<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 June 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
----------- -----------
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
-------------
(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
------ -----
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENTS OF NET ASSETS IN LIQUIDATION
June 30, December 31,
1998 1997
------------- ------------
(Unaudited)
ASSETS (Liquidation Basis):
Investment in real estate $8,184,373 $22,796,248
Cash and cash equivalents 1,315,273 5,245,307
Tenant accounts receivable, net of
allowance for doubtful accounts
($251,750 in 1998 and $102,831 in 1997) 264,447 367,393
Other assets 87,923 338,816
----------- ------------
Total assets 9,852,016 28,747,764
----------- ------------
LIABILITIES (Liquidation Basis):
Long-term debt 6,654,937 19,429,050
Interest payable 1,529,436 1,417,295
Accounts payable and accrued expenses 192,352 161,607
Security deposits 27,651 103,175
Due to related parties - 70,436
----------- ------------
Total liabilities 8,404,376 21,181,563
----------- ------------
Net assets in liquidation $1,447,640 $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 June 30, 1998
(Unaudited)
Net assets in liquidation at December 31, 1997 $7,566,201
----------
Increase (decrease) during the period:
Operating activities:
Interest income 76,457
Net loss from operating activities (161,564)
Leasing commissions (33,454)
----------
(118,561)
----------
Liquidating activities:
Distributions to partners (6,000,000)
----------
(6,000,000)
----------
Net decrease in net assets in liquidation (6,118,561)
----------
Net assets in liquidation at June 30, 1998 $1,447,640
==========
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 six
quarter ended months ended
June 30, 1997 June 30, 1997
------------- -------------
Income:
Rental income $1,277,048 $2,615,470
Tenant reimbursement income 267,816 531,933
---------- ----------
Total income 1,544,864 3,147,403
---------- ----------
Operating expenses:
Interest expense 635,888 1,297,932
Write-down of assets 550,000 550,000
Depreciation 332,359 673,020
Repairs and maintenance 190,326 421,267
Taxes and insurance 190,475 377,830
Management and leasing to related parties 96,445 183,445
Provision for doubtful accounts 19,079 33,751
Amortization 33,565 66,074
Other expenses 185,580 409,600
---------- ----------
Total operating expenses 2,233,717 4,012,919
---------- ----------
Loss from rental operations (688,853) (865,516)
Other income:
Gain (loss) on sale of shopping center 128,597 128,597
Interest income 32,194 67,099
---------- ----------
Net loss $ (528,062) $ (669,820)
========== ==========
Net income allocated to general partners $ 25,583 $ 24,165
========== ==========
Net loss allocated to assignee
limited partners $ (553,645) $ (693,985)
========== ==========
Net loss allocated to assignee
limited partners per unit (1,200,000
units issued and outstanding) $ (0.46) $ (0.58)
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE> 5
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
(Unaudited)
For the six months ended
June 30, 1997
------------------------
Cash flows from operating activities:
Net loss $ (669,820)
----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 739,094
Write-down of assets 550,000
Gain on sale of shopping center (128,597)
Changes in operating assets and liabilities:
Decrease in tenant accounts receivable, net 101,014
Decrease in prepaid expenses and other assets 115,046
Increase in accounts payable and accrued
expenses and other liabilities 86,531
Increase in accrued interest payable 203,200
Increase in due to related parties 12,213
----------
Total adjustments 1,678,501
----------
Net cash provided by operating activities 1,008,681
----------
Cash flows from investing activities:
Proceeds from sale of real estate 2,503,957
Improvements of real estate (115,237)
----------
Net cash provided by investing activities 2,388,720
----------
Cash flows from financing activities:
Distributions to partners (2,400,000)
Retirement of long-term debt (1,723,147)
Principal payments on long-term debt (299,591)
Financing fees (102,306)
----------
Net cash used in financing activities (4,525,044)
----------
Net decrease in cash and cash equivalents (1,127,643)
Cash and cash equivalents at beginning of period 3,051,221
----------
Cash and cash equivalents at end of period $1,923,578
==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $1,094,732
==========
The accompanying notes are an integral part of this statement.
<PAGE> 6
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
June 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 determined 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 June 30, 1998 and December 31, 1997
consists of land, buildings and improvements which are stated at
estimated liquidation value. Investment in real estate at June 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 six months ended
June 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 June 30, 1998, the Partnership paid or accrued
to First Washington Management, Inc., an affiliate of FW Realty Limited
Partnership, one of the general partners, $14,115 and Legg Mason Realty
Capital, Inc., an affiliate of Realty Capital IV Limited Partnership,
the other general partner, $26,486 for management fees and
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
<PAGE> 8
revenues and expenses expected to be recorded in 1998 for the period
prior to the sale.
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 appraisal 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 June 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 settlement 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 June 30, 1998, tenant accounts receivable prior to the allowance
for doubtful accounts totaled $516,197. As of December 31, 1997,
comparative tenant accounts receivable totaled $470,224. During the
six months ended June 30, 1998, the Partnership increased its allowance
for doubtful accounts by $148,919 to $251,750. 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 $3,930,034 net decrease in cash and cash
equivalents in the six months ended June 30, 1998. The decrease in
<PAGE> 10
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 June 30,
1998 decreased $3,930,034 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 related 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. As a result of an
appraised value of Tarrytown Mall below the outstanding balance of non-
recourse debt, the Partnership continues to estimate its net equity in
that property at zero. 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 timing of such
transfer has not been resolved at this time and discussions with that
center's mortgage lenders regarding completion of the transfer
continue.
At June 30, 1998, Tarrytown Mall was subject to $6,654,937 in mortgage
indebtedness, of which $1,269,940 is a first trust mortgage and
$5,384,997 is a second trust mortgage. In addition, at June 30, 1998,
$12,104 in interest was accrued with respect to the first mortgage and
$1,517,332 in interest was accrued with respect to the second mortgage.
Both the first and second mortgages (principal and interest) are
nonrecourse to the Partnership.
Payment obligations with respect to Tarrytown Mall indebtedness are
currently limited to funds generated by current operations at that
property. Absent resolution of the terms of voluntary transfer of the
center, the Partnership may be required to default on its first trust
mortgage obligation which would result in foreclosure of the property.
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 June
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 $1,529,436 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 nonrecourse to the Partnership.
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 June 30, 1998, cumulative
cash distributions of $17,447,888 and $62,391 had been made to Limited
Partners and General Partners, respectively.
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
<PAGE> 12
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. Although the General
Partners will make every effort to complete the liquidation of the
Partnership in 1998, that objective may not be achieved, particularly
in view of the uncertainty regarding timing of the disposition of
Tarrytown Mall.
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 June 30, 1998, the Partnership incurred a
net operating loss of $133,660 and had interest income of $26,587. For
the six months ended June 30, 1998, the Partnership incurred a net
operating loss of $161,564 and had interest income of $76,457. 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.
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27.1 Financial Data Schedule for the six months ended
June 30, 1998.
(b) REPORTS ON FORM 8-K
The Partnership filed a report on Form 8-K in June 1998 to report
the sale of Quality Center Shopping Center on June 5, 1998.
<PAGE> 14
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: August 14, 1998 By: /s/ Richard J. Himelfarb
------------------ -----------------------------------
Richard J. Himelfarb, President
By: FW Realty Limited Partnership,
General Partner
By: FW Corporation, General Partner
Date: August 14, 1998 By: /s/ William J. Wolfe
------------------ ---------------------------------
William J. Wolfe, President
EXHIBIT INDEX
Exhibit
Number
27.1 Financial Data Schedule for the six months
ended June 30, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> $1,315,273
<SECURITIES> $0
<RECEIVABLES> $516,197
<ALLOWANCES> $251,750
<INVENTORY> $0
<CURRENT-ASSETS> $0
<PP&E> $8,184,373
<DEPRECIATION> $0
<TOTAL-ASSETS> $9,852,016
<CURRENT-LIABILITIES> $0
<BONDS> $6,654,937
$0
$0
<COMMON> $0
<OTHER-SE> $1,447,640
<TOTAL-LIABILITY-AND-EQUITY> $9,852,016
<SALES> $0
<TOTAL-REVENUES> $0
<CGS> $0
<TOTAL-COSTS> $0
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $0
<INCOME-PRETAX> ($161,564)
<INCOME-TAX> $0
<INCOME-CONTINUING> ($161,564)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> ($161,564)
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
