<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 March 31, 1997
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)
MARYLAND 52-1490861
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(State or other jurisdiction (I.R.S. Employer
of the organization) Identification No.)
111 South Calvert Street - Baltimore, MD 21203-1476
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(Address of principal executive offices) (Zip Code)
(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
March 31, December 31,
1997 1996
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(Unaudited)
ASSETS:
Investment in real estate held for lease, at cost:
Land $ 8,726,758 $ 8,724,880
Buildings and improvements 42,659,898 42,599,014
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51,386,656 51,323,894
Less accumulated depreciation (17,280,534) (16,939,873)
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34,106,122 34,384,021
Cash and cash equivalents 2,918,739 3,051,221
Tenant accounts receivable, net of allowance
for doubtful accounts ($239,569 in 1997 and
$228,991 in 1996) 775,487 767,223
Escrows 940,916 882,333
Prepaid expenses and other assets 165,307 360,030
Intangible assets, net of accumulated amortization
($1,067,839 in 1997 and $1,035,330 in 1996) 287,012 222,287
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Total assets $39,193,583 $39,667,115
=========== ===========
LIABILITIES AND PARTNERS' EQUITY:
Long-term debt, including current maturities $27,649,075 $28,104,113
Interest payable 1,206,191 1,098,751
Cash flow protector loans 789,203 789,203
Accounts payable and accrued expenses 133,593 124,800
Prepaid rents and security deposits 199,530 193,139
Due to related parties 127,420 126,780
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Total liabilities 30,105,012 30,436,786
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General partners and assignor limited partner 528,452 529,870
Assignee limited partners (1,200,000 units
authorized, issued and outstanding) 8,560,119 8,700,459
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Total partners' equity 9,088,571 9,230,329
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Total liabilities and partners' equity $39,193,583 $39,667,115
=========== ===========
The accompanying notes are an integral part of these balance sheets.
<PAGE> 3
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
For the quarters ended
March 31,
----------------------
1997 1996
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Income:
Rental income $1,338,422 $1,306,466
Tenant reimbursement income 264,117 259,733
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Total income 1,602,539 1,566,199
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Operating expenses:
Interest expense 662,044 713,471
Depreciation 340,661 353,836
Repairs and maintenance 230,941 251,749
Taxes and insurance 187,355 190,916
Management and leasing to
related parties 87,000 89,100
Amortization 32,509 25,848
Other expenses 238,692 155,032
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Total operating expenses 1,779,202 1,779,952
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Loss from rental operations (176,663) (213,753)
Other income:
Interest income 34,905 18,558
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Net loss $ (141,758) $ (195,195)
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Net loss allocated to
general partners $ (1,418) $ (1,952)
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Net loss allocated to
assignee limited partners $ (140,340) $ (193,243)
========== ==========
Net loss allocated to
assignee limited partners
per unit (1,200,000 units
issued and outstanding) $ (0.12) $ (0.16)
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE> 4
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended
March 31,
--------------------------
1997 1996
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Cash flows from operating activities:
Net loss $ (141,758) $ (195,195)
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Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 373,170 379,684
Changes in operating assets and liabilities:
(Increase) decrease in tenant accounts
receivable, net (8,264) 29,052
Decrease (increase) in prepaid expenses
and other assets 136,140 (34,994)
Increase (decrease) in accounts payable
and accrued expenses 15,184 (26,858)
Increase in accrued interest payable 107,440 102,368
Increase in due to related parties 640 1,614
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Total adjustments 624,310 450,866
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Net cash provided by operating activities 482,552 255,671
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Cash flows from investing activities:
Improvements of real estate (62,762) (57,835)
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Net cash used in investing activities (62,762) (57,835)
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Cash flows from financing activities:
Retirement of long-term debt (300,000) -
Principal payments on long-term debt (155,038) (163,405)
Financing fees (97,234) (13,152)
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Net cash used in financing activities (552,272) (176,557)
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Net (decrease) increase in cash and cash
equivalents (132,482) 21,279
Cash and cash equivalents at beginning of period 3,051,221 1,664,994
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Cash and cash equivalents at end of period $2,918,739 $1,686,273
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 554,604 $ 611,103
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE> 5
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1997
------------
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 $316,635 and $317,688 at March 31,
1997 and December 31, 1996, respectively.
Certain leases provide for additional rent computed on the basis
of a percentage of gross sales in excess of specified levels.
Rental income for the quarters ended March 31, 1997 and 1996
included income with respect to these percentage rentals of
$63,395 and $54,986, 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 maturities of less than three
months to be cash and cash equivalents.
USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
FINANCIAL INSTRUMENTS. The carrying values of the Partnership's
cash and cash equivalents, tenant accounts receivable, accounts
payable, due to related parties and long-term debt approximate
the fair values. As the cash flow protector loans are non-
interest bearing and will only be paid after certain returns to
<PAGE> 6
assignee limited partners, the fair value of the cash flow
protector loans are not readily determinable.
LONG-LIVED ASSETS. Effective January 1, 1996, the Partnership
adopted Statement of Financial Accounting Standards ("SFAS") No.
121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be held
and used or disposed of by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The adoption
on January 1, 1996 had no effect on the financial statements of
the Partnership. Management reviews the Partnership's assets for
impairment on a property by property basis at year end when the
third party appraisals have been completed and whenever
circumstances occur which indicate that the carrying amount of
the assets may be impaired.
The Partnership considers its properties to be long-lived assets
to be held and used. The Partnership's policy is to classify its
assets as held for sale when the Partnership has formally
committed to dispose of the properties whether by sale or
abandonment if suitable offers are not received, and that it is
unlikely that the plan would be withdrawn.
Certain properties are listed for sale with brokers with the
intent that if acceptable offers are received, the Partnership
would consider selling the property or properties. In the
meantime, the Partnership will continue to operate the
properties. To the extent some properties are sold there may be
losses recognized from the sales because the net proceeds from
the sale of certain properties may be below the carrying values.
NEW ACCOUNTING PRONOUNCEMENT. During 1997, the Financial
Accounting Standards Board issued SFAS No. 128, "Earnings Per
Share", which becomes effective December 31, 1997 with early
adoption not permitted. Under SFAS No. 128, disclosure of basic
earnings per share (the principal difference being that common
share equivalents would not be considered in the compilation of
basic earnings per share) and diluted earnings per share is
required. The effect of the adoption will not be material.
NOTE B - RELATED PARTY TRANSACTIONS:
During the quarter ended March 31, 1997, the Partnership paid
First Washington Management, Inc., an affiliate of FW Realty
Limited Partnership, one of the general partners, $76,258 and
Legg Mason Realty Capital, Inc., an affiliate of Realty Capital
IV Limited Partnership, the other general partner, $34,834 for
management fees and reimbursement of operating expenses. At
March 31, 1997, $28,297 was payable to First Washington
Management, Inc. and $25,692 was payable to Legg Mason Realty
<PAGE> 7
Capital, Inc. for management fees and reimbursement of operating
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 March 31, 1997, 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 March 31, 1997 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.
Sale or refinancing proceeds are distributed first to meet debts
<PAGE> 8
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.
<PAGE> 9
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 rents.
As of March 31, 1997, tenant rent receivables prior to the
allowance for doubtful accounts totaled $1,015,056 of which amount
$316,635 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 $698,421 represented the balance. As of December 31, 1996,
such rent receivables totaled $996,214 of which $317,688
represented receivables required to be accrued and $678,526
represented the balance.
CASH FLOW
The Partnership recorded a $132,482 net decrease in cash and cash
equivalents in the three months ended March 31, 1997, with $482,552
in net cash provided by operating activities offset by $62,762 used
in investing activities for improvements of real estate and
$552,272 used in financing activities. The principal differences
between net loss for the three months ended March 31, 1997 of
$141,758 and net cash provided by operating activities of $482,552
were the noncash charge of $373,170 for depreciation and
amortization, a decrease in prepaid expenses and other assets of
$136,140 and an increase in accrued interest payable of $107,440.
Net cash used in financing activities of $552,272 included $300,000
paid to reduce the principal balance of the Lynnwood Place mortgage
in connection with a loan extension, monthly principal payments on
long-term debt totalling $155,038, and payment of financing fees of
$97,234 related to the Lynnwood Place, Woodlawn Village, and
Quality Center loan extensions. Principal payments on long-term
debt included $67,500 with respect to the Tarrytown Mall first
trust loan.
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The cash and cash equivalents position of the Partnership at March
31, 1997 decreased $132,482 from that at December 31, 1996. 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 and sales 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.
It has been the policy of the Partnership 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. That policy reflects the
General Partners' belief that maintenance of adequate cash reserves
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.
Presently, and in light of the consummation of the sales of Orchard
Square and Holiday, the anticipated sale of Cloister Shopping
Center and the extensions of certain mortgages as described below,
the General Partners anticipate that the Partnership will make a
cash distribution to Unitholders in the second quarter of 1997 in
the amount of $2 per Unit payable upon the close of the sale of
Cloister. That distribution is presently anticipated to be payable
to Unitholders of record as of May 31, 1997. In the event such
sale does not occur, the distribution will be $1 per Unit.
The Lynnwood Place mortgage, which had an outstanding principal
balance of $5,908,755 at March 31, 1997, was scheduled to mature on
July 10, 1996. The lender extended the term of this loan to
December 31, 1996 on the same terms and conditions previously
existing under the loan. On January 29, 1997, the lender renewed
the mortgage for three years to February 10, 2000. The Lynnwood
Place mortgage has an interest rate of 9.5% and requires equal
payments of approximately $652,000 annually based on a 21 year
principal amortization. The renewed mortgage is prepayable without
penalty in the event of sale of the center. To obtain the mortgage
extension on the terms described, the Partnership paid the lender
$300,000 in reduction of the principal balance of this loan and a
fee of approximately $59,000. The Partnership incurred additional
legal and closing fees totalling approximately $70,000.
The Woodlawn Village mortgage, which had an outstanding principal
balance of $1,802,055 at March 31, 1997, was scheduled to mature on
December 1, 1996. In March 1997, the lender extended the full
principal balance of the loan for a 10 year term at an interest
rate of 8.5%. Equal payments of approximately $189,000 annually
based on a 20 year principal amortization were effective January 1,
<PAGE> 11
1997. The extended mortgage is designed to be assumable by a buyer
of the property. To obtain this extension, the Partnership paid
the lender a fee of approximately $18,000.
The Quality Center mortgage, which had an outstanding principal
balance of $3,683,616 at March 31, 1997, was scheduled to mature on
February 1, 1997. The lender extended the term of this loan for
one year to February 1, 1998 on the same terms and conditions
previously existing under the loan.
Two of the Partnership's mortgages are scheduled to mature during
the fourth quarter of 1997, Highlandtown Village and Berkeley
Square. The Highlandtown Village mortgage, which had an
outstanding principal balance of $3,125,482 at March 31, 1997,
matures on December 21, 1997. The Partnership currently
anticipates that it will refinance the Highlandtown Village
mortgage at or prior to maturity if the center is not sold in the
interim. The Berkeley Square mortgage, which had an outstanding
principal balance of $1,366,231 at March 31, 1997, matures on
December 31, 1997. The Partnership currently anticipates that
it will exercise its option to extend the Berkeley Square
mortgage to December 1998 if the center is not sold in the interim.
If the Partnership is unable to extend these loans or refinance on
acceptable terms, the Partnership may be required to seek
additional borrowing, sell one or more of its shopping center
properties, or default on its obligations.
At March 31, 1997, Tarrytown Mall was subject to $6,992,438 in
mortgage indebtedness, of which $1,607,440 is a first trust
mortgage and $5,384,998 is a second trust mortgage. In addition,
at March 31, 1997, $16,100 in interest was accrued with respect to
the first mortgage and $1,016,332 in interest was accrued with
respect to the second mortgage. Both the first and second
mortgages (principal and interest) are nonrecourse to the
Partnership. The first trust mortgage requires principal payments
of $22,500 per month until June 30, 1997 or such earlier date as a
replacement tenant is found for the Wholesale Depot space. Monthly
principal payments are scheduled to increase to $49,000 on July 1,
1997 and to $54,000 on February 1, 1998. Net cash flow from
operations at Tarrytown Mall currently would be insufficient to
meet the July 1997 scheduled increase in the monthly principal
payments under the first trust mortgage.
The second trust mortgage requires that after payment of first
trust debt service and capital improvements made with respect to
Tarrytown Mall, net cash flow from operations from that center be
applied to second trust mortgage interest and principal
curtailments. To the extent that net cash flow is insufficient to
make second trust debt service payments, unpaid interest on the
second trust loan is accrued rather than paid. The Partnership
accrued $107,700 in unpaid interest in the first three months of
1997. Accrued and unpaid interest bears interest at 8% per annum
<PAGE> 12
and is due at the maturity of the loan or earlier to the extent net
cash flow is available.
The Partnership has initiated discussions with Tarrytown Mall's
second trust mortgage lender regarding disposition of that center.
No definitive plan of disposition has been adopted. Any plan is
contingent upon the outcome of discussions with the first trust
lender regarding the required principal payments on the first trust
mortgage which are scheduled to increase July 1, 1997. Payment
obligations with respect to Tarrytown Mall indebtedness are
currently limited to funds generated by current operations at that
property.
In the fourth quarter of 1996, the Partnership recorded an
impairment charge of $2,895,000 to write-down the carrying value of
Tarrytown Mall to its fair value of $4,500,000 based upon an
appraisal as of December 1, 1996. In accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of", the assets, which include the land, building and
improvements and intangibles related to Tarrytown Mall, were
determined to be impaired because downward revisions in estimates
indicated future net cash flows would be insufficient to fully
recover the carrying value of this property. The revisions in
estimates were received in the fourth quarter of 1996 and resulted
in a lower valuation for Tarrytown Mall in comparison to the prior
year's valuation. Fair value was determined by an independent
appraisal based on an income capitalization approach. The
Partnership plans to continue operating Tarrytown Mall and
considers the center to be an asset to be held and used until an
offer is received that is deemed satisfactory by the Partnership
regarding disposal of the property with a capable buyer.
In the first quarter of 1997, depreciation charges with respect to
Tarrytown Mall were approximately $82,000. Escrows and prepaid
expenses and other assets in the Partnership's financial statements
include approximately $568,000 with respect to Tarrytown Mall which
is pledged to secure mortgage debt related to that property.
Interest payable includes approximately $1,032,000 with respect to
Tarrytown Mall, which is payable out of cash flow from operations
and sale or refinancing proceeds from that property. Principal and
interest obligations related to the Tarrytown Mall mortgages are
nonrecourse to the Partnership.
At Edgewood Plaza, the Partnership is attempting to negotiate a
termination agreement with Rite-Aid regarding its lease obligation
to the Partnership. Rite-Aid opened a free-standing retail store
directly across Route 755 from the shopping center in October 1996
and Rite-Aid closed its 6,400 square foot store at Edgewood Plaza
at that time. Rite-Aid's lease with the Partnership expires July
31, 1999.
<PAGE> 13
At Woodlawn Village, the Food Lion expansion which was
substantially complete in February 1997 added 4,444 square feet to
the center and converted 3,300 square feet of in-line space to Food
Lion use. Food Lion's rent increased by $25,500 annually effective
January 1997. As part of the lease modification, Food Lion funded
substantially all of the expansion costs. The expansion was
designed to add to the stability of the center.
Subsequent to March 31, 1997, the Partnership is obligated to
expend approximately $55,700 for tenant fit-up costs in connection
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. The
Partnership has executed a lease subject to material contingencies
for a tenant at Quality Center for 13,887 square feet. The
Partnership's obligation for tenant fit-up and tenant leasing
commission with respect to this lease is estimated to be
approximately $192,000.
In March 1997, the Partnership entered into an agreement to sell
Cloister to an unrelated third party for a contract price of
$2,650,000. The contract, which is subject to certain
contingencies, is scheduled to close on or before May 28, 1997.
Net proceeds from the sale are expected to be approximately
$1,100,000, after giving effect to payment of transaction
expenses and mortgage debt, and will be approximately equal to
the appraised net equity of Cloister included in the appraisal
value of the Partnership's portfolio at the end of 1996.
The General Partners currently intend to offer the Partnership's
remaining properties for sale in accordance with the following
strategies: (i) six properties, Lynnwood Place, Highlandtown
Village, Jackson Heights, Woodlawn Village, Edgewood Plaza and
Berkeley Square, have been listed for sale; (ii) the listing of
Quality Center will await further progress in the Partnership's
attempt to reposition Quality Center from a factory outlet center
to a neighborhood and community convenience center; and (iii) the
disposition of Tarrytown Mall will be resolved following
discussions with that center's mortgage lenders. Because
negotiations with Rite-Aid at Edgewood Plaza have not resulted in
an acceptable agreement for payment in termination of its lease,
the General Partners have determined to list that property for sale
at this time. Rite-Aid is obligated to pay rent through July 31,
1999. The General Partners have not committed to a formal plan to
dispose of any properties if satisfactory offers are not received.
In the meantime, the Partnership will continue to operate all of
its properties.
The Partnership considers its properties to be long-lived assets to
be held and used. The Partnership's policy is to classify its
assets as held for sale when the Partnership has formally committed
to dispose of the properties whether by sale or abandonment. If
the Partnership should formally commit to a plan of disposition,
<PAGE> 14
the Partnership would appropriately address the issue of
classifying the property or properties as held for sale at that
time and discontinue depreciating the property or properties.
The Partnership's operations, as well as the financial condition of
certain of its tenants, have been adversely affected by competitive
economic conditions. If the Partnership is not able to fund its
cash requirements from operations, the Partnership may be required
to seek additional financing. The Partnership could be adversely
affected by the increased 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 or refinancing 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
Partnership could default on its obligations, including its
obligations to pay debt service and mortgage interest, which could
result in the foreclosure by its mortgage lenders of one or more
shopping centers.
<PAGE> 15
RESULTS OF OPERATIONS
The results of operations for the quarter ended March 31, 1997
reflect the operations of nine shopping centers. The results of
operations for the comparable quarter in 1996 reflect the
operations of ten shopping centers. The Partnership sold Orchard
Square Shopping Center on December 29, 1995 and Holiday Shopping
Center on May 3, 1996. The net income (loss) for each shopping
center is as follows:
Net income (loss) for
the three months ended
-----------------------
Shopping Centers / Location 3/31/97 3/31/96
---------------------------- ---------- ----------
WOODLAWN VILLAGE
Fredericksburg, VA........ $ 13,635 $(11,606)
LYNNWOOD PLACE
Jackson, TN............... (43,734) (20,356)
HIGHLANDTOWN VILLAGE
Baltimore, MD............. 2,361 4,450
JACKSON HEIGHTS PLAZA
Murfreesboro, TN.......... 49,185 52,057
HOLIDAY
Collinsville, VA.......... - 71
CLOISTER
Ephrata, PA............... 19,551 4,230
EDGEWOOD PLAZA
Harford County, MD........ 3,235 15,498
TARRYTOWN MALL
Rocky Mount, NC........... (159,639) (160,405)
BERKELEY SQUARE
Goose Creek, SC........... 27,766 19,216
QUALITY CENTER
Lancaster, PA............. (36,294) (71,833)
--------- ---------
Shopping center totals (123,934) (168,678)
Other expenses, net of other
income (17,824) (26,517)
--------- ---------
Total $(141,758) $(195,195)
========= =========
THREE MONTHS ENDED MARCH 31, 1997:
The Partnership reported net loss of $141,758 for the first quarter
of 1997 and net loss of $195,195 for the comparable quarter of
1996. The significant factors contributing to the decline in net
loss in the first quarter of 1997 were increases in total income
and interest income and decreases in interest and repairs and
maintenance expenses. These factors were partially offset by an
increase in other expenses.
<PAGE> 16
The Partnership's total income increased $36,340 to $1,602,539 in
the quarter ended March 31, 1997 from $1,566,199 in the comparable
quarter of 1996. The increase in total income consisted of an
increase in rental income of $31,956 to $1,338,422 for the first
quarter of 1997 from $1,306,466 for the first quarter of 1996 and
an increase in tenant reimbursement income of $4,384 to $264,117
for the 1997 quarter from $259,733 for the 1996 quarter.
Seven of the Partnership's nine shopping centers had increases in
rental income, including a significant increase at Quality Center
of $16,732. Six of the shopping centers had increases in tenant
reimbursement income. The increases in rental and tenant
reimbursement income at Quality Center were primarily due to an
increase in Quality Center's leased percentage. Quality Center was
75% leased at March 31, 1997, which represented a net leasing gain
of 7% from March 31, 1996. The increase in rental income was
partially offset by the loss of rental income from Holiday.
Holiday, which was sold on May 3, 1996, had rental income of
$42,509 in the first quarter of 1996.
The following changes in leased percentages also contributed to
changes in rental income and tenant reimbursement income. Woodlawn
Village, Cloister and Jackson Heights experienced net leasing gains
from March 31, 1996 to March 31, 1997. Woodlawn was 100% leased at
March 31, 1997, which represented an increase from approximately
93% leased at March 31, 1996. Cloister was approximately 98%
leased, which represented a net leasing gain of approximately 4%
from March 31, 1996. Jackson Heights was 100% leased at March 31,
1997, which represented an increase of approximately 1%. The
leased percentages for Highlandtown Village, Edgewood Plaza and
Berkeley Square remained unchanged at March 31, 1997 from March 31,
1996 at 100%, 100%, and 97% leased, respectively. Lynnwood Place
and Tarrytown Mall experienced net leasing declines at March 31,
1997 from March 31, 1996. Lynnwood Place and Tarrytown Mall were
96% and 61% leased, respectively, which represented declines of 4%
and 2%, respectively. The Partnership's aggregate portfolio was
approximately 84% leased at March 31, 1997 and 1996. The
Partnership's shopping center portfolio at March 31, 1997
represented nine centers with approximately 945,000 leasable square
feet. The portfolio at March 31, 1996 represented ten shopping
centers with approximately 1,034,000 square feet.
Interest expense decreased $51,427 to $662,044 for the first
quarter of 1997 from $713,471 for the first quarter of 1996. The
net decrease in interest expense is partially attributable to
declines in interest expense at Tarrytown Mall of $20,881 and
Woodlawn Village of $14,233. The decrease at Tarrytown Mall
primarily resulted from the payment of $25,000 in January 1996 for
certain deferred interest obligations to the holder of the second
trust of Tarrytown Mall. These deferred interest payment
obligations were paid in full in April 1996. Woodlawn's interest
expense decreased due to the decline in the interest rate effective
<PAGE> 17
with the loan extension.
Repairs and maintenance expense decreased $20,808 to $230,941 for
the quarter ended March 31, 1997 from $251,749 for the comparable
quarter of 1996. The decline in repairs and maintenance expense
was attributable to the sale of Holiday in May 1996 and decreases
in that expense at six shopping centers. Repairs and maintenance
expense at Holiday was $13,097 in the first quarter of 1996. These
decreases were offset in part by increases at three shopping
centers. Repairs and maintenance expense at Tarrytown Mall
increased $23,276 primarily due to roof and parking lot repairs in
1997.
The decreases in interest expense and repairs and maintenance
expense were partially offset by an increase in other expenses of
$83,660 to $238,692 for the quarter ended March 31, 1997 from
$155,032 for the comparable quarter in 1996. The increase was
primarily due to increases in the provision for doubtful accounts
of $31,010, utilities expense of $21,637 and administrative expense
of $21,619. The provisions for doubtful accounts related to eight
of the Partnership's shopping centers were higher in 1997 as
compared to 1996. The increase in utilities expense was primarily
a result of an increase at Tarrytown Mall of $16,801.
Interest income increased $16,347 to $34,905 for the quarter ended
March 31, 1997 from $18,558 for the comparable quarter of 1996.
The increase in interest income was primarily the result of
increasing cash balances predominantly due to proceeds from the
sales of Orchard Square in December 1995 and Holiday in May 1996.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27.1 Financial Data Schedule for the three months ended
March 31, 1997.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Partnership during
the quarter ended March 31, 1997.
<PAGE> 18
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.
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
By: Realty Capital IV Limited Partnership
General Partner
By: LMRC IV, Inc., General Partner
Date: May 12, 1997 By: /s/ Richard J. Himelfarb
------------------ -----------------------------------
Richard J. Himelfarb, President
By: FW Realty Limited Partnership,
General Partner
By: FW Corporation, General Partner
Date: May 12, 1997 By: /s/ William J. Wolfe
------------------ ---------------------------------
William J. Wolfe, President
<PAGE> 19
EXHIBIT INDEX
Exhibit
Number
27.1 Financial Data Schedule for the three months
ended March 31, 1997.
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> $2,918,739
<SECURITIES> $0
<RECEIVABLES> $1,015,056
<ALLOWANCES> $239,569
<INVENTORY> $0
<CURRENT-ASSETS> $0
<PP&E> $51,386,656
<DEPRECIATION> $17,280,534
<TOTAL-ASSETS> $39,193,583
<CURRENT-LIABILITIES> $0
<BONDS> $27,649,075
$0
$0
<COMMON> $0
<OTHER-SE> $9,088,571
<TOTAL-LIABILITY-AND-EQUITY> $39,193,583
<SALES> $0
<TOTAL-REVENUES> $1,602,539
<CGS> $0
<TOTAL-COSTS> $1,102,486
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $14,672
<INTEREST-EXPENSE> $662,044
<INCOME-PRETAX> ($141,758)
<INCOME-TAX> $0
<INCOME-CONTINUING> ($141,758)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> ($141,758)
<EPS-PRIMARY> ($0.12)
<EPS-DILUTED> ($0.12)
</TABLE>
