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 September 30, 1998
or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition period from ______ to ______
Commission File Number: 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 I.R.S. Employer Identification No.
Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3183
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 ____
<PAGE>
2
<TABLE>
BALANCE SHEETS
<CAPTION>
At September 30, At December 31,
1998 1997
(unaudited) (audited)
---------------- --------------
<S> <C> <C>
Assets
Cash and cash equivalents $6,516,983 $4,430,503
Due from affiliates, net -- 141,345
Prepaid expenses -- 13,530
---------- ----------
Total Assets $6,516,983 $4,585,378
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 301,390 $ 113,313
Refunds due to former tenants 3,994,133 --
Deferred credit 1,132,223 --
---------- ----------
Total Liabilities 5,427,746 113,313
---------- ----------
Partners' Capital:
General Partner 10,893 44,722
Limited Partners (10,700,000
securities outstanding) 1,078,344 4,427,343
---------- ----------
Total Partners' Capital 1,089,237 4,472,065
---------- ----------
Total Liabilities and Partners' Capital $6,516,983 $4,585,378
========== ==========
</TABLE>
<TABLE>
STATEMENT OF PARTNERS' CAPITAL (UNAUDITED)
For the nine months ended September 30, 1998
<CAPTION>
General Limited
Partner Partners Total
-------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1997 $ 44,722 $ 4,427,343 $ 4,472,065
Net loss (3,296) (326,249) (329,545)
Distributions (30,533) (3,022,750) (3,053,283)
-------- ----------- -----------
Balance at September 30, 1998 $ 10,893 $ 1,078,344 $ 1,089,237
======== =========== ===========
</TABLE>
<PAGE>
3
<TABLE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
---------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Income
Interest $ 47,898 $ 36,000 $ 88,360 $ 109,926
Other income 4,252,352 -- 4,252,352 --
---------- -------- ---------- ---------
Total Income 4,300,250 36,000 4,340,712 109,926
---------- -------- ---------- ---------
Expenses
General and administrative 69,775 20,132 186,466 135,561
Professional fees 24,835 38,049 489,658 274,558
Refunds due to former
tenants 3,994,133 -- 3,994,133 --
---------- -------- ---------- ---------
Total Expenses 4,088,743 58,181 4,670,257 410,119
---------- -------- ---------- ---------
Net Income (Loss) $ 211,507 $(22,181) $ (329,545) $(300,193)
========== ======== ========== =========
Net Income (Loss) Allocated:
To the General Partner $ 2,115 $ (222) $ (3,296) $ (3,002)
To the Limited Partners 209,392 (21,959) (326,249) (297,191)
---------- -------- ---------- ---------
$ 211,507 $(22,181) $ (329,545) $(300,193)
========== ======== ========== =========
Per limited partnership
unit (10,700,000
securities outstanding) $ 0.02 $ (0.00) $ (0.03) $ (0.03)
------ ------- ------- -------
</TABLE>
<TABLE>
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended September 30,
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (329,545) $ (300,193)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Due from affiliates, net 141,345 (61)
Prepaid expenses 13,530 --
Accounts payable and accrued expenses 188,077 (316,303)
Refunds due to former tenants 3,994,133 --
Deferred credit 1,132,223 --
----------- ----------
Net cash provided by (used for) operating
activities 5,139,763 (616,557)
----------- ----------
Cash Flows From Financing Activities:
Cash distributions (3,053,283) --
----------- ----------
Net cash used for financing activities (3,053,283) --
----------- ----------
Net increase (decrease) in cash and cash
equivalents 2,086,480 (616,557)
Cash and cash equivalents, beginning of period 4,430,503 5,812,917
----------- ----------
Cash and cash equivalents, end of period $ 6,516,983 $5,196,360
=========== ==========
</TABLE>
<PAGE>
4
NOTES TO THE FINANCIAL STATEMENTS
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1997 audited financial statements within Form 10-K.
The unaudited interim financial statements include all 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 September 30,
1998 and the results of operations for the three and nine months ended September
30, 1998 and 1997, cash flows for the nine months ended September 30, 1998 and
1997 and the statement of partners' capital for the nine months ended September
30, 1998. 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 1997, and no
material contingencies exist which require disclosure in this interim report per
Regulation S-X, Rule 10-01, Paragraph (a)(5).
<PAGE>
5
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
In October 1997, the Partnership entered into a stipulation and agreement of
settlement (the "Settlement") of the class action litigation originally brought
against it and other parties in 1994. The General Partner decided to settle the
actions solely to avoid further expense and the burden of continued litigation,
and continues to deny the allegations asserted against it in the complaint.
Pursuant to the Settlement, which resolves all matters among the parties, the
Partnership contributed $500,000 toward a fund for the payment of all
plaintiffs' claims. On February 20, 1998, the Bankruptcy Court (the "Court")
issued and executed an order approving the Settlement which included a full and
final release of the Unitholder claims against the Partnership, the General
Partner and the other defendants.
The Partnership pursued a property tax assessment appeal with respect to
Brookdale Center for a portion of the time that the Partnership owned it. A
settlement was negotiated with Hennepin County, Minnesota (the "Tax
Settlement"), and at a hearing on July 16, 1998, the Tax Settlement was approved
by the Court. However, the allocation and distribution of the refunded taxes,
which total approximately $5.4 million, was challenged by certain former tenants
of Brookdale Center and the Partnership's former mortgage lender. On September
30, 1998 the Court issued an order approving the distribution of tax refunds to
the former tenants which totaled $3,994,133. The balance of the tax settlement
will be held by the Partnership pending resolution of the challenge by the
former mortgage lender which is being considered by the bankruptcy judge
responsible for the Partnership's plan of reorganization. The judge has advised
the Partnership that his decision should be issued during the first week of
December.
On July 28, 1998, after receiving approval from the Court, the Partnership paid
a cash distribution in the amount of $0.2825 per Limited Partnership Unit. This
amount represents the Partnership's cash, less reserves for current and
contingent liabilities, which was paid out following the Settlement.
Upon resolution of the claim made by the former mortgage lender, the General
Partner intends to distribute the Partnership's share of the rebated taxes, if
any, along with the Partnership's remaining cash reserves (after payment of, or
provision for, the Partnership's liabilities and expenses) and proceed with the
dissolution of the Partnership.
At September 30, 1998, the Partnership had cash and cash equivalents totaling
$6,516,983 compared with $4,430,503 at December 31, 1997. The increase is
primarily due to property tax refunds received in excess of distributions and
payment of Partnership administrative and professional fees.
Accounts payable and accrued expenses totaled $301,390 at September 30, 1998,
compared with $113,313 at December 31, 1997. The increase is primarily
attributable to legal expenses incurred related to the Partnership's bankruptcy
filing and property tax appeal regarding Brookdale Center.
Results of Operations
Net cash provided by operating activities totaled $5,139,763 for the nine months
ended September 30, 1998 compared to net cash used for operating activities of
$616,557 for the corresponding period in 1997. The increase in cash flow is
primarily due to the Brookdale Center property tax settlement, net of
differences in the timing of payments of professional fees between the two
periods.
<PAGE>
6
The Partnership reported net income for the three months ended September 30,
1998 of $211,507, and net loss for the nine months ended September 30, 1998 of
$329,545, compared to net losses of $22,181 and $300,193 for the corresponding
periods in 1997. The change from net loss to net income for the three-month
period is primarily due to Brookdale Center property tax refunds, net of funds
allocated to former tenants. For the nine-month period, the higher net loss is
primarily attributable to increases in professional fees, particularly legal
expenses related to the Partnership's bankruptcy and tax appeal regarding
Brookdale Center.
General and administrative expenses totaled $69,775 and $186,466 for the three
and nine months ended September 30, 1998, compared with $20,132 and $135,561 for
the corresponding periods in 1997. The increases reflect higher postage and
administrative expenses and professional fees related to the Partnership's
bankruptcy filing and property tax appeal.
Part II Other Information
Item 1 Legal Proceedings
On July 16, 1998, the Court heard a motion filed by the
Partnership to: (i) secure the Court's approval of the Brookdale
Center property tax appeal settlement, and (ii) set the record
date for the payment of distributions to Unitholders. The Court
approved the Brookdale Center property tax appeal settlement,
however, the allocation and distribution of the refunded taxes,
which total approximately $5.4 million, had been challenged by
certain former tenants of Brookdale Center and the Partnership's
former mortgage lender. On September 30, 1998, the Court issued
an order approving the distribution of $3,994,133 to the former
tenants. The balance of the tax settlement shall be held by the
Partnership pending resolution of the challenge by the former
mortgage lender.
The Court also approved certain technical modifications to the
Partnership's Plan of Reorganization facilitating interim payment
of distributions to Unitholders, and a cash distribution in the
amount of $0.2825 per Unit was paid to the Limited Partners on
July 28, 1998.
Items 2-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended September 30, 1998.
<PAGE>
7
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: November 16, 1998 BY: /s/Robert J. Hellman
Robert J. Hellman
President, Director and
Chairman of the Board
Date: November 16, 1998 BY: /s/Doreen D. Odell
Doreen D. Odell
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Sep-30-1998
<CASH> 6,516,983
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 6,516,983
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 6,516,983
<CURRENT-LIABILITIES> 5,427,746
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 1,089,237
<TOTAL-LIABILITY-AND-EQUITY> 6,516,983
<SALES> 000
<TOTAL-REVENUES> 4,340,712
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 4,670,257
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> (329,545)
<INCOME-TAX> 000
<INCOME-CONTINUING> (329,545)
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (329,545)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
