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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
Commission File Number 0-17684
ML/EQ REAL ESTATE PORTFOLIO, L.P.
(Exact name of registrant as specified in governing instrument)
Delaware 58-1739523
(State of organization) (IRS Employer Identification No.)
3424 Peachtree Road, N.E., Suite 800
Atlanta, Georgia 30326
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (404) 239-5002
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Beneficial Assignee Certificates ("BACs")
representing assignments of Limited Partnership Interests
(Title of Class)
Limited Partnership Interests underlying BACs
(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 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
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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 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]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant.
Not Applicable
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the Prospectus of the Registrant dated April 23, 1987, as
supplemented by supplements dated March 3, 1988 and March 17, 1988 (File No.
33-11064) filed pursuant to Rule 424 of the Securities Act of 1933, as amended,
are incorporated by reference in Parts I and II of this Annual Report on Form
10-K.
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The Form 10-K of ML/EQ Real Estate Portfolio, L.P. for the year ended December
31, 1999 is being amended to provide additional disclosure under Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.
PART I
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At December 31, 1999, the Partnership had cash and cash equivalents of
approximately $339,000. Such cash and cash equivalents are available for
distribution to the extent not utilized for general working capital requirements
and for capital needs at the Venture's Property. In addition, to the extent that
cash distributions from the Partnership's interest in the Venture are
insufficient, the payment or reimbursement of fees and expenses to the General
Partners and their affiliates will be paid out of such cash and cash
equivalents.
The Partnership's policy is to maintain adequate cash reserves (taking
into consideration reserves of the Venture) to enable it to meet short and
long-term requirements. The Partnership's working capital reserves may be
increased or decreased, from time to time, depending on the Managing General
Partner's determination as to their adequacy.
The Partnership owns an 80% interest in the Venture. At December 31,
1999, the Venture owned an undivided interest in Northland Center as a tenant in
common with Equitable. Northland Center (originally a property that secured a
zero coupon mortgage note of the Venture), was transferred to the Venture during
1994 in a deed in lieu of foreclosure transaction. The estimated fair market
value of the Venture's undivided interest in the Northland Center Zero
Coupon Mortgage Note Receivable immediately preceding the transfer was
approximately $32.2 million. The carrying value of Northland Center was adjusted
to the lower of cost or estimated net realizable value, resulting in a loss of
approximately $18.9 million in 1999.
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At December 31, 1999, the Venture also had approximately $11.5 million
in cash and cash equivalents. The Venture retained this amount primarily to fund
potential capital expenditures that might have been required to retenant or
reconfigure the Montgomery Ward and J.C. Penney buildings. J.C. Penney had
expressed an interest in relocating to the smaller vacant Montgomery Ward space
and another national anchor tenant had expressed interest in occupying a
significant portion of the larger J.C. Penney space. The proposals related to
this retenanting scenario involved a significant amount of capital expenditure
to be incurred by the Venture. In March 2000, J.C. Penney announced that they
would be closing their Northland Center store on June 1, 2000. At this time, it
also appears to be highly unlikely that the other National anchor tenant with
which the Venture was negotiating will agree to open a store in Northland
Center. No other potential anchor tenant candidates have been identified. In
light of this turn of events, the Venture has reevaluated its operating and
working capital requirements and will retain approximately $3.0 million to cover
potential operating and working capital expenses. The Venture will distribute
$8.5 million in the aggregate on April 25, 2000, of which $6.8 million or 80%
will be distributed to the Partnership and $1.7 million or 20% will be
distributed to EREIM LP Associates. The Partnership will in turn distribute
approximately $6.7 million on May 1, 2000 to BAC Holders of record as of March
1, 2000. Approximately $100,000 will be retained by the Partnership to cover
general partnership obligations. The Partnership will continue to make periodic
determinations of the advisability of distributing operating cash flow. For
1999, 1998 and 1997, the Partnership received distributions from the Venture
totaling approximately $54.2 million, $43.1 million and $34.5 million,
respectively.
The Venture's remaining Property and the properties sold during 1999
were acquired without mortgage indebtedness, and neither the Venture nor the
Partnership has incurred any borrowings. In aggregate, the Venture's Property is
currently producing operating cash flow to the Venture which, net of expenses of
the Venture and the establishment or increase of reserves, is distributable 80%
to the Partnership and 20% to EREIM LP Associates as provided in the Joint
Venture Agreement.
The Partnership conducts an on-going analysis of the Venture's
properties as a basis for hold/sell recommendations for the properties. As a
result of the analysis, on January 27, 1999 the Venture completed the sale of
the Richland Mall property for $9.01 million, on July 23, 1999, the Venture
completed the sale of the 300 Delaware property for $8.75 million and on October
28, 1999, the Venture completed the sale of the 16/18 Sentry Park West Property
for $29.05 million. In addition, at December 31, 1999, the Venture's only
remaining property was classified as held for sale. 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.
Cash provided by operating activities decreased approximately $3.6
million, or 40.9%, from $8.8 million in 1998 to $5.2 million in 1999. This
decrease is due to (i) a decrease of approximately $5.7 million in tenant
rentals received, (ii) a decrease of approximately $454,000 in interest
received, offset by a decrease of approximately $1.9 million in cash paid for
operating activities and a decrease of approximately $672,000 in cash
distributions to minority interest. The decrease in tenant rentals and cash paid
for operating activities is due primarily to the sales of 1200 Whipple and 1345
Doolittle in late 1998 and the sales of Richland Mall, 300 Delaware and 16/18
Sentry Park West in 1999. The decrease in interest received is due primarily to
the payoff of the Jericho Village mortgage loan receivable on February 1, 1999.
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Cash provided by operating activities increased approximately $1.3
million, or 17.6%, from $7.5 million in 1997 to $8.8 million in 1998. This
increase is due to (i) a decrease of approximately $3.2 million in cash paid for
operating activities and (ii) a decrease of approximately $3.1 million in cash
distributions to minority interest, offset by a decrease of approximately $4.3
million in tenant rentals received and a decrease of approximately $747,000 in
interest received. The decrease in cash paid for operating activities and tenant
rentals received is primarily due to the sale of Brookdale Center and the
Chicago Industrial properties in late 1997. The decrease in interest received is
due to lower cash balances held by the Venture during 1998 as compared to 1997.
Distributable Cash from operations is distributed in accordance with
the terms of the Partnership Agreement, which provides that such amounts will be
distributed 95% to the BAC Holders and Limited Partners and 5% to the General
Partners with the BAC Holders and Limited Partners entitled to a non-cumulative
preferred 6% simple return on their Adjusted Capital Contribution during each
period. Since inception, the Partnership has made the following distributions:
<TABLE>
<CAPTION>
Period Ended Date Paid Distribution per BAC
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<S> <C> <C>
December 31, 1990 February 28, 1991 $0.25
June 30, 1991 August 31, 1991 $0.50
December 31, 1991 February 28, 1992 $0.50
June 30, 1992 August 31, 1992 $0.662(1)
December 31, 1992 February 28, 1993 $0.40
June 30, 1993 -- $0.00
December 31, 1993 February 28, 1994 $0.10(2)
June 30, 1994 August 31, 1994 $0.10(2)
December 31, 1994 February 28, 1995 $0.15(2)
June 30, 1995 August 31, 1995 $0.15(2)
December 31, 1995 February 29, 1996 $0.10(2)
June 30, 1996 August 29, 1996 $0.10(2)
December 31, 1996 February 28, 1997 $0.15(2)
June 30, 1997 August 29, 1997 $2.70(3)
November 30, 1997 December 23, 1997 $3.26(4)
December 31, 1997 February 27, 1998 $2.75(5)
June 30, 1998 August 31, 1998 $0.25
November 30, 1998 December 21, 1998 $4.82(6)
December 31, 1998 February 26, 1999 $0.45(7)
January 31, 1999 February 26, 1999 $1.61(8)
February 26, 1999 March 12, 1999 $1.11(9)
July 31, 1999 August 16, 1999 $1.55(10)
October 31, 1999 November 17, 1999 $5.28(11)
</TABLE>
(1) The distribution made on August 31, 1992 to holders of record on June
30, 1992 includes a $0.162 distribution of sale or financing proceeds
associated with the termination of the lease with Saab-Scania of
America, Inc. ("Saab") at 1850 Westford Drive.
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(2) All of the distributions made from 1994 through February 28, 1997
constitute distributions of sale or financing proceeds derived from a
portion of the proceeds from the pay-off of a mortgage loan to the
Second Merritt Seven Joint Venture on November 22, 1993.
(3) The August 29, 1997 distribution represents a distribution of
distributable cash from operations. The Partnership made a decision to
distribute a major portion of the monies previously held following its
decision to sell one of its properties, Brookdale Center.
(4) The December 23, 1997 distribution constitutes distributions of sale
or financing proceeds derived from the sale of Brookdale Center.
(5) The February 27, 1998 distribution constitutes distributions of sale or
financing proceeds derived from the sale of the Chicago Industrial
Properties during 1997, remaining proceeds from both the sale of
Brookdale Center and the pay-off of the mortgage loan to the Second
Merritt Seven Joint Venture and early lease termination payments.
(6) The December 21, 1998 distribution constitutes distributions of sale or
financing proceeds derived from the sale of the properties located at
1200 Whipple Road and 1345 Doolittle Drive.
(7) The distribution made on February 26, 1999 to holders of record on
December 18, 1998 represents sale or financing proceeds from the
sale of 1850 Westfork Drive Property.
(8) The distribution made on February 26, 1999 to holders of record on
January 27, 1999 represents sale or financing proceeds from the
sale of Richland Mall.
(9) The distribution made on March 12, 1999 to holders of record on
February 1, 1999 constitutes distributions of the proceeds from the
payoff of the Jericho Village loan.
(10) The distribution made on August 16, 1999 to holders of record on
July 23, 1999 represents sale or financing proceeds from
the sale of the 300 Delaware Property.
(11) The distribution made on November 17, 1999 to holders of record on
October 28, 1999 represents sale or financing proceeds from the
sale of the 16/18 Sentry Park West Property.
During 1997, 1998 and 1999, the Venture received approximately
$133,000, $13,000 and $249,000, respectively, for early lease termination
payments. These early lease termination payments were classified as sale or
financing proceeds and were distributed in 1998 and 1999. See Item 5. MARKET FOR
REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The amount and
timing of distributions from sale or financing proceeds depend upon the timing
of disposition of properties as well as the need to allocate such funds to
increase reserves.
The Partnership is intended to be self-liquidating in nature, meaning
that proceeds from the sale of properties or principal repayments of loans will
not be reinvested but instead will be distributed to BAC Holders and partners,
subject to certain limitations. Under the terms of the Guaranty Agreement which
has been assigned to the Partnership, following the earlier of the sale or other
disposition of the remaining Property or the liquidation of the Partnership,
EREIM LP Associates has guaranteed to pay an amount which, when added to all
distributions from the Partnership to the BAC Holders, will enable the
Partnership to provide the BAC Holders with a minimum return equal to their
original capital contributions plus a simple annual return equal to 9.75% simple
interest per annum multiplied by their adjusted capital contributions calculated
from the investor closing at which an investor acquired his BACs, subject to
certain limitations.
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Capital contributions by the BAC Holders totaled $108,484,500. As of
December 31, 1999, the cumulative 9.75% simple annual return was $111,468,412.
As of December 31, 1999, cumulative distributions by the Partnership to the BAC
Holders totaled $146,139,456, or $26.94 per BAC, of which $27,663,548 is
attributable to income from operations and $118,475,908 is attributable to sales
of Venture assets, principal payments on mortgage loans and other capital
events. Management does not currently believe that future cash distributions to
the limited partners from liquidation of Venture assets will be sufficient to
provide the specified Minimum Return. Accordingly, the shortfall will be funded
by the guarantor, up to the above described maximum.
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SIGNATURES
Pursuant to requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 21st day of
April, 2000.
ML/EQ REAL ESTATE PORTFOLIO, L.P.
By: EREIM MANAGERS CORP.
(Managing General Partner)
By: /s/Joseph A. DeLuca
------------------------------------------------
JOSEPH A. DELUCA
President, Chief Executive Officer and Director
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