United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
For the Quarterly Period Ended June 30, 1997
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
For the Transition period from ______ to ______
Commission File Number: 1-9331
MIDWEST REAL ESTATE SHOPPING CENTER L.P.
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Exact Name of Registrant as Specified in its Charter
Delaware 13-3384643
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State or Other Jurisdiction I.R.S. Employer Identification No.
of Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
- -------------------------------------- --------
Address of Principal Executive Offices Zip Code
(212) 526-3237
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Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Balance Sheets At June 30, At December 31,
1997 1996
Assets
Cash $5,274,745 $5,812,917
Due from affiliates, net 141,345 141,284
Total Assets $5,416,090 $5,954,201
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 384,052 $ 644,151
Total Liabilities 384,052 644,151
Partners' Capital:
General Partner 50,321 53,101
Limited Partners (10,700,000 securities
outstanding) 4,981,717 5,256,949
Total Partners' Capital 5,032,038 5,310,050
Total Liabilities and Partners' Capital $5,416,090 $5,954,201
Statement of Partners' Capital
For the six months ended June 30, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $53,101 $5,256,949 $5,310,050
Net loss (2,780) (275,232) (278,012)
Balance at June 30, 1997 $50,321 $4,981,717 $5,032,038
Statements of Operations
Three months Six months
ended June 30, ended June 30,
1997 1996 1997 1996
Income
Rental income $ -- $1,104,353 $ -- $2,231,256
Escalation income -- 1,329,159 -- 2,552,172
Interest income 37,103 94,026 73,926 194,344
Miscellaneous income -- 29,315 -- 102,789
Total Income 37,103 2,556,853 73,926 5,080,561
Expenses
Property operating expenses 6,460 898,694 6,460 1,573,290
Interest expense -- 1,806,358 -- 3,612,716
Real estate taxes -- 627,245 -- 1,244,945
General and administrative 34,585 46,405 108,969 104,723
Management fee -- 47,771 -- 101,556
Professional fees 79,343 95,124 236,509 258,841
Total Expenses 120,388 3,521,597 351,938 6,896,071
Net Loss $(83,285) $ (964,744) $(278,012) $(1,815,510)
Net Loss Allocated:
To the General Partner $(833) $(9,647) $(2,780) $(18,155)
To the Limited Partners (82,452) (955,097) (275,232) (1,797,355)
$(83,285) $(964,744) $(278,012) $(1,815,510)
Per limited partnership unit
(10,700,000 securities
outstanding) $ (.01) $ (.09) $ (.03) $ (.17)
Statements of Cash Flows
For the six months ended June 30, 1997 1996
Cash Flows From Operating Activities:
Net loss $(278,012) $(1,815,510)
Adjustments to reconcile net loss to net cash
used for operating activities:
Increase in interest on zero coupon mortgage note payable -- 1,637,716
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Restricted cash -- (19,084)
Accounts receivable, net -- 135,051
Deferred rent receivable -- 30,869
Due from affiliates, net (61) (1,899)
Prepaid assets -- (114,226)
Accounts payable and accrued expenses (260,099) (142,845)
Net cash used for operating activities (538,172) (289,928)
Net decrease in cash and cash equivalents (538,172) (289,928)
Cash and cash equivalents, beginning of period 5,812,917 5,971,023
Cash and cash equivalents, end of period $5,274,745 $5,681,095
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ -- $1,975,000
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction
with the Partnership's annual 1996 audited financial statements
within Form 10-K.
The unaudited interim financial statements include all
adjustments consisting of only normal recurring accruals which
are, in the opinion of management, necessary to present a fair
statement of financial position as of June 30, 1997 and the
results of operations for the three and six months ended June 30,
1997 and 1996, cash flows for the six months ended June 30, 1997
and 1996 and the statement of partner's capital for the six
months ended June 30, 1997. Results of operations for the
periods are not necessarily indicative of the results to be
expected for the full year.
Certain prior year amounts have been reclassified in order to
conform to the current year's presentation.
No significant events have occurred subsequent to fiscal year
1996, and no material contingencies exists which require
disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The General Partner was unable to consummate a sale of its
property, Brookdale Center ("Brookdale") and repay the mortgage
(the "Brookdale Note") held by The Equitable Life Assurance
Society of the United States ("Equitable") prior to
June 30, 1995, the maturity date of the Brookdale Note. As a
result, on July 5, 1995, Equitable issued a notice of default to
the Partnership and commenced advertising Brookdale for a public
nonjudicial foreclosure sale to be held on September 12, 1995.
Such date was subsequently postponed on several occasions.
On April 12, 1996, the Partnership and Equitable executed a
letter of intent that outlined the principal terms, as described
below, of a plan of reorganization (the "Plan") for the
Partnership under Chapter 11 of the Bankruptcy Code that would be
supported by Equitable. On June 21, 1996, the Partnership filed
for bankruptcy protection under Chapter 11 of the Bankruptcy Code
in the United States Bankruptcy Court for the Southern District
of New York in order to prevent the foreclosure sale of
Brookdale, which was scheduled for June 21, 1996. The
Partnership undertook the bankruptcy filing after extended
negotiations with Equitable. As a result of the bankruptcy
filing, among other reasons, trading of the Partnership's Units
on the New York Stock Exchange was suspended as of June 24, 1996.
Under the Plan, which was filed on October 16, 1996 and
subsequently approved by the holders of Limited Partnership Units
(the "Unitholders"), its creditors and the bankruptcy court, the
Brookdale Note remained in default and the Partnership was to
market Brookdale to a third-party buyer. In the event no
acceptable third-party offer was received by November 15, 1996,
or a third party failed to close the acquisition by
December 1, 1996, both the Partnership and Equitable had the
right to transfer ownership of Brookdale to Equitable and
Equitable's participant, EML Associates ("EML"), for a $500,000
cash purchase price. Equitable and EML were also granted certain
limited rights of first refusal to acquire Brookdale. Pending a
sale of Brookdale, all available cash flow from Brookdale (after
payment of property expenses and administrative costs associated
with the bankruptcy) was paid to Equitable. Equitable was
required to fund necessary capital and leasing costs pursuant to
a super-priority, non-recourse, debtor-in-possession loan by
Equitable payable upon the disposition of Brookdale.
All parties holding claims on or interests in the Partnership
were sent on October 18, 1996 a copy of the Plan and Disclosure
Statement, together with a ballot which was due on
November 15, 1996. The Plan was subsequently approved by the
Unitholders and the Partnership's creditors. A confirmation
hearing to approve the Plan took place on November 25, 1996 and
the Plan was confirmed by the bankruptcy court.
Despite intensive marketing efforts, the Partnership was unable
to secure an acceptable third-party buyer for Brookdale by
November 15, 1996. Consequently, on December 16, 1996, the
Partnership transferred ownership of Brookdale, in accordance
with the terms of the Plan, to Equitable and EML for the
aforementioned purchase price of $500,000. In accordance with
the disposition of Brookdale, the Partnership was relieved of its
mortgage obligation on Brookdale. Once all of the conditions of
the Plan are met, which is expected to occur later in 1997, the
General Partner intends to move towards the dissolution of the
Partnership.
The Partnership is also pursuing a tax assessment appeal on
Brookdale for the time period that the Partnership owned it. The
amount of any recovery and how much would need to be refunded to
tenants and how much, if any, would be available to distribute to
partners and how much would be claimed by Equitable as the
lender, are all subject to future determinations.
The Unitholder Actions
Pursuant to the terms of the Plan, Unitholders who had commenced
certain actions including class actions against the Partnership
(the actions are referred to as the "Unitholder Actions") prior
to June 21, 1996, when the Partnership filed for bankruptcy
protection, were permitted to continue the Unitholder Actions
after confirmation of the Plan. In the Unitholder Actions, all
now pending in the federal district court for the Southern
District of New York, the Unitholders asserted a number of claims
in the various actions including causes of action for breach of
fiduciary duties owed to Unitholders, negligent
misrepresentation, breach of the Partnership Agreement and
violations of certain securities laws and regulations in
connection with the solicitation of (i) consent to the sale of
Northland Center in Southfield, Michigan and (ii) certain
amendments to the Partnership Agreement concerning the sale of
Brookdale. In addition, the Unitholders asserted causes of
action for breach of fiduciary duty in connection with the
operation of the Partnership and sale of Limited Partnership
Units. The defendants including the Partnership answered the
several complaints filed by the Unitholders and engaged in
discovery and pre-trial motion practice with the plaintiffs.
In January, 1997, the Partnership, the General Partner and the
other defendants in the Unitholder Actions engaged with the
plaintiffs in mediation proceedings supervised by a former U.S.
magistrate judge. Any proposed settlement remains subject to the
completion and execution of a settlement agreement and the
approval of the parties, including the Partnership, and by the
federal district court administering the Unitholder Actions after
notice to the class. The Partnership's participation in the
settlement is subject to approval of the Bankruptcy Court. The
Plan further provides that the Partnership would dissolve under
applicable law after the final resolution of the Unitholder
Actions against, or on behalf of, the Partnership.
At June 31, 1997, the Partnership had cash and cash equivalents
totaling $5,274,745 compared to $5,812,917 at December 31, 1996.
The decrease is due to expenditures for Partnership operations
and professional fees.
Accounts payable and accrued expenses decreased from $644,151 at
December 31, 1996 to $384,052 at June 30, 1997 reflecting the
payment of legal fees associated with the Partnership's
bankruptcy proceeding and the disposition of Brookdale.
Results of Operations
Net cash used for operating activities totaled $538,172 for the
six months ended June 30, 1997 compared to $289,928 for the same
period in 1996. The reduced cash flow is primarily due to the
payment of general and administrative expenses and to
professional fees associated with the disposition of Brookdale.
As a result of the disposition of Brookdale as discussed above,
the following categories decreased from their respective balances
for the three and six months ended June 30, 1996 to $0 for the
three and six months ended June 30, 1997: rental income;
escalation income; miscellaneous income; real estate taxes;
interest expense; and management fees.
Interest income decreased from $94,026 and $194,344 for the three
and six months ended June 30, 1996 to $37,103 and $73,926 for the
corresponding periods in 1997 reflecting lower average cash
balances and a reduction in interest rates in 1997 compared to
1996.
Property operating expenses decreased from $898,694 and
$1,573,290 for the three and six months ended June 30, 1996 to
$6,460 for both the three and six months ended June 30, 1997.
The decrease reflects the disposition of Brookdale explained
above. The balances at June 30, 1997 reflect a $5,000 payment
for the 1996 annual Minnesota Department of Revenue and other
municipal taxes and an estimated 1997 payment of $1,460.
Items 2-4 Not applicable.
Item 5 Other Information.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended June 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MIDWEST REAL ESTATE SHOPPING CENTER, L.P.
BY: MIDWEST CENTERS INC.
General Partner
Date: August 14, 1997 BY:/s/ Paul L. Abbott
Director, President and
Chairman of the Board
Date: August 14, 1997 BY:/s/ Robert J. Hellman
Director, Vice President and
Chief Financial Officer
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<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
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<RECEIVABLES> 141,345
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 000
<DEPRECIATION> 000
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000
<OTHER-SE> 5,032,038
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<CGS> 000
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<OTHER-EXPENSES> 351,938
<LOSS-PROVISION> 000
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<INCOME-PRETAX> (278,012)
<INCOME-TAX> 000
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<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (278,012)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
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