<PAGE> 1
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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-16285
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its partnership
agreement)
<TABLE>
<S> <C>
MARYLAND 52-1490861
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(State or other jurisdiction (I.R.S. Employer
of the organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
111 South Calvert Street - Baltimore, MD 21203-1476
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(Address of principal executive offices) (Zip Code)
</TABLE>
(410) 539-0000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
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(Unaudited)
<S> <C> <C>
ASSETS:
Investment in real estate held for lease, at cost:
Land $11,803,791 $11,803,791
Buildings and improvements 49,563,255 49,387,790
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61,367,046 61,191,581
less accumulated depreciation (11,878,952) (10,658,778)
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49,488,094 50,532,803
Cash and cash equivalents ($707,905 restricted for
retirement of debt in 1995) 1,774,168 384,181
Tenant accounts receivable, net of allowance
for doubtful accounts ($326,811 in 1995 and
$353,507 in 1994) 1,116,038 1,380,921
Prepaid expenses, mortgage escrows and other assets 1,394,930 681,024
Intangible assets, net of accumulated amortization
($1,037,957 in 1995 and $966,779 in 1994) 239,754 239,305
----------- -----------
Total assets $54,012,984 $53,218,234
=========== ===========
LIABILITIES AND PARTNERS' EQUITY:
Long-term debt, including current maturities $36,089,384 $35,285,891
Accounts payable and accrued expenses 333,501 61,093
Cash flow protector loans 789,203 789,203
Interest payable 607,833 488,734
Prepaid rents and security deposits 248,383 240,888
Due to related parties 92,844 118,163
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Total liabilities 38,161,148 36,983,972
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General partners and assignor limited partner (12,900) (9,076)
Assignee limited partners (1,200,000 units
authorized, issued and outstanding) 15,864,736 16,243,338
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Total partners' equity 15,851,836 16,234,262
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Total liabilities and partners' equity $54,012,984 $53,218,234
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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<PAGE> 3
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the quarters ended For the nine months ended
September 30, September 30,
---------------------- ------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income $1,575,702 $1,656,969 $4,779,785 $4,815,025
Tenant reimbursement income 284,038 375,115 852,685 1,041,334
---------- --------- ---------- ----------
Total income 1,859,740 2,032,084 5,632,470 5,856,359
---------- --------- ---------- ----------
Operating expenses:
Interest expense 790,436 792,181 2,395,874 2,375,121
Depreciation 406,068 418,021 1,220,174 1,266,925
Repairs and maintenance 215,946 196,548 647,220 655,562
Taxes and insurance 207,694 164,995 625,513 605,014
Management and leasing to
related parties 104,100 117,860 323,947 338,904
Provision for doubtful accounts 39,081 53,870 124,710 157,061
Amortization 30,513 28,302 71,178 115,735
Other expenses 183,170 161,859 622,703 525,086
--------- --------- ---------- ----------
Total operating expenses 1,977,008 1,933,636 6,031,319 6,039,408
--------- --------- ---------- ----------
Income (loss) from rental
operations (117,268) 98,448 (398,849) (183,049)
Other income:
Interest income 10,210 4,870 16,423 9,402
--------- --------- ---------- ----------
Net income (loss) $(107,058) $ 103,318 $ (382,426) $ (173,647)
========= ========= ========== ==========
Net income (loss) allocated to
general partners $ (1,070) $ 1,033 $ (3,824) $ (1,736)
========= ========= ========== ==========
Net income (loss) allocated to
assignee limited partners $(105,988) $ 102,285 $ (378,602) $ (171,911)
========= ========= ========== ==========
Net income (loss) allocated to
assignee limited partners per
unit (1,200,000 units issued
and outstanding) $ (0.09) $ 0.09 $ (0.32) $ (0.14)
========= ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 4
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
--------------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (382,426) $ (173,647)
---------- ----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,291,352 1,382,660
Changes in operating assets and liabilities:
(Increase) decrease in tenant accounts
receivable, net 264,883 (20,856)
(Increase) decrease in prepaid expenses and
other assets (131,421) 60,923
Increase (decrease) in accounts payable and
accrued expenses 279,903 (1,332,365)
Increase in accrued interest payable 119,099 26,999
Increase (decrease) in due to related parties (25,319) 8,570
---------- ----------
Total adjustments 1,798,497 125,931
Net cash provided by (used in) operating ---------- ----------
activities 1,416,071 (47,716)
---------- ----------
Cash flows from investing activities:
Improvements of real estate (175,465) (228,646)
---------- ----------
Net cash used in investing activities (175,465) (228,646)
---------- ----------
Cash flows from financing activities:
Proceeds from long-term debt 1,400,000 2,640,940
Principal payments on long-term debt (596,507) (610,815)
Mortgage escrow deposits (582,485) (206,149)
Financing fees (71,627) (86,487)
Retirement of long-term debt - (1,102,392)
Payment of deferred interest - (150,000)
Assigned certificate of deposit - (25,000)
---------- ----------
Net cash provided by financing activities 149,381 460,097
---------- ----------
Net increase in cash and cash equivalents 1,389,987 183,735
Cash and cash equivalents at beginning of period 384,181 353,577
---------- ----------
Cash and cash equivalents at end of period $1,774,168 $ 537,312
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $2,276,775 $2,498,122
========== ==========
The accompanying notes are an integral part of these statements.
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<PAGE> 5
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
September 30, 1995
------------------
NOTE A - BASIS OF PRESENTATION POLICIES:
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial reporting and the instructions to Form 10-Q.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments necessary for a fair presentation have been included.
All adjustments made in the interim period were of a normal
recurring nature. Operating results of any interim period are not
necessarily indicative of the results that may be expected for a
full year.
RENTAL INCOME. Certain leases provide for either abatement of
rents or scheduled rent increases over the life of the leases.
Rental income is recorded on a straight-line basis of equal monthly
payments over the respective terms of the leases. The receivables
related to the recording of rental income on a straight-line basis
totalled $675,412 and $682,399 at September 30, 1995 and December
31, 1994, respectively.
STATEMENTS OF CASH FLOWS. For purposes of the statements of cash
flows, the Partnership considers cash in banks, commercial paper
and repurchase agreements with original maturities of less than
three months to be cash and cash equivalents.
RECENT ACCOUNTING DEVELOPMENTS. Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of," was issued by the
Financial Accounting Standards Board in March 1995. The
Partnership expects to adopt the provisions of Statement No. 121
beginning in 1996. The Partnership is currently assessing the
effect adoption of the provisions will have on the Partnership's
financial position and results of operations.
NOTE B - RELATED PARTY TRANSACTIONS:
During the quarter ended September 30, 1995, the Partnership paid
First Washington Management, Inc., an affiliate of FW Realty
Limited Partnership, one of the general partners, $86,942 and Legg
Mason Realty Capital, Inc., an affiliate of Realty Capital IV
Limited Partnership, the other general partner, $36,529 for
management fees and reimbursement of operating expenses. At
September 30, 1995, $17,323 was payable to Legg Mason Realty
Capital, Inc. and $2,090 was payable to First Washington
Management, Inc. for management fees and reimbursement of operating
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<PAGE> 6
NOTE B - RELATED PARTY TRANSACTIONS, continued
expenses.
The general partners agreed to lend to the Partnership, without
interest, up to 50% of the acquisition fees actually paid to them
at the time the loan was made in the event the annual cumulative
non-compounded return to assignee limited partners fell below 7%
of the allocable invested capital for the period from February 1,
1989 through January 31, 1992. In 1990, the general partners
fulfilled their obligation under these cash flow protector loan
provisions. As of September 30, 1995, cash flow protector loans
totalling $789,203 were outstanding ($599,794 to FW Realty Limited
Partnership and $189,409 to Realty Capital IV Limited Partnership).
The loans are non-interest bearing and are required to be repaid
from distributable cash flow or sale or refinancing proceeds after
the payment of a preferred return to assignee limited partners
equal to a 10% annual cumulative non-compounded return on invested
capital.
In addition, acquisition fees totalling $73,431 were payable as of
September 30, 1995 to FW Realty Limited Partnership in the amount
of $55,808 and to Realty Capital IV Limited Partnership in the
amount of $17,623.
NOTE C - PARTNERSHIP ALLOCATIONS AND DISTRIBUTIONS:
Distributable cash flow is payable quarterly as follows:
1. 99% to the assignee limited partners and 1% to the general
partners until each assignee limited partner has received
an annual cumulative return equal to 10% of invested
capital; and
2. the balance is distributable 98% to the assignee limited
partners and 2% to the general partners.
Income and loss from operations for each fiscal year is allocated
as follows:
1. If there has been a distribution of distributable cash flow
during such fiscal year, net income from operations shall
be allocated to the assignee limited partners and general
partners in proportion to such distribution of
distributable cash flow.
2. If there has been no distribution of distributable cash flow
during such fiscal year, net income from operations shall be
allocated 99% to the assignee limited partners and 1% to the
general partners.
3. Net loss from operations for each fiscal year shall be
allocated 99% to the assignee limited partners and 1% to
the general partners.
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<PAGE> 7
NOTE C - PARTNERSHIP ALLOCATIONS AND DISTRIBUTIONS, continued:
Sale or refinancing proceeds are distributed first to meet debts
and obligations of the Partnership and to fund reserves for
contingent liabilities to the extent deemed reasonable by the
general partners and then to the assignee limited partners and
general partners in the order described in Section 4.4 of the
Partnership Agreement.
Any gain from a sale or refinancing is allocated as follows:
1. To the assignee limited partners and general partners having
negative balances in their capital accounts, prior to
distribution of sale or refinancing proceeds, an amount of
such gain sufficient to increase their negative balances
to zero;
2. To each assignee limited partner and general partner who has
received or will receive a distribution out of the sale or
refinancing proceeds, the amount of and in proportion to
the excess of such distribution over the positive balance
in his capital account, determined after any allocation of
gain from a sale or refinancing pursuant to (1) above,
and
3. The balance, 75% to the assignee limited partners and 25% to
the general partners.
Any loss from a sale or refinancing shall be allocated 99% to the
assignee limited partners and 1% to the general partners.
NOTE D - LONG-TERM DEBT:
On September 20, 1995, the Partnership obtained a loan in the
amount of $1,400,000 secured by a mortgage on Edgewood Plaza
shopping center. This center was previously unencumbered. The
proceeds of the loan were designated for the following uses: (i)
$452,485 was placed in escrow for the capital improvement program
now underway at Edgewood Plaza; (ii) $130,000 was placed in escrow
to be used to conduct certain environmental remediation work at the
property in the event the Partnership is unsuccessful in its
efforts to require third parties to complete that work; (iii)
$707,905 was disbursed to fund payment of the principal and accrued
interest of the Berkeley Square shopping center second priority
mortgage due October 2, 1995; and (iv) the balance was used for
loan fees and closing costs, including insurance and tax escrows,
of approximately $70,000 and working capital. The Edgewood Plaza
mortgage has a term of five years and an interest rate of 8.625%
and requires level payments of approximately $136,700 annually
based on 25 year amortization.
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Partnership's financial statements are prepared based on the
accrual method of accounting. The Partnership's rental income from
its shopping center properties consists of base rents from tenants
occupying space in each shopping center. In addition, certain
leases provide for additional rent computed on the basis of a
percentage of gross sales in excess of specified levels. In some
cases, leases provide for rent abatements and scheduled rent
increases over the life of the lease. To the extent a lease
provides for rent abatements or adjustments, the Partnership, in
accordance with generally accepted accounting principles,
recognizes rental income on a straight-line basis of equal monthly
payments over the term of such lease. Market conditions have
dictated offering a wide variety of concessions to prospective
tenants, which most frequently include a combination of free rent
and reduced rental rate.
As of September 30, 1995, tenant rent receivables prior to the
allowance for doubtful accounts totaled $1,442,849 of which amount
$675,412 represented receivables required to be accrued in
accordance with applicable accounting principles to reflect
scheduled rent increases over the terms of the applicable leases
and $767,437 represented the balance. As of December 31, 1994 and
September 30, 1994, such rent receivables totaled $1,734,428 and
$1,493,731, respectively, of which amounts $682,399 and $675,411,
respectively, represented receivables required to be accrued and
$1,052,029 and $818,320, respectively, represented the balances.
The Partnership wrote off tenant rent receivables and charged the
allowance for doubtful accounts in the quarters ended September 30,
1995 and 1994 for $12,049 and $2,490, respectively. The
Partnership charged a provision for doubtful accounts in the amount
of $39,081 for the third quarter of 1995 and $53,870 for the third
quarter of 1994. During the quarter ended September 30, 1995, the
Partnership increased its allowance for doubtful accounts to
$326,811, a net increase of $27,032. During the quarter ended
September 30, 1994, the Partnership increased its allowance for
doubtful accounts to $388,506, a net increase of $51,380. The
allowance for doubtful accounts represents an allowance for tenant
rent receivables that may become uncollectible in the future.
CASH FLOW
The Partnership recorded a $1,389,987 net increase in cash and cash
equivalents in the nine months ended September 30, 1995, of which
$707,905 was used, immediately after the close of the quarter, to
fund payment of the principal and accrued interest on the Berkeley
Square second priority mortgage which matured on October 2, 1995.
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<PAGE> 9
The net increase in cash and cash equivalents during the nine
months resulted from $1,416,071 in net cash provided by operating
activities and $149,381 provided by financing activities, which
were partially offset by $175,465 used in investing activities for
improvements of real estate. The principal differences between net
loss from operations of $382,426 and net cash provided by operating
activities of $1,416,071 were the noncash charge of $1,291,352 for
depreciation and amortization, an increase in accounts payable and
accrued expenses of $279,903, and a decrease of $264,883 in tenant
accounts receivable net of allowance for doubtful accounts. The
decrease in net tenant accounts receivable can be attributed to
receipt of the balance a letter of credit posted by Wholesale Depot
(a former tenant at Tarrytown Mall), a portion of which represented
payment of prior period receivables, and to collection of 1994
tenant expense reimbursements. The net cash provided by financing
activities represented net funds received from the Partnership's
Edgewood Plaza loan closing on September 20, 1995, net of principal
payments on long-term debt.
The Partnership presently expects to apply any increase in cash to
increase Partnership working capital reserves, to provide for
shopping center improvements if and when necessary, and to repay
and refinance debt as required. The General Partners believe it
is necessary to maintain adequate reserves to fund capital
improvements and tenant fit-up allowances that may be needed to
lease vacant space, as well as to provide funds that may be
required to reduce Partnership debt in connection with refinancing
mortgage obligations. Consequently, there is no assurance as to
the availability of cash flow to make distributions to partners.
This policy reflects the fact that existing working capital
reserves have been fully committed by the Partnership to carrying
tenant rent receivables and making capital improvements and other
expenditures. The General Partners believe that such a policy is
prudent in view of the current real estate and general economic
environments and is consistent with the Partnership's objective to
maintain and increase the value of its shopping centers.
LIQUIDITY AND CAPITAL RESOURCES
The cash and cash equivalents position of the Partnership at
September 30, 1995 increased $1,389,987 from that at December 31,
1994. The Partnership's cash and cash equivalents position
fluctuates from quarter to quarter as follows: (i) decreasing with
the funding of lease-up costs and tenant improvements; (ii)
decreasing with the funding of renovation and expansion costs of
the shopping centers; (iii) increasing as borrowing proceeds, net
rental income and interest income are received; (iv) decreasing as
expenses (including debt service requirements) are paid; and (v)
decreasing by any payment of Partnership distributions.
Subsequent to September 30, 1995, the Partnership is obligated to
expend approximately $52,000 for tenant fit-up costs in connection
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<PAGE> 10
with tenant leases which have been signed and other committed
capital expenditures. This amount does not include tenant
improvement expenditures for prospective or future tenants.
On September 20, 1995, the Partnership obtained a loan in the
amount of $1,400,000 secured by a mortgage on Edgewood Plaza
shopping center. This center was previously unencumbered. The
proceeds of the loan were designated for the following uses: (i)
$452,485 was placed in escrow for the capital improvement program
now underway at Edgewood Plaza; (ii) $130,000 was placed in escrow
to be used to conduct certain environmental remediation work at the
property in the event the Partnership is unsuccessful in its
efforts to require third parties to complete that work; (iii)
$707,905 was disbursed to fund payment of the principal and accrued
interest of the Berkeley Square shopping center second priority
mortgage due October 2, 1995; and (iv) the balance was used for
loan fees and closing costs, including insurance and tax escrows,
of approximately $70,000 and working capital. The Edgewood Plaza
mortgage has a term of five years and an interest rate of 8.625%
and requires level payments of approximately $136,700 annually
based on 25 year amortization.
The Partnership has executed a lease amendment with Santoni's
Market, an anchor tenant at Edgewood Plaza, on terms which provide
for an annual rent increase of approximately $25,000 commencing
when the improvements are substantially completed. A second tenant
has agreed to a $3,800 annual increase effective at that time.
Wholesale Depot at Tarrytown Mall filed for reorganization under
the provisions of Chapter XI of the U.S. Bankruptcy Code in May
1994. Wholesale Depot vacated its space at Tarrytown Mall in late
June 1994 and rejected its lease on October 7, 1994. Wholesale
Depot met its obligations to the Partnership for rent payments
through September 30, 1994 with the exception of base rent and
expense reimbursement for the month of April 1994.
The Partnership had as a security deposit a $500,000 letter of
credit issued by Shawmut Bank to be used to fund the lease
obligations of Wholesale Depot. The Partnership collected $450,000
with regard to the letter of credit, of which $250,000 was received
in June 1995 and $200,000 was received in January 1995. The
Partnership also settled unsecured claims against Wholesale Depot
for an additional $50,000, which was received in June 1995. The
monthly lease obligations for Wholesale Depot included
approximately $36,240 in base rent and approximately $10,540 in
monthly tenant reimbursements. Total income for the quarter ended
September 30, 1995 included rental income of approximately $32,000
with respect to Wholesale Depot. No further income with respect
to the Wholesale Depot lease obligations will be recognized
subsequent to the third quarter of 1995.
The Partnership continues to contact potential replacement tenants
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<PAGE> 11
for the former Wholesale Depot space. Given competitive conditions
in the marketplace, there is no assurance that a tenant will be
found.
A & P, an anchor tenant at Orchard Square, closed its store in that
center in August 1994. Although A & P, which leases 36,990 square
feet, remains obligated to pay rent until the expiration of its
lease in January 2008, the absence of an operating anchor tenant
at Orchard Square threatened the viability of the center. In order
to address this issue, the Partnership simultaneously undertook
negotiations with A & P and with the holder of the Orchard Square
mortgage.
The Partnership and A & P have entered into a lease modification
agreement calling for a reduction of A & P's rent and other
concessions in exchange for which A & P would reopen its store.
In conjunction with that agreement, the holder of the Orchard
Square mortgage, which had an outstanding balance of $5,769,823 at
September 30, 1995, has agreed in principle to accept $3,900,000
in satisfaction of its mortgage provided such payment is made by
December 22, 1995. The Partnership is presently seeking requisite
funds to make the payment. The mortgage on Orchard Square was due
and payable on December 31, 1994 and absent resolution of these
matters as described, the lender could be expected to institute
foreclosure proceedings.
The Partnership took a number of steps during the quarter to reduce
total mortgage debt on its Berkeley Square shopping center. That
center was subject to two mortgages, (i) a first mortgage in the
amount of $1,804,317 at September 30, 1995 which is further secured
by a $425,000 letter of credit and a $75,000 certificate of deposit
posted by the Partnership and (ii) a second mortgage in the
principal amount of $695,500. The letter of credit securing the
first mortgage is collateralized by a second mortgage on Cloister
shopping center.
In order to release the $425,000 letter of credit, the $75,000
certificate of deposit and the second mortgage on Cloister shopping
center and to permit sale of a pad site at Berkeley Square for
$217,000, the Partnership has agreed in principle with the first
mortgage lender as follows: (i) the Partnership would fund payment
of the principal and accrued interest of the Berkeley Square second
mortgage, (ii) the Partnership would apply $190,000 from the
proceeds of the pad site sale to reduce the first mortgage (and the
first mortgage holder would release the pad site from the lien of
the mortgage to permit that sale) and (iii) the Partnership would
pay an additional $150,000 in reduction of the Berkeley Square
first mortgage balance. The Partnership paid the second mortgage
in full on its due date, October 2, 1995, and the pad site sale is
expected to be completed by the end of the year. The $150,000
additional principal payment on the Berkeley Square first mortgage
is anticipated to be funded by the release of the $75,000
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<PAGE> 12
certificate of deposit and from Partnership working capital,
including $25,000 now held as a deposit from the buyer of the
Berkeley Square pad site.
Following completion of these transactions, total mortgage debt on
Berkeley Square will be reduced from $2,499,817 at September 30,
1995 to $1,464,317 and no Partnership property will cross
collateralize a mortgage or any other Partnership property.
The Partnership has entered into an agreement, subject to zoning
and land use approvals, to expand the Food Lion store at Woodlawn
Village from 25,000 to 32,744 square feet. The expansion would add
4,344 square feet to the center and convert 3,400 square feet of
in-line space to Food Lion use. The Partnership is currently
seeking the necessary approvals from certain Stafford County
agencies in Virginia. As part of the agreement, Food Lion would
fund substantially all of the expansion costs. If effected, the
expansion is intended to add to the stability of the center. There
can be no assurance the necessary approvals will be obtained or the
Food Lion expansion will be completed.
The Partnership has begun to seek opportunities to sell Partnership
properties in markets where the General Partners believe a sale
would be appropriate. Pursuant to that course of action, the
Partnership entered into brokerage agreements to sell two of its
centers, Highlandtown Village and Holiday, in the second quarter
of 1995. There were no acceptable offers made for either property.
The brokerage agreement for Highlandtown Village expired on
September 30, 1995. The brokerage agreement for Holiday is
scheduled to expire in November 1995.
The Partnership's Quality Center mortgage, which had an outstanding
balance of $3,840,680 at September 30, 1995, matures on February
1, 1996. The Partnership is currently seeking an extension of this
mortgage with the lender.
The Partnership's operations as well as the financial condition of
many of its tenants have been adversely affected by economic and
competitive conditions. If the Partnership is not able to fund its
cash requirements from operations, the Partnership may be required
to seek additional borrowing. The Partnership could be adversely
affected by the decrease in the number of sources of mortgage
financing and the stricter standards employed by lenders to
determine the amount, terms and underwriting requirements for such
financing, all of which have affected the amount and cost of
borrowing. If additional borrowing is not available, the
Partnership may be required to sell one or more of its shopping
center properties. There is no assurance that loans would be
available, or that the Partnership would be able to sell a
particular shopping center, or that the terms of such loans or any
sales would be advantageous to the Partnership. Furthermore, if
alternative sources of cash were needed and not found, the
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<PAGE> 13
Partnership could default on its obligations, including obligations
to pay debt service and mortgage interest, which could result in
the foreclosure by its mortgage lenders of one or more shopping
centers.
RESULTS OF OPERATIONS
The results of operations for the quarters and nine months ended
September 30, 1995 and 1994 reflect the operations of eleven
shopping centers. The net income (loss) for each shopping center
is as follows:
</TABLE>
<TABLE>
<CAPTION>
Net income (loss) for Net income (loss) for
the quarters ended the nine months ended
--------------------- --------------------
Shopping Centers / Location 9/30/95 9/30/94 9/30/95 9/30/94
--------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
WOODLAWN VILLAGE
Fredericksburg, VA........ $ (7,218) $ (2,284) $(37,792) $(30,994)
LYNNWOOD PLACE
Jackson, TN............... (24,183) 329 (146,668) (146,709)
HIGHLANDTOWN VILLAGE
Baltimore, MD............. 18,038 9,262 12,803 4,575
JACKSON HEIGHTS PLAZA
Murfreesboro, TN.......... 35,201 13,758 78,877 6,114
HOLIDAY
Collinsville, VA.......... 2,688 6,619 18,113 14,547
CLOISTER
Ephrata, PA............... 23,163 51,544 65,912 98,470
ORCHARD SQUARE
Cobb County, GA........... 29,771 75,422 105,954 164,555
EDGEWOOD PLAZA
Harford County, MD........ 31,532 39,095 111,259 111,985
TARRYTOWN MALL
Rocky Mount, NC........... (108,461) (46,211) (191,860) (235,083)
BERKELEY SQUARE
Goose Creek, SC........... (9,908) (6,311) (54,745) (14,323)
QUALITY CENTER
Lancaster, PA............. (64,502) (8,712) (228,818) (38,634)
--------- --------- --------- ---------
Shopping center totals (73,879) 132,511 (266,965) (65,497)
Other expenses (33,179) (29,193) (115,461) (108,150)
--------- --------- --------- ---------
Total $(107,058) $ 103,318 $(382,426) $(173,647)
========= ========= ========= =========
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1995:
Net income decreased $210,376 to net loss of $107,058 for the third
quarter of 1995 from net income of $103,318 for the comparable
quarter of 1994. Total income decreased $172,344 to $1,859,740 for
the third quarter of 1995 from total income of $2,032,084 for the
- 13 -
<PAGE> 14
third quarter of 1994. Total operating expenses increased $43,372
to $1,977,008 for the 1995 quarter from $1,933,636 for the 1994
quarter.
Rental income decreased $81,267 to $1,575,702 for the third quarter
of 1995 from $1,656,969 for the third quarter of 1994. Significant
changes in rental income during the quarter, excluding changes in
percentage rent, included declines in rental income at Tarrytown
Mall of $63,093, Quality Center of $58,331 and Orchard Square of
$17,442. The declines at Tarrytown Mall and Quality Center were
primarily due to declines in the shopping centers' leased
percentages. Tarrytown Mall was 62% leased at September 30, 1995,
a net decrease of 27% from September 30, 1994. The 27% decline at
Tarrytown Mall primarily resulted from the loss of Wholesale Depot
which occupied 79,066 square feet. Wholesale Depot terminated its
lease at Tarrytown Mall on October 7, 1994. Rental income for the
quarter ended September 30, 1995 included approximately $32,000
with respect to the Wholesale Depot lease in comparison to
approximately $108,700 for the quarter ended September 30, 1994.
Quality Center was 70% leased at September 30, 1995, which
represented a net leasing decline of 6% from September 30, 1994.
The decline in rental income at Orchard Square can be attributed
to decreases in tenant rental rates as a result of lease renewals
and rent abatements. However, Orchard Square's leased percentage
was 96% at September 30, 1995, an increase of 2% from September 30,
1994. The declines in rental income were partially offset by
increases at Jackson Heights of $16,608 and Berkeley Square of
$15,135, which were primarily due to increases in the shopping
centers' leased percentages. Jackson Heights and Berkeley Square
were 99% and 92% leased, respectively, at September 30, 1995, which
represented increases of 2% and 10%, respectively, compared to
September 30, 1994.
The following changes in leased percentages also contributed to
changes in rental income. Highlandtown was 100% leased at
September 30, 1995, which represented an increase of 2% compared
to September 30, 1994. Lynnwood Place, Cloister, and Edgewood
Plaza were 100% leased at the end of both periods. Woodlawn
Village remained unchanged at 93% leased. Holiday was 78% leased
at September 30, 1995, a net decrease of 4% from September 30,
1994. The Partnership's aggregate portfolio was 84% leased at
September 30, 1995, a decrease of 7% from September 30, 1994,
principally reflecting the changes at Tarrytown Mall.
Percentage rent for the Partnership increased $18,088 to $74,913
for the third quarter of 1995 from $56,825 for the third quarter
of 1994.
Tenant reimbursement income decreased $91,077 to $284,038 for the
1995 quarter from $375,115 for the 1994 quarter. A portion of the
change in tenant reimbursement income was a decline at Tarrytown
Mall of $46,144 which was primarily due to the loss of Wholesale
- 14 -
<PAGE> 15
Depot.
Depreciation expense decreased $11,953 to $406,068 for the quarter
ended September 30, 1995 from $418,021 for the comparable quarter
of 1994. This decrease was primarily the result of a decline at
Tarrytown Mall of $19,620 which was predominantly attributable to
the write-down, recorded in the fourth quarter of 1994, of
approximately $1,129,000 of leasehold improvements related to
Wholesale Depot. The Tarrytown Mall decrease was offset in part
by an increase of $7,081 at Orchard Square.
Repairs and maintenance expense increased $19,398 to $215,946 for
the 1995 quarter from $196,548 for the 1994 quarter.
Taxes and insurance expense increased $42,699 to $207,694 for the
quarter ended September 30, 1995 from $164,995 for the comparable
quarter of 1994. This net increase was primarily attributable to
a $33,745 increase in real estate tax expense at Lynnwood Place.
In the third quarter of 1994, an adjustment was made for a reduced
assessment for real estate tax expense for 1994.
The aggregate provision for doubtful accounts was $39,081 for the
quarter ended September 30, 1995 as compared to $53,870 for the
quarter ended September 30, 1994. The provisions for Tarrytown
Mall and Quality Center were lower by $25,946 and $15,474,
respectively, in the third quarter of 1995 as compared to the third
quarter of 1994.
Other expenses increased $21,311 to $183,170 for the quarter ended
September 30, 1995 from $161,859 for the comparable period in 1994,
predominantly due to an increase in utilities expense at various
centers.
NINE MONTHS ENDED SEPTEMBER 30, 1995:
Net loss increased $208,779 to net loss of $382,426 for the nine
months ended September 30, 1995 from net loss of $173,647 for the
comparable nine months of 1994. Total income decreased $223,889
to $5,632,470 for the first nine months of 1995 from total income
of $5,856,359 for the first nine months of 1994. Total operating
expenses decreased $8,089 to $6,031,319 for the 1995 period from
$6,039,408 for the 1994 period.
Rental income decreased $35,240 to $4,779,785 for the nine months
ended September 30, 1995 from $4,815,025 for the nine months ended
September 30, 1994. Significant changes in rental income during
the nine months, excluding changes in percentage rent, included
declines at Quality Center of $123,617, Tarrytown Mall of $53,087
and Orchard Square of $36,587. The declines in rental income at
Quality Center and Tarrytown Mall were primarily due to declines
in the shopping centers' leased percentages. Quality Center was 70%
leased at September 30, 1995, a net leasing decline of 6% from
- 15 -
<PAGE> 16
September 30, 1994. Tarrytown Mall was 62% leased at September 30,
1995, a net decrease of 27% from September 30, 1994. The 27%
decline at Tarrytown Mall primarily resulted from the loss of
Wholesale Depot which occupied 79,066 square feet. The decline in
rental income at Orchard Square can be attributed to decreases in
tenant rental rates as a result of lease renewals and rent
abatements and other leasing activity. However, Orchard Square's
leased percentage was 96% at September 30, 1995, an increase of 2%
from September 30, 1994. These declines in rental income were
partially offset by an increase at Jackson Heights of $86,810. The
increase in rental income at Jackson Heights was primarily due to
an increase in the shopping center's leased percentage to 99% at
September 30, 1995, an increase of 2% compared to September 30,
1994.
The following changes in leased percentages also contributed to
changes in rental income. Highlandtown and Berkeley Square were
100% and 92% leased, respectively, at September 30, 1995, which
represented net leasing gains of 2% at Highlandtown Village and 10%
at Berkeley Square compared to September 30, 1994. Lynnwood Place,
Cloister, and Edgewood Plaza were 100% leased at the end of both
periods. Woodlawn Village remained unchanged at 93% leased.
Holiday was 78% leased at September 30, 1995, a net decrease of 4%
from September 30, 1994. The Partnership's aggregate portfolio was
84% leased at September 30, 1995, a decrease of 7% from September
30, 1994.
Percentage rent for the Partnership increased $36,141 to $170,734
for the nine months in 1995 from $134,593 for the nine months in
1994.
Tenant reimbursement income decreased $188,649 to $852,685 for the
1995 period from $1,041,334 for the 1994 period. Significant
changes in tenant reimbursement income contributing to this decline
were decreases at Lynnwood Place of $69,510 and Tarrytown Mall of
$62,375. The decline at Lynnwood Place can be attributed to a
reduction in estimated real estate tax tenant reimbursements and
to adjustments for prior year accruals. The decline at Tarrytown Mall
can be attributed to the loss of Wholesale Depot and other leasing
activity.
Interest expense increased $20,753 to $2,395,874 for the nine
months ended September 30, 1995 from $2,375,121 for the comparable
nine months of 1994. The net increase is primarily attributable
to an increase in interest expense at Cloister of $26,871. This
increase was due to adjustments in the interest rate on the
Cloister mortgage which floats at prime plus 1.25%.
Depreciation expense decreased $46,751 to $1,220,174 for the nine
months in 1995 from $1,266,925 for nine months in 1994.
Depreciation expense at Tarrytown Mall decreased $73,433, which was
predominantly the result of the write-down, recorded in the fourth
- 16 -
<PAGE> 17
quarter of 1994, of approximately $1,129,000 of leasehold
improvements related to Wholesale Depot. The Tarrytown Mall
decrease was offset in part by an increase of $21,287 at Orchard
Square.
Repairs and maintenance expense decreased $8,342 to $647,220 for
the 1995 period from $655,562 for the 1994 period. The decrease
was primarily the result of a decline at Tarrytown Mall of $21,494
and Woodlawn of $16,054, as well as declines at other centers. The
declines were offset in part by an increase at Jackson Heights of
$34,503.
Taxes and insurance expense increased $20,499 to $625,513 for the
nine months ended September 30, 1995 from $605,014 for the
comparable period of 1994, principally as a result of increases in
real estate tax expense at seven of the portfolio's shopping
centers.
The aggregate provision for doubtful accounts was $124,710 for the
nine months ended September 30, 1995 as compared to $157,061 for
the nine months ended September 30, 1994. The provision related
to Tarrytown Mall was lower by $89,158 in 1995 as compared to
1994.
Amortization expense decreased $44,557 to $71,178 for the nine
months ended September 30, 1995 from $115,735 for the comparable
nine months of 1994. A significant portion of the change resulted
from a decline in amortization expense at Lynnwood Place of $30,496
due to full amortization of loan costs in the second quarter of
1994.
Other expenses increased $97,617 to $622,703 for the nine months
in 1995 from $525,086 for the comparable period in 1994. This
increase was primarily the result of increases in administrative
expense at Quality Center of $44,111 and in legal expense at
Tarrytown Mall of $34,332. The increase in administrative expense
at Quality Center was primarily due to an adjustment in the
marketing fund as a result of a decline in tenant contributions for
this period and prior periods based on occupancy at the property.
The increase in legal expense at Tarrytown Mall was related to the
bankruptcy of Wholesale Depot and lease negotiations with a
potential tenant for the Wholesale Depot space.
- 17 -
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
4 The Partnership hereby agrees, pursuant to Item 601 (b)
(4) (iii) (A) of Regulation S-K, to furnish to the
Commission upon request a copy of each instrument with
respect to the rights of holders of the Edgewood Plaza
long-term debt of the Partnership.
27.1 Financial Data Schedule for the nine months ended
September 30, 1995.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Partnership during
the quarter ended September 30, 1995.
- 18 -
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
By: Realty Capital IV Limited Partnership
General Partner
By: LMRC IV, Inc., General Partner
Date: November 13, 1995 By: /s/ Richard J. Himelfarb
------------------ -----------------------------------
Richard J. Himelfarb, President
By: FW Realty Limited Partnership,
General Partner
By: FW Corporation, General Partner
Date: November 13, 1995 By: /s/ William J. Wolfe
------------------ ---------------------------------
William J. Wolfe, President
- 19 -
EXHIBIT INDEX
Exhibit
Number
27.1 Financial Data Schedule for the nine months
ended September 30, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> $1,774,168
<SECURITIES> $0
<RECEIVABLES> $1,442,849
<ALLOWANCES> $326,811
<INVENTORY> $0
<CURRENT-ASSETS> $0
<PP&E> $61,367,046
<DEPRECIATION> $11,878,952
<TOTAL-ASSETS> $54,012,984
<CURRENT-LIABILITIES> $0
<BONDS> $36,089,384
<COMMON> $0
$0
$0
<OTHER-SE> $15,851,836
<TOTAL-LIABILITY-AND-EQUITY> $54,012,984
<SALES> $0
<TOTAL-REVENUES> $5,632,470
<CGS> $0
<TOTAL-COSTS> $3,439,557
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $124,710
<INTEREST-EXPENSE> $2,395,874
<INCOME-PRETAX> ($382,426)
<INCOME-TAX> $0
<INCOME-CONTINUING> ($382,426)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> ($382,426)
<EPS-PRIMARY> ($.32)
<EPS-DILUTED> ($.32)
</TABLE>
