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
[ ] 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.
Exact name of Registrant as specified in its charter
Delaware 13-3384643
State or other jurisdiction of incorporation or organization
I.R.S. Employer Identification No.
Attn. Andre Anderson
3 World Financial Center, 29th Floor, New York, NY
10285-2900
Address of principal executive offices
zip code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
10,700,000 UNITS OF LIMITED PARTNERSHIP SECURITIES
Title of Class
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 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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 this Form 10-K. (x)
Aggregate market value of voting stock held by non-affiliates of the
registrant: Not applicable.
Documents Incorporated by Reference: Agreement of Limited Partnership, dated
December 1, 1986, incorporated by reference to Exhibit A to the prospectus
contained in the Registration Statement No. 33-9937. Proxy Statement used in
connection with solicitation of Unitholders on June 7, 1994 (the "Proxy
Statement"). With the exception of the pages of the Proxy Statement
specifically incorporated by reference herein, the Proxy Statement is not
deemed to be filed as part of this Form 10-K.
PART I
Item 1. Business
(a) General Development of Business
Midwest Real Estate Shopping Center L.P. (formerly Equitable Real Estate
Shopping Centers, L.P.), a Delaware limited partnership (the "Partnership"),
was formed on October 28, 1986. Midwest Centers Inc. (formerly Shearson ESC/GP
Inc.), a Delaware corporation, is the general partner of the Partnership (the
"General Partner"). Midwest Centers Depositary Inc. (the "Assignor Limited
Partner", formerly Shearson ESC Corp.) is the sole limited partner of the
Partnership. The General Partner and the Assignor Limited Partner are
affiliates of Lehman Brothers Holdings, Inc.
On December 30, 1986, the Partnership completed an offering of $107,000,000 of
limited partnership securities ("Units," the holders of which are referred to
herein as "Unitholders" or "Limited Partners") representing assignments of
limited partnership interests from the Assignor Limited Partner. The net
proceeds of the offering after payment of syndication and organizational costs
aggregated $97,925,000.
The Partnership was formed to acquire from The Equitable Life Assurance Society
of the United States ("Equitable") two regional shopping malls which Equitable
had owned since 1978: Brookdale Center, located in Brooklyn Center (Hennepin
County), Minnesota ("Brookdale"), and Northland Center, located in Southfield
(Oakland County), Michigan ("Northland") (together the "Properties"). On
December 30, 1986 the Partnership acquired the lease fee interest in the land
and improvements constituting the Properties for a total purchase price of
$130,025,000 ($49,000,000 for Brookdale and $81,025,000 for Northland).
Two mortgage notes from Equitable were issued on December 30, 1986 in the
initial principal amounts of $15,175,000 (the "Brookdale Note") and $25,675,000
(the "Northland Note") (together, the "Notes"). The Partnership had deferred
payment of principal and interest on the Northland Note until its scheduled
maturity on June 30, 1995. In connection with the impending maturity of the
Northland Note, the Partnership executed a contract with Equitable on March 28,
1994 for the sale of Northland at the price of $6,600,000 in excess of the
balance of the Northland Note (the "Northland Sales Contract"). On July 22,
1994, the sale was completed and the Northland Note paid off. The effective
date of the sale of Northland was January 1, 1994 and any positive cash flow
generated by Northland Center from January 1, 1994 to the closing belonged to
Equitable.
The Partnership also deferred payment of principal and interest on the
Brookdale Note until its maturity date on June 30, 1995. The General Partner
attempted, but was unable, to sell Brookdale and pay off the Brookdale Note
prior to its maturity date. On July 5, 1995, Equitable notified the
Partnership of its default under the terms of the Brookdale Note and that it
would pursue all remedies available to it, including, without limitation,
foreclosure of the lien of the Mortgage by power of sale or judicial
foreclosure and the appointment of the receiver. Further to its July 5, 1995
notice of default to the Partnership, Equitable commenced advertising Brookdale
for a public nonjudicial foreclosure sale to be held on September 12, 1995. The
date of this foreclosure sale was subsequently postponed on several occasions.
On April 12, 1996, Equitable agreed to postpone the date of the previously
announced foreclosure sale of the property until May 24, 1996 at the earliest.
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 and
Equitable executed a letter of intent that outlined the principal terms of a
proposed loan work-out relating to Brookdale and a plan of reorganization (the
"Plan") for the Partnership under Chapter 11 of the Bankruptcy Code that would
be supported by Equitable.
On December 16, 1996, the Partnership transferred ownership of Brookdale, in
accordance with the terms of the Plan, to Equitable and EML Associates ("EML")
in consideration of a $500,000 payment to the Partnership from Equitable. In
accordance with the disposition of Brookdale, the Partnership was relieved of
its mortgage obligation on Brookdale. Please refer to Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," for
a detailed discussion of the Partnership's loan work-out with Equitable, its
filing for protection under Chapter 11 of the Bankruptcy Code and events
subsequent to such filing.
The Unitholders were solicited with a consent statement on June 7, 1994 in
connection with the above-mentioned sale of Northland. This solicitation
informed the Unitholders that the sale of Northland would be the first step in
the disposition of the assets of the Partnership with a view to the orderly
dissolution and liquidation of the Partnership. Information involving the plan
to dispose of all the assets of the Partnership with a view to its liquidation
is contained under the caption "The Plan to Liquidate" in the Partnership's
definitive proxy statement filed on May 27, 1994 pursuant to Regulation 14A and
is incorporated herein by reference.
On December 31, 1986 the Partnership entered into an agreement with Equitable
Real Estate Investment Management, Inc. ("EREIM"), an indirect wholly-owned
subsidiary of Equitable, to retain EREIM as asset manager (the "Asset Manager")
to the Partnership. In association with the sale of Northland and intention to
dispose of Brookdale, the asset management agreement with EREIM for both malls
was terminated effective December 31, 1993, thereby releasing the Partnership
from its obligation to pay EREIM an asset management fee of $1,060,000 per
year.
On November 21, 1994, the Partnership changed its name from Equitable Real
Estate Shopping Centers, L.P. to Midwest Real Estate Shopping Center L.P. The
name change was in conjunction with the termination of the former asset
management agreement with EREIM, pursuant to which the Partnership agreed to
cease using the words "Equitable" and "Equitable Real Estate" in its name.
(b) Financial Information About Industry Segments
The Partnership's sole business was the ownership and operation of its
remaining property, Brookdale Center. Pursuant to the Plan, Equitable obtained
title to Brookdale in December 1996 and relieved the Partnership of its entire
mortgage obligation on Brookdale. See Item 7.
(c) Narrative Description of Business
The Registrant's principal business was to own and operate its remaining
property. The Partnership's principal objective was to produce distributions
to Unitholders on sale. Pursuant to the Plan, Equitable obtained title to
Brookdale in December 1996. See Item 7.
Employees
The Partnership has no employees. The affairs of the Partnership are conducted
by the General Partner.
Item 2. Properties
On December 16, 1996, the Partnership transferred ownership of Brookdale, the
Partnership's one remaining property, to Equitable and EML, in accordance with
the terms of the Plan. As of December 31, 1996, the Partnership owned no real
estate.
Item 3. Legal Proceedings
On January 17, 1995, the Partnership announced that an action had been filed
against the General Partner, the Partnership and other defendants in the United
States District Court for the Southern District of New York on behalf of all
persons who owned Limited Partnership Units of the Partnership on June 7, 1994.
The complaint alleges, among other things, that the solicitation statement used
by the Partnership to solicit the consent of the Unitholders to the July 1994
sale of Northland (the "Solicitation Statement") contained material
misrepresentations and omissions in violation of Section 14(a) of the
Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. The
complaint also alleges claims for breach of fiduciary duty, negligent
misrepresentation and breach of the limited partnership agreement related to
the Northland sale and the partial liquidation of the assets. Plaintiffs seek,
among other things, compensatory damages and to have their action certified as
a class action under the Federal Rules of Civil Procedure. On May 12, 1995,
the Partnership announced that two similar actions had been filed in the
District Court for the Southern District of New York. On November 16, 1995,
the complaints in one of these three actions was amended to add a derivative
claim for breach of fiduciary duty on behalf of the Partnership. The amended
complaint also alleges that the General Partner, assisted by the other
defendants, breached its fiduciary duties by failing to take steps to maximize
the value of Brookdale.
On May 12, 1995, the Partnership also announced that an action had been filed
against the General Partner and other defendants in the Federal District Court
for the Central District of California on behalf of all persons who owned
Limited Partnership Units during the period June 7, 1994 to April 21, 1995.
The complaint alleges that the Solicitation Statement contained material
misrepresentations and omissions in violation of Section 14(a) of the
Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder.
Plaintiffs seek, among other things, compensatory damages, and to have their
action certified as a class action under the Federal Rules of Civil Procedure.
This action has been transferred to the District Court for the Southern
District of New York to be coordinated with the New York actions for pre-trial
proceedings.
The Partnership also announced on May 12, 1995, that a lawsuit had been filed
against the General Partner and other defendants in the Superior Court for Los
Angeles County and removed to the District Court for the Central District Court
of California. This action is brought on behalf of all persons who purchased
Limited Partnership Units of the Partnership during the period from December
26, 1986 to the present. The complaint alleges, among other things, that the
General Partner, assisted by the other defendants, breached its fiduciary duty
to the plaintiffs in connection with the offer and sale of Limited Partnership
Units, the operation of the Partnership and the Northland sale. Plaintiffs
seek, among other things, compensatory damages, punitive damages, and to have
their action certified as a class action under the Federal Rules of Civil
Procedure. This action also has been transferred to the District Court for the
Southern District of New York to be coordinated with the pre-trial proceedings.
The plaintiff subsequently amended the complaint to name the Partnership as a
defendant.
The General Partner believes that the allegations in these complaints are
without merit and will defend these lawsuits vigorously and believes that any
settlements reached are not currently expected to have a material impact on the
financial position of the Partnership.
Item 4. Submission of Matters to a Vote of Security Holders
In October 1996, the Partnership submitted to the holders of Limited
Partnership Units and the Partnership's creditors the Debtor's First Amended
Disclosure Statement With Respect to the Debtor's First Amended Chapter 11 Plan
(the "Disclosure Statement"), to which the Debtor's First Amended Chapter 11
Plan (the "Chapter 11 Plan") was attached as an exhibit; the Order Approving
Disclosure Statement as Amended and Fixing Dates; and a Ballot for Accepting or
Rejecting the Chapter 11 Plan (the "Ballot").
On November 15, 1996, the Chapter 11 Plan was approved by the the holders of
Limited Partnership Units and creditors. As of that date, Ballots representing
4,228,049.03 Units, or 39.5% of the outstanding Units and 33% of the
Partnership's creditors were received. Of this amount, Ballots representing
3,760,952.28 Units, or 35.1% of the outstanding Units, and 28.8% of the
Partnership's creditors voted to accept the Chapter 11 Plan, Ballots
representing 467,096.75 Units, or 4.4% of the outstanding Units, and 4.2% of
the Partnership's creditors voted to reject the Chapter 11 Plan, and Ballots
representing 6,471,950.97 Units, or 60.5% of the outstanding Units, and 66.7%
of the Partnership's creditors (including Unitholders that are plaintiffs in
the class action litigation currently pending against the Partnership),
abstained from voting on the Chapter 11 Plan. The Bankruptcy Court confirmed
the Chapter 11 Plan after a hearing on November 25, 1996.
PART II
Item 5. Market for the Registrant's Limited Partnership Units and Related
Security Holder Matters
Market Information
Prior to June 24, 1996, the Partnership's Units were listed on the New York
Stock Exchange (the "NYSE") and traded under the symbol "EQM". On June 24,
1996, the NYSE notified the Partnership that the trading of the Units had been
suspended and would be delisted from the NYSE effective as of the close of
business on June 24, 1996. According to a press release issued by the NYSE,
its action was taken in view of the fact that the Partnership had fallen below
the NYSE's continued listing criterion relating to aggregate market value of
shares outstanding (less than $8 million) together with average net income
after taxes for the past three years (less than $600,000); aggregate market
value of publicly-held shares (less than $5 million); and the Partnership's
announcement on June 20, 1996 that it had filed for bankruptcy protection under
Chapter 11 of the Bankruptcy Code.
The high and low sales prices of the Units as reported on the consolidated
transaction reporting system during the six quarters prior to the third
quarter of 1996 were as follows.
High Low
1995
First Quarter $ .88 $ .38
Second Quarter .75 .50
Third Quarter .85 .31
Fourth Quarter .50 .17
1996
First Quarter $.38 $ .11
Second Quarter * .34 .06
Third Quarter - -
Fourth Quarter - -
*Trading of Partnership Units was suspended and delisted from the
NYSE effective as of the close of business on June 24, 1996.
As of December 31, 1996, there were 5,666 Unit Holders.
Quarterly Cash Distributions Per Limited Partnership Unit
Distribution amounts are reflected in the period for which they are declared.
The record date is the last day of the respective quarter and the actual cash
distributions are paid approximately 45 days after the record date.
1996 * 1995
First Quarter - $.07
Second Quarter - .07
Third Quarter - .07
Fourth Quarter** - - *
TOTAL $ 0 $.21
* Distributions were suspended during the fourth quarter of 1995 pending a
resolution of the situation with respect to the Partnership's default on the
Brookdale Note. See Item 7.
Related Security Holder Matters
The Partnership is a "publicly traded partnership" for purposes of Federal
income taxation. The Revenue Act of 1987 (the "Act") changed the Federal
income tax treatment of "publicly traded partnerships." Under the Act, the
Partnership could be taxed as a corporation for Federal income tax purposes
beginning in 1998 if the Partnership does not satisfy an income test under the
Act. Under the modified rules applicable to publicly traded partnerships, the
passive loss rules are applied separately for the items attributable to each
publicly traded partnership.
Any Tax-Exempt Entity acquiring Units after December 17, 1987 (including any
acquired pursuant to a reinvestment plan) realizes unrelated business income
("UBI"), with respect to such Units for periods during which the Partnership is
a "publicly traded partnership", and such UBI may cause the Tax-Exempt Entity
to incur a federal income tax liability. It should be noted that the
Partnership agreement stated that An investment in the Units is not suitable
for Tax-Exempt Entities, including Individual Retirement Accounts ("IRA's") and
Keogh and other retirement plans, because such investment would give rise to
unrelated business taxable income."
Item 6. Selected Financial Data
(dollars in thousands except per Unit data)
As of and for the years ended December 31,
1996 1995 1994 1993 1992
Total Income $ 9,868 $ 11,772 $12,695 $ 30,312 $ 31,404
Extraordinary Gain on
Forgiveness of
Mortgage Loan Oblig. $15,727 - - - -
Net Income (Loss) $11,621 $(10,764)(3) $(7,567)(2) $(18,377)(1) $ (7,834)(1)
Net Income (Loss)
per Limited
Partnership Unit
(10,700,000
outstanding) $ 1.07 $ (1.00)(3) $ (.79)(2) $ (1.70)(1) $ (.73)(1)
Real Estate $ - $ 24,500 $35,072 $100,264 $118,416
Mortgage Notes
Payable $ - $ 38,029 $33,652 $ 82,011 $ 77,245
Total Assets $ 5,954 $ 32,365 $42,302 $113,448 $131,082
Cash Distributions
per Limited
Partnership Unit
(10,700,000
outstanding) $ - $ .21 $ 1.145 (4) $ .50 $ .50
(1)Includes write-downs in carrying value of the Northland property in 1992 and
1993.
(2)Includes gain on sale of Northland and write-down of Brookdale in 1994.
(3)Includes write-down in carrying value of Brookdale in 1995.
(4)Includes a special distribution resulting primarily from the sale of the
Northland property in 1994 in the amount of $.865 per unit.
The above selected financial data should be read in conjunction with the
financial statements and notes thereto contained in Item 8.
Item 7. 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 Brookdale and repay the
Brookdale Note 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 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. See Item 5 "Market for the Registrant's Limited Partnership Units and
Related Security Holder Matters."
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. However, if the Partnership is still involved
in litigation currently pending against it (See Item 3. "Legal Proceedings"),
the Partnership cannot be dissolved, and its remaining assets, if any, will not
be distributed to Unitholders until such litigation is resolved.
Beginning August 2, 1995, General Growth Management, Inc. ("General Growth"),
the property manager, acted as the receiver of Brookdale as appointed by the
Minnesota District Court. In such capacity, General Growth collected the rent
proceeds from Brookdale's tenants and applied the proceeds to payments of,
among other things, Brookdale's operating expenses, maintenance costs, real
estate taxes, tenant improvements and leasing commissions, with any remaining
funds paid to Equitable for interest due under the Mortgage. Pursuant to
bankruptcy court approval, the receivership was terminated and General Growth
was reinstated as Brookdale's property manager on June 21, 1996. From the date
of receivership through December 16, 1996, the date Brookdale was transferred
to Equitable, the net cash flow generated by Brookdale was not available to the
Partnership and is reflected on the Partnership's balance sheet as restricted
cash. For the years ended December 31, 1996 and 1995, $6,097,817 and $700,000,
respectively, was forwarded to Equitable and was applied against accrued
interest.
At December 31, 1996, the Partnership had unrestricted cash and cash
equivalents totaling $5,812,917 compared to $5,971,023 at December 31, 1995.
The decrease is due to expenditures for Partnership operations and professional
fees, partially offset by the receipt of $500,000 from Equitable upon
disposition of Brookdale pursuant to the Plan.
Accounts receivable decreased from $537,561 at December 31, 1995 to $0 at
December 31, 1996 due to the disposition of Brookdale in December 1996
mentioned above.
Prepaid assets decreased from $92,607 at December 31, 1995 to $0 at December
31, 1996 due to the disposition of Brookdale in December 1996 mentioned above.
Zero coupon mortgage note payable decreased from $38,028,587 at December 31,
1995 to $0 at December 31, 1996 due to the satisfaction of the Mortgage in
accordance with the disposition of Brookdale in December 1996 mentioned above.
Results of Operations
1996 versus 1995
Cash used for operating activities totaled $658,106 for the year ended December
31, 1996 compared to cash provided by operating activities of $2,817,025 during
1995. The reduced cash flow is primarily due to the payment of all net cash
flow generated by Brookdale to Equitable commencing on August 2, 1995 (see
"Liquidity and Capital Resources" above).
The Partnership recognized net income of $11,620,656 for the year ended
December 31, 1996 compared to a net loss of $10,763,695 during 1995. The
change from net loss to net income is primarily due to the $15,726,730 gain
recognized in 1996 on the forgiveness of the Brookdale Note.
Escalation income decreased from $6,053,160 for the year ended December 31,
1995 to $4,957,157 for the year ended December 31, 1996 due to a decrease in
real estate tax income and common area maintenance income.
Interest income decreased from $421,179 for the year ended December 31, 1995 to
$298,324 for the year ended December 31, 1996. The decrease reflects lower
average cash balances and a reduction in interest rates in 1996 compared to
1995.
Miscellaneous income decreased from $606,678 for the year ended December 31,
1995 to $126,582 for the year ended December 31, 1996. Miscellaneous income
during 1995 primarily consisted of lease buyout settlements related to three
Brookdale tenants totaling $444,000, whereas the balance for 1996 primarily
consisted of a lease settlement totaling $60,000 for one Brookdale tenant.
Total expenses decreased from $22,535,891 for the year ended December 31, 1995
to $13,974,118 for the year ended December 31, 1996. The decrease is primarily
due to the loss recorded on the write-down of Brookdale at December 31, 1995 of
$9,498,921 and lower depreciation and amortization during the 1996 period.
Loss on write-down of real estate decreased from $9,498,921 for the year ended
December 31, 1995 to $0 for the year ended December 31, 1996. During 1995, the
Partnership wrote down the net book value of Brookdale by $9,498,921 to its
estimated fair market value less selling costs. The determination of the
estimated fair market value of the property was based upon an appraisal of the
property, which was conducted annually.
Real estate taxes decreased from $3,205,621 for the year ended December 31,
1995 to $2,487,771 during 1996 due to a decrease in the assessed value of
Brookdale.
Interest expense increased from $5,076,282 for the year ended December 31, 1995
to $7,004,184 for the year ended December 31, 1996 primarily due to the accrual
of interest on the Brookdale Note at the default rate of 19% subsequent to the
Partnership's default on the Brookdale Note.
Depreciation and amortization decreased from $1,196,967 for the year ended
December 31, 1995 to $0 for the year ended December 31, 1996. Effective
January 1, 1996, the Partnership's assets were no longer depreciable due to the
adoption of Statement of Financial Accounting Standards No. 121 "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
Of," which requires the carrying amount of assets held for disposition to equal
fair value less estimated costs to sell. Depreciation and/or amortization was
not recorded during the period in which the asset was being held for
disposition.
Professional fees increased from $209,014 for the year ended December 31, 1995
to $823,894 for the year ended December 31, 1996 primarily due to higher legal
and other professional fees relating to the Brookdale Note and the
Partnership's bankruptcy as described under "Liquidity and Capital Resources"
above.
Sales for tenants (exclusive of anchor tenants) who operated at Brookdale for
each of the last two years were approximately $27,438,800 and $27,465,100 for
the eleven months ended November 30, 1996 and 1995, respectively. As of
December 31, 1996, Brookdale was 65% occupied (exclusive of anchor and
outparcel stores), compared with 80% at December 31, 1995.
1995 versus 1994
Cash provided by operating activities totaled $2,817,025 for the year ended
December 31, 1995 compared with $4,483,503 during 1994. The reduced cash flow
was primarily due to the funding of all net cash flow from Brookdale to
Equitable, which commenced on August 2, 1995 (see "Liquidity and Capital
Resources" above).
The Partnership recognized a net loss of $10,763,695 for the year ended
December 31, 1995 compared to $7,567,268 during 1994. The increase in net loss
during 1995 primarily reflected the gain recognized on the sale of Northland in
1994 and a greater loss on the write-down of Brookdale to its estimated fair
market value in 1995 compared to 1994. The carrying value of Brookdale was
reduced during the fourth quarter of 1995 and 1994 based upon management's
assessment of the estimated fair market value of the property. The
determination of the estimated fair market value of the property was based upon
the most recent appraisal of the property, which was conducted annually.
Rental income totaled $4,691,179 for the year ended December 31, 1995 compared
with $4,895,956 in 1994. The decrease reflected lower average rental rates on
new leases and a decrease in percentage rent due to the decrease in tenant
sales. Interest income for the year ended December 31, 1995 totaled $421,179
compared to $326,493 in 1994. The increase was mainly due to higher interest
rates earned on the Partnership's invested cash. Miscellaneous income totaled
$606,678 for the year ended December 31, 1995 compared to $1,508,212 during
1994. Miscellaneous income during 1995 primarily consisted of lease buyout
settlements for three Brookdale tenants totaling $444,000 and a $105,728
adjustment for an overaccrual of the Michigan Single Business Tax as a result
of the sale of Northland Center, whereas the balance for the 1994 period
primarily consisted of lease settlements for one former Brookdale in-line
tenant and Carson's, a former Brookdale anchor store, totaling $1,450,000.
Total expenses for the year ended December 31, 1995 totaled $22,535,891
compared to $24,872,636 during 1994. The decrease reflected the absence of
interest expense and depreciation and amortization associated with Northland,
which was sold in 1994, which was partially offset by an increased write-down
of Brookdale in 1995 compared to 1994. Property operating expenses increased
from $2,657,042 for the year ended December 31, 1994 to $2,897,546 during 1995.
The increase was due to the collection of past due Carson's receivables in
1994.
Real estate taxes decreased from $3,528,943 for the year ended December 31,
1994 to $3,205,621 during 1995 primarily due to a reduction in the assessed
value of Brookdale in January 1995. General and administrative expense
decreased for the year ended December 31, 1995 compared to 1994 reflecting
lower transfer agent fees in 1995 and costs associated with the proxy
solicitation incurred in 1994.
Sales for tenants (exclusive of anchor tenants) who operated at Brookdale for
each of the last two years were approximately $35,959,700 and $38,032,700 for
the years ended December 31, 1995 and 1994, respectively. The General Partner
attributes the decrease in sales to increased competition from nearby regional
shopping centers which have been renovated or upgraded and a decline in
consumer spending on softgoods, particularly apparel, a trend experienced by
retailers across the country. As of December 31, 1995, Brookdale was 80%
occupied (exclusive of anchor and outparcel stores), compared with 79% at
December 31, 1994.
Property Appraisal
The Partnership Agreement and the Mortgage Note required the Partnership to
retain an independent, third-party appraisal firm to appraise the Partnership's
property each year. The Partnership was required to provide an appraisal of
the property to the Unit Holders within 90 days after the end of the
Partnership's fiscal year. Cushman & Wakefield, Inc., an independent appraisal
firm retained by the Partnership to appraise Brookdale in 1995, appraised the
fair market value of Brookdale at $25,000,000 as of January 1, 1996. As
Brookdale was transferred to Equitable in December 1996 pursuant to the Plan,
no appraisal was conducted as of January 1, 1997. It should be noted that
appraisals are only estimates of current value and actual values realizable
upon a sale could be significantly different.
Item 8. Financial Statements and Supplementary Data
See Item 14a for a listing of the Financial Statements and Supplementary data
filed in this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no officers or directors. The General Partner manages and
controls substantially all of the Partnership's affairs and has general
responsibility and ultimate authority in all matters affecting the
Partnership's business. Certain officers and directors of the General Partner
are now serving (or in the past have served) as officers and directors of
entities which act as general partners of a number of real estate limited
partnerships which have sought protection under the provisions of the federal
Bankruptcy Code. The partnerships which have filed bankruptcy petitions own
real estate which has been adversely affected by the economic conditions in the
markets in which that real estate is located and, consequently, the
partnerships sought protection of the bankruptcy laws to protect the
partnerships' assets from loss through foreclosure.
On July 31, 1993, Shearson Lehman Brothers, Inc. ("Shearson") sold certain of
its domestic retail brokerage and asset management businesses to Smith Barney,
Harris Upham & Co. Incorporated ("Smith Barney"). Subsequent to this sale,
Shearson changed its name to Lehman Brothers Inc. The transaction did not
affect the ownership of the Partnership or the Partnership's General Partner.
However, the assets acquired by Smith Barney included the name "Shearson."
Consequently, the general partner changed its name to Midwest Centers Inc. to
delete any references to "Shearson."
The directors and executive officers of the General Partner are as follows:
Name Office
Paul L. Abbott Director, President and Chairman of the Board
Stevan N. Bach Director
Kathleen Carey Director
Raymond C. Mikulich Director
Robert J. Hellman Vice President, Director and Chief
Financial Officer
Joan B. Berkowitz Vice President
Elizabeth Rubin Vice President
Robert Sternlieb Vice President
Paul L. Abbott, 51, is a Managing Director of Lehman Brothers. Mr. Abbott
joined Lehman Brothers in August 1988, and is responsible for investment
management of residential, commercial and retail real estate. Prior to joining
Lehman Brothers, Mr. Abbott was a real estate consultant and a senior officer
of a privately held company specializing in the syndication of private real
estate limited partnerships. From 1974 through 1983, Mr. Abbott was an officer
of two life insurance companies and a director of an insurance agency
subsidiary. Mr. Abbott received his formal education in the undergraduate and
graduate schools of Washington University in St. Louis.
Stevan N. Bach, 57, is Chief Executive Officer of Bach, Thoreen, McDermott
Inc., a real estate valuation and consulting firm based in Houston, Texas. Mr.
Bach has over 32 years of experience in the real estate business. From
December 1980 through July 1984, Mr. Bach was a Senior Vice President, National
Director and General Manager of the Southwestern Region for Landauer
Associates, Inc. From December 1975 through December 1980, Mr. Bach was the
Vice President and Manager of Coldwell Banker Appraisal Services. Mr. Bach is
a graduate of the University of Southern California.
Kathleen B. Carey, 43, is an attorney specializing in commercial real estate.
She is a graduate of the State University of New York at Albany and St. John's
University Law School. In 1987, she joined the Connecticut law firm of
Cummings & Lockwood and served as a partner in the firm from 1989 until
mid-1994. Kathleen's practice has involved all facets of acquisitions, sales
and financing of commercial properties, including multifamily housing, office
buildings and shopping centers. She is admitted to practice in New York,
Connecticut and California and worked as an independent commercial real estate
consultant until August of 1996 when she joined GE Capital Investment Advisors
as a Managing Director.
Raymond C. Mikulich, 43, is a Managing Director of Lehman, and since January
1988, has been head of the Real Estate Investment Banking Group. Prior to
joining Lehman Brothers Kuhn Loeb in 1982, Mr. Mikulich was a Vice President
with LaSalle National Bank, Chicago, in the Real Estate Advisory Group, where
he was responsible for the acquisition of equity interests in commercial real
estate. Over his 23 years in the real estate business, Mr. Mikulich has
arranged acquisitions and dispositions on behalf of both individuals and
institutional investors. Mr. Mikulich holds a BA degree from Knox College and
a JD degree from Kent College of Law.
Robert J. Hellman, 42, is a Senior Vice President of Lehman Brothers and is
responsible for investment management of retail, commercial and residential
real estate. Since joining Lehman Brothers in 1983, Mr. Hellman has been
involved in a wide range of activities involving real estate and direct
investments including origination of new investment products, restructurings,
asset management and the sale of commercial, retail and residential properties.
Prior to joining Lehman Brothers, Mr. Hellman worked in strategic planning for
Mobil Oil Corporation and was an associate with an international consulting
firm. Mr. Hellman received a bachelor's degree from Cornell University, a
master's degree from Columbia University, and a law degree from Fordham
University.
Joan B. Berkowitz, 37, is a Vice President of Lehman Brothers, responsible
for investment management of retail, commercial and residential real estate
within the Diversified Asset Group. Ms. Berkowitz joined Lehman Brothers in
May 1986 as an accountant in the Realty Investment Group. From October 1984 to
May 1986, she was an Assistant Controller to the Patrician Group. From November
1983 to October 1984, she was employed by Diversified Holdings Corporation.
From September 1981 to November 1983, she was employed by Deloitte Haskins &
Sells. Ms. Berkowitz, a Certified Public Accountant, received a B.S. degree
from Syracuse University in 1981.
Elizabeth Rubin, 30, is a Vice President of Lehman Brothers in the Diversified
Asset Group. Ms. Rubin joined Lehman Brothers in April 1992. Prior to joining
Lehman Brothers, she was employed from September 1988 to April 1992 by the
accounting firm of Kenneth Leventhal and Co. Ms. Rubin is a Certified Public
Accountant and received a B.S. degree from the State University of New York at
Binghamton in 1988.
Robert Sternlieb, 32, is an Assistant Vice President of Lehman Brothers and is
responsible for asset management within the Diversified Asset Group. Mr.
Sternlieb joined Lehman Brothers in April 1989 as an asset manager. From May
1986 to April 1989, he was a systems analyst at Drexel Burnham Lambert. Mr.
Sternlieb received a B.S. degree in Finance from Lehigh University in 1986.
Item 11. Executive Compensation
The Directors and Officers of the General Partner do not receive any salaries
or other compensation from the Partnership, except that Mr. Bach and Ms. Carey
receive $12,000 per year for serving as Directors of the General Partner. Prior
to September 1, 1993 Mr. Bach received $10,000, and $2,400 for attendance in
person at any meeting of the Board of Directors of the General Partner or of
the Audit Committee. During 1996, Mr. Bach was paid $21,600 in director fees
and Ms. Carey was paid $19,200 in director fees.
The General Partner is entitled to receive 1% of Operating Cash Flow
distributed in any fiscal year and to varying percentages of the Net Proceeds
of capital transactions. See pages 84 and 85 of the Partnership Agreement for
a description of such arrangements which description is incorporated by
reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners - To the knowledge of the
Partnership, no person owns more than 5% of the outstanding Units as of
December 31, 1996.
(b) Security Ownership of Management - Various employees of Lehman Brothers
that perform services on behalf of the General Partner own no units of the
Partnership as of December 31, 1996.
(c) Changes in Control - None
Item 13. Certain Relationships and Related Transactions
The General Partner, an affiliate of Lehman Brothers, is entitled to receive a
portion of Operating Cash Flow and Net Proceeds from Capital Transactions. No
distributions of either Operating Cash Flow or Net Proceeds from Capital
Transactions were made.
During 1993, the Partnership engaged Lehman Brothers, an affiliate of the
General Partner, in conjunction with the possible sales of Brookdale and
Northland. Pursuant to such agreement, Lehman Brothers was entitled to a fee
equal to 0.875% of the gross proceeds of a transaction, as defined in the
Letter Agreement (incorporated by reference to Exhibit 10.13). Pursuant to this
agreement, the Partnership paid Lehman Brothers $508,774 in 1994 for advisory
services related to the sale of Northland Center. Such agreement was terminated
in 1995.
Affiliates of the General Partner have been responsible for certain
administrative functions of the Partnership. For amounts paid to such
affiliates, see Note 6 of the Notes to Financial Statements. PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) and (2).
MIDWEST REAL ESTATE SHOPPING CENTER L.P.
(a Delaware limited partnership)
Index to Financial Statements and Schedules
Page
Number
Independent Auditors' Report F-1
Balance Sheets
At December 31, 1996 and 1995 F-2
Statements of Partners' Capital (Deficit)
For the years ended December 31, 1996, 1995 and 1994 F-2
Statements of Operations
For the years ended December 31, 1996, 1995 and 1994 F-3
Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994 F-4
Notes to the Financial Statements F-5
Schedule II - Valuation and Qualifying Accounts F-11
Schedule III - Real Estate and Accumulated Depreciation F-12
(b) Exhibits.
Subject to Rule 12b-32 of the Securities Act of 1934 regarding incorporation by
reference, listed below are the exhibits which are filed as part of this
report:
3.* Registrant's Agreement of Limited Partnership, dated December 1, 1986, is
hereby incorporated by reference to Exhibit A to the Prospectus contained
in Registration Statement No. 33-9937, which Registration Statement (the
"Registration Statement") was declared effective by the SEC on December 23,
1986.
4.1*The form of Certificate of Limited Partnership Interest is hereby
incorporated by reference to Exhibit 4.1 to the Registration Statement.
4.2*The form of Unit Certificate is hereby incorporated by reference to Exhibit
4.2 to the Registration Statement.
10.1* The form of Property Management Agreement between Registrant and Center
Management Venture is hereby incorporated by reference to Exhibit 2 to the
Registration Statement.
10.2* The form of Transfer Agent Agreement is hereby incorporated by reference
to Exhibit 10.7 to the Registration Statement.
10.3* The form of Promissory Note (Brookdale) is hereby incorporated by
reference to Exhibit 10.8.1 to the Registration Statement.
10.4* The form of Promissory Note (Northland) is hereby incorporated by
reference to Exhibit 10.8.2 to the Registration Statement.
10.5* The form of Mortgage is hereby incorporated by reference to Exhibit 10.9
to the Registration Statement.
10.6* The form of Assignments of Leases and Rents is hereby incorporated by
reference to Exhibit 10.10 to the Registration Statement.
10.7* The Indemnification Agreement is hereby incorporated by reference to
Exhibit 10.11 to the Registration Statement.
10.8* The Agreement of Indemnification is hereby incorporated by reference to
Exhibit 10.11 to the Registration Statement.
10.9* The Second Mortgage Loan Agreement from Equitable to the Partnership
dated June 25, 1991 is hereby incorporated by reference to Exhibit 10.13 to
the Registrant's Form 10-K for the year ended December 31, 1991.
10.10* Letter of Intent to Purchase Northland Center by Equitable Life
Assurance Society of the United States is hereby incorporated by reference
to Exhibit A to the Partnership's Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 19, 1994.
10.11* The Engagement Letter between the Partnership and Lehman Brothers
securing Lehman Brothers services as exclusive financial advisor with
respect to the sale of Northland Center and Brookdale Center, dated October
25, 1993 is hereby incorporated by reference to Exhibit 10.13 to the
Partnership's Annual Report on Form 10-K for the year ended December 31,
1993.
10.12* Termination and Release Agreement between the Partnership and Equitable
Real Estate Investment Management, Inc. dated March 28, 1994 is hereby
incorporated by reference to Exhibit 10.14 to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1993.
27 Financial Data Schedule.
99 Debtor's First Amended Chapter 11 Plan, dated October 16, 1996, is hereby
incorporated by reference to documents filed with the United States
Bankruptcy Court for the Southern District of New York Chapter 11, Case No.
96B43335 (CB).
* Previously filed
(c) Reports on Form 8-K during the three months ended December 31, 1996:
None
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 its
behalf by the undersigned, thereunto duly authorized.
Dated: March 27, 1997
MIDWEST REAL ESTATE SHOPPING CENTER L.P.
BY: Midwest Centers Inc.
General Partner
BY: /s/Paul L. Abbott
Name: Paul L. Abbott
Title: Director, President and
Chairman of the Board
BY: /s/Robert J. Hellman
Name: Robert J. Hellman
Title: Director, Vice President
and Chief Financial Officer
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 in the capacities and on the dates indicated.
MIDWEST CENTERS INC.
General Partner
Date: March 27, 1997
BY: /s/ Paul L. Abbott
Paul L. Abbott
Director, Chairman of the
Board and President
Date: March 27, 1997
BY: /s/ Raymond Mikulich
Raymond Mikulich
Director
Date: March 27, 1997
BY: /s/ Stevan N. Bach
Stevan N. Bach
Director
Date: March 27, 1997
BY: /s/ Kathleen Carey
Kathleen Carey
Director
Date: March 27, 1997
BY: /s/ Robert J. Hellman
Robert J. Hellman
Director, Vice President
and Chief Financial Officer
Date: March 27, 1997
BY: /s/ Joan Berkowitz
Joan Berkowitz
Vice President
Date: March 27, 1997
BY: /s/ Elizabeth Rubin
Elizabeth Rubin
Vice President
Date: March 27, 1997
BY: /s/ Robert J. Sternlieb
Robert J. Sternlieb
Vice President
Independent Auditors' Report
The Partners
Midwest Real Estate Shopping Center L.P.:
We have audited the financial statements of Midwest Real Estate Shopping Center
L.P. (a Delaware limited partnership) as listed in the accompanying index. In
connection with our audits of the financial statements, we also have audited
the financial statement schedules as listed in the accompanying index. These
financial statements and financial statement schedules are the responsibility
of the Partnership's management. Our responsibility is to express an opinion
on these financial statements and financial statement schedules 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Midwest Real Estate Shopping
Center L.P. as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Also in our opinion, the related financial statement schedules, when considered
in relation to the basic financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
As discussed in Note 1 to the financial statements, the Partnership filed for
bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code on June 21,
1996. In accordance with a liquidation plan supported by the Partnership's
mortgage lender for the remaining property and approved by a bankruptcy court,
the Partnership transferred ownership of its remaining property to the lender
in settlement of the mortgage loan. The bankruptcy court is in the process of
settling remaining creditor claims in the Partnership's bankruptcy case. Upon
settlement of this case, the General Partner intends to dissolve the
Partnership.
KPMG Peat Marwick LLP
Boston, Massachusetts
February 13, 1997
Balance Sheets At Dec. 31, At Dec. 31,
1996 1995
Assets
Property held for disposition
(notes 3 and 5) $ _ $24,500,000
Cash and cash equivalents 5,812,917 5,971,023
Restricted cash (note 5) _ 1,012,296
Accounts receivable, net of allowance of
$174,600 in 1995 _ 537,561
Deferred rent receivable _ 112,931
Due from affiliates, net (note 6) 141,284 139,062
Prepaid assets _ 92,607
Total Assets $ 5,954,201 $32,365,480
Liabilities and Partners'
Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 644,151 $ 647,499
Zero coupon mortgage
note payable (note 5) _ 38,028,587
Total Liabilities 644,151 38,676,086
Partners' Capital (Deficit) (note 4):
General Partner 53,101 (111,270)
Limited Partners (10,700,000 securities
outstanding) 5,256,949 (6,199,336)
Total Partners' Capital (Deficit) 5,310,050 (6,310,606)
Total Liabilities and Partners'
Capital (Deficit) $ 5,954,201 $32,365,480
Statement of Partners' Capital (Deficit)
For the years ended December 31, 1996, 1995 and 1994
General Limited
Partner Partners Total
Balance at December 31, 1993 $(719,854) $27,385,161 $26,665,307
Net income (loss) 862,671 (8,429,939) (7,567,268)
Cash distributions (note 8) (123,752) (12,251,500) (12,375,252)
Balance at December 31, 1994 19,065 6,703,722 6,722,787
Net loss (107,637) (10,656,058) (10,763,695)
Cash distributions (note 8) (22,698) (2,247,000) (2,269,698)
Balance at December 31, 1995 (111,270) (6,199,336) (6,310,606)
Net income 164,371 11,456,285 11,620,656
Balance at December 31, 1996 $ 53,101 $ 5,256,949 $ 5,310,050
Statements of Operations
For the years ended December 31, 1996 1995 1994
Income
Rental income (note 3) $4,485,981 $4,691,179 $4,895,956
Escalation income (note 3) 4,957,157 6,053,160 5,964,157
Interest income 298,324 421,179 326,493
Miscellaneous income 126,582 606,678 1,508,212
Total Income 9,868,044 11,772,19 12,694,818
Expenses
Property operating expenses 3,147,576 2,897,546 2,657,042
Loss on write-down of
real estate (note 3) _ 9,498,921 9,068,553
Real estate taxes 2,487,771 3,205,621 3,528,943
Interest expense 7,004,184 5,076,282 6,145,897
Depreciation and amortization _ 1,196,967 2,677,432
General and administrative 304,532 236,175 311,639
Management fee (note 7) 206,161 215,365 230,565
Professional fees 823,894 209,014 252,565
Total Expenses 13,974,118 22,535,891 24,872,636
Loss from operations before
gain on sale of property
and extraordinary item (4,106,074) (10,763,695) (12,177,818)
Gain on sale of property _ _ 4,610,550
Loss from operations before
extraordinary item (4,106,074) (10,763,695) (7,567,268)
Extraordinary Item:
Gain on forgiveness of
mortgage loan obligation 15,726,730 _ _
Net Income (Loss) $11,620,656 $(10,763,695) $(7,567,268)
Net Income (Loss) Allocated:
To the General Partner $ 164,371 $ (107,637) $ 862,671
To the Limited Partners 11,456,285 (10,656,058) (8,429,939)
$11,620,656 $(10,763,695) $(7,567,268)
Per limited partnership unit
(10,700,000 units outstanding)
Net loss from operations before
extraordinary item $ (.38)$ (1.00) $ (.79)
Extraordinary item 1.45 _ _
Net Income (Loss) $ 1.07 $ (1.00) $ (.79)
Statements of Cash Flows
For the years ended December 31, 1996 1995 1994
Cash Flows From Operating
Activities
Net income (loss) $11,620,656 $(10,763,695) $(7,567,268)
Adjustments to reconcile net
income (loss) to net cash
provided by (used for)
operating activities:
Depreciation and amortization _ 1,196,967 2,677,432
Loss on write-down of real estate _ 9,498,921 9,068,553
Gain on forgiveness of mortgage
loan obligation (15,726,730) _ _
Increase in interest on
zero coupon mortgage note
payable 2,139,126 4,376,282 6,145,897
Gain on sale of property _ _ (4,610,550)
Increase (decrease) in cash
arising from changes
in operating assets and
liabilities:
Restricted cash 688,633 (1,012,296) _
Accounts receivable 172,654 (356,203) 304,519
Deferred rent receivable 112,931 (21,962) (62,341)
Due from affiliates, net (2,222) 814 1,469
Prepaid expenses (1,409) 50,072 1,533,654
Accounts payable and
accrued expenses 338,255 (151,875) (1,757,862)
Deferred income _ _ (1,250,000)
Net cash provided by
(used for) operating activities (658,106) 2,817,025 4,483,503
Cash Flows From Investing Activities
Proceeds from settlement of Brookdale 500,000 _ _
Proceeds from sale of Northland _ _ 5,625,304
Additions to real estate _ (513,241) (1,114,049)
Net cash provided by (used for)
investing activities 500,000 (513,241) 4,511,255
Cash Flows From Financing Activities
Distributions paid _ (3,026,263) (12,969,697)
Net cash used for financing activities _ (3,026,263) (12,969,697)
Net decrease in cash
and cash equivalents (158,106) (722,479) (3,974,939)
Cash and cash equivalents,
beginning of period 5,971,023 6,693,502 10,668,441
Cash and cash equivalents,
end of period $5,812,917 $5,971,023 $ 6,693,502
Supplemental Disclosure of
Cash Flow Information:
Cash paid during the year
for interest $6,097,817 $700,000 $ _
Supplemental Disclosure of
Non-Cash Operating Activities:
The Partnership transferred $440,982 of net operating assets of Brookdale to
Equitable pursuant to the foreclosure sale.
Supplemental Disclosure of Non-Cash Investing Activities:
Closing costs of $370,000 and capital expenditures of $422,677 were funded
through accounts payable in 1994.
Supplemental Disclosure of Non-Cash Financing Activities:
In connection with the sale of Northland Center, Equitable released the
Partnership from the related $54,504,713 mortgage obligation in 1994. In
connection with the foreclosure sale of Brookdale Center, the Partnership was
released from the $40,167,712 mortgage obligation.
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
1. Organization
Midwest Real Estate Shopping Center L.P., formerly Equitable Real Estate
Shopping Center L.P. (the "Partnership") was formed as a limited partnership on
October 28, 1986, under the laws of the State of Delaware. The Partnership was
formed to acquire two regional shopping malls, Brookdale Center and Northland
Center from Equitable Life Assurance Society of the United States
("Equitable").
In conjunction with the termination of the former asset management agreement
with Equitable Real Estate Investment Management, Inc., the Partnership was
required to cease using "Equitable" and "Equitable Real Estate" in its name.
Consequently, effective November 21, 1994, the Partnership changed its name to
Midwest Real Estate Shopping Center, L.P.
The general partner of the Partnership is Midwest Centers Inc., (the "General
Partner"), formerly Shearson ESC/GP Inc. (see below), an affiliate of Lehman
Brothers Inc., formerly Shearson Lehman Brothers Inc.
The Partnership was initially capitalized with $1,000, representing a capital
contribution by the General Partner. The Partnership commenced investment
operations on December 30, 1986, with the acceptance of subscriptions for
10,700,000 limited partnership securities from Unitholders, the maximum
authorized by the agreement of limited partnership (the "Partnership
Agreement").
On July 31, 1993, Shearson Lehman Brothers Inc. ("Shearson") sold certain of
its domestic retail brokerage and asset management businesses to Smith Barney,
Harris Upham & Co. Incorporated ("Smith Barney"). Subsequent to the sale,
Shearson changed its name to Lehman Brothers Inc. ("Lehman Brothers"). The
transaction did not affect the ownership of the General Partner. However, the
assets acquired by Smith Barney included the name "Shearson". Consequently,
effective November 12, 1993, the general partner changed its name to Midwest
Centers Inc. to delete any reference to "Shearson".
On July 22, 1994, the Partnership sold back Northland Center to Equitable.
Since 1995, the General Partner attempted to sell the Partnership's remaining
property, Brookdale Center ("Brookdale"), and pay off the Zero Coupon Mortgage
Note Payable (the "Mortgage"), which was held by Equitable and secured by
Brookdale. The General Partner was unable to consummate a sale of Brookdale
and repay the Mortgage prior to June 30, 1995, the maturity date of the
Mortgage. 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 several times until June 21, 1996.
On August 2, 1995, at the request of Equitable, the District Court for the
Fourth Judicial District of Minnesota appointed General Growth Management, Inc.
("General Growth") as the receiver of Brookdale. In such capacity, General
Growth collected the rent proceeds from Brookdale's tenants and applied the
proceeds to payment of, among other things, Brookdale's operating expenses,
maintenance costs, real estate taxes, tenant improvements and leasing
commissions, with any remaining funds to be paid to Equitable on account of its
mortgage on Brookdale. For the years ended December 31, 1996 and 1995 ,
$4,865,059 and $700,000, respectively was forwarded to Equitable and was
applied against accrued interest, per the terms of the receivership.
On April 12, 1996, the Partnership and Equitable executed a letter of intent
that outlined the principal terms, as described below, of a proposed loan
work-out relating to the disposition of Brookdale including a plan of
liquidation (the "Plan") for the Partnership under Chapter 11 of the U.S.
Bankruptcy Code that was supported by Equitable. On June 21, 1996, the
Partnership filed for bankruptcy protection under Chapter 11 of the U.S.
Bankruptcy Code in the United States Bankruptcy Court for the Southern District
of New York. The Partnership undertook the bankruptcy filing after extended
negotiations with Equitable.
Under the Plan, which was filed on October 16, 1996 with the bankruptcy court,
the Mortgage remained in default and the Partnership marketed Brookdale to
potential third-party buyers. 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 in the
mortgage, EML Associates ("EML"), for $500,000. Equitable and EML were also
granted certain limited rights of first refusal to acquire Brookdale. Pursuant
to the Plan, all available cash flow from Brookdale (after payment of property
expenses and administrative costs associated with the bankruptcy) was paid to
Equitable.
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 contemplated arrangements were
approved by the bankruptcy court at a confirmation hearing on the Plan on
November 25, 1996. No acceptable offer was received by the deadline and, as a
result, on December 16, 1996, Equitable obtained title to Brookdale pursuant to
the Plan. The Partnership was relieved of its mortgage obligation on Brookdale
and received $500,000 from Equitable, pursuant to the Plan. The Partnership
recorded a gain on foreclosure of Brookdale in the amount of $15,726,730.
Pursuant to the Partnership agreement (see note 4), the gain on foreclosure was
allocated $205,432 to the General Partner and $15,521,298 to the Limited
Partners.
The net sales proceeds from a bona fide third-party offer (as defined in the
Plan), after costs of the sale and amounts owed to Equitable under any
debtor-in-possession financing, and assuming a sales price in excess of $30
million, would have been split as follows: first, up to $750,000 to the
Partnership and $30 million to Equitable on a pari passu basis, then 50/50 on
any additional net sales proceeds up to the next $6 million, with the balance,
if any, to the Partnership. The only offer submitted to Equitable was for $17
million.
2. Summary of Significant Accounting Policies
Basis of Accounting The financial statements of the Partnership have been
prepared on the accrual basis of accounting.
Property Held for Disposition Property held for disposition, which consisted
of buildings, land and personal property, was recorded at its fair market
value, as determined by independent appraisals, less costs to sell at December
31, 1995 and 1994. Prior to December 31, 1994, the Property was held for use.
Effective January 1, 1996, Brookdale was no longer depreciated. Prior to
January 1, 1996, after adjustment for write downs, depreciation of the
buildings was computed using the straight- line method over an estimated useful
life of 33 years. Depreciation of personal property was computed using the
straight- line method over an estimated useful life of 12 years. Amortization
of tenant leasehold improvements was computed using the straight-line method
over the lease term.
Accounting for Impairment 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 Long-Lived Assets to Be Disposed Of
("FAS 121"), which requires long-lived assets that are expected to be disposed
of to be recorded at fair value less costs to sell. Additionally, long-lived
assets to be disposed of should not be depreciated. The Partnership adopted
FAS 121 in the fourth quarter of 1995 and, as a result, ceased depreciation of
the property held for disposition effective January 1, 1996.
Fair Value of Financial Instruments Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments"
("FAS 107"), requires the Partnership disclose the estimated fair values of its
financial instruments. Fair values generally represent estimates of amounts at
which a financial instrument could be exchanged between willing parties in a
current transaction other than in forced liquidation.
Fair value estimates are subjective and are dependent on a number of
significant assumptions based on management's judgment regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. In addition, FAS 107 allows
a wide range of valuation techniques, therefore, comparisons between entities,
however similar, may be difficult.
Offering Costs Offering costs are nonamortizable and have been deducted from
partners' capital (deficit).
Transfer of Units and Distributions Upon the transfer of a limited partnership
unit, net income and net loss from operations attributable to such unit
generally will be allocated between the transferor and the transferee based on
the number of days during the year of transfer that each is deemed to have
owned the unit. The Unitholder of record on the last day of a calendar month
will be deemed to have owned the unit for the entire month. Distributions of
operating cash flow, as defined in the Partnership Agreement, will be paid on a
quarterly basis to registered holders of units on record dates established by
the Partnership, which generally will be the last day of each quarter.
Income Taxes No provision is made for income taxes since such
liability is the liability of the individual partners.
Net Income (Loss) Per Limited Partnership Unit Net income (loss) per limited
partnership unit is based upon the limited partnership units outstanding at
year-end and the amount of net loss allocated to the limited partners.
Rental Income and Deferred Rent The Partnership had rented its property to
tenants under operating leases with various terms. Deferred rent receivable
consisted of rental income which was recognized on the straight-line basis over
the lease terms.
Cash and Cash Equivalents Cash equivalents consists of short- term highly
liquid investments which have maturities of three months or less from the date
of issuance. The carrying amount approximates fair value because of the short
maturity of the instruments.
Restricted Cash Restricted cash represented accumulated net cash flow
generated by Brookdale subsequent to the date of receivership.
Concentration of Credit Risk Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash
and cash equivalents in excess of the financial institutions' insurance limits.
The Partnership invests available cash with high credit quality financial
institutions.
Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassification Certain prior year amounts have been reclassed to conform to
the current year's presentation.
3. Real Estate
The Partnership's real estate, which was purchased on December 30, 1986 from
Equitable, originally consisted of two regional shopping malls known as
Brookdale Center, located in Brooklyn Center, Hennepin County, Minnesota; and
Northland Center, located in Southfield, Oakland County, Michigan
("Northland"), collectively, the "Properties."
Northland Center
On July 22, 1994, the Partnership executed an agreement with Equitable for the
sale of Northland for the price of $6,600,000 in excess of the balance of the
existing first mortgage loan. The Partnership received net proceeds of
$5,625,304 and recognized a gain of $4,610,550 from the sale in 1994. Pursuant
to the Partnership agreement (see note 4), the gain was allocated $984,449 to
the General Partner and $3,626,101 to the Unitholders.
Brookdale Center
Brookdale is a regional shopping mall anchored by five major department stores
located on a site of approximately 81 acres. Brookdale contains approximately
985,000 gross leasable square feet, of which approximately 780,000 square feet
is owned or leased by the anchor tenants and not by the Partnership.
During 1995 and 1994, the Partnership wrote down the net book value of
Brookdale by $9,498,921 and $9,068,553, respectively, to its estimated fair
market value less costs to sell. The determination of the estimated fair
market value of Brookdale was based upon the most recent appraisal of the
property, which was conducted annually.
4. Partnership Agreement
Pursuant to the terms of the Partnership Agreement, profits, losses and
distributions of net cash flow from operations shall generally be allocated 99%
to the Unitholders and 1% to the General Partner. Net income from capital
transactions shall be allocated in the following order: (i) first, to all
partners having negative balances in their capital accounts, in proportion to
the negative balances, the portion of such net income that is necessary to
increase their negative balance to zero; (ii) second, to each partner in the
same proportions as net proceeds from capital transactions are distributed; and
(iii) third, the balance, if any, 11.76% to the General Partner and 88.24% to
the Unitholders.
Distributions of net proceeds from capital transactions shall be distributed
99% to the Unitholders and 1% to the General Partner, until the Unitholders
have received, from aggregate distributions of operating cash flow and net
proceeds from capital transactions, an amount equal to a cumulative annual
return of 11% compounded quarterly on their adjusted capital contributions. As
of December 31, 1996, the Unitholders have not yet received their cumulative
annual return.
5. Zero Coupon Mortgage Note Payable
Financing for the purchase of the Properties from Equitable was provided by two
nonrecourse mortgage notes in the initial principal amounts of $15,175,000 (the
"Brookdale Note") and $25,675,000 (the "Northland Note"). Upon the sale of the
Northland on July 22, 1994, Equitable released and discharged the Partnership
from the Northland Note and all interest accrued on the principal as specified
in the mortgage note agreement. The Brookdale Note had an interest rate of
10.2% per annum, compounded semiannually and matured June 30, 1995. As
described in Note 1, the Partnership was unable to pay off the Brookdale Note
at June 30, 1995. On July 5, 1995, the Partnership received notice from
Equitable that the Partnership failed to pay all principal and accrued interest
due under the terms of the Brookdale Note. Beginning on July 1, 1995, the
Partnership started to accrue interest on the Mortgage at the default rate of
19%, in accordance with the Brookdale Note. As of December 16, 1996, the
Partnership incurred $10,364,199 in default interest. On December 16, 1996,
pursuant to the Plan, Equitable obtained title to Brookdale and relieved the
Partnership of its obligations under the Brookdale Note in the amount of
$40,167,712.
6. Transactions with Related Parties
The General Partner or its affiliates earned fees and compensation in
connection with the syndication, acquisition and administrative services
rendered to the Partnership of $11,342,000 and incurred unreimbursed costs on
behalf of the Partnership of $570,352. The aggregate amount of the
aforementioned fees and compensation earned and unreimbursed costs was composed
of $7,490,000 included in offering costs and $4,422,352 included in deferred
charges. During 1993, the Partnership engaged Lehman Brothers, an affiliate of
the General Partner, in conjunction with exploring the possible sales of
Brookdale and Northland. Pursuant to such agreement, Lehman Brothers was
entitled to a fee equal to .875% of the gross proceeds of a transaction, as
defined in the Letter Agreement. Pursuant to this agreement, Lehman Brothers
received $508,774, in 1994, from the Partnership for advisory services related
to the sale of Northland. The Letter Agreement was terminated in 1995. As of
December 31, 1996 and 1995, $141,284 and $139,062, respectively, is the net
amount due from affiliates. For the years ended December 31, 1996, 1995 and
1994, $5,931, $70,237 and $576,932 respectively, was earned by or expenses
reimbursed to affiliates.
Cash and Cash Equivalents Cash and cash equivalents were on deposit with an
affiliate of the General Partner during a portion of 1996 and all of 1995. As
of December 31, 1996, no cash and cash equivalents were on deposit with an
affiliate of the General Partner or the Partnership.
7. Management Agreement
The Partnership entered into a management agreement (the "Management
Agreement") with General Growth for the day-to-day operations of the
Properties. General Growth received a monthly fee of 4.45% (increased from 4%
commencing February 1, 1989) of the net rents as defined in the Management
Agreement. The Management Agreement expired January 31, 1989 and was extended
for two years. The Properties were managed pursuant to the terms of the
Management Agreement through August 2, 1995. Pursuant to the default of the
Brookdale Note and the appointment of General Growth as the receiver of
Brookdale, General Growth was entitled to receiver's fees equal to 4.45% of all
fixed minimum rents and percentage or overage rents collected. During 1996,
General Growth was reinstated as property manager under the terms of the
Management Agreement until December 16, 1996. For the years ended December 31,
1996, 1995 and 1994, General Growth earned property management/receiver fees of
$206,161, $215,365 and $230,565, respectively.
8. Distributions to Limited Partners
Distributions to limited partners for 1995 and 1994 were $2,247,000 ($.21 per
limited partnership unit) and $12,251,500 ($1.15 per limited partnership unit),
respectively. Cash distributions to limited partners were suspended, beginning
in the fourth quarter of 1995.
9. Reconciliation of Financial Statement Net Income (Loss) and
Partners' Capital (Deficit) to Federal Income Tax Basis Net
Income (Loss) and Partners' Capital
1996 1995 1994
Financial statement
net income (loss) $11,620,656 $(10,763,695) $ (7,567,268)
Tax basis depreciation
over financial
statement depreciation (2,383,610) (1,539,664) (169,715)
Tax basis rental income
over (under) financial
statement rental income 8,005 (54,816) (2,187,492)
Tax basis loss on sale of
property over
financial statement gain
on sale of property (5,102,993) _ (12,630,880)
Financial statement loss on
write-down of
real estate over tax basis
loss on
write-down of real estate _ 9,498,921 9,068,553
Other (14,811) 74,568 (194,409)
Federal income tax basis
net income (loss) $ 4,127,247 $ (2,784,686) $(13,681,211)
Financial statement
partners' capital (deficit) $ 5,310,050 $ (6,310,606) $ 6,722,787
Current year financial
statement net income
(loss) over (under) federal
income tax
basis net income (loss) (7,493,409) 7,979,009 (6,113,943)
Cumulative financial statement
net income (loss) over
(under) federal income tax
basis net income (loss) 7,493,409 (485,600) 5,628,343
Federal income tax basis partners'
capital $ 5,310,050 $ 1,182,803 $ 6,237,187
Because many types of transactions are susceptible to varying interpretations
under Federal and state income tax laws and regulations, the amounts reported
above may be subject to change at a later date upon final determination by the
taxing authorities.
10. Litigation
On January 17, 1995, the Partnership announced that an action had been filed
against the General Partner, the Partnership and other defendants in the United
States District Court for the Southern District of New York on behalf of all
persons who owned Limited Partnership Units of the Partnership on June 7, 1994.
The complaint alleges, among other things, that the solicitation statement used
by the Partnership to solicit the consent of the Limited Partners to the July
1994 sale of Northland (the "Solicitation Statement") contained material
misrepresentations and omissions in violation of Section 14(a) of the
Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. The
complaint also alleges claims for breach of fiduciary duty, negligent
misrepresentation and breach of the limited partnership agreement related to
the Northland sale and the partial liquidation of the assets. Plaintiffs seek,
among other things, compensatory damages and to have their action certified as
a class action under the Federal Rules of Civil Procedure. On May 12, 1995, the
Partnership announced that two similar actions had been filed in the District
Court for the Southern District of New York. On November 16, 1995, the
complaints in one of these three actions was amended to add a derivative claim
for breach of fiduciary duty on behalf of the Partnership. The amended
complaint also alleges that the General Partner, assisted by the other
defendants, breached its fiduciary duties by failing to take steps to maximize
the value of Brookdale.
On May 12, 1995, the Partnership also announced that an action had been filed
against the General Partner and other defendants in the Federal District Court
for the Central District of California on behalf of all persons who owned
Limited Partnership Units during the period June 7, 1994 to April 21, 1995.
The complaint alleges that the Solicitation Statement contained material
misrepresentations and omissions in violation of Section 14(a) of the
Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder.
Plaintiffs seek, among other things, compensatory damages, and to have their
action certified as a class action under the Federal Rules of Civil Procedure.
This action has been transferred to the District Court for the Southern
District of New York to be coordinated with the New York actions for pre-trial
proceedings.
The Partnership also announced on May 12, 1995, that a lawsuit had been filed
against the General Partner and other defendants in the Superior Court for Los
Angeles County and removed to the District Court for the Central District Court
of California. This action is brought on behalf of all persons who purchased
Limited Partnership Units of the Partnership during the period from December
26, 1986 to the present. The complaint alleges, among other things, that the
General Partner, assisted by the other defendants, breached its fiduciary duty
to the plaintiffs in connection with the offer and sale of Limited Partnership
Units, the operation of the Partnership and the Northland sale. Plaintiffs
seek, among other things, compensatory damages, punitive damages, and to have
their action certified as a class action under the Federal Rules of Civil
Procedure. This action also has been transferred to the District Court for the
Southern District of New York to be coordinated with the pre-trial proceedings.
The plaintiff subsequently amended the complaint to name the Partnership as a
defendant.
The General Partner believes that the allegations in these complaints are
without merit and will defend these lawsuits vigorously and believes that any
settlements reached are not currently expected to have a material impact on the
financial position of the Partnership.
Schedule II Valuation and Qualifying Accounts
Balance at Charged to Balance at
Beginning Costs and End of
of Period Expenses Deductions Period
Allowance for doubtful
accounts:
Year ended
December 31, 1994: $1,251,805 $(184,872) $971,704 $ 95,229
Year ended
December 31, 1995: $ 95,229 $ 87,621 $ 8,250 $174,600
Year ended
December 31, 1996: $ 174,600 $ 282,375 $456,975 $ _
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1996
Brookdale
Shopping Center Total
Location Hennepin County, MN
Construction date 1962 na
Acquisition date 12-30-86 na
Life on which depreciation
in latest income statements
is computed (2) na
Encumbrances _ _
Initial cost to Partnership:
Land $ 5,413,594 $ 5,413,594
Buildings and
improvements 42,816,568 42,816,568
Costs capitalized
subsequent to acquisition:
Land, buildings
and improvements 5,611,188 5,611,188
Write-down (3) $(29,341,350) $(29,341,350)
Gross amount at which
carried at close of period:
Land _ _
Buildings and
improvements _ _
_ _
Accumulated depreciation _ _
(1) Represents aggregate cost for both financial reporting and
Federal income tax purposes.
(2) Buildings and improvements - 33 years; personal property - 12
years.
(3) In 1995, the Partnership recorded a write-down to reduce the
carrying value of Brookdale Center to its estimated fair value.
A reconciliation of the carrying amount of real estate and
accumulated depreciation for the years ended
December 31, 1996, 1995, and 1994 follows:
1996 1995 1994
Real estate investments:
Beginning of year $24,500,000 $35,072,000 $108,498,993
Additions _ 90,564 1,536,726
Write-down _ (10,662,564) (18,678,786)
Dispositions (24,500,000) _ (56,284,933)
End of year $ _ $24,500,000 $ 35,072,000
Accumulated depreciation:
Beginning of year $ _ $ _ $ 8,234,897
Depreciation expense _ 1,163,643 2,510,802
Write-down _ (1,163,643) (9,610,233)
Dispositions _ _ (1,135,466)
End of year $ _ $ _ $ _
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,812,917
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 5,954,201
<CURRENT-LIABILITIES> 644,151
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 5,310,050
<TOTAL-LIABILITY-AND-EQUITY> 5,954,201
<SALES> 000
<TOTAL-REVENUES> 9,868,044
<CGS> 000
<TOTAL-COSTS> 5,841,508
<OTHER-EXPENSES> 1,128,426
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 7,004,184
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 15,726,730
<CHANGES> 000
<NET-INCOME> 11,620,656
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
