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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 ): October 28, 1999
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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REPORT ON FORM 8-K
Item 2. Acquisition or Disposition of Assets
On October 28, 1999, EML Associates, (the "Venture"), in which
ML/EQ Real Estate Portfolio, L.P. (the "Partnership") holds an 80% interest,
completed the sale of 16/18 Sentry Park West, at a cash price of $29,050,000.
Prior to the sale, 16/18 Sentry Park West was wholly-owned by the Venture. 16/18
Sentry Park West is comprised of two four-story office buildings located
approximately 15 miles northwest of the Philadelphia central business district.
The Venture received $28,585,199 in cash at closing, after deduction for closing
costs and prorations. The sale resulted in a gain of $4,726,752 to the Venture.
Management anticipates making a special distribution of $5.28 per unit on
November 17, 1999, representing a return of capital from the sale proceeds, to
holders of record as of October 28, 1999. The purchaser, Income and Growth Fund
II, Inc., is unaffiliated with the Partnership and the Venture, and the
transaction was negotiated at arm's length.
Under the Guaranty Agreement, EREIM LP Associates has agreed to
pay to the Partnership an amount which when added to all distributions from the
Partnership to BAC Holders will enable the Partnership to provide BAC Holders
with a minimum return equal to their initial capital contributions ($20 per BAC)
plus a 9.75% simple annual return on their adjusted capital contribution (which
is defined as $20 per BAC reduced by distributions from sale or financing
proceeds) calculated from the dates of investor closings. The unpaid cumulative
minimum return under the Guaranty Agreement as of September 30, 1999 was $18.84
per BAC, which will be reduced by $5.28 per BAC, after the November 17, 1999
distribution. The unpaid cumulative minimum return under the Guaranty Agreement
does not necessarily represent the price at which a BAC may be purchased or
sold.
While the Partnership Agreement provides that the term of the
Partnership may extend until December 31, 2002, the Partnership's present
intention is to sell the remaining property in advance of the foregoing date.
With that in mind, the Partnership is continuing its efforts to sell or position
for sale the remaining property, Northland Mall. However, there is no certainty
as to when the remaining property will be sold.
Item 7. Financial Statements and Exhibits
(a) Pro Forma Financial Statements
(i) Pro Forma consolidated balance sheet dated
September 30, 1999 (unaudited).
(ii) Pro Forma consolidated statement of operations for
the nine months ended September 30, 1999 and the
year ended December 31, 1998 (unaudited).
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ML/EQ REAL ESTATE PORTFOLIO, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999
(unaudited)
This unaudited pro forma balance sheet is presented as if the Venture's sale of
16/18 Sentry Park West had occurred on September 30, 1999. 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, 1999, nor does it purport to represent the future financial
position of the Partnership.
<TABLE>
<CAPTION>
Adjustments For
Sale of 16/18
Historical Sentry Park West Pro Forma
------------ ---------------- ------------
<S> <C> <C> <C>
ASSETS
NET REAL ESTATE INVESTMENTS $54,461,982 $(23,526,928)(A) $30,935,054
CASH AND CASH EQUIVALENTS 9,981,074 (54,709)(B) 9,926,365
OTHER ASSETS - NET 7,369,180 (420,689)(C) 6,948,491
----------- ------------ -----------
TOTAL ASSETS $71,812,236 $(24,002,326) $47,809,910
=========== ============ ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES $ 2,253,507 $ (89,170)(C) $ 2,164,337
MINORITY INTEREST IN THE VENTURE 30,716,846 945,350 (D) 31,662,196
PARTNERS' CAPITAL
General partners 2,416,414 189,070 (E) 2,605,484
Initial limited partner 6,247 166 (E) 6,413
Limited partners (5,424,225 BACs 36,419,222 (25,047,742)(E) 11,371,480
issued and outstanding) ----------- ------------ -----------
Total partners' capital 38,841,883 (24,858,506) 13,983,377
----------- ------------ -----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $71,812,236 $(24,002,326) $47,809,910
=========== ============ ===========
</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 16/18 Sentry Park West having a
combined net book value of $23,526,928 at September 30, 1999.
B. Represents the amount of cash received by the Venture at closing of
$28,585,199 offset by the $5.28 special distribution to BAC holders.
C. Represents net other assets and liabilities of 16/18 Sentry Park West
transferred in connection with the sale.
D. Reflects 20% minority interest share of the $4,726,752 gain on the sale
of 16/18 Sentry Park West.
E. Reflects the Partnership's share of the $4,726,752 gain on the sale of
16/18 Sentry Park West 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 $5.28 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, 1999
(unaudited)
The accompanying pro forma consolidated statement of operations is presented as
if the Venture's sale of 16/18 Sentry Park West had occurred as of December 31,
1997. 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 31, 1997,
nor does it purport to represent the results of operations for future periods.
<TABLE>
<CAPTION>
Adjustments For
Sale of 16/18
Historical Sentry Park West (A) Pro Forma
------------ -------------------- ------------
<S> <C> <C> <C>
REVENUE:
Rental income $ 12,646,826 $(2,563,439) $ 10,083,387
Lease termination income 191,661 (120,000) 71,661
Interest on loans receivable 51,250 -- 51,250
------------ ----------- ------------
Total revenue 12,889,737 (2,683,439) 10,206,298
------------ ----------- ------------
OPERATING EXPENSES:
Real estate operating expenses 5,540,003 (457,169) 5,082,834
Depreciation and amortization 789,345 -- 789,345
Real estate taxes 1,602,427 (213,655) 1,388,772
Property management fees 262,017 (78,991) 183,026
------------ ----------- ------------
Total operating expenses 8,193,792 (749,815) 7,443,977
------------ ----------- ------------
INCOME FROM PROPERTY OPERATIONS 4,695,945 (1,933,624) 2,762,321
OTHER INCOME (EXPENSE):
Loss on sale of real estate (212,979) -- (212,979)
Loss on write-down of real estate assets (11,371,847) -- (11,371,847)
Interest and other nonoperating income 482,836 -- 482,836
Asset management fees (300,804) 121,500(B) (179,304)
Amortization of guaranty fee (201,188) -- (201,188)
General and administrative (336,579) -- (336,579)
------------ ----------- ------------
Total other income (expense) - net (11,940,561) 121,500 (11,819,061)
------------ ----------- ------------
INCOME (LOSS) BEFORE MINORITY INTEREST (7,244,616) (1,812,124) (9,056,740)
MINORITY INTEREST IN NET (INCOME) LOSS OF
CONSOLIDATED VENTURE 1,306,911 386,725 1,693,636
------------ ----------- ------------
NET INCOME (LOSS) $ (5,937,705) $(1,425,399) $ (7,363,104)
============ =========== ============
ALLOCATION OF NET INCOME (LOSS):
General partners $ (296,885) $ (368,155)
Initial limited partner (260) (322)
Limited partners (5,640,560) (6,994,627)
------------ ------------
TOTAL $ (5,937,705) $ (7,363,104)
============ ============
NET INCOME PER LIMITED PARTNER BAC $ (1.04) $ (1.29)
============ ============
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, 1998
(unaudited)
<TABLE>
<CAPTION>
Adjustments For
Sale of 16/18
Historical Sentry Park West (A) Pro Forma
------------ -------------------- ------------
<S> <C> <C> <C>
REVENUE:
Rental income $ 19,974,688 $ (3,212,929) $ 16,761,759
Lease termination income 12,501 -- 12,501
Interest on loans receivable 615,000 -- 615,000
------------ ------------ ------------
Total revenue 20,602,189 (3,212,929) 17,389,260
------------ ------------ ------------
OPERATING EXPENSES:
Real estate operating expenses 8,125,398 (543,076) 7,582,322
Depreciation and amortization 2,907,869 (560,377) 2,347,492
Real estate taxes 1,867,477 (302,896) 1,564,581
Property management fees 434,224 (97,278) 336,946
------------ ------------ ------------
Total operating expenses 13,334,968 (1,503,627) 11,831,341
------------ ------------ ------------
INCOME FROM PROPERTY OPERATIONS 7,267,221 (1,709,302) 5,557,919
OTHER INCOME (EXPENSE):
Gain on sale of real estate 8,501,691 8,501,691
Loss on write-down of real estate assets (10,243,677) (10,243,677)
Interest and other nonoperating income 605,329 -- 605,329
Asset management fees (611,923) 162,000 (449,923)
Amortization of guaranty fee (268,251) -- (268,251)
General and administrative (797,052) -- (797,052)
------------ ------------ ------------
Total other income (expense) - net (2,813,883) 162,000 (2,651,883)
------------ ------------ ------------
INCOME BEFORE MINORITY INTEREST 4,453,338 (1,547,302) 2,906,036
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED VENTURE (1,186,498) 341,860 (844,638)
------------ ------------ ------------
NET INCOME $ 3,266,840 $ (1,205,442) $ 2,061,398
============ ============ ============
ALLOCATION OF NET INCOME:
General partners $ 163,342 $ 103,070
Initial limited partner 143 90
Limited partners 3,103,355 1,958,238
------------ ------------
TOTAL $ 3,266,840 $ 2,061,398
============ ============
NET INCOME PER LIMITED PARTNER BAC $ 0.57 $ 0.36
============ ============
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.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
A. On October 28, 1999, 16/18 Sentry Park West was sold and all of the
operating revenues and expenses have been eliminated for the period
presented in arriving at pro forma amounts. The sale resulted in a gain of
$4,726,752, which is not reflected in the pro forma statement of
operations.
B. Represents the portion of asset management fees related to 16/18 Sentry
Park West. 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 Lend Lease Real Estate Investments, Inc,
the advisor to the Partnership, by the Managing General Partner.
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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: /s/Debra L. Keller
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Debra L. Keller
Vice President and Assistant Treasurer
(Principal Accounting Officer)
Dated: November 12, 1999
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