<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 Quarter Ended September 30, 1998
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
---------------------------------------------------------
(Exact name of registrant as specified in its partnership
agreement)
MARYLAND 52-1490861
- -----------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of the organization) Identification No.)
100 Light Street - Baltimore, MD 21202
- -----------------------------------------------------------------
(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
STATEMENTS OF NET ASSETS IN LIQUIDATION
September 30, December 31,
1998 1997
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(Unaudited)
ASSETS (Liquidation Basis):
Investment in real estate $8,224,573 $22,796,248
Cash and cash equivalents 1,377,352 5,245,307
Tenant accounts receivable, net of
allowance for doubtful accounts
($193,852 in 1998 and $102,831 in 1997) 156,716 367,393
Other assets 73,478 338,816
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Total assets 9,832,119 28,747,764
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LIABILITIES (Liquidation Basis):
Long-term debt 6,587,437 19,429,050
Interest payable 1,637,136 1,417,295
Accounts payable and accrued expenses 127,000 161,607
Security deposits 29,251 103,175
Due to related parties - 70,436
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Total liabilities 8,380,824 21,181,563
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Net assets in liquidation $1,451,295 $7,566,201
=========== ============
The accompanying notes are an integral part of these statements.
<PAGE> 3
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENT OF CHANGES OF NET ASSETS IN LIQUIDATION
for the period from January 1, 1998 to September 30, 1998
(Unaudited)
Net assets in liquidation at January 1, 1998 $7,566,201
----------
Increase (decrease) during the period:
Operating activities:
Net loss from operating activities (171,645)
Interest income 90,193
Leasing commissions (33,454)
----------
(114,906)
Liquidating activities:
Distributions to partners (6,000,000)
----------
Net decrease in net assets in liquidation (6,114,906)
----------
Net assets in liquidation at September 30, 1998 $1,451,295
==========
The accompanying notes are an integral part of this statement.
<PAGE> 4
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
For the For the nine
quarter ended months ended
September 30, 1997 September 30, 1997
------------------ ------------------
Income:
Rental income $1,046,315 $3,661,785
Tenant reimbursement income 235,020 766,953
---------- ----------
Total income 1,281,335 4,428,738
---------- ----------
Operating expenses:
Interest expense 564,318 1,862,250
Depreciation 274,669 947,689
Repairs and maintenance 185,332 606,599
Write-down of assets - 550,000
Taxes and insurance 144,718 522,548
Management and leasing to related parties 74,700 258,145
Amortization 40,482 106,556
Provision for doubtful accounts 20,262 54,013
Other expenses 135,671 545,271
---------- ----------
Total operating expenses 1,440,152 5,453,071
---------- ----------
Loss from rental operations (158,817) (1,024,333)
Other income:
Gain on sale of shopping centers 175,726 304,323
Interest income 69,975 137,074
---------- ----------
Net income (loss) $ 86,884 $ (582,936)
========== ==========
Net income allocated to general partners $ 43,379 $ 67,544
========== ==========
Net income (loss) allocated to assignee
limited partners $ 43,505 $ (650,480)
========== ==========
Net income (loss) allocated to assignee
limited partners per unit (1,200,000
units issued and outstanding) $ 0.04 $ (0.54)
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE> 5
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
(Unaudited)
For the nine months ended
September 30, 1997
-------------------------
Cash flows from operating activities:
Net loss $ (582,936)
----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,054,245
Write-down of assets 550,000
Gain on sale of shopping centers (304,323)
Changes in operating assets and liabilities:
Decrease in tenant accounts receivable, net 124,995
Decrease in prepaid expenses and other assets 128,787
Decrease in accounts payable and accrued
expenses and other liabilities (2,631)
Increase in accrued interest payable 242,985
Increase in due to related parties 12,767
----------
Total adjustments 1,806,825
----------
Net cash provided by operating activities 1,223,889
----------
Cash flows from investing activities:
Proceeds from sale of real estate 9,928,513
Improvements of real estate (138,725)
----------
Net cash provided by investing activities 9,789,788
----------
Cash flows from financing activities:
Retirement of long-term debt (5,027,880)
Distributions to partners (2,400,000)
Principal payments on long-term debt (437,223)
Financing fees (102,625)
Mortgage escrow deposits 200,000
----------
Net cash used in financing activities (7,767,728)
----------
Net increase in cash and cash equivalents 3,245,949
Cash and cash equivalents at beginning of period 3,051,221
----------
Cash and cash equivalents at end of period $6,297,170
==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $1,619,265
==========
The accompanying notes are an integral part of this statement
<PAGE> 6
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
September 30, 1998
------------------
NOTE A - BASIS OF PRESENTATION:
The accompanying unaudited financial statements of Mid-Atlantic Centers
Limited Partnership (the "Partnership") have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission.
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. These financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Partnership's annual report on Form
10-K for the year ended December 31, 1997.
Liquidation Basis of Accounting
Effective December 31, 1997, the general partners decided to liquidate
the partnership and adopt a plan of liquidation. This plan consists of
selling, or otherwise disposing of the Partnership's remaining shopping
centers, liquidating all assets remaining after the sale of the
shopping centers, and distributing the net proceeds to the assignee
limited partners.
The Partnership adopted the liquidation basis of accounting effective
December 31, 1997. Under the liquidation basis of accounting, assets
are stated at their estimated net realizable values and liabilities are
stated at their anticipated payable amounts. The valuation of assets
and liabilities necessarily requires estimates and assumptions, and
there are uncertainties in carrying out the dissolution of the
Partnership. The actual values upon dissolution and costs associated
therewith could be higher or lower than the amounts recorded.
The accompanying statements of net assets in liquidation and statement
of changes of net assets in liquidation reflect the transactions of the
Partnership utilizing liquidation accounting concepts as required by
generally accepted accounting principles. Prior to December 31, 1997,
the Partnership recorded results of operations using the accrual basis
of accounting. Comparison of results to prior years, therefore, is not
meaningful.
Investment in Real Estate
Investment in real estate at September 30, 1998 and December 31, 1997
consists of land, buildings and improvements which are stated at
estimated liquidation value. Investment in real estate at September
30, 1998 includes only Tarrytown Mall presented as described in Note D
- - Sale of Certain Shopping Centers and Plan of Liquidation.
<PAGE> 7
Rental Income
Certain leases provide for either abatement of rents or scheduled rent
increases over the life of the lease. Prior to the date of the
adoption of the plan of liquidation, rental income was recorded on a
straight-line basis of equal monthly payments over the respective terms
of such leases. The balance of these receivables were written off upon
adoption of liquidation accounting.
Statement of Cash Flows
For purposes of the statement of cash flows for the nine months ended
September 30, 1997, 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.
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.
NOTE B - RELATED PARTY TRANSACTIONS:
During the quarter ended September 30, 1998, the Partnership paid to
First Washington Management, Inc. and Legg Mason Realty Capital, Inc.,
affiliates of the general partners, a total of $24,938 for
reimbursement of operating expenses.
NOTE C - PARTNERSHIP ALLOCATIONS AND DISTRIBUTIONS:
Partnership allocations and distributions are made in the manner
prescribed by the Partnership Agreement and as more fully described in
Note F to the Partnership's financial statements in the annual report
on Form 10-K for the year ended December 31, 1997.
In 1998, the Partnership has made cash distributions totaling
$6,000,000 or $5 per Assignee Limited Partnership Unit ($3 per Unit
payable to Unitholders of record as of February 1, 1998 and $2 per Unit
payable to Unitholders of record as of May 1, 1998). These
distributions represented proceeds from the sale of shopping centers.
NOTE D - SALE OF CERTAIN SHOPPING CENTERS AND PLAN OF LIQUIDATION
On January 29, 1998, the Partnership sold Lynnwood Place Shopping
Center to an unrelated third party for a contract price of $6,365,000.
The carrying value of this property had been adjusted at December 31,
1997 to reflect the actual sale transaction and estimated operating
revenues and expenses expected to be recorded in 1998 for the period
prior to the sale.
<PAGE> 8
On March 2, 1998, the Partnership sold Edgewood Plaza Shopping Center
to an unrelated third party for a contract price of $2,220,000. The
carrying value of this property had been adjusted at December 31, 1997
to reflect the actual sale transaction and estimated operating revenues
and expenses expected to be recorded in 1998 for the period prior to
the sale.
On April 30, 1998, the Partnership sold Woodlawn Village Shopping
Center to an unrelated third party for a contract price of $2,375,000.
The carrying value of this property had been adjusted at March 31, 1998
to reflect the actual sale transaction and estimated operating revenues
and expenses expected to be recorded in 1998 for the period prior to
the sale.
On June 5, 1998, the Partnership sold Quality Center Shopping Center to
an unrelated third party for a contract price of $4,480,000. The
carrying value of this property had been adjusted at March 31, 1998 to
reflect the sale transaction and estimated operating revenues and
expenses expected to be recorded in 1998 for the period prior to the
sale.
The disposition of Tarrytown Mall is expected to be resolved following
discussions with that center's mortgage lenders. The appraised value
of this property as of December 1, 1997 was below the level of the
outstanding mortgage debt on the property. As a result, the carrying
value of this property has been adjusted at September 30, 1998 and
December 31, 1997 to the outstanding balance of the mortgage debt on
the property and accrued interest as of the respective dates. The
Partnership's net equity in Tarrytown Mall is effectively zero.
In February and May 1998, the Partnership made distributions totaling
$3,600,000 and $2,400,000, respectively, to the limited partners. These
distributions represented proceeds from the sale of shopping centers.
It is currently the plan of the general partners to make one additional
distribution to the limited partners subsequent to the liquidation of
all partnership assets and satisfaction of all partnership liabilities.
The net amount ultimately available for distribution from the
liquidated partnership depends on factors which cannot be predicted
with certainty, particularly collection of tenant accounts receivable
and expenses of the Partnership until completely liquidated.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The matters discussed in this Form 10-Q include forward-looking
statements as contemplated by the Private Securities Litigation Reform
Act of 1995. Forward-looking statements are statements which relate to
future operations, strategies, financial results, or other
developments. Forward-looking statements are necessarily based upon
estimates and assumptions that are inherently subject to significant
business, economic and competitive risks, uncertainties and
contingencies, many of which are beyond the Partnership's control and
many of which, with respect to future business decisions, are subject
to change. These risks, uncertainties and contingencies can affect
actual results and could cause actual results to differ materially from
those expressed in any forward-looking statements made by the
Partnership.
The General Partners approved a plan of liquidation effective December
31, 1997. The plan provides that the Partnership sell or otherwise
dispose of the Partnership's remaining shopping centers, liquidate all
assets remaining after sale of the shopping centers and distribute net
proceeds to the assignee limited partners. The Partnership adopted the
liquidation basis of accounting effective December 31, 1997. Prior to
that date, the Partnership recorded results of operations using the
accrual basis of accounting.
Under the liquidation basis of accounting, assets are stated at their
estimated net realizable values and liabilities are stated at their
anticipated payable amounts. The valuation of assets and liabilities
necessarily requires many estimates and assumptions, and there are
substantial uncertainties in carrying out the dissolution of the
Partnership. The actual values upon dissolution and costs associated
therewith could be higher or lower than the amounts recorded. In
connection with the planned liquidation, the Partnership has recorded a
reserve for additional expenses to reflect the Partnership's estimate
of the costs associated with the liquidation.
As of September 30, 1998, tenant accounts receivable prior to the
allowance for doubtful accounts totaled $350,568. As of December 31,
1997, comparative tenant accounts receivable totaled $470,224. During
the nine months ended September 30, 1998, the Partnership increased its
allowance for doubtful accounts by $91,021 to $193,852. The allowance
for doubtful accounts represents an allowance for tenant accounts
receivable that may become uncollectible in the future. The increase
in the allowance for doubtful accounts in 1998 resulted from
adjustments made based on an analysis of the collectibility of tenant
accounts receivable relating to shopping centers sold by the
Partnership.
CASH FLOW
The Partnership recorded a $3,867,955 net decrease in cash and cash
equivalents in the nine months ended September 30, 1998. The decrease
<PAGE> 10
in cash and cash equivalents is primarily attributable to the payment
of distributions to limited partners totaling $6,000,000 in 1998 which
was offset in part by net proceeds from the sales of Lynnwood Place
Shopping Center, Edgewood Plaza Shopping Center, Woodlawn Village
Shopping Center and Quality Center Shopping Center. The sale of
Lynnwood Place on January 29, 1998, Edgewood Plaza on March 2, 1998,
Woodlawn Village on April 30, 1998 and Quality Center on June 5, 1998
contributed approximately $249,000, $912,000, $539,000 and $616,000,
respectively, to cash and cash equivalents after payment of mortgage
debt and transaction expenses related to the sale. See the discussions
of the sales of these centers in Liquidity and Capital Resources
herein.
LIQUIDITY AND CAPITAL RESOURCES
The cash and cash equivalents position of the Partnership at September
30, 1998 decreased $3,867,955 from that at December 31, 1997.
On January 29, 1998, the Partnership sold Lynnwood Place Shopping
Center to an unrelated third party for a contract price of $6,365,000.
The carrying value of this property had been adjusted at December 31,
1997 to reflect the actual sale transaction and estimated operating
revenues and expenses expected to be recorded in 1998 for the period
prior to the sale. Net proceeds from the sale, after satisfaction of
the mortgage debt and transaction expenses and adjustments for mortgage
escrow balances, were approximately $249,000 or $0.21 per Assignee
Limited Partnership Unit ("Unit") which approximates the appraised net
equity of Lynnwood Place included in the appraised value of the
Partnership's portfolio at the end of 1997.
On March 2, 1998, the Partnership sold Edgewood Plaza Shopping Center
to an unrelated third party for a contract price of $2,220,000. The
carrying value of this property had been adjusted at December 31, 1997
to reflect the actual sale transaction and estimated operating revenues
and expenses expected to be recorded in 1998 for the period prior to
the sale. Net proceeds from the sale, after satisfaction of the
mortgage debt and transaction expenses and adjustments for mortgage
escrow balances, were approximately $912,000 or $0.76 per Unit which
approximates the appraised net equity of Edgewood Plaza included in the
appraised value of the Partnership's portfolio at the end of 1997.
On April 30, 1998, the Partnership sold Woodlawn Village Shopping
Center to an unrelated third party for a contract price of $2,375,000.
Net proceeds from the sale, after payment of the mortgage debt and
transaction expenses and adjustments for mortgage escrow balances, were
approximately $539,000 or $0.45 per Unit which slightly exceeds the
appraised net equity of Woodlawn Village included in the appraised
value of the Partnership's portfolio at the end of 1997.
On June 5, 1998, the Partnership sold Quality Center Shopping Center to
an unrelated third party for a contract price of $4,480,000. Net
proceeds from the sale, after payment of the mortgage debt and
transaction expenses and adjustments for mortgage escrow balances, were
approximately $616,000 or $0.51 per Unit which approximates the
appraised net equity of Quality Center included in the appraised value
of the Partnership's portfolio at the end of 1997.
<PAGE> 11
The Partnership continues to own Tarrytown Mall Shopping Center and to
estimate its net equity in that center at zero, reflecting an appraised
value of Tarrytown Mall below non-recourse debt. No value was ascribed
to Tarrytown Mall (or the related escrow or other asset accounts) in
the estimated net asset value of the Partnership's portfolio at the end
of 1997.
In view of these considerations, the Partnership has offered to deed
Tarrytown Mall to the second trust mortgage holder in satisfaction of
mortgage indebtedness encumbering the property. The holder of the
second trust has advised the Partnership that it will not deal with
this matter until the mortgage debt comes due in January 1999.
At September 30, 1998, Tarrytown Mall was subject to $6,587,437 in
mortgage indebtedness, of which $1,202,440 is a first trust mortgage
and $5,384,997 is a second trust mortgage. In addition, at September
30, 1998, $12,104 in interest was accrued with respect to the first
mortgage and $1,625,032 in interest was accrued with respect to the
second mortgage. Both the first and second mortgages (principal and
interest) are non-recourse to the Partnership.
Payment obligations with respect to Tarrytown Mall indebtedness are
currently limited to funds generated by current operations at that
property and the General Partners are focused on continuing to limit
the Partnership's liability to such funds. Absent resolution of the
terms of voluntary transfer of the center, the Partnership anticipates
foreclosure of the property when the mortgage debt securing Tarrytown
Mall matures.
In accordance with liquidation accounting, the Partnership adjusted the
carrying value of Tarrytown Mall to the sum of the outstanding balance
of the mortgage debt on the property and accrued interest as of
September 30, 1998 and December 31, 1997. In addition, escrow balances
and other assets related to Tarrytown Mall were written off to reflect
the assets at their estimated realizable values. Interest payable in
the Partnership's financial statements of $1,637,136 relates to
Tarrytown Mall and is payable out of cash flow from operations and sale
or refinancing proceeds from that property and is not reflective of the
fact that the principal and interest related to the Tarrytown Mall
mortgages are non-recourse to the Partnership.
Although the General Partners have attempted to complete the
liquidation of the Partnership in 1998, it now appears that this
objective will not be achieved, particularly in view of the
circumstances regarding timing of the disposition of Tarrytown Mall.
During 1998, the Partnership has made cash distributions aggregating
$6,000,000 or $5 per Unit to Limited Partners which represented
proceeds from the sales of shopping centers and directly reduced the
net asset value of the Partnership. As of September 30, 1998,
cumulative cash distributions of $17,447,888 and $62,391 had been made
to Limited Partners and General Partners, respectively.
<PAGE> 12
The Partnership's net assets were valued at approximately $6.31 per
Unit as of December 31, 1997. Subsequent to that valuation, $5 per
Unit ($3 per Unit in February and $2 per Unit in May) in sales proceeds
have been distributed to Limited Partners. These distributions
directly reduced the net asset value of the Partnership. The General
Partners currently intend to make a final distribution to Limited
Partners subsequent to the liquidation of all partnership assets and
provision for all partnership liabilities. The General Partners
currently estimate the net amount of the final distribution to be in
the range of $1.15 to $1.25 per Unit with the ultimate amount
particularly dependent on collection of retained tenant accounts
receivable and expenses of the Partnership until completely liquidated.
RESULTS OF OPERATIONS
Because the Partnership adopted the liquidation basis of accounting on
December 31, 1997, a comparison of the results of operations is not
meaningful. The Partnership's operating results have been reflected on
the statement of changes of net assets in liquidation.
For the three months ended September 30, 1998, the Partnership incurred
a net operating loss of $10,081 and had interest income of $13,736. For
the nine months ended September 30, 1998, the Partnership incurred a
net operating loss of $171,645 and had interest income of $90,193. Net
operating loss for these periods resulted primarily from adjustments
made to the provision for doubtful accounts based on an analysis of the
collectibility of tenant accounts receivable relating to centers sold
by the Partnership. Interest income resulted from the temporary
investment of proceeds from the sales of shopping centers.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27.1 Financial Data Schedule for the nine months ended
September 30, 1998.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Partnership during
the quarter ended September 30, 1998.
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: November 10, 1998 By: /s/ Richard J. Himelfarb
------------------ -----------------------------------
Richard J. Himelfarb, President
By: FW Realty Limited Partnership,
General Partner
By: FW Corporation, General Partner
Date: November 10, 1998 By: /s/ William J. Wolfe
------------------ ---------------------------------
William J. Wolfe, President
EXHIBIT INDEX
Exhibit
Number
27.1 Financial Data Schedule for the nine months ended
September 30, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF NET ASSETS IN LIQUIDATION AND STATEMENT OF CHANGES OF NET
ASSETS IN LIQUIDATION. THE PARTNERSHIP'S FINANCIAL STATMENTS ARE
PRESENTED UTILIZING THE LIQUIDATION BASIS OF ACCOUNTING.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> $1,377,352
<SECURITIES> $0
<RECEIVABLES> $350,568
<ALLOWANCES> $193,852
<INVENTORY> $0
<CURRENT-ASSETS> $0
<PP&E> $8,224,573
<DEPRECIATION> $0
<TOTAL-ASSETS> $9,832,119
<CURRENT-LIABILITIES> $0
<BONDS> $6,587,437
$0
$0
<COMMON> $0
<OTHER-SE> $1,451,295
<TOTAL-LIABILITY-AND-EQUITY> $9,832,119
<SALES> $0
<TOTAL-REVENUES> $0
<CGS> $0
<TOTAL-COSTS> $0
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $0
<INCOME-PRETAX> $(171,645)
<INCOME-TAX> $0
<INCOME-CONTINUING> $(171,645)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $(171,645)
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
