- ----------
$ .88 $ .88 $ .88 $ .88 $ 1.18
Weighted Average Number of Shares Outstanding.... 8,281,696 8,280,051 8,280,052 8,092,024 5,264,627
OTHER DATA
Funds From Operations (1)(2)..................... $ 9,502 $ 8,631 $ 8,018 $ 7,629 $ 5,978
</TABLE>
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(1) Persons formerly related to the Company are obligated to pay certain amounts
to the Company as described in Note G Consolidated Financial Statements.
Such amounts are not included in the Funds From Operations shown above.
(2) Management considers Funds From Operations to be an appropriate measure of
the performance of an equity REIT. The Company calculates Funds From
Operations based upon the definition adopted by the National Association of
Real Estate Investment Trusts ("NAREIT"). Funds From Operations is defined
as net income before gains/losses from property sales adjusted for non-cash
items in the income statement, such as depreciation and amortization. Funds
From Operations should not be considered by the reader as an alternative to
net income as an indicator of the Company's operating performance or to cash
flows as a measure of liquidity.
The 1996 Funds From Operations reported above reflect recommendations
contained in the Funds From Operations White Paper (the "FFO White Paper")
recently adopted by the National Association of Real Estate Investment
Trusts to standardize financial reporting by real estate investment trusts.
The Company adopted the recommendations prescribed in the FFO White Paper
for reporting periods beginning after January 1, 1996. In addition, 1995
Funds From Operations has been restated to conform to the prescribed FFO
White Paper.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Real Estate Investments:
Property, net.................................. $ 124,312 $ 127,765 $ 127,261 $ 116,439 $ 119,866
Investment in Mid-America Bethal............... 15,201 15,597 16,367 16,522 15,732
Interest in Twin Oaks Centre, net.............. -- -- 2,953 5,697 5,276
Investment in Valley Park Centre............... -- -- -- 2,889 3,498
---------- ---------- ---------- ---------- ----------
$ 139,513 $ 143,362 $ 146,581 $ 141,547 $ 144,372
Total Assets..................................... $ 145,840 $ 150,339 $ 151,442 $ 147,178 $ 151,049
Mortgages and Notes Payable...................... $ 64,348 $ 65,592 $ 63,486 $ 51,868 $ 78,105
Shareholders' Equity............................. $ 79,535 $ 82,916 $ 86,813 $ 94,081 $ 72,381
Shares Outstanding............................... 8,283,255 8,280,524 8,279,892 8,264,627 5,264,627
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis could contain forward looking
statements which reflect management's current views and estimates of future
economic circumstances, industry conditions, company performance and the
financial results. The statements are based on many assumptions and factors,
including general economic conditions, interest rates, consumer behavior,
competitive environment and related market conditions, operating efficiencies,
and actions of governments. Any changes in such assumptions or factors could
produce significantly different results.
The Company was organized in October 1986 as a real estate investment trust
and first issued shares of its common stock to the public in December 1986 to
finance the acquisition of seven properties. Since that time, 18 currently-owned
additional properties (or equity interests therein) have been acquired through
cash, debt financing and/or in exchange for common stock. The following
discussion should be read in conjunction with the Consolidated Financial
Statements and Notes thereto.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary sources of funds are (i) cash generated from
operations which includes distributions from Mid-America Bethal, (ii)
borrowings, (iii) sales of real estate, and (iv) principal repayments on notes
receivable. Management anticipates that these sources will provide the necessary
funds for its operating expenses, interest expense on outstanding indebtedness,
recurring capital expenditures and dividends to shareholders in accordance with
REIT requirements, during the next twelve months. Management also believes that
it has capital, and the access to capital resources, sufficient to expand and
develop its business in accordance with its strategy for growth. In general, the
Company intends to acquire and finance additional real estate properties and
investments, to the extent possible, in such a manner as to maintain the ability
to make regular distributions to shareholders. However, the future issuance of
debt or equity securities by the Company or the acquisition of new properties or
investments could affect the yield to shareholders.
At December 31, 1996, the Company had invested approximately 96% of its
assets in enclosed malls and neighborhood shopping centers, including the
Company's investment in Mid-America Bethal. The remainder of the Company's
assets primarily consisted of accounts and notes receivable.
Net cash flows from investing activities were $(893,000). Net cash flows
provided during 1996 from the sales of real estate totaled $572,000. In
addition, principal proceeds from the Company's notes receivable with the former
related parties totaled approximately $334,000 for the year ended December 31,
1996, while principal proceeds from the repayment of tax increment financing
bonds totaled $242,000 for the same period. Also during 1996, the Company
invested approximately $2,005,000 in expansion projects, tenant improvements and
other capital expenditures.
Net cash flows from financing activities were $(8,533,000). Dividends paid
for the year ended December 31, 1996 were $.88 per share or $7,288,000. At the
present time, the Company has sufficient funds to support operations and the
payment of the dividend in accordance with the Company's dividend policy.
At December 31, 1996, the Company had a debt-to-equity ratio of .81 to 1,
compared to .79 to 1 at December 31, 1995, based upon the ratio of mortgages and
notes payable to total shareholders' equity. The increase in the ratio from
December 31, 1995 resulted primarily from the effect of the Company's use of new
loan proceeds to finance expansions of several of the Company's properties
during 1996 and current year distributions. The Company's ratio of debt to total
market capitalization was 45% at December 31, 1996, compared to 51% at December
31, 1995.
During 1997, principal payments of approximately $18,678,000 under mortgage
and revolving credit agreements will mature. The mortgage collateralized by the
Miracle Hills Shopping Center ($3,302,000 at
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9.0%) is expected to be extended for a period of seven years by the existing
lender. Revolving credit agreements of approximately $14,860,000 mature during
1997 and are expected to be extended for one to two years.
RESULTS OF OPERATIONS--YEARS ENDED DECEMBER 31, 1996 AND 1995
Net income for the year ended December 31, 1996 was $3,889,000 or $.47 per
share, which included a net loss on the sale of real estate of $289,000, or $.03
per share. These results compare to $3,384,000 or $.41 per share for the year
ended December 31, 1995, which included net gains on sales of real estate of
$189,000 or $.02 per share.
The increase in net income for the year ended December 31, 1996 compared to
the year ended December 31, 1995 was primarily due to increased base and
percentage rents, positive impact of recent expansion activities, a decrease in
the weighted average cost of funds during 1996 and the continued impact of the
Company's expense reduction initiatives. The Company experienced an increase of
$733,000 in total revenues and a $254,000 decrease in total expenses from the
year ended December 31, 1996 compared to the same period in 1995.
RENTAL INCOME
Rental income for the year ended December 31, 1996 was $17,012,000 compared
to $16,564,000 for the year ended December 31, 1995, an increase of $448,000 or
3%. This increase in rental income reflects the effect of new leases and rent
increases, the full year impact of 1995 expansion activities and the partial
year impact of 1996 expansion activities, specifically the Herberger's
Department Store expansion at Lakewood Mall in Aberdeen, South Dakota which
began operating in March 1996, and the theatre expansion at Monument Mall in
Scottsbluff, Nebraska which began operating in September 1996, and the full year
impact of the acquisition of the Twin Oaks Centre in April 1995.
REIMBURSEMENT INCOME
Reimbursement income for the year ended December 31, 1996 was $5,097,000
compared to $4,834,000 for the year ended December 31, 1995, an increase of
$263,000 or 5%. This increase in reimbursement income reflects the effect of new
leases and the positive impact of recent expansion activities.
PROPERTY MANAGEMENT INCOME
Property management income, which primarily consists of lease and property
management fees from properties managed for Mid-America Bethal, was $194,000 for
the year ended December 31, 1996 compared to $200,000 for the year ended
December 31, 1995, a decrease of $6,000 or 3%. The decrease was attributable to
fewer new leases at properties owned by Mid-America Bethal during 1996 compared
to 1995.
OTHER INCOME
Other income for the year ended December 31, 1996 was $763,000 compared to
$735,000 for the year ended December 31, 1995, an increase of $28,000 or 4%. The
increase was primarily attributable to a $90,000 final settlement from the
Company's investment in Valley Park Center offset by a decrease in interest
income on the Company's temporary investments, notes receivable and tax
increment financing bonds.
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REAL ESTATE TAXES
Real estate taxes for the year ended December 31, 1996 were $3,076,000
compared to $3,063,000 for the year ended December 31, 1995, an increase of less
than 1%.
OTHER PROPERTY COSTS
Other property costs for the year ended December 31, 1996 were $3,584,000
compared to $3,674,000 for the year ended December 31, 1995, a decrease of
$90,000 or 2%. This decrease was due to timing of certain recurring property
expenses offset by an increase in property expenses of approximately $30,000 at
Twin Oaks Centre due to the full year impact.
INTEREST EXPENSE
Interest expense for the year ended December 31, 1996 was $5,787,000
compared to $5,965,000 for the year ended December 31, 1995, a decrease of
$178,000 or 3%. The decrease was due primarily to a decrease in the average cost
of funds slightly offset by an increase in average total debt in 1996 over 1995.
The Company's average total debt was $65,306,000 for the twelve months ended
December 31, 1996 compared to $65,209,000 for the twelve months ended December
31, 1995. In addition, the average cost of funds for the twelve months ended
December 31, 1996 was 8.86% compared to 9.17% during the same period in 1995.
ADMINISTRATIVE EXPENSES
Administrative expenses for the year ended December 31, 1996 were $1,268,000
compared to $1,458,000 for the year ended December 31, 1995, a decrease of
$190,000 or 13%. This decrease reflects the continued impact of improved cost
control throughout the Company and a decrease in legal and consulting costs due
to one-time items incurred in 1995.
PROPERTY MANAGEMENT EXPENSES
Property management expenses for the year ended December 31, 1996 were
$1,062,000 compared to $812,000 for the year ended December 31, 1995, an
increase of $250,000 or 31%. This increase was primarily attributable to the
impact of the acquisition of the Twin Oaks Centre in April 1995, an increase in
leasing and marketing activities and the timing of certain property management
expenses.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense for the year ended December 31, 1996
was $5,066,000 compared to $5,125,000 for the year ended December 31, 1995, a
decrease of $59,000 or 1%. This decrease was related to certain intangible
assets that were fully amortized in 1996 offset by an increase due to the full
year impact of the Twin Oaks Centre acquisition in April 1995, renovation and
expansion projects and tenant finish projects which were completed during 1995
and 1996.
EQUITY IN EARNINGS OF MID-AMERICA BETHAL LIMITED PARTNERSHIP
The Company's equity in earnings of Mid-America Bethal Limited Partnership
for the year ended December 31, 1996 was $955,000 compared to $959,000 for the
year ended December 31, 1995, a decrease of $4,000 or less than 1%. The decrease
was a result of higher real estate taxes and other property expenses offset by
an increase in total revenues for the twelve months ended December 31, 1996
compared to the same period in 1995.
11
<PAGE>
RESULTS OF OPERATIONS--YEARS ENDED DECEMBER 31, 1995 AND 1994
Net income for the year ended December 31, 1995 was $3,384,000, or $.41 per
share, which included net gains on sales of real estate of $189,000, or $.02 per
share. These results compare to a net loss for the year ended December 31, 1994
of $128,000 or $.02 per share.
The increase in net income for the year ended December 31, 1995 compared to
the year ended December 31, 1994 was primarily due to increased base and
percentage rents and the impact of the Company's expense reduction initiatives.
In addition the year ended December 31, 1994 included $3,150,000 for the loss
provision related to the Company's interest in Twin Oaks Centre. The Company
also experienced an increase of $1,181,000 in total revenues and a $60,000
increase from the Company's equity in earnings of Mid-America Bethal.
RENTAL INCOME
Rental income for the year ended December 31, 1995 was $16,564,000 compared
to $15,615,000 for the year ended December 31, 1994, an increase of $949,000 or
6%. Rental income recorded during the year ended December 31, 1995 from the Twin
Oaks Centre (acquired April 1995) was $368,000. Also impacting the 1995 increase
in rental income was the full year impact of Fitchburg Ridge Shopping Center
(acquired August 1994). Fitchburg rental income was $305,000 and $105,000 for
the years ended December 31, 1995 and 1994, respectively. The remainder of the
increase reflects the effect of new leases and rent increases.
REIMBURSEMENT INCOME
Reimbursement income for the year ended December 31, 1995 was $4,834,000
compared to $4,366,000 for the year ended December 31, 1994, an increase of
$468,000 or 11%. Reimbursement income recorded during the year ended December
31, 1995 from the Twin Oaks Centre was $23,000. Also impacting the increase in
reimbursement income was the full year effect of 1994 acquisitions.
Specifically, reimbursement income for Southport Centre (acquired January 1994)
and Fitchburg Ridge Shopping Center (acquired August 1994) together was $809,000
and $532,000, respectively, for the twelve months ended December 31, 1995 and
1994, respectively. The remainder of the increase reflects the effect of new
leases.
PROPERTY MANAGEMENT INCOME
Property management income, which primarily consists of lease and property
management fees from properties managed for Mid-America Bethal, was $200,000 for
the year ended December 31, 1995 compared to $211,000 for the year ended
December 31, 1994, a decrease of $11,000 or 5%. The decrease was attributable to
fewer new leases at properties owned by Mid-America Bethal during 1995 compared
to 1994.
OTHER INCOME
Other income for the year ended December 31, 1995 was $735,000 compared to
$960,000 for the year ended December 31, 1994, a decrease of $225,000 or 23%.
The decrease was primarily attributable to approximately $300,000 of interest
income in 1994 related to the Company's investment in Twin Oaks Centre. In April
1995, the Company entered into a Settlement Agreement with the Twin Oaks Centre
Limited Partnership resulting in the Company taking ownership of the Twin Oaks
Centre. See Note D to the Company's Consolidated Financial Statements.
12
<PAGE>
REAL ESTATE TAXES
Real estate taxes for the year ended December 31, 1995 were $3,063,000
compared to $2,815,000 for the year ended December 31, 1994, an increase of
$248,000 or 9%. The increase was due primarily to the full year impact of prior
year acquisitions and the acquisition of the Twin Oaks Centre during 1995. Real
estate taxes related to the Southport Centre and Fitchburg Ridge Shopping Center
recorded during the year ended December 31, 1995 and 1994 were $605,000 and
$410,000, respectively. Real estate taxes related to the Twin Oaks Centre
recorded during the year ended December 31, 1995 were $33,000.
OTHER PROPERTY COSTS
Other property costs for the year ended December 31, 1995 were $3,674,000
compared to $3,651,000 for the year ended December 31, 1994, an increase of
$23,000 or 1%. Other property costs recorded during the year ended December 31,
1995 and 1994 related to the Southport Centre and Fitchburg Ridge Shopping
Center together were $201,000 and $132,000, respectively. Other property costs
recorded at Twin Oaks for the year ended December 31, 1995 were $40,000. These
increased costs were mitigated by a decrease in weather related costs (i.e.,
snow removal, utilities, etc.).
INTEREST EXPENSE
Interest expense for the year ended December 31, 1995 was $5,965,000
compared to $5,389,000 for the year ended December 31, 1994, an increase of
$576,000 or 11%. The increase was due primarily to the increase in average total
debt in 1995 over 1994 and an increase in the average cost of funds. The
Company's average total debt was $65,209,000 for the twelve months ended
December 31, 1995 compared to $61,014,000 for the twelve months ended December
31, 1994. In addition, the average cost of funds for the twelve months ended
December 31, 1995 was 9.17% compared to 8.77% during the same period in 1994.
ADMINISTRATIVE EXPENSES
Administrative expenses for the year ended December 31, 1995 were $1,458,000
compared to $1,540,000 for the year ended December 31, 1994, a decrease of
$82,000 or 5%. This decrease reflects the full year impact of improved cost
control throughout the Company initiated during 1994.
PROPERTY MANAGEMENT EXPENSES
Property management expenses for the year ended December 31, 1995 were
$812,000 compared to $1,277,000 for the year ended December 31, 1994, a decrease
of $465,000 or 36%. This decrease reflects the full year impact of improved cost
control throughout the Company initiated during 1994. The most significant
impact of these cost controls was a reduction in the number of personnel.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense for the year ended December 31, 1995
was $5,125,000 compared to $5,047,000 for the year ended December 31, 1994, an
increase of $78,000 or 2%. Depreciation and amortization expense related to the
Twin Oaks Centre recorded during the year ended December 31, 1995 was $62,000.
The remainder of the increase related primarily to renovation and expansion
projects and tenant finish projects which were completed during 1995.
PROVISION FOR LOSS ON INTEREST IN TWIN OAKS CENTRE
The Company recorded a loss reserve relating to its interest in Twin Oaks
Centre for the year ended December 31, 1994 of $3,150,000. This amount reflected
charges to reduce the recorded value of the Company's loan to the Twin Oaks
Centre Limited Partnership (the "Partnership") to the estimated fair
13
<PAGE>
value of the underlying collateral. The collateral for the Company's loan to the
Partnership included the Twin Oaks Centre (the "Centre"), a 95,000 square-foot
neighborhood shopping center in Silvis, Illinois, and tax increment financing
bonds issued in connection with the Centre. Walgreens, a major anchor tenant of
the Centre, vacated in the second quarter of 1994. Although Walgreens continued
to pay rent, management reviewed the adverse effect of the Walgreens exit on
property lease-up and cash flows from the tax increment financing bonds and
provided additional loss reserves with respect to the Company's loan on the
property in the second quarter of 1994. On April 19, 1995, the Company entered
into a settlement agreement with the Partnership. The Partnership was in default
on a mortgage loan to the Company. Pursuant to the settlement, the Company took
ownership of the underlying collateral which consisted of the Centre and the tax
increment financing bonds. All litigation was dismissed as part of the
settlement. See Note D to the Company's Consolidated Financial Statements.
EQUITY IN EARNINGS OF MID-AMERICA BETHAL LIMITED PARTNERSHIP
The Company's equity in earnings of Mid-America Bethal Limited Partnership
for the year ended December 31, 1995 was $959,000 compared to $899,000 for the
year ended December 31, 1994, an increase of $60,000 or 7%. The increase was the
result of the net impact of lease up of vacant space during 1995 and the full
year impact of 1994 leases. Also impacting this increase was a decrease in bad
debt expense during the twelve months ended December 31, 1995 as compared to the
same period of 1994.
FUNDS FROM OPERATIONS
Management considers Funds From Operations to be an appropriate measure of
the performance of an equity REIT. The Company defines Funds From Operations as
net income before gains/losses from property sales adjusted for non-cash items
in the income statement, such as certain depreciation and amortization. Funds
From Operations should not be considered by the reader as an alternative to net
income as an indicator of the Company's operating performance or to cash flows
as a measure of liquidity.
Funds From Operations were $9,502,000 for the year ended December 31, 1996
compared to $8,631,000 for the year ended December 31, 1995. The increase of
$871,000, or 10%, was attributable to the full year impact of the Twin Oaks
Centre acquisition in April 1995, the positive impact of recent expansion
activities, a decrease in the Company's weighted average cost of funds and, to a
lesser degree, increased base rents.
Funds From Operations is computed as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Net Income (Loss).......................................................... $ 3,889 $ 3,384 $ (128)
Depreciation and Amortization (1).......................................... 4,859 4,857 5,047
Provision for loss on Interest in Twin Oaks Centre......................... -- -- 3,150
Loss (Gains) on Sales of Real Estate, net (2).............................. 289 (189) (690)
Investment in Mid-America Bethal:
Equity in Earnings....................................................... (955) (959) (899)
Equity in Funds From Operations (3)...................................... 1,510 1,538 1,493
Other.................................................................... (90) -- 45
--------- --------- ---------
Funds From Operations...................................................... $ 9,502 $ 8,631 $ 8,018
--------- --------- ---------
--------- --------- ---------
</TABLE>
The 1996 Funds From Operations reported above reflect recommendations
contained in the Funds From Operations White Paper (the "FFO White Paper")
recently adopted by the National Association of Real Estate Investment Trusts to
standardize financial reporting by real estate investment trusts. The Company
adopted the recommendations prescribed in the FFO White Paper for reporting
periods
14
<PAGE>
beginning after January 1, 1996. In addition, 1995 Funds From Operations has
been restated to conform to the prescribed FFO White Paper.
- ------------------------
(1) Depreciation and amortization for the year ended December 31, 1996 and 1995,
respectively, consisted of real property depreciation of $4,489,000 and
$4,389,000, lease fee amortization of $266,000 and $366,000, and other
intangible amortization of $104,000 and $102,000.
(2) Loss on sales of real estate for the year ended December 31, 1996 consisted
of a net loss of $314,000 on the sale of the Westview Plaza in McCook,
Nebraska and a net gain of $24,400 on the sale of an outlot parcel. Gains on
sales of real estate for the year ended December 31, 1995 consisted of a
$189,000 gain from the sale of two outlot parcels.
(3) Equity in Funds From Operations of Mid-America Bethal for the years ended
December 31, 1996 and 1995, respectively, included real property
depreciation of $536,000 and $542,000, and lease fee amortization of $19,000
and $37,000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item appear in the audited
consolidated financial statements and schedules included herein and listed in
the index on page 15 of this report. The supplementary data required by this
item appears at footnote K entitled "Quarterly Information (Unaudited)" on page
34 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no change in the Company's independent accountants during the
two most recent fiscal years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference to the
Sections entitled "Persons Nominated for Election as Directors" and "Executive
Officers of the Company" in the 1997 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Sections entitled "Director Meetings and Compensation", "Summary Compensation
Table", "Option Grants in 1996", "Option Exercises in 1996 and Year-End Values
Table", and "Employment Agreements" in the 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Sections entitled "Ownership of Shares by Directors and Executive Officers" and
"Ownership of Certain Beneficial Owners" in the 1997 Proxy Statement.
ITEM 13. CERTAIN TRANSACTIONS AND RELATIONSHIPS
The Company has no transactions or relationships reportable pursuant to this
Item.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(1) Financial Statements:
The audited Consolidated Financial Statements and Schedules of
Mid-America Realty Investments, Inc. are included herein and listed on
the index on page 17 of this report.
(2) Financial Statement Schedules: Certain financial statement schedules of
Mid-America Realty Investments, Inc. are included herein and listed on
the index on page 17 of this report.
(3) Exhibits:
The Exhibit Index, set forth below, is incorporated herein by reference.
(B) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the last quarter of
the fiscal year ended December 31, 1996.
(C) EXHIBITS
See Item 14(a)(3) above.
(D) FINANCIAL STATEMENTS REQUIRED BY REGULATIONS S-X WHICH ARE EXCLUDED FROM THE
ANNUAL REPORT BY RULE 14A-3(B)
The financial statements and schedules of Mid-America Bethal Limited
Partnership (financial statements of significant subsidiary, pursuant to Rule
3-09) are filed as part of this report.
16
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
The following Consolidated Financial Statements of Mid-America Realty
Investments, Inc. and the related Independent Auditors' Report are included in
Item 8 and Item 14 (a) (1):
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Management................................................................... 18
Independent Auditors' Report........................................................... 19
Consolidated Balance Sheets at December 31, 1996 and 1995.............................. 20
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and
1994.................................................................................. 21
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1996,
1995 and 1994......................................................................... 22
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and
1994.................................................................................. 23
Notes to Consolidated Financial Statements............................................. 25
</TABLE>
The following Consolidated Financial Statement Schedule of Mid-America
Realty Investments, Inc. is included in Item 14 (a) (2):
<TABLE>
<S> <C>
Schedule III--Real Estate and Accumulated Depreciation................ 35
</TABLE>
All other schedules have been omitted because they are not applicable or not
required, or because the required information is shown in the consolidated
financial statements or notes thereto.
17
<PAGE>
REPORT OF MANAGEMENT
The management of Mid-America Realty Investments, Inc. has prepared and is
responsible for the consolidated financial statements and other financial
information included in this Form 10-K Annual Report. The consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles and include amounts that are based upon informed judgments and
estimates by management. The other financial information in this annual report
is consistent with the consolidated financial statements.
The Company maintains a system of internal accounting controls. Management
believes the internal accounting controls provide reasonable assurance that
transactions are executed and recorded in accordance with Company policy and
procedures and that the accounting records may be relied on as a basis for
preparation of the consolidated financial statements and other financial
information.
The Audit Committee of the Board of Directors, composed of directors who are
not employees of the Company, meets periodically with management and the
independent auditors to discuss the adequacy of internal accounting controls and
the quality of financial reporting. The independent auditors have full and free
access to the Audit Committee.
<TABLE>
<S> <C>
[SIG] [SIG]
Jerome L. Heinrichs Dennis G. Gethmann
CHAIRMAN AND CHIEF EXECUTIVE OFFICER PRESIDENT AND CHIEF OPERATING OFFICER
</TABLE>
18
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Mid-America Realty Investments, Inc.
We have audited the accompanying consolidated balance sheets of Mid-America
Realty Investments, Inc. and subsidiary as of December 31, 1996 and 1995, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a)(2). These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Mid-America Realty Investments,
Inc. and subsidiary as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
January 24, 1997
Omaha, Nebraska
19
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(COLUMNAR DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash...................................................................................... $ -- $ --
Accounts receivable, net of allowance of $195,000 and $175,000............................ 1,571 1,497
Notes receivable, net of allowance of $70,000 and $160,000................................ 498 742
Property:
Land and land improvements.............................................................. 37,352 37,567
Buildings............................................................................... 114,913 113,602
Equipment and fixtures.................................................................. 555 559
Construction-in-progress................................................................ -- 287
---------- ----------
152,820 152,015
Less: Accumulated depreciation.......................................................... (28,508) (24,250)
---------- ----------
Property, net........................................................................... 124,312 127,765
Investment in Mid-America Bethal Limited Partnership...................................... 15,201 15,597
Intangible assets, less accumulated amortization of $3,422,000 and $2,948,000............. 1,623 2,042
Other assets.............................................................................. 2,635 2,696
---------- ----------
$ 145,840 $ 150,339
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages and notes payable............................................................... $ 64,348 $ 65,592
Accrued liabilities....................................................................... 1,957 1,831
---------- ----------
Total Liabilities..................................................................... 66,305 67,423
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.01 par value; authorized 25,000,000 shares; issued and outstanding
8,283,255 and 8,280,524 shares........................................................ 83 83
Capital in excess of par value.......................................................... 119,700 119,682
Distributions in excess of net income................................................... (40,248) (36,849)
---------- ----------
Total Shareholders' Equity............................................................ 79,535 82,916
---------- ----------
$ 145,840 $ 150,339
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(COLUMNAR DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Rental income............................................................ $ 17,012 $ 16,564 $ 15,615
Reimbursement income..................................................... 5,097 4,834 4,366
Property management and leasing income................................... 194 200 211
Other income............................................................. 763 735 960
---------- ---------- ----------
Total Revenues......................................................... 23,066 22,333 21,152
EXPENSES
Real estate taxes........................................................ 3,076 3,063 2,815
Other property costs..................................................... 3,584 3,674 3,651
Interest expense......................................................... 5,787 5,965 5,389
Administrative expenses.................................................. 1,268 1,458 1,540
Property management and leasing expenses................................. 1,062 812 1,277
Depreciation and amortization............................................ 5,066 5,125 5,047
Provision for loss on interest in Twin Oaks Centre....................... -- -- 3,150
---------- ---------- ----------
Total Expenses......................................................... 19,843 20,097 22,869
---------- ---------- ----------
Income (Loss) Before Equity in Earnings of Mid-America Bethal Limited
Partnership and Gains on Sales of Real Estate, net........................ 3,223 2,236 (1,717)
Equity in Earnings of Mid-America Bethal Limited Partnership............... 955 959 899
---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS.............................................. 4,178 3,195 (818)
(Loss) Gain on Sales of Real Estate, net................................... (289) 189 690
---------- ---------- ----------
NET INCOME (LOSS).......................................................... $ 3,889 $ 3,384 $ (128)
---------- ---------- ----------
---------- ---------- ----------
Weighted Average Shares Outstanding During Period.......................... 8,281,696 8,280,051 8,280,052
---------- ---------- ----------
---------- ---------- ----------
NET INCOME (LOSS) PER COMMON SHARE......................................... $ .47 $ .41 $ (.02)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(COLUMNAR DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL IN DISTRIBUTIONS
EXCESS OF IN EXCESS OF
COMMON STOCK PAR VALUE NET INCOME TOTAL
------------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994.......................................... $ 83 $ 119,530 $ (25,532) $ 94,081
Issuance of shares.............................................. -- 150 -- 150
Repurchase of shares............................................ -- (3) -- (3)
Net loss........................................................ -- -- (128) (128)
Dividends declared and paid--$.88 per share..................... -- -- (7,287) (7,287)
--- ---------- ------------ ---------
BALANCE, DECEMBER 31, 1994........................................ 83 119,677 (32,947) 86,813
Issuance of shares.............................................. -- 5 -- 5
Net income...................................................... -- -- 3,384 3,384
Dividends declared and paid--$.88 per share..................... -- -- (7,286) (7,286)
--- ---------- ------------ ---------
BALANCE, DECEMBER 31, 1995........................................ 83 119,682 (36,849) 82,916
Issuance of shares.............................................. -- 18 -- 18
Net income...................................................... -- -- 3,889 3,889
Dividends declared and paid--$.88 per share..................... -- -- (7,288) (7,288)
--- ---------- ------------ ---------
BALANCE, DECEMBER 31, 1996........................................ $ 83 $ 119,700 $ (40,248) $ 79,535
--- ---------- ------------ ---------
--- ---------- ------------ ---------
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(COLUMNAR DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)............................................................. $ 3,889 $ 3,384 $ (128)
Adjustments:
Depreciation and amortization............................................... 5,066 5,125 5,047
Provision for loss on interest in Twin Oaks Centre.......................... -- -- 3,150
Investment in Mid-America Bethal Limited Partnership:
Equity in earnings........................................................ (955) (959) (899)
Distributions received.................................................... 1,350 1,500 1,050
Loss (gains) on sales of real estate, net................................... 289 (189) (690)
Increase (decrease) in related liabilities.................................. 145 537 (84)
(Increase) decrease in related assets....................................... (358) (542) 324
--------- ---------- ----------
Net Cash Flows From Operating Activities........................................ 9,426 8,856 7,770
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of real estate............................................ 572 469 1,224
Principal repayments of notes receivable...................................... 334 123 131
Interest in Twin Oaks Centre.................................................. -- -- (406)
Payments from Valley Park Centre.............................................. -- -- 3,974
Additions to property:
Purchase of new properties.................................................. -- -- (14,636)
Expansion projects & other capital expenditures............................. (1,725) (1,184) (1,303)
Tenant improvements......................................................... (280) (667) (563)
Cash paid for leasing fees.................................................... (55) (263) (237)
Payments from Yield Maintenance Agreement..................................... 19 1,027 106
Principal repayments of Tax Increment Financing Bonds......................... 242 71 --
Cash paid for intangibles and other assets.................................... -- -- (442)
--------- ---------- ----------
Net Cash Flows From Investing Activities...................................... (893) (424) (12,152)
CASH FLOWS FROM FINANCING ACTIVITIES
(Payments) proceeds on short-term debt, net................................... (119) (2,147) 12,139
Proceeds of mortgages payable................................................. -- 14,500 --
Principal payments on mortgages............................................... (1,126) (13,279) (521)
Cash paid for loan fees....................................................... -- (220) (131)
Dividends paid................................................................ (7,288) (7,286) (7,287)
--------- ---------- ----------
Net Cash Flows From Financing Activities...................................... (8,533) (8,432) 4,200
--------- ---------- ----------
NET CHANGE IN CASH.............................................................. -- -- (182)
CASH, BEGINNING OF YEAR......................................................... -- -- 182
--------- ---------- ----------
CASH, END OF YEAR............................................................... $ -- $ -- $ --
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
<S> <C> <C>
1996: (A) One of the Company's acquisition lines of credit was extended one year to July
1997.
(B) The Company extended the two Twin Oaks Centre mortgages for three years to April
1999.
(C) The Company repaid the maturing fixed rate mortgage loan secured by Bishop Heights
Shopping Center with proceeds from one of the Company's acquisition lines of
credit.
1995: (A) Both of the Company's acquisition lines of credit were extended, one to July 1996
and the other to July 1997.
(B) The Company extended its working line of credit two years to July 1997.
(C) The Company extended the Lakewood Mall mortgage loan for three years to August
1998.
(D) The Company assumed the Twin Oaks Centre loan. See Note D to the Company's
Consolidated Financial Statements.
1994: (A) In connection with the acquisition of Southport Centre, the Company issued 15,585
shares of common stock to the seller.
(B) The Company obtained a $5,000,000 working capital line of credit and allowed its
existing working line of credit to expire.
(C) Both of the Company's acquisition lines of credit were extended one year to July
1995.
(D) The Company's adjustable-rate mortgage on Fairacres Shopping Center was reduced by
$2,000,000 and extended to July 1995. The $2,000,000 was funded through one of the
Company's acquisition lines of credit.
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(COLUMNAR DOLLARS IN FOOTNOTES ARE IN THOUSANDS EXCEPT PER SHARE DATA)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS--Mid-America Realty Investments, Inc. (the "Company"),
a Maryland corporation, owns and manages income-producing properties, primarily
enclosed malls and neighborhood shopping centers. The Company has qualified as a
real estate investment trust ("REIT") under the provisions of the Internal
Revenue Code.
At December 31, 1996, the Company owned 18 neighborhood shopping centers and
four enclosed malls located as follows: eight in Nebraska, three in Wisconsin,
two each in Indiana and Minnesota, and one each in Arkansas, Georgia, Illinois,
Iowa, Michigan, South Dakota and Tennessee. Additionally, the Company is a 50%
partner in Mid-America Bethal Limited Partnership ("Mid-America Bethal") which
owns two neighborhood shopping centers in Nebraska and Wisconsin and one
enclosed mall in Nebraska.
USE OF ESTIMATES--In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements are
prepared on an accrual basis and include the accounts of the Company and its
wholly-owned subsidiary, Mid-America Centers Corp. All significant intercompany
balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS--The Company considers short-term investments with
a maturity at acquisition of three months or less as cash equivalents. The
Company currently utilizes daily cash receipts to pay down any working capital
balances.
INVESTMENT IN MID-AMERICA BETHAL LIMITED PARTNERSHIP--The Company's 50%
investment in Mid-America Bethal is accounted for using the equity method.
PROPERTY--Property is stated at the lower of depreciated cost or the amount
estimated to be recoverable through future cash flows from property operations
and dispositions. Assets are depreciated using the straight-line method over the
following lives: land improvements--15 years; buildings--40 years; tenant
improvements--shorter of the term of the lease or the estimated useful life of
the improvement; and equipment and fixtures--5 to 7 years. Real property
depreciation for the years ended December 31, 1996, 1995 and 1994 was
$4,489,000, $4,389,000 and $4,299,000, respectively. In March 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", effective for fiscal years beginning after
December 15, 1995. The adoption of the provisions of this statement did not have
a material impact on the Company's financial condition or results of operations.
INTANGIBLE ASSETS--Fees paid for leasing commissions on new or renewed
leases are amortized using the straight-line method over the initial term or
extension of the lease. Costs incurred to obtain mortgages and notes payable are
being amortized over the term of the obligation or agreement. Other intangible
assets, primarily from the acquisition of Mid-America Centers Corp., are being
amortized using the straight-line method over periods of 60-120 months.
25
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(COLUMNAR DOLLARS IN FOOTNOTES ARE IN THOUSANDS EXCEPT PER SHARE DATA)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LEASES--All leases with tenants are classified as operating leases.
REVENUE RECOGNITION--Minimum rents from tenants are recognized monthly based
upon total fixed cash flow over the initial term of the lease, using the
straight-line method. Percentage rents are based upon tenant sales levels for a
specified period. Reimbursed expenses for real estate taxes, common area
maintenance, utilities, janitorial and building maintenance are recognized in
the period in which the expenses are incurred, based upon the provisions of the
tenant's lease.
FEDERAL INCOME TAXES--The Company has qualified as a REIT under the Internal
Revenue Code and, accordingly, will not be subject to federal income taxes on
amounts distributed to shareholders provided certain requirements are met,
including the provision that at least 95% of its real estate investment trust
taxable income is distributed by March 15 of the following year.
The dividends paid during 1996, 1995 and 1994 were allocated between
ordinary income and non-taxable return of capital as follows (amounts are per
share):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Ordinary income............................................... $ .62 $ .05 $ .32
Return of capital............................................. .26 .83 .56
--- --- ---
$ .88 $ .88 $ .88
--- --- ---
--- --- ---
</TABLE>
In 1995, a portion of previously recorded book losses associated with the
Company's interest in Twin Oaks Centre were utilized for income tax purposes. As
a result of the settlement described in footnote D, these losses affected the
taxation of dividends paid during 1995 by increasing the return of capital
portion and decreasing the ordinary income portion.
REPURCHASE OF COMMON STOCK--Under the laws of the state of Maryland, all
shares of common stock reacquired by the Company must be retired.
EARNINGS PER SHARE--The computation of earnings per share is based upon the
weighted average number of shares outstanding during the period.
B. PROPERTY TRANSACTIONS
WESTVIEW PLAZA--In August 1996, the Company completed the sale of Westview
Plaza in McCook, Nebraska. The gross sales price was $425,000 resulting in a
book loss of approximately $314,000. Proceeds from the sale were used to reduce
bank debt.
OUTLOT SALES--During 1996, the Company sold one outlot parcel for total
proceeds of $183,000, resulting in a gain of $24,400. During 1995 and 1994, the
Company sold two outlot parcels for total proceeds of $469,000 and $495,000,
respectively, resulting in book gains of $189,000 and $220,000, respectively.
TWIN OAKS CENTRE--On April 19, 1995, the Company entered into a settlement
agreement with the Twin Oaks Centre Limited Partnership (the "Partnership"). The
Partnership was in default on a mortgage
26
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(COLUMNAR DOLLARS IN FOOTNOTES ARE IN THOUSANDS EXCEPT PER SHARE DATA)
B. PROPERTY TRANSACTIONS (CONTINUED)
loan to the Company. Pursuant to the settlement, the Company took ownership of
the underlying collateral which consisted of the Twin Oaks Centre, a 95,000
square foot neighborhood shopping center in Silvis, Illinois and tax increment
financing bonds payable from incremental sales and real estate taxes generated
by the shopping center and adjacent properties. All litigation against the
Company was dismissed as part of the settlement. Twin Oaks Centre's net
operating income (excluding interest on related debt) was $489,000 and $234,000
for the twelve months ended December 31, 1996 and 1995, respectively. See Note D
to the Company's consolidated financial statements for further discussion of the
Twin Oaks property transaction.
VILLAGE SQUARE--On December 15, 1994, the Company completed the sale of
Village Square in Inver Grove Heights, Minnesota. The gross sales price was
$810,000 resulting in a book loss of approximately $790,000.
FITCHBURG RIDGE SHOPPING CENTER--On August 31, 1994, the Company completed
the acquisition of Fitchburg Ridge Shopping Center in Fitchburg, Wisconsin for
$2,071,000, including acquisition costs. The acquisition was accounted for using
the purchase method of accounting. Fitchburg Ridge Shopping Center's net
operating income (excluding interest on related debt) which is included in the
accompanying Consolidated Statements of Operations was $81,000, $234,000 and
$219,000 for the twelve months ended December 31, 1994, 1995 and 1996,
respectively.
INVESTMENT IN VALLEY PARK CENTRE--On April 29, 1994, the Company recognized
a gain of $1,260,000 on the loan to Valley Park Centre.
SOUTHPORT CENTRE--On January 13, 1994, the Company completed the acquisition
of Southport Centre in Apple Valley, Minnesota. The purchase price, including
acquisition costs, was $12,985,000 with $12,835,000 paid in cash and $150,000
paid through the issuance of 15,585 shares of the Company's common stock. The
acquisition was effective January 1, 1994 using the purchase method of
accounting. Southport Centre's net operating income (excluding interest on
related debt) was $1,266,000, $1,258,000 and $1,244,000, respectively, for the
twelve months ended December 31, 1994, 1995 and 1996, respectively.
C. NOTES RECEIVABLE
Notes receivable at December 31, 1996 consists of two separate notes from
parties formerly related to the Company. The notes carry interest rates of 9.50%
and 12%, mature in varying amounts through 2004 and are collateralized by
specific tangible assets and personal guarantees.
D. TWIN OAKS CENTRE
In December 1989, the Company entered into a mortgage loan with Twin Oaks
Centre Limited Partnership (the "Partnership") for the construction of Twin Oaks
Centre ("TOC") in Silvis, Illinois. The loan was secured by the Twin Oaks Centre
and tax increment financing bonds payable from incremental sales and real estate
taxes to be generated by the shopping center and adjacent properties, which are
currently undeveloped.
The Company considered the Partnership loan impaired and therefore recorded
charges of $3,150,000 in the second quarter of 1994 to reduce the recorded
balance of the loan to the estimated value of the
27
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(COLUMNAR DOLLARS IN FOOTNOTES ARE IN THOUSANDS EXCEPT PER SHARE DATA)
D. TWIN OAKS CENTRE (CONTINUED)
underlying collateral. Provisions were based on management's estimate of value
of the collateral considering the current and anticipated future operating
conditions. Walgreens, a major anchor tenant of the Twin Oaks Centre, vacated in
the second quarter of 1994. Although Walgreens continued to pay rent, management
reviewed the adverse effect of the Walgreens exit on property lease-up and cash
flows from the related tax increment financing bonds and provided the loss
reserves discussed above.
On April 19, 1995, the Company entered into a settlement agreement (the
"Settlement") with the Twin Oaks Centre Limited Partnership. The Partnership was
in default on a mortgage loan to the Company. Pursuant to the Settlement, the
Company took ownership of the underlying collateral which consisted of the TOC
and tax increment financing bonds (the "TIF Bonds") payable from incremental
sales and real estate taxes generated by the shopping center and adjacent
properties.
The TOC is a 95,000 square foot neighborhood shopping center in Silvis,
Illinois. At April 19, 1995 the TOC was 86% leased and 73% occupied, and at
December 31, 1996 the TOC was 92% leased and 74% occupied. Walgreens vacated in
the second quarter of 1994 but continues to pay annual rent of $119,000.
In conjunction with the Settlement, the Company transferred from "Interest
in Twin Oaks Centre" on the Consolidated Balance Sheet, the estimated value of
the TOC ($4,136,000) to "Property", the estimated value of the TIF Bonds
($2,000,000) to "Other Assets", and the balance of a first mortgage (the "TOC
Loan"), which was assumed by the Company, to "Mortgages and Notes Payable". The
TOC Loan had a balance of $3,033,000 on April 19, 1995. Since the settlement
date, the Company has received approximately $782,000 from the City of Silvis,
Illinois related to the TIF Bonds; approximately $313,000 of this payment was
recorded by the Company as principal reduction.
E. INVESTMENT IN MID-AMERICA BETHAL LIMITED PARTNERSHIP
The Company has a 50% general partnership interest in Mid-America Bethal, a
Nebraska limited partnership. The Company is the managing general partner of
Mid-America Bethal and a European investor is the limited partner. Mid-America
Bethal owns and operates two neighborhood shopping centers and one enclosed
mall.
28
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(COLUMNAR DOLLARS IN FOOTNOTES ARE IN THOUSANDS EXCEPT PER SHARE DATA)
E. INVESTMENT IN MID-AMERICA BETHAL LIMITED PARTNERSHIP (CONTINUED)
Summarized financial information on Mid-America Bethal is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
BALANCE SHEETS
Assets:
Cash and cash equivalents............................................................... $ 751 $ 817
Property, net of accumulated depreciation of $7,370,000 and $6,278,000.................. 29,097 29,940
Other assets............................................................................ 572 454
--------- ---------
$ 30,420 $ 31,211
--------- ---------
--------- ---------
Liabilities and Partners' Capital:
Accrued liabilities..................................................................... $ 18 $ 18
Partners' capital....................................................................... 30,402 31,193
--------- ---------
$ 30,420 $ 31,211
--------- ---------
--------- ---------
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1996 1995
--------- ---------
1994
--
<S> <C> <C>
STATEMENTS OF OPERATIONS
Total Revenues..................................................................... $ 4,442 $ 4,330 $ 4,264
--------- --------- ---------
--------- --------- ---------
Net Income......................................................................... $ 1,909 $ 1,918 $ 1,798
--------- --------- ---------
--------- --------- ---------
EQUITY IN EARNINGS OF MID-AMERICA BETHAL RECORDED BY THE COMPANY..................... $ 955 $ 959 $ 899
--------- --------- ---------
--------- --------- ---------
</TABLE>
Mid-America Centers Corp. has agreements with Mid-America Bethal for the
management and leasing of properties owned by Mid-America Bethal. For the years
ended December 31, 1996, 1995 and 1994, Mid-America Bethal paid property
management fees of $171,000, $172,000, and $172,000, respectively, and incurred
and capitalized leasing commissions of $32,000, $28,000, and $39,000,
respectively. In addition, the Company administers the day-to-day activities of
Mid-America Bethal. For these services during each of the three years ended
December 31, 1996, the Company received administrative fees from Mid-America
Bethal of $20,000.
29
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(COLUMNAR DOLLARS IN FOOTNOTES ARE IN THOUSANDS EXCEPT PER SHARE DATA)
F. MORTGAGES AND NOTES PAYABLE
Mortgages and notes payable are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MAXIMUM INTEREST ANNUAL MATURITY --------------------
AVAILABLE RATE PAYMENT DATE 1996 1995
----------- --------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fixed-Rate Mortgage Debt:
Mortgages and Notes Payable:
Bishop Heights........................... 9.00% $ 98 Nov. 1996 $ -- $ 679
Miracle Hills Park....................... 9.00% $ 352 Aug. 1997 3,302 3,355
Lakewood Mall............................ 8.50% $ 768 Aug. 1998 7,204 7,446
Meadows S.C.............................. 9.88% $ 346 Nov. 1998 3,002 3,048
Twin Oaks Centre......................... 8.50% $ 84 Apr. 1999 699 718
Twin Oaks Centre (See Note D)............ 8.50% $ 342 Apr. 1999 2,915 2,974
Eastville Plaza.......................... 9.25% $ 292 Feb. 2001 2,925 2,945
Rivergate S.C............................ 10.00% $ 336 Jan. 2002 3,093 3,119
Shenandoah Plaza......................... 10.00% $ 456 Jan. 2002 4,156 4,191
Edgewood S.C............................. 9.08% $ 590 Feb. 2002 6,500 6,500
Southport Centre......................... 9.20% $ 736 Apr. 2002 8,000 8,000
Moorland Square.......................... 9.00% $ 384 Nov. 2002 3,600 3,656
Kimberly West............................ 8.00% $ 403 Dec. 2002 4,092 4,165
--------- ---------
Total Fixed-Rate Mortgage Debt............. 49,488 50,796
Adjustable-Rate Debt:
Revolving Credit Agreements:
Working Line of Credit................... $ 5,000 7.54% July 1997 545 663
Lines of Credit for Acquisitions......... $ 10,000 8.04% July 1997 4,756 8,574
$ 15,000 7.78% July 1997 9,559 5,559
--------- ---------
Total Adjustable Rate Debt................... 14,860 14,796
--------- ---------
Total Mortgages and Notes Payable............ $ 64,348 $ 65,592
--------- ---------
--------- ---------
</TABLE>
During 1996, the Company completed the extension of the two Twin Oaks Centre
mortgage loans with the existing lender. These loans total $3,673,000 and have
been extended for three years to April 1999, with an interest rate of 8.50%. In
addition, the Company renegotiated the terms of its $15,000,000 acquisition line
of credit. This line was converted from $15 million of committed funds to $10
million of committed funds with an additional $5 million standby, which can be
accessed with bank approval and has been extended to July 1997 at an interest
rate of LIBOR plus 250 basis points, with a non-use fee of 25 basis points on
the committed amount. This interest rate can be reduced by 25 basis points if
$100,000 of non-interest bearing deposits are kept with the lending institution.
At December 31, 1996, the Company had $100,000 of deposits with the lending
institution and the interest rate was LIBOR plus 225.
In November 1996, the Company repaid the maturing fixed rate mortgage loan
secured by the Bishop Heights Shopping Center primarily from proceeds of the
$15,000,000 acquisition line. The Bishop Heights mortgage loan bore interest of
9% and had a balance of approximately $655,000 prior to being repaid.
30
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(COLUMNAR DOLLARS IN FOOTNOTES ARE IN THOUSANDS EXCEPT PER SHARE DATA)
F. MORTGAGES AND NOTES PAYABLE (CONTINUED)
Principal maturities of total mortgages and notes payable, after giving
effect to the commitments described above, for the next five years are as
follows: 1997--$18,678,000; 1998--$10,325,000; 1999-- $3,737,000;
2000--$417,000; 2001--$3,285,000; and thereafter--$27,906,000.
Substantially all of the Company's properties serve as collateral on one or
more of the above-mentioned obligations. The Company was in compliance with all
debt covenants at December 31, 1996 which require, among other covenants, that
the Company's total debt will not exceed 50% of total assets.
G. COMMITMENTS AND CONTINGENCIES
YIELD MAINTENANCE AGREEMENT--In June 1992, the Company entered into a Yield
Maintenance Agreement, as amended (the "YMA") with parties formerly related to
the Company. Under the YMA, the formerly related parties guarantee a 10% return
from June 1, 1992 to December 31, 1996, calculated on a quarterly basis, to the
Company based upon the amount of the Company's Investment Base for five specific
properties purchased from the formerly related parties. If the net operating
income of the properties after debt service on a quarterly basis does not exceed
the required 10% return, the difference (defined as the "Arrearage" in the YMA)
is owed to the Company by the formerly related parties. The formerly related
parties have the option of paying the Arrearage in cash every quarter or having
it added to the Investment Base.
Under the YMA, the market value of these properties was determined as of
December 31, 1996. The determined market value was based on a 10.25%
capitalization rate applied to net operating income for the year ended December
31, 1996. The determined market value of the properties was less than the
Company's adjusted acquisition cost, accordingly, the difference is owed to the
Company, subject to certain limits. The obligations of the formerly related
parties under the YMA are limited to $2,800,000 and are secured by promissory
notes. The promissory notes are personally guaranteed by the formerly related
parties and are collateralized by specific tangible collateral. Cumulative
amounts applied under this agreement totaled $1,322,000 through December 31,
1996.
Accumulated YMA arrearages exceeded the guaranteed limit of $2,800,000 as of
December 31, 1996 and the remaining amounts owed under this agreement total
$1,478,000 at December 31, 1996, and are due March 31, 1997. The Company will
not reflect this amount in the consolidated financial statements until payment
is received.
LITIGATION--The Company is subject to a number of lawsuits and claims for
various amounts which arise out of the normal course of business. In the opinion
of management, the disposition of claims currently pending will not have a
material adverse effect on the Company's financial position or results of
operations.
H. EMPLOYEE BENEFIT AND STOCK PLANS
RETIREMENT SAVINGS PLAN--In 1994, the Company established a qualified
savings 401(k) plan covering substantially all full-time employees. Participants
may contribute up to 15% of their pre-tax base pay with a discretionary Company
matching contribution. During 1996 and 1995, the Company contribution was
31
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(COLUMNAR DOLLARS IN FOOTNOTES ARE IN THOUSANDS EXCEPT PER SHARE DATA)
H. EMPLOYEE BENEFIT AND STOCK PLANS (CONTINUED)
equal to 25% of the first 4% of participant contributions. Participants vest in
Company contributions over five years. Contribution expense for the years ended
December 31, 1996 and 1995 was $14,400 and $14,000, respectively.
STOCK PLANS--Pursuant to the Amended Stock Option Plan which was approved by
shareholders in 1992 and the 1995 Stock Plan approved by shareholders in 1995
(collectively, the "Plans"), the Compensation Committee of the Board of
Directors is authorized to issue options to purchase shares of common stock at
the then current market price of such shares and other stock awards to employees
of the Company and Mid-America Centers Corp. Stock options become exercisable
over discretionary periods not to exceed 10 years from the date of grant. At
December 31, 1996, approximately 200,000 shares remained available for issuance
under the Plans.
Following is a summary of the option activity under the Plans:
<TABLE>
<CAPTION>
SHARES OPTION PRICE PER
UNDER OPTION SHARE
------------- ---------------------
<S> <C> <C>
Outstanding January 1, 1992....................................... -- --
Granted........................................................... 108,000 $10.375 to $25.375
-------------
Outstanding December 31, 1992..................................... 108,000 $10.375 to $25.375
Granted........................................................... 140,000 $10.75
Canceled.......................................................... (108,000 ) $10.375 to $25.375
-------------
Outstanding December 31, 1993..................................... 140,000 $10.75
Forfeited......................................................... (15,000 ) $10.75
-------------
Outstanding at December 31, 1994.................................. 125,000 $10.75
Granted........................................................... 100,000 $ 8.00
Forfeited......................................................... (10,000 ) $10.75
-------------
Outstanding at December 31, 1995 and 1996......................... 215,000 $8.00 to $10.75
-------------
-------------
</TABLE>
At December 31, 1996, 115,000 stock options were exercisable.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" (FAS 123), effective for fiscal years beginning after December 15,
1995. The statement requires employers to adopt a fair value method of
accounting for the recognition of employee stock based compensation expense or,
as an alternative, supplemental disclosure of the impact such expense
recognition would have had on the Company's results of operations. The Company
has elected the supplemental disclosure option and has determined, based on the
use of the Black-Scholes option-pricing model and appropriate Company-specific
assumptions, that expense recognition of employee stock based compensation would
have had an immaterial impact on the Company's consolidated operating results or
net income per share.
32
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(COLUMNAR DOLLARS IN FOOTNOTES ARE IN THOUSANDS EXCEPT PER SHARE DATA)
I. DISCLOSURE OF FAIR VALUE
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments." The estimated fair value amounts have been determined by
the Company, using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1996. Although management is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date, and current estimates of fair value
may differ significantly from the amounts presented herein.
NOTES RECEIVABLE:
The carrying amounts of these items represent the Company's reasonable
estimate of their fair value.
MORTGAGES AND NOTES PAYABLE--FIXED RATE MORTGAGE DEBT:
At December 31, 1996, the carrying amount was $49,488 compared to an
estimated fair market value of approximately $49,422. Interest rates that are
currently available to the Company for the issuance of mortgages with similar
terms and remaining maturities were used to estimate fair value of these
mortgages.
J. LEASING ACTIVITIES
Spaces in the Company's properties are leased under operating leases with
initial terms ranging from one to 40 years. Certain of the leases contain
options to renew. Leases generally provide for minimum rents and percentage
rents plus reimbursement of certain operating expenses. The majority of tenants
pay reimbursements for their pro rata share of certain operating expenses.
Rent income in excess of base rent from tenants with percentage rent
provisions (based upon tenant sales levels for a specified period) for the years
ended December 31, 1996, 1995 and 1994 was $471,000, $536,000, and $366,000,
respectively.
Wal-Mart, Herberger's, Hy-Vee grocery stores, Kmart, Walgreens, Target
and/or Shopko and J.C. Penney anchored a total of 17 of the Company's properties
either as tenants or as occupants of buildings adjacent to the properties and
lease in the aggregate approximately 39% of the total leasable space in the
Company's properties.
Additionally, Kmart, Hy-Vee grocery stores, Herberger's and/or Wal-Mart
anchored all Mid-America Bethal properties as either lessees or as occupants of
buildings adjacent to the properties and lease approximately 38% of the total
leasable space in the Mid-America Bethal properties.
33
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(COLUMNAR DOLLARS IN FOOTNOTES ARE IN THOUSANDS EXCEPT PER SHARE DATA)
J. LEASING ACTIVITIES (CONTINUED)
The only tenant with rental commitments more than 10% of the gross leasable
space of the properties owned by the Company at December 31, 1996 is Wal-Mart,
whose five stores at properties owned by the Company account for approximately
15% of total gross leasable area. Wal-Mart also operates stores adjacent to
three of the Company's properties and to one of Mid-America Bethal's properties.
Future base rents under non-cancelable operating leases on properties owned
solely by the Company at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, WAL-MART OTHER TENANTS TOTAL
- ------------------------------------------------------- ----------- ------------- ----------
<S> <C> <C> <C>
1997................................................... $ 1,232 $ 14,467 $ 15,699
1998................................................... 1,232 13,403 14,635
1999................................................... 1,232 12,558 13,790
2000................................................... 1,232 11,680 12,912
2001................................................... 1,232 10,557 11,789
Thereafter............................................. 5,689 75,254 80,943
----------- ------------- ----------
$ 11,849 $ 137,919 $ 149,768
----------- ------------- ----------
----------- ------------- ----------
</TABLE>
The Company had no tenant which in any of the three years ended December 31,
1996 provided 10% or more of the Company's rental income or total revenues.
K. QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996:
Total revenues................................. $ 5,893 $ 5,797 $ 5,736 $ 5,640 $ 23,066
Net income..................................... $ 1,166 $ 950 $ 769 $ 1,004 $ 3,889
Net income per share........................... $ .14 $ .11 $ .09 $ .13 $ .47
Dividends declared per share................... $ .22 $ .22 $ .22 $ .22 $ .88
Weighted average number of shares
outstanding.................................. 8,280,842 8,281,407 8,281,978 8,282,548 8,281,696
Year Ended December 31, 1995:
Total revenues................................. $ 5,593 $ 5,488 $ 5,517 $ 5,735 $ 22,333
Net income..................................... $ 889 $ 844 $ 823 $ 828 $ 3,384
Net income per share........................... $ .11 $ .10 $ .10 $ .10 $ .41
Dividends declared per share................... $ .22 $ .22 $ .22 $ .22 $ .88
Weighted average number of shares
outstanding.................................. 8,279,892 8,279,892 8,279,892 8,280,524 8,280,051
</TABLE>
L. SUBSEQUENT EVENT
On January 23, 1997, the Company declared a cash dividend of $.22 per common
share payable on February 24, 1997 to stockholders of record on February 6,
1997.
34
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
(COLUMNAR DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
INITIAL COST TO COMPANY ADDITIONAL
COSTS REDUCTIONS DECEMBER 31, 1996
------------------------ SUBSEQUENT FROM RECEIPTS -----------------------------------
BUILDINGS AND TO SUBSEQUENT TO BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION ACQUISITION LAND IMPROVEMENTS TOTAL
- -------------------- ---------------- --------- ------------- ----------- ------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monument Mall, Line of Credit
Scottsbluff, NE (2) $ 420 $ 9,691 $ 3,634 $ (1,612) $ 353 $ 11,780 $ 12,133
Delta Plaza, Line of Credit
Escanaba, MI (2) 527 6,949 4,697 (311 ) 1,096 10,766 11,862
Thunderbird Mall, Line of Credit
Virginia, MN (2) 305 6,027 3,651 -- 305 9,678 9,983
Eastville Plaza,
Fremont, NE $2,925 706 3,529 626 (403 ) 633 3,825 4,458
Bishop Heights, Line of Credit
Lincoln, NE (2) 710 723 156 -- 710 879 1,589
Ile de Grand, Grand Line of Credit
Island, NE (2) 690 2,880 999 -- 690 3,879 4,569
Edgewood-Phase I, (
Lincoln, NE ( 1,396 1,993 1,470 -- 1,396 3,463 4,859
( $6,500
Edgewood-Phase II, (
Lincoln, NE ( 1,387 4,327 746 -- 1,387 5,073 6,460
The Meadows,
Lincoln, NE $3,002 1,179 3,121 19 -- 1,179 3,140 4,319
Miracle Hills Park,
Omaha, NE $3,302 2,250 4,972 503 (330 ) 2,147 5,248 7,395
Macon County, Line of Credit
Lafayette, TN (2) 228 3,021 77 (40 ) 225 3,061 3,286
Town West Center, Line of Credit
Paragould, AR (2) 366 4,263 48 -- 366 4,311 4,677
<CAPTION>
ACCUMULATED DATE OF
DEPRECIATION COMPLETION ACQUISITION
AT DECEMBER DATE FOR OR
DESCRIPTION 31, 1996 CONSTRUCTION COMPLETION
- -------------------- ------------- ------------- -----------
<S> <C> <C> <C>
Monument Mall,
Scottsbluff, NE $ (3,395) 08/1986 12/30/86
Delta Plaza,
Escanaba, MI (2,844 ) 09/1971 12/30/86
Thunderbird Mall,
Virginia, MN (2,388 ) 09/1971 12/30/86
Eastville Plaza,
Fremont, NE (1,252 ) 08/1986 12/30/86
Bishop Heights,
Lincoln, NE (302 ) 09/1971 12/30/86
Ile de Grand, Grand
Island, NE (1,182 ) 07/1977 04/09/87
Edgewood-Phase I,
Lincoln, NE (1,178 ) 09/1980 06/01/87
Edgewood-Phase II,
Lincoln, NE (947 ) 06/1991 06/26/91
The Meadows,
Lincoln, NE (883 ) 12/1987 06/01/88
Miracle Hills Park,
Omaha, NE (1,577 ) 03/1987 07/05/88
Macon County,
Lafayette, TN (836 ) 12/1985 12/21/88
Town West Center,
Paragould, AR (1,097 ) 04/1987 12/21/88
</TABLE>
35
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
(COLUMNAR DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
REDUCTIONS GROSS AMOUNT AT WHICH CARRIED AT
ADDITIONAL FROM
INITIAL COST TO COMPANY COSTS RECEIPTS DECEMBER 31, 1996
------------------------ SUBSEQUENT SUBSEQUENT -----------------------------------
BUILDINGS AND TO TO BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION ACQUISITION LAND IMPROVEMENTS TOTAL
- -------------------- ---------------- --------- ------------- ----------- ------------ --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rivergate,
Shelbyville, IN $3,093 163 4,058 281 (25) 162 4,315 4,477
Germantown, Line of Credit
Jasper, IN (2) 488 8,766 476 (15 ) 540 9,175 9,715
Shenandoah Plaza,
Newnan, GA $4,156 485 5,281 130 -- 485 5,411 5,896
Cornhusker Plaza,
South Sioux City, Line of Credit
NE (2) 1,185 3,169 59 (26 ) 1,185 3,202 4,387
Lakewood Mall,
Aberdeen, SD $7,204 600 13,890 1,633 (953 ) 850 14,320 15,170
Kimberly West,
Davenport, IA $4,092 1,700 4,653 216 -- 1,790 4,779 6,569
Moorland Square, New
Berlin, WI $3,600 1,550 3,750 1,084 (45 ) 1,725 4,614 6,339
Fairacres, Line of Credit
Oshkosh, WI (2) 1,500 3,310 361 -- 1,550 3,621 5,171
Southport Centre,
Apple Valley, MN $8,000 3,675 8,946 305 -- 3,675 9,251 12,926
Fitchburg Ridge,
Fitchburg, WI None 500 1,545 42 -- 500 1,587 2,087
Twin Oaks Centre
Silvis, IL $3,614 1,075 3,062 47 (247 ) 1,019 2,918 3,937
--------- ------------- ----------- ------------ --------- ------------- ---------
$ 23,085 $ 111,926 $ 21,260 $ (4,007 ) $ 23,968 $ 128,296 $ 152,264
--------- ------------- ----------- ------------ --------- ------------- ---------
--------- ------------- ----------- ------------ --------- ------------- ---------
<CAPTION>
ACCUMULATED DATE OF
DEPRECIATION COMPLETION ACQUISITION
AT DECEMBER DATE FOR OR
DESCRIPTION 31, 1996 CONSTRUCTION COMPLETION
- -------------------- ------------- ------------- -----------
<S> <C> <C> <C>
Rivergate,
Shelbyville, IN (1,076) 03/1986 12/21/88
Germantown,
Jasper, IN (2,161 ) 12/1985 12/21/88
Shenandoah Plaza,
Newnan, GA (1,401 ) 02/1988 12/21/88
Cornhusker Plaza,
South Sioux City,
NE (582 ) 02/1990 06/27/91
Lakewood Mall,
Aberdeen, SD (2,180 ) 08/1990 08/28/92
Kimberly West,
Davenport, IA (657 ) 01/1989 12/14/92
Moorland Square, New
Berlin, WI (533 ) 02/1990 11/23/92
Fairacres,
Oshkosh, WI (559 ) 05/1992 12/22/92
Southport Centre,
Apple Valley, MN (776 ) 01/1992 01/01/94
Fitchburg Ridge,
Fitchburg, WI (92 ) 12/1980 08/31/94
Twin Oaks Centre
Silvis, IL (153 ) 01/1992 04/19/95
-------------
$ (28,051 )
-------------
-------------
</TABLE>
- ------------------------------
(1) The aggregate cost for federal income tax purposes for these properties is
approximately $152,264,000.
(2) Revolving credit agreements totaled $14,860,000 at December 31, 1996.
36
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
(COLUMNAR DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS
LAND AND TENANT EQUIPMENT AND CONSTRUCTION-
LAND IMPROVEMENTS IMPROVEMENTS FIXTURES IN-PROGRESS TOTAL
--------- ------------- ------------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
REAL ESTATE
Balance, January 1, 1994........... $ 18,547 $ 12,623 $ 99,067 $ 491 $ 306 $ 131,034
Additions at cost................ 4,175 891 11,219 76 523 16,884
Retirements...................... (268) (171) (1,425) (8) -- (1,872)
Reclassification of outlots held
for sale to land............... 1,015 -- -- -- -- 1,015
Transfer of assets when placed
into service................... -- -- 495 -- (495) --
--------- ------------- ------------- ------------- ------------- ---------
Balance, December 31, 1994....... 23,469 13,343 109,356 559 334 147,061
Additions at cost................ 1,075 22 5,181 -- 599 6,877
Retirements...................... (250) -- -- -- -- (250)
Reductions for receipts under
Yield Maintenance Agreement.... (92) -- (935) -- -- (1,027)
Transfer of assets when placed
into service................... -- -- -- -- (646) (646)
--------- ------------- ------------- ------------- ------------- ---------
Balance, December 31, 1995......... 24,202 13,365 113,602 559 287 152,015
Additions at cost................ -- 167 832 -- 1,011 2,010
Retirements...................... (232) (148) (801) (4) -- (1,185)
Reductions for receipts under
Yield Maintenance Agreement.... (2) -- (18) -- -- (20)
Transfer of assets when placed
into service................... -- -- 1,298 -- (1,298) --
--------- ------------- ------------- ------------- ------------- ---------
Balance, December 31, 1996......... $ 23,968 $ 13,384 $ 114,913 $ 555 $ -- $ 152,820
--------- ------------- ------------- ------------- ------------- ---------
--------- ------------- ------------- ------------- ------------- ---------
ACCUMULATED DEPRECIATION
Balance, January 1, 1994........... $ -- $ 3,842 $ 11,766 $ 277 $ -- $ 15,885
Additions charged to costs and
expenses....................... -- 894 3,327 73 -- 4,294
Retirements...................... -- (89) (284) (6) -- (379)
--------- ------------- ------------- ------------- ------------- ---------
Balance, December 31, 1994......... -- 4,647 14,809 344 -- 19,800
Additions charged to costs and
expenses....................... -- 884 3,506 60 -- 4,450
--------- ------------- ------------- ------------- ------------- ---------
Balance, December 31, 1995......... -- 5,531 18,315 404 -- 24,250
Additions charged to costs and
expenses....................... -- 883 3,605 53 -- 4,541
Retirements...................... -- (67) (216) -- -- (283)
--------- ------------- ------------- ------------- ------------- ---------
Balance, December 31, 1996......... $ -- $ 6,347 $ 21,704 $ 457 $ -- $ 28,508
--------- ------------- ------------- ------------- ------------- ---------
--------- ------------- ------------- ------------- ------------- ---------
</TABLE>
37
<PAGE>
MID-AMERICA BETHAL LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
The following Financial Statements of Mid-America Bethal Limited Partnership
and the related Independent Auditors' Report are included in Item 14(d) of
Mid-America Realty Investments, Inc.'s Form 10-K:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report........................................................... 39
Balance Sheets at December 31, 1996 and 1995........................................... 40
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994...................................................... 41
Statements of Partners' Capital for the Years Ended
December 31, 1996, 1995 and 1994...................................................... 42
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994...................................................... 43
Notes to Financial Statements.......................................................... 44
</TABLE>
The following Financial Statement Schedule of Mid-America Bethal Limited
Partnership is furnished pursuant to Rule 3-09:
<TABLE>
<S> <C>
Schedule III--Real Estate and Accumulated Amortization................ 45
</TABLE>
All other schedules have been omitted because they are not applicable or not
required or because the required information is shown in the financial
statements or notes thereto.
38
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Mid-America Bethal Limited Partnership
Omaha, Nebraska
We have audited the accompanying balance sheets of Mid-America Bethal
Limited Partnership as of December 31, 1996 and 1995, and the related statements
of operations, partners' capital and cash flows for each of the three years in
the period ended December 31, 1996. Our audits also included the financial
statement schedule listed in the Index on page 35. These financial statements
and financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Mid-America Bethal Limited Partnership as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
January 24, 1997
Omaha, Nebraska
39
<PAGE>
MID-AMERICA BETHAL LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
Cash and cash equivalents.......................................................... $ 750,587 $ 817,304
Accounts receivable, net of allowance of $36,000 and $57,000....................... 365,048 236,810
Property:
Land and land improvements....................................................... 6,497,545 6,497,545
Buildings........................................................................ 29,738,735 29,488,830
Equipment and fixtures........................................................... 231,353 231,353
------------- -------------
36,467,633 36,217,728
Less: Accumulated depreciation................................................... (7,370,141) (6,278,088)
------------- -------------
29,097,492 29,939,640
Intangible assets, less accumulated amortization of $250,000 and $211,000.......... 206,848 213,088
Other assets....................................................................... -- 4,236
------------- -------------
$ 30,419,975 $ 31,211,078
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' CAPITAL
Accrued liabilities................................................................ $ 17,499 $ 18,000
Partners' capital.................................................................. 30,402,476 31,193,078
------------- -------------
$ 30,419,975 $ 31,211,078
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements.
40
<PAGE>
MID-AMERICA BETHAL LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES
Rental income......................................................... $ 3,510,511 $ 3,480,916 $ 3,451,278
Reimbursement income.................................................. 833,159 739,796 757,982
Other income.......................................................... 98,630 109,233 54,363
------------ ------------ ------------
Total Revenues...................................................... 4,442,300 4,329,945 4,263,623
EXPENSES
Real estate taxes..................................................... 365,061 319,972 337,674
Management fees....................................................... 171,205 172,086 172,609
Other property costs.................................................. 834,522 708,426 767,845
Administrative expenses............................................... 38,654 42,394 15,418
Depreciation and amortization......................................... 1,123,460 1,168,567 1,172,243
------------ ------------ ------------
Total Expenses...................................................... 2,532,902 2,411,445 2,465,789
------------ ------------ ------------
NET INCOME.............................................................. $ 1,909,398 $ 1,918,500 $ 1,797,834
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to financial statements.
41
<PAGE>
MID-AMERICA BETHAL LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
ALBETH
MID-AMERICA REALTY INVESTMENTS,
INVESTMENTS, INC. L.P. TOTAL
------------------ --------------- -------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1994..................................... $ 16,288,372 $ 16,288,372 $ 32,576,744
Allocation of net income..................................... 898,917 898,917 1,797,834
Distributions paid........................................... (1,050,000) (1,050,000) (2,100,000)
------------------ --------------- -------------
BALANCE, DECEMBER 31, 1994................................... 16,137,289 16,137,289 32,274,578
Allocation of net income..................................... 959,250 959,250 1,918,500
Distributions paid........................................... (1,500,000) (1,500,000) (3,000,000)
------------------ --------------- -------------
BALANCE, DECEMBER 31, 1995................................... 15,596,539 15,596,539 31,193,078
Allocation of net income..................................... 954,699 954,699 1,909,398
Distributions paid........................................... (1,350,000) (1,350,000) (2,700,000)
------------------ --------------- -------------
BALANCE, DECEMBER 31, 1996................................... $ 15,201,238 $ 15,201,238 $ 30,402,476
------------------ --------------- -------------
------------------ --------------- -------------
</TABLE>
See notes to financial statements.
42
<PAGE>
MID-AMERICA BETHAL LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income......................................................... $ 1,909,398 $ 1,918,500 $ 1,797,834
Adjustments:
Depreciation and amortization.................................... 1,123,460 1,168,567 1,172,243
(Decrease) Increase in related liabilities....................... (501) (15,599) 80
(Increase) Decrease in related assets............................ (117,002) 57,255 112,429
------------- ------------- -------------
Net Cash Flows From Operating Activities........................... 2,915,355 3,128,723 3,082,586
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property:
Tenant improvements.............................................. (219,200) (27,227) (31,607)
Other capital expenditures....................................... (30,705) (85,129) (89,051)
Cash paid for leasing fees......................................... (32,167) (28,579) (37,808)
------------- ------------- -------------
Net Cash Flows From Investing Activities........................... (282,072) (140,935) (158,466)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions made to partners..................................... (2,700,000) (3,000,000) (2,100,000)
------------- ------------- -------------
Net Cash Flows From Financing Activities........................... (2,700,000) (3,000,000) (2,100,000)
------------- ------------- -------------
NET CHANGE IN CASH................................................... (66,717) (12,212) 824,120
CASH, BEGINNING OF YEAR.............................................. 817,304 829,516 5,396
------------- ------------- -------------
CASH, END OF YEAR.................................................... $ 750,587 $ 817,304 $ 829,516
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to financial statements.
43
<PAGE>
MID-AMERICA BETHAL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS--Mid-America Bethal Limited Partnership, a Nebraska
limited partnership, was formed on June 1, 1989 between Mid-America Realty
Investments, Inc. (Mid-America Realty) and Albeth Investments, L.P. (Albeth),
pursuant to provisions of an Amended and Restated Partnership Agreement (the
"Partnership Agreement"). Mid-America Realty holds a 50% interest and is the
managing general partner and Albeth holds a 50% limited partner interest.
CASH AND CASH EQUIVALENTS--Mid-America Bethal considers short-term
investments with a maturity at acquisition of three months or less as cash
equivalents.
USE OF ESTIMATES--In preparing financial statements in conformity with
Generally Accepted Accounting Principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
PROPERTY--Property is stated at the lower of depreciated cost or the amount
estimated to be recoverable through future cash flows from the property
operations and dispositions. Assets are depreciated using the straight-line
method over the following lives: land improvements--15 years; buildings--40
years; tenant improvements--shorter of the lease term or the estimated life of
the improvement; and equipment and fixtures--5 to 7 years. In March 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". This statement was effective for fiscal
years beginning after December 15, 1995. The adoption of the provisions of this
statement did not have a material impact on Mid-America Bethal's financial
condition or results of operations.
INTANGIBLE ASSETS--Costs incurred in the organization of Mid-America Bethal
are amortized using the straight-line method over a 60-month period. Fees paid
for leasing commissions on new or renewed leases are amortized using the
straight-line method over the initial term or extension of the lease.
LEASES--All leases with tenants are classified as operating leases.
REVENUE RECOGNITION--Minimum rents from tenants are recognized monthly based
upon total fixed cash flow over the initial term of the lease, using the
straight-line method. Percentage rents are based upon tenant sales levels for a
specified period. Reimbursed expenses for real estate taxes, common area
maintenance, utilities, janitorial and building maintenance are recognized in
the period in which the expenses are incurred, based upon the provisions of the
tenant's lease.
INCOME TAXES--The financial statements do not include any provision for
income taxes on Mid-America Bethal's earnings as such taxes are the
responsibility of the individual partners.
B. RELATED PARTY TRANSACTIONS
ADMINISTRATION OF MID-AMERICA BETHAL--Pursuant to the Partnership Agreement,
Mid-America Realty provides administrative services and manages the day-to-day
affairs of Mid-America Bethal as managing general partner. For these services
during each of the years ended December 31, 1996, 1995, and 1994, Mid-America
Bethal paid $20,000.
44
<PAGE>
MID-AMERICA BETHAL LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
B. RELATED PARTY TRANSACTIONS (CONTINUED)
PROPERTY MANAGEMENT AND LEASING--Mid-America Bethal has entered into
property management agreements with Mid-America Centers Corp. ("Mid-America
Centers"), a wholly-owned subsidiary of Mid-America Realty. Under these
agreements, Mid-America Centers is responsible for the day-to-day operations of
all the properties, including leasing, rent collections and maintenance. For
these services, Mid-America Bethal pays a management fee of 4% of gross
revenues. Mid-America Centers also receives leasing commissions upon the
obtaining of new tenant leases, the renegotiation of existing tenant leases and
the renewal of existing tenant leases if the tenants did not have a renewal
option in the original lease. For the years ended December 31, 1996, 1995 and
1994, $171,205, $172,086 and $172,609, respectively, was incurred for management
fees and $32,167, $28,579 and $39,222, respectively, was incurred and
capitalized as leasing fee commissions.
C. LEASING ACTIVITIES
Space in the properties is leased under operating leases with initial terms
ranging from one year to thirty years. Certain of the leases contain options to
renew. Leases generally provide for minimum rents and percentage rents plus
reimbursement of certain operating expenses. The majority of tenants pay
reimbursements for their pro rata share of certain operating expenses.
Rent income in excess of base rent for tenants with percentage rent
provisions (based upon tenants sales levels for a specified period) for the
years ended December 31, 1996, 1995 and 1994 was $71,880, $48,901 and $122,619,
respectively.
Future base rents under non-cancelable operating leases at December 31, 1996
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- --------------------------------------------------------------------- -------------
<S> <C>
1996................................................................. $ 3,294,722
1997................................................................. 3,100,232
1998................................................................. 2,793,972
1999................................................................. 2,535,955
2000................................................................. 2,264,004
Thereafter........................................................... 22,147,592
-------------
$ 36,136,477
-------------
-------------
</TABLE>
45
<PAGE>
MID-AMERICA BETHAL LIMITED PARTNERSHIP
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
REDUCTIONS GROSS AMOUNT AT WHICH CARRIED AT
ADDITIONAL FROM MASTER
INITIAL COST TO COMPANY COSTS LEASE AND DECEMBER 31, 1996
------------------------- SUBSEQUENT INCOME ------------------------------------
ENCUM- BUILDINGS AND TO GUARANTEE BUILDINGS AND
DESCRIPTION BRANCES LAND IMPROVEMENTS ACQUISITION PAYMENTS LAND IMPROVEMENTS TOTAL(1)
- ------------------- --------- ---------- ------------- ----------- ------------ --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Imperial Mall,
Hastings, NE None $ 677,826 $11,851,303 $6,914,284 $ -- $ 834,020 $18,609,393 $19,443,413
Stockyards Plaza,
Omaha, NE None 944,111 6,602,742 497,672 (372,877) 1,041,577 6,630,071 7,671,648
Stockyards
Theatres,
Omaha, NE None 251,645 1,849,242 -- -- 251,645 1,849,242 2,100,887
Taylor Heights
Shopping Center,
Sheboygan, WI None 1,029,223 5,697,723 293,385 -- 1,034,231 5,986,100 7,020,331
---------- ------------- ----------- ------------ --------- ------------- ----------
$2,902,805 $26,001,010 $7,705,341 $ (372,877) $3,161,473 $33,074,806 $36,236,279
---------- ------------- ----------- ------------ --------- ------------- ----------
---------- ------------- ----------- ------------ --------- ------------- ----------
<CAPTION>
ACCUMULATED DATE OF
DEPRECIATION COMPLETION ACQUISITION
AT DECEMBER DATE FOR OR
DESCRIPTION 31, 1996 CONSTRUCTION COMPLETION
- ------------------- ------------ ------------- -----------
<S> <C> <C> <C>
Imperial Mall,
Hastings, NE $(3,722,267) 09/1970 12/01/87
Stockyards Plaza,
Omaha, NE (1,700,419) 08/1988 06/01/89
Stockyards
Theatres,
Omaha, NE (441,474) 06/1990 07/17/90
Taylor Heights
Shopping Center,
Sheboygan, WI (1,276,298) 02/1989 07/30/90
------------
$(7,140,458)
------------
------------
</TABLE>
- ------------------------------
(1) The aggregate cost for federal income tax purposes for these properties is
approximately $36,236,279.
46
<PAGE>
MID-AMERICA BETHAL LIMITED PARTNERSHIP
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
<TABLE>
<CAPTION>
BUILDINGS
AND
LAND TENANT EQUIPMENT CONSTRUCTION-
LAND IMPROVEMENTS IMPROVEMENTS AND FIXTURES IN-PROGRESS TOTAL
--------- ------------- ------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
REAL ESTATE
Balance, January 1, 1994...... $3,161,473 $ 3,296,005 $29,295,883 $ 231,353 $ -- $35,984,714
Additions at cost........... -- 31,607 89,051 -- -- 120,658
Retirements................. -- -- -- -- -- --
--------- ------------- ------------- ------------ ------------- ----------
Balance, December 31, 1994.... 3,161,473 3,327,612 29,384,934 231,353 -- 36,105,372
Additions at cost........... -- 8,460 103,896 -- -- 112,356
Retirements................. -- -- -- -- -- --
--------- ------------- ------------- ------------ ------------- ----------
Balance, December 31, 1995.... 3,161,473 3,336,072 29,488,830 231,353 -- 36,217,728
Additions at cost........... -- -- 249,905 -- -- 249,905
Retirements................. -- -- -- -- -- --
--------- ------------- ------------- ------------ ------------- ----------
Balance, December 31, 1996.... $3,161,473 $ 3,336,072 $29,738,735 $ 231,353 $ -- $36,467,633
--------- ------------- ------------- ------------ ------------- ----------
--------- ------------- ------------- ------------ ------------- ----------
ACCUMULATED DEPRECIATION
Balance, January 1, 1994...... $ -- $ 922,555 $ 2,963,238 $ 175,393 $ -- $4,061,186
Additions charged to costs
and expenses.............. -- 221,949 874,382 30,194 -- 1,126,525
Retirements................. -- -- -- -- -- --
--------- ------------- ------------- ------------ ------------- ----------
Balance, December 31, 1994.... -- 1,144,504 3,837,620 205,587 -- 5,187,711
Additions charged to costs
and expenses.............. -- 221,879 856,338 12,160 -- 1,090,377
Retirements................. -- -- -- -- -- --
--------- ------------- ------------- ------------ ------------- ----------
Balance, December 31, 1995.... -- 1,366,383 4,693,958 217,747 -- 6,278,088
Additions charged to costs
and expenses.............. -- 222,128 857,987 11,938 -- 1,092,053
Retirements................. -- -- -- -- -- --
--------- ------------- ------------- ------------ ------------- ----------
Balance, December 31, 1996.... $ -- $ 1,588,511 $ 5,551,945 $ 229,685 $ -- $7,370,141
--------- ------------- ------------- ------------ ------------- ----------
--------- ------------- ------------- ------------ ------------- ----------
</TABLE>
47
<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
behalf by the undersigned, thereunto duly authorized.
MID-AMERICA REALTY INVESTMENTS, INC.
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<C> <S>
by: /s/ JEROME L. HEINRICHS
------------------------------------------
Jerome L. Heinrichs, Chairman and March 3, 1997
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<C> <S>
/s/ JEROME L. HEINRICHS
- ---------------------------------------------
Jerome L. Heinrichs, Director and March 3, 1997
Chief Executive Officer
/s/ MICHAEL F. LAWLER
- --------------------------------------------- March 3, 1997
Michael F. Lawler, Director
/s/ DANIEL A. BURKHARDT
- --------------------------------------------- March 3, 1997
Daniel A. Burkhardt, Director
/s/ GARY R. HAWKINS
- --------------------------------------------- March 3, 1997
Gary R. Hawkins, Director
/s/ JOHN L. MAGINN
- --------------------------------------------- March 3, 1997
John L. Maginn, Director
/s/ DENNIS G. GETHMANN
- ---------------------------------------------
Dennis G. Gethmann, President and Chief March 3, 1997
Operating Officer (Principal Financial and
Accounting Officer)
</TABLE>
48
<PAGE>
EXHIBIT INDEX
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<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ----------- --------------------------------------------------------------------------------------------------- ---------
<C> <C> <S> <C>
3. Articles of Incorporation and By-Laws
3.1 Articles of Incorporation of the Company, as amended, incorporated by reference to
Exhibit 3.1 of the Company's Form 10-Q for the quarter ended March 31, 1994.
3.2 By-Laws of the Company, as amended, incorporated by reference to the Company's
Registration Statement on Form S-2 (Reg. No. 33-54878) filed on November 24, 1992.
10. Material Contracts
10.1 Purchase and Sale Agreement dated June 1, 1992 by and between the Company, Lakewood
Associates Limited Partnership, Twin Oaks Centre Limited Partnership, Kimberly West
Shopping Center Limited Partnership, Donald F. Day, Christopher R. Held, Terry L.
Clauff and James M. Thorburn incorporated by reference to Exhibit 10.1 on the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1992.
10.2 Yield Maintenance Agreement dated June 1, 1992 by and between the Company, Lakewood
Associates Limited Partnership, Twin Oaks Centre Limited Partnership, Kimberly West
Shopping Center Limited Partnership, Donald F. Day, Christopher R. Held, Terry L.
Clauff and James M. Thorburn incorporated by reference to Exhibit 10.2 on the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1992.
10.3 Letter dated August 28, 1992 amending the Yield Maintenance Agreement dated June 1, 1992
by and between the Company and Lakewood Associates Limited Partnership, Kimberly West
Shopping Center Limited Partnership, Donald F. Day, Christopher R. Held, Terry L.
Clauff and James M. Thorburn incorporated by reference to Exhibit 10.3 on the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1992.
10.4 First Amendment to the Yield Maintenance Agreement dated April 19, 1995 incorporated by
reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.
10.5 Settlement Agreement dated April 19, 1995 among inter alia Twin Oaks Centre Limited
Partnership and Mid-America Realty Investments, Inc. incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995.
10.6 Company Stock Option Plan (as amended and restated June 1994), incorporated by reference
to Exhibit 10.10 on the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
10.7 Company 1995 Stock Plan, incorporated by reference to Exhibit 10.3 of the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
10.8 Employment Agreement dated April 13, 1992 by and between Jerome L. Heinrichs and the
Company incorporated by reference to Exhibit 10.23 of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1992.
10.9 Employment Agreement dated January 20, 1994 by and between Dennis G. Gethmann and the
Company filed as Exhibit 10.12 to the 1993 Form 10-K and incorporated by reference
herein.
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ----------- --------------------------------------------------------------------------------------------------- ---------
10.10 Company's Executive Death Benefit Plan incorporated by reference to Exhibit 10.1 of the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.
<C> <C> <S> <C>
10.11 Company's Executive Deferred Compensation Plan incorporated by reference Exhibit 10.2 of
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.
21. Subsidiaries of the registrant.................................................................. 51
23. Consent of Experts and Counsel.
23.1 Consent of Deloitte & Touche LLP........................................................ 52
27. Financial Data Schedule............................................................................ 53
</TABLE>
Pursuant to Item 601(b) (4) of Regulation S-K, certain instruments with
respect to the Company's long-term debt obligations are not filed with this Form
10-K. The Company will furnish a copy of any such long-term debt agreement to
the Securities and Exchange Commission upon request.
Management contracts and compensatory plans are set forth as Exhibits 10.6
through 10.11.
50
<PAGE>
EXHIBIT 21
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<CAPTION>
STATE OF
NAME OF SUBSIDIARY INCORPORATION
- -------------------------------------- --------------------
<S> <C>
Mid-America Centers Corp. Nebraska
(formerly Dial Enterprises Corp.)
</TABLE>
51
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-87066 and Registration Statement No. 33-58987 of Mid-America Realty
Investments, Inc. on Form S-8 of our report dated January 24, 1997 appearing in
this Annual Report on Form 10-K of Mid-America Realty Investments, Inc. for the
year ended December 31, 1996.
January 24, 1997
Omaha, Nebraska
52
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,354
<ALLOWANCES> 285
<INVENTORY> 0
<CURRENT-ASSETS> 2,069
<PP&E> 152,820
<DEPRECIATION> 28,508
<TOTAL-ASSETS> 145,840
<CURRENT-LIABILITIES> 1,957
<BONDS> 64,348
0
0
<COMMON> 83
<OTHER-SE> 79,452
<TOTAL-LIABILITY-AND-EQUITY> 145,840
<SALES> 0
<TOTAL-REVENUES> 23,066
<CGS> 0
<TOTAL-COSTS> 7,588
<OTHER-EXPENSES> 5,668
<LOSS-PROVISION> 134
<INTEREST-EXPENSE> 5,787
<INCOME-PRETAX> 3,889
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,889
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,889
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
