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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 24, 1997
Commission file number 0-17684
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ML/EQ Real Estate Portfolio, L.P.
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(Exact name of registrant as specified in its governing instrument)
Delaware 58-1739523
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(State of Organization) (I.R.S. Employer Identification No.)
3424 Peachtree Road N.E., Suite 800, Atlanta, Georgia 30326
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(Address of principal executive office) (Zip Code)
(Registrant's telephone number, including area code) (404) 239-5002
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Item 2. Acquisition or Disposition of Assets
On November 24, 1997, EML Associates (the "Venture"), in which ML/EQ Real Estate
Portfolio, L.P. (the "Partnership") holds an 80% interest, completed the sale of
Brookdale Center at a cash price of $24,830,000, of which the Venture's portion
was approximately $17,793,000. Prior to the sale, the Venture held a 71.66%
participation interest in Brookdale Center, which was transferred to the Venture
and The Equitable Life Assurance Society of the United States ("Equitable") as
tenants in common on December 16, 1996, pursuant to a Chapter 11 bankruptcy plan
for the borrower, Midwest Real Estate Shopping Center L.P. Brookdale Center is a
regional shopping mall located approximately five miles northwest of the central
business district of Minneapolis, Minnesota. The Venture received $17,490,746 in
cash at closing, after deduction for closing costs and prorations. The sale
resulted in a gain of $1,931,569 to the Venture. Management anticipates making a
special distribution of $3.26 per unit on December 23, 1997, representing a
return of capital from sale or financing proceeds, to holders of record as of
November 30, 1997. The purchaser, Talisman Brookdale L.L.C., is unaffiliated
with the Partnership and the Venture and the transaction was negotiated at arm's
length.
Item 7. Financial Statements and Exhibits
(a) Pro Forma Financial Statements
(i) Pro Forma condensed consolidated balance sheet dated
September 30, 1997 (unaudited).
(ii) Pro Forma consolidated statement of operations for
the nine months ended September 30, 1997 (unaudited)
and the year ended December 31, 1996 (unaudited).
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ML/EQ REAL ESTATE PORTFOLIO, L.P.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(unaudited)
This unaudited pro forma balance sheet is presented as if the Venture's sale of
Brookdale Center had occurred on September 30, 1997. In management's opinion,
all adjustments necessary to reflect the effect of this transaction have been
made. This unaudited pro forma condensed consolidated balance sheet is not
necessarily indicative of what the actual financial position would have been at
September 30, 1997, nor does it purport to represent the future financial
position of the Partnership.
<TABLE>
<CAPTION>
Adjustments
For Sale of
Brookdale
Historical Center Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
NET REAL ESTATE INVESTMENTS $135,200,226 $(15,389,863) (A) $119,810,363
CASH AND CASH EQUIVALENTS 13,354,668 (192,228) (B) 13,162,440
OTHER ASSETS - NET 10,144,297 (701,695) (C) 9,442,602
------------ ------------ ------------
TOTAL ASSETS $158,699,191 $(16,283,786) 142,415,405
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES $ 4,436,964 $ (532,381) (C) $ 3,904,583
MINORITY INTEREST IN THE VENTURE 30,534,478 386,314 (D) 30,920,792
PARTNERS' CAPITAL:
General partners 2,375,566 77,263 (E) 2,452,829
Initial limited partner 6,274 68 (E) 6,342
Limited partners (5,424,225 BACs issued and
outstanding) 121,345,909 (16,215,050) (E) 105,130,859
------------ ------------ ------------
Total partners' capital 123,727,749 (16,137,719) 107,590,030
------------ ------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $158,699,191 $(16,283,786) 142,415,405
============ ============ ============
</TABLE>
See notes to pro forma condensed consolidated balance sheet.
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ML/EQ REAL ESTATE PORTFOLIO, L.P.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
A. Represents the Venture's sale of Brookdale Center having a net book value of
$15,389,863 at September 30, 1997.
B. Represents the amount of cash received by the Venture at closing of
$17,490,746, offset by the $17,682,974 special distribution to BAC holders.
C. Represents net other assets and liabilities of Brookdale Center transferred
in connection with the sale.
D. Reflects 20% minority interest share of the $1,931,569 gain on the sale of
Brookdale Center.
E. Reflects the Partnership's share of the $1,931,569 gain on the sale of
Brookdale Center allocated 95% to the limited partners as a group and 5% to the
general partners. The limited partners' share of the gain has been reduced by
the $3.26 per unit special distribution to BAC holders.
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ML/EQ REAL ESTATE PORTFOLIO, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(unaudited)
The accompanying pro forma consolidated statement of operations is presented as
if the Venture's sale of Brookdale Center had occurred as of December 16, 1996,
the date of reclassification from zero coupon mortgage note receivable to rental
properties. In management's opinion, all adjustments necessary to reflect the
effects of this transaction have been made. This unaudited pro forma
consolidated statement of operations is not necessarily indicative of what
actual results of operations would have been had this transaction occurred on
December 16, 1996, nor does it purport to represent the results of operations
for future periods.
<TABLE>
<CAPTION>
Adjustments
For Sale of
Brookdale
Historical Center (A) Pro Forma
-------------- -------------- -------------
<S> <C> <C> <C>
REVENUE:
Rental income $ 19,067,500 $ (4,277,541) $ 14,789,959
Lease termination income 132,840 -- 132,840
Interest on loans receivable 461,250 -- 461,250
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Total revenue 19,661,590 (4,277,541) 15,384,049
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OPERATING EXPENSES:
Real estate operating expenses 7,270,894 (1,317,427) 5,953,467
Depreciation and amortization 3,214,801 (212,682) 3,002,119
Real estate taxes 2,478,275 (836,391) 1,641,884
Property management fees 420,380 (90,461) 329,919
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Total operating expenses 13,384,350 (2,456,961) 10,927,389
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INCOME FROM PROPERTY OPERATIONS 6,277,240 (1,820,580) 4,456,660
OTHER INCOME (EXPENSE):
Interest and other nonoperating income 1,104,311 (23,710) 1,080,601
Asset management fees (566,265) 69,785(B) (496,480)
Amortization of guarantee fee (201,188) -- (201,188)
General and administrative (530,124) -- (530,124)
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Total other income (expense) - net (193,266) 46,075 (147,191)
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INCOME BEFORE MINORITY INTEREST 6,083,974 (1,774,505) 4,309,469
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED VENTURE (1,459,639) 354,901 (1,104,738)
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NET INCOME $ 4,624,335 $ (1,419,604) $ 3,204,731
============= ============= =============
ALLOCATION OF NET INCOME:
Limited partners $ 231,217 $ 160,237
Initial limited partner 202 140
Limited partners 4,392,916 3,044,354
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TOTAL $ 4,624,335 $ 3,204,731
============= =============
NET INCOME PER LIMITED PARTNER BAC $ 0.81 $ 0.56
============= =============
WEIGHTED AVERAGE BACs OUTSTANDING 5,424,225 5,424,225
============= =============
</TABLE>
See notes to pro forma consolidated statement of operations.
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ML/EQ REAL ESTATE PORTFOLIO, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(unaudited)
<TABLE>
<CAPTION>
Adjustments
For Sale of
Brookdale
Historical Center (A) Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
REVENUE:
Rental income $ 20,702,439 $ (342,566) $ 20,359,873
Lease termination income 179,149 -- 179,149
Interest on loans receivable 4,101,334(C) -- 4,101,334
------------ ---------- ------------
Total revenue 24,982,922 (342,566) 24,640,356
------------ ---------- -------------
OPERATING EXPENSES:
Real estate operating expenses 8,289,903 (173,076) 8,116,827
Depreciation and amortization 4,046,483 (25,917) 4,020,566
Real estate taxes 2,365,348 (76,191) 2,289,157
Property management fees 477,385 (8,026) 469,359
Loss on write-down of zero coupon mortgage 6,211,644(D) -- 6,211,644
------------ ---------- -------------
Total operating expenses 21,390,763 (283,210) 21,107,553
------------ ---------- -------------
INCOME FROM PROPERTY OPERATIONS 3,592,159 (59,356) 3,532,803
OTHER INCOME (EXPENSE):
Interest and other nonoperating income 1,221,906 (925) 1,220,981
Asset management fees (686,658) 4,079(B) (682,579)
Amortization of guarantee fee (268,251) -- (268,251)
General and administrative (685,524) -- (685,524)
------------ ---------- -------------
Total other income (expense) - net (418,527) 3,154 (415,373)
------------ ---------- -------------
INCOME BEFORE MINORITY INTEREST 3,173,632 (56,202) 3,117,430
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED VENTURE (947,766) 11,240 (936,526)
------------ ---------- -------------
NET INCOME $ 2,225,866 $ (44,962) $ 2,180,904
============ ========== =============
ALLOCATION OF NET INCOME:
General partners $ 111,293 $ 109,045
Initial limited partner 97 96
Limited partners 2,114,476 2,071,763
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TOTAL $ 2,225,866 $ 2,180,904
============ =============
NET INCOME PER LIMITED PARTNER BAC $ 0.39 $ 0.38
============ =============
WEIGHTED AVERAGE BACs OUTSTANDING 5,424,225 5,424,225
============ =============
</TABLE>
See notes to pro forma consolidated statements of operations.
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ML/EQ REAL ESTATE PORTFOLIO, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
A. On November 24, 1997, Brookdale Center was sold and all of its operating
revenues and expenses have been eliminated for the period presented in arriving
at pro forma amounts. The sale resulted in a gain of $1,931,569, which is not
reflected in the pro forma statement of operations.
B. Represents the portion of asset management fees related to Brookdale
Center. Asset management fees are based on the purchase price of each property
multiplied by .75% annual basis points for rental properties. Asset management
fees are paid to the Managing General Partner. Such asset management fees are
then paid to ERE Yarmouth by the Managing General Partner.
C. During the period January 1, 1996 through December 16, 1996, Brookdale
Center was classified as a zero coupon mortgage note receivable. Due to
default by the borrower, the Partnership discontinued the accrual of interest
on the zero note during 1995 and accounted for cash received from the operation
of Brookdale Center on a cash basis as interest income. The Venture received
$3,486,334 in interest income related to Brookdale Center during 1996.
D. On December 16, 1996, Brookdale Center was transferred to the Venture and
Equitable, as tenants in common. An internal review of the property performed
for the Venture as of the date of transfer estimated the fair market value of
Brookdale Center to be $21,700,000, of which the Venture's portion was
$15,550,364. Following the transfer, Brookdale Center was reclassified from
zero coupon mortgage note receivable to rental properties and rental income and
operating expense were recorded from that date. The Venture recognized a loss
of $6,211,644 to record Brookdale Center as its estimated fair market value.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be filed on behalf of the
undersigned hereunto duly authorized.
ML/EQ Real Estate Portfolio, L.P.
By: EREIM Managers Corp.
Managing General Partner
By: Patricia C. Snedeker
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Patricia C. Snedeker
Vice President, Controller and Treasurer
(Principle Accounting Officer)
Dated: December 9, 1997
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